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KBC Group Retail bancassurance and private banking on the Belgian market April 2005. Web site: www.kbc.com Ticker codes: KBC BB (Bloomberg) KBKBT BR (Reuters) ISIN code: BE0003565737. Contact information.

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kbc group retail bancassurance and private banking on the belgian market april 2005
KBC Group

Retail bancassurance and private banking on the Belgian marketApril 2005

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

contact information
Contact information

Investor Relations OfficeLuc 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.
ing financials day 18 april 2005
ING Financials Day - 18 April 2005
  • Introduction W. Duron
  • Retail bancassurance in Belgium F. Florquin
  • Private banking in Belgium F. Florquin
  • Synergies for private banking W. Duronwithin KBC Group
slide5

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1

Introduction

benelux players have considerable scale
Benelux players have considerable scale

Euroland top-30 banks, by market cap *

KBC Group : 24 bn euros

* DJ Euro Stoxx Banks constituents ranking by market cap, as at 14 March 2005

kbc group s business portfolio
KBC Group’s business portfolio
  • Although KBC has successfully expanded its operations in CEE, it primarily is a top bancassurer and asset manager in Belgium, its historical home market
  • 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

Revenue breakdown*

Capital markets

Gevaert

International SME/corporate

Belgium :- retail bancassurance- private banking- asset management- SME and corporates

Europeanprivate banking

CEE

* 2004 pro forma figures, excl. group items

belgian market headlines
Belgian market, headlines

Market shares:

31-Dec-03

  • The banking landscape in Belgium is highly consolidated (80%held by top-4 banks)
  • The market growth in the field of wealth management is significant (high savings rate)
  • The market is highly receptive to cross-selling of AM & insurance products
  • KBC is a top-3 player, especially strong in the Northern region
retail and private bancassurance
Retail and private bancassurance *

Return on capital

Profit contribution

Target 2007:high single digit CAGR

Target 2007:sustained high level

Cost/income ratio, banking

Combined ratio, non-life

Target 2007:further down to low 60-ties

Target 2007:max 95% over-the-cycle

* excl. European private banking

european private banking network
European private banking network

Netherlands:Theodoor GilissenAcquired in ’03 – participation: 100%

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

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

Belgium:KBC Private bankingPuilaetco private bankers (100% participation acquired in ’04)

Switzerland:Kredietbank (Suisse)Historical presence

Luxembourg:Kredietbank LuxembourgParent company for European PB

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

Spain:Banco UrquijoAcquired in ’98 – participation: 100%

Monaco:KB Luxembourg (Monaco)Historical presence

Italy:Fumagalli SoldanAcquired in ’01 – participation: 95%

  • Since ‘98, KBC Group (KBL) has developed a private banking network throughout Western Europe, anticipating further erosion of its offshore activities for a/o Belgian customers in Luxembourg
  • Private banking assets outside Belgium grew to 43 bn across the 10 countries
slide11

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2

Retail bancassurancein Belgium

retail and private bancassurance belgium
Retail and private bancassurance, Belgium

Return on capital

Profit contribution

Core retailRetail and private bancassurance

Core retailOther retail and private banking

583

382

Target 2007:high single digit CAGR

Target 2007:sustained high level

Cost/income ratio

Combined ratio, non-life

Core retailRetail and private bancassurance

Core retailRetail and private bancassurance

Target 2007:further down to low 60-ties

Target 2007:max 95% over-the-cycle

* excl. European private banking

nice results 2004
Nice results 2004

Core retail only:

How to achieve further growth ?

sharp increase in productivity
Sharp increase in productivity

Efficiencystrategy

Strong growth in revenue per FTE

Strong growth in revenue per branch

Revenues per branch, 1998 = 100

Revenues per FTE, 1998 = 100

cost savings largely implemented
Cost-savings largely implemented

Efficiencystrategy

Core retail only, cost trend, in m EUR

Up to 2004: significant decline in costs

2001 costs

Spontaneous cost inflation

1

1

Cutback in branch FTEs: -1 300 or -18%

2

2

Reduction in No. of branches: -680 or -45%

3

3

Integration of ICT platforms and of products and support services

4

4

Henceforth: upwards pressure on costs

2004 costs

Target:cost growth below wage inflation rate

Spontaneous cost inflation

1

1

2007 costs

rather limited potential for further automation
Rather limited potential for further automation

Efficiency strategy

Potential for further automation

Rate of automation

strict cost control remains important
Strict cost control remains important

Efficiency strategy

Closely-knit network

High wage costs

  • Wage costs in Belgium are higher than in other European countries
  • Average level of education of branch staff is higher than in other European countries

Source: Febelfin

slide18

Low over-the-cycle credit-loss charges

Risk strategy

Core retail Belgium only Trend of impairments in credit portfolio

Write-downs vs.

risk-weighted assets

0.24%

0.23%

0.09%

Target:<0.25%over-the-cycle

2002

2003

2004

focus on revenue growth strategy
Focus on revenue growth strategy

Growth strategy

(*) Core retail Belgium only

Revenue growth (*) in 2001-2004 period partly driven by positive pricing effects.

