Belfius Swings to Profit on Debt Buybacks, Won’t Pay Dividend

Belfius Bank NV, the state-owned Belgian lender, swung to a profit in the first half after buying back subordinated debt at a discount and said it won’t pay dividends before 2016 to meet more stringent capital rules.

First-half net income of 252 million euros ($318 million) compared with a loss of 100 million euros in the same period a year earlier, the Brussels-based bank said today in a statement handed out to reporters. Profit included a 430 million-euro gain from discounted buybacks, which Belfius used to offset losses from selling 3.1 billion euros of bonds including all of its Spanish government debt.

Four to five years of retained profits should help Belfius raise about 2 billion euros to reach a common equity ratio of 9 percent under Basel III capital rules, Chief Executive Officer Jos Clijsters said. The bank’s core Tier 1 ratio rose to 12 percent at the end of June from 11.8 percent at the end of last year. Chairman Alfred Bouckaert reiterated that Belfius won’t seek taxpayer funds to raise capital.

“De-risking was ahead of our expectations so far and we’re fully secured now in our exposure on Dexia,” Bouckaert told reporters. “We will meet Basel III rules as they will be implemented gradually.”

Under plans submitted to the European Commission, Belfius will shrink its balance sheet to about 180 billion euros in three to four years from about 220 billion euros at the end of June, Chief Financial Officer Johan Vankelecom said.

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