KBC tracker comments take us back to an unwelcome past

KBC Group chief executive Johan Thijs figured he was among his own kind when he let rip on a conference call with financial analysts on Thursday, bemoaning how the Central Bank of Ireland had focused for too long on the State's tracker mortgage scandal and other past banking misdeeds.

“What is still an annoying thing is all tracker mortgage stuff and, honestly, we would recommend to Central Bank of Ireland: come on, guys, turn the page,”said Thijs, head of KBC Bank Ireland’s parent, as the group reported quarterly earnings. “We’re focused on doing business, we’ve learned our lessons, we know what to do.

“Let’s now stop doing all the nitty-gritty stuff, which is an administrative hampering of the development of the financial institution – and the financial market as a whole in Ireland.”

Tracker scandal

Not since then AIB chief executive Eugene Sheehy's infamous comments a decade ago that his bank would "rather die than raise equity" has a CEO connected to the Irish banking industry made such an ill-judged statement full of unfounded conceitedness.

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Sheehy, you may remember, made his comments to a room full of clients of a Dublin stockbroker just weeks after taxpayers were forced to guarantee the financial system. AIB would subsequently require a €20.8 billion bailout and fall into the hands of the Government.

Lest we forget, KBC Bank Ireland was the last of the five banks in the market to 'fess up in late 2017 to the extent to which it had participated in the tracker mortgage scandal, Ireland's answer to the UK's payment protection insurance debacle.

Executives from the bank, which had about a 10 per cent share of the mortgage market before the crash, were alone among banking chiefs hauled before the Oireachtas finance committee that September in refusing to disclose how many of its customers had been affected by the issue or how much it had set aside to cover redress and compensation.

Sources said at the time that the bank had low-balled its number of identified cases in its submissions to the Central Bank. They were said at the time to be in the low hundreds.

A month later, the lender admitted – as politicians, regulators and wider public outcry brought the issue to a head for the industry – that up to 1,661 of its mortgage customers had either been wrongly denied a cheap mortgage tied to the European Central Bank’s main rate or put on the wrong rate entirely.

The figure has only risen since then. In February, the bank revealed that it had identified more than 660 additional cases – bringing its total to 3,737 customers.

Complaints

More recently, it emerged in August that KBC Bank Ireland was among banks that were actively contesting the Financial Services Ombudsman’s attempts to investigate tracker-case complaints, claiming they fell outside a legal six-year time limit.

The bank had used this cause 27 times before the chairman of the new Irish Banking Culture Board, Mr Justice John Hedigan, stepped in and persuaded lenders that they needed to do the right thing by customers.

Meanwhile, KBC Bank Ireland has also been the last of the five banking groups to start setting aside money to cover expected Central Bank fines relating to the industry’s handling of the tracker fiasco. The bank ringfenced €14 million for this in the three months to the end of September, it revealed on Thursday, serving to push its net profit for the period down to €4.4 million from €33.6 million for the corresponding three months in 2018.

Culture

Thijs's comments came two days after Central Bank deputy governor Ed Sibley warned that bankers in Ireland and elsewhere are beginning to display echoes of pre-crisis hubris, as pressure mounts on regulators to ease back on checks and controls introduced in the past decade to prevent another crash.

Since reaffirming its commitment to its Irish unit in early 2017, Belgium’s KBC Group has been using it as a petri dish to spawn funky fintech projects before rolling them out elsewhere in the company.

On Thursday, Thijs offered up a culture dish of another kind. One that showed up healthy strains of cockiness and hubris – bugs the banking industry would like you to think had long been exterminated.

Thijs moved on Friday evening to apologise for his comments, saying: “I want to acknowledge the insensitivity of what I said and the manner in which it was delivered”. He had little other choice.

KBC Bank Ireland promotes itself as Ireland's leading digital bank, making it, in many ways, a frontrunner for both the Belgian group and Irish banking industry, with its award-winning mobile app and market-leading virtual wallet offering customer access to Apple Pay, Google Pay, Fitbit Pay and Garmin Pay to pay for that coffee and a sandwich or fill their petrol tank.

In a country where banking completion has contracted sharply in the past decade, KBC Bank Ireland offers real and welcome choice.

And people are voting with their index fingers, with its number of customers having grown by 60,000 so far this year to top 300,000.

Without the burden of a large legacy branch network, KBC Bank Ireland stands alone among the country’s top five banks in not currently being in the midst of a cost-cutting drive in a low interest-rates environment that will see thousands of workers in the industry lose their jobs in the next few years.

In many ways, KBC bank is ahead of the curve in mapping out a future for the industry. But Thijs’s outburst also take us back to an unwelcome past.