Transcript KBC Bank & Insurance Group

KBC Group
Web site: www.kbc.com
Ticker codes: KBC BB (Bloomberg)
KBKBT BR (Reuters)
Company presentation
Winter 2005
Contact information
Investor Relations Office
Luc Cool
Nele Kindt
Marina Kanamori
[email protected]
Surf to www.kbc.com for the latest update.
2
Important information

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

KBC believes that this presentation is reliable, although some information may be condensed or incomplete

This presentation contains forward-looking statements with respect to our earnings development involving
assumptions and uncertainties. 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 possesses sufficient expertise to
understand the risks involved
3
Table of contents
1.
Company profile
2.
Strategy and earnings drivers
3.
Financial highlights
4.
Closing remarks on the equity valuation
4
Foto gebouw
1
Company profile
Market cap ranking in Euroland
1
2
BSCH (66 bn)
BNP Paribas (59 bn)
3
BBVA (50 bn)
4
Deutsche Bank (45 bn)
5
Société Générale (44 bn)
6
7
Crédit Agricole (39 bn)
ABN AMRO (39 bn)
8
9
Unicredit (32 bn)
Fortis (32 bn)
10
KBC (27 bn)
11
Intesa BCI (243 bn)
12
Dexia (20bn)
13
HVB (20 bn)
14
San Paolo IMI (19 bn)
15
16
Allied Irish Banks (15 bn)
Bank Austria (15 bn)
17
Commerzbank (14 bn)
18
Bco Popular (13 bn)
19
Mediobanca (12 bn)
20
Bank of Ireland (12 bn)
Data as at 14 Nov. 2005
DJ Euro
Stoxx Banks
constituents
6
Historic milestones
1998
Creation of KBC
(domestic merger
in Belgium)
1999
Start of CEE
expansion
2000
2001
Restructuring of
Belgian business
2002
2003
Leading presence
in CEE-5
2004
Improving
profitability in
CEE:
-cross-selling
- cost efficiency
- cross-border
synergies
2005
Merger with
parent company
to simplify
shareholder
structure
7
Shareholder structure
Free float
Institutional,
Cont. Europe
14%
CERA/Almancora
27.1%
MRBB
11.6%
Free float
47.3%
Institutional,
UK
23%
Institutional,
N. America
20%
Institutional,
R/o world
1%
Other committed
shareholders 11.7%
Institutional,
Belgium
14%
(own shares: 2.3%,
including ESOP hedge)
Situation as at 30 Sept. 2005
Staff
6%
Retail,
Belgium
22%
Shareholder identification as at 31 Dec. 2004
(before merger with Almanij)

KBC is majority-owned by a group of committed shareholders, thereby providing continuity for the pursuit of longterm strategic goals

Core shareholders include the Cera/Almancora Group (co-operative investment company), a Belgian farmers’
association (MRBB) and a syndicate of industrialist families
8
Business portfolio
Revenue geographical breakdown
(9M 2005)
21%
CEE:
- retail bancassurance
- asset management
- private banking
- SME/corporate
Selected other markets (mostly in W. Europe):
- private banking
- SME/corporate
- capital markets
55%
24%
Belgium:
- retail bancassurance
- asset management
- private banking
- SME/corporate

KBC is a top bancassurer and asset manager in Belgium and has successfully expanded its operations in
CEE-5, its 2nd home market.

Recently, Private Banking (76 bn AUM) has become more of a key focus. The PB business was expanded to
include a Western European network.

KBC is also active – be it rather selective – in commercial banking (mostly in W. Europe) and capital markets.
9
KBC’s presence in CEE
CEE profit contribution to KBC Group
Profit contribution, Poland
23%
2005
9M
2004
9M 2005
25 m
61 m
Share of business segments
in gross income, CEE Banking
Other
22%
Total assets, bank:
5 bn EUR
Market share, bank:
5% (No. 8)
Market share, life:
3% (No. 7)
Market share, non-life: 11% (No. 2)
SME/Corp
21%
Retail
57%
Profit contribution, CZ + SK
2004
9M 2005
162 m
279 m
Czech Republic
Total assets, bank: 18 bn EUR
Market share, bank: 21% (No. 2)
Market share, life:
8% (No.4)
Market share, non-life: 4% (No. 6)
Profit contribution, Slovenia
2004
9M 2005
26 m
18 m
Minority stake (34%)
Market share, bank: 41% (No. 1)
Market share, life:
6% (No. 5)
Slovakia
Total assets, bank: 2 bn EUR
Market share, bank: 6% (No. 4)
Market share, life: 4% (No. 9)
Market share, non-life: 4% (No. 4)
Profit contribution, Hungary
2004
9M 2005
31 m
23 m
Total assets, bank:
7 bn EUR
Market share, bank: 11% (No. 2)
Market share, life:
4% (No. 7)
Market share, non-life: 4% (No. 6)
10
Total banking assets in CEE
In million euros
UniCredito / HVB (Newco)
KBC Group
Erste Bank
UniCredito Italiano
Raiffeissen Zentralbank
HVB / Bank Austria CA
Société Générale
Banca Intesa
0
Source: S&P – figures as at 31 Dec. 2004
10 000
20 000
30 000
40 000
50 000
60 000
11
KBC’s European banking network
•
Ireland
• ••
U.K.
Commercial banking
(credit exposure)
Belgium
74 bn
CEE
27 bn
Western Europe
51 bn
Rest of the world
16 bn
TOTAL
168 bn
••
••• •
• • ••
• •• • •
•
•
Netherlands
Germany
Belgium
Czech Rep.
Luxembourg
France
Italy
•
Spain
Slovakia
Hungary
Switserland
Monaco
Poland
Slovenia
Private banking
(Assets under Management)
Belgium
27 bn
CEE
3 bn
Western Europe
46 bn
TOTAL
76 bn
Situation as of 30-Sep
12
Solid financial track record
Combined ratio, non-life
Cost/income, banking
In m EUR
66%
65%
96%
58%
FY03
FY04
9M05
FY03
Return on equity
95%
95%
FY04
9M05
Net profit growth
In m EUR
19%
12%
FY03
14%
FY04
9M05
Pro forma figures, KBC Group (2003 figures are based on B-GAAP)
1 305
1 615
1 796
FY03
FY04
9M05
13
Foto gebouw
2
Strategy and earnings
drivers
We build a solid future

