Kbc Group N.v. · EURONEXT:KBC
Kbc — Debt Investor Presentation (August 2022)
66 slides from Kbc's debt investor presentation, August 2022
Slide 1: KBC Group Debt presentation August 2022
KBC Group Debt presentation August 2022 More infomation: www.kbc.com KBC Group - Investor Relations Office – E-mail: IR4U@kbc.be
Slide 2: Important information for investors
Important information for investors This presentation is provided for information purposes only. It does not constitute an offer to sell or the solicitation to buy any security issued by the KBC Group. KBC believes that this presentation is reliable, although some information is condensed and th
Slide 3: KBC Group Passport: Well-defined core markets
KBC Group Passport Well-defined core markets Market share (end 2021) BE CZ SK HU BG 19% 20% Loans and deposits 11% 11% 11% 3.8m clients 4.3m clients 430 branches 28% 203 branches 23% 115bn EUR loans 34bn EUR loans 12% 10% Investment funds 7% 146bn EUR dep. 47bn EUR dep. 22% 0.8m clients 13% 117 bran
Slide 4: Group's legal structure and issuer of debt instruments
KBC Group Passport Group’s legal structure and issuer of debt instruments KBC Group NV AT 1 Tier 2 MREL Senior 100% 100% 100% 100% KBC Bank KBC Insurance KBC Global Services N.V.* DISCAI** Covered bond No public issuance KBC IFIMA*** Retail and Wholesale EMTN • To ensure that KBC’s HoldC
Slide 5: Latest credit ratings
KBC Group Passport Latest credit ratings Latest updates: Moody’s S&P Fitch • 28 July 2022: Moody’s changed the outlook to positive and reflected the expectation that KBC's strong earnings A- generated in recent years will continue to be supported Senior Unsecured Baa1 A by strong revenue growth, tha
Slide 6: ESG ratings and indices – Ahead of the curve
KBC Group Passport ESG ratings and indices – Ahead of the curve Agencies ESG rating of 25th of July 2022 (previous score) Position versus industry average D- A • Financial services average B A- (A-) Severe Risk High Risk Medium Risk Low Risk Negligible Risk • 3rd percentile of 415 diversified banks
Slide 7: Contents
Contents 1. Strategy and business profile 2. Financial performance 3. Solvency, liquidity and funding 4. Covered bond programme 5. Green & Social bond framework 6. Looking forward Appendices 7
Slide 8: KBC Group in a nutshell: What differentiates us from peers
KBC Group in a nutshell What differentiates us from peers Unique integrated Successful digital Firmly embedded Core shareholder bank-insurance model approach sustainability strategy structure • Our organisation is similarly integrated, • Our Digital interaction with clients • As a company that aims
Slide 9: KBC Group in a nutshell: Our financial footprint
KBC Group in a nutshell Our financial footprint High profitability... Solid capital position... Fully loaded Basel 3 CET1 ratio C/I ratio* Combined ratio Net result (Danish Compromise) 17.1% 17.6% 2614m 16.3% 16.0% 15.5% 15.9% 55% 89% EUR 1269m 53% 85% EUR 11.87% MDA * Adjusted for specific item
Slide 10: KBC Group in a nutshell: Our non-financial targets
KBC Group in a nutshell Our non-financial targets % bank-insurance (BI) clients Customer NPS ranking 77% 78% 85% Top-3 Top-2 Top-2 22% 23% 27% 2020 2021* target '23 2020 BI 2021 BI target '23 2020 2021 target '23 stable BI stable KBC is 3rd in customer NPS ranking 78% of active customers are BI
Slide 11: Our sustainability roadmap
Our sustainability roadmap KBC milestones and initiatives Equator Principles Joined the UN Global compact and We have been a signatory to the Equator Principles (Eps) published first sustainability report over FY 2005 since 2004 and have integrated them in our lending policy of project finance 2006
Slide 12: Strong progress on Environmental, Social and Governance issues
Strong progress on Environmental, Social and Governance issues Some latest highlights ESG ESG ESG Environmental Social Governance All remaining direct coal exposure has been 31bn EUR in Responsible Investing Top level responsibility for phased out in line with our commitment funds sustainabili
Slide 13: Our sustainability ambitions
Our sustainability ambitions We substantially raise the bar for our climate-related ambitions Achieved Achieved Volume of Responsible Renewable energy loans Investing Funds(*) (In % of total energy sector loan portfolio) (In billions of EUR) 32 66% 31 30 61% 63% 65% 57% 44% 17 58% 12 56% 9 55% 40% 3
Slide 14: Our environmental footprint
Our environmental footprint Measuring and reporting both our direct and indirect footprint scope Measure, reduce and set clear targets on our direct footprint scope already since 2015. - We already substantially reduced our direct footprint by -71% in 2021. - In line with our commitment, we reache
Slide 15: Our environmental footprint
Our environmental footprint Measuring and reporting both our direct and indirect footprint scope 10% Energy Remaining sectors outside white 3% Mortgage loans paper scope Commercial real 34% 9% estate Building and Total financed Scope 3 7% construction GHG emission KBC Group 57 Mt CO2e 3% Automotive
Slide 16: Contents
Contents 1. Strategy and business profile 2. Financial performance BREAKDOWN OF ALLOCATED CAPITAL BY BUSINESS UNIT AS AT 30 June 2022 3. Solvency, liquidity and funding 4. Covered bond programme Czech Republic 17% 5. Green & Social bond framework 6. Looking forward Belgium 60% 17% International Mark
Slide 17: Key takeaways for KBC Group
Key takeaways for KBC Group 2Q22 financial performance Commercial bank-insurance franchises in core markets performed excellently Customer loans and customer deposits increased y-o-y in all 1H22 ROE 15%1 our core countries (on a comparable basis) Cost-income ratio excluding bank taxes 47%
Slide 18: Net result at KBC Group
Net result at KBC Group CONTRIBUTION OF BANKING ACTIVITIES TO KBC GROUP NET RESULT* 639 653 572 508 412 345 NET RESULT AT KBC GROUP* Amounts in m EUR 793 811 663 601 557 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 458 CONTRIBUTION OF INSURANCE ACTIVITIES TO KBC GROUP NET RESULT* 168 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22
Slide 19: Overview of contribution of business units to 1H22 result
Overview of contribution of business units to 1H22 result NET PROFIT – KBC GROUP Amounts in m EUR 1H22 ROAC: 20% 2,570 2,614 2,489 1,322 1,264 1,314 1,440 1,269 1,235 1,248 1,175 1,350 205 2018 2019 2020 2021 2022 2H 1H NET PROFIT – BELGIUM NET PROFIT – CZECH REPUBLIC NET PROFIT – INTERNATIONAL MARK
Slide 20: Higher net interest income and stable net interest margin
Higher net interest income and stable net interest margin NII Amounts in m EUR 1,094 1,112 1,177 1,200 1,248 Net interest income (1 248m EUR) 1,068 100 2 28 112 1 23 97 16 101 1 26 • NII increased by 4% q-o-q and 14% y-o-y, driven primarily by: 98 16 102 1 15 o Strong organic loan & deposit volume
Slide 21: Lower net fee and commission income q-o-q, but stable y-o-y
Lower net fee and commission income q-o-q, but stable y-o-y F&C Amounts in m EUR Net fee and commission income (451m EUR) 479 482 450 467 451 441 • Down by 6% q-o-q and stable y-o-y 237 250 247 229 234 244 • Q-o-q decrease was mainly the result of the following: o Net F&C income from Asset Managem
Slide 22: Insurance premium income up y-o-y and excellent combined ratio
Insurance premium income up y-o-y and excellent combined ratio PREMIUM INCOME (GROSS EARNED PREMIUMS) 861 745 735 740 777 769 292 272 256 375 290 266 Insurance premium income (gross earned premiums) at 769m EUR • Non-life premium income (503m EUR) increased by 9% y-o-y 484 486 487 503 • Life premi
