#1KBC Group Investor presentation Acquisition of Raiffeisenbank Bulgaria More information: www.kbc.com KBC Group - Investor Relations Office - E-mail: [email protected] 1 KBC#2Important 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. KBC 2#3Executive Summary 1 Transaction summary: KBC Bank NV has agreed to acquire 100% of Raiffeisenbank Bulgaria (RBBG) from RBI for a total consideration of 1 015m EUR, paid in cash. 2 3 Indisputable strategic rationale: Strengthening our #3 position in the Bulgarian banking market. The proforma combined entity (RBBG and UBB) would reach 18.2% market share by assets, becoming the #2 player in loans. It will allow KBC to benefit from the underpenetrated Bulgarian financial services market and strong macroeconomic fundamentals and reinforce our position as #1 financial group in Bulgaria. Strong financial rationale, EPS accretive from year 1 onwards, whereby purchase price represents a 1.64x multiple of the 2022E Tangible Book Value (1) of the target and a 13x P/E (2) (based on 2022E earnings) Leveraging on the combined entity & KBC expertise we see benefits from synergies quickly ramping up from ~12m EUR in 2022 to ~29m EUR in 2024 and remaining above ~25m EUR from 2025-2031 (pre-tax numbers) 4 Capital Impact on KBC Group's CET1 (3Q21: 16.4% (3)) at around -1pp upon closing 5 6 KBC Group Dividend Policy to remain unchanged (at least 50% pay-out ratio including interim dividend and AT1 coupon) Transaction is subject to relevant regulatory approvals and expected to close mid-2022 (1) As per consolidated best estimate book value (2) Including RR synergies (Run Rate synergies: recurring for longer terms & perpetual synergies) (3) No IFRS interim profit recognition. Pro forma CET1 including 100% of 9M21 profit recognition 18.1% 3 KBC#4Agenda 1 Transaction overview 2 Strategic rationale 3 Financial impact 4 Summary 4 KBC#5Transaction highlights Transaction Overview Strategic Rationale KBC Bank NV has agreed to acquire 100% of Raiffeisenbank BG (RBBG) for a total consideration of 1015m EUR (the "Transaction"). The transaction perimeter also includes a leasing company (10.5% market share, 234m EUR portfolio), a small asset management firm (9.7% market share with 106m EUR AuM) and a small insurance brokerage for RBBG leasing and corporate clients. ■ EPS accretive from year 1 onwards. The Purchase Price represents a 1.64x multiple of the 2022E Tangible Book value and a 13 P/E (1) (based on 2022E earnings) ■ The acquisition price will be paid in cash ■Transaction is subject to the relevant regulatory approvals and expected to close in mid-2022 Materially strengthening our top 3 market position of the banking franchise (the 2nd biggest franchise by loans with a 17% market share), in one of KBC Group's core markets, reinforcing our position as the #1 financial group in Bulgaria. ■ Substantial value creation for shareholders through synergies which are expected to reach ~ 12m EUR in 2022 quickly ramping up to ~ 29m EUR in 2024 and remaining above ~25m EUR from 2025-2031 (pre-tax numbers) ■ Raiffeisenbank BG is an attractive successful standalone franchise with a proven track record and a holistic product offering including leasing, asset management and insurance ancillaries, boosting best-in-class NPS scores, aligning perfectly to KBC's strategic priorities. ■ Raiffeisenbank BG has a track record of delivering attractive growth and profitability, on a standalone base. Combined with the net synergy assumptions this leads to attractive return on investment for KBC Group. ■ The transaction allows KBC Group to deploy excess capital in a value accretive transaction, in a core market. ☐ Estimated capital impact on KBC Group's CET1 (9M21: 16.4% (2)) will amount to -1pp upon closing Financial Impact ■ The Transaction will be accretive from year 1 to KBC Group's EPS Source: Company data (1) (2) KBC Bank is financing the Transaction in cash using internal resources KBC Group Dividend policy to remain unchanged (at least 50% pay-out ratio including interim dividend and AT1 coupon) Including RR synergies (Run Rate synergies: recurring for longer terms & perpetual synergies) Fully loaded (Danish Compromise). No IFRS interim profit recognition. Pro forma CET1 including 100% of 9M21 profit recognition 18.1% KBC#6RBBG Overview & Transaction Perimeter RBBG - An Established Universal Banking Franchise in Bulgaria Business Overview & Key Highlights (1) • Raiffeisenbank Bulgaria (founded 1994, HQ: Sofia) is a well-established universal bank in Bulgaria • Full range of banking, asset management, leasing and insurance services to Corporates & Retail (SME, Micro companies and Private Individuals) clients • Trusted brand nation-wide, supported by its #1 NPS ranking for customer experience in Retail and Corporate • Focused on innovation and digitalisation, providing high quality services via online banking and its top rated mobile app RaiMobile • Ranked #6 by assets, loans and deposits as of December 2020 • 122 branches and 572 ATMs across Bulgaria, supported by c. 2.5k employees serving c. 635k customers, of which: (1) ~566,000 Private Customers ~60,000 & 4,400 ~4,400 Micro & SME Customers Corporate Customers Transaction Perimeter & Ownership Structure ☑Raiffeisen Bank International Raiffeisen RS Beteiligungs GmbH Raiffeisen SEE Region Holding GmbH ☑ Transaction Perimeter Raiffeisen BANK Bulgaria • Widely recognized industry platform with continuous industry acclaim and awards: The Banker Raiffeisen Asset Mgmt. BG EAD • 2020 Best Employer Award in all industries 1110 • career show index 2020 2020 Best Bank, Private Bank and Asset Manager in Bulgaria (EMEA Finance) Bank of the Year 2019 BULGARIA НИЕ СМЕ СРЕД 50-те най-добри работодатели 2019 Bank of the Year Bulgaria (The Banker) • Both awards received for the 4th year Source: Company information, SNL. (1) As of 31-03-2021 6 Raiffeisen Leasing BG EOOD Raiffeisen Service EOOD Raiffeisen Insurance Broker EOOD KBC#7Recap: Overview of RBBG Business Segments RBBG is Present Across UBB's Entire Client Footprint Private Client Traditional and digital banking products and services, incl. online and mobile apps and payments, as well as bancassurance Services " Current accounts Savings & deposits (term deposits, child deposits, savings account) Credit & debit cards Consumer loans & mortgages FX and derivative products Precious metal trading Operating Income Split(¹) 44% Corporate Portfolio 4,400 clients, incl. leading clients from all growing and export- oriented sectors; custodian and depositary services Services Current accounts, cash pooling, collection; custody & depositary Term deposits, overdrafts, credit lines & real estate financing Factoring (see callout) European and national funding programs FX and derivative products Operating Income Split(¹) 24% Corporate Micro & SME Lending and non-lending services, including starter packages, payroll, terminals and bank guarantees with the European Investment Fund Services Current accounts Term deposits, overdrafts & credit lines Loans (standard, micro business, agriculture, financing under guarantee agreements, medical specialist) FX and derivative products Operating Income Split(1)(3) 28% o/w Micro Financing for locally registered Micro Enterprises, with an annual turnover of up to €1 million; loans granted to Micro business owners Services Current accounts Term deposits, overdrafts & credit lines Loans with collaterals: purchase of residential property, repair or refinancing of other bank loans Unsecured financing: repairs, furnishing, education, private expenses/plan implementation YoY 11.1% Micro Loan Growth 16% M/S Micro Companies NPS (4): 43 (#1, next: 22) H1'21 Micro Net Promoter Score Non-client & Others Non-client: Group's proprietary financial transactions and market risk exposures management Services FX, securities and derivatives & money market trading Liquidity and interest rate risk management Others: Non-allocated P&L, i.e. cash, capital, assets, and liabilities Operating Income Split(1) 3% Gross Loans Split(2) Gross Loans Split(2) Gross Loans Split(2)(3) 22% 4th 22% 19% 36% Leasing largest leasing company, with leasing in vehicles, industrial machinery, equipment, car fleets, and real estate Delivers leasing services to corporate, small and medium enterprises and private clients; strong access to SME and Micro Clients Smart Leasing pilot project unit within RBI Group 11.7% M/S 9.5% M/S Mortgage Loans Consumer Loans 7.9% M/S Corporate Loans 7.9% M/S Corporate Deposits NPS (4): 53 (#1, next: 38) H1'21 Private Client Net Promoter Score NPS (4): 76 (#1, next: 59) H1'21 Corporate Net Promoter Score 7.5% M/S 9.3% M/S Micro & SME Loans Micro & SME Deposits #1 NPS (4) Across Micro and SME in Bulgaria 10.5% M/S 14,623 Leasing Active Contracts Asset management AuM: €106m €234m Leasing Portfolio Insurance Brokerage (5) GWP: €8m Source: Management Presentation, Company website, Filings. Note: Market shares self-reported. (1) Consolidated, as of 30-06-2020. (2) Standalone, as of 31-12-2020, based on Seller business plan. (3) Split between Micro and SME not available. (4) Source: KANTAR Customer Satisfaction Survey as of April 2021. (5) No insurance underwriting, only sale of insurance policies to predominantly Leasing clients / companies. KBC#8X RBBG - Key Highlights Attractive Franchise with High-Quality Assets and Strong Profitability Attractive Client Franchise . Footprint: universal banking franchise active in all core products & ancillaries • Market position: attractive market shares