Dexia Holding SA · EURONEXT:DEXB
Dexia Holding SA — Q3 2008 Earnings Presentation
38 slides from Dexia Holding SA's earnings presentation, Nov 14, 2008
Slide 1: Dexia's Transformation Plan and 3Q 08 Results
Dexia’s Transformation Plan and 3Q 08 Results Pierre Mariani, CEO November 14, Paris
Slide 2: Highlights
Highlights • Dexia reported a net loss of EUR 1,544 million in Q3 2008, reflecting a major negative impact from the financial crisis of EUR 2,191 million. • Agreement reached for the sale of FSA Insurance business and containment of FSA Financial products portfolio through a State guarantee mechanis
Slide 3: Agenda
Agenda • Q3 results • FSA disposal • Dexia transformation plan 3
Slide 4: 3Q08 Results
3Q08 Results Reported P&L Dexia total • €1,544M 3Q08 loss driven by: - €2,191M losses directly linked to the financial 3Q 3Q 9M €M Var. Var. crisis, o/w €460M from FSA and €1,731M 2007 2008 2008 from other credit and markets effects Income 1,452 315 -78.3% 3.805 -26.8% • Revenues down 78% YoY owing
Slide 5: 3Q heavily impacted by financial crisis
3Q heavily impacted by financial crisis Reported Net income (€M) 500 439 0 -500 1,000 1,500 -1,544 2,000 3Q07 3Q08 Impact from financial crisis (€M) + Net income, exc. financial crisis (€M) 0 800 -216 655 647 1,000 600 400 2,000 -2,191 200 3,000 0 3Q07 3Q08 3Q07 3Q08 5
Slide 6: €2,191M financial crisis impact on net income
€2,191M financial crisis impact on net income After-tax impact (€M) 3,000 1,731 2,191 2,000 Limited or even positive impact so far 1,000 460 0 FSA Credit & markets Liquidity Total 6
Slide 7: €460M financial crisis impact on FSA
€460M financial crisis impact on FSA After-tax impact (€M) 3,000 Revenues Cost of Risk €M Net income (before tax) (before tax) 1,731 2,191 Own credit risk 178 115 Limited 2,000 or even MTM of insured CDS -276 -178 positive impact so far Non economic FP -144 -93 impairments 1,000 Economic FP -139 -13
Slide 8: €1,731M impact from credit and financial markets crisis
€1,731M impact from credit and financial markets crisis Revenues Cost of Risk €M Net income (before tax) (before tax) After-tax impact (€M) Losses on Dexia’s 3,000 bond investment -538 -292 -741 portfolio Collective provision -5 -325 -320 for credit risks 1,731 2,191 MtM adjustments on Limited -407
Slide 9: All business lines impacted by the financial crisis
All business lines impacted by the financial crisis Net income, excl. financial crisis: €647M Impact from financial crisis: -€2,191M €400M €0M 309 -16 -28 300 -200 -278 200 -400 125 118 -430 -459 100 93 20 18 + -600 0 -800 -36 -981 -100 -1,000 PWB FSA PFS TFM AM IS CA PWB FSA PFS TFM AM IS CA excl.
