Dexia
Encyclopedia
Dexia N.V./S.A., also referred to as the Dexia Group, is a Belgian-French financial institution
active in public finance
, providing retail
and commercial bank
ing services to individuals and SMEs, asset management, and insurance. The company has about 35,200 members of staff and core shareholders' equity of €19.2 billion as at 31 December 2010, and provides governments and local public finance operators with banking and other financial services. Asset Management and Services provides asset management, investor and insurance services, in particular to clients of the two other business lines. In 2008, the bank received bailouts for €6 billion, and it has become the first casualty of the 2011 European sovereign debt crisis. Negotiations are taking place for its breakup. Its headquarters are in Saint-Josse-ten-Noode
, Brussels
.
(which lists companies by total income) Dexia was ranked 49th, the top-ranked Belgian company.
The company was founded in 1996 through the merger of Crédit Communal de Belgique/Gemeentekrediet van België (founded in 1860) and Crédit Local de France (founded in 1987). The Dexia Group was founded as a dual-listed company
, but in 1999 the Belgian entity took over the French entity to form one company. The company is headquartered in Brussels
, Belgium.
The next day the rating agency Moody's
downgraded Dexia's long term debt and deposits ratings from Aa1 to Aa3, and downgraded the individual banks' strengths to C- ("adequate intrinsic financial strength") with a negative outlook.
Dexia was quickly forced to apply for a bailout by the State. This support was assured within days, taking two forms:
The three states have the potential to make a profit from their intervention:
Since Dexia had a New York banking office they were eligible for various bailouts from the US Federal Reserve. At its peak Dexia had borrowed $58.5 billion.
On 30 September 2008 the company's chairman Pierre Richard and CEO Axel Miller
were sacked, and were replaced on 7 October 2008 by former Belgian prime minister Jean-Luc Dehaene
and Pierre Mariani respectively.
At the end of 2008 Dexia sold the healthy parts of FSA, ceased its trading activities in Paris and trading on its own account
in the financial markets.
Further losses are still possible on the remaining FSA portfolio. On 19 January 2009 Moody's
lowered the credit rating
for Dexia's long term obligations and saving accounts of the three banking parts of Dexia (Dexia Credit Local, Dexia Bank Belgium and Dexia Banque Internationale in Luxembourg) from Aa3 to A1. The rating agency also downgraded the Bank Financial Strength Rating for the three banks from C− to D+.
On 5 March 2009 Dexia's share price fell to an all-time low of €1.21, a loss of over 90% in a year. A further restructuring
plan was announced, with the firm aiming to concentrate on its primary activities, and to avoid risks on the financial markets. A total of 1,500 job cuts were announced, of which more than half were in Belgium, 260 in France, and the rest worldwide. Dexia's share price subsequently increased over the rest of 2009, largely varying between €4 to €7.50.
On 31 March 2010 Bloomberg reported that Dexia was one of the largest borrowers from the discount window
of the United States Federal Reserve, having outstanding loans of over $30 billion.
, Icelandic banks, and Washington Mutual
)
According to the financial services provider Bloomberg
Dexia lost €78 million through the Ponzi scheme
of Bernard Madoff
.
Vintage retail activities represented a bigger share in profits again in 2010; apart from Belgium and France, Turkey became very promising in this area. So much so that predictions were that Turkish staff would account for half of the Dexia employees by 2014. At the same time, outgoing cashflows were diminished by reducing the bonds portfolio; even selling bonds at a loss, if necessary, which explained to a large extent the lesser profits in 2010.
More incoming funds from private saving accounts and less outgoing capital through bonds and loans to public institutions meant that Dexia could already worry a bit less about finding sufficient short term funding. The greater international trust in the company also showed when it announed an early retirement from the State Guarantee in 2010.
, the bank subsidiary of the French postal services
, reached an agreement in January 2011 about a cash transaction involving covered bonds worth €3 billion. This was presented for La Banque Postale as an investment at market conditions, and as a extra source of liquidity for Dexia.
Alleged differences of opinion were reported at the top of Dexia. More specifically about tensions between Belgian directors and the French CEO, Pierre Mariani, concerning on the one hand the deficitary investments that had been mostly done in the French division of Dexia, and the liquid funds that were above all present in Belgium.
On July 15 the European Banking Authority
, as part of its European bank stress tests, gave Dexia a clean bill of health, reporting that its tier 1 capital
was 12.1 percent, and would fall to 10.4 percent in 2012 under its "adverse scenario". This would make it one of Europe's safest banks.
Dexia posted a €4 billion loss for the second quarter, the biggest in its history, after writing down the value of its Greek debt. On 4 October its shares fell 22% to €1.01 in Brussels, cutting its market value to €1.96 billion. Discussions were taking place about a possible breakup, with a plan to place its "legacy" division into a bad bank
with government guarantees.
On 10 October, it was announced that the Belgian banking arm will be purchased for €4 billion by the Belgian federal government. Some units such as DenizBank
and the Luxembourg retail bank will be put up for sale. Part of its French operations are likely to be purchased by Caisse des dépôts et consignations
and La Banque Postale
. The remaining troubled assets, including a €95 billion bond portfolio would remain in a "bad bank" that would receive funding guarantees of up to €90 billion provided by the governments of Belgium (60.5%), France (36.5%) and Luxembourg (3%).
