KBC Group Company presentation Winter 2005 Web site: Ticker codes: KBC BB (Bloomberg) KBKBT BR...

KBC Group

Company presentationWinter 2005Web site: www.kbc.com

Ticker codes: KBC BB (Bloomberg) KBKBT BR (Reuters)

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Contact information

Investor Relations Office

Luc CoolNele KindtMarina Kanamori

[email protected]

Surf to www.kbc.com for the latest update.

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This presentation is provided for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any security

KBC believes that this presentation is reliable, although some information may be condensed or incomplete

This presentation contains forward-looking statements with respect to our earnings development involving assumptions and uncertainties. The risk exists that these statements may not be fulfilled and that future results differ materially.

By receiving this presentation, each investor is deemed to represent that it possesses sufficient expertise to understand the risks involved

Important information

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Table of contents

1. Company profile

2. Strategy and earnings drivers

3. Financial highlights

4. Closing remarks on the equity valuation

Company profile

Foto gebouw

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Market cap ranking in Euroland

1 BSCH (66 bn)2 BNP Paribas (59 bn)

3 BBVA (50 bn)

4 Deutsche Bank (45 bn)

5 Société Générale (44 bn)

6 Crédit Agricole (39 bn)7 ABN AMRO (39 bn)

8 Unicredit (32 bn)9 Fortis (32 bn)

10 KBC (27 bn)

11 Intesa BCI (243 bn)

12 Dexia (20bn)

13 HVB (20 bn)

14 San Paolo IMI (19 bn)

15 Allied Irish Banks (15 bn)16 Bank Austria (15 bn)

17 Commerzbank (14 bn)

18 Bco Popular (13 bn)

19 Mediobanca (12 bn)

20 Bank of Ireland (12 bn)

Data as at 14 Nov. 2005

DJ Euro Stoxx Banksconstituents

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2005

Historic milestones

2004200320022001 2000 19991998

Creation of KBC (domestic merger in Belgium)

Start of CEE expansion

Restructuring of Belgian business Leading presence

in CEE-5

Improving profitability in CEE: -cross-selling- cost efficiency- cross-border synergies

Merger with parent company to simplify shareholder structure

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Shareholder structure

CERA/Almancora27.1%

(own shares: 2.3%, including ESOP hedge)

Other committed shareholders 11.7%

MRBB11.6%

Free float47.3%

Staff6%

Institutional, Belgium

14%

Retail, Belgium

22%

Institutional, UK

23%

Institutional, Cont. Europe

14%

Institutional, N. America

20% Institutional, R/o world

1%

Free float

KBC is majority-owned by a group of committed shareholders, thereby providing continuity for the pursuit of long-term strategic goals

Core shareholders include the Cera/Almancora Group (co-operative investment company), a Belgian farmers’ association (MRBB) and a syndicate of industrialist families

Shareholder identification as at 31 Dec. 2004(before merger with Almanij)

Situation as at 30 Sept. 2005

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Business portfolio

KBC is a top bancassurer and asset manager in Belgium and has successfully expanded its operations in CEE-5, its 2nd home market.

Recently, Private Banking (76 bn AUM) has become more of a key focus. The PB business was expanded to include a Western European network.

KBC is also active – be it rather selective – in commercial banking (mostly in W. Europe) and capital markets.

55%24%

21%

Revenue -geographical breakdown(9M 2005)

Belgium:- retail bancassurance- asset management- private banking- SME/corporate

CEE:- retail bancassurance- asset management- private banking- SME/corporate

Selected other markets (mostly in W. Europe):- private banking- SME/corporate- capital markets

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2005 9M

23%

KBC’s presence in CEE

CEE profit contribution to KBC Group

Retail 57%

Other22%

SME/Corp 21%

Share of business segments in gross income, CEE Banking

Profit contribution, CZ + SK

2004 9M 2005

162 m 279 m

Czech Republic

Total assets, bank: 18 bn EURMarket share, bank: 21% (No. 2)Market share, life: 8% (No.4)Market share, non-life: 4% (No. 6)

Profit contribution, Poland

2004 9M 2005

25 m 61 m

Total assets, bank: 5 bn EURMarket share, bank: 5% (No. 8)Market share, life: 3% (No. 7)Market share, non-life: 11% (No. 2)

Profit contribution, Hungary

2004 9M 2005

31 m 23 m


Slovakia


Profit contribution, Slovenia

2004 9M 2005

26 m 18 m

Minority stake (34%)Market share, bank: 41% (No. 1)Market share, life: 6% (No. 5)

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Total banking assets in CEE

0 10 000 20 000 30 000 40 000 50 000 60 000

Banca Intesa

Société Générale

HVB / Bank Austria CA

Raiffeissen Zentralbank

UniCredito Italiano

Erste Bank

KBC Group

UniCredito / HVB (Newco)

Source: S&P – figures as at 31 Dec. 2004

In million euros

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KBC’s European banking network

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•

•

• •

• • •

• • •

• • •

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•

•

•

•

•

• •

•

Situation as of 30-Sep

Private banking(Assets under Management)

Belgium 27 bn

CEE 3 bn

Western Europe 46 bn

TOTAL 76 bn

Commercial banking(credit exposure)

Belgium 74 bn

CEE 27 bn

Western Europe 51 bn

Rest of the world 16 bn

TOTAL 168 bn

•

•

•

•

Spain

Italy

Luxembourg

France

Germany Poland

Switserland

U.K.

