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KBC Group

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Solid solvency levels and credit ratings. 17. Do not underestimate the market: ... Backed by its strong solvency position and enhanced profitability, KBC Group ... – PowerPoint PPT presentation

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Title: KBC Group


1
KBC Group
  • Company presentation Spring 2005

Web site www.kbc.comTicker codes KBC BB
(Bloomberg) KBKBT BR (Reuters)ISIN code
BE0003565737
2
Contact information
  • Investor Relations Office Luc CoolNele
    KindtMarina KanamoriTel. 32 2 429 49 16
    investor.relations _at_ kbc.com
  • Surf to www.kbc.com for the latest update.

3
Disclaimer
  • 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.
  • Although the statements of fact in this
    presentation have been obtained from and are
    based on sources that KBC believes to be
    reliable, KBC does not guarantee their accuracy,
    and any such information may be condensed or
    incomplete.
  • This presentation contains forward-looking
    statements with respect to our strategies and
    earnings development. By their nature, these
    forward-looking statements involve numerous
    assumptions, uncertainties and opportunities. 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 is a sophisticated
    investor and possesses sufficient investment
    expertise to understand the risks involved.

4
Table of contents
  • Company profile
  • Strategy and earnings drivers
  • 2004 Financial highlights
  • Impact of IFRS
  • Information on capital management
  • Closing remarks on valuation

5
Foto gebouw
1
Company profile
6
Considerable scale in Euroland
Euroland top-30 banks, ranking by market cap
KBC Group 24 bn euros
DJ Euro Stoxx Banks constituents as at 14 March
2005
7
Shareholder structure
Free float
CERA/Almancora27.3
Free float46.6
MRBB11.6
Other committed shareholders 11.4
KBC(own shares 3.3)
Situation as of 3-Mar-05
Situation as of 31-Dec-04(before merger with
Almanij)
Including ESOP hedge
  • KBC is majority-owned by a group of committed
    shareholders providing continuity to pursue
    long-term strategic goals
  • Core holders include the Cera/Almancora Group
    (co-operative investment company), a farmers
    association (MRBB) and a syndicate of
    industrialist families

8
Business portfolio
Revenue breakdown (2004 pro forma new Group,
excl. group items)
Gevaert
Capital markets
International corporate
Belgium
Europeanprivate banking
CEE
  • KBC is a top bancassurer and asset manager in
    Belgium and has successfully expanded its
    operations in CEE
  • Thanks to the merger with Almanij (March 2005),
    the private banking activities were expanded to
    include a Western-European network. PB has become
    a more pronounced key focus
  • KBC is also active be it rather selective in
    corporate banking (mostly in W. Europe) and
    financial markets. As investments in CEE have
    increased, operations in these areas became
    relatively less important

9
Top-3 player in Belgium
Market share
31-Dec-03
  • Consolidated banking landscape (80 of market
    held by top-4 banks)
  • Market highly receptive to cross-selling of AM
    insurance products (the bancassurance model
    dominates)

10
Top-3 player in the CEE region
International banks in CEE (by total assets, in
bn EUR)
Source RZB assets as at 31 Dec 03, ownership
structure as at 30 Jun 04
  • KBC Group is one of the largest international
    players in the region
  • Unlike the other players, KBC limits its presence
    to the EU Member States (Czech Republic,
    Slovakia, Hungary, Poland and Slovenia) and is
    active in both the banking and insurance fields

11
Top-3 position in the CEE region
Banking
Insurance
Czech RepublicMarket share 21 (No.
2)Inhabitants 10 mTotal assets18 bn EUR
Czech RepublicLife M share 8 (No. 5)Non-life
M share 4 (No. 6)
SlovakiaMarket share 6 (No. 4)Inhabitants 5
mTotal assets 2 bn EUR
SlovakiaLife M share 4 (No. 8)Non-life M
share 2 (No. 7)
HungaryMarket share 11 (No. 2)Inhabitants
10 mTotal assets 7 bn EUR
HungaryLife M share 3 (No. 7)Non-life M
share 4 (no 6)
PolandMarket share 5 (No. 8)Inhabitants 38
mTotal assets 5 bn EUR
PolandLife M share 2 (No. 7)Non-life M
share 12 (No. 2)
SloveniaMinority interest (34)Inhabitants 2
mMarket share 41 (No. 1)
SloveniaLife M share 6 (No. 5)
  • KBC Group invested 3.6 bn to achieve a
    prominent position in a growth market of 65 m
    inhabitants
  • Especially in Poland, KBC is looking for external
    growth (lack of scale)

12
European private banking network
NetherlandsTheodoor Gilissen Acquired in 03
participation 100
GermanyMerck Finck Co Acquired in 99
participation 100
UKBrown ShipleyAcquired in 89
participation 100
SwitzerlandKredietbank (Suisse)Historical
presence
BelgiumPuilaetco private bankersAcquired in
04 participation 100
FranceKBL France Acquired in 98
participation 100
LuxembourgKredietbank LuxembourgParent company
MonacoKB Luxembourg (Monaco)Historical presence
SpainBanco Urquijo Acquired in 98
participation 100
ItalyFumagalli SoldanAcquired in 01
participation 95
  • Since 98, KBC Group (KBL) has developed a
    private banking network throughout
    Western-Euope, anticipating erosion of its
    offshore activities in Luxembourg
  • AUM grew from 18 bn to c. 44 bn (appx. 70
    managed outside Luxembourg)

