Troubled Dexia’s shares fall by over a fifth

October 04, 2011

Belgium’s finance minister promised again that his government and France’s were ready to help troubled bank Dexia, but investors ignored the assurances, driving its share price down more than a fifth.

The Franco-Belgian bank’s stock began its plummet Monday after Moody’s warned it could be downgraded, leading the board of directors to call an emergency meeting.

In a vaguely worded statement in the early hours of Tuesday, the board said it would resolve its “structural problems’’ but gave no details. There has been speculation the bank will be split up with support from the French and Belgian governments — both have stakes in the bank following a 2008 bailout.

Dexia was first forced to take a bailout in 2008 after it was hit hard by the U.S. subprime crisis. Since then, it has worked to shore up its finances, and the Tuesday statement said it was making progress.

But Europe’s worsening debt crisis and the resulting reluctance among banks to lend to one another have exacerbated Dexia’s troubles. It has significant exposure to Greek and other risky debt.

Assurances from Belgian Finance Minister Didier Reynders have done little to calm investors. The bank’s stock was down over 20 percent, on top of Monday’s around 10 percent decline.

Reynders told reporters ahead of a meeting of European Union finance ministers on Tuesday that both France and Belgium were ready to help.

“We have seen some possible action from the two governments, French and Belgian,’’ he said. “We need to read all the proposals coming from the bank, and, if it’s needed, we will act.’’

READER COMMENTS »

View reader comments » Comment on this story »