Embed Size (px)
Citation preview
1
KBC Group Company presentation 2Q 2013
KBC Group - Investor Relations Office - Email: More infomation: www.kbc.com or on your mobile: m.kbc.com
2
This presentation is provided for informational 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.
Important information for investors
3
Key takeaways for KBC Group
STRONG BUSINESS PERFORMANCE IN 2Q13 • Net reported profit of 517m EUR • Continued good adjusted* net result of 485m EUR, an increase of 35% q-o-q, leading to a ROE of 15%. This is the result of:
o Strong commercial bank-insurance franchises in our core markets and core activities, o Stable net interest margin o Strong net fee and commission income, o Solid gains from financial instruments at fair value (mainly high M2M ALM derivatives), o Good combined ratio o Excellent Cost/Income ratio o Lower impairment charges. Note that the loan loss provisions in Ireland were in line with guidance. As such, we are maintaining our FY
2013 guidance of 300m-400m EUR for KBC Bank Ireland
SOLID CAPITAL AND ROBUST LIQUIDITY POSITIONS • Pro forma** common equity (B3 fully loaded***) ratio of 11.8% at end 1H13 • Continued strong liquidity position (NSFR at 107% and LCR at 125%)****. Unencumbered assets are more than 4 times the amount of
short-term wholesale funding
MOMENTUM MAINTAINED ON DIVESTMENTS AND DERISKING • Further progress on divestments: the sale of Absolut Bank is completed • CDO/ABS exposure further reduced by roughly 4.6bn EUR
* Adjusted net result is the net result excluding a limited number of non-operating items, i.e. legacy CDO and divestment activities and the M2M effect of own debt instruments due to own credit risk ** Pro forma figures include the accelerated repayment of 1.17bn EUR of State aid to the Flemish Regional Government (+50% penalty), the impact of the transfer of part of the shareholder loans and the impact of the signed divestment of KBC Banka *** Including remaining State aid of 2.33bn EUR **** NSFR: Net Stable Funding Ratio; LCR: Liquidity Coverage Ratio
4
Contents
1 2Q 2013 performance of KBC Group
3 Divestments and derisking
4 Strong solvency and solid liquidity
5 Wrap up
Annex 1: 2Q 2013 performance of business units
Annex 2: Company profile
Annex 3: Other items
2 2Q 2013 financial highlights per business unit
5
KBC Group
Section 1
2Q 2013 performance of KBC Group
6
Earnings capacity
ADJUSTMENTS
2Q13
32
1Q13
161
4Q12
-39
3Q12
158
2Q12
-882
1Q12
-121
1Q13
517
2Q13
520
4Q12
240
3Q12
531
2Q12
-539
1Q12
380
NET RESULT *
* Note that the scope of consolidation has changed over time, due partly to divestments
Amounts in m EUR
2Q13
485
359 373
1Q13 4Q12
279
3Q12 2Q12
343
1Q12
501
ADJUSTED NET RESULT
Excluding adjustments
Legacy + own credit risk items (post-tax) • Revaluation of structured credit portfolio + 180m EUR • Divestments - 128m EUR • M2M own credit risk - 20m EUR
7
Adjusted net result at KBC Group
* Difference between adjusted 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 ADJUSTED NET RESULT*
2Q13
485
1Q13
359
4Q12
279
3Q12
373
2Q12
343
1Q12
501
ADJUSTED NET RESULT AT KBC GROUP *
2Q13
399
1Q13
363
4Q12
231
3Q12
263
2Q12
251
1Q12
356
2Q13
97
-33
86
78
84
46
1Q13
74
-43
67
50
4Q12
71
-27
106
-8
3Q12
117
-25
63
79
2Q12
105
-43
71
77
1Q12
146
-18
Life result Non-technical & taxes Non-Life result
CONTRIBUTION OF INSURANCE ACTIVITIES TO KBC GROUP ADJUSTED NET RESULT*
Amounts in m EUR
8
Net interest income and margin
Net interest income
• Fell by 2% q-o-q and 7% y-o-y (across all business units), excluding deconsolidated entities
• Both q-o-q and y-o-y decline can mainly be explained by lower reinvestment yields and a deliberately decreasing loan portfolio at the foreign branches and the legacy Project Finance portfolio, despite sound commercial margins and deposit volume increases (4% y-o-y on a comparable basis)
Net interest margin (1.72%)
• flat q-o-q and down by 6bps y-o-y
• Q-o-q, sound commercial margins offset the negative impact from lower reinvestment yields
NIM* (excl. IFRS 5 entities and divestments in 2012)
NII
24 50
2Q12
1,153 1,078
26 42
2Q13
990
1Q13
1,066
1,032
1,008
24
4Q12
1,084
1,013
26 45
3Q12
1,004
19
1Q12
1,217
1,117
29 52
19
NII at Absolut Bank NII at Kredyt Bank NII at Warta and Zagiel
2Q13
1.72%
1Q13
1.72%
4Q12
1.71%
3Q12
1.66%
2Q12
1.78%
1Q12
1.87%
Amounts in m EUR
* Net interest margin: net Interest Income divided by total interest bearing assets excl. reverse repos
9
Net fee and commission income and AUM
Strong net fee and commission income • Increased by 2% q-o-q and 23% y-o-y excluding
deconsolidated entities • Y-o-y increase is driven by higher entry and
management fees on mutual funds • The q-o-q increase can be explained by higher
management fees on investment products
Assets under management (156bn EUR) • Rose by 3% y-o-y thanks to a positive price effect • Stabilised q-o-q with net new entries
compensated by negative price effects
AUM
F&C
Amounts in m EUR
2Q13
156
1Q13
156
4Q12
155
3Q12
155
2Q12
151
1Q12
153
2Q13
388
1Q13
385
380
5
4Q12
359
332
6 21
3Q12
345
320
5 20
2Q12
309
317
5 21
-34
1Q12
312
322
5 19
-34
F&C at Absolut Bank F&C at Kredyt Bank F&C at Warta and Zagiel
10
Premium income and combined ratio
Insurance premium income (gross earned premium) at 557m EUR
Excluding deconsolidated entities • Non-life premium income (316m) up 3% q-o-q and
4% y-o-y. • Life premium income (241m) down 11% q-o-q and
35% y-o-y
The non-life combined ratio in 1H13 stood at a good 91% (despite 2Q13 being negatively impacted by the floods in the Czech Republic)
COMBINED RATIO (NON-LIFE)
PREMIUM INCOME (GROSS EARNED PREMIUM)
2Q13
557
1Q13
577
4Q12
623
3Q12
578
2Q12
890
674
216
1Q12
884
658
226
Premium income at Warta
FY
95%
9M
90%
1H
91% 89%
1Q
87% 89%
2013 2012
Amounts in m EUR
11
Sales of insurance products
Sales of non-life insurance products • Up almost 6% y-o-y (excluding Warta) • Down 24% q-o-q (seasonal effect)
Sales of life insurance products • Down 20% q-o-q and 69% y-o-y (-20% and -64%,
respectively, excluding deconsolidated entities) • The q-o-q decline in sales of unit-linked products can
be explained by a limited number of newly launched tranches/campaigns and the increase in insurance tax as from January 2013 and with a shift towards AM products (both factors occurring in the Belgium BU). Furthermore, there was limited premium income from guaranteed interest products due to the low rate of guaranteed interest
• Sales of unit-linked products only accounted for 53% of total life insurance sales
LIFE SALES
NON-LIFE SALES (GROSS WRITTEN PREMIUM)
2Q13
302
1Q13
397
4Q12
270
3Q12
280
2Q12
433
285
148
1Q12
540
386
154
Non-life sales at Warta
2Q13
454
242 212
1Q13
567
337
230
4Q12
1,224
956
268
3Q12
951
752
199
2Q12
1,445
1,021
226
198
1Q12
1,183
713
300
170
Unit-linked products
Guaranteed interest products
Deconsolidated entities
Amounts in m EUR
12
FV gains and gains realised on AFS
The higher q-o-q figure for net gains from financial instruments at fair value (256m EUR) was the result of a positive q-o-q change in ALM derivatives (126m EUR in 2Q13 compared with 85m EUR in 1Q13)
Gains realised on AFS assets came to 46m EUR (mainly on Belgian AFS assets)
FV GAINS
Amounts in m EUR
2Q13
256
1Q13
218
4Q12
156
3Q12
223
2Q12
58
1Q12
353
2Q13
46
1Q13
96
4Q12
85
3Q12
55
2Q12
9
1Q12
31
GAINS REALISED ON AFS ASSETS
13
Operating expenses and C/I ratio
Cost/income ratio (banking) at excellent 50% • Driven by the high M2M impact of ALM derivatives
and the realisation of AFS assets • Adjusted for specific items, the C/I ratio amounted
to roughly 56% in 1H13 • Operating expenses went up by 4% y-o-y excluding
deconsolidated entities, accounted for almost entirely by a higher recurrent new financial transaction levy (FTL) in K&H (as of 2013) and higher bank tax in both the Belgium BU (despite the recovery of amounts from the former Deposit Guarantee Scheme) and Hungary (an additional one-off FTL related charge in 2Q13). Excluding all one-offs, operating costs fell 1% y-o-y
• Operating expenses decreased by 8% q-o-q excluding deconsolidated entities due mainly to lower bank tax (as a consequence of reimbursement of amounts from the Deposit Guarantee Scheme in Belgium in 2Q13 and the FY13 Hungarian bank tax in 1Q13, partly offset by an additional one-off FTL related charge in Hungary in 2Q13). Excluding all one-offs, operating costs fell 3% q-o-q
OPERATING EXPENSES
Amounts in m EUR
921
1Q13
1,029
999
30
4Q12
1,068
973
33 2 60
3Q12
990
892
31 10
57
2Q12
1,016
2Q13
30 5 61
33
1Q12
887
980
32 6 58
34 1,110
Opex at Absolut Bank
Opex at Private Equity
Opex at Kredyt Bank
Opex at Warta and Zagiel
14
Asset impairment, credit cost and NPL ratio
Lower impairment charges • Q-o-q decrease of 79m EUR in loan loss provisions (217m
EUR in 2Q13), mainly the result of lower impairments for corporates in the Belgium BU, KBC Bank Ireland (88m in 2Q13 compared with 99m EUR in 1Q13) and KBC Finance Ireland
• Compared with the level recorded in 2Q12 (202m EUR), loan loss provisions were up by 15m EUR given the unsustainable low level recorded in the Belgium BU in 2Q12 and despite the fact that 2Q12 included 136m EUR loan loss provisions at KBC Bank Ireland
• Impairment of 3m EUR on AFS shares (mainly on a bond at DZI) and of 15m EUR related to real estate
The credit cost ratio amounted to 0.75% in 1H13, due mainly to a deterioration in the SME portfolio, KBC Bank Ireland and a few large corporate files. Excluding KBC Bank Ireland and the one large corporate file in 1Q13, the CCR stood at 0.46% in 1H13
The NPL ratio amounted to 5.5%, primarily due to increases in Slovakia, Ireland and Group Centre
ASSET IMPAIRMENT
2Q13
235
1Q13
335
4Q12
378
366
12
3Q12
305
295
13
2Q12
241
243
1Q12
271
264
14
-7 -2 -3
Impairments at Kredyt Bank Impairments at Absolut Bank and Warta
NPL RATIO
2Q13
5.5%
1Q13
5.3%
4Q12
5.3%
3Q12
5.5%
2Q12
5.3%
1Q12
5.2%
CCR RATIO
1H13
0.75%
FY12
0.71%
FY11
0.82%
FY10
0.91%
FY09
1.11%
15
KBC Group
Section 2
2Q 2013 financial highlights per business unit
16
Key takeaways for the Belgium Business Unit
Net result increased by 8% q-o-q to 418m EUR as a result of: Slightly higher net interest margin Strong net fee and commission income (thanks to
our integrated bank-insurance model)
Lower unit-linked life insurance sales
Seasonally higher dividend income
High M2M impact of ALM derivatives, more than offsetting the smaller amount realised on AFS assets
Good combined ratio (93% in 2Q13 and 89% YTD) Excellent C/I ratio (44% in 2Q13 and 45% YTD) Lower impairment charges q-o-q
ROAC at 29% in 1H13
2Q13
418
1Q13
385
4Q12
295
3Q12
335
2Q12
244
1Q12
486
NET RESULT
Amounts in m EUR
17
Details of net result for Belgium Business Unit (1) Net result: +8% q-o-q to 418m EUR
• Net interest income (640m EUR) down 3% q-o-q and 5% y-o-y. This decline can mainly be explained by technical items and a decreasing loan portfolio at the foreign branches, despite an increase in commercial NII. Note that the SME & Corporate loan portfolio and customer deposits increased y-o-y (+1% and +6%, respectively)
• Strong net fee and commission income (-1% q-o-q and +21% y-o-y) thanks to our integrated bank-insurance model. The y-o-y growth was driven primarily by higher income from mutual funds (both entry and management fees). The q-o-q decline was attributable to lower fee income related to unit-linked life insurance products (less transfers from guaranteed interest to unit-linked products) and less switches between different unit-linked products
• Net result from FIFV rose by 49% q-o-q owing chiefly to high M2M impact of ALM derivatives
• Costs fell by 6% q-o-q (but rose by 1% y-o-y) mainly thanks to the recovery of 13m EUR from the former Deposit Guarantee Scheme and lower ICT expenses. This resulted in an excellent C/I ratio (44% in 2Q13)
• Lower impairment charges q-o-q
2Q13
640
1Q13
658
4Q12
688
3Q12
639
2Q12
671
1Q12
724 NII
* Non-annualised ** Loans to customers, excluding reverse repos (and not including bonds)
VOLUME TREND Total
loans ** Of which
mortgages Customer deposits
AuM Life reserves
Volume 83bn 31bn 100bn 145bn 25bn
Growth q/q* 0% 0% 0% 0% 0%
Growth y/y -1% +3% +6% +4% +7%
2Q13
288
1Q13
291
4Q12
253
3Q12
234
2Q12
238
1Q12
222
F&C
2Q13
544
1Q13
575
4Q12
557
3Q12
535
2Q12
536
1Q12
568 OPEX
Amounts in m EUR
2Q13
201
1Q13
135
4Q12
94
3Q12
134
2Q12
1
1Q12
278 Net result from FIFV
18
• The net interest margin widened by 2bps q-o-q to 1.19%, as sound commercial margins offset the negative impact of lower reinvestment yields. The higher product margin on savings accounts was due to the decrease of 5bps in the basic interest rate and of 15bps in the fidelity premium from mid-May onwards
• The credit cost ratio increased from 28bps in FY12 to
49bps in 1H13 due to a deterioration in the SME & Corporate portfolio (compared with 62bps in 1Q13 due to a few corporate files). Excluding the one large corporate file in 1Q13, the CCR amounted to 35bps in 1H13
• The NPL ratio stabilised at 2.3%
• An excellent (non-life) combined ratio (89% YTD). Note
that technical charges in 2Q13 increased (both q-o-q and y-o-y) driven by a higher level of car insurance claims and some other large claims files
NIM
1Q13
1.17%
4Q12
1.16%
3Q12
1.15%
2Q12
1.28%
1Q12
1.43%
2Q13
1.19%
COMBINED RATIO (NON-LIFE)
FY
95%
9M
87%
1H
87%
1Q
85% 81% 89%
2013 2012
NPL RATIO
1Q13
2.3%
4Q12
2.3%
3Q12
2.6%
2Q12
2.5%
1Q12
2.5% 2.3%
2Q13
Details of net result for Belgium Business Unit (2)
19
Economic background and 2Q13 key events Belgium Business Unit
Economic background • Consumer and producer confidence have been clearly improving since March. In June, however, the NBB indicator was down slightly
again. The significant volatility of the indicator since end 2012 confirms the current uncertainty still surrounding the Belgian economic situation
• The difficult economic climate is having a tangible impact on the labour market, with unemployment rising since spring 2012. In May 2013, the unemployment rate stood at 8.6%, which is 0.2% above the peak in the summer of 2010
• Economic activity will only recover gradually in the months ahead. It is expected to be hampered by ongoing weak European growth and by the slow recovery in confidence. Overall, GDP growth will be close to zero in 2013. The recovery should result in stronger growth in 2014, although it will be modest at an estimated 1.3%
Amounts in m EUR
2Q13 key events Opening of the first new branch concept (Bamboo) in June, substantially cheaper than a traditional branch set-up of a similar
size, with a totally different customer experience to emphasise the multi-channel coverage of our retail client relationships Campaign focused on local entrepreneurship (known as the ‘gap in the market’-campaign) was chosen as best campaign of its
kind in Europe (winning the golden lion award at the advertising awards in Cannes) , stressing the importance of local embeddedness in our SME market
KBC Private Banking elected best private bank in Belgium in 2013 by Euromoney Further implementation of PEARL strategy through different initiatives, focusing on increasing efficiency and stimulating
entrepreneurial behavior
20
Key takeaways for the Czech Republic Business Unit
Net result increased by 11% q-o-q to 146m EUR as a result of: Slightly higher net interest income Lower net fee and commission income
Higher (non-life) claims due to floods and lower life
insurance sales
Higher net gains from financial instruments at fair value
Stable costs
Lower impairment charges
ROAC at 34% in 1H13
Amounts in m EUR
NET RESULT
2Q13
146
1Q13
132
4Q12
114
3Q12
149
2Q12
159
1Q12
158
21
Details of net result for Czech Republic BU (1) Net result: +11% q-o-q to 146m EUR
• Excluding FX effect, net interest income o Rose by 2% q-o-q, a result primarily of higher NII on loans
in the Corporate/SME segment o Fell by 3% y-o-y due mainly to a lower reinvestment yield o Loan volumes were up 3% q-o-q and 8% y-o-y, driven by
growth in corporate/SME and mortgage loans • Excluding FX effect, net fee and commission income
o Decreased by 7% q-o-q, attributable chiefly to lower entry fees for mutual funds and lower sales fees for pension funds
o Rose by 12% y-o-y, on account of higher entry fees for mutual funds and lower fees paid to distribution
• Excluding FX effect, opex stabilised q-o-q, but rose by 1% y-o-y. Q-o-q, slightly lower staff (less FTEs) and marketing expenses were offset by a number of small other items. C/I ratio at 46%
• Impairments on L&R fell sharply q-o-q thanks to releases in the corporate/SME segment owing to improved models and a better performing portfolio
2Q13
246
1Q13
244
4Q12
249
3Q12
260
2Q12
258
1Q12
261 NII
* Non-annualised ** Loans to customers, excluding reverse repos (and not including bonds)
VOLUME TREND
Total loans **
Of which mortgages
Customer deposits
AuM Life reserves
Volume 19bn 8bn 25bn 6.2bn 1.1bn
Growth q/q* +3% +2% 0% +2% -4%
Growth y/y +8% +9% +2% +10% -7%
2Q13
46
1Q13
51
4Q12
41
3Q12
47
2Q12
42
1Q12
49 F&C
2Q13
163
1Q13
164
4Q12
196
3Q12
165
2Q12
164
1Q12
164
OPEX
Amounts in m EUR 2Q13
9
1Q13
22
4Q12
23
3Q12
19
2Q12
14
1Q12
13
ASSET IMPAIRMENT
22
• The net interest margin decreased by 3bps q-o-q and 22bps y-o-y to 3.04% o This y-o-y decline decline was caused primarily by a
lower reinvestment yield o The q-o-q decrease was partly the result of further
pressure on deposit margins, despite the cut in interest rates on savings deposits in April
• The credit cost ratio amounted to 0.30% (0.31% in 2012) • The NPL ratio came to 3.3%
• The combined ratio stood at 102% in 1H13 (104% in
2Q13), due mainly to flood claims
3.04%
2Q13 1Q13
3.07%
4Q12
3.03%
3Q12
3.19%
2Q12
3.26%
1Q12
3.36%
FY
95%
9M
99%
1H
94%
1Q
99% 91%
102%
2013 2012
NIM
NPL RATIO
COMBINED RATIO (NON-LIFE)
3.3%
1Q13
3.2%
4Q12
3.2%
3Q12
3.5%
2Q12
3.4%
1Q12
3.5%
2Q13
Details of net result for Czech Republic BU (2)
23
Economic background and 2Q13 key events Czech Republic Business Unit
Economic background The Czech economy has been marked by a recession lasting one and a half years so far, and which is hitting the construction and
service sectors in particular. But export-oriented industry has also noted a decline due to the suppression of European demand The decline of the economy has been reflected in the labour market (higher unemployment and reduced real wages) and a
greater tendency to save (households less interested in spending and taking on debt) Decline in household consumption has significantly stifled inflation pressures. This has enabled the central bank to maintain its
key interest rate at the all-time low of 0.05% and keep the Czech koruna at weaker levels with verbal interventions The favourable results of public budgets, reduced aversion to risk, and stable rating of the Czech Republic by rating agencies have
resulted in maintaining a low level of yields on Czech Republic government bonds
Amounts in m EUR
2Q13 key events The UK’s EMEA Finance magazine named ČSOB the best bank in the Czech Republic for 2012. The main criteria included market
share, size of portfolio and profitability or corporate strategy The UK’s ACQ Finance magazine named ČSOB the best acquisition finance bank in the Czech Republic for 2012 ČSOB successfully launched Czech POINT service as the only bank in the Czech Republic at selected Era financial centers, so
people can get extracts from various official registers there (e.g. extracts from the commercial register, land register etc.) Successful launch of special cash service for retailers and logistic companies allowing cash deposits directly at their premises. Clients can conclude new travel insurance contracts via the ČSOB and Era smartbanking application ČSOB was one of the Joint Lead Managers for the successful City of Prague 10Y bond issue amounting to 200m EUR, historically
the largest municipal bond issue in the Czech Republic ČSOB launched a new loan programme focused on the agricultural segment to meet clients’ needs in the light of business
seasonality Employees helped non-profit organisations as well as their colleagues to clean up after floods. ČSOB provided advantageously
priced loans and supported a benefit concert for the victims of floods
24
Key takeaways for the International Markets Business Unit
Net result amounted to -23m EUR Mainly due to Ireland (-69m EUR) Loan loss provisions in Ireland (88m EUR in 2Q13
compared with 99m EUR in 1Q13) were in line with guidance. We are maintaining our FY 2013 guidance of 300m-400m EUR for KBC Bank Ireland
Turnaround potential: break-even returns at latest
by 2015 for International Markets BU, mid-term returns above cost of capital
ROAC at -14% in 1H13
Amounts in m EUR
NET RESULT
2Q13
-23
1Q13
-87
4Q12
-18
3Q12
-38
2Q12
-41
1Q12
-163
25
Net result: -23m EUR • International Markets profit breakdown: 16m Slovakia,
26m Hungary, 3m Bulgaria and -69m Ireland • Q-o-Q results were characterised by higher net interest
income, higher net fee and commission income, recuperation of insurance claims, lower costs (accounted for primarily by the FY13 Hungarian bank tax, recorded in full in 1Q13) and lower impairments
• Credit cost ratio of 1.76%. Excluding Ireland, the CCR in BU IM amounted to 85bps
• NPL ratio at 18.5% • Total loan book fell by 1% q-o-q and 5% y-o-y. On a y-o-y
basis, the decrease was accounted for by Ireland (matured loans surpassed new production) and Hungary (where the trend was impacted by e.g. the FX mortgage relief programme)
• Total deposits were up 3% q-o-q and 20% y-o-y, thanks mainly to the successful retail deposit campaign in Ireland
ORGANIC GROWTH**
TOTAL LOANS MORTGAGES DEPOSITS
q/q y/y q/q y/y q/q y/y
IRE -2% -8% -2% -6% +9% +79%
SK +1% +5% +4% +14% +1% +11%
HU +1% -6% -2% -5% +2% +10%
BU 0% +3% 0% -2% -7% -11%
TOTAL -1% -5% -1% -4% +3% +20% ** Organic growth excluding FX impact, q-o-q figures are non-annualised. Loan and mortgage figures after impairment charges
4Q12
17.6%
9.2%
3Q12
17.3%
9.5%
2Q12
16.9%
9.8%
1Q12
16.3%
9.7%
2Q13
18.5%
9.2%
1Q13
18.1%
9.0%
NPL excluding Ireland NPL including Ireland
NPL RATIO
Details of net result for International Markets BU
Loan book
2010 CCR
2011 CCR
2012 CCR
1H13 CCR
IM BU 26bn 2.26% 1.76%
- Ireland - Hungary - Slovakia - Bulgaria
16bn 5bn 5bn 1bn
2.98% 1.98% 0.96% 2.00%
3.01% 4.38% 0.25%
14.73%
3.34% 0.78% 0.25% 0.94%
2.35% 0.79% 0.80% 1.62%
26
Hungary YTD profitable: net result amounted to 7m EUR (including the
post-tax impact all bank taxes and levies)
Credit cost remains at 0.79%, in line with 1Q and FY12. NPL formation in private loan book versus decrease in corporate book
Tax burden: FY13 ‘regular’ bank tax of 43m EUR post-tax (recorded in full in 1Q13) and an additional one-off FTL related charge of 22m EUR post-tax (recorded in 2Q13). On top of that, the increased financial transaction levy will be around 40m EUR post-tax for the full year 2013, of which 16m EUR already recorded in 1H13
Municipal Loans: end of June 46% of K&H’s municipality portfolio has been taken over by the State at par
FX Housing Loans: discussion ongoing towards intention for law proposal in September. Total retail FX housing loan portfolio amounts to 0.6bn EUR
Funding for Growth: K&H lends to SME’s against 0% funding at MNB. First lending has happened of the 96bn HUF allotted pool. Positive P&L impact primarily in 2014
PROPORTION OF HIGH RISK AND NPLS
HUNGARIAN LOAN BOOK KEY FIGURES AS AT 30 JUNE 2013
Amounts in bn EUR
Loan portfolio Outstanding NPL NPL coverage
SME/Corporate 2.8bn 6.0% 61%
Retail 2.4bn 17.2% 65%
o/w private 2.0bn 18.7% 65%
o/w companies 0.4bn 9.1% 69%
5.1bn 11.2% 64%
8
9
10
11
12
13
14
15
4Q12 1Q13
13.5% 13.5%
2Q12 3Q12 1Q12
11.4%
12.6% 11.9%
14.3%
11.3%
13.3%
11.3%
13.0%
High Risk (probability of default > 6,4%) Non-Performing
2Q13
11.7%
11.2%
27
1. The total NPL coverage ratio amounted to 53% at the end of 2Q13 (52% in 1Q13) taking into account the adjustments for the Mortgage Indemnity Guarantee and Reserved Interest (42% for owner occupied mortgages and 49% for buy to let mortgages, respectively)
Ireland Credit cost continues slowdown at 2.35% compared to 3.34% FY12. Mild increase in
NPL formation in 2Q13. Loan loss provisions in 2Q13 of 88m EUR (136m EUR in 2Q12). We maintain our full year 2013 guidance on LLP of 300m-400m EUR
Overall, recent data remain consistent with the expectation of a modest rise in GDP in 2013, increasing employment and a gradual but uneven improvement in the housing market in 2013
KBCI has met the Q2 public target set by the Central Bank of Ireland in relation to the resolution of greater than 90 day arrears cases
KBCI is resolving the mortgage difficulties of a significant number of its customers and this should reduce the requirement for such customers to seek a Personal Insolvency Arrangement (operational from Q3 onwards)
Continued successful retail deposit campaign with gross retail deposit levels increased by 0.6bn EUR since end 2012 to 2.7bn EUR at end 2Q13 and approx. 6,000 new customer accounts were opened in the quarter
Local tier-1 ratio of 12.51% at the end of 2Q13
PROPORTION OF HIGH RISK AND NPLS
IRISH LOAN BOOK KEY FIGURES AS AT JUNE 2013
Amounts in m EUR
LOAN PORTFOLIO OUTSTANDING NPL NPL
COVERAGE
Owner occupied mortgages 9.2bn 18.8% 34%1
Buy to let mortgages 3.1bn 32.0% 43%1
SME /corporate 1.6bn 21.4% 77%
Real estate investment Real estate development
1.3bn 0.5bn
31.3% 89.6%
67% 77%
15.6bn 24.9% 48%1
0
5
10
15
20
25
30
24.9% 24.0% 20.5%
25.8%
17.1%
17.7%
1Q12 2Q12
24.9%
3Q12
18.3%
4Q11 2Q13 1Q13
21.5%
20.0% 21.8%
22.5%
4Q12
24.4%
23.3%
High Risk (probability of default > 6.4%)
Non-performing
28
Economic background and 2Q13 key events International Markets Business Unit
Economic background Economic growth in Ireland, Slovakia, Hungary and Bulgaria remained weak. For example, industrial output growth was mostly
negative, with the only exception being Slovakia In the light of the ongoing recession, unemployment generally stagnated at a high level, with the negative exception being
Bulgaria (with rising unemployment). Future prospects, however, look better, with consumer confidence indicators improving. However, actual data for retail sales growth continued to stagnate
Inflation rates followed the global disinflationary trend, with inflation being well below the respective central banks’ inflation target. In the case of Hungary, this prompted further policy rate cuts
The global monetary climate, mainly influenced by the US Fed, put some (limited) depreciating pressure on the HUF. Against that background, bond yields remained stable or rose moderately in line with the German Bund. In the case of the Hungarian 10-year government bond yield, there was substantial volatility during 2Q13
2Q13 key events CSOB Group Slovakia:
Further mobile app development allows management of mortgage loan installments as first in the market. Successful SME loan campaign supported through a EUR 140m guarantee facility provided by European Investment Fund.
K&H Group Hungary: Best Bank in Hungary for 2013 awarded by Euromoney. Both Bank and Insurance remained profitable despite additional government measures and contrary to peers.
