KBC Group Company presentation - 2Q 2019 - KBC Bank
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KBC Group
Company presentation
2Q 2019
More information: www.kbc.com
KBC Group - Investor Relations Office – E-mail: IR4U@kbc.be
1
Important information for investors
▪ This presentation is provided for information purposes only. It does not constitute an offer to sell or the solicitation to buy any
security issued by the KBC Group.
▪ KBC believes that this presentation is reliable, although some information is condensed and therefore incomplete. KBC cannot be
held liable for any loss or damage resulting from the use of the information.
▪ This presentation contains non-IFRS information and forward-looking statements with respect to the strategy, earnings and capital
trends of KBC, involving numerous assumptions and uncertainties. There is a risk that these statements may not be fulfilled and
that future developments differ materially. Moreover, KBC does not undertake any obligation to update the presentation in line
with new developments.
▪ By reading this presentation, each investor is deemed to represent that it possesses sufficient expertise to understand the risks
involved.
2
2Q 2019 key takeaways
2Q19 financial performance*
1H19
❖ Commercial bank-insurance franchises in core ➢ ROE 15.4% *
markets performed well ➢ Cost-income ratio 59% (adjusted for specific items)
❖ Customer loans and customer deposits** ➢ Combined ratio 92%
increased in most of our core countries ➢ Credit cost ratio 0.12%
❖ Higher net interest income and lower net ➢ Common equity ratio 15.6%** (B3, DC, fully loaded)
interest margin ➢ Leverage ratio 6.1% (fully loaded)
Good net ➢ NSFR 133% & LCR 140%
❖ Higher net fee and commission income
result of
❖ Lower net gains from financial instruments at
fair value and higher net other income
745m Net result
745
EUR in 556
692 701
621
❖ Excellent sales of non-life and life insurance
y-o-y
2Q19 430
❖ Strict cost management
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
❖ Lower net impairments on loans
* when evenly spreading the bank tax throughout the year
❖ Solid solvency and liquidity ** 15.9% when including 1H19 net result taking into account the
payout ratio in FY2018 of 59% (dividend + AT1 coupon)
❖ Interim dividend of 1 EUR per share in Nov’19
* Comparisons against the previous quarter unless otherwise stated
** Customer deposit volumes excluding debt certificates & repos
3
Overview of building blocks of the 2Q19 net result
1.913
-30
170
176
-957
435
1.132
4
-40
-144
745
NII NFCI Technical Other Total Income Bank tax Opex excl. Impairments Other Taxes 2Q19 net
Insurance Income** bank tax result
Result*
Q-o-Q 0% +6% +17% -1% +3% +5% +73%
Y-o-Y +1% -1% -7% +43% +3% +2% +8%
* Earned premiums – technical charges + ceded reinsurance
** Dividend income + net result from FIFV + net realised result from debt instruments FV through OCI + net other income
4
Main exceptional items
2Q19 1Q19 2Q18
Non-Life – Reassessment of claims provisions -16m EUR
Opex - Facilities expenses +1m EUR
BE BU
Opex – Staff expenses (management reorganisation costs) -6m EUR +8m EUR
Tax - DTA impact +11m EUR
Total Exceptional Items BE BU -22m EUR +19m EUR + 1m EUR
NOI - Settlement of legacy legal files +6m EUR
CZ BU
NOI – Revaluation of 55% stake in ČMSS +82m EUR
Total Exceptional Items CZ BU +82m EUR +6m EUR
IRL - NOI – Additional impact for the tracker mortgage review -4m EUR
IM BU
IRL - Opex – Costs, mainly related to sale of part of legacy loan portf. -2m EUR
IRL - Impairments – On sale of legacy loan portfolio -12m EUR
Total Exceptional Items IM BU -18m EUR
NOI – Settlement of old legal file -38m EUR
Opex - Staff expenses (management reorganisation costs) -4m EUR
GC
Tax - DTA impact +34m EUR +4m EUR
Total Exceptional Items GC +30m EUR +4m EUR -38m EUR
Total Exceptional Items (pre-tax) +72m EUR +29m EUR -37m EUR
Total Exceptional Items (post-tax) 5 EUR
+82m +25m EUR -37m EUR
Contents
1 2Q 2019 performance of KBC Group
2 2Q 2019 performance of business units
3 Strong solvency and solid liquidity
4 Looking forward
Annex 1: Company profile
Annex 2: Other items
6
KBC Group
Section 1
2Q 2019 performance of KBC Group
7Net result at KBC Group
CONTRIBUTION OF BANKING ACTIVITIES
TO KBC GROUP NET RESULT*
603 618
574
539
461
334
NET RESULT AT KBC GROUP*
745
692 701
621 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
556
430
CONTRIBUTION OF INSURANCE ACTIVITIES
TO KBC GROUP NET RESULT*
155
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
74 124
107 93
102
96 61
42 73 66
33
113
75 68 83
61 62
-15 -4
* Difference between net result at KBC Group and the sum of the banking and insurance -32 -27 -35 -20
contribution is accounted for by the holding-company/group items
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
Non-Life result Non-technical & taxes
Amounts in m EUR 8
Life resultHigher net interest income and lower net interest margin
NII Amounts in m EUR
1,125 1,117 1,136 1,166 1,129 1,132 ▪ Net interest income (1,132m EUR)
0 27 1 19 128 2 17 125 2 24 118 4 16 1 12 • Slightly increased q-o-q and up by 1% y-o-y. Note that NII
128 124 114
banking increased by 1% q-o-q and by 3% y-o-y
• The q-o-q small increase was driven primarily by:
1,016 1,006
970 972 989 992 o continued good loan volume growth
o small additional positive impact of short-term interest rate
increases in the Czech Republic
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 o 1-month full consolidation of ČMSS (7m EUR)
NII - netted positive impact of ALM FX swaps* NII - Insurance
o higher number of days
NII - Holding-company/group NII - Banking
almost fully offset by:
NIM ** o lower reinvestment yields in our euro area core countries
2.01% 2.00% 2.02% o pressure on commercial loan margins (on total outstanding
1.98% 1.98%
1.94% portfolio) in most core countries
o slightly lower netted positive impact of ALM FX swaps
▪ Net interest margin (1.94%)
• Down by 4 bps q-o-q and by 6 bps y-o-y due mainly to
negative impact of lower reinvestment yields, pressure on
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
commercial loan margins (on total outstanding portfolio) and
* From all ALM FX swap desks
** NIM is calculated excluding the dealing room and the net positive impact of ALM FX swaps & repos
an increase of the interest-bearing assets (denominator)
ORGANIC VOLUME TREND Total loans** o/w retail mortgages Customer deposits*** AuM Life reserves
Volume 154bn 66bn 199bn 210bn 28bn
Growth q-o-q* +1% +1% -2% 0% 0%
Growth y-o-y +4% +4% 0% -2% -1%
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds) 9
*** Customer deposits, including debt certificates but excluding repos. Customer deposit volumes excluding debt certificates & repos flat q-o-q and +3% y-o-yHigher net fee and commission income
F&C Amounts in m EUR
▪ Net fee and commission income (435m EUR)
450 438 424 435
• Up by 6% q-o-q and slightly down y-o-y
407 410
• Q-o-q increase was the result chiefly of the following:
215 223 219 225 219 230 o Net F&C income from Asset Management Services
increased by 2% q-o-q as a result of higher management
fees from mutual funds and unit-linked life insurance
