Proud to deliver strong financials Herman Agneessens Chief Financial and Risk Executive

Proud to deliver strong financials

Herman AgneessensChief Financial and Risk Executive

2

2

1Q 01 2Q 01 3Q 01 4Q 01 1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03 Q4 03 1Q04

Banking Insurance

Q avg‘01-’03(265 m)

Net profit+ 29% yoy

Delivering strong earnings

Net profit m EUR

Group ROE 17 %

355

304 300256 259

392

152

280

316

278

159

230

287

Insurance: 32

Especially strong momentum in banking

Banking: 370

Holding: -10

Highlights — Banking — Insurance — Areas of activity — Outlook

3 Highlights — Banking — Insurance — Areas of activity — Outlook

Net profit at a high level, up 29% year-on-year :1. Very strong underlying revenue growth, especially in banking :

Top-line growth in banking: +8 % year-on-year Organic premium growth in insurance: +19 % year-on-year, but

pressure on investment yields

2. Expenses well under control and low risk charges : Cost/income ratio, banking at 59 % Loan loss ratio, banking at 11 bp Combined ratio, non-life well below 100 % (at 97.5 %)

3. No net support impact of ‘exceptional items’ : capital gain on ‘Belgacom’ (57 m) significant provision amounts (-81 m) set aside for various future

liabilities and charges In insurance: impairments on equity portfolio (-128 m) to a large

degree offset by use of provision for financial risks

Key points

4

Target 2005

Dec 2002

Dec 2003

Mar2004

Cost / income, banking <=58% 65% 65% 59%

Combined ratio, insurance * <=95% 101% 95% 99%

Solvency (Tier 1), banking > 8% 8.8% 9.5% 9.5%

Solvency, insurance ** > 200% 320% 316% 333%

Return on equity 16% 13% 13% 17%

EPS growth 10% +1% +8% +25%

* Combined ratio excluding reinsurance. ** Solvency insurance including unrealized gains.

Improving performance levels


5

Q3 Q4

2003

Full consolidation, previously equity method

at 40 %

2004

Warta Insurance (Poland)

Q1 Q2 Q1 Q2

Impact of consolidation changes

Impact on top line

+2 %

Impact on bottom line

-1 %

Main changes in scope of consolidation :

Premium income 99 m EUR, 3/4 non-life (21% of non-life total, Group)


6

400 m

Solid quality of banking earnings

Underlyingrevenuegrowth+ 14 %

Expenses- 0.1%

Capitalgains-53%

+ 186 m - 65 m

Pre-taxprofit

1Q 2003

Year-on-year comparison

Positive impact of operational items: +120 m EUR

+ 1 m


7

Strong growth of operational income

Gross income up 8 % yoy : Interest income in line with

strong previous quarter and +12 % yoy (interest margin up yoy from 1.6 % to 1.8 %)

Sustained high commission income, up 16 % qoq (‘seasonal’) and +2 % yoy

Robust trading revenu (up 51 % yoy) after somewhat depressed 2003 numbers

No ‘exceptionals’, capital gains on investment portfolio in line with previous quarter (4% of total)

719 773 826 800 806

610 587 520 570 708

123

58

54

0

200

400

600

800

1 000

1 200

1 400

1 600

1Q03 2Q03 3Q03 4Q03 1Q04

Interest income Non-interest income Capital gains

1452 1416 13641424

1572

Quarterly income (m EUR)


8

Expenses at stable level

Cost basis stable yoy (-1% qoq) : In Belgium: - 5 % yoy (- 26 m)

Headcount continued to reduce at 250 FTE (-2 %)

In CEE: - 1 % yoy (-2 m) Headcount reduction programs running: 67 % of target achieved in CR and 50 % in Poland

Increase in expenditures in rest of the world, mainly related to trading bonuses

Cost/income ratio significantly improved to 59 % (65% for FY03)

546 527

241 255 258 239

128 162

552 553 568

253

135 110 96

1Q 03 2Q 03 3Q 03 4Q03 1Q04

Belgium CEE Other

929 931 897 938 928

Quarterly expenses (m EUR)


9

Loan provisioning very limited

Loan loss provisions at very low level (charge of 11 bp* versus 71 for FY 2003)

No problem areas/regions recognised, but cautiousness prevails about quarters ahead !(same level in all probability not sustainable)

Loan losses in Poland only 4 m (charge of 42 bp)

Loan loss ratio: 10 bp in Belgium, 16 bp in C/SR, 46 bp in Hungary and 5 bp for the international portfolio

79

141

204

43

Quarterly loan provisions (m EUR)


252

* Net specific provisions to average gross customer loans

25

28

139

175

41

35 36

12 25 31

6126

49

40

1Q 03 2Q 03 3Q 03 4Q03 1Q04

Belgium CEE Other

10

400 m

Development of earnings, banking

Underlyingincomegrowth+ 14 %

Expenses- 0.1%

Loanlosses- 85%

Lesssecurities

impairments

OtherCapitalgains -53%

Gain on FFA

disposal

Provisionfor futureexpenses

+ 186 m - 65 m

+ 1 m

+ 36 m

+ 79 m

+ 33 m - 92 m

575 m

Pre-taxprofit

1Q 2003

Pre-taxprofit

1Q 2004

+ 175 m- 3 m



*

* Gains of financial fixed assets: Belgacom in Q1 04 versus Krefima in Q1 03

+38 % organic growth

11

40 m57 m

Development of earnings, insurance

Premiumgrowth+ 20%

Other **

+288 m

-281 m

-40 m

-4 m

Technicalcharges+ 23%

Investmentincome+ 13%

Expenses+ 9%

Less non-recurring

- 9% *

+14 m

Pre-taxprofit

1Q 2003

Pre-taxprofit

1Q 2004

+6 m -17 m


* Of which impairments on equity ** Of which consolidation changes


-23 % organic change

12

Continued fast growth of premiums

Sustained robust growth in Life (mainly Belgium) : In organic terms, up again, +24 %

and almost double as 2 previous quarters,

Renewed interest for linked products (54% of Life total)

Non-life: in organic terms up 6 % yoy Stronger in direct underwriting

(+11%) Drop in re-insurance (- 6 %)

1Q 2004

Non-life366 mUnit-linked

477 m

Interest-guaranteed life401 m

24 % 35 %

33 %*

**

* Growth rate, including extension of scope of consolidation Highlights — Banking — Insurance — Areas of activity — Outlook

13

Satisfactory efficiency and underwriting performance in non-life

Combined ratio at fair level (97.5 %)

Less strong year-on-year (-4.3 pp): Non-life claims are volatile by

nature Exceptional circumstances in 2003

in Belgium (no large loss cases) Changes in consolidation scope

(adverse impact 1 pp)

1Q 2004

65.9% 65.6% 65.1% 64.6% 68.5%

27.3% 29.7% 31.2% 29.0%30.3%

1Q 03 6M 03 9M 03 FY 03 1Q 04

Claims Expenses


97.5 %95.9 %95.4 %95.4 %93.2 %

14

Insurance business suffering from low investment yields

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04

Effective interest yield, bonds 10 y EUR market rate, T-bonds

1Q 03 1Q 04

Interest yield 5.5 % 5.0 %

Return on shares 7.0 % 7.1 %*

Total 5.9 % 5.6 %

Investment return downto 5.6 % from 5.9 %

* Corresponds with 7.3 % of the market value of the portfolio (= 10 years’ adjusted average)


15

P/L-impact largely neutralized by write-back of provision for financial risks

Non-realized gains on shares untouched

Additional impairment of 56 m expected in Q2-Q4 (market level of Apr 2004) but adequately offset by unrealized gains

Impairments on equity portfolio largely offset

In m EUR 1Q 04

Value adjustments, shares -128

Transfer from financial provision +93

Non-recurring capital gains * +22

Other - 4

Total non-recurring result - 17

* Gain on the equity tranche of an unwoud private CDO structure Highlights — Banking — Insurance — Areas of activity — Outlook

16

Market value of securities portfolio significantly above book value

In m EUR Book value Market value Unrealised

Bankingbook 42 033 43 819 1 786

Bonds 40 868 42 470 1 602

Shares 1 165 1 349 184

Insurancebook 11 912 12 538 626

Bonds 7 962 8 421 459

Shares 3 198 3 267 69

Other 747 845 98

17

Updated strategy for investment book

* Excl. private equity and smaller porfolios held by subsidiaries

Previous Current

Equity portfolio banking *

Basic portfolio :35 % Belgian blue chips

(Bel 20)65 % European stoxx

sectors

Basic portfolio :100% MSCI Pan Euro

Financials (ca. 50 m EUR) Financials (ca. 25 m EUR)

Asset-mix new inflowLife insurance

75% Fixed income

20 % Equity

5% Real Estate

90 % Fixed income

10 % Equity

18

58

73 50

45

23

80

101

49 38

59

1Q 03 2Q 03 3Q 03 4Q 03 1Q 04

Banking Insurance

Profit contribution 124 m, return 17 %*

Strong momentum in banking : Widening gross margin

(up yoy from 5.8 % tot 6.4 %*) Maintained cost reduction

(C/I down yoy from 81 % to 69 %) Sustained low level of problem

loans (loan loss ratio 11 bp*)

Although strong premium income, pression on insurance contribution : Higher claims ratio (69 % versus

58 % in Q1 03) Lower investment yields

Robust performance in Belgian retail


Profit contribution (m EUR)

122

97108

125 124

* Return on average allocated capital Margin and loan losses on average RWA

19

Working along “4 dimensions” (4 C’s)

Robust performance in Belgian retail

1. Cost efficiency Programs of product simplification (less ‘cost drivers’) and

co-sourcing (economies of scale)