CiBank & DZI Bulgaria DZI elected General Insurer of the year in 2013 for the 3rd consecutive year and CiBank most efficient bank for 2012. Retail mortgage sales in CiBank outperform the market (continued increase in market share since the end of 2011)
KBC Bank Ireland KBC Bank Ireland referenced as having the best brand reputation of any bank in Ireland (International Reputation
Institute) New branch operational in Cork and further openings planned in Limerick and Galway (roll-out of retail strategy planned
for 3Q13)
29
NET PROFIT - BELGIUM NET PROFIT – CZECH REPUBLIC
1H13
803
2012
1,360 1H13 ROAC: 29%
Amounts in m EUR
1H13
279
2012
581 1H13 ROAC: 34%
NET PROFIT - INTERNATIONAL MARKETS
1H13
-110
2012
-260
1H13 ROAC: -14%
1H13
36
2012
145
NET PROFIT - INTERNATIONAL MARKETS EXCL. IRELAND
Overview of results based on new business units
30
KBC Group
Section 3
Divestments and derisking
31
RWA reduced by more than initially planned
40% reduction in risk weighted assets between the end of 2008 and 1H13 due mainly to divestment activities • Further progress on divestments: the sale of Absolut Bank is completed, and we have signed agreement to sell KBC Banka • The 4.7bn EUR RWA reduction during 2Q13 was attributable chiefly to the further reduction of loan exposure in foreign
branches and LGD model changes (both in the Belgian BU), next to the divestment of Absolut Bank and the further reduced CDO exposure (both in Group Centre)
end 2010
132.0
end 2009
143.4
end 2008
155.3
end 2007
147.0
end 2006
140.0
end 2005
128.7
end 2011
102.1
End 1H13
126.3
93.3
1H13 pro
forma*
-40%
93.9
end 2012
KBC GROUP RISK WEIGHTED ASSETS (bn EUR)
KBC FP Convertible Bonds
KBC FP Asian Equity Derivatives
KBC FP Insurance Derivatives
KBC FP Reverse Mortgages
KBC Peel Hunt
KBC AM in the UK
KBC AM in Ireland
KBC Securities BIC
KBC Business Capital
Secura
KBC Concord Taiwan
KBC Securities Romania
KBC Securities Serbia
Organic wind-down of international MEB loan book outside home markets
Centea
Fidea
Warta
KBL European Private Bankers
Zagiel
Kredyt Bank
NLB
Absolut Bank
KBC Banka Signed
KBC Bank Deutschland Work-in-progress
Antwerp Diamond Bank Work-in-progress
SELECTED DIVESTMENTS
* Including the effects of the KBC Banka divestment
-62bn EUR
32
Net CDO exposure further reduced (2Q 2013)
Exposure reduction to the tune of 4.5bn EUR thanks to the collapsing of several CDOs. Please note that the net CDO exposure excludes all expired, unwound or terminated CDO positions and after settled credit events (3.1bn EUR)
REMINDER: CDO exposure largely covered by a State guarantee
IN BN EUR NET CDO EXPOSURE
OUTSTANDING MARKDOWNS
CDO exposure protected with MBIA Other CDO exposure
5.3 1.1
-0.1 -0.3
TOTAL 6.3 -0.4
1. Taking into account the guarantee agreement with the Belgian State
P&L sensitivity further decreased by 30% in the second quarter of 2013 mainly due to the de-risking activities and the lowering of the provisioning rate for MBIA from 80% to 60%
For more info, see slides 80-82 in annex
We continue to look at our CDO exposure in an opportunistic way: we will reduce further if the net negative impact is limited (taking into account the possible P&L impact, the value of the State guarantee and the RWA reduction)
NEGATIVE P&L IMPACT1 (m EUR) OF A 50% WIDENING IN CORPORATE AND ABS CREDIT SPREADS
0
100
200
300
400
500
600
1Q12 2Q13
142
1Q13
204
4Q12
280
3Q12
261
2Q12
448 438
4Q11
505
33
KBC Group
Section 4
Strong solvency and solid liquidity
34
Strong capital position
Strong tier-1 ratio of 16.8% under B2.5 and common equity (B3 fully loaded*) of 13.3% as at end 1H13
Pro forma solvency ratios**: core tier-1 ratio of 12.6% under B2.5 and common equity (B3 fully loaded*) of 11.8% at KBC Group
Fully loaded B3 CET1 leverage ratio: 3.7% at KBC Bank Consolidated, based on current CRR legislation
1H13** pro forma
14.9%
12.6%
10.1%
1H13
16.8%
14.5%
10.8%
FY09
10.8%
9.2%
4.3%
FY12
13.8%
11.7%
8.3%
FY11
12.3%
10.6%
5.5%
FY10
12.6%
10.9%
5.6%
T1 CT1 including State capital CT1 excluding State capital
* With remaining State aid included in CET1 as agreed with local regulator ** 1H13 pro forma CT1 includes the effects of the accelerated repayment of 1.17bn EUR of State aid to the Flemish Regional Government (+50% penalty), the impact of the transfer of part of the shareholder loans and the impact of the signed divestment of KBC Banka
Basel 2.5 Basel 3
1H13** pro forma
12.4% 11.8%
1H13
14.3% 13.3%
1Q13
12.9% 12.0%
FY12
11.2% 10.8%
9M12
12.6% 11.7%
1H12
11.1% 10.0%
Phased in B3 CET Fully loaded B3 CET
35
Solid liquidity position (1)
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 & markets
100%
1H13
75%
4% 9%
9% 1% 3%
FY12
73%
3% 9%
8% 0%
6%
FY11
69%
3% 9%
7%
9% 3%
FY10
70%
7%
8%
7% 5%
3%
FY09
64%
7%
8%
8% 5%
8%
FY08
66%
7% 7%
8%
5% 7%
FY07
64%
8%
8%
10%
-4%
14%
Funding from customers
Certificates of deposit
Total equity
Debt issues placed with institutional investors
Net secured funding
Net unsecured interbank funding
5.4% 0.9%
35.6%
58.2%
Government and PSE
Debt issues in retail network
Mid-cap
Retail and SME
75% customer
driven
36
Solid liquidity position (2)
The available liquid assets increased slightly in comparison with the end of 1Q13, due primarily to: • Increased investments in high liquidity assets • Reduction in secured funding in 2Q13
Therefore, the already solid liquidity position further strengthened • Unencumbered assets are now more than 4 times the
amount of the net recourse on short-term wholesale funding
• Funding from non-wholesale markets is stable funding from core customer segments in our core markets
* In line with IFRS5, the situation at the end of 2Q13 excludes the divestments that have not yet been completed (KBC Deutschland, KBC Banka, & ADB)
** 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
Ratios 2Q13 Target 2015
NSFR1 107% 105%
LCR1 125% 100%
1 LCR (Liquidity Coverage ratio) and NSFR (Net Stable Funding Ratio) are calculated based on KBC’s interpretation of current Basel Committee guidance, which may change in the future. The LCR can be relatively volatile in future due to its calculation method, as month-to-month changes in the difference between inflows and outflows can cause important swings in the ratio even if liquid assets remain stable
1818,7 22,8
15,214,9
42,6
50,3 53,9
60 61,7
237%269% 236%
395% 414%
180%
230%
280%
330%
380%
430%
0
10
20
30
40
50
60
70
2Q12 3Q12 FY2012 1Q13 2Q13
Short term unsecured funding KBC Bank vs Liquid assets as of end June 2013 (bn EUR)
Net Short Term Funding Available Liquid Assets Liquid Assets Coverage
(*, **)
NSFR at 107% and LCR at 125% by the end of 2Q13 • In compliance with the implementation of Basel 3 liquidity
requirements, KBC is targeting LCR and NSFR of at least 100% and 105%, respectively by 2015. KBC’s target for LCR is well above regulatory requirement of only 60% in 2015. There is no regulatory requirement yet for NSFR
37
KBC Group
Section 5
Wrap up
38
Wrap up
Strong commercial bank-insurance franchises in Belgium and the Czech Republic with stable and solid returns
Turnaround potential in the International Markets Business Unit
Successful underlying earnings track record
Solid capital and robust liquidity position
Momentum maintained on divestments and derisking
39
Looking forward
Looking forward, management envisages: • Continued stable and solid returns for the Belgium & Czech Republic BUs • Break-even returns at latest by 2015 for the International Markets BU, mid-term returns above cost of capital • A fully loaded B3 common equity ratio of minimum 10%
• LCR and NSFR of at least 100% and 105%, respectively by 2015
40
KBC Group
Annex 1
2Q 2013 performance of business units
41
BELGIUM BUSINESS UNIT
CFO SERVICES
CRO SERVICES
CORPORATE STAFF
CORPORATE CHANGE & SUPPORT
INTERNATIONAL PRODUCT FACTORIES
BELGIUM CZECH
REPUBLIC INTERNATIONAL
MARKETS
42
Belgium Business Unit (1)
Net result at the Belgium Business Unit amounted to 418m EUR • The quarter under review was characterised by a
slightly higher net interest margin, strong net fee and commission income, lower unit-linked life insurance sales, seasonally higher dividend income, high M2M impact of ALM derivatives, lower realised gains on AFS assets, recuperation on insurance claims, a good non-life insurance combined ratio, excellent C/I ratio and lower impairment charges q-o-q
* Non-annualised ** Loans to customers, excluding reverse repos (and not including bonds)
VOLUME TREND
Total loans ** Of which mortgages Customer deposits AuM Life reserves
Volume 83bn 31bn 100bn 145bn 25bn
Growth q/q* 0% 0% 0% 0% 0%
Growth y/y -1% +3% +6% +4% +7%
2Q13
418
1Q13
385
4Q12
295
3Q12
335
2Q12
244
1Q12
486
NET RESULT
Amounts in m EUR
43
Belgium Business Unit (2)
Net interest income (640m EUR) • Down 3% q-o-q and 5% y-o-y • This decline was attributable primarily to technical
items and a decreasing loan portfolio at the foreign branches. Note that commercial net interest income rose q-o-q, owing chiefly to the decrease in interest rates on savings accounts, increase in volumes on current accounts and a higher margin on mortgage and investment loans.
• Note that the SME & Corporate loan portfolio and customer deposits increased y-o-y (+1% and +6%, respectively)
Net interest margin (1.19%) • Widened by 2bps q-o-q, as sound commercial
margins offset the negative impact of lower reinvestment yields (due in part to the reduced exposure to GIIPS during the last 2 years and declining interest rates)
• The higher product margin on savings accounts was accounted for by the decrease of 5bps in the basic interest rate and of 15bps in the fidelity premium from mid-May onwards
NIM
NII
Amounts in m EUR
2Q13
640
1Q13
658
4Q12
688
3Q12
639
2Q12
671
1Q12
724
2Q13
1.19%
1Q13
1.17%
4Q12
1.16%
3Q12
1.15%
2Q12
1.28%
1Q12
1.43%
44
Credit margins in Belgium
PRODUCT SPREAD ON CUSTOMER LOAN BOOK, OUTSTANDING
PRODUCT SPREAD ON NEW PRODUCTION
1.2
1.0%
0.8
0.6
0.4
0.2
0.0%
2Q13 1Q13 4Q12 3Q12 2Q12 1Q12 Customer loans
1.0
0.8
0.6
0.4
0.2
1.2
1.4
1.6
3Q12 2Q12 1Q12 2Q13 1Q13 4Q12 Mortgage loans
SME loans
45
Belgium Business Unit (3)
Net fee and commission income (288m EUR) • Increased by 21% y-o-y, driven mainly by higher
income from mutual funds (both entry and management fees)
• Fell slightly q-o-q (by 1%), due to lower fee income related to unit-linked life insurance products, despite higher fee income from mutual funds
Assets under management (145bn EUR) • Rose by roughly 4% y-o-y, entirely as a result of a
positive price effect • Stabilised q-o-q
AUM*
F&C
Amounts in bn EUR
2Q13
288
1Q13
291
4Q12
253
3Q12
234
2Q12
238
1Q12
222
2Q13
145
1Q13
145
4Q12
144
3Q12
143
2Q12
139
1Q12
141
Amounts in m EUR
* The split among the BUs is based on the Assets under Distribution in each BU
46
Belgium Business Unit (4)
Sales of non-life insurance products • Fell by 23% q-o-q as the first quarter is traditionally a
very strong quarter • Rose by 10% y-o-y (mainly in Fire and Motor
insurance)
Combined ratio amounted to 89% in 1H13 (95% in FY 2012), an excellent level. Note that technical charges in 2Q13 increased (both q-o-q and y-o-y) driven by a higher level of car insurance claims and some other large claims files
COMBINED RATIO (NON-LIFE)
Amounts in m EUR
FY
95%
9M
87%
1H
89% 87%
1Q
85% 81%
2013 2012
NON-LIFE SALES (GROSS WRITTEN PREMIUM)
2Q13
239
1Q13
312
4Q12
197
3Q12
204
2Q12
217
1Q12
306
47
Belgium Business Unit (5)
Sales of life insurance products • Fell by 64% y-o-y, driven almost entirely by sharply
lower sales of unit-linked products, as 2Q12 benefitted from extra commercial efforts and due to the increase in insurance tax from January 2013
• Fell by 21% q-o-q as the sale of unit-linked life insurance products continued to suffer from the increase in insurance tax, converging total client charges on mutual funds and unit-linked products (whereas in the past, unit-linked products had a favorable overall cost structure for the client). Furthermore, a limited number of new tranches/ campaigns were launched during 2Q13
• As a result, guaranteed interest products and unit-linked products accounted for 47% and 53%, respectively, of life insurance sales in 2Q13 (22% and 78%, respectively, for FY 2012)
LIFE SALES
Amounts in m EUR
2Q13
382
203
179
1Q13
485
290
195
4Q12
1,143
909
234
3Q12
839
675
165
2Q12
1,047
862
185
1Q12
915
651
265
Guaranteed interest products Unit-linked products
48
Belgium Business Unit (6)
Operating expenses: -6% q-o-q and +1% y-o-y • The q-o-q decrease was attributable chiefly to the
recovery of 13m EUR from the former Deposit Guarantee Scheme and lower ICT expenses
• Cost/income ratio: 44% in 2Q13 and 45% YTD (an improvement compared to 51% in FY 2012)
Loan loss provisions amounted to 82m EUR in 2Q13 • Note that 1Q13 was impacted by high loan loss provisions
for corporates (mainly due to a few large files)
Credit cost ratio increased from 28bps in FY12 to 49bps in 1H13 due to a deterioration in the SME & Corporate portfolio (compared with 62bps in 1Q13 due to a few corporate files). Excluding the one large corporate file in 1Q13, the CCR amounted to 35bps in 1H13
NPL ratio stabilised at 2.3%
Limited impairment on AFS shares (2m EUR) and impairment of 14m EUR related to real estate
ASSET IMPAIRMENT
OPERATING EXPENSES
Amounts in m EUR
536
1Q12
568
2Q13
544
1Q13
575
4Q12
557
3Q12
535
2Q12
2Q13
98
1Q13
140
4Q12
159
3Q12
84
2Q12
79
1Q12
6
49
Net result at the Belgium BU
* Difference between net profit at the Belgium BU and the sum of the banking and insurance contribution is accounted for by the rounding up or down of figures
CONTRIBUTION OF BANKING ACTIVITIES TO NET RESULT OF THE BELGIUM BU *
NET RESULT AT THE BELGIUM BU *
Amounts in m EUR
2Q13
418
1Q13
385
4Q12
295
3Q12
335
2Q12
244
1Q12
486
2Q13
329
1Q13
300
4Q12
239
3Q12
219
2Q12
171
1Q12
360
2Q13
89
-18
68
39
1Q13
85
-18
59
44
4Q12
56
-8
85
-21
3Q12
115
-5
54
66
2Q12
73
-19
53
39
1Q12
127
-6
72
61
Non-technical & taxes Life result Non-Life result
CONTRIBUTION OF INSURANCE ACTIVITIES TO NET RESULT OF THE BELGIUM BU *
50
CZECH REPUBLIC BUSINESS UNIT
CFO SERVICES
CRO SERVICES
CORPORATE STAFF
CORPORATE CHANGE & SUPPORT
INTERNATIONAL PRODUCT FACTORIES
BELGIUM CZECH
REPUBLIC INTERNATIONAL
MARKETS
51
Czech Republic Business Unit (1)
Net result at the Czech Republic Business Unit of 146m EUR • Results were characterised by slightly higher net
interest income, lower net fee and commission income, higher (non-life) claims due to floods and lower life insurance sales, higher M2M impact of ALM derivatives, stable costs and lower loan loss provisions q-o-q
• Profit contribution from the insurance business remained limited in comparison to the banking business
* Non-annualised ** Loans to customers, excluding reverse repos (and not including bonds)
VOLUME TREND
Total loans ** Of which mortgages Customer deposits AuM Life reserves
Volume 19bn 8bn 25bn 6.2bn 1.1bn
Growth q/q* +3% +2% 0% +2% -4%
Growth y/y +8% +9% +2% +10% -7%
NET RESULT
Amounts in m EUR
2Q13
146
1Q13
132
4Q12
114
3Q12
149
2Q12
159
1Q12
158
52
Czech Republic Business Unit (2)
Net interest income (246m EUR) • Rose by 1% q-o-q, but fell by 5% y-o-y to 246m EUR
(+2% and -3%, respectively, excluding FX effect) • The q-o-q increase mainly resulted from higher NII
on loans in the Corporate/SME segment • The y-o-y decline was accounted for mainly by a
lower reinvestment yield • Loan volumes up 3% q-o-q and 8% y-o-y, driven by
growth in corporate/SME and mortgage loans
Net interest margin (3.04%) • Fell by 3bps q-o-q and 22bps y-o-y to 3.04% • This y-o-y decline was caused primarily by a lower
reinvestment yield • The q-o-q decrease was partly the result of further
pressure on deposit margins, despite the cut in interest rates on savings deposits in April
NIM
NII
Amounts in m EUR
2Q13
246
1Q13
244
4Q12
249
3Q12
260
2Q12
258
1Q12
261
2Q13
3.04%
1Q13
3.07%
4Q12
3.03%
3Q12
3.19%
2Q12
3.26%
1Q12
3.36%
53
Czech Republic Business Unit (3)
Net fee and commission income (46m EUR) • Fell by 8% q-o-q, but rose by 9% y-o-y (or -7% q-o-q
and +12% y-o-y, respectively, excluding the FX effect) • The q-o-q decrease was attributable mainly to lower
entry fees for mutual funds and lower sales fees for pension funds
• The y-o-y increase was achieved by higher entry fees for mutual funds and lower fees paid to distribution
Assets under management (6.2bn EUR) • Went up by 2% q-o-q to roughly 6.2bn EUR, entirely
as a result of a positive price effect • Y-o-y, assets under management rose by 10%, mainly
driven by net inflows
AUM*
F&C
Amounts in bn EUR
Amounts in m EUR
2Q13
46
1Q13
51
4Q12
41
3Q12
47
2Q12
42
1Q12
49
2Q13
6.2
1Q13
6.1
4Q12
5.9
3Q12
5.7
2Q12
5.6
1Q12
5.7
* The split among the BUs is based on the Assets under Distribution in each BU
54
Czech Republic Business Unit (4)
Insurance premium income (gross earned premium) stood at 78m EUR • Non-life premium income (42m) rose by 2% q-o-q
and y-o-y (+4% q-o-q and +5% y-o-y excluding FX effect)
• Life premium income (36m) went down 25% q-o-q and 78% y-o-y (-25% q-o-q and -77% y-o-y excluding FX effect). Note that 2Q12 included high unit-linked single premium due to the more successful sale of Maximal Invest products (only one tranche issued in 2Q13)
Overall, the life result in 2Q13 was in line with 2Q12, but slightly below 1Q13
Combined ratio at 102% in 1H13 (104% in 2Q13), due mainly to flood claims
COMBINED RATIO (NON-LIFE)
PREMIUM INCOME (GROSS EARNED PREMIUM)
Amounts in m EUR
2Q13
78
1Q13
89
4Q12
97
3Q12
129
2Q12
201
1Q12
111
FY
95%
9M
99%
1H
102% 94%
1Q
99% 91%
2013 2012
55
Czech Republic Business Unit (5)
Opex (163m EUR) • Fell by 1% q-o-q and y-o-y (flat q-o-q and +1% y-o-y
excluding FX effect) • Q-o-q, slightly lower staff (less FTEs) and marketing
expenses were offset by a number of small other items
• Cost/income ratio at 46% in 2Q13 (and YTD)
Impairments on L&R fell sharply q-o-q thanks to releases in the corporate/SME segment owing to improved models and a better performing portfolio
Credit cost ratio amounted to 0.30% in 1H13
NPL ratio amounted to 3.3%
No other impairments
ASSET IMPAIRMENT
OPERATING EXPENSES
Amounts in bn EUR
2Q13
163
1Q13
164
4Q12
196
3Q12
165
2Q12
164
1Q12
164
2Q13
9
1Q13
22
4Q12
23
3Q12
19
2Q12
14
1Q12
13 2010 2011 2012 1H13
CCR 0.75% 0.37% 0.31% 0.30%
56
INTERNATIONAL MARKETS BUSINESS UNIT
CFO SERVICES
CRO SERVICES
CORPORATE STAFF
CORPORATE CHANGE & SUPPORT
INTERNATIONAL PRODUCT FACTORIES
BELGIUM CZECH
REPUBLIC INTERNATIONAL
MARKETS
57
International Markets Business Unit (1)
* Non-annualised ** Loans to customers, excluding reverse repos (and not including bonds)
