KBC Bank & Insurance Group

Full-Year results 2003

Analysts briefing

2

Content

Question time

Performance 2003, overview

Performance, banking Performance, insurance

3

Group result : up 8 % year-on-year

Full-year results 2003

355

230

159

278316

280

152

287 304 300256 259

1 119

1 0341 022

1Q 01 2Q 01 3Q 01 4Q 01 FY 01 1Q 02 2Q 02 3Q 02 4Q 02 FY 02 1Q 03 2Q 03 3Q 03 Q4 03 FY 03

Q avg‘01-’03

+ 8%

In m EUR

+ 1%

4

698 708858

360 348

275

FY 01 FY 02 FY 03

Banking Insurance

1 022 1 034

Net profit

ROE banking : 11.3 %

ROE insurance : 17.4 %

ROE Group: 12.7 %

1 119

Performance 2003

+8%+1%

Banking : strong year-on-year performance Insurance : pressure on investment income, though high level of return

in m EUR

5

Earnings growth peer group

2000 2001 2002 2003

KBC

DJ ES Banks

DJ ES Insurance

KBC Insurance

KBC Banking

Note : estimate 2003 DJ ES Banks at 20 Feb. 2004 by KBC

Compared to the sector, earnings remained at a high level

Earnings level2000 = 100

6

Performance 2003

Overall : Change yoy pre-tax

Positive impact : (m EUR)Strong income trend for all basic banking activities (spread, commission) +232Strong premium growth, insurance +330Strong technical result, non-life +59Good cost control, banking +56Less impairments on equity portfolios, banking +238

Negative impact : Higher loan-loss provisions - 211Less gains on (‘free’) bonds, banking -148Less favourable trading results -135Less investment income, insurance -54

Net profit : +85

7

Performance 2003

Areas of activity :

Robust performance in Belgium Further improving level of costs in banking (-5%)

Strong commission (+22%) and premium income (+8%) and interest spread slightly increasing (2.01% versus 1.97% in ‘02)

Low level of loan loss ratio (24 bp) and non-life claims ratio (59%)

Satisfactory operating performance in most CEE markets ROAC for banking in Czech (CR) / Slovak republics (SR) : 17% ROAC for banking in Hungary : 8% (20% excl. K&H Equities case)

Improving performance for insurance operations (still limited scale)

Higher profit of corporates (+19%) and markets (+35%)

… but still disappointing performance of banking business in Poland (high loan loss provisions: 365 m)

Note : ROAC = return on allocated capital

8

Growing dividend

2.69

3.26

3.90

3.39 3.423.68

1.091.23

1.42 1.48 1.52 1.64

1998 1999 2000 2001 2002 2003

Net profit per share Gross dividend per share

EUR

Dividend per share : up 7.9% year-on-yearLast 5 years : every year growing dividend (CAGR : 8.5%)

9

Business highlights 2003 Enhancing efficiency

in Belgium

Strengthening the position in CEE

Further downscaling of less-strategic areas

Finalizing the merger

Product complexity reduction program

Pooling of back offices and co-sourcing of transaction processing

Stronger governance model and controlling

Intensified cross-border initiatives in such areas as e.g. card technology

Restructuring program in Poland

Majority stake in WARTA (Poland)

Successful start of bancassurance in Slovenia

Sale of retail activities in the Netherlands, broker-related consumer lending in Belgium, non-strategic operations in CEE (Ukraine, Lithuania)

10

Performance 2003, overview

Performance, banking

Content

Performance, insurance

Question time

11

Banking, income development Interest income : + 5% organically

(margin : 1.67% 1.73%)

Commission income : 12% organic growth (i.a. success of cap-guaranteed funds)

Lower trading income due to i.e. lower FX income and MtM of equity derivatives

Lower realized capital gains (250 m), mainly on the ‘free’ bond portfolio

Lower dividends, ‘other income’ on a par with 2002 (strong leasing revenue)

2 5413 046 3 118

1 057

1 0901 251

610

615480

275

250495

605 557

398

0

1 000

2 000

3 000

4 000

5 000

6 000

FY01 FY02 FY03

Interest CommissionTrading Realized capital gainsOther

Total income -1%organically

- 37%

+ 2%

- 22%

+15%

Excluding capital gains, income + 1%

4 977

5 6555 756

12

Growth in banking assetsCustomer deposits (bn EUR)

