Thrice-bailed-out Dexia suffers fresh loss
August 7, 2013 Leave a comment
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.
About bambooinnovator
Bamboo Innovator 