2003
Four business lines
Austria Germany
Public/Project Finance and Credit Enhancement
Belgium Monaco
The Netherlands
Serving
two markets The Group’s reputation, the skills of its staff and the architecture of its information systems are aligned exclusively to two markets: on the one hand, the local public institutions and semi-public and private companies associated with this market. Dexia knows them well and develops a major part of its activities with them, worldwide; the other one is the market of individuals, professionals and small companies where Dexia is a major player in Belgium and in Luxembourg.
∆
ANNUAL REPORT
2003
ANNUAL REPORT
Luxembourg
Retail Financial Services
Hong Kong Singapore
∆
Portugal
Investment Management Services
Ireland
Treasury and Financial Markets
Denmark
United Kingdom
All of Dexia’s resources are deployed with a view to providing customers in these two markets with the most innovative products and services available, through the best suited and most efficient channels of distribution.
United States
Contents
Spain
Financial
France
2-3
profile
A group that 60-67
Message Switzerland
4-7
Sweden Australia
68-91
governance
Slovakia
management
and shareholderss
the bank for sustainable development
results
Management Services
Treasury 116-123
Financial 48-59
Financial Services
Investment 104-115
Dexia’s share 36-47
Finance and Credit Enhancement
Retail 92-103
Risk 24-35
SDXI 0029-5 04-04
Public/Project
Corporate 8-23
Italy
Israel
from the chairmen
lives and breathes
and Financial Markets
Dexia 124-128
in the world
PROFILE AND OVERVIEW
Dexia’s four business lines Dexia’s activities and management mode are organized according to four business lines which transcend the entities which compose them. Dexia’s Annual Report is published
Public/Project Finance and Credit Enhancement
Retail Financial Services
Investment Management Services
Treasury and Financial Markets
by the Group’s corporate communications division in cooperation with the communication departments of Dexia Bank Belgium, Dexia Crédit Local and Dexia Banque Internationale à Luxembourg.
Since its creation in 1996,
Dexia has a large network
Since its creation,
As a result of the large volumes
the Group has been Europe’s
of local branches. This significant
the Group has developed
of its long-term bond issues – the majority
leading bank in the local public
commercial presence was increased
many specializations in Investment
of which are rated AAA – Dexia also
finance market. Its North American
by the 2001 acquisition
Management Services.
has a global presence in Treasury
subsidiary, Financial Security
of Artesia Banking Corporation
These include Private Banking,
and Financial Markets, providing it
Assurance (FSA), is one of the market
and in particular the BACOB Bank
Fund Administration, Institutional
and its customers with the best possible
leaders in credit enhancement
network. Since that acquisition,
and Mutual Fund Management.
access to market products.
of US municipal bonds. Together,
Dexia has established itself as one
The latter includes a range
they place Dexia in a position
of the three leading banks in Belgium.
of ethical funds distributed
This business line is also in charge
of worldwide leader. This business line,
It offers domestic customers,
throughout Europe.
of the bond portfolio management
for which the Group is deservedly
professionals and small
renowned, is the greatest contributor
and medium-sized companies
to Group results.
a comprehensive range of retail
Dexia is one of the highest-rated
banking and insurance services.
financial institutions in the world;
Dexia also has a large network
most Group issuers are rated AA or AAA.
of the Group.
of local branches in Luxembourg.
The Annual Report is also available in French, Dutch and German. A copy may be obtained on request from Dexia headquarters in Brussels or Paris.
Dexia SA
Contribution of the business lines to the net income
Square de Meeûs 1 B-1000 Brussels
Shareholders’ base Total number of shares outstanding 1,175,222,680 as of December 31, 2003
8.74%
19%
51%
Non-identified shareholders
43.66% Shareholders with more than 5% of the capital:
27.66%
13%
Identified institutional investors of which: Belgium: 6.32% France: 8.84% Other countries: 12.50%
17%
of which: Arcofin: 15.29% Holding Communal: 14.93% Groupe Caisse des dépôts: 7.71% Ethias*: 5.73%
2.77% Treasury shares
Public/Project Finance and Credit Enhancement
Retail Financial Services
Investment Management Services
Treasury and Financial Markets
13.04% Estimated individual shareholders
In Paris 7 à 11, quai André Citroën F-75015 Paris
4.14% Staff and management shares *Ethias is the new name of SMAP Group.
Photographs Xavier Pierre - Stefan Martens - Roel Ruttens - P. Miara - Marc Vanderslagmolen - Michel Labelle - Michael Moore - Getty Images - Goodshots Photographic library Terre de Sienne - Photographic library Dexia Design Terre de Sienne Layout nord compo + 33 3 20 40 40 01 Printing Snoeck-Ducaju & Zoon, B-9000 Ghent
A key player in the European
financial sector Dexia was born out of the alliance in 1996, of the two major European players in local public finance: Crédit local de France and Crédit Communal de Belgique. Both institutions, together with Banque Internationale à Luxembourg (BIL), were united under the name Dexia in 1999. This was one of the very first cross-border mergers in the European banking sector. Today, Dexia ranks as one of the top fifteen banks in the euro zone.
Dexia, the bank for
sustainable development Dexia’s activities, its roots and the values to which it is committed, give the Group its distinctive identity, in the financial industry, as the bank for sustainable development. Historically, Dexia’s long-term intervention horizon, proximity to customers, and its socially responsible corporate culture are the basis of its commitment to sustainable development. That commitment is defined by the very nature of its main business line: local public finance. This activity caters to essential public services and improvements to the everyday quality of life, particularly in the fields of transport, education, health, social housing, energy and the environment. That commitment also applies in Retail Financial Services which are delivered in a manner always respectful of common interests, in terms of good relationship with customers and in terms of product offer. Sustainable development thus constitutes an essential dimension of value creation. It represents a constant objective in the relationships with customers, staff and shareholders.
Financial p r o f i l e Balance sheet total
Total regulatory capital
Capital adequacy ratio
(in billions of EUR)
(in billions of EUR)
(in %)
11.9 11.7 351 351
11.9
12.8 11.5
350
10.7
11.2
9.8 8.6 245
99
258
7.2
00
01
02
03
99
00
01
02
03
00
01
02
03
Outstanding customer loans(1)
Net income (Group share)
Return on equity (ROE)
(in billions of EUR)
(in millions of EUR)
(in %)
1,434 156.4
157.8
161.9
1,431
1,299 1,001
134.4 128.5
99
∆
2
99
00
15.7
17.7 18.7 16.2
16.5
761
01
02
03
Dexia Annual Report 2003
99
00
01
02
03
99
00
01
02
03
Financial
p ro f i l e
Ratings (long term)(2)
Moody’s Standard & Poor’s Fitch
Dexia Bank
Dexia Crédit Local
Dexia BIL
Financial Security Assurance
Dexia Municipal Agency
Aa2 AA AA+
Aa2 AA AA+
Aa2 AA AA+
Aaa AAA AAA
Aaa AAA AAA
Dexia is one of the financial institutions with the best ratings in the world as the main entities within the Group are rated AA or AAA.
Tier 1 ratio
Customer deposits and debt securities(1)
(in %)
(in billions of EUR) 231.8 227.2 224.9
9.9 9.0 9.3 9.3 9.3
186.8 179.2
99
00
01
02
03
99
00
01
02
03
Workforce(2) Cost/income ratio
Earnings per share
(in %)
(in EUR)
59.2
1.25 1.15
53.9
1.24 1.13
In Belgium In France In Luxembourg Internationally
∆ ∆ ∆ ∆
59.0 58.9 54.8
23,865 members of staff
15,040 2,110 2,900 3,815
0.98
(1) Outstanding loans on the balance sheet. (2) As of December 31, 2003.
99
00
01
02
03
99
00
01
02
03
∆
3
Message from
the chairmen François Narmon, Chairman of the Board of Directors
who nevertheless returned to the equity markets in spite of the ever-present geopolitical risks.
After a very difficult year in 2002 from both an economic and financial point of view, without a doubt 2003 was lived as a year of honorable quality for the western world, even though it had not gotten off to a good start. The war in Iraq and the persistent threat of terrorism weighed heavily on the beginning of 2003, stymieing economic and political initiatives for several months. Then, most fortunately, confidence returned. The lack of a clear trend in economic indicators did not inhibit an upturn in investments, keep capital from returning to the financial markets or preclude public optimism. 2003 thus proved to be a surprising year. In 2003, and even at the beginning of 2004, the US dollar continued to depreciate vis-à-vis the euro. This phenomenon is a constant source of concern for political and economic leaders, as it is for investors,
∆
4
Dexia Annual Report 2003
The progressive rise in stock market indices and the improvement in the economic environment in the second half of the year combined, in the last analysis, to make 2003 a year of recovery for the European banking industry. This is good news for everyone in the banking sector, and in particular for the Dexia Group. Our share price, which had declined sharply at the beginning of 2003, recovered to finish the year with an increase of 16.13%, a performance that surpassed that of the BEL20 index (+10.82%) and equaled that of the CAC 40 index (+16.12%). Dexia's share price has continued to climb in 2004, rising 9.45% in January and February, outperforming the Eurostoxx Banks index (+2.71%). This trend augurs well for the development of our company, as do its good financial results, since net income totaled more than EUR 1,400 million in 2003. More than ever, Dexia confirms its position as the world leader in public finance. Through the merger of Dexia Bank Belgium
Message from
the chairmen
and Artesia Banking Corporation, our Group now plays a major role in retail banking in Belgium. All told, the Group showed strong resistance in asset management, and was therefore able to benefit fully from the upturn in the markets at the beginning of 2004.
Dexia's sound financial base and its significant profitability were again demonstrated in 2003. The Board of Directors will ask the Ordinary Shareholders’ Meeting to approve the distribution of a dividend of EUR 0.53 per share, representing an increase of 10.4%.
The Board of Directors met seven times in 2003. Participation at Board meetings was 85%. In complete independence and assisted by its specialized committees, the Board examined the development of the Dexia Group in the current economic and financial environment. With regard to the integration of Artesia BC and Dexia Bank in Belgium, it noted with satisfaction the success of the merger. The Board took a very close look at recent developments concerning Dexia Bank Nederland. It approved the audit charter and the main lines of the Group's new organization, which was introduced as of January 1, 2004. For the second time, the Board of Directors conducted a self-assessment. It decided to bolster the Strategy Committee and increase the number of meetings of the Audit Committee. From now on, the Board's self-evaluation will be programmed on a yearly basis.
∆
5
Message from
the chairmen Pierre Richard, Group Chief Executive Officer and Chairman of the Management Board
2003 was a very good year for most banks, and Dexia was no exception, a fact that is a source of real satisfaction. Growth in net income, +10.2% to EUR 1,431 million (and +18.3% excluding changes in the scope of consolidation and nonrecurring items and at a constant exchange rate), was mainly due to the dynamism of our current activities, since nonrecurring items were down significantly from 2002. I wish to congratulate all the Group's teams throughout the world on their contribution to these good results. After the exception that 2002 proved to be, the year 2003 thus marked Dexia’s return to its usual profile – as a bank that is able to generate regular growth in results over a long period, driven by recurring revenues and strict control of operating costs. Each of our business lines made a contribution to the Group.
∆
6
Dexia Annual Report 2003
This year again, the Group’s public and project finance business line achieved a remarkable performance. This activity contributed more than 50% of Dexia's results, posting growth in net income of 8.2% and a return on economic equity (ROEE) of 22.8%. All the Group's European entities working in this business line made a positive contribution. For their part, our American teams reported a record level of business, and synergies between our subsidiary FSA and Dexia's entities in New York made it possible to launch a growing number of joint operations. At the same time, Dexia continued to develop debt management services for local governments in different European countries. Dexia has a global reputation in the local public sector market, in which it can boast of unexcelled expertise as a result of specialization and know-how developed over many years. We have several development plans, at the global level, and we will continue to expand the range of services offered to our public and semi-public clients.
Message from
the chairmen
In our second market, Retail Financial Services also prospered with an increase in net income of 50.9% and a return on economic equity (ROEE) of 15.8%. Let me underline the very positive effects of the integration of the two banking networks, Artesia BC and Dexia Bank, in Belgium. Cost synergies totaled EUR 149 million in 2003 versus the EUR 50 to 60 million initially forecast. Dexia Bank aims to become Belgium's best “customeroriented” bank by applying an extremely modern and professional commercial approach with the following characteristics: customer segmentation, significant technological accessibility, instruments to measure customer satisfaction and a highly developed degree of responsiveness. Investment Management Services, which are closely linked to the performance of the stock markets, reported a decline in net income of 13.8% while maintaining ROEE at a high level of 35.3%. With the upturn in the markets, the trend improved at the end of 2003 and the beginning of 2004. We note with satisfaction that our subsidiary Dexia Asset Management was very successful and generated highly respectable results. In particular, the firm gave a great boost to the development of its institutional management business and positioned our Group as a leader in the field of socially responsible investment in Europe. Treasury and Financial Markets activities are not only a center of expertise, with specialized teams in the main market segments, but it is also an important profit center for the Group since it represented 17% of net income in 2003 with a high ROEE of 28.3%. More than ever, we are proud of our motto, the bank for sustainable development, for Dexia promotes the
well-being of our fellow citizens, since it specializes in financing a better way of life and the management of savings. In 2004, we will continue to develop Dexia’s values, which are based on a sense of the long term and of the general interest. We emphasize commercial development and internal growth, while maintaining the strictest standards in risk management and cost control. Our ambition is to confirm Dexia’s status as a “predictable growth stock”. Our multi-year plan for 2004-2006 fuels this ambition, i.e. to generate significant cash flow able to finance our growth and provide proper compensation for our shareholders.
∆
7
Board of Directors, independent members of the Board, control, res
At Dexia, corporate governance incorporates the best international standards. Committed to these values, Dexia strictly applies new regulations. The development of an ethical culture is a key factor in Dexia’s management control system.
nominations, non-executive
pect for rules, compensation, ethics, dialogue, specialist committees,
members of the Board, strategy, internal audit, compliance, Management Board, etc.
Corporate
governance
(1)
Dexia works to apply the best principles of corporate governance by adapting or modifying its organization, discipline and internal rules to the many changes in this area. In 2003, after having transformed its Executive Committee into a Management Board, Dexia transposed into its body of rules the latest guidelines governing the independence of auditors and of Board members. In both these areas, Dexia not only transposed the rules resulting from the Belgian ”corporate governance” law of August 2, 2002 and the Royal Decrees for its implementation adopted in 2003, but it also included international standards of corporate governance, particularly the criteria for independent Board members defined in the Bouton report published in 2002 under the aegis of the French business association MEDEF.
(1) See also Annual Report – Accounts and Reports, pages 14-31.
∆
10
Dexia Annual Report 2003
Cor por ate
governance
Board of Directors As of December 31, 2003, the Board of Directors was composed of eighteen members. The Board of Directors reflects the European presence of the Group with five nationalities represented. There are also the
same number of French and Belgian directors, consistent with Dexia’s Franco-Belgian legal identity, with each of both nationalities representing at least one third of the Board.
Composition of the Board of Directors(1) François Narmon Belgian 69 years old Holds 7,060 Dexia shares(1)
Chairman of the Board of Directors, Dexia
Pierre Richard French 62 years old Holds 29,350 Dexia shares(1)
Group Chief Executive Officer and Chairman of the Management Board, Dexia
Eric André Belgian 49 years old Holds 1,500 Dexia shares(1)
Alderman of Finance, Uccle (Belgium)
Gilles Benoist French 57 years old Independent director Holds 300 Dexia shares(1)
Chairman of the Management Board, CNP Assurances
Rik Branson Belgian 59 years old Holds no Dexia shares
Chairman of the Management Board, Arcofin
Thierry Breton French 48 years old Independent director Holds 1,230 Dexia shares(1)
Chairman and Chief Executive Officer, France Télécom
Guy Burton Belgian 55 years old Holds 2,000 Dexia shares(1)
Chief Executive Officer and Chairman of the Management Board, Ethias
Karel De Gucht Belgian 49 years old Holds no Dexia shares
Lecturer in European Law at Vrije Universiteit Brussel Municipal councilor, Berlare (Belgium)
Didier Donfut Belgian 47 years old Holds 500 Dexia shares(1)
Burgomaster, Frameries (Belgium)
Paul-Louis Halley French Deceased on December 6, 2003 Independent director
Director, Chairman of the Strategy Committee, Carrefour
The list of directors with full information as well as the changes in the composition of the Board in 2003 are available in the Annual Report – Accounts and Reports, pages 15-20.
Denis Kessler French 51 years old Independent director Holds 25,285 Dexia shares(1)
Chairman and Chief Executive Officer, SCOR Group
André Levy-Lang French 66 years old Independent director Holds 38,000 Dexia shares(1)
Associate professor (émérite), Université Paris Dauphine
Francis Mayer French 54 years old Holds no Dexia shares
Chief Executive Officer, Caisse des dépôts et consignations
Roberto Mazzotta Italian 63 years old Independent director Holds no Dexia shares
Chairman of Banca Popolare di Milano
Jan Renders Belgian 54 years old Holds no Dexia shares
Chairman of ACW
Gaston Schwertzer Luxembourg Independent director Holds 55,660 Dexia shares(1)
Doctor of law, Company director
Anne-Claire Taittinger French 54 years old Independent director Holds 1,000 Dexia shares(1)
(2)
(3)
Chairwoman of the Management Board, Groupe Taittinger Chief Executive Officer, Société du Louvre, Groupe du Louvre
Marc Tinant Belgian 49 years old Holds 100 Dexia shares(1)
Member of the Management Board, Arcofin
Sir Brian Unwin British 68 years old Independent director Holds no Dexia shares
Chairman of Assettrust Housing Limited
Frank Beke Observer Holds 1,400 Dexia shares(1)
Burgomaster of Ghent (Belgium)
(1) As of December 31, 2003. (2) Since February 5, 2004. (3) Up till March 6, 2004. of of of of
the the the the
Appointments Committee Strategy Committee Compensation Committee Audit Committee
∆
Member Member Member Member
11
The Board of Directors of Dexia regrets the passing away of Mr Paul-Louis Halley who died in an accident on December 6, 2003. The Board of Directors on March 4, 2004 coopted Mrs Anne-Marie Idrac in order to replace Mr Paul-Louis Halley on a provisional basis. It will be proposed to the next Ordinary Shareholders’ Meeting on May 12, 2004 to appoint Mrs Anne-Marie Idrac to complete Mr Paul-Louis Halley’s mandate which would have ended at the 2007 Ordinary Shareholders’ Meeting.
necessarily be entrusted to different individuals of different nationalities, even when the Chairman of the Board of Directors is unable to preside and is replaced by another member of the Board.
Term of office The term of office of the new members of the Board elected as of May 7, 2002 is a maximum of four years. In this way, Dexia is aligning its practice with recommendations on good governance in this regard.
Responsibilities of the Board of Directors Independent directors In order to reflect the size of the Dexia Group and to ensure greater credibility with respect to the criteria for independence that it intends to apply to its members, the Board of Directors, at its meeting of February 5, 2004, decided to apply criteria for independence that are even stricter than the criteria stipulated by Belgian law for the implementation of Article 524 of the company code and by the governance principles recommended by the Bouton report. The Board of Directors now counts 9 independent directors. Information on independent directors and the independence criteria adopted by the Board of Directors are mentioned in detail in the Annual Report – Accounts and Reports, pages 20-21.
The Board of Directors determines the strategic objectives and the general policy of both the parent company and the Group. It oversees and sets guidelines for management. The Board of Directors appoints the members of the Management Board, approves the measures required to achieve the strategic objectives it defines, monitors the implementation of the company’s management and control programs, and reports to shareholders.
Operation of the Board of Directors The Board of Directors met seven times in 2003. The directors’ attendance rate at Board meetings was 84.8%.
∆
Besides the statutory appointments, the main issues examined by the Board of Directors were as follows: discussion and approval of the 2002 company and consolidated financial statements and a review of the Group’s business results for the 2002 financial year; discussion and approval of the company and consolidated interim financial statements as of March 31, June 30, and September 30, 2003 and a review of the Group’s business results for the same periods; discussion and approval of the Dexia Group’s budget for 2003; discussion and approval of the audit program for 2003; discussion and approval of the principal elements of the new organization of the Group that was implemented as of January 1, 2004;
Non-executive members of the Board of Directors
∆
Non-executive members of the Board of Directors exercise no management functions in the company or any of its subsidiaries. Except for Pierre Richard, who is both Chief Executive Officer and Chairman of the Management Board, the other members of the Board of Directors are all non-executive members.
∆
∆
12
Dexia Annual Report 2003
∆
The articles of association of the company specifically define the rule requiring that the functions of Chairman of the Board of Directors and Chief Executive Officer (CEO) cannot be exercised by the same person. They must
∆
Separation of the functions of Chairman of the Board of Directors and Chief Executive Officer
Cor por ate
governance
The Board conducted a self-assessment during 2003.
∆ ∆
Overall, the 82% satisfaction rate expressed by members of the Board in the questions asked may be considered very satisfactory. The decisions made to respond to the wishes expressed by the Board members included the following points: strengthen the role of the Strategy Committee; increase the number of meetings of the Audit Committee (from 3 to 4); increase the length of the meetings of the Board of Directors; conduct an annual self-assessment; possibility for the Chairman of the Board to request information or assign missions to the Group’s general auditor.
∆ ∆
Self-assessment of the Board of Directors
changes to the audit charter; calling and setting the agenda for and the resolutions to be submitted to the Ordinary and Extraordinary Shareholders’ Meetings.
∆
Each quarter, the Chief Executive Officer provides a report to the members of the Board of Directors in advance of the relevant Board meeting on the activities of the different entities and their subsidiaries. This report focuses on the Group’s four key business lines and gives a detailed picture of Dexia’s position in each of these domains.
∆ ∆
Between meetings of the Board of Directors, the Chief Executive Officer also sends to directors an information letter on major events in the life of the Dexia Group. The statutory rules and internal code of rules of the Board of Directors are given in detail in the Annual Report – Accounts and Reports, pages 21-22.
∆ ∆ ∆ ∆ ∆ ∆ ∆ ∆ ∆ ∆ ∆
discussion and decisions following the selfassessment of the Board of Directors; discussion and approval of the compliance charter and action plan; discussion and reading of the internal audit report and the report on risk assessing and monitoring in 2002; periodic reports of the Audit Committee; monitoring of the Artesia Banking Corporation acquisition, the merger and integration of Dexia Bank Belgium and Artesia Banking Corporation, and monitoring of the integration of these two entities; monitoring of Dexia Bank Nederland; monitoring of the Lernout&Hauspie matter; employee shareholding plan (for Company and Group employees) and stock option plan for 2003; the reports of the Strategy, Compensation and Appointments Committees; strategy and processing of transactions on own shares; review of the Board’s internal code of rules, the internal rules of the Management Board, and the protocol concerning the prudential structure of the Dexia Group following, amongst other, the entering into force of the Belgian “corporate governance” Law of August 2, 2002;
Directors’ compensation In 2002, Dexia’s Ordinary Shareholders’ Meeting resolved to grant maximum global annual directors’ remuneration of EUR 700,000. This meeting also authorized the Board to determine the practical procedures and individual allocation of this remuneration. At its meeting held on May 23, 2002, the Board of Directors resolved to grant each director a fixed remuneration of EUR 20,000 (EUR 5,000 per quarter), and directors’ fees (variable remuneration) of EUR 2,000 per Board meeting or specialist committee meeting. Directors who have been in office for less than one full year shall earn a proportion of this fixed fee equivalent to the number of quarters during which they have effectively been in office. The Chairman of the Board of Directors does not receive any compensation for his position as director. However, at its meeting on March 13, 2000, the Compensation Committee allotted a fixed annual fee to the Chairman, for the full period of his term. This decision, which was approved by the Board of Directors on March 14, 2000, ∆
13
Fees paid to the directors of Dexia SA for the performance of their duties in 2003 (in EUR)
Board of Directors (fix. rem.)
Board of Directors (var. rem.)
Strategy Committee
Audit Committee
Compensation Committee
Appointments Committee
Total
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00 20,000.00 0.00
0.00 14,000.00 0.00
0.00 0.00 0.00
0.00 4,000.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00
0.00 38,000.00 0.00
15,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 5,000.00 10,000.00
12,000.00 14,000.00 4,000.00 4,000.00 14,000.00 12,000.00 14,000.00 12,000.00 12,000.00 12,000.00 2,000.00 6,000.00
0.00 2,000.00 0.00 0.00 2,000.00 0.00 0.00 0.00 2,000.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0,00 0.00
2,000.00 0.00 0.00 0.00 0.00 0.00 2,000.00 0.00 0.00 0.00 0.00 0.00
0.00 8,000.00 0.00 0.00 8,000.00 0.00 0.00 6,000.00 6,000.00 0.00 0.00 0.00
29,000.00 44,000.00 24,000.00 24,000.00 44,000.00 32,000.00 36,000.00 38,000.00 40,000.00 32,000.00 7,000.00 16,000.00
20,000.00
12,000.00
0.00
0.00
2,000.00
0.00
34,000.00
20,000.00 20,000.00 20,000.00
14,000.00 14,000.00 12,000.00
0.00 0.00 0.00
4,000.00 8,000.00 0.00
0.00 0.00 2,000.00
0.00 0.00 0.00
38,000.00 42,000.00 34,000.00
5,000.00
4,000.00
0.00
2,000.00
0.00
0.00
11,000.00
20,000.00
14,000.00
0.00
0.00
0.00
0.00
34,000.00
François Narmon Pierre Richard Eric André Gilles Benoist (1) Philippe Bourguignon Rik Branson Thierry Breton Guy Burton Karel De Gucht Didier Donfut Paul-Louis Halley Denis Kessler André Levy-Lang Roberto Mazzotta Jan Renders Theo Rombouts Gaston Schwertzer Anne-Claire Taittinger Marc Tinant Sir Brian Unwin Pieter Paul Van Besouw Frank Beke (observer)
(1) Gilles Benoist does not wish to receive any compensation for the performance of his duties as director.
was taken in view of the pre-eminent role played by the current Chairman of the Board of Directors in promoting and representing the Group. The Chief Executive Officer does not receive any fee for his position as director. However, he is remunerated for his responsibilities as Chief Executive Officer and Chairman of the Management Board (see page 18).
∆
14
Dexia Annual Report 2003
Board’s specialist committees The Board of Directors has created four specialist committees composed of its own members (Strategy Committee, Audit Committee, Compensation Committee and Appointments Committee). These committees have an advisory role enabling the Board of Directors to take full advantage of individual members’ expertise by allocating specific functions to each member.
Cor por ate
governance
Full attributions of the four specialist committees are given in detail in the Annual Report – Accounts and Reports, pages 23-25.
Strategy Committee Composition The Strategy Committee is composed of six directors, including the Chairman and the Chief Executive Officer, as well as two independent directors. The attendance rate of the directors concerned was 83.3% in 2003.
Attributions
∆ ∆
The Audit Committee is composed of four directors, two of whom are independent. The attendance rate of the directors on this committee was 92.9% in 2003.
∆ ∆
Composition
∆
Audit Committee
∆
∆ ∆
The Strategy Committee met once on June 17 to consider the following issues in particular: the Basel II project; the organization of the Group.
In 2003, the Audit Committee met on January 24, March 7, September 5, and December 19 to review the following issues: a review of the Group’s financial statements and earnings for the periods ending December 31, 2002, and June 30, 2003; six-month interim reports on the internal audit status within the Group; six-month interim reports on the internal audit activities in the Group’s companies; the Risk Management Group’s 2003 report on risk measurement and monitoring; the Group’s compliance charter; the 2003-2008 multi-year audit plan and 2003-2004 annual audit plans; six-month follow-up on the internal audit recommendations; results of audit missions on the process for drawing up consolidated financial statements and the IFRS and Basel II programs; follow-up on the Legiolease and Lernout&Hauspie cases; follow-up on the regulators’ report on the Group’s New York entities.
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Operation and activities in 2003
Operation and activities
∆
The Strategy Committee meets to assess the strategic position of the Dexia Group in view of developments in its markets and trading environment and its mediumterm growth strategies. The Chief Executive Officer also has the power to convene a meeting of the Strategy Committee at any time to enable the members to study sensitive matters before they are put to the Board Directors. Any member may also suggest to the CEO that he convenes a meeting of the Strategy Committee.
