Quarterly Report • Aug 6, 2020
Quarterly Report
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Summary 3 Financial highlights 4 Overview of results and balance sheet 5 Analysis of the quarter 6 Analysis of the year-to-date period 9 Risk statement, economic views and guidance 10
Consolidated income statement 13 Consolidated statement of comprehensive income 15 Consolidated balance sheet 16 Consolidated statement of changes in equity 17 Consolidated cashflow statement 20 Notes on statement of compliance and changes in accounting policies 22 Notes on segment reporting 29 Other notes 30
Credit risk 42 Solvency 48 Income statement, volumes and ratios per business unit 53 Details of ratios and terms 61
The expectations, forecasts and statements regarding future developments that are contained in this report are, of course, based on assumptions and are contingent on a number of factors that will come into play in the future. Consequently, the actual situation may turn out to be (substantially) different.
[email protected] KBC Group NV, Investor Relations Office, Havenlaan 2, 1080 Brussels, Belgium
This report contains information that is subject to transparency regulations for listed companies. Date of release: 6 August 2020
'I, Rik Scheerlinck, Chief Financial Officer of the KBC Group, certify on behalf of the Executive Committee of KBC Group NV that, to the best of my knowledge, the abbreviated financial statements included in the quarterly report are based on the relevant accounting standards and fairly present in all material respects the financial condition and results of KBC Group NV including its consolidated subsidiaries, and that the quarterly report provides a fair view of the main events, the main transactions with related parties in the period under review and their impact on the abbreviated financial statements, and an overview of the main risks and uncertainties for the remainder of
| KBC Group – overview (consolidated, IFRS) | 2Q2020 | 1Q2020 | 2Q2019 | 1H2020 | 1H2019 |
|---|---|---|---|---|---|
| Net result (in millions of EUR) | 210 | -5 | 745 | 205 | 1 175 |
| Basic earnings per share (in EUR) | 0.47 | -0.04 | 1.76 | 0.43 | 2.75 |
| Breakdown of the net result by business unit (in millions of EUR) | |||||
| Belgium | 204 | -86 | 388 | 119 | 564 |
| Czech Republic | 77 | 88 | 248 | 165 | 425 |
| International Markets | -45 | 35 | 104 | -11 | 175 |
| Group Centre | -26 | -43 | 4 | -68 | 11 |
| Parent shareholders' equity per share (in EUR, end of period) | 44.9 | 43.8 | 42.8 | 44.9 | 42.8 |
The quarter under review started with the society in lockdown due to the coronavirus crisis. Over and above the human suffering caused by the pandemic itself, this also triggered unprecedented economic consequences. Even though society is now gradually reopening, it is clear that the coronavirus crisis will have a significant impact, especially in particular sectors. However, the various relief measures implemented in our home countries may help contain the overall impact going forward. Obviously, the long-term impact on the economy also depends on the occurrence and intensity of new outbreaks of the virus now and in the coming months.
Since the start of the coronavirus crisis, we have been working hard with government agencies to support all customers impacted by coronavirus, by efficiently instituting relief measures – including loan deferrals – and adapting or extending these measures where necessary. In these difficult times, we have also managed to continue providing our customers in all our home markets with a high level of service, thanks in the main to the efforts and investments we have made over the past few years on the digital transformation front, in combination with the expertise and commitment of our employees in all our home countries. Meanwhile we will continue to work on solutions to proactively make life easier for our customers. The interaction between human and machine, between branch and digital app, supported by artificial intelligence and data analysis, plays a prominent role here. We will be communicating on this and other topics in more depth during a strategy update session on 12 November.
We believe that the world emerging from the coronavirus crisis will have to be a more sustainable one and we are working tirelessly to contribute to such a scenario. With that in mind, we successfully launched our second green bond in June for the amount of 500 million euros. By issuing green bonds, we aim to create a closer link with socially responsible investors, to provide finance to customers directly involved in sustainable projects and to contribute to the development of a liquid and efficient green bond market, which would help to finance the transition to a low-carbon economy.
As regards our financial results, we generated a net profit of 210 million euros in the second quarter of 2020. The result was significantly impacted by the recording of 845 million euros in loan loss impairment charges, the bulk of which related to the potential economic consequences of the coronavirus crisis. In this regard, we wish to reiterate our guidance for full-year 2020, i.e. an estimated 1.1 billion euros in loan loss impairment charges. As expected, net interest income and net fee and commission income fell in the second quarter, while our non-life insurance result, on the other hand, was very solid and our life insurance business witnessed strong sales in the second quarter. What's more, our trading and fair value result, which had been hit hard during the first quarter of the year, recovered to a large extent in the quarter under review. Last but not least, our strict cost control measures, together with the additional cost savings announced when the first-quarter results were published, helped reduce our operating expenses (excluding bank taxes) by 6% quarter-on-quarter and by 8% year-on-year.
Our solvency position remained very strong, with a common equity ratio of 16.6% on a fully loaded basis, well above the current minimum capital requirement of 7.95%. Our liquidity position remained solid too, with an LCR of 136% and an NSFR of 142% at the end of June 2020. As a result, our current capital and liquidity buffers allow us to face today's challenges with
confidence. It should also be noted that, in line with the recent ECB recommendation, we cannot execute our usual dividend policy. As a consequence, no interim dividend will be paid out in November 2020.
In closing, I would like to take this opportunity to explicitly thank all those stakeholders who have continued to put their trust in us. I can assure you that, in these challenging times, we remain fully committed to maintaining our position as the reference in bank-insurance in all our home markets. Johan Thijs, Chief Executive Officer
The cornerstones of our strategy
Our strategy rests on four principles:
The result of the quarter under review was significantly impacted by the recording of loan loss impairment charges related to the pandemic.
That aside, costs were reduced significantly, the non-life insurance result was excellent and trading & fair value income recovered following the initial drop in the first quarter. Net interest income and fee and commission went down compared to the previous quarter.
210 388 247 253 Net fee and commission income 1 083 Net interest income Net result Technical insurance income Other income Trading & FV income 72 -904 -857 Operating expenses Impairment -3 Other -69 Income taxes Breakdown of 2Q2020 result (in millions of EUR)
| Consolidated income statement, IFRS | 2Q2020 | 1Q2020 | 4Q2019 | 3Q2019 | 2Q2019 | 1H2020 | 1H2019 |
|---|---|---|---|---|---|---|---|
| KBC Group (in millions of EUR) | |||||||
| Net interest income | 1 083 | 1 195 | 1 182 | 1 174 | 1 132 | 2 278 | 2 261 |
| Non-life insurance (before reinsurance) Earned premiums |
255 435 |
185 443 |
229 441 |
192 440 |
174 425 |
440 879 |
335 840 |
| Technical charges | -180 | -258 | -212 | -248 | -251 | -439 | -505 |
| Life insurance (before reinsurance) | 6 | 0 | 2 | -5 | 1 | 6 | -2 |
| Earned premiums | 276 | 297 | 364 | 291 | 317 | 574 | 668 |
| Technical charges | -271 | -297 | -363 | -297 | -316 | -568 | -669 |
| Ceded reinsurance result | -13 | -7 | -11 | -9 | 1 | -21 | -5 |
| Dividend income | 17 | 12 | 17 | 14 | 39 | 30 | 51 |
| Net result from financial instruments at fair value through P&L1 Net realised result from debt instruments at fair value through |
253 | -385 | 130 | -46 | -2 | -132 | 97 |
| other comprehensive income | 2 | 0 | 0 | 5 | 0 | 3 | 2 |
| Net fee and commission income | 388 | 429 | 445 | 444 | 435 | 816 | 845 |
| Net other income | 53 | 50 | 47 | 43 | 133 | 102 | 192 |
| Total income | 2 043 | 1 479 | 2 041 | 1 813 | 1 913 | 3 522 | 3 775 |
| Operating expenses | -904 | -1 338 | -1 045 | -975 | -988 | -2 242 | -2 283 |
| Impairment | -857 | -141 | -82 | -26 | -40 | -997 | -109 |
| Of which: on financial assets at amortised cost and at fair value through other comprehensive income2 |
-845 | -121 | -75 | -25 | -36 | -966 | -103 |
| Share in results of associated companies & joint ventures | -3 | -3 | -1 | 0 | 4 | -7 | 8 |
| Result before tax | 279 | -3 | 912 | 812 | 889 | 276 | 1 392 |
| Income tax expense | -69 | -2 | -210 | -200 | -144 | -71 | -217 |
| 210 | -5 | 702 | 612 | 745 | 205 | 1 175 | |
| Result after tax | |||||||
| attributable to minority interests | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| attributable to equity holders of the parent Basic earnings per share (EUR) |
210 0.47 |
-5 -0.04 |
702 1.66 |
612 1.44 |
745 1.76 |
205 0.43 |
1 175 2.75 |
| Diluted earnings per share (EUR) | 0.47 | -0.04 | 1.66 | 1.44 | 1.76 | 0.43 | 2.74 |
| Key consolidated balance sheet figures | 30-06-2020 | 31-03-2020 | 31-12-2019 | 30-09-2019 | 30-06-2019 | ||
| KBC Group (in millions of EUR) Total assets |
317 388 | 301 451 | 290 735 | 294 830 | 289 548 | ||
| Loans and advances to customers, excl. reverse repos | 157 563 | 158 364 | 155 816 | 154 863 | 154 169 | ||
| Securities (equity and debt instruments) | 72 131 | 67 176 | 65 633 | 65 122 | 63 746 | ||
| Deposits from customers & debt certificates, excl. repos | 210 811 | 208 293 | 203 369 | 205 270 | 199 138 | ||
| Technical provisions, before reinsurance | 18 775 | 18 816 | 18 560 | 18 549 | 18 652 | ||
| Liabilities under investment contracts, insurance | 12 505 | 11 979 | 13 610 | 13 456 | 13 381 | ||
| Parent shareholders' equity | 18 710 | 18 220 | 18 865 | 18 086 | 17 799 | ||
| Selected ratios | |||||||
| KBC group (consolidated) | 1H2020 | FY2019 | |||||
| Return on equity | 2%3 | 14% | |||||
| Cost/income ratio, banking (when excluding certain non-operating items and spreading bank taxes evenly throughout the year) |
66% (59%) |
58% (58%) |
|||||
| Combined ratio, non-life insurance | 83% | 90% | |||||
| Common equity ratio, Basel III Danish Compromise, fully loaded [transitional] | 16.6% [16.6%] | 17.1% | |||||
| Common equity ratio, FICOD fully loaded [transitional] | 15.4% [15.5%] | 15.8% | |||||
| Leverage ratio, Basel III fully loaded [transitional] | 6.0% [6.0%] | 6.8% | |||||
| Credit cost ratio | 0.64% | 0.12% | |||||
| Impaired loans ratio | 3.4% | 3.5% | |||||
| for loans more than 90 days past due | 1.9% | 1.9% | |||||
| Net stable funding ratio (NSFR) | 142% | 136% | |||||
| 136% | 138% |
1 Also referred to as 'Trading and fair value income'.
2 Also referred to as 'Loan loss impairment'. 3 4% when bank taxes are spread evenly throughout the year.
We provide a full overview of our IFRS consolidated income statement and balance sheet in the 'Consolidated financial statements' section of the quarterly report. Condensed statements of comprehensive income, changes in shareholders' equity, as well as several notes to the accounts, are also available in the same section. As regards the (changes in) definition of ratios, see 'Details of ratios and terms' in the quarterly report.
2 043 million euros
Total income Total income increased by 38% quarter-on-quarter, due almost entirely to the recovery of our trading and fair value income, following the huge drop in the previous quarter that had been caused by the initial financial market turmoil after the outbreak of the pandemic. All other income items combined fell slightly quarter-on-quarter, with the decrease in net interest income and in net fee and commission income being partly offset by higher technical insurance income and seasonally higher dividend income.
Net interest income amounted to 1 083 million euros in the quarter under review, down 9% on the figure recorded in the previous quarter and 4% year-on-year. In both cases, the decrease was mainly related to the effect of interest rates being cut by the CNB in the Czech Republic, the depreciation of the Czech koruna and Hungarian forint against the euro, low reinvestment yields in general, lower portfolio lending margins in most core countries (except Belgium), the lower netted positive impact of ALM FX swaps, and the fact that the previous quarter had included a positive one-off item. In the year-on-year comparison, these negative effects were partially offset by good loan volume growth (see next paragraph), the beneficial effect of ECB tiering, lower funding costs, a larger bond portfolio (also quarter-on-quarter) and the full consolidation of ČMSS since June 2019 (ČMSS was consolidated for the full three months in the second quarter of 2020, but for just one month in the second quarter of 2019 – this impact is referred to as the 'ČMSS impact' elsewhere in this publication).
The total volume of customer lending (158 billion euros) was more or less stable quarter-on-quarter but went up by 4% year-onyear, with year-on-year growth recorded in all business units. Customer deposits including debt certificates (211 billion euros) were up 1% quarter-on-quarter and 7% year-on-year, again with year-on-year growth in all business units. Excluding debt certificates, deposits were even up 5% quarter-on-quarter and 11% year-on-year. The net interest margin for the quarter under review amounted to 1.82%, 15 and 12 basis points down on the figures recorded in the previous quarter and year-earlier quarter, respectively.
Technical income from our non-life insurance activities (earned premiums less technical charges, plus the ceded reinsurance result) contributed 247 million euros to total income, up 43% quarter-on-quarter and 40% on the corresponding year-earlier quarter. The quarter-on-quarter increase came about primarily because of lower technical charges (the quarter under review included the positive effect of the lockdown on claims, whereas the previous quarter had included the significant impact of storms in Belgium), which more than offset the slight decrease in earned premiums. The year-on-year increase was due mainly to a combination of lower charges (a lower level due to lockdown in the quarter under review, whereas the reference quarter had been negatively impacted by storm-related claims and a re-assessment of claims provisions) and a slight increase in premium income, despite a lower ceded reinsurance result. Overall, the combined ratio for the first half of 2020 came to an excellent 83%, compared to 90% for full-year 2019.
Technical income from our life insurance activities (earned premiums less technical charges, plus the ceded reinsurance result) amounted to 1 million euros, compared to 4 million euros in the previous quarter and 0 million euros in the year-earlier quarter. Sales of life insurance products in the quarter under review (561 million euros) were up 32% and 22% on the level recorded in the previous and year-earlier quarters, respectively (thanks to increased sales of unit-linked products in Belgium due to the launch of new products), which more than offset lower sales of guaranteed-interest products. Overall, the share of unit-linked products in our total life insurance sales increased to 58% in the quarter under review, with guaranteed-interest products accounting for the remaining 42%.
In the quarter under review, net fee and commission income amounted to 388 million euros. Compared to the previous and year-earlier quarters, this represented a significant drop of 10% and 11%, respectively. In both cases, the decrease was caused primarily by the effects of the coronavirus pandemic on asset management-related fees (a decline in entry fees due to decreased sales and margins, and a decline in management fees due to the lower average level of assets under management in combination with lower margins). Moreover, fees related to banking services also fell (payment services fees, for instance, decreased due in part to the generally lower level of activity following lockdown). These negative items were only partially offset by the lower level of distribution fees paid (quarter-on-quarter) and the ČMSS impact (year-on-year). At the end of June 2020, our total assets under management amounted to 202 billion euros, up 4% quarter-on-quarter but down 4% year-on-year. The quarter-on-quarter increase was due to a recovery in asset prices (+5%) in the second quarter, combined with a limited net outflow of assets (-1%). The year-on-year decrease resulted from a combination of lower asset prices (-1%) and net outflows (-3%).
The net result from financial instruments at fair value (trading and fair value income) amounted to a positive 253 million euros, as opposed to -385 million euros in the previous quarter (which had been impacted by the initial market turmoil following the outbreak of the coronavirus crisis) and -2 million euros in the year-earlier quarter. The trading and fair value results for the quarter under review recovered largely from their level of the previous quarter, as they were positively impacted by rising stock markets and decreasing counterparty credit spreads and KBC funding spread, partly offset by lower long-term interest rates.
The other remaining income items included dividend income of 17 million euros, up on the figure recorded in the previous quarter (as the second quarter of the year traditionally includes the bulk of received dividends), but down on the year-earlier figure as a consequence of generally lower dividend payments due to the coronavirus crisis. The remaining income lines also include 53 million euros in net other income. This is in line with the normal run rate for this item, but down on the figure recorded in the year-earlier quarter, which had benefited from an 82-million-euro revaluation gain on the stake in ČMSS that had been triggered by the acquisition of the remaining participation in that company in that quarter.
904 million euros
Operating expenses Excluding bank taxes, operating expenses in the second quarter were down 6% on the previous quarter, thanks to strict cost containment. The cost/income ratio for the first half of 2020 amounted to 66%, or 59% when certain non-operating items are excluded and bank taxes are spread evenly through the year.
Operating expenses in the second quarter of 2020 amounted to 904 million euros. The quarter-on-quarter comparison is distorted by the upfront recognition in the first quarter of most of the bank taxes for the full year (27 million euros in the second quarter of 2020; 407 million euros in the first quarter of 2020; 30 million euros in the second quarter of 2019). Excluding bank taxes, expenses decreased by 6% quarter-on-quarter and by 8% year-on-year, thanks in essence to the announced cost savings, which led to, inter alia, a decrease in accruals for variable remuneration, a reduction in FTEs, lower marketing, travel, facilities and event costs (these four cost items were directly related to the effects of lockdown), as well as to the depreciation of the Czech koruna and Hungarian forint against the euro. These items largely offset the negative impact of items such as wage drift and the ČMSS impact (year-on-year).
The cost/income ratio of our banking activities came to 66% for the first half of 2020, but was distorted by most of the bank taxes being recorded in the first quarter. Excluding certain non-operating items and spreading bank taxes evenly throughout the year, the ratio amounted to 59%, compared to 58% for full-year 2019.
845-million-euro charge
Loan loss impairment We recorded a net loan loss impairment charge of 845 million euros, up on the 121 million euros recorded in the previous quarter. Almost 90% of the loan loss impairment in the second quarter related to collective impairment charges for the effects of the coronavirus crisis. The credit cost ratio for the first half of the year went up to 0.64%.
In the second quarter of 2020, we recorded an 845-million-euro net loan loss impairment charge, compared with a net charge of 121 million euros in the previous quarter and 36 million euros in the second quarter of 2019. 746 million euros of that 845 million euros related to collective impairment charges for the coronavirus crisis. Of this amount, 596 million euros related to an expertbased calculation ('management overlay' based on certain stress assumptions depending on country, segment, sector and probability-weighted macroeconomic scenarios) and 150 million euros was captured by the ECL models through updated macroeconomic variables. A detailed calculation and background information regarding this calculation can be found in Note 1.4 of the 'Consolidated financial statements' section of the quarterly report. It should be noted that the full collective expected credit losses for the coronavirus crisis – based on the assumptions at the end of the second quarter - have already been recorded in the first half of 2020.
Broken down by country, loan loss impairment charges in the second quarter of 2020 came to 458 million euros in Belgium, 170 million euros in the Czech Republic, 41 million euros in Slovakia, 55 million euros in Hungary, 23 million euros in Bulgaria and 97 million euros in Ireland. For the entire group, the credit cost ratio increased to 0.64% for the first half of 2020 (0.20% excluding the amount recorded for the coronavirus pandemic), up from 0.12% for full-year 2019.
The impaired loans ratio was down slightly on its level at the start of the year. At the end of June 2020, some 3.4% of our total loan book was classified as impaired (stage 3), compared to 3.5% at year-end 2019. Impaired loans that are more than 90 days past due amounted to 1.9% of the loan book, comparable to the figure recorded at year-end 2019.
For an indication of the expected impact of loan loss impairment for full-year 2020, see 'Guidance' on page 11 of this publication.
Impairment on assets other than loans amounted to 12 million euros, compared to 20 million euros in the previous quarter and 4 million euros in the second quarter of 2019. The figures for the quarter under review and the previous quarter relate principally to the accounting treatment of various payment moratoria in our home countries.
| Net result | Belgium | Czech Republic | International Markets | Group Centre |
|---|---|---|---|---|
| by business unit | 204 | 77 | -45 | -26 |
| million euros | million euros | million euros | million euros |
Belgium: the net result (204 million euros) increased by 290 million euros quarter-on-quarter. Excluding bank taxes (the bulk of which are recorded in the first quarter and hence distort the quarter-on-quarter comparison), the net result still went up by 75 million euros (58%), as the strong rebound in trading and fair value income (following the huge drop in the first quarter of the year), higher technical non-life insurance result (lower claims) and lower costs more than offset the negative impact of the significant increase in loan loss impairment charges (most of which related to the impact of the coronavirus crisis) and lower net fee and commission income and net interest income.
Czech Republic: the net result (77 million euros) was down 12% on its level for the previous quarter. Excluding bank taxes (the bulk of which are recorded in the first quarter) and the effect of the depreciation of the Czech koruna against the euro, the net result was down 32% quarter-on-quarter, as significantly higher loan loss impairment charges (primarily related to the impact of the coronavirus crisis) and lower net interest income (following the CNB's rate cuts, among other things) more than offset the rebound in the trading and fair value result (following the decline in the first quarter) and the reduction in costs.
International Markets: the -45-million-euro net result breaks down as follows: -6 million euros in Slovakia, 16 million euros in Hungary, 14 million euros in Bulgaria and -70 million euros in Ireland. For the business unit as a whole, the net result was down 80 million euros quarter-on-quarter, or 127 million euros excluding bank taxes. The latter decrease came about mainly on account of higher loan loss impairment charges (in all countries; largely related to the impact of the coronavirus crisis), which were only partially offset by increased trading and fair value income and lower costs.
Group Centre: the net result (-26 million euros) was up 17 million euros quarter-on-quarter, thanks essentially to higher trading and fair value income and increased net interest income, which more than offset the absence of loan loss impairment reversals in the quarter under review and the lower ceded reinsurance result.
| Belgium | Czech Republic | International Markets | ||||
|---|---|---|---|---|---|---|
| Selected ratios by business unit | 1H2020 | FY2019 | 1H2020 | FY2019 | 1H2020 | FY2019 |
| Cost/income ratio, banking (excluding certain non-operating items and spreading bank taxes evenly throughout the year) |
58% | 60% | 48% | 47% | 68% | 68% |
| Combined ratio, non-life insurance | 85% | 89% | 86% | 94% | 78% | 88% |
| Credit cost ratio* | 0.63% | 0.22% | 0.62% | 0.04% | 0.82% | -0.07% |
| Impaired loans ratio | 2.4% | 2.4% | 2.2% | 2.3% | 7.8% | 8.5% |
* A negative figure indicates a net impairment release (positively affecting results). See 'Details of ratios and terms' in the quarterly report.
A full results table is provided in the 'Additional information' section of the quarterly report. A short analysis of the results per business unit is provided in the analyst presentation (available at www.kbc.com).
| Equity, solvency and liquidity |
Total equity |
Common equity ratio (fully loaded) |
Liquidity coverage ratio |
Net stable funding ratio |
|---|---|---|---|---|
| 20.2 billion euros | 16.6% | 136% | 142% |
At the end of June 2020, total equity amounted to 20.2 billion euros, comprising 18.7 billion euros in parent shareholders' equity and 1.5 billion euros in additional tier-1 instruments. Total equity was down 0.2 billion euros on its level at the end of 2019, owing to the combined effect of a number of items, including the profit for the half-year period (+0.2 billion euros), a decrease in the revaluation reserves for equity instruments of the insurance company (the so-called 'insurance overlay approach'; -0.1 billion euros), translation differences (-0.3 billion euros, due largely to the depreciation of the Czech koruna and Hungarian forint in the period under review) and a number of other minor items. We have provided details of these changes in the 'Consolidated financial statements' section of the quarterly report (under 'Consolidated statement of changes in equity').
At 30 June 2020, our fully loaded common equity ratio (Basel III, under the Danish compromise) amounted to a solid 16.6%, compared to 16.3% at 31 March 2020 and 17.1% at the end of 2019. Our fully loaded leverage ratio (Basel III, fully loaded) came to 6.0%, compared to 6.8% at the end of 2019. The solvency ratio for KBC Insurance under the Solvency II framework was 198% at the end of June 2020, compared to 202% at the end of 2019.
