Financial highlights for the second quarter of 2017
- Both our banking and insurance franchises in our core markets and core activities continued to perform strongly.
- On a comparable basis, lending to and deposits received from our clients continued to increase in all business units. Lending and deposits each went up by 2% quarter-on-quarter and by a respective 4% and 8% year-on-year.
- Net interest income – our main source of income – was slightly higher (+0.3%) than in the previous quarter (even after a technical shift to trading and fair value income), but was down 4% on its year-earlier level. The net interest margin came to 1.86%, down 2 basis points quarter-on-quarter and 8 basis points year-on-year.
- Year-on-year, the premium income we earned on our non-life insurance products increased by 6% while claims fell by 9%. Consequently, our non-life combined ratio for the first half of 2017 ended up at an exceptional 84%. Sales of our life insurance products decreased by some 12% quarter-on-quarter and were down 26% on the high level recorded a year ago.
- Our net fee and commission income remained strong: it went up 19% year-on-year, thanks in the main to our asset management services. Compared to the previous quarter, net fee and commission income slightly decreased by 2%.
- Our other income items combined rose 15% quarter-on-quarter and 4% year-on-year, thanks primarily to high trading and fair value income.
- Our operating expenses were significantly down on their level in the first quarter, which had included the upfront booking of most of the bank taxes for the full year. Excluding these taxes, expenses increased by 3% quarter-on-quarter and 5% year-on-year. As a consequence, when the bank taxes are evenly spread throughout the year and certain non-operating items excluded, our adjusted cost/income ratio for the first half of 2017 stands at a comfortable 53%.
- The quarter under review included 78 million euros in net loan loss impairment releases. This was due essentially to 87 million euros in impairment releases in Ireland, combined with a generally very low level of impairment in all other countries. Consequently, our cost of credit amounted to a very favourable -0.10% in the first half of 2017 (a negative figure indicates a positive impact on profit).
- Our liquidity position remained strong, as did our capital base, with a common equity ratio of 15.7% (fully loaded, Danish compromise), despite the first-time consolidation of United Bulgarian Bank and Interlease.
Johan Thijs, our Group CEO, says:
‘We have continued where we left off in the first quarter, delivering another excellent performance in the second quarter on the back of robust revenues – including resilient net interest income, solid net fee and commission income and high trading and fair value results – and the release of loan loss provisions, especially in Ireland. This resulted in an exceptionally strong 855 million euros of net profit being posted in the quarter under review. Combined with the 630 million euros recorded in the first quarter, this brings our net result for the first half of 2017 to 1 485 million euros, a 33% increase on the figure for the comparable period of 2016.
The second quarter was also an important one on the strategic front. First of all, we finalised the acquisition of United Bulgarian Bank and Interlease, which has enabled us to take a quantum leap in Bulgaria, one of our six core countries. We have now become a strong market player in this core market and will be able to make a significant positive impact on the banking, insurance, asset management and leasing businesses that we will pursue there.
Secondly, we fleshed out our ‘Digital First’ strategy in Ireland at an Investor Visit event in Dublin on 21 June. We also provided an update of our group strategy, our capital deployment plan and our financial guidance. We have summarised our updated strategy in the slogan ‘more of the same but differently’. This means that we will leave our highly successful business model and strategy largely unchanged, but adapt it to the new digital reality. In all of this, our clients will drive the pace of action and change.
Ultimately, our goal is to ensure that our clients, shareholders and other stakeholders benefit from our activities, something which all our employees are committed to working towards. In closing, I'd like to take this opportunity again to thank all the stakeholders who have put their trust in us to help them achieve their goals and dreams.’
* This news item contains information that is subject to the transparency regulations for listed companies.