13
Solid performance
KBC pre-merger
Target
Dec 03
Dec 04
Dec 02
Profitability
Return on equity
13
13
16
18
8
1
10
54
EPS growth
Efficiency
Cost/income, banking
65
60
65
58
Combined ratio, insurance
96
95
101
95
Combined ratio, insurance, excluding reinsurance.
Solvency
Tier-1, banking
9.5
10.1
8.8
gt8
Solvency, insurance
316
389
320
gt200
Solvency, insurance, including unrealized gains.
14
Solid performance (pro forma)
KBC post-merger (pro-forma)
Dec 03
Dec 04
Dec 02
Profitability
Return on equity
12
10
14
26
2
29
EPS growth
Efficiency
Cost/income, banking
66
63
66
Combined ratio, insurance
96
95
101
Combined ratio, insurance, excluding reinsurance.
Solvency
Tier-1, banking
9.6
10.0
8.8
Solvency, insurance
316
389
320
Solvency, insurance, including unrealized gains.
Non-updated targets used by the KBC Bank and
Insurance Group before the merger with Almanij in
March 2005
15
Foto gebouw
2
Strategy and earnings drivers
16
Strategy headlines
  • Merger of KBC with parent company Almanij,
    following public bid on KBL European Private
    bankers (KBL epb'), in order to unlock
    additional value on the back of
  • increased visibility and liquidity
  • realization of group synergies
  • Flexibility to continue current strategies
  • Leverage on bancassurance model and private
    banking expertise
  • Core geographic focus on Belgium, CEE and private
    banking throughout Europe
  • Continued good prospects for Belgian market
  • CEE and European private banking to remain
    long-term earnings drivers
  • Continued quest for (cost) synergies, partly
    through intra- and cross-group co-sourcing for
    back-office processes
  • Balanced risk profile through diversified
    business portfolio
  • Solid solvency levels and credit ratings

17
Earnings drivers in Belgium - overview
Do not underestimate the market
KBC Group is well positioned
  • Consolidated banking market (80 of assets held
    by Top 4)
  • 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
  • Growth trend for mortgages, AM and life insurance
    business of about 10 per year expected to
    continu
  • Credit quality has proven to be solid over the
    cycle
  • Top-3 market position, esp. strong in Northern
    region (one of the wealthiest regions in the EU)
  • Innovative product offering in retail AM
    (steadily increasing market share throughout the
    past 10 yrs.)
  • Performing bancassurance distribution model (life
    reserves grew gt20 p.a. over last 3 yrs.)
  • Cost efficiency improvement potential (on the
    back of business process redesigning and
    co-sourcing of back offices processes with other
    banks)

18
Earning drivers in CEE - overview
Strong market growth momentum
KBC Group is well positioned
  • Nom. GDP growth in 2005 at 6.5, outgrowing EMU
    by 3.3
  • Ongoing catch-up in product penetration
    (currently, an avg. 45 for banking accounts and
    5 for mortgages)
  • Mortgage volumes growing at double-digit pace (up
    51 on avg. in 2004)
  • Financial sector could grow five-fold if
    financial assets to GDP were to reach current
    levels of S. Europe
  • Solid market position in retail and corporate
    businesses (excl. banking in Poland)
  • Competitive advantage in enhancing cross-selling
    of asset management and insurance products
  • C/I still on high side, allowing for further
    improvement
  • Adequately provisioned balance sheet (risks under
    control)
  • Geographical exposure entirely within EU,
    limiting risk substantially
  • Availability of capital within the Group

19
Above average GDP growth, CEE
Czech Republic
Slovakia
Real GDP growth inflation - KBC estimates
Real GDP growth inflation - KBC estimates
12.5
6.8
5.6
6.8
8.5
8.0
3.2
Hungary
Poland
Real GDP growth inflation - KBC estimates
Real GDP growth inflation - KBC estimates
10.7
8.9
7.7
8.1
8.3
6.5
20
Earnings drivers in private banking
Changing market environment
KBC Group is well positioned
  • Strong relationship-based approach, open
    architecture concept and add-on of the product
    expertise of KBC AM to the tailor-made services
    of KBL epb
  • Stringent compliance infrastructure, centrally
    monitored from Luxembourg
  • Greatly improved efficiency (implementation of
    large scale rationalization program), to be
    further fueled by the realization of merger
    synergies within an enlarged KBC Group
  • Shift in customer preference towards new
    investment concepts open architecture,
    alternative investments, financial planning..
  • Progressively growing requirements from
    regulators (increasing vulnerability of smaller
    players)
  • Pressure on profitability (although decent
    performance was seen again in Europe in 2004)

21
Foto gebouw
3
2004Financial highlights
22
Headlines Results KBC Bank Insurance (pre
merger) - Financial performance - Areas of
activity Results KBL epb Results
Gevaert Financial outlook for 2005 Merger
synergies update
Foto gebouw
23
Quick reminder
  • Until 31-Dec-04
  • As of 01-Jan-05

Almanij
KBCBank Insurance
Gevaert
KBLEuropean Private Bankers
KBC Bank
KBC Insurance
KBCAsset Management
KBC Group NV
KBCBank
KBCInsurance
KBCAM
KBLEuropean Private Bankers
Gevaert
24
Strong earnings momentum
KBC Bank Insurance
Net profit
in m EUR
57
  • Net profit FY2004 of 1 758 m
  • Strong year-on-year growth (57) and ROE (18),
    driven by solid revenue dynamics and successful
    risk- and cost management

Organic growth
25
Outperforming the market
KBC Bank Insurance
Peer group
CAGR 20
CAGR 6
  • Earnings growth at sustained high level compared
    to sector

DJ Euro Stoxx Banks universe
CAGR compound average growth rate
26
KBC Group (mergco)
Net profit
in m EUR
  • Pro forma net profit FY2004 of 1 682 m
  • Major differences with KBC Bank Insurances
    results
  • Elimination of gains on the sale of Almanij Group
    shares (82 m)
  • Add-on of earnings of KBL epb, however with the
    non-recognition through P/L of the use of the
    GFBR (130 m) net contribution of 63 m
  • Add-on of profit contribution of Gevaert (-36m) ,
    adversely impacted by theone-off divestment loss
    of Agfa Gevaert (81 m)

27
Simulated impact of IFRS standards
Impact on P/L -67 m
Impact on equity 426 m
in m EUR
in m EUR
Impact on KBC Mergcos 2004 pro-forma figures
28
Growing dividend
Dividend per KBC share
EUR
12
  • Gross 2004 dividend yield, relative to 2004
    average share price is 3.7 (subject to AGM
    approval)
  • Backed by its strong solvency position and
    enhanced profitability, KBC Group intends in
    future to continue its policy of paying out a
    steadily growing dividend

4.7 for ex-Almanij shares that were converted
to KBC shares
29
Headlines Results KBC Bank Insurance (pre
merger) - Financial performance - Areas of
activity Results KBL European Private
Bankers Results Gevaert Financial outlook for
2005 Merger synergies update
Foto gebouw
30
Key points
Premium growth, insurance
Top-line growth, banking
In m EUR
In m EUR
6
33 org
Investment return, insurance
Loan-loss ratio, banking
In bn EUR
- 50 bp
- 70bp
31
Key points
Combined ratio, non-life
Cost/income ratio, banking
- 1pp
- 5pp
Return on equity, insurance
Return on equity, banking
-1pp
8pp
32
Solid growth in banking revenues
FY 2004
Banking income (in m EUR)
  • Total FY04 income up 6 y-o-y
  • Sustained high commission income (10), mainly
    on the back of growth in investment management
    and to a lesser extent in corporate finance,
    bancassurance and payments services in CEE
  • Robust financial market activity (24), mainly
    in the first half of the year. Capital gains on
    investments (365m) in line with 2003
  • Interest income up 1 owing to volume growth.
    NIM slightly down to 1.67 from 1.73 in 2003
    (vs. 1.67 in 2002)
  • Strong Q4 thanks to a successful marketing
    campaign (investment products) in Belgium and
    normalized trading levels (after weak Q3)

6 011
5 756
5 655
NIM net interest margin
33
Favourable growth in banking assets
End of 2004
Customer loans(in bn EUR)
106.6
  • Customer deposits up 6
  • Customer loans up 7
  • Corporate book up 4 (down in 2003, partly due
    to impairments in Poland)
  • Solid mortgage growth

98.8
90.3
O/S outstanding.Chg in 2003 excl.
deconsolidation of Krefima
Excl. institutional activity
Note mortgage growth adjusted for currency
depreciations
34
Spread development
Interest margin, Belgium banking business
Spreads on outstanding loans,Belgium banking
business
trend
trend
35
Strong growth in premium income
FY 2004
Premium income (in m EUR)
  • Sustained robust growth in Life
  • Up 45 y-o-y in organic terms
  • Very strong in Belgium (47), outgrowing the
    market on the back of successful business model
    (market share up from 13 to 15, at 31 in
    unit-linked business)
  • Solid growth in CEE (28). Market share up in
    Hungary and Slovenia, down in Poland and CR.
  • Non-life up 5 in organic terms
  • Primary business in Belgium growing (7)
    slightly above claims inflation (stable market
    share)
  • Expansion in CEE premiums up 11 y-o-y in
    organic terms. Market share stable in Hungary and
    SR, down in Poland and CR.
  • Drop in reinsurance exposure(premium income -3
    y-o-y)

5 037
3 486
3 156
Extension of consolidation scope in 2004
36
Lower investment yields, insurance
Interest income, insurance
Total Investment income, insurance
capital gains on shares in 2004 4.75 on
market value of equity portfolio
37
Low loan-loss charges
FY 2004
Loan-loss provisions (in m EUR)
  • Loan-loss provisions at very low level (-71
    y-o-y)

