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Page 1: KBC Group Company presentation 1Q 2018€¦ · KBC Group Company presentation 1Q 2018 KBC Group - Investor Relations Office –E-mail: ... By reading this presentation, ... was offset

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KBC GroupCompany presentation1Q 2018

KBC Group - Investor Relations Office – E-mail:

More information: www.kbc.com

[email protected]

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This presentation is provided for information purposes only. It does not constitute an offer to sell or the solicitation to buy anysecurity issued by the KBC Group.

KBC believes that this presentation is reliable, although some information is condensed and therefore incomplete. KBC cannot beheld liable for any loss or damage resulting from the use of the information.

This presentation contains non-IFRS information and forward-looking statements with respect to the strategy, earnings and capitaltrends of KBC, involving numerous assumptions and uncertainties. There is a risk that these statements may not be fulfilled andthat future developments differ materially. Moreover, KBC does not undertake any obligation to update the presentation in linewith new developments.

By reading this presentation, each investor is deemed to represent that it possesses sufficient expertise to understand the risksinvolved.

Important information for investors

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The fully loaded** B3 common equity ratio based on theDanish Compromise decreased from 16.3% at the end of2017 to 15.9% at the end of 1Q18 due to the impact of thefirst-time application of IFRS 9 (-41bps)

Fully loaded B3 leverage ratio, based on current CRRlegislation, amounted to 5.7% at KBC Group

Continued strong liquidity position (NSFR at 137% and LCRat 139%) at end 1Q18

Capital and liquidity positions:

** This clearly exceeds the minimum capital requirements set by the competentsupervisors of respectively 9.875% phased-in and 10.60% fully loaded for 2018. Ontop of the above-mentioned capital requirements, the ECB expects KBC to hold apillar 2 guidance (P2G) of 1.0% CET1

Very good net result of 556m EUR, despite the largeupfront bank taxes (371m EUR). ROE of 14%* in 1Q18 Good performance of the commercial bank-insurance franchises

in our core markets and core activities

Q-o-q increase in customer loan volumes and customer deposits(excluding debt certificates & repos) in most of our core countries

Roughly stable net interest income and higher net interest marginq-o-q

High net fee and commission income

Lower net gains from financial instruments at fair value and higherother net income

Combined ratio of 90% in 1Q18. Excellent sales of non-life and lifeinsurance products

Strict cost management resulted in a cost/income ratio of 55%YTD adjusted for specific items

Net impairments releases on financial assets at amortised cost of63m EUR, mainly driven by Ireland (net release of 43m EUR in1Q18). We are maintaining our impairment guidance for Ireland,namely a net release in a range of 100m-150m EUR for FY18

1Q18 financial performance:

1Q 2018 key takeaways for KBC Group

* ROE taking into account pro rata bank taxes amounted to 19% in 1Q18

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Contents

1

4

Strong solvency and solid liquidity

1Q 2018 wrap up

Annex 2: Other items

2

1Q 2018 performance of KBC Group

3

1Q 2018 performance of business units

Annex 1: Company profile

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KBC Group

Section 1

1Q 2018 performance of KBC Group

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Net result at KBC Group

* Difference between net result at KBC Group and the sum of the banking and insurancecontribution is accounted for by the holding-company/group items

CONTRIBUTION OF BANKING ACTIVITIES TO KBC GROUP NET RESULT*

691

1Q17

399

556

2Q17 3Q17 4Q17 1Q18

630

855

NET RESULT AT KBC GROUP*

526

330

1Q181Q17 2Q17 3Q17 4Q17

750

575

461

61 82 93 84 75

7864

96

27 42

-29 -33 -52 -34

2Q171Q17

-15

3Q17 4Q17 1Q18

111 113

137

10278

CONTRIBUTION OF INSURANCE ACTIVITIES TO KBC GROUP NET RESULT*

Amounts in m EUR

Non-Life result

Life result

Non-technical & taxes

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Summary 2017 pro forma figures

Impact shift per P&L line

4Q17 as was

4Q17 pro forma

3Q17 as was

3Q17 pro forma

2Q17 as was

2Q17 pro forma

1Q17 as was

1Q17 pro forma

NII 1,029 1,137 1,039 1,114 1,028 1,094 1,025 1,081

FIFV 235 118 182 94 249 180 191 130

F&C 430 456 408 433 430 454 439 463

AFS gains* 51 6 51 2 52 8 45 14

+108

+17

• Interest accrual FX derivatives: shifted from FIFV to NII (in line with the transition to IFRS 9)• Network income (income received from margins earned on FX transactions carried out by the network for clients): shifted from FIFV to F&C• IFRS 9: overlay approach for insurance: shift from realised gains AFS shares and impairments on AFS shares to FIFV• Please note that due to IFRS 9, the realised gains on AFS shares in Banking (26m in 4Q17, 32m in 3Q17, 21m in 2Q17 and 10m in 1Q17) have

been eliminated from net result as they are now booked in equity

+26

+75

+12

+25

+66

+21

+24

+56

+19

+24

* Due to IFRS 9, the P&L line ‘net realised result from AFS assets is replaced by ‘net realised result from debt instruments at FV through OCI’

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Good net interest income and higher net interest margin

Net interest income (1,125m EUR)• Down by 1% q-o-q and up by 4% y-o-y• The small q-o-q decrease was driven primarily by:

o lower netted positive impact of ALM FX swapso lower reinvestment yieldso more negative pressure on commercial loan margins in

most core countrieso lower number of dayspartly offset by:o lower funding costs (due mainly to the call of the CoCo)o continued good loan volume growtho positive impact of both short & long term increasing

interest rates in the Czech Republic

Net interest margin (2.01%)• Up by 4 bps q-o-q and by 8 bps y-o-y thanks to lower funding

costs and the positive impact of repo rate hikes in the CzechRepublic

NIM (pro forma for 2017***)

NII (pro forma for 2017*)

907 928 946 952 970

143 142 144 135 12828 21 22 47 27

2Q17

3

1,114

1Q17

23

3Q17

3

4Q17 1Q18

1,1370

1,081 1,094 1,125

1Q181Q17 2Q17 3Q17

2.01%1.96%

4Q17

1.96%1.93%1.97%

Amounts in m EUR

NII - netted positive impact of ALM FX swaps**

NII - Holding-company/group

NII - Insurance

NII - Banking

* Non-annualised** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos

VOLUME TRENDExcluding FX effect Total loans ** o/w retail mortgages Customer deposits*** AuM Life reserves

Volume 143bn 60bn 188bn 213bn 29bn

Growth q-o-q* +1% 0% -3% -2% 0%

Growth y-o-y +5% +4% +3% 0% -2%

Customer deposit volumes excluding debtcertificates & repos +2% q-o-q and +7% y-o-y

* 2017 pro forma figures for NII as the impact of ALM FX derivatives was ‘netted’ in NII as of 2018** From all ALM FX swap desks*** NIM is calculated excluding the dealing room and the net positive impact of ALM FX swaps & repos

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High net fee and commission income

Net fee and commission income (450m EUR)• Down by 1% q-o-q and by 3% y-o-y

• Positive net sales of mutual funds in 1Q18

• Q-o-q decrease was the result chiefly of:o lower management feeso lower fees from payment serviceso lower fees from credit files & bank guaranteeso lower securities-related feespartly offset by:o higher entry feeso lower commissions paid on insurance sales

• Y-o-y decrease was mainly the result of:o lower entry feeso lower securities-related feeso lower fees from credit files & bank guaranteespartly offset by:o higher fees from payment serviceso the contribution of UBB/Interlease

Assets under management (213bn EUR)• Fell by 1.5% q-o-q owing entirely to a negative price effect

• The mutual fund business has seen net inflows again, but thiswas offset by net outflows in group assets and investmentadvice

F&C (pro forma for 2017*)

Amounts in m EUR

511 506 489 518 502

-72 -73 -81 -86 -77

4Q17

2424

1Q17

-2

2Q17

2625

3Q17

454

-1

25

0

1Q18

463 433 456 450

F&C - contribution of holding-company/group

F&C - network income

F&C - insurance contribution

F&C - banking contribution

Amounts in bn EUR

AuM*

214 213 215 217 213

3Q171Q17 2Q17 4Q17 1Q18

* 2017 pro forma figures as the network income shifted from FIFV to net F&C as of 2018

* Note that 2017 AuM figures were reduced due to a roughly 2bn EUR adjustment in Institutional Mandates

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Insurance premium income (gross earned premium) at 714m EUR• Non-life premium income (378m) increased by 5%

y-o-y

• Life premium income (336m) down by 18% q-o-qand up by 8% y-o-y

The non-life combined ratio at 1Q18 amountedto 90%, still a good number despite highertechnical charges due mainly to higher stormclaims in Belgium

Insurance premium income up y-o-y and good combined ratio

COMBINED RATIO (NON-LIFE)

PREMIUM INCOME (GROSS EARNED PREMIUM)

88%

FY1Q

83%90%

1H

84%

9M

79%

2017 2018

360 369 378 384 378

312 267 282410

336

1Q181Q17 2Q17

672

3Q17 4Q17

636 660

794714

Life premium income Non-Life premium income

Amounts in m EUR

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Non-life and life sales up y-o-y

Sales of non-life insurance products• Up by 5% y-o-y thanks to a good commercial

performance in all major product lines in our coremarkets and tariff increases

Sales of life insurance products• Decreased by 15% q-o-q and up by 5% y-o-y

• The q-o-q decrease was driven mainly by lower sales ofguaranteed interest products in Belgium (attributablechiefly to traditionally higher volumes in tax-incentivised pension saving products in 4Q17 and extrasales for individual pension agreements for self-employed business leaders, anticipating the reductionof corporate tax as of 2018) and lower sales of unit-linked products in the Czech Republic

• The y-o-y increase was driven mainly by higher sales ofguaranteed interest products in Belgium and highersales of unit-linked products in the Czech Republic

• Sales of unit-linked products accounted for 44% of totallife insurance sales

LIFE SALES

NON-LIFE SALES (GROSS WRITTEN PREMIUM)

207 193 187270 219

267222 218

318279

1Q17

415474

2Q17 3Q17 4Q17

405

1Q18

588

498

Guaranteed interest products Unit-linked products

468

358 349 342

492

1Q181Q17 2Q17 3Q17 4Q17

Amounts in m EUR

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Lower FV gains, higher other net income

The lower q-o-q figures for net gains fromfinancial instruments at fair value wereattributable mainly to:• a negative change in market, credit and funding value

adjustments (mainly as a result of changes in theunderlying market value of the derivative portfolio)

