Strategy updates

Foto gebouw

2

Start of a new decade

In Q1 2005, KBC merged with its parent company Almanij:

‘Quick wins’ included:• The re-rating of the share due to increased corporate transparency,

company visibility and share liquidity• Operational synergies, particularly in the field of wealth management

Further value-creating potential includes:• shifting the earnings trend in the private banking area into

a much higher gear

Clearly, KBC continues to be ambitious and maintains its performance commitments in both Belgium and the CEE

3

The first harvest is in

105 104

100

104

100

105

112

115

108

117

100102

Dec-04 Jan Feb Mar Apr May-05

An initial layer of ‘merger benefits’ has already appeared: The ‘ugly duckling’ discount has disappeared

(indication: at pre-merger price of 48 € - avg. 3Q04 - a hypothetical 10% discount represents 4.8 €/share - total 1.8 bn)

Today, KBC has grown to 25 bn market cap with a ytd average daily trading turnover of 47 m (velocity, last 12 months: 50%)

DJES

DJES

• Outperformance driven by strong fundamentals • Outperformance facilitated by increased stock visibility and liquidity

DJESDJES

DJES

DJES

Share price, 31 May 05, ytd (KBC +17% vs. DJES banks 4%)(Dec04 = 100)

4

0

20

40

60

80

By Area By Type

Operational synergies - reminder

Type of Benefits*

€m

Revenue(40%)

Cost (60%)

ICT & Overheads

Asset Managemen

t

Insurance

Corporate

Fin. Markets

Securities

Payments

16.7

12.6

27.7

74.6

12.6

3.9 1.0

0

10

20

30

40

50

60

70

80

Cross Sales

NewBus'ness

Optimi-zation

Pro-cure-ment

People

Source of Benefits*€m

* Synergy benefits described as peak recurring annual increase in pre-tax bottom-line result (peak level as of 2009)

In Q1 2005, we announced operational synergies in the areas of private

banking and fund management of net 1.4 € / share - total 500 m (75 m pre-tax recurring per year, 50% of which as of 2006)

CostsAvoided

Total

Securities

5

Operational synergies - update

SYNERGY PLAN ACHIEVED IN 2Q 2005

No. of projects

Recurring synergy

O/w in 2005

O/w in 2006

Recurringsynergies achieved

ImpactP&L 2005

IT and overheadsAsset ManagementInsuranceCorporatesFinancial marketsSecuritiesPayments

7534374

29 m16 m

9 m8 m7 m5 m1 m

3 m-

3 m-

2 m--

11 m12 m

4 m3 m5 m3 m

-

3 m-

1 m----

3 m-

1 m----

TOTAL 33 75 m 8 m 37 m 4 m 4 m

In Q2 2005, group-wide risk management methodology implemented in enlarged Group

At the same time, detailed implementation of synergy projects started: Agreed milestones and delivery profile for 33 projects Transparency on execution risks Incorporation into business & individual targets

At end of Q2 2005, 4 m in recurring synergies already realized (6% of total)

By end of 2005, 8 m is expected - in 2006, level will increase to 37 m

6

Gevaert portfolio - update

P’folioDec-04

Profit 2004

Strategy Completion by

Equity holdings in listed companies

a. Held for trading b. Held as investment c. Agfa Gevaert (atypical) (2) (3)

17 m 578 m 854 m

pm20 m42 m

Integration into 'KBC Securities‘Exit (sale on market) Exit (opportunistic)

Q2 2005Q2 2005 (1) At right moment

Private equity holdings

a. Private equity 79 m pm Integration into 'KBC Private Equity' (integrated portfolio 360 m)

Q3 2005

Real estate activities

a. Real estate 299m pm Selective integration into KBC Bank Q3 2005 (4)

Specialized leasing activities

a. Entertainment sector b. Railway freight cars c. Audiovisual material (vendor lease)

163 m35 m37 m

2 m1 m

0.4 m

Exit (if not successful: run-off)Exit (if not successful: run-off)Integration into KBC Lease

Q4 2005Q4 20051Q 2006

Gevaert is expected to upstream ca. 300 m cash dividend in Q3 2005(1) 30 m capital gains realized in Q2 2005, excl. gains on KBL and KBC (150 m) eliminated in consolidated group P&L(2) Position of 34.1 m shares booked in KBC’s accounts at 17 euros/share(3) 2004 profit contribution (42 m) excludes one-off loss of consumer imaging (-81 m) and amortization of goodwill (-27 m)(4) Legal and practical winding-up and exit from discontinued operations may be drawn out

7

We build a solid future

We still see a lot of ‘growth and value’ in our current strategic scope: Retail- and wealth-management-oriented, with focus on Belgium and

CEE-5 and selected Western-European activities Further enhancement of efficiency (with emphasis on, but not

exclusively, in CEE and European private banking) Standalone basis (opportunistic operational alliances in certain areas

to generate economies of scale, if needed) Stable dividend policy and solid level of financial strength/solvency

This outlook is reflected in ambitious financial targets, valid until 2008

In 2H 2005, we will re-assess our strategic horizons to ensure ‘growth and value’ post-2008 (project ‘next’)

8

Enhancing efficiency - banking

65% 65%

60%58%

62%

58%

71%

2001 2002 2003 2004 2005target

2004new

2005 2006 2007 2008target

• Branch closures in Belgium • IT integrations• FTE reductions

• Impact of co-sourcing with 3rd parties• Cost savings due to ‘private banking hub’

