Quarterly Report • Feb 11, 2021
Quarterly Report
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Summary 3 Financial highlights 4 Overview of results and balance sheet 5 Analysis of the quarter 6 Analysis of the year-to-date period 9 Risk statement, economic views and guidance 10
Consolidated income statement 14 Consolidated statement of comprehensive income 16 Consolidated balance sheet 17 Consolidated statement of changes in equity 18 Consolidated cashflow statement 19 Notes on statement of compliance and changes in accounting policies 20 Notes on segment reporting 28 Other notes 29 Additional information
Credit risk 40 Solvency 46 Income statement, volumes and ratios per business unit 51 Details of ratios and terms 59
The expectations, forecasts and statements regarding future developments that are contained in this report are, of course, based on assumptions and are contingent on a number of factors that will come into play in the future. Consequently, the actual situation may turn out to be (substantially) different.
[email protected] KBC Group NV, Investor Relations Office, Havenlaan 2, 1080 Brussels, Belgium
This report contains information that is subject to transparency regulations for listed companies. Date of release: 11 February 2021
'I, Rik Scheerlinck, Chief Financial Officer of the KBC Group, certify on behalf of the Executive Committee of KBC Group NV that, to the best of my knowledge, the abbreviated financial statements included in the quarterly report are based on the relevant accounting standards and fairly present in all material respects the financial condition and results of KBC Group NV including its consolidated subsidiaries, and that the quarterly report provides a fair view of the main events, the main transactions with related parties in the period under review and their impact on the abbreviated financial statements, and an overview of the main risks and uncertainties for the remainder of
| KBC Group – overview (consolidated, IFRS) | 4Q2020 | 3Q2020 | 4Q2019 | FY2020 | FY2019 |
|---|---|---|---|---|---|
| Net result (in millions of EUR) | 538 | 697 | 702 | 1 440 | 2 489 |
| Basic earnings per share (in EUR) | 1.26 | 1.64 | 1.66 | 3.34 | 5.85 |
| Breakdown of the net result by business unit (in millions of EUR) | |||||
| Belgium | 396 | 486 | 412 | 1 001 | 1 344 |
| Czech Republic | 94 | 116 | 205 | 375 | 789 |
| International Markets | 86 | 123 | 119 | 199 | 379 |
| Group Centre | -38 | -28 | -33 | -135 | -23 |
| Parent shareholders' equity per share (in EUR, end of period) | 48.1 | 46.2 | 45.0 | 48.1 | 45.0 |
In 2020, we were confronted with the outbreak and challenges of the pandemic, a situation causing human suffering all over the world and unprecedented economic upheaval. Recently, some countries have started rolling out vaccination programmes, which could bring some degree of relief going forward. We have taken responsibility in safeguarding the health of our staff and customers, while ensuring that services continue to be provided. We have worked closely with government agencies to support all customers impacted by coronavirus, by efficiently implementing various relief measures, including loan deferrals. In our six home countries combined, we had granted a total of 13.4 billion euros in loan payment deferrals by the end of December 2020 (according to the EBA definition), as well as 0.8 billion euros' worth of loans under public guarantee schemes introduced in response to the pandemic. As a result of the lockdowns, which led to a far-reaching digital boost, our digital sales increased significantly. In that respect, the significant investments we made in digital transformation over the past few years are clearly paying off. With our renewed strategy 'Differently, the next level' – in which Kate, our new personal AI-enabled digital assistant, plays an important role – we are now going one step further by making our customer interactions even more proactive and future-proof, through the use of data and artificial intelligence. We plan to invest an additional 1.4 billion euros in digitalisation in the period 2021-2023.
As regards our financial results, we generated a net profit of 538 million euros in the last quarter of 2020. In the quarter under review, our net interest income decreased, whereas our trading and fair value result fared well. In the current lower-for-longer interest rate environment, this quarterly result has also been clearly benefiting from the diversification achieved through KBC's integrated bank-insurance model. This was reflected in higher net fee and commission income and a good non-life result (good premium growth and an excellent combined ratio of 85% for the full year). Costs were tightly managed. On a full-year basis, operating expenses excluding bank taxes fell by 4.2% compared to last year, due chiefly to the announced cost savings triggered by the pandemic. Adding the result for this quarter to the one for the first nine months of the year brings our net profit for full-year 2020 to 1 440 million euros.
Our solvency position remained very strong with a common equity ratio of 17.6%. In line with the ECB recommendation of 15 December 2020 which limits dividend payments, we will propose to the General Meeting of Shareholders in May of this year a (gross) dividend of 0.44 euros per share for the accounting year 2020, payable in May 2021. Additionally, it is the intention of the Board of Directors to distribute an extra gross dividend of 2 euros per share over the accounting year 2020 in the fourth quarter of 2021. For the latter, the final decision of the Board of Directors is subject to restrictions on dividends being lifted by the ECB.
On top of that, our dividend policy as of 2021 entails a payout ratio of at least 50% of the consolidated profit of the accounting year, of which an interim dividend of 1 euro per share, payable in November. On top of the payout ratio of at least 50% of consolidated profit, all capital which exceeds the reference capital position (a pre-Basel IV fully loaded common equity ratio of 14.5%) plus the 1% management buffer will be considered for distribution to the shareholders. Each year, the Board of Directors will take this decision at its discretion when announcing the full-year results.
Lastly, we have also updated our long-term financial guidance. Between 2020 and 2023, we are aiming to achieve a compound annual growth rate of approximately 2% for total income and approximately 1% for operating expenses (excluding bank taxes). Besides that, we also want to achieve a combined ratio below or equal to 92% by 2023.
In closing, I would like to take this opportunity to explicitly thank all stakeholders who have continued to put their trust in us. I also wish to express my utmost appreciation to all our staff, who have continued to serve our customers and support the sound functioning of the group from their homes and other remote locations. Johan Thijs, Chief Executive Officer
Our strategy rests on five principles:
• We place our customers at the centre of everything we do
• We look to offer our customers a unique bank-insurance experience • We focus on our group's long-term development and aim to achieve sustainable and
profitable growth • We meet our responsibility to society and local economies
• We focus on the joint development of solutions, initiatives and ideas within the group
on-year, with year-on-year growth in all business units. The figures have been calculated on a 'comparable scope' basis.
brought these collective impairment charges for the full-year to 783 million euros. As a consequence, the credit cost ratio for fullyear 2020 amounted to 0.60%, up from 0.12% for full-year 2019. Impairment on assets other than loans included a one-off software impairment of 59 million euros in the quarter under review.
KBC Group I Quarterly Report – 4Q2020 I p.4 Our liquidity position remained strong with an LCR of 147% and NSFR of 146%. Our capital base remained equally as robust, with a fully loaded common equity ratio of 17.6% (i.e. after deduction of the proposed dividend of 0.44 euros per share).
| Consolidated income statement, IFRS KBC Group (in millions of EUR) |
4Q2020 | 3Q2020 | 2Q2020 | 1Q2020 | 4Q2019 | FY2020 | FY2019 |
|---|---|---|---|---|---|---|---|
| Net interest income | 1 067 | 1 122 | 1 083 | 1 195 | 1 182 | 4 467 | 4 618 |
| Non-life insurance (before reinsurance) | 192 | 233 | 255 | 185 | 229 | 865 | 756 |
| Earned premiums | 450 | 448 | 435 | 443 | 441 | 1 777 | 1 721 |
| Technical charges | -258 | -215 | -180 | -258 | -212 | -912 | -966 |
| Life insurance (before reinsurance) | 4 | 1 | 6 | 0 | 2 | 10 | -6 |
| Earned premiums | 382 | 267 | 276 | 297 | 364 | 1 223 | 1 323 |
| Technical charges | -378 | -266 | -271 | -297 | -363 | -1 213 | -1 329 |
| Ceded reinsurance result | 10 | -9 | -13 | -7 | -11 | -20 | -25 |
| Dividend income | 11 | 12 | 17 | 12 | 17 | 53 | 82 |
| Net result from financial instruments at fair value through P&L1 Net realised result from debt instruments at fair value through |
80 | 85 | 253 | -385 | 130 | 33 | 181 |
| other comprehensive income | -1 | 1 | 2 | 0 | 0 | 2 | 6 |
| Net fee and commission income | 403 | 390 | 388 | 429 | 445 | 1 609 | 1 734 |
| Net other income | 37 | 37 | 53 | 50 | 47 | 176 | 282 |
| Total income | 1 802 | 1 872 | 2 043 | 1 479 | 2 041 | 7 195 | 7 629 |
| Operating expenses | -988 | -926 | -904 | -1 338 | -1 045 | -4 156 | -4 303 |
| Impairment | -122 | -63 | -857 | -141 | -82 | -1 182 | -217 |
| Of which: on financial assets at amortised cost and at fair value through other comprehensive income2 |
-57 | -52 | -845 | -121 | -75 | -1 074 | -203 |
| Share in results of associated companies & joint ventures | -2 | -2 | -3 | -3 | -1 | -11 | 7 |
| Result before tax | 690 | 881 | 279 | -3 | 912 | 1 847 | 3 116 |
| Income tax expense | -152 | -184 | -69 | -2 | -210 | -407 | -627 |
| Result after tax | 538 | 697 | 210 | -5 | 702 | 1 440 | 2 489 |
| attributable to minority interests | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| attributable to equity holders of the parent | 538 | 697 | 210 | -5 | 702 | 1 440 | 2 489 |
| Basic earnings per share (EUR) | 1.26 | 1.64 | 0.47 | -0.04 | 1.66 | 3.34 | 5.85 |
| Diluted earnings per share (EUR) Key consolidated balance sheet figures |
1.26 | 1.64 | 0.47 | -0.04 | 1.66 | 3.34 | 5.85 |
| KBC Group (in millions of EUR) | 31-12-2020 | 30-09-2020 | 30-06-2020 | 31-03-2020 | 31-12-2019 | ||
| Total assets3 | 320 743 | 321 053 | 317 246 | 301 311 | 290 591 | ||
| Loans and advances to customers, excl. reverse repos | 159 621 | 157 773 | 157 563 | 158 364 | 155 816 | ||
| Securities (equity and debt instruments) | 71 784 | 71 310 | 72 131 | 67 176 | 65 633 | ||
| Deposits from customers & debt certificates, excl. repos | 215 430 | 211 672 | 210 811 | 208 293 | 203 369 | ||
| Technical provisions, before reinsurance | 18 718 | 18 613 | 18 775 | 18 816 | 18 560 | ||
| Liabilities under investment contracts, insurance | 12 724 | 12 482 | 12 505 | 11 979 | 13 610 | ||
| Parent shareholders' equity3 | 20 030 | 19 244 | 18 570 | 18 080 | 18 722 | ||
| Selected ratios KBC group (consolidated) |
FY2020 | FY2019 | |||||
| Return on equity | 8% | 14% | |||||
| Cost/income ratio, banking (when excluding certain non-operating item) |
60% (59%) |
58% (58%) |
|||||
| Combined ratio, non-life insurance | 85% | 90% | |||||
| Common equity ratio, Basel III Danish Compromise, fully loaded [transitional] | 17.6% [18.1%] | 17.1% | |||||
| Common equity ratio, FICOD fully loaded [transitional] | 16.4% [16.9%] | 15.8% | |||||
| Leverage ratio, Basel III fully loaded | 6.4% | 6.8% | |||||
| Credit cost ratio | 0.60% | 0.12% | |||||
| Impaired loans ratio | 3.3% | 3.5% | |||||
| for loans more than 90 days past due | 1.8% | 1.9% | |||||
| Net stable funding ratio (NSFR) | 146% | 136% | |||||
| Liquidity coverage ratio (LCR) | 147% | 138% |
1 Also referred to as 'Trading and fair value income'.
2 Also referred to as 'Loan loss impairment'. 3 Note that, as of 2019, total assets and parent shareholders' equity have been restated to take account of the change in software capitalisation policy (see Note 1.1: 'Statement of compliance' of the quarterly report).
We provide a full overview of our IFRS consolidated income statement and balance sheet in the 'Consolidated financial statements' section of the quarterly report. Condensed statements of comprehensive income, changes in shareholders' equity, as well as several notes to the accounts, are also available in the same section. As regards the (changes in) definition of ratios, see 'Details of ratios and terms' in the quarterly report.
Net interest income amounted to 1 067 million euros in the quarter under review, down 5% on the figure recorded in the previous quarter and down 10% year-on-year. The quarter-on-quarter decline was due mainly to the negative impact of lower reinvestment yields and a lower positive one-off item related to inflation-linked bonds (insurance). These items more than offset the positive impact of higher margins on the new production of mortgage loans, which exceeded the margins on the outstanding portfolios in Belgium, the Czech Republic and Slovakia. Year-on-year, the decrease was mainly related to the negative impact of past CNB rate cuts in the Czech Republic, the year-on-year depreciation of the Czech koruna and Hungarian forint against the euro and the negative effect of lower reinvestment yields, all of which was only partly offset by the positive impact of TLTRO III and ECB deposit tiering, more extensive charging of negative interest rates on certain current accounts held by corporate entities and SMEs and a larger loan and government bond portfolio.
The total volume of customer lending (160 billion euros) rose slightly (0.5%) quarter-on-quarter and was up 3% year-on-year, with year-on-year growth recorded in all business units. On a comparable scope basis (eliminating the effects of changes in scope, including the full consolidation of OTP Slovakia in December 2020), the total volume of customer lending remained fairly stable quarter-on-quarter. The volume of granted loans with payment holidays in the various relief schemes amounted to 13.4 billion euros by the end of December 2020 according to the EBA definition (broken down evenly among home loans, SME loans and loans to corporations). The moratoria had already expired for approximately 8.7 billion euros of that figure by the end of December 2020 (with payments resuming for 96% of that figure). In addition, we granted some 0.8 billion euros in loans that fall under the various coronavirus-related government guarantee schemes in our home markets.
Customer deposits including debt certificates (215 billion euros) were up 1% quarter-on-quarter and 7% year-on-year, with yearon-year growth in all business units. On a comparable scope basis, the year-on-year growth was 6%. Excluding debt certificates, deposits were up by no less than 11% year-on-year. All growth figures stated disregard forex movements.
The net interest margin for the quarter under review amounted to 1.75%, down 6 and 19 basis points, respectively, on the figures recorded in the previous and year-earlier quarters.
Technical income from our non-life insurance activities (earned premiums less technical charges, plus the ceded reinsurance result) contributed 203 million euros to total income, down 10% on the performance in the previous quarter and down 7% on the corresponding year-earlier quarter. Notwithstanding higher earned premium income and a higher ceded reinsurance result, both the quarter-on-quarter and year-on-year decrease in non-life technical income was driven entirely by higher technical charges (claims gradually returning to more normal levels following the exceptionally low level in the second quarter as a consequence of the full lockdown, the impact of major claims, storm claims and an increase of the ageing reserves (of 21 million euros) in the fourth quarter). Overall, the combined ratio for full-year 2020 came to an excellent 85%, compared to 90% for full-year 2019.
Technical income from our life insurance activities (earned premiums less technical charges, plus the ceded reinsurance result) amounted to 3 million euros, compared to 0 million euros in the previous quarter and 1 million euros in the year-earlier quarter. Sales of life insurance products in the quarter under review (582 million euros) were up 39% on the level recorded in the previous quarter, due to higher sales of guaranteed-interest life products in Belgium (attributable chiefly to traditionally higher volumes in tax-incentivised pension savings products in the fourth quarter of 2020) and higher sales of unit-linked products in Belgium and the Czech Republic. Sales were up 23% on the level recorded in the year-earlier quarter, driven mainly by higher sales of unitlinked products in Belgium (due to commercial campaigns aimed at Retail/SME customers). Overall, the share of guaranteedinterest products in our total life insurance sales amounted to 56% in the quarter under review, with unit-linked products accounting for the remaining 44%.
In the quarter under review, net fee and commission income amounted to 403 million euros, up 3% on the level in the previous quarter. Quarter-on-quarter, net fee and commission income benefited from an increase in fees for our asset management business (higher management fees, partly offset by lower entry fees) and in fees for banking services (mainly securities-related fees and fees from credit files and bank guarantees), while distribution fees rose because of higher commissions paid on banking products and increased sales of life insurance products. Compared to the year-earlier quarter, net fee and commission income was down 10%, due to a combination of lower asset management related fees, lower fees for banking services (especially for payment services), stable distribution fees paid and the year-on-year depreciation of the Czech koruna and Hungarian forint against the euro. At the end of December 2020, our total assets under management amounted to 212 billion euros, up 4% quarteron-quarter and down 2% year-on-year. The quarter-on-quarter increase was due entirely to a further recovery in asset prices (+4%). The year-on-year decrease resulted mainly from limited net outflows in the 'investment advice' segment.
The net result from financial instruments at fair value (trading and fair value income) amounted to 80 million euros, down slightly by 5 million euros on the level recorded in the previous quarter (due mainly to a decline in the value of derivatives used for asset/liability management purposes, lower market value adjustments, partly offset by a higher result in the insurance share portfolio and higher dealing room and other income) and down 50 million euros year-on-year (due mainly to a decline in the value of derivatives used for asset/liability management purposes).
The other remaining income items included dividend income of 11 million euros, down slightly on the figure recorded in the previous quarter, and also down on the year-earlier figure. The remaining income lines also included 37 million euros in net other income, somewhat below the normal run rate for this item as it included a negative one-off item of 6 million euros for a legacy legal file in the Czech Republic and a negative 3 million euros for the tracker mortgage review in Ireland.
| Operating expenses 988 million euros |
• • |
Tight cost management. Operating expenses excluding bank taxes up 4% quarter on-quarter, but down 6% year-on-year. Cost/income ratio for full-year 2020 at 59% (when certain non-operating items are excluded). |
|---|---|---|
| Operating expenses in the fourth quarter of 2020 amounted to 988 million euros. Excluding bank taxes, this constitutes an increase of 4% on the level recorded in the previous quarter. This was due to a number of factors, including higher staff expenses (due largely to the higher accrual of variable compensation and wage inflation in most countries), higher ICT & marketing costs and |
Year-on-year, expenses excluding bank taxes were down 6%, due chiefly to the announced cost savings triggered by the impact of the coronavirus crisis (lower facilities, marketing and professional fees), a positive one-off impact of 10 million euros resulting from the updated software capitalisation policy and the year-on-year depreciation of the Czech koruna and Hungarian forint against the euro. These items more than offset the negative impact of higher ICT costs.
higher professional fees. These items were partly offset by a positive one-off impact of 10 million euros resulting from the updated
software capitalisation policy and lower facilities expenses.
The cost/income ratio of our banking activities came to 60% for full-year 2020. Excluding certain non-operating items, the ratio amounted to 59%, more or less in line with the 58% recorded for full-year 2019.
KBC's Board of Directors approved a change in accounting policy where software assets developed in-house that are below a certain materiality threshold will no longer be capitalised (see more detailed information in Note 1.1 of the quarterly report). The impact for 2020 was fully incorporated into the operating expenses for the fourth quarter and resulted in a positive one-off impact of 10 million euros before tax.
| Loan loss impairment | • Net loan loss impairment charges slightly up on their level in the previous quarter. |
|---|---|
| 57 | • |
| -million-euro charge | Credit cost ratio for full-year 2020 at 0.60%. |
In the fourth quarter of 2020, we recorded a 57-million-euro net loan loss impairment charge, compared with a net charge of 52 million euros in the previous quarter and 75 million euros in the fourth quarter of 2019. Most of the net impairment charge in the quarter under review related to a number of corporate loans in Belgium and the Czech Republic. In the fourth quarter, the collective impairment charges for the coronavirus crisis were adjusted slightly (reduced by 1 million euros, following updated macroeconomic forecasts and management overlay). This brought these collective impairment charges for the full-year to 783 million euros. Of this amount, 672 million euros was based on a 'management overlay' and 111 million euros captured by the ECL models through updated macroeconomic variables. A detailed calculation and background information regarding collective impairment charges for the coronavirus crisis is provided in Note 1.4 of the 'Consolidated financial statements' section of the quarterly report.
Broken down by country, loan loss impairment charges in the fourth quarter of 2020 came to 39 million euros in Belgium, 17 million euros in the Czech Republic and 8 million euros in Hungary, while there were small net reversals of impairment of 5 million euros in Ireland and 1 million euros in Slovakia, Bulgaria and the Group Centre.
For the entire group, the credit cost ratio amounted to 0.60% for full-year 2020 (0.16% excluding the amount recorded for the coronavirus crisis), up from 0.12% for full-year 2019. The impaired loans ratio was down on its level at the start of the year: at the end of December 2020, some 3.3% of our total loan book was classified as impaired (Stage 3), compared to 3.5% at year-end 2019. Impaired loans that are more than 90 days past due amounted to 1.8% of the loan book, compared to 1.9% at year-end 2019.
For an indication of the expected impact of loan loss impairment for full-year 2021, see 'Guidance' on page 11 of this publication.
Impairment on assets other than loans amounted to 66 million euros, compared to 11 million euros in the previous quarter and 7 million euros in the fourth quarter of 2019. The figure for the quarter under review included a one-off software impairment of 59 million euros, as a result of specific impairment triggers related to a few distinct software projects.
| Net result | Belgium | Czech Republic | International Markets | Group Centre |
|---|---|---|---|---|
| by business unit | ||||
| 396 million euros |
94 million euros |
86 million euros |
-38 million euros |
|
Belgium: the net result (396 million euros) fell by 90 million euros quarter-on-quarter. The fourth quarter result included lower net interest income, higher net fee and commission income, lower trading and fair value income, higher net other income, lower technical insurance results, higher operating expenses and higher impairment on assets other than loans (mainly driven by a oneoff software impairment).
Czech Republic: the net result (94 million euros) was down 19% on its level for the previous quarter. The fourth quarter result included lower net interest income, lower net fee and commission income, lower net other income (related to a negative one-off item of 6 million euros for a legacy legal file), higher operating expenses and higher impairment charges (mainly driven by a oneoff software impairment). This more than offset the quarter-on-quarter increase in trading and fair value income.
International Markets: the 86-million-euro net result breaks down as follows: 25 million euros in Slovakia, 38 million euros in Hungary, 25 million euros in Bulgaria and -3 million euros in Ireland. For the business unit as a whole, the net result was down 37 million euros quarter-on-quarter. This decrease came about mainly on account of higher bank taxes (mainly in Ireland) and higher impairment charges. This more than offset the quarter-on-quarter increase in net interest income, net fee and commission income and net other income.
Group Centre: the net result (-38 million euros) was 10 million euros lower than the figure recorded in the previous quarter, with the increase in impairment (on software), higher operating expenses and lower technical insurance result being partly offset by higher trading and fair value income.
| Belgium | Czech Republic | International Markets | |||||
|---|---|---|---|---|---|---|---|
| Selected ratios by business unit | FY2020 | FY2019 | FY2020 | FY2019 | FY2020 | FY2019 | |
| Cost/income ratio, banking (excluding certain non-operating items) | 57% | 60% | 53% | 47% | 65% | 68% | |
| Combined ratio, non-life insurance | 84% | 89% | 87% | 94% | 84% | 88% | |
| Credit cost ratio* | 0.57% | 0.22% | 0.67% | 0.04% | 0.78% | -0.07% | |
| Impaired loans ratio | 2.3% | 2.4% | 2.3% | 2.3% | 6.9% | 8.5% |
* A negative figure indicates a net impairment release (positively affecting results). See 'Details of ratios and terms' in the quarterly report.
A full results table is provided in the 'Additional information' section of the quarterly report. A short analysis of the results per business unit is provided in the analyst presentation (available at www.kbc.com).
| Equity, solvency and liquidity |
Total equity |
Common equity ratio (fully loaded) |
Liquidity coverage ratio |
Net stable funding ratio |
|---|---|---|---|---|
| 21.5 billion euros | 17.6% | 147% | 146% |
At the end of December 2020, total equity amounted to 21.5 billion euros, comprising 20.0 billion euros in parent shareholders' equity and 1.5 billion euros in additional tier-1 instruments. Total equity was up 6% on its level at the end of 20191. This came about due to the combined effect of a number of items, including the profit for the year (+1.4 billion euros), an increase in the revaluation reserve for bonds (+0.1 billion euros), negative translation differences (-0.2 billion euros, due to the depreciation of the Czech koruna and Hungarian forint in the period under review) and a number of minor items. We have provided details of these changes under 'Consolidated statement of changes in equity' in the 'Consolidated financial statements' section of the quarterly report.
At 31 December 2020, our fully loaded common equity ratio (Basel III, under the Danish compromise) amounted to 17.6%. In line with the ECB recommendation of 15 December 2020 which limits dividend payments, we will propose to the General Meeting of Shareholders in May of this year a (gross) dividend of 0.44 euros per share for the accounting year 2020, payable in May 2021. Additionally, it is the intention of the Board of Directors to distribute an extra gross dividend of 2 euros per share2 over the accounting year 2020 in the fourth quarter of 2021. For the latter, the final decision of the Board of Directors is subject to restrictions on dividends being lifted by the ECB.
For an indication of the dividend policy and capital deployment plan as of 2021, see 'Guidance' on page 11 of this publication.
Our fully loaded leverage ratio (Basel III) came to 6.4%, compared to 6.8% at the end of 2019. The solvency ratio for KBC Insurance under the Solvency II framework was 222% at the end of December 2020, compared to 202% at the end of 2019. Our liquidity position remained excellent too, as reflected in an LCR ratio of 147% and an NSFR ratio of 146% at year-end (compared to 138% and 136%, respectively, at the end of 2019).
1 Note that parent shareholders' equity for 2019 was restated by -143 million euros to take account of the change in software capitalisation policy
2 This amount is not deducted from the solvency ratios at year-end 2020
| Net result | • Net result down by 42% compared to full-year 2019. • Loan loss impairment charges significantly up, as they included 783 million euros in collective impairment charges for the coronavirus crisis. |
|---|---|
| 1 440 million euros |
• Net interest income, net fee and commission income, trading and fair value income, dividend income and net other income down. • Tight cost control and excellent non-life result. |
As we are mainly active in banking, insurance and asset management, we are exposed to a number of typical risks for these financial sectors such as – but not limited to – credit default risk, counterparty credit risk, concentration risk, movements in interest rates, currency risk, market risk, liquidity and funding risk, insurance underwriting risk, changes in regulations, operational risk, customer litigation, competition from other and new players, as well as the economy in general. KBC closely monitors and manages each of these risks within a strict risk framework, but they may all have a negative impact on asset values or could generate additional charges beyond anticipated levels.
