KBC Group : Earnings statement KBC Group, 4Q 2012 and FY 2012
This news release contains information that is subject to transparency
regulations for listed companies.
Date of release: 14 February 2013, 7 a.m. CET.
Summary: further alignment with core strategy and good commercial results
KBC ended the last three months of 2012 with a net profit of 240 million euros,
compared with a net profit of 531 million euros in the previous quarter and 437
million euros in the year-earlier quarter. This means the group has generated a
total net profit of 612 million euros for the full-year 2012, compared with 13
million euros a year earlier.
After excluding all exceptional and non-operating items, KBC ended the fourth
quarter of 2012 with an underlying net profit of 309 million euros, compared
with a net profit of 406 million euros in the previous quarter and 161 million
euros in the corresponding quarter of 2011. The underlying results for full-year
2012 amounted to 1 542 million euros, well above 1Â 098Â million euros in 2011.
Johan Thijs, Group CEO:
'The continued alignment of the group with its core strategy was the main focus
for the last quarter of 2012. Besides generating good commercial results, we
made substantial progress again in this quarter towards bringing KBC into line
with its strategic objectives. Significant divestments, a very successful
strengthening of our capital and a large repayment of state aid were the main
features of the fourth quarter, a period in which we recorded underlying net
profit of 309 million euros.
Our underlying result was driven by the good commercial performance of our
strategic banking and insurance business model in our home markets in Belgium
and Central and Eastern Europe. Net interest income held firm despite the
current challenging low-yield environment, thanks to healthy commercial margins
and the lower funding cost of covered bonds, among other things. Loan and
deposit volumes grew considerably in our core markets. Fee income went up
significantly and insurance products sold well, particularly in the life
insurance business. The combined ratio was persistently low across the year, but
loan loss impairments in the quarter under review were slightly higher.
We also successfully carried out the merger of our Polish banking subsidiary,
Kredyt Bank, with Bank Zachodni WBK. In addition, we signed an agreement to sell
our Russian banking subsidiary, Absolut Bank, to Blagosostoyanie, the group that
manages the assets of the second-largest non-state pension fund in Russia. And
we signed an agreement to fully exit NLB by selling our remaining 22% stake to
the Republic of Slovenia. Consequently, we are now in a position to focus
further on our core activities.
We improved our already strong liquidity position, as illustrated by a loan-to-
deposit ratio of 78% at the end of December. We have decided to repay 8.3
billion euros of the LTRO to the ECB, given that our group boasts a strong
retail and corporate deposit base in our core markets and our wholesale funding
needs for 2013 are well advanced.
In addition to the successful placement of 350 million euros' worth of treasury
shares at the beginning of the fourth quarter, an equally successful placement
of 59 million ordinary shares at the beginning of December added gross cash
proceeds of 1 250 million euros to our capital. At the beginning of 2013, we
complemented these transactions with the issue of a tier-2 contingent capital
note for 1 billion US dollars that was eight times oversubscribed.
We repaid 3 billion euros of state aid plus paid a penalty of 15% (450 million
euros) to the Belgian Federal Government in December. We intend to accelerate
repayment of 1.17 billion euros of state aid to the Flemish Regional Government
plus pay the accompanying penalty of 580 million euros in the first half of
2013, subject to the customary approval of the National Bank of Belgium.
As a result, our tier-1 capital ratio settled at 13.8% in the fourth quarter of
2012. This ratio will amount to 14.6% on a pro forma basis when the effects of
the sale of our stake in Bank Zachodni WBK, the sale of our holding in Nova
Ljubljanska banka group and the sale of Absolut Bank are included. Our common
equity ratio under Basel III at the end of 2012 stood at 10.8% (fully loaded),
well above our goal to maintain a target common equity ratio under Basel III
(fully loaded) of 10% as of 1 January 2013.
At the beginning of October, we announced our updated strategy for the group for
2013 and beyond and have restructured our organisation with effect from 1
January 2013 to better reflect this updated strategy. Our goal is to become more
agile and efficient and thus more competitive. In doing so, we will not only
adapt to changing client behaviour but will also meet the legitimate
expectations from society as a whole, to the benefit of our clients, employees,
shareholders and other stakeholders alike.
Over the whole of 2012, KBC generated a profit of 612 million euros. On an
underlying basis, this figure stood at an even higher 1 542 million euros. When
taking into account the repayment penalty of 450 million euros, paid to the
Belgian State, and the coupon of 543 million euros, to be paid on the core
capital securities sold to the Belgian State and the Flemish Region, our
underlying earnings per share comes to 1.57 euros, while reported earnings per
share amounts to -1.09 euros. Given our strong solvency position - as reflected
in our tier-1 capital ratio of 13.8% - we will propose to the Annual General
Meeting of Shareholders that a dividend of 1.00 euro per share be paid this
year.
We also intend not to pay a dividend next year, which means no coupon will be
paid to the Flemish Regional Government either. Taking all factors into account,
the return the Flemish Region will receive on the core capital securities will
remain higher than 10% per year. As mentioned above, we still intend to
accelerate repayment of 1Â 167 million euros of state aid to the Flemish Regional
Government plus pay the accompanying premium of 583Â million euros in the first
half of 2013, subject to the customary approval of the National Bank of Belgium.
