Earnings Statement KBC Group, 2Q 2009 and 1H 2009

Regulated information* - 6 August 2009 (07.00 a.m. CEST)

Summary


For the second quarter of 2009, KBC achieved a net positive result of
302 million euros. Excluding exceptional items, underlying net profit
came to 409 million euros. In many fields, the operating  environment
turned positively since the start of the year and this trend  largely
persisted during the second quarter. Jan Vanhevel, recently appointed
Group CEO:  ''Business  margins  remained strong,  sentiment  on  the
capital markets  improved,  insurance  results were  solid  and  cost
cutting is paying off.  Trends for problem  loans rose, but  remained
within expectations'.
'A number of exceptional  items were recorded  as we took  additional
measures to further reduce future  earnings sensitivity, such as  the
acquisition of a  guarantee from  the State  for capping  CDO-related
losses. We also  marked down some  investment banking positions  that
have been discontinued.'

Financial highlights - 2Q 2009

Jan Vanhevel, Group CEO summarises the underlying business
performance for 2Q 2009 as follows:

* 'On an underlying basis, interest income grew by 7% year-on-year.
  While volume growth slowed in Eastern Europe and merchant banking
  outstandings were reduced, credit and deposit spreads remained
  healthy.' The net interest margin for banking was broadly stable at
  1.8% after the strong rise recorded in the previous quarter.

* 'Though trends are still somewhat fragile, fee and commission
  income was up 19% on the previous quarter, benefiting from the
  improved investment climate. For the same reason, the quarterly
  series of negative CDO revaluations and share portfolio impairments
  came to an end. Trading results were also strong.'

* 'Operating expenses were down for the second consecutive quarter
  and ended 14% lower year-on-year. Normal cost inflation was offset
  by various cost containment measures across business units and the
  effect of the downsizing of merchant banking activities.'

* 'Compared to the previous quarter, loan losses remained stable for
  both Belgium and for Eastern Europe. Losses on the non-domestic
  loan book outside Belgium and Eastern Europe rose, especially in
  relation to the credit exposure to the US (largely for
  mortgage-backed securities), the UK (mostly corporate) and Ireland
  (primarily residential mortgages).' The year-to-date credit cost
  ratio stood at 0.76% annualised, or at 1.01% when the
  mortgage-backed securities are included.


Headlines of underlying performance per business unit:
* 'With net interest and asset management fee income up, costs down,
  a good performance from the insurance business and loan losses at a
  stable low level, the Belgium Business Unit again delivered rather
  well.' The year-to-date return on allocated equity came to 31%.

* 'Compared to the preceding quarter, income from Eastern Europe was
  down due to lower trading revenue and revaluation results on
  hedges, but since loan impairment did not increase, the
  year-to-date credit cost ratio remained broadly stable at 1.75%.'

* 'Loan impairment in merchant banking went up, especially related to
  exposure to Ireland, with a year-to-date credit cost ratio 0.67%,
  and the UK. And we also set aside 138 million euros' worth of
  general provisions for the US mortgage-backed securities portfolio.
  But this was largely offset by solid sales and trading results for
  money and securities markets' activities.'

* 'Though market conditions remained tough, results from the European
  Private Banking Business Unit were up on the previous quarter.
  Although there was some net money outflow in our offshore
  activities, assets under management rose 5% compared to the
  previous quarter.'


The quarter was also characterised by a number of one-off items that
were not part of the normal course of business and were excluded from
the presented underlying results. The main items were:

* The fee of 1.1 billion euros (0.7 billion euros after tax) paid for
  the guarantee KBC bought from the State to cover the potential
  downside risk on the value of its collateralised debt obligations
  (CDOs).

* The market price for corporate credit - reflected in credit default
  swap spreads - improved markedly, generating a value mark-up of
  KBC's CDO exposure. The positive impact on earnings from the CDO
  revaluation amounted to 1.3 billion euros (including the positive
  impact from the acquired guarantee and the negative impact from the
  increase in the coverage of the CDO-linked counterparty risk
  against MBIA, the US monoline insurer, from 60% to 70%).

