Opportunities and constraints for banking in a new ... - Dexia.com

Opportunities and constraints for banking in a new environment
GOLDMAN SACHS Conference, Madrid
Philippe Rucheton, Chief Financial Officer
June 11, 2010

Disclaimer
This presentation and the information contained herein are provided for information purposes only
and may not be complete. It does not constitute an offer to sell or the solicitation to buy any
securities issued by Dexia or any entity of the Dexia Group.
This presentation includes unaudited figures.
This presentation may include future expectation and/or forward-looking statements and
assumptions related to the possible evolutions of business environment. By their very nature,
statements contained in this document involve inherent risks and uncertainties, both general and
specific, and risks exist that predictions, forecasts, projections and other forward-looking
statements will not be achieved. We caution readers not to place undue reliance on these
statements as a number of important factors could cause our actual results to differ materially from
the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in
such statements. Such important factors may include, but are not limited to, general economic
conditions, general competitive factors, changes in the availability or costs of liquidity, general
market conditions, changes in laws and regulations (including accounting principles), changes in
the policies of regulatory authorities, changes in interest rates and/or exchange rates, and other
factors not specified herein. In any event, such forward-looking statements speak only as of the
date on which they are made, and Dexia does not undertake any obligation to update or revise
such statements as a result of new information, future events or otherwise.
2

Dexia: Flight path cleared after 2008 turbulences
Reported Statement of Income (including FSA Insurance)
(EUR m) FY08 FY09 1Q10
Income 3 556 6 163 1 474
Expenses -4 119 -3 607 -884
Gross operating income -563 2 556 590
Cost of risk & impairments -3 314 -1 153 -265
Pre-tax income -3 877 1 403 325
Net income - Group share -3 326 1 010 216
Agreement reached with EC in February 2010 on
Dexia’s transformation plan leading to a clear flight
path for the group
• Priority given to core client franchises
• Improvement of the Group’s risk profile
• Adaptation of the cost base
• Additional divestment plan to be executed until end of
2013
Execution of the transformation plan on track reducing
excessive leverage and strengthening the group in a
tough economic environment and in anticipation of
regulatory changes
Group back to profitability in 2009 and 1Q10
• Each core business back to profitability in 2009
• C. EUR 350 m realized cost savings in 2009 vs. 2008,
EUR 150 m over initial target
Getting back to the “essence” of relevant commercial franchises
Reduce excessive leverage
3

Back to the essence of robust commercial franchises
Retail &
Commercial
Banking Belgium
and Luxemburg
In Belgium, deployment of a 4-year investment plan to strengthen strong
commercial franchise in a mature and concentrated market
• Solid commercial performance: 4.5M clients (+3.5% in 2009), deposits up 14% and loans
up 5% in 2009, restarted life insurance activity in 2010
• New concept of “open branches” already implemented in 180 outlets greeted by strong
customer acceptance
• Focus on the reduction of the Cost/Income Ratio
In Luxembourg, resilient franchise in a turbulent environment
• In 1Q10 net inflows of retail and private customers and increased production of credits to
individuals and professionals
• Private banking franchise resilient despite uncertain regulatory environment
4
Retail & Commercial
Banking Turkey
Potential for growth and solid market fundamentals
• Low public debt to GDP (39.5% in 2008), high economic growth (estimated GDP growth
5% in 2010)
• Young population, low loan to GDP penetration (37% in 2008)
Strong commercial momentum for Denizbank translating into solid net income
• Opening of 50 new branches in 2009, 25 new branches targeted in 2010
• Deposits up 24% in 2009 (vs 14% for peers), loans up 8% (vs 7% for peers)
• Net income Group share 1Q10 up 35% vs 1Q09
Disciplined loan growth strategy and prudent risk management to be maintained
• Deposit funded growth to be further emphasized (L/D ratio at 124% in 1Q10)
• Significant decrease of CoR in 1Q10, still early signs though

Back to the essence of robust commercial franchises
Public and
Wholesale Banking
Full fledge banking relationship in Belgium and solid expertise in public and project
finance in France, Italy and Spain
• Resilient business in France and Belgium, stable long term commitments in 1Q10
• Confirmed leadership in renewable energies and infrastructure project finance
PWB impacted by EU key decisions and pressure on the budget of local authorities
• Acceleration of geographical refocusing and divestiture of Dexia Crediop and Dexia Sabadell
within the next three years
• New production aligned with long term funding capacities and at minimum RAROC of 10%
• European local authorities operating under stringent financial constraints
Dexia AM: Growing institutional clients franchise and high operational efficiency
• AuM up 16% between 1Q09 and 1Q10
• Cost reduction efforts paying off: total costs / average AuM at 15bps in 1Q10
• Increased regulatory requirements, growth held back by retail outflows
Asset Management
& Services
RBC Dexia IS: valuable and growing franchise in a rapidly consolidating environment
• AuA up 40% between 1Q09 and 1Q10
• Joint venture benefiting from high industry recognition (#1 in global custody service for 6
consecutive years)
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Dexia Insurance Services: cross selling potential with RCB and PWB
• Gross written premium up 38% between 1Q09 and 1Q10 thanks to positive retail dynamic
• Important rebound of net income in 2009 and 1Q10 after severe impairments in 2008

