KBC Group: Fourth-quarter result of 702 million euros
Outside trading hours - Regulated information*
Thursday, February 13, 2020 —
- Excellent performance delivered by the commercial bank-insurance franchises in our core markets and core activities.
- Lending volumes stabilised quarter-on-quarter and were up 3% year-on-year, with year-on-year growth recorded in all business units. Deposits including debt certificates declined by 1% quarter-on-quarter but were up 2% year-on-year. The figures have been calculated on a ‘comparable scope’ basis.
- Net interest income increased by 1% both quarter-on-quarter and year-on-year. This item benefited mainly from continued good loan volume growth, the positive impact of ECB tiering as of the fourth quarter of 2019, the full consolidation of ČMSS since June 2019 (year-on-year) and the increase in short-term interest rates in the Czech Republic (year-on-year). However, it continued to suffer from low reinvestment yields in our euro area core countries and ongoing pressure on loan portfolio margins (notwithstanding a recovery of the margin on new mortgage loan production in some of our core countries).
- Sales of our non-life insurance products rose 7% year-on-year. Technical income from these non-life insurance activities (premiums less charges, plus the ceded reinsurance result) was up 17% on its level in the year-earlier quarter, due mainly to higher earned premiums and improved claims quality. The combined ratio for 2019 amounted to 90%, compared with 88% for 2018. Sales of our life insurance products were up 17% on their level in the previous quarter, but down 8% on their level recorded in the fourth quarter of 2018.
- Net fee and commission income was slightly higher than the figure recorded in the previous quarter and up 9% on the year-earlier quarter. Items contributing to this growth were the full consolidation of ČMSS (year-on-year), increased asset-management-related fees and higher banking-services-related fees.
-The quarter under review included strong trading and fair value income, owing to the positive impact of various market value adjustments and good dealing room income. Moreover, net other income and dividend income were also slightly up on their level for the previous quarter.
- Costs excluding bank taxes were up 5% quarter-on-quarter (partly due to seasonal effects) and 4% year-on-year (partly due to ČMSS). The cost/income ratio amounted to 58% for full-year 2019, in line with the previous year. When excluding bank taxes, the cost/income ratio came to 51% for full-year 2019.
- The quarter under review included a 75-million-euro loan loss impairment charge (accounted for mainly by five corporate loans in Belgium), compared to a 25-million-euro charge in the previous quarter and 30 million euros in the yearearlier quarter. The cost of credit amounted to a benign 0.12% in 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 16.1% (15.7% when including the proposed share buy-back). Our leverage ratio amounted to 6.4% at the end of December 2019 (6.3% when including the proposed share buy-back).
See the full press release in attachment.
Johan Thijs, Chief Executive Officer
We generated a net profit of 702 million euros in the fourth quarter of 2019. This excellent performance was accounted for mainly by the quarter-on-quarter increases in trading and fair value income, technical income from our insurance activities and net interest income, partly offset by higher loan loss impairment charges and seasonally higher costs. Adding this fourthquarter figure to the 1 787 million euros recorded in the first nine months of the year brings our net result to a solid 2 489 million euros for full-year 2019. This is 3% below the 2 570 million euros recorded for full-year 2018.
Our solvency position remained strong with a common equity ratio of 16.1%. We will propose to the General Meeting of Shareholders in May of this year to set the total (gross) dividend for 2019 at 3.5 euros per share, meaning that – following payment of the interim dividend of 1 euro per share in November 2019 – the final gross dividend to be paid in May will be 2.5 euros per share. We will also propose a buy-back of maximum 5.5 million shares, subject to the prior approval of the ECB. This will lead to a CET1 ratio (after capital distribution) of approximately 15.7%. Including the proposed total dividend, AT1 coupon and share buy-back, the pay-out ratio will amount to approximately 76% for financial year 2019.
On the sustainability front, KBC has endorsed the ‘Collective Commitment to Climate Action’ and is committed to stimulating the greening of the economy and to limiting global warming in line with the Paris Climate Agreement. Therefore, we pursue an open dialogue and communicate transparently with our customers and stakeholders on how we approach sustainability and to get a clear idea of their expectations. We also help our customers by supporting their transition to a greener future. For instance, in 2019, we concluded our first syndicated green loan within the shipping sector. This loan was structured according to the 'Green Loan Principles' as drawn up by the Loan Market Association, whose aim is to promote investments in green projects by providing banks and businesses with guidelines on the characteristics of such loans.
Our role as a pioneer in the field of sustainable investments was again highlighted when our SRI funds were awarded Febelfin quality certification for sustainable investment.
In our role towards customers and all other stakeholders, we aim to actively support the communities and economies in which we operate and to further build on future-proof digital transformation and customer solutions. We were, therefore, delighted to receive a series of awards in 4Q19. This reflects the appreciation in which our customer-oriented innovations are held and reaffirms our strategy going forward.
Ultimately, our goal is to ensure that our customers and all other stakeholders benefit from our activities, something which our employees are committed in their day-to-day work. In closing, I would like to take this opportunity to explicitly thank all those stakeholders who have put their trust in us.
* This news item contains information that is subject to the transparency regulations for listed companies.
