2004 Earnings ReleaseTicker symbols: KBC BB (Bloomberg), KBKBT BR (Reuters)Schedule, 23 March 2005:

Results published on www.kbc.com 11.00 a.m. CETPress conference (Brussels) 1.30 p.m. CETMeeting for financial analysts (Brussels) 3.30 p.m. CET Tel. +44 207 162 0181 with live phone conference/webcast 3.30 p.m. CET Website: www.kbc.com

Investor Relations: Tel. +32 2 429 4916 E-mail: investor.relations@kbc.comPress Officers: Tel. +32 2 429 8545 Tel. +32 2 429 65 01

23 March 2005

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.

Key figures 1

In millions of EUR 4Q 04 4Q/4Q 03 4Q/3Q 04 FY 03 FY 04 12M/12M

OPERATING RESULTNET PROFIT - Group share

662557

+16%+115%

+9%+68%

2 2971 119

2 6931 758

+17%+57%

Operating result per share (EUR)

Earnings per share (EUR)

Net asset value per share (EUR) - year-end

7,563,6833,8

8,675,6639,3

+15%+54%+16%

Contribution, bankingContribution, insuranceContribution, holding-company activities

407163-13

+100%+168%

-

+29%+504%

-

858275-14

1 508284-34

+76%+3%

-

Contribution, retail and private bancassuranceContribution, Central and Eastern EuropeContribution, asset management Contribution, services to corporate customersContribution, market activities

26046429475

+105%-

+18%+23%

>500%

+168%-38%+40%

+4%+353%

490-132132219126

582269143378221

+19%-

+8%+72%+76%

Key ratios

FY 02 FY 03 FY 04Cost/income ratio, banking Combined ratio, non-life insurance

65%105%

65%96%

60%95%

Solvency ratio, banking (Tier 1) - year-endSolvency ratio, insurance - year-end (incl. net unrealized gains)

8,8%320%

9,5%316%

10,1%389%

Return on equity (ROE)Growth in earnings per share (y-o-y)

13%+1%

13%+8%

18%+54%

Created through the merger of KBC Bank and Insurance Holding Company and Almanij, KBC Group is one of the largest bancassurers in Belgium and Central and Eastern Europe, as well as a leading asset manager catering for retail and private banking clients in Europe. The Group currently has a market capitalization of 24 billion euros, employs around 51 000 people and serves approximately 11 million customers.

This press release is available in English, Dutch, French and German at www.kbc.com, along with a presentation and detailed financial statements (in English).

1 The results per share are calculated on the basis of 303 706 758 shares entitled to dividend at 31 December 2003, and 310 710 665 at 31 December 2004. The net asset value per share is calculated on the basis of 310 709 797 shares at 31 December 2003 and 310 849 427 at 31 December 2004.

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%.

Operating highlights – FY 2004

In the retail business in Belgium: sales of investment products, insurance and home loans were buoyant, business processes continued to be rationalized and customer-centricity was enhanced.

In Central and Eastern Europe: the exchange of know-how was stepped up, more group synergies were realized (in bancassurance and asset management, etc.), the banking activities in Poland were restructured and a majority shareholding was taken in WARTA, Poland’s second biggest property and casualty insurer.

Services to corporates and financial market activities : the risk profile of the business lines was adjusted, fee business was strengthened, a joint venture was started up with Rabobank for the joint processing of securities transactions, and the position in Central and Eastern Europe was reinforced.

Balance sheet and solvency at 31 December 2004

The Group’s capital and reserves amounted to 10.5 billion euros, a 15% increase on year-end 2003. In addition, there was a net unrealized gain on securities of 2.5 billion euros, 518 million euros of which came from shares. The net asset value per share went up to 39.3 euros.

Solvency is still high, with a core capital ratio for the banking business (Tier 1) of 10.1%, and a solvency margin in the insurance business of 389% (including unrealized gains and losses).

Customer deposits amounted to 148.7 billion euros, up by 6% (the percentage increase does not take interprofessional deposits into account). Life insurance reserves grew by 28% to 13.5 billion euros. Assets under management in the asset management businesses went up by 20% to 106.6 billion euros.

The loan portfolio (excluding loans and advances to credit institutions and reinsurers) came to 106.5 billion euros at the end of the year. If the volume of reverse repurchase agreements is not taken into

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account, this represents a 7% increase on 2003, which can be attributed chiefly to the 17% increase in the volume of home loans (+9% in Belgium, and +51% in Central and Eastern Europe).

Changes in the scope of consolidation, valuation rules and currency translation

The results of WARTA (Poland), in which KBC stepped up its shareholding from 40% to 75%, have been fully consolidated from the first quarter of 2004 (in 2003, they had been accounted for using the equity method). This has had a substantial impact on various profit and loss items in the insurance business, but the effect on the bottom line was limited. Other changes in the scope of consolidation have not had any material impact.

There were no changes in the valuation rules with a significant effect on the results.

For currency translation purposes, the value of the US dollar relative to the euro was 9% lower than in 2003. Fluctuations in the value of other currencies were not that relevant, nor were there any significant movements in exchange rates in the fourth quarter compared to the first nine months of 2004.

Report of the statutory auditor

We have issued an unqualified opinion on the consolidated financial statements of KBC Bank and Insurance Holding Company NV as of and for the year ended December 31, 2004 which show a balance sheet total of EUR 249.233.555 thousand and a share of the group in the profit for the year of EUR 1.758.046 thousand and we confirm that the accounting information contained in the present press release has not given rise to any qualification on our part and is consistent with the financial statements mentioned above. Brussels, 23 March 2005. Ernst & Young Bedrijfsrevisoren BCV. Represented by Jean-Pierre Romont, Partner and Danielle Vermaelen, Partner.

2004 dividend

The Board of Directors will propose to the General Meeting of Shareholders on 28 April 2005 that a gross dividend of 1.84 euros per share be paid out, a 12% increase. The new KBC shares, issued in 2005 on the merger with Almanij, are entitled to the same dividend. Dividend payment has been set for 2 May.

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.

Information releases for financial year 2004

Pro forma key figures for the new KBC Group for 2004 (i.e. drawn up on the notional basis that the merger between KBC and Almanij took place on 1 January 2004) are available on www.kbc.com, along with information on the impact on the results of the International Financial Reporting Standards (IFRS).

The 2004 annual report will be available on www.kbc.com from 13 April 2005.

The embedded value at year-end 2004 for the life insurance business will be made available on www.kbc.com on 16 June 2005 at 11 a.m. (CET).

Earnings release for the first quarter of 2005

The first-quarter results will be available on www.kbc.com on 9 June 2005 at 11 a.m. (CET). They will be drawn up for the first time according to the IFRS. In this regard, on 28 April 2005, the impact of the application of IAS 32 and 39 and IFRS 4 on equity in the opening balance sheet at 1 January 2005 will also be disclosed.

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Overview of results

In millions of EUR 4Q 03 3Q 04 4Q 04 FY 03 FY 04

GROSS OPERATING INCOME 1 627 1 610 1 790 6 498 6 999

Banking 1 424 1 352 1 565 5 655 6 011Net interest income 800 755 781 3 118 3 138Dividends 12 25 32 107 116Result from participating interests, equity method

8 19 4 18 35

Profit (Loss) on financial transactions 157 141 228 730 902 On currency dealing and securities trading 104 93 143 480 637 Realized gains 54 48 85 250 265Net commission income 303 323 393 1 251 1 380Other operating income 144 89 126 432 441Insurance 207 264 232 847 1 006Earned premiums, net of reinsurance 712 870 1 550 3 486 5 037Net technical charges -744 -764 -1 618 -3 458 -4 906 Value adjustments, unit-linked life assurance -91 10 -140 -209 -226Investment income and charges 241 152 297 802 854 Realized gains and losses -4 39 37 91 104 Value adjustments, unit-linked life assurance 91 -10 140 209 226Result from participating interests, equity method

