RAROC profile and corporate credit pricing model derived from Pillar 3 disclosures.
KBC Group is a Belgium-based bank with approximately EUR 45bn of corporate credit exposure (EAD) under the A-IRB approach to credit risk capital. The numbers below come directly from KBC Group's most recent Pillar 3 CR6 regulatory filings and are used to model how this bank prices corporate credit facilities.
KBC Group is a smaller corporate book by disclosed EAD (57 of 59). Its cost-to-income ratio of 46.0% is structurally efficient (-3.8pp vs the 59-bank cross-section average of 49.8%). The corporate portfolio is weighted toward sub-IG obligors, with an EAD-weighted average PD of 4.2% against a cross-bank average of 2.1%.
Because the bank runs the advanced IRB approach, its own LGD and credit-conversion models drive capital requirements, which on our comparable sample deal typically produces tighter minimum spreads than foundation-IRB peers with identical obligor risk. Unsecured LGD disclosed at 29.1% is -7.7pp against the 36.8% cross-bank average, indicating recovery assumptions that are more favourable than the peer median — often a feature of senior-unsecured lending to large investment-grade obligors.
On the standardised BBB+ EUR 25M 5-year term loan used across every bank profile, KBC Group lands in the top half of the pricing ranking (#20 of 59), with a RAROC of 7.59% and a minimum spread of 243bp to reach the 12% hurdle.
| Parameter | Value | What it means |
|---|---|---|
| IRB approach | A-IRB | How the bank computes risk-weighted assets |
| Cost-to-income ratio | 46.0% | Operating cost share of net revenue |
| Effective tax rate | 22.1% | Applied to RAROC numerator after EL and funding |
| Average corporate PD | 4.22% | EAD-weighted probability of default |
| Avg LGD (unsecured) | 29.1% | Loss share if borrower defaults, no collateral |
| Avg LGD (secured) | 18.0% | Loss share with eligible collateral |
| Funding spread | 15bp | Bank's wholesale funding cost above risk-free |
| Corporate EAD | EUR 45bn | Total exposure at default to corporates |
On a representative BBB+ rated, 5-year term loan of EUR 25M at 150bp spread with a 20bp commitment fee, KBC Group would generate an estimated RAROC of 7.59% against a typical 12% bank hurdle rate. To hit that hurdle on this exact deal, the bank would need a minimum spread of 243bp. This deal is significantly below target — the bank would either reprice it or decline.
| Component | Value |
|---|---|
| Annual revenue (spread + fees) | EUR 385,000 |
| Operating cost | EUR 154,000 |
| Expected loss (PD × LGD × EAD) | EUR 28,750 |
| Capital required (FPE) | EUR 2,451,320 |
| RAROC (after tax) | 7.59% |
| Min spread to hit 12% RAROC | 243bp |
Out of 59 banks in the OpenRAROC dataset, KBC Group ranks #20 by RAROC on this sample deal.
| Rank | Bank | Country | RAROC | Min spread |
|---|---|---|---|---|
| 1 | Qatar National Bank | Qatar | 9.00% | 203bp |
| 2 | DBS Group | Singapore | 8.18% | 224bp |
| 3 | JP Morgan | United States | 8.12% | 231bp |
| 4 | ICBC | China | 8.06% | 233bp |
| 5 | China Construction Bank | China | 8.06% | 233bp |
| 19 | Barclays | United Kingdom | 7.64% | 241bp |
| 20 | KBC Group | Belgium | 7.59% | 243bp |
| 21 | HSBC | United Kingdom | 7.53% | 244bp |
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