The French-Belgian bank Dexia, rescued with government support, today reported a net loss of €11.6 billion for 2011, marking a record for French banks.
This huge figure is not, however, the biggest loss reported by a French company, coming way behind Vivendi which lost €23.3 billion and France Telecom which lost €20.7 billion in 2002 as a result of the Internet bubble.
The bank is a leading casualty in Europe of the financial and then euro zone debt crises and risk aversion on the interbank market. The bank was strangled by its high dependency on refinancing on the capital markets and by huge holdings of bonds, including a large amount of Greek government bonds.
At the end of 2011, several financial establishments declined to provide it with market funding. Dexia was forced to turn to central banks for funds, and its borrowings from this source rose by €17 billion between the end of June and the end of December last year.
At the end of the year, the total of its loans from central banks was €31 billion, the bank said today. Dexia said it hoped to reduce this amount by issuing debt, backed by public guarantees.
Dexia said the disposal of the Belgian retail banking arm cost €4 billion in capital loss, and provisions for exposure to bad loans to Greece cost €3.4 billion.
The sale of the business making loans to French local authorities, which formed the second main part of a restructuring of the group, cost €984m in capital loss.
Earlier in the year the bank had booked an exceptional charge of €2.6 billion, but it still had to request additional support from the governments of France, Belgium and Luxembourg. The three countries provided guarantees worth €90 billion to ensure that Dexia could complete its restructuring and asset sales.
France also guaranteed part of the losses which could arise at the subsidiary which carries loans made to French local authorities and will become an indirect shareholder. The bank specialised in financing local authorities, but many French municipalities have found themselves in serious financial difficulties, blaming in part the structure of loans from Dexia which they have pushed to restructure.
In 2008 the bank lost €3.3 billion and was rescued for the first time by France, Belgium and Luxembourg. Dexia was already having great difficulty in refinancing itself on the interbank markets.
