KBC Group: Fourth-quarter result of 677 million euros

• Net interest income decreased by 2% quarter-on-quarter and by 4% year-on-year. The net interest margin for the quarter under review amounted to 1.99%, down 5 basis points on the previous quarter and 11 basis points on the year-earlier quarter. Loan volumes were up 1% quarter-on-quarter and 3% year-on-year. Deposits excluding debt certificates were up 1% quarter-on-quarter but down 3% year-on-year, the latter due largely to the outflow of deposits caused by the issuance of a 1-year State Note in Belgium in September 2023. Volume growth figures were calculated on an organic basis (excluding changes in the scope of consolidation and forex effects).

• The insurance service result (insurance revenues before reinsurance - insurance service expenses before reinsurance + net result from reinsurance contracts held) amounted to 100 million euros (compared to 138 million euros and 139 million euros in the previous and year-earlier quarters, respectively) and breaks down into 60 million euros for non-life insurance and 40 million euros for life insurance. The non-life combined ratio for full-year 2023 amounted to an excellent 87%, the same as for full-year 2022. Non-life insurance sales increased by 14% year-on-year, while life insurance sales were up 56% on the level recorded in the previous quarter but down 5% on the level recorded in the year-earlier quarter.

• Net fee and commission income was up 2% and 9% on its level in the previous and year-earlier quarters, respectively. Fees for our asset management activities were up 5% quarter-on-quarter, while banking services-related fees were down 1% (as the previous quarter had benefitted from one-off securities-related fees received on the sale of the September State Note in Belgium). Year-on-year, fees for both our asset management activities and our banking service activities increased by 11% and 6%, respectively.

• Trading & fair value income was stable compared to the previous quarter and down 35% on the level recorded in the year-earlier quarter. Net other income was slightly above its normal run rate due mainly to a one-off realised gain.

• Operating expenses including bank and insurance taxes were up 7% on their level in the previous quarter and up 4% on their year-earlier level. The cost/income ratio for full-year 2023 came to 49%, the same as for full-year 2022. In that calculation, certain non-operating items have been excluded. Excluding all bank and insurance taxes, the cost/income ratio for full-year 2023 amounted to 43%, compared to 45% for full-year 2022.

• The quarter under review included a 5-million-euro net loan loss impairment release, as opposed to a net charge of 36 million euros in the previous quarter and a net charge of 82 million euros in the year-earlier quarter. The credit cost ratio for full-year 2023 amounted to 0.00%, compared to 0.08% for full-year 2022. Impairment on assets other than loans amounted to 175 million euros in the quarter under review (including a 109-million-euro impairment on goodwill in the Czech Republic), compared to 27 million euros in the previous quarter and 51 million euros in the year-earlier quarter.

• Our liquidity position remained strong, with an LCR of 159% and NSFR of 136%. Our capital base remained robust, with a fully loaded common equity ratio of 15.2% (which already includes the full impact of the ongoing share buyback programme of 1.3 billion euros and the proposed dividend of 4.15 euros per share for full-year 2023).

See full press release in attachment

Johan Thijs, Chief Executive Officer KBC Group:

We recorded a net profit of 677 million euros in the last quarter of 2023. Compared to the result of the previous quarter, our total income benefitted from several factors, including better net fee and commission income and higher net other income, though these items were offset by a lower level of net interest income and lower insurance results. Costs, including bank and insurance taxes, were up quarter-on-quarter, as were impairment charges, driven mainly by an impairment of 109 million euros on goodwill on building savings company ČSOBS (a subsidiary of ČSOB Bank) in the Czech Republic and approximately 53 million euros impairment charges on software. Consequently, when adding up the four quarters of the year, our full-year net profit amounted to 3 402 million euros, up 21% year-on-year.

Our loan portfolio continued to expand, increasing by 1% quarter-on-quarter and by 3% compared to a year ago, with growth being recorded in each of the group’s core countries. Customer deposits were up 1% on the level of the previous quarter but down 3% year-on-year, as they were largely affected by deposit outflows caused by the issuance of a retail State Note (‘Staatsbon’) in Belgium at the start of September 2023.

On the sustainability front, we are delighted to note that the outside world is continuing to recognise our approach and achievements as ‘best in class’. In particular we note that renowned ESG Risk agency Sustainalytics has awarded KBC the excellent ‘ESG negligible risk rating category’. With this rating, KBC is included in the Sustainalytics 2024 ESG Top-Rated Companies List. We are equally proud to have received the coveted CDP A rating for our climate-related disclosures for a second year in a row.

As regards our ongoing share buyback programme of 1.3 billion euros, we had already bought back approximately 11 million shares for a total consideration of around 0.6 billion euros by the end of January 2024. The programme is planned to run until 31 July 2024.

Our solvency position remained strong, with a fully loaded common equity ratio of 15.2% at the end of December 2023, which already fully incorporates the effect of the ongoing share buyback programme of 1.3 billion euros. Our Board of Directors has decided to propose a total gross dividend of 4.15 euros per share to the General Meeting of Shareholders for the accounting year 2023 (of which an interim dividend of 1.0 euro per share was already paid in November 2023 and the remaining 3.15 euros per share is to be paid in May 2024). Including the proposed total dividend and additional tier-1 coupon, the pay-out ratio would amount to 51%. In line with our announced capital deployment plan for full-year 2023, the distribution of the surplus capital above the fully loaded common equity ratio of 15% will be decided at the discretion of the Board of Directors of KBC Group in the first half of 2024.

Lastly, we have also updated our three-year financial guidance. By 2026, we are aiming to achieve a cost/income ratio (excluding bank and insurance taxes) of below 42% and a combined ratio of maximum 91%.

In closing, I would like to sincerely thank all customers, employees, shareholders and all other stakeholders for their trust and support, and assure them that we remain committed to being the reference in bank-insurance and digitalisation in all our home markets.’

*This news item contains information that is subject to the transparency regulations for listed companies.

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