Kbc Group N.v. · EURONEXT:KBC
Kbc — Debt Investor Presentation (November 2012)
50 slides from Kbc's debt investor presentation, Nov 19, 2012
Slide 1: Inaugural Covered Bond Roadshow
INAUGURAL COVERED BOND ROADSHOW 19 November 2012
Slide 2: Important information for investors
Important information for investors • The information in this document has been prepared by KBC Bank NV (KBC Bank) solely for use at a presentation to be held in connection, inter alia, with a potential offering (the Offering) of Covered Bonds (the Covered Bonds) by KBC Bank. • In the event the Offe
Slide 3: Important information for investors
Important information for investors • This presentation is provided for information purposes only. This presentation does not constitute an offer or invitation to sell, or any solicitation of any offer to subscribe for or purchase any securities, and nothing contained herein shall form the basis of
Slide 4: Executive summary
Executive summary • KBC Bank has strong and diversified financial performance • Strong core banking operations in Belgium and CEE • Highly liquid – a loyal deposit base and low refinancing needs • Conservative risk profile – loan losses in Belgium of only 6 bps • Well capitalised – pro forma CT1 Rat
Slide 5: Contents
Contents Page Number •1 Key highlights of KBC Group/Bank 4 •2 Overview of Belgian housing and mortgage market 16 •3 Review of Belgian covered bond legislation 21 •4 KBC Bank residential mortgage covered bond programme 27 •5 Appendices 34 4
Slide 6: KBC at a glance
KBC at a glance • KBC Group has a successful track record in bancassurance in its domestic market of Belgium and has been expanding to Central & Eastern Europe over the last 10 years • KBC Group has proven to be good at traditional bank-insurance business through the cycle • Integrated bank-insuranc
Slide 7: Group's legal structure
Group’s legal structure Group’s legal structure KBC Group NV 100% 100% KBC Bank NV KBC Insurance NV Issuing Entity of Covered Bonds €1,258m Profit attributable to KBC Profit attributable to KBC Banking and Asset €884m Management¹ Insurance €736m €404m €364m €369m FY10 FY11 9M12 FY10 FY11 9M12 1. Exc
Slide 8: KBC Bank's geographical presence
KBC Bank’s geographical presence BE CZ SK HU BG KBC Bank’s core markets ESTONIA 1 Market share, as of end 2011 In Belgium and CEE-4 RUSSIA Loans and 19% 20% LATVIA 10% 9% deposits 3% LITHUANIA 41% 31% 20% Investment IRELAND 10% NETHERLANDS funds UK POLAND BELGIUM GERMANY CZECH REPSLOVAKIA BE CZ SK H
Slide 9: Underlying earnings capacity remains strong through crisis
Underlying earnings capacity remains strong through crisis Reported net profit 3,430 3,281 1,860 Losses on non-core structured credit 372 13 Excl. exceptional items -2,484 -2,466 Excl. exceptional items and FY06 FY07 FY08 FY09 FY10 FY11 9M12 cyclical effects of credit provisions Underlying net profi
Slide 10: Satisfying FY results in home markets
Satisfying FY results in home markets Underlying net profit Belgium (retail) Underlying net profit CEE 2011 ROAC: 27% 2011 ROAC: 11% Consistent performer Consistent performer 1.4 1.1 1.1 1.1 1.1 1.1 0.6 0.6 0.6 1.0 0.1 0.5 0.1 0.1 0.4 0.1 0.3 0.1 0.2 0.8 0.3 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY05 F
Slide 11: Very low loan losses in Belgian operations
Very low loan losses in Belgian operations 9M12 FY 2011 FY 2010 FY 2009 credit cost credit cost credit cost credit cost Average Peak ratio ratio ratio ratio 1999-2010 1999-2010 Belgium 0.06% 0.10% 0.15% 0.15% 0.16% 0.31% CEE 0.40% 1.59%¹ 1.16% 2.11% 1.05% 2.75% Merchant 1.38%² 1.36%² 1.38%² 1.19% 0.