• lower dealing room income

Other net income amounted to 71m EUR,higher than the normal run rate of around 50mEUR due to the settlement of an old legal file inBelgium and the sale of a building in Hungary

FV GAINS (pro forma for 2017*)

Amounts in m EUR

19 21 17 19

73110

86

7194

73

11112

180

1Q17

7

2Q17

4

4Q173Q17 1Q18

130

94

11896

77

47

4

-14

71

2Q171Q17 3Q17 4Q17 1Q18

OTHER NET INCOME

Other FV gains

M2M ALM derivatives

Net result on equity instruments (overlay insurance)

* 2017 pro forma figures as:1) the impact of the FX derivatives was ‘netted’ in NII as of 2018 2) the shift from realised gains AFS shares and impairments on AFS shares to FIFV due to IFRS 9 (overlay approach for insurance)

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Operating expenses up due entirely to higher bank taxes, but good cost/income ratio

Cost/income ratio (banking) adjusted for specificitems* at 55% in 1Q18• Operating expenses excluding bank tax went down by

6% q-o-q due mainly to seasonal effects such astraditionally lower ICT, marketing and professional feeexpenses, despite a 12m EUR provision for facilityexpenses for one specific file in Belgium in 1Q18

• Operating expenses without bank tax increased by 6%y-o-y due chiefly to the consolidation of UBB/Interlease,higher ICT costs, higher staff expenses (wage drift inmost countries), higher marketing expenses, a 12m EURprovision for facility expenses for one specific file inBelgium and higher depreciation & amortisation costs(due to the capitalisation of some projects)

• Pursuant to IFRIC 21, certain levies (such ascontributions to the European Single Resolution Fund)have to be recognised in advance, and this adverselyimpacted the results for 1Q17. The y-o-y increase canmainly be explained by the consolidation of UBB

• Total bank taxes (including ESRF contribution) areexpected to increase from 439m EUR in FY17 to 461mEUR in FY18, although still subject to changes

OPERATING EXPENSES

868 891 896 980 920

361371

1,291

41

1Q17 3Q172Q17

19

1Q184Q17

18

1,229

910 9141,021

Bank tax Operating expenses

* See glossary (slide 88) for the exact definition** still subject to changesAmounts in m EUR

TOTAL Upfront Spread out over the year

1Q18 1Q18 1Q18 2Q18e 3Q18e 4Q18e

BU BE 273 273 0 0 0 0

BU CZ 29 29 0 0 0 0

Hungary 45 26 19 21 21 21

Slovakia 7 3 4 4 4 4

Bulgaria 14 14 0 0 0 0

Ireland 4 3 1 1 1 14

GC 0 0 0 0 0 0

TOTAL 371 347 24 25 25 39

EXPECTED BANK TAX SPREAD IN 2018 (PRELIMINARY)**

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Overview of bank taxes*

INTERNATIONAL MARKETS BUCZECH REPUBLIC BU

BELGIUM BUKBC GROUP

46

24

25

41

52

11

18

25

1Q181Q17

1

57

2Q17 4Q173Q17

70

Common bank taxesESRF contribution

225

-7

215

53 58

4Q171Q17

-2

3Q17 1Q18

-4

2Q17

278

-6

0

273

ESRF contribution Common bank taxes

6 1 6

2022

0

2Q171Q17 3Q17

26

4Q17 1Q18

0

29

ESRF contribution Common bank taxes

278

1841

273

83 98

3Q171Q17

361

20

1Q18

-1

0

2Q17 4Q17

1941

371

Common bank taxes

European Single Resolution Fund contribution

* This refers solely to the bank taxes recognised in opex, and as such it does not take account of income tax expenses, non-recoverable VAT, etc.** The C/I ratio adjusted for specific items of 55% in 1Q18 amounts to roughly 48% excluding these bank taxes

Bank taxes of 371m EUR in 1Q18. On a pro rata basis, bank taxes represented 11.1% of 1Q18 opex at KBC Group**

Bank taxes of 273m EUR in 1Q18. On a pro rata basis, banktaxes represented 11.1% of 1Q18 opex at the Belgium BU

Bank taxes of 29m EUR in 1Q18. On a pro rata basis, bank taxes represented 4.3% of 1Q18 opex at the CZ BU

Bank taxes of 70m EUR in 1Q18. On a pro rata basis, bank taxes represented 18.0% of 1Q18 opex at the IM BU

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Net impairment releases, excellent credit cost ratio and improved impaired loans ratio

Very low asset impairments• This was attributable mainly to:

o net loan loss provision releases in Ireland of 43m EUR(compared with 52m in 4Q17)

o also small net loan provision reversals in Bulgaria, Hungary,Slovakia and Group Centre

• Impairment of 6m on other in the Czech Republic as a result ofthe review of the residual value calculation on financial leasesfor cars in CSOB Leasing

The credit cost ratio amounted to -0.15% in 1Q18 due tolow gross impairments and several releases

The impaired loans ratio improved to 5.9%, 3.5% ofwhich over 90 days past due

ASSET IMPAIRMENT

1532

15

-30

616

1Q17

7

-78

2Q17 3Q17

31

4Q17

-63

1Q18

8

-71

2

-56

IMPAIRED LOANS RATIO

4Q172Q17

3.6%

1Q17

3.9% 3.4%3.7%

3Q17

3.5%

1Q18

6.8% 6.9% 6.6%6.0% 5.9%

CREDIT COST RATIO

FY16FY14

0.09%

0.23%

FY15 FY17 1Q18

0.42%

-0.06%

-0.15%

of which over 90 days past dueImpaired loans ratio

Impairments on financial assets at AC*Other impairments

* AC = Amortised Cost. Under IAS 39, impairments on L&R

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KBC Group

Section 2

1Q 2018 performance of business units

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BELGIUM BUSINESS UNIT

CFO SERVICES

CRO SERVICES

CORPORATE STAFF

BELGIUMCZECH

REPUBLICINTERNATIONAL

MARKETS

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Belgium BU (1): net result of 243m EUR

Net result at the Belgium Business Unitamounted to 243m EUR• The quarter under review was characterised by lower

net interest income, roughly stable net fee andcommission income, decreased trading and fair valueincome, higher other net income, an improvedcombined ratio, seasonally lower sales of lifeinsurance products, higher operating expenses dueentirely to higher bank taxes and lower impairmentcharges q-o-q

• Excluding both the upfront booking of the bank tax in1Q18 and the one-off negative impact of the reformof the Belgian corporate income tax regime in 4Q17,the net result rose by roughly 3% q-o-q

• Customer deposits excluding debt certificates andrepos rose by 4% y-o-y, while customer loans alsoincreased by 4% y-o-y

* Non-annualised ** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos

VOLUME TREND

Total loans ** o/w retail mortgages Customer deposits*** AuM Life reserves

Volume 96bn 35bn 126bn 199bn 27bn

Growth q-o-q* +1% 0% -5% -1% -1%

Growth y-o-y +4% +1% 0% 0% -2%

301

483455

336

243

2Q171Q17 3Q17 4Q17 1Q18

NET RESULT

Amounts in m EUR

Customer deposit volumes excluding debtcertificates & repos +2% q-o-q and +4% y-o-y

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Belgium BU (2): lower NII despite stable NIM

Net interest income (649m EUR)• Fell by 4% q-o-q due mainly to the lower netted impact of FX

swaps, lower reinvestment yields and lower number of days

• Down by 5% y-o-y, driven primarily by:o lower reinvestment yieldso pressure on commercial loan marginso lower upfront prepayment fees (6m EUR in 1Q18 compared

with 9m EUR in 1Q17)partly offset by:o lower funding costs on term depositso good loan volume growth

Net interest margin (1.73%)• Stabilised q-o-q

• Fell by 5 bps y-o-y due to the negative impact of lowerreinvestment yields and some pressure on commercial loanmargins

NIM (pro forma for 2017***)

NII (pro forma for 2017*) Amounts in m EUR

523 529 512 515 513

130 129 132 123 117

4Q172Q17

28 2019

1Q17 3Q17

39 19

1Q18

681 677 664 677649

2Q171Q17 3Q17

1.72%

4Q17 1Q18

1.79%1.78% 1.73% 1.73%

NII - contribution of insurance

NII - netted positive impact of ALM FX swaps** NII - contribution of banking

• 2017 pro forma figures for NII as the impact of ALM FX derivatives was ‘netted’ in NII as of 2018** From all ALM FX swap desks*** NIM is calculated excluding the dealing room and the net positive impact of ALM FX swaps & repos

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Credit margins in Belgium

PRODUCT SPREAD ON CUSTOMER LOAN BOOK, OUTSTANDING

PRODUCT SPREAD ON NEW PRODUCTION

1.0

0.4

1.2

0.0

1.4

0.2

0.6

0.8

4Q11 3Q12 1Q14 3Q16 1Q181Q171Q11 3Q172Q11 3Q11 1Q12 2Q12 4Q12 3Q151Q13 4Q163Q132Q13 3Q144Q13 2Q14 4Q14 1Q161Q15 2Q15 4Q15 2Q16 2Q17 4Q17

Customer loans

1.4

1.2

0.8

0.4

0.2

1.6

0.6

1.8

1.0

4Q173Q11 2Q144Q13 4Q143Q142Q13 1Q171Q13 4Q161Q164Q11 4Q151Q11 2Q11 1Q12 2Q12 3Q12 3Q164Q12 3Q13 1Q14 2Q161Q15 2Q15 3Q15 2Q17 3Q17 1Q18

SME and corporate loans Mortgage loans

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Belgium BU (3): good net F&C income

Net fee and commission income (318m EUR)• Positive net sales of mutual funds in 1Q18

• Net F&C income decreased by 1% q-o-q due mainly to:o lower management feeso lower securities-related feeso lower fees from credit files & bank guaranteespartly offset byo higher entry fees from mutual funds and unit-linked

life insurance productso higher fees from payment serviceso lower commissions paid on insurance sales

• Fell by 11% y-o-y driven chiefly by lower entry fees frommutual funds & unit-linked life insurance products (as1Q17 benefited from the launch of EasyInvest), lowersecurities-related fees, lower fees from credit files &bank guarantees, slightly lower fees from paymentservices and higher commissions paid on insurance sales

Assets under management (199bn EUR)• Fell by 1% q-o-q owing entirely to a negative price effect

• Stabilised y-o-y as net inflows (+1%) were offset by anegative price effect (-1%)

AuM*

F&C (pro forma for 2017*)