'
Main exceptional and non-operating items impacting the reported IFRS result for
4Q2012:
A number of exceptional items were excluded from the underlying results. Their
combined impact in 4Q2012 amounted to -0.1Â billion euros. Apart from some
smaller items, the main non-operating items in 4Q2012 were a negative amount of
0.1 billion euros for a marked-to-market adjustment in relation to KBC's own
credit risk, a positive amount of 0.1 billion euros attributable to the Kredyt
Bank divestment file and a negative amount of 0.1 billion euros from the sale of
our stake in the Nova Ljubljanska banka group.
Financial highlights for 4Q2012 compared to 3Q2012:
* Continued good underlying net group profit through strong commercial
franchise.
* Stable net interest income.
* Good growth in loan and deposit volumes in our core markets.
* Healthy combined ratio at 95% year-to-date.
* Robust sales of unit-linked life insurance products.
* Increased net fee and commission income, up by 4%.
* Solid gains from financial instruments at fair value.
* Underlying cost/income ratio at 57% year-to-date.
* Credit cost ratio at a satisfactory 0.71% year-to-date. Excluding Ireland,
this ratio stands at 0.39%.
* Consistently strong liquidity position with a solid loan-to-deposit ratio of
78%.
* Solvency: strong capital base: pro forma tier-1 ratio - including the effect
of divestments which have been signed, but not yet closed - at 14.6% (with a
core tier-1 ratio of 12.5%). Basel III common equity ratio (fully loaded)
well above the 10% target.
Overview 4Q2011 3Q2012 4Q2012 Cumul. FY2011 Cumul. FY2012
KBC Group (consolidated)
Net result, IFRS (in 437 531 240 13 612
millions of EUR)
Basic earnings per share, 0.63 1.16 -0.97 -1.93 -1.09
IFRS (in EUR)(1)
-------------------------------------------------------------------------------
Underlying net result (in 161 406 309 1 098 1 542
millions of EUR)
Underlying basic earnings -0.19 0.79 -0.84 1.26 1.57
per share (in EUR)(1)
Breakdown of underlying
net result per business
unit (in millions of EUR)
     Belgium 251 290 237 802 1 019
     Central & 98 169 146 327 621
Eastern Europe
     Merchant -153 10 -7 -110 -19
Banking
     Group Centre -35 -64 -67 79 -78
-------------------------------------------------------------------------------
Parent shareholders'
equity per share (in EUR, 28.7 31.3 29.0 28.7 29.0
end of period)
-------------------------------------------------------------------------------
The IFRS and underlying income statement summary tables are provided below in
this earnings statement.
1 Note: If a coupon is expected to be paid on the core-capital securities sold
to the Belgian Federal and Flemish Regional governments, it will be deducted
from the numerator (pro rata). If a penalty has to be paid, it will likewise
be deducted.
Underlying results
Highlights of 4Q2012 (excluding exceptional and non-operating items)
In addition to the figures according to IFRS (next section), KBC provides
'underlying' figures aimed at giving more insight into the business performance.
The differences with the IFRS figures relate to the exclusion of exceptional or
non-operating items and a different accounting treatment for certain hedging
results and capital-market income.
A full explanation of the differences between the IFRS and underlying figures is
provided in the 'Consolidated financial statements' section of the quarterly
report, under 'Notes on segment reporting'. A reconciliation table for the net
result is provided below.
Consolidated Cumul Cumul
income FY2011 FY2012
statement,
underlying
KBC Group (in
millions of 4Q 4Q
EUR) 1Q 2011 2Q 2011 3Q 2011 2011 1Q 2012 2Q 2012 3Q 2012 2012
Net interest 1 374 1 390 1 342 1 298 1 211 1 150 1 087 1 086 5 404 4 534
income
Earned
premiums,
insurance 1 141 975 972 1 033 884 890 578 623 4 122 2 975
(before
reinsurance)
Technical
charges,
insurance -1 016 -843 -817 -880 -752 -757 -499 -584 -3 556 -2 593
(before
reinsurance)
Ceded
reinsurance -17 -8 -18 -1 -14 -1 -12 13 -44 -13
result
Dividend 8 37 14 15 5 21 10 5 74 41
income
Net result
from financial
instruments at 259 102 10 138 326 113 256 222 509 917
fair value
through profit
or loss
Net realised
result from 53 42 11 85 31 6 57 55 191 150
available-for-
sale assets
Net fee and
commission 399 394 367 374 306 310 349 363 1 535 1 328
income
Other net 73 72 -210 12 -8 53 74 89 -52 209
income
------------------------------------------------------------------------------------------
Total income 2 274 2 161 1 673 2 075 1 989 1 786 1 900 1 873 8 182 7 549
------------------------------------------------------------------------------------------
Operating -1 227 -1 155 -1 172 -1 -1 110 - 1 016 -990 -1 -4 686 -4 184
expenses 133 068
Impairment - 105 -333 -740 -730 -271 -241 -305 -378 -1 909 -1 195
   on loans
and -97 -164 -475 -599 -261 -198 -283 -329 -1 335 -1 072
receivables
   on
available-for- -6 -135 -228 -85 -5 -24 -4 -4 -453 -37
sale assets
   on 0 0 0 0 0 0 0 0 0 0
