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Czech building savings bank acquisition improves KBC's Q2 profit YOY

KBC Group NV reported second-quarter profit after tax attributable to equity holders of the parent of €745 million, up from €692 million a year earlier.

EPS for the quarter increased to €1.76 from the year-ago €1.61.

CEO Johan Thijs attributed the result to a number of positive one-off items, including an €82 million gain related to the acquisition of a 45% stake in Czech building savings bank Českomoravská stavební spořitelna as.

Net interest income amounted to €1.13 billion, compared to €1.12 billion in the second quarter of 2018. Net fee and commission income declined on a yearly basis to €435 million from €438 million.

The group's nonlife insurance income, before reinsurance, decreased to €174 million in the quarter from €202 million a year earlier. Life insurance income, before reinsurance, remained flat year over year at €1 million.

The Belgian financial services group recorded impairments of €40 million, compared to a reversal on impairments of €1 million a year earlier. The group booked a €36 million loan loss impairment, compared to a net release of impairments of €21 million in the second quarter of 2018.

For the first half, the Belgian lender reported an attributable profit of €1.18 billion, down from €1.25 billion earned in the same period in 2018. EPS for the half was €2.74, compared to the year-ago €2.91.

First-half return on equity was 14%, compared to 16% for the full year 2018.

As of June 30, KBC's Basel III fully loaded common equity ratio according to the Danish compromise method stood at 15.6%, compared to 16.0% at the end of 2018. The group noted the purchase of Českomoravská stavební spořitelna had a negative impact of 0.3 percentage point on its CET1 ratio.

KBC Insurance's Solvency II ratio was 201% at the end of June, compared to 217% at 2018-end and 219% in the prior-year period.

In terms of guidance, KBC said it expects solid returns for all its business units. The impact of Basel IV, which is scheduled to be implemented Jan. 1, 2022, is estimated to increase the group's risk-weighted assets by about €8 billion on a fully loaded basis at 2018-end, resulting in a negative impact of 1.3 percentage points on its common equity ratio.

KBC said it will pay an interim dividend of €1 per share Nov. 15 as an advance payment on the total dividend for 2019.