Growth ambitions in the CEE region Foto gebouw. 2 Reminder: KBC’s presence in CEE Update on...
-
date post
21-Dec-2015 -
Category
Documents
-
view
218 -
download
5
Transcript of Growth ambitions in the CEE region Foto gebouw. 2 Reminder: KBC’s presence in CEE Update on...
2
Reminder: KBC’s presence in CEE
Update on economic and financial background
KBC’s opportunities
Update on Poland
Financial outlook
Agenda
3
Profit contribution, Slovenia
Minority stake (34%) Market share, bank: 41% (No. 1)Market share, life: 6% (No. 5)
2610n/a
200420032002
Reminder: KBC’s presence in CEE
Profit contribution, CZ + SL
2002 2003 2004
156 m 144 m 168 m
Profit contribution, Poland
2002 2003 2004
-49 m -297 m 40 m
Total assets, bank: 5 bn EURMarket share, bank: 5% (No. 8)Market share, life: 2% (No. 7)Market share, non-life: 12% (No. 2)
Profit contribution, Hungary
2002 2003 2004
16 m 11 m 35 m
Total assets, bank: 7 bn EURMarket share, bank: 11% (No. 2)Market share, life: 3% (No. 7)Market share, non-life: 4% (No. 6)
Czech Republic
Total assets, bank: 18 bn EURMarket share, bank: 21% (No. 2)Market share, life: 8% (No. 5)Market share, non-life: 4% (No. 6)
Slovakia
Total assets, bank: 2 bn EURMarket share, bank: 6% (No. 4)Market share, life: 4% (No. 8)Market share, non-life: 2% (No. 7)
CEE profit contribution to KBC Group
2004 2005 Q1
17% 27%
Retail 57%
Other22%
SME/Corp
21%
Share of retail segment in gross income, CEE Banking
4
Reminder: KBC’s presence in CEE
Update on economic and financial background
KBC’s opportunities
Update on Poland
Financial outlook
Agenda
5
Growth fundamentals maintained
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5
Germany
SwitzerlandItaly
Denmark
UKSweden
EMU
BelgiumFrance
The Netherlands
Portugal
US
Spain Finland
Ireland (9,4;5,0)
High flyers
Average real GDP growth, 1997-2001 (in %)
Ave
rag
e re
al G
DP
gr o
wt h
, 200
2-20
04 (
in %
)
Czech Rep.
Slovakia
Slovenia
Poland
HungaryEU-13
(not-EMU)
Turkey (1,2; 7,5)
(Source: IMF) 0% 1% 2% 3% 4% 5% 6% 7% 8% 9%
Belgium
EU-15
US
Poland
Hungary
Czech Republic
Slovakia
Slovenia
Financial services (banking & insurance) in % of GDP (2004)
2005/2006 growth prospects have recently been reviewed downwards due to global economic slowdown
But growth in CEE will still be at higher rate (+/-2%) than euro zone
0%
1%
2%
3%
4%
5%
6%
2004 2005 2006
CEE-5 (forecast 4Q04) CEE-5 (forecast 2Q05)
EMU (forecast 4Q04) EMU (forecast 2Q05)
…but positive gap maintained
GDP growth prospects adjusted… (Source: IMF)
(Source: Vienna Institute for International Economic Studies)
6
EU entry - catalyst for developmentResults of one-year EU membership
Adoption of EU-compatible regulation and legislation EU-10 economic growth double of EU-25 (5% vs. 2%) Exports to EU-15 rose spectacularly (market share from
2% in 1997 up to probably 4% in 2005) FDIs in EU-10 continue (2004: 11 bn EUR or 3% of CEE-
10’s GDP) Agricultural subsidies / EU funds Stimulation of macroeconomic stability Strong financial integration with EU Declining inflation (11.7% in 1998 down to 4.3% in 2004) No budgetary deterioration Decrease in unemployment, though rather slow
EBRD transition index (EMU = 100)50 60 70 80 90
Hungary
Cech Rep
Slovakia
Poland
Slovenia
Baltics
Bulgaria
Romania
Russia
Ukraine
1999
2004
EU accession acts as catalyst
(Source: OECD)
Limited impact on KBC of French and Dutch ‘NO’ to the treaty establishing a constitution for Europe
KBC is currently operating within EU countries only
Entry into euro is guaranteed by EU membership once economic criteria are met
7
UCI-HVB merger may transform landscape somewhat
In the Polish market, the UniCredit-HVB combination will strengthen their already strong individual positions; the impact will be somewhat less in Slovakia and very limited in the other markets where KBC is active.
The UniCredit-HVB merger should be seen as much an opportunity as a threat: In Poland, the merger efforts may temporarily weaken the commercial
clout of the parties involved, enabling other parties to increase market share
Potential for gaining new customers preferring to be ‘multi-banked’ rather than ‘uni-banked’
The merger could trigger the much-needed start of early consolidation in Poland
In the short run, UniCredit-HVB may partly divest from some markets, creating investment opportunities for other players.
