February 22, 2007 01:06 ET

KBC : Final quarter (634 million euros) continued to benefit from robust revenue momentum

BRUSSELS, BELGIUM -- (MARKET WIRE) -- February 22, 2007 --

KBC closed the fourth quarter of 2006 with a net profit of 634 million euros. This brought the result for the 2006 financial year to 3 430 million euros, corresponding with a return on equity of 24%. Underlying profit, i.e. profit excluding items not relating to the normal course of business, came to 2 548 million euros; the corresponding return on equity to 18%.

According to André Bergen, Group CEO, 'KBC's business model developed positively in many areas during the past year. Business volumes were robust, while cost and risk levels remained under control. Although we benefited from a generally favourable environment, the group also proved to be in very good shape. We are therefore confident that we will deliver on our growth and return targets.'

Financial highlights - 4Q 2006

* During the final quarter of 2006, customer loan growth accelerated, especially in Central Eastern Europe. The customer loan book expanded by 4% (+9% in Central Eastern Europe), bringing the year-to-date increase to 14% (26% in Central Eastern Europe). The outstanding volume of mortgages grew during the quarter by 4% (3% in Belgium and 11% in Central Eastern Europe).

* After a traditionally weak third quarter, fee and commission income recovered strongly, driven by robust sales of retail mutual funds, and almost reached the exceptionally high level achieved in the last quarter of 2005, which had been underpinned by strong tax-driven sales in Belgium.

* Capital market revenues were buoyant. On an underlying basis, net gains from financial instruments at fair value (mostly institutional trading profit) were 91% higher compared with the previous quarter.

* The quarter also benefited from the divestment gain of 60 million euros from the sale - in Belgium - of the stake in Banksys/Bank Card Company.

* As expected, and in line with the usual seasonal cost pattern, operating expenses were up significantly compared with the previous quarter. Among other factors, the stronger results from the capital market activities were a major driver behind the 5% underlying cost increase on the last quarter of 2005.

* Impairment on loans (102 million euros) was higher than in previous quarters, chiefly in Hungary where loan provisioning was tightened given the more difficult local economic environment. Overall loan quality nevertheless remained sound (the non-performing-loan ratio for the group decreased to 1.6% from 1.8% at the beginning of the quarter).

Developments in 1Q 2007

According to Andre Bergen, Group CEO, 'Even though our insurance business had to weather the Kyrill storm, with its negative net impact of around 28 million euros, January was a good month. Moreover, we realised a capital gain of 200 million euros following the sale of our small, non-strategic holding in Intesa Sanpaolo.' Up to 15 February, 1.6 million shares had already been bought back for an amount of 155 million euros as part of the 2007 share buyback programme.


At the next Annual General Meeting to be held on 26 April 2007, the Board of Directors will propose to the shareholders that a gross dividend per share of 3.31 euros be paid (32% more than the 2005 dividend).

Please find below the full text of the press release.

KBC : 4Q earnings release:

Tamara Bollaerts
KBC Group
Investor Relations Office

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