update to credit analysis kbc group n.v....2020/07/28 · for any credit ratings referenced in this...

FINANCIAL INSTITUTIONS

CREDIT OPINION28 July 2020

Update

RATINGS

Domicile Brussels, Belgium

Long Term CRR Not Assigned

Long Term Debt Baa1

Type Senior Unsecured -Dom Curr

Outlook Stable

Long Term Deposit Not Assigned

Please see the ratings section at the end of this reportfor more information. The ratings and outlook shownreflect information as of the publication date.

Contacts

Roland Auquier +33.1.5330.3341VP-Senior [email protected]

Delphine Larrousse +33.1.5330.3361Associate [email protected]

Alain Laurin +33.1.5330.1059Associate Managing [email protected]

Nick Hill [email protected]

KBC Group N.V.

Update to credit analysisSummaryKBC Group's long-term senior unsecured debt rating reflects (1) KBC Bank N.V.'s (KBC Bank)Baseline Credit Assessment (BCA) of baa1, and (2) our Advanced Loss Given Failure (LGF)analysis applied to KBC Group.

KBC Bank's baa1 BCA reflects the bank's solid fundamentals resulting from its strongfranchise in Belgium and several Central and Eastern European (CEE) countries. The bank hascontinuously reported strong profit in its main markets in recent years despite pressure fromthe low interest rate environment in the euro area, although it posted a net loss of €5 millionin Q1 2020 as a result of market fluctuations stemming from the coronavirus outbreak. Wealso take into account KBC Bank's strong capital base and sound liquidity profile stemmingfrom a historically stable and resilient customer deposit base.

KBC Bank’s long-term deposit and its issuing subsidiary IFIMA's senior debt ratings of Aa3 andA1 benefit from the three- and two- notch uplift from our Advanced Loss Given Failure (LGF)analysis, and an additional one-notch uplift from a moderate probability of governmentsupport. The stable outlook reflects our expectation that KBC Bank’s asset risk and capital willdeteriorate as a result of the coronavirus outbreak but remain consistent with a baa1 BCA,while profitability, although declining, will continue to be supported by a diversified earningsbase.

Exhibit 1

Rating Scorecard - Key financial ratios

4.3%16.4%

0.0%20.3%

29.5%

0%

5%

10%

15%

20%

25%

30%

35%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Asset Risk:Problem Loans/

Gross Loans

Capital:Tangible Common

Equity/Risk-WeightedAssets

Profitability:Net Income/

Tangible Assets

Funding Structure:Market Funds/

Tangible BankingAssets

Liquid Resources:Liquid BankingAssets/Tangible Banking Assets

Solvency Factors (LHS) Liquidity Factors (RHS)

KBC Group (BCA: baa1) Median baa1-rated banks

Solv

en

cy F

acto

rs

Liq

uid

ity F

acto

rs

Source: AHS

http://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=PBM_1235906

https://www.moodys.com/credit-ratings/KBC-Bank-NV-credit-rating-441250

MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Credit strengths

» Strong earnings power, supported by the group's solid presence in Belgium and CEE countries and diversified business spanningbanking activities, insurance and asset management

» Solid asset quality

» Sound capitalisation

» Robust liquidity based on a strong core deposit base

Credit challenges

» Pressure on earnings stemming from the coronavirus crisis and the low interest rate environment

» Rapid growth in credit lending to Belgian corporates and in the Czech Republic, which may entail increased asset risk in the future

OutlookThe stable outlook on the long-term ratings reflects our expectation that, despite the expected deterioration of certain financialmetrics, notably asset risk and profitability, as a result of the coronavirus outbreak, we believe that KBC’s creditworthiness will remainconsistent with its ratings over the outlook horizon.

Factors that could lead to an upgrade

» An upgrade of KBC Bank's, IFIMA's and KBC Group N.V.'s (KBC Group; Baa1 stable) long-term ratings could result from (1)significantly improved regulatory capital and asset-risk ratios at the group level; or (2) substantial issuance of senior debt by KBCGroup, adding subordination in favour of KBC Bank's and IFIMA’s senior creditors and debt volume benefitting KBC Group's seniorcreditors.