Compliance Officer. It also informs the Chief Executive Officer of any such contacts.
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Attributions
The Audit Committee has free access to the statutory auditors, the Group General Auditor and the Chief
∆
The role of the Audit Committee is to ensure (i) the accuracy and reliability of Dexia’s company and consolidated financial statements, including the quality of procedures adopted in their preparation, and (ii) that risks of any kind that Dexia undertakes in its operations, including on- and off-balance sheet items, are properly monitored applying reliable procedures.
Compensation Committee Composition The Compensation Committee is composed of three nonexecutive Group directors, two of whom are independent directors. The attendance rate of directors at meetings of the Compensation Committee was 100% in 2003. ∆
15
Appointments Committee Composition
Attributions The responsibilities of the Committee include the determination of the compensation criteria for the Chairman of the Board of Directors, the Chief Executive Officer and the compensation of senior executives and the shareholding policy for staff members.
Operation and activities in 2003
∆
In 2003, the Compensation Committee held two meetings, on February 26 and November 20. The following subjects were discussed: comparative analysis of the systems in effect in European groups for calculating variable compensation and bonuses; annual survey on compensation levels for members of the Management Board (European benchmark outside the United Kingdom); new group insurance payment for the Management Board of Dexia Bank Belgium; adaptation of the terms of the supplemental retirement contract for the French members of the Management Board of the company; determination of the general conditions of the global shareholding plan reserved for employees and the 2003 stock option plan; monitoring of the conversion of the Artesia Banking Corporation (ABC) options into Dexia options further to the consolidation of the Artesia BC Group within the Dexia Group; initiation of an internal and external benchmark for supplemental retirement plans.
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Attributions The Appointments Committee prepares decisions of the Board of Directors relating in particular to appointments and renewals of terms of office of directors or of members of the Management Board.
Operation and activities The Appointments Committee meets at least once a year prior to the Board of Directors meeting called to prepare the resolutions to be submitted to the Ordinary Shareholders’ Meeting and, during the year, on a justified request from one of its members.
∆ ∆ ∆ ∆
∆
∆ ∆
The Appointments Committee met four times in 2003 on February 27, May 14, September 11, and November 19. Topics discussed included the following: the membership of the Board of Directors; the membership of the specialist committees; the membership of the Management Board; the criteria for independence that may be applied to directors (see above); the age limit for directors; the Board self-assessment.
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∆ ∆
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16
It is composed of six directors including the Chairman of the Board of Directors, the CEO and two independent directors. Furthermore, it is chaired by an independent director. The attendance rate of the directors on this committee was 91.7% in 2003.
Dexia Annual Report 2003
Cor por ate
governance
Management Board Following the implementation of the Belgian “corporate governance” law of August 2, 2002, the former Executive Committee of Dexia was transformed into a Management Board as defined by this law by a resolution adopted by the Extraordinary Shareholders’
Meeting of May 14, 2003 and a resolution of the Board of Directors on May 21, 2003. This name change does not modify the distribution of responsibilities that already existed among the various governing bodies of the company.
From left to right: Claude Piret, Jacques Guerber, Axel Miller, Pierre Richard, Rembert von Lowis, Marc Hoffmann, Dirk Bruneel
Chairman
Members
Marc HOFFMANN
Dirk BRUNEEL
Pierre RICHARD
Rembert von LOWIS
Group Chief Executive Officer
Group Chief Financial Officer
Head of Investment Management Services
Head of Treasury and Financial Markets
Chairman of the Supervisory Board of Dexia Crédit Local
Vice-chairman of the Supervisory Board of Dexia Crédit Local
Chairman of the Management Board of Dexia Bank Nederland
Vice-chairman of the Board of Directors of Dexia Bank Belgium
Director of Financial Security Assurance (FSA)
Chairman of the Management Board of Dexia Banque Internationale à Luxembourg
Vice-chairman of the Board of Directors of Dexia Banque Internationale à Luxembourg Vice-chairman of the Board of Directors of Financial Security Assurance (FSA)
Jacques GUERBER Head of Public/Project Finance and Credit Enhancement Chairman of the Management Board of Dexia Crédit Local Director of Financial Security Assurance (FSA)
Axel MILLER Head of Personal Financial Services Chairman of the Management Board of Dexia Bank Belgium
Director of Financial Security Assurance (FSA) Claude PIRET Group Chief Operations & Technology Officer Director of Dexia Crédit Local
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17
them in February 2003. The Compensation Committee also assigned a study to an outside consultant to support its analysis of the methods for calculating the variable portion.
Composition The Management Board is composed of a maximum of eight members who are appointed and removed from office by the Board of Directors acting on the recommendation of the Chief Executive Officer. The age limit is 65.
The amount of the fixed compensation is set on the basis of the type and importance of the responsibilities performed by each member, with reference to the market for comparable positions.
Changes in the membership of the Management Board at January 1, 2004
The variable portion, which is capped at equal to the fixed compensation for executives and at twice the fixed portion for the Chief Executive Officer, was based in 2003, as in 2002, on the criterion of the Group’s performance, in this case earnings per share, measured through net earnings per share in absolute level and in terms of the change between 2002 and 2003. Elements related to the specific contribution made by members of the Management Board to the growth of their activity and compliance with specific objectives are also used and can increase or decrease their variable portions.
Claude Piret, who was a member of the Management Board of Dexia Bank Belgium, was appointed by the Dexia Board of Directors on November 20, 2003 to the Management Board of Dexia, effective January 1, 2004. He holds the position of Chief Operations & Technology Officer. Information on the functioning of the Management Board and in particular on its attributions, its decision-making process and its meetings are given in detail in the Annual Report – Accounts and Reports, pages 25-27.
Compensation of the members of the Management Board The compensation of the members of the Management Board is set by the Board of Directors on the recommendation of the Compensation Committee. For the third consecutive year, the compensation of the members of the Management Board was the subject of a study conducted by the Compensation Committee with the assistance of a specialized consultant. The conclusions of this report were discussed in the Compensation Committee, which then submitted its proposal to the Board of Directors. The Board adopted
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18
Dexia Annual Report 2003
The total gross annual compensation paid in 2003 to the Chief Executive Officer was EUR 1,410,000. Gross fixed remuneration was EUR 785,000, plus a total variable portion of EUR 625,000. These amounts are to be compared with 2002, a year in which the Chief Executive Officer collected total gross compensation of EUR 1,325,000 including a variable portion of EUR 565,000. The total gross compensation paid in 2003 to the six members of the Management Board was EUR 5,018,000. As part of the 2003 stock option plan, all members of the Management Board received a total of 490,000 Dexia options, 150,000 of which were granted to the Chief Executive Officer.
Cor por ate
governance
On top of their general retirement schemes, Directors of the Board of Directors benefit from specific complementary retirement schemes determined in accordance with applicable national rules and regulations (group insurance, article 39).
DexiaGroup teams On an operational level, the Management Board relies on some fifteen teams totaling nearly 130 senior staff in Brussels and Paris. These teams work transversally throughout the Group. They are charged with directing and monitoring the vital functions of the Group, including audit and ethics, accounting consolidation, risk management and strategic planning. They are also responsible for defining and coordinating Dexia’s policy in the areas of treasury and financial markets, communication, human resources, data processing, etc. Since the end of 2003, they have also been responsible for sustainable development. The Chairman’s office, reporting to Mireille Eastwood, coordinates and monitors the activities of the CEO and the Management Board in collaboration with the general secretariat. It also ensures optimum coordination between Group departments and head office. Mireille Eastwood also heads logistics department of the holding company. Olivier Van Herstraeten, who reports directly to the CEO, is in charge of the general secretariat and the legal and tax department. The general secretariat is principally responsible for ensuring that Dexia SA’s corporate bodies and Management Board function properly in coordination with the Chairman’s office. The legal and tax department deals with issues concerning the Group as a whole. Véronique Thirion has been in charge of the Group’s audit department since March 4, 2004. The General Auditor reports to the CEO.
The Chief Compliance Officer (Group ethics officer) is Jean-Noël Lequeue who reports directly to the CEO (see ethics and compliance page 22-23). The strategic planning and management information team, managed by Yves Guérit, is responsible for producing information to prompt long-term strategic reflection. It is responsible for preparing Dexia’s budget, and for monitoring the Group’s various business lines. The risk management team, headed by Eric Hermann, is in charge of defining and organizing risk management, control and monitoring of Group own funds. The financial communication and investor relations team, headed by Robert Boublil, reports to the CEO. It communicates with investors, analysts and credit rating agencies relating to all relevant Group financial and strategic information. Headed by Françoise Lefebvre, the external communication team reports to the CEO. It is charged with promoting Dexia’s image, especially with journalists, individual shareholders and the general public. Michel Buysschaert heads a team that manages and evaluates mergers, acquisitions and disposals and studies the financial impact of internal reorganizations of Dexia’s subsidiaries and equity investments. Thierry Nederlandt heads the Group accounting and consolidation department and the project to implement the new IFRS accounting policies. The Basel II project is managed by André Delasnerie, assisted by risk management staff. Within the operations and information systems team, André Guilliams is in charge of back offices and Vincenzo Pagliaro manages IT systems and equipment throughout the Group. The human resources and internal communication team, under Bernard-Franck Guidoni-Tarissi’s management, reports to the CEO. Its mission is to ∆
19
The capital integration of the Group was realized in 1999 with the merger of Dexia Belgium and Dexia France. At the end of 2003, Dexia completed a further stage in its integration process. In November 2003 the Dexia Board of Directors approved the major principles and alignments of a new managerial organization which came into being on January 1, 2004. Dexia in Paris
∆
promote an active employment and mobility policy as well as to steer the management of high potential individuals and of senior executives within the Group culture. It also aims at strengthening the group spirit and the identification with the Group’s values and the strategy through an in-house information support.
That new managerial organization rests on four principles:
Daniel Caille is in charge of the Group’s sustainable development team, which is directly linked to the Chairman of the Management Board. Daniel Caille is also the Chairman and Director of the Management Board of Dexia Crédit Local. ∆
The organization of the Dexia Group The creation of Dexia was the result of a business alliance of two banks, Crédit Communal de Belgique and Crédit local de France. That new initiative anticipated the emergence of a single European financial market. Dexia developed in an economic and political landscape successively marked by the implementation of the Single Market and the arrival of the euro.
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20
Dexia Annual Report 2003
Reinforcement of the central role of the Management Board of Dexia SA in steering the Group and its four basic business lines: that reinforcement is reflected in particular by the creation of the post of Chief Operations & Technology Officer (a post occupied since January 1, 2004 by Claude Piret) which will play a decisive role in seeking synergies and in Group integration. The central role of the Group Chief Financial Officer in the implementation of the “strategy - plans budgets” process was also strengthened. Managerial organization of the Group around the four basic business lines, which are: Public/Project Finance and Credit Enhancement, Retail Financial Services, Investment Management Services and Treasury and Financial Markets. This organization is accompanied by the creation of four business line Executive Committees chaired by the four heads of business line, also members of the Group Management Board. These committees are composed of the principal representatives of the business lines within operational entities. Beyond other competences in the management of human resources (senior management in those business lines), these Executive Committees will be charged with initiating the strategy of the business line, defining annual objectives and monitoring results.
Cor por ate
governance
∆ ∆
Organization The internal audit organization is based on three fundamental principles: the strategy, requirement level and operating rules of the internal audit are set by the Management Board and approved by the Audit Committee of Dexia; the internal audit responsibilities are performed by a network of audit teams that conduct their mission under the direction of the Group Auditor, who reports directly to the Chief Executive Officer who is Chairman of the Management Board. The Group Auditor has direct access to the Audit Committee to which he regularly reports on the internal audit operations within the Group; at the same time, both the Audit Committee and the Chairman of the Board of Directors may ask the Group Auditor to conduct an audit; each audit department in the subsidiaries is responsible for the performance of its mission to the Chairman of the Management Board of the entity in question, and also reports to the Group Auditor.
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The Group’s operations are strictly monitored both internally by the internal audit and externally in particular by the Board of Statutory Auditors. (see Annual Report – Accounts and Reports, pages 29-31).
In this context, the internal audit team evaluates whether the risks incurred by Dexia in its activities and in all its entities are identified, analyzed and adequately covered. The internal audit team must also ensure continuous improvement in the operations of the Group.
∆
Auditthewithin Dexia Group
This requirement is consistent with the Group’s desire to ensure that the protection of its reputation and the efficiency and integrity of its structures are priority values.
∆
The Management Boards of the three major founding entities of the Group (Dexia Bank Belgium, Dexia Crédit Local and Dexia BIL) have been organized similarly to the Management Board of Dexia SA, so as to enable efficient and direct collaboration between the heads of the entities and Group heads, both for business lines and for financial and operational functions (Chief Financial Officer and Chief Operations & Technology Officer). In order to serve the two Dexia markets better, public institutions and individuals, the new Group managerial organization involved a redefinition of the perimeters of certain business lines. As from January 1, 2004, the “Equities” activities of Dexia Securities have been transferred to the fourth business line (Treasury and Financial Markets), which allows uniform management of market processes. Furthermore, the significant activities of corporate finance at Dexia Securities have been attached to the first business line (Public/Project Finance and Credit Enhancement). More fundamentally, as from January 1, 2005, private banking activities will be regrouped in the second business line (Retail Financial Services), and insurance activity will be transferred to the third business line (Investment Management Services).
Assignments
Internal audit
Fiscal year 2003 was marked by the completion of a growing number of audits that simultaneously involved auditors from Dexia and the operational units.
Dexia has a homogeneous audit department that complies with the highest standards. The mission of this department is to promote internal control within the Group and to ensure continuous performance and effective application of the control system in effect.
These were primarily audits conducted on strategic projects of the Group: the application of the IFRS and Basel II standards, Group-wide standardization of the IT work stations. ∆
21
Finally, to complete the integration of the sector and increase exchanges between audit departments, an Intranet was developed at the end of 2003 and will be available to the audit network in early 2004.
Ethics and compliance(1)
In addition, each of the Group’s four business lines was the subject of specific audit programs which reviewed credit, market or operational risks. Special attention was paid to the Group’s banking operations in the United States. The different audits completed in 2003 resulted in the development of various plans to correct the weaknesses detected in the internal control system. Each action plan was approved by the Management Board of the relevant entity, and was regularly monitored to ensure that the recommendations developed were effectively implemented.
Since it was created at the beginning of 2003, the ethics and compliance unit has significantly expanded within the Group. Composed of a team of specialists, the unit has worked to establish ties with the other ethics and compliance teams in each of the Group’s three operational entities. This team now benefits from significant autonomy with resulting gains in effectiveness. The mission of this unit has resulted in many working meetings for the Compliance Officers of all the entities in order to harmonize methodologies and procedures in all areas of finance and insurance, at both the international and national levels, and to conduct a complete analysis of the risks related to any ethical failures or failures to comply with laws or regulations.
Ethical principles Methods
Based on this analysis, a general strategy was developed and recommended to the Management Board, which approved it. This strategy was designed to strengthen and apply the Group’s ethical guidelines. These guidelines are based on the following principles: the application of the same ethical principles within all Dexia companies; compliance with both domestic and international laws and regulations; the promotion of a climate of transparency and confidence with customers, employees and shareholders; the definition of a policy to prevent fraud or any other misuse of assets, bypass of systems or information or procedural offenses; continued integrity in conducting operations on or providing information to the financial markets.
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The global approach to risk, the common audit methodology implemented, and the reporting and follow-up procedures established at the level of the parent company all give Dexia an effective internal control system.
∆
This approach will be strengthened in 2004 with the use of a common computer-based audit tool.
∆
Dexia Annual Report 2003
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∆
22
∆
The definition of the audit universe and the methodology for analyzing the risks specific to Dexia were refined in 2003 to ensure consistency and completeness in the approaches. In addition, in an effort to harmonize and improve the quality of the audit work, the auditors increasingly use common indicators developed at Group level.
Cor por ate
governance
Dexia follows international standards to combat money laundering and the financing of terrorism. In particular, Dexia adheres to the recommendations published by the FATF (Financial Action Task Force on Money Laundering) and the Wolfsberg principles for private banking and with our correspondent banks. These principles apply to all entities of the Group. They are reinforced in practice through automated prevention, follow-up and monitoring tools.
The Compliance unit also identifies good corporate governance practices. In particular, it proposed to the Management Board, which adopted them, strict rules for the entire Group concerning the independence of corporate and outside auditors. (1) The compliance is an independent function which identifies, assesses, gives recommendations and takes into account the compliance risk, i.e. the risk of legal or regulatory sanctions, of financial loss of reputation that a bank may sustain as a consequence of having not acted in accordance with law, rules, codes of conduct and good practice standards.
Organization The mission of the Chief Compliance Officer and the Compliance Officers is to ensure the effective application of the Group’s rules of integrity. To succeed in this mission, they rely on two tools: first, the compliance charter, which defines the status and missions of the unit, as well as its organization, powers and duties; and, second, the Group’s code of ethics, approved by all Group entities, which defines the rules of conduct to be applied by all employees. These ethical values and good ethical practices include the prevention of insider trading and the standardization of transactions on Dexia stock by employees for their own account. The principal Compliance Officers meet regularly with control authorities and regulators in the various countries in which the Dexia Group operates in order to identify and apply the best ethical practices.
From our
shareholders
"For me, Dexia is a good example of corporate governance. The Group has always sought to adapt its organization and its body of internal rules to the numerous changes in the field. For example, Dexia applied criteria of independence for the members of its Board of Directors that are stricter than those required by Belgian law and the Bouton report in France. At the recommendation of the Appointments Committee, the Board of Directors chose nine independent members in 2003, out of a total of eighteen Board members. Except for Pierre Richard, all the members of the Board of Directors are non-executive directors. Since May 2002, the functions of Chairman of the Board of Directors and Chief Executive Officer are separate and the term of office of Board members appointed since that date has been reduced to a maximum of four years."
Michel Roi Member of the European advisory committee of individual shareholders
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23
cre dit risk s, o p
control and risk management and to the quality of its commitments. At the present time, the programmed application of the new Basel II regulations mobilizes corporate teams within the Group in each business line.
ark Basel II, m et risks, id en tify ,
the greatest attention to risk
capital, co n t r o l , assets/liabilitie s ,
Since its creation, Dexia pays
ic om con s, e isk al r on
erati
me
asure,
diversifi c
mitments m o S, c R IF , n atio
Risk
management
Major projects in 2003
Credit risks
Dexia’s consolidated exposure as of December 31, 2003 The Group’s total exposure slightly declined from EUR 602 billion as of December 31, 2002 to EUR 575 billion as of December 31, 2003, down 4.5%, largely due to the fall in the US dollar against the euro (-17.2%).
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Two specialized risk committees exist at Group level concerning credit risk management: Credit Risk Policy Committee defines the Group’s risk profile and risk guidelines; Dexia Credit Committee rules on questions that are beyond the scope of the delegations granted to operational entities.
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The Group Risk Management team oversees Dexia’s risk policy under the guidance of Dexia’s Management Board or specialized risk committees. It sets Group guidelines on limits and delegations, sets and manages the risk assessment function and decision processes and it implements Group-wide risk assessment methods for each of the bank’s business lines and operational entities.
As to the monitoring policy of credit risks, the Management Board decided: a reduction of the maximum commitments on banks with a low rating as well as a rationalization within the Group of the use of the limits on local banks; a specific methodology of accounting and limitation of the risks on monoline insurers.
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Organization
In 2003, one of Dexia’s major risk management projects was the formalization and the operational implementation of homogeneous internal rating systems for all counterparties of the Group.
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26
Dexia Annual Report 2003
Exposure in the local public sector increased by more than 6% in 2003 to EUR 282 billion. It accounts for 49.0% of total Group exposure. This increase pertains to the Group as a whole and FSA’s commitments in this
Risk
management
Exposure by category of counterparty Other 1.2% Financial institutions 9.8% PPEI (individuals, professionals, self-employed, SMEs) 5.1%
Central governments 8.1%
Project Finance 1.2%
Exposure by geographical region
ABS/MBS 19.4%
Local public sector 49.0%
Monoline insurers 1.3% Corporate 4.9%
Belgium
14.5%
France
14.3%
Italy
7.2%
Germany
4.6%
Luxembourg Other EU countries Eastern Europe Rest of Europe
sector have increased by 24% in terms of volume (+2.7% taking into account the dollar effect). Exposures on asset-backed securities (ABS), booked mainly at FSA (86%), have decreased for the second consecutive year to EUR 112 billion against EUR 137 billion as of December 31, 2002 (-18.7%). These ABS are of very high credit quality, more than 55% being AAA-rated and more than 85% being at least A-rated. As of December 31, 2003, the Group’s exposure is mainly concentrated in the European Union (53.3%), particularly in Belgium (14.5%) and in France (14.3%).
1.7% 11.0% 0.3% 0.7%
United States and Canada
40.5%
South and Central America
0.1%
Japan
0.4%
Southeast Asia Other
0.1% 4.6%
Group’s exposures in the United States and Canada represent 40.5% of total, against 42% as of December 31, 2002 due to the fall of the USD. Calculated in US dollars, the exposure in this part of the world increased by 11% over the year. In euros, however, it decreased from EUR 253 billion to EUR 233 billion (-7.9%) over the same period. Only 0.5% of total exposure is located in Eastern Europe, Southeast Asia and South and Central America, i.e. a marginal and slightly decreasing part compared with 2002. It relates to Project Finance and Credit export for which risk is mitigated.
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27
FSA’s creditmanagement risk FSA restricts its business to market sectors characterized not only by low loss probability but also by low loss severity and high recovery rates in the unlikely event of a claim on its guarantee. All transactions must be at least investment-grade quality before FSA insures them, must meet its legal and structuring requirements and fit within single and aggregate risk limits.
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28
FSA: portfolio ratings BBB 12%
Non-investment grade 1%
AAA 25%
A 35%
AA 27%
Before insuring a municipal bond, FSA typically requires a pledge of tax revenues or a claim on a dedicated revenue stream from essential public services. In the asset-backed market, FSA guarantees senior tranches structured to withstand substantial deterioration in the underlying asset performance before FSA would be called upon to pay a claim. Most of its asset-backed securities (ABS) transactions are structured to have collateral protection that increases over time and to have self-correcting mechanisms that are triggered to restore protection if collateral performance falls below established minimums. For example, cash flows may be shifted from subordinate to senior insured tranches or accumulated in a reserve fund. Where circumstances warrant, FSA transfers servicing or replaces collateral management.
solicits opinions from outside counsel to ensure that structures perform as intended. Once a transaction is guaranteed, FSA monitors the issue throughout its life, so that FSA can spot potential problems and take action before they become serious.
Thorough due diligence is the hallmark of FSA’s underwriting process. FSA routinely conducts site visits and file review to verify issuer information. Internal legal staff reviews documents and, in many cases,
Through its disciplined underwriting approach, FSA has assembled an extremely conservative insured portfolio: 87% of net par insured is of A quality or higher, and 52% is AA or higher.
Dexia Annual Report 2003
Reinsurance also plays a key role in the overall risk management program. Just as banks syndicate loans in order to address single-risk concerns, FSA reinsures transactions with a group of AA and AAA reinsurance companies.
Risk
management
Basel II reform
The Group has therefore decided to adapt its credit evaluation systems to bring them into line with future regulations. The work realized in 2003 was mainly focused on:
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completing the adaptation of the methodological concepts upon which the reform is founded to the Group’s specific situation;
Market risks Market risks are all the risks linked to the fluctuations of market prices (interest rates, exchange rates, share prices...) applicable to the Group’s capital market activities. The market risks generated by the other commercial businesses are generally hedged and residual risks are handled by the Asset and Liability Management function (or ALM). Dexia’s market risk exposure is mainly to European interest rates. The risks in equities and in foreign exchange remain much smaller.
overhauling existing rating systems to bring them into line with this new situation – specifically, this has led to setting up a European rating system that draws on Dexia’s unique experience in the local public sector;
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The Quantitative Impact Study – QIS no. 3 – which took place in late 2002 was designed to estimate the effects of the new calculation methods. At the end of this report, it was observed that, taking into account the excellent quality of Dexia’s commitments and the very substantial share of credits outstanding in the local public sector, application of the “Internal Ratings Based Approach – IRBA Advanced” for credit risks could generate a potentially substantial gain of regulatory capital (for operational risks, see the specific section on pages 32-33).
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This reform was defined by the central bankers and the regulators involved in the “Basel Committee on Banking Supervision”. It is aimed at improving the supervision of credit institutions and the calculation of the regulatory capital required.
selecting a single IT tool to monitor the credit risks at Group level. All management systems of the various entities will merge their information according to a unified data model and use this tool.
The dedicated Group-level project management team, set up in 2002 to take care initially of methodological aspects, has been augmented with a highly structured IT organization, to manage this project successfully. The Group’s Management Board closely monitors the entire Basel II project. In early 2004, it explicitly confirmed the application of new internal rating systems in the main activity sectors, thus preparing the Dexia Group for “IRBA Advanced” approval by the end of 2006, subject of course to the decision of regulators. The project was implemented in 2003, in close harmony with the IFRS project, which has very closely related constraints, particularly regarding information systems.
The main risk indicator within the Group is the value at risk (VaR). The VaR calculated by Dexia is a measure of the potential loss that can be experienced with a level of confidence of 99% and for a holding period of 10 days. For most positions, the “parametric” method is applied. For some optional positions, a “historical” or Monte Carlo VaR, or a specific VaR on the “vega” (sensitivity to market volatilities) is computed. Besides the VaR, the risk level is also constrained by nominal volume limits, limits on basis point interest rate sensitivity and spread sensitivity, limits on option sensitivities.
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29
Value at risk 2003
Organization of the control The main decisions for the market risk management (overall risk limits, choice of the risk indicators, organization of the reporting and of the decision processes) are taken by Dexia Management Board, advised by Group Risk Management (GRM). It is the task of GRM, in collaboration with the Risk Management teams of the entities, to translate these decisions into precise and detailed limits and procedures. GRM is also in charge of defining the calculation methods that are to be applied within the Group for the computation of the statement of income as well as for measuring the risks. The day-to-day operational control (computation of the risk indicators, control of the limits...) is first carried out by the entities’ risk management teams. The work is coordinated by the GRM responsible for ensuring the coherence and the quality of risk control within the whole Group.
Exposures The financial activities of Dexia are mainly oriented as a support function for the Group. In 2003, VaR limits have decreased as the proprietary management activity had been closed in the first quarter of 2003 confirming the willingness of Dexia to lower its risk profile.
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30
Dexia Annual Report 2003
VaR 10 days – 99%
Average
Maximum
(in millions of EUR)
Financial engineering Money Market Forex Fixed Income Dexia Nederland
8.9 12.5 1.0 1.0 1.0
16.2 24.2 2.3 3.1 2.1
Dexia
22.7
35.1
The above figures show a decrease of the risks levels compared with last year. The average VaR consumption is below EUR 23 million, while it was EUR 36.6 million in 2002.
Asset and Liability Management (ALM) Measurement of the balance-sheet risks is harmonized among the Group’s various entities. A calculation of value at risk (VaR) – with a confidence level of 99% and a holding period of 20 days – and of the sensitivity of the net present value (NPV) of the ALM positions are used as the main ALM indicators. The risk exposure is primarily to long-term interest rates in Europe and results from the
Risk
management
difference between the amortization profiles of the fixedrate assets and liabilities. In order to manage the level and the sensitivity of accounting results in a time frame, Dexia Management Board has set up an earnings at risk framework in 2003. Earnings at risk are part of the ALM scope.
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Even though the operational Asset and Liability Management remains decentralized in Dexia’s three major entities, two regular monitoring processes allow Dexia ALM risks to be supervised globally: a monthly meeting of the ALM managers where they share their views on the evolution of the markets and the details of the hedging policy for the coming month; the Dexia ALM committee, which includes the members of the Management Board, monitors the overall consistency of the Group’s Asset and Liability Management. The ALM committee also decides on the methodologies and the risk measurement guidelines, notably on the investment of shareholders’ equity and on internal transfer pricing mechanisms.
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In addition, a monthly report on the positions is made to the Management Board.
Liquidity management
∆
Given the size of Dexia’s balance sheet, the balance between its resources and their use is carefully managed. In practice, attention is paid to two main concerns: the adequacy of expected new lending production (in maturity and amount) with the available resources; the Group’s liquidity needs, even in troubled times.
