KBC Group / Bank Debt presentation November KBC Group - Investor Relations Office

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1 KBC Group / Bank Debt presentation November 2018 More infomation: KBC Group - Investor Relations Office investor.relations@kbc.com 1

2 Important information for investors This presentation is provided for information purposes only. It does not constitute an offer to sell or the solicitation to buy any security issued by the KBC Group. KBC believes that this presentation is reliable, although some information is condensed and therefore incomplete. KBC cannot be held liable for any loss or damage resulting from the use of the information. This presentation contains non-ifrs information and forward-looking statements with respect to the strategy, earnings and capital trends of KBC, involving numerous assumptions and uncertainties. There is a risk that these statements may not be fulfilled and that future developments differ materially. Moreover, KBC does not undertake any obligation to update the presentation in line with new developments. By reading this presentation, each investor is deemed to represent that it possesses sufficient expertise to understand the risks involved. 2

3 KBC Passport Well-defined core markets: access to new growth in Europe Market share (end 17) BE CZ SK HU BG IRL IRELAND 0.3m clients 18 branches 11bn EUR loans 5bn EUR dep. 3.5m clients 627 branches 99bn EUR loans 132bn EUR dep. BELGIUM 1.6m clients 206 branches 4bn EUR loans 7bn EUR dep. 3.7m clients 265 branches 23bn EUR loans 32bn EUR dep. CZECH REP SLOVAKIA HUNGARY 0.6m clients 122 branches 7bn EUR loans 6bn EUR dep. BULGARIA Loans and deposits Investment funds Life insurance Non-life insurance 20% 33% 14% 9% 20% 22% 11% 11% 7% 13% 13% 8% 4% 3% 7% 7% 3% 10% 8% * 21% 11% Real GDP growth BE CZ SK HU BG IRL % of Assets 2018e 64% 1.5% 20% 3% 3% 3.0% 3.6% 4.2% 3.5% 2% 4% 7.0% Belgium Business Unit Czech Republic Business Unit Internat ional Markets Business Unit 1.2m clients 224 branches 3bn EUR loans 4bn EUR dep. 2019e 2020e 1.4% 1.2% 2.7% 2.3% 3.7% 3.4% 3.4% 3.5% 3.5% 2.6% 3.3% 3.0% 3 GDP growth: KBC data, November 18 * Retail segment

4 KBC Passport Group s legal structure and issuer of debt instruments KBC Group NV AT 1 Tier 2 Senior MREL 100% 48% 100% KBC Bank 52% KBC Asset Management KBC Insurance Covered bond No public issuance No public issuance KBC IFIMA* Retail and Wholesale EMTN * All debt obligations of KBCIFIMA are unconditionally and irrevocably guaranteed by KBCBank. 4

5 Contents SHAREHOLDER STRUCTURE AT END 9M18 1 Strategy and business profile 2 Financial performance 3 Balance sheet MRBB Cera 11.5% 2.7% KBC Ancora 18.6% Other core 7.4% 4 Solvency and liquidity 5 MREL strategy 6 Looking forward Appendices 59.8% Free float Roughly 40% of KBC shares are owned by a syndicate of core shareholders, providing continuity to pursue long-term strategic goals. Committed shareholders include the Cera/KBC Ancora Group (co-operative investment company), the Belgian farmers association (MRBB) and a group of industrialist families The free float is held mainly by a large variety of international institutional investors 5

6 KBC Group in a nutshell (1) We want to be among Europe s best performing financial institutions! By achieving this, KBC wants to become the reference in bank-insurance in its core markets We are a leading European financial group with a focus on providing bank-insurance products and services to retail, SME and mid-cap clients, in our core countries: Belgium, Czech Republic, Slovakia, Hungary, Bulgaria and Ireland. Diversified and strong business performance geographically Mature markets (BE, CZ, IRL) versus developing markets (SK, HU, BG) Economies of BE & 4 CEE-countries highly oriented towards Germany, while IRL is more oriented to the UK & US Robust market position in all key markets & strong trends in loan and deposit growth and from a business point of view An integrated bank-insurer Strongly developed & tailored AM business Strong value creator with good operational results through the cycle Diversification Unique selling proposition: in-depth knowledge of local markets and profound relationships with clients Integrated model creates cost synergies and results in a complementary & optimised product offering Broadening one-stop shop offering to our clients 6 Synergy Customer Centricity

7 KBC Group in a nutshell (2) High profitability C/I ratio Combined ratio 55% 88% FY17 9M18 57% 88% Net result ROE EUR 2575m EUR 17% 1948m 17% CET1 generation before any deployment 296 bps 277 bps 279 bps Solid capital position and robust liquidity positions Fully loaded Basel 3 CET1 ratio of KBC Group (Danish Compromise) 15.7% 15.7% 15.9% 16.3% 15.9% 15.8% 16.0% 14.0% Own Capital Target 10.6% regulatory minimum NSFR 134% LCR 139% 134% 138% 1Q17 1H17 9M17 FY17 1Q18 1H18 9M18 FY17 9M18 7

8 KBC Group in a nutshell (3) We aim to be one of the better capitalised financial institutions in Europe Every year, we assess the CET1 ratios of a peer group of European banks active in the retail, SME and corporate client segments. We position ourselves on the fully loaded median CET1 ratio of the peer group (14% at end of 2017) We want to keep a flexible buffer of up to 2% CET1 for potential add-on M&A in our core markets This buffer comes on top of our Own Capital Target and together they form the Reference Capital Position Any M&A opportunity will be assessed subject to very strict financial and strategic criteria Flexible buffer for M&A Own capital target = Median CET1 Peers (FL) 2.0% 14.0% 2017 Reference Capital Position = 16.0% Capital distribution to shareholders Payout ratio policy (i.e. dividend + AT1 coupon) of at least 50% of consolidated profit Interim dividend of 1 EUR per share in November of each accounting year as an advance on the total dividend On top of the payout ratio of 50% of consolidated profit, each year, the Board of Directors will take a decision, at its discretion, on the distribution of the capital above the Reference Capital Position 8

9 More of the same, but differently Wants to be among the best performing financial institutions in Europe KBC wants to be among Europe s best performing financial institutions. This will be achieved by: Strengthening our bank-insurance business model for retail, SME and mid-cap clients in our core markets, in a highly cost-efficient way Focusing on sustainable and profitable growth within the framework of solid risk, capital and liquidity management Creating superior client satisfaction via a seamless, multi-channel, clientcentric distribution approach By achieving this, KBC wants to become the reference in bankinsurance in its core markets 9

10 Our bank-insurance model In different countries and different stages of implementation Level 4: Integrated distribution and operation Acting as a single operational company: bank and insurance operations working under unified governance and achieving commercial and noncommercial synergies Level 3: Integrated distribution Acting as a single commercial company: bank and insurance operations working under unified governance and achieving commercial synergies Level 2: Exclusive distribution Bank branches selling insurance products from intragroup insurance company as additional source of fee income Level 1: Non-exclusive distribution Bank branches selling insurance products of third party insurers as additional source of fee income Belgium Target for Central Europe KBC targets to reach at least level 3 in every country, adapted to the local market structure and KBC s market position in banking and insurance. 10

11 Sustainablity The core of our sustainability strategy Strict policies for our day-to-day activities Focus on sustainable investments Reducing our own environmental footprint Limiting our adverse impact on society Increasing our positive impact on society Four focus domains that are close to our core activities Financial literacy Environmental responsibility Stimulating entrepreneurship Longevity or health Encouraging responsible behaviour on the part of all employees The mindset of all KBC staff should go beyond regulation and compliance. Responsible behaviour is a requirement to implement an effective and credible sustainability strategy. Specific focus on responsible selling and responsible advice 2018 achievements: Launch of the first Belgian Sustainable Pension Savings Fund for private individuals Successful launch of the Green Bond Framework and issue of the Inaugural Green Bond of 500m EUR SRI funds increased to 8.7 bn EUR by the end of 9M18 Updated KBC Sustainability Policies KBC/CSOB announced to stop financing of Coal Fired Power Generation and Coal mining (current exposure phases out in 2023) Please find more info in our 2017 Sustainability Report 11

