Kbc Group N.v. · EURONEXT:KBC

Kbc — Debt Investor Presentation (August 2013)

56 slides from Kbc's debt investor presentation, August 2013

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

    KBC Group / Bank Covered Bond Investor Presentation August 2013 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 18 3 Review of Belgian covered bond legislation 25 4 KBC Bank residential mortgage covered bond programme 31 5 Appendices 39 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 2012 BE¹ CZ SK HU BG KBC Group’s core markets Loans and 20% 20% 2 10% 8% deposits 2% Belgium and CEE-4 Investment 35% 30% 20% funds 8% Life 17% 13% insurance 8% 5% 3% IRELAND NETHERLANDS 9% 11% UK Non-life 6%

  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 2Q 2013

    Overview of key financial data at 2Q 2013 KBC Group KBC Bank KBC Insurance  Market cap (08/08/13): 15bn  Adjusted net result (1H 2013):  Adjusted net result (1H 2013): EUR 0.8bn¹ EUR 0.2bn  Adjusted net result (1H 2013): EUR 0.8 bn  Total assets: EUR 222bn  Total assets: EUR 36bn  Total asset

  9. Slide 9: 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  KBC

  10. Slide 10: Earnings capacity

    Earnings capacity NET RESULT1 CONTRIBUTION OF BANKING ACTIVITIES TO KBC GROUP ADJUSTED NET RESULT1,2 399 3,430 3,281 356 363 1,860 251 263 1,037 231 612 13 -2,484 -2,466 FY06 FY07 FY08 FY09 FY10 FY11 FY12 1H13 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 Excluding adjustments CONTRIBUTION OF INSURANCE ACTIVITIES A

  11. Slide 11: Overview of results based on new business units

    Overview of results based on new business units NET PROFIT - BELGIUM NET PROFIT – CZECH REPUBLIC 1,360 581 1H13 ROAC: 29% 1H13 ROAC: 34% 803 279 2012 1H13 2012 1H13 NET PROFIT - NET PROFIT - INTERNATIONAL INTERNATIONAL MARKETS MARKETS EXCL. IRELAND 1H13 ROAC: -14% 145 -110 36 -260 2012 1H13 2012 1H1

  12. Slide 12: Very low loan losses in Belgian private persons operations

    Very low loan losses in Belgian private persons operations 1H13 FY 2012 AVERAGE PEAK CREDIT COST RATIO CREDIT COST RATIO ‘99 –’12 ‘99 –’12 Belgium 0.49% 0.28% n.a. n.a. Of which private persons Approx. 0.05% Approx. 0.10% n.a. n.a. Czech Republic 0.30% 0.31% n.a. n.a. International Markets 1.76%1 2.

  13. Slide 13: Strong capital position

    Strong capital position  Strong tier-1 ratio of 16.8% under B2.5 and common equity (B3 fully loaded*) of 13.3% as at end 1H13  Pro forma solvency ratios**: core tier-1 ratio of 12.6% under B2.5 and common equity (B3 fully loaded*) of 11.8% at KBC Group  Fully loaded B3 CET1 leverage ratio: 3.7% a

  14. Slide 14: Common equity at end 1H13 pro forma - Fully loaded B3

    Common equity at end 1H13 pro forma - Fully loaded B31 B3 IMPACT AT NUMERATOR LEVEL (BN EUR) 13.7 -0.9 -0.7 11.2 -1.2 -0.6 0.0 -0.1 1.0  Pro forma fully loaded B3 common equity ratio of Jan 2012 Dec 2012 1H 2013 2014-2020 approx. 11.8% at end CT1 at end DTAs Shareholders’ Reimbursement Penalty on P

  15. Slide 15: Solid liquidity position (1)

    Solid liquidity position (1)  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% 100% 14% 7% 8% 5% 6% 1% 3% 9% 0% 9% 5% 5% 7% 8% 10% 8

  16. Slide 16: Upcoming mid-term funding maturities

    Upcoming mid-term funding maturities Breakdown funding maturity buckets 350 10.000 9.000 300 8.000 250 7.000 Millions EUR 6.000 200 5.000 150 4.000 3.000 100 2.000 50 1.000 0 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 ≥2022 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Senior Unsecured Subordinated

