Belgian banking and insurance group KBC said it had slipped into an unexpected underlying net loss for the third quarter, as Greece, Ireland, Bulgaria, Hungary and divestments cost it €1.3 billion.
KBC's underlying net loss for the third quarter was €248m, much worse than then €83.4m profit expected by analysts. The company said, that excluding one-offs, the figure would have been €222m.
"The operating environment has been harsh in the third quarter and we realise that these are tough times for most economies and for millions of people. KBC has obviously not been immune to this and our results have been severely impacted," said chief executive Jan Vanhevel.
KBC said it had incurred higher impairment charges related to Irish property loans. It said that the economic situation in Ireland had not improved and that austerity measures had an impact on the financial strength of households. It said it expected loan loss provisions of about €200m per quarter in the next couple of quarters.
It said it faces payment arrears of at least three months on more than 15% of its €16.8 billion Irish loan book, up from 13% three months ago.
The group's central European unit made a loss in the quarter as it took an impairments on loan portfolios in Hungary, related to foreign currency mortgages, and Bulgaria as well as on Greek government bonds.
KBC also said it intended to pay back by the end of the year €500m by of the €7 billion of state support it received during the credit crisis of 2008-2009 from the Belgian authorities. It added it would incur a 15% penalty for doing so, well below the 50% it could eventually be liable to pay.
The bank said that due to good results in October, it expected its underlying net profit for the full year to reach €1.2-1.4 billion after achieving €0.9 billion in the first nine months.
KBC cut its exposure to government bonds of Italy, Ireland, Portugal, Greece and Spain, to €5.1 billion from the €9.6 billion at the end of June. The group said it now had written down 58% of its Greek sovereign exposure.
In October, the group sold its insurance subsidiary Fidea to private equity group JC Flowers for €243m, after having parted with its private banking arm KBL one week earlier in a €1.05 billion deal with Qatari-backed Luxembourg firm Precision Capital.
The group is still looking for buyers for its Polish subsidiaries Kredyt Bank and Warta. Santander, the euro zone's largest lender is said to be interested in buying Kredytbank in a joint deal with private equity firm Apax.