goodwill
   on other -2 -35 -38 -46 -5 -18 -18 -45 -121 -86
Share in
results of 1 0 -23 -35 -9 -9 -13 1 -57 -31
associated
companies
------------------------------------------------------------------------------------------
Result before 943 673 -262 177 599 520 592 428 1 530 2 139
tax
------------------------------------------------------------------------------------------
Income tax - 271 -138 22 -9 -136 -144 -177 -110 -397 -567
expense
------------------------------------------------------------------------------------------
Result after 671 534 -240 167 463 376 415 317 1 133 1 572
tax
------------------------------------------------------------------------------------------
 attributable 14 6 8 7 7 5 9 9 35 30
to minority
interests
 attributable
to equity 658 528 -248 161 455 372 406 309 1 098 1 542
holders of the
parent
------------------------------------------------------------------------------------------
     280 238 32 251 266 226 290 237 802 1 019
Belgium
Central & 123 146 -40 98 118 188 169 146 327 621
Eastern Europe
Merchant 177 63 -196 -153 42 -65 10 -7 -110 -19
Banking
     77 81 -44 -35 30 23 -64 -67 79 -78
Group Centre
------------------------------------------------------------------------------------------
Basic earnings
per share 1.50 1.11 -1.17 -0.19 0.93 0.69 0.79 -0.84 1.26 1.57
(EUR)
Diluted 1.50 1.11 -1.17 -0.19 0.93 0.69 0.79 -0.84 1.26 1.57
earnings per
share (EUR)
------------------------------------------------------------------------------------------
Reconciliation
of underlying
and IFRS
result
KBC Group (in
millions of 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Cumul Cumul
EUR) 2011 2011 2011 2011 2012 2012 2012 2012 FY2011 Â FY2012
Result after
tax,
attributable
to equity 658 528 -248 161 455 372 406 309 1 098 1 542
holders of the
parent:
UNDERLYING
-------------------------------------------------------------------------------------------
+ MTM of
derivatives 96 -77 -245 -46 45 -29 -33 -30 -273 -46
for ALM
hedging
+ gains/losses 114 -108 -628 154 149 -32 274 40 -468 431
on CDOs
+ impairment 0 -17 -57 -41 0 -16 0 -8 -115 -24
on goodwill
+ result on
legacy
structured 14 43 5 -12 -11 -7 6 7 50 -6
derivative
business (KBC
FP)
+ MTM of own -16 -25 185 215 -340 41 -144 -87 359 -531
debt issued
+ results on -45 -12 -591 8 81 -868 23 10 -640 -754
divestments
-------------------------------------------------------------------------------------------
Result after
tax,
attributable 821 333 -1 579 437 380 -539 531 240 13 612
to equity
holders of the
parent: IFRS
-------------------------------------------------------------------------------------------
The underlying net result for the quarter under review amounted to 309 million
euros, compared to 406 million euros in 3Q2012 and 161 million euros in 4Q2011.
Gross income stable quarter-on-quarter.
* Underlying net interest income stood at 1 086 million euros, the same level
as the previous quarter and down 16% year-on-year. The year-on-year
performance was impacted partly by the deconsolidation of KBL epb, Warta,
Zagiel and Fidea. Leaving these items out, net interest income was down by
10% year-on-year. This was due primarily to the lower income from asset and
liability management, while commercial margins remained healthy. The net
interest margin came to 1.77% for the quarter under review, 3 basis points
higher than in the previous quarter but 18 basis points less than the high
level of a year earlier. In the Belgium Business Unit, both deposit and loan
volumes were up quarter-on-quarter and year-on-year (loans: +5% year-on-year
and +1% quarter-on-quarter; deposits: +5% year-on-year and 1% quarter-on-
quarter). The loan book in the CEE Business Unit increased by 4% year-on-
year (attributable to the Czech Republic, Slovakia and Bulgaria) and by 1%
quarter-on-quarter, while deposits rose by 2% year-on-year and 3% quarter-
on-quarter. The loan portfolio in the Merchant Banking Business Unit was
down 6% year-on-year (mainly in Western Europe and the US) and 2% quarter-
on-quarter, while the deposit base grew by 23% year-on-year, after a sharp
contraction in 4Q2011 and by 2% quarter-on-quarter.
* Both the life and non-life insurance businesses had good commercial results
during the quarter under review. In total, gross earned premiums less gross
technical charges and the ceded reinsurance result came to 52 million euros,
down 22% quarter-on-quarter and 66% year-on-year. However, when account is
taken of the deconsolidation of Fidea, VITIS and Warta, this result was 42%
less than the year-earlier figure. This year-on-year effect was caused by
technical elements.
The non-life segment was characterised by a good level of premiums but a
relatively high level of claims due to bad weather conditions as well as
technical elements like the introduction of new indicative tables for bodily
injury claims, leading to a high figure for technical charges. The combined
ratio for the year came to a good 95%.
