KBC reacts to factual inaccuracy in analyst's report

KBC wants to react to an equity research note issued this morning by KBW Ltd (London), since it contains a number of material factual inaccuracies concerning KBC's total subprime exposure. KBC Group's consolidated exposure to CDOs with underlying ABS amounts to ¤7 bn as was disclosed in detail in the 2Q and 3Q quarterly reports. This amount includes the exposure of KBC Financial Products, the issuer of the CDOs. The perception that only ¤12 bn out of the ¤26 bn issued is still outstanding is unfounded. The ¤7 bn in proprietary exposure forms part of a total (non-matured) amount outstanding of ¤26 bn in CDOs with ABS underlyings issued by KBC Financial Products. KBW's estimate that KBC holds 57% of the outstanding CDOs issued by KBC Financial Products is therefore incorrect. The research note also suggests that there is a risk of KBC marking to market "to itself", since it holds a large portion of the CDOs. In this regard, we would like to clarify that the marking to market of the CDO components (ABS, CDS) is based on third-party trades of these instruments or their comparables. It is correct that ¤1.3 bn was placed on credit watch by Moody's yesterday, ¤592 m of which is held by KBC. In this regard, KBC wants to reconfirm its earlier and repeated statements that it considers its exposure to US subprime mortgage debt to be limited. There are no reasons to change the loss expected as disclosed on 9 November 2007 in the 3Q quarterly report. For more information, please contact: Luc Cool, Director of Investor Relations, KBC Group Tel. (32) 2 429 40 51 investor.relations@kbc.com Viviane Huybrecht, Head of Group Communication and of the KBC Press Office spokesperson, KBC Group Tel. (32) 2 429 85 45 pressofficekbc@kbc.be