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Belgium’s banking sector: Facts & Figures

Updated September 2019 – For earlier editions of Facts & Figures click here

According to the European Commission, after an increase of 1.4% in 2018, Belgian GDP is expected to grow by 1.2% in 2019 and 2020. Compared to 2017 (+1.7%), GDP growth eased in 2018 in the wake of the economic slowdown in the Euro area, as a whole, to which the very open Belgian economy was all but immuned. However, several positive developments should be noted: the policy to improve competitiveness by reducing labour costs (including a major tax shift operation) supports exports and employment growth (employment grew by 1.2% in 2018, and the unemployment rate fell from 7.1% in 2017 to 6.0% in 2018). Investments are in a relatively strong phase, in particular, equipment investments by companies.

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 combined balance sheet on a non-consolidated basis of 66% of the sector total at the end of 2018) 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.

Like the Belgian economy, the banking sector is characterised by a high degree of international openness. Of the 87 banks established in Belgium at the end of September 2018, 84% were branches or subsidiaries of foreign institutions, and only 16% had Belgian majority ownership. At the end of 2018, 13 credit institutions under Belgian law had 87 entities in 25 other countries.

At the end of 2018, there were 2,983 bank branches in Belgium (adding branches held by independent bank agents, this number reaches 5,126). The number of ATMs amounted to 13,118, including 7,869 cash dispensers. E-banking and mobile banking are strongly on the rise: 12.9 million subscriptions for internet banking and 7.0 million subscriptions for mobile banking. As a result, several banks are restructuring their retail distribution network and will continue to do so.

Banks in Belgium employ some 52,000 wage-earners, with 120,600 in the wider financial sector. The sector invests continuously 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 competences.

At the end of 2018, the Belgian banks’ total assets (on a consolidated basis) amounted to €993 billion. Interbank claims accounted for approximately 20% of the total balance sheet. Loans to households also accounted 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 14% of the total assets. In the Belgian banking sector, 69% of the liabilities are clients’ deposits (including debt evidenced by securities), mainly consisting of regulated saving deposits, sight deposits and term deposits.

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. Credit demand by companies increased considerably. The volume of outstanding loans to non-financial corporations (NFCs) rose to a record level. Long-term loans, in particular, are 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, almost three-quarters of the NFC loan volume is granted to SMEs.

Belgian households had gross financial assets of €1,317 billion at the end of 2018. In addition to deposit products (Belgian households, non-banking companies and public authorities together had around €530 billion in deposit accounts with Belgian banks at the end of 2018), 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.

Since 2008, the Belgian banking sector has 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 61.2% in 2018, indicating a significant improvement in cost efficiency. The return on average equity (ROE) was 8.0% in 2018. The Liquidity Coverage Ratio and CET I ratio also remained very robust in 2018, at 144.6% and 15.6% respectively. Finally, the credit quality is solid, with an impaired claims’ percentage of 2.3% at the end of 2018.

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) will also be an important challenge.

Contributor: Tim de Vos