The first question is addressed in the annual planning process. Each year, the forecasts for the new lending production are compared with the funding capacity. The purpose is to preserve an acceptable liquidity gap profile (i.e. the evolution over the years of the cash shortages/surpluses resulting from the difference between the repayment dates of the assets and of the liabilities). Besides, the Group has decided to improve its analytical accounting process, in order to reflect more accurately the funding cost of the transactions originated by the business lines, whether they require funding or bring funding. The purpose of this kind of “internal market” for liquidity is to provide the right incentive to the business lines to achieve a match between the lending and the funding capacities.
∆
The second question is addressed by way of various scenarios representing highly stressed situations. These scenarios are then translated into a set of limits and ratios. They are designed so that Dexia can withstand for several months, thanks to its liquidity reserve (notably the Credit Spread Portfolio), a total squeeze of funding and a stress on deposits while maintaining its lending activity. The liquidity position is monitored and controlled from one day up to several months. Great care is given to the forecast of the expected liquidity needs in the main currencies as well as to the estimate of the liquidity reserve. Special attention is also paid to off-balance sheet liquidity commitments of the Group. Given their importance, all the main issues regarding the liquidity of the Group are directly managed by the Group’s ALM committee, which includes all the members of the Management Board.
∆
31
coordinating a general framework. Specifically, the operational risk managers will define a methodology, select the appropriate means and tools to implement it and build standard reporting across the Group.
Operational risks
Finally, the Group Operational Risk Management Committee was created in 2003. This committee decides on the policies related to operational risk and reports to the Management of the Group.
Organization The Basel committee defines operational risk as “the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events”. The management of operational risks implemented in 2003 is very decentralized in order to allow for a reactivity close to the source of identified problems. This structure is organized according to three levels: “operational risk correspondents”, the heads of the risk management team and the operational risk committee. “Operational risk correspondents” appointed within all major Dexia Group entities and activities will collect operational loss events and input them in a Group-wide loss database; coordinate the risk and control self-assessments for their respective activities; and ensure all necessary data is available for reporting purposes at local and Group levels. In line with this structure, the operational risk function within Group Risk Management takes the lead in defining and
∆
32
Dexia Annual Report 2003
Implementation of a database An IT tool dedicated to the collection of operational risks data was developed in 2003 in order to meet Basel II requirements in terms of a sufficiently long historical operational loss event data set. This database will also allow Dexia to continue to improve its understanding and management of operational risks per business line, which will in turn allow for a better understanding of the operational risk profile of the Dexia Group. This consolidation of information will allow for the quick detection and correction of procedure errors and for the monitoring of their corrective measures. Within the next two years, this operational risk management system will be supplemented with the inventory of potential events which could have a significant impact on the Group. A Group-wide joint approach will be defined and tested in 2004 and a risk database will be implemented in 2005.
Risk
management
Calculation of operational risk capital requirements
∆
In terms of regulatory operational risk capital requirements, the Basel committee proposes three methods, i.e. the basic, standard and advanced methods. In view of its size and international activity base, the Group will have to pick the second or third method. This delay in decision is based on two factors: the final Basel II accord will only be published sometime in 2004, and therefore with it the exact definitions in terms of capital requirements for the “advanced” method. The only definite requirement is the need for a historical operational loss event data set of minimum three years on January 1, 2007. The implementation of a collection tool and of an operational risks database on January 1, 2004 will enable the Group to meet this requirement; the qualitative criteria of both the “standard” and the “advanced” methods are so similar that Dexia is already bringing in line its operation “risks procedures”.
Economic equity Economic equity takes into account the risks faced by the Group under catastrophic scenarios. As of December 31, 2003, total economic equity amounted to EUR 7.80 billion (EUR 8.10 billion as of December 31, 2002). After diversification between the Group’s business lines, this figure was EUR 6.63 billion (EUR 6.85 billion as of December 31, 2002). This difference of EUR 1.17 billion (EUR 1.25 billion as of December 31, 2002) corresponds to the portfolio effect due to the presence of different business lines within the Dexia Group, which are subject to partially independent risks.
∆
The Dexia Group has therefore decided that it will choose a calculation method applicable to its equity only once the definitive version of the Basel Accord is published in 2004.
From our
shareholders
“Following the scandals that destabilized the financial markets in 2002 and 2003, the management and prevention of risks truly represent a major priority for the banking community and, closer to home, for Dexia. The Group has a structurally low risk profile. In my opinion, it is one of the rare banks that has both a high level of outstanding commitments and a particularly low risk index, which is estimated at 5.7 basis points for its banking activities and 1.2 basis point for the credit enhancement activities of its American subsidiary Financial Security Assurance (FSA). Within the framework of the Basel II reform, risk management teams accomplished an enormous task in 2003 to adapt credit risk evaluation systems and ensure their compliance with the new regulations.”
François Springuel Member of the European advisory committee of individual shareholders
∆
33
∆ ∆
The amounts allocated by business line at year-end 2003 are as follows. ∆
∆
∆
Public and Project Finance and Credit Enhancement: EUR 3.71 billion (same as of December 31, 2002). The growth requirements of the activity are offset by the effect of the declining US dollar. Retail Financial Services: EUR 1.80 billion (EUR 1.75 billion as of December 31, 2002). This stability reflects the success of the integration of the commercial bank activities of BACOB Bank and of insurance.
Investment Management Services: EUR 0.45 billion (EUR 0.61 billion as of December 31, 2002). This decline reflects a reduction of activity in the Dutch operations and in brokerage. Treasury and Financial Markets: EUR 0.85 billion (EUR 1.18 billion as of December 31, 2002). This reduction reflects the desired contraction of the Credit Spread Portfolio and the termination of Proprietary Management. Equity not allocated to the business lines: EUR 1.00 billion (EUR 0.81 billion as of December 31, 2002).
Economic equity takes into account the risks faced by the Group under catastrophic scenarios. The excess capital helps keeping the level of solvency and credit ratings of Dexia at desirable levels.
Capital adequacy and risk-weighted assets Capital adequacy (in millions of EUR) 2000
2001
2003
Tier 1 capital
6,909
9,686
10,197
10,509
7,245
11,911
11,741
11,917
74,007
103,633
109,365
107,683
Tier 1 ratio(1)
9.3%
9.3%
9.3%
9.9%
Capital adequacy ratio(1)
9.8%
11.5%
10.7%
11.2%
Risk-weighted assets
(1) The profit for the financial year minus the proposed dividend is included in the shareholders’ equity.
∆
34
2002
Total regulatory capital(1)
(1)
Dexia Annual Report 2003
Risk
management
With no specific equity operations in 2003, the Group’s Tier 1 equity increased by 3.1% thanks to retained earnings.
The equity and capital adequacy ratios rose considerably. This is due to the increase of the exposures’ relative share on less risk-weighted local public authorities in Dexia’s commitments.
Risk-weighted assets (in millions of EUR) 2000
2001
2002
2003
20% weighted counterparties
23,485
28,297
29,673
28,772
50% weighted counterparties
5,854
9,968
10,103
10,190
100% weighted counterparties
38,383
57,267
61,201
57,717
6,286
8,101
8,388
9,861
74,007
103,633
109,365
106,540
Trading portfolio Total
Asset quality (in millions of EUR) Doubtful loans Nonperforming loans Write-downs (2) Nonperforming loans/gross outstanding loans Coverage ratio
2000 666 239 588
2001(1) 1,064 833 1,266
2002(1) 1,153 789 1,320
2003(1) 991 717 1,243
0.18% 65.0%
0.54% 66.7%
0.50% 68.0%
0.44% 72.80%
(1) Including Artesia BC. (2) Does not include the general provision set aside to cover potential risks on Legiolease products.
Asset quality remains high: at 0.44% of nonperforming loans, the bad debt ratio is low and the coverage ratio (72.8%) is the result of a conservative policy of Dexia
regarding the monitoring of its doubtful and nonperforming loans.
Ratings The high rating levels reflect the financial strength of Dexia Group. In 2003, Moody’s and S&P confirmed their Aa2/AA rating as Fitch confirmed its AA+ rating. The rating of FSA and Dexia Municipal Agency are the best financial ratings that could be given
to a counterparty (Aaa/AAA/AAA by Moody’s, S&P and Fitch). These ratings allow the Group to obtain the resources it needs in the best price and volume conditions (see financial profile).
∆
35
ro
Stoxx Banks, Do
es Sustainability Index w Jon
F TSE Eurotop
100 ,
u CI Europe Banks, Dow Jones E S M
CAC 40, BEL20, Paris, Bru s
, Luxembourg, Euronext 100, sels
IE
urozone, FTSE4G
hibel Sustainability Index “Europe” & “Global”… urope” & “Global”, Et E “ d oo
P “World”, A S
Dexia shares are traded in Paris, Brussels and Luxembourg and are included in the most important European stock market indices, including those based on criteria of social and environmental responsibility. The Group ranks among the 15 leading financial institutions listed on the stock market in the euro zone. Attentive to its shareholders, Dexia has implemented an active dividend policy since its creation.
Dexia’s share and
shareholders Since its creation, Dexia has always been attentive to the quality of relations with its individual and institutional shareholders. The Group is constantly focused to respect its commitments in an effort to enhance dialogue and transparency in their regard. After the significant stock market and geopolitical uncertainty, that marked the first months of the year and affected Dexia’s share price, 2003 was finally rather positive for the stock market as well as for the Group, which won back investor confidence and reclaimed its profile as a predictable growth stock. Dexia has an active dividend distribution policy. Shareholders have always received a high dividend, with a significant dividend payout ratio of approximately 40% As a European banking group, Dexia intends to be one of the first companies to adopt the legal status of a European company by the end of 2004.
EUR
0.53
16.1%
(1) The gross dividend paid to shareholders rose by 10.4% compared with 2002.
(2)
16,000 (1) Dividend proposed at the Shareholders’ Meeting of May 12, 2004. (2) Average rate on Euronext Paris and Brussels.
∆
38
Dexia Annual Report 2003
Increase of the Dexia share over 2003.
Shareholders who are members of the European Club of Dexia individual shareholders.
Dexia’s share and
s h a re h o l d e r s Dexia shares are traded on Euronext Paris and Euronext Brussels as well as on the Luxembourg stock exchange. Dexia figures in the main European stock market indices – Euronext 100, FTSE Eurotop 100, MSCI Europe Banks, Dow Jones EuroStoxx Banks – as well as in the CAC 40 in Paris and the BEL20 in Brussels. It is also listed in the main stock market indices based on criteria of social and environmental responsibility – Dow Jones Sustainability Index “World”, ASPI Eurozone, FTSE4Good “Europe” and “Global”, Ethibel Sustainability Index “Europe” and “Global”.
Shareholding structure As of December 31, 2003, the composition of Dexia’s shareholding structure did not basically change and the percentage of capital held by the four traditional shareholders rose slightly in one year from 42.18% to 43.66%. Among the stable shareholders, Arcofin held 15.29% of Dexia’s capital as of December 31, Holding Communal 14.93%, the group Caisse des dépôts et consignations 7.71% and Ethias (formerly the SMAP Group) 5.73%. Within the framework of the obligation to declare the crossing of an acquisition or disposal threshold of 3% of the capital, at the end of 2003 Deutsche Bank held 3.12% of the capital. At the same date, and to the knowledge of the company, no individual shareholder, with the exception of those previously mentioned, held 3% or more of Dexia’s capital. The percentage of capital held by Dexia employees also increased, following a new capital increase reserved to the workforce. As of December 31, 2003, it totaled 4.14%, compared with 3.50% at the end of 2002. At the same date, company-owned shares represented 2.77% of the capital versus 1.7% at the end of 2002. Lastly, as of December 31, 2003, the company’s directors held 161,985 shares in the company. Dexia has no knowledge of agreements binding its principal shareholders or groups of shareholders or directors.
The
Dexia share in 2003
If the beginning of the year was marked by a depressed stock market linked to a difficult international environment, the outcome of the Iraqi conflict put an end to a period of doubt. Since then, stock market indices have risen in an uninterrupted way, breaking with three years of lackluster market performance. In the United States, NYSE indices were boosted by the excellent performance of technology stocks and reached impressive levels, with the NASDAQ and the Dow Jones indices rising more than 50% and 25%, respectively.
∆
The Dexia share is listed in Brussels, Paris and Luxembourg.
∆
39
The euro shows its mettle In Europe, the year’s champion was the euro. The more than 20% appreciation of the European currency vis-àvis the US dollar did not, finally, have an adverse affect on European stock markets. Only the markets in which financial scandals came to light were weakened. At the front of the pack was the DAX index, which rose more than 37% under the double impact of signs of an economic recovery in Germany and speculation linked to possible restructuring in the German banking sector. In France, the CAC 40 index increased by 16.1%, while the FTSE and the BEL20 were up 13.6% and 10.8%, respectively. Amsterdam, which felt the backlash of the Ahold affair, rose only 4.6%, like Milan where, in the last few days of December, the default of Parmalat largely overshadowed the growth in the MIB30 (+11.8%).
The banking sector boosts European stock markets On the basis of EuroStoxxs sector criteria, the banking sector was the big winner in 2003, owing to speculation on German banks, the merger of Crédit Agricole and Crédit Lyonnais, the excellent results reported by French banks and the recovery of Italian banks. In addition, the performance of the Spanish bank Santander Central Hispano, up 43.6%, also contributed to the sharp rise in the EuroStoxx Banks index, which rose almost 31% in 2003. Outside of the euro zone, performance was less significant, e.g. the Stoxx Banks index, which increased by 21.7% in the same period.
The Dexia share, the CAC 40 and the BEL20 After two years of decline, Dexia shares made a significant comeback in a market that was very unsettled, especially in the first quarter of 2003. At closing on December 31, Dexia reported an increase of 16.1%, 16.8% in Paris and 15.5% in Brussels. The share price was very volatile with a 94% gap between the year’s lowest price (EUR 7.10 on March 11) and the highest price (EUR 13.81 on November 10). Dexia outperformed the BEL20 which gained 10.8% and recorded almost the same rise as the CAC 40 (16.12% exactly versus 16.13% for Dexia). Dexia outperformed the EuroStoxx50, up 15.6%; but did not do as well as the EuroStoxx Banks index, which climbed 31% in 2003, as explained above. Finally, since the creation of the Group in 1996, Dexia has continued to progress at a yearly average of 9.8%; since Crédit local de France was first floated on the stock exchange in 1991, the rise is even greater at 13.2% per year.
ISIN codes* Since June 30, 2003, securities listed on Euronext Paris are officially identified by their ISIN code. ISIN Code Dexia shares in Paris
BE0003796134PAR
Dexia shares in Brussels
BE0003796134BRU
VVPR strips in Paris
BE0005587580PAR
VVPR strips in Brussels
BE0005587580BRU
*International Securities Identification Number.
∆
40
Dexia Annual Report 2003
Dexia’s share and
s h a re h o l d e r s Dexia’s stock market performance* (from November 1996 to March 2004) €
23 21 19 17 15 13 11 9 7
Average Dexia
EuroStoxx Banks
03/04
11/03
05/03
11/02
02/02
05/01
08/00
11/99
02/99
05/98
08/97
11/96
5
EuroStoxx50
*Price average on Euronext Brussels and Paris.
€
Dexia’s stock market performance in Brussels and trading volume 45,000,000
25
40,000,000 20
35,000,000 30,000,000
15
25,000,000 20,000,000 10
15,000,000 10,000,000
5
5,000,000
-
Monthly trading volume
Dexia
12/03 03/04
03/03
06/02
08/01
11/00
01/00
04/99
06/98
09/97
11/96
-
BEL20
Dexia’s stock market performance in Paris and trading volume 90,000,000
25
80,000,000 20
70,000,000 60,000,000
15
50,000,000 40,000,000 10
30,000,000 20,000,000
5
10,000,000 -
Monthly trading volume
Dexia
12/03 03/04
03/03
06/02
08/01
11/00
01/00
04/99
06/98
09/97
-
11/96
€
CAC 40
∆
41
Stock market data Share price as of December 31, 2002 (EUR) Share price as of December 31, 2003 (EUR) Highest/lowest price (EUR) Average daily trading volume (in millions of EUR) Number of shares traded daily (thousands)
Brussels
Paris
11.83 13.66 13.81 – 7.10 15.87
11.67 13.63 13.80 – 7.11 28.47
1,397
2,517
Number of shares outstanding As of Dec. 31, 1999
As of Dec. 31, 2000
As of Dec. 31, 2001
As of Dec. 31, 2002
As of Dec. 31, 2003
804,406,460
975,482,350
1,166,813,164
1,181,685,852
1,175,222,680
23,005,560 3,364,150
21,321,110 10,099,640
11,867,710 18,331,214
20,082,005 31,809,349
32,546,412 43,301,416
Total number of shares and options(1)
807,770,610
985,581,990
1,185,144,378
1,213,495,201
1,218,524,096
Weighted average number of shares(2)
774,762,770
870,841,830
1,137,242,884
1,150,867,134
1,157,363,982
Number of shares of which company-owned Employee stock options
Data per share EUR Net income, Group share Net assets excluding general banking risks reserve, Group share(4) Net assets including general banking risks reserve, Group share(4) Gross dividend Net dividend(6) (3)
2000
2001
2002
2003
1.15
1.25
1.13
1.24
6.41
6.73
7.20
7.68
8.02 0.43 0.32
8.39 0.48 0.36
8.79 0.48 0.36
9.25 0.53(5) 0.40(5)
Stock market ratios In millions of EUR Dividend payout ratio (%) Price-earnings ratio P/E(9) Price to book ratio(10) Annual yield (%)(11)
(7)
2000
2001
2002
2003
41.9 16.8 2.4 2.2
39.3 12.9 1.9 3.0
43.0 10.4 1.3 4.1
42.1(8) 11.0 1.5 3.9
(1) Not including bonds convertible into shares. Also consult the legal information at www.dexia.com. (2) Not including company-owned shares. (3) Ratio between the net income and the weighted average number of shares. (4) Net assets after deduction of company-owned shares (on the basis of shares held at the end of the financial year). (5) Dividend proposed to the Ordinary Shareholders’ Meeting of May 12, 2004. (6) After payment of Belgian withholding tax at a rate of 25%, reduced to 15% for shares with a VVPR strip. (7) Ratio between distributable income and net income, Group share. (8) Estimated dividend payout ratio. (9) Ratio between the average share price as of December 31 and net income per share as of December 31. (10) Ratio between the average share price as of December 31 and net assets (including the general banking risks reserve, Group share) per share as of December 31. (11) Ratio between the gross dividend per share and the share price as of December 31.
∆
42
Dexia Annual Report 2003
Dexia’s share and
s h a re h o l d e r s
Customized tools for individual shareholders Dexia has developed a system to provide individual shareholders with regular, transparent and interactive information. This system comprises a shareholders’ club, a European advisory board of individual shareholders, meetings in different cities, specific publications, a telephone information service and Internet updates in real time. In addition, Dexia works to ensure that shareholders in Belgium and France are treated on equal terms given the major difference in tax regulations and shareholding cultures in the two countries. This attention is particularly evident in the new individual shareholders’ guide published by the Group at the end of 2002 and updated at the beginning of 2003.
European club of individual shareholders This club took over from Dexia France’s shareholders’ club in 2000, after the merger of Dexia Belgium and Dexia France. It now has more than 16,000 members, mainly Belgian and French shareholders. The club’s primary purpose is to provide financial information to individual shareholders who wish to keep up to date on Group developments through publications and
documents specifically designed for club members. Dexia shareholders can join the club over the telephone (there is a toll-free number in France) or via the Group’s Web site at www.dexia.com.
Shareholders’ information meetings in different regions Dexia regularly organizes information meetings in different cities to discuss the Group’s businesses, strategy and results with shareholders. In 2003, Pierre Richard, Chief Executive Officer and Chairman of the Management Board, met with shareholders in Rennes, Paris and Toulouse at events organized in partnership with French financial newspapers. The Group also participates, together with other firms, in meetings organized by Euronext, the Cercle de liaison des informateurs financiers in France (CLIFF) and the Fédération française des clubs d’investissement. In 2003, Dexia met with its shareholders in Lyons, Lille, Saint-Etienne, Metz, Biarritz and Tours. Every year, Dexia has a stand at the Actionaria shareholder convention in Paris, an event organized to put investors in direct contact with participating companies.
Information supports Dexia publishes a shareholders’ newsletter in French and Dutch at least three times a year. This publication keeps individual shareholders up to date on developments in the Group, its results and decisions taken at Shareholders’ Meetings. Sent to members of the shareholders’ club and to anyone who so requests, these newsletters are also available on the Group’s website. Dexia also publishes a condensed annual report. Designed particularly
∆
Dexia won the Top Com Corporate Business 2004 Grand Prix for its 2002 annual report. The jury particularly appreciated the transparency and comprehensive nature of the information it contained, as well as its clarity and innovative design. ∆
43
∆
Throughout the year, Dexia provides regular, comprehensive information to its individual shareholders.
Internet site The Internet site www.dexia.com is a complete information tool that is updated in real time. In 2003, the Group’s Internet site was completely restructured in order to improve its architecture and graphics, facilitate navigation, enrich the contents, structure the information and provide full information adapted to the needs of the different users – journalists, institutional investors and individual shareholders. ∆
44
Dexia Annual Report 2003
∆
for individual shareholders, it is available in English, French and Dutch. By the same token, on the occasion of the announcement of the Group’s quarterly, semiannual and annual results, Dexia publishes financial notices in the Belgian, French, Luxembourg and English-speaking press. The Group’s guide for individual shareholders, first published in 2002, was reprinted at the beginning of 2003. The guide was designed as a practical tool to help shareholders to trade shares, manage their portfolio, deal with tax issues and participate in the life of the company. Through this guide, Dexia aims to make the Group better known in individual shareholder circles, indicate the usual rules to follow when placing orders on Euronext markets, and highlight specific tax provisions in Belgium and France according to the country of residence.
The remodeling of the site targeted two main objectives: first, to develop a portal approach by concentrating the maximum amount of practical and thematic information on the homepage and, second, to encourage interactivity by proposing a variety of services (mailing lists, new press release alerts, etc.). Dexia’s site has been very successful. In 2003, it received 40,000 hits per month, up 30% from 2002, and the average connection time was approximately 15 minutes. The Financial Times ranked the site’s editorial content among the top four sites of major European financial groups and first among Belgian and French banks.
In 2003, Dexia restructured its Internet site in order to enhance its architecture, facilitate navigation and enrich its contents.
Shareholders’ Meetings A major event in the life of the company, the Ordinary Shareholders’ Meeting is the occasion for Dexia to make use of specific forms of communication, such as an official notice in the Belgian and French Gazettes, announcements in major financial newspapers in France and Belgium, reminders via the toll-free telephone information service and shareholder information kits available in English, French and Dutch, which can be downloaded from the company’s website. Since 2000, the Ordinary Shareholders’ Meeting is broadcasted live over the Internet, thereby enabling shareholders who cannot attend in person to follow the proceedings.
Dexia’s share and
s h a re h o l d e r s
European advisory board of individual shareholders
∆
Created in June 2001, Dexia’s European advisory board of individual shareholders took over from the shareholders’ advisory board of Dexia France, formed in 1997. Its composition reflects the Group’s European identity. The current nine members will soon be joined by three new members, one from Belgium and two from Luxembourg. The board is an important link in the chain of information with the Group’s other shareholders. The board also plays a key role in optimizing Dexia’s communication with individual shareholders. Chaired by Pierre Richard, the shareholders’ advisory board meets two or three times a year. Every year, one of its members makes a presentation and reports on the board’s activity at the Ordinary Shareholders’ Meeting.
In Paris, Dexia publishes a survey on individual shareholders during the Actionaria convention.
Dexia/Sofres Poll for 2003 Expectations and attitudes of individual shareholders In October 2003, and for the second year in a row, Dexia and TNS Sofres conducted a telephone poll of a representative national panel of 515 French individual shareholders.
∆
Investor behavior
After the slump that marked the year 2002, a slight upturn in the stock market was observed in the second half of 2003. One out of every three shareholders initiated at least one buying or selling transaction in the stock market in the last three months, compared with one out of four in the same period in 2002. Prudence and a wait-and-see attitude appeared, however, to be the general rule. Three out of four shareholders planned no transactions in their stock portfolios in the coming months, representing the same proportion as in 2002. Thirty-six percent of the shareholders polled have changed the way they manage their stock portfolios, in
Shareholder demands on listed companies Shareholders have the impression they are not sufficiently recognized by listed companies, particularly in comparison with institutional investors. They want large issuers to communicate better in a more direct, transparent and responsive manner. They also want to be reassured about the quality of their investments, especially with regard to the company’s future and continued viability. Sustainable development remains a subject of prime interest, since more than four shareholders out of five (86%) integrate this parameter into their investment choices. The disappearance of the tax credit is not viewed favorably by shareholders, especially the older generation whom this reform may dissuade from investing in the stock market.
∆
The survey showed that two years after the burst of the speculative bubble, individual shareholders are more and more selective and have significant demands to make on listed companies.
particular the most active investors. This proportion increased significantly in two years, rising more than 14%. Investors are currently much more selective in their choice of equities and tend to concentrate on the safest investments (large capitalizations, traditionally reliable sectors). They are primarily interested in information on the economic and financial situation of companies and their strategy. Stock market information is still sought after, but plays a lesser role (20% versus 34% in 2002).
∆
45
Shareholders’ telephone information service This service is available at a toll-free number in France (0 800 35 50 00) and in Belgium (02 213 57 46). Shareholders call regularly to ask for information about Dexia shares, the amount of the dividend, taxation and the organization of the Ordinary Shareholders’ Meeting.
Activity report édité en 2003
The 2004 finance law in France
Thus, after the January 2002 opening of PEAs to shares of European companies and mutual funds invested therein, the French Parliament ratified the same tax system for income distributed by French and European companies. Dexia was not eligible for the tax credit in the past, but will benefit from the measures of substitution, primarily the 50% deduction, a considerable advantage for Dexia shareholders.
∆
46
Dexia Annual Report 2003
∆
The 2004 finance law, which was adopted at the end of 2003, confirmed the definitive disappearance of the French tax credit. This reform will apply to dividends distributed as of 2005, and thus for income to be declared in 2006. Another system has been substituted that applies to income distributed by French companies, but also concerns income distributed by companies with headquarters in a Member State of the European Union or in a State that has signed an agreement to eliminate double taxation. The system thus applies to Dexia: the net dividend of Dexia shares held on a normal securities account will therefore significantly increase. In the calculation of income tax, there is now a 50% deduction on distributed income, with no ceiling on the deduction. In addition to this deduction, there is a flat-rate exemption of EUR 1,220 for a single taxpayer and of EUR 2,440 for a couple filing jointly. Finally, a tax credit is introduced with a ceiling of EUR 115 for a single taxpayer and of EUR 230 for a couple filing jointly. This tax credit also benefits income distributed within the framework of a Plan d’Epargne en Actions (PEA). In a PEA, this tax credit will be deducted from taxable income and not paid into the PEA. If the tax credit is greater than the tax due, the difference will be reimbursed, with the condition that the sum to be reimbursed be more than EUR 8.
Activity reports, Internet site and briefings help nurture relations with investors and financial analysts.
Relations with institutional shareholders For Dexia, relations with institutional shareholders have great importance, since this category of investors holds more than 25% of the capital. At Dexia, two teams, one based in Paris and the other in Brussels, are in charge of relations with institutional investors and financial analysts.
Providing regular information Dexia provides institutional investors and financial analysts with regular information, principally quarterly, semiannual and annual activity reports, thematic presentations and press releases on business developments, financial results and recent Group events. Once released, this data is available on the company’s Internet site www.dexia.com on the page “You are an Investor”. Investors can also request that the information be sent by e-mail. In 2003, Dexia produced 21 publications, including four activity reports, seven adhoc presentations and ten press releases.
Dexia’s share and
s h a re h o l d e r s
Relations with institutional shareholders After every presentation of results or in other circumstances, meetings are organized throughout the world with the principal institutional investors. This gives them the opportunity to address their questions directly to members of the Management Board or executive officers concerning results or Group strategy. In 2003, Group management, assisted by the investor relations team met with 648 investors in 17 countries and 28 cities.
Shareholders’ calendar in 2004 March 4, 2004 Publication of 2003 annual results.
June 24, 2004 Dexia participates in a meeting organized by CLIFF* in Nancy.
