In 2014, Natixis’ Wholesale Banking division undertook structurebuilding projects across all business lines, in line with the objectives of the New Frontier strategic plan.
Thanks to the turnaround in sales activity and renowned product innovation, Global Transaction Banking signifi cantly improved its fi nancial results. This success supported its targeted development strategy in the United States, Latin America, Southeast Asia and Dubai, as well as the expansion of its offering.
In 2014, the Investment Solutions division expanded the synergies of its four business lines (Asset Management, Insurance, Private Banking and Private Equity) with Natixis’ other core businesses and the Groupe BPCE networks in a persistently buoyant economic environment in the US versus more challenging conditions in Europe.
Natixis Global Asset Management (NGAM) continued to grow in 2014, purchasing private equity asset managers in Europe as at March 31, 2014 (Naxicap, Seventure, Alliance Entreprendre, Euro PE & Dahlia) and the holding structure for this activity as at April 1, 2014. In June 2014, NAM SA launched NAM US, a wholly-owned subsidiary specializing in global tactical allocation. At September 30, 2014, NAM SA took over Dorval by buying an additional 25% shareholding (bringing its total stake to 50.1%). In December 2014, NGAM bought 100% of the shares in Toronto-based NexGen Financial to gain access to the Canadian retail market, one of the largest markets in the world. Finally, NGAM sold asset management company Hansberger in 2014.
After a very solid performance in 2013, 2014 was a record year in terms of results and infl ows generated by the distribution platforms; V At €735.5 billion, NGAM’s assets under management hit a new peak, as did those of NGAM US ($462.9 billion); V Net inflows totaled €27.7 billion, the highest level achieved (on a current-euro basis) since 2006; V NGAM US Distribution posted record gross and net inflows of $60.2 billion and $20.5 billion, respectively. At end-December, NGAM was ranked 7th in the United States for its retail net inflows in long-term products; V NGAM International Distribution posted gross inflows of $32 billion in long-term products and net inflows of $11.2 billion, including $14.2 billion in long-term products.
For the second year in a row, VEGA Investment Managers was recognized as the best French asset manager in its category at the European Funds Trophy awards (26-40 funds rated). In addition, the Elite 1818 Euro Rendement fund was given a rating of fi ve stars by Morningstar.
In September 2014, the Private Banking business line, already operating in wealth management in Luxembourg, opened a Natixis Bank branch in Brussels. This initiative is part of the strategic plans of Natixis and Groupe BPCE to enhance the international presence of their business lines.
The Insurance division carried forward with the strategic ambition laid down in the New Frontier plan, namely to become a fully-fl edged bancassurance player in two segments: personal insurance (life insurance, personal protection insurance) and non-life insurance (property and casualty insurance), predominantly covering the insurance risks of the individual and professional customers of Groupe BPCE’s banking networks.
The Specialized Financial Services division stepped up its relations with the BPCE networks, in both the Specialized Financing and Financial Services business lines. The division’s business lines also maintained strict control of operating expenses and use of scarce resources while implementing a strategy based on operational effi ciency and innovation. Accordingly: V Employee Savings Schemes, which issues Chèque de Table® meal vouchers, launched its electronic meal voucher, Apetiz, on March 7, 2014. The first version introduced to the market is the Apetiz meal voucher card. Developed with Natixis Payment Solutions, it is the only meal voucher card on the market backed by the expertise of a banking group. Apetiz is a completely reliable and secure card (issued to an individual person, using a pin code, card verification code and expiration date, etc.) benefiting from the latest in electronic banking technology (including NFC contactless payment); V on October 25, 2014, the Consumer Finance business line’s consumer loan management IT platform, developed with BNPP Personal Finance, went on line.
Return on assets corresponding to the net income for the period, recognized in total consolidated assets, stood at 0.21% at December 31, 2014, up from 0.17% at December 31, 2013.
Equity (Average) 16,227 17,310 * Excluding GAPC and pro forma of the CCI disposal.
Workout portfolio management (GAPC) income and net restructuring costs are presented below net income (group share). This presentation facilitates comparisons between reporting periods and makes it easier to interpret business performances.
Natixis’ net revenues amounted to €7,505 million at December 31, 2014, up 3.9% on December 31, 2013. Revaluation of own senior debt (1) accounted for -€208 million in net revenues for the year.
Net revenues generated by the businesses (2) rose 3.6% to €7,689 million. All three core businesses posted increased revenues, with 4% for Wholesale Banking (excluding non-recurring items), 15% (3 ) for Investment Solutions and 1% for Specialized Financial Services.
Net revenues earned by Investment Solutions climbed 15%, buoyed by solid momentum in asset management, especially in the United States, and by boosted income in all segments of the Insurance business.
Net revenues from Financial Investments decreased by 3% compared to 2013 to €828 million. Excluding the exchange rate and scope effect and non-recurring items, net revenues were up 6.2%, thanks in large part to Coface’s claims management.
(1) The impact on net revenues of the revaluation of Natixis’ own senior debt was -€208 million in 2014 versus -€195 million in 2013.
Recurring expenses (excluding GAPC) totaled €5,391 million, up 3.7% on 2013 at constant USD exchange rates. This increase was mainly attributable to the Investment Solutions division’s continued expansion (up 12% at constant USD exchange rates) in Asset Management (particularly in the United States) and Insurance. Meanwhile Wholesale Banking posted a 3% rise in expenses at constant exchange rates and the Specialized Financial Services division’s expenses were stable.
In 2014, Wholesale Banking’s net revenues amounted to €2,781 million, down 3% on 2013. Restated for non-recurring items related to Fixed Income and Treasury activities (income of €72 million in 2013 and expenses of €119 million in 2014), revenues were up 3.7%. These non-recurring items were related to the fi rst application of IFRS 13 in 2013 and to a change in CVA/DVA/FVA methodology in 2014.
In 2014, average trading VaR stood at €7.4 million compared to €6.5 million in 2013 (excluding GAPC).
Despite requirements on management of RWA and liquidity consumption, Commercial Banking revenues rose 6.2% yearon -year, buoyed by the international development of Trade Finance activities. In Vanilla Finance, credit line drawdown rates remained very low at 14%.
V Revenues generated by the Debt Platform activities rose 6% on 2013, thanks to the resilience of securitization activities and the momentum in the primary segment, whose contribution increased by 21%. Natixis was named No. 1 bookrunner on the French EUR primary bond market in 2014 (source: Dealogic) and No. 1 bookrunner on the EUR primary covered bond market in 2014 (source: Dealogic).
V Revenues from Commodities activities picked up 21% as a result of renewed volatility on the commodity markets, including oil in particular.
V Income from Equity Markets activities gained 28%, boosted by a solid showing across all segments (Cash, Equity Finance and Structured Derivatives).
