KBC Group: Third-quarter result of 601 million euros
Outside trading hours - Regulated information*
Friday, November 12, 2021
- Net interest income increased by 2% compared to the previous quarter and decreased by 1%
compared to the year-earlier quarter. The net interest margin for the quarter under review was
1.80%, up 1 basis point on the previous quarter and down 1 basis point on the year-earlier
quarter. Volumes continued to increase, with deposits excluding debt certificates growing by
1% quarter-on-quarter and 7% year-on-year, and loans up 2% quarter-on-quarter and 4% yearon- year. These 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 18% and 23% on the level recorded in the previous and
year-earlier quarters, respectively, due essentially to higher technical charges consequent on
the heavy flooding in Belgium (with a gross impact 100 million euros). Non-life earned premiums went up 4% quarter-on-quarter and 8% year-on-year. The combined ratio for the first nine months of 2021 amounted to an excellent 87%. Sales of our life insurance products were down 7% on the level recorded in the previous quarter, but up 9% on the level recorded in the yearearlier quarter.
- Net fee and commission income was up 4% on its level in the previous quarter and by as
much as 20% on the year-earlier quarter. In both cases, this was accounted for primarily by an increase in fees for our asset management activities and, to a lesser extent, higher fee income related to our banking services.
- The trading & fair value result was in line with the previous quarter’s low figure and down 67% on the year-earlier quarter.
- All remaining other income items combined were 67% and 84% higher than the figure
recorded in the previous and year-earlier quarters, respectively, thanks mainly to realised gains on the sale of bonds.
- Costs increased 5% quarter-on-quarter and 11% year-on-year. In both cases, this was almost
entirely due to items such as forex effects, bank taxes, changes in the scope of consolidation
(OTP Banka Slovensko) and one-off items, including 81 million euros of staff-related costs in
Ireland in the quarter under review due to the pending sale transactions there. Excluding such
items, costs remained virtually stable. The resulting cost/income ratio for the first nine months
of 2021 amounted to 54%. In that calculation, certain non-operating items have been excluded and bank taxes spread evenly throughout the year. Excluding all bank taxes, the cost/income ratio amounted to 50% in the first nine months of 2021.
- The quarter under review included a 66-million-euro net release of loan loss impairment,
compared to a net release of 130 million euros in the previous quarter, and a net charge of 52
million euros in the year-earlier quarter. The net release in the quarter under review was related to a significant reversal (260 million euros) of collective impairment previously recorded for the coronavirus crisis, which more than offset the one-off impairment of 170 million euros relating to the pending sale transactions in Ireland. As a consequence, the credit cost ratio in the first nine months of 2021 amounted to -0.20%, compared to 0.60% for full year 2020 (a negative sign implies a positive impact on the results).
- Income taxes were up 43% quarter-on-quarter, due in part to the derecognition of deferred tax assets consequent on the pending sale transactions in Ireland.
- Our liquidity position remained strong, with an LCR of 167% and NSFR of 153%. Our capital base remained equally as robust, with a fully loaded common equity ratio of 16.4% (under ECB rules, this does not include the interim profit for the interim quarters).
See the full press release in attachment.
Johan Thijs, Chief Executive Officer
Early in the third quarter, Belgium was confronted with the devastating consequences of heavy flooding in a number of provinces. We would once again like to express our heartfelt sympathy to everyone directly affected, as well as our deep appreciation to all the relief workers and volunteers who have been working tirelessly on behalf of the victims. We fully support the agreement reached following the talks held between Assuralia (the federation of the Belgian insurance sector) and the authorities, which provides greater security for all victims. Over the past few months, we have been using all our knowledge and expertise – via our broad network of insurance agents, experts and repairers – to ensure that the claims of the customers affected are settled quickly and properly. At the same time, the coronavirus crisis is still high on the agenda. In many countries, the large-scale rollout of vaccines is well under way or even in its final stages. Social life is gradually resuming, but caution is still paramount, as the virus is certainly not beaten yet. From the start of this crisis, we have taken responsibility in safeguarding the health of our staff and customers, while ensuring that services continue to be provided. We have also worked closely with government agencies to support all customers impacted by the coronavirus, implementing various measures such as loan payment holidays.
Over the past few months, we have signed a number of transactions that either strengthened or adjusted our geographic focus. At the end of July, for instance, we strengthened our share of the Bulgarian market by acquiring NN’s Bulgarian pension insurance and life insurance businesses. And at the end of August, we reached an agreement to dispose of substantially all of the nonperforming mortgage loan portfolio of KBC Bank Ireland. More recently, we also entered into a legally binding agreement relating to the sale of substantially all of KBC Bank Ireland’s performing loan assets and its deposit book to Bank of Ireland Group. A small portfolio of non-performing mortgages will also be sold as part of that transaction. The transaction remains subject to regulatory – including Irish competition – approvals. The immediate one-off P&L impact in the third quarter of these Irish transactions amounted to -0.3 billion euros after tax, while there will be a positive impact of approximately 0.2 billion euros upon closure. The finalisation of both deals will ultimately lead to KBC withdrawing from the Irish market and will have a positive impact on our common equity ratio of approximately 0.9 percentage points.
Profit amounted to 601 million euros in the quarter under review, despite 319 million euros negative one-off impact related to the pending sale transactions in Ireland. Total income went up quarter-on-quarter, as higher net interest income, net fee and commission income and net other income more than offset the lower non-life insurance result (which had been negatively impacted by the floods in Belgium) and the seasonally lower level of dividend income. Excluding one-off and non-operating items (including forex effects and bank taxes), costs remained virtually stable quarter-on-quarter. Loan loss impairment contributed positively to the result, as the reversal of previously recorded impairment charges for the coronavirus crisis more than offset the negative impact on impairment of the pending sale transactions in Ireland. As announced earlier, we will pay an interim dividend of 3 euros per share on 17 November 2021, comprising 2 euros per share for financial year 2020 and 1 euro per share as an advance on the total dividend for financial year 2021.
Lastly, I would like to say a few words about our mobile app. In September, KBC Mobile was crowned best mobile banking app in the world by independent international research agency, Sia Partners. This is a clear recognition of 10 years of innovation, development and carefully listening to our customers. The Digital First approach we launched a year ago is clearly paying off and demonstrates the innovative strength we can harness as a group, with the ultimate goal of making our customers’ lives easier. I would also like to take this opportunity to explicitly thank our customers and all other stakeholders for the trust they continue to put in us.
* This news item contains information that is subject to the transparency regulations for listed companies.
