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1 KBC Group Company presentation 1Q 2017 KBC Group - Investor Relations Office – E-mail: More information: www.kbc.com [email protected]
1
KBC GroupCompany presentation1Q 2017
KBC Group - Investor Relations Office – E-mail:
More information: www.kbc.com
2
This presentation is provided for information purposes only. It does not constitute an offer to sell or the solicitation to buy anysecurity issued by the KBC Group.
KBC believes that this presentation is reliable, although some information is condensed and therefore incomplete. KBC cannot beheld liable for any loss or damage resulting from the use of the information.
This presentation contains non-IFRS information and forward-looking statements with respect to the strategy, earnings and capitaltrends of KBC, involving numerous assumptions and uncertainties. There is a risk that these statements may not be fulfilled andthat future developments differ materially. Moreover, KBC does not undertake any obligation to update the presentation in linewith new developments.
By reading this presentation, each investor is deemed to represent that it possesses sufficient expertise to understand the risksinvolved.
Important information for investors
3
1Q 2017 key takeaways for KBC Group
STRONG BUSINESS PERFORMANCE IN 1Q17Excellent net result of 630m EUR in 1Q17, despite the large upfront bank taxes. ROE of 17% in 1Q17o Strong performance of the commercial bank-insurance franchises in our core markets and core activitieso Q-o-q increase in customer loan volumes and customer deposits in most of our core countrieso Lower net interest income and net interest margin q-o-q o Sharply higher net fee and commission income q-o-qo Slightly lower net gains from financial instruments at fair value and lower net other income, higher realised AFS gainso Exceptional combined ratio of 79% in 1Q17. Excellent sales of non-life products, while sales of life insurance products were lowero Strict cost management resulted in a cost/income ratio of 52% in 1Q17 adjusted for specific items o Very low impairment charges due mainly to Ireland (net release of 50m EUR in 1Q17) and seasonal effects. The impairment guidance for Ireland
is updated towards a net release of a range of 120m-160m EUR for FY17
SOLID CAPITAL AND ROBUST LIQUIDITY POSITIONSo The B3 common equity ratio based on the Danish Compromise at end 1Q17 amounted to 15.9% phased-in and 15.7% fully loaded, which
clearly exceeds the minimum capital requirements set by the ECB / NBB of respectively 8.65% and 10.40% for 2017o On top of the above-mentioned capital requirements, the ECB expects KBC to hold a pillar 2 guidance (P2G) of 1.0% CET1o Fully loaded B3 leverage ratio, based on current CRR legislation, amounted to 5.7% at KBC Groupo Continued strong liquidity position (NSFR at 130% and LCR at 145%) at end 1Q17
We will organise a KBC Group investor visit in Dublin on Wednesday 21 June 2017
4
Contents
1
4
Strong solvency and solid liquidity
1Q 2017 wrap up
Annex 2: Other items
2
1Q 2017 performance of KBC Group
3
1Q 2017 performance of business units
Annex 1: Company profile
5
KBC Group
Section 1
1Q 2017 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*
629
2Q16
721
1Q16
392
1Q17
630
4Q16
685
3Q16
NET RESULT AT KBC GROUP*
1Q17
526
4Q16
613
3Q16
552
2Q16
644
1Q16
358
-30 -35
83 72 6131
22 5856
78
-21 -29
2761
1Q17
111
4Q16
96
3Q16
95
2Q16
75
1Q16
48
-9
CONTRIBUTION OF INSURANCE ACTIVITIES TO KBC GROUP NET RESULT*
Amounts in m EUR
Net result
Net result
Non-Life result Non-technical & taxes
Life result
7
Lower net interest income and net interest margin
Net interest income (1,025m EUR)• Down by 3% q-o-q and by 4% y-o-y• The q-o-q decrease was driven primarily by:
o lower reinvestment yieldso more negative NII of dealing room activitieso pressure on commercial loan margins in most core countrieso lower number of dayso slightly lower upfront prepayment feespartly offset by:o lower funding costso continued good volume growth in current accounts and loanso further positive effect of enhanced ALM management
Net interest margin (1.88%)• Down by 2 bps q-o-q and by 8 bps y-o-y• Q-o-q decrease is due to lower reinvestment yields, decreased net interest
income from the dealing room and pressure on commercial loan marginsin most core countries, only partly offset by lower funding costs and thefurther positive effect of enhanced ALM management
NIM
NII
914 925898903
157156
907
147154 14358 4
2Q16
1,0702
-1
1Q16
1,067
1Q17
1,0253
-28
4Q16
1,0572
-17
3Q16
1,0641
2Q16
1.94%
1Q16
1.96%
1Q17
1.88%
4Q16
1.90%
3Q16
1.90%
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 134bn 57bn 181bn 216bn 28bn
Growth q-o-q* +1% 0% +2% +1% 0%
Growth y-o-y +4% +4% +10% +4% 0%
Customer deposit volumes excluding debtcertificates & repos +2% q-o-q and +5% y-o-y
8
Sharply higher net fee and commission income
Net fee and commission income (439m EUR)• Up by 17% q-o-q and by 27% y-o-y
• Q-o-q increase was the result chiefly of:o higher management fees from mutual funds & unit-
linked life insurance products (mainly thanks to a goodequity market performance)
o higher entry fees from mutual funds and unit-linked lifeinsurance products due to the successful shift to the newdiscretionary-based service proposition in Belgium
o higher securities-related feespartly offset by:o lower fees from credit files and bank guarantees (due
mainly to less mortgage refinancings in Belgium &Slovakia in 1Q17 and specific event fees in 4Q16)
o slightly lower fees from payment services (seasonaleffect)
• Y-o-y increase was even higher as all the above-mentioneddrivers were higher compared with the weak 1Q16 number(as a result of difficult market circumstances in 1Q16)
Assets under management (216bn EUR)• Went up by 1% q-o-q owing entirely to a positive price
effect
• Rose by 4% y-o-y owing to net outflows (-2%) and a positiveprice effect (+6%)
• The mutual fund business has seen net inflows this quarter,but this was more than offset by net outflows in groupassets and investment advice
F&C
Amounts in m EUR
422 432 443 455
-80-74-71-76 -72
511
439
1Q174Q16
376
3Q16
368
2Q161Q16
360
-1
346
F&C - contribution of holding-company/group
F&C - banking contribution
F&C - insurance contribution
Amounts in bn EUR
AuM
216213209207207
1Q171Q16 2Q16 4Q163Q16
9
Insurance premium income (gross earned premium) at 672m EUR• Non-life premium income (360m) increased by 6%
y-o-y
• Life premium income (312m) down by 24% q-o-qand by 27% y-o-y
The non-life combined ratio at 1Q17 amountedto 79%, an improvement compared with 93% inFY16 due to exceptionally low technical charges(in all countries, except for the Czech Republic) asa result of mild winter conditions. Rememberthat 1Q16 was negatively impacted by one-offcharges due to terrorist attacks in Belgium (-30mEUR)
Amounts in m EUR
Insurance premium income down, but exceptional combined ratio
COMBINED RATIO (NON-LIFE)
PREMIUM INCOME (GROSS EARNED PREMIUM)
FY
93%
9M
94%
1H
95%
1Q
79%
91%
20172016
341 349 357 363
426 402 336413
360
312
776
4Q163Q16
693
2Q16
751
1Q16
767
672
1Q17
Non-Life premium incomeLife premium income
10
Non-life sales up y-o-y, life sales down q-o-q and 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 9% q-o-q and by 19% y-o-y
