KBC became the latest Belgian financial group to be hit by the financial crisis, disclosing today that it expects a quarterly loss of up to €930m on credit portfolio write-downs.
A ratings cut by Moody's Investors Service on the lender and insurer's collateralised debt obligations (CDOs) portfolio triggered a charge of €1.6 billion, KBC said. KBC owns IIB Bank in Ireland.
The disclosure is the latest blow for Belgium's financial sector, after the carve-up and nationalisation of Fortis and rescue of Dexia, triggered by souring risky investment portfolios, loss of investor confidence and, for Fortis, depositor withdrawals.
KBC's CEO Andre Bergen said the write-down would help reduce customer and shareholder uncertainty, but he also said that KBC had €277m in credit exposure to three Icelandic banks that the Iceland government took over under a law passed this week.
KBC has not taken any impairment on this exposure, Chief Financial Officer Herman Agneessens said, adding that any charge would need to be reported in fourth-quarter results.
KBC also said it may tap into government capital, if necessary. The Belgian government has indicated that it will extend borrowing guarantees given to Dexia and other banks.
'We have no plans at the moment to tap into the government guarantee and we continue to have the confidence of our counterparts in the market,' Agneessens said.
For the third quarter, KBC said it expects a quarterly loss of between €880m and €930m, down from a net profit of €639m in the same time last year.
Banks have been hit hard in recent months by investment writedowns triggered after US homeowners started defaulting on their mortgages more than a year ago, sparking a worldwide credit crisis that has led to plunging stock prices and bank bailouts.
KBC added that the combined loss from the US bank sector, where KBC is exposed through bonds linked to bankrupt US investment bank Lehman Brothers and savings bank Washington Mutual, amounted to €172m, leading to a net negative impact on results of €120m.