In the life segment, and on a comparable basis, sales of life insurance products
rose by 29% quarter-on-quarter, due to a very successful savings campaign in the
fourth quarter. Year-on-year, these sales rose by as much as 49%.
It should be noted that the insurance results were also impacted by low
investment income but benefitted from strict control of general administrative
expenses.
* The net result from financial instruments at fair value amounted to 222
million euros in the quarter under review, down on the exceptionally high
figure for the previous quarter but substantially up on the year-earlier
figure.
* Net realised gains from available-for-sale assets stood at 55 million euros
for the quarter under review, similar to the previous quarter but well above
the 45-million-euro average for the last four quarters. This item was
impacted mostly by gains on the sale of bonds.
* Net fee and commission income amounted to 363 million euros, up 4% quarter-
on-quarter but down 3% year-on-year. The year-on-year performance was
impacted partly by the deconsolidation of KBL epb, Warta, Zagiel and Fidea.
Leaving these items out, income was up by 8% year-on-year. Assets under
management stood at 155 billion euros, up 4% on the year-earlier figure, due
to a positive investment performance, but flat compared with the figure for
the third quarter of 2012.
* Other net income came to 89 million euros, 41 million euros of which was
recovered with respect to the KBC Lease UK fraud case.
Operating expenses impacted by year-end effects.
* Operating expenses came to 1 068 million euros in the last quarter of 2012,
up 8% on their level in the previous quarter and down 6% on their year-
earlier level. The year-on-year performance was accounted for partly by the
deconsolidation of KBLÂ epb, Warta, Zagiel and Fidea. Excluding
deconsolidated companies, underlying costs increased by 10% compared to the
previous year. Higher marketing expenses and restructuring charges,
primarily in Central and Eastern Europe, were the main causes of the
quarterly increase. The year-on-year comparison is distorted by the recovery
of 55 million euros of the bank tax in Hungary in the last quarter of 2011.
The year-to-date cost/income ratio came to 57%, a clear indication that
costs remain well under control.
Credit cost ratios up; loan loss provisions for Merchant Banking Business Unit
sizeable.
* Loan loss impairment stood at 329 million euros in the last quarter, up on
the 283 million euros recorded in the previous quarter, but down on the 599
million euros recorded a year earlier. The quarterly figure was accounted
for by the fact that loan loss impairment of 87 million euros was recorded
at KBC Bank Ireland, as well as 96 million euros at the Merchant Banking
Business Unit excluding Ireland. The annualised credit cost ratio stood at
0.71% for 2012. This breaks down into a low 0.11% for the Belgian retail
book (compared to 0.10% for FY2011), 0.40% in Central and Eastern Europe
(down from 1.59% for FY2011, which had been adversely affected by Hungary
and Bulgaria) and 1.42% for Merchant Banking (marginally up from 1.36% for
FY2011). Excluding Ireland, the credit cost ratio for Merchant Banking stood
at 0.48% (down from 0.59% for FY2011).
* Impairment charges on available-for-sale assets came to 4 million euros and
other impairment charges amounted to 45Â million euros in the quarter under
review.
Strong solvency capital position under Basel II.
* The group's tier-1 ratio (under Basel II) stood at a strong 13.8% at 31
December 2012 (core tier-1 ratio of 11.7%). Including the effect of the sale
of the stake in Bank Zachodni WBK, the sale of the holding in the Nova
Ljubljanska banka group and the sale of Absolut Bank, the pro forma tier-1
ratio was as high as 14.6% (core tier-1 ratio of 12.5%).
* The solvency ratio for KBC Insurance stood at an excellent 322% at 31
December 2012, down from a very high 365% at the end of the previous
quarter.
* The common equity ratio under the current Basel III framework stood at
10.8% (fully loaded, including the aid from the Flemish Region) at the end
of 2012, well above the targeted common equity ratio of 10% under Basel III
(fully loaded).
Highlights of underlying performance per business unit.
* The Belgium Business Unit contributed 237 million euros to profit in
4Q2012, compared to 290 million euros in the previous quarter. The quarter
was characterised by increased net interest income due to good commercial
margins, good insurance sales but a challenging combined ratio due largely
to technical elements, increased fee income and a higher level of loan
impairment. Operating expenses were up for seasonal reasons but remained
very well under control.
* The CEE Business Unit (Czech Republic, Slovakia, Hungary and Bulgaria)
posted a profit of 146 million euros in 4Q2012, compared to 169 million
euros in the previous quarter, driven partly by a higher level of operating
expenses and a somewhat lower net interest income. Overall, impairment
levels in the fourth quarter remained low.
* The Merchant Banking Business Unit recorded a loss of 7 million euros in
4Q2012, compared to a profit of 10 million euros in 3Q2012. The result was
impacted by an increased level of loan impairment in the corporate branches.
In Ireland, impairment charges amounted to 87 million euros, down 33% on the
previous quarter. The respectable dealing room results and a recovery of an
amount related to the fraud case at KBC Lease UK contributed substantially
to the gross income. Excluding KBC Bank Ireland, net profit for the Merchant
Banking Business Unit in 4Q2012 would have been 53 million euros.
