presentation march 2004 march 2004 own issues office
TRANSCRIPT
PRESENTATIONPRESENTATION
MARCH 2004MARCH 2004
OWN ISSUES OFFICEOWN ISSUES OFFICE
Profound restructuring process of Kredyt BankProfound restructuring process of Kredyt Bank
There are three main restructuring areas
Credit risk Investment banking OrganisationalStructure
Restructuring areasRestructuring areas
2001 2002 III kw 2003 2003
11,8%
17,5%
28,3%
20,4%
Increase of irregular receivables
Share of irregular receivables in total receivables
Restructuring and quality of receivablesRestructuring and quality of receivables
2001 2002 III kw 2003 2003
Należności kredytowe brutto
Increase of loan portfolio safetyIncrease of loan portfolio safety
39,6%42,5% 43%
52%
Coverage ratio of irregular receivables by provisions
Significant increase of coverage ratio by provisions
Economy industries of heavy loan provisioningEconomy industries of heavy loan provisioning
• Real-estate financingReal-estate financing
• Metal processing industryMetal processing industry
• Power industryPower industry
• Food processingFood processing
• Ship buildingShip building
• Automotive industryAutomotive industry
Investment bankingInvestment banking
Kredyt Bank S.A. Group restructuring process
Kredyt Trade Sp. z o.o.100%
Kredyt Trade Sp. z o.o.100%
BFI Serwis Sp. z o.o. 100%
BFI Serwis Sp. z o.o. 100%
BDH Serwis Sp. z o.o. 100%
BDH Serwis Sp. z o.o. 100%
ŻAGIEL S.A. 100%
ŻAGIEL S.A. 100%
KREDYT LEASE S.A. 100%
KREDYT LEASE S.A. 100%
KB Zarządzanie Aktywami S.A. (asset management) 100%
KB Zarządzanie Aktywami S.A. (asset management) 100%
Kredyt International Finance B.V. 100%
Kredyt International Finance B.V. 100%
additionaladditionaldistribution channelsdistribution channels
support functionssupport functions
SPVSPV
to be soldto be sold
already soldalready sold
for sale orfor sale orunder restructuring processunder restructuring process
KREDYT BANK UKRAINA66.7%
KREDYT BANK UKRAINA66.7%
PTE KREDYT BANK S.A. 100%
PTE KREDYT BANK S.A. 100%
AGROPOLISA Insurance company
AGROPOLISA Insurance company
KREDYT BANK S.A. Vilnius Branch
KREDYT BANK S.A. Vilnius Branch
POLSKI KREDYT BANK S.A. POLSKI KREDYT BANK S.A.
RESULTRESULT
Profound restructuring process of Kredyt BankProfound restructuring process of Kredyt Bank
Kredyt Bank S.A. commenced work, in collaboration with the KBC Bank,on the Kredyt Bank S.A. Reorganization Program.
Functioning of the Kredyt Bank S.A. was analysedFunctioning of the Kredyt Bank S.A. was analysed
including:including:the sthe saleale processes, processes,the costs of activity,the costs of activity,the banking risk (market and credit risks).the banking risk (market and credit risks).
A concept was developed for organisational changesA concept was developed for organisational changesin the Kredyt Bank S.A. Capital Groupin the Kredyt Bank S.A. Capital Group
It was approved by the Bank’s Management Board and the Bank’s Supervisory Board.It was approved by the Bank’s Management Board and the Bank’s Supervisory Board.
The Reorganisation Program of the Kredyt Bank S.A. will be conducted by way of mutually
interdependent projects encompassing significant areas of the Bank’s functioning.
23 04724 691 23 980
2001 2002 2003
Total assets of Kredyt Bank Group
7,1% -2,9%
Changes to key balance sheet items of the GroupChanges to key balance sheet items of the Group
Slow down of increase of scale of activity measured by total assets
in PLN millionin PLN million
%% Change in relation to previous periodChange in relation to previous period
4 155,54 431,5
2002 2003
6,6%
%%
Changes to securities portfolio
Changes to key balance sheet itemsChanges to key balance sheet items
in PLN millionin PLN million
Debt securitiesDebt securities
Increase of share of debt securities.
They account for app. 90%of total securities portfolio.