Well on track to deliver on current 2005 cost/income target (58%)

Adverse impact by Group enlargement and IFRS reclassificiations - new C/I target (58%) therefore more ambitious than previous target (58%)

Cost/income, banking

(KBC Old, GAAP) (KBC Mergco, IFRS)

• Further cost cutting in CEE• Bus’ss-process simplification• Centralized procurement

9

Enhancing efficiency - insurance

96% 95% 95% 95% 95%

105%104%

2001 2002 2003 2004 2005target

2004new

2005 2006 2007 2008target

• Optimization of inbound R/I• Increased underwriting discipline in CEE• Pricing discipline (hard market)

• Increased price competition• Further improvement in CEE

Well on track to deliver on current 2005 combined ratio target (95%)

Positive view on underlying drivers (market growth, claims frequency, claims inflation, etc.), but market is expected to soften - new C/R target (95%) therefore more ambitious than previous target (95%)

Combined ratio, non-life

KBC Old, GAAP KBC Mergco, IFRS

10

Enhancing bottom-line profit

3.68

5.66

4.96 5.07

7.42

3.423.39

2001 2002 2003 2004 2005target

2004new

2005 2006 2007 2008target

• Sound business growth• Strict cost management• Risks adequately managed

Expected to exceed current 2005 EPS growth target (10% CAGR)

Downward impact of IFRS reclassificiations and Group enlargement

Growth outlook: our reality check makes us believe a 10% CAGR is sustainable at least until 2008 - growth target reconfirmed

Earnings per share

(KBC Old, GAAP) (KBC Mergco, IFRS)

CAGR target+10%

CAGR target> 10%

*

* Adjusted 2004 level after adding back 210 m in one-off charges

4.49

11

Tier-1, banking

10% 10% 10%9%9%

2001 2002 2003 2004 2004new

Securing financial strength In the last few years, we stayed above our minimum safety levels and

accumulated excess capital for add-on investments in CEE

Minimum solvency levels are maintained (8% Tier-1, banking – incl. 15% hybrid, and 200% solvency margin, insurance)*

Solvency margin, insurance

316%389% 347%320%

504%

2001 2002 2003 2004 2004new

• Solid earnings momentum• Stable dividend payout range

• Recovery of capital markets

* under Basel I / Solvency I regulatory frameworks

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Securing financial strength

Capital position as at 31 March 2005

Available capital 1 Surplus capital 2 Immediatefree surplus 3

Banking 10.7 bn 2.1 bn 1.5 bn

Insurance 2.8 bn 1.2 bn 0.4 bn

Gevaert 1.2 bn 1.0 bn 0.4 bn

Total 14.7 bn 4.3 bn 2.3 bn

Internal capital budget requirements

Deleveraging of the holding company 0.4 – 0.6 bn

Buy-out of 3rd parties in CEE 0.8 – 1.3 bn

External growth in CEE 1.0 – 2.0 bn

1 Regulatory capital under Basel I/Solvency I, (incl. hybrids and minority interests, after elimination of intangibles and goodwill)2 Difference between available capital and internal minimum level3 Surplus capital excl. adverse IFRS impact on Tier-1 (as of 2006), unrealized gains on tied-up assets and value of Agfa- Gevaert (timing of disposal uncertain)

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Generating high return level

13%

18%

16%

14%

16%

13%13%

2001 2002 2003 2004 2005target

2004new

2005 2006 2007 2008target

• Strong earnings growth (19% CAGR)• Dividend payout of 40-45%• Signifcant capital accumulation

• Sound EPS growth (>10% CAGR)• Stable dividend policy• Further accumulation of capital

Well on track to exceed current 2005 ROE target (16%)

Carry-on of excess capital for add-on investments in CEE and higher capital base according to IFRS - new ROE target (16%1) is therefore more ambitious than previous target (16%)

Return on equity

(KBC Old, GAAP) (KBC Mergco, IFRS)1 Equity excl. changes in revaluation reserve on AFS assets.

14

Financial targets - overview

Efficiency: Cost/income, banking

Combined ratio, non-life

max. 58% (1)

max. 95% (1)

Financial strength:

Tier-1, banking

Solvency margin, insurance

min. 8% (3)

min. 200% (3)

Value creation: Adjusted ROE (2)

EPS growth (CAGR)

min. 16% (1)

Min. 10% (3)

(1) By 2008 at the latest(2) Equity excl. change revaluation reserve AFS assets(3) For 2006-2008 period

15

Assessing the Romanian opportunity

Since the largest bank (BCR) is up for privatization now, we cannot postpone our views on this until our new strategy charter is defined in 2H05 (project ‘next’)

Since optimization of CEE activities has progressed well and an immediate acquisition in Poland is rather unlikely, management capacity and capital gradually becomes available for new areas of investment

At first sight, the BCR opportunity may be attractive and is in line with our past CEE strategy: Material size (5.5 bn assets) and dominant market position (29% share) Profitable franchise Possibility to pursue double-digit growth, based on fast growing market Possibility to focus on retail/SME Availability of an insurance operation, allowing start-up of bancassurance Progressive development in legal and political environment since EU

accession schedule is expected

In order to understand the opportunity fully, assess the risks and quantify the value-creation potential, KBC is studying the case