Belgium

IrelandNetherlands

Hungary

Czech Rep.Slovakia

Monaco

Slovenia

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12% 14%19%

FY03 FY04 9M05

66% 65%

58%

FY03 FY04 9M05

Cost/income, banking

Solid financial track record

96%

95% 95%

FY03 FY04 9M05

Combined ratio, non-life

In m EUR

Return on equity

1 305 1 615 1 796

FY03 FY04 9M05

Net profit growth

In m EUR

Pro forma figures, KBC Group (2003 figures are based on B-GAAP)

Strategy and earnings drivers

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We build a solid future

Strategy headlines include: Retail- and wealth-management-oriented, with focus on Belgium and CEE-5 and selected

Western European markets Further enhancement of efficiency (with emphasis on - but not exclusively in - CEE and European

private banking) Standalone basis (opportunistic operational alliances in certain areas to generate economies of

scale, if needed) Steady dividend growth and solid level of financial strength/solvency

“Execution is key”: Primarily organic growth agenda in core markets Committment to further enhance efficiency Conservative risk culture

Continuing to deliver a consistent financial performance: ROE 16% Double-digit EPS growth

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We build a solid future

The solid ‘growth and value’ outlook is reflected in ambitious financial targets, valid until 2008:

Efficiency: Cost/income, banking


max. 58%

max. 95%

Financial strength: Tier-1, banking

Solvency margin, insurance

min. 8%

min. 200%

Value creation: Adjusted ROE

EPS growth (CAGR)

min. 16%

min. 10%

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Do not underestimate market potential: KBC Group is well positioned:

Savings ratio amongst highest in the world (every year, ca. 15% of GDP flows into fin. assets)

Market highly receptive to cross-selling of AM & insurance, fueling strong growth trend in AM and life insurance business

Strong mortgage growth trend (ca. 10% per year) expected to continue, as residential property price levels are still below other European markets

After a temporary surge in price competition (late 2004/early 2005), price rationality is tending to be restored, epecially for interest-bearing products.

Fee rates for retail banking services only 50% of European average (gradual increase expected)

Credit quality has proven to be solid over the cycle

Top-3 market position, esp. strong in Northern region (one of the wealthiest regions in the EU)

Leading position in retail AM through innovative product offering (steadily increasing market share over the past 10 yrs.)

Still high cross-selling potential for insurance products and well-performing bancassurance distribution model

Well-diversified revenue structure (50% fee income) and further increase in fee income targeted (e.g., in SME segment)

Of the top players, level of customer satisfaction is high(est)

Further cost efficiency improvement potential, among other things, via co-sourcing of back offices with other banks

Value drivers in Belgium: overview

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Mid-term financial outlook, Belgium

Gross income C/I, banking LLR Net profit

Retail * 5% CAGR Low 60s < 0.25% >10% CAGR

Business customers * >2% on RWA < 43% < 0.35% >10% CAGR

* Related to parent-company operations only; excl. subsidiaries

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Strong market-growth momentum: KBC Group is well positioned:

Value drivers in CEE - overview

Nom. GDP growth in 2005-07 at 6.5% yearly, outgrowing EMU by 3-3.5%

Ongoing catch-up in product penetration – retail volumes growing at double-digit pace:

Mortgages: up 28% ytd (9M05)

AUM: up 33% ytd (9M05)

Written premiums, life: up 23% ytd (9M05)

Financial sector could grow five-fold if financial assets to GDP were to reach current levels of S. Europe

Solid market position in retail and corporate businesses with nationwide branch networks

Strong competitive position for enhancing cross-selling of asset management and insurance products and well positioned in HNWI and private-banking sectors through epb know-how

C/I still on the high side in several countries, inducing further improvement, e.g., by setting up cross-border platforms

Adequately provisioned balance sheets Availability of capital within the Group for:

buy-out of third-party interests or selective bolt-on M&A

more aggressive organic growth in Poland since immediate M&A opportunies are not expected

Potential entry into new markets (e.g., Romania, Croatia)

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Value drivers in CEE: bancassurance

KBCCross-sell

rates2004

CZ HU PL SK BE

Consumer loan

XLife

83% 50% 100% 94% 67%

Mortgage loan

XLife

45% 50% 100% 75% 67%

Mortgage loan

XProperty

insurance

54% 71% 42% 30% 50%

Now the model is in place:

A unified management responsibility was put into place (joint management committee of bank and insurance company)

KBC’s bancassurance distribution model has been implemented and sales incentives and adequate sales approach for cross-selling set up

Know-how has been transferred and business processes and IT systems are being adequately streamlined

= distinguishing factor vis-à-vis other CEE players

Cross-selling results are encouraging:

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Value drivers in CEE: asset management

KBC is well positioned:

Strong appetite for ‘risk-free’ investments in the market, fully in line with KBC’s core competencies and successful track record in Belgium for capital-guaranteed funds

Cost/AUM below average (around 15 bps vs. 20 bps for Europe)

Results are encouraging:

In 9M05, AUM grew by 43% annualized. Continued high growth expected in coming years

Via the funds business, new customers are being recruited. Existing customers who use deposits to buy funds replenish their deposit accounts after one year

Market share

2003 2004 1H05 Trend

CZ 19% 22% 26% +++

HU 8% 9% 11% ++

SK 6% 7% 8% +

SLO - 8% 10% ++

PL 3% 4% 4% +

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Mid-term financial outlook, CEE

