KBC Group Company presentation FY 2015 / 4Q 2015 · 6 Some specific remarks for 4Q15 • At the end of 2015, KBC repaid the full outstanding tranche of 2bn EUR of remaining state

1

KBC GroupCompany presentationFY 2015 / 4Q 2015

KBC Group - Investor Relations Office – E-mail:

More information: www.kbc.com

[email protected]

https://www.kbc.com/

mailto:[email protected]

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This presentation is provided for informational purposes only. It does not constitute an offer to sell or the solicitation to buy anysecurity issued by the KBC Group.

KBC believes that this presentation is reliable, although some information is condensed and therefore incomplete. KBC cannot beheld liable for any loss or damage resulting from the use of the information.

This presentation contains non-IFRS information and forward-looking statements with respect to the strategy, earnings and capitaltrends of KBC, involving numerous assumptions and uncertainties. There is a risk that these statements may not be fulfilled andthat future developments differ materially. Moreover, KBC does not undertake any obligation to update the presentation in linewith new developments.

By reading this presentation, each investor is deemed to represent that it possesses sufficient expertise to understand the risksinvolved.

Important information for investors

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4Q 2015 key takeaways for KBC Group

STRONG BUSINESS PERFORMANCE IN 4Q15Good net result of 862m EUR in 4Q15 (and 2.6bn EUR in FY15), supported by a gain of 765m EUR as a result of the liquidation of KBC FinancialHolding, partly offset by 344m EUR goodwill impairments

Excluding these two items, net result amounted to 441m EUR in 4Q15 (and 2.2bn in FY15):o Good commercial bank-insurance franchises in our core markets and core activitieso Q-o-q increase in customer loan volumes in most of our core countrieso Higher net interest income, despite lower net interest margin q-o-qo Net asset management inflows, but lower net fee and commission income q-o-q (slightly above the guided range)o Higher net gains from financial instruments at fair value (excluding impact KBC FH), lower net other income and lower realised AFS gainso Excellent combined ratio (91% in FY15). Excellent sales of both non-life and life insurance productso Cost/income ratio (55% in FY15) adjusted for specific items (one of which was the impact of the liquidation of KBC FH) o Seasonally higher impairment charges (excluding goodwill impairments) q-o-q, but sharply lower y-o-y. Loan loss provisions in Ireland amounted

to 16m EUR in 4Q15 and 48m EUR in FY15, fully in line with our guidance. We are maintaining our guidance for Ireland, namely the lower end of the 50m-100m EUR range for FY16

SOLID CAPITAL AND ROBUST LIQUIDITY POSITIONSo Common equity ratio (B3 phased-in) of 15.2% based on the Danish Compromise at end 2015, which clearly exceeds the new minimum capital

requirements set by the ECB (9.75%) and the NBB (0.5%), i.e. an aggregate 10.25% for 2016. The B3 fully loaded common equity ratio stood at14.9% based on the Danish Compromise at end 2015

o At the end of 2015, KBC repaid the full outstanding tranche of 2bn EUR of remaining state aid plus a penalty of 1bn EUR to the Flemish RegionalGovernment, well ahead of the official deadline of 2020.

o Fully loaded B3 leverage ratio, based on current CRR legislation, amounted to 6.3% at KBC Groupo Continued strong liquidity position (NSFR at 121% and LCR at 127%) at end 2015

DIVIDEND PROPOSAL1:o As guided, no dividend will be proposed to the AGM for the 2015 accounting yearo As of the 2016 accounting year, the target for the dividend payout ratio (including the coupon paid on AT1) is at least 50%

1. Any dividend payment will be subject to the usual approval of the regulator

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Contents

1

4

Strong solvency and solid liquidity

4Q 2015 wrap up

Annex 2: Company profile

2

4Q 2015 performance of KBC Group

3

4Q 2015 performance of business units

Annex 3: Other items

5 FY 2015 key takeaways

Annex 1: FY 2015 performance of KBC Group

https://multimediafiles.kbcgroup.eu/ng/published/KBCCOM/PDF/COM_pdf_kbc_quarterly_report_4Q2012_en.pdf



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KBC Group

Section 1

4Q 2015 performance of KBC Group

6

Some specific remarks for 4Q15

• At the end of 2015, KBC repaid the full outstanding tranche of 2bn EUR of remaining state aid plus apenalty of 1bn EUR to the Flemish Regional Government, well ahead of the official deadline of 2020

• As mentioned together with the 3Q15 results, KBC liquidated KBC Financial Holding Inc. (US). Thisresulted in the tax deductibility of losses already booked in previous years (specifically 2008 and2009), for which a DTA was booked, leading to:• an one-off gain in the IFRS P&L of 765m EUR in 4Q15: -156m EUR translation differences

booked in net gains from FIFV and +921m EUR in the tax expense line (recognition of tax losscarry forward DTAs and current tax impact on translation differences)

• initially only a limited positive impact of 0.19% on KBC’s fully loaded CET1 ratio under theDanish Compromise

• Goodwill impairments of 344m EUR (191m EUR on Istrobanka* in Slovakia, 117m EUR CI Bank and34m EUR DZI, 2m EUR at Hypotecni Banka**) were recorded in 4Q15, mainly the result of higherlocal capital targets and a higher discount rate

• In 4Q15, the final calculation for 2015 led to an extra 15m EUR contribution to the European SingleResolution Fund (on top of the 50m EUR booked in 9M15)

* Istrobanka acquired by and merged with CSOB SK** A subsidiary of CSOB CZ

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Net result at KBC Group

* Difference between net result at KBC Group and the sum of the banking and insurancecontribution is accounted for by the holding-company/group items

CONTRIBUTION OF BANKING ACTIVITIES TO KBC GROUP NET RESULT*

600666

510

494305337 441493

114

-344

2Q151Q154Q14

473

-20

3Q14

608

2Q14 4Q15

862

3Q15

76533429

1Q14

34710

NET RESULT AT KBC GROUP* 264442

524564

412

430240

448

102

2Q14

26222

1Q14

257

-7

3Q152Q151Q154Q14

420

-22

3Q14

532

-310

765

4Q15

903

-41

73 82 6650

8959 48 44

42 46 51

37

73

6250 44

-21-19-19-32-31-14

17 3

4Q14

71

3Q14

98

13

2Q14

105

8

1Q14

118

-34

2Q15

121

1

1Q15

121

4Q15

33

3Q15

79

GW impairments

Legacy & OCR

Non-technical & taxes

Life result

Non-Life result

CONTRIBUTION OF INSURANCE ACTIVITIES TO KBC GROUP NET RESULT*

Amounts in m EUR

Impact KBC FHGW impairmentsLegacy & OCR

Impact KBC FHGW impairmentsLegacy & OCR

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Net interest income slightly up, net interest margin slightly under pressure

Net interest income• Slightly up q-o-q and down by 5% y-o-y• The slight q-o-q increase was driven primarily by:

o lower funding costso additional rate cuts on savings accounts in all core countries (except in

the Czech Republic, which happened at the start of 3Q15)o Loan volume growthalmost fully offset by:o mortgages in Belgium: lower upfront prepayment fees (2m EUR less

q-o-q) and increased hedging losses on previously refinanced mortgageso lower reinvestment yieldso pressure on commercial loan margins in most core countrieso a decrease of 9m EUR in NII from the dealing room

Net interest margin (1.95%)• Down by 4 bps q-o-q and by 20 bps y-o-y• Q-o-q decrease is due almost entirely to lower reinvestment yields (mainly

in the Czech Republic), the increased hedging losses on previouslyrefinanced mortgages and pressure on commercial loan margins in mostcore countries, partly offset by rate cuts on savings accounts and lowerfunding costs

NIM

NII

807 849 921 936 900

162

888

154166 167

173 168 163 157

906 898

42919

2110192231211923

4Q15

1,066

3Q15

1,062

-2

2Q15

1,092

1Q15

1,091

-3-2

3Q14

1,120

-2

2Q14

1,056

-3

24

1Q14

1,010

-7

4Q14

1,123

4Q15

1.95%

3Q15

1.99%

2Q15

2.06%

1Q15

2.10%

4Q14

2.15%

3Q14

2.13%

2Q14

2.04%

1Q14

1.99%

Amounts in m EUR

NII - Banking

NII - Holding-company/group

NII - Insurance

NII - deconsolidated entities

NII - dealing room

* Non-annualised ** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos. Please be aware of the significant impact of calling most of the hybrid tier-1 instruments and maturing wholesale debt

VOLUME TRENDExcluding FX effect Total loans ** Of which mortgages Customer deposits*** AuM Life reserves

Volume 128bn 55bn 162bn 209bn 28bn

Growth q-o-q* +1% +1% 0% +4% +1%

Growth y-o-y +3% +3% +5% +12% +1%

Customer deposit volumes excluding debtcertificates & repos flat q-o-q and +6% y-o-y

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Net asset management inflows, but lower net fee and commission income (slightly above the guided range)

Net fee and commission income• Down by 3% q-o-q and by 9% y-o-y

• Q-o-q decrease was the result chiefly of:o lower management fees from mutual funds, due mainly

to the effect of the very large switch of CPPI productstowards cash at the end of August

o lower entry fees from unit-linked life insuranceproducts, due mainly to less switches

o higher commissions paid on insurance salespartly offset by:o higher entry fees from mutual fundso higher fees from securities transactions

• Y-o-y decline resulted chiefly from lower management feesfrom mutual funds, lower entry fees from mutual fundsand unit-linked life insurance products, lower fees fromcredit files and bank guarantees and higher commissionspaid on insurance sales, partly offset by higher fees frompayment services

• Note that net F&C income in FY15 increased roughly 7%y-o-y and will remain an important top-line contributor

• Given the current market circumstances, the recovery ofnet F&C is being delayed

Assets under management (209bn EUR)• Up by 4% q-o-q as a result of a net inflows (+2%) and a

positive price effect (+2%)

• Up by 12% y-o-y owing to net inflows (+8%) and a positive price effect (+4%)

F&C

Amounts in m EUR

435 443 460 475 518 530453

-69-64-59-66-61-58-62 -70 -4-1-1-2

1

445

3 2

1Q14

374 387

2Q14

3402

3Q14

371

3Q154Q14 2Q15

459

1Q15 4Q15

465383410

F&C - banking contribution

F&C - insurance contribution F&C - contribution of holding-company/group

F&C - deconsolidated entities

Amounts in bn EUR

AuM

209200204208

186180

172167

3Q14 4Q152Q14 2Q151Q14 1Q15 3Q154Q14

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Insurance premium income sharply up and excellent combined ratio

Insurance premium income (gross earnedpremium) at 783m EUR• Non-life premium income (338m) increased by 5%

y-o-y

• Life premium income (445m) up by 54% q-o-q andby 30% y-o-y. The q-o-q increase was driven by theseasonal sale of guaranteed interest products inBelgium and higher sales of unit-linked products inthe Czech Republic

The non-life combined ratio at FY15 stood atan excellent 91%, a strong improvementcompared to FY14 (as FY14 was negativelyimpacted by hailstorms in Belgium)

COMBINED RATIO (NON-LIFE)

PREMIUM INCOME (GROSS EARNED PREMIUM)

91%

FY

94%89%

82%

1Q

93%86%

1H

93% 89%

9M

20152014

Amounts in m EUR

307 315 321 322 320 326 335

308 297 299 343 302 265 289

338

445

615 620 591

4Q141Q14

612

2Q14 3Q14

665

2Q15 3Q15 4Q151Q15

624622

783

Life premium income Non-Life premium income

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Non-life sales up y-o-y and life sales up q-o-q and y-o-y

Sales of non-life insurance products• Up by 6% y-o-y thanks to a good commercial

performance in all major product lines in our coremarkets and premium increases

Sales of life insurance products• Increased by 40% q-o-q and by 6% y-o-y

• The q-o-q rise was driven by higher sales ofguaranteed interest products in Belgium (attributablechiefly to traditionally higher volumes in tax-incentivised pension saving products in 4Q15) andhigher sales of unit-linked products in the CzechRepublic

• The y-o-y increase can be explained by the samereasons as mentioned above, partly offset by lowersales of unit-linked products in Belgium (attributableto the further shift towards AM products)