April 6, 2004 Meeting of the European advisory board of individual shareholders in Brussels.
September 2, 2004 Publication of 2004 semiannual results.
April 22, 2004 Pierre Richard meets with Dexia shareholders in Lille, in partnership with Le Journal des Finances.
September 23, 2004 Pierre Richard meets with Dexia shareholders in Nantes, in partnership with Le Journal des Finances.
May 12, 2004 Publication of 2004 first quarter results. Ordinary and Extraordinary Shareholders’ Meetings in Brussels.
November 16, 2004 Publication of 2004 third quarter results.
June 3, 2004 Pierre Richard meets with Dexia shareholders in Paris, in partnership with Investir. June 11, 2004 Payment of the dividend of the Dexia share. June 16, 2004 Dexia participates in a meeting organized by Le Revenu in Lyons.
November 19-20, 2004 Dexia participates in the Actionaria shareholder convention in Paris. November 25, 2004 Dexia participates in a meeting organized by Le Revenu in Lille. December 2, 2004 Dexia participates in a meeting organized by Euronext and Cortal in Paris. December 16, 2004 Dexia participates in a meeting organized by Euronext and CLIFF* in Strasbourg.
From our
shareholders
"A former member of the advisory committee of Dexia France shareholders, I am now a member of the European advisory committee of Dexia shareholders. It is for me a wonderful experience to be able to meet shareholders of other nationalities at committee meetings. In Belgium and Luxembourg, shareholding culture is very different from what is practiced in France. They are countries in which banks play a major role. Shares are a financial product like any other. You are first a customer of your bank before becoming a shareholder. Commercial policy, customer segmentation, initiatives to attract young people with service offerings that meet their needs take precedence over relations with individual shareholders. The organization of regular meetings with shareholders, chaired by the CEOs of major firms listed on the stock market, is still not very widespread. It is in this connection that our knowledge of French practices can contribute something to our committee."
Yves Cognat Member of the European advisory committee of individual shareholders
* Cercle de liaison des informateurs financiers en France.
∆
47
After the exception of 2002, results in 2003 marked Dexia’s return to its regular path: that of a bank capable of producing regular growth in results over a long period owing to recurring revenues and strict control of operating expenses.
Financial
results
• Changes in scope and methods • Analysis of the consolidated statement of income • Analysis of the balance sheet
∆
50
Dexia Annual Report 2003
Financial
re s u l t s Consolidated statement of income (in millions of EUR)
Revenues - Net interest and related income - Net commissions and other income - Technical and financial margin of insurance activities Costs Gross operating income Cost of risk Operating income Net gains & recoveries on long-term investments Net allocation to GBRR Amortization of goodwill Corporate income tax Income from equity-accounted companies Net income before minority interests Minority interests Net income
2003
2002
5,160 3,429 992
5,157 3,422 1,015
Evolution +0.1% +0.2% -2.3%
739 (3,055) 2,104 (176) 1,929
720 (3,037) 2,120 (722) 1,398
+2.6% +0.6% -0.7% -75.7% +37.9%
15 7 (131) (362) 56 1,513 82 1,431
(36) 82 (57) (58) 56 1,385 86 1,299
n.s. -91.6% n.s. n.s. -0.2% +9.3% -4.4% +10.2%
Underlying statement of income(1) (in millions of EUR)
Revenues Changes in consolidation scope Revenues pro forma Nonrecurring items Underlying revenues of which - net interest and related income - net commissions and other income - technical and financial margin of insurance activities Costs Changes in consolidation scope Costs pro forma Nonrecurring items Underlying costs Gross operating income pro forma Nonrecurring items Underlying gross operating income
2003
2002
Evolution
5,160 5,160 20 5,140
5,157 (104) 5,053 101 4,953
+0.1% n.s. +2.1% -80.2% 3.8%
3,401 1,000 739
3,179 1,069 705
+7.0% -6.5% +4.9%
(3,055) (3,055) (37) (3,018)
(3,037) 70 (2,967) (60) (3,028)
+0.6% n.s. +3.0% n.s. -0.3%
2,104 (17) 2,121
2,086 161 1,925
Cost of risk pro forma Nonrecurring items
(176) (17)
Underlying cost of risk
(158)
Net income pro forma Nonrecurring items Underlying net income
1,431 68 1,363
(717) (448) (269) 1,299 115 1,183
+0.9% n.s. +10.2% -75.5% n.s. -41.0% +10.2% -40.9% +15.2%
(1) Excluding nonrecurring items and pro forma for 2002.
∆
51
Reallocations within business lines
Changes in scope and methods Changes in scope of consolidation The main changes in 2003 concerned the sale of the minority stake in Landbouwkrediet Group NV in Belgium, the sale of online brokerage activity of Alex in the Netherlands and the takeover of the stake of the minority shareholders in Dexia Hypothekenbank Berlin. Some other companies, which were previously not consolidated, are now accounted for by the equity method (Banksys, Isabel, Bank Card Company, Card Management Company).
Minor transfers occurred between the business lines (e.g. the results of Banque Vernes Artesia are now included in the third business line; the reinsurance results of DVV Insurance are now included in the second business line). The impact on the net income of each business line is not material. Nevertheless all business line financial data have been restated.
Analysis of the consolidated statement of income Net income
Those changes, as well as the acquisition of Bank of NT Butterfield & Son in the second half of 2002, were taken into account to establish pro forma financial statements for 2002 and the first 3 quarters of 2003 so as to enable comparisons. The difference between reported and pro forma net income in 2003 is not relevant (impact of EUR -104 million on the revenues and EUR +70 million on the costs compensated by movements in other headings).
Dexia’s 2003 net income, at EUR 1,431 million, is up 10.2%. Adjusting for the changes in scope of consolidation(1), and excluding nonrecurring items(2), net income progression was even higher, at +15.2%, and +18.5% at constant exchange rate.
Changes in accounting methods
Revenues
Following the harmonization of accounting methods, commissions paid to agents, selling other products than those of the Group, are now booked in the revenue line (technical and financial margin of insurance activities) instead of the cost line (network commissions). The financial statements of the previous years have been restated accordingly. The impact on the 2002 net income amounts to EUR 8 million.
Total annual revenues amounted to EUR 5,160 million, up by a slight 0.1%. This apparent stability hides in fact a progression of the underlying revenues (up 3.8%), whilst the nonrecurring revenues went down, from EUR 101 million in 2002 to EUR 20 million in 2003.
∆
52
Dexia Annual Report 2003
This marks a very satisfactory upturn, particularly of the underlying operating results, after the very difficult 2002, as will be seen in the following analysis.
(1) See the details of changes on this page. (2) See detailed list of nonrecurring items on pages 56-57.
Financial
re s u l t s
(or EUR -10 million) when looking at the underlying pro forma numbers. The analysis of underlying costs by type shows the following: ∆ ∆
Furthermore, the progression of underlying revenues was itself curtailed by the evolution of the USD. This has greatly impacted the revenues of mainly two business lines (Public Finance, and Treasury and Financial Markets), which have a substantial fraction of their revenues in USD. This shortfall was only partly compensated by the positive results of hedges put in place, the revenues of which are booked in Central Assets. Had the USD remained stable, the revenues would have grown by 5.5%.
∆
Technical and financial margin of insurance activities was up 2.6% to EUR 739 million, and up 4.9% (or EUR 34 million) on the underlying basis. This increase would have been much higher (+17.9% or EUR 126 million), had the EUR/USD parity remained constant. This reflects in particular the good performance of FSA (see pages 81-82).
Costs During the whole year 2003, costs amounted to EUR 3,055 million, slightly up (+0.6%) on the equivalent number reported in 2002, but down 0.3%
∆
Net commissions and other income amounted to EUR 992 million, down 2.3%. However, looking at the underlying basis (pro forma), the reduction in commissions and other income was higher (-6.5%, or EUR -69 million) observed essentially in Retail Financial Services (EUR -19 million) and Investment Management Services (EUR -56 million), as the customers’ appetite for equity-linked investment products has remained weak, at least in the first part of the year.
∆
Net interest and related income amounted to EUR 3,429 million, up 0.2%. This apparent stability masks what has in reality been a strong increase at similar scope of consolidation of 7.0% (or EUR 222 million) of the total underlying revenues. In 2002, a large amount of nonrecurring items impacted positively this caption, (EUR 173 million) whilst the equivalent was only EUR 28 million in 2003.
staff costs amounted to EUR 1,423 million in 2003, down 3.2% compared to the previous year; network commissions, representing the commissions paid by the Group to its networks of independent agents and business introducers, amounted to EUR 340 million, up 11.7%; operating expenses amounted to EUR 888 million, down 1.7%; depreciation and amortization amounted to EUR 316 million, up 3.9%; deferred acquisition costs, corresponding essentially to the business of FSA, EUR 51 million, up 11.3%.
For the second consecutive year, the underlying cost base has come down, reflecting the efforts everywhere in the Group to this end. However, the exchange parity contributed in part positively to this good result, since part of the cost base is USD denominated. Looking at the respective evolutions, at constant exchange rate, of the underlying costs (+0.7%) and revenues (+5.5%), there is confirmation that the trend is in the right direction.
Gross operating income For the whole year 2003, the gross operating income amounted to EUR 2,104 million, down 0.7% from what it was in 2002. On the basis of underlying revenues and costs, on the contrary, it is up 10.2%, and the progression even reaches +13.0% at constant exchange rate.
Cost of risk In 2003, the total cost of risk amounted to EUR 176 million for the whole Group, much lower to what it was in 2002, but the charge of the latter year included exceptional provisions made at Dexia Bank Nederland (see hereafter). Without that specific item, the cost of risk amounted to EUR 274 million in 2002, i.e. still EUR 98 million more than in 2003.
∆
53
Other items Net gains and recoveries on long-term investments totaled EUR 15 million in 2003, against EUR -36 million in 2002. This EUR +51 million variance stems from several sources including the sale of some participations (Alex in the Netherlands and Erste Bank in Austria notably) and, in the other direction, impairments (mainly on the stakes in Fortis and VEOLIA Environnement) or capital losses, generally classified as nonrecurring and detailed on pages 56-57. A minor write-back of EUR 7 million was made in 2003 to the general banking risks reserve to be compared to EUR 82 million in 2002.
∆
The cost of risk ratios (annual net charge as a percentage of total outstanding commitments) thus stand as follows in 2003: 5.7 basis points for the banking activities, against 9.8 basis points in 2002 (without Dexia Bank Nederland); 1.2 basis point for FSA, against 2.5 basis points in 2002.
Amortization of goodwill on fully-consolidated subsidiaries amounted to EUR 131 million in 2003, compared to EUR 57 million in 2002. This increase is due to accelerated depreciation of the goodwill on several participations held by the Group (for further details, see on pages 56-57).
∆
Regarding the provisions at Dexia Bank Nederland, it must be reminded that allowances were made in 2002 in the amount of EUR 448 million. In 2003, the provisions started to be utilized, in the amount of EUR 22 million to finance the costs of the commercial offer. As of December 31, 2003 total provisions relating to the share leasing products stood at EUR 456 million (against EUR 478 million as of December 31, 2002). More generally, regarding Dexia Bank Nederland, a full disclosure on the portfolio and litigations regarding Legiolease contracts is made in the Annual Report Accounts and Reports on pages 6, 90-92.
∆
54
Dexia Annual Report 2003
Corporate income tax, comprising both current and deferred taxes, amounted to EUR 362 million in 2003. This marks a sharp increase compared to the EUR 58 million charge of 2002. But the latter was exceptionally low due to the treatment of the Dexia Bank Nederland provision discussed elsewhere. The tax charge therefore comes back closer to a more normal level. However, the impairments and accelerated goodwill depreciation made in 2003 on participations as indicated above, have caused exceptional tax credits of EUR 102 million. Furthermore a prior provision of EUR 21 million on a tax litigation in Belgium has been written back, following the favorable outcome of the legal proceedings. Lastly, tax latencies at insurance companies in Belgium were adjusted in the amount of EUR +43 million.
Financial
re s u l t s
Net income from companies accounted for by the equity method, net of goodwill amortization, amounted to EUR 56 million, unchanged on 2002. Minority interests came to EUR 82 million in 2003 against EUR 86 million in 2002. In summary, net income progressed by 10.2%, in line with the guidance given earlier. More importantly, the quality of the recurring results substantially improved, with a +15.2% progression over 2002, and +18.5% at constant exchange rate.
Focus on noteworthy nonrecurring items The incidence of nonrecurring items on the net income keeps reducing. It amounts to EUR +68 million in 2003. It was EUR +115 million in 2002, and EUR +147 million in 2001. The detail of the nonrecurring items is listed on pages 56-57. Concerning 2003, other than the adjustments made on the items previously included as nonrecurring items (CLN portfolio and Dexia Bank Nederland, principally), there were on the one hand EUR 106 million (pre-tax) gains on the sale of assets (Alex and Erste Bank principally), and on the other hand impairments on participations (EUR 86 million pre-tax, of which Fortis for an amount of EUR 47 million and VEOLIA Environnement for an amount of EUR 39 million) and subsidiaries for an amount of EUR 86 million pre-tax. Regarding taxes, the impairments and accelerated goodwill depreciation made in 2003 on participations indicated above have caused nonrecurring tax credits of EUR +102 million. These tax credits added to other nonrecurring tax items (mainly tax latencies and writeback of a provision for a nonrecurring tax litigation described above) totaled EUR 158 million in 2003.
Financial performance Operating performance improved in 2003: the cost/income ratio went from 58.9% in 2002 to 59.2% in 2003. On the basis of underlying figures, it went from 61.1% to 58.7% respectively. Return on equity (ROE), representing the ratio between net income for the period and average shareholders’ equity (excluding the general banking risks reserve and after income appropriation), stood at 16.5% in 2003, against 16.2% in 2002(1/2). Earnings per share (EPS) amount to EUR 1.24 per share, against EUR 1.13 in 2002, an increase of 9.5%.
Outlook In Public Finance, after two record years, business is expected to remain at a high level. In Retail Financial Services, both the economic and financial environment and the good progress of Artesia BC integration create the conditions for further improvements of the business line’s profitability. Regarding Investment Management Services, the better market conditions should permit to confirm the recovery recorded in the late part of 2003. All in all, Dexia is on track for another year of earnings growth.
(1) If the goodwill relating to the public exchange offer on Dexia BIL shares (in 1999), on the acquisition of FSA and Labouchere (in 2000) and Artesia BC, Kempen & Co and Groupe Financière Opale (in 2001) were recorded in the assets in the balance sheet and written off over 20 years, the ROE would amount to 2.7 % in 2002 and 7.1% in 2003. (2) Detail of ROE calculation (in millions of EUR):
Net income
ROE as reported
ROE adjusted
1,431
1,431 -533
1,431 8,656 16.5%
898 12,612 7.1%
Write-off costs charged to reserves Net income (adjusted) Shareholders’ equity (adjusted) ROE
∆
55
MAIN ITEMS REPORTED AS NONRECURRING IN 2002 AND 2003 Net interest and related income
Costs
(EUR +44.4 million); net revenues on
In Q4 2003: net revenues on CLN portfolio
∆
∆
∆
In Q1 2002: gains on OLOs
(1)
∆
(2)
In Q1 2002: commissions to the network for shift to euro (EUR -1.4 million).
(EUR +5.0 million); utilization of
In Q2 2002: restructuring costs Dexia Bank
CLN portfolio (EUR +1.3 million);
Legiolease provision (EUR +9.3 million);
interests on arrears on a loan in Italy
capital losses on nonstrategic assets
Nederland (EUR -22.7 million); write-back
(EUR +13.6 million); early redemption of
(EUR -8.6 million).
of a provision for integration costs Artesia BC (EUR +4.7 million); provision for
bonds redeemable in shares at Dexia
Net commissions and other income
restructuring costs at DVV Insurance
In Q2 2002: gains on OLOs (EUR +49.1 mil-
∆
∆
Crediop (EUR +12.4 million).
(EUR -2.0 million).
(EUR -12.3 million).
∆
(EUR +3.4 million); capital gain on the sale
∆
lion); net revenues on CLN portfolio
In Q1 2002: insurance of CLN portfolio
In Q3 2002: provision for restructuring
of participation in Clearstream
(EUR -11.6 million); payment to the
(EUR -30.0 million); provision for
(EUR +74.9 million); capital gains on sale
Belgian Banks’ fund for the Jewish
restructuring costs at DVV Insurance
of nonstrategic assets (EUR +12.3 million).
community (EUR -3.9 million); provision
(EUR -5.3 million).
In Q3 2002: gains on OLOs
for compensation for Dexia Bank
(EUR +41.3 million); net revenues on CLN
Nederland (EUR -10.5 million).
the provision for restructuring costs at
In Q3 2002: insurance of CLN Portfolio
Dexia Bank Nederland (EUR +15.4 mil-
on sale of nonstrategic assets (EUR -9.5 mil-
(EUR -34.5 million); write-back of a
lion); write-back of a provision for
lion).
provision for compensation for Dexia Bank
integration costs at Artesia BC
In Q4 2002: gains on OLOs
Nederland (EUR +4.9 million).
(EUR +5.0 million); capital gains on real
In Q4 2002: insurance of CLN portfolio
estate (EUR +124.8 million); allocation
(EUR -4.3 million).
to pension fund Artesia BC
In Q1 2003: insurance of CLN portfolio
(EUR -24.4 million).
portfolio (EUR -5.4 million); capital losses
∆
∆
(EUR +2.6 million); net revenues on CLN
∆
costs at Dexia Bank Nederland
portfolio (EUR -25.6 million); capital losses
∆
on sale of nonstrategic assets
(EUR -4.1 million).
∆
∆
In Q1 2003: net revenues on CLN portfolio
∆
(EUR -38.0 million).
∆
∆
In Q2 2002: insurance of CLN portfolio
In Q4 2002: partial write-back of
In Q1 2003: provision for restructuring costs on insurance activities (EUR -1.3 mil-
(EUR -4.0 million).
lion); operating costs linked to the “Dexia
In Q3 2003: insurance of CLN portfolio
offer” at Dexia Bank Nederland
In Q2 2003: net revenues on CLN portfolio
(EUR -5.6 million); interest arrears on
(EUR -2.5 million).
(EUR +4.2 million); losses on sale of
settlement with Belgian fiscal authorities
equities (EUR -4.5 million); exchange gain
(EUR +5.8 million); Bancoval litigation
costs on insurance activities (EUR -0.4 mil-
(EUR +7.1 million).
(EUR -1.5 million).
lion); staff reduction plan at Dexia BIL
(EUR +5.5 million); losses on sale of
∆
∆
∆
In Q3 2003: net revenues on CLN portfolio
∆
equities (EUR -4.7 million).
∆
In Q2 2003: insurance of CLN portfolio
In Q2 2003: provision for restructuring
In Q4 2003: insurance of CLN portfolio
Group (EUR -15.3 million); operating costs
(EUR +5.1 million); capital gain on sale of
(EUR -3.9 million); integration of Sofaxis
linked to the “Dexia offer” at Dexia Bank
equities (EUR +3.8 million); utilization of
over 14 months (EUR +4.5 million).
Nederland (EUR -2.3 million); gain on sale
Legiolease provision (EUR +5.2 million).
of a building at Dexia Bank Nederland (EUR +5.5 million).
∆
56
Dexia Annual Report 2003
Financial
re s u l t s
Taxes
In Q3 2003: provision for restructuring
on long-term investments
All items above are before tax. The amount of
costs on insurance activities (EUR +1.0 mil-
∆
In Q1 2002: capital gains on long-term
corresponding taxes, at appropriate rates, is
investments (EUR +17.8 million).
treated as a nonrecurring item in the total
In Q2 2002: capital losses on long-term
amount of taxation. The individual tax
(EUR -0.3 million); staff reduction plan at
investments (EUR -3.2 million); value
incidence of some items is specified below, as
Dexia BIL Group (EUR -4.6 million);
adjustment on I-Broker (EUR -6.4 million).
well as particular tax entries.
In Q3 2002: impairment on long-term
∆
∆
Net gains and recoveries
lion); operating costs linked to the
∆
additional costs Landbouwkrediet NV
∆
“Dexia offer” at Dexia Bank Nederland
In Q3 2002: tax credit of
investments (EUR -49.0 million); capital
EUR +214.7 million caused by the
and relocations at Dexia BIL Group
gains on long-term investments
deductible part of the impairment written
(EUR 8.5 million).
(EUR +7.9 million).
on the shares of subsidiaries in the
In Q4 2002: capital losses on long-term
Netherlands. As the goodwill is deducted
investments (EUR -4.9 million).
from the equity, the impairment itself is
In Q1 2003: capital gains on long-term
neutral on the consolidated reserves.
In Q4 2003: restructuration at Dexia BIL
∆
∆
(EUR -1.0 million); real estate restructuring
Group (EUR -7.3 million); provision
∆
for restructuring costs for Rekord
∆
(EUR -3.9 million); write-back of provi-
investments (EUR +50.2 million).
sions on Kempen & Co (EUR +9.7 million).
∆
caused by the deductible part of the
investments (EUR -67.9 million).
impairment written on the shares of
In Q3 2003: capital gains on long-term
subsidiaries in the Netherlands.
investments (EUR +11.9 million).
∆
∆
In Q1 2002: charges for Legiolease at Dexia
In Q2 2003: tax credit of EUR +63.3 million
In Q2 2003: impairment on long-term
∆
Cost of risk
∆
(EUR -2.5 million); integration of Sofaxis
In Q3 2003: tax credit of EUR +20.6 million following the settlement of a VAT litigation
investments (EUR +43.8 million); net
with the Belgian fiscal authorities.
In Q2 2002: charges for Legiolease at Dexia
impairments on long-term investments
Bank Nederland (EUR -31.8 million).
(EUR -17.8 million).
∆
In Q3 2002: charges for Legiolease at Dexia
∆
∆
In Q4 2003: capital gains on long-term
Bank Nederland (EUR -4.0 million).
In Q4 2003: restatement of tax latencies of EUR +42.6 million on insurance activities. Tax credit linked to the accelerated goodwill
Accelerated goodwill amortization
amortizations of several participations (see
In Q4 2002: charges for Legiolease at Dexia
following impairments
above, EUR +21.6 million) and Kempen &
Bank Nederland (EUR -11.2 million).
∆
∆
Bank Nederland (EUR -401.1 million).
Co (EUR +17.4 million).
In Q4 2003: accelerated goodwill
∆ ∆
In Q1 2003: charges for Legiolease at Dexia
amortization (EUR -80.9 million) following
Bank Nederland (EUR -22.8 million).
impairments on several participations
In Q2 2003: net write-back of charges for
(Ely, Dexia Partenaires France, Dexia
Legiolease at Dexia Bank Nederland
Banque Privée France, Rekord).
(EUR +13.2 million).
∆
In Q3 2003: charges for Legiolease at Dexia Bank Nederland (EUR -7.4 million).
(1) OLOs are Belgian Government bonds. (2) CLN portfolio on which a fraud was uncovered in early 2001.
∆
57
Analysis of the balance sheet Total consolidated balance-sheet footings as of December 31, 2003 amounted to EUR 349.9 billion. Compared to December 31, 2002, the amount of total assets has slightly decreased (-0.3%).
Customer loans
The balance sheet is shown in the bancassurance format.
Securities
Debts The amount of customer deposits and debt securities (savings bonds, certificates and bonds) is EUR 227.2 billion at the end of 2003 (-2.0%). Their relative share in the total of the balance sheet is 65.0%. Customer deposits stood at EUR 92.3 billion at the end of 2003, an increase of +8.2% essentially due to the savings accounts as 2003 was marked by commercial campaigns. Debt securities decreased to EUR 134.9 billion (-7.9%). This should be seen together with a decrease of investments in government securities, bonds and other fixed-income securities in an insurance subsidiary.
∆
58
Dexia Annual Report 2003
Customer loans have slightly increased by +2.6% and stood at EUR 161.9 billion as of December 31, 2003.
The total amount of investments in government securities, bonds and other fixed-income securities as well as variable-income securities amounted to EUR 126.5 billion (-4.8%).
Equity Shareholders’ equity in the Dexia Group (capital, additional paid-in capital, reserves, profit for the year before allocation, goodwill deducted and GBRR not included) amounted to EUR 9,790 million as of December 31, 2003 against EUR 9,090 million at the end of 2002, i.e. a growth of +7.7%.
Financial
re s u l t s
Consolidated balance sheet (before income appropriation)
(1)
(in millions of EUR)
2001 Balance total
2002
2003
Evolution
351,380
350,924
349,888
-0.3%
Liabilities and shareholders’ equity items Shareholders’ equity Minority interests GBRR Subordinated debt Interbank loans and deposits Customer deposits Debt securities
8,337 768 1,925 6,243 77,079 84,007 140,861
9,090 714 1,842 5,583 68,176 85,322 146,505
9,790 485 1,793 5,411 68,088 92,343 134,905
+7.7% -32.1% -2.7% -3.1% -0.1% +8.2% -7.9%
Assets items Government securities Interbank loans and advances Customer loans Bonds and other fixed-income securities Equities and other variable-income securities Long-term investments
7,642 39,018 156,404 110,369 6,411 1,434
10,886 29,841 157,773 117,009 4,906 1,883
5,977 29,696 161,941 115,351 5,157 1,443
-45.1% -0.5% +2.6% -1.4% +5.1% -23.4%
(1) Restated for 2001 and 2002.
∆
59
23,865 employees in 21 countries. The multinational character of Dexia’s teams and the diversity of its businesses are fundamental
Ulrike Fabienne Pavol Corentin
strengths that guarantee a long life and success.
Kim
Bénédicte Mies Christiane Paul Helmut Arnaud
Ratislav Tang Viera
Jana
Philippe Lenca
Mary
Amy Tom
Luigi
Mike
Fabrice
Miguel Françoise
Kirri
Julia Björn
Alessandra
Anne-Sophie Steve
Leentje
A group that lives and
breathes
Ensuring long-term employee commitment, capitalizing on present skills and attracting new talent are among the challenges the Group faces in its determination to be a socially responsible enterprise. These principles are founded on confidence and transparency, values that are progressively taking root at all levels of the Group to form a coherent whole based on solidarity. Human resources and internal communication departments work closely together to reinforce the feeling of belonging to a work community that respects the culture and aspirations of each of its 23,865 employees.
23,865 38.5 4.14% EUR
∆
62
Dexia Annual Report 2003
mia
The number of Dexia employees working in 21 countries, mainly in Europe, in all the Group’s business lines
Average age of the men and women who work in the Dexia Group
Percentage of Dexia’s capital held by employees after the fourth capital increase reserved for them
A g roup that lives and
b re a t h e s
Workforce
The entities concerned accompanied these departures with the required transparency vis-à-vis employee representatives and management. They regularly informed the European works council, and encouraged the application of innovative measures adapted to each situation. Priority was systematically given to voluntary departures and reassignments within the company. In Belgium, the agreement negotiated allowed employees to benefit from measures such as time credits and early retirement, as well as from the services of an in-house Job Center. In Luxembourg, the “Reshaping your working life” project was pursued with, among other measures, the possibility to take a career break or to work with an NGO. Finally, in the Netherlands, the plan agreed upon allowed employees to leave the Group with a favorable financial package. Most of the other companies maintained or slightly increased their numbers. This was particularly the case for companies operating in the first business line and in fund administration.
∆
The year 2003 was marked by a contraction in the Group’s workforce, which counted 23,865 men and women as of December 31, 2003. This reduction of slightly more than 1,000 positions, which primarily concerned three Group entities, was the result of decisions taken and partially implemented in 2002. It reflected initiatives taken within the framework of the merger of Dexia Bank Belgium and Artesia BC, the reorganization of Dexia entities in the Netherlands, and cost reduction measures at Dexia BIL.
The bimonthly publication team+spirit produces supplements on key subjects affecting the life of the Group, such as sustainable development.
23,865 employees throughout the world Belgium
15,040
Luxembourg
2,900
France
2,110
The Netherlands
1,050
Slovakia
636
United States
495
Germany
378
Italy
224
Switzerland
222
Spain
214
Ireland
146
United Kingdom
138
Singapore
77
Monaco
66
Hong Kong
57
Israel
26
Denmark
22
Australia
18
Sweden
15
Other
31
∆
63
∆
Reinforcing a feeling of belonging
One of the Group’s principal objectives within the framework of its human resources policies is to communicate the Dexia spirit to each employee, regardless of national borders and business lines.
