Annual report 2010 - Dexia.com

Notes to the consolidated financial statementsManagement reportof Dexia FP portfolio to which the put option relates or ona number of assets whose par value is equal to the totalamount of the liabilities pursuant to the GICs if this amount islower. The assets are sold at their residual par value increasedby the amount of interest due.A.3.3. Credit quality of assetsWithin the portfolio, the most sensitive exposures as at31 December 2010, are mainly USD 9 billion of US RMBSof which 89% are Non Investment Grade as well asUSD 200 million of Triple-X exposures (Structured Financepositions) of which 50% are Non Investment Grade.The expected weighted average life is around 9.2 years. Asignificant portion of the RMBS portfolio has contractualmaturity after 2035 and up until 2057 for the longestmaturity.Consolidatedfinancial statementsAdditional information Annual financial statementsBalance (in millions of USD)AAA AA A BBB BB B CCC&below TOTALRMBS 185 573 182 55 348 398 7,300 9,041Subprime 141 481 167 45 281 315 5,026 6,456Alt-A 44 75 15 9 67 22 1,556 1,788Option ARM - 11 - - - 11 475 497CES - - - - - 9 113 122HELOCs - 7 - - - 42 101 150ABS CDO - - - - - - 30 30Other ABS - 359 127 225 100 - - 811CLO - 174 92 74 - - - 340CMBS - - - 151 - - - 151FSA Refi - 119 - - - - - 119Triple-X - 65 35 - 100 - - 200Other assets 1,978 466 400 895 100 65 - 3,905Corporate 125 - - - - - - 125Demutualization - 63 - 25 - - - 88Domestic IOU - - 68 14 - - - 82Full Faith US 1,067 - - - - - - 1,067Military Housing - - 59 504 - - - 563Municipal - 392 77 225 100 65 - 858Trust Preferreds - 11 - - - - - 11UK Regulated Utility - - 196 129 - - - 325US Agency 786 - - - - - - 786TOTAL December 2010 2,163 1,398 709 1,175 548 463 7,300 13,757% Total 16% 10% 5% 9% 4% 3% 53% 100%TOTAL December 2009 2,464 1,644 1,400 1,161 1,071 1,435 6,213 15,387% Total 16% 11% 9% 8% 7% 9% 40% 100%The main macroeconomic evolutions and assumptionsdeveloped by Dexia’s economists that may impact the recoveryof the portfolio are the following ones:A volatile economic environment despite recentpositive indicatorsAccording to Dexia’s economists, the economic situation inthe US has recently evolved positively. After a difficult secondand third quarter 2010, in the fourth quarter 2010 weobserved an improvement in consumption, investment fromcorporations and GDP. This improvement in GDP is expectedto continue in first quarter 2011 mainly driven by recent taxcuts.As a whole since the beginning of the crisis, GDP hasbeen very volatile and according to Dexia’s economists, thissituation may not stabilize before 2013 and as long as theUS households and the US states continue to re-balance theirfinances. GDP is expected to grow by 2.6% in 2011 versus2.9% in 2010.On the unemployment side, while new jobs are slowlybeing created, employment remains substandard, and theunemployment rate is likely to decline at a slow pace. Finally,due to the expectation of mild to low inflation, Dexia’seconomists expect real term wages to improve in 2011, thussustaining consumption.212 Dexia Annual report 2010