KBC rise in profits for 2011 first quarter

BELGIAN BANK and insurer group KBC reported a rise in quarterly net profit as “robust” trading income, reduced loan losses and higher net interest income boosted the company.

KBC, which has operations in Ireland and was formerly known as IIB Bank, said net profit was €821 million in the first quarter, while underlying net profit was €658 million. Revenue rose by 19 per cent to €2.42 billion.

KBC’s Irish business contributed €13 million to group profit after a year-to-date loan impairment of €45 million. The bank said the Irish economy was beginning to show signs of stabilisation, with exports offsetting weakness in domestic spending.

Lower loan impairments were recorded across all its business units, with the bank reporting loan losses of €105 million, some €405 million lower than the previous quarter.

The most significant drop was seen in merchant banking, including its Irish operations, where 2010 had seen “exceptional” losses. There were several impairment releases during the period, including €20 million of provisions in Poland; €9 million in Hungary, Russia; and Atomium assets.

KBC said non-performing loans in Ireland rose to 11.1 per cent in the first quarter of the year, compared to 10.3 per cent in the preceding quarter.

The bank said the rise was mainly related to the commercial portfolio. The company said it was confident it had sufficient provisioning for KBC Ireland in the base case scenario.

“The base case scenario assumes there will be a worsening of the portfolio,” said chief financial officer Luc Popelier.

He said the bank was expecting non-performing loans in its Irish business to peak at between 13 and 14 per cent, with loan impairment provisions of €40 million to €50 million.

The bank’s loan book currently includes €9.7 billion in owner occupied mortgages, 7.7 per cent of which are classed as non-performing, while buy to let mortgages account for €3.3 billion of the total book.

Across the group, fee and commission income fell 7 per cent year on year on the same period.

– (Additional reporting: Bloomberg)