Credit crisis results in disappointing quarter
Press release 21 October 2008 (amended, amended text coloured)
- Despite a growth in client numbers, turnover is slightly decreased while profits are strongly lower as a result of the credit crisis
- Solvency and liquidity remain strong
- Additional impairment of € 6–8 million above the € 15 million announced previously
- Further measures taken to improve profitability
In the third quarter of 2008, KAS BANK experienced significant fallout from the credit crisis that affected the financial markets. Turnover during the first nine months increased fractionally compared to 2007, while operating profits decreased by 20 per cent. This decline was caused by the credit crisis which resulted in lower prices, less trading and strongly lower revenue from securities lending. Interest income has increased less significantly compared to the first six months, following the decision to maintain the risk profile as low as possible.
The increase in new clients was satisfactory, and client losses have been restricted to a minimum. Costs have been stabilized at the level of the preceding quarter.
KAS BANK’s risk profile remains lowKAS BANK’s solvency amounts to 15 per cent, as at the end of September 2008. The core tier 1 capital is approximately 0.1 per cent below this level. As at mid-October, the bank’s solvency amply exceeded the external objective of 12.5 per cent.
The bank’s liquidity continues to be strong. The surplus exceeding the
legal required minimum amounts to approximately € 1.5 billion.
Update ‘available for sale’-portfolioThe enormous impact on the exchanges has resulted in a supplementary impairment of € 6–8 million. This relates to the high volatility of collateral positions as a result of fluctuating markets, the lower than expected recovery rate following the Lehman Brothers default and the falling prices on NYSE Euronext. Losses totaling € 15 million have already been announced in our interim figures and in our announcement following the bankruptcy of Lehman Brothers.
The bonds and money market instruments in our portfolio are as follows (according to Moody’s):
| in millions of euros |
30 September 2008 |
Distribution in % |
30 June 2008 |
Distribution in % |
| Aaa — Aa3 |
506 |
53% |
569 |
68% |
| A1 — A3 |
27 |
3% |
35 |
4% |
| Baa1 — Baa3 |
9 |
1% |
9 |
1% |
| P1 — P2 |
373 |
40% |
193 |
23% |
| Shares |
27 |
3% |
31 |
4% |
| Total of investments available for sale |
943 |
100% |
837 |
100% |
Of the bonds in the portfolio, 96 percent are European bonds and 4 percent are US bonds.
Complementary measuresKAS BANK has now taken several measures that will contribute to improved profitability in 2009. Costs, including those relating to external staff, have been reduced, therefore total costs will decrease slightly compared to the previous quarter.
In addition, further measures will be taken in the commercial area to offset falling revenue. The emphasis on services to control risk — institutional risk management — will be intensified as the credit crisis has increased demand for these services among institutional investors. In addition, our neutral and independent position in the European market offers alternative opportunities for growth.
Central government measuresIn the past weeks, several measures have been taken in a European context that may boost confidence in the financial sector. Prompt details of the exact nature of these from the Dutch government is of vital importance for the financial sector as a whole. KAS BANK is particularly pleased with the measures that may stimulate interbank transfers.
Given its solid position on the market, KAS BANK at this moment does not expect to make use of the aforementioned measures itself.