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KBC GroupCompany presentation3Q 2016
KBC Group - Investor Relations Office – E-mail:
More information: www.kbc.com
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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
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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
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Contents
1
4
Strong solvency and solid liquidity
3Q 2016 wrap up
Annex 1: Company profile
2
3Q 2016 performance of KBC Group
3
3Q 2016 performance of business units
Annex 2: Other items
5
KBC Group
Section 1
3Q 2016 performance of KBC Group
6
Net result at KBC Group
* Difference between net result at KBC Group and the sum of the banking and insurancecontribution is accounted for by the holding-company/group items
CONTRIBUTION OF BANKING ACTIVITIES TO KBC GROUP NET RESULT*
629721
392
600666
510
441
862
765
-344
3Q152Q151Q15 3Q162Q161Q164Q15
NET RESULT AT KBC GROUP*
552644
358
524564
412
448
3Q162Q161Q164Q15
903
765
-310
3Q152Q151Q15
-41
8959 48 44
83
73
6250 44
31
22
-30-21-19-35
2772
58
48
-9
4Q15
33
-34
3Q15
79
2Q15
121
1
1Q15
121
3Q162Q16
75
1Q16
95
CONTRIBUTION OF INSURANCE ACTIVITIES TO KBC GROUP NET RESULT*
Amounts in m EUR
Net resultImpact KBC FHGW impairments
Net resultImpact KBC FHGW impairments
Non-technical & taxes
GW impairments
Non-Life result
Life result
7
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 903900
162
888
154 156
914 898
157142
154157163452810192231
1,064
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
8
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
9
Insurance premium income (gross earned premium) at 693m EUR• Non-life premium income (357m) increased by 7%
y-o-y
• Life premium income (336m) down by 16% q-o-qand up by 16% y-o-y
The non-life combined ratio at 9M16 amountedto 94%, an improvement compared with 95% in1H16 due to (very) low claims ratio in 3Q16
Amounts in m EUR
Insurance premium income down, but claims significantly lower
COMBINED RATIO (NON-LIFE)
PREMIUM INCOME (GROSS EARNED PREMIUM)
FY
91%
9M
89%
1H
95%86%
1Q
91%82%
94%
20162015
320 326 335 338 341 349
302 265 289445 426 402
357
336
3Q16
693
2Q16
751
1Q16
767
4Q15
783
3Q15
624
2Q15
591
1Q15
622
Non-Life premium incomeLife premium income
10
Non-life sales up y-o-y, life sales down q-o-q and up y-o-y
Sales of non-life insurance products• Up by 6% y-o-y thanks to a good commercial
performance in all major product lines in our coremarkets and tariff increases
Sales of life insurance products• Decreased by 20% q-o-q and increased by 17% y-o-y
• The q-o-q decrease was driven mainly by lower salesof guaranteed interest products in Belgium, as theguaranteed interest was further lowered during thecourse of 3Q16
• The y-o-y increase can be explained chiefly bysignificantly higher sales of guaranteed interestproducts and (to a lesser extent) higher sales of unit-linked products, both in Belgium
• Sales of unit-linked products accounted for 39% oftotal life insurance sales
LIFE SALES
NON-LIFE SALES (GROSS WRITTEN PREMIUM)
189 181 170 182 235 209 173
275231 212
353353 349
275
447
3Q162Q16
558
1Q16
587
4Q15
535
3Q15
382
2Q15
412
1Q15
464
Unit-linked productsGuaranteed interest products
Amounts in m EUR
327336
445
302308314
418
3Q162Q161Q164Q153Q152Q151Q15
11
Lower FV gains and gains realised on AFS assets, higher other net income
The lower q-o-q figures for net gains fromfinancial instruments at fair value wereattributable to:• a negative change in market, credit and fair value
adjustments (mainly as a result of model changes,despite tightening spreads)
• a negative change in ALM derivatives (-4m EUR in3Q16 compared with 13m EUR in 2Q16) due to afurther decrease q-o-q in IRS rates
partly offset by:
• slightly better dealing room income
Lower gains realised on AFS assets (q-o-qdecrease entirely on shares), due mainly torealised gains on Visa Europe Limited (99m EURpre-tax and 84m EUR post-tax) in 2Q16
Other net income amounted to 59m EUR,slightly higher than the normal run rate ofaround 50m EUR
FV GAINS
Amounts in m EUR
89
76 73141
-156
904560 73
69
3Q162Q16
154
13
1Q16
93
20
4Q15
12
3Q15
47
2
2Q15
179
1Q15
57
-3 -4
26
128
273044
36
80
3Q162Q161Q164Q153Q152Q151Q15
GAINS REALISED ON AFS ASSETS
59475147
96105
49
3Q162Q161Q164Q153Q152Q151Q15
OTHER NET INCOME
Liquidation KBC FHM2M ALM derivativesOther FV gains
-68
12
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
51
871
24895
3Q162Q16
904
853
1Q16
1,186
851
4Q15
962
914
3Q15
862
841
21
2Q15
941
858
1Q15
1,125
861
Operating expensesBank tax
* See glossary (slide 82) 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
13
Overview of bank taxes*
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
* This refers solely to the bank taxes recognised in opex, and as such it does not take account of income tax expenses, non-recoverable VAT, etc.** The C/I ratio adjusted for specific items of 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 Group**
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
14
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
15
KBC Group
Section 2
3Q 2016 performance of business units
16
BELGIUM BUSINESS UNIT
CFO SERVICES
CRO SERVICES
CORPORATE STAFF
BELGIUMCZECH
REPUBLICINTERNATIONAL
MARKETS
17
Belgium BU (1): net result of 414m EUR
