growth in outstandings. Sectors report significant commercial
advances in each of the group's lines of business
income up 47.4% at EUR 1,092 million (9 months)
income per share up 9.4%
expected from the integration of Artesia BC
of Dexia Bank Nederland
statement of income (1)
Sept 2001/Sept 2000
income from companies accounted for by the equity method
income before minority interests
It should be noted that Financial Security Assurance in
the United States and Bank Labouchere in the Netherlands
were the main companies newly consolidated by the group
as of July 1, 2000. Artesia Banking Corporation in Belgium
is the main company newly consolidated by the Dexia group
as of January 1, 2001, and Kempen &co as of July 1, 2001.
- Strong growth in outstandings and in business lines' activities
first nine months of the year, in an environment marked by
a downturn in equity markets and significantly slower growth
in the principal developed countries, Dexia's businesses have
pursued their activities in a globally satisfactory way, and
contributed together to the group's good results.
line of business posted significant growth in all respects.
Long-term outstanding commitments increased by 10.3% in
12 months to EUR 141.8 billion (EUR 115.1 billion excluding
Germany), of which EUR 3.9 billion from the consolidation
of Artesia BC.
Customers assets increased by 63.3% in 12 months to EUR
16.0 billion as of September 30, 2001 (of which EUR 4.7
billion from Artesia BC, representing 41.6% of the rise).
Since the beginning of the year, Dexia-Sofaxis has continued
to report strong growth in its insurance brokerage activity
in France. At EUR 203 million, premiums increased by 62.4%
compared with the same period in 2000. In addition, DVV
- Les Assurances Populaires, Artesia's insurance subsidiary,
posted revenues of EUR 71 million in this segment of clientele
in Belgium, bringing premium income to a total of EUR 274
million for the first nine months of 2001.
Finally, FSA reported very strong growth in business in
the first nine months in both the credit enhancement of
municipal bonds and asset-backed securities. Outstanding
municipal debt insured by FSA totaled EUR 101.4 billion
as of September 30, 2001, rising significantly in 12 months
(+20.4%). In this sector, FSA was the leader in the third
quarter with a market share of 30%. Outstanding asset-backed
securities insured by FSA increased even more to EUR 87.2
billion as of September 30, 2001, representing growth of
48.0% in 12 months.
the world leader in this sector following the acquisition
of FSA, Dexia benefits from significant growth opportunities
which exist in the different markets in which the group
operates. Operational bridges and the sharing of expertise
already make it possible to exploit synergies among the
different entities. For example, the combination of Dexia's
and FSA's know-how's have led to the introduction of a single
product offering for American municipalities in the area
of floating rate debt . Twelve transactions have been won
, representing insured outstandings of USD 1.55 billion.
In addition, in the current economic environment, business
has grown significantly as a result of many factors: stronger
demand for financing by local players; the widening of the
credit spreads which improves pricing conditions ; a flight
to quality on the part of bond investors who favor AAA rated
securities , which explains that the percentage of bonds
insured has risen ; and finally significant business in
active debt management by public-sector borrowers in the
main European markets.
Retail Financial Services
line of business also reported a rise in outstandings, owing
partly to the acquisition of Artesia BC and partly to the
development of existing businesses.
- - As
of September 30, 2001, customers assets totaled EUR 76.9
billion, up 29.9% from the end of December 2000, a rise
mainly due to the consolidation of Artesia BC. Disintermediated
products represented 38.5% of total customer deposits and
investments. Excluding the consolidation of Artesia, customer
deposits and investments decreased by 2.2%, reflecting several
contrasting factors: positive new flows in all product categories
(either in or off-balance sheet), except for savings bonds,
which continued to decline (EUR -1.9 million in nine months),
in line with the group's policy to reduce this product's
volumes . In mutual funds, which totaled EUR 12.2 billion
(excluding Artesia) as of September 30, 2001, compared with
EUR 13.1 billion as of December 31, 2000, the drop in stock
market values eroded total assets by EUR 2.1 million, while
in nine months, new money totaled EUR 1.5 billion, reflecting
sustained commercial activity.
Outstanding retail loans totaled EUR 20.6 billion as of
September 30, 2001, representing an increase of 44.8% in
nine months, of which 37.0% was due to the contribution
of Artesia BC, and 7.8% to organic growth over twelve months.
Finally, retail insurance activities continued to report
very strong growth (+141.7%), as new business totaled EUR
1,512 million in the first nine months of 2001. The contribution
of the newly consolidated Artesia BC was EUR 591 million
and that of Dexia's own networks EUR 921 million (+47.4%).
Investment Management Services
sector of activities demonstrated good resistance to an
economic environment characterized by a marked downturn
in the stock markets.
