KBC Bank is targeting up to 25% of the new mortgage market in Ireland. The bank's Belgian parent is prepared to commit another tranche of new mortgage funding to the bank's Irish home-loans division if it manages to lend up to €1bn this year through two new mortgage products, according to market sources.

Sources said the group has a further €1bn waiting in the wings for KBC Homeloans if the distribution of the first instalment goes well. The two portions together could give KBC up to 25% of the new lending market, which shrank to €8bn last year, according to Irish Banking Federation figures.

The lender indicated to brokers two weeks ago that it had an estimated €800m-€1bn to lend for 2010 and would be introducing a switcher mortgage and offset mortgage to its product mix to attract new customers and increase its 10% home-loans market share.

The move signals a return to the market after the bank effectively shut down to new business in 2009 amid rising arrears in Ireland. Brokers told the Sunday Tribune that KBC had now reversed course and was "beating the bushes" for the "right type" of borrower. They also said KBC's apparent strategy indicated the bank wanted to snatch the best available borrowers at the bottom of the price curve leaving the domestic banks with bad risks and bad loans.

KBC Bank Ireland, headed up by John Reynolds, declined to comment except to say it intended "to continue its long established business of seeking prudent lending opportunities with creditworthy customers".

Last November KBC Group chief financial officer Luc Philips said the bank would not be selling its Irish division as part of a restructuring mandated by EU commissioner Neelie Kroes, even though it was not considered a core part of the business. KBC Bank Ireland's profits fell 25% to €115m in 2008 and the Irish unit had the highest share of non-performing loans across the whole KBC group.