under full sail…€¦ · wealth management in kbc belgium cee merchant banking european private...

Under full sail…

Under full sailKBC Investor Day – Prague

Asset management, forging ahead…5

Prague, 7 December 2006Stefan Duchateau

CEO, KBC Asset Management

85

Introduction

• Some basic statistics• General organisation

Asset management strategy

• ‘T/A/SP/I/O’• Some results

Conclusion & outlook

Contents

86

Wealth management in KBC

Belgium CEE MerchantBanking

EuropeanPrivateBanking

AUM:0.6 bn euros

AUM:54.1 bn euros

AUM:9.2 bn euros

AUM:141.2 bn euros

AUM as of 30 Sept. 2006

KBC Asset Managementmanaging 150.6 bn euros

87

020

4060

80100

120140

160

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 1Q062Q063Q06okt/06

KBC AM: AUM trend Some peersUNION: 147 bn (09/2006) Robeco: 137 bn

Breakdown of AUM & FUM : see appendix (1)Strong organic growth : see appendix (2)

09/2006 : 150.6 bn

AUM as of 10/2006: 153.6 bn

88

KBC AM: general organization

DublinActive equity

Tracking error > 5%

BrusselsResearch

Structured productsIndex tilted equity

Sector funds

Coordination

LuxembourgBonds

CEE

Shanghai

Local

Product- and Management platforms

Details on organisation : see appendix (3)

89

Current base of AUMStrong volume base

• Belgium (Flanders)

Strong growth base• Belgium (Flanders), Central Eastern Europe, …

90

Per capita net financial wealth

0

10000

20000

30000

40000

50000

60000

Belgium UK

Netherl

ands

Italy

France

EU-15 (*

)Swed

enGerm

any

Austria

Finlan

dSpa

inPort

ugal

Denmark

Czech

Rep

.Hun

gary

Croatia

Poland

Slovak

iaNE (*

*)Turk

eyBulg

aria

Roman

ia

Source: PFA database (UniCredit Group)

Strong volume base(2003/4, in EUR)

91

Allocation of customer assets in CEE

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CEE AVG Eurozone USA Japan

Other

Insurance(Life,Pension)Funds+directinvestments

Deposits

Strong growth base

Only 23% of client money in funds/direct investments (Eurozone 1.7x, US 2.3x)

CAGR 2001-04: 44% - expected growth rate > 25%

92

Introduction

• Some basic statistics• General organisation

Asset management strategy

• ‘T/A/SP/I/O’• Some results

Conclusion & outlook

Contents

Home Markets’strategy

93

KBC’s asset management strategy

UniqueUnique

ValuableValuable

SubstantialSubstantial

SustainableSustainable

Competition

Customers

Shareholder

Personnel

Strategy concerns the creation of a unique and valuable position,involving a different set of activities …

94

Targets Analysis Strategic Positioning

Implemen-tation

OperationalEfficiency

Asset management strategyThe phased roll-out of our strategy

T A SP I O

95

Clearly defined targetsThe ‘150%’ target:

• AM’s target market share in a home market is the average market share in banking x 150%

• Financial asset growth >> Economic growth

Provide a full range of products:• ‘All Weather Portfolio’

• Right time, Right product, Right price,…Right customer

Provide low-risk, substantial and recurrent income

96

Targets Analysis Strategic Positioning

Implemen-tation

OperationalEfficiency

Asset management strategyThe phased roll-out of our strategy

T A SP I O

Deep understanding of the customer’s fundamental needs drives our innovation process

97

Asset management strategy

Key driversin my industry ?

Background ‘instruments’

Macroeconomic fundamentalsRisk-aversion patterns

Regulatory issuesManufacturing …

Linking analysis to targets

Targets Analysis Strategic Positioning

Implemen-tation

OperationalEfficiency

98

Be the fastest mover in the fastest-moving (substantial) segment of the market …

– Fastest mover

– Fastest-moving segment

StrategicPositioning

Implemen-tation

OperationalEfficiency

Analysis

How to increase market share … ?

Targets

A real life example of how analysis leads to effective product-positioning…

Targets Analysis Strategic Positioning

Implemen-tation

Operational Efficiency

996

5

4

3

2

1

01 2 3 4 5 6 7 8 9 10 11 12

Very def def dyn very dyn

~0…. in 1996> 35 bn EUR in 2006

Investment horizon

Downside Risk

Client typology

100

Global product mismatch

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1

little

somewhat

much

importance

63%

Customer needs

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1

Product offerings

Protected

Source : Mc Kinsey & Company, 9th Annual Investment and Wealth Management CEO conference 01/2006

Capital Protection?

