KBC Groupe : General Investor Presentation 2Q2020

Net interest margin (1.63%)

• Fell by 5 bps q-o-q and 4 bps y-o-y due chiefly to the negative

impact of lower reinvestment yields and an increase of the

interest-bearing assets (denominator). Also note that the NIM in

August 06, 2020 at 03:39 am EDT

KBC Group

Company presentation 2Q 2020

More information: www.kbc.com

KBC Group - Investor Relations Office - E-mail:IR4U@kbc.be

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.

2Q 2020 key takeaways

2Q20 financial performance

Commercial bank-insurance franchises in core markets performed well
Customer loans and customer deposits increased y-o-yin all of our core countries
Lower net interest income and net interest margin
Lower net fee and commission income
Sharply higher net gains from financial instruments at fair value and higher net other income
Excellent result of non-life& life insurance
Costs significantly down
Higher net impairments on loans. The full collective Covid-19expected credit losses have already been booked in 1H20
Solid solvency and liquidity
In line with the recent ECB recommendation, we cannot execute our usual dividend policy. As a consequence, no interim dividend will be paid out in November 2020

Comparisons against the previous quarter unless otherwise stated

Net result of 210m EUR in 2Q20

1H20

ROE 4%*
Cost-incomeratio 59% (adjusted for specific items)
Combined ratio 83%
Credit cost ratio 0.64% (0.20% without collective covid-19 impairments**)
Common equity ratio 16.6% (B3, DC, fully loaded)
Leverage ratio 6.0% (fully loaded)
NSFR 142% & LCR 136%

		745	Net result
		612	702


430
						210

					-5
	1Q19	2Q19	3Q19	4Q19	1Q20	2Q20

when evenly spreading the bank tax throughout the year
789m EUR collective Covid-19 impairments in 1H20, of which 639m EUR management overlay (596m EUR in 2Q20 and 43m EUR in 1Q20) and 150m EUR impairments captured by the ECL models through the updated IFRS 9 macroeconomic variables in 2Q20

Overview of building blocks of the 2Q20 net result

					72	2.043	-27
				253

			247					-877
	1.083	388

								-857
									-3	-69	210

	NII	NFCI	Technical	FIFV	Other	Total	Bank taxes	Opex excl. Impairments	Other	Income	2Q20 net
			Insurance		Income**	Income		bank tax		taxes	result
			Result*
Q-o-Q	-9%	-10%	+39%			+38%		-6%
Y-o-Y	-4%	-11%	+40%			+7%		-8%

Earned premiums - technical charges + ceded reinsurance
Dividend income + net realised result from debt instruments FV through OCI + net other income

Main exceptional items

BE BU

NII - Early termination of 1 large corporate file Non-Life - Reassessment of claims provisions

Opex - Staff expenses

Impairments - Modification loss from moratorium

Total Exceptional Items BE BU

2Q20

1Q20

2Q19

+12m EUR

-16m EUR

-6m EUR

-11m EUR	-11m EUR	+12m EUR	-22m EUR

IM BU CZ BU

NOI - Revaluation of 55% stake in ČMSS			+82m EUR
Impairments - Modification loss from moratorium	-5m EUR
	Total Exceptional Items CZ BU		-5m EUR		+82m EUR
					-4m EUR
IRL - NOI - Additional impact for the tracker mortgage review
IRL - Opex - Costs, mainly related to sale of part of legacy loan portf.		-2m EUR
IRL - Impairments - On sale of legacy loan portfolio	+7m EUR		-12m EUR
HU - Impairments - Modification loss from moratorium	-18m EUR
	Total Exceptional Items IM BU		+7m EUR	-18m EUR	-18m EUR
					-4m EUR
Opex - Staff expenses (management reorganisation costs)
Tax - DTA impact				+34m EUR
	Total Exceptional Items GC				+30m EUR
	Total Exceptional Items (pre-tax)
		-9m EUR	-6m EUR	+72m EUR

	Total Exceptional Items (post-tax)		-6m EUR	-7m EUR	+82m EUR

Contents

2Q 2020 performance of KBC Group
Covid-19
2Q 2020 performance of business units
Strong solvency and solid liquidity
Looking forward

Annex 1: Company profile

Annex 2: Other items

KBC Group

Section 1

2Q 2020 performance of KBC Group

Net result at KBC Group

NET RESULT AT KBC GROUP*

745702

612

430

210


				-5
1Q19	2Q19	3Q19	4Q19	1Q20	2Q20

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

Amounts in m EUR

CONTRIBUTION OF BANKINGACTIVITIES

TO KBC GROUP NET RESULT*

618586

514

334

					42

				-11
1Q19	2Q19	3Q19	4Q19	1Q20	2Q20

CONTRIBUTION OF INSURANCEACTIVITIES

TO KBC GROUP NET RESULT*

										173
					99	143
			124						119
						94
96		61	66

33
68		83	79	79	3		85

36
	-4
		-20	-46	-30		-20	-13	-31

						4Q19
1Q19	2Q19	3Q19		1Q20		2Q20

				Non-Life result		Non-technical & taxes

				Life result

Lower net interest income and net interest margin

															NII		Amounts in m EUR

1,129			1,132			1,174	1,182		1,195		1,083
						14			12
														114
		4			16				12		117		111		17
118			114							6

										106


	1		1,044	1,057		1,066	1

			1,006
992					971


												-1
																1Q20
	1Q19			2Q19			3Q19		4Q19			2Q20
	NII - netted positive impact of ALM FX swaps*			NII - Insurance

	NII - Holding-company/group							NII - Banking

														NIM **
1.98%		1.94%			1.94%	1.94%	1.97%

																		1.82%

Net interest income (1,083m EUR)
- Decreased by 9% q-o-q and by 4% y-o-y
- The q-o-q decrease was driven primarily by:
  o the CNB rate cuts (from 2.25% early February to 0.25% early May 2020) o the depreciation of the CZK & HUF versus the EUR (-18m EUR q-o-q)
  o lower reinvestment yields
  o pressure on loan margins on total outstanding portfolio in most core countries (except in Belgium)
  o lower netted positive impact of ALM FX swaps partly offset by:
  o lower funding cost
  o higher margin on new production mortgages than the margin on the outstanding portfolio in Belgium, the Czech Republic and Slovakia
  o higher NII due to larger bond portfolio

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

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 margin (1.82%)
- Decreased by 15 bps q-o-q and by 12 bps y-o-y due mainly to the CNB rate cuts, the negative impact of lower reinvestment yields and an increase of the interest-bearing assets (denominator)

ORGANIC VOLUME TREND	Total loans**	o/w retail mortgages	Customer deposits***	AuM	Life reserves
Volume	158bn	68bn	211bn	202bn	28bn
Growth q-o-q*	0%	+1%	+1%	+4%	+2%
Growth y-o-y	+4%	+4%	+7%	-4%	-3%

* Non-annualised ** Loans to customers, excluding reverse repos (and bonds). Growth figures are excluding9 FX, consolidation adjustments, reclassifications and collective Covid-19 ECL

*** Customer deposits, including debt certificates but excluding repos. Customer deposit volumes excluding debt certificates & repos +5% q-o-q and +11% y-o-y

Lower net fee and commission income

						F&C			Amounts in m EUR

410	435		444	445	429	388


219	230		237	243	229	219

264	270		275	279	270	237

-73	-65		-68	-77	-71	-68
		1Q19	2Q19	3Q19	4Q19	1Q20	2Q20
		Distribution				Banking services		Asset management services

									Amounts in bn EUR
						AuM
210	210		212	216	193	202

Net fee and commission income (388m EUR)
- Down by 10% q-o-q and by 11% y-o-y
- Q-o-qdecrease was the result of the following:
  o Net F&C income from Asset Management Services decreased by 12% q-o-q as a result of lower management and entry fees from mutual funds & unit-linked life insurance products
  o Net F&C income from banking services decreased by 5% q-o-q(-3%q-o-q excluding FX effect) due mainly to lower fees from payment services (less transaction volumes as a result from Covid-19) and lower network income, partly offset by higher fees from credit files & bank guarantees
  o Distribution costs fell by 4% q-o-q
- Y-o-ydecrease was mainly the result of the following:
  o Net F&C income from Asset Management Services fell by 13% y-o-y as a result of lower management fees and entry fees
  o Net F&C income from banking services decreased by 5% y-o-y(-2%y-o-y excluding FX effect) driven mainly by lower fees from payment services (partly due to less transaction volumes as a result of Covid-19, partly due to the SEPA regulation) and lower fees from credit files & bank guarantees, partly offset by higher securities-related fees
  o Distribution costs rose by 3% y-o-y due chiefly to higher commissions paid linked to banking products

