KBC Bank N.V.

• Fixed Deposit Programme Rating : FAAA

The rating reflects the size and strong commercial position of KBC Bank N.V. The bank has an outstanding counterparty rating of ‘A+’ from Standard and Poors (S&P) which reflects its robust asset quality, stable profitability and comfortable capitalisation. The bank, which was formed from the merger of Kredietbank N.V. and CERA Bank in June 1998, is one of the top two banks in Belgium and has a presence in more than 30 countries. The asset quality is robust on account of a significant proportion of low risk government debt in the asset book and the conservative portfolio management followed by the bank. However, the bank’s expansion in Central and Eastern Europe has exposed it to the region’s volatility. The profitability has been stable with an average ROA (PAT/Average Assets deployed) of 0.45% over the past five years. The bank is comfortably capitalised with a Tier I capital ratio of 7.18% as at December 31, 1998. KBC Bank N.V. had an asset base of BFr 5640 billion and a deposit base of BFr 2562 billion as at December 31, 1998.

KBC Bank N.V. has had a presence in India since 1995 through its representative office. Over this period, the bank had taken credit exposure to foreign currency denominated paper of domestic corporates and financial institutions. However, in 1999 the bank set up its first, and till date only, branch in India at Mumbai. The bank has strategically positioned its Indian operations towards wholesale banking and currently performs Corporate Banking, Treasury and Correspondent Banking functions. The bank plans to focus on adding high credit quality corporate banking assets and leverage its global network and relationships to attract the top tier corporates and MNC’s in the country. The recently started branch operations, despite a small balance sheet size, have been able to breakeven in the first few months of its operations. Given the limited track record and nascent stage of operations, the branch is yet to establish a stable funding profile and the funding is significantly aligned towards the inter-bank borrowings. However, the bank is expected to build a significant and stable wholesale deposit base in the near future which should reduce its dependence on the inter-bank market. The Indian operations of the bank had an asset base of Rs. 283.22 crores and a capital base of Rs. 58.76 crores as at September 30, 1999.