• Sales of unit-linked products accounted for 34% oftotal life insurance sales

LIFE SALES

NON-LIFE SALES (GROSS WRITTEN PREMIUM)

157 189250

190 189 181 170

283 260251

313 275231 212

182

353

382

3Q152Q15

412

1Q15

464

4Q14

503

3Q14

501

2Q14

449

1Q14

440

4Q15

535

Guaranteed interest products Unit-linked products

Amounts in m EUR

302308314

418

284296304

399

1Q14 2Q14 3Q14 1Q154Q14 3Q152Q15 4Q15

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Lower FV gains, gains realised on AFS assets and other net income

The lower q-o-q figures for net gains fromfinancial instruments at fair value wereattributable to:• -156m EUR translation differences as a result of the

liquidation of KBC Financial Holding Inc. (US)

• a positive change in ALM derivatives (12m EUR in4Q15 compared with 2m EUR in 3Q15)

• a positive change in market, credit and fair valueadjustments (as a result of tightening spreads anddecreased volumes)

• better dealing room income

Lower gains realised on AFS assets (mainly onshares)

Other net income amounted to 47m EUR, in linewith the normal run rate of around 50m EUR

FV GAINS

Amounts in m EUR

9095

8485

122

89

-3

-156

-46-57-86 -6-5

31 456076

34

-7

3Q14 4Q14

109

1Q15

57

179

2Q15 4Q15

12

-68

47

2

3Q15

44

2Q141Q14

40

17

30

4436

80

2228

4951

1Q14 3Q142Q14 4Q151Q15 3Q154Q14 2Q15

GAINS REALISED ON AFS ASSETS

47

96105

496873

-99

52

4Q154Q14 3Q151Q15 2Q152Q141Q14 3Q14

OTHER NET INCOME

Other FV gains M2M ALM derivatives Legacy & OCR Liquidation KBC FH

13

Operating expenses up, but good cost/income ratio

Cost/income ratio (banking) adjusted for specificitems* at 59% in 4Q15 and 55% in FY15• Operating expenses excluding bank tax went up by 9%

q-o-q due to:o seasonal effects such as traditionally higher

marketing, ICT and professional fee expenseso higher pension costs in Belgiumo a gradual acceleration of (strategic) projects

executiono restructuring charges in CZ

• Operating expenses without bank tax decreased by 1%y-o-y due to lower staff and marketing expenses inBelgium in 4Q15 and one-off expenses in Hungary in4Q14, despite higher ICT investments into the strategicprogramme of KBC Group (digitalisation, mainly inBelgium and the Czech Republic)

• Pursuant to IFRIC 21, certain levies (such ascontributions to the new European Single ResolutionFund) have to be recognised in advance, and thisadversely impacted the results for 1Q15. In 4Q15, thefinal disclosure for 2015 led to an extra 15m EURcontribution to the ESRF (on top of the 50m EURbooked in 9M15)

OPERATING EXPENSES

198

47

264

834943

489

257

1,125

858

862

941

3Q15

841

21

962

1Q15

861

4Q14

964

918

3

3Q14

897

816

2Q14

908

845

8

1,049

1Q14

834

9 8

2Q15 4Q15

914

Operating expenses

Bank tax

Deconsolidated entities

Legacy & OCR

* See glossary (slide 93) for the exact definitionAmounts in m EUR

TOTAL Upfront Spread out over the year

4Q15 1Q15 2Q15 3Q15 4Q15 1Q15 2Q15 3Q15 4Q15

BU BE 13 160 49 0 13 0 0 0 0

BU CZ 7 11 0 -12 0 9 10 9 7

Hungary 20 56 1 0 0 16 19 19 20

Slovakia 5 3 1 0 2 3 3 3 3

Bulgaria 2 0 0 0 1 1 1 1 1

Ireland 0 2 0 0 -1 0 0 0 1

GC 0 5 0 0 0 0 0 0 0

TOTAL 49 237 51 -12 15 28 32 32 33

EXPECTED BANK TAX SPREAD (including ESRF contribution)

14

Overview of bank taxes*

INTERNATIONAL MARKETS BUCZECH REPUBLIC BU

BELGIUM BUKBC GROUP

232520

2425

78

26

71

8

1Q14 4Q15

282

3Q152Q151Q15

79

4Q143Q142Q14

Common bank taxesESRF contribution

49

141415

108

118

130

42

160

1Q15 4Q153Q152Q154Q143Q142Q141Q14


7109998

-12

9 9

11

3Q14 4Q14

20

1Q152Q141Q14 4Q153Q15

-3

2Q15


-12

83

434748

198

34

202

32

62

21

2Q151Q15

264

3Q15 4Q15

4915

1Q14 2Q14 3Q14 4Q14European Single Resolution Fund contribution

Common bank taxes

* This refers solely to the bank taxes recognised in opex, and as such it does not take account of income tax expenses, non-recoverable VAT, etc.** The C/I ratio adjusted for specific items of 55% in FY15 amounts to roughly 49% excluding these bank taxes

Bank taxes of 417m EUR YTD, representing 10.7% of FY15 opex at KBC Group**

Bank taxes of 222m EUR YTD, representing 9.4% of FY15 opexat the Belgium BU

Bank taxes of 35m EUR YTD, representing 5.7% of FY15 opex at the CR BU

Bank taxes of 154m EUR YTD, representing 20.5% of FY15 opex at the IM BU

15

Asset impairment driven by GW impairments, excellent credit cost ratio and impaired loans ratio dropped

Sharply higher impairment charges q-o-q• The seasonal q-o-q increase in loan loss provisions was

attributable mainly to:o high impairments in foreign branches, but low impairments in

retail, corporates & real estate in the Belgium Business Unito higher impairments on SMEs in the Czech Republic and

Slovakiao Ireland (16m EUR compared with 9m in 3Q15 and 41m EUR

in 4Q14)

• Loan loss provisions significantly decreased y-o-y (-50%)

• Impairment ofo 21m EUR on AFS shares (18m EUR in Belgium and 4m EUR in

the Czech Republic)o 344m EUR on goodwill (191m EUR on Istrobanka* in Slovakia,

117m EUR at CI Bank, 34m EUR at DZI and 2m EUR atHypotecni B.**) booked in Group Centre (except 2m EUR inthe Czech BU)

o 29m EUR on ‘other’ (of which 20m EUR on Hungarian DataCenter)

The credit cost ratio only amounted to 0.23% in FY15 dueto low gross impairments (especially in 3Q15) and somereleases (especially in 1Q15), despite an increase of IBNRimpairments (due to parameter changes) byapproximately 34m EUR in 2Q15

The impaired loans ratio dropped further to 8.6%

ASSET IMPAIRMENT

15678

124102 13873

-125

15

5035

165

2711

4

11 35

34

1 6

3Q14

58

2Q14

142

7 8

1Q14

114

4Q15

472

344

3Q15

49

2Q15

149

1Q15

77

4Q14

193

IMPAIRED LOANS RATIO

4.8%

3Q15

9.0% 8.6%9.3%

5.3%

2Q15

5.2%

4Q151Q14

6.3% 6.0%

2Q14

10.5%

6.0%

10.6%9.9%

5.5%

3Q14

10.3%

5.5%

9.6%

1Q154Q14

CREDIT COST RATIO

FY15

0.42%

FY14

0.23%

FY13FY10

0.91%

FY09

1.11%

FY11

0.82%0.71%

1.21%

FY12

Impaired loan ratio of which over 90 days past due

Other impairments

Impairments on L&RDeconsolidated entities

Legacy & OCR

GW impairments

* Istrobanka acquired by and merged with CSOB SK** A subsidiary of CSOB CZ

16

KBC Group

Section 2

4Q 2015 performance of business units

17

BELGIUM BUSINESS UNIT

CFO SERVICES

CRO SERVICES

CORPORATE STAFF

BELGIUMCZECH

REPUBLICINTERNATIONAL

MARKETS

18

Belgium BU (1): net result of 348m EUR

Net result at the Belgium Business Unitamounted to 348m EUR• The quarter under review was characterised by lower

net interest income, a decline in net fee andcommission income, increased trading and fair valueincome, a decrease in realised gains on AFS assets,lower other net income, an excellent combined ratioin non-life insurance, higher sales of life insuranceproducts, seasonally higher operating expenses(including an additional ESFR contribution) andimpairment charges q-o-q

• Loan volumes rose by 1% q-o-q. Customer depositsdecreased by 1% q-o-q

* Non-annualised ** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos

VOLUME TREND

Total loans ** Of which mortgages Customer deposits*** AuM Life reserves


Growth q-o-q* +1% +1% -1% +5% 0%

Growth y-o-y +3% +3% +5% +13% +1%

348358

528

330

414399398

304

2Q15 3Q15 4Q153Q141Q14 4Q14 1Q152Q14

NET RESULT

Amounts in m EUR

Customer deposit volumes excluding debtcertificates & repos -1% q-o-q and +4% y-o-y

19

Belgium BU (2): slightly lower NII and NIM

Net interest income (691m EUR)• Almost flat q-o-q and down by 9% y-o-y

• Q-o-q stabilisation was driven primarily by lower funding costson term deposits and higher volumes on mortgage &corporate loans fully offset by lower upfront prepayment fees(11m EUR in 4Q15 compared with 13m EUR in 3Q15),increased hedging losses on previously refinanced mortgages,lower reinvestment yields and reduced net interest incomefrom the dealing room

• Decreased y-o-y as sharply lower funding costs on termdeposits, lower rate of interest paid on savings accounts,increase in volumes on current and savings accounts andhigher net interest income on lending activities were morethan offset by lower reinvestment yields, lower prepaymentfees (11m EUR in 4Q15 compared with 51m EUR in 4Q14),increased hedging losses on previously refinanced mortgagesand lower net interest income from the dealing room

• Note that customer deposits excluding debt certificates andrepos increased by 4% y-o-y, while customer loans rose by 3%y-o-y

Net interest margin (1.85%)• Decreased by 1 bp q-o-q and by 22 bps y-o-y due to the

negative impact of lower reinvestment yields, increasedhedging losses on refinanced mortgages and some pressureon commercial loan margins

• KBC lowered the savings account rate by 5 bps (base rate)from 20 bps to 15 bps (of which 5 bps base rate and 10 bpsloyalty premium) from 8 December 2015 onwards

NIM

NII

Amounts in m EUR

535 537 569 589 540 549 531

156 157163 157

151 152 147

534

145

4Q15

69112

3Q15

69416

2Q15

19720714

3Q14

23

4Q14 1Q15

76216

74412

13

1Q14

707

2Q14

70413

4Q15

1.85%

3Q15

1.86%

2Q15

1.96%

1Q15

1.96%

4Q14

2.07%

3Q14

2.01%

2Q14

1.93%

1Q14

1.96%

NII - dealing room income NII - contribution of banking

NII - contribution of insurance

20

Credit margins in Belgium

PRODUCT SPREAD ON CUSTOMER LOAN BOOK, OUTSTANDING

PRODUCT SPREAD ON NEW PRODUCTION

0.2

1.0

1.2

0.8

0.6

0.4

0.0

1.4

1Q144Q13 2Q14 3Q143Q11 3Q122Q12 4Q12 1Q13 3Q132Q13 4Q152Q154Q14 1Q15 3Q154Q11 1Q122Q111Q11

Customer loans

0.8

1.8

1.4

0.4

1.2

0.6

1.0

0.2

1.6

3Q11 4Q12 4Q153Q152Q151Q153Q12 3Q144Q134Q112Q111Q11 4Q142Q121Q12 2Q141Q142Q13 3Q131Q13

Mortgage loansSME and corporate loans

21

Belgium BU (3): lower net F&C income, but positive net inflows

Net fee and commission income (270m EUR)• Decreased by 6% q-o-q, due mainly to the

combination of lower management fees from mutualfunds, lower entry fees from unit-linked lifeinsurance products, lower fees from paymenttransactions and lower fees from credit files andbank guarantees, which was only partly offset byhigher entry fees from mutual funds and higher feesfrom securities transactions