• The q-o-q decrease was driven mainly by lower sales ofguaranteed interest products in Belgium (attributablechiefly to traditionally higher volumes in tax-incentivised pension saving products in 4Q16) andlower sales of unit-linked products in the CzechRepublic
• The y-o-y decrease can be explained chiefly by lowersales of guaranteed interest products in Belgium (drivenby reduced guaranteed interest offered) and lowersales of unit-linked products in the Czech Republic
• Sales of unit-linked products accounted for 44% of totallife insurance sales
LIFE SALES
NON-LIFE SALES (GROSS WRITTEN PREMIUM)
235 209 173 204
353 349275
318
207
267
1Q174Q16
522
3Q16
447
2Q16
558
1Q16
587
474
Unit-linked productsGuaranteed interest products
Amounts in m EUR
468
321327336
445
1Q171Q16 2Q16 3Q16 4Q16
11
Lower FV gains and other net income, higher gains realisedon AFS assets
The lower q-o-q figures for net gains fromfinancial instruments at fair value wereattributable to:• a negative change in ALM derivatives (1m EUR in
1Q17 compared with 59m EUR in 4Q16) due to:o negative M2M value of EUR/CZK FX swaps in 1Q17o the higher increase of IRS rates in 4Q16
partly offset by:
• a positive change in market, credit and funding valueadjustments (mainly as a result of changes in theunderlying market value of the derivative portfolio)
• better dealing room income
Higher gains realised on AFS assets (q-o-qincrease both on bonds and shares)
Other net income amounted to 77m EUR,higher than the normal run rate of around 50mEUR due to the settlement of an old legal file
FV GAINS
Amounts in m EUR
73
141
73
165
190
59
3Q16
69
-4
2Q16
154
13
1Q16
93
20
1Q17
1
4Q16
224
191
45
8
26
128
27
4Q163Q162Q161Q16 1Q17
GAINS REALISED ON AFS ASSETS
77
101
594751
1Q174Q163Q162Q161Q16
OTHER NET INCOME
Other FV gains M2M ALM derivatives
-68
12
Operating expenses up due entirely to higher bank taxes, but good cost/income ratio
Cost/income ratio (banking) adjusted for specificitems* at 52% in 1Q17• The C/I ratio of 66% was affected mainly by IFRIC 21
• Operating expenses excluding bank tax went down by7% q-o-q due mainly to:o seasonal effects such as traditionally lower ICT,
marketing and professional fee expenseso 33m one-off expenses for early retirement in 4Q16
• Operating expenses without bank tax increased by 2%y-o-y due chiefly to:o higher staff expenses (higher pension costs in
Belgium and wage drift in most countries)o higher ICT costso higher professional fee expenseso higher depreciation and amortisation costs
• 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 1Q17. The 32m EUR netadditional bank taxes in Belgium booked in 2Q16following a decision of the Belgian government werealso booked in 1Q17 as a result of IFRIC 21 (owing to atiming difference)
• Total bank taxes (including ESRF contribution) areexpected to increase from 437m EUR in FY16 to 448mEUR in FY17, although still subject to changes
OPERATING EXPENSES
851 853 871 935 868
361335
1Q17
1,229
4Q16
96327
3Q16
89524
2Q16
90451
1Q16
1,186
Bank tax Operating expenses
* See glossary (slide 86) for the exact definition** Still subject to changesAmounts in m EUR
TOTAL Upfront Spread out over the year
1Q17 1Q17 1Q17 2Q17e 3Q17e 4Q17e
BU BE 278 278 0 0 0 0
BU CZ 26 26 0 0 0 0
Hungary 44 26 18 20 20 21
Slovakia 7 3 4 3 3 4
Bulgaria 3 3 0 0 0 0
Ireland 3 3 1 1 1 14
GC 0 0 0 0 0 0
TOTAL 361 338 22 24 24 39
EXPECTED BANK TAX SPREAD (PRELIMINARY)**
13
Overview of bank taxes*
INTERNATIONAL MARKETS BUCZECH REPUBLIC BU
BELGIUM BUKBC GROUP
11
23
11
272450 46
1Q17
61
2Q16
22
-1
1Q16 3Q16 4Q16
57
ESRF contribution Common bank taxes
57
53
225184
38 00
3Q16
32
1Q17
241
-6
2Q16 4Q161Q16
278
Common bank taxesESRF contribution
6
-1
6 00
2022
3Q162Q161Q16
2826
1Q174Q16
ESRF contribution Common bank taxes
9283
2724
278243
59
1Q17
361
3Q16 4Q162Q16
51
-8
335
1Q16
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 % in 1Q17 amounts to roughly 45% excluding these bank taxes
Bank taxes of 361m EUR in 1Q17. On a pro rata basis, bank taxes represented 11.6% of 1Q17 opex at KBC Group**
Bank taxes of 278m EUR in 1Q17. On a pro rata basis, banktaxes represented 11.3% of 1Q17 opex at the Belgium BU
Bank taxes of 26m EUR in 1Q17. On a pro rata basis, bank taxes represented 4.5% of 1Q17 opex at the CZ BU
Bank taxes of 57m EUR in 1Q17. On a pro rata basis, bank taxes represented 19.5% of 1Q17 opex at the IM BU
14
Very low asset impairments, excellent credit cost ratio and further improved impaired loans ratio
Sharply lower impairment charges (-90% q-o-q and -73%y-o-y)• The q-o-q decrease in loan loss provisions was attributable
mainly to:o net loan loss provision releases in Ireland of 50m EUR
(compared with 12m in 4Q16)o also small reversals in the Czech Republic and in Group
Centredespiteo relatively high gross impairments in Belgium due to two large
corporate files
• Impairment of 1m EUR on AFS shares (in Belgium)
The credit cost ratio only amounted to 0.02% in 1Q17due to low gross impairments and several releases
The impaired loans ratio improved further to 6.8%
ASSET IMPAIRMENT
25
21
10
19
18
28
4
1Q17
8
61
4Q16
73
54
3Q16
28
2Q16
71
50
1Q16
IMPAIRED LOANS RATIO
1Q17
6.8%
3.6%
4Q16
7.2%
3.9%
3Q16
7.6%
4.2%
2Q16
7.8%
4.4%
1Q16
8.2%
4.7%
CREDIT COST RATIO
0.82%
FY10
0.91%
1Q17
0.02%
FY16
0.09%
FY15
0.23%
FY14
0.42%
FY13
1.21%
FY12
0.71%
FY11
of which over 90 days past dueImpaired loan ratio
Impairments on L&ROther impairmentsGW impairments
15
KBC Group
Section 2
1Q 2017 performance of business units
16
BELGIUM BUSINESS UNIT
CFO SERVICES
CRO SERVICES
CORPORATE STAFF
BELGIUMCZECH
REPUBLICINTERNATIONAL
MARKETS
17
Belgium BU (1): net result of 301m EUR
Net result at the Belgium Business Unitamounted to 301m EUR• The quarter under review was characterised by lower
net interest income, a sharp increase in net fee andcommission income, slightly lower dividend income,decreased trading and fair value income, an increasein realised gains on AFS assets, lower other netincome, an excellent combined ratio, slightly lowersales of life insurance products, higher operatingexpenses due entirely to higher bank taxes andstable impairment charges q-o-q
• Loan volumes rose by 1% q-o-q. Customer depositsexcluding debt certificates & repos also increased by1% q-o-q
• Mortgage loan volume fell by 0.5% q-o-q as KBCsmargins strategy was not entirely followed bycompetition
* 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 92bn 34bn 127bn 202bn 27bn
Growth q-o-q* +1% -1% +2% +1% -1%
Growth y-o-y +3% +2% +11% +5% 0%
301
439414
371
209
4Q163Q162Q161Q16 1Q17
NET RESULT
Amounts in m EUR
Customer deposit volumes excluding debtcertificates & repos +1% q-o-q and +3% y-o-y
18
Belgium BU (2): lower NII and NIM
Net interest income (625m EUR)• Down by 4% q-o-q, driven primarily by:
o lower contribution of dealing roomo lower reinvestment yieldso pressure on commercial loan marginso lower number of dayso slightly lower upfront prepayment fees (9m EUR in 1Q17
compared with 13m EUR in 4Q16)partly offset by:o lower funding costs on term depositso continued good loan volume growtho further positive effect of enhanced ALM management
• Decrease by 9% y-o-y due mainly to the lower contribution ofdealing room and insurance, next to the negative impact oflower reinvestment yields
• Customer deposits excluding debt certificates and repos as wellas customer loans both rose by 3% y-o-y
Net interest margin (1.67%)• Fell by 5 bps q-o-q and by 19 bps y-o-y due to the negative
impact of lower reinvestment yields, decreased net interestincome from the dealing room and some pressure oncommercial loan margins
