2003 kbc bank & insurance group investor presentation winter 2003 website: ticker codes: kbc bb...

2 0 0 3

KBC Bank & Insurance Group

Investor presentation Winter 2003Website: www.kbc.com

Ticker codes: KBC BB (Bloomberg) KBKBT BR (Reuters)

B:KB (Datastream)

ISIN code: BE0003565737


2

2 0 0 3Table of contents

1. Shareholder information

2. Company profile

3. Strategy overview

4. Business highlights, year-to-date

5. Financial highlights, year-to-date

6. Additional information

7. Contact co-ordinates

2 0 0 3

Shareholder information

Website: www.kbc.com


B:KB (Datastream)



4

2 0 0 3Relatively low share price related to book value and earnings capactity

2000 2001 2002Oct

2003

Closing price 46.1 37.7 30.4 36.5

EPS 3.90 3.39 3.42 3.70

P/E (based on closing) 11.8 11.1 8.9 -

Net Asset Value 35.2 33.8 31.6 34.9

P/NAV 1.3 1.1 1.0 1.0

Key figures

N° of shares outstanding : 302.4 m

Analyst forecasts (September 2003)

EPS 2003 consensus: 3.59 EPS 2004 consensus: 4.11 P/E (average 2 years): 9.6

Recommendations : Positive : 14 Neutral : 11 Negative : 2


5

2 0 0 3Shareholder structure guaranteeing

long-term strategic perspective

CERA Holding& Almancora

Other stable shareholders

MRBB

Almanij

StockMarket

Gevaert Private equity

KBC Bank & Insurance

KBLPrivate bank

± 17%± 16%± 38%

± 78%

100%

± 68%

± 26%

± 30%

0

5

10

15

20

25

30

35

40

45

Inte

sa

Dex

ia

Sanp

aolo KB

CAl

l. Ir

.Ba

nks

Bk o

fIr

el.

Bco

Pop.

Esp.

Number 11 in Euro ranking

KBC is a middle-sized financial company in Europe with a market cap of ± 11 bn (float: ± 3.3 bn)

Almanij is an investment company (of which KBC is ± 75% of the assets) committed to support KBC on the long-term

Core holders include the Ceragroup (co-operative investment company), a farmers association (MRBB) and a syndicate of industrialist families, all of which KBC is a major asset

As of end of 18 November 2003


6

2 0 0 3Dividend policy aiming steady

and growing dividend

1998 1999 2000 2001 2002

2.69 3.26 3.90 3.39 3.42

1.09 1.23 1.42 1.48 1.52

41% 38% 36% 44% 44%

1.8% 2.1% 3.1% 3.6% 4.2%

EPS

DPS

Payout

Yield (*)

(*) Gross DPS versus average share price

Board of directors’ preference to maintain a steadily growing dividend

Gross dividend up every year over the past 5 years (at a CAGR of 9%)

Average payout: 40-45% (usually cash). Payout may be raised to keep dividend stable in case of temporary drop in profit

2 0 0 3

Company profile



B:KB (Datastream)



8

2 0 0 3

Top bancassurer in Belgium: 3rd bank (market share: ± 22 %) 1st asset manager (31% in retail

funds) 3rd retail insurer (13% L&H, 9% P&C)

Successful expansion in the 5 most

converged countries in ‘Emerging Europe’

growth market of ± 65 mln inhabitants

± 3 bn capital invested prominent/leading position in banking

in each country

Focused/niche activities in corporate and investment banking As investments in CE progressed, CIB activities have been downsized.

Successful in core businesses

KEY FIGURES:

Total assets: EUR ±210 bn

Net profit ‘02: 1.03 bn

ROE ’02: 12.7 %

Headcount: ± 44 000

Customers: ± 10 m

Credit rating: AA-, AA3, A+

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1998 1999 2000 2001 2002

Corporate andmarketsCentral Europe

Retail (Belgium)

Share in allocated capital (excl. goodwill)


9

2 0 0 3Leading player in Central Europe

Banking Insurance

25%

30%

1998 1999 2000 2001 2002

share in group profit (left) and in allocated capital (right), excl. group items

Slovakia:Market share: 6% (no 4)

Czech Republic:Market share: 18% (no 2)Total assets: 19 bnProfit/ROE ‘02: 199m (16%)

