Banking group Dexia's profit slumps 60%
The Belgian-French banking group reported about 60 percent drop in profits in the first quarter.15 May 2008
BRUSSELS - Belgian-French banking group Dexia reported Wednesday a near 60 percent drop in profits in the first quarter as its US bond insurer suffered from exposure to the slumping US mortgage market.
The group said net profit fell to EUR 289 million in the first three months of 2008 from 720 million in the same period of 2007 to be well short of analyst forecasts for EUR 342 to EUR 532 million.
Income fell 16 percent over the period to EUR 1.50 billion.
In the wake of the news, shares in Dexia fell 3.0 percent in mid-morning trade to 16.39 euros in Brussels while the Bel-20 index of leading Belgian stocks eased 0.2 percent.
"During the first quarter of 2008, Dexia faced a particularly challenging environment marked by a steep widening of market spreads and a deep deterioration of the US mortgage credit environment," chief executive Axel Miller said.
In addition to charges on its FSA bond insurance unit's exposure to the US mortgage market, the company said its bottomline was hit by the writing down of its portfolio of complex derivatives known as credit default swaps.
"We are unhappy that, despite our strong risk management and organization, which allowed us to avoid the worst risks of the structured finance and mortgage bubble, some transactions in the US resulted in losses far exceeding historic loss expectations," Miller said.
"While this is not threatening either Dexia or FSA's financial strengths, we are taking the necessary measures to address this issue," he added.
The company said FSA would get out of the businesses causing the problems.
[AFP / Expatica]