Involving employees in growth Since the creation of the Group, employee shareholding is a privileged way to reinforce this feeling of belonging by associating the whole workforce in the Group’s performance. Today, Dexia employees are the Group’s fifth largest shareholder with 4.14% of the capital as of December 31, 2003 (versus 3.5% at the end of 2002). Seven employees out of ten are shareholders in the Group, reflecting the determination of the Management Board and a pro-active, innovative Group policy that proposes easily accessible products to allow both employees and management to participate according to their resources. The objective of 5% of the capital in employee hands by 2005 remains a priority goal.
The “Discovering Dexia” seminars are a unique opportunity to create links between staff members. It was held for the first time in the United States in 2003.
and focuses, presented by members of the entities’ management boards. In the same spirit, a “Discovering Dexia” day was organized for employees in France to introduce the entities that are active in the hexagon.
Informing and sharing After 2002, a year in which new internal communication tools and supports were introduced to be shared by all employees, 2003 was a year of consolidation and development. The newsletter and Intranet team+spirit have fostered the communication and adoption of a group spirit among employees. This spirit is based on values that respect different cultures and encourage the sharing of experience. Published in three languages (French, Dutch and English) these channels of communication have become a prime source of shared internal information and knowledge concerning Dexia and its activities. At the same time, each Group entity circulates electronic newsletters locally via the Intranet. In order to have a better idea of employee expectations, a first survey on in-house communication at the Group level was conducted at the end of 2003.
Facilitating integration In 2003, Dexia pursued its policy to facilitate the integration of new company employees. Three “Discovering Dexia” programs were held, one of which in New York. More than 400 staff members from European and American entities in the Group were able to discover Dexia’s organization
∆
64
Dexia Annual Report 2003
The announcement of the Group’s new management structure in November was also one of the major events of 2003. The high point was the workshop for the Group’s 250 top executive managers. This event was reported in the in-house newsletter and on the employee Intranet site.
A g roup that lives and
b re a t h e s
social responsibility
Principles of social management After the creation of a European works council in 1998, the adoption and implementation of a charter of “Principles of Social Management” was a major step forward in the Group’s human resources management policy. Signed at the end of 2002 and distributed to the whole workforce in mid-2003, this document reflects the importance given to open and constructive social dialogue based on the respect of commitments in terms of labor relations, employment and mobility. At Group level, Dexia convenes the European works council twice a year alternately in Brussels and Paris. In order to encourage more regular social dialogue, Dexia’s management meets with the officers of the European works council every month.
The charter of “Principles of Social Management” presents Dexia’s commitments in terms of labor relations, employment and mobility.
Finally, the Group Intranet was opened to employee representatives with a section dedicated to the European works council, which lists the names and business coordinates of the representatives, minutes of the meetings and the motions made by employee representatives.
Action plan A multi-year action plan to promote social responsibility was drawn up and presented to local works councils and to the officers of the European works council at the end of 2003, and then to the whole European works council at the beginning of 2004. The plan is organized around six priority actions: informing, training and heightening the awareness of management in the field of sustainable development; career development prospects within the Group; better knowledge and understanding of the Group’s strategy on the part of the employees; a better match between appreciation and compensation; prevention in the area of health and attention to working conditions; the role of women in the company.
∆ ∆ ∆ ∆
The importance accorded to the transparency of information motivated Dexia to allow the European works council to commission an audit of the financial statements. In 2003, therefore, the Syndex auditing firm conducted an audit of the 2002 accounts. It presented its conclusions in January 2004 at a plenary session of the European works council. It will pursue its mission by auditing the financial statements for 2003.
+ + + + + + + +
∆
As the bank for sustainable development, Dexia is committed to social responsibility through its social management principles and a dedicated action plan.
+ + ++ ++ ++
Principles of Social Management
Affirming
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ 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∆ ∆
For more information on Dexia’s commitments with regard to social responsibility, see the 2003 Sustainable Development Report, pages 24-41.
∆
65
Age pyramid > 61 56-60 51-55
∆
During the top executive management seminar, Pierre Richard and the members of the Group’s Management Board presented Dexia’s new organization.
46-50 41-45 36-40 31-35 26-30 21-25
Buildingon strengths The average age of Dexia’s workforce is 38 and a half. In comparison with many other European firms, Dexia’s age pyramid poses few generational problems. Employees over 50 account for 14.8% of the workforce. Nevertheless, preparing the managers the Group will need tomorrow to lead its development and developing specific internal skills represent an essential factor in the Group’s commercial and managerial success but also in terms of team motivation. In 2003, the objective was to develop a common policy at the Group level, based on shared tools and skills. Concrete expression was given to the identification and management of potential, but also to the development of skills at the Group level, an initiative launched at the end of 2002.
< 21 2,500
1,500
500
500
Female
1,500
Male
Seniority pyramid > 41 36-40 31-35 26-30 21-25 16-20 11-15 6-10 0-5
6,000
4,000
2,000
0 Female
2,000 Male
DEAL (DExia Assessment of Leadership) Dexia continued to organize DEAL sessions, during which managers with potential are evaluated on the basis of the Group’s key skills. The information gleaned during these sessions serves to design personalized career development paths. Such paths are composed of training programs, coaching, reflections on cross-division projects and professional mobility.
Gender breakdown
47% 53%
∆
66
Dexia Annual Report 2003
2,500
4,000
6,000
A g roup that lives and
b re a t h e s
The LEAD Future Executive Program, which involves two two-day sessions for managers on the themes of “vision” and “mission”, gives rise to a project that is presented to the members of the Group’s Management Board.
Encouraging mobility For confirmed managers, Dexia has set up a more complete program, the LEAD Corporate Executive Program, with the objective of giving participants a comprehensive overview of activities and issues in the banking sector.
Training
Dexia aims to offer its employees a broader range of career opportunities. Since the beginning of 2003, almost all employees can access job offers from all Group entities via the Intranet. New developments are in process to make it possible to address job offers directly to employees in function of the profile required for the position.
39,039 days of training were organized in 2003, representing an average of 1.43 day per employee. This figure covers different realities linked, on the one hand, to local regulations and agreements, and on the other hand to the specific requirements of each business line. Thus in certain departments, the figure is up to five days. Particular attention is paid to achieving a balance in training for the different categories in the workforce.
From our
shareholders
“In an international group like Dexia, which has a workforce of 23,865 in 21 countries with an average age of 38.5, the age pyramid is a fundamental asset in the management of human resources and, in particular, for career development and mobility. The application of social management principles in terms of employment, mobility and labor relations, and the introduction of common rules on expatriation and outside assignments are factors that are expected to contribute to major progress in the management of the company’s human resources.”
Nicole Sablong
∆
The Dexia Group has set down common rules for outside assignments and expatriation, described in detail in the brochure “Passport for Dexia”.
Member of the European advisory committee of individual shareholders
∆
67
Belgium, France, Luxembourg, Italy, Spain, United Kingdom, Portugal, Germany, Austria, Sweden, Slovakia,
Israel, United States, Singapore, Australia, Poland…
As the world leader in public/project finance and credit enhancement, Dexia is present in almost all of the countries of the European Union, North America and the Asia-Pacific region. Dexia’s success in this market resides in its ability to innovate, to adapt its products and services to all local environments and to export its know-how.
Public/Project
Finance and Credit Enhancement Recognized for its expertise and know-how in public finance, structured project finance, credit enhancement and, more generally, financial services to the local public sector, Dexia is a global leader in this market. The Group operates in its domestic market, Belgium and France, but also internationally through subsidiaries, branches, agencies and affiliates located in Australia, Austria, Germany, Israel, Italy, Luxembourg, North America, Portugal, Poland, Slovakia, Spain, Sweden, the Netherlands and the United Kingdom. Elsewhere, Dexia directs its development from its Paris headquarters.
No. 1 +13% 37.9 177.2 895
Global leader in public finance
(1) New loans Strong growth in this business line
(2)
EUR
billion
New long-term loans
(2)
EUR
USD
(1) Excluding Germany and Austria. (2) Entirely consolidated companies.
∆
70
Dexia Annual Report 2003
billion
Total outstanding loans at the end of 2003
million
Gross present value premiums collected by FSA
Public/Project
Finance
Presentation and strategy A business steered by experts, a very innovative range of products and services: ∆ ∆ ∆
Dexia is present in almost all European Union countries and in the United States: ∆ ∆
∆ ∆
∆
financing the needs of local public authorities and other public service organizations by direct loans, credit commitments and the acquisition of securities issued by clients; a broad range of value added financial services related to public finance: insurance, financial advisory, asset management, debt management; project finance and, in particular, the development of public-private partnerships with major local players in the fields of public transport, the environment and energy; corporate financing in Benelux, particularly for small and medium-sized businesses; credit enhancement of municipal bonds and assetbacked securities.
Dexia has a broad client base: ∆
∆ ∆ ∆
∆
∆
the local public sector, including local authorities and other local public entities (public hospitals, inter-municipal groupings, social welfare centers, social housing organizations, etc.); other semi-public clients (public-private partnerships) and private companies, including those delegated to provide public services; non-profit organizations (foundations, congregations, etc.); promoters of securitization products (banks, credit institutions, commercial companies, etc).
in the “historical” markets of France and Belgium; in the other main countries of the European Union through subsidiaries and branches; in certain central European countries, such as Slovakia and Poland, where the Group operates with its Austrian partner Kommunalkredit Austria; in North America, Dexia is present through the American subsidiary of Dexia Crédit Local, Dexia Crédit Local New York Agency, Financial Security Assurance, a leader in the market for municipal bond credit enhancement, the Group’s specialized subsidiary Dexia Global Structured Finance, and Astris Finance, a financial consulting company for local authorities in Latin America. elsewhere in the world, Dexia Crédit Local directs its international development from its headquarters in France.
∆
71
Toulouse
∆
Dexia’s strategy is based on: ∆ ∆ ∆ ∆ ∆
∆
72
strengthening its position as a world leader in order to enable the Group to employ the best teams with the broadest experience and maintain a balance between Europe and the United States; constant innovation, in particular, joint Dexia/FSA offerings in the United States, a wide range of products and services in Europe, from active debt management to local government employer insurance brokerage activities; sharing experience among its different teams, since local authorities’ needs have many common features in spite of specific national requirements; balanced development between, on the one hand, the Group’s two “historical” markets of France and Belgium, characterized by a continually expanding range of products and services and a high stable market share, and, on the other hand, target regions i.e. most of the 15 countries in the European Union, the United States and countries in Central Europe (Poland and Slovakia); permanent efforts to achieve excellence in the quality of customer service. Dexia Sofaxis meets the highest international criteria in terms of sustainable development (ISO 9001, ISO 14001, OHSAS 18001, SA 8000) and Dexia Crédit Local has initiated a Quality Project to win ISO 9001 certification. These efforts to enhance quality go hand in hand with limited operating expenditures and a general cost/income ratio of 34%;
Dexia Annual Report 2003
its high rating allows the Group to raise funds under the best conditions – Dexia Crédit Local: Aa2, AA, AA+; Dexia Municipal Agency: Aaa, AAA, AAA – and to be a major player in credit enhancement in the United States through its subsidiary Financial Security Assurance: Aaa, AAA, AAA.
Local finances in the countries of the European Union 1997-2002: local authorities on a solid financial base Increased presence of local authorities Decentralization continues to gain ground in the European Union, particularly in Spain for health care and education, and in France for rail transport. The economic weight of the European local public sector (EUR 1,068 billion in 2002) continues to rise; it now represents 11.6% of European GDP, compared with 11.1% in 1997.
Local authorities show strong resistance to the economic slowdown From 1997 to 2000, in an environment of dynamic economic growth, the European local public sector actively participated in efforts to control public deficits and debt. Altogether, it generated a surplus throughout this period, and the weight of the local public debt in GDP contracted from 6.3% in 1997 to 5.6% in 2000.
Public/Project
Finance
∆
Since 2001, in an environment characterized by a significant economic slowdown, certain local indicators have been seen to slide. Local tax revenues, for example, were affected. They rose only slightly in 2001 (+0.9%) and 2002 (+0.5% excluding tax transfers in Spain). Local authorities in Europe nevertheless showed stronger resistance than nations in economic turmoil: although at a slower rate, the trend in local investment (+1.0% in 2002) was much more favorable than for all public administrations (-4.4%); the European local deficit (-0.11% of GDP in 2002) remained low compared with that of public administrations in general (-1.9%), and the local public sector still generates a surplus in 8 out of the 15 member states; the weight of the local debt vis-à-vis GDP (5.4%) and the total public sector debt (8.6%) remained practically stable in 2001 and 2002.
∆ ∆
Trends for 2003-2004 In 2003, local finances continued to be affected by the economic slowdown
In 2003, in most countries (Austria, Germany, Italy and Sweden, for example), local capital expenditures did not grow to any great extent, owing to pressure on current expenditures and lackluster tax revenues. Conversely, local investment took off again in several countries, such as in France, where the electoral cycle and investments by intermunicipal structures would generate an increase of approximately 6% in value in 2003, Belgium with its electoral cycle, and the United Kingdom, where major investments are programmed to upgrade facilities, particularly in the fields of public transport and health care.
In 2004, many reforms planned Beginning in 2004, France will undertake the second stage in decentralization, leading to transfers of responsibility to the country’s departments and regions, accompanied by tax transfers. In Spain, after the reform of municipal corporate income taxes introduced in 2003, the year 2004 will be marked by the reform of State transfers to local authorities. In Italy, regional tax rates will be frozen in 2003 and 2004, and an initiative to eliminate the regional tax on economic activities may be launched. In the United Kingdom, credit access conditions will be made more flexible, facilitating local government borrowing. In Germany, in order to guarantee relative stability in municipal tax revenues, there will be a decrease in the portion of the professional tax retroceded by municipalities to the Bund and the Länder, a change that should ensure municipalities of additional revenues of EUR 2.8 billion in 2004. In Portugal, within the framework of the country’s objective of balancing its budget, the rules governing ceilings on municipal debt introduced in 2002 have been given stricter application in 2003 and 2004.
Geneviève Engel
In an environment of economic stagnation in Europe, the local public sector continues to report an increase in current expenditures and pressure on tax revenues in certain countries. Increasingly solicited by States to participate in internal budget stability pacts, the local public sector nonetheless maintains its good fundamentals in spite of consistently negative balances in certain countries.
Contrasting capital expenditures in different countries
∆
Strasbourg
73
∆
To share its expertise, Dexia pursues a high-quality editorial policy.
Keeping pace with changes In order to keep pace with changes in the local sector throughout the world, Dexia strives to develop longterm, constructive relations with the main players in local development financing. In 2003, the Group supported many initiatives, including those launched by the lnternational Union of Local Authorities at the meeting organized in Madrid on the training of territorial managers, the Congress of the Association of Energy-saving European Cities held in Krakow, and the United Nations Development Program at the Forum of the World Alliance of Cities Against Poverty. To share its know-how, Dexia produces publications that present comparisons of local government institutions and management practices in Europe. In 2003, the Group published a book on local finances in the ten countries preparing to join the European Union in 2004. The work presents an exhaustive panorama of the local sector, the institutional organization of responsibilities, and financial resources in the ten future member states of the European Union. The high point of the year was the organization of an international summit of mayors, held in Paris in September 2003. The meeting brought together 250 major local sector players from around the world. ∆
74
Dexia Annual Report 2003
They exchanged points of view on the role of local authorities in urban development, the weight of local institutions in the new Europe of 25, public-private partnerships and the conditions for the successful use of long-term financing in emerging countries. At the summit meeting, Pierre Richard announced that Dexia has adopted the Equator Principles. Drawn up by the World Bank, these rules target environmental protection and equal opportunity as applied to project finance operations of USD 50 million or more funded by bank loans.
From our
shareholders “In this field, Dexia has great experience and expertise, as well as the constant ability to innovate. This business, which is atypical in the banking world, contributes more than 50% of the Group’s net income. Initially a purveyor of long-term loans to local governments, Dexia, in a certain sense, invented the business of local public sector financing. In a few years, it has become the world leader with a market share of 22% in Europe and 25% in the United States. Dexia operates in almost all the countries of the European Union and well intends to play a role in the new member states. Dexia constantly expands the range of services it offers its public and semi-public clients and also seeks to propose its services to public sector entities for the management of their assets, workforce and insurance.”
Didier Deleruelle Member of the European advisory committee of individual shareholders
Public/Project
Finance
Business review
In structured financing, new loans totaled EUR 5.1 billion, up 10.1% compared with the volume negotiated in 2002. Dexia moved up in the international League Tables and five transactions completed in 2003 were named Deals of the Year by the magazine Project Finance Euromoney.
In 2003, business rose to a record level. Long-term financing originations, excluding Germany, totaled EUR 34.3 billion, up 13.0% from 2002; growth was reported in both the public sector and in project finance. In the public sector, business excluding Germany amounted to EUR 29.2 billion, representing an increase of 13.6% over 2002. The volume of business was particularly significant in 2003 in all countries and, especially, Italy, the United Kingdom, Belgium and France. Note should also be made that new loans in North America increased by 14.9% (calculated in USD) over 2002 and represented 31.5% of total originations in 2003 despite the depreciation of the USD.
∆
Belgium France America(2) Asia – Pacific Spain Israel Italy United Kingdom Sweden Paris headquarters Slovakia
Total excluding Germany and Austria Germany Austria(3)
Pierre Richard and Peter Woicke, Chairman of SFI, a subsidiary of the World Bank, announce that Dexia has adopted the Equator Principles.
New long-term loans in 2003
Total outstanding loans as of Dec. 31, 2003
(in millions of EUR)
(in millions of EUR)(1)
4,754 8,687 9,537 67 1,205 105 6,970 1,325 497 976 198
+8.2% +21.7% -6.1% +49.8% +6.4% +15.6% +26.7% x3.1 -41.6% +101.3% +30.9%
28,337 55,250 24,050 333 3,853 319 24,808 3,561 3,199 3,298 416
+4.5% +3.0% +13.7% +1.4% +31.7% +5.2% +22.7% +29.4% +3.2% +12.6% +30.3%
34,321
+13.0%
147,424
+9.4%
3,561 2,400
-66.8% +42.3%
29,808 7,494
-4.9% +31.5%
(1) Including off-balance sheet products. (2) Excluding FSA. (3) Corresponds to total outstanding commitments and long-term financing originations at Kommunalkredit Austria, in which Dexia has had a 49% equity interest since 2001.
∆
75
Brussels
strong growth in new loans to public hospitals: EUR 169 million, representing an increase of 41%.
Outstanding commitments in these two sectors stood at EUR 177.2 billion (including Germany and excluding Austria) as of December 31, 2003, up 6.7% from the end of December 2002. The rise was particularly significant in Italy, Belgium and America. FSA, the Group’s North American subsidiary, which specializes in credit enhancement, municipal bonds and asset-backed securities, reported USD 895 million in gross present value premiums in 2003, representing an increase of 1.5% over the previous year, which had been its best year ever.
Deposits and assets under management totaled EUR 14.1 billion, up 9.4% from the end of 2002. Public sector funds stood at EUR 10 billion, representing an increase of 11%. This growth was attributable to public authorities for EUR 587 million, illustrating the improved situation of their treasuries, and to the health care and social services segment for EUR 370 million (social profit).
Belgium
In 2003, many asset management operations were initiated for a total of EUR 6.2 billion, up 85% from 2002.
In the public sector, new long-term loans totaled EUR 2.6 billion compared with EUR 2.3 billion in 2002, representing an increase of 12.9% mainly fueled by the local government segment with originations of EUR 1.9 billion, up 22.6% from 2002. These good results were primarily due to an upturn in local investment in phase with the electoral cycle. The improvement concerned municipalities (+19%) and inter-municipal structures (+17.4%). It is important to note that in Belgium, Dexia remains the leader in this segment with a market share of 84%. With other local organizations, new loans stood at EUR 463 million, down 6%, reflecting the lackluster market. In the profit-making social services sector (health care and social services), originations amounted to EUR 302 million. The year 2003 was marked by
∆
76
At the end of 2003, outstanding short-term loans totaled EUR 12.7 billion compared with EUR 9.7 billion in 2002 (+31%). Growth in this segment was mainly driven by public sector activities. In this segment, outstanding loans totaled EUR 8.6 billion, representing an increase of EUR 3.7 billion. This growth was due to the fixed-term loans granted to the three principal regional housing organizations at the end of 2003 for a total of EUR 3.3 billion.
Dexia Annual Report 2003
In Belgium 4,754 4,394
28,337 27,263 27,109
2,592
2001
2002
2003
New loans (in millions of EUR)
2001
2002
2003
Outstanding commitments(1)
(in millions of EUR) (1) Including off-balance sheet items.
Public/Project
Finance
As to structured financing, new loans reached EUR 2.12 billion and remained stable in 2003. At constant exchange rate, the production would have reached EUR 2.27 billion, i.e. an increase of almost 10%. This evolution is due to a decline on the Belgian market (EUR -473 million) and a rise in Ireland (EUR +418 million) and in New York (EUR +114 million at current exchange rate). The rise in Ireland is mainly attributable to five new transactions signed in March 2003 for a total of EUR 317 million.
France
∆
In 2003, commercial activity reached a new high with EUR 8.6 billion in new loans, representing an increase of more than 21.7% over 2002, based on the following items: the volume of originations with local authorities increased more than the market, boosted by a marked upturn in municipal investments after the procrastination that characterized new electoral mandates in 2001 and 2002. Growth was concentrated on large governments that launched many tenders in the last quarter. In an environment of fierce competition, Dexia Crédit Local maintained its market share in France at approximately 42% and won several major contracts such as the one it signed with the city of Paris. there was strong growth with the other local players. The three main segments in this market reported a rise in business as a result of programs to enable social housing authorities to acquire properties, the launch of the Hospital 2007 plan to modernize the French hospital sector, and several large financing operations organized by national government entities.
Paris In 2003, almost 4,000 asset management transactions were initiated for EUR 7.3 billion (up 28.1% from 2002) in all client compartments, representing a volume comparable to that of new loans. Among these operations, more than EUR 4.0 billion were negotiated in cooperation with Dexia Finance, including a EUR 280 million operation with the department of Rhone and two operations totaling EUR 81 million and EUR 82 million, respectively, for the cities of Nantes and Marseilles. For its local institutional clients, Dexia CLF Banque offers a full range of asset management products and services. Despite a generally lackluster market, assets under management increased by more than 35% to EUR 3.4 billion at the end of 2003. The number of asset management clients rose from 640 to 830.
∆
In France 8,687
52,767 53,646
55,250
6,935 7,136
2001
2002
2003
New loans (in millions of EUR)
2001
2002
2003
Outstanding commitments(1) (in millions of EUR)
(1) Including off-balance sheet items.
∆
77
Outstanding short-term loans totaled EUR 12.7 billion in 2003, compared with EUR 9.7 billion in 2002, representing an increase of 31%. However, following the State’s decision to modify regulations governing major financing operations, the short-term loan business slowed in the last quarter.
∆
In structured finance, originations in 2003 totaled EUR 657 million, up 25.7% from 2002. In 2003, Dexia confirmed its leading role in France in project and asset financing arrangements, with several mandates as lead arranger, particularly in the fields of renewable energy, environmental protection and public transport. Here are several examples: for the Provence-Alpes-Côte d’Azur region, structured financing in the amount of EUR 207 million earmarked for the acquisition of 35 regional express rail cars; in Toulouse, EUR 41 million in financing to create a technical center for the production of fluids for the new Airbus jumbo jet A380; in the department of Hérault, structured financing for the creation of a wind-power facility, a first for Dexia in the field of renewable energy in France.
firm specialized in providing financial coverage for the employer obligations of territorial governments and public hospitals. In 2003, this subsidiary reported sustained commercial activity, broadened its client base and augmented the amount of premiums collected. The second entity, Dexia Epargne Pension, markets social engineering products (supplemental retirement, employee savings plans) to local institutional clients. In its first year of business, this recently created company generated encouraging results with more than 120 contracts signed and outstanding assets of more than EUR 120 million.
∆ ∆
Benefiting from the synergies at work within the Group, Dexia also offers an expanded range of services to the French local public sector, especially for local players and their employees. Two main entities develop this activity. The first, Dexia Sofaxis, is the only French
∆
78
Dexia Annual Report 2003
Dexia Finance Dexia Finance specializes in the organization and implementation of financial arrangements for large European local authorities. Dexia Finance remains on the cutting edge of new financial engineering techniques and develops innovative debt financing and restructuring strategies. In 2003, Dexia Finance reported strong growth in business in terms of volume and geographic expansion. Long-term originations totaled EUR 12.8 billion, twice the volume processed in 2002. Dexia Finance is also active on the international scene and provides support for Dexia’s other subsidiaries. In 2003, Dexia Finance conducted operations in nine countries, including France, Italy, Germany, Spain and Sweden. Dexia Finance’s success with the Italian public sector enabled Dexia Crediop to accelerate considerably its development in this market.
Public/Project
Finance
Germany In 2003, the major event was Dexia’s acquisition of the 49.52% equity interest previously held by the minority shareholder. Since October 1, 2003, the Group owns all the capital of Dexia Hypothekenbank Berlin. In Germany, Dexia operates from the bank’s headquarters in Berlin and an office in Frankfurt. From a commercial point of view, the year 2003 was marked by dynamic growth at the Frankfurt office, which is active in the German market in long-term loan brokerage and the implementation of financial engineering for German local authorities. The Frankfurt office reported business volume of EUR 4.7 billion, representing an increase of 80.8% over 2002. The volume of structured products (such as those proposed by Dexia Finance) totaled EUR 975 million, a remarkable performance for this new activity in Germany.
In Germany 10,720
31,345 29,808 26,887
5,826
Frankfurt
Among the significant operations conducted by Dexia Hypothekenbank Berlin, there was the bank’s participation, in association with Kommunalkredit Austria, in the tender organized by Hamburg’s mortgage loan institution for the sale of a part of its outstanding commitments (guaranteed by the city). In the mortgage loan sector, the strategic decision taken in 1998 to discontinue any activity of this kind quite naturally resulted in a contraction in the portfolio. In 2003, it was decided to accelerate its liquidation and the volume of loans totaled only EUR 173 million at the end of 2003 compared with EUR 294 million at the end of 2002.
3,561
2001
2002
2003
New loans (in millions of EUR)
2001
2002
2003
Outstanding commitments(1)
(in millions of EUR) (1) Including off-balance sheet items.
Dexia Hypothekenbank Berlin headquarters ∆
79
New York
North America Dexia is present in North America through Dexia Crédit Local New York Agency, Financial Security Assurance (FSA), Astris Finance, a financial advisory firm for local authorities in Latin America, and Dexia Global Structured Finance, specialized in structured finance advisory services and arrangements.
Dexia Crédit Local New York Agency
In 2003, the acquisition value of US taxable municipal bonds and Canadian bonds totaled USD 2 billion, representing an increase of 71.3% over 2002. This rise was notably due to Dexia’s USD 850 million participation in the USD 10 billion bond issue launched by the State of Illinois to finance its state government employee retirement fund. Aside from this exceptional operation, Dexia diversifies its portfolio by multiplying counterparties to include large local authorities and other local players in North America.
The New York Agency is active in two areas: public sector (liquidity guarantees on municipal bond issues and purchases of bond securities) and structured finance products. In 2003, commercial performance was again excellent in the first segment as new business totaled USD 10.9 billion, up 15% from 2002. At the end of 2003, outstanding commitments stood at USD 30.4 billion, representing an increase of 42.6% over 2002.
In North America 10,890
30,375
9,656 22,177
∆
∆
80
Public sector Benefiting from the dynamism and almost 7% growth of the American municipal bond market (USD 383 billion in 2003), new liquidity guarantees increased by 6.4% over 2002 to USD 8.5 billion. Dexia remains a leading player in this market. In this segment, synergies with FSA were actively pursued. With 37 joint operations out of the 85 organized in 2003, they represent a total of credit enhanced issues of USD 4.3 billion, up 23.2% from 2002.
Dexia Annual Report 2003
6,463 14,599
2001
2002
2003
New loans (in millions of EUR)
2001
2002
2003
Outstanding commitments(1)
(in millions of EUR) (1) Including off-balance sheet items.
