Kbc Group N.v. · EURONEXT:KBC
Kbc — Merrill Lynch Banking & Insurance Conference, October 2006
26 slides from Kbc's conference presentation, October 2006
Slide 1: KBC Group: Risk, Return & Growth - Getting the Balance right
KBC Group “Risk, Return & Growth - Getting the Balance right” Merrill Lynch Banking & Insurance Conference, October 2006
Slide 2: Important information for investors
Important information for investors n 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. n KBC believes that this presentation is reliable, although the information is condensed and t
Slide 3: Introduction: strategy framework
Introduction: strategy framework REMINDER KBC’s strategy framework include: n Focused business scope: • Retail-, bancassurance- and wealth-management-oriented • Geographical focus on Belgium, CEE and selected Western European markets (mostly Belgium’s neighbours) n Standalone basis n Conservative ma
Slide 4: Introduction (2): business mix
Introduction (2): business mix REMINDER Gross income breakdown (1H 2006) * Belgium: 22% CEE-4: - retail bancassurance - retail bancassurance - asset management 40% - asset management - private banking - private banking - commercial banking - commercial banking (mostly SME) (mostly SME) 29% 9% Privat
Slide 5: Introduction (3): business developments
Introduction (3): business developments Over the past 12 months, we have been carrying out what we promised: n Optimisation of Group structure: • Divestiture of non-core assets (Gevaert-related assets, insurance in Ireland, private banking in Spain) for an amount of ca. 1.4 bn • Further simplificati
Slide 6: Introduction (4): financial track record
Introduction (4): financial track record Return on equity Net profit In m EUR 25% 2 249 18% 1 615 1 725 12% 14% 1 305 FY03* FY04* FY05 1H06 FY03* FY04* FY05 1H06 n Over the last few years, financial performance improved significantly n FY06 profit is expected to outgrow 3.2 bn euros n KBC will updat
Slide 7: 1st dimension: Growth
1st dimension: “Growth” 1H2006 Total Of which Customer AUM Life loans mortgages deposits reserves Outstanding (bn) 119 37 179 208 20 Growth, y/y +12% +22% +8% +19% +33% Belgium +9% +15% +3% +21% +34% CEE +17% +36% +16% +32% +27% Merchant banking +16% - +20% - - Private banking - - - +20% +34% Growth
Slide 8: Growth (2): case study - Belgium
Growth (2): case study - Belgium KBC, Belgium, Total Mort- Customer AUM Life % y/y loans gages deposits reserves Growth, 1H06 +9% +15% +3% +21% +34% Growth, 2005 +8% +16% +4% +31% +38% Growth, 2004 +5% +9% +10% +20% +28% n The Belgian market has experienced consistent “high” growth (with an ongoing
Slide 9: Growth (3): case study - Belgium
Growth (3): case study - Belgium Belgium Number of branches in 2005 Total North South Brussels KBC 946 80% 10% Sector 4 564 60% 30% e.g. Fortis 1 109 - - Dexia 1 054 - - ING 804 - - Source: Annual reports n In contrast to its main competitors, KBC is mainly present in the Northern region of Belgium:
Slide 10: Growth (4): close-up of Belgium
Growth (4): close-up of Belgium KBC, retail funds, market share, Belgium Breakdown of KBC’s retail funds, Belgium 30 June 2006 Unit-linked products, Equity funds, 33% Funds of 4% 31% 32% 11% 30% 31% funds, 18% 29% Capital- Fixed- guaranteed income & 2001 2002 2003 2004 2005 1Q06 funds, 40% balanced
Slide 11: Growth (5): close-up of Belgium
Growth (5): close-up of Belgium KBC, insurance distribution channels KBC, insurance, sales volume and market share Market share (LH-scale) Tied agents Independent brokers Bank branches 20% Sales volume (m EUR) (RH-scale) 9 000 21% 8 000 15% 7 000 6 000 5 000 10% 4 000 3 000 5% 2 000 10% 1 000 0% 0 6
Slide 12: 2nd dimension: Risk
2nd dimension: “Risk” Normalised cost of risk Portfolio quality: (relative to gross outstanding loans) share of high risk loans in portfolio 0.36% 0.32% 0.33% 0.25% 20.8% 0.20% 18.3% 18.8% 17.0% 14.1% 14.7% 14.5% 14.3% 0.08% 0.01% Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Mar-06 Jun-06 2000 * 2001 2
Slide 13: Risk (2): focus on FX mortgages in CEE
Risk (2): focus on FX mortgages in CEE CEE exchange rates (Jan 2004=100%) FY 05 6M 06 in millions of EUR apprec iation 125% Czech Rep. non-existent 120% 115% Hungary 420 495 110% Poland 310 380 105% I 100% CEE Total 95% 730 875 90% deprec iation 85% % of total 20% 22% 80% mortgages, CEE 75% Jan-04 A
Slide 14: Risk (3): market risk
Risk (3): market risk Banking book (simplified): Trading book: n The entire loan book is hedged n The trading activities focus on (no interest-rate risk). However, currency and fixed-income the surplus of bank deposits to products (predominantly client- loans is invested in treasury driven), on the
Slide 15: Risk (4): insurance risk (life)
Risk (4): insurance risk (life) n The cross-selling of insurance products (life/non-life) is one of the key features in enhancing return levels in our home markets n We have ca. 20 bn life reserves on the balance sheet, the bulk of which are investments-oriented, typically collected as lump-sum amou
Slide 16: Risk (5): insurance risk (non-life)
Risk (5): insurance risk (non-life) n We underwrite ca. 1.7 bn non-life premiums per year (2005 figure) and we believe our underwriting policy has been consistently conservative: • Our non-life franchise is predominantly a “private persons’” business (low level of corporate risk), with car- and fire
Slide 17: 3rd dimension: Return
3rd dimension: “Return” Belgium CEE Return on allocated capital Return on allocated capital 2005 avg 2005 avg 62% 49% 40% 36% 40% 31% 38% 35% 33% 28% 26% 27% 3M05 6M05 9M05 12M05 3M06 6M06 3M05 6M05 9M05 12M05 3M06 6M06 Merchant banking Private banking Return on allocated capital Return on allocated
Slide 18: Return (2): case study - Belgium
Return (2): case study - Belgium KBC, Belgium, NIM and gross revenue margin (vs. RWA)* 10% NIM Gross margin to RWA 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 2001 2002 2003 2004 2005 1H06 n Belgium is considered to be a low-return market because of, among other things, recent competitive pressure in the mortgage
Slide 19: The end: Risk, Return & Growth - Getting the Balance right
The end “Risk, Return & Growth - Getting the Balance right” n We believe that we can offer you an attractive “balance”: • Interesting growth potential in Belgium and CEE, boosted by a “winning” bancassurance business model • Modest risk profile (e.g., moderated “emerging market risk”) • Solid return
Slide 20: Additional information
Additional information
Slide 21: KBC at a glance
KBC at a glance COMPANY PROFILE SHAREHOLDER PROPOSITION n Top-20 financial player in Europe n Attractive franchises: with a 30bn-euro market cap • Interesting growth potential: n Active in banking, wealth CEE and (surprise?) Belgium management and insurance, with • Winning bancassurance model a stro
Slide 22: Strategic planning 2006-07
Strategic planning 2006-07 Management objective Examples Magagement Additional (long-term) attention capital Strengthening CEE franchise: - Buyout of third parties - e.g., 40% of K&H (Hungary), 7% of CSOB (CR) - Acquisitions - e.g., Poland, Romania, Bulgaria, etc. llm llm - Accelerated organic - e.g
Slide 23: Financial performance - quick scan
Financial performance - quick scan + Gross income * (in m) Risk-weighted assets (in bn) 123.3 2 574 120.7 2 264 2 332 2 128 2 003 117.6 2 0011 916 1 979 114.0 1 734 1 974 111.7 107.6 107.6 105.1 105.3105.8 Net profit (in m) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun 2004 2
Slide 24: Current valuation
Current valuation Key figures: Valuation relative to peer group n Share price: 84.1 euros n Book value: 42.9 euros weighted unweighted n Daily traded volume 8M06 : 54m euro P/E 2007 P/E 2007 CEE banks 3 14.6 14.7 Analyst estimates:1 n 2006 EPS consensus: 9.25 euros (+48%)² CEE-exposed 12.3 11.5 n 20
Slide 25: Analysts' opinions
Analysts’ opinions Situation as at 18 Sept 06 Broker Name analyst Tel Rating Target price Ron Heydenrijk +44 20 7678 0442 Buy 110 Ivan Lathouders +32 2 287 91 76 Buy 95 Jaap Meijer +31 20 573 06 66 Outperform 102 Kiri Vijayarajah +44-20-7986-4258 Buy 98 Ivan Vatchkov +44 20 7888 0873 Outperform 101
Slide 26: Contact information
Contact information Investor Relations Office Luc Cool, Director of IR E-mail: investor.relations@kbc.com Surf to www.kbc.com for the latest update 25
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