Hungary:Market share: 12% (no 2)Total assets: 5 bnProfit/ROE ‘02: 48m (13%)

Poland:Market share: 6% (no 7)Total assets: 6 bnProfit/ROE ‘02: -82m (-17%)

Slovenia:Minority interest (34%)Market share: 45% (no 1)Total assets: 9 bn

Czech Republic:Life M share: 9% (no 5)Non life M share: 4% (no 6)Assets/Profit ‘02: 0.6 bn/-12m

Slovakia:Life M share: 4% (no 6)Non life M share: 2% (no 8)Assets/Profit ‘02: 40m/-1m

Hungary:Life M share: 2% (no 14)Non life M share: 4% (no 6)Assets/Profit ‘02: 67m/2m

Poland:Minority interest (40%), agreement to acquire 51 %Life M share: 1% (no 9)Non life M share: 14% (no 2)Total assets: 1.1 bn

Slovenia:Startup life business


10

2 0 0 3Successful financial track record

Financial track record ‘98-’02 Gross revenue growth: 13 % CAGR

Life premium income doubled from 1.1 bn in ’98 to 2.2 in ‘02 (bancassurance model)

Slowdown in cost efficiency: C/I up from 60 % in ’98 to 65 % in ’02. Although merger synergies in Belgium arose, acquisitions in CEE weighted on efficiency (synergies still to materialize)

Since 2001:impact of the adverse financial climate (cost of risk, value losses)

As a balance: EPS CAGR 6 %

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1998 1999 2000 2001 2002

50%

10%

8%

13%

19%

Other

Interest income,banking

Insurance(technical and investment income)

Trading income

Gross operating (left), net operating income (mid) and net profit (right)

19% Commission

Revenue profile :(9M ‘03)


11

2 0 0 3

18.3% 18.1%

12.1%

9.9%

5.0%4.2%

3.6% 3.5% 3.5%2.8%

1.1%

1.1% 1.0% 1.0%

13.7%

Balanced credit portfolio

C.E.E.16.9 bn

Sector breakdown

Other

W. Eur19.9 bn

30 June 2003

Geographical breakdown

Credit portfolio incl. corporate bonds and loans to banks, excl. reverse repo’s.

US6.9 bn

Belgium53.1 bn


12

2 0 0 3

40

24

12

42

26

13

41

26

13

43

28

13

2000 2001 2002 30/09/03

Retail funds Institutional funds Private banking

Performing asset manager

76 81 80 84

Assets under management (bn EUR)Breakdown of Belgian retail funds:

Equity: 12%

Bonds &

MM: 16%

Mixed: 12%

Capital guaranteed: 49%

Other

Market share, retail funds: Belgium : 31% Czech Republic : 23% Slovak Republic: 11% Hungary : 11%

Belgium:85 %

Central Europe: 5 %


13

2 0 0 3SWOT analysis

Opportunities

Revenue growth and barely tapped cost cutting potential in CEE

Availability of excess capital

Unexploited synergy within Almanij group

Relatively low share valuation

Threats

Consolidation wave in Europe, if any

Strenghts

Prominent market positions in home markets, both Belgium and CEE

Geographical/business diversification

High performing asset management and P&C insurance division

Unique bancassurance concept

Good overall profitability track recordand Very sound solvency levels

Stable core shareholders (long term)

Weaknesses

Still high cost/income ratio

Cost reduction management is rather difficult in Belgium

Volatily related to level of gearing to equity markets

CEE still a somewhat higher risk zone(although rapidly converging)

Lack of stability and scale in Poland(work in progress)

Moderate share liquidity

2 0 0 3

Strategy overview



B:KB (Datastream)



15

2 0 0 3Group strategy

Key objectives

Cross selling (bancassurance) in Belgium

Reducing banking costsin Belgium

Developing a second home market in CEE

Achieved up-to-date

Premium income boosted (life premiums doubled from 1.1 bn in ’98 to 2.2 in ’02 at al level of 85 % sold via bank outlets. Bank distribution of P&C growing faster then via traditional channels)

Cost synergies thanks to integrated IT-infrastructure, reduced branches (-43%) and headcount (-12%)

Solid franchise in the main 5 countries, renewed IT-systems and bancassurance model gradually set up. Cost reduction programs in progress.

