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KBC Group. Company presentation Spring 2005. Web site: www.kbc.com Ticker codes: KBC BB (Bloomberg) KBKBT BR (Reuters) ISIN code: BE0003565737. Contact information. Investor Relations Office : Luc Cool Nele Kindt Marina Kanamori Tel.: +32 2 429 49 16 investor.relations @ kbc.com

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Kbc group

KBC Group

Company presentation Spring 2005

Web site: www.kbc.comTicker codes: KBC BB (Bloomberg) KBKBT BR (Reuters)ISIN code: BE0003565737


Contact information

Contact information

Investor Relations Office :Luc CoolNele KindtMarina KanamoriTel.: +32 2 429 49 16 investor.relations @ kbc.com

Surf to www.kbc.com for the latest update.


Disclaimer

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.


Table of contents

Table of contents

  • Company profile

  • Strategy and earnings drivers

  • 2004 Financial highlights

  • Impact of IFRS

  • Information on capital management

  • Closing remarks on valuation


Kbc group

Foto gebouw

1

Company profile


Considerable scale in euroland

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


Shareholder structure

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


Business portfolio

Business portfolio

  • 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

Revenue breakdown

(2004 pro forma new Group, excl. group items)

Gevaert

Capital markets

International corporate

Belgium

Europeanprivate banking

CEE


Top 3 player in belgium

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)


Top 3 player in the cee region

Top-3 player in the CEE region

International banks in CEE (by total assets, inbn 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


Top 3 position in the cee region

Top-3 position in the CEE region

Banking

Insurance

Czech Republic:Market share: 21% (No. 2)Inhabitants: 10 mTotal assets:18 bn EUR

Czech Republic:Life M share: 8% (No. 5)Non-life M share: 4% (No. 6)

Slovakia:Market share: 6% (No. 4)Inhabitants: 5 mTotal assets: 2 bn EUR

Slovakia:Life M share: 4% (No. 8)Non-life M share: 2% (No. 7)

Hungary:Market share: 11% (No. 2)Inhabitants: 10 mTotal assets: 7 bn EUR

Hungary:Life M share: 3% (No. 7)Non-life M share: 4% (no 6)

Poland:Market share: 5% (No. 8)Inhabitants: 38 mTotal assets: 5 bn EUR

Poland:Life M share: 2% (No. 7)Non-life M share: 12% (No. 2)

Slovenia:Minority interest (34%)Inhabitants: 2 mMarket share: 41% (No. 1)

Slovenia:Life 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)


European private banking network

European private banking network

Netherlands:Theodoor Gilissen Acquired in ’03 – participation: 100%

Germany:Merck Finck & CoAcquired in ’99 – participation: 100%

UK:Brown ShipleyAcquired in ’89 – participation: 100%

Switzerland:Kredietbank (Suisse)Historical presence

Belgium:Puilaetco private bankersAcquired in ’04 – participation: 100%

France:KBL France Acquired in ’98 – participation: 100%

Luxembourg:Kredietbank LuxembourgParent company

Monaco:KB Luxembourg (Monaco)Historical presence

Spain:Banco Urquijo Acquired in ’98 – participation: 100%

Italy:Fumagalli 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)


Solid performance

Solid performance

KBC pre-merger:

Target

Dec 02

Dec 03

Dec 04

Profitability

Return on equity

13%

13%

18%

16%

+1%

+8%

+54%

+10%

EPS growth

Efficiency

Cost/income, banking

65%

65%

60%

58%

Combined ratio, insurance

101%

96%

95%

95%

Combined ratio, insurance, excluding reinsurance.

Solvency

Tier-1, banking

8.8%

9.5%

10.1%

>8%

320%

316%

389%

>200%

Solvency, insurance

Solvency, insurance, including unrealized gains.


Solid performance pro forma

Solid performance (pro forma)

KBC post-merger (pro-forma):

Dec 02

Dec 03

Dec 04

Profitability

Return on equity

10%

12%

14%

+2%

+26%

+29%

EPS growth

Efficiency

Cost/income, banking

66%

66%

63%

Combined ratio, insurance

101%

96%

95%

Combined ratio, insurance, excluding reinsurance.

Solvency

Tier-1, banking

8.8%

9.6%

10.0%

320%

316%

389%

Solvency, insurance

Solvency, insurance, including unrealized gains.