676
465
199
Net specific provisions to average gross
customer loans
38
Favourable non-life claims charge
FY 2004
  • Favourable development in all markets

Claims ratio( of net premium income)
39
Banking expenses well controlled
FY 2004
Banking expenses (in m EUR)
3 695
3 751
3 636
  • Total cost basis down 2 y-o-y
  • In Belgium -4 y-o-y (-78 m), headcount reduced
    y-o-y by 800 FTEs
  • CEE -1 y-o-y (-9 m).In Poland, headcount
    reduced by 1 275 FTEs (exceeding initial target)
  • Elsewhere 6 (29 m), mainly related to
    trading bonuses
  • Cost/income ratio significantly improved from 65
    to 60
  • Q4 up 2 y-o-y (higer profit than anticipated
    resulting in higher bonus expenses) and 13 q-o-q
    (seasonality reasons and higher marketing costs)

Extension of consolidation scope in 4Q01
40
Reducing product complexity - update
Product simplification programme - banking,
Belgium
41
Co-sourcing initiatives - update
Joint venture with the DZ Bank Group for
cross-border payments
GE
BE
Transactions from DZ and its 1 200 co-operative
banks
12 m transactions p.a. from KBC's Belgian
banking activities
Fin-Force
shared processing platform for cross-border
payments transactions
Multi-bank platform based on high performance
straight-through processing and compliant with
new EU regulation
Economies of scale the no. of cross-border
transactions will go up over 50, generating
substantial recurring cost savings (double-digit
reduction of unit cost per transaction - expected
payback period lt 1 year)
For competitivity reasons, no further details
can be disclosed
42
Incremental intra-group synergies
  • Cross-border synergies with CEE entities
  • Centralized card purchasing/processing (SiNSYS)
  • Alignment of ICT approach and joint contracting
    of business partners, e.g., in the field of cash
    handling (purchases of vendor solutions
    machinery, etc.) and HRM (SAP)
  • Integrated intl cash management product offering
    (W1SE), joint nostro/vostro proposal, centralized
    approach for cash handling, etc.
  • KBC standards for retail distribution and
    bancassurance (Mercator)

43
Headlines Results KBC Bank Insurance (pre
merger) - Financial performance - Areas of
activity Results KBL European Private
Bankers Results Gevaert Financial outlook for
2005 Merger synergies update
Foto gebouw
44
Areas of activity overview
Net profit contribution, in m EUR
Pro forma
45
Belgian retail
Profit contribution (in m EUR)
FY 2004
  • FY profit conribution of 582 m, up 19, thanks to
    remarkable improvement in banking profitability.
    ROAC at 19
  • Banking result up 32, driven by 4 revenue
    growth (margin pressure offset by asset growth
    and higher fee income in funds and insurance
    business), sustained cost control (-2 expenses)
    and low level of problem loans (9 bp loss on
    RWA). Private banking contributing 49 m
  • Strong premium income (38 y-o-y) and strict
    technical discipline (combined ratio at 93), but
    negative impact from lower investment yields and
    normalized tax level
  • Excellent performance in Q4 on the back of a
    succesful marketing campaign (investment
    products) and capital gains (offsetting
    impairment charges of preceding quarters)

582
490
363
FY 04 at a glance RevenuesExpensesCredit risk
46
Central and Eastern Europe
Profit contribution (in m EUR)
FY 2004
  • FY profit contribution of 269 m, up from -132m
    in 2003, underpinned by the robust turnaround in
    Poland and solid operating performance on the
    other markets. ROAC 14 (15 in banking)
  • Banking at 244 m (vs. 131 m), thanks to solid
    revenue expansion (11), cost discipline (C/I
    down from 75 to 67) and normalized credit
    risk (loan-loss charges at 48 bp)
  • Insurance at 24 m (vs. 1 m), driven by solid
    premium growth (20 in organic terms) and
    improved underwriting (C/R down from 104 to 97)
  • Q4 result below quarterly average due to various
    items change in recognition of interest income
    and higher marketing costs (PL), seasonal effects
    in operating expenditure and higher life
    reservation charges (CZ) and provisioning for
    legal disputes (HU).

