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Dexia loss swollen by derivative value adjustments
May 14, 2014 / 6:03 AM / 4 years ago

Dexia loss swollen by derivative value adjustments

BRUSSELS, May 14 (Reuters) - Nationalised Franco-Belgian financial group Dexia suffered a first quarter net loss of 184 million euro ($252.2 million) due to a mark-down of derivative values and consulting fees linked to the European Central Bank’s asset review.

The loss places a question mark on the bank’s earlier guidance that its full-year loss could fall to around 440 million euros, from 1.08 billion euros in 2013.

The bank, 94 percent owned by the Belgian and French states, said its net result from recurring items was a negative 88 million euros, an improvement of 72 million euros from the final quarter of 2013 as funding costs reduced.

However, the group incurred a negative 148 million euro due to the adjustment of the value of collateralised derivatives. Dexia separately made a gain of 53 million euros from the sale of Dexia Asset Management and its 40 percent stake in Popular Banca Privada.

The group, once the world’s largest municipal lender, is no more than a penny stock investment, but its results matter because France, Belgium and, to a lesser extent, Luxembourg are guaranteeing its borrowings by up to 85 billion euros.

The states, which have already pumped in billions of euros to prop up Dexia, are threatened with losses that could derail their efforts to rein in their budget deficits.

Dexia has been stripped of all its activities, including public sector lending and retail banking, after it failed to recover from the 2007-2008 credit crunch, which deprived it of access to short-term money to fund largely long-term loans.

Now essentially a portfolio of loans and bonds in run-off, it has benefited from a sharp reduction in the fee it has had to pay for government guarantees to 5 basis points per year from an average 85 basis points in 2012. ($1 = 0.7296 Euros) (Reporting By Philip Blenkinsop, editing by Robert-Jan Bartunek)

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