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KBC Group / BankDebt presentationDecember 2016
KBC Group - Investor Relations Office – Email:More infomation: www.kbc.com
2
This presentation is provided for information purposes only. It does not constitute an offer to sell or the solicitation to buy anysecurity issued by the KBC Group.
KBC believes that this presentation is reliable, although some information is condensed and therefore incomplete. KBC cannot beheld 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 capitaltrends of KBC, involving numerous assumptions and uncertainties. There is a risk that these statements may not be fulfilled andthat future developments differ materially. Moreover, KBC does not undertake any obligation to update the presentation in linewith new developments.
By reading this presentation, each investor is deemed to represent that it possesses sufficient expertise to understand the risksinvolved.
Important information for investors
3
3Q 2016 key takeaways for KBC Group
STRONG BUSINESS PERFORMANCE IN 3Q16Good net result of 629m EUR in 3Q16 (and 1.74bn EUR in 9M16)o Good commercial bank-insurance franchises in our core markets and core activitieso Slight q-o-q increase in customer loan volumes in most of our core countrieso Slightly lower net interest income and net interest margin q-o-qo Higher net fee and commission income q-o-q, despite net asset management outflowso Lower net gains from financial instruments at fair value, lower realised AFS gains and higher net other income o Combined ratio of 94% YTD. Excellent sales of non-life products, but decline in sales of life insurance productso Good cost management resulted in a cost/income ratio of 57% YTD adjusted for specific items o Excellent, but unsustainably low level of impairment charges. Net loan provision release of 28m EUR in 3Q16 in Ireland. The impairment
guidance for Ireland is updated towards a release of a 10m-50m EUR range for FY16
SOLID CAPITAL AND ROBUST LIQUIDITY POSITIONSo Common equity ratio (B3 phased-in) of 15.1% based on the Danish Compromise at end 9M16, which clearly exceeds the minimum
capital requirements set by the ECB (9.75%) and the NBB (0.5%), i.e. an aggregate 10.25% for 2016. The B3 fully loaded common equityratio stood at 15.3% based on the Danish Compromise at end 9M16
o Fully loaded B3 leverage ratio, based on current CRR legislation, amounted to 6.2% at KBC Groupo Continued strong liquidity position (NSFR at 123% and LCR at 137%) at end 9M16o An interim dividend of 1 EUR per share (an advance payment on the total 2016 dividend) will be paid on 18 November 2016
4
Contents
1 Strategy and business profile
2 Financial performance
3 Balance sheet
4 Solvency and liquidity
5 MREL strategy
Appendices
6 3Q16 Wrap up
5
BE CZ SK HU BG
Loans and deposits
Investment funds
Life insurance
Non-life insurance
Well-defined core markets provide access to ‘new growth’ in Europe
1. Excluding group insurance. Including group insurance, market share of life insurance amounted to 13% at the end of 2015
2. Source: KBC data, November 2016
MARKET SHARE (END 2015)
21% 19%11% 10%
3%
18%7%26%
40%
7%17%1
12%4%4%
10%5%3%
7%9%
BE CZ SK HU BG
% of Assets
2015
2016e
2017e
1%3%3%15%
70%
3.0%2.9%3.6%4.3%
1.5%
3.0%2.0%3.5%2.5%
1.3%
3.4%2.6%3.0%2.3%1.2%
REAL GDP GROWTH OUTLOOK FOR CORE MARKETS2
Macroeconomic outlookBased on GDP, CPI and unemployment trendsInspired by the Financial Times
IRELAND UK
BELGIUM
NETHERLANDS
GERMANY
CZECH REP
SLOVAKIA
HUNGARY
BULGARIA
GREECE
ITALY
PORTUGAL
SPAIN
FRANCE
KBC Group’s core markets
and Ireland
6
Group’s legal structure and issuer of debt instruments
KBC Group NV
KBC Bank KBC Insurance
100%100%
KBC IFIMA*
* All debt obligations of KBC IFIMA are unconditionally and irrevocably guaranteed by KBC Bank.
Retail and Wholesale EMTN
AT 1 Tier 2 Wholesale EMTN
Covered bond No public issuance
KBC Asset Management
48%
52%
No public issuance
7
Overview of key financial data at 3Q 2016
1. As at 15 November 2016
2. Presented ratio is fully loaded; on a phased-in basis the ratio as at 3Q 2016 stands at 15.1% for KBC Group and 14.1% for KBC Bank
3. Includes KBC Asset Management ; excludes holding company eliminations
4. Adjusted for specific items, the C/I ratio amounted to c.57% in 3Q 2016
KBC Group
24bn EUR
Market cap1
1.7bn EUR
Net result 9M16
266bn EUR
Total assets
17bn EUR
Total equity
15.3%
CET1 ratio2
KBC BankNet result 9M 20163: 1 554m EUR
Total assets: 230bn EUR
Total equity: 14bn EUR
CET1 ratio2: 14.3%
C/I ratio4: 52%
Credit Cost Ratio 9M 2016: 0.07%
KBC InsuranceNet result 9M 2016: 217m EUR
Total assets: 39bn EUR
Total equity: 3bn EUR
Solvency II ratio: 170%
Combined operating ratio 9M 2016: 94%
8
Credit ratings as at 15 November 2016
S&PMoody’s Fitch
Gro
up
Ban
kIn
sura
nce
Senior UnsecuredTier II
Additional Tier I
Short-term P-2 A-2 F1
Outlook Stable Stable Positive
Baa1 BBB+ A-- BBB- BBB+
- BB BB
Senior Unsecured
Additional Tier I
Short-term P-1 A-1 F1
Outlook Stable Stable Positive
A1 A A-
-2 -2 -2Tier II (CoCo)1
Covered Bonds AAA - AAA
-
Financial Strength Rating
Issuer Credit Rating
- A- -
- A- -
BBB-
1. Next to a Contigent Convertible Tier II debt obligation, KBC Bank has approx. 0.6bn EUR of unrated non-convertible Tier II debt outstanding issued as private placement or to retail investors.2. Outstanding Tier I, net amount 44.5m GBP and callable as of December 2019, rated Baa3 by Moody’s, BB+ by S&P and BB+ by Fitch.
Outlook - Stable -
-
On 24 October 2016, S&P revised the outlook of KBC Bank to Stable from Negative “reflecting the continued strengthening of KBC group'sbalance sheet, and its solid and resilient earnings profile despite the low-interest-rate environment”. At the same time all KBC’s ratings were affirmed.
9
Overview of KBC Group
STRONG BANK-INSURANCE GROUP PRESENT WITH LEADING MARKET POSITIONS IN ITS CORE GEOGRAPHIES (BELGIUM AND CEE)• A leading financial institution in both Belgium and the Czech Republic
• Business focus on Retail, SME & Midcap clients
• Unique selling proposition: in-depth knowledge of local markets and profound relationships with clients
INTEGRATED BANK-INSURANCE BUSINESS MODEL, LEADING TO HIGH CROSS-SELLING RATES• Strong value creator with good operational results through the cycle
• Integrated model creates cost synergies by avoiding overlap of supporting entities and generates added value for our clients through a complementary and optimised product and service offering
10
Business profile: KBC is a leading player in Belgium and its 4 core countries in CEE
BREAKDOWN OF ALLOCATED CAPITAL BY BUSINESS UNIT AT 30 September 2016
CFO SERVICES
CRO SERVICES
CORPORATE STAFF
BELGIUMCZECH
REPUBLICINTERNATIONAL
MARKETS
* Covers inter alia impact own credit risk and results of holding company
Group Centre
5%
International Markets
19%
Czech Republic
15%
Belgium 61%
11
KBC Group going forward:To be among the best performing retail-focused institutions in Europe
KBC wants to be among Europe’s best performing retail-focused 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
12
Based on adjusted figures
1. Excluding marked-to-market valuations of ALM derivatives2. 2019 minimum fully loaded CET1 ratio under the Danish compromise of 10.40% set by the ECB (minimum Pillar 1 of 4.5% plus 1.75% P2R) in combination with a capital
conservation buffer of 2.5%, NBB’s systemic buffer (1% minimum in 2017 increasing to 1.5% in 2018) and 0.15% of countercyclical buffer from the Czech and Slovak competent authorities. P2G is set at 1%
Summary of the financial targets at KBC Group level as announced at our investor day in June 2014
Targets… by…
CAGR total income (‘13-’17)1 ≥ 2.25% 2017
CAGR bank-insurance gross income (‘13-’17) ≥ 5% 2017
C/I ratio ≤ 53% 2017
Combined ratio ≤ 94% 2017
Common equity ratio (fully loaded, Danish compromise)
≥ 10.40%2 2019
Total capital ratio(fully loaded, Danish compromise)
≥ 17% 2017
NSFR ≥ 105% 2014
LCR ≥ 105% 2014
Dividend payout ratio ≥ 50% 2016
13
Contents
1 Strategy and business profile
2 Financial performance
3 Balance sheet
4 Solvency and liquidity
5 MREL strategy
Appendices
6 3Q16 Wrap up
14
1 Note that the scope of consolidation has changed over time, due partly to divestments
2 Difference between the net result at KBC Group and the sum of the banking and insurance contribution are the holding-company/group items
CONTRIBUTION OF BANKING ACTIVITIES TO KBC GROUP NET RESULT1,2
644
358524564
412552
4Q15
903
448
-310
765
3Q15 3Q162Q161Q162Q151Q15
-41
8959 48 44
83
73
6250 44
31
22
-30-21-19 -35
