KBC has posted a net result of €697m for the third quarter of 2020, an increase of 14% from the prior year quarter, and up 232% from 2Q 2020.
Sales of life insurance products in 3Q 2020, at €420m, increased by four percent year-on-year. The rise was driven entirely by higher sales of unit-linked products (which include structured products) in Belgium, due to a shift from mutual funds to unit-linked products by private banking clients.
However, quarter-on-quarter, sales of life products were 25% lower, mainly due to a drop in sales of both unit-linked products and guaranteed interest products in Belgium.
Sales of unit-linked products, at €205m, accounted for 49% of total life insurance sales in 3Q 2020, according to the bank-insurer.
Business units
In Belgium, where the business unit posted a net result of €486m (3Q 2019: €368m), KBC distributed seven structured products, down four from the third quarter last year, according to SRP data.
Issuance this quarter included four structured funds and three unit-linked life insurance (Class 23) products. Of these, KBC-Life Multinvest KBC-Life MI+ Global 90-5, which is issued via the Arcade Finance vehicle and has a tenor of 3.6-years sold the most, collecting €65m during its subscription period.
The bank's best performing product in Belgium during the quarter was KBC EquiPlus 90 Timing Infrastructure 5, a 6.5-year structured fund that sold €18.6m at inception. The product, which was linked to a basket of 30 equally weighted shares returned 141.87% in June, or 5.47% per annum.
The net result for the Czech business unit, at €116m, was down 27% year-on-year. Trading and fair value income was €74m lower quarter-on-quarter, mainly due to lower dealing room results and a negative q-o-q change in market, credit and funding value adjustment.
The international markets BU posted a net result of €123m, which can be broken down as follows: Slovakia €33m; Hungary €51m, Bulgaria €27m and Ireland €13m.
Funding
In September 2020, KBC Group issued a senior benchmark with a six-year maturity for €750m. The bond has a call date after five years. KBC Bank has six sources of long-term funding: structured notes and covered bonds using the private placement format; retail term deposits; retail euro medium-term notes (EMTNs); public benchmark transactions; covered bonds; and senior unsecured, T1 and T2 capital instruments issued at KBC Group level and down-streamed to KBC Bank.
As of 30 September 2020, the fair value of derivatives in financial assets held for trading decreased by €182m, primarily due to instruments that had reached maturity, and only partly offset by new transactions. The fair value of debt securities rose by €30m due to new acquisitions.
The group’s third quarter profit is well above the €210m recorded in the previous quarter, which had included €746 million euros in collective impairment charges for the coronavirus crisis, according to Johan Thijs (pictured), chief executive officer.
‘Our net interest income went up quarter-on-quarter, while our trading and fair value result fared well too, though it was down on the exceptionally high level recorded in the previous quarter,’ he said.
Click the link to read the full third quarter results, presentation, report and strategy update.