BNP Paribas Fortis 2013 Results

• Net profit attributable to shareholders at EUR 638 million, compared to EUR 313 million^[1] in 2012
• Business performance resilient in an adverse environment. Further improvement in our service to clients, and the Bank’s role in financing the economy further enhanced with volume growth in Retail Belgium and in Turkey
• Additional contribution from Specialised Finance, Leasing and Factoring activities
• The interest margin remains under pressure due to persisting low interest rates
• Ongoing containment in operating expenses to improve the cost-to-income ratio
• Strong balance sheet: Tier 1 solvency ratio stands at 14.8%; solid liquidity, with customer deposits standing at EUR 161 billion and customer loans at EUR 153 billion, after funding of the newly-added Specialised Finance, Leasing and Factoring activities^[2]

Net profit attributable to shareholders came in at EUR 638 million in 2013, up EUR 325 million on 2012, mainly driven by: (i) a resilient business performance in 2013 despite a challenging economic and financial environment; (ii) revenues from newly-added Specialised Finance, Leasing and Factoring activities; (iii) ongoing containment of expenses so as to improve cost-to-income ratio; and (iv) a moderate cost of risk.

In Belgium, business activity showed a 3.9% increase in client deposits, reaching EUR 105 billion, due to good growth in current and savings accounts. Lending rose by 2.4% to EUR 86 billion, due in particular to a rise in loans to individual customers, while corporate lending remained subdued due to weak demand. Outside Belgium, Turkey showed strong loan and deposit growth.

Operating income amounted to EUR 1,676 million, a strong increase of EUR 549 million or 49% on 2012.

• Total revenues came to EUR 6,515 million in 2013, up EUR 634 million compared to 2012.

• Net interest income totalled EUR 4,439 million in 2013, down by EUR 18 million versus 2012. Excluding scope changes, the underlying downward trend in net interest income is mainly observed in Belgium, Luxembourg and the foreign branches. The decrease in Belgium was related to pressure on the margin of liabilities, mainly on savings accounts. The interest margin at BGL BNP Paribas was negatively impacted by the sale of government bonds in 2012 and lower margins on commercial activities. Interest revenues at foreign branches were affected by the rundown of portfolios. In addition, net interest income was under pressure in Turkey as the volume impact was offset by a lower margin, due to the interest rate ceiling imposed by the regulator since June 2013 and the depreciation of the Turkish lira.

• Net commission income amounted to EUR 1,557 million in 2013, up EUR 240 million or 18% compared to 2012. The increase in net commission income was supported by higher fees at Belgian Retail Banking and by commissions earned on Specialised Finance activities at Corporate & Investment Banking (CIB), while 2012 included a fee of EUR 17 million paid to the Belgian State to end the guarantee on the Structured Credit Instruments portfolio. Net commission income also increased in Luxembourg and in Turkey.

• Net results on financial instruments at fair value through profit or loss stood at EUR 249 million, up by EUR 161 million compared to 2012. This was driven by a lower net negative impact of credit spread-related results in 2013, including the first time booking of a positive debt valuation adjustment, while in 2013 the results of Capital Markets were lower compared to the exceptional performance of 2012.

• Net results on available-for-sale financial assets amounted to EUR 164 million in 2013 compared to –EUR 45 million in 2012. The positive result in 2013 was linked to sales of government bonds in Belgium and in Turkey. In 2012, the reduction of the exposure to sovereign risk led to losses on the sale of Portuguese government bonds. 

• Operating expenses and depreciation amounted to EUR 4,346 million in 2013, EUR 35 million lower than in 2012. The cost evolution in Belgium reflects the ongoing efforts to improve the cost-to-income ratio, as evidenced by lower staff expenses and lower IT-charges, while restructuring costs were higher in 2012. The cost increase in Luxembourg is linked to the transformation costs for the Simple & Efficient programme, whereas the cost increase in Turkey is linked to growth initiatives. The decrease in depreciation charges was linked to lower depreciation on IT assets and the write-off in 2012 of intangible assets of the branches in Portugal and the UK that were transferred to BNP Paribas.

• Cost of risk, at EUR 493 million in 2013, remained at a moderate level, equivalent to 32 basis points on outstanding loans. The increase of EUR 119 million versus 2012 is mainly attributable to lower net releases of collective provisions than in 2012, especially at Belgian Retail Banking. Specific provisions were also higher than in 2012, mainly in Spain and Turkey, partly counterbalanced by lower specific provisions at Belgian Retail Banking.

Income tax expenses in 2013 amounted to EUR 529 million, with an effective tax rate of 30%^[3].

Net profit attributable to shareholders came to EUR 638 million, impacted by an impairment of EUR 446 million on the investment in asset management associates and including positive results on non-current assets at EUR 64 million, mainly linked to the revaluation of subordinated debt issued by TEB^[4] and the liquidation of Fortis Holding Malta. 

The BNP Paribas Fortis balance sheet totalled EUR 261 billion at the end of December 2013, EUR 11 billion or 4% lower than at the end of 2012. The decrease was due to the deleveraging and optimisation programmes. Despite this decrease, there was growth in customer loans and deposits and an increase arising from the full consolidation of TEB and several Factoring entities. The transfer of Specialised Finance activities to Belgium and the first consolidation of the branch in the Netherlands were partially offset by the transfer of the branches in the UK and Portugal to BNP Paribas. From a geographical point of view - based on the location of BNP Paribas Fortis companies - 70% of the assets are located in Belgium, 9% in Luxembourg and 21% in other countries. The proportion of assets in other countries increased in 2013, mainly due to the impact of the full consolidation of TEB and the inclusion of the branch in the Netherlands.

