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Introduction Strategy Investor Relations conference 2 July 2001

Introduction Strategy Investor Relations conference 2 July 2001. Remi Vermeiren President of KBC Group. Welcome …. …to KBC’s first Investor Relations Conference with : detailed presentations financials time for questions and answers but no concrete statements about 1H01 figures. Topics.

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Introduction Strategy Investor Relations conference 2 July 2001

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  1. IntroductionStrategyInvestor Relations conference 2 July 2001 Remi VermeirenPresident of KBC Group

  2. Welcome … …to KBC’s first Investor Relations Conference with : • detailed presentations • financials • time for questions and answers but • no concrete statements about 1H01 figures

  3. Topics • Introduction and strategy : Remi Vermeiren • Bancassurance : Frans Florquin • Insurance : Willy Duron • Risk Management : Maurits Verherstraeten Lunch • Central Europe : Herman Agneessens • Market activities and asset management: Luc Philips • Conclusion : Remi Vermeiren

  4. Introduction and Strategy • The merger in 1998 • Current group structure • How merger challenges have been met • Current Strategy • Financials Topics

  5. Some history : the merger in 1998 Merger participants KBC was formed in June 1998 from the merger of • Kredietbank: a universal bank • equity : 2 700 m. EUR • profit : 365 m. EUR • CERA Bank : a retail co-operative bank • equity : 1 575 m. EUR • profit : 228 m. EUR • ABB : a personal non-life insurance company • premium income : 1 018 m. EUR • profit : 188 m. EUR • Omniver and Fidelitas : life and non-life insurance companies of the Almanij/KB Group • premium income : 423 m. EUR • profit : 15 m. EUR

  6. KBC Current group structure Almancora Flemish Families MRBB Cera Holding 9.3% 28.3% 16.6% 15.8% Free Float 26% Almanij NV 67.8% KBC Bank & Insurance Holding NV Free Float 28.5% 100% 100% 55% 45% KBC Bank KBC Insurance KBC Asset Man

  7. Some history : the merger in 1998 Merger objectives • Increase critical mass in banking and insurance • Create a unique multi-channel bancassurance concept • Realize merger savings / synergies • Develop strategy on basis of i.a. stronger home / capital base

  8. Creation of critical mass 1998 1Q01 • Balance sheet (m EUR)147 725 209 740 • Equity (m EUR)5 222 5 879 • Premium income (Y2000/m EUR)1 801 2 650 • Net profit (Y2000/ m EUR) 798 1 166 • Solvency • Bank 7.2% 8.9% • Insurance 311% 309% • Total staff 23 000 35 000 • Total customers +/- 2.6 m. +/- 7.1m.

  9. Creation of critical massMarket shares • KBC Bank • home loans : 22.8 % 25.2% • deposits : 19.2 % 19.4% • Insurance • non-life 9.2% 8.6% • life 9.4% 12.8% 1998 1Q01

  10. Realize merger savings / synergies • Merger effects on P/L as of • 2003 / 2004 : • 200 m EUR / yr before tax • cost savings : 140 m. EUR • inc. synerg : 60 m. EUR Tot. NPV ‘98 : 926 m EUR Total: 1268 m EUR  + 37 % NPV upwards revised in oct 2000

  11. Develop a strong strategy • Focus on 4 activities • Retail bancassurance • Corporate services • Asset management • Market activities • Focus on ‘local’ clients • Retail • SME • Focus on Europe • Belgium : home market • Central Europe : second home market • Western Europe : smaller countries/regions, niches.

  12. Strategic realizations to date • Central Europe established as a second home market (4.5 m. clients) • important acquisitions of banks and insurance companies in Czech Rep., Hungary and Poland (tot. 2.1 bn. EUR) • KBC one of the leading foreign groups in Central Europe • Market activities • development of a European platform for small & mid caps through the acquisition of Peel Hunt, KBC Sec. Netherl. • acquisition of convert. bond business of DE Shaw (KBC FP) • Asset Management • undisputed leader in fund management in Belgium • increase of AUM from 37 to 73 bn. EUR thanks to endogeneous growth and acquisition of UBIM

  13. Value based managementROE targets and Capital allocation • High overall ROE target (+/- 2 x cost of capital) • Reallocation of capital • markets  retail / bancassurance • corporate credits  asset management corporate finance/private equity • ROE target per activity based on cost of capital

  14. Increased overall financial targets Minimum Target 2000 Targets in 1998 ROE at holding-co. level ROE at operat. level EPS growth Cost/income ratio bank Combined ratio insurer Tier-1 ratio bank CAD ratio bank Solvency ratio insurer 22% 17% 15% p.a. 55% by 2004 103% by 2004 7% 11% 200% 15.0% 12.5% 10% p.a. <60% <105% 7% na na

  15. Profit contribution by activity % tot. profit 1Q01 Ext. 2000 Ext. % tot. profit In m. EUR Retailbancassurance Central Europe Corporate Services Asset management Market activities Group Item TOTAL 452 66 148 131 172 196 1166 39% 6% 13% 11% 15% 17% 100% 27% 17% 18% 8% 15% 15% 100% 97 61 64 30 52 53 355

  16. Profit contribution by activity Management calculation 1Q01 Int. % tot. profit 2000 Int. % tot. profit In m. EUR Retailbancassurance Central Europe Corporate Services Asset management Market activities Group Item TOTAL 452 29 145 129 159 200 1113 41% 3% 13% 12% 14% 18% 100% 96 50 63 29 45 53 336 29% 15% 19% 8% 13% 16% 100% • Difference between management calculations and externally • published figures is : • goodwill amortization over 20 years • FGBR considered as equity

  17. Value CreationEquity allocation 2000 ext. . 2000 int. . 1Q01 ext. . 1Q01 int. Target Eq. alloc. 37% 14% 38% - % 10% 2% 5 776 28.0% 10.8% 31.7% - % 8.1% 21.1% 8 953 1 841 1 336 Retailbancassurance Central Europe Corporate services Asset management Market activities Group item TOT. alloc. equity (*) FGBR Goodwill 39% 14% 34% - % 14% -1% 5 879 29.0% 11.5% 28.0% - % 11.5% 20.0% 9 295 1 843 1 574 35% 15/20% 20% 10% 15% 0 / 5% 100% (*) in m. EUR

  18. Value CreationROE per activity MinimumROE target Cost of Capital ROE 1Q 01(in) ROE 2000 (in) ROE 1Q 01(ex) Retailbancassurance Central Europe Corporate services Asset management Market activities TOTAL at operat. level TOTAL at group level 8.5% 13% 10.5% 8% 11.5% 9.5% - 20.0% 15.0% 12.5% 13.0% 21.0% 17% 22% 17.6% 29.2% 12.3% - 30.9% 17.6% 24.7% 14.6% 19.2% 9.4% - 18.1% 15.6% - 17.4% 3.6% 5.3% - 17.1% 12.9% -

  19. IntroductionStrategyInvestor Relations conference2 July 2001 Remi VermeirenPresident of KBC Group

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