Gross operating income decreased by 11.7% on 2013 to €1,069 million. Restated for non-recurring items included in the above-mentioned net revenues, GOI came to €1,188 million in 2014 versus €1,139 million in 2013 (+4.3%).
Based on average RWA calculated according to Basel 3 rules and intangible fi xed assets used, allocated capital was virtually stable compared to 2013.
At 8.6%, ROE gained 0.4 point compared to 2013. Restated for the non-recurring items included in the above-mentioned net revenues, ROE after tax for 2014 was 9.7%, up 1.8 pt on 2013 (7.6%).
Expenses rose 11.8% (+11.6% at constant exchange rates), mainly due to the implementation of the Assurément#2016 project in the Insurance segment and the development of the Asset Management business.
Gross operating income was up 24.5% (+24.1% at constant exchange rates) to €814.6 million.
Pre-tax profit totaled €817.0 million, up 20.5% at constant exchange rates.
In Europe: V Mirova was named Best SRI Fund Management Firm in 2014 by Thomson Reuters and the UK Sustainable Investment Finance association (UKSIF) in their annual survey of the top European players in Socially Responsible Investment (SRI) and sustainable finance; V Natixis Global Asset Management rose from 7th to 6th place in the annual Institutional Investor Euro 100 ranking of the leading European investment institutions by AuM at June 30, 2014.
At end-2014, net revenues picked up 16.6% year-on-year to €2,136 million (i.e. +16.3% at constant exchange rates), on the back of fees on AuM in US asset management fi rms.
With €4.36 billion in premiums Life Insurance inflows rose 32% compared to 2013. Premiums invested in unit-linked policies (€638 million) recorded an even more impressive improvement of +43%, in line with the strategic goal of increasing the proportion of infl ows attributable to unit-linked policies. Given the virtual stability of Investment Solutions services (+1% year-on-year), net infl ows topped €1.4 billion in 2014 (3.6 times higher than 2013).
Personal protection insurance and payment protection insurance premiums (€627 million, up 15%) were buoyed by dynamic activity in payment protection insurance (+21%), contrasting with the stability of personal protection insurance business (down 1%).
In mature market conditions, Property & Casualty insurance premiums climbed 8.5% to €1,060 million for the Caisse d’Epargne and Banque Populaire networks, driven by 11% growth in Multirisk home guarantees and 8% in automotive guarantees. Overall, 1.1 million new policies were taken out in 2014, up 12% on 2013.
Operating expenses increased by 12.1% to €300.8 million, including €10 million allocated to the Assurément#2016 project under which the life insurance and personal protection insurance offering will be rolled out in the Caisse d’Epargne network starting in 2016.
Expenses rose 4.8% on 2013 to €127.7 million, due in large part to IT expenses related to the go-live phrase of the Mercury project (overhaul of front-offi ce tools).
4 OVERVIEW OF THE FISCAL YEARManagement report at December 31, 2014 4.1.4.3 Specialized Financial Services
Consumer Finance saw an annual increase of 10% in personal loan commitments and growth of 2% in revolving credit commitments.
With factoring revenues of €31.9 billion, up 7% on 2013, the Factoring business boasted 14.1% market share.
Assets under management in Employee Savings Plans continued to climb, reaching €23.2 billion. Securities Services maintained strong development momentum, with a market share gain of 1 point to 15.5% in Chèque de Table meal vouchers.
The Payments business enjoyed robust momentum in 2014, particularly in Electronic Banking. The number of cards manufactured and clearing transactions rose by 10% and 4%, respectively. The Transactions and Checks business was more contrasted, with national check processing down 17% and mass transactions remaining stable.
Securities Services saw a 13% decline in the number of transactions in 2014. Assets under custody were stable at €178 billion. The business continued to expand its service offering to the networks.
Net revenues amounted to €1,262 million in 2014, up 1% in persistently challenging French economic conditions.
Specialized Financial Services recorded expenses of €832 million at end-2014, which were stable compared to 2013.
At 15.6%, ROE improved 1.7 points, refl ecting ongoing efforts to improve management of allocated capital, which fell 4% on average compared to 2013.
2014 revenues were stable at €1.4 billion. At constant scope and exchange rates, revenues were up 1.6% on 2013. Insurance, which accounts for 95% of revenues, was virtually stable (-0.1%) and Factoring climbed 2%.
The loss ratio net of reinsurance came out at 50.4% versus 53.8% in 2013, improving by 3.4 points.
Natixis Algérie posted a 6% increase in net revenues on 2013 to €69 million. Excluding the impact of the change in regulations governing bills for collection and at constant exchange rates, net revenues were up 13%.
Corporate Center expenses consisted of expenses that were not re-invoiced to the Natixis business lines. These expenses were down 8% on 2013 due to various non-recurring expenses.
The current provision for credit losses (excluding GAPC) was -€300 million at December 31, 2014, compared to -€392 million at December 31, 2013. The breakdown by division and geographic area is as follows.
The economic backdrop continued to deteriorate in the euro zone and 2014 saw very short rates fall below zero, as well as high expectations in terms of monetary policy.
By implementing targeted long-term refi nancing operations (TLTRO) and adopting a stance in favor of quantitative easing, the ECB allayed fears that liquidity would dry up and accentuated the fl attening in yield curves.
Outstanding certifi cates of deposit ended the year at their lowest level since 2006, and issue maturities continued to grow longer throughout the second half of the year.
In the euro zone, weak growth and low infl ation led the ECB to take action. In June, Mario Draghi announced a series of measures to tackle infl ation and boost growth by encouraging euro zone banks to increase their lending to businesses. These measures included a cut to leading interest rates, the end of sterilization under the securities markets program (SMP), unlimited liquidity allotments until the end of 2016 and the implementation of TLTROs. As these measures failed to have the intended effect, in September the ECB decided to lower interest rates by a further 10 points and announced purchase programs for ABS and covered bonds.
Euro zone 10-year government bond yields declined throughout 2014 (the 10-year OAT fell by 138 points over 2014). Yields on peripheral debt fell even further, as investors sought yields in the low interest rate environment.
Refer to Note 14, “Post Closing Events”, in Chapter [5.1], Consolidated Financial Statements and Notes.
In 2014, net revenues increased by €36 million to €3,720 million thanks to: V a €146 million decrease in the interest margin; V a €221 million increase in net fee and commission income; V a €1 million increase in income from variable-income securities; V a €50 million decrease in income from trading book transactions; V a €81 million decrease in income from transactions on securities held for sale; V a €91 million increase in other banking operating income and expenses.
Gains or losses on fi xed assets were negative at €202 million.
Natixis’ fi nancial statements at December 31, 2014 showed positive net income of €1,305,316,943.00 and, taking into account retained earnings €500,383,696.32, distributable profi ts of €1,805,700,639.32.
