Dexia presents its strategic 5-year plan for 2002-2006
21/06/2002

Dexia presents its strategic 5-year plan for 2002-2006

On 21st June, Mr Pierre RICHARD, CEO, Chairman of the Management Board, invited in Paris representatives of the financial community to the group's annual investor day to present the group's strategic plan.

Two years after having presented its ambitious targets for profitable growth to the market, Dexia is in a position today to confirm them for the five years to come, despite a radically changed environment and the broadening of the group's operational base, achieved in each of its business lines over the last two years. This has simultaneously brought to the group an increase in income potential, created prospects of productivity gains, whilst keeping the cost of risks at a very low level.

The hypotheses retained in drawing up the plan have been particularly conservative, so that it constitutes a working plan a minima for the operational teams. The accent has been placed on a search for productivity gains, which mark a break from past evolution as regards general costs. Finally, the capacity of the group to generate more capital than necessary to ensure organic growth has been taken into account in order to optimise the financial performance.

So the Dexia Group sets its target for its cost/income ratio at around 50%, and its target for return on equity at 18 - 20% at the horizon of 2006, and it confirms that the rate of earnings per share growth can be maintained at an average of 12% per annum between 1999 and 2006.

On presenting the strategic plan, Mr Pierre RICHARD stated:

"Whilst our plan's hypotheses are deliberately conservative, and despite an ever more uncertain environment, Dexia is in a position to pursue its profitable growth strategy, and in particular to ensure a significant increase in its earnings per share, outside any new acquisition. The group can therefore continue to pay a high and growing dividend.

This outlook of continual growth rests on the specificities of our three core businesses, in which Dexia benefits from a long-established franchise.

In our advance towards this objective, 2002 certainly constitutes a more difficult period, since it is a post-acquisition year, and because the period is marked by an unfavourable stock market climate. During this period of integration, Dexia will make a point to finding the best balance between the implementation of an effective organisation and the maximum mobilisation of its commercial teams.

Dexia's capacity to generate equity enables it to implement a policy of share buy backs and, as opportunities arise, to proceed with acquisitions if they can further strengthen its business lines and increase their profitability.

The strategic plan for 2002-2006 therefore confirms that Dexia will continue its march towards the targets set for the entire group and for each of its business lines".

I- The main strategies reaffirmed

  • Dexia wishes to hold, wherever possible, a leading position.
  • Dexia wants to keep a balanced distribution in its portfolio of activities, both geographically and operationally, which will guarantee a good balance of income and its continued growth, even in the case of temporary down trends. For this purpose, being a European Bank rather than a national one is one of the major assets of the Dexia Group.
  • Dexia has a very low risk profile.
  • Dexia carries out activities with a long-term horizon.
  • Dexia intends to continue its profitable growth: all growth initiatives must create value.

II- Undertakings have been met

Since the creation of the group in 1996:

  • Earnings per share have grown continuously and very significantly over 13 years, and the dividend paid has also been showing constant growth.
  • The operational basis of the group has been extended, especially in 2000 and 2001.
  • The three strategic business lines have been developed, very significantly, both by organic growth and acquisitions.
    • Public Finance has tripled its income in 4 years.
    • Investment Management Services have multiplied their earnings five times.
    • Retail Financial Services have grown less quickly, hence the strategic importance of the acquisition of Artesia for the future of this business line.

The objectives fixed in 1996 for 2001 have been achieved in full:

    • Dexia now belongs to the league of major players in European banking;
    • Dexia operates as a group with a well-balanced portfolio of activities;
    • Dexia is the world leader in Public/Project Finance and is in a leading position in each of its businesses;
    • Dexia has created value for its shareholders.

The operating base built over the last few years is now an excellent springboard for Dexia's growth in future years.

III - Ambitions are both simple and bold

The growth in earnings per share is at the heart of the 5-year strategic plan.

The group intends:

1. to cultivate its areas of excellence, in its markets which are very deep,
2. to focus on certain types of services, clients and geographical markets,
3. to improve its productivity,
4. to maintain its low risk profile.

IV- A dynamic development in the three strategic business lines

1- Public/Project Finance and Credit Enhancement

The medium-term strategic objective is definitively to consolidate the worldwide leadership of Dexia in this field, with priority being placed on the two major regions of Europe and North America, and with a suitable strategy in each of these two regions: in Europe, the unification of the European market will allow Dexia to benefit from economies of scale, as the group is alone in being able to claim a role as a pan-European actor. In the United States, the aim is to benefit from the structural growth capacity of FSA, and to continue developing synergies between Dexia Crédit Local and FSA.

"For the Dexia Group as a whole, public sector clients are a mine which concerns all three of our business lines. We are just beginning to exploit them, in the field of investment management or personal insurance in particular," Mr Pierre RICHARD declared.

A conservative 5-year plan has been established, based upon low revenue growth of 4% per annum. The increase expected in net income is 7% per annum (8% at constant rates of exchange).

This business line will continue performing brilliantly, both in terms of its cost/income ratio (36% in 2006), and return on economic equity (21% in 2006).

2- Retail Financial Services

The group will focus on the integration of Artesia and Dexia Bank in Belgium, and drive out annual synergies amounting to € 255 Million as from 2005, as announced in 2001.

The central objective is to increase the share of this business in total group profits, from 15% in 2001 to 23% in 2006. This merger will make Dexia Bank one of the retail banks in Belgium, with 25% market share.

The net income in this business is expected to increase by 5% per annum, owing in particular to the effect of synergies with Artesia. Dexia thus aims at reducing the cost/income ratio to 65% by 2006 and to increase the return on economic equity to 25%.

3- Investment Management Services

This strategic business for the group aims to remain so, even if it suffers from the current poor stock market environment.

Dexia aims at becoming a true European leader in certain specialities businesses such as private banking and fund administration where Dexia holds a significant position and has been experiencing a very strong growth.

The 5-year plan provides for a double-digit growth in net income (+14% per annum), based on a cautious average revenue growth prospect (+6% per annum), a reduction in the cost/income ratio by 10 points (53% in 2006) and a return on economic equity of 58%.

Mr Pierre RICHARD'S comments and the documents presenting the strategic plan can be consulted at www.dexia.com.