12 Sustainablity Our non-financial environmental targets Indicator Goal Share of renewables in total energy credit portfolio Minimum 50% by % 42.1% Financing of coal-related activities Immediate stop of coal-related activities and gradual exit in the Czech Republic by Progress in line with target See 2018 achievements Progress in line with target Total GHG emissions (excluding commuter travel) 25% reduction by 2020 relative to 2015, both absolute and per FTE Long term target for a 50%-decrease by % (absolute) -28.2% (per FTE) % (absolute) -14.1% (per FTE) ISO certified environmental management system ISO certification in all core countries at the end of 2017 All 6 core countries certified Belgium, Slovakia, Hungary and Bulgaria Business solutions in each of the focus domains Develop sustainable banking and insurance products and services to meet a range of social and environmental challenges See 2017 Sustainability & Annual Report for examples For examples: see Sustainability & Annual Report 2016 Volume of SRI funds 10 billion EUR by end billion EUR 2.8 billion EUR Awareness of SRI among both our staff and clients Increase awareness and knowledge of SRI 100% awareness among Belgian sales teams through e-learning courses Progress in line with target 74 85/100 (Sector Leader) C (Prime, best in class) A- (Leadership) (1) Except for financing of existing coal-fired district heating plants until 2035 under strict conditions, i.e. only to assist further ecological upgrades (2) Our initial target of 5 billion EUR by the end of 2018 had already been met by mid

13 Sustainability First green bond issuance Inclusion of existing and new Green Assets KBC GREEN PORTFOLIO APPROACH Green Bond portfolio KBC will ensure the availability of sufficient Green Assets to match Green funding Deletion of ineligible or amortising Green Assets Green Bond funding At a first stage, in the context of the inaugural Green Bond, KBC allocated the proceeds to two green asset categories: renewable energy and residential realestate loans. Within those categories, KBC has identified more than EUR 1.3 billion of Green Assets within its private and corporate client business lines in Belgium. For future transactions, in cooperation with the relevant business teams, KBC aims to capture more green assets from other categories and expand the green eligibility to more business lines and clients. 13 Certification On 23 May 2018, the Climate Bonds Standard Board approved the certification of the proposed KBC Green Bond Application was made on the basis of the proposed inaugural allocation, focused on renewable energy and green residential real-estate loans Verification One year after issuance and until maturity, a limited assurance report on the allocation of the Green Bond proceeds to Eligible Assets to be provided by an external auditor To be published on KBC website

14 More of the same but differently Enhanced channels for empowered clients Real time Creating superior client satisfaction via a seamless, multi-channel client-centric distribution approach Enhanced channels for empowered clients Investing 1.5bn cash-flow ( ): Further optimise our integrated distribution model according to a real-time omni-channel approach Prepare our applications to engage with Fintechs and other value chain players Invest in our digital presence (e.g., social media) to enhance client relationships and anticipate their needs Further increase efficiency and effectiveness of data management Set up an open architecture IT package as core banking system for our International Markets Business Unit Operating Expenses = 1bn EUR 14

15 KBC the reference Group financial guidance (Investor visit 2017) Guidance CAGR total income ( 16-20)* 2.25% by 2020 C/I ratio banking excluding bank tax 47% by 2020 C/I ratio banking including bank tax 54% by 2020 Combined ratio 94% by 2020 Dividend payout ratio 50% as of now * Excluding marked-to-market valuations of ALM derivatives Regulatory requirements Common equity ratio* excluding P2G 10.6% by 2019 Common equity ratio* including P2G 11.6% by 2019 MREL ratio 25.9% by May 19 NSFR 100% as of now LCR 100% as of now * Fully loaded, Danish Compromise. P2G = Pillar 2 guidance. 15

16 KBC the reference Group non-financial guidance (Investor visit 2017) Non-financial guidance: CAGR Bank-Insurance clients (1 bank product + 1 insurance product) BU BE > 2% by 2020 BU CR > 15% by 2020 BU IM > 10% by 2020 Non-financial guidance: CAGR Bank-Insurance stable clients (3 bk + 3 ins products in Belgium; 2 bk + 2 ins products in CEE) BU BE > 2% by 2020 BU CR > 15% by 2020 BU IM > 15% by 2020 Non-financial guidance: % Inbound contacts via omni-channel and digital channel* KBC Group** > 80% by 2020 Clients interacting with KBC through at least one of the non-physical channels (digital or through a remote advisory centre), possibly in addition to contact through physical branches. This means that clients solely interacting with KBC through physical branches (or ATMs) are excluded ** Bulgaria & PSB out of scope for Group target 16

17 Contents 1 Strategy and business profile BREAKDOWN OF ALLOCATED CAPITAL BY BUSINESS UNIT AS AT 30 SEPTEMBER Financial performance 3 Balance sheet 4 Solvency and liquidity 5 MREL strategy 6 Looking forward Belgium 61% 2% 16% 21% Group Centre Czech Republic International Markets Appendices 17

18 KBC Group 3Q 2018 key takeaways 3Q18 financial performance Commercial bank-insurance franchises in core markets performed well Customer loans and customer deposits increased in most of our core countries Good net interest income and net interest margin Lower net fee and commission income Higher net gains from financial instruments at fair value and net other income Excellent sales of non-life insurance and lower sales of life insurance y-o-y Costs up, partly due to one-offs Net impairment releases on loans Solid solvency and liquidity An interim dividend of 1 EUR per share (as advance payment on the total 2018 dividend) will be paid on 16 November 2018 Comparisons against the previous quarter unless otherwise stated Excellent net result of 701m EUR in 3Q M18 ROE 17%* Cost-income ratio 57% (excl. specfic items) Combinedratio 88% Credit cost ratio -0.07% Common equity ratio 16.0% (B3, DC, fully loaded) Leverage ratio 6.1% (fully loaded) NSFR 134% & LCR 138% 630 1Q Q Q17 Net result Q17 1Q18 2Q18 3Q18 * when evenly spreading the bank tax throughout the year

19 Main exceptional items 3Q18 2Q18 3Q17 BE BU Opex Expenses for early retirement Opex - Facility expenses Technical charges non-life: release of provisions Technical charges life: release of provisions Total Exceptional Items BE BU -4m EUR -4m EUR +1m EUR +1m EUR +26m EUR +23m EUR +49m EUR CZ BU Opex Restructuring costs Total Exceptional Items CZ BU -5m EUR -5m EUR IM BU IRL NOI - Provisions related to the tracker mortgage review IRL Opex - Costs related to sale of part of legacy loan portf. -3m EUR -54m EUR Total Exceptional Items IM BU -3m EUR -54m EUR GC NOI Settlement of legacy legal file Opex Expenses for early retirement Total Exceptional Items GC +3m EUR +5m EUR -2m EUR -38m EUR -38m EUR Total Exceptional Items (pre-tax) -9m EUR -37m EUR -5m EUR Total Exceptional Items (post-tax) -7m EUR -37m EUR -15m EUR 19

20 Net result at KBC Group CONTRIBUTION OF BANKING ACTIVITIES TO KBC GROUP NET RESULT* NET RESULT AT KBC GROUP* * Difference between net result at KBC Group and the sum of the banking and insurance contribution is accounted for by the holding-company/group items Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q Q17 2Q17 3Q17 4Q17 1Q18 2Q CONTRIBUTION OF INSURANCE ACTIVITIES TO KBC GROUP NET RESULT* Q17 2Q17 3Q17 4Q Q Q Q Q18 Amounts in m EUR 20 Non-Life result Life result Non-technical & taxes

21 Good net interest income and net interest margin NII (pro forma for 2017*) Amounts in m EUR 1,136 1,081 1,094 1,114 1,137 1,125 1, Q17 2Q17 3Q17 4Q17 1Q18 NII - netted positive impact of ALM FX swaps** NII - Holding-company/group 1.93% NIM (pro forma for 2017***) 1.96% 1.96% 1.97% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 2Q18 3Q18 NII - Insurance NII - Banking 2.01% 2.00% 1.98% 3Q18 * 2017 pro forma figures for NII as the impact of ALM FX derivatives was netted in NII as of 2018 ** From all ALM FX swap desks *** NIM is calculated excluding the dealing room and the net positive impact of ALM FX swaps & repos Net interest income (1,136m EUR) Up by 2% both q-o-q and y-o-y. Note that NII banking increased by 2% q-o-q and by 5% y-o-y The q-o-q increase was driven primarily by: o additional positive impact of both short- & long-term interest rate increases in the Czech Republic o continued good loan volume growth o lower funding costs partly offset by: o lower netted positive impact of ALM FX swaps o lower reinvestment yields in our eurozone core countries o pressure on commercial loan margins in most core countries Net interest margin (1.98%) Down by 2 bps q-o-q Up by 2 bps y-o-y thanks to lower funding costs (due mainly to the call of the CoCo) and the positive impact of repo rate hikes in the Czech Republic VOLUME TREND Total loans** o/w retail mortgages Customer deposits*** AuM Life reserves Volume 147bn 61bn 194bn 214bn 29bn Growth q-o-q* +1% +1% 0% 0% 0% Growth y-o-y +5% +3% +3% 0% -1% * Non-annualised ** Loans to customers, excluding reverse repos (and bonds). Note that part of the Irish portfolio for which a sales agreement has been signed, is still included in 3Q18 *** Customer deposits, including debt certificates but excluding repos. Customer deposit volumes 21 excluding debt certificates & repos stable q-o-q and +6% y-o-y

