KBC Groupe : Strategy update (English)

Strategy Update

November 12th, 2020

Johan Thijs

Bank-insurance ecosystem is changing

Business cycles come and go

4

Bank-insurance ecosystem is changing

Customer behavior is changing

'Customers are in control and they decide'

Johan Thijs

5

Bank-insurance ecosystem is changing

New business models

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Bank-insurance ecosystem is changing

New business models

'Once the

alternative is

created, clients always shift to the better'

Johan Thijs

7

Bank-insurance ecosytem is changing

Customer expectations are changing

8

Bank-insurance ecosystem is changing

New assertive innovative competitors

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Bank-insurance ecosystem is changing

Data is the new electricity

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Bank-insurance ecosystem is changing

Banks have 4 options for the future

Remain a traditional - digital bank

Status quo: business transforms into a customer centric bank with a traditional scope and a shrinking business model

Broaden distribution

Financial Supermarkets: banks use their customer base to provide customers with other (non-bank) services

Platformication

Banks open their core processing as part of the supply chain of other banks or other industries

Complementary of alternative business income

Look for adjacent business or expand into new territory, leveraging existing customer base

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Bank-insurance ecosystem is changing

Insurers have 4 options for the future

Remain a traditional-digital insurance company

Status quo: business transforms into a customer centric insurer with a traditional scope and a shrinking business model

Broaden distribution

Financial Supermarkets: insurance companies use their customer base to provide customers with other (non-insurance) services

Platformication

Insurance companies open their core processing as part of the supply chain of other insurers, bank or different industries

Complementary of alternative business income

Look for adjacent business or expand into new territory, leveraging existing customer base

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Differently: the next level …. Bank-insurance+

Beyond bank-insurance: value added service provider

'We go beyond

bank-

insurance in our offer to

clients'

Johan Thijs

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Differently: the next level …. Bank-insurance+

Beyond bank-insurance: value added service provider

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Differently: the next level …. Bank-insurance+

Beyond bank-insurance: value added service provider

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Differently: the next level …. Bank-insurance+

Platformication: Bank-insurance core systems become a building block in other players value chain

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YOU CAN'T

STOP THE WAVES BUT YOU CAN LEARN HOW TO SURF

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Differently: the next level ….

The customer remains at the center …

What are customers telling us ?

KNOW ME		KNOW YOUR		KEEP IT SAFE		KEEP IT SIMPLE
	STUFF

'Digital First

means

Customer First

at KBC'

Johan Thijs

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Differently: the next level ….

The customer remains at the center … Be a trusted partner

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Differently: the next level ….

The customer remains at the center … Be proactive

21

Differently: the next level ….

The customer remains at the center … Be personal

PERSONAL ADVICE

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Differently: the next level ….

The customer remains at the center … Be efficient

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KBC is the reference

The winning factors

Trust

Capitalising on the trust customers place in us today

Customer experience

Providing zero-hassle,no-frills customer experience leveraging our unique strengths on data-security and data-privacy

Straight-through processes

This implies re-design of processes and avoiding to digitise the current ones. Aim is E2E digital processes

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Personalised solutions

Using data and AI to offer proactively compelling, relevant and personalised financial solutions

Broad offer

Emphasising our broad financial offer and ensuring these solutions are Bigtech proof (pro-active, convenient & personalised)

Beyond bank-insurance

Staying focused on the financial wellness of our customers and offer services to become embedded in our customer's daily life

Proactively providing solutions to fulfill customer needs in a digital first way

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,your digital assistant

KBC's Assistant To Ease your mind …

DIGITAL FIRST STRATEGY

CLIENT NEED ANALYSIS

CONVENIENCE

AI DRIVEN

INTELLIGENT

BEYOND TRADITIONAL BANK-INSURANCE

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, your digital assistant

Hyper personalised and trusted financial digital assistant

PERSONALISED & DATA DRIVEN

The interaction between the customer and Kate will

be triggered by data analysis (approval granted by

customer). Kate will be trained on the basis of the

customer's profile, preferences and activities

DIGITAL FIRST & E2E

We will offer the client a frictionless

End2End digital process and in doing so make

bank/insurance simple and hassle free

'No hassle, no

friction, zero	SERVING: SECURE & FRICTIONLESS
Kate will help the client saving time and/or money,
delay'
focusing more on the convenience factor. Kate will
Johan Thijs
	also serve the client regarding security and fraud

RELEVANT & VALUABLE OFFER

Kate will only propose offers where sufficient added value is shown or when she can serve the client in an important moment in the client's live

AT THE RIGHT TIME

Lead journeys driven by time or location are preferably taken care of by Kate, as notifications linked to a specific location or specifying moment in time are perceived as highly personal

VOLUME

We want all our clients to meet Kate as much as possible. Kate will allow us to reach out to a sufficient volume of clients, in terms of transactions and in terms of number of targetable audience

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, your digital assistant

Disruptive strategy: impact on allproducts & processes

'We take control of the entire customer journey'.

