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Central Europe Investor Relations Conference 2 July 2001 PowerPoint Presentation
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Central Europe Investor Relations Conference 2 July 2001

Central Europe Investor Relations Conference 2 July 2001

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Central Europe Investor Relations Conference 2 July 2001

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  1. Central EuropeInvestor Relations Conference2 July 2001 Herman AgneessensMember of the EC

  2. Central Europe • Mission Statement • Acquisitions to date • Guiding management concepts • Financial Results • Financial Objectives • SWOT analysis • Asset Quality • Efficiency initiatives • Current IPB status Topics

  3. Central EuropeMission Statement Create a second home market In future EU member-countries For bankinsurance activities On a segmented basis In KBC’s 4 activitity areas

  4. Kredyt bank Agropolisa Warta CSOB CSOB Poijst'ovna Patria K&H Bank K&H Life Argosz

  5. Acquisitions to date Current Ownership Market share Investmentin m EUR P/BV 82% 75% 100% 2.3 2.34 4.13 23 % 0.5 % na 1361.9 16.0 56.0 Czech & Slovak Rep. CSOB CSOB Pojist’ovna Patria non-life Poland Kredyt Bank Agropolisa Warta & Warta Vita 49.99% 49.90% 40.00% 213.4 7.2 123.2 1.42 na 3.35 6 % 1 % 12 % non-life 0.7% life 1.34 1.23 na Hungary K&H Bank (new) K&H Life (*) Argosz 15% 0.3 %3 % 279.4 2.5 23.9 60.00% 50% 95.40% (+ 30%) (*) 30 % indirectly through K&H Bank

  6. Central Europe Total investment : EUR 2,084 million banking EUR 1,911 million insurance EUR 173 million

  7. Guiding management conceptsCareful balance between autonomy and control • Branding policy : customer identification • Strong local management input • Strict central control requirements • Credit/insurance risks, market risks, operational integrity • Internal audit & compliance principles • KBC reporting standards • Maximisation of synergies • IT, payment systems, operational efficiency • Bankinsurance, markets & asset management know-how • “best group practices”

  8. m EURY2000 1Q01 CSOB 116.1 78.7 K&H Bank 3.8 0.2 Kredyt Bank 46.8 15.5 p.m. Patria n/a 0.2 Financial results 1Q01 Stand alone results banks

  9. Net profit (m EUR) Share in group profit Return on alloc. equity Share in alloc. equity Cost/Income ratio Financial results 1Q01- Banking External (2) Normalized External (1) Internal(3) 60.0 16.9% 44.4% 10.1% 59.4% 40.0 11.9% 29.0% 10.1% 59.4% 30.5 9.7% 16.6% 8.7% 59.3% (1) external: after minorities and funding cost (2) ext. normalized: excluding 20 m EUR except. loan loss recoveries (3) internal : including FGBR and amortization of goodwill over 20 yrs

  10. m EURY2000 1Q01 CSOB Poijst'ovna -1.6 +1.0 K&H Life -0.2 -0.04 Argosz +0.05 +0.2 Warta -7.2 +0.03 Financial results 1Q01 Stand alone results insurance

  11. Net profit (m EUR) Share in group profit Return on alloc. equity Share in alloc. equity Financial results 1Q01- Insurance External (1) Internal(2) - 0.9 - 0.3% - 1.4% 2.7% 0.9 0.2% 1.4% 4.2% (1) external: after minorities and funding cost (2) internal : after amortization of goodwill over 20 yrs

  12. Net profit (m EUR) Share in group profit Return on alloc. equity Share in alloc. equity Financial results 1Q01- Combined External (1) Internal (2) 29.6 9.4% 11.5% 11.4% 60.9 17.1% 29.2% 14.3% (1) external: after minorities and funding cost (2) internal : including FBGR and amortization of goodwill over 20 yrs

  13. Financial Objectives 2004 • Stand-alone ROE : 20 % • CAD-ratio banks : 11 to 13 % • Stand-alone cost/income ratio : 55 % • Stand-alone combined ratio : 103 % • Net profit contribution to KBC Group profit : 10 % • Net ROE for KBC : 15 %

