KBC Group: Fourth-quarter result of 818 million euros

• Net interest income increased by 9% quarter-on-quarter and by 20% year-on-year (17% year-on-year when recently consolidated Raiffeisenbank Bulgaria is excluded). The net interest margin for the quarter under review amounted to 2.10%, up 20 basis points quarter-on-quarter and 25 basis points on the year-earlier quarter. Loan volumes went up by 7% year-on-year (stable quarter-on-quarter) and deposits excluding debt certificates increased by 2% quarter-on-quarter and 8% year-on-year. These volume growth figures were calculated on an organic basis (excluding the changes in the scope of consolidation and forex effects).
• Technical income from our non-life insurance activities (premiums less charges, plus the ceded reinsurance result) was down 12% on the level recorded in the previous quarter but up 4% on the year-earlier quarter. The year-on-year increase was related to higher premium income and lower technical charges, partially offset by a lower ceded reinsurance result. The combined ratio for 2022 amounted to an excellent 89%. Sales of our life insurance products were up 85% and 34% on the level recorded in the previous and year-earlier quarters, respectively.
• Net fee and commission income was down 3% on its level in the previous quarter and 6% on the year-earlier quarter (down 9% year-on-year when recently consolidated Raiffeisenbank Bulgaria is excluded). The quarter-on-quarter decrease was due mainly to the higher level of distribution fees paid.
• Trading & fair value result was more than double its level of the previous quarter and up 156 million euros on the negative 39 million euros recorded in the year-earlier quarter. The quarter-on-quarter increase was attributable primarily to a significantly higher dealing room result and a higher result related to the insurer’s equity portfolio.
• All other income items combined were up 34 million euros on the figure recorded in the previous quarter, but down 12 million euros on their year-earlier level. The quarter-on-quarter increase was due mainly to an increase in net other income (resulting in part from realised losses on the sale of bonds in the previous quarter). ​
• Costs excluding bank taxes were up 10% on their level in the previous quarter and 11% on their year-earlier level (9% excluding recently consolidated Raiffeisenbank Bulgaria). The cost/income ratio for 2022 amounted to 54%. In that calculation, certain non-operating items have been excluded. Excluding all bank taxes, the cost/income ratio amounted to 48%.
• The quarter under review included an 82-million-euro net loan loss impairment charge, compared to a net charge of 79 million euros in the previous quarter, and a net release of 62 million euros in the year-earlier quarter. The net charge in the quarter under review included 40 million euros in respect of the loan book and a 42-million-euro increase in the reserve for geopolitical and emerging risks. As a consequence, the credit cost ratio for 2022 amounted to 0.08%, compared to -0.18% for full-year 2021 (a negative sign implies a positive impact on the results).
• Our liquidity position remained strong, with an LCR of 152% and NSFR of 136%. Our capital base remained robust, with a fully loaded common equity ratio of 15.4.

See full press release in attachment

Johan Thijs, Chief Executive Officer KBC Group:

‘Almost a year has now passed since Russia invaded Ukraine and, unfortunately, there is no sign of an end to the war. The tragedy in Ukraine is causing immense human suffering and our heartfelt solidarity goes out to all victims of this conflict. We sincerely hope that a respectful, peaceful and lasting solution can be achieved as soon as possible. The war in Ukraine, alongside other geopolitical uncertainties, is also sending shockwaves throughout the global economy, resulting in high inflation and weighing on economic growth. Given those uncertainties, we have further increased our dedicated reserve for geopolitical and emerging risks, bringing it to 429 million euros at the end of the quarter under review.

Besides these developments, the past few months have also seen us make significant progress in implementing our strategy. Next to finalising the acquisition of Raiffeisenbank Bulgaria in early July, we were able at the end of last week to announce the closing of the sale of substantially all of KBC Bank Ireland’s performing loan assets and liabilities to Bank of Ireland Group. In addition, a small portfolio of non-performing mortgages and credit card balances was acquired by Bank of Ireland. The deal marks a major step in KBC’s orderly and phased withdrawal from the Irish market.

On the sustainability front, I’m extremely proud that KBC has been awarded the Terra Carta Seal. We are one of only 19 companies worldwide to have received this award in 2022. Whilst this is a clear recognition of our continuous sustainability efforts, we will continue along this path and are now seeking to obtain validation of our climate targets by the Science Based Targets initiative.

As regards our financial results, we generated an excellent net profit of 818 million euros in the last quarter of 2022. Total income benefited from higher levels of net interest income, trading and fair value income and net other income, all of which was partly offset by lower technical insurance income, dividend income and net fee and commission income. Costs were higher (partly seasonal), and we recorded a net impairment charge on our loan book, due in part to an increase in the reserve for geopolitical and emerging risks. Adding the result for this quarter to the one for the first nine months of the year brings our net profit for full-year 2022 to an excellent 2 864 million euros.

Our solvency position remained strong with a fully loaded common equity ratio of 15.4%. For full-year 2022, our Board of Directors has decided to propose a total gross dividend of 4.0 euros per share to the General Meeting of Shareholders for the accounting year 2022 (of which an interim dividend of 1.0 euro per share already paid in November 2022 and the remaining 3.0 euros per share to be paid in May 2023). In line with our announced capital deployment plan for full-year 2022, we envisage to distribute the surplus capital above the fully loaded common equity ratio of 15% (approximately 0.4 billion euros), in the form of share buy-back (subject to ECB approval) and/or an extraordinary interim dividend. The final decision by the Board of Directors will be taken in the first half of 2023. Including the proposed total dividend, AT1 coupon and the surplus capital above the fully loaded common equity ratio of 15%, the pay-out ratio would then amount to approximately 75%.

The closing of the sale of substantially all of KBC Bank Ireland’s performing loan assets and liabilities to Bank of Ireland Group will lead to a capital relief of approximately 1 billion euros. We envisage to distribute this 1 billion euros, in the form of share buy-back (subject to ECB approval) and/or an extraordinary interim dividend. The final decision by the Board of Directors will be taken in the first half of 2023.

Lastly we have also updated our three-year financial guidance. Between 2022 and 2025, we are aiming to achieve a compound annual growth rate of approximately 6.0% for total income and approximately 1.8% for operating expenses (excluding bank taxes). Furthermore, we also want to achieve a combined ratio of maximum 92%.

In closing, I would like to thank our customers, our employees, our shareholders and all our other stakeholders for their continuing trust and support.’

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