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ANNUAL REPORT

Cover visual : own Belfius photo composition. Many thanks to Belfius Bank staff members (from left to right): Aurélie Thiran, Joris De Kelver, Delphine Belle, Nawfal-Morad Mouhal, Miek Bellings, Nicolas Fruy and Matthias Baillieul.

2 Annual report 2018 BELFIUS BANK

2. Crefius

Company servicing and managing mortgage loans. At the end of 2018, total balance sheet of Crefius amounted to EUR 45 million (4)^.

OUR MAIN COMMERCIAL SUBSIDIARIES

1. Belfius Insurance

Insurance company marketing life and non-life insurance products, savings products and investments for individuals, the self-employed, liberal professions, companies and the public and social sector. At the end of 2018, total consolidated balance sheet of Belfius Insur- ance amounted to EUR 20 billion (3)^.

PROFILE

OF BELFIUS

Belfius is a Belgian banking and insurance group wholly owned by the Belgian federal state through the

Federal Holding and Investment Company (FHIC). At the end of 2018, total consolidated balance sheet

amounted to EUR 164 billion.

Simplified group structure (1)

BELFIUS INSURANCE

CREFIUS

BELFIUS AUTO LEASE

BELFIUS LEASE

BELFIUS LEASE SERVICES (2)

BELFIUS INVESTMENT PARTNERS

BELFIUS COMMERCIAL FINANCE

BELFIUS BANK

FHIC

(1) For more details, see the list of subsidiaries of the consolidated financial statements in this annual report. (2) Belfius Lease Services operates under the same brand (logo) as Belfius Lease. (3) For more details, see the annual report 2018 of Belfius Insurance. (4) Total IFRS balance sheet before consolidation adjustments.

BELFIUS BANK Annual report 2018 3

Profile of Belfius

(1) Total IFRS balance sheet before consolidation adjustments.

3. Belfius Auto Lease

Company for operational vehicle leasing and car fleet management, maintenance and claims management services. At the end of 2018, total balance sheet of Belfius Auto Lease amounted to EUR 329 million (1)^.

4. Belfius Lease

Company for financial leasing and renting of professional capital goods. At the end of 2018, total balance sheet of Belfius Lease amounted to EUR 842 million (1)^.

5. Belfius Lease Services

Financial leasing and renting of professional capital goods to the self-employed, companies and liberal professions. At the end of 2018, total balance sheet of Belfius Lease Services amounted to EUR 2,068 million (1).

6. Belfius Commercial Finance

Company for financing commercial loans to debtors, debtor in- solvency risk cover and debt recovery from debtors (factoring). At the end of 2018, total balance sheet of Belfius Commercial Finance amounted to EUR 999 million (1)^.

7. Belfius Investment Partners

Company for administration and management of funds. At the end of 2018, total balance sheet of Belfius Investment Partners amount- ed to EUR 161 millionand assets under management amounted to EUR 17.0 billion (1)^.

OUR ACTIVITIES

Belfius is a Belgian bank-insurer serving all segments of the Belgian economy, including the retail, SME, public sector and corporate mar- kets. As at 31 December 2018, it was the second largest retail bank- insurer in Belgium, with 3.6 million customers; the fourth largest bank for SMEs, with approximately 0.3 million professional custom- ers; the largest bank in the public sector, with almost 100% penetra- tion; and the fourth largest bank for corporates, serving approxi- mately 50% of the Belgian market of companies with a turnover equal to or above EUR 10 million. Belfius serves approximately 30% of the Belgian population. Belfius’ integrated business model is based on creating and leverag- ing synergies across these client segments, as well as its products and businesses. Belfius organises its commercial activities into its Retail and Commercial segment and Public and Corporate segment:

1. Retail and Commercial

Belfius Bank offers individuals, self-employed persons, the liberal professions (i.e. doctors, lawyers, etc.) and SMEs a comprehensive range of retail, commercial, private banking, wealth management and insurance products and services. Belfius Bank serves its 3. million customers through its integrated omni-channel distribution

network, which includes more than 650 branches, its modern inter- action platform Belfius Connect, and a large number of automatic self-banking machines. Belfius has also been developing a digital strategy and is now a leader in mobile banking ( Finalta Digital and Multichannel Banking Benchmarking Study 2017 ), with over 1. million active mobile users.