• Fell by 10% y-o-y driven chiefly by lowermanagement fees from mutual funds, lower entryfees from mutual funds and unit-linked life insuranceproducts, lower fees from credit files and bankguarantees and slightly higher commissions paid oninsurance sales, which was only partly offset byhigher fees from payment transactions

Assets under management (194bn EUR)• Went up by 5% q-o-q owing to net inflows (+3%) and

a positive price effect (+2%)

• Rose by 13% y-o-y as a result of net inflows (+8%)and a positive price effect (+4%)

AuM*

F&C

Amounts in bn EUR

319 322 337 348400 406

335

-48-43-40-47-43-40-44 -48

318

275

1Q14

282

2Q14

294

3Q14

301

4Q14

360

1Q15

363

2Q15

287

3Q15

270

4Q15

194185189193

172167160155

3Q152Q15 4Q152Q14 3Q14 4Q14 1Q151Q14

Amounts in m EUR

* The breakdown across the BUs is based on the ‘Assets under Distribution’ in each BU

F&C - contribution of insurance F&C - contribution of banking

22

Belgium BU (4): higher y-o-y non-life sales and excellent combined ratio

Sales of non-life insurance products• Increased by 4% y-o-y driven by premium growth in

the ‘fire’, ‘other damage to property’ and ‘motor’classes and some premium increases

Combined ratio amounted to 90% in FY15, astrong improvement compared with FY14 (FY14was negatively impacted by hailstorms inBelgium)


Amounts in m EUR

92%87%

FY

94%

9M1H

84%93%

1Q

79%88% 90%

20152014


211222

238

328

202218

233

317

4Q14 1Q15 2Q153Q142Q141Q14 4Q153Q15

23

Belgium BU (5): sharply higher life sales and good cross-selling ratios

Sales of life insurance products• Rose by 52% q-o-q, driven entirely by significantly

higher sales of guaranteed interest products,attributable mainly to traditionally higher volumes inpension savings products in 4Q15. On the other hand,lower sales of unit-linked products owing to thefurther shift towards AM products in 4Q15

• Fell by 6% y-o-y driven entirely by significantly lowersales of unit-linked products.

• As a result, guaranteed interest products and unit-linked products accounted for 80% and 20%,respectively, of life insurance sales in 4Q15

Mortgage-related cross-selling ratios• 87.1% for fire insurance

• 76.4% for life insurance

LIFE SALES

Amounts in m EUR

125 142198

152 149 13885

255 234

227285

248205

184

82

327

343

269

2Q15 3Q15 4Q15

409

2Q141Q14

376380

4Q14

397425 437

3Q14 1Q15

Unit-linked productsGuaranteed interest products

MORTGAGE-RELATED CROSS-SELLING RATIOS

49,5

63,7

40

45

50

55

60

65

70

75

80

85

90

Fire insurance Life insurance

87,1%

76,4%

24

The higher q-o-q figures for net gains fromfinancial instruments at fair value were theresult mainly of:• a positive q-o-q change in ALM derivatives (13m

EUR in 4Q15 compared with -1m EUR in 3Q15)

• the higher q-o-q figure was due partly to a positivechange in market, credit and fair value adjustments

• better dealing room income (especially IRS)

Gains realised on AFS assets came to 26mEUR (less gains realised on both shares andbonds in 4Q15 compared with 3Q15)

Other net income amounted to 41m EUR in4Q15, somewhat below the normal run rate

FV GAINS

Amounts in m EUR

-86-63

9159 48 49

84

45

-31-32-10 -1

38

2Q15

7

3Q14 4Q14

17

17

136

-32

51

-15

1Q14

-27

70

-14

3Q151Q15 4Q15

13

2Q14

26

3338

52

2019

33

43

4Q151Q152Q141Q14 2Q154Q143Q14 3Q15


41

5567

45

6558

104

42

3Q14 4Q151Q14 3Q151Q15 2Q152Q14 4Q14

OTHER NET INCOME

Belgium BU (6): higher FV gains, but lower gains realisedon AFS assets and other net income

Other FV gains M2M ALM derivatives

25

Belgium BU (7): higher operating expenses andimpairments, excellent credit cost ratio

Operating expenses: +3% q-o-q and -3% y-o-y• The q-o-q increase was attributable entirely to higher bank

taxes. Operating expenses without bank tax were roughlyflat q-o-q mainly as lower ICT and facilities expenses werefully offset by higher pension costs and higher marketingexpenses

• The y-o-y decrease was chiefly the result of lower staff andmarketing expenses

• Cost/income ratio: both 50% in 4Q15 and in FY15.Adjusted for specific items, the C/I ratio amounted toroughly 56% in 4Q15 and 53% in FY15

Loan loss provisions amounted to 34m EUR in 4Q15.The q-o-q increase was due chiefly to higherimpairments in corporates and foreign branches.Gross impairments remained low in all segments.Credit cost ratio amounted to 19 bps in FY15 (23 bpsin FY14)

Impaired loans ratio dropped to 3.8%, 2.2% of whichover 90 days past due

Impairment on AFS shares (18m EUR)

ASSET IMPAIRMENT

OPERATING EXPENSES

Amounts in m EUR

518 529 525 559 535 534 540 541

49160

108

4Q143Q14

14539

695

14

573

15

626

544

1Q14 2Q14

13

2Q15

0

584

1Q15 3Q15

540 554

4Q15

52

28

77

65

96

81

3638

1Q14 2Q151Q15 4Q153Q154Q143Q142Q14

Operating expensesBank tax

26

Net result at the Belgium BU

* Difference between net profit at the Belgium Business Unit and the sum of the banking and insurance contribution is accounted for by the rounding up or down of figures

CONTRIBUTION OF BANKING ACTIVITIES TO NET RESULT OF THE BELGIUM BU *

NET RESULT AT THE BELGIUM BU *

Amounts in m EUR

348358

528

330

414399398

304

3Q152Q151Q154Q143Q142Q141Q14 4Q15

288300

429

212

356322312

215

4Q153Q152Q151Q154Q143Q142Q141Q14

63 55 56 4280

49 37

3331 41

24

62

50

33

-12-25-19

38

24

2Q15

99

0

3Q15

5860

-20

1Q14

90

-6

1Q15

117

4Q14

58

-8

3Q14

78

2Q14

86

4Q15

Life resultNon-Life result Non-technical & taxes

CONTRIBUTION OF INSURANCE ACTIVITIES TO NET RESULT OF THE BELGIUM BU *

27

CZECH REPUBLIC BUSINESS UNIT

CFO SERVICES

CRO SERVICES

CORPORATE STAFF

BELGIUMCZECH


MARKETS

28

Czech Republic BU (1): net result of 119m EUR

Net result at the Czech Republic Business Unit of119m EUR• Q-o-q results were characterised by lower net interest

income, higher net fee and commission income,stable net results from financial instruments, norealised gains on AFS assets, a good combined ratio innon-life insurance and higher sales of life insuranceproducts, higher costs and impairment charges

• Profit contribution from the insurance businessremained limited in comparison to the bankingbusiness


VOLUME TREND

Excluding FX effect Total loans ** Of which mortgages Customer deposits*** AuM Life reserves

Volume 18bn 8bn 24bn 8.8bn 1.0bn

Growth q-o-q* +2% +2% +3% +4% +7%

Growth y-o-y +8% +9% +6% +19% 0%

NET RESULT

Amounts in m EUR

119

153

127

143

121130

140138

2Q15 3Q151Q154Q143Q142Q141Q14 4Q15

29

Czech Republic BU (2): lower NII and NIM

Net interest income (210m EUR)• Down by 2% q-o-q and flat y-o-y to 210m EUR.

Corrected for FX effects, NII decreased by 2% q-o-q andby 3% y-o-y pro forma

• The pro forma q-o-q decrease was the result primarilyof reduced net interest income from the dealing room,lower reinvestment yields, pressure on lending marginsand lower fees on early repaid corporate loans, whichwere only partly offset by growth in loan volumes.

• Loan volumes up by 8% y-o-y, driven mainly by growthin mortgages and corporate loans and, to a lesserextent, in SME loans

• Customer deposit volumes up by 6% y-o-y

Net interest margin (2.95%)• Fell by 6 bps q-o-q and by 16 bps y-o-y to 2.95%

• The q-o-q decrease was attributable to lowerreinvestment yields and pressure on lending margins

• The y-o-y decrease was the result of a lowerreinvestment yield and pressure on margins for newloans sold, partially offset by several cuts in interestrates on savings accounts during the last year

NIM

NII

Amounts in m EUR

210215208212211211220219

1Q14 2Q14 3Q14 2Q154Q14 3Q151Q15 4Q15

2.95%

4Q15

3.20%3.00%

3.29%

1Q153Q142Q14

3.01%3.16%3.11%

2Q154Q14 3Q15

3.12%

1Q14

30

Czech Republic BU (3): higher net F&C income andpositive net inflows

Net fee and commission income (52m EUR)• Increased by 6% q-o-q and by 2% y-o-y (or +6% q-o-q

and -1% y-o-y pro forma, adjusted to take account ofFX effect)

• The pro forma q-o-q increase was the result of higherfees from payment services (seasonal effect ofChristmas and success of contactless cards), highermanagement fees and higher fees from securities,partly offset by lower fees from credit files and bankguarantees and lower entry fees from mutual funds

• The pro forma y-o-y decrease was attributable chieflyto lower entry fees from mutual funds and higher feespaid to the Czech Post

Assets under management (8.8bn EUR)• Went up by 4% q-o-q to roughly 8.8bn EUR, as a result

of a 2% increase in net inflows and a positive priceeffect (+2%). Net sales of balanced funds and CPPIproducts in particular were good

• Y-o-y, assets under management rose by 19%, drivenby net inflows (+12%) and a positive price effect (+7%)

AuM*

F&C

Amounts in bn EUR

Amounts in m EUR

524950505150

4845

4Q151Q154Q14 2Q152Q141Q14 3Q14 3Q15

4Q14

6.77.1

1Q15

8.5

3Q14

7.4

3Q151Q14

6.4

2Q152Q14

8.38.28.8

4Q15


31

Czech Republic BU (4): higher premium income andgood combined ratio

Insurance premium income (gross earnedpremium) stood at 142m EUR• Non-life premium income (47m) rose by 6% y-o-y

excluding FX effect, due mainly to improved retail (inmotor and households businesses) and corporatesales

• Life premium income (95m) went up by 24% q-o-qand by 154% y-o-y, excluding FX effect. Growthmainly in unit-linked single premiums due tointensified product campaigns

Combined ratio: 94% in FY15, unchanged inrelation to last year

Cross-selling ratios: increased commercial focusand sales activities helped to improve demandfor property insurance combined with amortgage


PREMIUM INCOME (GROSS EARNED PREMIUM)

39 41 42 43 41 44 45 47

32 41 51 37 30 41

9576

82

2Q14

71

4Q152Q15

121

1Q15

142

3Q15

85

3Q14

93

4Q14

80

1Q14

71

1Q FY

93%94%

9M

95%

1H

94%94% 94%96% 94%

20152014

Non-Life premium incomeLife premium income

CROSS-SELLING RATIOS

Mortg. & prop. Mortg. & life risk Cons. Fin. & life risk

2015

50%

2013

39%36%47%

2014

55%

2013

38%37%

59%

20122012

33%

2015 2014 20152012

48%

2014

60% 68%

2013

32

Czech Republic BU (5): higher operating expenses andimpairments, excellent credit cost ratio

Operating expenses (140m EUR)• Rose by 19% q-o-q and by 4% y-o-y, excluding FX effect

• Excluding FX effect and bank tax, operating expensesincreased by 11% q-o-q and by 5% y-o-y

• The q-o-q increase excluding FX effect and bank taxwas due mainly to traditionally higher marketingexpenses, professional fees and ICT expenses (thelatter due to a gradual acceleration of (strategic)projects execution) and restructuring charges

• The y-o-y decrease excluding FX effect and bank taxwas attributable primarily to increased IT expenses andrestructuring charges

• Cost/income ratio at 52% in 4Q15 and 48% in FY15

Impairments on L&R increased q-o-q due mainlyto higher impairments on SMEs and the extremelylow level in 3Q15

Impairment of 4m EUR on AFS shares and 2m ongoodwill

Credit cost ratio amounted to 0.18% in FY15

Impaired loans ratio dropped to 3.4%, 2.5% of which over 90 days past due

ASSET IMPAIRMENT

OPERATING EXPENSES

137 139 135147 141 140

159142

201458

4Q14

156

99

3Q14

144

9

2Q14

148

1Q14 1Q15

161

10

150

2Q15

-2

140

3Q15

7

166

4Q15

20

4

15

2

19

14

22

4Q154Q141Q14 2Q14 3Q14 1Q15 2Q15 3Q15

2011 2012 2013 2014 2015

CCR 0.37% 0.31% 0.26% 0.18% 0.18%

Bank tax Operating expenses

33

INTERNATIONAL MARKETS BUSINESS UNIT

CFO SERVICES

CRO SERVICES

CORPORATE STAFF

BELGIUMCZECH


MARKETS

34

International Markets BU (1): net result of 61m EUR in 4Q15 and245m in FY15. Profitability target more than achieved


VOLUME TREND

Total loans ** Of which mortgages Customer deposits*** AuM Life reserves

Volume 21bn 14bn 17bn 6.2bn 0.6bn

Growth q-o-q* 0% 0% +4% -3% +1%

Growth y-o-y 0% +1% +15% +2% +8%

NET RESULT

Amounts in m EUR

61

92

68

24

-7

28

-175

-28

1Q14 2Q14 3Q14 4Q152Q15 3Q151Q154Q14

Net result: 61m EUR, despite 28m EUR bank taxes• Profit breakdown for International Markets: 14m EUR for

Slovakia, 42m EUR for Hungary, 3m EUR for Bulgaria and3m EUR for Ireland.

