Annual report 2008 Annual report 2008 Management report ...................................................................................... 2 Consolidated financial statements .............................................................. 102 Annual financial statements ........................................................................ 216 Additional information................................................................................. 242 Dexia - Rapport annuel 2008 1 COMPTES SOCIAUX Management report 2008 Group profile.................................................................................................. 4 COMPTES SOCIAUX Message from the Chairmen ......................................................................... 8 2008 and early 2009 highlights ..................................................................... 10 Corporate governance................................................................................... 13 Shareholder information............................................................................... 48 Human resources............................................................................................ 52 Sustainable development .............................................................................. 55 Risk management........................................................................................... 57 Financial results.............................................................................................. 69 Activity and results of the business lines ...................................................... 76 General information ...................................................................................... 90 Group profile Dexia is a European bank, with 36,760 members of staff and Retail and Commercial Banking a core shareholders’ equity of EUR 17.5 billion as of December 31, 2008. Dexia Group focuses on Public and Wholesale Bank- Dexia is a leading European bank, ranking among the three ing, providing local public finance actors with comprehensive major banks in Belgium and Luxembourg and holding a strong banking and financial solutions, and on Retail and Commercial position in Turkey. It is also present in Slovakia. The bank is Banking in Europe, mainly Belgium, Luxembourg and Turkey. offering a wide range of retail, commercial and private bank- ing services as well as insurance products to more than six mil- lion customers. BUSINESS LINES This business line also includes asset management and investor MANAGEMENT REPORT REPORT services activities. Dexia Asset Management had EUR 79 billion Public and Wholesale Banking of assets under management as of December 31, 2008. The investor services business is conducted by RBC Dexia Investor As a consequence of the transformation plan initiated by Dexia Services, a joint venture with Royal Bank of Canada, which in November 2008, the Public and Wholesale Banking business offers its expertise in global custody, fund and pension admin- line has been revisited in order to take into account the cur- istration and shareholder services to institutions around the rent market environment. It will focus on markets combining world. Total assets under custody amounted to USD 1.9 trillion strong commercial franchises, a long-term funding capacity as of December 31, 2008. and potential for profitable growth. The commercial franchises in France, Belgium, Luxembourg, COMPTES CONSOLIDÉS Italy and the Iberian Peninsula have been confirmed and these RATINGS markets will remain core markets for Public and Wholesale Banking. Dexia will maintain a presence in Germany, Japan and The Group’s main operating entities – Dexia Bank Belgium, Switzerland to retain platforms for access to funding sources. Dexia Crédit Local and Dexia Banque Internationale à Luxem- The activities in the United Kingdom and in the United States bourg – are rated AA- by Fitch, A1 by Moody’s and A by will be significantly reduced. Standard & Poor’s. Three of Dexia’s European subsidiaries issue The ongoing financial crisis does neither question our clients’ Triple-A rated secured bonds. solvency nor their financing needs. And Dexia remains – on its core markets – a major player in public and infrastructure COMPTES SOCIAUX finance, the financing of the health and social housing sectors, and social economy. Its strategy in this field is aiming at strengthening the range of products and services to customers. This approach, which is already largely effective in Belgium, will enable the Group to go beyond its role of specialist lender in order to offer a better service to a broader customer base. 4 Dexia Annual report 2008 Group profile SIMPLIFIED GROUP STRUCTURE Dexia SA Dexia Dexia Banque Dexia MANAGEMENT REPORT Crédit Local Internationale Bank