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KBC pays hefty dividend after strong results

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After a strong second quarter, the banking and insurance group KBC is raising expectations for the full year and promising shareholders a solid dividend.

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Thanks to a profit recovery in all regions, KBC

a much better quarterly result than last year, when the pandemic forced the company to take 845 million euros in provisions for possible credit losses.

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The final net result of 793 million euros was well above the average analyst forecast of 739 million euros. The most optimistic analyst had forecast 790 million euros in quarterly profit.

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Dividend

KBC will pay a gross dividend of EUR 3 in November: EUR 2 deferred dividend for 2020 and an interim dividend of EUR 1 for 2021.

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The interest rate hike that the Czech central bank announced earlier has a double positive effect on KBC’s figures: the performance in the second home market improves and the group can there be an escape from the negative ECB interest rate which affects the Belgian branch. Depositing cash at the central bank in Prague has already provided a lucrative escape route in recent years that was temporarily cut off by corona.

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the Czech interest rate hike is one of the reasons why CEO Johan Thijs are forecast for interest income increases: from 4.3 to 4.4 billion euros. He is also convinced of the quality of the loan portfolio. The full year credit cost will be 0 basis points while the group normally expects 30-40 basis points. By setting up heavy corona provisions last year, KBC has already sufficiently covered itself against possible defaulters.

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floods

For the first time, the group is also attempting to estimate the damage caused by the floods that hit our country last month. For the time being, it expects a negative impact of 41 million euros. All in all, that figure appears to be better than expected, possibly because KBC Insurance is less active than some of its competitors in the most affected Walloon regions.

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Dividend

Thijs confirms that the announced dividend train will leave in the autumn. Now that the ECB has lifted the corona restrictions on dividends, the bank’s board wants to pay a deferred gross dividend of 2 euros for the 2020 financial year in November and an advance of 1 euro on the 2021 dividend.

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The bank was already able to unpack with good grades after a stress test by the European banking watchdogs. It showed that the Belgian group would still have strong capital buffers after a severe ongoing corona impact with low interest rates, an economic contraction, inflation, high unemployment and a crash of the real estate and stock markets.

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