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Shares in Belgian bank KBC continue meltdown

BRUSSELS – Shares in troubled Belgian bank KBC extended heavy losses on Tuesday amid worry about its exposure to fragile emerging markets and its need to raise fresh capital.

In afternoon trading, its shares showed a loss of 13.38 percent to 11.07 euros, its fifth straight day of decline. Shares in the bank have lost almost half their value since the beginning of the year.

In an interview with Flemish business daily de Tijd on Tuesday, chief executive Andre Bergen sought to reassure investors about the bank’s finances, saying it was not seeking public capital

"At this moment we are not in talks with the Flemish or federal governments (for a cash injection)," he told the newspaper.

He added however that if investors began to worry about the bank’s capital levels then the lender would adapt.

The bank’s core capital ratio, now 8.2 percent, is likely to fall below 8.0 percent when it publishes fourth-quarter results next month, said Bank Degroof analyst Ivan Lathouders.

This raised the likelihood of a capital hike because the market has expectations of a higher level, he said.

KBC is a leading bank in emerging markets which have been hit hard by the financial crisis. It has expanded strongly in central and eastern Europe and is also exposed to the rapidly deteriorating Irish market.

KBW bank underlined Tuesday in a research note of the danger of further writedowns by KBC on CDO derivatives, complicated debt instruments at the source of many of the problems in the Western banking system.