(25/11/2004) KBC - news release: 9M04 earnings up 40% - FY04 profit outlook revised upwards

25 November 2004 KBC Bank & Insurance GroupEarnings for the first nine months of the year up 40% 2004 profit outlook revised upwards Ticker symbols: KBC BB (Bloomberg), KBKBT BR (Reuters) Investor Relations: Tel. +32 2 429 4916 - E-mail: investor.relations@kbc.com KBC closed the third quarter of 2004 with a Group profit of 332 million euros, less than the figure for the exceptionally good second quarter, but 30% more than for the third quarter of 2003. This brings profit for the first nine months of the year to 1 201 million euros, a 40% increase year-on-year that can be attributed to the improvement in operating income and charges (the operating result went up by 17%) and the decline in loan loss provisions (-68%). One of the leading bancassurers and asset management companies in Belgium and Central Europe, the KBC Group has a market capitalization of 18 billion euros, employs around 48 000 people and serves approximately 11 million customers. The press release is available at www.kbc.com (along with a PowerPoint presentation and detailed interim report, in English only) and at http://www.companynewsgroup.com Financial highlights - 3Q 2004: - The operating result for the third quarter, as is traditionally the case, was lower (-17%) than the result for the preceding quarter. Conspicuous in this respect was the very low level of revenue generated by the securities business with professional counterparties. The interest margin narrowed slightly, while (life) insurance premium turnover remained relatively high. - The operating result was up 9% year-on-year, owing in part to the ongoing cost-cutting in the banking business (-6%) and the improved underwriting result in the (non-life) insurance business (combined ratio for the quarter of 95%). - On all submarkets, loan loss provisions were still at a low level (loan loss ratio for the quarter of 0.07%). - Results for the various business segments: at the operating level, most of the areas of activity made a relatively good showing (aside from the activities on the financial markets). A conspicuously fine operating performance was turned in on the Belgian market (although the profit contribution is being squeezed there by the low level of investment income in the retail insurance business). In the asset management business, assets under management have now surpassed the 100-billion-euro mark. In Central and Eastern Europe, a third-quarter return on equity was achieved of 14%; in the corporate segment, the figure came to 18%. Financial highlights - 9M 2004: - Net profit (1 201 million euros) went up by 341 million euros (40%). - There was brisk growth in revenues: in banking, income went up by 5% (on an organic basis), while premium income in the life insurance business rose by (an organic) 19% (5% in the non-life business). - In the banking business, expenditure fell by 75 million euros (-3%) and the cost/income ratio underwent a marked improvement, ending the period at 60% (compared with 65% in 2003). - In the non-life insurance business, the underwriting result remained very sound (combined ratio for the first nine months of 2004: 94%). - Loan losses were extremely limited, with a loan loss ratio of 0.16%. In Poland, where substantial loan loss provisions had had to be taken in 2003, the ratio (0.85%) remained below the market average. - In the insurance business, however, profitability was undermined by equity portfolio impairments (-191 million euros) and higher taxes. Capital gains on investments were down, too. - The profit figure includes extraordinary income (48 million euros, net) derived mainly from the sale of the investment in the Belgian telecom, Belgacom. - The retail segment (mainly in Belgium) contributed 322 million euros to Group profit, asset management (mainly in Belgium) 101 million euros, the activities in Central Europe 223 million euros, services to corporates 284 million euros and the activities on the financial markets 146 million euros. - Return on allocated capital in the retail business in Belgium came to 14% and in services to corporates and financial market activities to 19% and 17%, respectively. In Central and Eastern Europe, profitability has recovered well (return of 15%) following a difficult 2003. Operating highlights - 9M 2004: - In the retail business in Belgium: life insurance and (mortgage) loans were a commercial success, and work continued on the product rationalization and customer-mindedness programme. - In Central and Eastern Europe: knowledge-exchange and Group synergy projects were implemented, the banking activities in Poland were restructured, and the majority stake in WARTA (Poland's second biggest property and casualty insurer) was stepped up to 75%. - Corporate and financial market activities: innovative electronic applications were launched to facilitate customers' foreign trade and payments transactions, the joint securities processing venture, Orbay, was launched in collaboration with Rabobank, and the risk profile of the activities continued to be scaled down (given that the risk/return ratio is not considered adequate at this time). Profit outlook for 2004: Assuming economic conditions remain unchanged and share prices stable, we expect 2004 profit to be at least 35% higher than the 2003 profit figure. (C) CompanynewsGroup