• Q-o-q results were characterised by slightly higher netinterest income, stable net fee and commission income,lower result from financial instruments at fair value, norealised gains on AFS assets, higher non-life insurancesales and lower life insurance sales, a decrease in net otherincome, higher costs and loan loss impairment charges

35

International Markets BU (2): organic growth

The total loan book remained unchanged both q-o-q and y-o-y• On a y-o-y basis, the 4% decrease in Ireland (matured and impaired mortgage loans surpassed new production + deleveraging of the

corporate loan portfolio) and 7% decrease in Hungary (due to large repayments within the Corporate portfolio) were offset entirely bythe increases of 16% in Slovakia (due mainly to the continuously increasing mortgage portfolio) and 9% in Bulgaria

Total deposits were up by 4% q-o-q and by 15% y-o-y• The 4% q-o-q increase was accounted for chiefly by an increase of 8% in Hungary (especially on current accounts in retail and SME,

driven mainly by the low interest rate environment and K&Hs successful client acquisition strategy), of 3% in Slovakia (primarily incurrent accounts and corporates) and of 4% in Bulgaria

• The y-o-y rise of 15% was due mainly to the successful retail deposit campaign in Ireland. Deposits also grew solidly in all the othercountries (Slovakia, Hungary and Bulgaria)

* Organic growth excluding FX impact; q-o-q figures are non-annualised. Loan and mortgage figures after impairment charges

ORGANIC GROWTH*

TOTAL LOANS MORTGAGES DEPOSITS

q-o-q y-o-y q-o-q y-o-y q-o-q y-o-y

IRE -1% -4% -1% -2% +1% +26%

SL +4% +16% +5% +15% +3% +8%

HU -1% -7% 0% +3% +8% +12%

BG +3% +9% 0% +1% +4% +15%

TOTAL 0% 0% 0% +1% +4% +15%

36

International Markets BU (3): higher NII, despite lowerNIM

Net interest income (181m EUR)• Rose by 1% q-o-q and by 7% y-o-y

• The q-o-q increase was driven entirely by Ireland(lower allocated liquidity and funding costs)

• The y-o-y rise was attributable mainly to Ireland(lower allocated liquidity and funding costs) andSlovakia (consolidation of VB Leasing as of 3Q15 andgrowth of lending volumes), which more than offseta decrease in Hungary (lower reinvestment yield andsome Curia decisions, like for instance theconversion of FX mortgages)

Net interest margin (2.50%)• Down by 6 bps q-o-q and up by 6 bps y-o-y

• The q-o-q decrease was accounted for entirely bySlovakia and Bulgaria as a result of reduced lendingmargins

• The y-o-y increase was attributable entirely to aconsiderable rise in NIM in Ireland (mainly as a resultof lower allocated liquidity and funding costs)

NIM

NII

Amounts in m EUR

181180178172169

175173160

4Q14 1Q15 2Q15 3Q153Q142Q141Q14 4Q15

2.26%

2.56%

2Q15 3Q152Q14

2.60%2.50%

1Q14 4Q14

2.46% 2.53%2.44%

1Q153Q14 4Q15

2.50%

37

International Markets BU (4): stable net F&C income

Net fee and commission income (51m EUR)• Flat q-o-q and down by 4% y-o-y

• The q-o-q stabilisation was driven primarily byhigher fees from payment services in Hungaryentirely offset by higher commissions paid oninsurance sales in Bulgaria and higher fees paid onbanking services in Ireland

• The y-o-y decrease was driven mainly by:o lower fees from credit files and bank guarantees

and somewhat lower fees from assetmanagement in Slovakia (despite higher feeincome from leasing)

o higher commissions paid on insurance sales inBulgaria

o higher fees paid on banking services in Ireland

Assets under management (6.2bn EUR)• Decreased by 3% q-o-q, as a result of net outflows

(-4%), partly offset by a positive price effect (+1%)

• Y-o-y, assets under management rose by 2%, duefully to positive price effects

AuM*

F&C

Amounts in bn EUR

Amounts in m EUR

515153

505454

5149

1Q14 4Q152Q14 3Q154Q143Q14 2Q151Q15

6.2

4Q15

5.8 6.0

2Q14 4Q14

5.5

3Q151Q14

6.1

3Q14 1Q15

6.8 6.76.4

2Q15


38

International Markets BU (5): lower premium incomeand good combined ratio

Insurance premium income (gross earnedpremium) stood at 67m EUR• Non-life premium income (46m) rose by 18% y-o-y as

a result of:o improved sales in motor retail in Hungaryo good performance in MTPL and home insurance in

Slovakiao good performance in casco and motor retail in

Bulgaria

• Life premium income (21m)o fell by 21% q-o-q due chiefly to lower unit-linked

single premiums in Slovakia and a drop inguaranteed interest products in Bulgaria (as 3Q15was very strong)

o rose by 10% y-o-y driven mainly by higher unit-linked single premiums in Slovakia

Combined ratio at a good 95% in FY15. Thecombined ratio for FY15 breaks down into 97%for Hungary, 88% for Slovakia and 97% forBulgaria


PREMIUM INCOME(GROSS EARNED PREMIUM)

Amounts in m EUR

37 38 39 39 39 41 43

22 22 21 19 23 1927

46

21

60

2Q14 3Q15 4Q15

6770

4Q143Q14

58 6062

2Q151Q15

60

1Q14

59

FY9M

96%

1Q

88%95%93% 95%

1H

97%89%

95%

2014 2015

Life premium income Non-Life premium income

39

International Markets BU (6): higher operating expensesand impairments, excellent credit cost ratio

Operating expenses (184m EUR)• Rose by 8% q-o-q and fell by 4% y-o-y

• Opex without bank tax rose by 6% q-o-q driven chiefly by Hungary(higher staff and ICT expenses) and Ireland (higher generaladministrative expenses)

• The 9% y-o-y decrease of opex without bank tax was driven by:o Hungary, as 4Q14 was impacted by one-off expenseso Lower ICT expenses in Slovakia

• C/I ratio stood at 65% in 4Q15 and 66% in FY15. Adjusted forspecific items, the C/I ratio amounted to 71% in 4Q15 and 66% inFY15

Impairments on L&R (26m EUR)• Rose q-o-q owing mainly to Ireland, Slovakia (one large corporate

file) and Hungary (impairments on real estate in 4Q15 and write-backs in 3Q15)

• Fell sharply y-o-y driven mainly by Ireland (16m EUR in 4Q15compared with 41m EUR in 4Q14) and Hungary (as 4Q14 wasimpacted by higher impairments on some large corporate files)

Credit cost ratio of 0.32% in FY15

Impaired loans ratio dropped to 29.8%, of which 16.0% over 90 days past due

ASSET IMPAIRMENT

OPERATING EXPENSES

Amounts in m EUR

141 140 142171

148 145 148

78

25 24

20 79

25 23

156

28165

2Q14

166

3Q141Q14 3Q152Q15

171

219

184

4Q15

226

191

1Q154Q14

170

28

12

28

16

72

63

84

64

1Q14 2Q14 4Q14 1Q15 2Q153Q14 3Q15 4Q15

Loan book

2011CCR

2012CCR

2013CCR

2014CCR

2015CCR

IM BU 25bn 2.26% 4.48% 1.06% 0.32%

- Ireland- Hungary- Slovakia- Bulgaria

14bn5bn6bn1bn

3.01%4.38%0.25%

14.73%

3.34%0.78%0.25%0.94%

6.72%1.50%0.60%1.19%

1.33%0.94%0.36%1.30%

0.34%0.12%0.32%1.21%

Bank tax Operating expenses

40

Ireland (1): already profitable in FY15

Irish economic growth has moved onto a stronger trajectory, with GDPgrowth of about 7% in 2015

Improvement in domestic spending supporting jobs growth, which

reduced unemployment to 8.8% at end 2015

Economic conditions supportive of solid Irish housing market withrecovery now becoming established outside Dublin

Customer Deposits (Retail & Corporate) net inflows of 0.1bn EUR in 4Q15,resulting in a deposit portfolio of 5.1bn EUR (compared with 5.0bn EUR in3Q15). Full year growth in 2015 of Customer Deposits amounted to 27%y-o-y

Loan loss provisions amounted to 16m EUR in 4Q15 compared to 9m EURin 3Q15 (increase driven by model adjustments). Coverage ratio increasedfrom 40% in 3Q15 to 41% in 4Q15

Looking forward, we are maintaining our guidance for Ireland, namely:

• continued profitability on an annual basis

• loan loss provisions at the lower end of the 50m-100m EUR range forFY16

LOAN PORTFOLIO €

OUT-STANDING

€

IMPAIRED LOANS

€

IMPAIRED LOANS PD

10-12

SPECIFIC PROVISIONS

€

IMPAIRED LOANS

PD 10-12 COVERAGE

Owner occupied mortgages

9.1bn 3.1bn 34.6% 1.0bn 31%

Buy to let mortgages

2.6bn 1.8bn 68.4% 0.7bn 38%

SME /corporate 1.1bn 0.7bn 64.6% 0.4bn 61%

Real estate- Investment- Development

0.9bn0.3bn

0.7bn0.3bn

77.9%100%

0.4bn0.2bn

52%84%

Total 13.9bn 6.6bn 47.3% 2.7bn 41%

The Impaired portion of loans increased significantly in 4Q13 due to the reassessment of the loan book. KBC’s definition of impaired loans includes PD 10-12. PD 10 is considered as unlikely to pay exposure.

PROPORTION OF HIGH RISK AND IMPAIRED LOANS

7.2%20.1%

30.9%

52.1%47.0%

High Risk Performing (PD 8-9 probability of Default >6.4%)

Impaired Loan (PD 10-12)

5.4%

52.6%50.2%

4.7%8.2%

52.0%

10.2%

51.3% 50.3%

8.4%8.2% 9.2%

48.7%

9.5%

47.3%

41

Retail portfolio Impaired portfolio fell by roughly 0.2bn EUR q-o-q due to a

combination of property sales and improvement in the portfolioperformance. This was in line with previous quarter (reduction of0.2bn EUR q-o-q and 0.7bn EUR y-o-y)

Coverage ratio for impaired loans increased to 34.4% in 4Q15 (from 33.0% in 3Q15)

Overall exposure has decreased due to a reduction of the impaired book, partly offset by new mortgage production

Ireland (2): Portfolio analysis

Corporate loan portfolio Impaired portfolio has reduced by roughly 50m EUR q-o-q.

