Slide 1: Conference call dial-in numbers
+44 20 7162 0177 Until 26 February +32 2 290 14 11 +44 20 7031 4064 +1 334 420 4905 (code: 855994) 1
Slide 2: Contact information
Contact information Investor Relations Office e-mail: investor.relations@kbc.com Go to www.kbc.com for the latest update 2
Slide 3: Important information for investors
Important information for investors This presentation is provided for informational 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 ther
Slide 4: Content
Content 1 Company profile and strategy 2 2Q 2011 financial highlights 3 2Q 2011 underlying business performance 4 Wrap up Additional data set 5 4
Slide 5: Company profile and strategy
Section 1 Company profile and strategy
Slide 6: Business profile
Business profile Breakdown of allocated capital as of 30 June 2011 per business unit Central and Eastern Europe 27% Retail, SMEs and Private Banking Belgium 26% 31% Merchant Banking (incl. Belgian corporates, Ireland and International activities) 16% Group Centre • KBC is a leading player in Belgium
Slide 7: KBC's geographical presence
KBC’s geographical presence KBC’S CORE MARKETS KBC’s core markets Belgium (Moody’s Aa1) Total assets: 181bn EUR In Belgium and CEE-4 ESTONIA RUSSIA Czech Republic (A1) Total assets: 37bn EUR LATVIA Hungary (Baa3) Total assets: 11bn EUR LITHUANIA Slovakia (A1) Total assets: 6bn EUR IRELAND Bulgaria (
Slide 8: Underlying profit per business unit
Underlying profit per business unit Underlying net profit – Belgium* (retail) Underlying net profit - CEE 1,080 1,050 1,052 469 YTD ROAC: 35% YTD ROAC: 20% 406 161 280 137 238 2Q 101 2Q 2Q 2Q 2Q 2Q FY08 FY09 FY10 1Q11 2Q11 FY08 FY09 FY10 1Q11 2Q11 * Note that Secura has been excluded from 4Q10 onwar
Slide 9: Loan loss experience at KBC
Loan loss experience at KBC 1H 2011 FY 2010 FY 2009 Average Peak credit cost ratio credit cost ratio credit cost ratio ‘99 –’10 ‘99 –’10 Belgium 0.10% 0.15% 0.15% 0.16% 0.31% CEE 0.53% 1.22% 1.70% 1.05% 2.75% Merchant 0.58% 1.38%* 1.19% 0.55% 1.38%* Group Centre -0.25% 1.03% 2.15% Total 0.32%** 0.91
Slide 10: 2010-2013 Business Plan
2010-2013 Business Plan • Generate capital by leveraging our successful business model in 1. Leverage core markets (retained earnings) Earnings Power • Free up capital by: • Reducing international lending & capital market activities 2. Shrink RWA • Divesting European Private Banking, complementary c
Slide 11: Key strengths
Key strengths • Well-developed bancassurance strategy and strong cross-selling capabilities • Strong franchise in Belgium with high and stable return levels • Exposure/access to growth in ‘new Europe’, with mitigated risk profile (most mature markets in the region) • Successful underlying earnings t
Slide 12: Stable shareholder structure
Stable shareholder structure • Over 50% of KBC shares are owned Other Core KBC Group (Treasury shares) by a syndicate of core shareholders, 11% 5% providing continuity to pursue long- MRBB term strategic goals. Committed 13% shareholders include the Cera / KBC 41% FREE FLOAT Ancora Group (co-operati
Slide 13: Analysts' coverage
Analysts’ coverage Bank/broker Analyst Contact details Rating Target price Upside ABN Amro Robin van den Broeck robin.van.den.broeck@nl.abnamro.com + 35 62% Autonomous Britta Schmidt bschmidt@autonomous-research.com - 32 48% Barclays Capital Kiri Vijayarajah kiri.vijayarajah@barcap.com + 41 90% BOFA
Slide 14: 2Q 2011 Financial highlights
Section 2 2Q 2011 Financial highlights
Slide 15: Solid earnings power
