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2017-02-09

KBC Group: Ireland new core market of KBC Group. KBC Bank Ireland : a Digital-First Customer Centric Bank.

Press Release

Outside trading hours - Regulated information*

Brussels, 9 February 2017 (07.00 a.m. CET)

Ireland: new core market of KBC Group.

KBC Bank Ireland
: a Digital-First Customer Centric Bank.

During its meeting yesterday, the Board of Directors of KBC Group decided on
its strategy in relation to the Irish market.

* KBC Group confirms its long standing commitment of almost 40 years to the
Irish market. Ireland will become one of the group's core markets,
alongside Belgium, Czech Republic, Bulgaria, Slovakia and Hungary. As a
consequence, KBC Bank Ireland will strive to achieve at least 10% market
share in retail and micro SME segments and will plan to develop
bank-insurance similar to other core markets of KBC Group.
* KBC Group will pursue a fully-fledged sustainable growth strategy based on
implementation of a 'Digital First' customer-centric strategy.
* KBC Bank Ireland will accelerate its efforts and investments in expertise
and resources to evolve fully into a digital-first customer-centric bank,
while continuing to carefully and efficiently manage its legacy portfolio
for maximum recovery. The bank will facilitate 'always-on 24/7
accessibility' in terms of distribution and service.
* The bank will continue to attract retail and micro SME customers. The
banking product offering will include day-to-day banking services, as well
as access to credit and savings and investments. Recognising ever changing
consumer trends the bank will cater also for the new emerging digital savvy
consumer in the future.
* Insurance products (life and non-life) will continue to be offered through
partnerships and collaboration. KBC Bank Ireland will continue to cultivate
its current relationships with insurance product providers.
* To digitalise and innovate faster, KBC Bank Ireland will intensify its
collaboration with KBC Group entities and leverage proven innovations and
learnings from other KBC core markets. KBC Bank Ireland also has a unique
business model with its integrated distribution model (with online and
mobile supported by a contact centre and physical hubs) , from which other
KBC Group core countries can learn.
* Through its integrated distribution business model, KBC Bank Ireland will
be given the support to innovate. For example, distributing its products
through non-captive channels, on behalf of and to the benefit of its own
growth and that of the entire KBC Group. Moreover, the bank's new core
banking system with an open architecture will allow KBC Bank Ireland to tap
into opportunities offered by the fintech community and provide services
from and to other market players, thus broadening the value proposition to
its own customers and playing a frontrunner role for KBC Group.

* To realise these ambitious plans, KBC Bank Ireland has plans to recruit
additional expertise across domains like business integration, smart data,
digital development and testing.

Johan Thijs, KBC Group CEO
commented : 'During the recent economic and financial crisis that hit the
country, our
colleagues in Ireland have gone through very tough times. We admire the
resilience and strong determination they have shown in those challenging
circumstances and how they managed to return to profitability as soon as
2015, earlier than we had anticipated. On the back of the encouraging
turnaround they achieved and strong results for financial year 2016 (net
profit after tax of 184 million euros) and after having made a thorough
analysis, we believe Ireland is a sound and attractive market which presents
opportunities and in which we wish to play a more active role. Ireland
provides diversification to our operations in Western and Central Europe.
Going forward, Ireland will be a core market in which KBC will continue to
invest. KBC Bank Ireland will be the customer-centric bank of the future
where digitalisation will support a great customer experience. Moreover KBC
Bank Ireland will be a frontrunner in the digital transformation of the KBC
Group where digital solutions will be tested for further group-wide roll-out.

We believe we have the people in Ireland with the right skills, the energy and
determination to do this and we are ready to support them. In

the medium and long-term this customer-centric approach, combined with the
differentiation through innovation, partnerships and collaboration will
result in a sustainable future-proof business model and financial results for
KBC Bank Ireland, to the benefit of its customers, staff and all other
stakeholders.'

Luc Gijsens, CEO of KBC's International Markets Business Unit and Chairman of
the Board of KBC Bank Ireland
added: 'KBC has been present in the Irish market since 1978 when we acquired
Irish
Intercontinental Bank (which became KBC Bank Ireland in 2008). We've been
through boom times and recessions but we have always maintained a belief in
Ireland and supported our Irish colleagues

.

I would like to extend my thanks to CEO Wim Verbraeken, his management team
and staff who have led the organisation over the past years as it transformed
itself into a relevant retail bank in the Irish landscape.

I am convinced that both the customers and the employees of KBC Bank Ireland
as well as all other stakeholders will benefit significantly from our
decision to

strengthen and invest in the KBC franchise here.

