KBC Bank Ireland has posted its first quarterly net profit since the height of the financial crisis here, and has made a robust defence against critics who accuse Irish lenders of charging customers too much for their mortgage home loans.
KBC Ireland is disentangling itself from its troubled corporate and property lending to focus instead on the improving home-loans market. It said it is shaping up to become “a serious player” in the mortgage market.
With a huge reduction in the level of provisions it set aside in the first three months of the year to cover soured business loans in Ireland, the bank says it is on course to return to sustainable profits for the first time since 2008.
KBC Ireland said those impairment costs of €7.4m in the first quarter were down sharply from €47.9m it set aside a year earlier. That helped the bank record a net profit of €16.2m in the first quarter, compared with a loss of €17.1m a year earlier.
Wim Verbraeken, chief executive of KBC Ireland, said that “after five long years”, the Irish unit had posted its first quarterly profit since 2010. However, it is still not forecasting a return to sustainable annual profits until 2016 because, he said, “the road to recovery is still bumpy.”
A better-than-expected outcome in exiting a Dublin residential property development loan meant it could write back around €14m in provision charges in the quarter.
KBC Ireland is effectively transforming itself into a home-loans lender and is turning away from lending to the corporate and property markets by winding down its existing loan books in those sectors.
Mr Verbraeken denied that lenders are charging customers too much for their mortgages.
Opposition politicians and debt advocates claim banks here are generating excessive profits by charging mortgage rates that are above comparable home-loan rates in the rest of the eurozone.
“People are losing sight of [the fact that] that there are a number of other variables and components coming into play to determine the return that banks are earning on a mortgage.
"In Ireland, deposit rates are still quite high compared with other countries in the eurozone, and the cost of operating a bank in Ireland is much higher than operating a bank in other countries,” Mr Verbraeken said.
He said the amount of capital that a bank here has to hold against individual loans is “much higher” than other countries.
The bank’s total outstanding loan book of €14.4bn, includes €9bn in home-loan mortgages, €2.8bn of investment or buy-to-let mortgages, €1.3bn in SME and corporate loans, and commercial property loans worth €1.3bn. The bank has so far made €2.8bn in provisions for bad loans since the crash.
“We are in an orderly wind down of 800 customers in corporate and SME lending. That is a strategic decision. KBC Ireland is now going to be retail focused. We want to be a serious player in the home-loans market,” Mr Verbraeken said.
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