At present, a number of items are considered to constitute the main challenges for the financial sector. These stem primarily from the impact of the coronavirus crisis on the global economy and, in particular, the financial sector (including credit and market risks and the impact of persisting low interest rates on our results). These risks come on top of risks relating to macroeconomic and political developments, which affect global and European economies, including KBC's home markets. Regulatory and compliance risks (including anti-money laundering regulations and GDPR) remain a dominant theme for the sector, as does enhanced consumer protection. Digitalisation (with technology as a catalyst) presents both opportunities and threats to the business model of traditional financial institutions, while climate-related risks are becoming increasingly prevalent. Finally, cyber risk has become one of the main threats during the past few years, not just for the financial sector, but for the economy as a whole.
We provide risk management data in our annual reports, quarterly reports and dedicated risk reports, all of which are available at www.kbc.com.
After rebounding strongly in the third quarter, European economic growth was much more moderate in the fourth quarter. Quarteron-quarter growth in the euro area turned negative again, while economic growth in Belgium and the Czech Republic remained slightly positive. The new pandemic measures following the resurgence of Covid-19 infections played an important role in this situation. The divergence between the weak service sector and the more resilient manufacturing sector was particularly noticeable. The manufacturing sector held up relatively well, helped by its more export-oriented character, meaning it also benefited from the more favourable economic recovery in China and the US.
The second pandemic wave gained some fresh momentum towards the end of 2020. Nevertheless, things appear to have taken a turn for the better in the fourth quarter. In particular, the approval of several vaccines and the start of vaccination campaigns have boosted hopes that the pandemic will ultimately be a temporary phenomenon. The agreement between the EU and the UK at year-end 2020 also reduced uncertainty about future trade relations, although the agreement is still far from complete. The conclusion of the US presidential elections removed another significant political risk. At the start of 2021, the main economic risk would seem to be in the form of a possible third pandemic wave and unexpected obstacles to the vaccination campaign.
2021 is set to be a year of transition. The impact of the vaccination programmes on the economic recovery will probably become increasingly visible in the second half of 2021. We expect an accelerated recovery for the European economy as of the second half of 2022.
Monetary and fiscal policy continue to support both the US and the euro area economies. We expect the Fed and the ECB to keep their policy rates unchanged in the years to come. Moreover, the extension in size and duration of the ECB's Pandemic Emergency Programme in December suggests that the environment of low long-term interest rates will remain in place for quite some time. We also expect intra-EMU sovereign spreads – and Bulgarian sovereign spreads – to broadly remain at their current compressed levels.
The exchange rate of the Hungarian forint against the euro was quite volatile during the fourth quarter and, on balance, ended the quarter virtually unchanged. We expect the Hungarian forint to strengthen somewhat against the euro in the first half of 2021, allowing the Hungarian Central Bank to ease its monetary policy stance again. The Czech koruna strengthened against the euro during the fourth quarter, helped by the support for long-term interest rates. We expect the Czech National Bank to raise its policy rate by 25 basis points in the second half of 2021.
The exchange rate of the US dollar against the euro weakened further in the fourth quarter, mainly as a result of weak real interest rate support. Some slight further depreciation in the short term is possible, but we expect the dollar to broadly stabilise in 2021, mainly on the back of increasing long-term interest rates in the US.
| Guidance | • Full-year 2021 guidance: |
|---|---|
| Net interest income: in the region of 4.3 billion euros |
|
| Operating expenses excluding bank taxes: increase of approximately 2% year-on-year like for-like (excluding the impact of the acquisition of OTP Slovakia) as some of the cost savings announced in 2020 (measures taken immediately after the first lockdown in March 2020) are not sustainable in 2021 and cost savings from our digital first strategy are more back-end loaded |
|
| Credit cost ratio: expected to be in line with the high end of our average through-the-cycle credit cost ratio (of 30-40 basis points) |
|
| • Basel IV impact (as of 1 January 2023) for KBC Group estimated at approximately 8 billion euros in higher risk weighted assets on a fully loaded basis at year-end 2020, corresponding with 8% risk weighted asset inflation and an impact of -1.3% points on the common equity ratio |
|
| • Long-term financial guidance: | |
| CAGR total income (2020-2023): approx. 2% by 2023 |
|
| CAGR OPEX excl. bank taxes (2020-2023): approx. 1% by 2023 |
|
| Combined ratio: < 92% by 2023 |
|
| Common equity ratio (Fully loaded, Danish Compromise): 14.5% with a management buffer of 1% on top of, as of now |
|
| • Dividend policy and capital deployment plan: | |
| • For 2019-2020: |
|
| The ECB recommendation of 15 December 2020 limits dividend payments re. 2019 and 2020 profits to the lower of 15% of cumulated 2019-2020 profits and 20 basis points of RWA |
|
| As we paid out an interim dividend of 1 euro per share in November 2019, which o represented more than 15% of the 2019 profit, the ECB recommendation limits the present dividend payment to 15% of the 2020 profits only. Therefore, for the accounting year 2020, a gross dividend of 0.44 euros per share will be proposed to the AGM and paid out in May 2021 |
|
| As a consequence of the ECB recommendation, the payout for 2019 & 2020 is below o the payout ratio of at least 50% in our dividend policy. The amounts not distributed are part of the surplus capital of KBC Group |
|
| Additionally, it is the intention of the Board of Directors of KBC Group to distribute an extra gross dividend of 2 euros per share over the accounting year 2020 in 4Q21 (this amount is not deducted from the solvency ratios at year-end 2020). The final decision of the Board of Directors is subject to restrictions on dividends being lifted by the ECB |
|
| • As of 2021: |
|
| The dividend policy entails: |
|
| A payout ratio (i.e. dividend + AT1 coupon) of at least 50% of the consolidated profit of o the accounting year |
|
| An interim dividend of 1 euro per share (payable in November of the accounting year) o as an advance of the total dividend for the accounting year |
|
| We aim to be amongst the better capitalised financial institutions in Europe. Therefore, we are aiming for a (pre-Basel IV) fully loaded CET1 ratio of 14.5% (= reference capital position). A management buffer of 1% will be held on top of the reference capital position. When this buffer is used, the Board of Directors will decide at its discretion upon the replenishment of the buffer on an annual basis |
|
| On top of the payout ratio of at least 50% of consolidated profit, all capital which exceeds the reference capital position plus the 1% management buffer, will be considered for distribution to the shareholders. Each year, the Board of Directors will take this decision at its discretion when announcing the full year results |
|
| From the moment Basel IV will apply, the capital deployment plan will be updated (as of 1 January 2023 at the earliest) |
The statutory auditor, PwC Bedrijfsrevisoren BV/Reviseurs d'Entreprises srl, represented by Roland Jeanquart and Tom Meuleman, has confirmed that its audit work, which is substantially complete, has not to date revealed any significant matters requiring adjustments to the 2020 consolidated income statement, the condensed consolidated statement of comprehensive income for the year, the consolidated balance sheet and the consolidated statement of changes in equity and explanatory notes, comprising a summary of significant accounting policies and other explanatory notes included in this press release.
__
| Upcoming events |
Annual report: 1 April 2021 AGM: 6 May 2021 1Q2021 results: 11 May 2021 Dividend: ex-date 17 May 2021; record date 18 May 2021; payment date 19 May 2021 (provided AGM approves) |
|---|---|
| More information on 4Q2020 |
Quarterly report: www.kbc.com / Investor Relations / Reports Company presentation: www.kbc.com / Investor Relations / Presentation |
| Detailed impact of coronavirus crisis |
Quarterly report, Note 1.4 in 'Consolidated financial statements according to IFRS' Company presentation, section 2 on 'Covid-19' |
| Definitions of ratios |
'Details of ratios and terms at KBC Group level' in the last section of the quarterly report. |
Consolidated financial statements according to IFRS
AC: Amortised Cost AFS: Available For Sale (IAS 39) ALM: Asset Liability Management ECL: Expected Credit Loss FA: Financial Assets FV: Fair Value FVA: Funding Value Adjustment FVO: Fair Value Option (designated upon initial recognition at Fair Value through Profit or Loss) FVOCI: Fair Value through Other Comprehensive Income FVPL: Fair Value through Profit or Loss FVPL – overlay: Fair Value through Profit or Loss - overlay GCA: Gross Carrying Amount HFT: Held For Trading MFVPL: Mandatorily Measured at Fair Value through Profit or Loss (including HFT) OCI: Other Comprehensive Income POCI: Purchased or Originated Credit Impaired Assets SPPI: Solely payments of principal and interest SRB: Single Resolution Board R/E: Retained Earnings
| (in millions of EUR) | Note | 2020 | 2019 | 4Q 2020 | 3Q 2020 | 4Q 2019 |
|---|---|---|---|---|---|---|
| Net interest income | 3.1 | 4 4 6 7 | 4618 | 1 0 6 7 | 1 1 2 2 | 1 1 8 2 |
| Interest income | 3.1 | 6 2 6 4 | 7 2 4 4 | 1464 | 1468 | 1809 |
| Interest expense | 3.1 | $-1797$ | $-2626$ | $-397$ | 346 $\blacksquare$ |
$-627$ |
| Non-life insurance (before reinsurance) | 3.7 | 865 | 756 | 192 | 233 | 229 |
| Earned premiums | 3.7 | 1 7 7 7 | 1721 | 450 | 448 | 441 |
| Technical charges | 3.7 | - 912 | - 966 | 258 | 215 $\overline{\phantom{a}}$ |
212 |
| Life insurance (before reinsurance) | 3.7 | 10 | - 6 | 4 | 1 | $\overline{2}$ |
| Earned premiums | 3.7 | 1 2 2 3 | 1 3 2 3 | 382 | 267 | 364 |
| Technical charges | 3.7 | $-1213$ | $-1329$ | $-378$ | 266 $\overline{\phantom{a}}$ |
363 |
| Ceded reinsurance result | 3.7 | $-20$ | $-25$ | 10 | - 9 | - 11 |
| Dividend income | 53 | 82 | 11 | 12 | 17 | |
| Net result from financial instruments at fair value through profit or loss | 3.3 | 33 | 181 | 80 | 85 | 130 |
| of which result on equity instruments (overlay approach) | -14 $\blacksquare$ |
93 | 23 | 13 | 28 | |
| Net realised result from debt instruments at fair value through OCI | 2 | 6 | - 1 | 1 | $\mathbf 0$ | |
| Net fee and commission income | 3.5 | 1609 | 1 7 3 4 | 403 | 390 | 445 |
| Fee and commission income | 3.5 | 2 3 6 5 | 2 4 7 6 | 602 | 575 | 643 |
| Fee and commission expense | 3.5 | 755 | - 741 | 200 $\sim$ |
184 | 198 |
| Net other income | 3.6 | 176 | 282 | 37 | 37 | 47 |
| TOTAL INCOME | 7 1 9 5 | 7629 | 1802 | 1872 | 2041 | |
| Operating expenses | 3.8 | $-4156$ | $-4303$ | - 988 | $-926$ | $-1045$ |
| Staff expenses | 3.8 | $-2329$ | $-2357$ | $-626$ | 564 | $-602$ |
| General administrative expenses | 3.8 | $-1518$ | - 1595 | $-326$ | 267 $\blacksquare$ |
$-352$ |
| Depreciation and amortisation of fixed assets | 3.8 | - 309 $\overline{\phantom{a}}$ |
- 351 | - 35 $\overline{\phantom{a}}$ |
- 96 | - 92 |
| Impairment | 3.10 | $-1182$ | $-217$ | $-122$ | 63 | - 82 |
| on financial assets at AC and at FVOCI | 3.10 | $-1074$ | $-203$ | 57 | $-52$ | - 75 |
| on goodwill | 3.10 | 0 | 0 | 0 | 0 | 0 |
| other | 3.10 | - 108 $\overline{\phantom{a}}$ |
14 $\sim$ |
- 66 | - 11 | $-7$ |
| Share in results of associated companies and joint ventures | - 11 | $\overline{7}$ | $-2$ | $-2$ | - 1 | |
| RESULT BEFORE TAX | 1847 | 3 1 1 6 | 690 | 881 | 912 | |
| Income tax expense | 3.12 | - 407 | - 627 | $-152$ | 184 ÷ |
210 $\blacksquare$ |
| Net post-tax result from discontinued operations | 0 | 0 | 0 | 0 | 0 | |
| RESULT AFTER TAX | 1 4 4 0 | 2 4 8 9 | 538 | 697 | 702 | |
| attributable to minority interests | 0 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | 0 | |
| of which relating to discontinued operations | 0 | 0 | 0 | 0 | $\it{0}$ | |
| attributable to equity holders of the parent | 1 4 4 0 | 2 4 8 9 | 538 | 697 | 702 | |
| of which relating to discontinued operations | 0 | 0 | 0 | 0 | 0 | |
| Earnings per share (in EUR) | ||||||
| Ordinary | 3.34 | 5.85 | 1.26 | 1.64 | 1.66 | |
| Diluted | 3.34 | 5.85 | 1.26 | 1.64 | 1.66 |
The equity instruments of the insurance companies within the group are designated under the overlay approach. These equity instruments, mainly classified as AFS under IAS 39, would have been measured at fair value through P&L under IFRS 9. The overlay approach reclassifies from the income statement to OCI the extra volatility related to the adoption of IFRS 9 as long as IFRS 17 is not in place, until 31 December 2022 (subject to EU endorsement).
The extra volatility due to IFRS 9, reclassified out of the net result from financial instruments at fair value through profit or loss to the revaluation reserves of equity instruments (overlay approach) refers to the unrealised fair value fluctuations amounting to -25 million euros in 2020. It can be summarized as the difference between :
| (in millions of EUR) | 2020 | 2019 | 4Q 2020 | 3Q 2020 | 4Q 2019 |
|---|---|---|---|---|---|
| RESULT AFTER TAX | 1440 | 2489 | 538 | 697 | 702 |
| Attributable to minority interests | $\Omega$ | 0 | $\mathbf{0}$ | ||
| Attributable to equity holders of the parent | 1440 | 2489 | 538 | 697 | 702 |
| OCI THAT MAY BE RECYCLED TO PROFIT OR LOSS | $-66$ | 510 | 253 | 20 | $-49$ |
| Net change in revaluation reserve (FVOCI debt instruments) | 138 | 411 | 48 | 80 | $-247$ |
| Net change in revaluation reserve (FVPL equity instruments) - overlay | $-25$ | 191 | 56 | 5 | 41 |
| Net change in hedging reserve (cashflow hedges) | 37 | $-68$ | 27 | 29 | 105 |
| Net change in translation differences | 291 $\sim$ |
18 $\blacksquare$ |
149 | $-131$ | 68 |
| Hedge of net investments in foreign operations | 74 | 3 | $-25$ | 34 | - 5 |
| Net change in respect of associated companies and joint ventures | - 6 | 0 | $-12$ | ||
| Other movements | 0 | - 3 | - 3 | 2 | |
| OCI THAT WILL NOT BE RECYCLED TO PROFIT OR LOSS | $-35$ | 127 | - 4 | $-35$ | 124 |
| Net change in revaluation reserve (FVOCI equity instruments) | 8 | 6 | $-8$ | ||
| Net change in defined benefit plans | - 46 | 119 | - 6 | $-41$ | 131 |
| Net change in own credit risk | $\blacksquare$ | 0 | |||
| Net change in respect of associated companies and joint ventures | ÷ | 0 | 0 | 0 | |
| TOTAL COMPREHENSIVE INCOME | 1 3 3 9 | 3 1 2 6 | 787 | 682 | 777 |
| Attributable to minority interests | $\Omega$ | 0 | |||
| Attributable to equity holders of the parent | 1 339 | 3 1 2 6 | 787 | 682 | 778 |
The largest movements in other comprehensive income (2020 vs. 2019):
| (in millions of EUR) | Note 31-12-2020 31-12-2019 | |
|---|---|---|
| ASSETS | ||
| Cash, cash balances with central banks and other demand deposits with credit institutions | 24 583 | 8 3 5 6 |
| 4.0 Financial assets |
286 386 | 273 399 |
| 4.0 Amortised cost |
243 527 | 230 639 |
| Fair value through OCI 4.0 |
18 451 | 19 037 |
| Fair value through profit or loss 4.0 |
24 248 | 23 563 |
| of which held for trading 4.0 |
8695 | 7 2 6 6 |
| 4.0 Hedging derivatives |
160 | 158 |
| Reinsurers' share in technical provisions, insurance | 145 | 121 |
| Profit/loss on positions in portfolios hedged for interest rate risk | 1 3 6 0 | 478 |
| Tax assets | 1 6 2 4 | 1434 |
| Current tax assets | 125 | 96 |
| Deferred tax assets | 1499 | 1 3 3 7 |
| Non-current assets held for sale and disposal groups | 19 | 29 |
| Investments in associated companies and joint ventures | 24 | 25 |
| Property, equipment and investment property | 3691 | 3818 |
| Goodwill and other intangible assets | 1551 | 1458 |
| Other assets | 1 3 6 1 | 1474 |
| TOTAL ASSETS | 320 743 | 290 591 |
| LIABILITIES AND EQUITY | ||
| Financial liabilities 4.0 |
276 781 | 248 400 |
| 4.0 Amortised cost |
254 053 | 224 093 |
| Fair value through profit or loss 4.0 |
21 409 | 23 137 |
| of which held for trading 4.0 |
7 1 5 7 | 6988 |
| 4.0 Hedging derivatives |
1319 | 1 1 7 1 |
| Technical provisions, before reinsurance | 18718 | 18 560 |
| Profit/loss on positions in portfolios hedged for interest rate risk | 99 | $-122$ |
| Tax liabilities | 498 | 476 |
| Current tax liabilities | 79 | 98 |
| Deferred tax liabilies | 419 | 378 |
| Provisions for risks and charges | 209 | 227 |
| Other liabilities | 2 9 0 8 | 2827 |
| TOTAL LIABILITIES | 299 214 | 270 369 |
| 5.10 Total equity |
21 530 | 20 222 |
| 5.10 Parent shareholders' equity |
20 030 | 18722 |
| 5.10 Additional tier-1 instruments included in equity |
1 500 | 1500 |
| Minority interests | 0 | 0 |
| TOTAL LIABILITIES AND EQUITY | 320 743 | 290 591 |
The increase in the balance sheet total is for a substantial part driven by TLTROIII. For more information, see 'Financial assets and liabilities: breakdown by portfolio and product' (note 4.1) further in this report.
The balance sheet at 31 December 2020 contains figures of OTP Banka Slovensko (Slovakia), of which 99.44% ownership was acquired by KBC Bank NV on 26 November 2020, resulting in full consolidation on the balance sheet. For more information see note 'Main changes in the scope of consolidation' (note 6.6) further in this report.
In 2020, KBC made a change in accounting policy for intangible assets. Following the requirements of IAS 8, the change in accounting policy has been applied retrospectively (as if the new accounting policy had always been applied). Consequently, parent shareholders' equity of 2019 has been retrospectively restated (decrease of 143 million euros). For more information, see 'Statement of compliance' (note 1.1) further in this report.
| Issued and paid up |
Share | Treasury | Retained | Total revaluation |
Parent shareholders' |
Additional tier-1 instruments included in |
Minority | Total | |
|---|---|---|---|---|---|---|---|---|---|
| (in millions of EUR) | share capital | premium | shares | earnings | reserves | equity | equity | interests | equity |
| 2020 | |||||||||
| Balance at the end of the previous period | 1458 | 5498 | $-2$ | 11 732 | 37 | 18722 | 1 500 | $\mathbf{0}$ | 20 222 |
| Net result for the period | $\Omega$ | $\Omega$ | $\mathbf 0$ | 1440 | $\mathbf{0}$ | 1440 | $\overline{0}$ | $\Omega$ | 1 4 4 0 |
| Other comprehensive income for the period | $\mathbf{0}$ | $\Omega$ | $\mathbf{0}$ | $\mathbf 0$ | $-102$ | $-102$ | $\Omega$ | $\overline{0}$ | $-102$ |
| Subtotal | $\mathbf{0}$ | $\bf{0}$ | $\bf{0}$ | 1 4 4 0 | $-102$ | 1 3 3 9 | $\bf{0}$ | $\mathbf{0}$ | 1 3 3 9 |
| Dividends | $\Omega$ | $\Omega$ | $\Omega$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf{0}$ | $\mathbf{0}$ | $\Omega$ | $\Omega$ |
| Coupon on AT1 | $\Omega$ | $\Omega$ | $\Omega$ | $-50$ | $\mathbf 0$ | $-50$ | $\Omega$ | $\Omega$ | $-50$ |
| Capital increase | 17 | $\Omega$ | $\mathbf 0$ | $\mathbf{0}$ | 18 | $\Omega$ | $\Omega$ | 18 | |
| Transfer from revaluation reserves to retained earnings on realisation | $\Omega$ | $\Omega$ | $\Omega$ | 23 | $-23$ | $\bf{0}$ | $\mathbf{0}$ | $\Omega$ | $\Omega$ |
| Purchase/sale of treasury shares | $\Omega$ | $\Omega$ | $\mathbf 0$ | $\mathbf 0$ | -1 | $\Omega$ | |||
| Change in minorities interests | $\Omega$ | $\Omega$ | $\Omega$ | $\mathbf 0$ | $\mathbf{0}$ | $\bf{0}$ | $\Omega$ | $\Omega$ | |
| Total change | $\overline{1}$ | 17 | $\mathbf{1}$ | 1414 | $-125$ | 1 3 0 8 | $\mathbf{0}$ | $\Omega$ | 1 3 0 8 |
| Balance at the end of the period | 1459 | 5 5 1 4 | $-1$ | 13 146 | $-88$ | 20 030 | 1500 | $\Omega$ | 21 530 |
| 2019 | |||||||||
| Balance at the end of the previous period | 1 4 5 7 | 5482 | $-3$ | 10 901 | $-605$ | 17 233 | 2 4 0 0 | $\mathbf 0$ | 19 633 |
| Change in accounting policies | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $-143$ | 0 | $-143$ | $\mathbf 0$ | $\mathbf 0$ | $-143$ |
| Adjusted balance at the end of previous period | 1457 | 5482 | $-3$ | 10758 | $-605$ | 17 090 | 2 4 0 0 | $\mathbf 0$ | 19 490 |
| Net result for the period | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | 2489 | 0 | 2 4 8 9 | $\mathbf 0$ | $\mathbf 0$ | 2 4 8 9 |
| Other comprehensive income for the period | $\mathbf 0$ | 0 | $\mathbf 0$ | $-3$ | 640 | 637 | $\mathbf 0$ | $\overline{0}$ | 637 |
| Subtotal | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | 2 4 8 6 | 640 | 3 1 2 6 | $\mathbf 0$ | $\mathbf 0$ | 3 1 2 6 |
| Dividends | 0 | 0 | $\mathbf 0$ | $-1457$ | 0 | $-1457$ | $\Omega$ | $\overline{0}$ | $-1457$ |
| Coupon on AT1 | 0 | $\Omega$ | $\Omega$ | $-52$ | 0 | -52 | $\mathbf 0$ | $\Omega$ | $-52$ |
| Issue/repurchase of AT1 included in equity | 0 | $\Omega$ | $\Omega$ | $\overline{2}$ $\sim$ |
$\mathbf{0}$ | $\overline{\mathbf{2}}$ | 900 $\blacksquare$ |
$\Omega$ | $-902$ |
| Capital increase | 15 | $\Omega$ | 0 | 0 | 16 | $\Omega$ | $\Omega$ | 16 | |
| Transfer from revaluation reserves to retained earnings on realisation | U | $\Omega$ | $\Omega$ | $\Omega$ | $\Omega$ | ∩ | $\Omega$ | ||
| Change in scope | U | $\Omega$ | $\Omega$ | $\mathbf 0$ | 0 | $\Omega$ | $\Omega$ | ∩ | O |
| Change in minorities interests | $\Omega$ | $\Omega$ | $\Omega$ | $\mathbf 0$ | $\bf{0}$ | $\Omega$ | $\Omega$ | ||
| Total change | 15 | $\Omega$ | 974 | 641 | 1632 | 900 $\sim$ |
$\Omega$ | 732 | |
| Balance at the end of the period | 1458 | 5498 | $-2$ | 11 732 | 37 | 18722 | 1500 | $\Omega$ | 20 222 |
The ECB recommendation of 15 December 2020 limits dividend payments re. 2019 and 2020 profits to the lower of 15% of cumulated 2019-2020 profits and 20 basis points of RWA.
The changes in equity in 2020 include a transfer from revaluation reserves (FVOCI equity instruments) to retained earnings for 23 million euros on realisation, mainly related to a corporate action.
The 'Dividends' item in 2019 includes:
The line 'Issue or Call of additional Tier-1 instruments included in equity' in 2019 includes:
In 2020, KBC made a change in accounting policy for intangible assets. Following the requirements of IAS 8, the change in accounting policy has been applied retrospectively (as if the new accounting policy had always been applied). Consequently, parent shareholders' equity of 2019 has been retrospectively restated (decrease of 143 million euros). For more information, see Statement of compliance (note 1.1) further in this report.
| (in millions of EUR) | 31-12-2020 | 31-12-2019 |
|---|---|---|
| Revaluation reserve (FVOCI debt instruments) | 1 1 3 0 | 992 |
| Revaluation reserve (FVPL equity instruments) - overlay | 325 | 350 |
| Revaluation reserve (FVOCI equity instruments) | 15 | 32 |
| Hedging reserve (cashflow hedges) | $-1294$ | $-1331$ |
| Translation differences | $-382$ | 92 a. |
| Hedge of net investments in foreign operations | 163 | 89 |
| Remeasurement of defined benefit plans | $-45$ | $\Omega$ |
| Own credit risk through OCI | - 4 | |
| Total revaluation reserves | - 88 | 37 |
More details will be available in the annual report of 2020.
The condensed interim financial statements of the KBC Group for the period ended 31 December 2020 have been prepared in accordance with the International Financial Reporting Standards as adopted for use in the European Union ('endorsed IFRS').
The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2019, which have been prepared in accordance with the International Financial Reporting Standards as adopted for use in the European Union ('endorsed IFRS').
