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KBC Group / BankDebt presentationNovember 2018
KBC Group - Investor Relations Office – Email:More infomation: www.kbc.com
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This presentation is provided for information purposes only. It does not constitute an offer to sell or the solicitation to buy anysecurity issued by the KBC Group.
KBC believes that this presentation is reliable, although some information is condensed and therefore incomplete. KBC cannot beheld liable for any loss or damage resulting from the use of the information.
This presentation contains non-IFRS information and forward-looking statements with respect to the strategy, earnings and capitaltrends of KBC, involving numerous assumptions and uncertainties. There is a risk that these statements may not be fulfilled andthat future developments differ materially. Moreover, KBC does not undertake any obligation to update the presentation in linewith new developments.
By reading this presentation, each investor is deemed to represent that it possesses sufficient expertise to understand the risksinvolved.
Important information for investors
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Market share (end ’17) BE CZ SK HU BG IRL
Loans and deposits
Investment funds
Life insurance
Non-life insurance
GDP growth: KBC data, November ‘18 * Retail segment
11%20%
11%20%
10% 8%
22%33%7% 13% 13%
14% 8% 4% 3%21%
11%9%3%
7% 7%
Real GDP growth BE CZ SK HU BG IRL
% of Assets
2018e
2019e
2020e
3%3%
64%
20%2% 4%
1.5% 3.0% 3.5%3.6% 4.2%7.0%
1.4% 2.7% 3.7% 3.4% 3.4% 3.5%
IRELAND
BELGIUMCZECH REP
SLOVAKIA
HUNGARY
BULGARIA
*3.5m clients627 branches99bn EUR loans132bn EUR dep.
0.3m clients18 branches11bn EUR loans5bn EUR dep.
3.7m clients265 branches23bn EUR loans32bn EUR dep.
0.6m clients122 branches7bn EUR loans6bn EUR dep.
1.6m clients206 branches4bn EUR loans7bn EUR dep.
1.2m clients224 branches3bn EUR loans4bn EUR dep.Belgium
Business Unit
CzechRepublicBusiness Unit
InternationalMarkets Business Unit
2.3%1.2%3.0%3.5% 2.6% 3.3%
KBC PassportWell-defined core markets: access to ‘new growth’ in Europe
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KBC Group NV
KBC Bank KBC Insurance
100%100%
KBC IFIMA*
* All debt obligations of KBC IFIMA are unconditionally and irrevocably guaranteed by KBC Bank.
Retail and Wholesale EMTN
AT 1 Tier 2 Senior
Covered bond No public issuance
KBC Asset Management
48%
52%
No public issuance
MREL
KBC PassportGroup’s legal structure and issuer of debt instruments
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Contents
1 Strategy and business profile
Financial performance
3 Balance sheet
4 Solvency and liquidity
5 MREL strategy
Appendices
6 Looking forward Roughly 40% of KBC shares are owned by a syndicate of core
shareholders, providing continuity to pursue long-term strategicgoals. Committed shareholders include the Cera/KBC AncoraGroup (co-operative investment company), the Belgian farmers’association (MRBB) and a group of industrialist families
The free float is held mainly by a large variety of international institutional investors
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KBC Ancora 18.6%
11.5%2.7%
Cera
MRBB7.4%
Other core
59.8%Free float
SHAREHOLDER STRUCTURE AT END 9M18
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KBC Group in a nutshell (1)
We want to be among Europe’s best performing financial institutions! By achieving this, KBC wants to become the reference in bank-insurance in its core markets• We are a leading European financial group with a focus on providing bank-insurance products and services to
retail, SME and mid-cap clients, in our core countries: Belgium, Czech Republic, Slovakia, Hungary, Bulgaria andIreland.
Diversified and strong business performance… geographically
• Mature markets (BE, CZ, IRL) versus developing markets (SK, HU, BG)• Economies of BE & 4 CEE-countries highly oriented towards Germany, while IRL is more oriented to the UK & US• Robust market position in all key markets & strong trends in loan and deposit growth
… and from a business point of view• An integrated bank-insurer• Strongly developed & tailored AM business• Strong value creator with good operational
results through the cycle• Unique selling proposition: in-depth
knowledge of local markets and profound relationships with clients
• Integrated model creates cost synergies and resultsin a complementary & optimised product offering
• Broadening ‘one-stop shop’ offering to our clients
Diversification Synergy
Customer Centricity
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High profitability
Solid capital position…
FY17
Net result
EUR 2575m 17%
ROE
55% 88%
C/I ratio Combined ratio
9M18
EUR 1948m 17%57% 88%
CET1 generationbefore any deployment
20162015 2017
296 bps 277 bps 279 bps
Fully loaded Basel 3 CET1 ratio of KBC Group (Danish Compromise)
14.0% ‘Own Capital Target’
10.6% regulatory minimum
15.7%
9M17 9M181Q17 1Q181H17 FY17 1H18
15.7% 15.9% 16.3% 15.9% 15.8% 16.0%
134%
NSFR
139%
LCR
134% 138%
… and robust liquidity positions
FY179M18
KBC Group in a nutshell (2)
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• Every year, we assess the CET1 ratios of a peergroup of European banks active in the retail, SMEand corporate client segments. We positionourselves on the fully loaded median CET1 ratio ofthe peer group (14% at end of 2017)
• We want to keep a flexible buffer of up to 2% CET1for potential add-on M&A in our core markets
• This buffer comes on top of our ‘Own CapitalTarget’ and together they form the ‘ReferenceCapital Position’
• Any M&A opportunity will be assessed subject tovery strict financial and strategic criteria
Own capital target=
Median CET1 Peers (FL)
2017
2.0%
14.0%
‘Reference Capital Position’
= 16.0%
Flexible buffer for M&A
We aim to be one of the better capitalised financial institutions in Europe
• Payout ratio policy (i.e. dividend + AT1 coupon) of at least 50% of consolidated profit• Interim dividend of 1 EUR per share in November of each accounting year as an advance on the total dividend• On top of the payout ratio of 50% of consolidated profit, each year, the Board of Directors will take a decision,
at its discretion, on the distribution of the capital above the ‘Reference Capital Position‘
Capital distribution to shareholders
KBC Group in a nutshell (3)
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More of the same, but differentlyWants to be among the best performing financial institutions in Europe
KBC wants to be among Europe’s best performing financial institutions. This will be achieved by:
• Strengthening our bank-insurance business model for retail, SME and mid-cap clients in our core markets, in a highly cost-efficient way
• Focusing on sustainable and profitable growth within the framework of solid risk, capital and liquidity management
• Creating superior client satisfaction via a seamless, multi-channel, client-centric distribution approach
By achieving this, KBC wants to become the reference in bank-insurance in its core markets
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Our bank-insurance modelIn different countries and different stages of implementation
Bank branches selling insurance products from intra-group insurance company as
additional source of fee income
Bank branches selling insurance products of third party insurers as
additional source of fee income
Acting as a single operational company: bank and insurance operations working under unified governance and achieving commercial and non-
commercial synergies
Acting as a single commercial company: bank and insurance operations working under unified governance and achieving
commercial synergies
Level 4: Integrated distribution and operation
Level 3: Integrated distribution
Level 2: Exclusive distribution
Level 1: Non-exclusive distribution
KBC targets to reach at least level 3 in every country, adapted to the local market structure and KBC’s market position in banking and insurance.
Belgium
Target for Central Europe
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SustainablityThe core of our sustainability strategy
Increasing ourpositive impact
on society
Encouraging responsiblebehaviour on the part of
all employees
Limiting ouradverse impact
on society
The mindset of all KBC staff should go beyond regulation and compliance. Responsible behaviour is a requirement to implement an effective and credible sustainability strategy. Specific focus on responsible selling and responsible advice
Four focus domains that are close to our core activities
Financial literacy
Environmentalresponsibility
Stimulating entrepreneurship
Longevity or health
Strict policies for our day-to-day activities
Focus on sustainable investments
Reducing our own environmental footprint
2018 achievements:• Launch of the first Belgian Sustainable Pension Savings Fund for private individuals• Successful launch of the Green Bond Framework and issue of the Inaugural Green Bond of 500m EUR• SRI funds increased to 8.7 bn EUR by the end of 9M18• Updated KBC Sustainability Policies• KBC/CSOB announced to stop financing of Coal Fired Power Generation and Coal mining (current exposure phases out in 2023)
Please find more info in our 2017 Sustainability Report
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SustainablityOur non-financial environmental targets
Indicator Goal 2017 2016Share of renewables in total energy credit portfolio
Minimum 50% by 2030 41.2% 42.1%
Financing of coal-related activities Immediate stop of coal-related activities and gradual exit in the Czech Republic by 20231
Progress in line with target See 2018 achievements
Progress in line with target
Total GHG emissions (excluding commuter travel)
25% reduction by 2020 relative to 2015, both absolute and per FTE Long term target for a 50%-decrease by 2030
-28.9% (absolute)-28.2% (per FTE)
-14.03% (absolute)-14.1% (per FTE)
ISO 14001-certified environmental management system
ISO 14001 certification in all core countries at the end of 2017
All 6 core countries certified
Belgium, Slovakia, Hungary and Bulgaria
Business solutions in each of the focus domains
Develop sustainable banking and insurance products and services to meet a range of social and environmental challenges
See 2017 Sustainability & Annual Report for examples
For examples: seeSustainability & Annual Report 2016
Volume of SRI funds 10 billion EUR by end 20202 7.1 billion EUR 2.8 billion EUR
Awareness of SRI among both our staff and clients
Increase awareness and knowledge of SRI 100% awareness among Belgian sales teams through e-learning courses
Progress in line with target
(1) Except for financing of existing coal-fired district heating plants until 2035 under strict conditions, i.e. only to assist further ecological upgrades(2) Our initial target of 5 billion EUR by the end of 2018 had already been met by mid-2017
85/100 (Sector Leader) C (Prime, best in class) A- (Leadership)74
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SustainabilityFirst green bond issuance
On 23 May 2018, the Climate Bonds Standard Board approved the certification of the proposed KBC Green Bond
Application was made on the basis of the proposed inaugural allocation, focused on renewable energy and green residential real-estate loans
Certification
Verification
One year after issuance and until maturity, a limited assurance report on the allocation of the Green Bond proceeds to Eligible Assets to be provided by an external auditor
To be published on KBC website
KBC GREEN PORTFOLIO APPROACH
Green Bond
portfolio Green Bond
funding
Inclusion of existing and new Green Assets
KBC will ensure the availability of sufficient Green Assets to match Green funding
Deletion of ineligible or amortising Green Assets
At a first stage, in the context of the inaugural Green Bond, KBC allocated theproceeds to two green asset categories: renewable energy and residential real-estate loans.
