Commercial banking - France/international coverage - Loans and credits - Flow and cash management
1 PRESENTATION OF NATIXIS 2010 Key fi gures 1.3.4 INCOME BEFORE TAX BY BUSINESS
STEPPING UP BALANCE SHEET ROTATION TO OPTIMIZE THE USE OF CAPITAL
This move particularly affected the “Project and Process Management” and “Monitoring and Analysis” teams (previously reporting to the Head of Capital Markets, a position that has since been eliminated), Credit Portfolio Management, the Restructuring and Special Affairs Department, and the unit in charge of fi rst-level analysis of institutional clients.
The Corporate and Institutional Relations Department provides global coverage of large corporate clients, fi nancial institutions and the public sector, for all products and services offered by Natixis, ranging from conventional loans to the most sophisticated deals set up with the business lines.
FIC&T employs over 600 people in Europe (Paris, London, Milan, Madrid, Frankfurt, etc.), Singapore, Tokyo, Hong Kong and New York, and covers both sales and trading functions.
Business was brisk in 2010, with growth well-balanced between Europe (45%) and the Asia and emerging countries area (55%).
The recovery of the global asset management market continued in 2010, but was weaker than expected due to sluggish economic growth, the euro crisis and volatility in the capital markets. Assets under management reached €538 billion in 2010 versus €505.2 billion in 2009. This growth was affected by the strong outfl ows in money-market products in Europe that hit the entire market.
New collective products, suited to the “post-crisis” period, were launched in the fi xed-income, equities and diversifi ed management segments. The range of packaged formula funds for the Banque Populaire and Caisse d’Epargne networks was expanded. A “global macro” alternative management range was launched in partnership with H
The health and benefi t protection insurance business again fared well in 2010, lifting premiums by 22% to €381 million. Natixis continued to roll out its borrower insurance offer, which covers conventional loans, as well as consumer loans and Natixis leasing products, distributed by the Banque Populaire and Caisse d’Epargne networks. Payment protection insurance accounted for 54% of health and benefi t protection insurance premiums in 2010.
Further progress was made In November 2010 when Banque Privée 1818 and Rothschild & Cie Gestion agreed to merge the platforms of 1818 Partenaires and Sélection R. The new entity will be called Sélection 1818 and will be 66%-owned by Banque Privée 1818. With €5.9 billion assets under management, and with one IWMA already a client of one of the two platforms, the new entity will be an uncontested benchmark in the sector.
● Eagle: A spin-off of TIF Ventures, a Singapore government private equity structure, Eagle Asia Partners was founded in 2007 by five experienced professionals with a strong track record. With its $120 million fund, it operates in all Asian countries, predominantly in China, and across several private equity strategies (buyout, expansion capital, etc.), thus offering increased diversification while tapping into the region’s growth on the small- to mid-market segment.
2010 was also a year of big changes for specialist subsidiary MCI, which took over BPCE Group’s Sofi ca business.
As a pioneer in solidarity employee savings, Natixis held on to its top spot on this market via Natixis Asset Management, with a 48.4% market share (source: Finansol 2010).
Boosted by a sharply rising investment rental property market, property developer fi nancing exceeded €3 billion in new loans in 2010. The Caisses d’Epargne fi nanced more than 500 real estate transactions representing 7,600 residential properties.
Partnering with UNIOPSS (1), FEGAPEI (2) and FNOGEC (3), Caisse d’Epargne strengthened its positions with the health, medical and social services, and private education sectors. At the same time, it continued its development among mutual companies, paid annual leave funds and approved organizations that collect company contributions.
(2) National Federation for the Management of Associations Providing Employment and Services to Mentally Disabled Persons (Fédération des établissements pour personnes handicapées mentales).
Under the terms of the Caisse d’Epargne CCI Memorandum of Understanding, Natixis undertakes to sell to BPCE or the relevant Caisse d’Epargne, in accordance with the terms and conditions defi ned below, the Caisse d’Epargne CCIs without the prior authorization of the Special General Meeting of the holders of Caisse d’Epargne CCIs, in the following circumstances: (i) in the event that BPCE’s control over Natixis ceases; (ii) any sale and/or transfer of Caisse d’Epargne CCIs for any reason whatever, including in the event of a merger or spinoff of Natixis; (iii) reform of France’s 1947 law resulting in a substantial change to the rights of CCI holders; (iv) any legislative or regulatory changes or changes in the assessment of the relevant regulators or of the Statutory Auditors of Natixis should make it necessary to increase Natixis’ influence or to alter it significantly in order to enable Natixis to continue to consolidate Caisse d’Epargne CCIs. In such an event, Natixis must submit the precise terms of the changes made necessary to BPCE and the Caisse d’Epargne concerned in order for them to be able to determine whether they should incorporate these new aspects of influence into the existing arrangements or whether they should decide to exercise their right to buy back the CCIs.
The subsidiaries and Financial Investments in Corporate and Investment Banking (CIB) businesses transferred by CNCE in 2006 provide the following services, in particular, to the Caisse d’Epargne network: ● custodial services; ● design and management of customer products (asset management, revolving credit facilities, surety bonds for borrowers, factoring and equipment lease financing, financial engineering and capital-market products, local government financing, debt management); and
No. 2 in receivables management (source: Coface Marketing Intelligence Unit – July 2010).
● The Coface Transparency Charter, implemented in 2008 in France and in all entities worldwide, made significant strides in 2010 (more than 14,000 companies had signed the Charter at December 31, 2010), thus strengthening Coface’s dialogue with businesses. The Charter commits Coface to openly discussing the Scores that it assigns them, any modifications to these scores and any new information it receives, all on simple request by the company concerned.