Amounts in bn EUR

391 376 352 368 356

-45 -45 -52 -55 -47

2Q17

910

1Q17 4Q17

7

356

3Q17

8 9

1Q18

339307

321 318

200 198 200 202 199

3Q171Q17 2Q17 4Q17 1Q18

Amounts in m EUR

* Also note that 2017 AuM figures were reduced due to a roughly 2bn EUR adjustment in Institutional Mandates

F&C - network income

F&C - contribution of insurance

F&C - contribution of banking

* 2017 pro forma figures as the network income shifted from FIFV to net F&C as of 2018

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Sales of non-life insurance products• Increased by 2% y-o-y

• Premium growth was situated in all classes, except for‘Accident & Health’

Combined ratio amounted to 93% in 1Q18(86% in FY17). 1Q18 was negatively impacted byhigher technical charges y-o-y due mainly tohigher storm claims

Belgium BU (4): higher y-o-y non-life sales and goodcombined ratio

COMBINED RATIO (NON-LIFE)

81%

93%

80%

1Q

77%

9M1H FY

86%

2017 2018

NON-LIFE SALES (GROSS WRITTEN PREMIUM)

323

256241

228

329

4Q171Q17 3Q172Q17 1Q18

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Belgium BU (5): lower life sales and good cross-sellingratios

Sales of life insurance products• Fell by 12% q-o-q as the sales of guaranteed interest

products are traditionally lower in the first quarter(versus traditionally higher volumes in tax-incentivisedpension saving products in the fourth quarter andextra sales for individual pension agreements for self-employed business leaders in 4Q17, anticipating thereduction of corporate tax as of 2018). The lowersales of unit-linked products was the result ofcommercial efforts in 4Q17 and a less favourableinvestment climate in 1Q18

• Increased by 2% y-o-y driven entirely by higher salesof guaranteed interest products

• As a result, guaranteed interest products and unit-linked products accounted for 62% and 38%,respectively, of life insurance sales in 1Q18

Mortgage-related cross-selling ratios• 86.5% for property insurance

• 78.9% for life insurance

LIFE SALES

Amounts in m EUR

155 143 113170 154

241197

193

290250

396

3Q171Q17 1Q182Q17

340

4Q17

306

460

404

Guaranteed interest products Unit-linked products

MORTGAGE-RELATED CROSS-SELLING RATIOS

49.5%

86.5%

63.7%

78.9%

40

45

50

55

60

65

70

75

80

85

90

Property insurance Life insurance

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The lower q-o-q figures for net gains fromfinancial instruments at fair value were theresult mainly of negative q-o-q change inmarket, credit and funding value adjustments(mainly as a result of changes in theunderlying market value of the derivativeportfolio)

Other net income amounted to 59m EUR in1Q18, higher than the normal run rate ofaround 50m EUR due to the settlement of anold legal file

FV GAINS (pro forma for 2017*)

Amounts in m EUR

20 21 12 17 19

29 30

14

3617

61

23

1Q17 3Q17

51

2Q17

10

-2

4Q17

-2

1Q18

110

74

36 34

4640

51

38

59

1Q17 2Q17 1Q183Q17 4Q17

OTHER NET INCOME

Belgium BU (6): lower FV gains and higher other net income

Other FV gains

M2M ALM derivatives

Net result on equity instruments (overlay insurance)

* 2017 pro forma figures as:1) the impact of the FX derivatives was ‘netted’ in NII as of 2018 2) the shift from realised gains AFS shares and impairments on AFS shares to FIFV due to IFRS 9 (overlay approach for insurance)

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Belgium BU (7): higher opex due entirely to higher bank taxes, lower impairments, good credit cost ratio

Operating expenses: +45% q-o-q and stable y-o-y• Operating expenses without bank tax fell by 3% q-o-q due

mainly to traditionally lower marketing, professional feeand ICT expenses in the first quarter, despite a 12m EURprovision for facility expenses for one specific file in 1Q18

• Operating expenses without bank tax increased by 1% y-o-yas lower staff and marketing expenses were more thanoffset by a 12m EUR provision for facility expenses for onespecific file in 1Q18, higher ICT & professional fee expenses

• Cost/income ratio: 77% in 1Q18, distorted mainly by thebank taxes. Adjusted for specific items, the C/I ratioamounted to 56% in 1Q18 (53% in FY17)

Loan loss provisions amounted to 14m EUR in 1Q18(compared with loan loss provisions of 12m EUR in4Q17), so continuously overall low gross impairments(in all segments) in 1Q18. Credit cost ratio amountedto 5 bps in 1Q18 (9 bps in FY17)

Impaired loans ratio improved to 2.6%, 1.3% of whichover 90 days past due

ASSET IMPAIRMENT

OPERATING EXPENSES

Amounts in m EUR

544 550 527 566 549

278 273

0

1Q17 4Q172Q17

-6 -7

566

3Q17 1Q18

822

544 520

822

59

2112 14

-4

13

12

4Q17

1

1Q182Q171Q17

3

3Q17

-1

60

-2

34

24

13

Operating expensesBank tax

Other impairments Impairments on financial assets at AC*

* AC = Amortised Cost. Under IAS 39, impairments on L&R

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Net result at the Belgium BU

* Difference between net profit at the Belgium Business Unit and the sum of the banking and insurance contribution is accounted for by the rounding up or down of figures

CONTRIBUTION OF BANKING ACTIVITIES TO NET RESULT OF THE BELGIUM BU*

NET RESULT AT THE BELGIUM BU*

Amounts in m EUR

301

483455

336

243

1Q17 2Q17 4Q173Q17 1Q18

208

385336

271

165

1Q17 2Q17 4Q173Q17 1Q18

5070 80 74 63

6448

79

20

-21 -20-40

-19

93

3Q171Q17 2Q17

9

4Q17

-5

1Q18

98

119

65 78

Life resultNon-Life result Non-technical & taxes

CONTRIBUTION OF INSURANCE ACTIVITIES TO NET RESULT OF THE BELGIUM BU*

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CZECH REPUBLIC BUSINESS UNIT

CFO SERVICES

CRO SERVICES

CORPORATE STAFF

BELGIUMCZECH

REPUBLICINTERNATIONAL

MARKETS

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Czech Republic BU (1): net result of 171m EUR

Net result at the Czech Republic Business Unit of171m EUR• Q-o-q results were characterised by higher net

interest income, higher net fee and commissionincome, lower but still good net results from financialinstruments at fair value, stable net other income, animproved combined ratio, lower sales of life insuranceproducts, higher operating expenses (due entirely tohigher bank taxes) and lower impairment charges

• The net result rose by 2% q-o-q. Excluding the upfrontbooking of the bank tax in 1Q18, the net result waseven up by 16% q-o-q

• Profit contribution from the insurance businessremained limited in comparison to the bankingbusiness

* Non-annualised ** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos

VOLUME TREND

Excluding FX effect Total loans ** o/w retail mortgages Customer deposits*** AuM Life reserves

Volume 23bn 11bn 31bn 9.7bn 1.2bn

Growth q-o-q* +1% +1% +1% +1% +7%

Growth y-o-y +5% +10% +3% +10% +13%

NET RESULT

Amounts in m EUR

181 183

170 167 171

1Q184Q172Q171Q17 3Q17

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Czech Republic BU (2): higher NII and NIM

Net interest income (248m EUR)• Up by 6% q-o-q and by 15% y-o-y to 248m EUR.

Corrected for FX effects, NII rose by 5% q-o-q and by8% y-o-y pro forma

• The pro forma q-o-q increase was the result primarilyof the positive impact of both short & long termincreasing interest rates and the growth in retail loanvolumes, which were partly offset by pressure onlending margins in mortgages and consumer finance

• Loan volumes up by 5% y-o-y, driven mainly by growthin mortgages and consumer finance and, to a lesserextent, in SME loans

• Customer deposit volumes up by 3% y-o-y

Net interest margin (3.02%)• Up by 7 bps q-o-q and by 9 bps y-o-y to 3.02%

• The q-o-q increase was driven mainly by the positiveimpact of repo rate hikes, partly offset by pressure onlending margins

• The y-o-y increase was the result of the positive impactof repo rate hikes, partly offset by pressure on lendingmargins (especially in mortgages and consumerfinance)

NIM (pro forma for 2017*)

NII

Amounts in m EUR

216 220 218234

248

1Q17 4Q172Q17 3Q17 1Q18

1Q182Q171Q17

2.84%

3Q17 4Q17

2.93% 2.91% 2.95% 3.02%

* NIM is is calculated excluding the dealing room and the net positive impact of ALM FX swaps & repos

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Czech Republic BU (3): higher net F&C income

Net fee and commission income (67m EUR)• Rose by 5% q-o-q and by 19% y-o-y on a pro forma

basis

• The q-o-q increase was driven by lower paidcommissions to the Czech Post (from this year on,Czech Post receives more support than in the past,booked in opex). Besides this effect, there is impact ofhigher entry fees, higher securities-related fees, butlower fees from payment services (seasonal effect ofChristmas) and lower fees from credit files & bankguarantees

• The y-o-y increase was attributable chiefly to highermanagement & entry fees, higher fees from paymentservices, higher securities-related fees and due to lessfees paid to the Czech Post

Assets under management (9.7bn EUR)• Increased by 1% q-o-q owing to net inflows (+2%) and

a negative price effect (-1%)

• Y-o-y, assets under management rose by 10%, drivenby net inflows (+6%) and a positive price effect (+4%)

AuM

F&C (pro forma for 2017*)

Amounts in m EUR

47 47 4353 57

9 910

1010

3Q17

53

64

1Q17 4Q172Q17

56

1Q18

56

67

9.2

3Q17

8.8

1Q181Q17 2Q17 4Q17

9.3 9.6 9.7

* 2017 pro forma figures as the network income shifted from FIFV to net F&C as of 2018

F&C - network income F&C - banking & insurance

Amounts in bn EUR

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Czech Republic BU (4): higher premium income, goodcombined ratio

Insurance premium income (gross earnedpremium) stood at 117m EUR• Non-life premium income (57m) rose by 10% y-o-y

excluding FX effect, due to growth in all products

• Life premium income (60m) went down by 39% q-o-qand increased by 17% y-o-y, excluding FX effect. Q-o-qdecline entirely in unit-linked single premiums

Combined ratio: 93% in 1Q18 (compared with97% in FY17) due to very good claim experience(no large claims and mild winter)

Cross-selling ratios remained at a good level

COMBINED RATIO (NON-LIFE)

PREMIUM INCOME (GROSS EARNED PREMIUM)

