KBC Ireland sees no new spike in distressed loans in longer lockdown

KBC Bank Ireland chief executive Peter Roebben said the lender has not seen a fresh surge in distressed borrowers seeking forbearance as a result of Covid-19 lockdowns since the industry stopped offering blanket payment breaks in September.

Some 98 per cent of the 6,843 payment breaks granted by KBC Bank Ireland to households and small businesses under the umbrella initiative have now expired, Mr Roebben told The Irish Times on Thursday, after the bank reported full-year figures. The number of payment breaks granted was 30 per cent below what the bank expected when the relief was first announced last spring, he said.

A fifth of the borrowers who availed of the payment holidays for up to six months had loans, mainly mortgages, that were categorised as non-performing beforehand, he said. Of the remaining 80 per cent, one in ten have needed further forbearance, including longer periods of payment holidays, reduced payments, and deeper restructuring measures.

“Those total final numbers are much less severe than what we feared in the second quarter. That’s actually a positive outcome and I think you see that reflected in the wider market. We’re not an outlier,” said Mr Roebben said, noting that Government supports have helped borrowers during the crisis.

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Economists have noted that many of the lower-paid workers in industries most affected to date by Covid-19, including in the leisure and non-essential retail sectors, are less like to have a home loan.

The bank CEO said there has “definitely been no special surge” in cases as the State went into Level 5 lockdown for a period in late October and again at the end of December.

Taoiseach Micheál Martin indicated to party colleagues on Wednesday evening that the current lockdown could last up to the beginning of May, with Government sources suggesting only key sectors such as education and construction will see an easing of restrictions early next month.

Impairment charge

KBC Bank Ireland has released €4 million – €2 million in each of the last two quarters of the year – of the €95 million impairment charge set aside in the first six months of 2020 to deal with the Covid-19 crisis, as headline economic figures have been better than expected since then.

The bank had the most pessimistic view in the market for Irish house prices at the height of the coronavirus shock last May, pencilling a 12 per cent slump in its calculations as it started to set aside loan loss provisions. As of November, residential property prices were little changed on the year, according to Central Statistics Office data.

Ireland's gross domestic product (GDP) probably grew by 2.5 per cent last year despite a series of national lockdowns as a strong multinational sector lifted the economy, the Central Bank forecast last month. KBC had factored in a 5 per cent GDP decline early last year.

Still, the extent of repeated restrictions and continuing economic uncertainty caused by the pandemic has limited the extent to which KBC Bank Ireland can release provisions.

The net €91 million Covid-related charge for the year pushed the bank into a loss of €48 million, compared to a profit of €32.3 million for 2019.

Meanwhile, the bank's level of legacy impaired loans reduced by €223 million to €1.43 billion to represent 14 per cent of the total portfolio. The company is part of the Belgian-based KBC Group.

KBC Bank Ireland benefited from an industry-wide surge in mortgage drawdowns late last year, with its new home loans lending jumping 30 per cent in the fourth quarter on the previous three months, to €386 million. While its total new mortgage lending declined to €1.05 billion for the year from €1.12 billion in 2019, its market share of business rose to 12.6 per cent from 11.8 per cent.

Fully fledged

During the year, KBC Bank Ireland became a fully fledged bank and insurance business with pensions and life product offerings from a local branch of the group’s Belgian insurance unit. While Mr Roebben said that activity in this space has “outperformed our ambitious” to date, he declined to give figures.

When asked if KBC Bank Ireland had any interest in parts of Ulster Bank, as the latter faces wind-down under scenarios being considered by its UK parent NatWest Group, Mr Roebben said that his focus is “on our customers and growing our business”.