BPCE and Natixis agreed to put in place a mechanism to hedge Natixis against future losses and earnings volatility potentially stemming from the GAPC credit asset portfolio, represented by the Guarantee.
The breakdown of the assets covered by the Guarantee as of December 31, 2010 is as follows: (in billions of euros) Total assets 12.31.2010
The Natixis individual shareholder relations and communication platform is manned by a four-person team and has three main access points: ● a toll-free (1) number (numéro vert) (+33 800 41 41 41) available Monday to Friday from 9 a.m. to 6 p.m. (except weekends and public holidays) to answer questions about Natixis; ● a dedicated e-mail address (actionnaires@natixis.com), managed directly by the Individual Shareholder Relations team, that enables those who so wish to ask the Company questions; ● the website: www.natixis.com: − provides round-the-clock access to information about the Company,
● In addition to the partnership between Natixis and the Ecole de la Bourse, we sought to make greater use of our internal expertise and extended the range of topics discussed during the program to include climate change and sociallyresponsible investment. In an effort to make this expertise available to more of our Shareholders’ Club members, we also set up a webcast system to broadcast these Shareholders’ Club Web Conferences on the Internet, in live and downloadable format.
In accordance with Article 26 of Law 2008-649 of July 3, 2008, involving various provisions to adapt Company law to
Chairman and Chief Executive Officer of: Aventis Pharma Participation France (up to 04.30.2006) Chairman of: Biocitech Sas (since 05.24.2006), Sanofi 1 (since 05.30.2006) Chief Executive Officer of: Sanofi Aventis Europe (since 05.29.2006), Sanofi Aventis Participations (since 05.04.2006) Member of the Board of: Aventis Pharma Participation (up to 04.30.2006) Managing Directof of: Sanofi 3 (since 05.29.2006), Sanofi 4 (since 12.07.2006), Sanofi Aventis North America (since 04.30.2006) Permanent representative for Aventis Pharma France, Member of the Board of: Rhone Cooper (up to 05.31.2006) Permanent representative for Aventis Pharma Participation: Manager de Sanofi Aventis North America (up to 04.30.2006)
Chairman of the Executive Board of: Caisse d’Epargne Rhône Alpes Member of the Supervisory Board of: Ecureuil Gestion, Ecureuil Gestion FCP Permanent representative for CERA, member of the Board of: SALT Permanent representative for CERA, member of the Supervisory Board of: ARPEGE
Member of the Board of: Natixis (since August 5, 2010) Chairman of the Executive Board of: Caisse d’Epargne et de Prévoyance de Rhône Alpes (CERA) (since 07.01.2010) Chief Executive Officer of: Novacrédit, Natixis Financement (up to 11.23.2010), Natixis Consumer Finance (up to 11.23.2010) Chairman of the Supervisory Board of: Rhône-Alpes PME Gestion (since 09.20.2010) Member of the Board of: Natixis Paiements (since 10.06.2010) Permanent representative for CERA to the Supervisory Board of: GCE Business Services (since 07.19.2010), Société des Trois Vallées (since 07.19.2010) Permanent representative for CERA to the board of: Fédération Nationale des Caisses d’Epargne (since 07.19.2010)
From March 2 to July 31, 2009, he chaired the Executive Board of la Caisse Nationale des Caisses d’Epargne and was Chief Executive Offi cer of La Banque Fédérale des Banques Populaires. Since July 31, 2009, he has been Chairman of the Management Board of BPCE. He is also Chairman of the Boards of Directors of Natixis, Crédit Foncier de France and BPCE International et Outre-Mer, and Chairman of the French banking federation.
Mr. Henri Proglio, aged 61, has held various general management positions at Générale des Eaux and Vivendi, before serving as Chief Executive Offi cer of Veolia Environnement, and he has served on the Boards of Directors and the Supervisory Boards of several French fi nancial and industrial groups. Since November 2009, he has been Chairman and Chief Executive Offi cer of EDF
Member of the Board of: Natixis Vice President of the guidance and Supervisory Board of: Caisse d’Epargne Île-de-France Member of the Board of: Groupe Ecureuil Assurance, S.E.M.A.V.O. (Société d’Économie Mixte d’Aménagement du Val d’Oise) Vice President of: the French association for mayors of tourist municipalities President of: IFAC (Local Supervisors’ Training Institute) for France and Val d’Oise (non-profi t organisations)
2006 FRANCE Legal representative for HBI: chair company of Bercy Participations (SAS) Legal representative for Bercy Présidence: general Manager of H.B.I., chairman of Bercy Participations, the general managing company of Elior (SCA) Manager of: Bercy Patrimoine, MBOB (SCI), LMDB (SCI) Chairman and member of the Board of: Avenance (SAS) and Eliance (SAS) Legal representative for Avenance (SAS): chair company of Bercy Services I (SAS) and Bercy Services V (SAS) Legal representative for Elior (SCA), which chairs Elior Gestion (SAS) Member of the Supervisory Board of: Pragma Capital (S.A.) INTERNATIONAL Chairman and member of the Board of: Avenance UK Vice-President and member of the Board of: Areas (S.A.) Member of the Board of: Elior UK Ltd, Areas IbericoAmericana, Serunion (S.A.)
When a board member is appointed, his/her curriculum vitae with a career summary is sent to the other board members and to the shareholders.
Depending on its agenda, the Audit Committee also benefi ted from the presence at its various meetings of the Natixis Chief Finance and Risk Offi cer, as well as the Head of Risk, the heads of General Audit for Natixis and BPCE, the Corporate Secretary and the heads of compliance for Natixis.