NIM
NII
Amounts in m EUR
536 541 530
145 141 145
533 523
130135
680
-17
3Q162Q16
682625651
5
4Q16 1Q17
-28
7688
1Q16
3Q16
1.67%
1Q174Q16
1.72%1.84% 1.78%
1Q16 2Q16
1.86%
NII - contribution of insurance
NII - dealing room income NII - contribution of banking
19
Credit margins in Belgium
PRODUCT SPREAD ON CUSTOMER LOAN BOOK, OUTSTANDING
PRODUCT SPREAD ON NEW PRODUCTION
1.4
1.2
1.0
0.8
0.6
0.0
0.2
0.4
3Q13 4Q153Q12 3Q152Q122Q11 2Q152Q141Q141Q12 2Q13 4Q14 1Q151Q13 4Q134Q113Q111Q11 3Q14 2Q16 4Q164Q12 1Q173Q161Q16
Customer loans
1.0
1.6
1.8
0.8
0.2
1.2
1.4
0.4
0.6
3Q132Q123Q11 4Q11 1Q14 2Q14 4Q163Q162Q163Q154Q14 1Q174Q121Q12 3Q143Q12 2Q152Q13 1Q164Q13 1Q151Q132Q111Q11 4Q15
Mortgage loansSME and corporate loans
20
Belgium BU (3): sharply higher net F&C income
Net fee and commission income (346m EUR)• Increased by 24% q-o-q, due mainly to:
o higher management fees from mutual funds & unit-linked life insurance products thanks to a higherequity allocation (also in CPPI) as a result of goodequity market performance
o higher entry fees from mutual funds & unit-linked lifeinsurance products due to the successful shift to thenew discretionary-based service proposition
o higher securities-related feeso higher fees from payment transactionswhich were only partly offset by:o lower fees from credit files & bank guarantees (due
mainly to less mortgage refinancings in 1Q17 andspecific event fees in 4Q16)
• Rose by 36% y-o-y driven chiefly by higher managementfees from mutual funds and unit-linked life insuranceproducts (thanks to reset date CPPI and the good equitymarket performance), higher entry fees from mutualfunds & unit-linked life insurance products and higherfees from securities & payment transactions, which wereonly partly offset by lower fees from other bankingservices and slightly lower fees from credit files & bankguarantees
Assets under management (202bn EUR)• Rose by 1% q-o-q owing entirely to a positive price effect
• Went up by 5% y-o-y as a result of net outflows (-1%)and a positive price effect (+6%)
AuM*
F&C
Amounts in bn EUR
307 312 324 333
-54-52-47-52 -45
391
4Q16
279
3Q16
272
2Q16
264
1Q16
255
346
1Q17
202199194193192
3Q162Q161Q16 1Q174Q16
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 3% 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 amounted to 77% in 1Q17(92% in FY16), an exceptional level as a result oflow technical charges. Remember that 1Q16 wasnegatively impacted by one-off charges due toterrorist attacks in Belgium (-30m EUR)
Belgium BU (4): higher y-o-y non-life sales andexceptional combined ratio
COMBINED RATIO (NON-LIFE)
96%
1Q
77%
92%
1H
92%
FY
92%
9M
2016 2017
NON-LIFE SALES (GROSS WRITTEN PREMIUM)
323
220234
249
314
4Q163Q162Q161Q16 1Q17
22
Belgium BU (5): slightly lower life sales, but good cross-selling ratios
Sales of life insurance products• Fell by 1% q-o-q as the sales of guaranteed interest
products are traditionally lower in the first quarter(versus traditionally higher volumes in tax-incentivisedpension saving products in the fourth quarter),despite significantly higher sales of unit-linked lifeinsurance products due to the successful shift to thenew discretionary-based service proposition
• Decreased by 19% y-o-y driven mainly by significantlylower sales of guaranteed interest products (driven byreduced guaranteed interest offered)
• As a result, guaranteed interest products and unit-linked products accounted for 61% and 39%,respectively, of life insurance sales in 1Q17
Mortgage-related cross-selling ratios• 88.4% for property insurance
• 77.1% for life insurance
LIFE SALES
Amounts in m EUR
163 140 108 106
327322
252 294
155
241
396
1Q17
462
1Q16 2Q16
490
4Q16
361
3Q16
399
Unit-linked productsGuaranteed interest products
MORTGAGE-RELATED CROSS-SELLING RATIOS
49.5%
88.4%
63.7%
77.1%
40
45
50
55
60
65
70
75
80
85
90
Property insurance Life insurance
23
The lower q-o-q figures for net gains fromfinancial instruments at fair value were theresult mainly of:• a negative q-o-q change in ALM derivatives (29m
EUR in 1Q17 compared with 56m EUR in 4Q16)due to the higher increase of IRS rates in 4Q16
partly offset by
• a positive q-o-q change in market, credit andfunding value adjustments (mainly as a result ofchanges in the underlying market value of thederivative portfolio)
Dealing room income roughly stabilised q-o-q at ahigh level
Gains realised on AFS assets came to 23mEUR (q-o-q increase mainly on shares)
Other net income amounted to 46m EUR in1Q17, roughly in line with the normal run rate
FV GAINS
Amounts in m EUR
57 53
118
127
2956
17
1Q17
156
2Q16
66
9
1Q16
20
3
4Q16
174
3Q16
69
16
23
612
49
23
1Q174Q163Q162Q161Q16
GAINS REALISED ON AFS ASSETS
46
66
53
4446
2Q161Q16 1Q174Q163Q16
OTHER NET INCOME
Belgium BU (6): lower FV gains and lower other net income, but higher gains realised on AFS assets
M2M ALM derivativesOther FV gains
24
Belgium BU (7): higher operating expenses, stableimpairments, good credit cost ratio
Operating expenses: +48% q-o-q and +6% y-o-y• The q-o-q increase was attributable entirely to higher bank
taxes
• Operating expenses without bank tax fell by 2% q-o-q duemainly to traditionally lower marketing and professional feeexpenses in the first quarter, while 20m EUR one-offexpenses for early retirement were booked in 4Q16
• Operating expenses without bank tax increased by 2% y-o-ydriven chiefly by higher staff expenses (partly due to higherpension costs and wage inflation, despite lower number ofFTEs), higher ICT costs and higher facilities & marketingexpenses
• Cost/income ratio: 67% in 1Q17, distorted mainly by thebank taxes. Adjusted for specific items, the C/I ratioamounted to 50% in 1Q17 (55% in FY16)
Loan loss provisions amounted to 59m EUR in 1Q17(compared with 46m EUR in 4Q16). The q-o-qincrease was due largely to two large corporate files,despite low gross impairments in all other segments(even net release in retail). Credit cost ratioamounted to 24 bps in 1Q17 (12 bps in FY16).Impairments on AFS shares only amounted to 1m EUR
Impaired loans ratio improved to 3.0%, 1.5% of whichover 90 days past due
ASSET IMPAIRMENT
OPERATING EXPENSES
Amounts in m EUR
544
556529
541533
278241
1Q17
822
4Q163Q162Q16
57332
1Q16
774
2833
4624
20 8
14
6
59
3Q16
41
2Q16
48
1Q16
30
1Q17
601
4Q16
60
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
301
439414
371
209
1Q174Q163Q162Q161Q16
208
371330
303
176
1Q173Q16 4Q162Q161Q16
-29 -20
7461 4819
52
4064
-15 -21
1950
1Q17
93
3Q16 4Q16
68
84
-5
68
2Q161Q16
33
8
Non-Life result Non-technical & taxesLife 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 181m EUR
Net result at the Czech Republic Business Unit of181m EUR• Q-o-q results were characterised by higher net
interest income, lower net fee and commissionincome, higher net results from financial instrumentsat fair value, an increase in realised gains on AFSassets and net other income, a deteriorated combinedratio, substantially lower sales of life insuranceproducts, higher operating expenses (due entirely tohigher bank taxes) and a small net impairment release
• 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 20bn 9bn 28bn 8.8bn 1.0bn
Growth q-o-q* +4% +2% +6% +3% 0%
Growth y-o-y +9% +12% +14% 0% +4%
NET RESULT
Amounts in m EUR
181
131145
191
129
4Q163Q162Q161Q16 1Q17
28
Czech Republic BU (2): higher NII and NIM
Net interest income (216m EUR)• Up by 1% q-o-q and by 2% y-o-y to 216m EUR (also