Solid earnings power Reported net profit 821 724 528 545 442 302 304 333 149 Exceptional items 556 86 100 163 -3,600 -107 -103 -101 -195 -405 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Excluding exceptional items -4,065 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Underlying net profit 6
Slide 16: Financial highlights 2Q 2011
Financial highlights 2Q 2011 • Continued high underlying net group profit even after the impact of Greek sovereign bond impairment • Sustained level of net interest income • Slight decrease in net fee and commission income, in line with the trend in assets under management given the reduced investor
Slide 17: Looking forward
Looking forward Jan Vanhevel, Group CEO: • ‘We continued to make good progress regarding the execution of our strategic plan: • During 1Q11, we announced the sale of Centea to Landbouwkrediet. This deal, which was closed on 1 July 2011, will free up around 0.4bn EUR of capital for KBC, primarily by
Slide 18: 2Q 2011 underlying business performance
Section 3 2Q 2011 underlying business performance
Slide 19: Revenue trend - Group (net interest income)
Revenue trend - Group NII 1,459 NIM 2.07% 1.98% 1.94% 1.92% 1.93% 1.86% 1.87% 1,410 1,406 1.80% 1.78% 1.82% 1,391 1,394 1,390 1,374 1,353 1,344 1,344 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2009 2009 2009 2009 2010 2010 2010 2010
Slide 20: Revenue trend - Group (fees and commissions)
Revenue trend - Group F&C AUM 450 454 211 209 212 209 429 417 201 200 206 205 205 203 391 400 399 394 367 328 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 Amounts in bn EUR • Net fee an
Slide 21: Revenue trend - Group (insurance premiums)
Revenue trend - Group Premium income FV gains 1,308 335 1,256 1,249 321 320 1,122 1,169 1,146 1,151 1,141 1,075 264 975 259 231 147 124 102 52 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2009 2009 2009 2009 2010 2010 2010 2010 2011 20
Slide 22: Revenue trend - Group (AFS gains, dividends)
Revenue trend - Group Gains 106 realised on AFS Dividend income 47 95 36 37 28 51 53 41 41 42 18 24 28 12 12 9 8 8 6 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 • Gains realised on AFS
Slide 23: Opex and asset impairment - Group
Opex and asset impairment - Group Operating expenses Asset impairment 1,311 666 1,235 1,231 560 1,224 1,214 1,227 510 1,196 1,158 1,150 1,155 367 356 361 319 333 298 139 105 194 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2009 2009 20
Slide 24: Loan loss provisions
Loan loss provisions • Credit cost ratio fell to 0.32% YTD (compared to 0.91% in 2010 and 1.11% in 2009) thanks to several impairment releases in 1Q11. Excluding these releases, the credit cost ratio is still at a low 0.41%. NPL ratio amounted to 4.3% • Credit cost in Belgium remained at a low level
Slide 25: NPL ratio at Group level
NPL ratio at Group level NPL ratio at Group level 4.2% 4.3% 4.0% 4.1% 3.6% 3.7% 3.3% 3.4% 2.8% 2.5% 1.8% 1.5% 1.4% 1.5% 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 2Q 2011 Non-Performing High risk Restructured Loans (>90 days (probability of loans (probability overdue) defa
Slide 26: NPL ratios per business unit
NPL ratios per business unit BELGIUM BU non performing loans CEE BU New BU reporting as of 2010 (pro forma 2009 figures) 5,6% 5,6% 5,7% 5,2% 5,3% 4,6% 4,0% 4,1% 3,1% 2,4% 1.5% 1.5% 1.5% 1.5% 1.6% 1.5% 1.5% 1.5% 1.6% 1.5% 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 1Q 09 2Q 09 3Q 09 4
Slide 27: Belgium Business Unit
Belgium Business Unit Underlying net profit 298 Volume trend 276 271 268 279 280 255 Total Of which Customer AuM Life 234 238 220 loans ** mortgages deposits reserves Volume 53bn 28bn 71bn 144bn 22bn Growth q/q* +2% +2% +3% -1% +1% Growth y/y +4% +7% +6% -4% +4% * Non-annualised ** Loans to customer