Slide 12: Strong capital position at KBC Group
Strong capital position at KBC Group Capital position at 9M 2012 Favourable peer group comparison1 16.8% UBS 17.1% 2.0% 19.1% 15.3% 3 14.7% SEB 15.3% 2.3% 17.5% 13.4% CS 12.5% 4.0% 16.5% 2 12.3% KBC 14.7% 2.1% 16.8% DB 10.2% 3.4% 13.6% 10.6% St.Ch 11.6% 1.8% 13.4% 8.5% RBS 11.1% 2.4% 13.4% 7.5% ING
Slide 13: Assessment of state aid position
Assessment of state aid position • First repayment of 500m EUR to the Federal Government in January 2012 at 15% premium • Next reimbursement will be made once common equity target has been decided by the National Bank of Belgium • We are continuing our efforts to ensure that 4.67bn EUR in state aid
Slide 14: Estimated 10.2% fully loaded B3 common equity ratio at end 2013
Estimated 10.2% fully loaded B3 common equity ratio at end 2013 B3 impact at numerator level Amounts in EUR billion 1.9 0.0 13.8 0.3 0.4 10.9 (4.2) (1.2) • Fully loaded B3 common equity Look through Consensus Impact of Reimbursement Penalty on Recuperation of Other Estimated common equity earnings 4
Slide 15: A solid liquidity position driven by a loyal deposit base
A solid liquidity position driven by a loyal deposit base throughout the crisis • KBC Bank continues to have a strong retail/corporate deposit base in its core markets – resulting in a stable funding mix with a significant portion of the funding attracted from core customer segments & markets • LTD
Slide 16: Low refinancing need compared to peers
Low refinancing need compared to peers Breakdown funding maturity buckets senior vs. subordinated & callable vs. 5Y Credit Spreads vs. iTraxx Senior Financial Index non-callable 8,000 7,000 400 KBC 4.500% 03-2017 Amount Maturing (in €m eqv) 6,000 ITRAXX Senior Financial 5 yr 350 5,000 300 4,000 250
Slide 17: Contents
Contents Page Number •1 Key highlights of KBC Group/Bank 4 •2 Overview of Belgian housing and mortgage market 16 •3 Review of Belgian covered bond legislation 21 •4 KBC Bank residential mortgage covered bond programme 27 •5 Appendices 34 16
Slide 18: Belgium outperforms EMU
Belgium outperforms EMU Challenging economic environment: Belgium outperforms • With Europe still addressing the fall-out of the financial crisis, this also affects Belgium, but the country’s economy is demonstrating its habitual resilience1 • 2011 GDP growth was +1.5% and for 2012, Belgian GDP grow
Slide 19: Demand for houses continues to be well supported
Demand for houses continues to be well supported Increasing demand for houses • “A Belgian is born with a brick in his stomach”: Home ownership in Belgium is around 78%1 • Total outstanding mortgage debt is now at EUR 163bn. Total mortgage debt compared to GDP in Belgium is 46% and compares well to
Slide 20: Belgian house prices are affordable
Belgian house prices are affordable Belgian housing market Mortgage market technicals2 • Belgian borrowers predominantly prefer to take out a longer • The average Belgian house is still affordable for the Belgian fixed rate period. A very high 71% is fixed permanently and an borrower and, although p
Slide 21: KBC's disciplined origination leads to lower arrears and loan losses
KBC’s disciplined origination leads to lower arrears and extremely low loan losses Belgium shows a solid performance of mortgages Arrears have been pretty stable over the past 10 years. Arrears in Belgium are low due to: • Cultural aspects, stigma associated with arrears, importance attached to owni
Slide 22: Contents
Contents Page Number •1 Key highlights of KBC Group/Bank 4 •2 Overview of Belgian housing and mortgage market 16 •3 Review of Belgian covered bond legislation 21 •4 KBC Bank residential mortgage covered bond programme 27 •5 Appendices 34 21
Slide 23: Belgian legal framework
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 • The special estate is not affected by a bank insolvency of Belgium • Requires licences from the National
Slide 24: Special estate - dual recourse
Special estate - dual recourse General bank estate Covered bond insolvency regime • Material exception to ordinary rules: Covered Bond • Proceedings only affect the general estate Special estate • The special estate is not affected by the bank’s bankruptcy • The NBB may appoint a Cover Pool Administ
