15 October 2008

BRUSSELS -- KBC NV, the only Belgian bank not to seek state rescue from the financial crisis, said Thursday it was chalking up a EUR 1.6 billion loss on complex investments which would cause a third quarter net loss of EUR 880 million  to EUR 930 million.

The bank said it had "more than adequate" funds to absorb the loss and its financial position remained strong.

It said it was marking down the value on a number of collateralized debt obligations, or CDOs, after the ratings agency Moody's downgraded their credit ratings.

"KBC is now applying the more stringent approach to its entire portfolio," it said in a statement. "In so doing, it is reducing future volatility in its results."

The bank also released provisional results for the three months ending 30 September ahead of the full earnings it will report on 6 November.

The company said that despite the predicted net loss "underlying profit" - excluding the effect of the financial crisis - would come to over EUR 500 million.

It lost some EUR 172 million on bonds from the collapse of US investment bank Lehman Brothers and U.S. savings bank Washington Mutual.

But its core banking business in Belgium was boosted by savers moving money to KBC from July onward, the company said. Worries over the solvency of Belgium's biggest bank, Fortis, and struggling lender Dexia saw many people move deposits out of those banks to others.

In recent weeks, Fortis was partly nationalised by the governments of Belgium, Netherlands and Luxembourg, and its banking business was split between each state or sold off. Dexia also sought help - in return for state shares - from Belgium, France and Luxembourg.

KBC said its investment banking would be hurt by current market conditions but loan losses remained relatively limited. It grew profit from its eastern European operations by more than 25 percent in the third quarter.

Frozen lending between banks had not hurt it badly, it said, because it borrows only very small amounts on the interbank market and had more than EUR 50 billion in bonds that it could use to pull funds from the European Central Bank.

The company said its Tier 1 ratio - which calculates how much money it can use to cover debts - is well above 8.5 percent and over most banks' average.

KBC made a profit of EUR 3.28 million in 2007.

[AP / Expatica]