2772
58
95
-9
4Q15
33
-34
3Q15
79
3Q162Q162Q15
121
1
75
1Q16
48
1Q15
121
Goodwill imprairments
Non-technical & taxes
Life result
Non-life result
CONTRIBUTION OF INSURANCE ACTIVITIES TO KBC GROUP NET RESULT1,2
Amounts in m EUR
Earnings capacity
-344
612
13
765
1 762
FY13
1 015
FY12FY11 FY15
2 639
2 218
FY14 9M16
1 742
FY10
1 860
FY09
-2 466
NET RESULT1
Goodwill impairmentsImpact Financial Holding
Impact Financial Holding
Goodwill impairments
15
Slightly lower net interest income and net interest margin
Net interest income• Down by 1% q-o-q and slightly up y-o-y• The q-o-q decrease was driven primarily by:
o lower reinvestment yieldso hedging losses on previously refinanced mortgageso pressure on commercial loan margins in most core countrieso slightly lower upfront prepayment feesalmost fully offset by:o lower funding costso continued good volume growth in current accounts and loanso further positive effect of enhanced ALM managemento an increase of 7m EUR in NII from the dealing room
Net interest margin (1.90%)• Down by 4 bps q-o-q and by 9 bps y-o-y• Q-o-q decrease is due to lower reinvestment yields, pressure on
commercial loan margins in most core countries and hedging losses onpreviously refinanced mortgages partly offset by lower funding costs
NIM
NII
906 898 903 898900
162
888
154 156
914
1574142
154157163 528101922311 064
3Q162Q16
1 070
-1
1Q16
1 067
4Q15
1 066
3Q15
1 062
-2
2Q15
1 092
1Q15
1 091
-3
1.90%
3Q162Q16
1.94%
1Q16
1.96%
4Q15
1.95%
3Q15
1.99%
2Q15
2.06%
1Q15
2.10%
Amounts in m EUR
NII - Banking
NII - Insurance
NII - Holding-company/group
NII - dealing room
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos
VOLUME TRENDExcluding FX effect Total loans ** Of which mortgages Customer deposits*** AuM Life reserves
Volume 131bn 57bn 168bn 209bn 28bn
Growth q-o-q* 0% +1% -2% +1% 0%
Growth y-o-y +4% +4% +3% +4% 1%
Customer deposit volumes excluding debtcertificates & repos flat q-o-q and +3% y-o-y
16
Higher net fee and commission income
Net fee and commission income• Up by 2% q-o-q and down by 4% y-o-y
• Q-o-q increase was the result chiefly of:o higher management fees from mutual funds & unit-
linked life insurance products (thanks to reset date CPPI)o higher fees from payment services in Belgium, Slovakia
and Hungaryo slightly higher entry fees from mutual fundspartly offset by:o lower fees from credit files and bank guarantees (due
mainly to less mortgage refinancings in BE)o lower securities-related fees in Belgiumo higher commissions paid on insurance sales
• Y-o-y decline occurred chiefly in the Belgium Business Unitdue to lower management fees from mutual funds and unit-linked life insurance products, lower fees from securitiestransactions and higher commissions paid on insurancesales
Assets under management (209bn EUR)• Went up by 1% q-o-q as a result of net outflows (-1%) and a
positive price effect (+2%)
• Rose by 4% y-o-y owing to net inflows (+1%) and a positiveprice effect (+3%)
F&C
Amounts in m EUR
518 530453 445 422 432
-71-76-70-69-64-59 -74-1-4-1 -1
443
360
1Q16
346
3Q162Q164Q15
371
3Q15
383
2Q15
465
1Q15
459
368
F&C - contribution of holding-company/group
F&C - banking contribution
F&C - insurance contribution
Amounts in bn EUR
AuM
209207207209200204208
2Q151Q15 3Q162Q161Q164Q153Q15
17
Operating expenses down, due entirely to lower bank taxes
Cost/income ratio (banking) adjusted for specificitems* at 57% in 3Q16 and YTD• Operating expenses excluding bank tax increased by 2%
q-o-q as higher professional fees, timing differences andhigher staff expenses were only partly offset by lowerICT expenses
• Operating expenses without bank tax increased by 4%y-o-y due mainly to higher ICT expenses, higherprofessional fees and general administrative expenses(partly timing differences), despite lower staff expenses
• Operating expenses excluding bank tax increased by 1%y-o-y in 9M16
• Pursuant to IFRIC 21, certain levies (such ascontributions to the European Single Resolution Fund)have to be recognised in advance, and this adverselyimpacted the results for 1Q16. In 2Q16, the Belgiangovernment replaced the 4 existing taxes by 1, whichled to 38m EUR additional bank taxes in Belgium, partlyoffset by the ability to book 6m EUR of the ESRFcontribution as a non-P&L item
• Total bank taxes (including ESRF contribution) areexpected to increase from 417m EUR in FY15 to 441mEUR in FY16
OPERATING EXPENSES
264
8349
335
841
24
2Q15
941
858
1Q15
1 125
861
51
1Q16
904
3Q16
871
895
853
2Q16
1 186
851
21
4Q15
962
914
3Q15
862
Operating expensesBank tax
* See glossary (slide 87) for the exact definition
Amounts in m EUR
TOTAL Upfront Spread out over the year
3Q16 1Q16 2Q16 3Q16 1Q16 2Q16 3Q16 4Q16e
BU BE 0 241 32 0 0 0 0 0
BU CZ 0 28 -1 0 0 0 0 0
Hungary 20 31 0 0 17 19 20 25
Slovakia 3 6 -2 0 3 3 3 3
Bulgaria 0 1 1 0 0 1 0 0
Ireland 1 2 0 0 1 1 1 2
GC 0 5 -3 0 0 0 0 0
TOTAL 24 314 27 0 22 24 24 30
EXPECTED BANK TAX SPREAD
18
Unsustainably low asset impairments, excellent credit cost ratio and decreased impaired loans ratio
Lower impairment charges q-o-q (unsustainable lowlevel)• The q-o-q decrease in loan loss provisions was attributable
mainly to:o net loan loss provision releases of 28m EUR in Ireland and
11m EUR in Hungaryo a 25m EUR increase due to IBNR parameter changes in 2Q16
• Impairment ofo 7m EUR on AFS shares (entirely in Belgium)o 3m EUR on other (IT and equipment)
The credit cost ratio only amounted to 0.07% in 9M16due to low gross impairments and several releases
The impaired loans ratio dropped further to 7.6%
ASSET IMPAIRMENT
73
138
785034 18
21
25
50
3Q16
2810
2Q16
71
1Q16
28
4
4Q15
472
344
3Q15
4915
2Q15
14911
1Q15
774
IMPAIRED LOANS RATIO
7.6%
3Q162Q16
7.8%
4.4%
1Q16
8.2%
4.7%
4Q15
8.6%
4.8%
3Q15
9.0%
5.2%
2Q15
9.3%
5.3%
1Q15
9.6%
5.5%4.2%
CREDIT COST RATIO
0.07%
9M16FY15
0.23%
FY14
0.42%
FY13
1.21%
FY12
0.71%
FY11
0.82%
FY10
0.91%
FY09
1.11%
of which over 90 days past dueImpaired loan ratio
Impairments on L&RGW impairments Other impairments
19
NET PROFIT – BELGIUM NET PROFIT – CZECH REPUBLIC
377 414348
993296
9M162015
1 564
1 216
2014
1 515
1 102
2013
1 570
1 193
2012
1 360
1 064
9M16 ROAC: 22%
Amounts in m EUR
467 435 408 423
114119
121 119465
9M162015
542
2014
528
2013
554
2012
5819M16 ROAC: 43%
NET PROFIT –INTERNATIONAL MARKETS
-731
-242
-122
-7
184
289
-175
9M162015
24561
2014
-182
2013
-853
2012
-260
-18
9M16 ROAC: 20%
49 34
-41
174
10595
20058
38
144
9M162015
232
2014
-3
2013
139
2012
NET PROFIT – INTERNATIONAL MARKETS EXCL. IRELAND
Overview of results based on business units
9M4Q 9M4Q
9M4Q 4Q 9M
9M16 ROAC: 22%
20
Contents
1 Strategy and business profile
2 Financial performance
3 Balance sheet
4 Solvency and liquidity
5 MREL strategy
Appendices
6 3Q16 Wrap up
21
Balance sheet(KBC Group consolidated at 30 September 2016)
41
21
50
131
1013
Total assets (EUR 266bn)
Insurance investment contracts
Insurance investment portfolio
Bank investment portfolio
Loan book (loans and advances to customers)
Other (incl. interbank loans, intangible fixed assets..)
Trading assets
37
20
27
17
143
913
Total liabilities and equity (EUR 266bn)
Liabilities under insuranceinvestment contracts
Technical provisions,before reinsurance
Other funding (excl. interbank deposits)
Trading liabilities
Other (incl. interbank deposits)
Equity
Customer deposits
Credit quality
Capital adequacy &liquidity position
22
Breakdown of KBC Bank’s loan portfolio*
Private Persons
42%
11%
Agriculture, farming, fishing
2%
Automotive4%
Building & construction3%3%
Authorities
Rest
7%
Real estate
Finance & insurance6%
Services
8%
14%
Distribution
* KBC Bank’s loan portfolio, 146bn EUR outstanding as at 30/09/2016, differs from the IFRS balance sheet item ‘loans and advances to customers, excl. repos’ (131bn EUR asat 30/09/2016) and includes all payment credit, guarantee credit (except for confirmations of letters of credit and similar export-/import-related commercial credit), standbycredit and credit derivatives, granted by KBC to private persons, companies, governments and banks. Bonds held in the investment portfolio are included if they arecorporate- or bank-issued, hence government bonds and trading book exposure are not included.The breakdowns are based on the outstanding amount and include all on-balance sheet commitments and off-balance sheet guarantees
Machinery & heavy equipment
Shipping
Metals
Chemicals
Food producers
Electricity
Other sectors
1%
2%
Oil, gas & other fuels
Hotels, bars & restaurants
1%
5%
1%1%1%
1%1%
Sector breakdown Geographic breakdown
5%
Ireland 9%
Czech Rep.
