KBC Groep NV, Belgium’s biggest bank by market value, repaid 500 million euros ($680 million) to the Flemish government from a 2009 bailout ahead of schedule.
KBC is paying 330 million euros in aid, with a 50 percent premium, it said in a statement today. The Brussels-based company still has 2 billion euros left to return. The shares rose as much as 4.6 percent to the highest level in more than five years.
The company repaid the Flemish government even as it set aside as much as 775 million euros in the fourth quarter to cover doubtful loans in Ireland before the European Central Bank’s review of asset quality. The bank had a common equity ratio, a measure of its ability to absorb losses, of 12.5 percent at the end of the third quarter.
“This is a strong signal in a year where the ECB conducts an asset-quality review” followed by European Banking Authority stress tests, Albert Ploegh, an Amsterdam-based analyst at ING Groep NV, said in a note today. “We had expected an acceleration, but not before the outcome” of the tests.
KBC shares rose 4.3 percent to 43.78 euros as of 11:17 a.m. in Brussels, the highest level since October 2008.
The bank agreed with European Union regulators to repay its bailout between 2014 and 2020 in seven parts of 330 million euros. It’s allowed to speed up the payments if its capital position is strong enough and the National Bank of Belgium doesn’t object.
Full repayment may be possible by the end of 2015, said ING’s Ploegh, who recommends clients buy the shares.
KBC received 7 billion euros from the Belgian federal and Flemish regional governments in 2008 and 2009, and has paid 9.5 billion euros in principal, coupons and guarantee fees.