The Flemish government is injecting €2bn into KBC, Belgium’s second largest financial services firm. News of the lifeline, which will enable KBC to maintain its tier 1 capital at 8%, sent shares in KBC soaring by 47%.
KBC’s share price had been on a six-day downward spiral after revealing a net loss for the fourth quarter bringing its full-year net loss to €2.5bn. It marked down a total of €4bn in 2008.
Concerns over more losses from risky assets prompted chief executive Andre Bergen to call on state funds to raise reserves. The deal also includes a standby core capital facility worth €1.5bn.
“We took a conservative stance when marking down to zero all CDO investments which do not have the highest, so-called super senior status. We have also taken decisive measures to reduce costs and to further reduce the risk profile of our activity portfolio,” said Bergen in a statement.
This is the second round of state funds KBC has received. In October it accepted €3.5bn in fresh capital. This week, lenders in both the UK and France have been boosted by a second wave of financial assistance from governments.
The Flemish government expects the €2bn injection to complete before the end of Q1 2009.
Source: Thomson Merger News
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