Change in relationChange in relation to previous periodto previous period
232,5232,5
1 176,5
1 409
Operating resultOperating result
The Bank generated positive financial result excluding cost of risk
PositiveOPERATING
RESULTbefore the cost of
provisions
Functioning costsFunctioning costs Net income Net income from operating activityfrom operating activity
in PLN millionin PLN million
Net result from operating activityNet result from operating activity
Increase of net commissions and decrease of net interest
21,4
797,3
486,8
216,1
6,2
723,2
524,8
154,8
2002 2003
result on other activities
net commissions
net interest
result on other operating income andexpenses
-9,3%
7,8%
%%Change in relation to previous period
iin PLN millionn PLN million
Functioning costsFunctioning costs
Decrease of tangible costs, increase of fixed assets depreciation costs
117,2
558,3
494,5
28,4
168,6
465,1
504,9
37,9
2002 2003
taxes and fees
personell costs
tangible costs
depreciation of fixed assest
... due to intensive build-out and updating
of sale and IT infrastructure.
%% Change in relation to previous periodChange in relation to previous period
in PLN millionin PLN million
43,9%43,9%
16,7%
2,1%
Main reasons for net loss generated in 2003Main reasons for net loss generated in 2003
Main reason for net loss - loan portfolio restructuring
in PLN million
Negative financial result of the
Group
-1 567Financial result of the Group
excluding „risk cost”
+232,5
Establishing provisions for credit risk
Corporate income tax
Write-off of goodwill of subsidiaries
-1 533,3
-187,5
-81,7
KBC Bank NV - strategic investor in Kredyt BankKBC Bank NV - strategic investor in Kredyt BankFinancial strength of KBC Bank NV as compared with Polish banking sector
KBC Group with its seat in BrusselsKBC Group with its seat in Brussels• conducts banking activity (KBC Bank) as well as insurance activity (KBC Insurance)conducts banking activity (KBC Bank) as well as insurance activity (KBC Insurance)
• one of the largest financial groups in Belgiumone of the largest financial groups in Belgium
• occupies a leading position in the Central Europeoccupies a leading position in the Central Europe
• in Poland - it conducts banking activity through Kredyt Bank S.A.and insurance activity through Warta S.A.in Poland - it conducts banking activity through Kredyt Bank S.A.and insurance activity through Warta S.A.
• worldwide - it employs about 45,000 people and services 9 million customers.worldwide - it employs about 45,000 people and services 9 million customers.
Data as at end IIIQ 2003Data as at end IIIQ 2003
KBC GROUP ASSETS: KBC GROUP ASSETS: EUR 224 billionEUR 224 billion
OWN FUNDS OF KBC GROUP: OWN FUNDS OF KBC GROUP: EUR 9.3 billion EUR 9.3 billion
• more than more than twice as large astwice as large as the assets of the Polish banking sector the assets of the Polish banking sector • more than more than 22 times as large as22 times as large as own funds of Polish banking sector own funds of Polish banking sector
• similar to own funds similar to own funds of Polish banking sectorof Polish banking sector
KBC Bank holds 81.4% participation in the capital of Kredyt Bank S.A. KBC Bank holds 81.4% participation in the capital of Kredyt Bank S.A.
Capital adequacy ratio of the BankCapital adequacy ratio of the Bank
Increase of capital adequacy ratio as a result of series W shares issue
2001 2002 III kw 2003 2003 II kw 2004
8,80%
12,00%
8,55%
11,00%
14,96%
Capital adequacy ratio of the Bank
II kw 2004II kw 2004FORECAST
8%8%Level required by Polish Banking LawLevel required by Polish Banking Law
Total financial support of KBC Bank N.V. PLN 8 630 million
Actions securing appropriate levels of receivables’ concentration Actions securing appropriate levels of receivables’ concentration ratios and level of capital adequacy ratio ratios and level of capital adequacy ratio
within the process of restructuringwithin the process of restructuring. .
MAINTENANCE OF THE CURRENT AS WELL AS MAINTENANCE OF THE CURRENT AS WELL AS FFUTURE LEVELUTURE LEVEL OF STABILITY ANDOF STABILITY AND
SAFETY OF THE BANKSAFETY OF THE BANK
TARGETTARGET
Increase of the Bank’s core funds in 2003Increase of the Bank’s core funds in 2003Series U shares issue
Series U shares issue with pre-emption rights for existing shareholdersSeries U shares issue with pre-emption rights for existing shareholdersamounting toamounting to
PLN 665 millionPLN 665 milliontook place in the fourth quarter of 2003.took place in the fourth quarter of 2003.
