December 10, 2012 6:00 pm

KBC to sell €1.23bn in shares

KBC, Belgium’s largest financial group, on Monday said it would sell €1.23bn worth of shares, as part of a broader effort to pay back the state aid it received during the global financial crisis.

The Brussels-based bank said it would repay the Belgian government, which lent KBC €3bn during the 2008-2009 crisis, by the end of this month along with a €450m premium for the loan.

Analysts welcomed the move as they said that an earlier than expected repayment suggested the bank was returning to a state of normality.

“The share sale seems to make a lot of sense as the stock has been doing well year to date,” said Matthias De Wit, analyst at Petercam, a Belgian broker. “After an amazing year to date stock price performance, this was an ideal time to do the capital increase as shareholders’ dilution will remain limited at current levels.”

“The accelerated exit is also a positive sign as it shows that the bank is stabilising while it materially improves the strength of the common equity – ie stand alone capitalisation,” he added.

The repayment will also help Belgium achieve its budget targets, said the finance ministry. Following the nationalisation of the Belgo-French lender Dexia, Belgium has been under pressure to maintain its debt below 100 per cent of gross domestic product.

KBC’s shares, which were suspended from trading on Monday, have increased more than 140 per cent since the beginning of the year.

The strong share performance was reflected in KBC’s third-quarter results when it reported better than expected profits driven by its insurance business in Central and eastern Europe. Net income in the three months ending September 30 was €531m compared with a loss of €1.58bn during the same period a year earlier.

KBC still has an outstanding €4bn debt with Dutch-speaking Flanders – the northern region of Belgium – and it plans to repay €1.17bn plus a premium worth €580m within the first half of 2013. The rest will be repaid in seven equal parts worth €330m between 2014 and 2020, the bank said.

Nevertheless, Monday’s share sale should help the Belgian bank maintain a capital ratio of 10 per cent of risk-weighted assets in-line with the latest Basel III rules.

JPMorgan has been appointed as joint bookrunner for the share sale, while Nomura International will act as joint bookrunner and KBC Securities will act as global co-ordinator and co-book runner.

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