KBC Group Company presentation - 3Q 2018 - KBC Bank
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KBC Group
Company presentation
3Q 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.
2
3Q 2018 key takeaways
3Q18 financial performance
❖ Commercial bank-insurance franchises in core
markets performed well
9M18
❖ Customer loans and customer deposits ➢ ROE 17%*
increased in most of our core countries ➢ Cost-income ratio 57% (excl. specfic items)
❖ Good net interest income and net interest ➢ Combined ratio 88%
margin ➢ Credit cost ratio -0.07%
❖ Lower net fee and commission income Excellent ➢ Common equity ratio 16.0% (B3, DC, fully loaded)
net ➢ Leverage ratio 6.1% (fully loaded)
❖ Higher net gains from financial instruments at
result of ➢ NSFR 134% & LCR 138%
fair value and net other income
855 Net result
❖ Excellent sales of non-life insurance and lower 701m
691 692 701
sales of life insurance y-o-y EUR in 630
556
❖ Costs up, partly due to one-offs 3Q18
399
❖ Net impairment releases on loans
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
❖ Solid solvency and liquidity * when evenly spreading the bank tax throughout the year
❖ An interim dividend of 1 EUR per share (as
advance payment on the total 2018 dividend)
will be paid on 16 November 2018
Comparisons against the previous quarter unless otherwise stated
3
Overview of building blocks of the 3Q18 net result
Bringing
CCR to
-0.07%
1.888
-26
147
182
424 -956
1.136
2
2
-211
701
NII NFCI Technical Other Total Income Bank tax Opex excl. Impairments Other Taxes 3Q18 net
Insurance Income** bank tax result
Result*
Q-o-Q +2% -3% -4% +24% +1% +1% +1%
Y-o-Y +2% -2% -9% +32% +2% +7% +6%
***
* Earned premiums – technical charges + ceded reinsurance
** Dividend income + net result from FIFV + net realised result from debt instruments FV through OCI + net other income
*** Y-o-Y comparison based on pro forma 3Q17 numbers
4
Main exceptional items
3Q18 2Q18 3Q17
Opex – Expenses for early retirement -4m EUR
BE BU
Opex - Facility expenses +1m EUR
Technical charges non-life: release of provisions +26m EUR
Technical charges life: release of provisions +23m EUR
Total Exceptional Items BE BU -4m EUR +1m EUR +49m EUR
CZ BU
Opex – Restructuring costs -5m EUR
Total Exceptional Items CZ BU -5m EUR
-54m EUR
IM BU
IRL – NOI - Provisions related to the tracker mortgage review
IRL – Opex - Costs related to sale of part of legacy loan portf. -3m EUR
Total Exceptional Items IM BU -3m EUR -54m EUR
NOI – Settlement of legacy legal file +5m EUR -38m EUR
Opex – Expenses for early retirement -2m EUR
GC
Total Exceptional Items GC +3m EUR -38m EUR
Total Exceptional Items (pre-tax) -9m EUR -37m EUR -5m EUR
Total Exceptional Items (post-tax) -7m5 EUR -37m EUR -15m EUR
Contents
1 3Q 2018 performance of KBC Group
2 3Q 2018 performance of business units
3 Strong solvency and solid liquidity
4 Looking forward
Annex 1: Company profile
Annex 2: Other items
6
KBC Group
Section 1
3Q 2018 performance of KBC Group
7Net result at KBC Group
CONTRIBUTION OF BANKING ACTIVITIES
TO KBC GROUP NET RESULT*
750
603
575 574
526
461
NET RESULT AT KBC GROUP*
330
855
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
691 692 701
630
556
CONTRIBUTION OF INSURANCE ACTIVITIES
399 TO KBC GROUP NET RESULT*
137 155
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
111 113
96 74 107
78 102
64
78 27 42 73
113
82 93 84 75
61 61
-29 -15 -32 -27
* 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 2Q18 3Q18
Non-Life result Non-technical & taxes
Amounts in m EUR 8
Life resultGood net interest income and net interest margin
NII (pro forma for 2017*) Amounts in m EUR
1,081 1,094 1,114 1,137 1,125 1,117
1,136
2 17 ▪ Net interest income (1,136m EUR)
143 3
28
142
21 144 22 135 47 128 27 124 19 128 • Up by 2% both q-o-q and y-o-y. Note that NII banking
3 2 3 0 1
increased by 2% q-o-q and by 5% y-o-y
• The q-o-q increase was driven primarily by:
907 928 946 952 970 972 989 o additional positive impact of both short- & long-term
interest rate increases in the Czech Republic
o continued good loan volume growth
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 o lower funding costs
NII - netted positive impact of ALM FX swaps** NII - Insurance
partly offset by:
NII - Holding-company/group NII - Banking
o lower netted positive impact of ALM FX swaps
NIM (pro forma for 2017***) o lower reinvestment yields in our eurozone core countries
2.01% 2.00% 1.98%
o pressure on commercial loan margins in most core
1.96% 1.96% 1.97%
1.93% countries
▪ Net interest margin (1.98%)
• Down by 2 bps q-o-q
• Up by 2 bps y-o-y thanks to lower funding costs (due mainly to
the call of the CoCo) and the positive impact of repo rate hikes
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
in the Czech Republic
* 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
VOLUME TREND Total loans** o/w retail mortgages Customer deposits*** AuM Life reserves
Volume 147bn 61bn 194bn 214bn 29bn
Growth q-o-q* +1% +1% 0% 0% 0%
Growth y-o-y +5% +3% +3% 0% -1%
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds). Note that part of the Irish portfolio for which a sales agreement has been signed, is still included in 3Q18
*** Customer deposits, including debt certificates but excluding repos. Customer deposit volumes
9 excluding debt certificates & repos stable q-o-q and +6% y-o-yLower net fee and commission income
F&C (pro forma for 2017*) Amounts in m EUR
▪ Net fee and commission income (424m EUR)
463 454 456 450
• Down by 3% q-o-q and by 2% y-o-y
433 438 424
• Q-o-q decrease was the result chiefly of:
208 213 213 229 215 223 219
o lower securities-related fees (holiday season)
o lower entry fees from mutual funds (holiday season led to
less gross inflows)
323 314 301 299
o lower management fees from mutual funds and unit-linked
295 281 275
life insurance products
o higher commissions paid on insurance sales, mainly non-life
-70
-69 -73 -74 -75 -64 -66 o lower fees from credit files & bank guarantees
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 partly offset by:
o higher fees from payment services (holiday season)
Distribution Banking services Asset management services
o higher network income
* 2017 pro forma figures as the network income shifted from FIFV to net F&C as of 2018
• Y-o-y decrease was mainly the result of:
o lower entry and management fees from mutual funds &
Amounts in bn EUR
unit-linked life insurance products,
o lower fees from credit files & bank guarantees
AuM*
partly offset by:
214 213 215 217 213 214 214 o higher fees from payment services
o higher securities-related fees
o higher network income
▪ Assets under management (214bn EUR)
• Stabilised q-o-q and y-o-y as small net outflows were offset by
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
a positive price effect
• The mutual fund business has seen net outflows, mainly in
* Note that 2017 AuM figures were restated due to a roughly -2bn EUR adjustment in investment advice
Institutional Mandates
10Insurance premium income up y-o-y
and excellent combined ratio
PREMIUM INCOME (GROSS EARNED PREMIUMS) ▪ Insurance premium income (gross earned
794
premiums) at 696m EUR
672 636 660
714 707 696 • Non-life premium income (403m) increased by 7%
410 y-o-y
336 315 293
282
312 267 • Life premium income (293m) down by 7% q-o-q
and up by 4% y-o-y
360 369 378 384 378 392 403
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
Life premium income Non-Life premium income
▪ The non-life combined ratio at 9M18
COMBINED RATIO (NON-LIFE) amounted to 88%. 3Q18 was impacted by 2
90%
84% 88% 83% 88% 88% large fire claims in Belgium, while technical
79%
charges were low in 2Q18. Remember that
3Q17 benefited from a one-off release of
provisions in Belgium (positive effect of 26m
EUR). Excluding this one-off release in 3Q17,
the combined ratio amounted to 86% at 9M17
1Q 1H 9M FY
2017 2018
11
Amounts in m EURNon-life sales up y-o-y, life sales down y-o-y
NON-LIFE SALES (GROSS WRITTEN PREMIUM) ▪ Sales of non-life insurance products
468 492 • Up by 8% y-o-y thanks to a good commercial
performance in all major product lines in our core
382 378
358 349 342 markets and tariff increases
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
▪ Sales of life insurance products
• Decreased by 10% q-o-q and by 5% y-o-y
LIFE SALES • The q-o-q decrease was primarily due to lower sales of
588 guaranteed interest products in Belgium
498
474
415 426 • The y-o-y decrease was driven entirely by lower sales of
405 383
318 unit-linked products in Belgium
267 279
222 218 261 230 • Sales of unit-linked products accounted for 40% of total
life insurance sales
270 219
207 193 187 165 153
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
Guaranteed interest products Unit-linked products
12
Amounts in m EURHigher FV gains and other net income
FV GAINS (pro forma for 2017*) ▪ The higher q-o-q figures for net gains from
180 financial instruments at fair value were
130
attributable mainly to:
86 118
94 96 • a positive change in ALM derivatives
79
110 94
54 • a positive change in market, credit and funding value
73 71 73 35 66 adjustments (mainly as a result of changes in the
1 11 7 4 33
underlying market value of the derivatives portfolio
19 21 12 17 19 2 11
-14 and decreased credit spreads)
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 partly offset by:
Other FV gains Net result on equity instruments (overlay insurance) • lower net result on equity instruments (insurance)
M2M ALM derivatives • lower dealing room income, mainly in Belgium and
the Czech Republic
* 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 on AFS shares and impairments on AFS shares to FIFV
due to IFRS 9 (overlay approach for insurance)
▪ Other net income amounted to 56m EUR, more
or less in line with the normal run rate of around
OTHER NET INCOME 50m EUR. Note that 2Q18 was negatively
77 impacted by the settlement of a legacy legal file
71
in the Group Centre (-38m EUR), while 3Q17
56
47 was negatively impacted by an additional
23
provision of 54m EUR related to an industry
4
wide review of the tracker rate mortgage
products originated in Ireland before 2009
-14
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
13
Amounts in m EUROperating expenses up, partly due to one-offs
OPERATING EXPENSES ▪ Cost/income ratio (banking) adjusted for specific
items* at 58% in 3Q18 and 57% YTD
1,291
1,229
• Operating expenses excluding bank tax went up by 1%
361
1,021 371 966 981 q-o-q primarily as a result of:
910 914 41 26
19 18
24 o higher staff expenses (mainly due to wage
inflation), except for Belgium
o higher ICT and marketing expenses
980 956
868 891 896 920 942 o 14m EUR one-off costs:
o 6m EUR expenses for early retirement in Belgium
o 5m EUR restructuring charges in CZ
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 o 3m EUR costs related to the sale of part of the
legacy loan portfolio in Ireland
Bank tax Operating expenses
partly offset by:
o lower facilities expenses
• Operating expenses without bank tax increased by 7%
EXPECTED BANK TAX SPREAD IN 2018 y-o-y in 3Q18
TOTAL Upfront Spread out over the year • Excluding the consolidation impact of UBB/Interlease,
bank tax, FX effect and one-off costs, operating
3Q18 1Q18 2Q18 3Q18 1Q18 2Q18 3Q18 4Q18e expenses in 9M18 rose by roughly 3% y-o-y
BE BU 0 273 -4 0 0 0 0 0
CZ BU 0 29 1 0 0 0 0 0 • Pursuant to IFRIC 21, certain levies (such as
contributions to the European Single Resolution Fund)
Hungary 21 26 0 0 19 22 21 22 have to be recognised in advance, and this adversely
3 0 0 4 4 4 4
impacted the results for 1Q18. The YTD increase can
Slovakia 4
mainly be explained by the consolidation of UBB
Bulgaria 0 14 1 0 0 0 0 0 • Total bank taxes (including ESRF contribution) are
Ireland 1 3 0 0 1 0 1 14 expected to increase from 439m EUR in FY17 to 462m
EUR in FY18
GC 0 0 0 0 0 0 0 0
TOTAL 26 347 -2 0 24 26 26 40
14
Amounts in m EUR * See glossary (slide 79) for the exact definitionOverview of bank taxes* Bank taxes of 269m EUR YTD.
On a pro rata basis, bank taxes
represented 10.7% of 9M18
KBC GROUP Bank taxes of 421m EUR YTD. BELGIUM BU opex at the Belgium BU
361 371 On a pro rata basis, bank taxes 278 273
represented 10.9% of 9M18 53 58
83 98
opex at KBC Group**
225 215
278 273
41
19 18 0 24 26 0 0
41 2 -4 -2 -7 3
20 22
-1 -6 -7 -4
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
European Single Resolution Fund contribution ESRF contribution Common bank taxes
Common bank taxes
Bank taxes of 122m EUR YTD.
