Annual report 2008 DEXIA BANK BELGIUM Contents 2008 2008 Group profile 2 Key figures for Dexia Bank Belgium 4 Management report 7 Consolidated financial statements 29 Non-consolidated financial statements 147 Additional information 208 Annual Report 2008 – Dexia Bank Belgium 1 Group profile Dexia is a European bank, with 36,760 members of staff and This business line also includes asset management and investor a core shareholders’ equity of EUR 17.5 billion as of Decem­ services activities. Dexia Asset Management had EUR 79 billion ber 31, 2008. Dexia Group focuses on Public and Wholesale of assets under management as of December 31, 2008. The Banking, providing local public finance actors with comprehensive investor services business is conducted by RBC Dexia Investor banking and financial solutions, and on Retail and Commercial Services, a joint venture with Royal Bank of Canada, which Banking in Europe, mainly Belgium, Luxembourg and Turkey. offers its expertise in global custody, fund and pension adminis­ tration and shareholder services to institutions around the world. Total assets under custody amounted to USD 1.9 trillion as of December 31, 2008. Business lines 1. PUBLIC AND WHOLESALE BANKING Ratings As a consequence of the transformation plan initiated by Dexia in November 2008, the Public and Wholesale Banking The Group’s main operating entities – Dexia Bank Belgium, business line has been revisited in order to take into account Dexia Crédit Local and Dexia Banque Internationale à Luxem­ the current market environment. It will focus on markets bourg – are rated AA­ by Fitch, A1 by Moody’s and A by REPORT MANAGEMENT combining strong commercial franchises, a long­term funding Standard & Poor’s. Three of Dexia’s European subsidiaries capacity and potential for profitable growth. issue Triple­A rated secured bonds. The commercial franchises in France, Belgium, Luxemburg, D Italy and the Iberian Peninsula have been confirmed and these ATE markets will remain core markets for Public and Wholesale D Banking. Dexia will maintain a presence in Germany, Japan and Switzerland to retain platforms for access to funding sources. The activities in the United Kingdom and in the United States CONSOLI will be significantly reduced. FINANCIAL STATEMENTS FINANCIAL The ongoing financial crisis does neither question our clients’ solvency nor their financing needs. And Dexia remains – on its D core markets – a major player in public and infrastructure finance, the financing of the health and social housing sectors, and ATE D 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 NON-CONSOLI service to a broader customer base. STATEMENTS FINANCIAL 2. RETAIL AND COMMERCIAL BANKING Dexia is a leading European bank, ranking among the three major banks in Belgium and Luxembourg and holding a strong position in Turkey. It is also present in Slovakia. The bank is offering a wide range of retail, commercial and private banking services as well as insurance products to more than six million customers. Annual Report 2008 – Dexia Bank Belgium 3 Key figures for Dexia Bank Belgium CONSOLIDATED STATEMENT OF INCOME – KEY FIGURES 31/12/07 31/12/08 r Evolution (in millions of EUR) 2007/2008 Income 2,884.9 1,702.6 (1,182.3) -41.0% Expenses (1,747.8) (1,790.8) (43.0) +2.5% GROSS OPERATING PROFIT 1,137.1 (88.2) (1,225.3) -107.8% Cost of risk (60.1) (558.8) (498.7) +830.3% NET INCOME – GROUP SHARE 1,032.0 (573.9) (1,605.9) -155.6% KEY RATIOS Profit margin(1) 36.0% -35.3% -71.3% (2) Cost-income ratio 60.6% 105.2% +44.6% (3) Return on equity (ROE) 22.5% -9.7% -32.2% MANAGEMENT REPORT MANAGEMENT KEY RATIOS – UNDERLYING (2) Cost-income ratio 63.3% 105.1% +41.8% D ATE D CONSOLI FINANCIAL STATEMENTS FINANCIAL D ATE D NON-CONSOLI FINANCIAL STATEMENTS FINANCIAL (1) The ratio between the net income and the income. (2) The ratio between the expenses and the income. (3) The ratio between the annualized net income – Group share and the weighted average of core shareholders’ equity (estimated dividend for the period deducted). 4 Dexia Bank Belgium – Annual Report 2008 CONSOLIDATED BALANCE SHEET – KEY FIGURES 31/12/07 31/12/08 r Evolution (in millions of EUR) 2007/2008 TOTAL ASSETS 264,698 263,093 (1,605) -0.6% Of which Loans and advances to customers 80,206 103,520 23,314 +29.1% Loans and securities 80,673 53,614 (27,059) -33.5% TOTAL LIABILITIES 259,312 259,581 269 +0.1% Of which Customer borrowings and deposits 76,079 69,815 (6,264) -8.2% Debt securities 26,820 17,349 (9,471) -35.3% TOTAL EQUITY 5,386 3,512 (1,873) -34.8% Of which REPORT MANAGEMENT Core shareholders’ equity 5,430 6,855 1,425 +26.2% 5,199 3,474 (1,725) -33.2% Total shareholders’ equity EQUITY RATIOS Basel I(1) Basel II(2) D ATE Tier 1 ratio 8.1% 12.9% +4.8% D Capital adequacy ratio 9.4% 14.7% +5.3% Risk-weighted assets 