Slide 28: Belgium Business Unit (2)
Belgium Business Unit (2) NII NIM 581 1.60% 1.62% 577 1.56% 1.54% 567 1.50% 1.49% 563 562 1.43% 1.44% 1.42% 1.42% 550 553 544 522 516 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 • Net
Slide 29: Credit margins in Belgium
Credit margins in Belgium Product spread on customer loans book, outstanding 1.2% Customer loans 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Product spread on new production 1.4 1.2% 1.0% SME loans 0.8% Mortgage loans 0.6% 0.4% 0.2% 1Q08 2Q08 3
Slide 30: Belgium Business Unit (3)
Belgium Business Unit (3) F&C AUM 200 207 201 148 147 146 150 149 152 148 193 186 143 145 144 170 178 165 160 128 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 Amounts in bn EUR • Net fe
Slide 31: Belgium Business Unit (4)
Belgium Business Unit (4) Operating expenses 488 Asset impairment 74 446 433 432 429 418 417 45 414 407 39 394 35 29 27 18 19 15 10 29 3 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 Imp
Slide 32: CEE Business Unit
CEE Business Unit Underlying net profit 137 Volume trend 131 110 112 Total Of which Customer AUM Life 101 loans ** mortgages deposits reserves 77 58 Volume 33bn 15bn 42bn 12bn 2bn 53 39 Growth q/q* -1% +1% +0% 0% +2% Growth y/y +1% +4% +0% -3% +14% * Non-annualised -13 ** Loans to customers, excludi
Slide 33: CEE Business Unit (2)
CEE Business Unit (2) Organic growth (*) Total loans Mortgages Deposits q/q y/y q/q y/y q/q y/y CZ -2% +5% +2% +9% 0% +1% SK +6% +13% +6% +22% 0% -8% HU -2% -9% -2% -6% 0% -2% PL -2% -3% 0% 0% -2% +2% BU -1% -6% -2% -5% +1% -7% TOTAL -1% +1% +1% +4% 0% 0% • The total loan book fell by 1.5% q-o-q, bu
Slide 34: CEE Business Unit (3)
CEE Business Unit (3) NII NIM 487 3.21% 3.32% 3.18% 3.19% 3.18% 3.17% 3.18% 2.94% 2.91% 3.03% 470 473 467 454 447 440 419 398 399 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 • Net inte
Slide 35: CEE Business Unit (4)
CEE Business Unit (4) F&C AUM 79 81 13.4 13.2 76 76 77 12.4 12.4 12.6 12.7 12.3 12.2 71 72 11.6 64 67 10.8 60 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 Amounts in bn EUR • Net fee an
Slide 36: CEE Business Unit (5)
CEE Business Unit (5) Operating expenses 437 Asset impairment 425 218 402 404 392 156 143 133 133 111 117 112 365 362 357 93 347 347 53 50 59 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2009 2009 2009 2009 2010 2010 2010 2010 2011 201
Slide 37: Merchant Banking Business Unit
Merchant Banking Business Unit Underlying net profit Volume trend 51 94 58 53 77 Total Customer 105 103 126 14 74 90 17 24 44 45 48 loans deposits -19 -5 -52 Volume 42bn 56bn Commercial Banking -273 Growth q/q* 0% -7% Market Activities Growth y/y* -8% -9% *non-annualised 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2
Slide 38: Merchant Banking Business Unit (2)
Merchant Banking Business Unit (2) RWA banking NII (Commercial Banking) (Commercial Banking) 219 232 214 213 193 202 202 189 180 167 45 42 42 40 38 37 34 33 32 31 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2009 2009 2009 2009 2010 20
Slide 39: Merchant Banking Business Unit (3)
Merchant Banking Business Unit (3) F&C 63 FV gains (Market Activities) 217 196 203 55 57 56 54 52 53 176 178 51 45 45 151 112 67 67 -39 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 • Ne
Slide 40: Merchant Banking Business Unit (4)
Merchant Banking Business Unit (4) Operating expenses Asset impairment 175 355 157 330 152 143 144 140 137 142 142 131 256 219 126 130 112 102 91 5 57 107 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2009 2009 2009 2009 2010 2010 2010
