Annual report 2010 - Dexia.com

StrategyIn October 2010, within the context of an Investor Dayorganised in Brussels, Dexia presented its financial andcommercial targets by 2014.The strategy described in the present chapter was establishedtaking account of the financial and economic environmentand information available at the time it was established. Itmay be altered in particular when material changes occur tomarket conditions as well as to legislation, regulation (interalia accounting principles) and prudential control.Dexia 2014: an ambitious planDexia has posted clear strategic ambitions for 2014 and fixedas objectives:• to complete its financial restructuring, giving precedence toincome from its commercial franchises;• to consolidate and to develop its strong commercialfranchises, rebalancing its business line portfolio (Retail andCommercial Banking, Public and Wholesale Banking and AssetManagement and Services) around retail banking, tapping thegrowth opportunities offered by the market in Turkey;• to reshape its operating model, seeking for more synergiesand efficiency gains.A bank with a robust financial structureBy 2014, the Group targets to reduce the size of its balancesheet by 35% to less than EUR 430 billion and to completean in-depth modification of its funding structure in orderto achieve a maximum of 11% of short-term funding. Asa result the Group will be for the most part funded longterm,via deposits collected by the business lines, by coveredbond issues and via opportunist access to the unsecuredsenior segment. Its annual long-term funding programme willbe in a range of EUR 10 to 15 billion, in line with Grouprequirements and market appetite.Assets managed in run-off will represent less thanEUR 80 billion thanks to the ongoing asset deleverage planimplemented by dedicated teams since the end of 2008.More details on the deleverage plan and on the liquidity profileare given in the chapter “Update on the transformation plan”on pages 14-15 of this annual report.Dexia will have improved the quality of its income by reducingthe share stemming from financial activities (revenues fromtransformation activities and from investment portfolios) andby developing commercial income which will represent 95%of total estimated income.The Group will continue its efforts to reduce costs in order toachieve a cost-income ratio lower than 65% in 2014.The cost of risk should improve for Public and WholesaleBanking and Retail and Commercial Banking, including Turkeywhere it could nonetheless be subject to volatility.This should lead the Group to achieve pre-tax income ofabout EUR 1.8 billion in 2014.The fall of weighted risks, via a reduction of assets managedin run-off as well as the disposal of entities together withits capacity for organic capital generation will enable theGroup to maintain robust solvency with a Core Tier 1 Ratio ofaround 15% (Basel II standards), and a ratio above the newBasel III standards.A business line portfolio rebalancedaround retail banking and founded on solidfranchisesRetail and Commercial Banking (RCB)Dexia intends to increase the proportion of income from itsRetail and Commercial Banking activities. By 2014, these willrepresent about 60% of the Group’s total income (of which27% from Turkey), against 36% in 2007. Dexia will have abase of some 10 million customers (4 million in Belgium andLuxembourg, 6 million in Turkey).Retail and Commercial Banking in Belgium andLuxembourgResting upon solid foundations, the aim of Retail andCommercial banking activity is to increase its market share aswell as the equipment rate for its customer base in Belgiumand Luxembourg.In Belgium, Dexia is positioned among the Top 3 retailand commercial banks: its network of 846 branches at theend of December 2010 covers the whole territory and thebank occupies a prime position in private banking activity.Notwithstanding the good resistance of the franchise duringthe crisis, the activity posts a relatively low equipment rateand income per customer compared to its peers.In a renewed competitive environment, Dexia’s ambition forRCB Belgium by 2014 is:• to increase cross-selling and revenue from its client base byapproaching the client proactively at key moments;• to gain market shares, particularly on private banking andSME segments;• to become a reference bank in terms of customersatisfaction.In order to sustain that ambition, a plan to invest EUR 350 millionwas launched in 2009. It is composed of several parts:Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia17