Belfius Bank SA/NV

The stable outlook reflects our view that Belfius' solid domestic franchise, good business diversification, strong capital, and sound asset quality and risk management will help maintain its creditworthiness over the next two years. We also think the bank's profitability will be supported by its bancassurance model, dynamic lending growth, and supportive economic environment. Those credit strengths position Belfius well to achieve its target by the end of its 2025 business plan. We could lower the rating if Belfius departs from its current capital management policy and its RAC ratio weakens below 10%. This could happen if the bank unexpectedly upstreams higher dividends to its shareholders or undertakes a significant acquisition that erodes its capital. We could also lower our ratings

...We expect Belfius to focus on bancassurance organic growth, which supports capitalization and profitability. Our central scenario is based on Belfius focusing on organically growing its banking and insurance businesses while remaining open to acquisitions to reinforce its domestic competitive position. That said, a transformative acquisition could potentially change our view on the bank, and in particular its capital strength. We forecast Belfius' risk-adjusted capital (RAC) ratio will stay at about 11.5%-12.5% over the next two years compared with 11.4% at year-end 2023. This increase is backed by expected retained earnings supporting capital at a faster rate than risk weighted assets (RWAs) growth despite slight net interest income decline and ongoing investments and inflationary costs. Overall, we expect a return on average common equity of about 8.5%-8.8% over the next two years, down from 9.8% in 2023....

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