Earnings Release • Nov 15, 2018
Earnings Release
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| KBC Group - overview (consolidated, IFRS) | 3Q2018 (IFRS 9) |
2Q2018 (IFRS 9) |
3Q2017 (IAS 39) |
9M2018 (IFRS9) |
9M2017 (IAS39) |
|---|---|---|---|---|---|
| Net result (in millions of EUR) | 701 | 692 | 691 | 1 948 | 2 176 |
| Basic earnings per share (in EUR) | 1.63 | 1.61 | 1.62 | 4.54 | 5.11 |
| Breakdown of the net result by business unit (in millions of EUR) | |||||
| Belgium | 409 | 437 | 455 | 1 089 | 1 240 |
| Czech Republic | 168 | 145 | 170 | 484 | 534 |
| International Markets | 141 | 163 | 78 | 440 | 370 |
| Group Centre | -17 | -53 | -12 | -64 | 32 |
| Parent shareholders' equity per share (in EUR, end of period) | 40.6 | 39.9 | 40.6 | 40.6 | 40.6 |
We delivered a net profit of 701 million euros in the third quarter of 2018. An excellent result, thanks, among other things, to higher levels of net interest income, trading and fair value income and other net income, an outstanding combined ratio in our non-life insurance activities, and – yet again – a net release of some loan loss impairments, the bulk of which related to our Irish mortgage book. Adding this third-quarter results figure to the 556 million euros and 692 million euros earned in the first and second quarters of the year brings our result for the first nine months of 2018 to a solid 1 948 million euros. Loans increased by 5% year-on-year and deposits excluding debt certificates by 6%. Our solvency position remained strong too. At the end of September 2018, our common equity ratio was 16%, up again on the 15.8% recorded in the previous quarter and comfortably surpassing the regulatory minimum levels in this respect. As announced earlier, we will, in line with our dividend policy, pay an interim dividend of 1 euro per share on 16 November 2018, as an advance payment on the total dividend for 2018.
Early in the third quarter, we completed the buyback of 2.7 million own shares and subsequently cancelled them, reducing our total number of shares to 415 897 567. And as already announced, KBC Bank Ireland reached an agreement with Goldman Sachs to sell part of its legacy loan portfolio, which will significantly reduce that entity's impaired loans ratio as well as lower the group's ratio. We expect the deal to be completed in the fourth quarter of this year.
On the digital front, our focus is on developing innovative client-centric solutions that make our clients' lives easier. To name just a few examples, we not only added multi-banking possibilities to our KBC Mobile app in Belgium, but also recently added new specific non-banking features to this app, including the ability to pay for car parking services and the possibility to use the app to buy digital tickets for public transport. In Ireland, we added a new feature to the mobile app that allows customers to easily mark a card as lost or stolen and moreover instantly receive a digital replacement. And in the Czech Republic, ČSOB was crowned Best Internet Bank in that country by Capital Finance International, yet more proof of the success of our clientcentric digital initiatives.
On the broader economic front, European economic conditions remain attractive, although we believe that the growth peak is behind us. The risk of further economic de-globalisation with an escalation of ongoing trade conflicts, Brexit and political turmoil in Italy are the main factors that could impede European economic growth.
Lastly, I'm very proud to announce that we not only received top scores in the international Extel Awards, but that we were also recently honoured by the Belgian Association of Financial Analysts with the award for 'Best Financial Communication'.
This is especially gratifying since open and transparent communication to our stakeholders ranks very high on our priority list. To close, I would like to take the opportunity to explicitly thank all our stakeholders for the trust they put in us and to assure them that we are more focused than ever in our efforts to become the reference in bank-insurance in all our core countries.