across all products • Micro Business: differentiated approach to customer segment Customer satisfaction: strong NPS across all segments Loan M/S: 8.4% Deposit M/S: 7.6% NPS Score: 76 Highly Digitalised Distribution Strategy . Mobile penetration: >30% of existing customer base Digital sales: ~20ppts increase over L3Y Digital Loan Sales: 28% Branches: 122 Raiffeisen BANK Bulgaria Attractive Financial Profile Strong track record of growth in the Bulgarian market... ...While simultaneously delivering attractive shareholder returns... ...And remittances to its current parent 12% Loan Growth L3Y @~15% ROATE 1 . High-Quality Loan Portfolio Attractive, well-balanced, high quality loan portfolio... ...With low levels of well-provisioned NPE NPE Ratio: 2.5% NPE Coverage: 122% (H1'21 figures) Employer of Choice . Strong talent base with consistently high employee engagement • 9% CAGR of employee engagement levels since 2014 • Market leading employee satisfaction levels 2021 Best Employer in Banking Award Source: Company data 1 ROATE Return on Average Tangible Equity 8 KBC#9Overview of RBBG Track record of strong pre-impairment profitability RBBG pre-provision earnings (m EUR) 85 85 2012 RBBG net profit (m EUR) 74 79 69 71 68 88 12 72 75 66 99 80 2013 2014 2015 2016 2017 2018 2019 2020 2021E 71 69 69 65 99 25 31 66 56 30 10 -15 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E Source: Company data 9 KBC#10Purchase price & closing requirements Purchase Price Considerations ■ KBC Bank NV has agreed to acquire 100% of Raiffeisenbank Bulgaria (RBBG) for a total cash consideration of 1015m EUR (the "Purchase Price"), payable at closing EPS accretive from year 1 onwards. The Purchase Price represents a 1.64x multiple of the 2022E Tangible Book value and a 13 P/E (1) (based on 2022E earnings) Closing Requirements ■ Closing of the Transaction is dependent upon the regulatory approvals from the Bulgarian National Bank (BNB) and the Bulgarian Financial Supervision Commission (FSC), the non-objection by the National Bank of Belgium (NBB) and the European Central Bank (ECB) and Bulgarian Competition Protection Commission approval ■ The Transaction is expected to close mid-2022 (1) Including RR synergies (Run Rate synergies: recurring for longer terms & perpetual synergies ) + best estimate book value 10 KBC#11Agenda 1 Transaction overview 2 Strategic rationale 3 Financial impact 4 Summary 11 KBC#12In-market combination with sound strategic and financial rationale UBB Part of KBC Group KBC + Райфайзен БАНК 1 Materially strengthening our Top 3 position in banking (having 17% market share in loans), in close reach of #2, reinforcing our position as #1 financial group in Bulgaria 3 2 Attractive investment opportunity with manageable risks Immediate EPS accretive, highly synergetic transaction An attractive transaction with immediate effects 12 KBC#13Empty#14✓ Investment Case & Challenges for KBC Attractive Investment Opportunity with Manageable Risks Key Opportunities Attractive Standalone Franchise with Proven Track Record ■ Successful universal banking franchise with holistic product offering incl. leasing, asset management and insurance ancillaries that align to KBC's strategic priorities ■ Track record of delivering attractive growth (CAGR: 12%) (¹) and profitability (ROATE: ~15%) (1,2) ■ Well capitalised (CET1: 16.5%) (3), clean (NPL: 2.5%) (4) and well provisioned (coverage ratio 122%) (4) Establish UBB as Top 3 Franchise in Consolidating Bulgarian Market ■ Opportunity to establish UBB as Top 3 franchise in the Bulgarian market (PF M/S: ~18%)(5) ... ...Significantly distancing it from the local Tier 2 franchises (Eurobank M/S: 10%; Fibank M/S: 9%) (5) ... ■...And putting it at the level of UCG (M/S: 19%) (5) and OTP (M/S: 18%) (5) Attractive Value Creation Opportunity ■ Realisation of significant recurring cost synergies on the branch network and HQ overlap in Bulgaria ■ Revenues synergy potential from full implementation of KBC bank-insurance model High Return & Dividend Enhancement Potential ■ Attractive return on investment for KBC Group (approx. 10%+ expected) driven by a combination of standalone profitability and net synergy realisation ■ Long term, sustainable enhancement of KBC Group dividend capacity Opportunity to Deploy KBC Group Excess Capital in a Value Accretive Transaction Deployment of KBC Group financial resources into a franchise-enhancing, synergistic and value accretive investment opportunity in a market the group knows intimately ■ Attractive alternative to potential return of excess capital to shareholders Sources: Company Disclosure, SNL. (1) 2017-H1'21 CAGR on Gross Loans. (2) FY2019 (pre-COVID) ROATE on a standalone basis. (3) As of FY2020. (4) As of H1'21 Standalone basis. (5) FY2020 market shares calculated based on total assets; Individual (company) figures based on SNL and company disclosure; Total market size based on BNB annual disclosure for Bulgarian banking sector.. 