Strategy headlines include:

Retail- and wealth-management-oriented, with focus on Belgium and CEE-5 and selected
Western European markets

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)

Steady dividend growth and solid level of financial strength/solvency

“Execution is key”:

Primarily organic growth agenda in core markets

Committment to further enhance efficiency

Conservative risk culture
Continuing to deliver a consistent financial performance:

ROE  16%

Double-digit EPS growth
15
We build a solid future

The solid ‘growth and value’ outlook is reflected in ambitious financial targets, valid until 2008:
Efficiency:
Financial strength:
Value creation:
Cost/income, banking
max. 58%
Combined ratio, non-life
max. 95%
Tier-1, banking
min. 8%
Solvency margin, insurance
min. 200%
Adjusted ROE
min. 16%
EPS growth (CAGR)
min. 10%
16
Value drivers in Belgium: overview
Do not underestimate market potential:






Savings ratio amongst highest in the world (every
year, ca. 15% of GDP flows into fin. assets)
Market highly receptive to cross-selling of AM &
insurance, fueling strong growth trend in AM and
life insurance business
Strong mortgage growth trend (ca. 10% per year)
expected to continue, as residential property
price levels are still below other European
markets
After a temporary surge in price competition (late
2004/early 2005), price rationality is tending to be
restored, epecially for interest-bearing products.
Fee rates for retail banking services only 50% of
European average (gradual increase expected)
Credit quality has proven to be solid over the
cycle
KBC Group is well positioned:






Top-3 market position, esp. strong in Northern
region (one of the wealthiest regions in the EU)
Leading position in retail AM through innovative
product offering (steadily increasing market share
over the past 10 yrs.)
Still high cross-selling potential for insurance
products and well-performing bancassurance
distribution model
Well-diversified revenue structure (50% fee
income) and further increase in fee income
targeted (e.g., in SME segment)
Of the top players, level of customer satisfaction
is high(est)
Further cost efficiency improvement potential,
among other things, via co-sourcing of back
offices with other banks
17
Mid-term financial outlook, Belgium
Gross income
C/I, banking
LLR
Net profit
Retail *
5% CAGR
Low 60s
< 0.25%
>10% CAGR
Business
customers *
>2% on RWA
< 43%
< 0.35%
>10% CAGR
* Related to parent-company operations only; excl. subsidiaries
18
Value drivers in CEE - overview
Strong market-growth momentum:
KBC Group is well positioned:

Nom. GDP growth in 2005-07 at 6.5% yearly,
outgrowing EMU by 3-3.5%
 Solid market position in retail and corporate
Ongoing catch-up in product penetration – retail
volumes growing at double-digit pace:
 Strong competitive position for enhancing cross-





businesses with nationwide branch networks
selling of asset management and insurance
products and well positioned in HNWI and
private-banking sectors through epb know-how
Mortgages: up 28% ytd (9M05)
AUM: up 33% ytd (9M05)
 C/I still on the high side in several countries,
inducing further improvement, e.g., by setting up
cross-border platforms
Written premiums, life: up 23% ytd (9M05)
Financial sector could grow five-fold if financial
assets to GDP were to reach current levels of S.
Europe
 Adequately provisioned balance sheets

Availability of capital within the Group for:

buy-out of third-party interests or
selective bolt-on M&A

more aggressive organic growth in
Poland since immediate M&A
opportunies are not expected

Potential entry into new markets
(e.g., Romania, Croatia)
19
Value drivers in CEE: bancassurance
Now the model is in place:



=
Cross-selling results are encouraging:
A unified management responsibility was put
into place (joint management committee of
bank and insurance company)
KBC
Cross-sell
rates
2004
CZ
HU
PL
SK
BE
KBC’s bancassurance distribution model has
been implemented and sales incentives and
adequate sales approach for cross-selling
set up
Consumer
loan
X
Life
83%
50%
100%
94%
67%
Know-how has been transferred and business
processes and IT systems are being
adequately streamlined
Mortgage
loan
X
Life
45%
50%
100%
75%
67%
Mortgage
loan
X
Property
insurance
54%
71%
42%
30%
50%
distinguishing factor vis-à-vis other
CEE players
20
Value drivers in CEE: asset management
KBC is well positioned:
Results are encouraging:

Strong appetite for ‘risk-free’ investments in
the market, fully in line with KBC’s core
competencies and successful track record in
Belgium for capital-guaranteed funds

Cost/AUM below average (around 15 bps vs.
20 bps for Europe)

In 9M05, AUM grew by 43% annualized.
Continued high growth expected in coming
years

Via the funds business, new customers are
being recruited. Existing customers who use
deposits to buy funds replenish their deposit
accounts after one year
Market
share
2003
2004
1H05
Trend
CZ
19%
22%
26%
+++
HU
8%
9%
11%
++
SK
6%
7%
8%
+
SLO
-
8%
10%
++
PL
3%
4%
4%
+
21
Mid-term financial outlook, CEE
Banking
Insurance
AM
RWA
CAGR
Net profit
CAGR
Loan-loss
ratio
Cost/Income
ratio
10% – 15%
10% – 15%
< 0.50%
< 60%
Premium income
CAGR
Net profit
CAGR
Combined
ratio
15% – 25%
25% - 35%
95%
AUM growth,
mutual funds
AUM growth,
pension producs
15% – 20%
10% - 20%
22
Value drivers in private banking
Business model: integrated private banking business in selected European markets focusing on clients
with >€1m of investable assets. The network has been built over the past few years via separate
acquisitions. Operations will now be further integrated. Total assets currently amount to 76 bn (Sep-05)
Belgium

Dual brand strategy:
‘network-led’ vs.
‘independent boutique’

Growth drivers: network
trade-up, extension of
product offering and
hiring of private bankers
W. Europe onshore

Integrated network of local
pure-play private banking
brands (boutique style with
strong status/heritage,
esp. in Germany, Spain,
Netherlands, UK)

AUM 27 bn

Priority of reducing costs by
creating synergies within a
central ‘hub’
W. Europe offshore
CEE

Low-growth market, focus
on profitability (leveraging
the hub)

Small today, but strong
market growth
expected (>15% p.a.)