Johan Thijs Chief Executive Officer
Important. As of 2018, we have started applying IFRS 9. In simplified terms, this means that the classification of financial assets and liabilities, as well as the impairment methodology, have changed significantly. As a result, some of the income statement and balance sheet figures are not fully comparable to the 2017 reference figures (which are still based on IAS 39, as KBC is making use of transition relief for comparative data). To enhance transparency, we have – as of 2018 and in line with IFRS 9 – also moved interest accruals for FX derivatives in the banking book from 'Trading and fair value income' to 'Net interest income'. We have also shifted network income (i.e. income received from margins earned on FX transactions carried out by the network for our customers) from 'Trading and fair value income' to 'Net fee and commission'. A short overview is provided in the annex. Furthermore, related to IFRS 9, we changed, as of 2018, the definition of our loan portfolio from outstanding to gross carrying amount (i.e. incl. reserved and accrued interests) and slightly amended the scope. In order to enhance comparability, we have added certain comparisons with pro forma (recalculated) figures for 2017 (unaudited) in the analysis below. When this is done, it is indicated by the words 'on a comparable basis'.
Our strategy rests on four principles:
24%
* This news item contains information that is subject to the transparency regulations for listed companies. 2
| Consolidated income statement, IFRS KBC Group (in millions of EUR) |
3Q2018 (IFRS 9) |
2Q2018 (IFRS 9) |
1Q2018 (IFRS 9) |
4Q2017 (IAS 39) |
3Q2017 (IAS 39) |
9M2018 (IFRS 9) |
9M2017 (IAS 39) |
|---|---|---|---|---|---|---|---|
| Net interest income | 1 136 | 1 117 | 1 125 | 1 029 | 1 039 | 3 378 | 3 091 |
| Non-life insurance (before reinsurance) | 197 | 202 | 162 | 152 | 188 | 562 | 554 |
| Earned premiums | 403 | 392 | 378 | 384 | 378 | 1 173 | 1 107 |
| Technical charges | -205 | -190 | -216 | -232 | -190 | -611 | -553 |
| Life insurance (before reinsurance) | -9 | 1 | -7 | -3 | -3 | -15 | -55 |
| Earned premiums | 293 | 315 | 336 | 410 | 282 | 944 | 861 |
| Technical charges | -302 | -314 | -343 | -414 | -284 | -959 | -916 |
| Ceded reinsurance result | -6 | -14 | -9 | -10 | 16 | -29 | 2 |
| Dividend income | 12 | 34 | 21 | 8 | 11 | 67 | 55 |
| Net result from financial instruments at fair value through P&L1 |
79 | 54 | 96 | 235 | 182 | 229 | 622 |
| Net realised result from available-for-sale assets | - | - | - | 51 | 51 | - | 148 |
| Net realised result from debt instruments at fair value through | 0 | 8 | 1 | - | - | 9 | - |
| other comprehensive income | |||||||
| Net fee and commission income | 424 | 438 | 450 | 430 | 408 | 1 312 | 1 277 |
| Other net income | 56 | 23 | 71 | -14 | 4 | 150 | 128 |
| Total income | 1 888 | 1 863 | 1 912 | 1 878 | 1 896 | 5 663 | 5 822 |
| Operating expenses | -981 | -966 | -1 291 | -1 021 | -914 | -3 239 | -3 053 |
| Impairment | 2 | 1 | 56 | -2 | -31 | 60 | 32 |
| Of which: on loans and receivables2 | - | - | - | 30 | -15 | - | 57 |
| Of which: on financial assets at amortised cost and at fair value through other comprehensive income2 |
8 | 21 | 63 | - | - | 92 | - |
| Share in results of associated companies & joint ventures | 2 | 3 | 6 | -5 | 8 | 12 | 16 |
| Result before tax | 911 | 901 | 683 | 850 | 959 | 2 496 | 2 818 |
| Income tax expense | -211 | -210 | -127 | -451 | -268 | -548 | -641 |
| Result after tax | 701 | 692 | 556 | 398 | 691 | 1 949 | 2 176 |
| attributable to minority interests | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| attributable to equity holders of the parent | 701 | 692 | 556 | 399 | 691 | 1 948 | 2 176 |
| Basic earnings per share (EUR) | 1.63 | 1.61 | 1.30 | 0.92 | 1.62 | 4.54 | 5.11 |
| Diluted earnings per share (EUR) | 1.63 | 1.61 | 1.30 | 0.92 | 1.62 | 4.54 | 5.11 |
| Key consolidated balance sheet figures | 30-09-2018 | 30-06-2018 | 31-03-2018 | 31-12-2017 | 30-09-2017 | ||
| KBC Group (in millions of EUR) | (IFRS 9) | (IFRS 9) | (IFRS 9) | (IAS 39) | (IAS 39) | ||
| Total assets | 304 740 | 301 934 | 304 022 | 292 342 | 296 885 | ||
| Loans and advances to customers, excl. reverse repos | 146 011 | 145 346 | 142 512 | 140 999 | 139 538 | ||
| Securities (equity and debt instruments) | 63 030 | 63 936 | 66 050 | 67 743 | 69 273 | ||
| Deposits from customers and debt certificates, excl. repos | 194 056 | 192 951 | 188 034 | 193 708 | 188 962 | ||
| Technical provisions, before reinsurance | 18 533 | 18 595 | 18 754 | 18 641 | 18 696 | ||
| Liabilities under investment contracts, insurance | 13 444 | 13 428 | 13 338 | 13 552 | 13 294 | ||
| Parent shareholders' equity | 16 878 | 16 616 | 17 119 | 17 403 | 17 003 | ||
| Selected ratios KBC group (consolidated) |
9M2018 | FY2017 | |||||
| Return on equity | 16%5 | 17% | |||||
| Cost/income ratio, banking | |||||||
| (when excluding certain non-operating items and evenly spreading the bank tax) |
59% (57%) |
54% (55%) |
|||||
| Combined ratio, non-life insurance | 88% | 88% | |||||
| Common equity ratio, Basel III Danish Compromise (fully loaded) | 16.0% | 16.3% | |||||
| Common equity ratio, FICOD (fully loaded) | 15.1% | 15.1% | |||||
| Leverage ratio, Basel III (fully loaded) | 6.1% | 6.1% | |||||
| Credit cost ratio3 | -0.07% | -0.06% | |||||
| Impaired loans ratio4 | 5.5% | 6.0% | |||||
| for loans more than 90 days past due | 3.2% | 3.4% | |||||
| Net stable funding ratio (NSFR) | 134% | 134% | |||||
| Liquidity coverage ratio (LCR) | 138% | 139% | |||||
| 1 Also referred to as 'trading and fair value income'. 2 Also referred to as 'loan loss impairment'. |
3 A negative figure indicates a net impairment release (with a positive impact on the results).
4 Excluding the part of the Irish portfolio for which a sales agreement has been signed, the impaired loans ratio would amount to 4.5% in 9M2018.
5 17%, when evenly spreading the bank tax 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.
| Total income | Total income increased slightly (+1%) quarter-on-quarter. Overall, net interest income and trading and fair value income rose, while technical insurance income, net fee and |
|---|---|
| 1 888 | commission income and dividend income were down. Net other income was up, as the |
| million euros | previous quarter had been impacted by a negative one-off item. |
Net interest income amounted to 1 136 million euros in the quarter under review. On a comparable basis, it was up 2%, both quarter-on-quarter and year-on-year. In general, the pressure on commercial loan margins in most core countries, the negative effect of low reinvestment yields (in our core countries in the euro area) and the lower netted positive impact of ALM forex swaps were more than offset by loan volume growth, lower funding costs (especially year-on-year) and higher interest rates in the Czech Republic. As already mentioned, interest income continued to be supported by loan volume growth: the total volume of customer lending rose by 1% quarter-on-quarter and by 5% year-on-year, with increases in all business units. Customer deposits including debt certificates remained more or less flat quarter-on-quarter, and were up 3% year-on-year. Excluding debt certificates (which were down year-on-year due to several factors, including the lower level of certificates of deposits and the contingent capital securities being redeemed in January), deposits were up 6% year-on-year, again with increases in all business units. The net interest margin came to 1.98% for the quarter under review, down 2 basis points on the level recorded in the previous quarter and up 2 basis points on the level in the year-earlier quarter.
