THE STATE's fifth-largest mortgage lender, KBC Bank Ireland (formerly IIB Bank), has reported a sharp rise in mortgage arrears to the end of September, reflecting the pressure on customer incomes and higher borrowing costs.
Belgian bank KBC reported in its third-quarter results that non-performing loans in its €13.6 billion Irish mortgage book - arrears of 90 days or more - amounted to 2.5 per cent at the end of September, up from just under 2 per cent three months earlier.
The Belgian bank's Irish mortgage book has the highest proportion of non-performing loans across the group's operations in eight European countries and compares with average arrears of 1.2 per cent across the banking group.
The average loan-to-value (LTV) ratio on outstanding Irish mortgages stood at 76 per cent, while the average LTV ratio on new mortgages was 79 per cent.
KBC Bank Ireland has an overall loan book of €19 billion.
The banking group posted its first loss since the bank was created in a 1998 merger relating to the falling value of credit investments. The bank posted a third-quarter loss of €906 million, compared with a profit of €639 million a year earlier.
KBC was the last major Belgian bank to seek government support after a downgrade of debt securities led to a writedown of €1.6 billion on its investment portfolio.
The bank raised €3.5 billion from the Belgian government last month and scrapped its dividend to protect against further credit losses. Investors "are expecting a severe recession to come our way in the coming months if not year", the bank's chief financial officer Herman Agneessens said. "We are fully prepared for it. We have a buffer to withstand it."
Having announced last month it had taken a €172 million writedown on bonds issued by Lehman Brothers and Washington Mutual in the US, KBC said yesterday that it may lose as much as €277 million from Icelandic bank defaults.
Provisions for bad loans will probably rise, chief executive officer Andre Bergen said. Loan-loss provisions more than doubled to €130 million in the third quarter. KBC fell 3.6 per cent to €33.50. The share price has declined 65 per cent this year. - (Additional reporting Bloomberg)
