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Market Activities Asset Management
Investor Relations Conference2 July 2001
Luc PhilipsMember of the EC
Market Activities
Description of the activities
Business characteristics
Market position
Financial results
Challenges
Risk profile
Market risk
Outlook / plans
To
pic
s
Description
The activity consists of :
FX - MM - Capital Markets of KBC Bank
Equity markets of KBC Securities (excl. Corporate Finance) in Belgium, France & Netherlands, Peel Hunt (GB) and Patria Finance (Czech Rep.)
Convertible Bonds & Equity Derivatives of KBC Financial Products
Clearing and Settlement Services
Characteristics
Focus on (European) Small & Medium Caps
Centralized management responsibility realized in FX, MM, Capital Markets and in KBCFP. Process started in KBC Securities
Synergies between business lines and with Corporate Finance/Banking Business
Market Leadership
Equity in Belgium Convertibles (secondary market) in
New York and Tokyo Warrants in Hong Kong Structured Equity Products in Europe Czech Republic
Market position
0
10
20
30
40
50
60
70
1998 1999 2000 2001(annualised)
U.S. DomesticMarketsEuropeanMarketsJapaneseMarketsAsias Markets
KBC FP’s Convertible Turnover (in US$ billion)
1998 1999 2000 2001 (Annualised*)
U.S. Domestic Markets 0.5 8.7 23.3 40.4
European Markets 13.2 9.2 13.1 19.2
Japanese Markets 5.5 7.1 8.1 5.4
Asian Markets 2.9 2.0 2.3 2.3
Total Convertible Turnover 22.1 27.1 46.9 67.4
* KBC FP’s convertible turnover for 2001 has been annualised using data from 01-Jan-2001 to 31-Mar-2001
KB
C F
P's
Con
vert
ible
Tur
nove
r(in
US
$ bi
llion
)Significant Share of US$ 500 Bil Global
CB Markets
Good Market Position
Small & Medium Caps in UK Brokerage in France
Relative Weak Position
Netherlands & Germany (equity) Corporate Finance in France Warrants in Europe
Market position
Financial Results
Profit Contribution
Share in Group Profit (%)
Equity allocation
ROE (%)
184
18.4
1 374
-
90
7.8
1 135
7.2
159
14.3
728
17.1
45
13.4
1 061
18.1
1998 1999 2000 1Q01In m EUR
Challenges
Decreased importance Belgian market
Consolidation of exchanges
Integration of equity business
Optimization of synergies Small & Midcaps
Control risk profile
Market requirements on system development
Risk Profile
All activities increasingly client instead of trading oriented
KBC FP Belgium : managing Long Term OTC Derivatives
Convertibles sales and other equity derivatives : low risk profile
KBCSec (Belgium) Equities somewhat higher relative exposure, due to dominant profile in the Belgian market
Risk Profile
Peel Hunt/Patria : very small position trading/limits
“Consolidated” risk profile from equity + Equity Derivatives Business
Role of RIS & Market Committee
Market Risk
Possibility extreme negative MTM results mitigated by Conservative position taking/limits in
equity derivatives; cfr NO trading losses throughout recent weeks/months
Compensation between activities in all but the most extreme scenario’s
Stress scenario testing
Market Risk
Revenue generation most vulnerable in scenario of combination of
absence of volatility
low stock prices
low stable interest rates
Outlook - Plans
Strengthen equity position in France and Germany
Integrate product offering to Small and Mid cap European market (Limitation : liquidity in underlying stock for more sophisticated derivatives offering)
Fully integrate/centralize management of equity business
Outlook - Plans
Develop credit derivatives trading activity prudently
In Synergy with Asset Management : launch Hedge Fund Products on the basis
of existing strengths (e.g. convertible arbitrage)
Asset Management
Structure
Assets under management
Financial results
Retail market shares
Drivers of success
Opportunities
Plans
Targets
To
pic
s
KBC Bank & Insurance
Holding NV
Asset Management
KBC Bank KBC Insurance
100%100%
KBC Asset Man45%
55%
• KBC Asset Management Ltd Dublin• Luxemburg Conseils
Assets under Management
32,4
5,3
3,36,5
4,4
35,8
5,1
4,2
8,6
8,6
7,3
37,4
4,94,4
8,9
8,5
8,6
31.12.1999 31.12.2000 30.05.2001
51.9
69.6
In b
illio
n s o
f E
UR
72.7
Fund of Funds
Group Assets
Institut. Internat.
Institut. BelgiumRetail Others
Retail UCI
Financial Results
Strategic Capital Allocation by 2003 : 8.5 - 10 %
Contribution to Group Profitsin m. EUR 1999 91 2000 129 2001 (Q1) 29
Share of Group Profits : 1999 8% 2000 12% 2001 (Q1) 8%
Cost Efficiency : 5bp vs 15 bp AUM (McKinsey survey)
Retail Market Share UCI’s in Belgium
0%
10%
20%
30%
40%
50%
60%
Bond funds Equity funds Mixed funds Moneymarket funds
Cap.Guarant.Funds
Y2000 figures
19.9%
25.9% 24.6% 24.9%
51.7%
Comparative Market position in Belgium
Drivers of success
Product development capacity New products launched 2000 : 87
2001 : 42 (1Q01)
Very short time to market Seamless to distribution system
Very broad product range, consistent with4 defined customer risk profiles(430 Retail products outstanding)
Undisputed market leadership in Capital Guaranteed Products (210 products)
Belgium: huge UCI market share in Europe, making KBC the nr 13 UCI manager in Europe
Opportunities
Demographics in Belgium/Europe
Pension funding problems in Europe
Third party/white labeling services
Grow KBC AM Ltd in UK (and US)
Plans
Consolidate Belgian market share
Export retail model to Central Europe (30 - 40 % market share)
Make reporting fully gips compliant
Select additional 3/4 products for institutional market
Direct marketing European and UK market
Work with marketing services in the US
Alternative investment initiatives
Targets A.U.M
Retail UCI
Other Retail
Institutional Belgium
Institutional Int’l
Group Assets
FoF/Inst. funds
90
9
8
26
13
16
56
7
6
16
10
11
Total 106 162
2003 2006In bn EUR
Market Activities Asset Management
Investor Relations Conference2 July 2001
Luc PhilipsMember of the EC