General Meeting of Shareholders. May 14th, 2014

Transcription

1 General Meeting of Shareholders May 14th, 2014

2 Disclaimer This presentation and the information contained therein are provided for informational purposes only. No representation or warranty is made as to the adequacy, accuracy, reliability or completeness of such information. This presentation does not constitute - and shall not be interpreted as constituting - a public offer of securities issued by Dexia or by any other entity of Dexia group. Certain figures in this presentation have not been audited. In addition, this presentation contains projections and financial estimates which are based on hypotheses, objectives and expectations linked to future events and performances. No guarantee can be given as to the realization of these forecasts which are subject to uncertainties relating to Dexia, its subsidiaries and their assets (such as, inter alia, changes within the industry and in the general economic climate, the development of the financial markets, changes in the policies of central banks and/or governments, or of regulations at global, regional or national level). The actual results could significantly differ from the projected results. Unless required by law, Dexia shall not be obliged to publish any modifications or updates of these forecasts. The information included in this presentation, insofar as it relates to parties other than Dexia, or is extracted from external sources, has not been subject to independent verification. Neither Dexia, nor any of its affiliated companies, or their representatives can be held liable for any negligence or any damages which may result from the use of this presentation or anything related to this presentation. 2

3 Shareholders Meeting Agenda I. Evolution of the Dexia Group against the background of a still tepid economic recovery II. Implementation of the orderly resolution plan III. Annual results 2013 and Q IV. Activity of the board of directors and dedicated committees V. Compensation policy 2013 VI. Company project: what future profile for the Group? 3

4 Shareholders Meeting Agenda I. Evolution of the Dexia Group against the background of a still tepid economic recovery II. Implementation of the orderly resolution plan III. Annual results 2013 and Q IV. Activity of the board of directors and dedicated committees V. Compensation policy 2013 VI. Company project: what future profile for the Group? 4

5 Evolution of the Dexia Group in 2013 Finalisation of all the entity sales as per the orderly resolution plan "DSA" Dexia Belgium "BIL" Dexia Banque Internationale à Luxembourg Luxembourg "DBB" Dexia Banque Belgique Belgium DenizBank Turkey "DTS" Associated Dexia Technology Services Luxembourg "DAM" Dexia Asset Management Luxembourg Luxembourg Dexia Asset Management Belgium Belgium Dexia Asset Management France France Ausbil Dexia Limited Australia Branches - Switzerland - Netherlands - Italy - Spain - UK - German Rep. offices - Middle East Bahrain) - MENA (Dubai) Other entities - Parfipar - Dexia Participation Belgique - Dexia Participation Luxembourg 100% except * 40% Other entities - Dexia Nederland (Netherlands) - Dexiarail (France) - DCL Investissements (France) - Popular Banca Privada* (Spain) Entities closed or sold Sofaxis France "DKB" Dexia Kommunalkredit Bank Austria "DMA" Dexia Municipal Agency France 100% French subsidiaries - Dexia CLF Banque - Public Location Longue Durée - Dexia Bail - Exterimmo - Domiserve - Dexia Flobail US subsidiaries (resolution TBC) - Dexia Real Estate Capital Markets - Artesia Mortgage CMBS - Dexia CAD Funding LLC - Dexia Delaware "DCL" Dexia Crédit Local France 100% "DKD" Dexia Kommunalbank Deutschland 70% 65% 100% Germany "Crediop" Dexia Crediop & Dexia Crediop Ireland Italy Dexia Israel Bank Ltd Israel Dexia Holdings US 100% US Branches - Dexia FP Holdings - Dexia Financial Products Services FSA Asset Management - FSA Capital Management Services 79% "Sabadell" Dexia Sabadell & Portuguese branch Spain 100% "DMS" Dexia Management Services 100% UK Other internal subsidiaries. -Dexia Credito Local Mexico (Mexico) - Dexia LdG Banque (Lux) 100% SPV - Sumitomo Mitsui SPV - Wise PLC 100% French subs. - Dexia CLF Régions-Bail - CLF Immobilier DCL, Dublin branch Ireland DCL, New York branch US 5