R 1 - MANAGEMENT RESULTS RECLASSIFIED AS CONSOLIDATED RESULTS IN 2014
Gain or loss on other assets 3 75 78 0 78
R 2 - MANAGEMENT RESULTS RECLASSIFIED AS CONSOLIDATED RESULTS IN 2013
Recurring net income (group share) 1,105 (75) 1,030 (3) (70) (51) 907 23 884
III - Specifi c verifi cation 322 5.3 PARENT COMPANY FINANCIAL STATEMENTS AND NOTES 323 5.4 STATUTORY AUDITORS’ REPORT ON THE PARENT COMPANY FINANCIAL STATEMENTS 364
I - Opinion on the parent company fi nancial statements 364
Financial assets at fair value through profi t and loss 6.1 254,560 218,324
Loans and receivables due from banks 6.5 71,718 77,600 o/w institutional operations
Due to banks 6.13 134,988 127,657 o/w institutional operations 46 46 o/w institutional operations 799 771
Revaluation adjustments on portfolios hedged against interest rate risk 233 163
V Non-recyclable gains and losses recorded directly in equity (125) (70)
Consolidated net income/(loss) – group share – per share, calculated on the basis of the average number of shares over the period, excluding treasury shares 5.24 0.35 0.27
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 0.35 0.27
NET INCOME/(LOSS), GAINS AND LOSSES RECORDED DIRECTLY IN EQUITY 1,878 1,926 o/w group share 1,741 1,927 o/w non-controlling interests share 137 (1)
5 FINANCIAL DATAConsolidated fi nancial statements and notes STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
Equity component of share-based payment plans 7 2012 dividend paid in 2013 (308)
Total activity related to relations with shareholders 23 (933) 0 0 (2) (1,373)
Equity as of December 31, 2013 after appropriation of income - pro forma 4,960 5,701 0 989 (19) 6,434
Total activity related to relations with shareholders 26 14 0 0 8 (488)
Issuance and redemption of deeply subordinated notes and preference shares 0 0
(1) Issue premiums, legal reserve, contractual reserves, long-term capital gains reserve and other Natixis reserves.
(2) Other equity instruments issued: refers to the undated deeply subordinated notes and preference shares that were reclassifi ed as equity instruments.
(4) The acquisition under joint control of BPCE Assurances generated goodwill deducted from shareholders’ equity, group share amounting to €137 million.
5 FINANCIAL DATAConsolidated fi nancial statements and notes NET CASH FLOW STATEMENT
Changes in cash related to investing operations result from cash fl ows related to acquisitions and disposals of investments in consolidated and non-consolidated affi liates, tangible and intangible fi xed assets, and acquisitions and disposals of investment property, property provided under operating leases and held-to-maturity fi nancial assets.
+/- Net charge to depreciation and amortization of property, plant and equipment and intangible assets 284 313
+/- Decrease/(increase) in fi nancial assets and equity interests (1) 444 12,985
+/- Decrease/(increase) in property, plant and equipment and intangible assets (63) (51)
+/- Other cash provided/(used) by fi nancing operations (3) 1,694 (1,587)
Cash fl ow of assets and liabilities held for sale (4) 3
Impact of exchange rate changes on cash and cash equivalents 4,363 (1,365)
(2) Flows from or to shareholders include: V dividends paid to BPCE (-€357 million) and dividends paid outside the Group (-€148 million); V the capital increase reserved for employees (see Notes 5.18 and 11.2.4) (+€40 million).
(3) Flows from fi nancing activities can be broken down as follows: V partial disposal of Coface - without loss of control (+€957 million); V issuance of securities and subordinated debt (+€1,626 million); V redemption of subordinated notes (-€718 million); V interest paid on subordinated notes (-€120 million); V the return on deeply subordinated notes recognized in equity capital (-€53 million).
NOTE 5 ACCOUNTING PRINCIPLES AND VALUATION METHODS 222 5.1 Financial assets and liabilities (excluding derivatives) 222 5.3 Credit risk on assets classifi ed as loans and receivables 225 5.4 Derivative fi nancial instruments and hedge accounting 225 5.5 Currency trading 227 5.6 Fair value of fi nancial instruments 227 5.7 Guarantee mechanism for former segregated GAPC assets 232 5.8 Property, plant and equipment, intangible assets (excluding goodwill) and investment property 233 5.9 Non-current assets held for sale and discontinued operations 234 5.10 Financial liabilities at fair value through profi t and loss 234 5.13 Offsetting fi nancial assets and liabilities 235 5.14 Provisions and contingent liabilities 235 5.15 Employee benefi ts 236 5.16 Distinction between debt and equity 236 5.17 French State support 237 5.18 Share-based payments 237 5.19 Treasury shares and treasury share derivatives 238 5.20 Fees and commissions received 238 5.21 Income taxes 238 5.22 Financing and guarantee commitments 238 5.23 Use of estimates in preparing the fi nancial statements 239 5.24 Earnings/(loss) per share 240
Consolidated fi nancial statements and notes 6.10 Property, plant and equipment, intangible assets, investment property 261 6.11 Assets obtained by taking possession of guarantees 262 6.13 Due to banks and customer deposits 264 6.14 Debt securities 264 6.15 Insurance companies’ technical reserves 265 6.16 Provisions and impairment 265 6.17 Subordinated debt 267 6.18 French State support 269 6.19 Fair value of fi nancial liabilities carried at fair value in the balance sheet 269 6.20 Fair value of fi nancial liabilities valued at amortized cost 272 6.21 Breakdown of fi nancial assets and liabilities by contractual maturity 273
NOTE 7 NOTES TO THE INCOME STATEMENT 276 7.1 Interest margin 276 7.2 Net fee and commission income 276 7.3 Gains and losses on fi nancial instruments at fair value through profi t and loss 277 7.4 Net gains or losses on available-for-sale fi nancial assets 277 7.5 Other income and expenses 278 7.6 Operating expenses 279 7.7 Provision for credit losses 279 7.8 Gain or loss on other assets 280 7.9 Reconciliation of the tax expense in the fi nancial statements and the theoretical tax expense 281
NOTE 8 STATEMENT OF NET INCOME/(LOSS), GAINS AND LOSSES RECORDED DIRECTLY IN EQUITY 282 8.1 Change in gains and losses recorded directly in equity 282 8.2 Breakdown of tax on gains and losses recognized in equity 282
NOTE 10 RISK MANAGEMENT 287 10.1 Capital adequacy 287 10.2 Credit risk and counterparty risk 287 10.3 Market risk, overall interest rate risk, liquidity risk and structural foreign exchange risk 290
NOTE 15 OTHER INFORMATION 302 15.1 Finance and operating leases 302 15.2 Related parties 303 15.3 Insurance companies 305 15.4 Fees paid to the Statutory Auditors 307
As required by European regulation 1606/2002 of July 19, 2002, Natixis has prepared its consolidated fi nancial statements for the year ended December 31, 2014, in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union at that date (1). These standards include IAS 1 to 41, IFRS 1 to 15 as well as the related IFRIC interpretations adopted by the European Union as at December 31, 2014.
