Quarterly Report • Nov 10, 2011
Quarterly Report
Open in ViewerOpens in native device viewer
Extended Quarterly Report – KBC Group – 3Q2011 1
'I, Luc Popelier, 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 the current year.
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.
www.kbc.com/ir m.kbc.com
KBC Group NV Investor Relations Office (IRO) Havenlaan 2, BE 1080 Brussels, Belgium
[consolidated total regulatory capital] / [total risk-weighted volume].
[technical insurance charges, including the internal cost of settling claims / earned premiums] + [expenses / written premiums] (after reinsurance).
[consolidated tier-1 capital] / [total risk-weighted volume]. The calculation of the core tier-1 ratio does not include hybrid instruments (but does include the core-capital securities sold to the Belgian and Flemish governments).
[operating expenses of the banking businesses of the group] / [ total income of the banking businesses of the group].
[expenses / written premiums] (after reinsurance).
[individual impairment on non-performing loans] / [outstanding nonperforming loans]. For a definition of 'non-performing', see 'Non-performing ratio'. The cover ratio may also include the individual impairment on still performing loans and portfolio-based impairments.
[net changes in individual and portfolio-based impairment for credit risks]/ [average outstanding loan portfolio]. Note that, inter alia, government bonds are not included in this formula.
[result after tax, attributable to the equity holders of the parent)] / [average number of ordinary shares, plus mandatorily convertible bonds, less treasury shares]. If a coupon is expected to be paid on the core-capital securities sold to the Belgian and Flemish governments, it will be deducted from the numerator (pro rata).
[result after tax, attributable to equity holders of the parent, adjusted for interest expense (after tax) for non-mandatorily convertible bonds] /
[average number of ordinary shares, plus mandatorily convertible bonds, less treasury shares, plus the dilutive effect of options (number of
stock options allocated to staff with an exercise price less than the market price) and non-mandatorily convertible bonds]. If a coupon is expected to be paid on the core-capital securities sold to the Belgian and Flemish governments, it will be deducted from the numerator (pro rata).
[net interest income of the banking activities (underlying)] / [average interest-bearing assets of the banking activities].
[amount outstanding of non-performing loans (loans for which principal repayments or interest payments are more than ninety days in arrears or overdrawn)] / [total outstanding loan portfolio]
[parent shareholders' equity] / [number of ordinary shares and mandatorily convertible bonds, less treasury shares (at period-end)].
[result after tax, including minority interests, of a business unit, adjusted for income on allocated instead of real equity] / [average equity allocated to the business unit]. The result of a business unit is the sum of the result of the companies belonging to the business unit, adjusted for the funding cost of goodwill (related to the companies in the business unit) and allocated central governance expenses. The equity allocated to a business unit is based on risk-weighted assets for banking and risk-weighted asset equivalents for insurance.
[result after tax, attributable to the equity holders of the parent] / [average parent shareholders' equity, excluding the revaluation reserve for availablefor-sale investments]. If a coupon is expected to be paid on the core-capital securities sold to the Belgian and Flemish governments, it will be deducted from the numerator (pro rata).
[consolidated available capital of KBC Insurance] / [minimum required solvency margin of KBC Insurance].
Extended Quarterly Report – KBC Group – 3Q2011 2
This news release contains information that is subject to transparency regulations for listed companies. Date of release: 10 November 2011, 7 a.m. CET.
KBC ended the third quarter of 2011 with an underlying net result of -248 million euros but excluding one-off items induced by the prevailing and exceptional market circumstances, the net result would have amounted to 222 million euros. This compares with +528 million euros in 2Q2011 and +445 million euros in 3Q2010. The underlying result for the first nine months of 2011 amounted to +937 million euros, compared to +1 542 million euros for the corresponding period in 2010.
The IFRS-based net result reported for the quarter under review came to a net loss of 1 579 million euros, compared with a net profit of 333 million euros in the previous quarter and 545 million euros in the year-earlier quarter. This means that the group has generated a total net loss of 424 million euros in the first nine months of 2011, as opposed to a net profit of 1 136 million euros for the corresponding period in 2010.
Jan Vanhevel, Group CEO: 'The third quarter for KBC was characterised by a continuing good level of underlying income and considerable progress in both our divestment and de-risking plans. We concluded the sales agreements for KBL EPB and Fidea. We further reduced our CDO and ABS exposure and have already reached our initial target (capital relief of 0.5 billion euros). We have also substantially reduced our exposure to Southern European government bonds.
Unfortunately, the third quarter results were also affected significantly by exceptional items related to the uncertain macroeconomic climate and challenging, turbulent market conditions. We are disappointed to record a loss in the third quarter, largely on account of these market-driven items.
However, our core strengths remain fundamentally sound and we have a very solid customer base in our core markets of Belgium and Central Europe, where there was further loan and deposit growth, and an excellent underlying insurance performance. Our liquidity profile is robust and supported by a stable and resilient customer deposit base. Moreover, our solvency position is and remains strong and has enabled us to continue to increase lending to our customers.
I would like to add that our already comfortable capital position has been further enhanced by the fact that the Belgian regulator has recognised the Yield Enhanced Securities (YES) as common equity under the current CRD4 proposal . We continue to strive to reimburse 7 billion euros to the state by the end of 2013, in line with the European plan.
KBC has expressed its intention to repay a first tranche of the YES to the amount of 500 million euros by year end to the Federal Government under the conversion mechanism. The Federal Government has confirmed that the 15% penalty will be applicable. The Flemish Government has agreed to waive its "pari passu" rights for this repayment and any further repayments effected before end of 2012.
We remain committed to executing our strategic plan with the same diligence and determination to ensure timely repayment of the state aid and are committed to playing an active role in the European financial sector, which will benefit our customers, employees, shareholders and other stakeholders. The good results we have observed during October, lead us to guide for a full year underlying net profit of 1.2 billion to 1.4 billion euros.'
Further to a continued strong RWA management (RWA reduction of 6.7 billion euros in the third quarter), KBC has also acted to reduce volatility in its results.
• CDO exposure
During the third quarter, our CDO exposure was reduced by 2.5 billion euros, which constitutes a 12% decline in the notional amount outstanding. This was achieved by early terminations and sales at limited cost.
During the third quarter, our ABS exposure was reduced by 0.7 billion euros, which constitutes a 17% decline in the notional amount outstanding. This was achieved by sales at limited cost.
In the third quarter, we substantially reduced our exposure to Southern European government bonds. The reduction amounted to 2.9 billion euros, or more than 30% compared to the exposure at the end of June. We have further reduced this exposure since the end of September by another 1.6 billion euros.
Main exceptional factors in 3Q2011 that have impacted the reported IFRS result :
Notwithstanding the particularly challenging market circumstances, the execution of our strategic plan has gained further momentum with, for instance, sales agreements being signed for KBL EPB and Fidea. The transactions related to the sale of Centea and KBC Asset Management's stake in KBC Concord Asset Management Co. Ltd. (Taiwan) have been closed, and KBC Securities completed the divestment of its operations in Serbia and Romania. Other planned divestments are well on track. The divestments of KBL EPB and Fidea had a combined negative impact of 0.6 billion euros on KBC's thirdquarter net result, but a positive impact on our capital.
During the third quarter, global economic uncertainty intensified, resulting in volatile markets and significantly wider corporate and ABS credit spreads. This resulted in a valuation markdown of some 0.6 billion euros on the CDO exposure. 30% of the unrealised losses booked in 3Q11 could already be reversed in October 2011.
Main important one-off factors in 3Q2011 that have impacted the underlying result :
As a result of the deteriorating credit position of Greece in the financial markets, we recorded an additional impairment of 126 million euros after tax (176 million pre-tax) on our Greek government bond portfolio in this quarter (as a result, the impairment on Greek government bonds at 30 September 2011 was recognised in full at 58% of the nominal amount of these bonds).
We also recorded a provision of 174 million euros after tax (263 million pre-tax) on the contingent intention to repurchase on a voluntary basis the bonds (KBC IFIMA 5/5/5 and KBC Group 5-5-5) sold to retail customers, conditional on the occurrence of a credit event. These structured bonds were launched in the spring of 2008, have a term to maturity of five years, a gross coupon of 5% (which so far have all been paid) and are linked until their maturity to the creditworthiness of five countries (Belgium, France, Spain, Italy and Greece). All holders of these bonds had been informed in March 2011 of this contingent intention. Untill the date of this press release no credit event occurred, but since the probability of a credit event is estimated by the financial markets to be higher than 50% on 30 September 2011, we decided to book the provision in the third quarter results. If no credit event under ISDA definitions occurs, the provision will be reversed.
During September, new legislation designed to help households with foreign-currency-based mortgages was introduced in Hungary. This legislation allows households during a limited period to pay off foreign-currency debts in one lump sum at a fixed, discounted exchange rate. The shortfall between the fixed and market rates is to be covered by the banks. The Hungarian Banking Association has taken the matter to the Constitutional Court in Budapest. Nevertheless, KBC has recorded an impairment of 74 million euros (after tax) on its FX retail mortgage portfolio (92 million euros, pre-tax), reflecting that an estimated 20% of all debtors will pay off their foreign currency loans.
KBC performed an in-depth evaluation of its Bulgarian assets for which the Group has recorded an additional impairment of 96 million euros.
Main special items in 3Q2011 that have impacted the underlying result :
Following the downturn on the stock market, an impairment of 87 million euros (before and after tax) had to be booked on the share portfolio.
• Ireland
We indicated during the 2Q11 results presentation in August that we had seen some deterioration in the number of payment arrears. The economic situation and the Irish marketplace have not improved in the way we envisaged and the austerity measures put in place by the Irish authorities have had a considerable impact on the financial strength of households. Besides that, we have observed a change in behaviour of some borrowers. As a consequence, a loan loss provision of 164 million euros after tax (187 million euros, pre-tax) was recorded in 3Q2011.
These factors aside, underlying income in the third quarter was characterised by a good level of net interest income, strict cost control, an excellent combined ratio, good life insurance results, and robust liquidity and solvency positions. The credit cost ratio in our core markets remains low (barring the specific situation in Hungary and Bulgaria). Fundamentally, KBC continues to have a strong loan-to-deposit ratio (85% at the end of September 2011) which translates into a robust liquidity position.
With a total tier-1 ratio of 14.4% and a core tier-1 ratio of 12.6% (including the impact of the sale of KBL EPB and Fidea), solvency remains not only firm, but also exceeds the threshold set under the recent EBA stress test.
Under the preliminary EBA exercise based on data as at the end of June (see press release of 27 October 2011), both KBC group and KBC Bank complied with the 9% core tier-1 threshold as determined by the EBA (capital position according to Basel2.5, corrected with the marked-down sovereign exposures based on market prices as at 30 September 2011). The preliminary capital buffer as identified at the end of June is sufficient to cover 3Q11 results. An update of the outcome of the EBA exercise based on positions and market prices as of 30 September is expected to be published in November 2011.
Jan Vanhevel concludes: 'The operating environment has been harsh in the third quarter and we realise that these are tough times for most economies and for millions of people. KBC has obviously not been immune to this and our results have been severely impacted. However, KBC continues to build on and reap the benefits of its sound customer-driven bancassurance model, as illustrated by the good results during October. This resulted in a strong liquidity and robust solvency position, helping us to remain a solid European financial player committed to actively financing our customers' projects, even in extremely difficult conditions. The Executive Committee has decided to forego all variable remuneration for financial year 2011, regardless of how profits develop in the remainder of the year.'
| Overview (consolidated) | 3Q2010 | 2Q2011 | 3Q2011 | Cumul. 9M2010 |
Cumul. 9M2011 |
|---|---|---|---|---|---|
| Net result, IFRS (in millions of EUR) | 545 | 333 | -1 579 | 1 136 | -424 |
| Earnings per share, basic, IFRS (in EUR)1 | 1.17 | 0.54 | -5.08 | 2.03 | -2.56 |
| Underlying net result (in millions of EUR) | 445 | 528 | -248 | 1 542 | 937 |
| Underlying earnings per share, basic (in EUR)1 | 0.87 | 1.11 | -1.17 | 3.23 | 1.45 |
| Breakdown of underlying net result per business unit (in millions of EUR)2 | |||||
| Belgium | 220 | 238 | 32 | 797 | 551 |
| Central & Eastern Europe | 84 | 146 | -40 | 412 | 229 |
| Merchant Banking | 156 | 63 | -196 | 361 | 43 |
| Group Centre | -15 | 81 | -44 | -28 | 114 |
| Parent shareholders' equity per share (in EUR, end of period) | 33.1 | 33.8 | 28.9 | 33.1 | 28.9 |
1 Note: the coupon that is expected to be paid on the core-capital securities sold to the Belgian State and Flemish Region is deducted from earnings (pro rata) in the EPS calculation.
2 The changes in the strategic plan announced in mid-2011 are reflected in the breakdown by business unit; all reference figures have been adjusted retroactively.
The IFRS and underlying income statement summary tables are provided further on in this earnings statement.
Financial highlights for 3Q2011 compared to 2Q2011:
Extended Quarterly Report – KBC Group – 3Q2011 6
Jan Vanhevel, Group CEO, summarises the underlying business performance for 3Q2011 as follows:
• The group's tier-1 ratio (under Basel II) came to a strong 13.6% at 30 September 2011 (core tier-1 ratio of 11.7%). Including the effect of divestments for which a sale agreement has been signed to date (Fidea and KBL EPB), the pro forma tier-1 ratio even stands at approximately 14.4% (core tier-1 ratio of 12.6%).
Explanations per heading of the IFRS income statement for the first nine months of 2011 (see summary table on the next page):
Extended Quarterly Report – KBC Group – 3Q2011 9
A summary of the income statement of KBC Group, based on the International Financial Reporting Standards (IFRS) is given below. A full overview of the IFRS consolidated income statement and balance sheet is provided in the 'Consolidated Financial Statements' section of the quarterly report. Condensed statements of comprehensive income, changes in shareholders' equity, and cash flow, as well as several notes to the accounts, are also available in the same section. In order to provide a good insight into the underlying business trends, KBC also publishes its 'underlying' results (see the following section).
| Consolidated income statement according to IFRS, KBC Group (in millions of EUR) |
1Q 2010 |
2Q 2010 |
3Q 2010 |
4Q 2010 |
1Q 2011 |
2Q 2011 |
3Q 2011 |
4Q 2011 |
Cumul. 9M2010 |
Cumul 9M2011 |
|---|---|---|---|---|---|---|---|---|---|---|
| Net interest income | 1 519 | 1 567 | 1 562 | 1 598 | 1 395 | 1 406 | 1 341 | - | 4 647 | 4 142 |
| Interest income | 2 621 | 2 651 | 2 627 | 2 642 | 3 047 | 3 195 | 2 910 | - | 7 900 | 9 151 |
| Interest expense | -1 103 | -1 085 | -1 065 | -1 045 | -1 651 | -1 789 | - 1569 | - | -3 253 | - 5 009 |
| Earned premiums, insurance (before | 1 248 | 1 144 | 1 074 | 1 150 | 1 141 | 974 | 972 | - | 3 466 | 3 087 |
| reinsurance) Technical charges, insurance (before reinsurance) |
-1 163 | -1 123 | -957 | -1 018 | -1 012 | -840 | -812 | - | -3 243 | -2 665 |
| Ceded reinsurance result | -9 | 50 | -23 | -26 | -17 | -8 | -18 | - | 18 | -43 |
| Dividend income | 15 | 40 | 21 | 21 | 12 | 41 | 17 | - | 76 | 70 |
| Net result from financial instruments at fair value through profit or loss |
-11 | -721 | 227 | 429 | 472 | -194 | -892 | - | -506 | -613 |
| Net realised result from available-for-sale assets |
19 | 30 | 11 | 29 | 34 | 42 | 10 | - | 61 | 86 |
| Net fee and commission income | 322 | 336 | 259 | 307 | 300 | 297 | 281 | - | 917 | 877 |
| Fee and commission income | 549 | 578 | 480 | 549 | 518 | 530 | 480 | - | 1 607 | 1 529 |
| Fee and commission expense | -227 | -242 | -221 | -242 | -218 | -233 | -200 | - | -690 | -651 |
| Other net income | 98 | 182 | 65 | 107 | 92 | 110 | -149 | - | 345 | 53 |
| Total income | 2 038 | 1 504 | 2 239 | 2 597 | 2 416 | 1 829 | 749 | - | 5 781 | 4 994 |
| Operating expenses | -1 072 | -1 044 | -1 130 | -1 190 | -1 143 | -1 081 | -1 077 | - | -3 246 | -3 301 1 |
| Impairment | -383 | -299 | -420 | -555 | -105 | -332 | -940 | - | -1 102 | -1 377 |
| on loans and receivables | -355 | -278 | -357 | -492 | -97 | -164 | -473 | - | -990 | -733 |
| on available-for-sale assets | -1 | -16 | -5 | -9 | -6 | -118 | -223 | - | -23 | -347 |
| on goodwill | -27 | -1 | -13 | -47 | 0 | -17 | -62 | - | -41 | -79 |
| on other | 0 | -3 | -45 | -6 | -2 | -33 | -183 | - | -48 | -218 |
| Share in results of associated companies | -2 | -9 | -5 | -46 | 1 | 0 | -23 | - | -16 | -22 |
| Result before tax | 581 | 153 | 683 | 806 | 1 170 | 416 | -1 292 | - | 1 418 | 294 |
| Income tax expense | -164 | 304 | -124 | -97 | -334 | -76 | 165 | - | 16 | -245 |
| Net post-tax result from discontinued operations | 31 | -302 | -7 | 24 | 0 | 0 | -445 | - | -278 | -445 |
| Result after tax | 448 | 155 | 553 | 733 | 835 | 340 | -1 571 | - | 1 156 | -396 6 |
| attributable to minority interests | 6 | 6 | 8 | 8 | 14 | 6 | 8 | - | 20 | 28 |
| attributable to equity holders of the parent |
442 | 149 | 545 | 724 | 821 | 333 | -1 579 | - | 1 136 | -424 |
| Belgium | 283 | 131 | 321 | 453 | 385 | 158 | -348 | - | 734 | 196 |
| Central & Eastern Europe* | 146 | 173 | 113 | 178 | 141 | 145 | -91 | - | 431 | 195 |
| Merchant Banking | 64 | 73 | 173 | -138 | 203 | 69 | -255 | - | 310 | 17 |
| Group Centre* | -50 | -228 | -61 | 231 | 92 | -39 | -885 | - | -339 | -831 |
| Earnings per share, basic (EUR) | 0.86 | 0.00 | 1.17 | 1.69 | 1.98 | 0.54 | -5.08 | - | 2.03 | -2.56 |
| Earnings per share, diluted (EUR) | 0.86 | 0.00 | 1.17 | 1.69 | 1.98 | 0.54 | -5.08 | - | 2.03 | -2.56 |
* The changes in the strategic plan announced in mid-2011 are reflected in the figures for these business unit; all reference figures have been adjusted retroactively.
| Highlights, consolidated balance sheet and ratios, KBC Group (in millions of EUR or %) |
31-03- 2010 |
30-06- 2010 |
30-09- 2010 |
31-12- 2010 |
31-03- 2011 |
30-06- 2011 |
30-09- 2011 |
31-12- 2011 |
|---|---|---|---|---|---|---|---|---|
| Total assets | 340 128 | 350 232 | 328 590 | 320 823 | 322 493 | 312 899 | 305 109 | - |
| Loans and advances to customers* | 153 640 | 157 024 | 149 982 | 150 666 | 147 625 | 143 182 | 143 451 | - |
| Securities (equity and debt instruments)* | 101 984 | 95 910 | 96 876 | 89 395 | 88 839 | 85 144 | 74 062 | - |
| Deposits from customers and debt certificates* | 203 367 | 205 108 | 198 825 | 197 870 | 192 412 | 188 116 | 184 453 | - |
| Technical provisions, before insurance* | 23 222 | 22 384 | 22 843 | 23 255 | 23 870 | 24 084 | 21 064 | - |
| Liabilities under investment contracts, insurance* | 7 908 | 6 496 | 6 488 | 6 693 | 6 568 | 6 638 | 6 787 | - |
| Parent shareholders' equity | 10 677 | 10 259 | 11 245 | 11 147 | 11 011 | 11 500 | 9 834 | - |
| Non-voting core-capital securities | 7 000 | 7 000 | 7 000 | 7 000 | 7 000 | 7 000 | 7 000 | - |
| KBC Group ratios (based on underlying results, year-to-date) | ||||||||
| Return on equity | 11% | 6% | - | |||||
| Cost/income ratio, banking | 56% | 61% | - | |||||
| Combined ratio, non-life insurance | 100% | 90% | - | |||||
| KBC Group solvency | ||||||||
| Tier-1 ratio | 12.6% | 13.6% | - | |||||
| Core tier-1 ratio | 10.9% | 11.7% | - |
* Note: in accordance with IFRS 5, the assets and liabilities of a number of divestments were moved to 'Non-current assets held for sale and assets associated with disposal groups' and 'Liabilities associated with disposal groups', which slightly distorts the comparison between periods.
Over and above the figures according to IFRS, KBC provides a number of 'underlying' figures aimed at providing more insight into the business trends. The differences with the IFRS figures relate to the exclusion of exceptional or non-operating items and a different accounting treatment of certain hedging results and capital-market income. In view of their nature and materiality, it is important to adjust the results for these factors to understand the profit trend fully. A full explanation of the differences between IFRS and underlying figures is provided in the 'Consolidated financial statements' section of the quarterly report, under 'Notes on segment reporting'. A reconciliation table for the net result is provided below.
| Consolidated income statement, KBC Group, underlying (in millions of EUR) |
1Q 2010 |
2Q 2010 |
3Q 2010 |
4Q 2010 |
1Q 2011 |
2Q 2011 |
3Q 2011 |
4Q 2011 |
Cumul. 9M2010 |
Cumul 9M2011 |
|---|---|---|---|---|---|---|---|---|---|---|
| Net interest income | 1 344 | 1 394 | 1 406 | 1 459 | 1 374 | 1 390 | 1 342 | - | 4 144 | 4 106 |
| Earned premiums, insurance (before reinsurance) | 1 249 | 1 146 | 1 075 | 1 151 | 1 141 | 975 | 972 | - | 3 470 | 3 088 |
| Technical charges, insurance (before reinsurance) | -1 168 | -1 129 | -962 | -1 022 | -1 016 | -843 | -817 | - | -3 259 | -2 676 |
| Ceded reinsurance result | -9 | 50 | -23 | -26 | -17 | -8 | -18 | - | 18 | -43 |
| Dividend income | 8 | 36 | 12 | 18 | 8 | 37 | 14 | - | 55 | 59 |
| Net result from financial instruments at fair value through profit or loss |
320 | 147 | 264 | 124 | 259 | 102 | 10 | - | 731 | 371 |
| Net realised result from available-for-sale assets | 24 | 41 | 6 | 28 | 53 | 42 | 11 | - | 71 | 106 |
| Net fee and commission income | 429 | 454 | 367 | 417 | 399 | 394 | 367 | - | 1 249 | 1 161 |
| Other net income | 85 | 68 | 62 | -96 | 73 | 72 | -210 | - | 215 | -64 |
| Total income | 2 282 | 2 205 | 2 206 | 2 051 | 2 274 | 2 161 | 1 673 | - | 6 693 | 6 107 |
| Operating expenses | -1 158 | -1 150 | -1 214 | -1 311 | -1 227 | -1 155 | -1 172 | - | -3 521 | -3 553 |
| Impairment | -356 | -298 | -361 | -510 | - 105 | -333 | -740 | - | -1 015 | -1 179 |
| on loans and receivables | -355 | -278 | -356 | -492 | -97 | -164 | -475 | - | -989 | -736 |
| on available-for-sale assets | -1 | -17 | -5 | -10 | -6 | -135 | -228 | - | -23 | -369 |
| on goodwill | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - | 0 | 0 |
| on other | 0 | -3 | 0 | -7 | -2 | -35 | -38 | - | -3 | -75 |
| Share in results of associated companies | -1 | -9 | -5 | -46 | 1 | 0 | -23 | - | -15 | -22 |
| Result before tax | 767 | 749 | 626 | 184 | 943 | 673 | -262 | - | 2 142 | 1 353 |
| Income tax expense | -218 | -189 | -173 | -7 | - 271 | -138 | 22 | - | -580 | -388 |
| Result after tax | 549 | 559 | 453 | 177 | 671 | 534 | -240 | - | 1 562 | 966 |
| attributable to minority interests | 6 | 6 | 8 | 9 | 14 | 6 | 8 | - | 20 | 28 |
| attributable to equity holders of the parent | 543 | 554 | 445 | 168 | 658 | 528 | -248 | - | 1 542 | 937 |
| Belgium | 279 | 298 | 220 | 255 | 280 | 238 | 32 | - | 797 | 551 |
| Central & Eastern Europe* | 156 | 171 | 84 | 158 | 123 | 146 | -40 | - | 412 | 229 |
| Merchant Banking | 85 | 121 | 156 | -228 | 177 | 63 | -196 | - | 361 | 43 |
| Group Centre* | 24 | -36 | -15 | -16 | 77 | 81 | -44 | - | -28 | 114 |
| Earnings per share, basic (EUR) | 1.16 | 1.19 | 0.87 | 0.06 | 1.50 | 1.11 | -1.17 | - | 3.23 | 1.45 |
| Earnings per share, diluted (EUR) | 1.16 | 1.19 | 0.87 | 0.06 | 1.50 | 1.11 | -1.17 | - | 3.23 | 1.45 |
* The changes in the strategic plan announced in mid-2011 are reflected in the figures for these business unit; all reference figures have been adjusted retroactively.
| Reconciliation between underlying result and result according to IFRS KBC Group (in millions of EUR) |
1Q 2010 |
2Q 2010 |
3Q 2010 |
4Q 2010 |
1Q 2011 |
2Q 2011 |
3Q 2011 |
4Q 2011 |
Cumul. 9M2010 |
Cumul 9M2011 |
|---|---|---|---|---|---|---|---|---|---|---|
| Result after tax, attributable to equity holders of the parent, UNDERLYING |
543 | 554 | 445 | 168 | 658 | 528 | -248 | - | 1 542 | 937 |
| + MTM of derivatives for ALM hedging | -57 | -179 | 16 | 41 | 96 | -77 | -245 | - | -220 | -226 |
| + gains/losses on CDOs | 176 | 326 | 221 | 304 | 124 | -86 | -618 | - | 723 | -580 |
| + MTM of CDO guarantee and commitment fee |
-33 | -18 | -23 | 6 | -10 | -22 | -10 | - | -74 | -41 |
| + impairment on goodwill (and associated companies) |
-27 | -1 | -43 | -47 | 0 | -17 | -57 | - | -71 | -74 |
| + result on legacy structured derivative business (KBC FP) |
-126 | -210 | 6 | -42 | 14 | 43 | 5 | - | -330 | 62 |
| + MTM of own debt issued | -2 | 33 | -34 | 41 | -16 | -25 | 185 | - | -3 | 144 |
| + Results on divestments | 0 | -338 | -44 | 206 | -45 | -12 | -591 | - | -382 | -647 |
| + other | -32 | -18 | 2 | 46 | 0 | 0 | 0 | - | -48 | 0 |
| Result after tax, attributable to equity holders of the parent: IFRS |
442 | 149 | 545 | 724 | 821 | 333 | -1 579 | - | 1 136 | -424 |
o Under the preliminary EBA exercise based on data as at the end of June (see press release of 27 October 2011), both KBC group and KBC Bank complied with the 9% core tier-1 threshold as determined by the EBA (capital position according to Basel2.5, corrected with the marked-down sovereign exposures based on market prices as at 30 September 2011). The preliminary capital buffer as identified at the end of June is sufficient to cover 3Q11 results. An update of the outcome of the EBA exercise based on positions and market prices as of 30 September is expected to be published in November 2011.
o We have also acted to reduce volatility in our results. During the third quarter, our CDO exposure was reduced by 2.5 billion euros, which constitutes a 12% decline in the notional amount outstanding. This was achieved by early terminations and sales at limited cost. During the third quarter, our ABS exposure was reduced by 0.7 billion euros, which constitutes a 17% decline in the notional amount outstanding. This was achieved by sales at limited cost.
