Growth in business in 2000 in each of the Dexia group

The business review for the fiscal year 2000 was presented to Dexia"s Board of Directors at their meeting on Tuesday, February 6, 2001. Business was marked by very satisfactory growth in line with the trends observed in the first half of the year in each of the Dexia group"s sectors of activity.

1 - Public and project finance

Outstanding long-term commitments (balance sheet and off-balance sheet) totaled EUR 150.6 billion as of December 31, 2000 (including 100% of the outstanding commitments of affiliates accounted for under the equity method), representing an increase of 5.4% over the end of 1999 (and of 6.5% excluding the outstanding commitments of the German subsidiary). This increase was only slightly due to changes in consolidation (full consolidation since January 1, 2000, of the outstanding commitments of the Slovak subsidiary Prvá Kommunálna Banka).

Overall, outstanding commitments grew in the business"s two main markets. In the public sector, outstanding commitments increased by 5.3% to EUR 98.2 billion (excluding Germany). In structured financing, they grew 14.5% to EUR 11.2 billion.

Outstanding commitments increased in all regional markets, although in unequal proportions. In France, where the trend in the reduction of local government debt continues, outstanding long-term commitments nevertheless rose 0.5% to EUR 55.2 billion. Likewise in Belgium, outstanding commitments increased by 1.1% to EUR 23.8 billion. In Italy, sustained marketing efforts in an environment that is also very competitive made it possible to report a slight rise in outstanding commitments (+ 0.1%) in spite of a significant rise in early repayment. In Germany, too, outstanding commitments rose only 0.2%. Elsewhere, growth was satisfactory, as in the United Kingdom (+ 4.8%), or very strong, as in the United States (+ 48%), where outstanding commitments totaled EUR 11.3 billion (excluding credit enhancement activities).

Beyond long-term financing, deposits and investment products of public finance clients rose significantly, up 8.2%, to EUR 12 billion at the end of 2000, with a notable increase in France (+ 41% to EUR 1.7 billion).

In addition, the efforts undertaken to diversify the products and services offered to the local public sector produced satisfactory results, in particular with regard to the brokerage business of the group"s insurance subsidiary Sofaxis, whose premium income increased by 6.5% to EUR 145.1 million.

At FSA, which has been consolidated since July 1, 2000, the total amount of American local government bonds insured at the end of 2000 was up 9.5% from the previous year to EUR 153.7 billion. Since Dexia"s acquisition of FSA in March 2000, more than a dozen joint operations have been conducted in municipal bond credit enhancement, illustrating the strong potential for marketing synergies now existing in the group.

2 - Retail banking

Dexia reported increased business volume in each of its sectors of activity

Customer deposits and investment products

As of December 31, 2000, total customer savings (deposits, savings bonds, mutual funds, life insurance policies and Dexia bond issues, excluding securities accounts) totaled EUR 59.0 billion, up 3.2% from December 31, 1999. The breakdown of these investments confirms the trend towards disintermediation encouraged by the group. Deposits and savings bonds were down 3.1% from the end of 1999 to EUR 38.0 billion as of December 31, 2000. During the same period, investment in mutual funds rose 11.4% to EUR 13.0 billion as of December 31, 2000. In addition, Dexia bond issues subscribed by retail banking customers totaled EUR 5.6 billion, up 22.5%. Finally, life insurance policies increased by 37.1% to EUR 2.4 billion. Therefore, as of December 31, 2000, customer savings other than deposits and savings bonds represented 35.6% of total retail customer investments in the group, as compared with 24.9% at the end of 1998 and 31.5% at the end of 1999.

Lending activities

As of December 31, 2000, outstanding retail loans in the group totaled EUR 14.2 billion, up 10.9% from the end of 1999. Of this total, mortgage loans rose dynamically during the year in a lackluster market; up 8.7%, they stood at EUR 7.6 billion at the end of 2000. Outstanding consumer loans and overdrafts remained stable at EUR 1.9 billion, and outstanding loans to small businesses and the self-employed grew 20.4% from the end of 1999 to EUR 4.7 billion as of December 31, 2000.