							Assets under management (202bn EUR)
1Q19	2Q19	3Q19	4Q19	1Q20	2Q20	•	Increased by 4% q-o-q due to a positive price effect (+5%), partly
							•	offset by net outflows (-1%)
							Decreased by 4% y-o-y as a result of net outflows (-3%) and a
								negative price effect (-1%)

Non-life premium income up y-o-y and excellent combined ratio

PREMIUM INCOME (GROSS EARNEDPREMIUMS)

766	742	731	805	740	712


351	317	291	364	297	276

415	425	440	441	443	435

1Q19	2Q19	3Q19		4Q19	1Q20	2Q20
		Life premium income		Non-Life premium income

COMBINED RATIO (NON-LIFE)

93%	90%	92%	92%	90%
			83%

2019 2020

Amounts in m EUR

Insurance premium income (gross earned premiums) at 712m EUR
- Non-lifepremium income (435m EUR) increased by 2% y-o-y
- Life premium income (276m EUR) down by 7% q-o-q and by 13% y-o-y
The non-lifecombined ratio for 1H20 amounted to an excellent 83%. This is the result of 5% y-o-y premium growth combined with 13% y-o-y lower technical charges in 1H20. The latter was due mainly to lower normal claims in 1H20 (especially in Motor due to Covid-19) and a negative one-off in 1H19 (-16m due to reassessment on claims provisions). However, note that 1H20 was impacted by a higher negative ceded reinsurance result compared with 1H19

Non-life sales up y-o-y, life sales up q-o-q and y-o-y

NON-LIFE SALES (GROSS WRITTENPREMIUM)

534			567

412	411	400	415

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

LIFE SALES

516						561
459		471
		403	427	235


302	261		311	249
		242

214	198				177	327
161	160

1Q19	2Q19	3Q19	4Q19	1Q20	2Q20
		Guaranteed interest products		Unit-linked products

Amounts in m EUR

Sales of non-life insurance products
- Up by only 1% y-o-y due to negative impact of Covid-19 on new business (mainly in motor and property) and on renewals
Sales of life insurance products
- Increased by 32% q-o-q and by 22% y-o-y
- The q-o-q and y-o-y increase was driven entirely by higher sales of unit-linked products in Belgium (due to the launch of new products), only partly offset by lower sales of guaranteed interest products (mainly due to the suspension of universal single life insurance products in Belgium)
- Sales of unit-linked products accounted for 58% of total life insurance sales in 2Q20

Sharply higher FIFV and higher net other income

			FIFV			253
				130		126
99
			44		100
62		8
		48
29 11		19	17	28 10		-331
-3	-22	-8	-25		-58
-2	-137
			-46		-186

					-59
					-82
					-385
1Q19	2Q19		3Q19	4Q19	1Q20	2Q20

Dealing room & other income		M2M ALM derivatives
MVA/CVA/FVA		Net result on equity instruments (overlay insurance)

The q-o-q strong rebound in net gains from financial instruments at fair value was attributable mainly to:
- 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 due to increasing equity markets and decreasing counterparty credit spreads & KBC funding spread, partly offset by lower long-term interest rates)
  o FVA: 73m EUR (+173m EUR q-o-q)
  o CVA: 26m EUR (+105m EUR q-o-q)
  o MVA: 1m EUR (+8m EUR q-o-q)
- excellent dealing room income
- a higher net result on equity instruments (insurance)
- a positive change in ALM derivatives

NET OTHER INCOME

	133
59		43	47	50	53



1Q19	2Q19	3Q19	4Q19	1Q20	2Q20

Amounts in m EUR

Net other income amounted to 53m EUR, more or less in line with the normal run rate of around 50m EUR per quarter

Costs significantly down

OPERATING EXPENSES

1,296								1,338

382	988	975		1,045		407
51		904
		30			28
					994		27
913	957	947	931
877

Operating expenses excluding bank taxes decreased by 6% q-o-q primarily as a result of the announced cost savings related to Covid-19:

lower staff expenses (partly due to reduced accrued variable remuneration and less FTEs q-o-q), despite wage inflation in most countries

lower facilities, marketing, travel and event costs o FX effect (-14m EUR q-o-q)

1Q19	2Q19	3Q19	4Q19	1Q20	2Q20
			Bank tax		Operating expenses

Amounts in m EUR

BANK TAX SPREAD IN 2020 (PRELIMINARY)**

Operating expenses excluding bank taxes decreased by 8% y-o-y due partly to the announced cost savings related to Covid-19, despite the full consolidation of CMSS (15m EUR in 2Q20 versus 5m EUR in 2Q19). Also note that 2Q19 was impacted by the 12m EUR negative one-offs

	TOTAL	Upfront		Spread out over the year		 Cost/income ratio (banking) adjusted for specific

									items* at 52% in 2Q20 and 59% YTD (58% in
	2Q20	1Q20	2Q20	1Q20	2Q20	3Q20e	4Q20e
			FY19), the latter distorted by sharply lower FIFV
BE BU	2	289	2	0	0	0	0		(Financial Instruments at Fair Value).

									Cost/income ratio (banking): 46% in 2Q20 and
CZ BU	0	40	0	0	0	0	0
									66% YTD, both distorted by bank taxes and the
Hungary	18	25	1	20	18	22	22
									latter by sharply lower FIFV
Slovakia	8	3	0	8	8	0	0
		 Total bank taxes (including ESRF contribution) are
Bulgaria	-1	17	-1	0	0	0	0
		expected to increase by 3% y-o-y to 504m EUR in
Ireland	0	4	-1	1	1	1	26
		FY20
GC	0	0	0	0	0	0	0
TOTAL	27	377	0	29	27	23	48	14	* See glossary (slide 90) for the exact definition
	** Still subject to changes

Overview of bank taxes*						Bank taxes of 291m EUR YTD.
																On a pro rata basis, bank taxes
										Amounts in m EUR					represented 12.1% of 1H20
					KBC GROUP				Bank taxes of 434m EUR YTD.			BELGIUMBU		opex at the Belgium BU

							407			On a pro rata basis, bank taxes	273				289
382									represented 12.2% of 1H20				67
									63
109							115			opex at KBC Group**

273							292				210				222

	30			28	51		27		4	0	0		2
			2					2
	29						25		1Q19	2Q19	3Q19	4Q19	1Q20		2Q20

1Q19	2Q19	3Q19	4Q19	1Q20	2Q20

European Single Resolution Fund (ESRF) contribution Common bank taxes

ESRF contribution Common bank taxes

CZECH REPUBLICBU

							41
35
							29
28
7	1	0	0		12	0


1Q19	2Q19	3Q19	4Q19	1Q20	2Q20
		ESRF contribution			Common bank taxes

Bank taxes of 41m EUR YTD. On a pro rata basis, bank taxes represented 5.7% of 1H20 opex at the CZ BU

									Bank taxes of 102m EUR YTD.
									On a pro rata basis, bank
INTERNATIONAL MARKETSBU	taxes represented 19.2% of
1H20 opex at the IM BU
74								77

18								19

						50
56	26		28			58	25

	28

		-2

1Q19	2Q19	3Q19	4Q19	1Q20	2Q20
			ESRF contribution		Common bank taxes

This refers solely to the bank taxes recognised in opex, and as such it does not take account of income tax expenses, non-recoverable VAT, etc.
The C/I ratio adjusted for specific items of 59% in 1H20 amounts to 51% excluding these bank taxes

