KBC Group Company presentation Autumn 2005 Web site: Ticker codes: KBC BB (Bloomberg) KBKBT BR (Reuters)

KBC Group

Company presentationAutumn 2005Web site: www.kbc.com

Ticker codes: KBC BB (Bloomberg) KBKBT BR (Reuters)

2

Contact information

Investor Relations Office

Luc CoolNele KindtMarina Kanamori

[email protected]

Surf to www.kbc.com for the latest update.

3

This presentation is provided for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any security

KBC believes that this presentation is reliable, although some information may be condensed or incomplete

This presentation contains forward-looking statements with respect to our earnings development involving assumptions and uncertainties. The risk exists that these statements may not be fulfilled and that future results differ materially.

By receiving this presentation, each investor is deemed to represent that it possesses sufficient expertise to understand the risks involved

Important information

4

Table of contents

1. Company profile

2. Strategy and earnings drivers

3. 1H 2005 financial highlights

4. Information on capital management

5. Closing remarks on valuation

Company profile

Foto gebouw

1

6

Ranking in Euroland

1 BNP Paribas (35 bn) 1 BNP Paribas (43 bn) 1 BSCH (63 bn)2 BSCH (31bn) 2 BSCH (37 bn) 2 BNP Paribas (53 bn)

3 BBVA (29 bn) 3 BBVA (36 bn) 3 BBVA (47 bn)

4 Deutsche Bank (26bn) 4 Société Générale (30 bn) 4 Deutsche Bank (39 bn)

5 ABN AMRO (25 bn) 5 Deutsche Bank (30 bn) 5 Société Générale (39 bn)

6 Société Générale (24 bn) 6 Crédit Agricole (29 bn) 6 ABN AMRO (37 bn)7 Unicredito (22 bn) 7 ABN AMRO (28 bn) 7 Crédit Agricole (33 bn)

8 Fortis (22 bn) 8 Unicredit (24 bn) 8 Fortis (31 bn)9 Crédit Agricole (14bn) 9 Fortis (23 bn) 9 Unicredit (29 bn)

10 Dexia (14 bn) 10 Intesa BCO (17 bn) 10 KBC (25 bn)

11 Intesa BCI (12bn) 11 Dexia (16 bn) 11 Intesa BCI (23 bn)

12 Allied Irish Banks (12 bn) 12 KBC (15 bn) 12 Dexia (20bn)

13 Bank of Ireland (10 bn) 13 SanPaolo IMI (13 bn) 13 San Paolo IMI (18 bn)

14 KBC (9 bn) 14 Allied Irish Banks (11 bn) 14 HVB (17 bn)15 SanPaolo IMI (9 bn) 15 HVB (10 bn) 15 Allied Irish Banks (16 bn)16 Banco Popular (8 bn) 16 Commerzbank (8 bn) 16 Bank Austria (13 bn)

17 HVB (7 bn) 17 Erste Bank (8 bn) 17 Commerzbank (13bn)

18 Mediobanca (6 bn) 18 Bank Austria (8 bn) 18 Mediobanca (12 bn)

19 Bca MPS (6 bn) 19 Mediobanca (7bn) 19 Bank of Ireland (12 bn)

20 Bco Popular (5 bn) 20 Bca MPS (6 bn) 20 Bco Popular (12 bn)

Dec 2002 Aug 2004 Aug 2005

DJ Euro Stoxx Banksconstituents

Market cap ranking

7

Shareholder structure

CERA/Almancora27.1%

(own shares: 2.3%, including ESOP hedge)

Other committed shareholders 11.7%

MRBB11.6%

Free float47.3%

Staff6%

Institutional, Belgium

14%

Retail, Belgium

22%

Institutional, UK

23%

Institutional, Cont. Europe

14%

Institutional, N. America

20% Institutional, R/o world

1%

Free float

KBC is majority-owned by a group of committed shareholders, thereby providing continuity for the pursuit of long-term strategic goals

Core shareholders include the Cera/Almancora Group (co-operative investment company), a farmers’ association (MRBB) and a syndicate of industrialist families

Situation as at 31-Dec-04(before merger with Almanij)Situation as at 30-Jun-05

8

Business portfolio

KBC is a top bancassurer and asset manager in Belgium and has successfully expanded its operations in CEE-5, its 2nd home market.

Recently, Private Banking (69 bn AUM) has become more of a key focus. The PB business was expanded to include a Western European network. KBC is also active – be it rather selective – in commercial banking (mostly in W. Europe) and financial markets.

55%25%

20%

Revenue geographical breakdown(1H 2005)

Belgium:- retail bancassurance- asset management- private banking- SME/corporate

CEE:- retail bancassurance- asset management- private banking- SME/corporate

Selected other markets (mostly in W. Europe):- private banking- SME/corporate

9

Top-3 player in Belgium

Market share: 32% (1st) 19% (2nd ) 15% (3rd)

Mutual funds

Mortgages Business loans Non-life insurance

Market share: 24% (2nd) 21% (2nd) 9% (4th)

Individual Life Savings deposits

Consolidated banking landscape (80% of market held by top-4 banks)

Market highly receptive to cross-selling of AM & insurance products (the bancassurance model dominates)

10

2005 H1

25%

KBC’s presence in CEE

CEE profit contribution to KBC Group

Retail 57%

Other22%

SME/Corp 21%

Share of business segments in gross income, CEE Banking

Profit contribution, CZ + SK

2003 2004

143 m 162 m

Czech Republic

Total assets, bank: 18 bn EURMarket share, bank: 21% (No. 2)Market share, life: 8% (No. 5)Market share, non-life: 4% (No. 6)

Profit contribution, Poland

2003 2004

-295 m 25 m


Profit contribution, Hungary

2003 2004

11 m 31 m


Slovakia


Profit contribution, Slovenia

2003 2004

10 m 26 m

Minority stake (34%)Market share, bank: 41% (No. 1)Market share, life: 6% (No. 5)

