Press Release
Outside trading hours - Regulated information*
Brussels, 14 February 2019 (07.00 a.m. CET)
Fourth-quarter result of 621 million euros
We generated a net profit of 621 million euros in the fourth quarter of 2018. This excellent result was due in part to higher levels of net interest income, an outstanding combined ratio in our non-life insurance activities and strict cost management. Adding this figure for the fourth quarter to the 1 948 million euros recorded in the first nine months of the year brings our result for full-year 2018 to a solid 2 570 million euros. This is in line with the 2 575 million euros recorded for full-year 2017. Lending increased by 5% year-on-year, as did deposits (excluding debt certificates and repos).
Our solvency position remained strong. The common equity ratio amounted to 16% at the end of full-year 2018 after dividend distribution. The total (gross) dividend for 2018 of 3.5 euros per share (which will be proposed to the General Meeting of Shareholders in May) will result in a pay-out ratio of 59% for financial year 2018.
As announced earlier, KBC Bank Ireland closed the sale of part of its legacy loan portfolio in the quarter under review, which significantly reduced its impaired loans ratio by 10 percentage points to 23%, and also decreased the group’s impaired loans ratio by one percentage point, leaving it at 4.3%.
On the sustainability front, we strive to enhance the positive impact that our day-to-day operations have on society. We actively monitor our own ecological impact and offer a wide range of socially responsible investment opportunities. This resulted in an improved score as provided by third party sustainability analysts (such as Sustainalytics). We have a long tradition of communicating openly and transparently with all our stakeholders about sustainability. For example, as a member of the United Nations Environment Programme Finance Initiative (UNEP FI) we are set to become the first financial institution in Belgium to endorse the new guidelines on responsible banking, as announced in December.
European economic conditions are generally solid, although the growth peak is behind us. Decreasing unemployment rates and growing labour shortages in some European economies combined with gradually rising wage inflation, will continue to support private consumption. Moreover, also investments will remain an important driver of growth. The main elements that could substantially impede European economic sentiment and growth remain the risk of further economic de-globalisation, including an escalation of trade conflicts, Brexit and political turmoil in some euro area countries.
Ultimately, our goal is to finance and service the dreams of our clients, shareholders and other stakeholders, something which all our employees are committed to working towards. We are genuinely grateful for the trust our clients place in us and that encourages us even more to become the reference in bank-insurance in all our core countries.
JohanThijs
Chief Executive Officer
Important. We have started applying IFRS 9 with effect from 2018. In simplified terms, this means that the classification of financial assets and liabilities, as well as the impairment methodology, have changed significantly. As a result, some of the income statement and balance sheet figures are not fully comparable with the 2017 reference figures (which are still based on IAS 39, as KBC is making use of transition relief for comparative data). To enhance transparency – and in line with IFRS 9 requirements – we have also moved accrued interest from FX derivatives in the banking book from ‘Trading and fair value income’ to ‘Net interest income’. We have also moved network income (i.e. revenue from margins earned on FX transactions carried out by the network for our customers) from ‘Trading and fair value income’ to ‘Net fee and commission income’. A concise overview is provided in the annex. Furthermore – on account of IFRS 9 and with effect from 2018 – we have changed the definition of our loan portfolio, switching from ‘outstanding amount’ to ‘gross carrying amount’ (i.e. including reserved and accrued interest), and slightly amended the scope. In order to enhance comparability, we have added certain comparisons with pro forma (restated and unaudited) figures for 2017 in the analysis below. When this is done, it is indicated by the words ‘on a comparable basis’.
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