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KBC Group

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KBC Group Retail bancassurance and private banking on the Belgian market April 2005 Web site: www.kbc.com Ticker codes: KBC BB (Bloomberg) KBKBT BR (Reuters) – PowerPoint PPT presentation

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Title: KBC Group


1
  • KBC Group
  • Retail bancassurance and private banking on the
    Belgian marketApril 2005

Web site www.kbc.comTicker codes KBC BB
(Bloomberg) KBKBT BR (Reuters)ISIN code
BE0003565737
2
Contact information
  • Investor Relations OfficeLuc CoolNele
    KindtMarina KanamoriTel. 32 2 429 49 16
    investor.relations_at_kbc.com
  • Surf to www.kbc.com for the latest update.

3
Disclaimer
  • This presentation is provided for informational
    purposes only and does not constitute an offer to
    sell or the solicitation of an offer to buy any
    security.
  • Although the statements of fact in this
    presentation have been obtained from and are
    based on sources that KBC believes to be
    reliable, KBC does not guarantee their accuracy,
    and any such information may be condensed or
    incomplete.
  • This presentation contains forward-looking
    statements with respect to our strategies and
    earnings development. By their nature, these
    forward-looking statements involve numerous
    assumptions, uncertainties and opportunities. The
    risk exists that these statements may not be
    fulfilled and that future results differ
    materially.
  • By receiving this presentation, each investor is
    deemed to represent that it is a sophisticated
    investor and possesses sufficient investment
    expertise to understand the risks involved.

4
ING Financials Day - 18 April 2005
  1. Introduction W. Duron
  2. Retail bancassurance in Belgium F. Florquin
  3. Private banking in Belgium F. Florquin
  4. Synergies for private banking W. Duronwithin
    KBC Group

5
Foto gebouw
1
Introduction
6
Benelux players have considerable scale
Euroland top-30 banks, by market cap
KBC Group 24 bn euros
DJ Euro Stoxx Banks constituents ranking by
market cap, as at 14 March 2005
7
KBC Groups business portfolio
Revenue breakdown
Capital markets
Gevaert
International SME/corporate
Belgium - retail bancassurance- private
banking- asset management- SME and corporates
Europeanprivate banking
CEE
  • Although KBC has successfully expanded its
    operations in CEE, it primarily is a top
    bancassurer and asset manager in Belgium, its
    historical home market
  • Thanks to the merger with Almanij (March 2005),
    the private banking activities were expanded to
    include a Western European network. PB has become
    a more pronounced key focus

2004 pro forma figures, excl. group items
8
Belgian market, headlines
Market shares
31-Dec-03
  • The banking landscape in Belgium is highly
    consolidated (80held by top-4 banks)
  • The market growth in the field of wealth
    management is significant (high savings rate)
  • The market is highly receptive to cross-selling
    of AM insurance products
  • KBC is a top-3 player, especially strong in the
    Northern region

9
Retail and private bancassurance
Return on capital
Profit contribution
Target 2007high single digit CAGR
Target 2007sustained high level
Cost/income ratio, banking
Combined ratio, non-life
Target 2007further down to low 60-ties
Target 2007max 95 over-the-cycle
excl. European private banking
10
European private banking network
NetherlandsTheodoor GilissenAcquired in 03
participation 100
UKBrown ShipleyAcquired in 89
participation 100
GermanyMerck Finck CoAcquired in 99
participation 100
BelgiumKBC Private bankingPuilaetco private
bankers (100 participation acquired in 04)
SwitzerlandKredietbank (Suisse)Historical
presence
LuxembourgKredietbank LuxembourgParent company
for European PB
FranceKBL France Acquired in 98
participation 100
SpainBanco UrquijoAcquired in 98
participation 100
MonacoKB Luxembourg (Monaco)Historical presence
ItalyFumagalli SoldanAcquired in 01
participation 95
  • Since 98, KBC Group (KBL) has developed a
    private banking network throughout Western
    Europe, anticipating further erosion of its
    offshore activities for a/o Belgian customers in
    Luxembourg
  • Private banking assets outside Belgium grew to 43
    bn across the 10 countries