11

KBC’s presence in CEE

0% 20% 40% 60% 80% 100%

PL

CZ

SK

SLO

HU

0 200 400 600 800 1000

PL

CZ

SK

SLO

HU

towns with KBC branch

No. of towns

Percent of towns with KBC branch Density of KBC’s branch network

KBC Group is one of the largest international players in the region

The density of KBC’s branch network is amongst the highest in the CEE region

Unlike the other players, KBC limits its presence to the EU Member States (Czech Republic, Slovakia, Hungary, Poland and Slovenia) and is active in both the banking and insurance fields

12

KBC’s commercial banking network

•

•

•

• •

• • • •

•

• • •

Credit exposure

Belgium 61 bnCEE 21 bnWestern-Euope 32 bnRest of the world 8 bnTOTAL 122 bn

13

KBC’s private banking network

AUMBelgium 24 bnCEE 3 bnLuxemburg

Switzerland 18 bnMonaco

Spain * 12 bnGermany 5 bnNetherlands 3 bnUnited Kingdom 3 bnFrance 1 bnItaly 0.4 bnTotal 69 bn * Of which 7 bn in low-yielding assets•

• • • •

•

•

• •

•

•

• •

•

14

12% 14%20%

FY03 FY04 1H05

66% 65%

57%

FY03 FY04 1H05

Cost/income, banking

Solid financial track record

96%95%

94%

FY03 FY04 1H05

Combined ratio, non-life

In m EUR

Return on equity

1 305 1 6151 253

FY03 FY04 1H05

Net profit growth

In m EUR

Pro forma figures, KBC Group (2003 figures are according to B-GAAP)

Strategy and earnings drivers

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2

16

Start of a new decade

In Q1 2005, KBC merged with parent company Almanij:

‘Quick wins’ for shareholders included:• The re-rating of the KBC share due to increased transparency, visibility and share liquidity

(analysts previously used a 10-15% discount)• Operational synergies, particularly in the field of wealth management

(programme of 75 m recurring pre-tax result, of which ½ as from 2006)

Further value-creating potential includes:• Shifting the earnings trend in the private banking area ‘into much higher gear’

(earnings growth to be doubled from 5% to at least 10% CAGR)

Moreover, KBC continues to be ambitious, maintaining its performance commitments in both Belgium and CEE

17

We build a solid future

Strategy headlines include: Retail- and wealth-management-oriented, with focus on Belgium and CEE-5 and selected

Western European markets Further enhancement of efficiency (with emphasis on - but not exclusively in - CEE and European

private banking) Standalone basis (opportunistic operational alliances in certain areas to generate economies of

scale, if needed) Steady dividend growth and solid level of financial strength/solvency

The solid ‘growth and value’ outlook is reflected in ambitious financial targets, valid until 2008:

Efficiency: Cost/income, banking

Combined ratio, non-life

max. 58%

max. 95%

Financial strength: Tier-1, banking

Solvency margin, insurance

min. 8%

min. 200%

Value creation: Adjusted ROE

EPS growth (CAGR)

min. 16%

min. 10%

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Do not underestimate the market: KBC Group is well positioned:

Consolidated banking market (80% of assets held by top-4 players)

Savings ratio amongst highest in the world (every year, ca. 15% of GDP flows into fin. assets)

Market highly receptive to cross-selling of AM & insurance, fueling strong growth trend in AM and life insurance business

Strong mortgage growth trend (ca. 10% per year) expected to continue, as residential property price levels are still below other European markets

Fee rates for retail banking services only 50% of European average (gradual increase expected)

Credit quality has proven to be solid over the cycle

Top-3 market position, esp. strong in Northern region (one of the wealthiest regions in the EU)

Of the top players, level of customer satisfaction is highest

Innovative product offering in retail AM (steadily increasing market share over the past 10 yrs.)

Still high cross-selling potential for non-life products and well-performing bancassurance distribution model

Further cost efficiency improvement potential, among other things, via co-sourcing of back offices with other banks

Well-diversified revenue structure (50% fee income) and further increase in fee income targeted

Earnings drivers in Belgium - overview

19

Strong market growth momentum: KBC Group is well positioned:

Earning drivers in CEE - overview

Nom. GDP growth in 2005/06 at 6.3%. Although prospects have been revised due to global economic slowdown, growth will still outgrow EMU by 3.1%

Ongoing catch-up in product penetration (currently, an avg. of 45% for banking accounts and 5% for mortgages)

Mortgage volumes growing at double-digit pace (up 51% on avg. in 2004)

Financial sector could grow five-fold if financial assets to GDP were to reach current levels of S. Europe

Solid market position in retail and corporate businesses (excl. banking in Poland) with nationwide branch networks

Competitive advantage in enhancing cross-selling of asset management and insurance products

Well positioned in HNWI and private banking through epb know-how

C/I still on the high side overall, inducing further improvement, e.g., by setting up cross-border platforms for processing transactions

Adequately provisioned balance sheet (risks under control)

Availability of capital within the Group

20

Strong growth fundamentals in CEE

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1.0 1.5 2.0 2.5 3.0 3.5 4.0

Germany

SwitzerlandItaly

Denmark

UKSweden

EMU

BelgiumFrance

The Netherlands

Portugal

US

Spain Finland

Ireland (9,4;5,0)

High flyers

Average real GDP growth, 1997-2001 (in %)

Ave

rag

e r

ea

l GD

P g

row

t h, 2

002-

20

04 (

in %

)

Czech Rep.

Slovakia

Slovenia

Poland

HungaryEU-13

(not-EMU)

Turkey (1,2; 7,5)

(Source: IMF)

0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

Belgium

EU-15

US

Poland

Hungary

Czech Republic

Slovakia

Slovenia

Financial services (banking & insurance) in % of GDP (2004)

(Source: Vienna Institute for International Economic Studies)

21

Bancassurance fueling CEE earnings

Cross-sell rates2004

CZ HU PL SK BE

Consumer loan

XLife

83% 50% 100% 94% 67%

Mortgage loan

XLife

45% 50% 100% 75% 67%

Mortgage loan

XProperty

insurance

54% 71% 42% 30% 50%

Now the model is in place:

Transfer of product know-how and streamlining of business processes and IT systems

Implementation of KBC’s distribution model and setting up of sales incentives and adequate sales approach

Unified management responsibility (joint management committee of bank and insurance)

= competitive advantage relative to other CEE players

Results are encouraging:

22

Growth in AM fueling CEE earnings

KBC is well positioned:

Strong appetite for ‘risk-free’ investments in the market (money-market, capital-guaranteed funds), fully in line with KBC’s core competencies and successful track record in Belgium

Cost/AUM below average (around 16 bps vs. 20 bps for Europe)

= competitive advantage relative to other CEE players

Results are encouraging:

AUM grew in ’04 by 25%. Continued high growth expected in coming years (CAGR of 15-20% in mutual funds and 10-15% in pension products)

Via the funds business, new customers are recruited. Existing customers using deposits to buy funds replenish deposit accounts after one year

Market share

2003 2004 1H05 Trend

CZ 19% 22% 26% +++

HU 8% 9% 11% ++

SK 6% 7% 8% +

SLO - 8% 10% ++

PL 3% 4% 4% +

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Centralized processes reducing costs

Example 1: card transactions

Centralized purchasing & processing of: 7.5 million cards 500 million transactions

Reduced costs driven by: Standardized technology anticipating future

developments (SEPA) Economies of scale

Example 2: cross-border payments

Centralized processing of cross-border transactions (also open for third-parties)

Reduced costs driven by: Standardized technology anticipating future

developments (SEPA) Economies of scale

0.00 €

0.02 €

0.04 €

0.06 €

0.08 €

0.10 €

0.12 €

- 500 1 000 1 500 2 000 2 500

cost/trans.

million transactions

Open for other

parties

Incl. KBC CEE

Incl. DZ Bank

Group

Standalone

Volume of transactions

Pro

ce

ss

ing

co

sts

100

80

90

24

Mid-term financial outlook, CEE

RWA CAGR

Net profit CAGR

Loan-loss ratio

Cost/Incomeratio

Banking 10% – 15% 10% – 15% < 0.50% < 60%

Premium income CAGR

Net profit CAGR

Combined ratio

Insurance 15% – 25% 25% - 35% 95%

25

Private banking in higher gear

Dual brand strategy: network-led vs. ‘independent boutique’

Growth drivers: network trade-up, extension of product offer and hiring of private bankers

Core business: an integrated private banking business in selected European markets focusing on clients with >€1m of investable assets

Integrated network of local pure-play private banking brands (boutique style)

Priority of reducing costs by creating synergies in a central ‘hub’ (IT, operations, support)

Growth drivers: increased share of wallet, hiring of PB managers and opportunistic M&A

Low-growth market

Focus on profitability (leveraging the hub)

If possible, steer repatriated assets to KBC onshore

No expansion, except in IFAs with short payback

Small today (2 bn AUM), but high market growth expected (>15% p.a.)

Strengthening a network-led model, leveraging Belgian experience

Belgium W. Europe onshore W. Europe offshore CEE

Opportunistic acquisitions may imply investments of 150-250 m per year

26

Shift in customer preference towards greater sophistication: open architecture, alternative investments, financial planning, accessibility and Internet delivery

However, the core needs of customers will remain the same (trusted personal relationships, status/exclusivity, investment performance)

Strong relationship-based approach, open architecture concept, KBC AM’s sound product expertise and solid capability for tailor-made solutions

Greatly improved efficiency (implementation of large scale rationalization programme), to be further boosted by the realization of merger synergies within the enlarged KBC Group

Leveraging the network in Belgium Local private banking brands with status/heritage in

Germany, Spain, Netherlands, UK and Belgium ‘Unique’ model attracting experienced private bankers

from big banks

Changing market environment: KBC Group is well positioned:

Private banking in higher gear

27

0

20

40

60

80

By Area By Type

Type of benefits*

€m

Revenue(40%)

Cost (60%)

ICT & Overheads

Asset Managemen

t

Insurance

Corporate

Fin. Markets

Securities

Payments

16.7

12.6

27.7

74.6

12.6

3.9 1.0

0

10

20

30

40

50

60

70

80

Cross sales

Newbusiness

Optimi-zation

Pro-cure-ment

People

Source of benefits*€m

* Synergy benefits defined as peak recurring annual increase in pre-tax bottom-line result (2009 - peak level)

Costsavoided

Total

Securities

The merger of KBC and Almanij allows to realise synergies by reducing costs and cross selling.The total benefit amounts to 75 m euro (pre-tax) per year as of 2009 (50% to be realised as of 2006).

Operational synergies in private banking

28

In total, KBC Group projects ~10% net income growth per year until 2008

KBC Group Forecasts

2004 2008 Forecasts

AUA (€bn) KBL EPB 44

KBC PB 14

Total 58 83

2004 2008 Forecasts

Net Income (€bn)

KBL EPB 205

KBC PB 50

Total 255 380

Cost Income Ratio 67% 55%

AUA Growth

Belgium CAGR 14%

Onshore W. Europe CAGR 10%

Offshore W. Europe CAGR 0%

CEE CAGR 15%

Total AUA Growth CAGR 9%

0

50

100

150

200

250

300

350

400

2004 2008

Net Income Growth

This assumes normal market conditions

Excluding any future acquisitions

CAGR 10%

Private banking, financial projections

1H 2005Financial highlights

Foto gebouw

3

Foto gebouw

Financial highlights

- At a glance

- Group financial performance

- Headlines per segment

FY 2005 profit outlook

31

1. Net profit at 1 253 m, up 55% y/y, generating a return on equity of 20%

2. Underlying profit (excl. one-offs) growing at 34%

3. Comparison of individual P/L lines with pro forma 2004 figures distorted by application of IFRS 32/39 and IFRS 4 as of 2005

4. Strong business volume growth (deposits / loans / AUM / insurance) generating strong commission income (+23%) and offsetting impact of flattening yield curve on net interest income

5. AUM reaching the 170 bn EUR level (o/w 69 bn in private banking)

6. Further downtrend in expenses - cost/income ratio (banking) at 57 %

7. Sustained low combined ratio, non-life (94%)

8. Very low credit-risk provisioning (loan-loss ratio at 0.06%)

9. High levels of return in most business segments, especially in Belgian retail (29%) and in CEE (54%)

10. Outlook for 2005 remains positive

1H 2005 at a glance

32

Solid business growth

Note: Growth trend, excl. (reverse) repo activity, from 31-Dec-04 to 30-Jun-05

Growth, Ytd +7% +10% +7% +11% +11%

Belgium +7% +8% +5% +10% +15%

CEE +3% +16% +15% +15% +20%

Rest of world +7% +15% +7% - +5%

30 June 2005Customer

loans o/w

mortgagesCustomer deposits(banking)

Life ‘deposits’

(insurance)

AUM(asset

management)

Outstanding 108.7 bn 30.7 bn 167.8 bn 14.9 bn 170.5 bn

33

Profit trend, 1H 05

1H 2004pro forma

1H 2005 1H/1H 1H/1Hexcl.

one-offs

Gross income, net of technical insur. charges

3 919 4 163 +6% +2%

Expenses -2 373 -2 313 -3% -6%

Operating result 1 545 1 850 +20% +15%

Impairments -242 -57 -76% -76%

Associated companies -39 +33 - -27%

Net profit 810 1 253 +55% +34%

C/I, bankingCR, non-lifeROE

61%93%14%

57%94%20%

Notes:1) One-offs include the disinvestment loss at Agfa Gevaert (net bottom-line impact of –80 m) in Q2 2004, the write-back of of provisions for

operating expenses after a legal settlement (net +48m) in Q2 2004, the income related to the settlement of a ‘historic’ Slovakian loan (net +68 m) in Q1 2005, the ‘non-recurring’ value gains on shares of Irish insurer FBD (net +68m) in Q1 2005 and merger-related expenses (net 13m) in Q2 2005

2) All 2004 figures exclude impact of IAS 32/39 and IFRS 4

34

Profit trend, Q2 05

2Q 04 1Q 05 2Q 05 2Q/2Q 2Q/1Q

Gross income, net of tech. charges 1 917 2 127 2 035

Expenses -1 105 -1 104 -1 209

Operating result 812 1 024 826 +2% -19%

Operating result, underlying 739 851 846 +15% -1%

Impairments -90 -15 -42

Associated companies -60 +21 +13

Net profit 434 717 536 +24% -25%

Net profit, underlying 465 581 550 +18% -5%

Notes:1) One-offs include the disinvestment loss at Agfa Gevaert (net bottom-line impact of -80m) in Q2 2004, the write-back of of provisions for

operating expenses after a legal settlement (net +48m) in Q2 2004, the income related to the settlement of a ‘historic’ Slovakian loan (net +68 m) in Q1 2005, the ‘non-recurring’ value gains on shares of Irish insurer FBD (net +68m) in Q1 2005 and merger-related expenses (net 13m) in Q2 2005

2) All 2004 figures exclude impact of IAS 32/39 and IFRS 4

Foto gebouw


- At a glance


- Financial headlines per segment


36

Solid revenue trend

Gross income (in m), per half year

6 353 5 980 5 660

1H04 2H04 1H05 2H05

Gross income (in m), per quarter

3 175 3 1782 517

3 4622 756 2 904

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05

IFRS reclassfications distort comparison with 2004 (among other things, non-recognition of unit-linked insurance premiums)

Q1’s solid trends continued in Q2: NII: volume growth almost offsetting q/q

NIM contraction High level of life insurance premium income

(1.2 bn - mostly unit-linked, in line with stock market performance)

Strong commission line (410 m)

Down 693 m y/y, mainly due to non-recognition of 1.1 bn new unit-linked premium volume under IFRS 2005

Apart from one-offs (136 m in Q1), solid revenue ‘quality’: NII: volume growth almost offsetting negative impact

on NIM from flattening yield curve (-13 bps) High level of life insurance premium income (2 bn) Strong commission line (+23%)

37

NII trend, banking activities

Belgium 1.96%E x c l. IF R S 05 : sta b le

CEE 2.94%E x c l. IF R S 0 5 : - 4 0 b ps

Other(o /w e p b 0 .55 % ,

s ta b le e xc l. IFR S )

NIM 1.63%In c l. IF R S 0 5 : sta b le

E x c l. IF R S 0 5 : -1 3 b ps

Belgium+ 8%

CEE+ 1 7%

Other(o /w ep b -1 4% )

Avg. volumein te re st-be a rin g a ss e ts

+ 6%

N II 1 886mIn c l. IF R S 0 5 : + 6%E x c l. IF R S 0 5 : -3%

1H 05 (y/y trend)

38

Impact of IFRS on NII / FV income

1H 04 1H 05 %

NII 1 961 2 122 +8%

FV income 415 225 -46%

Total 2 376 2 348 -1%

1H 04 1H 05 %

NII 1 961 1 947 -1%

FV income 415 470 +13%

Total 2 376 2 417 +2%

1H 05 IFRS, as reported

1H 05, adjusted for comparison *

Main impact from IFRS:

Reclassification of interest income on hedging derivatives from NIM to FV income ( 175m)

Negative impact of FV adjustments on financial instruments (-70m)

* Remark: simplified - only the mentioned main IFRS-adjustments are used

39

Impact of IFRS on Life income

1H 05 IFRS, as reported

1H 05, adjusted for comparison

1H 04 1H 05 %

Premium income, life 1 910 892 -53%

Fees, investments w/o DPF - 32 -

Technical charges, life -1 945 -983 -49%

Financial income 160 259 +62%

Total 123 197 +61%

1H 04 1H 05 %

Premium income, life 1 910 1 963 +3%

Fees, investments w/o DPF - - -

Technical charges, life -1 945 -2 025 +4%

Financial income 160 259 +62%

Total 123 197 +61%

No recognition of premium income and technical charges of investments contracts without Discretionary Participationt Feature (mostly unit-linked life products)

Margin recognized as fee/commission income

Remark: no bottom-line impact !

40

Competitive landscape in Belgium

In 1H 05, NIM was stable y/y at 2.0 %.

In Q4 04 and Q1 05 the (obviously lagging) effect of the flattening of the yield curve was offset by the improved product mix (shift to low-yielding liquid savings deposits in anticipation of an interest rate hike). In Q2 05, customers switched to long-term investments, anticipating deposit rate cuts (-25 bps as of Q3 03).

Volume growth (deposits/loans) was strong in Belgium, further boosting NII

Since mid-2004, credit spreads have seen a significant deterioriation as a result of increased price competition. Currently, pricing rationality is tending to be restored.

