Financial highlights - 1Q 2006
Profit came to 980 million euros, with a return on equity of 29%. The various business units' contribution to profit was as follows: Belgium, 373 million euros; Central Eastern Europe, 144 million euros; Merchant Banking, 281 million euros; European Private Banking, 59 million euros; and the Group Center, 123 million euros.
As had been announced previously, a few extraordinary gains were recorded on the sale of equity holdings (including the holding in the Belgian industrial concern, Agfa-Gevaert) and office buildings in Prague. Income was also enhanced by changes in the fair value primarily of ALM hedging derivatives. All this had a total positive impact on net profit of 204 million euros.
Underlying group profit (i.e. group profit net of one-off factors and fair value changes in the amount of 204 million euros) came to 776 million euros and was up - on a comparable basis - by 201 million euros (+35%) on the preceding quarter and by 190 million euros (+32%) on the first quarter of 2005.
Total gross income came to 3.2 billion euros. The quarter was characterised by persistently strong earnings from sales of bank, insurance and asset management products. Moreover, on balance, developments on the interest rate and capital markets had a positive effect.
Customer deposits, the loan portfolio and the life insurance reserves went up over a period of three months by 4%, 4% and 5% (these percentages do not take interprofessional business into account). Assets under management passed the 200-billion-euro mark (213 billion euros, a 9% increase on the start of the year, 85% of which was accounted for by the inflow of new money).
Expenses came to 1.2 billion euros, and were significantly affected by higher result-based staff costs relating to capital market activities, which generated a high level of income. The cost/income ratio in the banking business fell to 49% (54%, if the non-recurring income is not taken into account).
No net impairment was recorded on the loan and investment portfolios (loan loss ratio: 0%) and the technical result in the non-life business was excellent (combined ratio: 89%).
The earnings release and its appendices are available in English, Dutch, French and German at www.kbc.com, along with a PowerPoint presentation and a quarterly report (both in English).
KBC is one of the largest bancassurers in Belgium and Central Eastern Europe, and a leading asset manager catering for retail and private banking clients in Europe. KBC group currently has a market capitalisation of some 30 billion euros, employs around 50 000 people and serves approximately 13 million customers.
Outlook for 2006
A target has been set of achieving an average increase in earnings per share of over 10% a year. KBC expects that it will more than meet this target for the third year in a row. There are no indications, for instance, that the loan quality will worsen to any significant extent on the short term and steady growth in volumes and fee business is expected. Earnings per share will also be boosted by the ongoing share buyback programme.
On the other hand, the results for the first quarter are of such a nature that they cannot be extrapolated over the entire year. Moreover, the recent developments on the financial markets are a major source of uncertainty at present. Consequently, we are unable to be more precise in our earnings outlook at this stage.
Towards the end of the year, the long-term financial targets will be updated.