Factors that could lead to a downgrade

» A downgrade of KBC Bank's BCA could be driven by (1) sustained reduced profitability should both fees and net interest incomedecline; (2) reduced regulatory capital ratios at the bank and group levels, because of, for example, more aggressive earningsdistribution, lending growth or acquisitions; and (3) a deterioration in asset quality.

» A downgrade of KBC Bank's BCA would typically result in a downgrade of the long-term ratings of KBC Bank, IFIMA and KBC Group.These ratings could also be downgraded if there were a significant and sustained decrease in the debt loss-absorption capacity,resulting in higher loss given failure for one or more instrument classes.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.

2 28 July 2020 KBC Group N.V.: Update to credit analysis

https://www.moodys.com/credit-ratings/KBC-Group-NV-credit-rating-600050084


Key indicators

Exhibit 2

KBC Group N.V. (Consolidated Financials) [1]

03-202 12-192 12-182 12-172 12-162 CAGR/Avg.3

Total Assets (EUR Million) 298,194.4 288,123.0 280,896.0 288,999.0 270,269.0 3.14

Total Assets (USD Million) 327,193.6 323,417.6 321,104.7 347,029.2 285,066.8 4.34

Tangible Common Equity (EUR Million) 16,839.0 17,122.4 16,315.0 15,751.0 13,673.0 6.64

Tangible Common Equity (USD Million) 18,476.6 19,219.8 18,650.4 18,913.8 14,421.7 7.94

Problem Loans / Gross Loans (%) 3.3 3.5 4.3 6.2 6.8 4.85

Tangible Common Equity / Risk Weighted Assets (%) 16.4 17.3 17.2 17.0 15.6 16.76

Problem Loans / (Tangible Common Equity + Loan Loss Reserve) (%) 27.2 27.8 33.3 46.4 56.4 38.25

Net Interest Margin (%) 1.6 1.6 1.5 1.5 1.7 1.65

PPI / Average RWA (%) 0.5 3.4 3.2 4.0 3.5 2.96

Net Income / Tangible Assets (%) 0.0 0.9 0.8 0.9 0.9 0.75

Cost / Income Ratio (%) 91.0 56.8 59.7 53.0 55.8 63.35

Market Funds / Tangible Banking Assets (%) 23.4 20.3 28.3 35.4 35.6 28.65

Liquid Banking Assets / Tangible Banking Assets (%) 31.7 29.5 31.4 39.5 30.3 32.55

Gross Loans / Due to Customers (%) 92.2 92.1 95.8 96.5 111.6 97.65

[1] All figures and ratios are adjusted using Moody's standard adjustments. [2] Basel III - fully loaded or transitional phase-in; IFRS. [3] May include rounding differences because of thescale of reported amounts. [4] Compound annual growth rate (%) based on the periods for the latest accounting regime. [5] Simple average of periods for the latest accounting regime. [6]Simple average of Basel III periods.Sources: Moody's Investors Service and company filings

ProfileKBC Group N.V. (KBC Group) is a leading bank-insurance group based in Belgium. It is comprised of a large universal bank (KBC BankN.V. [KBC Bank]), active in Belgium, several CEE countries (namely the Czech Republic, Slovakia, Hungary and Bulgaria) and Ireland, andan insurance subsidiary (KBC Insurance N.V.), active in life and non-life activities in the same markets.

In Belgium, KBC Bank reported stable market shares of around 20% in traditional bank products and 30% in investment funds as ofthe end of March 2020. In CEE, the bank reported loan and deposit market shares of 21% in the Czech Republic, 10% in Hungary, 10%in Slovakia and 10% in Bulgaria after the acquisition of United Bulgarian Bank (UBB) in mid-2017. In Ireland, KBC Bank is currentlydeveloping a digitalised retail bank; Ireland is now considered a core market for the group, where the bank reported a market share of9% in the retail segment.

Please click on the following links for further information on Belgium's banking system outlook and on Belgium's Macro Profile.

