BRUSSELS, May 15 (Reuters) - Belgian financial group KBC reported a better-than-expected net profit in the first quarter on Thursday, as higher client deposits as well as fee and commission income outweighed the impact of a Hungarian banking tax.
The group, which still owes 2 billion euros ($2.74 billion)excluding penalties of the 7 billion euros state aid in received at the height of the credit crisis, said customer deposits grew by 4 percent from the fourth quarter in Belgium.
They were also 1 percent higher in the Czech Republic and up by 1 percent in its international business, comprising of Bulgaria, Hungary, Ireland and Slovakia.
KBC’s fee and commission income rose 4 percent from the fourth quarter, as it gained higher fees from mutual funds and payment transactions.
The group’s cost to income ratio in banking rose to 62 percent from 52 percent in the whole of 2013 as the group booked a Hungarian banking tax for the full year.
The government of Prime Minister Viktor Orban, who was re-elected to a second consecutive term in a vote in April, has levied hefty crisis taxes on banks, energy and telecoms companies to rein in the country’s budget deficit.
These taxes and a 2011 government measure to help households indebted in foreign currency, mainly in Swiss francs, have inflicted huge losses on Hungary’s banking sector in recent years.
Underlying net profit rose 7.8 percent in the first quarter to 387 million euros, well above the 359 million expected in a Reuters poll of five analysts.
KBC, which took a 775 million euros hit on its Irish loan loss portfolio in the fourth quarter, said it had 15.1 billion of outstanding loans in Ireland, down from 15.3 billion at the end of the fourth quarter. Customer deposits in Ireland were up 11 percent from the fourth quarter. ($1 = 0.7294 Euros) (Reporting by Robert-Jan Bartunek; editing by Philip Blenkinsop)