49 53 56 59 57

48 4768

9660

1Q182Q17

100

1Q17 3Q17 4Q17

97

124

155

117

98% 97%

1Q FY1H 9M

100%93% 97%

2017 2018

Life premium income Non-Life premium income

CROSS-SELLING RATIOS

Mortg. & prop. Mortg. & life risk Cons. Fin. & life risk

1Q182017

65%48%

2016

63%

2016

61% 60%47%

2017

45%

1Q18 2016

57%

2017

53%

1Q18

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Czech Republic BU (5): higher opex due entirely to higher bank taxes, excellent credit cost ratio

Operating expenses (189m EUR)• Fell by 10% q-o-q and rose by 8% y-o-y, excluding FX

effect and bank tax

• The q-o-q decrease excluding FX effect and bank taxwas due mainly to traditionally lower marketingexpenses and professional fees, lower ICT costs andfacilities expenses in the first quarter

• The y-o-y increase excluding FX effect and bank tax wasattributable primarily to higher staff expenses (mainlydue to wage inflation) and higher support to the CzechPost (which is compensated by lower paid fee)

• Cost/income ratio at 47% in 1Q18. Adjusted for specificitems, the C/I ratio amounted to roughly 42% in 1Q18(and 43% in FY17)

Very limited loan loss provisions due to severalreleases (which almost fully offset the low grossimpairments)

Impairment of 6m EUR on ‘other’ as the result ofa revaluation of leased cars in CSOB Leasing

Credit cost ratio amounted to 0.01% in 1Q18

Impaired loans ratio stabilised at 2.4%, 1.6% ofwhich over 90 days past due

ASSET IMPAIRMENT

OPERATING EXPENSES

139 150 152176

160

26

29

1Q183Q17

0

2Q171Q17

01

4Q17

165151 153

177189

-1

11

3

11

7

1Q183Q171Q17 4Q172Q17

2014 2015 2016 2017 1Q18

CCR 0.18% 0.18% 0.11% 0.02% 0.01%

Bank tax Operating expenses

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INTERNATIONAL MARKETS BUSINESS UNIT

CFO SERVICES

CRO SERVICES

CORPORATE STAFF

BELGIUMCZECH

REPUBLICINTERNATIONAL

MARKETS

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International Markets BU (1): net result of 137m EUR

VOLUME TREND

Excluding FX effect Total loans ** o/w retail mortgages Customer deposits*** AuM Life reserves

Volume 24bn 15bn 23bn 4.5bn 0.7bn

Growth q-o-q* 0% 0% +1% -11% +6%

Growth y-o-y +13% +8% +24% -21%**** +7%

NET RESULT

Amounts in m EUR

22 25 16 16 23

20

47

40 3934

67

99

22

57

18

21

2Q17

78

4

1Q17

3

1775

-1

4Q173Q17 1Q18

114

74

137

Net result: 137m EUR

The pro forma q-o-q results were characterised by:• lower net interest income. NIM amounted to 2.88% in

1Q18 (2.84% in 4Q17)

• lower net fee and commission income (in BG & HU)

• higher result from financial instruments at fair value

• sharply higher net other income (especially in IRL, as 4Q17was impacted by an additional provision related to thetracker mortgage review)

• a very good combined ratio of 86% (especially in HU & SK)

• higher life insurance sales (in SK & BG)

• higher costs due entirely to higher bank taxes

• higher net impairment releases

Profit breakdown for International Markets (nextslides): 23m EUR for Slovakia, 34m EUR for Hungary,57m EUR for Ireland and 21m EUR for Bulgaria

SlovakiaBulgaria Ireland Hungary

* Non-annualised ** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos**** The decrease can partly be explained by the divestment of KBC TFI in Poland in December 2017 (-0.93bn AuM in 4Q17)

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International Markets BU (2): Slovakia

Net result of 23m EUR characterised by (proforma q-o-q):• slightly lower net interest income as volume growth

was more than offset by margin pressure

• stable net fee & commission income as the strongperformance in sales of mutual funds was offset bylower income from banking services

• lower net other income

• an excellent combined ratio (87% in 1Q18); roughlystable technical insurance result in life

• lower operating expenses driven by traditionally lowerICT & marketing expenses in the first quarter and lowerstaff expenses

• net impairment releases (mainly in consumer financeand leasing)

• credit cost ratio of -0.20% in 1Q18

* Non-annualised ** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos

VOLUME TREND

Total loans ** o/w retail mortgages Customer deposits***

Volume 7bn 3bn 6bn

Growth q-o-q* +1% +3% +3%

Growth y-o-y +7% +12% +9%

NET RESULT

Amounts in m EUR

22

25

16 16

23

4Q171Q17 2Q17 3Q17 1Q18

Volume trend:• Total customer loans rose by 1% q-o-q and by 7% y-o-y,

amongst other things due to the continuouslyincreasing mortgage portfolio and consumer finance

• Total customer deposits rose by 3% q-o-q and by 9%y-o-y thanks to retail as well as corporates

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International Markets BU (3): Hungary

NET RESULT

Amounts in m EUR

20

47

40 39

34

1Q17 4Q173Q172Q17 1Q18

* Non-annualised ** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos

VOLUME TREND

Excl. FX effect Total loans ** o/w retail mortgages Customer deposits***

Volume 4bn 2bn 7bn

Growth q-o-q* 0% 0% -3%

Growth y-o-y +11% +7% +6%

Net result of 34m EUR characterised by (pro formaq-o-q):• lower net interest income due to a one-off effect (2m

EUR)

• lower net fee and commission income as highermanagement fees were more than offset by traditionallylower fees from payment transactions in the first quarter

• higher net results from financial instruments thanks tohigher M2M ALM derivatives

• higher net other income due to the sale of a building

• good non-life commercial performance y-o-y in all majorproduct lines and growing average tariff in motor retail;an excellent combined ratio (84% in 1Q18); stable sales oflife insurance products q-o-q

• lower operating expenses excluding bank tax (45m EUR)due mainly to lower staff & ICT expenses

• net impairment releases (mainly in retail and corporates)

• credit cost ratio of -0.44% in 1Q18

Volume trend:• Total customer loans stabilised q-o-q and rose by 11%

y-o-y, mainly in mortgages and corporates

• Total customer deposits fell by 3% q-o-q, but rose by 6%y-o-y due to strong growth in corporates

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International Markets BU (4): Ireland

NET RESULT

Amounts in m EUR

67

99

-1

3

57

1Q17 4Q172Q17 3Q17 1Q18

* Non-annualised ** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos

VOLUME TREND

Total loans ** o/w retail mortgages Customer deposits***

Volume 11bn 10bn 6bn

Growth q-o-q* -1% 0% +5%

Growth y-o-y 0% +2% +8%

Net result of 57m EUR characterised by (pro formaq-o-q):• higher net interest income due mainly to lower funding

costs

• net other income in 4Q17 was impacted by an additionalprovision of 61.5m EUR related to the industry-widereview of the tracker rate mortgage products originatedin Ireland before 2009

• higher operating expenses excluding bank tax due mainlyto higher ICT expenses and regulatory levies (mainly CBIIndustry Funding levy)

• lower net impairment releases (-43m EUR in 1Q18compared with -52m EUR in 4Q17), as 4Q17 benefitedfrom 31m EUR IBNR parameter changes. Releases in1Q18 are driven by:o an increase in the 9-month average House Price

Index and an improved portfolio performanceo lower provisions on existing non-performing loans

driven by improved macro-economic conditions andprovision releases following deleveraging forcorporates

• credit cost ratio of -1.36% in 1Q18

Volume trend:• Total customer loans fell by 1% q-o-q and stabilised y-o-y.

The q-o-q decrease resulted from the further deleveragingof the corporate loan portfolio

• Retail mortgages: new business (written from 1 Jan 2014)+7% q-o-q and +49% y-o-y, while legacy -2% q-o-q and -7%y-o-y

• Total customer deposits rose by 5% q-o-q and by 8% y-o-y

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International Markets BU (5): Bulgaria

NET RESULTAmounts in m EUR

45

22

18

21

2Q171Q17 3Q17 1Q184Q17

VOLUME TREND

Excl. FX effect Total loans *** o/w retail mortg. Customer deposits****

Volume 3bn 1bn 4bn

Growth q-o-q* +1% +1% +3%

Growth y-o-y +231%** +239%** +396%**

Net result of 21m EUR

Net result was characterised by (pro forma q-o-q):• In banking (CIBank & UBB/Interlease):

o slightly lower net interest income, as volume growth wasmore than offset by margin pressure

o lower net fee and commission income due to traditionallylower fees from payment transactions in the first quarter

o lower net results from financial instrumentso lower operating expenses excluding bank tax due mainly to

lower staff & ICT expenseso higher bank tax y-o-y due to UBB/Interlease acquisitiono net impairment releases. Credit ratio of -1.09% in 1Q18

• In insurance (DZI): higher net resulto good earned premiums both in Life and Non-Life, offset by

higher technical charges. Combined ratio amounted to 93%

Volume trend:• Total customer loans rose by 1% q-o-q and by 231% y-o-y

(11% y-o-y excluding UBB/Interlease), amongst other thingsdue to the continuously increasing mortgage portfolio and astrong pick-up in corporates in 1Q18

• Total loans: new business +3% q-o-q and +186% y-o-y, whilelegacy -7% q-o-q and +787% y-o-y

• Total customer deposits rose by 3% q-o-q and by 396% y-o-y(9% y-o-y excluding UBB/Interlease)

* Non-annualised ** Y-o-y growth excluding UBB/Interlease amounted to +11% for total loans, +20% for retail mortgages and +9% for customer deposits*** Loans to customers, excluding reverse repos (and bonds)**** Customer deposits, including debt certificates but excluding repos

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GROUP CENTRE

CFO SERVICES

CRO SERVICES

CORPORATE STAFF

BELGIUMCZECH

REPUBLICINTERNATIONAL

MARKETS

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Group Centre: net result of 5m EUR

Net result: 5m EUR The net result for the Group Centre comprises the results coming

from activities and/or decisions specifically made for grouppurposes (see table below for components)

