KBC's Bergen Says Russian Bank Unit Didn't Run Out of Funding

By John Martens

Oct. 4 (Bloomberg) -- KBC Group NV, Belgium's biggest financial-services company by market value, said its Russian unit didn't run out of funding, even as interbank lending surged to a record last month.

Absolut Bank's short-term needs were met through access to KBC funding and loans provided by Russia's central bank, KBC Chief Executive Officer Andre Bergen told investors at a conference in Antwerp today. Retail banking in Russia has become ``more difficult lately, but is still solid,'' he said.

A measure of financial stocks on Russia's benchmark Micex Index fell 25 percent last month as credit markets seized up, pushing the MosPrime rate on overnight loans between Russian banks to a record 11.08 percent on Sept. 17. The collapse in shares led the government to pledge more than $100 billion in emergency funding after closing the stock market for two days.

European banks face ``challenging times'' as the ``blue-sky scenario of the past five years has vanished,'' Bergen said. He added that further actions to drive down costs are ``possible'' after approving only 95 percent of budgeted spending at the start of the year.

Third-quarter earnings will show the negative impact of writedowns on the securities portfolio and margin pressure in Belgium, Bergen said. Commercial activities remained ``sustained'' on growth in central Europe, he added.

Bergen declined to say if the Brussels-based financial- services company was asked by the Belgian government to make a bid for parts of Fortis.

To contact the reporter on this story: John Martens in Antwerp, Belgium via jmartens1@bloomberg.net