Full collective Covid-19 expected credit losses have already been booked in 1H20

					ASSET IMPAIRMENT			857
										141	12
										746
								82	20
69						43
						7
		1	40		26			78	99
				75
67
	4
36	25	1


	1Q19	2Q19		3Q19	4Q19	1Q20	2Q20
Other impairments			Impairments on financial assets at AC and FVOCI

Collective Covid-19 ECL

 Higher asset impairments q-o-q

• The q-o-q increase of loan loss provisions was attributable to:

o 746m EUR collective Covid-19 impairments, of which 596m

EUR management overlay (compared with 43m EUR in 1Q20)

and 150m EUR impairments captured by the ECL models

through the updated IFRS 9 macroeconomic variables. Note

that based on the assumptions at the end of 2Q20, the full

collective Covid-19 expected credit losses (ECL) have already

been booked in 1H20

o higher loan loss impairments in Belgium and the Czech

CREDIT COST RATIO

0.42%

0.23%

0.64%

Republic due mainly to several corporate files
• Impairment of 12m EUR on 'other', of which	a 16m EUR
negative one-off impact of the payment moratorium in Belgium
and the Czech Republic, partly offset by a 7m EUR positive one-
off partial reversal of the payment moratorium	in Hungary

		0.09%			0.12%


			-0.06%	-0.04%
FY14	FY15	FY16	FY17	FY18	FY19	1H20

booked in 1Q20 (IFRS modification loss from the time value of

payment deferral)

IMPAIRED LOANS RATIO

4.3%
			3.7%	3.5%	3.5%	3.3%	3.4%

2.4%	2.1%	2.0%	1.9%	1.9%	1.9%


	1Q19	2Q19	3Q19	4Q19	1Q20	2Q20
Amounts in m EUR		Impaired loans ratio			of which over 90 days past due	16

The credit cost ratio in 1H20 amounted to:
- 20 bps (12 bps in FY19) without collective Covid-19 ECL
- 64 bps with collective Covid-19 ECL (already 100% booked in 1H20)
The impaired loans ratio amounted to 3.4%, 1.9% of which over 90 days past due

KBC Group

Section 2

Covid-19

COVID-19(1/9)

Commitment towards our stakeholders

Safety & continuity

All principles of health & safety in line with local government recommendations
Vast majority of staff worked remotely during lockdown. In the meanwhile, partial return of staff on premise (split teams (remote/on premise) to ensure continuity)
Dedicated crisis team
Continuous Covid-19 communication update (such as social distancing instructions) via different information channels
Cancellation of all travel & events

Digital is the new normal

During lockdown, our customers switched in large numbers to digital channels
The digital share of total product sales hit record levels in our six core countries
Growth in % of customers who have at least one of our digital apps in all age categories, but exceptionally strong growth among customers of > 55 years

Digital boost in different core markets

New additional services in KBC Mobile (Belgium), such as those for purchasing film tickets and for topping up call credit, transport solutions like renting of a shared car and the launch of 'Goal Alert' (where customers and non-customers of KBC, will be able to watch the goals, action replays and highlights of the weekend's football matches in Belgium). For insured victims of a physical accident (private individuals), it is now also possible to upload their medical expenses online and to follow-up the status of the processing of their claims digitally
UBB Interlease was the first leasing company in Bulgaria to introduce fully digital front office activities and the digital signing of lease contracts a month before the Covid-19 outbreak. Customers welcomed the digital service and 24% of all leasing contracts have already been signed remotely since the start of May
KBC Bank Ireland experimented with an innovative way to interact with (potential) customers remotely. Live webinars are organised where customers are informed about the process of buying, financing and insuring a house. Customers can ask questions live and book appointments. The first of its kind in Ireland with 1,300 registrations (via social media)

COVID-19(2/9)

Latest status of government & sector measures in each of our core countries

Belgium

payments	Opt-in: 3 months for consumer finance , 6-9
months for mortgages and non-retail loans,

	(maximum until 31 Oct 2020 and can be
	extended to 31 Dec 2020)
	• For private persons: deferral of principal and
of	interest payments, while only deferral of
principal payments for non-retail clients
Deferral
• Interest is accrued over the deferral period,

	with the exception of families with net
	income less than 1,700 EUR. For the latter
	group, this results in a modification loss for
	the bank (-11m EUR booked in 2Q)

		• A state guarantee scheme up to 40bn EUR to

		cover losses incurred on future non-retail
Guarantee Scheme &	liquidity assistance	loans granted before 30 Sep 2020 to viable
companies, with a tenor of maximum 12
months and with maximum interest of
1.25%. Guarantee covers 50% of losses above
3% of total credit losses and 80% above 5%
of losses
• As of 3Q, a revised state guarantee scheme
up to 10bn EUR has been offered to cover
losses on future SME loans granted before 31
Dec 2020, with a tenor between 1 and 3
years and with maximum interest of 2%.

		Guarantee covers 80% on all losses

		Czech Republic			Hungary

Opt-in: 3 or 6 months				Opt-out: a blanket moratorium
• Applicable for retail and non-retail clients			until 31 Dec 2020
• For private persons and entrepreneurs: deferral of	• Applicable for retail and non-retail
	principal and interest payments, while only	• Deferral of principal and interest payments
	deferral of principal payments for non-retail clients	• Interest is accrued over deferral period, but
• Interest is accrued over the deferral period, but	unpaid interest cannot be capitalised and
	has to be paid in the last instalment, resulting in a	must be collected on a linear way during
	modification loss for the bank (-5m EUR, booked in	the remaining (extended) lifetime. This
	2Q)					results in a modification loss for the bank
• For consumer loans, the interest during the	(-18m EUR booked in 1Q; revised to -11m
	deferral period cannot exceed 2-week repo rate	EUR in 2Q based on the actual opt-out
+ 8%					ratio)
• The	Czech-Moravian	Guarantee		and	• A guarantee scheme is provided by
	Development (CZMRB)	launched	several	Garantiqa and the Hungarian Development
	guarantee programs (COVID II, COVID II Praha,	Bank. These state guarantees can cover up
	COVID III) for working capital loans provided by	to 90% of the loans with a maximum tenor
	commercial banks to non-retail clients.	The loan	of 6 years
	amount is guaranteed up to 80% or 90% of the	• Funding for growth scheme (launched by
	loan amount. Interest on these loans is subsidised	MNB): a framework amount of 4.2bn EUR
	up to 25% (COVID II)				for SMEs that can receive loans with a 20-
• The Export Guarantee and Insurance Cooperation	year tenor at maximum interest rate of 2.5%
	(EGAP) under its COVID Plus program offers	• Annual interest rate on personal loans
	guarantees on loans provided by commercial	granted by commercial banks may not
	banks. EGAP guarantees 70% to 80% of the loan	exceed the central bank base rate by more
	amount, depending on the rating of the debtor.	than 5pp
	The program is aimed at companies for which
	exports accounted for more than 20% of turnover
	in 2019

COVID-19(3/9)

Latest status of government & sector measures in each of our core countries

				Slovakia

	payments		Opt-in: 9 months or 6 months (for leases)
		•	Interest is accrued over the deferral period, but
			•	Applicable for retail customers, SMEs and
				entrepreneurs
			• Deferral of principal and interest payments
	of			the client has the option to pay all interests at
			once after the moratorium or pay it on a linear
	Deferral
			basis. The latter option would result in an

				immaterial modification loss for the bank
			• Anti-CoronaGuarantee program offered by the

GuaranteeScheme & liquidityassistance
		Slovak Investment Holding (SIH), aiming at SMEs,
		EUR guaranteed up to 90%. No portfolio cap
				consists of two components: (i) state guarantee
				with 50% portfolio cap and (ii) the interest rate
				subsidy reaching up to 4% p.a.
			• In addition, the financial aid in the form of the
				State guarantee schemes with guarantee fee
				subsidy can be provided by (i) Export-Import Bank
				of SR guaranteed up to 80% for loan < 2m EUR
				and (ii) Slovak Investment Holding for loans 2-20m

Bulgaria

Opt-in: 6 months

(until 31 Mar 2021 at the latest)

