Annual report 2009 - Dexia.com

2009 and early 2010 highlightsExit of Kommunalkredit AustriaAs part of the recapitalisation plan for Kommunalkredit Austria,announced on 3 November 2008, Dexia sold its 49%stake in Kommunalkredit Austria and purchased the KommunalkreditAustria stake in Dexia Kommunalkredit Bank, thustaking its stake to 100%.This double transaction was finalised on 19 March 2009. Ithad a limited impact on the Dexia accounts but enabled theGroup to reduce its balance sheet by EUR 37.5 billion.Other disinvestmentsThe Dexia subsidiary in India was disposed of, and the Mexicanentity was closed and its assets transferred to the Dexiabranch in New York, where they were placed in run-off. Thenumber of staff in the Dexia subsidiary in Australia and itsbranch in Japan was halved in 2009 and the activities wereplaced in run-off. The public finance commercial activities inSwitzerland were also ceased. The Swedish entity was closedand its assets transferred and placed in run-off at the Dexiahead office in Paris.Reorganisation of trading activitiesThe reorganisation of trading activities commenced in 2008has been effective since the beginning of 2009 and reflectedby:• the cessation of proprietary trading activities;• the reduction by one half of the VaR limits and the centralisationof other trading activities in Brussels; and• the centralisation of the management of the bond portfoliosin run-off in Dublin.Active balance-sheet deleveragingpolicyIn 2009 the Group continued the active balance-sheetdeleveraging policy it began at the end of 2008.The bond portfolio in run-off was reduced by EUR 24 billionin 2009, and amounted to EUR 134 billion as at 31 December2009. Bonds were sold for a total of EUR 16.5 billion in2009 (EUR 15 billion of net sales within the bond portfolio inrun-off and EUR 1.5 billion from ALM portfolios).The Financial Products portfolio was written down by 4% in2009 and amounted to USD 15.5 billion as at 31 December2009.The Group also sold loans for a total amount of EUR 1.7 billionin 2009.On the other hand, the outstanding of undrawn liquidity linesin the United States was reduced by USD 6 billion in 2009.The total losses resulting from bond sales amounted toEUR 136 million and losses associated with loan sales stoodat EUR 39 million in 2009.This policy, combined with the natural amortisation of theportfolios, enabled Dexia to reduce its balance sheet by 11%,or EUR 73 billion in 2009. As at 31 December 2009, Dexia’stotal assets were EUR 578 billion.Improvement to the liquidity profileConsiderable progress was made in 2009 in terms of Groupliquidity consolidation.To recall, in October 2008, the Belgian, French and LuxembourgStates granted Dexia a guarantee on a large proportionof its short and medium-term funding to assist the Group infacing the liquidity crisis confronting it.The remuneration paid to the States for this guarantee was50 basis points for any transaction of less than 12 monthsand 86.5 basis points for any transaction of more than oneyear.By an endorsement signed on 14 October 2009, that guaranteewas extended until 31 October 2010, and the followingchanges were made to the mechanism:• the cap on guaranteed outstandings was lowered fromEUR 150 billion to EUR 100 billion;• the maturity of the new long-term debts was extended tomaximum four years.Moreover, since 16 October 2009, Dexia has waived the benefitof the guarantee for all new contracts with a maturitybelow one month and for all new contracts with no fixedmaturity. The Group could easily replace guaranteed by nonguaranteedfunding.On 30 October 2009, the European Commission provisionallyauthorised the extension of the guarantee in the fundinguntil the end of February 2010. Then, under the agreementwith the European Commission on 5 February 2010, an earlyexit from the guarantee mechanism was announced, thedetails of which are given later in this chapter.In 2009, the Group issued a total of EUR 45.7 billion ofmedium and long-term funds. The proportion of debt notcovered by the State guarantee was 51%, rising constantlyover the year.This good performance, combined with a voluntary deleveragingpolicy, allowed Dexia to sharply reduce its guaranteedoutstandings. Indeed, as at 31 December 2009, the totalamount of short and medium-term guaranteed debt stood atEUR 50.4 billion, down EUR 45.4 billion compared to a peakof EUR 95.8 billion in May 2009. As at 15 March 2010, theguaranteed outstandings amounted to EUR 45,8 billion.More detailed information on the improvement of Dexia’sshort and long-term liquidity profile is provided in the Liquiditypart of the chapter on Risk Management in this annualreport (pages 62-63).Cost reductionIn order to maintain the Group’s profitability refocused onits main franchises, in 2008 Dexia announced a target forthe reduction of its cost base by 15% in three years, with apositive impact of EUR 200 million expected on the accountsfrom 2009 and EUR 600 million at the end of 2011.The 2009 target was exceeded with an effective cost reductionof EUR 350 million over the year as a whole, or an additionalsaving of EUR 150 million.Management reportConsolidatedfinancial statementsAnnual financial statementsAdditional informationAnnual report 2009 Dexia 11