Results KBC Group 1Q2013: 520 million euros profit, 15 billion euros capital, 9 million clients.
Press Release
Outside trading hours - Regulated information*
Brussels, 16 May 2013 (07.00 a.m. CET)
Summary: 520 million euros profit, 15 billion euros capital, 9 million clients.
KBC ended the first three months of 2013 with a net profit of 520 million euros,
compared with a net profit of 240 million euros in the previous quarter and 380
million euros a year earlier.
After excluding the impact of the legacy business (CDOs, divestments) and the
valuation of own credit risk, adjusted net profit came to 359 million euros,
compared with 279 million euros in the previous quarter and 501 million euros in
the corresponding quarter of 2012.
Johan Thijs, Group CEO:
'KBC has started 2013 by posting a high level of profit in the first quarter. We
recorded a good 520 million euros in net profit against what was a challenging
economic background. At group level and excluding deconsolidated entities, we
achieved a higher net interest margin, which had a positive impact on interest
income, recorded strong fee and commission income, posted solid gains on
financial instruments, as well as on available-for-sale assets, and recorded an
excellent combined ratio and cost/income ratio.
A new management structure was introduced at the start of 2013, reflecting the
group's updated strategy.
Based on this, the group also reworked its financial segment reporting
presentation.
In 1Q2013, the Belgium Business Unit generated a net result of 385 million
euros, above the average figure of 340 million euros for the four preceding
quarters. We recorded strong fee and commission income, an excellent non-life
insurance combined ratio, a very low cost/income ratio and high realised gains
on available-for-sale securities. Given the economic circumstances, the quarter
under review was also characterised by lower net interest income, and - due to
the impact of a limited number of corporate loans - a relatively high level of
loan loss provisions in line with the previous quarter.
In the quarter under review, the Czech Republic Business Unit generated a net
result of 132 million euros, slightly down on the average figure of 145 million
euros for the four preceding quarters The results for this quarter reflected an
increase in net fee and commission income, good cost control and roughly stable
loan loss impairment. Net interest income was flat, disregarding FX effects,
while the net interest margin widened slightly. The combined ratio for non-life
insurance went up somewhat.
In 1Q2013, the International Markets Business Unit recorded a net result of -87
million euros, down on the average of -65 million euros for the four preceding
quarters. The quarter's result was impacted by the Hungarian bank tax being
booked for the full year and by the high level of loan loss impairment in
Ireland, where impairment charges of 300 to 400 million euros are expected to be
recorded for the full year.
Yet again, we took further steps in implementing our divestment plan. Continuing
on what had been announced at the end of 2012, we successfully placed our
participation in Bank Zachodni WBK through a secondary offering. The proceeds
from the sale of the 15 million shares offered came to 0.9 billion euros,
further strengthening our already solid solvency position. We also finalised the
sale of our remaining 22% stake in NLB to the Republic of Slovenia in March. KBC
is now no longer a shareholder of NLB, complying with the request of the
European Commission to divest from NLB. Furthermore, we reached an agreement
with Société Générale and Telenor regarding the acquisition of KBC Banka in
Serbia, a move which marks our exit from the Serbian banking market. These sales
are among the last major milestones in implementing the strategic plan agreed
with the European Commission in 2009. Consequently, we are now in a position to
focus on our core activities.
We also managed to reduce the remaining CDO exposure from 15.5 billion euros at
the end of 2012 to 13.9 billion euros at the end of this quarter. Even when
account is taken of both the cost of reducing this CDO exposure and the fee for
the guarantee scheme, the market valuation of the CDO exposure increased by some
0.2 billion euros.
The liquidity position of our group remained strong, with the LCR and NSFR being
well above 100%.
Our capital position has strengthened further to a tier-1 ratio of 15.4%, or
15.7% on a pro-forma basis, when the effects of the sale of Absolut Bank and KBC
Banka are included. Our common equity ratio under Basel III at the end of the
quarter stood at 12.0% (fully loaded), well above our goal to maintain a target
common equity ratio under Basel III (fully loaded) of 10% as of 1Â January 2013.
We intend to accelerate repayment of 1.17 billion euros of state aid to the
Flemish Regional Government and to pay the accompanying premium of 583 million
euros in the first half of 2013, subject to the customary approval of the
National Bank of Belgium.