Belfius Insurance, a subsidiary of Belfius Bank, offers insurance products to its customers through the Belfius Bank branch network, as well as through the tied agent network of DVV/LAP insurance. Belfius’ bank-insurance model is fully integrated, with insurance expertise offered through Belfius Bank branches and the omni- channel distribution network. It also offers insurance products through Corona Direct Insurance, which is, according to Assuralia , the fastest growing full direct insurer in Belgium. Corona operates exclusively via digital media and call channels, as well as via “affin- ity partners”, which are external parties who offer Corona insurance products. Through its Elantis and DVV/LAP brands, Belfius Insurance also offers mortgage loans and consumer loans to its customers.

2. Public and Corporate

Belfius offers services to the Belgian public and social sectors (in- cluding hospitals, schools, universities and retirement homes). It provides these clients with a wide and integrated range of products and services, including credit lending, treasury management, insur- ance products, financial markets products and financial IT tools.

Belfius’ corporate banking activities are focused on large- and medium-sized corporates which have a decision-making centre in Belgium as well as corporates offering services to the public sector. Belfius Insurance also sells insurance products to its public and social clients. Specific life insurance solutions are offered, espe- cially pension insurance in the first and second pension pillars for civil servants and investment products in Branch 26 (life insurance with a capital guarantee and guaranteed minimum return, to which a variable profit participation feature may be added).

OUR STAFF MEMBERS

At the end of 2018, Belfius’ operations gave employment to 6,494 staff members, and there were approximately 3, persons working in the Bank’s and Insurer’s independent networks.

BELFIUS BANK Annual report 2018 5

(1) For the determination of the Capital ratios under Basel III, the regulatory authority asks Belfius to apply a prudential deconsolidation of Belfius Insurance and to apply a risk weighting of 370% on the participation. This is commonly known as “Danish compromise”. (2) Pro forma.

(1) Restated figures for 2016 and 2017.

(1) Unaudited. (2) 12 month average (as from 2017 onwards).

Ratios (1)^ 31/12/

IAS 39

IAS 39

IAS 39

IAS 39

IFRS 9

IFRS 9

Solvency ratios 31/12/

IAS 39

IAS 39

IAS 39

IAS 39

IFRS 9

IFRS 9

Return on equity (ROE) Return on assets (ROA) Cost- income ratio (C/I ratio) Asset quality ratio Coverage ratio Liquidity Coverage Ratio (LCR) (2) Net Stable Funding Ratio (NSFR)

CET 1- ratio Phased In (1) CET 1- ratio Fully Loaded (1)

Tier 1- ratio Phased In (1) Tier 1- ratio Fully Loaded (1)

Total capital ratio Phased In (1) Total capital ratio Fully Loaded (1)

Leverage ratio Phased In Leverage ratio Fully Loaded

Solvency II – ratio (before dividend) Solvency II – ratio (after dividend)

69.9% 63.9% 60.5% 58.1% n.a. 60.4% 2.33% 2.29% 2.54% 1.99% 2.15% 2.05% 56.0% 57.1% 54.4% 63.3% 63.3% 61.6% 122% 132% 127% 132% n.a. 135% 100% 108% 110% 116% n.a. 116%

14.7% 15.9% 16.6% 16.1% no longer applicable 13.2% 14.9% 16.1% 15.9% 16.2% 16.0%

14.7% 15.9% 16.6% 16.1% no longer applicable 13.2% 14.9% 16.1% 15.9% 16.2% 17.0%

16.1% 17.7% 19.4% 18.6% no longer applicable 14.3% 16.2% 18.4% 18.1% 18.3% 19.6%

n.a. 5.3% 5.4% 5.6% no longer applicable n.a. 4.9% 5.3% 5.5% n.a. 6.0%

n.a. 209% (2)^ 217% 230% n.a. 219% n.a. 199% (2)^ 207% 219% n.a. 203%

CSR as a business driver 2016 2017 2018

Human capital

Staff members

Male Female Total Male Female Total Male Female Total

Total volume of investment funds managed based on sustainable criteria (SRI) under management (in millions of EUR) (1) Total volume of investments managed based on the Portfolio21 criteria under management (in millions of EUR)

