KBC Bank Ireland plc Annual Report

Transcription

1 KBC Bank Ireland plc Annual Report 2008 Member of the KBC group

2 Contents 2 Board of Directors 3 Chairman s Statement 4 Chief Executive s Review 6 KBC Bank Profile 7 Summary Consolidated Income Statement 8 Summary Consolidated Balance Sheet 10 Management 11 Corporate Governance and Company Information 12 About KBC Pictured from left to right are Rita Seymour and Paula Ryan, Receptionists, KBC Bank Ireland s Head Office, Sandwith Street Dublin 2.

3 We start from the principle that every client is our only client. We are committed to integrity and excellence, using our strength and expertise to bring value to our customers, our shareholders, our staff and our community. 1

4 Board of Directors Guido Segers Chairman Ted Marah Chief Executive John Reynolds Chief Executive Designate Christine Moran Executive Director Tom Foley Executive Director Luc Gijsens Non-Executive Director James Kelly Non-Executive Director Paddy Mullarkey Non-Executive Director Ian Black Company Secretary 2

5 Chairman s Statement The performance of the Irish economy in 2008 reflected the sharp downturn in the international economic environment and the decline in domestic demand. Global financial market s importance to and influence on domestic financial systems were underlined by the pace at which the disruption of those markets has affected all major economies. While the intervention by national monetary and fiscal authorities has been unprecedented in its size and scope, with assistance provided to the banking sector through guarantee arrangements and capital injections along with actions to stimulate the economy such as rapid interest rate reductions, most developed economies are in recession. The Irish economy shrank by about 1% in 2008 and is expected to decline by over 4% in 2009 which will be well above the European average. Against this backdrop, the Bank continued to show strong resilience in 2008 achieving an operating profit of 103 Million before return on debt capital notwithstanding rising credit and liquidity costs. This represents a satisfactory outturn in a challenging environment. With capital resources strengthened in recent years, a robust and efficient business model and a strong track record of prudent management, we remain confident that the Bank will surmount the challenges ahead and continue to deliver a successful performance in Across the KBC Group, we place a very strong emphasis on high standards of corporate governance and take pride in the honesty, integrity and ethical behaviour of our management and staff. These standards are and always have been a hallmark of our colleagues in Ireland. I would like to pay tribute to Ted Marah and the management team and staff for their contribution to the Bank s success in The Bank continued to show strong resilience in 2008 achieving an operating profit of 103 Million... After almost 35 years service with KBC Bank Ireland (fifteen of them as Chief Executive) Ted has decided to retire from the role to commence a well deserved retirement. During his long career he has successfully steered the Bank through a series of economic cycles and business initiatives. I am pleased that he will continue to serve on the Board as a non-executive director. He will be succeeded as Chief Executive by John Reynolds who joined the Bank in early 1985 and has been an Executive Director and member of the Executive Committee since We have every confidence that, under John s leadership, the Bank will continue to be a significant and successful participant in the Irish market. Guido Segers Chairman MARCH

