By Robert-Jan Bartunek
BRUSSELS, Feb 9 (Reuters) - Belgian financial group KBC comforted investors by saying it was required to pay back only two-thirds of its state aid by 2013, after fourth-quarter earnings came in lower than expected.
KBC, which took 7 billion euros ($9.3 billion) from Belgium and the region of Flanders during the 2008-09 financial crisis, clarified on Thursday it only needed to repay 4.67 billion euros of principal, plus penalties, in the next two years.
It had previously said it would repay 7 billion euros, but it had not been clear whether this was the principal amount or whether the figure also included penalties that ranged from 15-50 percent depending on when KBC repaid.
The group also paid back 500 million euros in December.
'Half of the analysts were still concerned about a possible capital increase, now the probability is much lower,' said Jean Pierre Lambert, analyst at KBW in London.
KBC shares increased as much as 9.3 percent, making them the strongest gainers in the STOXX 600 banking index and extending a run which has seen the shares gain some 87 percent since the start of the year.
For the fourth quarter, solid performances in Belgium and most of eastern Europe were offset by one-off hits in Ireland, Greece and Hungary, and for certain retail bonds.
Underlying net profit fell 4 percent to 161 million euros, below the 219 million expected in a Reuters poll of nine analysts.
Continued economic uncertainty in Ireland led to a loan loss provision of 228 million euros there.
Chief Financial Officer Luc Popelier said this should drop to 200 million euros in the first quarter and be between 500 million and 600 million euros for the whole of the year.
The group also set aside 71 million euros for a possible reimbursement of Belgians who bought its 5/5/5 product, a bond linked to the creditworthiness of five countries, one of them Greece. It would have to pay out if a credit event occurred.
KBC took a further 85 million pre-tax hit on its Greek sovereign debt, taking the total amount impaired to 71 percent.
KBC said it reduced its overall exposure to euro zone periphery nation government bonds by 1.9 billion euros to 4.8 billion at the end of 2011.
On the positive side, in-credit volume and deposits in Belgium rose.
In central and eastern Europe, the loan book also increased but the result was tainted by an 82-million euro pre-tax impairment in Hungary.
A law was introduced there to help households pay foreign currency loans at a discounted exchange rate, the shortfall to be covered by the bank.
KBC said it was making considerable progress on the sale of Poland's Kredyt Bank, the last major divestment required by the European Commission in return for KBC's receipt of state aid.
($1 = 0.754 Euros)
(Editing by Philip Blenkinsop and David Hulmes) Keywords: KBC/
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