-2 7 2 17 20

Holding-company activities -5 -7 -6 -4 -18

GENERAL ADMINISTRATIVE EXPENSES -1 059 -1 004 -1 128 -4 202 -4 306

banking -938 -844 -954 -3 695 -3 636 insurance -119 -158 -170 -499 -663 holding-company activities -2 -1 -5 -8 -7OPERATING RESULT 568 606 662 2 297 2 693 banking 487 508 611 1 961 2 376 insurance 88 106 62 348 343Value adjustments banking -215 -38 -155 -624 -331 Write-downs on and provisions for credit risks -252 -14 -65 -676 -199 Value adjustments on securities 28 0 -20 36 -10 Provisions for other liabilities and charges 9 -24 -70 16 -122Non-recurring result, insurance -18 -54 116 -35 37Amortization of goodwill on consolidation -8 -10 -7 -40 -39Extraordinary result 39 -3 13 43 61PROFIT BEFORE TAX 367 501 629 1 641 2 421

banking 302 460 463 1 352 2 081 insurance 71 52 177 301 365Income taxes -123 -123 -35 -442 -490 banking -113 -100 -18 -413 -407 insurance -12 -21 -15 -27 -75 holding-company activities 2 -1 -1 -2 -8CONSOLIDATED PROFIT 243 379 595 1 199 1 931

Minority interests 16 -46 -38 -80 -172CONSOLIDATED PROFIT, Group share 259 332 557 1 119 1 758

Contribution, banking 204 314 407 858 1 508 Contribution, insurance 61 27 163 275 284 Contribution, holding-company activities -5 -9 -13 -14 -34

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Appendix 1: Comments on the profit and loss account

Operating result, banking

In millions of EUR 4Q 03 3Q 04 4Q 04 FY 03 FY 04 12M/12MGross operating income Net interest income Net commission income Profit on financial transactions Currency dealing/securities trading Realized gains on investments Dividend income Result, equity method Other operating income

1 424800303157104

5412

8144

1 352755323141

9348251989

1 565781393228143

8532

4126

5 6553 1181 251

730480250107

18432

6 0113 1381 380

902637265116

35441

+6%+1%

+10%+24%+33%

+6%+9%

+98%+2%

General administrative expenses -938 -844 -954 -3 695 -3 636 -2%

Operating result, banking 487 508 611 1 961 2 376 +21%

After a traditionally weak third quarter, income picked up in the fourth, increasing by 16% quarter-on-quarter and by 10% year-on-year. This was due in part to a successful marketing campaign conducted for investment products in Belgium and to the normalization of the interprofessional securities business (mainly in interest rate and currency products). In addition, KBC responded to the bid for shares in Belgian airport operator, BIAC, allowing the banking business to realize a capital gain of 42 million euros (and the insurer one of 11 million euros).

For the year as a whole, income went up by 356 million euros (+6%), with growth being achieved in all components of income:

Net interest earnings were up by 20 million euros (+1%). The positive impact of mounting volumes (the loan portfolio – excluding loans made to professional counterparties – grew by 7%, for instance) was mitigated by a slight narrowing of the interest margin. For 2004, the interest margin came to 1.67%, unchanged from 2002 and lower than the 1.73% recorded for 2003. The interest margin in Belgium came to 1.98% (compared with 1.97% in 2002 and 2.04% in 2003), and in Central and Eastern Europe to 3.16% (compared with 3.32% in 2002 and 3.21% in 2003). For the Group’s international and interprofessional transactions, the margin is of course narrower.

Commission income was up by 129 million euros (+10%) on 2003, thanks mainly to the higher revenues from investment funds, but also to the higher income derived from corporate finance, payment services in Central and Eastern Europe and the sale of insurance products.

Earnings on financial transactions rose by 172 million euros (+24%), after a modest result in 2003. Growth in this component was particularly pronounced at the start of the year. The 265 million euros in gains realized on investments were in line with gains realized in 2003.

The ‘Other operating income’ item (441 million euros) was likewise in line with the 2003 figure.

Fourth-quarter charges were up 2% year-on-year. Charges were also up on the third quarter of 2004, partly on account of the increased expense incurred this year for profit-sharing bonuses (linked to the strong results) and higher marketing expenses (in Poland and elsewhere).

For 2004 as a whole, charges were 59 million euros (-2%) lower than for 2003. In Belgium, expenses for the year fell by 4% and in Central and Eastern Europe by 1%. Through cost-containment and higher revenues, the cost/income ratio dropped to 60%, a significant improvement compared to the 2002 and 2003 ratio of 65%. If the investment banking activities of KBC Financial Products are not taken into account, the cost/income ratio came to 59%.

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Operating result, insurance

In millions of EUR 2 4Q 03 3Q 04 4Q 04 FY 03 FY 04 12M/12M

Gross operating income 207 264 232 847 1 006 +19% Earned premiums (net of reinsurance) Life guaranteed-interest-rate products unit-linked products Non-life

712448307141264

870514376138355

1 5501 188

985202363

3 4862 4381 676

7621 048

5 0373 6102 5251 0851 428

+45%+48%+51%+42%+36%

Technical charges (net) Life Non-life

-653-470-183

-774-550-224

-1 478-1 253

-225

-3 248-2 518

-730

-4 680- 3 748

-932

+44%+49%+28%

Net investment income Capital gains Other investment income

150-4

154

16139

122

15737

120

59391

502

628104524

+6%+14%

+4% Result, equity method -2 7 2 17 20 +21%

General administrative expenses -119 -158 -170 -499 -663 +33%

Operating result Life Non-life Non-technical result

885251

-15

1064567-6

622067

-25

348202191-45

343164238-59

-2%-19%+25%

-

The fourth quarter was again characterized by a strong technical result in the non-life business (claims ratio for the quarter: 60%). In the life insurance business, premium income came to nearly 1.2 billion euros, the highest quarterly amount ever, thanks to a successful marketing campaign on the Belgian market. The operating result in the life insurance business was adversely affected, however, by extra provisioning for the prevailing low-interest-rate climate (impact of around 37 million euros).

For the full year, operating income increased by 159 million euros. This reflects the significant impact of including Polish insurer WARTA in the scope of consolidation. On an organic basis (i.e. disregarding changes in the scope of consolidation), income rose by 24 million euros (+3%).

Premium income was 1.6 billion euros higher than for 2003; 1.2 billion euros (+33%) higher on an organic basis. In the life insurance business, premium volume reached a record 3.6 billion euros, representing an organic increase of 45% on 2003. In Belgium, which accounts for 93 % of premium turnover, organic growth came to 47%, and in Central and Eastern Europe to 28%. In the non-life business, earned premiums went up to 1.4 billion euros (+5% on an organic basis). The primary non-life insurance activities grew by 7% on an organic basis in Belgium and by 11% in Central and Eastern Europe, although reinsurance turnover fell by 3%.

The claims ratio in the non-life insurance business improved from 72% in 2002 and 65% in 2003 to 62% in 2004, primarily on the back of the optimized acceptance policy in Central and Eastern Europe, which drove the claims ratio there down from 79% in 2002 and 74% in 2003 to 63% in 2004. The claims ratio in the reinsurance business underwent a marked improvement, as well (falling from 89% and 75% to 69%). The claims reserve ratio for non-life insurance (excluding the premium and equalization reserve) came to 177% (223% in Belgium, 88% in Central and Eastern Europe and 210% for the reinsurance business).

Investment income rose by 35 million euros (+6%); although it should be pointed out that this increase was rather modest when compared with the increase in the volume invested, owing to the lower average return achieved on investment.

Administrative expenses (including commissions paid) rose by 164 million euros; 40 million euros (+8%) on an organic basis. Expenses in the life insurance business went up (on an organic basis) by 9%, which is significantly less than the increase in premium income, owing to the relatively high proportion of single premium policies. In the non-life insurance business, the level of costs rose (on an organic basis) by 8%, while the expense ratio came to 33%.

The non-technical result came to a negative 59 million euros, as a result of the low average return on the investment portfolio.