Technical income from our non-life insurance activities (earned premiums less technical charges, plus the ceded reinsurance result) contributed 191 million euros to total income, roughly in line with the previous quarter, as the increase in technical charges was offset by an increase in premium income in all core countries and a better ceded reinsurance result. Compared to the third quarter of 2017, non-life technical income fell by 5%, with the growth of earned premiums being offset by the lower ceded reinsurance result and higher technical charges (since the third quarter of 2017 had benefited from a one-off 26-million-euro release of provisions in Belgium). Overall, the combined ratio for the first nine months of 2018 came to an excellent 88%, fully in line with the figure recorded for full-year 2017.
Technical income from our life insurance activities stood at -10 million euros, compared to 0 million euros in the previous quarter and -1 million euros in the year-earlier quarter (the latter had also benefited from a 23-million-euro release of provisions in Belgium). Sales of life insurance products (383 million euros) suffered under the low investment appetite of clients (related to market uncertainty) and the holiday season, and were consequently down 10% on the level recorded in the previous quarter, with most of the drop relating to guaranteed-interest products. Compared to the year-earlier quarter, sales of life insurance products were down 5% (decline in sales of unit-linked products). Overall, the share of guaranteed-interest products in our total life insurance sales stood at 60% in the third quarter of 2018, with unit-linked products accounting for the remaining 40%.
At 424 million euros, net fee and commission income was – on a comparable basis – down 3% and 2%, respectively, on its level of the previous and year-earlier quarters. The quarter-on-quarter drop was essentially the result of lower asset managementrelated fees (again on account of the generally low investment appetite of clients and the holiday season) and lower fee income from banking services, together with higher commissions paid on non-life insurance sales. The 2% year-on-year drop was caused by the decrease in asset management-related fees which more than offset the increase in banking fees (for payment services, securities transactions, etc.). At the end of September 2018, our total assets under management stood at 214 billion euros, more or less stable both quarter-on-quarter and year-on-year. In both cases, the limited positive impact of improved price performance was offset by likewise limited net outflows.
All other remaining income items amounted to an aggregate 147 million euros, as opposed to 119 million euros in the previous quarter and 111 million euros in the year-earlier quarter (on a comparable basis). The figure for the third quarter of 2018 included 12 million euros in dividend income (down on the previous quarter, since the bulk of dividends is traditionally received in the second quarter of the year). It also included 56 million euros in other net income, significantly up on both reference quarters as the second quarter of 2018 had been negatively impacted by a 38-million-euro one-off item related to the settlement of a legacy legal case, while the third quarter of 2017 had been adversely impacted by 54 million euros set aside as a result of an industrywide review of tracker rate mortgage products originated in Ireland before 2009. The other remaining income items also included a 79-million-euro net result from financial instruments at fair value (trading and fair value income). This figure was up 44% on the figure recorded in the previous quarter, due mainly to the higher value of derivatives used for asset/liability management purposes and the positive impact of various valuation adjustments, which more than offset the weaker dealing room income and the drop in realised gains on the sale of shares in the insurance portfolio. Compared to the third quarter of 2017, trading and fair value income was down 16% on a comparable basis, due primarily to lower dealing room income in the Czech Republic and lower realised gains on the sale of shares in the insurance portfolio, which more than offset the positive impact of various valuation adjustments.
Operating expenses Excluding bank taxes, operating expenses in the third quarter were up 1% on the previous quarter. When the bank taxes are spread evenly throughout the year and certain non-operational items are excluded, the year-to-date cost/income ratio came to 57%. 981 million euros
Operating expenses in the third quarter of 2018 stood at 981 million euros. Excluding bank taxes, this constitutes an increase of 1% quarter-on-quarter, caused mainly by somewhat higher staff expenses in a number of countries apart from Belgium (wage inflation, etc.), higher marketing and ICT costs and a few one-off items, partly offset by lower facility-related expenses. Costs rose 7% year-on-year, due in part to higher bank taxes, increased staff expenses, higher ICT costs, increased marketing and professional fee expenses and a few one-off items.
As a result, the cost/income ratio of our banking activities stood at 59% in the first nine months of the year. When the bank taxes are spread evenly throughout the year (the bulk of bank taxes is effectively booked in the first quarter of the year) and certain nonoperating items are excluded, the cost/income ratio came to 57%, compared to 55% for full-year 2017.
Loan loss impairments Another net release of loan loss impairment charges thanks largely to Ireland. Very favourable credit cost ratio of -0.07%. 8-million-euro net release
In the third quarter of 2018, we recorded an 8-million-euro net release of loan loss impairments. This compares with a net release of 21 million euros in the previous quarter and a net addition of 15 million euros in the third quarter of 2017. As has been the case for a number of consecutive quarters now, the net release in the third quarter of 2018 was largely attributable to Ireland (net release of 15 million euros in the quarter under review), which came about mainly because of the positive effect of increased house prices on the mortgage loan portfolio, as well as the general improvement in the performance of the portfolio. In the Czech Republic, loan loss impairment charges edged up to 12 million euros, caused by one large corporate loan. In all the other core countries, there was either a small release of loan loss impairments (Slovakia, Hungary, Bulgaria, Group Centre) or a generally very low level of loan loss impairment charges (Belgium). Consequently, the credit cost ratio for the entire group amounted to a very favourable -0.07% for the first nine months of the year (a negative figure indicates a net release and, hence, has a positive impact on the results), compared to -0.06% in full-year 2017. Excluding Ireland, the credit cost ratio would have come to 0.01% in the first nine months of the year (0.09% in full-year 2017).
The impaired loans ratio improved further in all business units. At the end of September 2018, some 5.5% of our total loan book was classified as impaired, compared with 6.0% at year-end 2017. Impaired loans that are more than 90 days past due amounted to 3.2% of the loan book (3.4% at year-end 2017).
The quarter under review also included a limited amount (6 million euros) of impairments on assets other than loans. This compares to 20 million euros in the previous quarter (mainly related to the impact of the review of residual values of financial car leases under short-term contracts in the Czech Republic and a legacy property file in Bulgaria) and to 17 million euros in the third quarter of 2017 (relating to available-for-sale shares, facilities assets and ICT, among other things).
| Net result | Belgium | Czech Republic | International Markets | Group Centre |
|---|---|---|---|---|
| by business unit | 409 million euros | 168 million euros | 141 million euros | -17 million euros |
Belgium: the net result (409 million euros) was down 6% quarter-on-quarter. It included a virtually stable level of trading and fair value income and only slightly lower net interest income (-1%), as well as lower net fee and commission income, technical insurance income and dividend income (seasonal effect). Costs were slightly lower (reduction in staff expenses, among other things) and loan loss impairments stood at a very low level.
Czech Republic: the net result (168 million euros) was up 16% on its level for the previous quarter, due mainly to increased net interest income (increasing interest rates, etc.) and higher trading and fair value income. Costs were up, as were loan loss impairments (due to one corporate loan).
International Markets: the 141-million-euro net result breaks down as follows: 27 million euros in Slovakia, 51 million euros in Hungary, 31 million euros in Bulgaria and 32 million euros in Ireland. For the business unit as a whole, the net result was down 13% quarter-on-quarter, which was largely due to a lower level of net loan loss releases in Ireland (15 million euros, compared to 39 million euros in the previous quarter).
Group Centre: the net result (-17 million euros) was up 36 million euros on the level recorded in the previous quarter, which had been impacted by a negative one-off item related to the settlement of a legacy legal case (38 million euros).
