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KBC Group

KBC Group. Company presentation Spring 2005. Web site: www.kbc.com Ticker codes: KBC BB (Bloomberg) KBKBT BR (Reuters) ISIN code: BE0003565737. Contact information. Investor Relations Office : Luc Cool Nele Kindt Marina Kanamori Tel.: +32 2 429 49 16 investor.relations @ kbc.com

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KBC Group

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  1. KBC Group Company presentation Spring 2005 Web site: www.kbc.comTicker codes: KBC BB (Bloomberg) KBKBT BR (Reuters)ISIN code: BE0003565737

  2. Contact information Investor Relations Office :Luc CoolNele KindtMarina KanamoriTel.: +32 2 429 49 16 investor.relations @ kbc.com Surf to www.kbc.com for the latest update.

  3. Disclaimer • This presentation is provided for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any security. • Although the statements of fact in this presentation have been obtained from and are based on sources that KBC believes to be reliable, KBC does not guarantee their accuracy, and any such information may be condensed or incomplete. • This presentation contains forward-looking statements with respect to our strategies and earnings development. By their nature, these forward-looking statements involve numerous assumptions, uncertainties and opportunities. The risk exists that these statements may not be fulfilled and that future results differ materially. • By receiving this presentation, each investor is deemed to represent that it is a sophisticated investor and possesses sufficient investment expertise to understand the risks involved.

  4. Table of contents • Company profile • Strategy and earnings drivers • 2004 Financial highlights • Impact of IFRS • Information on capital management • Closing remarks on valuation

  5. Foto gebouw 1 Company profile

  6. Considerable scale in Euroland Euroland top-30 banks, ranking by market cap * KBC Group : 24 bn euros * DJ Euro Stoxx Banks constituents as at 14 March 2005

  7. Shareholder structure Free float CERA/Almancora27.3% Free float46.6% MRBB11.6% Other committed shareholders 11.4% KBC(own shares: 3.3%) Situation as of 3-Mar-05 Situation as of 31-Dec-04(before merger with Almanij) * Including ESOP hedge • KBC is majority-owned by a group of committed shareholders providing continuity to pursue long-term strategic goals • Core holders include the Cera/Almancora Group (co-operative investment company), a farmers’ association (MRBB) and a syndicate of industrialist families

  8. Business portfolio • KBC is a top bancassurer and asset manager in Belgium and has successfully expanded its operations in CEE • Thanks to the merger with Almanij (March 2005), the private banking activities were expanded to include a Western-European network. PB has become a more pronounced key focus • KBC is also active – be it rather selective – in corporate banking (mostly in W. Europe) and financial markets. As investments in CEE have increased, operations in these areas became relatively less important Revenue breakdown (2004 pro forma new Group, excl. group items) Gevaert Capital markets International corporate Belgium Europeanprivate banking CEE

  9. Top-3 player in Belgium Market share: 31-Dec-03 • Consolidated banking landscape (80% of market held by top-4 banks) • Market highly receptive to cross-selling of AM & insurance products (the bancassurance model dominates)

  10. Top-3 player in the CEE region International banks in CEE (by total assets, inbn EUR): Source: RZB – assets as at 31 Dec 03, ownership structure as at 30 Jun 04 • KBC Group is one of the largest international players in the region • Unlike the other players, KBC limits its presence to the EU Member States (Czech Republic, Slovakia, Hungary, Poland and Slovenia) and is active in both the banking and insurance fields

  11. Top-3 position in the CEE region Banking Insurance Czech Republic:Market share: 21% (No. 2)Inhabitants: 10 mTotal assets:18 bn EUR Czech Republic:Life M share: 8% (No. 5)Non-life M share: 4% (No. 6) Slovakia:Market share: 6% (No. 4)Inhabitants: 5 mTotal assets: 2 bn EUR Slovakia:Life M share: 4% (No. 8)Non-life M share: 2% (No. 7) Hungary:Market share: 11% (No. 2)Inhabitants: 10 mTotal assets: 7 bn EUR Hungary:Life M share: 3% (No. 7)Non-life M share: 4% (no 6) Poland:Market share: 5% (No. 8)Inhabitants: 38 mTotal assets: 5 bn EUR Poland:Life M share: 2% (No. 7)Non-life M share: 12% (No. 2) Slovenia:Minority interest (34%)Inhabitants: 2 mMarket share: 41% (No. 1) Slovenia:Life M share: 6% (No. 5) • KBC Group invested ± 3.6 bn to achieve a prominent position in a growth market of ± 65 m inhabitants • Especially in Poland, KBC is looking for external growth (lack of scale)