Slide 10: Public & Wholesale Banking: key financials (excl. FSA)
Public & Wholesale Banking: key financials (excl. FSA) Reported P&L PWB excluding FSA • 3Q08 Net loss resulting from 3Q 3Q 9M €M Var. Var. 2007 2008 2008 - a €430M loss related to the financial crisis - Partly offset by €41M non-recurring items Income 575 485 -15.6% 1.899 11.6% • Financial crisis ef
Slide 11: Public & Wholesale Banking: slower production in Q3, concentrated in historic markets
Public & Wholesale Banking: slower production in Q3, concentrated in historic markets Long term commitments PWB CAGR (07-08) €400B • Outstanding up 18.5% YoY, +18.5% 363 18% 33 9% due to strong originations 306 300 31 79 39% during previous 57 years/quarters 200 129 16% 111 • Originations down 23% d
Slide 12: Personal Financial Services: key financials
Personal Financial Services: key financials • 3Q08 Net loss resulting from: Reported P&L - €278M loss related to the financial crisis Personal Financial Services - €46M restructuring charges: Russia and 3Q 3Q 9M Belgium €M Var. Var. 2007 2008 2008 • Financial crisis effects mainly reflect: Income 69
Slide 13: Personal Financial Services: customer assets down 2% QoQ
Personal Financial Services: customer assets down 2% QoQ mainly due to market effects Customer assets (€B) CAGR • Customer assets down 5% YoY, as (07-08) market effects more than offset positive €150B 137 132 net inflows 129 -5% 15 17 17 11% 100 53 • Customer assets down 2% QoQ (mainly 43 41 -23% du
Slide 14: Treasury & Financial Markets severely hit by the financial crisis
Treasury & Financial Markets severely hit by the financial crisis Reported P&L Treasury & Financial Markets • 3Q08 Net loss resulting from: 3Q 3Q 9M - €981M loss related to the financial crisis, €M Var. Var. 2007 2008 2008 - €20M restructuring charge Income 25 -606 ns -222 ns • €981M financial crisi
Slide 15: Asset Management: good resilience despite market turbulence
Asset Management: good resilience despite market turbulence Reported P&L Asset Management • Volumes under pressure: AUM at €94B, €M 3Q 3Q Var. 9M Var. 2007 2008 2008 down €5.1B QoQ (of which €2.8B due to a negative market effect) Income 68 35 -48.7% 159 -24.7% Expenses -39 -33 -15.6% -107 -5.7% • Ne
Slide 16: Investor Services: resilient net income and strong commercial performance
Investor Services: resilient net income and strong commercial performance Reported P&L Investor Services • Commercial performance: €M 3Q 3Q Var. 9M Var. 2007 2008 2008 - Number of funds under administration up 7% QoQ (+11% YoY) Income 103 101 -1.4% 320 1.9% - Number of shareholder accounts in transf
Slide 17: Q4 reported results will be adversely impacted but solvency will remain strong
Q4 reported results will be adversely impacted but solvency will remain strong • Dislocation of financial markets in the beginning of Q4 • IAS39 amendment to be implemented in Q4 • Sale of FSA Inc. and containment of Financial Products • Increased cost of funding: - Market deteriorations since end o
Slide 18: Solvency Buffer to Face Crisis: Tier 1 ratio at 14.5% at end of Q3
Solvency Buffer to Face Crisis: Tier 1 ratio at 14.5% at end of Q3 Tier 1 ratio and core Tier 1 ratio 15% 14.5% • Tier 1 capital boosted by €6.0B 1.1% capital increase 11.4% 11.2% 1.2% 1.2% • An additional €0.4B Tier 1 capital to 10 9.1% be included at end of 2008 0.9% 13.4% • RWA increased by 6.4%
Slide 19: Agenda
Agenda • Q3 results • FSA disposal • Dexia transformation plan 19
Slide 20: FSA in Perspective
FSA in Perspective Financial Guaranty Business FSA • Cumulative losses of the portfolio at the end of $442bn Q3 2008: $1.5bn • Risk concentrated in the insured $110bn ABS portfolio Insured Portfolio $425bn Financial Products Business • Cumulative losses of the portfolio at the end of Public ABS Fina
Slide 21: Sale of FSA Insurance Business and Containment of Exposure to Financial Products
Sale of FSA Insurance Business and Containment of Exposure to Financial Products • Scope - Sale of 100% of FSA Holdings excluding the Financial Products business • Acquirer - Assured Guaranty, a bond insurer listed on the New York stock exchange (market capitalisation of $737m as of 13-Nov-2008) • P
Slide 22: Transaction Rationale
Transaction Rationale • Dexia divestiture rationale - Exit a no longer core financial guaranty business with significant exposure to the US market - Reduce Dexia’s risk profile - Benefit from transaction upside including cost synergies through ongoing ownership stake in the combined group • Assured
Slide 23: Price / Consideration
Price / Consideration • Consideration: $361m in cash and 44.6m of newly issued Assured Guaranty shares • Key transaction parameters (based on Assured Guaranty closing price of November 13, 2008)1: - Consideration of $722m or 0.375x FSA Holdings’ book value2 excluding Financial Products at Q3 2008 -
