kbc bank & insurance group
DESCRIPTION
KBC Bank & Insurance Group. Interim results at 30 June 2003. www.kbc.com. Highlights Results, banking Results, insurance. Overview of results. In m EUR. 604. 596. 585. +1%. -1%. +7%. 355. 316. 304. 300. 280. Average quarter 2002. 230. Results – first half-year. - PowerPoint PPT PresentationTRANSCRIPT
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KBC Bank & Insurance Group
Interim results at 30 June 2003
www.kbc.com
KBC Bank & Insurance Group – Half-year results
2
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Highlights
Results, banking
Results, insurance
KBC Bank & Insurance Group – Half-year results
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1Q 01 2Q 01 1H 01 1Q 02 2Q 02 1H 02 1Q 03 2Q 03 1H 03
Overview of results
596
316
Average quarter2002
604
300
585
355
230
+1%
280304
In m EUR
+7% -1%
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Results – first half-year
In mln. EUR 1H 02 1H 03 % Auton. %
Gross operating income 3 287 3 302 +0.5% + 0.5% - banking 2 871 2 867 0% +1% - insurance 422 433 +3% -2%Administrative expenses -2 120 -2 127 +0.3% -0.3% - banking -1 898 -1 860 -2% -2% - insurance -221 -264 +19% +10%Operating result 1 167 1 175 + 0.7% + 2.1% - banking 973 1 007 +4% +5% - insurance 201 169 -16% -15%Loan loss provisions
Value adjustments, banking
Value adjustments, insurance
Other non-recurring result, insurance
Other and extraordinary results
-174
-70
-
-7
+24
-220
-4
-90
+86
-10
Pre-tax profit 939 937 - 0.2% + 0.5%
Taxes -250 -255
Minority interests -93 -78
Net profit 596 604 + 1.4% + 2.0%
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Highlights – 1st half-year
Stable income (+0.5%), despite difficult economic situation
Improving cost level in banking (-2%)
Strong technical result in non-life : combined ratio 95.4% (excl. reinsurance : 93.5%)
Relatively high credit loss provisions (220 m EUR)
Value impairments on shares (94 m EUR, but compensated)
Solid solvency : 8.8% (Tier 1 - bank) and 327% (insurance)
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Changes in the scope of consolidation
Impact (*)
CSOB Insurance
NLB Bank
Full consolidation
Equitymethod
+0.4%
+0.3%
+0.1%
-0.7%
1 q 2 q 3 q 4 q 1 q 2 q 3 q 4 q
2002 2003
Ergo Insurance
Krefima Bank
Full consolidation
Deconsolidation(previously full consolidation)
(*) Impact on gross operating income
Limited net impact of changes in consolidation
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Key ratios
In m EUR 30 June 02 31 Dec 02 30 June 03
Cost / income, banking 66.1% 65.2% 64.9%
Combined ratio, insurance (*) 96.7% 101.4% 93.5%
Solvency (Tier 1), banking 8.8% 8.8% 8.8%
Solvency, insurance (**) 432% 320% 327%
Return on equity 14.8% 12.7% 14.1%
Growth in EPS (y-o-y) +1% +1% +1%
(*) Excluding reinsurance(**) Including unrealized gains
Strategic objectives coming closer
KBC Bank & Insurance Group – Half-year results
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2 0 0 3
442
170
422
183
459
147
1H 01 1H 02 1H 03
Profit contribution - banking / insurance
Net profit in m EUR 585 596 604
Group result : 3/4 from banking, 1/4 from insurance
+1%
+9%
-19%
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Areas of activity
Profit contribution
KBC Group (*) % ROE
Retail (Belgium) 219 m 17% 15.5%
Central Europe 48 m -56% 4.4%
Asset management 61 m 1% -
Corporate services 78 m -45% 7.4%
Market activities 76 m 35% 13.2%
(*) Profit including minority interests
Profit improvement in retail activities in Belgium and financial markets, result in Central Europe and
corporate services below expectations
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Areas of activity
Profit contribution (incl. minority interests)
Allocated capital
Retail (Belgium) 36% 32%
Central Europe 8% 24%
Asset management 10% -
Corporate services 13% 24%
Market activities 13% 13%
Group 20% 8%
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Results, banking
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Banking income
Interest income : 2 % due to low interest rate environment(interest margin : 1.68% 1.63%)
Commission income : strong growth (investment funds)
