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Central Europe Investor Relations Conference 2 July 2001. Herman Agneessen s Member of the EC. Central Europe. Mission Statement Acquisitions to date Guiding management concepts Financial Results Financial Objectives SWOT analysis Asset Quality Efficiency initiatives Current IPB status.

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central europe
Central Europe
  • Mission Statement
  • Acquisitions to date
  • Guiding management concepts
  • Financial Results
  • Financial Objectives
  • SWOT analysis
  • Asset Quality
  • Efficiency initiatives
  • Current IPB status

Topics

central europe mission statement

Central EuropeMission Statement

Create a second home market

In future EU member-countries

For bankinsurance activities

On a segmented basis

In KBC’s 4 activitity areas

slide4

Kredyt bank

Agropolisa

Warta

CSOB

CSOB Poijst'ovna

Patria

K&H Bank

K&H Life

Argosz

acquisitions to date
Acquisitions to date

Current

Ownership

Market

share

Investmentin m EUR

P/BV

82%

75%

100%

2.3

2.34

4.13

23 %

0.5 %

na

1361.9

16.0

56.0

Czech & Slovak Rep.

CSOB

CSOB Pojist’ovna

Patria

non-life

Poland

Kredyt Bank

Agropolisa

Warta & Warta Vita

49.99%

49.90%

40.00%

213.4

7.2

123.2

1.42

na

3.35

6 % 1 %

12 % non-life

0.7% life

1.34

1.23

na

Hungary

K&H Bank (new)

K&H Life (*)

Argosz

15%

0.3 %3 %

279.4

2.5

23.9

60.00% 50%

95.40%

(+ 30%)

(*) 30 % indirectly through K&H Bank

central europe1

Central Europe

Total investment : EUR 2,084 million

banking EUR 1,911 million

insurance EUR 173 million

guiding management concepts careful balance between autonomy and control
Guiding management conceptsCareful balance between autonomy and control
  • Branding policy : customer identification
  • Strong local management input
  • Strict central control requirements
    • Credit/insurance risks, market risks, operational integrity
    • Internal audit & compliance principles
    • KBC reporting standards
  • Maximisation of synergies
    • IT, payment systems, operational efficiency
    • Bankinsurance, markets & asset management know-how
    • “best group practices”
financial results 1q01

m EURY2000 1Q01

CSOB 116.1 78.7

K&H Bank 3.8 0.2

Kredyt Bank 46.8 15.5

p.m. Patria n/a 0.2

Financial results 1Q01

Stand alone results banks

slide9
Net profit (m EUR)

Share in group profit

Return on alloc. equity

Share in alloc. equity

Cost/Income ratio

Financial results 1Q01- Banking

External (2)

Normalized

External (1)

Internal(3)

60.0

16.9%

44.4%

10.1%

59.4%

40.0

11.9%

29.0%

10.1%

59.4%

30.5

9.7%

16.6%

8.7%

59.3%

(1) external: after minorities and funding cost

(2) ext. normalized: excluding 20 m EUR except. loan loss recoveries

(3) internal : including FGBR and amortization of goodwill over 20 yrs

m eur y2000 1q01 csob poijst ovna 1 6 1 0 k h life 0 2 0 04 argosz 0 05 0 2 warta 7 2 0 03
m EURY2000 1Q01

CSOB Poijst'ovna -1.6 +1.0

K&H Life -0.2 -0.04

Argosz +0.05 +0.2

Warta -7.2 +0.03

Financial results 1Q01

Stand alone results insurance

net profit m eur share in group profit return on alloc equity share in alloc equity
Net profit (m EUR)

Share in group profit

Return on alloc. equity

Share in alloc. equity

Financial results 1Q01- Insurance

External (1)

Internal(2)

- 0.9

- 0.3%

- 1.4%

2.7%

0.9

0.2%

1.4%

4.2%

(1) external: after minorities and funding cost

(2) internal : after amortization of goodwill over 20 yrs

net profit m eur share in group profit return on alloc equity share in alloc equity1
Net profit (m EUR)

Share in group profit

Return on alloc. equity

Share in alloc. equity

Financial results 1Q01- Combined

External (1)

Internal (2)

29.6

9.4%

11.5%

11.4%

60.9

17.1%

29.2%

14.3%

(1) external: after minorities and funding cost

(2) internal : including FBGR and amortization of goodwill over 20 yrs

financial objectives 2004
Financial Objectives 2004
  • Stand-alone ROE : 20 %
  • CAD-ratio banks : 11 to 13 %
  • Stand-alone cost/income ratio : 55 %
  • Stand-alone combined ratio : 103 %
  • Net profit contribution to