2.0%1.9% 2.0%

2.0% 2.0%

1.9%

2.1% 2.1% 2.1%

1.7%

1.6%

1.3%

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05

Interest margin, BelgiumSpread 3m-10y treasury

Net Interest Margin, KBC Bank, Belgium Spreads on new mortgages (bps), KBC, Belgium

Jan

-04

Mar-

04

May-0

4

Ju

l-04

Sep

-04

No

v-0

4

Jan

-05

Mar-

05

May-0

5

Ju

l-05

0.88

0.76

0.41

0.48

41

Competitive landscape in Belgium

0.0% -0.1%0.1%0.0%0.0%

0.9% 1.0%

-1.1%-0.9%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05

KBC

Other large banks

Small retail banks

Change in retail market share since the beginning of 2004 (avg. deposits and loans), proxy

Source: Febelfin (market sample)Includes consumer loans, mortgages, saving accounts and saving certificates

In 2004, the large banks, representing >80% of the market, lost roughly 1% market share to the benefit of smaller players. But from 1H05, this trend seems to be on the wane.

KBC has been able to keep its market share stable (and may have further increased its market share in unit-linked insurance and probably mutual funds).

42

Sustained favourable y/y cost trend

Operating expenses (in m), per half year

2 373 2 571 2 313

1H04 2H04 1H05 2H05

Operating expenses (in m), per quarter

1 269 1 105 1 1471 424

1 104 1 209

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05

Ytd expenses down 3%, mainly driven by (a) cost cutting in Belgium and (b) lower staff profit-sharing bonuses (esp. at KBC Financial Producs)

Cost/income, banking, down from 61% to 57%

As expected, cost level up q/q due to: Elimination in Q2 of underusage of IT and

marketing budgets of ca. 20m in Q1 (time lag)

Higher income-related staff costs ( 27 m esp. at KBC Financial Products)

Restructuring costs (20 m) and one-off merger-related costs (20 m)

Y/y trend: Q2 04 includes write-back (73 m) of provision for operating charges (after legal settlement)

-3%

43

Historic low impairment level

Impairment charges (in m), per half year

242

12357

1H04 2H04 1H05 2H05

Impairment charges (in m), per quarter

152

90

4479

1542

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05

Impairments down 185 m (-76%) on the back of limited credit risk and solid equity markets

Loan-loss ratio down from 0.20% in FY 04 to 0.06%

Impairments on investments limited to 16 m versus 130 m in 1H 04

-76%

LLR Avg loans FY 04 1H 05

Belgium 58.3 0.09% 0.03%

CZ/Slovakia 10.7 0.26% 0.00%Hungary 5.4 0.64% 0.93%

Poland 3.9 0.69% 0.00%International 40.2 0.26% 0.09%

Total 118.5 0.20% 0.06%

Q2 impairments remain at historic low

Q2 includes 5 m impairment on goodwill at KBL France

44

Excellent underwriting result, non-life

Combined ratio

105%96% 95% 94%

2002 2003 2004 1H05

Combined ratio, year-to-date

97% 93% 94% 95% 92% 94%

3M04 6M04 9M04 12M04 3M05 6M05

Combined ratio at 94% on the back of Sound risk management (claims ratio at 64%) Good cost control (expense ratio at 30%)

Favourable claims environment on all markets

Q2 sligthly higher q/q, mainly for seasonality reasons

C/R FY03 FY04 1H05

Belgium 93% 92% 93%

Czech Rep. 102% 99% 93%Slovakia 146% 138% 116%

Hungary 103% 98% 86%

Poland - 95% 97%

R/I 100% 98% 90%

Total 96% 95% 94%

Foto gebouw


- At a glance




46

Segment structure

KBC Group NV

KBCInsurance

KBCAM KBL epb GevaertKBC

Bank

Primary segmentation by business segment

47

Banking: Q2 05 result at 314 m:

Good top-line mix, commissions particularly strong, not boosted by gains and trading income, NII almost stable despite flatening yield curve

Higher costs after the very low Q1 level (see above) Impact of one-offs in y/y and q/q comparison (see below)

1H 05 profit at record level of 784 m, driven by: Strong commission income (+21%) Strict cost control (C/I at 57% incl. AM) Limited credit cost (0.06 bp) One-off income related to settlement of historic

Slovakian loan (net 68 m)

Insurance: Q2 05 results in line with Q1 (though high gains in Q1), due to

Record level of sales of life products (1.2 bn) High dividend income (86 m) Slightly better claims result

1H 05 results increasing to 246 m on the back of: High sales of life insurance (2 bn euro) Excellent underwriting performance (CR, non-life, 94%) Higher investment income o/w capital gains (esp. FBD –

net non-recurring impact: 68 m) Low impairment charges on portfolios (extremely high in

1Q 04)

Key points, business segments

332246

470

367

318

314

0

100

200

300

400

500

600

700

800

900

1H04 2H04 1H05 2H05

Pro forma IFRS 2004 IFRS 2005

BANKINGNet profit (in m)

699

564

784

-55

30

122

58

89

124

-70

-20

30

80

130

180

230

280

1H04 2H04 1H05 2H05


INSURANCE

Net profit (in m)

3

119

246

1Q04

2Q04

3Q04

4Q04

1Q04

2Q04

1Q05

2Q05

1Q05

2Q05

4Q04

3Q04

48

Profit trend, banking segment

Segment banking 2Q 04 1Q 05 2Q 05 2Q/2Q as

stated

2Q/2Qexcl.

one-offs

2Q/1Q as

stated

2Q/1Qexcl.

one-offs

Gross income 1 400 1 513 1 373 -2% -2% -9% -3%

Expenses -816 -807 -878 +8% -1% +9% +9%

Operating result 585 706 495 -15% -3% -30% -18%

Net profit 367 470 314 -14% -2% -33% -22%

Net profit, underlying 319 402 314 -2% -22%

Notes:1) One-offs include the write-back of of provisions for operating expenses after a legal settlement (net +48m) in Q2 2004 and the income

related to the settlement of a ‘historic’ Slovakian loan (net +68 m) in Q1 20052) All 2004 figures exclude impact of IAS 32/39 and IFRS 4