* Non-updated targets used by the KBC Bank and Insurance Group before the merger with Almanij in March 2005


Kbc group

Foto gebouw

2

Strategy and earnings drivers


Strategy headlines

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


Earnings drivers in belgium overview

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 >20% 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)


Earning drivers in cee overview

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


Above average gdp growth cee

Above average GDP growth, CEE

Czech Republic

Slovakia

Real GDP growth + inflation - KBC estimates

Real GDP growth + inflation - KBC estimates

12.5%

6.8%

6.8%

5.6%

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%


Earnings drivers in private banking

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)


Kbc group

Foto gebouw

3

2004Financial highlights


Kbc group

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


Quick reminder

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


Strong earnings momentum

Strong earnings momentum

  • 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

KBC Bank & Insurance

Net profit

in m EUR

+57%

* Organic growth


Outperforming the market

Outperforming the market

  • Earnings growth at sustained high level compared to sector

KBC Bank & Insurance

Peer group *

CAGR: +20%

CAGR: +6%

* DJ Euro Stoxx Banks universe

CAGR = compound average growth rate


Kbc group mergco

KBC Group (mergco)

  • Pro forma net profit FY2004 of 1 682 m

  • Major differences with KBC Bank & Insurance’s 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)

Net profit

in m EUR


Simulated impact of ifrs standards

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 Mergco’s 2004 pro-forma figures


Growing dividend

Growing dividend

  • 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

Dividend per KBC share *

EUR

+12%

* 4.7% for ex-Almanij shares that were converted to KBC shares


Kbc group

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


Key points

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


Key points1

Key points

Combined ratio, non-life

Cost/income ratio, banking

- 1pp

- 5pp

Return on equity, insurance

Return on equity, banking

-1pp

+8pp


Solid growth in banking revenues

Solid growth in banking revenues

  • 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)

FY 2004

Banking income (in m EUR)

6 011

5 756

5 655

NIM = net interest margin


Favourable growth in banking assets

Favourable growth in banking assets

  • Customer deposits up 6%*

  • Customer loans up 7%*:

    • Corporate book* up 4% (down in 2003, partly due to impairments in Poland)

    • Solid mortgage growth :

End of 2004

Customer loans(in bn EUR)

106.6

98.8

90.3

O/S = outstanding.Chg in 2003: excl. deconsolidation of Krefima

* Excl. institutional activity

Note : mortgage growth adjusted for currency depreciations


Spread development

Spread development

Interest margin, Belgium banking business

Spreads on outstanding loans,Belgium banking business

trend

trend


Strong growth in premium income

Strong growth in premium income

  • 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)

FY 2004

Premium income (in m EUR)

5 037

3 486

3 156

* Extension of consolidation scope in 2004


Lower investment yields insurance

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


Low loan loss charges

Low loan-loss charges

  • Loan-loss provisions at very low level (-71% y-o-y)

FY 2004

Loan-loss provisions (in m EUR)

676

465

199

* Net specific provisions to average gross customer loans


Favourable non life claims charge

Favourable non-life claims charge

FY 2004

  • Favourable development in all markets:

Claims ratio(% of net premium income)


Banking expenses well controlled

Banking expenses well controlled

  • 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)

FY 2004

Banking expenses (in m EUR)

3 751

3 695

3 636

* Extension of consolidation scope in 4Q01


Reducing product complexity update

Reducing product complexity - update

Product simplification programme - banking, Belgium


Co sourcing initiatives update

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 < 1 year) *

* For competitivity reasons, no further details can be disclosed


Incremental intra group synergies

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 int’l cash management product offering (W1SE), joint nostro/vostro proposal, centralized approach for cash handling, etc.

  • KBC standards for retail distribution and bancassurance (Mercator)


Kbc group

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


Areas of activity overview

Areas of activity overview

Net profit contribution, in m EUR *

* Pro forma


Belgian retail

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)

Belgian retail

Profit contribution (in m EUR)

FY 2004

582

490

363

FY 04 at a glance :RevenuesExpensesCredit risk


Central and eastern europe

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).