RWA CAGR

Net profit CAGR

Loan-loss ratio

Cost/Incomeratio

Banking 10% – 15% 10% – 15% < 0.50% < 60%

Premium income CAGR

Net profit CAGR

Combined ratio

Insurance 15% – 25% 25% - 35% 95%

AUM growth, mutual funds

AUM growth, pension producs

AM 15% – 20% 10% - 20%

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Value drivers in private banking

Dual brand strategy: ‘network-led’ vs. ‘independent boutique’

Growth drivers: network trade-up, extension of product offering and hiring of private bankers

Business model: integrated private banking business in selected European markets focusing on clients with >€1m of investable assets. The network has been built over the past few years via separate acquisitions. Operations will now be further integrated. Total assets currently amount to 76 bn (Sep-05)

Integrated network of local pure-play private banking brands (boutique style with strong status/heritage, esp. in Germany, Spain, Netherlands, UK)

Priority of reducing costs by creating synergies within a central ‘hub’

Growth drivers: increased share of wallets, hiring of PB managers and opportunistic M&A

Low-growth market, focus on profitability (leveraging the hub)

If possible, steer repatriated assets to KBC onshore

Small today, but strong market growth expected (>15% p.a.)

Strengthening a network-led model, leveraging Belgian experience

Belgium W. Europe onshore W. Europe offshore CEE

AUM expected to grow at 9% CAGR on an organic basis

Opportunistic acquisitions may imply investments of 150-250 m per year

AUM 28 bn

AUM 27 bn

AUM 18 bn

AUM 3 bn

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Mid-term financial outlook, private banking

AUM growth Net profit Cost/Income

Private Banking 9% CAGR * 10% CAGR < 55%

*14% Belgium, 15% CEE, 0% offshore and 10% W. Eur. onshore

9M 2005Financial highlights

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Foto gebouw

Financial highlights

- At a glance

- Group financial performance

- Headlines per segment

FY 2005 profit outlook

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376434

365440

717

536 543

1Q 04 2Q 04 3Q 04 4Q 04 1Q 05 2Q 05 3Q 05 4Q 05

Profit trend, 3rd quarter 2005

Net profit m EUR

All major business units delivered excellent results in Q305, even though past Q3s have nearly always been weaker than other quarters (–30% q/q on avg.)

Profit in CEE was down somewhat q/q, despite higher banking income/lower costs, as credit losses returned to more ‘normalized low’ levels (these were almost zero in Q2)

Main drivers were: Strong volume growth momentum, e.g.:

Mortgages +6% q/q Life insurance reserves: +8% q/q (esp. unit-linked) Assets under management: +6% q/q

Net positive impact of developments in interest rate and equity markets Very low credit-risk provisioning

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Profit trend, 9 months 2005

9M 2004pro forma

9M 2005

9M/9M 9M/9Mexcl.

one-offs

Gross income, net of technical insurance charges

5 652 6 154 +9% +6%

Operating expenses -3 520 -3 490 -1% -1%

Operating result 2 132 2 664 +25% +17%

Impairments -286 -54 -81% -81%

Net profit(after tax and minorities)

1 175 1 796 +53% +32%

Cost/income ratio, bankingLoan-loss ratio, bankingCombined ratio, non-lifeReturn on equity

62%0.20%

94%14%

58%0.04%

95%19%

Notes:1) One-offs include the disinvestment loss at Agfa Gevaert (net bottom-line impact of –80 m) in Q2 2004, the income related to the

settlement of a ‘historic’ loan (+68 m net) and the ‘non-recurring’ value gains on shares of Irish insurer FBD (+68 m net) in Q1 2005 .

2) All 2004 figures exclude impact of IAS 32/39 and IFRS 4

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1. Net profit at 1.8 bn, up 53% y/y, generating a return on equity of 19%

2. Underlying profit (excl. main one-offs) growing at 32%

3. Strong business volume growth across our activities and geographies, generating strong commission income (+22%) and highly offsetting impact of flattened yield curve on net interest income

4. Profit from mark-to-market of financial instruments and capital gains realized on investments signifcantly lower than 2004 (though partly due to IFRS valuation rules)

5. Downtrend in expenses (-1 % y/y) - cost/income ratio (banking) at 58%

6. Sustained low combined ratio, non-life (95%)

7. Very low credit-risk provisioning (loan-loss ratio at 0.04%)

8. Reminder: comparison of individual P/L lines with pro forma 2004 figures distorted by application of IFRS 32/39 and IFRS 4 as of 2005

9. Business outlook for 2005 remains positive

Highlights, 9 months 2005

Foto gebouw


- At a glance


- Financial headlines per segment


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Solid underlying revenue trend

Gross income (in m), year-to-date

8 87012 333

8 359

9M04 12M04 9M05 12M05

Gross income (in m), per quarter

3 175 3 1782 517

3 4622 756 2 904 2 699

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05

IFRS reclassifications distort y/y comparison (among other things, non-recognition of unit-linked premiums)

H1’s solid trend in F&C income continued in Q3 (452m, up 10% q/q and 40% y/y)

Banking NIM: up q/q from 1.63% to 1.69%, benefiting from, among other things, 25 bps deposit rate cut in Belgium (however, other one-off impacts, as well)

Record level of life insurance premium income (1.3 bn - mostly unit-linked, driven by low interest rates and good stock market performance)

Down 511m y/y, due to non-recognition of 2.1 bn new unit-linked premium volume under IFRS 2005

Apart from one-offs (173m in Q1), solid revenue ‘quality’: NII: volume growth and refinancing fees offsetting

negative impact on NIM of flattened yield curve. NIM down -9 bps y/y to 1.65%.

