Annual report 2006 - Dexia.com

GROUP PRESENTATION
All these projects will be examined in observance of strict
internal rules taking account of the careful examination of
risks, return of investment for projects, and the creation of
strategic value for Dexia, its members of staff, its clients and
its shareholders.
ACTIVITIES OF THE BUSINESS LINES
CORPORATE MODEL
The alliance between Crédit local de France and Crédit Communal
de Belgique in 1996 aimed at creating a universal bank
on a European scale with, inter alia, the ambition to become
the world leader in public finance. By pooling the respective
domestic leaderships of the two founding institutions, Dexia
was able to develop such a strategy most successfully.
Following the effective merger in 1999, Dexia has thus become
one of the twenty largest banks in the euro zone (by market
capitalization), and today it addresses two main markets:
• on a European scale, individuals, small and medium-sized
enterprises and institutional clients;
• on a global scale, local public authorities, borrowers with a
similar profile (hospitals, schools, social housing institutions
and other institutions of the non-profit sector) and essential
infrastructure project finance sponsors.
The alliance has fulfilled and even exceeded its initial ambitions.
Dexia was able to expand all its activities in several
directions: the product offer is now wide-ranging in the two
markets it serves; the client base has been strongly developed
both in number and type; lastly, the geographic scope of the
Group is now much broader, with a presence in 33 countries.
Today, Dexia counts among the very few banking institutions
which hold a global leadership position in one specific business
(Public/Project Finance) whilst being a strong local retail
player in some European countries: Belgium, Luxembourg,
Slovakia and, since 2006, Turkey.
This presence gives Dexia a unique spread in terms of portfolio
mix and geographic contributions to earnings. After a decade
of existence, Dexia has not only increased its size – net income
and market capitalization have quadrupled since inception
– but it has also built a renowned worldwide franchise in the
area of Public/Project Finance, a very strong regional presence
in Personal Financial Services, and established its name very
soundly on the financial markets.
• In the Public/Project Finance arena, Dexia can today engineer
and execute all forms of transactions: long and short-term
credit facilities, ranging from traditional to more sophisticated
schemes; debt management services; credit enhancement of
municipal bonds and asset-backed securities; arrangement
and underwriting of infrastructure projects. As an illustration
of the latter capability, Dexia is regularly listed among the
“Top Ten” worldwide league of project finance players.
• In terms of international development, Dexia’s presence
has been dramatically enlarged, to a large extent in the
United States following the acquisition of FSA in 2000, and
also through several moves in European countries, and more
recently in Canada, Mexico and Japan. The Group has constructed
its presence in various ways, either through branches,
wholly-owned subsidiaries or joint ventures.
• In Personal Financial Services, Dexia is today one of the three
largest universal banks in Belgium and Luxembourg, and,
through DenizBank, one of the six largest privately-owned
banks in Turkey. In all the above markets, Dexia’s position is
significant in asset-gathering and lending.
• In the financial markets, the marriage of the two institutions
has given Dexia a considerably greater visibility: the Group is
one of the largest private issuers of long-term bonds and one
of the very large counterparts in interest rate derivatives. The
growing sophistication of the products offered to clients has
developed a substantial business flow and revenue base for the
Group.
• Initially established to support the commercial efforts of
Dexia in its two main markets, some specialist subsidiaries
have been successfully developed in the areas of Asset Management
and Insurance Services. Their products show good
performances and are sold both in the proprietary distribution
networks of the Group and now more importantly through
third party channels. In the area of Investor Services, Dexia has
constructed a strong franchise in Europe which was brought
into a joint venture with the Royal Bank of Canada a year and
a half ago, to form RBC Dexia Investor Services. This young
company already boasts a very high profile and global ranking
among global institutions offering custodian and fund administration
services.
The Dexia business model is today comparable to that of its
European peers, with a spread of contributions from retail
networks, institutional clientele, and capital market and specialist
activities. Like any other bank, Dexia generates value
on the strengths of its multi-million client base in Belgium,
Luxembourg, Slovakia and Turkey, where it enjoys good market
shares and offers “state of the art” products and services.
But Dexia is also a unique player in the financial services industry,
as the world leader in Public/Project Finance. In this area,
its business model is in fact a combination of several business
models: it can be a “retail” approach – as in Belgium and now
Turkey – where the complete range of services is offered to
local authorities and/or project finance sponsors; it can also be
a “wholesale/investment banking” approach – as adopted in
France, Italy or the United States – where only some products
or services, with high added value, are offered to selected segments
of the market.
This capacity to carry on the business in different ways gives
Dexia a major competitive advantage in the deployment of
its international strategy. For instance, Dexia has established
successfully in Spain and Austria by establishing a joint, highly
specialized, public finance subsidiary with a local retail bank
which operates on the local market. In other cases, following
an acquisition, Dexia wholly or partly owns a company conducting
specialist activities (e.g. Dexia Crediop in Italy; FSA,
a US major in the credit enhancement of municipal bonds;
or Dexia Kommunalbank Deutschland – formerly Dexia
HypothekenBank Berlin –, a holder and manager of German
public authority funding instruments). Lastly, Dexia may own
and directly operate a fully-fledged “bank of the municipalities”,
such as Dexia Banka in Slovakia, which operates a similar
business model to that of Dexia Bank in Belgium.
MANAGEMENT REPORT
COMPTES CONSOLIDÉS
COMPTES SOCIAUX
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