French-Belgian bank Dexia posted better than expected fourth quarter earnings on Friday as a good performance at its public finance division helped it shake off the impact of the credit crisis.
Dexia reported a 14 percent rise in its underlying fourth quarter net profit to 603 million euros ($910.7 million) from 528 million a year earlier.
A Reuters poll of 17 analysts on Feb. 26 gave an average net profit forecast of 477 million euros.
"The figures were excellent," said KBC Securities analyst Dirk Peeters, who kept a "buy" rating on Dexia.
Along with many of the world's top banks, Dexia -- which is the world leader in lending to local governments -- has been hurt by the global credit crunch caused by losses on U.S. subprime mortgages.
Earlier this month, the company's U.S. bond insurance unit Financial Security Assurance (FSA) posted a fourth-quarter net loss of $91.9 million, due to writedowns on its derivatives portfolio caused by the credit market turmoil.
However, Dexia said its financial position was solid.
"Though the widening of credit spreads translates into negative mark-to-market accounting adjustments, it has little consequences on our solvency, capital needs and on our cash position, whilst our exposure to subprime mortgages remains well protected," said Dexia Chief Executive Axel Miller.
More Writedowns Possible
Dexia had a negative mark-to-market impact of 75 million euros during the fourth quarter but said it had managed to offset this with gains at its treasury division.
Mark-to-market is the process by which a position or portfolio is revalued based on the current day's closing price.
Instead of being valued at the original purchase price, the portfolio is valued at its current worth to reflect any profit or loss which is not yet realized but which would be taken into account if the position were sold immediately.
Dexia said further writedowns in the first quarter were possible.
"Q1 2008 will likely be marked by additional accounting impacts if spreads stabilize at February level or widen further," the bank said in a presentation as it published its fourth quarter results.
The company proposed a dividend of 0.91 euros per share, up 12.3 percent from last year and above an average forecast of 0.88 euros.
The company also maintained a growth target of 10 percent in earnings per share (EPS) for the period from 2008-2010.
Dexia's Paris-listed shares closed down 1.9 percent at 15.66 euros on Friday. The stock has fallen around 7 percent since the start of 2008.