KBC shares rise on Q2 earnings beat, 2025 outlook lifted on NII strength

Published 07/08/2025, 09:10
© Reuters

Investing.com -- Shares of KBC Group (EBR:KBC) rose more than 4% on Thursday after the Belgian financial group reported second-quarter earnings that beat expectations and raised its full-year guidance, citing stronger net interest income and loan growth.

KBC posted net profit of €1.02 billion, topping the €933 million consensus. Pre-tax profit and pre-provision profit both came in 8% above expectations. 

Revenues were 3% ahead of consensus, while total expenses matched estimates. Operating expenses, as defined by company targets, were 2% above expectations.

Net interest income rose 6% quarter over quarter, 4% above forecasts, helped by a €29 million swing from inflation-linked bonds, higher dealing room income and commercial transformation gains. 

Loan volumes increased 2% from the previous quarter, with net interest income in Belgium up 8%, driven by both strong loan growth and inflation-linked bond gains.

Deposits increased by €5 billion during the quarter, reflecting a shift from term deposits to savings and current accounts.

Fee income matched expectations, declining 3% from the prior quarter but rising 7% year over year. 

The drop was linked to lower asset management fees and higher distribution commissions. Insurance sales were mixed: non-life sales rose 8% year over year, life sales grew 6%, but fell 35% from the first quarter due to weaker sales of unit-linked and guaranteed products.

Total (EPA:TTEF) impairments were €124 million, above the €106 million consensus. This included €76 million in loan loss provisions and a €40 million increase in the expected credit loss buffer, which reached €112 million by quarter’s end. The impaired loan ratio improved to 1.8% from 1.9%.

Costs excluding bank levies rose 2% quarter over quarter and 5% year over year, mainly from staffing, IT, and seasonal marketing spending. KBC reiterated its full-year cost growth target of below 2.5%.

The fully loaded CET1 ratio was 14.6%, slightly under the 14.7% consensus but up from 14.5% in Q1. KBC cited upcoming regulatory capital headwinds, including the 365.bank acquisition and changes in insurance risk-weighting, expected from 2026.

KBC raised its 2025 net interest income guidance to “at least €5.85 billion,” up from €5.7 billion, and above the €5.822 billion consensus. 

The company also lifted its 2025 total income growth target to at least 7%, from 5.5%, and raised organic loan growth expectations to at least 6.5% from 4%.

The jaws guidance was increased to at least 4.5% for 2025, with other targets,  including insurance revenue growth, operating costs, and cost of risk, unchanged. 

The payout ratio of 50–65% was reiterated, along with an interim dividend of €1 per share in November.

KBC maintained its 2027 targets and reaffirmed capital impact expectations under Basel IV. 

About 7% of its loan book is tied to sectors exposed to current U.S. tariffs, though the company said EU-U.S. agreements have improved the medium-term outlook.

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