Recent DevelopmentsGlobal economy is limping back to life, but the recovery will be long and bumpy. The full extent of the economic costs will be unclearfor some time but it is unlikely real GDP in 2021 will come back to pre-coronavirus crisis levels. In Europe, the coronavirus outbreakadds to late-cycle risks for European banks. Under our baseline scenario, the direct negative credit impact on the European bankingsector would be limited. A prolonged outbreak, however, would have a more severe outcome, weighing on banks' loan quality andprofitability. We expect fiscal and regulatory policy measures, as announced by a variety of euro-area nations and European regulators,to mitigate, but not fully offset, the economic contraction caused by the outbreak, safeguarding banks' role as a provider of credit asthey cope with the short-term pressures of the coronavirus outbreak.

The greatest negative credit effects will be felt initially by banks in regions most immediately and acutely disrupted or withconcentrated lending to the most affected sectors, as well as more thinly capitalised banks and non-bank lenders. To reflect thegrowing strain of coronavirus disruption, in March 2020, we changed the outlook on six European banking systems to negative,including Belgium.


https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1219976






Detailed credit considerationsAsset quality is solid in KBC Bank's core markets, but credit costs will materially increase as a result of the coronavirusoutbreakWe view KBC Group's loan quality as solid considering the current low cost of risk overall, specifically in Belgium, and the net releasesof loan-loss provisions linked to the Irish portfolio. At 3.3% as of March 2020, KBC Group's non-performing loan (NPL) ratio is trendingback to the Belgian banks’ average (2.7% in December 2019). It is still slightly higher than that of its peers, reflecting the still-high yetdecreasing proportion of impaired loans in the Irish loan book (16% in March 2020).

After two years of net provision - write-backs - , KBC Group’s cost of risk has started to pick up again in the context of coronavirus in2020, at 27 basis points (bps) of gross loans (in the first three months of the year). The cost of risk has increased, especially in Belgium(to 40 bps of gross loans from 22 bps in 2019), mostly driven by the corporate exposures, and Slovakia (to 30 bps from 14 bps in 2019).The Group published a guidance of around 60 bps for the full year 2020.

Exhibit 3

Loan-loss provisions increase in first quarter 2020Loan-loss provisions/average loan portfolio (percentage)

1.11%

0.91%

0.82%

0.71%

1.21%

0.42%

0.23%

0.09%

-0.06% -0.04%

0.12%

0.27%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 3M2020*

*Q1 2020 metric includes 0.10% of management overlaySource: KBC Group

We indeed expect asset quality to deteriorate in 2020 in the wake of the coronavirus pandemic. The strict lockdown measurestaken in Belgium were highly disruptive for businesses. Government support measures will help avoid a very sharp rise in corporatebankruptcies, but a rise in problem loans is inevitable.

The Belgian government has rolled out a package of fiscal and budgetary measures to support companies and households through thecoronavirus pandemic. The measures taken will help to reduce loan quality deterioration in banks' portfolios resulting from a prolongedeconomic slowdown. They will go some way towards easing cash flow pressures on consumers and businesses and so help to contain asharp increase in corporate bankruptcies.

Nonetheless, the government's loan guarantee scheme leaves banks to pick up a large share of losses. The loan guarantees do not offerthe same protection for the banks as guarantees in other European countries. The scheme consists of a “first loss” portfolio insurancemechanism whereby the government guarantee is prompted only if a minimum level of losses has been reached - which amounts toa severe scenario well beyond current expectations. Even if the government guarantee were activated, Belgian banks would be on thehook for at least 20% of losses incurred on the loans.

On 16 July, a second guarantee scheme was approved by the parliament. One fifth of the €50 billion budget for the first guaranteescheme will be transferred to the second guarantee scheme. Under the second guarantee scheme, loans with a maximum jointprincipal of €10 billion will be eligible for the State guarantee. The second scheme will notably apply for new loans and credit lines until31 December 2020 to small or medium-sized non-financial enterprises with a term which can now be up to 36 months.




The total loan portfolio in Ireland was €10 billion as of March 2020, accounting for 5.1% of the group's consolidated loan book. InIreland, residential mortgages account for around 99% of the loan portfolio. We expect KBC Ireland's stock of problem loans to remainhigh in the absence of further disposal transactions.

KBC Bank's corporate portfolio and international market loan book grew rapidly, above the market average recent years, especiallyin the Czech Republic (+10% year-over-year). These fast-growing activities may entail unseasoned risks, which may offset asset-riskimprovements in other parts of the group.

