KBC Ireland returns to profit as it plots exit from Republic

KBC Bank Ireland returned to profit in the first half of the year, even as the Belgian-owned lender advanced a plan to exit the Republic.

The bank posted a €21 million net profit for the period as loan impairment charges fell to zero. KBC Bank Ireland made a loss of €58 million for the same period last year, driven by a €95 million loan charge the bank took as it braced itself for a spike in bad loans as a result of Covid-19, a scenario that has yet to materialise.

The company revealed in April that it was in talks to sell its €9 billion performing loan book, almost entirely comprised of mortgages, to Bank of Ireland.

The development came less than two months after Ulster Bank, the only other remaining overseas-owned retail bank in the State following a number of exits in the wake of the financial crash, had confirmed that it was winding down.

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Options

KBC Bank Ireland is continuing to look at options for selling its non-performing loans portfolio, which declined in size by 6 per cent during the first half to €1.34 billion and represents 12.8 per cent of its entire loan book.

“The bank will provide an update when there are material developments related to any of the proposed transactions,” the unit’s new chief executive, Ales Blazek, said on Thursday, adding that, for now, normal day-to-day banking services remain the same for customers.

The wider KBC Group, based in Brussels, reported a net profit of €1.35 billion for the first half. Ulster Bank and Permanent TSB stand out among the five Irish retail banks in reporting first-half losses, albeit down sharply from a year earlier.

KBC Group, which entered the Irish market in 1978 by acquiring Irish Intercontinental Bank (IIB), was forced to inject €1.4 billion into the unit during the financial crisis to keep it afloat as loan losses spiralled. It has only managed to claw back a little over €400 million of the rescue funds.

Speculation

After reaffirming its commitment to the Republic in early 2017, following two years of heightened speculation, it signalled last year that it was doubling down in the market by launching a life and pensions offering to become a fully-fledged bancassurer, a model it has pursued in other core markets.

However, KBC Bank Ireland has been struggling to make an acceptable return in a low interest-rate environment and also in a country where banks have to hold much higher levels of capital against loans than the average European lender.

Bank of Ireland, led by chief executive Francesca McDonagh, made an approach to KBC in February on a potential deal, after learning late last year that the Belgian group may be reviewing its ongoing presence in Ireland.