101

-

5.000.000.000

10.000.000.000

15.000.000.000

20.000.000.000

25.000.000.000

30.000.000.000

35.000.000.000

dec/96

mrt/97

jun/97

sep/97

dec/97

mrt/98

jun/98

sep/98

dec/98

mrt/99

jun/99

sep/99

dec/99

mrt/00

jun/00

sep/00

dec/00

mrt/01

jun/01

sep/01

dec/01

mrt/02

jun/02

sep/02

dec/02

mrt/03

jun/03

sep/03

dec/03

mrt/04

jun/04

sep/04

dec/04

mrt/05

jun/05

sep/05

dec/05

mrt/06

jun/06

sep/06

Net inflows in capital-protected structures

Constant proportionportfolio insurance

Option-based portfolio insurance

An engine for growth …

Ratio ‘open’ funds / CGF: ~50/50See appendix (4) KBC AM

102

Back to strategy…

UniqueUnique

ValuableValuable

SubstantialSubstantial

SustainableSustainable

103

Targets Analysis Strategic Positioning

Implemen-tation

Operational Efficiency

design

service

performance

distribution

INSTITUTIONALMARKETS

COMMERCIALBANKS

KBC’sspecific

approach

Needs-based

Access-based

Variety-based

Highly interactive

PRIVATEBANKING

104

Low FeeArea

High FeeArea

High GrowthArea

Low Growth

Area

Capital-guaranteed

Funds

Structured products

Hedgefunds

SpecialBonds

Balanced fundswith floorprotection Special

equity

Realestatefunds

EquityBonds

Highly instrumental for product-positioning...

Targets Analysis Strategic Positioning

Implemen-tation

Operational Efficiency

105

ImplementationRelationship Management

InformationProcesses

Product Delivery

MotivationalStructures

Knowledgetransfer

Portfolio CommitteeMarketing Committee

Trailerfees

Participation

Pro-active positioningStrong focus on ADVICE

548 m EUR in 2006(15 times the level of 1996)

106

AttractiveProducts

EfficientWrapper

ProductionCost

KnowledgeTransfer

GoodPerformance

Conditions

Targets Analysis Strategic Positioning

Implemen-tation

Operational Efficiency

107

Innovative approach ?• Perception?• How well can you put innovation into practice?• Innovation is not about incremental change,

but addresses fundamental needs

100% tuned to network• Based on real demand• Dedicated product development• Minimal ‘time-to-market’

‘De-commoditize’• Allows for innovation premium• Innovation ≠ product proliferation• Innovation implies ‘out-of-the-box’ thinking

AttractiveProducts

EfficientWrapper

ProductionCost

KnowledgeTransfer

GoodPerformance

Targets Analysis Strategic Positioning

Implemen-tation

Operational Efficiency

108

ICBUnit-linkedMutual fundsDiscret. Management

EfficiencyFiscal treatmentTransparencyLiquidity

Targets Analysis Strategic Positioning

Implemen-tation

Operational Efficiency

AttractiveProducts

EfficientWrapper

ProductionCost

KnowledgeTransfer

GoodPerformance

109

Right-sourcing …Manage Complexity…

Targets Analysis Strategic Positioning

Implemen-tation

Operational Efficiency

AttractiveProducts

ProductionCost

Efficientwrapper

KnowledgeTransfer

GoodPerformance

0

10

20

30

40

50

60

70

2004, bp

KBC Belgium: 5.8

European average 19.219.2

Comparison of overall costs to the sample's distribution

Source: McKinsey European Asset Management Survey 2005

110

Focus on attributesinstead of products

Make choices digestibleMake complexity approachable

Performance measure?Consistency?Advice?

AttractiveProducts

ProductionCost

Efficientwrapper

KnowledgeTransfer

GoodPerformance

Targets Analysis Strategic Positioning

Implemen-tation

Operational Efficiency

111

Investment ranking over 3 years (30/9/2006)

5,84%

17,04%

22,65%

18,27%

12,34%

3,55%4,78%

2,28%

12,87%

0,39%

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

1 2 3 4 5 6 7 8 9 10

All funds

NormalDistribution

77% of funds under managementare ranked in the first two quartiles

112

Performance?How good was your performance?

• The answer should be relevant to your client base

• Did you also advise your clients to invest in your (past) outperformers?

Balanced funds provide the acid test …• On a 3-year basis, 92% of our

balanced funds rank in the first 2 quartiles

• On a 1-year basis, 94% of our balanced funds rank in the first 2 quartiles

94%92%

50%50%

0

10

20

30

40

50

60

70

80

90

100

3 Y 1 Y

113

Testing our strategy

Unique

Products?

But most of all: Our people

At AM levelAt sales-support levelAt branch level

114

This is us …

115

8

Example : ČSOB ads follow KBC AM practice and include personalised pictures of IAs.