Customer loans (bn EUR)

121 123128

1015 5

2001 2002 2003

Customer deposits Repos

Note : mortgage growth adjusted for currency depreciations

64 62 59

21 23 252 13 6

2001 2002 2003

Corporate Private Repos

Customer deposits : up 5% (excl. repos)

Shift to demand deposits Shift to life products and mutual funds

Customer loans : organically flat (excl. repos)

Strong organic mortgage growth : Belgium : + 10% C/SR : + 36% Hungary : + 69% Poland : + 24%

Corporate book (excl. repos) down 3 bn EUR, reflecting :

currency depreciations (2.4bn) build down of ‘old book’ (IPB) in CR

(1.7 bn) & in the Netherlands (0.4bn) write-downs in Poland (0.3 bn)

13

Banking, expense development Belgium :

Expenditures : - 5% (- 105 m) Headcount reduction :

target of 1 650 FTE (-12%) achieved

Central and Eastern Europe : Expenditures : - 1% (-12 m) Headcount reduction :

CR (HQ) : 54% of target of 1 000 FTE (-27%) achieved

Poland : 28% of target of 1000/1200 FTE (-15%) achieved

Other : Expenditures : + 14% (+60 m)

2 197

724 1 006

2 3022 398

1 018

491431389

FY 01 FY 02 FY 03

Belgium CEE Other

Cost/Income ratio: 65%(65% for FY 02)

3 5103 751 3 695

2001: KB only 4Q01

Ytd expenses (m EUR)

Continuing cost control

-1%

14

Cost control in Belgium

Merger completed, full extent of cost savings in bottom-line as of 1H 04

Lower cost/income ratio ahead, thanks to : Income growth Co-sourcing of transaction processing and pooling

of back-office activities within the group and with third-parties

Monitoring of real-estate-related and other non-FTE-costs

Reduction in product complexity in retail

Although Belgium is a ‘mature’ market, further growth and improvement in performance can be expected

15

Reducing product complexity

Planned Realized Example : To do Example :

Paymentservices 59 24% No of types of credit

cards from 8 to 4 76% No of transactionsforms from 34 to 5

Investmentproducts 129 40%

No of types of savings accounts from 8 to 1

60% Reduction in highly complex orders

Home, carand travelservices

45 38%No add’l floating rates for consumer loans

62%No of types of mortgages from 50 to 15

Services tocompanies 131 40%

Reduction in interest rate formulas for cash facilities

60%

Integrating 15 types of insurance policies in more comprehensive policies

TOTAL 364 37% 63%

Note : situation as of Feb-2004

Implementation running or further enquiry required

16

Banking, loan provisions

Customerloan book

Gross loans

Dec. 03

Lossratio

FY 03

Lossratio

FY 02

Belgium 49.9 bn 0.24% 0.29%

Hungary 3.8 bn 0.32% 0.34%

CR / SR 6.0 bn 0.34% -0.62%

Poland 3.8 bn 8.68% 4.20%

International 29.4 bn 0.48% 0.70%

Total 92.9 bn 0.71% 0.55%

Loan loss provisions (m EUR)

Loan loss ratio : 0.71%(0.55% for FY 02)

156 144 117

23153

403142

168

156

FY 01 FY 02 FY 03

Belgium CEE Other

Note : Loan loss = specific provisions to average gross outstanding loans

Intensive clean-up of loan portfolio in Poland

Loan loss ratio excl. Poland : 0.35%

676

321

465

17

Note: Profit contribution excl. retail asset management and excl. retail insurance.Loan loss ratio on risk-weighted assets

70

225

41

2001 2002 2003

Retail banking in Belgium

2%4%12%

42% 37%

27%

2001 2002 2003

banking insurance

Return on allocated capital

14% 13%

x5

16%

FY profit, banking: 225 m, ROAC : up to 12% from 2%

Income growth : + 10% (strong commission and rebound in interest)

Cost reduction : - 7%

Provisions remain low (21 bp)

Marketing headlines 2004 :

New customer acquisition Bancassurance Wealth management

2003 has seen a strong turnaround in Belgian retail on the back of robust commission income and cost savings

Profit contribution after minorities

18

Banking performance in CEE

CR & SR : ROAC target of 17 % achieved in spite of pressure on margins (and fewer one-offs), thanks to commission income and modest expense growth

Hungary : income and volume growth more than set off pressure on margin, but adverse impact of K&H Equities loss (pre-tax impact: 20 m)

Poland : difficult economic conditions and high loan provisions due to thorough credit review (pre-tax impact 277m)

Notes : profit contribution excl. minority interests. Change (%) adjusted for currency effect. Allocated capital: 7% on RWA + non-amortized goodwill.