High level of life insurance premium income (3.3 bn) Strong F&C income (+29%)

* Sales of unit-linked life insurance, recognized differently under IFRS 2005

2.1 bn*

1.0 bn*0.6 bn*0.5 bn*

IFRS 2005IFRS 2004

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Business volumes, growth trend

Growth, 3Q 05 (q/q) +1% +6% +1% +8% +6%

Belgium -1% +4% -3% +8% +6%

CEE - CZ/Slovakia - Hungary - Poland

+5%+7%+8%-6%

+10%+11%+10%+9%

+5%+6%+2%+6%

+7%+4%+5%

+28%

+11%+7%

+17%+6%

Rest of the world +2% +9% +4% - +6%

Note: growth trend excl. (reverse) repo and interbank activity

Outstanding (in bn) 113 32 158 16 171

Total loans Of which mortgages

Customer deposits

Life reserves

AUM

Growth, 9M 05 (ytd) +8% +17% +8% +19% +19%

Belgium +8% +12% +2% +19% +22%

CEE - CZ/Slovakia - Hungary - Poland

+7%+13%+12%-10%

+28%+27%+34%+16%

+22%+29%+12%+3%

+23%+17%+54%+39%

+33%+31%+97%+14%

Rest of the world +10% +25% +12% - +14%

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NIM / IR sensitivity

NIM trend

Group, total* +0.01% -0.02% +0.06% -0.09%

whereof Belgium +0.00% -0.10% +0.06% -0.01%

whereof CEE -0.10% -0.06% -0.13% -0.34%

Q1 05 (q/q trend)

Q2 05(q/q trend)

Q3 05(q/q trend)

9M 05(y/y trend)

In Q3, NIM went up 6 bps, benefiting from, among other things, a deposit rate cut in Belgium. YtD NIM is down 9 bps, impacted by margin erosion in CEE (offset by volume growth, F&C income and lower cost of risk)

The P/L impact of a 50-bps parallel upwards shift of the yield curve would have a positive impact of appx. 10 m euros (assuming deposit rate in Belgium remains stable) vs. the base scenario for 2006 with a 2% ECB rate and 3.75% 10-y Govi yield

* For comparison purposes vis-a-vis 2004, impact of IFRS 32/39 has been been neutralised

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Sustained favourable y/y cost trend

Operating expenses (in m), year-to-date

3 5204 944

3 490

9M04 12M04 9M05 12M05

Operating expenses (in m), per quarter

1 269 1 105 1 1471 424

1 104 1 209 1 177

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05

Ytd expenses down 30m (-1%), mainly due to cost-cutting efforts in the Belgian banking business in 2004

Cost/income ratio, banking, down from 62% to 58%

As expected, cost level - down 32m q/q since Q2 - was negatively impacted by one-off merger-related costs (20 m) and catch-up on underusage of expense budgets in Q1 (20m)

3Q includes update of provisions for legal risks

Y/y trend: +3% since staff profit-sharing bonuses were very low in Q3 04 (very poor performance at KBC Financial Products)

-1%

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Historic low impairment levelImpairment charges (in m), year-to-date

286

10054

9M04 12M04 9M05 12M05

Impairment charges (in m), per quarter

152

90

4479

1542 -3

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05

Impairments down 232 m (-81%) on the back of limited credit risk and solid equity markets

Loan-loss ratio down from 0.20% in FY 04 to 0.04%

-81%

Q3 impairments remain at historic low levels (net write-back of 3m)

LLR FY 03 FY 04 9M 05

Belgium 0.24% 0.09% 0.00%

CR/Slovakia 0.34% 0.26% 0.21%Hungary 0.32% 0.64% 0.72%

Poland 8.68% 0.69% 0.00%International 0.48% 0.26% 0.00%

Total 0.71% 0.20% 0.04%

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Excellent underwriting result, non-life

Combined ratio

105%96% 95% 95%

2002 2003 2004 9M05

Combined ratio, year-to-date

97% 93% 94% 95% 92% 94% 95%

3M04 6M04 9M04 12M04 3M05 6M05 9M05

Combined ratio at 95% on the back of Sound risk management (claims ratio at 64%) Good cost control (expense ratio at 31%)

Favourable claims environment in all markets

Q3 sligthly higher q/q, mainly due to seasonal pattern in expense ratio

C/R FY03 FY04 9M05

Belgium 93% 92% 94%

Czech Rep. 102% 99% 92%Slovakia 146% 138% 120%

Hungary 103% 98% 95%

Poland - 95% 99%

R/I 100% 98% 90%

Total 96% 95% 95%

Foto gebouw


- At a glance




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Segment structure

KBC Group NV

KBCInsurance

KBCAM KBL epb GevaertKBC

Bank

Primary segmentation by business segment

39

5830

89122 124 120

-55

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05

332 367

246318

470

314363

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05

Banking: Q3 05 profit contribution at 363 m:

Good top-line mix, commissions particularly strong, not boosted by gains and trading income, NII up (however, significant one-off positive impact)

Costs flat q/q (incl. 40m provision related to legal files) Once again, very limited loan-loss charges (3m)

