16 May 2007
KBC closed the first quarter of 2007 with a net profit of 997 million
euros (2.85 euros per share). Underlying profit, i.e. net profit
excluding items not relating to the normal course of business, came
to 781 million euros; the corresponding return on equity came to 21%.
Underlying profit increased by 38% compared with the previous quarter
and even exceeded the exceptionally strong level (+1%) of the first
quarter of 2006. Growth was particularly robust (+21% year-on-year)
in Central and Eastern Europe (CEE), testifying to the region's role
as a strong growth-driver for the group.
According to André Bergen, Group CEO, "The year has started well,
even exceeding our expectations. Indeed, we had to face a short-term
equity market downturn and the damage caused by the storm Kyrill,
especially in Belgium. But the underlying business dynamics remained
sound and general optimism improved with respect to the economic
environment. Moreover, we continued to see evidence that operating
costs and credit risks are well under control throughout KBC."
+-------------------------------------------------------------------+
| In millions of EUR | 1Q | 4Q | 1Q | 1Q 2007 | 1Q2007/ |
| | 2006 | 2006 | 2007 | / | 4Q 2006 |
| | | | | 1Q 2006 | |
|----------------------+------+------+------+-------------+---------|
| Profit after tax, | 980 | 634 | 997 | 2% | 57% |
| attributable to the | | | | | |
| equity holders of | | | | | |
| the parent (IFRS) | | | | | |
|----------------------+------+------+------+-------------+---------|
| Underlying profit | 776 | 564 | 781 | 1% | 38% |
|----------------------+------+------+------+-------------+---------|
| Breakdown of | | | | | |
| underlying profit by | | | | | |
| business unit | | | | | |
|----------------------+------+------+------+-------------+---------|
| Belgium | 323 | 241 | 327 | 1% | 36% |
| Business Unit | | | | | |
|----------------------+------+------+------+-------------+---------|
| Central & | 124 | 56 | 150 | 21% | 168% |
| Eastern Europe | | | | | |
| Business Unit | | | | | |
|----------------------+------+------+------+-------------+---------|
| Merchant | 282 | 227 | 269 | -5% | 19% |
| Banking Business | | | | | |
| Unit | | | | | |
|----------------------+------+------+------+-------------+---------|
| European | 55 | 38 | 52 | -5% | 37% |
| Private Banking | | | | | |
| Business Unit | | | | | |
|----------------------+------+------+------+-------------+---------|
| Group Centre | -9 | 3 | -17 | - | - |
|----------------------+------+------+------+-------------+---------|
| Basic earnings per | 2,73 | 1,82 | 2,85 | 4% | 57% |
| share (IFRS, in EUR) | | | | | |
|----------------------+------+------+------+-------------+---------|
| Diluted earnings per | 2,70 | 1,80 | 2,84 | 5% | 58% |
| share (IFRS, in EUR) | | | | | |
|----------------------+------+------+------+-------------+---------|
| Parent shareholders' | 43,1 | 49,2 | 47,7 | 11% | -3% |
| equity per share | | | | | |
| (EUR, at end of | | | | | |
| period) | | | | | |
+-------------------------------------------------------------------+
Highlights in this earnings release:
* Solid business growth in most areas
* Favourable cost trend
* Sustained low level of loan loss charges
* Significantly lower level of loan loss provisions in Hungary
* Negative impact of winter storm Kyrill
* Further delivery on strategic promises: investing in CEE growth
markets and share buyback programme
* Good start to the second quarter of 2007
Publication schedule for 16 May 2007:
Earnings release available on www.kbc.com 7.00 a.m. CEST
Telephone conference / webcast for financial 1.30 p.m. CEST - Tel. +
analysts 44 207 162 0125
Financial highlights
André Bergen, Group CEO, summarises the financial highlights as
follows:
"Business growth remained solid in most areas. We are satisfied to
see sustained loan growth, while the narrowing of interest margins
has been halted. Risk-weighted assets were up 4% during the quarter,
while the average interest margin remained stable at 1.7%. Assets
under management were 4% higher, three percentage points of this
increase were accounted for by new money inflows. Moreover, our
dealing rooms also performed well. On the other hand, we saw tax
burdens slowing sales of life products."