The financial calendar, including the dates of earnings releases as well as analysts and investor meetings, is available at www.kbc.com.
Please note that the breakdown of results by business unit in this report is based on the situation after the changes to the strategic plan (approved on 27 July 2011), whereby all reference figures have been adjusted retroactively.
| Total income, underlying (in millions of EUR) | 1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 1 344 | 1 394 | 1 406 | 1 459 | 1 374 | 1 390 | 1 342 | - |
| Earned premiums, insurance (before reinsurance) | 1 249 | 1 146 | 1 075 | 1 151 | 1 141 | 975 | 972 | - |
| Non-life | 489 | 480 | 495 | 451 | 451 | 468 | 477 | - |
| Life | 760 | 666 | 580 | 699 | 691 | 507 | 496 | - |
| Technical charges, insurance (before reinsurance) | -1 168 | -1 129 | -962 | -1 022 | -1 016 | -843 | -817 | - |
| Non-life | -330 | -378 | -307 | -234 | -234 | -245 | -259 | - |
| Life | -838 | -751 | -655 | -788 | -782 | -599 | -557 | - |
| Ceded reinsurance result | -9 | 50 | -23 | -26 | -17 | -8 | -18 | - |
| Dividend income | 8 | 36 | 12 | 18 | 8 | 37 | 14 | - |
| Net result from financial instruments at fair value through profit or loss |
320 | 147 | 264 | 124 | 259 | 102 | 10 | - |
| Net realised result from available-for-sale assets | 24 | 41 | 6 | 28 | 53 | 42 | 11 | - |
| Net fee and commission income | 429 | 454 | 367 | 417 | 399 | 394 | 367 | - |
| Banking | 542 | 547 | 470 | 510 | 497 | 488 | 468 | - |
| Insurance | -113 | -93 | -104 | -93 | -98 | -93 | -101 | - |
| Other net income | 85 | 68 | 62 | -96 | 73 | 72 | -210 | - |
| Total income | 2 282 | 2 205 | 2 206 | 2 051 | 2 274 | 2 161 | 1 673 | - |
| Belgium | 818 | 864 | 768 | 868 | 845 | 864 | 692 | - |
| Central & Eastern Europe | 538 | 541 | 540 | 557 | 556 | 537 | 538 | - |
| Merchant Banking | 482 | 361 | 495 | 202 | 469 | 340 | 105 | - |
| Group Centre | 444 | 439 | 403 | 425 | 404 | 420 | 338 | - |
Net interest income in the quarter under review amounted to 1 342 million.
This was, at first sight, down some 5% on its year-earlier level. However, excluding the effect of divestments (including Centea), net interest income was more or less stable year-on-year. The net interest margin widened by 6 basis points yearon-year to 1.98% in 3Q2011. On a comparable basis, the group's total loan portfolio was slightly up (+1%) on its year-earlier level, and deposits decreased by 4%. The situation was very different at business unit level: whereas the loan books of the Merchant Banking Business Unit and the Group Centre are being run down intentionally (resulting in a 4% and 2% year-onyear decrease, respectively), the loan book of the Belgium and CEE Business Units are expanding (+5% for the Belgian retail loan book and +3% for the four combined core CEE loan books). Roughly the same situation applies for the year-onyear change in customer deposits: significant decreases in the Merchant Banking Business Unit and the Group Centre, and an increase in the Belgium (+9%) and CEE Business Units (+3%).
Compared to the previous quarter (2Q2011), net interest income was down 3%. However, it was stable quarter-on-quarter, when the effect of divestments (Centea) is excluded. Quarter-on-quarter movements in loan book and deposit volumes were clearly more limited. However, here too, credit and deposit volumes increased in Belgium and CEE. The net interest margin was flat in the quarter under review.
Earned insurance premiums amounted to 972 million in 3Q2011, which breaks down into 496 million for life insurance and 477 million for non-life insurance.
Compared to 3Q2010, non-life premium income was up 7% (Secura was excluded from the comparison, since it was sold in 4Q2010). Thanks in part to a relatively low claims level, the non-life combined ratio for the first nine months of the year stood at a very good 90%, a significant improvement on the 100% recorded for FY2010. The 9M2011 combined ratio breaks down into an excellent 85% for Belgium and a good 93% for CEE (significantly better than the 103% for FY2010, which was impacted by the storms and floods in the region). Compared to 2Q2011, non-life premium income was up 2%.
Earned premiums for life insurance under IFRS exclude certain types of life insurance contracts (simplified, the unit-linked contracts). When these contracts are included, total life insurance sales amounted to almost 1.1 billion in the quarter under review. Compared to 3Q2010 and 2Q2011, this figure was up 27% and 8%, respectively, thanks in both cases to increased sales of unit-linked insurance in Belgium and CEE in the quarter under review. As a result, sales of interest-guaranteed products for the group as a whole accounted for 52% of life insurance sales in 9M2011, while unit-linked insurance products increased their share to 48%.
This is virtually unchanged on its weak year-on-year level and down 7% quarter-on-quarter. A relatively low level of fee income was generated by the asset management business in the quarter under review (lower management fees and lower entry fees for mutual funds), which is clearly related to investors losing their appetite for risk. At end-September 2011, total assets under management of the group stood at 193 billion (150 billion excluding KBL EPB), 5% less than three months ago and 9% less than one year ago, in both cases due to a combination of negative net entries and a negative price effect.
The other income components were as follows: dividend income amounted to 14 million (down on 2Q2011, as the bulk of dividends is traditionally received in the second quarter) , trading and fair value income ('Net result from financial instruments at fair value') amounted to a very low 10 million (modest dealing room result), the realised result on available-for-sale assets stood at 11 million (down on the average of 32 million for the last four quarters) and other net income amounted to -210
million. The latter figure was negatively impacted by a 263 million provision related to the 5-5-5 investment product (see the 'Report on 3Q and 9M2011' section of this report).
As usual, the underlying figures exclude a number of non-operating items, such as the fair value changes in ALM hedging instruments (a negative amount in 3Q2011), the CDO-related impact (a significant negative amount), fair value changes in own debt instruments (a positive amount), results related to divestments (mainly KBL EPB and Fidea; a significant negative amount), etc. A full overview of these items is provided in the table 'Reconciliation between underlying result and result according to IFRS' in the first part of this report, while the impact for each business unit is summarised separately in the following section of the report.
| Operating expenses, underlying (in millions of EUR) | 1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
|---|---|---|---|---|---|---|---|---|
| Staff expenses | -691 | -674 | -697 | -745 | -694 | -701 | -719 | - |
| General administrative expenses | -371 | -382 | -422 | -468 | -444 | -366 | -367 | - |
| Depreciation and amortisation of fixed assets | -96 | -94 | -95 | -97 | -89 | -87 | -86 | - |
| Operating expenses | -1 158 | -1 150 | -1 214 | -1 311 | -1 227 | -1 155 | -1 172 | - |
| Belgium | -407 | -394 | -414 | -488 | -429 | -446 | -462 | - |
| Central & Eastern Europe | -264 | -270 | -339 | -310 | -350 | -302 | -297 | - |
| Merchant Banking | -140 | -137 | -142 | -157 | -152 | -142 | -143 | - |
| Group Centre | -346 | -349 | -320 | -355 | -296 | -265 | -269 | - |
Operating expenses amounted to 1 172 million in the quarter under review and remain under control.
At first sight, costs were down 3% on their 3Q2010 level. However, this comparison is distorted by the fact that Hungary's special bank tax for FY2010 was booked in 3Q2010 (whereas the amount for FY2011 was recorded in 1Q2011). Excluding this element, costs were slightly up (+1%) year-on-year, which was due largely to such offsetting elements as slightly higher staff expenses (wage increases, inflation), voluntary redundancy costs, changes in the scope of consolidation (Centea, KBC Peel Hunt, etc.), among other factors.
Compared to the previous quarter, costs increased by 1%, due mainly to the above-mentioned voluntary redundancy costs, increased staff expenses, changes in the scope of consolidation (Centea), etc. Broken down by business unit, quarter-onquarter costs increased by 4% in the Belgium Business Unit (stable, excluding voluntary redundancy costs in 3Q2011), decreased by 1% on an organic basis in the CEE Business Unit and remained virtually unchanged in the Merchant Banking Business Unit.
As a result, the cost/income ratio (operating expenses versus total income) of the group's banking activities stood at 61% in the first nine months of the year, up on the FY2010 level (56%) though this was partly caused by the drop in total income (the denominator in the formula). Excluding the impact of provisioning for 5-5-5 products, the cost/income ratio would have amounted to 58% in 9M2011. The 9M2011 cost/income ratio breaks down per business unit as follows: 64% for Belgium, 57% for CEE and 48% for Merchant Banking.
| Impairment, underlying (in millions of EUR) | 1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
|---|---|---|---|---|---|---|---|---|
| Impairment on loans and receivables | -355 | -278 | -356 | -492 | -97 | -164 | -475 | - |
| Impairment on available-for-sale assets | -1 | -17 | -5 | -10 | -6 | -135 | -228 | - |
| Impairment on goodwill | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Impairment on other | 0 | -3 | 0 | -7 | -2 | -35 | -38 | - |
| Impairment | -356 | -298 | -361 | -510 | -105 | -333 | -740 | - |
| Belgium | -3 | -39 | -27 | -35 | -15 | -74 | -165 | - |
| Central & Eastern Europe | -89 | -82 | -113 | -66 | -52 | -96 | -280 | - |
| Merchant Banking | -219 | -91 | -130 | -355 | -57 | -112 | -215 | - |
| Group Centre | -44 | -86 | -91 | -55 | 19 | -51 | -81 | - |
In 3Q2011, total impairment charges stood at 740 million.
Impairment on loans and receivables (loan loss provisions) stood at 475 million. This is a significant increase on both the 356 million recorded in the year-earlier quarter and the 164 million recorded in 2Q2011, as the quarter under review included a substantial impairment charge for Hungary (some 92 million related to the impact of the new legislation for forex mortgage loans; calculation based on a 20% participation rate), Bulgaria (96 million) and Ireland (187 million).
Overall, this led to a credit cost ratio of 61 basis points for the first nine months, still below the 91 basis points recorded for FY2010. The credit cost ratio for 9M2011 breaks down as follows: a (continued) excellent low level of 9 basis points for the Belgium Business Unit, 144 basis points for CEE, 90 basis points for Merchant Banking and 9 basis points for the Group Centre (including all companies to be divested). At the end of September 2011, non-performing loans accounted for some 4.6% of the total loan book, somewhat up on the 4.3% registered three months earlier.
Other impairment in the quarter under review totalled 265 million and related mainly to impairment on shares in portfolio (87 million, because of falling stock markets) and to additional impairment on Greek government bonds (a further marking down of these bonds to market value as at 30 September 2011 resulted in an additional 176 million impairment being recorded in 3Q2011, over and above the 139 million that had been booked for Greece in 2Q2011). It should be noted that impairment on goodwill booked on group companies is always excluded from the underlying results, and hence it is always zero in the table above.
| Other components of the result, underlying (in millions of EUR) |
1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
|---|---|---|---|---|---|---|---|---|
| Share in result of associated companies | -1 | -9 | -5 | -46 | 1 | 0 | -23 | - |
| Income tax expense | -218 | -189 | -173 | -7 | -271 | -138 | 22 | - |
| Minority interests in profit after tax | 6 | 6 | 8 | 9 | 14 | 6 | 8 | - |
The share in the results of associated companies was -23 million in the quarter under review (this item traditionally includes the result of KBC's minority participation in NLB in Slovenia). Underlying group tax amounted to a positive 22 million in 3Q2011 (cf. the negative pre-tax result) and minority interests in the result amounted to 8 million, in line with the reference quarters.
Unless otherwise specified, all amounts are given in euros.
In order to create more transparency and to avoid substantial quarter-on-quarter distortion in the results of the business units upon each divestment, all the results of the companies that are earmarked for divestment have been grouped together in the Group Centre. The results of the other business units (Belgium, Central & Eastern Europe (CEE) and Merchant Banking) therefore exclude these companies. Please note that the breakdown of results by business unit in this report is based on the situation after the changes to the strategic plan (approved on 27 July 2011), whereby all reference figures have been adjusted retroactively. More information is provided in the CEE Business Unit and Group Centre sections.
The Belgium Business Unit encompasses the retail and private bancassurance activities in Belgium. More specifically, it includes the retail and private banking activities of the legal entity KBC Bank in Belgium, the activities of the legal entity KBC Insurance, and the activities of a number of subsidiaries (primarily CBC Banque, ADD, KBC Asset Management, part of KBC Lease, Secura (now sold), KBC Group Re (the former Assurisk) and VAB). It should be noted that the entities that are earmarked for divestment under the strategic plan (Centea, now sold, and Fidea, sale agreement already signed) are not included here, but grouped together in the Group Centre.
| Income statement, Belgium Business Unit, underlying (in millions of EUR) |
1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 550 | 562 | 553 | 577 | 567 | 581 | 581 | - |
| Earned premiums, insurance (before reinsurance) | 839 | 721 | 631 | 694 | 615 | 512 | 473 | - |
| Technical charges, insurance (before reinsurance) | -823 | -721 | -608 | -699 | -593 | -507 | -436 | - |
| Ceded reinsurance result | -4 | 10 | -12 | -5 | -8 | -1 | -11 | - |
| Dividend income | 5 | 25 | 8 | 13 | 6 | 26 | 9 | - |
| Net result from financial instruments at fair value through profit or loss |
21 | 25 | 9 | 6 | 10 | 12 | 10 | - |
| Net realised result from available-for-sale assets | 2 | 13 | -5 | 42 | 22 | 24 | 7 | - |
| Net fee and commission income | 193 | 207 | 170 | 201 | 186 | 178 | 169 | - |
| Other net income | 35 | 23 | 24 | 38 | 41 | 37 | -110 | - |
| Total income | 818 | 864 | 768 | 868 | 845 | 864 | 692 | - |
| Operating expenses | -407 | -394 | -414 | -488 | -429 | -446 | -462 | - |
| Impairment | -3 | -39 | -27 | -35 | -15 | -74 | -165 | - |
| on loans and receivables | -2 | -25 | -21 | -33 | -11 | -16 | -10 | - |
| on available-for-sale assets | -1 | -13 | -7 | -2 | -4 | -53 | -142 | - |
| on goodwill | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| on other | 0 | 0 | 0 | 0 | 0 | -5 | -13 | - |
| Share in results of associated companies | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Result before tax | 408 | 432 | 327 | 346 | 402 | 344 | 65 | - |
| Income tax expense | -127 | -133 | -106 | -91 | -121 | -105 | -32 | - |
| Result after tax | 280 | 299 | 222 | 255 | 281 | 238 | 33 | - |
| attributable to minority interests | 2 | 1 | 1 | 0 | 1 | 0 | 1 | - |
| attributable to equity holders of the parent | 279 | 298 | 220 | 255 | 280 | 238 | 32 | - |
| Banking | 197 | 221 | 156 | 151 | 175 | 147 | 64 | - |
| Insurance | 81 | 77 | 64 | 103 | 106 | 91 | -32 | - |
| Risk-weighted assets, group (end of period, Basel II) | 29 038 | 28 609 | 28 358 | 28 744 | 29 104 | 29 158 | 29 161 | - |
| of which banking | 18 293 | 17 699 | 17 288 | 17 669 | 18 086 | 18 013 | 17 988 | - |
| Allocated equity (end of period, Basel II) | 2 771 | 2 741 | 2 726 | 2 751 | 2 775 | 2 786 | 2 787 | - |
| Return on allocated equity (ROAC, Basel II) | 39% | 42% | 30% | 35% | 39% | 32% | 3% | - |
| Cost/income ratio, banking | 53% | 48% | 57% | 62% | 57% | 60% | 77% | - |
| Combined ratio, non-life insurance | 90% | 96% | 96% | 103% | 74% | 89% | 95% | - |
These underlying figures exclude exceptional items. A table reconciling the underlying result and the result according to IFRS is provided below (amounts are after taxes and minority interests).
| Reconciliation between underlying result and result according to IFRS Belgium Business Unit (in millions of EUR) |
1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
|---|---|---|---|---|---|---|---|---|
| Result after tax, attributable to equity holders of the parent: underlying |
279 | 298 | 220 | 255 | 280 | 238 | 32 | - |
| + MTM of derivatives for ALM hedging | -31 | -124 | 1 | 11 | 57 | -56 | -213 | - |
| + gains/losses on CDOs | 40 | -51 | 103 | 113 | 49 | -20 | -165 | - |
| + MTM of CDO guarantee and commitment fee | -5 | -3 | -4 | 1 | -1 | -4 | -2 | - |
| + impairment on goodwill | 0 | 0 | 0 | -6 | 0 | 0 | 0 | - |
| + result on divestments | 0 | 0 | 0 | 79 | 0 | 0 | 0 | - |
| + other | 0 | 11 | 0 | 0 | 0 | 0 | 0 | - |
| Result after tax, attributable to equity holders of the parent: IFRS |
283 | 131 | 321 | 453 | 385 | 158 | -348 | - |
In the quarter under review, the Belgium Business Unit generated an underlying profit of 32 million, significantly below the average of 248 million for the last four quarters, as the current quarter has been considerably impacted by the booking of a provision for the 5-5-5 investment product (132 million pre-tax) and an additional impairment on Greek government bonds (79 million, pre-tax) and on shares (77 million, pre-tax).
Net interest income stood at 581 million in the quarter under review, unchanged on the level recorded in the previous quarter and up almost 7% on the year-earlier quarter (in the latter comparison, we have excluded Secura, which was sold in 4Q2010). The year-on-year increase was due mainly to higher interest income from loans and deposits. At 1.43%, the net interest margin of the bank in Belgium remained stable compared to its quarter-earlier and year-earlier levels. In line with the group's refocus on its home markets, the Belgian retail loan book increased by 5% year-on-year (2% in the last three months), with mortgage loans remaining an important driver of this volume growth (+8% year-on-year). Customers' deposits increased by 9% year-on-year (3% in the last three months).
Earned insurance premiums in the quarter under review amounted to 473 million and break down into 252 million for life insurance and 221 million for non-life insurance.
Non-life sales went up 3% compared to the previous quarter and 2% on the year-earlier quarter (comparison excludes Secura). Notwithstanding the impact of some storm damage in 3Q2011, the overall claims level for 9M2011 remained favourable, which resulted in an excellent combined ratio of 85% for the first nine months of the year, a further improvement on the already good 95% registered for FY2010.
Life sales, including unit-linked products (which – simplified – are not included in the premium figures under IFRS), amounted to 0.7 billion in 3Q2011, significantly up on their level in 2Q2011 and 3Q2010. In both cases, the decrease in the sales of interest-guaranteed products was more than offset by a strong increase in sales of unit-linked insurance products (successful issuance of KBC Life MI products). As a result, interest-guaranteed products and unit-linked products each accounted for roughly half of life insurance sales in the first nine months of 2011. At the end of September 2011, the life reserves of this business unit amounted to 21.8 billion.
Total net fee and commission income amounted to 169 million in the quarter under review, down 5% on the previous and year-earlier quarters (the latter comparison excludes Secura). Both decreases were again largely attributable to the asset management business, which generated lower entry and management fees on mutual funds, due to the more difficult investment climate in general and a further decline in assets under management in particular. The overall drop in net fee and commission income was mitigated somewhat by a higher margin generated by increased sales of unit-linked insurance products (under IFRS, the margin on these products is included in net fee and commission income). At 30 September 2011, assets under management of this business unit stood at 138 billion, down 4% quarter-on-quarter and 9% year-on-year, in both cases due to a combination of a negative net entry and price effect.
Trading and fair value income (recorded under 'Net result from financial instruments at fair value') came to 10 million in the quarter under review, in line with the average of the last four quarters. Dividend income stood at 9 million, down on its 2Q2011 level, as dividends are traditionally received in the second quarter of the year. The realised result on available-forsale assets amounted to 7 million (including the result of the sale of some PIIGS government bonds), down on the average of 21 million for the last four quarters. Other net income came to -110 million in 3Q2011, and was adversely impacted by the booking of a provision for the 5-5-5 investment product (see 'Report on 3Q and 9M2011' section of this report), 132 million of which was assigned to the Belgium Business Unit.
The operating expenses of the Belgium Business Unit stood at 462 million in the quarter under review, 4% higher than the level recorded in the previous quarter, owing mainly to increased charges related to voluntary redundancies (stable excluding this element). Costs were 13% higher than the year-earlier quarter (excluding Secura), roughly half of which was due to technical elements and the remainder to higher staff costs, the higher contribution to the deposit guarantee scheme and increased charges related to voluntary redundancies. The cost/income ratio for the first nine months of the year stood at 64% (excluding the provisions for the 5-5-5 product from the denominator, the cost-income ratio was 59%), as opposed to 55% for FY2010.
As was the case in previous quarters, loan loss impairment on the Belgian retail loan book remained at a low level (10 million in the quarter under review, a further reduction on the 16 million in the previous quarter). This resulted in a very favourable annualised credit cost ratio of 9 basis points for the first nine months of the year, down on the 15 basis points recorded for FY2010. At the end of 3Q2011, around 1.6% of the Belgian retail loan book was non-performing, in line with the figure recorded three months earlier (1.5%).
The other impairment charges amounted to 155 million in the quarter under review and mainly related to shares (77 million, due to the stock market downturn) and Greek government bonds (additional impairment of 79 million, over and above the 45 million recorded in the previous quarter).
The CEE Business Unit encompasses the banking and insurance activities in the Czech Republic (ČSOB Bank* and ČSOB Insurance), Slovakia (ČSOB Bank and ČSOB Insurance), Hungary (K&H Bank and K&H Insurance) and Bulgaria (CIBANK and DZI Insurance). Since they are earmarked for divestment, Absolut Bank in Russia, KBC Banka in Serbia, NLB and NLB Vita in Slovenia, Żagiel (consumer finance in Poland) and Kredyt Bank and Warta (both Poland*) are not included here, but grouped together in the Group Centre.