Within those categories, KBC has identified more than EUR 1.3 billion of GreenAssets within its private and corporate client business lines in Belgium.
For future transactions, in cooperation with the relevant business teams, KBCaims to capture more green assets from other categories and expand the greeneligibility to more business lines and clients.
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More of the same… but differently…Enhanced channels for empowered clients
Creating superior client satisfaction via a seamless, multi-channel client-centric
distribution approach
Real time
Enhanced channels for empowered clients
Investing €1.5bn cash-flow (2017-20):• Further optimise our integrated distribution
model according to a real-time omni-channel approach
• Prepare our applications to engage with Fintechs and other value chain players
• Invest in our digital presence (e.g., social media) to enhance client relationships and anticipate their needs
• Further increase efficiency and effectiveness of data management
• Set up an open architecture IT package as core banking system for our International Markets Business Unit
Operating Expenses 2017-2020 = 1bn EUR
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Guidance
CAGR total income (‘16-’20)* ≥ 2.25% by 2020
C/I ratio banking excluding bank tax ≤ 47% by 2020
C/I ratio banking including bank tax ≤ 54% by 2020
Combined ratio ≤ 94% by 2020
Dividend payout ratio ≥ 50% as of now
* Excluding marked-to-market valuations of ALM derivatives
Regulatory requirements
Common equity ratio* excluding P2G ≥ 10.6% by 2019
Common equity ratio* including P2G ≥ 11.6% by 2019MREL ratio ≥ 25.9% by May ‘19NSFR ≥ 100% as of nowLCR ≥ 100% as of now
* Fully loaded, Danish Compromise. P2G = Pillar 2 guidance.
KBC the reference…Group financial guidance (Investor visit 2017)
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Non-financial guidance: % Inbound contacts via omni-channel and digital channel*
KBC Group** > 80% by 2020
Non-financial guidance: CAGR Bank-Insurance clients (1 bank product + 1 insurance product)
BU BE > 2% by 2020
BU CR > 15% by 2020
BU IM > 10% by 2020
Non-financial guidance: CAGR Bank-Insurance stable clients (3 bk + 3 ins products in Belgium; 2 bk + 2 ins products in CEE)
BU BE > 2% by 2020
BU CR > 15% by 2020
BU IM > 15% by 2020
• Clients interacting with KBC through at least one of the non-physicalchannels (digital or through a remote advisory centre), possibly in additionto contact through physical branches. This means that clients solelyinteracting with KBC through physical branches (or ATMs) are excluded
** Bulgaria & PSB out of scope for Group target
KBC the reference…Group non-financial guidance (Investor visit 2017)
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Contents
2
Strategy and business profile1
Financial performance
3 Balance sheet
4 Solvency and liquidity
5 MREL strategy
Appendices
6 Looking forward
BREAKDOWN OF ALLOCATED CAPITAL BY BUSINESS UNIT AS AT
30 SEPTEMBER 2018
61%
16%
21%
International Markets
Belgium
Czech Republic
2%Group Centre
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Commercial bank-insurance franchises in coremarkets performed well
Customer loans and customer depositsincreased in most of our core countries
Good net interest income and net interestmargin
Lower net fee and commission income
Higher net gains from financial instruments atfair value and net other income
Excellent sales of non-life insurance and lowersales of life insurance y-o-y
Costs up, partly due to one-offs
Net impairment releases on loans
Solid solvency and liquidity
An interim dividend of 1 EUR per share (asadvance payment on the total 2018 dividend)will be paid on 16 November 2018
Comparisons against the previous quarter unless otherwise stated
Excellent net result of 701mEUR in 3Q18
ROE 17%* Cost-income ratio 57% (excl. specfic items)
Combined ratio 88% Credit cost ratio -0.07% Common equity ratio 16.0% (B3, DC, fully loaded)
Leverage ratio 6.1% (fully loaded)
NSFR 134% & LCR 138%
9M18
1Q184Q17 2Q18 3Q183Q17
630
1Q17 2Q17
855
691
399
556
692 701
* when evenly spreading the bank tax throughout the year
3Q18 financial performance
Net result
KBC Group3Q 2018 key takeaways
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Main exceptional items
3Q18 2Q18
BE B
UIM
BU
GC
Opex - Facility expenses
Total Exceptional Items BE BU
-9m EUR -37m EUR -5m EUR
Total Exceptional Items IM BU
Total Exceptional Items GC
Total Exceptional Items (pre-tax)
Total Exceptional Items (post-tax) -7m EUR -37m EUR -15m EUR
3Q17
IRL – NOI - Provisions related to the tracker mortgage reviewIRL – Opex - Costs related to sale of part of legacy loan portf.
-54m EUR
NOI – Settlement of legacy legal file -38m EUR
+1m EUR
-54m EUR
-38m EUR
Technical charges non-life: release of provisionsTechnical charges life: release of provisions
+1m EUR+26m EUR+23m EUR
+49m EUR
+5m EUR
+3m EUR
CZ B
U Opex – Restructuring costs
Total Exceptional Items CZ BU -5m EUR
-5m EUR
-3m EUR
-3m EUR
Opex – Expenses for early retirement -4m EUR
Opex – Expenses for early retirement -2m EUR
-4m EUR
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Net result at KBC Group
* Difference between net result at KBC Group and the sum of the banking and insurancecontribution is accounted for by the holding-company/group items
CONTRIBUTION OF BANKING ACTIVITIES TO KBC GROUP NET RESULT*
701
1Q17 2Q17 3Q183Q17 4Q17 1Q18 2Q18
630
855
691
399
556
692
NET RESULT AT KBC GROUP*
3Q18
461
1Q17 2Q17 2Q18
330
1Q18
603574
750
4Q17
575
3Q17
526
61 82 93 84 75113
61
7864
96
27 42
74
73
-29 -33 -52 -34 -32 -27
2Q181Q17 2Q17 4Q173Q17
-15
1Q18 3Q18
111
155
113
137
78 102107
CONTRIBUTION OF INSURANCE ACTIVITIES TO KBC GROUP NET RESULT*
Amounts in m EUR
Non-Life result
Life result
Non-technical & taxes
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Good net interest income and net interest margin
Net interest income (1,136m EUR)• Up by 2% both q-o-q and y-o-y. Note that NII banking
increased by 2% q-o-q and by 5% y-o-y• The q-o-q increase was driven primarily by:
o additional positive impact of both short- & long-terminterest rate increases in the Czech Republic
o continued good loan volume growtho lower funding costspartly offset by:o lower netted positive impact of ALM FX swapso lower reinvestment yields in our eurozone core countrieso pressure on commercial loan margins in most core
countries
Net interest margin (1.98%)• Down by 2 bps q-o-q• Up by 2 bps y-o-y thanks to lower funding costs (due mainly to
the call of the CoCo) and the positive impact of repo rate hikesin the Czech Republic
NIM (pro forma for 2017***)
NII (pro forma for 2017*)
907 928 946 952 970 972 989
143 142 144 135 128 124 1283 228 21 22 47 27 19
2Q17
1,117
3Q17
1,136
3
1Q184Q171Q17
1,1251,081
3 0 1
1,114
2Q18
172
3Q18
1,094 1,137
3Q181Q17 2Q17 3Q17
1.93%
4Q17 2Q181Q18
1.96% 1.96% 1.97% 2.01% 2.00% 1.98%
Amounts in m EUR
NII - Holding-company/groupNII - netted positive impact of ALM FX swaps**
NII - BankingNII - Insurance
* 2017 pro forma figures for NII as the impact of ALM FX derivatives was ‘netted’ in NII as of 2018** From all ALM FX swap desks*** NIM is calculated excluding the dealing room and the net positive impact of ALM FX swaps & repos
* Non-annualised ** Loans to customers, excluding reverse repos (and bonds). Note that part of the Irish portfolio for which a sales agreement has been signed, is still included in 3Q18*** Customer deposits, including debt certificates but excluding repos. Customer deposit volumes excluding debt certificates & repos stable q-o-q and +6% y-o-y
VOLUME TREND Total loans** o/w retail mortgages Customer deposits*** AuM Life reserves
Volume 147bn 61bn 194bn 214bn 29bn
Growth q-o-q* +1% +1% 0% 0% 0%
Growth y-o-y +5% +3% +3% 0% -1%
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Lower net fee and commission income
Amounts in bn EUR
AuM*214 213 215 217 213 214 214
2Q181Q17 2Q17 3Q184Q173Q17 1Q18
* Note that 2017 AuM figures were restated due to a roughly -2bn EUR adjustment inInstitutional Mandates
323 314 295 301 299 281 275
208 213 213 229 215 223 219
-69 -73 -74 -75 -64 -66 -70
1Q17 1Q182Q17 3Q17 4Q17 2Q18
450
3Q18
463 454 433 456 438 424
Distribution Asset management servicesBanking services
Amounts in m EUR Net fee and commission income (424m EUR)• Down by 3% q-o-q and by 2% y-o-y• Q-o-q decrease was the result chiefly of:
o lower securities-related fees (holiday season)o lower entry fees from mutual funds (holiday season led to
less gross inflows)o lower management fees from mutual funds and unit-linked
life insurance productso higher commissions paid on insurance sales, mainly non-lifeo lower fees from credit files & bank guaranteespartly offset by:o higher fees from payment services (holiday season)o higher network income
• Y-o-y decrease was mainly the result of:o lower entry and management fees from mutual funds &
unit-linked life insurance products,o lower fees from credit files & bank guaranteespartly offset by:o higher fees from payment serviceso higher securities-related feeso higher network income
Assets under management (214bn EUR)• Stabilised q-o-q and y-o-y as small net outflows were offset by
a positive price effect• The mutual fund business has seen net outflows, mainly in
investment advice
F&C (pro forma for 2017*)
* 2017 pro forma figures as the network income shifted from FIFV to net F&C as of 2018
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Insurance premium income (gross earned premiums) at 696m EUR• Non-life premium income (403m) increased by 7%
y-o-y• Life premium income (293m) down by 7% q-o-q
and up by 4% y-o-y
The non-life combined ratio at 9M18amounted to 88%. 3Q18 was impacted by 2large fire claims in Belgium, while technicalcharges were low in 2Q18. Remember that3Q17 benefited from a one-off release ofprovisions in Belgium (positive effect of 26mEUR). Excluding this one-off release in 3Q17,the combined ratio amounted to 86% at 9M17
Insurance premium income up y-o-y and excellent combined ratio
COMBINED RATIO (NON-LIFE)
PREMIUM INCOME (GROSS EARNED PREMIUMS)
1Q 1H 9M
84%79%
FY
90% 88% 83% 88% 88%
2017 2018
360 369 378 384 378 392 403
312 267 282410 336 315 293
1Q17 3Q17
714
2Q17
636
4Q17 2Q181Q18 3Q18
672 660
794707 696
Life premium income Non-Life premium income
Amounts in m EUR
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Non-life sales up y-o-y, life sales down y-o-y
Sales of non-life insurance products• Up by 8% y-o-y thanks to a good commercial
performance in all major product lines in our coremarkets and tariff increases
Sales of life insurance products• Decreased by 10% q-o-q and by 5% y-o-y• The q-o-q decrease was primarily due to lower sales of
guaranteed interest products in Belgium• The y-o-y decrease was driven entirely by lower sales of
unit-linked products in Belgium• Sales of unit-linked products accounted for 40% of total
life insurance sales
LIFE SALES
NON-LIFE SALES (GROSS WRITTEN PREMIUM)
207 193 187270 219 165 153
267 222 218
318279
261 230
1Q17 2Q17 2Q184Q173Q17 1Q18 3Q18
474 498415 405
588
426383
Guaranteed interest products Unit-linked products
468
358 349 342
492
382 378
4Q173Q171Q17 2Q17 3Q182Q181Q18
Amounts in m EUR
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Higher FV gains and other net income
The higher q-o-q figures for net gains fromfinancial instruments at fair value wereattributable mainly to:• a positive change in ALM derivatives• a positive change in market, credit and funding value
adjustments (mainly as a result of changes in theunderlying market value of the derivatives portfolioand decreased credit spreads)
partly offset by:• lower net result on equity instruments (insurance)• lower dealing room income, mainly in Belgium and
the Czech Republic
Other net income amounted to 56m EUR, moreor less in line with the normal run rate of around50m EUR. Note that 2Q18 was negativelyimpacted by the settlement of a legacy legal filein the Group Centre (-38m EUR), while 3Q17was negatively impacted by an additionalprovision of 54m EUR related to an industrywide review of the tracker rate mortgageproducts originated in Ireland before 2009
FV GAINS (pro forma for 2017*)
Amounts in m EUR
19 21 19 33
73
11 735
11
110
86
71 94 73 66
96
1-14
1Q17 3Q172Q17
1712
4Q17
4
1Q18 2Q18
2
3Q18
130
180
94118
54 79
77
47
4
-14
71
23
56
1Q17 2Q17 4Q173Q17 1Q18 3Q182Q18
OTHER NET INCOME
Net result on equity instruments (overlay insurance)M2M ALM derivativesOther FV gains
* 2017 pro forma figures as:1) the impact of the FX derivatives was ‘netted’ in NII as of 2018 2) the shift from realised gains on AFS shares and impairments on AFS shares to FIFV
due to IFRS 9 (overlay approach for insurance)
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Operating expenses up, partly due to one-offs Cost/income ratio (banking) adjusted for specific
items* at 58% in 3Q18 and 57% YTD• Operating expenses excluding bank tax went up by 1%
q-o-q primarily as a result of:o higher staff expenses (mainly due to wage
inflation), except for Belgiumo higher ICT and marketing expenseso 14m EUR one-off costs:o 6m EUR expenses for early retirement in Belgiumo 5m EUR restructuring charges in CZo 3m EUR costs related to the sale of part of the
legacy loan portfolio in Irelandpartly offset by:o lower facilities expenses
• Operating expenses without bank tax increased by 7%y-o-y in 3Q18
• Excluding the consolidation impact of UBB/Interlease,bank tax, FX effect and one-off costs, operatingexpenses in 9M18 rose by roughly 3% y-o-y
• Pursuant to IFRIC 21, certain levies (such ascontributions to the European Single Resolution Fund)have to be recognised in advance, and this adverselyimpacted the results for 1Q18. The YTD increase canmainly be explained by the consolidation of UBB
• Total bank taxes (including ESRF contribution) areexpected to increase from 439m EUR in FY17 to 462mEUR in FY18
OPERATING EXPENSES
868 891 896 980 920 942 956
361 371
1Q183Q171Q17
19
1,02141
2Q17
18914
4Q17
24
2Q18
26
3Q18
1,229
910
1,291
966 981
Bank tax Operating expenses
• See glossary (slide 79) for the exact definition** The C/I ratio adjusted for specific items of 57% in 9M18 amounts to roughly 50% excluding these bank taxesAmounts in m EUR
TOTAL Upfront Spread out over the year
3Q18 1Q18 2Q18 3Q18 1Q18 2Q18 3Q18 4Q18e
BE BU 0 273 -4 0 0 0 0 0
CZ BU 0 29 1 0 0 0 0 0
Hungary 21 26 0 0 19 22 21 22
Slovakia 4 3 0 0 4 4 4 4
Bulgaria 0 14 1 0 0 0 0 0
Ireland 1 3 0 0 1 0 1 14
GC 0 0 0 0 0 0 0 0
TOTAL 26 347 -2 0 24 26 26 40
EXPECTED BANK TAX SPREAD IN 2018
Bank taxes of 421m EUR YTD. On a pro rata basis, bank taxes represented 10.9% of 9M18 opex at KBC Group**
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Net impairment releases, excellent credit cost ratio and improved impaired loans ratio
Very low asset impairments• This was attributable mainly to:
o net loan loss impairment releases in Ireland of 15m EUR(compared with 39m in 2Q18)
o also small net loan loss impairment reversals in Slovakia,Hungary, Bulgaria and Group Centre
partly offset by:o loan loss impairments of only 3m EUR in Belgiumo loan loss impairments of 12m EUR in the Czech Republic due
to 1 large corporate file
• Impairment of 6m on ‘other’, of which 4m EUR in the CzechRepublic mostly resulting from a review of residual values offinancial car leases under short-term contracts
The credit cost ratio amounted to -0.07% in 9M18 due tolow gross impairments and several releases
The impaired loans ratio stabilised at 5.5%*, 3.2% ofwhich over 90 days past due
ASSET IMPAIRMENT
21 29 20 6
10
-27 -21-87 1
-2
4Q171Q17
5
31
-76
2Q17 3Q17
6
-63
1Q18 2Q18 3Q18
8
-71
2
-56
-1
IMPAIRED LOANS RATIO
2Q18
3.4%
1Q17
3.7%3.9%3.6%
6.0%
2Q17 3Q17
3.2%
4Q17
3.5%
1Q18
3.2%
3Q18
5.5%
6.8% 6.9% 6.6%5.9% 5.5%
CREDIT COST RATIO
0.23%
FY14
0.09%
FY15 FY16 FY17-0.07%
0.42%
9M18
-0.06%
Impaired loans ratio of which over 90 days past due
Other impairments Impairments on financial assets at AC* and FVOCI* AC = Amortised Cost. Under IAS 39, impairments on L&R
* Excluding the part of the Irish portfolio for which a sales agreement hasbeen signed, the impaired loans ratio would amount to 4.5% in 3Q18
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NET PROFIT – BELGIUM NET PROFIT – CZECH REPUBLIC
993
414 348439
3351,432
2014
1,516
20162015 2017
1,564
9M18
1,575
1,102 1,216 1,240
1,089
9M18 ROAC: 22%
Amounts in m EUR
408 423 465 534
484121 119
131168
528
2015
542
9M182014 2016
596
2017
702
9M18 ROAC: 38%
NET PROFIT – INTERNATIONAL MARKETS
184289
370
440
-175
61
13974
2016
-7
20172014-182
2015 9M18
245
428 444
9M18 ROAC: 27%
Overview of contribution of business units to 9M18 result
4Q 9M 4Q 9M
4Q 9M
NET PROFIT – KBC GROUP
473
863 685462
1,948
20152014 2016
2,113
2017 9M18
2,5752,4272,639
1,762
1,2891,776 1,742
9M18 ROAC: 24%
9M4Q
29
Contents
3
Strategy and business profile1
Financial performance2
Balance sheet
4 Solvency and liquidity
5 MREL strategy
Appendices
6 Looking forward
30
Y-O-Y ORGANIC* VOLUME GROWTH
4%
BE
* Volume growth excluding FX effects and divestments/acquisitions** Loans to customers, excluding reverse repos (and bonds)*** Customer deposits, including debt certificates but excluding repos**** Retail mortgages in Bulgaria: new business (written from 1 Jan 2014) +8% y-o-y, while legacy -24% y-o-y***** Retail mortgages in Ireland: new business (written from 1 Jan 2014) +35% y-o-y, while legacy -7% y-o-y
Loans** Retail mortgages
2%
Deposits***
6%
2%
Deposits***Loans** Retail mortgages
8%8%
4%
Deposits***Loans**
4%
Retail mortgages****
3%
0%
11%12%
Loans** Retail mortgages
Deposits***
8%
Deposits***
10%
Loans** Retail mortgages
4%5%
CR
1%
Loans**
-1%
Retail mortgages*****
Deposits***-5%
5%
Retail mortgages
Loans** Deposits***
3% 3%
Balance sheet:Loans and deposits continue to grow in most core countries
31
Balance sheet KBC Group consolidated at 30 September 2018
78
61
146
145
Total assets (EUR 305bn)
Trading assets
Loan book (loans and advances to customers)
Other (incl. interbank loans, reverse repos, property & equipment etc...)
Insurance investment contracts
Investment portfolio (equity and debt securties)
54
193419
160
6 13
Total liabilities and equity (EUR 305bn)
Deposits from customers
Trading liabilities
Other (incl. interbank deposits)
Other MREL instruments and debt certificates
Equity (including AT1)
Technical provisions, before reinsurance NL and L
Liabilities under insurance investment contracts
Credit qualityCapital adequacy &liquidity position
32
Sectorial breakdown of outstanding loan portfolio(167bn EUR*) of KBC Bank Consolidated
11%
7%
15%
7%
7%4%4%
3%
40%
AutomotiveFinance & insurance
Real estate
Services
Distribution
Authorities Building & construction
Rest
Agriculture, farming, fishing
2%
Private Persons
Electricity
1.6%
1.5%
1.6%
ShippingFood producers
5.2%
1.2%
Other sectorsMetals
Chemicals
0.7%
1.1%
0.8%
Machinery & heavy equipment
1.0%
Hotels, bars & restaurantsOil, gas & other fuels
* It includes all payment credit, guarantee credit (except for confirmations of letters of credit and similar export/import related commercial credit), standby credit and credit derivatives, granted by KBC to private persons, companies, governments and banks. Bonds held in the investment portfolio are included if they are corporate or bank issued, hence government bonds and trading book exposure are not included* Outstanding amount includes all on-balance sheet commitments and off-balance sheet guarantees
33
Investment portfolio (as per 30/09/2018)
72%
6%
4%
7%
4%2% 4%
Covered bonds
Financial bonds
Sovereign bonds
Other public bonds
Other
1%Asset Backed securties
EquitiesNon-Financial bonds
(*) 1%, (**) 2%
INVESTMENT PORTFOLIO (Total EUR 61bn) SOVEREIGN BOND PORTFOLIO
(Carrying value1 EUR 47.2bn) (Notional value EUR 44.6bn)
1. Carrying value is the amount at which an asset [or liability] is recognised: for those not valued at fair value this is after deducting any accumulated depreciation (amortisation) and accumulated impairment losses thereon, while carrying amount is equal to fair value when recognised at fair value
32%
13%
3%4%6%
4%
13%
9%
6%
Italy
Belgium
Hungary
Czech Rep.Bulgaria**
PolandSlovakia
2%
France
Other
SpainGermany **
Portugal *Austria *Netherlands * Ireland
34
Impaired loans ratios*, of which over 90 days past due
INTERNATIONAL MARKETS BU (including UBB)CZECH REPUBLIC BU
6.6%
3.5%
1Q18
3.2%
6.0%
2Q18 3Q184Q17
3.4%
2Q17
3.2%3.6%
1Q17
3.9% 3.7%
3Q17
6.8% 6.9%
5.9%5.5% 5.5%
Of which over 90 days past dueImpaired loans ratio *
1.6%
2.3%
1.5%
2Q18
1.4%
3Q181Q17
2.7%
1Q18
1.8% 1.7%
3Q172Q17
1.6% 1.6%
4Q17
2.6% 2.5% 2.4% 2.4%2.1%
1Q17 4Q17
13.4%
2Q17
11.3%
3Q18
11.2%
2Q18
11.5%
1Q18
22.4%
12.1%
3Q17
12.6%
24.2% 23.6%
19.7% 20.4% 19.5% 18.9%
12.8%
BELGIUM BU
1Q18 2Q18
1.2% 1.3%
3Q181Q17
2.8%
1.5%
2.4%
1.5% 1.4%
4Q172Q17
1.5%
3Q17
1.3%
3.0% 3.0%
2.4%
2.8%2.6%
KBC GROUP
* Impaired loans ratio: As of 1Q18, a switch has been made in the risk reporting figures from outstanding (PD10-12) to the new definition of gross carrying amount, i.e. including reserved and accrued interests. In addition, the transaction scope of the credit portfolio was extended and now additionally includes the following 4 elements: (1) bank exposure (money market placements, documentary credit, accounts), (2) KBC Commercial Finance debtor risk, (3) unauthorised overdrafts, and (4) reverse repo (excl. central bank exposure)
** Excluding the part of the Irish portfolio for which a sales agreement has been signed, the impaired loans ratio would amount to 4.5% in 3Q18
**
35
Cover ratios
INTERNATIONAL MARKETS BU (including UBB)CZECH REPUBLIC BU
BELGIUM BUKBC GROUP
• Impaired loans cover ratio: As of 1Q18 a switch has been made in the risk reporting figures from outstanding to the new definition of gross carrying amount, i.e. including reserved and accrued interests
2Q171Q17
44.0%
3Q17
48.0%47.8%
4Q17 1Q18
46.6%
2Q18 3Q18
63.7%
47.3%
64.2% 64.5%
47.5%
64.1%68.1% 67.7%
47.2%
66.8%
Impaired loans cover ratio *
Cover ratio for loans with over 90 days past due
55.1%
1Q17
48.1%54.7%
2Q17
66.9%
4Q173Q17 1Q18
53.0%
2Q18 3Q18
69.4%
56.7%
71.8% 69.0%
57.7%
68.9%
52.5%
66.8% 66.9%
2Q17 3Q182Q184Q17
67.5%
3Q171Q17 1Q18
47.9% 46.4%
67.6%
48.4%
69.7%
44.4%
68.6%
44.2%
67.6%
45.9%
66.4%
44.4%
63.4%
3Q181Q17 2Q17
43.5%
3Q17 4Q17 1Q18 2Q18
58.8%
45.9%
58.9%
45.4%
60.8%
40.9%
60.2%
46.9%
64.8%
46.0%
66.0% 65.5%
45.7%
36
Loan loss experience at KBC
9M18CREDIT COST
RATIO
FY17CREDIT COST
RATIO
FY16CREDIT COST
RATIO
FY15CREDIT COST
RATIO
FY14CREDIT COST
RATIO
AVERAGE ‘99 –’17
Belgium 0.06% 0.09% 0.12% 0.19% 0.23% n/a
Czech Republic 0.04% 0.02% 0.11% 0.18% 0.18% n/a
International Markets -0.56% -0.74% -0.16% 0.32% 1.06% n/a
Group Centre -0.77% 0.40% 0.67% 0.54% 1.17% n/a
Total -0.07% -0.06% 0.09% 0.23% 0.42% 0.47%
Credit cost ratio: amount of losses incurred on troubled loans as a % of total average outstanding loan portfolio
37
Contents
4
Strategy and business profile1
Financial performance2
Balance sheet3
Solvency and liquidity
5 MREL strategy
Appendices
6 Looking forward
38
Strong capital positionFully loaded Basel 3 CET1 ratio at KBC Group (Danish Compromise)
10.6% fully loaded regulatory minimum
1H17 FY171Q17 9M17 9M181Q18 1H18
15.7% 16.0%15.7% 15.9% 16.3% 15.9% 15.8%
The common equity ratio* increased from15.8% at the end of 1H18 to 16.0% at the endof 9M18 based on the Danish Compromise.This clearly exceeds the minimum capitalrequirements** set by the competentsupervisors of 9.875% phased-in for 2018 and10.6% fully loaded and our ‘Own CapitalTarget’ of 14.0%
* Note that 1 January 2018, there is no longer a difference betweenfully loaded and phased-in
** Excludes a pillar 2 guidance (P2G) of 1.0% CET1
14.0% ‘Own Capital Target’
Fully loaded Basel 3 total capital ratio (Danish Compromise)
15.8% CET1
1.5% AT12.3% T2
2.4% T2
15.9% CET1
2.3% T2
2.6% AT1
1Q18 total capital ratio
1H18 total capital ratio
19.7%20.8%
9M18 total capital ratio
20.9%
16.0%CET1
2.6% AT1
The fully loaded total capital ratio amountedto 20.9% at the end of 9M18
Total distributable items (under Belgian GAAP) KBC Group 5.8bn EUR at 9M 2018, of which:• available reserves: 949m• accumulated profits: 4 681m
39
Fully loaded Basel 3 leverage ratio and Solvency II ratio
5.0%4.8%
9M171Q17 1H17 FY17 1Q18 1H18 9M18
4.7% 4.7% 4.7%5.1% 5.2%
Fully loaded Basel 3 leverage ratio at KBC BankFully loaded Basel 3 leverage ratio at KBC Group
9M17 1Q181Q17 FY17 9M181H17 1H18
5.7% 5.7% 5.8% 6.1% 5.7% 6.0% 6.1%
Solvency II ratio
2Q18 9M18
Solvency II ratio* 219% 216%
The decrease (-3%-point) in the Solvency II ratiowas mainly the result of an increase in spreads andnet purchases in the equity portfolio
* On 19 April 2017, the NBB retroactively relaxed the strict cap on the loss-absorbing capacity of deferred taxes in the calculation of the required capital. Belgian insurancecompanies are now allowed to apply a higher adjustment for deferred taxes, in line with general European standards, if they pass the recoverability test. This is the case for KBC
40
Strong and growing customer funding base
KBC Bank continues to have a strong retail/mid-cap deposit base in its core markets – resulting in a stable funding mixwith a significant portion of the funding attracted from core customer segments & markets
Customer funding further increased in 9M18 (versus FY17). The elevated amount in short-term wholesale funding ismainly on the back of short-term arbitrage opportunities
69% 73% 75% 73% 73% 69% 70% 72%
8% 10% 7%9%9% 8% 9% 8% 8%
9% 9%7%8% 10% 8% 8% 8%
7% 7%9% 0% 2% 2% 2%8%
10% 12%6% 5%
-6% -6%
3%
3%
FY12
3%
FY11 FY13
4%
FY14 FY15
-1%
FY16 FY17 9M18
3%
2%3%
3%
Net unsecured interbank funding
Net secured funding
Total equity
Debt issues placed with institutional investors
Certificates of deposit
Funding from customers
73%
21%
7%0%
Debt issues in retail network
Retail and SME
Government and PSE
Mid-cap
72% customer
driven
129 555 131 914 132 862 133 766 139 560 143 690 155 774 163 513
FY11 FY12 FY13 FY14 FY15 FY16 FY17 9M18
Funding from customers (m EUR)
41
Short term unsecured funding KBC Bank vs liquid assets as of end June 2018 (bn EUR)
KBC maintains a solid liquidity position, given that:• Available liquid assets remained very high at more than
3 times the amount of the net short-term wholesalefunding
• Funding from non-wholesale markets is stable fundingfrom core-customer segments in core markets
* Graph is based on Note 18 of KBC’s quarterly report, except for the ‘available liquid assets’ and‘liquid assets coverage’, which are based on the KBC Group Treasury Management Report
* Net Stable Funding Ratio (NSFR) is based on KBC’s interpretation of the proposed CRRamendment
** Liquidity Coverage Ratio (LCR) is based on the Delegated Act requirements. From EOY2017onwards, KBC discloses 12 months average LCR in accordance to EBA guidelines on LCRdisclosure
(*)
NSFR at 134% and LCR at 138% by the end of 9M18• Both ratios were well above the regulatory requirement of
at least 100%
Liquidity ratios remain very solid
Ratios FY17 9M18 Regulatory requirement
NSFR* 134% 134% ≥100%
LCR** 139% 138% ≥100%
11,56
22,7018,71
15,1918,01
56,23
65,39
57,79 58,83 56,85
486%
288%309%
387%
316%
3Q17 4Q17 1Q18 2Q18 3Q18Net Short Term Funding Available Liquid Assets Liquid Assets Coverage
end of September 2018*
42
Upcoming mid-term funding maturities
17%
3%
10%
10%
32%
28%
0.0%
1.0%
1.8%
1.4%
1.7%
0.7%
0.2%0.4%
0.2%0.3%
0
1000
2000
3000
4000
5000
6000
2018 2019 2020 2021 2022 2023 2024 2025 2026 ≥ 2027
Mill
ions
EUR
Breakdown Funding Maturity Buckets
Senior Unsecured - Holdco Senior Unsecured - Opco Subordinated T1 Subordinated T2 Covered Bond TLTRO
Total outstanding = 23.6 bn EUR
(Including % of KBC Group’s balance sheet) CoCo has been called (on 25 January 2018)
KBC Bank placed covered bonds of 750m EUR with 8-yearmaturity and 250m EUR with 20-year maturity in March 2018
KBC Group issued a perpetual non-call 7.5-year additional Tier-1instrument of 1bn EUR in April 2018
KBC Group successfully issued its inaugural green seniorbenchmark issue of 500m EUR with a 5-year maturity in June2018
There were no new issuances during 3Q18
KBC Bank has 6 solid sources of long-term funding:• Retail term deposits• Retail EMTN• Public benchmark transactions• Covered bonds• Structured notes and covered bonds using the private
placement format• Senior unsecured, T1 and T2 capital instruments issued at KBC
Group level and down-streamed to KBC Bank
43
Latest credit ratings
S&PMoody’s Fitch
Gro
upBa
nkIn
sura
nce
Senior UnsecuredTier IIAdditional Tier IShort-term P-2 A-2 F1Outlook Positive Stable Stable
Baa1 A- A- BBB A-- BB+ BB+
Senior Unsecured
Short-term P-1 A-1 F1Outlook Positive Stable Stable
A1 A+ A+Tier II
Covered Bonds AAA - AAA
-
Financial Strength RatingIssuer Credit Rating
- A -- A -
BBB
Outlook - Stable -
-
Latest updates:• 23 Nov 2018: Fitch rating upgrade of KBC Bank • 19 Nov 2018: Moody’s revised KBC Group, KBC Bank and KBC Bank Ireland outlook to positive and affirmed ratings• 30 July 2018: S&P rating upgrade of KBC Group, KBC Bank, Insurance and CSOB CR.
44
-40
10
60
110
160
210
-20
0
20
40
60
80
100
120
140
Credit spreads trends
0.5Y Senior Debt Opco 5Y Covered Bond Interpolated 5Y Senior Debt Holdco Interpolated 7NC2 Subordinated Tier 2
Credit spreads trends
1 7NC2 Subordinated Tier 2 spread is depicted based on the right hand axis.
1
45
KBC IS A FREQUENT ISSUER WITH AN OUTSTANDING AMOUNT OF 7.56 BN EUR• KBC’s 10bn EUR covered bond programme is rated Aaa/AAA (Moody’s/Fitch)• CRD and UCITS compliant / 10% risk-weighted• All issues performed well in the secondary market
KBC’S COVERED BONDS ARE BACKED BY STRONG LEGISLATION AND SUPERIOR COLLATERAL• Cover pool: Belgian residential mortgage loans• Strong Belgian legislation – inspired by German Pfandbriefen law• Direct covered bond issuance from a bank’s balance sheet• Dual recourse, including recourse to a special estate with cover assets included in a register• Requires license from the National Bank of Belgium (NBB)• The special estate is not affected by a bank insolvency. In that case, the NBB can appoint a cover pool administrator to manage
the special estate in issuer ; both monitor the pool on a ongoing basis• The value of one asset category must be at least 85% of the nominal amount of covered bonds• The value of the cover assets must at least be 105% of the covered bonds (value of mortgage loans is limited to 80% LTV)• Maximum 8% of a bank’s assets can be used for the issuance of covered bonds
THE COVERED BOND PROGRAMME IS CONSIDERED AS AN IMPORTANT FUNDING TOOL FOR THE TREASURY DEPARTMENT• KBC’s intentions are to be a frequent benchmark issuer if markets and funding plan permit
Summary covered bond programme (1/2) (details, see Annex 3)
46
Summary covered bond programme (2/2) (details, see Annex 3)
COVER POOL: BELGIAN RESIDENTIAL MORTGAGE LOANS• Exclusively, this is selected as main asset category• Value (including collections) at least 105% of the
outstanding covered bonds• Branch originated prime residential mortgages
predominantly out of Flanders• Selected cover asset have low average LTV (60.57%) and
high seasoning (54 months)
KBC HAS A DISCIPLINED ORIGINATION POLICY• 2009 to 2017 residential mortgage loan losses below 4 bp• Arrears in Belgium approx. stable over the past 10 years:
(i) Cultural aspects, stigma associated with arrears,importance attached to owning one’s property
(ii) High home ownership also implies that the change inhouse prices itself has limited impact on loanperformance
(iii) Well established credit bureau, surrounding legislationand positive property market
1,12
%1,
12%
1,11
%1,
08%
1,08
%1,
09%
1,09
%1,
09%
1,10
%1,
11%
1,09
%1,
08%
1,08
%1,
08%
1,06
%1,
06%
1,06
%1,
06%
1,12
%1,
12%
1,13
%1,
14%
1,12
%1,
11%
1,12
%1,
13%
1,14
%1,
15%
1,16
%1,
16%
1,16
%1,
17%
1,17
%1,
18%
1,17
%1,
17%
1,17
%1,
19%
1,20
%1,
20%
1,19
%1,
20%
1,20
%1,
20%
1,22
%1,
22%
1,19
%1,
18%
1,17
%1,
18%
1,16
%1,
17%
1,16
%1,
16%
1,17
%1,
18%
1,17
%1,
16%
1,13
%1,
12%
1,11
%1,
11%
1,12
%1,
14%
1,11
%1,
11%
1,10
%1,
10%
1,10
%1,
09%
1,06
%1,
05%
1,04
%1,
03%
1,03
%1,
03%
1,02
%
0,38
%0,
39%
0,41
%0,
430%
0,44
0%
0,44
0%
0,44
%
0,50
%
0,53
%
0,52
%
0,56
%
0,54
%
0,48
%
0,41
%
0,43
%
0,39
%
0,39
%
0.01
2%
0.00
8%
0.00
6%
0,02
0%
0,01
3%
0,03
7%
0,02
0%
0,02
7%
0,01
7%
0,0%
0,2%
0,4%
0,6%
0,8%
1,0%
1,2%
1,4%
dec/
09
dec/
10
dec/
11
feb/
12
apr/
12
jun/
12
aug/
12
okt/
12
dec/
12
feb/
13
apr/
13
jun/
13
aug/
13
okt/
13
dec/
13
feb/
14
apr/
14
jun/
14
aug/
14
okt/
14
dec/
14
feb/
15
apr/
15
jun/
15
aug/
15
okt/
15
dec/
15
feb/
16
apr/
16
jun/
16
aug/
16
okt/
16
dec/
16
feb/
17
apr/
17
jun/
17
aug/
17
okt/
17
dec/
17
Market loans in 3 months arrears KBC loans in 90days arrears KBC loan losses
47
Contents
5
Strategy and business profile1
Financial performance2
Balance sheet3
Solvency and liquidity4
MREL strategy
Appendices
6 Looking forward
48
The resolution plan for KBC is based on a Single Point of Entry (SPE) approach at KBC Group level Bail-in is identified as the preferred resolution tool SRB’s current approach to MREL is defined in the ‘2017 MREL Policy’ published on 20 December 2017, which is based on the current legal
framework and hence might be revised in the context of the ongoing legislative process to review BRRD The MREL target for KBC is 25.9%, which is based on fully loaded capital requirements as at 31 December 2016 SRB requires KBC to achieve this target by 1 May 2019, using both HoldCo and eligible OpCo instruments
LAA Loss Absorbing AmountRCA ReCapitalisation AmountMCC Market Confidence ChargeCBR = Combined Buffer Requirement = 2.5% Conservation Buffer +1.5% O-SII buffer + 0.15% countercyclical buffer
LAA
RCA
MCC
8% P1
1.75% P2R
4.15% CBR
8% P1
1.75% P2R
2.9% (CBR – 1,25%)
@ 100% RWA
@ 95% RWA
= 25.9%
T2 2.3%
1.3% OpCo (T2 & senior >1y)
4.3%
3Q18
16.0%
2.6%
