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					              Growth ambitions in the
                        CEE region
Foto gebouw
               Agenda

       Reminder: KBC’s presence in CEE
       Update on economic and financial background
       KBC’s opportunities
       Update on Poland
       Financial outlook




2
                    Reminder: KBC’s presence in CEE
    CEE profit contribution to KBC Group                                                                Share of retail segment
                                                             Profit contribution, Poland            in gross income, CEE Banking
         17%                                               2002          2003         2004
                                   27%
                                                           -49 m        -297 m        40 m
                                                                                                               Other
                              2005                                                                             22%
      2004                                               Total assets, bank: 5 bn EUR                                   Retail
                               Q1                        Market share, bank: 5% (No. 8)                    SME/Corp     57%
                                                         Market share, life: 2% (No. 7)                       21%
                                                         Market share, non-life: 12% (No. 2)
             Profit contribution, CZ + SL
             2002           2003          2004
           156 m         144 m            168 m
                                                                                                             Slovakia

                                                                                                Total assets, bank: 2 bn EUR
                    Czech Republic                                                              Market share, bank: 6% (No. 4)
          Total assets, bank: 18 bn EUR                                                         Market share, life: 4% (No. 8)
          Market share, bank: 21% (No. 2)                                                       Market share, non-life: 2% (No. 7)
          Market share, life: 8% (No. 5)
          Market share, non-life: 4% (No. 6)



                                                                                                 Profit contribution, Hungary

                      Profit contribution, Slovenia                                              2002        2003         2004
                                                                                                 16 m         11 m        35 m
                     2002          2003           2004                                         Total assets, bank: 7 bn EUR
                      n/a            10            26                                          Market share, bank: 11% (No. 2)
                                                                                               Market share, life: 3% (No. 7)
                    Minority stake (34%)                                                       Market share, non-life: 4% (No. 6)
                    Market share, bank: 41% (No. 1)
                    Market share, life: 6% (No. 5)

3
               Agenda

       Reminder: KBC’s presence in CEE
       Update on economic and financial background
       KBC’s opportunities
       Update on Poland
       Financial outlook




4
                                                                               Growth fundamentals maintained
                                                                                                                                                                               Financial services (banking & insurance) in % of GDP (2004)
                                                                                                                                     (Source: IMF)                                    0%       1%      2%      3%     4%      5%      6%     7%      8%    9%
       Average real GDP growth, 2002-2004 (in %)




                                                   4.5
                                                                                                                                                   Ireland
                                                                Turkey                                             Slovakia
                                                                                                                                                   (9,4;5,0)               Belgium
                                                   4.0          (1,2; 7,5)                    High flyers                                     Poland

                                                   3.5                                                                                                                       EU-15
                                                                                                                                                          Hungary
                                                                                                                EU-13
                                                   3.0                                                        (not-EMU)                  Slovenia
                                                            Czech                                                             US                                                US
                                                   2.5      Rep.
                                                                                                                        Sweden
                                                                                                                UK                     Spain         Finland
                                                   2.0
                                                                                                     Belgium                                                                Poland
                                                   1.5                                                       France
                                                                                              Denmark

                                                   1.0                                               EMU                                                                   Hungary
                                                                               Germany
                                                                                                                       The Netherlands
                                                   0.5                                Italy                                                                          Czech Republic
                                                                               Switzerland                                         Portugal
                                                   0.0
                                                                                                                                                                           Slovakia
                                                   -0.5
                                                          1.0            1.5          2.0          2.5          3.0            3.5             4.0             4.5         Slovenia
                                                                                Average real GDP growth, 1997-2001 (in %)
                                                                                                                                                                                           (Source: Vienna Institute for International Economic Studies)

    GDP growth prospects adjusted…                                                                                                   (Source: IMF)
                                                   6%

