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Belgium to give KBC bank 3.5b-euro capital injection

Belgium to give KBC bank 3.5b-euro capital injection

The Belgian government is giving KBC bank a 3.5 billion-euro (US$4.4 billion) capital injection after the financial crisis saw its share price plummet, the bank said yesterday.
CEO Andre Bergen said the bank's solvency was solid but it needed the extra buffer to protect the bank as confidence in the sector continues to slide.
KBC had previously been the only Belgian bank not to seek state help.
That changed when its share price dropped 7 percent on Friday as markets plunged on signs of a sharp downturn in Europe and the United States. KBC shares have shed more than 70 percent of their value since the start of the year.
KBC will issue 3.5 billion euros' (US$4.4 billion) worth of non-voting securities to the Belgian state in a move that will not dilute its capital. In return the government will nominate two KBC board members.
The money will raise its overall core Tier-1 ratio _ a measure of a bank's ability to cover its debts _ to 8 percent from close to 7 percent. The usual rule of thumb for banks is a minimum of 6 percent.
KBC said it would use 2.25 billion euros (US$2.83 billion) to increase the solvency of its banking business while the remaining 1.25 billion euros (US$1.57 billion) will back up its insurance operations.
It also said it would not pay shareholders a dividend this year and would not pay out any executive bonuses for 2008.
KBC can buy back the state securities at 150 percent of the issue price in cash, or swap them for ordinary shares. The state can also redeem them at 100 percent of the issue price. KBC said earlier this month that it would likely chalk up a third quarter-loss of between of 880 million and 930 million euro (US$1.21 billion and US$1.28 billion) as it recorded a 1.6 billion-euro (US$2.2 billion) loss on collateralized debt obligations.
It will publish third-quarter earnings on Nov. 6.
Unlike other Belgian banks that sought a state bailout _- Fortis and Dexia _- KBC was seen as a more prudent investor that pushed into banking in central and eastern Europe instead of the high-risk investments that led many European banks into trouble.


Updated : 2021-06-15 02:08 GMT+08:00