Event ID: Culture: en-us Event Name: Q4 & Full Year 2011 Dexia SA Earnings Conference Call Event Date: T08:00:00 UTC

Transcription

1 Event ID: Culture: en-us Event Name: Q4 & Full Year 2011 Dexia SA Earnings Conference Call Event Date: T08:00:00 UTC C: Pierre Mariani;Dexia SA;CEO C: Philippe Rucheton;Dexia SA;CFO P: Ludna Belhassan;;Analyst P: Caspar van Grafhorst;ING;Analyst P: Estelle;LBPAM;Analyst P: Dirk Peeters;KBC Securities;Analyst P: Marc Leemans;Bank Degroof;Analyst P: Operator;; P: Unidentified Participant;; +++ presentation Operator: Good day and welcome to the Dexia's full-year 2011 results and update on the Group's restructuring process conference call. Today's conference is being recorded. At this time I would like to turn the conference over to Mr. Pierre Mariani, CEO of Dexia. Please go ahead sir. Pierre Mariani: Yes, good morning everybody. So thank you for joining this conference call about 2011 results. We have prepared these results with a strong assumption that all the measures decided and supported by the State in October 2011 will be finally authorized by the European Commission. It means that we expect that the European Commission will be take soon the final decisions and will confirm the capacity of the French, Belgian and Luxembourg States to guarantee the funding of the Group. Of course 2011 has been a very shaky year, with a strong contrast between the first part of the year where the Group has been able to continue to implement very aggressively its restructuring plan decided in And everything until June was clearly on schedule in terms of deleveraging, capacity of reducing the short-term funding need, capacity also to sell assets to get rid of most of the subprime exposure in the US. But the deterioration of the eurozone situation and particularly the sovereign crisis in peripheral economies hit very badly the Group. And that's not a surprise for a Group that still had very important shortterm funding needs, that was mainly present with strong exposures in peripheral countries, and also funding and financing local authorities, so sovereign activities. The pressure on liquidity induced by the deterioration of the eurozone finance had consequences on our ratings that were challenged first in the beginning of -- in May, and then particularly the decision of Moody's to downgrade the short-term ratings of the Group, with as a consequence, the complete disappearance of our unsecured short-term funding needs that led to the decision of October. In consequence 2011 results reflect all the decision taken all over the year and that should not be a surprise to you because most of these decisions are already known. It's not only the cost of accelerating the

2 deleveraging and sales of the guaranteed -- the sale of the financial product portfolio that was announced in May, but on top of that the decision included in the resolution plan of October had huge consequences on our accounts. The disposal of Dexia Bank Belgium translates in a loss of EUR4.1b. The decision to divest the French business will also translate into a loss of close to EUR1b that are included in our 2011 results. And on top of that the multiple decisions on Greece taken by the various governments between July 2011 and the last decision of February are leading to a loss on our Greek sovereign assimilated exposure of EUR3.4b, equivalent to 75% of our residual exposure, on top of what has remained in Dexia Bank Belgium portfolio. All these elements are translating in very significant change in the perimeter and the financial situation of the portfolio. First of all it translates into EUR154b decrease of the balance sheet, which was at the end of December 2011 EUR413b. The Tier 1 also of the Group has been impacted by the significant amount of losses and this one now stands at 7.6%. We should emphasize there that we have taken all the losses into account on the sale of Dexia Municipal Agency particularly and also the results of the sale of the Bank in Luxembourg. But we have not yet, because the deals are not closed, reflected this element and these decisions into the evolution of the risk-weighted assets. And the pro-forma ratio would amount to 8.6%. Given the loss recorded in 2011, even if there is no need of capital increase, we will propose to the shareholders' general meeting not to pay any dividend in cash or in kind. And we have announced also and we will confirm that there will be no coupon payment on hybrid debt unless legally mandatory. And no exercise of calls on all subordinated debt existing in the remaining Group. I think it's worth a few words on the update of the Dexia restructuring process. You know perfectly what was the Group in Before 2008 it was Group's high rating, granting easy access to wholesale funding that led to the situation of October 2008, with a short-term funding need of EUR260b outstanding in October 2008, i.e. 43% of total balance sheet. This situation has been the combination of a very fast growing expansion of the public finance business beyond the Group domestic base, but also with a very significant acceleration in build-up of the bond portfolio, was amounting at EUR203b at the end of 2008, mostly carry trade with margin improvement of customer access. No opportunity to develop a commercial relationship and extra customer value. But that led to a very significant gearing ratio because the portfolio size was at that time 25 times the Group equity. On top of that you all knew that we were strongly exposed to the US market through FSA that led not only to a strong exposure to the municipal bond and municipal debt market but also to hazardous diversification in insuring the subprime structures with more than EUR120b exposure to that kind of business. And on top of that the build-