Our liquidity position remained excellent too, as reflected in an LCR ratio of 136% and an NSFR ratio of 142% at the end of the quarter under review (compared to 138% and 136%, respectively, at the end of 2019).
| Net result | The net result for the first half of 2020 amounted to 205 million euros, compared to 1 175 million euros in the corresponding period of 2019. The decline was largely accounted for |
|---|---|
| 205 million euros |
by the impact of the coronavirus lockdown and related economic turmoil, which pushed up loan loss impairments from 103 million euros in the first half of 2019 to 966 million euros in the period under review. Moreover, net fee and commission income, trading and fair value income, dividend income and net other income were all down on their reference period levels. On the positive side, net interest income increased slightly and the technical insurance result rose, while costs fell compared to the first half of 2019. |
Highlights (compared to the first half of 2019):
As we are mainly active in banking, insurance and asset management, we are exposed to a number of typical risks for these financial sectors such as – but not limited to – credit default risk, counterparty credit risk, concentration risk, movements in interest rates, currency risk, market risk, liquidity and funding risk, insurance underwriting risk, changes in regulations, operational risk, customer litigation, competition from other and new players, as well as the economy in general. KBC closely monitors and manages each of these risks within a strict risk framework, but they may all have a negative impact on asset values or could generate additional charges beyond anticipated levels.
At present, a number of items are considered to constitute the main challenges for the financial sector. These stem primarily from the impact of the coronavirus crisis on the global economy and, in particular, the financial sector (including credit, market and liquidity risks and the impact of persisting low interest rates on our results). These risks come on top of risks relating to macroeconomic and political developments, such as Brexit and trade conflicts, all of which affect global and European economies, including KBC's home markets. Regulatory and compliance risks (including anti-money laundering regulations and GDPR) remain a dominant theme for the sector, as does enhanced consumer protection. Digitalisation (with technology as a catalyst) presents both opportunities and threats to the business model of traditional financial institutions, while climate-related risks are becoming increasingly prevalent. Finally, cyber risk has become one of the main threats during the past few years, not just for the financial sector, but for the economy as a whole.
We provide risk management data in our annual reports, quarterly reports and dedicated risk reports, all of which are available at www.kbc.com.
Global economic growth suffered in the second quarter from the coronavirus (Covid-19) pandemic shock, leading to an unprecedented fall in quarterly GDP growth in the euro area and the US. Belgium followed the general euro area trend, whereas Ireland outperformed it, relatively speaking. Central and Eastern European countries were severely hit, too. During the second quarter, however, most advanced economies reopened their economies after intensive lockdown periods, initiating a strong recovery. This rebound became visible in all major economies, with China leading the way and returning to positive growth levels in the second quarter. Sentiment indicators and other data point to a similarly strong recovery in the euro area and the US. Nevertheless, caution is warranted, as the path to recovery could turn out to be a long and bumpy one, and will be heavily reliant on how the Covid-19 situation pans out. New virus outbreaks will undoubtedly slow down the recovery. The other main risk factors include the resurgence of the US-China trade and economic conflict and ongoing Brexit negotiations. Our base-case scenario assumes a steady but gradual path to recovery in both Europe and the US. We forecast for the European and US economy a strong recovery in the third and fourth quarter of 2020 and a continued recovery in 2021. However, risks are tilted to the downside. New outbreaks of Covid-19 followed by partial or full lockdowns may temporarily disrupt the course of recovery. We expect real GDP levels in the euro area to recover to their pre-coronavirus levels by the end of 2023 at the earliest.
Despite the expected recovery, the economic damage caused by the pandemic will be substantial. However, some negative effects have been postponed thanks to the temporary unemployment schemes and temporary moratoria on loans that mitigated the initial impact of the Covid-19 crisis. We expect European unemployment rates to go up in the second half of 2020 and in 2021. Moreover, we expect bankruptcies among European firms to increase, but the effect will be spread over a number of years. Hence non-performing loan ratios will gradually climb.
The recovery is strongly supported by monetary and fiscal stimuli. We expect the ECB – and the Czech and Hungarian National Banks – to keep their policy rates unchanged in the years to come. Additional monetary stimulus measures by the ECB are likely, in the form of additional quantitative easing, in particular by extending the Pandemic Emergency Purchasing Programme. These market interventions will also guarantee low longer-term interest rates and compressed intra-EMU spreads in the coming years, despite country-specific risks (particularly in Southern Europe) and a structural upswing in public deficits and public debt ratios across Europe. Moreover, the ECB will continue to support European financial institutions through the TLTROs and the tiered deposit rate instrument. In recent months, fiscal stimuli have been extended substantially, both at EU level and by the EU member states. The 'Next Generation EU' instrument, launched by the European Commission and approved by the European Council, creates a tool for financial solidarity within the EU and has clearly succeeded in calming the financial markets. Moreover, the number and span of fiscal stimulus initiatives launched by national EU governments continue to increase. Combined monetary and fiscal stimulus will underpin the recovery in Europe, similar to the policy initiatives launched in the US.
The recent recovery of the euro against the US dollar should be seen as market optimism towards the economic recovery in Europe and the policy initiatives to support this trend. We expect the euro to continue its gradual appreciation against the dollar, although the rate at which it appreciates may slow down. Central European currencies have also recovered from their Covid-19 crisis dips. In particular, we expect the Czech koruna and Hungarian forint to remain relatively stable around their current levels in the near future. Bulgaria's accession to the ERM-II is a welcome and expected step towards euro area membership, though that is not expected anytime in the next three years.
| Guidance | • Full-year 2020 guidance: |
|---|---|
| ▪ Net interest income: approximately 4.4 billion euros (up from 4.3 billion euros mentioned in the previous report); |
|
| ▪ Operating expenses excluding bank taxes: decrease of approximately 3.5% year-on-year; |
|
| ▪ Loan loss impairment: approximately 1.1 billion euros. Depending on a number of events such as the length and depth of the economic downturn, the significant number of government measures in each of our core countries, and the unknown number of customers who will call upon these mitigating actions, we estimate loan loss impairment for full-year 2020 to range between approx. 0.8 billion euros (optimistic scenario) and approx.1.6 billion euros (pessimistic scenario); |
|
| • The impact of the coronavirus lockdown on digital sales, services and digital signing has so far been very positive. KBC is clearly benefiting from the digital transformation efforts it has made to date; |
|
| • Basel IV has been postponed by one year (as of 1 January 2023 instead of 2022); | |
| • In line with the recent ECB recommendation, we cannot execute our usual dividend policy. As a consequence, no interim dividend will be paid out in November 2020; |
|
| • We will provide a strategy update together with the results for the third quarter of 2020, while new long-term guidance and our capital deployment plan will be updated when the results for full-year 2020 are published. |
__
| Upcoming events | 3Q2020 results and strategy update: 12 November 2020 4Q2020 results and update of new long-term guidance & capital deployment plan: 11 February 2021 |
|---|---|
| More information on | Quarterly report: www.kbc.com / Investor Relations / Reports |
| 2Q2020 | Company presentation: www.kbc.com / Investor Relations / Presentation |
| Detailed impact of | Quarterly report, Note 1.4 in 'Consolidated financial statements according to IFRS' |
| coronavirus crisis | Company presentation, section 2 on 'Covid-19' |
| Definitions of ratios | 'Details of ratios and terms at KBC Group level' in the last section of the quarterly report. |
Consolidated financial statements according to IFRS
2Q 2020 and 1H 2020
Section reviewed by the Auditor
AC: Amortised Cost AFS: Available For Sale (IAS 39) ALM: Asset Liability Management ECL: Expected Credit Loss FA: Financial Assets FV: Fair Value FVA: Funding Value Adjustment FVO: Fair Value Option (designated upon initial recognition at Fair Value through Profit or Loss) FVOCI: Fair Value through Other Comprehensive Income FVPL: Fair Value through Profit or Loss FVPL – overlay: Fair Value through Profit or Loss - overlay GCA: Gross Carrying Amount HFT: Held For Trading MFVPL: Mandatorily Measured at Fair Value through Profit or Loss (including HFT) OCI: Other Comprehensive Income POCI: Purchased or Originated Credit Impaired Assets SPPI: Solely payments of principal and interest SRB: Single Resolution Board R/E: Retained Earnings
| (in millions of EUR) | Note | 1H 2020 | 1H 2019 | 2Q 2020 | 1Q 2020 | 2Q 2019 |
|---|---|---|---|---|---|---|
| Net interest income | 3.1 | 2 2 7 8 | 2 2 6 1 | 1 0 8 3 | 1 1 9 5 | 1 1 3 2 |
| Interest income | 3.1 | 3 3 3 2 | 3629 | 1497 | 1835 | 1807 |
| Interest expense | 3.1 | $-1054$ | $-1367$ | - 415 | $-640$ | - 675 |
| Non-life insurance (before reinsurance) | 3.7 | 440 | 335 | 255 | 185 | 174 |
| Earned premiums | 3.7 | 879 | 840 | 435 | 443 | 425 |
| Technical charges | 3.7 | - 439 | 505 $\overline{a}$ |
$-180$ | 258 $\overline{\phantom{a}}$ |
251 |
| Life insurance (before reinsurance) | 3.7 | 6 | $-2$ | 6 | $\mathbf 0$ | 1 |
| Earned premiums | 3.7 | 574 | 668 | 276 | 297 | 317 |
| Technical charges | 3.7 | - 568 | 669 | $-271$ | $-297$ | 316 $\frac{1}{2}$ |
| Ceded reinsurance result | 3.7 | 21 $\blacksquare$ |
- 5 | - 13 | $-7$ | 1 |
| Dividend income | 30 | 51 | 17 | 12 | 39 | |
| Net result from financial instruments at fair value through profit or loss | 3.3 | 132 | 97 | 253 | 385 $\blacksquare$ |
$-2$ |
| of which result on equity instruments (overlay approach) | 51 $\qquad \qquad \blacksquare$ |
48 | 31 | - 82 | 19 | |
| Net realised result from debt instruments at fair value through OCI | 3 | 2 | 2 | 0 | $\mathbf 0$ | |
| Net fee and commission income | 3.5 | 816 | 845 | 388 | 429 | 435 |
| Fee and commission income | 3.5 | 1 1 8 8 | 1 203 | 559 | 628 | 616 |
| Fee and commission expense | 3.5 | $-371$ | 358 $\blacksquare$ |
- 172 | 199 $\blacksquare$ |
180 $\frac{1}{2}$ |
| Net other income | 3.6 | 102 | 192 | 53 | 50 | 133 |
| TOTAL INCOME | 3522 | 3775 | 2 0 4 3 | 1479 | 1913 | |
| Operating expenses | 3.8 | $-2242$ | $-2283$ | $-904$ | $-1338$ | 988 ÷ |
| Staff expenses | 3.8 | $-1139$ | $-1170$ | - 545 | 594 $\sim$ |
603 $\blacksquare$ |
| General administrative expenses | 3.8 | - 925 | - 944 | $-270$ | 654 $\sim$ |
298 |
| Depreciation and amortisation of fixed assets | 3.8 | 178 $\overline{\phantom{0}}$ |
- 169 | -89 $\overline{\phantom{a}}$ |
- 89 $\overline{\phantom{a}}$ |
- 87 |
| Impairment | 3.10 | - 997 | $-109$ | $-857$ | 141 $\sim$ |
$-40$ |
| on financial assets at AC and at FVOCI | 3.10 | - 966 | - 103 | $-845$ | 121 $\overline{\phantom{a}}$ |
- 36 |
| on goodwill | 3.10 | 0 | 0 | 0 | 0 | 0 |
| other | 3.10 | 32 $\overline{\phantom{0}}$ |
- 6 $\overline{\phantom{a}}$ |
12 | $-20$ | - 4 |
| Share in results of associated companies and joint ventures | $-7$ | 8 | - 3 | $-3$ | 4 | |
| RESULT BEFORE TAX | 276 | 1 3 9 2 | 279 | $-3$ | 889 | |
| Income tax expense | 3.12 | - 71 | $-217$ | - 69 | $-2$ | 144 ä, |
| Net post-tax result from discontinued operations | 0 | 0 | 0 | 0 | 0 | |
| RESULT AFTER TAX | 205 | 1 1 7 5 | 210 | $-5$ | 745 | |
| attributable to minority interests | $\pmb{0}$ | 0 | 0 | $\pmb{0}$ | 0 | |
| of which relating to discontinued operations | 0 | 0 | 0 | 0 | 0 | |
| attributable to equity holders of the parent | 205 | 1 1 7 5 | 210 | $-5$ | 745 | |
| of which relating to discontinued operations | 0 | 0 | 0 | 0 | 0 | |
| Earnings per share (in EUR) | ||||||
| Ordinary | 0.43 | 2.75 | 0.47 | $-0.04$ | 1.76 | |
| Diluted | 0.43 | 2.74 | 0.47 | $-0.04$ | 1.76 |
The equity instruments of the insurance companies within the group are designated under the overlay approach. These equity instruments, mainly classified as AFS under IAS 39, would have been measured at fair value through P&L under IFRS 9. The overlay approach reclassifies from the income statement to OCI the extra volatility related to the adoption of IFRS 9 as long as IFRS 17 is not in place, until 31 December 2022 (subject to EU endorsement).
The extra volatility due to IFRS 9, reclassified out of the net result from financial instruments at fair value through profit or loss to the revaluation reserves of equity instruments (overlay approach) refers to the unrealised fair value fluctuations amounting to -87 million euros in 1H 2020. It can be summarized as the difference between :
| (in millions of EUR) | 1H 2020 | 1H 2019 | 2Q 2020 | 1Q2020 | 2Q 2019 |
|---|---|---|---|---|---|
| RESULT AFTER TAX | 205 | 1 1 7 5 | 210 | $-5$ | 745 |
| attributable to minority interests | 0 | $\Omega$ | $\Omega$ | 0 | 0 |
| attributable to equity holders of the parent | 205 | 1 1 7 5 | 210 | - 5 | 745 |
| OCI THAT MAY BE RECYCLED TO PROFIT OR LOSS | $-339$ | 467 | 406 | $-745$ | 222 |
| Net change in revaluation reserve (FVOCI debt instruments) | 10 | 419 | 192 | $-182$ | 226 |
| Net change in revaluation reserve (FVPL equity instruments) - overlay | $-87$ | 139 | 138 | $-225$ | 17 |
| Net change in hedging reserve (cashflow hedges) | $-19$ | $-100$ | 5 | $-24$ | $-35$ |
| Net change in translation differences | $-309$ | - 6 | 86 | $-395$ | 2 |
| Hedge of net investments in foreign operations | 65 | 11 | $-15$ | 80 | 8 |
| Net change in respect of associated companies and joint ventures | 2 | $\Omega$ | 0 | 4 | |
| Other movements | $\Omega$ | 2 | 0 | ||
| OCI THAT WILL NOT BE RECYCLED TO PROFIT OR LOSS | 3 | - 4 | $-110$ | 113 | $-37$ |
| Net change in revaluation reserve (FVOCI equity instruments) | ۰. | 11 | 3 | $-4$ | 4 |
| Net change in defined benefit plans | $-13$ | $-98$ | 100 | $-43$ | |
| Net change in own credit risk | $-2$ | $-13$ | 17 | 0 | |
| Net change in respect of associated companies and joint ventures | $-2$ | 0 | $-2$ | 0 | 1 |
| TOTAL COMPREHENSIVE INCOME | $-131$ | 1637 | 506 | $-637$ | 930 |
| attributable to minority interests | $\Omega$ | 0 | $\Omega$ | $\Omega$ | |
| attributable to equity holders of the parent | $-131$ | 1637 | 506 | $-637$ | 930 |
The largest movements in other comprehensive income (1H 2020 vs. 1H 2019):
| (in millions of EUR) | Note 30-06-2020 31-12-2019 | |
|---|---|---|
| ASSETS | ||
| Cash, cash balances with central banks and other demand deposits with credit institutions | 23 578 | 8 3 5 6 |
| Financial assets 4.0 |
283 188 | 273 399 |
| Amortised cost 4.0 |
238 198 | 230 639 |
| Fair value through OCI 4.0 |
19 288 | 19 037 |
| 4.0 Fair value through profit or loss |
25 4 93 | 23 563 |
| 4.0 of which held for trading |
10 321 | 7 2 6 6 |
| 4.0 Hedging derivatives |
210 | 158 |
| Reinsurers' share in technical provisions, insurance | 133 | 121 |
| Fair value adjustments of the hedged items in portfolio hedge of interest rate risk | 1 6 2 3 | 478 |
| Tax assets | 1656 | 1 3 9 6 |
| Current tax assets | 136 | 96 |
| Deferred tax assets | 1 5 2 0 | 1 300 |
| Non-current assets held for sale and disposal groups | 17 | 29 |
| Investments in associated companies and joint ventures | 22 | 25 |
| Property, equipment and investment property | 3653 | 3818 |
| Goodwill and other intangible assets | 1666 | 1640 |
| Other assets | 1852 | 1474 |
| TOTAL ASSETS | 317 388 | 290 735 |
| LIABILITIES AND EQUITY | ||
| Financial liabilities 4.0 |
274 512 | 248 400 |
| 4.0 Amortised cost |
252 119 | 224 093 |
| 4.0 Fair value through profit or loss |
20 968 | 23 137 |
| 4.0 of which held for trading |
6429 | 6988 |
| Hedging derivatives 4.0 |
1424 | 1 1 7 1 |
| Technical provisions, before reinsurance | 18775 | 18 560 |
| Fair value adjustments of the hedged items in portfolio hedge of interest rate risk | 293 | $-122$ |
| Tax liabilities | 443 | 478 |
| Current tax liabilities | 57 | 98 |
| Deferred tax liabilies | 386 | 380 |
| Provisions for risks and charges | 209 | 227 |
| Other liabilities | 2946 | 2827 |
| TOTAL LIABILITIES | 297 178 | 270 371 |
| 5.10 Total equity |
20 210 | 20 365 |
| 5.10 Parent shareholders' equity |
18710 | 18865 |
| 5.10 Additional tier-1 instruments included in equity |
1 500 | 1 500 |
| Minority interests | 0 | 0 |
| TOTAL LIABILITIES AND EQUITY | 317 388 | 290 735 |
| Additional tier-1 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Issued and | Total | Parent | instruments | ||||||
| (in millions of EUR) | paid up share capital |
Share premium |
Treasury shares |
Retained earnings |
revaluation | shareholders' | included in | Minority interests |
Total equity |
| 30-06-2020 | reserves | equity | equity | ||||||
| Balance at the end of the previous period | 1458 | 5498 | $-2$ | 11 875 | 37 | 18 8 65 | 1 500 | $\Omega$ | 20 365 |
| Net result for the period | O | $\Omega$ | $\bf{0}$ | 205 | $\mathbf 0$ | 205 | $\Omega$ | $\Omega$ | 205 |
| Other comprehensive income for the period | $\Omega$ | $\bf{0}$ | $\bf{0}$ | -1 | $-337$ | $-336$ | $\Omega$ | $\mathbf{0}$ | $-336$ |
| Subtotal | $\Omega$ | $\mathbf{0}$ | $\Omega$ | 206 | $-337$ | $-131$ | $\Omega$ | $\overline{0}$ | $-131$ |
| Dividends | $\Omega$ | $\mathbf{0}$ | $\bf{0}$ | 0 | $\bf{0}$ | $\Omega$ | $\overline{0}$ | $\mathbf{0}$ | |
| Coupon on AT1 | $\Omega$ | $-25$ | $\Omega$ | 25 | $\Omega$ | $-25$ | |||
| Transfer from revaluation reserves to retained earnings on realisation | n | $\Omega$ | |||||||
| Purchase/sale of treasury shares | |||||||||
| Change in minorities interests | $\Omega$ | $\Omega$ | |||||||
| Total change | $\Omega$ | $\Omega$ | -1 | 183 | $-338$ | $-154$ | $\Omega$ | $\mathbf{0}$ | $-154$ |
| Balance at the end of the period | 1458 | 5 4 9 8 | $-1$ | 12 058 | $-302$ | 18710 | 1 500 | $\overline{0}$ | 20 210 |
| of which relating to the equity method | $\blacksquare$ | $\overline{\phantom{a}}$ | $\boldsymbol{0}$ | $\boldsymbol{0}$ | $\mathcal{O}$ | $\mathcal{O}$ | $\boldsymbol{0}$ | ||
| 2019 | |||||||||
| Balance at the end of the previous period | 1457 | 5482 | $-3$ | 10 901 | $-605$ | 17 233 | 2 4 0 0 | $\mathbf{0}$ | 19 633 |
| Net result for the period | 0 | 0 | 0 | 2 4 8 9 | 0 | 2 4 8 9 | $\Omega$ | 2 4 8 9 | |
| Other comprehensive income for the period | $\mathbf{0}$ | $\mathbf{0}$ | 0 | $-3$ | 640 | 637 | $\Omega$ | $\overline{0}$ | 637 |
| Subtotal | $\mathbf{0}$ | $\mathbf 0$ | 0 | 2486 | 640 | 3 1 2 6 | $\mathbf 0$ | $\mathbf 0$ | 3 1 2 6 |
| Dividends | $\Omega$ | $\Omega$ | $\mathbf{0}$ | $-1457$ | $\mathbf{0}$ | $-1457$ | $\Omega$ | $\Omega$ | $-1457$ |
| Coupon on AT1 | O | $\Omega$ | $-52$ | 0 | -52 $\sim$ |
$\Omega$ | $\Omega$ | $-52$ | |
| Issue/repurchase of AT1 included in equity | O | O | -2 | 0 | $\overline{2}$ | 900 $\blacksquare$ |
$\Omega$ | $-902$ | |
| Capital increase | 15 | 0 | 16 | $\Omega$ | $\Omega$ | 16 | |||
| Transfer from revaluation reserves to retained earnings on realisation | $\Omega$ | - 1 | O | ||||||
| Purchase/sale of treasury shares | |||||||||
| Change in minorities interests | O | O | $\Omega$ | $\Omega$ | |||||
| Total change | 15 | 0 | 974 | 641 | 1632 | $-900$ | $\mathbf 0$ | 732 | |
| Balance at the end of the period | 1458 | 5498 | $-2$ | 11 875 | 37 | 18 8 65 | 1 500 | $\overline{0}$ | 20 365 |
| of which relating to the equity method | $\blacksquare$ | $\blacksquare$ | $\,$ | $\overline{2}$ | $\mathbf{2}$ | 0 | 0 | $\overline{2}$ |
| (in millions of EUR) | Issued and paid up share capital |
Share premium |
Treasury shares |
Retained earnings |
Total revaluation reserves |
Parent shareholders' equity |
Additional tier-1 instruments included in equity |
Minority interests |
Tota equity |
|---|---|---|---|---|---|---|---|---|---|
| 30-06-2019 | |||||||||
| Balance at the end of the previous period | 1457 | 5482 | $-3$ | 10 901 | $-605$ | 17 233 | 2 4 0 0 | $\Omega$ | 19 633 |
| Net result for the period | 1 1 7 5 | 0 | 1 1 7 5 | $\Omega$ | 1 1 7 5 | ||||
| OCI for the period | 461 | 463 | 463 | ||||||
| Subtotal | 0 | 1 1 7 6 | 461 | 1 637 | 0 | $\Omega$ | 1637 | ||
| Dividends | $-1040$ | 0 | $-1040$ | $\Omega$ | $-1040$ | ||||
| Coupon on AT1 | $-29$ | 0 | $-29$ | $-29$ | |||||
| Issue/repurchase of AT1 included in equity | $-2$ | 0 | $-2$ | 900 $\sim$ |
$-902$ | ||||
| Transfer from revaluation reserves to retained earnings on realisation | 0 | ||||||||
| Purchase/sale of treasury shares | |||||||||
| Change in minorities interests | |||||||||
| Total change | 104 | 461 | 566 | 900 $\sim$ |
$\Omega$ | $-334$ | |||
| Balance at the end of the period | 1457 | 5482 | $-2$ | 11 005 | $-144$ | 17 799 | 1 500 | 0 | 19 299 |
| of which relating to application of the equity method | $\overline{\phantom{a}}$ | 0 |
Please note that, fully in line with the European Central Bank recommendation, the KBC Board of Directors has decided:
The line 'Dividends' in 1H 2019 includes:
• for 2018 a closing dividend of 2,50 euros per share (a total of 1 040 million euros is deducted from retained earnings in 2Q 2019). The closing dividend was paid on 9 May 2019.
