1 / 27

KBC Group Sanford Bernstein Conference Merrill Lynch Conference 28 September 2005 - 5 October 2005

KBC Group Sanford Bernstein Conference Merrill Lynch Conference 28 September 2005 - 5 October 2005. Web site: www.kbc.com. Important information.

vanna
Download Presentation

KBC Group Sanford Bernstein Conference Merrill Lynch Conference 28 September 2005 - 5 October 2005

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. KBC GroupSanford Bernstein ConferenceMerrill Lynch Conference 28 September 2005 - 5 October 2005 Web site: www.kbc.com

  2. Important information • This presentation is provided for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any security • KBC believes that this presentation is reliable, although some information may be condensed or incomplete • This presentation contains forward-looking statements with respect to our earnings development involving assumptions and uncertainties. The risk exists that these statements may not be fulfilled and that future results differ materially. • By receiving this presentation, each investor is deemed to represent that it possesses sufficient expertise to understand the risks involved

  3. Introduction: strategic framework • The strategic framework entails: • Focused business scope: • Retail-, bancassurance- and wealth-management-oriented • Geographical focus on Belgium and CEE and selected Western European markets • Standalone basis: • no M&A ambitions (neither domestic, nor cross-border - neither as acquirer, nor as target) • however, opportunistic operational alliances possible in certain areas to generate cost advantages through scale (‘industralization’ of operations) • Solid level of financial strength/solvency • Attractive shareholder return, including steady dividend growth

  4. Introduction: business mix • KBC is a top bancassurer and asset manager in Belgium and has successfully expanded its operations in CEE-5, its 2nd home market • Recently, private banking has become more of a key focus. The PB business was expanded to include a Western European network. Selected other markets (mostly in W. Europe):- private banking- commercial banking (SME/corporate)- capital markets Belgium:- retail bancassurance- asset management- private banking- commercial banking (SME/corporate) CEE:- retail bancassurance- asset management- private banking- commercial banking (SME/corporate) Revenu - geographical breakdown(1H 2005)

  5. Business mix: growth profile HIGH Slovenia RetailBelgium Commercial banking Belgium Czech Rep. PrivatebankingBelgium Market share Hungary Slovakia Europeanprivate banking Internationalcommercialbanking Poland LOW LOW HIGH Market growth potential Based on KBC estimates • Main facts: • 70% of gross income is realized in markets with leading market positions (i.e. Belgium and most CEE countries) • An increasing share of income (currently 30%) is generated in high-growth markets (CEE) • Key strategic topics: • Topic 1: securing growth trend in (mature) Belgian market, given its size • Topic 2: further increasing share in high-growth markets, inter alia, by boosting market power in countries where KBC has sub-optimal scale (mainly Poland)

  6. Business mix: value profile BancassuranceCEE Private banking Belgium HIGH RetailbancassuranceBelgium Commerial bankingBelgium Retun on allocated capital International commercial banking Europeanprivate banking LOW LOW HIGH Allocated capital Based on selective 1H2005 data, adjusted for one-offs • Main facts: • 85% of capital employed is allocated to businesses yielding 20% or more (roughly twice the cost of capital) – no activity is value-destroying • On the other hand: 15% of total capital base (2.3 bn) is ‘immediate free surplus’ capital • Key strategic topics: • Topic 3: shifting European private banking into much higher gear • Topic 4: adequately employing excess capital

  7. Topic 1: drivers for growth, Belgium Do not underestimate market potential: KBC Group is well positioned: • Savings ratio amongst highest in the world (every year, ca. 15% of GDP flows into fin. assets) • Market highly receptive to cross-selling of AM & insurance, fueling strong growth trend in AM and life insurance business • Strong mortgage growth trend (ca. 10% per year) expected to continue, as residential property price levels are still below other European markets • After a temporary surge of price competition (late 2004/early 2005), epecially for interest-bearing products, pricing rationality is tending to be restored • Fee rates for retail banking services only 50% of European average (gradual increase expected) • Top-3 market position, esp. strong in Northern region (one of the wealthiest regions in the EU) • Innovative product offering in retail AM (steadily increasing market share over the past 10 yrs.) • Still high cross-selling potential for insurance products and well-performing bancassurance distribution model • Well-diversified revenue structure (50% fee income) and further increase in fee income targeted (e.g. in SME/corporate) • Of the top players, level of customer satisfaction is high(est)