Slide 23: Non-life sales significantly up y-o-y, life sales down
Non-life sales significantly up y-o-y, life sales down q-o-q and y-o-y NON-LIFE SALES (GROSS WRITTEN PREMIUM) 645 590 Sales of non-life insurance products 487 446 450 435 • Up by 9% y-o-y (growth in almost all classes, but chiefly in the classes ‘Motor Comprehensive Cover’, ‘Property’, ‘Workmen’s
Slide 24: Decrease of net result from financial instruments at fair value
Decrease of net result from financial instruments at fair value (following an extremely strong 1Q22). Net other income sharply above normal run rate Amounts in m EUR FIFV The 54m EUR q-o-q decrease in FIFV was attributable mainly to: 143 • Significantly lower dealing room and other income (as 1Q22
Slide 25: Costs excluding bank taxes decreased q-o-q
Costs excluding bank taxes decreased q-o-q OPERATING EXPENSES Operating expenses excluding bank taxes went down by 3% q-o-q and Amounts in m EUR increased by 4% y-o-y 1,520 • The q-o-q decrease is due mainly to the extraordinary staff bonus and accelerated 1,320 514 depreciations in Ireland in 1Q2
Slide 26: Small net loan loss impairment charges and excellent credit cost ratio
Small net loan loss impairment charges and excellent credit cost ratio ASSET IMPAIRMENT Negative sign is a release 21 Amounts in m EUR Net impairment charges 193 22 28 19 • Net loan loss impairment charges of 9m EUR in 2Q22 (compared with 15m EUR 46 37 releases in 1Q22) due to: 17 18 -26 -1 6 -33
Slide 27: Outstanding ECL for geopolitical, emerging and covid risks
Outstanding ECL for geopolitical, emerging and covid risks Stable buffer q-o-q Q-o-q change in the outstanding ECL for geopolitical, emerging and Covid risks Q-o-q -5m • At the end of 2Q 2022, the ECL for geopolitical and emerging risks amounted 273 268 to 268m EUR and included an impairment release
Slide 28: Update on the Russia/Ukraine conflict (including emerging risks)
Update on the Russia/Ukraine conflict (including emerging risks) Estimated outstanding ECL A No No direct direct subsidiaries subsidiaries KBC has no direct subsidiaries in Russia (R), Belarus (B) or Ukraine (U) Direct transfer risk exposure amounts to approx. 35m EUR (-20m q-o-q) B Very limited dir
Slide 29: Loan loss experience at KBC
Loan loss experience at KBC 1H22 FY21 FY20 FY19 FY18 FY17 AVERAGE CREDIT COST CREDIT COST CREDIT COST CREDIT COST CREDIT COST CREDIT COST ‘99 –’21 RATIO RATIO RATIO RATIO RATIO RATIO Belgium -0.04% -0.26% 0.57% 0.22% 0.09% 0.09% n/a Czech -0.04% -0.42% 0.67% 0.04% 0.03% 0.02% n/a Republic Internatio
Slide 30: Impaired loans ratios, of which over 90 days past due
Impaired loans ratios, of which over 90 days past due KBC GROUP BELGIUM BU 3.3% 3.2% 2.5% 3.1% 2.4% 2.4% 2.9% 2.2% 2.1% 1.9% 2.3% 2.2% 1.8% 1.7% 1.6% 1.5% 1.2% 1.2% 1.2% 1.0% 1.0% 1.0% 0.9% 1.0% 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 Impaired loans ratio Of which over 90 days pa
Slide 31: Cover ratios
Cover ratios KBC GROUP BELGIUM BU 66.9% 69.5% 68.3% 67.4% 68.8% 66.9% 66.7% 66.9% 64.1% 66.1% 64.3% 63.0% 46.0% 47.1% 48.2% 48.5% 42.9% 42.7% 41.3% 42.6% 43.0% 42.7% 39.4% 40.3% 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 Impaired loans cover ratio Cover ratio for loans with over 90
Slide 32: Balance sheet
Balance sheet KBC Group consolidated at the end of June 2022 Total assets Total liabilities and equity (EUR 370bn) (EUR 370bn) Credit quality 169 217 Capital adequacy & liquidity position 64 20 3 13 24 19 8 12 121 69 Loan book (loans and advances to customers) Deposits from customers Investment port
Slide 33: Diversified loan portfolio
