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H1 2016: Countering market challenges

- Disappointing decrease in net result of 89% to EUR 0.9 million (H1 2015: EUR 8.3 million); result from operations decreased by 61% to EUR 4.3 million (H1 2015: EUR 10.9 million).
- As a result of low profitability we will forego the interim-dividend. Initiatives have been implemented to improve net results and to meet our financial objectives, these include adhering to a dividend pay-out ratio of 60-80%. KAS BANK has identified potential cost reductions of EUR 20 million in the period up to and including 2019.
- Revenues declined by 17% to EUR 51.6 million (H1 2015: EUR 62.4 million) due to lower returns on interest and securities lending, as well as lower result on the investment portfolio. Growth of 7% in commission income in our core services (custody and administration) supports the strategic direction for the growth of our business.
- Total operating expenses are 2% lower than last year, at EUR 46.7 million (H1 2015: EUR 47.8 million), being the first results of our cost control program.
- Assets under Administration have increased by 8% to EUR 500 billion (Q4 2015: EUR 460 billion).
- Capital ratio remains strong at 26% (Q4 2015: 25%) and the liquidity coverage ratio has increased to 171% (Q4 2015: 143%).

25 Aug 2016

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Key figures

In EUR H1 2016 H1 2015 Change
Result 0.9 million 8.3 million -89%
Operational result 4.3 million 10.9 million -61%
Revenues 51.6 million 62.4 million -17%
Assets under Administration 500 billion 460 billion 9%
Earnings per share 0.06 0.56 -86%
Dividend per share - 0.33  
Capital ratio (coverage) 23% 20%  

Chairman’s statement

“The markets remain challenging. We are disappointed that fee income growth and initiated cost reductions have not yet compensated for the decrease in Treasury income. We are positive about KAS BANK’s continued growth in our core custody and investment accounting services. We also detect greater market demand for our expanding range of back office services for institutional investors. The actions we have initiated have not yet fully impacted, resulting in a lower first half year profitability,” says Sikko van Katwijk, Chairman of KAS BANK’s Managing Board.

General overview

In the first half year of 2016 the market conditions were challenging, resulting in lower profitability. Extremely low interest rates and market response following political instabilities have impacted our financial performance. However, the growth in commission income on asset services (administration, data and reporting) supports our strategic ambitions for growth. KAS BANK's cost level needs to change in order to restore better financial performance. To achieve this we have begun executing initiatives we have identified to achieve efficiencies and resulting in lower costs in the future. KAS BANK expects to see the impact of these as of the second half of this year and onwards. KAS BANK has identified a structural annual efficiency potential of EUR 20 million to be implemented in the period up to and including 2019.

KAS BANK provides financial services to institutional investors including pension funds, insurance companies, funds and wealth companies. As our clients require full compliance with continuously changing and increasing rules and regulations, it is our mission to support them to be in control. In order to allow our clients to focus on their core objectives of creating maximum asset value for their clients, at KAS BANK we increasingly find ourselves a back office partner to our clients supporting their core activities and providing them a fully continued compliant process.

Through this way KAS BANK now facing adds an important new focus to its current range of client activities. Our core markets represent an enormous potential for these investor back office services that is fully aligned with our core competences. In past years we have seen healthy growth in areas related to administration, data and reporting services. It is our ambition to strengthen and expand this administrative role for our clients. In order to achieve this, we will execute plans to adjust our operating model, putting increased focus on this new core of service activities. As we have recently begun a process with ATOS for our IT-services, we intend to collaborate with outsourcing partners to combine the strength of these institutions with the strengths of KAS BANK, enhancing our push for focus on areas where we have the largest added value for our clients.

Dividend

KAS BANK will not distribute interim dividend (interim dividend 2015: EUR 0.33 per ordinary share). KAS BANK’s policy is to pay out an interim dividend based on actual performance in the first half year. In light of the first half year results, we will forego the interim-dividend. We repeat the bank’s aim to meet our long term external financial objectives, including adhering to a dividend pay-out ratio of 60-80%.

Outlook


In the second half of 2016 KAS BANK expects an improvement in the bank’s net result in comparison to the first half of 2016, supported by a stable level of income and a lower cost level.

In addition, we have non-recurring expenses related to IT outsourcing (substantial part of the transition costs of EUR 10 million will impact the result of 2016). Furthermore, the bank investigates the sale of its office building in Amsterdam in H2 2016, with an expected gain when effectuated. In the second half of 2016 KAS BANK will also finalise plans to realise a structural annual cost reduction of EUR 20 million in the period up to and including 2019 (based on the current income level). Part of these plans is the adjustment of the operating model, resulting in improving the quality and efficiency of the processes. This adjustment is expected to result in non-recurring expenses in H2 2016.
Figures in this press release have not been audited by an external auditor.

Read our full press release Countering market challenges (PDF opens in new window).

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Remko Dieker

For further information, please contact Remko

Remko Dieker

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