On a pro rata basis, bank
Bank taxes of 30m EUR YTD. taxes represented 18.1% of
CZECH REPUBLIC BU On a pro rata basis, bank INTERNATIONAL MARKETS BU 9M18 opex at the IM BU
taxes represented 4.2% of
29 9M18 opex at the CZ BU 70
26
57 18
11
41
22
20
25 25 27 26
1 52
46
24 28
6 1 0 0 6 1 0
-1
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
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 57% in 9M18 amounts to roughly 50% excluding these bank taxes
15Net impairment releases, excellent credit cost ratio and
improved impaired loans ratio
ASSET IMPAIRMENT
31 2 ▪ Very low asset impairments
10
8 29 • This was attributable mainly to:
21 20
7 1 5 6 6 o net loan loss impairment releases in Ireland of 15m EUR
-8
-21 -2
-76
-27
-63 (compared with 39m in 2Q18)
-1 o also small net loan loss impairment reversals in Slovakia,
-56 Hungary, Bulgaria and Group Centre
-71 partly offset by:
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 o loan loss impairments of only 3m EUR in Belgium
Other impairments Impairments on financial assets at AC* and FVOCI o loan loss impairments of 12m EUR in the Czech Republic due
* AC = Amortised Cost. Under IAS 39, impairments on L&R
to 1 large corporate file
CREDIT COST RATIO
0.42%
• Impairment of 6m on ‘other’, of which 4m EUR in the Czech
Republic mostly resulting from a review of residual values of
0.23% financial car leases under short-term contracts
0.09%
-0.06% -0.07% ▪ The credit cost ratio amounted to -0.07% in 9M18 due to
FY14 FY15 FY16 FY17 9M18 low gross impairments and several releases
IMPAIRED LOANS RATIO
6.8% 6.9% 6.6%
6.0% 5.9%
5.5% 5.5%
▪ The impaired loans ratio stabilised at 5.5%*, 3.2% of
which over 90 days past due
3.6% 3.9% 3.7% 3.4% 3.5% 3.2%
3.2%
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
* Excluding the part of the Irish portfolio for which a sales agreement has
16
Impaired loans ratio of which over 90 days past due been signed, the impaired loans ratio would amount to 4.5% in 3Q18KBC Group
Section 2
3Q 2018 performance of business units
17Business profile
BELGIUM CZECH GROUP
SLOVAKIA HUNGARY BULGARIA IRELAND
REPUBLIC CENTRE
3Q18 NET RESULT (in million euros) 409m 168m 27m 51m 31m 32m -17m
ALLOCATED CAPITAL (in billion euros) 6.6bn 1.7bn 0.6bn 0.7bn 0.4bn 0.6bn 0.3bn
LOANS (in billion euros) 99bn 23bn 7bn 4bn 3bn 11bn
DEPOSITS (in billion euros) 132bn 32bn 6bn 7bn 4bn 5bn
BRANCHES (end 9M18) 627 265 122 206 224 18
Clients (end 9M18) 3.5m 3.7m 0.6m 1.6m 1.2m 0.3m
18Belgium BU (1): net result of 409m EUR
NET RESULT Net result at the Belgium Business Unit amounted
483
to 409m EUR
455
437 • The quarter under review was characterised by good
409 net interest income, lower net fee and commission
336 income, lower dividend income, stable trading and fair
301 value income, lower other net income, an excellent
243 combined ratio, lower sales of life insurance products,
lower operating expenses and lower impairment
charges q-o-q
• Customer deposits excluding debt certificates and
repos rose by 7% y-o-y, while customer loans increased
by 6% y-o-y
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
Amounts in m EUR
VOLUME TREND Total loans** o/w retail mortgages Customer deposits*** AuM Life reserves
Volume 99bn 35bn 132bn 200bn 27bn
Growth q-o-q* +1% 0% +1% 0% 0%
Growth y-o-y +6% +2% +2% 0% -1%
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds)
*** Customer deposits, including debt certificates but excluding repos. Customer deposit volumes excluding debt certificates & repos -1% q-o-q and +7% y-o-y
19Belgium BU (2): good NII and lower NIM
Amounts in m EUR
NII (pro forma for 2017*)
681 677 677
▪ Net interest income (637m EUR)
664 649 642 637
28 19 20 39 19 11 8 • Fell by 1% q-o-q due mainly to:
129
130 132 123 117 113 116 o the lower netted positive impact of FX swaps
o lower reinvestment yields
o pressure on commercial margins
partly offset by:
523 529 512 515 513 518 513
o good loan volume growth
o higher NII insurance
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 • Down by 4% y-o-y, driven primarily by:
NII - netted positive impact of ALM FX swaps** NII - contribution of banking o lower netted positive impact of FX swaps
NII - contribution of insurance o lower reinvestment yields
o pressure on commercial loan margins
* 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 partly offset by:
*** NIM is calculated excluding the dealing room and the net positive impact of ALM FX swaps & repos o lower funding costs on term deposits
o good loan volume growth
NIM (pro forma for 2017***) Note that NII banking stabilised y-o-y
1.78% 1.79% 1.73% 1.73%
1.72% 1.72% 1.69%
▪ Net interest margin (1.69%)
• Fell by 3 bps both q-o-q and y-o-y due mainly to the negative
impact of lower reinvestment yields and pressure on commercial
loan margins
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
20Credit margins in Belgium
PRODUCT SPREAD ON CUSTOMER LOAN BOOK, OUTSTANDING
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
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 2Q18 3Q18
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 2Q18 3Q18
SME and corporate loans Mortgage loans
21Belgium BU (3): lower net F&C income
Amounts in m EUR
F&C (pro forma for 2017*)
▪ Net fee and commission income (289m EUR)
356
339
10
9 307
321 318 302 289 • Net F&C income decreased by 4% q-o-q due mainly to:
8
7 9 9 9 o lower securities-related fees (holiday season)
o lower entry fees from mutual funds (holiday season
led to less gross inflows)
391 376 352 368 356
o lower management fees from mutual funds and unit-
345 333
linked life insurance products
partly offset by:
o higher fees from payment services (holiday season)
-45 -45 -52 -55 -47 -53 -53
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 • Fell by 6% y-o-y driven chiefly by lower entry and
F&C - network income F&C - contribution of banking
management fees from mutual funds & unit-linked life
F&C - contribution of insurance
insurance products and lower fees from credit files &
bank guarantees partly offset by higher fees from
* 2017 pro forma figures as the network income shifted from FIFV to net F&C as of 2018 payment services, higher securities-related fees and
higher network income
AuM* Amounts in bn EUR
200 198 200 202 199 200 200
▪ Assets under management (200bn EUR)
• Stabilised q-o-q and y-o-y as small net outflows were
offset by a positive price effect
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
* Also note that 2017 AuM figures were reduced due to a roughly 2bn EUR adjustment
in Institutional Mandates
22Belgium BU (4): higher y-o-y non-life sales,
excellent combined ratio
▪ Sales of non-life insurance products
NON-LIFE SALES (GROSS WRITTEN PREMIUM) • Increased by 5% y-o-y
323 329
• Premium growth in all classes
256 262
241 252
228
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
Amounts in m EUR
COMBINED RATIO (NON-LIFE) ▪ Combined ratio amounted to 87% in 9M18
(86% in FY17). 3Q18 was impacted by 2 large fire
93%
81%
87% 87% 86% claims, while technical charges were low in 2Q18.
