KBC Bank & Insurance Group Half-Year Results 2002 visit 2 September 2002.

KBCBank & Insurance Group

Half-Year Results 2002

visit www.kbc.com

2 September 2002

2

1Q01 2Q01 1H01 1Q02 2Q02 1H02

Net profit at a glance

2Q 02 : 280 m EUR,+ 22% versus 2Q 01,- 11% versus 1Q 02

1H 02 : 596 m EUR,+ 2% versus 1H 01

1H 02 EPS : 1.97 (versus 1.95 in 1H 01)

1H 02 ROE : 14.8 % (versus 15.4% in 1H 01)

355 m

585 m

316 m

280 m

230 mQ-avg.2001

596 m

3

Operatingresult (m EUR) *

2Q 02 2Q/2Q 1H 02 1H/1H

Banking 484 +92% 973 +38%

Insurance 102 -1% 201 +5%

585 +67% 1 167 +33%

Net profit (m EUR)

2Q 02 2Q/2Q 1H 02 1H/1H

Banking 185 +24% 422 -5%

Insurance 96 +3% 182 +7%

280 +22% 596 2%

Banking Strong operating performance,

due i.a. to interest income growth (C.E.) and favourable cost trend

High level of negative non-operating items(i.a. credit provisions and value adjustments)

Insurance Strong performance in non-life Stable investment income

* Before provisions, value adjustments,extraordinary and non-recurring result,taxes and minority interests

Net profit at a glance

4

(in millions of EUR) 2Q 02 2Q/2Q 1H 02 1H/1H

Gross income 1 457 +32% 2 871 +20%

Adm. expenses -974 +14% -1 898 +13%

Operating result 484 +92% 973 +38%

Credit provisions -85 +264% -174 +112%

Value adjustments on securities

-77 - -70 +226%

Profit on ordinary activities

297 +35% 709 +20%

Extraordinary result +42 +380% +44 -52%Taxes -113 +169% -239 +55%Minority interests -40 +9% -92 +8%Net profit 185 +24% 422 - 5%

Cost / income 66.8% -10.4 pp. 66.1% -4.3 pp.

Banking : overview of results

5

Banking : main changes in consolidation

1Q01 2Q01 3Q01 4Q01 1Q02 2Q02

ABN AMRO Magyar Bank (Hungary)

KredytBank (Poland)

(*) From equity method to full consolidation

(*)

3228 28

31130 121

951 284

1 105 1 165

1 424 1 413 1 457

Gross operatingincome (m EUR)

1H 02 vs. 1H 01 : + 20%, autonomous : + 9%2Q 02 vs. 2Q 01 : + 32%, autonomous : + 21%

6

Gross operating income 2Q 02 2Q/2Q 1H 02 1H/1H

Interest /Dividend 880 + 35% 1 627 +28%Trading 161 +30% 332 +3%Capital gains 23 -32% 100 +0%Commission 268 +35% 574 +12%

Other 126 +55% 238 +38%Total 1 457 +32% 2 871 +20%

Banking : strong income growth

Growth in all types of income, except realized capital gains on shares Strong interest income, autonomous growth 1H 02 : 16% (*) Satisfactory trading result Decrease in capital gains on shares, compensated by capital gains on

fixed income securities in first quarter Growth in commission income mainly due to Central Europe Increased 2Q ‘other’ income due to leasing and a securitization transaction

(*) excl. one-off booking at CSOB of roughly 30 m EUR and currency effect (CZK) : + 12%

7

Administrative expenses

2Q 02 2Q/2Q 1H 02 1H/1H

KBC Bank N.V. (Belgium)

376 -11% 747 -8%

Central Europe 259 +89% 510 +95%

Other 339 641

Total 974 +14% 1 898 +13%

Banking : favourable cost trend

Considerable impact of consolidation : autonomous 1H 02 cost increase 1%

Cost decrease at KBC Belgium, 1H 02 : down 8%

Autonomous 1H 02 cost increase in C.E. : 14%, due to i.a. depreciation of new IT and branch network

Cost/income ratio : 1H 02 : 66.1% (vs. 1H 01 : 70.4%)

8

Banking : merger in Belgium still on schedule

13727

13937

14247

1150

1100

1063

13000

13200

13400

13600

13800

14000

14200

14400

12-01 01-02 02-02 03-02 04-02 05-02 06-02

850

900

950

1000

1050

1100

1150

FTE Retail branches KBC

KBC Bank N.V. (Belgium) Target 2003/2004 Achieved to date

Closure of bank branches 650 62%

Account migration (ICT platform) All 81%

Headcount reduction 1 650 32%

FTE Retail Branches

9

Banking : credit provisioning remains high

Provisioning stable at high level

Provisions spread over small and medium-sized loans, both in Belgium and elsewhere

Difficult economic situation in Poland. Impact of full consolidation of Kredyt Bank (Poland) in 4Q 01 : 39 million EUR1H 02 : 30 million EUR

Provisions for credit risk

1Q01 2Q01 3Q01 4Q01 1Q02 2Q02

24 m

79 m

160 m

88 m

59 m

85 m2001-avg.

