Favourable business development combined with substantial rise in profit

Press release 6 September 2007

  • Business operations broadly contribute to solid growth in turnover
  • Increased profits, not including exceptional items, of 33% to € 15.6 million. Including exceptional items, profits rise to € 42.3 million (+ 109%)
  • All financial targets met with lower operating costs and a conservative risk profile
  • Further strengthening of KAS BANK's independent position in wholesale securities services

Key figures
first half year 2007 first half year 2006 movement
in %
Profit after taxation EUR 42.3 million 20.2 million 109%
Profit per share EUR 2.83 1.36 108%
Operating profit EUR 15.6 million 11.8 million 33%
Operating profit per share EUR 1.04 0.79 32%
Interim dividend EUR 0.45 0.45  


Chairman's statement
“KAS BANK can look back on a good first half year, both operationally and financially", says Albert Röell, chairman of the bank's Managing Board. "Growth in non-interest income, including the value added service, is continuing unabated among institutional investors and financial institutions alike. It is also important to note that our conservative risk profile has resulted in the bank only marginally being affected by the unrest in the financial markets at present.

The transfer of the Private Banking operations earlier this year has sharpened the bank's focus on the wholesale securities services. Our objectivity is high rated when it comes to the settlement of transactions on European and American exchanges and the measurement, management and reporting of our clients' investment results.”

Outlook
Given the results for the first half year of 2007 and in the absence of any special circumstances, KAS BANK expects to see a healthy rise in profits over the whole of 2007. The results over the second half of 2007 will be lower than in the first half owing in part to the special items during the first half of 2007.

Interim dividend
It has been decided with the approval of the Supervisory Board, as in the previous year, to pay out an interim dividend of € 0.45 on each ordinary KAS BANK share, payable in cash.

Financial targets
All financial targets were met in the first half of 2007, even leaving aside the exceptional items. The targets and results since 2005 are shown in the table below.

Ratio target 1st half year 2007, incl. excep- tional items 1st half year 2007, excl. excep- tional items¹ 1st half year 2006, incl. excep- tional items 1st half year 2006, excl. excep- tional items²
Growth in non-interest income ≥ 10% 19%³ 19% 13% 13%
Efficiency ratio 70-77% 48% 69% 63% 74%
Return on equity 4) 10-yr interest
+ 5-8%		 40% 16% 20% 12%
Growth in earnings per share >8% 108% 32% 119% 27%
Dividend payout 60-80% not yet known      
Solvency (average BIS-ratio) ≥ 15% 15%   16%  
1) excluding three exceptional items, effect on the profit of € 26.7 million
2) excluding exceptional item, effect on the profit of € 8.4 million
3) Corrected for transfer of Private Banking on 1 April 2007
4) This constitutes minimum targets of 9.3% in the 1st half of 2007 and 9.0% in the 1st half of 2006

Spearheads
KAS BANK has developed in recent years as the independent European business securities specialist. Given the fact that our clients, including banks, brokers, asset managers, pension funds, insurers and charities, are increasingly expressing a need for neutrality and objectivity in the service, this position offers outstanding prospects for continued growth.

Mounting complexity, driven by product innovation and additional compliance and reporting regulations, is leading to an increase in the outsourcing of activities. A shift towards neutral specialists such as KAS BANK is taking place for the management of investment administration and risk reporting and for the settlement of trading flows.

KAS BANK has announced that it will be fully MiFID compliant by 1 November of this year. This includes the service for alternative trading platforms that are beginning to emerge in addition to the regular exchanges. Our existing European platform forms an ideal basis not only for the best execution of trade orders, but also for the subsequent clearing and settlement.

KAS BANK is anticipating national and international developments regarding defined contribution pension schemes and course of life schemes by developing under its own management a state-of-the-art information system for securities giro services and individualised participant administration systems. Taken together with asset pooling - bringing together and administering assets of various clients in order to gain benefits of scale - this service gives pension funds and life insurers the flexibility they need to firm up their pension policies.

Our investments, which are financed entirely from ordinary business operations, are aimed at autonomous growth. We are also continuing to look into ways of speeding up our current autonomous growth by assessing takeover options and joint ventures in Western Europe.

Supervisory Board
The chairman of the Supervisory Board, Mr P. Ribourdouille, will be stepping down at the end of the current term of office during the next general meeting of shareholders in April 2008. The Supervisory Board intends to appoint as its chairman Mr D.J.M.G Baron van Slingelandt.

Summary of results
Profit over the first half year of 2007 totalled € 42.3 million (H1-2006: € 20.2 million).

Operating profit rose in the first half of 2007 by 33% to € 15.6 million (H1-2006: € 11.8 million). This considerable increase can be attributed mainly to significant growth of 19% in the non-interest income, achieved through the intake of new clients, cross selling and rising transaction volumes. Additionally, the increase in revenues and activity levels were achieved with lower operating costs.

Total revenues rose in the first half year of 2007 by 42% to € 105.8 million (H1-2006: € 74.4 million). Leaving aside the exceptional items, income rose by 5% to € 67.3 million (H1-2006: € 63.8 million).

Compared to the first half year of 2006 interest income fell by 9% to € 9.2 million (H1-2006: € 10.1 million) owing to a narrowed interest margin.

Commission income rose by 14% to € 49.2 million (H1-2006: € 43.0 million). Trading income rose to € 8.4 million (H1-2006: € 7.6 million).

Total expenses rose by 7% to € 50.3 million (H1-2006: € 47.2 million). Excluding exceptional items, expenses fell by 2% to € 46.4 million. Lower other management expenses more than compensated for higher personnel expenses and amortisation.

The net effect of the exceptional items on the profit for the first half of 2007 totalled € 26.7 million. The items relate to the transfer of the Private Banking activities, the conversion of the Euronext shares and an impairment on immovable property. There was also an exceptional item (effect on net profit of € 8.4 million) in the same period of last year relating to the sale of shareholdings at a number of exchanges.

Adjusted for the exceptional items referred to above, the first half of 2007 saw a return on equity of 16% (H1-2006: 12%) with an efficiency ratio of 69% (H1-2006: 74%). The average BIS ratio in the first half of 207 was 15% (H1-2006: average 16%) and at the end of June 2007 was again equal to 15% (end of June 2006: 18%).

The figures are explained in more detail in the Report on the first half year of 2007.