KBC's profit hit by higher buffers against Iran war impact
First-Quarter Earnings and Geopolitical Pressures
By Jakob Van Calster and Mateusz Rabiega
May 12 (Reuters) - KBC missed market expectations on Tuesday as geopolitical challenges pressed on first-quarter earnings and the Belgian bank joined European peers boosting their buffers amid the Iran war.
Loan Loss Impairments and Reserve Increases
The lender's full loan loss impairment was 165 million euros ($194 million) in the quarter, a more than 100-million-euro increase compared with the same period last year, at a time when the U.S.-Israeli war with Iran bogs down the global economy.
CEO Statement on Geopolitical Uncertainties
"Due to the geopolitical turmoil we increased the reserve for geopolitical and macroeconomic uncertainties by 75 million euros," CEO Johan Thijs said in a press release.
Economic Outlook Amid War
Global and European economic growth projections have been revised downwards, while inflation expectations have moved higher because of the war.
Base Case Scenario and Central Bank Response
Thijs, however, said that his base case scenario still assumed the war would be short-lived, limiting the drag on Europe's economy.
Interest Rate Expectations
"Central banks will look through the inflation and will not hike (interest rates)," he said during an analyst call, contrary to interest rate forward curves that are inching up on bets that policymakers would raise rates as oil prices push inflation higher.
Financial Results and Market Reaction
KBC's net profit was 557 million euros in the first quarter, missing the 578 million euros analysts polled by the bank had expected, even as its net interest income soared 18% on the year.
Analyst Commentary
In a note to clients, RBC analysts said that an unchanged guidance also "dampens the excitement", even if NII beat expectations.
Share Performance
The lender's shares slumped 4% in early Brussels trading, underperforming the broader European banking index.
($1 = 0.8517 euros)
(Reporting by Jakob Van Calster and Mateusz Rabiega, editing by Milla Nissi-Prussak)
