KBC Groep NV (KBC), Belgium’s biggest bank and insurer by market value, agreed to sell its private-banking unit to a Qatari investor for 1.05 billion euros ($1.41 billion) as it seeks to repay Belgian government rescue funds.
The sale of Luxembourg-based KBL European Private Bankers SA will boost KBC’s capital by about 700 million euros and result in a 0.6 percent increase in its Tier 1 ratio, KBC said today in an e-mailed statement. The transaction will reduce third-quarter earnings by about 400 million euros, it said.
KBC, the recipient of 7 billion euros of government funds during the financial crisis, had to delay the sale earlier this year after failing to get regulatory approval to sell the unit to India’s Hinduja Group for 1.35 billion euros. KBL had assets under management of 47 billion euros on June 30.
“The capital release is at the low end of the range KBC indicated when they announced the plan to sell KBL,” said Jan Willem Weidema, an Amsterdam-based analyst at ABN Amro Bank NV. “Still, the main thing is that it is reassuring that they managed to do this under the current market circumstances.” Weidema recommends clients to buy the stock.
Including 115 million euros in capital KBC said it released from the unit in the last 1 1/2 years, the capital contribution totals 815 million euros. That compared with a range of 800 million euros to 1.5 billion euros targeted by KBC in 2009.
KBC shares dropped 1.4 percent to 18.70 euros as of 2:20 p.m. in Brussels, while the 46-company Bloomberg Europe Banks and Financial Services Index slipped 0.1 percent. KBC has declined 27 percent since the start of this year.
The buyer, Precision Capital, is a company representing the business interest of an unspecified Qatari investor, KBC said in the statement. KBC will continue to offer private-banking services in Belgium and central and eastern Europe through its KBC-branded private-banking businesses.
The transaction is subject to regulatory approval and KBC expects to complete the sale in the first quarter.
“The agreement will allow KBC to release a significant amount of capital, to reduce our risk profile and to further strengthen our focus on the core bancassurance expertise and markets of Belgium and central and eastern Europe,” Chief Executive Officer Jan Vanhevel said in the statement.
KBC is also in the process of selling its Polish bank and insurance subsidiaries as it seeks to raise funds to repay the Belgian state.
The firm originally agreed to sell as much as 40 percent of both its Czech and Hungarian banking units in initial public offerings to gain the EU’s approval for the taxpayer-financed rescue and raise funds to repay state aid. The Belgian bank and insurer renegotiated the agreement after Basel III capital rules and a banking-industry levy in Hungary made the IPOs less attractive options to raise capital.
“KBC shares have been under pressure lately on concerns on the execution of their asset disposal plans,” Weidema said, “So this is a good step. Now they can move on with Poland.”
Belgium’s Aa1 local- and foreign-currency ratings were placed under review for a downgrade by Moody’s Investors Service on Oct. 7 because of rising funding risks for euro-area nations with high levels of debt and additional bank support measures that are likely to be needed.
The review will focus on the vulnerabilities of Belgian public debt in the current euro-area sovereign crisis and potential costs and contingent liabilities that the government may incur in supporting Dexia SA, Moody’s said.
The Belgian federal government agreed to buy Dexia’s local consumer-lending unit for 4 billion euros after concern over its European sovereign-debt holdings caused its short-term funding to evaporate. Belgium also agreed to guarantee 60 percent of a so-called bad bank to be set up for Dexia’s troubled assets. Dexia will sell assets, including its Luxembourg unit and its French municipal lending arm, to give the bad bank capital to absorb future losses.
The bank is in talks to sell Dexia Banque Internationale a Luxembourg to a group backed by the Qatari family behind Precision Capital, Luxembourg’s Finance Minister Luc Frieden told reporters today.
“The fact that the family group from Qatar” bought KBL and agreed to buy Dexia BIL “is good for the Luxembourg financial sector because the two groups are complementary and can develop independently from one another,” Frieden said.