9M05 earnings at record level of 1.1 bn, driven by: Strong commission income (+22%) Strict cost control: -3% y/y (C/I at 58% incl. AM) Limited credit cost (4 bps) One-off income related to settlement of historic loan

dispute in Slovakia in Q1 (68 m net)Insurance: Strong Q3 05 results, in line with Q1/Q2 (without significant

capital gains and dividend income as in the 2 previuos quarters), due to:

Record level of sales of life products (1.3 bn), mostly unit-linked (recognized as F&C income)

Limited M2M gain (9m) & write-back of impairments (8m) 9M05 earnings increasing to 366m on the back of:

High sales of life insurance (3.3 bn euro), boosting life reserves by 19%

Excellent underwriting performance (CR, non-life, 95%) Higher investment income, partly due to the gain on the

disposal of the participation of FBD (net non-recurring impact: 68 m)

Low impairment charges on portfolios (extremely high in 1Q 04)

Key points, business segments

BANKING

INSURANCE

Net profit (in m)

Net profit (in m)

4 Qs moving average

4 Qs moving average

40

43

2338

-30

5341 39

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05

Net profit (in m)


Asset management: AUM in 3Q05 up 6% (o/w 40% new money inflows), boosting

net profit contribution to 74m 9M05 earnings at 200m, +38m y/y (+23%) driven by

increased AUM: AUM in 9M05 up 22% to 102 bn (60% due to new

inflows) C/I at 14% Net margin on AUM at 2.9%

Note: total AUM within the Group: 186 bn Asset management segment: 87 bn (3rd party) + 15 bn

(group assets) Banking segment: 24 bn (mostly private and HNWI

assets in Belgium and CEE) European private banking segment: 60 bn (o/w 52 bn of

private banking customers)European private banking: 3Q05 profit contribution (39 m) in line with previous quarter:

M2M of trading instruments was compensated by better NII of trading instruments, the reversal of impaiments on AFS assets and a positive tax impact

AUM increased by 9% (partly due to expansion of consolidation scope )

9M05 earnings at 133m, up 29 m (+28%): Sustained growth trend of F&C income out of private

banking and custody operations Even higher cost level (C/I at 72%, but negatively

impacted by 20 m in restructuring charges)

EUROPEAN PRIVATE BANKING

4 Qs moving average

5158 53

6658

68 74

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05

Net profit (in m)

ASSET MANAGEMENT

4 Qs moving average

41

-27

-18

-41

-12 -14-13-7

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05


Net profit (in m)

Net profit (in m)

HOLDING COMPANY

GEVAERT Gevaert: Downsizing of non-core activities is progressing according

to plan: Gevaert to disappear as seperate ‘business line’ 3Q05 negative profit contribution related to:

The ‘unwinding process’ (8 m impairment loss and 10 m taxes on intragroup dividend upstreaming )

Earnings loss at Agfa Gevaert (-38 m impact) mainly due to rise in restructuring provisions (Agfa Photo)

9M05 profit contribution of 59 m largely driven by gains on disposals

Holding company: 3Q05 net holding company results (-14 m) at ‘normalized’

level 9M05 net charge at –73 m, quite high due to:

One-off costs in Q2, related to Almanij-KBC merger: expenses for redemption of stock option plan at KBL that was delisted (15 m) and external advisory services (5 m)

Costs of debt related to minority buy-out of KBL (already partly reduced in Q3)

Elimination of dividends received on own shares (IFRS 2005) (9 m in Q2)

17

-65

1225 32 31

-4

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05

4 Qs moving average

4 Qs moving average

42

Segment structure – cont’d.

KBC Group NV

KBCInsurance

KBCAM KBL epb GevaertKBC

Bank

CEE

Markets

European private banking

Gevaert

Retail

Business customers

1

2

1 . Primary segmentation by business segment2. Additional breakdown by area of activity

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Retail Belgium and CEE

Retail Belgium: Strong profitability trend continues in Q3. Profit contribution up

15 m q/q supported by deposit rate cut, among other things. 9M05 earnings at 799 m, up 440 m (x2.2), generating ROAC of

29% (15% in 9M04): sound revenue growth (esp. related to investment

products and mortgages) sustained cost discipline (-3% y/y), C/I 57%(67% in 9M04) Solid P&C underwriting performance: C/R stable at 94% absence of credit provisioning (LLR 0%) and

normalization of value impairments on the investment portfolio (184 m impairments in 9M04)

‘Private banking’ sub-segment contributes 49 m in 9M05 (vs 32 m in 9M04)

CEE: Q305 profit contribution at 105 m. Compared with Q2: higher

banking income, lower costs (C/I 60%) but somewhat higher non-life claims (C/R 98%) and loan losses (LLR 26 bps)

9M05 earnings at 416m, up 175m (+73%) generating a ROAC of 48% (32% in 9M04):

In CR/Slovakia: 9M05 earnings at 289 m (incl. one-off of 68 m in Q1), driven by steady loan growth, increased F&C income and strong C/I ratio (48%)

Poland: 9M05 profit contribution of 82 m (incl. deferred taxes of 18 m) due to sound cost trend, growing insurance business and absence of loan losses

Hungary: further positive trend of operating performance, but update of legal legacy provision and higher loan-loss provisions (LLR 0.72%, still lower then major peer). 9M05 profit at 27 m

87132

97

260295

244 260

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05

Net profit (in m)

RETAIL (BELGIUM)

