Dexia break-up gathers pace as Belgium buys consumer bank
Published 11/10/2011 | 05:00
Dexia is being broken up as Belgium agreed to buy the local consumer-lending unit, ending a 15-year cross-border experiment with France after Europe's debt crisis deepened.
The Belgian federal government will pay €4bn for the division and guarantee 60pc of a so-called bad bank to be set up for Dexia's troubled assets, Finance Minister Didier Reynders said at a press conference in Brussels yesterday after weekend talks.
Dexia will sell assets, including its Luxembourg unit and its French municipal lending arm, to give the bad bank capital to absorb future losses.
The dismantling of Dexia, once the world's leading lender to municipalities, became inevitable after concern over European sovereign debt holdings caused its short-term funding to evaporate. Dexia's bailout, three months after it passed European Union regulators' stress tests, brings the region's banking crisis from the continent's periphery to its centre.
"Dexia is not an isolated problem," said Cor Kluis, an Utrecht, Netherlands-based analyst at Rabobank International who rates Dexia 'reduce'.
"The question for all investors in Europe is how politicians are going to handle this, and what they want to see is a coordinated and professional solution. That would be a good opportunity to restore calm."
Dexia fell as much as 36pc in Brussels trading and closed down 4 cents, or 4.7pc, to 80.5 cents, on concern the restructuring will leave shareholders with little of value.
The stock resumed trading yesterday afternoon after being suspended since October 6.
"Investors in Dexia shares will be left with a 'bad bank'," said Jean-Pierre Lambert, an analyst at Keefe, Bruyette & Woods in London.