Lower trading income ( 16%) due in part to lower FX income and MtM (*) of equity derivatives
Considerable capital gains (179 m) on ‘free’ bond portfolio
One-off ‘other income’ recorded in 2Q 02 and lower dividends
Stable gross operating income in spite of adverse economic climate
1 492
640
280 179 79 190
2 867
0%
+79%-16%
+12%
-2%
-28% -20%
(*) MtM = Market to market
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Administrative expenses
920
264
499
882
513
503
841
491
528
1H 01 1H 02 1H 03
Rest of the world
Central Europe
Belgium
Merger-related savings in Belgium : Expenditure 1H 03 : 5% (41 m) Follow-up headcount reduction plan :
1 350 FTE (82% of target)
Central Europe : Expenditure 1H 03 : 4% (20 m) Follow-up headcount reduction plan :
CSOB : 430 FTE
(45% of target)
KB : ca. 500 FTE
Better cost / income ratio :66.1 % 64.9%. Plus, technically,cost line too high : no compensation by write-backs from provisions (impact ca. 0.5%)
In m EUR 1 898 1 860-2%
- 4%
- 5%
Continuing cost control
- 4%
In 2001excl. KB
1 683
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Loan loss provisions Domestic loan losses at a
relatively ‘favourable’ level (excl. Poland) : Belgium : 23 bp Hungary : 34 bp CR and SR : 45 bp
(no write-backs)
Credit losses in Poland : 60 m EUR (loan loss ratio : 270 bp)
International portolio : sensitivity to the economic slowdown, problem loans in energy industry in US Loan loss ratio : 47 bp
Share of non-performing loans : 2.9%, 65% covered by loan loss provisions
Loan loss ratio 1H 03:0.44%
(0.55 for FY2002)
1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03
Quarter Moving average since start of 2002
88 85
131
160
79
141
Quarterly loan loss provisions (m EUR)
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Asset growth, banking
Customer deposits : status quo (excl. repos), plus shift to life assurance
Customer loans : 1% (excl. reverse repos) High level of private lending, especially
mortgages ( 7%, excl. negative consolidation effect from Krefima)
Belgium 4% Hungary 22% Czech Rep. 14% Poland 4%
Corporate lending :slight decrease ( 2%)
Risk-weighted assets : stable (95 bn)64
21
2
62
23
13
61
23
10
2001 2002 30/06/2003
Corporate Private Repos
121
10
123
15
122
6
2001 2002 30/06/2003
ReposDeposits excl. repos
Customer deposits (in bn EUR)
Customer loans (in bn EUR)
131
99 9487
137
128
KBC Bank & Insurance Group – Half-year results
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2 0 0 3
4Q 00 1Q 01 2Q 01 3Q 01 4Q 01 1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03
Value adjustments DJ Eurostoxx
Value adjustments on investments
+8 m
-77 m
-142 m
+9 m
-74 m
+ 69 m
Positive second quarter of 2003 offset first quarter
-85 m
-23 m-5 m
+25 m
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Unrealized gains
In m EUR 31-12-2002 30-06-2003
Banking Total 1 742 1 980 + 14%
Bonds 1 630 1 827
Shares 86 80
Other 27 73
Unrealized gains increasing due to decline in interest rates
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Retail banking (Belgium)
Turnaround in retailbanking : Profit contribution : 87 m ( 142%) Increase in income : 5%
(strong commission income, mainly from investment products)
Decrease in costs : 6% Loan loss provisions (29 m EUR) remain low
(18 bp on risk-weighted assets)
Belgium1st home market
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Progress of bank merger in Belgium
Targets
To be achieved by 2004 : Status30-06-03
Planned2H 03
Integration of central departments 100% -
Downsizing of branches by 650 (-43% ) 91% 94%
ICT migration : from 3 to 1 new platform 99.9% 100%
Rightsizing of headcount by 1 650 (-11%) 82% 91%
Increase in cross-selling from 20% 40% 38.3%
Belgium1st home market
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Banking in Central Europe
Facts banking business : Profit contribution : 39 m ( 49%)
Strong income growth in Hungary ( 13%)
Less extraordinary income in Czech Republic ( 10 m)
High provisions for loan losses in Poland ( 60 m)
Central Europe2nd home market
(*) Including minority interests, results via equity method and 12 m provisions 2002 for KB in 2003-result KBC
(mln.EUR) 1H 01 1H 02 2H 02 1H 03
CSOB Czech Rep.Slovak Rep.