10

Provisions ytd

Loan loss ratioannualised

Belgium 87 m 0.30%

Central Europe 12 m 0.25%

Other 75 m 0.54%

Total 174 m 0.40%

Banking : quality of loan book remains acceptable

Non-performing ratio stable at 2.9%

Limited LATAM exposure (mostly short term commercial facilities), well provisioned Argentina : 50 m EUR Brazil : 81 m EUR

Limited telecom and aviation exposure : both < 2% of portfolio

Non-investment-grade countries :

< 2% of portfolio

(*)

* Account taken of write-back of provisionsfor CSOB’s ‘historical’ credit portfolio

of 18 million EUR

11

Banking : substantial LOCOM-adjustments on investment porfolio

2Q 02 1H 02

Perpetuals -7 -3

Shares -69 -67

Total -77 -70

1Q01

2Q01 1Q02

2Q02

-22 m

+1 m+7 m

-77 m

No LOCOM on fixed-income securities

12

Banking : impact non-recurring elements on bottom line

2Q 02 2Q/2Q 1H 02 1H/1H

Extraordinary result +42 +380% +44 -52%

0

50

100

150

200

250

300

350

400

450

500

1Q01 2Q01 1Q02 2Q02

Extraordinary resultPre-tax income

83

9

229

342

454414

339

13

Insurance : overview of results

m EUR 2Q 02 2Q/2Q 1H 02 1H/1H

Net earned premiums

Life 710 +272% 1 413 +54%Non-life 204 +4% 442 +7%

Technical charges

Life (*) -727 +63% -1 435 +54%Non-life -130 -8% -314 -1%

Investment result (*) +154 -4% 317 +0%

Adm. expenses -108 +6% -221 +8%

Recurring result 102 -0% 201 +5%

Non-recurring and extraordinary -4 - -7 -Taxes -1 - -9 -Minorities 0 - -1 -Net profit 96 +3% 182 +7%

(*) Excluding value adjustments for unit-linked life insurance

14

Insurance : Sustained high level of life premium income

Evolution of gross premiums

64 76 70

110

296

433

376

334

221

298

364

241

1Q01 2Q01 3Q01 4Q01 1Q02 2Q02

Traditional Unit linked

(*) excl. Group contracts – 1H 02 : 69 m EUR

(m EUR)

15

Insurance : strong operating efficiency in non-life

1H 01 1H 02

Net loss ratio 71.9% 67.5%

Net expense ratio 32.2% 31.7%

Combined ratio 104.1% 99.2%

71.9% 67.5%

32.2% 31.7%

104.1%99.2%

Net loss Net expense Combined

Efficiency ratios, non-life

1H 01 1H 02

16

Insurance : recurring result per sector

Recurring result (m EUR) 1H 01 1H 02 %

Non-Life 45 75 +68%

Life 94 93 -0%

Non-technical 52 31 -40%

Total 190 199 +5%

45

75

94 94

52

31

Non-Life Life Non-technical

1H 01 1H 02

17

Insurance : value adjustments on securities

At 31-12-2001 At 30-6-2002

Provision for financial risks

Capital gains+30 m

Value adjustments-174 m

157 m

13 m

compensated by write-back of provision for

financial risks

18

Profit contribution and capital allocation per activity

Profit contribution

Asset Management 10%

Retailbancassur.

34%

CentralEurope

18%

Corporateservices

22%

MarketActivities

9%

Groupitems8%

Capital allocation

Retailbancassur.

33%

CentralEurope

25%

Corporate services 26%

MarketActivities

14%

Groupitems3%

As per 30-06-2002

19

Retail Bancassurance(Belgium)

1H 02 profit contribution : 201 m EUR, down 11%

Lower commission income from securities and asset management, insufficiently compensated by cost decrease in banking

Good technical result achieved in non-life insurance, strong growth in life premium income

Financial highlights

Profit contribution :(in m EUR)

30-06-2001 : 225 30-06-2002 : 201

Share in Group profit :

30-06-2001 : 38% 31-12-2001 : 36% 30-06-2002 : 34%

Return on equity:

30-06-2001 : 17% 31-12-2001 : 14% 30-06-2002 : 15%

Belgium1st home market

20

Retail Bancassurance(Belgium)

Distribution channels 31-12-01 30-6-02 Life sold via bank network 83% 90% +7 bp.

Non-life sold via bank network

7% 7% -

Continued cross selling 31-12-01 30-6-02 Shared customers (*) 539 000 561 000 +4%

Cross selling ratio 35.2% 36.7% +1.5 bp.

Stable market shares 31-12-00 31-12-01 30-6-02

Consumer credit / home loans 25.5% 26.0% 26.0%

Savings products 18.7% 18.7% 18.6%

Non-life insurance 8.7% 8.7% n.a.

Life insurance 13.2% 11.8% n.a.