These results strengthen our belief in our business. It works to the benefit of
our 9 million clients, our 37 000 employees, our shareholders and other
stakeholders. We truly appreciate and are grateful for all the trust that has
been placed in us.'
Impact of the legacy business and valuation of own credit risk:
In order to give a good insight in the ongoing business performance, KBC also
provides adjusted figures that exclude a) the impact of the legacy business,
i.e. the valuation of the remaining CDOs in portfolio (including fees for the
related guarantee agreement with the Belgian State) and the impact of
divestments and b) the impact of the valuation of own credit risk. For the
quarter under review, these items had the following impact:
* CDOs: During the first quarter, corporate and ABS credit spreads tightened
further, as had been the case during the fourth quarter of 2012. When the
negative impact of the fee for the CDO guarantee scheme with the Belgian
Federal Government and the cost of reducing the CDO exposure are taken into
account, there was a positive post-tax impact of some 165 million euros.
* Remaining divestments: The successful placement of KBC's 16.2% participation
in Bank Zachodni WBK through a secondary offering resulted in an additional
capital gain. In contrast, the sale of KBC Banka, as well as closing the
sale of NLB, led to a capital loss. The combined effect amounted to a
positive 22 million euros (post tax).
* Impact of own credit risk valuation: The improvement in the credit spread on
KBC debt between year-end 2012 and the end of the first quarter resulted in
a negative marked-to-market adjustment of 26 million euros (post tax).
Financial highlights for 1Q2013 compared to 4Q2012:
* High level of group profit thanks to strong commercial franchise and
positive CDO valuation.
* Return on Equity based on adjusted results of 13%.
* Net interest margin up and net interest income stable.
* Growth in deposit volumes in our core markets, stable loan portfolio.
* Excellent combined ratio at 87% year-to-date, with low claims ratio.
* Strong level of net fee and commission income, up by 14% (on a like-for-like
basis).
* Underlying cost/income ratio at 51% year-to-date.
* Credit cost ratio at a rather high 0.80% year-to-date. Ireland's ratio down
to 2.47%.
* Consistently strong liquidity position, with LCR at 133% and NSFR at 106%.
* Solvency: strong capital base: pro forma tier-1 ratio - including the effect
of divestments which have been signed, but are not yet closed - at 15.7%
(with a core tier-1 ratio of 13.5%). Basel III common equity ratio (fully
loaded) at 12.0%, well above the 10% target.
Overview 1Q2012 4Q2012 1Q2013
KBC Group (consolidated)
Net result, IFRS (in millions of 380 240 520
EUR)
Basic earnings per share, IFRS (in 0.71 -0.97 1.25
EUR)(1)
-------------------------------------------------------------------------------
Adjusted net result (in millions 501 279 359
of EUR)
Basic earnings per share, based on 1.19 -0.92 0.86
adjusted net result (in EUR)(1)
Breakdown per business unit (in
millions of EUR)(2)
     Belgium 486 295 385
     Czech Republic 158 114 132
     International Markets -163 -18 -87
     Group Centre 19 -113 -71
-------------------------------------------------------------------------------
Parent shareholders' equity per 32.2 29.0 30.0
share (in EUR, end of period)
-------------------------------------------------------------------------------
1 Note: If a coupon is expected to be paid on the core-capital securities sold
to the Belgian Federal and Flemish Regional governments, it will be deducted
from the numerator (pro rata). If a penalty has to be paid, it will likewise
be deducted.
2 A new breakdown by business unit entered into force in 2013(more information
on this breakdown can be found under 'Notes on segment reporting' in the
'Consolidated financial statements' section of the quarterly report). The
2012 reference figures have been restated in order to reflect this new
breakdown.
Overview of results according to IFRS
A full overview of the IFRS consolidated income statement and balance sheet is
provided in the 'Consolidated financial statements' section of the quarterly
report. Condensed statements of comprehensive income, changes in shareholders'
equity, and cash flow, as well as several notes to the accounts, are also
available in the same section.
In order to provide a good insight into the ongoing business performance, KBC
also publishes an overview of adjusted results, where the impact of legacy
activities (divestments, CDOs) and of the valuation of own credit risk is
excluded from P/L and summarised in three lines at the bottom of the
presentation (see next section).