Net result at the Belgium Business Unitamounted to 414m EUR• The quarter under review was characterised by
roughly flat net interest income, an increase in netfee and commission income, seasonally lowerdividend income, increased trading and fair valueincome, a decrease in realised gains on AFS assets,higher other net income, an improved combinedratio, lower sales of life insurance products, loweroperating expenses and lower impairment chargesq-o-q
• Loan volumes stabilised q-o-q. Customer depositsexcluding debt certificates & repos decreased by 1%q-o-q due to a decrease of (retail) term deposits
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos
VOLUME TREND
Total loans ** Of which mortgages Customer deposits*** AuM Life reserves
Volume 91bn 34bn 116bn 194bn 27bn
Growth q-o-q* 0% +1% -3% +1% +1%
Growth y-o-y +3% +3% +4% +5% +1%
414
371
209
348358
528
330
3Q162Q161Q164Q153Q152Q151Q15
NET RESULT
Amounts in m EUR
Customer deposit volumes excluding debtcertificates & repos -1% q-o-q and flat y-o-y
18
Belgium BU (2): roughly flat NII and lower NIM
Net interest income (680m EUR)• Roughly flat q-o-q and down by 2% y-o-y
• Group Re was shifted from the Belgium Business Unit to GroupCentre as of 2016 (NII amounted to 2m EUR in 3Q15)
• Q-o-q stabilisation was driven primarily by lower funding costson term deposits, continued good volume growth in currentaccounts & loans, further positive effect of enhanced ALMmanagement and increased net interest income from thedealing room fully offset by lower reinvestment yields, hedginglosses on previously refinanced mortgages, some pressure oncommercial loan margins and slightly lower upfront prepaymentfees (16m EUR in 3Q16 compared with 17m EUR in 2Q16)
• Decreased y-o-y as sharply lower funding costs on term deposits,increase in volumes on current and savings accounts, higher netinterest income on lending activities, further positive effect ofenhanced ALM management and slightly higher prepaymentfees (16m EUR in 3Q16 compared with 13m EUR in 3Q15) weremore than offset by lower reinvestment yields, increasedhedging losses on previously refinanced mortgages and lowernet interest income from the dealing room
• Customer deposits excluding debt certificates and reposstabilised y-o-y, while customer loans rose by 3% y-o-y
Net interest margin (1.78%)• Fell by 6 bps q-o-q and by 8 bps y-o-y due to the negative impact
of lower reinvestment yields, increased hedging losses onrefinanced mortgages and some pressure on commercial loanmargins
• KBC lowered the savings account rate by 4 bps (base rate) from15 bps to the legal limit of 11 bps from 16 April 2016 onwards
NIM
NII
Amounts in m EUR
549 531 534 536 541 530
152 147 145 145 141 145
540
151
3Q16
6805
2Q16
682
1Q16
6887
4Q15
69112
3Q15
69416
2Q15
72019
1Q15
71423
3Q16
1.78%
2Q16
1.84%
1Q16
1.86%
4Q15
1.85%
3Q15
1.86%
2Q15
1.96%
1Q15
1.96%
NII - contribution of banking
NII - contribution of insurance
NII - dealing room income
19
Credit margins in Belgium
PRODUCT SPREAD ON CUSTOMER LOAN BOOK, OUTSTANDING
PRODUCT SPREAD ON NEW PRODUCTION
1.4
0.8
0.6
1.0
0.4
0.2
0.0
1.2
3Q162Q161Q164Q153Q152Q151Q154Q143Q142Q141Q144Q133Q132Q131Q134Q123Q122Q121Q124Q113Q112Q111Q11
Customer loans
1.0
0.8
0.4
1.2
0.2
0.6
1.4
1.6
1.8
1Q15 2Q153Q13 3Q164Q132Q13 4Q14 4Q153Q15 1Q16 2Q162Q14 3Q141Q134Q123Q122Q12 1Q144Q113Q112Q111Q11 1Q12
Mortgage loansSME and corporate loans
20
Belgium BU (3): higher net F&C income
Net fee and commission income (272m EUR)• Increased by 3% q-o-q, due mainly to the combination
of higher management fees from mutual funds andunit-linked life insurance products (shift out of cashtowards equity and fixed income in CPPI products, forinstance), and to a lesser extent slightly higher entryfees from mutual funds and higher fees from paymenttransactions & other banking services, which wereonly partly offset by lower fees from credit files &bank guarantees (due to less mortgage refinancings),lower securities related fees and higher commissionspaid on insurance sales
• Fell by 5% y-o-y driven chiefly by lower managementfrom mutual funds and unit-linked life insuranceproducts, lower fees from securities transactions andhigher commissions paid on insurance sales onlypartly offset by higher entry fees from unit-linked lifeinsurance products, higher fees from credit files &bank guarantees and higher fees from paymenttransactions
Assets under management (194bn EUR)• Rose by 1% q-o-q owing to net outflows (-1%) and a
positive price effect (+2%)
• Went up by 5% y-o-y as a result of net inflows (+2%)and a positive price effect (+3%)
AuM*
F&C
Amounts in bn EUR
400 406
335 318 307 312
-47-52-48-48-43-40 -52
324
3Q16
272
2Q16
264
1Q16
255
4Q15
270
3Q15
287
2Q15
363
1Q15
360
194193192194185189193
3Q162Q161Q164Q153Q152Q151Q15
Amounts in m EUR
* The breakdown across the BUs is based on the ‘Assets under Distribution’ in each BU
F&C - contribution of bankingF&C - contribution of insurance
21
Sales of non-life insurance products• Increased by 5% y-o-y driven mainly by a good
commercial performance and some tariff increases.Premium growth was mainly situated in ‘motor casco’,‘property’ and ‘legal assistance’
Combined ratio improved to 92% in 9M16 (90%in FY15) thanks to the excellent performance in3Q16: very low normal and major claims, whilehigh storm and flood charges were largely offsetby reinsurance