The line 'Issue/repurchase of additional Tier-1 instruments included in equity' in 1H 2019 includes:
| (in millions of EUR) | 30-06-2020 | 31-12-2019 | 30-06-2019 |
|---|---|---|---|
| Revaluation reserve (FVOCI debt instruments) | 1 0 0 1 | 992 | 1 0 0 8 |
| Revaluation reserve (FVPL equity instruments) - overlay | 263 | 350 | 298 |
| Revaluation reserve (FVOCI equity instruments) | 29 | 32 | 34 |
| Hedging reserve (cashflow hedges) | $-1350$ | $-1331$ | $-1363$ |
| Translation differences | $-401$ | 92 $\sim$ |
- 79 |
| Hedge of net investments in foreign operations | 154 | 89 | 97 |
| Remeasurement of defined benefit plans | $\Omega$ | 132 ÷. |
|
| Own credit risk through OCI | -4 $\sim$ 100 $\pm$ |
$-6$ | |
| Total revaluation reserves | $-302$ | 37 | 144 |
| (in millions of EUR) | Note $(1)$ | 1H 2020 | 1H 2019 |
|---|---|---|---|
| OPERATING ACTIVITIES | |||
| Consolidated income | |||
| Result before tax | statement | 276 | |
| Adjustments for non-cash items in profit & loss | 1 2 1 3 | ||
| Changes in operating assets (excluding cash and cash equivalents) | $-10236$ | ||
| Changes in operating liabilities (excluding cash and cash equivalents) | 27 161 | ||
| Income taxes paid | $-303$ | ||
| Net cash from or used in operating activities | 18 112 | $-4877$ | |
| INVESTING ACTIVITIES | |||
| Purchase and proceeds of debt securities at amortised cost | 4.1 | $-4958$ | |
| Acquisition of a subsidiary or a business unit, net of cash acquired (including | |||
| increases in percentage interest held) | 0 | ||
| Proceeds from the disposal of a subsidiary or business unit, net of cash disposed of | |||
| (including decreases in percentage interest held) | 28 | ||
| Purchase and proceeds from the sale of intangible fixed assets | $-152$ | ||
| (excluding goodwill) Purchase and proceeds from the sale of property, plant and equipment (excluding |
|||
| goodwill) | 25 | ||
| Other | 43 | ||
| Net cash from or used in investing activities | $-5014$ | 848 | |
| FINANCING ACTIVITIES | |||
| Consolidated | |||
| statement of changes | |||
| Purchase or sale of treasury shares | in equity | $\mathbf{1}$ | |
| Issue or repayment of promissory notes and other debt securities | 4.1 | 576 | |
| Proceeds from or repayment of subordinated liabilities | 4.1 | $-65$ | |
| Principal payments under finance lease obligations | $\Omega$ | ||
| Consolidated | |||
| statement of changes | |||
| Proceeds from the issuance of share capital | in equity | $\Omega$ | |
| Consolidated | |||
| Issue of additional tier-1 instruments | statement of changes in equity |
$\Omega$ | |
| Consolidated | |||
| statement of changes | |||
| Proceeds from the issuance of preference shares | in equity | 0 | |
| Consolidated | |||
| statement of changes | |||
| Dividends paid | in equity Consolidated |
$\mathbf{0}$ | |
| statement of changes | |||
| Coupon additional Tier-1 instruments | in equity | $-25$ | |
| Net cash from or used in financing activities | 486 | $-685$ |
| (in millions of EUR) | Note $(1)$ | 1H 2020 | 1H 2019 |
|---|---|---|---|
| CHANGE IN CASH AND CASH EQUIVALENTS | |||
| Net increase or decrease in cash and cash equivalents | 13 5 84 | $-4715$ | |
| Cash and cash equivalents at the beginning of the period | 29 118 | 34 354 | |
| Effects of exchange rate changes on opening cash and cash equivalents | $-1330$ | 222 | |
| Cash and cash equivalents at the end of the period | 41 372 | 29 860 | |
| COMPONENTS OF CASH AND CASH EQUIVALENTS | |||
| Cash and cash balances with central banks and other demand deposits with credit institutions |
Consolidated balance sheet |
23 578 | 8 0 4 6 |
| Term loans to banks at not more than three months (excl. reverse repos) Reverse repos with credit institutions and investment firms at not more than three |
4.1 | 1667 | 696 |
| months | 4.1 | 22 307 | 26 781 |
| Deposits from banks repayable on demand | 4.1 | $-6180$ | - 5 662 |
| Cash and cash equivalents belonging to disposal groups | $\Omega$ | ||
| Total | 41 372 | 29 860 | |
| of which not available | 0 |
As of 2020, we provide additional details on the cash flow statement in the interim reporting (not retroactively).
The net cash from operating activities in 1H 2020 (+18 112 million euros) is mainly explained by +19.5 billion euros TLTRO III funding. In 1H 2019, the negative net cash from operating activities (-4 877 million euros) mainly includes higher term loans and mortgage loans, partly compensated by the realised result.
Net cash from investing activities in 1H 2020 (-5 014 million euros) is mainly explained by additional investments in debt securities at amortised cost. The net cash from investing activities in 1H 2019 (+848 million euros) can be explained by +439 million euros related to the acquisition of the remaining 45% stake in ČMSS (the acquisition price of 240 million euros is more than compensated by available cash and cash equivalents on the balance sheet of ČMSS) and +409 million euros maturing investments in debt securities at amortised cost.
The net cash flow from financing activities in 1H 2020 (+486 million euros) mainly includes the issue of Senior Holdco instruments for 1 billion euros (including the issue of a green bond for 500 million euros), partly offset by repayments. Matured covered bond position of 1 billion euros in May is fully renewed in June.
In 1H 2019 the net cash flow from financing activities (-685 million euros) includes:
The condensed interim financial statements of the KBC Group for the period ended 30 June 2020 have been prepared in accordance with IAS 34, 'Interim financial reporting'. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2019, which have been prepared in accordance with the International Financial Reporting Standards as adopted for use in the European Union ('endorsed IFRS').
The following IFRS standards became effective on 1 January 2020 and have been applied in this report:
The following IFRS standards were issued but not yet effective in 2020. KBC will apply these standards when they become mandatory.
A summary of the main accounting policies is provided in the group's annual accounts as at 31 December 2019.
Exchange rates used: during 1H 2020, the exchange rates of the CZK and HUF dropped significantly, with negative impact on the balance sheet total and on the result:
The growing public health crisis around the world has distressed financial markets amid concerns that the global economy, and the EU's economies in particular, are heading towards a sharp contraction in full year 2020. The coronavirus pandemic has triggered a chain of events in the markets that has led to a sharp increase in volatility.
The significant deterioration in the economic outlook has brought about an unprecedented monetary policy response from central banks and governments around the world.
Latest status overview of the different government and sector measures in each of our core countries:
| Deferral of payments |
Belgium • Opt-in: 3 months for consumer finance, 6-9 months for mortgages and non-retail loans, (maximum until 31 Oct 2020 and can be extended to 31 Dec 2020) • For private persons: deferral of principal and interest payments, while only deferral of principal payments for non retail clients • Interest is accrued over deferral period, with the exception of families with net income less than 1 700 euros. For the latter group, this results in a modification loss for the bank. (-11 million euros |
Czech Republic • Opt-in: 3 or 6 months • Applicable for retail and non-retail clients • For private persons and entrepreneurs: deferral of principal and interest payments, while only deferral of principal payments for non-retail clients • Interest is accrued over the deferral period, but the interest has to be paid in the last instalment, resulting in a modification loss for the bank (-5 million euros in 2Q. Refer to note 3.10) • For consumer loans, the interest during the deferral period cannot exceed 2-week repo rate + 8% |
Slovakia • Opt-in: 9 months or 6 months (for leases) • Applicable for retail customers, SMEs and entrepreneurs • Deferral of principal and interest payments • Interest is accrued over the deferral period, but the client has the option to pay all interests at once after the moratorium or pay on a linear basis. The latter option would result in an immaterial modification loss for the bank |
Hungary • Opt-out: a blanket moratorium until 31 Dec 2020. • Applicable for retail and non retail • Deferral of principal and interest payments • Interest is accrued over deferral period, but unpaid interest cannot be capitalised and must be collected on a linear way during the remaining (extended) lifetime. This results in a modification loss for the bank (-18 million euros in 1Q; revised to -11 million euros in 2Q based on the actual opt-out ratio. Refer to note 3.10) |
Bulgaria • Opt-in: 6 months (maximum until 31 Mar 2021) • Applicable for retail and non- retail • Deferral of principal and interest payments • In case of principal deferral, the tenor is extended with 6 months • Interest is accrued over deferral period and is payable in 12 months (consumer and non-retail) or 60 months (mortgages) |
Ireland • Opt-in: 3 to 6 months • Applicable for mortgage loans, consumer finance loans and business banking loans with repayment schedule • Deferral of principal and interest payments for up to 6 months (with revision after 3 months) for Mortgages & Consumer finance and 3 months for business banking • Option for customers to extend their loan term by up to 6 months to match payment break |
|---|---|---|---|---|---|---|
| Guarantee scheme & Liquidity assistance |
in 2Q. Refer to note 3.10) • A state guarantee scheme up to 40 billion euros to cover losses incurred on future non retail loans granted before 30 Sep 2020 to viable companies, with a tenor of maximum 12 months. Guarantee covers 50% of losses above 3% of total credit losses and 80% above 5% of losses. Maximum interest is 1,25% As of 3Q, a revised state • guarantee scheme up to 10 billion euros has been offered to cover losses on future SME loans granted before 31 December 2020, with a tenor between 1 and 3 years. Guarantee covers 80% on all losses. Maximum interest is 2% |
• The Czech-Moravian Guarantee and Development Bank (CZMRB) launched several guarantee programs (COVID II, COVID II Praha, COVID III) for working capital loans provided by commercial banks to non-retail clients. The loan amount is guaranteed up to 80% or 90% of the loan amount (depending on the program and the size of the company). Interest on these loans is subsidised up to 25% (COVID II) • The Export Guarantee and Insurance Corporation (EGAP) under its COVID Plus program offers guarantees on loans provided by commercial banks. EGAP guarantees 70% to 80% of the loan amount, depending on the rating of the debtor. The program is aimed at companies for which exports accounted for more than 20% of turnover in 2019 |
• Anti-Corona Guarantee program offered by the Slovak Investment Holding (SIH), aiming at SMEs, consists of two components: (i) a 80% state guarantee with 50% portfolio cap and (ii) the interest rate subsidy reaching up to 4% p.a. • In addition, financial aid in the form of the state guarantee schemes with guarantee fee subsidy can be provided by (i) Export-Import Bank of SR guaranteed up to 80% and for loans < 2 million euros and (ii) Slovak Investment Holding for loans between 2 and 20 million euros, guaranteed up to 90%. No portfolio cap |
• A guarantee scheme is provided by Garantiqa and the Hungarian Development Bank. These state guarantees can cover up to 90% of the loans with a maximum tenor of 6 years • Furthermore, the MNB has launched the Funding for growth scheme: A framework amount of 4,2 billion euros for SMEs that can receive loans with a 20 year tenor at maximum interest rate of 2,5% • Annual interest rate on personal loans granted by commercial banks may not exceed the central bank base rate by more than 5pp |
in equal instalments • 0.4 billion euros of state guarantees provided by the Bulgarian Development Bank to commercial banks. From this amount, 0.1 billion euros is used to guarantee 100% on consumer loans while 0.3 billion euros is planned to be used to guarantee 80% on non-retail loans |
term • Interest is accrued over the deferral period • The Irish authorities put substantial relief measures in place, amongst others via the SBCI. KBC Bank Ireland is mainly focused on individual customers, therefore the relief programs for business customers are less relevant. |
As in the first quarter, our ECL models were not able to adequately reflect all the specificities of the Covid-19 crisis nor the various government measures implemented in the different countries to support households, SME's and Corporates through this crisis. Therefore, an expert-based calculation at portfolio level has been performed to take into account the macroeconomic circumstances and the different government measures via a management overlay. In the first quarter, this exercise was performed for a certain number of (sub)sectors. The main reason for limiting the scope of the exercise was the significant uncertainty about how the virus would spread, the extent of the consequential lockdown measures and the government response to the economic instability. Over the last few months, the lockdowns have been gradually eased to a certain extent. Governments, most notably the EU, and central banks have announced measures to support the recovery. The significant uncertainty still exists, especially around the possibility and timing of resurgence of the virus or even a return in several waves, but the widespread extent of the economic crunch has become clearer. Therefore, in the approach applied for this quarter, the scope of the management overlay has been expanded to include all sectors of our corporate and SME portfolio as well as our retail portfolio.
| (in billions of EUR) | 30-06-2020 31-03-2020 31-12-2019 | ||
|---|---|---|---|
| Portfolio outstanding | 179 | 180 | 17: |
| Retail | 41% | 40% | 42% |
| of which mortgages | 38% | 37% | 389 |
| of which consumer finance | 3% | 3% | 39 |
| SME | 21% | 21% | 22% |
| Corporate | 38% | 39% | 37% |
For the 30 June performing portfolio, a 3-step approach was applied to estimate the additional Covid-19 impact for the performing portfolio:
* This graph does not include the stage transfers embedded underlying in the forecasted collective Covid-19 ECL, which amount to a net staging of 5%-points of the total portfolio from stage 1 to stage 2 and of 1%-point from stage 1 & 2 to stage 3.
For the non-performing portfolio, an additional impact assessment was performed on a portfolio basis for the stage 3 collective exposures based on expert judgement of the credit risk management department. Additional impairments due to Covid-19 on individually assessed stage 3 loans are already reflected on the specific allowance of the exposure (hence already included in P&L impairments) and thus not included in the management overlay.
| Sector-driven Covid-19 ECL (base-case): | Collective Covid-19 ECL per country: | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| KBC Group | Performing portfolio | Performing portfolio | Non- | Total | ||||||||||
| High risk | Medium | Low risk | Mortgages | Optimistic | Base | Pessimistic Probability Performing | 1H20 | 2020 1020 | ||||||
| sectors | risk sectors | sectors | & | TOTAL | EUR m | 15% | 45% | 40% | weigthed | portfolio | ||||
| $EUR$ m | 150% | 100% | 50% | other retail | KBC Group | 484 | 611 | 870 | 696 | 93 | 789 | 746 | 43 | |
| Base-case scenario | 175 | 244 | 68 | 124 | 611 | By country: | ||||||||
| Optimistic scenario | 146 | 200 | 52 | 86 | 484 | Belgium | 285 | 355 | 478 | 393 | 20 | 413 | 378 | 35 |
| Pessimistic scenario | 248 | 337 | 96 | 189 | 870 | Czech Republic | 103 | 129 | 186 | 148 | 10 | 158 | 152 | 6 |
| Slovakia | 30 | 34 | 50 | 40 | ٥ | 40 | 39 | |||||||
| Hungary | 37 | 48 | 69 | 55 | ٥ | 55 | 54 | |||||||
| Bulgaria | 14 | 19 | 13 | 28 | 28 | n/al | ||||||||
| Irolond | 2 A | 22 | 69 | En: | ΔE. | OF. | n/a |
The 3-step stress approach to the performing portfolio and the additional impact assessment of the non-performing portfolio resulted in a total collective Covid-19 ECL of 789 million euros (P&L charge in 1H20). In 2Q20, the ECL models captured 150 million euros of this impact through the updated macroeconomic variables used in the calculation (36% in stage 1, 35% in stage 2 and 29% in stage 3). Hence, the total Covid-19 management overlay in the books per 30-06-2020 amounts to 639 million euros, of which 43 million euros was accounted for in 1Q 2020 and 596 million euros in 2Q 2020. As in 1Q 2020, the management overlay is fully presented as stage 2, with the exception of the management overlay on the existing non-performing portfolio.
Including the collective Covid-19 ECL, the Credit Cost Ratio amounted to 0.64%.
| Credit Cost % | FY19 | 3M20 (annualized) |
1H 20 (annualized*) |
|---|---|---|---|
| Without collective COVID-19 ECL | 0.12% | 0.17% | 0.20% |
| With collective COVID-19 ECL | 0.27% | 0.64% |
The KBC Group Chief Economist has formulated three different forecasts that differ on the virus evolution and its impact on the lockdown measures in the different home countries. In short the three scenarios can be summarized as follows:
| OPTIMISTIC SCENARIO |
BASE SCENARIO |
PESSIMISTIC SCENARIO |
|---|---|---|
| Virus spread quickly and definitely brought under control permanently, with no further risk of future lockdowns, fast decline in number of cases |
Virus spread and impact under control without additional extensive lockdown measures |
Spread continues until vaccination becomes available, with partial or full lockdowns |
| Steep and steady recovery from 3Q20 onwards with a fast return to pre-Covid-19 activity levels |
More moderate, but still steady recovery from 3Q20 onwards with a recovery to pre-Covid-19 activity levels by end 2023 |
Longer term stagnation and negative growth, with unsteady recovery path |
| Sharp, short V pattern | Pronounced V/U-pattern | More L-like pattern, with right leg only slowly increasing |
Despite a gradual lifting of lockdown measures in many countries, there remains substantial uncertainty about the economic impact of the precautionary lockdown measures as well as about the policy reactions to mitigate the impact of the crisis. Because of this uncertainty, the KBC Group Chief Economist continues to work with three alternative scenarios: a base-case scenario, a more optimistic scenario and a more pessimistic scenario. The definition of each scenario remains approximately the same as in the previous quarter, but we are assigning the following probabilities: 45% for the base-case scenario, 40% for the pessimistic and 15% for the optimistic scenario.
The following table (in line with the KBC Group Chief Economist's forecasts of June 2020) gives these scenarios for three key indicators (GDP growth, unemployment rate and house price index) for each of our core countries for the next three years. After that, we take into account a gradual linear transition towards a steady state.
| Macroeconomic base scenario - key indicators (June 2020) |
2020 | 2021 | 2022 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Scenario | Optimistic | Base | Pessimistic | Optimistic | Base | Pessimistic | Optimistic | Base | Pessimistic |
| Real GDP growth | |||||||||
| Euro area | $-6.0%$ | $-9.6%$ | $-14.0%$ | 6.5% | 6.2% | $-3.2%$ | 1.3% | 1.2% | 5.0% |
| Belgium | $-5.0%$ | $-9.5%$ | $-13.2%$ | 6.0% | 5.7% | $-3.2%$ | 1.3% | 1.3% | 5.0% |
| Czech Republic | $-5.0%$ | $-10.0%$ | $-15.0%$ | 4.0% | 6.0% | 3.0% | 2.5% | 3.5% | 2.7% |
| Hungary | $-3.0%$ | $-6.2%$ | $-10.0%$ | 4.0% | 5.0% | 4.0% | 3.5% | 3.5% | 3.5% |
| Slovakia | $-5.0%$ | $-10.0%$ | $-14.0%$ | 4.5% | 7.0% | 1.5% | 2.6% | 4.5% | 2.5% |
| Bulgaria | $-4.0%$ | $-8.0%$ | $-12.0%$ | 3.0% | 5.0% | 4.0% | 3.0% | 3.0% | 3.0% |
| Ireland | $-2.0%$ | $-5.0%$ | $-10.0%$ | 2.0% | 4.0% | 1.0% | 2.6% | 3.5% | 2.5% |
| Unemployment rate | |||||||||
| Belgium | 5.9% | 7.2% | 10.0% | 5.8% | 7.6% | 12.0% | 5.6% | 6.9% | 9.5% |
| Czech Republic | 3.1% | 5.2% | 7.0% | 3.5% | 5.7% | 7.1% | 3.0% | 4.6% | 7.6% |
| Hungary | 4.8% | 6.4% | 9.0% | 4.2% | 5.6% | 7.5% | 4.0% | 4.8% | 5.9% |
| Slovakia | 8.0% | 9.0% | 12.0% | 9.2% | 10.5% | 13.0% | 7.7% | 8.0% | 14.0% |
| Bulgaria | 6.0% | 8.0% | 11.0% | 4.1% | 10.0% | 13.0% | 4.2% | 7.0% | 12.0% |
| Ireland | 8.2% | 11.0% | 20.0% | 6.1% | 7.0% | 16.0% | 5.1% | 6.0% | 10.0% |
| House price index | |||||||||
| Belgium | $-1.0%$ | $-3.0%$ | $-6.0%$ | 0.0% | $-2.0%$ | $-4.0%$ | 1.5% | 1.0% | $-1.0%$ |
| Czech Republic | 0.0% | $-2.0%$ | $-4.0%$ | $-0.8%$ | $-3.5%$ | $-6.0%$ | 2.0% | 2.0% | 0.0% |
| Hungary | $-1.0%$ | $-5.0%$ | $-7.5%$ | 0.0% | $-3.0%$ | $-5.0%$ | 2.5% | 2.0% | 1.0% |
| Slovakia | $-1.0%$ | $-5.0%$ | $-7.0%$ | 0.5% | $-2.0%$ | $-3.0%$ | 2.0% | 2.0% | 1.0% |
| Bulgaria | 0.5% | $-2.0%$ | $-4.0%$ | 1.0% | $-1.0%$ | $-3.0%$ | 3.0% | 3.0% | 0.0% |
| Ireland | $-6.0%$ | $-12.0%$ | $-20.0%$ | 5.0% | 8.0% | $-5.0%$ | 4.0% | 5.0% | 3.0% |
Net interest income was negatively impacted in 1H 2020 following multiple repo rate cuts of the Czech National Bank.
Net fee and commission income was negatively impacted by the coronavirus pandemic for asset management related fees (lower entry fees due to decreased sales and margins; lower management fees due to a lower average level of assets under management in combination with lower margins). Moreover, fees related to banking services also went down (payment services fees, for instance lower activity level due to the lockdown).
Financial instruments at fair value through P&L have been negatively affected by the increased volatility in financial markets in 1H 2020, leading to a net result on financial instruments at fair value through profit or loss of -0.1 billion euros in 1H 2020 (-0.4 billion euros in 1Q 2020 due to lower stock markets, widened credit spreads and lower long-term interest rates, partly recovered in 2Q 2020 for +0,3 billion euros). For more information: see note 3.3 further in this report.
Elevated technical results in Non-life 1H 2020 supported by a low claims level as a result of the lockdown. The context of Covid-19 is even more challenging for life sales in interest guaranteed products.
Operating expenses were favorably impacted by the Covid-19 crisis as cost saving measures were introduced, leading to, among other things, lower staff expenses (of which a decrease in accruals for variable remuneration, lower FTEs), lower marketing, travel and facility costs.
We have performed an ad-hoc assessment of goodwill impairment indication. The outcome shows no indication of impairment.
We have investigated whether it is probable that taxable profit will be available against which the deductible temporary differences can be utilised based on projections for a period of eight to ten years. The conclusion of this analysis is that there are sufficient estimated taxable profits available.
The impact of Covid-19 on the financial markets is also reflected in a downward movement of the revaluation reserves in OCI in 1H 2020, more specifically on the revaluation reserve (FVPL equity instruments) – overlay approach and the translation differences. For more information, see text below the table Other Comprehensive income.
KBC has maintained its strong liquidity position throughout the COVID-19 crisis. The Liquidity Coverage Ratio (LCR) of KBC Bank, which gives an idea of the bank's liquidity position in the short term, remained roughly stable in 1H 2020 and amounted to 136% at the end of June 2020. The Net Stable Funding Ratio (NSFR) of KBC Bank, which gives an idea of the bank's structural liquidity position in the long term, amounted to a high 142% at the end of June 2020 (compared to 136% at the end of December 2019).
The approval process is still ongoing.
For a description on the management structure and linked reporting presentation, reference is made to note 2.1 in the annual accounts 2019.
| Czech | International | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (in millions of EUR) | Belgium Business |
Republic Business |
Markets Business |
Of which: | Group | ||||
| unit | unit | unit | Hungary | Slovakia | Bulgaria | Ireland | Centre | Total | |
| 1H 2020 | |||||||||
| Net interest income | 1 2 7 5 | 587 | 438 | 127 | 100 | 72 | 140 | $-22$ | 2 2 7 8 |
| Non-life insurance (before reinsurance) | 278 | 69 | 85 | 32 | 15 | 38 | $\cal O$ | $\overline{7}$ | 440 |
| Earned premiums | 564 | 148 | 161 | 73 | 25 | 62 | $\mathcal O$ | $\overline{7}$ | 879 |
| Technical charges | 285 | $-79$ | $-76$ | $-42$ | $-10$ | 24 | $\mathcal O$ | $\mathbf{1}$ | $-439$ |
| Life insurance (before reinsurance) | $-37$ | 26 | 17 | 3 | 6 | 8 | $\mathcal{O}$ | $\mathbf 0$ | 6 |
| Earned premiums | 424 | 97 | 53 | 17 | 17 | 19 | $\mathcal O$ | $-1$ | 574 |
| Technical charges | $-461$ | $-70$ | $-36$ | $-13$ | $-12$ | 11 | $\mathcal{O}$ | $\bf 0$ | $-568$ |
| Ceded reinsurance result | $-19$ | $\mathbf 0$ | $-6$ | $\overline{c}$ ÷. |
$-1$ | $-3$ | $\cal O$ | $\overline{4}$ | $-21$ |
| Dividend income | 27 | $\mathbf{1}$ | $\mathbf 0$ | $\mathcal O$ | $\mathcal O$ | 0 | $\mathcal O$ | $\overline{2}$ | 30 |
| Net result from financial instruments at fair value through profit or loss | 68 | - 35 | 9 | 12 | $-1$ | $\boldsymbol{0}$ | $-2$ | 39 | $-132$ |
| Net realised result from debt instruments at fair value through OCI | $\overline{1}$ | $\mathbf 0$ | $\mathbf{1}$ | 0 | $\mathcal I$ | $\mathcal O$ | $\mathcal O$ | $\mathbf 0$ | 3 |
| Net fee and commission income | 579 | 106 | 135 | 95 | 29 | 12 | $-1$ | $-3$ | 816 |
| Net other income | 79 | 12 | 11 | $\overline{2}$ | 5 | $\overline{2}$ | $\mathcal O$ | $\mathbf 0$ | 102 |
| TOTAL INCOME | 2 1 1 4 | 766 | 692 | 270 | 154 | 129 | 137 | $-51$ | 3 5 2 2 |
| Operating expenses | $-1349$ | $-385$ | $-463$ | $-170$ | $-110$ | $-76$ | $-107$ | $-45$ | 2 2 4 2 |
| Impairment | $-586$ | $-184$ | 236 ä, |
$-66$ | $-48$ | $-28$ | $-95$ | 9 | - 997 |
| on financial assets at amortised cost and at fair value through OCI | $-574$ | $-178$ | 222 | $-54$ | 48 | $-26$ | $-95$ | 9 | $-966$ |
| on goodwill | $\pmb{0}$ | $\pmb{0}$ | $\mathbf 0$ | 0 | 0 | $\it{O}$ | $\mathcal O$ | $\mathbf 0$ | $\Omega$ |
| other | $-11$ | $-6$ | $-14$ | $-12$ | $\mathcal{O}$ | $-2$ | $\mathcal{O}$ | $\mathbf{0}$ | $-32$ |
| Share in results of associated companies and joint ventures | $-6$ | $-1$ | $\Omega$ | $\Omega$ | $\theta$ | $\Omega$ | $\Omega$ | $\mathbf 0$ | $-7$ |
| RESULT BEFORE TAX | 174 | 196 | $-8$ | 34 | $-4$ | 26 | $-66$ | $-86$ | 276 |
| Income tax expense | $-55$ | $-30$ | $-3$ | - 9 | $\overline{1}$ | $-3$ | $\boldsymbol{8}$ | 18 | $-71$ |
| Net post-tax result from discontinued operations | 0 | 0 | $\mathbf 0$ | 0 | 0 | 0 | $\cal O$ | $\mathbf 0$ | 0 |
| RESULT AFTER TAX | 119 | 165 | $-11$ | 25 | $-3$ | 24 | $-58$ | $-68$ | 205 |
| attributable to minority interests | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\mathcal O$ | $\mathcal{O}$ | $\mathcal{O}$ | $\mathcal{O}$ | $\mathbf 0$ | $\mathbf{0}$ |
| attributable to equity holders of the parent | 119 | 165 | $-11$ | 25 | $-3$ | 24 | - 58 | $-68$ | 205 |
| 1H 2019 | |||||||||
| Net interest income | 1 2 4 5 | 610 | 427 | 126 | 102 | 70 | 130 | $-21$ | 2 2 6 1 |
| Non-life insurance (before reinsurance) | 205 | 56 | 69 | 23 | 14 | 32 | 0 | $\sqrt{5}$ | 335 |
| Earned premiums | 545 | 136 | 155 | 73 | 23 | 60 | 0 | 5 | 840 |
| Technical charges | 340 | - 80 | 86 | $-49$ | - 9 | 28 | 0 | $\mathbf 0$ | $-505$ |
| Life insurance (before reinsurance) | $-49$ | 29 | 18 | $\overline{4}$ | 6 | 8 | $\mathcal{O}$ | $\mathbf 0$ | $-2$ |
| Earned premiums | 501 | 117 | 50 | 8 | 21 | 20 | $\mathcal O$ | $\mathbf 0$ | 668 |
| Technical charges | 550 | $-88$ | 32 | $-4$ | $-15$ | 12 | $\Omega$ | $\mathbf 0$ | $-669$ |
| Ceded reinsurance result | 12 | $-4$ | $-5$ | - 1 | $-1$ | 3 ÷ |
$\mathcal O$ | $-8$ | $-5$ |
| Dividend income | 49 | $\mathbf 0$ | $\pmb{0}$ | 0 | 0 | $\boldsymbol{0}$ | $\mathcal O$ | $\overline{2}$ | 51 |
| Net result from financial instruments at fair value through profit or loss | 97 | $-37$ | 20 | 18 | - 2 | 8 | $\overline{4}$ | 17 | 97 |
| Net realised result from debt instruments at fair value through OCI | $\mathbf 0$ | 0 | $\mathbf{1}$ | 0 | $\mathbf{1}$ | $\Omega$ | 0 | 0 | $\overline{2}$ |
| Net fee and commission income | 578 | 125 | 146 | 104 | 32 | 12 | $-2$ | $-3$ | 845 |
| Net other income | 95 | 97 | $\mathbf 0$ | $\mathcal I$ | 3 | $\boldsymbol{0}$ | $-4$ | $-1$ | 192 |
| TOTAL INCOME | 2 2 3 4 | 875 | 676 | 275 | 155 | 126 | 121 | $-10$ | 3775 |
| Operating expenses | $-1383$ | $-383$ | $-472$ | 183 | 107 | $-76$ | 107 | $-45$ | $-2283$ |
| Impairment | $-114$ | - 5 | 1 | 3 | - 11 | $-3$ | 12 | 10 | $-109$ |
| on financial assets at amortised cost and at fair value through OCI | 113 $\sim$ |
$-2$ | $\overline{\mathbf{c}}$ | 3 | 11 $\overline{\phantom{0}}$ |
- 3 | 12 | 10 | $-103$ |
| on goodwill | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 | 0 | 0 | 0 | $\mathbf 0$ | 0 |
| other | $-2$ | - 3 | $\mathbf{1}$ | 0 | 0 | 0 | 0 | $\mathbf 0$ | - 6 |
| Share in results of associated companies and joint ventures | $-2$ | 9 | $\overline{2}$ | 0 | 0 | 0 | 0 | $\mathbf 0$ | 8 |
| RESULT BEFORE TAX | 734 | 495 | 207 | 94 | 38 | 47 | 26 | $-45$ | 1 3 9 2 |
| Income tax expense | $-170$ | $-70$ | $-32$ | $-15$ | $-9$ | $-5$ | $-3$ | 56 | $-217$ |
| Net post-tax result from discontinued operations | $\mathbf 0$ | $\Omega$ | $\mathbf 0$ | 0 | 0 | 0 | 0 | $\mathbf 0$ | 0 |
| RESULT AFTER TAX | 564 | 425 | 175 | 79 | 29 | 42 | 22 | 11 | 1 1 7 5 |
| attributable to minority interests | $\mathbf 0$ | $\pmb{0}$ | 0 | $\boldsymbol{0}$ | 0 | 0 | 0 | $\bf 0$ | 0 |
| attributable to equity holders of the parent | 564 | 425 | 175 | 79 | 29 | 42 | 22 | 11 | 1 1 7 5 |
| (in millions of EUR) | 1H 2020 | 1H 2019 | 2Q 2020 | 1Q 2020 | 2Q 2019 |
|---|---|---|---|---|---|
| Total | 2 2 7 8 | 2 2 6 1 | 1 0 8 3 | 1 1 9 5 | 1 1 3 2 |
| Interest income | 3 3 3 2 | 3629 | 1497 | 1835 | 1807 |
| Interest income on financial instruments calculated using the effective interest rate method | |||||
| Financial assets at AC | 2 5 6 8 | 2743 | 1 1 8 1 | 1 3 8 6 | 1 3 8 3 |
| Financial assets at FVOCI | 163 | 166 | 80 | 83 | 78 |
| Hedging derivatives | 235 | 247 | 101 | 134 | 128 |
| Financial liabilities (negative interest) | 55 | 24 | 34 | 20 | 11 |
| Other | 11 | 3 | 3 | $\overline{4}$ | |
| Interest income on other financial instruments | |||||
| Financial assets MFVPL other than held for trading | 5 | 3 | 3 | 3 | 1 |
| Financial assets held for trading (*) | 300 | 434 | 95 | 206 | 201 |
| Of which economic hedges (*) | 279 | 421 | 82 | 197 | 195 |
| Other financial assets at FVPL | $\Omega$ | $\Omega$ | $\Omega$ | 0 | $\mathbf 0$ |
| Interest expense | $-1054$ | $-1.367$ | $-415$ | $-640$ | $-675$ |
| Interest expense on financial instruments calculated using the effective interest rate method | |||||
| Financial liabilities at AC | $-455$ | $-671$ | $-171$ | $-284$ | $-332$ |
| Financial assets (negative interest) | $-18$ | $-48$ | $-8$ | $-10$ | $-24$ |
| Hedging derivatives | $-335$ | $-330$ | $-158$ | $-177$ | $-167$ |
| Other | - 3 | - 3 | $-1$ | $-2$ | $-2$ |
| Interest expense on other financial instruments | |||||
| Financial liabilities held for trading (*) | $-222$ | $-291$ | $-67$ | $-155$ | $-139$ |
| Of which economic hedges (*) | $-205$ | $-274$ | $-60$ | $-145$ | $-130$ |
| Other financial liabilities at FVPL | $-19$ | $-20$ | $-9$ | $-10$ | $-11$ |
| Net interest expense relating to defined benefit plans | $-2$ | $-4$ | $-1$ | $-1$ | $-2$ |
(*) 1Q 2020: corrected figure without impact on net interest income.
The vast majority of negative interest on financial liabilities and financial assets relates to transactions with central banks, interbank and professional counterparties as well as the TLTRO.
The result from financial instruments at fair value through profit or loss in 2Q 2020 is 638 million euros higher compared to 1Q 2020. The quarter-on-quarter increase is due to:
Compared to 2Q 2019, the result from financial instruments at fair value through profit or loss is 256 million euros higher in 2Q 2020, for a large part explained by:
The result from financial instruments at fair value through profit or loss in 1H 2020 is 229 million euros lower compared to 1H 2019, for a large part explained by:
only partly compensated by:
• Higher dealing room income in the Czech Republic, partly offset by a lower dealing room income in Belgium.
| (in millions of EUR) | 1H 2020 | 1H 2019 | 2Q 2020 | 1Q 2020 | 2Q 2019 |
|---|---|---|---|---|---|
| Total | 816 | 845 | 388 | 429 | 435 |
| Fee and commission income | 1 1 8 8 | 1 2 0 3 | 559 | 628 | 616 |
| Fee and commission expense | $-371$ | $-358$ | $-172$ | $-199$ | $-180$ |
| Breakdown by type | |||||
| Asset Management Services | 507 | 534 | 237 | 270 | 270 |
| Fee and commission income | 535 | 562 | 250 | 285 | 285 |
| Fee and commission expense | $-28$ | $-28$ | $-13$ | $-15$ | $-14$ |
| Banking Services | 448 | 449 | 219 | 229 | 230 |
| Fee and commission income | 610 | 609 | 291 | 319 | 315 |
| Fee and commission expense | $-162$ | $-160$ | $-72$ | $-90$ | $-85$ |
| Distribution | $-138$ | $-138$ | $-68$ | $-71$ | $-65$ |
| Fee and commission income | 42 | 32 | 19 | 24 | 16 |
| Fee and commission expense | $-181$ | $-170$ | $-86$ | $-95$ | $-82$ |
| (in millions of EUR) | 1H 2020 | 1H 2019 | 2Q 2020 | 1Q 2020 | 2Q 2019 |
|---|---|---|---|---|---|
| Total | 102 | 192 | 53 | 50 | 133 |
| of which gains or losses on | |||||
| Sale of financial assets measured at amortised cost | 10 ° | 8 | $\Omega$ | ||
| Repurchase of financial liabilities measured at amortised cost | $\Omega$ | ||||
| of which other, including: | 93 | 188 | 51 | 42 | 133 |
| Income from (mainly operational) leasing activities, KBC Lease Group | 39 | 39 | 20 | 19 | 20 |
| Income from VAB Group | 25 | 22 | 13 | 12 | 11 |
| One-off effect revaluation of 55% share in CMSS | 82 | 82 | |||
| Settlement of legacy legal cases | 6 | $\Omega$ | |||
| Provisioning for tracker mortgage review | - 4 | - 4 |
Note : in 1H 2019
| (in millions of EUR) | Life | Non-life | Non- technical account |
Total |
|---|---|---|---|---|
| 1H 2020 | ||||
| Earned premiums, insurance (before reinsurance) | 574 | 888 | 1461 | |
| of which change in provision unearned premiums | $-1$ | $-188$ | $-189$ | |
| Technical charges, insurance (before reinsurance) | $-568$ | $-440$ | $-1008$ | |
| Claims paid | $-570$ | - 416 | $-986$ | |
| Changes in technical provisions | 16 | $\overline{7}$ | 24 | |
| Other technical result | $-14$ | $-31$ | $-45$ | |
| Net fee and commission income | - 1 | $-171$ | - 172 | |
| Ceded reinsurance result | - 1 | $-20$ | $-21$ | |
| General administrative expenses | $-81$ | $-127$ | - 1 | $-209$ |
| Internal claims settlement expenses | $-4$ | $-31$ | $-35$ | |
| Indirect acquisition costs | - 17 | $-37$ | $-54$ | |
| Administrative expenses | $-61$ | $-59$ | $-119$ | |
| Investment management fees | 0 | $\mathbf 0$ | - 1 | $-1$ |
| Technical result | $-77$ | 130 | - 1 | 52 |
| Investment Income (*) | 142 | 25 | 22 | 190 |
| Technical-financial result | 65 | 155 | 21 | 241 |
| Share in results of associated companies and joint ventures |
$\mathbf 0$ | $\mathbf 0$ | ||
| RESULT BEFORE TAX | 65 | 155 | 21 | 241 |
| Income tax expense | $-65$ | |||
| RESULT AFTER TAX | 176 | |||
| attributable to minority interest | $\mathbf 0$ | |||
| attributable to equity holders | 176 | |||
| of the parent | ||||
| 1H 2019 | ||||
| Earned premiums, insurance (before reinsurance) | 668 | 851 | $\blacksquare$ | 1519 |
| of which change in provision unearned premiums | - 1 | $-201$ | $-202$ | |
| Technical charges, insurance (before reinsurance) | - 669 | $-506$ | $-1176$ | |
| Claims paid | $-571$ | $-434$ | $-1005$ | |
| Changes in technical provisions | $-136$ | $-40$ | $-176$ | |
| Other technical result | 38 | $-32$ | 6 | |
| Net fee and commission income | - 13 | $-163$ | $-176$ | |
| Ceded reinsurance result | - 1 | - 4 | - 5 | |
| - 82 | $-127$ | -1 | - 211 | |
| General administrative expenses Internal claims settlement expenses |
- 4 | $-30$ | - 35 | |
| Indirect acquisition costs | - 15 | $-35$ | $-51$ | |
| Administrative expenses | $-61$ | $\blacksquare$ | - 124 | |
| Investment management fees | - 63 ÷ |
$-1$ | $-1$ | |
| Technical result | $-98$ | 50 | $-1$ | $-49$ |
| Investment Income (*) | 249 | 43 | 23 | 315 |
| Technical-financial result | 151 | 94 | 21 | 266 |
| Share in results of associated companies | $\overline{\phantom{0}}$ | $\overline{\phantom{0}}$ | 2 | $\overline{2}$ |
| and joint ventures | ||||
| RESULT BEFORE TAX | 151 | 94 | 23 | 268 |
| Income tax expense | $\equiv$ | $\equiv$ | $\overline{\phantom{a}}$ | $-47$ |
| RESULT AFTER TAX | - | $\qquad \qquad \blacksquare$ | $\qquad \qquad$ | 221 |
| attributable to minority interest | Ē, | |||
| attributable to equity holders of the parent |
221 |
(*)1H 2020 consists of (in millions of EUR): Net interest income (218), Net Dividend income (17), Net result from financial instruments at fair value through profit and loss (-47), Net other income (7) and Impairment (-6).
1H 2019 consists of (in millions of EUR): Net interest income (232), Net Dividend income (31), Net result from financial instruments at fair value through profit and loss (53), Net realised result from debt instruments at fair value through OCI (1), Net other income (0) and Impairment (-2). The non-technical account includes also results of non-insurance companies such as VAB group and ADD.
Note: Figures for premiums exclude the investment contracts without DPF (Discretionary Participation Features), which roughly coincide with the unit-linked products. Figures are before elimination of transactions between the bank and insurance entities of the group (more information in the 2019 annual accounts).
In 1H 2020 the technical result non-life was negatively impacted by storms in Belgium, Czech Republic and Hungary in 1Q 2020 for an amount of -51 million euros (pre-tax, before reinsurance). This was offset by a low claims level largely as a result of the lockdown in 2Q 2020.
In 1H 2019 the technical result non-life was negatively impacted by:
The operating expenses for 2Q 2020 include 27 million euros related to bank (and insurance) levies (407 million euros in 1Q 2020; 30 million euros in 2Q 2019), 434 million euros in 1H 2020 and 413 million euros in 1H 2019). Application of IFRIC 21 (Levies) has as a consequence that certain levies are taken upfront in expense of the first quarter of the year.
| (in millions of EUR) | 1H 2020 | 1H 2019 | 2Q 2020 | 1Q 2020 | 2Q 2019 |
|---|---|---|---|---|---|
| Total | $-997$ | $-109$ | $-857$ | $-141$ | $-40$ |
| Impairment on financial assets at AC and at FVOCI | $-966$ | $-103$ | $-845$ | $-121$ | $-36$ |
| Of which impairment on financial assets at AC | $-962$ | $-103$ | $-842$ | $-120$ | $-35$ |
| By product | |||||
| Loans and advances | $-948$ | $-95$ | - 837 | $-111$ | $-33$ |
| Debt securities | - 1 | 0 | 0 | $\Omega$ | |
| Off-balance-sheet commitments and financial guarantees | $-14$ | - 7 | $-5$ | - 9 | $-3$ |
| By type | |||||
| Stage 1 (12-month ECL) | $-60$ | $-17$ | $-52$ | - 8 | $-15$ |
| Stage 2 (lifetime ECL) | $-663$ | - 4 | $-618$ | - 46 | $-11$ |
| Stage 3 (non-performing; lifetime ECL) | $-236$ | $-88$ | $-171$ | $-65$ | $-18$ |
| Purchased or originated credit impaired assets | $-3$ | 6 | $-2$ | $-1$ | 9 |
| Of which impairment on financial assets at FVOCI | $-4$ | 0 | $-3$ | $-1$ | $\Omega$ |
| Debt securities | $-4$ | $\Omega$ | $-3$ | - 1 | $\Omega$ |
| Stage 1 (12-month ECL) | $\sim$ | ٠ | $-1$ | 0 | $\Omega$ |
| Stage 2 (lifetime ECL) | - 3 | $-2$ | ÷ | 0 | |
| Stage 3 (non-performing; lifetime ECL) | 0 | 0 | 0 | 0 | 0 |
| Impairment on goodwill | 0 | $\Omega$ | $\mathbf{0}$ | 0 | 0 |
| Impairment on other | $-32$ | $-6$ | $-12$ | $-20$ | $-4$ |
| Intangible fixed assets (other than goodwill) | $-2$ | $-3$ | $-2$ | $\Omega$ | $-3$ |
| Property, plant and equipment (including investment property) | $\sim$ | $\sim$ | $\Omega$ | 0 | - 1 |
| Associated companies and joint ventures | 0 | $\Omega$ | 0 | 0 | |
| Other | $-29$ | - 1 | - 9 | $-19$ | 0 |
The impairments on financial assets at AC in 1H 2020 include -789 million euros collective Covid-19 ECL (of which -43 million euros in 1Q 2020 and -746 million euros in 2Q 2020). For more information, see note 1.4 of this report.
The stage 3 impairments in 1H 2020 and 1H 2019 are attributable mainly to loan loss impairments in Belgium due to a number of corporate files.
The impairment on other (Other) include -27 million euros in 1H 2020 (respectively -18 and -9 million euros in 1Q and 2Q 2020) related to modification losses in Belgium, Czech Republic and Hungary. For more information, see note 1.4 of this report.