Consolidated
income
statement,
IFRS
KBC Group (in
millions of 3Q 3Q
EUR) 1Q 2012 2Q 2012 2012 4Q 2012 1Q 2013 2Q 2013 2013 4Q 2013
Net interest 1 261 1 190 1 097 1 121 1 068 - - -
income
   Interest 2 695 2 563 2 493 2 382 2 193  - - -
income  00
   Interest -1 434 -1 374 -1 396 -1 261 -1 125 - - -
expense   00
Earned
premiums,
insurance 884 890 578 623 577 - - -
(before
reinsurance)
Technical
charges,
insurance -752 -757 -499 -584 -487 - - -
(before
reinsurance)
Ceded
reinsurance -14 -1 -12 13 -12 - - -
result
Dividend 6 21 13 5 5 - - -
income
Net result
from financial
instruments at 60 43 275 42 314 - - -
fair value
through profit
or loss
Net realised
result from 32 9 56 85 142 - - -
available-for-
sale assets
Net fee and
commission 304 309 343 360 393 - - -
income
   Fee and 641
commission 492 479 494 541 00 - - -
income
   Fee and -248
commission -188 -170 -151 -181 Â 00 - - -
expense
Other net 73 368 106 187 76 - - -
income
-------------------------------------------------------------------------------
Total income 1 853 2 072 1 954 1 854 2 076 - - -
-------------------------------------------------------------------------------
Operating -1 132 -1 033 -1 003 -1 081 -1 039 - - -
expenses
Impairment -273 -1 473 -302 -463 -352 - - -
   on loans
and -261 -198 -283 -330 -295 - - -
receivables
   on
available-for- -5 -75 -4 -11 -13 - - -
sale assets
   on 0 -414 0 -8 -7 - - -
goodwill
   on other -7 -786 -15 -114 -37 - - -
Share in
results of -9 17 -6 1 0 - - -
associated
companies
-------------------------------------------------------------------------------
Result before 439 -417 644 310 684 - - -
tax
-------------------------------------------------------------------------------
Income tax -93 -110 -103 -56 -160 - - -
expense
Net post-tax
result from 40 -8 0 -6 0 - - -
discontinued
operations
-------------------------------------------------------------------------------
Result after 387 -535 540 249 524 - - -
tax
-------------------------------------------------------------------------------
attributable 7 5 9 9 4 - - -
to minority
interests
 attributable
to equity 380 -539 531 240 520 - - -
holders of the
parent
-------------------------------------------------------------------------------
Basic earnings
per share 0.71 -1.99 1.16 -0.97 1.25 - - -
(EUR)
Diluted
earnings per 0.71 -1.99 1.16 -0.97 1.25 - - -
share (EUR)
-------------------------------------------------------------------------------
Overview of adjusted results
In addition to the figures according to IFRS (previous section), KBC provides
figures aimed at giving more insight into the ongoing business performance.
Hence, in the overview below, the impact of legacy activities (remaining
divestments, CDOs) and of the valuation of own credit risk is excluded from P/L
and summarised in three lines at the bottom of the presentation (in segment
reporting, these items are all included in the Group Centre). Moreover, a
different accounting treatment for capital-market income was applied to the
Belgium Business Unit (all trading results shifted to 'Net results from
financial instruments at fair value').
A full explanation of the differences between the IFRS and adjusted figures is
provided under 'Notes on segment reporting' in the 'Consolidated financial
statements' section of the quarterly report.