KBC is a bancassurer, focussing on local clients (individuals and SME), in Belgium and selected countries in (Central) Europe


16

2 0 0 3Earnings drivers

Key objectives

Cross selling (bancassurance) in Belgium

Reducing banking costsin Belgium

Future earnings drivers in Belgium

Work in progress

Bancassurance potential for SME (10% market share vs 20-25 % in banking)

Bancassurance potential for P&C (10% via bank channel vs 90 % in life)

Cut of product complexity in retail (reduction by 70 % considered)

Outscourcing of processing (payments) and IT (lmited scale), ) stronger pooling of backoffices of Belgian subsidiaries and co-sourcing with other banks, e.g. within the Almanij group in the field of private banking

Rationalisation of headquarter workspace and other non FTE expenses


17

2 0 0 3Earnings drivers

Key objectives

Developing a second home market in CEE (more focus on commercial clout and operational efficiency)

Work in progress

Penetration of banking and AM products (deposits to GDP at 45%-80% of EU avg)

Sales of insurance products via bank network (premium/capita <20% of EU)

Business reorganising in CZ and PL -> 10-15% FTE downsizing by 2004

Cross border cost-sharing (payments systems, IT procurement, equity research, etc.)

Strenghening of internal governance model and central management structure

If acquisition opportunities arise, meeting the 10% market share in HU (insurance) and PL (banking)

Future earnings drivers in Central and Eastern Europe


18

2 0 0 3

Cost/income ratio, banking 58 %

Combined ratio, P&C insurance (*) 95 %

Tier-1, banking 8 %

Solvency, insurance (**) 200 %

EPS growth (4y CAGR) 10 %

ROE, group 16 %

ROAC

Retail in Belgium 16 %

Central and Eastern Europe 17 %

Corporates 12 %

Markets 18 %

Demanding financial objectives

Minimumtargets 2005

(*) excl. re-insurance(**) incl. non-realised capital gains

2 0 0 3

Year-to-date business highlights



B:KB (Datastream)



20

2 0 0 3

Increasing efficiency in Belgium

Shift from external expansion towards commercial clout and operational efficiency in Central and Eastern Europe

Further downscaling of less-strategic areas

Clustering of retail branches

Efficiency enhancement programs for the back office operations

Outscourcing of transaction processing (payments) and IT (lmited scale)

Reorganisation program in Poland and staff redcution in CR

Instensifying cross-border initiatives in such areas as bank card technology

Succesful start of bancassurance in Slovenia

Strenghening management and controlling capacity at KBC HQ

Selling of retail activities in the Netherlands, broker-related consumer lending in Belgium, non-strategic operations in CEE (Ukraïn, Lithuania)

Year-to-date business highlights

2 0 0 3

Year-to-date financial highlights



B:KB (Datastream)



22

2 0 0 3

355

230

159

744

278316

280

152

747

287 304 300256

860

1Q01

2Q01

3Q01

9M01

4Q01

1Q02

2Q02

3Q02

9M02

4Q02

1Q03

2Q03

3Q03

9M03

Third Quarter Highlights

Average quarter2002

In m EUR+ 0%

- 5%

- 15%

Relatively good performance (up 69 %) y-o-y

+ 69%

+ 15%


23

2 0 0 3Third Quarter Highlights

Robust performance in Belgium Further improving level of costs in banking (ytd -5%) Pressure on interest margin reversed (Q/Q: 195 -> 210 bp) Low level of loan loss ratio (ytd 22 bp) and P&C (*) claims ratio

(ytd 59 bp)

Satisfactory result in most CEE markets ROAC (*) banking in Czech (CR) / Slovak republics (SR): ytd 17% ROAC for banking in Hungary: ytd 19% Improved performance by insurance operations (still limited scale)

… but very poor performance of banking business in Poland (high loan loss provisions : 124 m in 3Q)

(*) P&C : Property and Casualty insurance(**) Return on allocated capital


24

2 0 0 3Banking, income development

Interest income : ytd 2% organic growth(margin : 6M 1.63% 9M 1.71%)

Commission income : strong growth(capital-guaranteed funds)