Belgium BU (4): higher y-o-y non-life sales and lowertechnical charges
COMBINED RATIO (NON-LIFE)
FY
90%
9M
92%87%
1H
96%
84%
1Q
92%
79%
20162015
NON-LIFE SALES (GROSS WRITTEN PREMIUM)
234249
314
211222238
328
3Q162Q161Q164Q153Q152Q151Q15
22
Belgium BU (5): lower life sales, but good cross-sellingratios
Sales of life insurance products• Fell by 22% q-o-q on the relatively strong 2Q16, driven
by lower sales of unit-linked life insurance products aswell as lower sales of guaranteed interest products, asthe guaranteed interest was further lowered duringthe course of 3Q16
• Increased by 34% y-o-y driven mainly by significantlyhigher sales of guaranteed interest products
• As a result, guaranteed interest products and unit-linked products accounted for 70% and 30%,respectively, of life insurance sales in 3Q16
Mortgage-related cross-selling ratios• 88.6% for fire insurance
• 77.3% for life insurance
LIFE SALES
Amounts in m EUR
149 13885 82
163 140 108
248205
184
327
327322
252
1Q16
490
4Q15
409
3Q15
269
2Q15
343
1Q15
397361
3Q162Q16
462
Guaranteed interest products Unit-linked products
MORTGAGE-RELATED CROSS-SELLING RATIOS
88.6%
77.3%
49,5
63,7
40
45
50
55
60
65
70
75
80
85
90
Fire insurance Life insurance
23
The higher q-o-q figures for net gains fromfinancial instruments at fair value were theresult mainly of:• better dealing room income
• a positive q-o-q change in ALM derivatives (16mEUR in 3Q16 compared with 9m EUR in 2Q16) dueto a smaller decrease q-o-q in IRS rates
partly offset by
• a negative q-o-q change in market, credit and fairvalue adjustments (mainly as a result of modelchanges, despite tightening spreads)
Gains realised on AFS assets came to 12mEUR (q-o-q decrease entirely on shares, as2Q16 benefited from 20m EUR realised gainson Visa Europe Limited)
Other net income amounted to 53m EUR in3Q16, somewhat above the normal run ratedue mainly to gains on real estate sales
FV GAINS
Amounts in m EUR
91
45
38 57
16
-31-10
1717
-1
53
3Q16
69
2Q16
66
9
1Q16
20
3
4Q15
51
13
3Q15
-32
2Q15
136
1Q15
7
12
49
2326
3338
52
3Q162Q161Q164Q153Q152Q151Q15
GAINS REALISED ON AFS ASSETS
53
444641
55
67
45
3Q162Q161Q164Q153Q152Q151Q15
OTHER NET INCOME
Belgium BU (6): higher FV gains and higher other net income, but lower gains realised on AFS assets
M2M ALM derivativesOther FV gains
24
Belgium BU (7): lower operating expenses, lowerimpairments, excellent credit cost ratio
Operating expenses: -8% q-o-q and -2% y-o-y• The q-o-q decrease was attributable mainly to lower bank
tax
• Operating expenses without bank tax fell by 2% q-o-q duemainly to lower ICT expenses and other lower generaladministrative expenses, despite higher professional fees
• Operating expenses without bank tax decreased by 2% y-o-ydriven chiefly by lower staff expenses and lower pensionexpenses, partly offset by higher professional fees
• Cost/income ratio: 47% in 3Q16 and 57% YTD, distortedpartly by the bank taxes. Adjusted for specific items, the C/Iratio amounted to roughly 54% in 3Q16 and 56% in 9M16
Loan loss provisions amounted to 33m EUR in 3Q16(compared with 28m EUR in 2Q16). The q-o-qincrease was due largely to impairments on a fewlarge corporate files. Gross impairments remainedlow in all other segments. Credit cost ratio amountedto 9 bps in 9M16 (19 bps in FY15). Total impairmentsfell q-o-q due to lower impairments on AFS shares(7m EUR in 3Q16 compared with 20m EUR in 2Q16)
Impaired loans ratio dropped to 3.5%, 1.9% of whichover 90 days past due
ASSET IMPAIRMENT
OPERATING EXPENSES
Amounts in m EUR
535 534 540 541 533 541 529
241160
3Q16
5290
2Q16
57332
1Q16
774
4Q15
55413
3Q15
5400
2Q15
584
49
1Q15
695
3328
6
34
13
6762820
24
18
15
10
3
3Q16
41
2Q16
48
1Q16
30
4Q15
52
3Q15
28
2Q15
77
1Q15
65
Operating expensesBank tax
Other impairments Impairments on L&R
25
Net result at the Belgium BU
* Difference between net profit at the Belgium Business Unit 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
414371
209
348358
528
330
3Q162Q161Q164Q153Q152Q151Q15
330303
176
288300
429
212
3Q162Q161Q164Q153Q152Q151Q15
8049 37 38
74
62
50
33 24
19
-29-15-12-25
19
61
52
3Q162Q16
688
1Q16
33
-5
4Q15
60
-2
3Q15
58
2Q15
99
0
1Q15
117
84
Non-technical & taxesLife resultNon-Life result
CONTRIBUTION OF INSURANCE ACTIVITIES TO NET RESULT OF THE BELGIUM BU *
26
CZECH REPUBLIC BUSINESS UNIT
CFO SERVICES
CRO SERVICES
CORPORATE STAFF
BELGIUMCZECH
REPUBLICINTERNATIONAL
MARKETS
27
Czech Republic BU (1): net result of 145m EUR
Net result at the Czech Republic Business Unit of145m EUR• Q-o-q results were characterised by higher net
interest income, lower net fee and commissionincome, lower net results from financial instruments,a decrease in realised gains on AFS assets, a combinedratio impacted by storms and large fire claims, highersales of life insurance products, stable costs (withoutbank tax) and extremely low impairment charges
• Profit contribution from the insurance businessremained limited in comparison to the bankingbusiness
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos
VOLUME TREND
Excluding FX effect Total loans ** Of which mortgages Customer deposits*** AuM Life reserves
Volume 19bn 9bn 25bn 8.6bn 1.0bn
Growth q-o-q* +1% +3% +2% 0% -2%
Growth y-o-y +9% +12% +8% +2% +4%
NET RESULT
Amounts in m EUR
145
191
129119
153
127
143
4Q15 1Q16 3Q162Q163Q152Q151Q15