6 Chief Executive s Review was an extremely difficult year for the Irish Economy with the deterioration evident in the latter half of 2007 gathering pace over the course of the year and continuing into The turbulence in global financial markets has extended to the wider global economy with most developed economies facing a rapid decline after a prolonged period of stable economic growth. Against this backdrop, I am pleased to report a satisfactory outturn for the year, with operating profit before return on subordinated debt capital of 103 Million while loans and advances to customers were 6% higher at circa 19 Billion. The Bank s solid capital base with the continuing support of its parent KBC Bank NV provides a robust foundation for weathering the current storm. The capital position improved over the year with core Tier 1 ratio at 31 December 2008 of 9.2% and a solvency ratio of 10.8%. To coincide with the 30th anniversary of KBC s involvement in the Bank, our name was changed to KBC Bank Ireland plc and our home loans business was rebranded KBC Homeloans. This reflects the strong relationship with the shareholder and the building by KBC of a consistent international identity for its operations across Europe and other markets. Liquidity was a key focus for all banks during 2008 and our institution was no exception. The introduction of the Government Support Scheme for seven of the Irish banks inevitably led to a dispersion in flows from banks, including KBC Bank Ireland, which were not included in the Guarantee Scheme. We very much appreciated the Government s prompt action in extending the number of institutions eligible for participation in the Scheme to include this Bank although, in the end, we chose not to participate. The KBC Group operates an integrated global liquidity policy under which KBC Bank Ireland has access to the strong liquidity position and retail and corporate deposit capacity of the Group. Additionally during 2008 we undertook two successive securitisations of residential home loans amounting in aggregate to 10.7 Billion generating significant additional access to funding. The sharp reduction in economic activity in Ireland during the year reflected negative consumer sentiment, rapid decline in asset valuations, increasing unemployment and concerns over the stability of employment in many sectors, together with increasing concern over the impact on public finances in the short and medium term. There was a marked weakening in demand across the markets in which the Bank operates with business weakness increasingly evident in the third and fourth quarters. Our key focus in business lending continues to be on the SME market where the strong performance in recent years in servicing small and medium enterprises continued. The rapid downturn in demand, difficult competitive environment, adverse exchange rate environment and the tight credit environment will undoubtedly continue to place strain on many of our business customers. Our approach is to work in partnership with long standing and viable customers in navigating through these difficult times. The adjustment in the housing market was particularly sharp. The Irish residential mortgage market has undergone a substantial repositioning during the year as housing output fell from the peak in Housing completions fell from 78,000 in 2007 to 52,000 in 2008 and are expected to fall further in 2009 to below 25,000 units as the supply market responds to the slowdown in demand. House prices retreated from their peak in 2007 as demand remains weak and buyers anticipated further price falls. While recent interest rate reductions have improved affordability, we expect that activity in the mortgage market will remain at low levels during KBC Homeloans will play its part in supporting house buyers who choose to enter the market and work with those existing customers struggling with worsened economic circumstances. The outlook for 2009 is challenging, with most observers expecting further deterioration in the domestic and international economic climate. We are committed to actively managing the quality of our loan portfolio and working with our customers to ensure that we are well positioned to deal with the challenges ahead and avail of improved economic conditions when they occur saw a sharp growth in our provisions for impaired loans across the bank s loan portfolio. Notwithstanding what we consider to be a prudent approach to risk, we anticipate that further significant impairment charges cannot be ruled out during However, as the results for 2008 indicate, our underlying earnings provide a strong base to absorb any such further impairments. KBC Bank Ireland s success is founded on the strong relationships built with our customers and intermediaries and a dedicated and professional management and staff committed to growing and developing those relationships. It has been a great privilege to have been part of this fine institution since its foundation and to have served as Chief Executive for the past fifteen years. Upon my impending retirement from the role I will be succeeded by John Reynolds. I and the Board have every confidence in John and the management team to continue to lead the Bank successfully through these turbulent times and I join with the Chairman in wishing them continued success in the years ahead. Edward A Marah Chief Executive MARCH 2009

7 Pictured from left to right: Guido Segers, Chairman, Ted Marah, Chief Executive and John Reynolds, Chief Executive Designate, kbc Bank Ireland plc. 5

8 KBC Bank Profile Banking for Business Business Banking We take your business personally Through our dedicated team of Relationship Managers, KBC Bank Ireland s mission is to provide a comprehensive range of financial solutions to growing businesses. Our key strategic focus continues to be owner-managed businesses throughout the country, with an emphasis on a personal approach to business lending. We believe that building strong relationships with our customers is important, thereby ensuring the best possible solution is delivered to each of our customers as they expand their businesses. Our success is attributable to our understanding of the sectors in which we operate and our strong association with industry bodies, local business groups and chambers of commerce. In 2008, KBC Bank Ireland partnered our customers countrywide, across a wide range of businesses and sectors. We are also one of the leading providers of finance to the growing healthcare sector including nursing homes, retirement homes and primary healthcare centres through to private hospitals. Corporate Banking and Treasury Global reach, local expertise KBC Bank Ireland is a leading financial partner to all segments of Irish Business. Through our international network, we provide services ranging from international cash management, cross border payments, electronic banking services and M and A services which are proving particularly attractive to clients with operations in Western and Central European Markets. Complementary to our lending capabilities, our Treasury and Capital Markets team provides a wide range of sophisticated products and services to the Bank s SME and Corporate client base, including the provision of products to assist companies manage their interest rate and foreign exchange exposure. Our strengths are a capacity to deliver innovative products that match client requirements coupled with a customer focus that ensures competitive pricing and delivery. In an increasingly complex world of financial products, the expertise of a highly experienced team, enhanced by our access to the global reach of KBC, means that our customers benefit from an exceptional resource. Our services range across the spectrum of highly specialised money, foreign derivatives, foreign exchange and capital markets. This is supported by expert commentary on developments in global financial markets and their impact on the local economy. Banking for People Homeloans Continuing excellence Our mortgage company, KBC Homeloans continued to grow its mortgage book in 2008 and in line with our reputation for innovation, we started the year with the launch of the new Saver Mortgage. The Saver Mortgage complemented the existing broad range of products that KBC Homeloans offers first time buyers, switchers, house-buyers looking to tradeup and residential property investors. KBC Homeloans has always emphasised its strong relationship with mortgage intermediaries and in 2008 we continued to focus on delivering products and services that are attractive to new and existing customers. We believe that our commitment to excellence in service and value for money is a vital part of what makes us successful. By the end of 2008, KBC Homeloans had implemented a number of internal initiatives to align our business to meet the demands of the new market environment. Wealth Management Services built around you KBC Bank Ireland is dedicated to serving our customers, both direct and intermediary, through relationships based on integrity and trust. Our mission is simple; to develop and deliver first class innovative and tailored financial solutions which address each client s wide range of investment needs. We provide wealth enhancement, wealth protection and wealth transfer solutions through the delivery of a full spectrum of financial options. 6

