Kbc Group N.v. · EURONEXT:KBC

Kbc — Debt Investor Presentation (January 2015)

52 slides from Kbc's debt investor presentation, January 2015

  1. Slide 1: KBC Group / Bank Covered Bond Investor Presentation

    KBC Group / Bank Covered Bond Investor Presentation January 2015 More infomation: www.kbc.com or on your mobile: m.kbc.com KBC Group ‐ Investor Relations Office ‐ Email: investor.relations@kbc.com 1

  2. 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

  3. 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

  4. Slide 4: Executive summary

    Executive summary  KBC Bank has strong and diversified financial performance • Strong core banking operations in Belgium and CEE region • Highly liquid – a loyal deposit base and low refinancing needs • Conservative risk profile – credit costs in the Belgian private persons segment around 5 bp at 2

  5. Slide 5: Contents

    Contents Page nr. 1 Key highlights of KBC Group/Bank 6 2 Overview of Belgian housing and mortgage market 16 3 Review of Belgian covered bond legislation 23 4 KBC Bank residential mortgage covered bond programme 29 5 Appendices 36 5

  6. Slide 6: Well-defined core markets provide access to 'new growth' in Europe

    Well‐defined core markets provide access to ‘new growth’ in Europe MARKET SHARE, AS OF END 2013 BE CZ SK HU BG KBC Group’s core markets 20% 19% Loans and 10% 9% and Ireland deposits 2% Investment 35% 29% funds 7% 17% NETHERLANDS IRELAND Life 17% UK 6% 10% insurance 5% 3% BELGIUM GERMANY 9% 10% Non‐l

  7. Slide 7: Overview of KBC Group

    Overview of KBC Group  STRONG BANK‐INSURANCE GROUP PRESENT WITH LEADING MARKET POSITIONS IN CORE GEOGRAPHIES (BELGIUM AND CEE region) • A leading financial institution in both Belgium and the Czech Republic • Turnaround potential in the International Markets Business • Business focus on Retail, SME

  8. Slide 8: Overview of key financial data at 3Q 2014

    Overview of key financial data at 3Q 2014 KBC Group KBC Bank KBC Insurance  Market cap (14/11/14): 18bn  Adjusted net result: EUR 0.9bn2  Adjusted net result: EUR 0.3bn  Adjusted net result: EUR 1.2bn  Total assets: EUR 217bn  Total assets: EUR 38bn  Total assets: EUR 252bn  Total equity: EU

  9. Slide 9: Earnings capacity

    Earnings capacity NET RESULT1 CONTRIBUTION OF BANKING ACTIVITIES 3 281 TO KBC GROUP ADJUSTED NET RESULT1,2 399 390 412 1 860 363 320 315 1 305 1 015 222 612 13 Adjusted net result excl. one-off -368 additional impairments ‐2 484 ‐2 466 FY07 FY08 FY09 FY10 FY11 FY12 FY13 9M14 1Q13 2Q13 3Q13 4Q13 1Q14

  10. Slide 10: Overview of results based on business units

    Overview of results based on business units NET PROFIT – BELGIUM NET PROFIT – CZECH REPUBLIC 9M14 ROAC: 26% 9M14 ROAC: 38% 1,570 581 554 1,360 114 377 119 296 1,117 408 1,193 467 435 1,064 2012 2013 9M14 2012 2013 9M14 4Q 9M 4Q 9M NET PROFIT – NET PROFIT – INTERNATIONAL INTERNATIONAL MARKETS MARKETS

  11. Slide 11: Loan loss experience at KBC

    Loan loss experience at KBC 9M14 FY13 FY 2012 AVERAGE CREDIT COST RATIO CREDIT COST RATIO CREDIT COST RATIO ‘99 –’13 Belgium 0.20% 0.37% 0.28% n.a. Czech Republic 0.13% 0.26% 0.31% n.a. International 1.09% 4.48%* 2.26%* n.a. Markets Group Centre 1.38% 1.85% 0.99% n.a. Total 0.41% 1.21%** 0.71% 0.55%

  12. Slide 12: Consistent track record of strengthening capital

    Consistent track record of strengthening capital  Common equity ratio (B3 fully loaded1) of 13.7% based on the Danish Compromise  Fully loaded B3 leverage ratio: • 4.74% at KBC Bank Consolidated, based on current CRR legislation • 5.62% at KBC Group1 1.2bn EUR 0.3bn EUR 3bn EUR repayment repayment