The following IFRS standards became effective on 1 January 2020 and have been applied in this report:
The following IFRS standards were issued and not yet effective in 2020, but KBC decided to early adopt.
The following IFRS standards were issued but not yet effective in 2020. KBC will apply these standards when they become mandatory.
• IFRS 17:
In May 2017, the IASB issued IFRS 17 (Insurance Contracts), a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. Once effective, IFRS 17 will replace IFRS 4 (Insurance Contracts) that was issued in 2005. IFRS 17 applies to all types of insurance contracts, regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. A few scope exceptions will apply. The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies, IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects.
The core of IFRS 17 is the general model, supplemented by a specific adaptation for contracts with direct participation features (the variable fee approach) and a simplified approach (the premium allocation approach) mainly for shortduration contracts. IFRS 17 will become effective for reporting periods beginning on or after 1 January 2023 (subject to EU endorsement), with comparative figures being required. KBC launched a group-wide project to implement IFRS 17 in 2018. The project is composed of sub-projects such as data delivery, local reporting, impact on business and strategic implications, guidance and support, consolidated reporting and IFRS 17 calculation tool.
The project is driven by the insurance business and Finance together and involves all departments and entities at group and local level that are affected. In the past year the focus has been on the further development of an unambiguous interpretation of the IFRS 17 standard and the further implementation of an IFRS 17-compliant process for the closing of the accounts. The interpretation of the IFRS 17 standard was gradually adjusted where necessary when new information became available from external sources or internal sources. Thus, we now also take into account the amendments to the original standard that were published by the IASB in June 2020.
Regarding the European ratification of the 'amended' IFRS 17 standard, EFRAG (European Financial Reporting Advisory Group) published its draft opinion at the end of September 2020. After incorporating the feedback from its stakeholders, EFRAG is expected to send its final advice to the European Commission at the end of March 2021.
• Other:
o The IASB published several limited amendments to existing IFRSs and IFRICs. They will be applied when they become mandatory, but their impact is currently estimated to be negligible.
In 2020, KBC made a change in accounting policy for intangible assets, with the aim to provide more relevant information by focusing on relevant and material software developments (in relation to our digitalization strategy from a front-end and/or backend perspective). Only software above certain thresholds may be capitalized, whereas software below these thresholds will be directly expensed in operating expenses.
As a result of the change in accounting policy, low value software has been derecognized. Following the requirements of IAS 8, the change in accounting policy has been applied retrospectively (as if the new accounting policy had always been applied). Consequently some balance sheet items for 2019 have been retrospectively restated: It concerns goodwill and other intangible assets (decrease of 182 million EUR), deferred tax assets (increase of 38 million euros), deferred tax liabilities (decrease of 2 million euros) and parent shareholders' equity (decrease of 143 million euros). The changes have an impact on the following tables in this quarterly report: Consolidated balance sheet and Consolidated statement of changes in equity. The profit and loss of 2019 and the first three quarters of 2020 have not been retrospectively restated given the limited impact.
A summary of the main accounting policies is provided in the group's annual accounts as at 31 December 2019.
Exchange rates used: during 2020, the exchange rates of the CZK and HUF dropped significantly, with negative impact on the balance sheet total and on the result:
The continuing public health crisis around the world has distressed financial markets amid concerns that the global economy, and the EU's economies in particular, were significantly affected in 2020. The Coronavirus pandemic has triggered a chain of events in the markets that has led to a sharp increase in volatility.
The significant deterioration in the economic outlook has brought about an unprecedented monetary policy response from central banks and governments around the world.
Meanwhile, we have been working hard with government agencies to support all customers impacted by coronavirus, by efficiently implementing various relief measures, including loan deferrals. In our six home countries combined, we have granted a total of 13.4 billion euros in loan payment deferrals by the end of December 2020 (according to the EBA definition) of which 8.7 billion euros of loan payment deferrals already expired. We have also granted 0.8 billion euros' worth of loans under public Covid-19 guarantee schemes (see on the next page, the latest status of the different government and sector measures in each of our core countries).
| Belgium | Czech Republic | Slovakia | Hungary | Bulgaria | Ireland | |
|---|---|---|---|---|---|---|
| ments Deferral of pay |
• Opt-in: 3 months for consumer finance, 6-9 months for mortgages and non-retail loans, (originally until 31 Oct 2020) • Application period extended for a second time (to 31 Mar 2021). All deferrals to expire at the end of June (max. total deferral period of 9 months) • For private persons: deferral of principal and interest payments, while only deferral of principal payments for non-retail clients • Interest is accrued over deferral period, apart from families with net income of less than 1 700 euros. For the latter group, this results in a modification loss for the bank. (-11 million euros in 2Q. Refer to note 3.10) |
• Opt-in: 3 or 6 months • Application period finished on 30 Sep 2020, however end of Oct 2020 all deferrals expired • Applicable for retail and non-retail clients • For private persons and entrepreneurs: deferral of principal and interest payments, while only deferral of principal payments for non-retail clients • Interest is accrued over the deferral period, but the interest must be paid in the final instalment, resulting in a modification loss for the bank (-5 million euros in 2Q. Refer to note 3.10) • For consumer loans, the interest during the deferral period may not exceed the 2-week repo rate + 8% |
• Opt-in: 9 months or 6 months (for leases) • Application period is still running (but most payment holidays will end in 1Q 2021) • Applicable for retail customers, SMEs and entrepreneurs • Deferral of principal and interest payments • Interest is accrued over the deferral period, but the customer has the option of paying all interests at once after the moratorium or paying on a linear basis. The latter option would result in an immaterial modification loss for the bank |
• Opt-out: a blanket moratorium originally until 31 Dec 2020 • Extension of the deferral period until 30 Jun 2021 • Applicable for retail and non-retail clients • Extension conditions are the same as the original moratorium • Deferral of principal and interest payments • Interest is accrued over the deferral period, but unpaid interest cannot be capitalised and must be collected on a linear basis during the remaining (extended) lifetime. This results in a modification loss for the bank (-18 million euros in 1Q; revised to -11 million euros in 2Q based on the actual opt-out ratio and increased to -12 million euros due to the extension Refer to note 3.10) |
• Opt-in: 9 months (deferral until 31 Dec 2021 at the latest) • Application period expires on 31 Mar 2021 • Applicable for retail and non- retail customers • Deferral of principal with or without deferral of interest payments • For both, full and partial deferrals, the tenor is extended by 9 months (or 6+3) • Interest is accrued over the deferral period and is payable in 12 months (consumer); in 18 months (or 12 + 6) for non-retail or 60 months (mortgages) in equal instalments |
• Opt-in: 3 to 6 months • Application period expired on 30 Sep 2020 • Applicable for mortgage loans, consumer finance loans and business banking loans with a repayment schedule • Deferral of principal and interest payments for up to 6 months (with review after 3 months) for Mortgages & Consumer finance and 3 months for business banking loans • Option for customers to extend their loan term by up to 6 months to match the payment holiday • Interest is accrued over the deferral period |
| & Liquidity assistance me Guarantee sche |
• A state guarantee scheme of up to 40 billion euros to cover losses incurred on future non retail loans granted before 31 December 2020 to viable companies, with a tenor of maximum 12 months. Guarantee covers 50% of losses above 3% of total credit losses and 80% above 5% of losses. Maximum interest is 1.25% • As of 3Q, a revised state guarantee scheme of up to 10 billion euros has been in place to cover losses on future SME loans granted before 31 December 2020 (extended until June 2021) , with a tenor between 1 and 3 years (extended to 5 years). Guarantee covers 80% of all losses. Maximum interest is 2% (or 2.5% if tenor > 3 years) |
• The Czech-Moravian Guarantee and Development Bank (CZMRB) launched several guarantee programs (COVID II, COVID II Praha, COVID III) for working capital loans provided by commercial banks to non-retail clients. The loan amount is guaranteed up to 80% or 90% of the loan amount (depending on the program and the size of the company). Interest on these loans is subsidised up to 25% (COVID II). COVID III extended until June 2021 • The Export Guarantee and Insurance Corporation (EGAP) under its COVID Plus program offers guarantees on loans provided by commercial banks. EGAP guarantees up to 90% of of the loan amount, depending on the rating of the debtor. The program is aimed at companies in which exports accounted for more than 20% of turnover in 2019 |
• Anti-Corona Guarantee program offered by the Slovak Investment Holding (SIH), and aimed at SMEs, consists of two components: (i) an 80% state guarantee with a 50% portfolio cap and (ii) an interest rate subsidy of up to 4% p.a. • In addition, financial aid in the form of state guarantee schemes, with guaranteed fee subsidy can be provided by (i) the Export-Import Bank of Slovakia (guarantee of up to 80% for loans < 2 million euros) and (ii) the Slovak Investment Holding (for loans between 2 and 20 million euros, guarantee of up to 90%). No portfolio cap |
• A guarantee scheme is provided by Garantiqa and the Hungarian Development Bank. These state guarantees can cover up to 90% of the loans with a maximum term of 6 years • Furthermore, the MNB has launched the Funding for growth scheme: A framework amount of 4,2 billion euros for SMEs that can receive loans with a 20-year tenor and at a maximum interest rate of 2.5% • Annual interest rate on personal loans granted by commercial banks may not exceed the central bank base rate by more than 5pp (until 31 Dec 2020) |
• 0.4 billion euros of state guarantees provided by the Bulgarian Development Bank to commercial banks. Of this amount, 0.1 billion euros is used to guarantee 100% on consumer loans while 0.3 billion euros is planned to be used to guarantee 80% on non retail loans |
• The Irish authorities put substantial relief measures in place, amongst other measures, via the SBCI. KBCI is mainly focused on individual customers, therefore the relief programs for business customers are less relevant |
| Items | Impact of the Coronacrisis | See further in note |
|---|---|---|
| Net interest income | Net interest income was negatively impacted in 2020 following multiple repo rate cuts of the Czech National Bank and in general lower long term interest rates than expected. This was partly compensated by lower funding costs thanks to ECB's TLTRO programme (TLTRO III), while lending income was supported by higher average volumes. |
3.1 |
| Non-life insurance | High technical result in 2020, supported by a low claims level as a result of the lower economic activity related to the lockdown. |
3.7.1 |
| Life insurance | Challenging context for the sale of life insurance products in view of the low interest rates environment. |
3.7.1 |
| Financial instruments at fair value through P&L |
Financial instruments at fair value through P&L have been negatively affected by the increased volatility in financial markets in 2020, leading to a net result on financial instruments at fair value through profit or loss of +0.03 billion euros in 2020 (-0.4 billion euros in 1Q 2020 due to lower stock markets and widened credit spreads versus opposite movements in the following quarters of 2020). |
3.3 |
| Net fee and commission income | Net fee and commission income was negatively impacted by the coronavirus pandemic for asset management related fees (lower entry fees due to decreased sales and margins; lower management fees due to a lower average level of assets under management (mainly due to the drop in share prices in 1Q 2020) in combination with lower margins). Moreover, fees related to banking services also went down (payment services fees, for instance lower activity level due to the lockdowns). Securities fees on the other hand performed substantially better as transaction volumes typically rise in a higher volatility environment. |
3.5 |
| Operating expenses | Significant opex reduction thanks to the various saving measures (which amongst others have resulted in lower provisions for variable remuneration and less FTEs) and lower marketing, travel, facility and event expenses (directly related to a lower activity level due to the lockdowns). |
|
| Impairment on financial assets at AC and at FVOCI |
Strong increase of collective ECL impairments; see separate section below. | 3.10 and 4.2 |
| Impairments on goodwill | We have performed the full yearly goodwill impairment test based on the discounted cash flow method. The outcome showed no impairment. |
|
| Deferred taxes | We have investigated whether it is probable that taxable profit will be available against which the deductible temporary differences can be utilised based on projections for a period of eight to ten years. The conclusion of this analysis is that there are sufficient estimated taxable profits available. |
|
| Revaluation reserves | Negative net change in revaluation reserve (FVPL equity instruments – overlay approach) and translation differences. |
Consolidated statement of comprehensive income (condensed) |
| Liquidity | KBC has maintained its strong liquidity position throughout the Coronacrisis, supported by KBC's participation in TLTRO III funding. The Liquidity Coverage Ratio (LCR) of KBC Bank, which gives an idea of the bank's liquidity position in the short term, increased in 2020 and amounted to 147% at the end of December 2020 (compared to 138% at the end of December 2019). The Net Stable Funding Ratio (NSFR) of KBC Bank, which gives an idea of the bank's structural liquidity position in the long term, amounted to a high 146% at the end of December 2020 (compared to 136% at the end of December 2019). |
|
| Solvency | Our solvency position remained very strong, with a common equity ratio of 17.6% on a fully loaded basis (compared to 17,1% at the end of 2019). For more information, see part Solvency KBC Group. |
|
| Retirement obligations | Increase in the employer's obligations in respect of employee benefits (defined benefit plan obligations) due to the impact of the historically low discount rate. The value of the assets held up, on the one hand because of this low interest rate and on the other hand because of the steady recovery of the stock markets after the pandemic. |
As disclosed during previous quarters, our Expected Credit Loss (ECL) models were not able to adequately reflect all the specifics of the Covid-19 crisis or the various government measures implemented in the different countries to support households, SMEs and Corporates through this crisis. Therefore, an expert-based calculation at portfolio level is required via a management overlay. In the first quarter, this calculation was limited to a certain number of (sub)sectors. In the second quarter, driven by significant uncertainties around the Covid-19 crisis, the scope of the management overlay was expanded to include all sectors of our Corporate and SME portfolio as well as our retail portfolio. To be consistent with the second and third quarter, we recalculated the Covid-19 ECL based on the same methodology used on the performing and non-performing portfolio at the end of December 2020 but including the latest economic scenarios.
Until now, only minor PD shifts have been observed in our portfolio, which is reflected in stable staging percentages (for further information, see note 4.2.1). Note that in line with ECB/ESMA/EBA guidance, any EBA-compliant government measures granted before the end of September 2020, as well as newly granted measures between 1 October 2020 and the end of December 2020, have not led to automatic staging.
*Aligned with the credit risk view of our loan portfolio as reported in the quarterly financial statements.
For the 31 December performing portfolio, the following 3-step approach was applied to estimate the additional Covid-19 impact:
Compared to the previous quarter, the sector split between high-medium-low risk did not undergo major changes. There were only some minor reallocations of underlying activities from 'high' to 'medium' or even to 'low' risk. Similarly, there were only very limited shifts from 'medium' to 'high' risk, situated mainly in the following sectors:
*Aligned with the credit risk view of our loan portfolio as reported in the quarterly financial statements.
3) Finally, a probability-weighted management overlay was calculated based on KBC's base-case, optimistic and pessimistic scenarios and attributed weights. An expert-based scaling factor was applied on the estimated sector-driven Covid-19 base-case ECL from the previous step to determine the collective Covid-19 impact under an optimistic and pessimistic scenario. The final overlay was then determined by weighting the resulting Covid-19 ECL under the three scenarios with the following weights: 55% for the base-case, 10% for the optimistic and 35% for the pessimistic scenario.
For the non-performing portfolio, in line with the second quarter, an additional impact assessment was performed on a portfolio basis for the stage 3 collective exposures based on expert judgement of the local credit risk management departments. Additional impairments due to Covid-19 on individually assessed stage 3 loans are already reflected in the specific allowance of the exposure (hence already included in P&L impairments) and thus not included in the management overlay.
| COVID-19 ECL sector driven – per scenario: | COVID-19 ECL per country – per scenario: | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| FY20 | Performing portfolio impact | Non | ||||||||||||||
| Optimistic | Base | Pessimistic Probability | Performing | Total | 4Q20 3Q20 2Q20 1Q20 | |||||||||||
| EUR m | 10% | 55% | 35% | weigthed | portfolio | FY20 | ||||||||||
| KBC Group | 511 | 618 | 930 | 717 | 66 | 783 | -1 | -5 746 | 43 | |||||||
| KBC Group | Performing portfolio | By country: | ||||||||||||||
| High risk | Medium | Low risk | Mortgages | Belgium | 338 | 358 | 464 | 393 | 20 | 413 | 3 | -3 378 | 35 | |||
| sectors | risk sectors | sectors | & | TOTAL | Czech Republic | 95 | 137 | 195 | 153 | 9 | 162 | -5 | 9 152 | 6 | ||
| EUR m | 150% | 100% | 50% | other retail | Slovakia | 23 | 32 | 48 | 37 | 0 | 37 | 0 | -3 | 39 | 1 | |
| Base-case scenario | 241 | 194 | 60 | 123 | 618 | Hungary | 25 | 45 | 81 | 56 | 0 | 56 | 2 | -1 | 54 | 1 |
| Optimistic scenario | 200 | 160 | 53 | 98 | 511 | Bulgaria | 7 | 17 | 26 | 19 | 5 | 24 | 1 | -5 | 28 n/a | |
| Pessimistic scenario | 334 | 272 | 81 | 243 | 930 | Ireland | 23 | 29 | 116 | 59 | 32 | 91 | -2 | -2 | 95 n/a |
The 3-step stress approach applied to the performing portfolio and the additional impact assessment of the non-performing portfolio resulted in a total 12M20 collective Covid-19 ECL of 783 million euros, implying a small P&L release of 1 million euros in 4Q 2020 compared to the 784 million euros P&L charge of 9M20. This q-o-q release resulted from a release in the non-performing portfolio of 4 million euros due entirely to the improved HPI forecast for Ireland, partly offset by an increase in the performing portfolio of 3 million euros due to small changes in the different country-level portfolios. The total collective Covid-19 ECL of 783 million euros in 12M20 consists of 6% stage 1, 86% stage 2 and 8% stage 3 impairments.
After 12M, the ECL models captured an impact of 111 million euros through the updated macroeconomic variables used in the calculation (40% in stage 1, 30% in stage 2 and 30% in stage 3), resulting in a q-o-q decrease of 36 million euros. This decrease can be explained by the improvement of the 2020 macro assumptions and a gradual recovery which accelerates in the second half of 2021.
The total Covid-19 management overlay in the books per 31-12-2020 amounts to 672 million euros, of which 43 million euros was accounted for in 1Q 2020, 596 million euros in 2Q 2020, with a small decrease of 2 million euros booked in 3Q 2020 and an increase of 35 million euros booked in 4Q 2020 following the reduction in the impact captured by the models as explained above. Similar to previous quarters, the management overlay is fully presented as stage 2, with the exception of the management overlay on the existing non-performing portfolio.
Including the collective Covid-19 ECL, the Credit Cost Ratio amounted to 0.60% in 2020.
| Credit Cost % $(annualized*)$ |
FY19 | 3M 20 | 1H 20 | 9M20 | FY20 |
|---|---|---|---|---|---|
| Without collective COVID-19 ECL | 0.12% | 0.17% | 0.20% | 0.17% | 0.16% |
| With collective COVID-19 ECL | 0.27% | 0.64% | 0.61% | 0.60% |
*Collective Covid-19 ECL, not annualized
KBC has formulated three different forecasts that differ on the virus evolution and its impact on the lockdown measures in the different home countries. In short the three scenarios can be summarized as follows:
| OPTIMISTIC SCENARIO | BASE SCENARIO | PESSIMISTIC SCENARIO |
|---|---|---|
| Virus spread and impact more quickly under control thanks to earlier than expected large-scale availability of vaccines, allowing social distancing measures and other precautionary measures to be lifted sooner |
Start of vaccination process and wider testing and tracing will allow only a very moderate easing of precautionary measures in H1 2021. From mid-2021 on, the normalisation of socio economic interactions will be helped by the mass rollout of effective vaccines. However, as the vaccination process will take time, socio economic interactions will not return to normal before 2022 |
The virus reappears and continues to weigh on society and the economy, because of setbacks in the vaccination process (e.g., logistical problems, disappointing immunity results, etc.) |
| Steep and steady recovery from the first half of 2021 onwards, with a fast return to pre-Covid-19 levels of activity |
The recovery will be gradual. It will take until the second half of 2021 for the mass rollout of vaccines to reinforce the recovery to pre-Covid 19 levels of activity by the end of 2023 |
Another (series of) shock(s) takes place, leading to an interrupted and unsteady path to recovery |
| Sharp, short V-pattern | U-pattern | More L-like pattern, with right leg only slowly increasing |
The Covid-19 pandemic continues to be the main driver of the global economy. However, the rollout of the different vaccines will support the economic recovery in the medium term. The strength and/or timing of the recovery is country-specific and subject to significant uncertainty. Also, the possible resurgence of virus outbreaks remains a concern and is forcing many countries to maintain or even extend specific lockdown measures. Because of this uncertainty, we continue to work with three alternative scenarios: a base-case scenario, a more optimistic scenario and a more pessimistic scenario. The definition of each scenario reflects the latest virus-related and economic developments, with the following probabilities assigned for year-end 2020: 55% for the base-case, 35% for the pessimistic and 10% for the optimistic scenario.
The following table (in line with the KBC forecast of December 2020) gives these three scenarios for three key indicators (GDP growth, unemployment rate and house price index) for each of our core countries for the next years. After that, a gradual linear transition towards a steady state is taken into account. The baseline scenario now incorporates an improvement in the macro assumptions for 2020 and a gradual recovery in Europe that accelerates in the second half of 2021.
| Macroeconomic base scenario - key indicators (December 2020) |
2020 | 2021 | 2022 | ||||
|---|---|---|---|---|---|---|---|
| Scenario | Base | Optimistic | Base | Pessimistic | Optimistic | Base | Pessimistic |
| Real GDP growth | |||||||
| Euro area | $-7.5%$ | 7.4% | 2.4% | $-3.1%$ | 4.1% | 4.1% | 1.8% |
| Belgium | $-7.4%$ | 6.8% | 0.9% | $-4.5%$ | 3.6% | 4.1% | 1.6% |
| Czech Republic | $-6.5%$ | 4.4% | 2.7% | $-2.0%$ | 4.1% | 5.0% | 3.2% |
| Hungary | $-6.0%$ | 6.3% | 3.5% | $-1.0%$ | 4.5% | 4.8% | 3.5% |
| Slovakia | $-6.8%$ | 7.0% | 4.2% | 1.6% | 4.8% | 4.2% | 3.2% |
| Bulgaria | $-5.0%$ | 4.0% | 3.0% | $-1.0%$ | 3.0% | 4.0% | 2.0% |
| Ireland | 2.5% | 6.0% | 4.0% | 1.0% | 6.0% | 4.0% | 1.0% |
| Unemployment rate | |||||||
| Belgium | 5.8% | 6.2% | 7.2% | 8.2% | 5.9% | 6.9% | 8.0% |
| Czech Republic | 3.3% | 3.5% | 4.2% | 5.2% | 3.3% | 4.0% | 5.6% |
| Hungary | 4.8% | 4.2% | 5.0% | 7.0% | 4.0% | 4.6% | 6.5% |
| Slovakia | 8.0% | 8.0% | 9.5% | 12.0% | 7.5% | 8.0% | 10.0% |
| Bulgaria | 8.0% | 6.0% | 10.0% | 12.0% | 4.3% | 7.0% | 11.0% |
| Ireland | 18.0% | 5.0% | 7.0% | 14.0% | 4.0% | 6.0% | 10.0% |
| House price index | |||||||
| Belgium | 3.0% | 2.0% | $-3.0%$ | $-5.0%$ | 2.5% | 1.0% | $-2.0%$ |
| Czech Republic | 6.7% | 3.6% | 1.5% | $-3.0%$ | 4.0% | 2.0% | $-1.0%$ |
| Hungary | $-1.0%$ | 2.5% | $-1.0%$ | $-4.0%$ | 3.5% | 2.0% | $-1.0%$ |
| Slovakia | 9.0% | 3.5% | 1.2% | $-4.0%$ | 4.0% | 2.0% | $-1.0%$ |
| Bulgaria | 1.0% | 1.0% | 0.0% | $-1.0%$ | 3.0% | 3.0% | 0.0% |
| Ireland | 0.0% | 3.0% | 0.0% | $-3.0%$ | 4.0% | 1.0% | $-3.0%$ |
Note:
• The unemployment rate of Ireland includes temporary layoffs rather than permanent job losses, and as such, may improve rapidly over vaccine rollout becomes better established in Ireland.
• The macroeconomic information is based on the economic situation in December 2020 and hence does not yet reflect the official macroeconomic figures for 4Q 2020 as reported by different authorities.
