KBC Reports Loss on Steep Investment Charges

Belgian financial group KBC which took 3.5 billion euros ($4.5 billion) in government capital to shore up its finances, reported a quarterly loss of 906 million euros on credit-related charges.

KBC's third quarter loss was caused by 1.4 billion euros in impairments on a net basis from losses in structured credit holdings.

A year earlier, KBC reported a profit of 639 million euros.

The loss was slightly better than the 930 million euros loss projected by the banker and insurer on Oct. 27, when KBC released most details of its results as it tapped into 3.5 billion euros of government funding to strengthen its capital base.

It will have to repay the government at a premium, or pay a steep 8.51 percent interest rate.

The banker and insurer has also decided to scrap its 2008 dividend.

Shares in KBC are down by a half since mid-September, when the global financial crisis deepened and triggered the nationalization or capitalization of financial companies by governments, but are up 30 percent from the 12-year lows recorded just before it took the government capital injection.

They last traded at 34.46 euros at the end of Wednesday trade.

Chief Executive Andre Bergen said in a statement that KBC's investments in central and eastern Europe helped to support the business, and that it would continue to focus on the area as well as strengthening its home Belgian market.

"Despite the difficult climate, and taking into account the recurring seasonal revenue pattern, commercial results were satisfactory, especially in Eastern Europe," Bergen said in a statement.

Including the capital injection measures, KBC said its Tier 1 capital ratio for its banking business stands at 10.7 percent, and that insurance solvency stood at 2.8 times the regulatory minimum.

Dutch banker and lender ING also tapped into government funding, accepting 10 billion euros in October under similar terms to the government capitalization deal with KBC.

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