14%
Belgium
7%Bulgaria
1%Hungary
3%Slovakia
1%
North America
2%
Other CEE
1%Other W-Eur
57%
Rest2%
Asia
23
Impaired loans ratios of KBC Group and per Business Unit, incl. of which over 90 days past due
BELGIUM BU
KBC GROUP
INTERNATIONAL MARKETS BUCZECH REPUBLIC BU
* Impaired loans ratio : total outstanding impaired loans (PD 10-12)/total outstanding loans** of which total outstanding loans with over 90 days past due (PD 11-12)/total outstanding loans
4.2%
7.6%
3Q162Q16
8.6%
4.8%
3Q15
9.0%
5.2%
2Q15
7.8%
4.4%
1Q16
8.2%
4.7%
4Q15
9.3%
5.3%
1Q15
9.6%
5.5%
of which over 90 days past due **Impaired loans ratio *
3.8%
2.2%
3Q15
4.0%
2Q16
3.6%
2.0%
1Q16
3.7%
2.5% 2.4%
2Q15
4.1%
2.4%
1Q15
4.2%
1.9%2.2%
4Q15 3Q16
3.5% 3.5%
2.6%
1Q15
2.7%
2.7%
2Q16
2.8%
2.2%
1Q16
3.2%
2.4% 2.1%
3Q164Q15
3.4%
2.5%
3Q15
3.4%
2.5%
2Q15
3.7%
14.3%
2Q16
27.8%26.9%
14.8%
1Q16
28.9%
15.4%
4Q15
29.8%
16.0%
3Q15
31.4%
17.0%
2Q15
17.9%
1Q15
33.4% 32.9%
18.4%
3Q16
International Markets excl. Ireland:
- Impaired loans ratio stands at 7%- Ratio of 90 days past due at 6%
24
Cover ratios
INTERNATIONAL MARKETS BUCZECH REPUBLIC BU
BELGIUM BUKBC GROUP
* Impaired loans cover ratio: total impairments (specific) for impaired loans / total outstanding impaired loans (PD10-12)** Cover ratio for loans with over 90 days past due: total impairments (specific) for loans with over 90 days past due / total outstanding PD11-12 loans
45.6%
3Q162Q16
61.5%
45.5%
1Q16
60.8%
45.4%
4Q15
60.3%
44.8%
3Q15
57.9%
43.9%
2Q15
57.8%
42.9%
1Q15
57.6%
42.4%
62.0%
Cover ratio for loans with over 90 days past due **
Impaired loans cover ratio *
56.7%
3Q162Q16
62.6%
56.1%
1Q16
63.2%
54.2%
4Q15
65.1%
53.6%
3Q15
67.1%
54.2%
2Q15
66.6%
53.4%
1Q15
67.1%
52.9%
63.6%
42.7%
3Q162Q16
59.7%
42.5%
1Q16
60.0%
44.8%
4Q15
60.4%
44.7%
3Q15
56.5%
44.0%
2Q15
57.6%
43.6%
1Q15
58.3%
43.4%
60.1%
60.6%
44.8%
3Q162Q16
60.0%
44.7%
1Q16
59.4%
44.0%
4Q15
58.1%
43.0%
3Q15
55.6%
41.7%
2Q15
55.2%
40.4%
1Q15
54.5%
39.8%
25
Loan loss experience at KBC
9M16CREDIT COST RATIO
FY15CREDIT COST RATIO
FY14CREDIT COST RATIO
FY13CREDIT COST RATIO
FY 2012CREDIT COST RATIO
AVERAGE ‘99 –’15
Belgium 0.07% 0.19% 0.23% 0.37% 0.28% n/a
Czech Republic
0.09% 0.18% 0.18% 0.26% 0.31% n/a
International Markets
-0.18% 0.32% 1.06% 4.48%1 2.26% n/a
Group Centre 0.73% 0.54% 1.17% 1.85% 0.99% n/a
Total 0.07% 0.23% 0.42% 1.21%2 0.71% 0.52%
Credit cost ratio: amount of losses incurred on troubled loans as a % of total average outstanding loan portfolio
1 The high credit cost ratio at the International Markets Business Unit is due in full to KBC Bank Ireland. Excluding Ireland, the CCR at this business unit amounted to 108 bps in FY13
2 Credit cost ratio amounted to 1.21% in FY13 due to the reassessment of the loan books in Ireland and Hungary
26
* RWA on fully loaded basis and under Danish Compromise
Limited trading activity at KBC Group
30-09-2016
Insurance activity10%
Operational risk
12%
Market risk3%
Credit risk 75%
BREAKDOWN ACCORDING TO RWA*
27
Investment portfolio (as per 30/09/2016)
Other
2%
Equities
2%Non-Financial bonds
5%Covered bonds
6%
ABS2%
Financial bonds3%
Other public bonds
6%
Sovereign bonds
73%
(*) 1%, (**) 2%
INVESTMENT PORTFOLIO (Total EUR 71bn)
SOVEREIGN BOND PORTFOLIO (Carrying value1 EUR 54bn)
(Notional value EUR 49bn)
1. Carrying value is the amount at which an asset [or liability] is recognised: for those not valued at fair value this is after deducting any accumulated depreciation (amortisation) and accumulated impairment losses thereon, while carrying amount is equal to fair value when recognised at fair value
8%
France
Spain6%
Other
Germany *
Slovakia
6%
Hungary
4%
Poland **
2%
Czech Rep.
13%
Belgium
38%
Ireland **Austria * Portugal *
Netherlands *
Italy
12%
4%
28
Contents
1 Strategy and business profile
2 Financial performance
3 Balance sheet
4 Solvency and liquidity
5 MREL strategy
Appendices
6 3Q16 Wrap up
29
KBC's capital remains well above the minimum requirements
KBC was informed by the European Central Bank of itsnew minimum capital requirements, leading to acombined overall fully loaded regulatory CET1requirement (under the Danish Compromise) of 10.40%
At the close of the third quarter of 2016, KBC’s fullyloaded CET1 ratio came to 15.3%, well above the newCET1 requirement
Following the Supervisory Review and EvaluationProcess (SREP) performed for 2016, the ECB formallynotified KBC of its decision to set
a pillar 2 requirement (P2R) of 1.75% CET1
a pillar 2 guidance (P2G) of 1.0% CET1
The Czech and Slovak competent authorities introduce 0.5% of countercyclical buffer, respectively in 1Q 2017 and 3Q 2017, which corresponds with an additional 0.15% CET1 requirement at KBC Group level
For more information, see the press release of 14 December 2016 on www.kbc.com
Countercyclical buffer
0.15%
move to P2 Guidance
-1.00%
11.25%10.40%
Pro forma fully loaded minimum CET1 under previous JCD
Pro forma fully loaded minimum CET1 under new JCD
(More details on the overall SREP decision, see slide 71 in annex 6)
Change in pro forma fully loaded CET1 requirement
30P1 Requirement
P2 Requirement
Capital Conservation buffer
O-SIFI buffer
CounterCyclical buffer
1.00%0.15%
2016
1.875%
1.75%
4.50%
1.50%0.15%
2017
8.65%
4.50%
1.75%
1.250%
9.78%
2018
0.15%
2.50%
1.50%
4.50%
1.75%
10.40%
2019
4.50%
4.625%
0.625%0.50%
10.25%
Minimum CET1 requirements in detailAT1 coupon non-payment level falling to 8.65% in 2017
1The National Bank of Belgium decided upon a systemicbuffer (CET1 phased-in of 0.5% in 2016 under the DanishCompromise) that gradually increases over a 3-year period,reaching 1.5% in 2018
2The Czech and Slovak competent authorities decided tointroduce a countercyclical buffer requirement of 0.5% in1Q2017 and 3Q2017 respectively, corresponding to anadditional 0.15% CET1 requirement at KBC Group level(0.10% + 0.05% respectively)
3Under the new framework on Maximum DistributableAmounts (MDA), the restriction to pay coupons on AT1instruments falls from 10.25% in 2016 to 8.65% in 2017.(assuming that the T1 and T2 minimum capital bucketcontinue to be adequately filled with externally placedinstruments)
12
3
based on 2015 JCD
Phasing in of minimum CET1 requirementsbased on 2016 Joint Capital Decision (JCD)
31
Strong capital position
CET1 RATIO AT KBC GROUP BASED ON THE DANISH COMPROMISE
8.65% regulatoryminimum
(phased-in) for 2017
Phased-inFully loaded
Common equity ratio (phased-in) of15.1% based on the DanishCompromise at end 9M16, whichclearly exceeds the minimum capitalrequirements of 8.65% based on the2016 Joint Capital Decision (JCD)
A pro forma fully loaded minimumcommon equity ratio translation to10.40% based on the 2016 JointCapital Decision (JCD) was clearlyexceeded with a fully loaded commonequity ratio of 15.3% based on theDanish Compromise at end 9M16
Total distributable items (under Belgian GAAP) KBC Group 6.5bn EUR as at 3Q16, of which:
• available reserves 1.3bn EUR
• accumulated profits 5.2bn EUR
1H16
15.3%
15.1%
9M16
14.9%
14.9%
1Q16
14.6%
14.6%
FY15
15.2%
14.9%
9M15
13.7%
14.0%
1H15
13.3%
13.2%
1Q15
11.4%
11.7%
Including the 1% Pillar 2 Guidancethe implied fully loaded minimumCET1 requirement stands at 11.40%(9.65% phased-in for 2017), which isalso amply exceeded by the actualCET1 ratio at end 9M16
10.40% regulatoryminimum
(fully loaded)
32
Fully loaded Basel 3 leverage ratio
Fully loaded B3 leverage ratio, based on thecurrent CRR legislation (which was adaptedduring 4Q14):• 5.3% at KBC Bank consolidated level
• 6.2% at KBC Group level
9M15
4.8%
1H15
4.8%
1Q15
4.9%
9M161H16
5.1%
1Q16
5.0%
FY15
5.4% 5.3%
Fully loaded Basel 3 leverage ratio at KBC Bank
Fully loaded Basel 3 leverage ratio at KBC Group
1Q15
5.2%
FY15
6.3%
9M15
5.6%
1H15
5.4%
6.2%
9M161H16
6.0%
1Q16
5.9%
33
Solid liquidity position (1/2)
KBC Bank continues to have a strong retail/mid-cap deposit base in its core markets – resulting in a stablefunding mix with a significant portion of the funding attracted from core customer segments & markets
64%70% 69%
73% 75% 73% 73%
8%
8%9%
9% 8% 9% 8%
4%
10% 8% 8%
8%
5%
5%9%
4% 5% 8%
71%
7%
7%
8%
7%7%
8%
2%2%2%0%
8%
6%3%8%
FY11
3%
3%
FY10FY09
100%
9M16
0%
FY15
3%
FY14
3%
FY13
2%
3%
FY12
3%
Funding from customers
Certificates of deposit
Total equity
Debt issues placed with institutional investors
Net secured funding
Net unsecured interbank funding
8%1%
20%
71%
Government and PSE
Debt issues in retail network
Mid-cap
Retail and SME
71% customer
driven
34
Short-term unsecured funding KBC Bank vs Liquid assets as of end September 2016 (bn EUR)
* Graphs are based on Note 18 of KBC’s quarterly report, except for the ‘available liquid assets’ and‘liquid assets coverage’, which are based on the KBC Group Treasury Management Report
(*)
NSFR is at 123% and LCR is at 137% by the end of 9M16
• Both ratios were well above the minimum target of at least105%, in compliance with the implementation of Basel 3liquidity requirements
Solid liquidity position (2/2)
Ratios FY15 9M16 Target
NSFR1 121% 123% >105%
LCR1 127% 137% >105%
1 Liquidity coverage ratio (LCR) is based on the Delegated Act requirements, while the NetStable Funding Ratio (NSFR) is based on KBC’s interpretation of current Basel Committeeguidance
KBC maintains a solid liquidity position, given that:
• Available liquid assets are more than 3 times the amountof the net recourse on short-term wholesale funding
• Funding from non-wholesale markets is stable fundingfrom core-customer segments in core markets
17.4 15.619.0
24.7
17.5
62.958.5 58.3
68.6
59.0
362%376%
306%278%
337%
3Q15 4Q15 1Q16 2Q16 3Q16
Net Short Term Funding Available Liquid Assets Liquid Assets Coverage
35
Upcoming mid-term funding maturities
KBC Group has successfully issued a 750m EUR senior unsecuredbond with 7-year maturity in October 2016
KBC’s credit spreads remained stable during 3Q16
KBC Bank has 6 solid sources of long-term funding:
• Retail term deposits
• Retail EMTN
• Public benchmark transactions
• Covered bonds
• Structured notes and covered bonds using the private placementformat
• Senior unsecured, T1 and T2 capital instruments issued at KBCGroup level and down-streamed to KBC Bank
8%
16%
7%
10%
4%
37%
18%
0.0%
1.1%
0.7%
1.2%
1.8%
0.7%
1.2%
0.6%
0.1%0.1%
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2016 2017 2018 2019 2020 2021 2022 2023 2024 >= 2025
Mill
ion
sEU
R
Breakdown Funding Maturity Buckets
Senior Unsecured - Holdco Senior Unsecured - Opco Subordinated T1 Subordinated T2
Contingent Convertible Covered Bond TLTRO
Total outstanding =
19.9bn EUR
(Including % of KBC Group’s balance sheet)
36
-10
40
90
140
190
240
-15
5
25
45
65
85
105
125
145
Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16
Credit Spreads Evolution
2Y Senior Debt Opco Interpolated 5Y Covered Bond Interpolated 5Y Senior Debt Holdco 10NC5 Subordinated Tier 2
Credit spreads evolution
1 10NC5 Subordinated Tier 2 spread is depicted based on the right hand axis.