Consolidated
income
statement, KBC
Group (in
millions of 2Q 4Q 4Q
EUR) 1Q 2012 2012 3Q 2012 2012 1Q 2013 2Q 2013 3Q 2013 2013
-------------------------------------------------------------------------------
Adjusted net
result
(i.e. excluding
legacy business
and own credit
risk)
Net interest 1 217 1 153 1 078 1 084 1 032 - - -
income
Earned
premiums,
insurance 884 890 578 623 577 - - -
(before
reinsurance)
Technical
charges,
insurance -752 -757 -499 -584 -487 - - -
(before
reinsurance)
Ceded
reinsurance -14 -1 -12 13 -12 - - -
result
Dividend income 5 22 10 5 4 - - -
Net result from
financial
instruments at 353 58 223 156 218 - - -
fair value
through profit
or loss
Net realised
result from 31 9 55 85 96 - - -
available-for-
sale assets
Net fee and
commission 312 309 345 359 385 - - -
income
Other net 22 60 80 89 76 - - -
income
-------------------------------------------------------------------------------
Total income 2 057 1 743 1 857 1 831 1 890 - - -
-------------------------------------------------------------------------------
Operating -1 110 -1 016 -990 -1 068 -1 029 - - -
expenses
Impairment -271 -241 -305 -378 -335 - - -
   on loans -261 -198 -283 -329 -295 - - -
and receivables
   on
available-for- -5 -24 -4 -4 -13 - - -
sale assets
   on 0 0 0 0 -7 - - -
goodwill
   on other -5 -18 -18 -45 -20 - - -
Share in
results of -9 -9 -13 1 0 - - -
associated
companies
-------------------------------------------------------------------------------
Result before 667 477 549 385 526 - - -
tax
-------------------------------------------------------------------------------
Income tax -159 -129 -167 -98 -163 - - -
expense
-------------------------------------------------------------------------------
Result after 508 348 382 287 363 - - -
tax
-------------------------------------------------------------------------------
 attributable 7 5 9 9 4 - - -
to minority
interests
 attributable
to equity 501 343 373 279 359 - - -
holders of the
parent
-------------------------------------------------------------------------------
     486 244 335 295 385 - - -
Belgium
     Czech 158 159 149 114 132 - - -
Republic
International -163 -41 -38 -18 -87 - - -
Markets
     Group 19 -19 -72 -113 -71 - - -
Centre
-------------------------------------------------------------------------------
Basic earnings 1.19 0.49 0.69 -0.92 0.86 - - -
per share (EUR)
Diluted 1.19 0.49 0.69 -0.92 0.86 - - -
earnings per
share (EUR)
Legacy business
and own credit
risk impact
(after tax)
Legacy -
gains/losses on 138 -39 280 46 165 - - -
CDOs
Legacy - 81 -884 23 3 22 - - -
divestments
MTM of own -340 41 -144 -87 -26 - - -
credit risk
Net result
(IFRS)
Result after
tax,
attributable to 380 -539 531 240 520 - - -
equity holders
of the parent:
IFRS
-------------------------------------------------------------------------------
Analysis of the quarter under review
(see attached pdf for the graphs)
The net result for the quarter under review amounted to 520Â million euros.
Excluding the legacy business and the impact of own credit risk, the adjusted
net result amounted to 359 million euros, compared with 279 million euros in
4Q2012 and 501 million euros in 1Q2012.
Total income (adjusted net result)
* Net interest income stood at 1 032 million euros, down 5% quarter-on-quarter
and 15% year-on-year. The quarter-on-quarter comparison was impacted partly
by the deconsolidation of Kredyt Bank, NLB and by certain other sales, while
the year-on-year performance was affected in part by the deconsolidation of
the aforementioned entities plus Warta and Zagiel. Disregarding these items,
net interest income fell by just 1% quarter-on-quarter and 10% year-on-year.
This was due primarily to the lower income generated by asset and liability
management (lower reinvestment yields), while commercial margins remained
healthy. The net interest margin came to 1.72% for the quarter under review,
1 basis point higher than in the previous quarter, but 15 basis points lower
than the high level of a year earlier. In the Belgium Business Unit, deposit
and loan volumes were up quarter-on-quarter and year-on-year (loans: +1%
year-on-year and +0.3% quarter-on-quarter; deposits: +10% year-on-year and
5% quarter-on-quarter). The loan book in the Czech Republic increased by 9%
year-on-year and by 0.3% quarter-on-quarter, while deposits rose by 2% year-
on-year and declined 1% quarter-on-quarter. The loan portfolio in the
International Markets Business Unit declined 6% year-on-year (due to Ireland
and Hungary) and 1% quarter-on-quarter, while the deposit base grew by 18%
year-on-year (driven by Ireland and Slovakia) and by 4% quarter-on-quarter.
* Both the life and non-life insurance businesses recorded good net results
during the quarter under review. In total, gross earned premiums less gross
technical charges and the ceded reinsurance result came to 78 million euros,
up 50% quarter-on-quarter, but down 34% year-on-year. However, when account
is taken of the deconsolidation of Warta, this result was 42% higher than
the year-earlier figure.
