KBC said a Moody's Investor Service downgrade of a large number of collateralised debt obligations (CDOs) - the investment instruments at the heart of the global credit crunch - would cost it 300 million euros in increased funding costs.

If investment ratings are cut, indicating a higher credit risk, companies normally have to pay higher interest rates to get access to funds.

Further adjustments following the Moody's action would result in losses of 600 million euros, meaning the company's earnings before tax would be hit for 900 million euros, it added.

KBC had to be bailed out to the tune of 3.5 billion euros by the government as it struggled in the global financial crisis.

It reported a net loss of 906 million euros in the third quarter, compared with a profit of 639 million euros in the same period of 2007, as its CDO holdings plummeted in value. -- AFP