1
37
KBC IS A FREQUENT ISSUER OF BENCHMARK COVERED BONDS AND PRIVATE PLACEMENTS FOR AN AMOUNT OF 7.31 BN EUR• KBC’s 10bn EUR covered bond programme is rated Aaa/AAA (Moody’s/Fitch)
• CRD and UCITS compliant / 10% risk-weighted
• All issues performed well in the secondary market
KBC’S COVERED BONDS ARE BACKED BY STRONG LEGISLATION AND SUPERIOR COLLATERAL• Cover pool: Belgian residential mortgage loans
• Strong Belgian legislation – inspired by German Pfandbriefen law
• Direct covered bond issuance from a bank’s balance sheet
• Dual recourse, including recourse to a special estate with cover assets included in a register
• Requires license from the National Bank of Belgium (NBB)
• The special estate is not affected by a bank insolvency. In that case, the NBB can appoint a cover pool administrator to managethe special estate in issuer ; both monitor the pool on a ongoing basis
• The value of one asset category must be at least 85% of the nominal amount of covered bonds
• The value of the cover assets must at least be 105% of the covered bonds (value of mortgage loans is limited to 80% LTV)
• Maximum 8% of a bank’s assets can be used for the issuance of covered bonds
THE COVERED BOND PROGRAMME IS CONSIDERED AS AN IMPORTANT FUNDING TOOL FOR THE TREASURY DEPARTMENT• KBC’s intentions are to be a frequent benchmark issuer if markets permit
Summary covered bond programme (1/2) (details, see Annex 3)
38
Summary covered bond programme (2/2) (details, see Annex 3)
COVER POOL: BELGIAN RESIDENTIAL MORTGAGELOANS• Exclusively, this is selected as main asset category• Value (including collections) at least 105% of the
outstanding covered bonds• Branch originated prime residential mortgages
predominantly out of Flanders• Selected cover asset have low average LTV (62%) and high
seasoning (48 months)
KBC HAS A DISCIPLINED ORIGINATION POLICY• 2009 to 2016 residential mortgage loan losses below 4 bp• Arrears in Belgium approx. stable over the past 10 years:
(i) Cultural aspects, stigma associated with arrears,importance attached to owning one’s property
(ii) High home ownership also implies that thechange in house prices itself has limited impacton loan performance
(iii) Well established credit bureau, surroundinglegislation and positive property market
1,1
4%
1,1
2%
1,1
2%
1,1
1%
1,0
8%
1,0
8%
1,0
9%
1,0
9%
1,0
9%
1,1
0%
1,1
1%
1,0
9%
1,0
8%
1,0
8%
1,0
8%
1,0
6%
1,0
6%
1,0
6%
1,0
6%
1,1
2%
1,1
2%
1,1
3%
1,1
4%
1,1
2%
1,1
1%
1,1
2%
1,1
3%
1,1
4%
1,1
5%
1,1
6%
1,1
6%
1,1
6%
1,1
7%
1,1
7%
1,1
8%
1,1
7%
1,1
7%
1,1
7%
1,1
9%
1,2
0%
1,2
0%
1,1
9%
1,2
0%
1,2
0%
1,2
0%
1,2
2%
1,2
2%
1,1
9%
1,1
8%
1,1
7%
1,1
8%
1,1
6%
1,1
7%
1,1
6%
1,1
6%
1,1
7%
1,1
8%
1,1
7%
1,1
6%
1,1
3%
0,3
3%
0,3
8%
0,3
9%
0,4
1%
0,4
30
%
0,4
40
%
0,4
40
%
0,4
4%
0,5
0%
0,5
3%
0,5
2%
0,5
6%
0,5
4%
0,4
8%
0,4
1%
0,0
03
4%
0,0
07
3%
0,0
12
%
0.0
15
%
0,0
13
%
0,0
37
%
0,0
20
%
0,0
14
%
0,0%
0,2%
0,4%
0,6%
0,8%
1,0%
1,2%
1,4%
Market loans in 3 months arrears KBC loans in 90days arrears KBC loan losses
39
Contents
1 Strategy and business profile
2 Financial performance
3 Balance sheet
4 Solvency and liquidity
5 MREL strategy
Appendices
6 3Q16 Wrap up
40
based on KBC Group HoldCo
issues only
5.8%
0.6%0.7% 0.3%
based on KBC Group HoldCo
issues only
5.9%
0.6%0.7%0.3%
as per regulatory framework
5.9%
0.6%1.3%
0.3%
3.9%
based on KBC Group HoldCo
issues only
5.6%
0.6%0.7% 0.3%
as per regulatory framework
5.6%
0.6%1.2%0.3%
based on KBC Group HoldCo
issues only
15.3%
1.6%
1.9%0.8%
as per regulatory framework
15.3%
1.6%
3.4%
0.8%2.0%
0.7% 0.8%
CET1AT1Eligible T2Senior unsecured debt HoldCoOther MREL eligible liabilities > 1y Senior unsecured debt OpCo
KBC Group: Already comfortable bail-in buffer (30/09/2016)
1 TLAC: Total loss-absorbing capacity / MREL: Minimum Requirement for own funds and Eligible Liabilities2 Resolution strategy and the individual institution MREL requirements are subject to the decision of the Single Resolution Board3 TLOF: Total Liabilities and Own Funds
23.1%
19.6%
8.4%7.2%
12.9%
7.6%
7.5%
TLAC1 as % of RWA TLAC1 as % of Leverage MREL1,2 as % of Liabilities3
Fully loaded Fully loaded Fully loaded Phased-in
+0.8%
+0.3%
+0.3%
At 18 October 2016 KBC Group issuedsenior unsecured debt to the tune of
750m EUR, 7 years
+0.3%
12.8% on phased-in basis
+0.8%
+0.3%
+0.3%
41
KBC Group: Moving towards MREL via HoldCo issues1
TOTAL CAPITAL KBC GROUP
CET1
AT1
T2
9.75%
1.5%
Joint Capital Decision 2015
Systemic Buffer (SB)
flexible internal buffer
0.5% for 20161.5% fully
loaded
HoldCo Seniorup to MREL target
In % RWA
Minimum CET1 (phased) 11.25%
up to total capital ratio of 17%
(and min. 2%).
