The general economic and market conditions during the 2nd quarter of 2002 saw a continuation, and, indeed an aggravation, of the uncertainties that had characterized the first quarter. While Dexiaâ€™s businesses were not immune from these trends, they did not have a significant adverse effect on the overall results of operations. It is once again clear that market fluctuations have only a moderate impact on Dexia and do not seriously imperil its overall profitability.
Revenues for the 2nd quarter of 2002 of EUR 1,442 Million, showed a marked improvement (+8,0%) over the preceding quarter. Excluding extraordinary and nonrecurring revenues, growth was +4.2%. This can be explained, among other things, by a very strong performance in the Groupâ€™s principal line of business, where underlying revenues grew by +1.3% in a single quarter, but also, and especially, by a comeback of Retail Financial Services (+9,4%). As to the Investment Management Services, despite an unfavorable market climate, the decline in their revenues was limited to â€“ 3.7%.
Operating Expenses amounted to EUR 805 Million, slightly ahead (+1.0%) of the 1st quarter. However, when extraordinary and nonrecurring charges are excluded (relating to provisions for the reorganisation of Dexia Bank Nederland in the 2nd quarter), they showed a strong decrease of -1,3% during the quarter. This shows the effect of the actions undertaken since the beginning of the year, aimed at containing annual operating expenses at a level below that of 2001 in absolute terms, are beginning to show results, in particular, thanks to the synergies resulting from the integration of Artesia. The quarterly cost base is now below what it was in the first quarter of 2001 (on a comparable basis).
Gross Operating Income was EUR 637 Million, or an improvement of +18.4%. Underlying growth (i.e. excluding exceptional and nonrecurring items) was +13.1%. The trend of the underlying gross operating income for the last 6 quarters, indicated in the table below, shows Dexiaâ€™s ability to react alertly in the area of costs (which have been declining during the last three quarters), and also shows that, while the revenues have varied, they have done so only to a minor degree compared to the banking industry in general, in a context that has changed radically during the period. This is due to the remarkable resilience of revenues from the Groupâ€™s first line of business, which is generally insensitive to economic cycles.
Operating Income was EUR 542 Million, or an improvement of +7.1%. Excluding extraordinary nonrecurring items, it has been stable for the last 2 quarters, at approximately EUR 449 Million.
Asset under Management went down by â€“6.5% (or EUR- 5.6 billion) during the second quarter. They stood at EUR 80.5 billion at June 30, 2002. This drop largely stemmed from the decline of market valuations (EUR- 5.3 billion, or â€“6.2%), net money outflows being limited to EUR â€“0.3 billion (or â€“0.4%) over the quarter. On the whole of the half year, net new money was EUR +0.7 billion (+0.8%). The drop in outstandings (EUR- 3.9 billion or â€“4.6% over the first half) thus stemmed from the market effect (EUR- 4.6 billion or â€“5.5%), compensated by the good activity of the collective and institutional asset management units, generating together EUR +1.0 billion of new money (+1.6%) during the first half. This performance shows the contra cyclical features of the institutional management sector, where a high proportion of 'alternative management' mandates exist, and also underlines the dynamism of the asset gathering activity in the networks.
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(source: Dexia SA)