Bloomberg News

Dexia Sees 1.7 Billion-Euro Capital Shortfall During Breakup

October 27, 2011

(Updates with shares in fourth paragraph.)

Oct. 27 (Bloomberg) -- Dexia SA, the French-Belgian lender being broken up after losing access to short-term funding, said it faces a 1.7 billion-euro ($2.4 billion) capital shortfall pending the sale of additional units including Denizbank AS.

The Belgian government’s takeover of Dexia Bank Belgium SA on Oct. 20 reduced the shortfall to reach a core Tier 1 ratio of 9 percent after markdowns of sovereign debt holdings by 2.2 billion euros from a 3.9 billion-euro estimate by the European Banking Authority, the lender, based in Brussels and Paris, said today in a statement. Various disposals in the near future should improve the capital position globally, Dexia said.

Dexia put its banking units in Luxembourg and Turkey, its asset-management division and a 50 percent stake in a custody joint venture with Royal Bank of Canada up for sale to reduce the need for regulatory capital as Belgium and France aren’t prepared to buy more stock for a second time in three years. The disposal of Dexia Bank Belgium cut risk-weighted assets by about 35 percent and led to a reduction in Dexia’s holdings of Greek, Irish, Italian, Portuguese and Spanish government bonds by about 42 percent to 12.2 billion euros, the lender said last week.

The lender’s shares soared as much as 12 percent on Euronext Brussels as trading resumed after being suspended pending the statement. The stock rose 4 cents to 63 cents at 1:06 p.m. local time, valuing Dexia at 1.23 billion euros.

KBC Groep NV, Belgium’s biggest bank and insurer by market value, said earlier today that its banking unit met the European Banking Authority’s target of a core Tier 1 capital ratio of 9 percent after reducing its holdings of Greek, Irish, Italian, Portuguese and Spanish government bond holdings to 6.7 billion euros by Sept. 30.

--Editors: Andrew Clapham, Jones Hayden

To contact the reporter on this story: John Martens in Brussels at jmartens1@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net


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