                                                   5%

                                                   4%                                                                                                                                              2005/2006 growth
                                                   3%                                                                     …but positive gap maintained
                                                                                                                                                                                                    prospects have recently
                                                   2%
                                                                                                                                                                                                    been reviewed downwards
                                                   1%
                                                                                                                                                                                                    due to global economic
                                                                                                                                                                                                    slowdown
                                                   0%
                                                                             2004                           2005                              2006
                                                                                                                                                                                                   But growth in CEE will still
                                                                       CEE-5 (forecast 4Q04)
                                                                       EMU (forecast 4Q04)
                                                                                                                   CEE-5 (forecast 2Q05)
                                                                                                                   EMU (forecast 2Q05)
                                                                                                                                                                                                    be at higher rate (+/-2%)
                                                                                                                                                                                                    than euro zone
5
                          EU entry - catalyst for development
    Results of one-year EU membership                                 Limited impact on KBC of French and
      Adoption of EU-compatible regulation and legislation          Dutch ‘NO’ to the treaty establishing a
      EU-10 economic growth double of EU-25 (5% vs. 2%)             constitution for Europe
      Exports to EU-15 rose spectacularly (market share from
        2% in 1997 up to probably 4% in 2005)                         KBC is currently operating within EU
      FDIs in EU-10 continue (2004: 11 bn EUR or 3% of               countries only
        CEE-10’s GDP)
      Agricultural subsidies / EU funds                             Entry into euro is guaranteed by EU
      Stimulation of macroeconomic stability
                                                                       membership once economic criteria are
      Strong financial integration with EU
                                                                       met
      Declining inflation (11.7% in 1998 down to 4.3% in
        2004)
      No budgetary deterioration
     Decrease in unemployment, though rather slow

                                EBRD transition index (EMU = 100)
                     50           60             70              80           90

              Hungary

             Cech Rep

              Slovakia

               Poland
                                                                                           EU accession acts as catalyst
             Slovenia

               Baltics



              Bulgaria

              Romania

                                                                                    1999
               Russia
                                                                                    2004
              Ukraine




6                                                                             (Source: OECD)
                UCI-HVB merger may transform
                landscape somewhat


       In the Polish market, the UniCredit-HVB combination will strengthen their
        already strong individual positions; the impact will be somewhat less in
        Slovakia and very limited in the other markets where KBC is active.
       The UniCredit-HVB merger should be seen as much an opportunity as a
        threat:
          In Poland, the merger efforts may temporarily weaken the commercial
            clout of the parties involved, enabling other parties to increase market
            share
          Potential for gaining new customers preferring to be ‘multi-banked’ rather
            than ‘uni-banked’
          The merger could trigger the much-needed start of early consolidation in
            Poland
          In the short run, UniCredit-HVB may partly divest from some markets,
            creating investment opportunities for other players.




7
               Agenda

       Reminder: KBC’s presence in CEE
       Update on economic and financial background
       KBC’s opportunities
       Update on Poland
       Financial outlook




8
                KBC’s opportunities in CEE

       Unique bancassurance concept, enabling cross-selling
       Outstanding track record in the promising AM market
       Well positioned in the emerging markets of HNWI and private banking
        through the epb know-how
       Nationwide branch network in all countries
       Introduction of uniform corporate image
       Setting up of technology for centralization of processing
       Increasing hands-on management approach




9
                       Bancassurance to fuel earnings
     Achievements:
           Transfers of product know-how and implementation of KBC’s distribution model
           Setting up of sales-incentive schemes
           Unified management responsibility (joint management committee of bank and insurance)
           Focus on:
               ‘Plugged-in’ non-life and life products
               Life investment insurance (savings & investment)

     Major challenges to exporting the model to CEE:
           Re-organization of insurance network & implementation of new branch organization models
           Enhancement of pro-active sales approach in both bank branches and agents’ networks
           Streamlining of business processes and IT systems in both bank and insurance company

     Results are encouraging: realizations in 2004
              Cross selling rates         Czech Rep    Hungary        Poland         Slovakia      Belgium
         Consumer loan X life assurance     83%          n/a          100%            94%             67%
         Mortgage loan X life assurance     45%         50%           100%            75%             67%
         Mortgage X property insurance      54%         71%            42%            30%             50%


10
                                                  Key developments in AM
             Total AUM in CEE as at 31/03/2005: 5.5 bn
                                                                                                                                                         Breakdown of AUM
             AUM grew in 04 by 25%; in Q105 up by 7.3%                                                                                                      Pension Funds
              Projected growth: 1-2 bn EUR p.a.                                                                                                                   8%
                                                                                                                                        Life Assurance
             Continued high growth of revenue:                                                                                               2%                                             Funds - Retail
                  CAGR revenue on mutual funds: 15-20%                                                                                                                                          42%