| MFVPL | ||||||||
|---|---|---|---|---|---|---|---|---|
| excl. HFT |
Hedging | |||||||
| and | deriva- | |||||||
| (in millions of EUR) | AC. | FVOCI overlay | Overlay | HFT | FVO | tives | Total | |
| FINANCIAL ASSETS, 30-06-2020 | ||||||||
| Loans and advances to credit institutions and investment firms (excl. reverse repos) |
6753 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf{1}$ | $\mathbf 0$ | $\mathbf 0$ | 6754 |
| of which repayable on demand and term loans at not more than three months | 1667 | |||||||
| Loans and advances to customers (excl. reverse repos) | 157 277 | $\mathbf 0$ | 286 | $\mathbf 0$ | 0 | $\mathbf 0$ | 0 | 157 563 |
| Trade receivables | 1689 | $\mathbf 0$ | 0 | $\mathbf 0$ | $\mathbf 0$ | 0 | $\mathbf 0$ | 1689 |
| Consumer credit | 5 3 0 0 | $\mathbf 0$ | 181 | $\mathbf 0$ | $\mathbf 0$ | 0 | $\mathbf 0$ | 5481 |
| Mortgage loans | 67 835 | $\mathbf 0$ | 96 | $\mathbf 0$ | $\mathbf 0$ | 0 | $\mathbf 0$ | 67931 |
| Term loans | 70 482 | $\mathbf 0$ | 9 | $\mathbf 0$ | $\mathbf 0$ | 0 | $\mathbf 0$ | 70 491 |
| Finance lease | 5753 | $\mathbf 0$ | $\overline{0}$ | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 | 5753 |
| Current account advances | 5 1 5 8 | 0 | 0 | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 | 5 1 5 8 |
| Other | 1 0 5 9 | $\mathbf{0}$ | $\mathbf{0}$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf{0}$ | $\mathbf 0$ | 1 0 5 9 |
| Reverse repos | 25 3 65 | $\mathbf 0$ | 0 | $\mathbf 0$ | 379 | 0 | 0 | 25744 |
| with credit institutions and investment firms | 24 125 | $\mathbf 0$ | 0 | $\mathbf 0$ | 379 | 0 | $\mathbf 0$ | 24 504 |
| with customers | 1 2 4 0 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf{0}$ | $\mathbf 0$ | 1 2 4 0 |
| Equity instruments | $\mathbf 0$ | 257 | $\overline{7}$ | 1 1 7 1 | 430 | 0 | 0 | 1864 |
| Investment contracts (insurance) | $\mathbf{0}$ | $\mathbf{0}$ | 13 655 | $\mathbf 0$ | $\mathbf 0$ | 0 | $\mathbf 0$ | 13 655 |
| Debt securities issued by | 47 510 | 19 031 | 53 | $\mathbf 0$ | 3673 | $\mathbf 0$ | $\mathbf 0$ | 70 267 |
| Public bodies | 41 136 | 12 9 29 | $\overline{0}$ | $\mathbf 0$ | 3616 | 0 | $\mathbf 0$ | 57 680 |
| Credit institutions and investment firms | 3754 | 2665 | $\mathbf 0$ | $\mathbf 0$ | 18 | 0 | $\mathbf 0$ | 6437 |
| Corporates | 2621 | 3 4 3 7 | 53 | $\mathbf{0}$ | 39 | 0 | 0 | 6 150 |
| Derivatives | $\mathbf 0$ | $\mathbf 0$ | 0 | $\mathbf 0$ | 5836 | 0 | 210 | 6 0 4 6 |
| Other | 1 2 9 3 | $\mathbf 0$ | 0 | $\mathbf 0$ | 3 | 0 | $\mathbf 0$ | 1 2 9 6 |
| Total | 238 198 | 19 288 | 14 001 | 1 1 7 1 | 10 321 | 0 | 210 | 283 188 |
| FINANCIAL ASSETS, 31-12-2019 | ||||||||
| Loans and advances to credit institutions and investment firms (excl. reverse repos) |
5 3 9 8 | 0 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf{1}$ | 0 | $\mathbf 0$ | 5 3 9 9 |
| of which repayable on demand and term loans at not more than three months | 468 | |||||||
| Loans and advances to customers (excl. reverse repos) | 155 598 | $\mathbf 0$ | 218 | 0 | 0 | 0 | $\mathbf 0$ | 155 816 |
| Trade receivables | 1885 | 0 | 0 | 0 | 0 | 0 | 0 | 1885 |
| Consumer credit | 5 3 8 3 | 0 | 122 | 0 | 0 | 0 | 0 | 5505 |
| Mortgage loans | 67 711 | 0 | 85 | 0 | 0 | 0 | 0 | 67796 |
| Term loans | 68 867 | 0 | 10 | $\Omega$ | $\Omega$ | $\Omega$ | $\mathbf 0$ | 68 877 |
| Finance lease | 5926 | $\mathbf 0$ | 0 | 0 | 0 | 0 | 0 | 5926 |
| Current account advances | 4979 | 0 | 0 | 0 | 0 | 0 | 0 | 4979 |
| Other | 847 | 0 | 0 | 0 | 0 | 0 | 0 | 847 |
| Reverse repos | 25 5 96 | 0 | 0 | 0 | 0 | 0 | 0 | 25 596 |
| with credit institutions and investment firms | 25 4 4 5 | 0 | 0 | 0 | 0 | 0 | 0 | 25 4 45 |
| with customers | 151 | 0 | 0 | 0 | 0 | 0 | 0 | 151 |
| Equity instruments | $\mathbf 0$ | 249 | $\overline{7}$ | 1431 | 833 | 0 | 0 | 2519 |
| Investment contracts (insurance) | $\mathbf 0$ | 0 | 14 584 | 0 | 0 | 0 | 0 | 14 584 |
| Debt securities issued by | 42 998 | 18788 | 58 | 0 | 1 2 6 9 | 0 | 0 | 63 114 |
| Public bodies | 37 0 24 | 12 370 | 0 | 0 | 1 1 4 9 | 0 | 0 | 50 542 |
| Credit institutions and investment firms | 3632 | 2753 | 0 | 0 | 20 | 0 | 0 | 6405 |
| Corporates | 2 3 4 3 | 3666 | 58 | 0 | 99 | 0 | 0 | 6 167 |
| Derivatives | 0 | 0 | 0 | 0 | 5 1 6 3 | 0 | 158 | 5 3 2 2 |
| Other | 1 0 4 9 | 0 | 0 | 0 | 0 | 0 | 0 | 1 0 4 9 |
| Total | 230 639 | 19 037 | 14 867 | 1431 | 7 2 6 6 | 0 | 158 | 273 399 |
| (in millions of EUR) | AC | HFT | FVO | Hedging derivatives |
Total |
|---|---|---|---|---|---|
| FINANCIAL LIABILITIES, 30-06-2020 | |||||
| Deposits from credit institutions and investment firms (excl. repos) |
37 401 | $\mathbf 0$ | $\overline{0}$ | $\mathbf 0$ | 37 401 |
| of which repayable on demand | 6 180 | ||||
| Deposits from customers and debt securities (excl. repos) | 208 594 | 183 | 2035 | 0 | 210 811 |
| Demand deposits | 95 792 | $\mathbf 0$ | 0 | 0 | 95792 |
| Time deposits | 14 341 | 29 | 173 | 0 | 14 543 |
| Savings accounts | 71964 | $\mathbf 0$ | $\mathbf 0$ | $\Omega$ | 71964 |
| Special deposits | 2478 | $\mathbf 0$ | 0 | 0 | 2478 |
| Other deposits | 250 | $\mathbf 0$ | 0 | 0 | 250 |
| Certificates of deposit | 6 0 8 5 | $\mathbf 0$ | 6 | 0 | 6092 |
| Savings certificates | 690 | $\mathbf 0$ | $\Omega$ | 0 | 690 |
| Non-convertible bonds | 14 737 | 154 | 1 7 0 1 | 0 | 16 593 |
| $\Omega$ | |||||
| Non-convertible subordinated liabilities | 2 2 5 5 | 153 | 0 | 2408 | |
| Repos | 3 2 2 8 | $\overline{2}$ | $\mathbf 0$ | $\mathbf 0$ | 3 2 2 9 |
| with credit institutions and investment firms | 2 3 4 8 | $\mathbf 0$ | $\overline{0}$ | 0 | 2 3 4 8 |
| with customers | 880 | $\mathbf{1}$ | $\Omega$ | 0 | 881 |
| Liabilities under investment contracts | 0 | $\Omega$ | 12 505 | $\Omega$ | 12 505 |
| Derivatives | $\mathbf 0$ | 5 2 3 8 | $\mathbf 0$ | 1424 | 6662 |
| Short positions | $\mathbf 0$ | 1 0 0 7 | $\mathbf 0$ | $\mathbf 0$ | 1 0 0 7 |
| In equity instruments | 0 | 12 | 0 | 0 | 12 |
| In debt securities | 0 | 995 | $\overline{0}$ | $\mathbf 0$ | 995 |
| Other | 2897 | $\mathbf 0$ | $\overline{0}$ | $\mathbf{0}$ | 2897 |
| Total | 252 119 | 6429 | 14 539 | 1 4 2 4 | 274 512 |
| FINANCIAL LIABILITIES, 31-12-2019 | |||||
| Deposits from credit institutions and investment firms (excl. | 18731 | 0 | $\mathbf 0$ | 0 | 18731 |
| repos) of which repayable on demand |
4 669 | ||||
| Deposits from customers and debt securities (excl. repos) | 200 607 | 223 | 2 5 3 9 | 0 | 203 369 |
| Demand deposits | 85 626 | 0 | $\mathbf 0$ | 0 | 85 626 |
| Time deposits | 15 271 | 39 | 184 | 0 | 15 4 94 |
| Savings accounts | 69 057 | 0 | 0 | 0 | 69 057 |
| Special deposits | 2465 | 0 | 0 | 0 | 2 465 |
| Other deposits | 542 | 0 | 0 | 0 | 542 |
| Certificates of deposit | 10 538 | 0 | 8 | 0 | 10 546 |
| Savings certificates | 1 0 2 5 | 0 | 0 | 0 | 1025 |
| Non-convertible bonds | 13756 | 183 | 2 2 0 0 | 0 | 16 139 |
| Non-convertible subordinated liabilities | 2 3 2 7 | 0 | 147 | 0 | 2 474 |
| 2 5 6 5 | 0 | 0 | 0 | 2 5 6 5 | |
| Repos | |||||
| with credit institutions and investment firms | 2 2 6 2 | O | U | U | 2 2 6 2 |
| with customers | 302 | 0 | 0 | 0 | 303 |
| Liabilities under investment contracts | 0 | 0 | 13 6 10 | 0 | 13 610 |
| Derivatives | 0 | 5 0 5 7 | 0 | 1 1 7 1 | 6 227 |
| Short positions | 0 | 1708 | 0 | 0 | 1708 |
| In equity instruments | 0 | 14 | 0 | 0 | 14 |
| In debt securities | 0 | 1693 | 0 | 0 | 1693 |
| Other | 2 190 | 0 | 0 | 0 | 2 190 |
| Total | 224 093 | 6988 | 16 149 | 1 1 7 1 | 248 400 |
Deposits from credit institutions and investment firms' include funding obtained from the ECB's TLTRO programme. In 2Q 2020, KBC participated in TLTRO III for an amount of 19.5 billion euros.
| 30-06-2020 | 31-12-2019 | ||||||
|---|---|---|---|---|---|---|---|
| (in millions of EUR) | Carrying value before impairment |
Impairment | Carrying value after impairment |
Carrying value before impairment |
Impairment | Carrying value after impairment |
|
| FINANCIAL ASSETS AT AMORTISED COST | |||||||
| Loans and advances (*) | 193 064 | $-3669$ | 189 395 | 189 446 | $-2855$ | 186 592 | |
| Stage 1 (12-month ECL) | 168 977 | $-177$ | 168 800 | 165 326 | $-131$ | 165 195 | |
| Stage 2 (lifetime ECL) | 18 7 34 | $-910$ | 17824 | 18 558 | $-254$ | 18 304 | |
| Stage 3 (lifetime ECL) | 5 1 9 0 | $-2556$ | 2 6 3 4 | 5 3 8 1 | $-2444$ | 2937 | |
| Purchased or originated credit impaired assets (POCI) |
163 | $-26$ | 137 | 182 | $-26$ | 155 | |
| Debt Securities | 47 522 | $-12$ | 47 510 | 43 010 | $-12$ | 42 998 | |
| Stage 1 (12-month ECL) | 47 484 | $-5$ | 47479 | 42 934 | $-5$ | 42 930 | |
| Stage 2 (lifetime ECL) | 31 | $-1$ | 30 | 69 | $-2$ | 67 | |
| Stage 3 (lifetime ECL) | $-6$ | 7 | - 6 | ||||
| Purchased or originated credit impaired assets (POCI) |
$\mathbf 0$ | 0 | $\Omega$ | 0 | 0 | 0 | |
| FINANCIAL ASSETS AT FAIR VALUE THROUGH OCI | |||||||
| Debt Securities | 19 040 | $-9$ | 19 0 31 | 18793 | $-5$ | 18788 | |
| Stage 1 (12-month ECL) | 18 903 | $-5$ | 18 897 | 18771 | $-4$ | 18767 | |
| Stage 2 (lifetime ECL) | 137 | $-3$ | 134 | 22 | - 1 | 22 | |
| Stage 3 (lifetime ECL) | 0 | 0 | 0 | $\mathbf 0$ | 0 | ||
| Purchased or originated credit impaired assets (POCI) | $\Omega$ | 0 | 0 | 0 | 0 |
The strong increase in impairments is mainly driven by collective Covid-19 ECL.
The table does not include the stage transfers embedded underlying in the forecasted collective Covid-19 ECL. For more information see note 1.4 in this report.
For more details on how KBC defines and determines (i) fair value and the fair value hierarchy and (ii) level 3 valuations reference is made to notes 4.4 up to and including 4.7 of the annual accounts 2019.
| (in millions of EUR) | 30-06-2020 | 31-12-2019 | ||||||
|---|---|---|---|---|---|---|---|---|
| Fair value hierarchy | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total |
| FINANCIAL ASSETS AT FAIR VALUE | ||||||||
| Mandatorily measured at fair value through profit or loss (other than held for trading) |
14 375 | 409 | 387 | 15 172 | 15 536 | 441 | 320 | 16 298 |
| Held for trading | 2 7 1 5 | 6 5 0 5 | 1 1 0 1 | 10 3 21 | 1685 | 4 3 8 1 | 1 200 | 7 2 6 6 |
| Fair value option | $\mathbf 0$ | $\mathbf 0$ | $\mathbf{0}$ | $\Omega$ | 0 | $\mathbf 0$ | $\mathbf 0$ | $\Omega$ |
| At fair value through OCI | 14 853 | 3859 | 576 | 19 288 | 14 945 | 3630 | 463 | 19 0 37 |
| Hedging derivatives | $\mathbf 0$ | 210 | $\mathbf{0}$ | 210 | 0 | 158 | $\Omega$ | 158 |
| Total | 31 943 | 10 983 | 2 0 6 4 | 44 990 | 32 166 | 8611 | 1982 | 42759 |
| FINANCIAL LIABILITIES AT FAIR VALUE | ||||||||
| Held for trading | 1 0 0 9 | 4 1 4 6 | 1 2 7 5 | 6429 | 1708 | 3 2 5 9 | 2021 | 6988 |
| Designated at fair value | 12 504 | 598 | 1437 | 14 539 | 13 610 | 657 | 1883 | 16 149 |
| Hedging derivatives | $\Omega$ | 1424 | $\mathbf{0}$ | 1424 | 0 | 1 1 7 1 | $\Omega$ | 1 1 7 1 |
| Total | 13 513 | 6 1 6 7 | 2 7 1 2 | 22 3 9 3 | 15 317 | 5 0 8 7 | 3903 | 24 308 |
During 1H 2020, KBC transferred about 122 million euros' worth of financial assets and liabilities out of level 1 and into level 2. It also reclassified approximately 323 million euros' worth of financial assets and liabilities from level 2 to level 1. Most of these reclassifications were carried out due to a change in the liquidity of government and corporate bonds.
In 1H 2020 significant movements in financial assets and liabilities classified in level 3 of the fair value hierarchy included the following:
On 6 October 2011, Irving H. Picard, trustee for the liquidation of Bernard L. Madoff Investments Securities LLC (& Bernard L. Madoff), sued KBC Investments Ltd (a wholly-owned subsidiary of KBC Bank) before the bankruptcy court in New York to recover (claw-back) approximately USD 110,000,000 which had been transferred from Madoff (via a feeder fund KBC had lent to called Harley) to KBC entities. This claim is one of a whole set made by the trustee against several banks, hedge funds, feeder funds and investors ("joint defense group").
A lengthy litigation process was conducted on the basis of preliminary objections in respect of the applicability of the Bankruptcy Code's 'safe harbor' and 'good defenses' rules to subsequent transferees (as is the case for KBC Investments Ltd), as detailed in previous disclosures. In June 2015 the trustee amended the original claim which led to an increase of the amount claimed to USD 196,000,000.
A final court ruling dismissing the claim of the Trustee was issued on 3 March 2017. The Trustee appealed and the Court of Appeal reversed the dismissal on 28 February 2019. A petition (i.e. writ of Certioriari) filed on 30 August 2019 was denied by the U.S. Supreme Court on 2 June 2020. As a consequence the merits of the case will be handled by the Bankruptcy Court.
KBC still believes there is a strong basis to get the action against KBC dismissed as there are a number of other defenses that can be raised together with the joint defense group. The procedure may still take several years.
| Quantities | 30-06-2020 | 31-12-2019 |
|---|---|---|
| Ordinary shares | 416 394 642 | 416 394 642 |
| of which ordinary shares that entitle the holder to a dividend payment | 416 394 642 | 416 394 642 |
| of which treasury shares | 24 817 | 38 607 |
| Additional information | ||
| Par value per share (in EUR) | 3.51 | 3.51 |
| Number of shares issued but not fully paid up | $\Omega$ |
The ordinary shares of KBC Group NV have no nominal value and are quoted on NYSE Euronext (Brussels). The treasury shares almost fully relate to positions in shares of KBC Group to hedge outstanding equity derivatives.
On 29 May 2020, KBC Insurance and Nova Ljubljanska banka ('NLB') closed the transaction announced on 27 December 2019 to sell, in a joint process, their respective stakes in the Slovenian 50/50 life insurance joint venture NLB Vita. The transaction had a negligible impact on KBC Group's P&L and capital ratio.
On 31 May 2019, ČSOB has acquired the remaining 45% stake in ČMSS from Bausparkasse Schwäbisch Hall (BSH) for a total consideration of 240 million euros. As a result, ČMSS is as of 1 June 2019 fully consolidated (previously equity method).
Significant non-adjusting events between the balance sheet date (30 June 2020) and the publication of this report (6 August 2020):
• At the end of July, the ECB has extended its recommendation not to pay dividends until January 2021.
Additional Information 2Q 2020 and 1H 2020
The main source of credit risk is the loan portfolio of the bank. A snapshot of the banking portfolio is shown in the table below. It includes all payment credit, guarantee credit and standby credit granted by KBC to private persons, companies, governments and banks. Bonds held in the investment portfolio are included if they are corporate- or bank-issued, hence government bonds and trading book exposure are not included. Further on in this chapter, extensive information is provided on the credit portfolio of each business unit. Information specifically on sovereign bonds can be found under 'How do we manage our risks (in the annual accounts 2019)'.
| Credit risk: loan portfolio overview | 30-06-2020 | 31-12-2019 |
|---|---|---|
| Total loan portfolio (in billions of EUR) 1 | ||
| Amount outstanding and undrawn | 221 | 218 |
| Amount outstanding | 179 | 175 |
| Loan portfolio breakdown by business unit (as a % of the outstanding portfolio) | ||
| Belgium | 65.2% | 64.1% |
| Czech Republic | 17.3% | 18.4% |
| International Markets | 15.5% | 15.6% |
| Group Centre | 1.9% | 2.0% |
| Loan portfolio breakdown by counterparty sector (as a % of the outstanding portfolio) | ||
| Private individuals Finance and insurance Governments Corporates Services Distribution Real estate Building & construction Agriculture, farming, fishing Automotive Food producers Electricity Metals Chemicals Machinery & heavy equipment Shipping Hotels, bars & restaurants |
40.9% 8.7% 3.5% 46.9% 10.8% 6.8% 6.3% 4.1% 2.7% 2.6% 1.7% 1.5% 1.5% 1.4% 1.0% 0.8% 0.7% |
41.7% 7.6% 2.9% 47.7% 10.9% 7.3% 6.4% 3.9% 2.7% 2.6% 1.7% 1.6% 1.4% 1.3% 1.0% 0.8% 0.7% |
| Oil, gas & other fuels Electrotechnics Textile & apparel Traders Other 2 |
0.6% 0.5% 0.5% 0.5% 3.0% |
0.6% 0.5% 0.6% 0.6% 3.1% |
| Loan portfolio breakdown by region (as a % of the outstanding portfolio) | ||
| Home countries Belgium Czech Republic Ireland Slovakia Hungary Bulgaria |
85.9% 53.7% 16.5% 5.7% 4.9% 3.1% 2.1% |
86.4% 52.9% 17.6% 5.9% 4.9% 3.1% 2.0% |
| Rest of Western Europe | 8.9% | 8.6% |
| Rest of Central and Eastern Europe | 0.3% | 0.4% |
| North America | 1.6% | 1.5% |
| Asia | 1.7% | 1.5% |
| Other | 1.6% | 1.6% |
| Loan portfolio breakdown by counterparty (as % of the outstanding portfolio) | ||
| Retail of which: mortgages of which: consumer finance SME |
40.8% 37.8% 3.1% 21.4% |
41.7% 38.5% 3.2% 21.8% |
| Corporate | 37.8% | 36.5% |
| 30-06-2020 | 31-12-2019 | |
|---|---|---|
| Loan portfolio breakdown by IFRS 9 ECL stage (as % of the outstanding portfolio) | ||
| Stage 1 (credit risk has not increased significantly since initial recognition) | 85.4% | 85.2% |
| of which: PD 1 - 4 | 63.4% | 62.7% |
| of which: PD 5 - 9 including unrated | 22.0% | 22.6% |
| Stage 2 (credit risk has increased significantly since initial recognition – not credit impaired) incl. POCI 3 | 11.3% | 11.3% |
| of which: PD 1 - 4 | 3.4% | 3.4% |
| of which: PD 5 - 9 including unrated | 7.8% | 7.9% |
| Stage 3 (credit risk has increased significantly since initial recognition – credit impaired) incl. POCI 3 | 3.4% | 3.5% |
| of which: PD 10 impaired loans | 1.4% | 1.6% |
| of which: more than 90 days past due (PD 11+12) | 1.9% | 1.9% |
| Impaired loan portfolio (in millions of EUR) | ||
| Impaired loans (PD10 + 11 + 12) | 6 024 | 6 160 |
| of which: more than 90 days past due | 3 463 | 3 401 |
| Impaired loans ratio (%) | ||
| Belgium | 2.4% | 2.4% |
| Czech Republic | 2.2% | 2.3% |
| International Markets | 7.8% | 8.5% |
| Group Centre | 11.8% | 12.4% |
| Total | 3.4% | 3.5% |
| of which: more than 90 days past due | 1.9% | 1.9% |
| Loan loss impairment (in millions of EUR) | ||
| Loan loss Impairment for Stage 1 portfolio | 200 | 144 |
| Loan loss Impairment for Stage 2 portfolio | 921 | 265 |
| Loan loss Impairment for Stage 3 portfolio | 2 696 | 2 584 |
| of which: more than 90 days past due | 2 163 | 2 050 |
| Cover ratio of impaired loans (%) | ||
| Loan loss impairments for stage 3 portfolio / impaired loans | 44.8% | 42.0% |
| of which: more than 90 days past due | 62.4% | 60.3% |
| Cover ratio of impaired loans, mortgage loans excluded (%) | ||
| Loan loss impairments for stage 3 portfolio / impaired loans, mortgage loans excluded | 52.2% | 49.7% |
| of which: more than 90 days past due | 72.1% | 71.7% |
| Credit cost ratio (%) | ||
| Belgium | 0.63% | 0.22% |
| Czech Republic | 0.62% | 0.04% |
| International Markets | 0.82% | -0.07% |
| Slovakia | 0.66% | 0.14% |
| Hungary | 0.96% | -0.02% |
| Bulgaria | 0.66% | 0.14% |
| Ireland | 0.94% | -0.32% |
| Group Centre | -0.53% | -0.88% |
| Total | 0.64% | 0.12% |
1Outstanding portfolio includes all on-balance sheet commitments and off-balance sheet guarantees but excludes off-balance sheet undrawn commitments; the amounts are measured in Gross Carrying Amounts;
2Other includes corporate sectors not exceeding 0.5% concentration and unidentified sectors
3Purchased or originated credit impaired assets
Impaired loans are loans for which full (re)payment of the contractual cash flows is deemed unlikely. This coincides with KBC's Probability-of-Default-classes 10, 11 and 12 (see annual accounts FY 2019 - section on credit risk for more information on PD classification). These impaired loans are equal to 'non-performing loans' under the definition used by EBA.