The non-life segment was characterised by a slightly lower level of premiums and
a significantly lower level of technical charges compared with 4Q 2012,
resulting in an excellent combined ratio of 87%.
In the life segment, and on a comparable basis, sales of life insurance products
(including unit linked products not included in premium income figures) declined
by 54% on their level in 4Q2012, which had benefited from a very successful
savings campaign. Year-on-year, these sales have fallen by as much as 52%,
triggered by a change in the tax treatment of unit-linked life insurance
contracts in Belgium since the beginning of 2013.
It should be noted that the insurance results were also impacted by lower
investment income, but benefited from strict control of general administrative
expenses.
* The net result from financial instruments at fair value amounted to 218
million euros in the quarter under review, higher than the 197-million-euro
average for the last four quarters. This figure is usually defined by
dealing-room income, but this quarter has been influenced primarily by a
positive result of 85 million euros on the marked-to-market valuations in
respect of the derivative instruments used in asset and liability
management.
* Net realised gains from available-for-sale assets stood at 96 million euros
for the quarter under review, well above the 45-million-euro average for the
last four quarters. In 1Q2013, this item benefited from gains on the sale of
Belgian government bonds.
* Net fee and commission income amounted to 385 million euros, up 7% quarter-
on-quarter and 23% year-on-year. The quarter-on-quarter comparison was
impacted in part by the deconsolidation of Kredyt Bank, NLB and by certain
other sales, while the year-on-year performance was impacted partially by
the deconsolidation of the aforementioned entities plus Warta and Zagiel.
Disregarding these items, income was up 14% quarter-on-quarter and 18% year-
on-year. The main drivers for this increase were entry and management fees
on mutual funds, as well as income from unit-linked life insurance products.
Assets under management stood at 156 billion euros, up 1% on the quarter-
earlier figure because of a positive price effect.
* Other net income came to 76 million euros.
Operating expenses (adjusted net result)
* Operating expenses came to 1 029 million euros in 1Q2013, down 4% on their
level in the previous quarter and down 7% on their year-earlier level. The
quarter-on-quarter comparison was impacted in part by the deconsolidation of
Kredyt Bank, NLB and by certain other sales, while the year-on-year
performance was impacted partly by the deconsolidation of the aforementioned
entities plus Warta and Zagiel. Excluding deconsolidated companies, costs
increased by 2% compared with the previous quarter, which was chiefly
attributable to the bank tax being charged for the full year in Hungary, as
well as to the financial transaction levy there. Year-on-year and excluding
deconsolidated companies, costs were also 2% higher. The year-to-date
cost/income ratio came to 51%, a clear indication that costs remain well
under control. However, it was positively impacted by the high level of
marked-to-market valuations in respect of the derivative instruments used in
asset and liability management and by net realised gains from available-for-
sale assets.
Impairment charges (adjusted net result)
* Loan loss impairment stood at 295 million euros in 1Q2013, down on the 329
million euros recorded in the previous quarter, but up on the 261 million
euros recorded a year earlier. The figure for 1Q2013 included loan loss
impairment of 99 million euros recorded at KBC Bank Ireland (as opposed to
87 million euros in the previous quarter and 195 million euros in the year-
earlier quarter), as well as a relatively high 138 million euros in the
Belgium Business Unit. The annualised credit cost ratio stood at 0.80% year-
to-date. This breaks down into a high 0.62% for the Belgian Business Unit
(compared to 0.28% for FY2012), 0.42% in Czech Republic Business Unit (up
from 0.31% for FY2012) and 1.78% for the International Markets Business Unit
(down from 2.26% for FY2012).
* Impairment charges on available-for-sale assets came to 13 million euros and
other impairment charges amounted to 27Â million euros in the quarter under
review.
Impact of the legacy business and own credit risk on the result:
* CDOs: During the first quarter, corporate and ABS credit spreads tightened
further, as had been the case during the fourth quarter of 2012. When the
negative impact of the fee for the CDO guarantee scheme with the Belgian
Federal Government and the cost of reducing the CDO exposure are taken into
account, there was a positive post-tax impact of some 165 million euros.
* Remaining divestments: The successful placement of KBC's 16.2% participation
in Bank Zachodni WBK through a secondary offering resulted in an additional
capital gain. In contrast, the sale of KBC Banka, as well as closing the
sale of NLB, led to a capital loss. The combined effect amounted to a
positive 22 million euros (post tax).