                  CAGR revenue on pension funds: 11-14%                                                                          Discretionary
                                                                                                                                     Assets
                  Margins on mutual funds already aligned                                                                            34%
                   with rest of Europe
                                                                                                                                                         Funds -               Funds -
             Strong appetite for ‘risk-free’ investments:                                                                                                Other
                                                                                                                                                             5%
                                                                                                                                                                             Institutional
                                                                                                                                                                                  9%
              money-market and capital-guaranteed funds,
              KBC’s speciality


                                                            Total AUM CE
                                                                                                                                Market                                        31/03/200
         10.000                                                                                                                                   2003             2004                          Trend
                                                                                                                                share                                             5
          9.000


          8.000                                                                                                                  CZ               19%              22%             23%             ++
          7.000
                                                                                                                                 HU               8%               9%              10%             ++
          6.000


          5.000
                                                                                                                                 SL               6%               7%               7%             ++
          4.000
                                                                                                                                  SI                -              8%               9%               +
          3.000

                                                                                                                                 PL               4%               4%               5%             ++
                                    4




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11
                     Key developments in AM
        Market challenger with excellent reputation in foreign funds and as product innovator
         (hedge funds, capital-guaranteed funds, etc.)
        Adequate risk-control measures and state-of-the-art front-office systems developed over
         the past years
        Cost/AUM ratios well below European average (around 16 bp vs. 20 bp for Europe)
        Through the funds business, new clients are brought in and retained
        Existing clients using their deposits to buy funds will replenish their deposit accounts after
         one year

     Poland:                                             Slovakia:
        big succes: capital-guaranteed funds               Recently created AM and pension fund
        20% of clients in funds are new clients             companies

     Czech Rep:                                             7.4% market share in mutual funds

        Most important market player                    Slovenia:
        KBC-owned pension funds companies (10%             Recently created AM company (mutual funds’
         market share, No. 3 in the market)                  market share from 0 to 10% in < 1 year)
     Hungary:                                               Pension fund company with market share of
                                                             21% (first player on the market)
        3rd in mutual funds (10% market share)
12
                   Necessary pension reforms
                   will lead to growth in pension funds
      Assets of insurance companies
                                                          Assets in pension funds
            and pension funds
               Source: Eurostat (2003)                   Source: FI-AD Financial Advisory (2003)
                                               6%
     160%
                          % of GDP                                              2002, % of GDP
     140%                                      5%

                                  1995
     120%
                                  2001         4%

     100%
                                                                                                                     Pension     1st Pillar   2nd Pillar    3rd Pillar
                                                                                                                     reform      (date of     (date of      (date of
                                               3%
     80%                                                                                                                         reform)      creation)     creation)
     60%                                       2%                                                                    Poland                                 
                                                                                                                                   (1999)       (1999)        (1999)
     40%
                                               1%                                                                    Czech                                     
     20%
                                                                                                                     Rep.                                     (1994)
                                               0%
      0%
                                                                                                                     Slovakia                              


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                                                                                                                                   (1998)       (1999)        (1993)
                  Share of elderly (65+) in total population (%)
                                                                      (Source: Eurostat)                             Slovenia                                  
                                                                                                                                                (2000)        (2000)
                    Belgium




                      EU-15
                                                                                                                        • e.g., in Slovakia:
                                                                                                                          recently begun 2nd pillar will provide
                        CEE
                                                                                                                          growth rate of above 25% for CSOB
                              0
                          Level in 1960
                                          10                    20
                                                       Change 1960 - 2000
                                                                                       30
                                                                                                                          Pension Fund
                          Change 2000 - 2010           Change 2010 - 2020
                          Change 2020 - 2030




13
       Centralized organization for AM
     Integration of companies (situation as at 1Q 2005)

                        Former entities                    KBC AM
      Poland          4 companies of KB
                      and Warta                            KBC TFI

      Czech Rep       4 KBC-owned AM
                      entities                       CSOB AM & IC

      Hungary         2 KBC-owned AM
                      entities (incl. ABN-             K&H SFIM
                      AMRO AM)


     Results:
          Lower costs (e.g., for Warta in Poland: -37%)

          Independent risk control and compliance

          Better investment process




14
                 Nationwide branch networks
                  Percent of towns with KBC Group branch             Density of KBC Group’s branch network

         HU                                                 HU

          SI                                                SI

         SL                                                 SL
                                                                                          towns with KBC Group
                                                                                          branch

