KBC Group: First-quarter result of 430 million euros
Outside trading hours - Regulated information*
Thursday, May 16, 2019
- Commercial bank-insurance franchises in our core markets performed well.
- Lending volumes were up 1% quarter-on-quarter and 5% year-on-year (adjusted for the sale of part of the Irish loan book in the last quarter of 2018), with year-on-year increases in all business units. Deposits including debt certificates were up 2% quarter-on-quarter and 6% year-on-year, with year-on-year increases in all business units.
- Net interest income was more or less flat year-on-year. It was down 3% quarter-on-quarter, due to several factors, including pressure on loan margins and the low reinvestment yields in our euro area core countries, which more than offset the positive effect of general loan volume growth, the positive impact of interest rate increases in the Czech Republic, and lower funding costs.
- Earned premium income from our non-life insurance activities went up 10% year-on-year, but this was offset by higher technical charges, due in part to storms and large fire claims. The combined ratio for the quarter under review amounted to a good 93%, compared to 88% for full-year 2018. Sales of our life insurance products were up by 1% and 4% on their level in the previous and year-earlier quarters, respectively.
- Net fee and commission income was slightly up (1%) quarter-on-quarter. It was down 9% year-on-year, mainly due to generally lower asset management-related entry and management fees.
- All other remaining income items combined were up 85% quarter-on-quarter, owing essentially to higher trading and fair value income. Year-on-year, such other income items decreased by 9%, mainly due to lower dividend and net other income.
- Excluding bank taxes (the bulk of which are recorded in the first quarter of the year), costs were down 4% quarter-on-quarter (partly a seasonal effect) and 1% year-on-year. In both cases, one-off items account for part of the variance. When certain non-operating items are excluded and the bank taxes are evenly spread throughout the year, the cost/income ratio amounted to 57% in the first quarter of 2019, in line with the figure for full-year 2018.
- The quarter included a 67-million-euro loan loss impairment charge, compared to a 30-million-euro charge in the previous quarter and a net release of impairments of 63 million euros in the year-earlier quarter. The annualised cost of credit for the quarter amounted to a still benign 0.16% in the first quarter of 2019, compared to -0.04% for full-year 2018 (a negative figure indicates a positive impact on the results).
- Our liquidity position remained strong, as did our capital base, with a common equity ratio of 15.7%, or 15.8% when including the net result for the first quarter, taking into account the full-year 2018 payout ratio of 59% (dividend + AT1 coupon). Our leverage ratio amounted to 6.0% at the end of March 2019.
See the full press release in attachment.
Johan Thijs, Chief Executive Officer
We generated a net profit of 430 million euros in the first quarter of 2019. This is a good result, considering that we – as usual – recorded the bulk of the bank taxes for the full year in the first quarter (382 million euros in the first quarter of 2019). Excluding the bank taxes, the net result even surpassed the previous quarter’s net result by 9%, thanks to a slight increase in total income and lower costs (excluding bank taxes), despite somewhat higher loan loss impairment charges. Adjusted for the sale of a legacy portfolio in Ireland last year, lending to customers increased by 5% year-on-year, and deposits including debt certificates rose by 6%. Sales of non-life and life insurance products also went up year-on-year by 9% and 4%, respectively. Our solvency position, which does not include the profit of the first quarter of 2019, remained strong too, with a common equity ratio of 15.7%. Our dividend policy (payout ratio of at least 50%) remains unchanged.
As regards sustainability, we are in continuous dialogue with our customers and stakeholders, aiming to fully live up to society’s expectations. In March, for instance, we tightened up our policy towards tobacco and decided not only to exclude the tobacco industry from our lending, insurance and SRI activities, but also start the process to eliminate it from our conventional investment funds and proprietary investment portfolio. Besides that, we signed up to the United Nations charter for tobacco-free financing, which fits in perfectly with the two key focus areas of Health and Population Ageing in our sustainability strategy.
In line with our general strategy, we continued to focus on our core activities and markets. In the weeks following the quarter-end, for instance, we reached an agreement for the sale of our Irish subsidiary’s legacy performing corporate loan portfolio of roughly 260 million euros. The transaction is expected to close in the course of 2019, and further solidifies KBC Bank Ireland’s core business focus on retail and micro SME clients. A few days later, our Czech subsidiary ČSOB reached an agreement to acquire the remaining 45% stake in the Czech building savings bank ČMSS for 240 million euros. The transaction will have an impact of approximately -0.3 percentage points on KBC Group’s common equity ratio. Furthermore, the revaluation of our already existing 55% stake in ČMSS will lead to a one-off gain of roughly 80 million euros on the closing date. As a result of this transaction, ČSOB will hold 100% of ČMSS and consolidates its position as the largest provider of financial solutions for housing purposes in the Czech Republic. The agreement is expected to close before the end of the second quarter of 2019.
Ultimately, our success is based on the trust that our clients continue to place in us. I’d like to explicitly thank each and every one of them for their long-standing confidence and to assure them that we’re more focused than ever in our efforts to become the reference in bank-insurance in all our core countries.
* This news item contains information that is subject to the transparency regulations for listed companies.