KBC may sell troubled Irish mortgages to draw line under crisis

Belgian group affirmed its commitment to Ireland in February after years of speculation

Over 40 per cent of KBC Bank Ireland’s €12.4 billion mortgage-dominated loan book was classified as impaired in March.

Over 40 per cent of KBC Bank Ireland’s €12.4 billion mortgage-dominated loan book was classified as impaired in March.

 

KBC Bank Ireland’s chief executive may sell some impaired mortgages as it comes to the end of restructuring of loans and as banks face mounting regulatory pressure to draw a line under an issue that has weighed on the industry for almost a decade.

Speaking to reporters on the sidelines at an international media and investors day in Dublin for the wider KBC Group, Wim Verbraeken said the bank may look to sell loans in time if it concluded it had “sweated enough and there is no more value for us to extract” from restructuring non-performing loans (NPLs).

Over 40 per cent of KBC Bank Ireland’s €12.4 billion mortgage-dominated loan book was classified as impaired in March, ostensibly the highest level among retail banks in the country.

However, Mr Verbraeken said that the bank applies the strictest classification of NPLs in the country and that the level of loans in arrears stood at €1.7 billion at the end of the first quarter.

Engage

While the European Central Bank’s banking supervision arm has pressed the domestic Irish banks in recent months for plans to reduce NPLs, Mr Verbraeken said the ECB is not expected to engage with his bank until the second half of 2017, as the wider KBC Group has a below-average level of troubled loans compared to the euro zone average.

He signalled that the ECB can expect some pushback if regulators don’t recognise that much of the bank’s NPL portfolio is comprised of restructured loans.

In many cases, eased terms have to be in place for up to a year before loans are reclassified as performing. In others, such as split mortgages, where repayments on part of a loan are put on ice until a future date, the “warehoused” portion will continue to be an NPL until it is being paid back.

Mr Verbraeken noted that European regulators were keen at the outset of the crisis for banks to work with customers and not pursue “repossession on a massive scale”.

Speculation

“And now [for regulators] to turn around and say these loans are staying as NPLs because of restructuring and other features needs to be reconsidered,” he said. “You can’t have your cake and eat it too.”

Brussels-based KBC Group affirmed its commitment to Ireland in February, after two years of speculation about its future in the market. The group, which has more than 1,000 employees in the Republic, also signalled its interest in bank and insurance acquisitions in Ireland to expand its footprint. Mr Verbraeken said that the bank isn’t currently working on a potential acquisition.

KBC Bank Ireland plans to “launch an appealing proposition” for “micro” businesses, such as doctors, dentists and solicitors practices, later this year, as the group uses Ireland as a testing ground for new digital applications.

The bank unveiled a new a new mobile app on Wednesday, reducing the number of steps a customers have to take to set up an account from 26 to five.

The Dublin-based unit, KBC Bank Ireland, aims to almost double its number of customers to 425,000 in the four years to the end of 2020.