KBC Group Company presentation - 1Q 2018 - KBC Bank
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KBC Group
Company presentation
1Q 2018
More information: www.kbc.com
KBC Group - Investor Relations Office – E-mail: investor.relations@kbc.com
1
Important information for investors
This presentation is provided for information purposes only. It does not constitute an offer to sell or the solicitation to buy any
security issued by the KBC Group.
KBC believes that this presentation is reliable, although some information is condensed and therefore incomplete. KBC cannot be
held 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 capital
trends of KBC, involving numerous assumptions and uncertainties. There is a risk that these statements may not be fulfilled and
that future developments differ materially. Moreover, KBC does not undertake any obligation to update the presentation in line
with new developments.
By reading this presentation, each investor is deemed to represent that it possesses sufficient expertise to understand the risks
involved.
21Q 2018 key takeaways for KBC Group
1Q18 financial performance: Capital and liquidity positions:
Very good net result of 556m EUR, despite the large The fully loaded** B3 common equity ratio based on the
upfront bank taxes (371m EUR). ROE of 14%* in 1Q18 Danish Compromise decreased from 16.3% at the end of
Good performance of the commercial bank-insurance franchises 2017 to 15.9% at the end of 1Q18 due to the impact of the
in our core markets and core activities first-time application of IFRS 9 (-41bps)
Q-o-q increase in customer loan volumes and customer deposits Fully loaded B3 leverage ratio, based on current CRR
(excluding debt certificates & repos) in most of our core countries legislation, amounted to 5.7% at KBC Group
Roughly stable net interest income and higher net interest margin Continued strong liquidity position (NSFR at 137% and LCR
q-o-q at 139%) at end 1Q18
High net fee and commission income ** This clearly exceeds the minimum capital requirements set by the competent
supervisors of respectively 9.875% phased-in and 10.60% fully loaded for 2018. On
top of the above-mentioned capital requirements, the ECB expects KBC to hold a
Lower net gains from financial instruments at fair value and higher pillar 2 guidance (P2G) of 1.0% CET1
other net income
Combined ratio of 90% in 1Q18. Excellent sales of non-life and life
insurance products
Strict cost management resulted in a cost/income ratio of 55%
YTD adjusted for specific items
Net impairments releases on financial assets at amortised cost of
63m EUR, mainly driven by Ireland (net release of 43m EUR in
1Q18). We are maintaining our impairment guidance for Ireland,
namely a net release in a range of 100m-150m EUR for FY18
3
* ROE taking into account pro rata bank taxes amounted to 19% in 1Q18Contents
1 1Q 2018 performance of KBC Group
2 1Q 2018 performance of business units
3 Strong solvency and solid liquidity
4 1Q 2018 wrap up
Annex 1: Company profile
Annex 2: Other items
4KBC Group
Section 1
1Q 2018 performance of KBC Group
5Net result at KBC Group
CONTRIBUTION OF BANKING ACTIVITIES
TO KBC GROUP NET RESULT*
750
575
526
461
NET RESULT AT KBC GROUP*
330
855
1Q17 2Q17 3Q17 4Q17 1Q18
691
630
556
CONTRIBUTION OF INSURANCE ACTIVITIES
399 TO KBC GROUP NET RESULT*
137
1Q17 2Q17 3Q17 4Q17 1Q18
111 113
96 102
78
64
78 27 42
82 93 84 75
61
-29 -15
* Difference between net result at KBC Group and the sum of the banking and insurance -33 -52 -34
contribution is accounted for by the holding-company/group items
1Q17 2Q17 3Q17 4Q17 1Q18
Non-Life result Non-technical & taxes
Amounts in m EUR 6
Life resultSummary 2017 pro forma figures
Impact shift 4Q17 4Q17 3Q17 3Q17 2Q17 2Q17 1Q17 1Q17
per P&L line as was pro forma as was pro forma as was pro forma as was pro forma
NII 1,029 1,137 1,039 1,114 1,028 1,094 1,025 1,081
+108 +75 +66 +56
FIFV 235 118 182 94 249 180 191 130
+26 +25 +24 +24
F&C 430 456 408 433 430 454 439 463
+17 +12 +21 +19
AFS gains* 51 6 51 2 52 8 45 14
* Due to IFRS 9, the P&L line ‘net realised result from AFS assets is replaced by ‘net realised result from debt instruments at FV through OCI’
• Interest accrual FX derivatives: shifted from FIFV to NII (in line with the transition to IFRS 9)
• Network income (income received from margins earned on FX transactions carried out by the network for clients): shifted from FIFV to F&C
• IFRS 9: overlay approach for insurance: shift from realised gains AFS shares and impairments on AFS shares to FIFV
• Please note that due to IFRS 9, the realised gains on AFS shares in Banking (26m in 4Q17, 32m in 3Q17, 21m in 2Q17 and 10m in 1Q17) have
been eliminated from net result as they are now booked in equity
7Good net interest income and higher net interest margin
NII (pro forma for 2017*) Amounts in m EUR
1,081 1,094 1,114
2 22
1,137
3 47
1,125
0 27
Net interest income (1,125m EUR)
3 28 3 21 128
143 142 144 135 • Down by 1% q-o-q and up by 4% y-o-y
• The small q-o-q decrease was driven primarily by:
o lower netted positive impact of ALM FX swaps
907 928 946 952 970
o lower reinvestment yields
o more negative pressure on commercial loan margins in
most core countries
1Q17 2Q17 3Q17 4Q17 1Q18
NII - netted positive impact of ALM FX swaps** NII - Insurance
o lower number of days
NII - Holding-company/group NII - Banking partly offset by:
* 2017 pro forma figures for NII as the impact of ALM FX derivatives was ‘netted’ in NII as of 2018
o lower funding costs (due mainly to the call of the CoCo)
** From all ALM FX swap desks o continued good loan volume growth
*** NIM is calculated excluding the dealing room and the net positive impact of ALM FX swaps & repos
o positive impact of both short & long term increasing
NIM (pro forma for 2017***) interest rates in the Czech Republic
2.01%
1.97%
1.93% 1.96% 1.96%
Net interest margin (2.01%)
• Up by 4 bps q-o-q and by 8 bps y-o-y thanks to lower funding
costs and the positive impact of repo rate hikes in the Czech
Republic
Customer deposit volumes excluding debt
1Q17 2Q17 3Q17 4Q17 1Q18 certificates & repos +2% q-o-q and +7% y-o-y
VOLUME TREND
Excluding FX effect Total loans ** o/w retail mortgages Customer deposits*** AuM Life reserves
Volume 143bn 60bn 188bn 213bn 29bn
Growth q-o-q* +1% 0% -3% -2% 0%
Growth y-o-y +5% +4% +3% 0% -2%
* Non-annualised
** Loans to customers, excluding reverse repos (and bonds) 8
*** Customer deposits, including debt certificates but excluding reposHigh net fee and commission income
Amounts in m EUR Net fee and commission income (450m EUR)
F&C (pro forma for 2017*) • Down by 1% q-o-q and by 3% y-o-y
• Positive net sales of mutual funds in 1Q18
463 454 456 450
24 24
433
26 25
• Q-o-q decrease was the result chiefly of:
25
o lower management fees
o lower fees from payment services
511 506 518 502
489 o lower fees from credit files & bank guarantees
o lower securities-related fees
-72 -73 -81 -86 -77
0 partly offset by:
-2 -1 o higher entry fees
1Q17 2Q17 3Q17 4Q17 1Q18
o lower commissions paid on insurance sales
