KBC Bank Ireland profits fall on tracker redress costs

Bank to free up less Irish bad-debt provisions in 2018

Photograph: Bryan O’Brien /The Irish Times

Photograph: Bryan O’Brien /The Irish Times

 

KBC Bank Ireland’s profits fell almost a fifth last year as costs relating to the country’s tracker-mortgage crisis offset the fact that the bank managed to release up to €215 million of bad-debt provisions as the economy continued to improve.

Net profits for 2017 fell to €183 million from €227 million for the previous year, as the lender, part of Brussels-based KBC Group, set aside €116 million of provisions last year to cover the redress and compensation due to the tracker mortgage scandal. This brought total such provision to €120.3 million.

KBC Bank Ireland, which reaffirmed its commitment to Ireland a year ago following years of speculation, has said that its number of affected customers in an industry-wide scandal going back as far as a decade stands at just under 3,000.

The bank has so far rectified rates and made redress and compensation payments to 501 impacted customers. The bank said in a statement on Thursday as it released its full-year results that it plans to address the remaining impacted customers “as soon as possible but will conclude no later than the end of June 2018”

The wider KBC Group said on Thursday that it recorded a €2.58 billion net profit last year, up 6 per cent on the year.

The Irish unit’s release of as much as €215 million of bad-loan provisions in 2017 was €15 million above the upper-end of its previous guidance. Still, it sees the rate of releases slowing this year to between €150 million and €150 million, according to an analysts presentation published by the Belgian group to go along with its full-year results on Thursday.

KBC Bank Ireland’s impaired loans fell by a quarter to €1.4 billion during 2017, resulting in its impaired loan ratio falling to 35 per cent by the end of December. The reduction was accelerated as the bank booked an accounting write-off of less than €400 million of loans.

With house prices rising at an annual rate of 12.3 per cent in December, KBC Bank Ireland saw the average loan-to-value on its impaired mortgages fall to 94 per cent from 104 per cent. That means that the average loan is now smaller than the value of the underlying property for the first time since the property bubble burst.