  13. Slide 13: Solid liquidity position

    Solid liquidity position  KBC Bank continues to have a strong retail/mid‐cap 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 3% 3% 3% 4% 100% 7% 8% 6% 2% 5% 9% 0% 4% 5% 5% 8% 10% 7% 8% 8%

  14. Slide 14: Upcoming mid-term funding maturities

    Upcoming mid‐term funding maturities Breakdown Funding Maturity Buckets Credit Spreads Evolution 3,500 330 3,000 280 2,500 230 Millions EUR 2,000 180 1,500 130 1,000 80 500 30 0 ‐20 2015 2016 2017 2018 2019 2020 2021 2022 2023 >= 2025 Mar‐12 Oct‐12 Apr‐13 Nov‐13 May‐14 Dec‐14 Senior Unsecured Subord

  15. Slide 15: Contents

    Contents Page nr. 1 Key highlights of KBC Group/Bank 6 2 Overview of Belgian housing and mortgage market 16 3 Review of Belgian covered bond legislation 23 4 KBC Bank residential mortgage covered bond programme 29 5 Appendices 36 15

  16. Slide 16: Modest economic recovery with doubts

    Modest economic recovery with doubts Economic recovery in Belgium takes further shape, but growth outlook surrounded by doubts • The recovery that started in spring 2013 has gradually gained strength, but the preliminary NBB‐estimate showed disappointing growth in Q2 2014 (after a strong Q1‐figure)

  17. Slide 17: Demand for houses continues to be supported

    Demand for houses continues to be supported Increasing demand for houses  High home ownership in Belgium: around 72%, approx. 5% higher than the EMU1  Total outstanding mortgage debt was at EUR 180bn. end 2013. Total mortgage debt compared to GDP in Belgium is 48.8% and compares well to other Euro

  18. Slide 18: Supply is subdued

    Supply is subdued Stable  Construction activity has remained relatively stable over the past decade and is only a fraction of GDP (around 5%)  No building boom in Belgium, increase in price of land is indicator that supply is subdued. In the past decade the increase in the number of dwellings was

  19. Slide 19: Belgian housing market not (excessively) overvalued

    Belgian housing market not (excessively) overvalued Belgian housing market Mortgage market technicality  Belgian house prices have risen relatively strongly, compared to  Belgian borrowers predominantly prefer to take fixed rate other European countries; regression‐based valuation techniques inter

  20. Slide 20: KBC's disciplined origination leads to low arrears and extremely low loan losses

    KBC’s disciplined origination leads to low arrears and extremely low loan losses BELGIUM SHOWS A SOLID PERFORMANCE OF MORTGAGES… Arrears have been very stable over the past 10 years. Arrears in Belgium are low due to:  Cultural aspects, stigma associated with arrears, importance attached to owning

  21. Slide 21: Low defaults, illustrated by KBC's securitisation transactions performance

    Low defaults, illustrated by KBC’s securitisation transactions performance PRUDENT ORIGINATION AND STABLE HOUSING RESULT IN LOW DEFAULTS AND HIGH RECOVERY Low cumulative default figures on KBC Home loan Invest transactions  The mortgage loans used in securitisation are similar to the mortgage loans

  22. Slide 22: Contents

    Contents Page nr. 1 Key highlights of KBC Group/Bank 6 2 Overview of Belgian housing and mortgage market 16 3 Review of Belgian covered bond legislation 23 4 KBC Bank residential mortgage covered bond programme 29 5 Appendices 36 22

  23. 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  The special estate is not affected by a bank insolvency National Bank of  Requires license from the National Bank of

  24. Slide 24: Special estate - dual recourse

    Special estate ‐ dual recourse COVERED BOND INSOLVENCY REGIME General bank estate Covered Bond  Material exception to ordinary rules: Special estate • Liquidation proceedings only affect the general estate Covered Bond • The special estate is not affected by the bank’s Cover assets insolvency/liqui

  25. 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 type • KBC Bank selects residential mortgage loans and commits that their value (including collections) will be at least 105% 2  The value of the cover asset

