KBCBank & Insurance Group
Half-Year Results 2002
visit www.kbc.com
2 September 2002
2
1Q01 2Q01 1H01 1Q02 2Q02 1H02
Net profit at a glance
2Q 02 : 280 m EUR,+ 22% versus 2Q 01,- 11% versus 1Q 02
1H 02 : 596 m EUR,+ 2% versus 1H 01
1H 02 EPS : 1.97 (versus 1.95 in 1H 01)
1H 02 ROE : 14.8 % (versus 15.4% in 1H 01)
355 m
585 m
316 m
280 m
230 mQ-avg.2001
596 m
3
Operatingresult (m EUR) *
2Q 02 2Q/2Q 1H 02 1H/1H
Banking 484 +92% 973 +38%
Insurance 102 -1% 201 +5%
585 +67% 1 167 +33%
Net profit (m EUR)
2Q 02 2Q/2Q 1H 02 1H/1H
Banking 185 +24% 422 -5%
Insurance 96 +3% 182 +7%
280 +22% 596 2%
Banking Strong operating performance,
due i.a. to interest income growth (C.E.) and favourable cost trend
High level of negative non-operating items(i.a. credit provisions and value adjustments)
Insurance Strong performance in non-life Stable investment income
* Before provisions, value adjustments,extraordinary and non-recurring result,taxes and minority interests
Net profit at a glance
4
(in millions of EUR) 2Q 02 2Q/2Q 1H 02 1H/1H
Gross income 1 457 +32% 2 871 +20%
Adm. expenses -974 +14% -1 898 +13%
Operating result 484 +92% 973 +38%
Credit provisions -85 +264% -174 +112%
Value adjustments on securities
-77 - -70 +226%
Profit on ordinary activities
297 +35% 709 +20%
Extraordinary result +42 +380% +44 -52%Taxes -113 +169% -239 +55%Minority interests -40 +9% -92 +8%Net profit 185 +24% 422 - 5%
Cost / income 66.8% -10.4 pp. 66.1% -4.3 pp.
Banking : overview of results
5
Banking : main changes in consolidation
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02
ABN AMRO Magyar Bank (Hungary)
KredytBank (Poland)
(*) From equity method to full consolidation
(*)
3228 28
31130 121
951 284
1 105 1 165
1 424 1 413 1 457
Gross operatingincome (m EUR)
1H 02 vs. 1H 01 : + 20%, autonomous : + 9%2Q 02 vs. 2Q 01 : + 32%, autonomous : + 21%
6
Gross operating income 2Q 02 2Q/2Q 1H 02 1H/1H
Interest /Dividend 880 + 35% 1 627 +28%Trading 161 +30% 332 +3%Capital gains 23 -32% 100 +0%Commission 268 +35% 574 +12%
Other 126 +55% 238 +38%Total 1 457 +32% 2 871 +20%
Banking : strong income growth
Growth in all types of income, except realized capital gains on shares Strong interest income, autonomous growth 1H 02 : 16% (*) Satisfactory trading result Decrease in capital gains on shares, compensated by capital gains on
fixed income securities in first quarter Growth in commission income mainly due to Central Europe Increased 2Q ‘other’ income due to leasing and a securitization transaction
(*) excl. one-off booking at CSOB of roughly 30 m EUR and currency effect (CZK) : + 12%
7
Administrative expenses
2Q 02 2Q/2Q 1H 02 1H/1H
KBC Bank N.V. (Belgium)
376 -11% 747 -8%
Central Europe 259 +89% 510 +95%
Other 339 641
Total 974 +14% 1 898 +13%
Banking : favourable cost trend
Considerable impact of consolidation : autonomous 1H 02 cost increase 1%
Cost decrease at KBC Belgium, 1H 02 : down 8%
Autonomous 1H 02 cost increase in C.E. : 14%, due to i.a. depreciation of new IT and branch network
Cost/income ratio : 1H 02 : 66.1% (vs. 1H 01 : 70.4%)
8
Banking : merger in Belgium still on schedule
13727
13937
14247
1150
1100
1063
13000
13200
13400
13600
13800
14000
14200
14400
12-01 01-02 02-02 03-02 04-02 05-02 06-02
850
900
950
1000
1050
1100
1150
FTE Retail branches KBC
KBC Bank N.V. (Belgium) Target 2003/2004 Achieved to date
Closure of bank branches 650 62%
Account migration (ICT platform) All 81%
Headcount reduction 1 650 32%
FTE Retail Branches
9
Banking : credit provisioning remains high
Provisioning stable at high level
Provisions spread over small and medium-sized loans, both in Belgium and elsewhere
Difficult economic situation in Poland. Impact of full consolidation of Kredyt Bank (Poland) in 4Q 01 : 39 million EUR1H 02 : 30 million EUR
Provisions for credit risk
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02
24 m
79 m
160 m
88 m
59 m
85 m2001-avg.
