Dexia bank, recapitalised by France and Belgium late on Wednesday, reported a third-quarter net loss of 1.2 billion euros ($1.53 billion) on Thursday, blaming the cost of selling assets and of financing state guarantees.

The bank, which is in the process of being dismantled, said that asset sales had generated big capital losses and had put Dexia SA into a state of negative shareholder funding at the end of September.

Overnight, the French and Belgian governments agreed to support the bank with new capital of 5.5 billion euros.

The two governments also agreed to change the way the cost of providing state guarantees to the bank is shared out, but this is subject to approval by European Union competition authorities.

Dexia bank has operated with a retail branch in Belgium but its core business was financing public bodies and local authorities in France and Belgium.

It has been mired in crippling financial problems since the beginning of the financial crisis four years ago.

France and Belgium also agreed overnight to cut sharply the cost to the bank of the state guarantees.

In the third quarter, the bank was hit by a capital loss of 599 million euros from the sale of its Turkish unit DenizBank.

The results were also set back by changes to arrangements for the divestment of the French subsidiary Dexia Municipal Agency, the vehicle for refinancing loans by the bank to local authorities.

The change turned on dropping guarantees by France and by the bank itself, and this reduced the price of disposing of the unit by 380 million euros with the result that overall cost of the operation for Dexia was 466 million euros in the third quarter.