80%
77%
Remember that 3Q17 benefited from a one-off
release of provisions (positive effect of 26m EUR).
Excluding this one-off release in 3Q17, the
combined ratio amounted to 83% at 9M17
1Q 1H 9M FY
2017 2018
23Belgium BU (5): lower life sales, good cross-selling ratios
LIFE SALES ▪ Sales of life insurance products
460
• Fell by 15% q-o-q driven by both lower sales of
404
guaranteed interest products and unit-linked products
396
340 333
• Decreased by 8% y-o-y driven entirely by lower sales
306
290 282
of unit-linked products
241 250 • As a result, guaranteed interest products and unit-
197
193 233 linked products accounted for 71% and 29%,
201
respectively, of life insurance sales in 3Q18
155 170 154
143 113 101 81 ▪ Life technical charges: note that 3Q17 benefited
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 from a release of life-related provisions (positive
effect of 23m EUR)
Guaranteed interest products Unit-linked products
Amounts in m EUR
MORTGAGE-RELATED CROSS-SELLING RATIOS
90
85 84.5%
▪ Mortgage-related cross-selling ratios
80 80.0% • 84.5% for property insurance
75 • 80.0% for life insurance
70
65
60 63.7%
Property insurance Life insurance
55
50
45 49.5%
40
24Belgium BU (6): stable FV gains and lower other net income
FV GAINS (pro forma for 2017*) ▪ The stable q-o-q figures for net gains from
110
financial instruments at fair value were
61 74 primarily due to a positive change in ALM
23 51 54 53 derivatives and a positive change in market,
36 34
7
14
33
credit and funding value adjustments (mainly
29 30 36
10
14
17
33
as a result of changes in the underlying
18
20 21 12
-2
17
-2
19
2 market value of the derivative portfolio and
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 decreased credit spreads), offset entirely by
lower net result on equity instruments and
Other FV gains Net result on equity instruments (overlay insurance)
M2M ALM derivatives
lower dealing room result
* 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 on AFS shares and impairments on AFS shares to FIFV
due to IFRS 9 (overlay approach for insurance)
OTHER NET INCOME
59
51
▪ Other net income amounted to 44m EUR in
49
46
40
44 3Q18 (roughly in line with the normal run
38
rate)
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
25
Amounts in m EURBelgium BU (7): lower opex and impairments, good credit
cost ratio
OPERATING EXPENSES ▪ Operating expenses: flat q-o-q and +8% y-o-y
822 822
• Operating expenses without bank tax fell by 1% q-o-q due
mainly to lower staff, facilities and professional fee
expenses, partly offset by higher marketing & ICT expenses
278 273
544
566 562
559
and 4m EUR expenses for early retirement
520 0
• Operating expenses without bank tax increased by 6% y-o-y
as lower facilities and staff expenses were more than offset
by higher ICT, professional fee & marketing expenses and
544 550 527 566 549 566 4m EUR expenses for early retirement
• Cost/income ratio: 51% in 3Q18 and 59% YTD, distorted by
the bank taxes. Adjusted for specific items, the C/I ratio
-6 -7 -4
amounted to 58% in 3Q18 and 57% YTD (53% in FY17)
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
Bank tax Operating expenses
ASSET IMPAIRMENT
60
▪ Loan loss impairments decreased to 3m EUR in 3Q18
(compared with 26m EUR in 2Q18) as 2Q18 was
impacted by some corporate files. Credit cost ratio
34
amounted to 6 bps in 9M18 (9 bps in FY17)
24 26
13
▪ Impaired loans ratio stabilised at 2.4%, 1.3% of which
over 90 days past due
14 41
3
-1
-2
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
Other impairments Impairments on financial assets at AC* and FVOCI
* AC = Amortised Cost. Under IAS 39, impairments on L&R
Amounts in m EUR 26Net result at the Belgium BU
CONTRIBUTION OF BANKING ACTIVITIES TO
NET RESULT OF THE BELGIUM BU*
385
336 325
302
271
NET RESULT AT THE BELGIUM BU* 208
165
483
455 437
409
336
301 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
243
CONTRIBUTION OF INSURANCE ACTIVITIES TO
NET RESULT OF THE BELGIUM BU*
119 135
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
93 98 58
79 84
48 65 78
64 9 20 55
101
70 80 74 63
50 48
-19 -5 -19
-21 -20 -24
-40
* Difference between net profit at the Belgium Business Unit and the sum of 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
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 27Czech Republic BU
NET RESULT Amounts in m EUR
181 183
170 171
Net result of 168m EUR in 3Q18
167 168
145
▪ +16% q-o-q excluding FX effect due mainly to higher net
interest income and higher net results from financial
instruments at fair value
▪ Customer deposits (including debt certificates, but
excluding repos) rose by 8% y-o-y, while customer loans
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
increased by 4% y-o-y
NII & NIM Amounts in m EUR Highlights
234 248 241
263
▪ Net interest income
216 220 218
2.93% 2.91% 2.84% 2.95% 3.02% 2.97% 3.04% • +9% q-o-q and +19% y-o-y excl. FX effects
• Q-o-q increase: primarily due to short & long term increasing
interest rates and growth in loan and deposit volume, despite
pressure on commercial margins
• Net interest margin at 3.04%: +7 bps q-o-q and +20 bps y-o-y
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
NIM NII
VOLUME TREND Total loans ** o/w retail mortgages Customer AuM Life reserves
excluding FX effect deposits***
Volume 23bn 11bn 32bn 9.7bn 1.3bn
Growth q-o-q* +1% +2% +3% +1% +2%
Growth y-o-y +4% +8% +8% +5% +8%
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds) *** Customer deposits, including debt certificates but excluding repos
28Czech Republic BU
▪ Net F&C income
F&C (pro forma for 2017*) • -3% q-o-q and +13% y-o-y on a pro forma basis excl. FX effects
Amounts in m EUR • Q-o-q decrease driven by lower fees from payment services,
64
67
64
lower securities-related fees and lower fees from credit files &
62
56 56 10 8
bank guarantees partly offset by higher network income
53 10 10
9 9
10
• Y-o-y increase due chiefly to slightly higher management fees,
higher securities-related fees and less fees paid to the Czech
Post
53 57 56 52
47 47 43
▪ Assets under management
• 9.7bn EUR
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 • +1% q-o-q due to net inflows (+0.8%) & positive price effect
(+0.6%)
F&C - network income F&C - banking & insurance
• +5% y-o-y, due to net inflows (+6%) & negative price effect (-1%)