* Please note that the impact of the recent changes to the strategic plan are included in this report. Hence, Poland (Warta and Kredyt Bank) has been shifted to the Group Centre and the portion of ČSOB's results related to the originally planned IPO of a minority stake in this company, which used to be included in Group Centre, has been included in the CEE Business Unit again (hence, this business unit now includes ČSOB's results in their entirety). All reference figures have been adjusted to enhance comparability.
| Income statement, CEE Business Unit, underlying (in millions of EUR) |
1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 366 | 376 | 385 | 400 | 385 | 381 | 388 | - |
| Earned premiums, insurance (before reinsurance) | 156 | 184 | 148 | 169 | 241 | 163 | 182 | - |
| Technical charges, insurance (before reinsurance) | -115 | -156 | -109 | -123 | -189 | -115 | -135 | - |
| Ceded reinsurance result | -5 | 0 | -3 | -3 | -5 | -4 | -6 | - |
| Dividend income | 0 | 1 | 0 | 0 | 0 | 1 | 1 | - |
| Net result from financial instruments at fair value through profit or loss |
38 | 29 | 38 | 49 | 33 | 14 | 5 | - |
| Net realised result from available-for-sale assets | 7 | 11 | 5 | -11 | 6 | 3 | 6 | - |
| Net fee and commission income | 81 | 78 | 72 | 76 | 76 | 86 | 84 | - |
| Other net income | 9 | 17 | 3 | 1 | 9 | 9 | 13 | - |
| Total income | 538 | 541 | 540 | 557 | 556 | 537 | 538 | - |
| Operating expenses | -264 | -270 | -339 | -310 | -350 | -302 | -297 | - |
| Impairment | -89 | -82 | -113 | -66 | -52 | -96 | -280 | - |
| on loans and receivables | -89 | -80 | -112 | -59 | -51 | -42 | -234 | - |
| on available-for-sale assets | 0 | 0 | 0 | 0 | 0 | -52 | -45 | - |
| on goodwill | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| on other | 0 | -2 | 0 | -7 | -1 | -2 | 0 | - |
| Share in results of associated companies | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Result before tax | 186 | 188 | 88 | 181 | 154 | 139 | -39 | - |
| Income tax expense | -29 | -17 | -4 | -23 | -31 | 8 | -1 | - |
| Result after tax | 156 | 171 | 84 | 158 | 123 | 147 | -40 | - |
| attributable to minority interests | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| attributable to equity holders of the parent | 156 | 171 | 84 | 158 | 123 | 146 | -40 | - |
| Banking | 145 | 167 | 83 | 145 | 113 | 136 | -43 | - |
| Insurance | 11 | 4 | 2 | 13 | 10 | 11 | 3 | - |
| Risk-weighted assets, group (end of period, Basel II) | 26 154 | 25 097 | 24 927 | 24 771 | 25 607 | 25 810 | 26 062 | - |
| of which banking | 24 778 | 23 719 | 23 528 | 23 376 | 24 140 | 24 300 | 24 541 | - |
| Allocated equity (end of period, Basel II) | 2 175 | 2 090 | 2 078 | 2 065 | 2 137 | 2 155 | 2 176 | - |
| Return on allocated equity (ROAC, Basel II) | 24% | 28% | 12% | 26% | 19% | 22% | -11% | - |
| Cost/income ratio, banking | 48% | 48% | 61% | 55% | 63% | 55% | 53% | - |
| Combined ratio, non-life insurance | 97% | 110% | 110% | 96% | 88% | 89% | 101% | - |
These underlying figures exclude exceptional items. A table reconciling the underlying result and the result according to IFRS is provided below (amounts are after taxes and minority interests).
| Reconciliation between underlying result and result according to IFRS CEE Business Unit (in millions of EUR) |
1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
|---|---|---|---|---|---|---|---|---|
| Result after tax, attributable to equity holders of the parent: underlying |
156 | 171 | 84 | 158 | 123 | 146 | -40 | - |
| + MTM of derivatives for ALM hedging | -17 | -24 | 31 | 21 | 22 | -1 | 2 | - |
| + gains/losses on CDOs | 6 | 26 | -2 | -1 | 2 | 0 | 0 | - |
| + MTM of CDO guarantee and commitment fee | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| + impairment on goodwill | 0 | 0 | 0 | 0 | 0 | -1 | -53 | - |
| + result on divestments | 0 | 0 | 0 | 0 | -5 | 1 | 0 | - |
| + other | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Result after tax, attributable to equity holders of the parent: IFRS |
146 | 173 | 113 | 178 | 141 | 145 | -91 | - |
The change in the average exchange rate against the euro of the main currencies in the region compared to both reference quarters is provided in the table. In order not to distort the comparison, the 'organic' growth figures mentioned below exclude this impact of changes in exchange rates.
| CEE average exchange rate changes +: appreciation against the euro -: depreciation against the euro |
CZK Czech Rep. |
EUR Slovakia |
HUF Hungary |
BGN Bulgaria |
|---|---|---|---|---|
| 3Q2011 / 2Q2011 | +1% | - | -3% | 0% |
| 3Q2011 / 3Q2010 | +3% | - | +4% | 0% |
In the quarter under review, the CEE Business Unit generated an underlying net result of -40 million, significantly below the average figure of +128 million for the last four quarters, due mainly to higher loan loss impairment in Hungary (92 million pre-tax, related to forex loans) and Bulgaria (96 million booked at KBC Group level, pre-tax) and an additional impairment on Greek Government bonds (45 million, pre-tax). It should be remembered that Poland is no longer included in the CEE Business Unit (shifted to Group Centre, with retroactive impact)
The CEE Business Unit's net result for 3Q2011 breaks down as follows: 116 million for the Czech Republic, 13 million for Slovakia, -50 million for Hungary (due to additional loan loss provisions for forex loans – see further), 1 million for Bulgaria and -120 million included under 'Other results' (including also the booking for Bulgaria at KBC Group level) .
Net interest income generated in this business unit amounted to 388 million in the quarter under review. On an organic basis, this represents a 2% increase on the previous quarter and a 2% decline on the year-earlier quarter. Excluding the foreign currency impact, the net interest margin remained more or less stable compared to both reference quarters (3.33% in 3Q2011). As regards volumes, the combined loan book for the business unit was up 3% year-on-year and customer deposits increased by the same percentage. Movements were more marked at country level, with significant year-on-year increases in the Czech and Slovak loan books being partially offset by decreases in Hungary and Bulgaria.
Earned insurance premiums in the quarter under review amounted to 182 million, which breaks down into 95 million for life insurance and 87 million for non-life insurance.
On an organic basis, non-life premium income was up 4% quarter-on-quarter (thanks mainly to the Czech Republic and Hungary) and 5% year-on-year (thanks mainly to Hungary). Notwithstanding a deterioration in the third quarter, the year-todate combined ratio for the first nine months of the year still stood at a favourable 93%, well below the high 103% recorded for FY2010, which had been impacted by storms and floods in the region. Moreover, the combined ratio for 9M2011 remained well below 100% in each of the four CEE countries.
Life sales, including insurance products not booked under earned premiums under IFRS, amounted to 106 million in the quarter under review, roughly 20% and 40% up on the previous and year-earlier quarters, thanks mainly to increased sales of unit-linked products in the Czech Republic. In the first nine months of the year, interest-guaranteed life products accounted for some one-third of life insurance sales, with unit-linked products accounting for the remaining two thirds. At the end of 3Q2011, the outstanding life reserves in this business unit stood at 1.6 billion.
Net fee and commission income amounted to 84 million in the quarter under review, which is only slightly below the previous quarter's figure (-2%, on an organic basis), and – excluding technical items – slightly up on the year-earlier figure. Total assets under management of this business unit amounted to 11 billion at end-September 2011, down on their quarter-onquarter and year-on-year levels, due mainly to a negative price effect.
Trading and fair value income (recorded under 'Net result from financial instruments at fair value') came to 5 million, well below the average of 34 million for the last four quarters. The net realised result from available-for-sale assets amounted to 6 million, while dividend income came to 1 million and other net income to 13 million.
The operating expenses of this business unit came to 297 million. In organic terms, this was 1% less than costs in the previous quarter. At first sight, costs fell 14% on their 3Q2010 level, but this was attributable to the Hungarian banking tax for FY2010 being booked in 3Q2010 (the FY2011 banking tax was booked in the first quarter of 2011) and a technical element; excluding these items, costs were more or less unchanged year-on-year. The cost/income ratio of the CEE banking activities stood at 57% for the first nine months of the year, compared to 53% for FY2010.
In the quarter under review, impairment on loans and receivables (loan losses) stood at a high 234 million, considerably up on both 2Q2011 (42 million) and 3Q2010 (112 million).The increase related mainly to Hungary (where loan loss provisions went up 126 million in 3Q2011, 92 million of which attributable to the effect of the new legislation on forex loans in that country; the calculation takes into account a 20% participation rate relating to the repayment option) and Bulgaria (KBC performed an in-depth evaluation of its Bulgarian assets for which the Group has booked an additional impairment of 96 million euros). In the Czech Republic and Slovakia, on the other hand, loan loss provisions in 3Q2011 decreased compared to both the previous and year-earlier quarters. As a result, the annualised credit cost ratio of this business unit amounted to 144 basis points for the first nine months of the year, compared to 116 basis points recorded for FY2010. At the end of 3Q2011, non-performing loans accounted for some 5.7% of the CEE loan book, in line with the 5.6% recorded three months earlier.
Impairment on assets other than loans and receivables amounted to 45 million and related entirely to additional impairment on Greek Government bonds (over and above the 53 million recorded in 2Q2011).
The underlying income statements for the Czech Republic, Slovakia, Hungary and Bulgaria are given below.
| Income statement, Czech Republic, underlying (in millions of EUR) |
1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 240 | 250 | 257 | 276 | 259 | 261 | 268 | - |
| Earned premiums, insurance (before reinsurance) | 91 | 121 | 88 | 102 | 178 | 96 | 119 | - |
| Technical charges, insurance (before reinsurance) | -67 | -96 | -67 | -74 | -151 | -71 | -92 | - |
| Ceded reinsurance result | -4 | -4 | -1 | -3 | -2 | -2 | -3 | - |
| Dividend income | 0 | 1 | 0 | 0 | 0 | 1 | 1 | - |
| Net result from financial instruments at fair value through profit or loss |
21 | 6 | 8 | 19 | 26 | 12 | -1 | - |
| Net realised result from available-for-sale assets | 3 | 7 | 5 | -11 | 5 | 3 | 6 | - |
| Net fee and commission income | 46 | 47 | 42 | 42 | 42 | 49 | 50 | - |
| Other net income | 7 | 7 | -1 | 0 | 4 | 2 | 9 | - |
| Total income | 337 | 341 | 331 | 350 | 361 | 351 | 357 | - |
| Operating expenses | -134 | -145 | -154 | -170 | -158 | -165 | -169 | - |
| Impairment | -31 | -38 | -46 | -31 | -18 | -65 | -52 | - |
| Of which on loans and receivables | -31 | -36 | -46 | -25 | -18 | -13 | -9 | - |
| Of which on available-for-sale assets | 0 | 0 | 0 | 0 | 0 | -52 | -43 | - |
| Share in results of associated companies | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Result before tax | 171 | 158 | 131 | 148 | 185 | 121 | 136 | - |
| Income tax expense | -26 | -16 | -11 | -22 | -28 | -13 | -19 | - |
| Result after tax | 146 | 142 | 120 | 127 | 157 | 108 | 116 | - |
| attributable to minority interests | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| attributable to equity holders of the parent | 146 | 142 | 120 | 127 | 157 | 108 | 116 | - |
| banking | 135 | 132 | 114 | 119 | 148 | 101 | 112 | - |
| insurance | 11 | 10 | 5 | 8 | 8 | 7 | 5 | - |
| Risk-weighted assets, group (end of period, Basel II) | 14 833 | 14 001 | 13 582 | 13 496 | 13 854 | 13 937 | 14 342 | - |
| of which banking | 14 060 | 13 229 | 12 790 | 12 707 | 13 015 | 13 080 | 13 477 | - |
| Allocated equity (end of period, Basel II) | 1 233 | 1 166 | 1 134 | 1 127 | 1 159 | 1 166 | 1 199 | - |
| Return on allocated equity (ROAC, Basel II) | 40% | 40% | 34% | 37% | 46% | 30% | 32% | - |
| Cost/income ratio, banking | 40% | 42% | 46% | 48% | 43% | 46% | 46% | - |
| Combined ratio, non-life insurance | 92% | 98% | 103% | 92% | 87% | 91% | 97% | - |
| Income statement, Slovakia, underlying (in millions of EUR) |
1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 51 | 52 | 54 | 53 | 48 | 46 | 48 | - |
| Earned premiums, insurance (before reinsurance) | 21 | 19 | 18 | 20 | 19 | 20 | 16 | - |
| Technical charges, insurance (before reinsurance) | -15 | -21 | -9 | -14 | -13 | -14 | -9 | - |
| Ceded reinsurance result | 0 | 6 | -4 | 0 | -1 | 0 | -1 | - |
| Dividend income | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Net result from financial instruments at fair value | ||||||||
| through profit or loss | 7 | 2 | 5 | 2 | 3 | 1 | -3 | - |
| Net realised result from available-for-sale assets | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Net fee and commission income | 8 | 8 | 7 | 9 | 11 | 10 | 9 | - |
| Other net income | 1 | 0 | 2 | -1 | 2 | 4 | 1 | - |
| Total income | 71 | 66 | 74 | 68 | 70 | 67 | 60 | - |
| Operating expenses | -39 | -41 | -39 | -40 | -40 | -42 | -39 | - |
| Impairment | -16 | -13 | -12 | -11 | -1 | -8 | -5 | - |
| Of which on loans and receivables | -17 | -13 | -12 | -11 | -1 | -7 | -3 | - |
| Of which on available-for-sale assets | 0 | 0 | 0 | 0 | 0 | 0 | -2 | - |
| Share in results of associated companies | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Result before tax | 16 | 11 | 23 | 17 | 29 | 17 | 16 | - |
| Income tax expense | -3 | -4 | -5 | -4 | -5 | 0 | -4 | - |
| Result after tax | 13 | 7 | 18 | 13 | 24 | 18 | 13 | - |
| attributable to minority interests | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| attributable to equity holders of the parent | 13 | 7 | 18 | 13 | 24 | 18 | 13 | - |
| banking | 11 | 6 | 17 | 11 | 19 | 15 | 13 | - |
| insurance | 2 | 1 | 2 | 2 | 6 | 3 | 0 | - |
| Risk-weighted assets, group (end of period, Basel II) | 4 056 | 4 133 | 4 139 | 4 142 | 4 208 | 4 382 | 4 435 | - |
| of which banking | 3 913 | 3 983 | 3 986 | 3 976 | 4 038 | 4 205 | 4 258 | - |
| Allocated equity (end of period, Basel II) | 333 | 340 | 340 | 341 | 347 | 361 | 365 | - |
| Return on allocated equity (ROAC, Basel II) | 11% | 4% | 17% | 10% | 23% | 16% | 9% | - |
| Cost/income ratio, banking | 55% | 62% | 52% | 58% | 61% | 63% | 65% | - |
| Combined ratio, non-life insurance | 84% | 131% | 110% | 104% | 85% | 88% | 89% | - |
| Income statement, Hungary, | 1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
| underlying( in millions of EUR) | ||||||||
| Net interest income | 94 | 96 | 98 | 95 | 103 | 100 | 95 | - |
| Earned premiums, insurance (before reinsurance) | 17 | 17 | 17 | 18 | 22 | 23 | 23 | - |
| Technical charges, insurance (before reinsurance) | -11 | -19 | -10 | -15 | -11 | -17 | -18 | - |
| Ceded reinsurance result | -1 | -1 | 0 | -1 | -1 | -1 | -1 | - |
| Dividend income | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Net result from financial instruments at fair value through profit or loss |
10 | 10 | 24 | 22 | 4 | 12 | 12 | - |
| Net realised result from available-for-sale assets | 4 | 4 | -1 | 0 | 0 | 0 | 0 | - |
| Net fee and commission income | 29 | 27 | 24 | 26 | 24 | 25 | 25 | - |
| Other net income | 1 | 8 | 0 | 0 | 1 | 2 | 1 | - |
| Total income | 143 | 141 | 152 | 145 | 143 | 143 | 138 | - |
| Operating expenses | -70 | -66 | -127 | -75 | -130 | -71 | -68 | - |
| Impairment | -35 | -28 | -50 | -19 | -29 | -19 | -126 | - |
| Of which on loans and receivables | -35 | -28 | -50 | -19 | -28 | -18 | -126 | - |
| Of which on available-for-sale assets | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Share in results of associated companies | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Result before tax | 37 | 47 | -25 | 51 | -15 | 54 | -56 | - |
| Income tax expense | -11 | -11 | 1 | -10 | -1 | -13 | 6 | - |
| Result after tax | 26 | 35 | -24 | 41 | -16 | 40 | -50 | - |
| attributable to minority interests | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| attributable to equity holders of the parent | 26 | 35 | -24 | 41 | -16 | 40 | -50 | - |
| banking | 23 | 38 | -26 | 40 | -19 | 38 | -50 | - |
| insurance | 3 | -2 | 1 | 1 | 3 | 2 | 0 | - |
| Risk-weighted assets, group (end of period, Basel II) | 6 275 | 6 005 | 6 270 | 6 219 | 6 666 | 6 587 | 6 505 | - |
| of which banking | 6 056 | 5 788 | 6 051 | 6 010 | 6 424 | 6 335 | 6 253 | - |
| Allocated equity (end of period, Basel II) | 515 | 493 | 515 | 510 | 548 | 542 | 536 | - |
| Return on allocated equity (ROAC, Basel II) | 14% | 21% | -24% | 27% | -18% | 24% | -41% | - |
| Cost/income ratio, banking Combined ratio, non-life insurance |
49% 87% |
44% 133% |
83% 116% |
50% 112% |
93% 74% |
49% 92% |
48% 109% |
- - |
| Income statement, Bulgaria, underlying (in millions of EUR) |
1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 11 | 10 | 11 | 11 | 12 | 10 | 8 | - |
| Earned premiums, insurance (before reinsurance) | 27 | 28 | 26 | 30 | 23 | 25 | 24 | - |
| Technical charges, insurance (before reinsurance) | -22 | -20 | -23 | -19 | -15 | -14 | -16 | - |
| Ceded reinsurance result | 0 | -2 | 1 | 1 | -2 | -1 | -1 | - |
| Dividend income | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Net result from financial instruments at fair value | ||||||||
| through profit or loss | 0 | 1 | 0 | 0 | 0 | 0 | 0 | - |
| Net realised result from available-for-sale assets | 0 | 0 | 1 | 0 | 0 | 0 | 0 | - |
| Net fee and commission income | -1 | -1 | 0 | -1 | 1 | 0 | 1 | - |
| Other net income | 0 | 1 | 0 | 1 | 0 | 0 | 0 | - |
| Total income | 17 | 17 | 17 | 23 | 19 | 21 | 17 | - |
| Operating expenses | -13 | -13 | -13 | -14 | -14 | -14 | -14 | - |
| Impairment | -4 | -3 | -4 | -4 | -4 | -3 | -2 | - |
| Of which on loans and receivables | -4 | -3 | -4 | -4 | -4 | -3 | -2 | - |
| Of which on available-for-sale assets | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Share in results of associated companies | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Result before tax | 0 | 1 | -1 | 4 | 2 | 4 | 1 | - |
| Income tax expense | 0 | 0 | 0 | -1 | 0 | 0 | 0 | - |
| Result after tax | 0 | 1 | -1 | 4 | 2 | 5 | 1 | - |
| attributable to minority interests | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| attributable to equity holders of the parent | 0 | 1 | 0 | 3 | 2 | 4 | 1 | - |
| banking | 0 | 0 | 0 | 0 | 0 | 0 | 1 | - |
| insurance | 0 | 0 | -1 | 3 | 1 | 4 | 1 | - |
| Risk-weighted assets, group (end of period, Basel II) | 955 | 926 | 902 | 877 | 846 | 867 | 750 | - |
| of which banking | 715 | 688 | 668 | 645 | 628 | 643 | 523 | - |
| Allocated equity (end of period, Basel II) | 91 | 88 | 86 | 84 | 81 | 83 | 74 | - |
| Return on allocated equity (ROAC, Basel II) | -23% | -21% | -28% | -7% | -17% | -15% | -13% | - |
| Cost/income ratio, banking | 70% | 72% | 65% | 69% | 66% | 74% | 82% | - |
| Combined ratio, non-life insurance | 115% | 112% | 119% | 91% | 107% | 83% | 104% | - |
| Income statement, CEE – funding cost and other results, underlying (in millions of EUR) |
1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
| Net interest income | -30 | -33 | -35 | -36 | -36 | -36 | -31 | - |
| Earned premiums, insurance (before reinsurance) | ||||||||
| -1 | -1 | -1 | -1 | -1 | -1 | -1 | - | |
| Technical charges, insurance (before reinsurance) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Ceded reinsurance result | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Dividend income | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Net result from financial instruments at fair value | ||||||||
| through profit or loss | 0 | 10 | 0 | 6 | 0 | -11 | -3 | - |
| Net realised result from available-for-sale assets | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Net fee and commission income | 0 | -2 | 0 | 0 | -2 | 2 | -1 | - |
| Other net income | 1 | 1 | 1 | 1 | 2 | 1 | 2 | - |
| Total income | -29 | -24 | -34 | -29 | -38 | -45 | -34 | - |
| Operating expenses | -8 | -5 | -6 | -10 | -9 | -11 | -8 | - |
| Impairment | -3 | 0 | 0 | 0 | 0 | -1 | -95 | - |
| Of which on loans and receivables | -3 | 0 | 0 | 0 | 0 | 0 | -96 | - |
| Of which on available-for-sale assets | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Share in results of associated companies | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Result before tax | -40 | -28 | -40 | -39 | -47 | -57 | -136 | - |
| Income tax expense | 12 | 14 | 12 | 13 | 3 | 34 | 17 | - |
| Result after tax | -28 | -14 | -29 | -26 | -43 | -23 | -120 | - |
| attributable to minority interests | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| attributable to equity holders of the parent banking |
-28 -23 |
-14 -9 |
-29 -22 |
-26 -26 |
-43 -36 |
-23 -19 |
-120 -118 |
- - |
The Merchant Banking Business Unit encompasses the financial services provided to SMEs & corporate customers and capital market activities (merchant banking activities of the CEE group companies are included in the CEE Business Unit). More specifically, it includes commercial banking and market activities of KBC Bank in Belgium and its branches elsewhere, and the activities of a number of subsidiaries, the main ones being KBC Lease (partial), KBC Securities, KBC Clearing, KBC Commercial Finance, KBC Credit Investments, KBC Real Estate, KBC Private Equity and KBC Bank Ireland. The entities that are earmarked for divestment under the strategic plan (the main ones being KBC Financial Products (various activities already sold), KBC Peel Hunt (sold), KBC Finance Ireland, Antwerp Diamond Bank and KBC Bank Deutschland) are not included here, but are grouped together in the Group Centre.
| Income statement, Merchant Banking Business Unit, underlying (in millions of EUR) |
1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 189 | 202 | 213 | 232 | 180 | 167 | 168 | - |
| Earned premiums, insurance (before reinsurance) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Technical charges, insurance (before reinsurance) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Ceded reinsurance result | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Dividend income | 0 | 2 | 2 | 1 | 0 | 4 | 2 | - |
| Net result from financial instruments at fair value through profit or loss |
210 | 67 | 196 | 67 | 213 | 87 | 9 | - |
| Net realised result from available-for-sale assets | 1 | 1 | 2 | 0 | 2 | 11 | 0 | - |
| Net fee and commission income | 54 | 63 | 56 | 52 | 51 | 53 | 43 | - |
| Other net income | 28 | 27 | 26 | -150 | 22 | 17 | -117 | - |
| Total income | 482 | 361 | 495 | 202 | 469 | 340 | 105 | - |
| Operating expenses | -140 | -137 | -142 | -157 | -152 | -142 | -143 | - |
| Impairment | -219 | -91 | -130 | -355 | -57 | -112 | -215 | - |
| on loans and receivables | -219 | -89 | -132 | -350 | -57 | -95 | -205 | - |
| on available-for-sale assets | 0 | -2 | 2 | -7 | 0 | -1 | -2 | - |
| on goodwill | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| on other | 0 | 0 | 0 | 1 | 0 | -16 | -7 | - |
| Share in results of associated companies | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Result before tax | 122 | 133 | 223 | -311 | 259 | 86 | -253 | - |
| Income tax expense | -35 | -8 | -63 | 88 | -78 | -21 | 61 | - |
| Result after tax | 88 | 125 | 160 | -223 | 182 | 65 | -192 | - |
| attributable to minority interests | 3 | 4 | 5 | 5 | 5 | 2 | 4 | - |
| attributable to equity holders of the parent | 85 | 121 | 156 | -228 | 177 | 63 | -196 | - |
| Banking | 83 | 119 | 155 | -230 | 176 | 62 | -197 | - |
| Insurance | 2 | 2 | 1 | 1 | 1 | 1 | 1 | - |
| Risk-weighted assets, group (end of period, Basel II) | 51 703 | 51 880 | 47 447 | 47 317 | 45 945 | 42 446 | 39 736 | - |
| of which banking | 51 703 | 51 880 | 47 447 | 47 317 | 45 945 | 42 446 | 39 736 | - |
| Allocated equity (end of period, Basel II) | 4 136 | 4 150 | 3 796 | 3 785 | 3 676 | 3 396 | 3 179 | - |
| Return on allocated equity (ROAC, Basel II) | 8% | 11% | 15% | -24% | 19% | 6% | -25% | - |
| Cost/income ratio, banking | 29% | 38% | 28% | 79% | 32% | 42% | 138% | - |
These underlying figures exclude exceptional items. A table reconciling the underlying result and the result according to IFRS is provided below (amounts are after taxes and minority interests).
| Reconciliation between underlying result and result according to IFRS Merchant Banking Business Unit (in millions of EUR) |
1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
|---|---|---|---|---|---|---|---|---|
| Result after tax, attributable to equity holders of the parent: underlying |
85 | 121 | 156 | -228 | 177 | 63 | -196 | - |
| + MTM of derivatives for ALM hedging | 0 | -18 | -4 | -1 | 9 | -7 | -31 | - |
| + gains/losses on CDOs | 12 | 4 | 34 | 63 | 18 | 18 | -13 | - |
| + MTM of CDO guarantee and commitment fee | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| + impairment on goodwill | 0 | -2 | -13 | -12 | 0 | -5 | -4 | - |
| + result on divestments | 0 | -3 | -2 | -4 | -1 | 0 | -10 | - |
| + other | -32 | -29 | 2 | 46 | 0 | 0 | 0 | - |
| Result after tax, attributable to equity holders of the parent: IFRS |
64 | 73 | 173 | -138 | 203 | 69 | -255 | - |
In the quarter under review, the Merchant Banking Business Unit generated an underlying result of -196 million, substantially below the +42 million average for the last four quarters, as 3Q2011 was characterised by a weak dealing room result, high loan loss impairment charges in Ireland (187 million, pre-tax) and a provision for the 5-5-5 investment product (132 million, pre-tax). The underlying result for 3Q2011 breaks down as follows: -115 million for commercial banking activities and -81 million for market activities.