- Applicable for retail and non-retail
- Deferral of principal and interest payments
- In case of principal deferral only, tenor is extended with 6 months
- Interest is accrued over deferral period and is payable in 12 months (consumer and non-retail) or 60 months (mortgages) in equal instalments
0.4bn EUR of state guarantees provided by the Bulgarian Development Bank to commercial banks. From this amount, 0.1bn EUR is used to guarantee 100% on consumer loans, while 0.3bn EUR is planned to be used to guarantee 80% on non-retailloans

Ireland

Opt-in: 3 to 6 months

Applicable for mortgage loans, consumer finance loans and business banking loans with repayment schedule
Deferral of principal and interest payments for up to 6 months (with revision after 3 months) for mortgages & consumer finance and 3 months for business banking
Option for customers to extend their loan term by up to 6 months to match payment break term
Interest is accrued over the deferral period
The Irish authorities put substantial relief measures in place amongst others via the SBCI. KBC Bank Ireland is mainly focused on individual customers, therefore the relief programs for business customers are less relevant

COVID-19(4/9)

IFRS 9 scenarios

OPTIMISTIC	BASE-CASE	PESSIMISTIC
SCENARIO	SCENARIO	SCENARIO
Virus spread quickly and	Virus spread and impact	Spread continues until
definitively brought under	under control without	vaccination becomes
control, with no further risk of	additional extensive	available, with partial or full
future lockdowns, fast decline	lockdown measures	lockdowns
in number of cases

•	Despite a gradual lifting of lockdown measures in many
	countries, there remains substantial uncertainty about the
	economic impact of the precautionary lockdown measures
	as well as about the policy reactions to mitigate the impact
•	of the crisis
Because of this uncertainty, we continue working with
	three alternative scenarios: a base-case scenario, a more

Steep and steady recovery from 3Q20 onwards with a fast return to pre-Covid-19 activity levels

Sharp, short V pattern

More moderate, but still steady recovery from 3Q20 onwards with a recovery to pre-Covid-19 activity levels by end 2023

Pronounced V/U-pattern

Longer term stagnation and negative growth, with unsteady recovery path

More L-like pattern, with right leg only slowly increasing

optimistic scenario and a more pessimistic scenario

• The definition of each scenario remains approximately the

same as in the previous quarter, but we are assigning the

following probabilities: 45% for the base-case scenario,

40% for the pessimistic and 15% for the optimistic

scenario

• We have revised up euro area GDP growth for 2020 to

-9.6% and, mechanically, this less negative outcome for

Macroeconomic scenarios*

June 2020

2020 translates into a downward revision of 2021 growth

to 6.2%

Real GDP growth		2020			2021			2022

	Optimistic	Base	Pessimistic	Optimistic	Base	Pessimistic	Optimistic	Base	Pessimistic
Euro area	-6.0%	-9.6%	-14.0%	6.5%	6.2%	-3.2%	1.3%	1.2%	5.0%
Belgium	-5.0%	-9.5%	-13.2%	6.0%	5.7%	-3.2%	1.3%	1.3%	5.0%

Czech Republic	-5.0%	-10.0%	-15.0%	4.0%	6.0%	3.0%	2.5%	3.5%	2.7%
Hungary	-3.0%	-6.2%	-10.0%	4.0%	5.0%	4.0%	3.5%	3.5%	3.5%
Slovakia	-5.0%	-10.0%	-14.0%	4.5%	7.0%	1.5%	2.6%	4.5%	2.5%
Bulgaria	-4.0%	-8.0%	-12.0%	3.0%	5.0%	4.0%	3.0%	3.0%	3.0%

Ireland	-2.0%	-5.0%	-10.0%	2.0%	4.0%	1.0%	2.6%	3.5%	2.5%

•	The macro-economic information is based on the economic situation in June 2020 and hence do not yet reflect the official	21
	macroeconomic figures for 2020Q2 as reported by different authorities

COVID-19(5/9)

IFRS 9 scenarios

Macroeconomic scenarios

June 2020

Unemployment		2020			2021			2022
rate

	Optimistic	Base	Pessimistic	Optimistic	Base	Pessimistic	Optimistic	Base	Pessimistic
Belgium	5.9%	7.2%	10.0%	5.8%	7.6%	12.0%	5.6%	6.9%	9.5%
Czech Republic	3.1%	5.2%	7.0%	3.5%	5.7%	7.1%	3.0%	4.6%	7.6%
Hungary	4.8%	6.4%	9.0%	4.2%	5.6%	7.5%	4.0%	4.8%	5.9%
Slovakia	8.0%	9.0%	12.0%	9.2%	10.5%	13.0%	7.7%	8.0%	14.0%
Bulgaria	6.0%	8.0%	11.0%	4.1%	10.0%	13.0%	4.2%	7.0%	12.0%
Ireland	8.2%	11.0%	20.0%	6.1%	7.0%	16.0%	5.1%	6.0%	10.0%

House-price		2020			2021			2022
index

	Optimistic	Base	Pessimistic	Optimistic	Base	Pessimistic	Optimistic	Base	Pessimistic

Belgium	-1.0%	-3.0%	-6.0%	0.0%	-2.0%	-4.0%	1.5%	1.0%	-1.0%
Czech Republic	0.0%	-2.0%	-4.0%	-0.8%	-3.5%	-6.0%	2.0%	2.0%	0.0%

Hungary	-1.0%	-5.0%	-7.5%	0.0%	-3.0%	-5.0%	2.5%	2.0%	1.0%

Slovakia	-1.0%	-5.0%	-7.0%	0.5%	-2.0%	-3.0%	2.0%	2.0%	1.0%

Bulgaria	0.5%	-2.0%	-4.0%	1.0%	-1.0%	-3.0%	3.0%	3.0%	0.0%

Ireland	-6.0%	-12.0%	-20.0%	5.0%	8.0%	-5.0%	4.0%	5.0%	3.0%

COVID-19(6/9)

Stress assumptions applied

Loan portfolio*:

(in billions of EUR)	YE19	1Q20	1H20
Portfolio outstanding	175	180	179
Retail	42%	40%	41%
of which mortgages	38%	37%	38%
of which consumer finance	3%	3%	3%
SME	22%	21%	21%
Corporate	37%	39%	38%

Total loan portfolio by IFRS 9 ECL stage *

Stage 3	3.5%	3.3%	3.4%

11.3%	10.7%	11.3%
Stage 2

Stage 1	85.2%	86.0%	85.4%

FY19 1Q20 1H20

As in the first quarter, our Expected Credit Loss (ECL) models were not able to adequately reflect all the specificities of the Covid-19 crisis nor the various government measures implemented in the different countries to support households, SMEs and Corporates through this crisis. Therefore, an expert-based calculation at portfolio level has been performed via a management overlay
In the first quarter, this exercise was performed for a certain number of (sub)sectors. Driven by significant uncertainty about how the virus would spread, the extent of the consequential lockdown measures and the government response to the economic instability. The significant uncertainty still exists, especially around the possibility and timing of resurgence of the virus or even a return in several waves, but the widespread extent of the economic crunch has become clearer.
Therefore, the scope of the management overlay has been expanded to include all sectors of our corporate and SME portfolio as well as our retail portfolio
To be consistent with optimistic and pessimistic scenarios we applied the following stress-assumptions to the performing and non- performing portfolio by the end of June 2020 :

Existing performing	• A 3-step methodology has been applied (see next slide)
portfolio	• In line with ECB/ESMA/EBA guidance, any general government
	measure has not led to an automatic staging
Existing non-	• An additional impact assessment was performed on a portfolio basis
performing portfolio	for the stage 3 collective exposures based on expert judgement
	• Additional impairments due to Covid-19 on individually assessed
	stage 3 loans are already included in P&L impairments and thus not
	included in the management overlay

•	Aligned with the credit risk view of our loan portfolio as reported in the quarterly financial statements	23

COVID-19(7/9)

Stress methodology applied on the performing portfolio

3-step approach to estimate additional Covid-19 impact on the performing portfolio :

COVID-19

effect

Sector stress effect

Scenario

weight

effect

Step 1: Covid-19 stress

On the performing portfolio we applied an expert-based stress migration matrix* linked to the macro forecast for end June 2020. After doing so, a certain portion of the portfolio moved to inferior PD rating classes or default, a certain portion remained unchanged and a minor portion improved. As such, we obtain an estimate of the Covid-19ECL (Expected Credit Loss) according to our base-casescenario (versus the normal through-the-cycle migration matrix)

Step 2: Additional sector stress effect

The COVID-19 ECL generated by the migration matrix, was further refined by taking a sectoral stress effect into account. The purpose of this step is to reflect the fact that some sectors will be more heavily affected than others, something which had not been included in the migration matrices.