* It should be noted that all planned divestments in the KBC group are not
included in the respective business units, but have been grouped together in
the Group Centre in order to clearly state the financial performance of the
long-term activities and the planned divestments separately. In 4Q2012, the
Group Centre's net result came to a negative 67 million euros, compared to
-64 million euros in the previous quarter. This result was driven largely by
the impairments in a small number of files in the project finance portfolio
of KBC Finance Ireland as well as at KBC Bank Deutschland.
Exceptional and non operating items.
A number of exceptional items were excluded from the underlying results. Their
combined impact in 4Q2012 amounted to -0.1Â billion euros. Apart from some
smaller items, the main non-operating items in 4Q2012 were a negative amount of
0.1 billion euros for a marked-to-market adjustment in relation to KBC's own
credit risk, a positive amount of 0.1 billion euros income from the Kredyt Bank
divestment file and a negative amount of 0.1 billion euros from the sale of the
group's stake in the Nova Ljubljanska banka group.
IFRS result
Highlights of FY2012
A full overview of the IFRS consolidated income statement and balance sheet is
provided in the 'Consolidated Financial Statements' section of this quarterly
report. Condensed statements of comprehensive income, changes in shareholders'
equity, and cash flow, as well as several notes to the accounts, are also
available in the same section. In order to provide a good insight into the
underlying business performance, KBC also publishes its 'underlying' results
(see above).
Consolidated
income
statement,
IFRS
KBC Group (in
millions of 3Q 3Q Cumul Cumul
EUR) 1Q 2011 2Q 2011 2011 4Q 2011 1Q 2012 2Q 2012 2012 4Q 2012 FY2011 FY2012
Net interest 1 395 1 406 1 341 1 337 1 261 1 190 1 097 1 121 5 479 4 669
income
   Interest 3 047 3 195 2 910 2 732 2 695 2 563 2 493 2 382 11 883 10 134
income
   Interest -1 651 -1 789 - -1 395 -1 434 -1 374 -1 -1 261 -6 404 -5 465
expense 1 569 396
Earned
premiums,
insurance 1 141 974 972 1 033 884 890 578 623 4 119 2 975
(before
reinsurance)
Technical
charges,
insurance -1 012 -840 -812 -877 -752 - 757 -499 -584 -3 541 -2 593
(before
reinsurance)
Ceded
reinsurance -17 -8 -18 -1 -14 -1 -12 13 -44 -13
result
Dividend 12 41 17 15 6 21 13 5 85 45
income
Net result
from
financial
instruments 472 -194 -892 436 60 43 275 42 -178 420
at fair value
through
profit or
loss
Net realised
result from
available- 34 42 10 83 32 9 56 85 169 181
for-sale
assets
Net fee and
commission 300 297 281 287 304 309 343 360 1 164 1 315
income
   Fee and
commission 518 530 480 514 492 479 494 541 2 043 2 005
income
   Fee and
commission -218 -233 -200 -227 -188 -170 -151 -181 -878 -690
expense
Other net 92 110 -149 3 73 368 106 187 56 734
income
----------------------------------------------------------------------------------------
Total income 2 416 1 829 749 2 317 1 853 2 072 1 954 1 854 7 310 7 733
----------------------------------------------------------------------------------------
Operating -1 143 -1 081 -1 -1 043 -1 132 -1 033 -1 -1 081 -4 344 -4 248
expenses 077 003
Impairment -105 -332 -940 -746 -273 -1 473 -302 -463 -2 123 -2 511
   on loans
and -97 -164 -473 -599 -261 -198 -283 -330 -1 333 -1 072
receivables
   on
available- -6 -118 -223 -71 -5 -75 -4 -11 -417 -95
for-sale
assets
   on 0 -17 -62 -41 0 -414 0 -8 -120 -421
goodwill
   on other -2 -33 -183 -35 -7 -786 -15 -114 -253 -923
Share in
results of 1 0 -23 -35 -9 17 -6 1 -58 2
associated
companies
----------------------------------------------------------------------------------------
Result before 1 170 416 -1 492 439 -417 644 310 786 976
tax 292
----------------------------------------------------------------------------------------
Income tax -334 -76 165 -75 -93 -110 -103 -56 -320 -362
expense
Net post-tax
result from 0 0 -445 26 40 -8 0 -6 -419 27
discontinued
operations
----------------------------------------------------------------------------------------
Result after 835 340 -1 443 387 -535 540 249 47 641
tax 571
----------------------------------------------------------------------------------------
attributable 14 6 8 6 7 5 9 9 34 29
to minority
interests
 attributable -1
to equity 821 333 579 437 380 -539 531 240 13 612
holders of
the parent
----------------------------------------------------------------------------------------
     385 158 -348 226 489 204 321 286 421 1 300
Belgium
Central & 141 145 -91 94 119 171 182 119 289 591
Eastern
Europe
Merchant 203 69 -255 -225 17 -65 -8 -58 -208 -114
Banking
     92 -39 -885 342 -246 -849 37 -107 -489 -1 165
Group Centre
----------------------------------------------------------------------------------------
Basic
earnings per 1.98 0.54 -5.08 0.63 0.71 -1.99 1.16 -0.97 -1.93 -1.09
share (EUR)
Diluted
earnings per 1.98 0.54 -5.08 0.63 0.71 -1.99 1.16 -0.97 -1.93 -1.09
share (EUR)
----------------------------------------------------------------------------------------
IFRS net result for 2012 at 612 million euros, compared to 13 million euros a
year earlier.