* Impact of own credit risk valuation: The improvement in the credit spread on
KBC debt between year-end 2012 and the end of the first quarter 2013
resulted in a negative marked-to-market adjustment of 26 million euros (post
tax).
Breakdown per business unit
* In 1Q2013, the Belgium Business Unit generated a net result of 385 million,
above the average of 340 million for the four preceding quarters. The
quarter under review was characterised by lower net interest income, strong
fee and commission income, an excellent non-life insurance combined ratio
and lower sales of life insurance. Other features included the relatively
high level of realised gains on available-for-sale securities, an excellent
cost/income ratio and relatively high loan loss provisioning.
* In the quarter under review, the Czech Republic Business Unit posted an
underlying net result of 132 million euros, slightly down on the average
figure of 145 million euros for the four preceding quarters. The quarter
under review was characterised by stable net interest income, good net fee
and commission income, higher non-life claims and lower life insurance
sales, lower trading results, capital gains from the sale of mortgage bonds,
good cost control and a roughly stable level of loan loss impairment.
* In the quarter under review, the International Markets Business Unit
generated a net result of -87 million, down on the average of -65 million
euros for the four preceding quarters. The net result breaks down as
follows: 17 million euros for Slovakia, -19 million euros for Hungary (where
the special bank tax for full-year 2013 was booked in this quarter),
* -9Â million euros for Bulgaria (negatively impacted by an impairment on a
bond), and -77 million euros for Ireland (still affected by high loan loss
provisioning).
* The Group Centre recorded a net result of 90 million euros in 1Q2013. This
performance includes the impact of the legacy business and own credit risk
(a combined 161 million euros in 1Q2013). Excluding these items, the Group
Centre's adjusted net result was -71 million euros.
Equity and solvency
* The group's tier-1 ratio (under Basel II) stood at a strong 15.4% at 31
March 2013 (core tier-1 ratio of 13.2%). Including the effect of the sale of
Absolut Bank and KBC Banka, the pro forma tier-1 ratio was as high as 15.7%
(core tier-1 ratio of 13.5%).
* The solvency ratio for KBC Insurance stood at an excellent 326% at 31 March
2013, up from an already very high 322% at the end of the previous quarter.
* The common equity ratio under the current Basel III framework came to 12.0%
(fully loaded, but including the aid from the Flemish Region) at the end of
the first quarter of 2013, well above the targeted common equity ratio of
10% under Basel III (fully loaded).
Liquidity
* The group's liquidity remains excellent, as reflected in the LCR ratio of
133% at 31 March 2013, as well as in the NSFR ratio of 106% at the end of
the quarter.
Selected balance sheet data
Highlights of
consolidated
balance sheet 31-03-2012 30-06-2012 30-09-2012 31-12-2012 31-03-2013 30-06-2013 30-09-2013 31-12-2013
KBC Group (in
millions of
EUR)
Total assets 290 635 285 848 270 010 256 928° 258 567 - - -
Loans and
advances to 135 980 133 326 131 048 128 492 129 753 - - -
customers*
Securities
(equity and 65 853 64 227 65 171 67 295 65 071 - - -
debt
instruments)*
Deposits from
customers and 166 551 163 685 160 945 159 632 167 994 - - -
debt
certificates*
Technical
provisions, 19 925 19 539 19 637 19 205 18 836 - - -
before
reinsurance*
Liabilities
under
investment 7 871 8 856 9 680 10 853 11 664 - - -
contracts,
insurance*
Parent
shareholders' 10 949 9 687 10 629 12 017° 12 505 - - -
equity
Non-voting
core-capital 6 500 6 500 6 500 3 500 3 500 - - -
securities
------------------------------------------------------------------------------------------------------
* In accordance with IFRS 5, the assets and liabilities of a number of divestments have been
reallocated to 'Non-current assets held for sale and disposal groups' and 'Liabilities associated
with disposal groups', which slightly distorts the comparison between periods.
° Restated based on IAS19 revision as of 1 January 2013.