22 Lower net fee and commission income Q17 Distribution F&C (pro forma for 2017*) Q17 3Q17 4Q17 1Q18 2Q18 Banking services AuM* Amounts in bn EUR 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 * Note that 2017 AuM figures were restated due to a roughly -2bn EUR adjustment in Institutional Mandates 450 Amounts in m EUR Q18 Asset management services * 2017 pro forma figures as the network income shifted from FIFV to net F&C as of 2018 Net fee and commission income (424m EUR) Down by 3% q-o-q and by 2% y-o-y Q-o-q decrease was the result chiefly of: o lower securities-related fees (holiday season) o lower entry fees from mutual funds (holiday season led to less gross inflows) o lower management fees from mutual funds and unit-linked life insurance products o higher commissions paid on insurance sales, mainly non-life o lower fees from credit files & bank guarantees partly offset by: o higher fees from payment services (holiday season) o higher network income Y-o-y decrease was mainly the result of: o lower entry and management fees from mutual funds & unit-linked life insurance products, o lower fees from credit files & bank guarantees partly offset by: o higher fees from payment services o higher securities-related fees o higher network income Assets under management (214bn EUR) Stabilised q-o-q and y-o-y as small net outflows were offset by a positive price effect The mutual fund business has seen net outflows, mainly in investment advice 22

23 Insurance premium income up y-o-y and excellent combined ratio PREMIUM INCOME (GROSS EARNED PREMIUMS) Insurance premium income (gross earned premiums) at 696m EUR Non-life premium income (403m) increased by 7% y-o-y Life premium income (293m) down by 7% q-o-q and up by 4% y-o-y 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Life premium income Non-Life premium income 79% COMBINED RATIO (NON-LIFE) 90% 84% 88% 83% 88% 88% The non-life combined ratio at 9M18 amounted to 88%. 3Q18 was impacted by 2 large fire claims in Belgium, while technical charges were low in 2Q18. Remember that 3Q17 benefited from a one-off release of provisions in Belgium (positive effect of 26m EUR). Excluding this one-off release in 3Q17, the combined ratio amounted to 86% at 9M17 1Q 1H 9M FY Amounts in m EUR 23

24 Non-life sales up y-o-y, life sales down y-o-y NON-LIFE SALES (GROSS WRITTEN PREMIUM) Sales of non-life insurance products Up by 8% y-o-y thanks to a good commercial performance in all major product lines in our core markets and tariff increases 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 LIFE SALES Sales of life insurance products Decreased by 10% q-o-q and by 5% y-o-y The q-o-q decrease was primarily due to lower sales of guaranteed interest products in Belgium The y-o-y decrease was driven entirely by lower sales of unit-linked products in Belgium Sales of unit-linked products accounted for 40% of total life insurance sales 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Guaranteed interest products Unit-linked products Amounts in m EUR 24

25 Higher FV gains and other net income FV GAINS (pro forma for 2017*) Q17 Other FV gains 180 2Q17 M2M ALM derivatives Q Q Q Q Q18 Net result on equity instruments (overlay insurance) * 2017 pro forma figures as: 1) the impact of the FX derivatives was netted in NII as of ) the shift from realised gains on AFS shares and impairments on AFS shares to FIFV due to IFRS 9 (overlay approach for insurance) OTHER NET INCOME The higher q-o-q figures for net gains from financial instruments at fair value were attributable mainly to: a positive change in ALM derivatives a positive change in market, credit and funding value adjustments (mainly as a result of changes in the underlying market value of the derivatives portfolio and decreased credit spreads) partly offset by: lower net result on equity instruments (insurance) lower dealing room income, mainly in Belgium and the Czech Republic Other net income amounted to 56m EUR, more or less in line with the normal run rate of around 50m EUR. Note that 2Q18 was negatively impacted by the settlement of a legacy legal file in the Group Centre (-38m EUR), while 3Q17 was negatively impacted by an additional provision of 54m EUR related to an industry wide review of the tracker rate mortgage products originated in Ireland before Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Amounts in m EUR 25

26 Operating expenses up, partly due to one-offs 1, Q Q17 OPERATING EXPENSES Q17 Bank tax 1, Q17 EXPECTED BANK TAX SPREAD IN ,291 1Q18 Operating expenses Q18 Bank taxes of 421m EUR YTD. On a pro rata basis, bank taxes represented 10.9% of 9M18 opex at KBC Group** Q18 TOTAL Upfront Spread out over the year 3Q18 1Q18 2Q18 3Q18 1Q18 2Q18 3Q18 4Q18e BE BU CZ BU Hungary Slovakia Bulgaria Ireland Cost/income ratio (banking) adjusted for specific items* at 58% in 3Q18 and 57% YTD Operating expenses excluding bank tax went up by 1% q-o-q primarily as a result of: o higher staff expenses (mainly due to wage inflation), except for Belgium o higher ICT and marketing expenses o 14m EUR one-off costs: o 6m EUR expenses for early retirement in Belgium o 5m EUR restructuring charges in CZ o 3m EUR costs related to the sale of part of the legacy loan portfolio in Ireland partly offset by: o lower facilities expenses Operating expenses without bank tax increased by 7% y-o-y in 3Q18 Excluding the consolidation impact of UBB/Interlease, bank tax, FX effect and one-off costs, operating expenses in 9M18 rose by roughly 3% y-o-y Pursuant to IFRIC 21, certain levies (such as contributions to the European Single Resolution Fund) have to be recognised in advance, and this adversely impacted the results for 1Q18. The YTD increase can mainly be explained by the consolidation of UBB Total bank taxes (including ESRF contribution) are expected to increase from 439m EUR in FY17 to 462m EUR in FY18 GC TOTAL Amounts in m EUR See glossary (slide 79) for the exact definition ** The C/I ratio adjusted for specific items of 57% in 9M18 amounts to roughly 50% excluding these bank taxes

27 Net impairment releases, excellent credit cost ratio and improved impaired loans ratio ASSET IMPAIRMENT Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Other impairments Impairments on financial assets at AC* and FVOCI * AC = Amortised Cost. Under IAS 39, impairments on L&R 0.42% 0.23% CREDIT COST RATIO Very low asset impairments This was attributable mainly to: o net loan loss impairment releases in Ireland of 15m EUR (compared with 39m in 2Q18) o also small net loan loss impairment reversals in Slovakia, Hungary, Bulgaria and Group Centre partly offset by: o loan loss impairments of only 3m EUR in Belgium o loan loss impairments of 12m EUR in the Czech Republic due to 1 large corporate file Impairment of 6m on other, of which 4m EUR in the Czech Republic mostly resulting from a review of residual values of financial car leases under short-term contracts 0.09% FY % FY15 FY16 FY % 9M18 The credit cost ratio amounted to -0.07% in 9M18 due to low gross impairments and several releases IMPAIRED LOANS RATIO 6.8% 6.9% 6.6% 6.0% 5.9% 5.5% 5.5% The impaired loans ratio stabilised at 5.5%*, 3.2% of which over 90 days past due 3.6% 3.9% 3.7% 3.4% 3.5% 3.2% 3.2% 1Q17 2Q17 3Q17 Impaired loans ratio 4Q17 1Q18 2Q18 of which over 90 days past due 3Q18 27 * Excluding the part of the Irish portfolio for which a sales agreement has been signed, the impaired loans ratio would amount to 4.5% in 3Q18

28 Overview of contribution of business units to 9M18 result NET PROFIT KBC GROUP Amounts in m EUR 1, ,289 2,639 2, ,776 1,742 9M18 ROAC: 24% 2, ,948 2, M18 4Q 9M 1, NET PROFIT BELGIUM 348 1, ,102 1,216 1, ,564 1, M18 ROAC: 22% 1,089 9M18 NET PROFIT CZECH REPUBLIC Q 9M 4Q 9M M18 ROAC: 38% 484 9M18 NET PROFIT INTERNATIONAL MARKETS 9M18 ROAC: 27% M18 4Q 9M 28

29 Contents Strategy and business profile Financial performance Balance sheet 4 Solvency and liquidity 5 MREL strategy 6 Looking forward Appendices 29

30 Balance sheet: Loans and deposits continue to grow in most core countries BE 8% 12% 11% 6% 2% 2% Y-O-Y ORGANIC * VOLUME GROWTH Loans** Retail mortgages Deposits*** Loans** Retail Deposits*** mortgages 5% CR 4% 8% 8% 4% 3% 4% 3% 3% Loans** Retail mortgages Deposits*** Loans** 0% Retail Deposits*** mortgages**** 10% Loans** Retail mortgages Deposits*** 4% 5% 1% * Volume growth excluding FX effects and divestments/acquisitions ** Loans to customers, excluding reverse repos (and bonds) *** Customer deposits, including debt certificates but excluding repos **** Retail mortgages in Bulgaria: new business (written from 1 Jan 2014) +8% y-o-y, while legacy -24% y-o-y ***** Retail mortgages in Ireland: new business (written from 1 Jan 2014) +35% y-o-y, while legacy -7% y-o-y Loans** 30 Retail mortgages Deposits*** -1% Loans** -5% Retail Deposits*** mortgages*****

31 Balance sheet KBC Group consolidated at 30 September 2018 Total assets (EUR 305bn) Total liabilities and equity (EUR 305bn) Credit quality Capital adequacy & liquidity position Loan book (loans and advances to customers) Investment portfolio (equity and debt securties) Insurance investment contracts Trading assets Other (incl. interbank loans, reverse repos, property & equipment etc...) 31 Deposits from customers Equity (including AT1) Other MREL instruments and debt certificates Technical provisions, before reinsurance NL and L Liabilities under insurance investment contracts Trading liabilities Other (incl. interbank deposits)

32 Sectorial breakdown of outstanding loan portfolio (167bn EUR*) of KBC Bank Consolidated 11% Services Private Persons 40% 7% Distribution 15% Rest Oil, gas & other fuels Hotels, bars & restaurants Machinery & heavy equipment Shipping 0.8% 0.7% 1.0% 1.1% 1.6% Electricity 1.6% Food producers Chemicals 1.2% 7% 2% Real estate Automotive 3% 7% 4% 4% Agriculture, farming, fishing Finance & insurance Authorities Building & construction Metals 1.5% 5.2% Other sectors * It includes all payment credit, guarantee credit (except for confirmations of letters of credit and similar export/import related commercial credit), standby credit and credit derivatives, granted by KBC to private persons, companies, governments and banks. Bonds held in the investment portfolio are included if they are corporate or bank issued, hence government bonds and trading book exposure are not included * Outstanding amount includes all on-balance sheet commitments and off-balance sheet guarantees 32

33 Investment portfolio (as per 30/09/2018) Asset Backed securties Equities Other Non-Financial bonds 4% 2% 4% Covered bonds 7% Financial bonds 6% 4% 1% INVESTMENT PORTFOLIO (Total EUR 61bn) Other SOVEREIGN BOND PORTFOLIO (Carrying value 1 EUR 47.2bn) (Notional value EUR 44.6bn) Netherlands * Ireland Austria * Portugal * Germany ** Spain 6% 9% 32% Other public bonds France 13% Belgium 72% Sovereign bonds 2% Bulgaria** 4% Italy 6% 4% 3% Slovakia Poland Hungary (*) 1%, (**) 2% 13% Czech Rep. 1. Carrying value is the amount at which an asset [or liability] is recognised: for those not valued at fair value this is after deducting any accumulated depreciation (amortisation) and accumulated impairment losses thereon, while carrying amount is equal to fair value when recognised at fair value 33

34 Impaired loans ratios*, of which over 90 days past due KBC GROUP BELGIUM BU 6.8% 6.9% 6.6% 6.0% 5.9% 5.5% 5.5% ** 3.0% 3.0% 2.8% 2.8% 2.6% 2.4% 2.4% 3.6% 3.9% 3.7% 3.4% 3.5% 3.2% 3.2% 1.5% 1.5% 1.5% 1.4% 1.3% 1.2% 1.3% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Impaired loans ratio * Of which over 90 days past due CZECH REPUBLIC BU INTERNATIONAL MARKETS BU (including UBB) 2.7% 2.6% 2.5% 2.4% 2.4% 2.1% 2.3% 24.2% 23.6% 22.4% 19.7% 20.4% 19.5% 18.9% 1.8% 1.7% 1.6% 1.6% 1.6% 1.5% 1.4% 12.8% 13.4% 12.6% 11.3% 12.1% 11.5% 11.2% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 * Impaired loans ratio: As of 1Q18, a switch has been made in the risk reporting figures from outstanding (PD10-12) to the new definition of gross carrying amount, i.e. including reserved and accrued interests. In addition, the transaction scope of the credit portfolio was extended and now additionally includes the following 4 elements: (1) bank exposure (money market placements, documentary credit, accounts), (2) KBC Commercial Finance debtor risk, (3) unauthorised overdrafts, and (4) reverse repo (excl. central bank exposure) ** Excluding the part of the Irish portfolio for which a sales agreement has been signed, the impaired loans ratio would amount to 4.5% in 3Q18 34

35 Cover ratios 63.7% 64.2% 64.5% KBC GROUP 64.1% 68.1% 67.7% 66.8% 67.5% 67.6% BELGIUM BU 69.7% 68.6% 67.6% 66.4% 63.4% 46.6% 47.3% 47.5% 44.0% 47.8% 48.0% 47.2% 47.9% 46.4% 48.4% 44.4% 44.2% 45.9% 44.4% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Impaired loans cover ratio * Cover ratio for loans with over 90 days past due CZECH REPUBLIC BU 69.4% 71.8% 69.0% 68.9% 66.8% 66.9% 66.9% 55.1% 56.7% 57.7% 54.7% 52.5% 53.0% 48.1% INTERNATIONAL MARKETS BU (including UBB) 66.0% 65.5% 64.8% 58.8% 58.9% 60.8% 60.2% 43.5% 45.9% 45.4% 46.9% 46.0% 45.7% 40.9% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Impaired loans cover ratio: As of 1Q18 a switch has been made in the risk reporting figures from outstanding to the new definition of gross carrying amount, i.e. including reserved and accrued interests 35

36 Loan loss experience at KBC 9M18 CREDIT COST RATIO FY17 CREDIT COST RATIO FY16 CREDIT COST RATIO FY15 CREDIT COST RATIO FY14 CREDIT COST RATIO AVERAGE Belgium 0.06% 0.09% 0.12% 0.19% 0.23% n/a Czech Republic International Markets 0.04% 0.02% 0.11% 0.18% 0.18% n/a -0.56% -0.74% -0.16% 0.32% 1.06% n/a Group Centre -0.77% 0.40% 0.67% 0.54% 1.17% n/a Total -0.07% -0.06% 0.09% 0.23% 0.42% 0.47% Credit cost ratio: amount of losses incurred on troubled loans as a % of total average outstanding loan portfolio 36

37 Contents Strategy and business profile Financial performance Balance sheet Solvency and liquidity 5 MREL strategy 6 Looking forward Appendices 37

38 Strong capital position Fully loaded Basel 3 CET1 ratio at KBC Group (Danish Compromise) 15.7% 15.7% 15.9% 16.3% 15.9% 15.8% 16.0% 14.0% Own Capital Target 10.6% fully loaded regulatory minimum The common equity ratio* increased from 15.8% at the end of 1H18 to 16.0% at the end of 9M18 based on the Danish Compromise. This clearly exceeds the minimum capital requirements** set by the competent supervisors of 9.875% phased-in for 2018 and 10.6% fully loaded and our Own Capital Target of 14.0% 1Q17 1H17 9M17 FY17 1Q18 1H18 9M18 * Note that 1 January 2018, there is no longer a difference between fully loaded and phased-in ** Excludes a pillar 2 guidance (P2G) of 1.0% CET1 Fully loaded Basel 3 total capital ratio (Danish Compromise) 19.7% 2.3% T2 1.5% AT1 20.8% 20.9% 2.4% T2 2.3% T2 2.6% AT1 2.6% AT1 The fully loaded total capital ratio amounted to 20.9% at the end of 9M % CET1 15.8% CET1 16.0%CET1 Total distributable items (under Belgian GAAP) KBC Group 5.8bn EUR at 9M 2018, of which: available reserves: 949m accumulated profits: 4 681m 1Q18 total capital ratio 1H18 total capital ratio 9M18 total capital ratio 38

39 Fully loaded Basel 3 leverage ratio and Solvency II ratio Fully loaded Basel 3 leverage ratio at KBC Group 5.7% 5.7% 5.8% 6.1% 5.7% 6.0% 6.1% Fully loaded Basel 3 leverage ratio at KBC Bank 4.8% 4.7% 4.7% 5.0% 4.7% 5.1% 5.2% 1Q17 1H17 9M17 FY17 1Q18 1H18 9M18 1Q17 1H17 9M17 FY17 1Q18 1H18 9M18 Solvency II ratio 2Q18 9M18 Solvency II ratio* 219% 216% The decrease (-3%-point) in the Solvency II ratio was mainly the result of an increase in spreads and net purchases in the equity portfolio * On 19 April 2017, the NBB retroactively relaxed the strict cap on the loss-absorbing capacity of deferred taxes in the calculation of the required capital. Belgian insurance companies are now allowed to apply a higher adjustment for deferred taxes, in line with general European standards, if they pass the recoverability test. This is the case for KBC 39

40 Strong and growing customer funding base KBC Bank continues to have a strong retail/mid-cap deposit base in its core markets resulting in a stable funding mix with a significant portion of the funding attracted from core customer segments & markets Customer funding further increased in 9M18 (versus FY17). The elevated amount in short-term wholesale funding is mainly on the back of short-term arbitrage opportunities 3% 6% 3% 9% 0% 2% 4% 5% 2% 8% 2% 8% 10% 8% 8% 8% 7% 9% 8% 9% 8% 8% 9% 3% 2% 3% 3% 3% 8% 10% 12% 7% 7% 9% 9% 10% 7% Funding from customers (m EUR) % 7% FY11 FY12 FY13 FY14 FY15 FY16 FY17 9M18 69% 73% 75% 73% 73% 69% 70% 72% 72% customer driven 21% 73% FY11 FY12 FY13 FY14 Net unsecured interbank funding Net secured funding Debt issues placed with institutional investors -1% -6% -6% FY15 FY16 FY17 9M18 Total equity Certificates of deposit Funding from customers Retail and SME Mid-cap Debt issues in retail network Government and PSE 40

41 Liquidity ratios remain very solid Short term unsecured funding KBC Bank vs liquid assets as of end end June of September 2018 (*) 2018* (bn EUR) 486% 65,39 56,23 57,79 58,83 56,85 387% 316% 309% 288% 22,70 18,71 18,01 15,19 11,56 KBC maintains a solid liquidity position, given that: Available liquid assets remained very high at more than 3 times the amount of the net short-term wholesale funding Funding from non-wholesale markets is stable funding from core-customer segments in core markets 3Q17 4Q17 1Q18 2Q18 3Q18 Net Short Term Funding Available Liquid Assets Liquid Assets Coverage * Graph is based on Note 18 of KBC s quarterly report, except for the available liquid assets and liquid assets coverage, which are based on the KBC Group Treasury Management Report Ratios FY17 9M18 Regulatory requirement NSFR * 134% 134% 100% LCR ** 139% 138% 100% NSFR at 134% and LCR at 138% by the end of 9M18 Both ratios were well above the regulatory requirement of at least 100% * Net Stable Funding Ratio (NSFR) is based on KBC s interpretation of the proposed CRR amendment ** Liquidity Coverage Ratio (LCR) is based on the Delegated Act requirements. From EOY2017 onwards, KBC discloses 12 months average LCR in accordance to EBA guidelines on LCR disclosure 41

42 Upcoming mid-term funding maturities Millions EUR Breakdown Funding Maturity Buckets 1.0% (Including % of KBC Group s balance sheet) CoCo has been called (on 25 January 2018) 1.8% 1.4% 1.7% 0.7% 0.2% 0.4% 0.2% 0.3% KBC Bank placed covered bonds of 750m EUR with 8-year maturity and 250m EUR with 20-year maturity in March 2018 KBC Group issued a perpetual non-call 7.5-year additional Tier-1 instrument of 1bn EUR in April 2018 KBC Group successfully issued its inaugural green senior benchmark issue of 500m EUR with a 5-year maturity in June 2018 There were no new issuances during 3Q % Senior Unsecured - Holdco Senior Unsecured - Opco Subordinated T1 Subordinated T2 Covered Bond TLTRO 28% Total outstanding = 23.6 bn EUR 32% 17% 3% 10% 10% KBC Bank has 6 solid sources of long-term funding: Retail term deposits Retail EMTN Public benchmark transactions Covered bonds Structured notes and covered bonds using the private placement format Senior unsecured, T1 and T2 capital instruments issued at KBC Group level and down-streamed to KBC Bank 42

43 Latest credit ratings Moody s S&P Fitch Group Bank Insurance Senior Unsecured Tier II Additional Tier I Baa1 A- A - BBB A- - BB+ BB+ Short-term P-2 A-2 F1 Outlook Positive Stable Stable Covered Bonds AAA - AAA Senior Unsecured A1 A+ A+ Tier II - BBB - Short-term P-1 A-1 F1 Outlook Positive Stable Stable Financial Strength Rating Issuer Credit Rating - A - - A - Outlook - Stable - Latest updates: 23 Nov 2018: Fitch rating upgrade of KBC Bank 19 Nov 2018: Moody s revised KBC Group, KBC Bank and KBC Bank Ireland outlook to positive and affirmed ratings 30 July 2018: S&P rating upgrade of KBC Group, KBC Bank, Insurance and CSOB CR. 43

44 Credit spreads trends Credit spreads trends Y Senior Debt Opco 5Y Covered Bond Interpolated 5Y Senior Debt Holdco Interpolated 7NC2 Subordinated Tier NC2 Subordinated Tier 2 spread is depicted based on the right hand axis. 44

45 Summary covered bond programme (1/2) (details, see Annex 3) KBC IS A FREQUENT ISSUER WITH AN OUTSTANDING AMOUNT OF 7.56 BN EUR KBC s 10bn EUR covered bond programme is rated Aaa/AAA (Moody s/fitch) CRD and UCITS compliant / 10% risk-weighted All issues performed well in the secondary market KBC S COVERED BONDS ARE BACKED BY STRONG LEGISLATION AND SUPERIOR COLLATERAL Cover pool: Belgian residential mortgage loans Strong Belgian legislation inspired by German Pfandbriefen law Direct covered bond issuance from a bank s balance sheet Dual recourse, including recourse to a special estate with cover assets included in a register Requires license from the National Bank of Belgium (NBB) The special estate is not affected by a bank insolvency. In that case, the NBB can appoint a cover pool administrator to manage the special estate in issuer ; both monitor the pool on a ongoing basis The value of one asset category must be at least 85% of the nominal amount of covered bonds The value of the cover assets must at least be 105% of the covered bonds (value of mortgage loans is limited to 80% LTV) Maximum 8% of a bank s assets can be used for the issuance of covered bonds THE COVERED BOND PROGRAMME IS CONSIDERED AS AN IMPORTANT FUNDING TOOL FOR THE TREASURY DEPARTMENT KBC s intentions are to be a frequent benchmark issuer if markets and funding plan permit 45

46 Summary covered bond programme (2/2) (details, see Annex 3) COVER POOL: BELGIAN RESIDENTIAL MORTGAGE LOANS Exclusively, this is selected as main asset category Value (including collections) at least 105% of the outstanding covered bonds Branch originated prime residential mortgages predominantly out of Flanders Selected cover asset have low average LTV (60.57%) and high seasoning (54 months) KBC HAS A DISCIPLINED ORIGINATION POLICY 2009 to 2017 residential mortgage loan losses below 4 bp Arrears in Belgium approx. stable over the past 10 years: (i) Cultural aspects, stigma associated with arrears, importance attached to owning one s property (ii) High home ownership also implies that the change in house prices itself has limited impact on loan performance (iii) Well established credit bureau, surrounding legislation and positive property market 1,4% 1,2% 1,12% 1,12% 1,11% 1,08% 1,08% 1,09% 1,09% 1,09% 1,10% 1,11% 1,09% 1,08% 1,08% 1,08% 1,06% 1,06% 1,06% 1,06% 1,12% 1,12% 1,13% 1,14% 1,12% 1,11% 1,12% 1,13% 1,14% 1,15% 1,16% 1,16% 1,16% 1,17% 1,17% 1,18% 1,17% 1,17% 1,17% 1,19% 1,20% 1,20% 1,19% 1,20% 1,20% 1,20% 1,22% 1,22% 1,19% 1,18% 1,17% 1,18% 1,16% 1,17% 1,16% 1,16% 1,17% 1,18% 1,17% 1,16% 1,13% 1,12% 1,11% 1,11% 1,12% 1,14% 1,11% 1,11% 1,10% 1,10% 1,10% 1,09% 1,06% 1,05% 1,04% 1,03% 1,03% 1,03% 1,02% 1,0% Market loans in 3 months arrears KBC loans in 90days arrears KBC loan losses 0,8% 0,6% 0,4% 0,38% 0,39% 0,41% 0,430% 0,440% 0,440% 0,44% 0,50% 0,53% 0,52% 0,56% 0,54% 0,48% 0,41% 0,43% 0,39% 0,39% 0,2% 0,0% 0.012% 0.008% 0.006% 0,020% 0,013% 0,037% 0,020% 0,027% 0,017% dec/09 dec/10 dec/11 feb/12 apr/12 jun/12 aug/12 okt/12 dec/12 feb/13 apr/13 jun/13 aug/13 okt/13 dec/13 feb/14 apr/14 jun/14 aug/14 okt/14 dec/14 feb/15 apr/15 jun/15 aug/15 okt/15 dec/15 feb/16 apr/16 jun/16 aug/16 okt/16 dec/16 feb/17 apr/17 jun/17 aug/17 okt/17 dec/17 46