11
Foto gebouw
2
Retail bancassurancein Belgium
12
Retail and private bancassurance, Belgium
Return on capital
Profit contribution
Core retailRetail and private bancassurance
Core retailOther retail and private banking
583
382
Target 2007sustained high level
Target 2007high single digit CAGR
Cost/income ratio
Combined ratio, non-life
Core retailRetail and private bancassurance
Core retailRetail and private bancassurance
Target 2007further down to low 60-ties
Target 2007max 95 over-the-cycle
excl. European private banking
13
Nice results 2004
Core retail only
In mio EUR 2004 12m Evolution Evolution
In mio EUR 2004 12m Abs.
a.o. Savings investments 1 132 19 2
Lending 424 -12 -3
Insurance 236 32 15
Gross income 1 829 66 4
Direct costs -811 4 -1
Allocated costs -439 13 -3
Operating expenses -1 250 17 -1
Provisions -11 42 -80
Pre-tax profit 568 125 28
Net profit 414 75 22
How to achieve further growth ?
14
Sharp increase in productivity
Efficiencystrategy
Strong growth in revenue per FTE
Strong growth in revenue per branch
Revenues per branch, 1998 100
Revenues per FTE, 1998 100
15
Cost-savings largely implemented
Efficiencystrategy
Core retail only, cost trend, in m EUR
Up to 2004 significant decline in costs
2001 costs
Spontaneous cost inflation
1
1
Cutback in branch FTEs -1 300 or -18
2
2
Reduction in No. of branches -680 or -45
3
3
Integration of ICT platforms and of
products and support services
4
4
Henceforth upwards pressure on costs
2004 costs
Targetcost growth below wage inflation rate
Spontaneous cost inflation
1
1
2007 costs
16
Rather limited potential for further automation
Efficiency strategy
Potential for further automation
Rate of automation
17
Strict cost control remains important
Efficiency strategy
Closely-knit network
High wage costs
  1. Wage costs in Belgium are higher than in other
    European countries
  2. Average level of education of branch staff is
    higher than in other European countries

Source Febelfin
18

Low over-the-cycle credit-loss charges
Risk strategy
Core retail Belgium only Trend of impairments in
credit portfolio
Write-downs vs.
risk-weighted assets
0.24
0.23
0.09
Targetlt0.25over-the-cycle
2002
2003
2004
19
Focus on revenue growth strategy
Growth strategy
() Core retail Belgium only
Revenue growth () in 2001-2004 period partly
driven by positive pricing effects.
Revenue growth () in 2004-2007 period driven by
positive volume effects and negative price
effects
Margin pressure
½ due to positive pricing effects
Ambitionmaintain growth trend
Achieved5 p.a.revenue growth
20
Growth in the savings investments field
How to grow within a mature market?
Growthstrategy
1
Attracting new funds
Market potential
Proven performance
Estimated nominal GDP growth rate
Market share of mutual funds
Savings rate
New funds attracted in bn
21
Growth in the insurance field
How to grow within a mature market?
Growthstrategy
1
2
Insurance
Attracting new funds
High internal potential
Proven performance
Premium growth, non-life
X-sell results
22
Growth in the lending field
How to grow within a mature market?
Growth strategy
1
2
Attracting new funds
Insurance
23
Obstacles to growth
How to grow within a mature market?
Growthstrategy
1
2
3
Attracting new funds
Lending
Insurance
Sharper price competition !
Hardening credit-pricing cycle
Threats to growth according to analysts Nos. 1
2 based on ranking
Small busniess loans
Mortgages
24
Catalysts for growth
How to grow within a mature market?
Growthstrategy
1
2
3
Attracting new funds
Insurance
Lending
Enhancing customer satisfaction
Top-4 bancassurers only
25
Foto gebouw
3
Private banking in Belgium
26
Business model in Belgium
  • KBC PB is a seperate channel for distribution of
    wealth management services to HNWI
  • Focus customers with 1-5m of investible assets.
    Downflow of below-threshold clients to retail (gt
    65 are (ex-)entrepreneurs and owners of own
    business or practice others are upper middle
    management/senior executives, heirs to a large
    fortune, etc.)
  • 19 dedicated branches focused on onshore private
    banking broad local market representation (in
    the Northern part of Belgium)
  • Network-led model private banking under
    corporate brand with growth primarily through
    identifying and converting clients from the
    retail and corporate network
  • Full-service banking (in partnership with the
    retail business) - broad range of wealth
    management products and services
  • Controlled open architecture gt 90 investment
    management in-house, with an emphasis on product
    design (structured products, particularly capital
    guaranteed products) and quantitative techniques

