Belgian banking and insurance group KBC said on Friday it had sold its private banking arm KBL European Private Bankers to Indian family-owned investment firm Hinduja Group for 1.35 billion euros ($1.68 billion).
The divestment is the largest to date by KBC in a restructuring plan required by the European Commission in return for 7 billion euros of state aid. Hinduja will push further into Europe, adding to its private bank in Switzerland.
KBC said the deal would add 1.3 billion euros to its capital, boosting its core Tier 1 solvency ratio by 1 percentage point to 10.4 percent. However, it would have to book an impairment of 0.3 billion euros in the second quarter.
KBC’s shares were up 2.4 percent at 30.5250 by 0900 GMT, outperforming the Stoxx Europe 600 banking index which was down 0.4 percent.
“It is a positive in our view that KBC managed to sell at a higher price than anticipated and this in the currently unsettled equity markets,” KBW analyst Jean-Pierre Lambert said in a note to clients.
Lambert said the market had expected a sale at 1.1 billion euros to 1.2 billion euros ($1.37-1.49 billion).
At the end of 2009 KBL European Private Bankers had 47 billion euros in assets under management, and 37 billion euros in assets under custody.
The number of bidders for KBL had narrowed in recent weeks to Exor, the investment firm controlled by Italy’s Agnelli family, and Hinduja.
The KBL epb brand will be retained and the operation will continue to be headquartered in Luxembourg, KBC said.
“With this divestment, we are releasing a significant amount of capital and further strengthening the KBC group, with its focus on its core bancassurance expertise and markets, and with its reduced risk-profile,” said Chief Executive Jan Vanhevel.
Hinduja Chairman Srichand Hinduja said his group aimed to provide KBL epb with access to fast-growing markets of the Middle East, the Indian subcontinent and elsewhere in Asia.
The deal is subject to regulatory approval and is expected to close in the third quarter of 2010, KBC said in a statement.
Deutsche Bank and Spencer House Partners LLP advised Hinduja on the deal.