Total income for this business unit amounted to a very low 105 million in the quarter under review. Trading and fair value income (Net result from financial instruments at fair value through profit or loss, traditionally a big contributor to income in this business unit) stood at a very weak 9 million in the quarter under review, below the 87 million registered in the previous quarter, and significantly down on the high level of 196 million recorded in 2Q2010. In both cases, the difference was accounted for mainly by the performance of the dealing rooms (weak in the quarter under review, modest in the previous quarter, very good in the year-earlier quarter).
Net interest income stood at 168 million, comparable to the previous quarter, but down 21% year-on-year, which, in the latter case, was due for a significant part to the ongoing reduction in the international loan portfolio outside the home markets, in line with the group's strategic plan, which (re)focuses credit activities on customers that have a relationship with KBC's home markets in Belgium and Central and Eastern Europe. As a result, the Merchant Banking's loan portfolio contracted some 4% in one year's time.
The other income components came to to a negative 72 million in the quarter under review and comprised net fee and commission income of 43 million (down on the 53 million average for the last four quarters, in line with the decline in activity and the ongoing divestment programme), dividend income of 2 million, a net realised result from available-for-sale assets of 0 million (versus 4 million average in the last four quarters), and other net income of -117 million. The latter figure was negatively impacted by the booking in 3Q2011 of a provision for the 5-5-5 investment product (see 'Report on 3Q and 9M2011' section of this report), 132 million of which was assigned to the Merchant Banking Business Unit.
Operating expenses in the quarter under review amounted to 143 million, roughly comparable to both 2Q2011 and 3Q2010, with a number of elements largely offsetting each other (higher restructuring charges, deconsolidation of some smaller entities, branch closures, etc.). The cost/income ratio stood at 48% for the first nine months of the year (excluding the provisions for the 5-5-5 product from the denominator, the cost-income ratio was 42%), as opposed to 37% for FY2010.
Following a relatively low loan loss impairment of 95 million in the previous quarter, impairment on loans and receivables amounted to a high 205 million in the quarter under review. The quarter-on-quarter increase was due mainly to higher loan loss impairments for the Irish loan book (187 million in the quarter under review, compared to 49 million in the previous quarter and 53 million in the year-earlier quarter).
As a result, the credit cost ratio for the first nine months of the year now stands at an annualised 90 basis points, which is still below the 138 basis points recorded in FY2010. At the end of 3Q2011, approximately 7.1% of the Merchant Banking Business Unit's loan book was non-performing, up on the 6.4% recorded three months earlier. Specifically for KBC Bank Ireland, the annualised credit cost ratio stood at 222 basis points in 9M2011, compared to 298 basis points for FY2010, while the non-performing ratio rose to 15.2% at the end of 3Q2011, up from 13.2% three months earlier.
Other impairment charges for this business unit stood at 10 million in 3Q2011, and consisted almost entirely of additional impairment on Greek government bonds (over and above the 5 million recorded in 2Q2011). The previous quarter had also included 12 million impairment related to investment property.
The underlying figures for the Merchant Banking Business Unit are broken down into 'Commercial Banking' (mainly lending and banking services to SMEs) and 'Market activities' (sales and trading on money and capital markets, corporate finance, etc.) on the next page.
| Income statement, Commercial Banking, underlying (in millions of EUR) |
1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 189 | 202 | 213 | 232 | 180 | 167 | 168 | - |
| Earned premiums, insurance (before reinsurance) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Technical charges, insurance (before reinsurance) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Ceded reinsurance result | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Dividend income | 0 | 2 | 2 | 1 | 0 | 4 | 2 | - |
| Net result from financial instruments at fair value | ||||||||
| through profit or loss | 14 | 0 | 18 | 0 | 10 | -25 | -48 | - |
| Net realised result from available-for-sale assets | 1 | 1 | 2 | 0 | 2 | 11 | 0 | - |
| Net fee and commission income | 35 | 33 | 35 | 28 | 26 | 29 | 26 | - |
| Other net income | 28 | 27 | 26 | -150 | 22 | 24 | 21 | - |
| Total income | 267 | 265 | 296 | 110 | 242 | 210 | 169 | - |
| Operating expenses | -92 | -87 | -89 | -99 | -87 | -88 | -90 | - |
| Impairment | -162 | -85 | -127 | -354 | -72 | -100 | -208 | - |
| Of which on loans and receivables | -162 | -83 | -128 | -354 | -72 | -83 | -200 | - |
| Of which on available-for-sale assets | 0 | -2 | 2 | -1 | 0 | -1 | -1 | - |
| Share in results of associated companies | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Result before tax | 13 | 92 | 81 | -342 | 83 | 23 | -130 | - |
| Income tax expense | -16 | -11 | -23 | 74 | -28 | -6 | 19 | - |
| Result after tax | -3 | 81 | 58 | -269 | 55 | 17 | -111 | - |
| attributable to minority interests | 3 | 4 | 5 | 4 | 4 | 3 | 4 | - |
| attributable to equity holders of the parent | -5 | 77 | 53 | -273 | 51 | 14 | -115 | - |
| Banking | -8 | 75 | 52 | -274 | 50 | 13 | -116 | - |
| Insurance | 2 | 2 | 1 | 1 | 1 | 1 | 1 | - |
| Risk-weighted assets, group (end of period, Basel II) | 38 295 | 36 689 | 33 812 | 32 993 | 32 176 | 30 934 | 30 733 | - |
| of which banking | 38 295 | 36 689 | 33 812 | 32 993 | 32 176 | 30 934 | 30 733 | - |
| Allocated equity (end of period, Basel II) | 3 064 | 2 935 | 2 705 | 2 639 | 2 574 | 2 475 | 2 459 | - |
| Return on allocated equity (ROAC, Basel II) | -1% | 9% | 6% | -41% | 7% | 2% | -19% | - |
| Cost/income ratio, banking | 34% | 33% | 30% | 91% | 36% | 42% | 54% | - |
| Income statement, Market Activities, underlying (in millions of EUR) |
1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
| Net interest income | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Earned premiums, insurance (before reinsurance) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Technical charges, insurance (before reinsurance) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Ceded reinsurance result | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Dividend income | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Net result from financial instruments at fair value | ||||||||
| through profit or loss | 196 | 67 | 178 | 67 | 203 | 112 | 57 | - |
| Net realised result from available-for-sale assets | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Net fee and commission income | 19 | 30 | 20 | 24 | 25 | 25 | 17 | - |
| Other net income | 0 | 0 | 0 | 0 | 0 | -8 | -138 | - |
| Total income | 215 | 97 | 199 | 91 | 227 | 129 | -64 | - |
| Operating expenses | -48 | -50 | -53 | -59 | -65 | -53 | -53 | - |
| Impairment | -57 | -6 | -4 | -1 | 15 | -12 | -6 | - |
| Of which on loans and receivables | -57 | -6 | -4 | 4 | 15 | -12 | -5 | - |
| Of which on available-for-sale assets | 0 | 0 | 0 | -6 | 0 | 0 | -1 | - |
| Share in results of associated companies | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Result before tax | 109 | 41 | 142 | 32 | 177 | 63 | -123 | - |
| Income tax expense | -19 | 3 | -40 | 14 | -50 | -15 | 42 | - |
| Result after tax | 90 | 44 | 102 | 46 | 127 | 48 | -81 | - |
| attributable to minority interests | 0 | 0 | 0 | 1 | 1 | -1 | 0 | - |
| attributable to equity holders of the parent | 90 | 44 | 103 | 45 | 126 | 48 | -81 | - |
| banking insurance |
90 0 |
44 0 |
103 0 |
45 0 |
126 0 |
48 0 |
-81 0 |
- - |
| Risk-weighted assets, group (end of period, Basel II) | 13 408 | 15 191 | 13 635 | 14 324 | 13 769 | 11 512 | 9 003 | - |
| of which banking | 13 408 | 15 191 | 13 635 | 14 324 | 13 769 | 11 512 | 9 003 | - |
| Allocated equity (end of period, Basel II) Return on allocated equity (ROAC, Basel II) |
1 073 35% |
1 215 16% |
1 091 36% |
1 146 17% |
1 102 46% |
921 18% |
720 -41% |
- - |
The Group Centre comprises, inter alia, the results of the holding company KBC Group NV, KBC Global Services, some results that are not attributable to the other business units and the elimination of the results of intersegment transactions. It also comprises the results of the companies that have been designated as non-core in the group's strategy and are therefore earmarked for divestment. The main ones are Centea (Belgium – sold early July 2011), Fidea (Belgium, sale agreement signed), Absolut Bank (Russia), KBC Banka (Serbia), NLB and NLB Vita (Slovenia), Żagiel (Poland), Kredyt Bank and Warta (Poland*), KBC Financial Products (various countries – various activities already sold), KBC Peel Hunt (UK – sold), KBC Finance Ireland (Ireland), Antwerp Diamond Bank (Belgium), KBC Bank Deutschland (Germany) and the KBL EPB group including VITIS Life (various countries – sale agreement signed).
* Please note that the impact of the recent changes to the strategic plan are included in this report. Hence, Poland (Warta and Kredyt Bank) has been shifted to the Group Centre and the portion of ČSOB's results related to the originally planned IPO of a minority stake in this company, which used to be included in Group Centre, has been included in the CEE Business Unit again. All reference figures have been adjusted to enhance comparability.
| Income statement, Group Centre, underlying (in millions of EUR) |
1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 239 | 254 | 254 | 250 | 242 | 261 | 205 | - |
| Earned premiums, insurance (before reinsurance) | 254 | 240 | 296 | 287 | 284 | 299 | 317 | - |
| Technical charges, insurance (before reinsurance) | -230 | -252 | -245 | -200 | -234 | -221 | -245 | - |
| Ceded reinsurance result | -1 | 40 | -8 | -18 | -4 | -3 | -2 | - |
| Dividend income | 3 | 8 | 1 | 4 | 2 | 6 | 2 | - |
| Net result from financial instruments at fair value through profit or loss |
52 | 27 | 21 | 2 | 4 | -11 | -14 | - |
| Net realised result from available-for-sale assets | 13 | 16 | 5 | -3 | 22 | 3 | -2 | - |
| Net fee and commission income | 101 | 106 | 69 | 88 | 86 | 77 | 72 | - |
| Other net income | 14 | 1 | 10 | 15 | 2 | 9 | 4 | - |
| Total income | 444 | 439 | 403 | 425 | 404 | 420 | 338 | - |
| Operating expenses | -346 | -349 | -320 | -355 | -296 | -265 | -269 | - |
| Impairment | -44 | -86 | -91 | -55 | 19 | -51 | -81 | - |
| on loans and receivables | -44 | -83 | -91 | -51 | 21 | -11 | -26 | - |
| on available-for-sale assets | 0 | -2 | 0 | -2 | -2 | -29 | -38 | - |
| on goodwill | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| on other | 0 | 0 | 0 | -2 | -1 | -12 | -17 | - |
| Share in results of associated companies | -2 | -9 | -5 | -46 | 1 | 0 | -23 | - |
| Result before tax | 51 | -4 | -12 | -32 | 127 | 104 | -35 | - |
| Income tax expense | -26 | -31 | -1 | 19 | -42 | -19 | -6 | - |
| Result after tax | 25 | -35 | -13 | -13 | 85 | 85 | -41 | - |
| attributable to minority interests | 1 | 0 | 2 | 3 | 8 | 3 | 3 | - |
| attributable to equity holders of the parent | 24 | -36 | -15 | -16 | 77 | 81 | -44 | - |
| Banking | 40 | -27 | -21 | -36 | 86 | 57 | -19 | - |
| Insurance | -3 | 0 | 8 | 22 | 20 | 26 | -10 | - |
| holding company | -14 | -8 | -2 | -1 | -29 | -2 | -16 | - |
| Risk-weighted assets, group (end of period, Basel II) | 36 654 | 33 502 | 32 386 | 31 202 | 30 933 | 29 959 | 25 693 | - |
| of which banking | 33 397 | 30 260 | 29 255 | 27 997 | 27 732 | 26 637 | 22 347 | - |
| Allocated equity (end of period, Basel II) | 3 087 | 2 833 | 2 742 | 2 650 | 2 628 | 2 556 | 2 216 | - |
These underlying figures exclude exceptional items. A table reconciling the underlying result and the result according to IFRS is provided below (amounts are after taxes and minority interests).
| Reconciliation between underlying result and result according to IFRS, Group Centre (in millions of EUR) |
1Q2010 | 2Q2010 | 3Q2010 | 4Q2010 | 1Q2011 | 2Q2011 | 3Q2011 | 4Q2011 |
|---|---|---|---|---|---|---|---|---|
| Result after tax, attributable to equity holders of the parent: underlying |
24 | -36 | -15 | -16 | 77 | 81 | -44 | - |
| + MTM of derivatives for ALM hedging | -9 | -13 | -12 | 10 | 8 | -13 | -2 | - |
| + gains/losses on CDOs | 118 | 347 | 87 | 129 | 55 | -84 | -439 | - |
| + MTM of CDO guarantee and commitment fee | -28 | -15 | -20 | 5 | -8 | -18 | -8 | - |
| + impairment on goodwill (incl. associated companies) | -27 | 0 | -31 | -29 | 0 | -11 | 0 | - |
| + MTM of own debt issued | -2 | 33 | -34 | 41 | -16 | -25 | 185 | - |
| + legacy structured derivative business (KBC FP) | -126 | -210 | 6 | -42 | 14 | 43 | 5 | - |
| + Results on divestments | 0 | -335 | -42 | 132 | -38 | -12 | -581 | - |
| + other | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
| Result after tax, attributable to equity holders of the parent: IFRS |
-50 | -228 | -61 | 231 | 92 | -39 | -885 | - |
The Group Centre's net result amounted to -44 million in 3Q2011. As mentioned before, this mainly includes the results of the companies that are earmarked for divestment, whose combined net result came to -27 million in 3Q2011, down on the 86 million recorded in 2Q2011. The 3Q2011 result was impacted by the -43 million (pre tax) impairment on Greek bonds (over and above the -36 million booked in the previous quarter) and the divestment of Centea, among other factors.
The net result contribution of the companies up for divestment can be broken down by former business unit as follows:
.
Reviewed by the auditors
| In millions of EUR | Note | 3Q 2010 | 2Q 2011 | 3Q 2011 | 9M 2010 | 9M 2011 |
|---|---|---|---|---|---|---|
| Net interest income | 3 | 1 562 | 1 406 | 1 341 | 4 647 | 4 142 |
| Interest income | 2 627 | 3 195 | 2 910 | 7 900 | 9 151 | |
| Interest expense | - 1 065 | - 1 789 | - 1 569 | - 3 253 | - 5 009 | |
| Earned premiums, insurance (before reinsurance) | 9 | 1 074 | 974 | 972 | 3 466 | 3 087 |
| Non-life | 495 | 468 | 477 | 1 464 | 1 395 | |
| Life | 10 | 579 | 506 | 495 | 2 001 | 1 691 |
| Technical charges, insurance (before reinsurance) | 9 | - 957 | - 840 | - 812 | - 3 243 | - 2 665 |
| Non-life | - 307 | - 245 | - 259 | - 1 015 | - 738 | |
| Life | - 650 | - 595 | - 553 | - 2 228 | - 1 927 | |
| Ceded reinsurance result | 9 | - 23 | - 8 | - 18 | 18 | - 43 |
| Dividend income | 21 | 41 | 17 | 76 | 70 | |
| Net result from financial instruments at fair value through profit or loss | 5 | 227 | - 194 | - 892 | - 506 | - 613 |
| Net realised result from available-for-sale assets | 6 | 11 | 42 | 10 | 61 | 86 |
| Net fee and commission income | 7 | 259 | 297 | 281 | 917 | 877 |
| Fee and commission income | 480 | 530 | 480 | 1 607 | 1 529 | |
| Fee and commission expense | - 221 | - 233 | - 200 | - 690 | - 651 | |
| Other net income | 8 | 65 | 110 | - 149 | 345 | 53 |
| TOTAL INCOME | 2 239 | 1 829 | 749 | 5 781 | 4 994 | |
| Operating expenses | 12 | - 1 130 | - 1 081 | - 1 077 | - 3 246 | - 3 301 |
| Staff expenses | - 634 | - 648 | - 653 | - 1 876 | - 1 938 | |
| General administrative expenses | - 407 | - 351 | - 345 | - 1 101 | - 1 117 | |
| Depreciation and amortisation of fixed assets | - 88 | - 83 | - 79 | - 270 | - 246 | |
| Impairment | 14 | - 420 | - 332 | - 940 | - 1 102 | - 1 377 |
| on loans and receivables | - 357 | - 164 | - 473 | - 990 | - 733 | |
| on available-for-sale assets | - 5 | - 118 | - 223 | - 23 | - 347 | |
| on goodwill | - 13 | - 17 | - 62 | - 41 | - 79 | |
| on other | - 45 | - 33 | - 183 | - 48 | - 218 | |
| Share in results of associated companies | - 5 | 0 | - 23 | - 16 | - 22 | |
| RESULT BEFORE TAX | 683 | 416 | - 1 292 | 1 418 | 294 | |
| Income tax expense | - 124 | - 76 | 165 | 16 | - 245 | |
| Net post-tax result from discontinued operations | 46 | - 7 | 0 | - 445 | - 278 | - 445 |
| RESULT AFTER TAX | 553 | 340 | - 1 571 | 1 156 | - 396 | |
| Attributable to minority interest | 8 | 6 | 8 | 20 | 28 | |
| of which relating to discontinued operations | 0 | 0 | 0 | 0 | 0 | |
| Attributable to equity holders of the parent | 545 | 333 | - 1 579 | 1 136 | - 424 | |
| of which relating to discontinued operations | - 7 | 0 | - 445 | - 278 | - 445 | |
| Earnings per share (in EUR) | 17 | |||||
| Basic | 1,17 | 0,54 | -5,08 | 2,03 | -2,56 | |
| Diluted | 1,17 | 0,54 | -5,08 | 2,03 | -2,56 | |
| In millions of EUR | 3Q 2010 | 2Q 2011 | 3Q 2011 | 9M 2010 | 9M 2011 |
|---|---|---|---|---|---|
| RESULT AFTER TAX | 553 | 340 | - 1 571 | 1 156 | - 396 |
| attributable to minority interest | 8 | 6 | 8 | 20 | 28 |
| attributable to equity holders of the parent | 545 | 333 | - 1 579 | 1 136 | - 424 |
| OTHER COMPREHENSIVE INCOME | |||||
| Net change in revaluation reserve (AFS assets) - Equity | 72 | - 25 | - 193 | 6 | - 228 |
| Net change in revaluation reserve (AFS assets) - Bonds | 388 | 224 | 427 | 714 | 359 |
| Net change in revaluation reserve (AFS assets) - Other | 0 | 0 | 0 | 1 | - 1 |
| Net change in hedging reserve (cash flow hedge) | - 68 | - 27 | - 222 | - 350 | - 78 |
| Net change in translation differences | 30 | - 6 | - 117 | 63 | - 104 |
| Other movements | - 1 | - 3 | 4 | - 3 | 2 |
| TOTAL COMPREHENSIVE INCOME | 975 | 502 | - 1 672 | 1 587 | - 446 |
| attributable to minority interest | 14 | 12 | - 6 | 29 | 16 |
| attributable to equity holders of the parent | 961 | 490 | - 1 666 | 1 558 | - 462 |
| ASSETS (in millions of EUR) | Note | 31-12-2010 | 30-09-2011 |
|---|---|---|---|
| Cash and cash balances with central banks | 15 292 | 10 906 | |
| Financial assets | 18 | 281 240 | 267 553 |
| Held for trading | 30 287 | 30 922 | |
| Designated at fair value through profit or loss | 25 545 | 23 580 | |
| Available for sale | 54 143 | 43 016 | |
| Loans and receivables | 157 024 | 154 544 | |
| Held to maturity | 13 955 | 14 767 | |
| Hedging derivatives | 286 | 723 | |
| Reinsurers' share in technical provisions | 280 | 232 | |
| Fair value adjustments of hedged items in portfolio hedge of interest rate risk | 218 | 195 | |
| Tax assets | 2 534 | 2 457 | |
| Current tax assets | 167 | 185 | |
| Deferred tax assets | 2 367 | 2 271 | |
| Non-current assets held for sale and assets associated with disposal groups | 46 | 12 938 | 15 529 |
| Investments in associated companies | 496 | 473 | |
| Investment property | 704 | 788 | |
| Property and equipment | 2 693 | 2 618 | |
| Goodwill and other intangible assets | 2 256 | 2 107 | |
| Other assets | 2 172 | 2 250 | |
| TOTAL ASSETS | 320 823 | 305 109 |
| LIABILITIES AND EQUITY (in millions of EUR) | Note | 31-12-2010 | 30-09-2011 |
|---|---|---|---|
| Financial liabilities | 18 | 260 582 | 245 533 |
| Held for trading | 24 136 | 24 899 | |
| Designated at fair value through profit or loss | 34 615 | 32 814 | |
| Measured at amortised cost | 200 707 | 186 225 | |
| Hedging derivatives | 1 124 | 1 595 | |
| Technical provisions, before reinsurance | 23 255 | 21 064 | |
| Fair value adjustments of hedged items in portfolio hedge of interest rate risk | 0 | 2 | |
| Tax liabilities | 468 | 539 | |
| Current tax liabilities | 345 | 237 | |
| Deferred tax liabilies | 123 | 302 | |
| Liabilities associated with disposal groups | 46 | 13 341 | 16 254 |
| Provisions for risks and charges | 600 | 795 | |
| Other liabilities | 3 902 | 3 572 | |
| TOTAL LIABILITIES | 302 149 | 287 758 | |
| Total equity | 18 674 | 17 351 | |
| Parent shareholders' equity | 39 | 11 147 | 9 834 |
| Non-voting core-capital securities | 39 | 7 000 | 7 000 |
| Minority interests | 527 | 517 | |
| TOTAL LIABILITIES AND EQUITY | 320 823 | 305 109 |
| In millions of EUR | Issued and paid up share capital |
Share premium |
Treasury shares | Revaluation reserve (AFS assets) |
Hedging reserve (cashflow hedges) |
Reserves | Translation differences |
Parent shareholders' equity |
Non-voting core-capital securities |
Minority interests |
Total equity |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at the beginning of the period (31/12/2009) | 1 245 | 4 339 | - 1 560 | 457 | - 374 | 5 894 | - 339 | 9 662 | 7 000 | 515 | 17 177 |
| Net result for the period | 0 | 0 | 0 | 0 | 0 | 1 136 | 0 | 1 136 | 0 | 20 | 1 156 |
| Other comprehensive income for the period | 0 | 0 | 0 | 717 | - 352 | - 3 | 59 | 422 | 0 | 9 | 431 |
| Total comprehensive income | 0 | 0 | 0 | 717 | - 352 | 1 133 | 59 | 1 558 | 0 | 29 | 1 587 |
| Dividends Capital increase |
0 0 |
0 0 |
0 0 |
0 0 |
0 0 |
0 0 |
0 0 |
0 0 |
0 0 |
0 0 |
0 0 |
| Results on (derivatives on) treasury shares | 0 | 0 | 30 | 0 | 0 | 0 | 0 | 30 | 0 | 0 | 30 |
| Impact business combinations | 0 | 0 | 0 | 0 | 0 | - 6 | 0 | - 6 | 0 | 0 | - 6 |
| Change in minorities | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - 9 | - 9 |
| Total change | 0 | 0 | 30 | 717 | - 352 | 1 128 | 59 | 1 583 | 0 | 20 | 1 603 |
| Balance at the end of the period (30/9/2010) | 1 245 | 4 339 | - 1 529 | 1 174 | - 726 | 7 022 | - 280 | 11 245 | 7 000 | 535 | 18 780 |
| of which revaluation reserve for shares of which revaluation reserve for bonds |
392 780 |
||||||||||
| of which revaluation reserve for other assets than bonds and shares | 1 | ||||||||||
| of which relating to non-current assets held for sale and disposal groups Balance at the beginning of the period (31/12/2010) |
1 245 | 4 340 | - 1 529 | 35 66 |
- 443 | 7 749 | 12 - 281 |
47 11 147 |
7 000 | 527 | 47 18 674 |
| Net result for the period Other comprehensive income for the period |
0 0 |
0 0 |
0 0 |
0 131 |
0 - 78 |
- 424 2 |
0 - 92 |
- 424 - 38 |
0 0 |
28 - 12 |
- 396 - 50 |
| Total comprehensive income | 0 | 0 | 0 | 131 | - 78 | - 423 | - 92 | - 462 | 0 | 16 | - 446 |
| Dividends | 0 | 0 | 0 | 0 | 0 | - 850 | 0 | - 850 | 0 | 0 | - 850 |
| Capital increase | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Results on (derivatives on) treasury shares Impact business combinations |
0 0 |
0 0 |
0 0 |
0 0 |
0 0 |
0 - 1 |
0 0 |
0 - 1 |
0 0 |
0 0 |
0 - 1 |
| Change in minorities | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - 26 | - 26 |
| Total change | 0 | 0 | 0 | 131 | - 78 | - 1 274 | - 92 | - 1 313 | 0 | - 10 | - 1 323 |
| Balance at the end of the period (30/9/2011) | 1 245 | 4 340 | - 1 529 | 197 | - 521 | 6 475 | - 373 | 9 834 | 7 000 | 517 | 17 351 |
| of which revaluation reserve for shares of which revaluation reserve for bonds |
208 - 11 |
||||||||||
| of which revaluation reserve for other assets than bonds and shares | 0 | ||||||||||
| of which relating to non-current assets held for sale and disposal groups | 3 | 10 | 13 | 13 |
The changes in equity of the first nine months of 2011 include the accounting of a gross dividend of 0.75 euros per share as approved by the General Meeting for the 2010 financial year. The total dividend on ordinary shares amounts to 258 million euros of which 4 million euros related to treasury shares. The dividend payment also includes the payment of a coupon on the core-capital securities sold to the Belgian Federal and Flemish Regional governments of 595 million euros (i.e. 8.5% of 7 billion euros).
| In millions of EUR | 9M 2010 | 9M 2011 |
|---|---|---|
| Net cash from (used in) operating activities | 7 437 | 2 127 |
| Net cash from (used in) investing activities | - 1 214 | - 832 |
| Net cash from (used in) financing activities | - 695 | - 1 521 |
| Change in cash and cash equivalents | ||
| Net increase or decrease in cash and cash equivalents | 5 528 | - 227 |
| Cash and cash equivalents at the beginning of the period | 5 487 | 20 557 |
| Effects of exchange rate changes on opening cash and cash equivalents | 555 | - 109 |
| Cash and cash equivalents at the end of the period | 11 571 | 20 222 |
As mentioned in note 46, KBL EPB and Fidea form a disposal group. The planned divestments of KBL EPB and Fidea (of which the closing of the sale transaction is planned in the first quarter of 2012) will have the following main impacts on the cash flows included in investing activities:
• receipt of the sale price : 1 billion euro and 0.2 billion euros for KBL EPB and Fidea respectively
• reduction of cash and cash equivalents which are part of the disposal group: 3.3 billion euros and 0.2 million euros for KBL EPB and Fidea respectively (amounts of 30 September 2011).
