Annual report 2006 - Dexia.com

GROUP PRESENTATION
MANAGEMENT REPORT
COMPTES CONSOLIDÉS
COMPTES SOCIAUX
Not only has Dexia all the means to deploy its strategy by
applying the right business model in the right place, but its
established experience in public finance has also allowed it, in
many countries, to transform a “demand-side” market – where
the products are quasi-commodities and where winning a
transaction is only a matter of price – into a “supply-side”
market where public finance customers are willing to discuss
all possible solutions to their overall financial and risk management
needs.
Dexia is organized in business lines, managed as profit
centers for strategy, marketing, budgeting and reporting
purposes.
• Public/Project Finance and Credit Enhancement covers
the activities of Municipal Finance, Project Finance, Credit
Enhancement and Corporate Lending. Municipal Finance
consists of financing the needs of local public authorities or
other public service organizations, in the form of direct loans,
signed commitments, liquidity guarantees or the purchase of
securities issued by customers. Dexia offers its clients an entire
range of products – including structured loans as well as debt
management – to optimize their debt portfolio profile and
efficiency. As indicated above, Dexia is also one of the major
players worldwide in Project Finance. Its approach is selective,
in line with the Group’s risk policy: priority is given to essential
infrastructures (transportation, environment etc.) and
the renewable energy sector. As one of the largest banks in
Belgium, Dexia also supplies finance to corporate borrowers.
Through its New York based AAA-rated subsidiary, Financial
Security Assurance (FSA), Dexia insures municipal bonds and
infrastructure deals, as well as asset-backed securities (ABS)
essentially in pooled corporate, consumer loans and mortgage
sectors.
• Personal Financial Services. The strategic focus of this
segment is the distribution of its own products and services
as well as those created in other business lines of the Group
(primarily Dexia Asset Management, Dexia Insurance Services
and Treasury and Financial Markets – TFM), to a clientele predominantly
composed of individuals (including affluent and
high net worth individuals, professionals and self-employed),
as well as small and medium-sized companies. The largest
part of this activity is conducted in Belgium and Luxembourg,
and since 2006, in Turkey, all countries where a broad and
comprehensive distribution apparatus exists. The networks, as
they now stand in Belgium, stem from the integration of the
Dexia Bank network and the BACOB/Artesia network acquired
in 2001. The scaling-down objective set at that time for 2005
has been exceeded. The network now has 802 branches operated
by independent agents, and 217 branches run by bank
employees. The integration of Artesia Banking Corporation
was aimed at releasing substantial cost synergies, and that target
has been achieved and even exceeded. The business line
also operates units outside Belgium and Luxembourg. These
involve various types of approach and/or product focus.
The main areas are:
– Turkey where the Group owns a 99.8% participation in Deniz-
Bank, the sixth largest privately-owned bank in the country;
– France where the Group holds a 20% participation in
Crédit du Nord, and Dexia Epargne Pension, a specialist life
insurance business;
– Switzerland through Dexia Private Bank Switzerland;
– Slovakia through Dexia banka Slovensko a bank with
52 branches, which caters both for local public clients and the
personal sector;
– Spain where Dexia holds a 40% participation in Popular
Banca Privada, a private banking joint venture with Banco
Popular.
• Treasury and Financial Markets (TFM) is a segment where
the aim is in part to give support to the other business lines of
the Group, and which is also partly run as a profit center in its
own right. TFM provides short-term money market products
and long-term funding for the Group, supporting the growth
of the Group’s balance sheet. Through permanent innovation,
TFM teams also develop the offer of a large range of capital
market products (fixed income, structured products based on
interest rates and equity derivatives, foreign exchange, securitization)
to customers of the commercial business lines (local
authorities, corporate customers, retail and private clients,
institutional investors, central banks, fund managers etc.).TFM
also runs a securitization business, both on the American and
the European markets. Lastly, TFM manages a bond portfolio
(Credit Spread Portfolio), which contributes to ensuring a high
level of liquidity for the Group and brings in a sizeable proportion
of the business line’s earnings.
• Asset Management. In this area, Dexia has successfully
developed its own production capacity. In the first place this
has related to mutual funds, considering the retail networks’
growing demand for this kind of product, with increasing levels
of sophistication. This expertise has then been extended to
institutional investors, among Dexia’s traditional clients – for
instance public sector institutions – but also to other institutions
such as pension funds, endowments and foundations,
via a professional distribution sales force. Today, Dexia Asset
Management is the organization where asset management
skills are concentrated. It is a significant European player, with
four production centers in Belgium, Luxembourg, France and
Australia, and client coverage in these four countries plus Italy,
Spain, Switzerland, Germany, Austria, the United Kingdom,
the Scandinavian countries. Dexia Asset Management manages
a complete range of products including equity, fixed
income, money market and diversified funds. The company
holds strong positions in specific areas such as alternative
investment management and socially responsible investment
funds. Products or mandates are distributed either through
the various distribution channels (Retail and Private Banking
networks, Public Finance customer base), through third
party networks, or via its own pan-European sales force. More
than half of the business comes from institutional mandates.
Dexia Asset Management’s main objective is to keep delivering
outstanding performances in its product range (60% of
Dexia Asset Management’s products have been in the first
two quartiles of sector peer group classification by Standard &
Poor’s over the last three years), whilst achieving superior productivity
(one of the best in Europe), through a strict control
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Dexia / Annual Report 2006