KBC soars to pre-2008 level as income forecast hike sweetens quarterly beat

By Jakob Van Calster and Mateusz Rabiega

(Reuters) -Belgian bank KBC lifted its annual net interest and total income forecasts on strong organic loan growth after beating quarterly earnings estimates on Thursday, sending its shares to levels seen before the global financial crisis.

The shares rose as much as 6.1% in early trading to their highest level since late 2007. 

The income forecast hikes come even as regional peers ING and ABN Amro have reported declines in the metric for several quarters, although they have flagged signs of a stabilisation on the horizon.

Lenders' interest income has been under pressure as slowing inflation in the euro zone has prompted the European Central Bank to cut interest rates, ending a period when banks raked in record-high profits as revenue from interest-bearing assets surged.

KBC's quarterly net interest income rose 9% year-on-year to 1.51 billion euros ($1.76 billion), securing a net profit beat at 1.02 billion euros.

At the start of the ECB's rate-hiking cycle, the bank took a contrarian stance to most of its peers, locking in long-term positions early and committing less to short-term reinvestments.

"At the time that meant lower net interest income, but the moment rate cuts start happening, we would see stable net interest income", CEO Johan Thijs said in February.

KBC on Thursday raised its forecast for annual net interest income to 5.85 billion euros from at least 5.7 billion euros previously and hiked its total income growth target to at least 7% from 5.5%.

ETHIAS, CENTRAL EUROPE

The bank repeated its interest in buying Belgian state-owned insurer Ethias, as the KBC CEO expects the issue of its sale to be cleared by the end of the year or at the beginning of 2026.

Ethias' potential sale has long been a point of political contention between its joint owners, the Flemish, Walloon and federal states.

"The defence spending comes on top of Belgium's not that comfortable budgetary situation. From that perspective, the assets the government holds can be instrumental," Thijs said on a conference call.

The CEO reiterated the bank's M&A ambitions in Central Europe, especially in Romania, where it is in talks with a number of undisclosed parties.

($1 = 0.8565 euros)

(Reporting by Jakob Van Calster and Mateusz Rabiega in Gdansk; Editing by Subhranshu Sahu, Rashmi Aich and Mrigank Dhaniwala)