6 Evolution of the Dexia Group in 2013 Finalisation of all the entity sales as per the orderly resolution plan Finalisation of the entity sales as per the orderly resolution plan A rather unfavourable context for asset sellers Entity sales to be handled simultaneously 6 in in 2013 Early 2014: finalisation of the sales as requested by the European Commission Dexia has gone beyond the initial plan by selling ADTS, Domiserve and Exterimmo 6

7 Evolution of the Dexia Group in 2013 Landing on the target perimeter of the wind down management Balance sheet reduction of EUR 134 billion in 2013 Portfolio 85% investment grade (EUR 174 billion, MCRE*, end of 2013) A 28% AA 22% BBB 21% AAA 14% NIG (Non Investment Grade) 12% D & unrated 2% End 2012 End 2013 Our task To manage our balance sheet wind down so as to protect the interests of the shareholders and guarantors, the States * The maximum credit risk exposure (MCRE) as at 31 December 2013 represents the net book value of the exposure, this being the nominal amount after deduction of specific impairments and the amount of available reserves, taking account of accrued interest and the impact of booking the hedge at fair value. 7

8 Evolution of the Dexia Group in 2013 On the assets side: a frozen residual portfolio, wind down over a period matching the maturity of the assets No sale possible within the portfolio Margins relatively low on assets in the portfolio Assets hedged against interest rate risk amongst others Under current market conditions, any asset sale would generate losses Only one way: to manage the assets through maturity Limited revenue generation Very sharp reduction of production No possibilities to offset any increase in funding cost or other shock which might, for instance, adversely affect the cost of risk 8

9 Macro-economic situation 2013 Growth has strengthened Sources : FMI 9

10 Evolution of the Dexia Group in 2013 Sovereign debt crisis averted Sovereign risk premiums (CDS 5 yearns, basis points) Economic turnaround for sovereigns, ratings up 10

11 Evolution of the Dexia Group in 2013 On the liabilities side: favourable context for Dexia to return to the markets Improvement of the funding structure Implementation of the guaranteed funding programme Funding more diversified and longer term Development of access to the repo market Reduction of central bank funding 11

12 Shareholders' Meeting Agenda I. Evolution of the Dexia Group against the background of a still tepid economic recovery II. Implementation of the orderly resolution plan III. Annual results 2013 and Q IV. Activity of the board of directors and dedicated committees V. Compensation policy VI. Company project: what future profile for the Group? 12

13 Autres Other actifs assets Implementation of the orderly resolution plan A very long resolution period, combined with limited flexiblity on assets (EUR billion) Cash collatéral collateral Prêts Loans et and obligations bonds Balance sheet as at 31 December 2013 Projection to Autres Other passifs liabilities Eurosystème Eurosystem Financements Government guaranteed garantis par les funding États Financements Non-guaranteed sécurisés secured non garantis funding Dépôts Deposits et financements and non-guaranteed sécurisés unsecured non funding garantis Assets Actif Liabilities Passif Limited flexibility on assets, inherited from Dexia s former activities Natural amortisation of assets of EUR 10 billion per annum over the period Margin of 40 bp, with interest rate risk hedged by derivatives No accelerated deleveraging but targeted disposals of assets Amount of cash collateral dependent on the level of interest rates, a factor beyond the Group s control Dynamic funding strategy, aiming to reduce the weight of Dexia on State guarantors 13

14 Implementation of the orderly resolution plan Significant evolution of the funding structure until 2017 (EUR billion) ELA Eurosystem Own use Government guaranteed funding Non-guaranteed secured funding Deposits and non-guaranteed unsecured funding ~94 Different funding sources reaching maturity in 2014 and 2015, resulting in a sharp decrease in guaranteed amounts to EUR 45 billion at the beginning of Guaranteed debt placed with Belfius to be repaid in Significant amounts of guaranteed debt reaching maturity Priority repayment of central bank funding Guaranteed oustanding in the range EUR 45 billion to EUR 50 billion in the coming years 14