14 KBC#15Significant synergy potential driving value creation in banking ■ Important efficiency gains, leveraging on the combined UBB and Raiffeisenbank BG entity & KBC expertise Key synergy sources include: Optimisation of branch network Streamlining HQ functions ➤ Optimisation of real estate and procurement costs Savings on HR expenses of combined RBBG + UBB Trusted brands with excellent NPS scores backed by quality of innovative digital platform Migration to a single state-of-the-art IT platform, data centres, call centres, and product factories Full range of banking, asset management, leasing and insurance services to Corporates & Retail (SME, Micro companies and Private Individuals) clients and distribution power through combined network building on KBC group capabilities for revenue synergies Potential to leverage KBC Group's best practices, utilising product capabilities and enhanced commercial acumen Bank-insurance model, including capturing of DZI's insurance underwriting Roll-out of KBC/UBB's Digital First Strategy to an enlarged customer base Supported by KBC/UBB's AI & data analytics capabilities Cross-selling opportunities Enhanced product mix Develop underpenetrated asset management business KBC Group's credit and ALM expertise Total net pre-tax synergies of ~12m EUR in 2022, quickly ramping up to ~29m EUR in 2024 and remaining above ~25m EUR from 2025-2031 15 KBC#16Agenda 1 Transaction overview 2 Strategic rationale 3 Financial impact 4 Summary 16 KBC#17Acquisition to have limited impact on KBC Group CET1 Pro-forma fully-loaded CET1 ratio at KBC Group (Danish compromise) Comments 16.4* CET1 Ratio 9M21 Pre-transaction (100bps) 15.4% 10.60% Overall Capital Requirement CET1 Ratio 9M21 Post-transaction * Remember, No IFRS interim profit recognition. Pro forma CET1 including 100% of 9M21 profit recognition 18.1% Consideration will be fully paid in cash from available funds Limited impact of the transaction on KBC Group CET1 capital ratio of around -1pp upon closing KBC Group remains very well capitalized, well above the fully-loaded regulatory minimum of 10.60% Dividend policy to remain unchanged (at least 50% pay-out ratio including interim dividend and AT1 coupon) 17 KBC#18Overview of combined financials in Bulgaria UBB * Райфайзен БАНК UBB + X Part of KBC Group Райфайзен БАНК Balance sheet (bn EUR)(2020A) Total assets Part of KBC Group 6.5 5.0 11.5 Gross loans 3.4 3.3 6.7 Deposits 5.5 4.1 9.6 Shareholder equity 0.8 0.5 1.3 Net interest income 132 114 246 Operating income 197 169 365 Profit & Loss (m EUR)(2020A) Operating expenses (98) (94) (193) Loan provisions (25) (31) (56) Net income CET1 ratio Loan/Deposits ratio Cost income ratio 52 (2021E: 66)(1) 30 (2021E:56)(1) 82 (2021E:122)(1) 23.5% 16.5% 20.2% 62% 80% 69% 50% 55.9% 52.7% Other Metrics (2020A) Cost of risk (gross, implied) (76bps) (98bps) (87bps) NPL(UBB)/NPE (RGBG) ratio 3.5% 2.5% n.m. Employees (k) 2'665 2'536 5'201 Branches (k) 175 122 297 Clients (k) 942 635 1'577 Source: Company data (1) Additional 2021E net income data, as the 2020 number was impacted by the Covid-19 pandemic 18 KBC#19Agenda 1 Transaction overview 2 Strategic rationale 3 Financial impact 4 Summary 19 19 KBC#20Key takeaways Materially strengthening our #3 position in the Bulgarian banking market. The proforma combined entity would reach 18.2% market share by assets (basically the same as the #2 (OTP) and would become the #2 player in loans (17.0% market share), whilst reinforcing our position as #1 financial group in Bulgaria. Further investment in Bulgaria to benefit from positive macro-economic environment: EU membership and convergence potential, Lev peg to Eur, expected real GDP growth of >4% over the next few years, strengthening legal framework An immediate EPS accretive, highly synergistic transaction: Substantial value creation for shareholders through synergies which are expected to reach ~ 12m EUR in 2022 quickly ramping up to ~ 29m EUR in 2024 and remaining above ~25m EUR from 2025-2031 (pre-tax numbers). Significant additional growth and profitability potential by leveraging on KBC Group's ownership and capabilities (e.g. asset management, insurance, leasing expertise, credit risk expertise and ALM) Limited capital impact on KBC Group's CET1 with impact estimated at around -1pp upon closing The Transaction represents a compelling opportunity for KBC Group to further expand its market position in a well-known core market 20 20 KBC#21Contact information Investor Relations Office E-mail: [email protected] visit www.kbc.com for the latest update 21 KBC