- - Assets
managed for private banking clients together with Labouchere's
share leasing products totaled EUR 40.0 billion as of September
30, 2001, compared with EUR 36.9 billion on December 31,
2000. The impact of changes in consolidation contributed
EUR 7.7 billion to this increase (Artesia BC contributed
EUR 3.6 billion, and Kempen & Co EUR 2.7 billion), whereas
market valuations led to a reduction of EUR 3.8 billion.
Assets under management increased by EUR 19.4 billion in
nine months to EUR 75.3 billion as of September 30, 2001.
Despite lackluster market performance, there was a net increase
in assets under management of EUR 0.5 billion. Market valuations
led to an erosion of EUR 5.2 billion in the value of assets
under management. Finally, the impact of the consolidation
of new companies augmented the volumes of assets under management
in the amount of EUR 16.5 billion with respect to Artesia,
and of EUR 7.6 billion for the other acquisitions.
In investment fund administration, the outstandings of capital
administered suffered from the drop in stock market values,
but this business continued to grow in terms of the volume
of transactions, which are the main profit driver. The number
of transactions conducted as a custodian bank was 20.2%
higher than in the first nine months of 2000 ; the number
of portfolios centrally administered increased by 8.5% over
September 30, 2000; and the number of transfer agent transactions
was up 20.7% in the same period.
- Strong growth in consolidated net income
In a less
and less favorable economic and financial environment, in
particular in the banking and financial sector, since the
beginning of the year, the Dexia group reported 47.4% growth
in net income to EUR 1,092 million as of September 30, 2001,
compared with EUR 741 million the previous year. This rise
reflected both the very good resistance of the group as a
whole, which can be attributed to its well-balanced business
portfolio, and also to the broadening of its scope of consolidation.
The contribution of the results of the companies consolidated
in the last twelve months (mainly Financial Security Assurance,
Bank Labouchere, Artesia Banking Corporation and Kempen &
Co) represented 82% of the increase recorded.
increase in net income per share demonstrates that growth
was once again profitable.
totaled EUR 4,271 million as of September 30, 2001, versus
EUR 2,849 million in September 2000, representing an increase
of EUR 1,422 million, almost 50%. This rise was due to changes
in consolidation in the amount of EUR 1,353 million. The components
of revenue in the first nine months of 2001 reflected trends
corresponding to the group's strategy. Net interest and related
income increased by 36.1% and accounted for 63.3% of the total
revenues. Net commissions and other revenues increased by
38.7% to EUR 1,047 million; they represented 24.5% of the
revenues. Finally income from insurance activities reported
very strong growth (EUR +413 million), particularly reflecting
the consolidation of the activities of FSA and Artesia in
this field, but also sustained development in Dexia's insurance
activities existing prior to these acquisitions, which alone
increased by 21.3%. Income from insurance activities accounted
for 12.2% of total net banking income reported by the group.
At the end of September 2001, operating expenses stood at
EUR 2,440 million, up EUR 943 million from the first nine
months of 2000. This increase was due to changes in consolidation
in the amount of EUR 877 million.
The cost/income ratio, stood at 57.1% (52.5% in the first
nine months of 2000 and 55.4% for the year 2000). It continues
to be one of the best in the banking sector in spite of the
increase, which was among other due to changes in consolidation
and, in particular, to the consolidation of Artesia BC. To
realign the trend with the group's medium-term objective (reduction
of this ratio to less than 50% in 2004), it has been decided
to put in place a strict cost-control plan for the whole group,
and in the each of the different business lines, and more
especially in those which are currently affected by the unfavorable
stock market environment. Accordingly, the group expects that
its cost base in 2002 will not exceed that of 2001, at constant
Write-downs and allowances and provisions for loan losses
and off-balance sheet items (excluding goodwill amortization)
totaled EUR 147 million as of September 30, 2001, compared
with EUR 121 million a year earlier. This net increase of
EUR 26 million was the result of several trends.
- - Capital
gains from the portfolio of investments were EUR 29 million
more than as of September 30, 2000, mainly because of the
sale in 2001 of the equity interest in Banco de Crédito
Local in Spain and of the reduction to 25% of the group's
equity interest in Fortior.
The net bad debt charge increased by EUR 91 million compared
with September 30, 2000, owing partly to changes in the
scope of consolidation (in the amount of EUR 68 million)
and partly to an increase in provisions. The latter rise
reflected, among other trends, an exceptionally low level
of provisions in the first half of 2000. Despite this increase,
the group's annualized net bad debt charge remained at a
very low level of 0.105% of outstanding client commitments
on the balance sheet and off-balance sheet, as compared
with the banking sector average.