If possible, steer repatriated
assets to KBC onshore

Strengthening a
network-led model,
leveraging Belgian
experience
AUM 18 bn
AUM 3 bn
Growth drivers: increased
share of wallets, hiring of
PB managers and
opportunistic M&A
AUM 28 bn
AUM expected to grow at 9% CAGR on an organic basis
Opportunistic acquisitions may imply investments of 150-250 m per year
23
Mid-term financial outlook, private banking
Private Banking
AUM growth
Net profit
Cost/Income
9% CAGR *
10% CAGR
< 55%
*14% Belgium, 15% CEE, 0% offshore and 10% W. Eur. onshore
24
Foto gebouw
3
9M 2005
Financial highlights
Financial highlights
Foto gebouw
- At a glance
- Group financial performance
- Headlines per segment
FY 2005 profit outlook
Profit trend, 3rd quarter 2005
Net profit
m EUR
717
376
1Q 04
434
2Q 04
365
3Q 04
536
543
2Q 05
3Q 05
440
4Q 04
1Q 05
4Q 05

All major business units delivered excellent results in Q305, even though past Q3s have nearly
always been weaker than other quarters (–30% q/q on avg.)

Profit in CEE was down somewhat q/q, despite higher banking income/lower costs, as credit
losses returned to more ‘normalized low’ levels (these were almost zero in Q2)

Main drivers were:

Strong volume growth momentum, e.g.:
 Mortgages +6% q/q
 Life insurance reserves: +8% q/q (esp. unit-linked)
 Assets under management: +6% q/q

Net positive impact of developments in interest rate and equity markets

Very low credit-risk provisioning
27
Profit trend, 9 months 2005
Gross income, net of technical insurance
charges
Operating expenses
Operating result
Impairments
Net profit
(after tax and minorities)
Cost/income ratio, banking
Loan-loss ratio, banking
Combined ratio, non-life
Return on equity
9M 2004
pro forma
9M
2005
9M/9M
9M/9M
excl.
one-offs
5 652
6 154
+9%
+6%
-3 520
-3 490
-1%
-1%
2 132
2 664
+25%
+17%
-286
-54
-81%
-81%
1 175
1 796
+53%
+32%
62%
0.20%
94%
14%
58%
0.04%
95%
19%
Notes:
1)
One-offs include the disinvestment loss at Agfa Gevaert (net bottom-line impact of –80 m) in Q2 2004, the income related to the
settlement of a ‘historic’ loan (+68 m net) and the ‘non-recurring’ value gains on shares of Irish insurer FBD (+68 m net)
in Q1 2005 .
2)
All 2004 figures exclude impact of IAS 32/39 and IFRS 4
28
Highlights, 9 months 2005
1.
Net profit at 1.8 bn, up 53% y/y, generating a return on equity of 19%
2.
3.
Underlying profit (excl. main one-offs) growing at 32%
4.
Profit from mark-to-market of financial instruments and capital gains realized on
investments signifcantly lower than 2004 (though partly due to IFRS valuation rules)
5.
Downtrend in expenses (-1 % y/y) - cost/income ratio (banking) at 58%
6.
Sustained low combined ratio, non-life (95%)
7.
8.
Very low credit-risk provisioning (loan-loss ratio at 0.04%)
9.
Business outlook for 2005 remains positive
Strong business volume growth across our activities and geographies, generating strong
commission income (+22%) and highly offsetting impact of flattened yield curve on net
interest income
Reminder: comparison of individual P/L lines with pro forma 2004 figures distorted by
application of IFRS 32/39 and IFRS 4 as of 2005
29
Financial highlights
Foto gebouw
- At a glance
- Group financial performance
- Financial headlines per segment
FY 2005 profit outlook
Solid underlying revenue trend
Gross income (in m), per quarter
IFRS 2004
0.5 bn*
3 175
3 178
3 462
2 517
2 756
0.6 bn*
1.0 bn*
2 904
2 699
IFRS 2005
Gross income (in m), year-to-date
2.1 bn*
12 333
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
8 870
9M04

IFRS reclassifications distort y/y comparison (among
other things, non-recognition of unit-linked premiums)

H1’s solid trend in F&C income continued in Q3
(452m, up 10% q/q and 40% y/y)


Banking NIM: up q/q from 1.63% to 1.69%, benefiting
from, among other things, 25 bps deposit rate cut in
Belgium (however, other one-off impacts, as well)
8 359
12M04
9M05
12M05

Down 511m y/y, due to non-recognition of 2.1 bn new unitlinked premium volume under IFRS 2005

Apart from one-offs (173m in Q1), solid revenue ‘quality’:
 NII: volume growth and refinancing fees offsetting
negative impact on NIM of flattened yield curve.
NIM down -9 bps y/y to 1.65%.
 High level of life insurance premium income (3.3 bn)
 Strong F&C income (+29%)
Record level of life insurance premium income
(1.3 bn - mostly unit-linked, driven by low interest
rates and good stock market performance)
* Sales of unit-linked life insurance, recognized differently under IFRS 2005
31
Business volumes, growth trend
Total loans
Of which
mortgages
Customer
deposits
Life
reserves
AUM
113
32
158
16
171
+1%
+6%
+1%
+8%
+6%
Belgium
-1%
+4%
-3%
+8%
+6%
CEE
- CZ/Slovakia
- Hungary
- Poland
+5%
+7%
+8%
-6%
+10%
+11%
+10%
+9%
+5%
+6%
+2%
+6%
+7%
+4%
+5%
+28%
+11%
+7%
+17%
+6%
Rest of the world
+2%
+9%
+4%
-
+6%
Outstanding (in bn)
Growth, 3Q 05 (q/q)
Growth, 9M 05 (ytd)
+8%
+17%
+8%
+19%
+19%
Belgium
+8%
+12%
+2%
+19%
+22%
CEE
- CZ/Slovakia
- Hungary
- Poland
+7%
+13%
+12%
-10%
+28%
+27%
+34%
+16%
+22%
+29%
+12%
+3%
+23%
+17%
+54%
+39%
+33%
+31%
+97%
+14%
Rest of the world
+10%
+25%
+12%
-
+14%
Note: growth trend excl. (reverse) repo and interbank activity
32
NIM / IR sensitivity
Q1 05
(q/q trend)
Q2 05
(q/q trend)
Q3 05
(q/q trend)
9M 05
(y/y trend)
NIM trend
Group, total*
+0.01%
-0.02%
+0.06%
-0.09%
whereof Belgium
+0.00%
-0.10%
+0.06%
-0.01%
whereof CEE
-0.10%
-0.06%
-0.13%
-0.34%

In Q3, NIM went up 6 bps, benefiting from, among other things, a deposit rate cut in Belgium. YtD NIM is
down 9 bps, impacted by margin erosion in CEE (offset by volume growth, F&C income and lower cost
of risk)

The P/L impact of a 50-bps parallel upwards shift of the yield curve would have a positive impact of
appx. 10 m euros (assuming deposit rate in Belgium remains stable) vs. the base scenario for 2006 with
a 2% ECB rate and 3.75% 10-y Govi yield
* For comparison purposes vis-a-vis 2004, impact of IFRS 32/39 has been been neutralised
33
Sustained favourable y/y cost trend
Operating expenses (in m), per quarter
Operating expenses (in m), year-to-date
1 269
1 424
1 105
1 147
2Q04
3Q04
1 104
1 209
1 177
1Q05
2Q05
3Q05
-1%
4 944
1Q04
4Q04
3 520
9M04

As expected, cost level - down 32m q/q since Q2 was negatively impacted by one-off merger-related
costs (20 m) and catch-up on underusage of
expense budgets in Q1 (20m)

3Q includes update of provisions for legal risks

Y/y trend: +3% since staff profit-sharing bonuses
were very low in Q3 04 (very poor performance at
KBC Financial Products)
3 490
12M04
9M05
12M05

Ytd expenses down 30m (-1%), mainly due to costcutting efforts in the Belgian banking business in
2004

Cost/income ratio, banking, down from 62% to 58%
34
Historic low impairment level
Impairment charges (in m), per quarter
Impairment charges (in m), year-to-date
152
90
79
44
15
1Q04

-81%
286
2Q04
3Q04
4Q04
1Q05
42
-3
2Q05
3Q05
Q3 impairments remain at historic low levels (net
write-back of 3m)
100
9M04
54
12M04
9M05
12M05

Impairments down 232 m (-81%) on the back of
limited credit risk and solid equity markets

Loan-loss ratio down from 0.20% in FY 04 to 0.04%
LLR
FY 03
FY 04
9M 05
Belgium
CR/Slovakia
Hungary
Poland
International
Total
0.24%
0.34%
0.32%
8.68%
0.48%
0.71%
0.09%
0.26%
0.64%
0.69%
0.26%
0.20%
0.00%
0.21%
0.72%
0.00%
0.00%
0.04%
35
Excellent underwriting result, non-life
Combined ratio, year-to-date
97%
3M04

Combined ratio
93%
94%
95%
92%
94%
95%
105%
6M04
9M04
12M04
3M05
6M05
9M05
2002
Q3 sligthly higher q/q, mainly due to seasonal
pattern in expense ratio
C/R
FY03
FY04
9M05
Belgium
Czech Rep.
Slovakia
Hungary
Poland
R/I
93%
102%
146%
103%
100%
92%
99%
138%
98%
95%
98%
94%
92%
120%
95%
99%
90%
Total
96%
95%
95%
96%
95%
95%
2003
2004
9M05

Combined ratio at 95% on the back of

Sound risk management (claims ratio at 64%)

Good cost control (expense ratio at 31%)

Favourable claims environment in all markets
36
Financial highlights
Foto gebouw
- At a glance
- Group financial performance
- Financial headlines per segment
FY 2005 profit outlook
Segment structure
KBC Group NV
KBC
Bank
KBC
Insurance
KBC
AM
KBL epb
Gevaert
Primary segmentation by business segment
38
Key points, business segments
BANKING
Net profit (in m)
4 Qs moving average
470
332
367
318
314
246
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
363
3Q05
INSURANCE
4 Qs moving average
Net profit (in m)
122
124
120
1Q05
2Q05
3Q05
89
58
30
1Q04
-55
2Q04
3Q04
4Q04
Banking:
 Q3 05 profit contribution at 363 m:
 Good top-line mix, commissions particularly strong, not
boosted by gains and trading income, NII up (however,
significant one-off positive impact)
 Costs flat q/q (incl. 40m provision related to legal files)
 Once again, very limited loan-loss charges (3m)
 9M05 earnings at record level of 1.1 bn, driven by:
 Strong commission income (+22%)
 Strict cost control: -3% y/y (C/I at 58% incl. AM)
 Limited credit cost (4 bps)
 One-off income related to settlement of historic loan dispute
in Slovakia in Q1 (68 m net)
Insurance:
 Strong Q3 05 results, in line with Q1/Q2 (without significant
capital gains and dividend income as in the 2 previuos quarters),
due to:
 Record level of sales of life products (1.3 bn), mostly unitlinked (recognized as F&C income)
 Limited M2M gain (9m) & write-back of impairments (8m)
 9M05 earnings increasing to 366m on the back of:
 High sales of life insurance (3.3 bn euro), boosting life
reserves by 19%
 Excellent underwriting performance (CR, non-life, 95%)
 Higher investment income, partly due to the gain on the
disposal of the participation of FBD (net non-recurring
impact: 68 m)
 Low impairment charges on portfolios (extremely high in
1Q 04)
39
Key points, business segments
ASSET
MANAGEMENT
Net profit (in m)
4 Qs moving average
51
1Q04
66
58
53
2Q04
3Q04
4Q04
58
1Q05
68
74
2Q05
3Q05
41
39
EUROPEAN PRIVATE
BANKING
Net profit (in m)
53
43
38
4 Qs moving average
23
1Q04
2Q04
3Q04
4Q04
-30
1Q05
2Q05
3Q05
Asset management:

AUM in 3Q05 up 6% (o/w 40% new money inflows), boosting
net profit contribution to 74m

9M05 earnings at 200m, +38m y/y (+23%) driven by
increased AUM:

AUM in 9M05 up 22% to 102 bn (60% due to new
inflows)

C/I at 14%

Net margin on AUM at 2.9%

Note: total AUM within the Group: 186 bn

Asset management segment: 87 bn (3rd party) + 15 bn
(group assets)

Banking segment: 24 bn (mostly private and HNWI
assets in Belgium and CEE)

European private banking segment: 60 bn (o/w 52 bn of
private banking customers)
European private banking:

3Q05 profit contribution (39 m) in line with previous quarter:

M2M of trading instruments was compensated by better
NII of trading instruments, the reversal of impaiments on
AFS assets and a positive tax impact

AUM increased by 9% (partly due to expansion of
consolidation scope )

9M05 earnings at 133m, up 29 m (+28%):

Sustained growth trend of F&C income out of private
banking and custody operations

Even higher cost level (C/I at 72%, but negatively
impacted by 20 m in restructuring charges)
40
Key points, business segments
GEVAERT
Net profit (in m)
17
1Q04
4 Qs moving average
12
2Q04
3Q04
25
4Q04
32
31
1Q05
2Q05
-4
3Q05
-65
HOLDING COMPANY
Net profit (in m)
1Q04
2Q04
3Q04
-12
-7
-13
4Q04
1Q05
2Q05
3Q05
-14
-18
-27
-41
4 Qs moving average
Gevaert:

Downsizing of non-core activities is progressing according
to plan: Gevaert to disappear as seperate ‘business line’

3Q05 negative profit contribution related to:

The ‘unwinding process’ (8 m impairment loss and
10 m taxes on intragroup dividend upstreaming )

Earnings loss at Agfa Gevaert (-38 m impact) mainly
due to rise in restructuring provisions (Agfa Photo)

9M05 profit contribution of 59 m largely driven by gains on
disposals
Holding company:

3Q05 net holding company results (-14 m) at ‘normalized’
level

9M05 net charge at –73 m, quite high due to:

One-off costs in Q2, related to Almanij-KBC merger:
expenses for redemption of stock option plan at KBL
that was delisted (15 m) and external advisory
services (5 m)

Costs of debt related to minority buy-out of KBL
(already partly reduced in Q3)

Elimination of dividends received on own shares
(IFRS 2005) (9 m in Q2)
41
Segment structure – cont’d.
2
1
KBC Group NV
KBC
Bank
KBC
Insurance
KBC
AM
KBL epb
Gevaert
Retail
Business customers
CEE
Markets
European
private banking
1 . Primary segmentation by business segment
2. Additional breakdown by area of activity
Gevaert
42
Retail Belgium and CEE
RETAIL
(BELGIUM)
Net profit (in m)
4 Qs moving average
260
87
1Q04
132
2Q04
295
244
260
2Q05
3Q05
97
3Q04
4Q04
1Q05
CEE
Net profit (in m)
4 Qs moving average
191
66
1Q04
98
2Q04
121
74
3Q04
105
46
4Q04
1Q05
2Q05
3Q05
Retail Belgium:

Strong profitability trend continues in Q3. Profit contribution up
15 m q/q supported by deposit rate cut, among other things.

9M05 earnings at 799 m, up 440 m (x2.2), generating ROAC of
29% (15% in 9M04):

sound revenue growth (esp. related to investment
products and mortgages)

sustained cost discipline (-3% y/y), C/I 57%(67% in 9M04)

Solid P&C underwriting performance: C/R stable at 94%

absence of credit provisioning (LLR 0%) and normalization
of value impairments on the investment portfolio (184 m
impairments in 9M04)

‘Private banking’ sub-segment contributes 49 m in 9M05
(vs 32 m in 9M04)
CEE:

Q305 profit contribution at 105 m. Compared with Q2: higher
banking income, lower costs (C/I 60%) but somewhat higher
non-life claims (C/R 98%) and loan losses (LLR 26 bps)

9M05 earnings at 416m, up 175m (+73%) generating a ROAC
of 48% (32% in 9M04):

In CR/Slovakia: 9M05 earnings at 289 m (incl. one-off of
68 m in Q1), driven by steady loan growth, increased F&C
income and strong C/I ratio (48%)

Poland: 9M05 profit contribution of 82 m (incl. deferred
taxes of 18 m) due to sound cost trend, growing insurance
business and absence of loan losses

Hungary: further positive trend of operating performance,
but update of legal legacy provision and higher loan-loss
provisions (LLR 0.72%, still lower then major peer). 9M05
profit at 27 m
43
SME and wholesale activities
SME / CORPORATE
Net profit (in m)
4 Qs moving average
182
108
1Q04
125
118
2Q04
91
94
3Q04
4Q04
1Q05
101
2Q05
3Q05
CAPITAL MARKETS
Net profit (in m)
4 Qs moving average
92
68
70
53
53
1Q05
2Q05
58
17
1Q04
2Q04
3Q04
4Q04
SME/corporate customers:

3Q05 profit contribution (182 m) boosted by strong income
from corporate finance / private equity business (including IPO
of ‘Telenet’) and writeback of loan losses

9M05 earnings at 408 m, up 107 m (+36%), generating ROAC
of 25% (18% in 9M04):

Succesful income growth, including in corporate finance.
Gross margin (on RWA): 3.2% (2.9% in 9M04)

Low credit provisions: LLR at 0.01% (0.16% in 9M04)

High cost efficiency: C/I at 33% (36% in 9M04)

Solid underwriting result of outbound R/I activities: C/R
90% (94% in 9M04)
3Q05
Capital markets:

3Q05 profit contribution (58 m), slightly higher then level
registered in previous quarters and driven by enhanced trading
activity in convertibles/equity derivatives

9M05 earnings at 164m, up 7 m (+4%):

Interest-rate and FX activities, equity brokerage and
equity derivatives trading brought about a result
improvement

