KBC GROUP QUARTERLY REPORT3Q2020

Report for 3Q2020

Summary 3 Financial highlights 4 Overview of results and balance sheet 5 Analysis of the quarter 6 Analysis of the year-to-date period 9 Risk statement, economic views and guidance 10

Consolidated financial statements

Consolidated income statement 13 Consolidated statement of comprehensive income 15 Consolidated balance sheet 16 Consolidated statement of changes in equity 17 Consolidated cashflow statement 20 Notes on statement of compliance and changes in accounting policies 22 Notes on segment reporting 29 Other notes 30

Additional information

Credit risk 42 Solvency 48 Income statement, volumes and ratios per business unit 53 Details of ratios and terms 61

the current year.' Forward-looking statements

The expectations, forecasts and statements regarding future developments that are contained in this report are, of course, based on assumptions and are contingent on a number of factors that will come into play in the future. Consequently, the actual situation may turn out to be (substantially) different.

Investor Relations contact details

[email protected] KBC Group NV, Investor Relations Office, Havenlaan 2, 1080 Brussels, Belgium

This report contains information that is subject to transparency regulations for listed companies. Date of release: 12 November 2020

KBC GROUP Report for 3Q2020

Management certification

'I, Rik Scheerlinck, Chief Financial Officer of the KBC Group, certify on behalf of the Executive Committee of KBC Group NV that, to the best of my knowledge, the abbreviated financial statements included in the quarterly report are based on the relevant accounting standards and fairly present in all material respects the financial condition and results of KBC Group NV including its consolidated subsidiaries, and that the quarterly report provides a fair view of the main events, the main transactions with related parties in the period under review and their impact on the abbreviated financial statements, and an overview of the main risks and uncertainties for the remainder of

Third-quarter result of 697 million euros

KBC Group – overview (consolidated, IFRS)	3Q2020	2Q2020	3Q2019	9M2020	9M2019
Net result (in millions of EUR)	697	210	612	902	1 787
Basic earnings per share (in EUR)	1.64	0.47	1.44	2.08	4.19
Breakdown of the net result by business unit (in millions of EUR)
Belgium	486	204	368	605	932
Czech Republic	116	77	159	281	584
International Markets	123	-45	85	113	260
Group Centre	-28	-26	0	-97	10
Parent shareholders' equity per share (in EUR, end of period)	46.6	44.9	43.5	46.6	43.5

During the third consecutive quarter of facing up to the challenges of the pandemic, the harsh reality that coronavirus is still far from being eradicated has become very clear. It is still causing human suffering all over the world and unprecedented economic upheaval. However, the various government relief measures should help control the overall impact going forward. Obviously, the long-term impact of the coronavirus crisis on society will be significant. It will also depend on the number and intensity of any new outbreaks, as well as on the timing of developing and distributing a vaccine or cure.

Meanwhile, we have been working hard with government agencies to support all customers impacted by coronavirus, by efficiently implementing various relief measures, including loan deferrals. In our six home countries combined, we have granted a total of 13.7 billion euros in loan payment deferrals by the end of September 2020 (according to the EBA definition) and have also granted 0.6 billion euros' worth of loans under public corona guarantee schemes. At the same time, we have continued providing a high level of service to our customers in all our core markets, thanks to the expertise and commitment of our employees, in combination with the efforts and investments we have made over the past few years on the digital transformation front. Given that the pandemic has accelerated the trend to digitalisation, we are clearly benefiting from our digital transformation efforts. We will continue to work on solutions to proactively make life easier for our customers, thanks in part to the extensive use of artificial intelligence and data analysis. We will be communicating on this and other topics in more depth during a separate strategy session today, with the accompanying press release being issued at 1 p.m. CET.

As regards our financial results, we generated a net profit of 697 million euros in the third quarter of 2020, leading to a return on equity of 15% in the third quarter of 2020 (when bank taxes are spread evenly throughout the year). The third quarter profit is well above the 210 million euros recorded in the previous quarter, which had included 746 million euros in collective impairment charges for the coronavirus crisis. Our net interest income went up quarter-on-quarter, while our trading and fair value result fared well too, though it was down on the exceptionally high level recorded in the previous quarter. In the current lower-for-longer interest rate environment, this quarterly result is also clearly benefiting from the diversification achieved through KBC's integrated bank-insurance model. This was reflected in a strong non-life result (good premium growth and an excellent combined ratio of 83% year-to-date), as well as higher net fee and commission income. Costs remained clearly under control. Adding the result for this quarter to the one for the first half of the year brings our net profit for the first nine months of 2020 to 902 million euros.

Our solvency position remained very strong, with a common equity ratio of 16.6% on a fully loaded basis, well above the current minimum capital requirement of 7.95%. Our liquidity position remained solid too, with an LCR of 142% and an NSFR of 146% at the end of September 2020. Consequently, our current capital and liquidity buffers allow us to face today's

challenges with confidence.

In closing, I would like to take this opportunity to explicitly thank all stakeholders who have continued to put their trust in us. I also wish to express my sincere thanks to all colleagues who have expended huge efforts to serve our customers and support the sound functioning of the group in these challenging times.

Johan Thijs, Chief Executive Officer

We look to offer our customers a unique bank-insurance experience
We focus on our group's long-term development and aim to achieve
- sustainable and profitable growth • We meet our responsibility to society and local economies

KBC Group I Quarterly Report – 3Q2020 I p.3

Financial highlights in the third quarter of 2020

Commercial bank-insurance franchises in our core markets performed well.
Net interest income increased by 4% quarter-on-quarter and decreased by 4% year-on-year. The quarter-on-quarter increase was due mainly to the positive impact of TLTRO III, a positive one-off item related to inflation-linked bonds (insurance), higher margins on the new production of mortgage loans than the margins on the outstanding portfolios in Belgium, the Czech Republic and Slovakia, and the higher netted impact of ALM FX swaps. These items more than offset the negative impact of past rate cuts made by the CNB in the Czech Republic and the lower reinvestment yields in general. Year-on-year, the decrease was mainly related to the past CNB rate cuts in the Czech Republic, the year-on-year depreciation of the Czech koruna and Hungarian forint against the euro and the negative impact of lower reinvestment yields, which could not be fully offset by the positive impact of TLTRO III, the abovementioned positive one-off item, ECB tiering and a larger loan and bond portfolio.
Loan volumes were up 1% quarter-on-quarter and 4% year-on-year, with year-on-year growth recorded in all business units. The volume of granted loans with payment holidays in the various relief schemes amounted to 13.7 billion euros by the end of September 2020 (EBA definition). Deposits excluding debt certificates grew by 1% quarter-on-quarter and 9% year-on-year, with year-on-year growth in all business units.
Technical income from our non-life insurance activities (premiums less charges, plus the ceded reinsurance result) was down 9% on its level in the previous quarter, which had included significantly lower technical charges related to the effect of the lockdown. It was up 22% year-on-year, thanks to a combination of higher premium income and lower technical charges. Consequently, the combined ratio for the first nine months of 2020 amounted to an excellent 83%. Sales of our life insurance products were down 25% on the level recorded in the previous quarter and up 4% on their level in the yearearlier quarter.
Net fee and commission income was slightly higher (1%) than the level recorded in the previous quarter and down 12% year-on-year. Quarter-onquarter, the positive effect of higher asset management fees was partly offset by the higher level of distribution fees paid. Year-on-year, both asset management fees and banking service fees were down, while distribution fees were up.
The trading and fair value result amounted to 85 million euros, down on the very high level recorded in the previous quarter, and up year-on-year. On the whole, the huge drop in the trading and fair value result in the first quarter of the year has now been offset for a large part by the positive trading and fair value result recorded in the two subsequent quarters.
All other income items combined were 31% and 19% lower than the figures recorded in the previous and year-earlier quarters, respectively, primarily because the quarter under review included a negative one-off item related to the tracker mortgage review in Ireland, and lower dividend income.
Costs have been reduced. Excluding bank taxes, they were down 4% compared to the year-earlier quarter as a result of cost-saving measures. Compared to the low level recorded in the previous quarter, costs were up 3%. The resulting cost/income ratio amounted to 59% for the first nine months of the year, compared to 58% for full-year 2019 (when certain non-operating items are excluded and bank taxes spread evenly throughout the year).
Loan loss impairment charges amounted to 52 million euros in the quarter under review, well down on the 845-million-euro charge in the previous quarter, which had incorporated 746 million euros' worth of collective impairment charges for the coronavirus crisis. As a consequence, the credit cost ratio for the first nine months of the year amounted to 0.61%, up from 0.12% for full-year 2019.
Our liquidity position remained strong with an LCR of 142% and NSFR of 146%. Our capital base remained robust as well, with a fully loaded common equity ratio of 16.6%.

697 390 225 85 -926 Other income 1 122 Net interest income Net fee and commission income Technical insurance income Trading & FV income 50 Operating expenses Net result Other -63 Impairment -2 -184 Income taxes Breakdown of 3Q2020 result (in millions of EUR) Belgium; 486 Czech Republic; 116 International Markets; 123 Group Centre; -28 Contribution of the business units to 3Q2020 group result (in millions of EUR)

Overview of results and balance sheet

Consolidated income statement, IFRS KBC Group (in millions of EUR)	3Q2020	2Q2020	1Q2020	4Q2019	3Q2019	9M2020	9M2019
Net interest income	1 122	1 083	1 195	1 182	1 174	3 400	3 436
Non-life insurance (before reinsurance)	233	255	185	229	192	673	527
Earned premiums	448	435	443	441	440	1 327	1 280
Technical charges	-215	-180	-258	-212	-248	-654	-753
Life insurance (before reinsurance)	1	6	0	2	-5	6	-7
Earned premiums	267	276	297	364	291	841	959
Technical charges Ceded reinsurance result	-266 -9	-271 -13	-297 -7	-363 -11	-297 -9	-834 -30	-966 -14
Dividend income	12	17	12	17	14	41	65
Net result from financial instruments at fair value through P&L1	85	253	-385	130	-46	-47	51
Net realised result from debt instruments at fair value through
other comprehensive income	1	2	0	0	5	4	7
Net fee and commission income	390	388	429	445	444	1 207	1 289
Net other income	37	53	50	47	43	139	234
Total income	1 872	2 043	1 479	2 041	1 813	5 394	5 588
Operating expenses	-926	-904	-1 338	-1 045	-975	-3 168	-3 258
Impairment	-63	-857	-141	-82	-26	-1 060	-134
Of which: on financial assets at amortised cost and at fair value through other comprehensive income2	-52	-845	-121	-75	-25	-1 018	-128
Share in results of associated companies & joint ventures	-2	-3	-3	-1	0	-9	8
Result before tax	881	279	-3	912	812	1 157	2 204
Income tax expense	-184	-69	-2	-210	-200	-255	-417
Result after tax	697	210	-5	702	612	902	1 787
attributable to minority interests	0	0	0	0	0	0	0
attributable to equity holders of the parent	697	210	-5	702	612	902	1 787
Basic earnings per share (EUR)	1.64	0.47	-0.04	1.66	1.44	2.08	4.19
Diluted earnings per share (EUR)	1.64	0.47	-0.04	1.66	1.44	2.08	4.19
Key consolidated balance sheet figures KBC Group (in millions of EUR)	30-09-2020	30-06-2020	31-03-2020	31-12-2019	30-09-2019
Total assets	321 193	317 388	301 451	290 735	294 830
Loans and advances to customers, excl. reverse repos	157 773	157 563	158 364	155 816	154 863
Securities (equity and debt instruments)	71 310	72 131	67 176	65 633	65 122
Deposits from customers & debt certificates, excl. repos	211 672	210 811	208 293	203 369	205 270
Technical provisions, before reinsurance	18 613	18 775	18 816	18 560	18 549
Liabilities under investment contracts, insurance	12 482	12 505	11 979	13 610	13 456
Parent shareholders' equity	19 384	18 710	18 220	18 865	18 086
Selected ratios KBC group (consolidated)	9M2020	FY2019
Return on equity	6%3	14%
Cost/income ratio, banking	61%	58%
(when excluding certain non-operating items and spreading bank taxes evenly throughout the year)	(59%)	(58%)
Combined ratio, non-life insurance	83%	90%
Common equity ratio, Basel III Danish Compromise, fully loaded [transitional]	16.6% [16.6%]	17.1%
Common equity ratio, FICOD fully loaded [transitional]	15.5% [15.5%]	15.8%
Leverage ratio, Basel III fully loaded	5.9%	6.8%
Credit cost ratio	0.61%	0.12%
Impaired loans ratio	3.2%	3.5%
for loans more than 90 days past due	1.8%	1.9%
Net stable funding ratio (NSFR)	146%	136%
Liquidity coverage ratio (LCR)	142%	138%

1 Also referred to as 'Trading and fair value income'.

2 Also referred to as 'Loan loss impairment'. 3 This is 7% when bank taxes are spread evenly throughout the year.

We provide a full overview of our IFRS consolidated income statement and balance sheet in the 'Consolidated financial statements' section of the quarterly report. Condensed statements of comprehensive income, changes in shareholders' equity, as well as several notes to the accounts, are also available in the same section. As regards the (changes in) definition of ratios, see 'Details of ratios and terms' in the quarterly report.

Analysis of the quarter (3Q2020)

1 872 million euros

Total income Total income down 8% quarter-on-quarter.
- Net interest income and net fee and commission income up.
- Technical insurance income, dividend income, trading and fair value income, and net other income down.

Net interest income amounted to 1 122 million euros in the quarter under review, up 4% on the figure recorded in the previous quarter and down 4% year-on-year. The quarter-on-quarter increase was due mainly to the positive impact of TLTRO III, a positive one-off item related to inflation-linked bonds (insurance), higher margins on the new production of mortgage loans than the margins on the outstanding portfolios in Belgium, the Czech Republic and Slovakia, and the higher netted impact of ALM FX swaps. These items more than offset the negative impact of the rate cuts made in the past by the CNB in the Czech Republic and the lower reinvestment yields in general. Year-on-year, the decrease was mainly related to the past CNB rate cuts in the Czech Republic, the year-on-year depreciation of the Czech koruna and Hungarian forint against the euro and the negative impact of lower reinvestment yields, which could not be fully offset by the positive impact of TLTRO III, the above-mentioned positive oneoff item, ECB tiering and a larger loan and bond portfolio.

The total volume of customer lending (158 billion euros) was up 1% quarter-on-quarter and 4% year-on-year, with year-on-year growth recorded in all business units. The volume of granted loans with payment holidays in the various relief schemes amounted to 13.7 billion euros by the end of September 2020 according to the EBA definition (broken down evenly among home loans, SME loans and loans to corporations). For approximately 1 billion euros of that amount, the moratorium has already expired by the end of September 2020 (of which 97% resumed payments). In addition to this, we granted some 0.6 billion euros in loans that fall under the various corona-related government guarantee schemes in our home markets.

Customer deposits including debt certificates (212 billion euros) were up 1% quarter-on-quarter and 4% year-on-year, with yearon-year growth in all business units. Excluding debt certificates, deposits were up by no less than 9% year-on-year. All growth figures disregard forex movements.

The net interest margin for the quarter under review amounted to 1.81%, down 1 and 13 basis points, respectively, on the figures recorded in the previous and year-earlier quarters.

Technical income from our non-life insurance activities (earned premiums less technical charges, plus the ceded reinsurance result) contributed 225 million euros to total income, down 9% on the excellent performance recorded in the previous quarter and up 22% on the corresponding year-earlier quarter. Notwithstanding higher earned premium income, the quarter-on-quarter nonlife technical income decrease came about primarily because of higher technical charges (claims gradually returning to more normal levels following the exceptionally low level in the second quarter as a consequence of the lockdown). The year-on-year increase was due to a combination of lower charges and higher premium income. Overall, the combined ratio for the first nine months of 2020 came to an excellent 83%, compared to 90% for full-year 2019.

Technical income from our life insurance activities (earned premiums less technical charges, plus the ceded reinsurance result) amounted to 0 million euros, compared to 1 million euros in the previous quarter and -6 million euros in the year-earlier quarter. Sales of life insurance products in the quarter under review (420 million euros) were down 25% on the level recorded in the previous quarter, due to lower sales of both unit-linked and guaranteed-interest life products in Belgium. Sales were up 4% on the level recorded in the year-earlier quarter, driven by higher sales of unit-linked products in Belgium (due to the shift from mutual funds to unit-linked products by private banking customers) and only partially offset by lower sales of guaranteed-interest products (due mainly to the suspension of universal single life insurance in Belgium). Overall, in the quarter under review, both unit-linked products and guaranteed-interest products accounted for approximately half of our total life insurance sales.

In the quarter under review, net fee and commission income amounted to 390 million euros. This figure was slightly up (1%) on the level of the previous quarter, with the increase in fees for our asset management business (higher management fees) more than offsetting the higher level of distribution fees paid for non-life insurance products (higher sales), with fee income from our banking activities remaining stable (recovery of payment transaction fees largely offset by a decrease in securities-related fees). Compared to the year-earlier quarter, net fee and commission income was down 12%, due to a combination of lower asset management related fees, lower fees for banking services (especially for payment services), higher distribution fees paid and the year-on-year depreciation of the Czech koruna and Hungarian forint against the euro. At the end of September 2020, our total assets under management amounted to 204 billion euros, up 1% quarter-on-quarter but down 4% year-on-year. The quarter-onquarter increase was due to a further recovery in asset prices (+1%), combined with a limited net inflow in mutual funds. The yearon-year decrease resulted mainly from lower asset prices.

The net result from financial instruments at fair value (trading and fair value income) amounted to 85 million euros, continuing its recovery from the very negative level in the first quarter (-385 million euros), though much less so than the exceptional rebound recorded in the second quarter. Consequently, it was down 168 million euros on the very high level recorded in that second quarter (lower dealing room results, lower amount resulting from market value adjustments and lower result of the insurance share portfolio) and up 131 million euros year-on-year (thanks mainly to higher dealing room results and a higher amount resulting from market value adjustments).

The other remaining income items included dividend income of 12 million euros, down on the figure recorded in the previous quarter (as the second quarter of the year traditionally includes the bulk of received dividends), and also slightly down on the yearearlier figure. The remaining income lines also included 37 million euros in net other income, somewhat below the normal run rate for this item as, among other things, it included a negative 6 million euros for the tracker mortgage review in Ireland (4 million euros of which relating to the tracker mortgage fine).

926 million euros

Operating expenses Operating expenses excluding bank taxes up 3% quarter-on-quarter, but down 4% year-on-year.
- Cost/income ratio for the first nine months of 2020 at 59% (when certain nonoperating items are excluded and bank taxes are spread evenly through the year).

Operating expenses in the third quarter of 2020 amounted to 926 million euros. Excluding bank taxes, this constitutes an increase of 3% compared to the low level recorded in the second quarter of 2020. This was due to a number of factors, including higher staff expenses (wage inflation and the fact that the previous quarter had benefited from a decrease in accruals for variable remuneration), increased marketing costs (seasonal), higher facilities expenses and higher depreciation expenses. These items were not fully offset by the positive impact of, inter alia, a decrease in FTEs and a reduction in ICT and professional fees. Year-on-year, expenses excluding bank taxes were down 4%, thanks essentially to lower staff expenses (lower accruals for variable remuneration and a decrease in FTEs), lower ICT costs, some direct coronavirus crisis impact (lower facilities, marketing and professional fees) and the year-on-year depreciation of the Czech koruna and Hungarian forint against the euro. These items more than offset the negative impact of wage drift and increased depreciation costs, among other things.

The cost/income ratio of our banking activities came to 61% for the first nine months of 2020. Excluding certain non-operating items and spreading bank taxes evenly throughout the year, the ratio amounted to 59%, more or less in line with the 58% recorded for full-year 2019.

Loan loss impairment	•	Net loan loss impairment charges significantly down on their level in the previous quarter, which had included 746 million euros in collective impairment charges related to the coronavirus crisis.
52-million-euro charge	•	Credit cost ratio for the first nine months at 0.61%.

In the third quarter of 2020, we recorded a 52-million-euro net loan loss impairment charge, compared with a net charge of 845 million euros in the previous quarter and 25 million euros in the third quarter of 2019. The huge drop compared to the previous quarter came about because the second quarter had included 746 million euros in collective impairment charges for the coronavirus crisis. In the third quarter, this amount was adjusted slightly (reduced by 5 million euros, following updated macroeconomic forecasts and management overlay), bringing the collective impairment charges related to the coronavirus crisis for the first nine months to 784 million euros. Of this amount, 637 million euros was based on a 'management overlay' and 147 million euros captured by the ECL models through updated macroeconomic variables. A detailed calculation and background information regarding collective impairment charges for the coronavirus crisis is provided in Note 1.4 of the 'Consolidated financial statements' section of the quarterly report.

Broken down by country, loan loss impairment charges in the third quarter of 2020 came to 41 million euros in Belgium, 15 million euros in the Czech Republic, 2 million euros in Bulgaria and 2 million euros for the Group Centre, while both Slovakia and Hungary recorded small net reversals of impairment (5 million euros and 3 million euros, respectively).

For the entire group, the credit cost ratio amounted to 0.61% for the first nine months of 2020 (0.17% excluding the amount recorded for the coronavirus crisis), up from 0.12% for full-year 2019. The impaired loans ratio was down on its level at the start of the year: at the end of September 2020, some 3.2% of our total loan book was classified as impaired (Stage 3), compared to 3.5% at year-end 2019. Impaired loans that are more than 90 days past due amounted to 1.8% of the loan book, compared to 1.9% at year-end 2019.

For an indication of the expected impact of loan loss impairment for full-year 2020, see 'Guidance' on page 11 of this publication.

Impairment on assets other than loans amounted to 11 million euros, compared to 12 million euros in the previous quarter and 1 million euros in the third quarter of 2019. The figure for the quarter under review included several small items (4 million euros of which resulting from an impairment on a lease contract relating to a head-office building in Hungary), whereas the figure for the previous quarter had related primarily to the accounting treatment of payment moratoria in our various countries.

Net result	Belgium	Czech Republic	International Markets	Group Centre
by business unit	486	116	123	-28
	million euros	million euros	million euros	million euros

Belgium: the net result (486 million euros) went up by 282 million euros quarter-on-quarter, due mainly to the drop in loan loss impairment compared to the significant amount recorded in the second quarter, which comprised 378 million euros in collective impairment charges for the coronavirus crisis. Other items accounting for the quarter-on-quarter difference were higher net interest income and lower trading and fair value income (compared to the high level recorded in the second quarter). Net fee and commission income and costs remained virtually unchanged.