The Chief Executive Offi cer subsequently set up a Senior Management Committee that he chairs, made up of the heads of Natixis’ three core businesses (Corporate and Investment Banking, Investment Solutions, Specialized Financial Services), and support functions.
An authorized proxy (namely the shareholder’s spouse or another shareholder) may always represent a shareholder at shareholders’ meetings. This proxy may not represent another person.
Note that the overall annual budget for attendance fees to be allocated to members of the Board of Directors is €500,000 (Cf. 38th resolution of the Extraordinary General Meeting of April 30, 2009).
In accordance with applicable “Professional standards concerning the governance and variable compensations of employees whose professional activities have a signifi cant impact on the company’s risk profi le” and with the provisions of Regulation 97-02 of February 21, 1997, concerning the internal control of credit institutions and investment fi rms, as amended by the Decree of December 13, 2010, the variable remuneration of Laurent Mignon will be paid as follows: ● 29% of this variable compensation will be paid in 2011, 50% of which shall be index-linked to Natixis shares; ● 71% of this variable compensation will be deferred under three years, 50% of which shall take the form of Natixis shares.
Date of the Executive Board’s decision Nov. 17, 2004 Nov. 15, 2005 Jan. 29, 2007 Jan. 21, 2008
Many external standards apply due to the diversity of business lines in which Natixis operates. The main standards are as follows: ● as a credit institution, Natixis is governed by the provisions of the French Monetary and Financial Code (which encompasses the provisions of the French Banking Act of January 24, 1984 and the French Financial Activity Modernization Act of July 2, 1996) and more specifically, it is subject to the specific banking guidelines resulting from the CRBF rule relating to internal control; ● as a provider of investment services, Natixis is subject to the provisions set out by the French financial market regulator (AMF), and especially the code of good conduct concerning market intervention and customer relations; ● Natixis complies with the terms of the best practices published by professional associations whenever the regulator recommends or enforces their application (for example, the code of ethics and compliance for Financial Analysts, made mandatory by the AMF); ● Natixis applies anti-money laundering and terrorist financing regulations, under the control of France’s Prudential Supervisory Authority (Autorité de Contrôle Prudentiel); ● regarding its foreign branches and subsidiaries, Natixis applies the Group’s organization standards and also the regulations defined by the regulators in the markets in which Natixis has offices (in particular, the Financial Services Authority in the United Kingdom, the Bundesanstalt für Finanzdienstleistungsaufsicht/BAFIN in Germany, the Banca Centrale in Italy, the Financial Supervisory Authority in Japan, the Federal Reserve, the National Association of Securities Dealers and the Securities and Exchange Commission in the United States, the Financial Supervisory Commission in Hong Kong, the Commission de Surveillance du Secteur Financier in Luxembourg, the Irish Financial Services Regulatory Authority in Ireland), in cases where the operations exercised locally are subject to these regulations;
● Natixis complies with recommendations from international organizations dealing with prudential regulation issues for international banks, the most important being the Basel Committee.
In 2010, the main actions focused on: ● reorganizing the Department starting in September 2010. It is now made up of “Anti-Money Laundering,” “AntiTerrorism, ” “Anti-Fraud Coordination” and “Know-YourCustomers ” teams; ● updating global money laundering and know-your-customers procedures. A tool was set up to qualify each client or transaction according to risk criteria. It will be rolled out in2011; ● reviewing “Client” files so as to comply with regulatory obligations regarding financial security. Clients presenting a high risk of money laundering were subject to an opinion or a pre-opinion based on updated documentation. All these files were dealt with by September 4, 2010. Files with a midlevel risk are currently being reviewed and should be finalized by March 31, 2011. Low-risk file will then be processed in a similar manner before June 30, 2011; ● employee training. Employee training has been broadened with the addition of an e-learning module originating from the CFBP training programs. As of December 31, 2010, 84% of Natixis employees had taken this training. As a complement, they took part in a series of presentations that tackled more specialized subjects.
He/she also participates in certain Committees responsible for the Bank’s controls and operational risks, in particular the Natixis Operational Risk Committee.
Governance of the IT Systems Security and Business Continuity function is ensured by the following Committees: ● a strategic ITSS Committee, which is Natixis’ highest-level decision-making body in the field of IT security and business continuity. This Committee is chaired by a member of the Senior Management Committee and is responsible for approving the annual security plan prepared for Natixis. All business lines are featured in it. No meetings were held in 2010; ● an IT Systems Security Coordination Committee that regularly brings together the various participants involved in security, and especially the Heads of ITSS within subsidiaries. It is responsible for monitoring the annual security plan, coordinating and steering all the function’s actions and pooling security projects. It met four times in 2010; ● a Plenary Business Continuity Committee that regularly brings together all persons involved in business continuity to ensure that continuity actions are monitored. This Committee met twice in 2010; ● Business Line or Subsidiary Security Committees that steer IT security and business continuity actions for their subsidiary or business line.
In addition to the individual decision-making circuit, Natixis possesses overall risk limits. Implementation of sector/activitybased risk policies initiated in 2010 will continue in 2011.
The credit risk management system is based on the advanced internal ratings based approach. Natixis received approval from France’s Prudential Supervisory Authority to use this approach for calculating regulatory capital requirements as from September 30, 2010.
An IT system allows for an overall consolidation of limits and credit exposures across a scope covering all of Natixis’ exposure to credit risk and most of that of its subsidiaries. Natixis counterparties are identifi ed in a counterparty database according to a dedicated management procedure: counterparties are allocated a unique code, a code for the regulatory group to which they belong and an indicator showing their rank within the group.