Since 1Q18 a switch has been made in the reported 'outstanding' figures from drawn principal to the new IFRS 9 definition of gross carrying amount (GCA), i.e. including reserved and accrued interests. The additional inclusion of reserved interests led, among others, to an increase in the reported amount of impaired loans. Furthermore, the transaction scope of the credit portfolio was extended and now additionally includes the following 4 elements: (1) bank exposure (money market placements, documentary credit, accounts), (2) debtor risk KBC Commercial Finance, (3) unauthorized overdrafts, and (4) reverse repo (excl. central bank exposure).
| 30-06-2020, in millions of EUR | Belgium 1 | Foreign branches | Total Business Unit Belgium | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Total portfolio outstanding | 109 250 | 7743 | 116993 | ||||||||
| Counterparty break down | % outst. | % outst. | % outst. | ||||||||
| retail | 37 437 | 34.3% | $\mathbf 0$ | 0.0% | 37 437 | 32.0% | |||||
| o/w mortgages | 35790 | 32.8% | $\Omega$ | 0.0% | 35790 | 30.6% | |||||
| o/w consumer finance | 1647 | 1.5% | 0 | 0.0% | 1647 | 1.4% | |||||
| SME | 31 437 | 28.8% | $\Omega$ | 0.0% | 31 437 | 26.9% | |||||
| corporate | 40 376 | 37.0% | 7743 | 100.0% | 48 120 | 41.1% | |||||
| Mortgage loans | % outst. | ind. LTV | % outst. | ind. LTV | % outst. | ||||||
| total | 35789 | 32.8% | 57% | $\mathbf 0$ | 0.0% | 35789 | 30.6% | ||||
| o/w FX mortgages | 0 | 0.0% | 0 | 0.0% | 0 | 0.0% | |||||
| o/w ind. $LTV > 100\%$ | 562 | 0.5% | $\mathbf 0$ | 0.0% | 562 | 0.5% | |||||
| Probability of default (PD) | % outst. | % outst. | % outst. | ||||||||
| low risk (PD 1-4: 0.00%-0.80%) | 84 552 | 77.4% | 4 3 9 5 | 56.8% | 88947 | 76.0% | |||||
| medium risk (PD 5-7; 0.80%-6.40%) | 19 0 69 | 17.5% | 2964 | 38.3% | 22033 | 18.8% | |||||
| high risk (PD 8-9: 6.40%-100.00%) | 2775 | 2.5% | 128 | 1.6% | 2903 | 2.5% | |||||
| impaired loans (PD 10 - 12) | 2586 | 2.4% | 164 | 2.1% | 2750 | 2.4% | |||||
| unrated | 268 | 0.2% | 93 | 1.2% | 360 | 0.3% | |||||
| Overall risk indicators | stage 3 imp. | % cover | stage 3 imp. | % cover | stage 3 imp. | % cover | |||||
| outstanding impaired loans | 2586 | 1 1 2 8 | 43.6% | 164 | 122 | 74.3% | 2750 | 1 2 5 0 | 45.4% | ||
| o/w PD 10 impaired loans | 1261 | 272 | 21.6% | 74 | 45 | 61.0% | 1335 | 317 | 23.8% | ||
| o/w more than 90 days past due (PD 11+12) | 1 3 2 5 | 856 | 64.6% | 90 | 77 | 85.2% | 1415 | 932 | 65.9% | ||
| all impairments (stage 1+2+3) | 1705 | 154 | 1859 | ||||||||
| o/w stage 1+2 impairments (incl. POCI) | 577 | 32 | 609 | ||||||||
| o/w stage 3 impairments (incl. POCI) | 1 1 2 8 | 122 | 1 2 5 0 | ||||||||
| 2019 Credit cost ratio (CCR) | 0.20% | 0.41% | 0.22% | ||||||||
| YTD 2020 CCR | 0.63% | 0.68% | 0.63% | ||||||||
, pa rt
| Total portfolio outstanding | 31 066 | ||
|---|---|---|---|
| Counterparty break down | % outst. | ||
| retail | 17 940 | 57,7% | |
| o/w mortgages | 15 745 | 50,7% | |
| o/w consumer finance | 2 195 | 7,1% | |
| SME | 4 722 | 15,2% | |
| corporate | 8 405 | 27,1% | |
| Mortgage loans | % outst. | ind. LTV | |
| total | 15 745 | 50,7% | 60% |
| o/w FX mortgages | 0 | 0,0% | - |
| o/w ind. LTV > 100% | 147 | 0,5% | - |
| Probability of default (PD) | % outst. | ||
| low risk (PD 1-4; 0.00%-0.80%) | 18 031 | 58,0% | |
| medium risk (PD 5-7; 0.80%-6.40%) | 11 078 | 35,7% | |
| high risk (PD 8-9; 6.40%-100.00%) | 1 257 | 4,0% | |
| impaired loans (PD 10 - 12) | 690 | 2,2% | |
| unrated | 11 | 0,0% | |
| Overall risk indicators 1 | stage 3 imp. | % cover | |
| outstanding impaired loans | 690 | 326 | 47,2% |
| o/w PD 10 impaired loans | 329 | 88 | 26,7% |
| o/w more than 90 days past due (PD 11+12) | 360 | 238 | 66,0% |
| all impairments (stage 1+2+3) | 591 | ||
| o/w stage 1+2 impairments (incl. POCI) | 266 | ||
| o/w stage 3 impairments (incl. POCI) | 326 | ||
| 2019 Credit cost ratio (CCR) | 0,04% | ||
| YTD 2020 CCR | 0,62% |
1 CCR at country level in local currency
| Loan portfolio Business Unit International Markets | |
|---|---|
| -- | ---------------------------------------------------- |
| 30-06-2020, in millions of EUR | Ireland | Slovakia | Hungary | Bulgaria | Total Int Markets | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total portfolio outstanding | 10 093 | 8 486 | 5 555 | 3 691 | 27 825 | ||||||||||
| Counterparty break down | % outst. | % outst. | % outst. | % outst. | % outst. | ||||||||||
| retail | 10 031 | 99,4% | 4 406 | 51,9% | 2 018 | 36,3% | 1 421 | 38,5% | 17 875 | 64,2% | |||||
| o/w mortgages | 9 968 | 98,8% | 3 914 | 46,1% | 1 576 | 28,4% | 755 | 20,5% | 16 213 | 58,3% | |||||
| o/w consumer finance | 63 | 0,6% | 492 | 5,8% | 442 | 8,0% | 665 | 18,0% | 1 662 | 6,0% | |||||
| SME | 43 | 0,4% | 976 | 11,5% | 154 | 2,8% | 1 043 | 28,3% | 2 215 | 8,0% | |||||
| corporate | 19 | 0,2% | 3 105 | 36,6% | 3 384 | 60,9% | 1 227 | 33,3% | 7 735 | 27,8% | |||||
| Mortgage loans | % outst. | ind. LTV | % outst. | ind. LTV | % outst. | ind. LTV | % outst. | ind. LTV | % outst. | ||||||
| total | 9 968 | 98,8% | 67% | 3 914 | 46,1% | 66% | 1 576 | 28,4% | 67% | 755 | 20,5% | 65% | 16 213 | 58,3% | |
| o/w FX mortgages | 0 | 0,0% | - | 0 | 0,0% | - | 4 | 0,1% | 81% | 84 | 2,3% | 67% | 88 | 0,3% | |
| o/w ind. LTV > 100% | 704 | 7,0% | - | 36 | 0,4% | - | 100 | 1,8% | - | 32 | 0,9% | - | 872 | 3,1% | |
| Probability of default (PD) | % outst. | % outst. | % outst. | % outst. | % outst. | ||||||||||
| low risk (PD 1-4; 0.00%-0.80%) | 819 | 8,1% | 5 472 | 64,5% | 2 801 | 50,4% | 985 | 26,7% | 10 077 | 36,2% | |||||
| medium risk (PD 5-7; 0.80%-6.40%) | 6 907 | 68,4% | 2 206 | 26,0% | 2 414 | 43,4% | 2 092 | 56,7% | 13 618 | 48,9% | |||||
| high risk (PD 8-9; 6.40%-100.00%) | 841 | 8,3% | 603 | 7,1% | 215 | 3,9% | 272 | 7,4% | 1 931 | 6,9% | |||||
| impaired loans (PD 10 - 12) | 1 527 | 15,1% | 181 | 2,1% | 124 | 2,2% | 342 | 9,3% | 2 174 | 7,8% | |||||
| unrated | 0 | 0,0% | 24 | 0,3% | 1 | 0,0% | 0 | 0,0% | 26 | 0,1% | |||||
| Overall risk indicators 1 | stage 3 imp. | % cover | stage 3 imp. | % cover | stage 3 imp. | % cover | stage 3 imp. | % cover | stage 3 imp. | % cover | |||||
| outstanding impaired loans | 1 527 | 427 | 28,0% | 181 | 106 | 58,3% | 124 | 76 | 61,2% | 342 | 156 | 45,6% | 2 174 | 764 | 35,2% |
| o/w PD 10 impaired loans | 714 | 87 | 12,2% | 40 | 8 | 19,8% | 25 | 10 | 40,3% | 62 | 11 | 17,2% | 841 | 116 | 13,8% |
| o/w more than 90 days past due (PD 11+12) | 812 | 340 | 41,8% | 141 | 98 | 69,2% | 100 | 66 | 66,3% | 280 | 145 | 51,9% | 1 333 | 649 | 48,7% |
| all impairments (stage 1+2+3) | 490 | 190 | 151 | 185 | 1 017 | ||||||||||
| o/w stage 1+2 impairments (incl. POCI) | 63 | 85 | 75 | 29 | 252 | ||||||||||
| o/w stage 3 impairments (incl. POCI) | 427 | 106 | 76 | 156 | 764 | ||||||||||
| 2019 Credit cost ratio (CCR) | -0,32% | 0,14% | -0,02% | 0,14% | -0,07% | ||||||||||
| YTD 2020 CCR | 0,94% | 0,66% | 0,96% | 0,66% | 0,82% | ||||||||||
1 CCR at country level in local currency
| Total portfolio outstanding | 3 481 | ||
|---|---|---|---|
| Counterparty break down | % outst. | ||
| retail | 0 | 0,0% | |
| o/w mortgages | 0 | 0,0% | |
| o/w consumer finance | 0 | 0,0% | |
| SME | 0 | 0,0% | |
| corporate | 3 481 | 100,0% | |
| Mortgage loans | % outst. | ind. LTV | |
| total | 0 | 0,0% | - |
| o/w FX mortgages | 0 | 0,0% | - |
| o/w ind. LTV > 100% | 0 | 0,0% | - |
| Probability of default (PD) | % outst. | ||
| low risk (PD 1-4; 0.00%-0.80%) | 2 834 | 81,4% | |
| medium risk (PD 5-7; 0.80%-6.40%) | 194 | 5,6% | |
| high risk (PD 8-9; 6.40%-100.00%) | 43 | 1,2% | |
| impaired loans (PD 10 - 12) | 411 | 11,8% | |
| unrated | 0 | 0,0% | |
| Overall risk indicators | stage 3 imp. | % cover | |
| outstanding impaired loans | 411 | 356 | 86,7% |
| o/w PD 10 impaired loans | 56 | 12 | 22,2% |
| o/w more than 90 days past due (PD 11+12) | 355 | 344 | 96,9% |
| all impairments (stage 1+2+3) | 361 | ||
| o/w stage 1+2 impairments (incl. POCI) | 4 | ||
| o/w stage 3 impairments (incl. POCI) | 356 | ||
| 2019 Credit cost ratio (CCR) | -0,88% | ||
| YTD 2020 CCR | -0,53% |
1 Total Group Centre = part of non-legacy portfolio assigned to BU Group and activities in wind-down (e.g. ex-Antwerp Diamond Bank)
KBC reports its solvency at group, banking and insurance level, calculating it on the basis of IFRS figures and the relevant guidelines issued by the competent regulator.
We report the solvency of the group, the bank and the insurance company based on IFRS data and according to the rules imposed by the regulator. For the KBC group, this implies that we calculate our solvency ratios based on CRR/CRD IV. This regulation entered gradually into force on 1 January 2014. The general rule under CRR/CRD IV for insurance participations is that an insurance participation is deducted from common equity at group level, unless the competent authority grants permission to apply a risk weighting instead (Danish compromise). KBC received such permission from the supervisory authority and hence reports its solvency on the basis of a 370% risk weighting being applied to the holdings of own fund instruments of the insurance company, after having deconsolidated KBC Insurance from the group figures.
In addition to the solvency ratios under CRD IV/CRR, KBC is considered a financial conglomerate since it covers both significant banking and insurance activities. Therefore KBC also has to disclose its solvency position as calculated in accordance with the Financial Conglomerate Directive (FICOD; 2002/87/EC. This implies that available capital is calculated on the basis of the consolidated position of the group and the eligible items recognised as such under the prevailing sectorial rules, which are CRR/CRD IV for the banking business and Solvency II for the insurance business. The capital requirement for the insurance business based on Solvency II is multiplied by 12.5 to obtain a risk weighted asset equivalent.
The Internal Rating Based (IRB) approach is since its implementation in 2008 the primary approach to calculate KBC's risk weighted assets. This is, based on a full application of all the CRD IV/CRR rules, used for approximately 93% of the weighted credit risks, of which approx. 88% according to Advanced and approx. 5% according to Foundation approach. The remaining weighted credit risks (ca. 7%) are calculated according to the Standardised approach.
The overall capital requirement (CET1) that KBC is to uphold is set at 10.45% (fully loaded, Danish Compromise which includes the CRR/CRD IV minimum requirement (4.5%), the Pillar 2 Requirement (1.75%) and the buffers set by national competent authorities (2.50% Capital Conservation Buffer, 1.50% Systemic Buffer and 0.20% Countercyclical Buffer). Furthermore ECB has set a Pillar 2 Guidance of 1.00%.
ECB temporarily allows banks to operate below the P2G and Capital Conservation Buffer and hence to use these buffers to withstand potential stress. This temporarily brings the regulatory minimum to 7.95% (being 10.45% – 2.5%). ECB does not have any discretion to waive the application of automatic restrictions to distributions (MDA) as they are set out in the CRR/CRD package. Therefore, the CCB remains included in the threshold for MDA).
(1) Fully in line with the European Central Bank recommendation that at least till January 2021 no dividends are paid out and no irrevocable commitment to pay out dividends is undertaken by the credit institutions for the financial year 2019 and 2020 and that credit institutions refrain from share buy-backs.
Distributions (being dividend payments, payments related to additional tier 1 instruments or variable remuneration) are limited in case the combined buffer requirements described above are breached. This limitation is also referred to as "Maximum Distributable Amount" or "MDA" thresholds.
The table below provides an overview of the buffers KBC Group has compared to these thresholds, both on an actuals basis (i.e. versus the regulatory targets that apply at the reporting date) and a fully loaded basis (i.e. versus the regulatory targets that will apply going forward).
| Buffer vs. Overall Capital Requirement (in millions of EUR) |
31-12-2019 | |||
|---|---|---|---|---|
| (consolidated, under CRR/CRD IV, Danish compromise method) |
Fully loaded |
Actuals | Fully loaded |
Actuals |
| CET1 Pillar 1 minimum | 4.50% | 4.50% | 4.50% | 4.50% |
| Pillar 2 requirement | 1.75% | 1.75% | 1.75% | 1.75% |
| Capital conservation buffer | 2.50% | 2.50% | 2.50% | 2.50% |
| Buffer for systemically important institutions (O-SII) | 1.50% | $1.50\%$ | 1.50% | 1.50% |
| Entity-specific countercyclical buffer | 0.20% | 0.26% | 0.30% | 0.43% |
| Overall Capital Requirement (OCR) | 10.45% | 10.51% | 10.55% | 10.68% |
| CET1 used to satisfy shortfall in AT1 bucket | 0.01% | 0.01% | $0.00\%$ | $0.00\%$ |
| CET1 used to satisfy shortfall in T2 bucket | 0.23% | 0.23% | 0.05% | $0.05\%$ |
| CET1 requirement | 10.68% | 10.74% | 10.60% | 10.74% |
| CET1 capital | 16 636 | 16 664 | 16 989 | 16 989 |
| CET1 buffer (= buffer to MDA) | 5918 | 5880 | 6486 | 6 3 5 3 |
Following table groups the solvency on the level of KBC Group according to different methodologies and calculation methods, including the deduction method.
| Overview of KBC Group's capital ratios (in millions of EUR) |
numerator | denominator (total (common weighted risk |
||
|---|---|---|---|---|
| 30-06-2020 | equity) | volume) | ratio $(\%)$ | |
| CRDIV, Common Equity ratio | ||||
| Danish Compromise | Fully loaded | 16 636 | 100 354 | 16.58% |
| Deduction Method | Fully loaded | 15837 | 95 395 | 16.60% |
| Financial Conglomerates Directive | Fully loaded | 17 178 | 111 202 | 15.45% |
| Danish Compromise | Transitional | 16 664 | 100 376 | 16.60% |
| Deduction Method | Transitional | 15 865 | 95 4 16 | 16.63% |
| Financial Conglomerates Directive | Transitional | 17 206 | 111 223 | 15.47% |
KBC's CET1 ratio of 16.58% at end 1H 2020 (fully loaded) represents a solid capital buffer:
| 30-06-2020 | 30-06-2020 | 31-12-2019 | |
|---|---|---|---|
| In millions of EUR | Fully loaded | Transitional | Fully loaded |
| Total regulatory capital (after profit appropriation) | 19918 | 19 945 | 20 4 14 |
| Tier-1 capital | 18 136 | 18 164 | 18 4 8 9 |
| Common equity | 16 636 | 16 664 | 16 989 |
| Parent shareholders' equity (after deconsolidating KBC Insurance) | 17 644 | 17 644 | 17933 |
| Intangible fixed assets (incl deferred tax impact) (-) | $-782$ | $-782$ | $-726$ |
| Goodwill on consolidation (incl deferred tax impact) (-) | $-730$ | $-730$ | $-766$ |
| Minority interests | 0 | 0 | $\Omega$ |
| Hedging reserve (cash flow hedges) (-) | 1 3 5 0 | 1 3 5 0 | 1 3 3 1 |
| Valuation diff. in fin. liabilities at fair value - own credit risk (-) | 14 | $-14$ | - 9 |
| Value adjustment due to the requirements for prudent valuation (-) | 95 ÷. |
$-95$ | - 54 |
| Dividend payout (-) | $\Omega$ | $\Omega$ | $\mathbf 0$ |
| Renumeration of AT1 instruments (-) | 12 | $-12$ | $-11$ |
| Deduction re. financing provided to shareholders (-) | 57 ä, |
$-57$ | $-57$ |
| Deduction re. Irrevocable payment commitments (-) | 58 $\sim$ |
$-58$ | $-45$ |
| IRB provision shortfall (-) | $-196$ | $-196$ | 140 |
| Deferred tax assets on losses carried forward (-) | - 414 | $-414$ | 467 |
| Transitional adjustments to CET1 | $\mathbf 0$ | 27 | |
| Limit on deferred tax assets from timing differences relying on future profitability and | 0 | $\Omega$ | 0 |
| significant participations in financial sector entities (-) | |||
| Additional going concern capital | 1 500 | 1 500 | 1 500 |
| CRR compliant AT1 instruments | 1 500 | 1 500 | 1500 |
| Minority interests to be included in additional going concern capital | $\mathbf 0$ | 0 | $\mathbf 0$ |
| Tier 2 capital | 1781 | 1781 | 1925 |
| IRB provision excess (+) | $\mathbf 0$ | 0 | 130 |
| Transitional adjustments to T2 | |||
| Subordinated liabilities | 1781 | 1781 | 1795 |
| Subordinated loans non-consolidated financial sector entities (-) | 0 | 0 | 0 |
| Minority interests to be included in tier 2 capital | $\mathbf{0}$ | $\Omega$ | $\Omega$ |
| Total weighted risk volume | 100 354 | 100 376 | 99 071 |
| Banking | 91 086 | 91 108 | 89 838 |
| Insurance | 9 1 3 3 | 9 1 3 3 | 9 1 3 3 |
| Holding activities | 148 | 148 | 124 |
| Elimination of intercompany transactions | $-14$ | $-14$ | $-25$ |
| Solvency ratios | |||
| Common equity ratio | 16.58% | 16.60% | 17.15% |
| Tier-1 ratio | 18.07% | 18.10% | 18.66% |
| Total capital ratio | 19.85% | 19 87% | 20.61% |
In line with the ECB recommendation we apply the IFRS 9 transitional measures as of 1H 2020. The impact of transitional is limited to 2 basis points at the end of 1H 2020 as there is no profit reservation. But taking also into account the ECL of the current year the positive impact of the transitional would amount to 52bps.
| Leverage ratio KBC Group (Basel III) In millions of EUR |
30-06-2020 30-06-2020 |
31-12-2019 | |
|---|---|---|---|
| Fully loaded | Transitional | Fully loaded | |
| Tier-1 capital (Danish compromise) | 18 136 | 18 164 | 18 4 8 9 |
| Total exposures | 300 573 | 300 614 | 273 029 |
| Total Assets | 317 388 | 317 388 | 290 735 |
| Deconsolidation KBC Insurance | $-31991$ | $-31991$ | $-33243$ |
| Transitional adjustment | $\Omega$ | 41 | $\Omega$ |
| Adjustment for derivatives | $-4704$ | $-4704$ | $-2882$ |
| Adjustment for regulatory corrections in determining Basel III Tier-1 capital | $-2331$ | $-2331$ | $-2254$ |
| Adjustment for securities financing transaction exposures | 2 5 3 4 | 2 5 3 4 | 638 |
| Off-balance sheet exposures | 19 676 | 19676 | 20 035 |
| Leverage ratio | 6.03% | 6.04% | 6.77% |
As is the case for the KBC group, the solvency of KBC Bank is calculated based on CRR/CRD IV. The solvency of KBC Insurance is calculated on the basis of Solvency II rules as they became effective on 1 January 2016. The tables below show the tier-1 and CAD ratios calculated under Basel III (CRD IV/CRR) for KBC Bank, as well as the solvency ratio of KBC Insurance under Solvency II.
| KBC Bank consolidated - CRDIV/CRR | 30-06-2020 | 30-06-2020 | 31-12-2019 |
|---|---|---|---|
| (in millions of EUR) | Fully loaded | Transitional Fully loaded | |
| Total regulatory capital, after profit appropriation | 16 200 | 16 227 | 16 660 |
| Tier-1 capital | 14 3 9 3 | 14 4 20 | 14 704 |
| Of which common equity | 12893 | 12920 | 13 204 |
| Tier-2 capital | 1807 | 1807 | 1957 |
| Total weighted risks | 91 086 | 91 108 | 89838 |
| Credit risk | 77 030 | 77 051 | 75 786 |
| Market risk | 2 7 1 6 | 2 7 1 6 | 2 7 1 3 |
| Operational risk | 11 340 | 11 340 | 11 340 |
| Solvency ratios | |||
| Common equity ratio | 14.2% | 14.2% | 14.7% |
| Tier-1 ratio | 15.8% | 15.8% | 16.4% |
| CAD ratio | 17.8% | 17.8% | 18.5% |
| Solvency II, KBC Insurance consolidated | 30-06-2020 | 31-12-2019 |
|---|---|---|
| (in millions of EUR) | ||
| Own Funds | 3 1 6 3 | 3496 |
| Tier 1 | 2 6 6 2 | 2996 |
| IFRS Parent shareholders equity | 3 3 5 4 | 3422 |
| Dividend payout | $-196$ | $-156$ |
| Deduction intangible assets and goodwill (after tax) | $-132$ | $-128$ |
| Valuation differences (after tax) | $-584$ | $-196$ |
| Volatility adjustment | 262 | 104 |
| Other | $-43$ | - 49 |
| Tier 2 | 500 | 500 |
| Subordinated liabilities | 500 | 500 |
| Solvency Capital Requirement (SCR) | 1598 | 1727 |
| Market risk | 1 2 0 3 | 1 3 8 9 |
| Non-life | 564 | 579 |
| Life | 707 | 689 |
| Health | 266 | 264 |
| Counterparty | 123 | 114 |
| Diversification | $-973$ | $-991$ |
| Other | $-292$ | $-316$ |
| Solvency II ratio | 198% | 202% |
Besides the ECB and NBB, which supervise KBC on a going concern basis, KBC is also subject to requirements set by the Single Resolution Board (SRB). The SRB is developing resolution plans for the major banks in the euro area. The resolution plan for KBC is based on a Single Point of Entry (SPE) approach at the level of KBC Group with 'bail-in' as the primary resolution tool. MREL measures the amount of own funds and eligible liabilities that can be credibly and feasibly bailed-in.
The Eligible instruments to satisfy the MREL target are defined in the '2018 SRB Policy for the 2nd wave of resolution plans' published on 16th January 2019. The so-called 'consolidated approach' (instruments issued by any entity within the resolution group were accepted by SRB to satisfy the MREL target) is replaced by a more restrictive 'hybrid approach'. This approach excludes MREL eligible liabilities that have not been issued by KBC Group NV (insofar as they do not constitute own funds) and requires tier-2 capital down-streamed by KBC Group NV to KBC Insurance to be deducted from MREL (in line with the treatment under CRR/CRD). At year-end 2019, 1 billion euro of instruments were no longer eligible for SRB to satisfy the MREL.
At the end of June 2020, the MREL ratio based on instruments issued by KBC Group NV following the 'hybrid approach' stands at 9.3% of TLOF versus the SRB requirement for KBC to achieve 9.67% as by year-end 2021.
The decrease of the MREL as a % of TLOF versus previous quarter (10.0% at the end of March 2020), can be fully explained by the participation in TLTRO III for an amount of 19.5bn EUR in June 2020. Excluding this, the MREL as % of TLOF would have amounted to 10.0%.
Details on our segments or business units are available in the company presentation.
