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The KBC group notes for the second quarter a greatly reduced profit, in particular because of the impact of the health crisis on the value of its loan portfolio. The group estimates that for the year, the latter should depreciate between 800 million and 1.6 billion.
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Measures taken to prevent the spread of the pandemic and the economic repercussions continue to affect the group KBC
. Its CEO says, however, that without the health crisis, business remains healthy and growing.
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The bancassurer reports for the second quarter of a sharply cut net profit of 210 million euros against 745 million in 2019. Per share, the net profit came out at 0.47 euros against 1.76 euros a year earlier.
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Belgian activity contributes 204 million to the profit, against 77 million for the Czech Republic while the international markets (Hungary, Bulgaria, Slovakia and Ireland) show a loss of 45 million.
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Caution regarding the loan portfolio
The group’s result was affected by some 845 million euros of write-downs on loans, “mainly attributable to the potential economic consequences of the coronavirus crisis”, we read. in a press release.
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During a conference call, Johan Thijs, CEO, however explained that for the moment, the group was not facing defaults. “But when you expect faults, you have to anticipate them.”
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The group which had thus announced in the 1st quarter to constitute a provision of more than one billion, has, to date, already recorded 966 million of this sum in its accounts. According to the optimistic to pessimistic scenarios taken into account in KBC’s models, the write-downs on credit will be established between 800 million and 1.6 billion.
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Note also that KBC acts 12 million euros linked the measures planned in Belgium to relieve consumers and businesses in repaying their loans.
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Saved by trading income
For the quarter under review, the KBC group notes revenues rising slightly to 2.04 billion euros. They benefited from a recovery in fair value and trading revenues which had fallen sharply in the 1st quarter.
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On the contrary, net interest income are down 4% on an annual basis. A decrease attributed to falling interest rates in the Czech Republic, the depreciation of the Czech crown and the Hungarian forint against the euro, the general weakness of reinvestment income and the pressure on the margins of credit portfolios in most of our strategic countries. The net commission income settle by 10%.
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KBC continues toa cost control (-8% excluding bank tax). “Our stringent cost containment measures as well as the additional cost reductions announced with the release of first quarter results have helped reduce our operating expenses.”
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Maintained forecasts
“We confirm our forecasts for the full financial year 2020, that is to say an estimate of 1.1 billion euros in impairments on loans. As expected, net interest income and net income from commissions fell in the second quarter, while in the same quarter, non-life results were very strong, as were sales in our life insurance business. “
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For the year as a whole, KBC is counting on net interest income of around 4.4 billion euros.
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Respecting the will of the ECB, KBC affirms that it will not pay any interim dividend next November.
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Digital transformation
“63% of our customers in Belgium are 100% ‘digital’, but for their contacts with the bank.”
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Johan Thijs finally insists on the fact that despite this health crisis, the group has not given up on its digital transformation. The health crisis and the resulting confinement have shown an explosion in the use of digital banking. “63% of our customers in Belgium are 100% ‘digital’, but for their contacts with the bank”. The CEO intends to communicate on his digital strategy in mid-November.
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