(MENAFN- AFP) Dexia bank, recapitalised by France and Belgium overnight, reported a third-quarter net loss of 1.2 billion euros ($1.53 billion) on Thursday, blaming the cost of asset sales and financing state guarantees.
The bank, in the process of being dismantled, said asset sales had generated big capital losses and left Dexia SA with negative shareholder funds, meaning its capital was fully written out.
Overnight, the French and Belgian governments agreed to support the bank with new capital of 5.5 billion euros.
The two governments also agreed to change the way providing state guarantees to the bank is shared out but this is subject to approval by European Union competition authorities.
The deal also calls for a cut in the limit on state loan guarantees to 85 billion euros from 90 billion euros.
After what sources close to the matter described as "difficult" talks between Paris and Brussels, Belgium's share of the restructuring burden was reduced from 60.5 percent to 51.4 percent.
The lower rate means Belgium's liabilities are in effect cut by nearly 11.0 billion euros.
Belgium however had sought a 50:50 split while France wanted Brussels to still take the lion's share of the costs at 55 percent, according to the Belgian press.
"The agreement is in our interest and is balanced," said Belgian Finance Minister Steven Vanackere, adding that the previous 60.5 percent commitment on 90 billion euros "impacted on the way we were looked at" by the markets.
The overnight agreement was reached by Vanackere and his French counterpart Pierre Moscovici and has already been given the green light by key ministers in the Belgian cabinet, a statement from Brussels said.
Paris and Brussels were keen to find an accord before Dexia issued its quarterly results early on Thursday.
Dexia bank operated a retail business in Belgium but its core business was financing public bodies and local authorities in France and Belgium.
It has been mired in crippling financial problems since the beginning of the financial crisis four years ago.
Shareholders France, Belgium and Luxembourg began breaking up Dexia in late 2011 after the bank sought a second bailout to keep it afloat as the global financial crisis morphed into the European debt crisis.
In the third quarter, the bank was hit by a capital loss of 599 million euros on the sale of its Turkish unit DenizBank with costs incurred too on other disposals.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.