NET BANKING INCOME in millions of euros in billions of euros as of December 31
In this climate, Natexis Banques Populaires delivered an excellent performance, with each of its core businesses achieving significant growth compared with the previous year: n Net banking income totaled €2,708 million, an increase of 9% on the previous year. Net banking income generated by the core businesses came to €2,588 million, an increase of 8%.
Personal risk premium income amounted to €109 million, an increase of 25%.The main contributors to this growth were personal accident policies, launched in the final quarter of 2003, and Sécuri+/Pro products.
Factored receivables rose by 13% to €10.9 billion, with the contribution from German subsidiary VR-Factorem representing one third of this growth.
Net banking income rose by 4% to €102.2 million despite a significant contraction in commission rates, caused by a growing weighting to major accounts, particularly in confidential contracts, coupled with a general erosion in rates due to competitive pressure.
n The proprietary portfolio and other activities contributed net banking income of €53.8 million compared with €27.5 million in 2003. Growth was driven mostly by the preferred stock issuance companies and a rise in value of treasury stock held.
Corporate France saw a sharp decrease in provisions. Apart from a decline in specific provisions, 2004 also benefited from a reversal of industry provisions amounting to almost €9 million due to an improvement in client rating systems, while 2003 suffered a large provision charge for the potential risk arising on some major European borrowers.
ANALYSIS OF INCOME BEFORE EXCEPTIONAL ITEMS AND TAX BY CORE BUSINESS
BREAKDOWN OF RISKS AND PROVISIONS AT DECEMBER 31, 2004 in millions of euros Specific Country Total Provisions Provisions Provisions Total Geographic area credit risks risks risks for specific for country for industry provisions
VaR In addition to these standard metrics, Natexis Banques Populaires also uses the Value at Risk (VaR) method. It uses Riskmanager software developed by Riskmetrics to perform historical VaR calculations designed to quantify the risk of losses from capital markets activities, using conservative assumptions. VaR calculations are based on one year's historical data, a one-day potential loss horizon and a 99% confidence level.
System improvements The market risk management system covers the capital markets activities conducted by Natexis Banques Populaires and its subsidiaries. The improvement program launched by Natexis Banques Populaires in 2002 continued during 2004. Improvements concerned organization, procedures and risk measurement.
n Further improvements to the qualitative limits granted to each business line.
n Structural currency risk, which is monitored by the ALM Committee.
Securities held under resale agreements – chiefly government securities – remained stable during the year, after growth in this business during the previous three years.These assets are financed by securities delivered under repurchase agreements, recorded as liabilities.
Having already raised its EMTS issuance program from €5 to €10 billion in 2003, Natexis Banques Populaires once again focused on this type of debt which is particularly sought after by international investors, with the aim of boosting its sources of financing outside France. EMTNs in issue rose from €4.8 billion at December 31, 2003 to over €7 billion at
n Continue the drive for efficiency by investing in people and technology. However, expenses will not grow nearly as fast as revenues.
Liabilities & shareholders’equity in millions of euros note 2004 2003 2002
2.2 – PROVISIONS Since 2000, Natexis Banques Populaires provides for loan losses at three levels: A – SPECIFIC PROVISIONS
A – SECURITIES TRANSACTIONS (TRADING ACCOUNT SECURITIES, SECURITIES HELD FOR SALE, DEBT SECURITIES HELD FOR INVESTMENT) Securities are classified according to the purpose of the transaction regardless of their legal form (equities, bonds and notes, treasury bills, certificates of deposit, negotiable instruments, money market securities, etc.), based on the following rules: n Trading account securities:these are securities traded on liquid markets which are bought or sold with the intention of reselling or repurchasing them within a short period.They are carried in the balance sheet at cost, including transaction expenses and accrued interest.At the period-end, they are marked to market and the resulting unrealized gain or loss is recognized as income or expense in the income statement.Trading account securities that are still in the portfolio six months from the date of acquisition are transferred to “securities held for sale” at their market price on the transfer date.
Non-performing loans 86 86 90 Accrued interest receivable 277 314 571 Provisions for loan losses (48) (59) (62)
Natexis Private Equity and subsidiaries 1 (3) - 16 18 21
The results of this method were corroborated by standard market comparisons, restated net asset value, etc.