Slide 41: Update on Ireland (1)
Update on Ireland (1) • Business conditions continue to be very difficult Irish loan book – key figures June 2011 Loan portfolio Outstanding NPL NPL coverage • Austerity measures impact consumer incomes and Owner occupied mortgages 9.7bn 8.8% 27% business confidence as a further budget adjustment of
Slide 42: Update on Ireland (2)
Update on Ireland (2) • Considering the gradual trend deterioration in the portfolio during 2Q11 and July, we anticipate a higher quarterly run-rate of loan loss provisions going forward • The current depressed environment in Ireland leads to a further deterioration in the portfolios: • The economy
Slide 43: Group Centre
Group Centre Underlying net profit 158 99 90 77 70 23 16 11 -13 -9 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 • Besides the existing activities of the holding and shared-services companies at ‘Group Centre’, all upcoming divestments were shifted to ‘Group Centre’
Slide 44: Group Centre (2)
Group Centre (2) Breakdown of underlying net group profit 2Q11 Group item (ongoing business) -5 Planned divestments 95 - Centea 16 - Fidea 10 - 40% minority stake in CSOB Bank CZ 40(*) - Absolut Bank 14 - ‘old’ Merchant Banking activities 15 - KBL EPB 11 - Other -11 TOTAL underlying net group profit
Slide 45: Wrap up
Section 4 Wrap up 45
Slide 46: Financial highlights 2Q 2011
Financial highlights 2Q 2011 • Continued high underlying net group profit even after the impact of Greek sovereign bond impairment • Sustained level of net interest income • Slight decrease in net fee and commission income, in line with the trend in assets under management given the reduced investor
Slide 47: Additional data set
Section 5 Additional data set
Slide 48: Proposed swap
Proposed swap In its application to the European Commission dated 12July 2011, KBC proposed to replace 2010 Profit (100%) 500 75 • The IPO of a minority stake of CSOB Bank (Czech Republic) and 40% of 2010 profit 200 30 • The IPO of a minority stake of K&H Bank (Hungary) plus • The sale & lease back
Slide 49: Rationale of the swap: regulatory factors
Rationale of the swap: regulatory factors The introduction of the Hungarian banking tax in 2010, expected to remain in place after 2012 • Very detrimental impact on the net profit of K&H Bank in Hungary Basel III impact on minority interests… • Only the minority share in line with the minimum requir
Slide 50: Rationale of the swap: financial factors
Rationale of the swap: financial factors A small market share in a fragmented and consolidating Polish banking sector (4%), versus a large market share (23%) with a strong franchise and earnings power in the Czech Republic . Earnings power enhanced by keeping totality of CSOB Bank CZ. 250 200 150 10
Slide 51: The Future
The Future KBC will be a stable KBC will build on KBC is resuming the KBC is reshaping the and high-performing sustainable convergence play in ‘other’ activities European regional foundations in Central and Eastern player with a more Belgium Europe KBC is divesting private focused range of banking o
Slide 52: Potential capital impact of the swap
Potential capital impact of the swap SWAP (all amounts in EUR, 2013, Basel III) Part of the initial restructuring plan Part of the proposed restructuring plan IPO minority stake of CSOB Bank 1.2-2.2bn CZ post-B3 Total capital relief from divestment (Kredyt Bank and Warta) + increase 1.8-2.4n IPO min
Slide 53: Upcoming mid-term funding maturities in 2011