  14. KBC’s major strenghts in CE • Strong banking franchises at competitive cost • Strong insurance franchise in Poland, …. perhaps also in Czech Republic • Good to strong local management teams • Segmentation already introduced • Early entrant in integrated bankinsurance • Positive profit potential outlook • Eu-joining of chosen countries well underway

  15. KBC’s major weaknesses in CE • Mostly inadequate IT-infrastructures • Insufficient customer orientation • Insufficient productivity & efficiency levels • Unequal risk-awareness & asset quality levels • Insufficient existing product offerings • Critical mass not available in all countries • Banks insufficiently strong in retail

  16. KBC’s major opportunities in CE • Above average (western) growth outlook • Country GDP as such • Country GDP because of eu-joining • GDP per capita • Savings ratio • Customer switch to higher value added products • Policy of combining local brand & local management with strong shareholder resp. know-how provider • Largely undeveloped SME / Asset Management / bankassurance markets - areas of KBC expertise • Domestic capital markets waiting to be developed

  17. Central European growth potential • Ample room for expansion... • Total population: 65 million (Belgium: 10 million) • GDP / capita: only 42% of EU average • Bank products penetration: only 47% of EU average • Insurance products penetration: only 42% of EU average • …and good prospects for the region: • GDP growth in 2000Czech Rep. 3.1% / Poland 4.1% / Hungary 5.2% • Hungary, Poland and Czech Republic figure as top-3 transition countries, Slovak Republic is nr. 5

  18. KBC’s major threats • The competition has woken up ! • IT-renewal is a major challenge • Large-scale employee education is a must • Change management must be concluded successfully • Bank-mergers in czech republic and hungary • Network expansion in slovak and polish banks • Implementation of integrated bankinsurance concept • New IT = new processes = “rationalizing yourself away” • Productivity increase requirements • Ensure adequate customer orientation • Need to significantly enlarge existing product-offerings • Develop & control new products in an untested environment

  19. Current Bank Asset Quality

  20. Efficiency initiatives - CSOB (CR only) CSOB + IPB staff June 2000 : CSOB + IPB staff now : CSOB + IPB staff Dec. 2001 : Estimated lay-off costs : Est. recurrent savings p.a. : 8 901 7 997 (-10.1%) 6 597 (- 25.9%) 2.2 m EUR 15.1 m EUR .

  21. Efficiency initiatives - K&H Bank K&H+AAM staff 30/08/00 : 5.174 K&H+AAM staff 31/05/01 : 4.468 (- 13.7 %) K&H+AAM staff 31/12/01 : 3.939 (- 24.9 %) K&H+AAM staff 31/12/02 : 3.400 (- 34.3 %) K&H+AAM staff 31/12/03 : 3.000 (- 42.0 %) estimated lay-off costs : 10.0 m EUR est. recurrent savings p/a : 11.4 m EUR

  22. Current CSOB -IPB status • Assets to be retained : 117 m CZK • Unwanted assets to be put : 48 m CZK • Assets to be managed by CSOB for account of the government : 110 m CZK • Unresolved : 22 m CZK • IPB-bank subsidiaries: at book value

  23. Remaining CSOB / IPB issues • IPB Pojistovna : ownership • Pension fund : ownership • 37 % IT affiliate PVT : modalities

  24. Central EuropeInvestor Relations Conference2 July 2001 Herman AgneessensMember of the EC

  25. KBC Control over CE-subsidiaries • Formally : AGM & BoD • Strategically : Steering Cttee CE & KBC • Factually : • KBC-expatriate in management board • regular CEO/KBC-top consultation • structured coordination

  26. KBC-control : structured coordination • Full-time regional KBC CE-coordinators for : • Overall coordination • Market activities • Internal Audit • Market Risk Management • Retail bankinsurance • Information technology

  27. KBC-control : structured coordination • Part-time regional KBC CE-coordinators for : • Financial reporting • Payment systems • Specific insurance issues • Credit-system integration • Ad-hoc consultancy when requested ordeemed appropriate

  28. Central EuropeInvestor Relations Conference2 July 2001 Herman AgneessensMember of the EC