All exposures in the SME and Corporate portfolio were classified as high, medium or low risk based on the expected impact of the Covid-19 crisis on the sector affected (for Mortgages and Consumer finance, no sectoral stress was applied). Based on this classification, the following weights have been applied to the ECL impact: 150% for high risk sectors, 100% for medium risk sectors and 50% for low risk sectors (see more details on next slide). This resulted in a sector-driven Covid-19 base-caseECL following the base- case scenario

Step 3: Application of scenario weight

To define the collective Covid-19 impact, under an optimistic and pessimistic scenario, a scaling factor was applied on the estimated sector-drivenCovid-19base-case ECL. The final overlay was determined by weighting the Covid-19 ECL under the three scenarios with the following weights: 45% for the base-case, 15% for the optimistic and 40% for the pessimistic scenario (see more details on next slide)

* The migration matrix is defined per country and per segment

COVID-19(8/9)

Details of the collective Covid-19 ECL

SME & Corporate loan portfolio* of 106bn EUR split by Covid-19 sector sensitivity:

Low

35%3.1%

1.2%

1.3%

1.4%

2.0%

20% High	2.9%
	3.5%
45%	4.6%
Medium	1H20

Sum of other sectors < 1% (incl. Aviation sector) Hotels, bars & restaurants

Shipping (transportation) Metals

Services (entertainement & leisure) Commercial real-estate

Automotive

Distribution retail

Some details on the composition of 'other sectors < 1%':

The aviation sector was fully assigned as high risk sector, but with limited share of 0.3%
The sector of exploration and production of oil, gas & other fuels was fully allocated as high risk sector, but with limited share of 0.2%

The construction sector wasdefined as medium risk, due to limited interruption, was one of the first sectors to restart and also temporary unemployment cover foreseen by the Belgian government

Sector-drivenCovid-19 ECL (base-case scenario):				Collective Covid-19 ECL per country:

KBC Group		Performing portfolio					Performing portfolio		Non-	Total
	High risk	Medium	Low risk	Mortgages								Performing				2Q20	1Q20
				Optimistic	Base	Pessimistic	Probability
				1H20
	sectors	risk sectors	sectors	&	TOTAL		EUR m	15%	45%	40%	weigthed	portfolio
EUR m	150%	100%	50%	other retail			KBC Group	484	611	870	696	93	789	746	43
Base-case scenario	175	244	68	124	611		By country:
Optimistic scenario	146	200	52	86	484		Belgium	285	355	478	393	20	413	378	35
Pessimistic scenario	248	337	96	189	870		Czech Republic	103	129	186	148	10	158	152	6
							Slovakia	30	34	50	40	0	40	39	1
							Hungary	37	48	69	55	0	55		54	1
							Bulgaria	5	14	19	15	13	28		28	n/a
							Ireland	24	32	68	45	50	95		95	n/a

•	Aligned with the credit risk view of our loan portfolio as reported in the quarterly financial statements.	25

COVID-19(9/9)

Impact of the collective Covid-19 ECL

Impairment on financial assets

at AC and at FVOCI

1Q20 78 43121

2Q20	99	150	596	845
1H20	177	150	639	966

Collective Covid-19 ECL = 789m

Impairments on financial assets at AC and at FVOCI without any COVID-19 impact Covid-19 impact already captured by ECL models

Management overlay

Credit Cost %	FY19	3M20	1H20
		(annualized)	(annualized*)

Without collective COVID-19 ECL	0.12%	0.17%	0.20%

With collective COVID-19 ECL		0.27%	0.64%

* No annualisation of the Collective Covid-19 ECL

The 3-step stress approach to the performing portfolio and the additional impact assessment of the non-performing portfolio resulted in a total collective Covid-19ECL of 789m EUR in 1H20, of which:
- a 43m EUR management overlay was booked in 1Q20
- a 596m EUR management overlay was booked in 2Q20
- the ECL models captured an impact of 150m EUR in 2Q20 through the updated macroeconomic variables used in the calculation
The total collective Covid-19 ECL of 789m EUR in 1H20 consists of 7% stage 1, 81% stage 2 and 12% stage 3 impairments
Including the collective Covid-19 ECL, the Credit Cost Ratio amounted to 0.64% in 1H20
We are reiterating our estimate for FY20 impairments (on financial assets at AC and at FVOCI) at roughly 1.1bn EUR as a result of the coronavirus pandemic. Depending on a number of events such as the length and depth of the economic downturn, the significant number of government measures in each of our core countries, and the unknown number of customers who will call upon these mitigating actions, we estimate the FY20 impairments to range between roughly 0.8bn EUR (optimistic scenario) and roughly 1.6bn EUR (pessimistic scenario)

Amounts in m EUR

KBC Group

Section 3

2Q 2020 performance of business units

Business profile

BELGIUM	CZECH	SLOVAKIA	HUNGARY	BULGARIA	IRELAND
REPUBLIC

2Q20 NET RESULT (in million euros)	204m	77m	-6m	16m	14m	-70m
ALLOCATED CAPITAL (in billion euros)	6.9bn	1.7bn	0.6bn	0.8bn	0.4bn	0.6bn
LOANS (in billion euros)	104bn	29bn	8bn	5bn	3bn	10bn
DEPOSITS (in billion euros)	137bn	40bn	7bn	8bn	5bn	5bn
BRANCHES (end 2Q20)	514	221	117	208	177	16
Clients (end 2Q20)	3.6m	4.2m	0.6m	1.6m	1.4m	0.3m

GROUP CENTRE

-26m

0.2bn

Belgium BU (1): net result of 204m EUR

NET RESULT

Net result at the Belgium Business Unit amounted to 204m EUR

388 368

412

• The quarter under review was characterised by slightly

lower net interest income (fully due to the 12m EUR

positive one-off in 1Q20), lower net fee and

commission income, higher dividend income, sharply

176

204

higher trading and fair value income, higher net other
income, an excellent combined ratio, lower operating
expenses (due largely to lower bank taxes and lower
staff expenses) and sharply higher impairment charges
q-o-q
• Customer deposits excluding	debt	certificates	and
repos rose by 11% y-o-y,	while	customer	loans

				-86
1Q19	2Q19	3Q19	4Q19	1Q20	2Q20

Amounts in m EUR

increased by 3% y-o-y

ORGANIC VOLUME TREND	Total loans**	o/w retail mortgages	Customer deposits***	AuM	Life reserves
Volume	104bn	37bn	137bn	185bn	26bn
Growth q-o-q*	-1%	+1%	-1%	+4%	+2%
Growth y-o-y	+3%	+3%	+7%	-5%	-3%

* Non-annualised ** Loans to customers, excluding reverse repos (and bonds). Growth figures are excluding FX, consolidation adjustments, reclassifications and collective Covid-19 ECL

*** Customer deposits, including debt certificates but excluding repos. Customer deposit volumes excluding debt certificates & repos +5% q-o-q and +11% y-o-y

Belgium BU (2): lower NII and NIM

								NII	Amounts in m EUR

625	621	637		634		640		635
	9
			5
	7					13		7
			10
							99	94
				105	101
	106		101

511

510

519

526

532

536

1Q19	2Q19	3Q19	4Q19	1Q20	2Q20
NII - netted positive impact of ALM FX swaps*		NII - contribution of banking

NII - contribution of insurance

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 (635m EUR)
- Excluding the 12m EUR positive one-off in 1Q20, NII rose by 1% q-o-q due mainly to:
  o higher margins on new loan production than on outstanding portfolio in all segments
  o higher NII due to larger bond portfolio o slightly lower funding cost
  partly offset by:
  o lower reinvestment yields o lower NII insurance
  o lower netted positive impact of FX swaps
- Rose by 2% y-o-y
- Note that NII banking rose by 1% q-o-q and by 5% y-o-y