Czech Republic: the net result (116 million euros) was up 50% on its level for the previous quarter, due mainly to significantly lower loan loss impairment charges, as the second quarter had included 152 million euros in collective impairment charges for the coronavirus crisis. This more than offset the quarter-on-quarter decrease in net interest income, trading and fair value income and technical insurance result, and the increase in expenses (compared to the very low level in the second quarter).

International Markets: the 123-million-euro net result breaks down as follows: 33 million euros in Slovakia, 51 million euros in Hungary, 27 million euros in Bulgaria and 13 million euros in Ireland. For the business unit as a whole, the net result was up 169 million euros quarter-on-quarter. This increase came about mainly on account of lower loan loss impairment charges in all countries, as the second quarter had included 215 million euros in collective impairment charges for the coronavirus crisis.

Group Centre: the net result (-28 million euros) was slightly lower (-2 million euros) than the figure recorded in the previous quarter, with the drop in trading and fair value income, lower ceded reinsurance result and higher costs being partly offset by higher net interest income (TLTRO III).

	Belgium		Czech Republic		International Markets
Selected ratios by business unit	9M2020	FY2019	9M2020	FY2019	9M2020	FY2019
Cost/income ratio, banking (excluding certain non-operating items and spreading bank taxes evenly throughout the year)	57%	60%	51%	47%	66%	68%
Combined ratio, non-life insurance	83%	89%	87%	94%	82%	88%
Credit cost ratio*	0.59%	0.22%	0.64%	0.04%	0.79%	-0.07%
Impaired loans ratio	2.2%	2.4%	2.1%	2.3%	7.2%	8.5%

* A negative figure indicates a net impairment release (positively affecting results). See 'Details of ratios and terms' in the quarterly report.

A full results table is provided in the 'Additional information' section of the quarterly report. A short analysis of the results per business unit is provided in the analyst presentation (available at www.kbc.com).

Equity, solvency and liquidity	Total equity	Common equity ratio (fully loaded)	Liquidity coverage ratio	Net stable funding ratio
	20.9 billion euros	16.6%	142%	146%

At the end of September 2020, total equity amounted to 20.9 billion euros, comprising 19.4 billion euros in parent shareholders' equity and 1.5 billion euros in additional tier-1 instruments. Total equity was up 0.5 billion euros on its level at the end of 2019. This was due to the combined effect of a number of items, including the profit for the nine-month period (+0.9 billion euros), a decrease in the revaluation reserves for equity instruments of the insurance company (the so-called 'insurance overlay approach'; -0.1 billion euros), an increase in the revaluation reserve for bonds (+0.1 billion euros), translation differences (-0.4 billion euros, due to the depreciation of the Czech koruna and Hungarian forint in the period under review) and a number of minor items. We have provided details of these changes under 'Consolidated statement of changes in equity' in the 'Consolidated financial statements' section of the quarterly report.

At 30 September 2020, our fully loaded common equity ratio (Basel III, under the Danish compromise) amounted to a solid 16.6%, stable compared to three months earlier (despite 1 billion euros in RWA add-ons for anticipated PD-migrations) and down somewhat on the 17.1% recorded at the end of 2019 (due chiefly to the absence of IFRS interim profit recognition). Our fully loaded leverage ratio (Basel III) came to 5.9%, compared to 6.8% at the end of 2019. The solvency ratio for KBC Insurance under the Solvency II framework was 196% at the end of September 2020, compared to 202% at the end of 2019.

Our liquidity position remained excellent too, as reflected in an LCR ratio of 142% and an NSFR ratio of 146% at the end of the quarter under review (compared to 138% and 136%, respectively, at the end of 2019).

Analysis of the year-to-date period (9M2020)

Net result	• •	Net result down by half on the corresponding period of 2019. Loan loss impairment charges significantly up, as they included 784 million euros in collective impairment charges for the coronavirus crisis.
902 million euros	• •	Net interest income, net fee and commission income, trading and fair value income, dividend income and net other income down. Technical insurance result up and costs down.

Highlights (compared to the first nine months of 2019):

Slightly lower net interest income (down 1% to 3 400 million euros), as inter alia, the rate cuts made by the CNB in the Czech Republic, the depreciation of the Czech koruna and Hungarian forint against the euro, the negative impact related to lower reinvestment yields and loan portfolio margin pressure in most core countries (except in Belgium) could not be fully offset by the positive impact of TLTRO III, a positive one-off item related to inflation-linked bonds (insurance), ECB tiering, the ČMSS impact (consolidated for nine months in the year-to-date period in 2020 compared to just four months in the corresponding period in 2019) and a larger loan and bond portfolio. The volume of deposits and debt certificates increased by 4% (or 9% excluding debt certificates) and lending volumes increased by 4%, with growth in all business units. All growth figures disregard forex movements. The net interest margin in the first nine months of 2020 came to 1.86%, down 9 basis points year-on-year.
Increased technical insurance result (up 28% to 649 million euros). The non-life insurance technical result was up 25%, thanks largely to the lower level of technical charges (partly related to the lower level of claims in the lockdown period and a negative one-off item in the reference period) and higher earned premiums, notwithstanding a lower ceded reinsurance result. The year-to-date non-life combined ratio amounted to an excellent 83%, compared to 90% for full-year 2019. Life insurance sales (1 407 million euros) were up by 2%, with the increase in sales of unit-linked products more than offsetting the decrease in sales of guaranteed-interest products.
Lower net fee and commission income (down 6% to 1 207 million euros), attributable primarily to a decline in fees for asset management services, and to a lesser extent, lower fees for banking services, higher distribution fees paid and the year-onyear depreciation of the Czech koruna and Hungarian forint against the euro, notwithstanding the positive ČMSS impact. At the end of September 2020, total assets under management amounted to 204 billion euros, down 4% on the level recorded a year earlier (mainly due to price decreases).
Lower trading and fair value income (down 98 million euros to -47 million euros). The figure for the first nine months of the year was the result of a huge drop in the first quarter (as the outbreak of the coronavirus crisis initially caused stock markets to tumble, credit spreads to widen and long-term interest rates to fall), followed by a significant recovery in the second and third quarters.
Lower level of all other income items combined (down 40% to 184 million euros), mainly attributable to the fact that the reference period had included the ČMSS-related one-off gain of +82 million euros and – to a lesser extent – to the lower level of dividend income.
Lower operating expenses (down 3% to 3 168 million euros). Excluding bank taxes, operating expenses were down by 4%, in line with the guidance for full-year 2020 (see further below). This was due to items such as lower staff expenses (lower accruals for variable remuneration and a decrease in FTEs), lower ICT costs, some direct coronavirus crisis impact (lower facilities, marketing and professional fees) and the year-on-year depreciation of the Czech koruna and Hungarian forint against the euro. These items more than offset the negative impact of wage drift, increased depreciation costs and the ČMSS impact, among other things. The year-to-date cost/income ratio came to 61%, or an adjusted 59% when bank taxes are evenly spread throughout the year and certain non-operating items are excluded (compared to 58% for full-year 2019).
Significant increase in loan loss impairment charges (up 890 million euros to 1 018 million euros). Over three-quarters (784 million euros) of these impairment charges in the period under review was related to collective impairment charges for the coronavirus crisis, with 637 million euros based on a 'management overlay' and 147 million euros captured by the ECL models through updated macroeconomic variables. As a result, the credit cost ratio for the whole group rose to 0.61%, compared to 0.12% for full-year 2019.
The 902-million-euro net result for the first nine months of 2020 breaks down as follows: 605 million euros for the Belgium Business Unit (down 327 million euros on the year-earlier level), 281 million euros for the Czech Republic Business Unit (down 303 million euros), 113 million euros for the International Markets Business Unit (down 147 million euros) and -97 million euros for the Group Centre (down 107 million euros). The result for the International Markets Business Unit for the first nine months of 2020 included 30 million euros for Slovakia, 76 million euros for Hungary, 50 million euros for Bulgaria and -45 million euros for Ireland.

Risk statement, economic views and guidance

Risk statement

As we are mainly active in banking, insurance and asset management, we are exposed to a number of typical risks for these financial sectors such as – but not limited to – credit default risk, counterparty credit risk, concentration risk, movements in interest rates, currency risk, market risk, liquidity and funding risk, insurance underwriting risk, changes in regulations, operational risk, customer litigation, competition from other and new players, as well as the economy in general. KBC closely monitors and manages each of these risks within a strict risk framework, but they may all have a negative impact on asset values or could generate additional charges beyond anticipated levels.

At present, a number of items are considered to constitute the main challenges for the financial sector. These stem primarily from the impact of the coronavirus crisis on the global economy and, in particular, the financial sector (including credit, market and liquidity risks and the impact of persisting low interest rates on our results). These risks come on top of risks relating to macroeconomic and political developments, such as Brexit and trade conflicts, all of which affect global and European economies, including KBC's home markets. Regulatory and compliance risks (including anti-money laundering regulations and GDPR) remain a dominant theme for the sector, as does enhanced consumer protection. Digitalisation (with technology as a catalyst) presents both opportunities and threats to the business model of traditional financial institutions, while climate-related risks are becoming increasingly prevalent. Finally, cyber risk has become one of the main threats during the past few years, not just for the financial sector, but for the economy as a whole.

We provide risk management data in our annual reports, quarterly reports and dedicated risk reports, all of which are available at www.kbc.com.

Our view on economic growth

Growth in the euro area and US bounced back strongly in the third quarter of 2020, as did KBC's home markets. It followed the sharp contraction in the second quarter caused by the pandemic and subsequent policy responses, which led to a lockdown of large parts of the economy. Therefore, the robust third-quarter growth figures largely represent a mechanical impact of economies opening up again, supported by massive monetary and fiscal stimulus packages. The Chinese economy is a notable frontrunner in the recovery cycle, as it returned to positive growth as early as the second quarter of 2020.

However, the pace of this recovery should be treated with caution. First of all, economic activity is still below pre-pandemic levels in both the service and manufacturing sectors, underlining the fact that there is still a long way to go to full recovery. Secondly, forward looking indicators point to downside risks with regard to the strength of the continued recovery in the fourth quarter of 2020 and the first quarter of 2021. In particular, the recovery in the service sector seems to be losing strength of late, with the manufacturing sector still showing some resilience.

The ongoing second wave of the pandemic is also leading to policy responses such as renewed partial or full lockdowns, which will at least temporarily disrupt the road to recovery. Such temporary restrictive policy measures are already being implemented in many European countries. The respective governments are, however, doing their best to limit the direct impact of these measures on economic activity as much as possible.

The other main risk factors to recovery include the Brexit transition phase ending without an EU-UK agreement, as well as renewed tensions in the economic conflict between the US and China.

Our view on interest rates and foreign exchange rates

The US and euro area economies are strongly supported by monetary and fiscal stimuli. We expect the Fed and the ECB to keep their policy rates unchanged in the years to come. Additional quantitative easing by the ECB is likely, with the size and duration of the Pandemic Emergency Purchasing Programme probably being extended. These market interventions will help to preserve the low longer-term interest rate environment for even longer and compress intra-EMU spreads – and Bulgarian sovereign spreads – in the coming years.

The Hungarian central bank recently tightened its policy stance to support the weakening exchange rate of the Hungarian forint against the euro. This depreciation was largely the result of increased global risk aversion. We expect the tightening to be a temporary policy measure, as the forint is forecast to appreciate to a certain extent again in the fourth quarter of 2020. The Czech koruna has also weakened against the euro, which – like the forint – is likely to be a temporary situation. We expect the Czech National Bank (CNB) to keep its policy rate unchanged. If the CNB decides to intervene, it is more likely to use unconventional policy measures.

Since August, the exchange rate of the US dollar has broadly stabilised against the euro, after having weakened significantly over a number of months previously. We expect the dollar to resume its gradual depreciation against the euro in the fourth quarter of 2020, since a major driving force behind the euro – real interest rate differentials – is expected to remain in place.

Guidance	• Full-year 2020 guidance:
	▪ Net interest income: approximately 4.5 billion euros (increased from the 4.4 billion euros stated in the previous quarterly report);
	▪ Operating expenses excluding bank taxes: decrease of approximately 3.5% year-on-year;
	▪ Loan loss impairment: approximately 1.1 billion euros. Depending on a number of events such as the length and depth of the economic downturn, the significant number of government measures in each of our core countries, and the unknown number of customers who will call upon these mitigating actions, we estimate loan loss impairment for full-year 2020 to range between approx. 0.8 billion euros (optimistic scenario) and approx.1.6 billion euros (pessimistic scenario);
	• The impact of the coronavirus lockdown on digital sales, services and digital signing has so far been very positive. KBC is clearly benefiting from the digital transformation efforts it has made to date;
	• Basel IV has been postponed by one year (as of 1 January 2023 instead of 2022);
	• We will provide a strategy update today, while new long-term financial guidance and our capital deployment plan will be updated when the results for full-year 2020 are published (11 February 2021).

Upcoming events	Strategy update: 12 November 2020, 1 p.m. CET 4Q2020 results and updated new long-term financial guidance & capital deployment plan: 11 February 2021 1Q2021 results: 11 May 2021
More information on 3Q2020	Quarterly report: www.kbc.com / Investor Relations / Reports Company presentation: www.kbc.com / Investor Relations / Presentation
Detailed impact of coronavirus crisis	Quarterly report, Note 1.4 in 'Consolidated financial statements according to IFRS' Company presentation, section 2 on 'Covid-19'
Definitions of ratios	'Details of ratios and terms at KBC Group level' in the last section of the quarterly report.

KBC Group

Consolidated financial statements according to IFRS

3Q 2020 and 9M 2020

Section reviewed by the Auditor

Glossary

AC: Amortised Cost AFS: Available For Sale (IAS 39) ALM: Asset Liability Management ECL: Expected Credit Loss FA: Financial Assets FV: Fair Value FVA: Funding Value Adjustment FVO: Fair Value Option (designated upon initial recognition at Fair Value through Profit or Loss) FVOCI: Fair Value through Other Comprehensive Income FVPL: Fair Value through Profit or Loss FVPL – overlay: Fair Value through Profit or Loss - overlay GCA: Gross Carrying Amount HFT: Held For Trading MFVPL: Mandatorily Measured at Fair Value through Profit or Loss (including HFT) OCI: Other Comprehensive Income POCI: Purchased or Originated Credit Impaired Assets SPPI: Solely payments of principal and interest SRB: Single Resolution Board R/E: Retained Earnings

Consolidated income statement

(in millions of EUR)	Note	9M 2020	9M 2019	3Q 2020	2Q 2020	3Q 2019
Net interest income	3.1	3 400	3 436	1 122	1 083	1 174
Interest income	3.1	4 800	5 435	1 468	1 497	1 806
Interest expense	3.1	- 1 400	- 1 999	- 346	- 415	- 632
Non-life insurance (before reinsurance)	3.7	673	527	233	255	192
Earned premiums	3.7	1 327	1 280	448	435	440
Technical charges	3.7	- 654	- 753	- 215	- 180	- 248
Life insurance (before reinsurance)	3.7	6	- 7	1	6	- 5
Earned premiums	3.7	841	959	267	276	291
Technical charges	3.7	- 834	- 966	- 266	- 271	- 297
Ceded reinsurance result	3.7	- 30	- 14	- 9	- 13	- 9
Dividend income		41	65	12	17	14
Net result from financial instruments at fair value through profit or loss	3.3	- 47	51	85	253	- 46
of which result on equity instruments (overlay approach)		- 37	65	13	31	17
Net realised result from debt instruments at fair value through OCI		4	7	1	2	5
Net fee and commission income	3.5	1 207	1 289	390	388	444
Fee and commission income	3.5	1 763	1 833	575	559	629
Fee and commission expense	3.5	- 556	- 543	- 184	- 172	- 185
Net other income	3.6	139	234	37	53	43
TOTAL INCOME		5 394	5 588	1 872	2 043	1 813
Operating expenses	3.8	- 3 168	- 3 258	- 926	- 904	- 975
Staff expenses	3.8	- 1 703	- 1 755	- 564	- 545	- 585
General administrative expenses	3.8	- 1 191	- 1 244	- 267	- 270	- 299
Depreciation and amortisation of fixed assets	3.8	- 274	- 260	- 96	- 89	- 90
Impairment	3.10	- 1 060	- 134	- 63	- 857	- 26
on financial assets at AC and at FVOCI	3.10	- 1 018	- 128	- 52	- 845	- 25
on goodwill	3.10	0	0	0	0	0
other	3.10	- 42	- 6	- 11	- 12	- 1
Share in results of associated companies and joint ventures		- 9	8	- 2	- 3	0
RESULT BEFORE TAX		1 157	2 204	881	279	812
Income tax expense	3.12	- 255	- 417	- 184	- 69	- 200
Net post-tax result from discontinued operations		0	0	0	0	0
RESULT AFTER TAX		902	1 787	697	210	612
attributable to minority interests		0	0	0	0	0
of which relating to discontinued operations		0	0	0	0	0
attributable to equity holders of the parent		902	1 787	697	210	612
of which relating to discontinued operations		0	0	0	0	0
Earnings per share (in EUR)
Ordinary		2.08	4.19	1.64	0.47	1.44
Diluted		2.08	4.19	1.64	0.47	1.44

Overview impact of the overlay approach on the consolidated income statement

The equity instruments of the insurance companies within the group are designated under the overlay approach. These equity instruments, mainly classified as AFS under IAS 39, would have been measured at fair value through P&L under IFRS 9. The overlay approach reclassifies from the income statement to OCI the extra volatility related to the adoption of IFRS 9 as long as IFRS 17 is not in place, until 31 December 2022 (subject to EU endorsement).

The extra volatility due to IFRS 9, reclassified out of the net result from financial instruments at fair value through profit or loss to the revaluation reserves of equity instruments (overlay approach) refers to the unrealised fair value fluctuations amounting to -81 million euros in 9M 2020. It can be summarized as the difference between :

IFRS 9 result (without applying the overlay): -119 million euros of which -122 million euros realized and unrealized fair value adjustments included in 'net result from financial instruments at fair value through profit or loss' and +3 million euros income taxes;
IAS 39 result: -37 million euros including net realized result amounting to +93 million euros and impairment loss of -130 million euros.

Consolidated statement of comprehensive income (condensed)

(in millions of EUR)	9 M 2020	9M 2019	3Q 2020	2Q 2020	3Q 2019
RESULT AFTER TAX	902	1787	697	210	612
attributable to minority interests	0	0	0	0	0
attributable to equity holders of the parent	902	1 787	697	210	612
OCI THAT MAY BE RECYCLED TO PROFIT OR LOSS	- 319	559	20	406	વેરૂ
Net change in revaluation reserve (FVOCI debt instruments)	90	658	80	192	239
Net change in revaluation reserve (FVPL equity instruments) - overlay	81 -	150	5	138	11
Net change in hedging reserve (cashflow hedges)	10	- 173	29	5	73 l
Net change in translation differences	- 440	86	131	86	81
Hedge of net investments in foreign operations	ರಿಗಿ	8	34	15 l	2
Net change in respect of associated companies and joint ventures	0	6	0	0	4
Other movements	3	3	2	0	5
OCI THAT WILL NOT BE RECYCLED TO PROFIT OR LOSS	31	3	35	- 110
Net change in revaluation reserve (FVOCI equity instruments)	5	16	6	3	5
Net change in defined benefit plans	39	12 -	41 -	- 98	1
Net change in own credit risk	5	1	1	13 -	1
Net change in respect of associated companies and joint ventures	2	0	0	2	0
TOTAL COMPREHENSIVE INCOME	552	2 349	682	506	712
attributable to minority interests	0	0	0	0	0
attributable to equity holders of the parent	552	2 349	682	506	711

The largest movements in other comprehensive income (9M 2020 vs. 9M 2019):

Net change in revaluation reserve (FVOCI debt instruments): the +90 million euros in 9M 2020 is mainly explained by lower interest rates. Note that 9M 2020 includes compensating effects in 1Q versus 2Q and 3Q 2020: the -182 million euros in 1Q 2020 was negatively impacted by higher credit spreads, while the +192 million euros and +80 million euros in respectively 2Q 2020 and 3Q 2020 was characterized by lower interest rates and credit spreads. In 9M 2019, the revaluation reserve (FV OCI debt instruments) increased by 658 million euros, positively impacted by lower interest rates. This also largely explains the negative net change in the hedging reserve (cashflow hedge) of -173 million euros in 9M 2019.
Net change in revaluation reserve (FVPL equity instruments overlay approach): the -81 million euros in 9M 2020 can be explained by negative fair value movements, partly offset by transfers to net result (impairments partly offset by gains on disposal). In 9M 2019, the +150 million euros can be explained by positive fair value movements, partly offset by transfers to net result (gains on disposal partly offset by impairments).
The net change in translation differences (-440 million euros) in 9M 2020 was mainly caused by the substantial weakening of the CZK and HUF versus the EUR. This is only partially compensated by the hedge of the net investment in foreign operations (+99 million euros) as the hedging policy of FX participations since mid-2019 aims to stabilize the group capital ratio (and not parent shareholders' equity).
Net change in defined benefit plans: the -39 million euros in 9M 2020 includes compensating effects in 1Q versus 2Q and 3Q 2020. The +100 million euros in 1Q 2020 is explained by the mortality risk of the KBC pension fund being fully reinsured as of 2020, while the higher discount rate is offset by a negative return on plan assets. In 2Q and 3Q 2020, the net change in defined benefit plans (respectively -98 million euros and -41 million euros) is mainly related to the lower interest rates, which is only partly offset by the positive return on the plan assets.