Income from convertibles trading, structured credit
business and AIM weaker then last year

9M05 key ratios:

Gross margin (on RWA): 6.9% (7.5% in 9M04)

C/I at 58% (61% in 9M04)

ROAC at 29% (31% in 9M04)
44
Financial highlights
Foto gebouw
- At a glance
- Group financial performance
- Financial headlines per segment
FY 2005 profit outlook
FY 2005 profit outlook

KBC continues to be positive on business development in Q4, with a strong sales
result, a better interest rate climate and favourable equity markets trend

On the other hand, the cost level is expected to be higher in Q4 on the back of one-off
expenses (including some 100 m euros (before tax), among other things, for the
redesigning of staff pension schemes). However, for the full-year, the guidance for a
decline in costs and historic low loan-loss ratio remains valid

Based on the prevailing view vis-à-vis the relevant economic and financial parameters,
KBC’s 2005 net profit is expected to be approx. 2.2 bn euros
46
Financial highlights
Foto gebouw
- At a glance
- Group financial performance
- Financial headlines per segment
FY 2005 profit outlook
Additional information
Group earnings, by quarter
(IFRS, in m euros)
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
Net interest income
Gross earned premium, insurance
Dividend income
Net gains from FI at FV
Net realised gains from AFS assets
Net fee and commission income
Other income
995
1 275
25
224
193
357
106
966
1 404
121
191
60
324
113
910
901
39
123
93
323
128
963
1 577
46
187
157
399
132
1 048
729
34
133
168
429
215
1 074
978
135
92
97
410
118
1 129
810
25
123
49
452
112
Gross income
3 175
3 178
2 517
3 462
2 756
2 904
2 699
-1 269
-152
-33
-119
- 1 169
-5
20
- 1 105
-90
-74
-12
-1 240
-22
-60
-1 147
-44
-15
-18
-771
-12
34
-1 424
-79
-76
-2
-1 454
-29
28
-1 104
-15
3
-16
-612
-17
21
-1 209
-42
-38
0
-852
-17
13
-1 177
3
-5
13
-696
-10
19
Profit before taxes
602
662
577
504
1 030
797
800
Income tax expense
Minority interests
-170
-55
-177
-51
-155
-57
-35
-29
-256
-57
-212
-48
-208
-48
376
434
365
440
717
536
543
332
-55
51
43
17
-12
367
58
58
23
-65
-7
246
30
53
38
12
-13
318
89
66
-30
25
-27
470
122
58
53
32
-18
314
124
68
41
31
-41
363
120
74
39
-38
-14
Operating expenses
Impairments
- of which on loans and receivables
- of which on AFS assets
Gross technical charges, insurance
Ceded reinsurance result
Share in results, associated companies
Net profit
Of which banking
insurance
asset management
european private banking
gevaert
holding company
4Q05
48
3Q 2005 earnings, by business segment
(in m euros)
Net interest income
Gross earned premium, insurance
Dividend income
Net gains from FI at FV
Net realized gains from AFS assets
Net fee and commission income
Other income
Banking
Insurance
AM
Epb
Gevaert
Holding
Group
932
0
19
116
13
293
80
141
810
10
9
29
-65
18
7
0
-7
7
0
106
1
65
0
3
-25
7
114
7
3
0
0
12
0
0
6
-13
0
0
3
0
0
105
1 129
810
25
123
49
452
112
1 454
953
114
170
21
95
2 699
Operating expenses
Impairments
- o/w on loans and receivables
- o/w on AFS assets
Gross technical charges, insurance
Ceded reinsurance result
Share in results, associated comp.
-878
-8
-3
-3
0
0
9
-125
8
0
8
-696
-10
0
-15
0
0
0
0
0
0
-146
11
-1
8
0
0
1
-12
-8
-1
0
0
0
-29
-109
0
0
0
0
0
0
1 177
3
-5
13
- 696
-10
-19
Profit before taxes
Income tax expense
Minority interests
577
-148
-66
129
-28
19
99
-25
0
36
4
-1
-29
-10
0
-13
-1
0
800
-208
-48
363
120
74
39
-38
-14
543
Gross income
Net profit
49
3Q 2005 earnings, by area of activity
(in m euros)
Retail
CEE
SME/
Corp.
Markets
Epb
Gevaert
Total
Banking and AM
(incl. KBL)
Gross income
Operating expenses
Impariments
Income tax expense
Minority interests
Net profit – group share
620
-355
3
-83
0
185
439
-265
-34
-26
-16
100
313
-86
31
-64
17
176
183
-110
0
-15
0
58
169
-144
11
4
-1
39
21
-12
-8
-10
0
-38
1 757
-1 049
12
-197
-67
438
147
-76
6
-19
17
75
53
-43
0
-3
-2
5
18
-7
2
-6
0
6
-
-
-
-
-
-
-14
260
105
182
58
39
-38
543
Insurance
Gross income - tecbn. ch.
Operating expenses
Impairments
Income tax expense
Minority interests
Net profit – group share
245
-125
8
-28
19
120
Holding Co
Net profit – group share
Group total
Net profit – Group share
Excl. non-allocated results
50
9M 05 earnings, by business segment
(in m euros)
Banking
Insurance
AM
Epb
Gevaert
Holding
Group
Net interest income
Gross earned premium, insurance
Dividend income
Net gains from FI at FV
Net realized gains from AFS assets
Net fee and commission income
Other income
2 740
0
86
237
75
898
303
407
2 516
96
13
173
-213
47
5
0
0
15
1
289
3
144
0
10
57
28
320
40
1
0
3
26
37
0
55
-43
0
0
0
0
-2
335
3 251
2 516
194
348
314
1 290
444
Gross income
4 340
3 041
313
598
122
290
8 359
-2 563
-41
-37
-2
0
0
26
-379
-12
0
-10
-2 161
-44
0
-45
0
0
0
0
0
0
-433
6
-2
9
0
0
3
-54
-7
0
1
0
0
-15
-361
0
0
0
0
0
0
-3 490
-54
-39
-3
-2 161
-44
14
Profit before taxes
1 762
445
268
174
46
-71
2 626
Income tax expense
Minority interests
-454
-162
-94
15
-68
0
-35
-5
-22
0
-3
0
-677
-153
1 146
366
200
133
24
-73
1 796
Operating expenses
Impairments
- o/w on loans and receivables
- o/w on AFS assets
Gross technical charges, insurance
Ceded reinsurance result
Share in results, associated companies
Net profit
Excl. intrasegment eliminations
51
9M 05 earnings, by area of activity
(in m euros)
Retail
CEE
SME/
Corp.
Markets
Epb
Gevaert
Total
1 908
-1 089
10
-261
0
568
1 364
-790
-41
-96
-57
382
821
-269
-2
-148
17
384
593
-345
-2
-82
0
164
598
-433
6
-35
-5
133
122
-54
-7
-22
0
24
5 373
3 095
-42
-579
-167
1 503
520
-232
-9
-65
16
230
182
-125
-1
-13
-9
34
65
-22
-2
-16
-1
24
-
-
-
-
-
-
-73
799
44%
29%
416
23%
48%
408
23%
25%
164
9%
29%
133
7%
15%
24
1%
3%
1 796
100%
19%
Banking and AM
Gross income
Operating expenses
Impairments
Income tax expense
Minority interests
Net profit – group share
Insurance
Gross income (- techn. ch.)
Operating expenses
