(full press release attached)
Financial highlights for the fourth quarter of 2015, compared with the third quarter of 2015:
Both the banking and insurance franchises in our core markets and core activities prospered.
We again granted more loans in Belgium (+1% in just one quarter), the Czech Republic (+2%), Slovakia (+4%) and Bulgaria (+3%), while clients further increased their deposits in most of our countries: the Czech Republic (+3%), Hungary (+8%), Slovakia (+3%), Bulgaria (+4%) and Ireland (+1%).
Net interest income was slightly higher despite the low interest rate environment and some pressure on lending margins. Our net interest margin narrowed from 1.99% to 1.95%.
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 91% for the full year. Aggregate sales of life products increased, with the Czech Republic turning in a particularly impressive performance.
Clients continued to entrust their assets to KBC. Total assets under management of our group ended higher at 209 billion euros, thanks to net entries and the market performing well. Our net fee and commission income dropped by 3%, due mainly to lower management fees stemming from a more cautious investment allocation.
Excluding special bank taxes, end-of-year costs were seasonally up, primarily at the Group Centre. The cost/income ratio stood at a good 55% for the full year.
The cost of credit for 2015 amounted to an excellent 0.23% of our loan portfolio.
The previously announced liquidation of KBC Financial Holding Inc. resulted in a positive income tax figure and a negative net result from financial instruments at fair value of 765 million euros, combined.
Impairment on goodwill came to 344 million euros in the fourth quarter, though it did not impact our capital ratios.
Our liquidity position remains solid, and our capital base – with a common equity ratio of 15.2% (phased-in, Danish compromise) – remains well above the regulators’ target, even after repayment of the final instalment of state aid.
Johan Thijs, our group CEO added:
‘Clients continue to entrust their assets to us and to rely on us for the realisation of their projects. We are genuinely grateful for that. It’s all systems go at KBC and the results show that our client-centric approach is paying off. We posted an excellent result of 2.6 billion euros in 2015. Some 862 million euros of that figure came in the last quarter, thanks to the good performance of the underlying business and exceptional items.
The underlying business thrived as illustrated by the increase in lending, as well as growth in assets under management and insurance contracts. A continued focus on cost control and excellent cost of credit are adding to the prosperity of the business.
The announced liquidation of KBC Financial Holding has taken place, leading to a post-tax impact on the result of 765 million euros.
Besides that, higher local capital targets and a higher discount rate lay behind impaired goodwill totalling 344 million euros being recorded almost entirely on our businesses in Bulgaria and Slovakia. This had no impact on our capital ratios. The franchise, reputation and opportunity of these businesses are beyond dispute.
On the regulatory front, we were informed during the fourth quarter of 2015 of the new minimum capital requirements, i.e. a common equity tier-1 (CET1) ratio of at least 9.75%, phased in under the Danish compromise. At the end of October, the National Bank of Belgium also announced its new capital buffers for systemically important Belgian banks. For KBC, it means that an additional capital buffer of 0.5% of CET1 (phased in under the Danish compromise) is required for 2016. We feel comfortable with these targets, which we had already factored in to our capital management models.
That is also why we were able to pay back the last remaining tranche of 2 billion euros of state aid, along with a penalty of 50%, to the Flemish Regional Government at the end of 2015, five years ahead of schedule. In doing that, we have met all the remaining financial obligations imposed on us during and after the recent financial crisis, and have closed that chapter completely. We are extremely grateful to the government and our clients, employees and shareholders for their trust and support during that time.
In line with our previously announced intention, it will be proposed to the annual general meeting that no dividend be paid for 2015.
Our aim for 2016 is to build on the momentum of previous years and, in particular, to assume our role in society as a client-centric organisation. Our bank-insurance model, supported by solid liquidity and capital bases, allows us to generate sustainable results. However, the continuing low level of interest rates remains a challenge for the entire financial sector. And volatility on the financial markets presents a challenge for our fee business. Fundamentally, we are continuing to invest in the future and to pro-actively roll out our financial technology plans so we can serve our clients even better than today.’