A remarkable observation in the figures of Belfius. On the current and savings accounts of private customers and the self-employed, 11 percent was added, representing an increase of 6.7 billion euros. ‘Customers were scared by the crisis and have saved more. We have seen more transactions on the exchanges, but absolutely not in proportion to the extra savings that customers have put aside, ”says CEO Marc Raisière.
Savings behavior is a double-edged sword for the banks. There are more options for investments, but hesitant consumers weigh on the economy and therefore also on the masses of credit that banks have outstanding companies. Raisière: ‘Consumption was strong in June, but stabilized again in July. The commerce runs well on the coast and in the Ardennes, but it is more difficult in the cities. We will have to see how things go in September. ‘
But Raisière doesn’t want to be too negative. ‘It’s not as bad as we expected. In the beginning, we feared that the crisis would lead to € 1 billion in risk costs for us. Now we are assuming more than 450 million euros for the whole year. ‘
How did the state bank get that figure? Belfius is counting on a blow of 10 to 11 percent for the Belgian economy this year and a recovery of 8 percent next year. Those numbers don’t take into account a new heavy virus wave and second lockdown.
The teams of financial director Johan Vankelecom and risk director Marianne Collin went through the loan portfolio with the comb through the loan portfolio, mindful of that scenario. “A large proportion of the credits were looked at line by line and we had personal contact with many companies,” says Raisière.
There were companies in which Belfius no longer sees a future. For those bankrupt or doomed companies, EUR 81 million was set aside to absorb the credit losses. The total provisions for bad loans amount to 393 million euros. That figure is relatively low, says Raisière. ‘We have a diversified portfolio with many governments and hospitals that will not go bankrupt. Hospitality and event companies make up only 2.5 percent of the portfolio. ”
Nevertheless, the fees are 13 times higher than the 30 million risk costs in the ‘normal’ first semester of 2019. Belfius also counts on ‘normal’ credit provisions for the second semester, so that they amount to approximately 450 million euros for the whole of 2020. “We are strong enough to handle that impact in one go,” says Raisière. “We think that we can also manage the crisis well: in the first half of the year we allocated 9.3 billion euros in new loans.”
The risk costs meant that the half-year profit just missed out on the red. This fell from 304 million euros to 21 million euros. The diversification paid off: the growth in investments and non-life insurance meant that revenues fell by only 2 percent to 1.13 billion euros.
Raisière also hopes to be able to maintain revenues and profits in 2021. ‘We have been able to limit personnel costs this year by investing in automation. Nor should we think of a social plan. By 2025, some 800 people will leave the bank as they reach retirement age. We already realize savings by limiting replacements. ‘
‘We can go abroad with neobank’
Raisière does not want to say any details about the recent deal with Proximus on banking services. 100 people are working on it and the neobank will be launched in the first half of next year. “It will be a real disruption on the Belgian market, a neo bank that will be able to compete with other neo banks.”
Neobanks such as N26, Revolut, Transferwise or Bunq are active in several countries. Does the neobank also open the door to other countries for Belfius? “We are going to start with Proximus in Belgium, but we cannot rule out the possibility of launching a neobank Belfius abroad,” says Raisière. ‘But we are not going to take any risks with Belfius capital abroad. We can finance that with capital from the financial markets. ‘