KBC Bank posts third-quarter profit on reduced impairments

Reduced impairment provisions helped KBC Bank Ireland to post a profit in the third quarter of this year, keeping it on course to return to full-year profitability in 2016.

The Irish subsidiary of the Belgian financial group reported a third-quarter profit of €25 million after tax and impairment costs, which compared to a loss of €14 million for the same period in 2014.

Its loan impairment costs fell to €9 million for the quarter, from €47 million a year earlier.

To confuse matters, its parent company in Belgium reported that the Irish bank had achieved a net profit for the third quarter of €10 million.

It seems that the difference between the two figures relates to the cost of funding provided by the group to its Irish subsidiary – KBC Bank Ireland has borrowed €4 billion from its parent at market rates.

KBC Bank Ireland chief executive Wim Verbraeken described the results as "very strong" and said it remained "on track to return to full year profitability by 2016".

Five new hubs

KBC opened five new hubs in Ireland this year to bring its total to 15 and Mr Verbraeken said it had completed the expansion of its branch network. “We have no plans for further opening at this stage,” he said, adding it would seek to increase the capabilities of its online and call centre activities. Some 40 per cent of its daily banking services are now conducted via its website or mobile apps.

KBC increased its retail and corporate deposits in the quarter by €200 million to €5 billion, opening 59,000 new customer accounts in the first nine months of the year.

Mr Verbraeken said the number of mortgage arrears cases continued to decline, with the total having reduced each month since February 2014.

At the end of October there were 9,300 cases, amounting in value to €2.4 billion, excluding residual debt balances. This comprised 6,500 private dwelling homes and 2,800 buy-to-let loans.

At the end of December 2013, the number of cases in arrears was 14,200, amounting to €3.5 billion in value.

In the year to date, the bank had achieved a reduction in its arrears of about 20 per cent. It identified solutions for 95 per cent of its arrears cases and agreed terms with customers in about 70 per cent of cases. “We’re making very good progress,” Mr Verbraeken said.

Lack of housing supply

The bank’s share of new mortgages is running at 14.2 per cent, with Mr Verbraeken citing a lack of housing supply and new macro

prudential rules from the Central Bank as factors impacting the market.

KBC recently announced a reduction in its standard variable rate for all private dwelling mortgage customers. From December 1st, the rate will reduce by 0.25 per cent to 4.25 per cent, with customers able to reduce it by a further 0.2 per cent if they open a current account with the bank.