For a description on the management structure and linked reporting presentation, reference is made to note 2.1 in the annual accounts 2019.
| Czech International | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (in millions of EUR) | Belgium | Republic | Markets | ||||||
| Business unit |
Business unit |
unit | Business Of which: Hungary |
Slovakia | Bulgaria | Ireland | Group Centre |
Total | |
| 2020 | |||||||||
| Net interest income | 2 5 7 9 | 1012 | 894 | 262 | 202 | 144 | 286 | $-18$ | 4 4 6 7 |
| Non-life insurance (before reinsurance) | 562 | 141 | 150 | 55 | 27 | 68 | $\it{0}$ | 13 | 865 |
| Earned premiums | 1 1 4 1 | 302 | 321 | 143 | 52 | 126 | 0 | 12 | 1777 |
| Technical charges | $-579$ | $-161$ | $-172$ | - 88 | - 25 | $-58$ | 0 | $\mathbf 0$ | $-912$ |
| Life insurance (before reinsurance) | $-63$ | 48 | 26 | $-1$ | 12 | 15 | $\mathcal{O}$ | $-1$ | 10 |
| Earned premiums | 913 | 206 | 105 | 35 | 34 | 36 | 0 | $\mathbf{0}$ | 1 2 2 3 |
| Technical charges | - 976 | $-158$ | - 79 | $-36$ | $-22$ | 21 | 0 | $\mathbf 0$ | $-1213$ |
| Ceded reinsurance result | $-12$ | $-1$ | $-5$ | $-3$ | $\sqrt{3}$ | - 5 | $\mathcal{O}$ | $-2$ | $-20$ |
| Dividend income | 47 | $\mathbf{1}$ | $\mathbf 0$ | 0 | $\mathcal O$ | $\mathcal O$ | 0 | $\overline{4}$ | 53 |
| Net result from financial instruments at fair value through profit or loss | 32 | $\overline{7}$ | 43 | 39 | 9 | 0 | $-4$ | $-51$ | 33 |
| Net realised result from debt instruments at fair value through OCI | $\mathbf{0}$ | $\overline{1}$ | $\overline{2}$ | $\mathbf{1}$ | $\overline{c}$ | 0 | 0 | $\mathbf 0$ | $\overline{2}$ |
| Net fee and commission income | 1 1 3 8 | 203 | 273 | 191 | 58 | 28 | $-3$ | - 4 | 1609 |
| Net other income | 157 | 13 | 8 | $\overline{4}$ | 8 | 3 | - 9 | $-1$ | 176 |
| TOTAL INCOME | 4 4 3 8 | 1425 | 1 3 9 1 | 548 | 320 | 253 | 269 | $-59$ | 7 1 9 5 |
| Operating expenses | $-2398$ | $-752$ | $-894$ | $-323$ | $-204$ | $-139$ | $-228$ | $-111$ | -4 156 |
| Impairment | $-695$ | $-226$ | $-250$ | $-85$ | - 45 | $-30$ | $-91$ | $-11$ | $-1182$ |
| of which on FA at amortised cost and at fair value through OCI | $-654$ | $-210$ | $-217$ | - 59 | $-42$ | $-27$ | $-90$ | $\overline{7}$ | $-1074$ |
| Share in results of associated companies and joint ventures | - 9 | $-2$ | $\mathbf 0$ | 0 | 0 | $\mathcal O$ | 0 | $\mathbf{0}$ | $-11$ |
| RESULT BEFORE TAX | 1 3 3 5 | 446 | 247 | 140 | 71 | 84 | $-50$ | $-181$ | 1847 |
| Income tax expense | $-335$ | $-71$ | $-48$ | $-26$ | - 15 | - 9 | $\overline{2}$ | 46 | $-407$ |
| Net post-tax result from discontinued operations | $\Omega$ | $\mathbf{0}$ | $\mathbf{0}$ | 0 | $\mathcal O$ | $\mathcal{O}$ | $\mathcal{O}$ | $\mathbf 0$ | 0 |
| RESULT AFTER TAX | 1 0 0 1 | 375 | 199 | 114 | 56 | 76 | $-48$ | $-135$ | 1440 |
| attributable to minority interests | $\mathbf{0}$ | $\mathbf{0}$ | $\mathbf{0}$ | 0 | 0 | 0 | 0 | $\pmb{0}$ | $\bf{0}$ |
| attributable to equity holders of the parent | 1 0 0 1 | 375 | 199 | 114 | 56 | 76 | $-48$ | $-135$ | 1440 |
| 2019 | |||||||||
| Net interest income | 2516 | 1 2 7 7 | 863 | 254 | 204 | 141 | 263 | $-38$ | 4618 |
| Non-life insurance (before reinsurance) | 494 | 115 | 136 | 48 | 28 | 60 | 0 | 10 | 756 |
| Earned premiums | 1 1 1 5 | 281 | 315 | 145 | 47 | 122 | 0 | 10 | 1721 |
| Technical charges | $-621$ | $-166$ | $-179$ | - 97 | - 19 | $-62$ | 0 | 0 | - 966 |
| Life insurance (before reinsurance) | $-95$ | 54 | 36 | 8 | 12 | 16 | 0 | $\mathbf 0$ | - 6 |
| Earned premiums | 1 0 0 0 | 228 | 95 | 17 | 43 | 36 | 0 | 0 | 1 3 2 3 |
| Technical charges | $-1095$ | $-174$ | $-60$ | - 9 | $-30$ | $-21$ | 0 | $\mathbf 0$ | $-1329$ |
| Ceded reinsurance result | $-2$ | $-5$ | - 8 | $-2$ | $-2$ | $-5$ | 0 | - 9 | $-25$ |
| Dividend income | 78 | $\mathbf{1}$ | 0 | 0 | 0 | 0 | 0 | 3 | 82 |
| Net result from financial instruments at fair value through profit or loss | 177 | - 85 | 48 | 33 | $\overline{4}$ | 15 | $-4$ | 41 | 181 |
| Net realised result from debt instruments at fair value through OCI | $\overline{4}$ | 0 | $\overline{2}$ | 1 | 1 | 0 | 0 | $\pmb{0}$ | 6 |
| Net fee and commission income | 1 1 8 2 | 254 | 301 | 215 | 65 | 24 | $-2$ | $-3$ | 1734 |
| Net other income | 187 | 102 | - 11 | $\overline{c}$ | 9 | $\mathbf{1}$ | $-23$ | 3 | 282 |
| TOTAL INCOME | 4 5 4 2 | 1 7 1 4 | 1 3 6 7 | 558 | 322 | 252 | 235 | $\,6\,$ | 7629 |
| Operating expenses | $-2485$ | $-770$ | $-932$ | $-353$ | - 211 | $-139$ | $-229$ | $-116$ | $-4303$ |
| Impairment | $-244$ | $-17$ | 12 | $-1$ | - 11 | - 9 | 33 | 32 | $-217$ |
| of which on FA at amortised cost and at fair value through OCI | $-241$ | $-12$ | 18 | $\boldsymbol{\mathcal{I}}$ | $-11$ | - 5 | 33 | 32 | $-203$ |
| Share in results of associated companies and joint ventures | $-6$ | 8 | 5 | 0 | 0 | 0 | 0 | $\pmb{0}$ | $\overline{7}$ |
| RESULT BEFORE TAX | 1807 | 935 | 452 | 204 | 100 | 104 | 39 | $-78$ | 3 1 1 6 |
| Income tax expense | $-463$ | $-146$ | $-73$ | - 31 | - 21 | $-11$ | $-10$ | 55 | $-627$ |
| Net post-tax result from discontinued operations | $\bf{0}$ | 0 | $\pmb{0}$ | 0 | 0 | 0 | 0 | 0 | 0 |
| RESULT AFTER TAX | 1 3 4 4 | 789 | 379 | 173 | 79 | 93 | 29 | $-23$ | 2489 |
| attributable to minority interests | 0 | $\pmb{0}$ | $\mathbf 0$ | 0 | 0 | 0 | 0 | $\pmb{0}$ | 0 |
| attributable to equity holders of the parent | 1 3 4 4 | 789 | 379 | 173 | 79 | 93 | 29 | $-23$ | 2489 |
| (in millions of EUR) | 2020 | 2019 | 4Q 2020 | 3Q 2020 | 4Q 2019 |
|---|---|---|---|---|---|
| Total | 4 4 6 7 | 4618 | 1 0 6 7 | 1 1 2 2 | 1 1 8 2 |
| Interest income | 6 2 6 4 | 7 2 4 4 | 1464 | 1468 | 1809 |
| Interest income on financial instruments calculated using the effective interest rate method | |||||
| Financial assets at AC | 4 8 6 9 | 5 5 3 6 | 1 1 3 0 | 1 1 7 1 | 1 3 8 9 |
| Financial assets at FVOCI | 330 | 333 | 82 | 85 | 83 |
| Hedging derivatives | 377 | 486 | 92 | 49 | 107 |
| Financial liabilities (negative interest) | 222 | 51 | 87 | 81 | 14 |
| Other | 10 | 15 | 4 | $\Omega$ | 4 |
| Interest income on other financial instruments | |||||
| Financial assets MFVPL other than held for trading | 14 | 8 | 5 | 3 | 3 |
| Financial assets held for trading | 442 | 816 | 64 | 78 | 210 |
| Of which economic hedges | 398 | 789 | 54 | 65 | 203 |
| Other financial assets at FVPL | $\Omega$ | 0 | $\Omega$ | 0 | 0 |
| Interest expense | $-1797$ | $-2626$ | $-397$ | $-346$ | $-627$ |
| Interest expense on financial instruments calculated using the effective interest rate method | |||||
| Financial liabilities at AC | $-707$ | $-1276$ | $-127$ | $-125$ | $-311$ |
| Financial assets (negative interest) | $-79$ | $-70$ | $-36$ | $-26$ | $-10$ |
| Hedging derivatives | $-632$ | $-663$ | $-165$ | $-132$ | $-166$ |
| Other | - 5 | - 6 | 0 | $-3$ | $-2$ |
| Interest expense on other financial instruments | |||||
| Financial liabilities held for trading | $-345$ | $-563$ | $-66$ | $-57$ | $-127$ |
| Of which economic hedges | $-313$ | $-525$ | $-57$ | $-50$ | $-117$ |
| Other financial liabilities at FVPL | $-25$ | $-40$ | $-3$ | $-3$ | $-10$ |
| Net interest expense relating to defined benefit plans | $-3$ | - 8 | $-1$ | - 1 | $-2$ |
The vast majority of negative interest on financial liabilities and financial assets relates to transactions with central banks, interbank and professional counterparties as well as the TLTRO (for more information on the TLTRO III, see note 'Financial assets and liabilities: breakdown by portfolio and product' (note 4.1) further in this report).
| (in millions of EUR) | 2020 | 2019 | 4Q 2020 | 3Q 2020 | 4Q 2019 |
|---|---|---|---|---|---|
| Total | 33 | 181 | 80 | 85 | 130 |
| Breakdown by driver | |||||
| Market value adjustments (xVA) | 13 | 1 | 45 | 55 | 48 |
| MTM ALM derivatives | - 94 | - 1 | - 30 | - 2 | 10 |
| Financial instruments to which the overlay is applied | - 14 | 93 | 23 | 13 | 28 |
| Dealing room and other | 128 | 88 | 42 | 19 | 43 |
The result from financial instruments at fair value through profit or loss in 4Q 2020 is 5 million euros lower compared to 3Q 2020. The quarter-on-quarter decrease is due to:
Partly compensated by
• Higher dealing room and other income in 4Q 2020
• Higher net result on equity instruments (insurance) compared to 3Q 2020, driven by lower impairments on shares
The result from financial instruments at fair value through profit or loss in 2020 is 149 million euros lower compared to 2019. This decrease is due to:
Partly compensated by
| (in millions of EUR) | 2020 | 2019 | 4Q 2020 | 3Q 2020 | 4Q 2019 |
|---|---|---|---|---|---|
| Total | 1 609 | 1 7 3 4 | 403 | 390 | 445 |
| Fee and commission income | 2 3 6 5 | 2476 | 602 | 575 | 643 |
| Fee and commission expense | $-755$ | $-741$ | $-200$ | $-184$ | $-198$ |
| Breakdown by type | |||||
| Asset Management Services | 1 0 0 2 | 1088 | 250 | 245 | 279 |
| Fee and commission income | 1 0 6 1 | 1 1 4 5 | 266 | 260 | 295 |
| Fee and commission expense | $-59$ | $-57$ | $-16$ | $-15$ | $-16$ |
| Banking Services | 895 | 930 | 229 | 218 | 243 |
| Fee and commission income | 1 2 2 5 | 1 2 6 6 | 316 | 300 | 331 |
| Fee and commission expense | $-330$ | $-336$ | $-87$ | - 81 | $-87$ |
| Distribution | $-288$ | $-284$ | $-77$ | $-73$ | $-77$ |
| Fee and commission income | 78 | 64 | 20 | 15 | 17 |
| Fee and commission expense | $-366$ | $-348$ | $-97$ | $-88$ | $-95$ |
| (in millions of EUR) | 2020 | 2019 | 4Q 2020 | 3Q 2020 | 4Q 2019 |
|---|---|---|---|---|---|
| Total | 176 | 282 | 37 | 37 | 47 |
| of which gains or losses on | |||||
| Sale of financial assets measured at amortised cost | 11 | 14 | |||
| Repurchase of financial liabilities measured at amortised cost | 9 | $\Omega$ | 0 | ||
| of which other, including: | 165 | 259 | 37 | 36 | 44 |
| Income from (mainly operational) leasing activities, KBC Lease Group | 76 | 72 | 18 | 20 | 16 |
| Income from VAB Group | 49 | 41 | 12 | 12 | 8 |
| One-off effect revaluation of 55% share in CMSS | 82 | $\Omega$ | $\Omega$ | ||
| Settlement of legacy legal cases | 9 | 0 | $\Omega$ | ||
| Provisioning for tracker mortgage review | ÷. | $-23$ | - 2 | - 6 |
Note :
In 2020
• Provision for tracker mortgage review in KBC Bank Ireland of -9 million euros in FY2020 (of which an additional -4 million euro related to the fine).
In 2019
| (in millions of EUR) | Life | Non-life | Non- technical account |
Total |
|---|---|---|---|---|
| 2020 | ||||
| Earned premiums, insurance (before reinsurance) | 1 2 2 3 | 1795 | 3 0 1 9 | |
| of which change in provision unearned premiums | $-2$ | $-28$ | $-30$ | |
| Technical charges, insurance (before reinsurance) | $-1212$ | $-913$ | $-2126$ | |
| Claims paid | $-1137$ | $-806$ | $-1943$ | |
| Changes in technical provisions | $-53$ | $-101$ | $-154$ | |
| Other technical result | $-22$ | - 6 | $-28$ | |
| Net fee and commission income | $-17$ | $-346$ | $-362$ | |
| Ceded reinsurance result | $-2$ | $-18$ | $-20$ | |
| General administrative expenses | $-139$ | $-248$ | $-2$ | $-390$ |
| Internal claims settlement expenses | - 8 | $-60$ | $-67$ | |
| Indirect acquisition costs | $-30$ | $-68$ | $-98$ | |
| Administrative expenses | $-102$ | $-120$ | ÷ | - 222 |
| Investment management fees | $\mathbf 0$ | $\mathbf 0$ | $-2$ | $-2$ |
| Technical result | $-148$ | 271 | $-2$ | 121 |
| Investment Income (*) | 355 | 92 | 29 | 477 |
| Technical-financial result | 207 | 363 | 27 | 598 |
| Share in results of associated companies and joint ventures |
$\mathbf 0$ | $\mathbf 0$ | ||
| RESULT BEFORE TAX | 207 | 363 | 27 | 598 |
| Income tax expense | $-132$ | |||
| RESULT AFTER TAX | 466 | |||
| attributable to minority interest | $\mathbf 0$ | |||
| attributable to equity holders | 466 | |||
| of the parent | ||||
| 2019 | ||||
| Earned premiums, insurance (before reinsurance) | 1 3 2 4 | 1741 | Ĭ. | 3 0 6 5 |
| of which change in provision unearned premiums | - 1 | $-53$ | $-54$ | |
| Technical charges, insurance (before reinsurance) | $-1329$ | - 967 | $-2296$ | |
| Claims paid | $-1119$ | $-848$ | $-1966$ | |
| Changes in technical provisions | $-267$ | - 113 | - 380 | |
| Other technical result | 57 | $-7$ | 50 | |
| Net fee and commission income | $-31$ | $-332$ | $-363$ | |
| Ceded reinsurance result | - 3 | $-22$ | - 25 | |
| General administrative expenses | $-145$ | $-253$ | 3 ÷. |
$-400$ |
| Internal claims settlement expenses | - 8 | $-62$ | $-70$ | |
| Indirect acquisition costs | $-35$ | $-76$ | $-110$ | |
| Administrative expenses | $-102$ | $-116$ | ÷ | $-218$ |
| Investment management fees | 0 | 0 | $-3$ | $-3$ |
| Technical result | $-183$ | 167 | $-3$ | $-19$ |
| Investment Income (*) | 492 | 87 | 25 | 604 |
| Technical-financial result | 309 | 254 | 22 | 585 |
| Share in results of associated companies and joint ventures |
$\overline{4}$ | $\overline{4}$ | ||
| RESULT BEFORE TAX | 309 | 254 | 26 | 589 |
| Income tax expense | $\blacksquare$ | $\blacksquare$ | ÷ | - 127 |
| RESULT AFTER TAX | L, | ä, | $\frac{1}{2}$ | 462 |
| attributable to minority interest | ÷ | $\blacksquare$ | 0 | |
| attributable to equity holders of the parent |
462 |
(*)2020 consists of (in millions of EUR): Net interest income (450), Net Dividend income (34), Net result from financial instruments at fair value through profit and loss (1), Net other income (8) and Impairment (-15).
2019 consists of (in millions of EUR): Net interest income (460), Net Dividend income (47), Net result from financial instruments at fair value through profit and loss (103), Net other income (-3) and Impairment (-3).
The non-technical account includes also results of non-insurance companies such as VAB group and ADD.
Note: Figures for premiums exclude the investment contracts without DPF (Discretionary Participation Features), which roughly coincide with the unit-linked products. Figures are before elimination of transactions between the bank and insurance entities of the group (more information in the 2019 annual accounts).
In 2020 the technical result non-life was positively impacted by low claim level largely as a result of the lockdown in 2Q 2020 (and to a lesser extent in 4Q 2020), partially offset by storms (in mainly Belgium) for a total amount of -43 million euros (pre-tax, before reinsurance).
In 2019 the technical result non-life was negatively impacted by:
The operating expenses for 4Q 2020 include 49 million euros related to bank (and insurance) levies (21 million euros in 3Q 2020; -51 million euros in 4Q 2019; 503 million euros in 2020; 491 million euros in 2019). Application of IFRIC 21 (Levies) has as a consequence that certain levies are taken upfront in expense of the first quarter of the year.
| (in millions of EUR) | 2020 | 2019 | 4Q 2020 | 3Q 2020 | 4Q 2019 |
|---|---|---|---|---|---|
| Total | $-1182$ | $-217$ | $-122$ | $-63$ | $-82$ |
| Impairment on financial assets at AC and at FVOCI | $-1074$ | $-203$ | $-57$ | $-52$ | $-75$ |
| Of which impairment on financial assets at AC | $-1069$ | $-204$ | $-57$ | $-51$ | $-75$ |
| By product | |||||
| Loans and advances | $-1067$ | $-182$ | $-70$ | $-49$ | $-68$ |
| Debt securities | ÷. | - 1 | $\Omega$ | ||
| Off-balance-sheet commitments and financial guarantees | $-2$ | $-21$ | 13 | - 1 | $-7$ |
| By type | |||||
| Stage 1 (12-month ECL) | $-44$ | $-20$ | 20 | - 4 | 5 |
| Stage 2 (lifetime ECL) | $-724$ | 48 | $-22$ | $-38$ | 37 |
| Stage 3 (non-performing; lifetime ECL) | $-302$ | $-237$ | $-56$ | $-11$ | $-118$ |
| Purchased or originated credit impaired assets | 6 | $\overline{2}$ | $\overline{2}$ | 1 | |
| Of which impairment on financial assets at FVOCI | $-5$ | $\mathbf{0}$ | $-1$ | 0 | |
| Debt securities | $-5$ | $\Omega$ | - 1 | $\Omega$ | |
| Stage 1 (12-month ECL) | $-2$ | 0 | $\Omega$ | 0 | |
| Stage 2 (lifetime ECL) | $-2$ | 0 | 0 | ||
| Stage 3 (non-performing; lifetime ECL) | 0 | 0 | 0 | 0 | 0 |
| Impairment on goodwill | $\Omega$ | $\Omega$ | $\mathbf 0$ | $\mathbf{0}$ | 0 |
| Impairment on other | $-108$ | $-14$ | $-66$ | $-11$ | $-7$ |
| Intangible fixed assets (other than goodwill) | $-64$ | - 6 | $-59$ | - 3 | - 3 |
| Property, plant and equipment (including investment property) | - 9 | - 3 | $-4$ | - 4 | $-2$ |
| Associated companies and joint ventures | 0 | 0 | $\Omega$ | 0 | $\Omega$ |
| Other | $-35$ | - 5 | $-2$ | - 4 | - 3 |
The impairments on financial assets at AC in 2020 include -783 million euros collective Covid-19 ECL (of which -43 million euros in 1Q 2020, -746 million euros in 2Q 2020, +5 million euros in 3Q 2020 and +1 million euros in 4Q 2020). For more information, see note 1.4 of this report.
The stage 3 impairments in 2020 and 2019 are attributable mainly to loan loss impairments in Belgium, Czech Republic and Hungary due to a number of corporate files.
4Q 2020 includes -59 million euros impairments on software related to software projects which were (partly) decommissioned (of which -28 million euros in Belgium, -6 million euros in Czech Republic, -5 million euros in Hungary, -2 million euros in Slovakia and -18 million euros in Group Centre).
The impairment on other (Other) include -29 million euros in 2020 (respectively -18, -9 and -2 million euros in 1Q, 2Q and 4Q 2020) related to modification losses in Belgium, Czech Republic and Hungary (for more information, see COVID-19 (note 1.4)). Additionally, 3Q 2020 included the result of an impairment on a lease contract related to a headquarter building in Hungary for -4 million euros.
| MFVPL | ||||||||
|---|---|---|---|---|---|---|---|---|
| excl. HFT |
Hedging | |||||||
| and | deriva- | |||||||
| (in millions of EUR) | AC | FVOCI overlay | Overlay | HFT | FVO | tives | Total | |
| FINANCIAL ASSETS, 31-12-2020 | ||||||||
| Loans and advances to credit institutions and investment firms (excl. reverse repos) |
6 3 4 3 | $\Omega$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | 6 3 4 3 |
| of which repayable on demand and term loans at not more than three months | 1 3 9 3 | |||||||
| Loans and advances to customers (excl. reverse repos) | 159 234 | $\mathbf 0$ | 387 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | 0 | 159 621 |
| Trade receivables | 1686 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 | 0 | 1686 |
| Consumer credit | 5476 | $\mathbf 0$ | 273 | $\mathbf 0$ | 0 | $\mathbf 0$ | $\mathbf 0$ | 5749 |
| Mortgage loans | 71841 | $\mathbf 0$ | 109 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | 0 | 71950 |
| Term loans | 69 477 | 0 | 5 | $\mathbf 0$ | 0 | 0 | $\mathbf 0$ | 69 482 |
| Finance lease | 5747 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | 5747 |
| Current account advances | 4 2 8 5 | 0 | $\mathbf 0$ | 0 | 0 | 0 | 0 | 4 2 8 5 |
| Other | 722 | 0 | $\mathbf 0$ | 0 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | 722 |
| Reverse repos | 27 628 | $\mathbf{0}$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\pmb{0}$ | 27 628 |
| with credit institutions and investment firms | 27 444 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 | 27 444 |
| with customers | 184 | $\Omega$ | $\mathbf 0$ | 0 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf{0}$ | 184 |
| Equity instruments | $\overline{0}$ | 294 | $\overline{7}$ | 1 2 7 6 | 489 | $\mathbf{0}$ | $\mathbf{0}$ | 2 0 6 7 |
| Investment contracts (insurance) | $\mathbf 0$ | $\mathbf 0$ | 13830 | 0 | $\mathbf 0$ | $\pmb{0}$ | $\mathbf 0$ | 13830 |
| Debt securities issued by | 48 965 | 18 157 | 53 | $\mathbf 0$ | 2 5 4 2 | 0 | 0 | 69 717 |
| Public bodies | 42 432 | 12 301 | $\mathbf{0}$ | $\mathbf 0$ | 2 4 7 9 | $\mathbf 0$ | $\mathbf 0$ | 57 212 |
| Credit institutions and investment firms | 3 9 0 2 | 2 5 6 9 | $\mathbf 0$ | $\mathbf 0$ | 19 | $\mathbf 0$ | $\mathbf{0}$ | 6490 |
| Corporates | 2631 | 3 2 8 6 | 53 | $\mathbf 0$ | 45 | $\mathbf 0$ | $\mathbf 0$ | 6014 |
| Derivatives | $\mathbf 0$ | $\pmb{0}$ | $\mathbf 0$ | 0 | 5 6 5 9 | $\mathbf 0$ | 160 | 5818 |
| Other | 1 3 5 8 | $\mathbf 0$ | $\mathbf 0$ | 0 | $\overline{4}$ | $\mathbf 0$ | $\mathbf 0$ | 1 3 6 1 |
| Total | 243 527 | 18 4 51 | 14 277 | 1 2 7 6 | 8695 | $\mathbf 0$ | 160 | 286 386 |
| FINANCIAL ASSETS, 31-12-2019 | ||||||||
| Loans and advances to credit institutions and investment firms (excl. reverse repos) |
5 3 9 8 | 0 | $\mathbf 0$ | 0 | $\mathbf{1}$ | 0 | 0 | 5 3 9 9 |
| of which repayable on demand and term loans at not more than three months | 468 | |||||||
| Loans and advances to customers (excl. reverse repos) | 155 598 | $\mathbf 0$ | 218 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | 155 816 |
| Trade receivables | 1885 | 0 | 0 | 0 | 0 | 0 | 0 | 1885 |
| Consumer credit | 5 3 8 3 | 0 | 122 | 0 | 0 | 0 | 0 | 5 5 0 5 |
| Mortgage loans | 67 711 | 0 | 85 | 0 | 0 | 0 | 0 | 67796 |
| Term loans | 68 867 | 0 | 10 | $\Omega$ | 0 | $\Omega$ | 0 | 68 877 |
| Finance lease | 5926 | 0 | 0 | 0 | 0 | 0 | 0 | 5926 |
| Current account advances | 4979 | 0 | 0 | 0 | 0 | 0 | 0 | 4979 |
| Other | 847 | 0 | 0 | 0 | 0 | 0 | 0 | 847 |
| Reverse repos | 25 596 | 0 | 0 | 0 | 0 | 0 | 0 | 25 596 |
| with credit institutions and investment firms | 25 4 4 5 | 0 | 0 | 0 | 0 | 0 | 0 | 25 4 45 |
| with customers | 151 | 0 | 0 | 0 | 0 | 0 | 0 | 151 |
| Equity instruments | $\mathbf 0$ | 249 | $\overline{7}$ | 1431 | 833 | 0 | 0 | 2 5 1 9 |
| Investment contracts (insurance) | 0 | 0 | 14 584 | 0 | 0 | 0 | 0 | 14 584 |
| Debt securities issued by | 42 998 | 18788 | 58 | 0 | 1 2 6 9 | 0 | 0 | 63 114 |
| Public bodies | 37 024 | 12 370 | 0 | 0 | 1 1 4 9 | 0 | 0 | 50 542 |
| Credit institutions and investment firms | 3632 | 2753 | 0 | 0 | 20 | 0 | 0 | 6405 |
| Corporates | 2 3 4 3 | 3666 | 58 | 0 | 99 | 0 | 0 | 6 1 6 7 |
| Derivatives | 0 | $\mathbf 0$ | 0 | 0 | 5 1 6 3 | 0 | 158 | 5 3 2 2 |
| Other | 1 0 4 9 | $\mathbf 0$ | 0 | 0 | 0 | 0 | 0 | 1049 |
| Total | 230 639 | 19 037 | 14 867 | 1431 | 7 2 6 6 | 0 | 158 | 273 399 |
| Hedging | |||||
|---|---|---|---|---|---|
| (in millions of EUR) | AC | HFT | FVO | derivatives | Total |
| FINANCIAL LIABILITIES, 31-12-2020 | 34 605 | $\mathbf 0$ | $\Omega$ | $\Omega$ | 34 605 |
| Deposits from credit institutions and investment firms (excl. repos) |
|||||
| of which repayable on demand | 4604 | ||||
| Deposits from customers and debt securities (excl. repos) | 213801 | 101 | 1528 | 0 | 215 430 |
| Demand deposits | 100 986 | 0 | 0 | 0 | 100 986 |
| Time deposits | 11 768 | 16 | 117 | 0 | 11 902 |
| Savings accounts | 74 862 | $\mathbf 0$ | 0 | 0 | 74 862 |
| Special deposits | 2 5 4 3 | 0 | 0 | 0 | 2 5 4 3 |
| Other deposits | 260 | 0 | 0 | 0 | 260 |
| Certificates of deposit | 5412 | 0 | 5 | 0 | 5417 |
| Savings certificates | 454 | $\mathbf 0$ | 0 | 0 | 454 |
| Non-convertible bonds | 15 3 19 | 85 | 1 2 6 4 | 0 | 16 668 |
| Non-convertible subordinated liabilities | 2 1 9 6 | $\mathbf 0$ | 142 | 0 | 2 3 3 8 |
| Repos | 3570 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | 3570 |
| with credit institutions and investment firms | 3 2 8 8 | 0 | 0 | 0 | 3 2 8 8 |
| with customers | 282 | $\mathbf 0$ | $\mathbf 0$ | 0 | 282 |
| Liabilities under investment contracts | 0 | $\mathbf 0$ | 12724 | 0 | 12724 |
| Derivatives | $\mathbf 0$ | 5 3 6 2 | 0 | 1 3 1 9 | 6681 |
| Short positions | $\mathbf{0}$ | 1694 | $\mathbf 0$ | $\mathbf 0$ | 1694 |
| In equity instruments | 0 | 12 | 0 | 0 | 12 |
| In debt securities | $\mathbf 0$ | 1682 | $\mathbf 0$ | 0 | 1682 |
| Other | 2 0 7 7 | $\mathbf 0$ | $\mathbf 0$ | 0 | 2077 |
| Total | 254 053 | 7 157 | 14 25 2 | 1 3 1 9 | 276 781 |
| FINANCIAL LIABILITIES, 31-12-2019 | |||||
| Deposits from credit institutions and investment firms (excl. | 18731 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | 18731 |
| repos) | |||||
| of which repayable on demand | 4669 | ||||
| Deposits from customers and debt securities (excl. repos) | 200 607 | 223 | 2 5 3 9 | 0 | 203 369 |
| Demand deposits | 85 626 | 0 | 0 | 0 | 85 626 |
| Time deposits | 15 271 | 39 | 184 | 0 | 15 4 94 |
| Savings accounts | 69 057 | 0 | 0 | 0 | 69 057 |
| Special deposits | 2 4 6 5 | 0 | 0 | 0 | 2465 |
| Other deposits | 542 | 0 | 0 | 0 | 542 |
| Certificates of deposit | 10 538 | 0 | 8 | 0 | 10 546 |
| Savings certificates | 1 0 2 5 | 0 | 0 | 0 | 1025 |
| Non-convertible bonds | 13756 | 183 | 2 2 0 0 | 0 | 16 139 |
| Non-convertible subordinated liabilities | 2 3 2 7 | 0 | 147 | 0 | 2474 |
| Repos | 2 5 6 5 | $\mathbf 0$ | $\mathbf 0$ | 0 | 2 5 6 5 |
| with credit institutions and investment firms | 2 2 6 2 | 0 | 0 | 2 2 6 2 | |
| with customers | 302 | 0 | 0 | 0 | 303 |
| Liabilities under investment contracts | 0 | 0 | 13 6 10 | 0 | 13 610 |
| Derivatives | 0 | 5 0 5 7 | 0 | 1 1 7 1 | 6 2 2 7 |
| Short positions | 0 | 1708 | 0 | 0 | 1708 |
| In equity instruments | 0 | 14 | 0 | 0 | 14 |
| In debt securities | 0 | 1693 | 0 | 0 | 1693 |
| Other | 2 1 9 0 | 0 | $\mathbf 0$ | 0 | 2 1 9 0 |
| Total | 224 093 | 6988 | 16 149 | 1 1 7 1 | 248 400 |
Deposits from credit institutions and investment firms: includes funding from the ECB's TLTRO programme (in 2019, 6.5 billion euros TLTRO II was repaid and 2.5 billion euros TLTRO III was drawn, further increased by 19.5 billion euros in the second quarter of 2020, totalling 22 billion euros for TLTRO III). KBC applies the effective interest rate principle to these deposits, changing it when we would no longer meet the terms (similar to a floating rate instrument) in accordance with IFRS 9 (Section B.5.4.5). KBC's management is confident that KBC will meet the related conditions (amongst others the level of lending to non-financial corporates and households) and therefore interest was recognised accordingly.
The balance sheet at 31 December 2020 contains figures of OTP Banka Slovensko (Slovakia), of which 99.44% ownership was acquired by KBC Bank NV on 26 November 2020, resulting in full consolidation on the balance sheet. For more information see note 'Main changes in the scope of consolidation' (note 6.6) further in this report.
| 31-12-2019 | ||||||
|---|---|---|---|---|---|---|
| (in millions of EUR) | Carrying value before impairment |
Impairment | Carrying value after impairment |
Carrying value before impairment |
Impairment | Carrying value after impairment |
| FINANCIAL ASSETS AT AMORTISED COST | ||||||
| Loans and advances (*) | 196 900 | $-3695$ | 193 205 | 189 446 | $-2855$ | 186 592 |
| Stage 1 (12-month ECL) | 172 059 | $-168$ | 171891 | 165 326 | $-131$ | 165 195 |
| Stage 2 (lifetime ECL) | 19 4 23 | $-992$ | 18 4 31 | 18 558 | $-254$ | 18 304 |
| Stage 3 (lifetime ECL) | 5 2 7 8 | $-2517$ | 2761 | 5 3 8 1 | $-2444$ | 2937 |
| Purchased or originated credit impaired assets (POCI) |
139 | $-18$ | 121 | 182 | $-26$ | 155 |
| Debt Securities | 48 974 | $-9$ | 48 965 | 43 010 | $-12$ | 42 998 |
| Stage 1 (12-month ECL) | 48 935 | $-6$ | 48 929 | 42 934 | $-5$ | 42 930 |
| Stage 2 (lifetime ECL) | 36 | $-1$ | 35 | 69 | $-2$ | 67 |
| Stage 3 (lifetime ECL) | 3 | $-2$ | 7 | - 6 | ||
| Purchased or originated credit impaired assets (POCI) |
$\mathbf 0$ | 0 | 0 | 0 | $\mathbf 0$ | 0 |
| FINANCIAL ASSETS AT FAIR VALUE THROUGH OCI | ||||||
| Debt Securities | 18 16 6 | - 9 | 18 157 | 18793 | $-5$ | 18788 |
| Stage 1 (12-month ECL) | 18 0 28 | $-6$ | 18 0 22 | 18771 | $-4$ | 18767 |
| Stage 2 (lifetime ECL) | 138 | $-3$ | 135 | 22 | - 1 | 22 |
| Stage 3 (lifetime ECL) | $\mathbf 0$ | 0 | 0 | 0 | 0 | |
| Purchased or originated credit impaired assets (POCI) | $\Omega$ | $\Omega$ | 0 | 0 | 0 |
The table does not include the stage transfers embedded underlying in the management overlay of the forecasted collective Covid-19 ECL, as these are determined based on a collective statistical approach and hence cannot be individually linked to specific credits. Taking into account the impact of the management overlay on staging would result in a carrying value before impairment of loans and advances of approximately respectively 164.4, 25.7 and 6.6 billion euros in stage 1,2 and 3 (or a net staging of 4% of the total portfolio from stage 1 to stage 2 and of 1% from stage 1 & 2 to stage 3). For more information see note 1.4 in this report.
For more details on how KBC defines and determines (i) fair value and the fair value hierarchy and (ii) level 3 valuations reference is made to notes 4.4 up to and including 4.7 of the annual accounts 2019.
| (in millions of EUR) | 31-12-2020 | 31-12-2019 | ||||||
|---|---|---|---|---|---|---|---|---|
| Fair value hierarchy | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total |
| FINANCIAL ASSETS AT FAIR VALUE | ||||||||
| Mandatorily measured at fair value through profit or loss (other than held for trading) |
14 722 | 344 | 487 | 15 553 | 15 536 | 441 | 320 | 16 298 |
| Held for trading | 2647 | 5 0 8 1 | 967 | 8695 | 1685 | 4 3 8 1 | 1 200 | 7 2 6 6 |
| Fair value option | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\Omega$ | 0 | 0 | $\mathbf 0$ | 0 |
| At fair value through OCI | 14 513 | 3 3 6 4 | 575 | 18 4 51 | 14 945 | 3630 | 463 | 19 037 |
| Hedging derivatives | $\mathbf{0}$ | 160 | $\mathbf{0}$ | 160 | 0 | 158 | $\mathbf 0$ | 158 |
| Total | 31 881 | 8948 | 2 0 3 0 | 42 859 | 32 166 | 8611 | 1982 | 42 759 |
| FINANCIAL LIABILITIES AT FAIR VALUE | ||||||||
| Held for trading | 1697 | 4 2 7 0 | 1 1 9 1 | 7 1 5 7 | 1708 | 3 2 5 9 | 2 0 2 1 | 6988 |
| Designated at fair value | 12724 | 377 | 1 1 5 1 | 14 25 2 | 13 610 | 657 | 1883 | 16 149 |
| Hedging derivatives | $\mathbf 0$ | 1 3 1 9 | $\mathbf{0}$ | 1 3 1 9 | 0 | 1 1 7 1 | $\mathbf{0}$ | 1 1 7 1 |
| Total | 14 4 20 | 5966 | 2 3 4 2 | 22 7 28 | 15 317 | 5 0 8 7 | 3903 | 24 308 |
During 2020, KBC transferred about 155 million euros' worth of financial assets and liabilities out of level 1 and into level 2. It also reclassified approximately 256 million euros' worth of financial assets and liabilities from level 2 to level 1. Most of these reclassifications were carried out due to a change in the liquidity of government and corporate bonds.
In 2020 significant movements in financial assets and liabilities classified in level 3 of the fair value hierarchy included the following:
On 6 October 2011, Irving H. Picard, trustee for the liquidation of Bernard L. Madoff Investments Securities LLC (& Bernard L. Madoff), sued KBC Investments Ltd (a wholly-owned subsidiary of KBC Bank) before the bankruptcy court in New York to recover (claw-back) approximately USD 110,000,000 which had been transferred from Madoff (via a feeder fund KBC had lent to called Harley) to KBC entities. This claim is one of a whole set made by the trustee against several banks, hedge funds, feeder funds and investors ("joint defense group").
A lengthy litigation process was conducted on the basis of preliminary objections in respect of the applicability of the Bankruptcy Code's 'safe harbor' and 'good defenses' rules to subsequent transferees (as is the case for KBC Investments Ltd), as detailed in previous disclosures. In June 2015 the trustee amended the original claim which led to an increase of the amount claimed to USD 196,000,000.
A final court ruling dismissing the claim of the Trustee was issued on 3 March 2017. The Trustee appealed and the Court of Appeal reversed the dismissal on 28 February 2019. A petition (i.e. writ of Certioriari) filed on 30 August 2019 was denied by the U.S. Supreme Court on 2 June 2020. As a consequence the merits of the case will be handled by the Bankruptcy Court.
KBC still believes there is a strong basis to get the action against KBC dismissed as there are a number of other defenses that can be raised together with the joint defense group. The procedure may still take several years.
| Quantities | 31-12-2020 | 31-12-2019 |
|---|---|---|
| Ordinary shares | 416 694 558 | 416 394 642 |
| of which ordinary shares that entitle the holder to a dividend payment | 416 694 558 | 416 394 642 |
| of which treasury shares | 20795 | 38 607 |
| Additional information | ||
| Par value per share (in EUR) | 3.51 | 3.51 |
| Number of shares issued but not fully paid up | $\Omega$ |
The ordinary shares of KBC Group NV have no nominal value and are quoted on NYSE Euronext (Brussels).
The treasury shares almost fully relate to positions in shares of KBC Group to hedge outstanding equity derivatives.
In December 2020 the number of KBC Group NV shares went up by 299 916 to 416 694 558 (in December 2019 by 238 966 to 416 394 642), due to new shares being issued following the yearly capital increases reserved for staff.
On 29 May 2020, KBC Insurance and Nova Ljubljanska banka ('NLB') closed the transaction announced on 27 December 2019 to sell, in a joint process, their respective stakes in the Slovenian 50/50 life insurance joint venture NLB Vita. The transaction had a negligible impact on KBC Group's P&L and capital ratio.
On 26 November 2020, we completed the acquisition of 99.44% of OTP Banka Slovensko for EUR 64 million, without any contingent consideration:
On 31 May 2019, ČSOB has acquired the remaining 45% stake in ČMSS from Bausparkasse Schwäbisch Hall (BSH) for a total consideration of 240 million euros. As a result, ČMSS is as of 1 June 2019 fully consolidated (previously equity method).
The table below sets out the fair values of the main assets and liabilities included in the acquisition of OTP Banka Slovensko in 2020 and ČMSS in 2019:
| in millions of EUR | 31/12/2019 | 31/12/2020 |
|---|---|---|
| Purchase or sale | Purchase | Purchase |
| Percentage of shares bought (+) or sold (-) in the relevant year | ČMSS 45% | OTP Banka Slovenska 99,44% |
| Total share percentage at the end of the relevant year | 100% | 99,44% |
| For business unit/segment | Czech Republic |
Slovakia |
| Deal date (month and year) | May 2019 | November 2020 |
| Incorporation of the result of the company in the result of the group as of: | 01-06-2019 | 01-01-2021 |
| Purchase price | 240 | 64 |
| Cashflow for acquiring or selling companies less cash and cash equivalents acquired | 439 | 107 |
| Recognised amounts of identifiable assets acquired and liabilities assumed - provisional fair value at: |
31/05/2019 | 31/12/2020 |
| Cash and cash balances with central banks | 729 | 171 |
| Financial assets | 4 959 | 1 179 |
| Amortised cost | 4 855 | 1 176 |
| Fair value through OCI | 103 | 2 |
| Hedging derivatives | 0 | 0 |
| Fair value adjustments of hedged items in portfolio hedge of interest rate risk | 15 | 0 |
| Tax assets | 4 | 16 |
| Property and equipment | 20 | 12 |
| Goodwill and other intangible assets | 39 | 0 |
| Other assets | 7 | 2 |
| of which: cash and cash equivalents (included in the assets above) | 729 | 171 |
| Financial liabilities | 5 384 | 1 048 |
| Measured at amortised cost | 5 362 | 1 048 |
| Hedging derivatives | 22 | 0 |
| Tax liabilities | 10 | |
| Provisions for risks and charges | 1 | 5 |
| Other liabilities | 33 | 21 |
| of which: cash and cash equivalents (included in the liabilities above) | 50 | 0 |
Significant non-adjusting events between the balance sheet date (31 December 2020) and the publication of this report (11 February 2021): None
Additional Information 4Q 2020 and FY 2020
The main source of credit risk is the loan portfolio of the bank. A snapshot of the banking portfolio is shown in the table below. It includes all payment credit, guarantee credit and standby credit granted by KBC to private persons, companies, governments and banks. Bonds held in the investment portfolio are included if they are corporate- or bank-issued, hence government bonds and trading book exposure are not included. Further on in this chapter, extensive information is provided on the credit portfolio of each business unit. Information specifically on sovereign bonds can be found under 'How do we manage our risks (in the annual accounts 2019)'.
| Credit risk: loan portfolio overview | 31-12-2020 | 31-12-2019 |
|---|---|---|
| Total loan portfolio (in billions of EUR) 1 | ||
| Amount outstanding and undrawn | 225 | 218 |
| Amount outstanding | 181 | 175 |
| Loan portfolio breakdown by business unit (as a % of the outstanding portfolio) | ||
| Belgium | 64.0% | 64.1% |
| Czech Republic | 17.6% | 18.4% |
| International Markets | 16.6% | 15.6% |
| Group Centre | 1.8% | 2.0% |
| Loan portfolio breakdown by counterparty sector (as a % of the outstanding portfolio) | ||
| Private individuals | 43.0% | 41.7% |
| Finance and insurance | 8.0% | 7.6% |
| Governments | 2.9% | 2.9% |
| Corporates | 46.1% | 47.7% |
| Services | 10.8% | 10.9% |
| Distribution | 6.9% | 7.3% |
| Real estate Building & construction |
6.3% 3.9% |
6.4% 3.9% |
| Agriculture, farming, fishing | 2.7% | 2.7% |
| Automotive | 2.5% | 2.6% |
| Food producers | 1.8% | 1.7% |
| Electricity | 1.6% | 1.6% |
| Chemicals | 1.4% | 1.3% |
| Metals | 1.4% | 1.4% |
| Machinery & heavy equipment | 0.9% | 1.0% |
| Hotels, bars & restaurants | 0.7% | 0.7% |
| Shipping | 0.6% | 0.8% |
| Oil, gas & other fuels | 0.5% | 0.6% |
| Traders | 0.5% | 0.6% |
| Electrotechnics | 0.5% | 0.5% |
| Other 2 | 3.3% | 3.6% |
| Loan portfolio breakdown by region (as a % of the outstanding portfolio) | ||
| Home countries | 86.7% | 86.4% |
| Belgium | 53.2% | 52.9% |
| Czech Republic | 16.6% | 17.6% |
| Ireland | 5.8% | 5.9% |
| Slovakia | 5.7% | 4.9% |
| Hungary | 3.3% | 3.1% |
| Bulgaria | 2.1% | 2.0% |
| Rest of Western Europe | 8.9% | 8.6% |
| Rest of Central and Eastern Europe | 0.2% | 0.4% |
| North America | 1.4% | 1.5% |
| Asia | 1.2% | 1.5% |
| Other | 1.6% | 1.6% |
| Loan portfolio breakdown by counterparty (as % of the outstanding portfolio) | ||
| Retail | 42.9% | 41.7% |
| of which: mortgages | 39.7% | 38.5% |
| of which: consumer finance | 3.2% | 3.2% |
| SME | 21.6% | 21.8% |
| Corporate | 35.4% | 36.5% |
| 31-12-2020 | 31-12-2019 | |
|---|---|---|
| Loan portfolio breakdown by IFRS 9 ECL stage (as % of the outstanding portfolio) | ||
| Stage 1 (credit risk has not increased significantly since initial recognition) | 85.2% | 85.2% |
| of which: PD 1 - 4 | 62.5% | 62.7% |
| of which: PD 5 - 9 including unrated | 22.7% | 22.6% |
| Stage 2 (credit risk has increased significantly since initial recognition – not credit impaired) incl. POCI 3 | 11.5% | 11.3% |
| of which: PD 1 - 4 | 3.6% | 3.4% |
| of which: PD 5 - 9 including unrated | 7.9% | 7.9% |
| Stage 3 (credit risk has increased significantly since initial recognition – credit impaired) incl. POCI 3 | 3.3% | 3.5% |
| of which: PD 10 impaired loans | 1.5% | 1.6% |
| of which: more than 90 days past due (PD 11+12) | 1.8% | 1.9% |
| Impaired loan portfolio (in millions of EUR) | ||
| Impaired loans (PD10 + 11 + 12) | 5 902 | 6 160 |
| of which: more than 90 days past due | 3 220 | 3 401 |
| Impaired loans ratio (%) | ||
| Belgium | 2.3% | 2.4% |
| Czech Republic | 2.3% | 2.3% |
| International Markets | 6.9% | 8.5% |
| Group Centre | 13.9% | 12.4% |
| Total | 3.3% | 3.5% |
| of which: more than 90 days past due | 1.8% | 1.9% |
| Loan loss impairment (in millions of EUR) | ||
| Loan loss Impairment for Stage 1 portfolio | 191 | 144 |
| Loan loss Impairment for Stage 2 portfolio | 998 | 265 |
| Loan loss Impairment for Stage 3 portfolio | 2 638 | 2 584 |
| of which: more than 90 days past due | 2 044 | 2 050 |
| Cover ratio of impaired loans (%) | ||
| Loan loss impairments for stage 3 portfolio / impaired loans | 44.7% | 42.0% |
| of which: more than 90 days past due | 63.5% | 60.3% |
| Cover ratio of impaired loans, mortgage loans excluded (%) | ||
| Loan loss impairments for stage 3 portfolio / impaired loans, mortgage loans excluded | 52.3% | 49.7% |
| of which: more than 90 days past due | 74.8% | 71.7% |
| Credit cost ratio (%) | ||
| Belgium | 0.57% | 0.22% |
| Czech Republic | 0.67% | 0.04% |
| International Markets | 0.78% | -0.07% |
| Slovakia | 0.50% | 0.14% |
| Hungary | 1.05% | -0.02% |
| Bulgaria | 0.73% | 0.14% |
| Ireland | 0.88% | -0.32% |
| Group Centre | -0.23% | -0.88% |
| Total | 0.60% | 0.12% |
1Outstanding portfolio includes all on-balance sheet commitments and off-balance sheet guarantees but excludes off-balance sheet undrawn commitments; the amounts are measured in Gross Carrying Amounts;
2Other includes corporate sectors not exceeding 0.5% concentration and unidentified sectors
3Purchased or originated credit impaired assets
Impaired loans are loans for which full (re)payment of the contractual cash flows is deemed unlikely. This coincides with KBC's Probability-of-Default-classes 10, 11 and 12 (see annual accounts FY 2019 - section on credit risk for more information on PD classification). These impaired loans are equal to 'non-performing loans' under the definition used by EBA.
Since 1Q18 a switch has been made in the reported 'outstanding' figures from drawn principal to the new IFRS 9 definition of gross carrying amount (GCA), i.e. including reserved and accrued interests. The additional inclusion of reserved interests led, among others, to an increase in the reported amount of impaired loans. Furthermore, the transaction scope of the credit portfolio was extended and now additionally includes the following 4 elements: (1) bank exposure (money market placements, documentary credit, accounts), (2) debtor risk KBC Commercial Finance, (3) unauthorized overdrafts, and (4) reverse repo (excl. central bank exposure).
