2 0 0 3

Challenges in the Central European banking environment

Herman Agneessens, Managing Director

2

Investor Day

2 0 0 3Agenda

Overview of Central European presence

Overview on the bank’s performance in ‘02 and 1Q '03

Comments on the ‘02 earnings in Poland

Poland : the outlook

Overall growth outlook for CE banking

3

Investor Day

2 0 0 3Central Europe, current presence

PolandKredyt Bank (77%)Warta (40%)Czech Republic

CSOB (84%)CSOB Pojist’ovna (84%)Patria Finance (100%)

SlovakiaCSOB (84%)Ergo Poist’ovna (69%)

HungaryK&H Bank (59%)K&H Life (80%)Argosz (99%)

SloveniaNLB (34%)NLB Vita (67%)

Indirect presenceLituania & Ukraine (via Kredyt Bank) Bosnia, Serbia & Macedonia(via NLB)

Percentages concern direct + indirect presence

4

Investor Day

2 0 0 3Central Europe,

market postion bankingPoland (banking)Ranking: 6thMarket share: 6%Clients: 1.2 m *Branches: 385

Czech Republic (banking)Ranking: 1stMarket share: 18%Clients: 3.1 mBranches: 205

Slovakia (banking)Ranking: 4thMarket share: 5%Clients: 0.2 mBranches: 51

Hungary (banking)Ranking: 2ndMarket share: 12%Clients: 0.8 mBranches 163

Slovenia (banking)Ranking 1stMarket share: 44%Clients: 0.9 mBranches 217

Market share is average of share in customer credits and in customer deposits* estimate

(31-12-2002)

5

Investor Day

2 0 0 3Central Europe,

market postion insurance

Poland (non-life / life insur.)Ranking: 2nd/10thMarket share: 13%/1%

Czech Republic (non-life / life insur.)Ranking: 5th/4thMarket share: 5%/10%

Slovakia (non-life / life insur.)Ranking: 7th/7thMarket share: 2%/4%

Hungary (non-life / life insur.)Ranking: 6th/14thMarket share: 4%/1%

SloveniaStart-up phase of life assurance cy

(31-12-2002)

6

Investor Day

2 0 0 3Central European banking,

the genesis1994 Policy to pursue presence in CE countries

(other than Baltic states) likely to join EU in 1st wave

1996 First minority stake purchase in Kredyt Bank, Poland

1997 Reference shareholdership in K&H Bank, Hungary through privatisation

1999 Majority shareholding in CSOB, Czech & Slovak Republics, through privatisation

1999 KBC becomes majority shareholder in K&H Bank

2000 Take-over of IPB assets & liabilities by CSOB

2001 Merger K&H Bank & ABN AMRO Magyar

2001 Majority shareholding in Kredyt Bank in November

2002 34% shareholding in Nova Ljubljanska Banka, Slovenia

7

Investor Day

2 0 0 3Central European banking,

the investments

Breakdown investment in banks KBC participation

Investment (EUR m)

P/BV

Czech and Slovak Republics

CSOB

Patria Finance

84%

100%

1 369

53

2.3

4.1

Hungary K&H Bank 59% 276 1.3

Poland Kredyt Bank 77% 524 1.4

Slovenia NLB 34% 434 2.7

Total investment EUR m

Banks 2 656

Insurance companies 298

Total 2 954

8

Investor Day

2 0 0 3Central European banking performance,

stand-alone 2002 earnings

186 199

-3

-82

1648 63

-150

-100

-50

0

50

100

150

200

CSOB Kredyt Bank K&H NLB

2001

2002

In m EUR

CSOB (IAS) Kredyt Bank K&H (IAS) NLB (IAS)

2001 2002 2001 2002 2001 2002 2002

RoE 17% 16% -1% -17% 7% 13% 13%

C/I 63% 63% 78% 70% 91% 80% 61%

RoI 10% -9% 10%

(+7%)

(+7%)

(+210%)

9

Investor Day

2 0 0 3Central European banking performance,

contribution to 2002 group profit

159182

-13

-91

-2

38

-150

-100

-50

0

50

100

150

200

CSOB Kredyt Bank K&H

2001

2002

In m EUR

CSOB Kredyt Bank K&H

2001 2002 2001 2002 2001 2002

RoE 18% 19% -3% -19% -1% 14%

C/I 68% 69% 85% 75% 90% 83%

(+15%)

Before minority interests

10

Investor Day

2 0 0 3Central European banking performance,

share in group banking business

Credit portfolio 13%

Gross operating income 24%

Interest income 27%

Expenses 27%

Net profit * 15%

Allocated equity ** 25%

* after minorities** excl. investment in NLB

(FY 2002)

