Dexia shares in new Greece slump

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4 October 2011 Last updated at 09:16 GMT Continue reading the main story Shares in the Franco-Belgian bank Dexia have fallen for the second day running as fears over its exposure to Greece debt continue.

They fell 37% at the open of Tuesday trading after losing 10% on Monday following an alert from the Moody's ratings agency.

Dexia is holding an emergency board meeting amid serious concerns.

The governments of France and Belgium, which are joint shareholders in Dexia, moved to guarantee its debts.

A joint statement from the countries' finance ministers said: "In the framework of Dexia's restructuring, the governments of France and Belgium, in coordination with our central banks, will take all necessary steps to ensure the protection of depositors and creditors."

The two ministers, who are at the wider European finance ministers' meeting in Luxembourg, have been discussing ways to support the bank.

Dexia's shares are worth only just over one euro, so almost any movement will result in a large percentage change.

Market concerns

Greece-linked concerns are also hitting financial markets again after eurozone finance ministers delayed a decision on giving Greece its next instalment of bailout cash.

It came after Greece said it would not meet this year's deficit cutting target.

A meeting set for 13 October, when finance ministers had been expected to sign off the next Greek loan, has now been cancelled, says BBC Europe correspondent Chris Morris.

The UK's FTSE 100 index was down 1.5% at the start of trading. France's Cac was 3.3% lower, while Germany's Dax had lost 3.2%.

Greece announced on Sunday that its 2011 deficit was projected to be 8.5% of gross domestic product, down from 10.5% in 2010, but short of the 7.6% target set by the EU and IMF.

Eurozone banks have been hit by cash outflows since the summer amid fears that Greece, and possibly other governments, may ultimately default on their debts, and even leave the eurozone, leaving their lenders sitting on big losses.

Dexia's exposure to Greek government debt totals 3.4bn euros ($4.5bn; ￡2.9bn). Its total exposure to Greece - including to private-sector Greek borrowers - is 4.8bn euros.

It has already written off 21% of its Greek debts, but market prices now suggest the eventually loss to lenders could be in excess of 50% of the amount owed by Greece.

The bank is already partly-owned by the two governments, after it received a 6bn euros joint bailout at the height of the financial crisis in 2008.

There were reports last week that the bank could be split up, and speculation of a possible nationalisation of the bank.

Another option under consideration is the sale of Credit Local, a unit of the bank responsible for lending to French local governments.

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Trading in Dexia shares suspended

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6 October 2011 Last updated at 17:01 GMT Dexia is reported to be selling its Luxembourg business to Qatar for 900m euros Trading of shares in Dexia has been halted by the Euronext stock exchange.

The stop was requested by the Belgian regulator until the troubled Franco-Belgian bank could provide details of a planned sale of its Luxembourg unit.

Its shares had fallen 17.3% during the day up until trading was suspended.

Meanwhile, the French and Belgian governments are negotiating a break-up of the bank - and how to share the cost of rescuing it between them - with a decision expected before the weekend.

Qataris

Dexia has confirmed it is in "exclusive negotiations" with a group of international investors to dispose of Dexia Banque Internationale a Luxembourg (BIL).

The subsidiary employs about 5,500 staff worldwide, 3,700 of whom are based in Luxembourg.

It runs a 40-branch retail network in the country, as well as offering private banking and asset management services.

Continue reading the main story The key buyer is reported to be the Qatari Investment Authority, the country's sovereign wealth fund.

Reports say it may pay 900m euros ($1.2bn, ￡785m) for control of the Dexia unit.

It follows an announcement in August that the Qataris were to become a major shareholder in the merger of two Greek lenders, Alpha Bank and EFG Eurobank.

The government of Luxembourg is also in talks to buy a minority stake. The country's finance minister, Luc Frieden, said he expects discussions to be completed by the end of the month.

Break-up

Dexia is facing its second rescue in three years because of the eurozone debt crisis.

The firm has 3.4bn euros ($4.5bn, ￡2.9bn) of exposure to Greek government bonds, and about four times that amount to Italian sovereign debt.

Ratings agency Moody's put the lender on review for a credit score downgrade on Monday. It said the bank was finding it harder to borrow from the markets.

The news led to a sell-off of Dexia's shares, prompting France and Belgium to announce they would prevent its collapse.

The governments are expected to pool its most risky assets into a "bad bank" and force it to sell off units that provide vital services, including a French division that specialises in lending to local authorities.

Belgium's Prime Minister said the burden must be divided fairly.

Yves Leterme told RTL radio: "This is a very sensitive and crucial part of the negotiations, an equitable split of the costs."

The two countries are expected to finalise the plan before the weekend.

Dexia's board says it intends to meet in Paris on Saturday to vote on the break-up.

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Dexia shares slump on Greece woes

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3 October 2011 Last updated at 19:56 GMT Dexia received a 6bn-euro bailout at the height of the financial crisis Dexia has called an emergency board meeting amid fears over its exposure to Greek debt.

Meanwhile, shares in the Franco-Belgian bank fell 10% on Monday after rating agency Moody's said it was reviewing Dexia for a possible downgrade.

The finance ministers of Belgium and France are meeting eurozone colleagues in Luxembourg, and are expected to discuss ways to support the bank.

Financial markets fell on news Greece would miss deficit reduction targets.

Greece announced on Sunday that the 2011 deficit was projected to be 8.5% of gross domestic product, down from 10.5% in 2010, but short of the 7.6% target set by the EU and IMF.

Write-off

The news affected financial markets across Asia and Europe, with bank shares among the hardest hit.

Eurozone banks have been hit by cash outflows since the summer amid fears that Greece, and possibly other governments, may ultimately default on their debts, and even leave the eurozone, leaving their lenders sitting on big losses.

Dexia shares initially fell 14% on news of the possible rating downgrde, and despite a rally back in later trading, they were still the worst hit in the financial sector.

Moody's cited Dexia's potential losses on a Greek debt default, as well as the bank's recent difficulties in borrowing short-term cash from markets, as reasons for the rating review.

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It was only on July 15 that the European Banking Authority [stress tests]... portrayed Dexia as one of the strongest banks in Europe”

End Quote Robert Peston Business editor, BBC News Dexia's exposure to Greek government debt totals 3.4bn euros ($4.5bn; ￡2.9bn). Its total exposure to Greece - including to private-sector Greek borrowers - is 4.8bn euros.

It has already written off 21% of its Greek debts, but market prices now suggest the eventually loss to lenders could be in excess of 50% of the amount owed by Greece.

Paris-based business newspaper Les Echos reported on Friday that the French and Belgian governments would discuss measures to shore up Dexia's balance sheet.

The bank is already partly-owned by the two governments, after it received a 6bn euros joint bailout at the height of the financial crisis in 2008.

There were reports last week that the bank could be split up, and speculation of a possible nationalisation of the bank.

Another option under consideration is the sale of Credit Local, a unit of the bank responsible for lending to French local governments.

Belgian Finance Minister Didier Reynders told Belgian radio on Friday that Dexia's shareholders should be behind the bank and be ready intervene if there was a problem.

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VIDEO: Eurozone crisis sparks fears for Dexia

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4 October 2011 Last updated at 22:15 GMT Help

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