2 Excluding value adjustments borne by policyholders for unit-linked products.6/10

Value adjustments, banking

In millions of EUR 4Q 03 3Q 04 4Q 04 FY 03 FY 04 12M/12MLoan loss provisions -252 -14 -65 -676 -199 -71%

Value adjustments on investment securities +28 +0 -20 +36 -10 -

Provisions for other liabilities and charges +9 -24 -70 +16 -122 -

An additional 65 million euros were provisioned for loan losses in the fourth quarter. Loan loss provisions for the full year (199 million euros) consequently remained at a low level, with a loan loss ratio of 0.20% (compared with 0.55% in 2002 and 0.71% in 2003). In Belgium, the loan loss ratio came to 0.09% (compared with 0.29% in 2002 and 0.24% in 2003) and in Central and Eastern Europe to 0.48% (compared with 1.17% in 2002 and 2.75% in 2003), while the ratio for the international loan portfolio amounted to 0.26% (compared with 0.70% in 2002 and 0.48% in 2003). The ratio of cover for problem loans through outstanding loan loss provisions came to 81%.

For the fourth quarter of the year, a net impairment of 20 million euros was recorded on the investment portfolio. For the whole of 2004, however, the valuation of the investment portfolio had no significant impact on the bottom line.

During the fourth quarter, a net 70 million euros were provisioned for other liabilities and charges, primarily to cover possible expenditure for risks in respect of litigation, etc. For 2004 as a whole, the net allocation to the various ‘provisions for other liabilities and charges’ came to 122 million euros (besides the amount provisioned in the fourth quarter, these provisions were set aside for ongoing cost-cutting programmes, among other things).

Non-recurring result, insurance

In millions of EUR 4Q 03 3Q 04 4Q 04 FY 03 FY 04 12M/12MValue adjustments, shares 12 -27 27 -96 -164 -

Non-recurring realized gains on investments - -27 89 122 107 -12%

Transfer to (-)/from (+) provision for fin. risks -25 - - -140 93 -

Other non-recurring results: - Transfer from the equalization provision

-5 - - 7992

- -

Non-recurring result -18 -54 116 -35 37 -

Owing to the favourable stock market trend during the fourth quarter of the year, equity portfolio impairments were able to be reduced by 27 million euros. This meant that net value impairments of 164 million euros were recorded in 2004 (applying the principle that requires a value impairment to be recorded if the market value remains below the carrying value for three years).

These impairments were offset by the realization of gains on (equity) investments (107 million euros, with 89 million euros being recognized in the fourth quarter on, inter alia, Irish insurance group FBD, Kredietbank SA Luxembourgeoise, and KBC’s parent company, Almanij) and the use in the first quarter of the provision for financial risks (93 million euros) that had been set aside for this purpose in the past. On balance, non-recurring profit (before tax) for the year as a whole came to 37 million euros.

Extraordinary result, taxes and profit contribution of the holding company

In 2004, an extraordinary result of a net 61 million euros was recorded, thanks mainly to the gain realized on the sale of the stake in the Belgian telecom operator, Belgacom.

The tax burden for the fourth quarter was exceptionally low, due in part to deferred taxes being recorded in the banking business (63 million euros) and to the exemption from tax on capital gains from equity investments in the insurance business. For the full year, the tax burden came to 490 million euros.

The holding company made a bigger negative profit contribution (-34 million euros) than in 2003, due mainly to the decline in interest income from investments, but also to the expense involved in setting up a broader management structure for the Central and Eastern European activities at holding-company level.

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Appendix 2: Profit contribution by area of activity - overview

The Group result can be broken down as follows across the various areas of activity (after deducting income from surplus capital and minority interests in profit, among other things):

In millions of EUR 4Q 03 3Q 04 4Q 04 FY 03 FY 04 12M/12MRetail and private bancassurance (mainly in Belgium)- banking business- insurance business

1278146

978016

26098

162

490260230

582343239

+19%+32%

+4%

Central and Eastern Europe- banking business in Czech Rep. & Slovakia- banking business in Hungary- banking business in Poland- banking business in Slovenia- insurance business

-12827

-12-146

4-1

7431

71415

6

4638

704

-3

-132143

11-295

10-1

269162

31252724

-+13%

+181%-

+180%-

Asset management 35 30 42 132 143 +8%

Services to corporate customers 77 91 94 219 378 +72%

Market activities 9 17 75 126 221 +76%

Retail and private bancassurance

The retail segment in Belgium turned in a very good performance in the fourth quarter (260 million euros). A successful marketing campaign buoyed up banking and insurance revenues, and gains were realized in the insurance business that made up for the value impairments on the investment portfolio during the first nine months of the year.