Note: The ECB approved to apply the IFRS9 transitional arrangements from 2Q 2020, as such the difference between fully loaded and the transitional measures are assigned to Group Centre. In other words, the RWA, allocated capital and the ROAC of the different countries remain based on fully loaded.
| Business unit Belgium | |||||
|---|---|---|---|---|---|
| (in millions of EUR) | 2Q 2020 1Q 2020 4Q 2019 3Q 2019 2Q 2019 | ||||
| Breakdown P&L | |||||
| Net interest income | 635 | 640 | 634 | 637 | 621 |
| Non-life insurance (before reinsurance) | 167 | 112 | 160 | 129 | 111 |
| Earned premiums | 280 | 283 | 285 | 284 | 275 |
| Technical charges | 113 | $-172$ | $-125$ | 156 $\sim$ |
165 ä, |
| Life insurance (before reinsurance) | 16 | - 21 | $-21$ | $-25$ | - 24 |
| Earned premiums | 208 | 216 | 282 | 217 | 233 |
| Technical charges | 224 | $-237$ | $-303$ | $-242$ | 256 |
| Ceded reinsurance result | 10 | - 9 | $-10$ | $-5$ | $\overline{4}$ |
| Dividend income | 16 | 11 | 15 | 14 | 38 |
| Net result from financial instruments at fair value through profit or loss | 149 | 217 $\sim$ |
89 | - 9 | 43 |
| Net realised result from debt instruments at fair value through OCI | $\mathbf{1}$ | 0 | 0 | $\overline{4}$ | 0 |
| Net fee and commission income | 271 | 308 | 307 | 297 | 293 |
| Net other income | 45 | 35 | 41 | 51 | 50 |
| TOTAL INCOME | 1 2 5 6 | 858 | 1 2 1 6 | 1 0 9 2 | 1 1 3 5 |
| Operating expenses | 521 | $-828$ | $-550$ | $-552$ | 575 L. |
| Impairment | 469 | 117 $\omega$ |
$-109$ | $-21$ | - 31 |
| on financial assets at AC and at FVOCI | 458 | $-116$ | $-107$ | 21 ÷. |
$-30$ |
| other | 11 | $\mathbf 0$ | $-2$ | 0 | $-1$ |
| Share in results of associated companies and joint ventures | 3 | 3 $\blacksquare$ |
$\overline{2}$ $\blacksquare$ |
$\overline{2}$ $\mathcal{L}^{\text{c}}$ |
$-2$ |
| RESULT BEFORE TAX | 264 | 90 $\sim$ |
556 | 517 | 526 |
| Income tax expense | 59 $\sim$ |
$\overline{4}$ | $-145$ | $\sim$ 149 |
$\frac{1}{2}$ 138 |
| RESULT AFTER TAX | 204 | 86 $\sim$ |
412 | 368 | 388 |
| attributable to minority interests | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 | 0 |
| attributable to equity holders of the parent | 204 | 86 | 412 | 368 | 388 |
| Banking | 68 | 55 $\blacksquare$ |
301 | 287 | 289 |
| Insurance | 136 | 30 $\sim$ |
111 | 81 | 99 |
| Breakdown Loans and deposits | |||||
| Total customer loans excluding reverse repos (end of period) | 103 689 | 104 969 | 100 909 | 100 945 | 101 125 |
| of which Mortgage Ioans (end of period) | 36 863 | 36 489 | 36 445 | 35 832 | 35 674 |
| Customer deposits and debt certificates excl. repos (end of period) | 136 928 | 138 045 | 130 771 | 134 355 | 128 544 |
| Technical provisions plus unit-linked, life insurance | |||||
| Interest Guaranteed (end of period) | 13 005 | 13 074 | 13 130 | 13 097 | 13 144 |
| Unit-Linked (end of period) | 12 599 | 12 0 64 | 13 4 26 | 13 2 8 1 | 13 201 |
| Performance Indicators | |||||
| Risk-weighted assets, banking (end of period, Basel III fully loaded) | 52 938 | 54 098 | 49486 | 49 985 | 48 959 |
| Required capital, insurance (end of period) | 1 3 5 8 | 1 2 9 6 | 1497 | 1572 | 1 508 |
| Allocated capital (end of period) | 6943 | 7 0 0 3 | 6792 | 6920 | 6747 |
| Return on allocated capital (ROAC) | 12% | $-5%$ | 24% | 22% | 23% |
| Cost/income ratio, banking | 44% | 95% | 48% | 53% | 54% |
| Combined ratio, non-life insurance | 74% | 95% | 82% | 91% | 91% |
| Net interest margin, banking | 1.63% | 1.68% | 1.68% | 1.68% | 1.67% |
| Business unit Czech Republic | |||||
|---|---|---|---|---|---|
| (in millions of EUR) | 2Q 2020 1Q 2020 4Q 2019 3Q 2019 2Q 2019 | ||||
| Breakdown P&L | |||||
| Net interest income | 235 | 351 | 338 | 329 | 308 |
| Non-life insurance (before reinsurance) | 38 | 31 | 30 | 29 | 27 |
| Earned premiums | 72 | 75 | 73 | 72 | 70 |
| Technical charges | 35 | 44 $\frac{1}{2}$ |
- 43 | 43 ÷. |
-42 |
| Life insurance (before reinsurance) | 12 | 14 | 12 | 13 | 15 |
| Earned premiums | 44 | 52 | 58 | 53 | 61 |
| Technical charges | 32 | 39 ä, |
- 45 | 40 ä, |
46 |
| Ceded reinsurance result | 0 | $\mathbf 0$ | 0 | 0 | $-2$ |
| Dividend income | 0 | $\Omega$ | 0 | $\Omega$ | 0 |
| Net result from financial instruments at fair value through profit or loss | 90 | 125 ò. |
8 | 56 | -34 |
| Net realised result from debt instruments at fair value through OCI | $\mathbf{1}$ | 0 | 0 | 0 | 0 |
| Net fee and commission income | 51 | 55 | 59 | 70 | 67 |
| Net other income | 3 | 9 | 3 | $\overline{2}$ | 84 |
| TOTAL INCOME | 431 | 335 | 451 | 388 | 465 |
| Operating expenses | 164 | 221 $\blacksquare$ |
200 $\blacksquare$ |
187 $\bar{a}$ |
179 |
| Impairment | 175 | - 9 | $-3$ | ÷. 9 |
$-7$ |
| on financial assets at AC and at FVOCI | 170 | 8 | $\overline{1}$ | 9 ä, |
$-4$ |
| other | 5 $\sim$ |
$\overline{1}$ | $\overline{1}$ ÷. |
0 | $-3$ |
| Share in results of associated companies and joint ventures | 0 | $\Omega$ | 0 | 0 | 4 |
| RESULT BEFORE TAX | 91 | 105 | 248 | 192 | 283 |
| Income tax expense | 14 $\sim$ |
$-17$ | $-43$ | $-33$ | $-35$ |
| RESULT AFTER TAX | 77 | 88 | 205 | 159 | 248 |
| attributable to minority interests | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 | 0 |
| attributable to equity holders of the parent | 77 | 88 | 205 | 159 | 248 |
| Banking | 61 | 75 | 194 | 147 | 237 |
| Insurance | 16 | 13 | 11 | 12 | 11 |
| Breakdown Loans and deposits | |||||
| Total customer loans excluding reverse repos (end of period) | 28 597 | 28 2 8 6 | 29 857 | 29 200 | 28 711 |
| of which Mortgage Ioans (end of period) | 15418 | 14876 | 15768 | 15 267 | 15 267 |
| Customer deposits and debt certificates excl. repos (end of period) | 39 704 | 37 627 | 39 559 | 38 170 | 38 536 |
| Technical provisions plus unit-linked, life insurance | |||||
| Interest Guaranteed (end of period) | 613 | 588 | 629 | 616 | 621 |
| Unit-Linked (end of period) | 659 | 655 | 727 | 700 | 698 |
| Performance Indicators | |||||
| Risk-weighted assets, banking (end of period, Basel III fully loaded) | 15 338 | 15 349 | 15 005 | 14 916 | 14 670 |
| Required capital, insurance (end of period) | 128 | 126 | 121 | 121 | 124 |
| Allocated capital (end of period) | 1746 | 1745 | 1726 | 1717 | 1694 |
| Return on allocated capital (ROAC) | 18% | 20% | 48% | 38% | 60% |
| Cost/income ratio, banking | 38% | 68% | 44% | 48% | 38% |
| Combined ratio, non-life insurance | 81% | 90% | 94% | 94% | 96% |
| Net interest margin, banking | 2.32% | 2.98% | 2.90% | 2.93% | 3.18% |
(*) As of 3Q 2019, ČMSS is taken fully into account
| Business unit International Markets | |||||
|---|---|---|---|---|---|
| (in millions of EUR) | 2Q 2020 1Q 2020 4Q 2019 3Q 2019 2Q 2019 | ||||
| Breakdown P&L | |||||
| Net interest income | 219 | 219 | 219 | 216 | 214 |
| Non-life insurance (before reinsurance) | 46 | 40 | 35 | 32 | 35 |
| Earned premiums | 78 | 82 | 80 | 80 | 78 |
| Technical charges | 33 | 43 $\blacksquare$ |
- 45 $\blacksquare$ |
48 $\blacksquare$ |
-43 |
| Life insurance (before reinsurance) | 10 | 8 | 11 | $\overline{7}$ | 10 |
| Earned premiums | 24 | 29 | 24 | 21 | 23 |
| Technical charges | 15 | 21 $\blacksquare$ |
- 14 | -14 | 14 |
| Ceded reinsurance result | 3 | $\mathbf{3}$ | $\overline{1}$ $\blacksquare$ |
$\overline{2}$ $\blacksquare$ |
$-3$ |
| Dividend income | $\overline{0}$ | $\mathbf 0$ | 0 | 0 | 0 |
| Net result from financial instruments at fair value through profit or loss | 14 | - 5 | 23 | 5 | 10 |
| Net realised result from debt instruments at fair value through OCI | $\mathbf{1}$ | $\mathbf 0$ | 0 | $\mathbf 1$ | $\mathbf 0$ |
| Net fee and commission income | 67 | 69 | 78 | 77 | 77 |
| Net other income | 5 | 6 | 4 | $-16$ | $-2$ |
| TOTAL INCOME | 359 | 333 | 370 | 321 | 340 |
| Operating expenses | 196 | $-268$ | $-248$ | $-212$ | 212 $\overline{a}$ |
| Impairment | 213 | 24 $\blacksquare$ |
18 | - 6 | - 7 |
| on financial assets at AC and at FVOCI | 217 | 6 $\blacksquare$ |
22 | 5 ä, |
$-6$ |
| other | 4 | 18 $\blacksquare$ |
$-4$ | $\mathbf{1}$ ÷. |
$-1$ |
| Share in results of associated companies and joint ventures | 0 | 0 | $\mathbf 1$ | 1 | 1 |
| RESULT BEFORE TAX | 50 | 42 | 141 | 104 | 122 |
| Income tax expense | 5 | $-7$ | $-22$ | $\omega$ 19 |
$-18$ |
| RESULT AFTER TAX | 45 $\equiv$ |
35 | 119 | 85 | 104 |
| attributable to minority interests | $\Omega$ | $\Omega$ | $\Omega$ | $\Omega$ | $\Omega$ |
| attributable to equity holders of the parent | 45 ä, |
35 | 119 | 85 | 104 |
| Banking | 66 $\overline{a}$ |
19 | 107 | 75 | 91 |
| Insurance | 21 | 16 | 12 | 11 | 13 |
| Breakdown Loans and deposits | |||||
| Total customer loans excluding reverse repos (end of period) | 25 277 | 25 109 | 25 050 | 24 7 18 | 24 3 3 3 |
| of which Mortgage Ioans (end of period) | 15 650 | 15 536 | 15 584 | 15 357 | 15 178 |
| Customer deposits and debt certificates excl. repos (end of period) | 24 272 | 23 197 | 24 041 | 22 939 | 22 970 |
| Technical provisions plus unit-linked, life insurance | |||||
| Interest Guaranteed (end of period) | 254 | 254 | 255 | 258 | 262 |
| Unit-Linked (end of period) | 397 | 373 | 432 | 414 | 420 |
| Performance Indicators | |||||
| Risk-weighted assets, banking (end of period, Basel III fully loaded) | 20 736 | 21 507 | 20 892 | 21 068 | 21 0 19 |
| Required capital, insurance (end of period) | 127 | 123 | 124 | 123 | 117 |
| Allocated capital (end of period) | 2 3 1 5 | 2 3 9 1 | 2 3 5 9 | 2 3 7 7 | 2 3 6 6 |
| Return on allocated capital (ROAC) | $-8%$ | 6% | 20% | 14% | 18% |
| Cost/income ratio, banking | 57% | 84% | 68% | 67% | 64% |
| Combined ratio, non-life insurance | 75% | 82% | 89% | 93% | 88% |
| Net interest margin, banking | 2.58% | 2.61% | 2.60% | 2.61% | 2.65% |
| Slovakia | |||||
|---|---|---|---|---|---|
| (in millions of EUR) | 2Q 2020 1Q 2020 4Q 2019 3Q 2019 2Q 2019 | ||||
| Breakdown P&L | |||||
| Net interest income | 49 | 50 | 51 | 51 | 50 |
| Non-life insurance (before reinsurance) | 8 | $\overline{7}$ | $\overline{7}$ | $\overline{7}$ | $\overline{7}$ |
| Earned premiums | 13 | 12 | 12 | 12 | 12 |
| Technical charges | $\overline{4}$ | 5 | -5 ÷. |
5 ÷. |
$-4$ |
| Life insurance (before reinsurance) | 3 | 3 | $\overline{4}$ | $\overline{2}$ | 3 |
| Earned premiums | 8 | 9 | 12 | 10 | 10 |
| Technical charges | 5 | 7 | $-7$ | $\overline{7}$ | $\overline{7}$ |
| Ceded reinsurance result | $\mathbf{1}$ | 0 | $\overline{1}$ | 0 | $\overline{1}$ |
| Dividend income | $\overline{0}$ | 0 | 0 | $\mathbf 0$ | $\mathbf 0$ |
| Net result from financial instruments at fair value through profit or loss | $\overline{7}$ | 8 $\blacksquare$ |
10 | 5 $\mathbf{r}$ |
$-2$ |
| Net realised result from debt instruments at fair value through OCI | $\mathbf{1}$ | 0 | $\mathbf 0$ | 0 | $\overline{0}$ |
| Net fee and commission income | 14 | 15 | 16 | 16 | 16 |
| Net other income | $\overline{2}$ | 3 | $\overline{4}$ | $\overline{2}$ | 1 |
| TOTAL INCOME | 84 | 70 | 93 | 74 | 75 |
| Operating expenses | 51 | 59 $\blacksquare$ |
53 $\bar{a}$ |
52 ÷ |
-51 |
| Impairment | 41 | 6 ä, |
6 | 6 $\overline{\phantom{a}}$ |
- 8 |
| on financial assets at AC and at FVOCI | 41 | 6 $\blacksquare$ |
5 | 6 L. |
- 8 |
| other | 0 | 0 | 0 | 0 | $\overline{0}$ |
| Share in results of associated companies and joint ventures | $\mathbf 0$ | $\mathbf 0$ | 0 | $\mathbf 0$ | 0 |
| RESULT BEFORE TAX | 8 $\blacksquare$ |
$\overline{4}$ | 46 | 16 | 15 |
| Income tax expense | $\overline{2}$ | $\mathbf{1}$ $\blacksquare$ |
- 8 | $-4$ | - 4 |
| RESULT AFTER TAX | 6 $\sim$ |
$\overline{4}$ | 38 | 12 | 11 |
| attributable to minority interests | 0 | 0 | 0 | 0 | $\mathbf 0$ |
| attributable to equity holders of the parent | 6 | 4 | 38 | 12 | 11 |
| Banking | 9 | $\mathbf{1}$ | 36 | 10 | 8 |
| Insurance | 3 | 3 | 2 | $\overline{2}$ | 3 |
| Breakdown Loans and deposits | |||||
| Total customer loans excluding reverse repos (end of period) | 7683 | 7607 | 7 5 0 6 | 7471 | 7 3 1 6 |
| of which Mortgage loans (end of period) | 3846 | 3714 | 3641 | 3593 | 3482 |
| Customer deposits and debt certificates excl. repos (end of period) | 6 5 3 1 | 6 287 | 6480 | 6438 | 6 2 3 6 |
| Technical provisions plus unit-linked, life insurance | |||||
| Interest Guaranteed (end of period) | 114 | 114 | 114 | 114 | 115 |
| Unit-Linked (end of period) | 92 | 89 | 100 | 97 | 104 |
| Performance Indicators | |||||
| Risk-weighted assets, banking (end of period, Basel III fully loaded) | 5 1 0 4 | 5 1 2 3 | 4 9 8 5 | 5030 | 4 9 6 0 |
| Required capital, insurance (end of period) | 27 | 26 | 27 | 28 | 26 |
| Allocated capital (end of period) | 565 | 567 | 560 | 566 | 557 |
| Return on allocated capital (ROAC) | $-5%$ | 3% | 27% | 8% | 8% |
| Cost/income ratio, banking | 62% | 88% | 56% | 71% | 71% |
| Combined ratio, non-life insurance | 79% | 82% | 94% | 84% | 81% |
| Hungary | |||||
|---|---|---|---|---|---|
| (in millions of EUR) | 2Q 2020 1Q 2020 4Q 2019 3Q 2019 2Q 2019 | ||||
| Breakdown P&L | |||||
| Net interest income | 64 | 62 | 64 | 64 | 64 |
| Non-life insurance (before reinsurance) | 17 | 14 | 14 | 10 | 12 |
| Earned premiums | 35 | 39 | 37 | 36 | 35 |
| Technical charges | 17 | 25 $\blacksquare$ |
$-22$ | 26 ä, |
24 |
| Life insurance (before reinsurance) | $\overline{2}$ | 1 | $\overline{2}$ | $\overline{2}$ | $\overline{2}$ |
| Earned premiums | 8 | 9 | $\overline{\mathbf{4}}$ | $\overline{\mathbf{4}}$ | 4 |
| Technical charges | 6 | 8 $\blacksquare$ |
$\overline{2}$ $\blacksquare$ |
$\overline{2}$ ÷. |
$\overline{\phantom{0}}$ |
| Ceded reinsurance result | $\mathbf{1}$ | $\mathbf{1}$ | 0 | $\mathbf{1}$ | $\overline{0}$ |
| Dividend income | $\overline{0}$ | $\mathbf 0$ | 0 | 0 | $\overline{0}$ |
| Net result from financial instruments at fair value through profit or loss | 10 | 2 | 9 | 6 | 8 |
| Net realised result from debt instruments at fair value through OCI | $\mathbf{0}$ | 0 | 0 | $\mathbf 1$ | $\mathbf 0$ |
| Net fee and commission income | 46 | 49 | 56 | 55 | 55 |
| Net other income | $\mathbf 0$ | $\overline{2}$ | 0 | 0 | 0 |
| TOTAL INCOME | 140 | 130 | 146 | 137 | 142 |
| Operating expenses | 69 | 101 | $-87$ | $-83$ | - 81 ÷ |
| Impairment | 50 | 16 $\blacksquare$ |
3 $\blacksquare$ |
$\mathbf{1}$ $\sim$ |
3 |
| on financial assets at AC and at FVOCI | 55 Ē. |
$\overline{2}$ | $\overline{2}$ $\blacksquare$ |
$\mathbf{1}$ $\overline{\phantom{a}}$ |
3 |
| other | 6 | 18 $\blacksquare$ |
$\overline{1}$ $\sim$ |
0 | 0 |
| Share in results of associated companies and joint ventures | 0 | $\mathbf 0$ | $\Omega$ | 0 | $\mathbf 0$ |
| RESULT BEFORE TAX | 21 | 13 | 57 | 53 | 64 |
| Income tax expense | -5 $\sim$ |
$-4$ | $-7$ | - 8 | - 9 |
| RESULT AFTER TAX | 16 | 10 | 50 | 45 | 55 |
| attributable to minority interests | $\mathbf 0$ | 0 | $\mathbf 0$ | 0 | $\mathbf 0$ |
| attributable to equity holders of the parent | 16 | 10 | 50 | 45 | 55 |
| Banking | $\overline{7}$ | $\overline{2}$ | 44 | 41 | 50 |
| Insurance | 9 | 8 | 6 | $\overline{\mathbf{4}}$ | 4 |
| Breakdown Loans and deposits | |||||
| Total customer loans excluding reverse repos (end of period) | 4617 | 4 5 3 4 | 4 6 2 3 | 4 5 2 2 | 4 5 2 7 |
| of which Mortgage loans (end of period) | 1512 | 1467 | 1596 | 1 558 | 1 602 |
| Customer deposits and debt certificates excl. repos (end of period) | 8 0 1 1 | 7435 | 7953 | 7 140 | 7 3 8 8 |
| Technical provisions plus unit-linked, life insurance | |||||
| Interest Guaranteed (end of period) | 49 | 48 | 52 | 52 | 55 |
| Unit-Linked (end of period) | 258 | 243 | 291 | 280 | 285 |
| Performance Indicators | |||||
| Risk-weighted assets, banking (end of period, Basel III fully loaded) | 6865 | 6555 | 6415 | 6480 | 6 3 2 0 |
| Required capital, insurance (end of period) | 47 | 44 | 48 | 47 | 43 |
| Allocated capital (end of period) | 772 | 735 | 735 | 740 | 719 |
| Return on allocated capital (ROAC) | 8% | 5% | 27% | 24% | 29% |
| Cost/income ratio, banking | 52% | 82% | 61% | 62% | 58% |
| Combined ratio, non-life insurance | 76% | 84% | 87% | 96% | 90% |
| Bulgaria | |||||
|---|---|---|---|---|---|
| (in millions of EUR) | 2Q 2020 1Q 2020 4Q 2019 3Q 2019 2Q 2019 | ||||
| Breakdown P&L | |||||
| Net interest income | 36 | 36 | 36 | 36 | 35 |
| Non-life insurance (before reinsurance) | 20 | 18 | 13 | 15 | 16 |
| Earned premiums | 31 | 31 | 31 | 32 | 31 |
| Technical charges | 11 | 13 ÷ |
18 $\bar{a}$ |
17 $\overline{a}$ |
15 |
| Life insurance (before reinsurance) | 5 | 4 | $\overline{4}$ | 3 | $\overline{4}$ |
| Earned premiums | 9 | 11 | 9 | 8 | 9 |
| Technical charges | $\overline{\mathbf{4}}$ | $\overline{7}$ | $\overline{4}$ | 5 $\overline{\phantom{a}}$ |
- 5 |
| Ceded reinsurance result | $\mathbf{1}$ | $\overline{2}$ | 0 | $\overline{2}$ | $\overline{2}$ |
| Dividend income | $\overline{0}$ | $\mathbf 0$ | 0 | 0 | $\overline{0}$ |
| Net result from financial instruments at fair value through profit or loss | $\Omega$ | 0 | 3 | 4 | 4 |
| Net realised result from debt instruments at fair value through OCI | 0 | 0 | 0 | 0 | 0 |
| Net fee and commission income | 6 | 6 | 5 | 6 | 6 |
| Net other income | $\mathbf{1}$ | 0 | 1 | $\mathbf 1$ | 0 |
| TOTAL INCOME | 67 | 62 | 63 | 63 | 63 |
| Operating expenses | 27 | 48 $\blacksquare$ |
33 $\blacksquare$ |
30 $\overline{a}$ |
-29 |
| Impairment | 25 | 3 ä, |
$\mathbf 0$ | 6 $\overline{a}$ |
$-1$ |
| on financial assets at AC and at FVOCI | 23 | 3 $\overline{a}$ |
$\overline{4}$ | 6 L. |
$-1$ |
| other | $\overline{1}$ | 0 | 3 ä, |
0 | $\overline{0}$ |
| Share in results of associated companies and joint ventures | $\mathbf 0$ | 0 | 0 | $\mathbf 0$ | 0 |
| RESULT BEFORE TAX | 16 | 11 | 31 | 26 | 33 |
| Income tax expense | $\overline{2}$ $\overline{a}$ |
$-1$ | $-3$ | $-3$ | - 3 |
| RESULT AFTER TAX | 14 | 10 | 27 | 23 | 29 |
| attributable to minority interests | $\mathbf 0$ | $\Omega$ | $\Omega$ | 0 | $\mathbf 0$ |
| attributable to equity holders of the parent | 14 | 10 | 27 | 23 | 29 |
| Banking | $\overline{4}$ | $\overline{4}$ | 24 | 20 | 24 |
| Insurance | 9 | 6 | 3 | 3 | 5 |
| Breakdown Loans and deposits | |||||
| Total customer loans excluding reverse repos (end of period) | 3 3 0 7 | 3 2 1 3 | 3 1 6 1 | 3 0 6 4 | 2927 |
| of which Mortgage Ioans (end of period) | 723 | 703 | 693 | 675 | 659 |
| Customer deposits and debt certificates excl. repos (end of period) | 4 6 3 4 | 4 4 9 7 | 4 4 3 9 | 4 2 1 6 | 4 2 9 1 |
| Technical provisions plus unit-linked, life insurance | |||||
| Interest Guaranteed (end of period) | 91 | 92 | 89 | 91 | 92 |
| Unit-Linked (end of period) | 47 | 41 | 41 | 37 | 31 |
| Performance Indicators | |||||
| Risk-weighted assets, banking (end of period, Basel III fully loaded) | 3073 | 3770 | 3413 | 3 3 3 8 | 3554 |
| Required capital, insurance (end of period) | 53 | 53 | 49 | 48 | 48 |
| Allocated capital (end of period) | 377 | 450 | 414 | 405 | 428 |
| Return on allocated capital (ROAC) | 13% | 9% | 27% | 24% | 30% |
| Cost/income ratio, banking | 44% | 86% | 51% | 47% | 46% |
| Combined ratio, non-life insurance | 70% | 82% | 89% | 91% | 89% |
| Ireland | |||||
|---|---|---|---|---|---|
| (in millions of EUR) | 2Q 2020 1Q 2020 4Q 2019 3Q 2019 2Q 2019 | ||||
| Breakdown P&L | |||||
| Net interest income | 69 | 71 | 67 | 66 | 65 |
| Non-life insurance (before reinsurance) | $\mathbf 0$ | 0 | 0 | 0 | 0 |
| Earned premiums | 0 | 0 | 0 | $\Omega$ | $\Omega$ |
| Technical charges | 0 | 0 | 0 | 0 | $\Omega$ |
| Life insurance (before reinsurance) | 0 | 0 | 0 | 0 | 0 |
| Earned premiums | 0 | 0 | 0 | 0 | 0 |
| Technical charges | 0 | $\mathbf 0$ | 0 | 0 | 0 |
| Ceded reinsurance result | 0 | $\mathbf 0$ | 0 | 0 | 0 |
| Dividend income | 0 | 0 | 0 | $\Omega$ | 0 |
| Net result from financial instruments at fair value through profit or loss | 3 | $\overline{2}$ | Ω | $\Omega$ | 0 |
| Net realised result from debt instruments at fair value through OCI | $\mathbf 0$ | $\Omega$ | $\Omega$ | 0 | 0 |
| Net fee and commission income | 0 | $\mathbf{1}$ | $\Omega$ | 0 | $\mathbf{1}$ |
| Net other income | $\mathbf 0$ | 0 | $\overline{1}$ $\sim$ |
18 $\sim$ |
$\overline{4}$ |
| TOTAL INCOME | 65 | 71 | 67 | 48 | 61 |
| Operating expenses | 48 ÷ |
60 $\blacksquare$ |
75 | 47 ÷. |
-51 |
| Impairment | 97 | $\overline{2}$ | 14 | 7 | 0 |