IFRS 10 replaces IAS 27, “Consolidated and Separate Financial Statements,” for the section on consolidated financial statements and the SIC 12 interpretation on special purpose entities. It defines a single audit model applicable to all entities, whether or not they are structured entities. The control of an entity will now be analyzed using three cumulative criteria: influence over relevant activities of the entity, exposure to the entity’s variable returns and the ability to influence variable returns obtained by the entity. As a result of the application of this new standard, Natixis has consolidated the Versailles and Bleachers multi-seller conduits, as well as five invested funds representing unit-linked insurance policies. The impact on total balance sheet assets at January 1, 2014 was €2.6 billion (see Note 3). The impacts on shareholders’ equity and the income statement were not material.
Natixis did not change its accounting principles further to the Asset Quality Review (AQR) conducted by the European Central Bank during fi scal year 2014. However, deliberations took place with the aim of refi ning methodologies and parameters, particularly with respect to valuation adjustments and the valuation of certain assets in Level 3 of the fair value hierarchy, with no material impact on the 2014 fi nancial statements.
Natixis did not opt for early application of the standards adopted by the European Union at December 31, 2014 but which had not yet entered into force. This includes: V interpretation IFRIC 21 (“Levies”) published by the IASB on May 21, 2013 and adopted by the European Commission on June 13, 2014, with mandatory application from January 1, 2015. The aim of this interpretation is to clarify the date used for the accounting recognition of levies in the financial statements of the levied entity in accordance with IAS 37 “Provisions, contingent liabilities and contingent assets.” With regard to Natixis’ financial statements, the impacts from the application of this interpretation amount to €29 million (excluding tax impacts) at December 31, 2014 on shareholder’s equity on January 1, 2014 ; V the amendment to IAS 19 “Employee benefits”, entitled “Defined benefit plans: employee contributions”, adopted by the European Commission on December 17, 2014, with mandatory application from January 1, 2016 to Natixis’ financial statements. This amendment applies to contributions by employees and third parties to defined benefit plans. The aim is to clarify and simplify accounting for contributions that are independent of employee seniority (e.g. employee contributions calculated as a fixed percentage of salary), which may be recognized as a reduction in the cost of services for the period during which the service is rendered instead of being allocated to the periods of service; V the amendment “IFRS - Annual Improvements cycle 2010-2012”, adopted by the European Commission on December 17, 2014, with mandatory application from January 1, 2016 to Natixis’ financial statements. This amendment stems from the annual improvement process aimed at simplifying and clarifying international accounting standards. The following standards have been amended: IFRS 2 “Share-based Payment”, IFRS 3 “Business Combinations”, IFRS 8 “Operating Segments”, IAS 16 “Property, Plant and Equipment”, IAS 38 “Intangible Assets” and IAS 24 “Related Party Disclosures”; V the amendment “IFRS - Annual Improvements cycle 2011-2013”, adopted by the European Commission on December 18, 2014, with mandatory application from January 1, 2015. This amendment stems from the annual improvement process aimed at simplifying and clarifying international accounting standards. The following standards have been amended: IFRS 3 “Business Combinations”, IFRS 13 “Fair Value Measurement” (and the resulting modifications to IAS 32 and IAS 39) and IAS 40 “Investment Property”.
In addition, in drawing up the consolidated fi nancial statements at December 31, 2014, Natixis also took the following into account: V with regard to the valuation of financial instruments, the recommendation published on October 15, 2008 by the AMF, the Conseil National de la Comptabilité (CNC– French National Accounting Board), the Commission Bancaire (French Banking Commission) and the Autorité de Contrôle des Assurances et des Mutuelles (ACAM– French insurance regulator), and the guide published by the IASB on October 31, 2008, entitled “Measuring and disclosing the fair value of financial instruments in markets that are no longer active.” These two texts underline the importance of using judgment to determine fair value in illiquid markets. As a result of this recommendation, as at December 31, 2014, Natixis does not systematically apply models using observable data, as with previous reporting periods, in view of the lack of market liquidity affecting some asset classes; V with regard to financial reporting on risk exposure, the recommendations applicable in France resulting from the Financial Stability Forum (FSF). Details of risk exposure, presented in the format recommended by the Commission Bancaire in its May 29, 2008, statement “Presentation note regarding the French application of the FSF’s recommendations for financial transparency”, have been incorporated into section 3.11 of Chapter [3], “Risk Management and Capital Adequacy” of the registration document.
If this is not the case, control is determined through the exercise of judgment and by taking into account all facts and circumstances, such as: V the objectives, terms and circumstances surrounding the creation of the entity; V the nature of the entity’s relevant activities and the decision-making processes concerning these activities; V the scope of Natixis’ decision-making rights (from voting rights or contractual agreements) over the management of the entity’s relevant activities (i.e. activities having a significant impact on the entity’s returns); V exposure to variability in the entity’s returns (the significance of the returns received by Natixis compared to the returns received by the other investors, etc); V rights held by other parties (withdrawal rights, early redemption rights, rights on termination of the entity, etc.).
The share of non-controlling interests in shareholders’ equity and in income appear separately on the balance sheet, income statement and the statement of net income/(loss), gains and losses recorded directly in equity.
Consolidated fi nancial statements and notes difference between the investments’ historical value and their reassessed value is recognized on the liabilities side of the balance sheet under “Shareholders’ equity, group share” and in income under “Share in income of associates” in the consolidated income statement and under “Share in gains/(losses) of associates recorded directly in equity” in the statement of net income/(loss), gains and losses recorded directly in equity.
These investments are subject to an impairment test whenever there is objective evidence of impairment. If the recoverable value of the investment is lower than its book value, an impairment is recorded under “Share in income of associates” in the consolidated income statement.
When Natixis’ share in the losses of a company consolidated using the equity method is equal to or higher than its interest in the company, Natixis ceases to take its share into account in future losses. In such cases, the investment is presented as zero. The associate’s additional losses are only provisioned when Natixis has a legal or implied obligation to hedge them or when it has made payments on behalf of the company.
V Joint operations are partnerships in which the parties exercising joint control of the arrangement have rights to the assets, and obligations for the liabilities, related to the arrangement. An investment in a joint operation is recorded by incorporating all of the interests held in the joint operation, i.e. its share in each of the assets, liabilities and other comprehensive income to which it is entitled. These interests are broken down by type across the various items on the consolidated balance sheet, consolidated income statement and statement of net income/(loss), gains and losses recorded directly in equity.