| 109 281 | Belgium 1 | Foreign branches | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Total Business Unit Belgium | |||||||||
| 6 559 | 115 840 | ||||||||
| % outst. | % outst. | % outst. | |||||||
| 39 493 | 36,1% | 0 | 0,0% | 39 493 | 34,1% | ||||
| 37 853 | 34,6% | 0 | 0,0% | 37 853 | 32,7% | ||||
| 1 640 | 1,5% | 0 | 0,0% | 1 640 | 1,4% | ||||
| 32 050 | 29,3% | 0 | 0,0% | 32 050 | 27,7% | ||||
| 37 737 | 34,5% | 6 559 | 100,0% | 44 296 | 38,2% | ||||
| % outst. | ind. LTV | % outst. | ind. LTV | % outst. | |||||
| 37 853 | 34,6% | 56% | 0 | 0,0% | - | 37 853 | 32,7% | ||
| 0 | 0,0% | - | 0 | 0,0% | - | 0 | 0,0% | ||
| 427 | 0,4% | - | 0 | 0,0% | - | 427 | 0,4% | ||
| % outst. | % outst. | % outst. | |||||||
| 84 832 | 77,6% | 3 445 | 52,5% | 88 277 | 76,2% | ||||
| 18 580 | 17,0% | 2 725 | 41,5% | 21 305 | 18,4% | ||||
| 3 263 | 3,0% | 148 | 2,3% | 3 412 | 2,9% | ||||
| 2 422 | 2,2% | 236 | 3,6% | 2 658 | 2,3% | ||||
| 185 | 0,2% | 5 | 0,1% | 189 | 0,2% | ||||
| stage 3 imp. | % cover | stage 3 imp. | % cover | stage 3 imp. | % cover | ||||
| 2 422 | 1 075 | 44,4% | 236 | 137 | 58,1% | 2 658 | 1 212 | 45,6% | |
| 1 218 | 276 | 22,7% | 147 | 53 | 35,8% | 1 365 | 329 | 24,1% | |
| 1 204 | 798 | 66,3% | 89 | 84 | 95,0% | 1 293 | 883 | 68,3% | |
| 1 672 | 175 | 1 847 | |||||||
| 597 | 38 | 635 | |||||||
| 1 075 | 137 | 1 212 | |||||||
| 0,20% | 0,41% | 0,22% | |||||||
| 0,55% | 0,83% | 0,57% | |||||||
1 Belgium = KBC Bank (all retail and corporate credit lending activities except for the foreign branches, part of non-legacy portfolio assigned to BU Belgium), CBC, KBC Lease Belgium, KBC Immolease and KBC Commercial Finance
| Total portfolio outstanding | 31 806 | ||
|---|---|---|---|
| Counterparty break down | % outst. | ||
| retail | 18 746 | 58,9% | |
| o/w mortgages | 16 550 | 52,0% | |
| o/w consumer finance | 2 195 | 6,9% | |
| SME | 4 714 | 14,8% | |
| corporate | 8 346 | 26,2% | |
| Mortgage loans | % outst. | ind. LTV | |
| total | 16 550 | 52,0% | 60% |
| o/w FX mortgages | 0 | 0,0% | - |
| o/w ind. LTV > 100% | 88 | 0,3% | - |
| Probability of default (PD) | % outst. | ||
| low risk (PD 1-4; 0.00%-0.80%) | 18 097 | 56,9% | |
| medium risk (PD 5-7; 0.80%-6.40%) | 11 745 | 36,9% | |
| high risk (PD 8-9; 6.40%-100.00%) | 1 237 | 3,9% | |
| impaired loans (PD 10 - 12) | 721 | 2,3% | |
| unrated | 7 | 0,0% | |
| Overall risk indicators 1 | stage 3 imp. | % cover | |
| outstanding impaired loans | 721 | 351 | 48,7% |
| o/w PD 10 impaired loans | 404 | 128 | 31,8% |
| o/w more than 90 days past due (PD 11+12) | 317 | 223 | 70,1% |
| all impairments (stage 1+2+3) | 618 | ||
| o/w stage 1+2 impairments (incl. POCI) | 267 | ||
| o/w stage 3 impairments (incl. POCI) | 351 | ||
| 2019 Credit cost ratio (CCR) | 0,04% | ||
| 2020 Credit cost ratio (CCR) | 0,67% |
1 CCR at country level in local currency
| 31-12-2020, in millions of EUR | Ireland | Slovakia2 | Hungary | Bulgaria | Total Int Markets | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total portfolio outstanding | 10 343 | 9 916 | 5 858 | 3 896 | 30 013 | ||||||||||
| Counterparty break down | % outst. | % outst. | % outst. | % outst. | % outst. | ||||||||||
| retail | 10 262 | 99,2% | 5 454 | 55,0% | 2 192 | 37,4% | 1 505 | 38,6% | 19 413 | 64,7% | |||||
| o/w mortgages | 10 199 | 98,6% | 4 792 | 48,3% | 1 646 | 28,1% | 802 | 20,6% | 17 438 | 58,1% | |||||
| o/w consumer finance | 63 | 0,6% | 662 | 6,7% | 546 | 9,3% | 703 | 18,0% | 1 975 | 6,6% | |||||
| SME | 64 | 0,6% | 1 045 | 10,5% | 146 | 2,5% | 1 105 | 28,4% | 2 360 | 7,9% | |||||
| corporate | 17 | 0,2% | 3 418 | 34,5% | 3 520 | 60,1% | 1 285 | 33,0% | 8 241 | 27,5% | |||||
| Mortgage loans | % outst. | ind. LTV | % outst. | ind. LTV | % outst. | ind. LTV | % outst. | ind. LTV | % outst. | ||||||
| total | 10 199 | 98,6% | 67% | 4 792 | 48,3% | 66% | 1 646 | 28,1% | 53% | 802 | 20,6% | 63% | 17 438 | 58,1% | |
| o/w FX mortgages | 0 | 0,0% | - | 0 | 0,0% | - | 3 | 0,1% | 85% | 77 | 2,0% | 65% | 80 | 0,3% | |
| o/w ind. LTV > 100% | 672 | 6,5% | - | 38 | 0,4% | - | 83 | 1,4% | - | 26 | 0,7% | - | 819 | 2,7% | |
| Probability of default (PD) | % outst. | % outst. | % outst. | % outst. | % outst. | ||||||||||
| low risk (PD 1-4; 0.00%-0.80%) | 1 057 | 10,2% | 5 640 | 56,9% | 2 875 | 49,1% | 998 | 25,6% | 10 570 | 35,2% | |||||
| medium risk (PD 5-7; 0.80%-6.40%) | 7 019 | 67,9% | 2 307 | 23,3% | 2 660 | 45,4% | 2 324 | 59,6% | 14 309 | 47,7% | |||||
| high risk (PD 8-9; 6.40%-100.00%) | 834 | 8,1% | 555 | 5,6% | 208 | 3,6% | 273 | 7,0% | 1 870 | 6,2% | |||||
| impaired loans (PD 10 - 12) | 1 433 | 13,9% | 227 | 2,3% | 114 | 1,9% | 301 | 7,7% | 2 075 | 6,9% | |||||
| unrated | 0 | 0,0% | 1 188 | 12,0% | 1 | 0,0% | 0 | 0,0% | 1 189 | 4,0% | |||||
| Overall risk indicators 1 | stage 3 imp. | % cover | stage 3 imp. | % cover | stage 3 imp. | % cover | stage 3 imp. | % cover | stage 3 imp. | % cover | |||||
| outstanding impaired loans | 1 433 | 375 | 26,2% | 227 | 160 | 70,6% | 114 | 57 | 50,1% | 301 | 121 | 40,3% | 2 075 | 714 | 34,4% |
| o/w PD 10 impaired loans | 650 | 76 | 11,7% | 51 | 19 | 36,8% | 43 | 13 | 31,0% | 73 | 9 | 12,7% | 817 | 118 | 14,4% |
| o/w more than 90 days past due (PD 11+12) | 782 | 299 | 38,2% | 176 | 142 | 80,5% | 72 | 44 | 61,5% | 228 | 112 | 49,2% | 1 258 | 597 | 47,4% |
| all impairments (stage 1+2+3) | 452 | 264 | 133 | 151 | 1 000 | ||||||||||
| o/w stage 1+2 impairments (incl. POCI) | 77 | 103 | 76 | 30 | 286 | ||||||||||
| o/w stage 3 impairments (incl. POCI) | 375 | 160 | 57 | 121 | 714 | ||||||||||
| 2019 Credit cost ratio (CCR) | -0,32% | 0,14% | -0,02% | 0,14% | -0,07% | ||||||||||
| 2020 Credit cost ratio (CCR) | 0,88% | 0,50% | 1,05% | 0,73% | 0,78% | ||||||||||
1 CCR at country level in local currency
2 Including portfolio outstanding of OTP SK amounting to 1 238 million euros (63.8% retail, 4.6% SME and 31.6% corporate)
| Total portfolio outstanding | 3 232 | ||
|---|---|---|---|
| Counterparty break down | % outst. | ||
| retail | 0 | 0,0% | |
| o/w mortgages | 0 | 0,0% | |
| o/w consumer finance | 0 | 0,0% | |
| SME | 0 | 0,0% | |
| corporate | 3 232 | 100,0% | |
| Mortgage loans | % outst. | ind. LTV | |
| total | 0 | 0,0% | - |
| o/w FX mortgages | 0 | 0,0% | - |
| o/w ind. LTV > 100% | 0 | 0,0% | - |
| Probability of default (PD) | % outst. | ||
| low risk (PD 1-4; 0.00%-0.80%) | 2 672 | 82,7% | |
| medium risk (PD 5-7; 0.80%-6.40%) | 112 | 3,5% | |
| high risk (PD 8-9; 6.40%-100.00%) | 0 | 0,0% | |
| impaired loans (PD 10 - 12) | 448 | 13,9% | |
| unrated | 0 | 0,0% | |
| Overall risk indicators | stage 3 imp. | % cover | |
| outstanding impaired loans | 448 | 361 | 80,6% |
| o/w PD 10 impaired loans | 96 | 19 | 19,3% |
| o/w more than 90 days past due (PD 11+12) | 352 | 342 | 97,2% |
| all impairments (stage 1+2+3) | 362 | ||
| o/w stage 1+2 impairments (incl. POCI) | 1 | ||
| o/w stage 3 impairments (incl. POCI) | 361 | ||
| 2019 Credit cost ratio (CCR) | -0,88% | ||
| 2020 Credit cost ratio (CCR) | -0,23% |
1 Total Group Centre = part of non-legacy portfolio assigned to BU Group and activities in wind-down (e.g. ex-Antwerp Diamond Bank)
KBC reports its solvency at group, banking and insurance level, calculating it on the basis of IFRS figures and the relevant guidelines issued by the competent regulator.
We report the solvency of the group, the bank and the insurance company based on IFRS data and according to the rules imposed by the regulator. For the KBC group, this implies that we calculate our solvency ratios based on CRR/CRD IV. This regulation entered gradually into force on 1 January 2014. The general rule under CRR/CRD IV for insurance participations is that an insurance participation is deducted from common equity at group level, unless the competent authority grants permission to apply a risk weighting instead (Danish compromise). As of the fourth quarter 2020, the revised CRR/CRD requires to use the equity method, unless the competent authority allows institutions to apply a different method. KBC Group has received ECB approval to continue to risk weight the historical carrying value (a historical carrying value of 2 469 million euros), after having deconsolidated KBC Insurance from the group figures.
In addition to the solvency ratios under CRR/CRD IV, KBC is considered a financial conglomerate since it covers both significant banking and insurance activities. Therefore KBC also has to disclose its solvency position as calculated in accordance with the Financial Conglomerate Directive (FICOD; 2002/87/EC). This implies that available capital is calculated on the basis of the consolidated position of the group and the eligible items recognised as such under the prevailing sectorial rules, which are CRR/CRD IV for the banking business and Solvency II for the insurance business. The capital requirement for the insurance business based on Solvency II is multiplied by 12.5 to obtain a risk weighted asset equivalent.
The Internal Rating Based (IRB) approach is since its implementation in 2008 the primary approach to calculate KBC's risk weighted assets. This is, based on a full application of all the CRD IV/CRR rules, used for approximately 92% of the weighted credit risks, of which approx. 88% according to Advanced and approx. 4% according to Foundation approach. The remaining weighted credit risks (ca. 8%) are calculated according to the Standardised approach.
The overall capital requirement (CET1) that KBC is to uphold is set at 10.45% (fully loaded, Danish Compromise which includes the CRR/CRD IV minimum requirement (4.5%), the Pillar 2 Requirement (1.75%) and the buffers set by national competent authorities (2.50% Capital Conservation Buffer, 1.50% Systemic Buffer and 0.20% Countercyclical Buffer). Furthermore ECB has set a Pillar 2 Guidance of 1.00%.
ECB temporarily allows banks to operate below the P2G and Capital Conservation Buffer and hence to use these buffers to withstand potential stress. This temporarily brings the regulatory minimum to 7.95% (being 10.45% minus 2.5%). ECB does not have any discretion to waive the application of automatic restrictions to distributions (MDA) as they are set out in the CRR/CRD package. Therefore, the capital conservation buffer remains included in the threshold for MDA.
In the context of the coronavirus pandemic, the EU has amended the CRR, applicable as from 27 June 2020 (so-called 'CRR quick fix'). It includes various relief measures to ensure that institutions are able to provide sufficient support to the households and corporate borrowers and thus mitigate the economic shock caused by the pandemic. For KBC, the main measures relate to the SME supporting factor (favourable risk weight of exposures to SMEs, applied as from the second quarter of 2020), the prudential treatment of software (prudently valued software is risk weighted at 100% instead of deducted from own funds, applied as from the fourth quarter of 2020) and IFRS 9 transitional measures (applied as from the second quarter of 2020). These transitional measures allow to add back a portion of the increased impairments to the common equity capital (CET1), during a transitional period of 5 years when provisions unexpectedly rise due to a worsening in macroeconomic outlook. Initially, the 5 years transition period has been set from 1 January 2018 to 31 December 2022. In the context of the coronavirus pandemic and following a BCBS statement to offer regulatory relief, the transition period will be extended with 2 years until 31 December 2024.
Distributions (being dividend payments, payments related to additional tier 1 instruments or variable remuneration) are limited in case the combined buffer requirements described above are breached. This limitation is also referred to as "Maximum Distributable Amount" or "MDA" thresholds.
The table below provides an overview of the buffers KBC Group has compared to these thresholds, both on an actuals basis (i.e. versus the regulatory targets that apply at the reporting date) and a fully loaded basis (i.e. versus the regulatory targets that will apply going forward).
| (MDA) | ||||
|---|---|---|---|---|
(*) A negative figure relates to a surplus above the pillar 1 bucket for these instruments, which is available to partly satisfy the pillar 2 requirement.
Following table groups the solvency on the level of KBC Group according to different methodologies and calculation methods, including the deduction method.
| Overview of KBC Group's capital ratios (in millions of EUR) 31-12-2020 |
numerator equity) |
denominator (total (common weighted risk volume) |
ratio $(\%)$ | |
|---|---|---|---|---|
| Common Equity ratio | ||||
| Danish Compromise | Fully loaded | 17 948 | 102 111 | 17.58% |
| Deduction Method | Fully loaded | 17 282 | 97 481 | 17.73% |
| Financial Conglomerates Directive | Fully loaded | 18 843 | 114 783 | 16.42% |
| Danish Compromise | Transitional | 18 441 | 101 843 | 18.11% |
| Deduction Method | Transitional | 17 775 | 97 214 | 18.28% |
| Financial Conglomerates Directive | Transitional | 19 336 | 114 515 | 16.89% |
KBC's fully loaded CET1 ratio of 17.58% at FY 2020 represents a solid capital buffer:
| 31-12-2020 | 31-12-2020 | 31-12-2019 | |
|---|---|---|---|
| In millions of EUR | Fully loaded | Transitional | Fully loaded |
| Total regulatory capital (after profit appropriation) | 21 627 | 21 856 | 20 4 14 |
| Tier-1 capital | 19 4 48 | 19 941 | 18 4 8 9 |
| Common equity | 17 948 | 18 441 | 16 989 |
| Parent shareholders' equity (after deconsolidating KBC Insurance) | 18 688 | 18 688 | 17 790 |
| Intangible fixed assets, incl deferred tax impact (-) | $-568$ | $-568$ | $-583$ |
| Goodwill on consolidation, incl deferred tax impact (-) | $-734$ | $-734$ | $-766$ |
| Minority interests | $\mathbf{0}$ | $\Omega$ | $\Omega$ |
| Hedging reserve (cash flow hedges) (-) | 1 2 9 4 | 1 2 9 4 | 1 3 3 1 |
| Valuation diff. in financial liabilities at fair value - own credit risk (-) | $-13$ | $-13$ | - 9 |
| Value adjustment due to the requirements for prudent valuation (-) | $-25$ | $-25$ | $-54$ |
| Dividend payout (-) | $-183$ | $-183$ | 0 |
| Coupon of AT1 instruments (-) | $-12$ | $-12$ | $-11$ |
| Deduction re. financing provided to shareholders (-) | 57 | $-57$ | - 57 |
| Deduction re. Irrevocable payment commitments (-) | 58 | $-58$ | $-45$ |
| Deduction re NPL backstops (-) | 11 | $-11$ | 0 |
| IRB provision shortfall (-) | 0 | $\mathbf 0$ | 140 |
| Deferred tax assets on losses carried forward (-) | $-373$ | $-373$ | 467 |
| Transitional adjustments to CET1 | 0 | 493 | 0 |
| Limit on deferred tax assets from timing differences relying on future profitability and | 0 | $\Omega$ | 0 |
| significant participations in financial sector entities (-) | |||
| Additional going concern capital | 1 500 | 1 500 | 1 500 |
| CRR compliant AT1 instruments | 1 500 | 1 500 | 1500 |
| Minority interests to be included in additional going concern capital | 0 | $\Omega$ | 0 |
| Tier 2 capital | 2 1 7 8 | 1914 | 1925 |
| IRB provision excess (+) | 427 | 427 | 130 |
| Transitional adjustments to T2 | $\Omega$ | $-264$ | 0 |
| Subordinated liabilities | 1751 | 1751 | 1795 |
| Subordinated loans non-consolidated financial sector entities (-) | 0 | $\mathbf{0}$ | 0 |
| Minority interests to be included in tier 2 capital | 0 | $\Omega$ | 0 |
| Total weighted risk volume | 102 111 | 101 843 | 99 071 |
| Banking | 92 903 | 92 635 | 89838 |
| Insurance | 9 1 3 3 | 9 1 3 3 | 9 1 3 3 |
| Holding activities | 66 | 66 | 124 |
| Elimination of intercompany transactions | 9 | 9 | $-25$ |
| Solvency ratios | |||
| Common equity ratio | 17.58% | 18.11% | 17.15% |
| Tier-1 ratio | 19.05% | 19.58% | 18.66% |
| Total capital ratio | 21.18% | 21.46% | 20.61% |
Note: for the composition of the banking RWA, see section 'Solvency banking and insurance activities separately' further in this memo.
In line with the ECB recommendation we apply the IFRS 9 transitional measures as of 1H 2020. The impact of transitional was limited during previous quarters as there was no interim profit recognition in CET1. At year-end 2020, the impact of the application of the transitional measures resulted in a positive impact on CET1 of 53bps compared to fully loaded.
In 2020, KBC made a change in accounting policy for intangible assets. Following the requirements of IAS 8, the change in accounting policy has been applied retrospectively (as if the new accounting policy had always been applied). Consequently, parent shareholders' equity of 2019 has been retrospectively restated (decrease of 143 million euros), as well as intangible fixed assets, including deferred tax impact (143 million euros less deducted). There was no impact on the CET1-ratio. For more information, see Statement of compliance (note 1.1) further in this report.
| Leverage ratio KBC Group (Basel III) In millions of EUR |
31-12-2020 | 31-12-2020 | 31-12-2019 |
|---|---|---|---|
| Fully loaded | Transitional | Fully loaded | |
| Tier-1 capital (Danish compromise) | 19448 | 19 941 | 18 4 8 9 |
| Total exposures | 303 069 | 303 696 | 272 885 |
| Total Assets | 320 743 | 320 743 | 290 591 |
| Deconsolidation KBC Insurance | $-32972$ | $-32972$ | $-33243$ |
| Transitional adjustment | 0 | 628 | $\Omega$ |
| Adjustment for derivatives | $-4158$ | $-4158$ | $-2882$ |
| Adjustment for regulatory corrections in determining Basel III Tier-1 capital | $-1825$ | $-1825$ | $-2254$ |
| Adjustment for securities financing transaction exposures | 830 | 830 | 638 |
| Off-balance sheet exposures | 20 451 | 20 451 | 20 035 |
| Leverage ratio | 6.42% | 6.57% | 6.78% |
In 2020, KBC made a change in accounting policy for intangible assets. Following the requirements of IAS 8, the change in accounting policy has been applied retrospectively (as if the new accounting policy had always been applied). Consequently, total assets of 2019 has been retrospectively restated (decrease of goodwill and other intangible assets of 182 million euros and increase of deferred tax assets of 38 million euros) with limited impact on the leverage ratio of +1bps. For more information, see Statement of compliance (note 1.1) further in this report.
As is the case for the KBC group, the solvency of KBC Bank is calculated based on CRR/CRD. The solvency of KBC Insurance is calculated on the basis of Solvency II rules as they became effective on 1 January 2016. The tables below show the tier-1 and CAD ratios calculated under Basel III (CRR/CRD) for KBC Bank, as well as the solvency ratio of KBC Insurance under Solvency II.
| KBC BANK SOLVENCY CRR / CRD (consolidated) | ||
|---|---|---|
| (in millions of EUR) | ||
Note: the multiplier of HVAR and SVAR used for the calculation of market risk is equal to 3.
| Solvency II, KBC Insurance consolidated | 2020 | 2019 |
|---|---|---|
| (in millions of EUR) | ||
| Own Funds | 3868 | 3496 |
| Tier 1 | 3 3 6 8 | 2996 |
| IFRS Parent shareholders equity | 3815 | 3422 |
| Dividend payout | $\Omega$ | $-156$ |
| Deduction intangible assets and goodwill (after tax) | $-136$ | $-128$ |
| Valuation differences (after tax) | $-383$ | $-196$ |
| Volatility adjustment | 89 | 104 |
| Other | $-16$ | $-49$ |
| Tier 2 | 500 | 500 |
| Subordinated liabilities | 500 | 500 |
| Solvency Capital Requirement (SCR) | 1744 | 1727 |
| Market risk | 1 3 5 5 | 1 3 8 9 |
| Non-life | 583 | 579 |
| Life | 735 | 689 |
| Health | 305 | 264 |
| Counterparty | 101 | 114 |
| Diversification | $-1027$ | - 991 |
| Other | $-308$ | $-316$ |
| Solvency II ratio | 222% | 202% |
In 2020, the Solvency II ratio was positively impacted by the decision to retain the 2020 profit in line with the NBB/EIOPA recommendation.
Besides the ECB and NBB, which supervise KBC on a going concern basis, KBC is also subject to requirements set by the Single Resolution Board (SRB). The SRB is developing resolution plans for the major banks in the euro area. The resolution plan for KBC is based on a Single Point of Entry (SPE) approach at the level of KBC Group with 'bail-in' as the primary resolution tool. MREL measures the amount of own funds and eligible liabilities that can be credibly and feasibly bailed-in.
Currently, the applicable MREL target for KBC Group is 9.67% as a percentage of TLOF under the so-called 'hybrid approach', to be achieved by 31-12-2021. This approach excludes MREL eligible liabilities that have not been issued by KBC Group NV (insofar as they do not constitute own funds) and requires tier-2 capital down streamed by KBC Group NV to KBC Insurance to be deducted from MREL (in line with the treatment under CRR/CRD).
At the end of December 2020, the transitional MREL ratio based on instruments issued by KBC Group NV following the 'hybrid approach' stands at 10.1% of TLOF versus the SRB requirement for KBC to achieve 9.67% as by year-end 2021. The increase of the MREL as a % of TLOF (versus 9.4% at the end of September 2020), can be fully explained by the recognition of FY2020 profit, after deduction of expected dividend in own funds.
Details on our segments or business units are available in the company presentation.
Note: The ECB approved to apply the IFRS9 transitional arrangements from 2Q 2020, as such the difference between fully loaded and the transitional measures are assigned to Group Centre. In other words, the RWA, allocated capital and the ROAC of the different countries remain based on fully loaded.
