Kbc Group N.v. · EURONEXT:KBC
Kbc — Morgan Stanley Investor Conference 2011
34 slides from Kbc's conference presentation, March 2011
Slide 1: Delivering Sustainable Risk-Adjusted Growth
Delivering Sustainable Risk-Adjusted Growth Morgan Stanley Investor Conference, March 2011 +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 FY 2010 financial highlights 3 Asset Quality 4 Solvency and Liquidity Wrap up 5 6 Additional data set 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 31 December 2010 per business unit Central and Eastern Europe 25% Retail, SMEs and Private Banking Belgium 24% 34% Merchant Banking (incl. Belgian corporates, Ireland and International activities) 17% Group Centre • KBC is a leading player in Bel
Slide 7: KBC's geographical presence
KBC’s geographical presence KBC’S CORE MARKETS Belgium (Moody’s Aa1) Total assets: 180bn EUR Czech Republic (A1) Total assets: 36bn EUR Hungary (Baa1) Total assets: 12bn EUR Poland (A2) Total assets: 12bn EUR Slovakia (A1) Total assets: 6bn EUR Bulgaria (Baa3) Total assets: 1bn EUR Real GDP growth o
Slide 8: Market shares of KBC in core markets
Market shares of KBC in core markets Market shares, as of end-2010** Czech Belgium Republic Slovakia Hungary Poland Bulgaria (Inhabitants) (10 million) (10 million) (5 million) (10 million) (39 million) (8 million) Loans and deposits 21% 23%* 10% 9% 4% 3% Investment funds 39% 32% 11%
Slide 9: A successful core strategy
A successful core strategy • Strategic review November 2009 • Core earnings power in Belgium and CEE largely intact • Our business model generates consistently high returns in core geographies (cyclical loan provision charge of 1.7% was the main swing factor in CEE in 2009) Return on allocated capit
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: FY 2010 Financial highlights
Section 2 FY 2010 Financial highlights
Slide 13: FY 2010 Group profit
FY 2010 Group profit Net reported profit 3,430 3,281 • 1.9bn EUR net reported profit, a clear 1,860 break from the results of the previous 2 years -2,484 -2,466 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 • 1.7bn EUR net underlying profit, in line with 2009 Excluding • Good revenue generation (both NII
Slide 14: Solid core earnings power
Solid core earnings power Reported net profit Amounts in EUR million 3,430 3,281 1,860 -2,484 -2,466 FY06 FY07 FY08 FY09 FY10 Excl. exceptional items and cyclical effects of Excl. exceptional items credit provisions Underlying net profit Underlying gross operating income (pre- impairments) 4,317 4,2
Slide 15: Revenue keeping up well based on healthy margin environment
Revenue keeping up well based on healthy margin environment • Net interest income from lending and deposit-taking rose 2% in 2010 on account of healthy credit spreads and shift to higher-margin deposit products. The NIM increased 8bps y-o-y to 1.92%, partly thanks to some technical items • Loan volu
Slide 16: Continued tight cost control, loan loss provisions significantly lower
Continued tight cost control, loan loss provisions significantly lower • Even after the 13% y-o-y reduction in operating expenses realised in 2009, operating costs remained very well under control (-1% y-o-y in 2010), reflecting strong cost management, despite the Belgian and Hungarian bank tax. We
Slide 17: Loan loss experience at KBC
Loan loss experience at KBC FY 2010 FY 2009 Average Peak credit cost ratio credit cost ratio ‘99 –’10 ‘99 –’10 Belgium 0.15% 0.15% 0.16% 0.31% CEE 1.22% 1.70% 1.05% 2.75% Merchant 1.38%* 1.19% 0.55% 1.38%* Group Centre 1.03% 2.15% Total 0.91% 1.11% 0.45% 1.11% Credit cost ratio: amount of losses inc
Slide 18: Highlights underlying full year 2010 results
Highlights underlying full year 2010 results • Net underlying profit of 1.7bn EUR • Rising net interest income thanks to a higher net interest margin (1.92% in 2010 vs 1.84% in 2009) • Increased sales of unit-linked products, offset by lower sales of ‘guaranteed interest’ products; combined ratio st
Slide 19: Asset Quality
Section 3 6 Asset Quality
Slide 20: Credit quality
Credit quality Total Assets Tangible & intangible fixed assets • Customer loan book: 151bn EUR at end 2010 • 41% residential mortgages • 3% consumer finance • 12% other retail loans 1. Credit quality (esp. in CEE) • 44% SME/corporate loans • Largely sold through own branches Loan book • Total NPL at
Slide 21: Focus on NPL trends in Ireland
Focus on NPL trends in Ireland 302m EUR loan impairments charged in 4Q10 (525m Loan portfolio Irish loan book – key figures December 2010 Outstanding NPL NPL coverage EUR in FY10) Owner occupied mortgages 9.8bn 7.4% 29% NPL rose to 10.3% in 4Q10 (9.0% in 3Q10), reflecting Buy to let mortgages 3.