  17. Slide 17: Contents

    Contents Page nr. 1 Key highlights of KBC Group/Bank 6 2 Overview of Belgian housing and mortgage market 18 3 Review of Belgian covered bond legislation 25 4 KBC Bank residential mortgage covered bond programme 31 5 Appendices 39 17

  18. 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 • In 2012, Belgian GDP contracted by 0.2%, but for this ye

  19. Slide 19: Demand for houses continues to be well supported

    Demand for houses continues to be well supported Increasing demand for houses  High home ownership in Belgium: around 70%, appr. 10% higher than the euro-average1  Total outstanding mortgage debt is now at EUR 163bn. Total mortgage debt compared to GDP in Belgium is 46% and compares well to other

  20. Slide 20: Supply is subdued

    Supply is subdued Stable supply  Construction activity has remained relatively stable in the past decade  No building boom in Belgium, increase in price of land is indicator that supply is subdued.  Construction economy is only a fraction of GDP 6 BUILDING ACTIVITY 10 % OF CONSTRUCTION ECONOMY AS

  21. Slide 21: Belgian house prices are affordable

    Belgian house prices are affordable Belgian housing market Mortgage market technicals  The average Belgian house is still affordable for the Belgian  Belgian borrowers predominantly prefer to take fixed rate borrower and, although price have risen in Belgium (graph interest rates. A 61.5% is fixed

  22. Slide 22: 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 pretty stable over the past 10 years. Arrears in Belgium are low due to:  Cultural aspects, stigma associated with arrears, importance attached to owning

  23. Slide 23: 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

  24. Slide 24: Contents

    Contents Page nr. 1 Key highlights of KBC Group/Bank 6 2 Overview of Belgian housing and mortgage market 18 3 Review of Belgian covered bond legislation 25 4 KBC Bank residential mortgage covered bond programme 31 5 Appendices 39 24

  25. Slide 25: 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 licences from the National Bank of

  26. Slide 26: 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

  27. Slide 27: 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

  28. Slide 28: 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

  29. Slide 29: 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

  30. Slide 30: Contents

    Contents Page nr. 1 Key highlights of KBC Group/Bank 6 2 Overview of Belgian housing and mortgage market 18 3 Review of Belgian covered bond legislation 25 4 KBC Bank residential mortgage covered bond programme 31 5 Appendices 39 30

  31. Slide 31: 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

  32. Slide 32: 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

  33. Slide 33: Benchmark issuance KBC covered bonds

    Benchmark issuance KBC covered bonds  Since establishment of the covered bond programme KBC has issued four benchmark issuances: • The inaugural EUR covered bond was issued in December 2012 for an amount of EUR 1.25 billion with a 5 years maturity at Mid swaps+30bp • On 24th January 2013, KBC Bank

  34. Slide 34: 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 : 30 June 2013 Total Outstanding Principal Balance 6,102,626,139 Total value of the assets for the over-collateralisation test 5

  35. Slide 35: Key cover pool characteristics (2/3)

    Key cover pool characteristics (2/3) REPAYMENT TYPE (LINEAR VS. ANNUITY) GEOGRAPHICAL ALLOCATION Oost- Brussels Waals Linear Vlaanderen Hoofdstedelijk Brabant 3.7% 18% gewest 1% 5% Vlaams West- Brabant Vlaanderen 18% 15% Luxemburg 0% Antwerpen 29% Henegouwen Annuity 1% 96.3% Namen Luik Limburg 0% 1%

  36. Slide 36: Key cover pool characteristics (3/3)

    Key cover pool characteristics (3/3) FINAL MATURITY DATE SEASONING 60.00 40.00 Weighted Average Weighted Average Remaining Maturity: 35.00 50.00 Seasoning: 234 months 26 months 30.00 40.00 25.00 30.00 20.00 % % 15.00 20.00 10.00 10.00 5.00 0.00 0.00 2013 - 2017 2018 - 2022 2023 - 2027 2028 - 2032 >

