Market Activities Asset Management Investor Relations Conference 2 July 2001 Luc Philips Member of the EC
Market Activities Description of the activities Business characteristics Market position Financial results Challenges Risk profile Market risk Outlook / plans Topics
Description The activity consists of : FX - MM - Capital Markets of KBC Bank Equity markets of KBC Securities (excl. Corporate Finance) in Belgium, France & Netherlands, Peel Hunt (GB) and Patria Finance (Czech Rep.) Convertible Bonds & Equity Derivatives of KBC Financial Products Clearing and Settlement Services
Characteristics Focus on (European) Small & Medium Caps Centralized management responsibility realized in FX, MM, Capital Markets and in KBCFP. Process started in KBC Securities Synergies between business lines and with Corporate Finance/Banking Business
Market Leadership Equity in Belgium Convertibles (secondary market) in New York and Tokyo Warrants in Hong Kong Structured Equity Products in Europe Czech Republic Market position
KBC FP’s Convertible Turnover (in US$ billion) (Annualised*) U.S. Domestic Markets European Markets Japanese Markets Asian Markets Total Convertible Turnover * KBC FP’s convertible turnover for 2001 has been annualised using data from 01-Jan-2001 to 31-Mar-2001 KBC FP's Convertible Turnover (in US$ billion) Significant Share of US$ 500 Bil Global CB Markets
Good Market Position Small & Medium Caps in UK Brokerage in France Relative Weak Position Netherlands & Germany (equity) Corporate Finance in France Warrants in Europe Market position
Financial Results Profit Contribution Share in Group Profit (%) Equity allocation ROE (%) Q01 In m EUR
Challenges Decreased importance Belgian market Consolidation of exchanges Integration of equity business Optimization of synergies Small & Midcaps Control risk profile Market requirements on system development
Risk Profile All activities increasingly client instead of trading oriented KBC FP Belgium : managing Long Term OTC Derivatives Convertibles sales and other equity derivatives : low risk profile KBCSec (Belgium) Equities somewhat higher relative exposure, due to dominant profile in the Belgian market
Risk Profile Peel Hunt/Patria : very small position trading/limits “Consolidated” risk profile from equity + Equity Derivatives Business Role of RIS & Market Committee
Market Risk Possibility extreme negative MTM results mitigated by Conservative position taking/limits in equity derivatives; cfr NO trading losses throughout recent weeks/months Compensation between activities in all but the most extreme scenario’s Stress scenario testing
Market Risk Revenue generation most vulnerable in scenario of combination of absence of volatility low stock prices low stable interest rates
Outlook - Plans Strengthen equity position in France and Germany Integrate product offering to Small and Mid cap European market (Limitation : liquidity in underlying stock for more sophisticated derivatives offering) Fully integrate/centralize management of equity business
Outlook - Plans Develop credit derivatives trading activity prudently In Synergy with Asset Management : launch Hedge Fund Products on the basis of existing strengths (e.g. convertible arbitrage)
Asset Management Structure Assets under management Financial results Retail market shares Drivers of success Opportunities Plans Targets Topics
KBC Bank & Insurance Holding NV Asset Management KBC BankKBC Insurance 100% KBC Asset Man 45% 55% KBC Asset Management Ltd Dublin Luxemburg Conseils
Assets under Management In billions of EUR 72.7 Fund of Funds Group Assets Institut. Internat. Institut. Belgium Retail Others Retail UCI
Financial Results Strategic Capital Allocation by 2003 : % Contribution to Group Profits in m. EUR (Q1) 29 Share of Group Profits : % % 2001 (Q1) 8% Cost Efficiency : 5bp vs 15 bp AUM (McKinsey survey)
Retail Market Share UCI’s in Belgium Y2000 figures 19.9% 25.9% 24.6% 24.9% 51.7%
Comparative Market position in Belgium
Drivers of success Product development capacity New products launched 2000 : :42 (1Q01) Very short time to market Seamless to distribution system Very broad product range, consistent with 4 defined customer risk profiles (430 Retail products outstanding) Undisputed market leadership in Capital Guaranteed Products (210 products) Belgium: huge UCI market share in Europe, making KBC the nr 13 UCI manager in Europe
Opportunities Demographics in Belgium/Europe Pension funding problems in Europe Third party/white labeling services Grow KBC AM Ltd in UK (and US)
Plans Consolidate Belgian market share Export retail model to Central Europe ( % market share) Make reporting fully gips compliant Select additional 3/4 products for institutional market Direct marketing European and UK market Work with marketing services in the US Alternative investment initiatives
Targets A.U.M Retail UCI Other Retail Institutional Belgium Institutional Int’l Group Assets FoF/Inst. funds Total In bn EUR
Market Activities Asset Management Investor Relations Conference 2 July 2001 Luc Philips Member of the EC