8
Reminder: KBC’s presence in CEE
Update on economic and financial background
KBC’s opportunities
Update on Poland
Financial outlook
Agenda
9
KBC’s opportunities in CEE
Unique bancassurance concept, enabling cross-selling
Outstanding track record in the promising AM market
Well positioned in the emerging markets of HNWI and private banking through the epb know-how
Nationwide branch network in all countries
Introduction of uniform corporate image
Setting up of technology for centralization of processing
Increasing hands-on management approach
10
Bancassurance to fuel earnings
Major challenges to exporting the model to CEE:
Re-organization of insurance network & implementation of new branch organization models
Enhancement of pro-active sales approach in both bank branches and agents’ networks
Streamlining of business processes and IT systems in both bank and insurance company
Achievements:
Transfers of product know-how and implementation of KBC’s distribution model
Setting up of sales-incentive schemes
Unified management responsibility (joint management committee of bank and insurance)
Focus on: ‘Plugged-in’ non-life and life products Life investment insurance (savings & investment)
Results are encouraging: realizations in 2004
Cross selling rates Czech Rep Hungary Poland Slovakia Belgium
Consumer loan X life assurance 83% n/a 100% 94% 67%
Mortgage loan X life assurance 45% 50% 100% 75% 67%
Mortgage X property insurance 54% 71% 42% 30% 50%
11
Key developments in AM Total AUM in CEE as at 31/03/2005: 5.5 bn
AUM grew in 04 by 25%; in Q105 up by 7.3% Projected growth: 1-2 bn EUR p.a.
Continued high growth of revenue: CAGR revenue on mutual funds: 15-20% CAGR revenue on pension funds: 11-14% Margins on mutual funds already aligned
with rest of Europe
Strong appetite for ‘risk-free’ investments: money-market and capital-guaranteed funds, KBC’s speciality
Market share
2003 200431/03/200
5Trend
CZ 19% 22% 23% ++
HU 8% 9% 10% ++
SL 6% 7% 7% ++
SI - 8% 9% +
PL 4% 4% 5% ++
Total AUM CE
3.000
4.000
5.000
6.000
7.000
8.000
9.000
10.000
Discretionary
Assets34%
Funds -
Institutional 9%
Funds -
Other5%
Funds - Retail
42%
Life Assurance
2%
Pension Funds
8%
Breakdown of AUM
12
Key developments in AM
Market challenger with excellent reputation in foreign funds and as product innovator (hedge funds, capital-guaranteed funds, etc.)
Adequate risk-control measures and state-of-the-art front-office systems developed over the past years
Cost/AUM ratios well below European average (around 16 bp vs. 20 bp for Europe)
Through the funds business, new clients are brought in and retained
Existing clients using their deposits to buy funds will replenish their deposit accounts after one year
Poland:
big succes: capital-guaranteed funds
20% of clients in funds are new clients
Czech Rep:
Most important market player
KBC-owned pension funds companies (10% market share, No. 3 in the market)
Slovenia:
Recently created AM company (mutual funds’ market share from 0 to 10% in < 1 year)
Pension fund company with market share of 21% (first player on the market)
Slovakia:
Recently created AM and pension fund companies
7.4% market share in mutual funds
Hungary:
3rd in mutual funds (10% market share)
13
0%
20%
40%
60%
80%
100%
120%
140%
160%
1995
2001
Necessary pension reformswill lead to growth in pension funds
Assets of insurance companies and pension funds
Source: Eurostat (2003)
0%
1%
2%
3%
4%
5%
6%Source: FI-AD Financial Advisory (2003)
% of GDP
Assets in pension funds
2002, % of GDP
0 10 20 30
CEE
EU-15
Belgium
Level in 1960 Change 1960 - 2000
Change 2000 - 2010 Change 2010 - 2020
Change 2020 - 2030
Share of elderly (65+) in total population (%)
• e.g., in Slovakia: recently begun 2nd pillar will provide growth rate of above 25% for CSOB Pension Fund
Pension reform
1st Pillar(date of reform)
2nd Pillar(date of creation)
3rd Pillar (date of creation)
Poland (1999)
(1999)
(1999)
Czech Rep.
