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

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Guided tour in the credit portfolio

Jan Vanhevel, Managing Director

2

Investor Day

2 0 0 3 KBC's global credit portfolio

Total credit portfolio(including corporate and bank bonds)

Granted 143.7 bn EUR Outstanding 99.4 bn EUR

Share of Belgium, CE and rest of the world

granted outstanding

Belgium 47% 52%

CE 13% 17% Rest of the world 40% 31% Total 100% 100%

Dec-02

3

Investor Day

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0

10

20

30

40

50

60

Belgium CE Rest of the world

outstanding amounts in € bn, using original exchange rates

52.1

16.413.9

KBC's global credit portfolio

Dec-02

4

Investor Day

2 0 0 3

0

25

50

75

100

Dec-98 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02

outstanding amounts in € bn, using original exchange rates

+8% +5% +4% -1%+6% +2%+18%

66.9

79.0

85.790.1

93.799.1

97.799.4

KBC's global credit portfolio

5

Investor Day

2 0 0 3

outstanding amounts in € bn, using dec-02 exchange rates

+8%

0

25

50

75

100

Dec-98 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02

+7% +1% +3%+5% +2% +7%+14%

68.9

78.583.8

88.1 89.5 95.496.7 99.4

KBC's global credit portfolio

6

Investor Day

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Belgium retail38%

Trade finance

1%

Central-Europe

16%

HO1%

Asia Pacific

2%

Belgium corporate

14%

Project finance

4%

Western-Europe

18%

USA6%

KBC's global credit portfolio business units / geographical spread

in % of total outstanding

Dec-02

7

Investor Day

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10 largest sectorsoutstanding in %

Belgium CE rest total

private individuals 34% 17% 0% 20%

finance & insurance 3% 16% 40% 17%

(non-financial) services 15% 9% 6% 11%

retail and wholesale trade 13% 11% 4% 10%

real estate 6% 3% 9% 6%

construction 5% 4% 3% 4%

governments 2% 11% 3% 4%

electricity 0% 3% 9% 3%

agriculture 5% 3% 0% 3%

automotive 2% 3% 2% 2%

total 86% 79% 77% 82%

KBC's global credit portfolio economic sectors

Dec-02

8

Investor Day

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final riskcountry

outstanding in %

Belgium CE rest total

Investment-grade 100% 99% 97% 99%

non-invest-grade 0% 1% 2% 1%

BB – B 0% 1% 2% 1%

CCC D 0% 0% 1% 0%

total 100% 100% 100% 100%

KBC's global credit portfolio geographical spread / country ratings

9

Investor Day

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risk classgranted in %

Belgium CE rest total dec-02

total mar-03

low 51% 33% 58% 51% 55%

medium 32% 38% 26% 30% 28%

high 14% 20% 14% 15% 14%

adversely 3% 10% 2% 4% 4%

performing 1% 5% 1% 2% 2%

non-performing 2% 4% 1% 2% 2%

total 100% 100% 100% 100% 100%

KBC's global credit portfolio risk classes

10

Investor Day

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53%

29%

16%

3%

53%

29%

15%

3%

53%

30%

15%

3%

52%

28%

17%

3%

50%

29%

18%

3%

50%

30%

16%

4%

51%

30%

15%

4%

55%

28%

14%

4%

0%

25%

50%

75%

100%

dec/99 jun/00 dec/00 jun/01 dec/01 jun/02 dec/02 mrt/03

Low Medium High Adversely classified

KBC's global credit portfoliorisk classes historical

in % of total granted

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Investor Day

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non-performing loansoutstanding in m EUR

BEL CE(excl. CE hist)

rest total

NPL outstanding (a) 1 356 750 668 2 774

% of outstanding 3% 5% 2% 3%

NPL specific provisions (b) 930 418 394 1 742

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 portfolioprovision coverage

Dec-02

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Investor Day

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non-performing

loans

in % of outstanding

98 99 00 01 02

Belgium 2.3% 2.1% 2.5% 2.6% 2.6%

CE (excl. CE hist) n/a 4.5% 2.9% 5.0% 4.6%

rest of the world 1.0% 1.4% 1.2% 1.7% 2.2%

total 1.8% 1.9% 2.0% 2.6% 2.8%

KBC's global credit portfolio historic

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Investor Day

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0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

1999 2000 2001 2002

KBC's global credit portfolio loan loss ratio

in % of total outstanding

Approximative

0.35%

0.31%

0.36%

0.55%

14

Investor Day

2 0 0 3 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 ratioFrom 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 theunexpected loss of the credit portfolio

15

Investor Day

2 0 0 3 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

2 0 0 3 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) SME’s 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 2000-2006 (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

2 0 0 3 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

2 0 0 3 KBC's global credit portfolio

Reduction RWA in corporate segment past years

2000 2001 2002 2003

bn EUR bn EUR bn EUR vs. 2000 bn EUR vs. 2000

RWA 42.8 37.0 32.3 -24% 37.9 -11%

Allocated equity 2.7 2.4 2.1 -22% 2.3 -14%

Services to corporates

19

Investor Day

2 0 0 3 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

2 0 0 3 KBC's global credit portfolio

Vision on securitisation

KBC has to a limited extent securitised part of its creditportfolio related to the corporate and retail market and tothe activities deployed by KBC Financial Products

Bank balance sheet (corporate loans) 7.7 bn EUR

Arbitrage (CDO’s) 4.5 bn EUR

KBC Bank NV (retail loans) 1.1 bn EUR

IIB (residential mortgages) 0.7 bn EUR