Clear skies for wealth management

Etienne VerwilghenManaging Director

CEO of KBL epb

Foto gebouw

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Our private banking businesses today (AUA: € 63 bn)

KBL European Private Banking AUA bn

United KingdomBrown Shipley 3.1

HollandTheodoor Gillissen 6.3

GermanyMerck Finck 5.0

SpainBanco Urquijo 10.5*

BelgiumPuillaetco Private Bankers 2.8

FranceKBL France 1.3

ItalyKBL Fumagalli Soldan 0.4

LuxembourgKredietbank LuxembourgSwitzerlandKredietbank (Suisse) 17.9

MonacoKB LuxembourgTotal 47.3

KBC Private Banking AUA bnBelgiumKBC PB 14.4

PolandKredyt Bank 0.7

Czech Rep.CSOB 0.8

HungaryK&H 0.1

Total 16.0

* Of which 5.5 low yielding assets

KBC Group has private banking operations in 16 countries, with >€5bn in Belgium, Luxembourg, Germany, Spain and the Netherlands

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Our core competencies & strategic assets

Processes, systems and culture to drive retail trade-up within KBC PB

In KBL EPB local private banking brands with status/heritage in Germany, Spain, Netherlands, UK, Belgium

Unique model of KBL EPB: attracts experienced Private Bankers from big banks

A strong Asset Management brand and range of structured products in KBC

Open architecture in KBL EPB

Estate planning in KBL EPB

Integrated business and personal banking offer to entrepreneurs in KBL EPB Spain (Banco Urquijo)

Low cost Private Banking hub for back office and IT in KBL EPB

Differentiated product and service offering in KBC PB, including greater use of open architecture including

Improvement of customer recruitment skills in KBC PB

Current core competencies & strategic assets Critical competencies we need to develop

The strategy leverages current strengths, but also depends on building new capabilities in key areas

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The competitive landscape – 4 different models

Type 1: Networked Retail/Universal Banks e.g., Royal Bank Scotland, Société Générale, ABN Amro

Type 2: Global Non-Networked Banks e.g., UBS, Credit Suisse, JP Morgan, Goldman Sachs

Type 3: Local Pure Play Private Banks e.g., Coutts, J. Baer, Degroof

Type 4: Other advisors Investment specialists: IFAs, asset managers, stockbrokers, pension

trustees, etc. Other personal advisors: solicitors, accountants, tax advisors, etc.

There are broadly four competitive models, which will all continueto exist with no one clear winning model overall

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Key market trends

Players will continue to innovate to in response to growing customer sophistication: More sophisticated investment products Enlarged scope of wealth management services Increasingly segmented offer Accessibility and internet delivery

However, the core client needs will remain the same Trusted personal relationships Status/exclusivity Investment performance

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Our strategic direction: 4 building blocks

Dual brand strategy for KBC PB and KBL EPB

KBC PB will remain a network-led model (retail trade up)

KBL EPB (Puilaetco) will be positioned as an ‘independent, boutique private bank’

Build an integrated, sustainably advantaged private banking business in selected European markets through two different but complementary models (network led and local pure-play private banks), focusing on private banking clients with >€1m of investable assets

We are building an integrated network of local pure play private banking brands (boutique style)

Near-term priority is to to reduce costs and improve profitability through creating synergies in a private banking hub and by attacking local HQ and overhead costs

Offshore will continue to be a low growth market

Focus on maintaining profitability (leveraging the hub)

The relative weight of this block will nevertheless continue to decrease in our global Private Banking business

We will build out a network-led model, leveraging KBC PB experience in Belgium

Belgium W. Europe onshore Offshore CEE

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Our strategic direction: Belgium Making the best of the KBC and KBL EPB ('Puilaetco') brands together:

Dual-brand offer in Belgium We will not seek to systematically drive wealthier customers to KBL EPB

('Puilaetco') rather than KBC PB (or vice versa), since customer preferences for the two private banking models do not neatly align with wealth bands

Clear rules of engagement between KBC PB and KBL EPB ('Puilaetco') to minimise direct competition and to capture referral potential (primarily from KBC SME/corporate)

Sources of profitable organic growth in KBC PB and KBL EPB ('Puilaetco'): Within KBC, retail trade-up will continue to be the major source of customers; the

corporate/SME referrals will be accelerated and over time we will shift towards increased ‘new to bank’ recruitment

KBC strength in in-house investment products and innovative solutions is a source of competitive advantage

However, we will increase open architecture in KBC PB as part of an overall positioning around excellence in portfolio structuring

Because KBL EPB ('Puilaetco') is a local pure-play private banker (boutique style), KBL EPB’s primary source of growth will be through Attracting new customers who prefer the boutique style Hiring Private Bankers who do not want to work in big groups

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Our strategic direction: why dual brand in Belgium?

Two brands ('KBC' and 'Puilaetco') capturing different asset flows in the market

Distinct brand positioning and distinct customer proposition

Limited cross-referral (mainly focussed on corporate customers)

‘Rules of engagement’ to govern behaviour

The headroom for growth that KBC PB and KBL EPB ('Puilaetco') can access is different

Type 3a: Local Pure Plays – Puilaetco,

Degroof, Delen, Petercam

Type 1: Networked

Retail/Universal – KBC,

Dexia, Fortis, ING

Type 2: Global PBs

Type 3b: Offshore

Retail Banks

Type 4: Other

Thickness of arrow indicate volume of asset flow(note: for simplicity, not all flows included)

Flows of Private Banking Assets

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Our strategic direction: W. Europe onshore

Objectives: Create a cost advantaged network of local pure-play private banks in selected

W. European markets We will focus on customers in the €1m+ investable assets segment Our primary focus will be on building our current businesses organically,

but we will be open to selective acquisitions

Profitability improvement: Near-term priority is to reduce costs and control cost growth while growing

revenues Achieved through standardising and centralising activities in a private banking hub

and by attacking local HQ and overheads

Sources of profitable organic growth: The local pure-play private bank model (boutique style) allows:

to attract new clients who do not want to be with big banks to drive organic growth with higher average balances

(share of wallet increases and shift in client mix) where possible, to grow through hiring experienced Private Bankers

with clients and assets

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The private banking hub

Improvement of efficiency: Global Custody Services

Subsidiaries use the hub for all International and Local custody services

Transaction/ Settlement Services Subsidiaries use the hub for all International

cash payments Financial Market Intermediation Services

Subsidiaries process all International and Local transactions through the hub (for all major asset classes i.e., Money, Bonds, Equities, Funds, Structured Products)

IT Platform Full harmonisation of major IT tools

Enhancing the development through distinctive offer: Front-Office Support: product sourcing and

development capability Increased use of emerging ‘Centres of

Excellence’ for particular product and service areas e.g.: Majority of product design and 3rd party product sourcing done via the hub

Back-office: large majority of local back office costs removed

Dealing rooms: minimal local market activities will remain (troubleshooting only)

IT: only local IT support will remain

Reduction in other overheads

Organisational impactOur endgame vision of the hub

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KBL EPB franchises in Western Europe

United Kingdom Brand name: Brown Shipley AUA as at 31.12.04 : € 3.1 bn Drivers for growth :

Bigger share of wallet Conversion of “Funds under influence" of the administrated Pension

Fund into Managed Assets Selective acquisition if we are confident to recapture premium to be paid

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KBL EPB franchises in Western Europe

Holland Brand name: Theodoor Gilissen Bankiers AUA as at 31.12.04 : € 3.3 bn Drivers for growth :

Private Banking sensu stricto + External Asset managers Acquisition of Stroeve Bank in April 2005 (AUM € 3.0 bn)

Closing planned early July 2005 Integration with Theodoor Gilissen will be effective by

October 2005 Hiring of (experienced) Private Bankers

(re turmoil situation with the big banks) No other major acquisition foreseen

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KBL EPB franchises in Western Europe

Germany Brand name: Merck Finck AUA as at 31.12.04 : € 5.0 bn Drivers for growth :

Bigger share of wallet through estate planning Hiring of experienced Private Bankers : 30 Private Bankers

have been hired and will join in the next months because they are attracted by KBL EPB model