47 Contents Strategy and business profile Financial performance Balance sheet Solvency and liquidity MREL strategy 6 Looking forward Appendices 47

48 KBC well on track to comply with resolution requirements The resolution plan for KBC is based on a Single Point of Entry (SPE) approach at KBC Group level Bail-in is identified as the preferred resolution tool SRB s current approach to MREL is defined in the 2017 MREL Policy published on 20 December 2017, which is based on the current legal framework and hence might be revised in the context of the ongoing legislative process to review BRRD The MREL target for KBC is 25.9%, which is based on fully loaded capital requirements as at 31 December 2016 SRB requires KBC to achieve this target by 1 May 2019, using both HoldCo and eligible OpCo instruments Regulatory requirement Actual Consolidated approach MCC RCA 2.9% (CBR 1,25%) 1.75% P2R 8% 95% RWA = 25.9% HoldCo approach = 25.1% HoldCo senior T2 2.3% AT1 26.4% 1.3% OpCo (T2 & senior >1y) 4.3% 2.6% Gradually mature. To be replaced by HoldCo senior 4.15% CBR LAA 1.75% 100% RWA CET1 16.0% 8% P1 LAA RCA MCC CBR = Loss Absorbing Amount ReCapitalisation Amount Market Confidence Charge 48 Combined Buffer Requirement = 2.5% Conservation Buffer +1.5% O-SII buffer % countercyclical buffer 3Q18

49 Available MREL as a % of RWA (fully loaded) 26.0% 26.3% 26.2% 26.3% 26.4% 26.4% 2.5% 2.3% 3.8% 3.4% 24.8% 1.4% 1.3% 1.3% 22.3% 22.8% 23.7% 24.0% 23.5% 25.1% 25.1% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 OpCo MREL HoldCo MREL 49

50 KBC has strong buffers cushioning Sr. debt at all levels (30 September 2018) Senior issued by KBC Bank, which will be limited going forward (for funding reasons) To large extent customerrelated, protected as much as possible KBC Group Senior Senior 531 KBC Bank Other liabilities Subordinated on loan by KBC Group Tier Additional Tier CET1 (fully loaded) Buffer for Sr. level 20.3bn EUR Tier Additional Tier CET1 (fully loaded) Buffer for Sr. level 19.6 bn EUR KBC Asset Management Fully consolidated for solvency purposes KBC Insurance Tier Parent shareholdersequity Legacy T2 issued by KBC Bank will disappear over time nominal amounts in million EUR 50

51 Contents Strategy and business profile Financial performance Balance sheet Solvency and liquidity MREL strategy Looking forward Appendices 51

52 Looking forward Economic outlook Group guidance Business units European economic conditions remain attractive, although we believe that the growth peak is behind us. Persistently decreasing unemployment rates, with even growing labour shortages in some European economies, combined with gradually rising wage inflation will continue to support private consumption. Moreover, also investments will remain an important growth driver. The main elements that could impede European economic sentiment and growth remain the risk of further economic de-globalisation, including an escalation of trade conflicts, the Brexit and political turmoil in Italy Solidreturns for all Business Units Loan impairments for Ireland towards a release in 100m-150m EUR range for FY18 Impact of the reform of the Belgian corporate income tax regime: recurring positive P&L impact as of 2018 onwards and one-off negative impact in 4Q17 will be fully recuperated in roughly 3 years time B4 impact for KBC Group estimated at roughly 8bn EUR higher RWA on fully loaded basis at year-end 2017, corresponding with 9% RWA inflation and -1.3% points impact on CET1 ratio Next to the Belgium and Czech Republic Business Units, the International Markets Business Unit has become a strong net result contributor, thanks to: Ireland: re-positioning as a core country with a sustainable profit contribution Bulgaria: merger of CIBank into UBB. The new group UBB has become the largest bank-insurance group in Bulgariawith a substantial increase in profit contribution Sustainable profit contribution of Hungary and Slovakia 52

53 Appendices 1 Overview of outstanding benchmarks 2 KBC Bank CDS levels Summary of KBC s covered bond programme Details on credit exposure of Ireland Solvency: details on capital Belgium: digital sales 53

54 Annex 1 - Outstanding benchmarks Overview till end of September 2018 Tranche Report Issuer Curr Amount issued Coupon Settlement Date Maturity Date ISIN YEAR UNSECURED KBC Group EUR ,000 26/04/ /04/2021 BE KBC Group EUR ,750 1/03/ /03/2022 BE KBC Group EUR FRN 24/05/ /11/2022 BE KBC Group EUR ,875 27/06/ /06/2023 BE KBC Group EUR ,750 18/10/ /10/2023 BE COVERED KBC Bank N.V. EUR /02/ /02/2019 BE KBC Bank N.V. EUR ,25 28/05/ /05/2020 BE KBC Bank N.V. EUR ,125 28/04/ /04/2021 BE KBC Bank N.V. EUR ,45 22/01/ /01/2022 BE KBC Bank N.V. EUR ,375 1/03/ /09/2022 BE KBC Bank N.V. EUR /01/ /01/2023 BE KBC Bank N.V. EUR ,75 8/03/ /03/2026 BE KBC Bank N.V. EUR ,75 24/10/ /10/2027 BE Total: EUR 11,0 bn 54

55 Annex 1 - Outstanding benchmarks Main characteristics of subordinated debt issues KBC Bank NV KBC Groep NV AT1 SUBORDINATED BOND ISSUES KBC KBC Groep NV AT1 KBC Groep NV Tier II KBC Groep NV Tier II KBC Groep NV Tier II Amount issued GBP EUR EUR EUR EUR EUR Tendered GBP Net Amount GBP EUR EUR EUR EUR EUR ISIN-code BE BE BE BE BE BE Call date 19/12/ /03/ /10/ /11/ /03/ /09/2024 Initial coupon 6.202% 5.625% 4.250% 2.375% 1.875% 1.625% Coupon step-up / reset 3m gbp libor + 193bps $ MS 5Y % MS 5Y bps MS 5Y % MS 5Y % MS 5Y % First (next) call date 19/12/ /03/ /10/ /11/ /03/ /09/2024 ACPM Yes Dividend Stopper Yes Conversion into PSC Yes Trigger Supervisory Event or "concursus creditorum" Trigger CET1 RATIO < 5.125% Temporary writedown Trigger CET1 RATIO < 5.125% Temporary writedown Regulatory + Tax Call Regulatory + Tax Call Regulatory + Tax Call Issued 17 Apr 2018 Issued 18 Sep

56 Annex 2 - KBC Bank CDS levels (in bp) 56

57 Annex 3 KBC s covered bond programme Belgian legal framework National Bank of Belgium Cover Pool Monitor Direct covered bond issuance from a bank s balance sheet Dual recourse, including recourse to a special estate with cover assets included in a register The special estate is not affected by a bank s insolvency Requires licenses from the National Bank of Belgium (NBB) Ongoing supervision by the NBB The cover pool monitor verifies the register and the portfolio tests and reports to the NBB The NBB can appoint a cover pool administrator to manage the special estate Issuer Special Estate with Cover Assets in a Register Covered bonds Proceeds Note Holders Cover Pool Administrator Representative of the Noteholders 57

58 Annex 3 KBC s covered bond programme Strong legal protection mechanisms 1 Collateral type The value of one asset category must be at least 85% of the nominal amount of covered bonds KBC Bank selects residential mortgage loans and commits that their value (including collections) will be at least 105% 2 Overcollateralisation Test The value of the cover assets must at least be 105% of the covered bonds The value of residential mortgage loans: 1) is limited to 80% LTV 2) must be fully covered by a mortgage inscription (min 60%) plus a mortgage mandate (max 40%) 3) 30 day overdue loans get a 50% haircut and 90 days (or defaulted) get zero value 3 Cover Asset Coverage Test The sum of interest, principal and other revenues of the cover assets must at least be the interest, principal and costs relating to the covered bonds Interest rates are stressed by plus and minus 2% for this test 4 Liquidity Test Cover assets must generate sufficient liquidity or include enough liquid assets to pay all unconditional payments on the covered bonds falling due the next 6 months Interest rates are stressed by plus and minus 2% for this test 5 Cap on Issuance Maximum 8% of a bank s assets can be used for the issuance of covered bonds 58