CEE2nd home

In m EUR FY 03 % Chg ROAC 03

CR / SR 143 +0 % 17%

Hungary 13 -13% (+97%) 8% (20%)

Poland -295 - -

Slovenia 10 - -

Contribution of banking operations to KBC Group profit

Satisfactory performance in Czech Republic, Slovakia and Hungary (even further improvement expected). Polish turnaround being implemented

19

CEE banking, share of group wallet

35%28%

43% 35%

16% 27%

27%

19%

-17%

36% 28%17%

33%

12% 17% 14% 13%

55%

39%

23%

Risk-weighted assets Allocated capital Gross operatingincome

Net operating income

Belgian retail (incl. AM) CEE Corporates Market activities

Impact of paid

goodwill

Improved cost structure

under way

Heavy credit risk charge

in Poland in 2003

Value-added products andcommission

income to grow

Note : banking business lines , excluding group centerFY03 earnings

Pre-taxresult

20

Restructuring in Poland Capital base strengthened (265 m in 2 steps)

Risk sensitivity greatly reduced Credit risk policies redefined and credit decision authority reduced ‘Historic’ loan book cleaned up Risk control and risk management improved

Cost base to be further reduced Centralizing back offices, strengthening HR and performance measurement Reducing headcount (driven by new central IT system) by 1000/1200 FTE,

real estate expenses (15-20 %) and other tangible costs (5-10%) by ‘04 Disinvesting non-strategic activities (Ukraine, Lithuania, PKB, Pension Fund,…)

Market position to be improved on the retail market Thorough customer segmentation in the nationwide network Intensified transfer of product knowhow (AM, retail lending, bancassurance,…) Acceleration of bancassurance efforts with WARTA Insurance

Profound restructuring plan being implemented

Central Europe2nd home market

21

Central Europe2nd home market

Loan provisioning level in Poland

12.6%

17.6%19.1%

23.9% 24.7%

28.5%

5.1%

8.5%

11.8%

14.6% 14.8%

0%

5%

10%

15%

20%

25%

30%

BZ WBK BRE BPH Mill Pekao KB

Non performing loansNPLs covered by provisions (specific and general)

Adequately provisioned compared to peer group

Sources: companies’ financial reports and presentations (consolidated basis)

22

Improving economic indicators

Outlook :

Economic growth is picking up

Corporate tax reduction (to 19% in ’04)

Credit demand is accelerating, notably mortgages/consumer lending

Shift from deposits to funds (off-balance) is likely, compensating further margin pressure

7.0%

5.0%

4.0% 4.0%

1.0% 1.0%

3.9%4.4%

5.0%

1997 1998 1999 2000 2001 2002 2003e 2004e 2005e

PolandGDP growth (y/y)

23

Situation as of Dec 2002 : the network model

CEE, governance model - 2002

CEE Group companies

Co-ordination UnitCEE Insurance (2)

Business co-ordinators (12)

KBC expats(31)

Co-ordination UnitCEE Banking (1)

Moreover : audit and market and credit risk managment centralized (for credit risk in Poland only from end of 2002)

ExecutiveCommittee

ManagementCommittee CEE (5)

Initiating and followup of :• Transfer of knowhow• Shared business projects

24

CEE, governance model - 2003

ExecutiveCommittee

ManagementCommittee CEE (6)

General ManagerCEE (1)

Controlling UnitCEE (5)

Steering committees Co-ordination UnitCEE (8)

Business co-ordinators(22) & task forces CEE

Performance monitoring

CEE Group companies

KBC expats(44)

Day-to-daymanagement

Steering of business projects

Initiating and followup of :• Transfer of knowhow• Business projects• Uniform methodology

