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Annual Report 2019

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Annual Report 2019 2019 ANNUAL REPORT Annual report 2019 2 Management report 62 Consolidated financial statements 162 Annual financial statements 189 Additional information 4 Message from the Chairmen 6 Group profile 9 Highlights 13 Financial results 17 Risk management 28 Information on capital and liquidity 33 Non-financial declaration - Corporate social responsibility 41 Governance Management report Message from the chairmen 2019 will have been another year of strong macroeconomic uncertainty: the Sino-Ame- rican trade war, the Brexit issue, and the slowdown in world growth induced in par- ticular by China's slowdown, will all have been factors of fragility, despite the sup- port provided to the economic situation by persistently negative interest rates and the Management report good health of the equity market. Throughout the past year, we continued to roll out our strategic roadmap and took fur- ther steps towards the Group's resolution by accelerating our efforts to reduce our port- folios, in particular through the implementation of two ambitious asset disposal programmes. We reduced our balance sheet total by 24% to EUR 120 billion and saw our asset portfolios fall below EUR 50 billion. Thus, in a favourable market dynamic and in order to reduce the operational risk linked to the transfer of Consolidated the Group's US assets to the Dexia Crédit Local head office, the Group sold its entire student loan ABS financial statements portfolio and assets related to the US public sector. The portfolio is now equally composed of loans and bonds and is mainly focused on Italian sovereign and European public sector (Italy, France, Spain, Portugal), with a residual concentration of Japanese and British assets. Our efforts also focused on reducing our geographic footprint: we finalised the sale of our German subsi- diary Dexia Kommunalbank Deutschland to Helaba, closed our Madrid branch and began the transforma- tion of our New York branch. Other highlights of the past year included the Belgian and French States reaffirming their support for the Group by finalising the steps with a view to the prolongation of the funding guarantee beyond 31 December 2021 and, in September, the European Commission confirmed its agreement to the extension Annual financial statements of this guarantee. In addition, the Dexia share was delisted from Euronext Brussels on 2 December 2019, enabling the Group to continue its administrative simplification. Additional information 4 Dexia Annual report 2019 The first months of this year were in line with 2019. We continued the transformation of our New York branch into a representative office, which should be concluded in the course of the year, and began a reflection on the evolution of Dexia Crediop within the context of the Group's resolution. At the time of closing this annual report, it is too early precisely to assess the long-term economic effects and draw up a definitive health assessment of the Covid-19 pandemic which is raging throughout the world, even if the consequences of the epidemic are already being painfully felt in many countries. Our first objective, in this unprecedented situation, was to protect the health of our staff members and Management report ensure the operational continuity of the Group. Dexia staff members mobilised in the face of adversity. Their sustained commitment and their reactivity enabled the Group, in the space of only a few days, to move to a level of 100% teleworking, demonstrating once again the resilience of our teams. It is natural to wonder about the impact of this major crisis on the Dexia Group. Our liquidity situation is entirely satisfactory, with a liquidity buffer close to EUR 20 billion as at 31 December 2019 and a continued active presence on various markets. It is too early to assess the full impact of the crisis for Dexia, but the strength of the Group's capital base and the intrinsic quality of its asset portfolio, 90% of which is rated Consolidated investment grade, make us confident in its ability to continue its orderly resolution. financial statements We are well aware that the implementation of this complex resolution in a situation of great economic uncertainty is only made possible, day after day, year after year, thanks to the unfailing commitment and responsiveness of the Group's staff members. We cannot thank them enough for their contribution. Bart Bronselaer Gilles Denoyel Chief Executive Officer ad interim Chairman of the Board of Directors Annual financial statements Additional information Annual report 2019 Dexia 5 Group profile by the States of Belgium, France and Luxembourg, to allow A Group in orderly resolution for the execution of the orderly resolution plan. Dexia Crédit Local holds a banking licence and has an international pres- Dexia(1) is a European banking group managed under an ence through its Italian subsidiary, Dexia Crediop, which orderly resolution plan since the end