28
Czech Republic BU (2): higher NII and stable NIM
Net interest income (213m EUR)• Up by 1% q-o-q and down by 1% y-o-y to 213m EUR
(also corrected for FX effects)
• The q-o-q increase was the result primarily of growth inloan volumes, a reduction of the average offered rateon savings accounts, a positive effect of enhanced ALMmanagement and higher income on early repaidcorporate loans, which were partly offset by lowerreinvestment yields and pressure on lending margins inmortgages and consumer finance
• Loan volumes up by 9% y-o-y, driven mainly by growthin mortgages, corporate loans, consumer finance and,to a lesser extent, in SME loans
• Customer deposit volumes up by 8% y-o-y
Net interest margin (2.91%)• Stabilised q-o-q and fell by 10 bps y-o-y to 2.91%
• The q-o-q stabilisation was attributable mainly to areduction of the average offered rate on savingsaccounts and higher margins on new loan production inCorporates & SME, fully offset by a lower reinvestmentyield and pressure on lending margins in mortgagesand consumer finance
• The y-o-y decrease was the result of a lowerreinvestment yield and pressure on lending margins,partially offset by several cuts in interest rates onsavings accounts
NIM
NII
Amounts in m EUR
213210211210215208212
3Q162Q161Q164Q153Q152Q151Q15
2.91%
3Q162Q16
2.91%
1Q16
3.00%
4Q15
2.95%
3Q15
3.01%
2Q15
3.00%
1Q15
3.16%
29
Czech Republic BU (3): lower net F&C income
Net fee and commission income (46m EUR)• Decreased by 7% q-o-q and by 6% y-o-y (also pro
forma, adjusted to take account of FX effect)
• The q-o-q decrease was mainly the result of lowerfees from payment services, partly offset by higherentry fees
• The y-o-y decrease was attributable chiefly to lowerfees from payment services and lower entry fees,partly offset by higher management fees
Assets under management (8.6bn EUR)• Stabilised q-o-q owing to small net inflows and a small
negative price effect
• Y-o-y, assets under management rose by 2%, drivenby net outflows (-3.4%) and a positive price effect(+5.6%)
AuM*
F&C
Amounts in bn EUR
Amounts in m EUR
4649
46
52495050
3Q162Q161Q164Q153Q152Q151Q15
8.8
4Q15
8.7
1Q16
8.6
2Q16
8.6
3Q163Q15
8.5
2Q15
8.3
1Q15
8.2
* The breakdown across the BUs is based on the ‘Assets under Distribution’ in each BU
30
Czech Republic BU (4): higher premium income, combined ratio impacted by storms and large fire claims
Insurance premium income (gross earnedpremium) stood at 108m EUR• Non-life premium income (49m) rose by 8% y-o-y
excluding FX effect, due mainly to growth in allproducts
• Life premium income (59m) went up by 15% q-o-q andfell by 23% y-o-y, excluding FX effect. Q-o-q increaseentirely in unit-linked single premiums
Combined ratio: 97% in 9M16 (compared with94% in FY15) impacted by storms and large fireclaims
Cross-selling ratios: increased commercial focusand sales activities helped to improve demand forproperty insurance combined with a mortgage
COMBINED RATIO (NON-LIFE)
PREMIUM INCOME (GROSS EARNED PREMIUM)
41 44 45 47 45 46 49
30 4176
9567 51 59
1Q16
112
4Q15
142
3Q15
121
2Q15
85
1Q15
71
3Q16
108
2Q16
97
97%
FY
94%
9M
94%
1H
98%95%
1Q
95%96%
20162015
Non-Life premium incomeLife premium income
CROSS-SELLING RATIOS
Mortg. & prop. Mortg. & life risk Cons. Fin. & life risk
9M16
63%
2015
68%
9M16
46%
2015
50%
9M16
62%
2015
57%
31
Czech Republic BU (5): stable operating expenses andextremely low impairments, excellent credit cost ratio
Operating expenses (144m EUR)• Rose by 1% q-o-q and by 3% y-o-y, excluding FX effect
• Excluding FX effect and bank tax, operating expensesstabilised q-o-q and increased by 1% y-o-y
• The q-o-q stabilisation excluding FX effect and bank taxwas due mainly to lower marketing expenses, fullyoffset by higher ICT expenses and higher administrativeexpenses
• The y-o-y increase excluding FX effect and bank tax wasattributable primarily to higher ICT expenses and higheradministrative expenses
• Cost/income ratio at 45% in 3Q16 and 44% in 9M16.Adjusted for specific items, the C/I ratio amounted toroughly 48% in 3Q16 and 45% YTD
Impairments on L&R were extremely low in 3Q16due to several reversals, while the increase in2Q16 was mainly the result of IBNR parameterchanges (6m EUR impact). Overall favourabledevelopment in all segments
Credit cost ratio amounted to 0.07% in 9M16
Impaired loans ratio dropped to 2.7%, 2.1% of which over 90 days past due
ASSET IMPAIRMENT
OPERATING EXPENSES
141 140159
141
20
142
28
144 144
0144
3Q162Q16
143
-1
1Q16
170
4Q15
1667
3Q15
140
-2
2Q15
150
10
1Q15
161
2
10
1
20
4
15
2
3Q162Q161Q164Q153Q152Q151Q15
2012 2013 2014 2015 9M16
CCR 0.31% 0.26% 0.18% 0.18% 0.07%
Bank tax Operating expenses
32
INTERNATIONAL MARKETS BUSINESS UNIT
CFO SERVICES
CRO SERVICES
CORPORATE STAFF
BELGIUMCZECH
REPUBLICINTERNATIONAL
MARKETS
33
International Markets BU (1): net result of 106m EUR
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos
VOLUME TREND
Total loans ** Of which mortgages Customer deposits*** AuM Life reserves
Volume 21bn 14bn 18bn 5.8bn 0.6bn
Growth q-o-q* +1% +1% -1% +4% +2%
Growth y-o-y +1% +2% +9% -9% +8%
NET RESULT
Amounts in m EUR
106
123
6061
92
68
24
3Q162Q161Q164Q151Q15 2Q15 3Q15
Net result: 106m EUR, despite 24m EUR bank taxes• Profit breakdown for International Markets: 20m EUR for
Slovakia, 42m EUR for Hungary, 8m EUR for Bulgaria and37m EUR for Ireland.