corrected for FX effects)
• The q-o-q increase was the result primarily of growth inloan volumes (in all segments), a reduction of theaverage offered rate on savings accounts and a positiveeffect of enhanced ALM management, which werepartly offset by lower reinvestment yields and pressureon lending margins in mortgages and consumer finance
• Loan volumes up by 9% y-o-y, driven mainly by growthin mortgages and consumer finance and, to a lesserextent, in corporate and SME loans
• Customer deposit volumes up by 14% y-o-y
Net interest margin (3.06%)• Up by 10 bps q-o-q and by 6 bps y-o-y to 3.06%
• The q-o-q increase was attributable mainly to a positiveeffect of enhanced ALM management and a reductionof the average offered rate on savings accounts, onlypartly offset by a lower reinvestment yield andpressure on lending margins in mortgages andconsumer finance
NIM
NII
Amounts in m EUR
216215213210211
4Q16 1Q173Q161Q16 2Q16
1Q16 2Q16
2.96%2.91%
3Q16 1Q17
3.00%
4Q16
3.06%2.91%
29
Czech Republic BU (3): lower net F&C income
Net fee and commission income (47m EUR)• Down by 5% q-o-q and up by 4% y-o-y (also corrected
for FX effect)
• The q-o-q decrease was mainly the result of lowerfees from payment services (seasonal effect ofChristmas) and lower securities-related fees, despitehigher entry fees, slightly higher fees from credit files& bank guarantees and slightly lower fees paid toCzech Post
• The y-o-y increase was attributable chiefly to highermanagement & entry fees, higher fees from creditfiles & bank guarantees and slightly lower fees paid toCzech Post, partly offset by lower securities-relatedfees and slightly lower fees from payment services
Assets under management (8.8bn EUR)• Increased by 3% q-o-q owing almost entirely to a
positive price effect
• Y-o-y, assets under management roughly stabilised, asnet outflows (-2%) were fully offset by a positive priceeffect (+2%)
AuM*
F&C
Amounts in bn EUR
Amounts in m EUR
4750
4649
46
1Q174Q163Q162Q161Q16
4Q16
8.5
3Q16
8.6
2Q16
8.6
1Q16
8.7 8.8
1Q17
* The breakdown across the BUs is based on the ‘Assets under Distribution’ in each BU
30
Czech Republic BU (4): lower premium income,combined ratio impacted by bad winter conditions
Insurance premium income (gross earnedpremium) stood at 97m EUR• Non-life premium income (49m) rose by 10% y-o-y
excluding FX effect, due mainly to growth in allproducts
• Life premium income (48m) went down by 49% q-o-qand by 27% y-o-y, excluding FX effect. Q-o-q declineentirely in unit-linked single premiums
Combined ratio: 100% in 1Q17 (compared with96% in FY16) due mainly to higher claims in MTPL,partly related to bad winter conditions
Cross-selling ratios remained at a good level
COMBINED RATIO (NON-LIFE)
PREMIUM INCOME (GROSS EARNED PREMIUM)
45 46 49 50
67 51 5994
49
48
97108112
2Q16 3Q161Q16 1Q17
97
4Q16
144
FY
96%
9M
97%100% 98%95%
1Q 1H
20172016
Life premium income Non-Life premium income
CROSS-SELLING RATIOS
Mortg. & prop. Mortg. & life risk Cons. Fin. & life risk
20151Q17
63%
20162015
57% 50%68%
1Q172016
65%
1Q17
47%
2015 2016
41%62% 66%
31
Czech Republic BU (5): higher operating expenses, net impairment releases, excellent credit cost ratio
Operating expenses (165m EUR)• Rose by 9% q-o-q and fell by 3% y-o-y, excluding FX
effect
• Excluding FX effect and bank tax, operating expensesdecreased by 8% q-o-q and by 1% y-o-y
• The q-o-q decrease excluding FX effect and bank taxwas due mainly to traditionally lower marketingexpenses and professional fees
• The y-o-y decrease excluding FX effect and bank taxwas attributable primarily to lower administrativeexpenses
• Cost/income ratio at 43% in 1Q17, distorted by IFRIC21. Adjusted for specific items, the C/I ratio amountedto roughly 40% in 1Q17 (and 46% in FY16)
Net impairment release on L&R was the result ofseveral reversals in SME and corporates (whichmore than offset the low gross impairments inretail)
Credit cost ratio amounted to -0.02% in 1Q17
Impaired loans ratio improved to 2.7%, 1.8% of which over 90 days past due
ASSET IMPAIRMENT
OPERATING EXPENSES
28
144
26152
144
141 139
1Q17
165
4Q163Q162Q16
143
-1
1Q16
170
-1
11
2
10
1
1Q174Q163Q162Q161Q16
2013 2014 2015 2016 1Q17
CCR 0.26% 0.18% 0.18% 0.11% -0.02%
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 114m 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 19bn 5.7bn 0.6bn
Growth q-o-q* 0% +0% +1% 0% +1%
Growth y-o-y +2% +3% +5% -7% +7%
NET RESULT
Amounts in m EUR
114
139
106
123
60
3Q16 4Q162Q161Q16 1Q17
Net result: 114m EUR, despite 57m EUR bank taxes• Profit breakdown for International Markets: 22m EUR for
Slovakia, 20m EUR for Hungary, 4m EUR for Bulgaria and67m EUR for Ireland
• Q-o-q results were characterised by lower net interestincome, lower net fee and commission income, higherresult from financial instruments at fair value, stablerealised gains on AFS assets, higher net other income, anexcellent combined ratio, higher life insurance sales,higher costs (due entirely to higher bank taxes) and highernet impairment releases
34
International Markets BU (2): organic growth
The total loan book stabilised q-o-q and increased by 2% y-o-y• On a y-o-y basis, the 4% 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 11% in Slovakia (amongst other things due to the continuouslyincreasing mortgage portfolio), 12% in Bulgaria and 4% in Hungary
Total deposits were up by 1% q-o-q and by 5% y-o-y• The 1% q-o-q increase was accounted for chiefly by an increase of 5% in Ireland (entirely in corporates) and 2% in Bulgaria, despite a
decrease of 2% in Hungary
• The y-o-y rise of 5% was due mainly to Hungary (both in retail and corporates), Slovakia (strong growth in current accounts) and Bulgaria
* Organic growth excluding FX impact; q-o-q figures are non-annualised. Loan and mortgage figures after impairment charges** Mortgages in Bulgaria: new business +2% q-o-q and +20% y-o-y, while legacy -8% q-o-q and -39% 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% -4% 0% -2% +5% -5%
SK +2% +11% +3% +26% 0% +3%
HU 0% +4% +1% +5% -2% +13%
BG -1% +12% +1%** -3%** +2% +18%
TOTAL 0% +2% 0% +3% +1% +5%
35
International Markets BU (3): lower NII and NIM
Net interest income (189m EUR)• Fell by 4% q-o-q and rose by 6% y-o-y
• The q-o-q decrease was driven mainly by:o Slovakia: volume growth was not enough to offset
margin pressureo Ireland: lower reserved interest releases (as the
fourth quarter was distorted mainly by thesettlement of a corporate non-performing loan), onlypartly offset by lower allocated liquidity and fundingcosts
• The y-o-y rise was attributable entirely to Ireland (lowerallocated liquidity and funding costs)
Net interest margin (2.69%)• Down by 1 bp q-o-q and up by 22 bps y-o-y
• The q-o-q decrease was driven mainly by Slovakia(margin pressure due to price competition) and Bulgaria(margin pressure, especially in retail)
• The y-o-y increase was accounted for entirely by Ireland
NIM
NII
Amounts in m EUR
189198
184179178
4Q163Q162Q161Q16 1Q17
4Q16
2.70%
3Q16
2.52%
2Q16
2.48%
1Q16
2.47%2.69%
1Q17
36
International Markets BU (4): lower net F&C income
Net fee and commission income (48m EUR)• Down by 3% q-o-q and by 1% y-o-y
• The q-o-q decrease was driven entirely by:o Hungary: lower asset management fees driven
by lower volumes, lower entry fees due tomethodology change and lower fees frompayment transactions
partly offset by:o Slovakia: higher fees from payment services and
