PRESS RELEASE
13/03/2001

Artesia banking corporation joins the Dexia Group

ARTESIA BANKING CORPORATION JOINS THE DEXIA GROUP IN RETAIL FINANCIAL SERVICES, THE NEW COMBINED OPERATION WILL BE TOP 2 BANCASSUREUR IN BELGIUM

Dexia, a European banking group, holding the global leadership in public finance, with assets of over 256 billion and market capitalisation of ¿18 billion, and Arcofin, a Belgian financial services group with consolidated assets of ¿75 billion, have announced today that their respective subsidiaries Artesia Banking Corporation (Artesia BC) and Dexia Bank, the Belgian financial services arm of Dexia, will be merged.

· Creates a leading Belgian bancassurance group.

· Banking and insurance activities of Artesia BC and Dexia Bank to be fully integrated, resulting in yearly pre-tax synergies of 200 million to be realised by 2005

· Artesia BC brings complementary capabilities to the Dexia group, including additional asset management, on-shore private banking in the Benelux and France and financial services to non-profit organisations and corporate clients

· Transaction value of 3.3 billion

· Arcofin, Artesia BC"s major shareholder, will receive 17.9 million shares in Dexia representing an ownership interest of 15.5% of the enlarged group

· Arcofin fully supports the transaction and is committed to supporting Dexia"s growth strategy as a stable long term shareholder in Dexia while creating a stable dividend stream for its co-operative shareholders

· Arcofin will be represented at the Board of Dexia. Dirk Bruneel, the CEO of Artesia BC, will join the Executive Committee of Dexia Group.

· Following two major acquisitions realised by Dexia in 2000 (Financial Security Assurance and Labouchère), the Artesia BC transaction represents the third element of Dexia"s expansion strategy in its other core business: Belgian financial services

Reasons for the Combination

The rationale for a combination of Artesia BC and Dexia is compelling:

· Continues Dexia"s profitable growth strategy

Dexia"s vision of the future is that financial institutions must hold global or pan-European leadership in activities with cross border scope, whilst holding a strong franchise in their original regional base. Dexia has pursued an acquisition programme which complies with both profitable growth and low risk profile objectives.

The merger of Dexia Bank and Artesia BC builds on this strategy, and follows the successful acquisitions of Financial Security Assurance in the United States and Bank Labouchère in the Netherlands during 2000.

· Creates a leading provider of retail financial services in Belgium

The new Dexia Bank will be a leader in Belgian retail financial services. The Bank will rank as a top 2 provider of retail banking services and unit-linked life insurance. The new institution will have a powerful distribution network, bringing together 930 branches from Dexia Bank and 584 from Artesia BC. The network management of the two banks is organised in a comparable way, based on a regional management structure, which will ease the integration process. Resources allocated to alternative distribution channels, including phone and internet banking will also be pooled. Dexia Bank"s strategy will be to increase cross selling to the combined customer base, particularly savings products to the affluent personal banking sector.

· Combines the complementary strengths of the two institutions

Artesia BC is established in on-shore private banking in the Benelux and France. Its insurance arm, DVV, brings a strong position in life insurance, particularly in the high growth "Branch 23" unit linked product (2000 equivalent annual premiums of ¿900 million). Artesia BC brings an additional ¿16.5 billion assets under management and its asset management business has experienced rapid growth and a strong performance track record. Dexia Bank on the other hand brings its unique retail distribution model, based on highly motivated, self employed agents. Combining compatible distribution systems and complementary competencies, the two parties will have a highly visible franchise in the market and an enhanced scale in back office processing.

· Optimises economic capital to maximise risk adjusted returns

Dexia intends to overlay its rigorous capital allocation methodology for the combined portfolio of businesses. The objective is to direct resources towards the areas of business with the highest returns and growth potential whilst minimising the risks. Based on work completed so far, it is expected that, over time, there will be an increase in capital allocated to life insurance, private banking and asset management activities. The relative share of capital allocated to retail banking and non-life insurance is expected to remain broadly constant, while resources tied up in capital markets and corporate and investment banking will be managed downwards progressively. A review will take place at the outset so as to evaluate capital allocation plans in each business segment concerned.

· Enables the realisation of significant synergies

The combination will enable estimated yearly pre-tax synergies of approximately ¿200 million, comprising 170 million in cost savings and 30 million of net revenue enhancements to be fully realised by 2005. The majority of the cost savings will be derived by integrating the retail banking businesses of the two companies. The cost savings represent around 15% of Artesia BC"s 2000 operating costs. Revenue growth is expected in retail, asset management and private banking, to be offset by some customer defections. Total Restructuring charges are expected to amount to 250-300 million.

Mr Rik Branson, Chairman of the Arco-group said: "Arcofin, as a large cooperative group, will become a core shareholder of a more powerful group, which creates a stronger growth potential, a more diversified income stream and a better profitability profile by using economies of scale and synergy potentials."

Mr Pierre Richard, Chairman of the Executive Committee of Dexia said "This combination is consistent with our announced strategy both for growth and for the improvement of our efficiency ratios. This transaction strengthens one of our three business lines - retail financial services in Belgium as well as our pan-European franchise in private banking and asset management.

We will now be in an even stronger position to service our customers, provide more and better opportunities for our employees and create more value for our shareholders".

Integration Plan

The merger integration planning process has been guided by six key principles:

· Value creation is central. The focus is on maximising synergies. The processes of the merged bank will be based on best practices, independent of their origin (Artesia BC, Dexia or external)

· The commercial power of the merged bank will be maximised, using one single umbrella brand, differentiating the offer by client segment and leveraging the power and the motivation of the self-employed agents

· Cost synergies are an important part of the objective, leading to a full merger of the back offices, the support services and information technology

· The risk criteria of the Dexia Group will be applied to the combined institution

· The merger will be executed to limit risks with respect to clients and employees

· The top management is committed to, and will continue to be actively and intensively involved in, the preparation and execution of the merger

Retail Financial Services

The retail financial services network will operate under the Dexia Bank brand.

The unique and highly efficient Dexia Bank franchisee system will be maintained. Artesia BC branches will be integrated within the "star" clusters of Dexia Bank"s local agency co-operative structure. Dexia Bank will consider offering the branch managers of Artesia BC"s retail banking network, Bacob, the opportunity to become self-employed agents, or to remain commercial employees of the bank. Also, the agents of Artesia BC"s insurance business, DVV(LAP), will enhance the retail bancassurance offering.

Insurance

The most efficient integration of Dexia Insurance and DVV(LAP) will be put in place. DVV( LAP) offers a range of life and non-life products through banking, agency and third party distribution channels. DVV(LAP) "s insurance products will find their place in the Dexia offering.

Private Banking and Asset Management

The private banking activities from Artesia BC in Belgium will enhance Dexia Bank"s strategy in this area. The Dexia agents will be incentivised to transfer high net worth clients to the private bank. The private banking offering may operate under a different brand, underneath the overall Dexia Bank umbrella brand.

In asset management, the investment teams of Cordius and Dexiam Belgium will join forces. This is intended to result in better investment performance, a broader range of products, shorter time to market for new products; the integration of middle and back-offices will allow costs reduction.

Corporate Banking

The corporate banking teams will be integrated mainly in terms of services provided to non-profit organisations. Artesia BC"s current strategy of selective focus on family owned clients and non-profit organisations, with a fee based product offering, will be continued. Asset quality and meeting Dexia"s financial targets are of utmost importance.

Financial Markets

In financial markets the respective teams will be integrated in Dexia Financial Markets. One trading platform will be created for all Belgian operations. Financial markets activities will be managed so as to apply the current risk criteria of Dexia, and enhance Dexia"s sales capabilities.

Back Office and Support Functions

All banking and insurance back office and support functions will be merged operationally. The decision on the target platform will be made based on clear evaluations of efficiency and level of service.

PRO-FORMA SHAREHOLDER STRUCTURE OF DEXIA GROUP

Following the successful completion of the transaction, the primary shareholders in the Dexia Group will be:

  • Arcofin : 15.5 %
  • Holding Communal : 15.3 %
  • CDC : 7.1 %
  • SMAP : 5.1 %

Arcofin is fully supportive of Dexia"s strategic plan and will remain a stable core shareholder of the group. Arcofin is committed to its cooperative structure and the payment of a stable dividend stream to its cooperative shareholders.

Financial Effects

The transaction will be accounted for by Dexia using the purchase method. Goodwill is expected to amount to ¿1.1 billion, assuming Artesia BC"s FRBG (¿466 million) and a preliminary estimate of unrealised gains (¿200 million) are included in Artesia BC"s equity base. The transaction is expected to have a neutral impact on cash earnings per share in 2001 and a positive impact in 2002, while reported EPS will be accretive from 2003.

Tier 1 ratio will be brought from 9.3% at December 31.12.00 down to 9.1% post deal.