15 Implementation of the orderly resolution plan Expected return to break-even in 2020 (EUR million) Cost of risk and other items Operational expenses Net banking income (margin on assets cost of funding) Net result group share Reduction of funding cost enabled by gradual replacement of costly funding sources Portfolio margins covering cost of funding from 2014 Limited cost of risk in absence of default of a major counterpart; concentration risk of the portfolio Potential significant negative impact in relation to volatility of market parameters (not corresponding to any cash loss, by increasing the volatility of quarterly results) Return to break-even expected in

16 Implementation of the orderly resolution plan Preserving the interests of the State guarantors over the long term 22,4 % 21,4 % 16,5 % 16,2 % 8,0 % Common Equity Tier 1 (excluding preference shares) Preference shares (EUR 5.5 bn) Total Capital Ratio Common Equity Tier 1 Ratio Total Capital Ratio (Basel III pro forma) Total Com Equity Tier 1 Ratio (Basel III pro forma) Application of the Basel III regulatory framework (CRD IV directive) in 2014, resulting in a fall of solvency ratios Progressive deduction of 20% per annum of non-sovereign AFS reserve From 2018, non-recognition of preference shares in Tier 1 Common Equity Mechanism for conversion of those shares into Tier 1 Core Capital guaranteeing compliance with regulatory requirements; based on current financial projections, compliance with regulatory minima without making use of the conversion mechanism Solvency primarily impacted by the evolution of the regulatory framework and the level of AFS reserve; limited impact of financial results on the resolution period 16

17 Implementation of the orderly resolution plan Group sensitivity to several external factors Financial projections sensitive to an evolution of external factors or the non-realisation of assumptions Sensitivity elements Impact Interest rates lower than assumed Higher level of cash collateral, resulting in additional funding needs; impact on result Capacity to absorb guaranteed or secured funding issued by the Group Recourse to other more costly funding sources (including ELA); impact on result Deterioration of the credit environment Increase of AFS reserve linked to the widening of credit spreads, impacting Group solvency Impact on cost of risk 17

18 Shareholders' Meeting Agenda I. Evolution of the Dexia Group against the background of a still tepid economic recovery II. Implementation of the orderly resolution plan III. Annual results 2013 and Q IV. Activity of the board of directors and dedicated committees V. Compensation policy VI. Company project: what futute profile for the Group? 18

19 Annual results 2013 and Q Annual results 2013 income statement Net result Group share Recurring elements Accounting volatility elements Non-recurring elements EUR -1,083 million EUR -669 million EUR -393 million EUR -21 million Income slightly higher than assumed in the orderly resolution plan, despite the impact of accounting volatility elements; significant decrease in funding cost 19

20 Annual results 2013 and Q Annual results 2013 income statement Recurring elements Considerable decrease of funding cost over the year Cost of risk up in Q4 in view of the provisions on Detroit and Porto Rico but remaining limited to 9 bp over the year (EUR million) Significant weighting of accounting volatility elements Implementation of IFRS 13 and change of method for valuing collateralised derivatives: impact of EUR -393 million in 2013 Impact not corresponding to a cash loss and gradually offset over the life of the underlying assets Q Q Q Q Income from portfolios Other income Funding cost Net banking income Non-recurring elements Impact of EUR -21 billion in 2013 associated with entity disposals as well as a general provision for litigations 20

21 Annual results 2013 and Q Annual results 2013 balance sheet and solvency Balance sheet total at EUR 223 billion at the end of 2013, down EUR -134 billion over the year Decrease of EUR 84 billion associated with the sale of Société de Financement Local (SFIL) in January 2013 Natural asset amortisation, combined with targeted disposals, of almost EUR 20 billion Favourable interest rate evolution, resulting in a reduction of cash collateral by EUR 10 billion (EUR billion) Disposal of entities Asset amortisation and disposals Decrease in cash collateral Change and interest rates effects Balance sheet as at 31/12/2012 Balance sheet as at 31/12/2013 Strengthening of solvency over the year Decrease of weighted risks by EUR -8 billion in 2013, principally due to the sale of SFIL Increase of solvency ratios, despite the loss posted over the year: CAD ratio at 22.4% and Tier 1 ratio at 21.4% at the end of 2013 (Basel II) 21