Diversified loan portfolio Total loan portfolio outstanding by sector Total loan portfolio outstanding as a % of total Group portfolio outstanding(1) by segment(1) 197bn EUR(2) Corporate 35.3% 43.5% Retail Mortgages 40.3% Consumer Finance 3.2% Retail 21.2% Services 10.0% SME Distribution 7.8% Real E
Slide 34: Balance sheet: Loans and deposits continue to grow in most countries
Balance sheet: Loans and deposits continue to grow in most countries 17% 13% 12% 9% 8% BE 2% Loans** Retail Deposits*** Loans** Retail Deposits*** Y-O-Y ORGANIC* VOLUME GROWTH mortgages mortgages 19% 9% 9% 9% 7% 7% 14% 5% CR 11% 4% Loans** Retail mortgages Deposits*** Loans** Retail Deposits*** Loan
Slide 35: Fully loaded Basel CET1 ratio at KBC Group
Contents Fully loaded Basel 3 CET1 ratio at KBC Group (Danish Compromise) 1. Strategy and business profile +4.03% +4.56% 2. Financial performance 3. Solvency, liquidity and funding 11.87% 11.34% 0.53% 4. Covered bond programme 2.50% 2.50% 0.65% 0.65% 15.90% 1.83% 1.83% 5. Green & Social bond framewo
Slide 36: Strong capital position (1)
Strong capital position (1) Fully loaded Basel 3 CET1 ratio at KBC Group (Danish Compromise) 17.6% 17.5% The fully loaded common equity ratio amounted to 15.9% at the end of 1H22 16.4% * 15.9% * based on the Danish Compromise. 15.5% 15.3% • The q-o-q increase in 2Q22 is mainly related to interim p
Slide 37: Strong capital position (3)
Strong capital position (3) Fully loaded Basel 3 total capital ratio (Danish Compromise) 21.2% 20.1% 19.7% * 2.1% T2 1.2% T2** 18.6% 18.5% 18.9% * 1.5% AT1 1.9% T2** 1.4% AT1 1.6% T2** 1.6% T2** 1.9% T2** 1.4% AT1 1.4% AT1 1.4% AT1 1.4% AT1 The fully loaded total capital ratio amounted to 18.9% at
Slide 38: Fully loaded Basel 3 leverage ratio and Solvency II ratio
Fully loaded Basel 3 leverage ratio and Solvency II ratio Fully loaded Basel 3 leverage ratio at KBC Group Fully loaded Basel 3 leverage ratio at KBC Bank 5.8% 5.5% 5.4% 5.4% * * 5.0% 5.1% 5.1% * 4.7% 4.6% 4.7% 4.4% * 4.4% 1Q21 1H21 9M21 FY21 1Q22 1H22 1Q21 1H21 9M21 FY21 1Q22 1H22 The decrease of
Slide 39: Strong and growing customer funding base with liquidity ratios remaining very strong
Strong and growing customer funding base with liquidity ratios remaining very strong KBC Bank continues to have a strong retail/mid-cap deposit base in its core markets – resulting in a stable funding mix with a significant portion of the funding attracted from core customer segments and markets;
Slide 40: Upcoming mid-term funding maturities
Upcoming mid-term funding maturities Breakdown Funding Maturity Buckets (Including % of KBC Group’s balance sheet) 7000 KBC Bank has 6 solid sources of long-term funding: 6000 • Retail term deposits 1.3% 5000 • Retail EMTN • Public benchmark transactions m EUR 4000 0.9% 3000 0.7% 0.7% • Covered bond
Slide 41: KBC has strong buffers cushioning Sr. debt at all levels
KBC has strong buffers cushioning Sr. debt at all levels (1H 2022) KBC Group Senior 9 962 Tier 2 2 182 KBC Bank Additional Tier 1 KBC Insurance 1 500 Subordinated on loan by KBC Group Tier 2 9 962 CET1 (transitional) 500 16 022 Tier 2 Parent shareholders equity 1 683 Buffer for Sr. level 19.7 bn EUR
Slide 42: KBC complies with resolution requirements
KBC complies with resolution requirements New MREL targets applicable as from 01-01-2024, with intermediate targets as from 01-01-2022 The resolution plan for KBC is based on a Single Point of Entry (SPE) approach at KBC Group level, with bail-in as the preferred resolution tool In 2Q22, the SRB
Slide 43: Available MREL as a % of RWA and LRE (BRRD2)
Available MREL as a % of RWA and LRE (BRRD2) Available MREL as a % of RWA * 27.9% 27.4% * 28.0% * 27.9% 27.7% 27.6% * 27.6% * MREL requirement The MREL ratio in % of RWA remained stable q-o-q and well above the 26.36% in 2022 MREL requirements FY20** 1Q21** 1H21** 9M21** FY21** 1Q22** 1H22** Avail