Signifi cant infl uence is the power to participate in the fi nancial and operating policy decisions of the corporate entity owned without having control over such policies. Signifi cant infl uence is presumed to exist when Natixis directly or indirectly owns at least 20% of the voting rights of the company in question. IAS 28 defi nes companies over which signifi cant infl uence is exercised as associates. These are consolidated using the equity method in accordance with the same terms as those applicable to joint ventures (see above), with the exception of Private Equity investments which Natixis classifi es under assets designated at fair value through profi t and loss, pursuant to the option available under IAS 28.
In the event of an increase in Natixis’ percentage of ownership in an already-controlled entity, the difference between the acquisition cost of the additional interest share and the share acquired in the entity’s net assets at this date is recorded in “Consolidated reserves”. In the event of a decrease in Natixis’ percentage of ownership in an entity without loss of control, the difference between the selling price and the book value of the share of interests sold is also recorded in “Consolidated reserves”.
The assumption of control through successive purchases of securities from an entity previously recognized in available-for-sale (AFS) fi nancial assets is shown as two transactions taking place upon the assumption of control: V the disposal of securities previously classified as available-for-sale financial assets, and; V the acquisition of all of the securities held after the assumption of control.
V Application of IFRS 3 to business combinations carried out before January 1, 2010: R Minority interests are determined based on their share in the identifi able net assets of the acquired entity, measured at their fair value at the purchase date (partial goodwill method); R Goodwill is the difference between the cost of the business combination and the share of the purchasing entity’s interest in the net fair value of identifi able assets, liabilities and contingent liabilities; V Application of IFRS 3 to business combinations carried out before January 1, 2010: R for each business combination, Natixis chose to determine noncontrolling interests: R either based on their share in the identifiable net assets of the acquired entity, measured at their fair value at the purchase date, and therefore without recognizing goodwill on the non-controlling interests (partial goodwill method),
R or based on their fair value at the purchase date, resulting in the recognition of goodwill, both for the Group share and the non-controlling interests (full goodwill method),
R hence, goodwill is a residual item determined as the difference between (i) the sum of the purchase price, the fair value at the purchase date of the share of interest held in the acquired entity prior to the purchase date, and the amount of non-controlling interests (determined using the partial or full goodwill method) and (ii) the net amount of the assets and liabilities assumed, measured at their fair value at the purchase date.
Positive goodwill is recorded on a separate line on the asset side of the balance sheet if it relates to a controlled entity. It is allocated at the purchase date to one or more cash-generating units (CGUs) expected to benefi t from the acquisition and is not amortized. It is tested for impairment at least once per year, and more often where there is objective evidence of impairment. The impairment test consists of comparing the carrying amount of the CGU or group of CGUs including goodwill with its recoverable amount.
Goodwill related to an associate or joint venture is included in the book value of “Investments in associates under assets” if it is positive; however, it cannot subsequently be amortized. If it is negative, it is immediately recognized in income under “Share in income of associates”.
Barring clarifi cation of IFRS 3R on the accounting treatment of business combinations under joint control, Natixis applies a method based on historic carrying amount to such transactions. According to this method, the difference between the price paid and Natixis’ share in the historic carrying amounts of the assets and liabilities of the acquired entity is recorded as a deduction from shareholders’ equity. In effect, in using this method, any goodwill and valuation differences resulting from the application of the purchase method are deducted from shareholders’ equity.
The carrying amounts used are those listed in the consolidated fi nancial statements of the ultimate parent company at the date of completion of the transaction.
The contribution values used for consolidation purposes in respect of both categories of assets are the carrying amounts of these assets in the CNCEs consolidated fi nancial statements, restated in accordance with IFRS as adopted in the European Union.
An amount of €3,170 million was charged against the issue premium in this respect at December 31, 2006.
Bund zone, averaged over a depth of 10 years, plus a risk premium calculated according to a sample of CGU-representative companies; V for the Coface CGU, the interest-rate references used were determined according to a similar method as applied to the other CGUs, using samples of equivalent companies for insurance and factoring activities; V for the former CDS CGU, the revenue-weighted average 10year risk-free interest rates of the countries in which the various entities do business, plus a risk premium calculated according to a sample of companies that are representative of the sector and an additional risk premium to account for the relative size of the CGU in comparison with sample references.
Note that Natixis impaired goodwill allocated to the Wholesale Banking business and the former segregated GAPC portfolio at the end of 2008, and the Private Equity goodwill at the end of 2009.
A 20 bp increase in discount rates combined with a 50 bp reduction in perpetual growth rates would help to reduce the value in use of CGUs by: V -6.4% for the Investment Solutions CGU; V -4.1% for the Specialized Financial Services CGU; V -4.9% for the Coface CGU; V -6.8% for the former CDS CGU; and would not result in an impairment recorded for those CGUs except for the former CDS CGU for which an additional €2 million impairment should then be recorded.
5 FINANCIAL DATAConsolidated fi nancial statements and notes 2.6 Subsidiaries held for sale
At December 31, 2014, Natixis undertook negotiations concerning the sale of two of its subsidiaries: Midt factoring A/S and Altus GTS Inc. At December 31, 2014, Natixis maintained the full consolidation of its subsidiaries and combined, in accordance with the provisions of IFRS 5 “Non-current assets held for sale and discontinued operations”, the assets and liabilities of these entities under two separate balance sheet line items: “Non-current assets held for sale” and “Liabilities associated with non-current assets held for sale”.
Furthermore, at December 31, 2013, Hansberger, a fully consolidated subsidiary of the Investment Solutions division, was recognized under IFRS 5. In accordance with the provisions of this standard, Natixis had recorded the entity’s assets and liabilities together on two separate lines of the balance sheet: “Non-current assets held for sale” and “Liabilities associated with non-current assets held for sale”. As the sale of all activities was fi nalized during the second half of 2014, the Hansberger subsidiary is no longer included in Natixis’ consolidation scope as of December 31, 2014.
Prior to consolidation, the individual fi nancial statements of companies included in the scope of consolidation are restated if necessary to bring them into line with Natixis’ accounting policies described below.
Policies managed by the insurance subsidiaries of the Coface, Compagnie Européenne de Garanties et Cautions (CEGC) and Natixis Assurances sub-groups meet the defi nitions of insurance policies and investment contracts with a discretionary participation feature set out in IFRS 4. Accordingly, they result in the recognition of technical reserves in liabilities. These reserves are measured in accordance with French GAAP pending publication of an IFRS standard dealing with technical liabilities of insurance companies.
Technical reserves for life-insurance policies are primarily composed of mathematical reserves corresponding to the surrender value of the contract.
Consolidated fi nancial statements and notes backdrop against which Natixis Assurances does business, as well as the normalization of margins established in accordance with the general conditions of insured contracts.