10
Provisions ytd
Loan loss ratioannualised
Belgium 87 m 0.30%
Central Europe 12 m 0.25%
Other 75 m 0.54%
Total 174 m 0.40%
Banking : quality of loan book remains acceptable
Non-performing ratio stable at 2.9%
Limited LATAM exposure (mostly short term commercial facilities), well provisioned Argentina : 50 m EUR Brazil : 81 m EUR
Limited telecom and aviation exposure : both < 2% of portfolio
Non-investment-grade countries :
< 2% of portfolio
(*)
* Account taken of write-back of provisionsfor CSOB’s ‘historical’ credit portfolio
of 18 million EUR
11
Banking : substantial LOCOM-adjustments on investment porfolio
2Q 02 1H 02
Perpetuals -7 -3
Shares -69 -67
Total -77 -70
1Q01
2Q01 1Q02
2Q02
-22 m
+1 m+7 m
-77 m
No LOCOM on fixed-income securities
12
Banking : impact non-recurring elements on bottom line
2Q 02 2Q/2Q 1H 02 1H/1H
Extraordinary result +42 +380% +44 -52%
0
50
100
150
200
250
300
350
400
450
500
1Q01 2Q01 1Q02 2Q02
Extraordinary resultPre-tax income
83
9
229
342
454414
339
13
Insurance : overview of results
m EUR 2Q 02 2Q/2Q 1H 02 1H/1H
Net earned premiums
Life 710 +272% 1 413 +54%Non-life 204 +4% 442 +7%
Technical charges
Life (*) -727 +63% -1 435 +54%Non-life -130 -8% -314 -1%
Investment result (*) +154 -4% 317 +0%
Adm. expenses -108 +6% -221 +8%
Recurring result 102 -0% 201 +5%
Non-recurring and extraordinary -4 - -7 -Taxes -1 - -9 -Minorities 0 - -1 -Net profit 96 +3% 182 +7%
(*) Excluding value adjustments for unit-linked life insurance
14
Insurance : Sustained high level of life premium income
Evolution of gross premiums
64 76 70
110
296
433
376
334
221
298
364
241
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02
Traditional Unit linked
(*) excl. Group contracts – 1H 02 : 69 m EUR
(m EUR)
15
Insurance : strong operating efficiency in non-life
1H 01 1H 02
Net loss ratio 71.9% 67.5%
Net expense ratio 32.2% 31.7%
Combined ratio 104.1% 99.2%
71.9% 67.5%
32.2% 31.7%
104.1%99.2%
Net loss Net expense Combined
Efficiency ratios, non-life
1H 01 1H 02
16
Insurance : recurring result per sector
Recurring result (m EUR) 1H 01 1H 02 %
Non-Life 45 75 +68%
Life 94 93 -0%
Non-technical 52 31 -40%
Total 190 199 +5%
45
75
94 94
52
31
Non-Life Life Non-technical
1H 01 1H 02
17
Insurance : value adjustments on securities
At 31-12-2001 At 30-6-2002
Provision for financial risks
Capital gains+30 m
Value adjustments-174 m
157 m
13 m
compensated by write-back of provision for
financial risks
18
Profit contribution and capital allocation per activity
Profit contribution
Asset Management 10%
Retailbancassur.
34%
CentralEurope
18%
Corporateservices
22%
MarketActivities
9%
Groupitems8%
Capital allocation
Retailbancassur.
33%
CentralEurope
25%
Corporate services 26%
MarketActivities
14%
Groupitems3%
As per 30-06-2002
19
Retail Bancassurance(Belgium)
1H 02 profit contribution : 201 m EUR, down 11%
Lower commission income from securities and asset management, insufficiently compensated by cost decrease in banking
Good technical result achieved in non-life insurance, strong growth in life premium income
Financial highlights
Profit contribution :(in m EUR)
30-06-2001 : 225 30-06-2002 : 201
Share in Group profit :
30-06-2001 : 38% 31-12-2001 : 36% 30-06-2002 : 34%
Return on equity:
30-06-2001 : 17% 31-12-2001 : 14% 30-06-2002 : 15%
Belgium1st home market
20
Retail Bancassurance(Belgium)
Distribution channels 31-12-01 30-6-02 Life sold via bank network 83% 90% +7 bp.
Non-life sold via bank network
7% 7% -
Continued cross selling 31-12-01 30-6-02 Shared customers (*) 539 000 561 000 +4%
Cross selling ratio 35.2% 36.7% +1.5 bp.
Stable market shares 31-12-00 31-12-01 30-6-02
Consumer credit / home loans 25.5% 26.0% 26.0%
Savings products 18.7% 18.7% 18.6%
Non-life insurance 8.7% 8.7% n.a.
Life insurance 13.2% 11.8% n.a.
