3
KBC Bank & Insurance GroupKey features
Ranking Belgium 3rd fin.
group Bank 3rd Insurance (overall) 3rd
Europe : Bank (Tier-1 capital) 27 th : Group (market cap) 30 th
Staff 42 700 Belgium 20 700 Abroad 22 000
Customers in first home market (Belgium) +/- 3.5
million in second home market (Central Europe) +/- 5.7
million
Domestic network bank branches (KBC +CBC) 1 200 independent insurance agencies: 684
Worldwide presence 30 countries
4
Almanij NV
KBC Bank & Insurance
Holding NV
KBC Bank KBC Insurance
67.9%
100%100%
32% FreeFloat
KBC Asset Man45%
55%
KBC Bank & Insurance Group Group structure
Cera Holding Almancora Flemish Families MRBB9.3% 16.6%15.8%28.3%
FreeFloat
26%
5
KBC Bank & Insurance GroupOverall business characteristics
Good track record in profitability
Solid solvency ratio’s
Diversified but balanced business income
Good asset quality
Strong market shares
Success in bancassurance
Successful expansion in Central Europe
6
KBC Bank & Insurance GroupGroup profit and profitability
798
970
355 316
10221166
1998 1999 2000 2001 1Q01 1Q02
Net profit ROE
+12.8%
+21.6%
16.1%
20.5%23.3%In
mill
ions
of
EU
R
+20.2%
-12.3%
17.3% -11.1%
15.9%
7
KBC Bank & Insurance GroupSustained solid solvency ratios
2000
Bank Tier-1 ratio CAD ratio
Insurance (*) Solvency ratio
7.2%
11.5%
311%
9.5%
16.0%
307%
(*) excluding unrealized capital gains
1998
7.4%
12.8%
298%
1999 2001
8.8%
14.7%
318%
1Q 02
9%
14.9%
323%
8
KBC Bank & Insurance GroupStrong homebase for expansion abroad
Profit contributionby group entity
Insurance35% Holding - 3%
Normalized profit contribution by region
Banking 70%
USA 2.5%
Belgium 66%
West. Eur 17%
Cent. Eur 12%
Asia 2.5%
9
KBC Bank & Insurance GroupDiversified but balanced business income
Gross operat. income banking4 977 m EUR (FY 2001)
Net interest income 53%
Commission income
21%
Other incomebanking 8%
Gross premium earned insurance2 570 m EUR (FY 2001)
Trad. life 18%
Profit Fin.Transact. 18%
Non-life 34%
Unit-linked 48%
10
Good asset quality in banking
2000
Loan loss ratio Non performing ratio
0.38%
2.1%
0.40%
2.1%
1999 2001
0.36%
2.8%
1Q 02
0.34%
2.9%
12
KBC’s strategic intent
… creating sustainable value for shareholders
A bancassureur and financial service provider in Europe
… in a standalone position
Activity portfolio
Ambitious financial targets
Corporate scaleCapital generation
13
A focused but diversified activity portfolio
Focus on 4 activities- Retail bancassurance- Corporate services- Asset Management- Market activities
Focus on Europe- Belgium : home market- Central Europe : second home market- Western Europe : smaller countries/regions
Focus on local clients- Retail- SME- Selected corporates
Profit contribution (avg 2000-2001)
12% Central Europe
36% Retail
16% CorporateServices
9% Asset Management
12% Market Activities
15% Group
14
Strategic objectives per activity
Retail bancassurance Increase cross-selling in Belgium Creation of a second home market in Central Europe and implement bancassurance concept
Asset Management Increase AUM Expand distribution network
Market activities Create European corporate finance / brokerage platform for SME’s
Corporate Services Strategic reduction of risk weighted assets Scale down exposure on large multinationals Refocus on SME’s and a selection of larger corporates
15
Target Realized Q1 2002
ROE at group level
EPS growth