The change in the deferred profi t-sharing asset and liability is recognized: V in equity when it relates to changes in the value of “available-for-sale assets”; V in income when it relates to changes in the value of assets “at fair value through profit and loss” or investment property held to cover insurance policies, as well as changes in provisions for prolonged declines in value in “available-for-sale assets”.
In the case of deferred profi t-sharing assets, a recoverability test is carried out. Deferred profi t-sharing may be recovered depending on the intention and ability of companies to steer future compensation of contracts according to resources. These are sensitive to: V changes in the equity and bond markets; V changes in net inflows, which result from the commercial appeal of policies and the propensity of policy holders to renew their contracts; V available reserves and own resources within companies to hold assets for a period compatible with changes in liabilities and consistent with market cycles.
2.10 Currency conversion of the statements of foreign subsidiaries and branches
The balance sheets of foreign subsidiaries and branches whose functional currency is not the euro are translated into euros at the closing exchange rate, except for share capital, reserves and capital allocations, which are translated at the historic exchange rate. The income statements of foreign subsidiaries and branches whose functional currency is not the euro are translated at the average exchange rate for the year. Any resulting translation gains or losses arising regarding both balance sheet and income statement items are recognized in equity under “Translation adjustments” for the portion attributable to the Group and “Minority interests” for the portion attributable to third parties.
This transaction generated goodwill of €137 million, recorded directly in shareholders’ equity, group share.
On June 26, 2014, Natixis placed nearly 80 million Coface shares accounting for 51% of its share capital on the market at a price of €10.40 per share.
An over-allotment option was granted at the time on approximately 11.9 million shares, which were fully placed on the market at the same date.
This transaction generated a capital loss of €135 million, recorded directly in shareholders’ equity, group share.
As a result of the application of IFRS 10 on January 1, 2014, Natixis consolidated the Versailles and Bleachers multi-seller conduits as well as fi ve invested funds representing unit-linked insurance policies (Fructifonds profil 3, Fructifonds profil 6, Fructifonds profil 9, Zelis actions monde and Odeis 2006 PR).
Financial assets at fair value through profi t and loss 218,324 417 0 218,741
(in millions of euros) 12.31.2013 reported IFRS 10 impacts IFRS 11 impacts 12.31.2013 restated
Gains and losses recorded directly in equity (95) 0 0 (95)
Non-recyclable gains and losses recorded directly in equity (70) 0 0 (70)
Liquidation of the following entities: V Sahara finance EUR Ltd; V Natixis Funding USA; V Natixis Derivatives Inc; V Natixis Malta Investments Limited; V Califano Investments Limited; V Ultima Trading & Global Strategies Limited (UTGS1, UTGS2 and UTGS3); V Bloom Asset Holding Fund PLC; V NexGen Mauritius Limited.
V Consolidation of the following asset management companies: R Alliance Entreprendre; R Dahlia Partners; R Seventure Partners; R Euro Private Equity S.A; R Dorval Finance, following the acquisition of an additional 25.1% of the company’s shares in Q3 2014. Partial goodwill of €20.8 million was recognized upon the acquisition.
V In accordance with IFRS 10 at January 1, 2014, consolidation of five funds predominantly invested by Natixis Assurance representing unit-linked policies: R Fructifonds profi l 3; R Fructifonds profi l 6; R Fructifonds profi l 9; R Zelis actions monde; R Odeis 2006 PR.
V Liquidation of the Odeis 2006 PR fund in the second quarter of 2014.
The main subsidiaries in which non-controlling interests are material at December 31, 2014 are Coface and BPCE Assurances.
3.3.3 Impact of the loss of control of entities during the period
The share of encumbered assets that cannot be freely used is presented in section 3.8.4 “Liquidity Risk and Refi nancing Strategy” of Chapter [3] “Risk Management and Capital Adequacy” of the registration document.
Despite the application of exchange controls in some countries, Natixis did not encounter diffi culties transferring the dividends of subsidiaries located in these countries during the period.
3.4 Interests in partnerships and associates 3.4.1 Types of partnerships and associates with which Natixis has dealings
The main investment by Natixis consolidated using the equity method at December 31, 2014 is the EDF Investment Group (EIG) entity. This entity met the defi nition of “joint venture” at December 31, 2013, when IFRS 11 was initially adopted. Following a change in governance in H1 2014, this entity now falls under the defi nition of “associate”.
EDF Investment Group (EIG)* 532 21 1 * The percentage of ownership and voting rights at 31.12.2014 are 4.49% each.
In accordance with IFRS 12, Natixis discloses information for all of the structured entities in which it holds interests and for which it acts in one or more of the following roles: V originator/structurer/arranger; V placement agent; V manager of relevant activities; V or any other role in which it has a decisive impact on the structuring or management of the transaction.
Consequently, the following are not included in the consolidation scope (IFRS 10) or in the scope applicable to the disclosure of additional information (IFRS 12): V structured entities linked to Natixis solely through an ongoing transaction. This corresponds to an unstructured financial instrument which does not generally have a material impact on the variability of the structured entity’s returns and which may be concluded by Natixis with structured entities or with traditionally-governed entities alike. Ongoing transactions are most commonly: R vanilla fi xed-income/currency derivatives, derivatives with other underlying assets and the lending/borrowing of securities and repos,
R guarantees and plain vanilla fi nancing granted to family SCIs or certain holdings; V external structured entities for which Natixis acts simply as an investor. This includes: R investments in external mutual funds not managed by Natixis, with the exception of those in which Natixis owns virtually all the shares,
In the context of mutual funds, relevant activities are investment and divestment activities involving securities in fund assets. These activities are managed in a discretionary manner on behalf of investors by the management companies of NGAM and Banque Privée 1818.
The compensation of NGAM and Banque Privée 1818 as managers is marginal compared to the returns generated for investors. Indeed, the management and incentive fees are obtained on the market and are consistent with the services rendered, since the asset management activity takes places on a competitive and international market.
In the absence of rights held by third parties (e.g. withdrawal or fund redemption/liquidation rights), the control of mutual funds managed by NGAM and Banque Privée 1818 is assessed according to the combined interests held by the entities and business lines within Natixis’ consolidated scope: V as managers, NGAM and Banque Privée 1818 do not invest in the funds and generally own only several shares; V Natixis Assurances may take out interests in mutual funds via its insurance subsidiaries. These interests are subscribed in the form of euro-denominated or unit-linked insurance policies: R Euro-denominated policies are policies under which the insured party receives a minimum guaranteed return plus the major share of the surpluses generated by the insurance company’s main fund. Any shortfall between the fund’s return and the minimum guaranteed return is borne by the insurer, which thus incurs the risks; R Unit-linked policies are policies under which the insured party selects the funds in which the insurer invests on its behalf. The value of the insurer’s interest in such funds is refl ected in the insurance policies. Invested funds representing unit-linked policies, which were not consolidated under SIC 12, are now consolidated under IFRS 10 if all of the control criteria are met cumulatively and if the funds have a material impact; V other Natixis entities and business lines may hold minority interests, intended mainly to meet cash investment needs.