PB clients are served by retail branches for
their standard banking needs
27
Leveraging links with retail and corporate
branches
Acquisition focus
  • Existing client relationships offer a high
    degree of opportunity

Prospects known to corporate banches
Retail clientslt 1 m withpotential
Prospects known to retail branches
Retail clientsgt 1 m
Other prospects
Retail clientsgt 2.5 m
Acquisition costs
KBC is primary bank (e.g. SME)KBC is second
bank (e.g. SME)
high
low
28
Key performance figures
Growth primarily from retail trade-up
Growth of relationships base
CAGR 9
2001 2002 2003
2004
2001 2002 2003
2004
New clients with former retail relationship
29
Key performance figures
Client asset growth (bn)
Cost/income
Contribution (bn pre-tax)
30
Key performance figures
Customer satisfaction
(Very) satisfied
(Very) good
Yes
Exits to competition
97
94
91
1.6 1.6 1,5
Are you satisfied with your CROs competence
level?
How do you rate your experience with PB overall?
Would you describe your CRO as proactive?
2002 2003 2004
Source Annual customer survey 2004 response
rate 21 of all PB clients
31
Foto gebouw
4
Synergies for private banking within KBC Group
32
Quick reminder
  • Until 31 Dec. 04
  • As of 01 Jan. 05

Almanij
KBCBank Insurance
Gevaert
KBLEuropean Private Bankers
KBC Bank
KBC Insurance
KBCAsset Management
KBC Group NV
KBCBank
KBCInsurance
KBCAM
KBLEuropean Private Bankers
Gevaert
33
KBC Groups epb today
  • Presence in 10 countries outside Belgium,
    multi-domestic positioning
  • No link with traditional banking network
    (contrary to the network-led model in Belgium)
  • Highly based on open architecture (though product
    penetration of in-house products to increase
    within new KBC Group)

epb European private banking
34
Key financials of epb
Net profit
Assets under management
In bn EUR
In m EUR (Lux GAAP)
CAGR 6
CAGR 6
Return on equity
Tier-1 ratio
Lux GAAP
Lux GAAP
Reminder figures excl. KBC PB in Belgium
35
Synergies within enlarged KBC Group
  • Synergies via integrating epb with KBC PB
    (Belgium) and KBC AM
  • Total synergy programme of NPV 500 m (net of
    restructuring and capital costs, post- tax)
  • Estimated capital and restructuring costs are ca.
    50m over 5 years
  • Recurring pre-tax benefits of 75 m (peak level),
    half of which can be realized by 2006
  • Cashflow positive every year
  • 40 revenue and 60 cost (and cost avoidance)
    benefits
  • All synergies reach their peak by 2009 (some
    faster than others)
  • Portfolio of 32 synergies, 19 large and 13
    small

Synergy benefit, in m (see note below)
Revenue
Cost Cost Avoidance
Note Synergy benefit described throughout as
peak recurring annual increase in pre-tax
bottom-line result vs. base business


36
  • KBC Group
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