The structural balance sheet risks of Natixis (the parent company), are managed and monitored under the authority of the Asset/Liability Management Committee (the ALM Committee), which is chaired by the Chief Executive Offi cer and attended by members of the Corporate and Investment Banking division, the Finance and Risk Department and BPCE. This highest-level Committee meets every two months and its main responsibilities are to: ● validate the main asset/liability management rules (including those relating to internal liquidity pricing), agreements, indicators and limits (including liquidity amounts allocated to the business lines as part of budgetary procedure) for monitoring, managing and supervising balance sheet structural risks, all within the standard ALM framework set up by BPCE; ● validate overall funding policy; ● monitor the main balance sheet aggregates and changes affecting them; ● monitor structural balance sheet risks and compliance with limits.
Natixis’ structural forex risk for the most part concerns structural positions on the US dollar refl ecting the presence of foreign branches and subsidiaries funded in this currency within Natixis’ scope of consolidation. Given the existence of weighted risks denominated in currencies other than the euro (in particular the US dollar), the ALM Committee has approved currency purchases to fund long-term investments in order to immunize the bank’s capital-adequacy ratio against changes in the euro-US dollar exchange rate.
Apart from the consolidation system, Natixis continues to use the interface implemented in 2009 for automatic consolidation data feeds. The kinematics of controls, particularly those linked to the interfacing of Natixis consolidated data with the BPCE system, were also strengthened in 2010.
● as a result, Capital Markets Accounting, reporting to the Accounting Department and responsible for firstlevel monthly production and control work, centralizes all reconciliation work regarding stocks and economic and accounting NBI, with these tasks being gradually carried out in one reconciliation system; ● continuing with the controls introduced at the end of 2009, either linked to specific financial structures or transactions, or to specific subjects thus complying with the recommendations issued during previous audits; ● setting up intermediate review assignments that, aside from period-ends, enable more exhaustive analysis of certain themes or enhancement of the control systems in place.
Having set up a program of specifi c assignments in addition to the closure of accounts in 2010, the “Accounting Review” function will extend its scope, particularly as regards regulatory requirements, the aim being to defi ne and set up a control program for regulatory reports.
In our capacity as Statutory Auditors of Natixis and in accordance with Article L.225-235 of the French Commercial Code, we hereby report to you on the report prepared by the Chairman of the Board of Directors in accordance with Article L.225-37 of the French Commercial Code for the year ended December 31, 2010.
Conditions in the fi nancial markets, particularly the primary and secondary debt markets, may have a material adverse impact on Natixis
Natixis has recorded signifi cant losses on GAPC assets. The GAPC credit portfolio is currently covered by the Guarantee provided by BPCE (described in Chapter 1 of this registration document). This risk henceforth concerns a reduced volume of assets. For further information about GAPC and its assets, please refer to section [1.5] “GAPC”.
Market risk (For further information, please refer to sections [3.2.5.4] and [2.6.4]).
Overall interest rate risk, liquidity and structural foreign exchange risk (for further details please refer to sections [3.3] and [2.6.4])
As part of its trading and investment operations, Natixis takes positions in the bond, currency, commodity and equity markets, as well as in unlisted securities, real estate and other asset classes. Market volatility and trends could have a negative impact on these positions. Such losses, if signifi cant, could adversely affect Natixis’ net income and fi nancial position.
The following deductions are made: ● treasury shares held and stated at their carrying value; ● intangible assets, including set-up costs and goodwill; ● capital gains and losses for own credit risk.
● Reclassifi cation of hybrids and fair value fi ltering (5.1) (6.7) 1.5
It plays an essential role in the structure of Committees, the highest-level Committee being Natixis’ global Risk Committee.
The increase in equity exposure (“Shares”) is related to the inclusion of Cooperative Investment Certifi cates (CCIs), treated prudentially as risk-weighted assets (no longer deducted from equity) as of December 31, 2010 (see section [3.2.4] “Composition of capital”).
Other exposure recorded in the retail customer category 1,660 1,615 3,275
❚ IMPACT OF RISK-REDUCTION TECHNIQUES ON DERIVATIVES OTHER THAN CREDIT DERIVATIVES (DATA AS AT DECEMBER 31, 2010)
Natixis uses VaR calculated with numerical simulations, based on Monte Carlo-type methodology taking into account a portfolio’s possible non-linear characteristics with respect to different risk factors. Calculation methods are harmonized using a single calculation tool.
To deal with this risk, ABP Vie has only sold policies without a minimum guaranteed rate in recent years: more than 90% of its policies do not have a minimum guaranteed rate. The minimum guaranteed rate averages 0.18%.
Credit risk concerns the risk of loss generated by the portfolio of insurance policies.
Coface maintains a diversifi ed credit risk portfolio, in order to minimise the risk that a default by a debtor, a slowdown in a particular sector of activity or an adverse event in a given country might exert a disproportionate impact on its overall claims expense. Furthermore, the fact that the great majority of Coface’s risks are short-term (94% of total outstandings) allows it to reduce the risk covered for a debtor or a group of debtors relatively quickly after recognizing a decrease in their solvency.
Coface is exposed to fi nancial risk related to variations in net investment income and risks related to different asset classes. For each category of assets, there are stress scenarios to simulate the sharpest drop in prices in a single year, based on statistics that cover as long a period as possible. The confidence interval is 97.5%, meaning that the maximum VaR loss should only happen once every 40 years. The Group’s policy is to strictly limit fi nancial risk as measured by 3-month Value at Risk, for all the group’s fi nancial investments (excluding technical stakes)
Natixis’ net revenues stood at €6,520 million at December 31, 2010, up 9.8% compared with December 31, 2009 (up 7.6% at constant consolidation scope and exchange rates). This change factors in the substantial non-recurring income earned in 2009 by the Corporate Center (see 4.1.4.6 – Corporate Center).