Johan Thijs

All product

development and updates are tailored to KATE, the new normal

.

All process

development and updates are tailored to KATE, the new normal

Interaction

between

branches, KBC Live and KATE maximised to boost pickup rate of Kate

solutions

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Follow-up of

success rate	Create the
on both	feedback loop
product level	('feed the
and individual	machine')
level

,your digital assistant

14 Cases to be rolled out in BE in 2020

First Date With Kate:

"Hi Johan, I'm Kate your digital assistant. Do you want to know what I can do for you?"

Money Transfer: Hi Kate, Transfer 100€ to Jan Peeters

Search Transactions: Hi Kate, have I paid my Telenet invoice this month?

Proof of Insurance / File a car claim :

Hi Kate, show my cars proof of insurance?

Hospitalisation:

Hi Kate, show my Assurcard? Can I help you to file your hospitalisation claim?

Mortgage:

"Hi Johan, Do you want to know how much you can spend on your mortgage?"

Kids are starting to drive

"Hi Johan, I noticed your daughter started taking driving lessons. Can I add her to your car insurance?"

Nudge about unused features current account

"Hi Johan, your card is about to expire. You can personalise your card. Shall we do this right away?"

The first 14 Kate use cases will be active for our 1.5m Mobile users Dec 1st.

Downsell Car Insurance:

"Hi Johan, I noticed your car is more then 5 years old. I think we can optimise your insurance coverage for your car."

Energy Switch:

"Hi Johan, I noticed you paid your energy provider. Are you interested in finding out how much you could save for your situation?"

After the storm:

"Hi Johan, That was quite a storm. I hope nothing got damaged? I'm here when you need me (assistance/file a claim)"

Travel case:

"Hi Johan, I noticed you are traveling abroad. Don't forget check your credit card limits & to arrange your settings for payments outside the EU. Shall we do this right now?"

Stop Parking 4411:

"Hi Johan, I noticed you reached your car. Can I end your active parking session?"

Payments:

"Hi Johan, You can save money by switching from your basic to plus account. Do you want to find out more?"

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,your digital assistant

7 Cases to be rolled out in CZ in 2020

First Date With Kate:

"Hi Johan, I'm Kate your digital assistant. Do you want to know what I can do for you?"

General Questions:

Approx 1000 questions and answers related to multiple bank products and general topics.

Pet Insurance

"Dear Ellen, do you know you could insure your pet for vet charges?"

Debit/Credit Card delivery

"Dear Ellen, your credit card is about to expire, would you like to check where it will be delivered to?"

Thefirst6Kateuse caseswillbeactive fortheDokapsy usersinCSOBby Nov25th

One time insurance:

"Dear Ellen, I can arrange a travel insurance for you."

Travel Insurance Reminder

"Dear Ellen, you are already set up! With the premium insurance you have you don't have to worry about getting insurance for your trip"

Energy Comparison (will be launched by December)

"Dear Ellen, you could save up to 500 per month by changing your energy provider"

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,your digital assistant

Beyond 2020 …

Starting 2021, we will launch at least 2 new cases every month !

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Differently: the next level

Products and services are top-notch

KBC relies on its own products for Financial Services

i.e. Closed product architecture

KBC relies on 3rd parties for non -financial services

KBC acts as gate-keeper in these eco-systems

KBC's products and services are top -notch

of high standards, simple and easy to use (zero-hassle)

Requires investments in E2E processes

These processes need to be digital first

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Continuously improving the customer journey by matching identified customer needs with high-end personalised product & services that solve these needs

Differently: the next level

Digital lead management: From data driven to solution driven

LEVEL 4: Fully automated lead life cycle management

LEVEL 3: AI-powered lead life cycle management

LEVEL 2: Lead life cycle management

LEVEL 1: Basic lead management

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SOLUTION	DRIVEN	rate
DATA	DRIVEN	Exponential conversion

Differently: the next level

What we deliver?										'Our clients are
											massively
											turning to
								STRAIGHT	digital.'
								Johan Thijs
								THROUGH
					SOLUTION	PROCESSING
		TOP-NOTCH	DRIVEN
		PRODUCT &
		SERVICES
FOCUS ON
CLIENT NEEDS

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THE STRONG BASIS REMAINS THE SAME !