299 275
products, partly offset by lower entry fees
281 255 264 270
o Net F&C income from banking services increased by 5%
q-o-q due mainly to seasonally higher fees from payment
-64 -66 -70 -74 -73 -65
services, higher securities-related fees, 1-month full
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 consolidation of ČMSS (2m EUR), higher fees from credit
files & bank guarantees and higher network income
Distribution Banking services Asset management services
o Distribution costs fell by 10% q-o-q due chiefly to seasonally
higher premium income in 1Q19
• Y-o-y decrease was mainly the result of the following:
Amounts in bn EUR
o Net F&C income from Asset Management Services
decreased by 4% y-o-y mainly as a result of lower
AuM
management fees from mutual funds & unit-linked life
213 214 213 210 210 insurance products
200
o Net F&C income from banking services increased by 3%
y-o-y as higher securities-related fees, higher network
income and 1-month full consolidation of ČMSS (2m EUR),
more than offset lower fees from credit files & bank
guarantees
o Distribution costs fell by 1% y-o-y
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
▪ Assets under management (210bn EUR)
• Stabilised q-o-q, but decreased by 2% y-o-y
• The mutual fund business has seen net outflows in 2Q19,
10 mainly in investment adviceInsurance premium income up y-o-y
and good combined ratio
PREMIUM INCOME (GROSS EARNED PREMIUMS) ▪ Insurance premium income (gross earned
825
premiums) at 742m EUR
766
714 707 696
742
• Non-life premium income (425m) increased by 9%
416 351 317
y-o-y
336 315 293
• Life premium income (317m) down by 10% q-o-q
and up by 1% y-o-y
378 392 403 409 415 425
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
Life premium income Non-Life premium income
COMBINED RATIO (NON-LIFE) ▪ The non-life combined ratio for 1H19
amounted to 92%, a good number despite
90% 93% 92%
88% 88% 88% high technical charges due mainly to large
claims (storm and fire, especially in 1Q19) and
a reassessment on claims provisions in 2Q19
(-16m EUR), partly offset by ceded reinsurance
result
1Q 1H 9M FY
2018 2019
11
Amounts in m EURNon-life and life sales up y-o-y
NON-LIFE SALES (GROSS WRITTEN PREMIUM) ▪ Sales of non-life insurance products
534 • Up by 8% y-o-y thanks to a good commercial
492
performance in all major product lines in our core
412
382 378 373 markets and tariff increases
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
▪ Sales of life insurance products
• Decreased by 11% q-o-q and rose by 8% y-o-y
LIFE SALES • The q-o-q decrease was driven entirely by lower sales of
498 510 516
459
guaranteed interest products and unit-linked products
426
383
in Belgium, partly offset by slightly higher sales of unit-
279 341 302 linked products in the Czech Republic
261
261 230 • The y-o-y increase was driven entirely by higher sales of
unit-linked products in Belgium (and to a lesser extent
219 169 214 198 in the Czech Republic)
165 153
• Sales of unit-linked products accounted for 43% of total
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 life insurance sales in 2Q19
Guaranteed interest products Unit-linked products
12
Amounts in m EURLower FV gains and higher net other income
FV GAINS ▪ The lower q-o-q figures for net gains from financial
96
54
99 instruments at fair value were attributable mainly
79
2
62
to:
78 55 45 36 • weak dealing room income
11
4
19 33 22 32 29
8
19
• a negative change in ALM derivatives
2 11 -3
-5 -21 -8
-22 • lower net result on equity instruments (insurance) due
-14 -62
-2 to less favourable stock markets in 2Q19 compared to
-3 1Q19
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 • a negative change in market, credit and funding value
Dealing room & other income M2M ALM derivatives adjustments in the Czech Republic (mainly as a result of
MVA/CVA/FVA Net result on equity instruments (overlay insurance) changes in the underlying market value of the derivatives
portfolio due to lower long-term interest rates)
NET OTHER INCOME ▪ Net other income amounted to 133m EUR. In
133
addition to the normal run rate of around 50m EUR
per quarter, 2Q19 was positively impacted by a
one-off gain of 82m EUR related to the revaluation
76
71
56 59
of the existing 55% stake in ČMSS
23
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
13
Amounts in m EURStrict cost management
OPERATING EXPENSES ▪ Excluding the 1-month full consolidation of ČMSS,
bank tax, FX effect and one-off costs, operating
1,291 1,296
expenses in 1H19 rose by roughly 1% y-o-y
382
371 966
24
981
26
996
41
988
30
▪ Cost/income ratio (banking) adjusted for specific
items* at 60% in 2Q19 and 59% YTD (57% in FY18)
Cost/income ratio (banking): 53% in 2Q19 and
920 942 956 954 913 957 63% YTD, distorted by the bank taxes
▪ Operating expenses excluding bank tax increased
by 5% q-o-q primarily as a result of:
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
o 12m EUR negative one-offs in 2Q19 (of which 10m
Bank tax Operating expenses
management reorganisation costs in Belgium and 2m
EUR costs related to the sale of part of the legacy
loan portfolio in Ireland) versus a 8m EUR positive
one-off in 1Q19
EXPECTED BANK TAX SPREAD IN 2019 (PRELIMINARY)** o seasonally lower professional fee, facilities &
TOTAL Upfront Spread out over the year marketing expenses in 1Q19
2Q19 1Q19 2Q19 1Q19 2Q19 3Q19e 4Q19e o wage inflation in most countries
o higher depreciation & amortisation costs
BE BU 4 273 4 0 0 0 0
o 1-month full consolidation of ČMSS (5m EUR)
CZ BU 1 35 1 0 0 0 0
▪ Operating expenses without bank tax increased by
Hungary 22 26 0 20 22 23 24
2% y-o-y due mainly to negative one-offs in 2Q19
Slovakia 3 4 -1 4 4 4 5 and 1-month full consolidation of ČMSS
Bulgaria -1 16 -1 0 0 0 0
▪ Total bank taxes (including ESRF contribution) are
Ireland 1 3 0 1 1 1 23 expected to increase from 462m EUR in FY18 to
GC 0 0 0 0 0 0 0 491m EUR in FY19
TOTAL 30 356 3 25 27 28 52
14
Amounts in m EUR * See glossary (slide 77) for the exact definition ** Still subject to changesOverview of bank taxes* Bank taxes of 277m EUR YTD.
On a pro rata basis, bank taxes
represented 11.1% of 1H19
opex at the Belgium BU
KBC GROUP Bank taxes of 413m EUR YTD. BELGIUM BU
382
On a pro rata basis, bank taxes 273 273
371
represented 11.6% of 1H19 58 63
98 109 opex at KBC Group**
215 210
273 273
24 26 41 30 0 0 4
29 2 -7 3
22 2
-4
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
European Single Resolution Fund (ESRF) contribution
ESRF contribution Common bank taxes
Common bank taxes
Bank taxes of 100m EUR YTD.
On a pro rata basis, bank
Bank taxes of 36m EUR YTD. taxes represented 19.2% of
CZECH REPUBLIC BU On a pro rata basis, bank INTERNATIONAL MARKETS BU 1H19 opex at the IM BU
taxes represented 5.0% of
35 1H19 opex at the CZ BU 74
70
29 18
18
28 41
22 27 26
26 56
52
28 28
6 1 7 1
0 0
-1 -2
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
ESRF contribution Common bank taxes
ESRF contribution Common bank taxes
* This refers solely to the bank taxes recognised in opex, and as such it does not take account of income tax expenses, non-recoverable VAT, etc.