Sales of provident insurance were also very brisk. The Provident Insurance business posted revenue that was up 5.3% year-on-year while sales of borrowers’ insurance were up 41.7%, driven by the network momentum in the distribution of mortgages.
(1) Corresponding to the second half-year of 2009 (see 4.1.1 Methodology).
Commissions rose 3.9% over the year, driven by growth in service commissions, notably credit management (+12.6%) and payment methods (+5.1%).
The provision for credit losses contracted by 0.8% and lost 3 percentage points with respect to outstandings compared with last year.
OVERALL PROVISION FOR CREDIT LOSSES FOR THE CIB BUSINESS (203) (1,385)
Nonetheless, throughout the year, Natixis continued its diversifi cation efforts, particularly towards its non-fi nancial clientele and reinforced coordination within Groupe BPCE.
This note is subject to a number of covenants, in particular: ● non-payment (suspension) of the coupon at a due date under certain circumstances; ● reduction in the amount of accrued interest and the principal value of the issue in the case of certain events affecting the issuer’s financial situation or certain ratios.
The subordination clause for this issue is set out below: STATUS OF THE NOTES
Net income (group share), excl. discontinued operations and restructuring costs 1,204 (2,433) (6) (153) (1,388) (318) (1,707)
Consolidated net income/(loss) – group share – per share, calculated on the basis of the average number of shares over the period excluding treasury shares and including shares that could be issued on the exercise of stock options and bonus shares 5.24 0.46 (0.60)
The balance of cash and cash equivalents consists of the net balances on cash and amounts due from central banks, as well as on demand deposits with and loans from credit institutions.
(a) Decrease/(increase) in fi nancial assets and investments in affi liates, including in particular: ● fl ows related to assets held to maturity (+€729 million); ● fl ows related to investments in consolidated affi liates (+€326 million, including the acquisition of Cicobail for -€182 million, GCE Paiement for -€31 million, buybacks of minority interests for -€41 million, and the disposal of the Private Equity entities to Axa Private Equity for +€502 million); ● fl ows related to affi liates accounted for by the equity method (-€210 million, including the increase in the subscriptions for BP and CEP corporate investment certifi cates for -€405 million and dividend payments received for +€176 million).
Only subsidiaries making a material contribution to the Group’s fi nancial statements are consolidated.
Companies controlled exclusively by Natixis are fully consolidated. Under IAS 27 (revised), control is presumed to exist when the parent has: ● ownership, directly or indirectly through subsidiaries, of more than half of the voting rights of an entity; ● power to govern the financial and operating policies of the entity under the by-laws or an agreement; ● power to appoint or remove the majority of the members of the Board of Directors or equivalent governing body; ● power to assemble the majority of voting rights at meetings of the Board of Directors or an equivalent governing body.
4FINANCIAL DATA Notes to the consolidated fi nancial statements and notes 2.3 Institutional operations
As the contributions were recognized at their net carrying amount under IFRS, no valuation adjustments have been recorded on the various assets and liabilities contributed. The difference between the acquisition cost and the Group’s interest in the net assets of the contributed entities does not constitute goodwill within the meaning of IFRS 3, since the acquisition cost takes into account the real value of the shares, while the contributions were recognized at their net carrying amount. Each of the differences observed was recognized in “consolidated reserves”.
At December 31, 2007, goodwill arising on the CCIs had been defi nitively allocated to the following valuation adjustments: ● valuation adjustments on Banques Populaires land and buildings in the amount of €102 million (Banques Populaires CCIs); ● valuation adjustments on Caisses d’Epargne land and buildings in the amount of €47 million (Caisses d’Epargne CCIs).
The change in the deferred participation liability from 2009 to 2010 can be attributed to the increase in credit spreads on debt instruments and the decrease in the liability risk provision cancelled in the consolidated fi nancial statements.
● Deconsolidation of entities in which Natixis had become a minority shareholder: − Loomis Sayles Alpha, LLC; − Loomis Sayles Multi – Strategy Alpha Master Fund, Ltd; − Loomis Sayles Multi – Strategy Alpha Fund, Ltd; − Loomis Sayles Multi – Strategy Alpha, LP; − ASG Diversifying Strategies Fund.
● Within the framework of the implementation of the tax consolidation between the US CIB division and the US Asset Management division, Natixis Global Asset Management Corporation (holding company of the US Asset Management division) was renamed Natixis US Holdings Inc. (NUSHI). NUSHI is 85%-owned by Natixis Global Asset Management Participation 1 (NGAM P1) and 15%-owned by Natixis S.A.
● Acquisition of Financière 5-7 by Natixis Private Equity, which was then incorporated into Natixis Private Equity.
● Benefits: the right to obtain a majority of the benefits of the SPE’s activities; the right to a majority of any economic benefits distributed in the form of future net cash flows, earnings, net assets or other economic benefits, or rights to the majority of residual interests.
Based on these factors, three entities were consolidated as of December 31, 2010: ● DAHLIA SICAR A; ● NPE Caspian 1A, LP; ● NPE Caspian 1B, LP.
It should be noted that at December 31, 2010, one entity was implicitly de facto consolidated, with Natixis remaining the main investor and the risks associated with the underlying assets being factored in via the valuation of the Natixis interest classifi ed under “Instruments at fair value through profi t and loss – Trading” and in respect of which provisions have been fully funded.
Changes in the fair value of derivatives relating to the effective and ineffective portion of fair value hedges are recorded in income symmetrically with changes in the fair value of the hedged items.
The section below describes the underlying principles used to value assets resulting from securitization transactions for which no market prices could be identifi ed and which were therefore measured using valuation models: US non-residential ABS CDOs
The same model was applied as in previous years, based on detailed knowledge of the characteristics of transactions and an assessment of credit risk using several inputs, including a benchmark average cumulative default rate of 30%, a recovery rate of 65% for senior underlyings, and a correlation rate of 43.6%, replacing the default distribution parameter used in previous years.
Debt originated by Natixis that is not classifi ed within fi nancial liabilities at fair value through profi t and loss is measured using the amortized cost method and recognized in the balance sheet under “Deposits from banks”, “Customer deposits”, “Debt securities in issue” or “Subordinated debt”.
At December 31, 2010, fi nancial assets at fair value primarily comprised securities and derivative instruments.
Instruments reclassifi ed within Loans and Receivables 7,160 7,209 (144) 58 59 6.6.3 FINANCIAL ASSETS PROVIDED AS SECURITY
The table below provides, by type of fi nancial instrument, a breakdown of the age of fi nancial assets which were past due but not impaired at the reporting date. It does not take into account any portfolio-based impairment losses which may be assessed.
Other operations 27 27 6.12 Deposits from banks and customer deposits
Impact on income statement (in millions of euros) Charge Reversal Net impact
j the repayments of reimbursable subordinated loans by Natixis concerned the April and August 2000 tranches for €300 million and €250 million, respectively; j ABP Vie repaid €1 5 million on undated subordinated loans maturing in June 2010.
(a) The premium paid to BPCE in respect of the guarantee given against GAPC assets classifi ed as “Loans and receivables” and “Available-for-sale fi nancial assets” is recognized in expenses pro rata to the write-back of the provisions and the discounts recognized in respect of reclassifi cations during the period.
Net charge to/reversal of insurance company technical reserves 0 (1,622) (1,622) 0 (1,687) (1,687)
(a) These correspond to sales of credit information, marketing information and receivables collection services provided by Coface subsidiaries.
Assets at fair value through profi t and loss 93,990 9,029 1 235 592 57,228 133 161,208
The following table sets out the exposure of all the Natixis’ fi nancial assets to credit risk. This exposure does not take into account guarantees, sureties, credit-default swaps, collateral OTC fi nancial instruments, the impact of netting agreements and other credit enhancements. It corresponds to the net value of the fi nancial assets on the balance sheet, after taking all writedowns into account (individually or collectively assessed).
Compensation paid under these plans is subject to presence and performance conditions.
The estimated cost of the deferred compensation is recognized on a straight-line basis over the period during which benefi ciaries must be present according to the plan, starting at the beginning of the reporting period in which the employee begins to provide the related service i.e., January 1, 2009 for compensation awarded in respect of 2009. The estimated cost recognized in the 2010 fi nancial statements is: ● €17.5 million for the portion settled in cash indexed to the price of the Natixis share; ● €7.5 million for the portion settled in Natixis shares.
Pension plans for which employees can volunatarily opt are operated by certain Natixis entities and are also classifi ed as defi ned contribution plans. These entities have a single contribution obligation (“PERCO” contribution).
i) Analysis of sensitivity to assumptions applied to defi ned benefi t plans and other long-term employee benefi ts recognized at December 31, 2010
Fédérale des Banques Populaires and Caisse Nationale des Caisses d’Epargne (1).
Total gross compensation paid to executive corporate offi cers was as follows: (in euros) 12.31.2010 12.31.2009
No stock options were awarded to executive corporate offi cers in 2010 and 2009.
The Deputy Auditors are: ● BEAS, 7-9 Villa Houssay – 92200 Neuilly-sur-Seine; ● Mr Malcolm McLarty, 1 cours Valmy – 92923 Paris La Défense Cedex; ● Mr Patrick de Cambourg, Immeuble Exaltis – 61, rue HenriRégnault – 92075 La Défense cedex.
ASAHI NVEST INVESTMENT ADVISORY CO, LTD Retail EM 49 49 49 49 Japan
LOOMIS SAYLES TRUST COMPANY,LLC (1) Asset Management FC 100 100 100 100
NATIXIS CASPIAN PRIVATE EQUITY GP, LP (1) Asset Management EM 40 40 40 40
REICH & TANG ASSET MANAGEMENT, LLC Asset Management FC 100 100 100 100
SNYDER CAPITAL MANAGEMENT, INC. Asset Management FC 100 100 100 100
NATIXIS CONSUMER FINANCE* (formerly ECRINVEST 11) Holding FC 100 100 100 100 France
COFACE NEDERLAND – SUCC (COFACE KREDIT) Insurance FC 100 100 100 100 Netherlands
(2) Removed from the consolidation scope as holding fell below the materiality threshold.
(13) Partial transfer of assets from Axeltis Ltd to Axeltis S.A.
In our opinion, the consolidated fi nancial statements give a true and fair view of the fi nancial position and the assets and liabilities of the Group of consolidated companies, and of the results of its operations for the year then ended, in accordance with IFRS as adopted by the European Union.
Commitments given to customers 18,407 19,618 23,016 23 o/w institutional operations:
● Securities held for sale: securities that are not classified as held for trading, held for investment, other long-term investments, investments in associates or investments in related corporate entities. They are reported on the balance sheet at their acquisition cost, excluding accrued interest.
Also, treasury shares held for distribution to employees are classified as held for sale and follow the corresponding rules.