* Net interest income amounted to 4 669 million euros, compared to 5 479
million euros a year earlier. The decline was caused primarily by the
deconsolidation of KBL epb, Warta, Zagiel and Fidea and lower re-investment
yields. Year-on-year, loan volumes grew overall by 1%: 5% in Belgium, 4% in
Central Europe and -6% in Merchant Banking. Customer deposits expanded by
9%: 5% in Belgium, 2% in Central Europe, and 23% at Merchant Banking, after
a sharp contraction in 4Q2011. The year-to-date net interest margin shrunk
to 1.81%, 16 basis points lower than the high figure a year ago.
* Gross earned premiums less gross technical charges and the ceded reinsurance
result came to 369 million euros, down 31% year-on-year, primarily because
of the deconsolidation of VITIS, Warta and Fidea.
For the non-life activities, the year-to-date combined ratio came to a strong
95%, slightly up on the 92% for FY2011 due largely to technical items. For the
life activities and on a comparable basis, there was a 16% year-on-year increase
in the sale of life insurance products (thanks to higher sales of unit-linked
products). It should be noted that the insurance results were also affected by
investment income and charges, as well as by general administrative expenses.
Investment income, in particular, was lower for both the life and non-life
businesses compared to the previous quarter and the year-earlier quarter.
* Net fee and commission income amounted to 1 315 million euros in 2012, up
13% on its level a year ago, thanks, inter alia, to the successful sale of
unit-linked products. Assets under management stood at 155 billion euros, up
4% on the year-earlier figure, due to a positive investment performance.
* The net result from financial instruments at fair value (trading and fair
value income) came to 420 million euros in 2012, compared to a negative 178
million euros a year earlier. On an underlying basis (i.e. excluding
exceptional items such as value adjustments to structured credit, fair
valuing of the group's own debt and after shifting all trading-related
income items to this heading), trading and fair value income amounted to
917 million euros on 31 December 2012, almost double the year-earlier
figure, due to the very good performance turned in by the dealing room,
especially in the first quarter, and the positive credit value adjustments
in the third quarter.
* The remaining income components were as follows: dividend income from equity
investments amounted to 45 million euros, the net realised result from
available-for-sale assets (bonds and shares) stood at 181 million euros and
other net income totalled 734 million euros, accounted for primarily by the
capital gain realised on the closure of the sale of Warta in the second
quarter.
* Operating expenses amounted to 4 248 million euros in 2012, 2% lower than
the year-earlier figure. This was caused by the divestments, but offset by
such factors as inflation, wage indexation and a higher bank tax. The
underlying cost/income ratio for banking - a measure of cost efficiency -
stood at 57% at the end of December 2012, an improvement on the 60% recorded
for FY2011.
* Total impairment stood at 2 511 million euros for 2012. Impairment on loans
and receivables amounted to 1 072 million euros, substantially lower than
the 1 333 million euros recorded in 2011. As a result, the annualised credit
cost ratio for 2012 came to 0.71%, an improvement on the figure of 0.82% for
FY2011. Impairment on available-for-sale assets stood at 95 million euros.
Impairment on goodwill totalled 421 million euros and other impairment
charges 923 million euros. Impairment charges on goodwill and other
impairment charges were both caused by the planned divestment files
(primarily NLB, Absolut Bank, Antwerp Diamond Bank, KBC Banka and KBC Bank
Deutschland) and were recorded in the second quarter.
* Income tax amounted to 362 million euros for FY2012.
* At year-end 2012, total equity came to 16.0 billion euros - down 0.8 billion
euros on its level at the start of the year - due mainly to the repayment of
3.0 billion euros (plus a penalty of 0.5 billion euros) of non-voting core
capital securities subscribed by the Belgian Federal Government and the
deduction of the coupon on non-voting core capital securities subscribed by
the Belgian Federal and Flemish Regional governments (-0.6 billion euros).
These outflows were mitigated by the inclusion of net profit for 2012 (0.6
billion euros), the substantial change in the available-for-sale revaluation
reserve (1.4 billion euros), and the capital increase through the sale of
treasury shares and issue of new shares (1.6 billion euros combined). The
remaining items include cash flow hedges and translation differences. The
group's tier-1 capital ratio - a measure of financial strength - stood at a
sound 13.8% at 31 December 2012. This ratio will amount to 14.6% on a pro
forma basis when the effects of the sale of the stake in Bank Zachodni WBK,
the sale of the holding in NLB and sale of Absolut Bank are included.
Selected balance sheet data
Highlights of
consolidated
balance sheet 31-03-2011 30-06-2011 30-09-2011 31-12-2011 31-03-2012 30-06-2012 30-09-2012 31-12-2012
KBC Group (in
millions of
EUR)
Total assets 322 493 312 899 305 109 285 382 290 635 285 848 270 010 256 886
Loans and
advances to 147 625 143 182 143 451 138 284 135 980 133 326 131 048 128 492
customers*
Securities
(equity and 88 839 85 144 74 062 65 036 65 853 64 227 65 171 67 295
debt
instruments)*
Deposits from
customers and 192 412 188 116 184 453 165 226 166 551 163 685 160 945 159 632
debt
certificates*
Technical
provisions, 23 870 24 084 21 064 19 914 19 925 19 539 19 637 19 205
before
reinsurance*
Liabilities
under
investment 6 568 6 638 6 787 7 014 7 871 8 856 9 680 10 853
contracts,
insurance*
Parent
shareholders' 11 011 11 500 9 834 9 756 10 949 9 687 10 629 12 099
equity
Non-voting
core-capital 7 000 7 000 7 000 6 500 6 500 6 500 6 500 3 500
securities
------------------------------------------------------------------------------------------------------
* In accordance with IFRS 5, the assets and liabilities of a number of divestments have been
reallocated to 'Non-current assets held for sale and disposal groups' and 'Liabilities associated
with disposal groups', which slightly distorts the comparison between periods.
Selected ratios
Selected ratios  FY2011 FY2012
KBC Group (consolidated)
Profitability and efficiency (based on
underlying results)
-------------------------------------------------------------------------------
   Return on equity(1)   5% 10%
   Cost/income ratio, banking  60% 57%
  Combined ratio, non-life insurance  92% 95%
-------------------------------------------------------------------------------
Solvency²
-------------------------------------------------------------------------------
   Tier-1 ratio  12.3% 13.8%
   Core tier-1 ratio  10.6% 11.7%
-------------------------------------------------------------------------------
Credit risk
-------------------------------------------------------------------------------
   Credit cost ratio  0.82% 0.71%
   Non-performing ratio  4.9% 5.3%
-------------------------------------------------------------------------------
1 If a coupon is expected to be paid on the core-capital securities sold to
the Belgian Federal and Flemish Regional governments, it will be deducted from
the numerator (pro rata).
2 After coupon on the core-capital securities sold to the Belgian Federal and
Flemish Regional governments and assumed dividend of 1.00 euros per share,
payable in May 2013.
Strategy highlights and main events
KBC's core strategy remains focused on bank-insurance in Belgium and a selection
of countries in Central and Eastern Europe (Czech Republic, Slovakia, Hungary
and Bulgaria). In line with its strategic plan, the group has almost finished
the sale or run-down of a number of (non-core) activities (see below).
Significant progress made in 4Q2012 and so far in 2013 in implementing strategic
refocusing plan.
* On 8 October 2012, Johan Thijs, the group's CEO, presented the updated
strategy and explained how KBC will address the challenges presented by the
changed business environment. He also put forward KBC's main financial
targets for 2015, setting the course for the group to become the reference
in bank-insurance in its core markets.
* On 16 October 2012, KBC Group NV and KBC Bank NV announced the successful
completion of the private placement of 18.2 million euros' worth of treasury
shares. The gross proceeds from the transaction amounted to 350 million
euros.
* On 3 December 2012, KBC launched a highly successful Mortgage Pfandbriefen
benchmark issue in euros, marking KBC's inaugural benchmark issue of covered
bonds. The 1.25-billion-euro covered bond issue allowed KBC to further
diversify its investor base and long-term funding mix and resources through
covered bonds.
* On 4 December 2012, the Polish Financial Supervision Authority approved the
merger of KBC and Banco Santander's respective Polish banking subsidiaries,
Kredyt Bank and Bank Zachodni WBK. The merger was registered on 4 January
2013.
* On 4 December 2012, KBC Private Equity NV reached an agreement with KeBeK I
regarding the sale of most of KBC Private Equity's remaining private equity
portfolio.
* On 10 December 2012, KBC Group NV announced the successful placement of
58.8 million ordinary shares at a price of 21.25 euros per share, resulting
in gross cash proceeds of 1 250 million euros.
* On 17 December 2012, KBC repaid 3 billion euros of state aid plus paid a
penalty of 15% (450 million euros) to the Belgian Federal Government, after
having obtained approval from the National Bank of Belgium. Since KBC had
already repaid 500 million euros in state aid (plus a 15% penalty) to the
Belgian Federal Government on 2 January 2012, all of the state aid received
from the Belgian Federal Government has now been reimbursed.
* On 20 December 2012, KCB announced the amendment of the guarantee agreement
(the Portfolio Protection Agreement or PPA) for the group's CDO and ABS
portfolio. Additional clauses have been added to the revised agreement that
grant KBC a conditional discount on the outstanding premiums, under certain
strict conditions and limited to a set maximum amount.
* On 24 December 2012, KBC Group NV signed an agreement to sell its Russian
banking subsidiary Absolut Bank to a group of Russian companies that manage
the assets of Blagosostoyanie, the group that manages the second-largest
non-state pension fund in Russia. The transaction is still subject to
regulatory approval, which is expected in the second quarter of 2013.
* On 28 December 2012, KBC reached agreement with the Republic of Slovenia
regarding the sale of its remaining 22% stake in the Nova Ljubljanska banka
group. Completion of the agreement is expected in early 2013 after the
approval of the Slovenian Competition Authority has been obtained.
