Belgian bank KBC said today it faces payment arrears of at least three months on more than 15 per cent of its €16.8 billion Irish loan book, up from 13 per cent three months ago.
In its latest quarterly figures, the bank said its loan-loss provisions in Ireland will climb to about €200 million by the end of the year. However, it said the provisions covered only 40 per cent of non-performing loans at the end of September.
The bank, Belgium's biggest bank and insurer by market value, posted the biggest quarterly loss in more than two years, missing estimates, led by declines in structured credit investments and mounting Irish loan-loss provisions.
The net loss of €1.58 billion was wider than analyst projections of a €1.01 billion shortfall.
Stripping out some elements including markdowns of collateralised debt obligations and the loss on the sale of KBL European Private Bankers, the loss was €248 million compared with a profit of €445 million a year earlier, the Brussels-based company said today in a statement.
Mounting provisions for bad loans in Ireland and continued losses on disposals are threatening KBC's plan to reimburse €7 billion of state aid it received without selling shares, leading the bank to accelerate the reduction of its balance sheet.
KBC said today that it will make a first reimbursement of €500 million at a 15 per cent penalty by the end of this year and still plans to repay all aid received by December 2013.
"Capital generation is clearly under pressure," Albert Ploegh, an analyst at ING Groep NV in Amsterdam who has a "hold" recommendation on KBC shares, wrote in a note to investors last week.
"Concerns over capital and thus dilution risk remain justified."
KBC also joined other banks and insurers including BNP Paribas, ING Groep NV and Ageas in selling Italian government bonds during the quarter after taking an additional writedown on Greek bonds.
The Belgian bank and insurer reduced its holdings of Italian sovereign debt to €2.2 billion by the end of October and said it has cut its combined exposure to the government debt of Greece, Italy, Ireland, Portugal and Spain by €4.5 billion to €5.1 billion since the end of June.
