The mortgage market here will not return to full strength next year even as the wider economy recovers from the impact of Covid-19, according to the chief executive of KBC Bank Ireland.
Speaking to RTÉ News, Peter Roebbens said the bank's baseline expectation is for mortgage lending to reach around 80% of what would be seen as "full-steam".
"We still see a pick up of the economy next year, as well as a reduction in the very high levels of unemployment," he said. "But you’ll have a market that is definitely not going to reach the level of around €10 billion, which we would think is 'full-steam’.
"When it will recover will depend on the health context… and on what will happen with Brexit."
Mr Roebbens said the uncertainty stemming from those two factors meant it was possible to draw a much bleaker picture for next year, however he was not predicting such an outcome.
This morning KBC Bank Ireland announced €297m in new mortgage lending for the three months to the end of September.
That is up 66% on the second quarter, but is well down on the levels of lending seen in the same period of last year.
Mortgage completions for the year so far stood at €667m, down 16% on last year, however Mr Roebbens said this was a far better picture that expected in the early days of the pandemic.
"If you go back to March or April of this year, our expectations, and those of the industry, were much more dire," he said.
"We thought that we would have a mortgage market that would maybe only be 50% of its expectations, we are now trending to a market that will probably end up some 20-30% below where it was last year, and about 30% below where we hoped it would be this year."
This morning the bank also announced a €41m net loss for the year to date, largely due to the Covid-19-related provision it took in the first half of the year.
KBC comfortable with Covid provisions
Mr Roebbens said the bank was comfortable with the amount it had set aside so far and currently saw no need to increase that amount.
KBC Bank Ireland issued 6,900 Covid-related payment breaks - three quarters of which had already concluded.
Mr Roebbens said it would be closer to the end of the year before the bank knew exactly how many would require further support. However, based on its work to date, around 15% of customers who were meeting their payments before the pandemic would need some kind of short or longer term help with their loans.
For customers who were in a restructured arrangement before, the expectation was that they would seek to continue with a restructured plan once their payment break had come to an end.
Tracker mortgage examination 'unprecedented, unique'
In its results today KBC Bank Ireland did take a €4m charge to cover the Central Bank's €18.3m tracker mortgage examination fine, which was announced in September.
The bank had provisioned €14m for the fine, however Mr Roebbens said it was an "unprecedented, unique event" for which there was no benchmark.
He said they had tried to use the fine levied against Permanent TSB as a baseline and in the end its provisioning was not too far away from the actual amount required.
He said the tracker mortgage issue was a "deeply regrettable situation" which had not reached a conclusion.
Physical branches 'at the core' of KBC's offering
In September KBC Bank Ireland announced plans to close four of its branches, or 'hubs’, however Mr Roebbens said it was not the bank’s plan to ultimately withdraw from the high street altogether.
He said KBC was ‘digital first’, but that human contact was at the core of its offer.
He said the bank was accelerating its vision of making as many products and services available digitally, including its recently-launched pensions product, but that a physical presence would remain in order to support customers where necessary.
It has been suggested that KBC’s future plans could also include some kind of tie up with Ulster Bank, who’s Republic of Ireland operations are currently under review at parent company NatWest.
Mr Roebbens cited recent comments by KBC Group’s CEO that they were not talking to Ulster Bank about any kind of a link-up, though he did not completely rule out the potential for a deal down the line.
"If there are specific transactions on the table, we would look at that like we would look at anything else," he said. "But my mission is to build that model [of banking] and do more like we’re doing in the pensions sphere, in the life insurance sphere.
"That is where our focus is."
In today's results statement, KBC also said that 8,000 new current accounts were opened in the third quarter, with 77% opened online and over the phone.
It also noted that contactless payments rose by 65% year-on-year through KBC's range of digital and mobile wallets, while customer accounts increased 6% year on year to 318,000.