Reduction driven mainly by continued deleveraging of theportfolio (reduction of 0.2bn EUR y-o-y)

Coverage ratio for impaired loans has increased to 61.8% in4Q15 (from 60.9% in 3Q15)

Overall exposure has dropped by 0.4bn EUR y-o-y

‘Forborne’ loans (in line with EBA Technical Standards) comprise loans on a live restructure or continuing

to serve a probation period post-restructure/cure to Performing.

4Q15 Retail Portfolio

PD Exposure Impairment Cover %

PD 1-8 5,922 25 0.4%

Of which non Forborne 5,873

Of which Forborne 49

PD 9 838 42 5.0%

Of which non Forborne 235

Of which Forborne 604

PD 10 2,733 620 22.7%

PD 11 1,455 539 37.0%

PD 12 728 535 73.5%

TOTAL PD1-12 11,676 1,759

Specific Impairment/(PD 10-12) 34.4%

Pe

rfo

rmin

gIm

pa

ire

d

4Q15 Corporate Loan Portfolio

PD Exposure Impairment Cover %

PD 1-8 541 4 0.8%

PD 9 45 5 11.8%

PD 10 560 211 37.6%

PD 11 335 195 58.2%

PD 12 770 624 81.0%

TOTAL PD1-12 2,251 1,040

Specific Impairment/(PD 10-12) 61.8%

Impa

ired

Perf

.

42

GROUP CENTRE

CFO SERVICES

CRO SERVICES

CORPORATE STAFF

BELGIUMCZECH


MARKETS

43

Group Centre: net result of 334m EUR

Net result: 334m EUR 4Q15 was impacted by a gain of 765m EUR as a result of the

liquidation of KBC Financial Holding, partly offset by 341m EURgoodwill impairments

The net result for the Group Centre comprises the results comingfrom activities and/or decisions specifically made for grouppurposes (see table below for components)

The q-o-q deterioration pro forma* was attributable mainly to:o An increase of 48m EUR in operating expenses in 4Q15 due

partly to the traditionally seasonal effect in 4Q15 and thedelayed partial shift of the benefit of low opex in 3Q15 atGroup Centre to the Business Units

o 25m EUR impairments on ‘other’ (of which 20m EUR on theHungarian Data Center)

NET RESULT

Amounts in m EUR

-2

-57-54-29

-72 -90

1353

334

3Q15 4Q15

51

4Q141Q14 2Q14

-2

3Q14 2Q151Q15

-67

5

-341

765

BREAKDOWN OF NET RESULT AT GROUP CENTRE

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

Group item (ongoing business) -81 -52 -48 -31 11 -36 -18 -422

- Operating expenses of group activities -22 -19 -7 -26 -19 -15 0 -62

- Capital and treasury management -38 -11 -1 4 5 7 0 0

o/w net subordinated debt cost -39 -26 -9 -9 -9 -10 -9 -9

- Holding of participations -22 -25 -34 -17 -17 -26 -18 -15

o/w net funding cost of participations -10 -11 -11 -8 -7 -7 -7 -6

- Other -1 4 -4 8 41 -2 0 -346

Ongoing results of divestments and companies in run-down 6 -8 -17 -4 2 -22 16 756

Legacy & OCR 10 29 114 -20 - - - -

Total net result at GC -67 -29 51 -54 13 -57 -2 334

Group CentreDeconsolidated entities

GW impairmentsImpact KBC FH

* Excluding the gain on KBC FH and the goodwill impairments

44

NET PROFIT – BELGIUM NET PROFIT – CZECH REPUBLIC

296

377414

348

1,216

2015

1,564

2014

1,516

1,102

2013

1,570

1,193

2012

1,360

1,064

FY15 ROAC: 26%

Amounts in m EUR

467 435 408 423

114119 121 119

2015

542

2014

528

2013

554

2012

581FY15 ROAC: 37%

NET PROFIT –INTERNATIONAL MARKETS

-731

-242

-122

184

-7-175

-260-182

2013 2014

245

2012

-853

61

-18

2015

FY15 ROAC: 12%

95 105

174

49 34

58

-41

38

232

2014

-3

2015

144

2013

139

2012

NET PROFIT – INTERNATIONAL MARKETS EXCL. IRELAND

Overview of results based on business units

9M4Q 4Q 9M

9M4Q 9M4Q

FY15 ROAC: 18%

45

KBC Group

Section 3

Strong solvency andsolid liquidity

46

Strong capital position

Phased-in Basel 3 CET1 ratio at KBC Group (Danish Compr)

10.25% regulatoryminimum

1.1%

9.6%

1.1%

2.2%

12.9% 13.2%

1Q14

1.1%

2.2%

14.4%

2.2%

9.9%

1.2%

1H14 FY14

11.0%

2.3%

1.1%

9M14

14.0%

10.6%

2.3%

11.4%

9M15

2.4%

1.2%

17.2%

13.3% 13.7%

14.7%2.4%

1.2%

16.9%

1Q15 1H15 FY15

15.2%

YES Phased-in B3 CET1 ratio w/o YES and penalty on YESPenalty on YES

Common equity ratio (B3 phased-in) of15.2% based on the Danish Compromise atend 2015, which clearly exceeds the newminimum capital requirements set by the ECB(9.75%) and the NBB (0.5%)*, i.e. anaggregate 10.25% for 2016

* As announced by the NBB the systemic buffer (CET1 phased-in of 0.5% in 2016 under the Danish Compromise) will gradually increase over a 3-year period, reaching 1.5% in 2018

Fully loaded Basel 3 CET1 ratio at KBC Group (Danish Compr)

11.25% pro forma regulatory minimum

1.1%

9.0%

1.1%

2.1%

12.2% 12.9%

1Q14

1.1%

2.1%

14.3%

2.2%

9.7%

1.1%

1H14 FY14

11.0%

2.2%

1.1%

9M14

13.7%

10.4%

2.2%

11.7%

9M15

2.3%

1.2%

17.4%

13.2% 14.0%

14.9%2.3%

1.2%

16.7%

1Q15 1H15 FY15

14.9%

YES Fully loaded B3 CET1 ratio w/o YES and penalty on YESPenalty on YES

A pro forma fully loaded common equity ratiotranslation to 11.25% was clearly exceededwith a fully loaded B3 common equity ratioof 14.9% based on the Danish Compromise atend 2015

47

Fully loaded Basel 3 leverage ratio

Fully loaded B3 leverage ratio, based on thecurrent CRR legislation (which was adaptedduring 4Q14):• 5.4% at KBC Bank consolidated level

• 6.3% at KBC Group level

9M14

4.8%5.1%

1H151Q15

4.9% 4.8%5.0%

FY14 FY159M15

5.4%

Fully loaded Basel 3 leverage ratio at KBC Bank

Fully loaded Basel 3 leverage ratio at KBC Group

1H15

0.8%

5.6%

1Q15

0.4%

9M15

0.4%

5.4%

0.8%

6.9%6.3%

6.7%

FY15

6.3%

0.4%

0.9%

6.4%

0.4%

FY14

6.4%

5.1%

0.9%0.9%

4.7% 5.2%

0.4%

9M14

6.0%

FL B3 leverage ratio excl. YES and penalty on YESPenalty on YES YES

48

KBC maintains a minimum total capital ratio of 17%*

• Minimum CET1 target of11.25% fully loaded (SREPof 9.75% and DomesticSIFI buffer of 1.50% fullyloaded)

• AT1 of 1.5%

• Minimum T2 target of 2%

• Minimum total capital ratio of 17.0%

Total capital ratioof 19.8% phased-in

11.25%

1.57%

2.57%

14.87%

1.66% AT1

2.99% T2

2017e fully loaded

1.50% AT1

2.25% additionalcapital

2.00% T2

2015 phased-in

15.16% CET1

2015 fully loaded

Total capital ratioof no less than 17.0%

fully loaded

Will be filled up with T2, depending on the actual CET1

position

* Basel 3, Danish compromise

Total capital ratioof 19.0% fully loaded

49

Solid liquidity position (1)

KBC Bank continues to have a strong retail/mid-cap deposit base in its core markets – resulting in a stablefunding mix with a significant portion of the funding attracted from core customer segments & markets

64%70% 69% 73% 75% 73% 73%

8%

8%9%

9% 8% 9% 8%8%

7%7%

8%

7%

7%

8%8%10%9%5%5%

5%4%6%8%

2%

2%3%

FY12 FY14FY13

3%

2%

3%

2%3%

FY09 FY11

0%

3%3%

3% 100%

FY15FY10

Funding from customers

Total equity

Debt issues placed with institutional investors

Net secured funding

Net unsecured interbank funding

Certificates of deposit

21%

7%1%

71%

Government and PSE

Debt issues in retail network

Mid-cap

Retail and SME

73% customer

driven

50

KBC maintains a solid liquidity position, given that:

• Available liquid assets are more than 3.5 times theamount of the net recourse on short-term wholesalefunding

• Funding from non-wholesale markets is stable fundingfrom core-customer segments in core markets

NSFR at 121% and LCR at 127% by the end of FY15

• Both ratios were well above the minimum target of at least105%, in compliance with the implementation of Basel 3liquidity requirements

Solid liquidity position (2)

1 Liquidity coverage ratio (LCR) is based on the Delegated Act requirements, while the NetStable Funding Ratio (NSFR) is based on KBC’s interpretation of current Basel Committeeguidance

Ratios FY14 FY15 Target

NSFR1 123% 121% >105%

LCR1 120% 127% >105%

Short term unsecured funding KBC Bank vs Liquid assets as of end December 2015 (bn EUR)

* Graphs are based on Note 18 of KBC’s quarterly report, except for the ‘available liquid assets’ and‘liquid assets coverage’, which are based on the KBC Group Treasury Management Report

(*)

17,7 18,4 18,5 17,4 15,6

59,1 60,965,0

62,958,5

333%

332%

352%362%

376%

4Q14 1Q15 2Q15 3Q15 4Q15Net Short Term Funding Available Liquid Assets Liquid Assets Coverage

51

KBC Group

Section 4

4Q 2015 wrap up

52

4Q 2015 wrap up

Strong commercial bank-insurance results in our core countries

Successful underlying earnings track record

Solid capital and robust liquidity position

53

KBC Group

Section 5

FY 2015 key takeaways

54

FY 2015 key takeaways for KBC Group

STRONG BUSINESS PERFORMANCE IN FY15Good net result of 2,639m EUR in FY15, impacted by a gain of 765m EUR as a result of the liquidation of KBC Financial Holding, partly offset by344m EUR goodwill impairments.

