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Thrice-bailed-out Dexia suffers fresh loss

August 7, 2013 10:38 am

Bailed-out Dexia suffers fresh loss

By James Fontanella-Khan in Brussels

Dexia, the Franco-Belgian bank that was one of the biggest victims of the financial crisis, suffered further losses in the first half of 2013, raising fears in Paris and Brussels that the troubled lender could further impact their recession-hit economies. The thrice bailed-out bank on Wednesday reported a net loss of €905m in the first half of 2013, despite enjoying lower funding costs. In the same period a year ago it lost €1.17bn. The performance of Dexia is being closely watched by French and Belgian authorities as their governments own most of the residual bank. They two countries were forced to inject €11bn in fresh capital and provide €90bn in state guarantees to save the bank in the aftermath of the 2008 crisis. Luxembourg also participated in the bailouts but to a lesser degree. Further losses at Dexia – once the world’s biggest lender to municipalities – raises the prospect of fresh capital injections or state guarantees from France and Belgium.This would be particularly damaging for the two countries, both of which have high sovereign debt ratios at a time when they are struggling to rein in their budget deficits to avoid EU sanctions on bloated national balance sheets.

“We should remain vigilant,” said the Belgian finance ministry in a statement. “The government is monitoring the situation closely and will continue primarily to ensure that the agreed trajectory is maintained.”

Robert de Metz, chairman of Dexia, said that although the economic environment remained uncertain the bank was moving in the right direction and its top priority was to protect taxpayers’ guarantees. He added that the bank’s progress had brought about a “further reduction of the systemic risk still represented by Dexia”.

Dexia’s consolidated balance sheet shrunk by 31 per cent in the first half of 2013 to €247bn, down €110bn from the end of last year, following the successful sale of its French lending unit Société de Financement Local.

However, a €380m deal for GCS Capital to buy the asset management arm of Dexiacollapsed last month.

Dexia hopes to return to profitability by 2018 but still faces a number of hurdles, according to government officials and analysts.

The Cour des Comptes, France’s national auditor, warned in July that Paris, which it estimated had already lost €6.6bn since it first bailed out the bank in 2008, had over-optimistic projections for the planned run-off of Dexia’s remaining assets and could face further losses.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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