KBC Earnings: Bullish Guidance Could Drive Earnings Upgrades

Narrow-moat KBC reported fourth-quarter 2024 results that were broadly in line with expectations. Guidance from management for the next three years is more bullish than what we and the company-compiled consensus currently have in our models. KBC expects a modest growth in net interest income. The firm also expects that positive loan volume growth will offset the ongoing pressure on deposit interest rates and the potential impact of lower interest rates. KBC is also guiding a much better outcome for loan loss provisions, with the credit loss ratio remaining below midcycle levels over the next three years while we are currently building in normalization to midcycle levels. The guided outcome for operating expense growth is also slightly better than what we are currently factoring in. Considering all, it would suggest that KBC still expects earnings growth despite the potential headwind from declining interest rates. KBC is one of the few European banks that could still deliver positive earnings momentum over the next few years.