** The C/I ratio adjusted for specific items of 59% in 1H19 amounts to roughly 51% excluding these bank taxes
15Lower asset impairments, benign credit cost ratio and
improved impaired loans ratio
ASSET IMPAIRMENT
69 ▪ Lower asset impairments q-o-q
1
43 40 • This was attributable mainly to:
13 67 4 o lower loan loss impairments in Belgium, as 1Q19 was
30 36
6
20
6
impacted by a few corporate files
-8
-63 -21 -2 o small net loan loss impairment reversals in Hungary and
-1 Group Centre
-56 partly offset by:
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 o slightly higher loan loss impairments in the Czech Republic
Other impairments Impairments on financial assets at AC* and FVOCI and Slovakia
* AC = Amortised Cost. Under IAS 39, impairments on L&R
• Note that in Ireland, 12m EUR net impairment releases were
CREDIT COST RATIO offset by charges related to the sale of part of the legacy loan
0.42% portfolio
0.23%
0.09%
0.12%
▪ The credit cost ratio amounted to 0.12% in 1H19 due to
higher gross impairments in Belgium
-0.06% -0.04%
FY14 FY15 FY16 FY17 FY18 1H19
IMPAIRED LOANS RATIO
5.9%
5.5% 5.5%
4.3% 4.3% ▪ The impaired loans ratio improved to 3.7%, 2.1% of
3.7% which over 90 days past due. The q-o-q improvement was
mainly the result of the accounting write-off of certain
3.5% 3.2% 3.2%
2.5% 2.4%
fully provisioned legacy loans in Ireland during 2Q19
2.1%
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
16
Impaired loans ratio of which over 90 days past dueKBC Group
Section 2
2Q 2019 performance of business units
17Business profile
BELGIUM CZECH GROUP
SLOVAKIA HUNGARY BULGARIA IRELAND
REPUBLIC CENTRE
2Q19 NET RESULT (in million euros) 388m 248m 11m 55m 29m 9m 4m
ALLOCATED CAPITAL (in billion euros) 6.7bn 1.7bn 0.6bn 0.7bn 0.4bn 0.7bn 0.3bn
LOANS (in billion euros) 101bn 29bn 7bn 5bn 3bn 10bn
DEPOSITS (in billion euros) 129bn 39bn 6bn 7bn 4bn 5bn
BRANCHES (end 2Q19) 575 233 121 206 190* 16
Clients (end 2Q19) 3.5m 3.7m 0.6m 1.6m 1.3m 0.3m
* 17 Interlease branches were excluded
18Belgium BU (1): net result of 388m EUR
NET RESULT Net result at the Belgium Business Unit amounted
437
to 388m EUR
409
388
• The quarter under review was characterised by lower
361 net interest income, higher net fee and commission
income, higher dividend income, lower trading and fair
value income, higher net other income, a good
243
combined ratio, lower sales of life insurance products,
176 lower operating expenses due entirely to lower bank
taxes and lower impairment charges q-o-q
• Customer deposits excluding debt certificates and
repos rose by 3% y-o-y, while customer loans also
increased by 4% y-o-y
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
Amounts in m EUR
ORGANIC VOLUME TREND Total loans** o/w retail mortgages Customer deposits*** AuM Life reserves
Volume 101bn 36bn 129bn 195bn 26bn
Growth q-o-q* +1% +1% -4% 0% 0%
Growth y-o-y +4% +3% -1% -3% -1%
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds)
*** Customer deposits, including debt certificates but excluding repos. Customer deposit volumes excluding debt certificates & repos flat q-o-q and +3% y-o-y
19Belgium BU (2): lower NII and NIM
Amounts in m EUR
NII
649 642 637 647
▪ Net interest income (621m EUR)
625 621
19 11 8 11 7 10 • Down by 1% q-o-q and by 3% y-o-y due mainly to:
117 113 116 113 106 101
o lower reinvestment yields
o pressure on commercial loan margins (on total outstanding
portfolio)
513 518 513 523 511 510
partly offset by:
o good loan volume growth
o higher margin on new production mortgages
o higher netted positive impact of FX swaps
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 o higher number of days
NII - netted positive impact of ALM FX swaps* NII - contribution of banking o lower funding cost
NII - contribution of insurance
• Note that NII banking roughly stabilised q-o-q and fell by 2%
* From all ALM FX swap desks
** NIM is calculated excluding the dealing room and the net positive impact of ALM FX swaps & repos y-o-y
NIM**
1.73% 1.72% 1.69% 1.72% 1.71% 1.67%
▪ Net interest margin (1.67%)
• Fell by 4 bps q-o-q and by 5 bps y-o-y due chiefly to the negative
impact of lower reinvestment yields, pressure on commercial
loan margins (on total outstanding portfolio) and an increase of
the interest-bearing assets (denominator)
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
20Credit margins in Belgium
PRODUCT SPREAD ON CUSTOMER LOAN BOOK, OUTSTANDING
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
Customer loans
PRODUCT SPREAD ON NEW PRODUCTION
1.8
1.7
1.6
1.5
1.4
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
SME and corporate loans Mortgage loans
21Belgium BU (3): higher net F&C income
Amounts in m EUR
F&C
▪ Net fee and commission income (293m EUR)
318 302 289 286 293 • Net F&C income increased by 2% q-o-q due mainly to:
273
o higher management fees from mutual funds and unit-
linked life insurance products
o lower distribution costs
365 354 342 330 342 343 o higher securities-related fees
o higher fees from credit files & bank guarantees
partly offset by:
o lower entry fees
-47 -53 -53 -57 -56 -51 o lower fees from payment services
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
o lower network income
F&C - contribution of insurance F&C - contribution of banking
• Fell by 3% y-o-y driven chiefly by lower entry and
management fees from mutual funds & unit-linked life
insurance products, lower fees from credit files & bank
guarantees and lower fees from payment services partly
offset by higher securities-related fees
AuM Amounts in bn EUR
199 200 199 195 195
186
▪ Assets under management (195bn EUR)
• Stabilised q-o-q as a positive price effect (+2%) was
offset by net outflows (-2%)
• Decreased by 3% y-o-y as a positive price effect (+1%)
was more than offset by net outflows (-4%)
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
22Belgium BU (4): higher y-o-y non-life sales,
good combined ratio
▪ Sales of non-life insurance products
NON-LIFE SALES (GROSS WRITTEN PREMIUM) • Increased by 4% y-o-y
329 340 • Premium growth in all classes and tariff increases
262 273
252
238
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
Amounts in m EUR
COMBINED RATIO (NON-LIFE)
93% 93% 92% ▪ Combined ratio amounted to 92% in 1H19
87% 87% 87%
(87% in FY18), a good number despite high
technical charges due mainly to large claims
(storm and fire, especially in 1Q19) and a
reassessment on claims provisions in 2Q19 (-16m
EUR), partly offset by ceded reinsurance result
1Q 1H 9M FY
2018 2019
23Belgium BU (5): lower life sales, good cross-selling ratios
LIFE SALES ▪ Sales of life insurance products
423
• Fell by 14% q-o-q driven by lower sales of both
404 397 guaranteed interest products and unit-linked products
362
333 • Increased by 9% y-o-y driven entirely by higher sales
282 267 of unit-linked products due to commercial efforts
250
309 230 • As a result, guaranteed interest products and unit-
233
201 linked products accounted for 64% and 36%,
respectively, of life insurance sales in 2Q19
154 157 132
101 81 87
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
Guaranteed interest products Unit-linked products
Amounts in m EUR
MORTGAGE-RELATED CROSS-SELLING RATIOS ▪ Mortgage-related cross-selling ratios
90 • 86.2% for property insurance
85 86.2% • 81.6% for life insurance