Excluding these two items, net result amounted to 2,218m EUR in FY15:o Good commercial bank-insurance franchises in our core markets and core activitieso Y-o-y increase in customer loan and deposit volumes in most of our core countries o Slightly higher net interest income, despite pressure on net interest margino Net fee and commission income increased by 7% y-o-y; AuM increased by 12% y-o-yo Higher net gains from financial instruments at fair value (excluding impact KBC FH), realised AFS gains and net other incomeo Excellent combined ratio (91% in FY15). Increase in sales of non-life insurance products, but decline in sales of life insurance productso Cost/income ratio (55% in FY15) adjusted for specific items (one of which was the impact of the liquidation of KBC FH) o Excellent level of loan loss provisions. Loan loss provisions in Ireland amounted to 48m EUR in FY15, fully in line with guidance (lower end of

the 50m-100m EUR range). We are maintaining our guidance for Ireland, namely the lower end of the 50m-100m EUR range for FY16

SOLID CAPITAL AND ROBUST LIQUIDITY POSITIONSo Common equity ratio (B3 phased-in) of 15.2% based on the Danish Compromise at end 2015, which clearly exceeds the new minimum capital

requirements set by the ECB (9.75%) and the NBB (0.5%), i.e. an aggregate 10.25% for 2016. The B3 fully loaded common equity ratio stood at14.9% based on the Danish Compromise at end 2015

o At the end of 2015, KBC repaid the full outstanding tranche of 2bn EUR of remaining state aid plus a penalty of 1bn EUR to the Flemish RegionalGovernment, well ahead of the official deadline of 2020.

o Fully loaded B3 leverage ratio, based on current CRR legislation, amounted to 6.3% at KBC Groupo Continued strong liquidity position (NSFR at 121% and LCR at 127%) at end 2015

DIVIDEND PROPOSAL:o As guided, no dividend will be proposed to the AGM for the 2015 accounting yearo As of the 2016 accounting year, the target for the dividend payout ratio (including the coupon paid on AT1) is at least 50%

1. Any dividend payment will be subject to the usual approval of the regulator

55

Looking forward to 2016

Looking forward, management envisages:

• Continued stable and solid returns for the Belgium & Czech Republic Business Units

• With 245m EUR profit in FY15, the International Markets BU more than achieved its profitability target, whichwas to become at least profitable as of FY15

• As per guidance already issued, profitability in Ireland expected to continue for the FY16…

• …moreover, we are maintaining our guidance on impairments for Ireland, namely the lower end of the50m-100m EUR range for FY16

• A phased-in B3 common equity ratio of minimum 10.25% for 2016

• LCR and NSFR of at least 105%

• Dividend payout ratio (including the coupon paid on AT1) ≥ 50% as of FY2016*

* Subject to the approval of the General Meeting of Shareholders

56

KBC Group

Annex 1

FY 2015 performance of KBC Group

57Amounts in m EUR

NET RESULT

765

-344

2,2181,756

2014 2015

61,762

2,639

Net result of 2,639m EUR in 2015 increased by 50% y-o-y

• Net result was positively impacted by a one-off P&L gain of 765mEUR as a result of the liquidation of KBC Financial Holding, partlyoffset by 344m EUR goodwill impairments

• Excluding these items as mentioned above, net result in 2015increased by 26% y-o-y to 2.2bn EUR, mainly as a result of:

o High quality revenue generation (slightly higher net interestincome and 7% higher net fee & commission income), next tolower net result from FIFV, higher realised AFS gains, higher netother income and higher result from non-life insurance afterreinsurance

o Strict cost control excluding bank taxes. Sharply higher banktaxes, partly due to contributions to the new European SingleResolution Fund

o Lower impairments, despite 2014 benefited from a largerelease of impairment on the participation in ADB and itsreconsolidationDeconsolidated entitiesGW impairments

Impact KBC FH

+50%

FY 2015 net result rose by 50% y-o-y to 2,639m EUR

+26%

58

Net interest income• On a comparable basis (excluding deconsolidated entities), net

interest income rose by 1% y-o-y, despite lower reinvestmentyields and a shift of savings to mutual funds

• NII contribution of banking activities rose by 2% y-o-y, whileNII contribution of insurance activities fell by 6% y-o-y

• On a comparable basis, loan volumes increased by 3% y-o-y,as an increase of 8% y-o-y in the Czech Republic BU and 3%y-o-y in the Belgium BU was only partly offset by a decrease of34% y-o-y in the Group Centre

• Deposit volumes also rose by 5% y-o-y on a comparable basis:the y-o-y increases in the Belgium BU (+5%), in the CzechRepublic BU (+6%) and in the International Markets BU (+15%)were partly offset by a 17% decrease in the Group Centre(mainly due to KBC Ifima reimbursements)

Net interest margin (2.02%)• Decreased by 6 bps y-o-y• Lower reinvestment yields and increased hedging losses on

previously refinanced mortgages were only partly offset byrate cuts on savings accounts, higher margins on refinancingsand lower funding costs

NIM

NII

2015

2.02%

2014

2.08%

Amounts in m EUR

636675771

2014

49

-14

4,308

3,511

2015

87

4,311

3,597

+0%

-6bps

NII - dealing room


NII - insurance contribution

NII - contribution of holding-company /group

NII - banking contribution

+2%

-6%

* Loans to customers, excluding reverse repos (and not including bonds)** Customer deposits, including debt certificates but excluding repos. Please be aware of the significant impact of calling most of the hybrid tier-1 instruments and maturing wholesale debt

VOLUME TRENDExcluding FX effect Total loans * Of which mortgages Customer deposits** AuM Life reserves


Growth y/y +3% +3% +5% +12% +1%

Customer deposit volumes excludingdebt certificates & repos +6% y-o-y

Net interest income slightly up, net interest margin under pressure

59

Strong net fee and commission income and AUM

Strong net fee and commission income• Increased by 7% y-o-y excluding deconsolidated

entities

• This increase was driven mainly by the BelgiumBusiness Unit (+11% y-o-y) owing to highermanagement fees on mutual funds and increasedfees from credit files and bank guarantees(benefitting from the refinancing of mortgageloans), only partly offset by higher commissionspaid on insurance sales and lower entry fees fromunit-linked life insurance products

Assets under management (209bn EUR)• Rose by 12% y-o-y owing to net inflows (+8%) and

a positive price effect (+4%)

Amounts in m EUR

AUM

F&C

-262-247

1,945

1,678

-5

1,573

2015

8

2014

1,814

-2

+7%

209186

20152014

+12%

F&C - deconsolided entities

F&C - banking contributionF&C - contribution of holding-company/group

F&C - insurance contribution

60

Higher non-life insurance sales and excellent combined ratio

Sales of non-life insurance products• Up by 5% y-o-y on a comparable basis mainly

thanks to a good commercial performance in allmajor product lines in our core markets

The non-life combined ratio at FY15 stood atan excellent 91%, a strong improvementcompared to FY14 (as FY14 was negativelyimpacted by hailstorms in Belgium)

Amounts in m EUR


1,2821,342

2014 2015

+5%


FY9M

94%86%

93% 89%82%

89%

1H1Q

93% 91%

20152014

61

Lower life insurance sales, but higher VNB

Sales of life insurance products• Down by 5% y-o-y on a comparable basis

• The decline in sales of unit-linked products wasattributable mainly to the small number of newlylaunched tranches/campaigns, the insurance tax and ashift towards AM products (all factors occurring in theBelgium Business Unit). Furthermore, sales ofguaranteed interest products decreased y-o-y as aresult of the low rate of guaranteed interest

• Sales of unit-linked products accounted for just 40% oftotal life insurance sales

VNB• Rose by 23% y-o-y to 116m EUR due to the switch in

sales to more profitable products (e.g. mortgage-linked insurance)

LIFE SALES

Amounts in m EUR

785 722

1,107

2014

1,8921,793

1,071

2015

Unit-linked productsGuaranteed interest products

VNB (Life)*

0

20

40

60

80

100

120

20%

0%

15

5

25

10

30

4.8%

2014 restated**

116.4

6.1%

94.4

2015

VNB/PVNBP (%)VNB (m EUR)

* Around 46% of the total VNB is generated through the inclusion of the expected future profits arising from KBC Asset Management and KBC Bank** VNB of 2014 has been restated because of the switch to solvency 2 capital and the full inclusion of intragroup banking and asset management income from KBC Insurance Belgium and CSOB Poj CZ• VNB = Value of New Business = present value of all future profits attributable to the shareholders from the new life insurance policies written during the year• VNB/PVNBP = VNB at point of sale compared with the Present Value of New Business Premiums. This ratio reflects the margin earned on total premiums

-5%

62

Lower FV gains, but higher gains realised on AFS assets and other net income

The lower y-o-y figure for net gains fromfinancial instruments at fair value wasattributable entirely to the impact of theliquidation of KBC FH. Note a sharply positivechange in ALM derivatives (101m EUR in FY15compared with -201m EUR in FY14)

Gains realised on AFS assets came to 190mEUR (mainly on Belgian AFS assets)

Other net income amounted to a high 297mEUR in FY15, higher than the normal run rateof roughly 200m EUR due to, among otherthings, the settlement of old legal files, realestate gains, a release from the previouslybooked Curia provision and from (previouslyannounced) divestments in the Group Centre

FV GAINS

Amounts in m EUR


OTHER NET INCOME

-201 -156

391269

101

37

227

2014

214

2015

190

150

2014 2015

297

94

20152014

-6%

+27%

+216%

Liquidation KBC FH Legacy & OCR M2M ALM derivatives Other FV gains

63

Operating expenses up, but good cost/income ratio

Cost/income ratio (banking) at 55% in FY15adjusted for specific items (one of which was theimpact of the liquidation of KBC FH)

• Operating expenses increased by 2% y-o-y due mainlyto:o higher bank tax (+23% y-o-y to 417m EUR, partly due

to the contributions to the new European SingleResolution Fund)

o higher pension costs in Belgiumo higher ICT investments into the strategic programme

of KBC Group (digitalisation, mainly in Belgium andthe Czech Republic)

OPERATING EXPENSES

Amounts in m EUR

4173394326

2015

3,890

3,473

2014

3,818

3,410

Opex

Legacy & OCR


Bank tax

+23%

+2%

64

Higher impairment charges, but sharply improved credit cost and impaired loans ratio

Significantly higher impairment charges• Total impairments rose by 48% y-o-y due entirely to

goodwill impairments

• Loan loss provisions decreased by 44% y-o-y to 323mEUR, mainly thanks to Ireland (198m EUR in FY14compared with 48m EUR in FY15), Group Centre andHungary

The credit cost ratio sharply improved from 0.42%in FY14 to 0.23% in FY15. The credit cost ratioimproved in each business unit, except for theCzech Republic Business Unit (which stabilised y-o-yat a low level of 0.18%)

The impaired loans ratio dropped to 8.6%, of which4.8% over 90 days past due

ASSET IMPAIRMENT

IMPAIRED LOANS RATIO

CCR RATIO

FY13 FY15

0.82%

0.23%

FY11

0.42%

0.91%

1.21%

0.71%

FY10 FY14FY12

323

-109

573

20152014

746

506

27 15

34

344

45

9.9%

5.5%

10.2%

3.8%

6.0% 4.8%

FY14FY13

4.4%4.2%

FY15

8.6%

+48%

Impaired loans ratio of which over 90 days past due

Impairment on other


Impairment on AFS assets

Impairment on goodwill Impairment on L&R

-44%

65

KBC Group

Annex 2

Company profile

66

Business profile

KBC is a leading player (retail and SME bank-insurance, private banking, commercial and local investment banking) in Belgium and its 4 core countries in CEE

BREAKDOWN OF ALLOCATED CAPITAL BY BUSINESS UNIT AT 31 DECEMBER 2015

Group Centre

6%

International Markets21%

Czech Republic

15%

Belgium 59%

67

BE CZ SK HU BG

Loans and deposits

Investment funds

Life insurance

Non-life insurance

Well-defined core markets provide access to ‘new growth’ in Europe

1. Excluding group insurance. Including group insurance, market share of life insurance amounted to 13% at the end of 2015

2. Source: KBC data, February 2016

MARKET SHARE (END 2015)

21% 19%11% 10%

3%

18%7%26%

40%

7%17%1

12%4%4%

10%5%3%

7%9%

BE CZ SK HU BG

% of Assets

2015

2016e

2017e

1%3%3%14%

69%

2.7%2.8%3.2%4.5%

1.4%

2.5%2.4%3.2%2.5%1.5%

2.4%2.7%3.2%2.3%1.5%

REAL GDP GROWTH OUTLOOK FOR CORE MARKETS2

Macroeconomic outlookBased on GDP, CPI and unemployment trendsInspired by the Financial Times

IRELAND UK

BELGIUM

NETHERLANDS

GERMANY

CZECH REP

SLOVAKIA

HUNGARY

BULGARIA

GREECE

ITALY

PORTUGAL

SPAIN

FRANCE

KBC Group’s core markets

and Ireland

68

Loan loss experience at KBC

FY15CREDIT COST RATIO



FY 2012CREDIT COST RATIO

AVERAGE ‘99 –’15

Belgium 0.19% 0.23% 0.37% 0.28% n/a

Czech Republic

0.18% 0.18% 0.26% 0.31% n/a

International Markets

0.32% 1.06% 4.48%* 2.26%* n/a

Group Centre 0.54% 1.17% 1.85% 0.99% n/a

Total 0.23% 0.42% 1.21%** 0.71% 0.52%

Credit cost ratio: amount of losses incurred on troubled loans as a % of total average outstanding loan portfolio

* The high credit cost ratio at the International Markets Business Unit is due in full to KBC Bank Ireland. Excluding Ireland, the CCR at this business unit amounted to 108 bps in FY13