higher asset management fees
Assets under management (5.7bn EUR)• Stabilised q-o-q as net outflows (-2%) were fully
offset by a positive price effect (+2%)
• Y-o-y, assets under management fell by 7%, due tonet outflows (-11%) and a positive price effect(+4%)
AuM*
F&C
Amounts in bn EUR
Amounts in m EUR
48505251
48
4Q163Q162Q161Q16 1Q17
4Q16
5.7
3Q16
5.8
2Q16
5.6
1Q16
6.15.7
1Q17
* The breakdown across the BUs is based on the ‘Assets under Distribution’ in each BU
37
International Markets BU (5): higher premium incomeand excellent combined ratio
Insurance premium income (gross earnedpremium) stood at 76m EUR• Non-life premium income (53m) rose by 14% y-o-y as
a result of:o good performance in MTPL, casco and property
insurance + growing average tariff in motor retail inHungary
o good performance in MTPL and casco in Bulgariao Good performance in casco and property insurance
in Slovakia
• Life premium income (23m)o rose by 8% q-o-q entirely due to higher sales of tax-
incentivised corporate life insurance products inBulgaria
o decreased by 4% y-o-y driven entirely by lowerunit-linked single premiums in Slovakia
Combined ratio at an excellent 85% in 1Q17(94% in FY16). The combined ratio for 1Q17breaks down into 84% for Hungary, 73% forSlovakia and 96% for Bulgaria
COMBINED RATIO (NON-LIFE)
PREMIUM INCOME(GROSS EARNED PREMIUM)
Amounts in m EUR
46 49 50 52
24 24 20 21
53
23
4Q16
73
3Q16
70
2Q16
73
1Q16
7076
1Q17
FY
94%
9M
92%
1H
90%
1Q
85%88%
20172016
Non-Life premium incomeLife premium income
38
International Markets BU (6): higher operating expenses, impairment releases, excellent credit cost ratio
Operating expenses (212m EUR)• Rose by 13% q-o-q and by 2% y-o-y
• Opex without bank tax fell by 4% q-o-q driven by:o lower staff, marketing and ICT expenses in Slovakia and Bulgariao lower staff & ICT expenses and depreciations in Hungarypartly offset by:o higher staff, regulatory, consultancy and ICT expenses in Ireland
• C/I ratio stood at 72% in 1Q17. Adjusted for specific items, the C/Iratio amounted to 64% in 1Q17 (66% in FY16)
Impairments on L&R (-47m EUR)• Net loan loss provision releases due mainly to Ireland (-50m EUR in
1Q17 compared with -12m EUR in 4Q16 and -3m EUR in 1Q16),driven by:o an increase in the 9-month average House Price Index and
improved non-performing portfolio performance for retailo lower provisions on existing non-performing loans, a release of
specific provisions as a result of deleveraging and improvedmacroeconomic conditions for corporates
Credit cost ratio of -0.75% in 1Q17
Impaired loans ratio improved to 24.2%, of which 12.8% over 90 days past due
ASSET IMPAIRMENT(Negative figures indicate net releases, hence positive profit impact)
OPERATING EXPENSES
Amounts in m EUR
147 150 157 161
6122
24 27
155
57
2Q16
172
1Q16
208
4Q16
189
3Q16
180
1Q17
212
-47
-3
-35
6
-2
4Q163Q162Q161Q16 1Q17
Loan book
2013CCR
2014CCR
2015CCR
2016CCR
1Q17CCR
IM BU 25bn 4.48% 1.06% 0.32% -0.16% -0.75%
- Ireland- Hungary- Slovakia- Bulgaria
13bn5bn7bn1bn
6.72%1.50%0.60%1.19%
1.33%0.94%0.36%1.30%
0.34%0.12%0.32%1.21%
-0.33%-0.33%0.24%0.32%
-1.54%-0.08%0.11%0.60%
Operating expensesBank tax
39
GROUP CENTRE
CFO SERVICES
CRO SERVICES
CORPORATE STAFF
BELGIUMCZECH
REPUBLICINTERNATIONAL
MARKETS
40
Group Centre: net result of 33m EUR
Net result: 33m 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 improvement was attributable mainly to:
o a +66m EUR positive DTA impact related to liquidation of IIBFinance Ireland (project finance)
o lower ICT costs
o realised gains on AFS assets
o 13m EUR one-off expenses for early retirement in 4Q16
partly offset by:
o lower FIFV and lower net other income
NET RESULT
Amounts in m EUR
-6
1Q17
33
4Q16
-24
3Q16
-36
2Q16
37
1Q16
BREAKDOWN OF NET RESULT AT GROUP CENTRE
1Q16 2Q16 3Q16 4Q16 1Q17
Group item (ongoing business) 2 27 -53 -38 -50
- Operating expenses of group activities -18 -7 -21 -39 -14
- Capital and treasury management 1 1 -4 4 -18
o/w net subordinated debt cost -9 -9 -10 -10 -9
- Holding of participations -17 -9 -13 -14 -9
o/w net funding cost of participations -5 -5 -6 -4 -2
- Group Re 3 2 -3 13 5
- Other 33 39 -11 -2 -14
Ongoing results of divestments and companies in run-down -8 10 17 14 83
Total net result at GC -6 37 -36 -24 33
Group CentreImpact KBC FH
41
NET PROFIT – BELGIUM NET PROFIT – CZECH REPUBLIC
486 385 351 330209
301
874
2016
1,432
1,223
2015
1,564
1,234
2014
1,516
1,165
2013
1,570
1,185
2012
1,360
1Q17
1Q17 ROAC: 20%
Amounts in m EUR
158 132 138 143 129
423 422 390 399 467
181
2016
596
2015
542
2014
528
2013
554
2012
581
1Q17
1Q17 ROAC: 48%
NET PROFIT – INTERNATIONAL MARKETS
-766
-163
221368
-156
114
-26
2014
-182
2013
-853-87
2012
-260
-97
2016
428
2015
245
24 60
1Q17
1Q17 ROAC: 23%
Overview of results based on business units
1Q2Q-4Q 1Q2Q-4Q
2Q-4Q 1Q
42
Balance sheet (1/2):Loans and deposits continue to grow in most core countries
Deposits***
10%
4% 4%
MortgagesLoans**
* Volume growth excluding 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
43
Balance sheet (2/2):Loans and deposits continue to grow in most core countries
Deposits***
11%
Mortgages
2%
Loans**
3%
Deposits***
14%
Mortgages
12%
Loans**
9%
Deposits***
-5%
Mortgages
-2%
Loans**
-4%
Deposits***
3%
Mortgages
26%
Loans**
11%
Deposits***
13%
Mortgages
5%
Loans**
4%
Deposits***
18%
Mortgages
-3%
Loans**
12%
BE
CZ
Y-O-Y ORGANIC* VOLUME GROWTH FOR MAIN ENTITIES
* Volume growth excluding FX effects and divestments/acquisitions** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos
44
KBC Group
Section 3
Strong solvency andsolid liquidity
45
Strong capital position
Phased-in Basel 3 CET1 ratio at KBC Group (Danish Compromise)
8.65% regulatoryminimum for 2017
1Q17
16.2%
9M161Q16 FY16
15.9%
1H16
15.1%14.9%14.6%
Phased-in B3 CET1 ratio w/o YES and penalty on YES
Common equity ratio (B3 phased-in) of 15.9%based on the Danish Compromise at end 1Q17,which clearly exceeds the minimum capitalrequirements set by the ECB / NBB* of 8.65%for 2017
• Systemic buffer announced by the ECB: CET1 phased-in of 1.0% in 2017 under the Danish Compromise
Fully loaded Basel 3 CET1 ratio at KBC Group (Danish Compromise)
10.40% pro forma regulatory minimum
9M16
15.8%
1H16
15.3%
1Q16 1Q17
14.9%14.6%
FY16
15.7%
A pro forma fully loaded common equity ratioof 15.7%* based on the Danish Compromise atend 1Q17, which clearly exceeds the minimumcapital requirements set by the ECB / NBB of10.40%**
* The acquisition of UBB & Interlease in Bulgaria (expected to beclosed in 2Q17) will have a very limited impact of -54bps onfully loaded B3 CET1 ratio
** Excludes a pillar 2 guidance (P2G) of 1.0% CET1
Fully loaded B3 CET1 ratio w/o YES and penalty on YES
46
Fully loaded Basel 3 leverage ratio
Fully loaded B3 leverage ratio, based on thecurrent CRR legislation (which was adaptedduring 4Q14):• 4.8% at KBC Bank consolidated level
• 5.7% at KBC Group level
FY16
5.1%
9M16
5.3%
1H161Q16
5.0%
1Q17
4.8%5.1%
Fully loaded Basel 3 leverage ratio at KBC Bank
Fully loaded Basel 3 leverage ratio at KBC Group
FY16
6.1%
6.1%
9M16
6.2%
6.2%
1H16
6.0%
6.0%
1Q16
5.9%
5.9%
5.7%
5.7%
1Q17
FL B3 leverage ratio excl. YES and penalty on YES
47
KBC maintains a minimum total capital ratio of 17%*
• Minimum CET1 target of10.40% fully loaded
• AT1 of 1.5%
• Minimum T2 target of 2%
• Minimum total capital ratio of 17.0%
Total capital ratioof 20.2% phased-in
2.73% T2
3.10% additionalcapital
1.58%
15.66%