* 2017 pro forma figures as the network income shifted from FIFV to net F&C as of 2018
▪ Trading and fair value income
• 12m EUR higher q-o-q net results from financial instruments at
fair value (to 20m EUR) due mainly to a higher q-o-q change in
market, credit & funding value adjustments as well as in ALM
CROSS-SELLING RATIOS derivatives, partly offset by lower dealing room result
Mortg. & prop. Mortg. & life risk Cons.fin. & life risk
▪ Insurance
• Insurance premium income (gross earned premium): 128m EUR
o Non-life premium income (65m EUR) +14% y-o-y excluding FX
65% 61% 59%
48% 48%
63% 57% 55% effect, due to growth in all products
47%
o Life premium income (63m EUR) +10% q-o-q and -9% y-o-y,
2016 2017 9M18 2016 2017 9M18 2016 2017 9M18
excluding FX effect. Q-o-q increase mainly in unit-linked single
premiums
• Good combined ratio of 96% in 9M18 (97% in FY17). Technical
charges in 3Q18 were in line with 2Q18, despite the fact that
3Q18 was impacted by a few large fire claims
29Czech Republic BU
▪ Operating expenses
OPERATING EXPENSES Amounts in m EUR
• 180m EUR; +5% q-o-q and +16% y-o-y, excluding FX effect
177 189 and bank tax
173 180
165 0
151 153 29 1 • Q-o-q increase excluding FX effect and bank tax was due
26 1 0 mainly to higher staff expenses (wage inflation), higher ICT
& marketing expenses and 5m EUR one-off restructuring
costs, partly offset by lower facilities expenses and lower
176 172 professional fees
150 152 160
139
• Y-o-y increase excluding FX effect and bank tax was due
primarily to higher staff expenses, higher support to the
Czech Post (which is compensated by lower paid fee), 5m
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 EUR one-off restructuring costs, higher marketing
expenses and higher professional fees
Bank tax Operating expenses
• Cost/income ratio at 46% in 3Q18 and 47% YTD. Adjusted
for specific items, C/I ratio amounted to roughly 48% in
3Q18 and 46% YTD (43% in FY17)
ASSET IMPAIRMENT Amounts in m EUR
▪ Loan loss and other impairment
16
11 9 4
• Loan loss impairments of 12m EUR due to 1 large
11 corporate file. Credit cost ratio amounted to 0.04% in
3 7 9M18
13 13 12
7
3 6 2014 2015 2016 2017 9M18
2
1 1 CCR 0.18% 0.18% 0.11% 0.02% 0.04%
-2 -4
-1
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
• Impaired loans ratio amounted to 2.3%, 1.4% of which >90
days past due
Other impairments Impairments on financial assets at AC* and FVOCI
* AC = Amortised Cost. Under IAS 39, impairments on L&R • Impairment of 4m EUR on ‘other’ mainly as the result of a
review of residual values of financial car leases under
short-term contracts
30International Markets BU
Amounts in m EUR
177 NET RESULT
5 163 Net result of 141m EUR
26 141
137
▪ Slovakia 27m EUR, Hungary 51m EUR, Ireland 32m EUR
114 21 31
4
99
55
and Bulgaria 31m EUR
32
78 74 57
67
22 18
47
3 62 51 Highlights (q-o-q results)
34
20 40 39 ▪ Higher net interest income. NIM 2.79% in 3Q18 (-2 bps q-o-q
25 27
22
-1
16 16 23 19 and -4 bps y-o-y)
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 ▪ Higher net fee and commission income (in SK)
Bulgaria Ireland Hungary Slovakia ▪ Stable result from financial instruments at fair value
▪ An excellent combined ratio of 88% YTD
▪ Higher life insurance sales (in HU)
▪ Higher costs
▪ Lower net impairment releases (especially IRL)
VOLUME TREND Total loans ** o/w retail mortgages Customer deposits*** AuM Life reserves
Excluding FX effect
Volume 25bn 15bn 22bn 4.3bn 0.7bn
Growth q-o-q* +1% +1% -2% 0% +2%
Growth y-o-y +4% +4% +3% -28%**** +4%
* 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)
31International Markets BU - Slovakia
NET RESULT Amounts in m EUR
25
27 Net result of 27m EUR
23
22
19
16 16 Highlights (q-o-q results)
▪ Higher net interest income due mainly to volume growth. NIM
stabilised q-o-q
▪ Higher net fee & commission income due mainly to higher fees
from payment services, higher entry fees and higher network
income
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 ▪ Higher result from financial instruments at fair value
▪ Lower net other income
▪ Excellent combined ratio (85% in 9M18); roughly stable
Technical insurance result in life
▪ Stable operating expenses, despite high wage pressure
▪ Net impairment releases (mainly in leasing and corporates);
credit cost ratio of -0.01% in 9M18
VOLUME TREND Total o/w retail Customer
loans ** mortgages deposits***
Volume 7bn 3bn 6bn Volume trend
▪ Total customer loans rose by 2% q-o-q and by 8% y-o-y, among
Growth q-o-q* +2% +2% +2%
other things due to the continuously increasing mortgage
Growth y-o-y +8% +12% +11% portfolio and corporate portfolio
▪ Total customer deposits increased by 2% q-o-q and by 11%
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds) y-o-y (both due mainly to retail)
*** Customer deposits, including debt certificates but excluding repos
32International Markets BU - Hungary
Net result of 51m EUR
NET RESULT Amounts in m EUR
62
51
Highlights (q-o-q results)
47 ▪ Higher net interest income excluding FX effect (despite margin
40 39
34
pressure)
▪ Higher net fee and commission income excluding FX effect due
20 mainly to higher fees from payment transactions
▪ Lower net results from financial instruments due mainly to
lower M2M ALM derivatives and dealing room result (as a result
of low market and FX volatility)
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
▪ Lower net other income as 2Q18 benefited from a 5m gain on
the sale of retail government bonds
▪ Good non-life commercial performance y-o-y in all major
product lines and growing average tariff in motor retail;
excellent combined ratio (90% in 9M18); higher sales of life
insurance products q-o-q
▪ Higher operating expenses excluding FX effect
VOLUME TREND Total o/w retail Customer
▪ Net impairment releases on loans (in retail). Credit cost ratio of
Excl. FX effect loans ** mortgages deposits***
-0.21% in 9M18. Impairment of 1m EUR on ‘other’, mainly on a
Volume 4bn 2bn 7bn legacy property file
Growth q-o-q* +3% +2% -1%
Growth y-o-y +10% +4% +5% Volume trend
▪ Total customer loans rose by 3% q-o-q and by 10% y-o-y, the
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds) latter due mainly to corporates and SMEs
*** Customer deposits, including debt certificates but excluding repos
▪ Total customer deposits -1% q-o-q (due mainly to corporates)
