KBC Group: Strong first-half profit of 1.1 billion euros. Interim dividend of 1 euro to be paid in November.

Press Release
Outside trading hours - Regulated information*

Brussels, 11 August 2016 (07.00 a.m. CEST)

KBC Group: Strong first-half profit of 1.1 billion euros.  Interim dividend of 1 euro to be paid in November.

Against a background of persisting low interest rates, modest economic growth in Belgium and firmer growth in Central Europe, KBC posted a strong net profit figure of 721 million euros in the second quarter of 2016, up on the 392 million euros recorded in the preceding quarter and above the 666 million euros returned in the second quarter of 2015. As proof of our clients' trust in us, we again increased our lending and deposit volumes in the second quarter. Our result was driven by a good level of total income in our traditional business activities, flat operating expenses (disregarding bank taxes) and what is still a very low level of loan impairment charges. It was also boosted by the one-off positive impact of our sale of Visa Europe shares. Added to the 392 million euros net profit realised in the first quarter, this brings our result for the first six months of the year to 1 113 million euros, compared to 1 176 million euros for the same period in 2015. The results were complemented by strong fundamentals relating to our solvency and liquidity positions. The Board of Directors approved a new dividend policy for KBC Group. Starting this year, and barring exceptional or unforeseen circumstances, KBC will pay each year an interim dividend of 1 euro in November of the accounting  year as well as a final dividend after the Annual Shareholders' Meeting. The interim dividend will be an advance payment on the total dividend. The current policy of paying a total dividend (and additional tier-1 coupon) of at least 50% of the annual consolidated profit is confirmed. The interim dividend of 1 euro per share for the accounting year 2016 will be paid on 18 November 2016.

Financial highlights for the second quarter of 2016, compared with the previous quarter:

• Both our banking and insurance franchises in our core markets and core activities performed well.
• Our lending volume was up in Belgium (+1%), the Czech Republic (+2%), Slovakia (+3%) and Bulgaria (+3%), while clients further increased their deposits in all countries: Belgium (+5%), the Czech Republic (+3%), Slovakia (+4%), Hungary (+4%), Bulgaria (+1%) and Ireland (+2%).
• Our net interest income was more or less unchanged quarter-on-quarter, with the negative impact of low interest rates being offset by positive elements such as growth in both current account and lending volumes, lower funding costs and rate cuts on saving accounts. The group's net interest margin was down slightly quarter-on-quarter, from 1.96% to 1.94% driven by lower reinvestment yields and pressure on commercial margins.
• Premium income earned on our non-life insurance products was up 2%, but claims rose to a greater extent (by 6%), due to the inclement weather and floods in Belgium and the Czech Republic. Our non-life combined ratio ended up at 95% year-to-date.
• Our total assets under management stood at 207 billion euros. This was roughly the same level as in the first quarter, since the small net outflow of assets was offset by a small price increase. Following the decrease in the first quarter, our net fee and commission income went up again (by 4%), due mainly to higher management fees on mutual funds and higher credit fees.
• The sale of our Visa Europe shareholding resulted in one-off additional income of 99 million euros (pre-tax), or 84 million euros (after tax).
• At 904 million euros, costs fell by 24%, since the bulk of bank taxes were booked in the first quarter of the year. Disregarding these taxes, costs remained unchanged quarter-on-quarter. The cost/income ratio stood at 59% year-to-date. After evenly spreading the bank taxes and excluding specific items, the cost/income ratio came to 56%.
• The year-to-date cost of credit amounted to an excellent but unsustainably low 0.07% of our loan portfolio. Lowered guidance for Irish loan impairment charges towards 0-40 million euros for the full year.
• Our liquidity position remained solid, and our capital base - with a common equity ratio of 14.9% (phased-in, Danish compromise) - remained well above the regulators' target of 10.25% for 2016.

Full press release and 2Q2016 Quarterly Report attached.