Consolidated balance sheet

ASSETS Cash, cash balances with central banks and other demand deposits with credit institutions 28 227 8 356 Financial assets 4.0 283 008 273 399 Amortised cost 4.0 238 147 230 639 Fair value through OCI 4.0 18 603 19 037 Fair value through profit or loss 4.0 26 060 23 563 of which held for trading 4.0 10 922 7 266 Hedging derivatives 4.0 198 158 Reinsurers' share in technical provisions, insurance 132 121 Fair value adjustments of the hedged items in portfolio hedge of interest rate risk 1 563 478 Tax assets 1 571 1 396 Current tax assets 107 96 Deferred tax assets 1 464 1 300 Non-current assets held for sale and disposal groups 19 29 Investments in associated companies and joint ventures 24 25 Property, equipment and investment property 3 602 3 818 Goodwill and other intangible assets 1 681 1 640 Other assets 1 365 1 474 TOTAL ASSETS 321 193 290 735 LIABILITIES AND EQUITY Financial liabilities 4.0 278 043 248 400 Amortised cost 4.0 255 763 224 093 Fair value through profit or loss 4.0 20 893 23 137 of which held for trading 4.0 6 764 6 988 Hedging derivatives 4.0 1 387 1 171 Technical provisions, before reinsurance 18 613 18 560 Fair value adjustments of the hedged items in portfolio hedge of interest rate risk 254 - 122 Tax liabilities 470 478





























Current tax liabilities 65 98
Deferred tax liabilies 405 380
Provisions for risks and charges 216 227
Other liabilities 2 713 2 827
TOTAL LIABILITIES 300 309 270 371
Total equity 5.10 20 884 20 365
Parent shareholders' equity 5.10 19 384 18 865
Additional tier-1 instruments included in equity 5.10 1 500 1 500
Minority interests 0 0
TOTAL LIABILITIES AND EQUITY 321 193 290 735

Consolidated statement of changes in equity

(in millions of EUR)	Issued and paid up share capital	Share premium	Treasury shares	Retained earnings	Total revaluation reserves	Parent shareholders equity	Additional tier-1 instruments included in equity	Minority interests	Total equity
30-09-2020
Balance at the end of the previous period	1 458	5 498	2 -	11 875	37	18 865	1 500	0	20 365
Net result for the period	0	0	0	902	0	902	O	0	902
Other comprehensive income for the period	0	O	0	3	353	351	O	0	351 l
Subtotal	0	0	0	905	353 l	552	O	0	552
Dividends	0	0	0	0	O	0	O	0	0
Coupon on AT1	O	O	0	34 ।	0	34 I	O	0	34 -
Transfer from revaluation reserves to retained earnings on realisation	0	O	0	22	22 I	0	0	0	0
Purchase/sale of treasury shares	0	0	1	0	0	1	O	0	1
Change in minorities interests	O	O	0	0	0	0	O	0	0
Total change	0	0	1	893	375 l	519	O	0	519
Balance at the end of the period	1 458	5 498	1 ।	12 768	339	19 384	1 500	0	20 884
2019
Balance at the end of the previous period	1 457	5 482	ਤ -	10 901	୧୦୧ l	17 233	2 400	0	19 633
Net result for the period	0	O	O	2 489	0	2 489	O	0	2 489
Other comprehensive income for the period	0	0	0	3 ।	640	637	0	0	637
Subtotal	0	0	0	2 486	640	3 126	O	0	3 126
Dividends	0	0	0	- 1 457	0	- 1 457	O	0	- 1 457
Coupon on AT1	0	0	0	52 ı	0	52 ।	O	0	52 l
Issue/repurchase of AT1 included in equity	0	0	0	2	0	2 ।	900 -	0	902 ।
Capital increase	1	ન ર	0	0	0	16	O	0	1 ર
Transfer from revaluation reserves to retained earnings on realisation	0	0	0	1 l	1	0	O	0	0
Purchase/sale of treasury shares	0	0	0	0	0	0	O	0	0
Change in minorities interests	0	0	0	0	0	0	O	0	0
Total change	1	ન ર	0	974	641	1 632	900 ।	0	732
Balance at the end of the period	1 458	5 498	2 l	11 875	37	18 865	1 500	0	20 365

(in millions of EUR)	Issued and paid up share capital	Share premium	Treasury shares	Retained earnings	Total revaluation reserves	Parent shareholders" equity	Additional tier-1 instruments included in equity	Minority interests	Total equity
30-09-2019
Balance at the end of the previous period	1 457	5 482	- 3	10 901	୧୦୧ l	17 233	2 400	O	19 633
Net result for the period	0	O	0	1 787	0	1 787	O	O	1 787
OCI for the period	O	O	O	- 3	૨૯૨	562	O	O	562
Subtotal	O	0	O	1 783	રેદર્દ	2 349	O	O	2 349
Dividends	O	O	O	-1 457	O	- 1 457	O	O	- 1 457
Coupon on AT1	O	0	0	37	0	- 37	O	O	- 37
Issue/repurchase of AT1 included in equity	O	0	O	- 2	0	- 2	900	O	- 902
Transfer from revaluation reserves to retained earnings on realisation	O	O	O	O	0	0	O	O	0
Purchase/sale of treasury shares	O	O	0	O	0	0	O	0	O
Change in minorities interests	0	0	O	0	0	0	O	0	O
Total change	0	O	0	287	રેદર્દ	853	900	O	- 47
Balance at the end of the period	1 457	5 482	- 2	11 188	- 39	18 086	1 500	O	19 585

30-09-2020

Please note that, fully in line with the European Central Bank recommendation, the KBC Board of Directors has decided:

to withdraw the proposal to the Annual Shareholders' meeting of 7 May 2020 to declare a final total (gross) dividend over 2019 profit of 2.5 EUR per share (after an interim dividend of 1 EUR per share that was paid in November 2019 already)
to cancel the proposed share buy-back program of 5.5 million shares, in deviation from what was announced in the press release of 13 February 2020 at the occasion of the 4th quarter 2019 results publication.
not to pay out any interim dividend in November 2020, contrary to our general policy on the matter as the ECB has extended its recommendation not to pay dividends until January 2021.

30-09-2019

The line 'Dividends' in 9M 2019 includes:

for 2018 a closing dividend of 2,50 euros per share (a total of 1 040 million euros is deducted from retained earnings in 2Q 2019). The closing dividend was paid on 9 May 2019.
an interim dividend of 1 euro per share (416 million euros in total), as an advance on the final dividend for 2019, paid on 15 November 2019 (already deducted from retained earnings in 3Q 2019).

The line 'Issue/repurchase of additional Tier-1 instruments included in equity' in 9M 2019 includes:

on February 26, 2019 KBC Group NV placed 500 million euros Additional Tier-1 securities.
on 19 March 2019, KBC called the Additional Tier-1 (AT1) instrument it issued in 2014, which had a nominal value of 1.4 billion euros.

(in millions of EUR)	30-09-2020	31-12-2019 -	30-09-2019
Revaluation reserve (FVOCI debt instruments)	1 081	992	1 250
Revaluation reserve (FVPL equity instruments) - overlay	268	350	309
Revaluation reserve (FVOCI equity instruments)	14	32	38
Hedging reserve (cashflow hedges)	- 1321	- 1331	1 436
Translation differences	- 531	92	160
Hedge of net investments in foreign operations	188	89	94
Remeasurement of defined benefit plans	- 39	O	131
Own credit risk through OCI		ব	5
Total revaluation reserves	- 339	37	- 39

Consolidated cash flow statement

(in millions of EUR)	Note (1)	9M 2020	9M 2019
OPERATING ACTIVITIES
	Consolidated income
Result before tax	statement	1 157
Adjustments for non-cash items in profit & loss		1 629
Changes in operating assets (excluding cash and cash equivalents)		- 10 104
Changes in operating liabilities (excluding cash and cash equivalents)		31 579
Income taxes paid		- 437
Net cash from or used in operating activities		23 824	- 5 539
INVESTING ACTIVITIES
Purchase and proceeds of debt securities at amortised cost	4.1	- 4 688
Acquisition of a subsidiary or a business unit, net of cash acquired (including
increases in percentage interest held)		O
Proceeds from the disposal of a subsidiary or business unit, net of cash disposed of
(including decreases in percentage interest held)		28
Purchase and proceeds from the sale of intangible fixed assets (excluding goodwill)		- 228
Purchase and proceeds from the sale of property, plant and equipment (excluding
goodwill)		107
Other		28
Net cash from or used in investing activities		-4 753	169
FINANCING ACTIVITIES
	Consolidated
	statement of changes
Purchase or sale of treasury shares	in equity	2
Issue or repayment of promissory notes and other debt securities	4.1	949
Proceeds from or repayment of subordinated liabilities	4.1	- 88
Principal payments under finance lease obligations		O
	Consolidated
	statement of changes
Proceeds from the issuance of share capital	in equity	0
	Consolidated
Issue of additional tier-1 instruments	statement of changes in equity	0
	Consolidated
	statement of changes
Proceeds from the issuance of preference shares	in equity	0
	Consolidated
	statement of changes
Dividends paid	in equity	0
	Consolidated
	statement of changes
Coupon additional Tier-1 instruments	in equity	- 34
Net cash from or used in financing activities		829	152

(in millions of EUR)	Note (1)	9M 2020	9M 2019
CHANGE IN CASH AND CASH EQUIVALENTS
Net increase or decrease in cash and cash equivalents		19 900	- 5 218
Cash and cash equivalents at the beginning of the period		29 118	34 354
Effects of exchange rate changes on opening cash and cash equivalents		- 1 786	- 127
Cash and cash equivalents at the end of the period		47 231	29 009
COMPONENTS OF CASH AND CASH EQUIVALENTS
Cash and cash balances with central banks and other demand deposits with credit	Consolidated
institutions	balance sheet	28 227	7 758
Term loans to banks at not more than three months (excl. reverse repos)	4.1	1114	426
Reverse repos with credit institutions and investment firms at not more than three
months	4.1	23 351	27 017
Deposits from banks repayable on demand	4.1	- 5 460	- 6 192
Cash and cash equivalents belonging to disposal groups		O	O
Total		47 231	29 009
of which not available		0	O

As of 2020, we provide additional details on the cash flow statement in the interim reporting (not retroactively).

The net cash from operating activities in 9M 2020 (+23 824 million euros) is mainly explained by +19.5 billion euros TLTRO III funding, in combination with the realized result. In 9M 2019, the negative net cash from operating activities (-5 539 million euros) mainly includes the repayment of a part (4 billion euros) of the outstanding TLTRO II in combination with higher term loans and mortgage loans, partly compensated by higher certificates of deposit and the realized result.

Net cash from investing activities in 9M 2020 (-4 753 million euros) is mainly explained by additional investments in debt securities at amortised cost. The net cash from investing activities in 9M 2019 (+169 million euros) can be explained by +439 million euros related to the acquisition of the remaining 45% stake in ČMSS (the acquisition price of 240 million euros is more than compensated by available cash and cash equivalents on the balance sheet of ČMSS) being partly offset by additional investments in debt securities at amortised cost.

The net cash flow from financing activities in 9M 2020 (+829 million euros) mainly includes the issue of Senior Holdco instruments for 1 750 million euros, partly offset by repayments. Matured covered bond position of 1 billion euros in May is fully renewed in June.

In 9M 2019 the net cash flow from financing activities (+152 million euros) includes:

the call by KBC Group NV of Additional Tier-1 instruments that had been issued in 2014, with a nominal value of 1.4 billion euros,
the issue of Additional Tier-1 instruments included in equity for 500 million euros,
payment of the closing dividend for 2018 of 2.5 euros per share (a total of 1 040 million euros),
the issue of Senior Holdco instruments for 1 500 million euros and

the issue of Tier-2 instruments for 750 million euros in August 2019, in view of the call in November 2019 of the existing 750 million euros Tier-2 instruments, issued in 2014.

Notes on statement of compliance and changes in accounting policies

Statement of compliance (note 1.1 in the annual accounts 2019)

The condensed interim financial statements of the KBC Group for the period ended 30 September 2020 have been prepared in accordance with IAS 34, 'Interim financial reporting'. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2019, which have been prepared in accordance with the International Financial Reporting Standards as adopted for use in the European Union ('endorsed IFRS').

The following IFRS standards became effective on 1 January 2020 and have been applied in this report:

Amendments to IAS 39 and related standards
- o As part of the phase 1 of the IBOR reform, the IASB has published a number of amendments to IAS 39 (and related standards which are also affected), which provide temporary relief from adopting specific hedge accounting requirements for hedging relationships directly affected by this reform. For more information regarding the IBOR reform, we refer to the 2019 Annual Report, to the section 'How do we manage our risks?'.

The following IFRS standards were issued and not yet effective in 2020, but KBC decided to early adopt.

Amendments to IAS 39 and related standards
- o As part of the phase 2 of the IBOR reform, the IASB has published a number of amendments to IAS 39 (and related standards which are also affected), which provide temporary relief from adopting specific hedge accounting requirements for hedging relationships directly affected by this reform. KBC decided to early adopt these amendments in 2020. For more information regarding the IBOR reform, we refer to the 2019 Annual Report, to the section 'How do we manage our risks?'.

The following IFRS standards were issued but not yet effective in 2020. KBC will apply these standards when they become mandatory.

IFRS 17:
- o In May 2017, the IASB issued IFRS 17 (Insurance Contracts), a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. Once effective, IFRS 17 will replace IFRS 4 (Insurance Contracts) that was issued in 2005. IFRS 17 applies to all types of insurance contracts (i.e. life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. A few scope exceptions will apply. The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies, IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects. The core of IFRS 17 is the general model, supplemented by a specific adaptation for contracts with direct participation features (the variable fee approach) and a simplified approach (the premium allocation approach) mainly for short-duration contracts. IFRS 17 will become effective for reporting periods beginning on or after 1 January 2023 (subject to EU endorsement), with comparative figures being required. An impact study is an inherent part of the IFRS 17 project that is currently underway at KBC.
Other:
- o The IASB published several limited amendments to existing IFRSs and IFRICs. They will be applied when they become mandatory, but their impact is currently estimated to be negligible.

Summary of significant accounting policies (note 1.2 in the annual accounts 2019)

A summary of the main accounting policies is provided in the group's annual accounts as at 31 December 2019.

Exchange rates used: during 9M 2020, the exchange rates of the CZK and HUF dropped significantly, with negative impact on the balance sheet total and on the result:

CZK (1 EUR = … currency):
- o exchange rate used for balance sheet depreciated versus EUR from 25,408 at year-end 2019 to 27,233 at 30 September 2020;
- o the average rate used for the income statement evolved from 25,704 in 9M 2019 to 26,375 in 9M 2020
HUF (1 EUR = … currency):
- o exchange rate used for balance sheet depreciated versus EUR from 330,53 at year-end 2019 to 365,53 at 30 September 2020;
- o the average rate used for the income statement evolved from 323,23 in 9M 2019 to 348,91 in 9M 2020

COVID-19 (note 1.4)

Introduction:

The continuing public health crisis around the world has distressed financial markets amid concerns that the global economy, and the EU's economies in particular, are heading towards a sharp contraction in full year 2020. The Coronavirus pandemic has triggered a chain of events in the markets that has led to a sharp increase in volatility.

The significant deterioration in the economic outlook has brought about an unprecedented monetary policy response from central banks and governments around the world.

Latest status overview of the different government and sector measures in each of our core countries:

	Be lg ium	ch bli Cze Re pu c	Slo kia va	Hu ng ary	lga ria Bu	lan Ire d
ts n e m y a p f o al rr e f e D	for Opt ‐in: 3 nth mo s con sum er  fina 6‐9 nth for rtga nce mo s mo ges , and ail loa (un til 31 Oct ‐ret non ns, 202 0 and be end ed 31 ext to Dec can 0) 202 priv def l of For ate  per son s: erra l and prin cipa inte rest nts, pay me wh ile onl def l of l prin cipa y erra for ail clie nts ‐ret nts pay me non d def l Inte is rest  acc rue ove r erra fro fam ilies h iod wit rt net per apa m , of less tha inco 1 700 For me n eur os. the latt this ults in er gro up, res a difi ion loss for the ban k. (‐11 cat mo mil lion Ref in 2Q. to not eur os er e 0) 3.1	(ap Opt ‐in: 3 6 nth plic atio or mo s n  iod fini she d 30 Sep 202 0, per on how end of Oct 202 0 all eve r def als ired ) err exp lica ble for il and ail App reta ‐ret  non clie nts priv and For ate  per son s def l of prin cipa l ent rep ren eur s: erra and wh ile onl inte rest nts pay me y , def l of l for prin cipa nts erra pay me ail clie ‐ret nts non d the def l Inte is rest  acc rue ove r erra iod but the be paid inte rest st per mu , in the fina l inst alm ulti in ent res ng a , difi ion loss for the ban k (‐5 cat mo mil lion in 2Q. Ref to not eur os er e 0) 3.1 loa the For inte rest  con sum er ns, dur the def l iod ing not erra per ma y eed the eek 2‐w 8% rate exc rep o +	Opt ‐in: 9 nth 6 nth mo s or mo s  (for ) lea App lica tion ses – iod is stil l nin (bu t st per run g mo wil l end in 1Q 202 1) lica ble for il App reta tom  cus ers , SM and Es ent rep ren eur s Def al of prin cipa l and  err inte rest nts pay me is d the Inte rest  acc rue ove r def l iod but the erra per , has the of tom opt ion cus er all afte ing inte rest at pay s onc e r the rium ing rato mo or pay on a line bas is. The latt ion opt ar er uld ult in imm rial ate wo res an difi ion loss for the ban k cat mo	Opt bla nke t: t ‐ou a mo ra‐  ium orig ina lly il 31 Dec tor unt 202 0. Ext ion of the ens def al il 30 202 but unt Jun 1 err wit h tain elig ibil ity crit eria cer (no det aile d legi slat ion ilab le for ail yet ‐ret ava non clie ) nts lica ble for il and App reta  non ‐ il clie reta nts Def al of l prin cipa and  err inte rest nts pay me d the Inte is rest  acc rue ove r def l iod but aid erra per unp , inte be ital ised rest not can cap and be col lect ed st mu on a line bas dur the is ing ar (ext end ed) lifet ain ing ime rem Thi ults difi in ion cat s res a mo loss for the ban k (‐18 mil lion in 1Q; ised ‐11 to eur os rev mil lion in 2Q bas ed eur os on the ual rati Ref act opt t ‐ou o. er 0) 3.1 to not e	(un Opt ‐in: 6 nth til mo s  31 Ma 202 1 the at r late st) App lica tion – iod ired 30 per exp on Sep 202 0 lica ble for il App reta  and il reta non ‐ tom cus ers Def l of l prin cipa  erra h hou wit wit t or def l of inte rest erra nts pay me the of l In prin cipa  cas e def l onl the ten erra or y, is end ed by 6 ext nth mo s Inte is d rest  acc rue ove r the def l iod and erra per abl nth is in 12 pay e mo s (co and nsu me r non ‐ il) 60 nth reta or mo s (mo ) in al rtga ges equ inst alm ent s	Opt ‐in: 3 6 nth to mo s  (ap plic atio iod n per ired 30 Sep 202 0) exp on App lica ble for rtga  mo ge loa fina ns, con sum er nce loa and bus ine ns ss ban king loa h wit ns a sch edu le ent rep aym Def l of l and prin cipa  erra for inte rest nts pay me up nth (wi th 6 iew to mo s rev afte nth s) for 3 r mo Mo & Con rtga ges sum er fina and 3 nth for nce mo s bus ban king ine ss ion for Opt tom to  cus ers end the loa by ir ext ter n m nth tch 6 to to up mo s ma the hol iday nt pay me d Inte is rest  acc rue ove r def the l iod erra per
e c e n m a e t is h c ss s a e y e t t di n ra ui a q u Li G &	sch of A sta te tee to  gua ran em e up bill loss 40 ion to eur os cov er es rred fut ail loa incu ‐ret on ure non ns bef d 31 Dec ber 202 0 nte gra ore em via ble ies, wit h to ten com pan a or of xim 12 nth ma um mo s. 50% of loss Gua tee ran cov ers es abo of al dit loss and 3% tot ve cre es abo of loss 80% 5% Ma xim ve es. um inte is 1.2 5% rest As of 3Q, ised sta te tee a rev gua ran  sch of 10 bill ion to em e up eur os has bee offe red loss to n cov er es on fut loa d bef SM E nte ure ns gra ore ber h 31 Dec 202 0, wit ten em a or bet and 1 3 Gua tee we en yea rs. ran of 80% all loss Ma xim cov ers es. um inte is 2% rest	The ch‐ ian and Cze Mo Gua tee  rav ran elo k (CZ B) Dev Ban MR ent pm lau nch ed l tee sev era gua ran (CO VID II, COV ID II Pra ha, pro gra ms III) COV ID for rkin ital loa wo g cap ns vid ed by rcia l ban ks to pro com me ail clie The loa is ‐ret nts t non n am oun d of the tee to 80% 90% gua ran up or loa (de din the t n am oun pen g on and the of the size pro gra m y). Inte the loa is rest com pan on se ns sub sidi sed 25% (CO VID II) to up The Exp Gua and Insu ort tee ran ran ce  Cor atio (EG AP) und its COV ID por n er Plu offe tee s pro gra m rs gua ran s on loa vid ed by l ban ks. rcia ns pro com me of the EGA P tee 70% to 80% gua ran s loa dep end the ing t, n am oun on of the deb The rati is tor ng pro gra m aim ed ies in wh ich at ort com pan exp s ted for tha 20% of acc oun mo re n in 201 9 tur nov er	i‐Co Ant Gua tee  ron a ran offe red by the pro gra m Slo vak Hol din Inv est nt me g (SIH ), and aim ed SM Es, at sist of two ent con s com pon s: (i) 80% wit h stat tee a e gua ran 50% tfo lio and a por cap (ii) the sub sidy of inte rest rate 4% to up p.a add fina l aid the In itio ncia in  n, for of the stat tee m e gua ran sch h d fee wit tee em es, gua ran sub sidy be vid ed by can pro (i) the Slov ak Inve stm ent Hol din (gu of nte to g ara e up for loa mil lion 90% 2 < ns os) and eur (ii) the k of Exp Imp Ban ort‐ ort (for loa bet and SR 2 20 ns we en mil lion of tee eur os, gua ran up 80% ). tfo lio is to No por cap lied app	sch is A tee  gua ran em e vid ed by iqa and Gar ant pro the elo Hun ian Dev ent gar pm Ban k. The stat tee se e gua ran s 90% of the to can cov er up loa wit h xim ten ns a ma um or of 6 yea rs the the has Fur MN B  rmo re, lau nch ed the din for Fun g wth sch fram rk A gro em e: ewo of bill for 4,2 ion t am oun eur os tha loa SM Es eive t can rec ns wit h 20‐ and ten a yea r or a xim inte of rest rate ma um 2.5 % ual inte Ann rest rate  on al loa d by nte per son ns gra l ban ks rcia not com me ma y eed the l ban k bas tra exc cen e by tha (un til 5pp rate mo re n 0) 31 Dec 202	bill ion of 0.4  eur os sta te tee gua ran s vid ed by the pro Bul ian gar Dev elo Ban k ent to pm rcia l ban ks. Of com me this billi t, 0.1 am oun on d is to eur os use 100 % tee gua ran on loa wh ile con sum er ns 0.3 bill ion is eur os pla d be d to to nne use 80% tee gua ran on non ‐ il loa reta ns	The h hor Iris aut itie put  s sub l reli ef ntia sta me asu r‐ plac oth esi st n e, am ong er via the SBC I. me asu res, KBC I is inly foc d ma use on ind ivid ual tom cus ers , the refo the reli ef re for bus ine pro gra ms ss less tom cus ers are rele t. van

Main Corona related items affecting the 9M 2020 results, revaluation reserves, liquidity and solvency:

		See further in
Items	Impact of the Coronacrisis	note
Net interest income	Net interest income was negatively impacted in 9M 2020 following multiple repo rate cuts of the Czech National Bank and in general lower long term interest rates than expected. This was partly compensated by lower funding costs thanks to ECB's TLTRO programme (TLTRO III), while lending income was supported by higher average volumes.	3.1
Non-life insurance	Exceptionally high technical result in 2Q 2020, supported by a low claims level as a result of the lower economic activity related to the lockdown.	3.7.1
Life insurance	Challenging context for the sale of life insurance products in view of the low interest rates environment.	3.7.1
Financial instruments at fair value through P&L	Financial instruments at fair value through P&L have been negatively affected by the increased volatility in financial markets in 9M 2020, leading to a net result on financial instruments at fair value through profit or loss of -0.05 billion euros in 9M 2020 (-0.4 billion euros in 1Q 2020 due to lower stock markets, widened credit spreads and lower long-term interest rates, largely recovered in 2Q 2020 and 3Q 2020).	3.3
Net fee and commission income	Net fee and commission income was negatively impacted by the coronavirus pandemic for asset management related fees (lower entry fees due to decreased sales and margins; lower management fees due to a lower average level of assets under management in combination with lower margins). Moreover, fees related to banking services also went down (payment services fees, for instance lower activity level due to the lockdowns). Securities fees on the other hand performed substantially better as transaction volumes typically rise in a more volatile environment.	3.5
Operating expenses	Significant opex reduction thanks to the various saving measures (which amongst others have resulted in lower provisions for variable remuneration and less FTEs) and lower marketing, travel, facility and event expenses (directly related to a lower activity level due to the lockdowns).
Impairment on financial assets at AC and at FVOCI	Strong increase of collective ECL impairments; see separate section below.	3.10 en 4.2
Impairments on goodwill	We have performed an ad-hoc assessment of goodwill impairment indication. The outcome shows no indication of impairment.
	 For UBB and CMSS, the sensitivity analysis shows that structural decreases over the entire forecasting horizon in annual profit of respectively 17% and 12% or increases in annual impairment of respectively 89% and 180% would trigger a goodwill impairment. However, these sensitivities are considered to be too harsh to trigger an impairment in light of the recent situation.  For K&H, DZI and CSOB Bank CZ, the impairment buffer is sufficiently large and we do not expect the short-term deviations to trigger an impairment.
Deferred taxes	We have investigated whether it is probable that taxable profit will be available against which the deductible temporary differences can be utilised based on projections for a period of eight to ten years. The conclusion of this analysis is that there are sufficient estimated taxable profits available.
Revaluation reserves	Negative net change in revaluation reserve (FVPL equity instruments – overlay approach) and translation differences.	Consolidated statement of comprehensive income (condensed)
Liquidity	KBC has maintained its strong liquidity position throughout the Coronacrisis, supported by KBC's participation in TLTRO III funding. The Liquidity Coverage Ratio (LCR) of KBC Bank, which gives an idea of the bank's liquidity position in the short term, increased in 9M 2020 and amounted to 142% at the end of September 2020 (compared to 138% at the end of December 2019). The Net Stable Funding Ratio (NSFR) of KBC Bank, which gives an idea of the bank's structural liquidity position in the long term, amounted to a high 146% at the end of September 2020 (compared to 136% at the end of December 2019).
Solvency	Our solvency position remained very strong, with a common equity ratio of 16.6% on a fully loaded basis (compared to 17,1% at the end of 2019). For more information, see part Solvency KBC Group.
Pending acquisitions	The approval process for the acquisition of OTP Banka Slovensko is still ongoing.

Details related to the impact of the Coronacrisis on the loan impairments in 9M 2020

As disclosed during previous quarters, our Expected Credit Loss (ECL) models were not able to adequately reflect all the specificities of the Covid-19 crisis or the various government measures implemented in the different countries to support households, SMEs and Corporates through this crisis. Therefore, an expert-based calculation at portfolio level is required via a management overlay. In the first quarter, this calculation was limited to a certain number of (sub)sectors. In the second quarter, driven by significant uncertainties around the Covid-19 crisis, the scope of the management overlay was expanded to include all sectors of our Corporate and SME portfolio as well as our retail portfolio. To be consistent with the second quarter, we recalculated the Covid-19 ECL based on the same methodology used on the performing and non-performing portfolio by the end of September 2020 but included the latest economic scenarios.

Until now, only minor PD shifts have been observed in our portfolio, which is reflected in stable staging percentages (for further information, see note 4.2.1).

Note that in line with ECB/ESMA/EBA guidance, any general government measure granted before the end of September 2020 has not led to automatic staging.

For the 30 September performing portfolio, the following 3-step approach was applied to estimate the additional Covid-19 impact:

1) Similar to the previous quarters, the methodology used for this purpose starts from KBC's updated macroeconomic forecast for end September 2020 (see paragraph Economic scenarios below for more details on these forecasts). The base scenario was translated to expert-based stress migration matrices, per country and per segment. The portfolio was transformed using this migration matrix, whereby a certain portion moved to inferior PD rating classes or default, a certain portion remained unchanged and a minor portion improved. After this transformation, the ECL was calculated again based on the new portfolio structure, including staging. The estimate of Covid-19 base-case ECL impact was then determined as the difference between the ECL calculated on the portfolio before and after applying the stressed migration matrix.
2) In a second step, a sectoral effect was incorporated in the calculation to refine the Covid-19 ECL. The purpose of this step is to reflect the fact that some sectors will be more heavily affected than others, something which is not yet captured by the migration matrices. All exposures in the SME and Corporate portfolio were classified as high, medium or low risk based on the expected impact of the Covid-19 crisis on the sector affected (for Mortgages and Consumer Finance, no sectoral stress was applied). Based on this classification, the following expert-based weights was applied to the ECL impact as determined in the first step described above: 150% for high risk sectors, 100% for medium risk sectors and 50% for low risk sectors. This resulted in a "sector-driven" Covid-19 base-case ECL following the base-case scenario.

Compared to the previous quarter, the sector split between high-medium-low risk did not undergo major changes. There were only some minor reallocations of underlying activities from 'high' to 'medium' or even to 'low' risk. Similarly, there were only very limited shifts from 'medium' to 'high' risk, situated mainly in the following sectors:

Distribution: A minor share of activities related to the wholesale distribution of apparel was moved into the 'high risk' category, adding to the already designated retail part (mainly retail fashion).
Services: The increase of the high risk share compared to the previous quarter was driven by the retirement homes, mainly concentrated in the Belgian portfolio.
Metals: The activity related to the manufacture of metal structures, linked to the construction of non-residential buildings, was shifted into the 'high risk' category.
Building & construction: In the previous quarter, the entire portfolio was allocated to 'medium risk' due to the limited lockdown interruption as this was one of the first sectors to restart. In addition, the temporary unemployment cover provided by the Belgian government tempered the impact. Now, in the third quarter, a limited share of activities related to the construction of non-residential buildings was shifted into the 'high risk' category.

ortfolio outstanding	175	180	179	179
Retail	42%	40%	41%	42%
of which mortgages	38%	37%	38%	39%
of which consumer finance	3%	3%	3%	3%
SME	22%	21%	21%	22%
Corporate	37%	39%	38%	37%

*Aligned with the credit risk view of our loan portfolio as reported in the quarterly financial statements.

3) Finally, a probability-weighted management overlay was calculated based on KBC's base-case, optimistic and pessimistic scenarios and attributed weights. An expert-based scaling factor was applied on the estimated sector-driven Covid-19 base-case ECL from the previous step to determine the collective Covid-19 impact under an optimistic and pessimistic scenario. The final overlay was then determined by weighting the resulting Covid-19 ECL under the three scenarios with the following weights: 45% for the base-case, 15% for the optimistic and 40% for the pessimistic scenario.

For the non-performing portfolio, in line with the second quarter, an additional impact assessment was performed on a portfolio basis for the stage 3 collective exposures based on expert judgement of the local credit risk management departments. Additional impairments due to Covid-19 on individually assessed stage 3 loans are already reflected in the specific allowance of the exposure (hence already included in P&L impairments) and thus not included in the management overlay.

COVID‐19 ECL sector driven – per scenario:				COVID‐19 ECL per country – per scenario:

The 3-step stress approach applied to the performing portfolio and the additional impact assessment of the non-performing portfolio resulted in a total 9M20 collective Covid-19 ECL of 784 million euros, implying a small P&L release of 5 million euros in 3Q20 compared to the 789 million euros P&L charge of 1H20. The total collective Covid-19 ECL of 784 million euros in 9M20 consists of 6% stage 1, 85% stage 2 and 9% stage 3 impairments.

After 9M, the ECL models captured an impact of 147 million euros through the updated macroeconomic variables used in the calculation (31% in stage 1, 33% in stage 2 and 36% in stage 3), resulting in a q-o-q release of 3 million euros . The total Covid-19 management overlay in the books per 30-09-2020 amounts to 637 million euros, of which 43 million euros was accounted for in 1Q 2020, 596 million euros in 2Q 2020, with a small release of 2 million euros booked in 3Q20. Similar to 1H20, the management overlay is fully presented as stage 2, with the exception of the management overlay on the existing non-performing portfolio.

Including the collective Covid-19 ECL, the Credit Cost Ratio amounted to 0.61%% in 9M20.

Credit Cost % (annualized*)		FY19 3M20	1H20	9M20
Without collective COVID-19 ECL	0.12%	0.17%	0.20%	0.17%
With collective COVID-19 ECL		0.27%	0.64%	0.61%

*Collective Covid-19 ECL, not annualized

Economic scenarios

KBC has formulated three different forecasts that differ on the virus evolution and its impact on the lockdown measures in the different home countries. In short the three scenarios can be summarized as follows:

OPTIMISTIC SCENARIO	BASE SCENARIO	PESSIMISTIC SCENARIO
Virus spread and impact sufficiently under control thanks to continued social distancing and other precautionary measures, avoiding the need for another lockdown period	Virus spread and impact sufficiently under control thanks to continued and possibly intensified social distancing and other precautionary measures, avoiding the need for another full lockdown period	Virus reappears and continues to weigh on society and economy, necessitating on-off lockdown periods that have a significant impact on economic activity
Steep and steady recovery from 3Q20 onwards with a fast return to pre-Covid-19 levels of activity	More moderate, but still steady recovery from 3Q20 onwards with a recovery to pre-Covid-19 activity levels by end 2023	Another (series of) shock(s) takes place, leading to an interrupted and unsteady path to recovery
Sharp, short V-pattern	U-pattern	More L-like pattern, with right leg only slowly increasing

The Covid-19 pandemic continues to be the main driver of the global economy. The epidemiological developments are far from good. The number of new Covid-19 cases are rapidly increasing in many countries. Because of this uncertainty, we continue to work with three alternative scenarios: a base-case scenario, a more optimistic scenario and a more pessimistic scenario. The definition of each scenario reflects the latest virus-related and economic developments, while we continue to assign the same probabilities as in previous quarter: 45% for the base-case, 40% for the pessimistic and 15% for the optimistic scenario.

The following table (in line with the KBC forecast of September 2020) gives these three scenarios for three key indicators (GDP growth, unemployment rate and house price index) for each of our core countries for the next three years*. After that, a gradual linear transition towards a steady state is taken into account. Compared to June 2020, we have revised up euro area GDP growth for 2020 to -8.3% and, mechanically, this less negative outcome for 2020 translates into a downward revision of growth to 5.2% for 2021.

Macroeconomic base scenario - key indicators (September 2020)		2020			2021			2022
Scenario	Optimistic	Base	Pessimistic	Optimistic	Base	Pessimistic	Optimistic	Base	Pessimistic
Real GDP growth
Euro area	-6.7%	-8.3%	-11.6%	8.7%	5.2%	-1.0%	2 9%	2.0%	2 2%
Belgium	-6.1%	-9.0%	-11.1%	9.1%	5.1%	-1.1%	2.9%	2.0%	2.0%
Czech Republic	-6.1%	-7.0%	-8.5%	6.2%	4.7%	1.3%	2.8%	3.0%	3.3%
Hungary	-3.0%	-6.2%	-12.0%	4.0%	5.0%	4.0%	3.5%	3.5%	3.5%
Slovakia	-6.5%	-8.0%	-9.5%	6.6%	6.1%	1.6%	4.5%	3.5%	3.8%
Bulgaria	-4.0%	-8.0%	-12.0%	4.0%	5.0%	4.0%	3.0%	3.0%	3.0%
Ireland	0.0%	-5.0%	-10.0%	5.0%	4.0%	1.0%	3.0%	3.5%	2.5%
Unemployment rate
Belgium	6.6%	7.2%	7.8%	7.0%	7.6%	11.0%	6.0%	6.9%	9.5%
Czech Republic	4.3%	5.1%	6.1%	4.2%	5.4%	7.3%	3.5%	4.8%	6.8%
Hungary	4.8%	6.1%	7.5%	4.2%	5.6%	7.5%	4.0%	4.8%	6.5%
Slovakia	7.5%	9.0%	10.0%	8.0%	10.0%	12.0%	7.0%	8.0%	10.5%
Bulgaria	6.0%	8.0%	11.0%	4.3%	10.0%	13.0%	4.2%	7.0%	12.0%
Ireland	8.0%	11.0%	20.0%	6.0%	7.0%	16.0%	5.0%	6.0%	12.0%
House price index
Belgium	1.5%	-0.5%	-1.5%	1.0%	-3.0%	-6.0%	2.5%	1.0%	-2.0%
Czech Republic	5.3%	4.8%	3.5%	1.0%	-0.8%	-4 0%	4.1%	2.0%	-0.8%
Hungary	4.0%	2.0%	-7.5%	1.0%	-1.0%	-5.0%	3.1%	2.0%	-1.0%
Slovakia	6.5%	5.0%	2.0%	1.0%	-1.0%	-5.0%	3.0%	2.0%	-0.5%
Bulgaria	0.5%	-2.0%	-3.0%	1.0%	-1.0%	1.0%	3.0%	3.0%	1.5%
Ireland	-2.0%	-7.0%	-12.0%	4.0%	3.5%	0%	4.0%	3.5%	1.0%

*The macroeconomic information is based on the economic situation in September 2020 (and include KBC's view on the Brexit outcome) and hence does not yet reflect the official macroeconomic figures for 3Q20 as reported by different authorities.

Notes on segment reporting

Segment reporting according to the management structure of the group (note 2.2 in the annual accounts 2019)

For a description on the management structure and linked reporting presentation, reference is made to note 2.1 in the annual accounts 2019.

		Czech	International
(in millions of EUR)	Belgium	Republic	Markets
	Business	Business		Business Of which:				Group
	unit	unit	unit	Hungary Slovakia Bulgaria			Ireland	Centre	Total
9M 2020
Net interest income	1 948	807	୧୧୧	194	151	108	212	- 20	3 400
Non-life insurance (before reinsurance)	435	105	119	43	23	53	0	14	673
Earned premiums	851	225	242	109	39	94	0	10	1 327
Technical charges	- 415	- 120	- 123	- 66	16 -	- 41	0	5	- 654
Life insurance (before reinsurance)	- 53	38	22	1	9	11	0	0	હ
Earned premiums	615	147	79	26	26	27	0	0	841
Technical charges	- 668	- 109	- 57	- 25	- 17	- 16	0	0	- 834
Ceded reinsurance result	- 22	- 1	- 7	- 2	- 2	- 3	0	0	- 30
Dividend income	37	1	0	0	0	0	0	3	41
Net result from financial instruments at fair value through profit or loss	- 1	- 19	27	24	5	O	3 -	- 54	47 l
Net realised result from debt instruments at fair value through OCI	1	O	2	1	1	0	0	O	4
Net fee and commission income	850	157	203	141	44	20	2 -	4 -	1 207
Net other income	116	15	7	3	7	2	6 l	1	139
TOTAL INCOME	3311	1 103	1 039	406	238	192	201	- 59	5 394
Operating expenses	- 1 868	- 564	- 663	- 244	- 156	- 106	- 157	- 72	- 3 168
lmpairment	- 629	- 203	- 236	- 68	- 43	- 30	- 95	7	- 1 060
of which on FA at amortised cost and at fair value through OCI	- 615	- 193	- 216	- 51	- 43	28 ।	95 -	7	- 1 018
Share in results of associated companies and joint ventures	- 8	- 1	0	0	0	0	0	0	- 9
RESULT BEFORE TAX	807	335	140	94	39	56	51 -	124 -	1 157
Income tax expense	- 202	- 54	- 27	- 18	- 9	- 6	6	28	- 255
Net post-tax result from discontinued operations	0	0	0	0	0	0	0	0	0
RESULT AFTER TAX	୧୦୧	281	113	76	30	50	45 -	97 -	902
attributable to minority interests	0	0	0	0	0	0	0	0	0
attributable to equity holders of the parent	୧୦୧	281	113	76	30	50	- 45	- 97	902

9M 2019
Net interest income	1 882	дзя	644	190	153	105	196	29	3 436
Non-life insurance (before reinsurance)	334	85	102	34	21	47	0	റ	527
Earned premiums	829	208	235	109	35	92	0	8	1 280
Technical charges	- 496	- 123	- 133	- 75	14 l	- 44	0	2 -	- 753
Life insurance (before reinsurance)	- 74	42	25	6	8	11	0	0	- 7
Earned premiums	718	170	71	12	31	28	0	0	ರಿಸಿದ
Technical charges	- 792	- 128	- 46	- 7	- 23	- 17	0	O	966 -
Ceded reinsurance result	7	- 5	- 8	- 2	- 1	- 5	0	ರಿ l	- 14
Dividend income	୧3	1	0	0	0	O	0	2	ર ર
Net result from financial instruments at fair value through profit or loss	88	- 93	25	24	- 7	11	ਤ -	31	ર્દ્રન
Net realised result from debt instruments at fair value through OCI	5	O	2	1	1	0	0	0	7
Net fee and commission income	875	195	222	158	48	18	2 -	3 -	1 289
Net other income	146	ਰੇਰੇ	- 15	1	5	0	- 22	5	234
TOTAL INCOME	3 326	1 263	997	412	229	189	168	2	ર રેક્ષેત્
Operating expenses	- 1 935	- 570	- 685	- 267	- 158	- 106	- 154	- 69	- 3 258
Impairment	- 136	- 14	- 5	2	- 16	- 9	18	21	- 134
	- 134	- 11	- 4	3	- 16	- 8	18	21	128
of which on FA at amortised cost and at fair value through OCI	- 4	9	4	0	0	0	0	0	8
Share in results of associated companies and joint ventures RESULT BEFORE TAX	1 251	687	311	147	54	73	33	- 46	2 204

Income tax expense	- 319	- 103	- 51	- 24	- 13	- 8	7 -	રેક	- 417
Net post-tax result from discontinued operations	0	0	0	0	0	0	0	0	0
RESULT AFTER TAX	932	584	260	124	41	୧୧	27	10	1 787
attributable to minority interests	0 932	0	0	0	0	O	O	O	0
attributable to equity holders of the parent		584	260	124	41	66	27	10	1 787

Other notes

Net interest income (note 3.1 in the annual accounts 2019)

(in millions of EUR)	9M 2020	9M 2019	3Q 2020	2Q 2020	3Q 2019
Total	3 400	3 436	1 122	1 083	1 174
Interest income	4 800	5 435	1 468	1 497	1 806
Interest income on financial instruments calculated using the effective interest rate method
Financial assets at AC	3 739	4 147	1 171	1 181	1 404
Financial assets at FVOCI	248	249	85	80	84
Hedging derivatives	285	379	49	101	132
Financial liabilities (negative interest)	136	37	81	34	13
Other	6	11	0	3	0
Interest income on other financial instruments
Financial assets MFVPL other than held for trading	8	5	3	3	2
Financial assets held for trading	378	606	78	95	171
Of which economic hedges	344	586	65	82	165
Other financial assets at FVPL	0	0	0	0	0
Interest expense	-1 400	-1 999	- 346	- 415	- 632
Interest expense on financial instruments calculated using the effective interest rate method
Financial liabilities at AC	- 580	- 965	- 125	- 171	- 294
Financial assets (negative interest)	- 44	- 60	- 26	- 8	- 12
Hedging derivatives	- 467	- 498	- 132	- 158	- 167
Other	-5	-4	-3	-1	-2
Interest expense on other financial instruments
Financial liabilities held for trading	- 279	- 436	- 57	- 67	- 145
Of which economic hedges	- 255	- 408	- 50	- 60	- 134
Other financial liabilities at FVPL	- 22	- 30	- 3	- 9	- 10
Net interest expense relating to defined benefit plans	- 2	- 6	- 1	- 1	- 2

The vast majority of negative interest on financial liabilities and financial assets relates to transactions with central banks, interbank and professional counterparties as well as the TLTRO.