4 Qs moving average

6698

7446

191

105121

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05

Net profit (in m)

CEE

4 Qs moving average

44

SME and wholesale activities

SME/corporate customers: 3Q05 profit contribution (182 m) boosted by strong income

from corporate finance / private equity business (including IPO of ‘Telenet’) and writeback of loan losses

9M05 earnings at 408 m, up 107 m (+36%), generating ROAC of 25% (18% in 9M04):

Succesful income growth, including in corporate finance. Gross margin (on RWA): 3.2% (2.9% in 9M04)

Low credit provisions: LLR at 0.01% (0.16% in 9M04) High cost efficiency: C/I at 33% (36% in 9M04) Solid underwriting result of outbound R/I activities: C/R

90% (94% in 9M04)

Capital markets: 3Q05 profit contribution (58 m), slightly higher then level

registered in previous quarters and driven by enhanced trading activity in convertibles/equity derivatives

9M05 earnings at 164m, up 7 m (+4%): Interest-rate and FX activities, equity brokerage and

equity derivatives trading brought about a result improvement

Income from convertibles trading, structured credit business and AIM weaker then last year

9M05 key ratios: Gross margin (on RWA): 6.9% (7.5% in 9M04) C/I at 58% (61% in 9M04) ROAC at 29% (31% in 9M04)

108 11891 94

125101

182

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05

Net profit (in m)

SME / CORPORATE

4 Qs moving average

68 70

17

92

53 53 58

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05

Net profit (in m)

CAPITAL MARKETS

4 Qs moving average

Foto gebouw


- At a glance




46


KBC continues to be positive on business development in Q4, with a strong sales result, a better interest rate climate and favourable equity markets trend

On the other hand, the cost level is expected to be higher in Q4 on the back of one-off expenses (including some 100 m euros (before tax), among other things, for the redesigning of staff pension schemes). However, for the full-year, the guidance for a decline in costs and historic low loan-loss ratio remains valid

Based on the prevailing view vis-à-vis the relevant economic and financial parameters, KBC’s 2005 net profit is expected to be approx. 2.2 bn euros

Foto gebouw


- At a glance




Additional information

48

Group earnings, by quarter

(IFRS, in m euros) 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05

Net interest incomeGross earned premium, insuranceDividend incomeNet gains from FI at FV Net realised gains from AFS assetsNet fee and commission incomeOther income

9951 275

25224193357106

9661 404

12119160

324113

91090139

12393

323128

9631 577

46187157399132

1 04872934

133168429215

1 0749781359297

410118

1 12981025

12349

452112

Gross income 3 175 3 178 2 517 3 462 2 756 2 904 2 699

Operating expensesImpairments - of which on loans and receivables - of which on AFS assetsGross technical charges, insuranceCeded reinsurance resultShare in results, associated companies

-1 269-152-33

-119- 1 169

-520

- 1 105-90-74 -12

-1 240-22-60

-1 147-44-15-18

-771-1234

-1 424-79-76-2

-1 454-2928

-1 104-15

3-16

-612-1721

-1 209-42-38

0-852-1713

-1 1773

-513

-696-1019

Profit before taxes 602 662 577 504 1 030 797 800

Income tax expense

Minority interests

-170-55

-177-51

-155-57

-35-29

-256-57

-212-48

-208-48

Net profit 376 434 365 440 717 536 543

Of which banking insurance asset management european private banking gevaert holding company

332-55514317

-12

367585823

-65-7

24630533812

-13

3188966

-3025

-27

470122585332

-18

314124684131

-41

3631207439

-38-14

49

3Q 2005 earnings, by business segment

(in m euros) Banking Insurance AM Epb Gevaert Holding Group

Net interest incomeGross earned premium, insuranceDividend incomeNet gains from FI at FV Net realized gains from AFS assetsNet fee and commission incomeOther income

9320

19116

13293

80

141810

109

29-6518

70

-770

1061

6503

-257

1147

300

12006

-1300300

105

1 129810

25123

49452112

Gross income 1 454 953 114 170 21 95 2 699

Operating expensesImpairments - o/w on loans and receivables - o/w on AFS assetsGross technical charges, insuranceCeded reinsurance resultShare in results, associated comp.

-878-8-3-3009

-125808

-696-10

0

-15000000

-14611-18001

-12-8-1000

-29

-109000000

1 1773

-513

- 696-10-19

Profit before taxes 577 129 99 36 -29 -13 800Income tax expense

Minority interests

-148-66

-2819

-250

4-1

-100

-10

-208-48

Net profit 363 120 74 39 -38 -14 543

50

3Q 2005 earnings, by area of activity

(in m euros) Retail CEE SME/Corp.

