(23/03/2005) KBC : 2004 Group profit up by 57%

KBC closed the fourth quarter of 2004 with a profit of 557 million euros, well above the average for the preceding quarters. This brought profit for the year to 1 758 million euros, a 57% increase on 2003. The merger between KBC and Almanij, which became legally effective on 1 January 2005, did not have any impact on these results for 2004. The full text of the earnings release is available at www.kbc.com, along with a Powerpoint presentation, detailed financial statements and pro forma key figures for the new KBC Group for 2004 are available on www.kbc.com, along with information on the impact on the results of the International Financial Reporting Standards (IFRS). The live audio cast of the meeting for financial analysts (in Brussels) this afternoon at 3.30 p.m. CET can be accessed at www.kbc.com or tel. +44 207 162 0181. Financial highlights - 4Q 2004: - In Belgium, a successful marketing campaign was conducted for investment products, helping to push banking income (1.6 billion euros) and premium income in the life insurance business (1.2 billion euros) up to a high level. - Loan loss provisions remained relatively low (65 million euros); the technical result from non-life insurance remained strong (claims ratio for the quarter: 60%). - The negative impact of impairments on the equity portfolio over the first nine months of 2004 was able to be offset during the fourth quarter, thanks in part to additional capital gains on investments. Gains were realized on the sale of equity positions in Belgian airport operator BIAC (53 million euros), Irish insurance group FBD (36 million euros), the Luxemburg bank KBL (33 million euros) and KBC's parent company Almanij (49 million euros). - Despite the increase in costs and the extra reserves set aside for low interest rates in the life insurance business, profit for the quarter (557 million euros) went up considerably compared with the preceding quarter (+68%). Year-on-year, profit more than doubled (+115%). Financial highlights - FY 2004: - Net profit increased by 639 million euros to 1 758 million euros (+57%). - Robust organic growth was recorded in revenues: banking income went up by 356 million euros (+6%), while premium income in the insurance business climbed 1.2 billion euros (+33%). - In the banking business, expenses fell by 59 million euros (-2%), resulting in a marked improvement in the cost/income ratio, which went from 65% in both 2002 and 2003 to 60% in 2004. - In the non-life insurance business, the technical result remained sound, with the combined ratio coming to 95% (compared to 105% in 2002 and 96% in 2003). - The operating result in the insurance business slipped, however, owing to the lower average return achieved on the investment portfolio, mainly because of the prevailing low-interest-rate climate. - Loan losses were limited, and the loan loss ratio came to 0.20% (compared with 0.55% in 2002 and 0.71% in 2003). - Return on allocated capital in the retail business (mainly in Belgium) amounted to 19%, and in the corporate and market activities to 19% and 20%, respectively. In Central and Eastern Europe, there was a fine recovery in profitability (return of 14%), following a difficult 2003. For the entire group, return on equity came to 18%. Outlook for 2005: The fundamental strategy of the (new) KBC Group is focused on strengthening the market position in Bancassurance and achieving further efficiency gains in Belgium, consolidating the position in the new retail home markets in the Czech Republic, Hungary, Poland, Slovakia and Slovenia, and further developing private banking activities in Europe. Although economic growth is expected to start slowing down a bit in 2005, company earnings prospects are good in most markets where KBC Group operates. KBC will also sustain its strict cost discipline and seek to harness synergy stemming from the merger with Almanij. Consequently, we expect that KBC Group NV's consolidated profit for 2005 (under IFRS) will exceed the Group's comparable pro forma IFRS results for 2004. Attachements to the press release is available on http://www.companynewsgroup.com © CompanynewsGroup