A spokesperson for RBC Dexia said it is business as usual as parent firm Dexia grapples with a major funding shortfall caused by the European sovereign debt crisis and tensions in the interbank market.
In a statement today, Dexia, the Franco-Belgian financial services group, said the size of its non-strategic asset portfolio continues to impact the group structurally despite a move to accelerate its restructuring plan in May 2011. Today, CEO Piere Mariani will meet with the relevant governments and supervisory authorities to prepare necessary measures to resolve the structural problems penalizing the groups operational activities, and to open up new prospects for the development of its historical commercial franchises in Belgium and France.
Dexias shares have fallen 40% in the last three months to 1.33.
Media reports, including one from Belgian daily De Standaard, have speculated that the rescue plan being discussed could see a breakup of the banks assets and the creation of a state-supported bad bank. De Standaard also speculated that new loans to French municipalities would be separated and put into a newly created French bank, while the healthier operations, such as Dexias Turkish unit Denizbank, Dexia Asset Management and its Canadian joint venture, may be sold.
The French and Belgian governments have also guaranteed Dexias debt, including debt that is coming up for refinancing. A French source close to the matter told Reuters the guarantees do not mean a capital injection or capital increase.
The RBC Dexia spokesperson offered further assurances by saying the company is an independently capitalized entity with a solid credit rating (S&P: AA- and Moodys: Aa3).
Global Custodian recently featured an article on the future of the RBC Dexia. The article highlighted downward pressure on revenues and profits given the trouble at Dexia, despite the current strength of the business of the joint venture. The article speculated on the potential sale of Dexias 50% stake in the joint venture given other divestments by the group, including that of Spanish-based Dexia Sabadell, in recent years in order to clear up its balance sheet.
Indeed, revenues at RBC Dexia have increased in recent quarters. Reporting for its share (50%) of the business, RBC said third quarter revenues for 2011 increased C$22 million, or 13%, versus the previous corresponding period. RBC, which reports figures for all of its businesses publicly, said this mainly reflects higher average fee-based client assets resulting from capital appreciation, higher transaction volumes and business growth.
(JDC)