80 81.6%
75
70 63.7%
65
60
Property insurance Life insurance
55
50
45 49.5%
40
24Belgium BU (6): lower FV gains and higher net other income
FV GAINS 54 ▪ The lower q-o-q figures for net gains from
54
53
financial instruments at fair value were
34 22 14
48 43 primarily due to lower dealing room income
7 17
24 19
8
(given the very strong 1Q19) and lower net
33 30
19
2
18
2
12 3
-1
19
-2
result on equity instruments (insurance),
-2 -7 -8
-23 partly offset by a positive change in ALM
-57
derivatives and a positive change in market,
-40 credit and funding value adjustments (mainly
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 as a result of changes in the underlying
Dealing room & other income M2M ALM derivatives market value of the derivative portfolio and
MVA/CVA/FVA Net result on equity instruments (overlay insurance) decreased credit spreads)
NET OTHER INCOME
73 ▪ Net other income amounted to 50m EUR in
59 2Q19, roughly in line with the normal run rate
49 50
44 45
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
25
Amounts in m EURBelgium BU (7): lower opex entirely to lower bank taxes
and lower impairments
OPERATING EXPENSES ▪ Operating expenses: -29% q-o-q and +2% y-o-y
822
• Operating expenses without bank tax rose by 7% q-o-q due
807
chiefly to
273 273
o higher staff expenses, partly due to a 6m EUR negative
575
562 559 541 4
one-off in 2Q19 as a result of a management
reorganisation (versus a 8m EUR positive one-off in
1Q19) and wage inflation, despite lower number of FTEs
549 566 534 572 o seasonally lower facilities & marketing expenses in 1Q19
o higher depreciation & amortisation costs
-4
1Q18 2Q18 3Q18 4Q18 1Q2019 2Q19
• Operating expenses without bank tax increased by 1% y-o-y
due mainly to the 6m negative one-off in 2Q19, higher ICT
Bank tax Operating expenses
and facilities expenses, partly offset by lower staff,
professional fee and marketing costs
ASSET IMPAIRMENT • Adjusted for specific items, the C/I ratio amounted to 59%
in 2Q19 and 58% YTD (58% in FY18)
83
1 • Cost/income ratio: 54% in 2Q19 and 66% YTD, distorted by
the bank taxes
49
1
82
▪ Loan loss impairments decreased to 30m EUR in
26
31
1
2Q19 (compared with 82m EUR in 1Q19) as 1Q19 was
13
48 impacted by a few corporate files. Credit cost ratio
4
30
amounted to 20 bps in 1H19 (9 bps in FY18)
14
3 1
-1
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
▪ Impaired loans ratio improved to 2.3%, 1.1% of which
over 90 days past due
Other impairments Impairments on financial assets at AC* and FVOCI
* AC = Amortised Cost. Under IAS 39, impairments on L&R
Amounts in m EUR 26Net result at the Belgium BU
CONTRIBUTION OF BANKING ACTIVITIES TO
NET RESULT OF THE BELGIUM BU*
325
302 289
279
NET RESULT AT THE BELGIUM BU*
165
437 102
409
388
361
243 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
176
CONTRIBUTION OF INSURANCE ACTIVITIES TO
NET RESULT OF THE BELGIUM BU*
135
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
58
84 82 99
78 74 37
20 55 52
21
101
63 55 69
48 49
-5 -2 -7
-24 -19 -19
* Difference between net profit at the Belgium Business Unit and the sum of 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
the banking and insurance contribution is accounted for by the rounding up
Non-Life result Life result Non-technical & taxes
or down of figures
Amounts in m EUR 27Czech Republic BU
Amounts in m EUR Net result of 248m EUR in 2Q19
NET RESULT
248
▪ +40% q-o-q excluding FX effect due mainly to higher net
171 168 170 177
82 other income (including a one-off gain of 82m EUR related
145 to the revaluation of the existing 55% stake in ČMSS), lower
operating expenses (due entirely to lower bank taxes),
166
higher net fee & commission income and higher net
interest income, partly offset by lower net results from
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 financial instruments at fair value and limited loan loss
One-off gain ČMSS impairments
▪ Customer deposits (including debt certificates, but
NII & NIM* Amounts in m EUR
excluding repos) rose by 4% y-o-y, while customer loans
308
291 302 increased by 3% y-o-y
248 241 263
3.25% 3.25% 3.18%
3.02% 2.97% 3.04%
Highlights
▪ Net interest income
• +2% q-o-q and +28% y-o-y (both excl. FX effects)
• Q-o-q increase: primarily due to the 1-month full consolidation of
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 ČMSS (+7m EUR), growth in loan volume and short-term
increasing interest rates, partly offset by lower netted positive
NIM NII
impact of ALM FX swaps and pressure on commercial margins (on
* NIM excluding ČMSS. Note that the NIM of ČMSS amounted to 1.75% in 2Q19 total outstanding portfolio)
ORGANIC VOLUME TREND Total loans ** o/w retail mortgages Customer deposits*** AuM Life reserves
Volume 29bn 15bn 39bn 10.6bn 1.3bn
Growth q-o-q* 0% +1% +1% +4% +1%
Growth y-o-y +3% +4% +4% +10% +8%
28
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds) *** Customer deposits, including debt certificates but excluding reposCzech Republic BU
▪ Net F&C income
F&C • +15% q-o-q and +4% y-o-y (both excl. FX effects)
Amounts in m EUR • Q-o-q increase driven mainly by higher fees from credit files &
67
64 64
67 bank guarantees, the 1-month full consolidation of ČMSS (+2m
62 EUR) and higher network income
58
▪ Assets under management
• 10.6bn EUR
• +4% q-o-q due to net inflows (+1%) and a positive price effect
(+3%)
• +10% y-o-y due to net inflows (+4%) and a positive price effect
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 (+6%)
▪ Trading and fair value income
• 31m EUR lower q-o-q net results from financial instruments at
fair value due mainly to lower dealing room results and a
negative q-o-q change in market, credit and funding value
adjustments (mainly as a result of changes in the underlying
CROSS-SELLING RATIOS market value of the derivatives portfolio due to lower long-term
Mortg. & prop. Mortg. & life risk Cons.fin. & life risk interest rates)
▪ Insurance
61% 59% 59%
48% 48% 49%
57% 54% 53% • Insurance premium income (gross earned premium): 131m EUR
o Non-life premium income (70m EUR) +13% y-o-y excluding FX
effect, due to growth in all products
2017 2018 1H19 2017 2018 1H19 2017 2018 1H19
o Life premium income (61m EUR) +8% q-o-q and +5% y-o-y,
excluding FX effect. Q-o-q increase mainly in unit-linked single
premiums
29 • Combined ratio of 94% in 1H19 (97% in FY18)Czech Republic BU
▪ Operating expenses
OPERATING EXPENSES Amounts in m EUR
• 179m EUR;
204
189 180 187 179
o -12% q-o-q and +4% y-o-y (both excluding FX effect)
173 35
29 1
0 0
1 o +5% q-o-q and +4% y-o-y, both excluding FX effect and
bank tax
• Q-o-q increase excluding FX effect and bank tax was due
180 186
169 178 mainly to:
160 172
o 1-month full consolidation of ČMSS (5m EUR),
o wage inflation (partly offset by FTE reductions) in 2Q19
o traditionally lower facilities & marketing expenses in
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 1Q19
Bank tax Operating expenses • Adjusted for specific items, C/I ratio amounted to roughly
48% in 2Q19 and 46% YTD (46% in FY18)
• Cost/income ratio at 38% in 2Q19 and 43% YTD, distorted
by the bank taxes and one-offs
ASSET IMPAIRMENT Amounts in m EUR
16
▪ Loan loss and other impairment
9 4 • Limited loan loss impairments in 2Q19 (compared with net
10 loan loss impairment releases in 1Q19). Credit cost ratio