Selected ratios
Selected ratios  FY2012 1Q2013
KBC Group (consolidated)
Profitability and efficiency (based on
adjusted net result)
-------------------------------------------------------------------------------
  Return on equity(1)   9% 13%
  Cost/income ratio, banking  57% 51%
  Combined ratio, non-life insurance  95% 87%
-------------------------------------------------------------------------------
Solvency
-------------------------------------------------------------------------------
  Tier-1 ratio (Basel II)  13.8% 15.4%
  Core tier-1 ratio (Basel II)  11.7% 13.2%
  Common equity ratio (Basel III,
fully loaded, including remaining  10.8% 12.0%
state aid)
-------------------------------------------------------------------------------
Credit risk
-------------------------------------------------------------------------------
  Credit cost ratio  0.71% 0.80%
  Non-performing ratio  5.3% 5.4%
-------------------------------------------------------------------------------
1 If a coupon is expected to be paid on the core-capital securities sold to
the Belgian Federal and Flemish Regional governments, it will be deducted from
the numerator (pro rata).
Strategy highlights and main events
Strategy and business highlights
* KBC's core strategy remains focused on bank-insurance in Belgium, the Czech
Republic, Slovakia, Hungary and Bulgaria. In line with its strategic plan,
the group has almost completed the sale or run-down of a number of (non-
core) activities (see below).
* Last steps in the divestment programme:
* On 11 March 2013, KBC Group finalised the transaction announced on
28 December 2012, whereby KBC sold its remaining 22% stake in NLB to
the Republic of Slovenia for a total consideration of 3 million
euros. KBC is now no longer a shareholder of NLB, complying with the
request of the European Commission to divest from NLB.
* On 22 March 2013, KBC Bank NV successfully placed its 16.2% participation in
Bank Zachodni WBK through a secondary offering. The bookbuilding process
started on 18 March and was reserved for eligible institutional investors.
The sale of the 15 125 964 shares offered (constituting 16.17% of BZ WBK
current shares outstanding) at the final offer price of 245 zlotys per one
offer share generated 3.71 billion zlotys (0.9 billion euros) for KBC and
strengthened its already solid solvency position by 0.6%.
* On 26 April 2013, KBC reached an agreement with Société Générale Srbija and
Telenor Serbia regarding the acquisition of KBC Banka, KBC's banking entity
in Serbia. Under the agreement, Telenor will purchase 100% of KBC Banka's
shares, while Société Générale Srbija will acquire KBC Banka's key assets
and deposits. All the parties involved agreed not to disclose any financial
details of the transaction. For KBC, however, the transaction will have an
impact on earnings of an estimated -47 million euros (-17m euros of which
recorded in 1Q2013), largely offset by another capital release of an
estimated 42 million euros, resulting in a negligible total capital release.
This deal is still subject to regulatory approval. When finalised, the
agreement will mark KBC's exit from the Serbian banking market.
* On 26 April 2013, KBC Securities Poland announced that it would be
refocusing its local business lines and decided to concentrate on its
Securities Services offering.
* KBC signed an agreement at the end of 2012 to sell its Russian banking
subsidiary, Absolut Bank, to a group of Russian companies that manage the
assets of Blagosostoyanie. This transaction is still subject to regulatory
approval, which is expected to be received in the second quarter of 2013.
* KBC is still in discussions with a number of interested parties as regards
two of its remaining divestment files, i.e. Antwerp Diamond Bank (Belgium)
and KBC Bank Deutschland (Germany). It is also maintaining an open and
constructive dialogue with the European Commission about these files.
* Other business developments:
* At the beginning of October, KBC announced its updated strategy for
the group for 2013 and beyond. With effect on 1Â January 2013, it
restructured its organisation to better reflect this updated
strategy.
* In the first quarter of 2013, KBC Group NV repaid its three-year
Long Term Refinancing Operation to the European Central Bank for an
amount totalling 8.3 billion euros. KBC boasts a strong retail and
corporate deposit base in its core markets and its wholesale funding
needs for 2013 are well advanced.
* On 18 January 2013, KBC successfully placed 1 billion US dollars'
worth of tier-2 contingent capital notes. The issue met with strong
demand and was more than eight times oversubscribed.
* On 7 February, Euromoney named KBC Private Banking as 'the best
private banker in Belgium' in its 2013 awards. KBC Private Banking
was also named 'a highly commended private banker' for 2012 by the
Financial Times/The Banker.