Impairments
Income tax expense
Minority interests
Net profit – group share
836
-379
-12
-94
15
366
Holding Co
Net profit – group share
Group total
Net profit – Group share
Share in group result
ROAC
Excl. non-allocated results
52
Financial performance, analysis breakdown
+ Gross income * (in m)
2 001 1 916
1 979
2 127 2 035
1 993
1 734
* Gross income minus
technical charges, insurance
Net profit (in m)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
717
536
376
- Operating expenses (in m)
543
365
1 424
1 269
ROE
Q1
Cost/income ratio, banking
440
434
Q2
Q3
Q4
Q1
Q2
1 105 1 147
63%
1 104
1 209 1 177
61%
62%
65%
51%
57%
58%
HY
9M
Q3
2005
24%
20%
13%
14%
14%
19%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q1
HY
- Impairment charges (in m)
Q1
HY
9M
9M
FY
Q1
14%
FY
2004
Q1
HY
Loan-loss ratio
9M
0.21%
152
2005
Return on adjusted equity
90
0.11%
79
44
11.1
11.6
11.9
12.3
13.3
14.4
42
0.06%
15
15.2
Jun
2004
Q1
Sep
Dec
Mar
Jun
0.04%
0.00%
Q2
Q3
Q4
Q1
Q2
Q3
-3
Q1
HY
- Taxes (in m)
Mar
0.20%
0.16%
Equity (in bn)
9M
FY
Q1
HY
9M
25%
26%
25%
Q1
HY
9M
Effective tax rate
Sep
2005
28%
256
170
177
212
208
Q2
Q3
27%
27%
23%
155
35
Q1
Q2
Q3
Q4
Q1
Q1
HY
9M
FY
53
Financial performance, analysis breakdown (2)
Net interest margin, banking
+ Yield income (in m)
1.69%
1 020
1 087
949
1 009
1 082
1 209 1 154
1.65% 1.64% 1.65%
1.63%
1.58%
Q1
Gross margin * (on avg RWA)
Q2
Q3
Q4
Q1
Q2
Q3
Q1
HY
9M
1.56%
FY
Q1
HY
9M
7.98%
7.48%
7.39%
7.12%
Gross income * (m)
Q1
HY
9M
644
7.21%
531
FY
Share of F&C in gross income *
+ Fee & Commisssion income
(in m)
7.68%
7.60%
Q1
HY
463
437
451
Q1
Q2
Q3
528
30%
564
23%
23%
24%
25%
Q1
HY
9M
FY
28%
28%
HY
9M
9M
2005
2 001 1 916
1 979
2 127 2 035
1 993
1 734
Q4
Q1
Q2
Q3
Q1
*Gross income minus technical chgs, insurance
+ Premium sales * (in m)
Q1
Q2
2004
Q3
Q4
Q1
Q2
Q3
2005
1 275
Risk-weighted assets (in bn)
*Gross income minus technical
charges, insurance
1 591
1 577
1 404
Combined ratio, non-life
1 759
97%
1 186
94%
901
94%
95%
94%
95%
92%
114.0
111.7
107.6
107.6
Q1
105.3 105.8
105.1
Q2
Q3
Q4
Q1
Q2
Q3
Q1
+ FV income + gains on AFS assets
Mar
Jun
Sep
Dec
HY
9M
FY
Q1
HY
9M
* in 2005, only partly recognized as ‘income’
Mar
Jun
Share of FV/AFS gains in gross
income *
Sep
2005
417
21%
344
251
Q1
Q2
216
Q3
Q4
17%
301
Q1
189
172
Q2
Q3
16%
16%
14%
12%
8%
Q1
HY
9M
FY
Q1
HY
9M
*Gross income minus technical chgs, insurance
54
Banking performance in CR/Slovakia
Income statement, CSOB Bank (CR/Slovakia)
(in m euros)
Statutory
accounts
1Q04
2Q04
3Q04
1Q05
2Q05
3Q05
123
1
6
5
50
17
202
120
-1
23
8
51
14
216
124
4
19
4
58
114
323
128
2
26
2
57
9
224
129
-3
26
7
60
41
259
-114
88
-120
96
111
1
29
-0
53
8
201
-122
79
-122
200
-143
81
-120
140
-4
0
-28
56
-6
0
-20
69
-14
0
-19
46
5
0
-54
151
2
0
-7
76
-23
0
- 31
86
Net statutory profit
Consolidation adjustments
Minority interests
56
-1
-8
69
-1
-4
46
-1
-4
76
-0
-7
86
-1
-7
Subtotal
48
65
41
151
19
-17
154
69
78
Transfer of income on excess capital to ‘Group item’
Profit contribution, Group share
-6
42
-6
59
-5
35
-6
148
-6
63
-9
68
44%
12%
49%
14%
42%
13%
120%
34%
83%
26%
73%
24%
Net interest income
Dividend income
Net gains from financial instruments at fair value
Net realized gains from available for sale assets
Net fee and commission income
Other income
Gross income, total
Operating expenses
Subtotal
Impairments
Share in result of associated companies
Taxes
Net statutory profit
Profit
contribution
to Group
Return
Return on allocated capital, Ytd
Return on investment, Ytd
55
Banking performance in Hungary
Income statement, K&H Bank
(in m euros)
Statutory
accounts
Profit
contribution
to Group
1Q04
2Q04
3Q04
1Q05
2Q05
3Q05
51
0
20
1
16
4
91
-63
28
54
0
18
-0
18
1
90
-66
24
63
0
17
0
23
3
106
-70
37
54
0
25
-0
25
3
106
-68
38
54
0
25
0
18
4
101
-74
28
61
0
23
0
22
3
109
-84
25
Impairments
Share in result of associated companies
Taxes
Net statutory profit
9
1
-7
31
-11
1
-1
13
-10
1
-5
23
-10
1
-8
21
-16
1
-3
10
-5
1
-5
16
Net statutory profit
Consolidation adjustments
Minority interests
Subtotal
31
-0
-8
23
13
-0
-5
8
23
-0
-7
16
21
-0
-5
15
10
-0
-5
5
16
-0
-6
10
-11
12
-1
7
-7
10
-8
7
3
7
-1
9
29%
23%
22%
16%
23%
16%
17%
15%
18%
11%
18%
11%
Net interest income
Dividend income
Net gains from financial instruments at fair value
Net realized gains from available for sale assets
Net fee and commission income
Other income
Gross income, total
Operating expenses
Subtotal
Transfer of income on excess capital to ‘Group item’
Profit contribution, Group share
Return
Return on allocated capital, Ytd
Return on investment, Ytd
56
Banking performance in Poland
Income statement, Kredyt Bank
(in m euros)
Statutory
accounts
Profit
contribution
to Group
Return
1Q04
2Q04
3Q04
1Q05
2Q05
3Q05
54
0
3
3
10
4
74
-60
15
53
0
6
-0
13
4
76
-60
17
44
0
9
9
11
8
81
-51
29
50
0
12
1
16
3
83
-59
24
51
0
6
-3
6
5
66
-54
12
52
0
7
2
13
3
78
-59
19
Impairments
Share in result of associated companies
Taxes
Net statutory profit
-2
2
-1
14
-7
1
-1
9
-12
4
-1
20
0
1
-1
23
12
-0
10
34
-6
0
9
23
Net statutory profit
Consolidation adjustments
Minority interests
Subtotal
14
-0
-3
11
9
-0
-2
7
20
-0
-4
15
23
-1
-3
19
34
-0
-5
29
23
-0
-3
20
Transfer of income on excess capital to ‘Group item’
Profit contribution, Group share
-0
10
0
7
-1
14
-2
17
-1
28
-4
16
25%
6%
23%
5%
25%
6%
32%
11%
32%
11%
40%
13%
Net interest income
Dividend income
Net gains from financial instruments at fair value
Net realized gains from available for sale assets
Net fee and commission income
Other income
Gross income, total
Operating expenses
Subtotal
Return on allocated capital, Ytd
Return on investment, Ytd
57
Positive growth gap in CEE
GDP, nominal growth % (incl. inflation)
8
7.4
6.9
6.7
5.9
6.5
6
5.3
4
3.9
3.3
3.3
3.5
2
0
2005 (F)
Czech
Source : KBC Outlook, November 2005
2006 (F)
Hungary
Poland
Belgium
EMU
58
No. of shares outstanding