• Q-o-q results were characterised by higher net interestincome, slightly higher net fee and commission income,lower result from financial instruments at fair value, lowerrealised gains on AFS assets, an excellent combined ratio innon-life insurance and lower life insurance sales, highercosts and net impairment releases
34
International Markets BU (2): organic growth
The total loan book increased by 1% both q-o-q and y-o-y• On a y-o-y basis, the 5% decrease in Ireland (matured and impaired mortgage loans surpassed new production + deleveraging of the
corporate loan portfolio) was more than offset by the increases of 13% in Slovakia (amongst other things due to the continuouslyincreasing mortgage portfolio), 10% in Bulgaria and 4% in Hungary
Total deposits were down by 1% q-o-q, but were up by 9% y-o-y• The 1% q-o-q decrease was accounted for chiefly by a decrease of 5% in Ireland (primarily in corporates, replaced by intragroup TLTRO
funding) and of 2% in Hungary (in corporates)
• The y-o-y rise of 9% was due mainly to Slovakia (strong growth in current accounts and corporates), Bulgaria and Hungary (both in retailand corporates)
* Organic growth excluding FX impact; q-o-q figures are non-annualised. Loan and mortgage figures after impairment charges** Customer deposit volumes excluding debt certificates & repos rose by 6% y-o-y
ORGANIC GROWTH*
TOTAL LOANS MORTGAGES DEPOSITS
q-o-q y-o-y q-o-q y-o-y q-o-q y-o-y
IRL -1% -5% -1% -3% -5% +2%**
SK +3% +13% +8% +26% +1% +14%
HU +3% +4% +2% +3% -2% +10%
BG +1% +10% -1% -3% +8% +13%
TOTAL +1% +1% +1% +2% -1% +9%
35
International Markets BU (3): higher NII and NIM
Net interest income (184m EUR)• Rose by 3% both q-o-q and y-o-y
• The q-o-q increase was driven by Ireland (lowerallocated liquidity and funding costs), Slovakia (growthin loan volumes and higher margins on new loanproduction in mortgages) and Hungary (higher lendingmargins in retail)
• The y-o-y rise was attributable fully to Ireland (lowerallocated liquidity and funding costs), which morethan offset a decrease in Hungary (lowerreinvestment yield) and Slovakia (pressure oncommercial loan margins)
Net interest margin (2.52%)• Up by 4 bps q-o-q and down by 4 bps y-o-y
• The q-o-q increase was driven entirely by Ireland(mainly as a result of lower allocated liquidity andfunding costs)
• The y-o-y decrease was accounted for entirely bySlovakia, Hungary and Bulgaria, despite a considerabley-o-y rise in NIM in Ireland
NIM
NII
Amounts in m EUR
184179178181180178172
4Q153Q152Q151Q15 2Q161Q16 3Q16
2.52%
3Q162Q16
2.48%
1Q16
2.47%
4Q15
2.50%
3Q15
2.56%
2Q15
2.60%
1Q15
2.53%
36
International Markets BU (4): higher net F&C income
Net fee and commission income (52m EUR)• Up by 2% q-o-q and by 1% y-o-y
• The q-o-q increase was driven primarily by:o higher fees from payment services in Slovakia
and Hungaryo lower commissions paid on insurance sales in
Bulgaria (seasonal effect)
• The y-o-y increase was driven mainly by:o higher fees from payment services in Hungaryo lower commissions paid on insurance in Slovakiapartly offset byo lower asset management fees in Hungary
Assets under management (5.8bn EUR)• Increased by 4% q-o-q owing almost entirely to a
positive price effect
• Y-o-y, assets under management fell by 9%, due tonet outflows (-14%) and a positive price effect(+5%)
AuM*
F&C
Amounts in bn EUR
Amounts in m EUR
525148
51515350
3Q162Q161Q164Q153Q152Q151Q15
5.8
3Q162Q16
5.6
1Q16
6.1
4Q15
6.2
3Q15
6.4
2Q15
6.7
1Q15
6.8
* The breakdown across the BUs is based on the ‘Assets under Distribution’ in each BU
37
International Markets BU (5): lower premium income, but excellent combined ratio
Insurance premium income (gross earnedpremium) stood at 70m EUR• Non-life premium income (50m) rose by 17% y-o-y as
a result of:o good performance in MTPL, casco and household +
growing average tariff in motor retail in Hungaryo good performance in casco in Bulgariao good performance in MTPL, casco and household
insurance in Slovakia
• Life premium income (20m)o fell by 15% q-o-q entirely due to the successful
sales of a new interest guaranteed product inBulgaria in 2Q16
o decreased by 25% y-o-y driven mainly by lowersales of guaranteed interest products in Bulgariaand lower sales of unit-linked products in Slovakiaand Hungary
Combined ratio at an excellent 92% in 9M16(95% in FY15). The combined ratio for 9M16breaks down into 91% for Hungary, 87% forSlovakia and 97% for Bulgaria
COMBINED RATIO (NON-LIFE)
PREMIUM INCOME(GROSS EARNED PREMIUM)
Amounts in m EUR
39 41 43 46 46 49
23 1927 21 24
24
50
20
3Q16
70
2Q16
73
1Q16
70
4Q15
67
3Q15
70
2Q15
60
1Q15
62
9M
95%
1H
90%95%
1Q
88%88%92%
FY
95%
20162015
Non-Life premium incomeLife premium income
38
International Markets BU (6): higher operating expenses, impairment releases, excellent credit cost ratio
Operating expenses (180m EUR)• Rose by 5% both q-o-q and y-o-y
• Opex without bank tax rose by 5% q-o-q driven by:o higher staff expenses and higher professional fees in Slovakiao higher staff expenses and depreciations in Hungaryo higher consultancy costs and a one-off sanction provision in
Ireland
• Opex without bank tax rose by 6% y-o-y
• C/I ratio stood at 67% in 3Q16 and 65% in 9M16. Adjusted forspecific items, the C/I ratio amounted to 69% in 3Q16 and 66% YTD
Impairments on L&R (-37m EUR)• Net loan loss provision releases due to:
o Ireland (-28m EUR in 3Q16 compared with -1m EUR in 2Q16 and9m EUR in 3Q15), driven mainly by an improved non-performingportfolio performance, an improved arrears position in retail andan increase in the 9-month average House Price Index*
o Hungary (-11m EUR in 3Q16), driven by a review of the retailimpairment model and various releases in corporate files
Credit cost ratio of -0.18% in 9M16
Impaired loans ratio dropped to 26.9%, of which 14.3% over 90 days past due
ASSET IMPAIRMENT(Negative figures indicate net releases, hence positive profit impact)
OPERATING EXPENSES
Amounts in m EUR
148 145 148 156 147 150
79
25 2328 61
22
157
24
180
3Q162Q16
172
1Q16
208
4Q15
184
3Q15
171
2Q15
170
1Q15
226
-35
6
-2
28
12
28
16
3Q162Q161Q164Q153Q152Q151Q15
Loan book
2012CCR
2013CCR
2014CCR
2015CCR
9M16CCR
IM BU 25bn 2.26% 4.48% 1.06% 0.32% -0.18%
- Ireland- Hungary- Slovakia- Bulgaria
13bn4bn7bn1bn
3.34%0.78%0.25%0.94%
6.72%1.50%0.60%1.19%
1.33%0.94%0.36%1.30%
0.34%0.12%0.32%1.21%
-0.32%-0.41%0.17%0.64%
Bank tax Operating expenses
* Note that the CSO launched a new Residential Property Price Index (RPPI) for Ireland at the end of September 2016, which will be implemented into our models from 4Q16 onwards
39
Ireland (1): 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 construction
is 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%
40
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): 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
.