F&C - network income F&C - banking contribution • Y-o-y decrease was mainly the result of:
F&C - insurance contribution F&C - contribution of holding-company/group o lower entry fees
* 2017 pro forma figures as the network income shifted from FIFV to net F&C as of 2018 o lower securities-related fees
o lower fees from credit files & bank guarantees
Amounts in bn EUR partly offset by:
o higher fees from payment services
AuM* o the contribution of UBB/Interlease
214 213 215 217 213
Assets under management (213bn EUR)
• Fell by 1.5% q-o-q owing entirely to a negative price effect
• The mutual fund business has seen net inflows again, but this
was offset by net outflows in group assets and investment
advice
1Q17 2Q17 3Q17 4Q17 1Q18
* Note that 2017 AuM figures were reduced due to a roughly 2bn EUR adjustment in Institutional Mandates
9Insurance premium income up y-o-y
and good combined ratio
PREMIUM INCOME (GROSS EARNED PREMIUM) Insurance premium income (gross earned
794
premium) at 714m EUR
672 636 660
714
• Non-life premium income (378m) increased by 5%
410 y-o-y
282 336
312 267 • Life premium income (336m) down by 18% q-o-q
and up by 8% y-o-y
360 369 378 384 378
1Q17 2Q17 3Q17 4Q17 1Q18
Life premium income Non-Life premium income
COMBINED RATIO (NON-LIFE)
79%
90%
84% 83%
88% The non-life combined ratio at 1Q18 amounted
to 90%, still a good number despite higher
technical charges due mainly to higher storm
claims in Belgium
1Q 1H 9M FY
2017 2018
10
Amounts in m EURNon-life and life sales up y-o-y
NON-LIFE SALES (GROSS WRITTEN PREMIUM) Sales of non-life insurance products
468 492 • Up by 5% y-o-y thanks to a good commercial
performance in all major product lines in our core
358 349 342 markets and tariff increases
1Q17 2Q17 3Q17 4Q17 1Q18
Sales of life insurance products
• Decreased by 15% q-o-q and up by 5% y-o-y
LIFE SALES • The q-o-q decrease was driven mainly by lower sales of
588 guaranteed interest products in Belgium (attributable
474 498 chiefly to traditionally higher volumes in tax-
415 405 incentivised pension saving products in 4Q17 and extra
318
267 279 sales for individual pension agreements for self-
222 218
employed business leaders, anticipating the reduction
270
of corporate tax as of 2018) and lower sales of unit-
207 193 187 219 linked products in the Czech Republic
1Q17 2Q17 3Q17 4Q17 1Q18 • The y-o-y increase was driven mainly by higher sales of
guaranteed interest products in Belgium and higher
sales of unit-linked products in the Czech Republic
Guaranteed interest products Unit-linked products • Sales of unit-linked products accounted for 44% of total
life insurance sales
11
Amounts in m EURLower FV gains, higher other net income
FV GAINS (pro forma for 2017*)
180
The lower q-o-q figures for net gains from
130 86 118
financial instruments at fair value were
94 96 attributable mainly to:
110 94 • a negative change in market, credit and funding value
73 71 73
adjustments (mainly as a result of changes in the
19
1
21 11 7
19
4 underlying market value of the derivative portfolio)
12 17
1Q17 2Q17 3Q17 4Q17 1Q18 • lower dealing room income
Other FV gains Net result on equity instruments (overlay insurance)
M2M ALM derivatives
* 2017 pro forma figures as:
1) the impact of the FX derivatives was ‘netted’ in NII as of 2018
2) the shift from realised gains AFS shares and impairments on AFS shares to FIFV due to IFRS 9 (overlay approach for insurance)
OTHER NET INCOME Other net income amounted to 71m EUR,
77
71
higher than the normal run rate of around 50m
EUR due to the settlement of an old legal file in
47
Belgium and the sale of a building in Hungary
4
-14
1Q17 2Q17 3Q17 4Q17 1Q18
12
Amounts in m EUROperating expenses up due entirely to higher bank taxes,
but good cost/income ratio
OPERATING EXPENSES Cost/income ratio (banking) adjusted for specific
items* at 55% in 1Q18
1,291
1,229 • Operating expenses excluding bank tax went down by
1,021 371 6% q-o-q due mainly to seasonal effects such as
361 910 914 41 traditionally lower ICT, marketing and professional fee
19 18
expenses, despite a 12m EUR provision for facility
expenses for one specific file in Belgium in 1Q18
891 896 980 920
868
• Operating expenses without bank tax increased by 6%
y-o-y due chiefly to the consolidation of UBB/Interlease,
higher ICT costs, higher staff expenses (wage drift in
1Q17 2Q17 3Q17 4Q17 1Q18 most countries), higher marketing expenses, a 12m EUR
provision for facility expenses for one specific file in
Bank tax Operating expenses Belgium and higher depreciation & amortisation costs
(due to the capitalisation of some projects)
EXPECTED BANK TAX SPREAD IN 2018 (PRELIMINARY)**
TOTAL Upfront Spread out over the year • Pursuant to IFRIC 21, certain levies (such as
contributions to the European Single Resolution Fund)
1Q18 1Q18 1Q18 2Q18e 3Q18e 4Q18e have to be recognised in advance, and this adversely
273 0 0 0 0
impacted the results for 1Q17. The y-o-y increase can
BU BE 273
mainly be explained by the consolidation of UBB
BU CZ 29 29 0 0 0 0 • Total bank taxes (including ESRF contribution) are
Hungary 45 26 19 21 21 21 expected to increase from 439m EUR in FY17 to 461m
EUR in FY18, although still subject to changes
Slovakia 7 3 4 4 4 4
Bulgaria 14 14 0 0 0 0
Ireland 4 3 1 1 1 14
GC 0 0 0 0 0 0
TOTAL 371 347 24 25 25 39 * See glossary (slide 88) for the exact definition
13
Amounts in m EUR ** still subject to changesOverview of bank taxes* Bank taxes of 273m EUR in
1Q18. On a pro rata basis, bank
taxes represented 11.1% of
KBC GROUP Bank taxes of 371m EUR in BELGIUM BU 1Q18 opex at the Belgium BU
361 371 1Q18. On a pro rata basis, 278 273
bank taxes represented 11.1% 53 58
83 98
of 1Q18 opex at KBC Group**
225 215
278 273
41
19 18 0 0
41 -4 -2
-1 20
-6 -7
1Q17 2Q17 3Q17 4Q17 1Q18
1Q17 2Q17 3Q17 4Q17 1Q18
European Single Resolution Fund contribution ESRF contribution Common bank taxes
Common bank taxes
Bank taxes of 70m EUR in
1Q18. On a pro rata basis,
Bank taxes of 29m EUR in bank taxes represented 18.0%
CZECH REPUBLIC BU 1Q18. On a pro rata basis, INTERNATIONAL MARKETS BU of 1Q18 opex at the IM BU
bank taxes represented 4.3%
29 of 1Q18 opex at the CZ BU 70
26
57 18
11
41
22
20
25 25
1 52
46
24
6 1 0 0 6
1Q17 2Q17 3Q17 4Q17 1Q18 1Q17 2Q17 3Q17 4Q17 1Q18
ESRF contribution Common bank taxes
ESRF contribution Common bank taxes
* 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 55% in 1Q18 amounts to roughly 48% excluding these bank taxes
14Net impairment releases, excellent credit cost ratio and
improved impaired loans ratio
ASSET IMPAIRMENT
31 2 Very low asset impairments
15
8
1 15
32 • This was attributable mainly to:
6 7 6
o net loan loss provision releases in Ireland of 43m EUR
-30
-78 -63 (compared with 52m in 4Q17)
o also small net loan provision reversals in Bulgaria, Hungary,
-56 Slovakia and Group Centre
-71
1Q17 2Q17 3Q17 4Q17 1Q18
• Impairment of 6m on other in the Czech Republic as a result of
Other impairments Impairments on financial assets at AC*
* AC = Amortised Cost. Under IAS 39, impairments on L&R
the review of the residual value calculation on financial leases
for cars in CSOB Leasing
CREDIT COST RATIO
0.42%
0.23%
0.09%
The credit cost ratio amounted to -0.15% in 1Q18 due to
low gross impairments and several releases
-0.06%
-0.15%
FY14 FY15 FY16 FY17 1Q18
IMPAIRED LOANS RATIO
6.8% 6.9% 6.6%
6.0% 5.9%
The impaired loans ratio improved to 5.9%, 3.5% of
which over 90 days past due
3.6% 3.9% 3.7% 3.4% 3.5%
1Q17 2Q17 3Q17 4Q17 1Q18
15
Impaired loans ratio of which over 90 days past dueKBC Group
Section 2
1Q 2018 performance of business units
16BELGIUM BUSINESS UNIT
CFO SERVICES
CRO SERVICES
CZECH INTERNATIONAL
BELGIUM
REPUBLIC MARKETS
CORPORATE STAFF
17Belgium BU (1): net result of 243m EUR
NET RESULT Net result at the Belgium Business Unit
483
amounted to 243m EUR
455 • The quarter under review was characterised by lower
net interest income, roughly stable net fee and
336 commission income, decreased trading and fair value
301 income, higher other net income, an improved
243 combined ratio, seasonally lower sales of life
insurance products, higher operating expenses due
entirely to higher bank taxes and lower impairment
charges q-o-q
• Excluding both the upfront booking of the bank tax in
1Q18 and the one-off negative impact of the reform
1Q17 2Q17 3Q17 4Q17 1Q18 of the Belgian corporate income tax regime in 4Q17,
the net result rose by roughly 3% q-o-q
Amounts in m EUR • Customer deposits excluding debt certificates and
repos rose by 4% y-o-y, while customer loans also
increased by 4% y-o-y
VOLUME TREND Customer deposit volumes excluding debt
certificates & repos +2% q-o-q and +4% y-o-y
Total loans ** o/w retail mortgages Customer deposits*** AuM Life reserves
Volume 96bn 35bn 126bn 199bn 27bn
Growth q-o-q* +1% 0% -5% -1% -1%
Growth y-o-y +4% +1% 0% 0% -2%
* Non-annualised
** Loans to customers, excluding reverse repos (and bonds)
*** Customer deposits, including debt certificates but excluding repos
18Belgium BU (2): lower NII despite stable NIM
Amounts in m EUR
NII (pro forma for 2017*)
681 677 664 677
649 Net interest income (649m EUR)
28 19 20 39
130 129
19 • Fell by 4% q-o-q due mainly to the lower netted impact of FX
132 123 117 swaps, lower reinvestment yields and lower number of days
• Down by 5% y-o-y, driven primarily by:
o lower reinvestment yields
523 529 512 515 513 o pressure on commercial loan margins
o lower upfront prepayment fees (6m EUR in 1Q18 compared
with 9m EUR in 1Q17)
partly offset by:
1Q17 2Q17 3Q17 4Q17 1Q18
o lower funding costs on term deposits
NII - netted positive impact of ALM FX swaps** NII - contribution of banking
o good loan volume growth
NII - contribution of insurance
• 2017 pro forma figures for NII as the impact of ALM FX derivatives was ‘netted’ in NII as of 2018
** From all ALM FX swap desks
*** NIM is calculated excluding the dealing room and the net positive impact of ALM FX swaps & repos
NIM (pro forma for 2017***) Net interest margin (1.73%)
1.78% 1.79%
1.72% 1.73% 1.73%
• Stabilised q-o-q
• Fell by 5 bps y-o-y due to the negative impact of lower
reinvestment yields and some pressure on commercial loan
margins
1Q17 2Q17 3Q17 4Q17 1Q18
19Credit margins in Belgium
PRODUCT SPREAD ON CUSTOMER LOAN BOOK, OUTSTANDING
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
Customer loans
PRODUCT SPREAD ON NEW PRODUCTION
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
SME and corporate loans Mortgage loans
20Belgium BU (3): good net F&C income
Amounts in m EUR
F&C (pro forma for 2017*) Net fee and commission income (318m EUR)
356 • Positive net sales of mutual funds in 1Q18
339 321
10
9 307
8
318
9
• Net F&C income decreased by 1% q-o-q due mainly to:
7
o lower management fees
o lower securities-related fees
o lower fees from credit files & bank guarantees
391 376 352 368 356 partly offset by
o higher entry fees from mutual funds and unit-linked
life insurance products
o higher fees from payment services
-45 -45 -52 -55 -47 o lower commissions paid on insurance sales
1Q17 2Q17 3Q17 4Q17 1Q18
F&C - network income F&C - contribution of banking • Fell by 11% y-o-y driven chiefly by lower entry fees from
F&C - contribution of insurance mutual funds & unit-linked life insurance products (as
* 2017 pro forma figures as the network income shifted from FIFV to net F&C as of 2018 1Q17 benefited from the launch of EasyInvest), lower
securities-related fees, lower fees from credit files &
AuM* Amounts in bn EUR
bank guarantees, slightly lower fees from payment
200 198 200 202 199 services and higher commissions paid on insurance sales
Assets under management (199bn EUR)
• Fell by 1% q-o-q owing entirely to a negative price effect
• Stabilised y-o-y as net inflows (+1%) were offset by a
negative price effect (-1%)
1Q17 2Q17 3Q17 4Q17 1Q18
* Also note that 2017 AuM figures were reduced due to a roughly 2bn EUR adjustment in Institutional Mandates
21Belgium BU (4): higher y-o-y non-life sales and good
combined ratio
Sales of non-life insurance products
NON-LIFE SALES (GROSS WRITTEN PREMIUM) • Increased by 2% y-o-y
323 329
• Premium growth was situated in all classes, except for
‘Accident & Health’
256
241
228
1Q17 2Q17 3Q17 4Q17 1Q18
COMBINED RATIO (NON-LIFE) Combined ratio amounted to 93% in 1Q18
(86% in FY17). 1Q18 was negatively impacted by
93%
81%
86% higher technical charges y-o-y due mainly to
80%
77%
higher storm claims
1Q 1H 9M FY
2017 2018
22Belgium BU (5): lower life sales and good cross-selling
ratios
LIFE SALES Sales of life insurance products
460
• Fell by 12% q-o-q as the sales of guaranteed interest
404
products are traditionally lower in the first quarter
396
(versus traditionally higher volumes in tax-incentivised
340 pension saving products in the fourth quarter and
306
290 extra sales for individual pension agreements for self-
241 250
197 employed business leaders in 4Q17, anticipating the
193 reduction of corporate tax as of 2018). The lower
sales of unit-linked products was the result of
155 143 170 154
commercial efforts in 4Q17 and a less favourable
113 investment climate in 1Q18
1Q17 2Q17 3Q17 4Q17 1Q18 • Increased by 2% y-o-y driven entirely by higher sales
of guaranteed interest products
Guaranteed interest products Unit-linked products • As a result, guaranteed interest products and unit-
linked products accounted for 62% and 38%,
Amounts in m EUR
respectively, of life insurance sales in 1Q18
MORTGAGE-RELATED CROSS-SELLING RATIOS
90
85 86.5%
80 78.9%
75
70 Mortgage-related cross-selling ratios
65 • 86.5% for property insurance
63.7%
60 • 78.9% for life insurance
Property insurance Life insurance
55
50
45 49.5%
40
23Belgium BU (6): lower FV gains and higher other net income
FV GAINS (pro forma for 2017*) The lower q-o-q figures for net gains from
110
financial instruments at fair value were the
61 74 result mainly of negative q-o-q change in
23 51 market, credit and funding value adjustments
36 34 (mainly as a result of changes in the
29 30 36
10
14
17 underlying market value of the derivative
20 21 12
-2
17
-2
19 portfolio)