Acquisition unlikely except possibly for small IFAs Working group on possible synergies with

KBC Corporate Banking (servicing entrepreneurs)

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KBL EPB franchises in Western Europe

Spain Brand name: Banco Urquijo AUA as at 31.12.04 : € 5.0 bn

(+ € 5.5 bn low yielding assets) Drivers for growth :

Pure organic growth Specific actions on low yielding assets Working group on possible development of

Corporate Activity with KBC Corporate Banking(servicing entrepreneur)

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KBL EPB franchises in Western Europe

France Brand name: KBL France AUA as at 31.12.04 : € 0.8 bn Drivers for growth :

Acquisition of Aurel Leven Gestion (IFA) in February 2005

(AUM € 0.5 bn) being currently integrated in KBL France Acquisition of small IFAs (more than 400 existing IFAs in

France as of today) who are currently being forced by the regulatory authority to join bigger financial institutions or to disappear

Hiring experienced Private Bankers

France needs to reach critical mass: periodic reassessment on France and global reassessment in 3 years

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KBL EPB franchises in Western Europe

Italy Brand name: Banca KBL Fumagalli Soldan AUA as at 31.12.04 : € 0.4 bn We are currently reassessing the model

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Our strategic direction : offshore

Drive hard on cost reduction (leveraging the hub) and revenue margins to maintain profitability as the offshore market declines

Where possible, steer repatriated assets to KBL EPB onshore businesses or to KBC

In the near-term, we will not aggressively pursue new sources of offshore wealth (e.g., Middle East, Asia), except where existing KBC operations provide a clear access point (e.g., CEE)

Selected small acquisitions of IFAs with short pay back period

The weight of offshore in our global private banking business will continue to decrease

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Our strategic direction : CEE

Small as of today (total AUM : € 1.6 bn) but an attractive long-term opportunity for KBC Group Expected market growth is above W.Europe markets

1st phase : Network-led model (as per KBC PB Belgium):The primary source of organic growth will be via retail trade-up

A reasonable expansion is foreseen by 2008 (yearly increase of 15%) but on the longer term, the increase could be much more significant

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KBC Group PB financial projections1KBC Group PB financial projections1

In total, KBC Group projects ~10% Net Income growth per year till 2008

KBC Group Forecast

2004 2008 Forecast

AUA (€bn) KBL EPB 44

KBC PB 14

Total 58 83

2004 2008 Forecast

Net Income (€bn)

KBL EPB 205

KBC PB 50

Total 255 380

Cost Income Ratio

67% 55%

AUA Growth

Belgium CAGR 14%

Onshore W. Europe CAGR 10%

Offshore CAGR 0%

CEE CAGR 15%

Total AUA Growth CAGR 9%

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2004 2008

Net Income Growth

This assumes normal market conditions1. Excluding any future acquisitions

CAGR 10%

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KBC Group PB financial projections

These projections take into account that : The offshore private banking, which have an above average

profitability, will slowly declined and so will do its relative contribution to the net income

The development of the onshore private banking and its higher efficiency through the hub implementation will assure a global CAGR on net income of 10 %

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Summary : big choices

The choices we are making :

The Private Banking market will continue to be attractive despite increased focus from competitors

We believe in our 2 models for Private Banking : EPB model : network of local pure-play private banking brand

(boutique style) which allows : to keep the “plus” of local proximity and human size service to leverage and optimise the local brands through 'the hub'

(increase the efficiency and the development of a distinctive offer) KBC PB model in Belgium : retail trade-up in a network-driven model

We believe CEE has got an important growth potential for Private Banking in the medium and long term and that the Belgian retail trade-up model is the adequate model to catch this opportunity

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Summary : our strategic actions by priority

Opportunistic acquisitions will imply an investmentin the range of € 150-250 mln a year

Increase profitability and drive organic growth in current businesses

Selectively acquire to reinforce current positions of strength onshore (e.g. Netherlands, Germany, UK, Spain)

Build critical mass in France (and Italy? )

Acquire offshore in Switzerland and Lux to maintain scale

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