3 up of financial product portfolio activities in the US that led also to significant losses during the last few years. What have we done during this period, during the last three and a half years? We have reduced very strongly the size of the portfolio, not only reducing the assets but also the off-balance-sheet asset commitments. All these elements have gone from EUR260b at the end of 2008 to EUR138b at the end of June, i.e. a decrease of EUR121b in less than three years. We have also actively managed the off-balance-sheet commitments. You know that one of the problems of the Group was the huge size of the SBPA portfolio in the US. It was more than EUR40b -- EUR55b in October It's been reduced to EUR4b in December So it's nearly a problem that is no longer a problem for us. We have also completely sold FSA, accelerated the deleveraging with the complete sale of the financial portfolio and we don't have any residual exposure to these kind of products in the US because we've been able to sell it -- sell completely the exposure and get rid of the State guarantee on this part of the portfolio at the end of July You know also what we have sold Kommunalkredit Austria AG in November I just remind you that in this subsidiary there was a small activity in Cyprus that held EUR19b of CDS on different countries of European --- or Eastern European countries on one side and South European countries on the other side, particularly Greece. We have sold FSA quite rapidly. We have sold also our stake in Credit du Nord, Dexia Epargne Pension, AdInfo, SPE stake, Assured Guaranty, Dexia banka Slovensko and DenizEmeklilik, which was the insurance business of DenizBank. We have in the meantime invested in many of our franchises in Belgium, Turkey and public and finance business, but on top of that the transformation was progressing in line with the target. So she short-term funding has been reduced from EUR260b to EUR96b, minus 63%, balance sheet reduced from EUR651b to EUR518b. The costs also have been reduced by more than EUR600m. And the Tier 1 ratio in the meantime increased from 10.6% to 13.4% at the end of March What happened in the second part of the year of 2011? From the second quarter 2011 we begin to feel the pressure of European sovereign crisis and successive rating actions. The decision to place Dexia's rating under review for possible downgrade in March and May 2011 created a first hit on our liquidity with a reduction of EUR22b, especially on dollar funding. And the US dollar position was impacted first and promptly, managed through FX transaction. It means that the good aspect of that was that in August, we were long in dollar because we covered all our dollar positions previously in the year. And the worsening of the crisis at the end of July following the second announced restructuring plan of Greek debt led to a big shake-up in the market and with further deterioration of the Group liquidity. And the final hit was given by Moody's with its announcement of October 3, 2011, to place the Group long- and short-term rating under review for possible downgrade, which led to a loss of EUR13b of funding in a few days.

4 Taking into account this situation, we announced a series of measures involving the support of the State to protect the Group commercial franchise and avoid any further deterioration of the Group liquidity situation that would lead to an orderly resolution of the Group, including the disposal of operational entities and also the grant by the States of funding guarantees. Where do we stand in the implementation of these measures? The Group has nothing to do today with what it was yesterday and even at the end of the year. First of all, we have sold and completed the sale of Dexia Bank Belgium. It's been closed on October 20, It means a reduction of the balance sheet by more than EUR150b. The risk-weighted assets reduction impact is EUR45b and a reduction also on short-term funding gap by EUR16b. And on top of that I must say that the Legacy division has also been reduced by EUR19b in this transaction because a large chunk of the Legacy division was embedded in Dexia Bank Belgium accounts, and not only sovereign debt but also a number of exposures of ABS of any kind that are leading to an overall average reduction of our risk due to this sale. We have also worked on a number of other transactions. You know that we have signed a binding memorandum to sell Dexia Bank Luxembourg. And we are finalizing the discussion so the transaction with the discussions and the negotiation of the SPA. As far as RBC Dexia Investor Services is concerned, not only the disposal process has been launched but we are now in very advanced negotiation with RBC. And we hope that we'll be able to complete a deal quite quickly but until signature of course no deal is absolutely certain. The Dexia Asset Management disposal has been launched. We have also seen ongoing negotiations and discussions about the potential sale of DenizBank, even if we can't be sure of the final outcome of the discussion yet. And we had signed also an agreement with the French State, Caisse des Depots et Consignations and La Banque Postale, for the financing of French authorities with the sale of majority stake of Dexia Municipal Agency to a new structure that will be the shareholder of Dexia Municipal Agency, our covered bond vehicle. And with, on top of that and besides that, the creation between Caisse des Depots and LBP of a joint venture commercial structure that will endow the new business to local authorities in France. This final deal will have an impact of EUR1b on the Dexia Group results, a reduction of the balance sheet of EUR65b, a reduction of the Legacy division of an additional EUR12b, and guarantees issued -- with a number of guarantees issued by Dexia to the benefit of Dexia Municipal Agency. But a significant contribution of Caisse des Depot et Consignations to the new bank with EUR12b -- EUR12.5b of liquidity injected in the new perimeter that will be a significant relief for the Group at this stage. That was the first aspect, so the disposal of assets. We are been granted also a guarantee scheme to support the execution of the structural measures decided by the Board. The States of Belgium, France and Luxembourg accepted to deliver guarantee to Dexia SA and Dexia Credit Local for an amount of EUR90b. This of course, and I repeat, there is