Slide 22: Trading activities
Trading activities Net (un)realised gains from FIFV within the subdivision ‘Market Activities’, ‘05-’10 Total Assets (on a pro forma basis) Tangible & intangible fixed assets 10.8% 9.8% 8.3% 7.4% 6.7% 1. Credit quality 5.9% (esp. in CEE) Loan book (loans & advances to customers) 2005 2006 2007 2008
Slide 23: Investment portfolio
Investment portfolio Total Assets Tangible & intangible fixed assets CDO exposure (bn EUR) Notional Outstanding markdowns - Hedged portfolio 14.9 -1.2 - Unhedged portfolio 7.7 -4.8 TOTAL 22.5 -6.0* Amounts in bn EUR Total 1. Credit quality Loan book Value adjustments (since start crisis) -6.0 “Effec
Slide 24: Investment portfolio (cont'd)
Investment portfolio (cont’d) Total Assets Tangible & intangible fixed assets • Around 60bn investment in government bonds (excl trading book), primarily as a result of significant excess liquidity position and the reinvestment of insurance reserves into fixed income instruments End 2010 1. Credit q
Slide 25: Solvency and Liquidity
Section 4 Solvency and Liquidity
Slide 26: Solvency and liquidity position
Solvency and liquidity position Total Liabilities & Equity With core tier-1 ratio of 10.5% at KBC Shareholders’ equity Bank (excl. KBL EPB) and 10.9% at KBC Capital Group, KBC is well positioned to pursue adequacy organic growth With loan-to-deposit ratio at 81%, limited needs for refinancing in
Slide 27: Overview total (Core) tier-1 composition
Overview total (Core) tier-1 composition KBC Bank KBC Group Total tier I capital: 13,809 (12.4%) Total tier-1 capital: 16,656m EUR (12.6%) Hybrid capital Hybrid capital 2,103 2,287m Capital funded by State Securities Yield Enhanced 7,000m Securities 5,500 Capital guarantee Capital guarantee 446m 354
Slide 28: Basel III impact for KBC Group (1)
Basel III impact for KBC Group (1) “Basel III” pro forma common equity ratio is estimated at roughly 8.0% at end 2013 10.4% 9.2% 8.0% 7.2% 4.9% 4.3% 5.2% 2008 2009 9M10 2013e Core tier-1 ratio including State capital Common equity ratio Core tier-1 ratio excluding State capital 28
Slide 29: Liabilities funding mix: stable & retail-based
Liabilities funding mix: stable & retail-based 3% 100% 7% 14% 7% 7% 8% 5%7% 9% 10% 5% 5% 8% 8% 8% 8% 7% 8% 13% 7% 8% 7% 7% 21% 20% 19% 20% 19% 47% 45% 46% 45% 49% -3% -4% FY06 FY07 FY08 FY09 FY10 Net unsecured interbank funding Certificates of deposit Net secured funding Funding from corporates Debt
Slide 30: Short term funding needs fully covered by central bank eligible collateral
Short term funding needs fully covered by central bank eligible collateral ST funding versus available Collateral for KBC Bank 80 400% 361% 70 350% 327% 60 306% 300% 300% 50 250% 250% … and healthy LTD ratios Billions 40 200% 174% 30 150% LTD ratio 20 100% 90.0% 87.7% 81.0% 10 50% 0 0% Dec-08 Dec-09
Slide 31: Wrap-up
Section 5 Wrap-up
Slide 32: Wrap up
Wrap up • Well-developed bancassurance strategy and strong cross-selling capabilities. 75%-80% of revenue is generated in markets with leading market share • Strong franchise in Belgium with high and stable return levels (ROAC of 37%) • Access to growth in ‘new Europe’, with mitigated risk profile g
Slide 33: Additional Data-set
Section 6 Additional Data-set
Slide 34: 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 - 27 -11% Autonomous Britta Schmidt bschmidt@autonomous-research.com - 27 -11% Barclays Capital Kiri Vijayarajah kiri.vijayarajah@barcap.com + 41 36% BO