| on financial assets at AC and at FVOCI | 97 | 1 | 14 | $\overline{7}$ | 0 |
| other | 0 | 0 | 0 | 0 | 0 |
| Share in results of associated companies and joint ventures | $\Omega$ | 0 | 0 | 0 | 0 |
| RESULT BEFORE TAX | 80 | 13 | 6 | 8 | 10 |
| Income tax expense | 10 | $-2$ | 3 $\sim$ |
3 | - 1 |
| RESULT AFTER TAX | 70 | 12 | $\overline{2}$ | $\overline{4}$ | 9 |
| attributable to minority interests | $\mathbf 0$ | $\mathbf 0$ | $\Omega$ | 0 | 0 |
| attributable to equity holders of the parent | 70 $\blacksquare$ |
12 | $\mathbf{z}$ | 4 | 9 |
| Banking | 68 $\blacksquare$ |
12 | $\overline{2}$ | $\overline{\mathbf{4}}$ | 9 |
| Insurance | $\mathbf{1}$ $\sim$ |
0 | $\Omega$ | $\Omega$ | 0 |
| Breakdown Loans and deposits | |||||
| Total customer loans excluding reverse repos (end of period) | 9670 | 9754 | 9760 | 9661 | 9562 |
| of which Mortgage Ioans (end of period) | 9 5 6 9 | 9651 | 9654 | 9531 | 9435 |
| Customer deposits and debt certificates excl. repos (end of period) | 5 0 9 5 | 4978 | 5 1 6 9 | 5 1 4 5 | 5056 |
| Performance Indicators | |||||
| Risk-weighted assets, banking (end of period, Basel III fully loaded) | 5 6 9 2 | 6057 | 6077 | 6 2 1 6 | 6 182 |
| Allocated capital (end of period) | 600 | 639 | 650 | 665 | 661 |
| Return on allocated capital (ROAC) | $-44%$ | 7% | 1% | 3% | 5% |
| Cost/income ratio, banking | 72% | 83% | 113% | 98% | 84% |
| Group Centre - Breakdown net result | |||||
|---|---|---|---|---|---|
| (in millions of EUR) | 2Q 2020 1Q 2020 4Q 2019 3Q 2019 2Q 2019 | ||||
| Operational costs of the Group activities | $-18$ ۰. |
$-15$ | $-34$ | $-14$ | $-14$ |
| Capital and treasury management | - 6 | $-11$ | - 8 | - 9 | $-7$ |
| Holding of participations | $\sim$ | - 3 | $-2$ | 21 | |
| Results companies in rundown | ÷. | 3 | 12 | 5 | |
| Other | $-18$ | 9 | $-1$ | ||
| Total net result for the Group centre | -26 $\sim$ |
$-43$ | - 33 | 4 |
| Business unit Group Centre | |||||
|---|---|---|---|---|---|
| (in millions of EUR) | 2Q 2020 1Q 2020 4Q 2019 3Q 2019 2Q 2019 | ||||
| Breakdown P&L | |||||
| Net interest income | 6 $\overline{a}$ |
16 ÷, |
-9 ÷. |
8 $\mathcal{L}^{\text{c}}$ |
11 |
| Non-life insurance (before reinsurance) | 5 | $\overline{2}$ | 4 | $\overline{2}$ | $\overline{2}$ |
| Earned premiums | 4 | $\overline{2}$ | $\overline{2}$ | 3 | 3 |
| Technical charges | $\mathbf 0$ | 1 | $\overline{2}$ | $\overline{1}$ | |
| Life insurance (before reinsurance) | $\overline{0}$ | $\Omega$ | 0 | $\mathbf 0$ | 0 |
| Earned premiums | $\Omega$ | 0 | 0 | 0 | $\Omega$ |
| Technical charges | 0 | 0 | 0 | 0 | 0 |
| Ceded reinsurance result | $\mathbf 1$ | 5 | 0 | $\mathbf 1$ | $\overline{2}$ |
| Dividend income | $\mathbf{1}$ | $\mathbf{1}$ | 1 | 0 | $\mathbf 1$ |
| Net result from financial instruments at fair value through profit or loss | $\mathbf{1}$ | 39 | 10 | 14 | 21 |
| Net realised result from debt instruments at fair value through OCI | 0 | $\mathbf 0$ | 0 | 0 | 0 |
| Net fee and commission income | $\mathbf{1}$ | $\overline{2}$ | 0 | 0 | $\overline{1}$ |
| Net other income | 0 | 0 | $\overline{2}$ $\blacksquare$ |
5 | $\overline{2}$ |
| TOTAL INCOME | 2 $\blacksquare$ |
48 $\blacksquare$ |
$\overline{\mathbf{4}}$ | 12 | - 27 $\overline{\phantom{0}}$ |
| Operating expenses | 24 | 21 ÷. |
48 | 23 | 21 |
| Impairment | 0 | 9 | 11 | 10 | 5 |
| on financial assets at AC and at FVOCI | 0 | 9 | 11 | 10 | 5 |
| other | $\Omega$ | $\mathbf 0$ | $\Omega$ | $\mathbf 0$ | $\mathbf 0$ |
| Share in results of associated companies and joint ventures | $\overline{0}$ | 0 | 0 | 0 | 0 |
| RESULT BEFORE TAX | 26 $\overline{a}$ |
60 $\blacksquare$ |
$-32$ | $\mathbf 1$ ÷. |
43 |
| Income tax expense | $\mathbf{0}$ | 18 | $\overline{1}$ $\blacksquare$ |
1 | 47 |
| RESULT AFTER TAX | 26 ä, |
- 43 | $-33$ | 0 | 4 |
| attributable to minority interests | $\mathbf{0}$ | $\mathbf 0$ | 0 | $\mathbf 0$ | 0 |
| attributable to equity holders of the parent | 26 | 43 $\blacksquare$ |
$-33$ | 0 | 4 |
| Banking | 21 | 49 $\omega$ |
$-17$ | 5 | 0 |
| Holding | 5 | 3 | $-26$ | $\mathbf 1$ ÷, |
3 |
| Insurance | 0 | $\overline{4}$ | 10 | 4 $\blacksquare$ |
1 |
| Breakdown Loans and deposits | |||||
| Total customer loans excluding reverse repos (end of period) | 0 | 0 | 1 | 0 | 0 |
| of which Mortgage loans (end of period) | 0 | 0 | 0 | 0 | 0 |
| Customer deposits and debt certificates excl. repos (end of period) | 9 9 0 8 | 9426 | 8999 | 9806 | 9089 |
| Performance Indicators | |||||
| Risk-weighted assets, banking (end of period, Basel III fully loaded) | 2 2 0 9 | 2 3 3 9 | 4 5 5 4 | 2 2 6 6 | 2 607 |
| Risk-weighted assets, insurance (end of period, Basel III fully loaded) | 9 1 3 3 | 9 1 3 3 | 9 1 3 3 | 9 1 3 3 | 9 1 3 3 |
| Required capital, insurance (end of period) | $-15$ | $-22$ | - 15 | $\overline{c}$ | 5 |
| Allocated capital (end of period) | 218 | 224 | 473 | 245 | 284 |
Gives an idea of the amount of profit over a certain period that is attributable to one share (and, where applicable, including dilutive instruments).
| Calculation (in millions of EUR) | Reference | 1H 2020 | 2019 | 1H 2019 |
|---|---|---|---|---|
| Result after tax. attributable to equity holders of the parent (A) |
Consolidated income statement' | 205 | 2489 | 1 1 7 5 |
| Coupon on the additional tier-1 instruments included in equity (B) |
Consolidated statement of changes in equity' | $-25$ | - 56 | $-32$ |
| Average number of ordinary shares less treasury shares (in millions) in the period $(C)$ or |
Note 5.10 | 416 | 416 | 416 |
| Average number of ordinary shares plus dilutive options less treasury shares in the period (D) |
416 | 416 | 416 | |
| Basic = $(A-B) / (C)$ (in EUR) | 0.43 | 5.85 | 2.75 | |
| Diluted = $(A-B) / (D)$ (in EUR) | 0.43 | 5.85 | 2.74 |
Gives an insight into the technical profitability (i.e. after eliminating investment returns, among other items) of the non-life insurance business, more particularly the extent to which insurance premiums adequately cover claim payments and expenses. The combined ratio takes ceded reinsurance into account.
| Calculation (in millions of EUR or %) | Reference | 1H 2020 | 2019 | 1H 2019 |
|---|---|---|---|---|
| Technical insurance charges, including the internal cost of settling claims (A) |
Note 3.7.1 | 467 | 1 0 0 6 | 519 |
| Earned insurance premiums (B) | Note 3.7.1 | 862 | 1693 | 828 |
| $+$ | ||||
| Operating expenses (C) | Note 3.7.1 | 274 | 526 | 269 |
| Written insurance premiums (D) | Note 3.7.1 | 962 | 1728 | 931 |
| $= (A/B)+(C/D)$ | 82.6% | 89.9% | 91.6% |
A risk-weighted measure of the group's solvency based on common equity tier-1 capital (the ratios given here are based on the Danish compromise). The CRD IV rules are gradually being implemented to allow banks to build up the necessary capital buffers. The capital position of a bank, when account is taken of the transition period, is referred to as the 'phased-in' view. The capital position based on full application of all the rules – as would be the case after this transition period – is referred to as 'fully loaded'.
A detailed calculation can be found under 'Solvency at group level' section.
Gives an impression of the relative cost efficiency (costs relative to income) of the banking activities.
| Calculation (in millions of EUR or %) | Reference | 1H 2020 | 2019 | 1H 2019 |
|---|---|---|---|---|
| Cost/income ratio | ||||
| Operating expenses of the banking activities (A) | Consolidated income statement": component of 'Operating expenses' |
2 0 0 2 | 3800 | 2.036 |
| Total income of the banking activities (B) | Consolidated income statement': component of 'Total income' |
3 0 3 5 | 6 5 6 3 | 3 2 5 5 |
| $= (A) / (B)$ | 66.0% | 57.9% | 62.6% |
Where relevant, we also estimate exceptional and/or non-operating items when calculating the cost/income ratio. This calculation aims to give a better idea of the relative cost efficiency of the pure business activities. The adjustments include: MTM ALM derivatives (fully excluded), bank taxes (including contributions to European Single Resolution Fund) are included pro rata and hence spread over all quarters of the year instead of being recognised for the most part upfront (as required by IFRIC 21) and one-off items. The Cost/Income ratio adjusted for specific items is 59% in 1H 2020 (versus 58% in FY 2019 and 59% in 1H 2019).
Indicates the proportion of impaired loans (see 'Impaired loans ratio' for definition) that are covered by impairment charges. Where appropriate, the numerator and denominator in the formula may be limited to impaired loans that are more than 90 days past due.
| Calculation (in millions of EUR or %) | Reference | 1H 2020 | 2019 | 1H 2019 |
|---|---|---|---|---|
| Specific impairment on loans (A) | Credit risk: Ioan portfolio overview' table in the 'Credit risk' section |
2696 | 2 5 8 4 | 2 7 1 4 |
| Outstanding impaired loans (B) | Credit risk: Ioan portfolio overview' table in the 'Credit risk' section |
6.024 | 6 160 | 6437 |
| $= (A) / (B)$ | 44.8% | 42.0% | 42.2% |
Gives an idea of loan impairment charges recognised in the income statement for a specific period, relative to the total loan portfolio (see 'Loan portfolio' for definition). In the longer term, this ratio can provide an indication of the credit quality of the portfolio.
| Calculation (in millions of EUR or %) | Reference | 1H 2020 | 2019 | 1H 2019 |
|---|---|---|---|---|
| Net changes in impairment for credit risks (A) |
Consolidated income statement': component of 'Impairment' |
961 | 204 | 102 |
| Average outstanding loan portfolio (B) | Credit risk: Ioan portfolio overview' table in the 'Credit risk' section |
177 398 | 170 128 | 168 800 |
| $=$ (A) (annualised) / (B) | 0.64% | 0.12% | 0.12% |
The credit cost ratio as of 1H2020 includes a collective Covid-19 expected credit loss (ECL) of 789 million euros, of which: (i) a management overlay of 43 million euros booked in 1Q2020; (ii) a management overlay of 596 million euros booked in 2Q20 and (iii) an impact of 150 million euros captured by our ECL models in 2Q20.
In the calculation of the credit cost ratio, the impact of the Covid-19 ECL is excluded from annualisation. Without the Covid-19 ECL impact, the credit cost ratio amounts to 0.20%.
Indicates the proportion of impaired loans in the loan portfolio (see 'Loan portfolio' for definition) and, therefore, gives an idea of the creditworthiness of the portfolio. Impaired loans are loans where it is unlikely that the full contractual principal and interest will be repaid/paid. These loans have a KBC default status of PD 10, PD 11 or PD 12 and correspond to the definition of 'nonperforming' used by the European Banking Authority.
| Calculation (in millions of EUR or %) | Reference | 1H 2020 | 2019 | 1H 2019 |
|---|---|---|---|---|
| Amount outstanding of impaired loans (A) | Credit risk: Ioan portfolio overview' table in the 'Credit risk' section |
6.024 | 6 160 | 6437 |
| Total outstanding loan portfolio (B) | Credit risk: Ioan portfolio overview in the 'Credit risk' section |
179 366 | 175431 | 172 776 |
| $= (A) / (B)$ | 3.4% | 3.5% | 3.7% |
Gives an idea of the group's solvency, based on a simple non-risk-weighted ratio. A detailed calculation can be found under 'Solvency at group level' section.
Gives an idea of the bank's liquidity position in the short term, more specifically the extent to which the group is able to overcome liquidity difficulties over a one-month period. It is the average of 12 end-of-month LCR figures.
| Calculation (in millions of EUR or %) | Reference | 1H 2020 | 2019 | 1H 2019 |
|---|---|---|---|---|
| Stock of high-quality liquid assets (A) | Based on the European Commission's Delegated Act on LCR and the European Banking Authority's guidelines for LCR disclosure |
74 512 | 74 884 | 78 050 |
| Total net cash outflows | 54 705 | 54 4 15 | 55 800 | |
| over the next 30 calendar days (B) | ||||
| $= (A) / (B)$ | 136% | 138% | 140% |
Gives an idea of the magnitude of (what are mainly traditional) lending activities.
| Calculation (in millions of EUR or %) | Reference | 1H 2020 | 2019 | 1H 2019 |
|---|---|---|---|---|
| Loans and advances to customers (A) | Note 4.1, component of 'Loans and advances to customers' |
157 563 | 155 816 | 154 169 |
| $\ddot{}$ | ||||
| Reverse repos (not with Central Banks) (B) | Note 4.1, component of 'Reverse repos with credit institutions and investment firms' |
3 4 3 9 | 1559 | 1675 |
| $\ddot{}$ | ||||
| Debt instruments issued by corporates and by credit institutions and investment firms (banking) (C) |
Note 4.1, component of 'Debt instruments issued by corporates and by credit institutions and investment firms' |
6 2 3 5 | 5894 | 5 5 6 3 |
| $\ddot{}$ | ||||
| Other exposures to credit institutions (D) | 4 8 0 8 | 4629 | 4670 | |
| $\ddot{}$ | ||||
| Financial guarantees granted to clients and other commitments (E) |
Note 6.1, component of 'Financial guarantees given' |
8 1 7 0 | 8 1 6 0 | 8 0 6 6 |
| $+$ | ||||
| Impairment on loans (F) | Note 4.2, component of 'Impairment' |
3680 | 2866 | 3 0 4 7 |
| $\ddot{}$ | ||||
| Insurance entities (G) | Note 4.1, component of 'Loans and advances to customers' |
$-2290$ | $-2288$ | $-2314$ |
| $\ddot{}$ | ||||
| Non-loan-related receivables (H) | $-939$ | $-738$ | $-743$ | |
| $\ddot{}$ | ||||
| Other (I) | Component of Note 4.1 | $-1299$ | $-468$ | $-1356$ |
| Gross Carrying amount = $(A)+(B)+(C)+(D)+(E)+(F)+(G)+(H)+(I)$ | 179 366 | 175 431 | 172 776 |
Gives an idea of the net interest income of the banking activities (one of the most important sources of revenue for the group) relative to the average total interest-bearing assets of the banking activities.
| Calculation (in millions of EUR or %) | Reference | 1H 2020 | 2019 | 1H 2019 |
|---|---|---|---|---|
| Net interest income of the banking activities (A) | Consolidated income statement': component of 'Net interest income' |
1917 | 3853 | 1889 |
| Average interest-bearing assets of the banking activities (B) | Consolidated balance sheet': component of 'Total assets' |
201 557 | 194 731 | 191 578 |
| $=$ (A) (annualised x360/number of calendar days) / (B) | 1.89% | l.95% | 1.96% |
From 1Q 2018 the definition of NIM has been updated, it concerns banking group NII excluding dealing room and the net positive impact of ALM FX swaps & repos.
Gives an idea of the bank's structural liquidity position in the long term, more specifically the extent to which the group is able to overcome liquidity difficulties over a one-year period.
| Calculation (in millions of EUR or %) | Reference | 1H 2020 | 2019 | 1H 2019 |
|---|---|---|---|---|
| Available amount of stable funding (A) | Basel III, the net stable funding ratio (Basel Committee on Banking Supervision publication. October 2014) |
203 437 | 174 977 | 174 250 |
| Required amount of stable funding (B) | 143 056 | 128 845 | 130 850 | |
| $= (A) / (B)$ | 142.2% | 135.8% | 133.2% |
Gives the carrying value of a KBC share, i.e. the value in euros represented by each share in the parent shareholders' equity of KBC.
| Calculation (in millions of EUR or %) | Reference | 1H 2020 | 2019 | 1H 2019 |
|---|---|---|---|---|
| Parent shareholders' equity (A) | 'Consolidated balance sheet' | 18 710 | 18 865 | 17 799 |
| Number of ordinary shares less treasury shares | Note 5.10 | 416 | 416 | 416 |
| (at period-end) (B) | ||||
| $= (A) / (B)$ (in EUR) | 44.94 | 45.31 | 42.77 |
Gives an idea of the relative profitability of a business unit, more specifically the ratio of the net result to the capital allocated to the business unit.
| Calculation (in millions of EUR or %) | Reference | 1H 2020 | 2019 | 1H 2019 |
|---|---|---|---|---|
| BELGIUM BUSINESS UNIT | ||||
| Result after tax (including minority interests) of the business unit (A) |
Note 2.2: Results by segment | 119 | 1 3 4 4 | 564 |
| The average amount of capital allocated to the business unit is based on the risk-weighted assets for the banking activities (under Basel III) and risk-weighted asset equivalents for the insurance activities (under Solvency II) (B) |
6853 | 6764 | 6703 | |
| $=$ (A) annualised / (B) | 3.5% | 19.9% | 16.8% | |
| CZECH REPUBLIC BUSINESS UNIT | ||||
| Result after tax (including minority interests) of the business unit (A) |
Note 2.2: Results by segment | 165 | 789 | 425 |
| The average amount of capital allocated to the business unit is based on the risk-weighted assets for the banking activities (under Basel III) and risk-weighted asset equivalents for the insurance activities (under Solvency II) (B) |
1 7 1 4 | 1692 | 1671 | |
| $=$ (A) annualised / (B) | 19.2% | 46.7% | 51.0% | |
| INTERNATIONAL MARKETS BUSINESS UNIT | ||||
| Result after tax (including minority interests) of the business unit (A) |
Note 2.2: Results by segment | 11 $\sim$ |
379 | 175 |
| The average amount of capital allocated to the business unit is based on the risk-weighted assets for the banking activities (under Basel III) and risk-weighted asset equivalents for the insurance activities (under Solvency II) (B) |
2 3 2 8 | 2 3 5 4 | 2 3 4 4 | |
| $=$ (A) annualised / (B) | $-0.9%$ | 16.1% | 14.9% |
Gives an idea of the relative profitability of the group, more specifically the ratio of the net result to equity.
| Calculation (in millions of EUR or %) | Reference | 1H 2020 | 2019 | 1H 2019 |
|---|---|---|---|---|
| Result after tax, attributable to equity holders of the parent (A) |
Consolidated income statement' | 205 | 2489 | 1 1 7 5 |
| Coupon on the additional tier-1 instruments included in equity (B) |
Consolidated statement of changes in equity' | $-25$ | - 56 | $-32$ |
| Average parent shareholders' equity, excluding the revaluation reserve for FVOCI instruments and for FVPL equity instruments – overlay approach (C) |
Consolidated statement of changes in equity' | 17454 | 16 978 | 16 459 |
| $= (A-B)$ (annualised) / (C) | 2.1% | 14.3% | 13.9% |
The return on equity amounts to 4% in 1H 2020 when including evenly spreading of the bank taxes throughout the year.
Gives the indication of the sales activities of life insurance products including unit-linked.
| Calculation (in millions of EUR or %) | Reference | 1H 2020 | 2019 | 1H 2019 |
|---|---|---|---|---|
| Life Insurance - earned premiums (before reinsurance) (A) | Consolidated income statement' | 574 | 1 3 2 3 | 668 |
| $\ddot{}$ | ||||
| Life insurance: difference between written and earned premiums (before reinsurance) (B) $\ddot{}$ |
||||
| Investment contracts without discretionary participation feature (large part of unit-linked) – margin deposit accounting (C) |
413 | 525 | 307 | |
| Total sales Life $(A)$ + $(B)$ + $(C)$ | 988 | 1849 | 975 |
Measures the solvency of the insurance business, as calculated under Solvency II.
A detailed calculation can be found under 'Solvency of KBC Bank and KBC Insurance' section.
Total assets under management (AuM) comprise third-party assets and KBC group assets managed by the group's various asset management companies (KBC Asset Management, ČSOB Asset Management, etc.), as well as assets under advisory management at KBC Bank. The assets, therefore, consist mainly of KBC investment funds and unit-linked insurance products, assets under discretionary and advisory management mandates of (mainly retail, private banking and institutional) clients, and certain group assets. The size and development of total AuM are major factors behind net fee and commission income (generating entry and management fees) and hence account for a large part of any change in this income line. In that respect, the AuM of a fund that is not sold directly to clients but is instead invested in by another fund or via a discretionary/advisory management portfolio, are also included in the total AuM figure, in view of the related work and any fee income linked to them.
| Calculation (in billions of EUR or quantity) | Reference | 1H 2020 | 2019 | 1H 2019 |
|---|---|---|---|---|
| Belgium Business Unit (A) | Company presentation on www.kbc.com | 185 | 200 | 195 |
| $\ddot{}$ | ||||
| Czech Republic Business Unit (B) | 11 | 11 | ||
| $\pm$ | ||||
| International Markets Business Unit (C) | 5 | 5 | ||
| $A)+(B)+(C)$ | 202 | 216 | 210 |
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