Annual report 2005 - Dexia.com

DexiaPublic/Project Finance and Credit EnhancementResultsThe analysis hereafter is based on theunderlying data (i.e. excluding non-operatingitems) for this business line, in order to allowa better understanding of the fundamentaltrends of the business line. Items considerednon-operating are defined on page 36.Net income – Group share for the fullyear posted a solid 14.0% progression andexceeded for the first time the symbolicone billion threshold, amounting toEUR 1,008 million. This new progressionconfirms the business line’s powerfulearnings momentum and its status as thefirst contributor to Dexia’s earnings. Takingout FSA’s contribution – as this subsidiaryexperienced in 2005 what may be describedas a pause (+0.8% compared to 2004) inits relentless double digit progression sinceits acquisition by Dexia –, the rest of thebusiness line grew by 19.1% year on year.This naturally reflects the very robust buildup of the book of business during many yearsof high and growing originations. It alsostems from Dexia’s strategy of internationaldiversification, which has greatly paid off.Today, the business line’s net income comesfrom the US (34%), France (26%), Belgium(20%), Italy (5%); the balance (15%) isoriginated in different countries worldwide,whose number keeps increasing and alreadyexceeds a dozen.Total income amounted toEUR 2,253 million for the whole year, up10.6% or EUR 215 million, and each of thesubsegments contributed positively to thisgrowth. FSA contributed EUR 495 million,i.e. EUR 33 million to the revenue growth.The rest of the business line achieved 11.6%growth year on year, or EUR +182 million.Costs were up EUR 65 million comparedto 2004, i.e. +9.5% in 2005, a slightlylower percentage than the progression ofrevenues. Among the reasons for the costincrease, note that expenses at FSA went upEUR 13 million (or 11.5%), caused by severalfactors: acceleration of deferred costs onthe refunding business; a lower cost deferralrate than in 2004; expenses linked to themove to new head offices. The costs of thebusiness line without FSA went up 9.0% orEUR 52 million. In Belgium, the increase ofcosts amounted to EUR 12 million, and wasprincipally caused by higher IT spending,legal costs on litigations, and IAS 19 pensionprovision adjustment. In France, costswere up EUR 9 million, one third of whichon account of the new projects of DexiaSofaxis, and the rest on compensation dueto the very high level of originations andhirings for new developments. Elsewhere,the bulk of the increase (EUR 31 million)stems from the various developments andprojects of the business line: EUR 8 millionfor the public sector bond origination andthe first expenditure on the Japanese project;EUR 9 million on Central and EasternEurope; EUR 6 million in America.72