Remaining highly profitable on the Belgian market Foto gebouw

Activities overview Earnings drivers, retail Earnings drivers, SME and corporate Mid-term financial outlook

3 Reminder : business portfolio Although KBC has successfully expanded its operations in CEE, it is primarily a top bancassurer and asset manager in Belgium, its historical home market CEE Capital markets International SME/corporate European private banking Revenue breakdown * Belgium : - retail bancassurance - private banking - asset management - SME and corporates Gevaert * 2004 pro-forma figures, excl. group items

4 Market headlines Market shares: Belgium’s banking landscape is highly consolidated (80% held by top-4 banks) KBC is a top-3 player, especially strong in the Northern region The market is highly receptive to cross-selling of AM & insurance products Growth in the field of wealth management is significant (high savings rate) 31-Dec-03

5 Financial highlights, Belgium 1 Including bancassurance, private banking Belgium and asset management 2 Core SME/Corporate activities only (at parent company level) Financial performance in Belgium has been strong, mainly due to:  Solid growth momentum for commission business (investment products in retail, non-lending income in SME/Corporate  Consecutive years of cost reduction  Over-the-cycle low loan losses +8% +23% Net Profit (mln) 12

6 Business model Segmented approach by customer group: Basic activity (parent company) Specific activities / segments (subsidiaries) Retail 820 retail bank branches 600 insurance agents Funds management ( KBC AM) Network of bank agents (Centea) and insurance brokers (Fidea) 110 branches in South Belgium ( CBC) HNW individuals 20 private banking branches 4 private banking ‘boutiques’ (Puilaetco) SME / Corporate 1 16 branches 4 social profit and public sector branches Multinational customers branch Real estate activities Corporate finance( KBC Securities) Leasing (KBC Lease) Factoring (International Factors) Diamond center (Antwerp Diamond Bank) Re-insurance (Secura) 1 Mostly SMEs (sales turnover > 8m), incl. 75 large corporate customers

Activities overview Earnings drivers, retail Earnings drivers, SME and corporate Mid-term financial outlook

8 Sharp increase in productivity Efficiency strategy Strong growth in revenue per FTE Revenues per FTE, 1998 = 100 Strong growth in revenue per branch Revenues per branch, 1998 = 100 Sharp increase in productivity (to large extent driven by reduction in density of branches and cutback in branch FTEs)

9 Cost containment has been successful Cost inflation 3 Integration of ICT platforms and of products and support services Cutbacks in branch FTEs and in number of branches Cost inflation Up to 2004: significant decline in costs Henceforth: upward pressure on costs 2001 costs 2004 costs 2007 costs Core retail only, excl. activities of subsidiaries Target: cost growth below wage inflation rate Efficiency strategy

10 Strict cost control remains important Efficiency strategy Source: Febelfin 1.Wage costs in Belgium are higher than in other European countries 2.Average level of education of branch staff is higher than in other European countries High wage costs (structural characteristic) High density of network (Competition does not permit further branch cutbacks)

11 Trend of impairments of credit portfolio Net write-downs vs. risk-weighted assets 0.21% 0.09% Low over-the-cycle credit-loss charges Target: < 0.25% over-the-cycle Risk strategy 1q % Credit-loss charges in Belgian retail are expected to be relatively low over the cycle (< 0.25%)

12 Focus on revenue growth Revenue growth in partly driven by positive pricing effects Revenue growth in mainly driven by positive volume effects ½ due to positive pricing effects Slower income growth due to margin pressure Mid-term ambition: maintain growth trend Growth strategy Core retail only (excl. activities in subsidiaries) Achieved +5% p.a. revenue growth

13 Growth in savings & investments Growth strategy How to grow within a mature market? Market potential Estimated nominal GDP growth rate 1 Attracting new funds Proven performance Savings rate New funds attracted – in bn Market share of mutual funds

14 Growth in insurance field Growth strategy How to grow within a mature market? 1 Attracting new funds 2 Insurance High cross-selling potential Proven performance Premium growth, non-life X-sell results