  26. Slide 26: External supervision / management

    External supervision / management  Provides a general and special authorization  The statutory auditor provides a report on the organizational capabilities of the issuer By the  Approves the appointment of the cover pool monitor NBB  Appoints, if circumstances require so, the cover pool administ

  27. Slide 27: Belgian covered bond legislation in comparison

    Belgian covered bond legislation in comparison Belgium Netherlands France Germany UK Segregation of Cover • Issuer holds assets on • Cover pool assets assigned • No segregation of covered • Issuer holds assets on • Cover pool assets sold to Pool balance sheet and the to SPE (which guarantees pool as

  28. Slide 28: Contents

    Contents Page nr. 1 Key highlights of KBC Group/Bank 6 2 Overview of Belgian housing and mortgage market 16 3 Review of Belgian covered bond legislation 23 4 KBC Bank residential mortgage covered bond programme 29 5 Appendices 36 28

  29. 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 • min 105% of covered bond outstanding is covered by residential mortgage loans and Main asset category: collections thereon Dual recourse: • Parri passu with the other unsecured obligations of the Issuer (general ba

  30. 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 Events of default: • A default in the payment of an amount of interest on any interest payment date • Moody’s Aaa Rating agencies: • Fitch AAA • 3 months interes

  31. Slide 31: Benchmark issuance KBC covered bonds

    Benchmark issuance KBC covered bonds  Since establishment of the covered bond programme KBC has issued five benchmark issuances: SPREAD EVOLUTION KBC COVERED BONDS (SPREAD IN BP VERSUS 6 MONTH MID SWAP) 50.0 40.0 30.0 Source Bloomberg Mid ASW levels 20.0 10.0 0.0 02/2013 08/2013 02/2014 08/2014 ‐10

  32. Slide 32: Key cover pool characteristics (1/3)

    Key cover pool characteristics (1/3) Investor reports, final terms and prospectus are available on www.kbc.com/covered_bonds Data based on preliminary portfolio data as of : 31 December 2014 Total Outstanding Principal Balance 8 816 610 499 Total value of the assets for the over‐collateralisation te

  33. Slide 33: Key cover pool characteristics (2/3)

    Key cover pool characteristics (2/3) REPAYMENT TYPE (LINEAR VS. ANNUITY) GEOGRAPHICAL ALLOCATION Brussels Linear Onbekend Hoofdstedelijk 4% Oost‐ 0.0% gewest 5.5% Waals Vlaanderen Brabant 17.6% 0.8% West‐ Vlaams Vlaanderen Brabant 15.4% 17.2% Luxemburg 0.1% Antwerpen Annuity 96% Henegouwen 29.0% 0.8

  34. Slide 34: Key cover pool characteristics (3/3)

    Key cover pool characteristics (3/3) FINAL MATURITY DATE SEASONING 30 60 Weighted Average Weighted Average 50 Remaining Maturity: 25 Seasoning: 40 209 months 44months 20 30 15 % 20 % 10 10 0 5 2013 - 2017 2018 - 2022 2023 - 2027 2028 - 2032 > 2032 0 -12 13 - 24 25 - 36 37 - 48 49 - 60 61 - 72 73 - 8

  35. Slide 35: Contents

    Contents Page nr. 1 Key highlights of KBC Group/Bank 6 2 Overview of Belgian housing and mortgage market 16 3 Review of Belgian covered bond legislation 23 4 KBC Bank residential mortgage covered bond programme 29 5 Appendices 36 35

  36. Slide 36: Appendices

    Appendices Page nr. 1 Initial mortgage selection criteria 37 2 Underwriting and approval process 39 3 Credit risk management 41 4 Additional financial information on KBC 44 5 Supplementary information on Belgian mortgage market 50 36

  37. Slide 37: Mortgage selection criteria

    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 originated on or

  38. Slide 38: Appendices

    Appendices Page nr. 1 Initial mortgage selection criteria 37 2 Underwriting and approval process 39 3 Credit risk management 41 4 Additional financial information on KBC 44 5 Supplementary information on Belgian mortgage market 50 38

  39. Slide 39: Underwriting and approval process

    Underwriting and approval process Customer Credit Credit Administration Step 1 Application Step 2 Analysis Step 3 Decision Step 4 Handling Standard Application Form Step 11 i. Information on the project (investment and financing plan, what is the total cost and how is it going to be financed?) ii. I

  40. Slide 40: Appendices

    Appendices Page nr. 1 Initial mortgage selection criteria 37 2 Underwriting and approval process 39 3 Credit risk management 41 4 Additional financial information on KBC 44 5 Supplementary information on Belgian mortgage market 50 40

  41. 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 

  42. Slide 42: Credit risk management: various phases

    Credit risk management: various phases Borrower Debtor The Step 1 Monitoring Step Special Step Possible Step Irrevocable Ste Written off Step 2 Mention 3 Loss 4 5 Phase p5 5 days 45 days 90 days Termination – Legal proceedings Written Off • Arrears < 45 days; local branch is responsible for Step • I

  43. Slide 43: Appendices

    Appendices Page nr. 1 Initial mortgage selection criteria 37 2 Underwriting and approval process 39 3 Credit risk management 41 4 Additional financial information on KBC 44 5 Supplementary information on Belgian mortgage market 50 43

  44. Slide 44: Assessment of the State aid position & repayment schedule

    Assessment of the State aid position & repayment schedule  KBC made accelerated full repayment of 3.0bn EUR of State aid to the Belgian Federal Government in December 2012 and the accelerated repayment of 1.17bn EUR of State aid to the Flemish Regional Government mid‐2013, approved by the NBB  At

  45. Slide 45: Assessment of state aid position

    Assessment of state aid position  OVERVIEW OF CAPITAL TRANSACTIONS WITH THE BELGIAN STATE AND THE FLEMISH REGIONAL GOVERNMENT BELGIAN STATE (FEDERAL HOLDING AND INVESTMENT COMPANY) AND FLEMISH REGIONAL GOVERNMENT 1 2 3 KBC Group NV KBC Bank KBC Insurance Issuing Entity of Covered Bonds 1. KBC Group

  46. Slide 46: Impaired loans ratios of KBC Group and per Business Unit

    Impaired loans ratios of KBC Group and per Business Unit, incl. of which over 90 days past due KBC GROUP  CUSTOMER LOAN BOOK: 126bn EUR at end 3Q14 10.6% 10.5% (LARGELY SOLD THROUGH OWN BRANCHES) 10.2% 10.3% 8.1% 8.3% 7.9% 46% 42% 5.4% 5.6% 5.9% 6.0% 6.0% 6.3% 6.0% 11% 2% Total retail = 54% Residen

  47. Slide 47: Government bond portfolio – Carrying value

    Government bond portfolio – Carrying value  Carrying value of 49.1bn EUR in government bonds (excl. trading book) at end of 9M14, primarily as a result of a significant excess liquidity position and the reinvestment of insurance reserves in fixed‐income instruments  Carrying value of GIIPS exposur

  48. Slide 48: Solid liquidity position

    Solid liquidity position (*) Short term unsecured funding KBC Bank vs Liquid assets as of end Sep 2014 (bn EUR)  KBC maintains a solid liquidity position in 3Q14 given that: 504% • Available liquid assets are close to 4 times the amount of 60.1 61.1 the net recourse on short‐term wholesale funding

  49. Slide 49: Appendices

    Appendices Page nr. 1 Initial mortgage selection criteria 37 2 Underwriting and approval process 39 3 Credit risk management 41 4 Additional financial information on KBC 44 5 Supplementary information on Belgian mortgage market 50 49

  50. Slide 50: Lending market dominated by banks

    Lending market dominated by banks MARKET SHARES OF BELGIAN MORTGAGE LENDING MARKET DOMINATED BY BANKS MARKET Specialised  The four biggest market participants, KBC Bank Insurance Mortgage NV, Belfius, BNP Paribas Fortis and ING control Companies: Companies: nearly 70 per cent of the mortgage lendin

  51. Slide 51: Contact Details

    Contact Details Wim Allegaert Kurt de Baenst Alpha Peeters General Manager, Investor Relations Investor Relations Manager Investor Relations Analyst Email: wim.allegaert@kbc.be Email: kurt.debaenst@kbc.be Email: alpha.peeters@kbc.be Work: (+32) (0)2 429 50 51 Work: (+32) (0)2 429 35 73 Work: (+32) (

  52. Slide 52: Contact information Investor Relations Office

    Contact information Investor Relations Office E‐mail : investor.relations@kbc.com visit www.kbc.com for the lastest update 52

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