Implementation of the Transaction

Dexia and Arcofin have entered into an agreement dated 13 March, 2001 which provides for the contribution by Arcofin of all of its shares in Artesia BC (99.53% ownership) in exchange for the issuance of 17,893,463 million Dexia shares. Following completion of the transaction, Dexia will have 115,441,698 ordinary shares outstanding. Artesia BC"s major shareholder, Arcofin, will have a proforma ownership of 15.5% of the enlarged Dexia group.

The completion of the transaction is subject to approval from banking and insurance regulatory authorities in the countries in which Dexia and Artesia BC operate, approval from European competition authorities, final approvals of the agreement regarding representation of Arcofin at the Board of Dexia., and satisfactory completion of confirmatory due-diligence. The transaction is expected to close by the end of June 2001

The boards of directors of Dexia, Arcofin and Artesia BC have unanimously approved the terms of the transaction. Dexia has been advised by Morgan Stanley Dean Witter. Arcofin and Artesia BC have been advised by Schroder Salomon Smith Barney.

COMBINED FINANCIAL INFORMATION

Key financial figures for the enlarged group at and for the year ended 31 December, 2000 are follows:

 
Dexia
ARTESIA BC
Combined(1)
Customer loans
134,370
19,830
154,200
Total assets
257,847
75,478
333,325
Customer deposits
52,323
22,127
74,450
 


Risk weighted assets
74,020
26,698
100,718
Assets under management (Bn)
56.8
16.5
73.3
 


Pre-tax profit
1,678
335
2,013
Net profit (after minorities)
1,001
195
1,196
 


Reported EPS
10.26
NA
10.35
Cash EPS(2)
10.61
NA
10.65
Book value per share
63.2
NA
82.05
 


Tier 1 ratio (%)
9.3%
8.3%
9.1%
Total capital ratio (%)
9.8%
14.2%
11.0%
Employees (FTE)
16,485
7,185
23,670

Note

1. Does not reflect differences, if any, in the accounting policies of Dexia and ARTESIA BC. Includes the effect of the transaction but excludes the effects of synergies

2. Before goodwill amortisation

INFORMATION ABOUT DEXIA

Dexia is a European multi-specialist banking group : it is the global leader in public finance, a European leader in investment management services, and holds a strong franchise in Benelux retail banking. Dexia operates through 3 main subsidiaries: Crédit Local, which specialises in lending to local authorities and public sector project finance, Dexia Bank, a Belgian bank active in retail financial services and to a lesser extent in public finance; and Dexia - Banque Internationale à Luxembourg, principally active in investment management services (asset management, private banking and fund administration). In addition to France, Belgium, the Netherlands and Luxembourg, the company has operations throughout Europe, as well as offices in the Americas, Asia and Australia. As at December 31, 2000, Dexia is rated Aa1 by Moody"s, AA+ by Fitch IBCA and AA by S&P. Dexia is listed on the Brussels (part of the BEL 20), Paris (part of the CAC 40) and Luxembourg Stock Exchanges and is included in the Euronext 100.

INFORMATION ABOUT ARCOFIN

Arcofin CVBA - a financial cooperative holding company - will become a core shareholder of Dali. Arcofin has a total capital and reserves of 1.9 billion at 31.12.2000. This financing capacity is provided by more than 800.000 individual private shareholders. Next to Arcopar CVBA (which owns directly and indirectly 54 %) individual shareholders being Artesia BC"" personnel and customers (19,4 %) and Arcoplus CVBA (which owns directly and indirectly 10 %), the Social Christian Movement (14,8 %) is the stable institutional shareholder within Arcofin CVBA.

INFORMATION ABOUT ARTESIA BC

The Group rests on three pillars, which are established players the Belgian market: merchant bank and portfolio manager Artesia BC Bank, BACOB Bank for the retail business and DVV insurance. Via Banque Artesia Nederland in the Netherlands, Banque Vernes Artesia in France and Artesia Bank Luxembourg in the Grand Duchy of Luxemburg, Artesia BC secures itself a very competitive position in the Benelux and the peripheral countries. Artesia BC is also the reference shareholder of the portfolio management company Cordius Asset Management, of Artesia Securities, a stockbroking company specialising in small & mid caps and index-linked products, and of specialist subsidiary companies dealing in leasing, renting and factoring. The Group has also specialised subsidiaries or representative offices in Austria, Denmark, Switzerland, Ireland and the United States. Artesia BC is rated A2 by Moody"s, A by S&P, A+ by Fitch IBCA. 99.53% of the capital of the public limited company are held by the financial holding company Arcofin.