Public/Project
Finance
In Mexico, a first operation was completed in the public sector with the launch of a local currency bond issue to finance the municipal water system in Tlalnepantla in the suburbs of Mexico City. The project was named “Latin America Municipal Finance Deal of the Year 2003” by the magazines Latin Finance and Project Finance.
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Municipal water system in Tlalnepantla Mexico
2003 ∆
Structured Finance In an environment of extreme cautiousness in the thermic electricity sector, new business totaled USD 390 million in 2003, down 25.1% from 2002. Project finance activities diversified into gas transmission and storage, environmental protection and wind energy. Dexia Crédit Local New York Agency obtained a lead arranger mandate for the financing of an underground gas storage facility in the State of New York. Dexia also co-arranged financing for two wind-power facilities in Minnesota. In US lease financing, business was sustained. For example, Dexia arranged financing for the sewer systems in four municipalities along the Hudson River, the first such operation in this segment in the United States.
Latin America Municipal Finance
Financial Security Assurance 882
895 294,390 265,700
696.5
217,111
Financial Security Assurance Financial Security Assurance (FSA) specializes in the credit enhancement of municipal bonds and assetbacked securities, mainly in North America, but also in Europe. Credit enhancement involves guaranteeing bonds primarily issued by municipalities. By enabling municipal governments to benefit from its excellent AAA rating, FSA provides access to the bond market under more attractive conditions, a service for which it collects a premium. Credit enhancement of assetbacked securities represents a similar guarantee granted to bond issues that refinance different classes of assets (e.g. consumer loans).
2001
2002
2003
2001
2002
2003
Gross present value premiums
Net par insured end of period
(in millions of USD)
(in millions of USD)
In 2003, FSA reported gross present value premiums of USD 895 million, representing an increase of 1.4% over 2002, which was a record year. At the end of December, the net par outstanding insured totaled USD 294.4 billion, up 12.1% from the end of the year 2002.
∆
81
Austria Vienna
∆
Municipal sector In 2003, FSA recorded with the municipal sector gross present value originations of USD 613 million, representing a rise of 12.4% compared with 2002. This trend reflected the dynamism of the North American municipal bond market and the positive contribution of international activities. In the dynamic municipal bond market, USD 383 billion, up 6.7% in 2003, credit enhancement was provided for 50% of these issues. In 2003, FSA guaranteed a total of USD 55 billion, representing a market share of 27%, and generating USD 483 million in gross present value premiums.
Dexia has a 49% minority interest in Kommunalkredit Austria, specialized in local government financing in Austria. It is also through the joint venture Dexia Kommunalkredit Holding in which Dexia holds a 51% stake that the Group directs its development in central European countries such as Slovakia, the Czech Republic, Hungary and Poland. Dexia’s majority equity interest in Dexia banka Slovensko is likewise through the Austrian entity. In 2003, Dexia launched new partnerships with the Austrian bank. It created a joint venture specialized in asset management: Kommunalkredit Dexia Asset Management, and opened a common office in Poland. The Group’s Austrian partner reported excellent results in 2003 with a new production of EUR 2.4 billion, up 42.3% from 2002. At the end of 2003, total outstanding commitments stood at almost EUR 7.5 billion (+31.5%).
International gross present value originations totaled USD 129 million, including an exceptional operation that generated premiums of USD 66 million: the credit enhancement of bonds issued by the Metronet consortium, in the amount of GBP 515 million, to finance the renovation of the London underground.
In Austria(1) 2,400
5,700
1,686 1,365
4,031
The US lease sector was also very active in 2003. Some 20 operations in Europe and the United States generated USD 17 million in gross present value premiums. ∆
∆
82
Asset-backed securities With gross present value premiums of USD 238 million, FSA’s results in asset-backed securities were down 12.2% from the previous year. They were in line with the risk criteria set in mid-2002, which concern ABS whose underlying assets pertain to large companies (“corporates”).
Dexia Annual Report 2003
7,494
2001
2002
2003
New loans (in millions of EUR)
2001
2002
2003
Outstanding commitments(2) (in millions of EUR)
(1) Corresponds to total outstanding commitments and new long-term loans at Kommunalkredit Austria, in which Dexia has a 49% interest since 2001. (2) Including off-balance sheet items.
Public/Project
Finance
Kommunalkredit Austria concentrates its activity in the public sector (EUR 2.1 billion), primarily in Austria but also in Central Europe and Switzerland. Two notable operations were conducted in association with Dexia Hypothekenbank Berlin, the German subsidiary, in response to tenders launched by the Länder of Styria in Austria and Hamburg in Germany for the acquisition of their real estate assets. Kommunalkredit Austria was also involved in several significant operations in Poland, the Czech Republic and Hungary.
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Wind-power facilities in Galicia Spain
2003
European Renewable Energy Acquisition
Lastly, the Austrian government delegated to Kommunalkredit Austria the management of the CO2 emission credits allowed by the Kyoto Protocol.
Spain In its second year of active business, Dexia Sabadell Banco Local reported very promising results. In 2003, new loans at this young subsidiary totaled EUR 1.2 billion, up 6.4% from 2002. Boosted by the year’s originations, outstanding commitments at Dexia Sabadell Banco Local stood at EUR 3.8 billion as of December 31, 2003, representing an increase of 31.7% over the end of 2002.
Madrid area, and co-arranged and financed extensions of Barcelona’s subway and tramway lines. In 2003, the Spanish subsidiary also actively pursued its development in renewable energies. Dexia arranged financing and acted as underwriter for the acquisition of two windpower facilities in Galicia. Project Finance magazine named this transaction the “European Renewable Energy Acquisition Deal of the Year 2003”.
In the public sector, new loans amounted to EUR 1.01 billion, up 2.7% from 2002. This result is all the more remarkable since the year was marked by a series of local elections in Spain, not a favorable environment for business in this client segment. The bank’s market share, measured by the volume of outstanding loans to Spanish local authorities, rose significantly to more than 5%. In structured finance, new loans of EUR 194 million marked an increase of 30.4% over 2002. This excellent performance was due to the advantageous positioning of the Dexia Sabadell Banco Local team in a favorable economic environment in which the government recently launched a EUR 10 billion program for the accelerated development of transport infrastructures. Within this framework, Dexia Sabadell Banco Local insured underwriting commitments in the amount of EUR 110 million for three toll highways in the greater
In Spain 3,853
1,132
1,205 2,926
2,013
735
2001
2002
2003
New loans (in millions of EUR)
2001
2002
2003
Outstanding commitments(1)
(in millions of EUR) (1) Including off-balance sheet items.
∆
83
London
United Kingdom In 2003, long-term financing originations made a spectacular comeback in both the public sector and structured finance, attaining EUR 1.3 billion compared with EUR 425 million in 2002. At the end of 2003, outstanding commitments at the branch totaled EUR 3.6 billion, up 29.4% from the previous year. In the public sector, with new loans of EUR 680 million compared with EUR 67 million in 2002, these excellent results can be attributed to the successful launch of the new LOBO product (Lender’s Option, Borrower’s Option). In certain yield curve configurations, these very innovative characteristics make it possible to offer clients lower interest rates in the initial years of the loan than those proposed by the public entity Public Work Loan Board (PWLB).
In structured finance, at EUR 645 million, the volume of business rose 80.6% compared with 2002. This excellent performance was the result of major operations in the mass transit sector, including the project to renovate the London underground. In the Private Finance Initiative sector, Dexia arranged six transactions to finance university residences, hospitals and street lighting.
Israel In 2003, the significant improvement in business in the last quarter of the year boosted the total of new long-term loans to EUR 105 million as of December 31, representing an increase of 15.6% over 2002.
In the United Kingdom
In Israel
3,561
1,325
319
105
303
2,752 91
2,527
250
73
398
425
2001
2002
2003
New loans (in millions of EUR)
2001
2002
2003
Outstanding commitments(1)
(in millions of EUR) (1) Including off-balance sheet items.
∆
84
Dexia Annual Report 2003
2001
2002
2003
New loans (in millions of EUR)
2001
2002
2003
Outstanding commitments(1)
(in millions of EUR) (1) Including off-balance sheet items.
Public/Project
Finance
Italy Business at Dexia Crediop is exceptionally good in 2003. The Italian bank reported overall growth in business of 26.7%, compared with 2002, a year that was already a reference. New loans totaled EUR 7.0 billion, and outstanding commitments at the end of 2003 stood at EUR 24.8 billion, up 22.7% from the end of 2002. Dexia Finance’s success in financial engineering for Italian local authorities led to the creation of Dexia Finance Italia. This new team, which is integrated into Dexia Crediop, enables the bank to step up its development in this market. These very good results can mainly be attributed to long-term financing in the public sector, which totaled EUR 6.5 billion, up 37.0%. Dexia Crediop reinforced its presence with major clients by accompanying the move to disintermediation, which began in 2002 and expanded in 2003. Its market share thus rose from 20% to 30% in international issues. Of the nine largest bond issues, six mandates were won by Dexia Crediop and, in particular, a mandate from the city of Rome. Dexia Crediop also benefited from the significant development of securitization by positioning itself as joint lead-manager in the largest transaction ever realized in the Italian market, involving the securitization of assets in the public health sector with the region of Latium in the form of asset-backed securities.
Dexia Crediop headquarters in Italy
In 2003, clients also focused on restructuring their debt for a total amount of EUR 1.9 billion. Highlights include the restructuring of the debt of the Campania region and the restructuring accomplished by Dexia Finance Italia for the cities of Milan and Turin.
In Italy 24,808 20,219 16,931
6,970 5,503 3,111
2001
2002
2003
New loans (in millions of EUR)
2001
2002
2003
Outstanding commitments(1)
(in millions of EUR) (1) Including off-balance sheet items.
∆
Rome
85
Slovakia
Bratislava
In structured finance, business in 2003 was in line with the previous year. Dexia Crediop operated in the sectors of water, environmental protection, transport and renewable energies. The biggest transaction in 2003 was the bank’s contribution of EUR 300 million to help finance the acquisition by the Benetton group’s holding company of 54% of the shares of the highway concession company Autostrade Spa. Dexia Crediop was also a lead in the financing of several wind-power facilities in Sardinia and Sicily (EUR 170 million). This project is one of the first in Italy to benefit from “green credit” advantages.
As of October 1, 2003, the Slovak subsidiary changed its name to Dexia banka Slovensko. This change reflects the Group’s strategic decision to add Dexia’s name to all Group subsidiaries (this point is further developed in the chapter on Retail Financial Services page 96). New long-term loans at the subsidiary totaled EUR 198 million, representing an increase of 30.9%. At the end of 2003, outstanding commitments amounted to EUR 416 million, up 30.3%.
In Slovakia 198 416 151 319
In asset financing, Rome’s transit authority used US lease financing to acquire 202 subway and tramway cars. This was the first transaction of its type in Italy. Finally, Dexia Crediop signed 13 financial advisory mandates, mainly for privatizations and public sector tenders.
196 56
2001
2002
2003
New loans In asset management, Dexia Crediop distinguished itself by winning a major mandate to manage all the assets (EUR 650 million) of the Italian institute for work accident compensation (INAIL).
(in millions of EUR)
∆
Dexia Annual Report 2003
2002
2003
Outstanding commitments(1)
(in millions of EUR) (1) Including off-balance sheet items.
Stockholm
86
2001
Public/Project
Finance
For public sector clients, long-term loans rose 81.2% to EUR 163 million. The increase was due to the acquisition of State securities and to loans to small and medium-sized municipalities. Among some of the most significant operations was the bank’s assistance in refinancing the debt of Bratislava in the amount of EUR 4 million over a period of five years. Structured finance originations totaled EUR 35 million. In 2003, Dexia banka Slovensko remained active in this market and conducted several transactions, in particular to finance the renovation of the Bratislava tramway and the upgrade of Slovakia’s second consumer waste incineration plant to enable it to meet European standards.
In Sweden 3,199 3,102
852 771
2,680
497
2001 2002
2003
New loans (in millions of EUR)
2001 2002
2003
Outstanding commitments(1)
(in millions of EUR) (1) Including off-balance sheet items.
Sweden In 2003, long-term financing originations totaled EUR 497 million, down 41.6% from 2002. Outstanding commitments at the end of 2003 remained stable at EUR 3.2 billion. For Dexia Public Finance Norden, the decline in new loans was linked to the almost general rise in local taxes, associated with the low level of capital expenditures, which helped improve the financial situation of Swedish local authorities. Local authorities thus borrowed less and, because of the very low rates, opted for very short-term contracts. The importance given to maintaining margins led the Swedish subsidiary to choose not to emphasize volume in new loans.
In structured finance, business totaled EUR 45 million. In addition to the operations in the public transport and housing sectors, Dexia Public Finance Norden contributed EUR 18 million to help finance highway E39 in western Norway.
Asia and Pacific 2003 was marked by the opening of an office in Sydney. In 2003, new long-term loans at the new Australian entity totaled EUR 67 million, representing an increase of 49.8% over 2002. At the end of 2003, outstanding commitments also increased in this region and stood at EUR 187 million.
Nevertheless, with Dexia Finance, the Swedish entity conducted eight structured operations with local authorities and municipal companies, six of which were in Sweden and, for the first time, two of them in Finland.
Sydney ∆
87
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Toll highway in Sydney
2003
Australia Transport
Business mainly concerned structured finance operations in road infrastructures and renewable energies. In the first category, Dexia won its first mandate as underwriter for the construction and operation of a toll highway to the west of Sydney. This transaction was named Australia Transport Deal of the Year 2003 by the magazine Project Finance. Dexia also helped finance the construction of a toll tunnel in the center of Sydney. In renewable energies, Dexia participated for the first time in the financing of wind-power facilities in Australia.
Other geographic regions From Paris, Dexia Crédit Local’s specialized teams operate in the countries in which the Dexia Group has no base and lend their support to outposts and representative offices. In 2003, long-term financing originations in these countries were excellent, doubling to attain EUR 1 billion, compared with EUR 485 million in 2002. At the end of 2003, outstanding commitments stood at EUR 3.3 billion, up 12.6%. The strongest growth was in the structured finance segment.
∆
88
Dexia Annual Report 2003
Public sector financing totaled EUR 376 million, representing an increase of 6.6% over 2002. Of particular note was the 15-year, EUR 150 million loan contact signed with the city of Athens to finance infrastructure improvements. It was the first time the Greek capital negotiated a long-term loan with a foreign bank. In addition, in the primary market, Dexia bought EUR 50 million of bonds issued by the city of Prague in a program of EUR 170 million with a maturity of 10 years. Intra-group synergies also enabled Dexia Capital Markets and Kommunalkredit Austria to work together as a dealer in the EUR 1 billion EMTN (Euro Medium Term Notes) program designed for the city of Prague. In structured finance, new loans in 2003 totaled EUR 601 million, more than four times the level reported in 2002. The principal operation was the co-arrangement of EUR 370 million for the PublicPrivate Partnership financing of the wastewater purification station at The Hague, a transaction that was named Europe Water PPP Deal of the Year 2003 by Project Finance magazine. Dexia also worked in telecommunications as co-arranger, for Optimus, Portugal’s third largest telephone operator, and in Hungary for VTH, that country’s second largest fixed telephone operator. In the water segment, Dexia helped the EBRD finance water purification facilities in Zagreb and upgrade the water purification station and extend the city sewerage system in Wroclaw, Poland.
Public/Project
Finance
l
Project of wastewater purification station at The Hague
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Wastewater purification station at The Hague
2003
Europe Water Private-Public Partnership
Water at The Hague In December 2003, Dexia signed one of its most prestigious project finance contracts as mandated lead arranger in the financing of wastewater purification facilities at The Hague in the Netherlands. For this Public-Private Partnership (PPP) project, a debt of EUR 370 million was structured with Rabobank. By reason of its size and contractual structure, this project is a true first in water processing in continental Europe. The Dutch concession company Delfluent, introduced by VEOLIA Environment, was able to finance its project under the best market conditions and will provide quality service to the population in and around The Hague. The project’s general economy satisfies a double requirement: the need to increase water purification capacity as a result of rapid urban expansion in the region of The Hague and the obligation to upgrade facilities to meet the latest European standards in wastewater processing. The concession company will build a new facility with capacity for the equivalent of 1.3 million inhabitants, but also renovate existing facilities to augment their capacity to the equivalent of 400,000 inhabitants. The project is scheduled for completion in March 2009. The project at The Hague is another example of the type of PPP infrastructure financing structured by Dexia in recent years and, in particular, of the project to build a very fast train line between Amsterdam and Belgium financed by Dexia in 2001 (EUR 1.3 billion). Dexia thus confirms its role as a precursor in PPP financing in the Netherlands, as well as the preeminent position the Group occupies in the PPP market in Europe.
Outlook In Europe, the local authorities debt market should continue to increase in 2004 under the effect of the ongoing process of devolution, implying the transfer of new responsibilities to local and regional authorities, and the economic situation should continue to weight on their fiscal revenues. For instance, the outstanding debt of local authorities in France, which had been decreasing for the seven past years, has stabilized in 2003 and should increase as from 2004. Besides, the public-private partnership (PPP) for the building and the maintenance of public equipments will continue to develop and expand into new countries (in France, the regulations regarding the public-private partnership should be released during the first half of 2004). As far as United States are concerned, the municipal market, after two record years in 2002 and 2003, should slow down in the course of 2004, however marked by a few important single transactions. The trend of decreasing risks in the asset-backed securities sector (ABS), particularly collateralized bond obligations (CBO), which has already began in 2003, should continue in 2004, with the economic recovery. All in all, the activity should maintain at a very high level, with a still contained cost of risk.
∆
89
Financial results of the business line The analysis hereafter is based on the underlying data (i.e. excluding nonrecurring items) for this business line, in order to allow a better understanding of the fundamental trends of the business line. Items considered nonrecurring are detailed on pages 56-57. After two record years in terms of activity, public and project finance recorded a solid growth of its net income. This business line took advantage of a favorable economic and financial environment. Net income for 2003 amounts to EUR 783 million (+8.2% compared to 2002 and +16.7% at constant exchange rate). This yearly performance confirms the business line’s status as the first contributor to Dexia’s earnings. The main contributors to the business line net income are FSA (30%), France (28%), Belgium (21%), the United States excluding FSA (9%) and Italy (7%). It should be noted that the earning streams in the United States (both FSA and Dexia) have experienced growth despite a very unfavorable evolution of the exchange rate (USD/EUR).
∆
90
Dexia Annual Report 2003
The evolution of revenues reflects the very good commercial performance of the business. For the whole year, they amount to EUR 1,867 million, up 4.1% or up 10.4% at constant exchange rate. Growth is observed particularly in revenues from net interest and related income and insurance activities where the progression is respectively +4.2% (+7.2% at constant exchange rate) and +5.1% (+24.8% at constant exchange rate). To be noted that Public Finance stricto sensu is the most important driver of this growth. Costs are up by a modest 0.6% for the whole year (+4.6% at constant exchange rate), in comparison with the revenue growth. Gross operating income amounts to EUR 1,232 million (+6.0% and +13.6% at constant exchange rate). The cost/income ratio further improves in 2003, at 34.0% for the full year against 35.2% in 2002.
Public/Project
Finance
Cost of risk decreased substantially over the year (-50.2%) and amounted to EUR 84 million for the full year 2003. It should be reminded that a EUR 43 million had been booked in 2002 to cover the risks on certain CDO (Collateralized Debt Obligations) transactions at FSA. Operating income (after cost of risk) of the business line progressed strongly during the full year (+15.5% at EUR 1,149 million). The business line’s strong financial performance is well reflected in the ratio of return on economic equity (ROEE)(1), which still continues to improve, reaching 22.8% in 2003 (21.0% in 2002). (1) Net income before minority interests as a percentage of allocated equity at the end of the period.
Underlying statement of income(1) (excluding nonrecurring items) (in millions of EUR) 2003
2002
Evolution
1,867
1,793
+4.1%
1,243 184
1,193 210
+4.2% -12.2%
- Net commissions and other income
218
214
+1.7%
- Technical and financial margin of insurance activities
405
386
+5.1%
Revenues - Net interest and related income of which interest on EEA(2)
Costs Gross operating income Cost of risk
Operating income Net gains & recoveries on long-term investments Corporate income tax
(635) 1,232
(631) 1,162
+0.6% +6.0%
(84)
(168)
-50.2%
995
+15.5%
1,149 (5)
10
n.s.
(319)
(266)
+19.9%
Income from equity-accounted companies
11
30
-64.2%
Net income before minority interests
835
768
+8.7%
52
45
+17.3%
783
724
+8.2%
34.0% 22.8% 3,663
35.2% 21.0% 3,659
Minority interests
Net income Cost/income ratio ROEE(3) Allocated equity (end of period) (1) Pro forma for full year 2002. (2) Economic Equity Allocated. (3) Return on Economic Equity.
∆
91
A network of almost 1,300 banking branches in Belgium, located throughout the country under a single name: Dexia Bank. Today, Dexia ranks as one of the three largest retail banks in Belgium. In Luxembourg, Dexia has a leading position. The bank
Namur
is also actively developing operations in Slovakia. Bratislava
Eupen
Brussels
Antwerp
Esch-sur-Alzette
^
Zilina Genk Nitra Wiltz Echternach
Ostend Bruges
Arlon Tournai Charleroi Luxembourg Liège
^
Kosice Ghent
Retail Financial
Services
In Retail Financial Services, Dexia is active in Belgium, Luxembourg and in Slovakia. In these countries, Dexia operates under the respective names Dexia Bank, Dexia BIL and Dexia banka Slovensko. Each of these entities works with retail banking customers, small and medium-sized businesses and self-employed professionals.
1,283 EUR
EUR
82.5 23.3 EUR
Dexia Bank headquarters in Brussels
∆
94
Dexia Annual Report 2003
2.2
branches
In Belgium, a dense network serving approximately 3.9 million retail banking customers
billion
Customer deposits and investments Up 4.8%
billion
Customer loans Up 4.4%
billion
Insurance premiums paid by Dexia customers Up 34.7%
Retail Financial
Services
Presentation and strategy In each of the three countries in which it is active in retail banking, Dexia markets a diversified range of banking products and services that are best adapted to meet consumer needs, including account management, savings and investments, mortgage loans, consumer financing and investment advances. Insurance rounds off this bank service offering and is a major growth focus. Finally, Dexia is a leader in electronic banking, actively developing new customer relationship channels such as the Internet, mobile banking, WAP/GSM and ATMs. These networks account for a growing share of transactions. In Belgium, Dexia Bank now ranks among the three largest Belgian retail banks, especially in terms of customer deposits and investments. The bank has a network of almost 1,300 banking branches throughout the country. Its presence in the Belgian banking market is further strengthened by the activity of its subsidiary Eural, which offers basic banking products through a network of 285 branch managers and the network of brokers who work for the retail bank loan specialist Dexia Société de Crédit. In insurance, the joint management structure introduced in 2002 for the two entities Dexia Insurance and DVV Insurance develops synergies at the level of the back office, marketing and human resources. With a market share of more than 10%, Dexia is now Belgium’s third largest life insurer. To market its life and non-life insurance products, Dexia employs several distribution channels: the Dexia Bank branches; the network of 250 exclusive agencies of DVV Insurance; Corona, Belgium’s largest direct insurer; Belstar, a network of independent brokers.
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In 2003, Dexia continued to integrate Artesia Banking Corporation and its two main subsidiaries – BACOB Bank, which provides retail financial services, and the insurance company DVV Insurance. The focus was primarily on the reorganization of IT systems and network unification. The installation of a unified IT system is under way for both back office and customer service applications. In addition, the branch network continues to adapt. First, since October 2003, all the BACOB branches now fly the Dexia Bank colors, and secondly, the network now counts 1,283 branches, with the objective of 1,100 by the end of 2005.
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Business review In Luxembourg, Dexia BIL ranks among that country’s three largest banks. The bank operates through a network of 41 branches, including two new branches opened in mid-2003. In Slovakia, on October 1, 2003, the Dexia subsidiary formerly called Prvá Komunálna Banka took the name Dexia banka Slovensko, making it clear that the bank belongs to the Group. With a solid base throughout the country, the 46-branch network is now under the Dexia banka masthead. Dexia banka is one of the ten largest Slovak retail banks with a market share of approximately 3%.
In 2003, in the retail banking market, the recovery began in the second quarter in spite of low interest rates and a wait-and-see attitude on the part of customers. Investors remained cautious, on the lookout for products that offered guarantees for their capital and locked in yields.
Customer assets
∆
As of December 31, 2003, customer assets (traditional deposits, savings bonds, mutual funds, life insurance products and Dexia bonds, excluding investment accounts) increased by 4.8% from 2002 to EUR 82.5 billion. The major trends during the year were as follows: a significant increase in savings accounts (+16.0%), which totaled EUR 25.0 billion as of December 31, 2003. To sustain a good level of activity, the bank developed customer enticement and loyalty programs throughout the year. In the first nine months of 2003, Dexia maintained its market share in spite of fierce competition in this market; a slight decrease in other deposits (-1.4% for the year) with contrasting trends in sight accounts, which rose 1.2% to EUR 5.2 billion, and term deposits, which declined 4.3% to EUR 4.1 billion;
Customer assets (in billions of EUR)
2003
Evolution
30.9
34.3
+10.7%
21.5
25.0
+16.0%
9.5
9.3
-1.4%
17.0
14.6
7.5
7.4
-14.3% -1.6% +0.8% +8.6% +26.9% +4.8%
1.2
1.2
16.3
17.7
5.8
7.4
78.7
82.5
(excluding Slovakia)
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Dexia Annual Report 2003
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Deposits Savings accounts Other deposits Savings bonds Dexia euro-bonds Cooperative shares Mutual funds (OPCVM) Life insurance Total
2002
Retail Financial
Services
∆ ∆
a continued decline in savings bonds (-14.3% for the year), which totaled EUR 14.6 billion at the end of 2003. This trend was due to the Group’s decision to promote savings accounts. The movement slowed slightly, however, at the end of the year with the rise in interest rates; a rise in investment in mutual funds (OPCVM), reflecting in particular the increased value of the assets. As of December 31, 2003, investments in mutual funds increased by 8.6% compared with the end of December 2002 (+2.3% excluding the market impact). After nine months of lackluster business, the last quarter saw heftier organic growth.
Outstanding loans (in billions of EUR) 2002 2003 Evolution Loans to customers
15.6
16.3
+4.3%
Mortgage loans
13.4
14.2
+5.5%
Consumer loans
2.2
2.1
-3.4%
Loans to small businesses 6.7 and the self-employed Total 22.3
7.0
23.3
+4.7% +4.4%
Earned insurance premiums (in millions of EUR)
Life Branch 21 Branch 23 Non-life Total
2002 1,350 531 819 283 1,633
2003 1,883 1,339 544 317 2,200
Evolution +39.5% x2.5 -33.5% +11.8% +34.7%
from 2002. It is important to note a further rise in 2003 in the volume of non-life insurance products issued and managed by Dexia Insurance, and distributed through Dexia networks. Almost 70% of this result is composed of premiums – life and non-life – collected by the Dexia Bank network.
Loans Bancassurance After relative stability in 2002 (+ 1.9%), investments in life insurance increased significantly by 26.9% to EUR 7.4 billion at the end of 2003. Earned insurance premiums paid by retail customers totaled EUR 2.2 billion, up 34.7% from 2002. This increase mostly concerned life insurance products and primarily branch 21 offerings (guaranteed-yield products, confirming customer interest in guaranteed-yield investments, while unit-linked branch 23 products proved to be less attractive because of the uncertain prospects that plagued the financial markets. New non-life insurance premiums totaled EUR 317 million, up 11.8%
As of December 31, 2003, outstanding loans to individuals and professionals totaled EUR 23.3 billion, representing an increase of 4.4% over the end of 2002. This rise was mainly due to the strength of the mortgage loan market, which was sustained by the low interest rates. Homeowner loans rose 5.5% to EUR 14.2 billion, while consumer loans fell 3.4%. Loans to small businesses and the self-employed, on the other hand, continued to grow throughout the year. In this category, outstanding loans rose 4.7% to EUR 7.0 billion at the end of 2003. The increase in outstandings loans is higher in Luxembourg (+9.2%) than in Belgium (+3.6%), notably as regards professionals.