  12. European private banking network Netherlands:Theodoor Gilissen Acquired in ’03 – participation: 100% Germany:Merck Finck & CoAcquired in ’99 – participation: 100% UK:Brown ShipleyAcquired in ’89 – participation: 100% Switzerland:Kredietbank (Suisse)Historical presence Belgium:Puilaetco private bankersAcquired in ’04 – participation: 100% France:KBL France Acquired in ’98 – participation: 100% Luxembourg:Kredietbank LuxembourgParent company Monaco:KB Luxembourg (Monaco)Historical presence Spain:Banco Urquijo Acquired in ’98 – participation: 100% Italy:Fumagalli SoldanAcquired in ’01 – participation: 95% • Since ‘98, KBC Group (KBL) has developed a private banking network throughout Western-Euope, anticipating erosion of its offshore activities in Luxembourg • AUM grew from 18 bn to c. 44 bn (appx. 70% managed outside Luxembourg)

  13. Solid performance KBC pre-merger: Target Dec 02 Dec 03 Dec 04 Profitability Return on equity 13% 13% 18% 16% +1% +8% +54% +10% EPS growth Efficiency Cost/income, banking 65% 65% 60% 58% Combined ratio, insurance 101% 96% 95% 95% Combined ratio, insurance, excluding reinsurance. Solvency Tier-1, banking 8.8% 9.5% 10.1% >8% 320% 316% 389% >200% Solvency, insurance Solvency, insurance, including unrealized gains.

  14. Solid performance (pro forma) KBC post-merger (pro-forma): Dec 02 Dec 03 Dec 04 Profitability Return on equity 10% 12% 14% +2% +26% +29% EPS growth Efficiency Cost/income, banking 66% 66% 63% Combined ratio, insurance 101% 96% 95% Combined ratio, insurance, excluding reinsurance. Solvency Tier-1, banking 8.8% 9.6% 10.0% 320% 316% 389% Solvency, insurance Solvency, insurance, including unrealized gains. * Non-updated targets used by the KBC Bank and Insurance Group before the merger with Almanij in March 2005

  15. Foto gebouw 2 Strategy and earnings drivers

  16. Strategy headlines • Merger of KBC with parent company Almanij, following public bid on KBL European Private bankers (‘KBL epb'), in order to unlock additional value on the back of: • increased visibility and liquidity • realization of group synergies • Flexibility to continue current strategies: • Leverage on bancassurance model and private banking expertise • Core geographic focus on Belgium, CEE and private banking throughout Europe • Continued good prospects for Belgian market • CEE and European private banking to remain long-term earnings drivers • Continued quest for (cost) synergies, partly through intra- and cross-group co-sourcing for back-office processes • Balanced risk profile through diversified business portfolio • Solid solvency levels and credit ratings

  17. Earnings drivers in Belgium - overview Do not underestimate the market: KBC Group is well positioned: • Consolidated banking market (80% of assets held by Top 4) • Savings ratio amongst highest in the world (every year, ca. 15% of GDP flows into fin. assets) • Market highly receptive to cross-selling of AM & insurance • Growth trend for mortgages, AM and life insurance business of about 10% per year expected to continu • Credit quality has proven to be solid over the cycle • Top-3 market position, esp. strong in Northern region (one of the wealthiest regions in the EU) • Innovative product offering in retail AM (steadily increasing market share throughout the past 10 yrs.) • Performing bancassurance distribution model (life reserves grew >20% p.a. over last 3 yrs.) • Cost efficiency improvement potential (on the back of business process redesigning and co-sourcing of back offices processes with other banks)

