According to Belgian newspaper “De Tijd”, Belgian and French authorities consulted their US counterpart in view of discussing a potential split of the (1,34 EUR, 2,14%) Group. The rumour was also fuelled by articles in “Le Figaro” and “Le journal de dimanche” but at the same time denied by “Les echos”.
The French authorities would be thinking about creating a new entity with the participation of Banque Postale and CDC, that would specialise in the financing of local public authorities. Key element for this strategy to succeed would be that the newly created bank keeps triple A-rated “Dexia Municipal Agency” which is needed for the issue of covered bonds.
Dexia’s French shareholders are believed not to be very supportive to this scenario.
The rumour of a split of the Group keeps popping up at regular times. We do not exclude that this will eventually be the fate of the Group, providing that two issues are dealt with: filling the funding & liquidity gap at Crédit Local de France and finding a solution for the legacy portfolio which needs to be financed for many more years.
We maintain our Accumulate rating with an unchanged target at € 3.50.