10.40%
2.78%
15.87% CET1
1Q17 phased-in
1.50% AT1
2017 fully loaded
2.00% T2
1.63% AT1
1Q17 fully loaded
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 20.0% fully loaded
48
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
Customer funding has further increased in 1Q17. The further increase in certificates of deposit and short-termwholesale funding is related to short-term trading opportunities
64%70% 69% 73% 75% 73% 73%
7%7%
70%
10% 8% 8%
8% 9%
-5%
69%
8%9%8%9%9%
8%
8% 8%8%
8%7%
7%
8%
9%5%5%
2%2%2%0%
8%8%
10%8%5%6%3%
8%3%
FY10FY09
100%
1Q17FY16
-1%
FY15
3%
FY14
3%
4%
FY13
2%
3%
FY12
3%
FY11
3%
Funding from customers
Certificates of deposit
Total equity
Debt issues placed with institutional investors
Net secured funding
Net unsecured interbank funding
8%1%
21%
70%
Government and PSE
Debt issues in retail network
Mid-cap
Retail and SME
70% customer
driven
129.555131.914 132.862 133.766
139.560143.690
146.436
FY11 FY12 FY13 FY14 FY15 FY16 1Q17
Funding from customers (m EUR)
49
Short-term unsecured funding KBC Bank vs liquid assets as of end March 2017 (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 130% and LCR is at 145% by the end of 1Q17
• Both ratios were well above the minimum target of at least
105%, in compliance with the implementation of Basel 3liquidity requirements
Solid liquidity position (2)
Ratios FY16 1Q17 Target
NSFR1 125% 130% >105%
LCR1 139% 145% >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 almost 3 times the amount ofthe net recourse on short-term wholesale funding
• Funding from non-wholesale markets is stable fundingfrom core-customer segments in core markets
19,04
24,70
17,53 19,37
25,10
58,3
68,6
59,0 59,7
68,14
306%278%
337%
308%271%
1Q16 2Q16 3Q16 4Q16 1Q17
Net Short Term Funding Available Liquid Assets Liquid Assets Coverage
50
KBC Group
Section 4
1Q 2017 wrap up
51
1Q 2017 wrap up
Strong commercial bank-insurance results in our core countries
Successful underlying earnings track record
Solid capital and robust liquidity position
52
Looking forward
We expect 2017 to be a year of sustained economic growth in both the euro area and the US
Management guides for:• solid returns for all Business Units
• loan impairments for Ireland towards a release of a 120m-160m EUR range for FY17
Next to the Belgium and the Czech Republic Business Units, the International Markets Business Unitbecomes a strong contributor to the net result of KBC Group thanks to:• Ireland: re-positioning as a core country with a sustainable profit contribution• Bulgaria: after the acquisition of UBB and Interlease, UBB-CIBank and DZI will become the largest bank-
insurance group in Bulgaria with a substantial increase in profit contribution. The transaction is expected to beclosed in 2Q17
53
KBC Group
Annex 1
Company profile
54
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 31 MARCH 2017
Group Centre
5%
International Markets19%
Czech Republic
16%
Belgium 60%
55
BE CZ SK HU BG IRL
Loans and deposits
Investment funds
Life insurance
Non-life insurance
Well-defined core markets provide access to ‘new growth’ in Europe
1. Source: KBC data, May 2017
MARKET SHARE (END 2016)
10%11%20%21%
7%3%
15%7%23%
33%
11%4%4%7%
13%
9% 10%6%3%
7%
BE CZ SK HU BG IRL
% of Assets
2016
2017e
2018e
4%1%3%3%21%
65%
2.0%3.3%2.4%
1.2%
5.2%3.4%
4.0%3.2%3.7%3.0%2.3%1.3%
3.5%3.4%3.2%3.0%2.0%1.5%
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 *
* Only for retail segment
56
Loan loss experience at KBC
1Q17CREDIT COST RATIO
FY16CREDIT COST RATIO
FY15CREDIT COST RATIO
FY14CREDIT COST RATIO
FY13CREDIT COST RATIO
AVERAGE ‘99 –’16
Belgium 0.24% 0.12% 0.19% 0.23% 0.37% n/a
Czech Republic
-0.02% 0.11% 0.18% 0.18% 0.26% n/a
International Markets
-0.75% -0.16% 0.32% 1.06% 4.48%* n/a
Group Centre -0.34% 0.67% 0.54% 1.17% 1.85% n/a
Total 0.02% 0.09% 0.23% 0.42% 1.21%** 0.50%
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
57
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. The International Markets Business Unit becomes a strong contributor to the net result of KBC Group
Successful underlying earnings track record
Solid capital and robust liquidity position
58
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 1Q17
18.5%
Free float
59.8%
Other core
7.6%MRBB
11.5%Cera
2.7%
KBC Ancora
59
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
60
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
61
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. Excluding additional pillar 2 guidance (P2G) of 1.0% CET1
Targets… by…
CAGR total income (‘13-’17)1 ≥ 2.25% 2017
CAGR bank-insurance gross income (‘13-’17) ≥ 5% 2017
C/I ratio ≤ 53% 2017
Combined ratio ≤ 94% 2017
Common equity ratio (fully loaded, Danish Compromise)
≥ 10.40%2 2019
Total capital ratio(fully loaded, Danish Compromise)
≥ 17% 2017
NSFR ≥ 105% 2014
LCR ≥ 105% 2014
Dividend payout ratio ≥ 50% 2017
62
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
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
63
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
64
Ireland (1): net result of 67m EUR in 1Q17
The Irish economy began 2017 with significant momentum in activity andemployment. On this basis, GDP growth of roughly 4% can be attained thisyear
Jobs growth has progressively strengthened, leading to a further sharp fallin unemployment, supporting consumer sentiment and spending power
Healthier economic conditions have underpinned rising demand forhousing. With supply still falling well short of levels appropriate to Irishdemographic needs, this imbalance has translated into continuing upwardpressure on residential property prices
Customer deposits (retail & corporate) of 5.2bn EUR (compared with 5.0bnEUR in 4Q16)
Net loan loss provision release of 50m EUR in 1Q17 (compared with 12mEUR release in 4Q16) driven by an increase in CSO House Price Index andimproved non-performing portfolio performance. Coverage ratio hasdecreased from 43% at 4Q16 to 41% primarily as a result of the completionof the sale in 1Q17 of 105m EUR of fully provided residual mortgage
balance (RMB) loans
Looking forward, FY17 loss provisioning guidance for Ireland is a provisionrelease in the range of 120m-160m EUR
8.2% 8.4% 9.2% 9.5% 9.9% 10.3% 9.7% 10.2% 10.2%
51.3 % 50.3% 48.7% 47.3% 46.4% 45.3% 44.7% 43.3%
42.1%
0
10
20
30
40
50
60
70
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
OUT-
STANDING
IMPAIRED
LOANS
IMPAIRED
LOANS
€ €PD 10-12
COVERAGE
Owner occupied
mortgages8.9bn 2.7bn 30% 0.9bn 32%
Buy to let
mortgages2.3bn 1.5bn 67% 0.6bn 41%
SME /corporate 0.8bn 0.5bn 65% 0.3bn 62%
Real estate
- Investment 0.7bn 0.5bn 74% 0.3bn 56%
- Development 0.2bn 0.2bn 100% 0.2bn 86%
Total 12.8bn 5.4bn 42% 2.2bn 41%
LOAN PORTFOLIO €
IMPAIRED
LOANS PD
10-12
SPECIFIC
PROVISIONS
€
High Risk Performing (PD 8-9 probability of Default >6.4%)
Impaired Loan (PD 10-12)
PROPORTION OF HIGH RISK AND IMPAIRED LOANS
65
Retail portfolio Impaired portfolio fell by roughly 191m EUR q-o-q due to a
combination of RMB sale completion and improvement in theportfolio performance (reduction of 0.6bn EUR y-o-y)
Coverage ratio for impaired loans has decreased to 35.2% in 1Q17(from 37.2% in 4Q16)
Overall exposure has decreased due to completion of RMB loansale, reduction of the impaired book and loan amortisations, partlyoffset by new mortgage production
Ireland (2): portfolio analysis
Corporate loan portfolio Impaired portfolio has reduced by roughly 103m EUR q-o-q.
