Flemish Government to Inject $2.58 Billion into KBC

The Flemish government said on Thursday it would inject 2 billion euros ($2.58 billion) into Belgian banking and insurance group KBC as it sought to calm investor concerns after the stock fell by two-thirds in the past week.

The injection from the Dutch-speaking regional government is aimed at keeping the group's core tier 1 capital at 8 percent, the Flemish government said in a statement.

It added that the transaction was due to be completed before the end of the first quarter of 2009.

KBC reported a net loss for the fourth quarter, bringing the full-year net figure to a loss of 2.5 billion euros.

The group's structured credit portfolio was marked down by 1.9 billion euros (1.7 billion euros after tax), bringing the total markdown for 2008 to 4.0 billion euros, KBC said in a statement.

"We took a conservative stance when marking down to zero all CDO investments which do not have the highest, so-called super senior status. We have also taken decisive measures to reduce costs and to further reduce the risk profile of our activity portfolio," KBC Chief Executive Andre Bergen said in a statement.

KBC shares starting falling sharply last Friday amid mounting speculation that the group would be forced to make further writedowns of its credit portfolio and need fresh funds.

Shares of the group were up 46.7 percent by the close Thursday.

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