1Q20 was positively impacted by the +12m EUR one-off item (which explains -3 bps of the -5 bps q-o-q)

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

Credit margins in Belgium

PRODUCT SPREAD ON CUSTOMER LOAN BOOK, OUTSTANDING

1.3

1.2

1.1

1.0

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.01Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

Customer loans

PRODUCT SPREAD ON NEW PRODUCTION

1.5

1.4

1.3

1.2

1.1

1.0

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.11Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

SME and corporate loans

Mortgage loans

Belgium BU (3): lower net F&C income

				F&C			Amounts in m EUR

286	293	297		307	308
			271


342	343	353		366	354	321


-56	-51	-56		-58	-46	-50
	1Q19	2Q19	3Q19	4Q19	1Q20	2Q20
		F&C - contribution of insurance			F&C - contribution of banking

				AuM		Amounts in bn EUR
195	195	197		200	178	185

Net fee and commission income (271m EUR)
- Decreased by 12% q-o-q due mainly to:
  o lower entry and management fees from mutual funds and unit-linked life insurance products
  o lower fees from payment services (linked to Covid-19)o lower network income
  partly offset by:
  o higher fees from credit files & bank guarantees o higher securities-related fees
- Fell by 7% y-o-y driven chiefly by lower entry & management fees and higher distribution costs, partly offset by higher securities-related fees and to a lesser extent higher network income, higher fees from payment services and higher fees from credit files & bank guarantees
Assets under management (185bn EUR)
- Increased by 4% q-o-q due to a positive price effect (+5%), partly offset by net outflows (-1%)
- Decreased by 5% y-o-y as a result of net outflows (-4%) and a negative price effect (-1%)

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

Belgium BU (4): higher y-o-ynon-life sales, excellent combined ratio

Amounts in m EUR

NON-LIFE SALES (GROSS WRITTEN PREMIUM)

340		359

273	263	276
	247

Sales of non-life insurance products
- Increased by 1% y-o-y
- Premium growth mainly in classes 'Fire' and 'Motor comprehensive cover', partly offset by the negative impact of Covid-19 on 'Workmen's compensation'

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

COMBINED RATIO (NON-LIFE)

93%	95%	92%	85%	91%	89%

2019 2020

Combined ratio amounted to an excellent 85% in 1H20 (89% in FY19). This is the result of 3% y-o-y premium growth combined with 16% y-o-y lower technical charges in 1H20. The latter was due mainly to lower normal claims in 1H20 (especially in Motor due to Covid-19) and a negative one-off in 1H19 (-16m due to reassessment on claims provisions). However, note that 1H20 was impacted by a negative ceded reinsurance result (compared with a positive ceded reinsurance result in 1H19)

Belgium BU (5): higher life sales, good cross-selling ratios

			LIFE SALES		Amounts in m EUR

						488
423			380
		362		339	206
		319


267	230
		214	282	215

						282
157	132	105	98	124


1Q19	2Q19	3Q19	4Q19	1Q20	2Q20
		Guaranteed interest products			Unit-linked products

Sales of life insurance products
- Rose by 44% q-o-q driven entirely by higher sales of unit-linked products due to the launch of new products
- Increased by 35% y-o-y driven entirely by higher sales of unit-linked products, only partly offset by lower sales of guaranteed interest products (fully due to the suspension of universal single life insurance products)
- Guaranteed interest products and unit-linked products accounted for 42% and 58%, respectively, of life insurance sales in 2Q20

	MORTGAGE-RELATEDCROSS-SELLING RATIOS
90		90.9%
85		82.2%
80

75
70
65	63.7%
60
Property insurance	Life insurance
55

50	49.5%
45

40

Mortgage-relatedcross-selling ratios
- 90.9% for property insurance
- 82.2% for life insurance

Belgium BU (6): sharply higher FIFV and higher net other income

												FIFV					Amounts in m EUR
																149
54														89			49

													46			74
					43
	48											6
													22
30		19		8	17						18		24					30

										-3			1		-4
		-23									-18
		-1				-2					-15
					-9						-113



																		-26
																		-78

																		-217
	1Q19	2Q19				3Q19		4Q19	1Q20		2Q20
Dealing room & other income			M2M ALM derivatives

MVA/CVA/FVA							Net result on equity instruments (overlay insurance)

NET OTHER INCOME

50	51	45
45	41
	35

The q-o-q strong rebound in net gains from financial instruments at fair value was due to:
- 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 due to increasing equity markets and decreasing counterparty credit spreads & KBC funding spread, despite lower long-term interest rates)
- a higher net result on equity instruments (insurance)
- higher dealing room income
- a positive change in ALM derivatives
Net other income amounted to 45m EUR in 2Q20

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

Belgium BU (7): lower opex and higher impairments

Amounts in m EUR

OPERATING EXPENSES

807							828

273	575				289
	552	550		521
		4
								2
534	572				539
			519

1Q2019	2Q19	3Q19	4Q19	1Q20	2Q20
				Bank tax		Operating expenses

Operating expenses: -37%q-o-q and -10%y-o-y
- Operating expenses without bank taxes decreased by 4% q-o-q and by 9% y-o-y due chiefly to
  o lower staff expenses (partly due to reduced variable remuneration and less FTEs)
  o lower marketing, ICT, travel and event costs partly offset by:
  o higher professional fees (only q-o-q, as it was stable y-o-y)
- Note that 2Q19 was impacted by a 6m EUR negative one-off as a result of a management reorganisation
- Adjusted for specific items, the C/I ratio amounted to 51% in 2Q20 and 58% YTD (60% in FY19)
- Cost/income ratio: 44% in 2Q20 and 66% YTD, both distorted by bank taxes and the latter by sharply lower FIFV in 1Q20

ASSET IMPAIRMENT

469

										117	378
								109
									0
83							2	35


		1		31				107

82			21	81		80
30	1


	1Q19	2Q19		3Q19	4Q19	1Q20	2Q20
Other impairments					Impairments on financial assets at AC and FVOCI

Collective Covid-19 ECL

Loan loss impairments increased to 458m EUR in 2Q20 (compared with 116m EUR in 1Q20), largely due to 329m EUR impairments from Covid-19 management overlay (compared with 35m EUR in 1Q20) and 49m EUR impairments captured by the ECL models through the updated macroeconomic variables. Furthermore, both 1Q20 and 2Q20 were impacted by several corporate files. Credit cost ratio amounted to 27 bps (22 bps in FY19) without collective Covid-19 ECL and 63 bps with collective Covid-19 ECL in 1H20
Impaired loans ratio amounted to 2.4%, 1.2% of which over 90 days past due
Impairment of 11m EUR on 'other' (IFRS modification

36 loss from the time value of payment deferral)

Net result at the Belgium BU

NET RESULT AT THE BELGIUM BU*

388 368 412

176	204

				-86
1Q19	2Q19	3Q19	4Q19	1Q20	2Q20

Amounts in m EUR

Difference between net profit at the Belgium Business Unit and the sum of the banking and insurance contribution is accounted for by the rounding up or down of figures

CONTRIBUTION OF BANKINGACTIVITIES TO

NET RESULT OF THE BELGIUM BU*

289 287 301

102					68

				-55
1Q19	2Q19	3Q19	4Q19	1Q20	2Q20

CONTRIBUTION OF INSURANCEACTIVITIES TO

NET RESULT OF THE BELGIUM BU*

						111					136
				81
			99							80
			47	70
74	37

21
55	69	68	65						74
	-2		-7									4
		-34	-25			-32	-17



										-3
									-30
1Q19	2Q19	3Q19	4Q19		1Q20	2Q20
			Non-Life result		Life result			Non-technical & taxes