| Business unit Belgium | |||||||
|---|---|---|---|---|---|---|---|
| (in millions of EUR) | FY 2020 FY 2019 4Q 2020 3Q 2020 2Q 2020 1Q 2020 4Q 2019 | ||||||
| Breakdown P&L | |||||||
| Net interest income | 2579 | 2516 | 631 | 673 | 635 | 640 | 634 |
| Non-life insurance (before reinsurance) | 562 | 494 | 127 | 157 | 167 | 112 | 160 |
| Earned premiums | 1 1 4 1 | 1 1 1 5 | 290 | 287 | 280 | 283 | 285 |
| Technical charges | 579 | 621 ÷. |
$-164$ | $-130$ | $-113$ | $-172$ | 125 |
| Life insurance (before reinsurance) | 63 ÷. |
95 | $-10$ | -16 | - 16 | 21 ÷. |
$-21$ |
| Earned premiums | 913 | 1 0 0 0 | 298 | 191 | 208 | 216 | 282 |
| Technical charges | 976 | $-1095$ | 308 $\sim$ |
206 | $-224$ | $-237$ | 303 |
| Ceded reinsurance result | 12 | $-2$ | 10 | $-3$ | $-10$ | - 9 | $-10$ |
| Dividend income | 47 | 78 | 10 | 10 | 16 | 11 | 15 |
| Net result from financial instruments at fair value through profit or loss | 32 | 177 | 33 | 67 | 149 | 217 $\ddot{\phantom{a}}$ |
89 |
| Net realised result from debt instruments at fair value through OCI | $\mathbf{0}$ | $\overline{4}$ | $-2$ | $\overline{1}$ | 1 | $\mathbf 0$ | $\mathbf 0$ |
| Net fee and commission income | 1 1 3 8 | 1 1 8 2 | 287 | 271 | 271 | 308 | 307 |
| Net other income | 157 | 187 | 41 | 36 | 45 | 35 | 41 |
| TOTAL INCOME | 4 4 3 8 | 4 5 4 2 | 1 1 2 7 | 1 1 9 7 | 1 2 5 6 | 858 | 1 2 1 6 |
| Operating expenses | $-2398$ | $-2485$ | $-530$ | 520 $\sim$ |
$-521$ | $\sim$ 828 |
$-550$ |
| Impairment | 695 ä, |
244 ÷ |
$-67$ | -43 ä, |
$-469$ | $-117$ | 109 ä, |
| on financial assets at AC and at FVOCI | 654 | 241 $\overline{a}$ |
$-39$ | 41 $\blacksquare$ |
458 ÷. |
$-116$ | 107 |
| other | $-41$ | - 4 | $-27$ | $-2$ | $-11$ | 0 | $-2$ |
| Share in results of associated companies and joint ventures | -9 | - 6 | $-1$ | $-2$ | $-3$ | -3 ÷. |
$-2$ |
| RESULT BEFORE TAX | 1 3 3 5 | 1807 | 529 | 633 | 264 | 90 ò. |
556 |
| Income tax expense | $-335$ | $-463$ | $-132$ | $-147$ | $-59$ | $\overline{4}$ | 145 à. |
| RESULT AFTER TAX | 1 0 0 1 | 1 3 4 4 | 396 | 486 | 204 | 86 $\sim$ |
412 |
| attributable to minority interests | 0 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | 0 | $\mathbf{0}$ | $\mathbf 0$ |
| attributable to equity holders of the parent | 1 0 0 1 | 1 3 4 4 | 396 | 486 | 204 | 86 $\blacksquare$ |
412 |
| Banking | 650 | 979 | 285 | 352 | 68 | 55 $\sim$ |
301 |
| Insurance | 351 | 364 | 111 | 134 | 136 | 30 $\sim$ |
111 |
| Breakdown Loans and deposits | |||||||
| Total customer loans excluding reverse repos (end of period) | 103 092 | 100 909 | 103 092 | 103 844 | 103 689 | 104 969 | 100 909 |
| of which Mortgage loans (end of period) | 38 831 | 36 445 | 38 831 | 37 717 | 36 863 | 36 489 | 36 445 |
| Customer deposits and debt certificates excl. repos (end of period) | 135 442 | 130 771 | 135 442 | 137 271 | 136 928 | 138 045 | 130 771 |
| Technical provisions plus unit-linked, life insurance | |||||||
| Interest Guaranteed (end of period) | 13 0 32 | 13 130 | 13 0 32 | 12 944 | 13 005 | 13 0 74 | 13 130 |
| Unit-Linked (end of period) | 12819 | 13 4 26 | 12819 | 12 576 | 12 599 | 12 064 | 13 4 26 |
| Performance Indicators | |||||||
| Risk-weighted assets, banking (end of period, Basel III fully loaded) | 52 671 | 49 486 | 52 671 | 53 363 | 52 938 | 54 098 | 49 486 |
| Required capital, insurance (end of period) | 1491 | 1497 | 1491 | 1 3 9 3 | 1 3 5 8 | 1 2 9 6 | 1497 |
| Allocated capital (end of period) | 6995 | 6792 | 6995 | 6970 | 6943 | 7 0 0 3 | 6792 |
| Return on allocated capital (ROAC) | 15% | 20% | 23% | 28% | 12% | $-5%$ | 24% |
| Cost/income ratio, banking | 57% | 58% | 50% | 47% | 44% | 95% | 48% |
| Combined ratio, non-life insurance | 84% | 89% | 87% | 81% | 74% | 95% | 82% |
| Net interest margin, banking | 1.63% | 1.69% | 1.59% | 1.63% | 1.63% | 1.68% | 1.68% |
| Business unit Czech Republic | |||||||
|---|---|---|---|---|---|---|---|
| (in millions of EUR) | FY 2020 | FY 2019 4Q 2020 3Q 2020 2Q 2020 1Q 2020 4Q 2019 | |||||
| Breakdown P&L | |||||||
| Net interest income | 1012 | 1 2 7 7 | 206 | 220 | 235 | 351 | 338 |
| Non-life insurance (before reinsurance) | 141 | 115 | 36 | 36 | 38 | 31 | 30 |
| Earned premiums | 302 | 281 | 77 | 78 | 72 | 75 | 73 |
| Technical charges | 161 $\blacksquare$ |
166 ä, |
41 ÷. |
42 $\sim$ |
35 ÷ |
44 ä, |
$-43$ |
| Life insurance (before reinsurance) | 48 | 54 | 10 | 12 | 12 | 14 | 12 |
| Earned premiums | 206 | 228 | 59 | 50 | 44 | 52 | 58 |
| Technical charges | 158 | 174 ä, |
49 ä, |
38 $\ddot{ }$ |
32 $\blacksquare$ |
39 ä, |
45 |
| Ceded reinsurance result | $\overline{1}$ | - 5 | $\mathbf 0$ | $\overline{1}$ | $\mathbf 0$ | $\mathbf{0}$ | 0 |
| Dividend income | 1 | $\mathbf{1}$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | 0 | $\mathbf 0$ |
| Net result from financial instruments at fair value through profit or loss | 7 | 85 $\blacksquare$ |
26 | 16 | 90 | 125 $\blacksquare$ |
8 |
| Net realised result from debt instruments at fair value through OCI | 1 | $\mathbf{0}$ | 0 | $\Omega$ | 1 | 0 | $\overline{0}$ |
| Net fee and commission income | 203 | 254 | 46 | 52 | 51 | 55 | 59 |
| Net other income | 13 | 102 | $-3$ | 3 | 3 | 9 | 3 |
| TOTAL INCOME | 1425 | 1714 | 322 | 337 | 431 | 335 | 451 |
| Operating expenses | $-752$ | 770 ÷. |
$-187$ | $-179$ | $-164$ | 221 $\blacksquare$ |
200 |
| Impairment | 226 | $-17$ | $-24$ | -18 ä, |
$-175$ | - 9 | $-3$ |
| on financial assets at AC and at FVOCI | 210 | 12 $\overline{a}$ |
$-17$ | 15 $\blacksquare$ |
170 ä. |
- 8 | $-1$ |
| other | $-16$ | $-4$ | $-7$ | $-3$ | $-5$ | $-1$ | $-1$ |
| Share in results of associated companies and joint ventures | $\overline{2}$ | 8 | $\mathbf{1}$ ä, |
$\mathbf 0$ | 0 | $\mathbf 0$ | $\mathbf 0$ |
| RESULT BEFORE TAX | 446 | 935 | 111 | 139 | 91 | 105 | 248 |
| Income tax expense | $-71$ | 146 a. |
$-17$ | $-23$ | - 14 | 17 $\sim$ |
$-43$ |
| RESULT AFTER TAX | 375 | 789 | 94 | 116 | 77 | 88 | 205 |
| attributable to minority interests | $\mathbf 0$ | 0 | 0 | 0 | $\bf{0}$ | $\mathbf 0$ | $\mathbf 0$ |
| attributable to equity holders of the parent | 375 | 789 | 94 | 116 | 77 | 88 | 205 |
| Banking | 321 | 743 | 81 | 104 | 61 | 75 | 194 |
| Insurance | 54 | 47 | 12 | 12 | 16 | 13 | 11 |
| Breakdown Loans and deposits | |||||||
| Total customer loans excluding reverse repos (end of period) | 29 0 99 | 29 857 | 29 0 99 | 28 106 | 28 597 | 28 28 6 | 29 857 |
| of which Mortgage loans (end of period) | 16 190 | 15 768 | 16 190 | 15 384 | 15418 | 14876 | 15768 |
| Customer deposits and debt certificates excl. repos (end of period) | 41 610 | 39 559 | 41 610 | 39 162 | 39 704 | 37 627 | 39 559 |
| Technical provisions plus unit-linked, life insurance | |||||||
| Interest Guaranteed (end of period) | 655 | 629 | 655 | 622 | 613 | 588 | 629 |
| Unit-Linked (end of period) | 614 | 727 | 614 | 615 | 659 | 655 | 727 |
| Performance Indicators | |||||||
| Risk-weighted assets, banking (end of period, Basel III fully loaded) | 15 3 38 | 15 005 | 15 338 | 14 971 | 15 338 | 15 349 | 15 005 |
| Required capital, insurance (end of period) | 137 | 121 | 137 | 131 | 128 | 126 | 121 |
| Allocated capital (end of period) | 1739 | 1726 | 1739 | 1696 | 1746 | 1745 | 1726 |
| Return on allocated capital (ROAC) | 22% | 47% | 22% | 27% | 18% | 20% | 48% |
| Cost/income ratio, banking | 53% | 44% | 59% | 54% | 38% | 68% | 44% |
| Combined ratio, non-life insurance | 87% | 94% | 87% | 90% | 81% | 90% | 94% |
| Net interest margin, banking | 2.31% | 3.04% | 1.95% | 2.05% | 2.32% | 2.98% | 2.90% |
| Business unit International Markets | |||||||
|---|---|---|---|---|---|---|---|
| (in millions of EUR) | FY 2020 FY 2019 4Q 2020 3Q 2020 2Q 2020 1Q 2020 4Q 2019 | ||||||
| Breakdown P&L | |||||||
| Net interest income | 894 | 863 | 229 | 227 | 219 | 219 | 219 |
| Non-life insurance (before reinsurance) | 150 | 136 | 31 | 34 | 46 | 40 | 35 |
| Earned premiums | 321 | 315 | 80 | 81 | 78 | 82 | 80 |
| Technical charges | 172 | 179 ä, |
49 | 47 $\overline{a}$ |
33 $\blacksquare$ |
43 L. |
$-45$ |
| Life insurance (before reinsurance) | 26 | 36 | 5 | $\overline{4}$ | 10 | 8 | 11 |
| Earned premiums | 105 | 95 | 26 | 25 | 24 | 29 | 24 |
| Technical charges | - 79 | 60 | 22 | 21 | $-15$ | 21 | $-14$ |
| Ceded reinsurance result | 5 | 8 ä, |
$\overline{2}$ | $\overline{\phantom{1}}$ ä, |
$\overline{3}$ $\omega$ |
3 ÷. |
$-1$ |
| Dividend income | $\mathbf 0$ | 0 | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 | 0 |
| Net result from financial instruments at fair value through profit or loss | 43 | 48 | 16 | 18 | 14 | -5 ÷. |
23 |
| Net realised result from debt instruments at fair value through OCI | $\overline{2}$ | $\overline{2}$ | $\mathbf 0$ | 0 | 1 | 0 | $\mathbf 0$ |
| Net fee and commission income | 273 | 301 | 69 | 68 | 67 | 69 | 78 |
| Net other income | 8 | $-11$ | $\mathbf{1}$ | $-4$ | 5 | 6 | $\overline{a}$ |
| TOTAL INCOME | 1 3 9 1 | 1 3 6 7 | 353 | 347 | 359 | 333 | 370 |
| Operating expenses | 894 $\sim$ |
932 $\blacksquare$ |
$-231$ | 200 $\omega$ |
$-196$ | $-268$ | 248 |
| Impairment | 250 | 12 | $-15$ | $\mathbf{1}$ | 213 | 24 ä, |
18 |
| on financial assets at AC and at FVOCI | 217 | 18 | $-1$ | 6 | 217 | 6 ÷. |
22 |
| other | $-33$ | 6 ä, |
$-13$ | 5 $\mathbf{r}$ |
$\overline{\mathbf{4}}$ | 18 $\overline{\phantom{a}}$ |
$-4$ |
| Share in results of associated companies and joint ventures | 0 | 5 | $\mathbf 0$ | $\mathbf 0$ | 0 | $\mathbf 0$ | $\mathbf{1}$ |
| RESULT BEFORE TAX | 247 | 452 | 107 | 148 | 50 $\bar{a}$ |
42 | 141 |
| Income tax expense | $-48$ | $-73$ | 20 $\sim$ |
$-24$ | 5 | $-7$ | $-22$ |
| RESULT AFTER TAX | 199 | 379 | 86 | 123 | $-45$ | 35 | 119 |
| attributable to minority interests | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ |
| attributable to equity holders of the parent | 199 | 379 | 86 | 123 | 45 $\blacksquare$ |
35 | 119 |
| Banking | 144 | 329 | 79 | 112 | - 66 | 19 | 107 |
| Insurance | 55 | 49 | $\overline{7}$ | 11 | 21 | 16 | 12 |
| Breakdown Loans and deposits | |||||||
| Total customer loans excluding reverse repos (end of period) | 27 430 | 25 050 | 27 430 | 25 8 24 | 25 277 | 25 109 | 25 050 |
| of which Mortgage loans (end of period) | 16929 | 15 584 | 16929 | 15 952 | 15 650 | 15 536 | 15 584 |
| Customer deposits and debt certificates excl. repos (end of period) | 28 075 | 24 041 | 28 075 | 24 789 | 24 272 | 23 197 | 24 041 |
| Technical provisions plus unit-linked, life insurance | |||||||
| Interest Guaranteed (end of period) | 249 | 255 | 249 | 250 | 254 | 254 | 255 |
| Unit-Linked (end of period) | 398 | 432 | 398 | 390 | 397 | 373 | 432 |
| Performance Indicators | |||||||
| Risk-weighted assets, banking (end of period, Basel III fully loaded) | 23 2 24 | 20 892 | 23 2 24 | 20 791 | 20736 | 21 507 | 20892 |
| Required capital, insurance (end of period) | 135 | 124 | 135 | 130 | 127 | 123 | 124 |
| Allocated capital (end of period) | 2 5 6 1 | 2 3 5 9 | 2 5 6 1 | 2 3 0 2 | 2 3 1 5 | 2 3 9 1 | 2 3 5 9 |
| Return on allocated capital (ROAC) | 8% | 16% | 15% | 21% | $-8%$ | 6% | 20% |
| Cost/income ratio, banking | 66% | 70% | 65% | 58% | 57% | 84% | 68% |
| Combined ratio, non-life insurance | 84% | 88% | 90% | 89% | 75% | 82% | 89% |
| Net interest margin, banking | 2.60% | 2.64% | 2.59% | 2.61% | 2.58% | 2.61% | 2.60% |
| Slovakia | |||||||
|---|---|---|---|---|---|---|---|
| (in millions of EUR) | FY 2020 FY 2019 4Q 2020 3Q 2020 2Q 2020 1Q 2020 4Q 2019 | ||||||
| Breakdown P&L | |||||||
| Net interest income | 202 | 204 | 51 | 52 | 49 | 50 | 51 |
| Non-life insurance (before reinsurance) | 27 | 28 | 4 | $\overline{7}$ | 8 | $\overline{7}$ | $\overline{7}$ |
| Earned premiums | 52 | 47 | 14 | 13 | 13 | 12 | 12 |
| Technical charges | 25 | 19 | 10 | $-6$ | $-4$ | 5 | $-5$ |
| Life insurance (before reinsurance) | 12 | 12 | 3 | 3 | 3 | 3 | $\overline{4}$ |
| Earned premiums | 34 | 43 | 8 | 9 | 8 | 9 | 12 |
| Technical charges | 22 | 30 | 5 L. |
5 | 5 | $-7$ | $-7$ |
| Ceded reinsurance result | 3 | $\overline{2}$ | $\overline{\mathcal{L}}$ | $\overline{1}$ | $\mathbf{1}$ | $\mathbf 0$ | $-1$ |
| Dividend income | 0 | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 | $\mathbf 0$ | $\mathbf 0$ |
| Net result from financial instruments at fair value through profit or loss | 9 | 4 | 3 | 6 | $\overline{7}$ | 8 ä. |
10 |
| Net realised result from debt instruments at fair value through OCI | $\overline{c}$ | 1 | $\mathbf 0$ | $\mathbf 0$ | 1 | $\mathbf 0$ | 0 |
| Net fee and commission income | 58 | 65 | 14 | 15 | 14 | 15 | 16 |
| Net other income | 8 | 9 | $\overline{2}$ | $\mathbf{1}$ | $\overline{2}$ | 3 | $\overline{4}$ |
| TOTAL INCOME | 320 | 322 | 82 | 84 | 84 | 70 | 93 |
| Operating expenses | 204 | 211 ÷. |
$-48$ | 46 ä, |
$-51$ | 59 $\sim$ |
$-53$ |
| Impairment | 45 | 11 | $\overline{2}$ $\blacksquare$ |
5 | -41 ÷. |
6 $\sim$ |
6 |
| on financial assets at AC and at FVOCI | 42 | 11 $\blacksquare$ |
$\mathbf{1}$ | 5 | - 41 | $-6$ | 5 |
| other | 3 ä, |
0 | $\overline{2}$ ä, |
0 | 0 | $\mathbf 0$ | $\mathbf 0$ |
| Share in results of associated companies and joint ventures | 0 | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 | $\mathbf 0$ | $\mathbf 0$ |
| RESULT BEFORE TAX | 71 | 100 | 32 | 43 | - 8 | $\overline{4}$ | 46 |
| Income tax expense | 15 | 21 ä, |
$-6$ | 10 ä, |
$\overline{2}$ | $\overline{1}$ ÷. |
$-8$ |
| RESULT AFTER TAX | 56 | 79 | 25 | 33 | - 6 | $\overline{4}$ | 38 |
| attributable to minority interests | $\mathbf 0$ | $\Omega$ | $\overline{0}$ | 0 | 0 | $\mathbf 0$ | $\mathbf 0$ |
| attributable to equity holders of the parent | 56 | 79 | 25 | 33 | - 6 | 4 | 38 |
| Banking | 45 | 69 | 23 | 30 | - 9 | $\mathbf{1}$ | 36 |
| Insurance | 11 | 10 | 3 | 3 | 3 | 3 | $\overline{2}$ |
| Breakdown Loans and deposits | |||||||
| Total customer loans excluding reverse repos (end of period) | 9016 | 7 506 | 9016 | 7857 | 7683 | 7607 | 7506 |
| of which Mortgage loans (end of period) | 4 7 0 7 | 3641 | 4 707 | 3992 | 3846 | 3714 | 3641 |
| Customer deposits and debt certificates excl. repos (end of period) | 8601 | 6480 | 8601 | 7 100 | 6531 | 6 2 8 7 | 6480 |
| Technical provisions plus unit-linked, life insurance | |||||||
| Interest Guaranteed (end of period) | 114 | 114 | 114 | 114 | 114 | 114 | 114 |
| Unit-Linked (end of period) | 83 | 100 | 83 | 87 | 92 | 89 | 100 |
| Performance Indicators | |||||||
| Risk-weighted assets, banking (end of period, Basel III fully loaded) | 5919 | 4985 | 5919 | 5 0 1 1 | 5 1 0 4 | 5 1 2 3 | 4985 |
| Required capital, insurance (end of period) | 29 | 27 | 29 | 28 | 27 | 26 | 27 |
| Allocated capital (end of period) | 648 | 560 | 648 | 552 | 565 | 567 | 560 |
| Return on allocated capital (ROAC) | 10% | 14% | 18% | 24% | $-5%$ | 3% | 27% |
| Cost/income ratio, banking | 65% | 66% | 59% | 54% | 62% | 88% | 56% |
| Combined ratio, non-life insurance | 82% | 85% | 80% | 87% | 79% | 82% | 94% |
Note: the balance sheet at 31 December 2020 contains figures of OTP Slovensko (Slovakia), of which 99.44% ownership was acquired by KBC Bank NV on 26 November 2020, resulting in full consolidation on the balance sheet. For more information see note 'Main changes in the scope of consolidation' (note 6.6) in this report.
| Hungary | |||||||
|---|---|---|---|---|---|---|---|
| (in millions of EUR) | FY 2020 FY 2019 4Q 2020 3Q 2020 2Q 2020 1Q 2020 4Q 2019 | ||||||
| Breakdown P&L | |||||||
| Net interest income | 262 | 254 | 68 | 68 | 64 | 62 | 64 |
| Non-life insurance (before reinsurance) | 55 | 48 | 12 | 12 | 17 | 14 | 14 |
| Earned premiums | 143 | 145 | 34 | 35 | 35 | 39 | 37 |
| Technical charges | 88 | 97 | 23 ÷. |
24 $\overline{a}$ |
17 $\mathbf{r}$ |
25 $\overline{a}$ |
$-22$ |
| Life insurance (before reinsurance) | $-1$ | 8 | $\overline{2}$ ÷. |
$\overline{2}$ ÷. |
2 | $\mathbf{1}$ | $\overline{2}$ |
| Earned premiums | 35 | 17 | 9 | 9 | 8 | 9 | $\overline{4}$ |
| Technical charges | 36 | -9 | 11 | -11 | $-6$ | 8 | $-2$ |
| Ceded reinsurance result | 3 | $\overline{2}$ ä. |
$\mathbf 0$ | $\overline{\mathbf{1}}$ $\blacksquare$ |
$-1$ | $\mathbf{1}$ ÷. |
$\mathbf 0$ |
| Dividend income | 0 | 0 | $\mathbf 0$ | 0 | 0 | 0 | $\mathbf 0$ |
| Net result from financial instruments at fair value through profit or loss | 39 | 33 | 14 | 12 | 10 | $\overline{2}$ | 9 |
| Net realised result from debt instruments at fair value through OCI | 1 | $\overline{1}$ | $\mathbf 0$ | $\mathbf 0$ | $\bf{0}$ | $\mathbf 0$ | $\mathbf 0$ |
| Net fee and commission income | 191 | 215 | 49 | 46 | 46 | 49 | 56 |
| Net other income | $\overline{4}$ | $\overline{2}$ | $\mathbf{1}$ | $\mathbf 0$ | 0 | $\overline{2}$ | $\mathbf 0$ |
| TOTAL INCOME | 548 | 558 | 142 | 136 | 140 | 130 | 146 |
| Operating expenses | 323 | 353 | $-79$ | $-74$ | - 69 | $-101$ | $-87$ |
| Impairment | 85 | - 1 | $-17$ | $\overline{2}$ $\blacksquare$ |
÷. -50 |
16 ä, |
$-3$ |
| on financial assets at AC and at FVOCI | 59 | $\mathbf{1}$ | 8 $\mathbf{r}$ |
3 | 55 $\blacksquare$ |
$\overline{2}$ | $-2$ |
| other | 26 | $\overline{2}$ $\ddot{\phantom{a}}$ |
9 $\blacksquare$ |
5 $\blacksquare$ |
6 | 18 ä, |
$-1$ |
| Share in results of associated companies and joint ventures | 0 | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 | 0 | $\mathbf 0$ |
| RESULT BEFORE TAX | 140 | 204 | 46 | 59 | 21 | 13 | 57 |
| Income tax expense | $-26$ | $-31$ | $-8$ | $-9$ | $-5$ | $-4$ | $-7$ |
| RESULT AFTER TAX | 114 | 173 | 38 | 51 | 16 | 10 | 50 |
| attributable to minority interests | $\mathbf{0}$ | 0 | $\mathbf{0}$ | 0 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ |
| attributable to equity holders of the parent | 114 | 173 | 38 | 51 | 16 | 10 | 50 |
| Banking | 90 | 156 | 35 | 46 | $\overline{7}$ | $\overline{2}$ | 44 |
| Insurance | 24 | 18 | $\overline{4}$ | $\overline{\mathbf{4}}$ | 9 | 8 | 6 |
| Breakdown Loans and deposits | |||||||
| Total customer loans excluding reverse repos (end of period) | 4 9 4 0 | 4 6 2 3 | 4 9 4 0 | 4775 | 4617 | 4 5 3 4 | 4 6 2 3 |
| of which Mortgage loans (end of period) | 1600 | 1596 | 1600 | 1541 | 1512 | 1467 | 1596 |
| Customer deposits and debt certificates excl. repos (end of period) | 8982 | 7953 | 8982 | 7983 | 8 0 1 1 | 7435 | 7953 |
| Technical provisions plus unit-linked, life insurance | |||||||
| Interest Guaranteed (end of period) | 46 | 52 | 46 | 46 | 49 | 48 | 52 |
| Unit-Linked (end of period) | 255 | 291 | 255 | 251 | 258 | 243 | 291 |
| Performance Indicators | |||||||
| Risk-weighted assets, banking (end of period, Basel III fully loaded) | 6961 | 6415 | 6961 | 6895 | 6865 | 6 5 5 5 | 6415 |
| Required capital, insurance (end of period) | 47 | 48 | 47 | 45 | 47 | 44 | 48 |
| Allocated capital (end of period) | 775 | 735 | 775 | 766 | 772 | 735 | 735 |
| Return on allocated capital (ROAC) | 15% | 23% | 21% | 27% | 8% | 5% | 27% |
| Cost/income ratio, banking | 61% | 64% | 56% | 56% | 52% | 82% | 61% |
| Combined ratio, non-life insurance | 86% | 90% | 93% | 92% | 76% | 84% | 87% |
| Bulgaria | |||||||
|---|---|---|---|---|---|---|---|
| (in millions of EUR) | FY 2020 FY 2019 4Q 2020 3Q 2020 2Q 2020 1Q 2020 4Q 2019 | ||||||
| Breakdown P&L | |||||||
| Net interest income | 144 | 141 | 36 | 36 | 36 | 36 | 36 |
| Non-life insurance (before reinsurance) | 68 | 60 | 15 | 15 | 20 | 18 | 13 |
| Earned premiums | 126 | 122 | 32 | 32 | 31 | 31 | 31 |
| Technical charges | 58 | 62 | 17 | 17 $\overline{a}$ |
11 ä. |
13 $\overline{\phantom{a}}$ |
-18 ä. |
| Life insurance (before reinsurance) | 15 | 16 | 3 | 3 | 5 | 4 | $\overline{4}$ |
| Earned premiums | 36 | 36 | 9 | $\overline{7}$ | 9 | 11 | 9 |
| Technical charges | 21 | 21 | $6\phantom{1}6$ $\blacksquare$ |
$\overline{4}$ ÷ |
$\overline{4}$ | - 7 | $-4$ |
| Ceded reinsurance result | 5 | -5 | $\overline{2}$ ÷ |
0 | $\overline{1}$ | $\overline{2}$ $\overline{a}$ |
$\mathbf 0$ |
| Dividend income | 0 | $\overline{0}$ | $\mathbf 0$ | $\mathbf 0$ | 0 | $\mathbf{0}$ | $\mathbf 0$ |
| Net result from financial instruments at fair value through profit or loss | $\mathbf{0}$ | 15 | $\overline{0}$ | $\mathbf{0}$ | 0 | $\mathbf{0}$ | 3 |
| Net realised result from debt instruments at fair value through OCI | $\mathbf 0$ | $\overline{0}$ | 0 | $\mathbf 0$ | 0 | $\mathbf 0$ | 0 |
| Net fee and commission income | 28 | 24 | 8 | 8 | 6 | 6 | 5 |
| Net other income | 3 | 1 | $\mathbf{1}$ | $\mathbf{1}$ | 1 | $\mathbf 0$ | $\mathbf{1}$ |
| TOTAL INCOME | 253 | 252 | 61 | 63 | 67 | 62 | 63 |
| Operating expenses | 139 | 139 | 33 | 31 $\ddot{\phantom{a}}$ |
$-27$ | 48 ä, |
$-33$ |
| Impairment | 30 | -9 ÷. |
$\overline{0}$ | $\overline{2}$ ÷. |
25 L. |
3 ä, |
$\mathbf 0$ |
| on financial assets at AC and at FVOCI | 27 | 5 $\overline{\phantom{a}}$ |
1 | $-2$ | $-23$ | 3 $\mathbf{r}$ |
$\overline{4}$ |
| other | 3 ÷. |
$\overline{4}$ ä, |
$\mathbf{1}$ ÷. |
0 | $-1$ | $\mathbf 0$ | $-3$ |
| Share in results of associated companies and joint ventures | $\mathbf{0}$ | $\overline{0}$ | $\overline{0}$ | 0 | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ |
| RESULT BEFORE TAX | 84 | 104 | 28 | 30 | 16 | 11 | 31 |
| Income tax expense | - 9 | 11 $\bar{a}$ |
$-3$ | $-3$ | $-2$ | $-1$ | $-3$ |
| RESULT AFTER TAX | 76 | 93 | 25 | 27 | 14 | 10 | 27 |
| attributable to minority interests | $\mathbf{0}$ | $\overline{0}$ | $\pmb{0}$ | $\mathbf 0$ | 0 | $\mathbf{0}$ | $\mathbf 0$ |
| attributable to equity holders of the parent | 76 | 93 | 25 | 27 | 14 | 10 | 27 |
| Banking | 53 | 76 | 23 | 22 | 4 | $\overline{4}$ | 24 |
| Insurance | 23 | 17 | $\overline{2}$ | 5 | 9 | 6 | 3 |
| Breakdown Loans and deposits | |||||||
| Total customer loans excluding reverse repos (end of period) | 3 5 0 8 | 3 1 6 1 | 3 5 0 8 | 3413 | 3 3 0 7 | 3 2 1 3 | 3 1 6 1 |
| of which Mortgage loans (end of period) | 778 | 693 | 778 | 752 | 723 | 703 | 693 |
| Customer deposits and debt certificates excl. repos (end of period) | 5 4 5 3 | 4 4 3 9 | 5453 | 4 8 0 2 | 4 6 3 4 | 4 4 9 7 | 4 4 3 9 |
| Technical provisions plus unit-linked, life insurance | |||||||
| Interest Guaranteed (end of period) | 88 | 89 | 88 | 90 | 91 | 92 | 89 |
| Unit-Linked (end of period) | 60 | 41 | 60 | 52 | 47 | 41 | 41 |
| Performance Indicators | |||||||
| Risk-weighted assets, banking (end of period, Basel III fully loaded) | 3 2 5 4 | 3413 | 3 2 5 4 | 3 1 3 3 | 3 0 7 3 | 3770 | 3413 |
| Required capital, insurance (end of period) | 58 | 49 | 58 | 57 | 53 | 53 | 49 |
| Allocated capital (end of period) | 398 | 414 | 398 | 384 | 377 | 450 | 414 |
| Return on allocated capital (ROAC) | 19% | 23% | 25% | 27% | 13% | 9% | 27% |
| Cost/income ratio, banking | 58% | 56% | 52% | 49% | 44% | 86% | 51% |
| Combined ratio, non-life insurance | 82% | 88% | 89% | 85% | 70% | 82% | 89% |
| Ireland (in millions of EUR) |
FY 2020 FY 2019 4Q 2020 3Q 2020 2Q 2020 1Q 2020 4Q 2019 | ||||||
|---|---|---|---|---|---|---|---|
| Breakdown P&L | |||||||
| Net interest income | 286 | 263 | 74 | 72 | 69 | 71 | 67 |
| Non-life insurance (before reinsurance) | 0 | $\Omega$ | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 | 0 |
| Earned premiums | 0 | $\Omega$ | $\mathbf 0$ | $\mathbf 0$ | 0 | $\mathbf 0$ | 0 |
| Technical charges | $\Omega$ | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 | $\mathbf 0$ | 0 |
| Life insurance (before reinsurance) | 0 | 0 | $\mathbf 0$ | 0 | 0 | 0 | 0 |
| Earned premiums | 0 | 0 | $\mathbf 0$ | 0 | 0 | 0 | 0 |
| Technical charges | 0 | 0 | $\mathbf 0$ | 0 | 0 | 0 | 0 |
| Ceded reinsurance result | $\Omega$ | 0 | $\overline{0}$ | $\mathbf 0$ | 0 | $\mathbf 0$ | 0 |
| Dividend income | $\mathbf 0$ | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 | 0 | 0 |
| Net result from financial instruments at fair value through profit or loss | $\overline{4}$ | $\overline{4}$ $\sim$ |
$\overline{2}$ | $\blacktriangleleft$ | 3 | $\overline{2}$ | 0 |
| Net realised result from debt instruments at fair value through OCI | 0 | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 | 0 | 0 |
| Net fee and commission income | 3 ä, |
$\overline{2}$ | $\mathbf{1}$ ÷ |
- 1 | 0 | $\overline{1}$ | $\mathbf 0$ |
| Net other income | 9 ÷. |
23 | 3 ÷. |
$-6$ | $\mathbf 0$ | $\mathbf 0$ | $-1$ |
| TOTAL INCOME | 269 | 235 | 68 | 64 | 65 | 71 | 67 |
| Operating expenses | 228 | 229 ä, |
71 | 49 | $-48$ | 60 $\ddot{\phantom{a}}$ |
$-75$ |
| Impairment | 91 | 33 | 4 | 0 | - 97 | $\overline{c}$ | 14 |
| on financial assets at AC and at FVOCI | 90 | 33 | 5 | $\mathbf 0$ | 97 ÷. |
$\mathbf 1$ | 14 |
| other | $\overline{2}$ $\blacksquare$ |
0 | $\mathbf{1}$ $\blacksquare$ |
0 | 0 | $\mathbf 0$ | $\mathbf 0$ |
| Share in results of associated companies and joint ventures | 0 | 0 | $\overline{0}$ | 0 | $\mathbf 0$ | $\mathbf 0$ | 0 |
| RESULT BEFORE TAX | 50 | 39 | $\mathbf{1}$ | 15 | $-80$ | 13 | 6 |
| Income tax expense | $\overline{2}$ | 10 | $-4$ | $-2$ | 10 | $-2$ | $-3$ |
| RESULT AFTER TAX | 48 | 29 | $-3$ | 13 | $-70$ | 12 | $\overline{\mathbf{c}}$ |
| attributable to minority interests | 0 | $\overline{0}$ | $\mathbf 0$ | $\mathbf 0$ | 0 | $\mathbf 0$ | 0 |
| attributable to equity holders of the parent | - 48 | 29 | 3 $\blacksquare$ |
13 | - 70 | 12 | 2 |
| Banking | 44 | 29 | $\overline{2}$ $\sim$ |
14 | $-68$ | 12 | $\overline{2}$ |
| Insurance | $\overline{4}$ ÷. |
0 | $\mathbf{1}$ $\sim$ |
- 1 | $-1$ | 0 | 0 |
| Breakdown Loans and deposits | |||||||
| Total customer loans excluding reverse repos (end of period) | 9966 | 9760 | 9966 | 9779 | 9670 | 9 7 5 4 | 9760 |
| of which Mortgage loans (end of period) | 9844 | 9654 | 9844 | 9666 | 9569 | 9651 | 9654 |
| Customer deposits and debt certificates excl. repos (end of period) | 5 0 4 0 | 5 1 6 9 | 5 0 4 0 | 4 9 0 4 | 5095 | 4978 | 5 1 6 9 |
| Performance Indicators | |||||||
| Risk-weighted assets, banking (end of period, Basel III fully loaded) | 7 0 8 9 | 6 0 7 7 | 7 0 8 9 | 5750 | 5692 | 6 0 5 7 | 6077 |
| Allocated capital (end of period) | 741 | 650 | 741 | 601 | 600 | 639 | 650 |
| Return on allocated capital (ROAC) | $-7%$ | 4% | $-2%$ | 8% | $-44%$ | 7% | 1% |
| Cost/income ratio, banking | 83% | 97% | 102% | 75% | 72% | 83% | 113% |
| Group Centre - Breakdown net result | |||||||
|---|---|---|---|---|---|---|---|
| (in millions of EUR) | FY 2020 FY 2019 4Q 2020 3Q 2020 2Q 2020 1Q 2020 4Q 2019 | ||||||
| Operational costs of the Group activities | $-95$ | - 80 | $-42$ | $-20$ | $-18$ | $-15$ | $-34$ |
| Capital and treasury management | $-20$ | $-26$ | $-4$ | - 6 | $-11$ | - 8 | |
| Holding of participations | - 3 | 9 | $\sim$ | $-1$ | - 3 | $-2$ | |
| Results companies in rundown | $\sim$ | 24 | $\Omega$ | 4 $\sim$ |
- 1 | $\overline{2}$ | |
| Other | $-16$ | 51 | 9 | - 8 | 0 | $-18$ | -9 |
| Total net result for the Group centre | 135 ۰. |
-23 | $-38$ | $-28$ | $-26$ | $-43$ | $-33$ |
| Business unit Group Centre | |||||||
|---|---|---|---|---|---|---|---|
| (in millions of EUR) | FY 2020 FY 2019 4Q 2020 3Q 2020 2Q 2020 1Q 2020 4Q 2019 | ||||||
| Breakdown P&L | |||||||
| Net interest income | $-18$ | 38 | $\overline{2}$ | $\overline{2}$ | 6 ÷. |
16 | - 9 |
| Non-life insurance (before reinsurance) | 13 | 10 | $\overline{2}$ | $\overline{7}$ | 5 | $\overline{\mathbf{c}}$ | $\overline{4}$ |
| Earned premiums | 12 | 10 | 3 | 3 | 4 | $\overline{2}$ | 2 |
| Technical charges | $\mathbf{0}$ | $\mathbf 0$ | $\overline{4}$ | 4 | 1 | $\mathbf 0$ | 1 |
| Life insurance (before reinsurance) | 1 | $\Omega$ | $\mathbf 0$ | $\Omega$ | 0 | 0 | $\mathbf 0$ |
| Earned premiums | $\mathbf{0}$ | $\mathbf{0}$ | $\mathbf{0}$ | $\mathbf{0}$ | 0 | 0 | 0 |
| Technical charges | $\mathbf{0}$ | $\mathbf 0$ | $\overline{0}$ | 0 | 0 | $\mathbf 0$ | $\mathbf 0$ |
| Ceded reinsurance result | $\overline{2}$ | 9 | $\overline{2}$ | $\overline{4}$ $\overline{a}$ |
-1 | 5 | $\mathbf{0}$ |
| Dividend income | 4 | 3 | 1 | $\mathbf 1$ | 1 | 1 | $\mathbf 1$ |
| Net result from financial instruments at fair value through profit or loss | 51 | 41 | 4 | 16 | 1 | 39 $\blacksquare$ |
10 |
| Net realised result from debt instruments at fair value through OCI | $\mathbf{0}$ | 0 | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 | 0 |
| Net fee and commission income | $\overline{4}$ | 3 | $\overline{0}$ | -1 | $\overline{1}$ ä, |
$\overline{2}$ ä, |
$\overline{0}$ |
| Net other income | $\mathbf{1}$ | 3 | $\overline{2}$ | 1 | 0 | 0 | $-2$ |
| TOTAL INCOME | $-59$ | 6 | $\mathbf{0}$ | - 9 | $-2$ | 48 ä, |
$\overline{\mathbf{4}}$ |
| Operating expenses | 111 | 116 ä, |
$-39$ | 27 | 24 ä, |
21 | $-48$ |
| Impairment | 11 | 32 | $-17$ | $-2$ | $\mathbf 0$ | 9 | 11 |
| on financial assets at AC and at FVOCI | $\overline{7}$ | 32 | 1 | $-2$ | $\mathbf 0$ | 9 | 11 |
| other | 18 | $\mathbf 0$ | 18 $\sim$ |
0 | 0 | 0 | $\mathbf 0$ |
| Share in results of associated companies and joint ventures | $\mathbf{0}$ | $\mathbf 0$ | $\mathbf 0$ | 0 | $\mathbf 0$ | 0 | $\mathbf 0$ |
| RESULT BEFORE TAX | 181 | 78 $\overline{\phantom{a}}$ |
$-57$ | 38 $\blacksquare$ |
26 $\equiv$ |
60 ÷. |
$-32$ |
| Income tax expense | 46 | 55 | 18 | 10 | $\mathbf 0$ | 18 | $-1$ |
| RESULT AFTER TAX | 135 | 23 | 38 | 28 ä, |
26 $\blacksquare$ |
43 $\blacksquare$ |
$-33$ |
| attributable to minority interests | $\mathbf{0}$ | $\overline{0}$ | $\pmb{0}$ | $\mathbf 0$ | $\mathbf 0$ | $\mathbf{0}$ | $\pmb{0}$ |
| attributable to equity holders of the parent | 135 | $-23$ | $-38$ | 28 $\blacksquare$ |
$-26$ | 43 $\blacksquare$ |
- 33 |
| Banking | 101 | $\mathbf{1}$ | 9 $\blacksquare$ |
22 $\blacksquare$ |
21 $\sim$ |
49 $\blacksquare$ |
$-17$ |
| Holding | 39 | 25 | $-31$ | - 6 | $-5$ | 3 | $-26$ |
| Insurance | 5 | $\overline{2}$ | $\overline{2}$ | $\mathbf{0}$ | $\mathbf{0}$ | 4 | 10 |
| Breakdown Loans and deposits | |||||||
| Total customer loans excluding reverse repos (end of period) | 1 | 1 | 1 | 0 | 0 | 0 | 1 |
| of which Mortgage Ioans (end of period) | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Customer deposits and debt certificates excl. repos (end of period) | 10 303 | 8999 | 10 303 | 10 450 | 9908 | 9426 | 8999 |
| Performance Indicators | |||||||
| Risk-weighted assets, banking (end of period, Basel III fully loaded) | 1744 | 4 5 5 4 | 1 7 4 4 | 1912 | 2 2 0 9 | 2 3 3 9 | 4 5 5 4 |
| Risk-weighted assets, insurance (end of period, Basel III fully loaded) | 9 1 3 3 | 9 1 3 3 | 9 1 3 3 | 9 1 3 3 | 9 1 3 3 | 9 1 3 3 | 9 1 3 3 |
| Required capital, insurance (end of period) | $-18$ | $-15$ | $-18$ | $-18$ | $-15$ | $-22$ | $-15$ |
| Allocated capital (end of period) | 164 | 473 | 164 | 182 | 218 | 224 | 473 |
Gives an idea of the amount of profit over a certain period that is attributable to one share (and, where applicable, including dilutive instruments).
| Calculation (in millions of EUR) | Reference | 2020 | 2019 |
|---|---|---|---|
| Result after tax. attributable to equity holders of the parent (A) |
'Consolidated income statement' | 1440 | 2489 |
| Coupon on the additional tier-1 instruments included in equity (B) |
'Consolidated statement of changes in equity' | $-50$ | - 56 |
| Average number of ordinary shares less treasury shares $(in$ millions) in the period $(C)$ |
Note 5.10 | 416 | 416 |
| or | |||
| Average number of ordinary shares plus dilutive options less treasury shares in the period (D) |
416 | 416 | |
| Basic = $(A-B) / (C)$ (in EUR) | 3.34 | 5.85 | |
| Diluted = $(A-B) / (D)$ (in EUR) | 3.34 | 5.85 |
Gives an insight into the technical profitability (i.e. after eliminating investment returns, among other items) of the non-life insurance business, more particularly the extent to which insurance premiums adequately cover claim payments and expenses. The combined ratio takes ceded reinsurance into account.
| Calculation (in millions of EUR or %) | Reference | 2020 | 2019 |
|---|---|---|---|
| Technical insurance charges, including the internal cost of settling claims (A) |
Note 3.7.1 | 945 | 1 006 |
| Earned insurance premiums (B) | Note 3.7.1 | 1 7 4 2 | 693 |
| $\ddot{}$ | |||
| Operating expenses (C) | Note 3.7.1 | 536 | 526 |
| Written insurance premiums (D) | Note 3.7.1 | 1769 | 1 7 2 8 |
| $= (A/B)+(C/D)$ | 84.5% | 89.9% |
A risk-weighted measure of the group's solvency based on common equity tier-1 capital (the ratios given here are based on the Danish compromise). The CRD rules are gradually being implemented to allow banks to build up the necessary capital buffers. The capital position of a bank, when account is taken of the transition period, is referred to as the 'transitional' view. The capital position based on full application of all the rules – as would be the case after this transition period – is referred to as 'fully loaded'.
A detailed calculation can be found under 'Solvency KBC Group' section.
Gives an impression of the relative cost efficiency (costs relative to income) of the banking activities.
| Calculation (in millions of EUR or %) | Reference | 2020 | 2019 |
|---|---|---|---|
| Cost/income ratio | |||
| Operating expenses of the banking activities (A) | 'Consolidated income statement': component of 'Operating expenses' |
3677 | 3 800 |
| Total income of the banking activities (B) | 'Consolidated income statement': component of 'Total income' |
6 1 3 2 | 6 5 6 3 |
| $= (A) / (B)$ | 60.0% | 57.9% |
Where relevant, we also estimate exceptional and/or non-operating items when calculating the cost/income ratio. This calculation aims to give a better idea of the relative cost efficiency of the pure business activities. The adjustments include: MTM ALM derivatives (fully excluded), bank taxes (including contributions to European Single Resolution Fund) are included pro rata and hence spread over all quarters of the year instead of being recognised for the most part upfront (as required by IFRIC 21) and one-off items. The Cost/Income ratio adjusted for specific items is 59% in FY 2020 (versus 58% in FY 2019).
Indicates the proportion of impaired loans (see 'Impaired loans ratio' for definition) that are covered by impairment charges. Where appropriate, the numerator and denominator in the formula may be limited to impaired loans that are more than 90 days past due.
| Calculation (in millions of EUR or %) | Reference | 2020 | 2019 |
|---|---|---|---|
| Specific impairment on loans (A) | 'Credit risk: Ioan portfolio overview' table in the 'Credit risk' section |
2638 | 2 5 8 4 |
| Outstanding impaired loans (B) | 'Credit risk: loan portfolio overview' table in the 'Credit risk' section |
5902 | 6 160 |
| $= (A) / (B)$ | 44.7% | 42.0% |
Gives an idea of loan impairment charges recognised in the income statement for a specific period, relative to the total loan portfolio (see 'Loan portfolio' for definition). In the longer term, this ratio can provide an indication of the credit quality of the portfolio.
| Calculation (in millions of EUR or %) | Reference | 2020 | 2019 |
|---|---|---|---|
| Net changes in impairment for credit risks (A) |
'Consolidated income statement': component of 'Impairment' |
1068 | 204 |
| Average outstanding loan portfolio (B) | 'Credit risk: loan portfolio overview' table in the 'Credit risk' section |
177 542 | 170 128 |
| $=$ (A) (annualised) / (B) | $0.60\%$ | 0.12% |
The credit cost ratio of FY 2020 includes a collective Covid-19 expected credit loss (ECL) of 783 million euros, of which: (i) a total management overlay of 672 million euros and (ii) an impact of 111 million euros captured by our ECL models after 12 months. Without the Covid-19 ECL impact, the credit cost ratio amounts to 0.16%.
Indicates the proportion of impaired loans in the loan portfolio (see 'Loan portfolio' for definition) and, therefore, gives an idea of the creditworthiness of the portfolio. Impaired loans are loans where it is unlikely that the full contractual principal and interest will be repaid/paid. These loans have a KBC default status of PD 10, PD 11 or PD 12 and correspond to the definition of 'nonperforming' used by the European Banking Authority.
| Calculation (in millions of EUR or %) | Reference | 2020 | 2019 |
|---|---|---|---|
| Amount outstanding of impaired loans (A) | 'Credit risk: Ioan portfolio overview' table in the 'Credit risk' section |
5 9 0 2 | 6 1 6 0 |
| Total outstanding loan portfolio (B) | 'Credit risk: Ioan portfolio overview in the 'Credit risk' section |
180891 | 175 431 |
| $= (A) / (B)$ | 3.3% | 3.5% |
Gives an idea of the group's solvency, based on a simple non-risk-weighted ratio. A detailed calculation can be found under 'Solvency KBC Group' section.
Gives an idea of the bank's liquidity position in the short term, more specifically the extent to which the group is able to overcome liquidity difficulties over a one-month period. It is the average of 12 end-of-month LCR figures.
| Calculation (in millions of EUR or %) | Reference | 2020 | 2019 |
|---|---|---|---|
| Stock of high-quality liquid assets (A) | Based on the European Commission's Delegated Act on LCR and the European Banking Authority's quidelines for LCR disclosure |
81 833 | 74 884 |
| Total net cash outflows over the next 30 calendar days (B) |
55 714 | 54 415 | |
| $= (A) / (B)$ | 147% | 138% |
Gives an idea of the magnitude of (what are mainly traditional) lending activities.
| Calculation (in millions of EUR or %) | Reference | 2020 | 2019 |
|---|---|---|---|
| Loans and advances to customers (A) | Note 4.1, component of 'Loans and advances to customers' |
159 621 | 155 816 |
| $\ddot{}$ | |||
| Reverse repos (not with Central Banks) (B) | Note 4.1, component of 'Reverse repos with credit institutions and investment firms' |
3 2 9 5 | 1559 |
| $\ddot{}$ | |||
| Debt instruments issued by corporates and by credit institutions and investment firms (banking) (C) |
Note 4.1, component of 'Debt instruments issued by corporates and by credit institutions and investment firms' |
6 0 5 6 | 5894 |
| $\ddot{}$ | |||
| Other exposures to credit institutions (D) | 4 0 0 9 | 4 6 2 9 | |
| $\ddot{}$ | |||
| Financial guarantees granted to clients and other commitments (E) |
Note 6.1, component of 'Financial guarantees given' |
7919 | 8 1 6 0 |
| $+$ | |||
| Impairment on loans (F) | Note 4.2, component of 'Impairment' |
3703 | 2866 |
| $\ddot{}$ | |||
| Insurance entities (G) | Note 4.1, component of 'Loans and advances to customers' |
$-2198$ | $-2288$ |
| $\ddot{}$ | |||
| Non-loan-related receivables (H) | $-592$ | - 738 | |
| $\ddot{}$ | |||
| Other (I) | Component of Note 4.1 | $-923$ | 468 |
| Gross Carrying amount = $(A)+(B)+(C)+(D)+(E)+(F)+(G)+(H)+(I)$ | 180 891 | 175 431 |
Gives an idea of the net interest income of the banking activities (one of the most important sources of revenue for the group) relative to the average total interest-bearing assets of the banking activities.
| Calculation (in millions of EUR or %) | Reference | 2020 | 2019 |
|---|---|---|---|
| Net interest income of the banking activities (A) | 'Consolidated income statement': component of 'Net interest income' |
3788 | 3853 |
| Average interest-bearing assets of the banking activities (B) | 'Consolidated balance sheet': component of 'Total assets' |
203 616 | 194 731 |
| $=$ (A) (annualised x360/number of calendar days) / (B) | 1.84% | 1.95% |
The net interest margin takes into account the banking group net interest income, excluding dealing room and the net positive impact of ALM FX swaps & repos.
Gives an idea of the bank's structural liquidity position in the long term, more specifically the extent to which the group is able to overcome liquidity difficulties over a one-year period.
| Calculation (in millions of EUR or %) | Reference | 2020 | 2019 |
|---|---|---|---|
| Available amount of stable funding (A) | Basel III, the net stable funding ratio (Basel Committee on Banking Supervision publication, October 2014) |
209 932 | 174 977 |
| Required amount of stable funding (B) | 143 901 | 128 845 | |
| $= (A) / (B)$ | 145.9% | 135.8% |
Gives the carrying value of a KBC share, i.e. the value in euros represented by each share in the parent shareholders' equity of KBC.
| Calculation (in millions of EUR or %) | Reference | 2020 | 2019 |
|---|---|---|---|
| Parent shareholders' equity (A) | 'Consolidated balance sheet' | 20 030 | 18 722 |
| Number of ordinary shares less treasury shares | Note 5.10 | 417 | 416 |
| (at period-end) (B) | |||
| $= (A) / (B)$ (in EUR) | 48.07 | 44.97 | |
The parent shareholders' equity has been retrospectively restated. For more information, see Statement of compliance (note 1.1) in this report.
Gives an idea of the relative profitability of a business unit, more specifically the ratio of the net result to the capital allocated to the business unit.
| Calculation (in millions of EUR or %) | Reference | 2020 | 2019 |
|---|---|---|---|
| BELGIUM BUSINESS UNIT | |||
| Result after tax (including minority interests) of the business unit (A) |
Note 2.2: Results by segment | 1 0 0 1 | 1 3 4 4 |
| The average amount of capital allocated to the business unit is based on the risk-weighted assets for the banking activities (under Basel III) and risk-weighted asset equivalents for the insurance activities (under Solvency II) (B) |
6894 | 6764 | |
| $=$ (A) annualised / (B) | 14.5% | 19.9% | |
| CZECH REPUBLIC BUSINESS UNIT | |||
| Result after tax (including minority interests) of the business unit (A) |
Note 2.2: Results by segment | 375 | 789 |
| The average amount of capital allocated to the business unit is based on the risk-weighted assets for the banking activities (under Basel III) and risk-weighted asset equivalents for the insurance activities (under Solvency II) (B) |
1 7 1 7 | 1692 | |
| $=$ (A) annualised / (B) | 21.7% | 46.7% | |
| INTERNATIONAL MARKETS BUSINESS UNIT | |||
| Result after tax (including minority interests) of the business unit $(A)$ |
Note 2.2: Results by segment | 199 | 379 |
| The average amount of capital allocated to the business unit is based on the risk-weighted assets for the banking activities (under Basel III) and risk-weighted asset equivalents for the insurance activities (under Solvency II) (B) |
2 3 6 7 | 2 3 5 4 | |
| $=$ (A) annualised / (B) | 8.4% | 16.1% |
Gives an idea of the relative profitability of the group, more specifically the ratio of the net result to equity.
| Calculation (in millions of EUR or %) | Reference | 2020 | 2019 |
|---|---|---|---|
| Result after tax, attributable to equity holders of the parent (A) |
'Consolidated income statement' | 1440 | 2489 |
| Coupon on the additional tier-1 instruments included in equity (B) |
'Consolidated statement of changes in equity' | $-50$ | - 56 |
| Average parent shareholders' equity, excluding the revaluation reserve for FVOCI instruments and for FVPL equity instruments – overlay approach (C) |
'Consolidated statement of changes in equity' | 17 954 | 16 907 |
| $= (A-B)$ (annualised) / (C) | 7.7% | 14.4% |
The parent shareholders' equity has been retrospectively restated. For more information, see Statement of compliance (note 1.1) in this report.
Gives the indication of the sales activities of life insurance products including unit-linked.
| Calculation (in millions of EUR or %) | Reference | 2020 | 2019 |
|---|---|---|---|
| Life Insurance - earned premiums (before reinsurance) (A) | 'Consolidated income statement' | 1 2 2 3 | 1 3 2 3 |
| $+$ | |||
| Life insurance: difference between written and earned premiums (before reinsurance) (B) $\ddot{}$ |
|||
| 764 | 525 | ||
| Investment contracts without discretionary participation feature (large part of unit-linked) – margin deposit accounting (C) |
|||
| Total sales Life $(A)$ + $(B)$ + $(C)$ | 989 | 1849 |
Measures the solvency of the insurance business, as calculated under Solvency II.
A detailed calculation can be found under 'Solvency banking and insurance activities separately' section.
Total assets under management (AuM) comprise third-party assets and KBC group assets managed by the group's various asset management companies (KBC Asset Management, ČSOB Asset Management, etc.), as well as assets under advisory management at KBC Bank. The assets, therefore, consist mainly of KBC investment funds and unit-linked insurance products, assets under discretionary and advisory management mandates of (mainly retail, private banking and institutional) clients, and certain group assets. The size and development of total AuM are major factors behind net fee and commission income (generating entry and management fees) and hence account for a large part of any change in this income line. In that respect, the AuM of a fund that is not sold directly to clients but is instead invested in by another fund or via a discretionary/advisory management portfolio, are also included in the total AuM figure, in view of the related work and any fee income linked to them.
| Calculation (in billions of EUR or quantity) | Reference | 2020 | 2019 |
|---|---|---|---|
| Belgium Business Unit (A) | Company presentation on www.kbc.com | 194 | 200 |
| $+$ | |||
| Czech Republic Business Unit (B) | 11 | 11 | |
| $+$ | |||
| International Markets Business Unit (C) | 5 | ||
| $A)+(B)+(C)$ | 212 | 216 |
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