Revenue growth (*) in 2004-2007 period driven by positive volume effects and negative price effects

Margin pressure

½ due to positive pricing effects

Ambition:maintain growth trend

Achieved+5% p.a.revenue growth

growth in the savings investments field
Growth in the savings & investments field

How to grow within a mature market?

Growthstrategy

1

Attracting new funds

Proven performance

Market potential

Estimated nominal GDP growth rate

Market share of mutual funds

Savings rate

New funds attracted – in bn

growth in the insurance field
Growth in the insurance field

How to grow within a mature market?

Growthstrategy

1

2

Insurance

Attracting new funds

High internal potential

Proven performance

Premium growth, non-life

X-sell results

growth in the lending field
Growth in the lending field

3

Lending

High expectations for growth in retail lending

Total market – Mortgage loans

  • Small business loans:
  • Moderate growth trend, in line with nominal GDP growth (+4.2% in 2005)
  • But, still additional growth potential via raising amounts of advances in current account (with higher margins) and increasing non-credit-linked revenues

CAGR 9%

  • Mortage loans: strong growth on the back of:
  • steep rise in Belgian real estate prices
  • real estate prices still below level of other European markets

Source: NBB

How to grow within a mature market?

Growth

strategy

1

2

Attracting new funds

Insurance

obstacles to growth
Obstacles to growth

How to grow within a mature market?

Growthstrategy

1

2

3

Attracting new funds

Lending

Insurance

Sharper price competition !

Hardening credit-pricing cycle

Threats to growth according to analysts

Nos. 1 & 2 based on ranking

Small busniess loans

Mortgages

catalysts for growth
Catalysts for growth

How to grow within a mature market?

Growthstrategy

1

2

3

Attracting new funds

Insurance

Lending

Enhancing customer satisfaction

Top-4 bancassurers only

slide25

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3

Private banking in Belgium

business model in belgium
Business model in Belgium
  • KBC PB is a seperate channel for distribution of wealth management services to HNWI
  • Focus: customers with 1-5m of investible assets. Downflow of below-threshold clients to retail (> 65% are (ex-)entrepreneurs and owners of own business or practice; others are upper middle management/senior executives, heirs to a large fortune, etc.)
  • 19 dedicated branches focused on onshore private banking; broad local market representation (in the Northern part of Belgium)
  • Network-led model; private banking under corporate brand with growth primarily through identifying and converting clients from the retail and corporate network
  • Full-service banking (in partnership with the retail business*) - broad range of wealth management products and services
  • Controlled open architecture: > 90% investment management in-house, with an emphasis on product design (structured products, particularly capital guaranteed products) and quantitative techniques

* PB clients are served by retail branches for their standard banking needs

leveraging links with retail and corporate branches
Existing client relationships offer a high degree of opportunityLeveraging links with retail and corporate branches

Acquisition focus

Prospects known to corporate banches

Retail clients< 1 m withpotential

Prospects known to retail branches

Retail clients> 1 m

Other prospects

Retail clients> 2.5 m

Acquisition costs

KBC is primary bank (e.g. SME)KBC is second bank (e.g. SME)

high

low

key performance figures
Key performance figures

Growth primarily from retail trade-up*

Growth of relationships base

CAGR 9%

2001 2002 2003 2004

2001 2002 2003 2004

* New clients with former retail relationship

key performance figures29
Key performance figures

Client asset growth (bn)

Cost/income

Contribution (bn; pre-tax)

key performance figures30
Key performance figures

Customer satisfaction

(Very) satisfied

(Very) good

Yes

Exits to competition

97%

94%

91%

1.6% 1.6% 1,5%

Are you satisfied with your CRO’s competence level?

Would you describe your CRO as proactive?

How do you rate your experience with PB overall?

2002 2003 2004

Source: Annual customer survey 2004; response rate: 21% of all PB clients

slide31

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4

Synergies for private banking within KBC Group

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

kbc group s epb today
KBC Group’s epb* today
  • Presence in 10 countries outside Belgium, multi-domestic positioning
  • No link with traditional banking network (contrary to the network-led model in Belgium)
  • Highly based on open architecture (though product penetration of in-house products to increase within new KBC Group)

* epb: European private banking

key financials of epb
Key financials of epb*

Net profit

Assets under management

In bn EUR

In m EUR (Lux GAAP)

CAGR +6%

CAGR +6%

Return on equity

Tier-1 ratio

Lux GAAP

Lux GAAP

* Reminder: figures excl. KBC PB in Belgium

synergies within enlarged kbc group
Synergies within enlarged KBC Group
  • Synergies via integrating epb with KBC PB (Belgium) and KBC AM
  • Total synergy programme of NPV 500 m(net of restructuring and capital costs, post- tax)
  • Estimated capital and restructuring costs are ca. 50m over 5 years
  • Recurring pre-tax benefits of 75 m (peak level), half of which can be realized by 2006
  • Cashflow positive 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