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Belgium's KBC raises net interest income guidance on Czech rate hikes

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Belgium's KBC raises net interest income guidance on Czech rate hikes

Belgian banking and insurance group KBC Group NV is raising its guidance for full-year net interest income on the back of a series of interest rate hikes in one of its key markets, the Czech Republic, executives said Aug. 9.

"We have seen now two [recent] rate increases in the Czech Republic, on June 27 and Aug. 2, and as a result of that we are now changing our guidance on NII," the bank's CFO Hendrik Scheerlinck told an analyst presentation following publication of the bank's second-quarter earnings.

The bank is now expecting full-year net interest income of €4.5 billion, up from a previous estimate of €4.46 billion. In 2017, net interest income was €4.12 billion. KBC is present in the Czech Republic through its Ceskoslovenská obchodní banka a.s. unit, and the central bank has raised rates three times so far in 2018, with the additional hike taking place in February.

Second-quarter net interest income rose 2% to €1.12 billion, boosted by lower funding costs, loan volume growth and interest rate hikes. The net interest margin rose to 2.00% in the second quarter compared to 1.96% in the same period of 2017.

Scheerlinck said margins would remain under pressure in Belgium for the time being as the low interest rate environment continues to bite, but he said the group was beginning to see improving margins in loans to corporates and small-and-medium-sized businesses.

While margins would rise in the Czech Republic thanks to rate rises, margins in KBC's other international banks would stabilize at current levels, he said.

KBC also said it had sold a portfolio of nonperforming corporate loans, nonperforming Irish buy-to-let mortgage loans, and performing and nonperforming U.K. buy-to-let mortgage loans belonging to its Irish unit. The loans were sold to Goldman Sachs Group Inc.

CEO Johan Thijs said the bank had no plans to make further sales in Ireland. However, he said the group would consider portfolio sales in other countries, noting that the bank had sold an NPL portfolio in Bulgaria in the first quarter, but would only carry out sales that would be positive for KBC's capital levels and its bottom line.

Thijs said the bank remained interested in acquisitions in countries in central and eastern Europe in countries where it is already present. Apart from the Czech Republic, KBC has operations in Hungary, Slovakia and Bulgaria. He said the bank would be particularly interested in strengthening its position in Hungary and will look at state-owned Budapest Hitel- és Fejlesztési Bank Zrt., which the Hungarian government has been planning to sell.