5 nothing new about that, if we were forced to ask for this support, it means that this support is absolutely key to sustain the viability of the Group in the long run, which is not a surprise. This new guarantee State agreement, you know what are the main elements on that. I will not come back in details about that. And this guarantee scheme will have to be approved by the European Commission. We already had a temporary approval for EUR45b maturities up to three years. The agreement is valid until May 31, And I must tell you that we'll have completed the use of these ceilings even if the agreement is valid until May We are covering now our funding needs. The guaranteed debt will be in this first stage collateralized to the benefit of the State, except for certain mutually agreed transactions. And we now, we are now working on the final restructuring plan that will be submitted by the State to the European Commission at the end of March And the approval of the final guarantee is or will be submitted and required from the European Commission following the analysis of this restructuring plan. What is the roadmap for 2012? On top of the negotiations of the restructuring with the States, but it's clear that will lead to definitive liquidity guarantee scheme to cover the residual Group. We will have to subscribe new commitments for the Group, but it's clear that once we will have sold everything but the portfolio and some subsidiaries, like Crediop and Sabadell who are not saleable in the short term, I don't see what could be the impact of granting new State aid and new guarantees on the competition in Europe. So I think it's clearly a Group that will have a very limited activity, limited to the management of the existing outstandings with a very limited level of new production. We'll have also to work on the completion of the pending divestiture processes with the sale of main operational entity. And we are working very hard to build the new vehicle of local public authority financing in France. And we will have at the end of all this process a Group that will serve the local public sector, mainly in Italy, Spain and planned vehicle of liquidity in Germany, with the clear intention to sell them as quickly as possible, which could be a long time because of the sovereign crisis. In the meantime we will manage these activities as we manage them since 2008, reducing the exposure, reducing also the level of risk. And we will continue to manage the Legacy portfolio in order to reduce as quickly as possible the exposure and the financing need implied by the handling of these portfolios. When we come now to the 2011 financial statements, it's important to say and to repeat that these financial statements have been prepared on a going concern basis, assuming that Dexia will benefit from a definitive liquidity State guarantee approved by the European Commission, which size and price will be compatible with the viability of the remaining Group. That's a key element but that's what the Board believes. And, as repeated yesterday, when we analyzed the financial statements for 2011, we have applied the IFRS5 rules to all entities expected to be sold

6 in 2012, DMA, BIL, DAM and RBC Dexia, except DenizBank, which is still too uncertain to justify the application of IFRS5. We have restated the Legacy asset classified as held for sale in the framework of the acceleration of the disposal announced in mid And of course we have deconsolidated Dexia Bank Belgium from October 1, So the 2011 results and the loss of the sale are reflected in the net result part of discontinued operations. Sorry for this methodological precision, but it's necessary to understand better what the figures are and how we have built the 2011 accounts. What are the main elements of the Group? The loss is EUR11.6b. It's largely driven by one-off items you already know and we announced all over the year. The main impact is linked to the loss or to the sale of Dexia Bank Belgium, which had an impact of EUR4,048m. The impairment on Greek sovereign and estimated exposure, which leads to a loss of EUR3,364m. And the cost of deleveraging, including the financial product portfolio, but also the sale of other assets which has been completed in 2011, which leads to a loss of EUR2.6b. And a potential loss on the sale of Dexia Municipal Agency of an additional EUR984m. All these factors explain the majority of the losses we have gone through. It's clear that most of them are linked to the past of the Group as Greek portfolios were bought between 2006 and Most of the assets, financial products portfolio etc., the same situation. And the rest and the divestiture is clearly linked to the liquidity issues linked to the magnitude and the size, the imbalances in the financing of the bond portfolio of the Company. We will now go through in more detailed analysis and I will leave maybe the floor to Philippe Rucheton that will comment the various elements of the financial accounts for And I will answer afterwards to your questions. Thank you very much. Philippe Rucheton: Thank you Pierre. Yes, so here, as you can see on this slide the numbers. The first column is the as-published numbers of And we have restated these numbers in order to have the comparative column with the disclosed and published numbers of 2011, which means that we have here again something which is the result of discontinued operations which has been split and isolated. So it shows that when you compare 2011 to 2010 that we have on the income side something which is quite significant, which is mostly linked to the Greece impairments and losses that's at the impairment line and the financial products. On the discontinued operations it's mostly the entities for sure which have been sold. We have more details here which are on the slide 22 and 23. The impairment on the Greek sovereigns. So these are the numbers. The EUR3b, which is at the level of the income, and the EUR300m, which is recorded at the level of the cost of risk, are the numbers for Dexia as such. If you want to have a global picture it would be interesting to add up what has been provided during the first three quarters at Dexia Bank Belgium and the Group, including Dexia Insurance Belgium, which then shows that

7 the total cost of Greece for the Group is actually EUR4.6b. I've no clue about what Dexia Bank Belgium has done for the last quarter so this includes only the three first quarters. The FPs, so as Pierre was mentioning we have sold during the summer these FPs, with a loss of EUR1.9b. And in terms of the cost of deleveraging, excluding for sure the financial products, we have EUR400m. And once again here we can confirm that it will have been, if we had integrated the numbers of DBB for the first nine months, it will have been a bit more than EUR450m. We had a movement under the IFRS5. At the end of June, as you remember, we put a bond portfolio and loans portfolio under IFRS5. And when, at the end of the year, because of the sale which was not expected on June 30, the sale of DBB and the sale of DMA, we have confirmed that the deleveraging of the debt has already occured, so we have released the IFRS5 provisions for the amount which was yet available. But globally we have an impact of this back and forth of EUR250m. State guarantee, you know that the temporary State guarantee, we have a fee, an upfront fee which we have paid and we have recorded for it at the end of the year of 50 basis points over that EUR45b, so the EUR225m. Goodwill is something that we have impaired the goodwill that we had on Crediop and for a smaller amount on Israel and Dexia Israel and a bit of DCL. And finally on the other side, the positive was the capital gain of the sale of the insurance in Belgium -- in Turkey, sorry, DenizEmeklilik for EUR130m. So here you have the full breakdown of the EUR6.2b of the continuing operations. On discontinued we have already spoken about the EUR4b of loss of DBB. And we have a loss of roughly EUR1b on the sale of Dexia Municipal Agency, which we have already taken into account since DMA has been put in the IFRS5 perimeter. So EUR5.1b, so you can see that it explains the bulk or nearly all the losses. In the meantime in terms of business, in Turkey DenizBank has done a very good year. In terms of new branches 88 new branches have been opened so now we have 600 branches. We had a deposit gathering up by 34% and 30% for the loans so now the loan to deposit ratio has improved from 121% to 117%. Luxemburg has suffered in 2011 particularly at the end of the year, as was already explained. In PWB, you can imagine that the business has been voluntarily cut down. We have new commitments which were down by 29%. And particularly in France the new commitments of EUR2.7b were more than half financed and backed by specific resources such as the one provided by the European Investment Bank or Caisse des Depots et Consignations. We have reduced, significantly reduced the level of production but the remaining production has been done with quite significant margins. And we have been able to keep on collecting deposits in France but also in Germany. In terms again in business, Asset Management and Services had a tough year with a decrease due both to market effect of EUR2.4b and net outflows EUR6b. EUR6b net outflows was mainly coming from the resale bond