33 and +5% y-o-y (due mainly to retail)International Markets BU - Ireland
Net result of 32m EUR
99 NET RESULT Amounts in m EUR
Highlights (q-o-q results)
▪ Higher net interest income due mainly to lower funding costs
67 (despite margin pressure)
57 55 ▪ Higher expenses excluding bank tax, due mainly to higher staff,
professional fee expenses and 3m EUR one-off costs related to
32
the sale of part of the legacy loan portfolio in Ireland
▪ Lower net impairment releases (-15m EUR in 3Q18, -38m EUR
3 in 2Q18). Releases in 3Q18 were driven by an increase in the
-1 9-month average House Price Index, an improved portfolio
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 performance and lower provisions on existing non-performing
loans (improved macro-economic conditions and provision
releases following deleveraging for corporates). Credit cost
ratio of -1.03% in 9M18
▪ Looking forward, we are maintaining our impairment guidance
for Ireland, namely a net release in a range of 100m-150m EUR
for FY18
VOLUME TREND Total o/w retail Customer
loans ** mortgages deposits*** Volume trend
▪ Total customer loans stabilised q-o-q and fell by 1% y-o-y. The
Volume 11bn 10bn 5bn
y-o-y decrease resulted from further deleveraging of the
Growth q-o-q* 0% 0% -8% corporate loan portfolio
Growth y-o-y -1% +1% -5% ▪ Retail mortgages: new business (written from 1 Jan 2014) +6%
q-o-q and +35% y-o-y, while legacy -1% q-o-q and -7% y-o-y
* Non-annualised ▪ Total customer deposits -8% q-o-q and -5% y-o-y as expensive
** Loans to customers, excluding reverse repos (and bonds). Note that the Irish
portfolio for which a sales agreement has been signed, is still included in 3Q18
corporate deposits were deliberately replaced by intragroup
*** Customer deposits, including debt certificates but excluding repos funding
34International Markets BU - Bulgaria
Net result of 31m EUR
NET RESULT Amounts in m EUR
31 Highlights (q-o-q results)
26 ▪ Banking (CIBank & UBB/Interlease): higher net result
22 21 ▪ Higher net interest income (despite margin pressure)
18 ▪ Lower net fee and commission income due mainly to higher
insurance distribution expenses (due to higher sales), partly
offset by higher asset management fees
4 5 ▪ Stable net results from financial instruments
▪ Stable operating expenses as higher staff expenses were
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 offset by lower ICT expenses and no additional bank tax
▪ Net impairments releases on loans. Credit ratio of -0.57% in
9M18. Impairment of 1m EUR on ‘other’, mainly on a legacy
property file
▪ Insurance (DZI): higher net result
▪ Strong non-life commercial performance y-o-y in motor retail
(both strong volume growth and growing average tariff);
VOLUME TREND Total o/w retail Customer excellent combined ratio at 87% in 9M18
Excl. FX effect loans ** mortgages deposits*** ▪ Stable life insurance sales
Volume 3bn 1bn 4bn
Growth q-o-q* +1% 0% 0% Volume trend:
Growth y-o-y +4% +3% 0% ▪ Total customer loans +1% q-o-q and +4% y-o-y, the latter
partially due to the increasing mortgage portfolio
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds) ▪ Total loans: new business +2% q-o-q and +8% y-o-y, while legacy
*** Customer deposits, including debt certificates but excluding repos
-4% q-o-q and -24% y-o-y
▪ Total customer deposits stabilised both q-o-q and y-o-y
35Group Centre
NET RESULT Amounts in m EUR Net result of -17m EUR
33 The net result for the Group Centre comprises the results
12 coming from activities and/or decisions specifically made
5
for group purposes (see table below for components)
-12 -17
Highlights (q-o-q results)
-53
Q-o-q improvement was attributable mainly to:
-179 ▪ the positive impact from the settlement of a legacy legal file in
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
3Q18 (+5m EUR in other net income) versus the negative impact
from the settlement of an legacy legal file in 2Q18 (-38m in other
net income)
BREAKDOWN OF NET RESULT AT GROUP CENTRE 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
Group item (ongoing business) -50 0 -31 -157 -17 -63 -27
Operating expenses of group activities -14 -14 -20 -25 -17 -15 -18
Capital and treasury management -18 17 5 -5 -4 8 4
o/w net subordinated debt cost -9 -9 -9 -13 -6 -3 -3
Holding of participations -9 -13 -13 18 1 3 -4
o/w net funding cost of participations -2 0 0 -1 -1 -2 -4
Group Re 5 6 5 10 7 6 3
Other -14 5 -9 -154 -3 -64 -13
Ongoing results of divestments and companies in run-down 83 11 19 -22 23 10 10
Total 33 12 -12 -179 5 -53 -17
Amounts in m EUR 36Overview of contribution of business units to 9M18 result
Amounts in m EUR
NET PROFIT – KBC GROUP
9M18 ROAC: 24%
2,639 2,575
2,427
462
863 1,948
685
1,762
473
2,113
1,776 1,742
1,289
2014 2015 2016 2017 9M18
4Q 9M
NET PROFIT – BELGIUM NET PROFIT – CZECH REPUBLIC NET PROFIT – INTERNATIONAL MARKETS
9M18 ROAC: 22% 9M18 ROAC: 38% 9M18 ROAC: 27%
1,516 1,564 1,575 702
1,432
335 596 168
348 542 444 440
414 528 428
439 1,089 131 484 74
121 119
139
245
1,216 1,240 534 61
1,102 993 465 370
408 423 289
184
-7
2014 2015 2016 2017 9M18 2014 2015 2016 2017 9M18
-175
4Q 9M 4Q 9M
-182
2014 2015 2016 2017 9M18
4Q 9M
37Balance sheet:
Loans and deposits continue to grow in most core countries
12%
11%
BE 8%
6%
2% 2%
Y-O-Y ORGANIC* VOLUME GROWTH Loans** Retail Deposits*** Loans** Retail Deposits***
mortgages mortgages
CR 8% 8%
5%
4% 4%
3%
3% 3% 0%
Loans** Retail Deposits*** Loans** Retail Deposits***
4% mortgages mortgages****
10%
Loans** Retail Deposits***
mortgages 5%
4%
1%
-1%
Loans** Retail Deposits***
-5%
* Volume growth excluding FX effects and divestments/acquisitions mortgages
** Loans to customers, excluding reverse repos (and bonds) Loans** Retail Deposits***
*** Customer deposits, including debt certificates but excluding repos mortgages*****
**** Retail mortgages in Bulgaria: new business (written from 1 Jan 2014) +8% y-o-y, while legacy -24% y-o-y 38
***** Retail mortgages in Ireland: new business (written from 1 Jan 2014) +35% y-o-y, while legacy -7% y-o-yKBC Group
Section 3
Strong solvency and
solid liquidity
39Strong capital position
Fully loaded Basel 3 CET1 ratio at KBC Group (Danish Compromise) ▪ The common equity ratio* increased from
15.8% at the end of 1H18 to 16.0% at the end
15.7% 15.7% 15.9% 16.3% 15.9% 15.8% 16.0%
of 9M18 based on the Danish Compromise.
