* To stop activities in non-core markets
* Aims to bring cost-income ratio down to 55 pct
* Aims to repay "significant" part of state aid
* Says selling Irish unit not an option
(Adds details, comments)
BRUSSELS, Oct 8 Belgian banking group KBC
said on Monday that concentrating on core markets of
Belgium and eastern Europe should increase its profitability
after it has weaned itself off most state aid.
Johan Thijs, chief executive since May, said KBC would stop
almost all activities outside of Belgium, the Czech Republic,
Hungary, Slovakia and Bulgaria to bring down costs.
KBC, which took 7 billion euros ($9.14 billion) from Belgium
and the region of Flanders during the 2008-09 financial crisis,
said its cost-income ratio should drop to 55 percent in 2015
from 60 percent in 2011.
"The targets aren't shocking, I think they're realistic,"
said analyst Matthias De Wit at Petercam.
KBC has made the main divestments it agreed to with European
regulators in exchange for receiving financial aid, but it still
needs to sell smaller units in Belgium, Germany, Russia and
The group would also review its operations in financing
long-term projects, Thijs told reporters at the group's
headquarters in Brussels.
"If we need to finance projects that are not part of our
core markets or our current client base, if they are different
from that, we will no longer pursue such projects in the
future," said Thijs, who had headed KBC's Belgian business unit.
KBC said that, apart from cutting costs, it would also try
to increase income in core markets by adapting its product
Shares of the group declined as much as 5.7 percent on
Monday, making it the worst performer on the FTSEurofirst 300
index of leading European stocks.
"Shares shot up on Friday ahead of the presentation as some
market participants expected big news on the repayment of state
aid. Now there was little news on this front they are
disappointed," De Wit said.
KBC still needs to repay a further 4.17 billion euros of
principal, plus penalties, by the end of 2013, having already
paid 500 million euros of principal in December. Thijs said KBC
would pay a significant part of this by the end of 2012.
KBC will create a new business unit for its Czech operations
and will split up its Merchant Banking division.
Thijs declined to specify the extent of expected job cuts.
KBC group will now consist of the Belgian, Czech and
International Markets businesses. KBC Bank Ireland, with a
sizeable loss-making residential mortgage business, would be
incorporated into the latter unit.
KBC had 16.4 billion euros ($21.42 billion) of outstanding
loans in Ireland, 21.4 percent of which were marked as
non-performing at the end of the second quarter.
On Monday, KBC said that it would aim to generate more
income from retail banking in Ireland and that selling the unit
was not an option for now.
($1 = 0.7657 euros)
(Reporting By Robert-Jan Bartunek; Editing by Philip Blenkinsop
and Toby Chopra)