KBC Group

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KBC Group

• Is Benelux boring?UBS Benelux Financials
  Conference, September 2006

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Important information for investors

• This presentation is provided for informational
  purposes only. It does not constitute an offer
  to sell or the solicitation to buy any security
  issued by the KBC Group.
• KBC believes that this presentation is reliable,
  although the information is condensed and
  therefore incomplete.
• This presentation contains forward-looking
  statements, involving numerous assumptions and
  uncertainties. The risk exists that these
  statements may not be fulfilled and that future
  developments differ materially. Moreover, KBC
  does not undertake any obligation to update the
  presentation in line with new developments.
• By reading this presentation, each investor is
  deemed to represent that it possesses sufficient
  expertise to understand the risks involved.

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Contents

• The Benelux demystified
• What makes KBC different
• Conclusions

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The Benelux demystified

• There are many common misunderstandings about the
  Benelux market.
• I would like to invite you to identify the valid
  and false statements
• The Benelux is a small market
• The Benelux is a consolidated market
• The Benelux is a low growth market
• The Benelux ia a low efficiency / high cost
  market
• The Benelux is a low risk market
• The Benelux is a low margin / low profitability
  market

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Is the Be(ne)lux a small market ?

• Banking assets per capita in the Benelux are at
  the high end of the European spectrum, higher
  than e.g. France and Germany
• As a consequence, unlike the limited number of
  inhabitants, total banking assets in the Benelux
  are approx. 1.5 times higher than in countries
  like Spain and Italy
• However, the Benelux market does not exist. It
  comprises3 sovereign states, 3 languages, 3
  markets with different players and different
  characteristics and dynamics
• KBC is a Belux player, operating on the Belgian
  market with a significant (off-shore)
  wealth-management presence in Luxembourg

Banking assets per capita(in 000 euros)
Mutual funds, AUM per capita(in 000 euros)
May 2006
1 600
1 500
Avg EU12
Source Feri FMI
Source ECB
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Is Belgium a consolidated market ?
Share of the 5 largest banks in total assets
Market share of 4 largest Belgian banks
Avg EU12
Source ECB
Source Annual reports

• Concentration is high, with top-5 institutions
  holding appx. 85 of the market
• In Belgium, the bancassurance model prevails (all
  important players are bancassurers) and cross
  selling rates typically are very high

banking products X mortgages X asset management X
insurance
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Is Belgium a low growth market ?
KBC, Belgium, y/y Total loans Mortgages Customer deposits Life reserves Assets under management
Growth, 1H06 9 15 3 34 21
Growth, 2005 8 16 4 38 31
Growth, 2004 5 9 10 28 20

• Belgium has experienced high growth in many
  fields
• Core growth drivers are
• House price inflation (from low average house
  price levels) driving mortgage book growth and,
  consequently, building the basis for further
  cross selling
• High savings rate, historic low private pension
  building and muted popularity of offshore
  investments driving wealth management growth
• Shift from traditional customer deposits to
  off-balance sheet products (incl. unit-linked
  Life) driven by overliquid bank balance sheets
  (sector average loans to deposits at 75)

Mutual funds, AUM, est. net sales(in m
euros)June 2005 - May 2006
Source Feri FMI
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Is Belgium a high cost market ?
KBC, Cost/income ratio, Belgium
Branches/ 000 population
Source ECB

• Average staff cost tends to be high with high
  fiscal/social securities charges and high
  proportion of higher-educated (better paid) staff
• Nevertheless, productivity gains have brought C/I
  levels to decent averages (however, best-in-class
  C/I levels, such as e.g. in the UK and Spain seem
  to be out of reach)

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Is Belgium a low risk area ?
KBC, loan loss ratio, Belgium
Private loans to GDP
Avg EU12
Source ECB

• The (private) economy is moderately leveraged
• Household and corporate loans to GDP 70 (vs.
  95 average in Europe)
• Savings rate is high has been for decades
  amongst the highest in Europe
• Credit exposure is well-diversified
• Mostly retail / SME business
• The number of corporates with a market cap gt 1 bn
  is only 30

restated
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Is Belgium a low profit market ?
KBC, Belgium, NIM andgross revenue margin vs RWA

• NIM in Belgium is at the low side (1.94 at KBC
  in 6M06) due to
• The high government bond portfolios (reinvestment
  of excess of deposits)
• Competitive presssure in the mortgage field
• However, NI spreads are not a good denominator
  for profitability
• Risk is low -gt please look at risk-adjusted
  margins
• Cross selling (FC income) is high
• Explains why competition in customer binding
  products such as mortgages is high
• Far less price competition in Fee Commission
  generating products
• Gross margin (incl. FC) to RWA was at ca. 9 !

The increase in gross margin as of 2005 is due
to new accounting treatment (IFRS)
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What makes KBC different to its peers ?