, CAC Next 20
, and LuxX
indices
. Dexia is also one of the components of the Euro STOXX and Euro STOXX Banks indices.
in August 2000 at the height of the market. On top of this, in 2001 the business bank Kempen & Co
was bought and removed from the stock market for about €1 billion. The two acquired companies Labouchère and Kempen & Co were merged into Dexia Netherlands. This merger had to be undone however, because of an asset leasing affair that threatened to damage the reputation of Kempen & Co.
The asset leasing affair left Dexia in The Netherlands in the end with so much negative publicity that it decided to reduce its Dutch activities. In 2004 Kempen & Co was sold for about €85 million, a fraction of the buying price, to its management, the Friesland Bank
, NPM Capital and HAL Investments.
Dexia Bank Netherlands still continues to unwind asset leasing contracts under the commercial name of Legio Lease, and the corresponding agreements and court cases. Dexia suffered a substantial loss in March 2008, after a ruling from the Supreme Court on the legality of leasing contracts, in which contracts were considered invalid for married couples of which both partners had not signed the contract. Dexia as a consequence had to repay these debts plus accrued interests. Luckily for Dexia many customers had previously agreed to a less favourable Duisenberg-agreement and could not revoke this. Eventually only 3,000 of the hundreds of thousands of Legiolease customers profited from this ruling of the High Council.
, Fortis
, ING
and KBC
invested over €6.6 billion in companies that were involved in human rights violations. The companies and projects in which banks invest are controversial because of their support for dictatorial regimes, forced displacements and forced labour. The criticism concerns among others investments in a gas pipe line in Myanmar
and the BTC pipe line through Turkey, Azerbaijan and Georgia. In 2005 Dexia announced a new policy concerning the weapons industry. Companies involved in the production of anti-personnel mine
s will be completely barred from banking services. For investment funds there is no limitation of investments in the weapons industry.
Dexia did on the other hand rank 17th in 2011 on the list of 'The Global 100 Most Sustainable Corporations in the World'. Dexia was the third company from the financial sector on the list.
was contractually entitled to a 'golden parachute' of €3.7 million. This provoked protest from the French president Nicolas Sarkozy
, and Miller subsequently renounced his bonus, leaving the matter to "the wisdom of the Board of Directors". The board eventually decided to pay him one year's salary (€825,000), thus ignoring Sarkozy's remarks.
The French Ministry of Finance stated in April 2009 that it had voted against the payout, but that its representatives on the board were outnumbered.
The board of directors unanimously accepted on 13 November 2008 to upgrade the yearly salary of the CEO to €1 million, and to fix the maximum bonus at €2.25 million. Miller's salary was €825,000, with a maximum bonus of €1.8 million.
, received a welcome bonus of €500,000.
a remuneration was planned of €88,000. The allotment of high bonusses at Dexia and competitor KBC caused some commotion in Belgium. Leading the city of Ghent to remove some €30 million in short term investments from Dexia and KBC.
The Dexia Tower
, the firm's new head office in Brussels, is with its height of 137m an icon in the business district of Brussels-North. In December 2006 the tower was equipped with LED
lighting. A total of 126,000 programmable LED strips have been fitted. From 22 December 2006 to 15 January 2007, the colours of the tower could be chosen by the public from a touchscreen
.
at La Défense, previously known as the CBX tower, is the bank's Parisian headquarter since 2007.
.
Financial institution
In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...
active in public finance
Public finance
Public finance is the revenue and expenditure of public authoritiesThe purview of public finance is considered to be threefold: governmental effects on efficient allocation of resources, distribution of income, and macroeconomic stabilization.-Overview:The proper role of government provides a...
, providing retail
Retail banking
Retail banking is banking in which banking institutions execute transactions directly with consumers, rather than corporations or other banks. Services offered include: savings and transactional accounts, mortgages, personal loans, debit cards, credit cards, and so forth.-Types of...
and commercial bank
Commercial bank
After the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...
ing services to individuals and SMEs, asset management, and insurance. The company has about 35,200 members of staff and core shareholders' equity of €19.2 billion as at 31 December 2010, and provides governments and local public finance operators with banking and other financial services. Asset Management and Services provides asset management, investor and insurance services, in particular to clients of the two other business lines. In 2008, the bank received bailouts for €6 billion, and it has become the first casualty of the 2011 European sovereign debt crisis. Negotiations are taking place for its breakup. Its headquarters are in Saint-Josse-ten-Noode
Saint-Josse-ten-Noode
Sint-Joost-ten-Node or Saint-Josse-ten-Noode is one of the nineteen municipalities located in the Brussels-Capital Region of Belgium....
, Brussels
Brussels
Brussels , officially the Brussels Region or Brussels-Capital Region , is the capital of Belgium and the de facto capital of the European Union...
.
Profile
In the 2010 Fortune Global 500Fortune Global 500
The Fortune Global 500 is a ranking of the top 500 corporations worldwide as measured by revenue. The list is compiled and published annually by Fortune magazine....
(which lists companies by total income) Dexia was ranked 49th, the top-ranked Belgian company.