9 Summary Consolidated Income Statement At 31 st December Net operating income 235, ,932 Operating expenses (65,425) (61,439) Impairment losses on loans and advances (55,431) (4,988) Operating profit before corporation tax 114, ,505 Corporation tax (11,533) (16,304) Profit for the year 103, ,201 * Net operating income is stated before interest on subordinated loan capital. 7

10 Summary Consolidated Balance Sheet At 31st December Share Capital, Premium and Reserves Ordinary Share Capital 465, ,048 Capital Conversion Reserve Fund Share Premium 27,051 27,051 Reserves 444, ,562 Shareholder s Funds 937,071 1,000,308 Other Debt Capital 205, ,000 Capital Employed 1,142,071 1,205,308 Current Liabilities Parent and other Bank Funding 13,528,330 12,901,187 Deposits from Customers 5,257,350 9,104,692 Other Liabilities including Taxation 1,178, ,605 Total Liabilities 21,106,577 24,074,792 Directors Statement The Directors have prepared the Summary Consolidated Balance Sheet above for the purposes of compliance with Section 20 of the Central Bank Act, 1971 using the information contained in the group s statutory balance sheet included in its annual statutory financial statements. Approved by the Directors on 2 nd March Approved by the Board on 2 nd March Guido Segers Edward A Marah John H Reynolds Ian A Black Chairman Chief Executive Director Secretary 8

11 Current Assets Balances with Banks and Money at Call or Short Notice 777,484 4,942,939 Securities 1,011,937 1,061,095 Loans and Advances to Customers 18,753,978 17,683,884 Other Assets 552, ,004 21,095,618 24,061,922 Fixed Assets 10,959 12,870 Total Assets 21,106,577 24,074,792 Independent Auditors Statement to the members of KBC Bank Ireland plc on the Summary Consolidated Financial Statements for the year ended 31 December We have examined the summary consolidated financial statements for the year ended 31 December 2008, which comprise the summary consolidated income statement and summary consolidated balance sheet. Respective Responsibilities of Directors and Auditors The Directors are responsible for the preparation of the summary consolidated financial statements for the purposes of compliance with Section 20 of the Central Bank Act, We have agreed to report to you our opinion on the consistency of the summary consolidated financial statements with the statutory consolidated financial statements, on which we reported on 26 March We also read the other information contained in the summary annual report and consider the implications for our report if we become aware of any apparent misstatements within it. Basis of Opinion We have carried out the procedures we consider necessary to enable us to report our opinion on whether the summary consolidated financial statements have been properly compiled based on the statutory consolidated financial statements. Opinion In our opinion the summary consolidated financial statements are consistent with the statutory consolidated financial statements for the year ended 31st December We have not considered the effects of any events between the date on which we signed our report on the statutory consolidated financial statements and the date of this statement. This report is made solely to the company s members, as a body. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company s members as a body, for our work, for this report, or for the opinions we have formed. Ernst and Young Chartered Accountants and Registered Auditors Dublin 26 th March

12 Management Board of Directors Guido Segers Edward A. Marah John H. Reynolds Thomas J. Foley Christine Moran Paddy H. Mullarkey Luc Gijsens James Kelly Chairman (Belgian) Chief Executive Executive Director / Chief Executive Designate Executive Director Executive Director Non-Executive Director Non-Executive Director (Belgian) Non-Executive Director Ian Black Company Secretary Executive Committee Ted Marah Tom Foley Christine Moran John Reynolds Chief Executive Homeloans and Wealth Management Banking and Treasury Chief Executive Designate Ian Black Banking Hugo Doherty Michael Gilmartin Barry Kealy Aidan Devlin Ger White Credit Siobhan Lynch Homeloans John Delaney Charlie Kiernan Richard Sloane Chief Financial Officer and Company Secretary Business Banking Corporate Banking Banking Credit Management Corporate Relationship Banking Business Banking - South and West Credit Homeloans Operations Broker Relationships Homeloans Credit Management Treasury and Capital Markets Terry Sullivan Austin Hughes Mark Barnes Eileen Parsons Treasurer Chief Economist Trading Asset and Liability Management Wealth Management Tony Barnes Wealth Management Group and Support Services Brian Austen Sinead Brennan Michael Martin John McAlinden Rickard Mills Damian O Neill Honorary President Patrick C. McEvoy Internal Audit Human Resources Information Technology Marketing Taxation and Pensions Regulatory, Risk and Compliance 10