The net allocation to the general banking risks reserve
was EUR 44 million. It had been EUR 80 million in the first
nine months of the previous year, reflecting increased non-recurring
income realized in 2000.
income tax, which also included deferred taxes, stood at EUR
511 million, up 16.7% from the same period in 2000, with the
rise in income attenuated by the decline in the effective
rate of taxation for the group.
from companies accounted for by the equity method (net of
amortization of goodwill) totaled EUR 33 million, compared
with EUR 26 million a year earlier for an increase of 25.0%.
first nine months of 2001, net income before minority interests
stood at EUR 1,163 million, up 48.7% from the same period
in 2000. Net income before minority interests reflected balanced
contributions from the group's different businesses. Public
and project finance accounted for 46.2%; retail financial
services for 16.6%; private banking and investment management
services for 18.4%; and capital markets for 18.9%.
was EUR 1,092 million, compared with EUR 741 million in the
first nine months of 2000, representing an excellent increase
of 47.4% from one period to the other.
per share totaled EUR 0.96, compared with EUR 0.88, up 9.4%.
This growth is particularly satisfying, for it enables Dexia
to rank among the European banks reporting the best performances
and to be in line in terms of the group's objective to double
net income per share by 2005, as announced last year.
- Integration of Artesia Banking Corporation
of Artesia Banking Corporation marks a major stage in the
Dexia group's growth, and its integration is now Dexia's most
Bank and Artesia chose to integrate as rapidly as possible,
in order to set up the most efficient commercial organization
while exploiting major synergies. These were the subject of
a highly detailed evaluation which started as soon as the
transaction was effectively concluded on July 3, 2001.
basis of the reports submitted to the integration committee
and approved by the group's Executive Board, the total amount
of synergies expected from the integration is between EUR
220 million and EUR 255 million per year (before taxes) achievable
in full in 2005. Of this total, between EUR 40 million and
EUR 55 million represent net additional revenues, i.e. after
accounting for improvements but also losses of revenues linked
to cutbacks in certain activities. This plan is higher than
the estimate made at the beginning of the year and announced
in March 2001. Synergies involving revenues will mainly come
from the harmonization of product lines, existing complementarity
between the asset management and private banking activities
of the two entities, and the generalization of a multi-distribution
approach (adaptation of distribution channels to targeted
cost side, savings of EUR 180 million and EUR 200 million
are forecast for 2005 on a full year basis. They had initially
been estimated at EUR 170 million. They represent more than
10% of the current combined cost base of Dexia Bank and Artesia
BC. Synergies affecting costs will involve three main focuses:
the re-sizing of the retail banking network in Belgium and
the corresponding reduction in real estate occupied; the integration
of the two banks' teams and IT platforms; and finally, the
melding of back offices and general services.
for achieving these synergies calls for a regular increase
so that a recurring level is reached in 2005. With respect
to cost synergies, approximately 14% of the expected annual
net savings should be achieved in 2002, approximately 27%
in 2003, and approximately 47% in 2004. For synergies involving
revenues, the calendar calls for a first year with a net reduction
in revenues representing approximately 25% of the annual envelope
of additional net revenues expected on a full year basis.
At the end of 2003, 15% of the annual synergies programmed
should be achieved, and this percentage will then rise to
50% in 2004 and 100% at the end of 2005.
stages in the integration of Artesia Banking Corporation,
in addition to negotiations with the staff representatives
which began last October and are currently under way, involve
the legal merger (scheduled for April 2002) and the effective
integration of the networks of Artesia BC and Dexia Bank in
- Merger of Kempen & Co and Bank Labouchere. Creation of Dexia
was announced in September 2001 following the successful takeover
bid for Kempen & Co, and it is currently being carried out.
The two banks have already been placed under the authority
of a single management team and they will be merged under
the name Dexia Bank Nederland at the beginning of next year.
will allow Dexia to occupy a position of first importance
in the Netherlands in asset management, private banking, financial
services for high net worth individuals, stock market brokerage
for individual and institutional clients, and finally advisory
services and financial engineering. This entity already represents
EUR 450 million in revenues, and EUR 200 million in operating
income before allowances.
these activities, the teams of Kempen & Co and Bank Labouchere
already have very good reputation, which will be further enhanced
under the Dexia banner.
of the two entities will make it possible to exploit major
synergies involving costs and revenues estimated overall at
EUR 40 million per year (EUR 25 million in costs and EUR 15
million in revenues) which will be achieved by 2003.
this merger, under the authority of the Chief Executive Officer
of Dexia Bank Nederland, there will be a central coordination
of all the group's activities in Europe in the sectors of
advisory services, equity brokerage and equity derivatives
under the name Dexia Securities.
activities are currently conducted by different entities in
the group in their respective markets (Dexia Securities France
- formerly ODB- , Kempen & Co and Bank Labouchere in the Netherlands,
Artesia Securities and Dexia Bank in Belgium, Dexia BIL in
Luxembourg). These entities employ some 300 professionals
and report cumulated revenues of approximately EUR 170 million.
and integration of all these resources will contribute to
the creation of a pole of competence which will improve the
level of service offered existing clients and strengthen the
strategic position of the group's Investment Management Services
business in the Euronext zone.