14.0% ‘Own Capital Target’ This clearly exceeds the minimum capital
requirements** set by the competent
10.6% fully loaded regulatory minimum
supervisors of 9.875% phased-in for 2018 and
10.6% fully loaded and our ‘Own Capital
Target’ of 14.0%
* Note that 1 January 2018, there is no longer a difference between
1Q17 1H17 9M17 FY17 1Q18 1H18 9M18 fully loaded and phased-in
** Excludes a pillar 2 guidance (P2G) of 1.0% CET1
Fully loaded Basel 3 total capital ratio (Danish Compromise)
20.8% 20.9%
19.7% 2.3% T2
2.4% T2
2.3% T2
2.6% AT1 2.6% AT1
1.5% AT1
▪ The fully loaded total capital ratio amounted
to 20.9% at the end of 9M18
15.9% CET1 15.8% CET1 16.0%CET1
1Q18 total 1H18 total 9M18 total
capital ratio capital ratio capital ratio 40Fully 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
6.1% 6.0% 6.1%
5.7% 5.7% 5.8% 5.7%
5.0% 5.1% 5.2%
4.8% 4.7% 4.7% 4.7%
1Q17 1H17 9M17 FY17 1Q18 1H18 9M18 1Q17 1H17 9M17 FY17 1Q18 1H18 9M18
Solvency II ratio
2Q18 9M18 ▪ The decrease (-3%-point) in the Solvency II ratio
was mainly the result of an increase in spreads and
Solvency II ratio* 219% 216% net purchases in the equity portfolio
* 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
41Strong and growing customer funding base
▪ 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 9M18 (versus FY17). The elevated amount in short-term wholesale funding is
mainly on the back of short-term arbitrage opportunities
Funding from customers (m EUR)
155.774 163.513
133.766 139.560 143.690
129.555 131.914 132.862
10% 12%
3% 6% 3% 2% 4% 5% 8%
0% 2% 2% 7%
9% 10% 7%
8% 8% 8% 8%
7% 9% 9%
9% 8% 9% 8% 8%
9% 2% 7% FY11 FY12 FY13 FY14 FY15 FY16 FY17 9M18
3% 3% 3% 10%
3% 8%
0% 7%
21%
75%
72%
69% 73% 73% 73% 70% 72%
69% customer
driven
73%
-1% -6%
-6%
FY11 FY12 FY13 FY14 FY15 FY16 FY17 9M18 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
42Liquidity ratios remain very solid
Short term unsecured funding KBC Bank vs liquid assets as of end June 2018 (*)
(bn EUR)
486%
65,39
57,79 58,83
56,23 56,85
387% ▪ KBC maintains a solid liquidity position, given that:
• Available liquid assets remained very high at more than
316% 3 times the amount of the net short-term wholesale
309%
288%
funding
22,70 • Funding from non-wholesale markets is stable funding
18,71 18,01 from core-customer segments in core markets
15,19
11,56
3Q17 4Q17 1Q18 2Q18 3Q18
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 9M18 Regulatory ▪ NSFR at 134% and LCR at 138% by the end of 9M18
requirement • Both ratios were well above the regulatory requirement of
NSFR* 134% 134% ≥100% at least 100%
LCR** 139% 138% ≥100%
* Net Stable Funding Ratio (NSFR) is based on KBC’s interpretation of the proposed 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
43KBC Group
Section 4
Looking forward
44Looking forward
➢ European economic conditions remain attractive, although we believe that the growth peak
is behind us. Persistently decreasing unemployment rates, with even growing labour
shortages in some European economies, combined with gradually rising wage inflation will
Economic continue to support private consumption. Moreover, also investments will remain an
outlook important growth driver. The main elements that could impede European economic
sentiment and growth remain the risk of further economic de-globalisation, including an
escalation of trade conflicts, the Brexit and political turmoil in Italy
➢ Solid returns for all Business Units
➢ Loan impairments for Ireland towards a release in 100m-150m EUR range for FY18
➢ Impact of the reform of the Belgian corporate income tax regime: recurring positive P&L
Group impact as of 2018 onwards and one-off negative impact in 4Q17 will be fully recuperated in
guidance roughly 3 years’ time
➢ B4 impact for KBC Group estimated at roughly 8bn EUR higher RWA on fully loaded basis at
year-end 2017, corresponding with 9% RWA inflation and -1.3% points impact on CET1 ratio
➢ Next to the Belgium and Czech Republic Business Units, the International Markets Business
Unit has become a strong net result contributor, thanks to:
Business ➢ Ireland: re-positioning as a core country with a sustainable profit contribution
units ➢ Bulgaria: merger of CIBank into UBB. 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
45KBC Group
Annex 1
Company profile
46KBC Group in a nutshell (1)
✓ We want to be among Europe’s best performing financial institutions! By achieving this,
KBC wants to become the reference in bank-insurance in its core markets
• We are a leading European financial group with a focus on providing bank-insurance products and services to
retail, SME and mid-cap clients, in our core countries: Belgium, Czech Republic, Slovakia, Hungary, Bulgaria and
Ireland.