Provisions for off-balance sheet commitments 11 1 (2) (7) 5 8
Provisions for real estate development risks 5 2 (1) - (5) 1
(2)Including: Change of method net of deferred tax following first-time adoption of standard CRC 2002-03 (7) Change of method net of deferred tax relating to liquidity risk reserves of insurance companies, as provided for in decree 2003-1236 and opinion 2004-B issued by the CNC Urgent Issues Task Force (96) Reversal of liquidity risk reserves in 2003 through shareholders' equity in the amount of the opening restatement 96 Total (7)
Coface's buyout of the minority interests in Unistrat (13) Dilution of Natexis Private Equity's percentage interest in FCPR Industrie. 9 Dilution of Nem2's percentage interests in Natexis Capital Structurant following the sale of shares 4 Buyout of Line Bourse minority interests (6) Total (30)
2002 figures include Coface Group companies as of July 1, 2002.
Provisions for contingencies 73 81 147 Provisions for guarantees 9 4 4
Loans and advances to banks 12,604 11,054 17,415 3,121 - 44,194
COFACE INTERCREDIT SLOVENIA (27) Credit information and management 100 75 60 44 60 44
COFACE SCRL Credit information and management (20) (20) (20) (20) 100 98
COFACERATING.COM Credit information and management 100 100 100 98 100 98
CREDITORS INFORMATION CO LTD Credit information and management 100 100 - - - -
REACOMEX Credit insurance and services (1) (1) (1) (1) 100 98
VISCONTEA COFACE Credit insurance and services 100 100 100 98 100 98
SUD EST CROISSANCE Private equity (17) (17) (17) (17) 25 25 *Consolidated on a proportional basis.
(9) After transfer of venture capital fund management business from Spef Venture.
n As described in note 9 to the consolidated financial statements, the Natexis Banques Populaires group reviewed its material intangible assets and goodwill recorded in the consolidated balance sheet, assisted by a firm of independent valuers.As part of our assessment of the significant estimates used for preparing the consolidated financial statements, we obtained an understanding of the conclusions provided by the firm of independent valuers and verified that they had been taken into consideration in preparing the consolidated balance sheet at December 31, 2004.
Interest income 17 3,807 3,874 5,452 Transactions with financial institutions 1,949 2,051 2,568 Customer transactions 1,154 1,114 1,944 Finance lease transactions 13 1 Operating lease transactions 5 1 Bonds and other fixed-income securities 476 492 673
Financial Information Parent company financial statements 1.23 – FUND FOR GENERAL BANKING RISKS (FGBR) A fund for general banking risks, consisting of amounts set aside from post-tax income, completes the range of provisions for general risks.
n Non-consolidated investments are valued individually at the lower of cost and fair value at the year end. Fair value is determined on the basis of criteria such as restated net asset value and profitability.
Fixed assets of the former BFCE are carried in the balance sheet at their fair value as determined at the time of BFCE’s acquisition by Crédit National.
Government securities and equivalent 5,775 4,088 4,874 Trading account securities 3,471 1,798 1,113 Securities held for sale 1,890 1,833 2,867 Accrued interest receivable 59 66 117
C) Other COFACE 12,860,503 646,383,735.83 NATEXIS ASSURANCES 5,246,967 496,842,974.06 VAL "A" 1,640,000 276,872,875.00 NATEXIS IMMO EXPLOITATION 7,674,462 124,002,112.22 AUXILIAIRE ANTIN 8,338,449 121,602,164.53 NATEXIS ARBITRAGE 4,019,846 60,614,602.32 NATEXIS ALTAIR 6,274,985 14,445,332.68 LINEBOURSE 1,166,227 12,045,694.86 FINANCIERE CLADEL 607,893 10,099,292.29 NATEXIS IMMO DEVELOPPEMENT 92,674 6,775,627.22 SLIB 748,693 12,696,599.52 SCI HAUSSMANN 90 1,809 2,757,802.72 SAMIC - Société Anonyme Monaco International Computer 756 2,040,718.40 NATEXIS IMMO PLACEMENT 89,607 1,241,182.31 CO-ASSUR 2,494 282,570.47 SCI ANTIN HAUSSMANN 18 274,408.23 INVEST ALPHA 14,994 228,582.06 INVEST DELTA 14,994 228,582.06 TURBO SA 8,166 126,847.48 VALMY LIBERTE CONSEIL 2,476 67,104.78 NATEXIS FORMATION 3,494 55,904.00 NXBP 1 2,590 39,484.30 VAL "B" 2,494 38,416.68 CRENINVEST 7 2,494 38,020.78 SDGP 38 2,493 37,893.60 SDGP 41 2,493 37,893.60 SDGP 43 2,493 37,893.60 SDGP 45 2,493 37,893.60 SAS MONTMARTRE 1 2,500 34,166.83 INVEST GAMMA 2,494 32,807.63 INVEST OMEGA 2,494 25,744.43 SEMA ENGHIEN LES BAINS 1,500 22,867.35 GIE RESTAUPRISE 14,740 22,470.99