* Developments on the Corporate Social Responsibility front:
* On 2 April 2013, KBC published its ninth CSR Report.
* On 16 April 2013, the second Report to Society was published. To mark its
publication, KBC invited several Belgian stakeholders, including NGOs,
politicians and academics, to a stakeholder meeting.
* On 31 January 2013, KBC Belgium became the first financial institution in
Belgium to gain EMAS certification for its support services. EMAS is the
European Commission's voluntary eco-management and audit scheme to help
companies continually improve their environmental performance.
* For the second year running, KBC Bank Ireland was again recognised as having
the best reputation of any bank in Ireland according to the annual RepTrak
study.
* For the tenth time, K&H has organised a new tender round from 27 March until
31 May 2013 for its MediMagic programme. The institutions involved may apply
for a share of the competition fund for paediatric and rescue equipment.
* In March 2013, CSOB Czech Republic launched an internal campaign supporting
the employment of people with a physical handicap. The aim was to follow up
its long-term co-operation with and support for non-profit organisations
that work with people with different handicaps.
* For the sixth time, CSOB Slovakia was the proud general partner of the
Bratislava Marathon and made a donation to a number of children's hospitals
via the CSOB Foundation.
* CIBANK, together with DZI, traditionally support projects in the Sofia
Municipality for the improvement of the urban environment and the renewal of
green areas.
* Statement of risk
* Mainly active in banking, insurance and asset management, KBC is exposed to
a number of typical risks such as - but not exclusively - credit default
risk, movements in interest rates, capital markets risk, currency risk,
liquidity risk, insurance underwriting risk, operational risk, exposure to
emerging markets, changes in regulations, customer litigation, as well as
the economy in general. It is part of the business risk that the
macroeconomic environment and the ongoing restructuring plans may have a
negative impact on asset values or could generate additional charges beyond
anticipated levels.
* Risk management data are provided in KBC's annual reports, the extended
quarterly reports and the dedicated risk reports, all of which are available
at www.kbc.com.
* The EMU economy remains in recession. After increasing for four consecutive
months, German business confidence fell in March and April. In the meantime,
confidence indicators in peripheral EMU countries have been bottoming out at
a low level. Against this background, the ECB cut its key rate further to
0.5% and is exploring ways to facilitate the provision of credit to the real
economy. The current economic weakness has also been felt in the US. The
underlying positive dynamics of US job creation, however, is continuing.
Moreover, real GDP growth in the first quarter of 2013 was driven by strong
growth of final domestic demand, in particular private consumption.
Meanwhile, the financial environment remains favourable. In the EMU, this
has largely been due to the presence of the OMT programme of the ECB, which
eliminated the risk of an EMU break-up. As a consequence, political events
such as the Cyprus crisis had virtually no effect on intra-EMU sovereign
spreads. On the contrary, recent data suggest that the fragmentation of EMU
financial markets is being reversed. This has been reflected in more
convergence of the credit rates charged in different EMU economies.
The financial calendar, including analyst and investor meetings, is available at
www.kbc.com/ir/calendar.
For more information, please contact:
Wim Allegaert, General Manager, Investor Relations, KBC Group
Tel +32 2 429 50 51 Â - E-mail: wim.allegaert@kbc.be
Viviane Huybrecht, General Manager, Corporate Communication/Spokesperson, KBC
Group
Tel +32 2 429 85 45 Â - E-mail: pressofficekbc@kbc.be
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* This news item contains information that is subject to the transparency
regulations for listed companies.
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KBC Group NV
Havenlaan 2 - 1080 Press Office KBC press releases are
Brussels Tel. +32 2 429 65 01 available at www.kbc.com or
Viviane Huybrecht Tel. +32 2 429 29 15 can be obtained by sending an
General Manager Fax +32 2 429 81 60 e-mail to
Corporate E-mail: pressofficekbc@kbc.be
Communication pressofficekbc@kbc.be Follow us on
/Spokesperson www.twitter.com/kbc_group
Tel. +32 2 429 85 45
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KBC_Group_Press_Release_results_1Q2013.pdf:
http://hugin.info/133947/R/1702394/562507.pdf
KBC_Group_Extended_Quarterly_Report_1Q2013.pdf:
http://hugin.info/133947/R/1702394/562509.pdf
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