Net result from financial instruments at fair value through profit or loss (note 3.3 in the annual accounts 2019)

(in millions of EUR)			9M 2020 9M 2019 3Q 2020 2Q 2020 3Q 2020 3Q 2019
Total	- 47	51	85	253	- 46
Breakdown by driver
Market value adjustments (xVA)	- 32	- 48 --	55	100	- 37
MTM ALM derivatives	- 65	11 l	- 2	- 3	ા
Financial instruments to which the overlay is applied	- 37	65	13	31	17
Dealing room and other	87	45	19	126	- 25

The result from financial instruments at fair value through profit or loss in 3Q 2020 is 168 million euros lower compared to 2Q 2020. The quarter-on-quarter decrease is due to:

Low dealing room income in 3Q 2020 compared to excellent dealing room income in 2Q 2020
Lower market value adjustments in 3Q 2020 compared to 2Q 2020, but still positive mainly as a result of decreasing counterparty credit spreads and KBC funding spread, partly offset by lower long-term interest rates
Lower net result on equity instruments (insurance) compared to 2Q 2020, driven by lower realized gains on shares, related to less favorable stock market evolution

The result from financial instruments at fair value through profit or loss in 9M 2020 is 98 million euros lower compared to 9M 2019. This decrease is due to:

Much lower net result on equity instruments (insurance) compared to 9M 2019, driven by high impairments related to a less favorable stock market evolution in 9M 2020 (specifically in 1Q 2020)
Very negative MTM ALM derivatives in 9M 2020 compared to slightly negative MTM ALM derivatives in 9M 2019
Higher dealing room income in 9M 2020 compared to 9M 2019, mainly in the Czech Republic
Less negative market value adjustments in 9M 2020 compared to 9M 2019, mainly as a result of changes in the underlying market value of the derivatives portfolio

Net fee and commission income (note 3.5 in the annual accounts 2019)

(in millions of EUR)	9M 2020	9M 2019	3Q 2020	2Q 2020	3Q 2019
Total	1 207	1 289	390	388	444
Fee and commission income	1 763	1 833	575	559	629
Fee and commission expense	- 556	- 543	- 184	- 172	- 185
Breakdown by type
Asset Management Services	752	809	245	237	275
Fee and commission income	795	850	260	250	288
Fee and commission expense	- 43	- 41	- 15	- 13	- 13
Banking Services	666	686	218	219	237
Fee and commission income	909	935	300	291	326
Fee and commission expense	- 243	- 249	- 81	- 72	- 89
Distribution	- 211	- 207	- 73	- 68	- 68
Fee and commission income	58	47	15	19	15
Fee and commission expense	- 269	- 254	- 88	- 86	- 83

Net other income (note 3.6 in the annual accounts 2019)

(in millions of EUR)	9M 2020	9M 2019	3Q 2020	2Q 2020	3Q 2019
Total	139	234	37	53	43
of which gains or losses on
Sale of financial assets measured at amortised cost	10	11	1	2	7
Repurchase of financial liabilities measured at amortised cost	0	9	0	0	9
of which other, including:	129	215	36	51	27
Income from (mainly operational) leasing activities, KBC Lease Group	58	56	20	20	16
Income from VAB Group	37	33	12	13	11
One-off effect revaluation of 55% share in CMSS	0	82	0	0	0
Settlement of legacy legal cases	0	9	0	0	3
Provisioning for tracker mortgage review	- 6	- 22	- 6	0	- 18

Note :

In 9M 2020

Provision for tracker mortgage review in KBC Bank Ireland of -6 million euros in 3Q 2020 (of which an additional -4 million euro related to the fine).

In 9M 2019

82 million euros one-off gain in Czech Republic as a result of the revaluation of KBC's 55% stake in ČMSS related to the acquisition in 2Q 2019 of the remaining 45% stake
Provision for tracker mortgage review in KBC Bank Ireland of -18 million euros in 3Q 2019 included the recognition of a provision for a potential fine of -14 million euros
Settlement of legacy legal cases concerns Czech Republic (+6 million euros) and Group Centre (+3 million euros)

Breakdown of the insurance results (note 3.7.1 in the annual accounts 2019)

			Non
(in millions of EUR)	Life	Non-life	technical account	Total
9M 2020
Earned premiums, insurance (before reinsurance)	841	1 341	-	2 181
of which change in provision unearned premiums	0	- 118		- 117
Technical charges, insurance (before reinsurance)	- 834	- 655	-	- 1 489
Claims paid	- 867	- 597	-	- 1 464
Changes in technical provisions	47	- 14	-	32
Other technical result	- 13	- 44	-	- 57
Net fee and commission income	- 7	- 257	-	- 264
Ceded reinsurance result	- 1	- 28	-	- 30
General administrative expenses	- 111	- 185	- 2	- 298
Internal claims settlement expenses	- 6	- 45	-	- 50
Indirect acquisition costs	- 24	- 54	-	- 78
Administrative expenses	- 81	- 87	-	- 168
Investment management fees	0	0	- 2	- 2
Technical result	- 113	215	- 2	100
Investment Income (*)	250	74	18	343
Technical-financial result	138	289	16	443
Share in results of associated companies	-	-	0	0
and joint ventures
RESULT BEFORE TAX	138	289	16	443
Income tax expense	-	-	-	- 110
RESULT AFTER TAX	-	-	-	333
attributable to minority interest	-	-	-	0
attributable to equity holders	-	-	-	333
of the parent

9M 2019
Earned premiums, insurance (before reinsurance)	959	1 295	-	2 254
of which change in provision unearned premiums	1	- 134		- 133
Technical charges, insurance (before reinsurance)	- 966	- 754	-	- 1 720
Claims paid	- 858	- 635	-	- 1 493
Changes in technical provisions	- 154	- 74	-	- 228
Other technical result	46	- 46	-	0
Net fee and commission income	- 21	- 247	-	- 268
Ceded reinsurance result	- 2	- 12	-	- 14
General administrative expenses	- 115	- 189	- 2	- 307
Internal claims settlement expenses	- 7	- 45	-	- 52
Indirect acquisition costs	- 24	- 54	-	- 78
Administrative expenses	- 85	- 90	-	- 175
Investment management fees	0	0	- 2	- 2
Technical result	- 144	92	- 2	- 55
Investment Income (*)	374	68	18	460
Technical-financial result	230	160	16	405
Share in results of associated companies and joint ventures	–	–	3	3
RESULT BEFORE TAX	230	160	19	409
Income tax expense	–	–	–	- 89
RESULT AFTER TAX	–	–	–	320
attributable to minority interest	–	–	–	0
attributable to equity holders of the parent	–	–	–	320

(*)9M 2020 consists of (in millions of EUR): Net interest income (347), Net Dividend income (25), Net result from financial instruments at fair value through profit and loss (-27), Net realised result from debt instruments at fair value through OCI (1), Net other income (6) and Impairment (-10). 9M 2019 consists of (in millions of EUR): Net interest income (347), Net Dividend income (40), Net result from financial instruments at fair value

through profit and loss (75), Net realized result from debt instruments at fair value through OCI (1), Net other income (-2) and Impairment (-1). The non-technical account includes also results of non-insurance companies such as VAB group and ADD.

Note: Figures for premiums exclude the investment contracts without DPF (Discretionary Participation Features), which roughly coincide with the unit-linked products. Figures are before elimination of transactions between the bank and insurance entities of the group (more information in the 2019 annual accounts).

In 9M 2020 the technical result non-life was positively impacted by low claim level largely as a result of the lockdown in 2Q 2020, partially offset by storms in mainly Belgium for a total amount of -37 million euros (pre-tax, before reinsurance).

In 9M 2019 the technical result non-life was negatively impacted by:

Storms in Belgium and Czech Republic (before tax and before reinsurance) for an amount of about -60 million euros. The net impact in 9M 2019 after reinsurance amounts to -50 million euros. No material storm impact in 3Q 2019.
Large fire claims in 9M 2019 in Belgium of -37 million euros (before tax, before reinsurance).
Reassessment of claims provisions in 2Q 2019 of -16 million euros (before tax).

Operating expenses – income statement (note 3.8 in the annual accounts 2019)

The operating expenses for 3Q 2020 include 21 million euros related to bank (and insurance) levies (27 million euros in 2Q 2020; 28 million euros in 3Q 2019; 454 million euros in 9M 2020; 440 million euros in 9M 2019). Application of IFRIC 21 (Levies) has as a consequence that certain levies are taken upfront in expense of the first quarter of the year.

Impairment – income statement (note 3.10 in the annual accounts 2019)

(in millions of EUR)	9M 2020	9M 2019	3Q 2020	2Q 2020	3Q 2019
Tota	-1 060	- 134	- 63	- 857	- 26
Impairment on financial assets at AC and at FVOCI	- 1 018	- 128	- 52	- 845	25 l
Of which impairment on financial assets at AC	- 1 013	- 129	51 -	- 842	26 ।
By product
Loans and advances	- 997	- 114	- 49	837	19
Debt securities	0	0	1 -	O	0
Off-balance-sheet commitments and financial guarantees	- 16	14 ।	7 -	- 5	7
By type
Stage 1 (12-month ECL)	- 64	25	- 4	52	- 8
Stage 2 (lifetime ECL)	- 701	11	- 38	- 618	14
Stage 3 (non-performing; lifetime ECL)	- 246	- 120	11	- 171	32
Purchased or originated credit impaired assets	1 -	5	2	- 2	0
Of which impairment on financial assets at FVOCI	5 -	1	1 -	- 3	1
Debt securities	5 -	1	1 -	- 3	1
Stage 1 (12-month ECL)	3 -	O	1 -	1 ।	1
Stage 2 (lifetime ECL)	2 -	1	1	2 ।	1
Stage 3 (non-performing; lifetime ECL)	0	0	0	0	0
Impairment on goodwill	0	0	0	0	0
Impairment on other	- 42	6 l	11 -	- 12	1
Intangible fixed assets (other than goodwill)	5 -	3 l	3 l	- 2	O
Property, plant and equipment (including investment property)	5 -	1 l	4 -	0	0
Associated companies and joint ventures	0	0	0	0	0
Other	- 33	2	4 -	அ l	1

The impairments on financial assets at AC in 9M 2020 include -784 million euros collective Covid-19 ECL (of which -43 million euros in 1Q 2020, -746 million euros in 2Q 2020 and +5 million euros in 3Q 2020). For more information, see note 1.4 of this report.

The stage 3 impairments in 9M 2020 and 9M 2019 are attributable mainly to loan loss impairments in Belgium and Czech Republic due to a number of corporate files.

The impairment on other (Other -33 million euros) include -27 million euros in 9M 2020 (respectively -18 and -9 million euros in 1Q and 2Q 2020) related to modification losses in Belgium, Czech Republic and Hungary. Additionally, 3Q 2020 included the result of an impairment on a lease contract related to a headquarter building in Hungary for -4 million euros.

Financial assets and liabilities: breakdown by portfolio and product (note 4.1 in the annual accounts 2019)

			MEVPL
			excl. HEI				Hedging
			and				deriva-
(in millions of EUR)	AC	FVOCI overlay		Overlay	HEI	FVO	tives	Total
FINANCIAL ASSETS, 30-09-2020 Loans and advances to credit institutions and investment firms (excl.	6 031	O	O	0	1	0	O	6 031
reverse repos)
of which repayable on demand and term loans at not more than three months								1114
Loans and advances to customers (excl. reverse repos)	157 443	0	330	0	0	0	O	157 773
Trade receivables	1 565	0	O	0	0	0	0	1 565
Consumer credit	5 252	0	220	0	0	0	0	5 473
Mortgage loans	68 951	0	102	0	0	0	0	69 053
Term loans	69 689	0	8	0	0	0	0	69 697
Finance lease	5 725	0	0	0	0	0	0	5 725
Current account advances	4673	0	0	0	0	0	0	4 673
Other	1 587	0	0	0	0	0	0	1 587
Reverse repos	26 144	O	0	0	285	0	0	26 429
with credit institutions and investment firms	24 921	O	0	0	285	0	O	25 206
with customers	1 223	0	0	0	0	0	0	1 223
Equity instruments	0	279	7	1 167	438	0	0	1 891
Investment contracts (insurance)	0	O	13 581	0	O	0	0	13 581
Debt securities issued by	47 093	18 324	રેરે રેજિ	0	3 850	0	0	69 419
Public bodies	40 812	12 349	0	0	3 865	0	0	57 026
Credit institutions and investment firms	3773	2639	0	0	18	0	0	6 430
Corporates	2 507	3 335	53	0	୧୫	0	0	5 963
Derivatives	0	O	0	0	6 246	0	198	6 443
Other	1 437	0	0	0	র্ব	0	O	1 440
Total	238 147	18 603	13 971	1 167	10 922	0	198	283 008
FINANCIAL ASSETS, 31-12-2019
Loans and advances to credit institutions and investment firms (excl. reverse repos)	5 388	0	O	0	1	0	O	5 399
of which repayable on demand and term loans at not more than three months								468
Loans and advances to customers (excl. reverse repos)	155 598	0	218	0	0	0	O	155 816
Trade receivables	1 885	0	O	0	0	0	0	1 885
Consumer credit	5 383	O	122	0	0	0	0	ર ૨૦૨
Mortgage loans	67 711	0	85	0	0	0	O	67 796
Term loans	68 867	0	10	0	0	0	0	68 877
Finance lease	5 926	0	0	0	0	0	0	5 926
Current account advances	4 979	O	0	0	O	0	0	4 979
Other	847	O	O	O	O	O	O	847
Reverse repos	25 596	O	0	0	0	0	0	25 596
with credit institutions and investment firms	25 445	0	0	0	0	0	0	25 445
with customers	151	O	O	0	O	0	O	151
Equity instruments	O	249	7	1 431	833	0	0	2 519
Investment contracts (insurance)	0	O	14 584	O	O	0	O	14 584
Debt securities issued by	42 998	18 788	58	0	1 269	0	O	63 114
Public bodies	37 024	12 370	O	O	1 149	0	O	50 542
Credit institutions and investment firms	3632	2 753	0	0	20	0	0	6 405
Corporates	2 343	3 666	58	0	පිරිම	0	O	6 167
Derivatives	O	0	O	0	5 163	0	158	5 322
Other	1 049	O	0	O	O	0	O	1 049
Total	230 639	19 037	14 867	1 431	7 266	O	158	273 399

				Hedging
(in millions of EUR)	AC	HFT	FVO	derivatives	Total
FINANCIAL LIABILITIES, 30-09-2020
Deposits from credit institutions and investment firms (excl. repos)	36 204	O	O	0	36 204
of which repayable on demand					5 460
Deposits from customers and debt securities (excl. repos)	209 879	146	1 647	0	211 672
Demand deposits	96603	0	0	0	96 603
Time deposits	13 177	30	152	0	13 359
Savings accounts	72 293	0	0	0	72 293
Special deposits	2 599	0	0	0	2 599
Other deposits	328	0	0	0	328
Certificates of deposit	6627	0	7	0	6 635
Savings certificates	546	0	0	0	546
Non-convertible bonds	15 467	116	1 341	0	16 924
Non-convertible subordinated liabilities	2 238	0	147	0	2 385
Repos	6678	20	0	0	6 698
with credit institutions and investment firms	5513	19	0	0	5 532
with customers	1 165	1	0	0	1 166
Liabilities under investment contracts	0	0	12 482	0	12 482
Derivatives	0	5 181	0	1 387	6 568
	0	1 418	0	0	1 418
Short positions	0	11	0	0	11
In equity instruments In debt securities	0	1 406	0	0	1 406
Other	3 001	0	0		3 001
				0
Total	255 763	6 764	14 129	1 387	278 043
FINANCIAL LIABILITIES, 31-12-2019
Deposits from credit institutions and investment firms (excl.	18 731	0	0	0	18 731
repos)
of which repayable on demand					4 669
Deposits from customers and debt securities (excl. repos)	200 607	223	2 539	0	203 369
Demand deposits	85 626	0	0	0	85 626
Time deposits	15271	39	184	0	15 494
Savings accounts	69 057	0	0	0	69 057
Special deposits	2 465	0	O	0	2 465
Other deposits	542	0	0	0	542
Certificates of deposit	10 538	0	8	0	10 546
Savings certificates	1 025	0	0	0	1 025
Non-convertible bonds	13 756	183	2 200	0	16 139
Non-convertible subordinated liabilities	2 327	0	147	0	2 474
Repos	2 565	0	0	0	2 565
with credit institutions and investment firms	2 262	0	0	0	2 262
with customers	302	0	0	0	303
Liabilities under investment contracts	0	0	13610	0	13610
Derivatives	0	5 057	0	1 171	6 227
Short positions	0	1 708	0	0	1 708
In equity instruments	0	14	0	0	14
In debt securities	0	1 693	0	0	1 693
Other	2 190	O	0	0	2 190
Total	224 093	୧ ୨୫୫	16 149	1 171	248 400

Deposits from credit institutions and investment firms' include funding obtained from the ECB's TLTRO programme. In 2Q 2020, KBC participated in TLTRO III for an amount of 19.5 billion euros.

Impaired financial assets (note 4.2.1 in the annual accounts 2019)

			31-12-2019
(in millions of EUR)	Carrying value before impairment	Impairment	Carrying value after impairment	Carrying value before impairment	Impairment	Carrying value after impairment
FINANCIAL ASSETS AT AMORTISED COST
Loans and advances (*)	193 207	- 3 589	189 618	189 446	- 2 855	186 592
Stage 1 (12-month ECL)	169 002	- 179	168 823	165 326	- 131	165 195
Stage 2 (lifetime ECL)	19 011	- 942	18 069	18 558	- 254	18 304
Stage 3 (lifetime ECL)	5 049	- 2 449	2 600	5 381	- 2 444	2 937
Purchased or originated credit impaired assets (POCI)	146	- 20	126	182	- 26	155
Debt Securities	47 105	- 12	47 093	43 010	- 12	42 998
Stage 1 (12-month ECL)	47 068	- 6	47 062	42 934	- 5	42 930
Stage 2 (lifetime ECL)	31	- 1	30	69	- 2	67
Stage 3 (lifetime ECL)	7	- 6	1	7	- 6	1
Purchased or originated credit impaired assets (POCI)	0	0	0	0	0	0
FINANCIAL ASSETS AT FAIR VALUE THROUGH OCI
Debt Securities	18 333	- 9	18 324	18 793	- 5	18 788
Stage 1 (12-month ECL)	18 221	- 7	18 214	18 771	- 4	18 767
Stage 2 (lifetime ECL)	112	- 3	110	22	- 1	22
Stage 3 (lifetime ECL)	0	0	0	0	0	0
Purchased or originated credit impaired assets (POCI)	0	0	0	0	0	0

(*) The carrying value after impairment in this note is equal to the sum of the lines Loans and advances to credit institutions and investment firms (excl. reverse repos), Loans and advances to customers (excl. reverse repos) and Reverse repos in note 4.1 (in the column Measured at amortised cost)

The table does not include the stage transfers embedded underlying in the management overlay of the forecasted collective Covid-19 ECL, as these are determined based on a collective statistical approach and hence cannot be individually linked to specific credits. Taking into account the impact of the management overlay on staging would result in a carrying value before impairment of loans and advances of approximately respectively 161, 26 and 7 billion euros in stage 1, 2 and 3 (or a net staging of approximately 5% of the total portfolio from stage 1 to stage 2 and of 1% from stage 1 & 2 to stage 3). For more information see note 1.4 in this report.

Financial assets and liabilities measured at fair value – fair value hierarchy (note 4.5 in the annual accounts 2019)

For more details on how KBC defines and determines (i) fair value and the fair value hierarchy and (ii) level 3 valuations reference is made to notes 4.4 up to and including 4.7 of the annual accounts 2019.

(in millions of EUR)				30-09-2020				31-12-2019
Fair value hierarchy	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
0
FINANCIAL ASSETS AT FAIR VALUE
Mandatorily measured at fair value through profit or loss (other than held for trading)	14 332	368	437	15 138	15 536	441	320	16 298
Held for trading	2 985	6 890	1 047	10 922	1 685	4 381	1 200	7 266
Fair value option	0	0	0	0	0	0	0	0
At fair value through OCI	14 469	3 585	548	18 603	14 945	3 630	463	19 037
Hedging derivatives	0	198	0	198	0	158	0	158
Total	31 787	11 041	2 033	44 861	32 166	8 611	1 982	42 759
FINANCIAL LIABILITIES AT FAIR VALUE
Held for trading	1 413	4 127	1 224	6 764	1 708	3 259	2 021	6 988
Designated at fair value	12 481	474	1 174	14 129	13 610	657	1 883	16 149
Hedging derivatives	0	1 387	0	1 387	0	1 171	0	1 171
Total	13 894	5 988	2 398	22 280	15 317	5 087	3 903	24 308

Financial assets and liabilities measured at fair value – transfers between level 1 and 2 (note 4.6 in the annual accounts 2019)

During 9M 2020, KBC transferred about 61 million euros' worth of financial assets and liabilities out of level 1 and into level 2. It also reclassified approximately 330 million euros' worth of financial assets and liabilities from level 2 to level 1. Most of these reclassifications were carried out due to a change in the liquidity of government and corporate bonds.

Financial assets and liabilities measured at fair value – focus on level 3 (note 4.7 in the annual accounts 2019)

In 9M 2020 significant movements in financial assets and liabilities classified in level 3 of the fair value hierarchy included the following:

Financial assets measured at fair value through profit and loss: the fair value of loans and advances increased by 113 million euros, mostly due to new transactions, partially compensated by changes in fair value
Financial assets held for trading: the fair value of derivatives decreased by 182 million euros, primarily due to instruments that had reached maturity, only partly offset by new transactions. The fair value of debt securities rose by 30 million euros due to new acquisitions
Financial assets measured at fair value through OCI: the fair value of debt securities increased by 96 million euros, mainly due to new positions and transfers into level 3.
Financial liabilities held for trading: the fair value of derivatives decreased by 729 million euros, mainly due to a combination of sales of existing positions, instruments that had reached maturity and changes in fair value, partially offset by new transactions. The fair value of debt securities issued also decreased by 67 million euros, primarily due to instruments that reached maturity
Financial liabilities designated at fair value: the fair value of debt securities issued decreased by 709 million euros, due to a combination of repurchases of existing positions, settlements, and changes in fair value, partially offset by new issues.

Provisions for risks and charges (note 5.7 in the annual accounts 2019)

On 6 October 2011, Irving H. Picard, trustee for the liquidation of Bernard L. Madoff Investments Securities LLC (& Bernard L. Madoff), sued KBC Investments Ltd (a wholly-owned subsidiary of KBC Bank) before the bankruptcy court in New York to recover (claw-back) approximately USD 110,000,000 which had been transferred from Madoff (via a feeder fund KBC had lent to called Harley) to KBC entities. This claim is one of a whole set made by the trustee against several banks, hedge funds, feeder funds and investors ("joint defense group").

A lengthy litigation process was conducted on the basis of preliminary objections in respect of the applicability of the Bankruptcy Code's 'safe harbor' and 'good defenses' rules to subsequent transferees (as is the case for KBC Investments Ltd), as detailed in previous disclosures. In June 2015 the trustee amended the original claim which led to an increase of the amount claimed to USD 196,000,000.

A final court ruling dismissing the claim of the Trustee was issued on 3 March 2017. The Trustee appealed and the Court of Appeal reversed the dismissal on 28 February 2019. A petition (i.e. writ of Certioriari) filed on 30 August 2019 was denied by the U.S. Supreme Court on 2 June 2020. As a consequence the merits of the case will be handled by the Bankruptcy Court.

KBC still believes there is a strong basis to get the action against KBC dismissed as there are a number of other defenses that can be raised together with the joint defense group. The procedure may still take several years.

Parent shareholders' equity and AT1 instruments (note 5.10 in the annual accounts 2019)

Quantities	30-09-2020	31-12-2019
Ordinary shares	416 394 642	416 394 642
of which ordinary shares that entitle the holder to a dividend payment	416 394 642	416 394 642
of which treasury shares	21 575	38 607
Additional information
Par value per share (in EUR)	3.51	3.51
Number of shares issued but not fully paid up	O	O

The ordinary shares of KBC Group NV have no nominal value and are quoted on NYSE Euronext (Brussels).

