KBC Bank posts €92m profit as loan losses up

BELGIAN-OWNED KBC Bank Ireland posted a net profit of €92 million in 2009, down 10 per cent on the previous year, after loan losses more than trebled to €176 million. The bank’s loan book dropped to €18 billion from €18.8 billion, reflecting limited demand among borrowers.

Chief executive John Reynolds said the bank’s Brussels-based parent was keen to “carve out a significant niche in the Irish market”.

He said the bank would not consider buying any part of the €10 billion retail loan book at Bank of Scotland (Ireland), which is closing its intermediary and Halifax retail business and branches.

“We are more comfortable with organic growth,” he said, adding that the bank expects to post a similar performance in 2010. “If we can push the loan book up toward €19 billion, that would probably be a good performance,” he said.

Operating income rose to €330 million from €235 million, as funding costs improved in 2009. “It was a good year in a horrible environment. We hope to be substantially profitable in 2010,” he said, adding that he was also hopeful the Irish market would be “a bit more buoyant in 2011”.

Deposits rose by about €6 billion from €5 billion the previous year, representing 30 per cent of total loans, with a further 20 per cent of funding coming from the bank’s parent KBC in Belgium.

“There has been a degree of easing on our funding in 2009, though not as much as we would have liked,” he said.

Arrears of 90 days or more on KBC’s €13.4 billion Irish home loans and residential investment mortgages rose to 3.7 per cent from 2 per cent the previous year.

Mr Reynolds said there had been “a very rapid deterioration” in the loan book in the first half of the year but that mortgage arrears peaked in November 2009 and have levelled off since then.

The bank has a 9 per cent share of the mortgage market, making it the fifth largest mortgage lender.

The bank has not had to seek additional capital from its parent as it has been able to absorb rising loan losses from operating profits.

“We have been totally self-sufficient,” said Mr Reynolds.

The bank expects to maintain staff numbers at 420, he said. It would be working with the National Asset Management Agency as a co-financier of development loans and was not concerned about its potential effect on the property market.

“We would not be so much fearful about it but we would like to see it up and running,” he said.

KBC has €600 million in development loans, representing 3.5 per cent of the overall loan book.

The bank’s Belgian parent suffered a worse than expected fourth quarter profit as it booked higher loan losses in eastern Europe and poor dealing room income. KBC made a profit of €218 million, down 65 per cent on the previous quarterly profit.