IBOS member KBC Group has announced a net profit of 701 million euros in the third quarter of 2018.
Net interest income amounted to 1 136 million euros in the quarter under review. On a comparable basis, it was up 2%, both quarter-on-quarter and year-on-year.
Belgium: the net result (409 million euros) was down 6% quarter-on-quarter. It included a virtually stable level of trading and fair value income and only slightly lower net interest income (-1%), as well as lower net fee and commission income, technical insurance income and dividend income (seasonal effect). Costs were slightly lower (reduction in staff expenses, among other things) and loan loss impairments stood at a very low level.
Below are highlights (compared to the first nine months of 2017, on a comparable basis):
• Higher net interest income (up 3% to 3 378 million euros), thanks inter alia to the consolidation of UBB/Interlease (for the full nine months in the 2018 figures, but for just three months in the 2017 figures), lower funding costs, interest rate increases in the Czech Republic and higher commercial lending volumes, which more than offset overall pressure on margins and the negative effects of low reinvestment yields in most core countries. The volume of deposits increased (+3%, or +6% excluding debt certificates), as did the volume of lending (+5%). The average net interest margin in the first nine months of 2018 came to 2%, up 5 basis points on the level recorded in the reference period.
• A higher contribution to profit made by the technical insurance result (up 3% to 518 million euros). Life insurance sales (1 307 million euros) were up slightly (+1%), as the increased sale of guaranteed-interest products more than offset the drop in the sale of unit-linked products. The non-life insurance technical result was somewhat lower (-4%) than in the year-earlier period, with higher premium income being offset by higher technical charges (the reference period had benefited from a positive one-off release) and a lower ceded reinsurance result. The year-to-date non-life combined ratio stood at 88%, the same level as in full-year 2017.
• Lower net fee and commission income (down 3% to 1 312 million euros), attributable primarily to KBC’s asset management services and, to a lesser extent, to lower securities-related fees, partly offset by increased payment services-related fees, lower distribution fees paid and the consolidation of UBB/Interlease (included for nine months, as opposed to three months in the reference figures). At the end of September 2018, total assets under management stood at 214 billion euros, in line with the level recorded a year earlier.
• A lower level of all other income items combined (down 26% to 455 million euros) caused mainly by a significantly lower trading and fair value result (lower value of derivatives used for asset/liability management purposes and decrease in the dealing room result), partly offset by an increase in dividend income and other net income.
• Higher operating expenses (up 6% to 3 239 million euros), partly due to Bulgaria (distorted due to the consolidation of UBB/Interlease for nine months in 2018 as opposed to three months in 2017), higher bank taxes, some one-off items and FX effects. Excluding these items, the increase would be around 3%. The year-to-date cost/income ratio came to 59%, or an adjusted 57% when bank taxes are evenly spread throughout the year and certain non-operating items are excluded (compared to 54% and 55%, respectively, for full-year 2017).
• A net release of loan loss impairments (92 million euros in the first nine months of 2018, compared to 57 million euros in the year-earlier period) thanks largely to the impairment releases in Ireland (96 million euros, largely related to the effect of increased house prices on the mortgage loan portfolio). As a result, the annualised credit cost ratio for the whole Group stood at an excellent -0.07% (a negative figure indicates a positive impact on the results), compared to -0.06% for full-year 2017.
• The net result for the first nine months of 2018 breaks down as follows: 1 089 million euros in the Belgium Business Unit, 484 million euros in the Czech Republic Business Unit, 440 million euros in the International Markets Business Unit and -64 million euros in the Group Centre. The result for the International Markets Business Unit for the first nine months of 2018 breaks down into
Read the full results and analysis via KBC here.