(1994)
Slovakia (2005)
(2005)
(1996)
Hungary (1998)
(1999)
(1993)
Slovenia (2000)
(2000)
(Source: Eurostat)
14
Centralized organization for AM
Results: Lower costs (e.g., for Warta in Poland: -37%) Independent risk control and compliance Better investment process
KBC TFI
CSOB AM & IC
K&H SFIM
Poland
Czech Rep
Hungary
4 companies of KB and Warta
4 KBC-owned AM entities
2 KBC-owned AM entities (incl. ABN-AMRO AM)
Integration of companies (situation as at 1Q 2005)
KBC AMFormer entities
15
Nationwide branch networks
The density of KBC’s branch network is amongst the highest in the CEE region
In the Czech Rep.: branches in 123 of the 264 municipalities having more than 5 000 inhabitants. Additionally, products distributed via dense network of PSB (Postal Bank), which covers all 264 municipalities
In Slovenia: twice as many branches as the next competitor, being present in almost all municipalities having more than 5 000 inhabitants
In Hungary: presence in all larger towns and in half of the smaller towns. Only OTP has denser branch network
In Slovakia: branches in 58 of the 124 municipalities with more than 5 000 inhabitants
In Poland: presence in almost all major cities and in 25% of the smaller cities, comparable to or greater than competitors with similar market share. Further branch openings may be considered (under review)
0% 20% 40% 60% 80% 100%
PLCZSL
SIHU
0 200 400 600 800 1000
PL
CZ
SL
SI
HU
towns with KBC Groupbranch
No. of towns
Percent of towns with KBC Group branch Density of KBC Group’s branch network
16
Centralized card purchasing & processing
KBC card business: Portfolio of 7.5 million cards, of which 4.5 million smart cards Portfolio of 200 000 merchants Yearly volume of 500 million transactions
Cards will be one of the key drivers for extending the retail activity in CEE
Central card processing: enlarging scale standardized technology to prepare
for future developments (SEPA)
to reduce costs0.00 €
0.02 €
0.04 €
0.06 €
0.08 €
0.10 €
0.12 €
- 500 1 000 1 500 2 000 2 500
/trans
million trans
Centralized card purchasing: Licence contract to use same open technology Common supplier contract for purchase of cards Common supplier contract for personalizing the cards
KBC Group Belgium
38%
Poland15%
Hungary17%
CR/SR 30%
17
Centralized cash management product
Centralisation of Treasury Management
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
W Eur C E Eur All of Eur
% o
f Cus
tom
er G
roup
s unknown
Planning to centralise in thenext 2 yearsCurrently centralised for
Selecting a Regional Cash Management Bank (Western Europe)
0%
10%
20%30%
40%
50%
60%
70%80%
90%
100%
Priority 1 Priority 2 Priority 3-5
Key decision criteria
Single corporate e-Banking product: Local & cross-border payments and
collections Statement reporting
Benefits: Avoid multiple product
development at Group level Savings on software licence fees
Objective = > 5 000 users after 5 years
Investment payback = 3.5 years
Survey of multinational corporates
18
Centralized processing, cross-border payments
Business case: co-sourcing of cross-border transactions will lead to lower costs for the entire KBC Group
2007 …2003 2004 2005 2006
Sepa2010
CEEpre-study
legal/fiscal
Implementationsin CEE
Open for other
parties
Incl. KBC CEE
Incl. DZ Bank Group
Standalone
Volume of transactions
Pro
cessin
g c
osts 100
83
94
19
CEE entities: hands-on governance
KBC Group ExecutiveCommittee
CEE Management Committee
Steering committees CEEDirectorate
CEE business co-ordinators & task forces
CEEGroup companies
KBC expats(+ temporary presence
via various projects)
- General Manager
- Co-ordination unit
- Projects unit
- Controlling unit
Expats in banking: 35% of Management Board (of which 2 CEOs)*
Expats in insurance: 28% of Management Board (of which 4 CEOs)
Many KBC managers involved in CEE businesses and projects
For each business area, co-ordinators supervising the area, looking for synergies
CEE Directorate co-ordinates / supervises
0 2
23
04
24
16
31
12
17
54
2000 2001 2002 2005
Expat CEO's Expat MB members Expat Managers
KBC’s management expats in CEE
* Additionally 6 CEOs in AM and securities subsidiaries
20
Reminder: KBC’s presence in CEE
Update on economic and financial background
KBC’s opportunities
Update on Poland
Financial outlook
Agenda
22
Update on Poland
1Q 2005 achievements: Portfolio risk profile:
Portfolio quality improvement (NPL -20% y/y)
Zero cost of risk in 1Q 2005
Safe coverage ratio level (67%, one of the highest in the banking sector)
High net profit (23 m 1) and satisfactory ROE (21% 1 vs. 7% in 1Q 2004)
Continuous improvement of Cost/Income ratio (76% 1 vs. 86% in 1Q 2004)
Visible signs of growth acceleration:
18% increase in housing loans granted in PLN (y/y)
26% increase in loans granted in CHF(y/y)
75 000 new savings accounts (y/y) and 187% increase in saving accounts volume (y/y)
175% increase of mutual funds (y/y)
Today, we believe we are in a better shape than ever. We even intend to accelerate organic growth
1 Statutory accounts
23
Reminder: KBC’s presence in CEE
Update on economic and financial background
KBC’s opportunities
Update on Poland
Financial outlook
Agenda