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Differently: the next level

The strong basis remains

+

+

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Differently: the next level

Powered by PEARL+

Performance

'Why would you build exactly the same thing in your country, when you have the solution next door?'

Johan Thijs

Differently: the next level

Bank-insurance+

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Differently: the next level

Among the best performing financial institutions in Europe …

Differently: the next level

Monitored through the KBC performance diamond

	The performance diamond defines, within
	the limits of the risk management
	framework, the targets for KBC Group and
PROFIT	for all the business units for 4 performance
	dimensions:

NET PROFIT

STAKE- CAPITAL HOLDERS

LIQUIDITY

CAPITAL

LIQUIDITY

STAKEHOLDERS

Clients, staff, society, shareholders

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Differently: the next level

Geographical playing field

CORE COUNTRIES	FINTECH	CORPORATE FINANCE
Strategy remains focused on our 6	Developing a FinTech network: next	Additionally we reviewed the focus of
core countries, where we continue	to partnerships, FinTechs can be	KBC Securities and are developing an
to look for bolt-on acquisitions	acquired in order to support the	advisory services franchise, adapted
	implementation of our strategy by	to our midcap corporate banking
	addressing our current white spots	client base in our core countries,
		whilst allowing a limited expansion as
		well in our neighboring countries,
		leveraging on international networks

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Differently: the next level

Retail/SME vs SME/corporate: same approach - different speeds

DIGITAL

• Trusted partner for financial and related services (Bank- Insurance+)
• Intelligent digital assistant 'KATE' that pro-actively takes the hassle to fulfill financial needs away from the client
• We offer convenience by simplifying daily activities
• KBC relies on its own solutions for financial services. For non- financial related services we rely on 3rd parties

Retail/ SME/

SME Corporate

PHYGITAL

• Trusted partner for financial and 'strategically adjacent' services
• The human factor remains paramount, through accountmanagers, with data and technology acting as prime levers
• a strong regional advisory services franchise
• Strategic adjacent services ensure a complete integrated Bank-Insurance + customer journey and offer

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Differently: the next level

SME/corporate banking: full service franchise

Equity, debt & corporate finance solutions

Seamless

CORPORATE BANKING

RETAIL BANKING

WEALTH MANAGEMENT

ADVISORY SERVICES

Local

Reference

Proactive

Entrepre-

neurial

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Differently: the next level

SME/corporate banking: Regional advisory service

	Our capabilities …
Raising the bar …		SECTOR EXPERTISE
Creating more options
…	STRONG RELATIONSHIPS with	INTERNATIONAL CONNECTIVITY
Structural trends …
PRIVATE EQUITY and	KEY DECISION MAKERS
PRIVATE DEBT FUNDS GROWING		DIGITAL TRANSFORMATION,
DESINTERMEDIATION		SUSTAINABILITY & ENERGY
PUSH for		TRANSITION
CAPITAL MARKETS UNION	QUALITY DEBT- and EQUITY FINANCE

SOLUTIONS & CORPORATE FINANCE

SERVICES	TRACK RECORD in ECM & DCM
	ORIGINATE-TO-DISTRIBUTE

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Differently: the next level

Taking AML to the next level

• Compliance groupwide function with clear governance structure
• Identical building blocks in different countries
• International cooperation supported by Expertise Board

Centrally	Top
steered -	Management
Group wide	Priority

• Responsible behavior top priority of
  CEO
• Periodic reporting to highest management levels

• Constantly improving awareness and culture.
• Constantly updated rules and policies
• Career long training and e-learning, more general or dedicated to client facing staff
• Clear guidelines with regards to atypical transactions

Built in

Culture, not

bolt on !