✓ Diversified and strong business performance
… geographically
• Mature markets (BE, CZ, IRL) versus developing markets (SK, HU, BG)
• Economies of BE & 4 CEE-countries highly oriented towards Germany, while IRL is more oriented to the UK & US
• Robust market position in all key markets & strong trends in loan and deposit growth
… and from a business point of view
• An integrated bank-insurer
• Strongly developed & tailored AM business
• Strong value creator with good operational
results through the cycle Diversification Synergy
• Unique selling proposition: in-depth
knowledge of local markets and profound
relationships with clients
• Integrated model creates cost synergies and results Customer Centricity
in a complementary & optimised product offering
• Broadening ‘one-stop shop’ offering to our clients 47KBC Group in a nutshell (2)
✓ High profitability
CET1 generation
C/I ratio Combined ratio Net result ROE before any deployment
296 bps 277 bps 279 bps
EUR
55% 88% 2575m EUR 17%
57% 88% 1948m 17%
2015 2016 2017
FY17
9M18
✓ Solid capital position… ✓ … and robust liquidity positions
Fully loaded Basel 3 CET1 ratio of KBC Group (Danish Compromise)
15.7% 15.7% 15.9% 16.3% 15.9% 15.8% 16.0% NSFR LCR
14.0% ‘Own Capital Target’
10.6% regulatory minimum 139%
134%
134% 138%
1Q17 1H17 9M17 FY17 1Q18 1H18 9M18 FY17
9M18
48KBC Group in a nutshell (3)
✓ We aim to be one of the better capitalised financial institutions in Europe
• Every year, we assess the CET1 ratios of a peer
Flexible buffer for M&A 2.0%
group of European banks active in the retail, SME
and corporate client segments. We position
ourselves on the fully loaded median CET1 ratio of
the peer group (14% at end of 2017) ‘Reference Capital
Own capital target Position’
• We want to keep a flexible buffer of up to 2% CET1
= 14.0% = 16.0%
for potential add-on M&A in our core markets Median CET1
• This buffer comes on top of our ‘Own Capital Peers (FL)
Target’ and together they form the ‘Reference
Capital Position’
• Any M&A opportunity will be assessed subject to
very strict financial and strategic criteria
2017
✓ Capital distribution to shareholders
• Payout ratio policy (i.e. dividend + AT1 coupon) of at least 50% of consolidated profit
• Interim dividend of 1 EUR per share in November of each accounting year as an advance on the total dividend
• On top of the payout ratio of 50% of consolidated profit, each year, the Board of Directors will take a decision,
at its discretion, on the distribution of the capital above the ‘Reference Capital Position‘
49Well-defined core markets: access to ‘new growth’ in Europe
Market share
(end ’17) BE CZ SK HU BG IRL
20% 20%
Loans and deposits 11% 11% 10% 8%*
3.5m clients 3.7m clients
627 branches 265 branches 33%
99bn EUR loans 23bn EUR loans 22% 13% 13%
Investment funds 7%
132bn EUR dep. 32bn EUR dep.
IRELAND
0.6m clients
21%
122 branches Life insurance 14% 8% 4% 3%
7bn EUR loans
BELGIUM
6bn EUR dep.
9% 11%
Non-life insurance 7% 7%
CZECH REP 3%
0.3m clients SLOVAKIA
18 branches
11bn EUR loans HUNGARY Real GDP
5bn EUR dep. growth BE CZ SK HU BG IRL
1.6m clients 64%
206 branches
% of Assets 20%
4bn EUR loans 3% 3% 2% 4%
7bn EUR dep.
7.0%
BULGARIA 3.0% 3.6% 4.2% 3.5%
2018e 1.5%
1.2m clients 2.7% 3.7% 3.4% 3.4% 3.5%
1.4%
224 branches 2019e
3bn EUR loans
Internat
Belgium Czech
ional 4bn EUR dep. 3.5% 2.6% 3.3% 3.0%
Republic 2.3%
Business
Business
Markets 1.2%
Unit Business
Unit 2020e
Unit
GDP growth: KBC data, November ‘18
50
* Retail segmentBusiness profile
BREAKDOWN OF ALLOCATED CAPITAL BY BUSINESS UNIT AS AT 30 SEPTEMBER 2018
Czech Republic
16%
Belgium 61%
21%
International Markets
2%
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
51Shareholder structure
SHAREHOLDER STRUCTURE AT END 9M18
Other core
MRBB
7.4%
Cera 11.5%
2.7%
KBC Ancora 18.6%
59.8%
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
52KBC Group going forward:
Aiming 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
53KBC 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
54More 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
55KBC the reference…
Group financial guidance (Investor Visit 2017)
Guidance
CAGR total income (‘16-’20)* ≥ 2.25% by 2020
C/I ratio banking excluding bank tax ≤ 47% by 2020
C/I ratio banking including bank tax ≤ 54% by 2020
Combined ratio ≤ 94% by 2020
Dividend payout ratio ≥ 50% as of now
* Excluding marked-to-market valuations of ALM derivatives
Regulatory requirements
Common equity ratio* excluding P2G ≥ 10.6% by 2019
Common equity ratio* including P2G ≥ 11.6% by 2019
MREL ratio ≥ 25.9% by May ‘19
NSFR ≥ 100% as of now
LCR ≥ 100% as of now
* Fully loaded, Danish Compromise. P2G = Pillar 2 guidance.
56KBC the reference…
Group non-financial guidance (Investor Visit 2017)
Non-financial guidance: Non-financial guidance:
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 CEE)
BE BU > 2% by 2020 BE BU > 2% by 2020
CR BU > 15% by 2020 CR BU > 15% by 2020
IM BU > 10% by 2020 IM BU > 15% by 2020
Non-financial guidance:
% Inbound contacts via omni-channel and
digital channel*
KBC Group** > 80% by 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
57Digital 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.
58Digital sales are increasing (examples: Belgium BU)
# of files # of files
35.000 3.000
30.000 2.500
25.000
2.000
20.000
1.500
15.000
1.000
10.000
5.000 500
0 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2017 2018 2017 2018
Consumer loans Travel insurance
# of files # of files
12.000 60.000
10.000 50.000
8.000 40.000
6.000 30.000
4.000 20.000
2.000 10.000
0 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2017 2018 2017 2018
Pension savings Current accounts
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