Lower trading income due to lower FX incomeand MtM of equity derivatives

Considerable capital gains (ytd 196 m) on ‘free’ bond portfolio

One-off ‘other income’ recorded in 2Q 02 and lower dividends

Excluding capital gains, stable gross operating income despite difficult climate in 1H

0

500

1000

1500

2000

2500

Inte

rest

Com

mission

Trad

ing

Capi

tal g

ains

Div

iden

dsOth

er

1Q 03 2Q 03 3Q 03

Total income -2%

- 33%- 13%

+16%

-1%

-30%- 12%

Gross income ytd

9M 03


25

2 0 0 3Banking, expense development

Belgium : Expenditures ytd : 5% (- 60 m) Headcount reduction :

target of 1 650 FTE met in Oct 03

Central and Eastern Europe : Expenditures ytd: 1% (6 m) Headcount reduction :

Czech Republic : 460 FTE(48% of target)

Poland : new target of 1 000/1200 FTE

1249

425 749

13131364

743

760726

673

0

500

1000

1500

2000

2500

3000

9M 01 9M 02 9M 03

Belgium CEE Other

Continuing cost control

Cost/Income ratio 9M 03: 65%(65% for FY 02)

9M 03:45 %

Belgium

9M 03:27 %CEE

2 4612 782 2 757

2001 excl. KB

Ytd expenses (m EUR)


26

2 0 0 3Cost control in Belgium

Although Belgium is a ‘mature’ market, further improvement

in performance can be expected

Merger (almost) completed, full extent of cost savings in bottom-line as of 1H 04

Lower cost/income ratio ahead, thanks to: Greater use of bancassurance (acceleration in P&C and to SME segment) Reduction in product complexity in retail (possibly by up to 70%) (*)

Outsourcing of transaction processing (payments) and IT (limited scale)(implementation in progress)

Stronger pooling of back-office activities of Belgian group companies Various other co-sourcing scenarios being considered Screening of real-estate-related costs

(*) e.g. by reducing the wide range of credit cards, travellers’ cheques, mortgage loans, savings certificates, …


27

2 0 0 3Banking, loan provisions

Customer loan bookSept. 03

(1)

Lossratio

9M 03 (2)

Belgium 49.0 bn 0.22%

Hungary 3.7 bn 0.32%

CR / SR 5.9 bn 0.45%

Poland 4.0 bn 6.09%

International 27.6 bn 0.51%

Total 90.3 bn 0.60%

Intensive clean-up of loan portfolio in Poland

Quarterly loan loss provisions (m EUR)

Loan loss ratio 9M 03: 0.60%(0.55 for FY 02)

47 4011

4625 31 25

11 88

65

28

61

139

3145

32

50

26

49

40

0

50

100

150

200

1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03

Belgium CEE Other

(1) Gross loans(2) Specific provisions - annualized


28

2 0 0 3Retail banking in Belgium

Ytd profit 145 m ( 189%), ROAC up to 10% from 3% Growth in income : ytd 6%

(strong commission income and rebound in interest income) Cost reduction : ytd 5% Provisions (38 m EUR) remain low (16 bp on RWA(*))

2003 has seen a turnaround in Belgian retail on the back of robust commission business and cost savings

Belgium1st home market

+36%

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

Profit contribution Trend 4Q avg

(*) Risk -weighted assets


29

2 0 0 3Banking in Central and

Eastern Europe

CR & SR : stable yoy in spite of pressure on margin, thanks to commission income and zero expense growth

Hungary : income and volume growth more than set off pressure on margin

Poland : difficult economic conditions and high loan loss provisions (195 m)

(*) excl. minority interests, incl. 12 m provisions for KB related to 02

Satisfactory performance in Czech Republic,Slovakiaand Hungary (though further improvement to be expected)

Still basic restructuring work to do in Poland

Central Europe2nd home market

In m EUR(*)

9M 02 9M 03 % ROAC 03

CR / SR 109 112 +3 % 18%

Hungary 13 23 +77 % 19%

Poland -37 -138 - -

Slovenia - + 5 - -


30

2 0 0 3Activities in Central and

Eastern Europe Confidence in our strategy fundamentals :

Satisfying year-to-date results in most markets (incl. insurance),excl. banking in Poland

Within 6 months : all CEE affiliates (5 countries) operating in the EU Common shared optimism regarding rebound of economic cycle in ‘04