Embrace

innovation

and

technology

• Advanced data driven detection.
•	Advanced monitoring tools
	using AI engine (algorithmic
	self-learning model)
•	Rule-based→ trend-based

	Strict client
• Part of the integration process in M&A	acceptance	Compliance
• Very limited N° of non-resident clients	(KYC) and
• Regular updates of client information (supported	transaction	Future proof
by Big Data and AI)	monitoring	and scalable
• Behavioural analysis + use of scenario tools	(KYT)
	processes

•	Increased focus on monitoring and
	constant quality control
•	First layer of defence is network

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Remain a reference: increase of ambition levels Strongly embedded in our organization

4 focus domains Financial literacy

Environmental Responsibililty

Stimulating entrepreneurship

Longevity or Health

Clear shift into 'environment / climate'

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Differently: the next level

Role in society: Sustainability

TRANSLATION

IN OUR

NON-FINANCIAL

GUIDANCE

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Differently: the next level

Translating strategy into non-financial targets

TARGETS

CLIMATE-RELATED

MORE STRINGENT

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Differently: the next level

We substantially raise the bar for our climate-related ambitions (1)

Renewable energy loans

(in % of total energy-sector loan portfolio)

SRI Funds

(in billions of EUR)				41%	44%	57%	57%	65%
			30
	9	12	14
7		2017	2018	2019		1H20 target '30 Direct coal-related finance
																	(in millions of EUR)
2017	2018	2019	1H20 target '25
		➢ Target raised from 50% to 65% by '30

• More than doubling of SRI funds by '25

➢	SRI funds ≥ 50% of new fund production by '21	252		34	36		FULL
	86	10	EXIT
		2016	2017	2018	2019	1H20	2021

➢ Proven track record in building down direct coal exposure

➢ Firm commitment to exit coal, supporting existing clients in their transition

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Differently: the next level

We substantially raise the bar for our climate-related ambitions (2)

Green electricity

	(in % of own electricity consumption)									Reduction own GHG emissions
														(in %, compared to 2015)
74%	78%	83%	83%			100%					80%
													29%	38%	50%
2017	2018	2019		1H20 target '30
	➢ Target raised from 90% to 100% by '30
	2017	2018	2019	target '30

Low Risk - 4th percentile of 385 diversified banks (Nov 4, 2020)

C (Prime)

A- (Leadership)

• Target reduction of own emissions raised from
  65% to 80% by '30

72/100

• KBC will achieve full climate neutrality as of the

end of '21 by offsetting the balance

Inclusion in the SAM

Sustainability

Yearbook 2020

4,6/5

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Differently: the next level

Translating strategy into non-financial targets

TARGETS

OPERATIONAL

NEW

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Differently: the next level

From key priorities to operational targets

CUSTOMER NPS RANKING

Maximize customer

No hassle, no frills, zero- delay customer experience

Proactive personalized

financial solutions via DATA

and AI

Re-design & automation of

all processes

Bank-insurance+

Digital lead management: from data driven to solution driven

Group-wide collaboration

• DIGITAL SALES

Go for

Digital first

experience

DATA

DRIVEN

Further

enhance

bank-

insurance

Outperform

on

operational

efficiency

STP

SCORE

• BANK-INSURANCECUSTOMERS

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Differently: the next level

Introducing 4 new operational targets (1)

Customer NPS ranking

Top-2Top-2

current

target '23

• Target is to remain the reference (top-2 score on group level)

Based on weighted avg of ranking in six core countries

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% bank-insurance (BI) clients

77%		85%
				22%		27%
current BI	target '23		current stable	target '23
					BI

• ≥85% of active customers to be BI customers
• ≥27% of active customers to be stable BI customers

BI customers have at least 1 bank + 1 insurance product of our group. Stable BI customers: at least 2 bank + 2 insurance products (Belgium: 3+3).

Differently: the next level

Introducing 4 new operational targets (2)

% digital sales

(bank / insurance)

31%	40%
		25%
		14%
current	target '23	current	target '23
bank		insurance

• Digital sales ≥40% of bank sales
• Digital sales ≥25% of insurance sales

Based on weighed avg of selected core products

STP score*

(straight through processing)
60%	80%
38%
22%

current target '23	current target '23
STP	STP
	potential

• STP ≥60% and STP potential ≥80%

The STP-ratio measures how many of the services that can be offered digitally are processed without any human intervention and this from the moment of interaction by a client until the final approval by KBC.

STP potential measures what the STP-ratio would be if KBC would only have the digital channel in its interaction with clients for a given process or product.

* Based on analysis of core commercial products.

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