KBC has reported a strong performance in the third quarter of 2017, posting a net profit of €691m, which brings the net result for the first nine months of 2017 to €2.2bn, significantly up from the €1.7bn recorded in the corresponding period of 2016.
The Belgian bank-insurer distributed more than 100 structured products (excluding open-ended products) across four jurisdictions (Belgium, Czech Republic, Hungary and Slovakia) during the first nine months of 2017, with combined sales of €2.1bn, according to SRP data.
Sales of life insurance products were 3% lower than in the previous quarter, and were down 10% on the year-earlier quarter, with most of the decline occurring in the sale of guaranteed interest products in Belgium which, according to KBC, was related to the low interest rate environment. Consequently, the share of guaranteed interest products in total sales of life insurance products dropped to 54% in the third quarter of 2017, with unit-linked products accounting for the remaining 46%.
As at September 30, 2017, the group's total assets included securities (equity and debt instruments) worth €69.3bn, down from €70.9bn the previous quarter and also a decrease compared to €72.8bn at the end of September last year. Assets under management (AUM) stood at €217bn at the end of September, up 1% quarter-on-quarter and almost 4% year-on-year, mainly due to positive price performance, according to KBC.
During the third quarter KBC issued a €500m 12NC7 Tier 2 benchmark as well as a €500m covered bond with 10-year maturity. The bank has six sources of long-term funding: retail term deposits, retail EMTNs, public benchmark transactions, covered bonds, structured notes and covered bonds using the private placement format, and senior unsecured, T1 and T2 capital instruments issued at KBC Group level and down-streamed to KBC Bank.
In Belgium, KBC collected sales of €1.3bn from 46 structured products - predominately funds and unit-linked life insurance products - during the first nine months of 2017, compared to 65 products worth €1.7bn in the same period last year. In the third quarter of 2017, €395m was sold across 15 products (3Q 2016: €636m from 23 products), according to SRP data. The bank's best-selling structure in 9M 2017, the unit-linked KBC-Life MI+ European Selection 90-1, sold €75m during its subscription period, while another unit-linked product, KBC-Life Timing Booster New Quality Stocks 2, which matured in June, was the second best performing product during the period, returning 191.8% after 4.5-years, or 15.4% per annum.
The net result at the Belgium business unit amounted to €455m in the third quarter of 2017. Net sales of mutual funds were still positive in 3Q 2017, despite a q-o-q decrease due to seasonality, according to the bank. Net fee and commission income, at €301m, rose by 11% year-on-year, driven chiefly by higher management fees from mutual funds and unit-linked life insurance products, mainly thanks to a more favourable asset mix and a higher assets base.
In the Czech Republic, KBC issued 33 structured products during the first nine months of 2017. Of these, 10 products, each distributed by the bank's ČSOB subsidiary, were sold in the third quarter. The Czech business unit reported a net result of €170m for 3Q 2017, up 17% year-on-year but down 7% on the previous quarter.
KBC reported a net result of €78m for the international business unit, €16m of which was accounted for by Slovakia, €40m by Hungary, €22m by Bulgaria and -€1m by Ireland. For the business unit as a whole, this represented a decrease of €99m from the second quarter, which was primarily attributable to Ireland, where loan loss impairment releases were lower in the quarter under review and a provision of €54m was set aside relating to an ongoing industry wide review of the tracker rate mortgage products originated in Ireland before 2009, according to KBC. In Hungary, where KBC had a 52% share of the structured products market, the bank-insurer sold 13 products worth HUF36.4bn (€116m) in 9M 2017 via K&H Bank (3Q 2017: HUF8.9bn) while in Slovakia nine structured products (€202m) were launched via ČSOB during the first nine months (3Q 2017: €7m).
'We have delivered yet another strong performance in the third quarter,' said Johan Thijs (pictured), group CEO, KBC, in a statement. 'A number of factors were instrumental in achieving this, including growth of net interest income, solid net fee and commission income and a high level of insurance income thanks in part to some releases of provisions. Moreover, our costs remained under control, and loan loss impairment charges continued to be very low.'
Click the link to view the KBC Group third quarter 2017 results and the presentation.
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