KBC Ireland assesses options to ‘materially reduce’ bad loans

KBC Bank Ireland's chief executive Wim Verbraeken will tell the Oireachtas finance committee on Tuesday that the Belgian-owned group is continuing to assess "all options" as it looks to "materially reduce" its non-performing loan levels.

In material forwarded to the committee in advance of the hearing, Mr Verbraeken noted that the bank’s non-performing loans (NPLS) have fallen almost by half from €8 billion in 2014 to €4.5 billion at the end of March, though 37 per cent of the group’s mortgage portfolio continues to be classified as NPLs, which needs to be “reduced substantially over the coming years”.

While KBC Bank Ireland’s NPLs ratio is ostensibly the highest among Irish retail banks, the bank applies the strictest classification of an impaired loan in the country.

European regulatory authorities have focused in the past 18 months on pressing domestic Irish banks to come up with detailed plans to cut their NPL ratios to the 5 per cent EU average, prompting Permanent TSB and AIB to engage in loan sales. However, regulatory attention is now turning to overseas-owned Irish banks with high levels of problem loans.

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Arrears

“To date, the bank has successfully focused on working with its corporate and retail customers on a case-by-case basis to resolve distressed loans and arrears, and ultimately reduce NPLs,” Mr Verbraeken will tell the Oireachtas committee on Tuesday. “However, we will continue to assess all options available to the bank to materially reduce NPL levels.”

KBC Bank Ireland will be the last of the country's five remaining retail banks to appear before the Oireachtas finance committee in the space of five weeks, with much of the hearings to date focusing on the industry-wide tracker mortgage crisis.

The bank, which had been among the industry laggards in identifying the extent of the problem last year, will tell the committee that its number of impacted cases has fallen from 2,974 in March to 2,754.

The change “relates to the testing and quality assurance work which was ongoing in [the first quarter] and has not been finalised,” the company said in documents provided to lawmakers.

KBC Bank Ireland will say that it has processed payments to 98 per cent of affected customers, though it is continuing to have trouble tracing the remaining 2 per cent.

The bank said that €120.3 million of provisions it had put aside by the end of last year to deal with the scandal remains its “best estimate” of its final cost. The wider Irish banking sector had set aside a total of about €1 billion of such provisions.