KBC softens resistance to mortgage loan sales under pressure

Belgian bank freed up less bad-loan provisions than in 2018

KBC Bank Ireland headquarters in Dublin. Photograph: Bryan O’Brien

KBC Bank Ireland headquarters in Dublin. Photograph: Bryan O’Brien


KBC Bank Ireland’s chief executive, Peter Roebben, has left the door open to the sale of soured residential mortgage loans as 16.4 per cent of its loan book continues to be impaired and regulators press lenders to draw a line under the issue more than a decade after the crash.

Speaking to The Irish Times after the Belgian-owned bank reported a drop in full-year profits, Mr Roebben said his team “at this point in time” was continuing its strategy of restructuring soured home loans, but has to “continuously monitor the environment” and expectations of regulators at a time when its level of non-performing loans “sticks out very visibly compared to local Irish banks”.

This marks a shift from comments he made last May, shortly after taking over as chief executive, that he did not “envisage any sale” of private dwelling home loans.

Irish banks have begun to sell owner-occupier loans in the past two years as they deal with their trickiest cases after restructuring 110,000 mortgages since 2013. Permanent TSB and Ulster Bank sold portfolios of home loans in the second half of last year, while AIB, which has offloaded billions of euro of commercial loans in recent years, is lining up a portfolio of soured home loans for disposal.

“We are not today in any sales process, but we are well aware the regulator continuously returns to the issue of their desire to see percentages of non-performing loans coming down rapidly. We’re continuing in that dialogue,” said Mr Roebben, pointing out that the wider KBC Group’s non-performing loans were in line with the EU average of about 3.5 per cent that European supervisors want individual banks to reach.

Net profit decline

KBC Bank Ireland disposed of a €1.9 billion problem buy-to-let and corporate loans portfolio in 2018 and sold a €260 million performing corporate book early last year to focus more on retail and micro business clients, which led to a €11.1 million exceptional loss.

KBC Bank Ireland’s net profit declined to €32.3 million from €162 million for the previous year. This was driven as the bank freed up fewer provisions that had been set aside to cover bad loans, took another charge in relation to the tracker-mortgage scandal, absorbed the loss on the corporate loan book sale and saw its bank levy increase.

Still the bank saw its share of the mortgage market rise to 11.8 per cent in 2019 from 10.8 per cent in 2018, as it lent €1.12 billion in new mortgages to customers.

The bank’s stock of impaired loans reduced by 32 per cent to €1.66 billion, bringing its non-performing loans ratio to 16.4 per cent.

KBC Bank Ireland set aside an additional €18 million in the third quarter to cover the tracker mortgage crisis, mainly driven by an expected Central Bank fine, bringing its total provisions for the debacle to almost €142 million. The wider industry has had to take €1.5 billion of tracker-related charges to cover refunds, compensation, administrative costs and probably regulatory sanctions relating to the State’s biggest bank overcharging fiasco.

Chief’s apology

KBC Group chief executive Johan Thijs was forced to apologise last November for what he called “insensitive” comments on the tracker-mortgage scandal on a call with financial analysts. Mr Thijs had said the Central Bank’s continued focus on the issue was “annoying” and that it should “turn the page” and allow the industry to get on doing business.

“What I am extremely sensitive to, and aware of, is that we have a long way to go and a lot of work to do to rebuild trust between the banking industry – and KBC as part of that – and society as a whole,” said Mr Roebben, adding that there is a “rawness” around the tracker scandal in Ireland. “I think expectations towards the industry has moved to a whole different territory here, and rightly so.”