The treasury shares almost fully relate to positions in shares of KBC Group to hedge outstanding equity derivatives.

Main changes in the scope of consolidation (note 6.6 in the annual accounts 2019)

In 9M 2020 :

On 29 May 2020, KBC Insurance and Nova Ljubljanska banka ('NLB') closed the transaction announced on 27 December 2019 to sell, in a joint process, their respective stakes in the Slovenian 50/50 life insurance joint venture NLB Vita.

The transaction had a negligible impact on KBC Group's P&L and capital ratio.

In 2019 :

On 31 May 2019, ČSOB has acquired the remaining 45% stake in ČMSS from Bausparkasse Schwäbisch Hall (BSH) for a total consideration of 240 million euros. As a result, ČMSS is as of 1 June 2019 fully consolidated (previously equity method).

Post-balance sheet events (note 6.8 in the annual accounts 2019)

Significant non-adjusting events between the balance sheet date (30 September 2020) and the publication of this report (12 November 2020): None

f3 KBC Group

Additional Information 3Q 2020 and 9M 2020

Section not reviewed by the Auditor

Credit risk

Snapshot of the loan portfolio (banking activities)

The main source of credit risk is the loan portfolio of the bank. A snapshot of the banking portfolio is shown in the table below. It includes all payment credit, guarantee credit and standby credit granted by KBC to private persons, companies, governments and banks. Bonds held in the investment portfolio are included if they are corporate- or bank-issued, hence government bonds and trading book exposure are not included. Further on in this chapter, extensive information is provided on the credit portfolio of each business unit. Information specifically on sovereign bonds can be found under 'How do we manage our risks (in the annual accounts 2019)'.

Credit risk: loan portfolio overview	30-09-2020	31-12-2019
Total loan portfolio (in billions of EUR) 1
Amount outstanding and undrawn	222	218
Amount outstanding	179	175
Loan portfolio breakdown by business unit (as a % of the outstanding portfolio)
Belgium	65.1%	64.1%
Czech Republic	17.2%	18.4%
International Markets	15.8%	15.6%
Group Centre	1.9%	2.0%
Loan portfolio breakdown by counterparty sector (as a % of the outstanding portfolio)
Private individuals Finance and insurance Governments Corporates Services Distribution	41.6% 8.3% 3.6% 46.4% 10.8% 6.8%	41.7% 7.6% 2.9% 47.7% 10.9% 7.3%
Real estate Building & construction Agriculture, farming, fishing Automotive Food producers	6.3% 3.9% 2.7% 2.5% 1.7%	6.4% 3.9% 2.7% 2.6% 1.7%
Electricity Metals Chemicals Machinery & heavy equipment Hotels, bars & restaurants Shipping Oil, gas & other fuels	1.6% 1.4% 1.4% 1.0% 0.7% 0.7% 0.5%	1.6% 1.4% 1.3% 1.0% 0.7% 0.8% 0.6%
Electrotechnics Traders Other 2 Loan portfolio breakdown by region (as a % of the outstanding portfolio)	0.5% 0.5% 3.3%	0.5% 0.6% 3.6%
Home countries Belgium Czech Republic Ireland Slovakia Hungary Bulgaria Rest of Western Europe	86.5% 54.1% 16.3% 5.8% 5.0% 3.2% 2.1% 8.7%	86.4% 52.9% 17.6% 5.9% 4.9% 3.1% 2.0% 8.6%
Rest of Central and Eastern Europe	0.3%	0.4%
North America	1.5%	1.5%
Asia	1.4%	1.5%
Other	1.6%	1.6%
Loan portfolio breakdown by counterparty (as % of the outstanding portfolio)
Retail	41.6%	41.7%
of which: mortgages	38.5%	38.5%
of which: consumer finance	3.1%	3.2%
SME	21.5%	21.8%
Corporate	36.9%	36.5%

	30-09-2020	31-12-2019
Loan portfolio breakdown by IFRS 9 ECL stage (as % of the outstanding portfolio)
Stage 1 (credit risk has not increased significantly since initial recognition)	85.4%	85.2%
of which: PD 1 - 4	63.6%	62.7%
of which: PD 5 - 9 including unrated	21.8%	22.6%
Stage 2 (credit risk has increased significantly since initial recognition – not credit impaired) incl. POCI 3	11.4%	11.3%
of which: PD 1 - 4	3.5%	3.4%
of which: PD 5 - 9 including unrated	7.9%	7.9%
Stage 3 (credit risk has increased significantly since initial recognition – credit impaired) incl. POCI 3	3.2%	3.5%
of which: PD 10 impaired loans	1.3%	1.6%
of which: more than 90 days past due (PD 11+12)	1.8%	1.9%
Impaired loan portfolio (in millions of EUR)
Impaired loans (PD10 + 11 + 12)	5 702	6 160
of which: more than 90 days past due	3 307	3 401
Impaired loans ratio (%)
Belgium	2.2%	2.4%
Czech Republic	2.1%	2.3%
International Markets	7.2%	8.5%
Group Centre	12.1%	12.4%
Total	3.2%	3.5%
of which: more than 90 days past due	1.8%	1.9%
Loan loss impairment (in millions of EUR)
Loan loss Impairment for Stage 1 portfolio	202	144
Loan loss Impairment for Stage 2 portfolio	950	265
Loan loss Impairment for Stage 3 portfolio	2 576	2 584
of which: more than 90 days past due	2 040	2 050
Cover ratio of impaired loans (%)
Loan loss impairments for stage 3 portfolio / impaired loans	45.2%	42.0%
of which: more than 90 days past due	61.7%	60.3%
Cover ratio of impaired loans, mortgage loans excluded (%)
Loan loss impairments for stage 3 portfolio / impaired loans, mortgage loans excluded	53.4%	49.7%
of which: more than 90 days past due	71.9%	71.7%
Credit cost ratio (%)
Belgium	0.59%	0.22%
Czech Republic	0.64%	0.04%
International Markets	0.79%	-0.07%
Slovakia	0.53%	0.14%
Hungary	0.89%	-0.02%
Bulgaria	0.81%	0.14%
Ireland	0.94%	-0.32%
Group Centre	-0.27%	-0.88%
Total	0.61%	0.12%

1 Outstanding portfolio includes all on-balance sheet commitments and off-balance sheet guarantees but excludes off-balance sheet undrawn commitments; the amounts are measured in Gross Carrying Amounts;

2 Other includes corporate sectors not exceeding 0.5% concentration and unidentified sectors

3 Purchased or originated credit impaired assets

Impaired loans are loans for which full (re)payment of the contractual cash flows is deemed unlikely. This coincides with KBC's Probability-of-Default-classes 10, 11 and 12 (see annual accounts FY 2019 - section on credit risk for more information on PD classification). These impaired loans are equal to 'non-performing loans' under the definition used by EBA.

Since 1Q18 a switch has been made in the reported 'outstanding' figures from drawn principal to the new IFRS 9 definition of gross carrying amount (GCA), i.e. including reserved and accrued interests. The additional inclusion of reserved interests led, among others, to an increase in the reported amount of impaired loans. Furthermore, the transaction scope of the credit portfolio was extended and now additionally includes the following 4 elements: (1) bank exposure (money market placements, documentary credit, accounts), (2) debtor risk KBC Commercial Finance, (3) unauthorized overdrafts, and (4) reverse repo (excl. central bank exposure).

Loan portfolio per business unit (banking activities)

Legend:

ind. LTV - Indexed Loan To Value: current outstanding loan / current value of property
Impaired loans: loans for which full (re)payment is deemed unlikely (coincides with KBC's PD-classes 10, 11 or 12)
Impaired loans that are more than 90 days past due: loans that are more than 90 days overdue and/or loans which have been terminated/cancelled or bankrupt obligors (coincides with KBC's PD-classes 11 and 12)
Stage 1+2 impairments: impairments for non-impaired exposure (i.e. exposure with PD < PD 10)
Stage 3 impairments: loan loss impairments for impaired exposure (i.e. exposure with PD 10, 11 or 12) Cover ratio impaired loans: stage 3 impairments / impaired loans

Loa ort fol io B usi s U nit Be lgiu n p nes m
30- 09- 202 0, i illio of EU R n m ns		1 Be lgiu m		For	eig n b che ran	s	Tot al B	usi s U nit Be nes	lgiu m
fol Tot al p ort io o uts tan din g	109 24 8			7 2 62			116 51 0
Co unt arty bre ak dow erp n		% o uts t.			% o uts t.			% o uts t.
il reta	38 351	35, 1%		0	0,0 %		38 351	32, 9%
/w rtga o mo ges	36 679	33, 6%		0	0,0 %		36 679	31, 5%
/w er f ina o con sum nce	1 6 72	1,5 %		0	0,0 %		1 6 72	1,4 %
SM E	31 598	28, 9%		0	0,0 %		31 598	27, 1%
ate cor por	39 299	36, 0%		7 2 62	100 ,0%		46 561	40, 0%
Mo rtga loa ge ns		% o uts t.	ind . LT V		% o uts t.	ind . LT V		% o uts t.
tota l	36 679	33, 6%	57%	0	0,0 %	-	36 679	31, 5%
/w FX rtga o mo ges	0	0,0 %	-	0	0,0 %	-	0	0,0 %
/w ind . LT V > 10 0% o	549	0,5 %	-	0	0,0 %	-	549	0,5 %
Pro bab ility of def aul t (P D)		% o uts t.			% o uts t.			% o uts t.
low ris k (P D 1 -4; 0.0 0% -0.8 0% )	85 078	77, 9%		4 0 02	55, 1%		89 080	76, 5%
diu isk (PD 5-7 ; 0. 80% -6.4 0% ) me m r	18 883	17, 3%		2 9 29	40, 3%		21 811	18, 7%
hig h ri sk (PD 8-9 ; 6. 40% -10 0.0 0% )	2 6 00	2,4 %		145	2,0 %		2 7 45	2,4 %
imp aire d lo (P D 1 0 - 12) ans	2 4 20	2,2 %		179	2,5 %		2 6 00	2,2 %
ate d unr	266	% 0,2		8	% 0,1		274	% 0,2
Ov ll ri sk ind ica tor era s		3 im sta ge p.	% c ove r		3 im sta ge p.	% c ove r		3 im sta ge p.	% c ove r
ndi imp aire d lo out sta ng ans	2 4 20	1 0 80	44, 6%	179	126	70, 4%	2 6 00	1 2 06	46, 4%
/w PD 10 im pai red loa o ns	1 1 49	274	23, 8%	89	42	47, 3%	1 2 38	316	25, 5%
/w re t han 90 da t du e (P D 1 1+1 2) o mo ys pas	1 2 71	806	63, 4%	90	84	93, 2%	1 3 61	890	65, 4%
all imp airm ent s (s tag e 1 +2+ 3)	1 6 72			163			1 8 35
PO /w sta 1+2 im pai nts (in cl. CI) o ge rme	592			37			629
/w (in PO CI) sta 3 im pai nts cl. o ge rme	1 0 80			126			1 2 06
201 9 C red it c io ( CC R) ost rat	0,2 0%			0,4 1%			0,2 2%
YT D 2 020 CC R	0,5 8%			0,7 5%			0,5 9%

Remarks

, p 1 Belgium = KBC Bank (all retail and corporate credit lending activities except for the foreign branches, part of non-legacy portfolio assigned to BU Belgium), CBC, KBC Lease Belgium, KBC Immolease and KBC Commercial Finance

art

Loan portfolio Business Unit Czech Republic

30-09-2020, in millions of EUR

Tot al p ort fol io o uts tan din g	30 781
Co unt arty bre ak dow erp n		% o uts t.
il reta	17 888	58, 1%
/w rtga o mo ges	15 733	1% 51,
/w er f ina o con sum nce	2 1 55	7,0 %
SM E	4 6 36	15, 1%
ate cor por	8 2 58	26, 8%
Mo rtga loa ge ns		% o uts t.	ind . LT V
tota l	15 733	51, 1%	60%
/w FX rtga o mo ges	0	0,0 %	-
/w ind . LT V > 10 0% o	105	0,3 %	-
Pro bab ility of def aul t (P D)		% o uts t.
k (P D 1 0.0 0% -0.8 0% ) low ris -4;	17 857	58, 0%
diu isk (PD 5-7 ; 0. 80% -6.4 0% ) me m r	11 060	35, 9%
hig h ri sk (PD 8-9 ; 6. 40% -10 0.0 0% )	1 1 98	3,9 %
imp aire d lo (P D 1 0 - 12) ans	654	2,1 %
ate d unr	13	0,0 %
1 Ov ll ri sk ind ica tor era s		sta 3 im ge p.	% c ove r
out sta ndi imp aire d lo ng ans	654	322	49, 2%
/w PD 10 im pai red loa o ns	317	99	31, 3%
/w han 90 da t du e (P D 1 1+1 2) re t o mo ys pas	337	223	66, 1%
all imp airm ent s (s tag e 1 +2+ 3)	584
/w sta 1+2 im pai nts (inc l. P OC I) o ge rme	262
/w sta 3 im pai nts (inc l. P OC I) o ge rme	322
201 9 C red it co st r atio (C CR )	0,0 4%
YT D 2 020 CC R	0,6 4%

1 CCR at country level in local currency

Loan portfolio Business Unit International Markets

30-0 9-20 20, in m illio f EU R ns o		Irela nd			Slov akia			Hun gary			Bulg aria		Tota	l Int Ma rket s
Tota l po rtfo lio o and ing utst	10 1 81			8 59 8			5 69 4			3 74 9			28 2 21
Cou nter part y br eak dow n		% o utst			% o utst			% o utst			% o utst			% o utst
reta il	10 1 18	99,4 %		4 54 6	52,9 %		2 08 2	36,6 %		1 47 8	39,4 %		18 2 23	64,6 %
/w m ortg o age s	10 0 53	% 98,7		4 05 3	% 47,1		1 59 1	% 27,9		780	% 20,8		16 4 77	% 58,4
/w c r fin o ons ume anc e	65	0,6%		492	5,7%		491	8,6%		698	% 18,6		1 74 6	6,2%
SME	53	0,5%		990	11,5 %		150	2,6%		1 06 9	28,5 %		2 26 2	8,0%
orat corp e	10	0,1%		3 06 2	35,6 %		3 46 2	60,8 %		1 20 2	32,1 %		7 73 6	27,4 %
Mor e lo tgag ans		% o utst	ind. LTV		% o utst	ind. LTV		% o utst	ind. LTV		% o utst	ind. LTV		% o utst
tota l	10 0 53	98,7 %	67%	4 05 3	47,1 %	65%	1 59 1	27,9 %	54%	780	20,8 %	65%	16 4 77	58,4 %
/w F X m ortg o age s	0	0,0%	-	0	0,0%	-	3	0,1%	84%	81	2,1%	67%	84	0,3%
/w in d. L TV > 100 % o	713	7,0%	-	36	0,4%	-	90	1,6%	-	30	0,8%	-	869	3,1%
Prob abil ity o f de faul t (P D)		% o utst			% o utst			% o utst			% o utst			% o utst
low risk (PD 1-4 ; 0.0 0%- 0.80 %)	896	8,8%		5 55 0	64,6 %		2 86 3	50,3 %		961	25,6 %		10 2 71	36,4 %
med ium risk (PD 5-7 ; 0.8 0%- 6.40 %)	6 94 6	68,2 %		2 28 4	26,6 %		2 49 7	43,9 %		2 18 9	58,4 %		13 9 16	49,3 %
high risk (PD 8-9 ; 6.4 0%- 100 .00% )	869	8,5%		592	6,9%		222	3,9%		281	7,5%		1 96 4	7,0%
impa ired loa ns ( PD 10 - 12)	1 46 9	14,4 %		151	1,8%		103	1,8%		318	8,5%		2 04 0	7,2%
ted unra	0	0,0%		21	0,2%		10	0,2%		0	0,0%		31	0,1%
1 Ove rall risk ind icat ors		stag e 3 imp	% c ove r		stag e 3 imp.	% c ove r		stag e 3 imp	% c ove r		stag e 3 imp.	% c ove r		stag e 3 imp	% c ove r
outs tand ing impa ired loa ns	1 46 9	402	27,4 %	151	95	62,8 %	103	58	57,0 %	318	137	43,2 %	2 04 0	693	34,0 %
/w P D 10 imp aire d lo o ans	670	82	12,3 %	25	7	29,1 %	22	8	36,1 %	66	11	16,3 %	784	108	13,8 %
/w m than 90 day st d ue ( PD 11+ 12) o ore s pa	799	320	40,1 %	125	87	69,6 %	81	50	62,7 %	251	126	50,3 %	1 25 6	584	46,5 %
all im pair ts (s tage 1+2 +3) men	479			172			132			167			950
/w s tage 1+2 imp airm ents (inc l. PO CI) o	76			78			73			30			257
/w s tage 3 im pair ts (i ncl. POC I) o men	402			95			58			137			693
9 Cr o (C CR) 201 edit cost rati	2% -0,3			% 0,14			2% -0,0			% 0,14			7% -0,0
0 CC YTD 202 R	% 0,94			% 0,53			% 0,89			% 0,81			% 0,79

Remarks

1 CCR at country level in local currency

Loan portfolio Group Centre ¹

30-09-2020, in millions of EUR Total portfolio outstandingCounterparty break down retail 0 o/w mortgages o/w consumer financeSME 0corporate 3 370Mortgage loans

	% o utst	ind. LT V
0	0,0%	-
0	0,0%	-
0	0,0%	-
	% o utst
2 78 7	82,7 %
132	3,9%
42	1,2%
409	12,1 %
0	0,0%
	stag e 3 imp	% c ove r
409	355	86,9 %
56	12	22,2 %
353	343	97,2 %
359
4
355
-0,8 8%
-0,2 7%

3 370

0

0

% outst.

0,0%

100,0%

Remarks

1 Total Group Centre = part of non-legacy portfolio assigned to BU Group and activities in wind-down (e.g. ex-Antwerp Diamond Bank)

Solvency(1)

KBC reports its solvency at group, banking and insurance level, calculating it on the basis of IFRS figures and the relevant guidelines issued by the competent regulator.

Solvency KBC Group

We report the solvency of the group, the bank and the insurance company based on IFRS data and according to the rules imposed by the regulator. For the KBC group, this implies that we calculate our solvency ratios based on CRR/CRD IV. This regulation entered gradually into force on 1 January 2014. The general rule under CRR/CRD IV for insurance participations is that an insurance participation is deducted from common equity at group level, unless the competent authority grants permission to apply a risk weighting instead (Danish compromise). KBC received such permission from the supervisory authority and hence reports its solvency on the basis of a 370% risk weighting being applied to the holdings of own fund instruments of the insurance company, after having deconsolidated KBC Insurance from the group figures.

In addition to the solvency ratios under CRD IV/CRR, KBC is considered a financial conglomerate since it covers both significant banking and insurance activities. Therefore KBC also has to disclose its solvency position as calculated in accordance with the Financial Conglomerate Directive (FICOD; 2002/87/EC). This implies that available capital is calculated on the basis of the consolidated position of the group and the eligible items recognised as such under the prevailing sectorial rules, which are CRR/CRD IV for the banking business and Solvency II for the insurance business. The capital requirement for the insurance business based on Solvency II is multiplied by 12.5 to obtain a risk weighted asset equivalent.

The Internal Rating Based (IRB) approach is since its implementation in 2008 the primary approach to calculate KBC's risk weighted assets. This is, based on a full application of all the CRD IV/CRR rules, used for approximately 93% of the weighted credit risks, of which approx. 89% according to Advanced and approx. 4% according to Foundation approach. The remaining weighted credit risks (ca. 7%) are calculated according to the Standardised approach.

The overall capital requirement (CET1) that KBC is to uphold is set at 10.45% (fully loaded, Danish Compromise which includes the CRR/CRD IV minimum requirement (4.5%), the Pillar 2 Requirement (1.75%) and the buffers set by national competent authorities (2.50% Capital Conservation Buffer, 1.50% Systemic Buffer and 0.20% Countercyclical Buffer). Furthermore ECB has set a Pillar 2 Guidance of 1.00%.

ECB temporarily allows banks to operate below the P2G and Capital Conservation Buffer and hence to use these buffers to withstand potential stress. This temporarily brings the regulatory minimum to 7.95% (being 10.45% – 2.5%). ECB does not have any discretion to waive the application of automatic restrictions to distributions (MDA) as they are set out in the CRR/CRD package. Therefore, the CCB remains included in the threshold for MDA.

(1) Fully in line with the European Central Bank recommendation that at least till January 2021 no dividends are paid out and no irrevocable commitment to pay out dividends is undertaken by the credit institutions for the financial year 2019 and 2020 and that credit institutions refrain from share buy-backs.

Distributions (being dividend payments, payments related to additional tier 1 instruments or variable remuneration) are limited in case the combined buffer requirements described above are breached. This limitation is also referred to as "Maximum Distributable Amount" or "MDA" thresholds.

The table below provides an overview of the buffers KBC Group has compared to these thresholds, both on an actuals basis (i.e. versus the regulatory targets that apply at the reporting date) and a fully loaded basis (i.e. versus the regulatory targets that will apply going forward).

Buffer vs. Overall Capital Requirement (in millions of EUR)	30-09-2020		31-12-2019
(consolidated, under CRR/CRD IV, Danish compromise method)	Fully loaded	Actuals	Fully loaded	Actuals
CET1 Pillar 1 minimum	4.50%	4.50%	4.50%	4.50%
Pillar 2 requirement	1.75%	1.75%	1.75%	1.75%
Capital conservation buffer	2.50%	2.50%	2.50%	2.50%
Buffer for systemically important institutions (O-SII)	1.50%	1.50%	1.50%	1.50%
Entity-specific countercyclical buffer	0.20%	0.16%	0.30%	0.43%
Overall Capital Requirement (OCR)	10.45%	10.41%	10.55%	10.68%
CET1 used to satisfy shortfall in AT1 bucket	0.00%	0.00%	0.00%	0.00%
CET1 used to satisfy shortfall in T2 bucket	0.23%	0.23%	0.05%	0.05%
CET1 requirement	10.69%	10.65%	10.60%	10.74%
CET1 capital	16 579	16 606	16 989	16 989
CET1 buffer (= buffer to MDA)	5 875	5 939	6 486	6 353

Following table groups the solvency on the level of KBC Group according to different methodologies and calculation methods, including the deduction method.

