KBC Group: Fourth-quarter result of 621 million euros
Outside trading hours - Regulated information*
Thursday, February 14, 2019
- Excellent performance delivered by the commercial bank-insurance franchises in our core markets and core activities.
- Lending volumes were up 1% quarter-on-quarter and 5% year-on-year (disregarding the sale of part of the Irish loan book). Deposits (excluding debt certificates and repos) were flat quarter-on-quarter and up 5% year-on-year, with year-on-year increases in all business units.
- Net interest income was up 3% quarter-on-quarter and 2% year-on-year (on a comparable basis). It benefited from a number of factors, including good loan volume growth, higher interest rates in the Czech Republic and lower funding costs, but continued to suffer from pressure on loan margins and low reinvestment yields in our euro area core countries.
- Technical income from our non-life insurance activities was up 31% compared to the year-earlier quarter, as higher earned premiums and lower technical charges were only slightly offset by the lower result from ceded reinsurance. The combined ratio for full-year 2018 amounted to an excellent 88%, fully in line with the figure recorded for full-year 2017. Sales of our life insurance products were up 33% on their level in the previous quarter but down 13% on their level in the fourth quarter of 2017.
- On a comparable basis, our net fee and commission income was down 4% quarter-on-quarter and 11% year-on-year due to a major downturn of the financial markets. In both cases, this came about mostly because of lower asset management-related fees, resulting from lower AuM volumes and a more defensive asset allocation.
- All other income items combined were down 37% quarter-on-quarter, owing to lower trading and fair value income, notwithstanding a higher level of other net income (the fourth quarter was positively impacted by the settlement of legacy legal cases) and slightly higher dividend income. On a comparable basis, all other income items combined were down 21% year-on-year, due primarily to lower trading and fair value income, which was partly offset by higher other net income as the reference quarter had been impacted by a provision of 61.5 million euros set aside for the industry-wide review of tracker rate mortgage products originated in Ireland before 2009.
- Costs excluding bank taxes were virtually stable quarter-on-quarter, because of reduced staff expenses and lower one-off costs, offset by seasonally higher ICT expenses, higher professional fees and higher depreciation and amortisation costs. There was even a decrease of 3% year-on-year, due mainly to lower marketing expenses. When certain non-operating items are excluded, the cost/income ratio amounted to 57% for full-year 2018, compared to the 55% recorded for full-year 2017.
- The quarter included a 30-million-euro increase in loan loss impairment, mainly in Belgium due to a number of corporate loans. Our cost of credit for full-year 2018 amounted to a very favourable -0.04% (a negative figure indicates a positive impact on the results), compared to -0.06% for full-year 2017. Excluding Ireland, the credit cost ratio would have been 0.03%, compared to 0.09% for full-year 2017.
- Our liquidity position remained strong, as did our capital base, with a common equity ratio of 16% (fully loaded, Danish compromise). Our leverage ratio amounted to 6.1% at year-end 2018.
See the full press release in attachment.
Johan Thijs, Chief Executive Officer:
We generated a net profit of 621 million euros in the fourth quarter of 2018. This excellent result was due in part to higher levels of net interest income, an outstanding combined ratio in our non-life insurance activities and strict cost management. Adding this figure for the fourth quarter to the 1 948 million euros recorded in the first nine months of the year brings our result for full-year 2018 to a solid 2 570 million euros. This is in line with the 2 575 million euros recorded for full-year 2017. Lending increased by 5% year-on-year, as did deposits (excluding debt certificates and repos).
Our solvency position remained strong. The common equity ratio amounted to 16% at the end of full-year 2018 after dividend distribution. The total (gross) dividend for 2018 of 3.5 euros per share (which will be proposed to the General Meeting of Shareholders in May) will result in a pay-out ratio of 59% for financial year 2018.
As announced earlier, KBC Bank Ireland closed the sale of part of its legacy loan portfolio in the quarter under review, which significantly reduced its impaired loans ratio by 10 percentage points to 23%, and also decreased the group’s impaired loans ratio by one percentage point, leaving it at 4.3%.
On the sustainability front, we strive to enhance the positive impact that our day-to-day operations have on society. We actively monitor our own ecological impact and offer a wide range of socially responsible investment opportunities. This resulted in an improved score as provided by third party sustainability analysts (such as Sustainalytics). We have a long tradition of communicating openly and transparently with all our stakeholders about sustainability. For example, as a member of the United Nations Environment Programme Finance Initiative (UNEP FI) we are set to become the first financial institution in Belgium to endorse the new guidelines on responsible banking, as announced in December.
European economic conditions are generally solid, although the growth peak is behind us. Decreasing unemployment rates and growing labour shortages in some European economies combined with gradually rising wage inflation, will continue to support private consumption. Moreover, also investments will remain an important driver of growth. The main elements that could substantially impede European economic sentiment and growth remain the risk of further economic de-globalisation, including an escalation of trade conflicts, Brexit and political turmoil in some euro area countries.
Ultimately, our goal is to finance and service the dreams of our clients, shareholders and other stakeholders, something which all our employees are committed to working towards. We are genuinely grateful for the trust our clients place in us and that encourages us even more 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.