Press Release
Outside trading hours - Regulated information*
Brussels, 9 February 2017 (07.00 a.m. CET)
KBC Group: Strong fourth-quarter result of 685 million euros, leading to a full-year profit of 2.4 billion euros
In an environment of persisting low interest rates, firm economic growth in Central Europe and Ireland, and more modest growth in Belgium, KBC turned in a strong performance by posting net profit of 685 million euros in the fourth quarter of 2016, compared with 629 million euros in the preceding quarter and an exceptional 862 million euros in the fourth quarter of 2015 (or 441 million euros excluding two major one-off items in that quarter). For full year 2016, our net result amounted to 2 427 million euros, compared with 2 639 million euros for 2015 (2 218 million euros excluding the two main one-off items). Moreover, our lending and deposit volumes continued to grow in 2016, as did sales of both non-life and life insurance products. Our already solid solvency and liquidity positions strengthened further.
Financial highlights for the fourth quarter of 2016, compared with the previous quarter:
· Both our banking and insurance franchises in our core markets and core activities continued to perform well.
· Lending to our customers increased by 1%, with volumes going up in all countries except Ireland. Deposits from our customers went up by 6%.
· Net interest income - our main source of income - continued to be impacted by the climate of low interest rates, but its quarter-on-quarter decrease was less than 1% thanks to offsetting factors such as healthy lending growth and lower funding costs. Our average net interest margin stood at 1.90% in the fourth quarter, similar to the quarter-earlier level. For full year 2016, our net interest margin stood at 1.92%.
· The premium income we earned on our non-life insurance products increased by 2%, while claims fell by 4%. Consequently, the non-life combined ratio for FY2016 ended up at a good 93%. Following a relatively weak third quarter, sales of life insurance products increased strongly by 17%, partially because of seasonal effects.
· Our net fee and commission income went up again, rising by 2% mainly on account of management fees and loan-related fees. Assets under management increased further, going up by 2% to 213 billion euros.
· Trading and fair value income more than tripled, thanks to a better performance in the dealing room, a higher mark-to-market valuation of derivatives used for asset/liability management purposes and positive changes in our valuation adjustments.
· Our operating expenses were up 8% on their level in the previous quarter, due to a one-off expense for early retirement and seasonal effects. Strict cost management resulted in a cost/income ratio for FY2016 of 55% (57% adjusted for specific items).
· Loan loss impairment stood at 54 million euros in the quarter under review, which brought the cost of credit to an excellent, but unsustainably low, 0.09% of our loan portfolio for full year 2016.
· Our liquidity position remained solid, as did our capital base, with a common equity ratio of 15.8% (fully loaded, Danish compromise). This compares positively to the new target of 10.40% set by the regulators to be reached by 2019 (with additional pillar 2 guidance (P2G) of 1.0% CET1).