KBC's Irish losses widen in 2012

Losses at KBC's Irish arm widened last year as loan impairment costs continued to rise.

KBC Bank Ireland reported a loss of €306 million in 2012 after tax and impairment costs of €547 million had been taken into account, describing it as "disappointing" but not unexpected given the country's challenging credit environment.

But although the bank's mortgage arrears continued to rise, the pace moderated somewhat, KBC said. In the last quarter of 2012, loan loss provisions were €87 million, down from €129 million in the third quarter. The bank also reported strong growth in retail deposits to €2.1 billion for the year.

"In Ireland, 2012 was a year of continued unacceptably high credit costs for the bank as mortgage arrears in its residential loan book continued to increase, albeit at a slower pace than heretofore, reducing quarter on quarter in 2012," KBC said in a statement. "The majority of our customers continue to repay their loans in full and the bank is working day by day to increase the number of customers availing of restructuring initiatives offered by the bank."

The bank also expanded its retail presence in Ireland, opening a new branch office in Baggot Street in Dublin and bringing 22,00 new retail customers to its books.

Its overall loan portfolio fell to €16 billion from €16.7 billion in 2011 as economic activity remained muted and new business demand was limited.

Chief executive of KBC Bank Ireland John Reynolds said the results represented "an unsatisfactory business performance".

"We had signalled that we expected conditions to remain challenging in 2012 and this proved to be the case," he said. "However, we anticipate increasing economic stability will lead to more sustainable conditions in 2013 with the bank hoping for reduced credit cost in the year ahead."

KBC Bank Ireland employs more than 650 people in Ireland, with offices in Dublin, Cork, Limerick, Galway and Belfast. The company said it remained committed to the Irish market, with plans to open retail offices in Cork, Limerick and Galway this year.

Its Belgian parent KBC beat expectations for quarterly profit, helped by lower loan loss provisions and a strong performance from its central European business.

Underlying fourth-quarter net profit came in at €309 million, compared with a forecast for €273 million in a Reuters poll.

In its Central European business, which comprises units in Bulgaria, the Czech Republic, Hungary and Slovakia, loans rose 1 per cent from the third quarter with deposits up 3 per cent. Non-performing loans in the region fell to 5.2 per cent in the fourth quarter, the lowest level in the past 10 quarters, partly due to a decline in Hungary.

KBC repeated that it planned to pay back €1.17 billion in state aid to the region of Flanders, along with a 50 per cent premium, or €580 million, in the first half of 2013.

The group said in January it would repay €8.3 billion of cheap three-year loans to the European Central Bank in the first quarter.

The group said its tier 1 ratio stood at 13.8 per cent at the end of 2012.

KBC will propose a gross dividend of €1 this year, and will not make a payout next year.

Additional reporting - Reuters