KBC Group: First-quarter result of 882 million euros
Outside trading hours - Regulated information*
- Net interest income decreased by 7% quarter-on-quarter, but increased by 10% year-on-year. The net interest margin for the quarter under review amounted to 2.04%, down 6 basis points quarter-on-quarter, but up 13 basis points on the year-earlier quarter. Loan volumes were more or less stable quarter-on-quarter and increased 6% year-on-year. Deposits excluding debt certificates, and excluding the volatile low-margin short-term deposits at KBC Bank's foreign branches as they are driven by short-term cash management opportunities, were also roughly stable quarter-on-quarter and increased 3% year-on-year. We also noticed a shift from deposits towards our mutual fund business, which led to net inflows in higher-margin direct client money of 1.8 billion euros in the quarter under review. Volume growth figures were calculated on an organic basis (excluding the changes in the scope of consolidation and forex effects).
- Insurance revenues before reinsurance were up 2% and 9% on the previous and year-earlier quarters, respectively. The insurance service result (insurance revenues before reinsurance - insurance service expenses before reinsurance + net result from reinsurance contracts held) amounted to 110 million euros (compared to 139 million euros and 74 million euros in the previous and year-earlier quarters, respectively) and break down into 15 million euros for life insurance and 96 million euros for non-life insurance. The non-life combined ratio for the first quarter of 2023 amounted to an excellent 83%, compared to 86% in the year-earlier quarter and 87% for full-year 2022. Non-life insurance sales increased by 11% year-on-year, with growth in all countries and all classes, due a combination of volume and tariff increases. Sales of our life insurance products were down 34% and 11% on the level recorded in the previous and year-earlier quarters, respectively.
- Net fee and commission income was up 5% and 1% on its level in the previous and year-earlier quarters, respectively. The quarter-on-quarter increase was accounted for by a combination of increased fees for both our asset management and banking activities.
- The trading & fair value result was in line with its level of the previous and year-earlier quarters and net other income was up significantly both quarter-on-quarter and year-on-year, due primarily to the one-off 405-million-euro gain related to the finalisation of the sale in Ireland.
- Costs in the quarter under review include the bulk of the bank and insurance taxes for the full year. Excluding those taxes, total costs were down 6% on their level in the previous quarter and up 7% on their year-earlier level. The cost/income ratio for the first quarter of 2023 came to 50%, compared to 49% for full-year 2022. In that calculation, certain non-operating items have been excluded and bank and insurance taxes spread evenly throughout the year. Excluding all bank and insurance taxes, the cost/income ratio amounted to 38%, compared to 45% for full-year 2022.
- The quarter under review included a 24-million-euro net loan loss impairment release, compared to a net charge of 82 million euros in the previous quarter and a net release of 15 million euros in the year-earlier quarter. The release in the quarter under review related mainly to an update of the reserve for geopolitical and emerging risks. The credit cost ratio for the first quarter of 2023 amounted -0.04%, compared to 0.08% for full-year 2022. A negative figure implies a positive impact on the result.
- Our liquidity position remained strong, with an LCR of 152% and NSFR of 139%. Our capital base remained robust, with a fully loaded common equity ratio of 16.1%.
See full press release in attachment.
Johan Thijs, Chief Executive Officer KBC Groep:
“More than a year has now passed since Russia invaded Ukraine and, unfortunately, there is still no sign of an end to the war and the immense human suffering it is causing. The war in Ukraine, alongside other geopolitical uncertainties, is continuing to dampen economic growth for the global economy. On top of this, the collapse of Silicon Valley Bank and Credit Suisse triggered turbulence on the financial markets.
The challenging environment is not distracting us from taking important steps towards achieving our strategic goals. In the quarter under review we finalised the sale of substantially all of the remaining assets and liabilities of KBC Bank Ireland. At the same time, the integration of the recently acquired ex-Raiffeisenbank Bulgaria into our existing Bulgarian banking subsidiary UBB is proceeding at full speed, with the legal merger of the entities being registered on 10 April 2023.
Our financial results took into account, for the first time, the new IFRS 17 accounting standard for insurance contracts. We generated an excellent net profit of 882 million euros in the first quarter of 2023. In the quarter under review, our total income benefited from, among other things, strong interest income from the transformation result, increased net fee and commission income resulting from the sale of investment products and a significant positive one-off gain related to the sale of our Irish portfolio in February. Operational costs were up, due to inflation and the fact that the bulk of the bank and insurance taxes for the full year were booked in this first quarter. Excluding bank and insurance taxes, costs decreased quarter-on-quarter. Last but not least, we were able to record a net loan loss impairment release in the quarter under review, as opposed to a net charge in the previous quarter. At the end of the quarter under review, the provisions we have set aside for geopolitical and emerging risks amounted to 0.4 billion euros. Our solvency position remained strong with a fully loaded common equity ratio of 16.1%. Our liquidity remained excellent, as illustrated by an NSFR of 139% and LCR of 152%, both well above the minimum legal target of 100%.
In line with the capital deployment plan we announced for full-year 2022, we envisage – over and above the 4 euros already paid as the dividend for 2022 – distributing the surplus capital. This means the surplus capital above a fully loaded common equity ratio of 15%, as well as the capital released from the completed sale transaction in Ireland. We expect to do this in the form of a share buyback (subject to ECB approval) and/or an exceptional interim dividend. The final decision on this matter will be taken by the Board of Directors in the next few months.
Progress on the digitalisation front remains a top priority too. We are pleased to report that the popularity of our digital assistant Kate has grown beyond our expectations. Customers throughout the group make active use of Kate. Kate has also outperformed our own targets last year in terms of the ability to autonomously handle customers’ questions. Also on the sustainability front, we are continuing our gradual but steadfast journey in a number of areas, including the climate domain. We are very proud that our efforts are also being recognised externally by, for instance, Terra Carta and CDP.
In closing, I’d like to sincerely thank all our customers, our employees, our shareholders and all other stakeholders for their continuing trust and support.’’
*This news item contains information that is subject to the transparency regulations for listed companies.