  8. Mid-term financial outlook, Belgium

  9. Topic 2: growth drivers in CEE Strong market-growth momentum: KBC Group is well positioned: • Nom. GDP growth in 2005-07 at 6.5% yearly, outgrowing EMU by 3-3.5% • Ongoing catch-up in product penetration (currently, on avg., only 45% of the population has a bank account and 5% a mortgage loan) • Mortgage volumes growing at double-digit pace (up by 32%, annualized, in 1H05) • Financial sector could grow five-fold if financial assets to GDP were to reach current levels of S. Europe • Solid market position in retail and corporate businesses with nationwide branch networks • Competitive advantage in enhancing cross-selling of asset management and insurance products and well positioned in HNWI and private banking through epb know-how • Availability of capital within the Group for: • buy-out of third-party interests or selective bolt-on M&A • more aggressive organic growth in Poland since immediate M&A opportunies are not expected • Potential entrance into Romanian market

  10. Bancassurance fueling CEE earnings Cross-selling results are encouraging: Now the model is in place: • Transfer of know-how and streamlining of business processes and IT systems • Implementation of KBC’s distribution model and setting up of sales incentives and adequate sales approach • Unified management responsibility (joint management committee of bank and insurance) = competitive advantage relative to other CEE players

  11. Growth in AM fueling CEE earnings KBC is well positioned: • Strong appetite for ‘risk-free’ investments in the market, fully in line with KBC’s core competencies and successful track record in Belgium for capital-guaranteed funds • Cost/AUM below average (around 15 bps vs. 20 bps for Europe) = competitive advantage relative to other CEE players Results are encouraging: • AUM grew in 1H05 by 40%, annualized. Continued high growth expected in coming years • Via the funds business, new customers are being recruited. Existing customers who use deposits to buy funds replenish their deposit accounts after one year

  12. Mid-term financial outlook, CEE

  13. Dual brand strategy: network-led vs. ‘independent boutique’ Growth drivers: network trade-up, extension of product offering and hiring of private bankers Topic 3 : value drivers in private banking Belgium W. Europe onshore W. Europe offshore CEE Business model: integrated private banking business in selected European markets focusing on clients with >€1m of investable assets. The network has been built over the past few years via separate acquisitions. Operations need to be further integrated. Total assets currently amount to 76 bn (Sep-05) • Small today, but strong market growth expected (>15% p.a.) • Strengthening a network-led model, leveraging Belgian experience • Integrated network of local pure-play private banking brands (boutique style) • Priority of reducing costs by creating synergies within a central ‘hub’ • Growth drivers: increased share of wallets, hiring of PB managers and opportunistic M&A • Low-growth market, focus on profitability (leveraging the hub) • If possible, steer repatriated assets to KBC onshore AUM 18 bn AUM 27 bn AUM 3 bn AUM 28 bn AUM expected to growth at 9% CAGR on an organic basis. Opportunistic acquisitions may imply investments of 150-250 m per year

  14. Merger synergies in private banking Source of benefits* Cross sales Newbusiness Pro-cure-ment People Costsavoided Total Optimi-zation The KBC-Almanij merger enables synergies to be achieved via cost-cutting and cross-selling.The total benefit amounts to 75 m euros (pre-tax) per year (50% will already be realized as of 2006) €m * Synergy benefits defined as peak recurring annual increase in pre-tax bottom-line result (2009 - peak level)