Cost/income ratio bank
Combined ratio insurer
min. Tier-1 ratio bank
min. CAD ratio bank
min. Solvency ratio insurer
20%
15% (1)
55% (2)
103% (2)
7%
11%
200%
15.9%
-11.8%
65.4%
102%
9%
14.9%
323%
Overall financial targets
(1) average over the period 2000-2004
(2) by 2004
16
Cost of capital
Focus on shareholder value
Retailbancassurance
Corporate services
Asset management
Market activities
Central Europe
TOTAL at operational level
TOTAL at group level
8.5%
10.5%
8%
11.5%
13%
10 %
-
ROE targetROE Targets per activity
20.0%
12.5%
13.0%
21.0%
15.0%
17%
20%
ROE target per activity based on 2 x cost of capital Reallocation of capital from activities with low or volatile ROE to
activities with high or stable ROE
(*)
(*)
(*) Interim target
17
Considerations on the level of corporate scale
Partnership, outsourcing Focus on retailing (less susceptible for scale effects) Focus on SME Risk avoidance, rational capital management Strongly tied up with local market / culture Low 'complexity' costs, cost efficient group structure
Non-evident scale effects on financial performance
Opportunities for a mid-scale player in Europe
Market cap. Tier-1 Cost/Income
EUR 5 – 10 bn10 – 15 bn15 – 20 bn20 – 30 bn30 – 50 bn
> 50 bn
6.7%7.2%6.5%8.1%7.7%7.4%
68%74%65%73%74%71%
(Source: Bloomberg, 65 – European banks / insurers)
18
External growth capacity
Group Capital Planning ( bn. EUR)
1Q02 2004 Hypothesis
Target Ratio Excess Dividend payout 40%
2002: 34% stake NLB
Potential increase participation Warta
Bank Tier 1 7.0% 9.0% 1.9 bn EUR
Insurance Solv. 200% 323% 0.5 bn EUR
Excess capital (strictu senso) 2.4 bn EUR 3.5 bn EUR
Unrealized capital gains (shares) Capital increase (dilution of Almanij to 51%) Additional leveraging holding
potential excess capital of 12 bn. EUR
(broad sense)
20
KBC Bank & Insurance Group Key future profit drivers
Full realization of merger in Belgium
Upside potential of bancassurance in Belgium
Development of second home market in Central Europe
Continue growth in Asset Management
21
Important merger effects on cost efficiency
57
122
205225
0
50
100
150
200
250
2002 2003 2004 2005
KBC Bank N.V. (Belgium) Target Start End Realised to date
Closure of bank branches 650 1999 2004 62%
Account migration (ICT-platform) All 2000 2003 81%
Headcount reduction 1 650 2001 2004 32%
Expected cost savings (m EUR)
22
Retail Bancassurance in Belgium
Market shares
Consumer credit : 26.1%
Home loans : 25.6%
Savings deposits : 20.0%
Savings certificates : 17.8% Investment funds : 29.3% Unit-linked : 20.2%
Traditional life : 5.5%
Non-life : 8.7%
Upside potential in insurance achieve level of banking market shares additional focus on SME’s for sale of insurance products
23
Retail bancassurance Belgium
171 000
555 000
762 000
1 527 000
Retail customers
Stable banking customers
Bancassurancecustomers
Market sharebanking20 à 25%insuranceca. 11%
Stable bancassurancecustomers
40%
15%11%
36%
50%
100%
Min. 3 banking products (*)
Min. 1 banking and 1 insurance
product (*)
Min. 3 banking and 3 insurance
products (*)
Immediatetargets
(*) out of a range of 6 banking products (current account, savings account, mortgage loan, credit card, …)
and 6 insurance products (car, home, health, life, …)
24
Strategy for Central Europe
Strategy Create a second homemarket in future EU member
countries