The company was founded in 1996 through the merger of Crédit Communal de Belgique/Gemeentekrediet van België (founded in 1860) and Crédit Local de France (founded in 1987). The Dexia Group was founded as a dual-listed company
Dual-listed company
A dual-listed company or DLC is a corporate structure in which two corporations function as a single operating business through a legal equalization agreement, but retain separate legal identities and stock exchange listings...
, but in 1999 the Belgian entity took over the French entity to form one company. The company is headquartered in Brussels
Brussels
Brussels , officially the Brussels Region or Brussels-Capital Region , is the capital of Belgium and the de facto capital of the European Union...
, Belgium.
Belgium: Gemeentekrediet van België / Crédit Communal de Belgique
- 1860 – Foundation of the Gemeentekrediet van België / Crédit Communal de Belgique, specifically aimed at financing the investments of the local administrations. The communities were shareholderShareholderA shareholder or stockholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders own the stock, but not the corporation itself ....
s, for a value of at least 5% of the amounts drawn.
- 1947 – Development of a network of retail branches that allow drawing funds from the general public through savings accountSavings accountSavings accounts are accounts maintained by retail financial institutions that pay interest but cannot be used directly as money . These accounts let customers set aside a portion of their liquid assets while earning a monetary return...
s. From 1960 on the branches were run by independent agents, allowing a broader range of services and products to be offered and a lasting relationship with clients to be developed.
- 1990 – Start of the international expansion of the bank with the creation of the Cregem International Bank in the Grand Duchy of Luxembourg, specialising in the management of large sums of money.
- 1991 – The Gemeentekrediet builds on its international expansion by taking a stake of 25% in the Banque Internationale à Luxembourg (BIL), the biggest bank in Luxembourg. In early 1992 the firm increased its stake in BIL to 51%.
France: Crédit Local de France
- 1987 – Foundation of the Crédit Local de France as a successor to the CAECL (Caisse d'aide à l'équipement des collectivités locales); it was a public administrative institution, managed by the Caisse des dépôts. The Crédit Local de France was a specialised financial institution responding to the needs of local administrationsLocal governmentLocal government refers collectively to administrative authorities over areas that are smaller than a state.The term is used to contrast with offices at nation-state level, which are referred to as the central government, national government, or federal government...
, that have become important economic agents in their own, and make as much use of products and services of the financial marketFinancial marketIn economics, a financial market is a mechanism that allows people and entities to buy and sell financial securities , commodities , and other fungible items of value at low transaction costs and at prices that reflect supply and demand.Both general markets and...
s as businesses.
- 1990 – The Crédit Local de France begins an international expansion with the opening of an American subsidiary, the CLF New York Agency. Aiming at a similar development in Europe, the CLF mainly operated in Great Britain, Spain, Germany and Italy; additional activities were later added in Austria, ScandinaviaScandinaviaScandinavia is a cultural, historical and ethno-linguistic region in northern Europe that includes the three kingdoms of Denmark, Norway and Sweden, characterized by their common ethno-cultural heritage and language. Modern Norway and Sweden proper are situated on the Scandinavian Peninsula,...
, and Portugal.
- 1991 – Crédit Local de France underwent an initial public offeringInitial public offeringAn initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
on the Paris Stock Exchange. The shareholders at the time were the French State (25.5%), the Caisse des dépôts (25%), and individual investors from France and abroad (49.5%).
Dexia: the group
- 1996: Merger of the Gemeentekrediet / Credit Communal de Belgium and the Crédit Local de France to form Dexia.
- 1997: Dexia takes a stake of 40% in the Italian firm Crediop, the biggest privately owned bank specialising in finance for Italian local administrations.
- 1998: Dexia increases its shareholding in Crediop to 60%.
- 1999: First listing of Dexia Group as a dual-listed companyDual-listed companyA dual-listed company or DLC is a corporate structure in which two corporations function as a single operating business through a legal equalization agreement, but retain separate legal identities and stock exchange listings...
on the BrusselsBrussels Stock ExchangeThe Brussels Stock Exchange was founded in Brussels, Belgium, by Napoleonic decree in 1801. On September 22, 2000, the BSE merged with Paris Bourse, Lisbon Stock Exchange and the stock exchanges of Amsterdam, to form Euronext N.V., the first pan-European exchange for equities and derivatives,...
and Paris stock exchanges in November, at a price of €6.86 per share. In Belgium the stock became part of the BEL20BEL20The BEL20 is the benchmark stock market index of Euronext Brussels. In general, the index consists of a minimum of 10 and a maximum of 20 companies traded at the Brussels Stock Exchange. Since 20 June 2011, the BEL20 has contained 20 listings.-Rules:...
index, and in France of the CAC 40CAC 40The CAC 40 is a benchmark French stock market index. The index represents a capitalization-weighted measure of the 40 most significant values among the 100 highest market caps on the Paris Bourse...
. The group broadens its insurance activities in France, Belgium and Germany.
- 2000: Acquisition of Financial Security Assurance (FSA) in the United States, a major player in credit enhancementCredit enhancementCredit enhancement is a key part of the securitization transaction in structured finance, and is important for credit rating agencies when rating a securitization. The credit crisis of 2007-2008 has discredited the process of credit enhancement of structured securities as a financial practice as...
for municipalities, making Dexia the world leader in the market of financial services to the public sector. Dexia is active in nearly all European countries in this market as well. Start of an annual reserved capital injection to which only Dexia members of staff can inscribe.