Czech Republic BU

						NET RESULT		Amounts in m EUR

			248
							205
177		82

		159

			166					88	77


	1Q19	2Q19			3Q19	4Q19	1Q20	2Q20
						One-off gain ČMSS

						NII & NIM		Amounts in m EUR
				329	338	351
302		308

	3.25%		3.18%	2.93%	2.90%	2.98%	235

									2.32%

1Q19	2Q19	3Q19	4Q19	1Q20	2Q20
		NIM	NII

Net result of 77m EUR in 2Q20

-7%q-o-q excluding FX effect due mainly to sharply higher Covid-19 related impairments and lower net interest income, largely offset by sharply higher net results from financial instruments at fair value and lower costs
Customer deposits (including debt certificates, but excluding repos) rose by 8% y-o-y, while customer loans rose by 6% y-o-y

Highlights

Net interest income
- -29%q-o-q and -19%y-o-y (both excl. FX effect)
- Q-o-qdecrease primarily due to the CNB rate cuts (from 2.25% early February to 0.25% early May 2020), the depreciation of the CZK versus the EUR and lower netted positive impact of ALM FX swap
- Y-o-ydecrease is less severe primarily due to the full consolidation of ČMSS and good growth in loan volume
Net interest margin
- Fell by 66 bps q-o-q due mainly to the several repo rate cuts in March and May, a positive technical item in 1Q20 and an increase of the interest-bearing assets (denominator)

ORGANIC VOLUME TREND	Total loans **	o/w retail mortgages	Customer deposits***	AuM	Life reserves
Volume	29bn	15bn	40bn	10.8bn	1.3bn
Growth q-o-q*	0%	+2%	+3%	+8%	+2%
Growth y-o-y	+6%	+6%	+8%	+2%	-4%

* Non-annualised ** Loans to customers, excluding reverse repos (and bonds). Growth figures are excluding FX, consolidation adjustments, reclassifications and collective Covid-19 ECL

*** Customer deposits, including debt certificates but excluding repos.	38

Czech Republic BU

		F&C		Amounts in m EUR

	67	70
	59
58		55	51

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

CROSS-SELLING RATIOS

Mortg. & prop.

Mortg. & life risk Cons.fin. & life risk

59%	60%	61%	48%	49%	48%	54%	54%	50%

2018	2019	1H20	2018	2019	1H20	2018	2019	1H20

Net F&C income
- -2%q-o-q and -19%y-o-y (both excl. FX effect)
- Q-o-qdecrease driven mainly by lower fees from payment services (mainly linked to Covid-19), lower network income, lower credit-related fees and lower entry fees for asset management
Assets under management
- 10.8bn EUR
- +8% q-o-q due entirely to a positive price & FX effect
- +2% y-o-y due to net inflows (+5%), partly offset by a negative price & FX effect (-3%)
Trading and fair value income
- 215m EUR higher q-o-q net results from financial instruments at fair value (FIFV) to 90m EUR due mainly to higher dealing room results and a positive q-o-q change in market, credit and funding value adjustments
Insurance
- Insurance premium income (gross earned premium): 116m EUR o Non-life premium income (72m EUR) +10% y-o-y excluding FX
  effect, due to growth in all products (except 'travel' due to Covid-19)
  o Life premium income (44m EUR) -10%q-o-q and -23%y-o-y, excluding FX effect. Q-o-q and y-o-y decrease mainly in single life insurance products
- Combined ratio of 86% in 1H20 (94% in FY19)

Czech Republic BU

		OPERATING EXPENSES	Amounts in m EUR
204						221
179	187	200	41

35
	1				164

169	178			181

1Q19	2Q19	3Q19	4Q19	1Q20	2Q20
		Bank tax			Operating expenses

ASSET IMPAIRMENT Amounts in m EUR

175

152

				7		9					9	18
						3			1
			4		3					6


								1
	-					1			2


	1	2Q19		3Q19	4Q19	1Q20	2Q20
	1Q19
Other impairments			Impairments on financial assets at AC and FVOCI

Collective Covid-19 ECL

 Operating expenses

• 164m EUR; -4%q-o-q and -3%y-o-y, both excluding FX effect and bank taxes

o Q-o-q decrease was due mainly to lower staff and marketing expenses

o Y-o-y decrease was chiefly the result of lower staff expenses and lower marketing, travel & event costs, despite the full consolidation of ČMSS (11m EUR in 2Q20)

• Adjusted for specific items, C/I ratio amounted to roughly 40% in 2Q20 and 48% YTD (47% in FY19)

• Cost/income ratio at 38% in 2Q20 and 51% YTD, both distorted by bank taxes and the latter by sharply lower FIFV in 1Q20

	Loan loss and other impairment
	• Loan loss impairments increased q-o-q due mainly to:
	o 152m EUR collective Covid-19 ECL, of which 135m EUR
	management overlay (compared with 6m EUR in 1Q20)
	and 17m EUR impairments captured by the ECL models
	through the updated macroeconomic variables
	o 18m EUR 'impairments on financial asset at AC', due
	mainly to a few corporate files
	• Credit cost ratio amounted to 0.10% (0.04% in FY19)
	without collective Covid-19 ECL and 0.62% with collective
	Covid-19 ECL in 1H20
	• Impaired loans ratio amounted to 2.2%, 1.2% of which over
	90 days past due
	• Impairment of 5m EUR on 'other' (IFRS modification loss
40	from the time value of payment deferral)

International Markets BU

								NET RESULT		Amounts in m EUR

	104					119
					27
	29		85
70				2
	23

			9			50
13
						4

14													35
55		45
25
					10
18											38	12	14
		11		12					4	10		16
														-70



																-6


															-45
1Q19		2Q19		3Q19	4Q19	1Q20	2Q20
		Bulgaria		Ireland		Hungary			Slovakia

ORGANIC VOLUME TREND	Total loans **
Volume	25bn
Growth q-o-q*	+1%
Growth y-o-y	+7%

Net result of -45m EUR was negatively impacted by 215m EUR collective Covid-19 ECL

Slovakia -6m EUR, Hungary 16m EUR, Ireland -70m EUR and Bulgaria 14m EUR

Highlights (q-o-q results)

Stable net interest income. NIM 2.58% in 2Q20 (-3 bps q-o-q and -7 bps y-o-y)
Lower net fee and commission income
Higher result from financial instruments at fair value
An excellent combined ratio of 78% in 1H20
Lower non-life & life insurance sales
Lower costs
Sharply higher loan loss impairment charges in 2Q20, due almost entirely to 215m EUR collective Covid-19 ECL (of which 39m in Slovakia, 54m in Hungary, 28m in Bulgaria and 95m in Ireland)

o/w retail mortgages	Customer deposits***	AuM	Life reserves
16bn	24bn	5.4bn	0.7bn
+1%	+4%	+9%	+4%
+5%	+9%	+16%	-5%

* Non-annualised ** Loans to customers, excluding reverse repos (and bonds). Growth figures are excluding FX, consolidation adjustments, reclassifications and collective Covid-19 ECL

*** Customer deposits, including debt certificates but excluding repos.

International Markets BU - Slovakia

NET RESULT	Amounts in m EUR
38

	11	12

				4

					-6
1Q19	2Q19	3Q19	4Q19	1Q20	2Q20

ORGANIC	Total	o/w retail	Customer
VOLUME TREND	loans **	mortgages	deposits***
Volume	8bn	4bn	7bn
Growth q-o-q*	+2%	+4%	+4%
Growth y-o-y	+6%	+11%	+5%

Non-annualised

Loans to customers, excluding reverse repos (and bonds). Growth figures are excluding FX, consolidation adjustments, reclassifications and collective Covid-19 ECL

*** Customer deposits, including debt certificates but excluding repos.	42

Net result of -6m EUR

Highlights (q-o-q results)

Lower net interest income as volume growth was offset by the negative impact of lower reinvestment yields and pressure on loan margins on the outstanding portfolio (except for SMEs)
Roughly stable net fee & commission income
Higher result from financial instruments at fair value
Lower net other income
Excellent combined ratio (81% in 1H20)
Lower non-life and life insurance sales
Lower operating expenses due mainly to lower bank taxes, lower staff expenses and lower ICT & marketing costs
Sharply higher loan loss impairment charges in 2Q20, due almost entirely to 39m EUR collective Covid-19 ECL, of which 33m EUR management overlay (compared with 1m in 1Q20) and 6m EUR impairments captured by the ECL models through the updated macroeconomic variables. Credit cost ratio of 0.19% (0.14% in FY19) without collective Covid-19 ECL and 0.66% with collective Covid-19 ECL in 1H20