1Q17 2Q17 3Q17 4Q17 1Q18
Other FV gains Net result on equity instruments (overlay insurance)
M2M ALM derivatives
* 2017 pro forma figures as:
1) the impact of the FX derivatives was ‘netted’ in NII as of 2018
2) the shift from realised gains AFS shares and impairments on AFS shares to FIFV due to IFRS 9 (overlay approach for insurance)
OTHER NET INCOME
Other net income amounted to 59m EUR in
59 1Q18, higher than the normal run rate of
46
51 around 50m EUR due to the settlement of an
40 38 old legal file
1Q17 2Q17 3Q17 4Q17 1Q18
24
Amounts in m EURBelgium BU (7): higher opex due entirely to higher bank
taxes, lower impairments, good credit cost ratio
OPERATING EXPENSES Operating expenses: +45% q-o-q and stable y-o-y
822 822
• Operating expenses without bank tax fell by 3% q-o-q due
mainly to traditionally lower marketing, professional fee
and ICT expenses in the first quarter, despite a 12m EUR
278 273
544
566 provision for facility expenses for one specific file in 1Q18
520 0
• Operating expenses without bank tax increased by 1% y-o-y
as lower staff and marketing expenses were more than
offset by a 12m EUR provision for facility expenses for one
544 550 527 566 549 specific file in 1Q18, higher ICT & professional fee expenses
• Cost/income ratio: 77% in 1Q18, distorted mainly by the
bank taxes. Adjusted for specific items, the C/I ratio
-6 -7
amounted to 56% in 1Q18 (53% in FY17)
1Q17 2Q17 3Q17 4Q17 1Q18
Bank tax Operating expenses
ASSET IMPAIRMENT
60
1 Loan loss provisions amounted to 14m EUR in 1Q18
(compared with loan loss provisions of 12m EUR in
34
4Q17), so continuously overall low gross impairments
59
(in all segments) in 1Q18. Credit cost ratio amounted
13 24
to 5 bps in 1Q18 (9 bps in FY17)
12 13
21
14
Impaired loans ratio improved to 2.6%, 1.3% of which
12
3 -1
over 90 days past due
-4
-2
1Q17 2Q17 3Q17 4Q17 1Q18
Other impairments Impairments on financial assets at AC*
* AC = Amortised Cost. Under IAS 39, impairments on L&R
Amounts in m EUR 25Net result at the Belgium BU
CONTRIBUTION OF BANKING ACTIVITIES TO
NET RESULT OF THE BELGIUM BU*
385
336
271
NET RESULT AT THE BELGIUM BU* 208
165
483
455
336
301 1Q17 2Q17 3Q17 4Q17 1Q18
243
CONTRIBUTION OF INSURANCE ACTIVITIES TO
NET RESULT OF THE BELGIUM BU*
119
1Q17 2Q17 3Q17 4Q17 1Q18
93 98
79
48 65 78
64 9 20
70 80 74 63
50
-5
-21 -20 -19
-40
* Difference between net profit at the Belgium Business Unit and the sum of 1Q17 2Q17 3Q17 4Q17 1Q18
the banking and insurance contribution is accounted for by the rounding up
Non-Life result Life result Non-technical & taxes
or down of figures
Amounts in m EUR 26CZECH REPUBLIC BUSINESS UNIT
CFO SERVICES
CRO SERVICES
CZECH INTERNATIONAL
BELGIUM
REPUBLIC MARKETS
CORPORATE STAFF
27Czech Republic BU (1): net result of 171m EUR
NET RESULT
Net result at the Czech Republic Business Unit of
181 183
170 167 171 171m EUR
• Q-o-q results were characterised by higher net
interest income, higher net fee and commission
income, lower but still good net results from financial
instruments at fair value, stable net other income, an
improved combined ratio, lower sales of life insurance
products, higher operating expenses (due entirely to
higher bank taxes) and lower impairment charges
• The net result rose by 2% q-o-q. Excluding the upfront
booking of the bank tax in 1Q18, the net result was
even up by 16% q-o-q
1Q17 2Q17 3Q17 4Q17 1Q18 • Profit contribution from the insurance business
remained limited in comparison to the banking
business
Amounts in m EUR
VOLUME TREND
Excluding FX effect Total loans ** o/w retail mortgages Customer deposits*** AuM Life reserves
Volume 23bn 11bn 31bn 9.7bn 1.2bn
Growth q-o-q* +1% +1% +1% +1% +7%
Growth y-o-y +5% +10% +3% +10% +13%
* Non-annualised
** Loans to customers, excluding reverse repos (and bonds)
*** Customer deposits, including debt certificates but excluding repos
28Czech Republic BU (2): higher NII and NIM
NII Net interest income (248m EUR)
248 • Up by 6% q-o-q and by 15% y-o-y to 248m EUR.
216 220 218
234 Corrected for FX effects, NII rose by 5% q-o-q and by
8% y-o-y pro forma
• The pro forma q-o-q increase was the result primarily
of the positive impact of both short & long term
increasing interest rates and the growth in retail loan
volumes, which were partly offset by pressure on
lending margins in mortgages and consumer finance
• Loan volumes up by 5% y-o-y, driven mainly by growth
in mortgages and consumer finance and, to a lesser
1Q17 2Q17 3Q17 4Q17 1Q18 extent, in SME loans
• Customer deposit volumes up by 3% y-o-y
Amounts in m EUR
NIM (pro forma for 2017*)
Net interest margin (3.02%)
3.02%
2.93% 2.91% 2.84% 2.95%
• Up by 7 bps q-o-q and by 9 bps y-o-y to 3.02%
• The q-o-q increase was driven mainly by the positive
impact of repo rate hikes, partly offset by pressure on
lending margins
• The y-o-y increase was the result of the positive impact
of repo rate hikes, partly offset by pressure on lending
margins (especially in mortgages and consumer
finance)
1Q17 2Q17 3Q17 4Q17 1Q18
* NIM is is calculated excluding the dealing room and the net positive impact of ALM FX swaps & repos
29Czech Republic BU (3): higher net F&C income
Amounts in m EUR
F&C (pro forma for 2017*) Net fee and commission income (67m EUR)
67 • Rose by 5% q-o-q and by 19% y-o-y on a pro forma
64 basis
56 56 10
53 10 • The q-o-q increase was driven by lower paid
9 9
10 commissions to the Czech Post (from this year on,
Czech Post receives more support than in the past,
booked in opex). Besides this effect, there is impact of
47 47
53 57 higher entry fees, higher securities-related fees, but
43 lower fees from payment services (seasonal effect of
Christmas) and lower fees from credit files & bank
guarantees
1Q17 2Q17 3Q17 4Q17 1Q18 • The y-o-y increase was attributable chiefly to higher
management & entry fees, higher fees from payment
F&C - network income F&C - banking & insurance
services, higher securities-related fees and due to less
* 2017 pro forma figures as the network income shifted from FIFV to net F&C as of 2018 fees paid to the Czech Post
AuM Amounts in bn EUR
9.7
8.8
9.2 9.3 9.6
Assets under management (9.7bn EUR)
• Increased by 1% q-o-q owing to net inflows (+2%) and
a negative price effect (-1%)
• Y-o-y, assets under management rose by 10%, driven
by net inflows (+6%) and a positive price effect (+4%)
1Q17 2Q17 3Q17 4Q17 1Q18
30Czech Republic BU (4): higher premium income, good
combined ratio
PREMIUM INCOME (GROSS EARNED PREMIUM)
155
Insurance premium income (gross earned
124 117
premium) stood at 117m EUR
97 100
96 • Non-life premium income (57m) rose by 10% y-o-y
68 60
48 47 excluding FX effect, due to growth in all products
53 56 59 57
• Life premium income (60m) went down by 39% q-o-q
49
and increased by 17% y-o-y, excluding FX effect. Q-o-q
1Q17 2Q17 3Q17 4Q17 1Q18 decline entirely in unit-linked single premiums
Life premium income Non-Life premium income
COMBINED RATIO (NON-LIFE)
100%
93% 98% 97% 97% Combined ratio: 93% in 1Q18 (compared with
97% in FY17) due to very good claim experience
