Troubled Franco-Belgian bank Dexia is set to sell various wealth management and investment-related businesses based in Luxembourg or tracing their origins to the group’s bank in the grand duchy, Dexia-BIL, as part of a rescue plan also involving fresh aid from the French and Belgian governments.
French prime minister François Fillon, his Belgian counterpart Yves Leterme and Luxembourg finance minister Luc Frieden met on Sunday in Brussels to work out a financial solution to underpin the break-up of the Dexia group, which was created from the 1996 merger of Crédit Communal de Belgique and Crédit Local de France.
Dexia announced on Thursday that it had “entered into exclusive negotiations with an international group of investors in which the state of Luxembourg will participate for the disposal of Dexia Banque Internationale à Luxembourg”. The statement from the group said its board would take a decision on a potential offer by the end of the exclusive negotiating period.
Belgian media reported last week that the Qatar Investment Authority, a sovereign wealth fund, was in negotiations to acquire all or part of the Luxembourg bank. Other potential investors cited in media reports include the local insurer Le Foyer and Luxembourg private equity group Luxempart – which ironically started life as BIL Participations, an investment vehicle for the bank and its clients.
BIL, which is the joint oldest bank in Luxembourg, having been founded in 1856, became part of Dexia because it was previously majority-owned by Crédit Communal de Belgique. Apart from its retail business and branch network in the grand duchy, BIL also includes the group’s private banking business.
In a statement, Dexia-BIL chief executive François Pauly said: “A solution involving the acquisition of Banque Internationale à Luxembourg by a respected international investor is currently under negotiation, with the support of the Luxembourg government, which will take a minority stake in the bank.”
Pauly quoted Frieden as saying: “Savers have no reason to worry about their money and deposits with the BIL. The bank is sound. The Luxembourg state will take all measures necessary to ensure the safety of deposits with the BIL under all circumstances.”
The Luxembourg state was already involved, together with Belgium and France, in the previous rescue of the bank in 2008 when it faced difficulty in obtaining ongoing finance in the wake of the bankruptcy of Lehman Brothers.
Now its troubled bond portfolio, which includes EUR21bn of Greek, Italian, Portuguese, Spanish and Irish sovereign debt, according to Bloomberg, has prompted a collapse in confidence among investors, leading to a 42 per cent fall in its share price last week on Euronext Brussels before its shares were suspended on Thursday.
Royal Bank of Canada has announced it is “business as usual” at RBC Dexia Investors Services, the global custody and administration joint venture created from the January 2006 merger of its fund and institutional investor services business and that of Dexia, which was originally developed out of Luxembourg as BIL Fund Services.
There is speculation by analysts, however, that RBC may exert a right of pre-emption to take full control of the business if Dexia’s 50 per cent stake is put up for sale as part of the break-up of the group. The cost of taking full control is estimated by Barclays Capital at between CAD300m and CAD400m. RBC Dexia, which has its headquarters in London, says that as of June 30 this year, it had USD3trn in client assets under administration.
Barclays analyst John Aiken has suggested that RBC could also be a bidder for Luxembourg-based Dexia Asset Management, which had EUR86.3bn in assets under management in long-only funds, alternative investments and structured products as of the end of March this year.