Managing down the Group’s Legacy Division
New Legacy Portfolio Management Division implemented
alongside the Core Division
• EUR 156 bn of assets and EUR 23 bn of off-balance sheet
liquidity commitments earmarked in the new LPM Division
• All state guaranteed funding allocated to LPM Division
• Core Division already in line with EC short term liquidity
commitment (11% of total balance sheet in 2014)
LPM Division (as of March 31, 2010)
(EUR bn)
156 156
FP, 11
PWB run-off
commitments,
17
FP (GICS), 7
Covered
bonds, 24
Still sustained pace of deleverage of the LPM division in
2010
• Total bond sales of EUR 11 bn with a P&L impact of EUR
54.8 m pre-tax on May 28th 2010, average maturity of bonds
sold 5 years
• PWB’s non-core market exposure down EUR 2 bn in 1Q10
• Outstanding US liquidity lines (SBPA) down USD 2.6 bn to
USD 31bn in 1Q10 reducing liquidity risk in US Dollar
Bond
portfolios in
run-off, 128
Long-term, 37
Short-term, 7
Long-term *, 8
Short-term **,
72
State guaranteed
funding
Assets
Liabilities
Effective delineation of core and non core businesses
Balance-sheet vulnerability decreasing rapidly
* LT unsecured unguaranteed
** ST Repo & ST unsecured unguaranteed
6

New Liquidity Regime: Getting Prepared for a Tougher Stance from
Regulation
Reduced liquidity leverage of the group
• Short term funding need down EUR 100 bn since end of 2008
thanks to active deleverage of the bond-portfolio and long term
issuance
• Refocus of PWB production and alignment with long term funding
capacities of the group
More balanced liquidity profile and diversified funding sources
• In 1Q10, RCB deposits up 11%, PWB deposits up 2% vs 1Q09
• Lengthening of the group’s debt profile via issuance of EUR 46 bn
of medium and long term debt in 2009 and EUR 33 bn YtD 2010
Improvement of the liquidity profile essentially in agreement with
current proposals from the regulators and aligned with Dexia’s
commitments to EC
• Commitment to limit short term funding to 11% of total balance
sheet by 2014
• Commitment to increase stable funding (as the sum of covered
bonds and deposits) over total assets to reach 58% by 2014
Current LCR and NSFR assumptions considering only few of the
public sector assets as liquid and few of the liabilities as stable:
not in line with trend observed during the crisis
Long-term funding (as of June 4th, 2010)
Government
guaranteed;
21,8
Unsecured
non
guaranteed;
2,7
EUR 33.2bn
Covered
Bonds; 8,7
Less reliance on short term wholesale funding and improved
funding mix heading in the right direction
7

New Capital Regulations: Constraints or Opportunities for Dexia
Strong capital base
• Tier 1 ratio of 12.5% and Core Tier 1 ratio of 11.5% in
1Q10
• Core capital contributes to 92% of Tier 1 capital
• State Guarantee on Financial Products protecting Dexia’s
solvency against losses above the USD 4.5 bn first loss on
the FP portfolio
RWA down EUR 10.1 bn since end 2008 following refocus
of the Group on Core commercial franchise
Very limited constraints from higher capital requirements
for market risks (2% of total RWAs)
Potential negative impact of AFS reserve on solvency ratio
calculation might be mitigated by change in IFRS rules
although still to early to assess both impacts
• AFS reserve per end of March 2010: EUR -7.3 bn (o/w
EUR -5.5 bn of AFS related to assets reclassified in L&R)
Current definition of the Leverage Ratio based on no risk
weighted measure of counterparty risk negatively
impacting banks active in local credits such as Dexia
Tier 1 ratio & Core Tier 1 ratio
12.3%
12.5%
10.6%
9.6%
11.3% 11.5%
31/12/08 31/12/09 31/03/10
Core capital Hybrid capital
Weighted risks
(EUR bn)
152.8
10.3
143.2
142.7
3.1
10.4 10.4
3.0 3.0
139.5
129.8 129.3
Strong capital base however uncertainty related to treatment
of AFS reserve and definition of the leverage ratio
31/12/08 31/12/09 31/03/10
credit risk market risk operational risk
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Stronger to face upcoming Challenges
The banking industry is facing major uncertainties regarding economic, regulation, accounting and
tax environment
• Future regulatory landscape will profoundly impact capital and liquidity management
• Some accounting and tax rules are expected to change also
In line with its restructuring plan, Dexia is refocusing on the essence of its commercial franchises
and actively deleveraging its legacy
• Capacity to execute the plan confirmed quarter after quarter while maintaining profitability of the Group
• Reduced vulnerabilty of the balance-sheet that will converge towards EC commitments over time
• Potential to grow commercial franchises and improve cost efficiency
2009 and 1Q10 results highlighted Dexia’s capacity to successfully lead its transformation while
remaing profitable
9

Appendix (1/2): Shareholding Structure
Shareholding structure
as of March, 31 2010
Belgian Federal
State
5.7%
Three Belgian
Regions
5.7%
Holding Communal
14.7%
French State
5.7%
Caisse des Dépôts
et Consignations
17.6%
CNP Assurances
3.0%
Arco Group
14.2%
Ethias Group Employee
5.0% Shareholding
1.5%
Other Institutional
and Individual
Shareholders
26.8%
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Appendix (2/2): Reported Statement of Income – 1Q10
(EUR m) 1Q09 4Q09 1Q10
1Q10/
4Q09
Income 1,703 1,451 1,474 1.6%
Expenses -896 -920 -884 -3.9%
Gross operating income 807 531 590 11.1%
Cost of risk & impairments -409 -281 -265 -5.7%
Pre-tax income 398 250 325 30.0%
Net income - Group share 251 202 216 6.9%
Income supported by sound operational performance of core businesses
Cost-income ratio down from 63.4% in 4Q09 to 60.0% in 1Q10
Decrease of cost of risk driven by PWB and RCB (o/w CoR DenizBank down 21%)
Capital gain on the sale of Assured Guarantee shares offset by additional impairments on
the Financial Product Portfolio
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