  37. Slide 37: Key messages

    Key messages  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 2Q2013

  38. Slide 38: Contents

    Contents Page nr. 1 Key highlights of KBC Group/Bank 6 2 Overview of Belgian housing and mortgage market 18 3 Review of Belgian covered bond legislation 25 4 KBC Bank residential mortgage covered bond programme 31 5 Appendices 39 38

  39. Slide 39: Appendices

    Appendices Page nr. 1 Initial mortgage selection criteria 40 2 Underwriting and approval process 42 3 Credit risk management 44 4 Additional financial information on KBC 47 5 Supplementary information on Belgian mortgage market 54 39

  40. Slide 40: 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

  41. Slide 41: Appendices

    Appendices Page nr. 1 Initial mortgage selection criteria 40 2 Underwriting and approval process 42 3 Credit risk management 44 4 Additional financial information on KBC 47 5 Supplementary information on Belgian mortgage market 54 41

  42. Slide 42: 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

  43. Slide 43: Appendices

    Appendices Page nr. 1 Initial mortgage selection criteria 40 2 Underwriting and approval process 42 3 Credit risk management 44 4 Additional financial information on KBC 47 5 Supplementary information on Belgian mortgage market 54 43

  44. Slide 44: 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 

  45. Slide 45: Credit risk management: various phases

    Credit risk management: various phases Borrower Debtor Step 1 The Monitoring Step Special Step Possible Step Irrevocable Ste Written off Step 2 Mention 3 Loss 4 Phase p55 5 days 45 days 90 days Termination – Legal proceedings Written Off • Arrears < 45 days; local branch is responsible for Step • Ir

  46. Slide 46: Appendices

    Appendices Page nr. 1 Initial mortgage selection criteria 40 2 Underwriting and approval process 42 3 Credit risk management 44 4 Additional financial information on KBC 47 5 Supplementary information on Belgian mortgage market 54 46

  47. Slide 47: RWA reduced by more than initially planned

    RWA reduced by more than initially planned  40% reduction in risk weighted assets between the end of 2008 and 1H13 due mainly to divestment activities • Further progress on divestments: the sale of Absolut Bank is completed, and we have signed agreement to sell KBC Banka • The 4.7bn EUR RWA reducti

  48. Slide 48: 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

  49. Slide 49: Loan book credit quality

    Loan book credit quality LOAN BOOK OVERVIEW BELGIAN retail/SME NPL PROGRESSION (2010- 2Q13)  Customer loan book: 132bn EUR at end June 2013 1.7% 1.6% 1.6% 1.6% 1.6% 1.6% • 41% residential mortgages 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% • 3% consumer finance • 15% other retail loans • 42% SME/corporate

  50. Slide 50: Net CDO exposure further reduced (2Q 2013)

    Net CDO exposure further reduced (2Q 2013) Exposure reduction to the tune of 4.5bn EUR NET CDO OUTSTANDING thanks to the collapsing of several CDOs. Please IN BN EUR EXPOSURE MARKDOWNS note that the net CDO exposure excludes all  CDO exposure protected with MBIA 5.3 -0.1 expired, unwound or termina

  51. Slide 51: Government bond portfolio – Carrying value

    Government bond portfolio – Carrying value  Carrying value of 48.4bn EUR in government bonds (excl. trading book) at end of 1H13, primarily as a result of a significant excess liquidity position and the reinvestment of insurance reserves into fixed-income instruments  Carrying value of GIIPS expos

  52. Slide 52: Solid liquidity position (2)

    Solid liquidity position (2) (*, **) 70 Short term unsecured funding KBC Bank vs Liquid assets as of end June 2013 (bn EUR) 430%  The available liquid assets increased slightly in 60 395% 414% comparison with the end of 1Q13, due primarily to: 60 61,7 380% • Increased investments in high liquidity

  53. Slide 53: Appendices

    Appendices Page nr. 1 Initial mortgage selection criteria 40 2 Underwriting and approval process 42 3 Credit risk management 44 4 Additional financial information on KBC 47 5 Supplementary information on Belgian mortgage market 54 53

  54. Slide 54: 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

  55. Slide 55: 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) (

  56. Slide 56: Contact information Investor Relations Office

    Contact information Investor Relations Office E-mail : investor.relations@kbc.com visit www.kbc.com for the lastest update 56

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