Our Asset Risk score of baa1 reflects the above factors.

The group is well capitalised ahead of potential regulatory changesKBC Group reported a fully loaded Common Equity Tier 1 (CET1) capital ratio of 16.33% as of March 2020, down from 17.10% as ofthe end of December 2019, but well above the fully loaded requirement of 8.05%. The 0.8 percentage point decrease was mainlycoronavirus-related (0.5 percentage points, mainly due to foreign exchange and a risk-weighted assets increase). Requirements havebeen lowered by the National Bank in March 2020 with some authorized relief on Pillar 2 and Countercyclical buffers. The group's CET1ratio is calculated under the so-called Danish compromise1, which is based on computation of risk-weighted assets (RWA) pertaining tothe bank's exposures to KBC Insurance, calculated as the book value of KBC Insurance multiplied by 370%.

The implementation of Basel IV being postponed to 2023, the impact of the expected rise of RWAs (around €8 billion, according to thebank) on capital (expected to be about 1.2% on the common equity ratio) is not an imminent concern.

KBC Group already complies with its minimum requirement for own funds and eligible liabilities (MREL) of 26.3%, applicable since May2019, with the available MREL buffer amounting to 27.2% of RWAs as of March 2020(including KBC Bank's eligible senior debt, whichwill gradually mature and will be replaced by senior unsecured debt issued by KBC Group).

Following the guidance from the European Central Bank (ECB), KBC decided to suspend all dividend payments until October 2020,and to evaluate then whether all or part of the withdrawn final dividend should be paid out later this year in the form of an interimdividend.

The Capital score is a2, reflecting our opinion that capitalisation is a relative strength for the bank.

Earnings generation capacity is robust, despite pressure on NIM and the coronavirus outbreakKBC Bank has preserved a robust earnings generation capacity from its core franchises, despite pressure on its NIM in Belgium. Thebank is penalised by lower rates on renegotiated mortgages and some commercial margin pressure in certain segments, notably inBelgium, where the NIM has decreased slightly, to 1.68% in the first quarter of 2020 from 1.71% in Q1 2019. Nonetheless, at thegroup level, margins have been preserved globally, because of the strong profitability of international markets and the Czech Republicbusinesses.

We expect the NIM at the group level to decline slightly in 2020 because Belgian banks now have very limited room for further cuts onthe rates paid on deposits, which will not be fully offset by higher volumes owing to the expected economic slowdown in Belgium. Inthe Czech Republic, economic growth is also likely to slow down and credit demand to normalise at lower volumes, leading to lowerprofitability.



Exhibit 4

NIM slightly increased in 1Q 2020KBC Group's NIM (percentage of loans to customers)

1.93%

1.96% 1.96%1.97%

2.01%2.00%

1.98%

2.02%

1.98%

1.94% 1.94% 1.94%

1.97%

1.70%

1.75%

1.80%

1.85%

1.90%

1.95%

2.00%

2.05%

2.10%

Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020

Source: KBC Group

KBC Group made a profit warning in the first quarter of 2020, in the context of the coronavirus outbreak, to signal the decrease onthe net gains from financial instruments at fair value (-€385m in March 2020 vs €99m in March 2019) resulting from the coronavirusoutbreak. The stock markets decline, combined with the widening of the credit spreads and the decrease in the long-term interest ratesled to (i) a material increase in impairments on shares at the insurance company, (ii) significant negative (mainly counterparty andfunding) value adjustments, (iii) the value of derivatives used for asset/liability management purposes becoming negative and (iv) asharp decrease in the result of the dealing room.

While we expect the results from financial instruments at fair value to remain subdued in 2020, KBC Bank's underlying pre-provisionprofit should provide loss-absorption capacity, which we consider adequate in view of the material credit costs still generated by itsforeign activities. However, in the first three months of 2020, KBC Group's cost of risk absorbed 41% of its pre-provision income. Asstated above, we expect loan-loss provisions to increase, which leaves little room for KBC to achieve a high level of net profit in theshort term.

Our assigned Profitability score of baa3 reflects the bank's sound efficiency metrics and its capacity to report strong and recurring netprofit in its main markets, despite pressure from the low interest rate environment and the effect of the coronavirus outbreak.