Reduction driven mainly by continued deleverage of theportfolio (reduction of roughly 0.4bn EUR y-o-y)
Coverage ratio for impaired loans has increased to 63.3% in1Q17 (from 61.2% in 4Q16)
Overall exposure has dropped by 0.5bn 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.
1Q17 Retail Portfolio
PD Exposure Impairment Cover %
PD 1-8 6,047 25 0.4%
Of which non Forborne 6,002
Of which Forborne 45
PD 9 924 44 4.7%
Of which non Forborne 145
Of which Forborne 778
PD 10 2,462 608 24.7%
PD 11 1,049 346 33.0%
PD 12 679 522 77.0%
TOTAL PD1-12 11,161 1,546
Specific Impairment/(PD 10-12) 35.2%
Pe
rfo
rmin
gIm
pa
ire
d
1Q17 Corporate Loan Portfolio
PD Exposure Impairment Cover %
PD 1-8 386 1 0.2%
PD 9 59 2 3.4%
PD 10 326 130 39.7%
PD 11 309 177 57.4%
PD 12 563 452 80.3%
TOTAL PD1-12 1,643 762
Specific Impairment/(PD 10-12) 63.3%
Imp
air
ed
Pe
rf.
66
The core of KBC’s sustainability strategy (1)
The mindset of all KBC-staff should go beyond regulation and compliance
Responsible behaviour is a requirement to implement an effective and credible sustainability strategy
Specific focus on responsible selling and responsible advice.
We apply strict sustainability rulesto our business activities, inrespect of human rights,environment, business ethics andsocial themes
KBC is a market leader in sociallyresponsible investments, offering afull range of SRI funds
We contribute to the transition toa low-carbon economy by reducingour own environmental footprint,tightening our lending policy to theenergy sector and taking initiativesto promote energy efficiency,renewable energy, etc
Sustainability goes beyond philanthropyand sponsorship
We focus on a number of societal needsand actively respond to these needs bydeveloping business solutions in which abank-insurer can provide the elementsthat make a difference
We defined following focus domains:‘financial literacy’, ‘environmentalresponsibility’, ‘entrepreneurship’, and‘demographic ageing and health’
Examples follow on the next slides
Increasing ourpositive impact
on society
Encouragingresponsible behaviour
on the part of allemployees
Limiting ouradverse impact
on society
67
The core of KBC’s sustainability strategy (2)
Our focus areas What? A few examples
Financialliteracy
• Transparent advice and clear communication
• Improving general public knowledge of financial concepts and products
• Using analysis to understand and respond to clients’ behaviour more effectively
• ČSOB Education Programme, Education Fund and Blue Life Academy in the Czech Republic
• Promotion of financial education through the national ‘K&H Ready, Steady, Money’ contest in Hungary
• Get-A-Teacher service at KBC Bank (teaching and lectures at schools and colleges by a dedicated team of KBC-trainers)
Environmental responsibility
• Developing products and services that can make a positive contribution to the society and environment
• Reducing our environmental footprint through a diverse range of initiatives and objectives
• KBC Renovation Loan for Owners’ Associations to provide flexible financing solutions for energy saving investments in apartment blocks
• KBC Mobility for sustainable and qualitative mobility solutions in Belgium
• Group wide target to reducing our own greenhouse gas emissions by at least 20% (from 2015 levels) by 2020
68
The core of KBC’s sustainability strategy (3)
Our focus areas What? A few examples
Entrepre-neurship
Contributing to economic growth by supporting innovative ideas and projects.
• ‘Gap in the Market’ campaign in Hungary.• Start it @KBC, a major incubator for start-ups in Belgium• KBC Match’it, a digital platform for transferring businesses.• Providing capital for start-ups via the KBC Start it Fund.• Supporting local initiatives via the Bolero Crowdfunding
platform.• Encouraging clients to take the step to e-commerce via
Storesquare and Farmcafé.• Strengthening our partnership with the Belgian Raiffeisen
Foundation
Demographic ageing and health
• We chose ‘demographic ageing’ as the fourth pillar in Belgium and the Czech Republic.
• We chose ‘Health’ as the fourth pillar in Bulgaria, Slovakia, Hungary and Ireland.
• ČSOB is collaborating with the Centre of Health Economics and Management at the Faculty of Social Sciences at the Charles University in Prague.
• Happy@Home, an ecosystem between KBC, the service provider ONS and the software firm CUBIGO to make domestic assistance readily available.
• Financial and material assistance to sick children through the ‘K&H MediMagic Programme’ in Hungary.
• Launching awareness campaigns in various countries in areas such as sports, health and well-being, road safety and child protection, and developing insurance products related to health and personal risks.
More information is available at www.kbc.com, under ‘Corporate Sustainability’.
69
KBC Group
Annex 2
Other items
70
Sectorial breakdown of outstanding loan portfolio (1)(148bn EUR*) of KBC Bank Consolidated
14%
2%3%
Agriculture, farming, fishingAuthorities
3%
Building & construction
42%
Automotive
Private Persons
Services
4%
12%
8%Distribution
7%
Real estate6%
Finance & insurance
Rest
4.3%
Machinery & heavy equipment
0.8%Shipping
0.7%
Oil, gas & other fuels
Food producers1.4%
Hotels, bars & restaurants
1.1%
Metals
1.4%
1.2%
1.2%
Electricity
Chemicals
Other sectors
1.6%
* 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
71
Geographical breakdown of the outstanding loan portfolio (2)(148bn EUR*) of KBC Bank Consolidated
Slovakia4.8%
Ireland 8.6%
Czech Rep.
Bulgaria
0.6%
Hungary
3.1%
Rest
1.6%
Asia
0.8%
North America
1.6%
Other CEE
0.5%Other W-Eur
7.8%
14.3%
Belgium
56.3%
* 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
72
Impaired loans ratios, of which over 90 days past due
INTERNATIONAL MARKETS BUCZECH REPUBLIC BU
8.2%
2Q16
4.2%
6.8%
1Q17
7.8%7.2%
4.4%
1Q16 3Q16
4.7%
4Q16
3.9% 3.6%
7.6%
Of which over 90 days past due **
Impaired loans ratio *
3Q162Q16
2.8%
2.2%
2.8%
2.1%
1Q174Q161Q16
2.4%
2.7%
1.9%
3.2%
1.8%
2.7%
4Q163Q16
27.8%28.9%
1Q17
25.4%
13.4%14.8%
26.9%
14.3%
2Q161Q16
15.4%
24.2%
12.8%
BELGIUM BU
1Q174Q163Q16
3.3%
1.7%2.2%
3.7% 3.6%
2Q16
1.9%
3.5%
2.0%
1Q16
1.5%
3.0%
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
73
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
46.6%
63.1%62.0%
45.5%
4Q16
45.4%
3Q162Q16
45.6% 46.1%
1Q16 1Q17
61.5% 63.7%60.8%
Cover ratio for loans with over 90 days past due **
Impaired loans cover ratio *
69.4%63.6%
56.1%54.2% 55.1%
3Q16 1Q17
68.9%62.6%
1Q16
54.7%
4Q16
63.2%
56.7%
2Q16
64.9%
3Q16 1Q17
67.5%
60.1%
42.7%
2Q16
47.9%44.9%
4Q16
60.0%
1Q16
59.7%
42.5%44.8%
58.8%
4Q16
59.3%
44.4%
3Q16
60.6%
44.8%
1Q17
44.7%44.0%
2Q161Q16
60.0%59.4%
43.5%
74
Fully loaded B3 CET1 based on the Danish Compromise (DC)from 4Q16 to 1Q17
Jan 2012 Dec 2012 2014-2020
1Q17 (B3 DC)
88.4
1Q17 impact
0.6
4Q16 (B3 DC**)
87.8
DELTA AT NUMERATOR LEVEL (BN EUR)
DELTA ON RWA (BN EUR)
* Includes the q-o-q delta in remeasurement of defined benefit obligations, 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. 15.7% at end1Q17 based on theDanish Compromise(DC)
A pro forma fullyloaded common equityratio translation to10.40% was clearlyexceeded
13.8
0.0
B3 CET1 at end 1Q17 (DC)
Other*Delta in AFS revaluation reserves
-0.1
Delta in DTAs on losses carried forward
-0.1
Pro-rata accrual dividend
-0.3
1Q17 net result (excl. KBC Ins. due to Danish Compr.)