NBP PREFERRED CAPITAL 3 1251, avenue of the Americas - NEW YORK 10020 211,500 USD (40) USD 100.00% 8,444 8,444 - - 14,265 USD 14,226 USD - *
SLIB 12, rue Auber - 75009 PARIS 11,979 EUR 3,552 EUR 100.00% 12,697 12,697 1,325 - 16,013 EUR (11,583) EUR - * SOCIETE FINANCIERE BFCE 5-7 rue de Monttessuy - 75007 PARIS 92,308 EUR 56,383 EUR 100.00% 9
in millions of euros Revaluation reserve for Provisions for Accelerated Total depreciable assets investment depreciation
in millions of euros Common Additional Legal General Long-term Other Retained Total stock paid-in reserve reserve capital reserves earnings capital gains reserve
As required by article 2 of standard CRC 2004-16, the fair value of futures and forward contracts at December 31, 2004 was €(176) million and the fair value of options was €(34) million.
Guarantees given on behalf of 17,979 16,628 15,669 Financial institutions 2,020 1,344 1,859
Income after tax, depreciation, amortization and provisions (5.40) 1.68 4.34 4.18 4.43
Report of the Statutory Auditors on the Chairman’s report on internal control over financial reporting 204
The double voting rights cease ipso jure if the shares are converted to bearer shares or transferred to another name, save in the case of transfer arising upon inheritance, division of estate between divorcing spouses or gifts inter vivos to a spouse or other person of an eligible degree of relationship.
Any natural or legal person, acting either alone or in concert with other natural or legal persons, that comes to hold or ceases to hold a number of shares representing 1% of the voting rights or any further multiple thereof, must, no later than fifteen days after the purchase or sale, advise the Company by recorded delivery mail of the number of voting rights held.
TRADING IN THE COMPANY’S OWN SHARES (SIXTH RESOLUTION) The Board of Directors is seeking authority to trade in the company’s own shares under the new terms and conditions set out in European Directive 2003/6/EC of January 28, 2003, which came into effect on October 13, 2004, and in European regulation 2273/2003 of December 22, 2003.
However, under paragraph 1 of article L225-129-6 of the French Commercial Code as amended by the law of June 24, 2004, whenever the shareholders authorize the Board of Directors to issue new shares for cash in accordance with article L225-129-2 of the French Commercial Code, except where arising from a previous issue of securities conferring rights in the capital stock, they are also required to vote on a resolution authorizing employee share issues under the provisions of article L443-5 of the French Employment Code (Code du travail).
Summary: the purpose of this resolution is to set a dividend of €3.30 per share.
– less the balance held on retained earnings in the sum of €(12,749,384.87)
Each option shall entitle the holder, under the terms and conditions provided for by law, to subscribe for or purchase one share in the company.
Options that are not exercised within seven years from the date of grant shall lapse.
Summary: the purpose of this resolution is to authorize the Board of Directors to make one or more share issues restricted to employees in accordance with the provisions of article L225-129-6 of the French Commercial Code
This authority constitutes ipso jure waiver by the shareholders of any pre-emptive rights over the shares to be issued to employees pursuant to this resolution.
The parent company financial statements for the year ended December 31, 2004, as approved by the Board of Directors, were audited by us in accordance with the professional standards applied in France. We expressed an unqualified opinion on those financial statements.Our report contained an emphasis of matter paragraph concerning a change in method of accounting for long service awards as described in paragraph 17 of the section on accounting policies and valuation methods in the notes to the financial statements.