41
GROUP CENTRE
CFO SERVICES
CRO SERVICES
CORPORATE STAFF
BELGIUMCZECH
REPUBLICINTERNATIONAL
MARKETS
42
Group Centre: net result of -36m EUR
Net result: -36m EUR
The net result for the Group Centre comprises the results coming
from activities and/or decisions specifically made for grouppurposes (see table below for components)
The q-o-q deterioration was attributable mainly to:o 46m EUR lower net results from financial instrumentso an increase of 26m EUR in operating expenses in 3Q16 due
partly to higher ICT costs, timing differences and slightlyhigher professional fees
NET RESULT
Amounts in m EUR
-36
-6-2
-57
-90
1337
1Q164Q15
334
-341
765
3Q152Q151Q15 3Q162Q16
BREAKDOWN OF NET RESULT AT GROUP CENTRE
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
Group item (ongoing business) 11 -36 -18 -422 2 27 -53
- Operating expenses of group activities -19 -15 0 -62 -18 -7 -21
- Capital and treasury management 5 7 0 0 1 1 -4
o/w net subordinated debt cost -9 -10 -9 -9 -9 -9 -10
- Holding of participations -17 -26 -18 -15 -17 -9 -13
o/w net funding cost of participations -7 -7 -7 -6 -5 -5 -6
- Group Re* - - - - 3 2 -3
- Other 41 -2 0 -346 33 39 -11
Ongoing results of divestments and companies in run-down 2 -22 16 756 -8 10 17
Total net result at GC 13 -57 -2 334 -6 37 -36
GW impairmentsGroup CentreImpact KBC FH
* Group Re was shifted from the Belgium Business Unit to Group Centre as of 2016
43
NET PROFIT – BELGIUM NET PROFIT – CZECH REPUBLIC
296
377 414348
993
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
2012
144
9M162015
232
2014
-3
2013
139
NET PROFIT – INTERNATIONAL MARKETS EXCL. IRELAND
Overview of results based on business units
9M4Q 9M4Q
9M4Q 4Q 9M
9M16 ROAC: 22%
44
Balance sheet (1/2):Loans and deposits continue to grow in most core countries
Deposits***
3%
4% 4%
MortgagesLoans**
* Volume growth making abstraction of FX effects and divestments/acquisitions** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos
Y-O-Y ORGANIC* VOLUME GROWTH FOR KBC GROUP
45
Balance sheet (2/2):Loans and deposits continue to grow in most core countries
Deposits***
4%
Mortgages
3%
Loans**
3%
Deposits***
8%
Mortgages
12%
Loans**
9%
Deposits***
2%
Mortgages
-3%
Loans**
-5%
Deposits***
14%
Mortgages
26%
Loans**
13%
10%
Mortgages
3%
Loans**
4%
Deposits***
Deposits***
13%
Mortgages
-3%
Loans**
10%
BE
CZ
Y-O-Y ORGANIC* VOLUME GROWTH FOR MAIN ENTITIES
* Volume growth making abstraction of FX effects and divestments/acquisitions** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos
46
KBC Group
Section 3
Strong solvency andsolid liquidity
47
Strong capital position
Phased-in Basel 3 CET1 ratio at KBC Group (Danish Compromise)
10.25% regulatoryminimum
15.1%
9M161H16
14.9%
1Q16
14.6%
FY15
15.2%
9M15
17.2%
13.7%
2.4%
1.2%
1H15
16.9%
13.3%
2.4%
1.2%
1Q15
14.7%
11.4%
2.2%
1.1%
Phased-in B3 CET1 ratio w/o YES and penalty on YESYESPenalty on YES
Common equity ratio (B3 phased-in) of15.1% based on the Danish Compromise atend 9M16, which clearly exceeds theminimum capital requirements set by the ECB(9.75%) and the NBB (0.5%)*, i.e. anaggregate 10.25% for 2016
* As announced by the NBB the systemic buffer (CET1 phased-in of 0.5% in 2016 under the Danish Compromise) will gradually increase over a 3-year period, reaching 1.5% in 2018
Fully loaded Basel 3 CET1 ratio at KBC Group (Danish Compromise)
11.25% pro forma regulatory minimum
1H16
14.9%14.6%
FY15 1Q16
15.3%14.9%
9M15
17.4%
14.0%
2.3%
1.2%
1H15
16.7%
13.2%
2.3%
1.2%
1Q15
14.9%
11.7%
2.2%
1.1%
9M16
Penalty on YES Fully loaded B3 CET1 ratio w/o YES and penalty on YESYES
A pro forma fully loaded common equity ratiotranslation to 11.25% was clearly exceededwith a fully loaded B3 common equity ratioof 15.3% based on the Danish Compromise atend 9M16
48
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
5.3%
9M161H16
5.1%
1Q16
5.0%
FY15
5.4%
9M15
4.8%
1H15
4.8%
1Q15
4.9%
Fully loaded Basel 3 leverage ratio at KBC Bank
Fully loaded Basel 3 leverage ratio at KBC Group
9M161H16
6.0%
6.0%
1Q16
5.9%
5.9%
FY15
6.3%
6.3%
9M15
6.9%
5.6%
0.8%
0.4%
1H15
6.7%
5.4%
0.8%
0.4%
1Q15
6.4%
5.2%
0.9%
0.4%6.2%
6.2%
FL B3 leverage ratio excl. YES and penalty on YESPenalty on YES YES
49
KBC maintains a minimum total capital ratio of 17%*
• Minimum CET1 target of11.25% fully loaded (SREPof 9.75% and DomesticSIFI buffer of 1.50% fullyloaded)
• AT1 of 1.5%
• Minimum T2 target of 2%
• Minimum total capital ratio of 17.0%
Total capital ratioof 19.5% phased-in
2017e fully loaded
11.25%
1.50% AT1
2.00% T2
2.25% additionalcapital
9M16 fully loaded
15.28%
1.57%
2.54%
9M16 phased-in
15.14% CET1
1.63% AT1
2.73% T2
Total capital ratioof no less than 17.0%
fully loaded
Will be filled up with T2, depending on the actual CET1
position
* Basel 3, Danish Compromise
Total capital ratioof 19.4% fully loaded
50
Solid liquidity position (1)
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
51
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)
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
52
KBC Group
Section 4
3Q 2016 wrap up
53
3Q 2016 wrap up
Strong commercial bank-insurance results in our core countries
Successful underlying earnings track record
Solid capital and robust liquidity position
54
KBC Group is the bank-insurer that puts its clients centre stage, even in demanding economiccircumstances
We expect the remainder of 2016 and 2017 to be years of sustained economic growth in both theeuro 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
Looking forward
55
KBC Group
Annex 1
Company profile
56
Business profile
KBC is a leading player (retail and SME bank-insurance, private banking, commercial and local investment banking) in Belgium and its 4 core countries in CEE
BREAKDOWN OF ALLOCATED CAPITAL BY BUSINESS UNIT AS AT 30 SEPTEMBER 2016
Group Centre
5%
International Markets19%
Czech Republic
15%
Belgium 61%
57
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
58
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%* 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%** 0.71% 0.52%
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 Business Unit is due in full to KBC Bank Ireland. Excluding Ireland, the CCR at this business unit amounted to 108 bps in FY13
** Credit cost ratio amounted to 1.21% in FY13 due to the reassessment of the loan books in Ireland and Hungary
59
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 achieved in the International Markets Business Unit
Successful underlying earnings track record
Solid capital and robust liquidity position
60
Shareholder structure
Roughly 40% of KBC shares are owned by a syndicate of core shareholders, providing continuity to pursue long-termstrategic goals. Committed shareholders include the Cera/KBC Ancora Group (co-operative investment company),the Belgian farmers’ association (MRBB) and a group of industrialist families
The free float is held mainly by a large variety of international institutional investors
SHAREHOLDER STRUCTURE AT END 9M16
2.7%
KBC Ancora 18.5%
Other core
Free float
MRBB7.6%
11.5%
59.8%
Cera
61
KBC Group going forward:To be among the best performing retail-focused institutions in Europe
KBC wants to build on its strengths and 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
62
KBC Group going forward:The bank-insurance business model, different countries, different stages of implementation
Bank branches selling insurance products from intra-group insurance company as
additional source of fee income
Bank branches selling insurance products of third party insurers as
additional source of fee income
Acting as a single operational company: bank and insurance operations working under unified governance and achieving commercial and non-
commercial synergies
Acting as a single commercial company: bank and insurance operations working under unified governance and achieving
commercial synergies
Level 4: Integrated distribution and operation
Level 3: Integrated distribution
Level 2: Exclusive distribution
Level 1: Non-exclusive distribution
KBC targets to reach at least level 3 in every country, adapted to the local market structure and KBC’s market position in banking and insurance.
