KBC forecasts hit of up to €600m on loan losses

KBC BANK Ireland is forecasting that it will take a hit of between €500 million and €600 million on loan losses this year, despite a moderation in second-quarter impairment charges. This would compare with an impairment charge of €510 million in 2011.

According to the Belgian bank’s results for the second quarter of 2012, loan loss provisions for its Irish operation were € 136 million, down from € 195 million in the first quarter. While this marked an improvement, it was still “sizeable”, as the bank noted, and contributed to the overall group’s fall into the red.

At group level, KBC reported a second-quarter loss of € 539 million, bringing its first-half results to a loss of € 160 million, down from a profit of € 1.2 million in the same period in 2011. A “good commercial performance” in its strategic banking and insurance businesses in its home market of Belgium and in central and eastern Europe was offset by loan loss provisions in Ireland.

According to the bank, the Irish operation struggled because “commercial collateral values continue to suffer as all Irish banks deleverage in an illiquid market”.

However, although the bank noted that residential mortgage arrears continued to deteriorate, it added that the pace had “slowed markedly” compared to 2011.

The bank’s loan book totalled €16.4 billion as of the end of June, €9.4 billion of which was residential and € 3.2 billion of which consisted of buy-to-let mortgages.

Of the bank’s residential book, 15.9 per cent is non-performing, or in arrears of 90 days or more, an increase on the 14.8 per cent figure reported in March.

Similarly, the proportion of non-performing buy-to-let mortgages has increased from 24.3 per cent in March to 26.7 per cent as of the end of June.

The Irish branch increased its retail deposits by €500 million in the first half of the year.