Moody's downgrades KBC

Moody's Investors Service said it downgraded KBC Bank's standalone bank financial strength rating to D+, mapping to a standalone credit assessment of Baa3, from C-/Baa1.

This prompted the downgraded of KBC Bank's long-term debt and deposit ratings by two notches to A3 from A1 and the short-term rating to Prime-2 from Prime-1.

Prompted by the rating action on KBC Bank, Moody's also downgraded KBC Group's long-term debt and deposit ratings by two notches to Baa1 from A2. Its short-term rating was lowered to Prime-2 from Prime-1.

The outlook is stable.

Moody's said the downgrades were triggered primarily by KBC Bank's higher sensitivity to the deteriorating European macro-economic environment, due its exposures to markets experiencing material stress, notably Ireland and Hungary. The losses stemming from these exposures are likely to continue to weigh on the bank's profits.

They were also triggered by the unfavorable market and economic conditions, which in Moody's view could constrain KBC Group's ability to meet the requirement of the European Commission under its restructuring plan to deleverage and repay part of the core capital securities held by the Belgian Federal and Flemish Regional Governments by the end of 2013, the agency said.

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