Annual report 2006 - Dexia.com

FINANCIAL RESULTS
MANAGEMENT REPORT
COMPTES CONSOLIDÉS
COMPTES SOCIAUX
FINANCIAL RESULTS
PRELIMINARY NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (1)
Changes in the scope of consolidation
The main changes which took place in 2005 concerned the sale
of Eural Banque d’Epargne (effective from the fourth quarter),
the liquidation of Rekord in Germany, and the acquisition of
FMS Hoche, a fund administration Company in France.
In 2006, the following changes took place:
• the fund services activity of Dexia (mainly Dexia Fund Services)
was transferred to the newly-created RBC Dexia Investor
Services (joint venture with Royal Bank of Canada), effective
from January 1, 2006;
• the Private Banking activities in the UK were sold, effective
in the second quarter of 2006;
• Banque Artesia Nederland was sold and left the scope of
consolidation in the last quarter of 2006.
• DenizBank was acquired in two tranches (75% in October
and the balance in December). In the fourth quarter it was
fully consolidated but minority interests were present for
25%, as the mandatory tender offer on that tranche of shares
became effective on December 22, 2006. From 2007, there
will be only a small amount of minority interests, as Dexia now
owns 99.8% of DenizBank’s shares.
Pro forma financial statements
The changes in the scope of consolidation were taken into
account to establish pro forma financial statements for
2005 so as to enable comparisons. In absolute figures, the
difference between the reported and pro forma 2005 net
income – Group share is EUR +16 million (income higher by
EUR 81 million; costs higher by EUR 55 million; cost of risk
lower by EUR 2 million; taxes higher by EUR 7 million).
(1) The analysis of Dexia SA’s financial statements can be found in the note 4
to the annual financial statements on page 220 of this annual report.
“Underlying“ and “non-operating“ items
“Underlying“ results exclude the effects of the change of
scope of consolidation, and also exclude the non-operating
factors. Those comprise both the nonrecurring elements of
the period, described and quantified individually, and the
variations of the marked-to-market value of FSA’s CDS portfolio.
The latter instruments being classified as derivatives, the
variation of their market value during the reporting period is
taken as a trading result; this treatment under IAS 39 does not
allow a good understanding of the economic results, as this
portfolio is composed of AAA-rated instruments, which FSA
is committed to insure until maturity. Therefore, the positive
or negative marked-to-market variations on this book in any
period are not underlying results, as they will eventually add
up to zero. Non-operating items are detailed on page 73 of
this report.
ANALYSIS OF THE CONSOLIDATED
STATEMENT OF INCOME
Foreword
In 2006, many changes took place in the scope of Dexia, principally
linked with the acquisition of DenizBank, and the disinvestments
from several business units. The most significant
changes in scope took place in the last quarter of the year,
with a 75% participation in DenizBank being fully consolidated
into Dexia, and Banque Artesia Nederland (BAN) leaving
the scope of consolidation. Hence, the full year 2006 reported
net income – Group share includes the results of DenizBank in
the fourth quarter (EUR 32 million), and those of BAN in the
first three quarters (EUR 18 million). They also include a very
high net amount of non-operating items (EUR 703 million).
In many cases, in order to underscore the essential economic
trends, the comparisons between the reporting periods are
made on a like-for-like basis. The net income – Group share
pro forma 2005 shows EUR +16 million difference with the
reported number.
Net income – Group share
Net income – Group share amounted to EUR 2,750 million
in 2006, up EUR 712 million (+34.9%) over 2005. The
contribution of DenizBank to the net income – Group share
was EUR 32 million in the fourth quarter of 2006. The net
contribution of the non-operating factors was EUR +703 million
in 2006 – detailed on page 73 – compared to EUR +263
million in 2005, thus accounting for EUR 440 million of the
increase. Taking into account the pro forma 2005 figures,
the underlying net income – Group share progressed by EUR
+256 million, or +14.3% overall. It was strong in all business
lines, with underlying progressions respectively of +14.1% in
Public/Project Finance and Credit Enhancement, +13.1% in
Personal Financial Services, +31.7% in Asset Management,
+51.4% in Investor Services, +12.1% in Insurance Services,
and +11.2% in Treasury and Financial Markets. As in the
previous year, the currency exchange impact on net income
– Group share was very limited in 2006 (EUR -5 million).
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Dexia / Annual Report 2006