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Guided tour in the credit portfolio
Jan Vanhevel, Managing Director
2
Investor Day
2 0 0 3 KBC's global credit portfolio
Total credit portfolio(including corporate and bank bonds)
Granted 143.7 bn EUR Outstanding 99.4 bn EUR
Share of Belgium, CE and rest of the world
granted outstanding
Belgium 47% 52%
CE 13% 17% Rest of the world 40% 31% Total 100% 100%
Dec-02
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Investor Day
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0
10
20
30
40
50
60
Belgium CE Rest of the world
outstanding amounts in € bn, using original exchange rates
52.1
16.413.9
KBC's global credit portfolio
Dec-02
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Investor Day
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0
25
50
75
100
Dec-98 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02
outstanding amounts in € bn, using original exchange rates
+8% +5% +4% -1%+6% +2%+18%
66.9
79.0
85.790.1
93.799.1
97.799.4
KBC's global credit portfolio
5
Investor Day
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outstanding amounts in € bn, using dec-02 exchange rates
+8%
0
25
50
75
100
Dec-98 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02
+7% +1% +3%+5% +2% +7%+14%
68.9
78.583.8
88.1 89.5 95.496.7 99.4
KBC's global credit portfolio
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Investor Day
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Belgium retail38%
Trade finance
1%
Central-Europe
16%
HO1%
Asia Pacific
2%
Belgium corporate
14%
Project finance
4%
Western-Europe
18%
USA6%
KBC's global credit portfolio business units / geographical spread
in % of total outstanding
Dec-02
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Investor Day
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10 largest sectorsoutstanding in %
Belgium CE rest total
private individuals 34% 17% 0% 20%
finance & insurance 3% 16% 40% 17%
(non-financial) services 15% 9% 6% 11%
retail and wholesale trade 13% 11% 4% 10%
real estate 6% 3% 9% 6%
construction 5% 4% 3% 4%
governments 2% 11% 3% 4%
electricity 0% 3% 9% 3%
agriculture 5% 3% 0% 3%
automotive 2% 3% 2% 2%
total 86% 79% 77% 82%
KBC's global credit portfolio economic sectors
Dec-02
8
Investor Day
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final riskcountry
outstanding in %
Belgium CE rest total
Investment-grade 100% 99% 97% 99%
non-invest-grade 0% 1% 2% 1%
BB – B 0% 1% 2% 1%
CCC D 0% 0% 1% 0%
total 100% 100% 100% 100%
KBC's global credit portfolio geographical spread / country ratings
9
Investor Day
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risk classgranted in %
Belgium CE rest total dec-02
total mar-03
low 51% 33% 58% 51% 55%
medium 32% 38% 26% 30% 28%
high 14% 20% 14% 15% 14%
adversely 3% 10% 2% 4% 4%
performing 1% 5% 1% 2% 2%
non-performing 2% 4% 1% 2% 2%
total 100% 100% 100% 100% 100%
KBC's global credit portfolio risk classes
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Investor Day
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53%
29%
16%
3%
53%
29%
15%
3%
53%
30%
15%
3%
52%
28%
17%
3%
50%
29%
18%
3%
50%
30%
16%
4%
51%
30%
15%
4%
55%
28%
14%
4%
0%
25%
50%
75%
100%
dec/99 jun/00 dec/00 jun/01 dec/01 jun/02 dec/02 mrt/03
Low Medium High Adversely classified
KBC's global credit portfoliorisk classes historical
in % of total granted
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Investor Day
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non-performing loansoutstanding in m EUR
BEL CE(excl. CE hist)
rest total
NPL outstanding (a) 1 356 750 668 2 774
% of outstanding 3% 5% 2% 3%
NPL specific provisions (b) 930 418 394 1 742
Coverage ratio(strict definition (a)/ (b)) 69% 56% 59% 63%
Coverage ratio (incl. all specific provisions) 81% 85% 75% 80%
Coverage ratio (incl. all provisions) 88%
KBC's global credit portfolioprovision coverage
Dec-02
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Investor Day
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non-performing
loans
in % of outstanding
98 99 00 01 02
Belgium 2.3% 2.1% 2.5% 2.6% 2.6%
CE (excl. CE hist) n/a 4.5% 2.9% 5.0% 4.6%
rest of the world 1.0% 1.4% 1.2% 1.7% 2.2%
total 1.8% 1.9% 2.0% 2.6% 2.8%
KBC's global credit portfolio historic
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Investor Day
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0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
1999 2000 2001 2002
KBC's global credit portfolio loan loss ratio
in % of total outstanding
Approximative
0.35%
0.31%
0.36%
0.55%
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Investor Day
2 0 0 3 KBC's global credit portfolio
corporate credit policy Facts and figures
Credit cost High and rising Unpredictable : concentration of risk increases volatility
Rising non-performing ratioFrom 1.8% (98) to 2.8% (02)
Target Mid term and over the cycle 25 bp credit cost (corporate segment) 25 bp credit cost (retail segment)
By reducing the expected loss and theunexpected loss of the credit portfolio
15
Investor Day
2 0 0 3 KBC's global credit portfolio corporate credit policy (cont'd)
Measures taken Midcap and niche focus in the corporate segment Caps on high risk exposure, non-investment grade
countries, specific sectors Introduction of raroc methodology since jun-02 (pricing) Portfolio management, incl. securitisations
16
Investor Day
2 0 0 3 KBC's global credit portfolio impact of Basel II on capital, costs
KBC anticipates a reduction in minimum capital requirement Under IRB foundation (even more under advanced) Picture is most favorable for retail & (better) SME’s But less favorable for sovereigns, interbank financing and starters
(similar to what other banks see)
Preparing for Basel II is not a free lunch, is complex Some 45 m EUR investment over 2000-2006 (of wich 2/3 ICT),
over 50 FTE involved (incl. ICT) Countered by :
Maximum use of outputs (credit process efficiency, pricing, management information system/reporting), probably more than what other banks do
Simplicity when and where possible (economic capital = IRB Advanced capital in transactional RAROC)
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Investor Day
2 0 0 3 KBC's global credit portfolio
Potential growth within the next 2 years ?
Belgium Limited credit portfolio growth,
related to the economical growth : 2 to 2.5% p.a.
Rest of the world Moderate growth related to :
economical growth EUR-zone : 2.5% p.a. recovery of the US portfolio : 3 to 5% p.a.
18
Investor Day
2 0 0 3 KBC's global credit portfolio
Reduction RWA in corporate segment past years
2000 2001 2002 2003
bn EUR bn EUR bn EUR vs. 2000 bn EUR vs. 2000
RWA 42.8 37.0 32.3 -24% 37.9 -11%
Allocated equity 2.7 2.4 2.1 -22% 2.3 -14%
Services to corporates
19
Investor Day
2 0 0 3 KBC's global credit portfolio
Active portfolio management Objectives :
Identifying and reducing risk concentration Improving diversity of KBC loan portfolio Managing changes in risk profile of corporate
credit portfolio Creating awareness of real cost of credit and of
pricing discrepancies across asset classes Enhancing liquidity of corporate loan portfolio
Instruments : Credit default swaps Buying and selling loans and bonds
20
Investor Day
2 0 0 3 KBC's global credit portfolio
Vision on securitisation
KBC has to a limited extent securitised part of its creditportfolio related to the corporate and retail market and tothe activities deployed by KBC Financial Products
Bank balance sheet (corporate loans) 7.7 bn EUR
Arbitrage (CDO’s) 4.5 bn EUR
KBC Bank NV (retail loans) 1.1 bn EUR
IIB (residential mortgages) 0.7 bn EUR
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