Annual report 2006 - Dexia.com

PUBLIC/PROJECT FINANCE
Two transactions are worth being mentioned: the enhancement
of the bond issued by the hospital Scottsdale Healthcare
in Arizona, for a total amount of USD 200 million, and the
enhancement of a USD 313 million bond issued by Philadelphia
Gas Works.
FSA’s international business saw a booming year with PV premiums
originated at USD 318 million (+71.5% over the last
twelve months). This performance is due to a number of largescale
transactions, among them the guarantee of an obligation
issue of GBP 200 million by United Utilities Water plc in
United kingdom and the enhancement of a AUD 482 million
issue by Monetary Policy Committee Funding in Australia.
In the US asset-backed securities sector, the very high quality of
the business originated and the tight spread environment led
to a decrease of originations (-17%), to USD 234 million. FSA
identified limited opportunities to deliver fair rates of return,
although the trend seemed to start reversing slightly at the end
of 2006. The market for car loans securitization has been very
active, along with CDO (collateralized debt obligations) activity.
Finally, the amount of USD 4.8 billion guaranteed generated
premiums of USD 19 million. FSA has continued to develop
the HELOC type transactions (Home Equity Lines of Credit).
Outside the United States, FSA has been granted a license to
open a subsidiary in Tokyo.
UNDERLYING (1) RESULTS
Net income – Group share for the full year amounted to
EUR 1,140 million, a very solid 14.1% increase. Excluding the
negative exchange rate impacts (EUR -9 million), the increase
would have been 15.0%. This business line comes up with
double-digit annual growth again this year, with progress
made in all subsegments (the public sector, project finance
and corporate activities, and credit enhancement), and successes
experienced in almost every country. Dexia’s ambitions
of diversifying its revenues into countries outside its historic
markets are being achieved year after year: net income -
Group share originated in France and Belgium now represents
42% (44% in 2005); FSA presents 25% of the business line’s
earnings, and the banking activities outside France and Belgium
amount to 33%.
The total income of the business line, at EUR 2,478 million,
was up EUR 222 million compared to 2005, i.e. +9.9%
(+10.6% at a constant exchange rate). Those very good
numbers stem from the conjunction of several factors: high
originations this year, adding up to a very substantial book
of assets constituted throughout the years in the different
entities of Public/Project Finance, and funding costs continued
to improve. FSA’s income rose 9.7% (at EUR 543 mil lion),
a good performance in a contrasted environment leading to
reduced ABS revenues in the USA, a lower level of refunding,
and in the opposite direction, higher originations in public
finance, solid revenues on financial products and some
exchange gains (appearing as additional revenues only under
the IFRS treatment). The business line, excluding FSA, experienced
exactly the same positive trend with EUR 175 million
(+9.9%) additional revenues compared to 2005, due to:
• a positive volume effect in many countries (i.e. France, UK,
Spain, Central Europe, America...);
• the positive influence on margins of the debt management
activity;
• a good level of commissions in view of the many transactions
for which Dexia has lead-arranger mandates (inter alia
in America, Spain and the UK);
• the increasing contribution of countries where Dexia has
recently established offices (for instance in Central and Eastern
Europe, Canada, Mexico and Japan). Particularly noteworthy
were the progressions experienced in France and
Belgium (6% more revenues), Italy (+9%), the USA (+16%),
the UK (+67%), Iberia (+59%) and Central Europe (+82%)
where the yearly revenues now stand at EUR 47 million. Of
note, the contribution to the business line revenues of DenizBank
was EUR 48 million (+46% on the fourth quarter of
2005 pro forma) bearing in mind that this came in only one
quarter.
MANAGEMENT REPORT
COMPTES CONSOLIDÉS
COMPTES SOCIAUX
(1) As described on page 70.
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