8 funds and through the Dexia Bank Belgium. As far as RBC Dexia is concerned the assets under administration were roughly stable. It was much better for the first half, stabilized in the second half, but we had from a commercial perspective quite a good performance. Legacy, we already spoke about the main events such as the Greek sovereign exposure impairment, sale of financial products, and we have sold EUR11.5b of assets, excluding DBB, with a loss of EUR400m. Legacy portfolio. The Legacy portfolio has, as you can see here, reduced quite significantly during the period. The Legacy division, we said it's partially linked to the sale of DBB for close to EUR19b but also globally EUR25b sales of assets. SBPA has been reduced and the deleveraging of the financial products. The loss on the bonds has been only 2.1% with bank bonds and ABS and sovereign. And we have an average life of the bonds which were sold, of 4.6 years and with a significant part of them in noneuro denominated securities. The percentage of loss on the loan sales is a bit higher, but it's also partially driven by the fact we have sold particularly some loans that were granted to Mexican units. Balance sheet. We have here, in the slide here, you can see we have put in gray the EUR110b, which is on the top of the column, is the assets held for sale, i.e. mostly DMA and BIL. The drop of EUR154b year over year, it's EUR109b of decrease of the core assets and EUR45b on the Legacy part. Short term, the funding: during the first half of the year, it was quite positive. The second half was much more difficult. We have been able to issue EUR18b of medium and long term actually during the first half of And in the second half we had a short-term funding which has significantly shifted since we lost some unsecured funding from our usual counterpart, and so we had also a sharp increase in the cash collateral to be posted. I remind you that because of our swap the exposure we have -- I shouldn't say the exposure we have in the swaps because our swaps are for hedging of our business. We have fixed rate assets which have to be hedged and it means that we are under the swaps paying fixed rates. When interest rates go down we have to post collateral and the drop of the interest rates has triggered an increase of our cash collateral to be posted. At the end of the year 2011 we had EUR31b of central bank outstanding including a usage of the emergency liquidity loan of close to EUR19b to central banks. In terms of the usage of the temporary guarantee which was authorized by the European Commission at the end of the year, we used it up to EUR22b, roughly half of the EUR45b, which is the cap that we have today. You can easily imagine that when a bank is using the emergency line it means that the compliance with the regulatory liquidity ratio is at stake so neither Dexia SA nor DCL are in line with the regulatory liquidity ratios at the end of December The regulators, both the Belgian and French ones, are aware of the situation and are following this very carefully. We are in full contact I would say nearly every day with them.

9 For 2012 it's clear that we rely on the State guarantee to issue funding and to close our liquidity gap. Core shareholder equity. You have here the dark part included the core shareholder equity and now you have the light blue is the other comprehensive income. The core shareholder equity is shrunk because of the loss. In terms of the OCI we had an improvement on one side, particularly during the first half when we sold the financial products and some other deleveraging. On the other side we had in the second half an additional negative OCI because we had both a spread widening of some of our European sovereign but also the fact that we have de-recognized more than EUR2b of deferred tax assets on these other comprehensive income. I can just say that we are really sensitive to what is going on on the sovereign market and just since the end of 2011 and roughly now, mid-feb, just the improvement of the other thing, reduction of the spread on the sovereigns, would have triggered roughly EUR800m of reduction of these negative AFS reserve. The weighted assets here have of course been significantly reduced when we sold particularly DBB. As Pierre Mariani was mentioning, under IFRS5 we take the results of the sales or rather the losses on the sales of entities, but because they are yet part of the Group we keep the weighted assets. So it means that the number that we have of 6.4% of Core Tier 1 and 7.6% of Global Tier 1 is something which at the time of the actual closing of the transactions will of course -- there will be a deconsolidation of including the assets and so mechanically the Tier 1 ratios would improve and the pro forma calculation on the numbers at the end of year 2011 leads to 7.3% of Core Tier 1 and 8.6% of Global Tier 1. We have noted as the last bullet point the fact that some of you might remember that we used to be within the scope of the EBA analysis for the capital buffer needs of the European Banks. It has been decided by the European Bank Association that we will not be part of the exercise any more. This is the end of this presentation so now I will leave again the floor to Pierre Mariani and I guess you are going to be invited to ask any questions through the operator. Thank you. +++ q-and-a Operator: Thank you Pierre. (Operator Instructions). We will take our first question today from [Ludna Belhassan] from [Akram Capital]. Please go ahead. Ludna Belhassan: Hi. I have two questions. The first one is why are you not willing to sell DenizBank at 1.2 its price to book value while you have accepted larger losses in the sale of other entities?