Impact of one-off items:

49


Asset management: AUM in 1H 05 up 16% to 97 bn (2/3 due to new money

inflows) 1H 05 profit contribution at 126 m, +16 m y/y (driven by

increased AUM) Note: total AUM within the Group: 170 bn

Asset management segment: 82 bn (3rd party) + 15 bn (group assets)

Banking segment: 24 bn (mostly private and HNWI assets in Belgium and CEE)

European private banking segment: 50 bn (o/w 46 bn of private banking customers)

European private banking: 1H 05 profit contribution at 94 m, up 28 m y/y and down

12 m q/q (due to restructuring provisions) Top-line at high level (partly due to M2M of financial

instruments) with sustained growth trend of commission income

Private banking AUM in 1H 05 up 8% to 50 bn Cost/income at 67% No relevant impairment charges

43 3853

23

-30

41


Net profit (in m)

51 53 58

58 66 68

0

20

40

60

80

100

120

140

160

180

1H04 2H04 1H05 2H05


Net profit (in m)

EUROPEAN PRIVATE BANKING

ASSET MANAGEMENT

66

8

94

109 119 126

3Q04

4Q04

1Q05

2Q05

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

1Q04

2Q04

50

17 1232

-65

85 31

1H04 2H04 1H05 2H05

Pro forma IFRS2004


-12 -18-7

-27

-41

-131H04 2H04 1H05 2H05


Net profit (in m)

IFRS 2005

Net profit (in m)

HOLDING COMPANY

GEVAERT Gevaert: 1H 05 profit contribution of 63 m (remember that in 2Q 04,

discontinued activities weighed on the P/L at –80 m) Revenue shored up, among other things, by M2M

according to IFRS standards of private equity portfolio in 1Q 05 (15 m) and by gains on disposal of listed equity holdings in 2Q 05 (30 m)

1H 05 profit contribution from Agfa-Gevaert: 14 m

Holding company: 1H 05 net holding company results at -59 m, quite high

due to: One-off costs in Q2, related to Almanij-KBC merger

(20m): expenses for existing stock option plan at KBL and external advisory services

Elimination of received dividends on own shares (IFRS 2005) (9 m)

Costs of debt related to minority buy-out of KBL Debt funding will be gradually reduced in future

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

-48

36

63

-19 -40 -59

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

51

Segment structure – cont’d.

KBC Group NV

KBCInsurance

KBCAM KBL epb GevaertKBC

Bank

CEE

Markets

European private banking

Gevaert

Retail

Business customers

1

2

1 . Primary segmentation by business segment2. Additional breakdown by area of activity

52

Retail Belgium and CEE

66 75

19198 51

121

1H04 2H04 1H05 2H05

Pro forma

Net profit (in m)

87 132

295132

303

244

1H04 2H04 1H05 2H05Pro forma

Net profit (in m)

CEE

RETAIL BELGIUM Retail Belgium: Q2 somewhat lower q/q due to lower banking revenue

(partly seasonal) and higher taxes (less exempted gains) 1H 05 net profit of 539 m, 320 m more than 1H 04:

sound revenue growth (esp. related to savings/investments and mortgages)

sustained cost discipline (-4%) strong non-life underwriting performance absence of credit provisioning and normalization of

value impairments on the investment portfolio (impairments 148 m)

‘Private banking’ sub-segment contributes 32m in 1H 05 1H 05 ROAC at 29% (pro forma FY 04: 22%)

CEE: Q2 on same (high) level as Q1 (except 68 m one-off in Q1) 1H 05 profit contribution of 312 m - ROAC at 54% (pro

forma FY04: 27%) In CZ/Slovakia: 1H 05 profit contribution of 219 m (incl.

one-off of 68 m in Q1). The negative effect of lower interest rates is compensated by higher volumes. Sound growth of insurance business.

Hungary: further positive trend of operating results, but somewhat higher loan-loss provisions (LLR 0.93%, similar to that of major peer). 1H 05 profit at 20 m.

Poland: 1H 05 profit contribution of 62 m, (incl. deferred taxes of 9 m in Q2) due to sound cost trend, growing insurance business and absence of loan losses)

219

435

539

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

164126

312

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

53

SME and wholesale activities

SME/corporate: Strong profitability trend of 2004 continues as a result of:

Low credit provisions (LLR 1H 05: 0.21%) High cost efficiency (C/I 36%) Solid technical result from reinsurance (C/R 90%)

2nd quarter profit level slightly lower than average of previous quarters due to lower revenue and higher taxes

1H 05 ROAC at 20% (pro forma FY04: 19%)

Capital markets: 2Q 05 profit contribution continues to be at level registered

in previous quarter, but below record high of 1H 04 (when exceptionally fine results were booked in derivatives)

1H 05 earnings amounts to 106 m (-23% y/y). Income from convertibles & equity derivatives trading was particular weak. Equity brokerage and structured credit business brought about a result improvement.

1H 05 ROAC at 28% (pro forma FY 04: 34%)

68

1953

70

76

53

1H04 2H04 1H05 2H05

Pro forma

Net profit (in m)

108 99 125

118105

101

1H04 2H04 1H05 2H05

Pro forma

Net profit (in m)

CAPITAL MARKETS

SME/CORPORATE

226204

225

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

137

96 106

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

Foto gebouw


- At a glance




55

2005 profit outlook

KBC continues to be positive on its strategy in the various business lines

Banking costs are expected to decrease in 2005

There are no signs of any substantial decline in credit quality or in underwriting performance, non-life

The interest rate and stock market environments remain factors of uncertainty

KBC has already set a mid-term objective of >10% CAGR EPS growth

On the basis of the solid 1H 05 earnings and the prevailing view regarding the relevant economic and financial parameters, KBC’s 2005 net profit is expected to exceed the10% growth level, amounting to more than 2 bn euros