  15. Centralized global custody services, processing/settlement of international payments and processing of financial market transactions (for all major asset classes i.e., Cash, Bonds, Equities, Funds, Structured Products) Full harmonization of major IT tools Front-office support: product sourcing and design capability and ‘Centres of Excellence’ Back office: great majority of local back-office costs eliminated Dealing rooms: a minimum level of local market activities will remain IT: only local IT support will remain Significant reduction in other overheads The private banking hub Organizational impact Our endgame vision of the hub Cost/income ratio to be improved from 67% (2004) to 55%

  16. Mid-term financial outlook, private banking *14% Belgium, 15% CEE, 0% offshore and 10% W. Eur. onshore

  17. Topic 4: valuing excess capital • Immediate free surplus capital amounts to 2.3 bn, primarily to be spend in CEE • KBC currently conducting ‘due diligence’ for BCR in Romania. Outcome expected to be known in the coming months 1 Regulatory capital under Basel I/Solvency I (incl. hybrids and minority interests, after elimination of intangibles and goodwill), based on capital position as at 30/03/2005 2 Difference between available capital and internal minimum level 3 Surplus capital excl. expected adverse IFRS impact on Tier-1 banking as of 2006 (ca. 0.6 bn), unrealized gains on tied-up assets (insurance, 0.8 bn) and value of Agfa-Gevaert

  18. Conclusion: growth and value proposition Third-party buy-outsAcceleration of bancassurance/AMAssessment of entrance into Romania (by end 2005) HIGH Slovenia Higher share of walletHigher margin products Commercial banking Belgium Czech Rep. PrivatebankingBelgium RetailBelgium Market share Hungary Selective approachEfficiency enhancement Slovakia Europeanprivate banking Internationalcommercialbanking Poland Organic growth accelerationM&A (mid-term) LOW LOW HIGH Market growth Based on KBC estimates • Attractive growth and value proposal within current franchises. • Main focus is on execution - shift to completely new markets/business lines unlikely • Use of excess capital highly dependent on outcome of privatization round in Romania

  19. Conclusion: growth and value proposition • The ‘growth and value’ outlook is reflected in ambitious mid-term financial targets: Outlook for 2005: On the basis of the solid 1H 05 earnings and the prevailing view regarding the relevant economic and financial parameters, KBC’s 2005 net profit is expected to exceed the10% growth level, amounting to more than 2 bn euros

  20. Foto gebouw Appendices

  21. Market cap ranking in Euroland DJ Euro Stoxx Banksconstituents August 2005

  22. Shareholder structure CERA/Almancora27.1% Free float47.3% MRBB11.6% Other committed shareholders 11.7% (own shares: 2.3%, including ESOP hedge) Situation as at 30 June 2005 • KBC is majority-owned by a group of committed shareholders, thereby providing continuity for the pursuit of long-term strategic goals • Core shareholders include the Cera/Almancora Group (co-operative investment company), a farmers’ association (MRBB) and a syndicate of industrialist families

  23. KBC’s presence in CEE Other22% Retail 57% SME/Corp 21% 25% 2005 H1 Share of business segments in gross income, CEE Banking CEE profit contribution to KBC Group

  24. Group income statement, 1H 2005 Excl. intrasegment eliminations

  25. Areas of activity overview, 1H 2005 Excl. non-allocated results

  26. Key figures: Share price: 66.6 euros Net asset value: 40.0 euros 1H 2005 EPS: 3.50 euros Analysts’ estimates: 1 2005 EPS consensus: 5.97 (+33% y/y) 2006 EPS consensus: 6.24 (+4% y/y) 2005-06 P/E: 10.9 Recommendations: Positive: 42% Neutral: 42% Negative: 16% Valuation Valuation relative to peer group: Weighted and unweighted averages of IBES data : 2 OTP, Komercni, Pekao, BPH PBK, BRE 3 BA-CA, Erste, Unicredit, Soc. Gen., Intesa BCI 4 Top-20 DJ Euro Stoxx Banks 5 Fortis, Dexia Situation as at 18 August 2005 5 Smart consensus collected by KBC (18 estimates)

  27. Contact information Investor Relations OfficeLuc CoolNele KindtMarina Kanamoriinvestor.relations@kbc.com Surf to www.kbc.com for the latest update.

More Related