(no large claims and mild winter)
1Q 1H 9M FY
2017 2018
CROSS-SELLING RATIOS
Mortg. & prop. Mortg. & life risk Cons. Fin. & life risk
Cross-selling ratios remained at a good level
65% 61% 60% 63% 57%
47% 48% 45% 53%
2016 2017 1Q18 2016 2017 1Q18 2016 2017 1Q18 31Czech Republic BU (5): higher opex due entirely to higher
bank taxes, excellent credit cost ratio
Operating expenses (189m EUR)
OPERATING EXPENSES • Fell by 10% q-o-q and rose by 8% y-o-y, excluding FX
effect and bank tax
189
165
177
0
• The q-o-q decrease excluding FX effect and bank tax
29
151 153 was due mainly to traditionally lower marketing
26 0
1 expenses and professional fees, lower ICT costs and
facilities expenses in the first quarter
176
• The y-o-y increase excluding FX effect and bank tax was
139 150 152 160 attributable primarily to higher staff expenses (mainly
due to wage inflation) and higher support to the Czech
Post (which is compensated by lower paid fee)
• Cost/income ratio at 47% in 1Q18. Adjusted for specific
1Q17 2Q17 3Q17 4Q17 1Q18 items, the C/I ratio amounted to roughly 42% in 1Q18
(and 43% in FY17)
Bank tax Operating expenses
Very limited loan loss provisions due to several
ASSET IMPAIRMENT releases (which almost fully offset the low gross
11 11 impairments)
Impairment of 6m EUR on ‘other’ as the result of
7 a revaluation of leased cars in CSOB Leasing
Credit cost ratio amounted to 0.01% in 1Q18
3
2014 2015 2016 2017 1Q18
CCR 0.18% 0.18% 0.11% 0.02% 0.01%
-1 Impaired loans ratio stabilised at 2.4%, 1.6% of
1Q17 2Q17 3Q17 4Q17 1Q18 which over 90 days past due
32INTERNATIONAL MARKETS BUSINESS UNIT
CFO SERVICES
CRO SERVICES
CZECH INTERNATIONAL
BELGIUM
REPUBLIC MARKETS
CORPORATE STAFF
33International Markets BU (1): net result of 137m EUR
Net result: 137m EUR
NET RESULT The pro forma q-o-q results were characterised by:
• lower net interest income. NIM amounted to 2.88% in
177
5
1Q18 (2.84% in 4Q17)
• lower net fee and commission income (in BG & HU)
137
• higher result from financial instruments at fair value
21
114 99 • sharply higher net other income (especially in IRL, as 4Q17
4
was impacted by an additional provision related to the
78 74 57 tracker mortgage review)
67
22 18 • a very good combined ratio of 86% (especially in HU & SK)
47
3
• higher life insurance sales (in SK & BG)
40 34
20 39
• higher costs due entirely to higher bank taxes
22 25 16 16 23 • higher net impairment releases
-1
1Q17 2Q17 3Q17 4Q17 1Q18 Profit breakdown for International Markets (next
Bulgaria Ireland Hungary Slovakia slides): 23m EUR for Slovakia, 34m EUR for Hungary,
Amounts in m EUR
57m EUR for Ireland and 21m EUR for Bulgaria
VOLUME TREND
Excluding FX effect Total loans ** o/w retail mortgages Customer deposits*** AuM Life reserves
Volume 24bn 15bn 23bn 4.5bn 0.7bn
Growth q-o-q* 0% 0% +1% -11% +6%
Growth y-o-y +13% +8% +24% -21%**** +7%
* Non-annualised
** Loans to customers, excluding reverse repos (and bonds)
*** Customer deposits, including debt certificates but excluding repos
**** The decrease can partly be explained by the divestment of KBC TFI in Poland in December 2017 (-0.93bn AuM in 4Q17)
34International Markets BU (2): Slovakia
Net result of 23m EUR characterised by (pro
NET RESULT forma q-o-q):
• slightly lower net interest income as volume growth
25 was more than offset by margin pressure
23
22 • stable net fee & commission income as the strong
performance in sales of mutual funds was offset by
lower income from banking services
16 16
• lower net other income
• an excellent combined ratio (87% in 1Q18); roughly
stable technical insurance result in life
• lower operating expenses driven by traditionally lower
ICT & marketing expenses in the first quarter and lower
staff expenses
• net impairment releases (mainly in consumer finance
1Q17 2Q17 3Q17 4Q17 1Q18 and leasing)
• credit cost ratio of -0.20% in 1Q18
Amounts in m EUR
VOLUME TREND Volume trend:
Total loans ** o/w retail mortgages Customer deposits*** • Total customer loans rose by 1% q-o-q and by 7% y-o-y,
amongst other things due to the continuously
Volume 7bn 3bn 6bn increasing mortgage portfolio and consumer finance
Growth q-o-q* +1% +3% +3% • Total customer deposits rose by 3% q-o-q and by 9%
y-o-y thanks to retail as well as corporates
Growth y-o-y +7% +12% +9%
* Non-annualised
** Loans to customers, excluding reverse repos (and bonds)
*** Customer deposits, including debt certificates but excluding repos
35International Markets BU (3): Hungary
Net result of 34m EUR characterised by (pro forma
NET RESULT q-o-q):
• lower net interest income due to a one-off effect (2m
47 EUR)
40 39
• lower net fee and commission income as higher
management fees were more than offset by traditionally
34 lower fees from payment transactions in the first quarter
• higher net results from financial instruments thanks to
higher M2M ALM derivatives
20
• higher net other income due to the sale of a building
• good non-life commercial performance y-o-y in all major
product lines and growing average tariff in motor retail;
an excellent combined ratio (84% in 1Q18); stable sales of
life insurance products q-o-q
1Q17 2Q17 3Q17 4Q17 1Q18 • lower operating expenses excluding bank tax (45m EUR)
due mainly to lower staff & ICT expenses
Amounts in m EUR • net impairment releases (mainly in retail and corporates)
• credit cost ratio of -0.44% in 1Q18
VOLUME TREND
Excl. FX effect Total loans ** o/w retail mortgages Customer deposits*** Volume trend:
Volume 4bn 2bn 7bn • Total customer loans stabilised q-o-q and rose by 11%
y-o-y, mainly in mortgages and corporates
Growth q-o-q* 0% 0% -3% • Total customer deposits fell by 3% q-o-q, but rose by 6%
Growth y-o-y +11% +7% +6% y-o-y due to strong growth in corporates
* Non-annualised
** Loans to customers, excluding reverse repos (and bonds)
*** Customer deposits, including debt certificates but excluding repos
36International Markets BU (4): Ireland
Net result of 57m EUR characterised by (pro forma
NET RESULT q-o-q):
• higher net interest income due mainly to lower funding
99 costs
• net other income in 4Q17 was impacted by an additional
provision of 61.5m EUR related to the industry-wide
review of the tracker rate mortgage products originated
67 in Ireland before 2009
57
• higher operating expenses excluding bank tax due mainly
to higher ICT expenses and regulatory levies (mainly CBI
Industry Funding levy)
• lower net impairment releases (-43m EUR in 1Q18
compared with -52m EUR in 4Q17), as 4Q17 benefited
from 31m EUR IBNR parameter changes. Releases in
3
1Q18 are driven by:
-1 o an increase in the 9-month average House Price
1Q17 2Q17 3Q17 4Q17 1Q18 Index and an improved portfolio performance
Amounts in m EUR o lower provisions on existing non-performing loans
driven by improved macro-economic conditions and
provision releases following deleveraging for
VOLUME TREND corporates
Total loans ** o/w retail mortgages Customer deposits*** • credit cost ratio of -1.36% in 1Q18
Volume trend:
Volume 11bn 10bn 6bn
• Total customer loans fell by 1% q-o-q and stabilised y-o-y.