97 103 72 92
K&H Bank Hongary -7 11 28 24
Kredyt Bank
Poland 2 -6 -85 -54
Others(*) -31 -32 16 -23
71 76 31 39
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Asset management
Market share, retail funds: Belgium : 31% Czech Republic : 23% Slovak Republic: 11% Hungary : 11%
Stable profit contribution, volumes under management heading back up
42.1
24.3
11.5
43.2
25.4
11.7
40.9
26.1
11.5
42.5
27.4
11.9
2000 2001 2002 30/06/2003
Private bankingInstitutional funds Retail funds (including AUM Central Europe)
78.1 80.3 78.481.8
Retail funds in 1H 03 : Market value : 3%,
Net inflow : 1%
AUM including CE
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Corporate banking
Profit contribution : 79 m EUR ( 45%) No repeat of 2002 one-off revenues Cost decrease ( 6%) due to strict cost control,
mainly in Belgium / Western Europe Provisions for problem loans (56 bp on RWA*),
mainly for the electricity sector in US
In m EUR 253290
239
124143
79
Operating result Net profit
- 64 m
-51m
1H 02
1H 01
1H 03
1H 02
1H 01
1H 03
(*) RWA = Risk Weighted Assets
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Market activities 1H 03 profit contribution : 76 m EUR, 35%
Very strong performance in money and capital market products
Equity trading: still weak, but KBC Securities’ loss halved, via cost-cutting
KBC Financial Products : satisfactory result but negative MtM for LT equity derivatives
4043
35
22
60
17
1H 01 1H 02 1H 03
Money & cap. market prod.Shares and derivatives
Profit contribution :
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Solvency banking
Stable at a high level
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
1H 02 FY 02 1H 03
Legal minimum Comfort zone Surplus
Tier-1 ratio,banking
8.8% 8.8% 8.8%
3 880 3 800 3 800
3 8003 8003 880
735 788 750
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Results, insurance
KBC Bank & Insurance Group – Half-year results
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2 0 0 3
2 176
525 500
1 151
Non-Life Life,guaranteed
rate
Life, Unit-linked
Total
Premium income
Non-life : 19% (14% autonomous)
Premium income, life : 17% (13% autonomous)
Very strong premium income
In m EUR
+17%
-17%
+42%
+19%
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Technical result, non-life
67.6% 64.4% 61.8%
33.5% 32.2% 31.7%
101.1%96.7%
93.5%
Net loss ratio Net expense ratio Combined ratio
1H 01 1H 02 1H 03
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Average amount of loss
Frequency of losses
Exceptionallylow level
KBC Belgium, motor insurance loss
Excl. reinsurance
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Profitability dynamics, non-life
Reserve ratio205
Return on investment5.00%
Allocated capital
40
Investment incomereserves
10.3
Investment incomecapital
2.0
Premium100
Combined ratio-97.5
Investment income
12.3
Profit14.8
Tax-3.5
ROAC28%
X
X
+ +
-
:
Investmentmix : 45% shares Return : 6.00%50% treasury bonds 4.00%
5% real estate 6.00%5.00%
Combined ratio 105 % 100% 95%
ROAC 16 % 24 % 32%
Low combined ratio, important leverage
Return on allocated capital (risk-weighted) :
Simplified example :
KBC Bank & Insurance Group – Half-year results
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2 0 0 3
4.6 5.3 5.96.8
33
2.8
3.1
0
2
4
6
8
10
12
Interest-guaranteed Unit-linked
Technical result, lifeActuarial reserves, life
Much higher life assurance reserves
Net,bn EUR
+16%
+9%
31-12-01 30-06-02 31-12-02 30-06-03
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Overview of the life portfolio
Overview Belgium, actuarial reserves interest-guaranteed life :
4.75% 3.75% 3.25% Other (**)
Traditional life 15% - 9% -
Universal life (*) 27% 23% 23% 3%
Interest rate riskpartly covered by provisions
Excl. death cover
Government bonds