The consolidated financial statements of the KBC Group have been prepared in accordance with the International Financial Reporting Standards (IAS 34), as adopted for use in the European Union ('endorsed IFRS'). The consolidated financial statements of KBC present one year of comparative information. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2010.
To improve transparency, as of 2011 interest on ALM hedging derivatives (i.e. those that do not qualify for fair value hedge accounting for a portfolio hedge of interest rate risk) appears as 'net interest income', whereas in previous periods this was presented under 'Net result from financial instruments at fair value'. Since the interest earned on the related assets appears under 'Net interest income', as of 2011 (not retroactively) the interest on the ALM hedging derivatives is also included in this heading. The net interest income on ALM hedging derivatives included in 'net interest income' totals -353 million euros for the first nine months of 2011.
On the 13th of July, KBC Group NV has applied to the European Commission to amend its strategic plan. On 27 July KBC Group has received approval from the European Commission to amend its strategic plan. This amendment has changed the segment reporting of the KBC Group (retroactively) as of 3Q 2011, whereby Kredyt Bank and Warta are now fully allocated to Group Centre (previously CEE business unit) and CSOB a.s. (Czech Republic) fully allocated to CEE Business unit (previously 40% of the net result was allocated to Group Centre).
A summary of the main accounting policies is provided in the annual report. In 9M2011, no changes in content were made in the accounting policies that had a material impact on the results.
KBC is structured and managed according to a number of segments (called 'business units'). This breakdown is based on a combination of geographic criteria (Belgium and Central and Eastern Europe, being the two core geographic areas the group operates in) and activity criteria (retail bancassurance versus merchant banking). The Shared Services and Operations business unit, which includes a number of divisions that provide support to and serve as a product factory for the other divisions (ICT, leasing, payments, asset management etc.) is not shown as a separate segment, as all costs and income of this business unit are allocated to the other business units and are hence included in their results. The segment reporting (see below) is based on this breakdown, but, as of 2010, also brings together all companies that
For reporting purposes, the business units hence are:
are up for divestment (according to the new strategic plan) under the Group Centre.
On the 13th of July, KBC Group NV has applied to the European Commission to amend its strategic plan. On 27 July KBC Group has received approval from the European Commission to amend its strategic plan. This amendment has changed the segment reporting of the KBC Group (retroactively) as of 3Q2011. See further under 'Statement of compliance'.
The basic principle of the segment reporting is that an individual subsidiary is allocated fully to one segment (see note 44 in annual report 2010). Exceptions are made for costs that cannot be allocated reliably to a certain segment (grouped together in a separate Group Centre) and KBC Bank NV (allocated to the different segments and to the Group Centre by means of different allocation keys).
Funding costs of goodwill regarding participations recorded in KBC Bank and KBC Insurance are allocated to the different segments in function of the subsidiaries concerned. The funding costs regarding leveraging at the level of KBC Group are not allocated.
The transactions conducted between the different segments occur at arm's length.
The figures of the segment reporting have been prepared in accordance with the general KBC accounting policies (see Note 1) and are thus in compliance with the International Financial Reporting Standards as adopted for use in the European Union (endorsed IFRS). Some exceptions to these accounting policies have been made to better reflect the underlying performance (the resulting figures are called 'underlying results'):
instruments at fair value', while the interest paid on the underlying assets is recognised as 'net interest income'. In the underlying accounts, the interest on these derivatives is also recognised in the 'net interest income' heading (where interest results on the underlying assets are already presented), without any impact on net profit. As of 2011, the net interest income on 'ALM derivatives' is included in the Net Interest Income heading in the IFRS figures (see also note 1A).
A table reconciling the net profit and the underlying net profit is provided below.
| Reconciliation between underlying result and result according to IFRS 1 KBC Group, in millions of EUR |
3Q 2010 |
2Q 2011 |
3Q 2011 |
9M 2010 |
9M 2011 |
|---|---|---|---|---|---|
| Result after tax, attributable to equity holders of the parent, UNDERLYING | 445 | 528 | -248 | 1 542 | 937 |
| + MTM of derivatives for ALM hedging | 16 | -77 | -245 | -220 | -226 |
| + gains/losses on CDOs | 221 | -86 | -618 | 723 | -580 |
| + MTM of CDO guarantee and commitment fee | -23 | -22 | -10 | -74 | -41 |
| + impairment on goodwill (and associated companies) | -43 | -17 | -57 | -71 | -74 |
| + result on legacy structured derivative business (KBC FP) | 6 | 43 | 5 | -330 | 62 |
| + MTM of own debt issued | -34 | -25 | 185 | -3 | 144 |
| + Results on divestments | -44 | -12 | -591 | -382 | -647 |
| + other | 2 | 0 | 0 | -48 | 0 |
| Result after tax, attributable to equity holders of the parent: IFRS | 545 | 333 | -1579 | 1 136 | -424 |
1 A breakdown of this reconciliation table per business unit is provided in the 'Underlying results per business unit' section of the Extended quarterly report.
In order to provide a more transparent view, taxes and minority interests are allocated to the different elements and not separately reported anymore.
The negative impact in the third quarter of 2011 is mainly caused by the widening of the credit spreads of government bonds in the designated at fair value through profit or loss portfolio. In KBC, a part of the government bond portfolio in the banking book is classified as financial assets designated at fair value through profit or loss (the fair value option) in order to significantly reduce a measurement inconsistency ('an accounting mismatch' that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases). This method is used specifically to avoid the remaining accounting mismatches relating to the loan portfolio (measured at amortized cost) and the interest rate swaps (measured at fair value) in ALM. For this purpose, a (government) bond portfolio has been classified as a financial asset at fair value through profit or loss.
In the third quarter of 2011, the market price for corporate credit decreased, as reflected in credit default swap spreads, generating a value mark-down of KBC's CDO exposure. The negative earnings impact from CDO revaluation amounted to -0.6 billion euros for 3Q 2011 (-0.6 billion euros for 9M2011), including the impact of the government guarantee but excluding the related fee and including the coverage of the CDO-linked counterparty risk against MBIA, the US monoline insurer which remained at the level of 31 December 2010, namely 70%.
The impairment on goodwill in the third quarter of 2011 mainly includes -53 million euros on the Bulgarian banking activities.
The positive impact on the results of the third quarter of 2011 can be explained by the increased risk aversion towards European banks in general (and hence also KBC), leading to a lower MTM of debt certificates included in the financial liabilities designated at fair value through profit or loss.
The third quarter results on divestments includes mainly an impairment on the sale of KBL EPB and Fidea for a total amount of 0.6 billion euro (see further note 46).
| Belgium Business |
CEE Business |
Merchant Banking Business |
Group Centre excluding interseg ment |
Inter segment |
||
|---|---|---|---|---|---|---|
| In millions of EUR | unit | unit | unit | eliminations | eliminations KBC Group | |
| INCOME STATEMENT - underlying results - 9M 2010 | ||||||
| Net interest income | 1 665 | 1 127 | 604 | 747 | 0 | 4 144 |
| Earned premiums, insurance (before reinsurance) | 2 192 | 488 | 0 | 864 | - 74 | 3 470 |
| Non-life | 787 | 237 | 0 | 476 | - 36 | 1 464 |
| Life | 1 404 | 251 | 0 | 388 | - 38 | 2 006 |
| Technical charges, insurance (before reinsurance) | - 2 152 | - 380 | 0 | - 777 | 51 | - 3 259 |
| Non-life | - 490 | - 156 | 0 | - 377 | 8 | - 1 015 |
| Life | - 1 662 | - 225 | 0 | - 400 | 43 | - 2 244 |
| Ceded reinsurance result Dividend income |
- 5 37 |
- 8 2 |
0 5 |
14 11 |
17 0 |
18 55 |
| Net result from financial instruments at fair value through | ||||||
| profit or loss | 54 | 105 | 472 | 99 | 0 | 731 |
| Net realised result from available-for-sale assets | 10 | 23 | 3 | 34 | 0 | 71 |
| Net fee and commission income | 569 | 232 | 173 | 275 | 0 | 1 249 |
| Other net income | 81 | 30 | 80 | 33 | - 9 | 215 |
| TOTAL INCOME | 2 450 | 1 619 | 1 338 | 1 301 | - 15 | 6 693 |
| Operating expenses | - 1 214 | - 874 | - 419 | - 1 030 | 15 | - 3 521 |
| Impairment | - 69 | - 284 | - 441 | - 221 | 0 | - 1 015 |
| on loans and receivables | - 49 | - 282 | - 440 | - 219 | 0 | - 989 |
| on available-for-sale assets | - 20 | 0 | - 1 | - 2 | 0 | - 23 |
| on goodwill | 0 | 0 | 0 | 0 | 0 | 0 |
| on other | 0 | - 2 | 0 | 0 | 0 | - 3 |
| Share in results of associated companies | 0 | 1 | 0 | - 16 | 0 | - 15 |
| RESULT BEFORE TAX | 1 167 | 462 | 479 | 34 | 0 | 2 142 |
| Income tax expense | - 366 | - 50 | - 106 | - 58 | 0 | - 580 |
| Net post-tax result from discontinued operations RESULT AFTER TAX |
0 801 |
0 412 |
0 372 |
0 - 23 |
0 0 |
0 1 562 |
| attributable to minority interests | 4 | 0 | 11 | 4 | 0 | 20 |
| attributable to equity holders of the parent | 797 | 412 | 361 | - 28 | 0 | 1 542 |
| INCOME STATEMENT - underlying results - 9M 2011 | ||||||
| Net interest income | 1 729 | 1 154 | 516 | 708 | 0 | 4 106 |
| Earned premiums, insurance (before reinsurance) | 1 601 | 586 | 0 | 953 | - 52 | 3 088 |
| Non-life | 650 | 250 | 0 | 520 | - 25 | 1 395 |
| Life | 951 | 336 | 0 | 433 | - 27 | 1 693 |
| Technical charges, insurance (before reinsurance) | - 1 537 | - 439 | 0 | - 737 | 37 | - 2 676 |
| Non-life | - 319 | - 129 | 0 | - 298 | 9 | - 738 |
| Life | - 1 217 | - 310 | 0 | - 439 | 28 | - 1 938 |
| Ceded reinsurance result | - 19 | - 15 | 0 | - 18 | 9 | - 43 |
| Dividend income | 40 | 2 | 6 | 11 | 0 | 59 |
| Net result from financial instruments at fair value through | ||||||
| profit or loss Net realised result from available-for-sale assets |
31 53 |
52 15 |
309 13 |
- 22 24 |
0 0 |
371 106 |
| Net fee and commission income | 533 | 246 | 147 | 237 | - 2 | 1 161 |
| Other net income | - 32 | 31 | - 78 | 24 | - 10 | - 64 |
| TOTAL INCOME | 2 401 | 1 631 | 913 | 1 180 | - 18 | 6 107 |
| Operating expenses | - 1 337 | - 950 | - 437 | - 848 | 18 | - 3 553 |
| Impairment | - 253 | - 428 | - 384 | - 113 | 0 | - 1 179 |
| on loans and receivables | - 37 | - 327 | - 357 | - 15 | 0 | - 736 |
| on available-for-sale assets | - 199 | - 98 | - 3 | - 69 | 0 | - 369 |
| on goodwill | 0 | 0 | 0 | 0 | 0 | 0 |
| on other | - 18 | - 4 | - 24 | - 30 | 0 | - 75 |
| Share in results of associated companies | 0 | 1 | 0 | - 23 | 0 | - 22 |
| RESULT BEFORE TAX | 811 | 255 | 93 | 196 | 0 | 1 353 |
| Income tax expense | - 258 | - 24 | - 38 | - 67 | 0 | - 388 |
| Net post-tax result from discontinued operations | 0 | 0 | 0 | 0 | 0 | 0 |
| RESULT AFTER TAX attributable to minority interests |
552 2 |
230 1 |
54 11 |
128 14 |
0 0 |
966 28 |
| attributable to equity holders of the parent | 551 | 229 | 43 | 114 | 0 | 937 |
In the table below, an overview is provided of certain balance sheet items divided by segment.
| Merchant | |||||
|---|---|---|---|---|---|
| Belgium | CEE | Banking | |||
| Business | Business | Business | Group | KBC | |
| In millions of EUR | unit | unit | unit | Centre | Group |
| Balance sheet information 31-12-2010 | |||||
| Total loans to customers | 51 961 | 28 960 | 48 202 | 21 543 | 150 666 |
| Of which mortgage loans | 26 952 | 10 503 | 12 809 | 11 313 | 61 577 |
| Of which reverse repos | 0 | 4 035 | 5 450 | 1 | 9 486 |
| Customer deposits | 67 663 | 38 192 | 73 538 | 18 477 | 197 870 |
| Of which repos | 0 | 3 219 | 12 179 | 0 | 15 398 |
| Balance sheet information 30-09-2011 | |||||
| Total loans to customers | 54 190 | 25 915 | 49 595 | 13 752 | 143 451 |
| Of which mortgage loans | 28 457 | 11 019 | 12 460 | 5 145 | 57 081 |
| Of which reverse repos | 0 | 89 | 7 052 | 29 | 7 170 |
| Customer deposits | 72 687 | 38 502 | 64 935 | 8 329 | 184 453 |
| Of which repos | 0 | 3 309 | 13 461 | 0 | 16 770 |
Note: The time series of customer deposits excluding repos have been restated for all previous periods. This was caused by a different allocation of the deposits of KBC Bank towards BU Belgium and BU Merchant Banking.
The geographical information is based on geographic areas, and reflects KBC's focus on Belgium (land of domicile) and Central and Eastern Europe (including Russia) – and its selective presence in other countries ('rest of the world', i.e. mainly the US, Southeast Asia and Western Europe excluding Belgium). The geographic segmentation is based on the location where the services are rendered. Since at least 95% of the customers are local customers, the location of the branch or subsidiary determines the geographic breakdown of both the balance sheet and income statement. The geographic segmentation differs significantly from the business unit breakdown, due to, inter alia, a different allocation methodology and the fact that the geographic segment 'Belgium' includes not only the Belgium business unit, but also the Belgian part of the Merchant Banking Business unit.
| Central and Eastern |
||||
|---|---|---|---|---|
| Europe and | Rest of the | |||
| In millions of EUR | Belgium | Russia | world | KBC Group |
| 9M 2010 | ||||
| Total income from external customers (underlying) | 3 033 | 2 221 | 1 439 | 6 693 |
| 31-12-2010 | ||||
| Total assets (period-end) | 209 103 | 61 269 | 50 452 | 320 823 |
| Total liabilities (period-end) | 194 672 | 55 030 | 52 447 | 302 149 |
| 9M 2011 | ||||
| Total income from external customers (underlying) | 2 628 | 2 330 | 1 149 | 6 107 |
| 30-09-2011 | ||||
| Total assets (period-end) | 196 794 | 61 341 | 46 974 | 305 109 |
| Total liabilities (period-end) | 182 213 | 55 532 | 50 013 | 287 758 |
| In millions of EUR | 3Q 2010 | 2Q 2011 | 3Q 2011 | 9M 2010 | 9M 2011 |
|---|---|---|---|---|---|
| Total | 1 562 | 1 406 | 1 341 | 4 647 | 4 142 |
| Interest income | 2 627 | 3 195 | 2 910 | 7 900 | 9 151 |
| Available-for-sale assets | 468 | 481 | 438 | 1 438 | 1 386 |
| Loans and receivables | 1 688 | 1 671 | 1 645 | 5 013 | 4 944 |
| Held-to-maturity investments | 143 | 160 | 169 | 411 | 469 |
| Other assets not at fair value | 7 | 8 | 9 | 23 | 25 |
| Subtotal, interest income from financial assets not measured at fair value through profit or loss |
2 307 | 2 321 | 2 261 | 6 884 | 6 824 |
| Financial assets held for trading | 79 | 620 | 385 | 277 | 1 552 (*) |
| Hedging derivatives | 85 | 134 | 155 | 251 | 397 |
| Other financial assets at fair value through profit or loss | 156 | 121 | 109 | 488 | 379 |
| Interest expense | - 1 065 | - 1 789 | - 1 569 | - 3 253 | - 5 009 |
| Financial liabilities measured at amortised cost | - 796 | - 828 | - 829 | - 2 383 | - 2 430 |
| Other | - 1 | 0 | - 6 | 1 | - 6 |
| Investment contracts at amortised cost | 0 | 0 | 0 | 0 | 0 |
| Subtotal, interest expense for financial liabilities not | |||||
| measured at fair value through profit or loss | - 797 | - 828 | - 835 | - 2 382 | - 2 436 |
| Financial liabilities held for trading | - 18 | - 667 | - 443 | - 65 | - 1 726 (*) |
| Hedging derivatives | - 194 | - 215 | - 191 | - 610 | - 603 |
| Other financial liabilities at fair value through profit or loss | - 57 | - 79 | - 100 | - 195 | - 244 |
(*) including interest on ALM derivatives as of 9M 2011: +1 337 million euro interest income and -1 690 million euro interest expense
| In millions of EUR | 3Q 2010 | 2Q 2011 | 3Q 2011 | 9M 2010 | 9M 2011 |
|---|---|---|---|---|---|
| Total | 11 | 42 | 10 | 61 | 86 |
| Breakdown by portfolio | |||||
| Fixed-income securities | 0 | 3 | 2 | 36 | 12 |
| Shares | 11 | 39 | 8 | 25 | 74 |
| In millions of EUR | 3Q 2010 | 2Q 2011 | 3Q 2011 | 9M 2010 | 9M 2011 |
|---|---|---|---|---|---|
| Total | 259 | 297 | 281 | 917 | 877 |
| Fee and commission income | 480 | 530 | 480 | 1 607 | 1 529 |
| Securities and asset management | 240 | 235 | 201 | 838 | 681 |
| Margin on deposit accounting (life insurance investment contracts | |||||
| w ithout DPF) | 5 | 10 | 17 | 18 | 35 |
| Commitment credit | 54 | 73 | 73 | 188 | 216 |
| Payments | 133 | 137 | 144 | 385 | 416 |
| Other | 48 | 76 | 47 | 179 | 181 |
| Fee and commission expense | - 221 | - 233 | - 200 | - 690 | - 651 |
| Commission paid to intermediaries | - 123 | - 120 | - 114 | - 372 | - 356 |
| Other | - 98 | - 113 | - 86 | - 318 | - 295 |
| In millions of EUR | 3Q 2010 | 2Q 2011 | 3Q 2011 | 9M 2010 | 9M 2011 |
|---|---|---|---|---|---|
| Total | 65 | 110 | - 149 | 345 | 53 |
| Of which net realised result following | |||||
| The sale of loans and receivables | 1 | - 10 | - 9 | 5 | - 21 |
| The sale of held-to-maturity investments | 0 | 0 | - 14 | 1 | - 14 |
| The sale of financial liabilities measured at amortised cost | 0 | - 1 | 0 | 0 | - 1 |
| Other: of which: | 64 | 121 | - 126 | 340 | 89 |
| Irregularities in KBC Lease UK | 0 | 2 | 0 | 0 | 2 |
| Income concerning leasing at the KBC Lease-group | 19 | 23 | 22 | 56 | 66 |
| Income from consolidated private equity participations | 13 | 12 | 11 | 40 | 39 |
| Income from Group VAB | 16 | 15 | 19 | 49 | 51 |
| Moratorium interests on tax recuperation | 0 | 0 | 0 | 14 | 0 |
| Realised gain on sale of building Louvain | 0 | 15 | 0 | 0 | 15 |
| Provisions re 5-5-5 bonds | 0 | 0 | - 263 | 0 | - 263 |
| Realised gains or losses on divestments | 0 | 20 | 53 | 0 | 68 |
Provision regarding 5/5/5 bonds:
In April and May 2008 KBC Bank and its Belgian subsidiaries sold structured 5/5/5 bonds 'First to default' with maturity in April and May 2013 to retail and institutional customers for a total amount of 670 million euros.
The 5/5/5 bonds are linked to the creditworthiness of Belgium, France, Spain, Italy and Greece. A credit event (as defined by the ISDA) in one of these countries would adversely affect the capital invested and no further coupons would be paid.
As a result of the Greek financial crisis, KBC Bank decided to offer comfort to retail holders of the 5/5/5 notes, by proactively clarifying KBC's contingent intention to purchase the notes, at a price equal to the invested capital less any coupons paid by the issuer (all amounts before costs and taxes), whereby such intention is conditional on the occurrence of a credit event. Until the date of this disclosure no credit event occured, but since the probability of a credit event before May 2013 on one of these countries is estimated by the financial markets to be higher than 50% on 30 September 2011, KBC had decided to book a provision of 263 million euros in the third quarter results (impact after tax of -174 million euros).
In the third quarter of 2011 the sale of Centea was finalised. The other net income of the third quarter of 2011 include a realised gain of 63 million euros on the sale of Centea. On the other hand, a negative net result from financial instruments at fair value through profit or loss was caused by the sale of Centea for an amount of -85 million euros (-56 million euros after tax) related to the discontinuation of cash flow hedges which were economically connected to Centea.
| Non | ||||
|---|---|---|---|---|
| technical | ||||
| Life | Non-life | account | TOTAL | |
| 9M 2010 | ||||
| Technical result | - 308 |
223 | 25 | - 60 |
| Earned premiums, insurance (before reinsurance) | 2 005 | 1 480 | 0 | 3 485 |
| Technical charges, insurance (before reinsurance) | - 2 228 | - 1 016 | 0 | - 3 243 |
| Net fee and commission income | - 83 | - 264 | 28 | - 319 |
| Ceded reinsurance result | - 1 |
23 | - 3 |
18 |
| Financial result | 616 | 152 | 107 | 875 |
| Net interest income | 748 | 748 | ||
| Dividend income | 37 | 37 | ||
| Net result from financial instruments at fair value | 79 | 79 | ||
| Net realised result from AFS assets | 12 | 12 | ||
| Allocation to the technical accounts | 616 | 152 | - 768 | 0 |
| Operating expenses | - 102 | - 268 | - 6 | - 376 |
| Internal costs claim paid | - 6 | - 54 | 0 | - 60 |
| Administration costs related to acquisitions | - 29 |
- 68 |
0 | - 97 |
| Administration costs | - 67 | - 145 | 0 | - 212 |
| Management costs investments | 0 | 0 | - 6 | - 6 |
| Other net income | 19 | 19 | ||
| Impairments | - 15 | - 15 |
||
| Share in results of associated companies | 0 | 0 | ||
| RESULT BEFORE TAX | 206 | 108 | 130 | 444 |
| Income tax expense | - 110 | |||
| Net post-tax result from discontinued operations | 9 | |||
| RESULT AFTER TAX | 343 | |||
| attributable to minority interest | 4 | |||
| attributable to equity holders of the parent | 340 | |||
| 9M 2011 | ||||
| Technical result | - 320 |
378 | 32 | 91 |
| Earned premiums, insurance (before reinsurance) | 1 694 | 1 410 | 0 | 3 104 |
| Technical charges, insurance (before reinsurance) | - 1 930 | - 742 |
0 | - 2 671 |
| Net fee and commission income | - 82 |
- 249 |
32 | - 299 |
| Ceded reinsurance result | - 2 |
- 41 |
0 | - 43 |
| Financial result | 481 | 100 | 76 | 657 |
| Net interest income | 765 | 765 | ||
| Dividend income | 45 | 45 | ||
| Net result from financial instruments at fair value | - 206 |
- 206 |
||
| Net realised result from AFS assets | 54 | 54 | ||
| Allocation to the technical accounts | 481 | 100 | - 581 |
0 |
| Operating expenses | - 111 |
- 270 |
- 6 |
- 386 |
| Internal costs claim paid | - 6 |
- 57 |
0 | - 63 |
| Administration costs related to acquisitions | - 31 |
- 74 |
0 | - 105 |
| Administration costs | - 74 |
- 139 |
0 | - 213 |
| Management costs investments | 0 | 0 | - 6 |
- 6 |
| Other net income | 14 | 14 | ||
| Impairments | - 416 |
- 416 |
||
| Share in results of associated companies | 0 | 0 | ||
| RESULT BEFORE TAX | 50 | 209 | - 300 | - 41 |
| Income tax expense | - 36 |
|||
| Net post-tax result from discontinued operations | - 13 | |||
| RESULT AFTER TAX attributable to minority interest |
- 90 2 |
|||
| attributable to equity holders of the parent | - 93 | |||
Note: Figures for premium income exclude the investment contracts without DPF, which roughly coincide with the unitlinked products. Figures are before elimination of transactions between the bank and insurance entities of the group (more information in the 2010 annual report).
