2 0 0 3
Andre Bergen, Deputy Group CEO
Strategy update and mid-term value drivers
2
Investor Day
2 0 0 3Overview
KBC, 5 year after take-off : Merger synergies in Belgium Expansion in Central Europe
Going forward : Drivers of future profit growth Mid-term financial objectives Conclusions
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Investor Day
2 0 0 3KBC, 5 year after take-off
We clearly benefited from the synergies of the merger in Belgium
0
500
1000
1500
2000
2500
3000
3500
1998 1999 2000 2001 2002
Life
Non-life
Gross premium income for life and non-life
Revenue synergies : the bancassurance model bearing fruit
In m EUR
4
Investor Day
2 0 0 3KBC, 5 year after take-off
We clearly benefited from the synergies of the merger in Belgium
12 000
12 500
13 000
13 500
14 000
14 500
1998 1999 2000 2001 2002 2003 2004
FTE KBC NV, Belgium
Cost synergies accelerated as of end 2001
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Investor Day
2 0 0 3KBC, 5 year after take-off
Highlights, Belgium :
Additional revenue generation from cross-selling of insurance products, mostly to private individuals
Stable to increasing market shares in banking (post-merger emphasis on customer retention)
Since 2001, cost synergies thanks to integrated IT infrastructure and reduction of branches(target of -1 650 FTEs, currently 78% realized)
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Investor Day
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Poland:banking: no 6insurance (L/NL): no 10 / 2
Czech Republic:banking: no 1insurance (L/NL): no 4 / 5
Slovakia:banking: no 4insurance (L/NL): no 7 / 7
Hungary:banking: no 2insurance (L/NL): no 14 / 6
Slovenia:banking: no 1insurance (L): start-up
KBC, 5 year after take-off
We've put ourselves on the map in Central Europe
Market positions for banking and insurance
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Investor Day
2 0 0 3KBC, 5 year after take-off
We've put ourselves on the map in Central Europe
CE: share in group profit and share in allocated capital (excl. group items)
-5%
0%
5%
10%
15%
20%
25%
30%
1998 1999 2000 2001 2002
Share in profit
Share in capital
8
Investor Day
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Highlights, Central Europe
We developped solid customer franchises in the 5 ‘main’ countries (worth 1/3 of our market cap)
We introduced gradually the bancassurance modelin each of the countries
We built high-performance IT systems, which are almost completed in the main companies
Earnings accelerated (although 2002 was an adverse year in Poland)
KBC, 5 year after take-off
9
Investor Day
2 0 0 3KBC, 5 year after take-off
We gradually adapted the group risk profile
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1998 1999 2000 2001 2002
Corporate and markets
Central Europe
Retail (Belgium)
Allocated capital (excl. goodwill) : share per area of activity
5.4 6.3 6.2 6.7 6.6 bn EUR
10
Investor Day
2 0 0 3KBC, 5 year after take-off
Financial track record 1998-2002
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
1998 1999 2000 2001 2002
Gross revenues
Operating result
Net profit
11
Investor Day
2 0 0 3KBC, 5 year after take-off
Financial highlights :
Robust revenue growth 1998-2002 : 13% p.a.
However : slowdown in cost efficiency Since 2001, impact of the adverse economic and
financial climate (cost of risk, value impairments)
As a balance : earnings up 6% p.a.
Sustained rise in DPS, even in difficult market situations (up 8% p.a.)
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Investor Day
2 0 0 3Going forward, earnings drivers
Going forward, investors rightly ask usabout the catalysts for future growth
The right question :
13
Investor Day
2 0 0 3Going forward, earnings drivers
from a mid-term perspective, the best way to secure the highest level of shareholder value
is to intensify the current strategic approach
The clear answer is :
(strategy horizon : 2003-05)
14
Investor Day
2 0 0 3Going forward, earnings drivers
Independent, how should we allocate our resources to earn the highest return? Strengthen current market presences? Develop new markets in (Central- or) Eastern-Europe? Develop new markets in Western-Europe? Develop new markets elsewhere?
To our analysis, building on our current market presences
is the option with the highest yield potential. In this regard, we feel confident that the current allocation of capital and management resources is the right way forward.
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Investor Day
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Main assets for revenue enhancement :
In Belgium : Developing the untapped cross-selling potential
of insurance products (primarily for SMEs and non-life)
Going forward, earnings drivers
Market share insuranceMarket share bankingNon-life: 8%Non-linked life:- individual: 12% - group: 4%Unit-linked life: - individual: 21% - group: 2%
22% 11%
Market situation as of Dec 31, 2002
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Investor Day
2 0 0 3
Main assets for revenue enhancement :
In Central Europe : Deepening product penetration of banking and asset
management products (cards, mortgages, funds, etc.)
Leveraging the bancassurance business model (increased sales of insurance products)
If acquisition opportunities arise, e.g. meeting the 10% market share objective in Hungary (insurance) and Poland (banking)
Going forward, earnings drivers
17
Investor Day
2 0 0 3
Milestones in productivity enhancement and cost control :
In Belgium (mainly in banking) :
Completing the bank merger> By 2004, downsizing will equal 12 % of the 2001 headcount
Optimizing the branch network concept (clustering)
Rolling out efficiency-improvment programs (back offices)
Going forward, earnings drivers
18
Investor Day
2 0 0 3
Milestones in productivity enhancement and cost control :
In Belgium (cont’d):
Intensively marketing e-bancassurance
Going forward, earnings drivers
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
2000 2001 2002 2003
Active subscribers to KBC's internet and PC banking facilities (Belgium)
19
Investor Day
2 0 0 3
Milestones in productivity enhancement and cost control :
In Central Europe: Reorganizing business processes
(front-end automation at advanced stage) Cross border cost-sharing projects
(payments systems, IT procurement, etc.)
> By 2005, we expect 2002 headcount could be reduced by 10-15 %
Going forward, earnings drivers
20
Investor Day
2 0 0 3
Milestones in productivity enhancement and cost control :
In general : Enhancing portfolio quality and controlling cost of risks
Going forward, earnings drivers
50%
52%
54%
56%
58%
60%
62%
64%
66%
68%
1999 2000 2001 2002 Benchmark
Loss ratio non-life (*) Loss ratio credit portfolio
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
1999 2000 2001 2002 Benchmark
* excl. reinsurance
Poland
21
Investor Day
2 0 0 3Mid-term financial objectives
Targets unchanged, although ambitious and highly sensitive to the uncertain economic environment
Achieved2002
Minimumtargets 2005
ROE, Group 13% 13% 16%EPS growth (4y CAGR) 6% 2% 10%
Cost/income ratio, banking 71% 65% 58%
Combined ratio, insurance (excl. re-insurance)
100% 101% 95%
Tier-1, banking 9% 9% 8%
Solvency, insurance 504% 320% 200%
Achieved2001
22
Investor Day
2 0 0 3Mid-term financial objectives
Share incapital 2002
Minimum return 2005
Retail bancassurance 34% 13% 16%
Central Europe 27% 5% 17%
Asset management - - -
Services to corporates 25% 9% 12%
Market activities 14% 7% 18%
Achievedreturn 2002
Return on allocated capital
23
Investor Day
2 0 0 3Conclusion
Course set for the mid-term future :
> In order to enable our shareholders to benefit from solid EPS growth and a robust ROE level : Concentrating (even more) on the bancassurance
potential in Belgium and Central Europe Heading for lower level of expenses and cost of risks
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