In accordance with CRC regulation 2008-17 reclassifi cations from the “held for trading” to the “held for sale” and “held for investment” categories and from “held for sale” to “held for investment” are permitted in exceptional market circumstances requiring a change in strategy or when the securities concerned have ceased to be tradable on an active market since their acquisition.
Cash-settled plans indexed to the share price give rise to the recognition of a payroll expense that is evaluated taking account of the share price on the balance sheet date and the likelihood of satisfying performance/and or service requirements. Where a service requirement exists, the calculated expense is recognized on a straight-line basis over the vesting period. The compensation begins to be recognized at the beginning of the year in which the employees provide the related service.
Under regulation No. 2010-04 on transactions between related parties, Natixis has no additional information to disclose, since these transactions are either excluded from the reporting scope (wholly-owned subsidiaries), or entered into under normal market conditions.
Net gains (losses) on forward fi nancial instruments (2,329) 978 (1,567)
INTEREST-RATE INSTRUMENTS 6,009,539 4,653,018 5,878,218 On organized markets 131 344 19 Swaps
Independent audit, certifi cation & examination of the separate and consolidated accounts 5.0 5.7 5.1
Income after tax, depreciation, amortization and provisions 744,399,468.97 (467,183,610.92) (5,053,779,558.57) (2,046,308,381.66) 284,641,699.57
1.2 Agreements and commitments approved since the close of the year
On August 25, 2009, the Board of Directors approved a preliminary agreement between Natixis and BPCE designed to protect Natixis against future losses and earnings volatility resulting from the assets ring-fenced in its Workout Management Portfolio structure (GAPC).
On December 18, 2008, the Supervisory Board: ● adopted regulations for the closed collective pension scheme insofar as those regulations define the potential rights of members of the Executive Board eligible to benefit from the scheme, provided that the members were appointed to the Board between November 27, 2006 and December 15, 2008. It also closed the scheme to any new members of the Executive Board (the regulations exclude any indemnities resulting from the termination of professional relations with members of the Executive Board); ● regarding the collective scheme, agreed to continue offering in 2009 the provident insurance scheme available to the Chief Executive Officers of the Banques Populaires banks to members of Natixis’ Executive Board, as there is conclusive evidence that the scheme adapts the guarantees applicable to all former Natixis Banques Populaires personnel to the specific situation of each member; ● regarding severance pay and retirement compensation, approved the decision not to apply the provisions regarding early termination or retirement compensation arrangements for the Chief Executive Officers of the Banques Populaires banks to Natixis’ corporate officers appointed after May 1, 2005.
On June 6, 2007, the Supervisory Board of Ixis CIB, prior to the merger within Natixis, approved a service agreement between Ixis CIB, CNCE and Banque Palatine pertaining to CNCE’s transfer of operational and technical responsibility for the “Click’n Trade” site to Banque Palatine. Under the agreement CNCE remains the owner of the website and the counterparty for forward and spot transactions carried out in relation to Ixis CIB.
Social and environmental information 5.1 HUMAN RESOURCES 388 5.2 SUSTAINABLE DEVELOPMENT AND DIVERSITY 393 5.3 NRE APPENDICES – LABOR INFORMATION 397 5.4 NRE APPENDICES – ENVIRONMENTAL INFORMATION 410
In 2010, Natixis hired almost 800 employees under permanent employment contracts. Natixis’ goal is to develop its image as a leading place to work in order to attract talent and bring the best candidates on board, while fulfi lling the Company’s needs and its business lines diversity.
The France scope changed in 2010 as a result of GCE Paiements’ incorporation into Natixis Paiements in September (235 employees) and the divestment of three Private Equity companies (Ixen Partners, Natixis Investissement Partners, Initiative et Finance Gestion, for a total workforce of 27).
Total headcount (permanent and temporary staff) amounted to 22,320 contract employees and 19,576 full-time equivalent (FTE) staff at December 31, 2010.
❚ SEPTEMBER 2008 PLAN FOR ADAPTING TO THE ECONOMIC AND COMPETITIVE CONTEXT (PACEC)
Within Natixis S.A., the collective workweek is 38 hours and employees also enjoy compensatory time off in lieu of overtime. Managers employed on the basis of a fi xed number of days rather than an hourly basis work 209 days. This includes the additional work day stipulated under the French Act of June 30, 2004 designed to fund care for the elderly and disabled.
In addition, Natixis’ complementary health insurance scheme (Mutuelle de Natixis), is managed by a 50/50 team comprising Company managers and scheme members. One of the scheme’s founding principles is inter-generational solidarity between active and retired employees.
5.4.6 LAND USE – ATMOSPHERIC EMISSIONS – WATER AND POLLUTANT DISCHARGES – NOISE AND ODOR POLLUTION – WASTE PRODUCTION AND DISPOSAL (EN 19 TO 23)
The Board may also allocate exceptional compensation to the directors in the cases and subject to the conditions provided by law.
On the proposal of the Chief Executive Offi cer, the Board of Directors may appoint one to fi ve individuals selected from among the directors or outside their ranks, in charge of assisting the Chief Executive Offi cer, with the title of Deputy Chief Executive Offi cer.
In its session on August 5, 2010, the Board of Directors used the authorization that was granted to it by the Combined General Shareholders’ Meeting on May 27, 2010 pertaining to the allocation of free shares for fi nancial market professionals, having their tax residence in France, as well as certain employees falling within the scope of the deferred compensation mechanism implemented by Natixis.
