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Dexia Balance Sheet to Shrink to $198 Billion by End of 2020

Dexia SA, the bank being wound down after receiving two government bailouts, said its assets will shrink by 61 percent by 2020 followed by a “marked reduction” in the subsequent five years.

Under the resolution plan approved by the European Union last week, Dexia’s balance sheet will decline to about 150 billion euros ($198 billion) by the end of 2020 from 384 billion euros as of Sept. 30, Dexia said today in an e-mailed statement. The projections “rely solely on the natural amortization of the portfolio” and include the sale of Dexia Municipal Agency, the refinancing unit for French local authorities, Dexia said.

The winding-down of Dexia ends what EU Competition Commissioner Joaquin Almunia this month called “the largest bad bank in the EU.” The bank, rescued initially in 2008 by Belgium and France, needed a second bailout this year after Europe’s sovereign-debt crisis caused refinancing difficulties.

The European Commission authorized the “orderly resolution” of Dexia and the restructuring of Belfius Bank NV, the local consumer-banking unit acquired by the Belgian government, the EU regulator in Brussels said on Dec. 28. Dexia shareholders this month approved a 5.5 billion-euro capital increase by the Belgian and French governments, avoiding a default.

The EU approval also allowed Dexia to receive state guarantees of 85 billion euros and the recapitalization from France and Belgium. The bank, whose shares have lost almost all their value, reported a loss for the third quarter of 1.23 billion euros. Dexia today said 2012 and 2013 net income will be hurt by costs from disposals and high funding costs.

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