During the course of 2004, efforts to promote insurance sales were stepped up. The traditional sales channel of agents and brokers accounted for 89% of the sales of non-life insurance and 13% of the sales of life insurance. Premium income derived through this channel in the non-life and life businesses went up by 5% and 14%, respectively. In the bank branch network, which is good for 11% of premium income in non-life insurance and 87% of premium income in life insurance, premium turnover went up by 12% and 57%, respectively. In addition, the bank’s workforce was reduced by 6%, the product offering and business processes continued to be rationalized and the degree of automation increased (with the proportion of electronic payment transactions, for instance, going up from 86% to nearly 90%).

Profit from this segment for 2004 (582 million euros) went up by 19% and return on allocated equity came to 19% (compared with 13% in 2002 and 17% in 2003). Profit in the banking business (343 million euros) was 32% higher than for 2003, thanks to the 4% increase in income (mainly higher commission income from asset management and sales of insurance) and the 2% drop in charges. The private banking subsegment made a profit contribution of 49 million euros, 44% more than in 2003. There was a sharp 38% increase in premiums in the insurance business, but the increase in the net profit contribution (by 4% to 239 million euros) was mitigated by the slower increase in investment income due to prevailing interest rate conditions.

Central and Eastern Europe

In the Czech Republic and Slovakia, the fourth quarter profit contribution (34 million euros) was slightly lower than the average contribution made in preceding quarters, mainly on account of provisioning for low interest rates in the insurance business. For the year as a whole, the profit contribution from the banking business went up by 13% to 162 million euros, thanks to the 11% increase in income (mainly interest related), the unchanged level of costs and lower loan loss provisioning. The return on allocated capital came to 17%. Premium growth in the insurance business came to 9% (+23% in Slovakia), and there was a marked improvement in the technical results (particularly in the Czech Republic) as well. The profit contribution went up by 5 million euros to 6 million euros, but the insurance business is still insufficiently profitable (return of 5%).

In Hungary, the fourth-quarter result was in line with the performance in the two preceding quarters, with higher commission income in the banking business and strong premium income in the life insurance business being offset by an increase in the provision for the fraud that occurred in 2003 at he equity trading subsidiary. In the banking business, the profit contribution for the full year came to 31 million euros, nearly three times as much as in 2003 when the profit contribution had been depressed by the provision set aside for the fraud. The operating result (i.e. excluding provisions) went up by 43% and the

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return on allocated capital came to 18%. The profit contribution made by the insurance activities went from break-even in 2003 to 4 million euros (return of 21%) in 2004, thanks to the brisk increase in premiums (by 28%, mainly in the life insurance business) and the improvement in the technical results (mainly in the non-life business).

In Poland, interest income suffered a one-off adverse effect in the fourth quarter of the year because of a change in a valuation rule. This, along with higher marketing expenses in the banking business and higher technical charges in the insurance business, among other things, accounts for the limited quarterly result (0.4 million euros). For 2004, the banking activities contributed 25 million euros to profit (return on allocated capital of 8%), a considerable improvement on 2003. This can be put down primarily to the 10% reduction in costs (in local currency), as well as to the containment of loan losses (the 0.69% loan loss ratio is below the market average). The contribution made by the Polish insurance activities (in which a majority shareholding was acquired in 2004) went from a negative 2 million euros to a positive 16 million euros, thanks mainly to the improved underwriting policy. At this time, return on allocated capital comes to 7%.

The contribution to profit made in 2004 by the banking activities in Slovenia (minority participation) went up strongly from 10 to 27 million euros, though this performance was bolstered by non-recurring deferred taxes in the third quarter. The insurance business that was started up in 2003 is more than meeting expectations (the market share in personal life insurance is estimated at 5 to 6% after less than two years), but is naturally still limited (2004 premium turnover came to 15 million euros). Its profit contribution currently comes to a negative 1 million euros.

