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KBC Bank Ireland PLC, Financial Results for H1 2018 (to 30th June)

09 August 2018

KBC adds more than 40,000 new customer accounts in first half of 2018

“KBC is a force for innovation in the Irish market and we are here to provide banking customers with the choice they deserve.Wim Verbraeken, Chief Executive, KBC Bank Ireland

Key Financial Developments
KBC Bank Ireland reports net profit of €115.9 million for H1 2018 (after tax and impairment)
  • Operating profit of €51.6 million (before tax and impairment).
  • Capital position at end of H1 2018: CET 1 Capital Ratio 14.4% (transitional and fully loaded).
  • Impaired loans stock reduced by 7% in H1 2018 to €4.4bn.
  • KBC sells part of legacy corporate and buy-to-let mortgage loan portfolio to Goldman Sachs.

Customer and Market Developments
  • Over 20,000 new customer accounts were added in the second quarter of 2018, bringing total number of new customer accounts added in H1 2018 to over 40,000 primarily driven by product and digital innovation.
  • New mortgage lending H1 2018 of €422 million, over 26.7% increase on H1 2017. The reduction in fixed mortgage rates as announced, will see KBC offer some of the most competitive rates in the market for both short and long term fixed rate options.
  • Mortgage cases in arrears down 7% in H1 2018, with nine out of 10 customers in difficulty offered a range of solutions.
  • KBC completes redress and compensation payments to all1 impacted tracker mortgage customers.

Wim Verbraeken, Chief Executive, KBC Bank Ireland said: “KBC is a force for innovation in the Irish market and we are here to provide banking customers with the choice they deserve. These financial results underpin the sustainable growth story of our Irish business with over 40,000 new customer accounts opened in the first half of the year alone and new mortgage production ahead of last year’s level. It further builds on achievements of the Bank in 2017 as a core entity of KBC Group. Customers are responding to KBC’s offering which has been developed in conjunction with both consumers and disrupters, thus ensuring that we are providing the choice, competition and value that Irish consumers are looking for.”

Financial Highlights
KBC Bank Ireland has reported a net profit of €115.9 million after tax and impairments for H1 2018 compared to a net profit of €173.1 million in H1 2017. Year on year decrease primarily due to reduced impairment provision releases.

KBC Group ended the second quarter of 2018 with a net profit of €692 million. Combined with the €556 million reported in the first quarter, this brings KBC Group’s net result for the first six months of 2018 to €1,248 million.

Sale of Part of Legacy Corporate and Buy-to-Let Loan Portfolio
KBC Bank Ireland reached an agreement with Goldman Sachs to sell a loan portfolio of approximately €1.9bn, comprising of:
  • Non-performing Corporate Loan book;
  • Non-performing Irish Buy-to-Let Mortgage Loans;
  • Performing and Non-performing UK Buy-to-Let Mortgage Loans.
to entities established and financed by Goldman Sachs (Beltany Property Finance DAC, Tramore Funding DAC and Banna Funding DAC).

As a result of this transaction, the level of NPLs at KBC Bank Ireland will decrease by approximately 40%, resulting in the NPL ratio reducing by roughly 11%-points to around 25% pro forma at end 2Q18 from 35.6% as reported at end 2Q18. The transaction is expected to result in a net P&L impact of +14m EUR (based on 1Q18 numbers and including all costs related to the transaction).

Wim Verbraeken, CEO KBC Bank Ireland said: “This transaction allows us to fully focus on sustainably and profitably growing our retail and micro-SME business providing much needed choice and competition for Irish consumers. Over the past two years, KBC Bank Ireland has focused on the implementation of a new ‘Digital First’ strategy. Going forward, our focus will be on integrating this approach into our retail and micro-SME offering.”

Customer Acquisition driven by Digital and Product Innovation
Over 20,000 new customer accounts were added in the second quarter of 2018, bringing the total number of new customer accounts added in the first six months of 2018 to over 40,000. This marks a new milestone of more than 273,000 customers attracted to KBC Bank Ireland’s competitive offering, digital solutions and commitment to innovation in product development and customer experience.

Recent statistics on digital wallet transactions illustrate the pace of change, showing that customers are adapting rapidly to new technologies in banking. Overall, the number of digital wallet transactions linked to a KBC Current Account increased by 221% year-on-year. The value of those transactions also rose exponentially, as they are up 329% year-on-year.

As the latest of a number of innovations, KBC launched Garmin Pay for its customers in Ireland in June. KBC is the only bank in Ireland to offer digital wallets from four of the world’s leading technology companies; Apple Pay, Google Pay, FitBit Pay and now Garmin Pay2. This latest development builds on KBC’s drive to transform banking by bringing innovation to the market in response to growing customer demand for easy, secure and digitally-led solutions.

Competitive Mortgage rates
During the quarter, KBC announced a reduction in its fixed mortgage rates, effective from 3rd September, for homebuyers and switchers who seek greater certainty in their repayments over the longer term. 1, 2, 3 and 5-year fixed rates will be reduced by between 0.25% and 0.55%, while KBC is maintaining market leading 10-year fixed rates.

The changes will see KBC offer some of the most competitive rates in the market for both short and long term fixed rate options to new home owners. In addition, KBC also extended its mortgage Switcher offer which entitles customers to €3,000 when they switch their mortgage to KBC before 30th September 2018.

Overall, new mortgage lending by KBC in H1 2018 was €422 million, up from €333 million in H1 2017 as first-time buyers, movers and switchers responded to the offers of lower monthly repayments and better long-term value.

Dara Deering, Executive Director, Retail Banking, KBC Bank Ireland, said: “At KBC, we pride ourselves on our ability to provide choice to first time buyers, movers and switchers. In order to fulfil our ambition to grow our customer numbers to 425,000 by 2020, we are determined to compete across a full retail product offering, including mortgages. Last month, we announced a reduction to our fixed mortgage rates, providing homebuyers and switchers with better long-term value and lower mortgage repayments while maintaining our market leading 10-year fixed rates.

Tracker Mortgage Examination – Progress Update
KBC has completed full redress and compensation payments to all impacted customers3. The total number of mortgage accounts identified as impacted as part of the examination is 2,754. KBC reiterates its apology to all impacted customers for the distress caused by the bank’s errors.

Sustainability Programme
KBC continues to support health and wellbeing initiatives in Ireland. Following on from the success of Wellfest 2018, KBC is rolling out the Wellfest Summer Tour. The tour brings Ireland's largest health, fitness and wellness festival to a broader community in towns and cities around the country with free pop-up events in locations across Ireland throughout August and September.

During the quarter, KBC signed up to the Low Carbon Pledge with Business in the Community Ireland. The Leaders Group is supporting Ireland’s business sector in the transition to a low carbon economy by launching the Low Carbon Pledge to reduce carbon emissions intensity by 50% by 2030.

KBC’s Sustainability Programme aims to make a positive impact on the lives of employees, customers and communities.

1c.2% pending as KBC continues to trace customers
2This newest contactless payment solution from popular sports device company Garmin will see KBC Bank Current Account and Credit Card customers able to pay for goods and services on the move using their Garmin smart watch, with both the Forerunner 645 and Vivoactive 3 models compatible.
3c.2% pending as KBC continues to trace customers