7 7 amounted to 0.04% in 1H19
13 12 3
6 2015 2016 2017 2018 1H19
4
1
-4 -2 0 CCR 0.18% 0.11% 0.02% 0.03% 0.04%
-1
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
• Impaired loans ratio amounted to 2.5%, 1.5% of which >90
Other impairments Impairments on financial assets at AC* and FVOCI days past due
* AC = Amortised Cost. Under IAS 39, impairments on L&R • Impairment of 3m EUR on ‘other’ mainly as the result of
the write-off of a software project
30International Markets BU
Amounts in m EUR
163 NET RESULT
141
Net result of 104m EUR
137 26
21 31 ▪ Slovakia 11m EUR, Hungary 55m EUR, Ireland 9m EUR
55
93
104 and Bulgaria 29m EUR
32 29
57 19
70
11 13 9
51
34
62
49
14
55
Highlights (q-o-q results)
25 ▪ Slightly higher net interest income. NIM 2.65% in 2Q19 (-4 bps
27
23 19 13 18
11 q-o-q and -16 bps y-o-y)
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 ▪ Higher net fee and commission income
▪ Stable result from financial instruments at fair value
Bulgaria Ireland Hungary Slovakia ▪ Lower net other income
▪ An excellent combined ratio of 86% in 1H19
▪ Stable life insurance sales
▪ Lower costs due entirely to lower bank taxes
▪ Loan loss impairments in 2Q19 (compared with net loan loss
impairment releases in 1Q19)
ORGANIC VOLUME TREND Total loans ** o/w retail mortgages Customer deposits*** AuM Life reserves
Volume 24bn 15bn 23bn 4.7bn 0.7bn
Growth q-o-q* +2% +2% 0% +1% +1%
Growth y-o-y +5% +4% +1% +10% +5%
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds) *** Customer deposits, including debt certificates but excluding repos
31International Markets BU - Slovakia
Net result of 11m EUR
NET RESULT Amounts in m EUR
27
23
Highlights (q-o-q results)
19
18 ▪ Lower net interest income as margin pressure and lower
reinvestment yields more than offset the volume growth
13
11 ▪ Higher net fee & commission income due mainly to higher fees
from payment services
▪ Lower net other income
▪ Excellent combined ratio (81% in 1H19); lower life insurance
sales
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
▪ Lower operating expenses due entirely to lower bank taxes.
Higher operating expenses without bank tax due chiefly to
wage inflation and higher ICT expenses
▪ Higher loan loss impairments; credit cost ratio of 0.27% in 1H19
Volume trend
ORGANIC Total o/w retail Customer
▪ Total customer loans rose by 2% q-o-q and by 7% y-o-y, the
VOLUME TREND loans ** mortgages deposits***
latter due mainly to the continuously increasing mortgage
Volume 7bn 3bn 6bn portfolio and corporate portfolio
Growth q-o-q* +2% +3% -1% ▪ Total customer deposits decreased by 1% q-o-q (due to
corporate deposits) and stabilised y-o-y
Growth y-o-y +7% +9% 0%
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds)
*** Customer deposits, including debt certificates but excluding repos
32International Markets BU - Hungary
Net result of 55m EUR
NET RESULT Amounts in m EUR
62
55 Highlights (q-o-q results)
51 49 ▪ Higher net interest income excluding FX effect driven mainly by
volume growth
34
▪ Higher net fee and commission income excluding FX effect due
25 mainly to strong fees from payment services in 2Q19
(compared to traditionally lower fees from payment
transactions in the first quarter)
▪ Lower net results from financial instruments at fair value
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 ▪ Good non-life commercial performance y-o-y in all major
product lines and growing average tariff in motor retail;
excellent combined ratio (89% in 1H19); higher sales of life
insurance products q-o-q
▪ Lower operating expenses excluding FX effect due entirely to
lower bank taxes
▪ Net impairment releases in retail. Credit cost ratio of -0.13% in
ORGANIC Total o/w retail Customer 1H19
VOLUME TREND loans ** mortgages deposits***
Volume 5bn 2bn 7bn Volume trend
Growth q-o-q* +4% +2% -1% ▪ Total customer loans rose by 4% q-o-q and by 8% y-o-y, the
Growth y-o-y +8% +6% +4% latter due mainly to mortgages, consumer loans and corporates
▪ Total customer deposits -1% q-o-q (due mainly to SMEs) and
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds) +4% y-o-y (due mainly to retail and SMEs)
*** Customer deposits, including debt certificates but excluding repos
33International Markets BU - Ireland
Net result of 9m EUR
57 NET RESULT Amounts in m EUR
55
Highlights (q-o-q results)
▪ Slightly higher net interest income and net interest margin
▪ Net other income was impacted by an additional 4m EUR for
32 the industry wide review of the tracker rate mortgage products
originated in Ireland before 2009
▪ Lower expenses due mainly to lower bank taxes and lower ICT
14
11
9 costs, despite a 2m EUR negative one-off cost related mainly to
the sale of part of the legacy loan portfolio
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 ▪ No impairments in 2Q19, as 12m EUR net impairment releases
were offset by charges related to the sale of part of the legacy
loan portfolio. Credit cost ratio of -0.23% in 1H19
ORGANIC Total o/w retail Customer Volume trend
VOLUME TREND loans ** mortgages deposits*** ▪ Total customer loans rose by 1% q-o-q and by 2% y-o-y
▪ Total customer deposits +1% q-o-q and -9% y-o-y, the latter as
Volume 10bn 9bn 5bn
a result of the reduction in the overall funding requirement
Growth q-o-q* +1% +1% +1% following legacy loan sales and the replacement of expensive
Growth y-o-y +2% +2% -9% corporate deposits by intragroup funding
* Non-annualised
** Loans to customers, excluding reverse repos (and bonds) and disregarding the
sale of part of the legacy loan portfolio
*** Customer deposits, including debt certificates but excluding repos 34International Markets BU - Bulgaria
Net result of 29m EUR
NET RESULT Amounts in m EUR
31
29 Highlights (q-o-q results)
26 ▪ Banking: higher net result
21 ▪ Stable total income
19
▪ Lower operating expenses due mainly to lower bank taxes and
13 facilities expenses
▪ Lower loan loss impairments. Credit cost ratio of 0.15% in
1H19
▪ Insurance: lower net result
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 ▪ Strong non-life commercial performance y-o-y in motor retail
(both strong volume growth and growing average tariff);
excellent combined ratio at 85% in 1H19
▪ Lower life insurance sales q-o-q
Volume trend:
ORGANIC Total o/w retail Customer ▪ Total customer loans +4% q-o-q and +6% y-o-y, the latter mainly
VOLUME TREND loans ** mortgages deposits***
due to the increasing SME portfolio
Volume 3bn 1bn 4bn ▪ Total customer loans: new bank portfolio +4% q-o-q and +7%
Growth q-o-q* +4% +2% 0% y-o-y, while legacy -6% q-o-q and -24% y-o-y
▪ Total customer deposits stabilised q-o-q and rose by 8% y-o-y
Growth y-o-y +6% +3% +8%
(the latter due mainly to retail and corporates)
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds)
*** Customer deposits, including debt certificates but excluding repos
35Group Centre
Net result of 4m EUR
The net result for the Group Centre comprises the results
NET RESULT Amounts in m EUR
from activities and/or decisions specifically made for
5
7
4
group purposes (see table below for components)
-3
Highlights (q-o-q results)
Q-o-q deterioration was attributable mainly to:
▪ lower net results from financial instruments at fair value due
-17
largely to a negative change in M2M ALM derivatives
