Update 2: DEXB.BB reopen 0.5% lower than prehalt.
Update: DEXB.BB to resume trading at 1340 CET according to the market regulator
Two days ago Zero Hedge revealed that "someone" may know something is fishy in Belgium's biggest bank Dexia, after two of the biggest investors in the bank's recent €3.2 billion FRN issuance decided to put their portion back to the bank. Sure enough, less than 48 hours later, the company's shares were halted, without much information, and it was subsequently revealed that the bank would book a multi-billion loss on asset sales, as a result it would accelerate the sale of non-core assets, and would divest its financial products portfolio. As a result of the €3.6 billion charge, "The second-quarter provision to cover future losses will reduce Dexia’s Tier 1 ratio, a measure of the bank’s ability to absorb losses, to about 11 percent from 13.4 percent at the end of March, the bank, based in Brussels and Paris, said today in an e-mailed statement." Once again, we see efficient markets in action. Luckily for Blackrock and Barclays, the market was just a little more efficient for them than for everyone else. And to anyone who dipped into Dexia protection as per our suggestion, now may be a good time to take some profits... or not. After all the last thing the bank needs now is to have to raise even more cash to meet the put demands, which are likely set to surge across all bond issues that have this investor-friendly option.
Dexia SA (DEXB), the French-Belgian bank forced to shrink its balance sheet by 35 percent by 2014, said it will take a charge of 3.6 billion euros ($5.1 billion) for the anticipated sale of mostly U.S. residential mortgage-backed securities and long-term bond disposals.
The second-quarter provision to cover future losses will reduce Dexia’s Tier 1 ratio, a measure of the bank’s ability to absorb losses, to about 11 percent from 13.4 percent at the end of March, the bank, based in Brussels and Paris, said today in an e-mailed statement. That ratio will increase to at least 12 percent by the end of this year, Dexia said.
Dexia is using the surplus capital accumulated over the past two years to accelerate the reduction of its balance sheet, which had slipped behind the targets agreed with the European Commission, and cut risks linked to the evolution of the U.S. housing market. The bank anticipates it will sell the asset- backed securities in the FSA Financial Products portfolio and most of the bonds before June 2012, reducing its need for short- term funding by an additional 20 billion euros.
“The provision is split evenly over the FSA portfolio and the bond portfolio,” Chief Executive Officer Pierre Mariani said on a conference call with reporters today. “This provision will give us more visibility on future profits.”
By writing down the U.S. asset-backed securities to their market value, Dexia said it will be in a position to waive the Belgian and French state guarantees covering losses on those assets and renegotiate the terms and consequences arising from the state support.