With so many banks pulling out of the Irish market and many of the remaining financial institutions wary about offering mortgages in what has become a difficult sector, is there an opportunity for a mortgage provider to do things differently?

KBC

John Casey, the new head of the Broker and Intermediary Division at KBC Groep NV (EBR:KBC) (OTCMKTS:KBCSF) thinks so. Casey says he expects the overall mortgage market to grow by around €1 billion to as much as €3.5 billion in 2014 and KBC is gearing up to take their slice of the cake.

“Assuming a 10% share, KBC Groep NV (EBR:KBC) (OTCMKTS:KBCSF) will write more than €300m of new mortgages in 2014, compared with about €100m this year,” he said.

Room for growth?

The bank is planning on a massive expansion in the Irish market, by taking business away from Allied Irish Banks PLC (ADR) (OTCMKTS:AIBYY) and Bank of Ireland (ADR) (NYSE:IRE). When asked how KBC would do this, a spokesperson told ValueWalk:

“KBC Bank Ireland expects an increase in new mortgage business in 2014 in line with our retail expansion program and continued recovery in the market. At KBC Groep NV (EBR:KBC) (OTCMKTS:KBCSF), we expect the First Time Buyer and Mover segments to continue to be the main growth segments in 2014.”

Clearly, the mortgage market in Ireland is a troubled sector with Ireland’s economic problems and the issue of strategic defaulters dominant throughout the media. Given the risks, will KBC Groep NV (EBR:KBC) (OTCMKTS:KBCSF) be able to profit?

“Although only two weeks into the New Year, the early indicators are proving positive. There is strong activity in terms of enquiries and inflows of applications through all KBC Groep NV (EBR:KBC) (OTCMKTS:KBCSF) channels.”

KBC Groep opening up new sales channels

Casey says KBC Groep NV (EBR:KBC) (OTCMKTS:KBCSF) is planning to target mortgage brokers, although KBC is increasingly selling mortgages through branches, pop-up outlets and online.

“We’ll differentiate ourselves in terms of service as well as price. When lending volumes are ramped up, it tests your service,” he explained.

At it stands, KBC Groep NV (EBR:KBC) (OTCMKTS:KBCSF)’s lending criteria could be a problem. The bank offers a maximum 80% mortgage for purchases outside main urban areas and 90% within 50km of major cities. Can the bank afford to be more flexible here?

“KBC Groep NV (EBR:KBC) (OTCMKTS:KBCSF) continues to maintain competitive rates and provide a compelling mortgage offering to all mortgage segments, and our credit criteria is reviewed on a regular basis.”

Opportunity in a shrinking market

Many would view the Irish mortgage market as a very risky bet right now, but with rival banks exiting the market, the lack of competition will mean opportunity, even in a difficult economic climate.

KBC increased its customer base by 25% during 2013 with new current accounts and is set to launch as life assurance product in partnership with Irish Life. There are plans to open five new branches and Dara Deering, head of retail banking, says there are credit card and personal loan products on the way. It’s likely that Casey will find his new customers among those who are fed up with their current providers, and he may not have to be offer too much to win them over.