Belgian banking and insurance group KBC will get a €3.5 billion ($4.4 billion) capital injection from the Belgian government and will not pay a dividend for 2008, the bank said on Monday.
The injection will boost KBC’s core tier-1 ratio for banking to above 8% from close to 7%, the group said in a statement. “Our solvency position is solid and well above the sector average and regulatory requirements. This has not changed in recent months or in the past few days,” CEO Andre Bergen said in a statement. “However, capital market sentiment has changed dramatically and has led in recent weeks to a unanimous call for higher capital requirements for financial institutions.”
KBC had said on Friday it would consider seeking state guarantees for its borrowing and was looking at its capital requirements as the only big bank in Belgium not to have made use of guarantees from governments. In a deal that mirrors the Dutch government’s capital injection into ING, KBC will issue €3.5 billion worth of securities to the Belgian state that are qualified as core capital by the regulator but which will not dilute existing shareholders’ capital.
But KBC will not pay a dividend this year. “Given the exceptional circumstances, KBC has decided not to pay a dividend for 2008. As a result, no coupon will be paid on the newly issued securities for 2008,” the bank said. As part of the deal, the state has the right to nominate two members for KBC group’s board of directors. Last week, KBC said it expected a Q3 loss of up to €930 million after taking a €1.6 billion charge on credit assets.
Banks operating in Belgium -- Fortis, Dexia, ING and new arrival BNP Paribas -- have all received some form of government support in the last few weeks. (Reuters)