Refocusing : from ‘external expansion’ to ‘improvement in performance’

Adjustment of group governance model to encompass CEE affiliates.Key issues :

Further increase in management and controlling capacity of KBC HQ Improved organization of transfer of know-how to CEE Strengthened central audit teams



31

2 0 0 3Addressing the challenges in Poland Capital base : strengthened (+ 666 m PLN (completed), KBC's stake up to 81%)

Risk sensitivity : to be greatly reduced Credit risk policies redefined and credit decision authority reduced (completed) Cleaning up ‘historic’ loan book (195 m provisions ytd) Improving risk control and risk management

Cost base : to be further reduced Centralizing back offices, strengthening HR and performance measurement Reducing headcount (driven by new central IT system) by 1000/1200 FTE,

real estate expenses (15-20 %) and other tangible costs (5-10%) by ‘04 Disinvesting from non-strategic activities (Ukraine, Lithuania, PKB, Pension Fund,…)

Market position : to be improved on the retail market (sales growth 10-15 %) Thorough customer segmentation in the nationwide network Transfer of KBC product know-how (e.g., in the field of AM) Acceleration of bancassurance efforts with WARTA Insurance



32

2 0 0 3Asset Management division

Breakdown of retail funds

Equity: 11%

Bonds & MM: 13%

Balanced: 12%

Capital- guaranteed:48%

Profit contribution : ytd 84 m ( 4%)New capital-guaranteed funds :

ytd 105 new mutual/unit-linked funds AUM : ytd 5% to 84 bn from 80 bn

Retail funds (42 bn) : 4% Private assets (13 bn) : 4% Institutional & group assets (28 bn):

6%

Profit contribution down slightly

Belgium:85 %

Central Europe: 5 %

Other


33

2 0 0 3

Corporate banking : Profit contribution: ytd 140m 10%

(ROAC 9%) Cost decrease ( 7%) due to strict

cost control, mainly in Belgium / Western Europe

No repeat of 2002 one-off revenues Provisions for problem loans

(56 bp on RWA), mainly for the electricity sector in the US

Market activities : Profit contribution: ytd 117 m 51 %

(ROAC 14%) Very strong performance in money and

capital market products Equity trading: still weak (break-even

for KBC Securities at operating level)

KBC Financial Products : satisfactory result but negative MtM for equity derivatives

Corporate and investment banking

-20

0

20

40

60

80

100

120

140

1Q 01 2Q 01 3Q 01 4Q 01 1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03

Corporate banking Market activities

²²

Profit contribution : corporate banking and market activities


34

2 0 0 3Interim results at 30 Sep 2003

Highlights

Outlook

Performance, insurance

Performance, banking


35

2 0 0 3

65.4% 62.0% 61.2%

34.0%33.3% 32.6%

9M 01 9M 02 9M 03

Loss/premium Expense/premium

P&C, underwriting result

Exceptionallylow level

Premium income Combined ratio

Very sound business, in ‘03 partly driven by upward trend in rates and in general by strong risk

and cost discipline

Premiums ytd 15%

org. growth

99% 95% 94%

452 477 505

2562

85137

145

193

9M 01 9M 02 9M 03

Belgium CEE R/ I

Excl R/I

614684

784


36

2 0 0 3

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Interest-guaranteed Unit-linked

Life business, underwriting result

Quarterly net premium income

Very strong growth (bancassurance-driven)

9M 02: 1816 m1 050 m interest-guar.766 m unit-linked9M 01: 1 230 m

299 m interest-guar. 931 m unit-linked

9M 03: 1 991 m1 369 m interest-guar.622 m unit-linked

9M 03:95 %

Belgium

9M 03:5%

Central Europe

Premiums ytd 9 %

organic growth


37

2 0 0 3Insurance, investment income

9M 02 9M 03

Interest, dividend,rent

347 347 +0%

Capital gainson shares (*) 136 96 -30%

Total 483 443 -8%

Suffering from low bond yields

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

1Q01

2Q01

3Q01

4Q 01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

Interest income, bonds10 y EUR T-bonds

(*) incl. write-back from provision for financial risk(15m in ‘03)and excl. value adj. for unit-linked products


38

2 0 0 3Insurance, non-recurring items

In m EUR 3Q 03 9M 03

Non-recurring result

Value adjustments, shares -18 -108

Transfer from equalization reserve - 92

Non-recurring gains on securities - 122

Transfer to provision for financial risks 7 -115

Other -2 -8

Total non-recurring result -13 -17

Value adjustments on shares offset by non-recurring income

Provision for financial risks, balance : 100 m EUR


39

2 0 0 3Interim results at 30 Sep 2003

Highlights

Outlook

Performance, insurance

Performance, banking


40

2 0 0 3Profit outlook

Interest rate environment and general financial climate have improved. Economic outlook is more favourable.

