THE LEADING Belgian banking and insurance group KBC, which owns IIB Bank in Ireland, secured a €2 billion cash injection from the Flemish government yesterday, fueling a sharp rebound of its pummelled shares.
KBC shares soared as much as 46.8 per cent to €11.01, the sharpest gainer in the FTSEurofirst 300 of top European stocks after losing as much as 63 per cent in the previous four trading sessions.
The injection from the Dutch-speaking region, where it has a large base of private and business customers, is aimed at keeping the groups core tier 1 capital at 8 per cent.
Bank Degroof raised its rating on KBC to Buy from Hold, saying that it saw substantial upside and that the Flemish government support was the best way of strengthening solvency.
In addition to the €2 billion, KBC has the right to get a further €1.5 billion of core capital from the Flemish government for at least five years.
“I hope the markets realise that the great uncertainty has now gone away,” chief executive Andre Bergen told a hastily arranged news conference.
The transaction, mirroring a €3.5 billion injection to KBC from the federal government in October, is due to be completed before the end of the first quarter of 2009.
The Flemish government will be entitled to an annual coupon of at least 8.5 per cent.
KBC can buy the securities back at any time for 150 per cent of the issue price.
KBC also reported a net loss for the fourth quarter, resulting in a full-year loss of around €2.5 billion.
It will present final figures on February 12th.
The group said that it had written down all its CDO (collateralised debt obligations) to zero except for those with the highest “super senior” status.
The group’s structured credit portfolio was marked down by €1.9 billion (€1.7 billion after tax) in the fourth quarter, bringing the 2008 total to €4 billion, the bank group said.
It took a €0.7 billion impairment on its equity investment portfolio in the fourth quarter and a €0.2 billion hit from write-offs on its exposure to Icelandic banks, which have suffered disproportiately in the current economic crisis.
It also announced measures to further concentrate its activities on its home markets, contain costs and reduce market risk.
Its derivatives products business would be downsized, the group said.
KBC shares starting falling sharply last Friday after a report from Moody’s on CDOs prompted speculation that the group would be forced to make further writedowns of its credit portfolio and need fresh funds.