The no. of ordinary shares outstanding is 366.4 million

As in previous years, a limited share issue for staff members is planned before year-end
(for your information, in the last 3 years, 0.2 m new shares per year were issued via similar plans)

On 10 Dec. 2005, a 1998-2005 convertible bond comes to maturity – convertible into max. 5.2 million
ordinary shares (but conversion price at 80 euro/share !)
In millions
31/12/04
31/03/05
30/06/05
30/09/05
No of ordinary shares outstanding
366.4
366.4
366.4
366.4
Avg. no. of shares for basic EPS:
- ordinary shares
- mandatory convertibles (+)
- treasury shares (-)
- total, end of period
- total, average most recent quarter
- total, average year-to-date
366.4
2.6
-9.6
359.5
259.5
359.4
366.4
2.6
-12.6
356.5
358.0
358.0
366.4
2.6
-9.1
360.0
358.3
358.1
366.4
2.6
-8.9
360.2
360.1
358.8
Avg. no. of shares for dilutive EPS:
- basic no of shares
- stock options (+)
- other convertible bonds (+)
- total, end of period
- total, average most recent quarter
- total, average year-to-date
359.5
5.0
5.2
369.7
370.1
370.5
356.5
5.0
5.2
366.7
368.2
368.2
360.0
4.0
5.2
369.3
368.0
368.1
360.2
3.8
5.2
369.2
369.3
368.5
59
Foto gebouw
4
Closing remarks on
equity valuation
Valuation of the KBC share
Valuation relative to peer group:
Key figures:

Share price: 73.2 euros

Net asset value: 42.4 euros

9M 2005 EPS: 5.10 euros
Analyst estimates: 1



2005 EPS consensus: 6.14 (+36% y/y)
2006 EPS consensus: 6.52 (+6% y/y)
2006 P/E: 11.2
Recommendations:



Positive: 64 %
Neutral: 27%
Negative: 9 %
weighted P/E
2006
unweighted P/E
2006
CEE banks 2
14.4
14.3
CEE-exposed banks 3
12.3
13.4
Euro-zone banks 4
11.3
11.9
KBC 1
11.2
11.2
BEL banks 5
10.3
10.3
Weighted and unweighted averages of IBES data :
2 OTP, Komercni, Pekao, BPH PBK, BRE
3 BA-CA, Erste, Unicredit, Soc. Gen., Intesa BCI, RZB Int.
4 Top-20 DJ Euro Stoxx Banks
5 Fortis, Dexia
Situation as at 14 November 2005
1
Smart consensus collected by KBC (22 estimates)
61
Equity research coverage
62