62,373 51,805 (10,568) CONSOLI RATINGS DEXIA BANK BELGIUM STATEMENTS FINANCIAL Long term Outlook Short term D Fitch AA- Stable F1+ ATE Moody’s A1 Negative P-1 D Standard & Poor’s A Stable A-1 DBRS AA (low) Negative trend R-1 (middle) Dexia Bank Belgium is rated AA­ outlook stable by Fitch (September 30, 2008), A1 outlook negative by Moody’s (January 19, 2009), A outlook stable by Standard & Poor’s (December 19, 2008) and AA (low) trend negative by DBRS (November 17, 2008). NON-CONSOLI FINANCIAL STATEMENTS FINANCIAL (1) In 2007 the ratios are calculated according to Basel II without application of “IRB – provision excess/shortfall” and with Risk Weighted Assets calculated according to Basel I. (2) Ratio Basel I floored: Tier 1 ratio = 9,3% and Total Capital ratio = 10,4%. Annual Report 2008 – Dexia Bank Belgium 5 6 Dexia Bank Belgium – Annual Report 2008 management repOrt Corporate governance 8 Activity report 12 Risk management 18 General information 24 Annual Report 2008 – Dexia Bank Belgium 7 Corporate governance Composition of the Management Ann De Roeck Member of the Management Board of Dexia Bank SA, (1) Board and the Board of Directors Secretary General, responsible for the Legal and Tax Depart­ ments, the Department for Wealth Analysis & Planning, the Secretary General division and Participations 1. MANAGEMENT BOARD Dirk Gyselinck Member of the Management Board of Dexia Bank SA, Chairman Responsible for Public & Wholesale Banking and Corporate Stefaan Decraene Marc Lauwers Member of the Management Board of Dexia Bank SA, Vice-Chairman Responsible for Retail & Commercial Banking Xavier de Walque Roger Leyssens Member of the Management Board of Dexia Bank SA, Members Responsible for Human Resources Management MANAGEMENT REPORT MANAGEMENT Ann De Roeck Jean-François Martin Dirk Gyselinck Member of the Management Board of Dexia Bank SA, Marc Lauwers Responsible for Risk Management D Roger Leyssens ATE Jean-François Martin Luc Van Thielen D Luc Van Thielen Member of the Management Board of Dexia Bank SA, Dirk Vanderschrick Chief Operations Officer, responsible for IT,O perations, Facility Management and Organization CONSOLI 2. BOARD OF DIRECTORS(2) Dirk Vanderschrick FINANCIAL STATEMENTS FINANCIAL Member of the Management Board of Dexia Bank SA, Chairman Responsible for Treasury and Financial Markets D Marc Deconinck Francine Swiggers ATE Mayor of Beauvechain Chairman of the Management Board of the ARCO Group D Vice-Chairmen Wivina Demeester Consultant Jean-Luc Dehaene Chairman of the Board of Directors of Dexia SA Bruno Flichy NON-CONSOLI Director and Honorary Chairman of Crédit du Nord FINANCIAL STATEMENTS FINANCIAL Jozef Gabriels Mayor of Genk Thierry Jacques President of the Mouvement Ouvrier Chrétien Members Patrick Janssens Stefaan Decraene Mayor of Antwerp Chairman of the Management Board of Dexia Bank SA, Member of the Management Board of Dexia SA Marc Justaert President of the Alliance Nationale des Mutualités Chrétiennes Xavier de Walque Vice­Chairman of the Management Board of Dexia Bank SA, Serge Kubla Chief Financial Officer Mayor of Waterloo Patrick Lachaert Solicitor and Municipal Councilor for Merelbeke (1) Situation on March 1, 2009. (2) Article 2 of the law of August 6, 1931 (Belgian Gazette of August 14, 1931) prohibits serving ministers, former ministers and ministers of state, and serving or former members of legislative chambers from mentioning their titles in deeds or publications relating to profit-making undertakings. 8 Dexia Bank Belgium – Annual Report 2008 Bernard Lux Mrs. Francine Swiggers as a director of Dexia Bank for a maxi­ Rector of the University of Mons­Hainaut mum renewable term of four years until the end of the Ordinary Shareholders’ Meeting of 2012. Pierre Mariani Chief Executive Officer and Chairman of the Management Board Mr. Herman Van Rompuy was appointed Prime Minister of the of Dexia SA Belgian Federal Government on December 30, 2008 and there­ fore resigned on that date as a director of the company. Claude Rolin Secretary General of the Confédération des Syndicats Chrétiens Mr. Jacques Guerber resigned as a director of the company on de Belgique December 29, 2008. Tony Van Parys At the Extraordinary Shareholders’ Meeting of February 27, Solicitor and Municipal Councilor of Ghent 2009 it was decided to enable the Board of Directors to co­opt two directors to replace Messrs. Herman Van Rompuy and Jean-Jacques Viseur Jacques Guerber who had resigned. The appointment of these Mayor of Charleroi two directors would be submitted for definitive approval at the next ordinary shareholders’ meeting of Dexia Bank Belgium As at March 1, 2009 Dexia Bank is managed by a Board of in accordance with the appointments procedure applied by Directors comprising twenty­five members, nine of whom also Dexia Bank Belgium.