Growth q-o-q* -1% 0% +5% The q-o-q decrease resulted from the further deleveraging
of the corporate loan portfolio
Growth y-o-y 0% +2% +8%
• Retail mortgages: new business (written from 1 Jan 2014)
* Non-annualised +7% q-o-q and +49% y-o-y, while legacy -2% q-o-q and -7%
** Loans to customers, excluding reverse repos (and bonds) y-o-y
*** Customer deposits, including debt certificates but excluding repos • Total customer deposits rose by 5% q-o-q and
37 by 8% y-o-yInternational Markets BU (5): Bulgaria
Net result of 21m EUR
NET RESULT
Net result was characterised by (pro forma q-o-q):
Amounts in m EUR
22 • In banking (CIBank & UBB/Interlease):
21
o slightly lower net interest income, as volume growth was
18 more than offset by margin pressure
o lower net fee and commission income due to traditionally
lower fees from payment transactions in the first quarter
o lower net results from financial instruments
o lower operating expenses excluding bank tax due mainly to
lower staff & ICT expenses
5
4 o higher bank tax y-o-y due to UBB/Interlease acquisition
o net impairment releases. Credit ratio of -1.09% in 1Q18
• In insurance (DZI): higher net result
1Q17 2Q17 3Q17 4Q17 1Q18 o good earned premiums both in Life and Non-Life, offset by
higher technical charges. Combined ratio amounted to 93%
VOLUME TREND Volume trend:
• Total customer loans rose by 1% q-o-q and by 231% y-o-y
Excl. FX effect Total loans *** o/w retail mortg. Customer deposits**** (11% y-o-y excluding UBB/Interlease), amongst other things
due to the continuously increasing mortgage portfolio and a
Volume 3bn 1bn 4bn strong pick-up in corporates in 1Q18
Growth q-o-q* +1% +1% +3% • Total loans: new business +3% q-o-q and +186% y-o-y, while
legacy -7% q-o-q and +787% y-o-y
Growth y-o-y +231%** +239%** +396%**
• Total customer deposits rose by 3% q-o-q and by 396% y-o-y
(9% y-o-y excluding UBB/Interlease)
* Non-annualised
** Y-o-y growth excluding UBB/Interlease amounted to +11% for total loans, +20% for retail mortgages and +9% for customer deposits
*** Loans to customers, excluding reverse repos (and bonds)
**** Customer deposits, including debt certificates but excluding repos
38GROUP CENTRE
CFO SERVICES
CRO SERVICES
CZECH INTERNATIONAL
BELGIUM
REPUBLIC MARKETS
CORPORATE STAFF
39Group Centre: net result of 5m EUR
NET RESULT Net result: 5m EUR
33 The net result for the Group Centre comprises the results coming
from activities and/or decisions specifically made for group
12 purposes (see table below for components)
5
-12
The q-o-q improvement was attributable mainly to:
-179 o one-off upfront negative P&L impact of 126m EUR due to the
1Q17 2Q17 3Q17 4Q17 1Q18
Belgian corporate income tax reform in 4Q17
o higher NII due to lower debt costs (as a result of the call of the
CoCo)
o lower operating expenses
o net impairment releases
BREAKDOWN OF NET RESULT AT GROUP CENTRE
1Q17 2Q17 3Q17 4Q17 1Q18
Group item (ongoing business) -50 0 -31 -157 -17
- Operating expenses of group activities -14 -14 -20 -25 -17
- Capital and treasury management -18 17 5 -5 -4
o/w net subordinated debt cost -9 -9 -9 -13 -6
- Holding of participations -9 -13 -13 18 1
o/w net funding cost of participations -2 0 0 -1 -1
- Group Re 5 6 5 10 7
- Other -14 5 -9 -154 -3
Ongoing results of divestments and companies in run-down 83 11 19 -22 23
Total net result at GC 33 12 -12 -179 5
Amounts in m EUR 40Overview of results based on business units*
Amounts in m EUR
NET PROFIT – KBC GROUP
1Q18 ROAC: 21%
2,639 2,575
2,427
1,762
2,129 1,945
2,035
1,415
556
510 392 630
347
2014 2015 2016 2017 1Q18
2Q-4Q 1Q
NET PROFIT – BELGIUM NET PROFIT – CZECH REPUBLIC NET PROFIT – INTERNATIONAL MARKETS
1Q18 ROAC: 15% 1Q18 ROAC: 40% 1Q18 ROAC: 25%
1,516 1,564 1,575 702
1,432
596
529 542 428 444
1,165 1,234 1,274 521
1,223 390 399 467 245 330
368
171 137
243 221
351 330 301 138 143 129 181 114
209 24 60
2014 2015 2016 2017 1Q18 2014 2015 2016 2017 1Q18
-156
2Q-4Q 1Q 2Q-4Q 1Q -26
-182
2014 2015 2016 2017 1Q18
2Q-4Q 1Q
* Note that the 1Q18 results & ROAC were impacted by the upfront booking of the bank tax
41Balance sheet (1/2):
Loans and deposits continue to grow in most core countries
Y-O-Y ORGANIC* VOLUME GROWTH FOR KBC GROUP
4% 4%
1%
Loans** Retail mortgages Deposits***
* Volume growth excluding FX effects and divestments/acquisitions
** Loans to customers, excluding reverse repos (and bonds)
*** Customer deposits, including debt certificates but excluding repos
42Balance sheet (2/2):
Loans and deposits continue to grow in most core countries
Y-O-Y ORGANIC* VOLUME GROWTH FOR MAIN ENTITIES
12%
9%
10%
7%
4% BE CZ
5%
3%
1%
0%
Loans** Retail Deposits*** Loans** Retail Deposits*** Loans** Retail Deposits***
mortgages mortgages mortgages
20%
11%
11%
7%
6% 9%
8%
2%
0%
Loans** Retail Deposits*** Loans** Retail Deposits*** Loans** Retail Deposits***
mortgages mortgages mortgages****
* Volume growth excluding FX effects and divestments/acquisitions
** Loans to customers, excluding reverse repos (and bonds)
*** Customer deposits, including debt certificates but excluding repos 43
**** Retail mortgages in Ireland: new business (written from 1 Jan 2014) +49% y-o-y, while legacy -7% y-o-yKBC Group
Section 3
Strong solvency and
solid liquidity
44Strong capital position
Fully loaded Basel 3 CET1 ratio at KBC Group (Danish Compromise) The common equity ratio* decreased from
15.9% 16.3% 16.3% at the end of 2017 to 15.9% at the end
15.7% 15.7% 15.9%
of 1Q18 based on the Danish Compromise,
14.0% ‘Own Capital Target’ due to the impact of the first-time application
of IFRS 9 (-41bps). This clearly exceeds the
10.6% fully loaded regulatory minimum
minimum capital requirements** set by the
competent supervisors of 9.875% phased-in
for 2018 and 10.6% fully loaded and our ‘Own
Capital Target’ of 14.0%
The pro forma*** fully loaded CET1 ratio
amounted to roughly 15.7% at the end of
1Q17 1H17 9M17 FY17 1Q18
1Q18
* Note that as from 01/01/2018 onwards, there is no difference
Fully loaded Basel 3 total capital ratio (Danish Compromise) anymore between fully loaded and phased-in
** Excludes a pillar 2 guidance (P2G) of 1.0% CET1
20.7% *** Also taking into account the impact of the share buy-back
19.7%
2.3%
2.3% T2
2.6%
1.5% AT1
The fully loaded total capital ratio amounted
to 19.7% at the end of 1Q18. Including the
15.9% CET1 15.9% successful issuance of 1bn EUR additional Tier-
1 instrument in April 2018, the pro forma fully
loaded total capital ratio amounted to 20.7%
Total capital Pro forma total
ratio 1Q18 capital ratio 1Q18 45Fully loaded Basel 3 leverage ratio and Solvency II ratio
Fully loaded Basel 3 leverage ratio at KBC Group Fully loaded Basel 3 leverage ratio at KBC Bank
5.7% 5.8% 6.1%
5.7% 5.7%
