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2003 Guided tour in the credit portfolio Jan Vanhevel, Managing Director.

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Presentation on theme: "2003 Guided tour in the credit portfolio Jan Vanhevel, Managing Director."— Presentation transcript:

1 2003 Guided tour in the credit portfolio Jan Vanhevel, Managing Director

2 Investor Day KBC's global credit portfolio Total credit portfolio (including corporate and bank bonds) Granted143.7 bn EUR Outstanding 99.4 bn EUR Share of Belgium, CE and rest of the world grantedoutstanding Belgium 47% 52% CE 13% 17% Rest of the world 40% 31% Total100%100% Dec-02

3 Investor Day outstanding amounts in bn, using original exchange rates KBC's global credit portfolio Dec-02

4 Investor Day outstanding amounts in bn, using original exchange rates +8%+5%+4%-1%+6%+2%+18% KBC's global credit portfolio

5 Investor Day outstanding amounts in bn, using dec-02 exchange rates +8% +7%+1%+3%+5%+2%+7%+14% KBC's global credit portfolio

6 Investor Day KBC's global credit portfolio business units / geographical spread in % of total outstanding Dec-02

7 Investor Day largest sectors outstanding in % BelgiumCEresttotal private individuals34%17%0%20% finance & insurance3%16%40%17% (non-financial) services15%9%6%11% retail and wholesale trade13%11%4%10% real estate6%3%9%6% construction5%4%3%4% governments2%11%3%4% electricity0%3%9%3% agriculture5%3%0%3% automotive2%3%2% total86%79%77%82% KBC's global credit portfolio economic sectors Dec-02

8 Investor Day final risk country outstanding in % BelgiumCEresttotal Investment-grade100%99%97%99% non-invest-grade0%1%2%1% BB – B0%1%2%1% CCC D 0% 1%0% total100% KBC's global credit portfolio geographical spread / country ratings

9 Investor Day risk class granted in % BelgiumCErest total dec-02 total mar-03 low51%33%58%51%55% medium32%38%26%30%28% high14%20%14%15%14% adversely3%10%2%4% performing1%5%1%2% non-performing2%4%1%2% total100% KBC's global credit portfolio risk classes

10 Investor Day KBC's global credit portfolio risk classes historical in % of total granted

11 Investor Day non-performing loans outstanding in m EUR BEL CE (excl. CE hist) resttotal NPL outstanding (a) % of outstanding3%5%2%3% NPL specific provisions (b) Coverage ratio (strict definition (a)/ (b) ) 69%56%59%63% Coverage ratio (incl. all specific provisions) 81%85%75%80% Coverage ratio (incl. all provisions) 88% KBC's global credit portfolio provision coverage Dec-02

12 Investor Day non- performing loans in % of outstanding Belgium 2.3%2.1%2.5%2.6% CE (excl. CE hist) n/a4.5%2.9%5.0%4.6% rest of the world1.0%1.4%1.2%1.7%2.2% total1.8%1.9%2.0%2.6%2.8% KBC's global credit portfolio historic

13 Investor Day KBC's global credit portfolio loan loss ratio in % of total outstanding Approximative 0.35% 0.31% 0.36% 0.55%

14 Investor Day KBC's global credit portfolio corporate credit policy Facts and figures Credit cost High and rising Unpredictable : concentration of risk increases volatility Rising non-performing ratio From 1.8% (98) to 2.8% (02) Target Mid term and over the cycle 25 bp credit cost (corporate segment) 25 bp credit cost (retail segment) By reducing the expected loss and the unexpected loss of the credit portfolio

15 Investor Day KBC's global credit portfolio corporate credit policy (cont'd) Measures taken Midcap and niche focus in the corporate segment Caps on high risk exposure, non-investment grade countries, specific sectors Introduction of raroc methodology since jun-02 (pricing) Portfolio management, incl. securitisations

16 Investor Day KBC's global credit portfolio impact of Basel II on capital, costs KBC anticipates a reduction in minimum capital requirement Under IRB foundation (even more under advanced) Picture is most favorable for retail & (better) SMEs But less favorable for sovereigns, interbank financing and starters (similar to what other banks see) Preparing for Basel II is not a free lunch, is complex Some 45 m EUR investment over (of wich 2/3 ICT), over 50 FTE involved (incl. ICT) Countered by : Maximum use of outputs (credit process efficiency, pricing, management information system/reporting), probably more than what other banks do Simplicity when and where possible (economic capital = IRB Advanced capital in transactional RAROC)

17 Investor Day KBC's global credit portfolio Potential growth within the next 2 years ? Belgium Limited credit portfolio growth, related to the economical growth : 2 to 2.5% p.a. Rest of the world Moderate growth related to : economical growth EUR-zone : 2.5% p.a. recovery of the US portfolio : 3 to 5% p.a.

18 Investor Day KBC's global credit portfolio Reduction RWA in corporate segment past years bn EUR vs. 2000bn EURvs RWA % % Allocated equity %2.3-14% Services to corporates

19 Investor Day KBC's global credit portfolio Active portfolio management Objectives : Identifying and reducing risk concentration Improving diversity of KBC loan portfolio Managing changes in risk profile of corporate credit portfolio Creating awareness of real cost of credit and of pricing discrepancies across asset classes Enhancing liquidity of corporate loan portfolio Instruments : Credit default swaps Buying and selling loans and bonds

20 Investor Day KBC's global credit portfolio Vision on securitisation KBC has to a limited extent securitised part of its credit portfolio related to the corporate and retail market and to the activities deployed by KBC Financial Products Bank balance sheet (corporate loans) 7.7 bn EUR Arbitrage (CDOs) 4.5 bn EUR KBC Bank NV (retail loans) 1.1 bn EUR IIB (residential mortgages) 0.7 bn EUR


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