-53 partly offset by
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 ▪ lower income taxes, mainly thanks to a 34m EUR positive one-off
related to a change in the FX hedging policy
▪ higher ceded reinsurance result
▪ lower operating expenses
▪ higher net other income
BREAKDOWN OF NET RESULT AT GROUP CENTRE 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
Group item (ongoing business) -17 -63 -27 -18 2 -1
Operating expenses of group activities -17 -15 -18 -28 -18 -14
Capital and treasury management -4 8 4 11 -3 -7
Holding of participations 1 3 -4 -9 -11 21
Group Re 7 6 3 3 0 8
Other -3 -64 -13 5 34 -9
Ongoing results of divestments and companies in run-down 23 10 10 15 4 5
Total 5 -53 -17 -3 7 4
Amounts in m EUR 36Overview of contribution of business units to 1H19 result
Amounts in m EUR
NET PROFIT – KBC GROUP
1H19 ROAC: 21%*
2,639 2,575 2,570
2,427
1,090 1,322
1,463
1,314
1,175
1,485 1,248
1,176 1,113
2015 2016 2017 2018 1H19
2H 1H
NET PROFIT – BELGIUM NET PROFIT – CZECH REPUBLIC NET PROFIT – INTERNATIONAL MARKETS
1H19 ROAC: 17%* 1H19 ROAC: 51%* 1H19 ROAC: 15%*
1,564 1,575
1,432 1,450
702
654
596
706 790 542 533
770 338
853 338 428 444
276 425
271 234
152
564 245 245
858 785 175
680 320 364 316 153 299
579 271 292
183
92
2015 2016 2017 2018 1H19 2015 2016 2017 2018 1H19 2015 2016 2017 2018 1H19
2H 1H 2H 1H 2H 1H
* Distorted by bank taxes
37Balance sheet:
Loans and deposits continue to grow in most core countries
9%
BE 7%
Customer deposit volumes
4% excluding debt certificates
3% & repos +3% y-o-y
0%
Y-O-Y ORGANIC* VOLUME GROWTH -1% Loans** Retail Deposits***
Loans** Retail Deposits*** mortgages
mortgages 8%
6%
4% 4%
4% 4% 3% 3%
Customer deposit volumes CR
excluding debt certificates
& repos +3% y-o-y
Loans** Retail Deposits*** Loans**** Retail Deposits***
4% mortgages mortgages
0%
8%
Loans** Retail Deposits*** 6%
mortgages
4%
2% 2%
Loans** Retail Deposits***
-9%
mortgages
* Volume growth excluding FX effects and divestments/acquisitions Loans** Retail Deposits***
** Loans to customers, excluding reverse repos (and bonds)
*** Customer deposits, including debt certificates but excluding repos
mortgages
38
**** Total customer loans in Bulgaria: new bank portfolio +7% y-o-y, while legacy -24% y-o-yKBC Group
Section 3
Strong solvency and
solid liquidity
39More stringent ECB approach re. dividend policy
Our unchanged dividend policy / capital distribution to shareholders
• Payout ratio policy (i.e. dividend + AT1 coupon) of at least 50% of consolidated profit
• Interim dividend of 1 EUR per share in November of each accounting year as an advance on the total dividend
• On top of the payout ratio of 50% of consolidated profit, each year, the Board of Directors will take a decision,
at its discretion, on the distribution of the capital above the ‘Reference Capital Position‘
More stringent ECB approach since 1Q19, based on the ECB Umbrella Decision
• We can apply for interim profit recognition based on the ECB Umbrella Decision (Decision EU 2015/656 of 4
February 2015), which states that the dividend to be deducted is the highest of (i) maximum pay-out according
to dividend policy, (ii) average pay-out ratio over the last 3 years or (iii) last year’s pay-out ratio
• BUT since recently:
• the ECB interprets ‘at least 50%’ as a range with an upper end of 100% pay-out
• the ECB indicated that KBC should first accrue for the interim dividend of 1 EUR per share before any
profit can be recognised (under the ECB Umbrella decision)
What does this mean in practice in the meantime?
• In anticipation of further clarification and reaching agreement upon our approach re. the interim profit
recognition process going forward, no interim profit has been recognised for 1H19. This resulted in a CET1 ratio
of 15.6% at the end of 1H19
• When including 1H19 net result taking into account 59% pay-out (dividend + AT1 coupon), in line with the
payout ratio in FY2018, the CET1 ratio at KBC Group (Danish Compromise) amounted to 15.9% at the end of
1H19
40Strong capital position
Fully loaded Basel 3 CET1 ratio at KBC Group (Danish Compromise) ▪ The common equity ratio slightly decreased
15.9% 15.8% 16.0% 16.0% 15.7% * 15.6% *
from 15.7% at the end of 1Q19 to 15.6%* at
the end of 2Q19 based on the Danish
14.0% ‘Own Capital Target’ Compromise due mainly to the closing of the
ČMSS transaction, partly offset by final
10.7% fully loaded regulatory minimum
dividend payment of KBC Insurance to KBC
Group. This clearly exceeds the minimum
capital requirements** set by the competent
supervisors of 10.7% fully loaded. Our ‘Own
Capital Target’ remained at 14.0% for 2019
after the update of the median CET1 ratio of
1Q18 1H18 9M18 FY18 1Q19 1H19 our peer group (based on FY18 numbers)
* No interim profit recognition given more stringent ECB approach * See previous slide…Is 15.9% when including 1H19 net result
taking into account the payout ratio in FY2018 of 59% (dividend +
Fully loaded Basel 3 total capital ratio (Danish Compromise) AT1 coupon)
** Excludes a pillar 2 guidance (P2G) of 1.0% CET1
20.8% 20.9%
19.7% 19.2% 19.3% 19.2%
2.4% T2 2.3% T2
2.3% T2 2.2% T2 2.1% T2 2.1% T2
1.5% AT1 2.6% AT1 2.6% AT1
1.1% AT1 1.6% AT1 1.6% AT1 ▪ The fully loaded total capital ratio fell from
19.3% at the end of 1Q19 to 19.2% at the
end of 2Q19
15.9% CET1 15.8% CET1 16.0%CET1 16.0% CET1 15.7% CET1 15.6% CET1
1Q18 1H18 9M18 FY18 1Q19 1H19
41Fully loaded Basel 3 leverage ratio and Solvency II ratio
Fully loaded Basel 3 leverage ratio at KBC Group Fully loaded Basel 3 leverage ratio at KBC Bank
6.0% 6.1% 6.1% 6.0% 6.1%
5.7%
5.1% 5.2% 5.2% 5.2% 5.1%
4.7%
1Q18 1H18 9M18 FY18 1Q19 1H19 1Q18 1H18 9M18 FY18 1Q19 1H19
Solvency II ratio
1Q19 1H19 ▪ The decrease (-9% points) in the Solvency II ratio
was mainly the result of lower interest rates,
Solvency II ratio 210% 201% impact of sovereign spreads movements, lapse
parameter updates and implementation of a new
FX hedging policy
42Strong and growing customer funding base with liquidity
ratios remaining very strong
▪ KBC Bank continues to have a strong retail/mid-cap deposit base in its core markets – resulting in a stable funding mix with a significant portion of the funding
attracted from core customer segments and markets
▪ Customer funding increased slightly at the expense of the certificates of deposits which decreased versus FY18. The elevated amount of ST wholesale funding
remains as a result of continued ST arbitrage opportunities
7% 9% 9% 9% Funding from customers (m EUR)
11% 1% 10% 11% 10% 173.000
1% 1% 1% 1% 155.774 163.824
9% 8% 8% 4% 2% 6% 7% 133.766 139.560 143.690
8% 8% 6%
8% 9% 8% 8% 8%
8% 8% 8%
2% 3% 3% 7% 4%
3% 7% 9%
FY14 FY15 FY16 FY17 FY18 2Q19
73% 71% 71% 71% 3%
69% 69%
63% 63%
71% 20% Retail and SME
customer Mid-cap
driven Government and PSE
77%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 2Q19
Unsecured Interbank Funding Total Equity
Secured Funding Certificates of deposit
Debt issues placed at institutional relations Funding from Customers
Ratios FY18 1H19 Regulatory requirement
▪ NSFR is at 133% and LCR is at 140% by the end of 2Q19
• Both ratios were well above the regulatory requirement of 100%
NSFR* 136% 133% ≥100%
LCR** 139% 140% ≥100%
* Net Stable Funding Ratio (NSFR) is based on KBC Bank’s interpretation of the proposal of CRR amendment.