4.8% 4.7% 4.7% 5.0%
4.7%
1Q17 1H17 9M17 FY17 1Q18 1Q17 1H17 9M17 FY17 1Q18
Solvency II ratio
4Q17 1Q18 The increase (+6%-points) in the Solvency II ratio
was mainly the result of lower equity markets
Solvency II ratio* 212% 218%
* On 19 April 2017, the NBB retroactively relaxed the strict cap on the loss-absorbing capacity of deferred taxes in the calculation of the required capital. Belgian insurance
companies are now allowed to apply a higher adjustment for deferred taxes, in line with general European standards, if they pass the recoverability test. This is the case for KBC
46Solid liquidity position (1)
KBC Bank continues to have a strong retail/mid-cap deposit base in its core markets – resulting in a stable funding mix
with a significant portion of the funding attracted from core customer segments & markets
Customer funding further increased in 1Q18. The elevated amount in short-term wholesale funding is on the back of
short-term arbitrage opportunities
Funding from customers (m EUR)
162.536
143.690 155.774
10% 129.555 131.914 132.862 133.766 139.560
3% 6% 3% 2% 4% 5% 8% 12%
0% 2% 2% 7%
9% 10%
8% 8% 8% 8% 7%
7% 9%
9% 8% 9% 8% 8% 8%
9% 3% 2% 3% 3% 10% 6%
8% FY11 FY12 FY13 FY14 FY15 FY16 FY17 1Q18
3%
0% 7%
21%
75%
72%
69% 73% 73% 73% 70% 72%
69% customer
driven
72%
-1% -4%
-6%
FY11 FY12 FY13 FY14 FY15 FY16 FY17 1Q18 Retail and SME
Mid-cap
Net unsecured interbank funding Total equity
Debt issues in retail network
Net secured funding Certificates of deposit
Government and PSE
Debt issues placed with institutional investors Funding from customers
47Solid liquidity position (2)
Short term unsecured funding KBC Bank vs Liquid assets as of end March 2018 (*)
(bn EUR)
486%
68,14
411% 65,39
58,30
KBC maintains a solid liquidity position, given that:
56,23 57,79
• Available liquid assets remained very high at more than
3 times the amount of the net short-term wholesale
309%
funding
271%
288% • Funding from non-wholesale markets is stable funding
25,10
22,70 from core-customer segments in core markets
18,71
14,19
11,56
1Q17 2Q17 3Q17 4Q17 1Q18
Net Short Term Funding Available Liquid Assets Liquid Assets Coverage
* Graph is 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
Ratios FY17 1Q18 Regulatory NSFR is at 137% and LCR is at 139% by the end of
requirement 1Q18
NSFR* 134% 137% ≥100% • Both ratios were well above the regulatory requirement
of at least 100%
LCR** 139% 139% ≥100%
* Net Stable Funding Ratio (NSFR) is based on KBC’s interpretation of the proposal of CRR
amendment
** Liquidity Coverage ratio (LCR) is based on the Delegated Act requirements. From EOY2017
onwards, KBC discloses 12 months average LCR in accordance to EBA guidelines on LCR
disclosure
48KBC Group
Section 4
1Q 2018 wrap up
491Q 2018 wrap up
Strong commercial bank-insurance results in our core countries
Successful earnings track record
Solid capital and robust liquidity position
50Looking forward
We expect 2018 to be a year of sustained economic growth in both the euro area, the US and in each of our
core markets
Management guides for:
• solid returns for all Business Units
• loan impairments for Ireland towards a release in a 100m-150m EUR range for FY18
• the impact of the reform of the Belgian corporate income tax regime: a recurring positive P&L impact as of 2018
onwards and the one-off negative impact in 4Q17 will be fully recuperated in roughly 3 years’ time
• B4 impact for KBC Group is estimated at roughly 8bn EUR higher RWA on a fully loaded basis as at year-end 2017, which
corresponds with a RWA inflation of 9% and an impact on the CET1 ratio of -1.3%
Next to the Belgium and the Czech Republic Business Units, the International Markets Business Unit has
become 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: the legal merger of CIBank into UBB was approved. The new group UBB has become the largest bank-insurance
group in Bulgaria with a substantial increase in profit contribution
• Sustainable profit contribution of Hungary and Slovakia
51KBC Group
Annex 1
Company profile
52Business profile
BREAKDOWN OF ALLOCATED CAPITAL BY BUSINESS UNIT AS AT 31 MARCH 2018
Czech Republic
16%
Belgium 61%
20%
International Markets
3%
Group Centre
KBC is a leading player (retail and SME bank-insurance, private banking, commercial and local investment
banking) in Belgium, the Czech Republic and its 4 core countries in the International Markets Business Unit
53Well-defined core markets provide access to ‘new
growth’ in Europe
MARKET SHARE (END 2017)
BE CZ SK HU BG IRL
KBC Group’s core markets Loans and 20% 20%
11% 11% 10% 8%*
deposits
Investment 33%
22% 13% 13%
funds 7%
NETHERLANDS Life 21%
14% 8%
IRELAND UK insurance 4% 3%
BELGIUM Non-life 11%
GERMANY insurance 9% 7% 7%
CZECH REP 3%
SLOVAKIA
* Only for retail segment
REAL GDP GROWTH OUTLOOK
FRANCE HUNGARY
FOR CORE MARKETS1
BE CZ SK HU BG IRL
64%
% of
BULGARIA Assets 20%
3% 3% 2% 4%
ITALY 7.8%
4.6% 3.4% 4.0% 3.6%
2017 1.7%
SPAIN
PORTUGAL
Macroeconomic outlook 6.0%
GREECE 3.9% 3.8% 3.6%
Based on GDP, CPI and unemployment trends 2018e 1.9% 3.3%
Inspired by the Financial Times
3.9% 3.5% 3.5% 4.0%
2019e 1.7% 2.8%
1. Source: KBC data, May 2018
54Key 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 also has become a strong contributor to the net result of KBC Group
Successful earnings track record
Solid capital and robust liquidity position
55Shareholder structure
SHAREHOLDER STRUCTURE AT END 1Q18
Other core
MRBB
7.4%
Cera 11.4%
2.7%
KBC Ancora 18.5%
60.0%
Free float
Roughly 40% of KBC shares are owned by a syndicate of core shareholders, providing continuity to pursue long-term
strategic 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
56KBC Group going forward:
Wants to be among the best performing financial institutions in Europe
KBC wants to be among Europe’s best performing 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
57KBC Group going forward:
The bank-insurance business model, different countries, different
stages of implementation
Level 4: Integrated distribution and operation
Acting as a single operational company: bank and insurance operations Belgium
working under unified governance and achieving commercial and non-
commercial synergies
Level 3: Integrated distribution
Acting as a single commercial company: bank and insurance
Target for Central
operations working under unified governance and achieving Europe
commercial synergies
Level 2: Exclusive distribution KBC targets to reach at
Bank branches selling insurance products from intra-
least level 3 in every
group insurance company as country, adapted to the
additional source of fee income
local market structure and
KBC’s market position in
Level 1: Non-exclusive
distribution
banking and insurance.