A fund is subject to consolidation: V if Natixis acts as principal, i.e. if Natixis is a manager and is nonrevocable by a limited number of persons and if Natixis holds a large enough material interest to conclude that it controls the fund; V or if Natixis is not a manager but owns virtually all the shares.
As part of its Private Equity operations, Natixis makes equity investments in unlisted companies via venture capital vehicles (Fonds Communs de Placement à Risque – FCPRs – venture capital funds and SICARs – Sociétés d’Investissement à Capital Risque – venture capital companies) and limited partnerships which it has typically managed.
The assets of these vehicles, and the liabilities they issue, are rated by the rating agencies, which continually monitor the suitability between the level of risk associated with each tranche sold and the rating attributed.
The following types of securitization are encountered at Natixis and involve structured entities: V transactions through which Natixis (or a subsidiary) transfers credit risk related to one of its asset portfolios to a dedicated vehicle in cash or synthetic form; V securitization transactions on behalf of third parties. These transactions consist in placing the assets of a third-party company in a dedicated structure (generally a special purpose entity (SPE) or a conduit). The SPE issues shares that may in some cases be subscribed to directly by investors, or subscribed to by a multi-seller conduit which refinances the purchases of its shares by issuing short-maturity “notes” (treasury notes or commercial paper).
Natixis is mainly involved in these entities in its capacity as: V structurer/arranger of securitization transactions; V originator of securities or loans held as assets and pending securitization; V credit risk intermediary between the market and the securitization entity.
5 FINANCIAL DATAConsolidated fi nancial statements and notes Natixis is also the sponsor of two ABCP (asset-backed commercial paper) conduits: Magenta and Versailles.
The NGAM sub-group is involved in such funds as manager of the underlying portfolio for third-party investors. Its role is strictly defi ned by the portfolio management agreement, which never provides it with effective control of the structure but rather with the role of agent. Furthermore, neither NGAM nor any other Natixis entity holds a material interest in these funds. Therefore, Natixis is not signifi cantly exposed to the variability of returns. Consequently, no such fund was consolidated as of December 31, 2014.
The Coface sub-group’s credit enhancement operations consist of insuring receivables securitized by a third party for investors via a structured entity for losses in excess of a predefi ned amount. A distinction must be made between the policies taken out by the German branch Coface Deutschland and those taken out by Compagnie Française d’Assurance pour le Commerce Extérieur: V under the German policies, the credit insurer is only liable for losses in excess of a deductible termed the Aggregate First Loss. This first loss tranche contractually defines the amount of first losses that are not covered by the credit insurer. The coverage provided by Coface Kredit via these policies is similar to “Natural disaster” type coverage. An analysis of these structures shows that the amount of the first loss is systematically higher than the expected loss, namely the average losses expected over the year. Furthermore, the activity of the structured entity is not conducted on behalf of the credit insurer, which is only a protection seller. Coface Kredit does not sponsor the securitization structures. Coface Kredit does not play any role in determining the activity of the structured entity, nor in its operational or administrative management. Coface Kredit has no power over the relevant activities of the securitization vehicle (selecting receivables comprising the portfolio, managing receivables, etc.) As the criteria for powers and significant exposure to returns are not met, these funds are not subject to consolidation; V the French policies taken out by Coface rarely include non-covered “first losses”. However, the policies only cover a small portion of the receivables held by the SPE. Furthermore, the quality of portfolio risk covered by Coface, compared to that borne by the other stakeholders (other insurers, sponsors, sellers) is not such as to significantly transfer the structure’s risks to Coface. In addition, Coface France does not play any role in determining the activity of the structured entity, nor in its operational or administrative management. In the event of a guarantee activation, Coface only has powers corresponding to its protective rights. Indeed, Coface France does not have any power over activities relevant to the securitization vehicle. Accordingly, such funds do not require consolidation.
V CEGC controls two SCIs which hold the business line’s operating property. CEGC also controls a third SCI which owns real estate assets.
In terms of the size of the structured entities, the data presented in the table below varies according to activity: V for Securitization, it is the total issues under balance sheet liabilities; V for Asset management, it is the fund’s net assets; V for Structured financing, it is the amount of remaining outstanding loans due to banks in the pool (drawn outstandings); V for other activities, it is the total assets.
The maximum risk exposure corresponds to the cumulative amount of interests recorded under balance sheet assets and commitments given, minus contingency reserves recorded under liabilities and guarantees received: V the “Notional amount of derivatives” item corresponds to the notional amount of option and CDS sales agreed to by Natixis with structured entities; V guarantees received are guarantees granted by third parties to Natixis to cover its exposure related to structured entities. They are only included on the “Guarantees received” line and are not deducted from the asset items.
Financial assets at fair value through profi t and loss 303 5,523 1,069 1 6,897
Financial instruments at fair value through profi t and loss 19 3,863 799 - 4,681
Net gains or losses on instruments at fair value through profi t and loss 46 9 55
Natixis did not grant any fi nancial support to consolidated or non-consolidated structured entities in a context of fi nancial diffi culties.
5 FINANCIAL DATAConsolidated fi nancial statements and notes NOTE 5 ACCOUNTING PRINCIPLES AND VALUATION METHODS
Securities held for trading purposes are those acquired by Natixis principally to be sold in the near term and those forming part of a portfolio of fi nancial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profi t taking.
After initial recognition, loans and receivables are measured at amortized cost using the effective interest rate method, and tested for impairment at each reporting date. Where necessary, an impairment charge is recorded in income under “Provision for credit losses”.
Specifi c case concerning shares of syndicated loans held for sale
Loans outstanding with a theoretical syndication date expired as at the reporting date were analyzed on a case-by-case basis in order to take into account the market discounts observed at the end of the reporting period. Changes in the discounts recognized for the period are shown in “Net gains or losses on available-for-sale fi nancial assets”.
Specifi c case concerning assets reclassifi ed as “Loans and receivables”
Consolidated fi nancial statements and notes defi nition of loans and receivables at the reclassifi cation date, i.e., they are not quoted on an active market, or were no longer quoted on an active market at the reclassifi cation date. Assets reclassifi ed in accordance with this amendment cannot be held with the intention of being sold in the near term.
The carrying amount of reclassifi ed fi nancial assets is provided in Note 6.7.2 and the fair value is disclosed in Note 6.7.8.