Markets Epb Gevaert Total

Banking and AM (incl. KBL)

Gross incomeOperating expensesImparimentsIncome tax expenseMinority interestsNet profit – group share

620-355

3-83

0185

439-265

-34-26-16100

313-8631

-6417

176

183-110

0-15

058

169-144

114

-139

21-12

-8-10

0-38

1 757-1 049

12-197

-67438

Insurance

Gross income - tecbn. ch.Operating expensesImpairmentsIncome tax expenseMinority interestsNet profit – group share

147-76

6-191775

53-43

0-3-25

18-72

-606

245-125

8-2819

120

Holding Co

Net profit – group share - - - - - - -14

Group total

Net profit – Group share 260 105 182 58 39 -38 543

Excl. non-allocated results

51

9M 05 earnings, by business segment

(in m euros) Banking Insurance AM Epb Gevaert Holding Group

Net interest incomeGross earned premium, insuranceDividend incomeNet gains from FI at FV Net realized gains from AFS assetsNet fee and commission incomeOther income

2 7400

86237

75898303

4072 516

9613

173-213

47

500

151

2893

1440

105728

32040

103

2637

055

-430000

-2335

3 2512 516

194348314

1 290444

Gross income 4 340 3 041 313 598 122 290 8 359

Operating expensesImpairments - o/w on loans and receivables - o/w on AFS assetsGross technical charges, insuranceCeded reinsurance resultShare in results, associated companies

-2 563-41-37

-200

26

-379-12

0-10

-2 161-44

0

-45000000

-4336

-29003

-54-70100

-15

-361000000

-3 490-54-39

-3-2 161

-4414

Profit before taxes 1 762 445 268 174 46 -71 2 626

Income tax expense

Minority interests

-454-162

-9415

-680

-35-5

-220

-30

-677-153

Net profit 1 146 366 200 133 24 -73 1 796

Excl. intrasegment eliminations

52

9M 05 earnings, by area of activity

(in m euros) Retail CEE SME/Corp.

Markets Epb Gevaert Total

Banking and AM

Gross incomeOperating expensesImpairmentsIncome tax expenseMinority interestsNet profit – group share

1 908-1 089

10-261

0568

1 364-790

-41-96-57382

821-269

-2-148

17384

593-345

-2-82

0164

598-433

6-35

-5133

122-54

-7-22

024

5 3733 095

-42-579-167

1 503

Insurance

Gross income (- techn. ch.)Operating expensesImpairmentsIncome tax expenseMinority interestsNet profit – group share

520-232

-9-6516

230

182-125

-1-13

-934

65-22

-2-16

-124

836-379

-12-9415

366

Holding Co

Net profit – group share - - - - - - -73

Group total

Net profit – Group shareShare in group resultROAC

79944%29%

41623%48%

40823%25%

1649%

29%

1337%

15%

241%3%

1 796100%

19%

Excl. non-allocated results

53

Financial performance, analysis breakdown

ROE

13% 14% 14% 14%

24%20% 19%

Q1 HY 9M FY Q1 HY 9M

Equity (in bn)

11.1 11.6 11.9 12.3 13.314.4 15.2

Mar Jun Sep Dec Mar Jun Sep

Net profit (in m)

376434

365440

717

536 543

Q1 Q2 Q3 Q4 Q1 Q2 Q3

+ Gross income * (in m)

2 001 1 9161 734

1 9792 127 2 035 1 993

Q1 Q2 Q3 Q4 Q1 Q2 Q3

- Operating expenses (in m)

1 2691 105 1 147

1 424

1 1041 209 1 177

Q1 Q2 Q3 Q4 Q1 Q2 Q3

- Impairment charges (in m)

152

90

44

79

1542

-3Q1 Q2 Q3 Q4 Q1 Q2 Q3

- Taxes (in m)

170 177155

35

256

212 208

Q1 Q2 Q3 Q4 Q1 Q2 Q3

Cost/income ratio, banking

63% 61% 62% 65%

51%57% 58%


Loan-loss ratio

0.11%

0.21%

0.16%

0.20%

0.00%

0.06%0.04%


Effective tax rate

28% 27% 27%23%

25% 26% 25%


2004 2005

2004 2005

2004 2005

* Gross income minus technical charges, insurance

Return on adjusted equity

54

Financial performance, analysis breakdown (2)

Risk-weighted assets (in bn)

105.1

107.6

105.3 105.8107.6

111.7

114.0

Mar Jun Sep Dec Mar Jun Sep

+ Yield income (in m)

1 020 1 087949 1 009 1 082

1 209 1 154

Q1 Q2 Q3 Q4 Q1 Q2 Q3

+ Fee & Commisssion income (in m)

463 437 451531

644

528 564

Q1 Q2 Q3 Q4 Q1 Q2 Q3

+ Premium sales * (in m)

1 2751 404

901

1 577

1 186

1 5911 759

Q1 Q2 Q3 Q4 Q1 Q2 Q3

+ FV income + gains on AFS assets

417

251216

344301

189 172

Q1 Q2 Q3 Q4 Q1 Q2 Q3

Gross income * (m)

2 001 1 9161 734

1 9792 127 2 035 1 993

Q1 Q2 Q3 Q4 Q1 Q2 Q3

Gross margin * (on avg RWA)

7.60%7.39%

7.12%7.21%

7.98%

7.68%7.48%



97%

94% 94%95%

92%

94%95%


Net interest margin, banking

1.69%

1.63%

1.58%1.56%

1.65% 1.64% 1.65%


Share of FV/AFS gains in gross income *

21%

17% 16% 16%14%

12%8%


Share of F&C in gross income *

23% 23% 24% 25%

30%28% 28%


*Gross income minus technical charges, insurance

* in 2005, only partly recognized as ‘income’

2004 2005

2004 2005

2004 2005

*Gross income minus technical chgs, insurance

*Gross income minus technical chgs, insurance

55

Banking performance in CR/Slovakia

Income statement, CSOB Bank (CR/Slovakia)(in m euros) 1Q04 2Q04 3Q04 1Q05 2Q05 3Q05