22 Annual results 2013 and Q Q1 results 2014 income statement Net result Group share Recurring elements Accounting volatility elements Non-recurring elements EUR -184 million EUR -88 million EUR -148 million EUR 53 million Improved result from recurring activities Net recurring income for Q1 at EUR -88 million, up EUR 72 million on the previous quarter Reduction of funding cost by EUR 38 million Improved cost of risk for Q1 at EUR -22 million Significant impact of accounting volatility elements 21,2% 21,4% EUR -148 million associated with accounting volatility elements, including in particular EUR -175 million on the valuation of collateralised derivatives (unfavourable evolution of credit spreads) Non-recurring elements Non-recurring quarterly result at EUR 53 million including gains on disposals (EUR 90 million) and a general provision for litigations (EUR -34 million) 22

23 Annual results 2013 and Q Q1 results 2014 balance sheet and solvency Balance sheet up EUR 13.8 billion, at EUR 237 billion Building up of a positive liquidity position, anticipating significant funding maturities over coming quarters, leading to an increase of central bank deposits by EUR 10.9 billion Balance sheet variation of EUR +6.5 billion with the effect of exchange and interest rate variations Amortisation of EUR -2.6 billion in assets and reduction of the Group s scope by EUR -0.5 billion resulting from entity disposals Impact of implementation of the Basel III regulatory framework on solvency ratios Impact of application of Basel III regulatory framework 21.2% 22.4% 16.3% 16.8% 16.2% 16.9% Basel II Basel III (pro forma*) Common Equity Tier 1 Ratio Basel III Total Capital Ratio First application of the Basel III regulatory framework on 1 January 2014 Within that framework, EUR 9 billion increase of weighted risks and partial deduction of the AFS reserve from regulatory capital Considering these elements, solvency ratios under Basel III at 16.9% (Total Capital) and 16.2% (Tier 1 Common Equity) *based on RWA as at 31/03/

24 Shareholders' Meeting Agenda I. Evolution of the Dexia Group against the background of a still tepid economic recovery II. Implementation of the orderly resolution plan III. Annual results 2013 and Q IV. Activity of the board of directors and dedicated committees V. Compensation policy 2013 VI. Company project: what future profile for the Group? 24

25 Activity of the board of directors and the specialised committees Number of meetings Board of Directors Audit Committee Strategic Committee Appointments and Compensation Committee TOTAL Dexia SA Topics regularly dealt with by the board of directors and the specialised committees the guaranteed issues agreement the revised orderly resolution plan and undertakings vis-à-vis the European Commission the Group s liquidity situation evolution of Group s governance the sale of operational entities the company project 25

27 Compensation policy 2013 Strict observance of legislative developments regarding compensation at a national, European and international level Application of compensation principles established within the framework of the European Directive CRD IV Application of the CEBS guidelines implemented in Belgium by the CBFA Circular and the Law of 7 February 2011 Respect of the behavioural undertakings made by the French and Belgian States to the European Commission, within the context of its orderly resolution plan 27

28 Compensation policy 2013 Simplification of the governance of Dexia SA and Dexia Crédit Local since The composition of the Board of directors and the Management Board of Dexia SA and Dexia Crédit Local has been unified as much as possible - The number of Management Board members participating in the Dexia SA and Dexia Crédit Local committees down from 20 to 3 - Cost savings of 51% between 2012 and 2014 for the management - The compensation of newly appointed executives is 20% to 35% lower than their predecessors. Members of the Management Board, the Executive Committee and the Group Committee are not entitled to variable remuneration. Measures related to the leaving indemnities for Management Board members aligned with the new Belgian Banking Law Workers Council met 25 times in