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Outside trading hours - Regulated information*
| Belgium | Czech Republic | International Markets | |||||
|---|---|---|---|---|---|---|---|
| Selected ratios by business unit | 9M2018 | FY2017 | 9M2018 | FY2017 | 9M2018 | FY2017 | |
| Cost/income ratio, banking excluding certain non-operating items and spreading the bank tax evenly throughout the year |
57% | 53% | 46% | 43% | 63% | 72% | |
| Combined ratio, non-life insurance | 87% | 86% | 96% | 97% | 88% | 93% | |
| Credit cost ratio1 | 0.06% | 0.09% | 0.04% | 0.02% | -0.56% | -0.74% | |
| Impaired loans ratio2 | 2.4% | 2.8% | 2.3% | 2.4% | 18.9% | 19.7% |
1 A negative figure indicates a net impairment release (with a positive impact on the results). See 'Details of ratios and terms' in the quarterly report.
2 2018 figures based on a slightly changed definition of the loan portfolio. See 'Credit risk' 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, | Total | Common equity | Liquidity coverage | Net stable funding |
|---|---|---|---|---|
| equity | ratio (fully loaded) | ratio | ratio | |
| liquidity | 19.3 billion euros | 16.0% | 138% | 134% |
At the end of September 2018, total equity stood at 19.3 billion euros (16.9 billion euros in parent shareholders' equity and 2.4 billion euros in additional tier-1 instruments), up 1.2 billion euros on its level at the beginning of the year on a like-for-like basis (i.e. after adjustment for the impact of the first-time application of IFRS 9, which led to a drop of 0.7 billion euros). The 'like-forlike' increase of 1.2 billion euros during the first nine months of the year resulted from the inclusion of the profit for that period (+1.9 billion euros), the issuance of a new additional tier-1 instrument in April 2018 (+1 billion euros), payment of the final dividend for 2017 in May 2018 and the decision to pay an interim dividend for 2018 in November 2018 (-0.8 billion euros and -0.4 billion euros, respectively), the share buyback (-0.2 billion euros), changes in various revaluation reserves (an aggregate -0.2 billion euros) and a number of minor items. We have provided details of the changes in the 'Consolidated financial statements' section of the quarterly report (under 'Consolidated statement of changes in equity').
At 30 September 2018, our fully loaded common equity ratio (Basel III, under the Danish compromise) stood at a strong 16.0%, compared to 15.8% three months earlier. Our leverage ratio (Basel III, fully loaded) came to 6.1%. The solvency ratio for KBC Insurance under the Solvency II framework was a sound 216% at 30 September 2018. Our liquidity position remained excellent too, as reflected in an LCR ratio of 138% and an NSFR ratio of 134% at the end of September 2018.
1 948 million euros
Net result The net result for the first nine months of 2018 was down 10% on its level in the corresponding period of 2017. On a comparable basis, the positive effect of the increase in net interest income, dividend income, other net income, technical insurance income and the higher level of loan loss impairment releases could not fully offset the significant drop in trading and fair value income, lower net fee and commission income and higher expenses.
Highlights (compared to the first nine months of 2017, on a comparable basis):
* This news item contains information that is subject to the transparency regulations for listed companies. 6
Risk statement: 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. Although we closely monitor and manage each of these risks within a strict risk framework containing governance and limits, 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. Regulatory risk remains a dominant theme for the sector (even though the 'Basel IV' agreement in December 2017 has brought some clarification as regards future capital requirements), as does enhanced consumer protection. Another ongoing challenge remains the low interest rate environment, combined with the increased risk of asset bubbles. The financial sector also faces the potential systemic consequences of political and financial developments like Brexit, the Italian budget discussions or protectionist measures in the US, which will have an impact on the European economy. Technology used in the financial industry is an additional challenge for the business model of traditional financial institutions. 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.
Our view on interest rates and foreign exchange rates: in line with its recent communication, we expect the ECB to end its Asset Purchase Programmes in December 2018. The first step towards policy rate normalisation will only be taken several months after the end of QE (quantitative easing), which is likely to be in September 2019. In the meantime, we expect the Fed to carry out one more rate hike this year while its balance sheet rundown continues as planned. We expect the Fed rate cycle to peak at 3.375% at the end of 2019. Consequently, we believe that the US dollar will continue strengthening against the euro in the short run, as it benefits from short-term interest rate support arising from persistent monetary policy divergence. On a somewhat longer-term horizon, however, the euro will probably start appreciating again. Despite the flight to quality and safe-haven effects, persistent excess liquidity, the sustained German budget surplus, relatively subdued European (core) inflation and still highly accommodating monetary policy of the ECB, German long-term bond yields are expected to rise in the period ahead, albeit only modestly. Unlike the dovish stance of the ECB, the Czech National Bank has been tightening its monetary policy in the light of a buoyant Czech growth and inflation environment. Given these favourable conditions, the Czech currency is expected to appreciate by the end of 2019. We expect two more increases in the policy rate before the end of 2020 in the Czech Republic.