Slide 24: Overview of Assured Guaranty
Overview of Assured Guaranty Business Description Insured Portfolio as of Q3 2008 • Assured Guaranty is a leading financial guaranty International company incorporated in Bermuda 20% - Market cap of $737m as of 13-Nov-2008 US Public Finance - AAA (stable) at S&P / Aaa (review for potential 46% downg
Slide 25: Transaction Timeline
Transaction Timeline Date Events Week of Regulatory filings 01-Dec Assured Guaranty shareholder meeting approves transaction Dec-2008 Assured Guaranty to complete capital raise to Spring 2009 Insurance regulatory authorities review transaction Antitrust authorities review transaction Sprin
Slide 26: Containment of Exposure to FSA's Financial Products Activity
Containment of Exposure to FSA’s Financial Products Activity • FSA’s USD 16.5bn Financial Products portfolio, managed by FSA Asset Management (“FSAM”) is excluded from the scope of the transaction - The Financial Products activity will be carved out of the transaction and placed into run-off, under
Slide 27: Impacts of the Transaction on Dexia
Impacts of the Transaction on Dexia Impact on Financial • €1.5bn net loss upon disposal of FSA Holdings (post-tax) Statements In • Impact of approximately 3.5% on Dexia Tier 1 ratio - Includes a total capital loss on disposal of FSA Holdings of €1.5bn Impact on - Includes a negative impact on Tier 1
Slide 28: Agenda
Agenda • Q3 results • FSA disposal • Dexia transformation plan 28
Slide 29: A transformation action plan has been launched
A transformation action plan has been launched 1 Priority given to core client franchises 2 Reduction of Group’s risk profile 3 Adaptation of cost base 4 New team and governance 29
Slide 30: New Dexia organization focused on core client franchises
1 New Dexia organization focused on core client franchises Priority given to core client franchises Public Retail & Commercial Banking Banking • Comprehensive banking • Retail Banking activities focused on local • Corporate Banking public sector clients • Private Banking • Insurance • Asset Manageme
Slide 31: Public Banking: revisited business model
1 Public Banking: revisited business model Priority given to core client franchises Franchise + Funding + Financials • Only countries with • Appropriate stable / • Attractive returns strong commercial long-term domestic • Low risk “local franchise: funding base authority” type - Direct client • Clie
Slide 32: Retail & Commercial Banking: focus on core franchises in the most attractive markets
1 Retail & Commercial Banking: focus on core franchises in the most attractive markets Priority given to core client franchises • Dexia retail & commercial activities: - Good resilience during crisis - Strongly supported overall Group liquidity • Dexia to continue developing attractive retail, priva
Slide 33: Reducing risk profile
2 Reducing risk profile Reduction of Group’s risk profile Bond portfolio Financial Markets Liquidity • €163.5B of which • Significant loss coming • Balance sheet mismatch - CSP: €72.1B from trading activities in with strong reliance on Q3 wholesale funding - Public Bonds: €91.4B • Portfolio manageme
Slide 34: Need to adapt cost base to deteriorated environment
3 Need to adapt cost base to deteriorated environment Adaptation of cost base Market environment and €300M cost savings transformation plan weight on already identified Group’s Income • Increased cost of funding • Target to reduce cost base by 15% - Including state guarantees over the next three yea
Slide 35: New management board appointed
4 New management board appointed New team and governance CEO P. Mariani Public Banking Retail & Commercial Risks Finance & CEO DCL Banking & CEO DBB C. Piret P. Rucheton P. Poupelle S. Decraene 35
Slide 36: New executive committee
4 New executive committee New team and governance CEO Management board P.Mariani Executive committee Operations Group Treasury & IT Audit HR Communications Conformity/Legal Strategy/ & Brand & Tax M&A Public Banking Retail & Commercial Risks Finance & CEO DCL & CEO DBB C. Piret P. Rucheton P. Poupel
Slide 37: Highlights
Highlights • Dexia reported a net loss of EUR 1,544 million in Q3 2008, reflecting a major negative impact from the financial crisis of EUR 2,191 million. • Agreement reached for the sale of FSA Insurance business and containment of FSA Financial products portfolio through a State guarantee mechanis
Slide 38: Appendix: Lexicon
Appendix : Lexicon Abbreviation What it stands for Abbreviation What it stands for ABS Asset-backed securities FSAM FSA Asset Management AOCI Accumulated other comprehensive income GIC Guaranteed investment contract AM Asset Management HRE Hypo Real Estate AUM Assets under management Ice Bks Iceland