KBC Group: Excellent first-quarter result of 630 million euros
Thursday, May 11, 2017 — Against the background of highly accommodating monetary policy, persistently low interest rates and further improving economic growth, particularly in Central Europe and Ireland, KBC turned in another strong performance with a net profit of 630 million euros, well up on the 392 million euros in the first quarter of 2016. It was down on the 685 million euros recorded in the fourth quarter of 2016, since it was distorted by the booking of upfront banking taxes in the first quarter. Our lending and deposit volumes as well as our assets under management continued to grow in the first quarter 2017. In addition to the fine business performance, costs remained under control, overall loan loss impairment charges were extremely low and our solvency position remained strong. For Ireland, our guidance for loan impairment is for a release of 120-160 million euros for full year 2017.
(full press release an presentation attached)
Financial highlights for the first quarter of 2017
Both our banking and insurance franchises in our core markets and core activities continued to perform strongly.
Quarter-on-quarter, lending to our clients increased by 1%, and deposits from our clients went up by 2%, with growth in both cases in almost all of our core countries.
Net interest income – our main source of income – continued to be impacted by the climate of low reinvestment yields, and fell by some 3% in the quarter. Our net interest margin came to 1.88%, down 2 basis points quarter-on-quarter.
Year-on-year, the premium income we earned on our non-life insurance products increased by 6% while claims fell 12%. Consequently, our non-life combined ratio for the first quarter of 2017 ended up at an exceptionally low 79%. Sales of our life insurance products decreased by 9% quarter-on-quarter.
Our net fee and commission income went up sharply, rising by 17% quarter-on-quarter thanks mainly to our asset management services.
Our other income items combined fell by 7% quarter-on-quarter; they included lower (but still high) trading and fair value income, higher gains realised on the sale of financial assets and lower other net income.
Our operating expenses were impacted by most of the full-year bank taxes being booked in the first quarter (361 million euros). Excluding these taxes, expenses increased by 2% year-on-year. As a consequence, when the bank taxes are evenly spread throughout the year and some non-operational items excluded, our cost/income ratio for the first quarter of 2017 stood at a comfortable 52%.
At 6 million euros, loan loss impairment remained extremely low in the quarter under review, thanks largely to impairment releases in Ireland. This brought our annualised cost of credit to a very low 0.02%. For Ireland, our guidance for loan impairment is for a release of 120-160 million euros for full year 2017.
Income taxes stood at 85 million euros and benefited from a one-off deferred tax asset of 66 million euros related to the liquidation of a group company.
Our liquidity position remained strong, as did our capital base, with a common equity ratio of 15.7% (fully loaded, Danish compromise).
Johan Thijs, our Group CEO, says:
‘We again performed very well in the quarter under review, notwithstanding the fact that the first quarter is traditionally impacted by the bulk of bank taxes for the full year being booked upfront. We are especially happy with the way our net fee and commission income has rebounded. This is evidence that we are succeeding in our ambition to diversify our income towards fee business such as asset management and insurance. This, together with the very low level of loan loss impairment and our continued focus on cost containment, has enabled us to post an excellent 630 million euros in net profit.
Clients borrowed more from us, and also increased their deposits and assets under management with us. All this is proof that our client-centric approach is clearly paying off. Moreover, our solvency position remained strong and comfortably surpassed the minimum capital requirements set by the regulators.
On the strategic front – and as already announced earlier this year – we have named Ireland as a core country, where we will focus on a ‘Digital First’ approach. In all of our other core markets too, we are continuing to pro-actively roll-out our financial technology plans so we can serve our clients even better going forward. Moreover, the recent appointment of a dedicated Group Chief Innovation Officer to our Executive Committee clearly reflects the importance we attach to digitalisation and innovation in our group.
However, we see digitalisation as a means rather than an end. We are in fact constantly looking at how we can adapt in order to respond to our clients’ changing needs. Indeed, in our business model, client-centricity is and remains the main pillar around which we define our future actions as a sustainable bank-insurer’.
* This news item contains information that is subject to the transparency regulations for listed companies. Details of the ratios and terms used are provided at the end of the quarterly report.