(*) Customers with both banking and insurance products

Belgium1st home market

21

Central Europe

1H 02 profit contribution : 129 m EUR, up 43%

Additional investments of ca. 655 m EURKredyt Bank (Poland) – 164 m EUR (total 524 m) IPB Pojist’ovna (Czech Republic) – 56 m EUR (80 m) NLB (Slovenia) – 435 m EUR – pending final closingErgo (Slovakia) – pending closing


Central Europe2nd home market


30-06-2001 : 90 30-06-2002 : 129


30-06-2001 : 12% 31-12-2001 : 12% 30-06-2002 : 18%

Return on equity:

30-06-2001 : 13% 31-12-2001 : 8% 30-06-2002 : 13%

Contribution percompany (m EUR)

2Q02 2Q/2Q 1H 02 1H/1H

CSOB 45 +197% 116 +19%

K&H Bank 9 - 19 -

Kredyt Bank -2 +73% -7 -

Insurance subsidiaries

3 - 2 -

Total 54 - 129 +43%

22

Corporate services


In banking : lower charges – 5% loan loss provisions 1/3 higher

In insurance : Better performance by Secura

(profit contribution : 2.2 m EUR)

Continued rationalization of international bank network Repositioning of activities in the Netherlands

Stable market share in lending (Belgium) Year-end 2001 : 22.4% Mid-2002 : 22.8%



30-06-2001 : 120 30-06-2002 : 133


30-06-2001 : 20% 31-12-2001 : 21% 30-06-2002 : 22%

Return on equity:

30-06-2001 : 9% 31-12-2001 : 8% 30-06-2002 : 11%

23

Asset Management


Largest Belgian player as to mutual funds Market share : 29.6%

Continued innovation 50 new funds launched in 2002 Hedge Fund linked life insurance Corporate sustainability research

Decrease in assets under management due to difficult market conditions

New retail business : + 4% Avg. Performance, retail funds : - 8%But : 54% of funds are capital-guaranteed or bond-related

Institutional market 18 new mandates for portfolio management



30-06-2001 : 43 30-06-2002 : 57


30-06-2001 : 8% 31-12-2001 : 9% 30-06-2002 : 10%

24

Asset Managementassets under management

27

55

35

12

5

40

24

5

42

24

5

40

24

5

1998 1999 2000 2001 1H02

37

52

In b

illio

n s o

f E

UR

70

Private Banking Institutional funds

Mutual funds

% of total AUM 1999 2000 2001 1H02

71

7%34%59%

10%23%66%

7%35%58%

7%35%58%

69

25

Market activities

1H 02 profit contribution : 51 m EUR, down 39% (inter alia increased taxes)

Weakness of stock markets reflected in results of equity subsidiaries, especially KBC Securities

Stable profit for dealing room in Brussels, rather poor performance elsewhere (excl. C.E.)

KBC Financial Products : satisfactory result, due to, amongst others successful credit derivatives business



30-06-2001 : 84 30-06-2002 : 51


30-06-2001 : 14% 31-12-2001 : 5% 30-06-2002 : 9%

Return on equity:

30-06-2001 : 16% 31-12-2001 : 4% 30-06-2002 : 9%

26

Strong solvency

06-01 12-01 06-02

Capital and reserves group

6.1 7.9 8.4

Total capital resources group

16.8 16.8 17.2

Tier 1 bank 8.6% 8.8% 8.8%

Solv. insurer (*) 314% 318% 325%

(*) Excl. unrealized gains

11.5

13.7

16.2 16.8 17.2

1998 1999 2000 2001 1H02

Total capital resources(bn EUR)

27

Balance sheet

Non-realized gains

Bonds Shares

Banking 488 243

Insurance 260 131

Group 748 3741998 1999 2000 2001 1H02

Total assets(bn EUR)

Banking Insurance

Investment portfolio

Bonds Shares

Banking (*) 50 149 1 342

Insurance (**) 5 632 2 788

Group 55 781 4 130

(*) excl. trading portfolio(**) excl. Unit-linked

148 156

187

228 225

28

Key figures KBC share

(in EUR) 12-2001 06-2002

Earnings/share 3.39 1.97

Net asset value/share 33.8 34.4

Closing price 37.70 40.95

P/E ratio 11.1 12.1

(6m)

0

100

200

300

400

500

600

94 95 96 97 98 99 00 01

KBCDJ Euro Stoxx Banks

60

70

80

90

100

110

120

Jan.02

Feb Mar Apr May Jun

Short term (31-12-01 = 100)Long term (31-12-94 = 100)

JulKBCDJ Euro Stoxx Banks

As at 30-6-02 :KBC : + 9%DJ ESB : - 3%

29

Profit outlook 2002 unchanged

Good operating performance 1H 02

Earnings growth in 2H 02 difficult to predict : uncertainty re economic recovery and rallying of financial markets

On the other hand: cost cuts and development of major sources of income proceeding according to plan

Publication of Q3 results : 21 November 2002

"… Profit for 2002 is therefore expected to be in line with the 2001 figure…”

KBCBank & Insurance Group

Half-Year Results 2002

visit www.kbc.com

2 September 2002

KBC Bank & Insurance Group Half-Year Results 2002 visit 2 September 2002.

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Transcript of KBC Bank & Insurance Group Half-Year Results 2002 visit 2 September 2002.