- 2001: Acquisition of Artesia Banking Corporation, a banking group with activities as retail bank (BACOB), insurance (DVV) and asset management (Cordius). The stake in Crediop grows to 70%, and Dexia gains control over Otzar Hashilton Hamekomi, an Israeli credit provider for local authorities.
- 2002: Integration of the Artesia branches in Belgium.
- 2006: Acquisition of 99.8% of the Turkish firm DenizbankDenizbankDenizBank A.Ş. is a private bank in Turkey controlled 99.79% by the French - Belgian bank Dexia since May 2006.DenizBank was established in 1938 as a state-owned bank to help finance the then emerging Turkish maritime industry...
.
- 2006: Royal Bank of CanadaRoyal Bank of CanadaThe Royal Bank of Canada or RBC Financial Group is the largest financial institution in Canada, as measured by deposits, revenues, and market capitalization. The bank serves seventeen million clients and has 80,100 employees worldwide. The company corporate headquarters are located in Toronto,...
created Institutional Investment Joint Venture with Dexia. It is a 50/50 Partnership called RBC Dexia Investor Services.
Crisis 2008/2009
On 29 September 2008 Dexia came under pressure during the crisis in the banking sector. Other banks and financial institutions refused to provide further credit to Dexia because of potential losses at its U.S. subsidiary FSA and from a multi-billion loan to troubled German bank Depfa. The price of the Dexia share, having peaked above €20 in the previous years, but gradually fallen to around €10, dropped in one day to €6.62.The next day the rating agency Moody's
Moody's
Moody's Corporation is the holding company for Moody's Analytics and Moody's Investors Service, a credit rating agency which performs international financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized...
downgraded Dexia's long term debt and deposits ratings from Aa1 to Aa3, and downgraded the individual banks' strengths to C- ("adequate intrinsic financial strength") with a negative outlook.
Dexia was quickly forced to apply for a bailout by the State. This support was assured within days, taking two forms:
- a capital injection of €6.4 billion, consisting of €3 billion from the Belgian State and regional governments, €3 billion from the French State and Caisse des Dépôts et Consignations and €376 million from the government of Luxembourg.
- a state guarantee (effective from 31 October 2008) covering Dexia's liabilities towards credit institutions and institutional counterpartiesCounterpartyA counterparty is a legal and financial term. It means a party to a contract. A counterparty is usually the entity with whom one negotiates on a given agreement, and the term can refer to either party or both, depending on context....
, as well as bonds and other debt securities issued for the same counterparties, for a total maximum amount of €150 billion. Belgium provided 60.5% of the guarantee, with a 36.5% contribution from the French state and 3% from Luxembourg.
The three states have the potential to make a profit from their intervention:
- the new capital buys Dexia shares at a price of €9.90 per asset
- for the state guarantee Dexia has to pay a monthly fee, from which the three states benefit proportionally to their share in the guarantee. The guaranteed amount varies continually as a function of Dexia's loans on the financial markets. It peaked mid-2009 at around €100 billion, but after Dexia managed to start selling non guaranteed commercial paperCommercial paperIn the global money market, commercial paper is an unsecured promissory note with a fixed maturity of 1 to 270 days. Commercial Paper is a money-market security issued by large banks and corporations to get money to meet short term debt obligations , and is only backed by an issuing bank or...
and bondBond (finance)In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
s again, fell to half this size by the end of 2009. In 2009 Dexia paid a fee of 0.5% on the guaranteed credits with a term of less than one year, and 0.865% on the credits longer than one year. The guarantee is currently planned to end in November 2010.
Since Dexia had a New York banking office they were eligible for various bailouts from the US Federal Reserve. At its peak Dexia had borrowed $58.5 billion.
On 30 September 2008 the company's chairman Pierre Richard and CEO Axel Miller
Axel Miller
Axel Miller is a Belgian businessman. From January 2006 to September 2008, he was chief executive officer and chairman of the Management Board of Dexia S.A...
were sacked, and were replaced on 7 October 2008 by former Belgian prime minister Jean-Luc Dehaene
Jean-Luc Dehaene
-Early life and political career:He was born in Montpellier, France, when his parents were fleeing German troops. He got into politics through the Algemeen Christelijk Werknemersverbond , a trade union which was closely linked to the Christelijke Volkspartij .In 1981, he became Minister of Social...
and Pierre Mariani respectively.
At the end of 2008 Dexia sold the healthy parts of FSA, ceased its trading activities in Paris and trading on its own account
Proprietary trading
Proprietary trading occurs when a firm trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments, with the firm's own money as opposed to its customers' money, so as to make a profit for itself...
in the financial markets.
Further losses are still possible on the remaining FSA portfolio. On 19 January 2009 Moody's
Moody's
Moody's Corporation is the holding company for Moody's Analytics and Moody's Investors Service, a credit rating agency which performs international financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized...
lowered the credit rating
Credit rating
A credit rating evaluates the credit worthiness of an issuer of specific types of debt, specifically, debt issued by a business enterprise such as a corporation or a government. It is an evaluation made by a credit rating agency of the debt issuers likelihood of default. Credit ratings are...
for Dexia's long term obligations and saving accounts of the three banking parts of Dexia (Dexia Credit Local, Dexia Bank Belgium and Dexia Banque Internationale in Luxembourg) from Aa3 to A1. The rating agency also downgraded the Bank Financial Strength Rating for the three banks from C− to D+.