BNP Paribas Fortis’s solvency remained strong in 2013. At 31 December 2013, the Basel II Tier 1 capital ratio stood at 14.8%, similar to the ratio on 31 December 2012. The total capital ratio stood at 17.4%, well above the regulatory minimum of 8%.

Liquidity remained solid, with customer deposits standing at EUR 161 billion and customer loans at EUR 153 billion, after funding of the newly-added Specialised Finance, Leasing and Factoring activities. Customer deposits consist of amounts due to customers excluding repurchase agreements (‘repos’) and customer loans are loans and receivables due from customers, excluding securities and reverse repos.

The BNP Paribas Fortis Board of Directors will propose at the Annual General Meeting of shareholders on 24 April 2014 that a dividend of EUR 0.80 per share be distributed, payment to be made in cash.

Commented CEO Max Jadot:

“We dedicated ourselves fully in 2013 to further improving our service to our clients and enhancing the bank’s role in financing the economy. Total savings deposits grew in 2013, both in retail customers’ current and savings accounts, and in business accounts. We see this evolution as a sign of our clients’ trust in our Bank. An increase was also recorded in our lending to households and businesses. We paid special attention to the needs of the self-employed, members of the liberal professions and SMEs via our ‘Bank for Entrepreneurs’ campaign.

Our ongoing efforts to improve customer satisfaction found their just reward as satisfaction scores were up in 2013. This was mainly due to the strong support provided to customers by our staff at the branches, business centres and contact centres, a strong management focus and implementation of the ‘One Bank Customer Satisfaction’ project.

We also invested substantially in 2013 in our digital banking offering and payment solutions, exemplified by the launch of Hello bank!, a 100% native mobile bank. Other innovative digital banking solutions will be rolled out in 2014.

Our financial results in 2013 show that the strategic direction on which we embarked in 2012 was the right one. We posted a net profit of EUR 638 million on the back of a very slow economic recovery. The newly-added Leasing, Factoring and Specialised Finance activities performed well and have reinforced the international service offering to our business clients. Meanwhile, the cost of risk continued to be moderate. All this was achieved while keeping our costs flat. To remain sustainable, we will continue our rationalisation efforts, touching upon all the bank’s layers and activities.

We fully acknowledge that the many changes require flexibility and adaptability on the part of our staff. A special word of thanks is due to them for their hard work in 2013 towards the development of a bank that is able to keep pace with the times. Our common goal is to continue to work to the satisfaction of our clients, whom we thank for the confidence they place in us. We will pursue this direction in 2014, in order to establish a business in which our customers can have more confidence than ever and to remain the market leader in Belgium for the long term.”

For more details, you can consult the consolidated and non-consolidated Financial Statements* available on www.bnpparibasfortis.com. This press release should be read in conjunction with these Financial Statements**.

*The published Financial Statements are in English and have been substantially audited by the joint statutory auditors. The final audit reports will be included in all language versions of the Financial Statements (Dutch, French and English), which are expected to become available before the end of the month. The financial information included in this press release is unaudited. Nevertheless, the consolidated net result amounting to EUR 638 million has been derived from the 2013 consolidated Financial Statements of BNP Paribas Fortis which were closed by the Board of Directors on 20 March 2014. The joint statutory auditors have substantially completed their audit on these Financial Statements and anticipate issuing the following audit report:

"Unqualified opinion on the 2013 consolidated Financial Statements with an emphasis of matter paragraph relating to the existence of claims for which the outcome remains uncertain."

**Please note that the results of BNP Paribas Fortis SA/NV announced in this press release are the consolidated results of BNP Paribas Fortis SA/NV and do not cover the contribution of BNP Paribas Fortis to the consolidated results of BNP Paribas, which have a different scope (limited to Retail Banking in Belgium) and take into account purchase accounting by BNP Paribas.

The Financial Report 2013 and this document include forward-looking statements based on current beliefs and expectations about future events. Forward-looking statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future events, operations, products and services, and statements regarding future performance and synergies. Forward-looking statements are not guarantees of future performance and are subject to inherent risks, uncertainties and assumptions about BNP Paribas Fortis and its subsidiaries and investments, developments at BNP Paribas Fortis and its subsidiaries, banking industry trends, future capital expenditure and acquisitions, changes in economic conditions globally or in BNP Paribas Fortis’ principal local markets, the competitive market and regulatory factors. Those events are uncertain; their outcome may differ from current expectations which may in turn significantly affect expected results. Actual results may differ materially from those projected or implied in these forward-looking statements. Any forward-looking statement contained in this document is made at the date of this document. BNP Paribas Fortis does not recognise any obligation to publicly revise or update any forward-looking statements in the light of new information or future events. The information contained in this document as it relates to parties other than BNP Paribas Fortis or derived from external sources has not been independently verified and no representation or warranty expressed or implied is made as to, and no reliance should be placed on the fairness, accuracy, completeness or correctness of, the information or opinions contained herein.