  18. Earning drivers in CEE - overview Strong market growth momentum: KBC Group is well positioned: • Nom. GDP growth in 2005 at 6.5%, outgrowing EMU by 3.3% • Ongoing catch-up in product penetration (currently, an avg. 45% for banking accounts and 5% for mortgages) • Mortgage volumes growing at double-digit pace (up 51% on avg. in 2004) • Financial sector could grow five-fold if financial assets to GDP were to reach current levels of S. Europe • Solid market position in retail and corporate businesses (excl. banking in Poland) • Competitive advantage in enhancing cross-selling of asset management and insurance products • C/I still on high side, allowing for further improvement • Adequately provisioned balance sheet (risks under control) • Geographical exposure entirely within EU, limiting risk substantially • Availability of capital within the Group

  19. Above average GDP growth, CEE Czech Republic Slovakia Real GDP growth + inflation - KBC estimates Real GDP growth + inflation - KBC estimates 12.5% 6.8% 6.8% 5.6% 8.5% 8.0 3.2% Hungary Poland Real GDP growth + inflation - KBC estimates Real GDP growth + inflation - KBC estimates 10.7% 8.9% 7.7% 8.1% 8.3% 6.5%

  20. Earnings drivers in private banking Changing market environment: KBC Group is well positioned: • Strong relationship-based approach, open architecture concept and add-on of the product expertise of KBC AM to the tailor-made services of KBL epb • Stringent compliance infrastructure, centrally monitored from Luxembourg • Greatly improved efficiency (implementation of large scale rationalization program), to be further fueled by the realization of merger synergies within an enlarged KBC Group • Shift in customer preference towards new investment concepts: open architecture, alternative investments, financial planning.. • Progressively growing requirements from regulators (increasing vulnerability of smaller players) • Pressure on profitability (although decent performance was seen again in Europe in 2004)

  21. Foto gebouw 3 2004Financial highlights

  22. Headlines Results KBC Bank & Insurance (pre merger) - Financial performance - Areas of activity Results KBL epb Results Gevaert Financial outlook for 2005 Merger synergies – update Foto gebouw

  23. Quick reminder • Until 31-Dec-04: • As of 01-Jan-05: Almanij KBCBank & Insurance Gevaert KBLEuropean Private Bankers KBC Bank KBC Insurance KBCAsset Management KBC Group NV KBCBank KBCInsurance KBCAM KBLEuropean Private Bankers Gevaert

  24. Strong earnings momentum • Net profit FY2004 of 1 758 m • Strong year-on-year growth (+57%) and ROE (18%), driven by solid revenue dynamics and successful risk- and cost management KBC Bank & Insurance Net profit in m EUR +57% * Organic growth

  25. Outperforming the market • Earnings growth at sustained high level compared to sector KBC Bank & Insurance Peer group * CAGR: +20% CAGR: +6% * DJ Euro Stoxx Banks universe CAGR = compound average growth rate

  26. KBC Group (mergco) • Pro forma net profit FY2004 of 1 682 m • Major differences with KBC Bank & Insurance’s results: • Elimination of gains on the sale of Almanij Group shares (82 m) • Add-on of earnings of KBL epb, however with the non-recognition through P/L of the use of the GFBR (130 m) – net contribution of 63 m • Add-on of profit contribution of Gevaert (-36m) , adversely impacted by theone-off divestment loss of Agfa Gevaert (81 m) Net profit in m EUR

  27. Simulated impact of IFRS standards Impact on P/L: -67 m * Impact on equity: + 426 m * in m EUR in m EUR * Impact on KBC Mergco’s 2004 pro-forma figures

  28. Growing dividend • Gross 2004 dividend yield, relative to 2004 average share price is 3.7%* (subject to AGM approval) • Backed by its strong solvency position and enhanced profitability, KBC Group intends in future to continue its policy of paying out a steadily growing dividend Dividend per KBC share * EUR +12% * 4.7% for ex-Almanij shares that were converted to KBC shares

  29. Headlines Results KBC Bank & Insurance (pre merger) - Financial performance - Areas of activity Results KBL European Private Bankers Results Gevaert Financial outlook for 2005 Merger synergies – update Foto gebouw