On 5 March 2009 Dexia's share price fell to an all-time low of €1.21, a loss of over 90% in a year. A further restructuring
Restructuring
Restructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs...
plan was announced, with the firm aiming to concentrate on its primary activities, and to avoid risks on the financial markets. A total of 1,500 job cuts were announced, of which more than half were in Belgium, 260 in France, and the rest worldwide. Dexia's share price subsequently increased over the rest of 2009, largely varying between €4 to €7.50.
On 31 March 2010 Bloomberg reported that Dexia was one of the largest borrowers from the discount window
Discount window
The discount window is an instrument of monetary policy that allows eligible institutions to borrow money from the central bank, usually on a short-term basis, to meet temporary shortages of liquidity caused by internal or external disruptions...
of the United States Federal Reserve, having outstanding loans of over $30 billion.
Losses
In February 2009 the bank announced net losses of 3.3 billion euros (approximately 4.2 billion US dollars) for 2008. The Dexia 2008 annual report mentions among others losses of €1.6 billion from selling FSA, €600 million on portfolios and €800 million on counterparties (including Lehman BrothersLehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
, Icelandic banks, and Washington Mutual
Washington Mutual
Washington Mutual, Inc. , abbreviated to WaMu, was a savings bank holding company and the former owner of Washington Mutual Bank, which was the United States' largest savings and loan association until its collapse in 2008....
)
According to the financial services provider Bloomberg
Bloomberg L.P.
Bloomberg L.P. is an American privately held financial software, media, and data company. Bloomberg makes up one third of the $16 billion global financial data market with estimated revenue of $6.9 billion. Bloomberg L.P...
Dexia lost €78 million through the Ponzi scheme
Ponzi scheme
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation...
of Bernard Madoff
Bernard Madoff
Bernard Lawrence "Bernie" Madoff is a former American businessman, stockbroker, investment advisor, and financier. He is the former non-executive chairman of the NASDAQ stock market, and the admitted operator of a Ponzi scheme that is considered to be the largest financial fraud in U.S...
.
2010: Downsizing and reorganizing
On 6 February 2010 Dexia could announce that the European Commission had, under certain conditions, approved of the restructuring plan that was necessary to justify the government support for Dexia and to prevent unfair competition:- some acquisitions had to be undone (Dexia Crediop, Dexia Sabadell and Dexia Banka Slovensko) but banking activities in Turkey, highly promising to Dexia, could continue.
- by the middle of 2010 the State Guarantee had to be abandoned
- in total Dexia had to downsize by one third by 2014.
Vintage retail activities represented a bigger share in profits again in 2010; apart from Belgium and France, Turkey became very promising in this area. So much so that predictions were that Turkish staff would account for half of the Dexia employees by 2014. At the same time, outgoing cashflows were diminished by reducing the bonds portfolio; even selling bonds at a loss, if necessary, which explained to a large extent the lesser profits in 2010.
More incoming funds from private saving accounts and less outgoing capital through bonds and loans to public institutions meant that Dexia could already worry a bit less about finding sufficient short term funding. The greater international trust in the company also showed when it announed an early retirement from the State Guarantee in 2010.
2011
Dexia and La Banque postaleLa Banque Postale
La Banque postale is a French bank created on 1 January, 2006 as a subsidiary of La Poste, the national postal service.- Controversy :In 2010 the French government's Autorité de la concurrence fined eleven banks, including , the sum of 384,900,000 Euros for colluding to charge unjustified fees on...
, the bank subsidiary of the French postal services
La Poste (France)
La Poste is the mail service of France, which also operates postal services in the French Overseas Departments of Réunion, Guadeloupe, Martinique and French Guiana, and the territorial collectivities of Saint Pierre and Miquelon and Mayotte...
, reached an agreement in January 2011 about a cash transaction involving covered bonds worth €3 billion. This was presented for La Banque Postale as an investment at market conditions, and as a extra source of liquidity for Dexia.
Alleged differences of opinion were reported at the top of Dexia. More specifically about tensions between Belgian directors and the French CEO, Pierre Mariani, concerning on the one hand the deficitary investments that had been mostly done in the French division of Dexia, and the liquid funds that were above all present in Belgium.
On July 15 the European Banking Authority
European Banking Authority
The European Banking Authority is a regulatory agency of the European Union headquartered in London, United Kingdom. Its activities include conducting stress tests on European banks to increase transparency in the European financial system by identifying weaknesses in banks' capital structures...
, as part of its European bank stress tests, gave Dexia a clean bill of health, reporting that its tier 1 capital
Tier 1 capital
Tier 1 capital is the core measure of a bank's financial strength from a regulator's point of view. It is composed of core capital, which consists primarily of common stock and disclosed reserves , but may also include non-redeemable non-cumulative preferred stock...
was 12.1 percent, and would fall to 10.4 percent in 2012 under its "adverse scenario". This would make it one of Europe's safest banks.