VOLUME TREND Total loans ** Of which mortgages Customer deposits AuM Life reserves
Volume 23bn 15bn 14bn 5.1bn 0.5bn
Growth q/q* -1% -1% +3% -4% +3%
Growth y/y -5% -4% +20% -16% +5%
NET RESULT
Amounts in m EUR
2Q13
-23
1Q13
-87
4Q12
-18
3Q12
-38
2Q12
-41
1Q12
-163
Net result: -23m EUR • International Markets profit breakdown: 16m Slovakia,
26m Hungary, 3m Bulgaria and -69m Ireland • Q-o-q results were characterised by higher net interest
income, higher net fee and commission income, recuperation of insurance claims, lower costs (accounted for primarily by the FY13 Hungarian bank tax, recorded in full in 1Q13) and lower impairments
• Turnaround potential: break-even returns at latest by 2015 for International Markets BU, mid-term returns above cost of capital
58
International Markets Business Unit (2)
The total loan book fell by 1% q-o-q and 5% y-o-y. On a y-o-y basis, the decrease was accounted for by Ireland (matured loans surpassed new production) and Hungary (where the trend was impacted by e.g. the FX mortgage relief programme)
Total deposits were up 3% q-o-q and 20% y-o-y, thanks mainly to the successful retail deposit campaign in Ireland
* Organic growth excluding FX impact, q-o-q figures are non-annualised. Loan and mortgage figures after impairment charges
ORGANIC GROWTH*
Amounts in m EUR
TOTAL LOANS MORTGAGES DEPOSITS q/q y/y q/q y/y q/q y/y
IRE -2% -8% -2% -6% +9% +79%
SK +1% +5% +4% +14% +1% +11%
HU +1% -6% -2% -5% +2% +10%
BU 0% +3% 0% -2% -7% -11%
TOTAL -1% -5% -1% -4% +3% +20%
59
International Markets Business Unit (3)
Net interest income (160m EUR) • Rose by 4% q-o-q, but fell by 1% y-o-y • The y-o-y decline was attributable mainly to higher
funding costs in Ireland due to a new methodology used
• The q-o-q increase was driven by: o Hungary: some technical items (e.g. higher
number of calendar days) and less maturities of bonds in the non-life portfolio
o Slovakia: continuous growth in the mortgage portfolio, successful consumer finance and SME campaigns, expiration of term deposits with high external rates and a small decline in the funding cost allocation
Net interest margin (2.11%) • Increased by 5bps y-o-y and 7bps q-o-q • The q-o-q increase was attributable primarily to a
considerable increase in NIM in Slovakia thanks to lower interest expenses related to deposits (expiration of relatively expensive 1Y term deposits)
NIM
NII
Amounts in m EUR
2Q13
160
1Q13
155
4Q12
157
3Q12
162
2Q12
161
1Q12
164
2Q13
2.11%
1Q13
2.04%
4Q12
2.03%
3Q12
2.08%
2Q12
2.06%
1Q12
2.05%
60
International Markets Business Unit (4)
Net fee and commission income (45m EUR) • Rose by 9% q-o-q and 31% y-o-y • The q-o-q increase was attributable mainly to
Hungary, where more transactions and services were provided and more fees were received for sales of unit-linked life insurance and mutual fund products
• In addition, part of the y-o-y increase was the result of increases in fees in Hungary from 2013 onwards
Assets under management (5.1bn EUR) • Decreased by 4% q-o-q, entirely as a result of a
negative price effect • Y-o-y, assets under management fell by 16%,
driven by net outflows (-3%) and a negative price effect (-13%)
AUM*
F&C
Amounts in bn EUR
Amounts in m EUR
2Q13
45
1Q13
41
4Q12
38
3Q12
36
2Q12
34
1Q12
35
2Q13
5.1
1Q13
5.4
4Q12
5.5
3Q12
5.6
2Q12
6.1
1Q12
6.2
* The split among the BUs is based on the Assets under Distribution in each BU
61
International Markets Business Unit (5)
Insurance premium income (gross earned premium) stood at 58m EUR • Non-life premium income (38m) stabilised q-o-q,
but fell by 6% y-o-y • Life premium income (20m) down 17% q-o-q and
6% y-o-y
Combined ratio at 92% in 1H13 COMBINED RATIO (NON-LIFE)
PREMIUM INCOME (GROSS EARNED PREMIUM)
Amounts in m EUR
2Q13
58
1Q13
63
4Q12
60
3Q12
58
2Q12
63
1Q12
63
FY
94%
9M
100%
1H
92% 99%
1Q
87%
98%
2013 2012
62
International Markets Business Unit (6)
Opex (176m EUR) • Fell by 16% q-o-q, but rose by 24% y-o-y • The q-o-q decrease was consequent chiefly on the FY13
Hungarian bank tax, recorded in full in 1Q13 (54m pre-tax and 44m post-tax), despite the additional one-off FTL related charge of 27m EUR pre-tax (22m post-tax) in Hungary in 2Q13. Also lower ICT expenses in both Slovakia and Hungary contributed to this decrease
• The y-o-y increase was caused by the introduction of a Financial Transaction Levy and the additional one-off FTL related charge in Hungary, as well as higher staff expenses in Ireland (higher number of FTEs)
• Cost/income ratio at 65% in 2Q13 (76% YTD)
L&R impairments (114m EUR): the decline of 2% q-o-q and 20% y-o-y was due mainly to Ireland
Credit cost ratio of 1.76% in 1H13
NPL ratio at 18.5%
ASSET IMPAIRMENT
OPERATING EXPENSES
Amounts in bn EUR
2Q13
176
1Q13
210
4Q12
164
3Q12
145
2Q12
143
1Q12
199
2Q13
116
1Q13
127
4Q12
108
3Q12
142
2Q12
144
1Q12
229
Loan book
2010 CCR
2011 CCR
2012 CCR
1Q13 CCR
IM BU 26bn 2.26% 1.76% *
- Ireland - Hungary - Slovakia - Bulgaria
16bn 5bn 5bn 1bn
2.98% 1.98% 0.96% 2.00%
3.01% 4.38% 0.25%
14.73%
3.34% 0.78% 0.25% 0.94%
2.35% 0.79% 0.80% 1.62%
* Excluding Ireland, the CCR in IM BU amounted to 85bps in 1H13
63
Hungary (1)
2Q13 net result at the K&H Group amounted to 26m EUR. This includes the full impact of the additional one-off Financial Transaction Levy (FTL) related charge of 27m EUR pre-tax (22m post-tax) in Hungary to compensate shortage of FTL related income in the state budget
YTD net result amounted to 7m EUR (including the post-tax impact of the FY13 ‘regular’ bank tax of 43m EUR and the additional one-off FTL related charge of 22m EUR post-tax, as mentioned above)
In line with 1Q13, loan loss provisions amounted to 10m EUR in 2Q13
The credit cost ratio came to 0.79% in 1H13 (versus 0.78% FY 2012) driven by continued stable trends in corporate and SME portfolios
NPL ratio again declined slightly, to 11.2% in 2Q13 (11.3% in 1Q13, 11.4% in 4Q12, 11.9% in 3Q12 and 12.6% in 2Q12)
PROPORTION OF HIGH RISK AND NPLS
HUNGARIAN LOAN BOOK KEY FIGURES AS AT 30 JUNE 2013
Amounts in bn EUR
Loan portfolio Outstanding NPL NPL coverage
SME/Corporate 2.8bn 6.0% 61%
Retail 2.4bn 17.2% 65%
o/w private 2.0bn 18.7% 65%
o/w companies 0.4bn 9.1% 69%
5.1bn 11.2% 64%
8
9
10
11
12
13
14
15
4Q12 1Q13
13.5% 13.5%
2Q12 3Q12 1Q12
11.4%
12.6% 11.9%
14.3%
11.3%
13.3%
11.3%
13.0%
High Risk (probability of default > 6,4%) Non-Performing
2Q13
11.7%
11.2%
64
Hungary (2)
Municipal loans
• In December 2012, the State repaid almost the entire debt of the municipalities with less than 5000 inhabitants at par. The second phase of the consolidation of municipal debt (partial debt consolidation of larger municipalities) was completed by the statutory deadline of June 28. There was no haircut, all items taken over were done at par (141m EUR, i.e. approximately 46% of K&H’s municipality portfolio was involved)
Financial transaction levy • The Hungarian Parliament adopted fiscal adjustment measures on 27 June 2013, including
o a significant increase in the level of the financial transaction levy (FTL) introduced in 1 Jan 2013 o a one-off charge (to compensate shortfall in the FTL in the state budget) which was set to 208% of the FTL payment obligation for the January-April period
• Details of the increased FTL levels, which will come into effect on 1 August 2013: o The levy on electronic and paper-based transfers and other non-cash financial transactions will be increased to 0.3% from the current 0.2% (the cap remains
unchanged at 6,000 HUF) o The levy on cash transactions will be raised from the current 0.3% to 0.6% and the 6,000 HUF cap will be abolished o Since this will have an impact on the cost to banks, it has prompted K&H to readjust its fee structure again. The gross amount of the levy is estimated to be
approximately 49m EUR pre-tax (40m EUR post-tax) for K&H in FY13 (of which roughly 20m EUR pre-tax was recorded in 1H13)
• The one-off charge based on 208% of the FTL obligation for the January-April period is to be paid in four equal instalments in the September-
December period. K&H has included the full amount of this one-off charge in its books for 2Q13 (27m EUR pre-tax and 22m EUR post-tax)
65
Hungary (3)
FX housing loans
• On 24 July, Economy Minister announced that foreign currency-denominated mortgage loans taken out for home purchases need to be taken out of the local lending market and a situation must be created where those borrowing in forint are not worse off than if they had taken out an FX loan
• Based on that working groups will be set up at the Ministry of the National Economy and the Hungarian Banking Association to start discussions. The government intends to submit a law proposal to parliament in September
• Since the outcome of these discussions is uncertain, the potential impact is also uncertain
• The size of K&H Bank’s FX mortgage portfolio (gross value): • Total Retail FX mortgage: 1.4 bn EUR • Retail FX housing loans: 0.6 bn EUR • Retail FX home equity loans: 0.8 bn EUR
66
1. The total NPL coverage ratio amounted to 53% at the end of 2Q13 (52% in 1Q13) taking into account the adjustments for the Mortgage Indemnity Guarantee and Reserved Interest (42% for owner occupied mortgages and 49% for buy to let mortgages, respectively)
Ireland (1) Loan loss provisions in 2Q13 of 88m EUR (136m EUR in 2Q12). We are maintaining
our FY 2013 guidance of 300m-400m EUR for KBC Bank Ireland. The loss after tax in 2Q13 was 69m EUR (-95m EUR in 2Q12).
