KBC Bank Ireland recorded a €69 million loss after tax and charges for impaired loans for the three months to the end of June.

This was down from €96 million in same period last year.

The Belgian lender said Irish loan impairments for the second quarter fell to €88 million from €99 million the previous quarter, and €136 million in the corresponding period last year.

KBC said, however, it continues to see a “mild increase” in arrears.

The bank said it had met its quarterly target in relation to resolving cases involving arrears of 90 days or more, as set down by the Irish Central Bank.

“Overall, recent data remain consistent with the expectation of a modest rise in GDPin 2013, increasing employment and a gradual but uneven improvement in the housing market in 2013,” the bank said.

Overall, the Brussels-based banking group reported profit that beat estimates and cut its remaining risk linked to collateralised debt obligations almost by half, freeing more capital for reimbursement of state aid.

Net income of €517 million in the three months through June, which compares with a loss a year earlier, surpassed the €402 million forecast by analysts.

Revenue on an adjusted basis rose 5.1 per cent to €1.83 billion and included a €126 million gain in the value of hedges used in asset and liability management, KBC said.

KBC, which spent €1.75 billion last month to repay a first portion of the Flemish government rescue funds it got in 2009.