Dexia denies market rumour of nationalisation
PARIS (Reuters) - Dexia (DEXI.BR), the multinational bank that received support from the French, Belgian and Luxembourg states earlier this month, on Tuesday denied a market rumour that Belgium was set to nationalise the bank completely.
"The chairman of the board and the chief executive deny formally any rumour about nationalisation of the bank by the state of Belgium," a spokesman told Reuters.
The Belgian government said there were no current plans to discuss Dexia at any level.
"As Prime Minister I should know about it. It's just a rumour plucked out of the air," Belgian Prime Minister Yves Leterme told Belgian Dutch-speaking Radio 1.
Luxembourg officials also said they were unaware of any talks.
Dexia's shares were down 15.5 percent at 5.29 euros at 1549 GMT.
"Maybe investors are fearing a Fortis-style scenario, but with Dexia its's an entirely different investor community. There are a lot of public bodies with holdings, so they can't just leave them dry. There are a lot of political issues that you cannot put aside," a Brussels-based trader said.
Last Thursday, France, Belgium and Luxembourg pledged to guarantee new borrowing by Dexia SA (DEXI.PA) to bolster an earlier public bailout, restoring some confidence in the world's largest municipal lender.
The three countries will back until Oct. 31, 2009 new bonds and interbank and institutional financing with a maturity of up to three years. The scheme, for which Dexia would pay a fee to reflect the benefit of lower interest rates it enjoys, could be extended for a further year.
Dexia, whose market capitalisation has dropped to some seven bilion euros, is an important vehicle for the financing of local municipalities and regions in France, Belgium and Luxembourg.
The share lost 64 percent of its value this year.
On Monday French bank Societe Generale (SOGN.PA), also issued a denial of a market rumour that dragged its share price down sharply.
French President Nicolas Sarkozy that day unveiled a bank rescue plan as part of a Europe-wide government drive to restore confidence in the financial sector, battered by the credit crunch.
Under the French bank rescue plan, a special company will guarantee bank loans up to 320 billion euros ($434.8 billion) and another vehicle will have 40 billion euros at its disposal to invest in banks at their request.
The chairman of the French banking federation, Georges Pauget, said on Tuesday French banks could use the 40 billion euro French state facility to refinance hybrid loans that are due to arrive to maturity.
Pauget, also chief executive of bank Credit Agricole (CAGR.PA), spoke to journalists after a meeting with Sarkozy.
However he said that none of the French banks was undercapitalised and needed to make a cash call.
"There is no capital increase for French banks on the agenda," he said. Pauget said he did not rule out that Credit Agricole could use the facility if the prices were interesting and he said it would take another few weeks before the new facility would be in working order.
Dexia rival Fortis (FOR.BR) was dismantled by the Dutch, Belgian and Luxembourg governments and part sold to France's BNP Paribas (BNPP.PA) earlier this month.
(Additional reporting by Michele Sinner in Luxembourg and Matthieu Protard in Paris; Editing by Greg Mahlich)