KBC wants to play an increasingly important role in supporting the local Irish
economy and society and help Irish retail and micro SME customers realise
their dreams.'

Wim Verbraeken, CEO of KBC Bank Ireland
welcomed the decision: 'On behalf of the management and all employees of KBC
Bank Ireland, I am truly
delighted with this decision. Everybody has worked extremely hard to
accomplish a spectacular turnaround in difficult and challenging
circumstances. We have managed to increase our customer base and deposits by
75% and 109% respectively, in the space of four years. We realise that our
path to the future will be lined with both opportunities and challenges. But
we are eager and have the skills, energy and determination to build this bank
into the first digital-first customer-centric Irish bank, offering our
customers instant, accessible and proactive solutions. We remain even more
firmly focused on meeting customers' needs for innovative, competitive
banking products and growing market share across our business. We are
especially grateful to our longstanding shareholder, KBC Group, for giving us
this tremendous opportunity and support to also become an innovation testing
ground for digital-first solutions that can be used throughout the entire KBC
Group. This fills us with pride and a great sense of responsibility. And we
are fully ready to assume the role.'

Ireland: solid macroeconomic fundamentals and growth prospects

The Irish economy has performed very well in recent years with 2016 set to be
the third year in a row in which it posted the strongest GDP growth in the
European Union. Importantly, the increase in GDP in 2016 which is estimated
at about 4% was primarily driven by a strengthening trend in domestic
economic activity. This translated into the fastest increase in employment in
nine years and prompted a further sharp drop in the unemployment rate to 7.2%
in December, a remarkable improvement from the early 2012 peak of 15.2% and
now also clearly below the latest figure for the EU average of 8.3%. The
pick-up in labour market conditions also resulted into a return to net inward
migration in 2016.

In turn, these conditions have underpinned a stronger trajectory in consumer
spending and the emergence of pent-up demand for housing. Accordingly, new
lending to households has picked up notably while household deposits have
held broadly stable. Healthier domestic economic conditions have also led to
a further reduction in Irish government borrowing with end 2016 data likely
to show Ireland's public deficit and debt below the Euro area average.

A more uncertain global environment, particularly in relation to policy shifts
in US and UK, may weigh on the pace of Irish GDP growth in the coming years.
However, significant improvements in cost competitiveness in recent years, a
stronger trend in domestic spending augmented by favourable demographics, a
supportive fiscal stance and a favourable borrowing environment should
provide significant offsetting support to activity and employment in the
Irish economy. As a result, it is widely envisaged that Irish economic growth
will remain above the European average.

Ireland has the youngest, digitally savvy population in Europe. 40% of the
population are under 29 years of age. According to the Google Consumer
Barometer Survey 2015/16, the Irish are arguably the biggest internet mobile
phone users in Europe / the Western world. The country has the highest
percentage of population working in IT with third-level degrees (Eurostat).
Ireland's education expenditure is close to the top in Europe (Eurostat) with
educational outcomes also close to top in Europe (OECD/PISA Report 2016).

KBC Bank Ireland: a digital challenger offering a platform for expansion (
www.kbc.ie)

The banking landscape in Ireland has contracted significantly since the
financial crisis. The sector itself is moving out of crisis mode and
beginning to invest again and there are indications of good growth potential.

Today KBC Bank Ireland is the only remaining privately owned (100% by KBC)
bank left and is the primary digital challenger bank with a very focused
physical distribution presence through its hubs.
KBC Bank Ireland has been providing banking services in Ireland for almost 40
years and the bank has been transitioning from a mortgage and corporate
lender to a retail bank since 2013.

KBC Bank Ireland is not a traditional bank with an extensive, legacy
distribution network. The bank has a physical footprint with later opening
hours and Saturday opening. Over 1 000 employees in Dublin, Cork, Limerick,
Galway, Kilkenny, Waterford, Wicklow and Kildare are dedicated to creating a
bank where the customer comes first. TheBank of You
approach shines through in the products and services, and in the bank's
dealings with its customers, shareholders, team and the Irish community.

2016 was a year of strong growth driven by a customer focused approach which
is helping deliver on KBC Bank Ireland's strategy of becoming Ireland's
retail bank of the future. KBC's challenger brand grew in 2016 and received
external recognition for its growing contribution to financial services in
Ireland. KBC's reputation ranked number 1 in retail banking (Reptrak) and the
bank achieved the prestigious Business in the Community Mark which recognises
its commitment to principles of contribution to society and sustai...

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