Upcoming mid-term funding maturities in 2011 Breakdown funding maturity buckets Senior vs. subordinated & callable vs. non-callable Amount maturing (in € 6.000 mio eqv) 5.000 4.000 3.000 2.000 1.000 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 >= 2020 Maturity Senior funding non callable Senior fu
Slide 54: Overview of LT EMTN funding attracted in 2011
Overview of LT EMTN funding attracted in 2011 • KBC Bank NV (mainly through KBC Ifima NV, using its EMTN program (40bn EUR)) has already raised 3.9bn EUR LT in 2011 (by the end of July). This debt programme was updated on 13 July 2011 • KBC Bank NV also has a US MTN program (10bn USD) available for
Slide 55: Effects of Greek assistance programme
Effects of Greek assistance programme • With regard to the Greek sovereign bonds that mature before the end of 2020, KBC decided to record 139m EUR pre-tax impairments (102m post-tax) at underlying level • Calculation method: As required by IAS 39, the AFS bonds are impaired to their fair value (m
Slide 56: Exposure to PIIGS
Exposure to PIIGS Breakdown of government bond portfolio, banking and insurance, at the end of 2Q11 (bn EUR) Banking Insurance Total Portugal 0.1 0.2 0.3 Ireland 0.3 0.1 0.4 Italy 5.3 0.8 6.1 Greece 0.3 0.2 0.5 Spain 1.5 0.7 2.2 TOTAL 7.6 1.9 9.6 56
Slide 57: Hungary (1)
Hungary (1) Should be profitable in 2011 • K&H Group realised an underlying net profit of 24m EUR in 1H11, despite the recognition of the Hungarian bank tax for the full year in 1Q11. The bank tax for 2011 amounted to 62m EUR before tax / 51m post-tax Economic scenario • Economic recovery is mainly
Slide 58: Hungary (2)
Hungary (2) • 2Q11 loan loss provisions amounted to 18m EUR (46m EUR in 1H11) • NPL rose to 9.1% in 2Q11 (9.0% in 1Q11), situated mainly in retail lending • Main driver for 2.3bn EUR FX mortgage portfolio is the CHF/HUF movement. A permanent 230-240 CHF/HUF rate over the quarter would, at worst and
Slide 59: Hungary (3)
Hungary (3) Hungarian loan book – key figures June 2011 Loan portfolio Outstanding NPL NPL coverage SME/Corporate 2.8bn 7.6% 64% Retail 3.6bn 10.3% 72% o/w private 3.1bn 10.2% 71% o/w companies 0.5bn 10.9% 75% 6.4bn 9.1% 69% Proportion of NPLs 13.5% 14 12.6% 12.8% 12.8% 11.6% 11.9% 12.0% 11.2% 12 10
Slide 60: Update on outstanding CDO exposure at KBC (end 2Q11)
Update on outstanding* CDO exposure at KBC (end 2Q11) Outstanding CDO exposure (bn EUR) Notional Outstanding • The total notional amount decreased by roughly 2.2bn markdowns EUR, mainly as a result of the Chiswell CDO reaching - Hedged portfolio 13.0 -0.9 maturity and the sale of the Avebury CDO - U
Slide 61: Maturity schedule for CDO portfolio
Maturity schedule for CDO portfolio Maturity schedule CDOs issued by KBC Financial Products Jun’11 Notional 25.000 (m EUR) 22.500 20.000 17.500 15.000 12.500 10.000 7.500 5.000 2.500 0 Equity/Cash Reserve All Notes issued KBC SSS MBIA SSS The total FP CDO exposure includes the ‘unhedged’ own investm
Slide 62: Summary of government transactions (1)
Summary of government transactions (1) • State guarantee on 16.0bn* euros’ worth of Potential P&L Potential capital CDO-linked instruments 16.0bn - 100% impact for KBC impact for KBC Scope 1st tranche 100% 100% o CDO investments that were not yet written 13.7bn - 85% 2.4bn down to zero (3.0bn EUR)
Slide 63: Summary of government transactions (2)
Summary of government transactions (2) 7bn EUR worth of core capital securities subscribed by the Belgian Federal and Flemish Regional Governments Belgian State Flemish Region Amount 3.5bn 3.5bn Instrument Perpetual fully paid up new class of non-transferable securities qualifying as core capital Ra