KBC First-Quarter 2021: Earnings Beat Driven by Net Provision Release

Narrow-moat KBC reported a net attributable profit of EUR 557 million for first-quarter 2021, compared with a EUR 5 million loss it reported for first-quarter 2020. The results came in 34% above the consensus expectation of analysts collected by KBC itself. This handsome earnings beat was largely the result of KBC releasing more loan-loss provisions than what consensus had anticipated. The first quarter tends to be the softest quarter of the year for KBC as incentive compensation and bank taxes are paid during the quarter. Our fiscal 2021 earnings estimate of EUR 1.8 billion is starting to look light and we are likely to hike our estimates, with a consequent increase in our fair value estimate of around 5%-10%. It will be mainly a more favourable loan-loss outcome that should drive our estimates higher. We maintain our narrow moat rating.