Bank branches selling insurance
products of third party insurers as
additional source of fee income
58More of the same… but differently…
• Integrated distribution model • Client-centricity will be further • Investment in our digital
according to a real-time fine-tuned into ‘think client, but presence (e.g., social media) to
omni-channel approach design for a digital world’ enhance client relationships and
remains key but client anticipate their needs
interaction will change over • Digitalisation end-to-end, front-
time. Technological and back-end, is the main lever: • Easy-to-access and convenient-
development will be the • All processes digital to-use set-up for our clients
driving force • Execution is the
differentiator • Clients will drive the pace of
• Human interface will still play action and change
a crucial role • Further increase efficiency and
effectiveness of data management • Further development of a fast,
simple and agile organisation
• Simplification is a • Set up an open architecture IT structure
prerequisite: package as core banking system for
• In the way we operate our International Markets Unit • Different speed and maturity in
• Is a continuous effort different entities/core markets
• Is part of our DNA • Improve the applications we offer
our clients (one-stop-shop offering) • Adaptation to a more open
via co-creation/partnerships with architecture (with easy plug in
Fintechs and other value chain and out) to be future-proof and
players to create synergy for all
59Summary of the guidance at KBC Group level
as announced at our Investor Visit in June 2017
More of the same …
Guidance… by…
CAGR total income (‘16-’20)* ≥ 2.25% 2020
C/I ratio banking excluding bank tax ≤ 47% 2020
C/I ratio banking including bank tax ≤ 54% 2020
Combined ratio ≤ 94% 2020
Dividend payout ratio ≥ 50% As of now
* Excluding marked-to-market valuations of ALM derivatives
Regulatory requirements… by…
Common equity ratio*excluding P2G ≥ 10.6% 2019
Common equity ratio*including P2G ≥ 11.6% 2019
MREL ratio** ≥ 25.9% May 2019
NSFR ≥ 100% As of now
LCR ≥ 100% As of now
* Fully loaded, Danish Compromise. P2G = Pillar 2 guidance.
** See slide 83 for more details
60Summary of the guidance at KBC Group level
as announced at our Investor Visit in June 2017
… but differently…
Make further progress in our bank-insurance model
Guidance by… Guidance by…
CAGR Bank-Insurance clients CAGR Bank-Insurance stable clients
(1 Bank product + 1 Insurance product) (3 Bk + 3 Ins products in Belgium; 2 Bk + 2 Ins products in CE)
BU BE > 2% 2020 BU BE > 2% 2020
BU CR > 15% 2020 BU CR > 15% 2020
BU IM > 10% 2020 BU IM > 15% 2020
Guidance on inbound omni-channel/digital behaviour*
Guidance by …
% Inbound contacts via omni-channel and
digital channel
KBC Group** > 80% 2020
• Clients interacting with KBC through at least one of the non-physical channels (digital or through a remote advisory centre), possibly in addition
to contact through physical branches. This means that clients solely interacting with KBC through physical branches (or ATMs) are excluded
** Bulgaria & PSB out of scope for Group target
61Digital Investments 2017-2020
Cashflow 2017-2020 = 1.5bn EUR Operating Expenses 2017-2020 = 1bn EUR
Regulatory driven Organic growth
developments (IFRS or operational
48 55
9, CRS(*), MIFID, Regulatory efficiencies 43 44
etc.) 20% Strategic
78 83 90
Growth 94
36%
Strategic Transformation 112 125 127 128
44%
2017 2018 2019 2020
Omni-channel Strategic Grow Strategic Transform Regulatory
and core-banking
system
(*) The Common Reporting Standard (CRS) refers to a systematic and periodic exchange of information at international level aimed at preventing tax evasion. Information on the
taxpayer in the country where the revenue was taken is exchanged with the country where the taxpayer has to pay tax. It concerns an exchange of information between as many as 53
OECD countries in the first year (2017). By 2018, another 34 countries will join.
62Digital sales are increasing (examples: BU Belgium)
20.000 1.200
18.000
16.000 1.000
14.000 800
12.000
10.000 600
8.000
6.000 400
4.000
200
2.000
0 0
Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1
2017 2018 2017 2018
Consumer loans Travel insurance
8.000 35.000
7.000 30.000
6.000
25.000
5.000
20.000
4.000
15.000
3.000
10.000
2.000
1.000 5.000
0 0
Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1
2017 2018 2017 2018
Pension savings Current accounts
63Omnichannel is embraced by our customers (examples: BU Belgium)
Digital signing after contact with the branches Digital sales @ KBC Live increases,
or KBC Live in 2017-2018 strong performance in non-life
90,00%
80,00%
30.000
70,00%
25.000
60,00%
KBC Live cumulative sales 2017-2018
20.000
50,00%
15.000
40,00%
10.000
30,00%
17Q1 17Q2 17Q3 17Q4 18Q1
5.000
Digital signing of consumer loans
Digital signing of debt protect cover life insurance
0
Digital signing mortgage loans Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mrt
Digital signing housing insurance
Non life insurance Life insurance Housing loans
Digital signing car insurance
Consumer loans Investment plans
64Impact of Basel 4 agreement
On 7 December, the Basel Committee reached an agreement on the remaining Basel 3 post-crisis regulatory
reforms (commonly known as Basel 4). The main elements of the Basel 4 agreement are:
o credit risk: changes to the internal ratings-based approach and a revised standardised approach;
o market risk: FRTB postponed to 2022;
o operational risk: a revised and more risk sensitive standardised approach, replacing all existing approaches;
o an aggregate output floor (gradually phased-in between 2022 and 2027), which will ensure that banks' risk-weighted assets
based on internal models are not lower than 72.5% of RWAs as calculated by the revised standardised approaches
For KBC Group, the RWA increase related to Basel 4 is estimated at roughly 8bn EUR higher RWA on a fully
loaded basis as at year-end 2017, which corresponds with a RWA inflation of 9% and an impact on the CET1 ratio
of -1.3%. This figure is based on our current interpretation of Basel 4, a static balance sheet and the current
economic environment. It also does not take into account possible management actions
We no longer see evidence that KBC is impacted significantly more than our peers. As a consequence, the 1%
buffer for Basel 4 in our management targets is no longer required
The Basel agreement now needs to be implemented in EU regulation (CRR/CRD package), which might influence (in
a positive or negative way) the final impact for KBC
Elements that are not included in above mentioned RWA impact (and which might affect KBC earlier):
o the ongoing Targeted Review of Internal Models (TRIM) exercise by ECB;
o the potential impact of the EBA review of the IRB approach (PD & LGD estimation; treatment defaulted exposures);
o any impact on the Pillar 2 requirements (given that pillar 1 more adequately captures the risks)
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