Statutoryaccounts

Net interest income Dividend income Net gains from financial instruments at fair value Net realized gains from available for sale assets Net fee and commission income Other incomeGross income, total

123165

5017

202

120-1238

5114

216

1111

29

-0538

201

1244

194

58114323

1282

262

579

224

129-3267

6041

259

Operating expenses -114 -120 -122 -122 -143 -120Subtotal 88 96 79 200 81 140

ImpairmentsShare in result of associated companiesTaxes

-40

-28

-60

-20

-140

-19

50

-54

20

- 7

-230

- 31

Net statutory profit 56 69 46 151 76 86

Profit contribution to Group

Net statutory profitConsolidation adjustmentsMinority interests

56-1-8

69-1-4

46-1-4

15119

-17

76-0-7

86-1-7

Subtotal 48 65 41 154 69 78

Transfer of income on excess capital to ‘Group item’ -6 -6 -5 -6 -6 -9

Profit contribution, Group share 42 59 35 148 63 68

Return Return on allocated capital, YtdReturn on investment, Ytd

44%12%

49%14%

42%13%

120%34%

83%26%

73%24%

56

Banking performance in Hungary

Income statement, K&H Bank(in m euros) 1Q04 2Q04 3Q04 1Q05 2Q05 3Q05

Statutoryaccounts


510

201

164

91

540

18-0181

90

630

170

233

106

540

25-0253

106

540

250

184

101

610

230

223

109Operating expenses -63 -66 -70 -68 -74 -84Subtotal 28 24 37 38 28 25


91

-7

-111

-1

-101

-5

-101

-8

-161

- 3

-51

-5




31-0-8

13-0-5

23-0-7

21-0-5

10-0-5

16-0-6

Subtotal 23 8 16 15 5 10

Transfer of income on excess capital to ‘Group item’ -11 -1 -7 -8 3 -1



29%23%

22%16%

23%

16%17%15%

18%11%

18%11%

57

Banking performance in Poland

Income statement, Kredyt Bank(in m euros) 1Q04 2Q04 3Q04 1Q05 2Q05 3Q05

Statutoryaccounts


54033

104

74

5306

-0134

76

44099

118

81

500

121

163

83

5106

-365

66

52072

133

78Operating expenses -60 -60 -51 -59 -54 -59Subtotal 15 17 29 24 12 19


-22

-1

-71

-1

-124

-1

01

-1

12-010

-609




14-0-3

9-0-2

20-0-4

23-1-3

34-0-5

23-0-3

Subtotal 11 7 15 19 29 20

Transfer of income on excess capital to ‘Group item’ -0 0 -1 -2 -1 -4



25%6%

23%5%

25%

6%32%11%

32%11%

40%13%

58

6.76.5

6.97.4

5.9

5.3

3.53.93.3 3.3

0

2

4

6

8

2005 (F) 2006 (F)

Czech Hungary Poland Belgium EMU

Source : KBC Outlook, November 2005

Positive growth gap in CEE

GDP, nominal growth % (incl. inflation)

59

No. of shares outstanding

In millions 31/12/04 31/03/05 30/06/05 30/09/05

No of ordinary shares outstanding 366.4 366.4 366.4 366.4

Avg. no. of shares for basic EPS:- ordinary shares- mandatory convertibles (+)- treasury shares (-)- total, end of period- total, average most recent quarter- total, average year-to-date

366.42.6

-9.6359.5259.5359.4

366.42.6

-12.6356.5358.0358.0

366.42.6

-9.1360.0358.3358.1

366.42.6

-8.9360.2360.1358.8

Avg. no. of shares for dilutive EPS:- basic no of shares- stock options (+)- other convertible bonds (+)- total, end of period- total, average most recent quarter- total, average year-to-date

359.55.05.2

369.7370.1370.5

356.55.05.2

366.7368.2368.2

360.04.05.2

369.3368.0368.1

360.23.85.2

369.2369.3368.5

The no. of ordinary shares outstanding is 366.4 million

As in previous years, a limited share issue for staff members is planned before year-end(for your information, in the last 3 years, 0.2 m new shares per year were issued via similar plans)

On 10 Dec. 2005, a 1998-2005 convertible bond comes to maturity – convertible into max. 5.2 million ordinary shares (but conversion price at 80 euro/share !)

Closing remarks on equity valuation

Foto gebouw

4

61

Valuation of the KBC share

weighted P/E 2006

unweighted P/E 2006

CEE banks 2 14.4 14.3

CEE-exposed banks 3 12.3 13.4

Euro-zone banks 4 11.3 11.9

KBC 1 11.2 11.2

BEL banks 5 10.3 10.3

Key figures: Share price: 73.2 euros Net asset value: 42.4 euros 9M 2005 EPS: 5.10 euros

Analyst estimates: 1

2005 EPS consensus: 6.14 (+36% y/y) 2006 EPS consensus: 6.52 (+6% y/y) 2006 P/E: 11.2

Recommendations: Positive: 64 % Neutral: 27% Negative: 9 %

Valuation relative to peer group:

Weighted and unweighted averages of IBES data :2 OTP, Komercni, Pekao, BPH PBK, BRE3 BA-CA, Erste, Unicredit, Soc. Gen., Intesa BCI, RZB Int.4 Top-20 DJ Euro Stoxx Banks 5 Fortis, Dexia

Situation as at 14 November 2005

1 Smart consensus collected by KBC (22 estimates)

62

Equity research coverage

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