Employment and incomes are increasing and survey evidence points towards some improvement in business conditions. Weak growth in export markets and ongoing budget adjustment in Ireland are restraining the recovery in Irish economic activity. Overall, recent data have been mixed but remain consistent with the expectation of a modest rise in GDP in 2013
Most indicators point towards a gradual but uneven improvement in the housing market in the first half of 2013. Broadly similar conditions are likely to prevail through the remainder of the year
Increased demand for commercial property within key urban areas from domestic and international investment funds
KBCI is proactively engaging with those customers who are experiencing financial difficulty and is implementing its long term Mortgage Arrears Resolution Strategy. As part of this, KBCI has met the Q2 public target set by the Central Bank of Ireland in relation to the resolution of greater than 90 day arrears cases
The new Insolvency Service of Ireland (ISI) is expected to be operational in 3Q13. As part of the rollout of its Mortgage Arrears Resolution Strategy, KBCI is resolving the mortgage difficulties of a significant number of its customers and this should reduce the requirement for such customers to seek a Personal Insolvency Arrangement
Continued successful retail deposit campaign with gross retail deposit levels increased by 0.6bn EUR since end 2012 to 2.7bn EUR at end 2Q13 and approx. 6,000 new customer accounts were opened in the quarter. KBCI is experiencing improved demand for mortgage products, from a low base, as evidence of a stable housing market emerges
Local tier-1 ratio of 12.51% at the end of 2Q13
PROPORTION OF HIGH RISK AND NPLS
IRISH LOAN BOOK KEY FIGURES AS AT JUNE 2013
Amounts in m EUR
LOAN PORTFOLIO OUTSTANDING NPL NPL
COVERAGE
Owner occupied mortgages 9.2bn 18.8% 34%1
Buy to let mortgages 3.1bn 32.0% 43%1
SME /corporate 1.6bn 21.4% 77%
Real estate investment Real estate development
1.3bn 0.5bn
31.3% 89.6%
67% 77%
15.6bn 24.9% 48%1
0
5
10
15
20
25
30
24.9% 24.0% 20.5%
25.8%
17.1%
17.7%
1Q12 2Q12
24.9%
3Q12
18.3%
4Q11 2Q13 1Q13
21.5%
20.0% 21.8%
22.5%
4Q12
24.4%
23.3%
High Risk (probability of default > 6.4%)
Non-performing
67
Ireland (2) Key indicators show tentative signs of stabilisation
CONTINUING TENTATIVE SIGNS OF GDP GROWTH UNEMPLOYMENT RATE HAS REMAINED BROADLY STABLE YEAR TO DATE
68
Ireland (3) Key indicators show tentative signs of stabilisation
RESIDENTIAL PROPERTY PRICES SHOWING SIGNS OF STABILISATION
SLOWING PACE OF INCREASE IN RESIDENTIAL MORTGAGE ARREARS & NPL
69
GROUP CENTRE
CFO SERVICES
CRO SERVICES
CORPORATE STAFF
CORPORATE CHANGE & SUPPORT
INTERNATIONAL PRODUCT FACTORIES
BELGIUM CZECH
REPUBLIC INTERNATIONAL
MARKETS
70
Group Centre
Adjusted net result: -56m EUR
KBL epb and Fidea were deconsolidated in the adjusted net result as of 1Q12, Warta and Zagiel as of 3Q12, NLB as of 4Q12, Kredyt Bank as of 1Q13 and Absolut Bank as of 2Q13
The Group Centre result is comprised of the results of the holding company, certain items that are not allocated to the business units, results of companies to be divested, and the impact of legacy business and own credit risk
ADUSTED NET RESULT
Amounts in m EUR
2Q13
-56
1Q13
-71
4Q12
-113
3Q12
-72
2Q12
-19
1Q12
19
BREAKDOWN OF ADJUSTED NET RESULT AT GROUP CENTRE
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
Group item (ongoing business) -53 -76 -71 -108 -73 -60
Planned divestments 72 57 -1 -4 2 4
TOTAL adjusted net result at GC 19 -19 -72 -113 -71 -56
71
KBC Group
Annex 2
Company profile
72
Business profile
KBC is a leading player (retail and SME bank-insurance, private banking, commercial and local investment banking) in Belgium and our 4 core countries in CEE
BREAKDOWN OF ALLOCATED CAPITAL BY BUSINESS UNIT AT 30 JUNE 2013
Group Centre
13%
International Markets 18%
Czech Republic
15%
Belgium 55%
73
BE¹ 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 Centea and Fidea
2. Including 55% of the joint venture with CMSS
3. Source: KBC data, August 2013
MARKET SHARE, AS OF END 2012
SPAIN
FRANCE
BELGIUM
NETHERLANDS
GERMANY
CZECH REP SLOVAKIA
HUNGARY
UK
IRELAND
ITALY
GREECE
Macroeconomic outlook Based on GDP, CPI and unemployment trends Inspired by Financial Times
KBC Group’s core markets Belgium and CEE-4
PORTUGAL
2 20% 20% 10% 8% 2%
BULGARIA
20% 8%
30% 35%
8% 17% 13%
3% 5%
11% 4% 3% 6% 9%
BE CZ SK HU BG
% of Assets
2012a
2013e
2014e
1% 4% 3% 15% 66%
0,8%
-1,7%
2,0%
-1,2% -0,3%
1,3% 0,3% 0,5%
-1,0%
0,1%
1,8% 1,5% 1,5% 1,7% 1,3%
REAL GDP GROWTH OUTLOOK FOR CORE MARKETS3
74
NET PROFIT - BELGIUM NET PROFIT – CZECH REPUBLIC
1H13
803
2012
1,360 1H13 ROAC: 29%
Amounts in m EUR
1H13
279
2012
581 1H13 ROAC: 34%
NET PROFIT - INTERNATIONAL MARKETS
1H13
-110
2012
-260
1H13 ROAC: -14%
1H13
36
2012
145
NET PROFIT - INTERNATIONAL MARKETS EXCL. IRELAND
Overview of results based on new business units
75
Loan loss experience at KBC
1H13 CREDIT COST RATIO
FY 2012 CREDIT COST RATIO
AVERAGE ‘99 –’12
PEAK ‘99 –’12
Belgium 0.49% 0.28% n.a. n.a.
Czech Republic 0.30% 0.31% n.a. n.a.
International Markets 1.76%* 2.26%* n.a. n.a.
Group Centre 1.41% 0.99% n.a. n.a.
Total 0.75%** 0.71%** 0.50% 1.11%
Credit cost ratio: amount of losses incurred on troubled loans as a % of total average outstanding loan portfolio
* The high credit cost ratio at the International Markets BU is due in full to KBC Bank Ireland. Excluding Ireland, the CCR at this business unit amounted to 85bps in 1H13
** Credit cost ratio amounted to 0.75% in 1H13 (from 0.71% in FY 2012). Excluding KBC Bank Ireland and the one large corporate file in 1Q13, the credit cost ratio stood at 0.46% in 1H13
76
Key strengths
Well-developed bank-insurance strategy and strong cross-selling capabilities
Strong commercial bank-insurance franchises in Belgium and the Czech Republic with stable and solid returns
Turnaround potential in the International Markets Business Unit
Successful underlying earnings track record
Solid capital and robust liquidity position
Momentum maintained on divestments and derisking
77
KBC Group
Annex 3
Other items
78
NPL ratios at KBC Group and per business unit
INTERNATIONAL MARKETS BU CZECH REPUBLIC BU
2Q13
5.5%
1Q13
5.3%
4Q12
5.3%
3Q12
5.5%
2Q12
5.3%
1Q12
5.2%
non-performing loan ratio
2Q13
3.3%
1Q13
3.2%
4Q12
3.2%
3Q12
3.5%
2Q12
3.4%
1Q12
3.5%
2Q13
18.5%
9.2%
1Q13
18.1%
9.0%
4Q12
17.6%
9.2%
3Q12
17.3%
9.5%
2Q12
16.9%
9.8%
1Q12
16.3%
9.7%
NPL excluding Ireland NPL including Ireland
BELGIUM BU
2Q13
2.3%
1Q13
2.3%
4Q12
2.3%
3Q12
2.6%
2Q12
2.5%
1Q12
2.5%
KBC GROUP
79
Non-performing and high risk loans
1H 2013 NON-PERFORMING LOANS (>90 DAYS OVERDUE)
HIGH RISK, EXCL. RESTRUCTURED LOANS
(PROBABILITY OF DEFAULT >6.4%)
RESTRUCTURED LOANS (PROBABILITY OF DEFAULT >6.4%)
BELGIUM BU 2.3% 4.9% 1.1%
CZECH REPUBLIC BU 3.3% 4.0% 0.9%
INTERNATIONAL MARKETS BU INCLUDING IRELAND 18.5% 9.7% 10.2%
INTERNATIONAL MARKETS BU EXCLUDING IRELAND 9.2% 8.1% 3.0%
IRELAND 24.9% 10.8% 15.0%
80
Breakdown of KBC’s CDOs originated by KBC FP (figures as of 8 July 2013)
BREAKDOWN OF ASSETS UNDERLYING KBC’S CDOS ORIGINATED BY KBC FP1
CORPORATE BREAK DOWN BY REGION2 CORPORATE BREAKDOWN BY INDUSTRY 4
CORPORATE BREAKDOWN BY RATINGS 3
2. Direct and tranched corporate exposure as a % of the total corporate portfolio 4. Direct corporate exposure as a % of total corporate portfolio; tranched
corporate exposure as a % of total corporate portfolio. Figures based on Moody’s ratings.
1. as % of total current deal notional, after settled credit events 3. Direct corporate exposure as a % of total corporate portfolio; tranched corporate exposure
as a % of total corporate portfolio. Figures based on Moody’s ratings.
North America, 57%
Europe, 23%
Asia, 17%
Other, 4%
0%
2%
4%
6%
8%
10%
12%
14%
Aaa
Aa1
Aa2
Aa3
A1 A2 A3
Baa1
Baa2
Baa3
Ba1
Ba2
Ba3
B1 B2 B3 Caa1
Caa2
Caa3
Ca C D/Credit Event
NR
Direct Corporate Portfolio
Tranched Corporate Portfolio
0% 2% 4% 6% 8% 10% 12%
Buildings & Real EstateBanking
InsuranceMining, Steel, Iron & Nonprecious Metals
Printing & PublishingUtilities
Retail StoresAutomobile
TelecommunicationsFinance
Oil & GasElectronics
Hotels, Motels, Inns and GamingDiversified Natural Resources, Precious Metals & Minerals
Cargo TransportPersonal Transportation
Diversified/Conglomerate ServiceLeisure, Amusement, Entertainment
Home & Office Furnishings, Housewares, & Durable …Broadcasting & Entertainment
Chemicals, Plastics & RubberDiversified/Conglomerate Manufacturing
Other
Direct Corporate Portfolio
Tranched Corporate Portfolio
Direct Corporate
Exposure, 59%
Tranched Corporate
Exposure, 39%
Multi-Sector ABS Exposure,
2%
81
0
2 500
5 000
7 500
10 000
12 500
15 000
17 500
20 000
22 500
25 000
27 500Ja
n-09
Apr-
09Ju
l-09
Oct
-09
Jan-
10Ap
r-10
Jul-1
0O
ct-1
0Ja
n-11
Apr-
11Ju
l-11
Oct
-11
Jan-
12Ap
r-12
Jul-1
2O
ct-1
2Ja
n-13
Apr-
13Ju
l-13
Oct
-13
Jan-
14Ap
r-14
Jul-1
4O
ct-1
4Ja
n-15
Apr-
15Ju
l-15
Oct
-15
Jan-
16Ap
r-16
Jul-1
6O
ct-1
6Ja
n-17
Apr-
17Ju
l-17
Oct
-17
in m
ln E
UR
Equity/Cash reserves All Notes issued KBC SSS MBIA SSS Original maturity schedule total notional
Maturity schedule of the CDOs issued by KBC FP
June ’13
82
Summary of government transactions (1)
STATE GUARANTEE COVERING 5.9BN* EUROS’ WORTH OF CDO-LINKED INSTRUMENTS • Scope, instrument by instrument approach
o CDO investments that were not yet written down to zero (0.7bn EUR) when the transaction was finalised
o CDO-linked exposure to MBIA, the US monoline insurer (5.3bn EUR)
• First and second tranche: 1.5bn EUR, impact on P&L
borne in full by KBC, KBC has option to call on equity capital increase up to 0.6bn EUR (90% of 0.7bn EUR) from the Belgian State
• Third tranche: 4.4bn EUR, 10% of potential impact borne by KBC
* Excluding all cover for expired, unwound or terminated CDO positions and after settled credit events.
