Kbc Group N.v. · EURONEXT:KBC
Kbc — Investor Day (November 2009)
18 slides from Kbc's investor day presentation, November 2009
Slide 1: Reshaping the merchant banking unit
Reshaping the merchant banking unit L. Popelier, CEO Market Activities ! Welcome to the New Normal Business plan for the years ahead KBC KBC Investor Day 2009
Slide 2: Important information for investors
Important information for investors This legend was added on 11DEC09 • As regards any reference to the sale of a minority stake in CSOB in these presentations: • The information contained therein is not for publication or distribution, directly or indirectly, in or into the United States of America.
Slide 3: Speakers' curriculum vitae
Speakers’ curriculum vitae 1988 Various functions in corporate banking, Kredietbank 1995 Associate Director Credit Risk Management, Warburg Dillen Read, London 1996 Director Corporate Finance, Leveraged Finance Group, SBC Warburg 1999 Executive Director Corporate Finance, KBC Securities 2002 General
Slide 4: Strategic review includes major reduction of scope and risk
• Strategic review includes major reduction of scope and risk profile of merchant banking operations • Measures are in place to ensure a timely and orderly exit of non-core activities • Remaining merchant banking activities have strategic fit with home market activities 104
Slide 5: Substantial impact of strategy review on merchant banking business unit
Substantial impact of strategy review on merchant banking business unit Capital allocation to BU Decreasing share BU Merchant Merchant Banking Banking in underlying group result 100% 100% 39% 45% 43% 42% 34% 31% 18% 15% 2006 2007 2008 1H 2009 2006 2007 2008 1H 2009 • Strategic need at group level to
Slide 6: Reduction of scope and risk profile of the merchant banking business unit
Reduction of scope and risk profile of the merchant banking business unit • Objective to exit in an orderly manner lending and investment banking activities that have no clear synergies with Belgium and CEE markets • Investment banking activities, especially KBC Financial Products • International co
Slide 7: Reduction of commercial banking
Reduction of commercial banking • International corporate lending activity outside home markets • Network of corporate branches and corporate banking subsidiaries • Total corporate loan portfolio of ca 30 bn • Will only be maintained for servicing home market customers abroad International corporate
Slide 8: Reduction of commercial banking: orderly and timely exit
Reduction of commercial banking • Orderly and timely exit • Combination of run-off upon maturity (in many cases, KBC is not the lead lender) and sale of parts of the portfolio • Credit rating migration might be a headwind for RWA reduction for 2010, but will become ‘tailwind’ later on • Internationa
Slide 9: Reduction of investment banking
Reduction of investment banking • Structured derivatives business • Structured credit, credit derivatives, fund derivatives, equity derivatives, RUN-OFF Life insurance settlement, US reverse mortgages, alternative investment management • Less liquid positions • Run-off process started 4Q08 • No rema
Slide 10: Run-off of structured derivatives business (details)
Run-off of structured derivatives business (details) • Reverse mortgages • Mainly US retail loans regulated and guaranteed by US government Activity Volume • 0.8bn (excl. 0.9 bn loans sold to FNMA or guaranteed by CNMA and sold to market) Risks • Main risk is operational risk given strict regulation
Slide 11: Run-off of structured derivatives business (details)
Run-off of structured derivatives business (details) • Hedge fund derivatives Activity • Provide leverage to hedge funds via synthetic loans where hedge fund serves as collateral Volume • Down from 7bn to 1 bn (underlying collateral still 2.9bn) Risks • Most remaining funds have illiquid assets as c
Slide 12: Run-off of structured derivatives business (details)
Run-off of structured derivatives business (details) • Structured credit / credit derivatives business Activity • Mainly securitisation of corporate credit risk on synthetic basis Volume • 27.1 bn of CDOs issued, of which 16.4bn hedged, 8.9bn unhedged and 1.7bn sold to clients; 1.6bn ‘Atomium portfo
Slide 13: Run-off of structured derivatives business - governance
Run-off of structured derivatives business - governance • We will not be a forced seller • Restructuring plan includes gradual wind-down over mid-term • Active management of the portfolio in view of value preservation (opportunistic choice for temporary stand still vs. early liquidation, vs. hedging
Slide 14: Strategic fit of the remaining business
Strategic fit of the remaining business • Focus on home market customers • SME • Midcap • Full financial service offering • Commercial banking • Lending, cash management and payments, trade finance, leasing, … • Investment banking • treasury services, equity and debt capital market products, equity
Slide 15: Special topic Ireland
Special topic Ireland • No core activity, but no strategic decision today since a potential exit at acceptable conditions is highly unlikely in the current difficult local economic environment • KBC Ireland profile: • Total assets: 21.2 bn • Loan book: 18 bn of which 13bn mortgage book • Book value:
Slide 16: Special topic European credit investments
Special topic European credit investments • Investments in European RMBS (ca 4 bn, nominal) • Separate from the US RMBS portfolio (‘Atomium’), that is part of the ‘to be discontinued’ business • Obviously, this is a non-core activity but we have an opportunistic approach as to winding down this book
Slide 17: Going forward
Going forward • Business earmarked for run-off and divestment contributed on average some 150m p.a. in the last 5 years • Going forward, the business will be run at a • Cost income ratio of ca. 50% • Low single digit organic growth • Depending on the economic scenario PD rating migration might, on b
Slide 18: Strategic review includes major reduction of scope and risk
• Strategic review includes major reduction of scope and risk profile of merchant banking operations • Measures are in place to ensure a timely and orderly exit of non-core activities • Remaining merchant banking activities have strategic fit with home market activities 118