Minimum 17% total capital,both phased or fully loaded
KBC Bank has a limited reliance on wholesale funding and has a number of transactions through KBC IFIMA (fully guaranteed subsidiary of KBC Bank) outstanding.Going forward, KBC will issue public senior unsecured from KBC Group to fulfil MREL needs and use KBC IFIMA issues to supplement remaining wholesale fundingneeds
1. Resolution strategy and the individual institution’s MREL requirements are subject to the decision of the Single Resolution Board2. TLOF: Total Liabilities and Own Funds
CET1
AT1
T2
Senior
7.5%
5.8%
0.6%
0.7%
0.3%
In % Liabilities2
UP TO 8% MINIMUM*
CET1, AT1 & T2
Partly a communicatingvessel with T2
CET1
AT1
T2
19.5%
15.1%
1.6%
2.7%
CONCEPT 30/09/2016(all transitional)
MREL AT HOLDCO
On
lyb
asedo
n K
BC
G
rou
p’s
issues
30/09/2016(all transitional)
+0.3%
adding 750m EUR senior unsecureddebt issued on 18
October 2016
42
KBC has a diversified holding structure which helps mitigate risks
KBC Insurance NV KBC Bank
(KBC Group)
KBC’S DIVERSIFIED GROUP STRUCTURE ALLOWS HOLDCO DEBT INVESTORS TO HAVE A CLAIM ON SUBSIDIARIES THAT ARE LESS IMPACTED BY LOSSES (LOWERCORRELATION BETWEEN ENTITIES) OR THAT ARE EVEN OUTSIDE THE RESOLUTION PERIMETER:
in a case where KBC Bank is fully wiped out by losses, investors in KBC Group will always have a claim on KBC Insurance and on part of KBC Asset Management In a case where KBC Insurance is fully wiped out by losses, investors in KBC Group will always have a claim on KBC Bank and on part of KBC Asset Management (note that, KBC Insurance
is outside the scope of BRRD)
ISSUING SENIOR UNSECURED FROM KBC GROUP WILL PROVIDE FOR EXTRA CUSHION TO THE SENIOR DEBT INVESTORS AT KBC BANK LEVEL GIVEN THESUBORDINATED ON-LOAN
FROM KBC PERSPECTIVE, THE BANK-INSURANCE MODEL (I.E. OUR LONG-TERM STRATEGIC VIEW) IS MAINTAINED IN ALL BUT THE MOST EXTREMERESOLUTION SCENARIOS
WILL KBC ISSUE FROM OTHER ENTITIES WITHIN THE GROUP? Recent capital issuances (AT1 & T2) have come from KBC Group – this approach will continue in the future (providing support to potential KBC Group senior creditors) Covered bonds will continue to be issued by KBC Bank Senior unsecured from KBC Bank for funding reasons
• Additional Tier 1• Tier 2
• Covered bonds • No public issuance
100%100%
* Before intragroup / consolidation effects
• Senior Unsecured (Funding)
• Senior Unsecured (MREL/TLAC)
KBC Asset Management NV
48%
52%
• No public issuance
Approx. 15% of profitas at 9M16
Approx. 85% of profitas at 9M16
43
KBC has strong buffers cushioning Sr. debt at all levels (pro forma: 30-09-2016 incl. KBC Group Sr. unsecured bond of 750m EUR issued at 18-10-2016)
KBC GroupSenior1 500
Short-term CDs1 015
Tier 2
1 681
Additional Tier 1
1 400
CET1 (phased)
13 349
KBC BankSenior
3 129Other liabilities
36 092
Tier 2
1 681
Additional Tier 1
1 400
CET1 (phased)
11 096
1 514
KBC Insurance
Tier 2
500
Parent shareholders equity
3 183
KBC Asset ManagementFully consolidated for solvency purposes
50
Temporary short-term finance which allowed repayment of state aid cash-wise as dividends
are up-streamed to KBC Group with a delay
To large extent customer-related, protected as
much as possible
Senior issued by KBC Bank, which will be limited going
forward (for funding reasons)
Buffer for Sr. level 15.7bn EUR
Buffer for Sr. level 16.4bn EUR
Legacy AT1 & T2 issued by KBC Bank and will disappear over time
MREL GROUP INSTRUMENTS = 7.8% (13.3+1.4+1.7+1.5)/229 135) BASED ON PHASED CET1
MREL KBC GROUP INSTRUMENTS + BANK INSTRUMENTS = 13.1% BASED ON PHASED CET1 ( 13.2% ON FULLY LOADED BASIS)
nominal amounts in million EUR
The buffer grows further as short-term CDs are repaid by up-streamed dividends (in excess to what is paid
out by KBC Group to its shareholders)
Subordinated on loan by KBC Group
1 500
44
Key investment highlights
KBC is one of the strongest capitalised and most capital generative financials in Europe
• Compared with other European financials to have issued from their Holding Companies, KBC has one of the strongest leverage ratios andone of the highest CET1 and total capital positions
• According to market estimates, KBC generates at least an approximated additional 2% of CET1 on a yearly basis before dividends
• Proven track record of prudent capital management (e.g. shareholder loans (2013), capital increase (2012), final repayment of YES (2015))
Given its already strong capitalisation and liquidity, KBC currently foresees relatively limited amounts of senior debt inthe future to reach MREL targets (at group level) and/or to complete its funding needs
A really diversified holding company and the absence of ring-fencing helps to mitigate the risks of structuralsubordination of Senior debt of KBC Group compared to other issuers
45
Contents
1 Strategy and business profile
2 Financial performance
3 Balance sheet
4 Solvency and liquidity
5 MREL strategy
Appendices
6 3Q16 Wrap up
46
Wrap up
Strong commercial bank-insurance results in our core countries
Successful underlying earnings track record
Solid capital and robust liquidity position
47
Looking forward
KBC Group is the bank-insurer that puts its clients centre stage, even in demandingeconomic circumstances
We expect the remainder of 2016 to be a year of sustained economic growth in boththe euro area and the US
Management guides for:• continued stable and solid returns for all Business Units• loan impairments for Ireland towards a release of a 10m-50m EUR range for FY16
48
Appendices
1 KBC 2015/16 benchmarks + overview of outstanding benchmarks
2 KBC Bank CDS levels
3
Overview of bank taxes
4
Solvency: details on capital
5
Details on selective credit exposure
6
7
Summary of KBC’s covered bond programme
Macroeconomic views
49
KBC 2015 benchmarks
KBC 7Y Fixed – Covered – BE0002482579
• Notional: 1bn EUR
• Issue Date: 22 January 2015 – Maturity: 22 January 2022
• Coupon: 0.45% A, Act/Act
• Re-offer spread: Mid Swap +2bp (issue price 99.815%)
• Joint lead managers: KBC, HSBC, ING Bank, LBBW and Unicredit
KBC 12NC7 Fixed – Tier 2 – BE0002485606
• Notional: 750m EUR
• Issue Date: 11 March 2015 – Maturity: 11 March 2027
• Coupon: 1.875 %, A, Act/Act
• Re-offer spread: Mid Swap +150bp (issue price 99.49%)
• Joint lead managers: KBC, Bank of America, BNP Parisbas , Deutsche Bank and Morgan Stanley
KBC 6Y Fixed – Covered – BE0002489640
• Notional: 1bn EUR
• Issue Date: 28 April 2015 – Maturity: 28 April 2021
• Coupon: 0.125% A, Act/Act
• Re-offer spread: Mid Swap -8 bp (issue price 99.678%)
• Joint lead managers: KBC, Commerzbank, Natixis, RBS andUnicredit
50
KBC 2016 Benchmarks
KBC Groep 5Y Fixed – Senior – BE6286238561
• Notional: 750m EUR
• Issue Date: 26 April 2016 – Maturity: 26 April 2021
• Coupon: 1%, A, Act/Act
• Re-offer spread: Mid Swap +112bp (issue price 99.396%)
• Joint lead managers: KBC, Deutsche Bank, Goldman Sachs, JP Morgan and Société Générale
KBC 6.5Y Fixed – Covered – BE0002498732
• Notional: 1.25bn EUR
• Issue Date: 01 March 2016 – Maturity: 01 September 2022
• Coupon: 0.375% A, Act/Act
• Re-offer spread: Mid Swap +19 bp (issue price 99.770%)
• Joint lead managers: KBC, Commerzbank, Credit Agricole, LBBW and Credit Suisse
KBC Groep 7Y Fixed – Senior – BE0002266352
• Notional: 750m EUR
• Issue Date: 18 Oct 2016 – Maturity: 18 Oct 2023
• Coupon: 0,75%, A, Act/Act
• Re-offer spread: Mid Swap +65bp (issue price 99,925%)
• Joint lead managers: KBC, Bank of America Merrill Lynch, ING, Morgan Stanley and Natixis
51
Outstanding benchmarks
Total: EUR 10.25bn
Issuer Curr Amount issued Coupon Settlement Date Maturity Date ISIN YEAR
KBC Ifima N.V. EUR 1 000 000 000 4.5 27/03/2012 27/03/2017 XS0764303490 2017
KBC Ifima N.V. EUR 750 000 000 2.125 10/09/2013 10/09/2018 XS0969365591 2018
KBC Group EUR 750 000 000 1.000 26/04/2016 26/04/2021 BE6286238561 2021
KBC Group EUR 750 000 000 0.750 18/10/2016 18/10/2023 BE0002266352 2023
KBC Bank N.V. EUR 1 250 000 000 1.125 11/12/2012 11/12/2017 BE6246364499 2017
KBC Bank N.V. EUR 750 000 000 2 31/01/2013 31/01/2023 BE0002425974 2023
KBC Bank N.V. EUR 1 000 000 000 1.25 28/05/2013 28/05/2020 BE0002434091 2020
KBC Bank N.V. EUR 750 000 000 1 25/02/2014 25/02/2019 BE0002462373 2019
KBC Bank N.V. EUR 1 000 000 000 0.45 22/01/2015 22/01/2022 BE0002482579 2022
KBC Bank N.V. EUR 1 000 000 000 0.125 28/04/2015 28/04/2021 BE0002489640 2021
KBC Bank N.V. EUR 1 250 000 000 0.375 1/03/2016 01/09/2022 BE0002498732 2022
Tranche Report
COVERED
UNSECURED
0
1 000
2 000
3 000
4 000
5 000
2016 2017 2018 2019 2020 =>2021
Maturity profile KBC benchmark issuesin million euros
52
Main characteristics of subordinated debt issues
KBC Bank NV KBC Groep NV KBC Groep NV KBC Groep NV
T2 Coco AT1 Tier II Tier II
GBP 525 000 000 USD 1 000 000 000 EUR 1 400 000 000 EUR 750 000 000 EUR 750 000 000
Tendered GBP 480 500 000
Net Amount GBP 44 500 000 USD 1 000 000 000 EUR 1 400 000 000 EUR 750 000 000 EUR 750 000 000
ISIN-code BE0119284710 BE6248510610 BE0002463389 BE0002479542 BE0002485606
Call date 19/12/2019 25/01/2018 19/03/2019 25/11/2019 11/03/2022
Initial coupon 6.202% 8% 5.625% 2.375% 1.875%
3m gbp libor + 193bps $ MS 5Y + 7.097% € MS 5Y + 4.759% € MS 5Y + 1.980% € MS 5Y + 1.50%
19/12/2019 25/01/2018 19/03/2019 25/11/2019 11/03/2022
ACPM Yes - - - -
Yes - - - -
Yes - - - -
Trigger
Supervisory Event or
general "concursus
creditorum"
CT1/CET1 < 7% at KBC
Group level
Full and permanent write-
down
Trigger CET1 RATIO <
5.125% Temporary write-
down
Regulatory+Tax Call Regulatory+Tax Call
Amount issued
Coupon step-up / reset
