RESIDENTIAL MORTGAGES:BELGIAN BANK KBC is "uneasy" about loans to property developers that Irish banks have transferred to the National Asset Management Agency (Nama) because the so-called bad bank could start "dumping" them at distressed prices in the market.
Chief financial officer Luc Philips made the comments to analysts on a conference call following the publication of the bank’s third quarter results. KBC, which had €2.15 billion worth of property loans outstanding in Ireland as of September 30th, did not transfer any loans to Nama.
While loan loss provisions at the group rose 28 per cent to €356 million from the second quarter, they were unchanged from a year earlier. Loans at least three months in arrears rose to 4 per cent of the amount outstanding from 3.7 per cent in the preceding quarter.
In Ireland, provisions for the period were €53 million. That compares to €28 million in the second quarter of the year and €142 million in the first three months of 2010.
KBC said 9 per cent of its Irish loan book, worth €17.4 billion, is at least three months in arrears, up from 7.7 per cent in the preceding quarter.
The majority of KBC’s loan book is made up of mortgages to owner occupiers.
If residential house prices fall a further 10 per cent, it will cost the bank a further €50 million in loan impairments. A rise of one percentage point in the unemployment rate, currently at more than 13 per cent, would lead to a rise of €25 million in residential loan impairments, the bank said.
However, the bank forecasts its Irish unit will remain profitable this year, and said 76 per cent of its outstanding portfolio remains low or medium risk.
The group as a whole reported third-quarter profit that beat analyst estimates after gains in trading income. Net income rose 3.2 per cent to €545 million.
Profit for common stockholders, after accounting for interest on €7 billion of government rescue funds, fell 25 per cent to €1.17 a share.
KBC said it would not need to raise additional capital to meet Basel III requirements, forecasting an 8 per cent common equity ratio by the end of 2013. The Belgian bank has accumulated about €4.3 billion of surplus capital to repay state aid. – (Additional reporting: Bloomberg)
