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    KBC Group: Third-quarter result of 701 million euros

    Outside trading hours - Regulated information*

    Thursday, November 15, 2018

    • 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, with increases in all business units. Deposits excluding debt certificates were flat quarter-on-quarter and up 6% year-on-year, the latter again with increases in all business units.
    • Net interest income was up 2%, both quarter-on-quarter and year-on-year (on a comparable basis). It benefited from a number of factors, including 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.
    • Net interest income was up 2%, both quarter-on-quarter and year-on-year (on a comparable basis). It benefited from a number of factors, including 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 down 5% compared to the year-earlier quarter, as higher earned premiums were more than offset by higher technical charges (which had benefited from a positive one-off release in the reference quarter) and a lower result from ceded reinsurance. The resulting combined ratio for the first nine months of the year amounted to an excellent 88%, fully in line with the figure recorded for full-year 2017. Sales of our life insurance products fell by 10% on their level recorded in the previous quarter and by 5% on their level of the third quarter of 2017.
    • On a comparable basis, our net fee and commission income was down 3% and 2%, respectively, on its quarter-earlier and year-earlier levels. This came about mostly because of lower asset management-related fees, relating to the low investment appetite of clients, among other things. 
    • All other income items combined were up 24% quarter-on-quarter, owing to higher trading and fair value income, a higher level of other net income (the previous quarter had been impacted by a negative one-off item) and notwithstanding seasonally lower dividend income, among other factors. On a comparable basis, all other income items combined were up 32% year-on-year, due primarily to the fact that the reference quarter had been impacted by a provision of 54 million euros set aside for the industry wide review of the tracker rate mortgage products originated in Ireland before 2009.

    • Costs excluding bank taxes were up 1% quarter on-quarter and 7% year-on-year, due, among other things, to staff and ICT-expenses and a number of one-off items. When bank taxes are spread evenly throughout the year and certain non-operating items are excluded, the cost/income ratio amounted to 57% in the first nine months of 2018, compared to the 55% recorded for full-year 2017.

    • The quarter benefited from an 8-million-euro release of loan loss impairments, mainly in Ireland. Consequently, our annualised cost of credit amounted to a very favourable -0.07% (a negative figure indicates a positive impact on the results), compared to the -0.06% registered for full-year 2017. Without Ireland, the credit cost ratio would have come to 0.01%, compared to 0.09% for full-year 2017.

    • Our liquidity position remained strong, as did our capital base, with a common equity ratio of 16.0% (fully loaded, Danish compromise). Our leverage ratio amounted to 6.1% at end September 2018.

     

    See the full press release in attachment.​​

     

    Johan Thijs, Chief Executive Officer:

    We delivered a net profit of 701 million euros in the third quarter of 2018. An excellent result, thanks, among other things, to higher levels of net interest income, trading and fair value income and other net income, an outstanding combined ratio in our non-life insurance activities, and – yet again – a net release of some loan loss impairments, the bulk of which related to our Irish mortgage book. Adding this third-quarter results figure to the 556 million euros and 692 million euros earned in the first and second quarters of the year brings our result for the first nine months of 2018 to a solid 1 948 million euros. Loans increased by 5% year-on-year and deposits excluding debt certificates by 6%. Our solvency position remained strong too. At the end of September 2018, our common equity ratio was 16%, up again on the 15.8% recorded in the previous quarter and comfortably surpassing the regulatory minimum levels in this respect. As announced earlier, we will, in line with our dividend policy, pay an interim dividend of 1 euro per share on 16 November 2018, as an advance payment on the total dividend for 2018. 

    Early in the third quarter, we completed the buyback of 2.7 million own shares and subsequently cancelled them, reducing our total number of shares to 415 897 567. And as already announced, KBC Bank Ireland reached an agreement with Goldman Sachs to sell part of its legacy loan portfolio, which will significantly reduce that entity’s impaired loans ratio as well as lower the group’s ratio. We expect the deal to be completed in the fourth quarter of this year.

    On the digital front, our focus is on developing innovative client-centric solutions that make our clients’ lives easier. To name just a few examples, we not only added multi-banking possibilities to our KBC Mobile app in Belgium, but also recently added new specific non-banking features to this app, including the ability to pay for car parking services and the possibility to use the app to buy digital tickets for public transport. In Ireland, we added a new feature to the mobile app that allows customers to easily mark a card as lost or stolen and moreover instantly receive a digital replacement. And in the Czech Republic, ČSOB was crowned Best Internet Bank in that country by Capital Finance International, yet more proof of the success of our client-centric digital initiatives.

    On the broader economic front, European economic conditions remain attractive, although we believe that the growth peak is behind us. The risk of further economic de-globalisation with an escalation of ongoing trade conflicts, Brexit and political turmoil in Italy are the main factors that could impede European economic growth.

    Lastly, I’m very proud to announce that we not only received top scores in the international Extel Awards, but that we were also recently honoured by the Belgian Association of Financial Analysts with the award for ‘Best Financial Communication’. This is especially gratifying since open and transparent communication to our stakeholders ranks very high on our priority list. To close, I would like to take the opportunity to explicitly thank all our stakeholders for the trust they put in us and to assure them that we are more focused than ever in our efforts 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.    

    Results KBC Group 3Q18

    Viviane Huybrecht General Manager KBC Corporate Communication / Spokesperson