Solid Stress Test For KBC

Narrow-moat KBC performed very well under the recent ECB stress test. Its 2023 common equity Tier 1 ratio under the adverse scenario of the stress test came to 14%, which is well above the 10.5% regulatory minimum common equity Tier 1 ratio KBC would need to keep to be able to pay dividends. Under the adverse scenario, only three banks we follow had a higher buffer than KBC over its minimum capital requirement. KBC’s adverse 2023 common equity Tier 1 ratio was 3.6% lower than the 17.6% KBC reported for 2020. The decline was lower than the average decrease of 4.6% that the European banks we cover experienced under the stress test. If we compare KBC’s operational performance under the base and adverse scenarios, its loan loss provisions increased to a similar extent as its peers. The decline in its revenue was among the lowest of the European banks that we cover. We maintain our narrow moat rating and our EUR 61 per share fair value estimate.