** Liquidity Coverage ratio (LCR) is based on the Delegated Act requirements. From EOY2017 onwards, KBC
Bank discloses 12 months average LCR in accordance to EBA guidelines on LCR disclosure. 43KBC Group
Section 4
Looking forward
44Looking forward
➢ In line with global economic developments, the European economy is currently going through a
slowdown. Decreasing unemployment rates and growing labour shortages in some European
economies, combined with gradually rising wage inflation, may continue to support private
Economic consumption. Investment may also remain supportive for growth. The main factors that could
outlook substantially impede European economic sentiment and growth remain the risk of further
economic de-globalisation, including an escalation of trade conflicts, Brexit and political turmoil
in some euro area countries
➢ Solid returns for all Business Units
➢ B4 impact (as of 1 January 2022) for KBC Group estimated at roughly 8bn EUR higher RWA on
fully loaded basis at end 2018, corresponding with 9% RWA inflation and -1.3% points impact on
Group
CET1 ratio
guidance ➢ Referring to our dividend policy, KBC will pay an interim dividend of 1 EUR per share in
November 2019, as an advance payment on the total dividend. The pay-out ratio policy (i.e.
dividend + AT1 coupon) of at least 50% of consolidated profit is reconfirmed
➢ Next to the Belgium and Czech Republic Business Units, the International Markets Business Unit
Business
has become a strong net result contributor (although 2018 figures were flattered by net
units impairment releases)
45KBC Group
Annex 1
Company profile
46KBC Group in a nutshell (1)
✓ We want to be among Europe’s best performing financial institutions! By achieving this,
KBC wants to become the reference in bank-insurance in its core markets
• We are a leading European financial group with a focus on providing bank-insurance products and services to
retail, SME and mid-cap clients, in our core countries: Belgium, Czech Republic, Slovakia, Hungary, Bulgaria and
Ireland.
✓ Diversified and strong business performance
… geographically
• Mature markets (BE, CZ, IRL) versus developing markets (SK, HU, BG)
• Economies of BE & 4 CEE-countries highly oriented towards Germany, while IRL is more oriented to the UK & US
• Robust market position in all key markets & strong trends in loan and deposit growth
… and from a business point of view KBC Group: topline diversification 2014-2018 (in %)
• An integrated bank-insurer 100%
• Strongly developed & tailored AM business 80% 45% 47% 49% 47%
49%
• Strong value creator with good operational
60%
results through the cycle Diversification Synergy
• Unique selling proposition: in-depth 40%
55% 53% 51% 53%
knowledge of local markets and profound 20%
51%
relationships with clients
0%
• Integrated model creates cost synergies and results Customer Centricity FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
in a complementary & optimised product offering Net Interest Income Other Income
• Broadening ‘one-stop shop’ offering to our clients 47KBC Group in a nutshell (2)
✓ High profitability
CET1 generation
C/I ratio Combined ratio Net result ROE before any deployment
277 bps 279 bps 271 bps
EUR
57% 88% 2570m EUR 16%
59% 92% 1175m 15%
2016 2017 2018
FY18
1H19
✓ Solid capital position… ✓ … and robust liquidity positions
Fully loaded Basel 3 CET1 ratio of KBC Group (Danish Compromise)
15.9% 15.8% 16.0% 16.0% 15.7%* 15.6% * NSFR LCR
14.0% ‘Own Capital Target’
10.6% regulatory minimum**
136%
139%
133% 140%
1Q18 1H18 9M18 FY18 1Q19 1H19 FY18
1H19
* No interim profit recognition given more stringent ECB approach
** 10.7% regulatory minimum in 2019 48KBC Group in a nutshell (3)
✓ We aim to be one of the better capitalised financial institutions in Europe
• Every year, we assess the CET1 ratios of a peer
Flexible buffer for M&A 1.7%
group of European banks active in the retail, SME
and corporate client segments. We position
ourselves on the fully loaded median CET1 ratio of
the peer group (remained 14% at end of 2018) ‘Reference Capital
Own capital target Position’
• KBC Group’s 2% flexible buffer for potential add-on
= 14.0% = 15.7%
M&A in our core markets decreased to 1.7% as the Median CET1
acquisition of the 45% stake in ČMSS was closed at Peers (FL)
the end of May 2019
• This buffer comes on top of our ‘Own Capital
Target’ and together they form the ‘Reference
Capital Position’
• Any M&A opportunity will be assessed subject to 2019
very strict financial and strategic criteria
✓ Capital distribution to shareholders
• Payout ratio policy (i.e. dividend + AT1 coupon) of at least 50% of consolidated profit
• Interim dividend of 1 EUR per share in November of each accounting year as an advance on the total dividend
• On top of the payout ratio of 50% of consolidated profit, each year, the Board of Directors will take a decision,
at its discretion, on the distribution of the capital above the ‘Reference Capital Position‘
49Well-defined core markets: access to ‘new growth’ in Europe
Market share
(end 2018) BE CZ SK HU BG IRL
20% 19%
Loans and deposits 10% 11% 10% 9%*
3.5m clients 3.7m clients
575 branches 233 branches 32% 23%
101bn EUR loans 29bn EUR loans 13% 14%
Investment funds 7%
129bn EUR dep. 39bn EUR dep.
IRELAND
0.6m clients
24%
121 branches Life insurance 13% 8% 4% 3%
7bn EUR loans
BELGIUM
6bn EUR dep.
9% 8% 11%
Non-life insurance 7%
CZECH REP 3%
0.3m clients SLOVAKIA
16 branches
10bn EUR loans HUNGARY Real GDP
5bn EUR dep. growth BE CZ SK HU BG IRL
1.6m clients 61%
206 branches
% of Assets 23%
5bn EUR loans 4% 3% 2% 4%
7bn EUR dep.