On the other hand, further loan losses in 4Q cannot be ruled out (credit review, Poland).

Profit ‘03 expectation : at least the ’02 level(based on current information and assumption of stable stock market)

2 0 0 3

Additional information


42

2 0 0 3Year-to-date results, detailed overview

m EUR 9M 02 9M 03 % Organic %

Gross operating income 4 979 4 872 - 2% - 2% - banking 4 338 4 231 - 2% - 2% - insurance 652 640 - 2% - 3%

Administrative expenses - 3 133 - 3 143 + 0% + 0% - banking - 2 782 - 2 757 - 1% - 1% - insurance -348 -380 + 9% + 7%Operating result 1 846 1 729 - 6% - 5%

- banking 1 556 1 474 - 5% - 4% - insurance 303 260 - 14% - 14%

Loan loss provisions

Value adjust., non-recurring, extraordinary and other results

- 305

- 211

- 425

8

Pre-tax profit 1 323 1 274 - 4% - 3%

Taxes - 445 - 318

Minority interests - 130 - 96

Net profit 747 860 + 15% + 15%


43

2 0 0 3

515 544655

258 219

214

9M 01 9M 02 9M 03

Banking Insurance

Contribution per business, year-to-date

744 747

860

Group result : 3/4 from banking, 1/4 from insurance

+20%

-2%

Net profit in m EUR

ROE banking : 11.1%

ROE insurance : 16.3%

ROE Group: 13.2%


44

2 0 0 3Year-To-Date Highlights

In banking : high commission income (y-o-y +16%) and in 3Q strongly improving interest income.

In insurance : high premium volume (y-o-y + 11%), but pressure on investment income.

Zero cost growth y.o.y. In banking : cost level down 1%.

Strong technical result in non-life : combined ratio 95.4% (excl. reinsurance : 93.8%).

Relatively high loan loss provisions (425 m).

Value impairments on shares (100 m, but offset).

Solid solvency : 8.6% (Tier 1 - bank) and 318% (insurance)


45

2 0 0 3Main changes in scope of consolidation

Impact (*)

CSOB Insurance

NLB Bank

Full consolidation,

retroactively to 1Q

Equitymethod

-0.4%

+0.1%

+0.1%

Q2 Q3 Q4 Q1 Q2 Q3 Q4

2002 2003

Ergo Insurance

Krefima Bank

Full consolidation

Deconsolidation(previously full consolidation)

(*) Impact on gross operating income

Limited net impact of changes in consolidation

(full consolidation, previously

equity method)

Q1

2004

Warta Insurance

EXPECTED


46

2 0 0 3Group, key performance ratios

Sep 02 Dec 02 Sep 03

Cost / income, banking 64.1% 65.2% 65.2%

Combined ratio, insurance (*) 95.2% 101.4% 93.8%

Solvency (Tier 1), banking 8.3% 8.8% 8.6%

Solvency, insurance (**) 305% 320% 318%

Return on equity 12.3% 12.7% 13.2%

Growth in EPS (y-o-y) +0% +1% +15%

(*) Excluding reinsurance(**) Including unrealized gains

Getting closer to strategic objectives


47

2 0 0 3Areas of activity, profit contribution

(*) Profit excluding minority interests

Profit contribution (*) year-to-date

Activity m EUR % ROAC Headlines

Retail, Belgium 328 m 30% 15%

- Strong commission and premium income- Improving interest margin (2.1% in 3Q)- Cost reduction in banking ( 5% y-o-y)- Low loan losses (16 bp/RWA) and low combined ratio P&C (92 %)

