While the global economy gradually recovers from its worst downturn in decades, KBC has been working on a strategic review to enhance its position in the post-crisis period. The new business plan will enable KBC to continue to act as a solid European regional player that is attractive for its customers, employees, shareholders and the communities in which it operates. The strategy will also generate enough capacity to redeem the capital securities that were issued to the State. The strategic plan, which was the basis for a restructuring plan as requested by the European Commission, was cleared by European regulatory authorities today.
Core business strategy
Until the credit crisis started, KBC’s strategy to invest in Central and Eastern European growth markets added great value and its distinctive retail bancassurance business model proved to be highly effective. Jan Vanhevel, Group CEO: ’When analysing the effects of the crisis, it is reassuring to note that our core business model remained largely untouched and that the strategic rationale remained valid for our Central and Eastern European presence. Unlike many of our peers, our high deposit-to-loan ratio means that our future growth will not be constrained by funding concerns. Moreover, customer and employee surveys show that loyalty levels have remained sound.’
Past market turbulence, however, has shown the need to markedly reduce the risk profile of the group and, accordingly, to reduce the scope of activities and geographic markets to which KBC allocates capital. The refocus project will also free up capital sources that will contribute to redeeming the capital securities subscribed by the State.
Fully aware of the increasing demands for accountability placed on it by many actors in society, KBC is also committed to continue its ongoing process of improving the way it conducts its business. KBC’s business model is geared towards direct and service-oriented relationships with its customer base. Employee professionalism and a deep connection with local markets are key contributors to such a strategy. Jan Vanhevel, Group CEO: ’Offering value-adding solutions for customers, while building strong ties with employees and contributing to the development of our local economies. That is our commitment. That’s how we create sustainable value for both shareholders and for the community at large.’
Business portfolio adjustments in core markets
The core countries are Belgium, the Czech Republic, Poland, Hungary, Slovakia and Bulgaria. In these markets (all within the European Union), KBC owns banking, insurance and asset management operations and has a platform for sustainable organic growth.
Recently KBC also made inroads in banking in a number of non-EU markets, such as Russia and Serbia. With market shares of less than 1%, its presence in these countries is still limited and strategy synergies are ’early phase‘. Nevertheless, KBC does not intend to start a divestment process soon. The situation will be reviewed in due time when market conditions will have changed, also taking into account how the risk/return profiles of these activities develop.
We would also repeat that KBC’s non-strategic 31% stake in NLB in Slovenia remains for sale.
In various core regions, KBC uses complementary distribution channels in addition to its core bancassurance platform. Operating under a different brand name, a differentiated product and service offer is made to customers through independent resellers. In order to be able to strengthen its capital base, KBC intends to divest the activities of Centea (retail banking, Belgium), Fidea (insurance, Belgium) and Zagiel (consumer finance, Poland). This step does not undermine the strength of the primary business model in the respective markets. Centea and Fidea represent a market share of around 1 to 2% for total loans, deposits and insurance in Belgium. Zagiel has a market share of around 3% in the Polish unsecured consumer finance market.
Financial highlights
KBC wants to position itself as a well-capitalised and risk-aware group. This is reflected in the regulatory capital target ratio (group tier-1 ratio) of 10%, of which 8% is core tier 1. On 30 September 2009, the group tier-1 ratio stood at 10.2%, of which 8.8% core tier 1.
Approval from the European Commission
Final approval from the Commission was granted on 18 November 2009.
Jan Vanhevel: ’Discussions with the European Commission were not always easy since difficult trade-offs had to be made. But we appreciated the open and constructive way these discussions were held. The same holds true for our discussions with lead representatives from both the Belgian Federal and Flemish Regional authorities.’
Contacts details
• Luc Cool, General Manager, Investor Relations, Tel. + 32 2 429 40 51 – investor.relations@kbc.com
• Viviane Huybrecht, General Manager Group Communication/Company Spokesperson,
Tel. + 32 2 429 85 45 – pressofficekbc@kbc.be
Additional information is provided in the powerpoint presentations on www.kbc.com
