TREASURY SEMINARAntwerp, 2nd of March 2017

BY ROB RÜHL

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CONCLUSIONS

• Impact (adverse) of Brexit on the UK is overstated

• Main risk is retaliation by the EU Commission

• Challenges for the EU are underestimated

• By 2020 a strong English Pound, a stronger US Dollar and a weak Euro

BY ROB RÜHL

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CONTENT

FACTS AND ALTERNATIVE FACTS ABOUT BREXIT: WHAT ARE THE IMPLICATIONS FOR THE CORPORATE TREASURER?

• Process towards Brexit

• Risks and opportunities for the UK economy

• Challenges for the EU and the Belgium economy

• Treasury environment in 2020

BY ROB RÜHL

BREXITFACTS AND ALTERNATIVE FACTS

BY ROB RÜHL

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BIGGEST RISKS UK

BY ROB RÜHL

“Supertramp: Fool's Overture

History recalls how great the fall can be. It seemed the answers were so easy to find. "Too late," the prophets (profits) cry. The island's sinking, let's take to the sky

• Uncertainty in the process towardsBrexit

• Retaliation by the EU commission

• Strengthening pound

“The island’s sinking, let’s take to the sky.”

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BREXIT ASSUMPTIONS

• Article 50 proposal inEUcouncil (9-10 March)

• Two year period of exit negotiations

• Breathing space to negotiate a FTA with EU.

• Article 50 starts in 6 months

• Followed by an interim EEA style arrangement

• FTA with EU

BY ROB RÜHL

“WTOBASEDDEALISSTILLPOSSIBLE.”

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IMPACT OF BREXIT: ON THE U.K.

PLUS MINUS

BY ROB RÜHL

• Still trade with EU

• Low £ stimulates exports

• FTA’s with others (US)

• Business climate improves

• FDI inflow triggered

• Financial center London stays

• Uncertainty

• Less (foreign) investments

• Trade diversion

• Changes financial sector

• Weak £ à inflation

• Passporting

“JAMIE OLIVER CLOSES 6ITALIAN RESTAURANTS IN UK.”

“BYE BYE BENIDORM.”

-3.5%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

Brexit sceanrio's versus base (Real GDP growth)

CustomsUnion FTA WTO

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CHALLENGES FOR THE EU

OPPORTUNITIES MINUS

BY ROB RÜHL

• Reforming EU

• Reduce size bureaucracy

• Introduce a Northern and a Southern Euro

• Punishment of UK

• Long lasting negotiations• Negative impact EU economy,

trade

• Less FDI inflow

• Loss of popular support

Main risk: it takes too long

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IMPACT OF BREXIT: ON BELGIAN ECONOMY

PLUS ? MINUS in 2016 -2026

BY ROB RÜHL

In case of a WTO deal, multiply the results by 3

Compared with base case

• GDP growth 0.1% less

• Export goods and services 8% less

• Import goods and services 6% less

• Employment 3,000 jobs less(manufacturing, distribution andbusiness services)

TREASURY SCENARIO BY 2020

10BY ROB RÜHL

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THE TRUMP HERITAGE IN 2020

BY ROB RÜHL

• Moderate US Growth

• Government deficit up by 50%

• Inflation up but managable

• Fed rate increased at least ….bps

• Long term bond rate up by...bps

• Stronger US dollar weighs on export competitiveness

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CURRENCY AND INTEREST RATES IN 2020

BY ROB RÜHL

Eng £ under strong upward pressure, MPC keeps Base rate flat

US $ still strong due to mixed bag of Trump results, one or two Fed rateincreases and higher bond yields

€ under downward pressure, ECB ‘s tapering and interest rate increase. Notenough to stop weak €

”HEDGE THE EURO!”

”NORTHERN AND SOUTHERN EURO?”

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BANKING ENVIRONMENT IN 2020

BY ROB RÜHL

• Change in distribution of services betweenUK and EU

• Passporting of regulations

• Back to home markets and core business, less risk appetite

• Competition by alternative funding sources for corporates

• Reduction complexity of banking processes

• Participation in open banking concepts withfintech companies

0

10

20

30

40

50

60

70

80

Bank Financing Corporate bonds

Private placements

Securitisation vehicles

New alternatives

Financing Dutch Corps

2010 2016

72%

63%

22%

33%

1% 3% 5%1%

Source:DNB2015

CURRENT SITUATION

DIFFERENT BREXIT SCENARIO’S

HURDLESEU member Bilateral FTA with

EUBilateral FTA with each EU country

WTO

Technical restrictions

No ? ? Yes

Capital restrictions No ? Yes Yes

Regulators No Yes Yes Yes

Taxes WHT No Yes Yes Yes

Taxes on X services No Yes Yes Yes

Corporate tax Yes Yes Yes Yes

Response EU banks No Yes Yes Yes

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CASH POOLING IN DIFFERENT BREXIT SCENARIOS

BY ROB RÜHL

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• This presentation was prepared by Rob Rühl, Director of Next Markets Advisory. The views expressed in this presentation reflect the personal views of the author. The presentation was prepared at the request of PowertoPay solely for the information of its clients. It contains no investment advice or an offer for the purchase or sale of any financial instrument or product. The information contained herein is not untrue or misleading at the time of presentation. The information contained herein is subject to change without notice. The author cannot accept any liability for any direct of consequential loss or damage arising from any use of this presentation or its contents. Copyright protection exists with respect of the contents of this presentation. Therefore nothing may be reproduced, distributed or published by any person for any purpose without prior written consent of the author.

• Main source of information: Oxford Economics, OECD and IMF several publications