Potential P&L impact for KBC
Potential capital impact for KBC
100% 100%
100% 10% (90% compensated by equity
guarantee)
10% (90% compensated by
cash guarantee)
10% (90% compensated by
cash guarantee)
5.9bn - 100%
1st tranche
5.1bn - 86%
2nd tranche
4.4bn - 74%
3rd tranche
0.8bn
0.7bn
4.4bn
83
Summary of government transactions (2)
ORIGINALLY, 7BN EUR WORTH OF CORE CAPITAL SECURITIES SUBSCRIBED BY THE BELGIAN FEDERAL AND FLEMISH REGIONAL GOVERNMENTS
BELGIAN STATE FLEMISH REGION Amount 3.5bn 3.5bn
Instrument Perpetual fully paid up new class of non-transferable securities qualifying as core capital
Ranking Pari passu with ordinary stock upon liquidation
Issuer KBC Group Proceeds used to subscribe ordinary share capital at KBC Bank (5.5bn) and KBC Insurance (1.5bn)
Issue price 29.5 EUR
Interest coupon Conditional on payment of dividend to shareholders The higher of (i) 8.5% or (ii) 120% of the dividend for 2009 and 125% for 2010 onwards
Not tax deductible
Buyback option KBC Option for KBC to buy back the securities at 150% of the issue price (44.25)
Conversion option KBC From December 2011 onwards, option for KBC to convert securities into shares (1 for 1). In that case, the State can ask for cash at 115%
(33.93) increasing every year by 5% to the maximum of 150%
No conversion option
84
Assessment of the State aid position & repayment schedule
KBC made accelerated full repayment of 3.0bn EUR of State aid to the Belgian Federal Government in December 2012 and the accelerated repayment of 1.17bn EUR of State aid to the Flemish Regional Government mid-2013, approved by the NBB
KBC is committed to repaying the remaining outstanding balance of 2.33bn EUR owed to the Flemish Regional Government in seven equal installments of 0.33bn EUR (plus premium) over the 2014-2020 period (KBC however has the option to further accelerate these repayments)
Jan 2012 Dec 2012 1H 2013 2014-2020
Total remaining
amount 7.0bn EUR 6.5bn EUR 3.5bn EUR 2.33bn EUR 0 EUR
Belgian Federal
Government
Flemish Regional
Government
3.5bn EUR 3.0bn EUR
0.5bn1 EUR
3.0bn2 EUR
3.5bn EUR 3.5bn EUR 3.5bn EUR 2.33bn EUR
1.17bn3 EUR
2.33bn4 EUR
To be repaid in seven equal instalments of 0.33bn EUR
(plus premium)
1. Plus 15% premium amounting to 75m EUR 2. Plus 15% premium amounting to 450m EUR 3. Plus 50% premium amounting to 583m EUR 4. Plus 50% premium amounting to 1,165m EUR
85
Common equity at end 1H13 - Fully loaded B31
Jan 2012 Dec 2012 1H 2013 2014-2020
1H13 (B3)
95,8
B3 impact
1,9
1H13 (B2,5)
93,9
B3 IMPACT AT NUMERATOR LEVEL (BN EUR)
IMPACT ON RWA (BN EUR)
1. With remaining State aid included in CET1 as agreed with local regulator
Fully loaded B3 common equity ratio of approx. 13.3% at end 1H13
Announced intention to maintain a fully loaded common equity ratio of minimum 10% as of 01-Jan-2013
B3 CET1 at end 1H13
12.7
Filter for AFS revaluation reserves
1.0
Equity guarantee
-0.1
Shareholders’ loans
-1.0
DTAs
-0.9
CT1 at end 1H13 (B2,5)
13.7
86
Common equity at end 1H13 pro forma - Fully loaded B31
Jan 2012 Dec 2012 1H 2013 2014-2020
1H13 (B3)
95,6
Impact KBC Banka
-0,2
B3 impact
1,9
1H13 (B2,5)
93,9
B3 IMPACT AT NUMERATOR LEVEL (BN EUR)
IMPACT ON RWA (BN EUR)
1. With remaining State aid included in CET1 as agreed with local regulator
Pro forma fully loaded B3 common equity ratio of approx. 11.8% at end 1H13
Announced intention to maintain a fully loaded common equity ratio of minimum 10% as of 01-Jan-2013
B3 CET1 at end 1H13
11.2
Filter for AFS revaluation
reserves
1.0
Equity guarantee
-0.1
P&L effect replacement
part of sh’ loans + KBC Banka
0.0
Penalty on reimbursed
principal YES
-0.6
Reimbursement of 1,2bn EUR principal YES
-1.2
Shareholders’ loans
-0.7
DTAs
-0.9
CT1 at end 1H13 (B2,5)
13.7
87
Government bond portfolio – Notional value
Notional investment of 45.6bn EUR in government bonds (excl. trading book) at end of 1H13, primarily as a result of a significant excess liquidity position and the reinvestment of insurance reserves into fixed-income instruments
Notional value of GIIPS exposure amounted to 1.6bn EUR at end of 1H13
Portugal Ireland *
Netherlands * Greece Austria *
Germany ** Spain
0% Other 8%
France 7%
Italy ** 2%
Slovakia 5%
Hungary 5%
Poland 0%
Czech Rep.
17%
Belgium
50%
6%
3%
7%
Ireland * Netherlands * Austria *
1%
Germany
3% Other 6%
France
Italy** 2% Slovakia
Hungary
Poland 0%
Czech Rep.
17%
Belgium
53%
END 1H13 (45.6bn EUR notional value)
END 2012 (47bn EUR notional value)
(*) 1%, (**) 2% (*) 1%, (**) 2%
88
Government bond portfolio – Carrying value
Carrying value of 48.4bn EUR in government bonds (excl. trading book) at end of 1H13, primarily as a result of a significant excess liquidity position and the reinvestment of insurance reserves into fixed-income instruments
Carrying value of GIIPS exposure amounted to 1.6bn EUR at end of 1H13
Portugal Ireland *
Netherlands * Greece Austria *
Germany ** Spain
0% Other 8%
France 7%
Italy** 2% Slovakia 5%
Hungary 5%
Poland * 1%
Czech Rep.
17%
Belgium
51%
6%
3%
5%
Ireland * Netherlands * Austria *
1%
Germany**
2% Other 6%
France
Italy** 2% Slovakia
Hungary
Poland* 1%
Czech Rep.
17%
Belgium
55%
END 1H13 (48.4bn EUR carrying value)
END 2012 (48.8bn EUR carrying value)
(*) 1%, (**) 2% (*) 1%, (**) 2%
* 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
89
Upcoming mid-term funding maturities
KBC successfully issued a third covered bond of 1bn EUR in May 2013
KBC’s credit spreads narrowed during 2Q13
KBC Bank has 5 solid sources of long-term funding: • Retail term deposits • Retail EMTN • Public benchmark transactions • Structured Notes using the private placement format • Covered bonds (supporting diversification of the funding mix)
0
50
100
150
200
250
300
350
Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13
3Y Senior Debt Interpolated Credit Spreads 5Y Covered Bond Spread
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
10.000
2013 2014 2015 2016 2017 2018 2019 2020 2021 ≥2022
Mill
ions
EU
R
Breakdown funding maturity buckets
Senior Unsecured Subordinated Contingent Convertible Covered Bond
90
Analysts’ coverage
Bank/broker Analyst Contact details Rating Target Price Upside
Situation as of 2 August 2013, based on an actual share price of 32.49 EUR
ABN Amro - - + 34.00 5% Alpha Value Christophe Nijdam [email protected] - 32.30 -1% Autonomous Giovanni Carriere [email protected] = 31.50 -3% Barclays Capital Kiri Vijayarajah [email protected] + 35.00 8% Berenberg Eleni Papoula [email protected] + 35.00 8% Citi Investment Research Stefan Nedialkov [email protected] + 36.00 11% Deutsche Bank Flora Benhakoun [email protected] + 38.00 17% Exane BNP Paribas François Boissin [email protected] + 38.00 17% HSBC Johannes Thormann [email protected] + 41.00 26% ING Albert Ploegh [email protected] + 34.00 5% JP Morgan Securities Paul Formanko [email protected] + 38.00 17% Keefe, Bruyette & Woods Jean-Pierre Lambert [email protected] + 44.70 38% KeplerCheuvreux Benoit Petrarque [email protected] + 41.00 26% Macquarie Thomas Stögner [email protected] - 23.00 -29% Mediobanca Riccardo Rovere [email protected] + 37.00 14% Morgan Stanley Sara Minelli [email protected] + 33.80 4% Natixis Securities Alex Koagne [email protected] + 35.00 8% Nomura Marco Kisic [email protected] = 32.00 -2% Oddo Julie Legrand [email protected] = 32.00 -2% Petercam Tom van Kempen [email protected] = 28.90 -11% Rabo Securities Cor Kluis [email protected] + 37.00 14% Societe Generale Philip Richards [email protected] = 33.00 2% UBS Anton Kryachok [email protected] + 24.00 -26%
91
Contact information Investor Relations Office E-mail:
www.kbc.com visit for the lastest update
