KBC 3Q2015: Strong quarterly profit of 600 million euros

(Full press release attached)

Financial highlights for the third quarter of 2015, compared with the second quarter of 2015:

• Both the banking and insurance franchises in our core markets and core activities turned in a good performance.

• We again granted more loans in Belgium (+2%), the Czech Republic (+2%), Slovakia (+5%) and Bulgaria (+3%), while clients further increased their deposits in most of our countries: the Czech Republic (+2%), Hungary (+1%), Slovakia (+3%), Bulgaria (+4%) and Ireland (+4%)

• Lower prepayment fees and the low interest rate environment caused our net interest income to contract by 3%, and the net interest margin narrowed from 2.06% to 1.99%

• Sales of non-life insurance products across all our markets were up year-on-year, and the non-life combined ratio stood at an excellent 89% year-to-date. Sales of life products decreased.

• Clients further increased their assets managed by KBC. Total assets under management of our group ended somewhat down at 200 billion euros, despite these positive net entries, mainly as a result of the weak market performance. Our net fee and commission income dropped substantially due to lower sales and the weak market performance from very strong levels in the second quarter and is estimated to end in the range of 360 to 370 million euros for the fourth quarter

• The result from financial instruments at fair value was modest given the stable valuation of the derivatives we use for asset/liability management purposes and weak level of dealing room income, among other factors.

• Excluding special bank taxes, costs were down 2%. The cost/income ratio stood at a good 54% year-to-date.

• The cost of credit amounted to a low 0.23% of our loan portfolio year-to-date.

• Our liquidity position remains solid, and our capital base – with a common equity ratio of 17.4% (fully loaded, Danish compromise) – remains well above the regulator’s target.

Johan Thijs, our group CEO added:

‘The confidence and trust we receive from both existing and new clients show that our approach is paying off. We posted an excellent result of 600 million euros in the third quarter through our strong banking and insurance franchise, and achieved it in challenging economic times. Clients’ trust in us is reflected in the growth of our deposit base, our loan book and the net increase in sales of our investment products as well as through our insurance products. I am also very pleased to see that a profit was recorded this quarter in all our countries. However, the continuing low level of interest rates remains a challenge for the entire financial sector. And the volatility in the financial markets puts a challenge on the fee business. Nevertheless, we continue to invest in the future and are pro-actively rolling out our digitalisation plans further in order to serve clients even better.

On the regulatory front, the National Bank of Belgium announced its new capital buffers for Belgian systemically important banks, including ours. The regulator’s decision clarifies for the group and our stakeholders the capital requirements KBC must meet. We feel comfortable with the size of the additional buffer that the National Bank is asking and that we had already factored in to our capital management models. As our capital position is currently very robust we can easily absorb this extra buffer and still stick to our strategic ambitions and planned dividend pay-out ratio of at least 50%. That is a comforting signal to all stakeholders who put their trust in us.’

Please read full press release attached.