* Q2 adjusted net profit 287 mln euros vs 241 mln consensus
* Takes 231 mln euro provision for Hungary
* Sees loan-loss provision for Ireland at high end of range
* Shares up 4 pct, among strongest of Europe's blue-chips
(Adds shares, analyst comment, more on Hungary)
By Philip Blenkinsop
BRUSSELS, Aug 7 Belgian financial group KBC's
profit fell by less than expected in the second quarter
even after taking a provision related to a new law on retail
loans in Hungary, which KBC hopes to challenge.
KBC, which still owes 2 billion euros ($2.68 billion) of the
7 billion euros state aid received in the financial crisis, said
on Thursday its results were overshadowed by a 231 million euro
provision for Hungary.
A Hungarian court ruled in June that banks had previously
overcharged customers for some loans. A law drafted by Prime
Minister Viktor Orban's government and passed last month will
force banks to repay customers for charges and interest rate
hikes on loans deemed unfair.
The loans, mostly in Swiss francs, were once popular for
their low interest rates but turned sour in the crisis partly
due to the weakening of Hungary's forint. Banks with businesses
in Hungary include KBC, Austria's Raiffeisen Bank and
Erste Bank, Italy's UniCredit and Intesa
Hungary's central bank has estimated the cost of
compensating borrowers for interest rate rises and fees could be
600-900 billion forints ($2.5-3.8 billion) for the banking
sector as a whole.
The European Central Bank has warned this could destabilise
Hungary's financial sector and questioned whether the
retroactive effect of the law violated European Union rules.
"We feel further supported in our original stance that we
will challenge this act," CEO Johan Thijs told a news
Thijs nevertheless said KBC had no intention of pulling out
of Hungary, even if the provision meant the group would incur a
loss there this year.
"The base is healthy, there's a certain stability. It is one
of our core countries," he said.
KBC had 5.1 billion euros of outstanding loans in Hungary at
the end of June, of which 1.5 billion in foreign currencies.
Overall group loans totalled 121 billion euros.
For KBC as a whole, underlying net profit dropped 41 percent
in the second quarter to 287 million euros. That was above a 241
million euro average expectation in a Reuters poll of seven
KBC shares rose as much as 4.8 percent to 41.49 euros in
early trading, making them among the strongest in the
FTSEurofirst 300 index of leading European stocks and
also recovering the losses of the previous two trading sessions.
"Capital generation was a bit better than expected, other
things more or less in line," ING analyst Albert Ploegh said.
"The shares have been rather weak so I can understand the price
KBC said that the results of its main Belgium and Czech
Republic businesses were in line with the average of the
preceding four quarters.
In its international business, a net loss of 176 million
euros was slightly better than the average of the past year,
with the positive results in Bulgaria and Slovakia wiped out by
Hungary and Ireland.
KBC took a 62 million loan-loss provision on its 15.0
billion euros Irish book of mostly residential mortgages.
It said it now saw full-year loan-loss provisions for
Ireland at the high end of its previous guidance of 150-200
million euros. KBC has said it hopes its loss-making Irish unit
will become profitable by 2016.
It also aims to have repaid all outstanding state aid by the
end of 2017.
($1 = 0.7475 Euros)
($1 = 236.3800 Hungarian Forints)
(Editing by Robert-Jan Bartunek and Jane Merriman)