* On 18 January 2013, KBC successfully placed 1 billion US dollars' worth of
tier-2 contingent capital notes. The issue met with strong demand and was
more than eight times oversubscribed.
* On 25 January 2013, KBC Group NV announced its decision to repay its three-
year Long Term Refinancing Operation to the European Central Bank in the
first quarter of 2013, for an amount totalling 8.3 billion euros. KBC boasts
a strong retail and corporate deposit base in its core markets and its
wholesale funding needs for 2013 are well advanced.
* For three of its remaining divestment files, i.e. Antwerp Diamond Bank
(Belgium), KBC Banka (Serbia) and KBC Bank Deutschland (Germany), KBC is
still in discussions with a number of interested parties, while the
divestment of the stake in Bank Zachodni WBK (Poland) is ongoing. For all
four files, KBC is also maintaining an open and constructive dialogue with
the European Commission
Other main events in 2012
* On 3 October 2012, the European Banking Authority and National
Bank of Belgium announced the final assessment of the capital
exercise and fulfilment of the EBA December 2011 Recommendation,
which showed that KBC Bank meets the 9% core tier-1 ratio
including the sovereign buffer as stated in the recommendation.
* The Irish economy appears to be growing modestly albeit not
evenly. A solid export performance and growing signs of
stabilisation in domestic activity have coincided with an
improvement in financial sentiment. Reflecting the challenging
global environment and ongoing budget austerity, the turnaround
in Irish economic conditions is likely to be gradual. However,
growth in tax revenues, a marginal easing in unemployment and
broadly encouraging survey data suggest domestic activity is
approaching a turning point, while recent data on housing
transactions and prices seem consistent with a bottoming out in
the housing market. A loan loss provision of 87 million euros
was recorded in 4Q2012, resulting in impairment on loans of 547
million euros for the full financial year.
* KBC has acted to reduce volatility in its results, and further
reduced its exposure to Southern European government bonds in
the first three quarters by almost a third, mainly through
cutting back its holdings of Spanish and Italian government
bonds.
* KBC reduced the profit and loss sensitivity of its CDO portfolio
significantly through de-risking activities.
Statement of risk
* Mainly active in banking, insurance and asset management, KBC is exposed to
a number of typical risks such as - but not exclusively - credit default
risk, movements in interest rates, capital markets risk, currency risk,
liquidity risk, insurance underwriting risk, operational risk, exposure to
emerging markets, changes in regulations, customer litigation, as well as
the economy in general. It is part of the business risk that the
macroeconomic environment and the ongoing restructuring plans may have a
negative impact on asset values or could generate additional charges beyond
anticipated levels.
* Risk management data are provided in KBC's annual reports, the extended
quarterly reports and the dedicated risk reports, all of which are available
at www.kbc.com.
* Although political event risks remain large, particularly in the Southern
part of the European Monetary Union (EMU) area, economic risks clearly
receded in recent months. This is illustrated, for example, by the avoidance
of the fiscal cliff in the US and the ongoing favourable effect on EMU
sovereign bond markets of the OMT programme announced by the ECB in
September 2012. As a consequence, the recovery in global manufacturing is
gaining strength and is becoming most visible in the US, China and in core
EMU economies such as Germany. Since structural reforms in the Southern EMU
area are starting to bear fruit and the political approach towards growth-
reducing austerity has become more pragmatic, it is likely that countries in
that area will gradually join the global recovery in the second half of
2013.
Additional information
* Â "Our auditor has confirmed that his audit procedures of the consolidated
financial statements, prepared in accordance with the International
Financial Reporting Standards as adopted in the European Union, are
substantially completed and that these procedures have not revealed any
material modification that would have to be made to the accounting
information derived from the consolidated financial statements and included
in this earnings statement."
* In 2012, the changes in the scope of consolidation related to Centea, Fidea,
Warta and KBL epb. The combined effect of these changes on profit is
immaterial.
Financial calendar for 2013
----------------------------------------------------------------
2012 Annual Report available as of 2 April 2013
2012 Risk Report available as of 2 April 2013
Annual General Meeting 2 May 2013
Ex-dividend date 13 May 2013
Payment date 16 May 2013
KBC Group - Publication of 1Q 2013 results 16 May 2013
KBC Group - Publication of 2Q 2013 results 8 August 2013
KBC Group - Publication of 3Q 2013 results 14 November 2013
KBC Group - Publication of 4Q 2013 results 13 February 2014
----------------------------------------------------------------
The financial calendar, including analyst and investor meetings, is available at
www.kbc.com/ir/calendar.
Contact details:
- Wim Allegaert, General Manager, Investor Relations, KBC Group
Tel 32 2Â 429 40 51 Â wim.allegaert@kbc.be
- Viviane Huybrecht, General Manager of Corporate Communication/ KBC Spokeswoman
Tel 32 2Â 429 85 45 Â pressoffice@kbc.be
Note for the editor:
Follow KBC via Twitter on www.twitter.com/kbc_group
KBC_Group_4Q2012_14_feb_2013:
http://hugin.info/133947/R/1677937/547438.pdf
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: KBC Groep via Thomson Reuters ONE
[HUG#1677937]