TOTAL

RATINGS OF BELFIUS BANK AS AT 21 MARCH 2019

Stand-alone rating (1)^ Long-term rating Outlook Short-term rating

Fitch a- A- Stable F Moody’s baa2 A2 Positive Prime- Standard & Poor’s a- A- Stable A- (1) Intrinsic creditworthness

6 Annual report 2018 BELFIUS BANK

We aspire and endeavour to make a maximum

contribution to the Belgian economy, and to

provide optimal service and the ultimate cus-

tomer experience on the market. In addition

to the solid financial and risk profile that we

pursue unremittingly through income diver-

sification, operating revenue growth and

efficiency, we base our long-term strategy

on a number of pillars. We are convinced

that we offer the best guarantee for a

future-proof business model, solid

growth for our profit-earning capacity,

as well as sustainable added value for

all our stakeholders.

OUR MISSION

AND AMBITION

8 Annual report 2018 BELFIUS BANK

MANAGEMENT REPORT

• BELFIUS BANK Annual report
• Profile of Belfius
• Our mission and ambition
• Management report
• Consolidated financial statements
• Non-consolidated financial statements
• Global Reporting Initiative (GRI) - table
• Abbreviations
• Additional information
  • BELFIUS BANK Annual report
• Message from the chairmen
• Corporate Social Responsibility (CSR)
• Human Resources
• Financial Results
• Segment Reporting
• Capital Management
• Risk Management
• Corporate Governance
• General Information

BELFIUS BANK Annual report 2018 11

Message from the chairmen

The European Banking Authority’s (EBA) stress test, conducted on an EU-wide scale in November 2018, reaf-

firmed the solid base and strength of Belfius. At the end of 2018, the Basel III CET 1 (Fully Loaded) ratio was

16%, which is an excellent level. The Solvency II ratio for Belfius Insurance was 203%, keeping it one of the

highest in Europe.

With an LCR ratio of 135%, Belfius largely met the liquidity requirements imposed by the ECB and the NBB, while

the NSFR ratio was 116%. As was the case at the end of 2017, total equity for the group was EUR 9.4 billion. And the

in-depth strength of Belfius left room for a dividend of EUR 363 million to be released for the 2018 financial year.

Customer satisfaction and the number of new customers continue to rise

Belfius’ strategic focus on customer satisfaction provided a strong foundation for its good results, as well as the

growing confidence that customers place in Belfius each year as a bank-insurer and the in-depth change of inter-

nal culture in which costs and investments are examined carefully in terms of their true added value for customers.

In 2018, Belfius achieved an overall satisfaction score of 95.97%, once again exceeding its strategic target of

95% satisfied customers. This score was 94.7% among personal customers and an outstanding 98.45% among

Public, Social and Corporate customers. Last year, Belfius succeeded in attracting 228,400 new customers.

Strong commercial dynamic in a challenging environment

Last year, Belfius again performed well in all key strategic areas. For example, a record EUR 17.5 billion in new

long-term funding (+14%) was granted to the Belgian economy. EUR 8.8 billion (+24%) went to Business and

Corporate customers, segments in which Belfius will continue to grow in the years ahead. Despite persistent

weak demand from the market, EUR 1.9 billion in long-term loans was granted to the public and social sector. In

the area of housing loans, Belfius applied a cautious risk policy designed to ensure that customers are comfort-

ably able to repay their mortgages over the whole term of their loan. However, this prudent approach did not

prevent EUR 6.9 billion of new long-term finance (+9%) – mainly mortgage loans – being granted to Retail cus-

tomers last year.

Organic growth, i.e. growth after removing market effects, rose in 2018 by EUR 3.5 billion (+46%) for invest-

ments by Retail customers (including the Business segment), which was the highest level ever recorded and a

perfect illustration of the ever-growing confidence in Belfius. As a leading Private Bank, Belfius attracted 4,

new Private customers in 2018 and implemented, with increasing success, a specific approach for Wealth Man-

agement that combines exclusive and individual service with an integrated digital offering. The relevance of our

strategic choice in opting to use a reinforced bank-insurance model as the driving force for growth and the di-

versification of revenue streams was again confirmed by the 5% increase in Non-Life premium receipts to EUR

704 million.

As was the case in previous years, Belfius again led the way in mobile applications in 2018. By the end of last

year, our innovative apps for smartphones and tablets had 1,250,000 users (+17%), while sales via direct chan-

nels grew steadily.

12 Annual report 2018 BELFIUS BANK

MANAGEMENT REPORT Message from the chairmen

Belfius and Corporate Social Responsibility (CSR)

Belfius occupies a unique position in the Belgian financial landscape: a 100% Belgian bank-insurer with activities

focused exclusively on the socioeconomic fabric of private individuals, the self-employed, professionals, SMEs,

large corporations, social institutions, government departments and local authorities in Belgium.

Belfius is very much aware of the corporate social responsibility associated with this position and seeks to play

its role as an important social and economic player in Belgium in an ethical, responsible and sustainable manner.

As explained in detail in this annual report, Belfius interprets this role through its economic and social commit-

ment, as well as its respect for sound governance, concern for the environment and the long-term relationship

it enjoys with its customers.

Partly due to the varied range of growing, legal and social challenges in areas such as the sustainability of prod-

ucts and services, transparency, environmental risks and diversity, Belfius will continue to fine-tune its corporate

social responsibility regarding these topics in the time ahead.

Diversifying and investing in a future that we build together

Despite the ongoing interest rate and market environment, last year Belfius was able to strengthen the added

value it brings the Belgian economy even further, while continuing to develop its market position as a bank and

insurance company in all customer segments. Not only, as was previously the case, with personal customers and

government, but also with business-owners and companies, as well as Private and Wealth customers. This di-

versification of its business activities and revenue streams is all part of the long-term strategy advocated by

Belfius and its aim to ensure the progressive and consistent development of income, rather than just focus on

generating short-term profits. This goes hand in hand with greater investment being made to consolidate the

company’s strength for the benefit of customers, staff and Belgian society as a whole.

Taken across all customer segments, record levels of long-term loans were granted. This underlines the success

enjoyed by Belfius as a driving force behind the Belgian economy. Belfius invested more intensively in digital

innovations for its customers, in line with its role as a pioneer in “mobile”. Our customers appreciate it, too, with

our highest score ever being achieved in terms of customer satisfaction and 228,400 new customers opting for

Belfius last year – at the same time generating the highest level of organic growth in savings and investments

to date.

Belfius also invests in its staff, because it is their talent that makes all the difference for customers. It does so

by ensuring their ongoing development and long-term employability and by providing a stimulating work environ-

ment and a proactive policy on wellbeing. By confirming branch employees – despite the growth of “digital” – in

the unique human added value they provide as local relationship managers and advisers. And by giving preference

to net staff recruitment instead of redundancies via a social plan. Our people appreciate us for this approach,

with commitment and satisfaction scores at 88% and 95% respectively.

14 Annual report 2018 BELFIUS BANK

→ A social dimension: Belfius has a strong tradition in supporting projects with a social goal, focusing on the disadvantaged. The company will continue to play this role in the future.

Belfius also translates this external commitment internally through revamped corporate values, programmes for gender equality, diver- sity, connecting the generations and staff members carrying out voluntary work.

2. CSR and risk management

A whole series of socially responsible aspects are monitored through the management of operating risks and reputational risk: our attitude to customers, suppliers and other stakeholders, the confidence of investors, legal, fiscal and compliance obligations, the health and safety of staff, the fight against fraud, discrimination and dealing with complaints correctly. In its management of some products, Belfius also uses tools such as screening and exclusion to ensure that no services are provided to certain controversial companies, countries and sectors.

3. Governance

The CSR unit at Belfius comes under the direction of the CSR man- ager as part of the Communication department. At a Management Board level, the Chief Risk Officer deals with CSR-related topics.

BELFIUS AND CSR

Belfius occupies a unique position in the Belgian financial landscape. Belfius is a 100% Belgian bank-insurer that focuses exclusively on the Belgian socio-economic fabric of private individuals, the self- employed, professionals, SMEs, large corporations, social institutions, government and local authorities.

This unique position brings with it a significant level of social re- sponsibility – a role that Belfius, as a major social and economic provider in Belgium, seeks to fulfil in an ethical, responsible and sustainable manner. There is a section providing greater detail about Belfius’s specific role as a responsible employer and the company’s policy on diversity elsewhere in this report.