First (next) call date
Dividend Stopper
Conversion into PSC
KBC Bank NV
SUBORDINATED BOND ISSUES KBC
53
Appendices
1 KBC 2015/16 benchmarks + overview of outstanding benchmarks
2 KBC Bank CDS levels
3
Overview of bank taxes
4
5
Details on selective credit exposure
6
7
Summary of KBC’s covered bond programme
Macroeconomic views
Solvency: details on capital
54
KBC Bank CDS levels (in bp)
0
100
200
300
400
500
600
KBC CDS EUR SR 2Y Corp
KBC CDS EUR SR 3Y Corp
KBC CDS EUR SR 5Y Corp
KBC CDS EUR SR 7Y Corp
KBC CDS EUR SR 10Y Corp
55
Appendices
1 KBC 2015/16 benchmarks + overview of outstanding benchmarks
2 KBC Bank CDS levels
3
Overview of bank taxes
4
5
Details on selective credit exposure
6
7
Summary of KBC’s covered bond programme
Macroeconomic views
Solvency: details on capital
56
Key messages on KBC’s covered bond programme
KBC’s covered bonds are backed by strong legislation and superior collateral• KBC’s covered bonds are rated Aaa/AAA (Moody’s/Fitch)
• Cover pool: Belgian residential mortgage loans
• Strong Belgian legislation – inspired by German Pfandbriefen law
• KBC has a disciplined origination policy – 2009 to 2016 residential mortgage loan losses below 4 bp
• CRD and UCITS compliant / 10% risk-weighted
KBC already issued 8 successful benchmark covered bonds in different maturity buckets• First covered bond matured in August 2016
The covered bond programme is considered as an important funding tool
Sound economic picture provides strong support for Belgian housing market• Private savings ratio of approx. 12 %
• Belgian unemployment is significantly below the EU average
• Demand still outstrips supply
57
KBC’s disciplined origination leads to low arrears and extremely low loan losses
Arrears have been very stable over the past 10 years. Arrears in Belgium are low due to:
Cultural aspects, stigma associated with arrears, importance attached to owning one’s property
High home ownership also implies that the change in house prices itself has limited impact on loan performance
Well established credit bureau and surrounding legislation
Housing market environment (no large house price declines)
BELGIUM SHOWS A SOLID PERFORMANCE OF MORTGAGES…
… AND KBC HAS EXTRAORDINARY LOW LOAN LOSSES
58
Direct covered bond issuance from a bank’s balancesheet
Dual recourse, including recourse to a special estatewith cover assets included in a register
The special estate is not affected by a bank’s insolvency
Requires licenses from the National Bank of Belgium(NBB)
Ongoing supervision by the NBB
The cover pool monitor verifies the register and theportfolio tests and reports to the NBB
The NBB can appoint a cover pool administrator tomanage the special estate
Belgian legal framework
National Bank of Belgium
Cover Pool Administrator
No
te H
old
ers
Covered bonds
Proceeds
Issuer
Cover PoolMonitor
Special Estate with Cover Assets in a Register
Representativeof the Noteholders
59
The value of one asset category must be at least 85% of the nominal amount ofcovered bonds• KBC Bank selects residential mortgage loans and commits that their value (including
collections) will be at least 105%
Strong legal protection mechanisms
Collateral type
Over-collateralisation
Test
Cover Asset Coverage Test
Liquidity Test
Cap on Issuance
1
2
3
4
5
The value of the cover assets must at least be 105% of the covered bonds• The value of residential mortgage loans:
1) is limited to 80% LTV
2) must be fully covered by a mortgage inscription (min 60%) plus a mortgage mandate (max 40%)
3) 30 day overdue loans get a 50% haircut and 90 days (or defaulted) get zero value
The sum of interest, principal and other revenues of the cover assets must atleast be the interest, principal and costs relating to the covered bonds• Interest rates are stressed by plus and minus 2% for this test
Cover assets must generate sufficient liquidity or include enough liquid assets topay all unconditional payments on the covered bonds falling due the next 6months Interest rates are stressed by plus and minus 2% for this test
Maximum 8% of a bank’s assets can be used for the issuance of covered bonds
60
KBC Bank NV residential mortgage covered bond programme
Issuer: • KBC Bank NV
Main asset category: • min 105% of covered bond outstanding is covered by residential mortgage loans and collections thereon
Programme size: • Up to 10bn EUR (only)
Interest rate: • Fixed rate, floating rate or zero coupon
Maturity: • Soft bullet: payment of the principal amount may be deferred past the final maturity
date until the extended final maturity date if the issuer fails to pay
• Extension period is 12 months for all series
Events of default:• Failure to pay any amount of principal on the extended final maturity date
• A default in the payment of an amount of interest on any interest payment date
Rating agencies: • Moody’s Aaa / Fitch AAA
Moody’s Fitch
Over-collateralisation 15% 25%
TPI Cap Probable D-cap 4 (moderate risk)
61
Benchmark issuance KBC covered bonds
Since establishment of the covered bond programme KBC has issued eight benchmark issuances:
SPREAD EVOLUTION KBC COVERED BONDS (SPREAD IN BP VERSUS 6 MONTH MID SWAP)
Sou
rce
Blo
om
ber
g M
id A
SW le
vels
62
Key cover pool characteristics (1/3)
Investor reports, final terms and prospectus are available on www.kbc.com/covered_bonds
Portfolio data as of : 30 September 2016
Total Outstanding Principal Balance 10 739 772 359
Total value of the assets for the over-collateralisation test 9 975 442 254
No. of Loans 135 428
Average Current Loan Balance per Borrower 111 009
Maximum Loan Balance 1 000 000
Minimum Loan Balance 1 000
Number of Borrowers 96 747
Longest Maturity 359 month
Shortest Maturity 1 month
Weighted Average Seasoning 48 months
Weighted Average Remaining Maturity 188 months
Weighted Average Current Interest Rate 2.38%
Weighted Average Current LTV 62.33%
No. of Loans in Arrears (+30days) 276
Direct Debit Paying 97.8%
63
Key cover pool characteristics (2/3)
REPAYMENT TYPE (LINEAR VS. ANNUITY) GEOGRAPHICAL ALLOCATION
LOAN PURPOSE INTEREST RATE TYPE (FIXED PERIODS)
Linear4%
Annuity96%
Brussels Hoofdstedelijk gewest5% Waals Brabant
1%
Vlaams Brabant
17%
Antwerpen29%
Limburg12%
Luik2%
Namen0%
Henegouwen1%
Luxemburg0%
West-Vlaanderen
15%
Oost-Vlaanderen
18%
No review54%
1 y / 1 y15%
3 y / 3 y20%
5 y / 5 y9%
10 y / 5 y2%
15 y / 5 y0%
20 y / 5 y0%
Purchase48%
Remortgage41%
Construction11%
64
0,00
2,00
4,00
6,00
8,00
10,00
12,00
14,00
16,00
18,00
0,00
10,00
20,00
30,00
40,00
50,00
60,00
< 2
,5
2.5
< t
o <
= 3
.0
3.0
< t
o <
= 3
.5
3.5
< t
o <
= 4
.0
4.0
< t
o <
= 4
.5
4.5
< t
o <
= 5
.0
5.0
< t
o <
= 5
.5
5.5
< t
o <
= 6
.0
6.0
< t
o <
= 6
.5
6.5
< t
o <
= 7
.0
> 7
.0
0,00
5,00
10,00
15,00
20,00
25,00
30,00
35,00
40,00
45,00
0 - 12 13 - 24 25 - 36 37 - 48 49 - 60 61 - 72 73 - 84 85 - 96 97 -108 109 -
0,00
10,00
20,00
30,00
40,00
50,00
60,00
2013 - 2017 2018 - 2022 2023 - 2027 2028 - 2032 > 2032
Key cover pool characteristics (3/3)
FINAL MATURITY DATE SEASONING
INTEREST RATE CURRENT LTV
Weighted Average Remaining Maturity:
188 months
Weighted Average Seasoning: 48 months
Weighted Average Current LTV:
62%
Weighted Average Current Interest Rate:
2.38%
65
Appendices
1 KBC 2015/16 benchmarks + overview of outstanding benchmarks
2 KBC Bank CDS levels
3
Overview of bank taxes
4
5
Details on selective credit exposure
6
7
Summary of KBC’s covered bond programme
Macroeconomic views
Solvency: details on capital
66
Ireland (1/2): Profitable YTD (89m EUR)
The Irish economy remains on track to record robust GDP growth ofaround 4% in 2016 as improving domestic demand counters the adverseimpact of Sterling weakness and more general Brexit-related uncertainty
Gains in domestic spending reflect an acceleration in jobs growth, a returnto net inward migration and the re-emergence of pent-up consumerdemand constrained through the downturn
With housing demand strong, a modest improvement in new constructionis likely to translate into a gradual easing in home price inflation
Customer Deposits (Retail & Corporate) of 5.3bn EUR (compared with5.0bn EUR in 3Q15). Growth of Customer Deposits (excluding debtcertificates & repos) amounted to 6% y-o-y
Net loan loss provision release of 28m EUR in 3Q16 compared with 1mEUR release in 2Q16. Coverage ratio has remained at 43% at 3Q16
The impairment guidance for Ireland is updated towards a release of a
10m-50m EUR range for FY16
LOAN PORTFOLIO €
OUT-STANDING
€
IMPAIRED LOANS
€
IMPAIRED LOANS PD
10-12
SPECIFIC PROVISIONS
€
IMPAIRED LOANS
PD 10-12 COVERAGE
Owner occupied mortgages
9.0bn 2.9bn 32.2% 1.0bn 33%
Buy to let mortgages
2.4bn 1.6bn 68.6% 0.7bn 43%
SME /corporate 1.0bn 0.7bn 66.9% 0.4bn 62%
Real estate- Investment- Development
0.7bn0.3bn
0.5bn0.3bn
74.0%100.0%
0.3bn0.2bn
56%89%
Total 13.4bn 6.0bn 44.7% 2.6bn 43%
PROPORTION OF HIGH RISK AND IMPAIRED LOANS
52.1%
High Risk Performing (PD 8-9 probability of Default >6.4%)
Impaired Loan (PD 10-12)
5.4%
52.6%
4.7%8.2%
52.0% 51.3% 50.3%
8.4%8.2% 9.2%
48.7%
9.5%
47.3% 46.4%
9.9%
45.3%
10.3%
44.7%
9.7%
67
Retail portfolio Impaired portfolio fell by roughly 80m EUR q-o-q due to a
combination of property sales and improvement in the portfolioperformance (reduction of 0.6bn EUR y-o-y)
Coverage ratio for impaired loans remained at 36.4% in 3Q16
Overall exposure has decreased due to a reduction of the impairedbook and loan amortisations, partly offset by new mortgageproduction
Ireland (2/2): Portfolio analysis
Corporate loan portfolio Impaired portfolio has reduced by roughly 70m EUR q-o-q.
