Bank Sabadell has informed Dexia’s management that it intends to exercise its option to sell to Dexia Crédit Local its 40% stake in Dexia Banco Sabadell. This would take Dexia Crédit Local’s stake in Dexia Banco Sabadell to 100%. Dexia acknowledges the choice made by Banco Sabadell in application of a contractual agreement taken in 2001. Our View: Dexia Banco Sabadell is one of the joint-ventures that Dexia put up for sale following the execution of the EU imposed restructuring plan for the State aidreceived. The current market turmoil and the concern about peripheral countries make it almost impossible to sell the 60% joint-venture. Raising the stake to 100% following the exercised of a put by Banco Sabadell must be appreciated in the wider framework of the orderly resolution process submitted to the European Commission. The main issue however remains Dexia’s funding structure and the cost associated with it. Conclusion: We maintain our Reduce rating and € 0.10 target.