  30. Key points Premium growth, insurance Top-line growth, banking In m EUR In m EUR +6% +33% org Investment return, insurance Loan-loss ratio, banking In bn EUR - 50 bp - 70bp

  31. Key points Combined ratio, non-life Cost/income ratio, banking - 1pp - 5pp Return on equity, insurance Return on equity, banking -1pp +8pp

  32. Solid growth in banking revenues • Total FY04 income up 6% y-o-y : • Sustained high commission income (+10%), mainly on the back of growth in investment management and – to a lesser extent – in corporate finance, bancassurance and payments services in CEE • Robust financial market activity (+24%), mainly in the first half of the year. Capital gains on investments (365m) in line with 2003 • Interest income up 1% owing to volume growth. NIM* slightly down to 1.67% from 1.73% in 2003 (vs. 1.67% in 2002) • Strong Q4 thanks to a successful marketing campaign (investment products) in Belgium and ‘normalized’ trading levels (after weak Q3) FY 2004 Banking income (in m EUR) 6 011 5 756 5 655 NIM = net interest margin

  33. Favourable growth in banking assets • Customer deposits up 6%* • Customer loans up 7%*: • Corporate book* up 4% (down in 2003, partly due to impairments in Poland) • Solid mortgage growth : End of 2004 Customer loans(in bn EUR) 106.6 98.8 90.3 O/S = outstanding.Chg in 2003: excl. deconsolidation of Krefima * Excl. institutional activity Note : mortgage growth adjusted for currency depreciations

  34. Spread development Interest margin, Belgium banking business Spreads on outstanding loans,Belgium banking business trend trend

  35. Strong growth in premium income • Sustained robust growth in Life: • Up 45% y-o-y in organic terms • Very strong in Belgium (+47%), outgrowing the market on the back of successful business model (market share up from 13% to 15%, at 31% in unit-linked business) • Solid growth in CEE (+28%). Market share up in Hungary and Slovenia, down in Poland and CR. • Non-life: up 5% in organic terms * • Primary business in Belgium growing (+7%) slightly above claims inflation (stable market share) • Expansion in CEE: premiums up 11% y-o-y in organic terms. Market share stable in Hungary and SR, down in Poland and CR. • Drop in reinsurance exposure(premium income: -3% y-o-y) FY 2004 Premium income (in m EUR) 5 037 3 486 3 156 * Extension of consolidation scope in 2004

  36. Lower investment yields, insurance Interest income, insurance Total Investment income, insurance * capital gains on shares in 2004: 4.75% on market value of equity portfolio

  37. Low loan-loss charges • Loan-loss provisions at very low level (-71% y-o-y) FY 2004 Loan-loss provisions (in m EUR) 676 465 199 * Net specific provisions to average gross customer loans

  38. Favourable non-life claims charge FY 2004 • Favourable development in all markets: Claims ratio(% of net premium income)

  39. Banking expenses well controlled • Total cost basis down 2% y-o-y : • In Belgium: -4% y-o-y (-78 m), headcount reduced y-o-y by 800 FTEs • CEE: -1% y-o-y (-9 m).In Poland, headcount reduced by 1 275 FTEs (exceeding initial target) • Elsewhere: +6% (+29 m), mainly related to trading bonuses • Cost/income ratio significantly improved from 65% to 60% • Q4 up 2% y-o-y (higer profit than anticipated resulting in higher bonus expenses) and 13% q-o-q (seasonality reasons and higher marketing costs) FY 2004 Banking expenses (in m EUR) 3 751 3 695 3 636 * Extension of consolidation scope in 4Q01

  40. Reducing product complexity - update Product simplification programme - banking, Belgium

  41. Co-sourcing initiatives - update Joint venture with the DZ Bank Group for cross-border payments GE BE Transactions from DZ and its 1 200 co-operative banks ±12 m transactions p.a. from KBC's Belgian banking activities Fin-Force shared processing platform for cross-border payments transactions Multi-bank platform based on high performance straight-through processing and compliant with new EU regulation Economies of scale: the no. of cross-border transactions will go up over 50%, generating substantial recurring cost savings (double-digit reduction of unit cost per transaction - expected payback period < 1 year) * * For competitivity reasons, no further details can be disclosed