11

Investor Day

2 0 0 3Central European banking performance,

stand-alone 1Q03 earnings

ČSOB KB K&H NLB

2002 2003 2002 2003 2002 2003 2002 2003

RoE 22 % 11 % 2 % 4 % 13 % 18 % 14 % 13 %

C/I 54 % 71 % 73 % 81% 84 % 75 % 61 % 69 %

RoI 16 % 8 % 1 % 3 % 10 % 16 % 5 %

71

37

3 4

1218

6 6

0

20

40

60

80

CSOB Kredyt Bank K&H NLB

1Q 2002

1Q 2003

In m EUR

12

Investor Day

2 0 0 3

ČSOB KB K&H NLB

2002 2003 2002 2003 2002 2003 2003

RoE 27 % 12 % - 2 % 1 % 12 % 21 % 5 %

C/I 58 % 75 % 76 % 84 % 88 % 78 % 69 %

61

30

-21

815

3

-10

0

10

20

30

40

50

60

70

CSOB Kredyt Bank K&H NLB

1Q 2002

1Q 2003

Central European banking performance, contribution to 1Q03 group profit

In m EUR

Before minority interests

13

Investor Day

2 0 0 3Central European banking performance,

the 1Q03 analysis

K&H Bank, Hungary Outstanding overall performance Current trendlines appear stable

ČSOB, Czech & Slovak Republics The Q-comparison predictably suffered

from exceptional income items in 2002 Even so, the Q1 performance disappoints Measures on the cost side are in hand Measures on the income generation side

particularly relate to retail banking and SME-banking

14

Investor Day

2 0 0 3

Kredyt Bank, Poland New management appointed Market share loss reversed For 1st time in 7 quarters, stabilisation in ACL's (°)

and NPL's, but too soon for predictions Economic environment remains extremely challenging Cost-cutting clearly underway Bancassurance initiative clearly successful Asset management product launches being prepared

Central European banking performance,the 1Q03 analysis

(°) adversely classified loans

15

Investor Day

2 0 0 3Banking presence in Poland,

past milestones

1989 Kredyt Bank founded

1996 KBC becomes 5% shareholder of Kredyt Bank

1997 KBC raises shareholding to 9.9%

1997 Kredyt Bank takes over PBI and Prosper Bank, gaining significant retail market share

1998 Strategic plan to increase branch network from 180 to 380 branches from 1999 to 2001

1999 KBC shareholding increased to 23%

1999 KBC shareholding reaches 49.9%

2001 Kredyt Bank has 382 branches

2001 In November, KBC becomes 56% majority shareholder

2002 In September, introduction of entirely new IT system completed

2002 KBC raises shareholding to 76.5%

16

Investor Day

2 0 0 3Banking presence in Poland,

earnings 2002 vs bank peer group

Largest loss of all Polish banks at 415 million PLN

Second worst RoE performance (-21 %)

Worst RoA performance (-1.8%)

Largest loan provisions addition (105 million EUR)

4th worst cost-income ratio (79 %)

But

3rd best in adversely classified loan levels

17

Investor Day

2 0 0 3

NPL in total loan portfolio as of Dec 2002

16.8%

23.6%

19.0%

21.7%

29.2%

20.7%

26.2%

19.4%

14.0%

16.7%

26.8%

21.4%

0%

5%

10%

15%

20%

25%

30%

35%

KB S.A

.

BIG-B

G

BOS

BPH PBK BH

BRE

ING

BSKPek

ao S

.A.

PKO B

PBZ W

BK BG

Jun 01Dec 02

Jun 02Dec 02

avg

Banking presence in Poland, asset quality 2002 vs bank peer group

18

Investor Day

2 0 0 3

NPL in total loan portfolio as at Mar. 2003

8.6%

19.5%

21.2%

15.5%13.3%

16.6%

21.3%

30.6%28.2%

21.0%

0%

5%

10%

15%

20%

25%

30%

35%

KB S.A

.

BPH PBK

BH

ING

BSK

Pekao

S.A

.

June 2001

December2001

June 2002

December2002

March 2003

blue figures : June 2001

yellow figures :March 2003

Banking presence in Poland, asset quality 1Q03 vs bank peer group

19

Investor Day

2 0 0 3

Largest loss of all Polish banks at 415 million PLN Second worst RoE performance (-20.8%) Worst RoA performance (-1.8%) Largest loan provisions addition (€105 million) 4th worst cost-income ratio (79.4%)

But 3rd best in adversely classified loans levels

5th largest, and arguably 3rd best, retail branch network coverage

Loan provisioning now fully in line with KBC methodology

New ICT system performing up to expectationsproviding the tool required for structure and

efficiency optimisation

Successful launch of bancassurance activity

Excellent position in automated channels

Banking presence in Poland, earnings 2002 vs bank peer group

20

Investor Day

2 0 0 3Kredyt Bank vs K&H Bank, K&H Bank’s performance

Acquisition price paid by KBC : 1.3 to book value

Stand-alone results K&H :

In m EUR 1998 1999 2000 2001 2002 Q1 2003

Net profit -15 -32 10 16 48 18

RoE -12% -33% 9% 7% 13% 18%

21

Investor Day

2 0 0 3Kredyt Bank vs K&H Bank, Kredyt Bank’s performance

Acquisition price paid by KBC : 1.4 to book value

Stand-alone results Kredyt Bank

In m EUR 1998 1999 2000 2001 2002 Q1 2003

Net profit 36 28 39 -3 -82 4

RoE 32% 13% 12% -1% -17% 4%

22

Investor Day

2 0 0 3Kredyt Bank,the outlook

AGENDA :

Priorities of the new management

Cost-efficiency enhancement measures

Income generation measures

Vulnerability issues

Conclusion

23

Investor Day

2 0 0 3Kredyt Bank,

new management’s priorities

Priority for retail bancassurance development

Introduction of asset management products

Maintenance of corporate lending position

Full integration in KBC’s risk control systems

Reduce cost-income ratio

Thus becoming a leading Polish bank

24

Investor Day

2 0 0 3Kredyt Bank,

cost efficiency enhancement

2003 : head-count reduction target of 1.000 (ca 15%) by leveraging the potential of the new ICT system Network staff optimisation Administrative overlap elimination Head office streamlining

Q1 2003 : already headcount reduction of 432

25

Investor Day

2 0 0 3Kredyt Bank,

income enhancement measures

Continue market share gains in retail bancassurance by leveraging penetration levels of a young network

Develop a new model for SME-market approach

Introduce market-tailored asset management products

Fill remaining gaps in the product range for both banking and bancassurance

26

Investor Day

2 0 0 3Kredyt Bank,

vulnerability issues

Vulnerability of the loan portfolio to a further weakening of the Polish/European economies

The lack of a perspective for a short term economic recovery in Poland

Effective implementation of cost efficiency enhancement program

27

Investor Day

2 0 0 3Kredyt Bank,

conclusion

Kredyt Bank offers excellent franchise value A dynamic new management team A well positioned retail network A promising bancassurance start Acceptable market shares in both deposits (5.2%)

and loans (7.2%) A new and meanwhile proven IT system

In the short term, a difficult economic environment is likely to continue to prevail

In the longer term, however, Poland offers excellent growth perspectives

KBC is a committed long term shareholder, providing access to both capital and know-how

28

Investor Day

2 0 0 3Central European banking,

the growth outlook

Annual growth real GDP,in % (period averages) 1991-1995 1996-2000 2000-2010 2010-2020

Belgium 1.5 2.8 2.0 to 2.5 1.5 to 2.0

EU-15 1.5 2.6 2.0 to 2.5 1.5 to 2.0

Central Europe -0.4 3.3 3.5 to 4.0 3.0 to 3.5

US 2.4 4.1 3.0 to 3.5 2.5 to 3.0

Source : EC, OECD, UN

29

Investor Day

2 0 0 3Central European banking,level of banking penetration

Deposits as % of GDP (EMU-average = 100)

45.6

79.6

43.7

67.4

62.9

34

72.9

43.5

67

44.4

0 20 40 60 80 100

Poland

Czech Republic

Hungary

Slovakia

Slovenia

1997

2002

30

Investor Day

2 0 0 3Central European banking,

high potential for bancassuranceInsurance premiums as % of GDP

(EMU-average = 100)

0 50 100

Hungary

Poland

Slovakia

Slovenia

CzechRepublic

2000

2001

Insurance premiums per capita(EMU-average = 100)

0 50 100Sloven

iaCzech

Rep

ublic

Hunga

ry

Poland

Slovak

ia

2000

2001

Source: Swiss Re

31

Investor Day

2 0 0 3

Austria Germany CzechRepublic

Hungary Poland Slovakia Slovenia

Account 89 97 64 46 34 55 79

Bank card 57 n.a. 49 35 21 36 57

Savings books 68 n.a. 38 16 13 58 53

Time deposits 29 n.a. 12 8 6 14 15

Mortgages 56 30 20 2 0 15 3

Loans 18 22 7 7 14 6 17

Securities 15 n.a. 3 4 n.a. 4 7

Source: HVB

% of total population over 15 years who use this product

Use of banking products not widely spread room for further development

Central European banking,the growth outlook

32

Investor Day

2 0 0 3

Financial assets as % of GDP reach current average level in Southern Europe

Average nominal GDP growth ± 7%

X

Size financial sector might rise by as much as factor 5 (in absolute terms) during catch-up process !

Rough measure : over next 10 years :

Central European banking,the growth outlook