Foto gebouw


- At a glance




Additional information

57

Solid business growth

Growth, 2Q 05 +3% +6% +3% +7% +4%

Belgium +4% +4% +2% +7% +5%

CEE - CZ/Slovakia - Hungary - Poland

+4%+5%+3%+0%

+9%+8%

+12%+5%

+5%+6%+6%-5%

+8%+3%

+27%+16%

+12%+10%+24%+12%

Rest of the world +1% +9% +4% - +0%

Note: growth trend excl. (reverse) repo activity

Growth, Ytd +7% +10% +7% +11% +11%

Belgium +7% +8% +5% +10% +15%

CEE - CZ/Slovakia - Hungary - Poland

+3%+6%+4%-4%

+16%+15%+22%+7%

+15%+21%+10%-3%

+15%+12%+46%+8%

+20%+22%+68%-4%

Rest of the world +7% +15% +7% - +5%

Customer loans

o/w mortgages

Customer deposits

‘Life deposits’

AUM(off-balance)

Outstanding (in bn) 108.7 30.7 167.8 14.9 170.5

58

Group income statement, 1H 2005

(in m euros) Banking Insurance AM KBL epb Gevaert Holding Group

Net interest incomeGross earned premium, insuranceDividend incomeNet gains from FI at FV Net realised gains from AFS assetsNet fee and commission incomeOther income

1 8070

67121

63605223

2661 707

864

144-148

29

-10781

1841

7907

8221

20633

-203

1437

049

-3000

-40

-2235

2 1221 707

169225265839330

Gross income 2 887 2 088 199 429 101 200 5 660

Operating expensesImpairments - o/w on loans and receivables - o/w on AFS assetsGross technical charges, insuranceCeded reinsurance resultShare in results, associated companies

-1 685-34-34

100

17

-254-20

-1-18

- 1464-33

0

-30000000

-287-501002

-4211100

15

-257000000

-2 313-57-34-16

-1 464-3333

Profit before taxes 1 185 316 169 137 75 -57 1 826

Income tax expense

Minority interests

-306-96

-66-4

-430

-39-4

-12-1

-20

-469-104

Net profit 784 246 126 94 63 -59 1 253

Excl. intrasegment eliminations

59

Areas of activity overview, 1H 2005

(in m euros) Retail CEE SME/Corp.

Markets KBL epb Gevaert Total

Banking and AM

Gross incomeOperating expensesImpairmentsIncome tax expenseMinority interestsNet profit – group share

1 288-734

+7-178

0383

925-526

-7-71-41282

508-183

-34-84

0208

410-235

-2-67

0106

429-289

-5-39

-494

3 515-2 004

-39-415-100

1 003

Insurance

Gross income (- techn. ch.)Operating expensesImpairmentsIncome tax expenseMinority interestsNet profit – group share

373-156

-15-46

-1155

131-83

-1-10

-730

47-15

-4-10

017

591-254

-20-66

-4246

Holding Co

Net profit – group share 63 3

Group total

Net profit – Group shareShare in group resultROAC

53943%29%

31225%54%

22518%20%

1068%

28%

948%

16%

635%

11%

1 253

20%

Excl. non-allocated results

60

Group income statement, 2Q 2005

(in m euros) Banking Insurance AM KBLepb Gevaert Holding Group


9100

4951

6284

74

136978

769

38-6710

-10440

961

4105

3819

1069

002

-634

026

-1400

-300

130

1 074978135

9297

410118

Gross income 1 373 1 180 105 217 56 112 2 904

Operating expensesImpairments - o/w on loans and receivables - o/w on AFS assetsGross technical charges, insuranceCeded reinsurance resultShare in results, associated comp.

-878-36-38

2006

-131-40

-4-852

-170

-15000000

-153-4-11001

-22211006

-149000000

-1 209-42-38

0-852

-1713

Profit before taxes 465 176 90 60 42 -37 797

Income tax expense

Minority interests

-109-42

-48-4

-220

-18-1

-110

-40

-212-48

Net profit 314 124 68 41 31 -41 536

61

Areas of activity overview, 2Q 2005

(in m euros) Retail CEE SME/Corp.

Markets KBLepb Gevaert Total

Banking and AM (incl. KBL)

Gross incomeOperating expensesImparimentsIncome tax expenseMinority interestsNet profit – group share

629-363

-6-91

0170

403-273

-2-11-16101

250-89-21-45

095

235-142

-2-38

053

218-155

-4-18

-141

1 696- 1 048

-40-149

-42422

Insurance

Gross income - tecbn. ch.

Operating expensesImpairmentsIncome tax expenseMinority interestsNet profit – group share

159-82

-3-35

074

70-42

0-4-419

22-70

-806

313-131

-4-48

-4124

Holding Co

Net profit – group share 31 -10

Group total

Net profit – Group share 244 121 101 53 41 31 536

Excl. non-allocated results

62

Group earnings, quarter by quarter

(in m euros) 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05


9951 275

25224193357106

9661 404

121191

60324113

910901

39123

93323128

9631 577

46187157399132

1 048729

34133168429215

1 074978135

9297

410118

Gross income 3 175 3 178 2 517 3 462 2 756 2 904

Operating expensesImpairments - o/w on loans and receivables - o/w on AFS assetsGross technical charges, insuranceCeded reinsurance resultShare in results, associated companies

-1 269-152

-33-119

- 1 169-520

- 1 105-90

-74 -12

-1 240-22-60

-1 147-44-15-18

-771-1234

-1 424-79-76

-2-1 454

-2928

-1 104-15

3-16

-612-1721

-1 209-42-38

0-852

-1713

Profit before taxes 602 662 577 504 1 030 797

Income tax expense

Minority interests

-170-55

-177-51

-155-57

-35-29

-256-57

-212-48

Net profit 376 434 365 440 717 536

63

CEE

CSOB K&H KB NLB Insurance

CEE, company overview

1H 2005 (in m EUR)

547 207 149 12 131 Gross income

-265 -142 -113 -83 General expenses

6 -25 12 -1 Impairments

-61 10 9 -10 Taxes

227 30 57 38 Standalone profit

7 -6 -4 -1 Adjustments, o/w elimination of yield on excess capital, etc

-24 -10 -8 -7 Minority interests

210 15 45 12 30 Profit contributionto Group

83% 17% 42% 31% Return on allocated capital

64

CEE banking - I/S details, 1H 2005

1H 2005 CSOB KB K&H NLB

Statutory accounts

Net interest incomeDividend incomeNet gains from financial instruments at fair valueNet realised gains from available for sale assetsNet fee and commission incomeOther income