The q-o-q improvement was attributable mainly to:

o one-off upfront negative P&L impact of 126m EUR due to theBelgian corporate income tax reform in 4Q17

o higher NII due to lower debt costs (as a result of the call of theCoCo)

o lower operating expenses

o net impairment releases

NET RESULT

Amounts in m EUR

33

12

-12

5

1Q183Q171Q17 2Q17 4Q17

-179

BREAKDOWN OF NET RESULT AT GROUP CENTRE

1Q17 2Q17 3Q17 4Q17 1Q18

Group item (ongoing business) -50 0 -31 -157 -17

- Operating expenses of group activities -14 -14 -20 -25 -17

- Capital and treasury management -18 17 5 -5 -4

o/w net subordinated debt cost -9 -9 -9 -13 -6

- Holding of participations -9 -13 -13 18 1

o/w net funding cost of participations -2 0 0 -1 -1

- Group Re 5 6 5 10 7

- Other -14 5 -9 -154 -3

Ongoing results of divestments and companies in run-down 83 11 19 -22 23

Total net result at GC 33 12 -12 -179 5

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NET PROFIT – BELGIUM NET PROFIT – CZECH REPUBLIC

351 330 209 301

243

1,2231,274

2015

1,165

2014

1,234

2016

1,575

2017 1Q18

1,516 1,5641,432

1Q18 ROAC: 15%

Amounts in m EUR

138 143 129 181

171

390 399 467

521

1Q1820172014 20162015

542529596

702

1Q18 ROAC: 40%

NET PROFIT – INTERNATIONAL MARKETS

-156

60114

137221

368330

1Q1820172016

-26

2014

24

245

-182

2015

428 444

1Q18 ROAC: 25%

Overview of results based on business units*

2Q-4Q 1Q 2Q-4Q 1Q

2Q-4Q 1Q

NET PROFIT – KBC GROUP

347 510 392630

556

2015

2,427

2017

1,415

2016

2,035

2014

2,129

1,762

1,945

1Q18

2,639 2,575

1Q18 ROAC: 21%

2Q-4Q 1Q

* Note that the 1Q18 results & ROAC were impacted by the upfront booking of the bank tax

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Balance sheet (1/2):Loans and deposits continue to grow in most core countries

Loans**

4%

Retail mortgages

4%

Deposits***

1%

* Volume growth excluding FX effects and divestments/acquisitions** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos

Y-O-Y ORGANIC* VOLUME GROWTH FOR KBC GROUP

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Balance sheet (2/2):Loans and deposits continue to grow in most core countries

1%

Retail mortgages

Loans** Deposits***

4%

0%

3%

Loans**

10%

Retail mortgages

Deposits***

5%

Deposits***Retail mortgages****

Loans**

0%2%

8%

12%

Loans**

9%

Retail mortgages

Deposits***

7%

11%

Loans**

6%7%

Retail mortgages

Deposits***

11%

Loans** Retail mortgages

Deposits***

9%

20%

BE CZ

Y-O-Y ORGANIC* VOLUME GROWTH FOR MAIN ENTITIES

* Volume growth excluding FX effects and divestments/acquisitions** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos**** Retail mortgages in Ireland: new business (written from 1 Jan 2014) +49% y-o-y, while legacy -7% y-o-y

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KBC Group

Section 3

Strong solvency andsolid liquidity

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Strong capital position

Fully loaded Basel 3 CET1 ratio at KBC Group (Danish Compromise)

10.6% fully loaded regulatory minimum

15.9%

9M171Q17 1Q18

15.7%

1H17 FY17

15.9%15.7% 16.3%

The common equity ratio* decreased from16.3% at the end of 2017 to 15.9% at the endof 1Q18 based on the Danish Compromise,due to the impact of the first-time applicationof IFRS 9 (-41bps). This clearly exceeds theminimum capital requirements** set by thecompetent supervisors of 9.875% phased-infor 2018 and 10.6% fully loaded and our ‘OwnCapital Target’ of 14.0%

The pro forma*** fully loaded CET1 ratioamounted to roughly 15.7% at the end of1Q18

* Note that as from 01/01/2018 onwards, there is no differenceanymore between fully loaded and phased-in

** Excludes a pillar 2 guidance (P2G) of 1.0% CET1*** Also taking into account the impact of the share buy-back

14.0% ‘Own Capital Target’

Fully loaded Basel 3 total capital ratio (Danish Compromise)

15.9% CET1

1.5% AT1

2.3% T22.3%

2.6%

Total capital ratio 1Q18

15.9%

Pro forma total capital ratio 1Q18

19.7%20.7%

The fully loaded total capital ratio amountedto 19.7% at the end of 1Q18. Including thesuccessful issuance of 1bn EUR additional Tier-1 instrument in April 2018, the pro forma fullyloaded total capital ratio amounted to 20.7%

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Fully loaded Basel 3 leverage ratio and Solvency II ratio

9M17

4.7%

1Q17

4.8%

1Q181H17

4.7%

FY17

5.0%4.7%

Fully loaded Basel 3 leverage ratio at KBC BankFully loaded Basel 3 leverage ratio at KBC Group

5.7%

FY17

5.8%5.7%

1Q17 1H17 9M17 1Q18

5.7%6.1%

Solvency II ratio

4Q17 1Q18

Solvency II ratio* 212% 218%

The increase (+6%-points) in the Solvency II ratiowas mainly the result of lower equity markets

* On 19 April 2017, the NBB retroactively relaxed the strict cap on the loss-absorbing capacity of deferred taxes in the calculation of the required capital. Belgian insurancecompanies are now allowed to apply a higher adjustment for deferred taxes, in line with general European standards, if they pass the recoverability test. This is the case for KBC

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Solid liquidity position (1)

KBC Bank continues to have a strong retail/mid-cap deposit base in its core markets – resulting in a stable funding mixwith a significant portion of the funding attracted from core customer segments & markets

Customer funding further increased in 1Q18. The elevated amount in short-term wholesale funding is on the back ofshort-term arbitrage opportunities

69% 73% 75% 73% 73% 69% 70% 72%

8%10% 6%9%

9% 8% 9% 8% 8%9%

8%7%8% 10% 8% 8% 8%

7%7%

9% 0% 2% 2% 2%8%

10%12%6% 5%

-6% -4%

3%

FY12

3%

FY13

3%

FY11

3%

FY15

3%

FY17

2%

4%

3%

FY14

-1%

FY16 1Q18

Net unsecured interbank funding

Certificates of deposit

Total equity

Net secured funding

Debt issues placed with institutional investors Funding from customers

72%

21%

7%0%

Retail and SME

Mid-cap

Debt issues in retail network

Government and PSE

72% customer

driven

129.555 131.914 132.862 133.766 139.560 143.690 155.774 162.536

FY11 FY12 FY13 FY14 FY15 FY16 FY17 1Q18

Funding from customers (m EUR)

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Short term unsecured funding KBC Bank vs Liquid assets as of end March 2018 (bn EUR)

KBC maintains a solid liquidity position, given that:

• Available liquid assets remained very high at more than3 times the amount of the net short-term wholesalefunding

• Funding from non-wholesale markets is stable fundingfrom core-customer segments in core markets

* Graph is based on Note 18 of KBC’s quarterly report, except for the ‘available liquid assets’ and‘liquid assets coverage’, which are based on the KBC Group Treasury Management Report

* Net Stable Funding Ratio (NSFR) is based on KBC’s interpretation of the proposal of CRRamendment** Liquidity Coverage ratio (LCR) is based on the Delegated Act requirements. From EOY2017onwards, KBC discloses 12 months average LCR in accordance to EBA guidelines on LCRdisclosure

(*)

NSFR is at 137% and LCR is at 139% by the end of1Q18

• Both ratios were well above the regulatory requirementof at least 100%

Solid liquidity position (2)

Ratios FY17 1Q18 Regulatory requirement

NSFR* 134% 137% ≥100%

LCR** 139% 139% ≥100%

25,10

14,1911,56

22,7018,71

68,14

58,30 56,23

65,39

57,79

271%

411%

486%

288%

309%

1Q17 2Q17 3Q17 4Q17 1Q18

Net Short Term Funding Available Liquid Assets Liquid Assets Coverage

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KBC Group

Section 4

1Q 2018 wrap up

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1Q 2018 wrap up

Strong commercial bank-insurance results in our core countries

Successful earnings track record

Solid capital and robust liquidity position

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Looking forward

We expect 2018 to be a year of sustained economic growth in both the euro area, the US and in each of ourcore markets

Management guides for:• solid returns for all Business Units• loan impairments for Ireland towards a release in a 100m-150m EUR range for FY18• the impact of the reform of the Belgian corporate income tax regime: a recurring positive P&L impact as of 2018

onwards and the one-off negative impact in 4Q17 will be fully recuperated in roughly 3 years’ time• B4 impact for KBC Group is estimated at roughly 8bn EUR higher RWA on a fully loaded basis as at year-end 2017, which

corresponds with a RWA inflation of 9% and an impact on the CET1 ratio of -1.3%

Next to the Belgium and the Czech Republic Business Units, the International Markets Business Unit hasbecome a strong contributor to the net result of KBC Group thanks to:• Ireland: re-positioning as a core country with a sustainable profit contribution• Bulgaria: the legal merger of CIBank into UBB was approved. The new group UBB has become the largest bank-insurance

group in Bulgaria with a substantial increase in profit contribution• Sustainable profit contribution of Hungary and Slovakia

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KBC Group

Annex 1

Company profile

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Business profile

KBC is a leading player (retail and SME bank-insurance, private banking, commercial and local investment banking) in Belgium, the Czech Republic and its 4 core countries in the International Markets Business Unit

BREAKDOWN OF ALLOCATED CAPITAL BY BUSINESS UNIT AS AT 31 MARCH 2018

61%

16%

20%

Belgium

International Markets

Czech Republic

Group Centre

3%

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BE CZ SK HU BG IRL

Loans and deposits

Investment funds

Life insurance

Non-life insurance

Well-defined core markets provide access to ‘new growth’ in Europe

1. Source: KBC data, May 2018

MARKET SHARE (END 2017)

20% 20%11% 11% 10% 8%

7%

33%22% 13% 13%

3%8%14%4%

21%

11%9% 7%3%

7%

BE CZ SK HU BG IRL

% of Assets

2017

2018e

2019e

64%

20%4%3% 3% 2%

4.0%1.7%

7.8%4.6% 3.6%3.4%

3.6%1.9%3.9%3.3% 3.8%

6.0%

3.5%2.8%1.7%3.9% 3.5% 4.0%

REAL GDP GROWTH OUTLOOK FOR CORE MARKETS1

Macroeconomic outlookBased on GDP, CPI and unemployment trendsInspired by the Financial Times

IRELAND UK

BELGIUM

NETHERLANDS

GERMANY

CZECH REP

SLOVAKIA

HUNGARY

BULGARIA

GREECE

ITALY

PORTUGAL

SPAIN

FRANCE

KBC Group’s core markets *

* Only for retail segment

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Key strengths

Well-developed bank-insurance strategy and strong cross-selling capabilities

Strong commercial bank-insurance franchises in Belgium and the Czech Republic with stable and solid returns. The International Markets Business Unit also has become a strong contributor to the net result of KBC Group

