Earnings Statement KBC Group, 1Q 2008

Regulated information* - 15 May 2008 (7 a.m. CEST)

KBC closed the first quarter of 2008 with a net profit (IFRS) of  554
million euros, down  44% vis-à-vis  the first quarter  of 2007  which
benefited from  exceptional income  from the  disposal of  shares  of
Intesa San Paolo. Underlying net profit for the first quarter of 2008
- i.e. net profit excluding exceptional  items - came to 573  million
euros. This was 15% below the level of previous quarter and 22% below
that of the first quarter of 2007, mainly on the back of weak capital
market conditions. The corresponding underlying return on equity  was
14%.

According to André Bergen, Group CEO, 'It was not the ideal start  to
the  year.  As  investment  yields  fell  across  asset  classes  and
volatility remained  high,  merchant  banking  and  asset  management
performances suffered.  However,  we  were  happy  to  see  that  the
performances of the second half of the quarter showed clear signs  of
improvement. These have so far persisted  into the first half of  the
second quarter. As a result, the second quarter up to now has shown a
strong performance. We  were also  glad to  see that  the trends  for
lending, deposit-gathering and life  insurance sales remained  solid.
Especially Central and Eastern Europe continued to do very well, with
organic loan growth  at 26% year-on-year  and underlying net  banking
profit  up  27%.  This   testifies  to  that   region's  role  as   a
growth-driver for the group. As insurance earnings in the region were
impacted by non-recurring items, the Business Unit's growth in  total
net profit was more limited."

Financial highlights - 1Q 2008

André Bergen, Group CEO, summarises  the financial highlights for  1Q
2008, as follows:
"Trends for lending,  deposit-gathering and life  insurance sales  in
our core markets remain highly encouraging. The size of the  mortgage
book in  Belgium was  10% above  the year-earlier  level, while  home
loans in Central &  Eastern Europe grew organically  by 50% over  the
same period. In Belgium, bank deposits were especially attractive  as
an alternative  to investment  funds, while  the decline  of  deposit
product spreads came to an end, though this does not make up for  the
changed deposit structure.  On an organic  basis, the underlying  net
interest income grew by 10% in  Belgium and 21% in Central &  Eastern
Europe compared with the first quarter of 2007. In Merchant  Banking,
loan growth was slowed down  somewhat temporarily, not on account  of
strains in funding, but  in order to  ensure an adequate  risk-return
level in light of  a global economic slowdown.  The Group's sales  of
life insurance were 54% more than the year-earlier figure."
"On the other hand, the roughly  17% decline in broad equity  indices
during the  quarter under  review has  weighed on  trading and  asset
management operations. New retail  customer money flowed mostly  into
secure products, such as  time deposits and interest-guaranteed  life
insurance, while income from  institutional sales and trading,  local
corporate finance  and  private  banking was  also  impacted  by  the
depressed market sentiment."
 "The  markdown  of  our  structured  credit  investments   portfolio
remained limited. An after-tax  earnings impact of -93 million  euros
was posted, while the impact on shareholder's equity was -61  million
euros. In the quarter under review, no further accrual of  provisions
was deemed necessary to cover the exposure to monoline insurers."
"Overall, customer loan quality remained  solid. The loan loss  ratio
came to just 6  basis points: 3 basis  points for the Belgian  retail
business, 38 basis points in the Central & Eastern Europe and  Russia
region and  nil  in  Merchant  Banking.  We  know  that  everyone  is
factoring in much  higher losses as  the cycle is  turning, but  even
today, we see only a marginal decrease in asset quality."
"Our solvency remains robust. At the  end of March, the Tier-1  ratio
for the banking  activities came to  8.6% according to  the Basel  II
capital adequacy regulations.  According to  the Basel  I rules,  the
ratio came  to  8.0%, while  the  solvency ratio  for  the  insurance
activities amounted to 191%."
"We have  prudent minimum  solvency target  levels of  8% for  Tier-1
banking capital and  200% for  insurance capital. Over  the last  few
years, we invested progressively in both organic and external growth.
Together with the share buyback programme, this almost fully used  up
the amount of  capital in excess  of these target  levels. Today,  we
still see   uncertainty as  to when  the adversity  on the  financial
markets will  come  to  a complete  end  and  as to  whether  or  not
regulatory  capital   adequacy   requirements  will   be   tightened.
Therefore, we believe it is better to err on the side of caution. The
ongoing share buyback plan will be temporarily suspended in order  to
safeguard our organic and external growth potential."