15 Growth in lending field Growth strategy How to grow within a mature market? 1 Attracting new funds 2 Insurance 3 Lending Total market – Mortgage loans CAGR 9% Source: NBB Small business loans: Moderate growth trend, in line with nominal GDP growth (+2.7% in 2005) But, further additional growth potential via raising amounts of advances in current account (with higher margins) and increasing non-credit-linked revenues High expectations for growth in retail lending Strong mortgage loans growth on the back of:  sustained rise in Belgian real estate prices  real estate prices still below level of other European markets

16 Obstacles to growth Growth strategy How to grow within a mature market? 1 Attracting new funds 2 Insurance 3 Lending Sharper price competition Mortgages Small business loans Threats to growth according to analysts Hardening credit-pricing cycle

17 Catalysts for growth Growth strategy How to grow within a mature market? 1 Attracting new funds 2 Insurance 3 Lending Enhancing customer satisfaction Top-4 bancassurers only * Extrapolation Closure of branches Customer-orientation program started

Activities overview Earnings drivers, retail Earnings drivers, SME and corporate Mid-term financial outlook

19 Growth in lending income Lending income vs. RWA  Until 2004:  Revenue growth driven by increased credit margins (up from 0.88% in 2002 to 1.06% in ‘04)  Despite low credit demand (and ensuing greater competition ), KBC consolidated its market share in lending (even rising slightly from 22% in 2002 to 23% in ‘04)  Recent trends:  Loan demand remains relatively limited (and competition increases as a result)  Pressure on margins makes growth in fee income a key priority

20 Growth in fee business: key priority Fee income vs. RWA Mid-term target: > 2% Fee revenue increased slightly in period due to higher sales of: corporate risk management products (average growth 15% p.a.) foreign trade products (average growth 28% p.a.) insurance products (average growth 59% p.a., but from a low base) … offsetting stagnation of revenues from payment services (adverse impact of EU regulation)

21 Growth potential in fee income Further growth of fee income targeted (to reach >2% on RWA) by means of: Continued growth in risk management, foreign trade and insurance products Increasing sale of ‘investment banking products’, in line with market trend, giving SMEs direct access to capital markets (e.g., debt capital, private equity) Implementation of training / tools to assist sales force in shifting from ‘operational’ relationship to ‘partnership’ with client Internal performance / remuneration model increasingly focused on boosting fee income % change in commission income * local players peers with substantial investment banking acitivities * Boston Consulting survey, peers are corporate bankers in Western Europe

22 Monitoring credit risk Risk strategy 1 KBC core SME/corporate banking excl. activities in specialized subsidiaries Impairments on loan portfolio 1 Mid-term target: loan loss ratio < 0.35% LLR on RWA Average 3yr-loan losses at 0.35%, in line with target, but rather cyclical (N.B. 2004/2005 historically low)

23 Monitoring credit risk To maintain loan losses below ‘maximum’ level (0.35%): Increased monitoring of individual credit risks Active credit portfolio management:  avoiding risk concentration  hedging credit risk exposure  limits/caps on sub-portfolios (e.g., real estate, acquisition finance)

24 Strict cost control Cost/income ratio 1 Efficiency strategy 1 KBC core SME/corporate banking excl. activities in specialized subsidiaries Expenses (m) 1 Mid-term cap: 43% Up to 2004: significant decline in C/I ratio to very low level (38%) cost inflation offset by FTE cutbacks and operational cost savings (reduced number of branches) Future: Continued cost control (without lessening commercial clout)

Activities overview Earnings drivers, retail Earnings drivers, SME and corporate Mid-term financial outlook

26 Mid-term target: 20% Mid-term target: further down to low 60s Mid-term target: max 95% over-the-cycle Cost/income ratio, banking 1 Return on allocated capital 2 Contribution to Group profit (m) 1 Mid-term outlook, retail Combined ratio, non-life 1 Adjusted definition as of 2005: including asset management 2 Adjusted definition as of 2005: including asset management and 8% allocated Tier-1 capital (instead of 7%)

27 Mid-term target: CAGR >10% Mid-term target: >2% Return on allocated capital, banking 1 Contribution to Group profit (m) 1 Mid-term outlook, SME and corporate Total revenue vs. RWA, banking 1 1 KBC core SME/corporate banking excl. activities in specialised subsidiaries Mid-term target: 3.30% Fee income vs. RWA, banking 1