Successful earnings track record

Solid capital and robust liquidity position

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Shareholder structure

Roughly 40% of KBC shares are owned by a syndicate of core shareholders, providing continuity to pursue long-termstrategic goals. Committed shareholders include the Cera/KBC Ancora Group (co-operative investment company),the Belgian farmers’ association (MRBB) and a group of industrialist families

The free float is held mainly by a large variety of international institutional investors

SHAREHOLDER STRUCTURE AT END 1Q18

18.5%

2.7%

KBC Ancora

Cera 11.4%

MRBB

60.0%

7.4%

Other core

Free float

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KBC Group going forward:Wants to be among the best performing financial institutions in Europe

KBC wants to be among Europe’s best performing financial institutions. This will be achieved by:

• Strengthening our bank-insurance business model for retail, SME and mid-cap clients in our core markets, in a highly cost-efficient way

• Focusing on sustainable and profitable growth within the framework of solid risk, capital and liquidity management

• Creating superior client satisfaction via a seamless, multi-channel, client-centric distribution approach

By achieving this, KBC wants to become the reference in bank-insurance in its core markets

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KBC Group going forward:The bank-insurance business model, different countries, different stages of implementation

Bank branches selling insurance products from intra-group insurance company as

additional source of fee income

Bank branches selling insurance products of third party insurers as

additional source of fee income

Acting as a single operational company: bank and insurance operations working under unified governance and achieving commercial and non-

commercial synergies

Acting as a single commercial company: bank and insurance operations working under unified governance and achieving

commercial synergies

Level 4: Integrated distribution and operation

Level 3: Integrated distribution

Level 2: Exclusive distribution

Level 1: Non-exclusive distribution

KBC targets to reach at least level 3 in every country, adapted to the local market structure and KBC’s market position in banking and insurance.

Belgium

Target for Central Europe

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More of the same… but differently…

• Integrated distribution model according to a real-time omni-channel approach remains key but client interaction will change over time. Technological development will be the driving force

• Human interface will still play a crucial role

• Simplification is a prerequisite:• In the way we operate• Is a continuous effort• Is part of our DNA

• Client-centricity will be further fine-tuned into ‘think client, but design for a digital world’

• Digitalisation end-to-end, front-and back-end, is the main lever:• All processes digital • Execution is the

differentiator

• Further increase efficiency and effectiveness of data management

• Set up an open architecture IT package as core banking system for our International Markets Unit

• Improve the applications we offer our clients (one-stop-shop offering) via co-creation/partnerships with Fintechs and other value chain players

• Investment in our digital presence (e.g., social media) to enhance client relationships and anticipate their needs

• Easy-to-access and convenient-to-use set-up for our clients

• Clients will drive the pace of action and change

• Further development of a fast, simple and agile organisation structure

• Different speed and maturity in different entities/core markets

• Adaptation to a more open architecture (with easy plug in and out) to be future-proof and to create synergy for all

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Summary of the guidance at KBC Group levelas announced at our Investor Visit in June 2017

Guidance… by…

CAGR total income (‘16-’20)* ≥ 2.25% 2020

C/I ratio banking excluding bank tax ≤ 47% 2020

C/I ratio banking including bank tax ≤ 54% 2020

Combined ratio ≤ 94% 2020

Dividend payout ratio ≥ 50% As of now

* Excluding marked-to-market valuations of ALM derivatives

More of the same …

Regulatory requirements… by…

Common equity ratio*excluding P2G ≥ 10.6% 2019

Common equity ratio*including P2G ≥ 11.6% 2019

MREL ratio** ≥ 25.9% May 2019

NSFR ≥ 100% As of now

LCR ≥ 100% As of now* Fully loaded, Danish Compromise. P2G = Pillar 2 guidance.

** See slide 83 for more details

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Summary of the guidance at KBC Group levelas announced at our Investor Visit in June 2017

… but differently…

Make further progress in our bank-insurance model

Guidance on inbound omni-channel/digital behaviour*

Guidance by …

% Inbound contacts via omni-channel and

digital channel

KBC Group** > 80% 2020

Guidance by…

CAGR Bank-Insurance clients (1 Bank product + 1 Insurance product)

BU BE > 2% 2020

BU CR > 15% 2020

BU IM > 10% 2020

Guidance by…

CAGR Bank-Insurance stable clients (3 Bk + 3 Ins products in Belgium; 2 Bk + 2 Ins products in CE)

BU BE > 2% 2020

BU CR > 15% 2020

BU IM > 15% 2020

• Clients interacting with KBC through at least one of the non-physical channels (digital or through a remote advisory centre), possibly in addition

to contact through physical branches. This means that clients solely interacting with KBC through physical branches (or ATMs) are excluded

** Bulgaria & PSB out of scope for Group target

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Digital Investments 2017-2020

112 125 127 128

94 78 83 90

43 44 48 55

Strategic Grow Strategic Transform Regulatory

Cashflow 2017-2020 = 1.5bn EUR Operating Expenses 2017-2020 = 1bn EUR

(*) The Common Reporting Standard (CRS) refers to a systematic and periodic exchange of information at international level aimed at preventing tax evasion. Information on the

taxpayer in the country where the revenue was taken is exchanged with the country where the taxpayer has to pay tax. It concerns an exchange of information between as many as 53

OECD countries in the first year (2017). By 2018, another 34 countries will join.

2017 2018 2019 2020

Regulatory driven

developments (IFRS

9, CRS(*), MIFID,

etc.)

Omni-channel

and core-banking

system

Organic growth

or operational

efficienciesRegulatory

20% Strategic

Growth

36%

Strategic Transformation

44%

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Digital sales are increasing (examples: BU Belgium)

0

200

400

600

800

1.000

1.200

Q1 Q2 Q3 Q4 Q1

2017 2018

Travel insurance

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

18.000

20.000

Q1 Q2 Q3 Q4 Q1

2017 2018

Consumer loans

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

Q1 Q2 Q3 Q4 Q1

2017 2018

Pension savings

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

Q1 Q2 Q3 Q4 Q1

2017 2018

Current accounts

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Omnichannel is embraced by our customers (examples: BU Belgium)

Digital sales @ KBC Live increases, strong performance in non-life

Digital signing after contact with the branches or KBC Live in 2017-2018

0

5.000

10.000

15.000

20.000

25.000

30.000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mrt

KBC Live cumulative sales 2017-2018

Non life insurance Life insurance Housing loans

Consumer loans Investment plans

30,00%

40,00%

50,00%

60,00%

70,00%

80,00%

90,00%

17Q1 17Q2 17Q3 17Q4 18Q1

Digital signing of consumer loans

Digital signing of debt protect cover life insurance

Digital signing mortgage loans

Digital signing housing insurance

Digital signing car insurance

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Impact of Basel 4 agreement

On 7 December, the Basel Committee reached an agreement on the remaining Basel 3 post-crisis regulatoryreforms (commonly known as Basel 4). The main elements of the Basel 4 agreement are:

o credit risk: changes to the internal ratings-based approach and a revised standardised approach;o market risk: FRTB postponed to 2022;o operational risk: a revised and more risk sensitive standardised approach, replacing all existing approaches;o an aggregate output floor (gradually phased-in between 2022 and 2027), which will ensure that banks' risk-weighted assets

based on internal models are not lower than 72.5% of RWAs as calculated by the revised standardised approaches

For KBC Group, the RWA increase related to Basel 4 is estimated at roughly 8bn EUR higher RWA on a fullyloaded basis as at year-end 2017, which corresponds with a RWA inflation of 9% and an impact on the CET1 ratioof -1.3%. This figure is based on our current interpretation of Basel 4, a static balance sheet and the currenteconomic environment. It also does not take into account possible management actions

We no longer see evidence that KBC is impacted significantly more than our peers. As a consequence, the 1%buffer for Basel 4 in our management targets is no longer required

The Basel agreement now needs to be implemented in EU regulation (CRR/CRD package), which might influence (ina positive or negative way) the final impact for KBC

Elements that are not included in above mentioned RWA impact (and which might affect KBC earlier):o the ongoing Targeted Review of Internal Models (TRIM) exercise by ECB;o the potential impact of the EBA review of the IRB approach (PD & LGD estimation; treatment defaulted exposures);o any impact on the Pillar 2 requirements (given that pillar 1 more adequately captures the risks)

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1%

14%Median CET1 peers (FL)

Additional buffer B4

2017

We aim to be one of the better capitalisedfinancial institutions in Europe. Therefore asa starting position, we assess each year theCET1 ratios of a peer group of Europeanbanks active in the Retail, SME, andCorporate client segments. We positionourselves on the fully loaded median CET1ratio of the peer group*. The median CET1 ofour 12 peers increased from 13.6% end-2016to 14% end-2017

Based on internal benchmarking, KBC will nolonger be impacted relatively more than thesector average by Basel 4. Therefore, the B4buffer of 1% versus peers is no longerrequired

‘Own

Capital Target’= 14.0%

* The impact of B4 will be fully included at the start of 2022 (Note that all Basel 4 proposals are applicable in 2022, except for the 72.5% floor which is gradually phased-in and only binding for KBC as of 2027)

Impact of Basel 4 agreement: update ‘Own Capital Target’

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Own Capital Target 14.0%

2.0%Flexible buffer for M&A

2017

‘Reference

Capital Position’= 16.0%

KBC Group wants to keep a flexiblebuffer of up to 2% CET1 for potentialadd-on M&A in our core markets

This buffer comes on top of the ‘OwnCapital Target’ of KBC Group, and alltogether forms the ‘Reference CapitalPosition’

Any M&A opportunity will be assessedsubject to very strict financial andstrategic criteria

Impact of Basel 4 agreement: update ‘Reference Capital Position’

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Capital distribution to shareholders

The payout ratio policy (i.e. dividend + AT1 coupon) of at least 50% of consolidated profit isreconfirmed, with an annual interim dividend of 1 EUR per share being paid in November of eachaccounting year as an advance on the total dividend

On top of the payout ratio of 50% of consolidated profit, each year, the Board of Directors will take adecision, at its discretion, on the distribution of the capital above the ‘Reference Capital Position‘

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The core of KBC’s sustainability strategy (1)

The mindset of all KBC staff should go beyond regulation and compliance

Responsible behaviour is a requirement to implement an effective and credible sustainability strategy

Specific focus on responsible selling and responsible advice

We apply strict sustainability rulesto our business activities, inrespect of human rights,environment, business ethics andsocial themes

KBC is a market leader in sociallyresponsible investments, offering afull range of SRI funds

We contribute to the transition toa low-carbon economy by reducingour own environmental footprint,tightening our lending policy to theenergy sector and taking initiativesto promote energy efficiency,renewable energy, etc.