* The new management team decided to set aside a reserve against
  losses related to the future discontinuation of activities in KBC
  Financial Products (Merchant Banking), while marking down trading
  positions that are being run off in the amount of 0.7 billion
  euros, net. It is currently also reviewing potential future
  scenarios for the remaining businesses of KBC Financial Products.
  Moreover, a net impact of -0.2 billion euros was recorded related
  to CDOs sold to customers.



Financial highlights - 1H 2009

The income statement  summary table  is on  page 5  of this  earnings
release. Explanations per heading:
* The net result for the first half of 2009 amounted to -3.3 billion
  euros. This figure includes exceptional items (totalling -4.2
  billion euros, net) such as value losses on CDO investments, the
  fee paid for the guarantee bought to cover the remaining CDO-linked
  exposure and the write-down of positions for discontinued trading
  activities. Adjusted for those items, (underlying) profit came to a
  positive 875 million euros.

* Net interest income came to 2.9 billion euros, up 18% year-on-year
  (+10% on an underlying basis). Volume growth was particularly solid
  in the second half of 2008, while margins recovered significantly
  at the start of 2009. As at 30 June 2009, the customer loan book
  (excluding reverse repos) stood, on an organic basis, at the same
  level as a year earlier (up 9% in Belgium and 12% in Central &
  Eastern Europe and Russia, but down 7% in Merchant Banking). The
  net interest margin for banking came to 1.8%, up from 1.7% for the
  first half of 2008.

* Gross earned premiums in insurance stood at 2.6 billion euros, up
  14% compared to the year-earlier figure. Net of technical charges
  and the ceded reinsurance result, the income was 241 million euros.
  The combined ratio for the non-life insurance activities again came
  to 92%, a very favourable level

*  Dividend income from equity investments amounted to 82 million
  euros, markedly lower than the 159 million euros reported for the
  first half of 2008. The equity investment portfolio shrank
  substantially (to 2.3 billion euros from 4.4 billion euros a year
  earlier) while, in general, corporate dividend payouts were also
  lower.

* Net gains from financial instruments at fair value came to -3.7
  billion euros. Although sales and trading activities on money and
  debt securities markets performed well, this income heading was
  strongly impacted by net negative value adjustments on structured
  credit exposure (including 1 121 million euros to cover the cost of
  the newly acquired guarantee) and the marking down of discontinued
  derivative positions. On an underlying basis, this income heading
  came to +551 million euros.

*  Gains from available-for-sale assets (mostly on investments in
  shares) were limited to 47 million euros. Due to the poor equity
  market performance until March 2009, this was considerably below
  the year-earlier figure of 260 million euros.

* Net fee and commission income amounted to 690 million euros. This
  is 25% lower than the year-earlier level, largely due to the lower
  volume of assets under management consequent on the prevailing
  investment climate.

* Other net income ended at 268 million euros, somewhat above the
  year-earlier amount of 225 million euros.

* Excluding exceptional items, operating expenses were down 9%
  year-on-year. Cost containment measures were implemented across all
  business units. The underlying cost/income ratio for banking stood
  at 56%, compared to 64% for 2008.

* Total impairment charges stood at 1.3 billion euros, of which 886
  million euros related to loans and receivables. This corresponds
  with a credit cost ratio of 1.01% (0.14% for the Belgium Business
  Unit, 1.75% for Central & Eastern Europe and Russia and 1.31% for
  Merchant Banking including US mortgage-backed securities).
  Excluding the charge for US mortgage-backed securities, the credit
  cost ratio for the group came to 0.76% (0.71% for Merchant
  Banking). Available-for-sale investment securities, mainly shares,
  were impaired to the tune of 330 million euros on the back of the
  prevailing poor equity market environment up to the end of the
  first quarter of 2009. An impairment loss of 124 million euros was
  recognised on the value of goodwill outstanding, related, among
  other things, to acquisitions in Bulgaria.

* As pre-tax results were negative, a deferred income tax credit of
  258 million euros was recognised.

* As at the end of June 2009, parent shareholders' equity came to
  14.9 billion euros. Shareholders' equity was up 0.7 billion euros
  on the start of the year as the negative year-to-date result was
  offset by the positive impact of the non-dilutive capital
  securities issued to the State (Flemish Regional Government) and
  positive market value adjustments on assets. The tier-1 capital
  ratio for banking stood at 10.8% (of which 8.1% core tier-1), while
  the solvency margin for the insurance business came to 182%.


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


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