"The cost trend was favourable. On an underlying basis, expenses
decreased by 13% compared with the previous quarter and by 2%
year-on-year. The market has to understand our seasonal cost pattern;
expenses always peak in the fourth quarter. In general, we believe
that our costs are pretty much under control. Indeed, the cost/income
ratio for the banking business ended at a mere 53%."
"Loan loss charges remained at a low level. The loan loss ratio came
to just to 8 basis points.
I know that we have been saying this for a while, but even today, we
see no indications that this will change soon."
"Loan loss provisions in Hungary amounted to 10 million euros,
significantly lower than the 53 million euros recorded for the
previous quarter. We felt that it was necessary to tighten loan
provisions last year, given the more difficult
macroeconomicenvironment in this market. Although we prefer to remain
cautious regarding the full 2007 financial year, loan loss charges
were much lower in the first quarter."
"The winter storm Kyrill had a negative net impact of 35 million
euros. On a one-off basis, Kyrill shaved five percentage points off
our earnings-per-share growth this quarter. Nonetheless, our mid-term
EPS growth target of an average 12% per year remains intact."
"On an underlying basis, a return on equity of 21% was achieved and
all business units met or exceeded their financial targets. The
return on the capital allocated to the Belgium Business Unit came to
34%. Once again, this figure proved that the Belgian franchise
provides a strong platform for generating earnings that can be
invested in future expansion. The corresponding return on capital in
other areas came to 29% in Central & Eastern Europe, 27% for Merchant
Banking and 40% for European Private Banking."
Other financial highlights:
* Extraordinary items: during the quarter under review, 216 million
euros were recorded for items that do not relate to the normal
course of business. This amount relates chiefly to the gain
realised on the sale of shares in Intesa Sanpaolo, following its
merger, and was fully excluded from the underlying profit figures.
* Shareholders' equity: on 31 March, parent shareholders' equity
amounted to 16.6 billion euros (47.7 euros per share). As is
usually the case in the first quarter, the amount was lower than at
the start of the year (-0.6 billon euros) on account of the
dividend to be paid out after the Annual General Meeting (already
deducted from shareholders' equity in the first quarter).
Operating highlights
During the quarter under review, a squeeze-out bid was launched for
the 2.6% remaining minority interests in CSOB Bank (Czech Republic).
The pending bid represents a cash consideration of 170 million euros
(completion of the deal is expected by July 2007, at the latest).
During the first quarter, KBC also made inroads into new CEE markets
by acquiring majority stakes in DZI insurance (Bulgaria), Romstal
Leasing (Romania), A Banka (Serbia) and Absolut Bank (Russia) for a
total consideration of 1.1 billion euros (some deal closings are
still pending).
By the morning of 15 May 2007, almost 2.4 million shares had already
been bought back for an amount of 230 million euros as part of the
2007-2009 3-billion-euro share repurchase programme.
André Bergen: "At the end of 2006, our excess capital was equal to
roughly 3 billion euros. It is part of our current strategy to deploy
that excess capital by making value-enhancing acquisitions. And given
the acquisitions we are considering at this point in time, the share
buyback programme will stay in place."
Developments in 2Q 2007
André Bergen: "April was a strong month." In addition, the divestment
from Banco Fumagalli (Italy) was completed and generated a value gain
of 14 million euros. The sale of our share in Hungarian bank-card
clearing house GBC is expected to be completed later in the second
quarter, with a positive impact on net earnings of about 25 million
euros.
KBC will publish its results for the first half of 2007 on Friday, 10
August, at 7 a.m. CEST. The 2006 Group Corporate Social
Responsibility Report will be available on www.kbc.com on 31 May
2007.
The 1Q 2007 report of KBC Group is available on www.kbc.com
KBC Group
Investor Relations Office
Tamara Bollaerts
investor.relations@kbc.com