Sustainability goes beyond philanthropyand sponsorship

We focus on a number of societal needsand actively respond to these needs bydeveloping business solutions in which abank-insurer can provide the elementsthat make a difference

We defined the following focus domains:‘financial literacy’, ‘environmentalresponsibility’, ‘entrepreneurship’, and‘demographic ageing and health’

Examples are given on the next slides

Increasing ourpositive impact

on society

Encouragingresponsible behaviour

on the part of allemployees

Limiting ouradverse impact

on society

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The core of KBC’s sustainability strategy (2)

Our focus areas What? A few examples

Financialliteracy

• Helping clients make the right choicesthrough good and transparent advice,and clear communication

• Improving general public knowledge offinancial concepts and products

• Around 200 lessons on financial subjectsgiven by ČSOB employees at 50 differentschools in 2017

• Launch of an investors' club by K&H inHungary, aimed at the younger generationso that they can learn more about investing,the financial markets, etc.

• Introduction of ‘KBC Go Digital Intro’ inBelgium, in which clients can discover ourdigital offering

• Launch of ‘Get-a-teacher’ by KBC inBelgium, to give schools the opportunity toextend financial knowledge by ‘ordering’ ateacher from KBC

Environmental responsibility

• Reducing our ecological footprintthrough a diverse range of initiatives andobjectives

• Developing products and services thatcan make a positive contribution to theenvironment

• Focusing on multi-mobility at KBCAutolease, including the development ofbicycle leasing

• Signing the ‘Green Deal for CircularProcurement’ to help achieve a morecircular economy in Flanders

• Obtaining a ‘Leadership A-’ score in the2017 Carbon Disclosure Project ClimateChange Programme

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The core of KBC’s sustainability strategy (3)

Our focus areas What? A few examples

Entrepre-neurship

• Contributing toeconomic growth bysupporting innovativeideas and projects

• Launching the e-stores programme in Bulgaria• Rolling out Start it @kbc from Belgium to other core countries• KBC Match’it, a digital platform for transferring businesses• Providing capital for start-ups via the KBC Start it Fund• Supporting local initiatives through the Bolero crowdfunding

platform• Encouraging clients to take the step to e-commerce via

Storesquare, FarmCafe and similar initiatives• Realising various European programmes to support small and

micro businesses and SMEs• Launching the KBC Service to Associations to encourage

involvement in clubs, societies and associations in Belgium

Demographic ageing and health

• We chose‘demographic ageing’as the fourth pillar inBelgium and the CzechRepublic

• We chose ‘Health’ asthe fourth pillar inBulgaria, Slovakia,Hungary and Ireland

• Providing digitalisation lessons for over-55s in Belgium• Providing financial and material assistance to sick children

through the ‘K&H MediMagic Programme’ in Hungary• ČSOB is collaborating with the Centre of Health Economics and

Management at the Faculty of Social Sciences at the CharlesUniversity in Prague

• Launch by ČSOB in the Czech Republic of the online portal ‘Findyour way through senior age’ in collaboration with the SueRyder Home advisory centre

More information is available at www.kbc.com, under ‘Corporate Sustainability’.

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KBC Group

Annex 2

Other items

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Loan loss experience at KBC

1Q18CREDIT COST

RATIO

FY17CREDIT COST

RATIO

FY16CREDIT COST

RATIO

FY15CREDIT COST

RATIO

FY14CREDIT COST

RATIO

AVERAGE ‘99 –’17

Belgium 0.05% 0.09% 0.12% 0.19% 0.23% n/a

Czech Republic

0.01% 0.02% 0.11% 0.18% 0.18% n/a

International Markets

-0.86% -0.74% -0.16% 0.32% 1.06% n/a

Group Centre -1.43% 0.40% 0.67% 0.54% 1.17% n/a

Total -0.15% -0.06% 0.09% 0.23% 0.42% 0.47%

Credit cost ratio: amount of losses incurred on troubled loans as a % of total average outstanding loan portfolio

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Ireland (1): impaired loans ratio further improved

The Irish economy has begun 2018 with significant positive

momentum in activity and employment growth, FY18 GDPgrowth of 6% is envisaged

The upswing in the Irish economy has progressively strengthenedand this has been reflected in robust and broadly based jobsgrowth. As a result, the unemployment rate has reduced to 5.9%,its lowest level in almost ten years

Healthy jobs growth, improving confidence and supportivedemographics are underpinning strengthening demand forhousing. While new supply has increased somewhat, this has notbeen sufficient to prevent significant upward pressure on houseprices

On a like-for-like basis, impaired loans have reduced in 1Q18 by0.2bn EUR (-3% q-o-q) with impaired loan ratio at 36.6% at 1Q18

Net loan loss provision release of 43m EUR in 1Q18 driven bygrowth in the CSO House Price Index and improved non-performing portfolio performance. This compares with a 52m

EUR release in 4Q17

Looking forward, we are maintaining our impairment guidancefor Ireland, namely a net release in a range of 100m-150m EURfor FY18

Note: In order to align with current accounting guidance, KBC has modified its classification of reserved interest provisions (i.e. interest charged and not recognised in the P&L on impaired loans since date of default). These amounts, previously netted from gross outstanding loan balances, are now included as part of impaired loan provisions. The net balance sheet carrying value of impaired loans is unchanged. As at 1Q18, reserved interest provisions totalled 0.5bn EUR. Prior quarter ratios have been restated

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Retail portfolio

The New Retail portfolio (all originations post 1 Jan 2014) comprises2.5bn EUR of the overall Retail portfolio and increased q-o-q by 0.2bnEUR. New Retail at 1Q18 represents 22% of total Retail portfolio (from15% at 1Q17)

Impaired portfolio decreased by roughly 84m EUR q-o-q on a like-for-like basis mainly due to improved portfolio performance (reduction of0.8bn EUR y-o-y)

Coverage ratio for impaired loans has remained stable at roughly 37%for 1Q18

Weighted average indexed LTV on the impaired portfolio has improvedsignificantly y-o-y and in 1Q18 decreased to 102% (from 120% at 1Q17)

Ireland (2): portfolio analysis

Corporate loan portfolio

Impaired portfolio on a like-for-like basis has reduced by roughly78m EUR q-o-q. Reduction driven mainly by continued deleverage ofportfolio (reduction of 0.5bn EUR y-o-y)

Coverage ratio for impaired loans has remained stable at roughly67% for 1Q18

Overall exposure has dropped by approximately 0.65bn EUR y-o-y(-35% y-o-y)

- Forborne loans (in line with EBA Technical Standards) comprise loans on a live restructure or continuing to serve a probation period post-restructure/cure to Performing

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Sectorial breakdown of outstanding loan portfolio (1)(163bn EUR* including UBB) of KBC Bank Consolidated

11%

7%

15%

7%

8%4%3%

3%

40%

Rest

Services

Real estate

Distribution

Authorities

Finance & insuranceAutomotive

Building & constructionAgriculture, farming, fishing

Private Persons

2%

Food producers0.7%

1.6%

Electricity

1.4%

1.5%

Other sectorsMetals

1.2%Chemicals

Shipping

1.1%Machinery & heavy equipment

1.1%

5.2%

0.7%

Hotels, bars & restaurantsOil, gas & other fuels

* It includes all payment credit, guarantee credit (except for confirmations of letters of credit and similar export/import related commercial credit), standby credit and credit derivatives, granted by KBC to private persons, companies, governments and banks. Bonds held in the investment portfolio are included if they are corporate or bank issued, hence government bonds and trading book exposure are not included* Outstanding amount includes all on-balance sheet commitments and off-balance sheet guarantees

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Geographical breakdown of the outstanding loan portfolio (2)(163bn EUR* including UBB) of KBC Bank Consolidated

54.2%

3.2%

Ireland

14.5% Belgium

Czech Rep.

7.7%

1.8%

4.8%

Other CEE

Slovakia

Hungary 2.1%

Bulgaria8.1%

Other W-Eur 0.6%1.5%

North America

1.6%

AsiaRest

* It includes all payment credit, guarantee credit (except for confirmations of letters of credit and similar export/import related commercial credit), standby credit and credit derivatives, granted by KBC to private persons, companies, governments and banks. Bonds held in the investment portfolio are included if they are corporate or bank issued, hence government bonds and trading book exposure are not included* Outstanding amount includes all on-balance sheet commitments and off-balance sheet guarantees

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Impaired loans ratios*, of which over 90 days past due

INTERNATIONAL MARKETS BU (including UBB)CZECH REPUBLIC BU

1Q18

3.7%3.9%3.6%

1Q17 2Q17

6.0%

3Q17

3.4%

4Q17

5.9%

3.5%

6.8% 6.9%6.6%

Impaired loans ratio *

Of which over 90 days past due

1.6%

2.5%

1.6%

1Q182Q17

2.4%

1.8%

3Q171Q17

1.7%

4Q17

1.6%

2.7% 2.6%2.4%

12.8%

4Q172Q171Q17

13.4% 12.6% 11.3%

3Q17

12.1%

1Q18

24.2%

20.4%

23.6%22.4%

19.7%

BELGIUM BU

1.5%1.5%

1Q17

2.8%

2Q17

1.5%

3Q17

1.4%

4Q17

1.3%

1Q18

3.0% 3.0%2.8%

2.6%

KBC GROUP

• Impaired loans ratio: As of 1Q18, a switch has been made in the risk reporting figures from outstanding (PD10-12) to the new definition of gross carrying amount, i.e. including reserved and accrued interests. In addition, the transaction scope of the credit portfolio was extended and now additionally includes the following 4 elements: (1) bank exposure (money market placements, documentary credit, accounts), (2) debtor risk KBC Commercial Finance, (3) unauthorized overdrafts, and (4) reverse repo (excl. central bank exposure)

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Cover ratios

INTERNATIONAL MARKETS BU (including UBB)CZECH REPUBLIC BU

BELGIUM BUKBC GROUP

• Impaired loans cover ratio: As of 1Q18 a switch has been made in the risk reporting figures from outstanding to the new definition of gross carrying amount, i.e. including reserved and accrued interests

63.7%

3Q17

68.1%

1Q17

47.3%

2Q17 1Q184Q17

46.6%

64.2%

47.5%

64.5%

44.0%

64.1%

47.8%

Impaired loans cover ratio *

Cover ratio for loans with over 90 days past due

1Q182Q17

69.0%

4Q173Q171Q17

56.7% 57.7%55.1%

69.4% 71.8%

54.7%

68.9%

52.5%

66.8%

47.9%

1Q17 4Q17

46.4%

2Q17

67.5%

1Q183Q17

67.6%

48.4%

69.7%

44.4%

68.6%

44.2%

67.6%

58.8%

3Q17 1Q18

60.8%

1Q17

43.5%

2Q17 4Q17

45.9%

58.9%

45.4%

66.0%

40.9%

60.2%

46.9%

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Fully loaded B3 CET1 based on the Danish Compromise (DC)from 4Q17 to 1Q18

Jan 2012 Dec 2012 2014-2020

4Q17 (B3 DC**)

0.8

1Q18 impact

93.2

1Q18 (B3 DC)

92.4

DELTA AT NUMERATOR LEVEL (BN EUR)

DELTA ON RWA (BN EUR)

* Includes the q-o-q delta in deferred tax assets on losses carried forward, remeasurement of defined benefit obligations, IRB provision shortfall, deduction re. financing provided

to shareholders, deduction re. irrevocable payment commitments, intangible fixed assets, AT1 coupon, translation differences, etc.

