Belgium more than most, with the near disappearance of Fortis and
the de facto nationalisation of Dexia. But while his bank has not
escaped unscathed, Danny De Raymaeker, CEO of KBC’s Belgian
Business Unit, says public trust in KBC remains relatively intact.
He talks to Douglas
Blakey.
While KBC endured a painful 2008, culminating in its first
annual loss as a result of bad credit investments as well as two
helpings of government support to shore up its capital, the group’s
Belgian business unit reported profit after tax of €1.15 billion
($1.46 billion), down a relatively less painful 16.2 percent
year-on-year.
Go deeper with GlobalData
KBC’s domestic division, comprising the group’s bancassurance
activities in Belgium, including the KBC-branded banking unit,
recorded a number of retail highlights over the year, including an
increase in its customer base by 33 percent and further success in
raising its cross-sell ratios.
“KBC’s unique bank-insurance cross-selling
model has been and continues to be very successful. Mortgages
traditionally show a high cross-selling ratio with home insurance
and loan balance insurances, and last year the figure rose again –
it is now up at 81 percent,” KBC’s Belgium Business Unit CEO, Danny
De Raymaeker, told RBI.
Product innovation in 2008 served to boost
KBC’s cross-sell drive, with the launch of a packaged account,
incorporating a current account, debit card and MasterCard credit
card, while a new pension service was introduced which targeted the
mass market. “It targeted customers of all ages and has also proven
to be a success – in 2008, 43 percent of new contracts were from
customers aged under 30 [in contrast to] the past where pension
products were more successful with older customers.”
KBC also tapped into the market for short-term
savings and investment products with a cash funds offering, which
attracted a net inflow of €1.7 billion. “Partially as a result of
this success, KBC Group’s assets under management increased
notwithstanding the current difficult market circumstances,” he
added.
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By GlobalDataIn terms of segmentation, De Raymaeker said
the financial crisis required KBC to look critically at the bank’s
current business model from the viewpoint of customer behaviour.
This led to a move towards a segmentation model based on customer
attitudes towards the bank and financial services in general rather
than typical segmentation according to age or social category. Some
mass affluent customers expect the services of a personal banker,
cites De Raymaeker, while others are self-directed and would regard
contact from a relationship manager as being “pushy or
inappropriate”.
“It is a mistake to service these different
customer segments in the same way simply because they belong to the
same demographic group,” he said. “We have done intensive research
over the last few years to fine tune our customer approach in this
respect and this will show over the coming months and years.”
KBC’s strong showing in customer satisfaction
surveys is a particular source of pride to De Raymaeker. Despite
the global financial crisis and very public bailouts of the Belgian
banking sector, KBC’s customer satisfaction rating during 2008
declined only slightly, from 72 percent to 70 percent. And on
customer attrition, he was also bullish.
“In 2008, our attrition rate [2.99 percent]
excelled the already low level of 3.7 percent in 2007,” De
Raymaeker said. “While bankers have never been the darlings of
public opinion, there was great confidence in the strength and
durability of the financial system and [the] figures are additional
proof that our customers remain confident and satisfied about their
banking relationship with KBC.”
RESULTS
KBC ‘committed’ to CEE
Having reported a full-year loss of
€2.5 billion ($3.17 billion), KBC received a €2 billion capital
injection from the state designed to increase the bank’s Tier 1
ratio to 8 percent. In the first round of aid, the group received
€3.5 billion from the state in return for non-voting securities
last October, a timely move as KBC had marked down its structured
credit portfolio by €1.9 billion on top of €2.1 billion of other
write-downs. The bank also suffered a €733 million loss on its
shares portfolio, €268 million impairments on Icelandic and US
banks and a €245 million loss on derivative trading positions.
Going forward, KBC said it would minimise risk
by downsizing its investment banking activities and focusing its
activities on its core market of Belgium and Central and Eastern
Europe (CEE). Despite souring sentiment towards CEE (see RBI 607),
KBC has been at pains to stress its commitment to the region. In
2008, underlying loan growth in Belgium was 8 percent, compared
with 25 percent in CEE, while net interest margin in CEE and Russia
increased from 3.0 percent to 3.2 percent. André Bergen, group CEO,
said: “We believe KBC is well positioned, with its exposure being
concentrated in countries that have a lower risk profile.”
On a positive note, KBC has said the group’s
performance in January was ahead of the same period in 2008.
|
Performance |
|
|
KBC – Belgium Business Unit, |
|
|
Net interest income (€m) |
1,984 |
|
Profit after tax (€m) |
1,147 |
|
Cost-income ratio(1) (%) |
88 |
|
Branches – Belgium |
879 |
|
Retail bank customers – Belgium (m) |
3.9 |
|
Market shares – Belgium |
|
|
Traditional retail banking (%) |
21 |
|
Life insurance (%) |
11 |
|
Investment funds (%) |
38 |
|
Note: figures exclude the direct impact of |
|