Overview of KBC Group's capital ratios (in millions of EUR)		numerator (common	denominator (total weighted risk
30-09-2020		equity)	volume)	ratio (%)
CRDIV, Common Equity ratio
Danish Compromise	Fully loaded	16 579	100 169	16.55%
Deduction Method	Fully loaded	15 774	95 195	16.57%
Financial Conglomerates Directive	Fully loaded	17 283	111 486	15.50%
Danish Compromise	Transitional	16 606	100 191	16.57%
Deduction Method	Transitional	15 801	95 216	16.60%
Financial Conglomerates Directive	Transitional	17 311	111 507	15.52%

KBC's CET1 ratio of 16.55% at end 9M 2020 represents a solid capital buffer:

8.6% capital buffer compared with the current theoretical minimum capital requirement of 7.95% (as a result of the announced ECB and National Bank measures which provided significant temporary relief on the minimum capital requirements)
6.1% capital buffer compared with the Overall Capital Requirement (OCR) of 10.45% (which still includes the 2.50% capital conservation buffer on top of the 7.95%)
5.9% capital buffer compared with the Maximum Distributable Amount (MDA) of 10.69%.

Danish Compromise

	30-09-2020	30-09-2020	31-12-2019
In millions of EUR	Fully loaded	Transitional	Fully loaded
Total regulatory capital (after profit appropriation)	19 849	19876	20 414
Tier-1 capital	18 079	18 106	18 489
Common equity	16 579	16 606	16 989
Parent shareholders' equity (after deconsolidating KBC Insurance)	17 553	17 553	17 933
Intangible fixed assets, incl deferred tax impact (-)	- 807	- 807	- 726
Goodwill on consolidation, incl deferred tax impact (-)	- 718	- 718	766
Minority interests	O	O	O
Hedging reserve (cash flow hedges) (-)	1 321	1 321	1 331
Valuation diff. in financial liabilities at fair value - own credit risk (-)	- 12	- 12	- 9
Value adjustment due to the requirements for prudent valuation (-)	- 26	- 26	- 54
Dividend payout (-)	O	O	O
Coupon of AT1 instruments (-)	- 15	- 15	- 11
Deduction re. financing provided to shareholders (-)	- 57	- 57	57 l
Deduction re. Irrevocable payment commitments (-)	- 58	- 58	- 45
IRB provision shortfall (-)	- 214	- 214	- 140
Deferred tax assets on losses carried forward (-)	- 388	- 388	- 467
Transitional adjustments to CET1	O	27
Limit on deferred tax assets from timing differences relying on future profitability and	O	0	O
significant participations in financial sector entities (-)

Additional going concern capital	1 500	1 500	1 500
CRR compliant AT1 instruments	1 500	1 500	1 500
Minority interests to be included in additional going concern capital	O	O	O

Tier 2 capital	1 770	1 770	1 925
IRB provision excess (+)	O	O	130
Transitional adjustments to T2
Subordinated liabilities	1 770	1 770	1 795
Subordinated loans non-consolidated financial sector entities (-)	0	0	0
Minority interests to be included in tier 2 capital	0	O	O
Total weighted risk volume	100 169	100 191	99 071
Banking	91 019	91 040	89 838
Insurance	9 133	9 133	9 133
Holding activities	29	29	124
Elimination of intercompany transactions	- 12	- 12	- 25

Solvency ratios
Common equity ratio	16.55%	16.57%	17.15%
Tier-1 ratio	18.05%	18.07%	18.66%
Total capital ratio	19.82%	19.84%	20.61%

In line with the ECB recommendation we apply the IFRS 9 transitional measures as of 1H 2020. The impact of transitional was limited to 2 basis points at the end of 9M 2020 as there was no interim profit recognition in CET1. At year-end 2020, the impact of the application of the transitional measures is expected to result in a positive impact on CET1 of 56 bps compared to fully loaded.

Leverage ratio KBC Group

Leverage ratio KBC Group (Basel III) In millions of EUR	30-09-2020	30-09-2020	31-12-2019
	Fully loaded	Transitional	Fully loaded
Tier-1 capital (Danish compromise)	18 079	18 106	18 489

Total exposures	304 188	304 229	273 029
Total Assets	321 193	321 193	290 735
Deconsolidation KBC Insurance	-31 760	-31 760	-33 243
Transitional adjustment	0	41	0
Adjustment for derivatives	-5 225	-5 225	-2 882
Adjustment for regulatory corrections in determining Basel III Tier-1 capital	-2 268	-2 268	-2 254
Adjustment for securities financing transaction exposures	2 247	2 247	638
Off-balance sheet exposures	20 000	20 000	20 035

Leverage ratio	5.94%	5.95%	6.77%

Solvency banking and insurance activities separately

As is the case for the KBC group, the solvency of KBC Bank is calculated based on CRR/CRD IV. The solvency of KBC Insurance is calculated on the basis of Solvency II rules as they became effective on 1 January 2016. The tables below show the tier-1 and CAD ratios calculated under Basel III (CRD IV/CRR) for KBC Bank, as well as the solvency ratio of KBC Insurance under Solvency II.

KBC Bank consolidated - CRDIV/CRR	30-09-2020	30-09-2020	31-12-2019
(in millions of EUR)	Fully loaded		Transitional Fully loaded
Total regulatory capital, after profit appropriation	16 138	16 165	16 660
Tier-1 capital	14 345	14 372	14 704
Of which common equity	12 845	12872	13 204
Tier-2 capital	1 793	1 793	1 957
Total weighted risks	91 019	91 040	89 838
Credit risk	77 067	77 088	75 786
Market risk	2611	2 611	2 713
Operational risk	11 340	11 340	11 340
Solvency ratios
Common equity ratio	14.1%	14.1%	14.7%
Tier-1 ratio	15.8%	15.8%	16.4%
CAD ratio	17.7%	17.8%	18.5%

Solvency II, KBC Insurance consolidated (in millions of EUR)	30-09-2020	31-12-2019
Own Funds	3 214	3 496
Tier 1	2 714	2 996
IFRS Parent shareholders equity	3 578	3 422
Dividend payout	- 307	- 156
Deduction intangible assets and goodwill (after tax)	- 133	- 128
Valuation differences (after tax)	- 578	- 196
Volatility adjustment	173	104
Other	- 19	- 49
Tier 2	500	500
Subordinated liabilities	500	500
Solvency Capital Requirement (SCR)	1 636	1 727
Market risk	1 214	1 389
Non-life	581	579
Life	709	689
Health	290	264
Counterparty	127	114
Diversification	-1 000	- 991
Other	- 285	- 316
Solvency II ratio	196%	202%

Minimum requirement for own funds and eligible liabilities (MREL)

Besides the ECB and NBB, which supervise KBC on a going concern basis, KBC is also subject to requirements set by the Single Resolution Board (SRB). The SRB is developing resolution plans for the major banks in the euro area. The resolution plan for KBC is based on a Single Point of Entry (SPE) approach at the level of KBC Group with 'bail-in' as the primary resolution tool. MREL measures the amount of own funds and eligible liabilities that can be credibly and feasibly bailed-in.

The Eligible instruments to satisfy the MREL target are defined in the '2018 SRB Policy for the 2nd wave of resolution plans' published on 16th January 2019. The so-called 'consolidated approach' (instruments issued by any entity within the resolution group were accepted by SRB to satisfy the MREL target) is replaced by a more restrictive 'hybrid approach'. This approach excludes MREL eligible liabilities that have not been issued by KBC Group NV (insofar as they do not constitute own funds) and requires tier-2 capital down-streamed by KBC Group NV to KBC Insurance to be deducted from MREL (in line with the treatment under CRR/CRD). At year-end 2019, 1 billion euro of instruments were no longer eligible for SRB to satisfy the MREL.

At the end of September 2020, the MREL ratio based on instruments issued by KBC Group NV following the 'hybrid approach' stands at 9.4% of TLOF versus the SRB requirement for KBC to achieve 9.67% as by year-end 2021.

The decrease of the MREL as a % of TLOF (versus 10.0% at the end of March 2020), can be fully explained by the participation in TLTRO III for an amount of 19.5 billion euros in June 2020. Excluding this, the MREL as % of TLOF would have amounted to 10.1% at the end of September 2020.

As of 1H 2020, the MREL ratio as a % of TLOF includes the impact of IFRS 9 transitional measures.

Income statement, volumes and ratios per business unit

Details on our segments or business units are available in the company presentation.

Note: The ECB approved to apply the IFRS9 transitional arrangements from 2Q 2020, as such the difference between fully loaded and the transitional measures are assigned to Group Centre. In other words, the RWA, allocated capital and the ROAC of the different countries remain based on fully loaded.

Business unit Belgium
(in millions of EUR)		3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019
Breakdown P&L
Net interest income	673	635	640	634	637
Non-life insurance (before reinsurance)	157	167	112	160	129
Earned premiums	287	280	283	285	284
Technical charges	- 130	- 113	- 172	- 125	156
Life insurance (before reinsurance)	- 16	- 16	- 21	21	25
Earned premiums	191	208	216	282	217
Technical charges	- 206	- 224	237	303	242
Ceded reinsurance result	- 3	- 10	- 9	10	5 I
Dividend income	10	16	11	15	14
Net result from financial instruments at fair value through profit or loss	67	149	217	89	9 -
Net realised result from debt instruments at fair value through OCI	1	1	O	O	ব
Net fee and commission income	271	271	308	307	297
Net other income	36	45	35	41	51
TOTAL INCOME	1 197	1 256	858	1 216	1 092
Operating expenses	- 520	521	828	550	552
Impairment	- 43	469	117	109	21
on financial assets at AC and at FVOCI	- 41	458	116	107	21
other	2 -	- 11	0	2 I	0
Share in results of associated companies and joint ventures	2 ।	- 3	3 -	2 -	2 -
RESULT BEFORE TAX	633	264	90	556	517
Income tax expense	147	ਦਰ	4	145	149
RESULT AFTER TAX	486	204	86	412	368
attributable to minority interests	O	O	O	O	0
attributable to equity holders of the parent	486	204	86	412	368
Banking	352	68	ട് ട	301	287
Insurance	134	136	30	111	81
Breakdown Loans and deposits
Total customer loans excluding reverse repos (end of period)	103 844	103 689	104 969	100 909	100 945
of which Mortgage loans (end of period)	37 717	36 863	36 489	36 445	35 832
Customer deposits and debt certificates excl. repos (end of period)	137 271	136 928	138 045	130 771	134 355
Technical provisions plus unit-linked, life insurance
Interest Guaranteed (end of period)	12 944	13 005	13 074	13 130	13 097
Unit-Linked (end of period)	12 576	12 599	12 064	13 426	13 281
Performance Indicators
Risk-weighted assets, banking (end of period, Basel III fully loaded)	53 363	52 938	54 098	49 486	49 985
Required capital, insurance (end of period)	1 393	1 358	1 296	1 497	1 572
Allocated capital (end of period)	6 970	6 943	7 003	6 792	6 920
Return on allocated capital (ROAC)	28%	12%	-5%	24%	22%
Cost/income ratio, banking	47%	44%	95%	48%	53%
Combined ratio, non-life insurance	81%	74%	95%	82%	91%
Net interest margin, banking	1.63%	1.63%	1.68%	1.68%	1.68%

Business unit Czech Republic
(in millions of EUR)		3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019
Breakdown P&L
Net interest income	220	235	351	338	329
Non-life insurance (before reinsurance)	36	38	31	30	29
Earned premiums	78	72	75	73	72
Technical charges	- 42	35	44	43	43
Life insurance (before reinsurance)	12	12	14	12	13
Earned premiums	50	44	52	58	ર્ટિક
Technical charges	- 38	32	33	45	40
Ceded reinsurance result	1	O	0	O	0
Dividend income	O	0	O	0	0
Net result from financial instruments at fair value through profit or loss	16	90	125	8	રક
Net realised result from debt instruments at fair value through OCI	O	1	O	0	O
Net fee and commission income	52	51	55	રેત્વે છે. વિત્તાના વિત્તાના પાકની ખેત	70
Net other income	3	3	9	3	2
TOTAL INCOME	337	431	335	451	388
Operating expenses	- 179	164	221	200	187
Impairment	- 18	175	9 -	- 3	9
on financial assets at AC and at FVOCI	15	170	8 -	1	9
other	3 -	- 5	1	1 -	0
Share in results of associated companies and joint ventures	O	O	0	O	0
RESULT BEFORE TAX	139	91	105	248	192
Income tax expense	- 23	14	17	- 43	33 l
RESULT AFTER TAX	116	77	88	205	159
attributable to minority interests	O	O	O	O	0
attributable to equity holders of the parent	116	77	88	205	159
Banking	104	61	75	194	147
Insurance	12	16	13	11	12
Breakdown Loans and deposits
Total customer loans excluding reverse repos (end of period)	28 106	28 597	28 286	29 857	29 200
of which Mortgage loans (end of period)	15384	15 418	14 876	15 768	15 267
Customer deposits and debt certificates excl. repos (end of period)	39 162	39 704	37 627	39 559	38 170
Technical provisions plus unit-linked, life insurance
Interest Guaranteed (end of period)	622	613	588	629	616
Unit-Linked (end of period)	615	659	୧୧୧	727	700
Performance Indicators
Risk-weighted assets, banking (end of period, Basel III fully loaded)	14 971	15 338	15 349	15 005	14 916
	131	128	126	121	121
Required capital, insurance (end of period)	1 696	1 746	1 745	1 726	1 717
Allocated capital (end of period)	27%	18%	20%	48%
Return on allocated capital (ROAC)					38%
Cost/income ratio, banking	54% 90%	38% 81%	68% 90%	44% 94%	48%
Combined ratio, non-life insurance Net interest margin, banking	2.05%	2.32%	2.98%	2.90%	94% 2.93%

Business unit International Markets
(in millions of EUR)		3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019
Breakdown P&L
Net interest income	227	219	219	219	216
Non-life insurance (before reinsurance)	34	46	40	35	32
Earned premiums	81	78	82	80	80
Technical charges	- 47	33	43	45	48
Life insurance (before reinsurance)	4	10	8	11	7
Earned premiums	25	24	29	24	21
Technical charges	- 21	- 15	21	- 14	14
Ceded reinsurance result	1	3	3	1	2
Dividend income	O	O	0	O	0
Net result from financial instruments at fair value through profit or loss	18	14	5	23	5
Net realised result from debt instruments at fair value through OCI	O	1	0	O	1
Net fee and commission income	68	67	ea	78	77
Net other income	- 4	5	6	য	16
TOTAL INCOME	347	359	333	370	321
Operating expenses	- 200	196	- 268	- 248	212
Impairment	1	213	- 24	18	6 -
on financial assets at AC and at FVOCI	6	217	6 -	22	5
other	5 ।	4	18	4	1
Share in results of associated companies and joint ventures	0	O	0	1	1
RESULT BEFORE TAX	148	50	42	141	104
Income tax expense	- 24	5	7 -	- 22	19 l
RESULT AFTER TAX	123	45	35	119	85
attributable to minority interests	O	O	O	O	0
attributable to equity holders of the parent	123	45	35	119	85
Banking	112	દિવેલ	19	107	75
Insurance	11	21	16	12	11
Breakdown Loans and deposits
Total customer loans excluding reverse repos (end of period)	25824	25 277	25 109	25 050	24 718
of which Mortgage loans (end of period)	15952	15 650	15 536	15 584	15 357
Customer deposits and debt certificates excl. repos (end of period)	24 789	24 272	23 197	24 041	22 939
Technical provisions plus unit-linked, life insurance
Interest Guaranteed (end of period)	250	254	254	255	258
Unit-Linked (end of period)	390	397	373	432	414
Performance Indicators
Risk-weighted assets, banking (end of period, Basel III fully loaded)	20 791	20 736	21 507	20 892	21 068
Required capital, insurance (end of period)	130	127	123	124	123
Allocated capital (end of period)	2 302	2 315	2 391	2 359	2 377
Return on allocated capital (ROAC)	21%	-8%	6%	20%	14%
Cost/income ratio, banking	58%	57%	84%	68%	67%
Combined ratio, non-life insurance	89%	75%	82%	89%	93%
Net interest margin, banking	2.61%	2.58%	2.61%	2.60%	2.61%

Slovakia
(in millions of EUR)		3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019
Breakdown P&L
Net interest income	52	49	50	51	51
Non-life insurance (before reinsurance)	7	8	7	7	7
Earned premiums	13	13	12	12	12
Technical charges	- 6	4 -	5	5	5 -
Life insurance (before reinsurance)	3	3	3	4	2
Earned premiums	9	8	9	12	10
Technical charges	5 -	5	/	7	7
Ceded reinsurance result	7	1	O	1	0
Dividend income	O	0	0	O	0
Net result from financial instruments at fair value through profit or loss	6	7	8 -	10	5 -
Net realised result from debt instruments at fair value through OCI	O	1	0	O	0
Net fee and commission income	15	14	15	16	16
Net other income	7	2	3	4	2
TOTAL INCOME	84	84	70	ત્ત્વે ઉત્પત્તર તે જીરુ, જીરુ, જીરુ, જીરુ, જીરુ, જીરુ, જીરુ, તેમ જ દૂધની ડેરી જેવી સવલતો પ્રાપ્ય થયેલી છે. આ ગામનાં લોકોનો મુખ્ય વ્યવસાય ખેતી, ખેતમજૂરી તેમ જ પશુપાલન છે. આ ગ	74
Operating expenses	- 46	51	ಕಾ	53	52
Impairment	5	41	6 -	6	ഗ -
on financial assets at AC and at FVOCI	5	41	6	5	ഗ -
other	0	0	0	0	0
Share in results of associated companies and joint ventures	O	0	0	0	0
RESULT BEFORE TAX	43	8	4	46	16
Income tax expense	10	2	1	8	4 -
RESULT AFTER TAX	33	ട	ব	38	12
attributable to minority interests	O	0	0	O	0
attributable to equity holders of the parent	33	હ l	4	38	12
Banking	30	ತಿ	1	રૂદિ	10
Insurance	3	3	3	2	2
Breakdown Loans and deposits
Total customer loans excluding reverse repos (end of period)	7 857	7 683	7 607	7 506	7 471
of which Mortgage loans (end of period)	3 992	3 846	3714	3 641	3 593
Customer deposits and debt certificates excl. repos (end of period)	7 100	6 531	6 287	6 480	6 438
Technical provisions plus unit-linked, life insurance
Interest Guaranteed (end of period)	114	114	114	114	114
Unit-Linked (end of period)	87	92	89	100	97
Performance Indicators
Risk-weighted assets, banking (end of period, Basel III fully loaded)	5011	5 104	5 123	4 985	5 030
Required capital, insurance (end of period)	28	27	26	27	28
Allocated capital (end of period)	552	ട്ട് ട	567	560	566
Return on allocated capital (ROAC)	24%	-5%	3%	27%	8%
Cost/income ratio, banking	54%	62%	88%	56%	71%
Combined ratio, non-life insurance	87%	79%	82%	94%	84%

Hungary		3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019
(in millions of EUR) Breakdown P&L
Net interest income	68	64	62	64	64
Non-life insurance (before reinsurance)	12	17	14	14	10
Earned premiums	35	35	રૂત્વ	37	રૂદ
Technical charges	- 24	- 17	25	22	26
Life insurance (before reinsurance)	2 -	2	1	2	2
Earned premiums	9	8	9	4	4
Technical charges	- 11	ଚ	8	2	2
Ceded reinsurance result	1 -	1	1	0	1
Dividend income	O	O	0	0	0
Net result from financial instruments at fair value through profit or loss	12	10	2	9	6
Net realised result from debt instruments at fair value through OCI	O	O	0	0	1
Net fee and commission income	46	46	49	56	55
Net other income	O	O	2	O	0
TOTAL INCOME	136	140	130	146	137
Operating expenses	74	ea	101	87	83
Impairment	2 -	50	16	3	1
on financial assets at AC and at FVOCI	3	55	2	2	1
other	5 ।	6	18	1	0
Share in results of associated companies and joint ventures	O	0	O	0	0
RESULT BEFORE TAX	59	21	13	57	53
Income tax expense	- 9	5	4 -	7	8 -
RESULT AFTER TAX	51	16	10	50	45
attributable to minority interests	O	O	0	O	0
attributable to equity holders of the parent	51	16	10	50	45
Banking	46	7	2	44	41
Insurance	4	9	8	ട	4
Breakdown Loans and deposits
Total customer loans excluding reverse repos (end of period)	4 775	4 617	4 534	4 623	4 522
of which Mortgage loans (end of period)	1 541	1 512	1 467	1 596	1 558
Customer deposits and debt certificates excl. repos (end of period)	7 983	8 011	7 435	7 953	7 140
Technical provisions plus unit-linked, life insurance
Interest Guaranteed (end of period)	46	49	48	52	52
Unit-Linked (end of period)	251	258	243	291	280
Performance Indicators
Risk-weighted assets, banking (end of period, Basel III fully loaded)	6 895	6 865	6 555	6 415	6 480
Required capital, insurance (end of period)	45	47	44	48	47
Allocated capital (end of period)	766	772	735	735	740
Return on allocated capital (ROAC)	27%	8%	5%	27%	24%
Cost/income ratio, banking	56%	52%	82%	61%	62%
Combined ratio, non-life insurance	92%	76%	84%	87%	96%

Bulgaria
(in millions of EUR)		3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019
Breakdown P&L
Net interest income	36	રૂદિ	રૂદ	રૂદ	રેક
Non-life insurance (before reinsurance)	15	20	18	13	15
Earned premiums	32	31	31	31	32
Technical charges	- 17	- 11	13	18	17
Life insurance (before reinsurance)	3	5	য	ব	3
Earned premiums	7	9	11	9	8
Technical charges	4 -	4	7	4	5 -
Ceded reinsurance result	O	1	2	0	2
Dividend income	O	0	0	0	0
Net result from financial instruments at fair value through profit or loss	O	0	0	3	4
Net realised result from debt instruments at fair value through OCI	O	O	0	0	0
Net fee and commission income	8	6	6	5	6
Net other income	1	1	0	1	1
TOTAL INCOME	e3	67	62	દર્ડ	દિર
Operating expenses	31 -	27	48	33	30
Impairment	2	25	3	0	ഗ -
on financial assets at AC and at FVOCI	2	23	3	ব	6 -
other	0	1	0	3	0
Share in results of associated companies and joint ventures	O	O	0	0	0
RESULT BEFORE TAX	30	16	11	31	26
Income tax expense	3	2	1 -	3	3 -
RESULT AFTER TAX	27	14	10	27	23
attributable to minority interests	O	O	O	O	O
attributable to equity holders of the parent	27	14	10	27	23
Banking	22	4	4	24	20
Insurance	5	9	6	3	3
Breakdown Loans and deposits
Total customer loans excluding reverse repos (end of period)	3413	3 307	3 213	3 161	3 064
of which Mortgage loans (end of period)	752	723	703	693	675
Customer deposits and debt certificates excl. repos (end of period)	4 802	4 634	4 497	4 439	4 216
Technical provisions plus unit-linked, life insurance
Interest Guaranteed (end of period)	90	91	92	89	91
Unit-Linked (end of period)	52	47	41	41	37
Performance Indicators
Risk-weighted assets, banking (end of period, Basel III fully loaded)	3 133	3 073	3 770	3 413	3 338
Required capital, insurance (end of period)	57	રૂડે	ર્કિક	49	48
Allocated capital (end of period)	384	377	450	414	405
Return on allocated capital (ROAC)	27%	13%	9%	27%	24%
Cost/income ratio, banking	49%	44%	86%	51%	47%
Combined ratio, non-life insurance	85%	70%	82%	89%	91%