Volume trend

Total customer loans rose by 2% q-o-q and by 6% y-o-y, the latter due mainly to the increasing mortgage portfolio
Total customer deposits increased by 4% q-o-q and by 5% y-o-y (both due mainly to retail deposits)

International Markets BU - Hungary

NET RESULT

Amounts in m EUR

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

ORGANIC	Total	o/w retail	Customer
VOLUME TREND	loans **	mortgages	deposits***
Volume	5bn	2bn	8bn
Growth q-o-q*	+2%	+3%	+7%
Growth y-o-y	+14%	+5%	+20%

Net result of 16m EUR

Highlights (q-o-q results)

Higher net interest income excluding FX effect due chiefly to loan volume growth and the positive reinvestment impact of the higher short-term yields
Lower net fee and commission income excluding FX effect due mainly to Covid-19
Higher net results from financial instruments at fair value
Excellent combined ratio (80% in 1H20)
Lower operating expenses excluding FX effect due largely to lower bank taxes and lower staff expenses, partly offset by higher ICT costs
Sharply higher loan loss impairment charges in 2Q20, due almost entirely to 54m EUR collective Covid-19 ECL, of which 41m EUR management overlay (compared with 1m EUR in 1Q20) and 13m EUR impairments captured by the ECL models through the updated macroeconomic variables. Credit cost ratio of -0.04%(-0.02% in FY19) without collective Covid-19 ECL and 0.96% with collective Covid-19 ECL in 1H20
6m EUR reversal of impairment on 'other' (7m EUR less IFRS modification losses on the assumption that 40% of the customers will opt out of the mandatory payment moratorium)

Volume trend

• Non-annualised		 Total customer loans rose by 2% q-o-q and by 14% y-o-y, the
** Loans to customers, excluding reverse repos (and bonds). Growth figures are excluding FX,		latter due mainly to corporate and consumer finance loans
consolidation adjustments, reclassifications and collective Covid-19 ECL
*** Customer deposits, including debt certificates but excluding repos.	43	 Total customer deposits rose by +7% q-o-q and +20% y-o-y

International Markets BU - Bulgaria

		NET RESULT	Amounts in m EUR
	29		27

		23
13					14

				10

1Q19	2Q19	3Q19	4Q19	1Q20	2Q20

ORGANIC	Total	o/w retail	Customer
VOLUME TREND	loans **	mortgages	deposits***
Volume	3bn	1bn	5bn
Growth q-o-q*	+4%	+4%	+3%
Growth y-o-y	+14%	+11%	+8%

Non-annualised

Loans to customers, excluding reverse repos (and bonds). Growth figures are excluding FX, consolidation adjustments, reclassifications and collective Covid-19 ECL

*** Customer deposits, including debt certificates but excluding repos.	44

Net result of 14m EUR

Highlights (q-o-q results)

Higher total income due mainly to higher non-life insurance result (including ceded reinsurance result) driven by covid-19, higher life insurance result and higher net other income
Excellent combined ratio at 76% in 1H20
Lower operating expenses due chiefly to lower bank taxes, lower staff and ICT costs
Sharply higher loan loss impairment charges in 2Q20, due entirely to 28m EUR collective Covid-19 ECL, of which 23m EUR management overlay and 5m EUR impairments captured by the ECL models through the updated macroeconomic variables. Credit cost ratio of -0.11% (0.14% in FY19) without collective Covid-19 ECL and 0.66% with collective Covid-19 ECL in 1H20

Volume trend:

Total customer loans +4% q-o-q and +14% y-o-y, the latter mainly due to corporates, SMEs and retail mortgages
Total customer loans: new bank portfolio +4% q-o-q and +15% y-o-y, while legacy -1%q-o-q and -22%y-o-y
Total customer deposits increased by 3% q-o-q and by 8% y-o-y (the latter due mainly to retail & SMEs)

International Markets BU - Ireland

14	NET RESULT	Amounts in m EUR

Net result of -70m EUR

Highlights (q-o-q results)

	Lower net interest income due mainly to the maturity of high
	yield sovereign bonds and pressure on the mortgage margin,
	despite lower funding costs
 Lower net results from financial instruments at fair value
 Lower expenses due to lower bank taxes, lower staff expenses,
	lower professional fees and lower marketing costs
	Sharply higher loan loss impairment charges in 2Q20, due

					-70
1Q19	2Q19	3Q19	4Q19	1Q20	2Q20

almost entirely to 95m EUR collective Covid-19 ECL, of which

35m EUR management overlay and 60m EUR impairments

captured by the ECL models through the updated

macroeconomic variables. Credit cost ratio of 0.00% (-0.32% in

FY19) without collective Covid-19 ECL and 0.94% with collective

Covid-19 ECL in 1H20

ORGANIC	Total	o/w retail	Customer
VOLUME TREND	loans **	mortgages	deposits***
Volume	10bn	10bn	5bn
Growth q-o-q*	0%	0%	+2%
Growth y-o-y	+2%	+2%	+1%

Non-annualised

Loans to customers, excluding reverse repos (and bonds). Growth figures are excluding FX, consolidation adjustments, reclassifications and collective Covid-19 ECL

*** Customer deposits, including debt certificates but excluding repos.

Volume trend

Total customer loans rose by 2% y-o-y driven by new production of fixed rate mortgages
Total customer deposits increased by 2% q-o-q and by 1% y-o-y as the increase in retail deposits more than offset the deliberate decrease in expensive corporate deposit

Group Centre

		NET RESULT	Amounts in m EUR
7	4

		0

					-26
			-33
				-43
1Q19	2Q19	3Q19	4Q19	1Q20	2Q20

Net result of -26m EUR

The net result for the Group Centre comprises the results from activities and/or decisions specifically made for group purposes (see table below for components)

Highlights (q-o-q results)

Q-o-q improvement was attributable mainly to:

higher net results from financial instruments at fair value due largely to a positive change in M2M ALM derivatives
higher net interest income

partly offset by:

no impairment reversals as in 1Q20
lower ceded reinsurance result

BREAKDOWN OF NET RESULT AT GROUP CENTRE	1Q19	2Q19	3Q19	4Q19	1Q20	2Q20

Group item (ongoing business)	2	-1	-12	-35	-46	-25
Operating expenses of group activities	-18	-14	-14	-34	-15	-18
Capital and treasury management	-3	-7	-9	-8	-11	-6
Holding of participations	-11	21	1	-2	-3	-1
Group Re	0	8	-3	11	7	3
Other	34	-9	12	-2	-25	-3
Ongoing results of divestments and companies in run-down	4	5	12	2	3	-1
Total	7	4	0	-33	-43	-26

Amounts in m EUR

Overview of contribution of business units to 1H20 result

NET PROFIT - KBC GROUP

Amounts in m EUR

1H20 ROAC: 4%

								2,427	2,575	2,570	2,489

								1,314	1,090	1,322	1,314

								1,113	1,485	1,248	1,175
										205


								2016	2017		2018	2019	1H20
												2H			1H

	NET PROFIT - BELGIUM	NET PROFIT - CZECH REPUBLIC	NET PROFIT - INTERNATIONAL MARKETS
	1,575				1H20 ROAC: 3%										1H20 ROAC: 19%					1H20 ROAC: -1%
1,432	1,450
		1,344										789
								702
	790									654
		770				596											533
853											364					444
		780				338								428
						276		338					234	379
																152
																		245
	785																				204
579		680	564			320	364		316	425	165				292	299
		119							183	175


																						-11
2016	2017	2018	2019	2020		2016	2017		2018	2019	2020
			2016	2017	2018	2019	2020
												2H				1H
			2H		1H														2H		1H

Balance sheet:

Loans and deposits continue to grow in all countries

11%

3% 3%

Y-O-Y ORGANIC* VOLUME GROWTH

4% 4%