Leading Belgian banking and insurance group KBC, which has bailed out three times by the Belgian government in the financial crisis, has reported an unexpected net quarterly profit of €302m.

The switch came after three quarterly losses running amid huge writedowns on its investments and weakness in its business banking division.

In late June, the European Commission gave the green light for six months to both a €3.5 billion recapitalisation of the group and plans to help KBC shoulder troubled assets with state guarantees.

The second-quarter results, although 38% lower than the figure for a year ago, were a pleasant surprise for the market which had been expecting a loss of more than €300m.

KBC said loan losses in its Belgian and Easter European businesses had stabilised, but rose in other markets, including from its Irish mortgage business. The bank owns KBC Bank Ireland, which includes KBC Homeloans in Ireland.

CEO Jan Vanhevel said the trend in bad debts was likely to be upwards for the rest of the year, saying developments in Eastern Europe and Ireland 'remain areas of attention'.