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KBC Bank & Insurance Group

KBC Bank & Insurance Group. General Investor Presentation June 2002. KBC Bank & Insurance Group. Profile Strategy Future Profit Drivers Investor Considerations. KBC Bank & Insurance Group Key features. Ranking Belgium 3rd fin. group Bank 3rd Insurance (overall) 3rd

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KBC Bank & Insurance Group

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  1. KBC Bank & Insurance Group General Investor Presentation June 2002

  2. KBC Bank & Insurance Group • Profile • Strategy • Future Profit Drivers • Investor Considerations

  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 • Staff42 700 • Belgium 20 700 • Abroad 22000 • 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 presence30 countries

  4. KBC Bank & Insurance Group Group structure Flemish Families MRBB Cera Holding Almancora 9.3% 28.3% 16.6% 15.8% Free Float 26% Almanij NV 67.9% KBC Bank & Insurance Holding NV Free Float 32% 100% 100% 55% 45% KBC Bank KBC Asset Man KBC Insurance

  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 +20.2% -12.3% +21.6% +12.8% In millions of EUR -11.1% 23.3% 17.3% 20.5% 16.1% 15.9%

  7. KBC Bank & Insurance GroupSustained solid solvency ratios 1Q 02 1998 1999 2000 2001 9% 14.9% 323% 7.4% 12.8% 298% 9.5% 16.0% 307% 8.8% 14.7% 318% • Bank • Tier-1 ratio • CAD ratio Insurance (*) • Solvency ratio 7.2% 11.5% 311% (*) excluding unrealized capital gains

  8. KBC Bank & Insurance GroupStrong homebase for expansion abroad Profit contribution by group entity Normalized profit contribution by region Insurance35% Cent. Eur 12% USA 2.5% Holding - 3% Asia 2.5% West. Eur 17% Banking 70% Belgium 66%

  9. KBC Bank & Insurance GroupDiversified but balanced business income Gross operat. income banking 4 977 m EUR (FY 2001) Gross premium earned insurance 2 570 m EUR (FY 2001) Net interest income 53% Non-life 34% Other incomebanking 8% Trad. life 18% Commission income 21% Profit Fin. Transact. 18% Unit-linked 48%

  10. Good asset quality in banking 1Q 02 1999 2000 2001 0.34% 2.9% 0.40% 2.1% 0.38% 2.1% 0.36% 2.8% • Loan loss ratio • Non performing ratio

  11. KBC Bank & Insurance Group • Profile • Strategy • Future Profit Drivers • Investor Considerations

  12. KBC’s strategic intent A bancassureur andfinancial service provider in Europe Activity portfolio … creating sustainable value for shareholders Ambitious financial targets … in a standalone position Corporate scale Capital generation

  13. Focus on 4 activities • Retail bancassurance • Corporate services • Asset Management • Market activities 15% Group 36% Retail 12% Market Activities 9% Asset Management 16% CorporateServices Focus on Europe - Belgium : home market - Central Europe : second home market - Western Europe : smaller countries/regions Focus on local clients - Retail - SME- Selected corporates A focused but diversified activity portfolio Profit contribution (avg 2000-2001) 12% Central Europe

  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. Overall financial targets Realized Q1 2002 Target 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% (1) average over the period 2000-2004 (2) by 2004

  16. Focus on shareholder value Cost of capital ROE target ROE Targets per activity 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 % - 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 Non-evident scale effects on financial performance (Source: Bloomberg, 65 – European banks / insurers) • 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 Opportunities for a mid-scale player in Europe

  18. External growth capacity • Unrealized capital gains (shares) • Capital increase (dilution of Almanij to 51%) • Additional leveraging holding potential excess capital of 12 bn. EUR(broad sense)

  19. KBC Bank & Insurance Group • Profile • Strategy • Future Profit Drivers • Investor Considerations

  20. KBC Bank & Insurance GroupKey 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 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 1527000 Retail customers 100% 762000 Min. 3 banking products (*) Stable banking customers 50% 555000 Min. 1 banking and 1 insurance product (*) Bancassurancecustomers 36% Market sharebanking20 à 25% insuranceca. 11% 40% 171000 Immediatetargets Min. 3 banking and 3 insurance products (*) Stable bancassurancecustomers 11% 15% (*) 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 mainlygreenfield 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 MarketShare Investmentin millions of EUR Ownership to date 5.5 % 1 % 13 % non-life 453 7 127 Poland Kredyt Bank Agropolisa Warta 66.5% 49.9% 40.0% 18.5 % 0.6%non-life 11% life/ 5% non-life na 1363 15 63 53 Czech & Slovak Rep. CSOB CSOB Pojist’ovna IPB Pojist’ovna Patria 83.8% 100.0% 65.0% 100.0% 13 % 2.1 % 3.5 % 273 2 30 Hungary K&H Bank after merger K&H Life Argosz 59.0% 50.0% 98.8% 45 % 435 Slovenia NLB 34% Total investment : 2.8 bn EUR Target contribution to group profit for 2002 : 15%

  26. Growth potential Central Europe • 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 Belgium 1st home market Central Europe2nd home market - Hungary - Czech Rep. - Slovakia - Poland - Slovenia

  27. Medium-term targets • Be one of the major players in the region • Market shares: • Stand-alone ratio’s: • Group level ratio’s:

  28. AssetManagementFurther growth in assets under management 72.9 (+2.5%) 71.1 (+2.2%) 69.6 (+34.1%) 51.9 (+41%) 36.8 (+18.3%) In bn. EUR % of total AUM 2000 2001 1Q02 Private Banking Institutional funds Mutual funds 7% 35% 58% 7% 34% 59% 7% 34% 59%

  29. KBC Bank & Insurance Group • Profile • Strategy • Future Profit Drivers • Investor Considerations

  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. KBC Bank & Insurance GroupKey figures per share 1998 1999 2000 2001 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 3.90 11.8 1.42 36.4% 35.2 1.3 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 UK 3 % USA 2 % Belg. instit. Invest. 8 % Unidentified 9 % Belgian retail invest. 5 % Personnel 2 % Other group cies. 3 % Almanij 68 %

  34. KBCBank & Insurance Group June 2002

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