KBC policy towards Central Europe

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					KBC policy towards Central Europe


   Conference on the current economic situation and future
  developments in the Visegrad countries on the eve of their
    accession to the European Union, 29 September 2003
     Dirk Mampaey, General Co-ordinator Banks Central Europe KBC Group
KBC strategy in Central Europe
Main bank-insurance group in CE with focus
             on Retail – SME

                                                             Estonia

                                                            Latvia          Russia
        Geographical priority :                Baltic Sea Lithuania

Czech Rep, Slovak Rep, Poland, Hungary,
                                                                      Byelarus
   Slovenia (EU accession countries)              POLAND



                                             CZECH                      Ukraine
                                                   SLOVAKIA
                                                                          Moldova
                                                    HUNGARY
                                             Slovenia            Romani
  Development of specialised activities         Croatia          a
                                                     Bosnia
  Markets, Leasing, Asset Management,                            Bulgari
                                                            Serbia
                                                                 a
           Structured Finance                      Montenegro Macedoni
                                                              a




                                                                                     2
        In search for a second home market
   Need to expand ‘domestic’ customer base :
       But saturated Belgian home market
   Second home market in Western Europe ?
       Also largely saturated
       Very high acquisition prices
       KBC only medium-sized player
   Second home market in Central Europe ?
       Room for further development of banking and insurance
        sector
       Early entry
       Ability to buy considerable market shares
       Risk tempered by expected EU-entry
                                                                3
                   How it started
                 Milestones - Bank
   1994 :   Approval of first Central European policy
   1996 :   First investment in Kredyt Bank, Poland
   1997 :   First investment in K&H Bank, Hungary
   1999 :   KBC acquires 82% in CSOB, Czech & Slovak
             Republics
   2000 :   CSOB acquires IPB
   2001 :   Merger of K&H Bank and ABN AMRO Magyar
   2002 :   Agreement on 34% stake in NLB

                                                         4
                  How it started
             Milestones - Insurance
   1993 :    Argosz (Hungary) : greenfield
   1998 :    - K&H Life: greenfield
              - 34% stake in Chmelarska Pojist’ovna
                (now CSOB Poj.)

   2000 :    KBC acquired 40% stake in Warta
   2002 :    - 65% stake in IPB Pojist’ovna
              - Majority stake in Ergo
   2003 :    NLB Vita : greenfield



                                                      5
       The KBC Group in Central Europe
             Participation rate of KBC                       (30-6-03)
                                     Poland
                                     Kredyt Bank (76%)
                                                                   Indirect presence
            Czech Republic           Warta (40%)
                                                                   Lituania & Ukraine
            CSOB (84%)
                                                                   (via Kredyt Bank)
            CSOB Pojist’ovna (96%)
                                                                   Bosnia & Macedonia
            Patria Finance (100%)
                                                                   (via NLB)


Slovakia
CSOB (84%)
Ergo Poist’ovna (74%)


       Hungary
       K&H Bank (59%)
       K&H Life (80%)
       Argosz (99%)


                   Slovenia
                   NLB (34%)
                   NLB Vita (67%)

                                             Percentages concern direct + indrect presence   6
  Current presence of the KBC Group
in Central Europe / Banking side (30-6-03)
                                               Poland (banking)
                                               Ranking:            7th
                 Czech Republic (banking)
                                               Market share:       6%
                 Ranking:            2nd
                                               Clients:            1.2 m *
                 Market share:       18%
                                               Branches:           379
                 Clients:            2.9 m
                 Branches:           208

Slovakia (banking)
Ranking:                 4th
Market share:            5,7 %
Clients:                 0.2 m
Branches:                67
       Hungary (banking)
       Ranking:                  2nd
       Market share:             12%
       Clients:                  0.7 m
       Branches                  157

                       Slovenia (banking)
                       Ranking               1st
                       Market share:         44%
                       Clients:              0.9 m          Market share is average of share in
    * estimate         Branches              264            customer credits and in customer deposits 7
      Current presence of the KBC Group
       in CE / Insurances side (30-6-03)
                                                  Poland (non-life / life insur.)
                                                  Ranking:                 2nd/9th
  Czech Republic (non-life / life insur.)
                                                  Market share:            14%/1%
  Ranking:            6th/5th
  Market share:       4%/9%



Slovakia (non-life / life insur.)
Ranking:                 8th/6th
Market share:            2%/4%


   Hungary (non-life / life insur.)
   Ranking:                6th/14th
   Market share:           4%/2%



                        Slovenia (non-life / life insur.)
                        Start-up phase of life assurance cy


