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KBC Groep (KBC.BR) Regulated information* - 6 June 2008 (6 a.m. CEST)
KBC's CEER activities continue to drive strong earnings growth
Net profit contribution from CEER is expected to almost double by 2010
During today's Investor Day in Moscow, the KBC group will present an update of its strategy and business plans for Central and Eastern Europe and Russia (CEER).
Mr Bergen continues: 'the Central and Eastern European and Russian region is expected to remain the group's growth engine over the next few years: the economic outlook for our home markets will support us, and recent initiatives to further strengthen our positions will start to deliver. We are also well on our way to ensure solid earnings growth in the region after 2009. We are now active in new high-growth countries further east and are making additional investments to upgrade technology and extend the business mix further. As announced earlier this year, KBC will invest 600 million euros to upgrade technology in order to harmonise group-wide business processes and IT applications. In the first phase (2009-2011), this will impact the results, but in the long term, the investment is expected to have an annual positive impact in excess of 200 million euros. In the past ten years, KBC has invested 7.4 billion euros in acquisitions. Initially, the group benefited from a strong first-mover acquisition advantage and, more recently, has maintained its pricing discipline. In the years ahead, KBC will focus on developing existing markets, including selected 'plug-in' acquisitions in these markets. We are convinced we have the capacity to generate substantial growth and return, which will benefit our shareholders, customers and staff alike.'
CEER Business Unit to double its net profit contribution by 2010 In his update of the business plan, Jan Vanhevel, CEO of the CEER Business Unit, added that 'volume expansion will be the key driver for earnings growth, while margin and loan-loss trends remain well under control and non-interest income is gradually accelerating. If we execute properly, the Business Unit's net profit will have almost doubled by 2010, from 0.6 billion euros to 1.1 billion euros. Close to 100 million euros of net profit is expected to come from Russia by 2010. Although there is still some work to do, for example, completing the expansion of the sales network, the execution risk is manageable.'
In order to ensure solid long-term earnings growth going forward from 2009, KBC aims to build a fully-fledged bancassurance activity in Bulgaria and Serbia. In Romania, the group will focus on the niches it is already operating in (consumer finance, leasing, securities business), and in Russia, KBC will concentrate initially on mortgage and SME loans, with asset management and insurance possibly being added later.
CEE: fertile ground for equity brokerage and equity corporate finance operations In 2007, KBC Securities was the leading equity broker in the Czech Republic, Hungary and Romania. In Poland, it ranked seventh, while in Serbia it took the number three spot. Meanwhile, market shares in all countries continue to increase. Between 2005 and 2007, some 60 corporate finance professionals in a pan-CEE network with strong local teams have executed transactions amounting to more than 20 billion euros.
Guy Van Eechaute, KBC Securities CEO, summarised the recent developments and expectations: 'KBC has become a leading player in corporate finance and stockbroking services for small and mid-caps and local blue chips throughout Central and Eastern European markets. The combination of local retail investors, international institutional investors investing in emerging countries, and local IPOs and mergers and acquisitions has led to long-term revenue growth with acceptable volatility. The earnings growth outlook for the next 3-5 years is, under normal market conditions, expected to reach a compounded annual growth rate of 30%'.
KBC Private Banking: integrated into Western Europe, due to expand into CEE by 2009 KBC is active in private banking through two complementary models: a KBC-branded network and a network of boutique-style private banks under separate brands (the European Private Banking concept). Its assets under management reached 54 billion euros at the end of 2007, while its underlying net profit contribution amounted to 194 million euros.
Jacques Peters, Senior General Manager European Private Banking: 'The structural review of KBC's European Private Banking Business Unit (EPB) in recent years - including exiting non-core activities and realising synergies - has created the basis for double-digit business growth in onshore private banking in the years ahead. Moreover, KBC is now ready to 'go East' and to sharpen up its strategic objectives by transferring the EPB business model to the CEE markets. Once at full speed, private banking in Central and Eastern Europe is expected to add at least 10% to the profit contribution of the European Private Banking Business Unit.'
Absolut Bank's ambitious plans in Russia Russia's fast-growing economy, political stability and rising purchasing power provide a solid environment for an emerging retail banking industry. Absolut Bank, KBC's recent acquisition, growing rapidly in every aspect, has doubled its size every year over the past five years.
Nikolaj Sidorov, CEO of Absolut Bank, Russia explained: 'With its focussed strategy and ambitious branch expansion program, Absolut Bank is outgrowing many competitors. With the support of our shareholder, KBC, it is our aim to become one of Russia's top-15 banks in terms of total assets. At the same time, risks are closely monitored and risk management standards adequately covered, in close co-operation with our colleagues from KBC. If the business plan is executed properly, Absolut Bank will contribute close to 100 million euros to the KBC group earnings by the beginning of the next decade.'
* This news item contains information that is subject to the transparency regulations for listed companies.