Reduction driven mainly by continued deleverage of theportfolio (reduction of roughly 0.3bn EUR y-o-y)
Coverage ratio for impaired loans has increased to 64.7% in3Q16 (from 64.0% in 2Q16)
Overall exposure has dropped by 0.4bn EUR y-o-y
‘Forborne’ loans (in line with EBA Technical Standards) comprise loans on a live restructure or continuing
to serve a probation period post-restructure/cure to Performing.
3Q16 Retail Portfolio
PD Exposure Impairment Cover %
PD 1-8 6,014 26 0.4%
Of which non Forborne 5,939
Of which Forborne 75
PD 9 859 43 5.0%
Of which non Forborne 138
Of which Forborne 722
PD 10 2,596 647 24.9%
PD 11 1,159 400 34.5%
PD 12 765 598 78.2%
TOTAL PD1-12 11,393 1,714
Specific Impairment/(PD 10-12) 36.4%
Perf
orm
ing
Impa
ired
3Q16 Corporate Loan Portfolio
PD Exposure Impairment Cover %
PD 1-8 445 1 0.1%
PD 9 69 3 3.6%
PD 10 468 172 36.7%
PD 11 273 173 63.5%
PD 12 712 594 83.5%
TOTAL PD1-12 1,967 943
Specific Impairment/(PD 10-12) 64.7%
Impa
ired
Perf
.
68
Appendices
1 KBC 2015/16 benchmarks + overview of outstanding benchmarks
2 KBC Bank CDS levels
3
Overview of bank taxes
4
5
Details on selective credit exposure
6
7
Summary of KBC’s covered bond programme
Macroeconomic views
Solvency: details on capital
69
Overview of bank taxes1
INTERNATIONAL MARKETS BUCZECH REPUBLIC BU
BELGIUM BUKBC GROUP
8
11
23
24232550
26
71
3Q162Q16
22
-1
1Q16
61
4Q15
282
3Q152Q151Q15
79
Common bank taxesESRF contribution
42
57
18449118
38130 0
3Q162Q16
32
-6
1Q16
241
4Q153Q152Q151Q15
160
Common bank taxesESRF contribution
11
9
22
-1
710
6
-12
90
3Q162Q161Q16
28
4Q153Q15
-3
2Q151Q15
20
ESRF contribution Common bank taxes
62
92
5924
-12
83243
34
202
3215
3Q162Q16
51
-8
1Q16
335
4Q15
49
3Q15
21
2Q151Q15
264
Common bank taxes
European Single Resolution Fund contribution
1 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.2 The C/I ratio adjusted for specific items of 57% in 9M16 amounts to roughly 50% excluding these bank taxes
Bank taxes of 410m EUR YTD. On a pro rata basis, bank taxes represented11.1% of 9M16 opex at KBC Group2
Bank taxes of 273m EUR YTD. On a pro rata basis, bank taxes represented 10.9% of 9M16 opex at the Belgium BU
Bank taxes of 27m EUR YTD. On a pro rata basis, bank taxes represented 4.4% of 9M16 opex at the CZ BU
Bank taxes of 107m EUR YTD. On a pro rata basis, bank taxes represented 18.6% of 9M16 opex at the IM BU
70
Appendices
1 KBC 2015/16 benchmarks + overview of outstanding benchmarks
2 KBC Bank CDS levels
3
Overview of bank taxes
4
5
Details on selective credit exposure
6
7
Summary of KBC’s covered bond programme
Macroeconomic views
Solvency: details on capital
71
Details on 2016 Joint Capital Decision
Joint Capital decision (JCD) JCD 2015 JCD 2016 projection
Target applicable in 2016 2017 2018 2019
phased phased phased fully loaded
CET1 4.5% 4.5% 4.5% 4.5%
AT1 - 1.5% 1.5% 1.5%
T2 - 2.0% 2.0% 2.0%
CET1phased: 4,625%
ful l : 2,75%1.75% 1.75% 1.75%
Conservation buffer CET1phased: 0,625%
ful l : 2,5%- - -
CET1 9.75% 6.25% 6.25% 6.25%
T1 - 7.75% 7.75% 7.75%
Total capital - 9.75% 9.75% 9.75%
Combined Buffer Requirement (CBR)
Conservation buffer CET1 - 1.25% 1.875% 2.50%
O-SII buffer CET1 0.50% 1.00% 1.50% 1.50%
Countercyclical buffer CET1 0.00% 0.15% 0.15% 0.15%
CET1 10.25% 8.65% 9.775% 10.40%
T1 - 10.15% 11.275% 11.90%
Total capital - 12.15% 13.275% 13.90%
Early warning threshold CET1 0.25% - - -
Pillar 2 Guidance (P2G) CET1 - 1.00% 1.00% 1.00%
CET1 10.50% 9.65% 10.775% 11.40%
* Under the Minimum Distributable Amounts framework other distribution restrictions triggers may also apply in the future after approval and implementation of the framework.
Total SREP Capital Requirement
(TSCR)
Overal capital requirement (OCR)
= MDA threshold*
CET1 requirement + P2G
Pillar 1 minimum requirement (P1
min)
Pillar 2 requirement (P2R)
72
Fully loaded B3 CET1 based on the Danish Compromise (DC)from 2Q16 to 3Q16
Jan 2012 Dec 2012 2014-2020
3Q16 (B3 DC)
89.0
3Q16 impact
-0.1
2Q16 (B3 DC**)
89.0
DELTA AT NUMERATOR LEVEL (BN EUR)
DELTA ON RWA (BN EUR)
* Includes the q-o-q delta in remeasurement of defined benefit obligations, DTAs on losses carried forward, IRB provision shortfall, deduction re. financing provided to
shareholders, translation differences, etc.
** Includes the RWA equivalent for KBC Insurance based on DC, calculated as the book value of KBC Insurance multiplied by 370%
Fully loaded B3common equity ratio ofapprox. 15.3% at end2Q16 based on theDanish Compromise(DC)
A pro forma fullyloaded common equityratio translation to11.25% was clearlyexceeded
B3 CET1 at end 3Q16 (DC)
13.6
Other*Delta in AFS revaluation reserves
0.1
Pro-rata accrual dividend
-0.3
3Q16 net result
0.5
B3 CET1 at end 2Q16 (DC)
13.30.0
73
Overview of B3 CET1 ratios at KBC Group
Method Numerator Denominator B3 CET1 ratio
FICOD1, phased-in 13 921 103 345 13.5%
FICOD, fully loaded 14 166 104 159 13.6%
DC2, phased-in 13 349 88 154 15.1%
DC, fully loaded 13 593 88 967 15.3%
DM3, fully loaded 12 484 83 232 15.0%
1 FICOD: Financial Conglomerate Directive2 DC: Danish Compromise3 DM: Deduction Method
74
Solvency II ratio
Solvency II ratio
1Q16 2Q16 3Q16
Solvency II ratio without cap of the NBB(ratio comparable with European peers)
210% 208% 198%
Solvency II ratio with cap of the NBB* 195% 187% 170%
* On 25 April 2016, the NBB published a circular determining the treatment of the loss absorbing capacity of deferred taxes in the Solvency II calculation. This caps theloss absorbing capacity of deferred taxes for Belgian insurance companies to the net deferred tax liability recognised on the economic balance sheet
On 25 April 2016, the NBB decided to impose a capon the loss absorbing capacity of deferred taxes inthe calculation of the required capital with retro-active application from 1 January 2016 onwards*.The introduction of such absolute cap deviatesboth from the European Solvency II regulation andthe practice of most other European regulatorsand increases the required capital
As a result of this gold-plating by the NBB, theformal Solvency II ratio came down from 198% to170% for 3Q16
The reduction (-10%-points) in the Solvency II ratiowithout this cap was mainly the result of lowerinterest rates and lower corporate spreads incombination with an update of the VolatilityAdjustment imposed by EIOPA. The strongerreduction of the Solvency II ratio with theapplication of the cap (-17%-points) is due to alower cap as a result of the reduction of theavailable Deferred Tax Liabilities on the economicbalance sheet for 3Q16
75
Implementation of the BRRD in Belgium
1. The BRRD has been transposed to a large extent by the Act of 25 April 2014 on the legalstatus and supervision of credit institutions ("The Banking Act") which applies sinceMay-2015, with the exception of some major provisions, such as the bail-in tool. Someprovisions will be further implemented by a Royal Decree (“RD”):
• Bail-in mechanism and MREL requirement of the BRRD: RD was published in theBelgian Official Journal 29 December 2015 and entries into force as from 1 January2016. However, the resolution strategy and MREL target for KBC are assumptionsand have not been determined by the Resolution Authority
• Group dimension of the BRRD: transposition is currently under preparation
2. The competent authorities are
• Supervision authority (KBC Bank NV, KBC Group NV): ECB/NBB.
• Resolution authority (KBC Bank NV, KBC Group NV): Single Resolution Board asfrom 1 January 2016.
• Competent authority for conduct supervision of financial institutions andintermediaries (KBC Bank NV): FSMA.
3. The hierarchy of claims in Belgium is in line with the BRRD as provided for in art. 48BRRD and applies losses accordingly.
• Creditors are protected by the No Creditor Worse Off (“NCWO”) principle whichensures that creditors in resolution can’t be worse-off than in normal insolvencyproceedings (art 34(1) BRRD).
4. KBC plans on on-lending senior unsecured issued out of KBC Group NV as subordinatedinstruments at KBC Bank NV to ensure the on-loan would only take losses after Tier 2securities.