116

Testing our strategy…

UniqueUnique

ValuableValuable

SubstantialSubstantial

SustainableSustainable

Market share?(Growth)

117

Market share, Belgium

10

15

20

25

30

35

40

dec/

93m

rt/9

4ju

n/94

sep/

94de

c/94

mrt

/95

jun/

95se

p/95

dec/

95m

rt/9

6ju

n/96

sep/

96de

c/96

mrt

/97

jun/

97se

p/97

dec/

97m

rt/9

8ju

n/98

sep/

98de

c/98

mrt

/99

jun/

99se

p/99

dec/

99m

rt/0

0ju

n/00

sep/

00de

c/00

mrt

/01

jun/

01se

p/01

dec/

01m

rt/0

2ju

n/02

sep/

02de

c/02

mrt

/03

jun/

03se

p/03

dec/

03m

rt/0

4ju

n/04

sep/

04de

c/04

mrt

/05

jun/

05se

p/05

dec/

05m

rt/0

6ju

n/06

KBC: 33.92%

Source : BeAMA

118

Δ market share(1996-2006)Δ = 250 m EUR recurrent annual

No. 1 in Cap.-guaranteed 54%No. 1 in Equity fundsNo. 1 in Bond funds

No. 1 in Balanced funds

Market share Value share?

119

Market share, CEE

0,0

5,0

10,0

15,0

20,0

25,0

30,0

Republic Republic

Czech Hungary Slovak Poland

2002Q1

2006/09

Total = 9.4 bn EUR

120

‘50% more’ approach

(30/10/2006: Local official professional sources )

AM activities were highly instrumentalin achieving (helping to achieve) overall targets setfor M&A operations

Czech Hungary Slovak PolandRepublic Republic

Effective AM market share:2002Q1 10% 6% 5% 5%2006/09 27% 18% 10% 4%

Banking market share 18% 12% 5% 5%Target AM market share 27% 18% 8% 8%

121

Rolling out our strategic concept

7166

42

54

45

0

10

20

30

40

50

60

70

80

Slovak R. Czech R. Hungary Belgium Poland

Cap guar

Market share in capital-guaranteed funds (local markets)

122

Testing our strategy…

UniqueUnique

ValuableValuable

SubstantialSubstantial

SustainableSustainable

Sales

123

Total sales, 2000-2005

0

2

4

6

8

10

12

14

16

18

20

2000 2001 2002 2003 2004 2005

2005 total: 17.3 bn EUR (10/2005: 13.4 bn) 2006 total: 13.6 bn EUR

For details, see appendix (5) and (6)

124

3Q 2006Capital-protected Products

Continuous Re-engineeringImproved market conditions

125

More testing

UniqueUnique

ValuableValuable

SubstantialSubstantial

SustainableSustainable

Are we creatingShareholder Value?

126

(in m euros) Est. 2006

Management income * 645 Management costs -46Administration fees 30 Allocated to KBC Administration costs -31 distribution networks

Distribution fees 286 Direct collection byKBC distribution network

Other income 24

Total 908* incl. financial results KBC AM

Revenue creation, AM activities

127

Testing our strategy …

HighPotential

LowPotential

Cannotadd value

Can add value

Natural Owner

KBC AMKBC AM

Source = McKinsey & Company: Next 2006

Industrial mapping

128

Conclusion & outlookIn 2007-09, AM’s earnings contribution is expected to grow at 10-15% p.a.

Successful implementation of our strategy in CEE countries:• Most important targets have already been reached• AM offers economies of scope / scale / financial diversification and synergies vis-à-vis

the Group’s strategy

Continued strong position in Belgium:• High savings rate and general product acceptance provide further room for growth,

even from a platform with high market share • Operationally effective and efficient

Strategy for non-home markets:• China: Oct. 06 license, strategic positioning in CGF• USA: EAFE , high yield equity• Germany / Spain / Taiwan / Hong Kong

129

Appendix (1) KBC Asset Management

Assets under management– Breakdown

Funds under management– Breakdown

Retail47%

CEE

Private 24%

Institutional 23%

Capital-guaranteed Structures

33.6%

Fixed Income22,9%

Equity13,4%

Real Estate0,7%

Money Market5,3%

Balanced23,7%

Hedge Funds0,4%

130

Appendix (2) :KBC: an organic growth story• ‘Financial news’, September 2006• Growth: 01/2000 09/2006

Asset Manager Growth %

Bridgewater Associates US 500GMO UK 362Union Investment GER 233Dimensional advisors US 206AIG Global Investment US 204Capital Group US 197Lord Abbett US 194Russel Investment US 189Eaton Vance US 188

KBC AM342%

131

Appendix (3) KBC, general organisation

Brussels Lux Dublin London Prague Budapest Warsaw Bratislava Shanghai New York

Global Products Design X Local Products Design X X X X X X X Sales Support X X X X X X X X XAdministrative Functions X OS OS OS X X X X X Global Products Management X X X Local Products Management X X X X X X X X

132

Appendix (4)KBC, ‘open funds’ relative to CGF

133

Appendix (5) KBC, total sales 2005-06

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

jan/05 feb/05 mrt/05 apr/05 mei/05 jun/05 jul/05 aug/05 sep/05 okt/05 nov/05 dec/05 jan/06 feb/06 mrt/06 apr/06 mei/06 jun/06 jul/06 aug/06 sep/06 okt/06

2005 2006In thousands of EUR

134

Appendix (6) KBC, capital-protected issues

0

2

4

6

8

10

12

14

2000 2001 2002 2003 2004 2005 2006/10

in bn EUR

CPPIOBPI