Resolution No. Purpose of authorization Amount authorized Duration Date used Amount used
For the purpose of increasing the capital via the issue of ordinary shares or of any securities giving access to capital, with retention of shareholders’ preferential subscription rights €4bn 26 months 09.30.2008 €3.7bn
For the purpose of increasing the capital via the incorporation of premiums, reserves, retained earnings or other items €5bn (b) 26 months none none
On May 24, 2007, the Combined General Shareholders’ Meeting once again authorized the Natixis Executive Board to grant stock options to some, or all, employees or corporate offi cers of the Company or of related companies, within th meaning of Article L.225-180 of the French Commercial Code. This authorization also involved a maximum of 10,000,000 shares (i.e. 15,400,000 shares following the adjustment resulting from the September 2008 capital increase).
The unexercised options from the September 10, 2003 plan expired on September 10, 2010.
Employee shareholding (ESOPs and Bonus share grant plan) 0.96% 0.55% 0.53%
6 LEGAL INFORMATION Purpose and draft resolutions submitted to the General Shareholders’ Meeting of May 26, 2011 6.5 Purpose and draft resolutions submitted to the General Shareholders’ Meeting of May 26, 2011 6.5.1 REPORT OF THE BOARD OF DIRECTORS ON THE RESOLUTIONS SUBMITTED TO THE GENERAL SHAREHOLDERS’ MEETING
A total of 23 resolutions will be submitted to the shareholders at the Combined General Shareholders’ Meeting to be held at 3 p.m. on May 26, 2011 at the Carrousel du Louvre – 99, rue de Rivoli 75001 Paris. The resolutions break down into two groups: ● the first 10 resolutions (from 1 to 10) concern ordinary business for fiscal year 2010 (approval of the financial statements and related party agreements), the ratification of the members co-opted to the Board of Directors since the previous General Shareholders’ Meeting and trading by the Company in its own shares; ● the subsequent 13 resolutions (from 11 to 23) concern extraordinary business and relate to the authorization to implement a reverse split of the Company’s shares, the renewal of all of the financial authorizations and delegated powers intended to provide your Company with the financial resources to grow and to successfully implement its strategy, and amendments to update the bylaws.
No. Subject Duration Reasons for possible uses of the delegated power 10 Authorization to trade in shares of the Company 18 months Possible objectives for share buybacks by your Company
− Any other goal authorized or that may be authorized by law or regulations in effect.
26 months May be used by your Board of Directors to decide on these issues on one or more occasions 14 Issue of shares and/or securities giving access to capital* of the Company and/or fi nancial instruments entitling the allotment of debt securities* that eliminate preferential subscription rights*
− Possibility of authorizing the issue of securities giving access to the capital of the Subsidiaries* of your Company
− that these securities will take the form of complex bonds, within the meaning used by the stock market authorities (for example, because of their terms and conditions of redemption or remuneration or other rights such as indexing or options); or
The shareholders hereby resolve to appropriate the distributable earnings as follows: To the legal reserve (5% of the earnings for the fi scal year) €9,200,482.42
− allot freely some or all of the shares, or in the case of securities giving access to the share capital, securities whose issuance has been decided but which have not been subscribed,
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for extraordinary business, having reviewed the report of the Board of Directors and the special report by the Statutory Auditors, and in accordance with the provisions of Articles L.225-129 and following of the French Commercial Code, in particular Articles L.225-129-2, L.225-135, L.225-136 and L.225-148 of said Code, and with the provisions of Articles L.228-91 and following of said Code: 1) delegates to the Board of Directors, with the right to sub-delegate said power in accordance with the law, its authorization to decide to carry out increases in the share capital, on one or more occasions, in France or abroad, in the proportions and at the timing of its choosing, subject to the provisions of Article L.233-32 of the French Commercial Code, by issuing, by public offer, in euros or in any other currency or currency unit established by reference to more than one currency, shares (other than preferred shares) or securities giving access to the capital of the Company (whether in the form of new or existing shares), issued for valuable consideration or free of consideration, governed by Articles L.228-91 and following of the French Commercial Code, it being stipulated that subscription for such shares and other securities may be in cash, by offset of debt, or by capitalization of reserves, profits or share premiums or, under the same terms, to decide to issue securities giving right to the allotment of debt instruments governed by Articles L.228-91 and following of the French Commercial Code. These securities may be issued for the purpose of remunerating securities that might be contributed to the Company as part of an exchange offer conducted in France or abroad according to local rules (for example as part of a reverse merger) concerning securities meeting the conditions set out in Article L.225-148 of the French Commercial Code; 2) delegates to the Board of Directors, with the right to further delegate in the manner provided by law, its authorization to decide upon issuance of shares or securities giving access to the capital of the Company to be issued following the issue, by companies, of which the Company directly or indirectly owns over 50% of the share capital, securities giving access to the Company’s capital.
− determine the characteristics of the securities remunerating the contributions and set the terms by which to preserve the rights of holders of securities giving access to the capital, where applicable,
6 LEGAL INFORMATION Purpose and draft resolutions submitted to the General Shareholders’ Meeting of May 26, 2011 shall be deducted from the overall ceiling provided for in point 3 of resolution 13 or, where appropriate, from any overall ceiling that may be provided for in any resolution of the same type that may supersede said resolution during the period of validity of this authorization; 2) fully empowers the Board of Directors, in the event it makes use of this resolution, with the right to sub-delegate said powers in accordance with the law, to implement this resolution, and notably to: − set the amount and the type of the funds to be incorporated into the capital, set the number of new equity securities to be issued and/or the amount by which the par value of the existing equity securities will be increased, order the vesting date, which can be retroactive, as well as any other terms and conditions for performance of the capital increase,
CRBF Comité de la Réglementation Bancaire et Financière/ Banking and Financial Regulation Committee