KBC Ireland sets €14m aside for expected tracker fine

Charge drives reduction in bank’s net profit

The latest provision brings to €142 million the amount KBC has ringfenced in recent years to cover redress, compensation and other costs relating to the tracker crisis.  Photograph: Bryan O’Brien

The latest provision brings to €142 million the amount KBC has ringfenced in recent years to cover redress, compensation and other costs relating to the tracker crisis. Photograph: Bryan O’Brien

 

KBC Group Ireland has set €14 million aside to cover an expected Central Bank fine for its involvement in the tracker mortgage scandal going back more than a decade.

The figure was part of a wider €18 million tracker-related provision that the Belgian-owned bank booked in the third quarter of the year, it said on Thursday.

The charge drove a reduction in the bank’s net profit for the period to €4.4 million from €33.6 million for the corresponding three months in 2018. The wider KBC Group’s profit dipped to €612 million from €701 million.

KBC Bank Ireland is the last among five lenders in the State subject to a Central Bank enforcement investigation relating to the issue put money aside for likely sanctions. Rival Permanent TSB was fined €21 million earlier this year for its handling of the industry-wide debacle.

“Of course we expect a fine. It goes without saying, given the extent to what happened with trackers,” Peter Roebben, the bank’s chief executive of seven months, said to The Irish Times. “But we’ve no indication when the investigation will be concluded.”

The latest provision, which brings to €142 million the amount KBC has ringfenced in recent years to cover redress, compensation and other costs relating to the tracker crisis, took the shine off more positive developments at the bank in the third quarter.

Its new mortgage lending rise 21 per cent for the first nine months of the year to €800 million, outpacing 11 per cent growth in the wider market and delivering a 11.7 per cent share of activity, compared to 10.9 per cent in 2018.

KBC has added 60,000 customer accounts so far this year, bringing its total number of customers above the 300,000 mark.

Impaired loans

Meanwhile, KBC Bank Ireland’s impaired loans level declined to 17.4 per cent at the end of September from 35 per cent a year earlier. This was fuelled by the sale of a €1.9 billion portfolio of soured corporate and buy-to-let mortgages to US investment bank Goldman Sachs late last year and as the bank continued to restructure of problem loans and benefit from borrowers’ improved circumstances in a rising economy.

The bank freed up €7 million of provisions that had previously been set aside to cover forecast losses on bad loans.

Mr Roebben said that the wider KBC Group’s non-performing loans (NPLs) ratio, which is slightly below the EU average of 3.5 per cent, is giving its Irish unit some breathing space to lower its NPLs ratio gradually, as other banks in the State face more regulatory pressure to address this issue.

Domestic banks have cut their average NPLs ratio from a peak of 30 per cent in 2013 to 7 per cent at the end of June, according to Central Bank data. They have been relying increasingly on selling distressed debt in recent years to deal with trickier debt after years of loan restructuring efforts.