252 1975 631

44 8666 496

114 291123 249

101 629184

17 312-1 14822 648

8 659

107 767127

50 139-191

42 9186 490

Gross income 546 730 149 283 207 251

Operating expensesImpairmentsShare in result of associated companiesTaxes

-265 0166 169

0-60 971

-113 08212 143

988 618

-142 048-25 178

1 369-10 989

Net statutory profit 226 911 57 061 30 405

Profit contibution to Group

Net statutory profitConsolidation adjustmentsResults of capital allocationMinority interests

226 91118 758

-11 586-23 609

57 061-949

-3 295-7 644

30 405-940

-4 870-9 971

Profit contribution, Group shareROACROI

210 47483%26%

45 17242%14%

14 62417%11%

11 731

65

CEE banking - I/S details, 2Q 2005

2Q 2005 CSOB KB K&H NLB

Statutory accounts

Net interest incomeDividend incomeNet gains from financial instruments at fair valueNet realised gains from available for sale assetsNet fee and commission incomeOther income

128 3132 118

25 9552 177

56 5988 801

51 216184

5 803-2 6116 4215 298

54 290114

24 864-141

18 3383 845

Gross income 223 961 66 311 101 309

Operating expensesImpairmentsShare in result of associated companiesTaxes

-142 6221 597

0- 7 434

-53 72412 118

09 950

-73 645-15 509

0633

Net statutory profit 75 502 34 174 9 559

Profit contibution to Group

Net statutory profitConsolidation adjustmentsResults of capital allocationMinority interests

75 502-299

- 6 377-6 106

34 174- 440

-1 267-4 406

9 559-443-213

- 1 695

Profit contribution, Group share 62 721 28 060 7 208 3 308

66

No. of shares outstanding

BASIC NUMBER OF SHARES (in millions)

Ordinary shares

Mandatory convertibles

Treasury shares

Basic No.of shares

Avg. quarter

Average Ytd

31/12/03 367.7 2. 6 -11.0 359.4 - -

31/03/04 367.0 2. 6 -10.1 359.6 359.5 359.5

30/06/04 366.3 2. 6 -9.7 359.2 359.4 359.5

30/09/04 366.3 2. 6 -9.5 359.4 359.3 359.4

31/12/04 366.4 2. 6 -9. 6 359.5 359.5 359.4

31/03/05 366. 4 2. 6 -12.6 356.5 358.0 358.0

30/06/05 366. 4 2. 6 -9.1 360.0 358.3 358.1

DILUTIVE NUMBER OF SHARES (in millions)

Basic No. of shares

Stock options

Convertible bonds

Dilutive No. of shares

Avg. quarter

Average Ytd

31/12/03 359.4 6.1 5.2 370.7 - -

31/03/04 359.6 6.1 5.2 370.9 370.8 370.8

30/06/04 359.2 6.0 5.2 370.5 370.7 370.8

30/09/04 359.5 5.8 5.2 370.5 370.5 370.7

31/12/04 359.5 5.0 5.2 369.7 370.1 370.5

31/03/05 356.5 5.0 5.2 366.7 368.2 368.2

30/06/05 360.0 4.0 5.2 369.3 368.0 368.1

Net profit 1H 05 (in m)

1 253

Basic number of shares

358 122 942

Dilutive number of shares

368 084 650

Basic EPS (in euros)

3.50

Dilutive EPS (in euros)

3.42

Foto gebouw

4 Information on capital management

68

Capital position

Capital position

Available capital 1

Surplus capital 2

Immediatefree surplus 3

Banking 10.7 bn 2.1 bn 1.5 bn

Insurance 2.8 bn 1.2 bn 0.4 bn

Gevaert 1.2 bn 1.0 bn 0.4 bn

Total 14.7 bn 4.3 bn 2.3 bn

Internal capital budget requirements

Deleveraging of the holding company 0.4 – 0.6 bn

Buy-out of 3rd parties in CEE 0.8 – 1.3 bn

External growth in CEE 1.0 – 2.0 bn

1 Regulatory capital under Basel I/Solvency I (incl. hybrids and minority interests, after elimination of intangibles and goodwill), based on capital position as at 30-Mar-052 Difference between available capital and internal minimum level3 Surplus capital excl. expected adverse IFRS impact on Tier-1, banking (as of 2006), unrealized gains on tied-up assets (insurance) and value of Agfa-Gevaert (timing of disposal uncertain)

Closing remarks on valuation

Foto gebouw

5

70

Valuation

weighted P/E 2005-06

unweighted P/E 2005-06

CEE banks 2 15.0 15.1

CEE-exposed banks 3 11.6 12.4

Euro-zone banks 4 11.5 12.4

KBC 1 10.9 10.9

BEL banks 5 10.3 10.4

Key figures: Share price: 66.6 euros Net asset value: 40.0 euros 1H 2005 EPS: 3.50 euros

Analysts’ estimates: 1

2005 EPS consensus: 5.97 (+33% y/y) 2006 EPS consensus: 6.24 (+4% y/y) 2005-06 P/E: 10.9

Recommendations: Positive: 42% Neutral: 42% Negative: 16%

Valuation relative to peer group:

Weighted and unweighted averages of IBES data :2 OTP, Komercni, Pekao, BPH PBK, BRE3 BA-CA, Erste, Unicredit, Soc. Gen., Intesa BCI4 Top-20 DJ Euro Stoxx Banks 5 Fortis, Dexia

Situation as at 18 August 2005

5 Smart consensus collected by KBC (18 estimates)

71

Analysts’ recommendations

Fair value momentum

61.864.3

67.5 67.8 67.170.5 70.5 70.6

45

50

55

60

65

70

75

Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 01-Aug

Fair value (smart consensus) Share price (month average)

EPS momentum

5.22

5.43

5.63 5.68 5.685.76 5.76 5.80

4.5

4.7

4.9

5.1

5.3

5.5

5.7

5.9

Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05

IBES consensus 2005 EPS

Documents

KBC Group Company presentation Autumn 2005 Web site: Ticker codes: KBC BB (Bloomberg) KBKBT BR (Reuters)