269
108

-132
FY04 at a glance (organic)RevenuesExpensesCred
it risk
47
Key developments in CEE banking
Top-line growth
Cost/income ratio
FY03
FY04
FY03
FY04
Market shares
Return on investment
FY03
FY04
Dec-04
Dec-03
Avg deposits and loans
n/r
Growth in local currency, after elimination of
the yield on excess capital
48
CEE, company overview
CEE
FY 04 (in m EUR)( chg y-o-y in local currency)
CSOB
KH
KB
NLB
Insurance
49
Asset management
Assets under management(in bn EUR)
Net change in assets, 2004
Retail funds, Belgium
107 bn
Retail funds, CEE
Corporate
89 bn
Belgium88
Private assets, Belgium
81 bn
Institutional assets
Retail
Group assets
CEE 5
Market share, retail funds Belgium
31.5 Czech Republic 22.0
Slovakia 7.7 Hungary
9.4 Poland 1.3
50
Asset management
Profit contribution (in m EUR)
FY 2004
  • FY profit contribution of 143 m (after allocation
    of distribution fees to retail business), up 8,
    underpinned by solid increase in AUM
  • Assets (107 bn) up 20 y-o-y (of which 66 net
    inflow), but gradual shift to lower margin
    business (buoyant growth in capital-guaranteed
    retail funds and advisory mandates for HNW
    individuals in Belgium)
  • Solid growth momentum in CEE region, be it from a
    low basis AUM up 25 y-o-y (57 for retail
    funds on the back of market innovation / launch
    of structured funds)
  • Search for international expansion through
    third-party distribution of funds (0.5 bn
    gathered in 2004)
  • Strong Q4 segment result (6 increase in AUM)

143
132
116
FY 04 at a glance RevenuesExpenses
Belgium 88
CEE 5
51
Market share in Belgium
Mutual funds market development of market shares
KBC
Competitor A
Competitor C
Competitor B
Rest of the market
52
SME and corporates
FY 2004
Profit contribution (in m EUR)
  • FY profit contribution 378 m, up 72, driven by
    improved operating performance and substantially
    lower loan-loss charges. ROAC at 19.
  • Solid growth in banking on the back of a 5
    revenue increase, stable expenditure level and
    significant gain (112 m) from lower loan-loss
    provisions (28 bp on RWA vs. 62 bp in 2003)
  • Better return in re-insurance thanks to further
    improvement in underwriting performance (combined
    ratio of 98 vs. 100 in 2003)
  • Remarkable profit increase in Belgium and in the
    global structured finance business. Also fine
    results from Ireland, the US and the diamond
    niche sector.
  • Q4 segment results in line with previous quarters
    (somewhat higher risk-provisioning offset by
    higher fee income)

378
219
193
FY 04 at a glance RevenuesExpensesCredit risk
53
SME and corporates
Profit contribution, geographical breakdown (in
m EUR)
54
Capital markets
Profit contribution (in m EUR)
FY 2004
221
  • FY profit contribution 221 m, up 76, boosted by
    the pick-up of equity capital markets. ROAC at
    20.
  • Revenues in ECM activity up 20 (with expenses
    almost flat), mainly on the back of the
    non-recurrence of fair value adjustments on an
    unwinding derivatives portfolio in 2003 and
    additional commission income out of hedge fund
    activities. Moreover, further improvement in
    contribution from cash equity business profit
    contribition of 22 m (vs. breakeven in 2003)
  • Profit contribution of money and debt capital
    markets up 9 as a result of 7 increase in
    income and 5 increase in expenditure
  • Q4 segment result back to high average level
    after weak Q3 which was hurt by seasonal activity
    slowdown and adverse climate

126
93
FY 04 at a glance RevenuesExpenses
55
Changes in activity reporting, 2005
  • Changes as of 1Q 2005
  • Use of IFRS reporting standards(impact expected
    to be limited)
  • Integration of Asset management business into
    retail and coporate divisions (separate details
    on asset management will be available)
  • Additional areas KBL epb Gevaert (to be
    integrated in 2006)
  • Allocation of capital
  • 6.8 on RWA (Tier-1 of 8 with 15 hybrid),
    previously 5.95
  • No further allocation of goodwill(ROAC becomes
    an indicator for operating performance, as
    opposed to ROI)
  • Areas of activity in 2005
  • Retail bancassurance (mainly in Belgium)
  • Central and Eastern Europe
  • Corporate services (SME and corporates)
  • Market activities
  • KBL European private banking
  • Gevaert
  • Best-efforts approach for 2005 will be
    reassessed for 2006

56
Headlines Results KBC Bank Insurance (pre
merger) - Financial performance - Areas of
activity Results KBL European Private
Bankers Results Gevaert Financial outlook for
2005 Merger synergies update
Foto gebouw
57
KBL 1996
Challenges
1996
  • Private banking purely concentrated on offshore
    (although predictable erosion of offshore
    center)
  • Limited geographic customer base diversification
  • KBL not primarily focused on private banking yet

58
Strategy of KBL epb
  • To develop a network of European Private Bankers
    (epb)
  • Higher proportion of AUM based in on-shore
    centres
  • Well-balanced and diversified geographic origin
    of private clients
  • To refocus KBL in Luxembourg
  • Parent company activity
  • Support function for the members of epb (IT,
    Global Custody, Markets, etc)
  • Local banking activities in Luxembourg
  • Private banking
  • Niches securities services and services to
    local professionals in Luxembourg (banks,
    insurers, asset managers)
  • To continue a reasonable profit growth and
    decrease reliance on non-private banking revenues

To achieve the above 3 targets, necessity to grow
through acquisitions
59
KBL epb today
2004
Achievements
  • Presence in 11 countries
  • Clearly focused on private banking
  • The client is at the center
  • Relationship-based on long term view
  • Multicultural
  • Based on open-architecture