0.5
B3 CET1 at end 4Q16 (DC)
13.9
75
Overview of B3 CET1 ratios at KBC Group
Method Numerator Denominator B3 CET1 ratio
FICOD*, phased-in 14,821 100,078 14.8%
FICOD, fully loaded 14,700 100,506 14.6%
DC**, phased-in 13,960 87,961 15.9%
DC, fully loaded 13,839 88,389 15.7%
DM***, fully loaded 12,754 82,716 15.4%
* FICOD: Financial Conglomerate Directive** DC: Danish Compromise*** DM: Deduction Method
76
Solvency II ratio
Solvency II ratio
4Q16 1Q17
Solvency II ratio without strict cap of the NBB 214% 220%
On 19 April 2017, the NBB retroactively waived thestrict cap on the loss absorbing capacity ofdeferred taxes in the calculation of the requiredcapital. Belgian insurance companies are nowallowed to apply a higher adjustment for deferredtaxes, in line with general European standards, ifthey pass the recoverability test. This is the casefor KBC
The increase (+6%-points) in the Solvency II ratiowithout this cap was mainly the result of slightlyhigher interest rates
77
Resolution strategy for KBC
SRB supports KBC’s preference for a Single Point of Entry approach at the level of KBC Group with bail-in as primaryresolution tool
SRB has not formally communicated any MREL target at this point in time (expected by the end of 2017). However, anindicative figure is put forward based on the mechanical approach as published by SRB on 28 November 2016
Source: SRB, 4th Industry Dialogue 28/11/2016
Applied on KBC (on a fully loaded basis):
2 x P1 2 x 8%+ 2 x P2R 2 x 1.75%+ 2 x CBR 2 x (2.5%+1.5%) (*)- 1.25% -1.25%
Indicative target = 26.25% as % of RWA
(*) excluding countercyclical buffers that will be introduced in 2017
Given the SPE approach at KBC Group level, the target needs to be satisfied with instruments issued by KBC Group NV
78
Available MREL based on KBC resolution strategy(instruments issued by KBC group only)
22.3%
1.6%
3.1%
1.9%
15.7%
1.9%1.9%
19.2%0.8%
2Q16
1.7%
3Q16
1.6%
15.3%
19.6%
1Q174Q16
1.6%
15.8%
21.0%
1.9%
14.9%
1.6%
0.8%
1Q16
18.0%
14.6%
1.6%
1.9%
MREL ratio as a % RWA (fully loaded)
CET1AT1T2Holdco Senior
79
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)
80
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
81
Government bond portfolio – Notional value
Notional investment of 49.8bn EUR in government bonds (excl. trading book) at end of 1Q17, 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 5.8bn EUR at end of 1Q17
Portugal *Ireland **
Netherlands *Austria *
Germany **Spain
5%
Other10%
France 12%
Italy
4%
Slovakia
5%
Hungary
4%
Poland
3%Czech Rep.
14%
Belgium
37%
END 1Q17(Notional value of 49.8bn EUR)
(*) 1%, (**) 2%
Portugal *Ireland **
Netherlands *Austria *
Germany **Spain
5%Other
8%
France 12%
Italy4%
Slovakia
5%
Hungary
4%
Poland**
3%
Czech Rep.
14%
Belgium
38%
END 2016(Notional value of 50.5bn EUR)
(*) 1%, (**) 2%
82
Government bond portfolio – Carrying value
Carrying value of 54.0bn EUR in government bonds (excl. trading book) at end of 1Q17, 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 6.7bn EUR at end of 1Q17
* 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 1Q17(Carrying value of 54.0bn EUR)
(*) 1%, (**) 2%
Portugal *Ireland **
Netherlands *Austria **
Germany **Spain
6%
Other9%
France 12%
Italy
4%
Slovakia
5%
Hungary
4%
Poland
3%Czech Rep.
13%
Belgium
37%
END 2016(Carrying value of 55.2bn EUR)
(*) 1%, (**) 2%
Portugal *Ireland **
Netherlands *Austria *
Germany *Spain
5%Other
8%
France 12%
Italy4%
Slovakia
5%
Hungary
4%
Poland **
3%Czech Rep.
13%
Belgium
38%
83
Upcoming mid-term funding maturities
12%
9%
6%
9%
4%
32%
28%
0.6% 0.6%
1.1%
1.9%
1.5% 1.5%
0.5%
0.1% 0.0%0.1%
0
1000
2000
3000
4000
5000
6000
2017 2018 2019 2020 2021 2022 2023 2024 2025 >= 2026
m E
UR
Breakdown Funding Maturity Buckets
Senior Unsecured - Holdco Senior Unsecured - Opco Subordinated T1 Subordinated T2
Contingent Convertible Covered Bond TLTRO
Total outstanding =
23bn EUR
(Including % of KBC Group’s balance sheet)
KBC Group successfully issued a 1.25bn EUR senior unsecured bondwith 5-year maturity in March 2017
KBC participated in ECB’s March 2017 TLTRO with a total take-up of2.3bn EUR
KBC’s senior unsecured credit spreads widened towards the end of1Q17. In contrast, covered bond spread narrowed over the sameperiod
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
84
-40
10
60
110
160
210
-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 Dec-16
Credit Spreads Evolution
1,5Y 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
85
Analysts’ coverage
Bank/broker Analyst Contact details Rating Target Price Upside
Situation as of 2 May 2017, based on a share price of 67.50 EUR
ABN Amro Cor Kluis [email protected] + 66,00 -2%
Alpha Value Farahad Moshiri [email protected] + 66,30 -2%
Autonomous Farquhar Murray [email protected] + 65,20 -3%
Bank of America Merrill Lynch Tarik El Mejjad [email protected] + 69,70 3%
Barclays Capital Kiri Vijayarajah [email protected] = 58,00 -14%
Berenberg Andrew Lowe [email protected] + 60,00 -11%
Citi Investment Research Stefan Nedialkov [email protected] + 76,00 13%
Degroof Petercam Bart Jooris [email protected] = 58,00 -14%
Deutsche Bank Flora Benhakoun [email protected] + 70,00 4%
Exane BNP Paribas Guillaume Tiberghien [email protected] + 67,00 -1%
Goldman Sachs Pawel Dziedzic [email protected] + 75,00 11%
HSBC Johannes Thormann [email protected] + 72,00 7%
ING Albert Ploegh [email protected] + 66,00 -2%
JP Morgan Securities Paul Formanko [email protected] + 68,00 1%
Keefe, Bruyette & Woods Jean-Pierre Lambert [email protected] + 67,00 -1%
Kempen & Co Bart Horsten [email protected] + 70,00 4%
KeplerCheuvreux Benoit Petrarque [email protected] + 67,80 0%
Macquarie Jain Vardhman [email protected] = 65,00 -4%
Mainfirst Bank Matthew Clark [email protected] = 62,00 -8%
Mediobanca Robin van den Broek [email protected] + 62,00 -8%
Morgan Stanley Bruce Hamilton [email protected] + 63,60 -6%
Natixis Securities Alex Koagne [email protected] = 65,00 -4%
Oddo Jean Sassus [email protected] + 69,00 2%
Santander Patrick Lee [email protected] = 58,00 -14%
Societe Generale Phelbe Pace [email protected] + 68,50 1%
UBS Anton Kryachok [email protected] = 53,00 -21%
86
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]
87
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
88
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