Slide 44: Contents
Contents 1. Strategy and business profile 2. Financial performance 3. Solvency, liquidity and funding 4. Covered bond programme 5. Green bond framework 6. Looking forward Appendices 44
Slide 45: KBC's covered bond programme
KBC’s covered bond programme Residential mortgage covered bond programme The covered bond programme is considered as an important funding tool for the treasury department. KBC’s intentions are to be a frequent benchmark issuer if markets and funding plan permit. Issuer: • KBC Bank NV • min 105% of c
Slide 46: KBC's covered bond programme: Belgian legal framework
KBC’s covered bond programme Belgian legal framework Direct covered bond issuance from a bank’s balance sheet Dual recourse, including recourse to a special estate with cover assets included in a register National Bank of The special estate is not affected by a bank’s insolvency Belgium Requ
Slide 47: KBC's covered bond programme: Strong legal protection mechanisms
KBC’s covered bond programme Strong legal protection mechanisms 1 Collateral type The value of one asset category must be at least 85% of the nominal amount of covered bonds • KBC Bank selects residential mortgage loans and commits that their value (including collections) will be at least 105% 2
Slide 48: KBC's covered bond programme: Cover pool
KBC’s covered bond programme Cover pool COVER POOL: BELGIAN RESIDENTIAL MORTGAGE LOANS • Exclusively, this is selected as main asset category • Value (including collections) at least 105% of the outstanding covered bonds • Branch originated prime residential mortgages predominantly out of Flanders
Slide 49: Contents
Contents 1. Strategy and business profile 2. Financial performance 3. Solvency, liquidity and funding 4. Covered bond programme 5. Green & Social bond framework 6. Looking forward Appendices 49
Slide 50: KBC Green bond framework
Sustainability KBC Green bond framework Rationale: enhancing the KBC sustainability strategy Aligned with best practices and market developments KBC is convinced that the financial industry has a key role to play in the The KBC Green Bond Framework is in line with the Green Bond Principles trans
Slide 51: Sustainability: Green bonds
Sustainability Green bonds Certification The Climate Bonds Standard Board approved KBC GREEN PORTFOLIO APPROACH the certification of the KBC Green Bonds KBC will ensure the Inclusion of existing and availability of sufficient Green Verification Assets to match Green new Green funding Assets One
Slide 52: KBC Social Bond Framework
Sustainability KBC Social Bond Framework Rationale: enhancing the KBC sustainability strategy Aligned with best practices and market developments KBC is dedicated to increase its positive social impact through its core The KBC Social Bond Framework is aligned with ICMA’s Social Bond activities b
Slide 53: Contents
Contents 1. Strategy and business profile 2. Financial performance 3. Solvency, liquidity and funding 4. Covered bond programme 5. Green & Social bond framework 6. Looking forward Appendices 53
Slide 54: Looking forward
Looking forward In 2Q22, both in Belgium and in the Czech Republic economic growth slowed, but remained positive at +0.2% q-o-q. For the second half of 2022, we expect the war in Ukraine to impact the European economy more severely than its US counterpart. Therefore, an economic stagnation in the
Slide 55: Differently: the next level – financial guidance
Differently: the next level 3-year and long-term financial guidance 3-year financial guidance* CAGR total income (‘21-’24) CAGR OPEX excl. bank taxes (’21-’24) + 7.0% + 3.0% by 2024 by 2024 } ⇒ Jaws of ± 4% (instead of 3% earlier guided) ⇒ C/I ratio excl BT ±46% in 2024 Combined ratio ≤ 92% as of no