of 2011. The Belgian also holds a banking licence, and branches in Ireland and Management report and French States own 99.6% of the Group(2). the United States. The Group has 606 staff members as at Dexia’s orderly resolution plan, which was approved by the 31 December 2019. European Commission in December 2012, aims to avoid the Dexia no longer has any commercial activities and is now Group’s bankruptcy and liquidation which, given the Group’s solely focused on managing its assets in run-off, mainly pub- residual size, could have been destabilising to the entire Euro- lic sector and sovereign assets, while protecting the interests pean banking sector. of the Group’s State shareholders and guarantors. To meet (3) As a significant bank , Dexia has been under the direct pru- this objective, the Group has established three strategic dential supervision of the European Central Bank within the goals: framework of the Single Supervisory Mechanism (SSM) since • Maintain the ability to refinance its balance sheet through- 4 November 2014. out its resolution plan; Dexia, the Group’s parent company, is a public limited com- • Preserve its capital base in order to comply with regulatory pany (société anonyme) and financial company governed by ratios; Consolidated Belgian law. Dexia Crédit Local, the Group’s main operating • Ensure operational continuity by retaining the necessary financial statements entity, is based in France and benefits from a funding guar- expertise and resources and developing appropriate informa- antee, up to a maximum amount of EUR 85 billion, provided tion systems. (1) Throughout this annual report, Dexia refers to Dexia SA/NV and Dexia Crédit Local refers to Dexia Crédit Local S.A. (2) In 2012 the Belgian and French States increased Dexia’s capital with EUR 5.5 billion. (3) Regulation (EU) No. 468/2014 of the European Central Bank of 16 April 2014. Annual financial statements Additional information 6 Dexia Annual report 2018 Group profile Simplified Group structure Belgian Federal State through French State Institutional, individual and the Federal Holding and employee shareholders Investment Company 46.81% Management report 52.78% 0.41% Dexia Dexia Crédit Local Dexia Nederland 100% 100% Including branches Consolidated in the United States and Ireland financial statements Dexia Crediop 99.57% Annual financial statements Management Board CEO ad interim Bart Bronselaer Assets Finance & Risk Funding Operations Communication & Markets & IT Additional information Guy Cools Véronique Hugues Giovanni Albanese Benoît Debroise Patrick Renouvin Annual report 2019 Dexia 7 Group profile Key figures MEMBERS OF STAFF AS AT 31 DECEMBER 2019 Ireland 5 19 Other United 42 countries States 77 Italy Total 606 407 56 Belgium France Management report RESULTS 2018 2019 (in EUR million) Net banking income (232) (746) Costs (386) (379) Gross operating income (618) (1,125) Cost of risk 128 265 Result from discontinued operations, net of tax 23 (111) Consolidated Net income Group share (473) (898) financial statements SOLVENCY 31/12/2018 31/12/2019 (in EUR million) Common Equity Tier 1 8,119 7,308 Total Capital 8,278 7,404 Risk-weighted assets 30,365 27,263 Common Equity Tier 1 ratio 26.7% 26.8% Total Capital ratio 27.3% 27.2% RATINGS AS AT 31 DECEMBER 2019 Long term Outlook Short term Dexia Crédit Local Fitch BBB+ Stable F1 Annual financial statements Moody’s Baa3 Stable P-3 Moody's - Counterparty Risk (CR) Assessment Baa3(cr) P-3(cr) Standard & Poor’s BBB Stable A-2 Dexia Crédit Local (guaranteed debt) Fitch AA- - F1+ Moody’s Aa3 Stable P-1 Standard & Poor’s AA - A-1+ Additional information 8 Dexia Annual report 2019 Highlights Since its entry into orderly resolution, Dexia has been imple- on 1 July 2019 for the asset portfolio recorded in DCL New menting a proactive strategy of reducing business and the York's balance sheet and on 1 January 2020 for the second Group's balance sheet through the sale of its commercial portfolio. franchises and asset portfolios. The year 2019 represents an During the year, in view of favourable market dynamics, Dexia important stage in this dynamic, in particular because of the sold EUR 7.7 billion of US assets. Assets sold include the conclusion of the sale of Dexia Kommunalbank Deutschland remaining portfolio of ABS on student loans (EUR 1.1 billion) Management report (DKD), Dexia's subsidiary in Germany, the closure of DCL as well as public sector assets (EUR 5.1 billion). The entirety of Madrid and the launch of the project to transform the US the Group's exposure to the Chicago Board of Education was branch of Dexia Crédit Local (DCL New York) into a repre- thus bought back or sold. sentative office. In addition, in May and July, the Group took The Group also sold Japanese assets (EUR 1.4 billion), loans structuring decisions on two new asset disposal programmes to French local authorities (EUR 0.6 billion) and loans to UK which contributed to a sharp reduction of the bank's bal- social housing (EUR 0.6 billion).
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