Liquidity is robust, because of a strong core deposit baseKBC Group's funding profile is solid, because of its strong core deposit base. Customer deposits are the bank's main funding source,accounting for around 69% of its financial liabilities as of the end of March 2020.

KBC Group has a structural liquidity excess, reflected in a loan-to-deposit ratio of 92% as of March 20202. This favourable consolidatedloan-to-deposit ratio is supported by strong funding positions in each of KBC Bank's core markets, except for Ireland, where the bankhas started raising retail deposits recently. Overall, the bank's liquidity continues to improve, because of an increase in deposits in itscore markets. We also view positively the longer-term structure of the bank's wholesale funding following the issuance of coveredbonds under new domestic legislation.

KBC Group holds a comfortable buffer of liquid assets, amounting to €83.9 billion as of March 2020, or around 29.5% of its tangiblebanking assets. The group’s strong liquidity profile is reflected in its monthly Liquidity Coverage Ratio (LCR) constantly above 130%; thelast published LCR for KBC Group was 135% in March 2020. In addition, the group's asset encumbrance represents 17% of total assets,below that of most EU banks (EU average was 27.3% as of December 2019).

We reflect the aforementioned factors in a Combined Liquidity score of baa1.



Environmental, social and governance considerationsKBC has a low exposure to environmental risks, in line with our general view for the banking sector. See our Environmental risk heatmap for further information.

For social risks, we also place KBC in line with our general view for the banking sector, which indicates a moderate exposure to socialrisks. See our Social risk heat map for further information. The rapid and widening spread of the coronavirus outbreak and deterioratingglobal economic outlook are also creating a severe and extensive shock across many sectors, regions and markets, affecting banks'business and performance

Corporate governance is highly relevant to all banks' creditworthiness. Governance risks are largely internal rather than externallydriven. We do not have any particular concern about KBC’s governance. We do not apply any qualitative adjustment to KBC Group'sfinancial profile for corporate behaviour. Nonetheless, corporate governance remains a key credit consideration and requires ongoingmonitoring, like for any other bank.

Support and structural considerationsLoss Given Failure (LGF) analysisKBC Bank (together with its parent KBC Group) is subject to the EU Bank Recovery and Resolution Directive, which we consider anoperational resolution regime. We assume residual tangible common equity of 3% and losses post-failure of 8% of tangible bankingassets, a 25% run-off in junior wholesale deposits, a 5% run-off in preferred deposits and a proportion of 26% of deposits as junior, andassign a 25% probability to deposits being preferred to senior unsecured debt. These are in line with our standard assumptions.

» Our LGF analysis indicates an extremely low loss given failure for KBC Bank's deposits and a very low loss given failure for the issuingentity IFIMA's senior unsecured debt, leading us to assign a three- and two-notch uplift, respectively, above the bank's AdjustedBCA.

» Our LGF analysis indicates a moderate loss given failure for KBC Group's long-term senior unsecured debt, leading to no uplift fromthe bank's Adjusted BCA.

» Our LGF analysis indicates a high loss given failure for subordinated debt and junior debt classes, leading us to adjust theseinstruments' ratings down by one notch from KBC Bank's Adjusted BCA. This is driven by the small volume of debt and limitedprotection from more subordinated instruments and residual equity. We also incorporate an additional two-notch negativeadjustment for preference share instruments, reflecting the risk of a suspension of coupon payments ahead of the point of non-viability.

Government support considerationsWe believe that there is a moderate likelihood of government support for KBC Bank's deposits and IFIMA's senior debt in the event offailure, resulting in one notch of additional uplift for these instruments' ratings. This probability reflects the bank's systemic importancein Belgium, given its significant share of retail and corporate deposits in the country. On the contrary, KBC Group's senior unsecureddebt, which is structurally subordinated to KBC Bank's deposits and debt, is assigned a low probability of government support, leadingto no uplift from the Adjusted BCA.

