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H1 2018 Progress on strategic transformation

“We are transforming our organisation into an innovative administration bank and accordingly have accelerated investments."

06 Sep 2018

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  • Net result of EUR 5.1 million (H1 2017: EUR 8.5 million)
  • Operating income of EUR 51.8 million (H1 2017: EUR 53.6 million)
  • Operating expenses of EUR 45.4 million (H1 2017: EUR 42.4 million)
  • Strategic investments accelerated to boost transformation process and cost programme well underway
  • Distribution of an interim dividend of EUR 0.21 (interim dividend 2017: EUR 0.33)
  • Strong capital ratio (31%) and liquidity coverage ratio (213%)

Chairman’s statement

“We are transforming our organisation into an innovative administration bank and accordingly have accelerated investments. In the first half of 2018, our operating income amounted to EUR 51.8 million, with the operating income level in the second quarter at the same levels we saw in the first quarter. On balance, the impact of consolidation and competition in the pension and insurance segment resulted in a lower number of clients and a decrease of commission income. We have broadened the scope of our services in our international branches. In the UK, we now offer clients a full suite of pension services. In Germany our visibility continues to increase, leading to new client wins. The Pensions-Akademie initiative underlines our commitment to the German pension market. In the Netherlands, we have further developed our ESG proposition and expanded our business with family offices.

We have decided to phase out our investment in a Dutch mortgage fund to avoid volatility in results due to the implementation of IFRS9. In the first half of this year, we sold part of this investment and used the positive investment result to accelerate improvements of our core processes and innovations. These investments include the recently launched robot-overlay service, expected launch of a new client front-end, and improvement in data quality and processes. This led to an increase in operating expenses of 7% to EUR 45.4 million. At the same time, our continued focus on efficiency resulted in a significant decrease in run rates in the last two years. We have implemented several new robotics processes and will continue with continuous improvement and robotics initiatives to become more efficient, improve quality and internal control for our clients. Our business is supported by continued high capital and liquidity ratios and a transparent and robust balance sheet.

The world around us is changing rapidly. Clients’ needs are changing, and new technologies are on the rise. Regulatory developments pose both challenges and opportunities to our business. Our traditional source of income, custody, is impacted by the unbundling of the value chain and the scale effect of globalisation. On the other hand, we can benefit from the same trends by launching sourcing of investment administration as a new service.

We are running a transformation programme, aimed at improving our financial as well as our operational performance, whilst at the same time broadening our business base through investing in new sources of income. Our change program continues to strengthen our entrepreneurial culture. 

Our cost programme is progressing according to plan. Excluding the accelerated strategic investments, our cost levels are coming down in line with the targeted EUR 20 million structural savings by the end of this year. We are now entering the second phase of our transformation programme in which we focus on innovations, further optimising our processes and accelerate investments. In Kas Lab, our ‘nursery’ for innovations, we use new technologies and focus on new markets to develop additional sources of income to support our growth for the future. Almost a year ahead of planning, we intend to launch the first initiatives in the coming months. We also see opportunities for smaller add-on acquisitions, strengthening our existing business and developing new activities relevant for our clients. Although investments needed for this transformation impact our net profit levels in the coming years, we believe this positions us better for a future as a healthy and innovative administration bank. We have exciting times ahead, but it’s also good to see that after 212 years, our purpose remains unchanged. With our transformation well underway, we are confident KAS BANK will continue to “enable prosperity for future generations.”

Dividend

We will distribute an interim dividend of EUR 0.21 in cash (interim dividend 2017: EUR 0.33 in cash). Our dividend policy remains unchanged (pay-out ratio: 60-80% of net profit).

Outlook

We do not foresee major changes in the macro-economic conditions impacting our results, capital and liquidity ratios in the next half year. Looking ahead, we believe that the second half of 2018 and 2019 will be an exciting period. We will continue our transformation, while fierce competition and consolidation of our client base result in a decrease of our 2019 Assets under Custody and operating income. We will continue our focus on cost control and improvement of processes and also develop new sources of income to adapt ourselves for the future, as we have done since 1806.

Read our full press release Progress on strategic transformation with the consolidated income statement and the consolidated balance sheet (PDF opens in a new window).

Figures in this press release have not been audited by an external auditor.

 

With our transformation well underway, we are confident KAS BANK will continue to “enable prosperity for future generations.”

Sikko van Katwijk, Chairman of KAS BANK's Board of Directors

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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