59 Annex 3 KBC s covered bond programme KBC Bank NV Residential mortgage covered bond programme Issuer: KBC Bank NV Main asset category: min 105% of covered bond outstanding is covered by residential mortgage loans and collections thereon Programme size: Up to 10bn EUR (only) Interest rate: Fixed rate, floating rate or zero coupon Maturity: Events of default: Soft bullet: payment of the principal amount may be deferred past the final maturity date until the extended final maturity date if the issuer fails to pay Extension period is 12 months for all series Failure to pay any amount of principal on the extended final maturity date A default in the payment of an amount of interest on any interest payment date Rating agencies: Moody s Aaa / Fitch AAA Moody s Fitch Over-collateralisation 10% 14.5% TPI Cap Probable 59 D-cap 4 (moderate risk)

60 Annex 3 KBC s covered bond programme Benchmark issuance KBC covered bonds Since establishment of the covered bond programme KBC has issued eight benchmark issuances: SPREAD EVOLUTION KBC COVERED BONDS (SPREAD IN BP VERSUS 6 MONTH MID SWAP) Source Bloomberg Mid ASW levels 60

61 Annex 3 KBC s covered bond programme Key cover pool characteristics (1/3) Investor reports, final terms and prospectus are available on Portfolio data as of : 30 September 2018 Total Outstanding Principal Balance Total value of the assets for the over-collateralisation test No. of Loans Average Current Loan Balance per Borrower Maximum Loan Balance Minimum Loan Balance Number of Borrowers Longest Maturity 359 month Shortest Maturity 1 month Weighted Average Seasoning 59.6 months Weighted Average Remaining Maturity 176 months Weighted Average Current Interest Rate 2.13% Weighted Average Current LTV 60.57% No. of Loans in Arrears (+30days) 255 Direct Debit Paying 97.96% 61

62 Annex 3 KBC s covered bond programme Key cover pool characteristics (2/3) REPAYMENT TYPE (LINEAR VS. ANNUITY) Annuity 97% Linear 3% Luxemburg 0% Henegouwen 1% Namen 0% GEOGRAPHICAL ALLOCATION Brussels Hoofdstedelijk gewest 5% Waals Brabant 1% Luik 1% Oost- Vlaanderen 18% West- Vlaanderen 14% Limburg 13% Vlaams Brabant 18% Antwerpen 29% LOAN PURPOSE INTEREST RATE TYPE (FIXED PERIODS) Construction 11% 10 y / 5 y 2% 5 y / 5 y 15 y / 5 y 0% 20 y / 5 y 0% Remortgage 42% Purchase 47% 3 y / 3 y 16% 1 y / 1 y 12% No review 62% 62

63 Annex 3 KBC s covered bond programme Key cover pool characteristics (3/3) 60,00 50,00 40,00 30,00 20,00 FINAL MATURITY DATE Weighted Average Remaining Maturity: 176 months 40,00 35,00 30,00 25,00 20,00 15,00 10,00 SEASONING Weighted Average Seasoning: 55.7 months 10,00 5,00 0, > , INTEREST RATE CURRENT LTV 70,00 60,00 50,00 40,00 30,00 20,00 10,00 0,00 < 2,5 2.5 < to <= < to <= < to <= 4.0 Weighted Average Current Interest Rate: 2.13% 4.0 < to <= < to <= < to <= < to <= < to <= < to <= 7.0 > ,00 16,00 14,00 12,00 10,00 8,00 6,00 4,00 2,00 0,00 <= 10% 10% < to <= 20% 20% < to <= 30% 30% < to <= 40% 40% < to <= 50% 50% < to <= 60% 60% < to <= 70% 70% < to <= 80% 80% < to <= 90% 90% < to <= 100% 100% < to <= 110% 110% < to <= 120% Weighted Average Current LTV: 60.57% 120% < to <= 130% 130% < to <= 140% 140% < to <=150% 150% < 63

64 Annex 3: Belgian real estate market Roughly stabilization in prices since 2011, with again an acceleration from 2016 onwards House prices Belgium (*) (*) Corrected for price changes resulting from changes in the quality and location of the real estate sold Debt position Belgian households (outstanding amounts, in % of GDP) 120 Index (Q = 100, lhs) Year-on-year change (in %, rhs) % 70% Belgium - Other debt (consumer loans) Belgium - Mortgage debt Euro Area (total debt) % 8 50% % % % -2 10% % Source: FOD Economie 64 Source: NBB.Stat; ECB

65 Annex 3 - Interest rates still historically low 5,5 4,5 3,5 10-year government bond yields (in %) Belgium Germany Belgium France Netherlands Italy Spain Ireland Interest rate spreads Euro Area (10-year rate versus Germany, in basis points) 2, , ,5 Spread Belgium-Germany 100-0,5 0 65

66 Annex 4 - Details on credit exposure of Ireland Impaired loans ratio further improved OUT- STANDING IMPAIRED LOANS IMPAIRED LOANS IMPAIRED LOANS LOAN PORTFOLIO PD PD COVERAGE Owner occupied mortgages 9.1bn 2.1bn 23% 0.6bn 28% Buy to let mortgages 2.1bn 1.4bn 68% 0.7bn 50% SME /corporate 0.5bn 0.3bn 63% 0.2bn 61% Real estate PROVISIONS PD - Investment 0.5bn 0.4bn 74% 0.2bn 61% - Development 0.1bn 0.1bn 100% 0.1bn 94% Total 12.3bn 4.3bn 35% 1.8bn 41% Recent indicators suggest positive momentum in the Irish economy remains strong. We now expect GDP growth will be around 7% in 2018 The sustained strength of jobs growth continues to apply downward pressure on unemployment and has also prompted a pick-up in net inward migration Robust improvements in Irish economic conditions continue to boost the demand for housing but with supply improving, there has been a modest easing in the pace of residential property price inflation of late Impaired loans have reduced by 0.1bn EUR (-2% q-o-q) with impaired loan ratio at 35.0% at 3Q18. On a pro-forma basis adjusting for the legacy portfolio sale announced as part of 2Q18 results, the impaired loan ratio is 25.0% Net loan loss provision release of 15m EUR in 3Q18 driven mainly by strong CSO House Price Index growth. This compares with a 39m EUR release in 2Q18 Looking forward, we are maintaining our impairment guidance for Ireland, namely a net release in a range of 100m-150m EUR for FY18 66

67 Annex 4 - Details on credit exposure of Ireland Portfolio analysis 3Q18 Retail Portfolio PD Legacy New Retail Impairment Provisions Cover % PD 1-8 4,219 2, % 3Q18 Corporate Portfolio PD Exposure Impairment Provisions Cover % Performing Impaired Of which non Forborne 4,203 2,839 Of which Forborne 16 0 PD % Of which non Forborne Of which Forborne PD 10 1, % PD % PD % Impaired Perf. PD % PD % PD % PD % PD % TOTAL PD1-12 1, PD Impairment Provisions /(PD 10-12) 64.4% TOTAL PD1-12 8,388 2,857 1,343 PD Impairment Provisions /(PD 10-12) 36.5% - Forborne loans (in line with EBA Technical Standards) comprise loans on a live restructure or continuing to serve a probation period post-restructure/cure to Performing Retail portfolio The New Retail portfolio (all originations post 1 Jan 2014) comprises 2.9bn EUR of the overall Retail portfolio and increased q-o-q by 0.2bn EUR. New Retail at 3Q18 represents 25% of total Retail portfolio (from 19% at 3Q17) Impaired portfolio decreased by roughly 56m EUR q-o-q mainly due to improved portfolio performance (reduction of 0.7bn EUR y-o-y) Coverage ratio for impaired loans has slightly improved to 36.5% for 3Q18 Weighted average indexed LTV on the impaired portfolio has improved significantly y-o-y and in 3Q18 decreased to 102% (from 107% at 3Q17) On a pro-forma basis adjusting for the portfolio sale, legacy retail impaired loans decreased by approximately 1.0bn EUR to 2.6bn EUR 67 Corporate loan portfolio Impaired portfolio has reduced by roughly 29m EUR q-o-q. Reduction driven mainly by continued deleverage of portfolio (reduction of 0.4bn EUR y-o-y) Coverage ratio for impaired loans has decreased to 64% for 3Q18 (from 66.5% in 2Q18) Overall exposure has dropped by approximately 0.5bn EUR y-o-y (-31% y-o-y) On a pro-forma basis adjusting for the portfolio sale, corporate impaired loans decreased by approximately 0.7bn EUR