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Axion promotes respect for the young At the beginning of the 1990s, Crédit Communal de Belgique faced the problem of an aging customer base. To respond and attract young people, who would drive its future growth, the bank decided to create specific products and services. Thus in 1994, the bank launched a new brand name, Axion, for customers between the ages of 10 and 24, that offered innovative products and developed dynamic and interactive communication supports. Since its creation, Axion has been very successful and approximately one out of three young Belgians is an Axion customer. Axion offers them a broad range of banking and associated products, such as sight accounts, savings accounts, debit cards, credit cards, and banking services via the Internet or mobile telephone. The last category is especially developed. For instance, the bank’s SMS Banking service that allows users to consult their last three transactions, check their balance and recharge their mobile phone card. In addition, the Internet site www.axionweb.be is one of the principal communication vehicles between Axion and its young customers. In 2003, the bank involved its customers in the creation of the design of the new Axion bank card. Creative suggestions were contributed and Axion customers voted for the one they liked best. In associated services, customers benefited from many services tailored to their specific needs. For example, Axion Info answers non-banking questions within 24 hours. Axion Training Center proposes a day-long free training program to help prepare for job interviews. Axion Doc Center is a source of bibliographies in the fields of marketing, finance and economics. Axion also offers a reduced-rate ADSL subscription, monthly coupons for the purchase of CDs or video games, reductions on concert tickets and the magazine Satisfaxion. Inspired by Axion’s success in Belgium, other Group entities have taken up the idea. It is now being developed by Dexia BIL in Luxembourg and Dexia banka in Slovakia.
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Retail banking in Luxembourg Despite a more difficult economic environment, retail banking reported excellent commercial results in 2003, significantly surpassing the good performances recorded in 2002. New loans skyrocketed, boosted by the historically low interest rates and fiscal incentives to stimulate consumer spending. In this context, the financing of solar panels at a preferred rate is just one example of Dexia BIL’s commitment to sustainable development in the Grand Duchy of Luxembourg. Traditional investment products, however, were adversely affected by the drop in interest rates, pushing more sophisticated investors toward new forms of investment, such as structured products. The launch of the “Stop & Win” structured guaranteed-capital investment product attracted significant customer interest. Among the fiscal products available to Luxembourg residents, savings accounts in view of a future real estate acquisition were tremendously successful. Banking customers also confirmed their interest in the supplemental pension product developed by Dexia Life & Pensions. With an even more developed product line, bancassurance activities reported considerable growth in 2003, mainly in unit-linked products associated with Dexia mutual funds.
Dexia Annual Report 2003
Retail Financial
Services
The good performance of retail banking in Luxembourg in 2003 was reflected in the results of two market studies that documented an increase in the market share of Dexia BIL in the role of principal banker. In the small business sector, in which special emphasis was put on credit risks in 2003, the economic environment augured a difficult year. Yet the results in this sector were appreciable. Boosted by historically low interest rates, the volume of loans to companies pursued the growth observed in previous years, and sustained efforts to attract new customers and ensure the loyalty of traditional small business clients fueled business at Dexia BIL and increased its market share. The year 2003 was also marked by the introduction of various rationalization initiatives that helped improve the productivity indicator in retail banking, in line with the overall objective of +10% set by the bank as a whole. At the same time, two new branches were opened in new promising areas of the capital, one of which, in an innovative initiative, is in the country’s largest hospital, which opened in mid-2003 with Dexia BIL cofinancing. Dexia BIL confirmed and strengthened its position among the country’s major banks.
A Dexia BIL branch in Luxembourg
From our
shareholders “Today the Group is mainly active in retail banking in Belgium and Luxembourg as well as in Slovakia. Dexia Bank Belgium accomplished a major step forward in its development when it acquired (in 2001) and then integrated the Artesia BC group and its network of BACOB branches. It is now the second largest retail bank and the third largest group life insurer in Belgium. In this line of business, the Group’s limits are primarily linked to the size of the market and the fierce competition. But Dexia has true strengths. For example, I am very impressed by the performance of the Axion product, which was developed for young people.”
Edouard Kaufmann Member of the European advisory committee of individual shareholders
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Each Axioneer has his/her own Axioncard ! You love psychedelic atmospheres, you are fans of Jaws or you are more into graffiti ? Young Axioneers in Luxembourg have the choice between three new designs for their payment card. ∆
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Outlook A huge marketing campaign for the launch of Dexia banka in Slovakia
From an economic point of view, 2004 should show regain in consumer confidence, the end of the stock market crisis and a rise of interest rates in Europe.
Retail banking in Slovakia
As of December 31, 2003, deposits by individual retail customers totaled EUR 170 million, up 8.9% from 2002.
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Dexia Annual Report 2003
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Vis-à-vis its professional customers (individual entrepreneurs, small and medium-sized companies), the bank manages financial flows, foreign exchange transactions and financing arrangements in the course of current business or for investment. Dexia banka also works with several large professional customers, including insurance companies.
In Belgium, where Dexia has the major part of its retail operations, two specific features must be added: the fiscal amnesty, decided by the Belgian Government in the late part of 2003, could result in funds’ repatriation to the Belgian market (notably from Luxembourg). The presence of Dexia both in the Grand Duchy and in Belgium will allow offering solutions to Belgian clients willing to get their situation sorted out and repatriate their assets, and thus keep or even extend, the overall business of the Group; the competitive environment should remain very fierce; many mid-sized, often non-listed, players have very aggressive strategies in terms of gaining market shares.
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In Slovakia, Dexia also provides Retail Financial Services through its subsidiary Dexia banka Slovensko. In close synergy with Dexia Bank, the Slovak entity offers retail banking services to individual and professional customers. Individual account holders benefit from a wide range of banking products, including current account management, savings products, payment systems, consumer loans and insurance products. In 2003, Dexia banka launched a mortgage loan program, a product that is very popular in the Slovak Republic. It also targets young customers along the lines of the Axion product developed by Dexia Bank in Belgium.
Finally, the Artesia BC integration will continue during the year 2004: the pace of branch closures will speed up with the completion of the IT integration, resulting in a single platform. In this context, the bank’s strategic priority will be to augment the profitability of the client relationship through an increased “share of wallet” and a better product mix, whilst trying to keep – or even improve, for
Retail Financial
Services
some products – its market share compared to the other big players in Belgium. The trends observed in 2003, i.e. an increase in revenues while operating costs are contained (notably due to the Artesia BC integration), should extend in 2004. Dexia Group should thus be able to further improve the profitability of its retail business line in 2004.
Financial results of the business line The analysis hereafter is based on the underlying data (i.e. excluding nonrecurring items) for this business line, in order to allow a better understanding of the fundamental trends of the business line. Items considered nonrecurring are detailed on pages 56-57. Retail Financial Services, mainly carried out in Belgium and Luxembourg, managed to record strong performances despite heavy competition on the Belgian market, an environment of rates remaining at low levels and the customers’ low appetite for equity-related products.
Net income before minority interests for the full year 2003 amounted to EUR 286 million, up 50.9% compared to 2002. This stemmed from a significant growth in revenues (+6.2% compared with 2002) associated with a modest increase in costs (+1.7%), whilst cost of risk has slightly decreased. Revenues for the full year amounted to EUR 1,764 million, up 6.2% or EUR +104 million. Net interest and related income experienced a strong increase (+10.1% or EUR +109 million). This evolution has been supported by a positive volume effect, on both the deposit side (principally savings accounts) and the lending activities (mortgage loans and loans to SMEs and the self-employed). Margin on investments (deposits, savings bonds, sight accounts) globally increased as the yield on those products went down. Finally, the product mix has improved, generating more revenues. Commissions were down 5.5% (or EUR -19 million), the demand for products generating commissions remained low over the year, even if commissions for insurance activities were stable year-on-year, thanks to a very good commercial performance.
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101
A Dexia Bank branch in Belgium
Financial results of the business line (continued) The technical and financial margin of insurance activities increased by 5.7% (or EUR +14 million) thanks to the good commercial performance over the year principally in the guaranteed-yield products (branch 21). The contribution of these products compensated the decline for unit-linked products, but the fourth quarter seems to indicate a reversal of this trend. For non-life activities, the rise in the claim/premium ratio has resulted in better operating results. Costs amount to EUR 1,371 million for the full year 2003, up 1.7%. This moderate increase of EUR 22 million was experienced both in Belgium (EUR 13 million) and in Luxembourg (EUR 8 million). Staff costs and general administrative expenses decreased, showing tangible results of the integration of Artesia BC. In the other direction, commissions paid to the agents network increased, reflecting the higher production and profitability of the commercial activity.
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102
Dexia Annual Report 2003
Gross operating income amounted to EUR 393 million for the full year (+26.1%), reflecting the trend described above. The cost/income ratio thus improved and stood at 77.7% in 2003 against 81.2% for 2002. Cost of risk amounts to EUR 34 million in 2003 compared to EUR 40 million in 2002, i.e. a decrease of 14.4% reflecting the very good quality of the loan portfolio. Corporate income tax was stable in 2003 (EUR 110 million) despite the fact that the operating income increased significantly. Indeed, the tax rate for Belgian companies decreased from 40.2% to 34.0%. All in all, the return on economic equity (ROEE)(1) stood at 15.8% in 2003, a significant improvement compared to the previous year (10.8%). (1) Net income before minotity interests as a percentage of allocated equity at the end of the period.
Retail Financial
Services
Underlying statement of income(1) (excluding nonrecurring items) (in millions of EUR) 2003
2002
Evolution
1,764 1,187 99 326 251
1,661 1,078 100 345 237
+6.2% +10.1% -0.8% -5.5% +5.7%
Costs Gross operating income Cost of risk Operating income Net gains & recoveries on long-term investments Corporate income tax Income from equity-accounted companies Net income before minority interests Minority interests Net income
(1,371) 393
(1,349) 312
+1.7% +26.1%
(34)
(40)
-14.4%
286
190
Cost/income ratio ROEE (3) Allocated equity (end of period)
77.7% 15.8% 1,799
81.2% 10.8% 1,748
Revenues - Net interest and related income of which interest on EEA(2) - Net commissions and other income - Technical and financial margin of insurance activities
359 4 (110)
272
+32.0%
(1)
n.s.
(109)
+0.9%
32
27
+18.9%
285
189
+51.2%
(1)
(1)
n.s.
+50.9%
(1) Pro forma for full year 2002. (2) Economic Equity Allocated. (3) Return on Economic Equity.
A Dexia BIL branch in Luxembourg
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103
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On a European scale, Dexia is very active in investment management services. In private banking, asset management, fund administration, equity advisory and brokerage activities, Dexia offers a wide range of financial services to private clients and institutional investors or fund promoters.
Investment Management
Services
Investment Management Services is a business that regroups four complementary activities: private banking, asset management, investment fund administration and equity-related services. Principally at the European level, Dexia offers a wide range of financial services for private clients, institutional investors and fund promoters.
EUR
EUR
76.8 28.0
153.7
EUR
* Excluding Dexia Nederland.
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106
Dexia Annual Report 2003
billion*
Total assets managed (up 10.6%)
billion*
Total private banking customer assets
billion
Fund administration capital managed in custody services (up 5.3%)
Invest ment Management
Services
Presentation and strategy Private banking Dexia offers high net-worth private banking clients a full range of financial services that mainly integrate asset management and the possibility of discretionary or advisory management. Dexia BIL headquarters in Luxembourg Historically, Dexia has been very active in international markets: Luxembourg, Switzerland, Monaco and Jersey. Dexia has also developed its activities in national markets: Belgium, Spain, France, the Netherlands, Denmark and the United Kingdom. Dexia adapts its distribution channels to specific domestic situations.
Asset management Asset management involves the development and management of investment funds, as well as discretionary management services for private and institutional investors (the latter category includes public sector entities, corporate investors, insurance companies, etc.). Dexia distributes its investment funds through different channels within the Group (retail banking, private banking, etc.) and also via third-party networks. Dexia Asset Management is the hub of the Group’s expertise in these activities. It has a strong position in continental Europe and ranks among the leaders in sustainable and alternative management. Dexia Asset Management’s strategic focus is on research, as it targets the continuous improvement of investment processes and a broader base for its commercial activities.
Fund administration This activity includes three segments: custody services, central administration services (fund accounting, periodic valuations) and transfer agent services (keeping of registers, management of fund subscription and repurchase). In the first two segments, Dexia Fund
Services is a major player in Europe owing to its predominant role in Europe’s largest market for fund administration – Luxembourg. Its subsidiary First European Transfer Agent (FETA) offers transfer agent services and distribution support. The strategy that drives these strong growth activities integrates the accelerated trend to consolidation in this now global market, which is characterized by increased competition and pressure on prices.
Business review In Investment Management Services, the year 2003 was marked by a climate of uncertainty with contrasting market performances. After a very difficult first quarter, in which the stock market was down, the end of the year confirmed the signs of recovery observed in the second and third quarters, in both asset management and fund administration. Private banking activities, however, were slow on the uptake.
Private banking In general, 2003 was a year of transition for Dexia, combining difficult market conditions and the reorganization of its international network.
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107
Total customer assets in private banking totaled EUR 28.0 billion as of December 31, 2003, down 8.9% from 2002. This decline was linked to several factors including the depreciation of the US dollar and the indirect consequences of the projected tax amnesty in Belgium. In addition, the bank recorded withdrawals of low profitability assets, which by definition had no great impact on revenues.
Breakdown of private banking customer assets By type of product Mutual funds 24.6%
Cash deposits 27.8%
In Luxembourg, customer assets at Dexia BIL stood at EUR 20.2 billion as of December 31, 2003, accounting for 71% of the Group total in private banking. Discretionary management mandates represent 19% of the portfolio and advisory management mandates 40%.
Securities 47.6%
Dexia Private Bank Switzerland reported a contraction in outstandings of 2.8% to EUR 2.5 billion as of December 31, 2003. End 2003, Dexia Banque Privée France managed customer assets of EUR 2.1 billion, an increase of 4.5%.
By type of management No mandate 41%
Advisory management 40%
In Belgium, private banking assets managed by Dexia Bank remained stable at EUR 2.3 billion as of December 31, 2003. In addition to these sums, mention should be made of the assets managed by Banco Popular Privada, an asset management firm active in Spain, created in partnership with Banco Popular and in which Dexia has a 40% interest. Total customer assets managed by the newly created Spanish entity as of December 31, 2003, and after 18 months of business, totaled EUR 1.6 billion. The decrease in consolidated revenues in this segment (-8.3%) to EUR 293 million, compared with EUR 320 million in 2002, masks the relative stability in activity throughout the year, which, together with significant cost reductions, generated strong gross operating income. In almost all countries, the diversification of the offer of financial products boosted the average profitability of customer assets by 10% compared with 2002 levels. It should be pointed out that all entities, Dexia Banque Privée excepted, realized or exceeded their budget targets in 2003. ∆
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Dexia Annual Report 2003
Discretionary management 19%
By entity Dexia Banque Privée France 7% Dexia Private Bank Switzerland 9% Other 1%
Dexia BIL Luxembourg 75%
Dexia Bank Belgium 8%
Invest ment Management
Services
Asset management
Total assets managed
As of December 31, 2003, assets under management totaled EUR 76.8 billion, representing a significant increase of EUR 7.4 billion or 10.6%. This strong growth was due, first, to a generally positive market trend during the year, driven by the upturn in the stock markets beginning in the second quarter, and second, to organic growth sustained by very satisfactory commercial results, mainly with institutional investors. As of December 31, 2003, assets under management in this client segment alone totaled EUR 24.8 billion. Organic growth in 2003 in the institutional investor client segment concerned both mutual funds (+12% at EUR 9.7 billion) and management mandates (+32.1% at EUR 15.1 billion).
(in billions of EUR)
2001*
2002*
2003*
Evolution
Mutual funds (retail and institutional)
46.4
40.1
43.7
Advisory management
11.0
10.6
10.8
+8.9% +2.1%
8.2
7.3
7.1
-2.1%
Institutional management mandates
10.8
11.5
15.1
+32.1%
Total assets managed
76.4
69.4
76.8
+10.6%
Private discretionary management
* Excluding Dexia Nederland.
In total, the assets under management reached EUR 43.7 billion, up 8.9% compared to 2002.
From our
shareholders “In a few years, Dexia has made great progress in the field of socially responsible management. Through its dedicated subsidiary, the Group has become one of the leading players in Europe, with a broad range of ethical funds and a high level of assets under management. Sustainable management is a strategic development focus for Dexia. I am particularly sensitive to this issue, since sustainable development is a priority for me as a citizen.”
Wilfried Migeotte Member of the European advisory committee of individual shareholders
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109
In addition, according to Standard & Poor’s Star Ranking, at the end of 2003, 34% of the funds managed by Dexia Asset Management were in the top 30% of their category versus 25% at the end of 2001(2). As of December 31, 2003, total assets under management by Dexia Asset Management stood at EUR 62.2 billion. For Dexia Asset Management, the reorganization launched in 2001 continued to bear fruit in 2003. For example, at 13 basis points in 2003, the ratio of costs to assets under management improved vis-à-vis the levels reported in 2001 (17 basis points) and 2002 (14 basis points). This ratio is an even greater achievement since it compares favorably with the average in the European market (17 basis points) and the US market (20 basis points)(1). With regard to the performance of the range of funds it manages, Dexia Asset Management placed 55% of its managed assets in the top half of the best performing funds with a three-year management horizon (on the basis of S&P Micropal classification).
Breakdown of asset management activities Institutional management mandates 19.7%
Private discretionary management 9.3%
Advisory management 14.0%
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Dexia Annual Report 2003
Mutual funds (retail and institutional) 57.0%
(1) Source BCG, 2002. (2) Source Standard & Poor’s Fund Services.
Dexia Asset Management Dexia Asset Management is in charge of the Group’s asset management, financial analysis and research activities. Dexia Asset Management is a European investment management firm with expertise on a global scale. It is organized around four management centers located in Brussels, Paris, Luxembourg and Sydney. Commercially, Dexia Asset Management is active in Spain, Italy, Austria, the Netherlands, Switzerland, Germany, France, Belgium, Luxembourg, Australia and Scandinavia. It operates in the main European financial centers (Luxembourg, Brussels, Paris, Madrid, Milan, Dublin) and also Australia. Asset management involves the development and management of investment funds as well as discretionary management for institutional and private clients in both traditional and alternative management. Dexia Asset Management exploits the full range of Dexia’s expertise in product development, analysis and management. In a few years, Dexia Asset Management has become Europe’s fourth largest player in socially responsible investment and has a leading position in this market as a result of the wide range of approved funds it offers in seven countries and of the amount of socially responsible assets it manages (EUR 1.5 billion). In this sector, Dexia Asset Management has a market share of 9.6% at the European level (see the Sustainable Development Report).
Invest ment Management
Services
Fund administration In 2003, despite a very unstable economic environment, this activity continued to report good performances owing, on the one hand, to its good commercial results, which helped broaden the client base, particularly in custody and central administration services, and on the other hand, to the positive trend in transfer agent activities linked to renewed interest in securities markets. In custody services, capital managed at the end of 2003 stood at EUR 153.7 billion, up 5.3% from the end of 2002. Dexia Fund Services primarily focuses on thirdparty funds (60% of the total). The capital is mainly located in Luxembourg (57%), but also in Ireland (8%), France (7%), Belgium (13%) and the Netherlands (10%). In 2003, Dexia Fund Services negotiated many mandates, including contracts with Robeco, a Dutch fund promoter, and Clerical Medical Investment, an important British company that is a subsidiary of the HBOS group. There were also developments in Italy where Dexia Fund Services Italia signed a fund administration mandate for Gestielle funds (Banco Popolare di Verona e Novara) totaling approximately EUR 16 billion (as of January 1, 2004). The trustee services provided by Dexia Fund Services in Dublin, Singapore and Hong Kong are similar to the Group’s custody services. In Anglo-Saxon law, trustees are mandated by the fund or the investment firm to oversee fund management. At the end of 2003, capital managed in this activity totaled EUR 19.0 billion, representing an increase of 17.0% over December 31, 2002. Capital managed in central administration services totaled EUR 122.4 billion, up 14.3%. Note should also be taken of the fact that this activity reported 5% growth in the number of calculations of net present value, the principal performance indicator in this segment.
Despite difficult market conditions, transfer agent services also reported growth. The number of subscriptions and repurchases, an indicator that characterizes performance in this branch, increased by 2.6%. Assets managed rose by 15.5% to EUR 271.3 billion at the end of 2003.
Dexia Fund Services Dexia Fund Services is a major player in Europe and Asia in custody services and fund administration (mutual funds, pension funds and institutional mandates). Its subsidiary First European Transfer Agent (FETA) offers transfer agent and distribution support to a broad spectrum of fund promoters and distributors. Most of these services are available from 11 major world financial centers (Amsterdam, Luxembourg, Brussels, Dublin, Hong Kong, the Cayman Islands, Madrid, Milan, Paris, Singapore and Zurich) at which Dexia Fund Services aims to offer a line of sophisticated services to an international clientele of fund managers and institutional investors.
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Equity-related services Most equity-related transactions are conducted in France by Dexia Securities France. In 2003, as in 2002, this activity was affected by very difficult market conditions. The drop in revenues and, in particular, the downturn in the brokerage business for both equities and equity derivatives were the result of lower volatility in the equity market in the last quarter of 2003.
Outlook In 2003, the US economy started on the road to recovery. This encouraging trend is expected to continue in 2004, helping to bolster growth prospects in Europe and the rest of the world. The economic upswing has already fueled the stock market, which should be relatively stable in 2004, in spite of possible rises in interest rates in the second half of the year.
Dexia in the Netherlands The difficulties related to the equity leasing activities of the former Bank Labouchere (now Dexia Bank Nederland) came to the fore in the rapid and pronounced fall of the Amsterdam stock market at the end of 2001. The value of the shares held by the bank for the loans it had granted proved insufficient to cover the debt of a great number of clients, putting them in the position of possibly seeing their contracts terminate with a residual debt instead of a capital gain, as they had originally hoped. Several individual and class action suits were filed against Dexia Bank Nederland. The negative publicity the Dutch media gave this product and Dexia led the Group to seek both to pacify its clients and to defend its rights and reputation in the interest of the company and its shareholders in the face of the negative media campaign and the legal proceedings initiated. Details of the measures taken by Dexia Bank Nederland in the Netherlands from a legal, financial and accounting point of view as well as at an organizational and commercial level are provided in the Annual Report – Accounts and Reports (see pages 6, 90-92).
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Dexia Annual Report 2003
Private banking should benefit as clients progressively return to the markets and transaction volume consequently increases. However, it is probable that investors will continue to feel little attraction for risk, and that in 2004 they will consequently show a preference for structured products that provide protection for the capital invested. In this presumably promising environment, increased business will have a positive influence on asset management and investment fund administration, as new capital is invested and transaction volume grows in investment funds.
Invest ment Management
Services
Financial results of the business line The analysis hereafter is based on the underlying data (i.e. excluding nonrecurring items) for this business line, in order to allow a better understanding of the fundamental trends of the business line. Items considered nonrecurring are detailed on pages 56-57. Dexia Asset Management headquarters After an extremely difficult first quarter in 2003, capital markets showed signs of recovery in the second and third quarters, which were confirmed in the last quarter of the year. This trend was generally well reflected in terms of volume and revenues in almost all segments of the business, as analyzed below.
The cost/income ratio remained stable in 2003 at 66.1%.
In 2003, the business reported total net income of EUR 204 million, down 13.8% from 2002. The decline was partly due to the EUR 18 million in allowances recorded in the French entity for the merger of Banque Vernes Artesia and Dexia Banque Privée France, which had no equivalent in 2002. Before the cost of risk, gross operating income (GOI) totaled EUR 310 million, down 9.6%. This decline was the result of a contraction in revenues only partly offset by significant cost reductions (-9.5%). The cost base
In millions of EUR
Private banking 2002(1) 2003
Revenues Costs GOI
(2)
had already been reduced by 6.8% in 2002, compared with 2001, reflecting the continuous efforts of the business line to cut costs in an environment that was not very conducive to generating revenues.
Asset management
In absolute terms, gross operating income decreased by EUR 33 million from the previous year with contributions from Dexia Nederland Holding (EUR -11 million), private banking (EUR -9 million), asset management (EUR +14 million), fund administration (EUR -23 million) and equity-related activities (EUR -5 million). Details are given in the following analysis.
Fund administration
Equity-related activities
2002(1)
2003
2002(1)
2003
2002(1)
2003
Dexia Nederland 2002(1)
2003
320
293
136
152
231
214
37
30
288
226
(244)
(226)
(86)
(88)
(141)
(147)
(41)
(38)
(156)
(105)
76
67
50
64
90
67
(4)
(9)
132
120
(1) Pro forma. (2) Gross operating income.
∆
113
Financial results of the business line (continued) Private banking activities generated revenues of EUR 293 million in 2003, versus EUR 320 million a year earlier (down 8.3%). Nevertheless, in 2003, this sector succeeded in maintaining a constant revenue base, since the outflows observed, particularly in the fourth quarter, only concerned low-profitability assets. Activities in Luxembourg reported an increase in gross operating income in 2003 (compared with 2002) owing to drastic cost reductions.
∆
114
which required substantial expenditures, particularly in information technology. In such a build-up phase, costs rise at a faster pace then revenues. In addition, strong competitive pressure squeezed margins. Gross operating income in this segment declined by 25.4% in 2003 to EUR 67 million. Equity-related activities continued to suffer, not a great surprise in the current market environment. These activities made a negative contribution to the business line’s gross operating income in the amount of EUR -9 million, compared with EUR -4 million in 2002. The decline in revenues in the fourth quarter reflected a lower level of activity in equity derivatives in France, owing to reduced volatility in the equity markets.
In asset management, gross operating income climbed from EUR 50 million in 2002 to EUR 64 million in 2003 (up 28.0%), mainly reflecting a rise in revenues (+11.7%), management fees related to the increase in assets under management, and performance commissions. This upturn was noticeable from the beginning of 2003 but became more marked toward the end of the year. The majority of performance commissions were booked in the fourth quarter.
In the Netherlands, the environment was not very different from the other markets in which the Group provides investment management services. However, Dexia Nederland had to face the specific problems linked to the Legiolease contracts and the bad publicity this issue generated. Gross operating income decreased from EUR 132 million to EUR 120 million (down 8.7%), a relatively modest decline under the circumstances. This was the result of the strict cost reduction program (-32.7% in a year) as revenues were down 21.7%. This trend was characteristic of all Dexia Nederland’s business segments and, particularly, of the Legiolease activity.
In fund administration, the satisfactory level of activity during the year did not produce corresponding financial results for reasons that were specific to this business and its international development,
For Dexia Bank Nederland, full information on the portfolio and current legal proceedings is provided in the Annual Report – Accounts and Reports (see pages 6, 90-92).
Dexia Annual Report 2003
Invest ment Management
Services
Underlying statement of income(1) (excluding nonrecurring items) (In millions of EUR)
2003 Revenues
2002
Evolution
914
1,011
-9.6%
- Net interest and related income of which interest on EEA(2)
464 32
505 35
-8.2% -7.7%
- Net commissions and other income
450
506
-11.0%
0
0
n.s.
- Technical and financial margin of insurance activities
Costs Gross operating income Cost of risk
Operating income Net gains & recoveries on long-term investments Corporate income tax Income from equity-accounted companies
Net income before minority interests Minority interests
Net income Cost/income ratio ROEE(3) Allocated equity (end of period)
(604) 310 (22)
(668) 343 (6)
-9.5% -9.6% n.s.
289
338
-14.5%
0
1
n.s.
(80)
(99)
-18.4%
(1)
(1)
n.s.
208
240
-13.3%
3
3
n.s.
204
237
-13.8%
66.1% 35.3% 588
66.0% 39.2% 614
(1) Pro forma for full year 2002. (2) Economic Equity Allocated. (3) Return on economic equity.
∆
115
In international capital markets, Dexia has a recognized position owing to the size of its bond issues and the quality of its ratings. Its teams' expertise enables Dexia to offer a great variety of market products and services.
Money market, AAA, Dexia Municipal Agency, asset swaps, Euribor, fixed income, Libor,
OAT, commercial paper, OLO, credit spread portfolio, certificates of deposit…
Treasury and Financial
Markets
Relying on its teams' expertise and the size of its bond issues, most of which are rated AAA, Dexia holds a recognized position in the international capital markets. The Treasury and Financial Markets business line provides Dexia with the best possible access to market and innovative financial products, while broadening the range of products the Group offers its clients.