1. Dual commitment to the community

Social commitment at Belfius covers two areas in the main:

→ Economic commitment as a driving force of the Belgian econ- omy: in addition to its historical role as a provider of funding to the public and social sectors, Belfius views sustainable develop- ment as an increasingly important business driver: non-financial factors are now playing an ever-greater, sometimes even central role in the approach the Belfius takes to its commercial activities and projects.

CORPORATE SOCIAL RESPONSIBILITY

(CSR)

BELFIUS BANK Annual report 2018 15

Corporate Social Responsibility (CSR)

Belfius is also a member of The Shift , the Belgian reference network for sustainable development. The Shift brings companies, NGOs and other organisations together to encourage partnerships and hence bring about the transition to a more sustainable society and economy. Belfius has also been a part of The Shift’s change lab on renewable energy and is a signatory to the Belgian SDG Charter for interna- tional development ( 1), a federal ministerial initiative that operates in conjunction with this network. The charter is part of the Sustainable Development Goals of the UN , dealing with the role of citizens and the private public sector in international development cooperation.

Belfius also underwrites the Green Deal Purchasing Circular (2), a Flemish ministerial initiative dealing with circular purchasing policies. Belfius is the only financial institution that plays the role of both purchaser and facilitator.

Finally, Belfius makes an active contribution to the Task Force Cir- cular Economy at the level of the sector federation Febelfin. This task force was established following a ministerial appeal to the banking and insurance sector to examine its initiatives and review possible funding techniques within the circular economy.

7. Belfius won various awards in 2018

→ On 10 January 2018, Belfius received the award for the best banking app, conferred on it by Bancompare, the bank compari- son website. → On 16 January 2018, and for the fifth year in a row – Belfius won the N°1 Bond Finance House of the Year award for its strategic role in offering alternative finance solutions on the bonds market. → On 30 January 2018, Belfius won the “Prize for the Mobility Week 2017” for having organized the best awareness actions for al- ternative and sustainable mobility in the Brussels Capital Region. → On 9 February 2018, the Belfius cyclists were awarded the Bike- towork “Winter Trophy”, since Belfius was Belgium’s large com- pany with the biggest share of staff going to work by bike in winter. → On 16 May 2018, BeCommerce presented Belfius with the Om- nichannel Award for its investment advice, as well as the Public Prize for its digital financial services. → On 14 September 2018, Belfius received the Bike Brussels Award from the Brussels Region for its promotion of the use of bicycles. → On 2 October 2018, Belfius was voted the most customer-friend- ly bank in Belgium by the consultancy agency goCX. → On 15 November 2018, Belfius won the Corporate HR Award in the category for Inspiring Workplace & Future of Work.

(1) Belgian SDG Charter: belfius.be/Belgian-SDG-Charter (2) Green Deal Purchasing Circular: Green Deal Circulair Aankopen: belfius.be/Green-Deal- aankopen

The mixed Union Commission for Corporate Social Responsibility (CSR committee) is a working group that operates as part of social consultation at Belfius Bank. This working group is made up of em- ployee representatives from the three social consultation bodies within the bank. The committee is chaired by the CSR manager and reports to the Occupational Health Committee (OHC).

The CSR committee is a permanent think-tank that looks at corporate social responsibility. Its work includes implementing practical pro- grammes aimed at sustainably reducing Belfius’s ecological footprint. For example, employees are made aware of the issues surrounding the restriction of waste, water and energy consumption, the contri- bution of local (organic) food providers and fairtrade products, as well as campaigns to encourage the use of bicycle for getting to and from work, collecting clothes for the poor and homeless in Brussels in conjunction with the “Solidarité Grands Froids” organisation.

4. Reporting

The detailed reporting for 2018 in relation to corporate social re- sponsibility is covered in the sections on “Corporate Social Respon- sibility and “Human Resources”. This report systematically examines what the direct and indirect impact is of Belfius operating its business.

As a reporting base, an internal materiality analysis was conducted in 2017, based on consultation with stakeholders and gauged against the “material” topics (i.e. the most relevant and essential ones to be dealt with) in the banking and insurance sector, according to the ratings agencies and sector organisations.

5. Compliance with reporting standards

“GRI Standards”, an internationally recognised reporting standard for non-financial reporting, was used as a guide through this process. This report has been prepared in accordance with the GRI Standards: Core option.