                                                                                     8
     Economy : LT growth potential
        Benefits of EU/EMU accession
   Growth potential higher than in EU-15 :
       Increase in competition and efficiency,
        lower transaction costs
       Possibility of economies of scale
       EU-membership stimulates significant inflow of
        foreign direct investments
          Gives investors clear signal about direction of
           economic policy in long term
          Puts new members on path to EMU
            fosters macro-economic stability
          Prospect of selling goods produced in candidate
           countries throughout EU single market


                                                             9
           Central European growth potential
                    Popu-          GDP       Real GDP growth            Transition         Penetration ratio**
                    lation         per                                    index
                                  capita
                    million       (PPP*)       2001        2002e            2002           Bank          Insurance
                                   2001                                                   deposits      products %
                                                                                          % GDP         GDP 2001
                                                                                           2002
                                  EU=100                                    EU=100         EU=100           EU=100
Czech Rep.              10.3            59       3.1%         2.0%                 83              79               56
Hungary                 10.2            53       3.8%         3.3%                 87              44               42
Poland                  38.6            40       1.0%         1.3%                 83              45               46
Slovak Rep.              5.4            47       3.3%         4.4%                 76              67               49
Slovenia                 2.0            70       3.0%         3.2%                 76              63               75
Average                       -         54       2.1%         2.1%                 81              60               54


Eurozone              303.6            100       1.5%         0,8%               100             100              100
         * Purchasing power parities
         ** Banking: average of deposits and domestic credits in % of GDP (2002). Insurance: premiums in % of GDP (2001).
                                                                                                                         10
                 EMU accession : when?
                    Not before 2008/2009
                  Maastricht convergence criteria
                    Price stability   Government      Government      Long term
                   (avg. CPI-inflation  deficit          debt           yield
                  over last 12 months, (2002e, % GDP) (% GDP, 2002)
                   in %, March 2003)                                  May 2003
Poland                        1.2            5.4            48           5.0
Czech Republic                0.8            6.8           21.6          3.7
Hungary                       4.9            9.8           50.4          6.3
Slovakia                      4.1            7.7           34.4          4.7

Slovenia                      7.1            2.8            31          n.a.

Reference value               2.7            3              60           6.3



                                                                                  11
              Economy
        …stimulates productivity

               n.a.




Source: OECD
                                   12
                                  Economy
     LT growth potential : outlook for 2002-2020

Annual growth real GDP,
                              1991-1995   1996-2000   2000-2010    2010-2020
in % (period averages)

Belgium                           1.5        2.8      2.0 to 2.5   1.5 to 2.0

EU-15                             1.5        2.6      2.0 to 2.5   1.5 to 2.0


Central Europe                    -0.4       3.3      3.5 to 4.0   3.0 to 3.5



US                                2.4        4.1      3.0 to 3.5   2.5 to 3.0



          Source : EC, OECD, UN
                                                                                13
                  Financial sector in CE

   Likely to undergo significant further changes in future.
    Moving from an era of transition, instability and restructuring
    into an era of stability, strengthening and development,
    but still largely underdeveloped despite considerable
    progress
   EU-accession and EMU-entry important milestones
     Anticipation has already begun to shape Central
       European financial sectors
       Adoption EU-compatible financial regulation and legislation
       High share EU-ownership in banking sectors
       Strong financial integration with EU



                                                                      14
                Financial sector in CE

   Strong growth potential, which can be gauged by
    comparing current situation with average of financial
    sector indicators in euro area : integration process can
    be expected to eventually make accession countries
    broadly comparable to current euro area member
    countries
   Different government approach in restructuring the
    financial sector and in taking over bad loans
   High degree of foreign involvement



                                                               15
                           Financial sector
                        Use of banking products
% of total population over 15 years who use this product
Use of banking products not widely spread  room for further development

                 Austria Germany    Czech Hungary Poland Slovakia Slovenia
                                   Republic
Account            89       97        64      46     34      55       79

Bank card          57      n.a.       49      35     21      36       57

Savings books      68      n.a.       38      16     13      58       53

Time deposits      29      n.a.       12       8      6      14       15

Mortgages          56       30        20       2      0      15        3

Loans              18       22         7       7     14       6       17

Securities         15      n.a.        3       4    n.a.      4        7


          Source: HVB

                                                                             16
KBC policy towards Central Europe
Conference on the current economic situation and future developments in the
 Visegrad countries on the eve of their accession to the European Union, 29
                             September 2003


      Dirk Mampaey, General Co-ordinator Banks Central Europe KBC Group