Central and Eastern Europe

Profit contribution (in m EUR)

FY 2004

269

108

-132

FY04 at a glance (organic):RevenuesExpensesCredit risk


Key developments in cee banking

Key developments in CEE banking

Top-line growth *

Cost/income ratio

FY03

FY04

FY03

FY04

Return on investment

Market shares

FY03

FY04

Dec-04

Dec-03

Avg deposits and loans

n/r

* Growth in local currency, after elimination of the yield on excess capital


Cee company overview

CEE, company overview

CEE

FY 04 (in m EUR)(% chg y-o-y in local currency)

CSOB

K&H

KB

NLB

Insurance


A sset m anage ment

Asset management

Assets under management(in bn EUR)

Net change in assets, 2004

Retail funds, Belgium

Retail funds, CEE

107 bn

Corporate

89 bn

Belgium:88%

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%


Asset management

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)

Asset management

Profit contribution (in m EUR)

FY 2004

143

132

116

FY 04 at a glance :RevenuesExpenses

Belgium :88%

CEE : 5 %


Market share in belgium

Market share in Belgium

Mutual funds market – development of market shares

KBC

Competitor A

Competitor C

Competitor B

Rest of the market


Sme and corporates

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)

SME and corporates

FY 2004

Profit contribution (in m EUR)

378

219

193

FY 04 at a glance :RevenuesExpensesCredit risk


Sme and corporates1

SME and corporates

Profit contribution, geographical breakdown (in m EUR)


Capital markets

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

Capital markets

FY 2004

Profit contribution (in m EUR)

221

126

93

FY 04 at a glance :RevenuesExpenses


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

Changes in activity reporting, 2005

* Best-efforts approach for 2005 – will be reassessed for 2006


Kbc group

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


Kbl 1996

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


Kbc group

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


Kbl epb today

KBL epb today

Achievements

2004

  • 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


Financial key points

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


Revenues in line with strategy trend

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


Continued stringent loan policy

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


Expenses under control

Expenses under control

  • 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%

Operating expenses (in m EUR)

530

526

492

* Extension of consolidation scope in 4Q01


Strongly reduced provisions

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%


Kbc group

Reconciliation with KBC Group’s 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)


Kbc group

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


Gevaert portfolio

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,…


Gevaert portfolio1

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


Gevaert portfolio2

Gevaert portfolio

Contribution to KBC Group’s pro forma results:

* Extension of consolidation scope (acquisition of Almafin) ** Mainly related to Afga Gevaert


Kbc group

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


Profit outlook 2005

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


2005 ifrs disclosure schedule

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


Kbc group

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


Quick reminder1

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


Kbc group

Synergy area

Synergy potential

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 Gevaert’s 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


Activities of kbl epb

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.


Kbc group

Business line

Strategy headlines

Gevaert portfolio

Holdings in listed companies

  • 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)

Real estate & specialized finance

Private equity


Kbc group

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4

Impact of IFRS


Disclaimer1

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.


Content

Content

  • Disclosure headlines

  • Impact on financial statements 2004

  • Impact on financial statements 2005


Kbc group

Headlines

1

2

3

Headlines – Impact 2004 – Impact 2005


Disclosure schedule 2005

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


Kbc group

Segment information, 2005

* Temporarly solution for 2005: KBL and Gevaert as non-integrated divisions

Headlines – Impact 2004 – Impact 2005


Main changes in valuation rules 2004

Main changes in valuation rules, 2004

Headlines – Impact 2004 – Impact 2005


Ifrs income statement fy 2004

IFRS Income statement FY 2004*

Headlines – Impact 2004 – Impact 2005

* Non-audited figures (excl. impact of IFRS 4 and IAS 32/39)


Impact on profit 2004 kbc old

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


Impact on profit 2004 kbc mergco

Impact on profit 2004 - KBC Mergco

1682

Provisions*

Other

-97

Goodwill

-29

DBP

+89

Fixedassets

-35

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


Impact on eps 2004

Impact on EPS 2004 *

* Non-audited figures (excl. impact of IFRS 4 and IAS 32/39)

Headlines – Impact 2004 – Impact 2005


Ifrs balance sheet 31 dec 04

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


Impact on bps 31 dec 04

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


Main changes in valuation rules 2005

Main changes in valuation rules, 2005

Headlines – Impact 2004 – Impact 2005


Disclosure schedule 2005 reminder

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


Indicative composition of portfolios

Indicative composition of portfolios*

* Figures for KBC pre-merger, book value according to B-GAAP

Headlines – Impact 2004 – Impact 2005


Annex

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)


Kbc group

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5

Information on capital management


Solvency

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


Non realized gains on investments

Non-realized gains on investments*

* Excluding trading portfolio


Allocation of excess capital

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

  • Board’s 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


Kbc group

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6

Closing remarks on valuation


Valuation

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%

Valuation

Valuation relative to peer group:

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)


Group restructuring benefits

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


Increased visibility and share liquidity

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)


Kbc group

Research coverage


Sollicited research coverage

Sollicited research coverage


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