Key elements :because of increased importance of 2nd

home market :• Increased management involvement• Intensified follow-up

Renewed model,situation as ofDec. 2003

25

Profit contribution (in m EUR)

91116 116

2001 2002 2003

Asset Management division FY profit : 116 m (stable) :

income pressure (market context) compensated by lower costs and taxes

AUM : + 10% Retail assets : 10%

including retail funds : + 11% of which : ± 5% net inflow

Institutional (3rd party): + 6% Group assets : + 18%

Note: As of 2004, in financial reporting, incorporated in retail / corporate area

Assets under management (in bn EUR)

82 8189

Retail

Corporate

42

14

17

9

40

14

17

9

45

15

19

11

2001 2002 2003

Institutional, group assets Institutional, third-party assets Retail, private assets Retail, funds

Belgium :87 %

Central Europe : 5 %

+10%

26

FY profit : 220 m, + 7%

Cost decrease (- 6%) due to strict cost control, especially in Belgium / Western Europe

Strong income growth in leasing, Ireland, diamond sector but no repeat of 2002 one-off revenues. As a balance, income down 2%

Lower provisions for problem loans, i.a. in traditional banking in the US

Corporate banking division

Profit contribution corporate banking (in m EUR, excl. minorities)

214 220206

FY 01 FY 02 FY 03

+7% 6490

643

12 128

-26

96 111

FY 02 FY 03

Belgium W. Europe USASE Asia Other

Details on corporate activities(m EUR)

27

Financial markets division

FY profit : 125 m (+ 35%)

Money and capital markets : strong performance (+ 43%)

Equity trading : substantial loss situation reversed

Derivatives :satisfactory result but negative MtM for long derivatives

Profit contribution market activities (excl. minorities):

Details on market activities :

125

4693

FY 01 FY 02 FY 03

9681

115

-34

0

-46

46

10

-12

Fixed income Equity Derivatives

FY 01 FY 02 FY 03

m EUR

m EUR

Note: including trading-, interest and commission incomefrom market activities,excluding trading income in CEE and related to treasury and investment book

+35%

28

Faster asset growth in line with expected 'faster' GDP growth :

Full year impact of deposit rate cut in Belgium (if competition / capital market levels allow rates to be stable) and positive impact from higher interest rates/steeper yield curve

Asset Management driven by ‘private pension building’ and expansion in CEE

Expected higher contribution from equity subsidiaries

Cost control : In Belgium : full impact of merger synergies + sustained cost discipline In CEE : efficiency programs in progress Cost sensitivity in all divisions

Strong decrease in loan loss levels : Towards a 'normalized' level in Poland (versus 365 in 2003)

Going forward, 2004

2004 Real growth GDP Inflation 10y-yield

Belgium

CEE

0.9% 1.8%

2.5 / 4% 3.5 / 4.5%

1.3% 1%

Diverse

4.1% 4.5%

Diverse

29

Performance 2003, overview

Performance, banking

Content

Performance, insurance

Question time

30

459

1 275

1 676

1 229

971

762

FY 01 FY 02 FY 03

Interest-guaranteed Unit-linked

Underwriting result, life

FY 03 :5%

CEE

Premiums ytd 8%

organic growth

FY 03 :95%

Belgium

Very strong growth (bancassurance-driven)and shift to non-linked products

Guaranteed rate (10y) in Belgium :• 1H 03 : 3.25%• 2H 03 : 2.75%

Net premium income

Total FY 01:1 689

Total FY 02:2 246

Total FY 03:2 438

31

69% 72%65%

34% 33%31%

FY 01 FY 02 FY 03

Claims ratio Expense ratio

Underwriting result, non-life

Verylow level

Combined ratioPremiums

+15% organically 104% 105%

96%

608 637 678

3387

120179

186

249

FY 01 FY 02 FY 03

Belgium CEE R/I

821910

1 048

Very sound business, partly driven by upward trend in rates and by strong risk and cost discipline

Net premium income

32

Cross selling, bancassurance

34,5%35,2%

37,5%

39,1% 40,0%

2000 2001 2002 2003 Target

Clients with both banking and insurance productssold by KBC (Belgium)

Cross selling 2003, Belgium :