• Additionally KBC Bank NV’s funding needs in senior unsecured are expected to bemoderate going forward
CET1
AT1
Tier 2
Internal Sub Loan
Senior Unsecured
Hierarchy of Claims in Belgium
Structured Notes
Derivatives
Junior Deposits
Individual & SME Deposits
Covered Deposits
Loss
Ab
sorp
tio
n in
KB
C B
ank
76
General principles (1/2): What happens in different solvency situations?
Point of Non Viability (PONV)
Business as usual Recovery plan Resolution plan
CET1sufficiently above Joint
Capital Decisionin breach (or breach is imminent) of Joint
Capital Decision
in breach of minimum requirements (4.5% CET1 / 6% T1 / 8% total capital) or considered as non
viable by the competent authorities.
AT1 no impactcoupon uncertain
absorbs losses when trigger (5.125% CET1 on transitional basis) is breached
absorb losses at PONV
T2 no impactno impact (except CoCo: absorbs losses when
trigger (7% CET1 on a transitional basis) is breached)
absorb losses at PONV
Senior debt no impact no impactabsorb losses beyond PONV
(bail-in)
KBC is in controlResolution Authority
is in control
Cap
ital
inst
rum
ents
77
General principles (2/2): What are the risks for HoldCo senior investors?
77
Shareholders equity
AT1
Tier 2
Senior Unsecured
Recapitalisation scenario, losses (originating in any or in all of the underlying entities*) are lower than the size of the capital instruments at theHoldCo level part or all of Senior debt issued by the HoldCo can be converted into shares to recapitalise the HoldCo up to a minimum level as decided by
the competent authorities. The investor then has a combination of shares and bonds of the HoldCo instead of only bonds and thus (co-)ownsthe underlying entities. The conversion factor would be determined by the competent authorities applying the NCWO principle.
Loss absorption scenario, losses (originating in any or in all of the underlying entities*) exceed the size of the capital instruments at the HoldColevel part or all of Senior issued by the HoldCo can be bailed-in to absorb losses. The NCWO principle implies that losses are only up-streamed to
the HoldCo upto the amount of the investment of the HoldCo in the entity(ies) generating the losses. Hence, the investor in the HoldCoSenior will lose (up to) its investment to the extent that the amount of outstanding HoldCo senior debt exceeds the value of the remainingunderlying entities of the HoldCo
Public Issuance
1 2
1
2
BRRD capitalinstruments
HoldCo
In all scenarios surpassing the Point of Non
Viability, the investors are protected by the
No Creditor Worse Off principle (“NCWO”),
which stipulates that no instrument will be
worse off in resolution than in normal
insolvency proceedings
* In KBC Group’s case this would be KBC Bank and/or KBC Insurance and/or KBC Asset Management
size of loss
78
Appendices
1 KBC 2015/16 benchmarks + overview of outstanding benchmarks
2 KBC Bank CDS levels
3
Overview of bank taxes
4
5
Details on selective credit exposure
6
7
Summary of KBC’s covered bond programme
Macroeconomic views
Solvency: details on capital
79
Belgian economic growthModerate but steady GDP growth – with strong consumption
92
94
96
98
100
102
104
106
108Belgium
Germany
France
Netherlands
Euro Area
Real GDP in the Euro Area (Q1 2008 = 100)
94
96
98
100
102
104
106
108
110
Real private consumption(Q1 2008 = 100)
Belgium
Germany
France
Netherlands
Euro Area
Source: Eurostat; NBB
80
Real GDP in the Euro Area (Q1 2008 = 100)
Exports (Q1 2008 = 100)
Belgian economic growthModerate but steady GDP growth – with rising exports
Source: Eurostat; NBB
80
85
90
95
100
105
110
115
120
125
130 Belgium
Germany
France
Netherlands
Euro Area
92
94
96
98
100
102
104
106
108Belgium
Germany
France
Netherlands
Euro Area
81
Belgium - Consumer confidence (standard deviation from long term average)
Confidence indicatorsSentiment indicators suggest growth slowed during the summer months
-2,5
-2
-1,5
-1
-0,5
0
0,5
1
1,5
Source: NBB
-3,5
-3
-2,5
-2
-1,5
-1
-0,5
0
0,5
1
1,5
Indicator NBB
Assessment export orders
Belgium - Producer confidence (standard deviation from long term average)
82
External tradeBelgian exports to the UK impacted by the GBP depreciation
Source: NBB
-15
-10
-5
0
5
10
15
20
Exports to EU countries (ex. UK)
Exports to UK
Exports to outside EU0,6
0,65
0,7
0,75
0,8
0,85
0,9
-15
-10
-5
0
5
10
15
20
Exports to UK (lhs)
GBP per EUR (rhs)
Belgian exports (in value, year-on-year change in %, 3mma)
83
Belgian labour market The positive momentum in the job market slowed somewhat
Reduced dynamic in the labour marketBelgium - Domestic employment
(year-on-year change in ‘000)
-40
-20
0
20
40
60
80
100
Agriculture Manufacturing Construction
Services Total
Source: NBB; RVA; Federgon
-20000
-15000
-10000
-5000
0
5000
10000
15000
20000
-10
-5
0
5
10
15
Number of unemployed (year-on-year change in %, lhs)
New vacancies received (Flanders, year-on-year change in '000, rhs)
84
REAL GDP GROWTH (IN %, KBC forecast)
2015 2016 2017
US 2.6 1.4 2.1
EMU 1.6 1.4 1.3
GERMANY 1.7 1.6 1.5
BELGIUM 1.4 1.3 1.2
CZECH REP. 4.3 2.5 2.3
SLOVAKIA 3.6 3.5 3.0
HUNGARY 2.9 2.0 2.6
BULGARIA 3.0 3.0 3.4
IRELAND 26.3 4.0 3.0
Growth outlook 2016 & 2017
Source: KBC (October 2016)
Comparison with other forecasters
2016 Belgium Euro Area Germany
IMF (April) 1.2 1.5 1.5
EC (Spring) 1.2 1.6 1.6
OECD (June) 1.2 1.6 1.6
Federal Planning Bureau (Sept.) 1.4 - -
Consensus Economics (Sept.) 1.3 1.5 1.8
KBC (October) 1.3 1.4 1.6
2017 Belgium Euro Area Germany
IMF (April) 1.4 1.6 1.6
EC (Spring) 1.6 1.8 1.6
OECD (June) 1.5 1.7 1.7
Federal Planning Bureau (Sept.) 1.2 - -
Consensus Economics (Sept.) 1.3 1.3 1.2
KBC (October) 1.2 1.3 1.5
85
Belgian housing marketA soft landing
House prices Belgium (*)
Source: FOD Economie
(*) Corrected for price changes resulting from changes in the quality and location of the real estate sold
-2
-1
0
1
2
3
4
5
6
7
8
95
100
105
110
115
120Index (Q1 2008 = 100, lhs)
Year-on-year change (in %, rhs)
0,0
0,2
0,4
0,6
0,8
1,0
1,2
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
Excluding refinanced loans (lhs) Refinanced loans (rhs)
Source: NBB.Stat
Mortgage market supported by historical low interest rates
86
-0,5
0,5
1,5
2,5
3,5
4,5
5,5
Belgium
Germany
0
100
200
300
400
500
600
700
800Belgium
France
Netherlands
Italy
Spain
Ireland
Interest rates still at an historically low level
10-year government bond yields(in %)
Spread Belgium-Germany
Interest rate spreads Euro Area(10-year rate versus Germany, in basis points)
87
Glossary (1)
AQR Asset Quality Review
B3 Basel III
CBI Central Bank of Ireland
Combined ratio (non-life insurance)[technical insurance charges, including the internal cost of settling claims / earned premiums] + [operating expenses / written premiums] (after reinsurance in each case)
Common equity ratio [common equity tier-1 capital] / [total weighted risks]
Cost/income ratio (banking) [operating expenses of the banking activities of the group] / [total income of the banking activities of the group]
Cost/income ratio adjusted for specific items
The numerator and denominator are adjusted for (exceptional) items which distort the P&L during a particular period in order to provide a better insight into the underlying business trends. Adjustments include: • MtM ALM derivatives (fully excluded)• bank taxes (including contributions to European Single Resolution Fund) are included pro rata and hence spread over all quarters of the year instead of
being recognised for the most part upfront (as required by IFRIC21)• up to the end of 2014, also Legacy & OCR was an important correction• one-off items (such as the impact of the liquidation of KBC FH)
Credit cost ratio (CCR)[net changes in individual and portfolio-based impairment for credit risks] / [average outstanding loan portfolio]. Note that, inter alia, government bonds are not included in this formula
EBA European Banking Authority
ESMA European Securities and Markets Authority
ESFR European Single Resolution Fund
FICOD Financial Conglomerates Directive
Impaired loans cover ratio [total impairments (specific) for impaired loans] / [total outstanding impaired loans]. For a definition of ‘impaired’, see ‘Impaired loans ratio’
Impaired loans ratio [total outstanding impaired loans (PD 10-11-12)] / [total outstanding loans]
Leverage ratio[regulatory available tier-1 capital] / [total exposure measures]. The exposure measure is the total of non-risk-weighted on and off-balance sheet items, based on accounting data. The risk reducing effect of collateral, guarantees or netting is not taken into account, except for repos and derivatives. This ratio supplements the risk-based requirements (CAD) with a simple, non-risk-based backstop measure
Liquidity coverage ratio (LCR) [stock of high quality liquid assets] / [total net cash outflow over the next 30 calendar days].
Net interest margin (NIM) of the group [net interest income of the banking activities] / [average interest-bearing assets of the banking activities]
Net stable funding ratio (NSFR) [available amount of stable funding] / [required amount of stable funding]
88
Glossary (2)
MARS Mortgage Arrears Resolution Strategy
MREL Minimum requirement for own funds and eligible liabilities
PD Probability of default
Return on allocated capital (ROAC) for a particular business unit
[result after tax, including minority interests, of a business unit, adjusted for income on allocated capital instead of real capital] / [average capital allocated to the business unit]. The capital allocated to a business unit is based on risk-weighted assets for banking and risk-weighted asset equivalents for insurance
Return on equity[result after tax, attributable to equity holders of the parent] / [average parent shareholders’ equity, excluding the revaluation reserve for available-for-sale assets]. If a coupon is expected to be paid on the core-capital securities sold to the Belgian Federal and Flemish Regional governments, it will be deducted from the numerator (pro rata)
TLAC Total loss-absorbing capacity
89
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