BELGIAN-OWNED KBC Bank Ireland made a loss of €59 million in the first quarter of the year after writing off €142 million on bad loans due to higher losses on development loans and mortgages.
The bank sharply increased the bad loan charge in the first three months of the year after adjusting its expectation of the peak-to-trough house price declines from 40 per cent to 50 per cent.
The lower-than-expected values assigned by the National Asset Management Agency also led the bank to reduce assumptions on its own loans, even though the bank is not participating in the toxic loans scheme.
“Nama has an insight on how we look at the market,” said KBC chief executive John Reynolds.
The loan losses compare with €176 million set aside to cover bad debts for all of 2009, including €75 million for the last quarter.
The bad debt charge rose to 3.16 per cent of loans, on an annualised basis, up from 0.96 per cent for 2009. The bank said the overall bad debt charge for the remainder of the year should be lower.
Mr Reynolds added that “2010 will continue to be really tough and we expect to see some abatement next year”.
KBC’s parent bank in Belgium said that a decrease in loan losses internationally was offset by the higher bad debt charge in Ireland.
Non-performing loans across KBC’s €17.8 billion book climbed to 6.9 per cent from 4.6 per cent a year earlier, while “high-risk” loans increased to 13 per cent from 6.9 per cent.
Some 5.2 per cent of the €10 billion mortgage book was non-performing, up from 4.9 per cent three months earlier. Non-performing buy-to-let mortgages rose to 7.2 per cent of the €3.3 billion book from 6.4 per cent at the end of last year.
Just over 40 per cent of the bank’s €600 million development loans was non-performing at the end of March 2010, up from 35.3 per cent at the end of last year.
Some 10.2 per cent of the bank’s €1.3 billion property investment book was classified as non-performing at the end of March, an increase from 9.4 per cent.
Arrears on residential mortgages were “stable enough but at a high level”, said Mr Reynolds. “It is not showing any signs of improvement.”.
The loan book shrank by €200 million over the first quarter. The bank made an operating profit of €74 million before loan losses.
Mr Reynolds said KBC could provide about €600 million in new mortgages this year, maintaining its 10 per cent share of the market, but that demand remained low.