Our view on economic growth: European economic conditions remain attractive, although we believe that the growth peak is behind us. Persistently decreasing unemployment rates, with growing labour shortages even arising in some European economies, combined with gradually rising wage inflation will continue to support private consumption. Moreover, investments will remain an important driver of growth. The main elements that could impede European economic sentiment and growth remain the risk of further economic de-globalisation, including an escalation of trade conflicts, Brexit and political turmoil in Italy.
| Guidance for the remainder of 2018 |
• • |
We expect solid returns for all business units. For Ireland, our guidance for loan impairment for full-year 2018 is for a net release of 100 to 150 million euros. |
|---|---|---|
| • | For Belgium, we expect a recurring positive impact on our results from the recent reform of the Belgian income tax system. The negative upfront effect recorded in the last quarter of 2017 should be fully recouped in roughly three years' time. |
| Pro forma recalculation of 2017 reference figures for the main income lines, KBC Group (in millions of EUR, unaudited figures) |
Pro forma recalculation of 2017 reference figures |
|||||||
|---|---|---|---|---|---|---|---|---|
| 3Q2018 | 2Q2018 | 1Q2018 | 4Q2017 | 3Q2017 | 2Q2017 | 1Q2017 | ||
| 1 136 | 1 117 | 1 125 | 1 029 | 1 039 | 1 028 | 1 025 | ||
| +108 | +75 | +66 | +56 | |||||
| =1 137 | =1 114 | =1 094 | =1 081 | |||||
| 79 | 54 | 96 | 235 | 182 | 249 | 191 | ||
| -108 | -75 | -66 | -56 | |||||
| -26 | -25 | -24 | -24 | |||||
| +17 | +12 | +21 | +19 | |||||
| =118 | =94 | =180 | =130 | |||||
| 424 | 438 | 450 | 430 | 408 | 430 | 439 | ||
| +26 | +25 | +24 | +24 | |||||
| =456 | =433 | =454 | =463 | |||||
Interest accruals on FX derivatives: moved from FIFV to 'Net interest income' (in line with the transition to IFRS 9).
Network income (income received from margins earned on FX transactions carried out by the network for clients): moved from FIFV to 'Net fee and commission income'.
Result on equity instruments: in line with the IFRS 9 'overlay approach', realised gains and losses and impairment on what used to be available-for-sale shares in the insurance portfolio have been moved from 'Net result from available-for-sales assets' and 'Impairment on available-for-sale assets' to FIFV. Please note that, under IFRS 9, realised and unrealised gains/losses on what used to be available-for-sale shares in the banking portfolio are recorded in other comprehensive income (i.e. eliminated from the net result).
Kurt De Baenst, General manager Investor Relations, KBC-group Tel +32 2 429 35 73 - E-mail: [email protected]
Viviane Huybrecht, General Manager, Corporate Communication/Spokesperson, KBC Group Tel +32 2 429 85 45 - E-mail: [email protected]
KBC Group NV Havenlaan 2 – 1080 Brussels Viviane Huybrecht General Manager Corporate Communication /Spokesperson Tel. +32 2 429 85 45
Press Office Tel. +32 2 429 65 01 Stef Leunens Tel. +32 2 429 29 15 Ilse De Muyer Tel. +32 2 429 32 88 Pieter Kussé E-mail: [email protected]
KBC press releases are available at www.kbc.com or can be obtained by sending an e-mail to [email protected]
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* This news item contains information that is subject to the transparency regulations for listed companies. 8
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