Financial à Luxembourg Belgium DenizBank Security Assurance (1) 100% 99.9% 100% 99.8% COMPTES CONSOLIDÉS Dexia Dexia Dexia Dexia Dexia Dexia RBC Dexia Dexia Crediop Sabadell Kommunal- Kommunal- Municipal Sofaxis Dexia Asset Insurance bank kredit Agency Investor Management Belgium Deutschland Bank Services 70% 60% 100% 100% 100% 100% 50% 100% 99.8% (1) Entity being sold; excl. Financial Products. COMPTES SOCIAUX 17.6% 6,850 26.9% 2,708 14.3% 15,045 2.1% 3.0% 4,113 5.0% 13.9% 5.7% 5.7% 5.7% 8,044 DEXIA SHAREHOLDING STRUCTURE MEMBERS OF STAFF as of December 31, 2008 as of December 31, 2008 (1) Caisse des dépôts et consignations Belgium Holding Communal Turkey Arco Group Luxembourg French State France Belgian federal State Other countries Three Belgian Regions Ethias Group (1) Including self-employed networks and RBC Dexia Investor Services. CNP Assurances Employee shareholding Other Institutional and Individual Shareholders Dexia Annual report 2008 5 Group profile RESULTS Dexia GAAP IFRS as adopted by EU (in millions of EUR) 2000 2001 2002 2003 2004 2004 (1) 2005 2006 2007 2008 Income 3,740 5,631 5,157 5,160 5,392 5,623 5,976 7,005 6,896 3,556 Costs (2,050) (3,323) (3,037) (3,056) (3,012) (3,057) (3,229) (3,474) (3,834) (4,119) Gross operating income 1,690 2,308 2,120 2,104 2,380 2,566 2,747 3,531 3,062 (563) Net income Group share 1,001 1,426 1,299 1,431 1,772 1,822 2,038 2,750 2,533 (3,326) (1) The reconciliation between Dexia GAAP and IFRS as adopted by EU, is explained in the Dexia Annual Report 2005 “Accounts & reports”. MANAGEMENT REPORT BALANCE SHEET Dexia GAAP IFRS as adopted by EU Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Jan. 1, Dec. 31, Dec. 31, Dec. 31, Dec. 31, (in billions of EUR) 2000 2001 2002 2003 2004 2005 (1) 2005 2006 2007 2008 Total assets 257.8 351.4 350.9 349.9 389.2 404.6 508.8 566.7 604.6 651.0 Loans and advances to customers 134.4 156.4 157.8 161.9 166.2 169.5 192.4 226.5 242.6 368.8 Financial assets at fair value COMPTES CONSOLIDÉS through profit or loss and financial investments 77.7 125.9 134.7 127.9 144.5 147.3 198.9 223.2 257.9 141.1 Customers borrowings and deposits 52.4 84.0 85.3 92.3 97.6 87.1 97.7 116.2 126.7 114.7 Debt securities 134.4 140.9 146.5 134.9 143.9 144.2 175.7 184.7 204.0 188.1 Core shareholders’ equity (2) 8.1 10.3 10.9 11.6 12.3 10.5 11.5 14.4 16.1 17.5 (1) The reconciliation between Dexia GAAP and IFRS as adopted by EU, and the impact of the first-time application of IFRS is explained in the Dexia Annual Report 2005 “Accounts & Reports”. (2) For the years 2000-2004: shareholders’ equity + general banking risks reserve. COMPTES SOCIAUX RATIOS Dexia GAAP IFRS as adopted by EU 2000 2001 2002 2003 2004 2004 2005 2006 2007 2008 Cost-income ratio (1) 54.8% 59.0% 58.9% 59.2% 55.9% 54.4% 54.0% 49.6% 55.6% 115.8% Tier 1 ratio 9.3% 9.3% 9.3% 9.9% 10.7% 10.0% 10.3% 9.8% 9.1% 10.6% Capital adequacy ratio 9.8% 11.5% 10.7% 11.2% 11.7% 11.1% 10.9% 10.3% 9.6% 11.8% (1) The ratio between the costs and the income. 6 Dexia Annual report 2008 Group profile QUALITY OF RISKS Dexia GAAP IFRS as adopted by EU 2000 2001 2002 2003 2004 2004 2005 2006 2007 2008 Impaired loans to customers (in millions of EUR) 905 1,897 1,942 1,708 1,722 1,722 1,473 1,359 1,218 3,535 Assets quality ratio (1) 0.68% 1.20% 1.23 % 1.05% 1.04% 1.04% 0.78% 0.61% 0.50% 0.99% Coverage ratio (2) 65.0% 66.7% 68.0 % 72.8% 73.2% 73.2% 69.1% 69.3% 67.2% 58.9% (1) The ratio between the impaired loans and the gross outstanding loans. (2) The ratio between the portfolio impairments and the impaired loans. MANAGEMENT REPORT DATA PER SHARE Dexia GAAP IFRS as adopted by EU (in EUR) 2000 2001 2002 2003 2004 2004 2005 2006 2007 2008 Earnings per share (1) 1.15 1.25 1.13 1.24 1.58 1.63 1.87 2.49 2.18 (2.54) Gross dividend 0.43 0.48 0.48 0.53 0.62 0.62 0.71 0.81 0.91 - (2) Net assets (3) 8.02 8.39 8.79 9.25 9.95 8.87 9.86 11.60 12.87 9.92 Pay-out ratio (4) 41.9% 39.3% 43.0% 42.1% 38.7% 37.6% 37.9% 34.3% 42.0% - (1) The ratio between the net income Group share and the average weighted number of shares (undiluted for the years under IFRS as adopted by EU). COMPTES CONSOLIDÉS (2) The Board of Directors decided to propose to the next Shareholders’ Meeting on May 13, 2009 that exceptionally no dividend be paid for 2008. (3) The ratio between the core shareholders’ equity and the number of shares (after deduction of treasury shares) at the end of the period. Under Dexia GAAP: including GBRR Group share. (4) The ratio between the total dividend and the net income Group share. RATINGS Long term Outlook Short term Fitch Dexia Bank Belgium AA- Stable outlook F1+ COMPTES SOCIAUX Dexia Crédit Local AA- Stable outlook F1+ Dexia Banque Internationale à Luxembourg AA- Stable outlook F1+ Dexia Municipal Agency AAA - Moody’s Dexia Bank Belgium A1 Negative