Mampaey

KBC’s experience in Central Europe: 

KBC’s experience in Central Europe Presentation to CEPS 30 January 2004 Dirk Mampaey, General Co-ordinator Central Europe KBC Bank

Contents: 

Contents Part 1 : KBC Group’s strategy in Central Europe KBC strategy History and milestones Current presence in Central Europe Part 2 : Growth potential Central Europe Macro economic approach Financial sector Part 3 : Elements for public policy

Slide3: 

POLAND Ukraine CZECH SLOVAKIA HUNGARY Lithuania Latvia Byelarus Baltic Sea Estonia Romania Bulgaria Moldova Russia Slovenia Serbia Croatia Bosnia Main bank-insurance group in CE with focus on Retail – SME Implementation of universal ‘bancassurance’ concept; segmented approach Geographical priority : Czech Rep, Slovak Rep, Poland, Hungary, Slovenia (EU accession countries) Development of specialised activities Markets, Leasing, Asset Management, Structured Finance KBC strategy in Central Europe Montenegro Macedonia

In search for a second home market: 

In search for a second home market Need to expand ‘domestic’ customer base : But saturated Belgian home market Second home market in Western Europe ? Also largely saturated Very high acquisition prices KBC only medium-sized player Second home market in Central Europe ? Room for further development of banking and insurance sector Early entry  acceptable prices Ability to buy considerable market shares Risk tempered by expected EU-entry

History & Milestones: 

History & Milestones

History & Milestones: 

History & Milestones

The KBC Group in Central EuropeParticipation rate of KBC : 

Poland Kredyt Bank (81%) Warta (75%) Indirect presence Lithuania & Ukraine (via Kredyt Bank) to be sold Bosnia-Hercegovina, Macedonia and Montenegro (via NLB) The KBC Group in Central Europe Participation rate of KBC Percentages concern direct + indirect presence Czech Republic CSOB (84%) CSOB Pojist’ovna (96%) Patria Finance (100%) Slovakia CSOB (84%) Ergo Poist’ovna (74%) Hungary K&H Bank (59%) K&H Life (80%) Argosz (99%) Slovenia NLB (34%) NLB Vita (67%)

Current presence of the KBC Groupin Central Europe / Banking side: 

Poland (banking) Ranking: 7th Market share: 6% Clients: 1.2 m * Branches: 379 Czech Republic (banking) Ranking: 2nd Market share: 18% Clients: 2.9 m Branches: 208 Slovakia (banking) Ranking: 4th Market share: 5.7% Clients: 0.2 m Branches: 67 Hungary (banking) Ranking: 2nd Market share: 12% Clients: 0.7 m Branches 157 Slovenia (banking) Ranking 1st Market share: 44% Clients: 0.9 m Branches 264 Market share is average of share in customer credits and in customer deposits Current presence of the KBC Group in Central Europe / Banking side * estimate

Current presence of the KBC Groupin CE / Insurances side: 

Current presence of the KBC Group in CE / Insurances side Poland (non-life / life insur.) Ranking: 2nd/9th Market share: 14%/1% Czech Republic (non-life / life insur.) Ranking: 6th/5th Market share: 4%/9% Slovakia (non-life / life insur.) Ranking: 8th/6th Market share: 2%/4% Hungary (non-life / life insur.) Ranking: 6th/14th Market share: 4%/2% Slovenia (non-life / life insur.) Start-up phase of life assurance cy

Presence of the KBC Group in CE: 

Presence of the KBC Group in CE Incl. KBC’s part in the PLN 666 m capital increase in Kredyt Bank; additional capital increase 2004 not yet in figures. ** Increase in WARTA 40%->51% included; result of additional public bid not yet included.

Contents: 

Contents Part 1 : KBC Group’s strategy in Central Europe KBC strategy History and milestones Current presence in Central Europe Part 2 : Growth potential Central Europe Macro economic approach Financial sector Part 3 : Elements for public policy

Central European growth potential: 

Central European growth potential * Purchasing power parities ** Banking: average of deposits and domestic credits in % of GDP (2002). Insurance: premiums in % of GDP (2001).

Economy LT growth potential : outlook for 2002-2020: 

Economy LT growth potential : outlook for 2002-2020 Source : EC, OECD, UN

Financial sectorHigh degree of foreign involvement: 

Financial sector High degree of foreign involvement Source: Bank Austria/Creditanstalt

“Mid-caps” are dominating financial investments in Central Europe (in banking): 

“Mid-caps” are dominating financial investments in Central Europe (in banking) One would expect * But the investors are Deutsche Bank BNP Paribas HSBC BSCH BBVA UBS ABN AMRO KBC Erste Bank Bank Austria Unicredito AIB BCP / Eureko *Exceptions: ING and Allianz (Insurances), Hypovereins and SOCGEN

Financial sectorHigh degree of foreign involvement: 

Financial sector High degree of foreign involvement 10 largest international banks in Central Europe (June 2002) Source: Bank Austria/Creditanstalt

Financial sectorHigh degree of foreign involvement: 

Financial sector High degree of foreign involvement Advantages Continuing access to capital Import of know-how Faster implementation of best practices of domestic banking system Conducive to strengthening competition Helps shelter from spill-over from crises in other emerging markets Improvement in corporate governance

Financial sector : banksLevel of development: 

Financial sector : banks Level of development

Financial sector : insuranceLevel of development still low: 

Financial sector : insurance Level of development still low Source: Swiss Re

Stock and bond marketsUnderdeveloped: 

Stock and bond markets Underdeveloped Euro area average

Financial sectorUse of banking products: 

Financial sector Use of banking products Source: HVB, figures 2001 % of total population over 15 years who use this product Use of banking products not widely spread  room for further development

Contents: 

Contents Part 1 : KBC Group’s strategy in Central Europe KBC strategy History and milestones Current presence in Central Europe Part 2 : Growth potential Central Europe Macro economic approach Financial sector Part 3 : Elements for public policy

Elements for public policy: 

Elements for public policy Corporate Governance Consolidated reporting hampered : Accounting Risk management Compliance Audit Credits … Limitation to the distribution of information Difficult role for members of the Supervisory Boards

Elements for public policy: 

Elements for public policy Introducing groupwide methodology To be accepted by all supervising organisations Transparancy In view of reporting (early focus of KBC) In view of processes (f.e. joint audits) History of privatisation Handeling of bad debt / provisioning rules Interdependency of the financial sector with the “official” economy

Elements for public policy: 

Elements for public policy Tax impact saving products / asset management products Corporate tax (f.e. balance sheet tax) Legal / regulatory impact F.e. bankruptcy law Credit bureau Co-operation with supervisors: Very good support from the Belgian supervisor Different experience on level of co-operation with CE regulators