Belgium
Target for Central Europe
63
Summary of the financial targets at KBC Group levelas announced at our Investor Day in June 2014
Based on adjusted figures
1. Excluding marked-to-market valuations of ALM derivatives2. 2016 minimum phased-in CET1 ratio of 10.25% set by the ECB (9.75% minimum CET1) in combination with NBB’s systemic buffer (0.5% minimum in 2016, gradually
increasing over a 3-year period and reaching 1.5% in 2018) under the Danish Compromise
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 (phased-in, Danish Compromise)
≥ 10.25%2 2016
Total capital ratio(fully loaded, Danish Compromise)
≥ 17% 2017
NSFR ≥ 105% 2014
LCR ≥ 105% 2014
Dividend payout ratio ≥ 50% 2016
64
KBC Group going forward: An optimised geographic footprint
Strengthen current geographic footprint
• Optimise business portfolio by strengthening current bank-insurance presence through organic growth or through acquisitions if possible.
• Strive for market leadership (top 3 bank/top 4 insurance) in core countries by 2020
• First priority for Ireland is to become profitable from 2016 onwards (already achieved in 2015). As of then, all available options (organically grow a profitable retail bank, build a captive bank-
insurance group or sell a profitable bank) will be considered
No further plans to expand beyond current geographic footprint
KBC Group will consider acquisition options, if any, to strengthen current geographic bank-insurance footprint
Clear financial criteria for investment decision-making, based on:
Solid capital position of KBC GroupInvestment returns in the short and mid termsNew investment contributing positively to group ROE
65
KBC Group going forward: An optimised geographic footprint
Become a reference in bank-insurance in each core country
Through a locally embedded bank-insurance business model and a strong corporate culture, creating superior client satisfaction
With a clear focus on sustainable and profitable growth
66
KBC Group
Annex 2
Other items
67
Sectorial breakdown of outstanding loan portfolio (1)(146bn EUR*) of KBC Bank Consolidated
Distribution
Real estate
Automotive2%
7%
Private Persons42%
11%
8%
14% Rest
Services
Agriculture, farming, fishing
3%
Authorities
3%
Building & construction
4%Finance & insurance
6%
4.5%
Other sectors
1.4%
Food producers
Metals
1.0%Chemicals
Electricity
1.6%
1.4%
Shipping
Hotels, bars & restaurants
Machinery & heavy equipment
0.7%
1.1%
1.1%
0.9%
Oil, gas & other fuels
* It includes all payment credit, guarantee credit (except for confirmations of letters of credit and similar export-/import-related commercial credit), standby credit and credit derivatives, granted by KBC to private persons, companies, governments and banks. Bonds held in the investment portfolio are included if they are corporate- or bank-issued, hence government bonds and trading book exposure are not included* Outstanding amount includes all on-balance sheet commitments and off-balance sheet guarantees
68
Geographical breakdown of the outstanding loan portfolio (2)(146bn EUR*) of KBC Bank Consolidated
4.7%
Ireland 9.1%
Czech Rep.
13.9%
Belgium
7.2%Bulgaria
0.6%
Hungary
3.0%Slovakia
0.7%
North America
1.5%
Other CEE
0.5%Other W-Eur
56.9%
Rest
1.9%
Asia
* It includes all payment credit, guarantee credit (except for confirmations of letters of credit and similar export-/import-related commercial credit), standby credit and credit derivatives, granted by KBC to private persons, companies, governments and banks. Bonds held in the investment portfolio are included if they are corporate- or bank-issued, hence government bonds and trading book exposure are not included* Outstanding amount includes all on-balance sheet commitments and off-balance sheet guarantees
69
Impaired loans ratios, of which over 90 days past due
INTERNATIONAL MARKETS BUCZECH REPUBLIC BU
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%
Of which over 90 days past due **
Impaired loans ratio *
2.7%
3Q16
2.8%
2Q16
2.2%
1Q16
3.2%
2.4%
4Q15
3.4%
2.5%
3Q15
3.4%
2.5%
2Q15
3.5%
2.6%
1Q15
3.7%
2.7%2.1%
31.4%
17.0%
2Q15
32.9%
17.9%
1Q15
33.4%
18.4%
26.9%
3Q162Q16
27.8%
14.8%
1Q16
28.9%
15.4%
4Q15
29.8%
16.0%
3Q15
14.3%
BELGIUM BU
4.0%
2.4%
2Q15
4.1%
2.4%
1Q15
4.2%
2.5%
3.5%
3Q162Q16
3.6%
2.0%
1Q16
3.7%
2.2%
4Q15
3.8%
2.2%
3Q15
1.9%
KBC GROUP
* 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
70
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%
71
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
72
Overview of B3 CET1 ratios at KBC Group
Method Numerator Denominator B3 CET1 ratio
FICOD*, phased-in 13,921 103,345 13.5%
FICOD, fully loaded 14,166 104,159 13.6%
DC**, phased-in 13,349 88,154 15.1%
DC, fully loaded 13,593 88,967 15.3%
DM***, fully loaded 12,484 83,232 15.0%
* FICOD: Financial Conglomerate Directive** DC: Danish Compromise*** DM: Deduction Method
73
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
74
Given the current regulatory framework, KBC Group is comfortable with:
• 23.1% risk-weighted TLAC*
• 8.4% leveraged TLAC
• 12.9% MREL*
Taking into account the 750m EURissuance of senior unsecured debtat Holdco level in October, theratios would respectively be:
• 23.9% risk-weighted TLAC
• 8.7% leveraged TLAC
• 13.2% MREL
23.1% TLAC as % of RWA
MREL (as % of total liabilities)
5.9%
0.6%1.3%0.8%
3.9%
TLAC (as % of leverage exposure)