In 2010 the Hungarian government has decided to impose a new extraordinary bank tax on the financial institutions. The bank tax was introduced for 2010, 2011 and 2012 and is due by both K&H Bank and K&H Insurance. The operating expenses for the first quarter of 2011 include the expenses related to the special tax imposed on financial institutions in Hungary payable for 2011 (62 million euros cost in 2011 fully booked in the first quarter of 2011, deductible expense).
| In millions of EUR | 3Q 2010 | 2Q 2011 | 3Q 2011 | 9M 2010 | 9M 2011 |
|---|---|---|---|---|---|
| Total | - 420 | - 332 | - 940 | - 1 102 | - 1 377 |
| Impairment on loans and receivables | - 357 | - 164 | - 473 | - 990 | - 733 |
| Breakdown by type | |||||
| Specific impairments for on-balance-sheet lending | - 328 | - 182 | - 402 | - 913 | - 703 |
| Provisions for off-balance-sheet credit commitments | - 22 | - 1 | 6 | - 30 | 13 |
| Portfolio-based impairments | - 7 | 19 | - 77 | - 48 | - 43 |
| Breakdown by business unit | |||||
| Belgium | - 21 | - 16 | - 10 | - 49 | - 37 |
| Central and Eastern Europe | - 112 | - 42 | - 234 | - 282 | - 327 |
| Merchant Banking | - 132 | - 95 | - 205 | - 440 | - 357 |
| Group Centre | - 92 | - 11 | - 24 | - 220 | - 13 |
| Impairment on available-for-sale assets | - 5 | - 118 | - 223 | - 23 | - 347 |
| Breakdown by type | |||||
| Shares | - 5 | - 14 | - 87 | - 23 | - 106 |
| Other | 0 | - 104 | - 136 | 0 | - 240 |
| Impairment on goodwill | - 13 | - 17 | - 62 | - 41 | - 79 |
| Impairment on other | - 45 | - 33 | - 183 | - 48 | - 218 |
| Intangible assets, other than goodwill | 0 | 0 | 0 | 0 | - 1 |
| Property and equipment and investment property | 0 | - 13 | 1 | - 1 | - 12 |
| Held-to-maturity assets | 0 | - 16 | - 34 | 0 | - 50 |
| Associated companies (goodwill) | - 31 | 0 | 0 | - 31 | 0 |
| Other | - 14 | - 4 | - 150 | - 15 | - 156 |
The impairment on loans and receivables for Merchant Banking business unit includes an impairment on loans & receivables in Ireland of 282 million euros for the first nine months in 2011 and an impairment of 187 million euros in 3Q2011.
For Bulgaria, KBC performed an in-depth evaluation of its Bulgarian assets for which the Group has booked an additional impairment of 96 million euros. In Hungary 92 million euros additional impairments were booked as a consequence of a new act of the Hungarian government. The Hungarian government act concerning FX mortgage lending gives an option to the clients to fully repay their FX-mortgages at a forex rate predetermined by law. This act came into force on 29 September, 2011. The 92 million impairment booked in the 3Q11 results takes into account an anticipated 20% participation rate of the client side in the program and considering the exchange rates of 30 September 2011 compared to the fixed rates. The Hungarian Banking Association has taken the matter to the Constitutional Court in Budapest and the relevant institutions of the European Union.
The impairment charge on AFS (240 million euros for 9M11 and 136 million euros for 3Q11) and HTM bonds (50 million euros for 9M11 and 34 million euros in 3Q11) is almost entirely related to impairment charges on Greek bonds. More information on this impairment charge can be found in note 47.
The impairment charge on goodwill includes in 3Q11 -53 million euros on the Bulgarian banking activities reflecting both the worsening macroeconomic situation in Bulgaria and the reduced expected cash flows from CIBANK discounted at a higher discount rate.
The impairment on other includes 148 million euros regarding the sale of Fidea based on the sale price below book value. Regarding Fidea's available for sale portfolio, an unrealized gain of 52 million euros (after tax) is included in parent shareholders' equity on 30 September 2011. At the latest at the time of closing (expected in 1Q12), these unrealized gains will be reclassified from equity to profit or loss.
| Total | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Measured | excluding | ||||||||
| at | Centea & | ||||||||
| Held for | Designated | Available | Loans and | Held to | Hedging | amortised | Fidea | ||
| In millions of EUR | trading | at fair value | for sale | receivables | maturity | derivatives | cost | Total | (IFRS 5) |
| FINANCIAL ASSETS, 31-12-2010 | |||||||||
| Loans and advances to credit institutions and investment | |||||||||
| firms a | 696 | 1 808 | 0 | 12 998 | - | - | - | 15 502 | 15 497 |
| Loans and advances to customers b | 4 109 | 6 471 | 0 | 140 087 | - | - | - | 150 666 | 143 183 |
| Discount and acceptance credit | 0 | 0 | 0 | 119 | - | - | - | 119 | 114 |
| Consumer credit | 0 | 0 | 0 | 4 274 | - | - | - | 4 274 | 4 024 |
| Mortgage loans | 0 | 380 | 0 | 61 198 | - | - | - | 61 577 | 55 517 |
| Term loans | 4 109 | 6 025 | 0 | 61 548 | - | - | - | 71 681 | 70 750 |
| Finance leasing | 0 | 0 | 0 | 4 909 | - | - | - | 4 909 | 4 909 |
| Current account advances | 0 | 0 | 0 | 4 456 | - | - | - | 4 456 | 4 376 |
| Securitised loans | 0 | 0 | 0 | 0 | - | - | - | 0 | 0 |
| Other | 0 | 66 | 0 | 3 583 | - | - | - | 3 649 | 3 494 |
| Equity instruments | 1 717 | 19 | 2 098 | - | - | - | - | 3 833 | 3 613 |
| Investment contracts (insurance) | 7 329 | - | - | - | - | - | 7 329 | 7 277 | |
| Debt instruments issued by | 7 709 | 9 727 | 51 020 | 3 477 | 13 629 | - | - | 85 562 | 80 487 |
| Public bodies | 5 806 | 8 852 | 40 612 | 132 | 12 712 | - | - | 68 114 | 63 991 |
| Credit institutions and investment firms | 731 | 266 | 5 075 | 224 | 584 | - | - | 6 879 | 6 530 |
| Corporates | 1 172 | 610 | 5 333 | 3 122 | 333 | - | - | 10 569 | 9 966 |
| Derivatives | 15 758 | - | - | - | - | 213 | - | 15 970 | 15 970 |
| Total carrying value excluding accrued intrest income | 29 988 | 25 353 | 53 117 | 156 562 | 13 629 | 213 | 0 | 278 862 | 266 027 |
| Accrued interest income | 299 | 192 | 1 025 | 463 | 325 | 73 | 0 | 2 378 | 2 259 |
| Total carrying value including accrued interest income | 30 287 | 25 545 | 54 143 | 157 024 | 13 955 | 286 | 0 | 281 240 | 268 286 |
| a Of which reverse repos | 2 284 | 2 284 | |||||||
| b Of which reverse repos | 9 486 | 9 486 | |||||||
| FINANCIAL ASSETS, 30-09-2011 | |||||||||
| Loans and advances to credit institutions and investment | |||||||||
| firms a | 4 758 | 2 260 | 0 | 14 776 | - | - | - | 21 794 | |
| Loans and advances to customers b | 97 | 7 317 | 0 | 136 037 | - | - | - | 143 451 | |
| Discount and acceptance credit | 0 | 0 | 0 | 85 | - | - | - | 85 | |
| Consumer credit | 0 | 0 | 0 | 3 938 | - | - | - | 3 938 | |
| Mortgage loans | 0 | 171 | 0 | 56 910 | - | - | - | 57 081 | |
| Term loans | 97 | 7 071 | 0 | 61 637 | - | - | - | 68 805 | |
| Finance leasing | 0 | 0 | 0 | 4 687 | - | - | - | 4 687 | |
| Current account advances | 0 | 0 | 0 | 5 400 | - | - | - | 5 400 | |
| Securitised loans | 0 | 0 | 0 | 0 | - | - | - | 0 | |
| Other | 0 | 75 | 0 | 3 381 | - | - | - | 3 456 | |
| Equity instruments | 1 054 | 31 | 1 575 | - | - | - | - | 2 661 | |
| Investment contracts (insurance) | 7 535 | - | - | - | - | - | 7 535 | ||
| Debt instruments issued by | 6 739 | 6 359 | 40 719 | 3 113 | 14 471 | - | - | 71 401 | |
| Public bodies | 5 266 | 5 673 | 32 500 | 330 | 13 824 | - | - | 57 592 | |
| Credit institutions and investment firms | 864 | 268 | 4 036 | 213 | 406 | - | - | 5 787 | |
| Corporates | 609 | 418 | 4 183 | 2 570 | 241 | - | - | 8 022 | |
| Derivatives | 18 205 | - | - | - | - | 611 | - | 18 816 | |
| Total carrying value excluding accrued interest income Accrued interest income |
30 853 69 |
23 502 78 |
42 295 721 |
153 926 618 |
14 471 297 |
611 112 |
0 0 |
265 659 1 895 |
|
| Total carrying value including accrued interest income | 30 922 | 23 580 | 43 016 | 154 544 | 14 767 | 723 | 0 | 267 553 | |
| a Of which reverse repos | |||||||||
| b Of which reverse repos | 7 456 | ||||||||
| 7 170 |
Reclassification of Available for sale (AFS) government bonds to Held to Maturity (HTM): In the third quarter of 2011, KBC shifted 1.7 billion euros high-rated government bonds from the AFS to the HTM portfolio.
Reclassification of AFS bonds to Loans and receivables (L&R): In the third quarter of 2011, KBC shifted 0.2 billion euros Hungarian municipal bonds from AFS to L&R
| Total | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Measured | excluding | ||||||||
| Designated | at | Centea & | |||||||
| Held for | at fair | Available | Loans and | Held to | Hedging | amortised | Fidea | ||
| In millions of EUR | trading | value | for sale | receivables | maturity | derivatives | cost | Total | (IFRS 5) |
| FINANCIAL LIABILITIES, 31-12-2010 | |||||||||
| Deposits from credit institutions and investment firms a | 21 | 6 911 | - | - | - | - | 20 924 | 27 856 | 27 856 |
| Deposits from customers and debt certificates b | 648 | 20 971 | - | - | - | - | 176 252 | 197 870 | 189 518 |
| Deposits from customers | 0 | 17 069 | - | - | - | - | 135 851 | 152 920 | 145 865 |
| Demand deposits | 0 | 57 | - | - | - | - | 48 189 | 48 246 | 47 571 |
| Time deposits | 0 | 17 012 | - | - | - | - | 42 131 | 59 142 | 58 957 |
| Savings deposits | 0 | 0 | - | - | - | - | 40 245 | 40 245 | 34 056 |
| Special deposits | 0 | 0 | - | - | - | - | 4 005 | 4 005 | 4 005 |
| Other deposits | 0 | 0 | - | - | - | - | 1 281 | 1 281 | 1 276 |
| Debt certificates | 648 | 3 902 | - | - | - | - | 40 400 | 44 950 | 43 654 |
| Certificates of deposit | 0 | 22 | - | - | - | - | 14 965 | 14 987 | 14 987 |
| Customer savings certificates | 0 | 0 | - | - | - | - | 2 155 | 2 155 | 858 |
| Convertible bonds | 0 | 0 | - | - | - | - | 0 | 0 | 0 |
| Non-convertible bonds | 648 | 3 600 | - | - | - | - | 14 427 | 18 674 | 18 674 |
| Convertible subordinated liabilities | 0 | 0 | - | - | - | - | 0 | 0 | 0 |
| Non-convertible subordinated liabilities | 0 | 280 | - | - | - | - | 8 854 | 9 134 | 9 134 |
| Liabilities under investment contracts | - | 6 514 | - | - | - | - | 179 | 6 693 | 6 642 |
| Derivatives | 22 317 | 0 | - | - | - | 849 | - | 23 166 | 23 166 |
| Short positions | 1 119 | 0 | - | - | - | - | - | 1 119 | 1 119 |
| in equity instruments | 10 | 0 | - | - | - | - | - | 10 | 10 |
| in debt instruments | 1 110 | 0 | - | - | - | - | - | 1 110 | 1 110 |
| Other | 0 | 145 | - | - | - | - | 2 564 | 2 709 | 2 644 |
| Total carrying value excluding accrued interest expense | 24 105 | 34 541 | - | - | - | 849 | 199 919 | 259 414 | 250 946 |
| Accrued interest expense | 31 | 74 | - | - | - | 276 | 789 | 1 169 | 1 125 |
| Total carrying value including accrued interest expense | 24 136 | 34 615 | - | - | - | 1 124 | 200 707 | 260 582 | 252 070 |
| a Of which repos b |
8 265 | 8 265 | |||||||
| Of which repos | 15 398 | 15 398 | |||||||
| FINANCIAL LIABILITIES, 30-09-2011 | |||||||||
| Deposits from credit institutions and investment firms a | 21 | 2 983 | - | - | - | - | 21 118 | 24 122 | |
| Deposits from customers and debt certificates b | 318 | 23 101 | - | - | - | - | 161 034 | 184 453 | |
| Deposits from customers | 0 | 18 333 | - | - | - | - | 130 890 | 149 224 | |
| Demand deposits | 0 | 174 | - | - | - | - | 48 155 | 48 329 | |
| Time deposits | 0 | 18 159 | - | - | - | - | 44 127 | 62 287 | |
| Savings deposits | 0 | 0 | - | - | - | - | 33 227 | 33 227 | |
| Special deposits | 0 | 0 | - | - | - | - | 3 945 | 3 945 | |
| Other deposits | 0 | 0 | - | - | - | - | 1 435 | 1 435 | |
| Debt certificates | 318 | 4 768 | - | - | - | - | 30 144 | 35 230 | |
| Certificates of deposit | 0 | 62 | - | - | - | - | 7 450 | 7 511 | |
| Customer savings certificates | 0 | 0 | - | - | - | - | 746 | 746 | |
| Convertible bonds | 0 | 0 | - | - | - | - | 0 | 0 | |
| Non-convertible bonds | 318 | 4 509 | - | - | - | - | 13 756 | 18 583 | |
| Convertible subordinated liabilities | 0 | 0 | - | - | - | - | 0 | 0 | |
| Non-convertible subordinated liabilities | 0 | 197 | - | - | - | - | 8 192 | 8 389 | |
| Liabilities under investment contracts | - | 6 633 | - | - | - | - | 154 | 6 787 | |
| Derivatives | 23 567 | 0 | - | - | - | 1 351 | - | 24 918 | |
| Short positions | 784 | 0 | - | - | - | - | - | 784 | |
| in equity instruments | 3 | 0 | - | - | - | - | - | 3 | |
| in debt instruments | 781 | 0 | - | - | - | - | - | 781 | |
| Other | 187 | 0 | - | - | - | - | 2 702 | 2 889 | |
| Total carrying value excluding accrued interest expense | 24 876 | 32 717 | - | - | - | 1 351 | 185 008 | 243 953 | |
| Accrued interest expense | 23 | 97 | - | - | - | 244 | 1 217 | 1 580 | |
| Total carrying value including accrued interest expense | 24 899 | 32 814 | - | - | - | 1 595 | 186 225 | 245 533 | |
| a Of which repos | 4 152 | ||||||||
| b Of which repos | 16 770 |
| In millions of EUR | 30-09-2010 | 31-12-2010 | 31-03-2011 | 30-06-2011 | 30-09-2011 |
|---|---|---|---|---|---|
| Total | 142 413 | 141 179 | 134 214 | 135 674 | 136 281 |
| Breakdown per business unit | |||||
| Belgium | 51 554 | 51 961 | 52 413 | 53 364 | 54 190 |
| Central and Eastern Europe | 25 040 | 24 924 | 25 279 | 25 950 | 25 826 |
| Merchant Banking | 44 284 | 42 752 | 42 561 | 42 389 | 42 542 |
| Group Centre (*) | 21 534 | 21 542 | 13 962 | 13 972 | 13 723 |
(*) Figures as from 31/03/2011 are excluding Centea.
| In millions of EUR | 30-09-2010 | 31-12-2010 | 31-03-2011 | 30-06-2011 | 30-09-2011 |
|---|---|---|---|---|---|
| Total | 60 879 | 61 577 | 55 795 | 56 731 | 57 081 |
| Breakdown per business unit | |||||
| Belgium | 26 466 | 26 952 | 27 337 | 27 833 | 28 457 |
| Central and Eastern Europe | 10 338 | 10 503 | 10 677 | 11 045 | 11 019 |
| Merchant Banking | 13 025 | 12 809 | 12 633 | 12 550 | 12 460 |
| Group Centre (*) | 11 050 | 11 313 | 5 149 | 5 303 | 5 145 |
(*) Figures as from 31/03/2011 are excluding Centea.
| In millions of EUR | 30-09-2010 | 31-12-2010 | 31-03-2011 | 30-06-2011 | 30-09-2011 |
|---|---|---|---|---|---|
| Total | 183 219 | 182 473 | 173 492 | 171 388 | 167 683 |
| Breakdown per business unit | |||||
| Belgium | 66 570 | 67 663 | 68 554 | 70 802 | 72 687 |
| Central and Eastern Europe | 34 524 | 34 973 | 35 543 | 35 692 | 35 193 |
| Merchant Banking | 61 793 | 61 360 | 60 175 | 56 010 | 51 474 |
| Group Centre (*) | 20 332 | 18 477 | 9 221 | 8 884 | 8 329 |
(*) Figures as from 31/03/2011 are excluding Centea.
| Technical provisions, Life Insurance (In millions of EUR) |
30-09-2010 | 31-12-2010 | 31-03-2011 | 30-06-2011 | 30-09-2011 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest | Interest | Interest | Interest | Interest | |||||||
| Guaranteed | Unit Linked | Guaranteed | Unit Linked | Guaranteed | Unit Linked | Guaranteed | Unit Linked | Guaranteed | Unit Linked | ||
| Total | 18 327 | 7 117 | 7 330 | 18 704 | 7 267 | 18 885 | 7 356 | 18 860 | 7 579 | ||
| Breakdown per business unit | |||||||||||
| Belgium | 14 959 | 6 076 | 15 343 | 6 294 | 15 260 | 6 148 | 15 374 | 6 217 | 15 363 | 6 466 | |
| Central and Eastern Europe | 838 | 701 | 841 | 691 | 868 | 783 | 879 | 803 | 865 | 779 | |
| Group Centre | 2 530 | 340 | 2 586 | 345 | 2 576 | 336 | 2 633 | 335 | 2 632 | 334 |
See note 8 (Other net income), for more detail on provision regarding 5/5/5 bonds.
| in number of shares | 31-12-2010 | 30-09-2011 |
|---|---|---|
| Ordinary shares | 357 938 193 | 357 938 193 |
| of which ordinary shares that entitle the holder to a dividend payment | 344 557 548 | 344 577 616 |
| of which treasury shares | 18 171 795 | 18 169 054 |
| Non-voting core-capital securities | 237 288 134 | 237 288 134 |
| Other information | ||
| Par value per ordinary share (in euros) | 3,48 | 3,48 |
| Number of shares issued but not fully paid up | 0 | 0 |
The ordinary shares of KBC Group NV have no nominal value and are quoted on NYSE Euronext (Brussels) and on the Luxembourg Stock Exchange.
The number of KBC-shares held by group companies is shown in the table under 'treasury shares'. As at 30 September 2011, this number includes, inter alia:
During the first 9 months of 2011, there was no significant change in related parties compared to the end of 2010. In 2009, KBC entered into a guarantee agreement with the Belgian State to cover most of its potential downside risk exposure to CDOs. Included in the 3Q2011 results is the related cost of -15 million euros (-63 million euro for 9M2011), which is recognized in 'Net result from financial instruments at fair value through profit or loss'.
Note that during the second quarter of 2011, KBC paid a coupon on the non-voting core capital securities subscribed by the Belgian Federal and Flemish Regional governments for a total amount of 595 million euro.
| 9M 2010 9M 2011 For income statement comparison Additions None Exclusions Secura Full 95,04% ------ Sold in 4Q2010 KBC Peel Hunt Ltd. Full 100,00% ------ Sold in 4Q2010 KBC Financial Products Group Full 100,00% 100,00% Centea Full 100,00% ------ Sold in 3Q2011 Name Changes Assurisk became KBC Group Re SA Changes in ownership percentage and internal mergers Cibank AD Full 83,91% 100,00% Increase % with 16,09 (4Q10) Nova Ljubljanska banka Equity 30,57% 25,00% Decrease with 5,57% (1Q11) 99,00% Increase with 4,00% (2Q11) Absolut Bank Full 95,00% For balance sheet comparison 31/12/2010 30/09/2011 Additions None Exclusions Centea Full 100,00% ------ Sold in 3Q2011 Name Changes Assurisk became KBC Group Re SA Changes in ownership percentage and internal mergers Nova Ljubljanska banka Equity 30,57% 25,00% Decrease with 5,57% (1Q11) |
Company | Consolidation method |
Ownership percentage at KBC Group level |
Comments | |
|---|---|---|---|---|---|
| Sale of a number of activities in 2010 | |||||
| Absolut Bank | Full | 95,00% | 99,00% | Increase with 4,00% (2Q11) |
The sale of Centea to Crédit Agricole Group was finalised on 1 July 2011. Hence the results of the first 9 months of 2011 only include the result of the first 6 months of Centea (16 million euro after tax).
On 30 September 2011, following planned divestments fulfill the criteria of IFRS 5:
The assets and liabilities of these divestments are shown separately on the balance sheet (Non-current assets held for sale and assets associated with disposal groups on the asset side and Liabilities associated with disposal groups on the liability side): see table below for more details.
