Canadian bank buys custodian JV from Dexia in €830m deal
GLOBAL - The Royal Bank of Canada has acquired full control of its global custodian joint venture with troubled European bank Dexia.
The agreement will see RBC Dexia Investor Services sold for €837m and occurred on the same day the European Commission launched an investigation to examine whether the partial sale of Dexia's banking division to the Luxembourg government was in breach of state aid regulations.
RBC Dexia's chief executive José Placido said he looked forward to the "continued support" of the Canadian bank, with the transaction expected to clear supervisory hurdles by mid-2012.
He added: "RBC Dexia has a clear vision for the future and has developed a compelling strategic plan to accelerate our growth over the next five years, which we will continue to pursue with the commitment of a financially strong and stable owner."
Jim Westlake, group head of international banking and insurance at RBC, added that full ownership of the company would allow RBC Dexia to profit from the bank's "excellent reputation and financial strength".
At the same time as the sale, the pension fund custodian sold €1.4bn in nominal value of Dexia Group fixed income securities back to the former parent company, acquiring the equivalent of US dollar-denominated securities.
"BC Dexia will incur a loss from the sale of the Dexia Group securities, and RBC's proportionate share of this loss is approximately $30m after tax, which will be recorded in the second quarter," the company said in a statement, adding that its capital position would not be "materially impacted" by the sale.
Meanwhile, the European Commission has decided to conduct an "in-depth" investigation in the transaction that saw the Luxembourg government take a 10% stake in Dexia Banque Internationale à Luxembourg.
"Given that the proposed sale is the result of exclusive negotiations with one private investor and that the Commission does not have enough information on the valuation of the carved-out businesses at this stage, the Commission has opened an in-depth investigation to assess whether the price of the transaction is market conform," it said in a statement.
The Commission further asked interested third parties to comment on the sale as part of its investigation.