         CZ                                                                               No. of towns
                                                            CZ
         PL
                                                            PL
           0%    20%     40%       60%      80%      100%
                                                                 0      200       400       600          800     1000



     The density of KBC’s branch network is amongst the highest in the CEE region

        In the Czech Rep.: branches in 123 of the 264 municipalities having more than 5 000 inhabitants.
         Additionally, products distributed via dense network of PSB (Postal Bank), which covers all 264
         municipalities
        In Slovenia: twice as many branches as the next competitor, being present in almost all
         municipalities having more than 5 000 inhabitants
        In Hungary: presence in all larger towns and in half of the smaller towns. Only OTP has denser
         branch network
        In Slovakia: branches in 58 of the 124 municipalities with more than 5 000 inhabitants
        In Poland: presence in almost all major cities and in 25% of the smaller cities, comparable to or
         greater than competitors with similar market share. Further branch openings may be considered
         (under review)
15
                                        Centralized card purchasing &
                                        processing
             KBC card business:
                Portfolio of 7.5 million cards, of which 4.5 million smart cards
                Portfolio of 200 000 merchants
                Yearly volume of 500 million transactions

             Cards will be one of the key drivers for extending the retail activity in CEE

             Central card processing:                                 0.12 €
                                                                        /trans
                                                                       0.10 €
                enlarging scale
                                                                       0.08 €
                standardized technology to prepare                    0.06 €
                   for future developments (SEPA)                      0.04 €
                                                                       0.02 €
               to reduce costs
                                                                       0.00 €
                                                                           -     500    1 000   1 500     2 000           2 500
                                                                                                                  million trans




                         Poland
                          15%
                                               Centralized card purchasing:
                                                  Licence contract to use same open technology
         KBC Group
          Belgium
            38%
                                  Hungary

                                                  Common supplier contract for purchase of cards
                                    17%




                     CR/SR
                                                  Common supplier contract for personalizing the cards
                      30%




16
                                                                               Centralized cash management
                                                                               product
                                                                                  Selecting a Regional Cash Management Bank (Western Europe)
     Key decision criteria
                              100%
                               90%
                               80%
                               70%
                               60%
                               50%
                               40%
                               30%
                               20%
                               10%
                                0%
                                                                                                                                                               t                                                        n
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                                                                                                                                                                                                                                                                                                         n
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                                            tw                                                 pr                                                     rs                                                        ol                                                                                 lu
                                          ne                        ra                                                    ip                        ke                              se                        s                       DI                     es            ov                    so
                                                               it                     iv   e                           sh                         an                     er                             al                          E                      pr          In
                                                                                                                                                                                                                                                                          n                  g
                                     ch                      ed                   ti t                             ion                           b                                                  ion                       .a
                                                                                                                                                                                                                                .                      l                                   in
                                  an
                                                            r                                                     t                                                     m
                                                                                                                                                                                                  at                                                 na                                  nk
                               Br                        kc                     pe                          ela
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                                                                                                                                                                   us
                                                                                                                                                                     to
                                                                                                                                                                                                rn
                                                                                                                                                                                                                            (e                    tio                                 ba
                                                     n                      m                              r                              co                                                  te                    rd
                                                                                                                                                                                                                      s                         a
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                                                                                                                                      e                   lC                               /in                    da                        te
                                                                                                                                                                                                                                              rn                               nic
                                                                                                  t in                                                  ra
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                                                                                                                                                                            re                       te
                                                                                                                                                                   in
                                                                                                                                                                        a
                                                                                                                                                                                               d
                                                                                                                                                                                                   in                                             Single corporate e-Banking product:
                                                                                                                                                            Fi
                                                                                                                                                               t                             ar
                                                                                                                                                                                           rw
     Survey of multinational corporates                                                                                                                                         d
                                                                                                                                                                                      fo                                                              Local & cross-border payments and
                                                                                                                                                                             an
                                                                                                                                                                        ce
                                                                                                                                                                          pt                                                                            collections
                                               Centralisation of Treasury Management                                                                               Ac

                               100%
                                                                                                                                                                                                                                                      Statement reporting
                                                                                                                                                 Priority 1                         Priority 2                    Priority 3-5
                               90%

                               80%                                                                                                                                                                                                                Benefits:
       % of Customer Groups