The other participations which are up for divestment in the future do not fulfill one or more of the criteria mentioned above on 30 September 2011:
| Activity: Segment: Other information: |
Private banking Group Centre On 10 October, the KBC group has reached an agreement with Precision Capital for the sale of its dedicated private banking subsidiary KBL European Private Bankers ('KBL EPB') for a total consideration of EUR 1050 million, 50 million euros of which depend on the results of KBL EPB ('conditional earn out') The transaction will release a total of approximately 0.7 billion euros in capital for KBC, resulting in a 0.6 % increase in KBC's tier-1 ratio (impact calculated on 30 June 2011). In addition, over the last 18 months, some 115 million euros in capital have already been released as a result of a reduction in risk-weighted assets. The transaction has a negative |
|---|---|
| impact of approximately 0.4 billion euros on KBC's third-quarter P&L. |
| Activity: | Insurance |
|---|---|
| Segment: | Group Centre |
| Other information: | On 17 October, KBC Group has reached an agreement with J.C. Flowers & Co. for the sale of |
| its subsidiary Fidea for a total consideration of 243,6 million euros, including 22,6 million euros | |
| pre-completion dividend and subject to pricing adjustments on closing accounts. A potential | |
| 'conditional earn out' is subject to Fidea's future results. | |
| In total, this deal will free up around 0.1 billion euros in capital for KBC, primarily by reducing | |
| risk-weighted assets by 1.8 billion euros, but also taking into account that the transaction has a | |
| negative impact of approximately 0.1 billion euros on KBC's P&L. The overall positive impact | |
| on KBC's tier-1 ratio is around 0.1% (impact calculated on 30 June 2011). |
| In millions of EUR | 3Q 2010 | 2Q 2011 | 3Q 2011 | 9M 2010 | 9M 2011 |
|---|---|---|---|---|---|
| A: DISCONTINUED OPERATIONS | |||||
| Income statement | |||||
| Income statement KBL EPB (including Vitis Life) | |||||
| Net interest income | 42 | 40 | 38 | 120 | 112 |
| Net fee and commission income | 89 | 89 | 84 | 288 | 272 |
| Other income | 8 | 2 | - 12 | 58 | 13 |
| Total income | 139 | 131 | 110 | 466 | 397 |
| Operating expenses | - 112 | - 97 | - 115 | - 346 | - 320 |
| Impairment | 1 | - 18 | - 9 | 1 | - 29 |
| Share in results of associated companies | 0 | 0 | 0 | 1 | 0 |
| Result before tax | 29 | 15 | - 15 | 123 | 48 |
| Income tax expense | - 9 | - 4 | 2 | - 41 | - 13 |
| Result after tax | 19 | 11 | - 13 | 82 | 35 |
| Result of sale of KBL EPB (including Vitis Life) | |||||
| Impairment loss recognised on the remeasurement to fair value less costs to sell | - 26 | - 11 | - 432 | - 359 | - 480 |
| Tax income related to measurement to fair value less costs to sell (deferred tax) | 0 | 0 | 0 | 0 | 0 |
| Result of sale after tax | - 26 | - 11 | - 432 | - 359 | - 480 |
| Net post-tax result from discontinued operations | - 7 | 0 | - 445 | - 278 | - 445 |
| Cashflow statement KBL EPB (including Vitis Life) | |||||
| Net cash from (used in) operating activities | 760 | 1 205 | |||
| Net cash from (used in) investing activities | - 78 | - 16 | |||
| Net cash from (used in) financing activities | - 6 | 5 | |||
| Net cash outflow/inflow | 676 | 1 193 |
| of which: | of which: | |||
|---|---|---|---|---|
| Discon | Discon | |||
| tinued | tinued | |||
| Balance sheet | 31-12-2010 | operations | 30-09-2011 | operations |
| Assets | ||||
| Cash and cash balances with central banks | 437 | 437 | 186 | 186 |
| Financial assets | 11 359 | 11 299 | 14 580 | 11 468 |
| Fair value adjustments of hedged items in portfolio hedge of interest rate risk | 7 | 7 | 11 | 11 |
| Tax assets | 83 | 83 | 80 | 77 |
| Investments in associated companies | 14 | 14 | 13 | 13 |
| Investment property and property and equipment | 240 | 234 | 263 | 227 |
| Goodwill and other intangible assets | 690 | 690 | 216 | 216 |
| Other assets | 109 | 101 | 181 | 104 |
| Total assets | 12 938 | 12 863 | 15 529 | 12 302 |
| Liabilities | ||||
| Financial liabilities | 12 489 | 12 489 | 12 214 | 12 171 |
| Technical provisions insurance, before reinsurance | 466 | 466 | 3 401 | 442 |
| Tax liabilities | 11 | 11 | 12 | 8 |
| Provisions for risks and charges | 28 | 28 | 28 | 23 |
| Other liabilities | 349 | 348 | 599 | 362 |
| Total liabilities | 13 341 | 13 341 | 16 254 | 13 006 |
| Other comprehensive income | ||||
| Available-for-sale reserve | 9 | 8 | - 67 | - 67 |
| Deferred tax on available-for-sale reserve | - 6 | - 6 | 18 | 18 |
| Translation differences | 10 | 10 | 10 | 10 |
| Total other comprehensive income | 12 | 12 | - 39 | - 39 |
| Banking and Insurance book | Trading book |
Total | Banking and insurance book maturity breakdown |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AFS | HTM | FIV* | Maturity date in 2011 |
Maturity date in 2012 |
Maturity date in & after 2013 |
||||||||
| Greece | 0,2 | 0,1 | 0,1 | 0,0 | 0,3 | 0,0 | 0,1 | 0,2 | |||||
| Portugal | 0,1 | 0,1 | 0,0 | 0,0 | 0,1 | 0,0 | 0,0 | 0,1 | |||||
| Spain | 1,8 | 0,2 | 0,0 | 0,0 | 2,1 | 0,1 | 0,5 | 1,5 | |||||
| Italy | 1,7 | 0,5 | 1,6 | 0,0 | 3,8 | 0,0 | 0,4 | 3,3 | |||||
| Ireland | 0,1 | 0,3 | 0,0 | 0,0 | 0,4 | 0,0 | 0,0 | 0,4 | |||||
| Total | 3,9 | 1,2 | 1,7 | 0,0 | 6,7 | 0,1 | 1,0 | 5,5 |
Sovereign bonds on selected European countries, in billions of EUR, 30-09-2011, carrying amounts
* Designated at fair value through profit and loss.
Sovereign bonds on selected European countries, banking and insurance book, in billions of EUR, 30-09-2011, carrying amounts
| End 2010 | End 1Q11 | End 2Q11 | End 3Q11 | |
|---|---|---|---|---|
| Greece | 0,6 | 0,6 | 0,5 | 0,3 |
| Portugal | 0,3 | 0,3 | 0,3 | 0,1 |
| Spain | 2,2 | 2,2 | 2,2 | 2,1 |
| Italy | 6,4 | 6,2 | 6,1 | 3,8 |
| Ireland | 0,5 | 0,4 | 0,4 | 0,4 |
| Total | 10,0 | 9,7 | 9,6 | 6,7 |
Market turbulences for sovereign bonds have not had any relevant impact on KBC's liquidity position and strategy. All sovereign bonds remain eligible for being pledged against the ECB.
In 2Q11, KBC considered Greek government bonds with maturities up to and including 2020 to be impaired due to the state of the Greek economy, discussions on restructuring the debt, downgrades of the debt, strongly decreased fair values, very high credit spreads and the expectation that financial institutions were to participate in the restructuring plan put forth on 21 July 2011 which included significant private sector support. For Greek government bonds maturing after 2020, KBC assessed the bonds not to be impaired since these bonds were not included in the scope of the private sector support.
In the third quarter the activity in the market for Greek government bonds continued to decline. As a result of the decrease in the traded volumes, KBC decided that a level 1 classification was no longer appropriate for these instruments. However, in our view the fair value for Greek government bonds can still be determined based on observable inputs. More specific, prices are still being quoted by several providers and these prices are in line with each other. In addition, the prices are frequently updated and bid and offer sizes are still quoted as well. Therefore, KBC reclassified its portfolio of Greek government bonds (carrying value at 30/09: 270 million euros) from level 1 to level 2 (for further information, see note 25 in the annual accounts 2010).
In 3Q11, KBC decided to book additional impairment on Greek government bonds due to the lower quoted prices in comparison with 30 June 2011. Contrary to the 2Q 2011, this decision applied to bonds maturing after 2020 as well.
Following impairments were recorded on the Greek bonds in 3Q 2011:
For the AFS portfolio:
The impairment was calculated as the difference between the amortized cost and the fair value as of 30 September 2011. This results in a recognition of additional impairment loss in the income statement of 140 million euros before taxes (YTD 262 million euros).
For the HTM portfolio:
The impairment was calculated as the difference between amortized cost and fair value as of 30 September 2011, resulting in an additional impairment loss of 36 million euros before taxes recognized in the income statement (YTD 54 million euros).
Carrying amount of Greek government bonds on 30 September 2011 forms on average 42% of the nominal amount of these bonds in available-for-sale and held-to-maturity portfolios.
The bonds held in the FIV and the trading portfolio are already recorded at fair value through P&L, thus no additional adjustment is needed.
No impairments were booked on the sovereign bonds of other European countries, since there is no evidence at this point that the future cash flows of these securities will be negatively impacted.
Significant events between the balance sheet date (30 September 2011) and the publication of this report (10 November 2011)
We have reviewed the accompanying interim condensed consolidated balance sheet of KBC Group nv (the "Company") as at 30 September 2011 and the related interim consolidated income statement, the condensed consolidated statement of comprehensive income, the consolidated statement of changes in equity and the condensed consolidated cash flow statement for the nine-month period then ended, and explanatory notes. Management is responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting ("IAS 34") as adopted for use in the European Union. Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review.
We conducted our review ("revue limitée/beperkt nazicht" as defined by the "Institut des Reviseurs d'Entreprises/Instituut van de Bedrijfsrevisoren") in accordance with the recommendation of the "Institut des Reviseurs d'Entreprises/Instituut van de Bedrijfsrevisoren" applicable to review engagements. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with the auditing standards of the "Institut des Reviseurs d'Entreprises/Instituut van de Bedrijfsrevisoren" and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34 as adopted for use in the European Union.
Brussels, 10 November 2011
Ernst & Young Bedrijfsrevisoren bcvba Statutory auditor Represented by
Pierre Vanderbeek Peter Telders Partner Partner
12PVDB0041
Not reviewed by the auditors
Extensive risk management and solvency data for 31-12-2010 is provided in KBC's 2010 Annual Report. A summary update of this information is provided below. For an explanation regarding the methodology used, please refer to the annual report.
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 (except for confirmations of letters of credit and similar export- /import-related commercial credit), standby credit and credit derivatives, 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. Structured credit exposure is described separately. Information specifically on sovereign bonds can be found under ' Note 47 (in the annual accounts 2010)'.
| Credit risk: loan portfolio overview (KBC Banking activities excl. KBL-EPB) | 31-12-20101 | 30-09-20112 | |
|---|---|---|---|
| Total loan portfolio (in billions of EUR) | |||
| Amount granted | 192 | 184 | |
| Amount outstanding | 161 | 155 | |
| Total loan portfolio, by business unit (as a % of the portfolio of credit granted) | |||
| Belgium | 31% | 34% | |
| CEE | 18% | 20% | |
| Merchant Banking | 36% | 36% | |
| Group Centre | 15% | 10% | |
| Total | 100% | 100% | |
| Impaired loans (in millions of EUR or %) | |||
| Amount outstanding | 10 950 | 10 360 | |
| Specific loan impairments | 4 696 | 4 505 | |
| Portfolio-based loan impairments | 353 | 388 | |
| Credit cost ratio, per business unit | |||
| Belgium | 0.15% | 0.09% | |
| CEE | 1.16% | 1.44% | |
| Czech Republic | 0.75% | 0.27% | |
| Slovakia | 0.96% | 0.37% | |
| Hungary | 1.98% | 3.38% | |
| Bulgaria | 2.00% | 19.12% | |
| Merchant Banking | 1.38% | 0.90% | |
| Group Centre | 1.17% | 0.09% | |
| Total | 0.91% | 0.61% | |
| Non-performing (NP) loans (in millions of EUR or %) | |||
| Amount outstanding | 6 551 | 7 190 | |
| Specific loan impairments for NP loans | 3 283 | 3 634 | |
| Non-performing ratio, per business unit | |||
| Belgium | 1.5% | 1.6% | |
| CEE | 5.3% | 5.7% | |
| Merchant Banking | 5.2% | 7.1% | |
| Group Centre | 5.8% | 5.4% | |
| Total | 4.1% | 4.6% | |
| Cover ratio | |||
| Specific loan impairments for NP loans / Outstanding NP loans | 50% | 51% | |
| Idem, excluding mortgage loans | 60% | 61% | |
| Specific and portfolio-based loan impairments for performing and NP loans / outstanding NP loans | 77% | 68% | |
| Idem, excluding mortgage loans | 96% | 85% |
31-12-2010 figures have been restated to represent the shift of Kredyt Bank from Business Unit CEE to Business Unit Group Centre.
From 30-09-2011 onward Centea is no longer included.
Further information on the provisions made for Hungary, Bulgaria and Ireland in Ireland can be found under 'Impairment – income statement (note 14 in the annual accounts 2010)'.
Remark
(*) mortgage loans: only to private persons (as opposed to the accounting figures)
| 30-09-2011, in millions of EUR | Czech republic | Slovakia | Hungary | Bulgaria | Total CEE | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total outstanding amount | 19.522 | 4.217 | 6.170 | 711 | 30.621 | ||||||||||
| Counterparty break down SME / corporate retail o/w private o/w companies |
6.174 13.348 9.866 3.481 |
% outst. 31,6% 68,4% 50,5% 17,8% |
2.326 1.891 1.594 297 |
% outst. 55,2% 44,8% 37,8% 7,0% |
2.805 3.366 3.045 320 |
% outst. 45,5% 54,5% 49,4% 5,2% |
306 406 237 169 |
% outst. 43,0% 57,0% 33,3% 23,8% |
11.610 19.010 14.742 4.268 |
% outst. 37,9% 62,1% 48,1% 13,9% |
|||||
| Mortgage loans (1) total o/w FX mortgages o/w vintage 2007 and 2008 o/w LTV > 100% |
6.210 0 2.206 424 |
% outst. 31,8% 0,0% 11,3% 2,2% |
ind. LTV 67% - - - |
1.332 0 336 0 |
% outst. 31,6% 0,0% 8,0% 0,0% |
ind. LTV 58% - - - |
2.584 2.251 1.343 532 |
% outst. 41,9% 36,5% 21,8% 8,6% |
ind. LTV 75% 79% - - |
111 65 56 12 |
% outst. 15,5% 9,2% 7,9% 1,6% |
ind. LTV 61% - - |
64% 10.237 2.317 3.942 968 |
% outst. 33,4% 7,6% 12,9% 3,2% |
|
| Probability of default (PD) low risk (PD 1-4; 0.00%-0.80%) medium risk (PD 5-7; 0.80%-6.40%) high risk (PD 8-10; 6.40%-100.00%) non-performing loans (PD 11 - 12) unrated |
12.082 5.857 869 713 1 |
% outst. 61,9% 30,0% 4,5% 3,7% 0,0% |
2.800 902 162 190 164 |
% outst. 66,4% 21,4% 3,8% 4,5% 3,9% |
3.327 1.550 706 583 3 |
% outst. 53,9% 25,1% 11,4% 9,4% 0,1% |
3 222 134 246 106 |
% outst. 0,5% 31,2% 18,9% 34,6% 14,9% |
18.213 8.531 1.872 1.731 274 |
% outst. 59,5% 27,9% 6,1% 5,7% 0,9% |
|||||
| Other risk measures outstanding non-performing loans (NPL) provisions for NPL all provisions (specific + portfolio based) cover NPL by all provisions (specific + portfolio) 2010 Credit cost ratio (CCR) (2) YTD 2011 CCR (local currency) (2) |
713 403 517 72% 0,75% 0,27% |
% outst. 3,7% |
190 117 154 81% 0,96% 0,37% |
% outst. 4,5% |
583 322 488 (5) 84% 1,98% 3,38% |
% outst. 9,4% |
246 138 140 57% 2,00% 19,12% |
% outst. 34,6% |
1.731 980 1.299 75% 1,16% 1,44% |
% outst. 5,7% |
Remarks
(1) mortgage loans: only to private persons (as opposed to the accounting figures)
(2) individual CCR's in local currencies.
(3) pre-tax loss if currency depreciates further by 30%
(4) pre-tax loss if both currency depreciates further by 30% and property value falls further by 30%
(5) provision during 3Q 2011 for the FX loans, based on a 20% client participation rate in the new act by the Hungarian government, where booked as portfolio based impairments (see 'Impairment – income statement (note 14 in the annual accounts 2010)').
| Loan portfolio Business Unit Merchant Banking 30-09-2011, in millions of EUR |
Belgium | Western Europe | o/w Ireland | USA | Southeast Asia | Global | Credit Investments | Total Merchant Banking | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total outstanding amount | 19.874 | 21.518 | 16.780 | 4.375 | 1.062 | 2.293 | 3.754 | 52.876 | |||||||||||
| Counterparty break down SME / corporate retail o/w private o/w companies |
19.874 0 0 0 |
% outst. 100,0% 0,0% 0,0% 0,0% |
8.673 12.845 12.845 0 |
% outst. 40,3% 59,7% 59,7% 0,0% |
3.934 12.845 12.845 0 |
% outst. 23,4% 76,6% 76,6% 0,0% |
4.375 0 0 0 |
% outst. 100,0% 0,0% 0,0% 0,0% |
1.062 0 0 0 |
% outst. 100,0% 0,0% 0,0% 0,0% |
2.293 0 0 0 |
% outst. 100,0% 0,0% 0,0% 0,0% |
3.754 0 0 0 |
% outst. 100,0% 0,0% 0,0% 0,0% |
40.031 12.845 12.845 0 |
% outst. 75,7% 24,3% 24,3% 0,0% |
|||
| Mortgage loans (*) total o/w FX mortgages o/w vintage 2007 and 2008 o/w LTV > 100% |
0 0 0 0 |
% outst. ind. LTV 0,0% 0,0% - 0,0% - 0,0% - |
- 12.845 0 4.691 7.527 |
59,7% 0,0% 21,8% 35,0% |
% outst. ind. LTV 106% - - - |
12.845 0 4.691 7.527 |
% outst. ind. LTV 76,6% 0,0% 28,0% 44,9% |
106% - - - |
0 0 0 0 |
% outst. ind. LTV 0,0% 0,0% 0,0% 0,0% |
- 0 - 0 - 0 - 0 |
% outst. ind. LTV 0,0% 0,0% 0,0% 0,0% |
- 0 - 0 - 0 - 0 |
% outst. ind. LTV 0,0% 0,0% 0,0% 0,0% |
- 0 - 0 - 0 - 0 |
0,0% 0,0% 0,0% 0,0% |
% outst. ind. LTV - - - |
- 12.845 0 4.691 7.527 |
% outst. 24,3% 0,0% 8,9% 14,2% |
| Probability of default (PD) low risk (PD 1-4; 0.00%-0.80%) medium risk (PD 5-7; 0.80%-6.40%) high risk (PD 8-10; 6.40%-100.00%) non-performing loans (PD 11 - 12) unrated |
13.033 4.117 911 701 1.113 |
% outst. 65,6% 20,7% 4,6% 3,5% 5,6% |
10.051 4.767 3.688 2.878 134 |
% outst. 46,7% 22,2% 17,1% 13,4% 0,6% |
7.756 3.690 2.780 2.553 0 |
% outst. 46,2% 22,0% 16,6% 15,2% 0,0% |
3.456 571 195 90 63 |
% outst. 79,0% 13,0% 4,5% 2,0% 1,4% |
674 302 62 23 0 |
% outst. 63,4% 28,5% 5,8% 2,2% 0,0% |
1.206 809 207 61 11 |
% outst. 9,0% 2,6% |
2.768 804 144 0 38 |
% outst. 73,7% 21,4% 3,8% 0,0% 1,0% |
31.188 11.370 5.206 3.752 1.360 |
% outst. 59,0% 21,5% 9,8% 7,1% 2,6% |
|||
| Other risk measures outstanding non-performing loans (NPL) provisions for NPL all provisions (specific + portfolio based) cover NPL by all provisions (specific + portfolio) 2010 Credit cost ratio (CCR) YTD 2011 CCR |
701 501 634 90% n.a. n.a. |
% outst. 3,5% |
2.878 956 1.328 46% n.a. n.a. |
% outst. 13,4% |
2.553 789 1.017 40% 2,98% 2,22% |
% outst. 15,2% |
90 70 81 90% n.a. n.a. |
% outst. 2,0% |
23 17 38 163% n.a. n.a. |
% outst. 2,2% |
61 58 60 98% n.a. n.a. |
% outst. 2,6% |
0 0 29 - n.a. n.a. |
% outst. 0,0% |
3.752 1.601 2.216 59% 1,38% 0,90% |
% outst. 7,1% |
Remarks
Belgium = Belgian Corporate Branches, KBC Lease (Belgium), KBC Commercial Finance, KBC Real Estate
Western Europe = Foreign branches in Western Europe (UK, France, Netherlands); KBC Bank Ireland (incl. former Homeloans), KBC Lease UK, Ex-Atomium assets
Ireland = KBC Bank Ireland (incl. former KBC Homeloans)
USA = foreign branch in USA
Southeast Asia = Foreign branches in Asia (Hong Kong, Singapore, China)
Global = Structured Trade Finance, Foreign branch in Dublin (Syndicated loans), KBC Bank Head-office
Credit Investments = KBC Credit Investments
(*) mortgage loans: only KBC Homeloans exposure and only to private persons (as opposed to the accounting figures)
| Loan portfolio Business Unit Group Centre (excl. EPB) 30-09-2011, in millions of EUR |
Belgium | CEER | o/w Poland | o/w Russia | Western Europe | Global | Total Group Centre (excl. EPB) | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total outstanding amount | 1.422 | 9.771 | 7.491 | 2.020 | 2.460 | 1.929 | 15.582 | ||||||||||||||
| Counterparty break down SME / corporate retail o/w private o/w companies |
1.422 0 0 0 |
% outst. 100,0% 0,0% 0,0% 0,0% |
3.702 6.069 5.821 248 |
% outst. 37,9% 62,1% 59,6% 2,5% |
2.489 5.002 4.830 172 |
% outst. 33,2% 66,8% 64,5% 2,3% |
1.046 975 899 76 |
% outst. 51,8% 48,2% 44,5% 3,8% |
2.460 0 0 0 |
% outst. 100,0% 0,0% 0,0% 0,0% |
1.929 0 0 0 |
% outst. 100,0% 0,0% 0,0% 0,0% |
9.513 6.069 5.821 248 |
% outst. 61,1% 38,9% 37,4% 1,6% |
|||||||
| Mortgage loans (*) total o/w FX mortgages o/w vintage 2007 and 2008 o/w LTV > 100% |
0 0 0 0 |
0,0% 0,0% 0,0% 0,0% |
% outst. ind. LTV 51% - - - |
4.913 3.062 3.041 1.720 |
50,3% 31,3% 31,1% 17,6% |
% outst. ind. LTV - - - - |
4.092 2.779 2.567 1.687 |
% outst. ind. LTV 54,6% 37,1% 34,3% 22,5% |
95% 110% - - |
747 210 431 22 |
37,0% 10,4% 21,3% 1,1% |
% outst. ind. LTV 55% 55% - - |
0 0 0 0 |
% outst. ind. LTV 0,0% 0,0% 0,0% 0,0% |
- - - - |
0 0 0 0 |
% outst. ind. LTV 0,0% 0,0% 0,0% 0,0% |
- - - - |
4.913 3.062 3.041 1.720 |
% outst. 31,5% 19,7% 19,5% 11,0% |
|
| Probability of default (PD) low risk (PD 1-4; 0.00%-0.80%) medium risk (PD 5-7; 0.80%-6.40%) high risk (PD 8-10; 6.40%-100.00%) non-performing loans (PD 11 - 12) unrated |
113 896 232 162 19 |
% outst. 7,9% 63,0% 16,3% 11,4% 1,3% |
5.078 2.884 789 565 455 |
% outst. 52,0% 29,5% 8,1% 5,8% 4,7% |
4.240 1.940 695 309 307 |
% outst. 56,6% 25,9% 9,3% 4,1% 4,1% |
829 847 71 230 44 |
% outst. 41,0% 41,9% 3,5% 11,4% 2,2% |
1.510 658 211 71 10 |
% outst. 61,4% 26,7% 8,6% 2,9% 0,4% |
405 1.326 150 37 11 |
% outst. 7,8% 1,9% |
7.106 5.764 1.381 835 495 |
% outst. 45,6% 37,0% 8,9% 5,4% 3,2% |
|||||||
| Other risk measures outstanding non-performing loans (NPL) provisions for NPL all provisions (specific + portfolio based) cover NPL by all provisions (specific + portfolio) 2010 Credit cost ratio (CCR) YTD 2011 CCR (local currency) |
162 138 145 90% n.a. n.a. |
% outst. 11,4% |
565 379 493 87% n.a. n.a. |
% outst. 5,8% |
309 221 310 100% 1,45% 0,36% |
% outst. 4,1% |
230 146 171 74% 0,90% -2,87% |
% outst. 11,4% |
71 54 92 130% 1,39% 1,17% |
% outst. 2,9% |
37 14 43 114% 0,78% 0,75% |
% outst. 1,9% |
835 586 824 99% 1,17% 0,09% |
% outst. 5,4% |
Remarks
Belgium = Antwerpse Diamantbank (incl. ADB Asia Pacific) CEER = Kredyt Bk, KBC Banka, Absolut Bk Western Europe = KBC Bank Deutschland Global = KBC Finance Ireland
(*) mortgage loans: only to private persons (as opposed to the accounting figures)
In the past, KBC acted as an originator of structured credit transactions and also invested in such structured credit products itself.
| In billions of EUR – 30-09-2011 | |
|---|---|
| KBC investments in structured credit products (CDOs and other ABS)* | |
| Total nominal amount o/w hedged CDO exposure o/w unhedged CDO exposure |
20.6 10.9 6.4 |
| o/w other ABS exposure | 3.3 |
| Cumulative value markdowns (mid 2007 to date)* | -5.7 |
| o/w value markdowns | -4.7 |
| for unhedged CDO exposure | -4.2 |
| for other ABS exposure | -0.5 |
| o/w Credit Value Adjustment (CVA) on MBIA cover | -1.1 |
* Note that, value adjustments to KBC's CDOs are accounted for via profit and loss (instead of directly via shareholders' equity), since the group's CDOs are mostly of a synthetic nature (meaning that the underlying assets are derivative products such as credit default swaps on corporate names). Their synthetic nature is also the reason why KBC's CDOs are not eligible for accounting reclassification under IFRS in order to neutralise their impact.
Over the third quarter of 2011, KBC continued its de-risking strategy related to the CDO and structured credit exposures resulting in a total notional reduction of 3.2 billion EUR in Q3.
The most important components of this decrease of exposure are the early termination of the Fulham Road CDO, the sale of KBC's exposure in the Wadsworth CDO and the sale of the underlying assets for the expired Aldersgate and Chiswell CDOs as well as further sales of impaired assets of the ex-Atomium portfolio.
The early termination of the Fulham Road CDO led to a nominal reduction of -1.7 billion EUR of hedged exposure and -0.3 billion EUR of unhedged exposure.
The sale of KBC's exposure in the Wadsworth CDO resulted in a reduction of nominal hedged exposure of -0.5 billion EUR.
In terms of ABS, the sale of the underlying assets for the expired Aldersgate and Chiswell CDOs as well as the sale of the impaired assets of the ex-Atomium portfolio along with other minor sales resulted in a further nominal reduction of exposure of -0.7 billion EUR.
Since the inception, the unhedged CDO positions held by KBC experienced net effective losses caused by claimed credit events until 7 October 2011 in the lower tranches of the CDO structure for a total amount of -2.1 billion euro's. Of these, -1.7 billion euro's worth of events have been settled. These have had no further impact on P/L because complete value markdowns for these CDO tranches were already absorbed in P/L in the past
As stated above, KBC bought credit protection from MBIA for a large part of the (super senior) CDOs it originated.
In February 2009, MBIA announced a restructuring plan, which included a spin-off of valuable assets, provoking a steep decline in its creditworthiness. The increase of the market value of the underlying swap in combination with the increased counterparty risk, resulted in significant additional negative value adjustments at KBC. KBC and other institutions filed court
1 Figures exclude all expired, unwound and terminated CDOs.
cases after MBIA announced its restructuring plan. After reaching an out of court settlement with MBIA, KBC on 6 September 2011 dropped out of the litigation. However, this has no impact on the protection bought from MBIA for the still outstanding CDOs.