10 And my second question is don't you feel you have a duty towards DenizBank to have a more stable parent company such as QNB? Thank you. Pierre Mariani: Sorry, I didn't understand the second part of your question. Ludna Belhassan: My second question was do you feel you have a duty towards DenizBank to have a more stable parent company such as QNB for example? Don't you think it will be more fair to DenizBank to have an owner that's more stable? Pierre Mariani: No. DenizBank is very stable. When you look at the performance it has a standalone Tier 1 ratio of more than --- CAD ratio of 15.5%. The liquidity has improved and it's a very strong liquidity situation. So we will decide if we sell it or not according to the final offer. I didn't comment on rumors about the price offered by the potential buyer etc. so we are handling the discussions and we will decide in the best interests of the shareholders. Ludna Belhassan: Okay. Thank you. Operator: (Operator Instructions). Our next question comes from Caspar van Grafhorst from ING. Please go ahead. Caspar van Grafhorst: Hi, good morning. I have two questions. First can you say anything about the profitability of the Luxemburg entity and the potential impact on the Tier 1 that's been issued out of the Luxemburg entity? And the second question is if all the sales have been executed what will be the commercial existence of Dexia SA? Is it a rundown bank basically or are there still viable commercial activities in the Group? Pierre Mariani: Sorry, once again, I didn't get completely the second part of your question so I will answer the first one. The profitability of Dexia -- the impact on Tier 1 will be extremely limited because the sale of Dexia BIL, if completed with the perimeter we decided and we agreed with Precision Capital, will lead to something close to neutral or slightly above book value. It will depend on the treatment of a few accounting items we are still finalizing but it should be very limited on Tier 1 linked to the price of the transaction. Of course there will be a release of risk-weighted assets and that's already included in the pro forma figures that are in the document we have commented a few minutes ago. When all the pending transactions will be completed there will be an impact of 0.8% or between 0.8% and 1% on the final Tier 1 thanks to the release of risk-weighted assets linked to BIL on one side and Dexia Municipal Agency on the other side. So when the Group, the remaining Group will have two elements, main elements. The first one is the portfolio. The second one is the assets of the three main subsidiaries that will be Dexia Crediop, Dexia Sabadell

11 and DKD, the funding vehicle. It will be a total of EUR250b, close to EUR250b of assets. A key element on the viability of the Group is the combination of the grant of the EUR90b funding guarantees. Without funding the questions are not -- couldn't even be asked and that's obvious since October. And of course the key element of the profitability will be -- one key element will be of course the cost of the State guarantees. We are now in a temporary situation with a temporary guarantee that obeys to certain rules imposed by the European Commission. When we'll be in a situation when all the activities will be sold, operating activities will be sold and where the financing activities of the remaining Group will be definitely reduced and very significantly reduced compared to what it was in the past, we'll be in a different category. But as we mentioned in the press release, these are very two elements of the financing costs of the Group because we still consider that the overall quality of the remaining Legacy assets are still good compared to -- contrary to what we are seeing here and then. But the remaining Legacy assets are good and so we don't expect any impact on the cost of risk of this remaining Group except in a further deterioration of the eurozone situation, but that's not the central assumptions we've made until now. Operator: (Operator Instructions). We will now take our next question from Estelle from LBPAM. Please go ahead. Unidentified Participant: Hello everybody. I don't know if I can ask a question about Dexma and the new Dexma it is going to be. I would like to know, I think that the new Dexma has to be guaranteed by the French State and do you have an idea of what will be the cost of that guarantee for the new Dexma? Pierre Mariani: So Dexma will not be guaranteed by the French State. Unidentified Participant: Okay. Pierre Mariani: But it will be owned by a public vehicle whose main shareholder will be the French State, La Banque Postale and Dexia and Caisse des Depots et Consignations. Unidentified Participant: Okay. Okay, thank you very much. Operator: Thank you. We will now take our next question from Caspar van Grafhorst from ING. Please go ahead. Caspar van Grafhorst: Hi, this is Caspar van Grafhorst again. One additional question on the Luxemburg entity. My first question was more on Luxemburg and if it has issued a hybrid security that's linked to the profitability of the Company. So can you -- will this hybrid security go with the sale of Dexia Bank Luxemburg to the new owners? And what is the profitability in 2011 of the Luxemburg entity which will have a consequence on this hybrid security?

