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Belgian Retail Banking: A profitability study

With a net profit before tax of 28%, Belgian retail banking is doing well, but a large disparity between financial institutions remains. Nevertheless, transformations are still expected to speed up. During the years 2012 and 2013, the top four retail banks present on the Belgian territory in terms of revenues and net profit before tax remain unsurprisingly BNP Paribas Fortis, KBC, ING and Belfius.


Strong financial results for the main Belgian banks but a strong disparity

Despite the gloomy results of KBC, aggregated profitability of our panel increases slightly over the 2012-2013 period (27.3% to 27.7%), mainly due to the results of KBC. Although aggregated costs rose with 2.4%, revenues increased with 3%. Operational expenses were under control thanks to the different operational efficiency plans in place. The cost of risk remained low (4.3% of BNPP Fortis revenues - 7.7% of Belfius revenues, after doubling in a year). The aggregated growth of revenues was driven by commissions (off-balance sheet savings) while interest income showed a slight decrease due to the low interest rate environment.

KBC Bank has the highest net profit before tax margin of our panel, up to 44% in 2013 (an increase compared to 2012 (+3.3 pts)). This result is largely linked to a satisfying growth while maintaining costs at a stable level (which are significantly lower than the 3 main competitors).

ING also reached a high ratio with 29% in 2013 (an increase compared to 2012, +1.1 pts).

BNPP Fortis ranked third reaching a profitability ratio of 21% in 2013 up to 2012 (+0.6 pts).

Belfius fell to 6% in 2013, while profitability was at 19% in 2012. Revenues decreased with 13%, mainly due to the combination of a vast decline of retail customers and an increased pressure on interest revenues. Fortunately, Belfius can count on its strong growth numbers in insurance activities in 2013.

Going one leap back, over the 2009-2013 period, we find that the net profit before tax margin in our sample does not have the same trajectory. KBC, ING and BNPP Fortis have managed to maintain and preserve their net profit over the past years. Belfius was able to maintain a sound level of profitability until 2012, plunging steeply afterwards in 2013. Panel revenues grew by 9% over the 2009-2013 study period. Apart from Belfius, all banks managed to increase their revenues in recent years.

Speed up the transformations

Despite the more than satisfactory results, especially compared to the financial results presented by French banks, Belgian banks will continue to make significant changes in the months and years to come. In the shadow of an unstable regulatory, economic and fiscal framework, customer processes are rapidly evolving to restore and attain the same client confidence levels as before the crisis. Due to the high stakes for banks, this results in necessary changes in revenue models, impacting the entire banking organization.

Resizing of branch networks will continue hand in hand with the closures that are already planned. Next to this, the redefinition of the advisor role and a strengthening of innovation plans will certainly gain on importance, consequences of the more direct and interactive business models. Finally, dematerialization (innovation-driven) and IT rationalization will be even more crucial.

Belgian banks have already started to transform their distribution channels, rebalancing the role of branches and the role of emerging channels in their business model. Agencies play an advisory role, while current operations are now conducted online. At the same time, banks are investigating intensively on different branch models and on defining adequate branch networks (self-service, branches specialization etc..).

Over two years, BNPP Fortis, Belfius, KBC and ING have closed more than 150 agencies. Relying on the banks strategic plans, we can expect a further amplification over the 2014-2015 period.

The average number of clients / agency will continue to grow in the coming years. For example, under the assumption of a constant increase of the total number of clients, an average BNPP Fortis branch should have up to 4,500 customers in 2015. A real challenge for client proximity initiatives and customer satisfaction, but a precondition when looking at the drop of daily branch activities.

Our analysis below, providing a "branch view" of financial results, highlights an important difference between Belfius and the three other major Belgian retail banks. Indeed, even if an average Belfius branch has more customers than other banks, the revenues of this branch are well below the panel average and continue to shrink sharply in 2013 (opposite performance to what we notice for KBC, ING or BNPP Fortis).

Belgian customers have adopted in the past years and months the "multi-channel" practice. Furthermore, they will evolve in the coming years to the "self first" model, where branches will have a much less central role.

Digitalisation of consumption patterns, particularly through the introduction of Mobile Banking (mobile and tablet) and an increased use of Online Banking will continue to drive innovation in the sector


  • BNPP Fortis will launch in the coming weeks, the "Belgian Mobile Wallet" (SIXDOTS), after launching last year the 100% digital bank, Hello bank!
  • KBC launched in 2013 an application dedicated to corporate customers.
  • ING focuses on education of its customers through the development of E w@lls present in branches, allowing bank employees to easily educate customers about Home Banking services.

Advisors should continue to adapt themselves to the new ways of customer banking experiences. Increase of customers' appointments, well-informed customers with even more specific consulting needs, increased range of product offers in branches (classic retail banking activities, insurance, telephony ...), extended opening times are just some examples of the many ongoing challenges. As already described, all in the context of a downsizing branch network.Accompanying these changes is and will be a crucial stage for banks. Internal mobility and training will be even more challenging.In addition, cost control requires extensive operational efficiency plans. BNPP Fortis has implemented "Simple & Efficient" which aims to save more than €2 billion per year (at group level) from 2015, through operations simplification (process optimization, IT rationalization, dematerialization, offer simplification ...).


Many current and future initiatives encompassed within Belgian bank strategies to maintain, and perhaps increase, profitability in the coming years are known.

In parallel to growing and more demanding customer expectations, the current landscape remains highly unstable. Innovation initiatives, cost optimization plans and changing business models in general will only gain on importance in the near future.

For more details, read the full article



Sia Partners

Figures used in this study come from the bank annual reports. Data for 2013 are at this stage not yet audited. Figures included retail / private banking (& SME / mid-corporate segments)
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