Moreover, the remaining risk related to MBIA's insurance coverage is to a large extent mitigated as it is included in the scope of the Guarantee Agreement that was agreed with the Belgian State on 14 May 2009. The contract with the Belgian State has a nominal value of 13.9 billion EUR of which 10.9 billion EUR relates to the exposure insured by MBIA. The remaining 3 billion EUR of exposure covered by the contract with the Belgian State relates to the unhedged exposure. Of this portfolio (i.e. CDO exposure not covered by credit protection by MBIA) the super senior assets have also been included in the scope of the Guarantee Agreement with the Belgian State.
Details on the hedged CDO exposure (insurance for CDO-linked risks received from MBIA), 30-09-2011 In billions of EUR
| Total insured amount (notional amount of super senior swaps)1 | 10.9 |
|---|---|
| Details for MBIA insurance coverage | |
| - Fair value of insurance coverage received (modelled replacement value, after taking the Guarantee Agreement into account) | 1.5 |
| - CVA for counterparty risk, MBIA | -1.1 |
| (as a % of fair value of insurance coverage received) | 70% |
| 1 The amount insured by MBIA is included in the Guarantee Agreement with the Belgian State (14 May 2009). |
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 Belgian regulator. For group solvency, the so-called 'building block' method is used. This entails comparing group regulatory capital (i.e. parent shareholders' equity less intangible assets and a portion of the revaluation reserve for available-for-sale assets, plus subordinated debt, etc.) with the sum of the separate minimum regulatory solvency requirements for KBC Bank, KBL EPB and the holding company (after deduction of intercompany transactions between these entities) and KBC Insurance. The total risk-weighted volume of insurance companies is calculated as the required solvency margin under Solvency I divided by 8%. The internal target for the tier-1 capital ratio at group level has been set at 10%.
| In millions of EUR | 31-12-2010 | 30-09-2011 |
|---|---|---|
| Regulatory capital | ||
| Total regulatory capital, KBC Group (after profit appropriation) | 21 726 | 20 644 |
| Tier-1 capital | 16 656 | 16 399 |
| Parent shareholders' equity | 11 147 | 9 834 |
| Non-voting core-capital securities (2) | 7 000 | 7 000 |
| Intangible fixed assets (-) | - 429 | - 436 |
| Goodwill on consolidation (-) | - 2 517 | - 1 887 |
| Innovative hybrid tier-1 instruments (2) | 598 | 606 |
| Non-innovative hybrid tier-1 instruments (2) | 1 689 | 1 690 |
| Minority interests | 161 | 153 |
| Equity guarantee (Belgian State) | 446 | 628 |
| Revaluation reserve available-for-sale assets (-) | - 66 | - 197 |
| Hedging reserve, cashflow hedges (-) | 443 | 521 |
| Valuation diff. in fin. liabilities at fair value - own credit risk (-) | - 190 | - 334 |
| Minority interest in AFS reserve & hedging reserve, cashflow hedges (-) | - 3 | - 3 |
| Equalization reserve (-) | - 128 | - 135 |
| Dividend payout (-) (3) | - 854 | - 449 |
| IRB provision shortfall (50%) (-) | 0 | 0 |
| Limitation of deferred tax assets | - 243 | - 234 |
| Items to be deducted (1) (-) | - 397 | - 357 |
| Tier-2 & 3 capital | 5 069 | 4 245 |
| Perpetuals (incl. hybrid tier-1 not used in tier-1) | 30 | 30 |
| Revaluation reserve, available-for-sale shares (at 90%) | 392 | 187 |
| Minority interest in revaluation reserve AFS shares (at 90%) | 0 | 0 |
| IRB provision excess (+) | 132 | 515 |
| Subordinated liabilities | 4 730 | 3 822 |
| Tier-3 capital | 182 | 48 |
| IRB provision shortfall (50%) (-) | 0 | 0 |
| Items to be deducted (1) (-) | - 397 | - 357 |
| Capital requirement | ||
| Total weighted risks | 132 034 | 120 652 |
| Banking | 116 129 | 104 446 |
| Insurance | 15 676 | 16 040 |
| Holding activities | 264 | 256 |
| Elimination of intercompany transactions between banking and holding activities | - 34 | - 90 |
| Solvency ratios | ||
| Tier-1 ratio | 12,62% | 13,59% |
| Core Tier-1 ratio | 10,88% | 11,69% |
| CAD ratio | 16,45% | 17,11% |
(1) items to be deducted are split 50/50 over tier-1 and tier-2 capital. Items to be deducted include mainly participations in and subordinated claims on financial institutions in w hich KBC Bank has betw een a 10% to 50% share (predominantly NLB).
(2) According to CRD II, these items are considered as grandfathered items.
(3) for 31/12/2010: includes 595 million euros coupon on non-voting core capital securities and 259 million euros dividend on ordinary shares
The tables below show the tier-1 and CAD ratios calculated under Basel II for KBC Bank, as well as the solvency ratio of KBC Insurance. More information on the solvency of KBC Bank and KBC Insurance can be found in their consolidated financial statements and in the KBC Risk Report.
| In millions of EUR | 31-12-2010 Basel II |
30-09-2011 Basel II |
|---|---|---|
| Regulatory capital | ||
| Total regulatory capital, KBC Bank (after profit appropriation) | 18 552 | 16 675 |
| Tier 1-capital | 13 809 | 12 498 |
| Tier 2- & 3-capital | 4 743 | 4 177 |
| Total weighted risk volume | 111 711 | 100 208 |
| Credit risk | 97 683 | 86 292 |
| Market risk | 3 279 | 3 166 |
| Operational risk | 10 749 | 10 749 |
| Solvency ratios | ||
| Tier-1 ratio | 12,36% | 12,47% |
| Core tier-1 ratio | 10,48% | 10,37% |
| CAD ratio | 16,61% | 16,64% |
| in millions of EUR | 31-12-2010 | 30-09-2011 |
|---|---|---|
| Available capital | 2 712 | 2 634 |
| Required solvency margin | 1 254 | 1 283 |
| Solvency ratios and surplus | ||
| Solvency ratio (%) | 216% | 205% |
| Solvency surplus, in millions of EUR | 1 458 | 1 350 |
Investor Relations Office
E-mail: [email protected]
Go to www.kbc.com for the latest update
This presentation is provided for informational purposes only. It does not constitute an offer to sell or the solicitation to buy any security issued by the KBC group.
KBC believes that this presentation is reliable, although some information is condensed and therefore incomplete. KBC can not be held liable for any damage resulting from the use of the information.
This presentation contains non-IFRS information and forward-looking statements with respect to the strategy, earnings and capital trends of KBC, involving numerous assumptions and uncertainties. There is a risk that these statements may not be fulfilled and that future developments differ materially. Moreover, KBC does not undertake any obligation to update the presentation in line with new developments.
By reading this presentation, each investor is deemed to represent that it possesses sufficient expertise to understand the risks involved.
Execution of our strategic plan gains further momentum
Core profitability in home markets remains intact, but 3Q11 results were affected by the execution of our strategy (KBL, Fidea), one-off items (Greek government bonds, 5-5-5 bonds, Hungary, Bulgaria) and market-driven items (CDO, Ireland, share portfolio)
Impairment on Greek gov. bonds at 30 Sep 2011 was fully booked at 58% of the nominal amount
4
Good Oct'11 results lead to FY11 guidance for underlying net profit of 1.2bn EUR – 1.4bn EUR
| 1 | Refocused KBC taking shape |
|---|---|
| 2 | 3Q 2011 results affected by a range of one-off and market-driven items |
| 3 | Core profitability of KBC remains intact in difficult years |
| 4 | Comfortable solvency and solid liquidity position |
| 5 | Areas of attention |
| 6 | Wrap up |
| Annex: 3Q11 underlying performance of business units |
KBC FP Convertible Bonds
KBC FP Asian Equity Derivatives
KBC FP Insurance Derivatives
KBC FP Reverse Mortgages
KBC Peel Hunt
KBC AM in the UK
KBC AM in Ireland
KBC Securities BIC
KBC Business Capital
Secura
KBC Concord Taiwan
KBC Securities Romania
KBC Securities Serbia
Organic wind-down of international MEB loan book outside home markets
Centea
Signed:
KBL European Private Bankers
Fidea
| In preparation / work-in-progress for 2011/2012/2013 |
|---|
| Kredyt Bank |
| Warta |
| Absolut Bank |
| KBC Banka |
| NLB |
| Zagiel |
| Antwerp Diamond Bank |
| KBC Germany |
| Global Project Finance |
| International leasing outside home markets |
| KBC Real Estate Development |
Where are we mid-November 2011, in terms of execution?
Stream 1: We have signed an agreement to sell KBL epb
Stream 2: We have completed the sale of Centea + signed an agreement to sell Fidea
Stream 3: The divestment process of Warta and Kredyt Bank is on track, with a sufficient number of interested candidates, given the strategic importance
Stream 4: PIIGS exposure down by 47% between end 2Q11 and end October 2011, impairment on Greek government bonds fully booked at 58% on notional amount
Stream 5: CDO/ABS exposure reduced by 3.6bn EUR, projected capital relief (0.5bn EUR) already reached target
Stream 6: RWA at 115bn EUR (pro forma), reduction better than initially planned
KBL epb: Pure play private banking with network of local brands
Underlying net profit YTD: 47m EUR
Transaction immediately restarted in March 2011
| 1H11 | |
|---|---|
| Total assets | 10.3bn EUR |
| RWA | 4.2bn EUR |
| Market share | 1%-2% |
| Agents | approx. 700 |
| Book value | |
| Goodwill | |
| Underlying net profit YTD | +23m EUR |
| 9M11 | |
|---|---|
| Total assets | 3.4bn EUR |
| RWA | 1.8bn EUR |
| Market share | 1%-2% |
| Agents | approx. 4200 |
| Book value (after 'impairment on other' of 0.1bn EUR) |
231m EUR |
| Goodwill | 0 |
| Underlying net profit YTD | +8m EUR |
=> KBC's tier-1 ratio rose by 0.4%
=> KBC's tier-1 ratio will rise by 0.1% (at closing)
| End 2010 | End 1Q11 | End 2Q11 | End 3Q11 | End Oct'11 | |
|---|---|---|---|---|---|
| Portugal | 0.3 | 0.3 | 0.3 | 0.1 | 0.1 |
| Ireland | 0.5 | 0.4 | 0.4 | 0.4 | 0.4 |
| Italy | 6.4 | 6.2 | 6.1 | 3.8 | 2.2 |
| Greece | 0.6 | 0.6 | 0.5 | 0.3 | 0.3 |
| Spain | 2.2 | 2.2 | 2.2 | 2.1 | 2.1 |
| TOTAL | 10.0 | 9.7 | 9.6 | 6.7 | 5.1 |
=> KBC's tier-1 ratio rose by 0.7%
• We will continue to look at reducing our ABS and CDO exposure, which will lead to additional capital relief and lower P&L volatility
KBC Group risk weighted assets (in bn EUR)
Underlying net profit
Amounts in m EUR
17
Additional impairments on our Greek government bonds : 176m EUR pre-tax and 126m EUR post-tax (58% impairment and M2M change through P&L in total versus nominal amount)
Impact of 5-5-5 bonds: 263m EUR pre-tax and 174m EUR post-tax. If no credit event under ISDA definition occurs, the provision will be reversed
Impairments on AFS shares: 87m EUR (pre-tax = post-tax)
Loan loss provisions in Ireland amounted to 187m EUR pre-tax in 3Q11 (versus 49m EUR in 2Q11) and 164m EUR post-tax. Going forward, the run-rate of loan loss provisions in Ireland is estimated at roughly 200m EUR for the next couple of quarters
Adjusted for one-offs (Greek government bonds, 5-5-5 bonds, Hungary and Bulgaria), underlying net group profit amounted to 222m EUR in 3Q11 (of which 171m EUR in BE BU, 167m EUR in CEE BU, -102m EUR in MEB BU and -15m EUR in GC BU)
Loan volumes rose by 1% y-o-y. The growth of loan volumes in the Belgium and CEE business units (respectively 5% and 3% y-o-y) was partly offset by a further reduction in the international loan book (Merchant Banking and Russia) in line with strategic focus. Deposit volumes fell by 4% y-o-y mainly due to a decrease in institutional deposits (deposit volumes -17% y-o-y in MEB BU), only partly offset by increased deposit volumes in the BE and CEE BU(resp. +9% and +3% y-o-y)
Net fee and commission income stabilised year-on-year (+2% y-o-y excluding Secura, which was sold in 4Q10), but fell by 7% quarter-on-quarter
The low figure for net gains from financial instruments at fair value (10m EUR) is primarily the result of weak dealing room activity
Gains realised on AFS came to 11m EUR
| Loan book |
2007 FY |
2008 FY |
2009 FY |
2010 FY |
9M11 YTD |
|
|---|---|---|---|---|---|---|
| 'Old' BU reporting | 'New' BU reporting | |||||
| Belgium | 56bn | 0.13% | 0.09% | 0.17% | 0.15% | 0.09% |
| CEE | 31bn | 0.26% | 0.73% | 2.12% | 1.16% | 1.44% |
| CEE (excl. 3Q11 one-offs) | 0.62% | |||||
| Merchant B. (incl. Ireland) |
53bn | 0.02% | 0.48% | 1.32% | 1.38% | 0.90% |
| Merchant B. (excl. Ireland) |
36bn | 0.02% | 0.53% | 1.44% | 0.67% | 0.28% |
| Total Group | 155bn | 0.13% | 0.46% | 1.11% | 0.91% | 0.61% |
| 3Q 2011 | Non-Performing Loans (>90 days overdue) |
High risk (probability of default >6.4%) |
Restructured loans (probability of default >6.4%) |
|---|---|---|---|
| Belgium BU |
1.6% | 3.2% | 1.3% |
| CEE BU | 5.7% | 3.4% | 2.7% |
| MEB BU | 7.1% | 5.3% | 4.5% |
BELGIUM BU CEE BU
non performing loans
3Q 11 2Q 11 1Q 11 4Q 10 3Q 10 2Q 10 1Q 10 4Q 09 3Q 09 2Q 09 1Q 09
MEB BU
* 9M11 annualised with neutralisation of impact of 5-5-5 bonds
Core earnings power intact, with a significantly reduced risk profile (trading), despite drastic RWA reduction of 41bn EUR
Strong core tier-1 ratio of 11.7% at KBC Group as at 30 September 2011
Pro forma core tier-1 ratio – including the effect of divestments for which a sale agreement has been signed to date – of 12.6% at KBC Group
Source: Company filings, BoAML, SNL as of June 2011
(1) Pro forma Tier 1 ratio of 14.3% if taking into account effect of divestments for which a sale agreement has been signed to date (i.e. 9th August 2011)
(2) Group solvency
(3) Excluding cashes
Core Tier 1 as of Jun-11 (Basel II)
Tier 1 as of Jun-11 (Basel II)
36 As of 19 December 2011, conversion of all or part of the federal YES into ordinary shares (1 for 1) may be requested by KBC Group. If KBC Group seeks such conversion, the Belgian State may choose to receive a cash payment with redemption at 15% premium until mid-December 2012. Intention to reimburse 500m EUR at 15% premium before end 2011 to Federal Government without pari passu, waived by the Flemish Government until end of 2012
Taking into account the sale of our Polish entities, the lower-than-initially-estimated impact on RWA of CRD3, B3 and Solvency2, the reduction in RWA due to the shift from IRB Foundation to IRB Advanced and lower-than-expected organic growth, we estimate that RWA will amount to110bn EUR at the end of 2013 (instead of the 151bn EUR previously estimated)
• KBC Bank further improved its already excellent funding profile, as reflected by the increased part of stable funding from customers. This underlines our retail, SME, mid-cap bancassurance model with a relatively low risk profile
The recourse on net short-term funding is limited, and this latter is three times covered by a buffer consisting of central banks eligible assets
| (m EUR) | Impairments on AFS |
Impairments on HTM |
Total pre-tax impairments |
Total post-tax impairments |
|---|---|---|---|---|
| Belgium BU |
-66 | -13 | -79 | -52 |
| CEE BU | -45 | 0 | -45 | -37 |
| MEB BU | -1 | -7 | -9 | -7 |
| GC BU | -28 | -16 | -43 | -29 |
| TOTAL | -140 | -36 | -176 | -126 |
| Irish loan book – key figures September 2011 |
||||
|---|---|---|---|---|
| Loan portfolio | Outstanding | NPL | NPL | |
| coverage | ||||
| Owner occupied | 9.6bn | 10.5% | 27% | |
| mortgages | 29% | |||
| Buy to let mortgages | 3.2bn | 16.2% | 33% | |
| SME /corporate | 2.1bn | 16.1% | 43% | |
| Real estate investment | 1.4bn | 23.3% | 42% | |
| Real estate development | 0.5bn | 67.4% | 81% | 63% |
| 16.8bn | 15.2% | 40% |
| Hungarian loan book – key figures September 2011 | |||||||
|---|---|---|---|---|---|---|---|
| Loan portfolio | Outstanding NPL |
NPL coverage | |||||
| SME/Corporate | 2.8bn | 7.7% | 69% | ||||
| Retail | 3.4bn | 10.8% | 94% | ||||
| o/w private | 3.0bn | 10.8% | 96%* | ||||
| o/w companies | 0.3bn | 10.3% | 76% | ||||
| 6.2bn | 9.4% | 84%** |
* Includes the loan loss provisions of 92m EUR for the expected impact of the new law on FX mortgage repayment.
** Excluding the loan loss provisions of 92m EUR, the NPL coverage ratio for Hungary would have been 68%
• The Bulgarian credit portfolio contains a part of loans granted before the acquisition by KBC, which is primarily linked to the Commercial Real Estate sector. It is monitored separately from the core SME and retail business
• Given the domestic Real Estate market has not improved, KBC reassessed its required provisioning levels in 3Q11. This led to additional loan loss provisions totaling 96m EUR in 3Q11, which the Group will book resulting in a NPL coverage ratio of 57%
• Due to the more difficult macroeconomic environment, KBC also decided to impair goodwill in the amount of 53m EUR
| Outstanding CDO exposure (bn EUR) |
Notional | Outstanding markdowns |
|---|---|---|
| - Hedged portfolio - Unhedged portfolio |
10.9 6.4 |
-1.1 -4.2 |
| TOTAL | 17.3 | -5.3 |
| Amounts in bn EUR |
Total |
|---|---|
| Outstanding value adjustments Claimed and settled losses - Of which impact of settled credit events |
-5.3 -2.1 -1.7 |
| 10% | 20% | 50% | |
|---|---|---|---|
| Spread tightening | +0.2bn | +0.3bn | +0.8bn |
| Spread widening | -0.0bn | -0.1bn | -0.4bn |
* Figures exclude all expired, unwound or terminated CDOs
** Taking into account the guarantee transacted with the Belgian State and a provision rate for MBIA at 70%
The total FP CDO exposure includes the 'unhedged' own investment portfolio as well as the 'hedged' portfolio that is insured by MBIA
7bn EUR worth of core capital securities subscribed by the Belgian Federal and Flemish Regional Governments
| Belgian State | Flemish Region | |||
|---|---|---|---|---|
| Amount | 3.5bn | 3.5bn | ||
| Instrument | Perpetual fully paid up new class of non-transferable securities qualifying as core capital | |||
| Ranking | Pari passu with ordinary stock upon liquidation | |||
| Issuer | KBC Group Proceeds used to subscribe ordinary share capital at KBC Bank (5.5bn) and KBC Insurance (1.5bn) |
|||
| Issue Price | 29.5 EUR | |||
| Interest coupon | Conditional on payment of dividend to shareholders The higher of (i) 8.5% or (ii) 120% of the dividend for 2009 and 125% for 2010 onwards Not tax deductible |
|||
| Buyback option KBC | Option for KBC to buy back the securities at 150% of the issue price (44.25) | |||
| Conversion option KBC | From December 2011 onwards, option for KBC to convert securities into shares (1 for 1). In that case, the State can ask for cash at 115% (33.93) increasing every year by 5% to the maximum of 150% |
No conversion option |
Execution of our strategic plan gains further momentum
Core profitability in home markets remains intact, but 3Q11 results were affected by the execution of our strategy (KBL, Fidea), one-off items (Greek government bonds, 5-5-5 bonds, Hungary, Bulgaria) and market-driven items (CDO, Ireland, share portfolio)
Impairment on Greek gov. bonds at 30 Sep 2011 was fully booked at 58% of the nominal amount
| Total loans ** |
Of which mortgages |
Customer deposits |
AuM | Life reserves |
|
|---|---|---|---|---|---|
| Volume | 54bn | 28bn | 73bn | 138bn | 22bn |
| Growth q/q* | +2% | +2% | +3% | -4% | +1% |
| Growth y/y | +5% | +8% | +9% | -9% | +4% |
* Non-annualised
** Loans to customers, excluding reverse repos (and not including bonds)
Corrected for one-offs (impairments Greek government bonds and impact 5-5-5 product), the underlying net group profit in the Belgium Business Unit amounted to 171m EUR in 3Q11
Product spread on new production
| Total loans ** |
Of which mortgages |
Customer deposits |
AUM | Life reserves |
|
|---|---|---|---|---|---|
| Volume | 26bn | 11bn | 35bn | 11bn | 2bn |
| Growth q/q* | +1% | +0% | +1% | -8% | -2% |
| Growth y/y | +3% | +4% | +3% | -15% | +7% |
* Non-annualised
** Loans to customers, excluding reverse repos (and not including bonds)
Corrected for one-offs (Greek government bonds, Hungary and Bulgaria), underlying net group profit in the CEE Business Unit amounted to 167m EUR in 3Q11
| Total loans | Mortgages | Deposits | |||||
|---|---|---|---|---|---|---|---|
| q/q | y/y | q/q | y/y | q/q | y/y | ||
| CZ | +3% | +8% | +2% | +9% | 1% | +4% | |
| SK | +2% | +9% | +4% | +20% | -2% | 0% | |
| HU | -3% | -10% | -5% | -11% | +4% | +3% | |
| BU | -16% | -21% | -19% | -21% | +4% | +3% | |
| TOTAL | +1% | +3% | +0% | +4% | +1% | +3% |
Loan to deposit ratio at 74%
At 388m EUR, net interest income rose by 2% q-o-q, but fell by 2% y-o-y (organic growth only)
86 84 76 76 72 78 81 2Q 2011 1Q 2011 4Q 2010 3Q 2010 2Q 2010 1Q 2010 3Q 2011 2Q 2011 12.2 1Q 2011 12.3 4Q 2010 12.7 3Q 2010 13.2 2Q 2010 12.6 1Q 2010 13.4 3Q 2011 11.2 F&C AUM Amounts in bn EUR
• Operating expenses (297m EUR) fell by 1% q-o-q and 14% y-o-y on an organic basis (excluding FX impact)
| Loan book |
2008* CCR |
2009* CCR |
2010 CCR |
9M11 CCR |
|
|---|---|---|---|---|---|
| CEE | 31bn | 0.73% | 2.12% | 1.16% | 1.44% |
| - Czech Rep. - Hungary - Slovakia - Bulgaria |
20bn 6bn 4bn 1bn |
0.38% 0.41% 0.82% 1.49% |
1.12% 2.01% 1.56% 2.22% |
0.75% 1.98% 0.96% 2.00% |
0.27% 3.38% 0.37% 19.12% |
* CCR according to 'old' business unit reporting'
| Total loans |
Customer deposits |
|
|---|---|---|
| Volume | 43bn | 51bn |
| Growth q/q* | 0% | -8% |
| Growth y/y* | -4% | -17% |
*non-annualised
Adjusted for one-offs (Greek government bonds and 5-5-5 bonds), underlying net group profit in the Merchant Banking Business Unit amounted to -102m EUR in 3Q11
Impairment of 9m EUR pre-tax for Greek government bonds
Besides the existing activities of the holding and shared-services companies at 'Group Centre', all upcoming divestments were shifted to 'Group Centre' from 1Q10 onwards. The q-o-q decrease in net group profit is chiefly attributable to the results of the companies that have been earmarked for divestment in the coming years. Note that the divestment of Centea was finalised on 1 July 2011 (3Q11), while the sale of KBL epb and Fidea was announced in October 2011
Adjusted for one-offs (Greek government bonds), underlying net group profit in the Group Centre Business Unit amounted to -15m EUR in 3Q11
| 3Q11 | |
|---|---|
| Group item (ongoing business) |
-17 |
| Planned divestments |
-27 |
| - Centea |
0 |
| - Fidea |
-15 |
| - Kredyt Bank |
11 |
| - Warta |
15 |
| - Absolut Bank |
17 |
| - 'old' Merchant Banking activities |
-8 |
| - KBL EPB |
-13 |
| - Other |
-34 |
| TOTAL underlying net group profit |
-44 |
| 1Q 2010 | 2Q 2010 | 3Q 2010 | 4Q 2010 | 1Q 2011 | 2Q 2011 | 3Q 2011 | |
|---|---|---|---|---|---|---|---|
| NPL NPL formation |
17.9% 3.9% |
17.8% -0.1% |
18.3% 0.5% |
16.8% -1.5% |
16.1% -0.7% |
13.5% -2.6% |
11.4% -2.1% |
| Restructured loans | 10.3% | 10.3% | 9.7% | 6.3% | 4.2% | 3.9% | 3.9% |
| Loan loss provisions (m EUR) | 0 | 19 | 12 | -9 | -29 | -9 | -8 |
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.