Annual report 2010 - Dexia.com

Financial resultsConsolidated statement of income (1)(in millions of EUR, except where indicated) 2009 (2) 2010 VariationIncome (3) 6,184 5,310 -14.1%Expenses (3,607) (3,703) +2.7%Gross operating income 2,577 1,607 -37.6%Cost of risk (1,096) (641) -41.5%Other impairments & provisions for legal litigation (2) (78) (42) -46.5%Pre-tax income 1,403 924 -34.1%Tax expense (314) (127) -59.6%Net income 1,089 797 -26.8%Non-controlling interests 79 74 -6.3%Net income Group share 1,010 723 -28.4%Return on equity (4) 5.6% 3.8%Cost-income ratio (5) 58.3% 69.7%Earnings per share (in EUR) (6) 0.55 0.39(1) FSA Insurance deconsolidated since 2Q 2009.(2) The provisions for legal litigation were previously included in income (other net income).(3) Income (also mentioned as revenues) = interest, fees, commissions, trading and other income.(4) The ratio between the net income Group share and the weighted average core shareholders’ equity.(5) The ratio between the cost and the income.(6) The ratio between the net income Group share and the average weighted number of shares. 2009 figures have been restated to take into account the issueof bonus shares distributed to the shareholders and to enable comparison.Management report• the changes in interest rate, foreign exchange rate andcredit spreads. A EUR 17 billion positive variation came fromcash collateral postings and fair value adjustments of assets(mainly derivatives) following the evolution of the EUR andUSD interest rate curves.• the sale of Dexia Épargne Pension (EUR -4.3 billion).EquityTotal shareholders’ equity is composed of core equity(capital, additional paid-in capital, reserves, result for theyear before allocation less treasury shares) and gains andlosses not recognized in the statement of income (or OtherComprehensive Income).Total shareholders’ equity of the Dexia Group amountedto EUR 8.9 billion as at 31 December 2010 againstEUR 10.2 billion as at 31 December 2009. This EUR 1.2billion decrease was due to the evolution of the OtherComprehensive Income partially offset by the current 2010result of EUR 723 million. The Other Comprehensive Incomedecreased by EUR 2 billion in 2010, mainly under the effectof the sovereign turmoil.Core shareholders’ equity increased by EUR 0.7 billion toEUR 19.2 billion supported by the organic capital generationof the Group.Gains and losses not recognised in the statementof income include the fair value on the available-for-saleassets, the "frozen" fair value adjustment of financial assetsreclassified to Loans and Receivables, the fair value of cashflowhedge derivatives and the translation reserve. Theydecreased by EUR 2 billion in 2010 and stood at EUR -10.3billion at the end of 2010.• The available-for-sale reserve, down by EUR 2.4 billion, wasimpacted by the spread widening on sovereign debt (Greece,Portugal and Italy).• The "frozen" fair value adjustment of financial assetsreclassified to Loans and Receivables, created within theframework of the amendments to IAS 39 and IFRS 7, isamortised over time and amounted to EUR -5.3 billion as at31 December 2010. If the reclassification had not been made,an additional net amount of EUR -0.6 billion would have beenrecognised in AFS reserve in 2010.• The cash-flow hedge reserve remained nearly stable atEUR -0.7 billion• The translation reserve improved by EUR 0.2 billion atEUR -0.4 billion.Non-controlling interests remained at EUR 1.8 billion.LiabilitiesThe amount of customer deposits and debt securities (savingsbonds, certificates and bonds) reached EUR 338 billion as at31 December 2010 (+1%). Their relative share in the totalbalance sheet reached 60% at the end of 2010 against 58%at the end of 2009.Customer deposits amounted to EUR 127 billion, anincrease of 5% or EUR 6.1 billion during the year. Savingsaccounts, term and other deposits grew by EUR 9 billionwhereas demand deposits were down EUR 2 billion. Reverserepurchase agreements decreased by EUR 1 billion.Debt securities decreased by EUR 2.6 billion (or -1%) toEUR 210 billion: certificates of deposit fell (EUR -17 billion)while non-subordinated debt increased by EUR 14 billion,showing the reallocation of the funding from short-term tomedium and long-term sources. Savings bonds decreasedslightly (EUR -0.7 billion) in the context of low interest rates.Subordinated debts stood at EUR 3.9 billion.Liabilities due to banks decreased to EUR 98 billion at theend of 2010, down EUR 25 billion, of which EUR 29 billionwith central banks, confirming that Dexia accelerated thecutback of central bank borrowing.Liabilities included in disposal groups held for saledecreased by EUR 4.3 billion due to the sale of Dexia ÉpargnePension in 2010.Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia101