Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- KBC Groupe NV (KBCSF, Financial) reported a strong net result of EUR925 million for Q2 2024, driven by diversified banking, insurance, and asset management operations.
- The company saw significant growth in its lending book and customer deposit inflows, leading to higher net interest income and an increased full-year guidance of EUR5.5 billion.
- Fee and commission income increased, supported by strong asset management and banking services performance.
- The cost-income ratio improved to 42% before bank taxes, better than the company's guidance.
- KBC Groupe NV (KBCSF) maintains a solid capital and liquidity position, allowing for an interim dividend of EUR1 per share and a completed share buyback of EUR1.3 billion.
Negative Points
- Commercial pressure on lending and saving margins continues to impact net interest income.
- The company faces increased bank taxes in Slovakia and Hungary, with potential additional levies in Hungary impacting future costs.
- Impairments increased slightly due to two corporate files in foreign branches, highlighting potential risks in the lending book.
- The competitive landscape in Belgium remains challenging, particularly in the mortgage market, affecting margins.
- Uncertainty around competition and deposit pricing, especially related to the state note maturity in Belgium, could impact future net interest income.
Q & A Highlights
Q: How do you view the long-term net interest income (NII) guidance of at least 1.8% CAGR for 2023-2026?
A: We are confident in achieving the 1.8% CAGR due to positive volume growth and margin improvements. However, we have not updated the guidance due to the volatility in forward rates and the competitive landscape, particularly concerning the state note maturing in September.
Q: Why didn't you update the cost guidance despite strong performance?
A: The cost guidance remains unchanged due to several factors, including the impact of Ireland's exit, wage increases, and the successful rollout of new modules in Hungary and Slovakia, which have led to earlier-than-expected depreciation.
Q: Is there a chance to exceed the EUR5.5 billion NII guidance for 2024?
A: While we are confident in the EUR5.5 billion ballpark, the competitive landscape, particularly around the state note, introduces uncertainty. We will have more clarity after the state note campaign ends in September.
Q: What is the impact of the Hungarian bank tax on future costs?
A: The additional EUR40 million bank tax in Hungary is expected to be neutralized next year through the purchase of Hungarian government bonds, which can offset the windfall tax.
Q: How do you view the impact of German economic slowdown on Central Eastern Europe?
A: We do not expect significant impact due to strong EU funds and FDI inflows into Central Eastern Europe, which support economic growth independent of Germany's performance.
Q: Can you provide more details on the EUR3.6 billion inflow into current accounts?
A: The inflow was observed mainly in Belgium and Central Europe, with a stabilization in April and May, followed by a significant increase in June. This trend is expected to positively impact net interest income in the coming quarters.
Q: How does the reinvestment yield look for the replicating portfolio?
A: The reinvestment yield remains positive due to the long duration of our replication portfolio and the cyclical investment strategy, which includes bonds from a low-interest-rate environment.
Q: How much of your cost efficiency is driven by AI investments?
A: AI investments, particularly through our service bot Kate, have significantly improved cost efficiency. Kate handles tasks equivalent to 200 FTEs per month and has generated 137,000 sales without human intervention.
Q: What is the outlook for Belgian mortgage spreads?
A: The competitive landscape remains challenging, but we have maintained or slightly increased our market share. The spreads are in line with market standards, and we expect continued strong performance.
Q: Are there more legacy cases in the foreign branches impacting cost of risk?
A: No, there is no significant pipeline of legacy cases. The recent impairments were linked to well-known files, and we do not expect a major shift in asset quality.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
