KBC Ireland takes €95m loan charge amid Covid-19 pandemic

Provisions for expected jump in problem loans push lender into second quarter loss

KBC Bank Ireland is setting aside €97m to cover an expected jump in problem loans as a result of the coronavirus crisis. Photograph: Bryan O’Brien/The Irish Times

KBC Bank Ireland is setting aside €97m to cover an expected jump in problem loans as a result of the coronavirus crisis. Photograph: Bryan O’Brien/The Irish Times

 

KBC Bank Ireland booked €95 million of provisions in the first half of the year to deal with an expected jump in problem loans as a result of the coronavirus crisis, pushing the lender into a loss for the period.

It resulted in the bank, a unit of Belgium-based KBC Group, reporting a €55 million loss for the six months.

“In a few short months, the world changed suddenly for both our customers and society. We are in an extremely challenging economic environment and the material provision taken in our [first-half] results reflects this,” said the Irish unit’s chief executive, Peter Roebben.

KBC Bank Ireland processed 6,400 payment breaks on loans to households and small businesses in recent months. Still, its level of impaired loans fell by 8 per cent during first half of the year, to €1.53 billion, as loans subject to Covid-19 payment freezes for up to six months continue to be accounted for as performing loans.

While lending activity slumped during the worst of the coronavirus shock, KBC Bank Ireland saw a stronger than expected growth in new mortgage applications towards the end of the second quarter, it said.

The bank, which employs about 1,400 people across Ireland, also completed a major upgrade to its main banking system in April. The following month, it announced that it plans to launch a pensions and life insurance offering on a phased basis from a new local branch of its Belgian insurance unit. It will end a long-term partnership with Irish Life in 2021.

The group operates a bancassurance model in all of its other core markets and it had been looking at insurance options since reaffirming its commitment to Ireland in 2017 following a strategic review.

The company’s number of customers increased 5 per cent year on year to 314,000 to the end of June.

Contactless payments through KBC’s digital and mobile wallets, including Apple Pay and Fitbit Pay, increased by 38 per cent year-on-year in June as Covid-19 accelerated a move by customers away from cash transactions. The level of contactless payments also rose a 27 per cent on the month from May, as the economy continued to re-open following the lockdown.

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