HoldCo senior
AT1
CET1
26.4%
= 25.1%
Gradually mature.To be replaced by
HoldCo senior
HoldCo approach
Consolidated approach
KBC well on track to comply with resolution requirements
ActualRegulatory requirement
49
Available MREL as a % of RWA (fully loaded)
23.7%
1.4%
23.5%22.8%
2.5%3.8%
2Q17
26.4%
1Q18
22.3%
1Q17
3.4%
25.1%
3Q17
2.3%
24.0%
4Q17
1.3%
25.1%
2Q18
24.8% 1.3%
3Q18
26.0% 26.3% 26.2% 26.3% 26.4%
OpCo MREL HoldCo MREL
50
KBC has strong buffers cushioning Sr. debt at all levels (30 September 2018)
KBC GroupSenior4 020
Tier 22 182
Additional Tier 12 400
CET1 (fully loaded)15 018
KBC BankSenior531
Other liabilities47 593
Tier 21 682
Additional Tier 12 400
CET1 (fully loaded)12 199
383
KBC InsuranceTier 2500
Parent shareholders equity3 036
KBC Asset ManagementFully consolidated for solvency purposes
To large extent customer-related, protected as
much as possible
Senior issued by KBC Bank, which will be limited going
forward (for funding reasons)
Buffer for Sr. level 20.3bn EUR
Buffer for Sr. level 19.6 bn EUR
Legacy T2 issued by KBC Bank will disappear over time
nominal amounts in million EUR
Subordinated on loan by KBC Group4 020
51
Contents
6
Strategy and business profile1
Financial performance2
Balance sheet3
Solvency and liquidity4
MREL strategy
Appendices
5
Looking forward
52
Looking forward
European economic conditions remain attractive, although we believe that the growth peakis behind us. Persistently decreasing unemployment rates, with even growing labourshortages in some European economies, combined with gradually rising wage inflation willcontinue to support private consumption. Moreover, also investments will remain animportant growth driver. The main elements that could impede European economicsentiment and growth remain the risk of further economic de-globalisation, including anescalation of trade conflicts, the Brexit and political turmoil in Italy
Economicoutlook
Group guidance
Business units
Solid returns for all Business Units Loan impairments for Ireland towards a release in 100m-150m EUR range for FY18 Impact of the reform of the Belgian corporate income tax regime: recurring positive P&L
impact as of 2018 onwards and one-off negative impact in 4Q17 will be fully recuperated inroughly 3 years’ time
B4 impact for KBC Group estimated at roughly 8bn EUR higher RWA on fully loaded basis atyear-end 2017, corresponding with 9% RWA inflation and -1.3% points impact on CET1 ratio
Next to the Belgium and Czech Republic Business Units, the International Markets BusinessUnit has become a strong net result contributor, thanks to: Ireland: re-positioning as a core country with a sustainable profit contribution Bulgaria: merger of CIBank into UBB. The new group UBB has become the largest
bank-insurance group in Bulgaria with a substantial increase in profit contribution Sustainable profit contribution of Hungary and Slovakia
53
Appendices
Overview of outstanding benchmarks
2 KBC Bank CDS levels
3
4
Solvency: details on capital5
Details on credit exposure of Ireland
6
Summary of KBC’s covered bond programme
Belgium: digital sales
1
54
Annex 1 - Outstanding benchmarksOverview till end of September 2018
Total: EUR 11,0 bn
Issuer Curr Amount issued Coupon Settlement Date Maturity Date ISIN YEAR
KBC Group EUR 750 000 000 1,000 26/04/2016 26/04/2021 BE6286238561 2021KBC Group EUR 1 250 000 000 0,750 1/03/2017 01/03/2022 BE0002272418 2022KBC Group EUR 750 000 000 FRN 24/05/2017 24/11/2022 BE0002281500 2022KBC Group EUR 500 000 000 0,875 27/06/2018 27/06/2023 BE0002602804 2023KBC Group EUR 750 000 000 0,750 18/10/2016 18/10/2023 BE0002266352 2023
KBC Bank N.V. EUR 750 000 000 1 25/02/2014 25/02/2019 BE0002462373 2019KBC Bank N.V. EUR 1 000 000 000 1,25 28/05/2013 28/05/2020 BE0002434091 2020KBC Bank N.V. EUR 1 000 000 000 0,125 28/04/2015 28/04/2021 BE0002489640 2021KBC Bank N.V. EUR 1 000 000 000 0,45 22/01/2015 22/01/2022 BE0002482579 2022KBC Bank N.V. EUR 1 250 000 000 0,375 1/03/2016 01/09/2022 BE0002498732 2022KBC Bank N.V. EUR 750 000 000 2 31/01/2013 31/01/2023 BE0002425974 2023KBC Bank N.V. EUR 750 000 000 0,75 8/03/2018 08/03/2026 BE0002583616 2026KBC Bank N.V. EUR 500 000 000 0,75 24/10/2017 24/10/2027 BE0002500750 2027
Tranche Report
UNSECURED
COVERED
55
Issued 18 Sep 2017Issued
17 Apr 2018
Annex 1 - Outstanding benchmarksMain characteristics of subordinated debt issues
KBC Bank NVKBC Groep NV
AT1KBC Groep NV
AT1KBC Groep NV
Tier IIKBC Groep NV
Tier IIKBC Groep NV
Tier II
Amount issued GBP 525 000 000 EUR 1 400 000 000 EUR 1 000 000 000 EUR 750 000 000 EUR 750 000 000 EUR 500 000 000Tendered GBP 480 500 000
Net Amount GBP 44 500 000 EUR 1 400 000 000 EUR 1 000 000 000 EUR 750 000 000 EUR 750 000 000 EUR 500 000 000ISIN-code BE0119284710 BE0002463389 BE0002592708 BE0002479542 BE0002485606 BE0002290592Call date 19/12/2019 19/03/2019 24/10/2025 25/11/2019 11/03/2022 18/09/2024Initial coupon 6.202% 5.625% 4.250% 2.375% 1.875% 1.625%Coupon step-up / reset 3m gbp libor + 193bps $ MS 5Y + 4.759% € MS 5Y + 359.4bps € MS 5Y + 1.980% € MS 5Y + 1.50% € MS 5Y + 1.25%First (next) call date 19/12/2019 19/03/2019 24/10/2025 25/11/2019 11/03/2022 18/09/2024ACPM Yes - - - - -Dividend Stopper Yes - - - - -Conversion into PSC Yes - - - - -
TriggerSupervisory Event or
"concursus creditorum"
Trigger CET1 RATIO < 5.125%
Temporary write-down
Trigger CET1 RATIO < 5.125%
Temporary write-down
Regulatory + Tax Call Regulatory + Tax Call Regulatory + Tax Call
SUBORDINATED BOND ISSUES KBC
56
Annex 2 - KBC Bank CDS levels (in bp)
57
Direct covered bond issuance from a bank’s balancesheet
Dual recourse, including recourse to a special estatewith cover assets included in a register
The special estate is not affected by a bank’s insolvency
Requires licenses from the National Bank of Belgium(NBB)
Ongoing supervision by the NBB
The cover pool monitor verifies the register and theportfolio tests and reports to the NBB
The NBB can appoint a cover pool administrator tomanage the special estate
National Bank of Belgium
Cover Pool Administrator
Not
e Ho
lder
s
Covered bonds
ProceedsIssuer
Cover PoolMonitor
Special Estate with Cover Assets in a Register
Representativeof the Noteholders
Annex 3 – KBC’s covered bond programmeBelgian legal framework
58
The value of one asset category must be at least 85% of the nominal amount ofcovered bonds• KBC Bank selects residential mortgage loans and commits that their value (including
collections) will be at least 105%
Collateral type
Over-collateralisation
Test
Cover Asset Coverage Test
Liquidity Test
Cap on Issuance
1
2
3
4
5
The value of the cover assets must at least be 105% of the covered bonds• The value of residential mortgage loans:
1) is limited to 80% LTV
2) must be fully covered by a mortgage inscription (min 60%) plus a mortgage mandate (max 40%)
3) 30 day overdue loans get a 50% haircut and 90 days (or defaulted) get zero value
The sum of interest, principal and other revenues of the cover assets must atleast be the interest, principal and costs relating to the covered bonds• Interest rates are stressed by plus and minus 2% for this test
Cover assets must generate sufficient liquidity or include enough liquid assets topay all unconditional payments on the covered bonds falling due the next 6months Interest rates are stressed by plus and minus 2% for this test
Maximum 8% of a bank’s assets can be used for the issuance of covered bonds
Annex 3 – KBC’s covered bond programmeStrong legal protection mechanisms
59
Annex 3 – KBC’s covered bond programme KBC Bank NV Residential mortgage covered bond programme
Issuer: • KBC Bank NV
Main asset category: • min 105% of covered bond outstanding is covered by residential mortgage loans and collections thereon
Programme size: • Up to 10bn EUR (only)
Interest rate: • Fixed rate, floating rate or zero coupon
Maturity: • Soft bullet: payment of the principal amount may be deferred past the final maturity
date until the extended final maturity date if the issuer fails to pay• Extension period is 12 months for all series
Events of default:• Failure to pay any amount of principal on the extended final maturity date• A default in the payment of an amount of interest on any interest payment date
Rating agencies: • Moody’s Aaa / Fitch AAA
Moody’s Fitch
Over-collateralisation 10% 14.5%
TPI Cap Probable D-cap 4 (moderate risk)
60
Annex 3 – KBC’s covered bond programmeBenchmark issuance KBC covered bonds
Since establishment of the covered bond programme KBC has issued eight benchmark issuances:
SPREAD EVOLUTION KBC COVERED BONDS (SPREAD IN BP VERSUS 6 MONTH MID SWAP)
Sour
ce B
loom
berg
Mid
ASW
leve
ls
61
Annex 3 – KBC’s covered bond programmeKey cover pool characteristics (1/3)
Investor reports, final terms and prospectus are available on www.kbc.com/covered_bonds
Portfolio data as of : 30 September 2018
Total Outstanding Principal Balance 10 266 025 846
Total value of the assets for the over-collateralisation test 9 596 048 409
No. of Loans 136 406
Average Current Loan Balance per Borrower 107 274
Maximum Loan Balance 1 000 000
Minimum Loan Balance 1 000
Number of Borrowers 95 699
Longest Maturity 359 month
Shortest Maturity 1 month
Weighted Average Seasoning 59.6 months
Weighted Average Remaining Maturity 176 months
Weighted Average Current Interest Rate 2.13%
Weighted Average Current LTV 60.57%
No. of Loans in Arrears (+30days) 255
Direct Debit Paying 97.96%
62
Annex 3 – KBC’s covered bond programmeKey cover pool characteristics (2/3)
REPAYMENT TYPE (LINEAR VS. ANNUITY) GEOGRAPHICAL ALLOCATION
LOAN PURPOSE INTEREST RATE TYPE (FIXED PERIODS)
Linear3%
Annuity97%
Purchase47%Remortgage
42%
Construction11%
Brussels Hoofdstedelijk gewest5% Waals Brabant
1%
Vlaams Brabant
18%
Antwerpen29%
Limburg13%
Luik1%
Namen0%
Henegouwen1%
Luxemburg0%
West-Vlaanderen
14%
Oost-Vlaanderen
18%
No review62%
1 y / 1 y12%
3 y / 3 y16%
5 y / 5 y…
10 y / 5 y2%
15 y / 5 y0%
20 y / 5 y0%
63
Annex 3 – KBC’s covered bond programmeKey cover pool characteristics (3/3)
FINAL MATURITY DATE SEASONING
INTEREST RATECURRENT LTV
0,00
10,00
20,00
30,00
40,00
50,00
60,00
2013 - 2017 2018 - 2022 2023 - 2027 2028 - 2032 > 2032
Weighted Average Remaining Maturity:
176 months
0,00
5,00
10,00
15,00
20,00
25,00
30,00
35,00
40,00
0 - 12 13 - 2425 - 3637 - 4849 - 6061 - 7273 - 8485 - 9697 -108 109 -
Weighted Average Seasoning:
55.7 months
0,0010,0020,0030,0040,0050,0060,0070,00
< 2,
5
2.5
< to
<=
3.0
3.0
< to
<=
3.5
3.5
< to
<=
4.0
4.0
< to
<=
4.5
4.5
< to
<=
5.0
5.0
< to
<=
5.5
5.5
< to
<=
6.0
6.0
< to
<=
6.5
6.5
< to
<=
7.0
> 7
.0Weighted
Average Current Interest Rate:
2.13%
0,002,004,006,008,00
10,0012,0014,0016,0018,00
<= 1
0%
10%
< to
<=
20%
20%
< to
<=
30%
30%
< to
<=
40%
40%
< to
<=
50%
50%
< to
<=
60%
60%
< to
<=
70%
70%
< to
<=
80%
80%
< to
<=
90%
90%
< to
<=
100%
100%
< to
<=
110%
110%
< to
<=
120%
120%
< to
<=
130%
130%
< to
<=
140%
140%
< to
<=1
50%
150%
<
Weighted Average Current LTV:
60.57%
64
Annex 3: Belgian real estate marketRoughly stabilization in prices since 2011, with again an acceleration from 2016 onwards
House prices Belgium (*)
Source: FOD Economie
(*) Corrected for price changes resulting from changes in the quality and location of the real estate sold
Source: NBB.Stat; ECB
-4
-2
0
2
4
6
8
10
12
14
16
95
100
105
110
115
120
Index (Q1 2008 = 100, lhs)Year-on-year change (in %, rhs)
Debt position Belgian households (outstanding amounts, in % of GDP)
0%
10%
20%
30%
40%
50%
60%
70%
80%Belgium - Other debt (consumer loans)Belgium - Mortgage debtEuro Area (total debt)
65
-0,5
0,5
1,5
2,5
3,5
4,5
5,5
Belgium
Germany
0
100
200
300
400
500
600
700
800BelgiumFranceNetherlandsItalySpainIreland
Annex 3 - Interest rates still historically low
10-year government bond yields(in %)
Spread Belgium-Germany
Interest rate spreads Euro Area(10-year rate versus Germany, in basis points)
66
Annex 4 - Details on credit exposure of IrelandImpaired loans ratio further improved
OUT-STANDING
IMPAIRED LOANS
IMPAIRED LOANS
IMPAIRED LOANS
€ € PD 10-12 PD 10-12 COVERAGE
Owner occupied mortgages 9.1bn 2.1bn 23% 0.6bn 28%
Buy to let mortgages 2.1bn 1.4bn 68% 0.7bn 50%
SME /corporate 0.5bn 0.3bn 63% 0.2bn 61%
Real estate
- Investment 0.5bn 0.4bn 74% 0.2bn 61%
- Development 0.1bn 0.1bn 100% 0.1bn 94%
Total 12.3bn 4.3bn 35% 1.8bn 41%
PROVISIONS PD 10-12 €
LOAN PORTFOLIO Recent indicators suggest positive momentum in the Irish
economy remains strong. We now expect GDP growth will bearound 7% in 2018
The sustained strength of jobs growth continues to applydownward pressure on unemployment and has also prompted apick-up in net inward migration
Robust improvements in Irish economic conditions continue toboost the demand for housing but with supply improving, therehas been a modest easing in the pace of residential propertyprice inflation of late
Impaired loans have reduced by 0.1bn EUR (-2% q-o-q) withimpaired loan ratio at 35.0% at 3Q18. On a pro-forma basisadjusting for the legacy portfolio sale announced as part of2Q18 results, the impaired loan ratio is 25.0%
Net loan loss provision release of 15m EUR in 3Q18 drivenmainly by strong CSO House Price Index growth. This compareswith a 39m EUR release in 2Q18
Looking forward, we are maintaining our impairment guidancefor Ireland, namely a net release in a range of 100m-150m EURfor FY18
67
Annex 4 - Details on credit exposure of IrelandPortfolio analysis
3Q18 Retail Portfolio
PD Legacy New RetailImpairment Provisions
Cover %
PD 1-8 4,219 2,839 15 0.2%
Of which non Forborne 4,203 2,839
Of which Forborne 16 0
PD 9 620 10 29 4.7%
Of which non Forborne 107 1
Of which Forborne 514 9
PD 10 1,826 4 263 14.4%
PD 11 881 3 327 37.0%
PD 12 842 0 708 84.1%
TOTAL PD1-12 8,388 2,857 1,343
PD 10-12 Impairment Provisions /(PD 10-12) 36.5%
Perf
orm
ing
Impa
ired
3Q18 Corporate Portfolio
PD Exposure Impairment Provisions
Cover %
PD 1-8 260 4 1.5%
PD 9 53 3 6.4%
PD 10 244 97 39.5%
PD 11 161 99 61.1%
PD 12 348 290 83.5%
TOTAL PD1-12 1,066 493
PD 10-12 Impairment Provisions /(PD 10-12) 64.4%
Impa
ired
Perf
.
- Forborne loans (in line with EBA Technical Standards) comprise loans on a live restructure or continuing to serve a probation period post-restructure/cure to Performing
Retail portfolio
The New Retail portfolio (all originations post 1 Jan 2014) comprises2.9bn EUR of the overall Retail portfolio and increased q-o-q by 0.2bnEUR. New Retail at 3Q18 represents 25% of total Retail portfolio (from19% at 3Q17)
Impaired portfolio decreased by roughly 56m EUR q-o-q mainly due toimproved portfolio performance (reduction of 0.7bn EUR y-o-y)
Coverage ratio for impaired loans has slightly improved to 36.5% for3Q18
Weighted average indexed LTV on the impaired portfolio has improvedsignificantly y-o-y and in 3Q18 decreased to 102% (from 107% at 3Q17)
On a pro-forma basis adjusting for the portfolio sale, legacy retailimpaired loans decreased by approximately 1.0bn EUR to 2.6bn EUR
Corporate loan portfolio
Impaired portfolio has reduced by roughly 29m EUR q-o-q. Reductiondriven mainly by continued deleverage of portfolio (reduction of0.4bn EUR y-o-y)
Coverage ratio for impaired loans has decreased to 64% for 3Q18(from 66.5% in 2Q18)
Overall exposure has dropped by approximately 0.5bn EUR y-o-y(-31% y-o-y)
On a pro-forma basis adjusting for the portfolio sale, corporateimpaired loans decreased by approximately 0.7bn EUR
68
Jan 2012 Dec 2012 2014-2020
92.9 1.0
2Q18 (B3 DC**) 3Q18 impact
94.0
3Q18 (B3 DC)
DELTA AT NUMERATOR LEVEL (BN EUR)
DELTA ON RWA (BN EUR)
* Includes the q-o-q delta in deferred tax assets on losses carried forward, remeasurement of defined benefit obligations, IRB provision shortfall, deduction re. financing providedto shareholders, deduction re. irrevocable payment commitments, intangible fixed assets, AT1 coupon, translation differences, etc.