• We believe KBC has the following competitive
  advantages
• Geographical presence
• Structuring capabilities in the Asset Management
  field
• Distribution business model

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KBCs geographical presence
Belgium
Number of branches in 2005
Total North South
KBC 946 80 10
Sector 4 564 60 30
a.o. Fortis 1 109 - -
Dexia 1 054 - -
ING 804 - -
Brussels
Source Annual reports

• For historicial reasons, KBC is mainly present in
  the Northern part of the country
• 90 of branches in the North, 10 in the South
• 35 market share in the North, 5 in the South
• This is highly important since the Northern
  region is much wealthier that the Southern

Population(in m) GDP/capita(euros) GDP growth Unemploy-ment rate Avg sales price houses (in 000 EUR)
North 6.1 27 356 2.2 6 122
South 3.4 19 858 1.7 12 81
2004 figures
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KBCs structuring capabilities in AM
KBC, retail funds, market share, Belgium
Breakdown of KBCs retail funds, Belgium
30 June 2006

• Since gt10 consecutive years, KBC has been able to
  increase its market share in mutual funds
• The market has a predominantly risk-adverse
  investment culture and is highly receptive for
  structured retail funds, (e.g. capital
  guaranteed products) for which KBC has strong
  product design capabilities
• Broad product range 200 new products launched
  in 2006
• Short term to market 20 days on average from
  idea to launch
• Highly cost effective AM product factory C/I
  ratio 15 (excl. distribution cost)

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KBCs distribution business model

• Integrated business model
• One single governance from top to bottom (no
  seperate management, no seperate budgets, no
  seperate marketing, )
• Integrated distribution channels
• Single branding, product offering and pricing
• Shared customer database
• Streamlined product profitability (shadow
  accounting)
• High level of customer ownership via branches
  and tied agents (limited share of broker channel)

KBC, insurance, sales volume and market share
KBC, insurance distribution channels
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Conclusions

• KBC has an attractive proposition for you
• Interesting growth potential in Belgium (and,
  moreover, in CEE)
• Winning business model bancassurance asset
  management
• Modest risk profile
• Strict capital discipline and conservative
  acquisition policy at Group level

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Additional information
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KBC at a glance

• COMPANY PROFILE
• Top-20 financial player in Europe with a 32 bn
  euros market cap
• Active in banking, wealth management and
  insurance with a strongly integrated business
  model
• Focus on retail and SME
• Key geographical markets
• Top-3 position in Belgium (3m customers)
• Top-3 position in CEE(9m customers)

• SHAREHOLDER PROPOSITION
• Attractive franchises
• Interesting growth potential CEE and
  (surprise?) Belgium
• Winning bancassurance model
• Modest risk profile
• Capital discipline
• Dividend policy oriented towards yearly
  increasing dividend
• Conservative acquisition policy
• 2006 share buy-back (1 bn)
• Increased share visibility, liquidity,
  transparancy

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Financial track record
Return on equity
Net profit
In m EUR

• Over the last years, the financial performance
  improved significantly.
• FY06 profit is expected to outgrow 3.2 bn euros
• KBC will update its mid-term financial objectives
  before the end of the year.

Pro forma for the new KBC group
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Share return track record
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Current valuation
Valuation relative to peer group

• Key figures
• Share price 84.4 euros
• Book value 42.9 euros
• Daily traded volume 8M06 54m euro
• Analyst estimates1
• 2006 EPS consensus 9.11 euros (46)²
• 2007 EPS consensus 7.87euros
• 2007 P/E 10.7
• Recommendations
• Positive 67
• Neutral 33
• Negative 0

weighted P/E 2007 unweighted P/E 2007
CEE banks 3 14.8 14.6
CEE-exposed banks 3 12.2 11.4
Euro-zone banks 4 10.7 11.0
KBC 1 10.7 10.7
BEL banks 5 9.8 9.8
Weighted and unweighted averages of IBES data 3
OTP, Komercni, Pekao, BPH PBK, BRE 4 Erste,
Unicredit, Soc. Gen., Intesa BCI, BA-CA, RZB
Int. 5 Top-20 DJ Euro Stoxx Banks 6 Fortis, Dexia
Situation as at 4 September 2006
1 Smart consenus collected by KBC (21
estimates)2 2006 estimates contain one-off items
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Analysts opinions
Situation on 4 September 2006
Broker Name analyst Tel Rating Target price
Ron Heydenrijk 44 20 7678 0442 Buy 110
Ivan Lathouders 32 2 287 91 76 Accumulate 95
Jaap Meijer 31 20 573 06 66 Outperform 105
Kiri Vijayarajah 44-20-7986-4258 Buy 98
Ivan Vatchkov 44 20 7888 0873 Outperform 101
Carlo Ponfoort 32 3 204 77 11 Accumulate 99
Gaelle Jarrousse 44 20 7547 6226 Hold 88
Patrick Leclerc 33 1 42 99 25 12 Outperform 105
Kurt Debaenst 32 2 565 60 42 Hold 97
Alain Tchibozo 33 1 56 39 32 84 Buy 106
Christophe Ricetti 33 1 58 55 05 22 Buy 95
Paul Formanko 44 20 7325 6028 Overweight 92
Jean-Pierre Lambert 44 20 7663 5292 Market perform 96
Albert Ploegh 31 20 563 2382 Buy 100
Manus Costello 44 20 7996 1953 Neutral 88
Scander Bentchikou 33 1 44 51 83 08 Add 95
Ton Gietman 31 20 573 54 63 Hold 92
Bart van der Feen de Lille 31 20 460 48 65 Hold 95
Eric Vanpoucke 33 142 13 82 43 Neutral 93
Simon Chiavarini 44 20 7568 2131 Buy 110
Ralf Breuer 49 211 826 4987 Buy 103
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Contact information

• Investor Relations OfficeLuc Cool, Director of
  IRE-mail investor.relations_at_kbc.com
• Surf to www.kbc.com for the latest update