60
Financial key points
Net profit
Assets under management
In bn EUR
In bn EUR (Lux Gaap)
CAGR 6
CAGR 6
Return on equity
Tier-1 ratio
Lux Gaap
Lux Gaap
61
Revenues in line with strategy trend
  • Strong increase in commission income (17 of
    which 6 on organic basis) due to the
    strengthening of the core private banking
    activity.
  • Contraction of net interest income on the back
    of
  • Focus on private banking and intentional
    restricting of loan exposure
  • Reduction of exceptional profits on treasury
    activity
  • Lower excess capital (further to acquisitions and
    maturity of high-yielding assets)
  • Non-recurrence of extraordinary dividends (in
    2003 related to re-insurance captive KB Ré)
  • Capital gains on non-core investments

Operating income (in m EUR)
914
822
756
62
Continued stringent loan policy
  • Loan portfolio of 7.7 bn (diversified portfolio
    with 90 of exposure in Western-Europe)
  • Progressive scaling down of lending activities
    not related to private banking since 2000
  • Centralization of risk exposure and Strict local
    lending limits
  • Consistantly low loss ratio

Loan portfolio (in m EUR)
10 017
9 600
7 679
Net specific provisions to average gross
customer loans
63
Expenses under control
Operating expenses (in m EUR)
  • Despite
  • continued streamlining of cost base resulting in
    organic cost decrease of -2.5 y-o-y
  • improved efficiency through support services to
    epb from Luxembourg
  • cost/income ratio rises from 60 to 70

530
526
492
Extension of consolidation scope in 4Q01
64
Strongly reduced provisions
  • Reduced operating result compensated by the
    non-recurrence of value adjustments on
    investments portfolios
  • A new provision was set aside for potential
    future restructuring charges (127 m), but offset
    by the writeback of the GFBR (130m)
  • As a balance, net profit up 6.5

65
Reconciliation with KBC Groups pro forma results
Mainly due to differences in scope of
consolidation (-16 m in 2001), the elimination of
intragroup income (-20m in 2002 and and -46m
in 2003), and the fact that the GFBR has already
been reversed (-130m) through equity in the
Group pro-forma accounts in 2001 (relevant for
2004 results)
66
Headlines Results KBC Bank Insurance (pre
merger) - Financial performance - Areas of
activity Results KBL European Private
Bankers Results Gevaert Financial outlook for
2005 Merger synergies update
Foto gebouw
67
Gevaert portfolio
  • Fields of business of Gevaert (total portfolio at
    31-Dec-04 1.5 bn)
  • Holdings in listed companies, of which important
    investment in Agfa Gevaert (26 stake, worth 854
    m at 31-Dec-04)
  • Private equity (0.2 bn)
  • Real estate and specialised leasing and finance
    activities within Almafin, a since 2004
    fully-owned subsidiary of Gevaert with total
    assets of 0.5 bn
  • Activity in 2004
  • New equity investments 166 m (excl. intragroup
    shares)
  • Realised gains on exits (incl. real estate) 35 m

Belgian listed imaging technology company
focusing on the health care and grafics sectors
(market cap ca. 3.4 bn) in the niche fields of
audiovisual and railway equipment, leisure
infrastructure,
68
Gevaert portfolio
  • Profit contribution 36m caused by the decreased
    contribution from Agfa Gevaert (-66 m, down from
    63m in 03)
  • Depressed contribution of Agfa due to
  • one-off divestment loss charge (81 m) related to
    the sale of the consumer imaging division
  • reduction of business scope (disposal of non-core
    assets in 2003/04)
  • rather difficult business climate, although
    reversed trend recognised at end of year
  • Significant non-realised gains on equity
    portfolio
  • On equity holdings 496m, of which on Agfa
    Gevaert 311m

Pro forma, including Almafin in the scope of
consolidation
69
Gevaert portfolio
Contribution to KBC Groups pro forma results
Extension of consolidation scope (acquisition
of Almafin) Mainly related to Afga Gevaert
70
Headlines Results KBC Bank Insurance (pre
merger) - Financial performance - Areas of
activity Results KBL European Private
Bankers Results Gevaert Financial outlook for
2005 Merger synergies update
Foto gebouw
71
Profit outlook - 2005
  • We continue to face a favourable environment in
    all of our home markets. In this respect, we are
    confident about 2005
  • However, due to uncertainty surrounding the
    implementation of IFRS, we cannot provide any
    precise quantitative guidance
  • Nevertheless, we are convinced that, on a
    like-for-like basis, year-on-year Group profit
    will be higher in 2005 then in 2004
  • This confidence is supported by the good results
    achieved so far in the first quarter

72
2005 IFRS disclosure schedule
  • New IFRS templates
  • FY04 IFRS earnings and B/S (excl. impact of IAS
    32/39 and IFRS 4)