** Credit cost ratio amounted to 1.21% in FY13 due to the reassessment of the loan books in Ireland and Hungary

69

Key strengths

Well-developed bank-insurance strategy and strong cross-selling capabilities

Strong commercial bank-insurance franchises in Belgium and the Czech Republic with stable and solid returns

Turnaround potential in the International Markets Business Unit

Successful underlying earnings track record

Solid capital and robust liquidity position

70

Shareholder structure

Roughly 40% of KBC shares are owned by a syndicate of core shareholders, providing continuity to pursue long-termstrategic goals. Committed shareholders include the Cera/KBC Ancora Group (co-operative investment company),the Belgian farmers’ association (MRBB) and a group of industrialist families

The free float is held mainly by a large variety of international institutional investors

SHAREHOLDER STRUCTURE AT END 2015

59.8%

MRBB

Free float

11.5%Cera

18.5%

2.7%

Other core

7.6%

KBC Ancora

71

KBC Group going forward:To be among the best performing retail-focused institutions in Europe

KBC wants to build on its strengths and be among Europe’s best performing retail-focused financial institutions. This will be achieved by:

• Strengthening our bank-insurance business model for retail, SME and mid-cap clients in our core markets, in a highly cost-efficient way

• Focusing on sustainable and profitable growth within the framework of solid risk, capital and liquidity management

• Creating superior client satisfaction via a seamless, multi-channel, client-centric distribution approach

By achieving this, KBC wants to become the reference in bank-insurance in its core markets

72

Summary of the financial targets at KBC Group levelas announced at our Investor Day in June 2014

Based on adjusted figures

1. Excluding marked-to-market valuations of ALM derivatives2. 2016 minimum phased-in CET1 ratio of 10.25% set by the ECB (9.75% minimum CET1) in combination with NBB’s systemic buffer (0.5% minimum in 2016, gradually

increasing over a 3-year period and reaching 1.5% in 2018) under the Danish compromise

Targets… by…

CAGR total income (‘13-’17)1 ≥ 2.25% 2017

CAGR bank-insurance gross income (‘13-’17) ≥ 5% 2017

C/I ratio ≤ 53% 2017

Combined ratio ≤ 94% 2017

Common equity ratio (phased-in, Danish compromise)

≥ 10.25%2 2016

Total capital ratio(fully loaded, Danish compromise)

≥ 17% 2017

NSFR ≥ 105% 2014

LCR ≥ 105% 2014

Dividend payout ratio ≥ 50% 2016

73

KBC Group going forward: An optimised geographic footprint

Strengthen current geographic footprint

• Optimise business portfolio by strengthening current bank-insurance presence through organic growth or through acquisitions if possible.

• Strive for market leadership (top 3 bank/top 4 insurance) in core countries by 2020

• First priority for Ireland is to become profitable from 2016 onwards (already achieved in 2015). As of then, all available options (organically grow a profitable retail bank, build a captive bank-

insurance group or sell a profitable bank) will be considered

No further plans to expand beyond current geographic footprint

KBC Group will consider acquisition options, if any, to strengthen current geographic bank-insurance footprint,

Clear financial criteria for investment decision-making, based on:

Solid capital position of KBC GroupInvestment returns in the short and mid termsNew investment contributing positively to group ROE

74

KBC Group going forward: An optimised geographic footprint

Become a reference in bank-insurance in each core country

Through a locally embedded bank-insurance business model and a strong corporate culture, creating superior client satisfaction

With a clear focus on sustainable and profitable growth

75

KBC wants to keep its options open

Solid capital generation 2Q14-2017

Accelerate the repayment of state aid (+ penalties) by year-end 2017 at the latest: roughly 1/3 of capital available in 2Q14-2017

Increase dividend payout ratio (including coupon

for YES and AT1) to ≥ 50% from financial year 2016 onwards. Given the current solvency buffer (above 10.5% B3 CET1) and given no dividend for financial year 2015: roughly 1/3 of capital to 2Q14-2017

Invest in the business (organic growth and potential

small add-on M&A under very strict financial criteria) and deal with regulatory uncertainties: roughly 1/3 of capital to 2Q14-2017

The excess capital can be returned to the shareholders if no value-added business investments are found

Multi-year distribution: Planned employment of capital 2Q14-2017(current capital buffer + capital generation 2Q14-2017)

33.3%

33.3%

33.3%

100.0%

Business investments & regulatory uncertainties

Available excess capital

Dividends and coupon for YES & AT1

Repayment of state aid (+ penalties)

76

KBC Group

Annex 3

Other items

77

Sectorial breakdown of outstanding loan portfolio (1)(143bn EUR*) of KBC Bank Consolidated

Services

4%Finance & insurance

Distribution

Authorities

8%

3%

7%

14% Rest

3%

Building & construction

2%Automotive

Private Persons42%

Real estate

6%

11%

Agriculture, farming, fishing

1.0%

Oil, gas & other fuels

Machinery & heavy equipment

Shipping

Hotels, bars & restaurants

1.3%

1.1%

1.0%

0.9%Food producers

0.8%

Chemicals4.5%

Other sectorsMetals

Electricity

1.6%

1.3%

* It includes all payment credit, guarantee credit (except for confirmations of letters of credit and similar export-/import-related commercial credit), standby credit and credit derivatives, granted by KBC to private persons, companies, governments and banks. Bonds held in the investment portfolio are included if they are corporate- or bank-issued, hence government bonds and trading book exposure are not included* Outstanding amount includes all on-balance sheet commitments and off-balance sheet guarantees

78

Geographical breakdown of the outstanding loan portfolio (2)(143bn EUR*) of KBC Bank Consolidated

Belgium

56.6%

0.6%

4.4%

3.1%Slovakia

Hungary

Ireland

7.7%

Other W-Eur 0.5%

Other CEE

1.5%

North America

0.8%

1.8%Rest

Asia

9.6%

Czech Rep.

13.3%

Bulgaria

* It includes all payment credit, guarantee credit (except for confirmations of letters of credit and similar export-/import-related commercial credit), standby credit and credit derivatives, granted by KBC to private persons, companies, governments and banks. Bonds held in the investment portfolio are included if they are corporate- or bank-issued, hence government bonds and trading book exposure are not included* Outstanding amount includes all on-balance sheet commitments and off-balance sheet guarantees

79

Impaired loans ratios, of which over 90 days past due


6.3%

1Q14

10.3%10.6%

5.2%5.5%

4Q15

8.6%

5.3%6.0%

4Q14

4.8%

2Q15

9.9%9.0%

6.0%

2Q14

5.5%

1Q15

9.6%

3Q14 3Q15

9.3%

10.5%

Impaired loans ratio *

of which over 90 days past due **

2.5%

3.7%

3.1%2.7%

4.0%

2.9%

1Q15

2.5%

2Q15

3.0%

3.4%

4.2% 4.1%

2Q14

3.1%

4Q143Q14

3.4%3.5%

3Q151Q14

3.8%

4Q15

2.6%

3Q15

34.6%

4Q14

35.4%

4Q15

33.4%

17.9%

2Q14

31.4%29.8%

16.0%20.8%

1Q14

19.7%

1Q15

18.4%

2Q15

20.0% 19.0%

3Q14

32.9%34.8% 34.1%

17.0%

BELGIUM BU

4.8%

1Q14

2.5% 2.6%

4.3%

2.4%

2Q15

2.2%

3Q14

4.1%

2Q14

2.4%

3Q15 4Q15

4.6%4.2%

1Q15

3.8%

2.5%

4Q14

2.5%

4.6%

2.2%

4.0%

KBC GROUP

* Impaired loans ratio : total outstanding impaired loans (PD 10-12)/total outstanding loans** of which total outstanding loans with over 90 days past due (PD 11-12)/total outstanding loans

80

Cover ratios


BELGIUM BUKBC GROUP

* Impaired loans cover ratio: total impairments (specific) for impaired loans / total outstanding impaired loans (PD10-12)** Cover ratio for loans with over 90 days past due: total impairments (specific) for loans with over 90 days past due / total outstanding PD11-12 loans

60.3%

4Q15

44.8%

3Q15

57.9%

43.9%

2Q15

57.8%

42.9%

1Q15

57.6%

42.4%

4Q14

57.1%

41.7%

3Q14

53.6%

40.5%

2Q14

49.8%

39.2%

1Q14

50.7%

39.0%

Cover ratio for loans with over 90 days past due

Impaired loans cover ratio

53.6%

4Q15

65.1%

3Q15

67.1%

54.2%

2Q15

66.6%

53.4%

1Q15

67.1%

52.9%

4Q14

63.9%

54.2%

3Q14

61.3%

50.0%

2Q14

61.5%

51.7%

1Q14

63.2%

51.9%

2Q15

43.6% 44.7%

60.4%

4Q15

44.0%

56.5%

3Q15

57.6%

1Q15

58.3%

43.4%

4Q14

63.1%

42.4%

3Q14

56.0%

41.1%

2Q14

54.6%

40.6%

1Q14

57.9%

40.3%

3Q15

55.6%

2Q15

41.7%45.1%

1Q14

38.2%

2Q14

54.5%

40.4%

55.2%

39.8%

52.7%

1Q154Q14 4Q15

43.0%

58.1%

36.4%

50.1%

39.3%

3Q14

45.4%

36.6%

81

State aid position fully paid back by the end of 2015

KBC made accelerated full repayment of 3.0bn EUR of state aid to the Belgian Federal Government inDecember 2012 and accelerated repayment of 1.17bn EUR of state aid to the Flemish Regional Governmentmid-2013, approved by the NBB

At the beginning of 2014, KBC accelerated the repayment of 0.33bn EUR (plus penalty), and as such saved 28mEUR in coupon payments

At the end of 2015, KBC repaid the full outstanding tranche of 2bn EUR of remaining state aid plus a penalty of1bn EUR to the Flemish Regional Government, well ahead of the official deadline of 2020

Jan 2012 Dec 2012 2013 2014

Total remaining

amount

7.0bn EUR 6.5bn EUR 3.5bn EUR 2.33bn EUR 2bn EUR

BelgianFederal

Government

Flemish Regional

Government

3.5bn EUR3.0bn EUR

0.5bn1 EUR

3.0bn2 EUR

3.5bn EUR 3.5bn EUR 3.5bn EUR2.33bn EUR

1.17bn3 EUR

2.0bn EUR

1. Plus 15% penalty amounting to 75m EUR2. Plus 15% penalty amounting to 450m EUR3. Plus 50% penalty amounting to 583m EUR4. Plus 50% penalty amounting to 167m EUR5. Plus 50% penalty amounting to 1 000m EUR

0.33bn4 EUR

2015

0 EUR

2bn5 EUR

82

Full restated capital position without state aid

Common equity ratio (B3 phased-in) of15.2% based on the Danish Compromise atend 2015, which clearly exceeds the newminimum capital requirements set by the ECB(9.75%) and the NBB (0.5%)**, i.e. anaggregate 10.25% for 2016

The B3 fully loaded common equity ratiostood at 14.9% based on the DanishCompromise at end 2015

* Pro forma assuming full state aid repayment (principal + penalty)** As recently announced by the NBB the systemic buffer (CET1 phased-in of 0.5% in 2016 under the Danish Compromise) will gradually increase

over a 3-year period, reaching 1.5% in 2018

Basel 3 CET1 ratio (both fully loaded and phased-in)at KBC Group based on the Danish Compromise*

10.25% regulatoryminimum for 20169.7%

1Q14 1H14

9.0%

1H15

14.9%

9M15

13.7%14.0%

FY15

15.2%

9.6%

10.4%11.0%

9M14

11.4%

13.3%

9.9%

FY14

13.2%

1Q15

11.7%11.0%

10.6%

Fully loaded B3 CET1 ratio Phased-in B3 CET1 ratio

83

Fully loaded B3 CET1 based on the Danish Compromise (DC)From 3Q15 to 4Q15

Jan 2012 Dec 2012 2014-2020

4Q15 (B3 DC)

89.1

4Q15 impact

2.5

3Q15 (B3 DC**)

86.5

DELTA AT NUMERATOR LEVEL (BN EUR)

DELTA ON RWA (BN EUR)

* Includes the q-o-q delta in DTAs on losses carried forward, IRB provision shortfall, deduction re. financing provided to shareholders, translation differences, etc