  42. Incremental intra-group synergies Cross-border synergies with CEE entities : • Centralized card purchasing/processing (SiNSYS) • Alignment of ICT approach and joint contracting of business partners, e.g., in the field of cash handling (purchases of vendor solutions & machinery, etc.) and HRM (SAP) • Integrated int’l cash management product offering (W1SE), joint nostro/vostro proposal, centralized approach for cash handling, etc. • KBC standards for retail distribution and bancassurance (Mercator)

  43. Headlines Results KBC Bank & Insurance (pre merger) - Financial performance - Areas of activity Results KBL European Private Bankers Results Gevaert Financial outlook for 2005 Merger synergies – update Foto gebouw

  44. Areas of activity overview Net profit contribution, in m EUR * * Pro forma

  45. FY profit conribution of 582 m, up 19%, thanks to remarkable improvement in banking profitability. ROAC at 19% Banking result up 32%, driven by 4% revenue growth (margin pressure offset by asset growth and higher fee income in funds and insurance business), sustained cost control (-2% expenses) and low level of problem loans (9 bp loss on RWA). Private banking contributing 49 m Strong premium income (+38% y-o-y) and strict technical discipline (combined ratio at 93%), but negative impact from lower investment yields and normalized tax level Excellent performance in Q4 on the back of a succesful marketing campaign (investment products) and capital gains (offsetting impairment charges of preceding quarters) Belgian retail Profit contribution (in m EUR) FY 2004 582 490 363 FY 04 at a glance :RevenuesExpensesCredit risk

  46. FY profit contribution of 269 m, up from -132m in 2003, underpinned by the robust turnaround in Poland and solid operating performance on the other markets. ROAC 14% (15% in banking) Banking at 244 m (vs. –131 m), thanks to solid revenue expansion (+11%), cost discipline (C/I down from 75% to 67%) and ‘normalized’ credit risk (loan-loss charges at 48 bp) Insurance at 24 m (vs. –1 m), driven by solid premium growth (+20% in organic terms) and improved underwriting (C/R down from 104% to 97%) Q4 result below quarterly average due to various items: change in recognition of interest income and higher marketing costs (PL), seasonal effects in operating expenditure and higher life reservation charges (CZ) and provisioning for legal disputes (HU). Central and Eastern Europe Profit contribution (in m EUR) FY 2004 269 108 … -132 FY04 at a glance (organic):RevenuesExpensesCredit risk

  47. Key developments in CEE banking Top-line growth * Cost/income ratio FY03 FY04 FY03 FY04 Return on investment Market shares FY03 FY04 Dec-04 Dec-03 Avg deposits and loans n/r * Growth in local currency, after elimination of the yield on excess capital

  48. CEE, company overview CEE FY 04 (in m EUR)(% chg y-o-y in local currency) CSOB K&H KB NLB Insurance

  49. Asset management Assets under management(in bn EUR) Net change in assets, 2004 Retail funds, Belgium Retail funds, CEE 107 bn Corporate 89 bn Belgium:88% Private assets, Belgium 81 bn Institutional assets Retail Group assets CEE: 5% Market share, retail funds Belgium : 31.5% Czech Republic : 22.0% Slovakia : 7.7% Hungary : 9.4% Poland : 1.3%

  50. FY profit contribution of 143 m (after allocation of distribution fees to retail business), up 8%, underpinned by solid increase in AUM Assets (107 bn) up 20% y-o-y (of which 66% net inflow), but gradual shift to lower margin business (buoyant growth in capital-guaranteed retail funds and advisory mandates for HNW individuals in Belgium) Solid growth momentum in CEE region, be it from a low basis: AUM up 25% y-o-y (+57% for retail funds on the back of market innovation / launch of structured funds) Search for international expansion through third-party distribution of funds (0.5 bn gathered in 2004) Strong Q4 segment result (6% increase in AUM) Asset management Profit contribution (in m EUR) FY 2004 143 132 116 FY 04 at a glance :RevenuesExpenses Belgium :88% CEE : 5 %

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