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Reorganisation costs moderate KAS BANK total profit

"KAS BANK performed well in 2013, in a market that remains unstable. Our position in the institutional market is improving each year, both in terms of growth in the Assets under Administration, which increased by 7% to EUR 325 billion," says Albert Röell, chairman of the KAS BANK Managing Board.

20 Feb 2014

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Main points

  • Total profit 13% lower at EUR 12.3 million as a result of reorganisation costs of approx. EUR 8 million gross; excluding the reorganisation costs, total profit amounted to EUR 18 million, an increase of more than 25%
  • Banking result at EUR 12.8 million approx. 10% higher than in 2012, operating profit one third lower, primarily as a result of lower market interest rates
  • Revenue fractionally lower, partly as a result of a 14% diminution in interest income. Assets under Administration increased by 7% in 2013 to EUR 325 billion
  • Operating costs (excluding non-operational items, including the reorganisation costs) were 3.5% lower in comparison with 2012
  • BIS ratio rose to an average of 23% (2012: 21%); leverage ratio at year-end 2013 well above 5%
  • Dividend proposal for 2013 unchanged, at EUR 0.64 per share, representing a pay-out ratio of more than 75%

Key figures

In EUR 2013 2012* Movement
Profit 12.3 million 14.2 million -13%
Banking result 12.8 million 11.6 million 10%
Result from operations 4.8 million 7.2 million -33%
Income 114.2 million 117.7 million -3%
Assets under Administration 325 billion 303 billion 7%
Total earnings per share 0.84 0.97 -13%
Dividend per share 0.64 0.64 0%
BIS-ratio (year-end) 29% 23%  
BIS-ration (average) 23% 21%  
* Comparative figures have been
adjusted in response to the
adjustments in IAS 19R from 1 January 2013
     

Quote from the chairman

"KAS BANK performed well in 2013, in a market that remains unstable. Our position in the institutional market is improving each year, both in terms of growth in the Assets under Administration, which increased by 7% to EUR 325 billion, and in appreciation of the high quality services regarding risk management and transparent reports. The recovery of the European banking sector is progressing slowly, as a result of which the ECB is keeping interest rates as low as possible and still places a great deal of liquidity in the market for low margins. As a result, we cannot obtain the normal fees for its surplus liquidity, which places profit margins under pressure," says Albert Röell, chairman of the KAS BANK Managing Board. "Because no change is expected in this situation in the coming years, we decided on an additional reorganisation. We made a start on this in 2013 by selling one of our Amsterdam offices and by including a reorganisation charge of approximately EUR 8 million in the results for 2013."

General

In European terms, 2013 can be described as a transitional year. The euro crisis appears to have been averted, but it is still far too early to say that Europe and the banking sector within Europe have fully recovered. Confidence in the sector remains fragile, as shown partly by the almost complete absence of an inter-bank market. A favourable development for KAS BANK here is that financial markets are increasingly resorting to collateral-driven transactions. As a custodian, the bank has long experience with such low-risk transactions and therefore increasingly acts as an intermediary for its institutional clients. With the arrival of EMIR, the need for day-to-day collateral and sound registration of collateral will also become a legal requirement for the derivatives markets from 2014. We play an important role for the institutional market here, as the market leader in the Dutch market.

The arrival of AIFMD in 2013, making it obligatory for funds to appoint a local custodian separate from the administrator, which independently supervises these funds, means that KAS BANK can further expand its role as a specialist in its core markets, the Netherlands, the UK and Germany. Particularly in the Netherlands, where the Securities Giro Act (WGE) forms a strong legal foundation, it is important for institutional parties, from a risk point of view, to keep the ‘custody chain’ as close as possible in the Netherlands in order to prevent the possibility of assets of e.g. pension funds being blocked in the event of severe unrest in the financial markets.

On the whole, in 2013 the outsourcing agreement with dwpbank progressed on time and according to plan. Although we now provide wholesale services to a number of German clients, we did not yet succeed to grow our asset base as intended. In The Netherlands, Secpoint, the joint venture of dwpbank and KAS BANK, which is targeted initially on retail processing for banks, was launched in September.

In the years 2014-2018, the Basel III rules concerning solvency and liquidity shall become applicable to KAS BANK. Even under these more stringent rules, our solvency and liquidity ratios lie well above the minimum levels. Through the sale of one of our offices, the Tier 1 ratio – the core ratio measuring the strongest form of capital – rose to 28% for 2013, an increase of six percentage points in comparison with 2012. The BIS-ratio - the ratio measuring total capital in relation to the risk-weighted assets – was among the strongest in the market at year-end 2013, at 29%. KAS BANK’s leverage ratio amounted to more than 5% at year-end 2013.

Dividend proposal

KAS BANK will propose a final cash dividend for 2013 to the General Meeting of Shareholders of EUR 0.31 per ordinary KAS BANK share. EUR 0.33 per ordinary share has already been paid out as an interim dividend for 2013. This meets the objective of paying out dividends of 60-80% of the total profit under normal market conditions. Given the developments in the financial sector and the importance of a strong capital position, we shall review this objective on an annual basis.

Outlook for 2014

We expect no improvement in market interest rates in 2014, which means that market conditions in 2014 will not be easy. As a result of the reorganisation that we commenced in the second half of 2013, we expect the operating result to improve.
In view of the continuing uncertainty in the market, we can make no statements regarding the total result. We reiterate the bank’s aim of meeting the external objectives that we have set ourselves for the longer term.

Read our full press release including the Consolidated Balance Sheet and Consolidated Income Statement (PDF in new window).

Remko Dieker

More information

Remko Dieker

Secretary to the Managing Board / Investor Relations
+31 (0)20 557 51 80