Dexia posted a €4 billion loss for the second quarter, the biggest in its history, after writing down the value of its Greek debt. On 4 October its shares fell 22% to €1.01 in Brussels, cutting its market value to €1.96 billion. Discussions were taking place about a possible breakup, with a plan to place its "legacy" division into a bad bank
Bad bank
Bad bank is a term for a financial institution created to hold nonperforming assets owned by a state guaranteed bank. Such institutions have been created to address challenges arising during an economic credit crunch wherein private banks are allowed to take problem assets off their books...
with government guarantees.
On 10 October, it was announced that the Belgian banking arm will be purchased for €4 billion by the Belgian federal government. Some units such as DenizBank
Denizbank
DenizBank A.Ş. is a private bank in Turkey controlled 99.79% by the French - Belgian bank Dexia since May 2006.DenizBank was established in 1938 as a state-owned bank to help finance the then emerging Turkish maritime industry...
and the Luxembourg retail bank will be put up for sale. Part of its French operations are likely to be purchased by Caisse des dépôts et consignations
Caisse des dépôts et consignations
The Caisse des Dépôts et Consignations is a French financial organization created in 1816, and part of the government institutions under the control of the Parliament. Augustin De Romanet is the board chairman and chief executive...
and La Banque Postale
La Banque Postale
La Banque postale is a French bank created on 1 January, 2006 as a subsidiary of La Poste, the national postal service.- Controversy :In 2010 the French government's Autorité de la concurrence fined eleven banks, including , the sum of 384,900,000 Euros for colluding to charge unjustified fees on...
. The remaining troubled assets, including a €95 billion bond portfolio would remain in a "bad bank" that would receive funding guarantees of up to €90 billion provided by the governments of Belgium (60.5%), France (36.5%) and Luxembourg (3%).
Dexia shares
Dexia is a member of the BEL20BEL20
The BEL20 is the benchmark stock market index of Euronext Brussels. In general, the index consists of a minimum of 10 and a maximum of 20 companies traded at the Brussels Stock Exchange. Since 20 June 2011, the BEL20 has contained 20 listings.-Rules:...
, CAC Next 20
CAC Next 20
The CAC Next 20 is an index of security prices used with the Euronext Paris. It gathers the 20 companies whose market capitalizations are ranked after those of the 40 companies who compose the CAC 40. These 20 are possible candidates to replace the members of the CAC 40 index. The CAC Next 20 was...
, and LuxX
LuxX Index
The LuxX Index is the main stock market index of the Luxembourg Stock Exchange, the stock exchange based in Luxembourg City, in southern Luxembourg. The LuxX is a weighted index of the eleven most valuable listed stocks by free floated market capitalisation...
indices
Stock market index
A stock market index is a method of measuring a section of the stock market. Many indices are cited by news or financial services firms and are used as benchmarks, to measure the performance of portfolios such as mutual funds....
. Dexia is also one of the components of the Euro STOXX and Euro STOXX Banks indices.
| Year | Share value in euros on Dec. 31 |
|---|---|
| 2001 | 15.80 |
| 2002 | 11.90 |
| 2003 | 13.70 |
| 2004 | 16.90 |
| 2005 | 19.50 |
| 2006 | 20.80 |
| 2007 | 17.00 |
| 2008 | 3.20 |
| 2009 | 4.50 |
| 2010 | 2.60 |
Results
| year | Revenue Revenue In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover.... |
Net income Net income Net income is the residual income of a firm after adding total revenue and gains and subtracting all expenses and losses for the reporting period. Net income can be distributed among holders of common stock as a dividend or held by the firm as an addition to retained earnings... /(loss) |
|---|---|---|
| 2005 | € 5,976 million | € 2,038 million |
| 2006 | € 7,012 million | € 2,750 million |
| 2007 | € 6,896 million | € 2,533 million |
| 2008 | € 3,556 million | (€ 3,326 million) |
| 2009 | € 6,163 million | € 1,010 million |
| 2010 | € 5,310 million | € 723 million |
Shareholder structure
| Shareholders | % 2009 | % 2010 |
|---|---|---|
| Institutional and private shareholders | 26.7 | 28.2 |
| Caisse des dépôts et consignations Caisse des dépôts et consignations The Caisse des Dépôts et Consignations is a French financial organization created in 1816, and part of the government institutions under the control of the Parliament. Augustin De Romanet is the board chairman and chief executive... |
17.6 | 17.6 |
| Communal Holding | 14.1 | 14.1 |
| ARCO Group ARCO Group ARCO Group is a Belgian cooperative holding, and part of the Catholic workers organisation ACW. The group has more than 900,000 shareholders and a capital of 4.5 billion euro. Arcofin invests in the financial sector and Auxipar mainly invests in basic and utility service sectors , and real estate... |
13.9 | 13.8 |
| French State | 5.7 | 5.7 |
| Belgian Federal State | 5.7 | 5.7 |
| Three Belgian Regions | 5.7 | 5.7 |
| Ethias | 5.0 | 5.0 |
| CNP Assurances CNP Assurances CNP Assurances S.A. is a major French insurance corporation. CNP stands for Caisse Nationale de Prévoyance. It is listed on the Fortune Global 500. The company was formed in 1959 as a subsidiary of Caisse des dépôts et consignations, which continues to hold approximately 40% of the company.... |
3.0 | 3.0 |
| Dexia employees | 2.6 | 1.1 |
BIC
Dexia's BIC codes are:- For Dexia Bank Belgium: GKCC BE BB, which mirrors the name of the old "Gemeentekrediet-Crédit Communal"
- For Dexia Credit Local: CLFR FR CC
- For Denizbank: DENI TR IS
- For Dexia Banque Internationale à Luxembourg: BILL LU LL
Netherlands
Dexia had ambitious plans in the Netherlands, and took over Bank Labouchère from the Dutch insurer AegonAEGON
Aegon N.V. is one of the world’s largest life insurance and pension groups, and a strong provider of investment products. Aegon's head office is in The Hague, Netherlands...