2. Cross selling of insurance products Cross selling to go beyond 40%

3. Customer satisfaction Refined segmentation and increase of customer-facing time

4. Canvassing affluent clients Broadening the affluent customer basis


20

Expanded horizons in CEE gradually paying off

CR & SR : strong contribution to Group profit driven by strong revenue growth in a) retail and b) due to the improved ‘interest rate environment’ and a sustained low loan loss ratio (16 bp)

Hungary : strong return number on the back of a) favourable development of revenue and b) a one-off writeback of a general provision for credit risk

Poland : "back in black" thanks to a) progress in the cost reduction program, bringing expenses down 3%* yoy and b) the - in all probability exceptional - low loan loss amount of 4 m EUR

* Profit contribution excl. return on excess capital and minority interests** adjusted for currency effects

CEE2nd home

Net profit(statutory)

Contributionto Group *

Contribution % yoy **

Return on allocated

captial

Return on invested capital

CR / SR 55 m 42 m +84 % 19 % 13%

Hungary 30 m 13 m +39 % 31 % 22%

Poland 5 m 3 m - 5 % 3 %

Contribution of banking operations to KBC Group profit :


21

15% 23% 21% 15% 17%

35% 25%37%

32%36%

31%23%

13%20%

24%

10%14% 16%

16%

17%

Risk-weighted assets Allocated capital Gross operatingincome

Operating result Net profit

CEE Belgian retail (incl AM) Corporates Markets Non allocated

CEE banking, share of banking wallet

Impact of paid

goodwill

Benefiting from higher margins

Note : banking business lines only

Risk issue under control


Improved cost structure

under way

22

Expanded horizons in CEE graduallypaying off

Enhanced performance going forward

1. High economic growth and increasing penetration rate of financial products

2. Better cross selling of insurance products

3. Increase of organisational efficiency and intensified quest for Group synergies

4. In Poland, business re-engineering cost level / organizational strength


23 Highlights — Banking — Insurance — Areas of activity — Outlook

1Q 03 2Q 03 3Q 03 4Q 03 1Q 04

Profit contribution : 34 m (after allocation of distribution fee to retail), in line with previous quarter and 1Q 03

Assets up 6 % qoq (3% net inflow)

Assets up 18 % yoy : Mutual funds (47 bn) : +20 % yoy Private assets (16 bn) : +17 % yoy Institutional (20 bn) : +16 % yoy

Performing asset management activities

Profit contribution (m EUR, excl. minorities)

Belgium :86 %

CEE : 4 %

35

25 24

3234

24

Profit contribution 100 m (return 21 %)

Turnaround in banking since 3Q 03 : mainly driven by lower cost of risk

(9 bp* versus 57 bp in FY 03) gross income margin and cost/income

stable at 2.6 %* and 36 % respectively

move towards lower risk lending, in a quest for more stable results (target loss ratio: 35 bp over the cycle)

Turnaround in in re-insurance since 3Q 03 : mainly driven by improved underwriting

performance (combined ratio : 90 % versus 100 % in FY 03)


Corporate activities stepping up

58

83 88

7

43 36

11

1Q 03 2Q 03 3Q 03 4Q03 1Q04

Banking Insurance

35

62

89100

* On average RWA

43


25

Profit contribution 64 m (return 23 %)

Strong performance in M/CM activity (x2 qoq and up 24 % yoy), mainly on the back of strong income growth

(Modest) profit contribution for cash equity business (4 m), in line with previous quarter (loss in 1Q 03)

Good results in equity derivatives business (up 14 % yoy) on the back of : Significant income growth and the non-

recurrence of negative MtM for long derivatives in previous quarters

Additional income sources (without higher risk exposure) out of (structured) investment management


32

19

38 34 31

25

10 9

1Q 03 2Q 03 3Q 03 4Q03 1Q04

Equity-related activities

Money and capital markets

Tail wind in ‘financial markets’

4135

41

7

64


26

3.1

3.73.4

1.3

4.8

2.6

0.4

2.1

3.2

2.0

3.3

2.7

3.4

3.9

3.2

3.7

1.1

4.8

1.1

2.2

0.6 0.7

0.9

1.61.6

0

2

4

6

2001 2002 2003 2004 (F) 2005 (F)

Czech Hungary Poland Belgium EMU

Source : KBC CEE Outlook, May 2004

Favourable trend in core markets

GDP, real growth

Belgium: 0.5 % above EMU avg

CEE: 1.5 % - 3 % above EMU avg

2004-05


27

Outlook 2004

Positive momentum in economic environment : Fuelling top-line growth Mitigating costs of risk

Commitment to sustained cost and underwriting discipline

Should the current economic and financial context prove to be sustainable, and taking into account stable stock exchange levels, then net earnings for 2004 are expected to be at least 15 % higher than in 2003


Documents

Proud to deliver strong financials Herman Agneessens Chief Financial and Risk Executive