This report also aims to comply with the requirements of the Belgian Act on the disclosure of non-financial information and information regarding diversity and hence also with the requirements of the similarly named European Directive 2014/95/E.

6. Commitments through membership and

partnership

Belfius is a member of and has a representative in the highest policy-making bodies of various financial and business federations, such as Febelfin (Belgian Federation for the Financial sector), As- suralia (Belgian trade association of (re)insurance companies), BVK (Credit Trade Association), BLV (Belgian Leasing Association), BVB (Belgian Association of Banks and Stockbrokers) and B-Hive, an innovative European collaborative platform of banks, insurance companies, government departments and fintechs.

BELFIUS BANK Annual report 2018 17

MANAGEMENT REPORT Corporate Social Responsibility (CSR)

This materiality exercise produced a list of topics about which there is a consensus among our stakeholders and which will serve as the base for the Belfius CSR policy. This analysis will be refined further by direct consultation with external stakeholders.

The topics defined as “priority” or “very important” also contribute to the following 8 out of the total of 17 Sustainable Development Goals (SDGs), which is the sustainability agenda of the United Nations until 2030.

An internal transversal thinking exercise is underway to determine the way in which the SDGs can best be incorporated into Belfius’s core activities so that they become the direction taken by the sustainability strategy of the Belfius Group towards 2030.

5,

4,

4,

3,

3,

2,

2,

1,

1,

0,

0,

Materiality Matrix

Importance to Stakeholders

Belfius Impact

PRIORITY

VERY IMPORTANT

IMPORTANT

2,0 2,5 3,0 3,5 4,0 4,5 5,

ECONOMIC IMPACT SOCIAL IMPACT GOVERNANCE IMPACT ENVIRONMENTAL IMPACT

18 Annual report 2018 BELFIUS BANK

MANAGEMENT REPORT Corporate Social Responsibility (CSR)

2. Dialogue with stakeholders

To keep itself aware of the needs and expectations of all its stakeholders, Belfius enters into dialogue with them in a systematic manner. The most important topics covered during this dialogue give Belfius a good view of their concerns.

Stakeholder How do we enter into dialogue? Main topics of conversation with stakeholders

Link with material topic from the analysis

Customers • Via an extensive network of 976 local bank

and insurance branches, relationship managers, business bankers, public & social bankers, corporate bankers, private bankers and wealth managers, and via websites, digital channels and Belfius Connect, a direct advice channel that can be accessed both after office hours and on Saturdays by telephone, e-mail or chat)

• Via an ongoing series of customer satisfaction surveys
• Via an annual satisfaction report on belfius. com explaining the added value provided by Belfius for customers and the community
• Through an ongoing management process of suggestions and complaints from customers integrated into branch applications and with central en analysis - Suggestions and complaints from customers - Sustainable responsible investing - Product transparency - Access to financial services - Financial inclusion, access to banking services for everyone - Digitalisation and innovation of products and services - Customer satisfaction, service quality - Transparency to customers: clear and correct information about products and services

Our employees • Via an annual or interim performance

appraisal interview and/or career interview and an annual questionnaire about employee satisfaction and commitment

• Via live information sessions and webinars given by senior management, with Q&A
• Via the intranet and organising in-house seminars
• Via representation in social bodies, a network of union representatives, and via a network for psychosocial help from persons of trust and the prevention adviser - Fair and competitive remuneration - Coaching and career guidance - Training and education - Pleasant and healthy working conditions: new way of organising work to create a more current and open corporate culture - Physical and mental health of employees - Transparency about strategy, policy and results. - Working conditions and social protection - Talent development and training - Employee health, safety and wellbeing in the workplace - Employee involvement and commitment - Policy on diversity and equal opportunities

The community • Via studies about the public and social

sectors

• Via daily contacts by the public and social bankers with public and social organisations
• By creating an ecosystem of government departments, companies and social organisations about specific major social challenges
• Via the annual presentation of the “Smart Awards”, recognising sustainable projects by governments - Financial health of local authorities - Ageing population - Credit terms - Policy on sustainability - Climate change, the environment, energy - Circular economy - Mobility - Urban development - Health and prevention (safety) - Reinvesting savings deposits in the local economy - Financial inclusion, access to banking services for everyone - Products and services that have a positive environmental and social impact - Indirect impact on the environment and climate (Impact via products and services)