                               70%

                               60%
                                                                                                               unknown
                                                                                                                                                                                                                                                      Avoid multiple product development
                               50%
                                                                                                               Planning to centralise in the
                                                                                                               next 2 years                                                                                                                            at Group level
                               40%                                                                             Currently centralised for

                               30%                                                                                                                                                                                                                    Savings on software licence fees
                               20%

                               10%
                                                                                                                                                                                                                                                  Objective = > 5 000 users after 5 years
                                0%
                                             W Eur              C E Eur              All of Eur

                                                                                                                                                                                                                                                  Investment payback = 3.5 years
17
                   Centralized processing, cross-border
                   payments
                                            Standalone
                                                                   Incl. DZ
                                               100               Bank Group


                         Processing costs
                                                                                    Incl. KBC
                                                                 94
                                                                                       CEE
                                                                               83

                                                                                                       Open for
                                                                                                         other
                                                                                                        parties

                                                            Volume of transactions
        Business case: co-sourcing of cross-border transactions will lead to lower costs for the
         entire KBC Group

                     2003                            2004                  2005                 2006              2007 …


                         Sepa
                         2010
                                                       CEE
                                                     pre-study
                                                                      legal/
                                                                      fiscal

                                                                                         Implementations
                                                                                             in CEE
18
                            CEE entities: hands-on governance
                          KBC’s management expats in CEE

                                                                         54




                                                       31                               KBC Group Executive
                                         24                                                 Committee
                           23
                                                                    17
                                                               12                             CEE
                                                                                       Management Committee
                                                   6
                                     4
                      2                        1
                  0              0
                                                                                                           CEE                   CEE business
                                                                              Steering committees
                   2000           2001          2002            2005                                    Directorate              co-ordinators
                                                                                                                                  & task forces
                 Expat CEO's      Expat MB members      Expat Managers
                                                                                                    - General Manager
         Expats in banking: 35% of Management                                                      - Co-ordination unit
          Board (of which 2 CEOs)*                                                                  - Projects unit
                                                                                                    - Controlling unit
         Expats in insurance: 28% of Management
          Board (of which 4 CEOs)                                                              CEE
                                                                                          Group companies
                                                                                                                                KBC expats
         Many KBC managers involved in CEE                                                                              (+ temporary presence
                                                                                                                           via various projects)
          businesses and projects
         For each business area, co-ordinators
          supervising the area, looking for synergies
         CEE Directorate co-ordinates / supervises
     * Additionally 6 CEOs in AM and securities subsidiaries
19
                Agenda

        Reminder: KBC’s presence in CEE
        Update on economic and financial background
        KBC’s opportunities
        Update on Poland
        Financial outlook




20
                Update on Poland
        Restructuring milestones:




21
                          Update on Poland
         1Q 2005 achievements:
             Portfolio risk profile:
                  Portfolio quality improvement (NPL -20% y/y)

                  Zero cost of risk in 1Q 2005
                  Safe coverage ratio level (67%, one of the highest in the banking sector)
             High net profit (23 m 1) and satisfactory ROE (21% 1 vs. 7% in 1Q 2004)
             Continuous improvement of Cost/Income ratio (76%    1   vs. 86% in 1Q 2004)
             Visible signs of growth acceleration:
                  18% increase in housing loans granted in PLN (y/y)

                  26% increase in loans granted in CHF(y/y)
                  75 000 new savings accounts (y/y) and 187% increase in saving accounts
                     volume (y/y)
                  175% increase of mutual funds (y/y)
              Today, we believe we are in a better shape than ever. We even intend to
              accelerate organic growth
     1   Statutory accounts
22
                Agenda

        Reminder: KBC’s presence in CEE
        Update on economic and financial background
        KBC’s opportunities
        Update on Poland
        Financial outlook




23
                 Financial outlook

                                         Net profit     Loan-loss ratio      Cost/Income
                          RWA
                                        2005-2007         Mid-term            Mid-term
                    2005-2007 CAGR
                                          CAGR              target             target


       Banking        10% – 15%         10% – 15%             < 0.50%           < 60%




                   Net earned premium            Net profit
                                                                        Net Combined Ratio
                        2005-2007               2004-2007
                                                                          Mid-term target
                          CAGR                    CAGR

     Insurance        15% – 25%                25% - 35%                      95%




24

				
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