** Includes the RWA equivalent for KBC Insurance based on DC, calculated as the historical book value of KBC Insurance multiplied by 370%
Fully loaded B3 commonequity ratio increased to 16.0%at end 3Q18 based on theDanish Compromise
This clearly exceeds theminimum capital requirementsset by the competentsupervisors of 10.6% fullyloaded
-0.3
B3 CET1 at end 2Q18 (DC) B3 CET1 at end 3Q18 (DC)
0.6
3Q18 net result (excl. KBC Ins. due to Danish Compr.)
Pro-rata accrual dividend
0.1
Other*
14.7
15.0
Annex 5 - Solvency details Fully loaded B3 CET1 based on the Danish Compromise (DC) from 2Q18 to 3Q18
69
Method Numerator Denominator B3 CET1 ratio
FICOD*, fully loaded 16,205 106,996 15.1%
DC**, fully loaded 15,018 93,980 16.0%
DM***, fully loaded 14,054 88,609 15.9%
* FICOD: Financial Conglomerate Directive** DC: Danish Compromise*** DM: Deduction Method
Annex 5 - Solvency detailsOverview of B3 CET1 ratios at KBC Group
70
Annex 5 - Solvency detailsImplementation of the BRRD in Belgium
1. The BRRD has been transposed to a large extent by the Act of 25 April 2014 on the legalstatus and supervision of credit institutions ("The Banking Act") which applies sinceMay-2015, with the exception of some major provisions, such as the bail-in tool. Someprovisions will be further implemented by a Royal Decree (“RD”):
• Bail-in mechanism and MREL requirement of the BRRD: RD was published in theBelgian Official Journal 29 December 2015 and entries into force as from 1 January2016. However, the resolution strategy and MREL target for KBC are assumptionsand have not been determined by the Resolution Authority
• Group dimension of the BRRD: transposition is currently under preparation
2. The competent authorities are
• Supervision authority (KBC Bank NV, KBC Group NV): ECB/NBB.
• Resolution authority (KBC Bank NV, KBC Group NV): Single Resolution Board asfrom 1 January 2016.
• Competent authority for conduct supervision of financial institutions andintermediaries (KBC Bank NV): FSMA.
3. The hierarchy of claims in Belgium is in line with the BRRD as provided for in art. 48BRRD and applies losses accordingly.
• Creditors are protected by the No Creditor Worse Off (“NCWO”) principle whichensures that creditors in resolution can’t be worse-off than in normal insolvencyproceedings (art 34(1) BRRD).
4. KBC plans on on-lending senior unsecured issued out of KBC Group NV as subordinatedinstruments at KBC Bank NV to ensure the on-loan would only take losses after Tier 2securities.
• Additionally KBC Bank NV’s funding needs in senior unsecured are expected to bemoderate going forward
CET1
AT1
Tier 2
Internal Sub Loan
Senior Unsecured
Hierarchy of Claims in Belgium
Structured Notes
Derivatives
Junior Deposits
Individual & SME Deposits
Covered Deposits
Loss
Abs
orpt
ion
in K
BC B
ank
71
Annex 5 - Solvency details What are the risks for HoldCo senior investors?
71
Shareholders equity
AT1
Tier 2
Senior Unsecured
Recapitalisation scenario, losses (originating in any or in all of the underlying entities*) are lower than the size of the capital instruments at theHoldCo level part or all of Senior debt issued by the HoldCo can be converted into shares to recapitalise the HoldCo up to a minimum level as decided by
the competent authorities. The investor then has a combination of shares and bonds of the HoldCo instead of only bonds and thus (co-)ownsthe underlying entities. The conversion factor would be determined by the competent authorities applying the NCWO principle.
Loss absorption scenario, losses (originating in any or in all of the underlying entities*) exceed the size of the capital instruments at the HoldColevel part or all of Senior issued by the HoldCo can be bailed-in to absorb losses. The NCWO principle implies that losses are only up-streamed to
the HoldCo upto the amount of the investment of the HoldCo in the entity(ies) generating the losses. Hence, the investor in the HoldCoSenior will lose (up to) its investment to the extent that the amount of outstanding HoldCo senior debt exceeds the value of the remainingunderlying entities of the HoldCo
Public Issuance
1 2
1
2
BRRD capitalinstruments
HoldCo
In all scenarios surpassing the Point of NonViability, the investors are protected by theNo Creditor Worse Off principle (“NCWO”),which stipulates that no instrument will beworse off in resolution than in normalinsolvency proceedings
* In KBC Group’s case this would be KBC Bank and/or KBC Insurance and/or KBC Asset Management
size of loss
72
0
500
1 000
1 500
2 000
2 500
3 000
Q1 Q2 Q3 Q4 Q1 Q2 Q3
2017 2018
Travel insurance
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
Q1 Q2 Q3 Q4 Q1 Q2 Q3
2017 2018
Consumer loans
0
2 000
4 000
6 000
8 000
10 000
12 000
Q1 Q2 Q3 Q4 Q1 Q2 Q3
2017 2018
Pension savings
0
10 000
20 000
30 000
40 000
50 000
60 000
Q1 Q2 Q3 Q4 Q1 Q2 Q3
2017 2018
Current accounts
# of files# of files
# of files# of files
Annex 6 – Digital sales BU BelgiumDigital sales are increasing
73
Digital sales @ KBC Live increases, strong performance in non-life
Digital signing after contact with the branches or KBC Live
30%
40%
50%
60%
70%
80%
90%
Q1 Q2 Q3 Q4 Q1 Q2 Q3
2017 2018
Digital signing of commercial loans
Digital signing of debt protect cover life insurance
Digital signing mortgage loans
Digital signing housing insurance
Digital signing car insurance
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
Jan
Feb
Mar Ap
r
May Jun Jul
Aug
Sep
Oct
Nov De
c
Jan
Feb
Mar Ap
r
May Jun Jul
Aug
Sep
KBC Live cumulative sales 2017-2018
Non life insurance Life insurance Housing loans
Consumer loans Investment plans
Annex 6 – Digital sales BU BelgiumOmnichannel is embraced by our customers
74
Glossary (1/2)
AQR Asset Quality Review
B3 Basel III
CBI Central Bank of Ireland
Combined ratio (non-life insurance) [technical insurance charges, including the internal cost of settling claims / earned premiums] + [operating expenses / written premiums] (after reinsurance in each case)
Common equity ratio [common equity tier-1 capital] / [total weighted risks]
Cost/income ratio (banking) [operating expenses of the banking activities of the group] / [total income of the banking activities of the group]
Cost/income ratio adjusted for specific items
The numerator and denominator are adjusted for (exceptional) items which distort the P&L during a particular period in order to provide a better insight into the underlying business trends. Adjustments include: • MtM ALM derivatives (fully excluded)• bank taxes (including contributions to European Single Resolution Fund) are included pro rata and hence spread over all quarters of the year instead of
being recognised for the most part upfront (as required by IFRIC21)• one-off items
Credit cost ratio (CCR) [net changes in individual and portfolio-based impairment for credit risks] / [average outstanding loan portfolio]. Note that, inter alia, government bonds are not included in this formula
EBA European Banking Authority
ESMA European Securities and Markets Authority
ESFR European Single Resolution Fund
FICOD Financial Conglomerates Directive
Impaired loans cover ratio [total specific impairments on the impaired loan portfolio (stage 3) ] / [part of the loan portfolio that is impaired (stage 3) ]
Impaired loans ratio [part of the loan portfolio that is impaired (stage 3)] / [total outstanding loan portfolio]
Leverage ratio[regulatory available tier-1 capital] / [total exposure measures]. The exposure measure is the total of non-risk-weighted on and off-balance sheet items, based on accounting data. The risk reducing effect of collateral, guarantees or netting is not taken into account, except for repos and derivatives. This ratio supplements the risk-based requirements (CAD) with a simple, non-risk-based backstop measure
Liquidity coverage ratio (LCR) [stock of high quality liquid assets] / [total net cash outflow over the next 30 calendar days].
Net interest margin (NIM) of the group [banking group net interest income excluding dealing room] / [banking group average interest-bearing assets excluding dealing room]
Net stable funding ratio (NSFR) [available amount of stable funding] / [required amount of stable funding]
75
Glossary (2/2)
MARS Mortgage Arrears Resolution Strategy
MREL Minimum requirement for own funds and eligible liabilities
PD Probability of default
Return on allocated capital (ROAC) for a particular business unit
[result after tax, including minority interests, of a business unit, adjusted for income on allocated capital instead of real capital] / [average capital allocated to the business unit]. The capital allocated to a business unit is based on risk-weighted assets for banking and risk-weighted asset equivalents for insurance
Return on equity [result after tax, attributable to equity holders of the parent] / [average parent shareholders’ equity, excluding the revaluation reserve for fair value through Other Comprehensive Income (OCI) assets]
TLAC Total loss-absorbing capacity