KBC publishes quarterly results above expectations

The Belgian financial services group KBC reported results above expectations in the second quarter thanks to lower costs and risk provisions on the debt portfolio, despite the decline in trading revenues.

KBC, which has received 7 billion euros in state aid during the financial crisis, said he expects to lower credit losses this year compared to 2009 due to healthy revenue and despite a possible increase in costs.

At 7:50 GMT, the KBC gained 4.15% to 36.50 euros, while the sector index of European banks yielded 0.09%.

Net income excluding items grew 35% in the second quarter compared to the corresponding period of 2009 to 554 million euros while the consensus was 459 million.

However, some 400 million euros of exceptional costs including derivatives and sovereign debt restructuring program of the group have reduced net income to 149 million euros, which remains above the 105 million expected.

The insurance division has suffered a decline in premium and an increase in reimbursements related to floods in Eastern Europe. The trading floor of KBC generated less income but the income from loans and deposits have grown much faster than expected.The commissions are also growing.

"We are positively surprised," said Ivan Lathouders, analyst at Degroof, who explained that the lower costs were a key factor in explaining these results exceeding expectations, and interest income and commissions were recurring elements that were so good news.

In return for the aid received, KBC is committed to reducing its market activities and activities outside Belgium and Central and Eastern Europe, where KBC is the fifth largest in terms of assets.

The group has already completed the sale of its private banking arm of KBL European Private Bankers, closed its trading floor in Japan sold its derivatives unit sold its Asian and reinsurance subsidiary based in Brussels.

Last week, KBC has concluded an agreement for the management buyout of UK broker Peel Hunt.

The Belgian group has also promised to sell its Polish unit of consumer credit and Zagiel IPO for a minority stake in the Czech CSOB and perhaps also the Hungarian K & H

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