** Includes the RWA equivalent for KBC Insurance based on DC, calculated as the book value of KBC Insurance multiplied by 370%

Fully loaded B3common equity ratio ofapprox. 14.9% at end2015 based on theDanish Compromise(DC)

A pro forma fullyloaded common equityratio translation to11.25% was clearlyexceeded

Delta in AFS revaluation

reserves

0.10.1

Pro-rata accrual

dividend & state aid coupons

Other*Remeasurement of defined

benefit obligations

Liq KBC FH

0.1

B3 CET1 at end 4Q15 (DC)

0.3

4Q15 net result excl

liq KBC FH & imp on GW

0.4

Repayment YES + penalty

-3.0

B3 CET1 at end 3Q15 (DC)

15.1

Dividend payment KBC Ins to KBC Group

13.2

0.2-0.0

84

Overview of B3 CET1 ratios at KBC Group

Method Numerator Denominator B3 CET1 ratio

FICOD*, phased-in 13,503 90,841 14.9%

FICOD, fully loaded 13,508 92,565 14.6%

DC**, phased-in 13,242 87,343 15.2%

DC, fully loaded 13,247 89,067 14.9%

DM***, fully loaded 12,103 83,245 14.5%

* FICOD: Financial Conglomerate Directive** DC: Danish Compromise*** DM: Deduction Method

85

Given the current regulatory framework, KBC Group is comfortable with:

• 22.6% risk-weighted TLAC*

• 8.6% leveraged TLAC

• 13.9% MREL*

22.6% TLAC as % of RWA

1.6%

MREL (as % of total liabilities)

TLAC (as % of RWA) TLAC (as % of leverage exposure)

1.0%

4.8%

3.6%

2.5%

14.9%0.6%

6.0%

1.5%1.4%1.0%

5.7%

0.6%

Senior unsecured debt, 2.5% of RWA

T2 eligible TLAC (excl. T2 with 1y remaining maturity)

Other MREL eligible liabilities > 1y

CET1

AT1

8.6% TLAC as % of leverage

exposure

13.9% MREL as % of total

liabilities

Comfortable bail-in buffer

* TLAC: Total loss-absorbing capacity / MREL: Minimum Required Eligible Liabilities

86

P&L volatility from ALM derivatives

ALM derivatives (swaps and options) are used to hedge the interest rate risk of the loan & deposit portfolios. This creates an accounting mismatch between derivatives (at market value) and hedged products (at amortised cost)• Options are used to hedge the caps/floors that KBC is obliged by law to include in Belgian mortgages

Most of this mismatch is removed with IFRS hedge accounting

A part of the ALM derivatives has not been included in any hedge accounting structure for different reasons:• Option hedging for mortgage loans: no hedge accounting possible given the dynamic hedging strategy used

• Part of the ALM interest rate derivatives has not been included in a hedge accounting structure, due to the offsetting effect with AFS bonds impact on capital ratios (which is not the case with valuation changes of cash flow hedges due to the applied regulatory capital filter)

87

Open ALM swap positionProtecting stability of capital ratio

Keeping part of the ALM swaps outside of hedge accounting reduces the volatility of the capital ratios as shown below (Basel III fully loaded + Danish Compromise insurance deconsolidation)

Drawback is more volatility in P&L as revaluation of swaps recorded in P&L, whereas the revaluation of the AFS bonds is recognised in capital

AFS BondsOptions

AFS Bonds

Options

Open ALM Swaps Position

No Open ALM Swap Position Current Status

88

Government bond portfolio – Notional value

Notional investment of 48.8bn EUR in government bonds (excl. trading book) at end of 2015, primarily as aresult of a significant excess liquidity position and the reinvestment of insurance reserves in fixed-incomeinstruments

Notional value of GIIPS exposure amounted to 6.0bn EUR at end of 2015

Slovakia

4%

47%

Belgium

5%

Hungary

8%

Italy

France

4%

7%

3%Other

Czech Rep.

Portugal

Netherlands **Austria ** Ireland *

SpainGermany **

Poland*

1%

14%

END 2014(Notional value of 46.3bn EUR)

(*) 1%, (**) 2%

Italy

10%

5%

8%

Portugal *

Hungary

Other

SpainGermany **

5%

France

Netherlands *Ireland **

Austria **

5%

4%Slovakia

Poland**

2%

Belgium

Czech Rep.

41%

14%

END 2015(Notional value of 48.8bn EUR)

(*) 1%, (**) 2%

89

Government bond portfolio – Carrying value

Carrying value of 53.4bn EUR in government bonds (excl. trading book) at end of 2015, primarily as a result of a significant excess liquidity position and the reinvestment of insurance reserves in fixed-income instruments

Carrying value of GIIPS exposure amounted to 7.1bn EUR at end of 2015

* Carrying value is the amount at which an asset [or liability] is recognised: for those not valued at fair value this is after deducting any accumulated depreciation (amortisation) and accumulated impairment losses thereon, while carrying amount is equal to fair value when recognised at fair value

PortugalIreland **

Netherlands **Austria **

Germany **Spain

3%Other

7%

France 8%

Italy 4%

Slovakia5%

Hungary

4%

Poland *

1%

Czech Rep.

13% Belgium

47%

END 2014(Carrying value of 50.9bn EUR)

(*) 1%, (**) 2%

END 2015(Carrying value of 53.4bn EUR)

(*) 1%, (**) 2%

Ireland **Portugal *

Netherlands *Austria **

Germany **Spain

6%Other

7%

France 10%

Italy5%

Slovakia

5%

Hungary

4%

Poland **

2%

Czech Rep.

13%

Belgium

41%

90

25%

7%

12%

5%

36%

15%

Upcoming mid-term funding maturities

KBC Bank has overall a limited reliance on wholesale funding

Senior debt and subordinated Tier 2 spreads have moderatelynarrowed towards the end of 4Q15

KBC Bank has 6 solid sources of long-term funding:

• Retail term deposits

• Retail EMTN

• Public benchmark transactions

• Covered bonds

• Structured notes and covered bonds using the private placementformat

• T1 and T2 capital instruments issued at KBC Group level anddown-streamed to KBC Bank

Total outstanding = 18.99bn EUR

(Including % of KBC Group’s balance sheet)

1,0%1,1%

1,8%

1,2%

0,5%0,5%

0,7%

0,3%

0,1%0,1%

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

2016 2017 2018 2019 2020 2021 2022 2023 2024 >= 2025

Mill

ion

s EU

R

Breakdown of Funding Maturity Buckets

Senior Unsecured Subordinated T1 Subordinated T2 Contingent Convertible Covered Bond TLTRO

91

Credit spreads evolution

1 10NC5 Subordinated Tier 2 spread is depicted based on the right hand axis.

-30

20

70

120

170

220

-15

-5

5

15

25

35

45

55

65

75

85

Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15

Credit Spreads Evolution

2.5Y Senior Debt Interpolated 5Y Covered Bond Interpolated 10NC5 Subordinated Tier 21

92

Analysts’ coverage

Bank/broker Analyst Contact details Rating Target Price Upside

Situation as of 17 February 2016, based on a share price of 48.35 EUR

ABN Amro Jan Willem Knoll [email protected] = 55.00 14%

Alpha Value Farahad Moshiri [email protected] + 60.00 24%

Autonomous Farquhar Murray [email protected] + 68.20 41%

Bank of America Merrill Lynch Tarik El Mejjad [email protected] = 65.30 35%

Barclays Capital Kiri Vijayarajah [email protected] = 61.00 26%

Berenberg Andrew Lowe [email protected] + 64.00 32%

Citi Investment Research Andrew Coombs [email protected] + 76.00 57%

Credit Suisse Maxence Le Gouvello [email protected] = 62.10 28%

Deutsche Bank Benjamin Goy [email protected] = 61.00 26%

Exane BNP Paribas Guillaume Tiberghien [email protected] = 64.00 32%

HSBC Johannes Thormann [email protected] = 60.00 24%

ING Albert Ploegh [email protected] + 72.00 49%

JP Morgan Securities Paul Formanko [email protected] + 75.00 55%

Keefe, Bruyette & Woods Jean-Pierre Lambert [email protected] = 65.60 36%

KeplerCheuvreux Benoit Petrarque [email protected] + 70.00 45%

Mediobanca Robin van den Broek [email protected] + 68.00 41%

Morgan Stanley Bruce Hamilton [email protected] = 64.20 33%

Natixis Securities Alex Koagne [email protected] = 65.00 34%

Nomura Matthew Clark [email protected] = 59.00 22%

Oddo Julie Legrand [email protected] + 69.00 43%

Rabo Securities Cor Kluis [email protected] + 70.00 45%

Santander Patrick Lee [email protected] = 63.00 30%

Societe Generale Philip Richards [email protected] = 62.00 28%

UBS Anton Kryachok [email protected] = 62.00 28%

93

Glossary (1)

AQR Asset Quality Review

B3 Basel III

CBI Central Bank of Ireland

Combined ratio (non-life insurance)[technical insurance charges, including the internal cost of settling claims / earned premiums] + [operating expenses / written premiums] (after reinsurance in each case)

Common equity ratio [common equity tier-1 capital] / [total weighted risks]

Cost/income ratio (banking) [operating expenses of the banking activities of the group] / [total income of the banking activities of the group]

Cost/income ratio adjusted for specific items

The numerator and denominator are adjusted for (exceptional) items which distort the P&L during a particular period in order to provide a better insight into the underlying business trends. Adjustments include: • MtM ALM derivatives (fully excluded)• bank taxes (including contributions to European Single Resolution Fund) are included pro rata and hence spread over all quarters of the year instead of

being recognised for the most part upfront (as required by IFRIC21)• Up to the end of 2014, also Legacy & OCR was an important correction• One-off items (such as the impact of the liquidation of KBC FH)

Credit cost ratio (CCR)[net changes in individual and portfolio-based impairment for credit risks] / [average outstanding loan portfolio]. Note that, inter alia, government bonds are not included in this formula

EBA European Banking Authority

ESMA European Securities and Markets Authority

ESFR European Single Resolution Fund

FICOD Financial Conglomerates Directive

Impaired loans cover ratio [total impairments (specific) for impaired loans] / [total outstanding impaired loans]. For a definition of ‘impaired’, see ‘Impaired loans ratio’

Impaired loans ratio [total outstanding impaired loans (PD 10-11-12)] / [total outstanding loans]

Leverage ratio[regulatory available tier-1 capital] / [total exposure measures]. The exposure measure is the total of non-risk-weighted on and off-balance sheet items, based on accounting data. The risk reducing effect of collateral, guarantees or netting is not taken into account, except for repos and derivatives. This ratio supplements the risk-based requirements (CAD) with a simple, non-risk-based backstop measure

Liquidity coverage ratio (LCR) [stock of high quality liquid assets] / [total net cash outflow over the next 30 calendar days].

Net interest margin (NIM) of the group [net interest income of the banking activities] / [average interest-bearing assets of the banking activities]

Net stable funding ratio (NSFR) [available amount of stable funding] / [required amount of stable funding]

94

Glossary (2)

MARS Mortgage Arrears Resolution Strategy

MREL Minimum requirement for own funds and eligible liabilities

PD Probability of default

Return on allocated capital (ROAC) for a particular business unit

[result after tax, including minority interests, of a business unit, adjusted for income on allocated capital instead of real capital] / [average capital allocated to the business unit]. The capital allocated to a business unit is based on risk-weighted assets for banking and risk-weighted asset equivalents for insurance

Return on equity[result after tax, attributable to equity holders of the parent] / [average parent shareholders’ equity, excluding the revaluation reserve for available-for-sale assets]. If a coupon is expected to be paid on the core-capital securities sold to the Belgian Federal and Flemish Regional governments, it will be deducted from the numerator (pro rata)

TLAC Total loss-absorbing capacity

95

Contact informationInvestor Relations OfficeE-mail: [email protected]

www.kbc.comvisit for the latest update

mailto:[email protected]

http://www.kbc.com/

Documents

KBC Group Company presentation FY 2015 / 4Q 2015 · 6 Some specific remarks for 4Q15 • At the end of 2015, KBC repaid the full outstanding tranche of 2bn EUR of remaining state