Slide 25: Strong legal protection mechanisms
Strong legal protection mechanisms 1 • The value of one asset category must be at least 85% of the nominal amount of covered bonds Collateral • KBC Bank selects residential mortgage loans and commits that their value (including collections) will be at least 105% 2 • The value of the cover assets mus
Slide 26: External supervision / management
External supervision / management • Provides a general and special authorization • The statutory auditor provides a report on the organisational capacity of the issuer By the • Approves the appointment of the cover pool monitor NBB • Appoints, if circumstances require so, the cover pool administrato
Slide 27: Belgian covered bond legislation in comparison
Belgian covered bond legislation in comparison Belgium Netherlands France Germany UK Segregation of • Issuer holds assets • Cover pool assets • No segregation of • Issuer holds assets on • Cover pool assets sold to Cover Pool on balance sheet and assigned to SPE (which covered pool assets balance sh
Slide 28: Contents
Contents Page Number •1 Key highlights of KBC Group/Bank 4 •2 Overview of Belgian housing and mortgage market 16 •3 Review of Belgian covered bond legislation 21 •4 KBC Bank residential mortgage covered bond programme 27 •5 Appendices 34 27
Slide 29: KBC Bank NV residential mortgage covered bond programme (1/2)
KBC Bank NV residential mortgage covered bond programme (1/2) Issuer: • KBC Bank NV Main asset category: • Residential Mortgage Loans, but excluding RMBS • Pari passu with other unsecured obligations of the Issuer (general bank estate) Status: • Exclusive recourse to the special estate (with some pr
Slide 30: KBC Bank NV residential mortgage covered bond programme (2/2)
KBC Bank NV residential mortgage covered bond programme (2/2) • Failure to pay any amount of principal on the Extended Final Maturity date subject to grace period Events of default: • A default in the payment of an amount of interest on any interest payment date subject to grace period • Moody’s and
Slide 31: Key characteristics of initial cover pool (1/3)
Key characteristics of initial cover pool (1/3) Portfolio as of: 30 September 2012 Total Outstanding Principal Balance 3,620,657,594 Total value of the assets for the over-collateralisation test 3,180,939,394 No. of Loans 32,313 Average Current Loan Balance per Borrower 140,243 Maximum Loan Balance
Slide 32: Key characteristics of initial cover pool (2/3)
Key characteristics of initial cover pool (2/3) Repayment type (linear vs. annuity) Geographical allocation Linear Brussels Hoofdstedelijk PR 0.3% 3.6% gewest 4.9% Waals Brabant 0.8% Oost- Vlaanderen Vlaams 18.4% Brabant West- 18.0% Annuity Vlaanderen 96.1% 15.0% Antwerpen Luxemburg 0.1% Limburg 29.
Slide 33: Key characteristics of initial cover pool (3/3)
Key characteristics of initial cover pool (3/3) Final Maturity date Seasoning 45 40 Weighted Average 60 Weighted Average 35 Seasoning: Remaining Maturity: 24.8 months 50 30 244 months 40 25 % 20 30 % 15 20 10 10 5 0 0 -12 109 - 97 - 108 13 - 24 25 - 36 37 - 48 49 - 60 61 - 72 73 - 84 85 - 96 -2012 2
Slide 34: Key messages
Key messages • KBC Bank has strong and diversified financial performance • Strong core banking operations in Belgium and CEE • Highly liquid – a loyal deposit base and low refinancing needs • Conservative risk profile – loan losses in Belgium of only 6 bps • Well capitalised – pro forma CT1 Ratio of
Slide 35: Contents
Contents Page Number •1 Key highlights of KBC Group/Bank 4 •2 Overview of Belgian housing and mortgage market 16 •3 Review of Belgian covered bond legislation 21 •4 KBC Bank residential mortgage covered bond programme 27 •5 Appendices 34 34
Slide 36: Appendices
Appendices Page Number •1 Initial mortgage selection criteria 35 •2 Underwriting and approval process 37 •3 Credit risk management 39 •4 Additional financial information on KBC 42 •5 Supplementary information on Belgian mortgage market 47 35
Slide 37: Initial mortgage selection criteria
Initial mortgage selection criteria • The Mortgage Loans have all been originated under the Mortgage Credit Act; • The Mortgage Loans and Related Security is governed by Belgian law; • The Mortgage Loans are granted with respect to Real Estate in Belgium; • The Mortgage Loans have all been originate