Taking all types of insurance products into account (including the life insurance products mentioned above), premium income from the group"s retail customers totaled EUR 987 million, representing an increase of 21.7% over 1999. This increase was the result of very different trends according to the type of product and particularly reflected the business"s new organization, now centered around Dexia Insurance.

In non-life insurance, premium income rose slightly (+ 2.4%) to EUR 104 million, versus EUR 101 million a year earlier. As Dexia Insurance pursued its efforts to externalize risks, the distribution of third-party products expanded to the detriment of direct subscriptions. As of December 31, 2000, premium income corresponding to third-party insurance products represented 40.5% of total premium income in the non-life sector (compared with 36.2% a year earlier).

In life insurance, which represented 89.5% of new bancassurance business, premium income totaled EUR 883 million as of December 31, 2000, up 24.4% from 1999.

Premium income was particularly significant as far as Branch 23 products (unit contracts) were concerned. The new insurance policy, Dexia Life Fund, was a commercial success and now accounts for almost 50% of the group"s total life insurance products.

3 - Financial management (private banking, asset management, investment fund administration)

The Dexia group continues to report excellent performances, in spite of the volatile stock market and monetary environment and the decrease in the value of financial assets which characterized the period. Note should be made of the fact that the group acquired several companies in 2000. The main acquisition was that of Banque Labouchere in the Netherlands (consolidated as of the second half of 2000), which reported remarkable commercial results, mentioned when appropriate in the following breakdown.

· In private banking, deposits managed for private banking clients totaled EUR 29.2 billion, up 4.4% from the end of 1999 in spite of the negative impact of the deterioration of the financial markets. This amount excludes deposits managed by Banque Labouchere for its private banking clients, which totaled EUR 1.6 billion.

· In asset management, as of December 31, 2000, assets under management totaled EUR 62.1 billion, representing an increase of 34.7% in a year, partly owing to the consolidation of the assets managed by Banque Labouchere (share leasing in the amount of EUR 6.2 billion and discretionary management for EUR 1.4 billion at the end of 2000), but also to savings deposits and new clients. After the elimination of assets counted twice (managed accounts may include group mutual funds), total assets under management stood at EUR 54.4 billion, up 33.3% in a year. Asset management provides a concrete example of the synergies which may exist among the Dexia group"s different business lines - approximately 6% of the sums invested in managed mutual funds are contributed by the public finance business, 54% by retail banking customers and 40% by private banking activities.

· In investment fund administration, growth was achieved in a generally depressed market environment marked by the stagnation or decline of the world"s main stock markets, especially in the last quarter. In custody services, assets totaled EUR 98 billion at the end of December 2000, representing an increase of 20.6% over 1999. Central administration funds increased by 19% over the course of the year to EUR 103.5 billion. Transfer agent services reported 40% growth during the year, with assets at the end of 2000 totaling EUR 185.8 billion. In this sector, Dexia remains the leader in the Luxembourg market, which is the largest in Europe for investment fund administration, with a market share of 32% in the number of funds managed for third-parties, and of 40% in volume. In this line, in two years, Dexia has more than doubled the funds it manages by expanding its range of services, pursuing its international development and profiting from the very strong growth in these markets.

4 - Group funding, investment portfolio and insurance of ABSs

Activities related to the group"s refinancing and balance sheet management, which are coordinated by Dexia Capital Markets, were bolstered by the addition of a new focus in 2000, the credit enhancement of asset-backed securities (ABSs) as a result of the acquisition of FSA.

Significant growth was reported in business volume in this sector as well. In 2000, long-term funding totaled EUR 21.8 billion, including EUR 8.5 billion in obligations financières issued by Dexia Municipal Agency. In addition, the group"s investment portfolio, mainly composed of public or private debt securities, amounted to EUR 35 billion at the end of 2000, as compared with EUR 30 billion in 1999. Finally, FSA"s credit enhancement of asset-backed securities grew significantly in 2000. A total of EUR 88.5 billion (representing the principal and interest of the insured issues) was reported at the end of 2000, as compared with EUR 69.7 billion in 1999, for an increase of 27%.