Counterparty Risk Ratings (CRRs)Our CRRs are opinions of the ability of entities to honour the uncollateralised portion of non-debt counterparty financial liabilities (CRRliabilities) and also reflect the expected financial losses in the event such liabilities are not honoured. CRR liabilities typically relate totransactions with unrelated parties. Examples of CRR liabilities include the uncollateralised portion of payables arising from derivativestransactions and the uncollateralised portion of liabilities under sale and repurchase agreements. CRRs are not applicable to fundingcommitments or other obligations associated with covered bonds, letters of credit, guarantees, servicer and trustee obligations, andother similar obligations that arise from a bank performing its essential operating functions.






KBC Bank's CRRs are positioned at Aa3/Prime-1KBC Bank's CRR, prior to government support, is three notches higher than the Adjusted BCA of baa1, based on the level ofsubordination to CRR liabilities in the bank's balance sheet and assuming a nominal volume of such liabilities. The CRR also benefitsfrom one notch of government support, in line with our support assumptions on deposits and senior unsecured debt.

Counterparty Risk (CR) AssessmentCR Assessments are opinions of how counterparty obligations are likely to be treated if a bank fails and are distinct from debt anddeposit ratings in that they (1) consider only the risk of default rather than both the likelihood of default and the expected financial losssuffered in the event of default, and (2) apply to counterparty obligations and contractual commitments rather than debt or depositinstruments. The CR Assessment is an opinion of the counterparty risk related to a bank's covered bonds, contractual performanceobligations (servicing), derivatives (for example, swaps), letters of credit, guarantees and liquidity facilities.

KBC Bank's CR Assessment is positioned at Aa3(cr)/Prime-1(cr)The CR Assessment includes three notches of uplift relative to the Adjusted BCA of baa1, based on the buffer against default providedto the senior obligations represented by the CR Assessment by subordinated instruments and one notch of government support uplift.The main difference with our Advanced LGF approach used to determine instrument ratings is that the CR Assessment captures theprobability of default on certain senior obligations, rather than expected loss; therefore, we focus purely on subordination and take noaccount of the volume of the instrument class.

About Moody's Bank ScorecardOur scorecard is designed to capture, express and explain in summary form our Rating Committee's judgement. When read inconjunction with our research, a fulsome presentation of our judgement is expressed. As a result, the output of our scorecardmay materially differ from that suggested by raw data alone (though it has been calibrated to avoid the frequent need for strongdivergence). The scorecard output and the individual scores are discussed in rating committees and may be adjusted up or down toreflect conditions specific to each rated entity.



Rating methodology and scorecard factors

Exhibit 5

KBC Group N.V.

Macro FactorsWeighted Macro Profile Strong 100%

Factor HistoricRatio

InitialScore

ExpectedTrend

Assigned Score Key driver #1 Key driver #2

SolvencyAsset RiskProblem Loans / Gross Loans 4.3% baa2 ←→ baa1 Quality of assets Unseasoned risk

CapitalTangible Common Equity / Risk Weighted Assets(Basel III - fully loaded)

16.4% aa3 ←→ a2 Expected trend

ProfitabilityNet Income / Tangible Assets 0.0% caa1 ←→ baa3 Earnings quality Expected trend

Combined Solvency Score baa2 baa1LiquidityFunding StructureMarket Funds / Tangible Banking Assets 20.3% baa2 ←→ baa2 Deposit quality

Liquid ResourcesLiquid Banking Assets / Tangible Banking Assets 29.5% baa1 ←→ a3 Quality of

liquid assetsCombined Liquidity Score baa2 baa1Financial Profile baa1Qualitative Adjustments Adjustment

Business Diversification 0Opacity and Complexity 0Corporate Behavior 0

Total Qualitative Adjustments 0Sovereign or Affiliate constraint Aa3BCA Scorecard-indicated Outcome - Range a3 - baa2Assigned BCA baa1Affiliate Support notching 0Adjusted BCA baa1

Balance Sheet in-scope(EUR Million)

% in-scope at-failure(EUR Million)

% at-failure

Other liabilities 41,960 24.3% 53,823 31.2%Deposits 116,307 67.4% 104,444 60.5%

Preferred deposits 86,067 49.8% 81,764 47.4%Junior deposits 30,240 17.5% 22,680 13.1%Dated subordinated bank debt 266 0.2% 266 0.2%Senior unsecured holding company debt 5,525 3.2% 5,525 3.2%Dated subordinated holding company debt 1,679 1.0% 1,679 1.0%Preference shares(holding company) 1,500 0.9% 1,500 0.9%Equity 5,180 3.0% 5,180 3.0%Total Tangible Banking Assets 172,417 100.0% 172,665 100.0%

De Jure waterfall De Facto waterfall NotchingDebt ClassInstrumentvolume +

subordination

Sub-ordination

Instrumentvolume +

subordination

Sub-ordination

De Jure De FactoLGF

NotchingGuidance

vs.Adjusted

BCA

AssignedLGF

notching

AdditionalNotching

PreliminaryRating

Assessment

Counterparty Risk Rating 21.5% 21.5% 21.5% 21.5% 3 3 3 3 0 a1Counterparty Risk Assessment 21.5% 21.5% 21.5% 21.5% 3 3 3 3 0 a1 (cr)Deposits 21.5% 8.2% 21.5% 8.3% 3 3 3 3 0 a1Senior unsecured holding company debt 8.2% 5.0% 8.2% 5.0% 0 0 0 0 0 baa1



Holding company non-cumulativepreference shares

3.9% 3.0% 3.9% 3.0% -1 -1 -1 -1 -2 ba1

Instrument Class Loss GivenFailure notching

Additionalnotching

Preliminary RatingAssessment

GovernmentSupport notching

Local CurrencyRating

ForeignCurrency

RatingCounterparty Risk Rating 3 0 a1 1 Aa3 Aa3Counterparty Risk Assessment 3 0 a1 (cr) 1 Aa3(cr)Deposits 3 0 a1 1 Aa3 Aa3Senior unsecured holding company debt 0 0 baa1 0 Baa1 Baa1Holding company non-cumulativepreference shares

-1 -2 ba1 0 Ba1 (hyb)

[1] Where dashes are shown for a particular factor (or sub-factor), the score is based on non-public information.Source: Moody’s Investors Service



Ratings

Exhibit 6

Category Moody's RatingKBC GROUP N.V.

Outlook StableDeposit Note/CD Program -Dom Curr --/P-2Issuer Rating Baa1Senior Unsecured -Dom Curr Baa1Pref. Stock Non-cumulative -Dom Curr Ba1 (hyb)ST Issuer Rating P-2Other Short Term -Dom Curr (P)P-2

CESKOSLOVENSKA OBCHODNI BANKA, A.S.

Outlook StableCounterparty Risk Rating Aa3/P-1Bank Deposits A1/P-1Baseline Credit Assessment a3Adjusted Baseline Credit Assessment a3Counterparty Risk Assessment Aa3(cr)/P-1(cr)

CESKOSLOVENSKA OBCHODNA BANKA(SLOVAKIA)

Outlook PositiveCounterparty Risk Rating -Dom Curr A2/P-1Bank Deposits Baa1/P-2Baseline Credit Assessment ba1Adjusted Baseline Credit Assessment baa2Counterparty Risk Assessment A2(cr)/P-1(cr)Issuer Rating Baa2

KERESKEDELMI & HITEL BANK RT.

Outlook StableCounterparty Risk Rating Baa1/P-2Bank Deposits -Fgn Curr Baa3/P-3Bank Deposits -Dom Curr Baa1/P-2Baseline Credit Assessment ba2Adjusted Baseline Credit Assessment baa3Counterparty Risk Assessment Baa2(cr)/P-2(cr)

KBC IFIMA S.A.

Outlook StableBkd Senior Unsecured A1Bkd Subordinate Baa2Bkd Other Short Term -Dom Curr (P)P-1

KBC BANK N.V.

Outlook StableCounterparty Risk Rating Aa3/P-1Bank Deposits Aa3/P-1Baseline Credit Assessment baa1Adjusted Baseline Credit Assessment baa1Counterparty Risk Assessment Aa3(cr)/P-1(cr)Bkd Jr Subordinate Baa3 (hyb)

Source: Moody's Investors Service



Endnotes1 The fully loaded CET1 ratio under the deduction method was 16.3% as of March 2020.

2 Total loans and advances to customers divided by deposits from customers (excluding nonconvertible bonds and subordinated liabilities).



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update to credit analysis kbc group n.v....2020/07/28 · for any credit ratings referenced in this...

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