30 Company project: what future profile for the Group? Three strategic objectives After reaching the target perimeter, need to redefine the Group s mandate and structure Reflection on the Group s tasks undertaken within the framework of the enterprise project launched in 2013 Definition of a general mandate and three strategic objectives Managing down Dexia Group s balance sheet in run-off, while preserving the interests of its guarantors and shareholders Funding capacity Dexia will maintain its funding capacity over the term of its resolution Operational continuity Dexia will seek to avoid any operational interruption in implementing its resolution plan Solvency level Dexia will preserve its capital in order to comply with regulatory and legal minimum solvency levels 30

31 Company project: what future profile for the Group? Reshaping the operational model Definition of a more centralised operational model offering the flexibility required to adapt to the decrease of the resolution scope Current situation Target model Structure 8 main establishments 2 main establishments IT systems Low mutualisation of IT systems Strong system integration Operations Operations often decentralised, autonomy of local entities Centralisation of operations Control activities Decentralised control Strong centralisation of risk and finance functions 31

32 Company project: what future profile for the Group? Towards simplification of the Group structure Reorganisation of the Group structure, enabling introduction of the defined target model Simplification and reorganisation of the structure - Creation of an Assets activity line, responsible for asset management, and a Funding and Markets line responsible for optimising Group funding and monitoring the derivatives portfolio - Creation of a Product Control department within Finance activity line - Realignment of the Risks activity line to its essential control functions Assets Management and valuation of Group assets Monitoring client relations Regrouping teams initially dispersed among different activity lines Funding and Markets Optimisation of Group funding Execution of market operations Management of the derivatives portfolio Simplification of Group governance Creation of a Transformation team, dedicated to monitoring the enterprise project 32

33 Company project: what future profile for the Group? Implementation commenced from 2014 Announcement in early 2014 of the new structure, in respect of social rules and obligations Identification of key projects in connection with the new strategic goals defined for the Group and launch of works such as: Reshaping IT systems with the aim of operational continuity of applications and infrastructure and improvement of the data architecture Establishment of a platform for the execution of Repo transactions Definition and presentation of a new human resources offer in order to train, attract and retain the talents necessary for managing the Group s resolution 33

34 Shareholders' Meeting Agenda I. Evolution of the Dexia Group against the background of a still tepid economic recovery II. Implementation of the orderly resolution plan III. Annual results 2013 and Q IV. Activity of the board of directors and the specialist committees V. Compensation policy VI. Company project: what future profile for the Group? 34

35 Shareholders' Meeting Appendices 35

36 Update of the revised business plan Adjustment of external parameters in December 2013 Taking account of the economic and financial parameters as known at the end of 2013 Adjustment of hypotheses on the basis of developments foreseeable on that date Economic and financial environment Elements updated Adjustment of interest rate levels (higher than initially expected) Update of credit margins as at 31 December 2013 Update of counterpart ratings as at 31 December 2013 and longer convergence towards historic averages Hypothesis of gradual convergence of credit margins on sovereigns towards their pre-crisis level in 2018 Main impacts Favourable impact on the level of cash collateral Reduction of the AFS reserve Increase of the cost of risk and weighted risks Reduction of the cost of the guaranteed debt over time Regulatory environment Taking account of national discretions in relation to the application of CRD IV known as at 31 December 2013 (reviewed since that date) Impact of IFRS 9 as from 2018 Negative impact on the regulatory capital of Dexia Crédit Local, associated with deduction of the AFS reserve Disappearance of the AFS reserve from

37 Update of the revised business plan Taking account of the Group situation at the end of 2013 Adjustment of the funding hypotheses on the basis of what has happened, and market momentum at the end of 2013 Taking account of the expected effects of the enterprise project commenced in 2013 Funding Elements updated Funding capacity greater than requirements from 2017 Reduction of liquidity risk associated with the extension of funding sources Main impacts Establishment of a liquidity buffer culminating in 2022 Operating costs Reduction of costs in connection with implementation of the enterprise project from 2014 Reduction of costs slower than initially planned until 2016, and then acceleration 37

38 General Meeting of Shareholders May 14th, 2014