KBC Group stock rises following Q1 earnings beat

Investing.com -- Shares of KBC Group (EBR:KBC) climbed 3% today after the company reported first-quarter earnings that surpassed consensus estimates.

The financial institution announced a net profit of EUR 546 million, exceeding the expected EUR 529 million. The positive movement can be attributed to several factors, including lower-than-anticipated impairments and a robust performance in fee income and insurance sales.

KBC’s underlying pre-tax profit was 14% above consensus, with total impairments reported at EUR 38 million, which is significantly lower than the EUR 86 million anticipated by analysts. Revenues were slightly ahead at 1% above consensus, while total adjusted expenses were 2% lower. Notably, net interest income (NII) was marginally higher by 0.5%, and fee-based income saw a 4% increase over consensus expectations, contributing to the stock’s upward movement.

Year-over-year, fee income showed a 12% increase, primarily driven by asset management fees and banking service fees. Insurance sales also demonstrated significant growth, with non-life sales up by 8% and life sales soaring by 32% compared to the same quarter last year.

Loan losses were well-managed, with KBC booking a net impairment of EUR 38 million, including net loan loss provisions of EUR 83 million offset by releases of EUR 45 million. The bank’s cost control measures were evident as underlying costs, excluding levies, increased by 4% year-over-year but fell by 8% compared to the previous quarter.

The capital position of the company remained solid, with a CET 1 ratio (fully loaded excluding output floor) reported at 14.5%, slightly below the 15.0% at the end of the fourth quarter but in line with consensus estimates.

Additionally, the company’s updated capital distribution framework has been a highlight, with the dividend payout ratio now set at 50-65% and the threshold for excess capital distribution lowered from 15% to 13%.

RBC analysts commented on the update, stating that the "updated capital framework points to additional distribution capacity."

KBC also announced the acquisition of 365 Bank in Slovakia, which is expected to be earnings per share (EPS) accretive from the first year. The transaction is forecasted to yield a return on investment of approximately 16% by 2028 and is anticipated to have a 50 basis points impact on KBC’s fully loaded CET1 ratio.

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