Annual report 2010 - Dexia.com

Message from the ChairmenManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsOver the last two years, Dexia has undergone an in-depth transformation,aimed at restoring the robustness of its financial base and ensuring asustainable future for the Group.In this transformation process, 2010 was a year of significant change,marked by two priority objectives: acceleration of our financialrestructuring and development of our commercial franchises, in linewith our objectives.Throughout the year, despite the unstable economic environment, wewent to great lengths to accelerate the financial restructuring, and thiswas reflected by rapid asset disposals and a substantial improvement ofour liquidity profile.We continued with our disposal plan in accordance with the programmeagreed with the European Commission, disposing of various holdingsand entities as well as a total of 27.2 billion euros in bonds and loans inrun-off. Those disposals have been reflected by a reduction of the sizeof our balance sheet by 18% since the end of 2008.In terms of liquidity, continuing the endeavours begun at the endof 2008, there has been a rapid and material improvement of the Group’s situation. Our short-term fundingrequirement has been reduced by 141 billion euros compared with the maximum reached in October 2008 and isnow at 119 billion euros at the end of December 2010. On the other hand, we have improved the quality of oursources of funding by rebalancing our liquidity profile, aligning it towards longer-term funding, based on stableresources, increasingly gathered from our clients.These efforts enabled us definitively to exit the Belgian, French and Luxembourg State guarantee on our fundingby 30 June 2010. In a particularly tense economic and financial environment resulting from the sovereign debtcrisis in certain European countries, we have returned to full funding autonomy, testifying to the solid progressmade in terms of our financial structure.In October 2010, we presented our strategic plan for 2014. The road map for each business line was chartedat an “Investor Day”, detailing the principles of the transformation of those business lines. For our Retail andCommercial Banking activities, our ambition is to increase our market share as well as the equipment rate for ourclient base. An investment plan was launched to support that ambition. Indeed, in Belgium, the establishment ofour new distribution model was a priority in 2010. In all, 304 branches were renovated and additional accountmanagers were appointed to improve the service provided to our clients. The intensification of our collectionefforts resulted in a 5% increase of deposits in Belgium and Luxembourg. In Turkey, we continued with our policyof dynamic expansion, supported by the opening of 50 new branches over the year. In the field of public banking,our Public and Wholesale Banking business line is confirming its status as a profitable and recognised specialist onits historical markets, Belgium and Luxembourg, on the basis of a model offering an increasingly comprehensiveand integrated range of products. Our asset management, investor services and insurance activities, characterisedby attractive growth prospects founded on a diversified client base, will further intensify their collaboration withthe Group’s other commercial franchises.At 723 million euros, net profit for 2010 is a sign of this accelerated transformation of our Group. Theimprovement of our funding mix and the disposal of assets in run-off are reflected in line with our objectivesby a fall in earnings. Nevertheless, the result reflects the solid progress made by the commercial business lines,which post pre-tax income up 18% over the year (excluding gains from disposals). The good performance byRetail and Commercial Banking, with strong growth of both loans and deposits, illustrates our robust commercial8 Dexia Annual report 2010