Irish losses hamper KBC

Belgian bank KBC reported profit rose as gains from disposals and a reversal of writedowns on collateralised debt obligations made up for mounting provisions tied to Irish loans.

Fourth-quarter net income more than doubled to €724 million from €304 million, the Brussels-based company said today in a statement. That beat the €466.4 million average of five analyst estimates compiled by Bloomberg.

KBC set aside €525 million last year to cover losses on its €17.2 billion of loans in Ireland. Mounting losses on Irish mortgages may hamper KBC's capacity to reimburse Belgian government rescue funds amid tightening capital rules.

"The fourth-quarter result was characterized by stronger net interest income and higher fees and commissions," chief executive Jan Vanhevel said. "The most noteworthy exceptional items were the capital gains on two of our divestment projects, as well as positive value adjustments on our CDO portfolio."

The Belgian bank marked up the value of collateralised debt obligations it holds by €296 million in the quarter because of narrowing credit spreads, a reversal from writedowns that caused much of KBC's losses in 2008 and 2009 and led it to seek state aid.

The results also included a €198 million gain from the sale of its convertible-bond and Asian equity-derivative businesses to Tokyo-based Daiwa Securities Group as well as the disposal of reinsurance unit Secura NV to QBE Insurance Group, Australia's largest insurer.

KBC's core Tier-1 ratio, a key measure of a bank's ability to absorb losses, increased to 10.9 per cent from 10.4 per cent on September 30th. Excluding the €7 billion of Belgian rescue funds, which KBC may at all times buy back at 150 per cent of the issue price, the ratio stood at 5.6 per cent.

After accounting for 8.5 per cent interest due on the rescue funds, profit available to common stockholders was €3.72 a share last year following two years of losses. KBC will resume distribution of a dividend at 75 cents a share, paying out 20 per cent of last year's profit. That compares with analysts' projections of 77 cents, the average of 19 estimates compiled by Bloomberg.

Bloomberg