Issue price:Issue price: PLN 10.50PLN 10.50
Pre-emption rights ratio:Pre-emption rights ratio: 7:37:3
Share of KBC Bank N.V. in capital after series U shares issue:Share of KBC Bank N.V. in capital after series U shares issue: 81.40%81.40%
Maintenance of own funds on the level adequate to the scale of activity
Assistance from KBC Bank N.V.Assistance from KBC Bank N.V.Key function of KBC financial assistance in restructuring process
TARGETSTARGETS
Placing of deposit Placing of deposit securing receivablessecuring receivables
of the Bankof the Bank
Loans repayment guarantee Loans repayment guarantee for the Bankfor the Bank
EUR 140 millionEUR 140 million PLN 6,364 millionPLN 6,364 million
Collateral for receivablesCollateral for receivablesSecuring concentration limits on Securing concentration limits on
appropriate levelsappropriate levels
Collateral for receivablesCollateral for receivablesIncrease of Increase of
capital adequacy ratiocapital adequacy ratio
TARGETTARGET
Providing the Bank with core fundsProviding the Bank with core fundsNew shares issue approved by General Assembly of the Bank held on January 9, 2004
Series W shares issue Series W shares issue with pre-emption rights for existing shareholders with pre-emption rights for existing shareholders amounting to approx. amounting to approx. PLN 600 millionPLN 600 million
will take place in the I H 2004will take place in the I H 2004
Issue price: Issue price: PLN 10.00PLN 10.00
Pre-emption rights ratio: Pre-emption rights ratio: 7:27:2
Share of KBC Bank N.V. in capital after series W shares issue, in case of purchasing all Share of KBC Bank N.V. in capital after series W shares issue, in case of purchasing all the shares issued:the shares issued: 85,53%85,53%
Increase of core funds (Tier I),Increase of core funds (Tier I),
which shall enable the Bank to pursue more flexible policy in Tier II capital areawhich shall enable the Bank to pursue more flexible policy in Tier II capital area
TARGETTARGET
Providing the Bank with supplementary fundsProviding the Bank with supplementary fundsThe Issuance Program of the registered, perpetual banking securities
in the amount up to PLN 800 million
On December 23, 2003 the Bank issued under Issuance Program On December 23, 2003 the Bank issued under Issuance Program debt securities amounting to debt securities amounting to
PLN 330 millionPLN 330 milliondirected to entities of KBC Bank N.V. Groupdirected to entities of KBC Bank N.V. Group
The raised funds are included into Upper Tier II capitalThe raised funds are included into Upper Tier II capitalon permit of Banking Supervision Commissionon permit of Banking Supervision Commission
Increase of supplementary funds (Tier II),Increase of supplementary funds (Tier II),
according to the Banking Law up to the amount of primary funds (Tier I)according to the Banking Law up to the amount of primary funds (Tier I)
FITCH RATINGSFITCH RATINGS
Long-term:Long-term: BBB+BBB+- - outlookoutlook positivepositive
Short-term:Short-term: F2F2
Individual:Individual: D/ED/E
SupportSupport :: 22
MOODY’S INVESTORS MOODY’S INVESTORS SERVICESERVICE
Long-term:Long-term: A2A2- outlook- outlook stablestable
Short-term:Short-term: P-1P-1
Financial strength:Financial strength: E+E+
Long-term rating of KB = sovereign rating of Poland.Long-term rating of KB = sovereign rating of Poland.
Positive impact of the major shareholder i.e. KBC Bank N.V. Positive impact of the major shareholder i.e. KBC Bank N.V.
Rating of the BankRating of the Bank
Investment grades from Fitch and Moody’s
Challenges for 2004Challenges for 2004Improvement of profitability and maintaining complete safety levels at the same time
• profitability improvement by decreasing costs and increasing salesprofitability improvement by decreasing costs and increasing sales
• effective controlling of credit risk effective controlling of credit risk
• maintaining of market position maintaining of market position • maintaining of maintaining of adequateadequate safety levels safety levels