23 Mar. 2005
  • Impact of IAS 32/39 and IFRS 4 on shareholders
    equity on 1 Jan 2005

28 Apr. 2005
  • 1Q05 earnings (full set of interim IFRS financial
    statements and notes)
  • 1Q04, 2Q04, 3Q04 and 4Q04 earnings (IFRS
    reference P/L and B/S, incl. segments, excl.
    impact of IAS 32/39 and IFRS 4)

9 June 2005
73
Headlines Results KBC Bank Insurance (pre
merger) - Financial performance - Areas of
activity Results KBL European Private
Bankers Results Gevaert Financial outlook for
2005 Merger synergies update
Foto gebouw
74
Quick reminder
  • Merger of KBC with parent company Almanij,
    following public bid on KBL European Private
    Bankers (KBL epb'), in order to unlock
    additional value on the back of
  • increased visibility and liquidity
  • realization of group synergies
  • Flexibility to continue current strategies
  • Leverage on bancassurance model and private
    banking expertise
  • Core geographic focus on Belgium, CEE and private
    banking throughout Europe
  • Continued good prospects for Belgian market
  • CEE and European private banking to remain
    long-term earnings drivers
  • Continued quest for (cost) synergies, partly
    through intra- and cross-group co-sourcing
  • Balanced risk profile through diversified
    business portfolio
  • Solid solvency levels and credit ratings

75
Synergy areas
  • Optimization of value management by centralising
    capital and and risk management function
  • Additional revenue growth based on
    complementarity of product ranges (e.g. funds,
    life insurance...) and geographical presence
  • Cost savings based on overlapping activities and
    functions
  • Optimization of capital and risk management by
    rebalancing equity portfolio
  • Strenghtening of competitive position by merging
    Gevaerts activities into KBC Bank and KBC
    Insurance

Corporate functions
Private banking(activities of KBL epb)
Gevaert portfolio
  • Synergy projects proceeding according to plan
  • Unified strategy for private banking and private
    equity expected to be fully ready for execution
    by mid-2005
  • Management is committed to start realizing
    synergies immediately

76
Activities of KBL epb
  • Total synergy program of NPV 500 m (net of
    restructuring and capital costs, post tax)
  • Estimated capital and restructuring costs are c
    50m over 5 years
  • Recurring pre-tax benefits of 75 m (peak level),
    half of which can be realized by 2006
  • Cashflow positive in every year
  • 40 revenue and 60 cost (and cost avoidance)
    benefits
  • All synergies reach their peak by 2009 (some
    faster than others)
  • Portfolio of 32 synergies, 19 large and 13
    small

Synergy benefit, in m (see note below)
Revenue
Cost Cost Avoidance
Note Synergy benefit described throughout as
peak recurring annual increase in pre- tax
bottom-line result vs. base business.


77
Gevaert portfolio
  • Reduction of equity portfolio (case by case
    approach as to individual equity positions)
  • Merger of activities of Almafin into KBC Bank
    (i.e. KBC Real Estate and KBC Lease)
  • Disposal of of non-core activities
  • Merger of Gevaert and KBC Investco (KBC
    Investco is a subsidiary of KBC Bank and KBC
    Insurance)
  • Build up a private equity platform with
    geographical focus on home markets (targeted
    portfolio of 500-600 m)

Holdings in listed companies
Real estate specialized finance
Private equity
78
Foto gebouw
4
Impact of IFRS
79
Disclaimer
  • By its nature, the information in this
    presentation involves numerous assumptions,
    uncertainties and opportunities, both general and
    specific. We caution readers of this presentation
    not to place undue reliance on this information
    as a number of factors could cause future Group
    results to differ materially.
  • All data in this document are unaudited and are
    meant as indications necessary to illustrate the
    changes introduced by IFRS which will affect
    future reportings.
  • KBC undertakes no obligation to revise or update
    any information to reflect changes in policy,
    events, expectations or otherwise.

80
Content
  • Disclosure headlines
  • Impact on financial statements 2004
  • Impact on financial statements 2005

81
Headlines
1
2
3
Headlines Impact 2004 Impact 2005
82
Disclosure schedule, 2005
  • New IFRS templates
  • FY04 IFRS income statement and B/S (excl. impact
    IAS 32/39 and IFRS 4)

Mar 23, 2005
  • Impact of IAS 32/39 on shareholders equity in
    opening B/S of 1-Jan-05

Apr 28, 2005
  • 1Q05 earnings (full set of IFRS interim financial
    statements and notes)
  • 1Q04, 2Q04, 3Q04 and 4Q04 earnings (IFRS
    reference P/L and B/S, incl. segments, excl.
    impact of IAS 32/39 and IFRS 4)