Main earnings trends - 1Q 2008
The underlying net interest  income for the  Group amounted to  1 202
million euros,  13% higher  than that  of the  year-earlier  quarter,
mainly thanks to the solid organic growth in both loans and deposits.

Gross earned premium, insurance, stood at 1 236 million euros, up 42%
compared to the first quarter of 2007. Net of technical charges,  the
income was  47  million  euros higher  (+47%).  The  combined  ratio,
non-life, amounted to 90%.

On an underlying basis, net gains from financial instruments at  fair
value  amounted  to   a  negative   28  million.   This  included   a
markdown-to-market of 141  million euros  on asset-backed  securities
and collateralised debt  obligations (93 million  euros, after  tax).
The trading income  was negatively  impacted by  the adverse  capital
markets climate.

A higher-than-average amount of gains from available-for-sales assets
was realised  (198 million  euros, mostly  on shares  in the  Belgium
Business Unit). Part of this amount offsets the increased  impairment
charges on  the  same  portfolio (see  below).  Net  of  impairments,
realised gains  in the  Belgium Business  Unit were  some 65  million
higher than the 2007 quarterly average.

Underlying net fee  and commission  income amounted  to 464  million.
This is 9% below the year-earlier level, mainly due to lower customer
investment activities as a  result of the  high volatility in  equity
markets during the quarter.

Operating expenses  came  to 1 278  million  euros. Compared  to  the
year-earlier quarter, the 6% cost growth is largely explained by  new
acquisitions and  currency  appreciations. Excluding  these  factors,
cost growth was less than 1%.

Impairment charges  stood at  98 million  euros, of  which a  low  27
million euros was  related to  loan impairment.  Due to  the fall  in
equity markets,  an impairment  charge in  the amount  of 71  million
euros was taken on (mainly shares in) the investment portfolio.

Taxes amounted to 144  million euros. The tax  rate was in line  with
the average for the 2007 financial year.

In order to arrive at the figure for underlying profit, factors  that
do not occur during the normal course of business are eliminated. For
the quarter under  review, these  amounted to -19  million euros  and
related to mark-to-market adjustments  on derivatives used for  Asset
and Liability Management purposes.

As at the end of March 2008, the parent shareholders' equity came  to
15.6 billion euros (45.7 euros  per share). Shareholder's equity  was
down on the  start of the  year (-  1.8 billion), as  profit for  the
quarter (+0.6 billion)  was more  than offset by  dividends paid  out
(-1.3 billion  euros),  a decrease  in  the revaluation  reserve  for
available-for-sale assets (-0.8 billion euros) and the repurchase  of
treasury shares (-0.2 billion euros).

Future developments

André Bergen: "The operating environment in the first quarter of  the
year was too uncertain to  provide much detailed earnings  visibility
for the  short term.  Although  it is  early  days, we  recently  saw
various signs  of improvement  and I  am happy  to confirm  that  our
second quarter has got off to a much better start. Given our business
model and  strategy,  I  remain  confident  on  the  earnings  growth
capacity of our franchise in the mid-term."
Given the importance of  Central & Eastern Europe  and Russia in  the
strategy of the Group, KBC is glad to host its annual Investor Day on
5-6 June in Moscow to explain  its growth ambitions in the region  in
further detail  to the  investment  community (more  information  via
[e-mail]).


* This news item contains information that is subject to the
transparency regulations for listed companies.