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<strong>Annual</strong> Report <strong>2005</strong>As a result, gross operating in<strong>com</strong>eamounted to EUR 1,501 million in <strong>2005</strong>,an 11.1% increase <strong>com</strong>pared to 2004,and 10.9% at constant exchange rate. Inspite of the expenditures on the variousdevelopments of the business line, andowing to the robust revenue growth, thecost-in<strong>com</strong>e ratio decreased slightly from33.7% in 2004 to 33.4% in <strong>2005</strong>. On thesubject, <strong>Dexia</strong> manages this indicator inview of the overall development perspectiveof the business line. Indeed, in an areawhere acquisition opportunities are rareand where organic growth opportunities arethere, management finds cost growth quiteacceptable when such expenses relate tobusiness development.The cost of risk in <strong>2005</strong> amounted toEUR 34 million, slightly above the levelof charge during the same period of 2004(EUR 30 million) but this increase is verysmall when <strong>com</strong>pared to the growth of theassets during the same period. The cost ofrisk thus remains in the region of its historiclows.Taxes went up in <strong>2005</strong> to EUR 421 million,up EUR 27 million (+6.8%). This wasbasically caused by the growth in operatingearnings. Of note however, the increase atFSA (USD 25 million in the third quarter,and USD 4 million in the fourth quarter),linked to the change of tax rate on theBermuda operations. In the other direction, aEUR 20 million provision was written back at<strong>Dexia</strong> New York in the third quarter of <strong>2005</strong>.Overall, the business line delivered anexcellent year, and posted a strong 22.7%return on economic equity (ROEE).UNDERLYING STATEMENT OF INCOME (excluding non-operating items)(in millions of EUR)2004 (1) <strong>2005</strong> Variation<strong>2005</strong>/2004In<strong>com</strong>e 2,037 2,253 +10.6%of which net <strong>com</strong>missions 157 150 -4.4%Costs (687) (752) +9.5%Gross operating in<strong>com</strong>e 1,351 1,501 +11.1%Cost of risk (30) (34) +14.7%Impairments on (in)tangible assets 0 0 n.s.Tax expense (394) (421) +6.8%Net in<strong>com</strong>e 927 1,046 +12.8%Minority interests 43 38 -12.0%Net in<strong>com</strong>e – Group share 884 1,008 +14.0%Cost-in<strong>com</strong>e ratio 33.7% 33.4%ROEE (2) 22.8% 22.7%Allocated equity 3,874 4,432(1) Pro forma.(2) Return on economic equity.73
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