France, Belgium to pump $ 7 billion into Dexia

Updated 09 November 2012
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France, Belgium to pump $ 7 billion into Dexia

BRUSSELS: France and Belgium agreed to pump 5.5 billion euros ($ 7 billion) into Dexia, the stricken lender the two states were forced to bail out a year ago, after it made another large loss and extensive writedowns.
The prospect of injecting more money into Dexia, which had already absorbed 6.4 billion euros in funds in 2008, threatens to undermine both countries’ efforts to rein in their deficits at a time of intense scrutiny on euro zone budgets.
The move was announced shortly before Dexia released third-quarter earnings showing it had made a net loss of 1.23 billion euros, bringing the loss for the first nine months to 2.39 billion euros. It lost 11.6 billion euros in 2011.
Hours after the two countries bailed it out again, the head of the ailing bank said that it will take until 2099 to liquidate toxic assets at Dexia, and reported a huge third-quarter loss.
Administrator Karel De Boeck told a news conference that totally dismantling the bank, a process that began in October 2011, would last almost another century due to its holdings of toxic assets.
The group, rescued for a second time in three years last October, also had to pay fees of 725 million euros to the states for the guarantees, which cover Dexia’s borrowings, in the first nine months of 2012.
Although the troubled bank has shed all of its subsidiaries, in September it remained saddled with a soured portfolio of bonds worth 69 billion euros which worse still had been bought on credit.
A forced sale of part or all of the assets before maturity would trigger “enormous” losses, he warned.
“A total and immediate liquidation of Dexia is not possible. It would cost a mad amount of money,” De Boeck said. “We think it would be better not to deleverage and not to take losses because these losses can be avoided,” he said.
In Paris, the bank reported a third-quarter net loss of 1.2 billion euros ($ 1.53 billion) yesterday, blaming the cost of asset sales and financing state guarantees.
It said asset sales had generated big capital losses and left Dexia SA with negative shareholder funds, meaning its capital was all used up.
The two governments also agreed to change the way providing state guarantees to the bank is shared out but this is subject to approval by European Union competition authorities.
The deal also calls for a cut in the limit on state loan guarantees to 85 billion euros from 90 billion euros.
After what sources close to the matter described as “difficult” talks between Paris and Brussels, Belgium’s share of the restructuring burden was reduced from 60.5 percent to 51.4 percent.
The lower rate means Belgium’s liabilities are in effect cut by nearly 11 billion euros.
The overnight agreement was reached by Vanackere and his French counterpart Pierre Moscovici and has already been given the green light by key ministers in the Belgian cabinet, a statement from Brussels said.
Paris and Brussels were keen to find an accord before Dexia issued its quarterly results early on Thursday.
Dexia bank operated a retail business in Belgium but its core business was financing public bodies and local authorities in France and Belgium.


Wealthy Gulf individuals feel more confident about regional prospects

Updated 25 April 2018
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Wealthy Gulf individuals feel more confident about regional prospects

  • “Factors like the region’s stability, attractive investment opportunities and low-tax environment are seen as the main drivers behind the growing confidence in the region’s economy.”
  • Among the most optimistic were respondents in the UAE, with 57 percent of those surveyed saying they thought the overall outlook was improving.

DUBAI: Survey finds growing optimism on region’s economies, but Saudi investors remain wary.

Wealthy individuals in the Gulf are more optimistic over the future of the region and the global economy compared with last year, and are increasing likely to invest in their own countries and other emerging markets in Asia than in western economies. These are among the main findings of an annual survey by Dubai-based Emirates Investment Bank (EIB), released on Tuesday, of the sentiment among high net worth individuals (HNWIs) in the region. 

After two years of falling confidence, some 60 percent of regional HNWIs now believe things will improve or stay the same. Fewer are pessimistic about both regional and global economic prospects than last year, while nearly 80 percent of respondents said they would prefer to invest in Gulf assets, rather than looking abroad.

The recovering oil price was a big reason for the increasing feel-good factor in the Gulf, according to Khalid Sifri, EIB’s chief executive officer, who added: “Factors like the region’s stability, attractive investment opportunities and low-tax environment are seen as the main drivers behind the growing confidence in the region’s economy.”

After falling below $30 per barrel in early 2016, oil has subsequently recovered to a three-and-a-half-year high, breaching the $75 a barrel mark yesterday for the first time since November 2014.

However, the overall optimism of the survey masks some concerns among regional HNWIs; in Saudi Arabia, 48 percent of respondents said that they saw the regional economic situation improving or staying the same, against 52 percent who felt it was likely to worsen in 2018.The survey was conducted last November and December, when investor sentiment in the Kingdom was affected by the high-profile anti-corruption campaign undertaken against some prominent business people accused of financial wrong-doing. “It may have been affected by that. We shall see what the situation is at the end of this year,” Sifri said. 

Respondents from Kuwait were even more pessimistic. None of the respondents from the country felt that things were going to improve on the investment front this year, while 54 percent said they would worsen. Among the most optimistic were respondents in the UAE, with 57 percent of those surveyed saying they thought the overall outlook was improving. On the long-term global outlook, a total of 78 percent of those surveyed across the region were optimistic about prospects over the next five years, with most citing positive economic and political stability as the reason, along with a smaller number who said oil price stabilization would benefit the world economy. The oil price recovery was the biggest reason for regional optimism. 

The geopolitics of the region was claimed as a big factor in deciding investment decisions, but Saudis were less concerned than others. Only 29 percent in the Kingdom said they were influenced by geo-political events, compared with 83 percent in Qatar and 85 percent in the UAE. 

Oil prices, economic reforms and the introduction of VAT were also factors influencing investment, as was the election of Donald Trump as president of the USA. There has been a big shift in global investor orientation outside the GCC. Nearly half of regional wealthy investors (47 percent) are now looking to Asia, 38 percent to the wider Middle East and North Africa, some 34 percent to Europe and only 17 percent to North America. The survey was conducted among 100 HNWIs with $2 million or more in investable assets.