Mortgage / fire insurance : 50%

Mortgage / death cover : 67%

Consumer loan / death cover : 66%

Cross selling continues

33

Insurance, investment income

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

Interest income, bonds10 y EUR T-bonds

FY 02 FY 03

Interest, dividend,rent 449 455 +1%

Capital gains on shares 198 138 -30%

Total 647 593 -8%

Investment return in FY 03down to 5.9% from 7.2 %

Suffering from low investment yields

Note: capital gains on shares: 5.30 % on portfolio value (incl. write-back from provision for financial risk at 45 m in ‘03), excl. value adjustments for unit-linked products. Planned recurring value gains on shares in 2004 : 4.75 % on market value of portfolio.

34

Insurance in CEE, overview

Premium2003

Premiumgrowth

Profit contribution

2002

Profitcontribution

2003

Czech Republic 165 +9% -12.1 -1.6

Hungary 67 +40% 1.7 0.3

Slovak Republic 22 - - -0.3

Poland 440 - -6.2 -1.9

Slovenia 10 - - -0.8

Startup in 2003 : retail market share from zero to ± 4%

Acquired at the end of 2002

Note : premium growth adjusted for changes in currency value. Profit contribution to KBC result after minorities.

Bancassurance models now set up in all target countries,but looking for more significant scale

Majority since end of 2003

35

Insurance in CEE, Poland WARTA

Market position : Market share, non-life :

13 % (no 2) Nation-wide coverage Customers : ± 1.5 m Workforce : ± 4 000 FTE Premium income 2003 :

330 m EUR non-life 110 m EUR life

Individual : 65% of premium income

Leading product : motor insurance

KBC’s footprint : 2000 : First stake (40%) 2003 : Majority stake (51%) 2004 : Clear control (75%)

Strategic focus : Optimization of agency sales network Intensifiying bancassurance with KB Stronger expansion to small-sized

enterprises Centralization of back-office activities

and sustained cost discipline

Majority in WARTA (Poland), important leverage of scale for KBC’s insurance activities in CEE

Poland

36

Insurance, non-recurring items

In m EUR FY 02 FY 03

Non-recurring result :

Value adjustments, shares - 299 - 96

Non-recurring gains on securities +113 +122

Other (write-back from egalization reserve in ’03 and other) +38 + 79

Transfer from (to) provision for fin. risks +157 -140

Total non-recurring result 9 -35

Note: provision for financial risks, balance at 31 Dec. 2003 : 93 m EUR

Non-recurring income offset by value adjustments and allocation to the provision for financial risks

37

Going forward, 2004 Full consolidation of WARTA Insurance (premium line impact : 435 m)

Organic premium growth : sustained high single-digit growth, driven by Successful bancassurance model Consumer trend for ‘private pension building’ (life)

Sustained good technical results (though '03 was ‘very’ good)

Mitigated pressure on investment income

Impairments on equity portfolio 2004 :

In m EUR Market levelDec 2003 + 5% + 10% + 15%

Expected impairments 190 170 150 130

Available provision for fin. risks 93 93 93 93

Potential impact on P/L 97 77 57 37

Available non-realized value gains 115 175 240 300

Note : Available non-realized value gains in excess of 'normal' level of value gains of ±125 m(at 4.75% of market value of portfolio)

38

Emile CelisChristian DefrancqJan Vanhevel Guido Segers

Herman AgneessensAndré BergenWilly Duron Frans Florquin

Q&A sessionTeleconference with live audience in Brussels

Analysts who want to participate in the conference call,please dial the number given in the invitation

39

•Group CEO•Head of insurance business

•Deputy Group CEO•Head of banking business

•Co-ordination CEE

•Retail bancassurance

•HRM and Communication

•Group CFRO•Transaction processing

•Non-life & reinsurance

•Claims management

•Corporate banking•West-European,US & SE Asian bank network

•Retail credit

• Information technology

• Insurance subsidiaries

•Treasury & markets•Asset Management• International credit

Emile CelisChristian DefrancqJan Vanhevel Guido Segers

Analysts who want to participate in the conference call,please dial the number given in the invitation

Herman AgneessensAndré BergenWilly Duron Frans Florquin

Q&A sessionTeleconference with live audience in Brussels