(*) Customers with both banking and insurance products
Belgium1st home market
21
Central Europe
1H 02 profit contribution : 129 m EUR, up 43%
Additional investments of ca. 655 m EURKredyt Bank (Poland) – 164 m EUR (total 524 m) IPB Pojist’ovna (Czech Republic) – 56 m EUR (80 m) NLB (Slovenia) – 435 m EUR – pending final closingErgo (Slovakia) – pending closing
Financial highlights
Central Europe2nd home market
Profit contribution :(in m EUR)
30-06-2001 : 90 30-06-2002 : 129
Share in Group profit :
30-06-2001 : 12% 31-12-2001 : 12% 30-06-2002 : 18%
Return on equity:
30-06-2001 : 13% 31-12-2001 : 8% 30-06-2002 : 13%
Contribution percompany (m EUR)
2Q02 2Q/2Q 1H 02 1H/1H
CSOB 45 +197% 116 +19%
K&H Bank 9 - 19 -
Kredyt Bank -2 +73% -7 -
Insurance subsidiaries
3 - 2 -
Total 54 - 129 +43%
22
Corporate services
1H 02 profit contribution : 133 m EUR, up 11%
In banking : lower charges – 5% loan loss provisions 1/3 higher
In insurance : Better performance by Secura
(profit contribution : 2.2 m EUR)
Continued rationalization of international bank network Repositioning of activities in the Netherlands
Stable market share in lending (Belgium) Year-end 2001 : 22.4% Mid-2002 : 22.8%
Financial highlights
Profit contribution :(in m EUR)
30-06-2001 : 120 30-06-2002 : 133
Share in Group profit :
30-06-2001 : 20% 31-12-2001 : 21% 30-06-2002 : 22%
Return on equity:
30-06-2001 : 9% 31-12-2001 : 8% 30-06-2002 : 11%
23
Asset Management
1H 02 profit contribution : 57 m EUR, up 33%
Largest Belgian player as to mutual funds Market share : 29.6%
Continued innovation 50 new funds launched in 2002 Hedge Fund linked life insurance Corporate sustainability research
Decrease in assets under management due to difficult market conditions
New retail business : + 4% Avg. Performance, retail funds : - 8%But : 54% of funds are capital-guaranteed or bond-related
Institutional market 18 new mandates for portfolio management
Financial highlights
Profit contribution :(in m EUR)
30-06-2001 : 43 30-06-2002 : 57
Share in Group profit :
30-06-2001 : 8% 31-12-2001 : 9% 30-06-2002 : 10%
24
Asset Managementassets under management
27
55
35
12
5
40
24
5
42
24
5
40
24
5
1998 1999 2000 2001 1H02
37
52
In b
illio
n s o
f E
UR
70
Private Banking Institutional funds
Mutual funds
% of total AUM 1999 2000 2001 1H02
71
7%34%59%
10%23%66%
7%35%58%
7%35%58%
69
25
Market activities
1H 02 profit contribution : 51 m EUR, down 39% (inter alia increased taxes)
Weakness of stock markets reflected in results of equity subsidiaries, especially KBC Securities
Stable profit for dealing room in Brussels, rather poor performance elsewhere (excl. C.E.)
KBC Financial Products : satisfactory result, due to, amongst others successful credit derivatives business
Financial highlights
Profit contribution :(in m EUR)
30-06-2001 : 84 30-06-2002 : 51
Share in Group profit :
30-06-2001 : 14% 31-12-2001 : 5% 30-06-2002 : 9%
Return on equity:
30-06-2001 : 16% 31-12-2001 : 4% 30-06-2002 : 9%
26
Strong solvency
06-01 12-01 06-02
Capital and reserves group
6.1 7.9 8.4
Total capital resources group
16.8 16.8 17.2
Tier 1 bank 8.6% 8.8% 8.8%
Solv. insurer (*) 314% 318% 325%
(*) Excl. unrealized gains
11.5
13.7
16.2 16.8 17.2
1998 1999 2000 2001 1H02
Total capital resources(bn EUR)
27
Balance sheet
Non-realized gains
Bonds Shares
Banking 488 243
Insurance 260 131
Group 748 3741998 1999 2000 2001 1H02
Total assets(bn EUR)
Banking Insurance
Investment portfolio
Bonds Shares
Banking (*) 50 149 1 342
Insurance (**) 5 632 2 788
Group 55 781 4 130
(*) excl. trading portfolio(**) excl. Unit-linked
148 156
187
228 225
28
Key figures KBC share
(in EUR) 12-2001 06-2002
Earnings/share 3.39 1.97
Net asset value/share 33.8 34.4
Closing price 37.70 40.95
P/E ratio 11.1 12.1
(6m)
0
100
200
300
400
500
600
94 95 96 97 98 99 00 01
KBCDJ Euro Stoxx Banks
60
70
80
90
100
110
120
Jan.02
Feb Mar Apr May Jun
Short term (31-12-01 = 100)Long term (31-12-94 = 100)
JulKBCDJ Euro Stoxx Banks
As at 30-6-02 :KBC : + 9%DJ ESB : - 3%
29
Profit outlook 2002 unchanged
Good operating performance 1H 02
Earnings growth in 2H 02 difficult to predict : uncertainty re economic recovery and rallying of financial markets
On the other hand: cost cuts and development of major sources of income proceeding according to plan
Publication of Q3 results : 21 November 2002
"… Profit for 2002 is therefore expected to be in line with the 2001 figure…”
KBCBank & Insurance Group
Half-Year Results 2002
visit www.kbc.com
2 September 2002