Asset management

Assets under management went up in the fourth quarter to 107 billion euros. This was one of the factors that drove quarterly profit (42 million euros) up considerably higher than the average for the preceding quarters.

During the course of 2004, several new retail funds were launched (a considerable proportion of them offered capital protection) and dozens of new institutional mandates were won. In 2004, the international expansion of fund management was tackled (through co-operation with third-party distributors) and the market position in Central and Eastern Europe was strengthened with the launch of dozens of new funds.

Assets under management went up in 2004 by 20% (+24% in the retail segment and +6% in the institutional segment), with two-thirds of this growth accounted for by the net inflow of new money. This growth is attributable mainly to capital-guaranteed retail funds and advisory asset management services for high-net-worth individuals. In Central and Eastern Europe, assets under management went up by 25% (+57% for the retail investment funds).

The contribution made to profit by the asset management division for the whole of 2004 went up by 8% to 143 million euros. The strong increase in volume more than offset the decline in the average margin brought about by the shift towards products and services with a lower margin.

Services to corporate customers

Despite the slightly higher level of loan loss provisioning and the greater pressure on the interest margin, fourth-quarter profit in the corporate segment (94 million euros) remained at the high level achieved during preceding quarters, thanks mainly to strong commission income in the banking business.

During the course of the year, an active effort was made worldwide to boost commission income by, among other things, stepping up cross-selling to credit customers (in such areas as trade finance, factoring, currency and interest rate hedging products and corporate finance). Accordingly, a number of innovative e-applications for customers were launched for international trade and payments transactions (W1SE, Flexims, etc.). At the same time, the risk profile of the loan portfolio was reduced (in the US and elsewhere). In the corporate segment, the focus on the mid-cap segment remains intact.

For 2004 as a whole, profit came to 378 million euros, 72% more than in 2003, thanks primarily to the structurally lower level of loan loss provisions (loan loss ratio of 0.28%). Other factors contributing to the result included the improvement in fee business in banking, sustained strict cost discipline, the lower claims ratio in non-life insurance (which went from 75% to 69%) and, to a less extent, the transfer of customers from the retail segment. Results were significantly better in Belgium, and a good performance was also recorded in global structured finance, in banking in Ireland, in the corporate market in the US and in the diamond industry niche. The return on allocated capital for the corporate segment went up to 19% (18% in banking and 37% in (re)insurance). In 2002 and 2003, return had come to 9% and 11%, respectively.

Market activities

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After a poor third quarter, the level of income on the capital markets returned to normal in the fourth, allowing a quarterly result of 75 million euros to be recorded.

During the course of 2004, the range of products continued to be expanded, though the limits on proprietary trading remained in place (risk-weighted assets even fell by 17%). The focus is being placed partly on developing the alternative investment business (assets under management went up to around 5 billion US dollars) and realizing group synergy in Central and Eastern Europe. In that region, KBC’s issuance activity in local currencies is considerable, and it is positioning itself as a market maker in derivatives. Its equity trading business and corporate finance activities in Central and Eastern Europe were also streamlined. Moreover, a joint venture was set up with Rabobank (Orbay) for the joint processing of securities transactions. This will result in a considerable reduction in unit costs.

For the whole of 2004, the profit contribution went up by 76% to 221 million euros. This is due to a 14% increase in income (a strong improvement was registered in the equity and credit derivatives markets and in alternative investment management), while charges only went up by 2%. In the fixed-income subsector, the profit contribution came to 127 million euros. The (traditional) equity trading business made a profit contribution of 22 million euros. The return on allocated equity of the capital market activities went up from 8% in 2002 and 11% in 2003 to 20% in 2004.

Group item

For 2004, an amount of 165 million euros in profit (40 million euros of which from the fourth quarter) was not allocated to a specific area of activity (mainly income from surplus capital, realized gains on investments in the banking business and extraordinary results, less ‘provisions for other liabilities and charges’ and holding-company expenses).

A presentation and detailed financial statements (in English) are available on www.kbc.com, along with further comments on the results of the various areas of activity.

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