Slide 38: Appendices
Appendices Page Number •1 Initial mortgage selection criteria 35 •2 Underwriting and approval process 37 •3 Credit risk management 39 •4 Additional financial information on KBC 42 •5 Supplementary information on Belgian mortgage market 47 37
Slide 39: Underwriting and approval process
Underwriting and approval process 4 steps in 1 registration system (“KPD”) in local branches Customer Credit Credit Step 4 Administration Step 1 Step 2 Step 3 Application Analysis Decision Handling Standard Application Form Step 1 i. Information on the project (investment and financing plan, what is
Slide 40: Appendices
Appendices Page Number •1 Initial mortgage selection criteria 35 •2 Underwriting and approval process 37 •3 Credit risk management 39 •4 Additional financial information on KBC 42 •5 Supplementary information on Belgian mortgage market 47 39
Slide 41: Start of credit risk monitoring: automatic processes
Start of credit risk monitoring: automatic processes • Main risk warning signal : detection of arrears in payment • Monthly review of the credit portfolio : start of Monitoring phase if arrears > 5 days • Daily review of the credit portfolio : start of special follow-up phase if arrears = 45 days •
Slide 42: Credit risk management: various phases
Credit risk management: various phases Borrower Debtor The Step 1 Monitoring Special Possible Step 2 Step 3 Step 4 Irrevocable Step Step55 Written off Phase Mention Loss 5 days 45 days 90 days Termination – Legal proceedings Written Off • Arrears < 45 days; local branch is responsible for the • Irre
Slide 43: Appendices
Appendices Page Number •1 Initial mortgage selection criteria 35 •2 Underwriting and approval process 37 •3 Credit risk management 39 •4 Additional financial information on KBC 42 •5 Supplementary information on Belgian mortgage market 47 42
Slide 44: Loan book credit quality
Loan book credit quality Belgian NPL Progression (2010-Q3 2012) Loan Book Overview Belgian NPLs • Customer loan book: 131bn EUR at end 9M12 1.6% 1.6% 1.6% 1.6% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% • 41% residential mortgages • 3% consumer finance • 11% other retail loans • 46% SME/corporate loans • La
Slide 45: Legacy Assets within investment portfolio
Legacy Assets within investment portfolio Outstanding CDO Exposure¹ Outstanding CDO Exposure¹ • CDO exposure largely written down or Outstanding covered by a State guarantee €bn as of 3Q 2012 Notional markdowns Hedged Portfolio 10.1 -0.6 • The total notional amount remained stable over the last quar
Slide 46: Sovereign Bonds within investment portfolio at KBC Bank
Sovereign Bonds within investment portfolio at KBC Bank Sovereign Bonds Overview Geographical Composition International • Notional investment of 34bn EUR in Inst 1% Spain 1% government bonds (excl trading book) at end Italy 1% Austria 0.4% Germany 1% Other 1% 9M12 Ireland 1% Slovakia 4% France 5% •
Slide 47: Liquid asset buffer more than double short term funding needs
Liquid asset buffer more than double short term funding needs Short term unsecured funding KBC Bank vs. Liquid assets as of end September 20121,2 50.3 The liquid asset buffer increased substantially in comparison with the end of June 2012, due to the following factors: • Increasing investments in hi
Slide 48: Appendices
Appendices Page Number •1 Initial mortgage selection criteria 35 •2 Underwriting and approval process 37 •3 Credit risk management 39 •4 Additional financial information on KBC 42 •5 Supplementary information on Belgian mortgage market 47 47
Slide 49: Lending market dominated by banks
Lending market dominated by banks Lending market dominated by banks Market Shares of Belgian Mortgage Market • The four biggest market participants, KBC Specialised Bank NV, Belfius, BNP Paribas Fortis and Insurance Mortgage ING control nearly 70 per cent of the Companies: Companies: mortgage lendin
Slide 50: Contact Details
Contact Details Wim Allegaert Kurt de Baenst General Manager, Investor Relations Investor Relations Manager Email: wim.allegaert@kbc.be Email: kurt.debaenst@kbc.be Work: +32 (0) 2 429 5051 Work: +32 (0) 2 429 3573 49
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