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PRESENTATION

PRESENTATION. MARCH 2004. OWN ISSUES OFFICE. Profound restructuring process of Kredyt Bank. There are three main restructuring areas. Restructuring areas. Credit risk. Investment banking. Organisational Structure. Restructuring and quality of receivables.

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PRESENTATION

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  1. PRESENTATION MARCH 2004 OWN ISSUES OFFICE

  2. Profound restructuring process of Kredyt Bank There are three main restructuring areas Restructuring areas Credit risk Investment banking Organisational Structure

  3. Restructuring and quality of receivables Increase of irregular receivables Share of irregular receivables in total receivables

  4. Increase of loan portfolio safety Significant increase of coverage ratio by provisions

  5. Economy industries of heavy loan provisioning • Real-estate financing • Metal processing industry • Power industry • Food processing • Ship building • Automotive industry

  6. Investment banking Kredyt Bank S.A. Group restructuring process ŻAGIEL S.A. 100% KB Zarządzanie Aktywami S.A. (asset management) 100% KREDYT LEASE S.A. 100% additional distribution channels Kredyt Trade Sp. z o.o. 100% BFI Serwis Sp. z o.o. 100% BDH Serwis Sp. z o.o. 100% support functions Kredyt International Finance B.V. 100% SPV for sale or under restructuring process PTE KREDYT BANK S.A. 100% KREDYT BANK S.A. Vilnius Branch KREDYT BANK UKRAINA 66.7% to be sold POLSKI KREDYT BANK S.A. AGROPOLISA Insurance company already sold

  7. Profound restructuring process of Kredyt Bank Kredyt Bank S.A. commenced work, in collaboration with the KBC Bank, on the Kredyt Bank S.A. Reorganization Program. Functioning of the Kredyt Bank S.A. was analysed RESULT including: the sale processes, the costs of activity, the banking risk (market and credit risks). A concept was developed for organisational changes in the Kredyt Bank S.A. Capital Group It was approved by the Bank’s Management Board and the Bank’s Supervisory Board. The Reorganisation Program of the Kredyt Bank S.A. will be conducted by way of mutually interdependent projects encompassing significant areas of the Bank’s functioning.

  8. Changes to key balance sheet items of the Group Slow down of increase of scale of activity measured by total assets in PLN million 7,1% -2,9% % Change in relation to previous period

  9. Changes to key balance sheet items Changes to securities portfolio in PLN million 6,6% Debt securities Increase of share of debt securities. They account for app. 90% of total securities portfolio. Change in relation to previous period %

  10. Operating result The Bank generated positive financial result excluding cost of risk in PLN million Positive OPERATING RESULT before the cost of provisions 232,5 1 409 1 176,5 Net income from operating activity Functioning costs

  11. Net result from operating activity Increase of net commissions and decrease of net interest in PLN million 7,8% -9,3% % Change in relation to previous period

  12. Functioning costs Decrease of tangible costs, increase of fixed assets depreciation costs in PLN million 2,1% 16,7% ... due to intensive build-out and updating of sale and IT infrastructure. 43,9% % Change in relation to previous period

  13. Main reasons for net loss generated in 2003 Main reason for net loss - loan portfolio restructuring in PLN million Establishing provisions for credit risk -1 533,3 Negative financial result of the Group Corporate income tax -187,5 +232,5 -1 567 Financial result of the Group excluding „risk cost” Write-off of goodwill of subsidiaries -81,7

  14. KBC Bank NV - strategic investor in Kredyt Bank Financial strength of KBC Bank NV as compared with Polish banking sector • KBC Group with its seat in Brussels • conducts banking activity (KBC Bank) as well as insurance activity (KBC Insurance) • one of the largest financial groups in Belgium • occupies a leading position in the Central Europe • in Poland - it conducts banking activity through Kredyt Bank S.A.and insurance activity through Warta S.A. • worldwide - it employs about 45,000 people and services 9 million customers. KBC GROUP ASSETS: EUR 224 billion OWN FUNDS OF KBC GROUP: EUR 9.3 billion • more than twice as large as the assets of the Polish banking sector • more than 22 times as large as own funds of Polish banking sector • similar to own funds of Polish banking sector KBC Bank holds 81.4% participation in the capital of Kredyt Bank S.A. Data as at end IIIQ 2003

  15. Capital adequacy ratio of the Bank Increase of capital adequacy ratio as a result of series W shares issue 8% Level required by Polish Banking Law II kw 2004 FORECAST Capital adequacy ratio of the Bank

  16. MAINTENANCE OF THE CURRENT AS WELL AS FUTURE LEVELOF STABILITY AND SAFETY OF THE BANK Actions securing appropriate levels of receivables’ concentration ratios and level of capital adequacy ratio within the process of restructuring. Total financial support of KBC Bank N.V. PLN 8 630 million

  17. Increase of the Bank’s core funds in 2003 Series U shares issue Series U shares issue with pre-emption rights for existing shareholders amounting to PLN 665 million took place in the fourth quarter of 2003. Issue price:PLN 10.50 Pre-emption rights ratio:7:3 Share of KBC Bank N.V. in capital after series U shares issue:81.40% TARGET Maintenance of own funds on the level adequate to the scale of activity

  18. Assistance from KBC Bank N.V. Key function of KBC financial assistance in restructuring process Placing of deposit securing receivables of the Bank Loans repayment guarantee for the Bank TARGETS PLN 6,364 million EUR 140 million Collateral for receivables Securing concentration limits on appropriate levels Collateral for receivables Increase of capital adequacy ratio

  19. Providing the Bank with core funds New shares issue approved by General Assembly of the Bank held on January 9, 2004 TARGET Series W shares issue with pre-emption rights for existing shareholders amounting to approx. PLN 600 millionwill take place in the I H 2004 Issue price: PLN 10.00 Pre-emption rights ratio: 7:2 Share of KBC Bank N.V. in capital after series W shares issue, in case of purchasing all the shares issued: 85,53% Increase of core funds (Tier I), which shall enable the Bank to pursue more flexible policy in Tier II capital area

  20. Providing the Bank with supplementary funds The Issuance Program of the registered, perpetual banking securities in the amount up to PLN 800 million On December 23, 2003 the Bank issued under Issuance Program debt securities amounting to PLN 330 million directed to entities of KBC Bank N.V. Group The raised funds are included into Upper Tier II capital on permit of Banking Supervision Commission TARGET Increase of supplementary funds (Tier II), according to the Banking Law up to the amount of primary funds (Tier I)

  21. Rating of the Bank Investment grades from Fitch and Moody’s FITCH RATINGS Long-term: BBB+ - outlookpositive Short-term: F2 Individual: D/E Support : 2 MOODY’S INVESTORS SERVICE Long-term: A2 - outlook stable Short-term: P-1 Financial strength: E+ Long-term rating of KB = sovereign rating of Poland. Positive impact of the major shareholder i.e. KBC Bank N.V.

  22. Challenges for 2004 Improvement of profitability and maintaining complete safety levels at the same time • profitability improvement by decreasing costs and increasing sales • effective controlling of credit risk • maintaining of market position • maintaining of adequate safety levels

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