in August 2000 at the height of the market. On top of this, in 2001 the business bank Kempen & Co
Kempen & Co
Kempen & Co is a Dutch merchant bank providing financial services in asset management, securities broking, and corporate finance. Clients include institutional investors, companies, financial institutions, public institutions, foundations, and high net-worth individuals.- History :Kempen & Co is a...
was bought and removed from the stock market for about €1 billion. The two acquired companies Labouchère and Kempen & Co were merged into Dexia Netherlands. This merger had to be undone however, because of an asset leasing affair that threatened to damage the reputation of Kempen & Co.
The asset leasing affair left Dexia in The Netherlands in the end with so much negative publicity that it decided to reduce its Dutch activities. In 2004 Kempen & Co was sold for about €85 million, a fraction of the buying price, to its management, the Friesland Bank
Friesland Bank
Friesland Bank is a Dutch retail bank specifically focusing on the northern provinces of the Netherlands: Friesland, Groningen, Drenthe, Overijssel and Noord-Holland.- History :...
, NPM Capital and HAL Investments.
Dexia Bank Netherlands still continues to unwind asset leasing contracts under the commercial name of Legio Lease, and the corresponding agreements and court cases. Dexia suffered a substantial loss in March 2008, after a ruling from the Supreme Court on the legality of leasing contracts, in which contracts were considered invalid for married couples of which both partners had not signed the contract. Dexia as a consequence had to repay these debts plus accrued interests. Luckily for Dexia many customers had previously agreed to a less favourable Duisenberg-agreement and could not revoke this. Eventually only 3,000 of the hundreds of thousands of Legiolease customers profited from this ruling of the High Council.
Sustainability
According to research of Netwerk Vlaanderen Dexia in 2005 together with AXAAXA
AXA S.A. is a French global insurance group headquartered in the 8th arrondissement of Paris. AXA is a conglomerate of independently run businesses, operated according to the laws and regulations of many different countries. The AXA group of companies engage in life, health and other forms of...
, Fortis
Fortis (finance)
Fortis N.V./S.A. was a company active in insurance, banking and investment management. In 2007 it was the 20th largest business in the world by revenue but after encountering severe problems in the financial crisis of 2008, most of the company was sold in parts, with only insurance activities...
, ING
ING Group
The ING Group is a global financial institution offering retail banking, direct banking, commercial banking, investment banking, asset management, and insurance services. ING is the Dutch member of the Inter-Alpha Group of Banks, a cooperative consortium of 11 prominent European banks...
and KBC
KBC Bank
KBC Bank N.V. is a Belgian universal multi-channel bank, focusing on private clients and small and medium-sized enterprises. Besides retail banking, insurance and asset management activities , KBC is active in European debt capital markets, domestic cash equity markets and in the field of corporate...
invested over €6.6 billion in companies that were involved in human rights violations. The companies and projects in which banks invest are controversial because of their support for dictatorial regimes, forced displacements and forced labour. The criticism concerns among others investments in a gas pipe line in Myanmar
Myanmar
Burma , officially the Republic of the Union of Myanmar , is a country in Southeast Asia. Burma is bordered by China on the northeast, Laos on the east, Thailand on the southeast, Bangladesh on the west, India on the northwest, the Bay of Bengal to the southwest, and the Andaman Sea on the south....
and the BTC pipe line through Turkey, Azerbaijan and Georgia. In 2005 Dexia announced a new policy concerning the weapons industry. Companies involved in the production of anti-personnel mine
Anti-personnel mine
Anti-personnel mines are a form of land mine designed for use against humans, as opposed to anti-tank mines, which are designed for use against vehicles...
s will be completely barred from banking services. For investment funds there is no limitation of investments in the weapons industry.
Dexia did on the other hand rank 17th in 2011 on the list of 'The Global 100 Most Sustainable Corporations in the World'. Dexia was the third company from the financial sector on the list.
Israeli settlements controversy
Through its Israeli subsidiary, Dexia operates in certain Israeli settlements in the Occupied Territories. Several Belgian and French NGOs mounted campaigns to attract attention to this. Leading ultimately in 2011 to concrete plans to sell the Israeli division.Axel Miller
After his forced departure in October 2008, CEO Axel MillerAxel Miller
Axel Miller is a Belgian businessman. From January 2006 to September 2008, he was chief executive officer and chairman of the Management Board of Dexia S.A...
was contractually entitled to a 'golden parachute' of €3.7 million. This provoked protest from the French president Nicolas Sarkozy
Nicolas Sarkozy
Nicolas Sarkozy is the 23rd and current President of the French Republic and ex officio Co-Prince of Andorra. He assumed the office on 16 May 2007 after defeating the Socialist Party candidate Ségolène Royal 10 days earlier....