8.2%
BULGARIA 4.1% 4.9%
2.9% 3.1%
2018 1.4%
1.3m clients 4.3% 5.0%
2.5% 3.5% 3.2%
190 branches 1.2%
2019e
3bn EUR loans
Internat
Belgium Czech
ional 4bn EUR dep. 3.4% 3.5% 3.1% 3.0%
Business Republic 2.3%
Business
Markets 1.1%
Unit Business
Unit 2020e
Unit
GDP growth: KBC data, May ‘19
50
* Retail segmentBusiness profile
BREAKDOWN OF ALLOCATED CAPITAL BY BUSINESS UNIT AS AT 30 JUNE 2019
Czech Republic
15%
Belgium 61%
21%
International Markets
3%
Group Centre
▪ KBC is a leading player (providing bank-insurance products and services to retail, SME and mid-cap clients) in
Belgium, the Czech Republic and its 4 core countries in the International Markets Business Unit
51Shareholder structure
SHAREHOLDER STRUCTURE AT END 1H19
Other core
MRBB
7.3%
Cera 11.5%
2.7%
KBC Ancora 18.6%
59.9%
Free float
▪ Roughly 40% of KBC shares are owned by a syndicate of core shareholders, providing continuity to pursue long-term
strategic goals. Committed shareholders include the Cera/KBC Ancora Group (co-operative investment company),
the Belgian farmers’ association (MRBB) and a group of Belgian industrialist families
▪ The free float is held mainly by a large variety of international institutional investors
52KBC Group going forward:
Aiming to be among the best performing financial institutions in Europe
▪ KBC wants to be among Europe’s best
performing financial institutions. This will
be achieved by:
- Strengthening our bank-insurance
business model for retail, SME and mid-
cap clients in our core markets, in a
highly cost-efficient way
- Focusing on sustainable and profitable
growth within the framework of solid risk,
capital and liquidity management
- Creating superior client satisfaction via a
seamless, multi-channel, client-centric
distribution approach
▪ By achieving this, KBC wants to become
the reference in bank-insurance in its
core markets
53KBC Group going forward:
The bank-insurance business model, different countries, different
stages of implementation
Level 4: Integrated distribution and operation
Acting as a single operational company: bank and insurance operations Belgium
working under unified governance and achieving commercial and non-
commercial synergies
Level 3: Integrated distribution
Acting as a single commercial company: bank and insurance
Target for Central
operations working under unified governance and achieving Europe
commercial synergies
Level 2: Exclusive distribution KBC targets to reach at
Bank branches selling insurance products from intra-
least level 3 in every
group insurance company as country, adapted to the
additional source of fee income
local market structure and
KBC’s market position in
Level 1: Non-exclusive
distribution
banking and insurance
Bank branches selling insurance
products of third party insurers as
additional source of fee income
54More of the same… but differently…
• Integrated distribution model • Client-centricity will be further • Investment in our digital
according to a real-time fine-tuned into ‘think client, but presence (e.g., social media) to
omni-channel approach design for a digital world’ enhance client relationships and
remains key but client anticipate their needs
interaction will change over • Digitalisation end-to-end, front-
time. Technological and back-end, is the main lever: • Easy-to-access and convenient-
development will be the • All processes digital to-use set-up for our clients
driving force • Execution is the
differentiator • Clients will drive the pace of
• Human interface will still play action and change
a crucial role • Further increase efficiency and
effectiveness of data management • Further development of a fast,
simple and agile organisation
• Simplification is a • Set up an open architecture IT structure
prerequisite: package as core banking system for
• In the way we operate our International Markets Unit • Different speed and maturity in
• Is a continuous effort different entities/core markets
• Is part of our DNA • Improve the applications we offer
our clients (one-stop-shop offering) • Adaptation to a more open
via co-creation/partnerships with architecture (with easy plug in
Fintechs and other value chain and out) to be future-proof and
players to create synergy for all
55KBC the reference…
Group financial guidance (Investor visit 2017)
Guidance End 2018
CAGR total income (‘16-’20)* ≥ 2.25% by 2020 2.5% (CAGR FY18 – FY16)
C/I ratio banking excluding bank tax ≤ 47% by 2020 51% (FY2018)
C/I ratio banking including bank tax ≤ 54% by 2020 57.5% (FY2018)
Combined ratio ≤ 94% by 2020 88% (FY2018)
Dividend payout ratio ≥ 50% as of now 59% (end 2018, incl. total dividend and
AT1 coupon)
* Excluding marked-to-market valuations of ALM derivatives
Regulatory requirements End 1H19
Common equity ratio*excluding P2G ≥ 10.7% by 2019 15.6%**
Common equity ratio*including P2G ≥ 11.7% by 2019 15.6%**
MREL ratio ≥ 9.76% by May ‘19 10.1%***
NSFR ≥ 100% as of now 133%
LCR ≥ 100% as of now 140%
• Fully loaded, Danish Compromise. P2G = Pillar 2 guidance
** See slide 40… Is 15.9% when including 1H19 net result taking into account the payout ratio in FY2018 of 59% (dividend + AT1 coupon)
*** MREL target as % of TLOF (Total Liabilities and Own Funds)
56KBC the reference…
Group non-financial guidance (Investor visit 2017)
Non-financial guidance: End 2018 Non-financial guidance: End 2018
CAGR Bank-Insurance clients (growth CAGR Bank-Insurance stable clients (growth
FY18-FY16) FY18-FY16)
(1 Bank product + 1 Insurance product) (3 Bk + 3 Ins products in Belgium;
2 Bk + 2 Ins products in CE)
BU BE > 2% by 2020 +1% BU BE > 2% by 2020 +1%
BU CR > 15% by 2020 +12% BU CR > 15% by 2020 +19%
BU IM > 10% by 2020 +31% BU IM > 15% by 2020 +33%
Non-financial guidance: End 2Q19
% Inbound contacts via omni-channel and
digital channel*
KBC Group** > 80% by 2020 80%
• Clients interacting with KBC through at least one of the non-physical channels (digital or
through a remote advisory centre), possibly in addition to contact through physical branches.
This means that clients solely interacting with KBC through physical branches (or ATMs) are
excluded
** Bulgaria & PSB out of scope for Group target
57Inbound contacts via omni-channel and digital channel* at KBC Group** amounted
to 80% in 2Q19… already reaching the Investor Visit target (≥ 80% by 2020)
• Clients interacting with KBC through at least one of the non-physical channels (digital or through a remote advisory centre), possibly in addition to contact
through physical branches. This means that clients solely interacting with KBC through physical branches (or ATMs) are excluded
** Bulgaria & PSB out of scope for Group target 58Realisation of omnichannel strategy* – client mix in 2Q19
CZECH
BELGIUM SLOVAKIA HUNGARY IRELAND BULGARIA***
REPUBLIC
14% 10% 10%
23% 21% 27% 25%
32% 32% 12%
40%
47%
1% 5%
43% 69%
54% 38%
56% 41%
Omnichannel clients Contact Centre only clients
Digital only clients Branch or ATM only clients**
* Clients interacting with KBC through at least one of the non-physical channels (digital or through a remote advisory centre), possibly in addition to contact through physical branches.
This means that clients solely interacting with KBC through physical branches (or ATMs) are excluded
** Might be slightly underestimated
*** Bulgaria out of scope for Group target
59Digital Investments 2017-2020
Cashflow 2017-2020 = 1.5bn EUR Operating Expenses 2017-2020 = 1bn EUR
Regulatory driven Organic growth
developments (IFRS or operational
48 55
9, CRS(*), MIFID, Regulatory efficiencies 43 44
etc.) 20% Strategic
78 83 90
Growth 94
36%
Strategic Transformation 112 125 127 128
44%
2017 2018 2019 2020
Omni-channel Strategic Grow Strategic Transform Regulatory
and core-banking
system
(*) The Common Reporting Standard (CRS) refers to a systematic and periodic exchange of information at international level aimed at preventing tax evasion. Information on the
taxpayer in the country where the revenue was taken is exchanged with the country where the taxpayer has to pay tax. It concerns an exchange of information between as many as 53
OECD countries in the first year (2017). By 2018, another 34 countries have joined.
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