Belgium’s banking sector: Facts & Figures
Updated September 2018 – For earlier editions of Facts & Figures click here
According to the European Commission, after an increase of 1.7% in 2017, Belgian GDP is expected to grow by 1.7% and 1.6% respectively in 2018 and 2019. This is slightly more than in the previous three years (2014-2016), albeit somewhat lower than in the euro area as a whole. The policy to improve competitiveness, by reducing labour costs (including a major tax shift operation) supports exports and employment growth (employment grew by 1.4% in 2017, and the unemployment rate is expected to fall from 7.1% in 2017 to 6.3% in 2019). Investments are in a strong phase, in particular, equipment investments by companies. In a coordinated investment plan, the Belgian government is planning to poo investments worth several tens of billions of euros in the fields of energy, mobility, security, digitisation and health.
The Belgian banking community is characterised by a variety of players who are active in different market segments. BNP Paribas Fortis, KBC, Belfius and ING Belgium are the four leading banks (with a cumulated balance sheet on a non-consolidated basis of 62% of the sector total at the end of 2017) and offer an extensive range of services in the field of retail banking, private banking, corporate finance and payment services. In addition, a number of smaller institutions exist that are often active in a limited number of market segments.
A number of institutions have specialised in international niche activities, such as Euroclear (one of the world’s biggest players in clearing and settlement services) or The Bank of New York Mellon (custody). Of the 87 banks established in Belgium, 84% are branches or subsidiaries of foreign institutions, and only 16% have Belgian majority ownership. At the end of 2017, 13 credit institutions under Belgian law had 91 branches in 25 other countries.
At the end of 2017, the number of bank branches in Belgium amounted to 3,195. When adding the number of branches held by independent bank agents, this number reaches 5,896. The number of ATMs amounted to 13,732, including 8,235 cash dispensers. E-banking and mobile banking are on the rise: there were 12.1 million subscriptions for internet banking and 5.9 million subscriptions for mobile banking.
Banks in Belgium employ some 54,000 people, with 123,200 in the wider financial sector. The sector invests significantly in staff skills: almost 3% of total annual staff costs is spent on training.
At the end of 2017, the Belgian banks’ total assets (on a consolidated basis) amounted to €994 billion. Interbank claims account for approximately 20% of the total balance sheet. Loans to households also account for one-fifth of the total balance sheet, followed by investment in debt securities issued by financial and non-financial companies and public-sector entities (18%) and corporate lending to non-financial companies, taking up about 13% of the total assets. Some 66% of liabilities are client deposits (including debt evidenced by securities), mainly consisting of regulated savings deposits, sight deposits and term deposits.
The Belgian banking sector is essential for financing the economy and companies. In recent years, banks have relaxed their criteria for granting loans to companies. Credit demand of companies increased considerably as well. The volume of outstanding loans to non-financial companies rose to a record level in 2017. Medium and long-term loans, in particular, are on the rise. Companies want to make maximum use of and fix the exceptionally low interest rates, driven by the ECB’s extremely accommodating stance. In addition, almost three-quarters of the loan volume taken out by companies is granted to SMEs.
Companies also use asset-based financial instruments, such as leasing, from independent leasing companies or the many banks that have leasing subsidiaries or provide lease financing themselves. Corporate financing in Belgium has become more diversified. The larger companies also rely directly on the financial markets (e.g. bond issues), with accompanying services provided by the banks.
A similar diversification of services occurs in the savings and investment segments. Belgian households had gross financial assets of €1,348 billion at the end of 2017, more than three times the value of Belgium’s GDP. Belgian households, non-banking companies and public authorities together had around €525 billion in deposit accounts with Belgian banks at the end of 2017. Banks also offer a wide range of investment instruments and services, including asset management.
In the years following the 2008 banking crisis, the Belgian banking sector worked on its financial soundness, including through a phase of balance sheet deleveraging. The cost-to-income ratio fell from 72.1% in 2012 to 58.2% in 2017, indicating a significant improvement in cost efficiency. The return on average equity (ROE) has been around 10% in each of the past three years. The Liquidity Coverage Ratio and CET 1 ratio also remained robust in 2017, at 140.1% and 18.3% respectively. Finally, credit quality is solid, with an impaired claims percentage of 2.8% at the end of 2017.
The sector is aware of the major challenges ahead. The climate of continuing extremely low interest rates increases the banks’ focus on adjusting their business models, including in terms of distribution channels. At the same time, digital applications are picking up speed, a development that is being met with substantial investments. Emphasis is put on shifting services from the traditional branch network to digital banking via online channels and banking applications. FinTech has become an important issue, and the Belgian financial centre is taking many notable initiatives such as Start It@KBC, ING Fin Tech Valley, Co.Station and The Birdhouse among others.
Contributor: Tim de Vos Tim.De.Vos@febelfin.be