** Includes the RWA equivalent for KBC Insurance based on DC, calculated as the historical book value of KBC Insurance multiplied by 370%

Fully loaded B3 commonequity ratio decreased to15.9% at end 1Q18 based onthe Danish Compromise, duemainly to the impact of thefirst-time application of IFRS 9(-41bps).

This clearly exceeds theminimum capital requirementsset by the competentsupervisors of 10.6% fullyloaded

14.8

B3 CET1 at end 4Q17 (DC)

Pro-rata accrual dividend

-0.30.5

1Q18 net result (excl. KBC Ins. due to Danish Compr.)

-0.4

FTA IFRS9

-0.1

Other* B3 CET1 at end 1Q18 (DC)

15.1

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Overview of B3 CET1 ratios at KBC Group

Method Numerator Denominator B3 CET1 ratio

FICOD*, fully loaded 15,803 106,327 14.9%

DC**, fully loaded 14,793 93,173 15.9%

DM***, fully loaded 13,806 87,743 15.7%

* FICOD: Financial Conglomerate Directive** DC: Danish Compromise*** DM: Deduction Method

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The resolution plan for KBC is based on a Single Point of Entry (SPE) approach at the level of KBC Group;

Bail-in is identified as the preferred resolution tool;

SRB’s current approach to MREL is defined in the ‘2017 MREL Policy’ published on 20 December 2017, which is based on thecurrent legal framework and hence might be revised in the context of the ongoing legislative process to review BRRD;

The MREL target for KBC is 25.9%, which is based on fully loaded capital requirements as at 31-12-2016;

SRB requires KBC to achieve this target by 1 May 2019, using both HoldCo and eligible OpCo instruments

LAA Loss Absorbing AmountRCA ReCapitalisation AmountMCC Market Confidence ChargeCBR = Combined Buffer Requirement = 2.5% Conservation Buffer +1.5% O-SII buffer + 0.15% countercyclical buffer

LAA

RCA

MCC

8% P1

1.75% P2R

4.15% CBR

8% P1

1.75% P2R

2.9% (CBR – 1,25%)

@ 100% RWA

@ 95% RWA

= 25,9%

T2

1.5%

1.3%

HoldCo senior 3.8%

2.3%

1Q18

15.9%

OpCo (T2 & senior >1y)

AT1

CET1

24.8%

= 23.5%

Gradually mature.To be replaced by

HoldCo senior

HoldCo approach

Consolidated approach

KBC well on track to comply with resolution requirements

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Available MREL as a % of RWA (fully loaded)

26.3%

22.3%

26.0%

3.8%

1Q17

24.6%23.7%

1Q182Q17

3.4%

22.8%

2.5%

23.5%

3Q17

2.3%

26.3%

24.0%

4Q17

26.2%

1.3%1.3%

1Q18 pro forma*

24.8%25.9%

OpCo MREL HoldCo MREL

* Pro forma MREL also includes the successful issuance of 1bn EUR additional Tier-1 instrument in April 2018

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Government bond portfolio – Notional value

Notional investment of 46.3bn EUR in government bonds (excl. trading book) at end of 1Q18, primarily as aresult of a significant excess liquidity position and the reinvestment of insurance reserves in fixed-incomeinstruments

Notional value of GIIPS exposure amounted to 5.8bn EUR at end of 1Q18

31%

15%

3%4%6%

4%

13%

9%

5%

France

SlovakiaCzech Rep.

Belgium

Poland

2%

Hungary

Bulgaria**Italy

Other

SpainGermany **

Austria *Netherlands * Ireland

Portugal *

END 1Q18(Notional value of 46.3bn EUR)

(*) 1%, (**) 2%

33%

14%

3%4%6%

4%

12%

9%

5%

Italy

Belgium

Bulgaria**Czech Rep.

PolandHungary

2%

Slovakia

France

Other

SpainGermany **

Austria **Netherlands * Ireland **

Portugal *

END 2017(Notional value of 47.3bn EUR)

(*) 1%, (**) 2%

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Government bond portfolio – Carrying value

Carrying value of 49.3bn EUR in government bonds (excl. trading book) at end of 1Q18, primarily as a result of a significant excess liquidity position and the reinvestment of insurance reserves in fixed-income instruments

Carrying value of GIIPS exposure amounted to 6.6bn EUR at end of 1Q18

* Carrying value is the amount at which an asset [or liability] is recognised: for those not valued at fair value this is after deducting any accumulated depreciation (amortisation) and accumulated impairment losses thereon, while carrying amount is equal to fair value when recognised at fair value

END 1Q18(Carrying value of 49.3bn EUR)

(*) 1%, (**) 2%

31%

14%

3%4%6%

4%

13%

9%

6%

Hungary

Belgium

Czech Rep.

Poland

ItalySlovakia

2%

Netherlands *

Bulgaria**

France

Other

SpainGermany **

Austria *Ireland

Portugal *

END 2017(Carrying value of 51.5bn EUR)

(*) 1%, (**) 2%

33%

13%

3%4%6%

4%

12%

9%

6%

SlovakiaHungary

Belgium

Czech Rep.

Poland

Italy

Spain

2%

Bulgaria**

France

Other

Germany **Austria **

Netherlands * Ireland**Portugal *

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Upcoming mid-term funding maturities

KBC Bank placed covered bonds of 750m EUR with 8-year maturityand 250m EUR with 20-year maturity in March 2018

KBC Bank has successfully issued a 1bn EUR additional Tier-1instrument with 7.5-year non-call perpetual in April 2018

CoCo has been called (on 25 January 2018)

KBC Group’s credit spreads have widened towards the end of 1Q18

KBC Bank has 6 solid sources of long-term funding:

• Retail term deposits

• Retail EMTN

• Public benchmark transactions

• Covered bonds

• Structured notes and covered bonds using the private placementformat

• Senior unsecured, T1 and T2 capital instruments issued at KBCGroup level and down-streamed to KBC Bank

15%

6%

10%

10%

32%

27%

0.3%

1.0%

1.8%

1.4%

1.7%

0.5%

0.2%

0.4%

0.2%0.3%

0

1000

2000

3000

4000

5000

6000

2018 2019 2020 2021 2022 2023 2024 2025 2026 ≥ 2027

m E

UR

Breakdown Funding Maturity Buckets

Senior Unsecured - Holdco Senior Unsecured - Opco Subordinated T1 Subordinated T2 Covered Bond TLTRO

(Including % of KBC Group’s balance sheet)

Total outstanding =

23bn EUR at the end of April 2018

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-40

10

60

110

160

210

-20

0

20

40

60

80

100

120

140

Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Credit Spreads Evolution

0.5Y Senior Debt Opco 5Y Covered Bond Interpolated 5Y Senior Debt Holdco Interpolated 7NC2 Subordinated Tier 2

Credit spreads evolution

1 7NC2 Subordinated Tier 2 spread is depicted based on the right hand axis.

1

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Glossary (1)

AQR Asset Quality Review

B3 Basel III

CBI Central Bank of Ireland

Combined ratio (non-life insurance)[technical insurance charges, including the internal cost of settling claims / earned premiums] + [operating expenses / written premiums] (after reinsurance in each case)

Common equity ratio [common equity tier-1 capital] / [total weighted risks]

Cost/income ratio (banking) [operating expenses of the banking activities of the group] / [total income of the banking activities of the group]

Cost/income ratio adjusted for specific items

The numerator and denominator are adjusted for (exceptional) items which distort the P&L during a particular period in order to provide a better insight into the underlying business trends. Adjustments include: • MtM ALM derivatives (fully excluded)• bank taxes (including contributions to European Single Resolution Fund) are included pro rata and hence spread over all quarters of the year instead of

being recognised for the most part upfront (as required by IFRIC21)• one-off items

Credit cost ratio (CCR)[net changes in individual and portfolio-based impairment for credit risks] / [average outstanding loan portfolio]. Note that, inter alia, government bonds are not included in this formula

EBA European Banking Authority

ESMA European Securities and Markets Authority

ESFR European Single Resolution Fund

FICOD Financial Conglomerates Directive

Impaired loans cover ratio [total specific impairments on the impaired loan portfolio (stage 3) ] / [part of the loan portfolio that is impaired (PD 10-11-12) ]

Impaired loans ratio [part of the loan portfolio that is impaired (PD 10-11-12)] / [total outstanding loan portfolio]

Leverage ratio[regulatory available tier-1 capital] / [total exposure measures]. The exposure measure is the total of non-risk-weighted on and off-balance sheet items, based on accounting data. The risk reducing effect of collateral, guarantees or netting is not taken into account, except for repos and derivatives. This ratio supplements the risk-based requirements (CAD) with a simple, non-risk-based backstop measure

Liquidity coverage ratio (LCR) [stock of high quality liquid assets] / [total net cash outflow over the next 30 calendar days].

Net interest margin (NIM) of the group [banking group net interest income excluding dealing room] / [banking group average interest-bearing assets excluding dealing room]

Net stable funding ratio (NSFR) [available amount of stable funding] / [required amount of stable funding]

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Glossary (2)

MARS Mortgage Arrears Resolution Strategy

MREL Minimum requirement for own funds and eligible liabilities

PD Probability of default

Return on allocated capital (ROAC) for a particular business unit

[result after tax, including minority interests, of a business unit, adjusted for income on allocated capital instead of real capital] / [average capital allocated to the business unit]. The capital allocated to a business unit is based on risk-weighted assets for banking and risk-weighted asset equivalents for insurance

Return on equity[result after tax, attributable to equity holders of the parent] / [average parent shareholders’ equity, excluding the revaluation reserve for fair value through Other Comprehensive Income (OCI) assets]

TLAC Total loss-absorbing capacity

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Contact informationInvestor Relations OfficeE-mail: [email protected]

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