68 Annex 5 - Solvency details Fully loaded B3 CET1 based on the Danish Compromise (DC) from 2Q18 to 3Q18 DELTA AT NUMERATOR LEVEL (BN EUR) B3 CET1 at end 2Q18 (DC) 3Q18 net result (excl. KBC Ins. due to Danish Compr.) Fully loaded B3 common equity ratio increased to 16.0% at end 3Q18 based on the Jan 2012 Other* Dec 2012 B3 CET1 at end 3Q18 (DC) Danish Compromise Pro-rata accrual dividend DELTA ON RWA (BN EUR) This clearly exceeds the minimum capital requirements set by the competent supervisors of 10.6% fully loaded Q18 (B3 DC**) 3Q18 impact 3Q18 (B3 DC) * Includes the q-o-q delta in deferred tax assets on losses carried forward, remeasurement of defined benefit obligations, IRB provision shortfall, deduction re. financing provided to shareholders, deduction re. irrevocable payment commitments, intangible fixed assets, AT1 coupon, translation differences, etc. ** Includes the RWA equivalent for KBC Insurance based on DC, calculated as the historical book value of KBC Insurance multiplied by 370% 68

69 Annex 5 - Solvency details Overview of B3 CET1 ratios at KBC Group Method Numerator Denominator B3 CET1 ratio FICOD*, fully loaded 16, , % DC**, fully loaded 15,018 93, % DM***, fully loaded 14,054 88, % * FICOD: Financial Conglomerate Directive ** DC: Danish Compromise *** DM: Deduction Method 69

70 Annex 5 - Solvency details Implementation of the BRRD in Belgium Loss Absorption in KBC Bank Hierarchy of Claims in Belgium Junior Deposits Derivatives Structured Notes Covered Deposits Individual & SME Deposits Internal Sub Loan Tier 2 AT1 CET1 Senior Unsecured 1. The BRRD has been transposed to a large extent by the Act of 25 April 2014 on the legal status and supervision of credit institutions ("The Banking Act") which applies since May-2015, with the exception of some major provisions, such as the bail-in tool. Some provisions will be further implemented by a Royal Decree ( RD ): Bail-in mechanism and MREL requirement of the BRRD: RD was published in the Belgian Official Journal 29 December 2015 and entries into force as from 1 January However, the resolution strategy and MREL target for KBC are assumptions and have not been determined by the Resolution Authority Group dimension of the BRRD: transposition is currently under preparation 2. The competent authorities are Supervision authority (KBC Bank NV, KBC Group NV): ECB/NBB. Resolution authority (KBC Bank NV, KBC Group NV): Single Resolution Board as from 1 January Competent authority for conduct supervision of financial institutions and intermediaries (KBC Bank NV): FSMA. 3. The hierarchy of claims in Belgium is in line with the BRRD as provided for in art. 48 BRRD and applies losses accordingly. Creditors are protected by the No Creditor Worse Off ( NCWO ) principle which ensures that creditors in resolution can t be worse-off than in normal insolvency proceedings (art 34(1) BRRD). 4. KBC plans on on-lending senior unsecured issued out of KBC Group NV as subordinated instruments at KBC Bank NV to ensure the on-loan would only take losses after Tier 2 securities. Additionally KBC Bank NV s funding needs in senior unsecured are expected to be moderate going forward 70

71 Annex 5 - Solvency details What are the risks for HoldCo senior investors? Public Issuance size of loss BRRD capital instruments Senior Unsecured Tier 2 AT1 Shareholders equity In all scenarios surpassing the Point of Non Viability, the investors are protected by the No Creditor Worse Off principle ( NCWO ), which stipulates that no instrument will be worse off in resolution than in normal insolvency proceedings HoldCo Recapitalisation scenario, losses (originating in any or in all of the underlying entities*) are lower than the size of the capital instruments at the HoldCo level part or all of Senior debt issued by the HoldCo can be converted into shares to recapitalise the HoldCo up to a minimum level as decided by the competent authorities. The investor then has a combination of shares and bonds of the HoldCo instead of only bonds and thus (co-)owns the underlying entities. The conversion factor would be determined by the competent authorities applying the NCWO principle. 2 Loss absorption scenario, losses (originating in any or in all of the underlying entities*) exceed the size of the capital instruments at the HoldCo level part or all of Senior issued by the HoldCo can be bailed-in to absorb losses. The NCWO principle implies that losses are only up-streamed to the HoldCo upto the amount of the investment of the HoldCo in the entity(ies) generating the losses. Hence, the investor in the HoldCo Senior will lose (up to) its investment to the extent that the amount of outstanding HoldCo senior debt exceeds the value of the remaining underlying entities of the HoldCo 71 * In KBC Group s case this would be KBC Bank and/or KBC Insurance and/or KBC Asset Management 71

72 Annex 6 Digital sales BU Belgium Digital sales are increasing # of files # of files Q1 Q2 Q3 Q4 Q1 Q2 Q3 0 Q1 Q2 Q3 Q4 Q1 Q2 Q Consumer loans Travel insurance # of files # of files Q1 Q2 Q3 Q4 Q1 Q2 Q3 0 Q1 Q2 Q3 Q4 Q1 Q2 Q Pension savings Current accounts 72

73 Annex 6 Digital sales BU Belgium Omnichannel is embraced by our customers Digital signing after contact with the branches or KBC Live Digital KBC Live increases, strong performance in non-life 90% 80% KBC Live cumulative sales % % % % % Q1 Q2 Q3 Q4 Q1 Q2 Q Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Non life insurance Life insurance Housing loans Digital signing of commercial loans Digital signing of debt protect cover life insurance Consumer loans Investment plans Digital signing mortgage loans Digital signing housing insurance Digital signing car insurance 73

74 Glossary (1/2) AQR B3 CBI Combined ratio (non-life insurance) Common equity ratio Cost/income ratio (banking) Cost/income ratio adjusted for specific items Credit cost ratio (CCR) EBA ESMA ESFR FICOD Asset Quality Review Basel III Central Bank of Ireland [technical insurance charges, including the internal cost of settling claims / earned premiums] + [operating expenses / written premiums] (after reinsurance in each case) [common equity tier-1 capital] / [total weighted risks] [operating expenses of the banking activities of the group] / [total income of the banking activities of the group] The numerator and denominator are adjusted for (exceptional) items which distort the P&L during a particular period in order to provide a better insight into the underlying business trends. Adjustments include: MtM ALM derivatives (fully excluded) bank taxes (including contributions to European Single Resolution Fund) are included pro rata and hence spread over all quarters of the year instead of being recognised for the most part upfront (as required by IFRIC21) one-off items [net changes in individual and portfolio-based impairment for credit risks] / [average outstanding loan portfolio]. Note that, inter alia, government bonds are not included in this formula European Banking Authority European Securities and Markets Authority European Single Resolution Fund Financial Conglomerates Directive Impaired loans cover ratio [total specific impairments on the impaired loan portfolio (stage 3) ] / [part of the loan portfolio that is impaired (stage 3) ] Impaired loans ratio Leverage ratio Liquidity coverage ratio (LCR) Net interest margin (NIM) of the group Net stable funding ratio (NSFR) [part of the loan portfolio that is impaired (stage 3)] / [total outstanding loan portfolio] [regulatory available tier-1 capital] / [total exposure measures]. The exposure measure is the total of non-risk-weighted on and off-balance sheet items, based on accounting data. The risk reducing effect of collateral, guarantees or netting is not taken into account, except for repos and derivatives. This ratio supplements the risk-based requirements (CAD) with a simple, non-risk-based backstop measure [stock of high quality liquid assets] / [total net cash outflow over the next 30 calendar days]. [banking group net interest income excluding dealing room] / [banking group average interest-bearing assets excluding dealing room] [available amount of stable funding] / [required amount of stable funding] 74

75 Glossary (2/2) MARS MREL PD Return on allocated capital (ROAC) for a particular business unit Return on equity TLAC Mortgage Arrears Resolution Strategy Minimum requirement for own funds and eligible liabilities Probability of default [result after tax, including minority interests, of a business unit, adjusted for income on allocated capital instead of real capital] / [average capital allocated to the business unit]. The capital allocated to a business unit is based on risk-weighted assets for banking and risk-weighted asset equivalents for insurance [result after tax, attributable to equity holders of the parent] / [average parent shareholders equity, excluding the revaluation reserve for fair value through Other Comprehensive Income (OCI) assets] Total loss-absorbing capacity 75

76 Contacts / Questions Company website: 76