12 Pierre Mariani: Okay. I'll leave the floor to Philippe. Philippe Rucheton: So for the time being in the discussions we have, the hybrid Tier 1 issued by DBL should follow with DBL and should be sold with DBL. Caspar van Grafhorst: And the profitability is there in 2011 that it will pay its coupon, it will be forced to pay its coupon? Philippe Rucheton: I think that the Board which is going to decide about the results of BIL is not yet. It's planned for -- I don't know very exactly what time it's planned. And so it's -- and then it will be a decision. As you know perfectly, for the time being DBL is a subsidiary of Dexia. We have, and it was mentioned before, that globally for the Group we cannot -- we are not going to pay coupons provided the Bank is within the Group and this later will have to be decided as well by the European Commission. The sale of DBL is something which will have also to be approved by the European Commission and the European Commission can decide about some different stock. As you know, the European Commission always, if there is a legal commitment to pay because the trigger is on, of course then the European Commission cannot go and push a company to break the law and the contract. But otherwise this is the decision of the European Commission to -- Caspar van Grafhorst: But you cannot say yet if the company is profitable in general terms over the last year? Philippe Rucheton: As I said, it's something which is going to be disclosed at the time that we publish the results, but, as you know, DBL has itself some Greek bonds. Caspar van Grafhorst: Sorry? DBL is -- Philippe Rucheton: Has itself some Greek bonds. Caspar van Grafhorst: Okay, great. And that's published in its own annual report of last year probably? Philippe Rucheton: Yes. Caspar van Grafhorst: Sorry? Philippe Rucheton: Yes. Caspar van Grafhorst: Okay. Okay, thank you very much. Operator: Thank you. We will now take our next question from Dirk Peeters from KBC Securities. Dirk Peeters: Hi. I have three questions actually. The first one is with reference to the IFRS equity, are there any statutory or regulatory requirements that you should recapitalize given a negative IFRS equity?

13 Then secondly I would also like to know some about your plans from Mr. Mariani and Mr. Rucheton regarding their mandates, knowing that there's quite some difficulty to find replacements? And then thirdly, when looking at Dexma I see what the realized losses, EUR65b of assets that are going and EUR12.5b of funding that's being provided. Could you also shed some light on what is happening for instance with the AFS reserve or other assets that may be of concern to the shareholders of the Dexia Group? Thank you. Pierre Mariani: IFRS equity, there is no requirements to recap. It's consolidated accounts and the AFS reserve is not an element that should justify any recapitalization. On plans of management I don't understand exactly because the CEO position is a very interesting and attractive one and should attract candidates if any need. But I'm not the right person to ask the question. You should reverse this question to the shareholders. And on DMA, EUR60b of assets, what is the -- Philippe Rucheton: I don't have -- I will try to get back to you on the AFS reserve, it's not very significant. Pierre Mariani: It's very limited. Philippe Rucheton: It's not very significant so we are going to get back to you but it's very limited. Dirk Peeters: Okay. Thank you. Operator: We'll now take our next question from Marc Leemans from Bank Degroof. Please go ahead. Marc Leemans: Thank you. Good morning gentlemen. You said that the combined Crediop, Sabadell and DKD have EUR250b in assets. Could you also shed some light on what the remaining equity is in those three businesses? Pierre Mariani: I don't understand your question because I said there was two elements, there was Crediop, DKD and Sabadell on the one side, and the Legacy portfolio on the other side. So it's not -- the EUR250m are composed of three elements. The first one -- two elements. The first one is Crediop, DKD and Sabadell, and the rest is the Legacy division. Marc Leemans: Okay, sure. Pierre Mariani: The existing bonds, that will be detailed in our -- the exposure by country will be analyzed in our annual report. Marc Leemans: What's the equity in the three remaining banks?

14 Philippe Rucheton: I think if you look at the, at our consolidated numbers, we have here, since we already account for the sale and the results of the sales of all the other entities, but for Deniz which is yet to be decided, it means that at the time of the actual sales there should be a marginal impact on the equity. There is one significant impact which could occur which would be if and when Deniz is sold. Then after that you have the consolidated equity of the Group which is with Dexia SA, DCL, DKD, Crediop and Sabadell. And now the allocation of capital between the entities is something which I would say is not so much relevant. So you can have a clue about which kind of equity will have the Group for these I would say four main entities. Marc Leemans: Okay. Alright, thanks. Operator: Thank you. (Operator Instructions). We have no further questions at this time. Pierre Mariani: Thank you very much. If there is no questions, this conference call is over and I thank you very much to all of you who attended it. Thank you. Bye. Operator: That will conclude today's conference call. Thank you for your participation ladies and gentlemen. You may now disconnect.