KBC Group profit : 10 %

  • Net ROE for KBC : 15 %
kbc s major strenghts in ce
KBC’s major strenghts in CE
  • Strong banking franchises at competitive cost
  • Strong insurance franchise in Poland, …. perhaps also in Czech Republic
  • Good to strong local management teams
  • Segmentation already introduced
  • Early entrant in integrated bankinsurance
  • Positive profit potential outlook
  • Eu-joining of chosen countries well underway
kbc s major weaknesses in ce
KBC’s major weaknesses in CE
  • Mostly inadequate IT-infrastructures
  • Insufficient customer orientation
  • Insufficient productivity & efficiency levels
  • Unequal risk-awareness & asset quality levels
  • Insufficient existing product offerings
  • Critical mass not available in all countries
  • Banks insufficiently strong in retail
kbc s major opportunities in ce
KBC’s major opportunities in CE
  • Above average (western) growth outlook
    • Country GDP as such
    • Country GDP because of eu-joining
    • GDP per capita
    • Savings ratio
    • Customer switch to higher value added products
  • Policy of combining local brand & local management with strong shareholder resp. know-how provider
  • Largely undeveloped SME / Asset Management / bankassurance markets - areas of KBC expertise
  • Domestic capital markets waiting to be developed
central european growth potential
Central European growth potential
  • Ample room for expansion...
    • Total population: 65 million (Belgium: 10 million)
    • GDP / capita: only 42% of EU average
    • Bank products penetration: only 47% of EU average
    • Insurance products penetration: only 42% of EU average
  • …and good prospects for the region:
    • GDP growth in 2000Czech Rep. 3.1% / Poland 4.1% / Hungary 5.2%
    • Hungary, Poland and Czech Republic figure as top-3 transition countries, Slovak Republic is nr. 5
kbc s major threats
KBC’s major threats
  • The competition has woken up !
  • IT-renewal is a major challenge
  • Large-scale employee education is a must
  • Change management must be concluded successfully
    • Bank-mergers in czech republic and hungary
    • Network expansion in slovak and polish banks
    • Implementation of integrated bankinsurance concept
    • New IT = new processes = “rationalizing yourself away”
    • Productivity increase requirements
    • Ensure adequate customer orientation
    • Need to significantly enlarge existing product-offerings
    • Develop & control new products in an untested environment
efficiency initiatives csob cr only
Efficiency initiatives - CSOB (CR only)

CSOB + IPB staff June 2000 :

CSOB + IPB staff now :

CSOB + IPB staff Dec. 2001 :

Estimated lay-off costs :

Est. recurrent savings p.a. :

8 901

7 997 (-10.1%)

6 597 (- 25.9%)

2.2 m EUR

15.1 m EUR

.

efficiency initiatives k h bank
Efficiency initiatives - K&H Bank

K&H+AAM staff 30/08/00 : 5.174

K&H+AAM staff 31/05/01 : 4.468 (- 13.7 %)

K&H+AAM staff 31/12/01 : 3.939 (- 24.9 %)

K&H+AAM staff 31/12/02 : 3.400 (- 34.3 %)

K&H+AAM staff 31/12/03 : 3.000 (- 42.0 %)

estimated lay-off costs : 10.0 m EUR

est. recurrent savings p/a : 11.4 m EUR

current csob ipb status
Current CSOB -IPB status
  • Assets to be retained : 117 m CZK
  • Unwanted assets to be put : 48 m CZK
  • Assets to be managed by CSOB for account of the government : 110 m CZK
  • Unresolved : 22 m CZK
  • IPB-bank subsidiaries: at book value
remaining csob ipb issues
Remaining CSOB / IPB issues
  • IPB Pojistovna : ownership
  • Pension fund : ownership
  • 37 % IT affiliate PVT : modalities
kbc control over ce subsidiaries
KBC Control over CE-subsidiaries
  • Formally : AGM & BoD
  • Strategically : Steering Cttee CE & KBC
  • Factually :
    • KBC-expatriate in management board
    • regular CEO/KBC-top consultation
    • structured coordination
kbc control structured coordination
KBC-control : structured coordination
  • Full-time regional KBC CE-coordinators for :
    • Overall coordination
    • Market activities
    • Internal Audit
    • Market Risk Management
    • Retail bankinsurance
    • Information technology
kbc control structured coordination1
KBC-control : structured coordination
  • Part-time regional KBC CE-coordinators for :
    • Financial reporting
    • Payment systems
    • Specific insurance issues
    • Credit-system integration
  • Ad-hoc consultancy when requested ordeemed appropriate