Central Europe: - banking in CR/SR - banking in Hungary - banking in Poland

-28 m112 m

23 m-138 m

-+ 3%

+ 77%-

- 2%+18%

+ 19%-

- Strong commissions and zero cost growth in CR (although margin pressure and fewer one-offs)- Strong income growth in banking in Hungary- High loan losses in Poland (195 m)- Improvement in insurance (though limited scale)

Asset management 84 m 4% - - AUM up 5% vs Dec 02

Corporate services 139 m 11% 9%

- Successful cost control- Less one-off income (CLOs) and higher loan losses (US energy) - R/I out of the red

Market activities 117 m 51% 14%- Fixed income: very strong - Equities: still weak but cost-cutting successful - Derivatives: satfisfactory (suffered from MtM)

Strong rebound in Belgian retail. High adverse impact of Poland.


48

2 0 0 3Interest spreads in Belgium, banking

1.80%

1.85%

1.90%

1.95%

2.00%

2.05%

2.10%

2.15%

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

3.5%

4.0%

4.5%

5.0%

5.5%

Interest margin, Belgium 10 y EUR T-bonds

Going forward, increasing market rates could fuel top-line growth

Interest margin Spread on new loans

0.5%

0.7%

0.9%

1.1%

1.3%

1.5%

1.7%

1.9%

Investment credit, Belgian SME loan book

Corporate bond A-rating


49

2 0 0 3Economic outlook

Popu-lation

Real GDP growth

10-y interest rate

CPI change

2002 2003e 2004e Dec 03e Sep 04e 2002 2003e 2004e

Belgium 10 m 0.7% 0.8% 1.9% 4.4% 4.8% 1.6% 1.5% 1.1%

Czech Republic 10 m 2.0% 3.0% 3.9% 4.5% 5.0% 1.8% 0.0% 2.2%

Slovak Republic 5 m 4.4% 3.5% 4.2% 5.1% 5.4% 3.3% 8.2% 6.0%

Hungary 10 m 3.2% 2.0% 3.0% 7.3% 7.5% 5.3% 4.5% 6.5%

Poland 38 m 1.3% 3.1% 4.0% 5.0% 5.8% 1.9% 0.6% 2.2%

Source : KBC Asset Management, November 2003


50

2 0 0 3Value adjustments, investment portfolio

Significant value adjustments in ‘02 and in 1Q 03 (offset in insurance business

by non-recurring result)

4Q 01 1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03

Adjustments, insurance book Adjustments, banking book

DJ Eurostoxx

-223

-35

-220

125

-6


51

2 0 0 3Unrealized gains, investment portfolio

In m EUR Dec 02 Sep 03 %

Bankingbook 1 742 1 784 + 2 %

Bonds 1 630 1 597

Shares 113 187

Insurancebook 82 174 + 112%

Bonds 497 434

Shares -516 -359

Real estate 101 99

Unrealized gains increasing, driven by upward trend of stock markets

Balance of gains and losses


52

2 0 0 3

0

500

1000

1500

2000

2500

FY 01 FY 02 Sep-03

Legal Buffer Excess

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

FY 01 FY 02 Sep-03

Legal Buffer Excess

Solvency

8.8% 8.8% 8.6% 504%

320%318%

Banking business (Tier 1)

Insurance business (Solvency margin)

564 m

564 m

668 m

612 m

3 868 m

3 868 m

Solid solvency in both banking and insurance (no double gearing and no DAC)

In m EURIn m EUR


53

2 0 0 3Solvency

KBC Bank 1993 / 2003 mandatory convertible bond Conversion, 30 Nov 2003 :

Capital increase: ca. 8.1 m new shares (*)(not dividend-entitled for ’03)

Impact : Lower interest charges (12.2% for ‘03) EPS ‘04 dilution, ca. 1.5 pp Tier 1: ca. 30 bp Free float : ca. + 1%

(*) Based on outstanding MCB at 30 Sept. 2003


54

2 0 0 3Contact information

Investor Relations Office:Luc CoolTel. +32 2 429 49 16 E-mail [email protected]

Visit www.kbc.com for the latest update on our company: press releases and E-mail alert service financial information, annual and quarterly reports company background, strategy and governance related items

2003 kbc bank & insurance group investor presentation winter 2003 website: ticker codes: kbc bb...

Documents

support kbc

be0003565737 slide

profit slide

rd bank market share

goodwill slide

bn almanij

dividend stable

bn capital