, and Miller subsequently renounced his bonus, leaving the matter to "the wisdom of the Board of Directors". The board eventually decided to pay him one year's salary (€825,000), thus ignoring Sarkozy's remarks.
The French Ministry of Finance stated in April 2009 that it had voted against the payout, but that its representatives on the board were outnumbered.
Salary of Pierre Mariani
Axel Miller's successor, Pierre Mariani, close to Nicolas Sarkozy, obtained a salary that is 30% higher than that of Miller.The board of directors unanimously accepted on 13 November 2008 to upgrade the yearly salary of the CEO to €1 million, and to fix the maximum bonus at €2.25 million. Miller's salary was €825,000, with a maximum bonus of €1.8 million.
Bonuses in 2008
Within Dexia Crédit Local, the French component of Dexia group, an pool of €8 million was dedicated to the bonuses of the leading managers, mainly directors. The management indicated that the sum would be shared among 400 to 765 employees."Golden hellos"
Philippe Rucheton, the financial director appointed by Dexia in April 2009, coming from Société GénéraleSociété Générale
Société Générale S.A. is a large European Bank and a major Financial Services company that has a substantial global presence. Its registered office is on Boulevard Haussmann in the 9th arrondissement of Paris, while its head office is in the Tours Société Générale in the business district of La...
, received a welcome bonus of €500,000.
Bonus 2010
In 2010 Dexia announced its plan to provide CEO Pierre Mariani with a bonus of €600,000. For Jean-Luc DehaeneJean-Luc Dehaene
-Early life and political career:He was born in Montpellier, France, when his parents were fleeing German troops. He got into politics through the Algemeen Christelijk Werknemersverbond , a trade union which was closely linked to the Christelijke Volkspartij .In 1981, he became Minister of Social...
a remuneration was planned of €88,000. The allotment of high bonusses at Dexia and competitor KBC caused some commotion in Belgium. Leading the city of Ghent to remove some €30 million in short term investments from Dexia and KBC.
Board of directors
- Jean-Luc DehaeneJean-Luc Dehaene-Early life and political career:He was born in Montpellier, France, when his parents were fleeing German troops. He got into politics through the Algemeen Christelijk Werknemersverbond , a trade union which was closely linked to the Christelijke Volkspartij .In 1981, he became Minister of Social...
, Belgium, Chairman of the board - Pierre Mariani, France, Chairman of the Management Board
- Gilles Benoist, F
- Olivier Bourges, F
- Robert de Metz, F
- Augustin de Romanet de Beaune, F
- Stefaan Decraene, B, Chairman of the Management Board of Dexia Bank Belgium
- Christian Giacomotto, F
- Serge Kubla, B
- Catherine Kopp, F
- Serge Kubla, F
- Hubert Reynier, F
- Francine SwiggersFrancine SwiggersFrancine Swiggers is a Belgian businesswoman and since 1 November 2007 she is Chairman of the Management Board of the ARCO Group.She obtained a licentiate in Applied Economic Sciences and Master in Business Administration at the Katholieke Universiteit Leuven . She started her career at the BACOB...
, B - Bernard Thiry, B
- Marc Tinant, B
- Sir Brian Unwin, Great Britain
- Koen Van Loo, B
- Francis Vermeiren, B
- Isabelle Bouillot, F
- Brigitte Chanoine, B
Dexia Tower
Dexia Tower
The Dexia Tower is a skyscraper located in the Northern Quarter central business district of Saint-Josse-ten-Noode, Brussels, Belgium. It owes its name to its current tenant, the bank Dexia...
, the firm's new head office in Brussels, is with its height of 137m an icon in the business district of Brussels-North. In December 2006 the tower was equipped with LED
Light-emitting diode
A light-emitting diode is a semiconductor light source. LEDs are used as indicator lamps in many devices and are increasingly used for other lighting...
lighting. A total of 126,000 programmable LED strips have been fitted. From 22 December 2006 to 15 January 2007, the colours of the tower could be chosen by the public from a touchscreen
Touchscreen
A touchscreen is an electronic visual display that can detect the presence and location of a touch within the display area. The term generally refers to touching the display of the device with a finger or hand. Touchscreens can also sense other passive objects, such as a stylus...
.
Tour Dexia
The Tour DexiaTour CBX
Tour CBX or Tour Dexia is an office skyscraper located in Supercomplex 2 of the La Défense business district situated west of Paris, France....
at La Défense, previously known as the CBX tower, is the bank's Parisian headquarter since 2007.
Sponsorship
In Belgium, Dexia is the main sponsor of football club Club Brugge K.V. and of basketball club Dexia Mons-HainautDexia Mons-Hainaut
Dexia Mons-Hainaut is a Belgian professional basketball club that is based in Mons, Wallonia. The club competes in the highest division of the Belgian League. The club's home arena is Mons Arena.-History:...
.