Johan Thijs, Group CEO:
‘The summer months of 2014 were characterised by a low interest rate environment and a weakening of the economic recovery that had set in earlier this year against a background of low inflation. It was in this context that KBC posted a net result of 591 million euros for the third quarter, or 477 million euros on an adjusted-profit basis. The group continued to record excellent commercial results: net interest income increased, with loan volumes and client deposits growing further. We also collected higher revenues in the form of fees and commissions particularly in the asset management activities. The combined ratio for our non-life insurance activities remained strong and sales of life insurance products were also up. The cost/income ratio adjusted for specific items remained robust. Loan loss impairment charges were up somewhat on the previous quarter’s level but remained low overall, with a decrease being recorded in Ireland. Our total income continued to be impacted slightly by negative marked-to-market changes in the value of derivatives used for asset/liability management purposes.
Besides these excellent commercial results, the group managed to complete the divestment programme agreed with the European Commission in 2009. The sale of KBC Deutschland was completed in September, the activities of Antwerp Diamond Bank were put into run down and the two remaining CDOs in the portfolio were collapsed. These operations heralded the completion of the divestment programme.
In the third quarter, the Belgium Business Unit generated a net result of 384 million euros, somewhat above the average figure of 375 million euros for the four preceding quarters. Compared with the previous quarter, the third quarter of 2014 was characterised by higher net interest income and net fee and commission income, a sound combined ratio for non-life insurance and increased sales of unit-linked life insurance products. Other features of the quarter under review were the reduced but still negative impact of the valuation of ALM derivatives, lower gains on the sale of financial assets, seasonally lower dividend income and a lower level of other net income. Costs were down slightly and impairment charges were up compared to the low level of the second quarter. The banking activities accounted for 80% of the net result in the quarter under review, and the insurance activities for 20%.
In the quarter under review, the Czech Republic Business Unit posted a net result of 130 million euros, somewhat below the 139-million-euro average for the four preceding quarters. Compared with the previous quarter, the results for the third quarter featured (on a comparable basis) flat net interest income and lower net fee and commission income, a lack of realised gains on the sale of financial assets, higher net results from financial instruments, a lower level of other income, a solid non-life combined ratio and increased sales of unit-linked life insurance products. Costs declined slightly and loan loss impairment charges were up on the unsustainably low level recorded in the previous quarter. Banking activities accounted for 95% of the net result in the quarter under review, and insurance activities for 5%.
In the quarter under review, the International Markets Business Unit recorded a positive net result of 27 million euros, a significant improvement on the negative 236-million-euro average for the four preceding quarters (which had been significantly affected by additional loan loss provisioning for Ireland in the fourth quarter of 2013 and by the impact of the new retail loans act in Hungary in the second quarter of 2014). Compared to the previous quarter, the third quarter of 2014 was characterised by slightly higher net interest income and strong net fee and commission income, a stable result from financial instruments at fair value and somewhat lower realised gains on bonds and shares, a deterioration in the non-life combined ratio and lower life insurance sales. It should be noted that the previous quarter had been significantly impacted by the new Hungarian act on retail loans. Costs in the third quarter were flat, and loan loss provisions fell, mainly in Ireland. Overall, the banking activities accounted for a net result of 23 million euros (positive results in Slovakia, Hungary and Bulgaria, but negative in Ireland), while the insurance activities accounted for a net result of 4 million euros.
The liquidity position of our group remains very strong, with both the LCR and NSFR being well above 100%.
Our capital position also continues to be very robust, as illustrated by a common equity ratio of 13.7% (Basel III fully loaded under the Danish compromise). In the analysis for the first nine months of the year, the repayment of 0.5 billion euros to the Flemish Regional Government at the beginning of January has been taken into account, as have the results for this nine-month period and a pro rata provision for the proposed dividend, the coupons on the additional tier-1 instruments and on the remaining state aid, which are all to be paid over 2014. The common equity ratio, therefore, continues to be well above our target of 10.5%.
This strong capital position has also been confirmed by the results of the comprehensive assessment carried out by the ECB. KBC exceeded the ECB’s asset quality review and stress test thresholds and maintained a strong buffer of 2.8 percentage points (2.8 billion euros) above the ECB-imposed threshold of 5.5%, an achievement that reflects KBC’s resilience.
The group welcomed the extension of the ‘KBC Group anchoring agreements’ made by Cera, KBC Ancora, MRBB and the other stable shareholders. They have confirmed that they intend to continue acting in concert with respect to KBC Group NV for another term of 10 years. In doing so, they will ensure continued shareholder stability and support the further development of the KBC group.
This anchoring agreement will help KBC realise its ambition of being among the best-performing, retail-focused financial institutions in Europe and becoming the reference in bank-insurance in its core markets. This aim will be achieved by strengthening in a highly cost-efficient way its bank-insurance business model for retail, SME and mid-cap clients in its core markets, by focusing on sustainable and profitable growth within the framework of solid risk, capital and liquidity management, and by creating superior client satisfaction via a seamless, multi-channel, client-centric distribution approach. The group is truly grateful for the continued trust that its clients and stakeholders have placed in the firm and its employees.’
Attached you can find the press release.
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