75%
Corporate
bonds(***)
0%
Equities 20%
Real estate 5%
30%
65%
5%
0%
(*) Flexible premium payments with 10-year interest rate guarantee (no guarantee for future payments)(**) incl. insurance certficates with relatively short term(***) Financial instrumens based on corporate bonds
Premiumgrowth 03
Premiumgrowth 02
Investment mix :
KBC Bank & Insurance Group – Half-year results
31
2 0 0 3Profitability dynamics, life (non-linked)
Reserve 100 (1st yr)
Return on investment4.23 %
Allocated capital7.74
Investment income reserves
4.23
Investmentincome capital
0.33
Investment income4.56
Guaranteed rate3.25
Profit1.31
X
X
+ -
Investmentmix : 30% treasury bonds 4.00%
65% corporate bonds 4.20%
5% shares 6.00%
4.23%
Return on allocated equity (risk-weighted) :
Simplified example
ROAC17%
Returndeath cover
Tax
+
-
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Investment income
6m 02 6m 03 Autonomous
Interest, dividend,rent
236 248 +5% +0%
Recurring value gains on shares
75 46 -39% -39%
Total 312 294 -6% -9%
Pressure on financial income
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Value adjustments on securities
4Q 00 1Q 01 2Q 01 3Q 01 4Q 01 1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03
Value adjustments DJ Eurostoxx
-6 m
+17 m
- 56 m
-118 m
-81 m
-44 m
-146 m
+56 m
+1 m
-43 m
Significant value adjustments, but offset by non-recurring result
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Non-recurring result
In m EUR 6m 03
Non-recurring result
Value adjustments, shares -90
Transfer from equalization reserve 92
Realized gains 122
Transfer to provision for financial risks -122
Other -6
Total non-recurring result -4
Value adjustments on shares offset by non-recurring income
Provision for financial risks, balance : 90 m EUR
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Unrealized gains
In m EUR 31-12-2002 30-06-2003
Insurance Total 82 240 +192%
Bonds 497 511
Shares -516 -376
Other 101 105
Unrealized losses down due to recovery of stock exchange
KBC Bank & Insurance Group – Half-year results
36
2 0 0 3Cross-selling, bancassurance
34.5%35.2%
37.5%38.3%
40.0%
2000 2001 2002 jun/03 Target
Cross-selling continues
About 50% of the customers with a home loan also choose for buying a fire insurance, compared to 25% in 2001 (*)
Clients with both bank and insurance products in Belgium :
(*) June 2003 figure
KBC Bank & Insurance Group – Half-year results
37
2 0 0 3Solvency
449
449
1 041
496
496
595
556
556
705
0
200
400
600
800
1000
1200
1400
1600
1800
2000
1H 02 31/12/2002 1H 03
Surplus
Comfort zone
Legal minimum
432%
320%
327%m EUR
Solvency very solid : 327%
KBC Bank & Insurance Group – Half-year results
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2 0 0 3
Q&A session
Teleconference with live audience in Brussels
Analysts who want to participate in the conference call,please dial the number given in the invitation
KBC Bank & Insurance Group – Half-year results
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2 0 0 3Executive Committee
Herman Agneessens
• Central European banking and SE Asian activities
• Payments and Securities processing
Emile Celis
Christian Defrancq
Frans Florquin
GuidoSegers
JanVanhevel
• Corporate customers• West European and
US bank network• Retail credit handling
• Retail bancassuranceand E-services
• Human resources and Communication
• Treasury, capital & equity markets
• Asset Management• International credit
handling
• Information technology
• Insurance subsidiaries• Non life
insurance & reinsurance
• Insurance claims management
• Group CEO• Head insurance business
• Deputy Group CEO• Head banking business
André BergenWilly Duron
2 0 0 3
KBC Bank & Insurance Group
Investor Relations - tel.: +32 2 429 4916E-mail : [email protected]