Today, KBC Ireland has published its annual report for 2012. It had previously announced its 2012 results in February 2013, so there isn’t very much that is new but it’s still worth a blogpost. For information, the Belgian KBC group report and accounts for 2012 are available here.
We learn that KBC Ireland has a new chairman, the bank’s fifth in five years. The new chairman is Danny de Raymaeker but it’s an exotic name to remember and he mightn’t be around for long, so probably no need for pronunciation tips. There are also two recent Belgian additions to the Irish bank’s board, Bart Guns and Jan Gysels and these two gentlemen are now the chair and deputy chair of the Irish risk committee at the bank. Something tells me the Belgian parent company is getting serious about the problems at the Irish unit.
KBC had another bad year in Ireland in 2012 and it lost €350m before tax, compared with €308m before tax in 2011. By the standards of AIB, Bank of Ireland and PTSB, these are small losses. Impairments on loans increased from €525m in 2011 to €547m in 2012.
KBC managed to add 22,000 new deposit customers during the year which was no mean feat in the Irish market, and its deposits grew from €1.7bn in 2011 to an impressive €2.7bn in 2012, attracted by comparatively high interest rates. Its loan book shrank from €16bn to €14bn, partly because of the €0.5bn impairment and partly with loan redemptions and practically no new lending. KBC Ireland doesn’t provide Loan-to-Deposit figures but the above implies the bank has a ratio of 523% which is scary though it’s down from 922% in 2011 – KBC Ireland has traditionally been funded by its Belgian parent rather than domestic depositors.
KBC in Belgium shoveled €380m into the Irish bank in 2012, and remember this ultimately comes from a bailout by the Belgians – the Irish aren’t the only patsies in Europe. The total bailout to date of the Irish unit is €930m. The €380m injection in 2012 appears to be shown in the abbreviated balance sheet as “other equity investments” and compares with nil on this line description in 2011. KBC Ireland has equity of €0.9bn versus assets of €17bn. The Central Bank has been asked about this transaction, but we’re unlikely to get a quotable response as the CBI doesn’t comment on the capital position of individual banks. There is no reference to the €380m at all in the parent company’s report.
What would happen if the Belgian parent decided to cut its losses in Ireland? What if the Belgian government rushed through a KBC Ireland special liquidation? The deposits under €100,000 would be covered by the Central Bank’s Deposit Guarantee which had €400m on hand at the end of 2012. The Belgian parent has at all times been supportive of the Irish operation and has not indicated it is considering its options, but the latest set of accounts, along with the parachuting of Belgians to the board of management, must give everyone pause for thought.