∆
118
Dexia Annual Report 2003
Treasur y and Financial
Markets
Business review The Treasury and Financial Markets business line ensures Group funding in the short and long term and makes it possible to offer clients of the Group's commercial businesses (local authorities, retail banking customers, institutional investors, fund promoters, etc.) a broad range of market products (interest rate and Forex products, equities). The business also engages in proprietary trading, in particular through the management of a bond portfolio.
Long-term funding In 2003, the Group issued bonds totaling EUR 21.5 billion, the same amount as in 2002. The average life of these new issues was slightly more than 6 years.
Issues in 2003 (in billions of EUR)
6.6
Dexia Crédit Local
2.1
Dexia Bank
1.3
Dexia BIL
0.4
Dexia Crediop
3.2
Dexia Hypothekenbank Berlin
7.9
21.5
* Dexia Municipal Agency is a registered company of the Dexia Group which issues mortgage bonds (collateralized bonds with first quality assets).
∆
Total
∆
Amounts issued Dexia Municipal Agency*
costs, reflecting the narrowing of bond spreads linked to the uncertainty that characterized the financial markets, especially in the first part of the year. The quality of the issues proposed by the Group, allied with the expertise of its refinancing teams, enabled Dexia to benefit fully from these market conditions. The basic objective of this activity is twofold: to meet the Group's short-term funding needs, in particular through commercial paper (CP) programs in USD and EUR and certificates of deposit (CD). Outstanding CP and CD totaled EUR 21 billion at the end of 2003 (EUR 22 billion at the end of 2002). The Group is also active in repurchase agreements and the interbank market; to manage the short-term interest rate positions generated by this refinancing.
The Group took advantage of the diversity of the vehicles it employs to access the bond market to minimize its funding costs. In particular, the strategy consists in concentrating AAA-rated issues in the public sector market and reserving the private placement and individual client market for AA-rated issues. The year 2003 was very favorable in terms of refinancing ∆
119
The portfolio is mainly composed of floating-rate bonds and bonds with interest rate risk exposure hedged by asset swaps. Investments target financial institutions (41%), asset-backed securities (31%), States and local governments (24%) and corporate issuers (4%).
Quality of the credit spread portfolio
BBB 6%
Non-Investment grade 1%
A 30%
AAA 39%
Fixed income The origination and syndication teams participated in 33 new bond issues in 2003 (27 in 2002) for a total of EUR 8.3 billion. In particular, they contributed to the development of the Group's bond product offering to large European local authorities. For instance, Dexia secured several arranger mandates for local authorities in Italy: Abruzzi region, city of Rome and province of Milan. In January 2003, Dexia Capital Markets (2) was co-lead arranger for the first time of a syndicated issue for the Kingdom of Belgium. The 10-year benchmark bond issue was for EUR 5 billion.
AA 24%
Credit spread portfolio(1) This portfolio has been built up over the years by the Group's various entities to serve as a liquidity buffer that can enhance the flexibility of the funding programs. The size of the portfolio contracted in 2003 to EUR 38.9 billion at the end of the year. This decline was partly the result of the deprecation of the US dollar vis-à-vis the euro, and partly the consequence of the strategic decision to reduce certain compartments in the portfolio. The portfolio's credit quality was excellent, as can be seen in the chart above.
∆
120
Dexia Annual Report 2003
Financial engineering and derivatives This activity strengthened its cooperation with the Group's different businesses in order to broaden the range of products offered to clients. It structured numerous financial instruments distributed through the Dexia Bank network. It launched the first inflationindexed bond for the Belgian retail market. This activity is also the leading arranger of employee stock option plans in the Belgian market.
Foreign exchange market This activity is mainly conducted from Luxembourg and Brussels and has been developed to accompany external and internal clients in their transactions in the foreign exchange markets.
Treasur y and Financial
Markets
Securitization This activity is conducted by the Brussels desk and by the Seattle-based company AMCC (Artesia Mortgage Capital Corporation). The Brussels desk securitizes assets for financial institutions and clients of the first business line. AMCC grants commercial mortgage loans in the American market in order to transfer them very rapidly via a securitization vehicle. The year 2003 was particularly dynamic in the United States, in terms of both the volume of new transactions and margins.
Proprietary trading
(2) Dexia Capital Markets is a brand name used in the capital markets to promote Dexia's name in different compartments.
The tightening of spreads that occurred in the second half of 2003 will have two impacts on Treasury and Financial Markets activities: a positive impact on the funding of the Group, whose ratings (AA for Dexia and AAA stable for the issuers of covered bonds, like Dexia Municipal Agency, the refinancing vehicle for the Public Finance business) are excellent; a mixed impact on the credit spread portfolio with, on the one hand, capital gains on the book and, on the other hand, tighter conditions for new investments.
∆
(1) A credit spread portfolio is a proprietary trading bond portfolio designed to generate a stable credit margin. It is managed without any exposure to interest rate risk.
Dexia’s policy regarding Treasury and Financial Markets, based on a low risk profile and focused on a support of the commercial business lines, will be maintained in 2004.
∆
This activity, first developed by Artesia BC, did not correspond to the Group's risk profile and was discontinued at the end of the first quarter of 2003. Positions in the markets were either closed or transferred to other activities (in particular, the trading desk of Financial engineering and derivatives).
Outlook
The expected improvement of the economic situation, in the United States, in Asia and in Europe, should put some pressure on interest rates, especially on the short term. Thus, interest rate related activities, such as Money Market or Financial Engineering and Derivatives will be managed very cautiously. Fixed income, Forex and Securitization products should benefit from the improving situation of Retail Financial Services and Investment Management Services. All in all, the contribution of Treasury and Financial Markets should be moderately volatile, and in line with 2003 results.
∆
121
The three main contributors to the overall business lines’ revenues are the credit spread portfolio, the Money Market and the Financial Engineering and Derivatives activities, representing together about 80% of total revenues of the business line.
Financial results of the business line The analysis hereafter is based on the underlying data (i.e. excluding nonrecurring items) for this business line, in order to allow a better understanding of the fundamental trends of the business line. Items considered nonrecurring are detailed on pages 56-57. The results of this business line decreased mainly due to the fall of the US dollar vis-à-vis the euro. However, the profitability of the business line improved as the capital allocated to this business line declined by 20% with the termination or the reduction in certain activities. Net income for the full year amounted to EUR 263 million, down 6.6% compared to 2002 (-1.1% at constant exchange rate). Revenues before minority interests for the full year 2003 amounted to EUR 472 million, down 14.6%. This decline has several reasons. First, revenues were particularly high in 2002, especially in money market activities. Second, the capital allocated to the business line was reduced implying less activity and less interest on economic capital (the decrease in capital is reflected by the downsizing of the credit spread portfolio and the termination of the Proprietary Management activities). Finally, as a substantial part of the revenues are USD denominated, the decrease in the US dollar against the euro affected the revenues in euros (at constant exchange rate -10.4%). ∆
122
Dexia Annual Report 2003
Costs were reduced by 10.2%, to EUR 153 million for the full year 2003 (after a decrease by 7.3% in 2002 compared to 2001). This is the result in particular of the merger of the two dealing rooms of Dexia Bank Belgium and Artesia BC in Belgium and the continuing efforts to contain costs. Gross operating income amounted to EUR 319 million for the full year (-16.6%). Despite a parallel decrease of revenues and costs for the reasons described above, the operating and financial performance of the business line remained strong. The cost/income ratio slightly increased in 2003, to 32.4% for the full year against 30.8% in 2002. The return on economic equity (ROEE)(1) stood at 28.3% in 2003 (24.0% in 2002). (1) Net result before minority interests as a percentage of allocated economic equity.
Treasur y and Financial
Markets
Underlying statement of income(1) (excluding nonrecurring items) (in millions of EUR)
2003
2002
472
552
-14.6%
469 52
543 68
- Net commissions and other income
3
9
-13.7% -23.5% -71.7%
- Technical and financial margin of insurance activities
0
0
Revenues - Net interest and related income of which interest on EEA(2)
Costs Gross operating income Cost of risk Operating income Net gains & recoveries on long-term investments Corporate income tax Income from equity-accounted companies Net income before minority interests Minority interests Net income Cost/income ratio ROEE(3) Allocated equity (end of period)
(153) 319 6
(170) 382 (24)
325
358
0
0
(60)
(75)
0
0
265
283
2
2
263
281
32.4% 28.3% 938
Evolution
n.s. -10.2% -16.6% n.s. -9.3% n.s. -20.0% n.s. -6.3% n.s. -6.6%
30.8% 24.0% 1,181
(1) Pro forma for full year 2002. (2) Economic Equity Allocated. (3) Return on Economic Equity.
∆
123
Dexia
in the world www.dexia.com Square de Meeûs 1 B-1000 Brussels Tel.: (32) 2 213 57 00 Fax: (32) 2 213 57 01
In Paris: 7-11, quai André Citroën BP 1002 F-75901 Paris Cedex 15 Tel.: (33) 1 43 92 77 77 Fax: (33) 1 43 92 70 00
Achatpublic.com
Ausbil Dexia
Belstar Assurances
Créatis
107, avenue Parmentier F-75011 Paris Tel.: (33) 1 48 07 53 20 Fax: (33) 1 48 07 53 21
Level 23 – Veritas House – 207 Kent Street Sydney NSW 2000 Australia Tel.: (61) 2 925 90 200 Fax: (61) 2 925 90 222 www.ausbil.com.au
Avenue Livingstone 6 B-1000 Brussels Tel.: (32) 2 556 01 75 Fax: (32) 2 524 01 88 www.belstar.be
34, rue Nicolas Leblanc BP 2007 F-59011 Lille Tel.: (33) 3 20 40 59 53 Fax: (33) 3 20 30 16 15
CEVI
Dexia Asset Management Belgium
Adinfo Boulevard Pachéco 44 B-1000 Brussels Tel.: (32) 2 222 67 10 Fax: (32) 2 222 24 37
AMCC (Artesia Mortgage Capital Corporation) 1180 NW Maple Street Suite 202 Issaquah,WA 98027 USA Tel.: (1) 425 3134 600 Fax: (1) 425 3131 005 www.artesiamortgage.com
Astris Finance 1730 K Street, NW Suite 900 Washington, DC 20006 USA Tel.: (1) 202 2239 427 ∆
124
Bancoval Fernando el Santo 20 E-28010 Madrid Tel.: (34) 91 360 99 00 Fax: (34) 91 360 99 95 www.bancoval.es
Banque Artesia Nederland Herengracht 539-543 NL-1017 BW Amsterdam PO Box 274 NL-1000 AG Amsterdam Tel.: (31) 20 520 49 11 Fax: (31) 20 624 75 02 www.artesia.nl
Dexia Annual Report 2003
Bisdomplein 3 B-9000 Ghent Tel.: (32) 9 264 07 01 Fax: (32) 9 233 05 24 www.cevi.be
Rue Royale 180 B-1000 Brussels Tel.: (32) 2 222 52 42 Fax: (32) 2 222 07 07 www.dexia-am.com
CIGER Rue de Néverlée 12 B-5020 Namur Tel.: (32) 81 55 45 11 Fax: (32) 81 55 45 06 www.ciger.be
Corona Avenue de la Métrologie 2 B-1130 Brussels Tel.: (32) 2 244 22 11 Fax: (32) 2 216 15 15 www.corona.be
Dexia Asset Management France Washington Plaza 40, rue Washington F-75408 Paris cedex 08 Tel.: (33) 1 53 93 40 00 Fax: (33) 1 45 63 31 04 www.dexia-am.com
Dexia
in the world
Dexia Asset Management Luxembourg 283, route d’Arlon L-1150 Luxembourg Tel.: (352) 25 43 43 1 Fax: (352) 25 43 43 4940 www.dexia-am.com
Dexia Asset Management Luxembourg, succursale de Genève 2, rue de Jargonnant CH-1207 Geneva Tel.: (41) 22 707 90 00 Fax: (41) 22 707 90 90 www.dexia-am.com
Dexia Assureco 7-11, quai André Citroën F-75015 Paris Tel.: (33) 1 43 92 77 49 Fax: (33) 1 43 92 78 99
Dexia Auto Lease Avenue Livingstone 6 B-1000 Brussels Tel.: (32) 2 285 35 88 Fax: (32) 2 282 66 01 www.dexia-auto-lease.be
Dexia Bail 7-11, quai André Citroën F-75015 Paris Tel.: (33) 1 43 92 75 13 Fax: (33) 1 43 92 34 59
Dexia Bank Belgium Dublin Branch George’s Dock 6 IRL-IFSC Dublin 1
Dexia Bank Belgium New York Branch 445 Park Avenue New York, NY 10022 USA Tel.: (1) 212 705 0700 Fax: (1) 212 705 0701
Dexia Bank Nederland Piet Heinkade 55 PO Box 808 NL-1000 AV Amsterdam Tel.: (31) 20 348 50 00 Fax: (31) 20 348 55 55 www.dexiabank.nl
Dexia banka Slovensko Hodzvova 11 V 01011, Zilina Slovakia Tel.: (421) 41 51 11 506 Fax: (421) 41 51 11 530 www.dexia.sk
Dexia Banque Internationale à Luxembourg 69, route d’Esch L-2953 Luxembourg Tel.: (352) 45 90 1 Fax: (352) 45 90 20 10 www.dexia-bil.lu
Dexia Bank Belgium Boulevard Pachéco, 44 B-1000 Brussels Tel. : (32) 2 222 11 11 Fax : (32) 2 222 40 32 www.dexia.be www.axionweb.be
Dexia Banque Privée France 37, rue d’Anjou F-75383 Paris Tel.: (33) 1 40 06 60 00 Fax.: (33) 1 42 65 00 98 www.dexiaplus.fr
Dexia BIL, Fuengirola representative office Puebla Lucia, Local 6 Avnda. Alcalde Clemente Diaz E-29640 Fuengirola Tel.: (34) 95 25 80 244 Fax: (34) 95 25 80 687
Dexia BIL Asia Singapore 9 Raffles Place #42-01 Republic Plaza Singapore 048619 Tel.: (65) 62 22 76 22 Fax: (65) 65 36 02 01
Dexia BIL Dublin Branch George’s Quay House 43 Townsend Street IRL-Dublin 2 Tel.: (353) 1 613 04 44 Fax: (353) 1 613 04 45
Dexia BIL Hong Kong Branch 51/F, Central Plaza 18 Harbour Road Wanchai, Hong Kong Tel.: (852) 2978 5656 Fax: (852) 2845 0390
Dexia BIL London Branch Shackleton House Hay’s Galleria 4 Battle Bridge Lane UK-London SE1 2GZ Tel.: (44) 207 556 3000 Fax: (44) 207 556 3055
Dexia BIL Singapore Branch 9 Raffles Place #42-01 Republic Plaza Singapore 048619 Tel.: (65) 62 22 76 22 Fax: (65) 65 36 02 01
Dexia CLF Banque 7-11, quai André Citroën BP 546 F-75725 Paris cedex 15 Tel.: (33) 1 44 37 45 02 Fax: (33) 1 44 37 45 07 www.dexia-clf.fr
Dexia CLF Lease Services 7-11, quai André Citroën F-75015 Paris Tel.: (33) 1 41 14 57 78 Fax: (33) 1 46 90 10 89 www.dexia-clflease.fr
Dexia CLF Régions Bail 7-11, quai André Citroën F-75015 Paris Tel.: (33) 1 43 92 73 89 Fax: (33) 1 43 92 34 59
Dexia Corporate Services Hong Kong 51/F, Central Plaza 18 Harbour Road Wanchai, Hong Kong Tel.: (852) 2978 5656 Fax: (852) 2845 0390
Dexia Crediop Via Venti Settembre, 30 I-00187 Roma Tel.: (39) 06 47 711 Fax: (39) 06 47 71 59 52 www.dexia-crediop.it
Dexia Crédit Local 7-11, quai André Citroën BP 1002 F-75901 Paris cedex 15 Tel.: (33) 1 43 92 77 77 Fax: (33) 1 43 92 70 00 www.dexia-clf.fr www.dexia-creditlocal.com
∆
125
Dexia Crédit Local Australia
Dexia Crédits Logement
Dexia Fund Services Belgium
Dexia Fund Services Singapore
Level 23, Veritas House 207 Kent Street Sydney NSW 2000 Australia Tel.: (61) 2 924 75 639 Fax: (61) 2 925 90 222
Headquarters Boulevard Pachéco 44 B-1000 Brussels Operations • Chaussée de Dinant 1033 B-5100 Wépion Tel.: (32) 81 46 82 11 Fax: (32) 81 46 05 55 • H. Consciencestraat 6 B-8800 Roeselare Tel.: (32) 51 23 21 11 Fax: (32) 51 23 21 45
Rue Royale 180 B-1000 Brussels Tel.: (32) 2 222 07 02 Fax: (32) 2 222 52 26 www.dexiafundservices.com
9 Raffles Place #42-01 Republic Plaza Singapore 048619 Tel.: (65) 64 35 33 36 Fax: (65) 65 36 02 19 www.dexiafundservices.com
Dexia Crédit Local Dublin Branch 6 George’s Dock IRL-IFSC Dublin 1 Tel.: (353) 1 670 27 00 Fax: (353) 1 670 27 05
Dexia Crédit Local London Branch Shackleton House 4 Battle Bridge Lane UK-London SE1 2GZ Tel.: (44) 207 407 4444 Fax: (44) 207 407 4400
Dexia Crédit Local New York Agency 445 Park Avenue New York, NY 10022 USA Tel.: (1) 212 515 7000 Fax: (1) 212 753 5522 www.dexia-americas.com
Dexia Editions 7-11, quai André Citroën F-75015 Paris Tel.: (33) 1 43 92 79 13 Fax: (33) 1 43 92 76 72
Dexia Epargne Pension 65/67, rue de la Victoire F-75009 Paris Tel.: (33) 1 55 07 95 21 www.dexia-ep.com
Dexia Fund Services Cayman Coconut Villa #2 Jennifer’s Drive PO Box 10211 APO Grand Cayman Tel.: (1345) 945 85 00 Fax: (1345) 945 85 01 www.dexiafundservices.com
Dexia Fund Services Dublin George’s Quay House 43 Townsend Street IRL-Dublin 2 Tel.: (353) 1 613 04 00 Fax: (353) 1 613 04 01 www.dexiafundservices.com
Dexia Factors Avenue Livingstone 6 B-1000 Brussels Tel.: (32) 2 282 66 33 Fax: (32) 2 282 66 99 www.dexia-factors.be
39, rue d’Anjou F-75008 Paris Tel.: (33) 1 49 35 68 01 Fax: (33) 1 49 35 70 54 www.dexiafundservices.com
Estrella Office Rua Domingos Sequeira 27-5G P-1350-119 Lisbon Tel.: (351) 21 395 15 16 Fax: (351) 21 397 77 33
Dexia Finance
Dexia Fund Services Italia
Dexia Crédit Local Singapore
Dexia Flobail
9 Raffles Place # 42-01 Republic Plaza Singapore 048619 Tel.: (65) 62 36 01 25 Fax: (65) 65 36 02 19
∆
126
7-11, quai André Citroën F-75015 Paris Tel.: (33) 1 43 92 75 28 Fax: (33) 1 43 92 75 35
7-11, quai André Citroën F-75015 Paris Tel.: (33) 1 43 92 73 89 Fax: (33) 1 45 75 34 59
Dexia Annual Report 2003
445 Park Avenue New York, NY 10022 USA Tel.: (1) 212 515 7157 Fax: (1) 212 421 4794
Dexia Hypothekenbank Berlin Charlottenstrasse 82 D-10969 Berlin Tel.: (49) 30 25 59 8-0 Fax: (49) 30 25 59 8-2 00 www.dexia.de
Dexia Insurance Dexia Fund Services France
Dexia Crédit Local Portugal
Dexia Global Structured Finance
Procaccini Center Via Messina 38 Torre B, Piano 5 I-20154 Milano Tel.: (39) 02 3362 31 Fax: (39) 02 3362 32 30 www.dexiafundservices.com
Avenue des Arts 23 B-1000 Brussels Tel.: (32) 2 237 15 11 Fax: (32) 2 237 16 99
Dexia Investments Ireland 6 George’s Dock IRL-IFSC Dublin 1 Tel.: (353) 1 645 50 00 Fax: (353) 1 829 15 77 www.dexia-investments.ie
Dexia Lease Belgium Headquarters Boulevard Pachéco 44 B-1000 Brussels Operations Avenue Livingstone 6 B-1000 Brussels Tel.: (32) 2 222 38 39 Fax: (32) 2 222 37 13 www.dexialease.be
Dexia
in the world
Dexia Lease France 7-11, quai André Citroën F-75015 Paris Tel.: (33) 1 43 92 75 13 Fax: (33) 1 47 75 34 59
Dexia Lease Services Avenue Livingstone 6 B-1000 Brussels Tel.: (32) 2 285 29 29 Fax: (32) 2 285 39 99
Dexia Life & Pensions 2, rue Nicolas Bové L-1253 Luxembourg Tel.: (352) 262 54 41 Fax: (352) 262 54 45 480 www.dexia-life.com
Dexia Municipal Agency 7-11, quai André Citroën F-75015 Paris Tel.: (33) 1 43 92 77 77 Fax: (33) 1 43 92 70 00 www.dexia-ma.com
Dexia Partenaires France 2, rue de Messine F-75008 Paris Tel.: (33) 1 40 76 03 74 Fax: (33) 1 40 76 03 71
Dexia P-H Private Bank Denmark Grønningen, 17 DK-1270 København Tel.: (45) 33 46 11 00 Fax: (45) 33 32 42 01 www.phbank.dk
Dexia Prévoyance Site BRGM BP 6009 F-45060 Orléans Cedex 2 Tel.: (33) 2 38 64 39 80 Fax: (33) 2 38 64 33 68
[email protected]
Dexia Private Bank Jersey PO Box 12 2-6 Church Street St Helier, Jersey JE4 9NE Tel.: (44) 1534 83 44 00 Fax: (44) 1534 83 44 11
Dexia Private Bank Switzerland Beethovenstrasse, 48 CH-8039 Zürich Tel.: (41) 1 286 92 92 Fax: (41) 1 201 14 71 www.dexia.ch
Dexia Public Finance Norden Box 7573 Engelbrektsplan 2 S-10393 Stockholm Tel.: (46) 8 407 57 00 Fax: (46) 8 407 57 01
Dexia Sabadell Banco Local Paseo de las Doce Estrellas, 4 Campo de las Naciones E-28042 Madrid Tel.: (34) 91 721 33 10 Fax: (34) 91 721 33 20 www.dexiasabadell.es
Dexia Securities France 112, avenue Kléber F-75116 Paris Tel.: (33) 1 56 28 52 00 Fax: (33) 1 56 28 52 90 www.dexia-securities.fr
Dexia Securities Services Beethovenstraat 300 PO Box 75666 NL-1070 AR Amsterdam Tel.: (31) 20 348 50 00 Fax: (31) 20 348 75 76
Dexia Securities USA 747 Third Avenue, 22nd floor New York, NY 10017 USA Tel.: (1) 212 376 0130 Fax: (1) 212 376 0139
Dexia Société de Crédit Headquarters and Operations Rue des Clarisses 38 B-4000 Liège Tel.: (32) 4 232 45 45 Fax: (32) 4 232 45 01 Operations Boulevard Saint-Michel 50 B-1040 Brussels Tel.: (32) 2 732 12 12 Fax: (32) 2 737 29 27 www.dexia-societedecredit.be
Dexia Sofaxis Route de Creton F-18100 Vasselay Tel.: (33) 2 48 48 10 10 Fax: (33) 2 48 48 10 11 www.sofaxis.com
Dexia Trust Services Hong Kong 51/F, Central Plaza 18 Harbour Road Wanchai, Hong Kong Tel.: (852) 2978 5656 Fax: (852) 2845 0390
Dexia Trust Services Singapore 9 Raffles Place #42-01 Republic Plaza Singapore 048619 Tel.: (65) 64 35 33 36 Fax: (65) 65 36 02 19
DVV Insurance Avenue Livingstone 6 B-1000 Brussels Tel.: (32) 2 286 61 11 Fax: (32) 2 286 15 15 www.dvvlap.be
Ely Fund Managers (Holdings) Audrey House Ely Place UK-London EC1N 6SN Tel.: (44) 207 404 5333 Fax: (44) 207 404 5747 www.ely.uk.com
Eural WTC Tour 1 Boulevard du Roi Albert II 30 boîte 37 B-1000 Brussels Tel.: (32) 2 204 39 99 Fax: (32) 2 204 38 00 www.eural.be
Experta (Suisse) Steinengraben, 22 CH-4002 Basel Tel.: (41) 61 285 17 17 Fax: (41) 61 285 17 77 www.experta.lu
Experta Corporate and Trust Services 180, rue des Aubépines L-1145 Luxembourg Tel.: (352) 26 92 55-2263 Fax: (352) 26 92 55-3366 www.experta.lu
Experta Trust Services Jersey PO Box 300 2-6 Church Street St Helier, Jersey JE4 8YL Tel.: (44) 1534 83 44 44 Fax: (44) 1534 83 44 55
Fidexis Rue de la Charité 15 B-1210 Brussels Tel.: (32) 2 209 02 30 Fax: (32) 2 209 02 37
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Financial Security Assurance
Kempen Capital Management België
350 Park Avenue New York, NY 10022 USA Tel.: (1) 212 826 0100 Fax: (1) 212 688 3101 www.fsa.com
Frankrijklei 103 B-2000 Antwerpen Tel.: (32) 3 224 82 00 Fax: (32) 3 224 82 39
First European Transfer Agent
22, rue de Villereuse CH-1207 Genève Tel.: (41) 22 592 91 41 Fax: (41) 22 592 91 42
5, rue Thomas Edison L-1445 Strassen Tel.: (352) 25 47 01-1 Fax: (352) 25 47 01-9500 www.dexiafundservices.com
Floral 7-11, quai André Citroën F-75015 Paris Tel.: (33) 1 45 77 33 93 Fax: (33) 1 43 92 70 57
Kempen Capital Management Suisse
Kommunalkredit Austria Türkenstrasse 9 A-1092 Wien Tel.: (43) 1 31 6 31 0 Fax: (43) 1 31 6 31 503 www.kommunalkredit.at
Société Luxembourgeoise de Leasing BIL-Lease 14-16, avenue Pasteur L-2310 Luxembourg Tel.: (352) 22 77 33 1 Fax: (352) 22 77 44
Société Monégasque de Banque Privée 9, boulevard d’Italie MC-98000 Monaco Tel.: (377) 93 15 23 23 Fax: (377) 93 15 23 32
Sogama Crédit associatif 75, rue Saint-Lazare F-75009 Paris Tel.: (33) 1 42 80 42 24 Fax: (33) 1 42 81 42 98
Kempen & Co
Otzar Hashilton Hamekomi
Van Lieshout & Partners
Beethovenstraat 300 NL-1077 WZ Amsterdam Tel.: (31) 20 348 80 00 Fax: (31) 20 348 84 00 www.kempen.nl
3, Heftman Street 61070 Tel-Aviv Israel Tel.: (972) 3 695 7211 5 Fax: (972) 3 691 9503
Maliebaan 45 PO Box 13224 NL-3507 LE Utrecht Tel.: (31) 30 234 54 32 Fax: (31) 30 234 54 00 www.vanlieshout-en-partners.nl
Kempen Capital Management
Parfibank
Beethovenstraat 300 PO Box 75666 NL-1070 AR Amsterdam Tel.: (31) 20 348 88 00 Fax: (31) 20 348 88 50 www.kempen.nl
Kempen Capital Management (UK) 41 Melville Street UK-Edinburgh EH3 7JF Tel.: (44) 131 226 6985 Fax: (44) 131 226 6984
Boulevard du Régent 40 B-1000 Brussels Tel.: (32) 2 513 90 20 Fax: (32) 2 512 73 20 www.parfibank.be
Popular Banca Privada Juan Ignacio Luca de Tena 11 E-28027 Madrid Tel.: (34) 914 18 93 00 Fax: (34) 914 18 93 28 www.popularbancaprivada.es
Sepia Avenue Livingstone 6 B-1000 Brussels Tel.: (32) 2 286 63 27 Fax: (32) 2 284 74 76
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Dexia Annual Report 2003
WGH Informatique Avenue de l’Expansion 7 B-4432 Ans Tel.: (32) 4 246 10 46 Fax: (32) 4 246 03 03 www.wgh.be
