KBC Groep NV (KBC), Belgium’s biggest bank and insurer by market value, rose the most in two weeks in Brussels after forecasting the value of its Bank Zachodni WBK SA (BZW) stake may increase following the merger with Kredyt Bank SA. (KRB)
KBC advanced as much as 6.9 percent on Euronext Brussels after agreeing to swap an 80 percent holding in Kredyt Bank for a 16.4 percent stake in Banco Santander SA (SAN)’s Zachodni. The Belgian bank will reduce that stake to 9.99 percent following completion of the merger and get 321 million euros ($432 million), with proceeds guaranteed by Santander, Chief Financial Officer Luc Popelier told analysts on a conference call today.
“We’re transforming a large shareholding in an illiquid bank into a minority holding in what’s going be the third- largest bank of Poland,” Popelier said on the call. “We’ll have more free float and secondly, it will create synergies.”
Santander aims to erase about 12 percent of costs in the combined bank and expects the merger will boost insurance, asset management and trading income by about 2 percent. The Spanish lender forecast profit at the Polish business will almost double to 3.07 billion zloty ($996 million) in 2015, a move that may boost the value of KBC’s Zachodni stake to 807 million euros assuming a multiple of 11 times profit, according to KBC.
Popelier, 47, said KBC plans to divest its remaining Zachodni stake through a private placement with investors or a potential secondary public offering aimed to boost the amount of shares that are available for trading. Santander has given KBC a “soft undertaking” to assist the Belgian bank in cutting its stake to less than 9.99 percent, he said.
Tier 1 Capital
KBC climbed 85 cents, or 5.1 percent, to 17.48 euros by 3:14 p.m. in trading on Euronext Brussels. The shares have lost 42 percent in the past 12 months, which compares with a 30 percent decline in the 49-company Stoxx 600 Banks Index (SX7P) in the same period.
The transaction will free about 700 million euros of capital and increase KBC’s pro-forma core Tier 1 capital to as much as 12.7 percent of risk-weighted assets assuming a full exit from Zachodni, KBC said in a presentation on its website today. That also includes completion of the divestments already signed, such as KBL European Private Bankers SA, Fidea NV and TUiR Warta SA.
KBC has until the end of this year to repay a remaining 3 billion euros of federal government funds before the penalty rate increases to 20 percent from 15 percent. Chief Executive Officer Jan Vanhevel, 63, who will retire on May 3, declined to comment on KBC’s repayment plans this year. He will be succeeded by Johan Thijs, 46, who currently heads KBC’s Belgian retail business.
The recipient of 7 billion euros in Belgian rescue funds already reimbursed 500 million euros of federal government aid last month and made a 75 million-euro penalty payment. It has to repay the 3.5 billion euros of Flemish government funds at a penalty rate of 50 percent.
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