Slide 56: Dividend policy & capital distribution as of 2022
Differently: the next level Dividend policy & capital distribution as of 2022 • We aim to be amongst the better capitalised financial institutions in Europe. As a consequence, the dividend policy of KBC Group is tailored to that purpose. Each year, the Board of Directors will decide, at its discreti
Slide 57: Appendices
Appendices 1. Overview of outstanding benchmarks 2. Summary of KBC’s covered bond programme 3. Solvency: details on capital 4. Details on business unit international markets & Ireland 57
Slide 58: Annex 1 - Outstanding benchmarks
Annex 1 - Outstanding benchmarks Overview till end of July 2022 Additional Tier 1 securities: Issuer Currency Isin Code Issued (in mio) Coupon Re-off spread Settlement date Call date Maturity Trigger Level KBC Group EUR BE0002592708 1,000 4.25% M/S+359,4bps 24/04/2018 24/10/2025 Perpetual Temporary
Slide 59: Annex 2 – Key cover pool characteristics
Annex 2 – KBC’s covered bond programme Key cover pool characteristics Investor reports, final terms and prospectus are available on www.kbc.com/covered_bonds Portfolio data as of : 30 June 2022 Total Outstanding Principal Balance 16 546 728 127 Total value of the assets for the over-collateralisatio
Slide 60: Annex 2 – Key cover pool characteristics
Annex 2 – KBC’s covered bond programme Key cover pool characteristics REPAYMENT TYPE (LINEAR VS. ANNUITY) GEOGRAPHICAL ALLOCATION Brussels Hoofdstedelijk gewest Linear 6% Waals Brabant 1% 1% Oost- Vlaanderen 18% Vlaams Brabant West- 18% Vlaanderen 14% Luxemburg Antwerpen Annuity 0% Henegouwen 28% 99
Slide 61: Annex 2 – Key cover pool characteristics
Annex 2 – KBC’s covered bond programme Key cover pool characteristics SEASONING FINAL MATURITY DATE 25 90 Weighted Average 80 20 Seasoning: Weighted Average 70 56 months Remaining Maturity: 60 186 months 15 50 40 10 30 20 5 10 0 0 2018 - 2022 2023 - 2027 2028 - 2032 > 2032 0 - 12 13 - 24 25 - 36 37
Slide 62: Annex 2 - Belgian real estate market
Annex 2 - Belgian real estate market House price dynamics in Belgium seem to slow down The y-o-y house price increase slowed to 6.0% in Q4 2021 and 6.4% in Q1 2022, down from 8.2% in Q3 2021. The overvaluation of Belgian real estate fell to 11% in Q1 2022. 62
Slide 63: Annex 3 - Solvency details
Annex 3 - Solvency details Overview of B3 CET1 ratios at KBC Group Method Numerator Denominator B3 CET1 ratio FICOD*, fully loaded 18,289 118,211 15.5% DC**, fully loaded 16,875 106,105 15.9% DM***, fully loaded 16,110 101,231 15.9% * FICOD: Financial Conglomerate Directive ** DC: Danish Compromise
Slide 64: Annex 4 – Business unit international markets
Annex 4 – Business unit international markets Business profile BELGIUM CZECH GROUP Of which SLOVAKIA HUNGARY BULGARIA REPUBLIC CENTRE IRELAND 2Q22 NET RESULT (in million euros) 564m 237m 28m -6m 30m -41m -2m ALLOCATED CAPITAL (in billion euros) 7.7bn 2.1bn 0.7bn 0.9bn 0.5bn 0.8bn 0.6bn LOANS (in bil
Slide 65: Glossary (1/2)
Glossary (1/2) B3 Basel III CBI Central Bank of Ireland [technical insurance charges, including the internal cost of settling claims / earned premiums] + [operating expenses / written premiums] (after reinsurance in Combined ratio (non-life insurance) each case) Common equity ratio [common equity ti
Slide 66: Contacts / Questions
Contacts / Questions More information • Company website KBC • Quarterly Report • Table of results (Excel) Quarterly Reports • Quarterly presentation • Debt presentation Presentations Upcoming events 12 August 2022 Equity roadshow, London 6 September 2022 Equity roadshow, Scandinavia 7 September 2022