Ireland
(in millions of EUR)		3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019
Breakdown P&L
Net interest income	72	ട്ടു	71	67	દિક
Non-life insurance (before reinsurance)	O	O	O	O	0
Earned premiums	O	O	0	O	0
Technical charges	O	O	0	0	0
Life insurance (before reinsurance)	O	O	0	0	0
Earned premiums	0	O	0	0	0
Technical charges	O	0	0	0	0
Ceded reinsurance result	O	0	0	0	0
Dividend income	0	O	0	0	0
Net result from financial instruments at fair value through profit or loss	1	3	2	0	0
Net realised result from debt instruments at fair value through OCI	0	O	0	O	0
Net fee and commission income	1 -	0	1 -	0	0
Net other income	6 -	O	0	1	18
TOTAL INCOME	64	65	71	67	48
Operating expenses	49 1	48	60	75	47
Impairment	0	97	2	14	7
on financial assets at AC and at FVOCI	0	97	1	14	7
other	0	O	0	O	0
Share in results of associated companies and joint ventures	O	0	0	0	0
RESULT BEFORE TAX	15	80	13	6	8
Income tax expense	2	10	2	3	3
RESULT AFTER TAX	13	70	12	2	4
attributable to minority interests	O	O	O	0	0
attributable to equity holders of the parent	13	70	12	2	4
Banking	14	୧୫ ।	12	2	4
Insurance	- 1	- 1	O	0	0
Breakdown Loans and deposits
Total customer loans excluding reverse repos (end of period)	9779	9670	9 754	9 760	9 661
of which Mortgage loans (end of period)	9 666	9 569	9 651	9 654	9 531
Customer deposits and debt certificates excl. repos (end of period)	4 904	5 095	4 978	5 169	5 145
Performance Indicators
Risk-weighted assets, banking (end of period, Basel III fully loaded)	5 750	5 692	6 057	6 077	6 216
Allocated capital (end of period)	601	600	୧39	650	୧୧୮
Return on allocated capital (ROAC)	8%	-44%	7%	1%	3%
Cost/income ratio, banking	75%	72%	83%	113%	98%

Group Centre - Breakdown net result
(in millions of EUR)			3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019
Operational costs of the Group activities	- 20	18 ।	- 15	- 34	- 14
Capital and treasury management	7	ട	11	- 8
Holding of participations	2		3	- 2
Results companies in rundown	য ા		ന	2	12
Other	- 8		18 ।	க	9
Total net result for the Group centre	- 28	26 ၊	- 43	- 33	O

Business unit Group Centre
(in millions of EUR)		3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019
Breakdown P&L
Net interest income	2	റ	16	9	రి
Non-life insurance (before reinsurance)	7	5	2	4	2
Earned premiums	3	4	2	2	3
Technical charges	4	1	0	1	2
Life insurance (before reinsurance)	O	O	0	0	0
Earned premiums	0	0	0	0	0
Technical charges	0	0	0	0	0
Ceded reinsurance result	4	1	5	0	1
Dividend income	1	1	1	1	0
Net result from financial instruments at fair value through profit or loss	- 16	1	39	10	14
Net realised result from debt instruments at fair value through OCI	0	0	0	0	0
Net fee and commission income	1	1	2	0	0
Net other income	1	0	0	2	5
TOTAL INCOME	9 -	2 -	48	4	12
Operating expenses	27	24	21	48	23
Impairment	2 -	0	9	11	10
on financial assets at AC and at FVOCI	2	0	9	11	10
other	0	0	0	0	0
Share in results of associated companies and joint ventures	0	0	0	0	0
RESULT BEFORE TAX	38	26	60	32	1
Income tax expense	10	0	18	1 -	1
RESULT AFTER TAX	28	26	43	33	0
attributable to minority interests	0	0	0	O	0
attributable to equity holders of the parent	- 28	26 ।	- 43	33	0
Banking	22	21	49	17	5
Holding	- 6	5	3	26	1
Insurance	0	0	4	10	4
Breakdown Loans and deposits
Total customer loans excluding reverse repos (end of period)	0	0	0	1	0
of which Mortgage loans (end of period)	0	0	0	0	0
Customer deposits and debt certificates excl. repos (end of period)	10 450	9 908	9 426	8 999	9 806
Performance Indicators
Risk-weighted assets, banking (end of period, Basel III fully loaded)	1 912	2 209	2 339	4 554	2 266
Risk-weighted assets, insurance (end of period, Basel III fully loaded)	9 133	9 133	9 133	9 133	9 133
Required capital, insurance (end of period)	- 18	- 15	- 22	- 15	2
Allocated capital (end of period)	182	218	224	473	245

Details of ratios and terms on KBC Group level

Basic and diluted earnings per share

Gives an idea of the amount of profit over a certain period that is attributable to one share (and, where applicable, including dilutive instruments).

Calculation (in millions of EUR)	Reference	9M 2020	2019	9M 2019
Result after tax, attributable to equity holders of the parent (A) -	Consolidated income statement'	902	2 489	1 787
Coupon on the additional tier-1 instruments included in equity (B)	Consolidated statement of changes in equity'	- 37	- 56	- 43
/
Average number of ordinary shares less treasury shares (in millions) in the period (C)	Note 5.10	416	416	416
or Average number of ordinary shares plus dilutive options less treasury shares in the period (D)		416	416	416
Basic = (A-B) / (C) (in EUR)		2.08	5.85	4.19
Diluted = (A-B) / (D) (in EUR)		2.08	5.85	4.19

Combined ratio (non-life insurance)

Gives an insight into the technical profitability (i.e. after eliminating investment returns, among other items) of the non-life insurance business, more particularly the extent to which insurance premiums adequately cover claim payments and expenses. The combined ratio takes ceded reinsurance into account.

Calculation (in millions of EUR or %)	Reference	9M 2020	2019	9M 2019
Technical insurance charges, including the internal cost of settling claims (A)	Note 3.7.1	696	1 006	779
/
Earned insurance premiums (B)	Note 3.7.1	1 302	1 693	1 260
+
Operating expenses (C)	Note 3.7.1	404	526	398
/
Written insurance premiums (D)	Note 3.7.1	1 371	1 728	1 334
= (A/B)+(C/D)		82.9%	89.9%	91.7%

Common equity ratio

A risk-weighted measure of the group's solvency based on common equity tier-1 capital (the ratios given here are based on the Danish compromise). The CRD IV rules are gradually being implemented to allow banks to build up the necessary capital buffers. The capital position of a bank, when account is taken of the transition period, is referred to as the 'phased-in' view. The capital position based on full application of all the rules – as would be the case after this transition period – is referred to as 'fully loaded'.

A detailed calculation can be found under 'Solvency KBC Group' section.

Cost/income ratio

Gives an impression of the relative cost efficiency (costs relative to income) of the banking activities.

Calculation (in millions of EUR or %)	Reference	9M 2020	2019	9M 2019
Cost/income ratio
Operating expenses of the banking activities (A) /	Consolidated income statement': component of 'Operating expenses'	2 814	3 800	2 895
Total income of the banking activities (B)	Consolidated income statement': component of 'Total income'	4 596	6 563	4 813
=(A) / (B)		61.2%	57.9%	60.2%

Where relevant, we also estimate exceptional and/or non‐operating items when calculating the cost/income ratio. This calculation aims to give a better idea of the relative cost efficiency of the pure business activities. The adjustments include: MTM ALM derivatives (fully excluded), bank taxes(including contributions to European Single Resolution Fund) are included pro rata and hence spread over all quarters of the year instead of being recognised for the most part upfront (as required by IFRIC 21) and one‐off items. The Cost/Income ratio adjusted for specific items is 59% in 9M 2020 (versus 58% in FY 2019 and 59% in 9M 2019).

Cover ratio

Indicates the proportion of impaired loans (see 'Impaired loans ratio' for definition) that are covered by impairment charges. Where appropriate, the numerator and denominator in the formula may be limited to impaired loans that are more than 90 days past due.

Calculation (in millions of EUR or %)	Reference	9M 2020	2019	9M 2019
Specific impairment on loans (A)	Credit risk: loan portfolio overview' table in the 'Credit risk' section	2 576	2 584	2 601
/ Outstanding impaired loans (B)	Credit risk: loan portfolio overview' table in the 'Credit risk' section	5 702	6 160	6 197
= (A) / (B)		45.2%	42.0%	42.0%

Credit cost ratio

*based on YTD view

Gives an idea of loan impairment charges recognised in the income statement for a specific period, relative to the total loan portfolio (see 'Loan portfolio' for definition). In the longer term, this ratio can provide an indication of the credit quality of the portfolio.

Calculation (in millions of EUR or %)	Reference	9M 2020	2019	9M 2019
Net changes in impairment for credit risks (A) /	Consolidated income statement': component of 'Impairment'	1 012	204	129
Average outstanding loan portfolio (B)	Credit risk: loan portfolio overview' table in the 'Credit risk' section	177 157	170 128	170 689
= (A) (annualised) / (B)		0.61%	0.12%	0.10%

The credit cost ratio of 9M2020 includes a collective Covid‐19 expected credit loss (ECL) of 784 million euros, of which: (i) a total management overlay of 637 million euros and (ii) an impact of 147 million euros captured by our ECL models after 9 months. In the calculation of the credit cost ratio, the impact of the Covid‐19 ECL is excluded from annualisation. Without the Covid‐19 ECL impact, the credit cost ratio amounts to 0.17%.

Impaired loans ratio

Indicates the proportion of impaired loans in the loan portfolio (see 'Loan portfolio' for definition) and, therefore, gives an idea of the creditworthiness of the portfolio. Impaired loans are loans where it is unlikely that the full contractual principal and interest will be repaid/paid. These loans have a KBC default status of PD 10, PD 11 or PD 12 and correspond to the definition of 'nonperforming' used by the European Banking Authority.

Calculation (in millions of EUR or %)	Reference	9M 2020	2019	9M 2019
Amount outstanding of impaired loans (A)	Credit risk: loan portfolio overview' table in the 'Credit risk' section	5 702	6 160	6 197
/ Total outstanding loan portfolio (B)	Credit risk: loan portfolio overview in the 'Credit risk' section	178 883	175 431	176 553
= (A) / (B)		3.2%	3.5%	3.5%

Leverage ratio

Gives an idea of the group's solvency, based on a simple non-risk-weighted ratio. A detailed calculation can be found under 'Solvency KBC Group' section.

Liquidity coverage ratio (LCR)

Gives an idea of the bank's liquidity position in the short term, more specifically the extent to which the group is able to overcome liquidity difficulties over a one-month period. It is the average of 12 end-of-month LCR figures.

Calculation (in millions of EUR or %)	Reference	9M 2020	2019	9M 2019
Stock of high-quality liquid assets (A)	Based on the European Commission's Delegated Act on LCR and the European Banking Authority's guidelines for LCR disclosure	77 858	74 884	76 500
/
Total net cash outflows over the next 30 calendar days (B)		55 057	54 415	54 750
= (A) / (B)		142%	138%	140%

Loan Portfolio

Gives an idea of the magnitude of (what are mainly traditional) lending activities.

Calculation (in millions of EUR or %)	Reference	9M 2020	2019	9M 2019
Loans and advances to customers (A) +	Note 4.1, component of 'Loans and advances to customers'	157 773	155 816	154 863
Reverse repos (not with Central Banks) (B)	Note 4.1, component of 'Reverse repos with credit institutions and investment firms'	3 886	1 559	4 008
+
Debt instruments issued by corporates and by credit institutions and investment firms (banking) (C)	Note 4.1, component of 'Debt instruments issued by corporates and by credit institutions and investment firms'	6 082	5 894	5 751
+
Other exposures to credit institutions (D) +		4 236	4 629	4 954
Financial guarantees granted to clients and other commitments (E)	Note 6.1, component of 'Financial guarantees given'	8 254	8 160	8 076
+
Impairment on loans (F)	Note 4.2, component of 'Impairment'	3 600	2 866	2 928
+
Insurance entities (G)	Note 4.1, component of 'Loans and advances to customers'	- 2 251	- 2 288	- 2 308
+
Non-loan-related receivables (H)		- 1 465	- 738	- 715
+
Other (I)	Component of Note 4.1	- 1 233	- 468	- 1 005
Gross Carrying amount = (A)+(B)+(C)+(D)+(E)+(F)+(G)+(H)+(I)		178 883	175 431	176 553

Net interest margin

Gives an idea of the net interest income of the banking activities (one of the most important sources of revenue for the group) relative to the average total interest-bearing assets of the banking activities.

Calculation (in millions of EUR or %)	Reference	9M 2020	2019	9M 2019
Net interest income of the banking activities (A) /	Consolidated income statement': component of 'Net interest income'	2 866	3 853	2 867
Average interest-bearing assets of the banking activities (B)	Consolidated balance sheet': component of 'Total assets'	202 799	194 731	193 407
= (A) (annualised x360/number of calendar days) / (B)		1.86%	1.95%	1.95%

The net interest margin takes into account the banking group net interest income, excluding dealing room and the net positive impact of ALM FX swaps & repos.

Net stable funding ratio (NSFR)

Gives an idea of the bank's structural liquidity position in the long term, more specifically the extent to which the group is able to overcome liquidity difficulties over a one-year period.

Calculation (in millions of EUR or %)	Reference	9M 2020	2019	9M 2019
Available amount of stable funding (A)	Basel III, the net stable funding ratio (Basel Committee on Banking Supervision publication, October 2014)	202 010	174 977	173 000
/
Required amount of stable funding (B)		138 488	128 845	128 600
= (A) / (B)		145.9%	135.8%	134.5%

Parent shareholders' equity per share

Gives the carrying value of a KBC share, i.e. the value in euros represented by each share in the parent shareholders' equity of KBC.

Calculation (in millions of EUR or %)	Reference	9M 2020	2019	9M 2019
Parent shareholders' equity (A)	'Consolidated balance sheet'	19 384	18 865	18 086
/
Number of ordinary shares less treasury shares	Note 5.10	416	416	416
(at period-end) (B)
= (A) / (B) (in EUR)		46.55	45.31	43.46

Return on allocated capital (ROAC) for a particular business unit

Gives an idea of the relative profitability of a business unit, more specifically the ratio of the net result to the capital allocated to the business unit.

Calculation (in millions of EUR or %)	Reference	9M 2020	2019	9M 2019
BELGIUM BUSINESS UNIT
Result after tax (including minority interests) of the business unit (A) /	Note 2.2: Results by segment	605	1 344	932
The average amount of capital allocated to the business unit is based on the risk-weighted assets for the banking activities (under Basel III) and risk-weighted asset equivalents for the insurance activities (under Solvency II) (B)		6 869	6 764	6 757
= (A) annualised / (B)		11.7%	19.9%	18.4%
CZECH REPUBLIC BUSINESS UNIT
Result after tax (including minority interests) of the business unit (A) /	Note 2.2: Results by segment	281	789	584
The average amount of capital allocated to the business unit is based on the risk-weighted assets for the banking activities (under Basel III) and risk-weighted asset equivalents for the insurance activities (under Solvency II) (B)		1 711	1 692	1 683
= (A) annualised / (B)		21.7%	46.7%	46.3%
INTERNATIONAL MARKETS BUSINESS UNIT
Result after tax (including minority interests) of the business unit (A) /	Note 2.2: Results by segment	113	379	260
The average amount of capital allocated to the business unit is based on the risk-weighted assets for the banking activities (under Basel III) and risk-weighted asset equivalents for the insurance activities (under Solvency II) (B)		2 318	2 354	2 352
= (A) annualised / (B)		6.5%	16.1%	14.7%

Return on equity

Gives an idea of the relative profitability of the group, more specifically the ratio of the net result to equity.

Calculation (in millions of EUR or %)	Reference	9M 2020	2019	9M 2019
Result after tax, attributable to equity holders of the parent (A)	Consolidated income statement'	902	2 489	1 787
-
Coupon on the additional tier-1 instruments included in equity (B) /	Consolidated statement of changes in equity'	- 37	- 56	- 44
Average parent shareholders' equity, excluding the revaluation reserve for FVOCI instruments and for FVPL equity instruments – overlay approach (C)	Consolidated statement of changes in equity'	17 755	16 978	16 477
= (A-B) (annualised) / (C)		6.5%	14.3%	14.1%

The return on equity amounts to 7% in 9M 2020 when including evenly spreading of the bank taxes throughout the year.

Sales Life (insurance)

Gives the indication of the sales activities of life insurance products including unit-linked.

Calculation (in millions of EUR or %)	Reference	9M 2020	2019	9M 2019
Life Insurance - earned premiums (before reinsurance) (A)	Consolidated income statement'	841	1 323	959
+
Life insurance: difference between written and earned premiums (before reinsurance) (B) +	-	0	1	0
Investment contracts without discretionary participation feature (large part of unit-linked) – margin deposit accounting (C)	-	567	525	419
Total sales Life (A)+ (B) + (C)		1 407	1 849	1 378

Solvency ratio (insurance)

Measures the solvency of the insurance business, as calculated under Solvency II.

A detailed calculation can be found under 'Solvency banking and insurance activities separately' section.

Total assets under management

Total assets under management (AuM) comprise third-party assets and KBC group assets managed by the group's various asset management companies (KBC Asset Management, ČSOB Asset Management, etc.), as well as assets under advisory management at KBC Bank. The assets, therefore, consist mainly of KBC investment funds and unit-linked insurance products, assets under discretionary and advisory management mandates of (mainly retail, private banking and institutional) clients, and certain group assets. The size and development of total AuM are major factors behind net fee and commission income (generating entry and management fees) and hence account for a large part of any change in this income line. In that respect, the AuM of a fund that is not sold directly to clients but is instead invested in by another fund or via a discretionary/advisory management portfolio, are also included in the total AuM figure, in view of the related work and any fee income linked to them.

Calculation (in billions of EUR or quantity)	Reference	9M 2020	2019	9M 2019
Belgium Business Unit (A)	Company presentation on www.kbc.com	188	200	197
+
Czech Republic Business Unit (B)		11	11	10
+
International Markets Business Unit (C)		6	5	5
A)+(B)+(C)		204	216	212

AI Terminal

KBC Groupe NV

3968_10-q_2020-11-12_7ce979f5-f22e-415a-9216-a3421e3a58c0.pdf

KBC GROUP QUARTERLY REPORT3Q2020

Report for 3Q2020

Consolidated financial statements

Additional information

the current year.' Forward-looking statements

Investor Relations contact details

KBC GROUP Report for 3Q2020

Management certification

Third-quarter result of 697 million euros

Financial highlights in the third quarter of 2020

Overview of results and balance sheet

Analysis of the quarter (3Q2020)

926 million euros

Analysis of the year-to-date period (9M2020)

Risk statement, economic views and guidance

Risk statement

Our view on economic growth

Our view on interest rates and foreign exchange rates

KBC Group

Glossary

Consolidated income statement

Overview impact of the overlay approach on the consolidated income statement

Consolidated statement of comprehensive income (condensed)

Consolidated balance sheet

Consolidated statement of changes in equity

30-09-2020

30-09-2019

Consolidated cash flow statement

Notes on statement of compliance and changes in accounting policies

Statement of compliance (note 1.1 in the annual accounts 2019)

Summary of significant accounting policies (note 1.2 in the annual accounts 2019)

COVID-19 (note 1.4)

Introduction:

Main Corona related items affecting the 9M 2020 results, revaluation reserves, liquidity and solvency:

Details related to the impact of the Coronacrisis on the loan impairments in 9M 2020

Economic scenarios

Notes on segment reporting

Segment reporting according to the management structure of the group (note 2.2 in the annual accounts 2019)

Other notes

Net interest income (note 3.1 in the annual accounts 2019)

Net result from financial instruments at fair value through profit or loss (note 3.3 in the annual accounts 2019)

Net fee and commission income (note 3.5 in the annual accounts 2019)

Net other income (note 3.6 in the annual accounts 2019)

Note :

In 9M 2019

Breakdown of the insurance results (note 3.7.1 in the annual accounts 2019)

Operating expenses – income statement (note 3.8 in the annual accounts 2019)

Impairment – income statement (note 3.10 in the annual accounts 2019)

Financial assets and liabilities: breakdown by portfolio and product (note 4.1 in the annual accounts 2019)

Impaired financial assets (note 4.2.1 in the annual accounts 2019)

Financial assets and liabilities measured at fair value – fair value hierarchy (note 4.5 in the annual accounts 2019)

Financial assets and liabilities measured at fair value – transfers between level 1 and 2 (note 4.6 in the annual accounts 2019)

Financial assets and liabilities measured at fair value – focus on level 3 (note 4.7 in the annual accounts 2019)

Provisions for risks and charges (note 5.7 in the annual accounts 2019)

Parent shareholders' equity and AT1 instruments (note 5.10 in the annual accounts 2019)

Main changes in the scope of consolidation (note 6.6 in the annual accounts 2019)

In 9M 2020 :

In 2019 :

Post-balance sheet events (note 6.8 in the annual accounts 2019)

f3 KBC Group

Credit risk

Snapshot of the loan portfolio (banking activities)

Loan portfolio per business unit (banking activities)

Legend:

Remarks

Loan portfolio Business Unit Czech Republic

30-09-2020, in millions of EUR

Loan portfolio Business Unit International Markets

Loan portfolio Group Centre 1

30-09-2020, in millions of EUR Total portfolio outstandingCounterparty break down retail 0 o/w mortgages o/w consumer financeSME 0corporate 3 370Mortgage loans

Remarks

Solvency(1)

Solvency KBC Group

Danish Compromise

Leverage ratio KBC Group

Solvency banking and insurance activities separately

Minimum requirement for own funds and eligible liabilities (MREL)

Loan portfolio Group Centre ¹