Focus on Countries with highest transition indices Banks with a significant market share and acceptable
asset quality Acquisitions of non-life insurance companies but
mainly greenfield operations for life insurance
Introduction of KBC’s bancassurance concept Acquired banks are to be universal banks with an
important retail activity Life insurance to be sold through banknetwork Non-life insurance mainly to be sold through agents
25
Acquisitions in Central Europe to dateKBC one of the leading financial groups
PolandKredyt BankAgropolisaWarta
Czech & Slovak Rep.CSOBCSOB Pojist’ovnaIPB Pojist’ovnaPatria
HungaryK&H Bank after mergerK&H LifeArgosz
66.5% 49.9% 40.0%
83.8%100.0% 65.0% 100.0%
59.0%50.0% 98.8%
Ownership to date
4537
127
1363156353
2732
30
Investmentin millions of EUR
Total investment : 2.8 bn EURTarget contribution to group profit for 2002 : 15%
5.5 %1 %
13 % non-life
18.5 %0.6% non-life
11% life/ 5% non-life
na
13 %2.1 %3.5 %
MarketShare
SloveniaNLB 34% 435 45 %
26
Growth potential Central Europe
Belgium1st home market
Central Europe2nd home market
- Hungary- Czech Rep.- Slovakia- Poland
- Slovenia
Gross operating income:expected annual growth to 2004 of ca. 20%
Planning assumptions: Increasing penetration
banking/insurance(currently 40-45% of EU-average)
Faster GDP-growth than EU (2002e: 2 times real EU-average)
Increase in market share via bancassurance concept
27
Medium-term targets
Be one of the major players in the region
Market shares:
Stand-alone ratio’s:
Group level ratio’s:
Banking 10%
Insurance 10% (Pol., Czech.) 5% (Hung.)
ROE 20%
C/I-ratio (banks) 55%
CAD-ratio (banks) 11-13%
Combined ratio (insurance companies) 98%
ROE circa 20%
Share in Group profit circa 20%
28
Asset ManagementFurther growth in assets under management
27.4
4.64.8
34.5
12.2
5.3
40.2
24.3
5.1
42.2
24.3
4.7
43
24.8
5.1
1998 1999 2000 2001 1Q02
36.8 (+18.3%)
51.9 (+41%)
In b
n.
EU
R
69.6 (+34.1%)
Private Banking Institutional funds
Mutual funds
% of total AUM 2000 2001 1Q02
71.1 (+2.2%)
7%34%59%
7%35%58%
72.9 (+2.5%)
7%34%59%
30
KBC Bank & Insurance GroupInvestor considerations
Strenghts Strong domestic market shares Diversified income Unique bancassurance concept Sound solvency ratios Good profitability track record
Opportunities Merger effects to materialize Strategy in Central Europe and
future return Investment of excess capital Low valuation
Weaknesses Still high cost/income ratio Low profitability of i.a.
corporate services Volatility of niche market
earnings
Threats Low free float High cost of capital Consolidation in Europe
31
19991998
Net profit
P/E
Gross dividend
Pay-out ratio
Net asset value
Price / NAV
2.69
25.0
1.09
40.6%
32.3
2.1
3.26
16.4
1.23
37.7%
33.8
1.6
2000
3.90
11.8
1.42
36.4%
35.2
1.3
KBC Bank & Insurance GroupKey figures per share
2001
3.39
11.1
1.48
43.6%
33.8
1.1
32
KBC Bank & Insurance Holding NVStock market info
Market cap : 12.5 bn. EUR
Number of outstanding shares : 302 000 000 Free float : 32 %
Listed on Euronext Brussels Included in following indices : Euronext 100,
Bel-20,Eurostoxx Financials, MSCI World Index, FTSE300 Financials
Sell-side analyst coverage : +/- 25 analysts
33
KBC Bank & Insurance GroupShareholder composition
Total number of shares : 302 000 000
Belg. instit. Invest. 8 %
Almanij 68 %
Unidentified 9 %
Other group cies. 3 %
Personnel 2 %
Belgian retail invest. 5 %
UK 3 %
USA 2 %