Jun 9, 2005
Headlines Impact 2004 Impact 2005
83
Segment information, 2005
Temporarly solution for 2005 KBL and Gevaert
as non-integrated divisions
Headlines Impact 2004 Impact 2005
84
Main changes in valuation rules, 2004
Headlines Impact 2004 Impact 2005
85
IFRS Income statement FY 2004
Headlines Impact 2004 Impact 2005
Non-audited figures (excl. impact of IFRS 4 and
IAS 32/39)
86
Impact on profit 2004 - KBC Old
Provisions
-92
1758
Other
Goodwill
DBP
Fixedassets
Tax
Lease
-10
39
-34
1659
5
0.4
-7
Net profit2004 IFRS
Net profit2004 BEL GAAP
Non-audited figures, excl. impact of IFRS 4 and
IAS 32/39
Mainly related to reversal of the use of the
provision for financial risks in the insurance
business
Headlines Impact 2004 Impact 2005
87
Impact on profit 2004 - KBC Mergco
1682
Provisions
Other
-97
Goodwill
-29
89
DBP
-35
Fixedassets
Lease
Tax
1615
3
0.4
2
Net profit2004 IFRS
Net profit2004 BEL GAAP
Non-audited figures excl. impact of IFRS 4 and
IAS 32/39
Mainly related to reversal of the use of the
provision for financial risks in the insurance
business
Headlines Impact 2004 Impact 2005
88
Impact on EPS 2004
Non-audited figures (excl. impact of IFRS 4 and
IAS 32/39)
Headlines Impact 2004 Impact 2005
89
IFRS Balance sheet, 31-Dec-04
non-audited figures (indicative only), excl.
impact of IFRS 4 and IAS 32/39
Headlines Impact 2004 Impact 2005
90
Impact on BPS, 31-Dec-04
non-audited figures excl. impact of IFRS 4 and
IAS 32/39, based on 307.7m shares for KBC old
and on 359.5 m shares for KBC Mergco
Headlines Impact 2004 Impact 2005
91
Main changes in valuation rules, 2005
Headlines Impact 2004 Impact 2005
92
Disclosure schedule 2005 - reminder
  • Impact of IAS 32/39 on shareholders equity in
    opening B/S of 1-Jan-05

Apr 28, 2005
  • 1Q05 earnings (full set of interim IFRS financial
    statements and notes, incl. impact of IAS 32/39
    and IFRS 4)

Jun 9, 2005
Headlines Impact 2004 Impact 2005
93
Indicative composition of portfolios
Figures for KBC pre-merger, book value
according to B-GAAP
Headlines Impact 2004 Impact 2005
94
Annex
  • Disclosure on IFRS available in the annual report
    at www.kbc.com
  • Description of major differences between IFRS and
    B-GAAP
  • Full P/L and B/S 2004 IFRS with reconciliation to
    B-GAAP, for both KBC (old) and KBC Group
    (Mergco)

95
Foto gebouw
5
Information on capital management
96
Solvency
Banking KBC, (Tier-1)
Private banking, KBL epb (Tier-1)
Insurance business (solvency margin)
In m EUR
In m EUR
10.1
In m EUR
10.0
9.5
389
2 060 m
9.2
1 372 m
316
467 m
3 871m
726 m
359 m
3 871m
726 m
In the short term, regulators will not apply the
IFRS approach for monitoring solvency
97
Non-realized gains on investments
Excluding trading portfolio
98
Allocation of excess capital
  • Excess capital may be used for
  • Increasing presence in CEE (banking presence in
    Poland and insurance presence in Hungary may be
    strenghtened by acquisitions or setting up
    business combinations)
  • Strenghtening the European private banking
    franchise
  • Buying out minority shareholders
  • Decreasing the leverage at holding-company level
  • Securing a stable, growing dividend
  • Boards mandate to buy back own shares, up to 10
    of capital

Valid until 29 Oct. 2005. Extension subject to
approval of the AGM on 28 Apr. 2005
99
Foto gebouw
6
Closing remarks on valuation
100
Valuation
Valuation relative to peer group
  • Key figures
  • Share price 65.8 euros
  • Net asset value 39.3 euros
  • Analysts estimates
  • 2005 EPS consensus 6.02 euros (7 y-o-y)
  • P/E 2005 10.9
  • Recommendations
  • Positive 55
  • Neutral 25
  • Negative 20

Weighted average of IBES data 1) OTP, Komercni,
Pekao, BPH PBK, BRE 2) BA-CA, Erste, Unicredit,
Soc. Gen., Intesa BCI 3) Top 20 DJ Euro Stoxx
Banks 4) Fortis, Dexia
Situation as at 14 March 2005
Smart consensus collected by KBC (13 estimates)
101
Group restructuring benefits
  • Merger of KBC with parent company Almanij (March
    2005)
  • Business benefits
  • Flexibility for fully implementing existing
    strategies
  • Unity of strategy, capital and management
  • Enhanced efficiency, with business synergies
  • Financial benefits
  • Increased share liquidity, thanks to pooling of
    two listed entities and higher free float
  • Elimination of holding-company discount
  • Increased transparency through simplified
    structure
  • Improved visibility on capital markets

102
Increased visibility and share liquidity
KBC (old)
Almanij
KBC (new)
  • Amongst top-10 banking shares in the euro zone
  • Increased weighting in stock indices due to
    higher free float
  • Further expansion of (equity) research coverage

Situation as at 15 Dec. 2004 for KBC (old) and
Almanij as at 14 Mar. 2005 for KBC (new)
103
Research coverage
104
Sollicited research coverage
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