5.6%
0.6%1.2%0.7%
TLAC (as % of RWA)
15.3%
1.6%
3.4%
2.0%0.8%
0.3%0.3%
Senior unsecured debt Holdco
T2 eligible TLAC (excl. T2 with 1y remaining maturity)
Senior unsecured debt Opco, 2.5% of RWA
Other MREL eligible liabilities > 1y
AT1
CET1
8.4% TLAC as % of leverage
exposure
12.9% MREL as % of total liabilities
and own funds
Comfortable bail-in buffer
* TLAC: Total Loss-Absorbing Capacity / MREL: Minimum requirement for own funds and eligible liabilities
75
P&L volatility from ALM derivatives
ALM derivatives (swaps and options) are used to hedge the interest rate risk of the loan & deposit portfolios. This creates an accounting mismatch between derivatives (at market value) and hedged products (at amortised cost)• Options are used to hedge the caps/floors that KBC is obliged by law to include in Belgian mortgages
Most of this mismatch is removed with IFRS hedge accounting
A part of the ALM derivatives has not been included in any hedge accounting structure for different reasons:• Option hedging for mortgage loans: no hedge accounting possible given the dynamic hedging strategy used
• Part of the ALM interest rate derivatives has not been included in a hedge accounting structure, due to the offsetting effect with AFS bonds impact on capital ratios (which is not the case with valuation changes of cash flow hedges due to the applied regulatory capital filter)
76
Open ALM swap positionProtecting stability of capital ratio
Keeping part of the ALM swaps outside of hedge accounting reduces the volatility of the capital ratios as shown below (Basel III fully loaded + Danish Compromise insurance deconsolidation)
Drawback is more volatility in P&L as revaluation of swaps recorded in P&L, whereas the revaluation of the AFS bonds is recognised in capital
AFS BondsOptions
AFS Bonds
Options
Open ALM Swaps Position
No Open ALM Swap Position Current Status
77
Government bond portfolio – Notional value
Notional investment of 49.0bn EUR in government bonds (excl. trading book) at end of 9M16, primarily as aresult of a significant excess liquidity position and the reinvestment of insurance reserves in fixed-incomeinstruments
Notional value of GIIPS exposure amounted to 5.7bn EUR at end of 9M16
Portugal *Ireland **
Netherlands *Austria *
Germany **Spain
5%Other
8%
France 12%
Italy4%
Slovakia
6%
Hungary
4%
Poland**
2%
Czech Rep.
14%
Belgium
38%
END 9M16(Notional value of 49.0bn EUR)
(*) 1%, (**) 2%
Spain5%
Other8%
France 10%
Italy5%
Slovakia
5%
Hungary
4%
Poland**
2%
Czech Rep.
14%
Belgium
41%
Portugal *Ireland **
Netherlands *Austria **
Germany **
END 2015(Notional value of 48.8bn EUR)
(*) 1%, (**) 2%
78
Government bond portfolio – Carrying value
Carrying value of 54.1bn EUR in government bonds (excl. trading book) at end of 9M16, primarily as a result of a significant excess liquidity position and the reinvestment of insurance reserves in fixed-income instruments
Carrying value of GIIPS exposure amounted to 7.0bn EUR at end of 9M16
* 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
END 9M16(Carrying value of 54.1bn EUR)
(*) 1%, (**) 2%
8%
France
Spain6%
Other
Germany *
Slovakia
6%
Hungary
4%
Poland **
2%Czech Rep.
13%
Belgium
38%
Ireland **Austria *
Portugal *
Netherlands *
Italy
12%
4%
END 2015(Carrying value of 53.4bn EUR)
(*) 1%, (**) 2%
Portugal *Ireland **
Netherlands *Austria **
Germany **Spain
6%Other
7%
France 10%
Italy5%
Slovakia
5%
Hungary2%
Czech Rep.
4%
13%
41%
Belgium
Poland **
79
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)
80
-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
81
Analysts’ coverage
Bank/broker Analyst Contact details Rating Target Price Upside
Situation as of 14 November 2016, based on a share price of 58.37 EUR
ABN Amro Cor Kluis [email protected] + 65,00 11%
Alpha Value Farahad Moshiri [email protected] + 60,10 3%
Autonomous Farquhar Murray [email protected] + 64,40 10%
Bank of America Merrill Lynch Tarik El Mejjad [email protected] + 61,50 5%
Barclays Capital Kiri Vijayarajah [email protected] = 56,00 -4%
Berenberg Andrew Lowe [email protected] + 55,00 -6%
Citi Investment Research Stefan Nedialkov [email protected] + 62,00 6%
Degroof Petercam Bart Jooris [email protected] = 52,20 -11%
Deutsche Bank Flora Benhakoun [email protected] + 54,00 -7%
Exane BNP Paribas Guillaume Tiberghien [email protected] + 57,00 -2%
Goldman Sachs Pawel Dziedzic [email protected] + 70,00 20%
HSBC Johannes Thormann [email protected] = 56,00 -4%
ING Albert Ploegh [email protected] + 60,00 3%
JP Morgan Securities Paul Formanko [email protected] + 68,00 16%
Keefe, Bruyette & Woods Jean-Pierre Lambert [email protected] + 63,40 9%
KeplerCheuvreux Benoit Petrarque [email protected] + 62,00 6%
Macquarie Jain Vardhman [email protected] + 62,00 6%
Mediobanca Robin van den Broek [email protected] + 61,00 5%
Morgan Stanley Bruce Hamilton [email protected] + 63,60 9%
Natixis Securities Alex Koagne [email protected] + 60,50 4%
Oddo Jean Sassus [email protected] + 69,00 18%
Santander Patrick Lee [email protected] = 58,00 -1%
Societe Generale Phelbe Pace [email protected] - 39,00 -33%
UBS Anton Kryachok [email protected] = 50,00 -14%
82
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]
83
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
84
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