Johan Thijs, Chief Executive Officer
In 2020, we were confronted with the outbreak and challenges of the pandemic, a situation causing human suffering all over the world and unprecedented economic upheaval. Recently, some countries have started rolling out vaccination programmes, which could bring some degree of relief going forward. We have taken responsibility in safeguarding the health of our staff and customers, while ensuring that services continue to be provided. We have worked closely with government agencies to support all customers impacted by coronavirus, by efficiently implementing various relief measures, including loan deferrals. In our six home countries combined, we had granted a total of 13.4 billion euros in loan payment deferrals by the end of December 2020 (according to the EBA definition), as well as 0.8 billion euros’ worth of loans under public guarantee schemes introduced in response to the pandemic. As a result of the lockdowns, which led to a far-reaching digital boost, our digital sales increased significantly. In that respect, the significant investments we made in digital transformation over the past few years are clearly paying off. With our renewed strategy ‘Differently, the next level’ – in which Kate, our new personal AI-enabled digital assistant, plays an important role – we are now going one step further by making our customer interactions even more proactive and future-proof, through the use of data and artificial intelligence. We plan to invest an additional 1.4 billion euros in digitalisation in the period 2021-2023.
As regards our financial results, we generated a net profit of 538 million euros in the last quarter of 2020. In the quarter under review, our net interest income decreased, whereas our trading and fair value result fared well. In the current lower-for-longer interest rate environment, this quarterly result has also been clearly benefiting from the diversification achieved through KBC’s integrated bank-insurance model. This was reflected in higher net fee and commission income and a good non-life result (good premium growth and an excellent combined ratio of 85% for the full year). Costs were tightly managed. On a full year basis, operating expenses excluding bank taxes fell by 4.2% compared to last year, due chiefly to the announced cost savings triggered by the pandemic. Adding the result for this quarter to the one for the first nine months of the year brings our net profit for fullyear 2020 to 1 440 million euros.
Our solvency position remained very strong with a common equity ratio of 17.6%. In line with the ECB recommendation of 15 December 2020 which limits dividend payments, we will propose to the General Meeting of Shareholders in May of this year a (gross) dividend of 0.44 euros per share for the accounting year 2020, payable in May 2021. Additionally, it is the intention of the Board of Directors to distribute an extra gross dividend of 2 euros per share over the accounting year 2020 in the fourth quarter of 2021. For the latter, the final decision of the Board of Directors is subject to restrictions on dividends being lifted by the ECB.
On top of that, our dividend policy as of 2021 entails a payout ratio of at least 50% of the consolidated profit of the accounting year, of which an interim dividend of 1 euro per share, payable in November. On top of the payout ratio of at least 50% of consolidated profit, all capital which exceeds the reference capital position (a pre-Basel IV fully loaded common equity ratio of 14.5%) plus the 1% management buffer will be considered for distribution to the shareholders. Each year, the Board of Directors will take this decision at its discretion when announcing the full-year results.
Lastly, we have also updated our long-term financial guidance. Between 2020 and 2023, we are aiming to achieve a compound annual growth rate of approximately 2% for total income and approximately 1% for operating expenses (excluding bank taxes). Besides that, we also want to achieve a combined ratio below or equal to 92% by 2023.
In closing, I would like to take this opportunity to explicitly thank all stakeholders who have continued to put their trust in us. I also wish to express my utmost appreciation to all our staff, who have continued to serve our customers and support the sound functioning of the group from their homes and other remote locations.
* This news item contains information that is subject to the transparency regulations for listed companies.