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Belgium’s banking sector: Facts & Figures

Updated December 2020 – For earlier editions of Facts & Figures click here

According to the European Commission, after an increase of 1.4% in 2019, Belgian GDP is expected to contract by 8.8% in 2020 before recovering at an annual growth rate of 6.5% in 2021. Compared to 2018 (+1.5%), GDP growth eased somewhat in 2019 in the wake of the economic slowdown in the euro area as a whole, for which the very open Belgian economy was all but immune. However, several positive developments should be noted: the policy to improve competitiveness, inter alia, by reducing labour costs (including a major tax shift operation), supports exports and employment growth (employment grew by 0.8% in 2019, and the unemployment rate fell from 6.0% in 2018 to 5.4% in 2019). Investments are in a relatively strong phase, in particular, equipment investments by companies. A plan has been elaborated at the political level with the aim of pooling investments worth several tens of billions of euros in the fields of energy, mobility, security, digitisation and health. Elections were held in May 2019 and regional governments have been installed. Conversely, it takes much more time to agree on a new federal government.

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 66% of the sector total at the end of 2019) 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 which 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). Like the Belgian economy, the banking sector is characterised by a high degree of international openness. Of the 85 banks established in Belgium end of December 2019, 83.5% are branches or subsidiaries of foreign institutions, and only 16.5% has a Belgian majority shareholdership. At the end of 2019, 13 credit institutions under Belgian law had 80 entities in 24 other countries.

At the end of 2019, the number of bank branches in Belgium amounted to 2,739. When adding the number of branches held by independent bank agents, this number reaches 4,692. The number of ATMs amounted to 11,659, including 7,460 cash dispensers. E-banking and mobile banking are on a strong rise: 13.8 million subscriptions for internet banking and 8.1 million subscriptions for mobile banking. This is why several banks are restructuring their retail distribution network and will continue to do so.

End of 2019, the Belgian banks’ total assets (on a consolidated basis) amounted to €1,048 billion. Loans to households account for almost one-quarter of the total balance sheet, followed by Interbank claims and investment in debt securities issued by financial and non-financial companies and public sector entities (18%). Corporate lending to non-financial companies, takes up about 14% of the total assets. 69% of the liabilities of the Belgian banking sector 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 eased their criteria for granting loans to companies. In the fourth quarter of 2018, banks slightly tightened these criteria for the first time since the first quarter of 2013. After, they also tightened their criteria in the first and fourth quarter of 2019. In 2019, credit demand of companies only increased in the second quarter of 2019. The volume of outstanding loans to non-financial companies rose to a record level. Long-term loans, in particular, were also 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, three-quarters of the loan volume taken out by companies is granted to SMEs (including micro-companies).

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 €1,409 billion at the end of 2019 (i.e. 298% compared with Belgium’s GDP). In addition to their large offer of deposit products (Belgian households, non-banking companies and public authorities together had around €560 billion in deposit accounts with Belgian banks at the end of 2019), banks offer a wide range of investment instruments and services. Asset management is an important part of this area, with banks (often through their asset management subsidiary) commercialising many investment funds.

In the years following the 2008 banking crisis, the Belgian banking sector worked on its financial soundness through a phase of balance sheet deleveraging, among other things. The cost-to-income ratio fell from 72.1% in 2012 to 59.5% in 2019, indicating a significant improvement in cost efficiency. The return on average equity (ROE) was 8.7% in 2019. The Liquidity Coverage Ratio and CET I ratio also remained very robust in 2019, at 140.5% and 15.5% respectively. Finally, the credit quality is solid, with an impaired claims percentage of 2.2% at the end of 2019.

Banks in Belgium employ almost 50,000 wage-earning people (of which almost 51% are women), with 115,300 in the wider financial sector in 2019. Since 2019, 90% of the Belgian financial sector signed the Women in Finance Charter to make progress on gender equality. The sector invests permanently in staff skills: almost 3% of total annual staff costs is spent on training. The swift digitisation is one of the factors that necessitate a permanent shift in competencies.

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. 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 (smartphone) banking applications. FinTech has become an important factor, 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. For the future, and keeping a commitment to climate in mind, financing the energy transition (for families as well as companies and governments) is also a challenge coming to the forefront.

Contributor: Tim de Vos Tim.De.Vos@febelfin.be