13 Corporate Governance Company Information Commitment to integrity is a cornerstone of our mission statement. KBC Bank Ireland is committed to maintaining the highest standards of corporate governance, ethics, business integrity and professionalism in all of our activities. These standards are embedded in the corporate culture, reflected in our code of conduct, and reinforced through continuing communication and training. Role of the Board The Board is the principal decision making forum for the company and is responsible to the Shareholder and other stakeholders for the leadership, direction and control of the Bank. It establishes the strategic objectives, corporate values and ethical standards that drive the activities of the Bank. Audit Committee The Audit Committee receives reports on various aspects of control, reviews the findings, conclusions and recommendations of the internal and external auditors, the internal audit and regulatory compliance functions, and ensures no restrictions are placed on the scope of the statutory audit or on the independence of the internal audit or compliance functions. KBC Bank Ireland plc Share Capital 000 Authorised 500,000 Issued Ordinary 465,048 Held by KBC Group 100% Registered Office Sandwith Street Dublin 2 Registered in the Republic of Ireland Number Tel: (353 1) Fax: (353 1) firstname.surname@kbc.ie Swift Code ICON IE2D website: Auditors Ernst and Young Harcourt Centre, Harcourt Street, Dublin 2 Solicitors Arthur Cox Arthur Cox Building, Earlsfort Terrace, Dublin 2 Internal Control and Risk Management The Board acknowledges its overall responsibility for the Bank s system of internal control and for reviewing its effectiveness. The Board has established a process for the identification, evaluation and management of the significant risks faced by the Bank, and regularly reviews this process. 11

14 KBC is a financial services group active in the fields of banking, insurance and wealth management. One of the top bancassurers and asset managers in Belgium, the KBC Group also has a key position in Central and Eastern Europe and has the disposal of a pan-european private banking network. Strategy Focusing on the development of its retail and SME customer base, KBC s strategic objective is to be an independent, and profitable bancassurer and wealth manager in Europe. Its strategy revolves around the following main activities: Retail and Private Bancassurance KBC engages in multi-channel retail distribution via bank branches, insurance agents/brokers and the Internet. Cross-selling of banking, insurance and asset management products is a core profit-driver. The bulk of the business is generated in Belgium and in a number of Central and Eastern European countries. European Private Business KBC has built a network of institutions specialising in private wealth management activities covering a number of Western-European countries. Merchant Banking KBC is active in the field of, Inter alia, commercial banking, corporate finance, leasing, factoring, reinsurance, insurance brokerage, project and trade finance and various market activities in Belgium, Central and Eastern Europe and elsewhere (mainly in Europe). The strategic emphasis is on serving small and middle-sized business customers. Major Shareholders 31/12/2008 Syndicate of core shareholders 53% KBC Group companies 5% Free Float 42% Staff (fte) 31/12/2008 Belgium 18,149 Central and Eastern Europe 35,583 Ireland 522 Rest of the world 5,025 Total 59,279 Website Information 12

15 Principal Subsidiary Company KBC Mortgage Bank Sandwith Street, Dublin 2 Tel: (353 1) Fax: (353 1) firstname.surname@kbc.ie website: Regional Offices Belfast 1 Lanyon Quay, Belfast BT1 3LG Tel: (44 28) Fax: (44 28) firstname.surname@kbc.ie Cork 52 South Mall Cork City Tel: (353 21) Fax: (353 21) firstname.surname@kbc.ie Other KBC Companies in Ireland KBC Asset Management (KBCAM) Ltd. Joshua Dawson House, Dawson Street, Dublin 2 Tel: (353 1) Fax: (353 1) website: KBC Bank NV Dublin Branch KBC House, 4 George s Dock, IFSC, Dublin 1 Tel: (353 1) Fax: (353 1) firstname.surname@kbcbank.ie KBC Finance Ireland KBC House, 4 George s Dock, IFSC, Custom House Dock, Dublin 1 Tel: (353 1) Fax: (353 1) firstname.surname@kbcbank.ie Galway 4 Dockgate Dock Road, Galway Tel: (353 91) Fax: (353 91) firstname.surname@kbc.ie Limerick Riverpoint Bishops Quay, Limerick Tel: (353 61) Fax: (353 61) firstname.surname@kbc.ie 13

16 Banking for Business and People KBCAR180209