Gains or losses arising from changes in the fair value (excluding revenues) of available-for-sale fi nancial assets that are not hedged are recognized directly in equity under “Gains and losses recorded directly in equity”. Accrued or earned income is recognized in the income statement under “Interest and similar income” using the effective interest rate method. Available-for-sale fi nancial assets are tested for impairment at each reporting date. Where there is objective evidence that an asset is impaired and a decline in the fair value has already been recognized directly in equity, the cumulative impairment loss is removed from equity and taken to income under “Provision for credit losses” (debt instruments) or “Net revenues” (equity instruments).
Determining whether there is objective evidence of impairment is based on a multi-criteria approach and independent expert opinions, particularly in the case of debt instruments. Evidence of impairment includes: V for debt instruments: default on interest or principal payments, existence of mediation, warning or legal reorganization procedures; counterparty bankruptcy and any other indicator pointing to a material decline in the counterparty’s financial position, such as losses on completion projected by discounted cash flow models; V for equity instruments (excluding investments in unlisted companies): any item suggesting that the entity will not be able to recover all or part of its initial investment. Securities presenting an unrealized capital loss of over 30% on their face value, or presenting an unrealized capital loss for a period of more than six months, are systematically tested for impairment. The test involves a qualitative analysis considering a variety of factors such as share price performance over a given period or information relating to the issuer’s financial position. Where necessary, an impairment loss is recognized based on the market price at the reporting date. Irrespective of this analysis, an impairment loss is systematically recognized when securities present an unrealized capital loss of over 50% at the reporting date, or an unrealized capital loss on their face value for a period of more than 24 months;
Revenues under the fi nance lease are recognized as income at the interest rate implicit in the lease so as to produce a constant periodic rate of return on the lessor’s net investment. The interest rate implicit in the lease is the discount rate that, at the inception of the lease, causes: V the aggregate present value of the minimum lease payments receivable by the lessor and the non-guaranteed residual value, to be equal to the sum of; V the fair value of the leased asset and any initial direct costs of the lessor, i.e., the costs incurred specifically by the lessor during the set-up of the leasing contract. These two items form the initial value of the asset.
At each reporting date, Natixis reviews assets classifi ed as loans and receivables to determine whether there is any objective evidence of impairment arising from one or more events occurring after initial recognition and having an impact on estimated future cash fl ows. This corresponds to loans identifi ed as non-performing or irrecoverable under French regulations (CRC Regulation 2002-03).
In the fi rst risk group comprising individual and small business customers, pre-disputed loans are recognized as impaired.
Loans on the watch list, for which a Basel default has been identifi ed, are written down collectively unless they are already subject to specifi c write-downs.
The documentation for these structural hedges is based on future variable cash management schedules for all variable-rate transactions.
Prospective hedge effectiveness tests involve establishing (by index and currency): (i) cumulative variable-rate borrowings and fi xed-rate borrower swaps by maturity bracket, and (ii) cumulative variable-rate loans and fi xed-rate lender swaps, by maturity bracket.
Retrospective hedge effectiveness tests are used to verify whether or not the hedge was effective at different reporting dates. At each such date, changes in the fair value of hedging instruments (excluding accrued interest) are compared with changes in the fair value of the hypothetical derivative instruments hedged (synthetic instruments representative of hedged assets or liabilities and management intentions). To be effective, changes in the fair value of hedging instruments must offset changes in the fair value of hedged items in a range of 80%-125%. Outside these limits, the hedge would no longer qualify.
Additional valuation adjustments incorporate factors related to valuation uncertainties, such as market, credit and liquidity risks in order to account, in particular, for the costs resulting from an exit transaction on the main market. Similarly, a Funding Value Adjustment (FVA) aiming to account for—through assumptions—costs associated with the funding cost of the future cash fl ows of uncollateralized derivatives or imperfectly collateralized derivatives is also taken into account.
The method for determining the CVA is primarily based on the use of market inputs in connection with the practices of market professionals. This method evolved over the fiscal year to be applied to all segments of counterparties subject to this calculation. In the absence of liquid market inputs, the method made use of proxies by type of counterparty, rating and geographic area.
V Value adjustment for internal credit risk (Debit Valuation Adjustment – DVA): The DVA is symmetrical to the CVA and represents the expected loss, from the counterparty’s perspective, on liability valuations of derivative financial instruments. It reflects the impact of Natixis’ credit quality on the valuation of these instruments. The DVA is measured by observing Natixis’ credit market inputs.
The factors taken into account include the following: V the origin of the external source (stock market pages, content contribution services, etc.); ; V the consistency of the various sources; V the frequency with which the data are updated; V the representative nature of inputs based on recent market transactions.
It involves verifying that the model is consistent with and relevant to its intended function (price setting, valuation, coverage, measurement and control of risk) and the product to which it applies, based on: V the theoretical approach: the financial and mathematical foundations of the model; V the application of the model: the pricing models used to generate risk and earnings data; V the stability of the model under parametric stress; V an assessment of the stability and consistency of the numerical methods used; V the independent re-implementation of the model as part of algorithm validation; V the comparative analysis of the calibration of model parameters; V an assessment of the modeling risk, particularly the comparative analysis of the model with other valuation models, in order to ensure the adequacy of the model and the payoff; V the implementation of an adjustment in respect of modeling risk to account for potential deficiencies in the model or its calibration; V the incorporation of the model into information systems.
The methods for determining fair value are monitored by a number of bodies including the Observability Committee, the Valuation Committee and the Impairment Committee, which comprise representatives of the Risk Department, the Finance Department, the market data monitoring department and the model validation committee.
Instruments measured using level 2 inputs also include: V securities that are less liquid than those classified as Level 1, whose fair value is determined based on external prices put forward by a reasonable number of active market makers and which are regularly observable without necessarily being directly executable (prices mainly taken from contribution and consensus databases); where these criteria are not met, the securities are classified as Level 3 fair value; V securities not quoted on an active market whose fair value is determined based on observable market data. E.g. use of market data published by listed peer companies or the multiple method from techniques commonly used by market participants; V Portuguese and Greek sovereign securities, whose fair value was recorded under level 2 given the wide bid-ask price spread on market prices; V shares of UCITS whose NAV is not determined and published on a daily basis, but are subject to regular reporting or offer observable data from recent transactions; V debt issues measured at fair value through profit and loss. The valuation of the“issuer credit risk” component is based on the discounted cash-flow method, using parameters such as yield curves, revaluation spreads, etc. For each issue, this valuation represents the product of its remaining notional amount and its sensitivity, taking into account the existence of calls, and based on the difference between the revaluation spread (based on BPCE’s cash reoffer curve as at December 31, 2014 and December 31, 2013) and the average issue spread. Changes in the issuer spread are generally not material for issues with an initial maturity of less than one year.
Hybrid instruments: Some more hybrid and/or long-maturity fi nancial instruments are measured using a recognized model on the basis of market inputs derived from observable data such as yield curves, implied volatility layers of options, market consensus data or active over-the-counter markets.
The main models for determining the fair value of these instruments are described below by type of product: V Equity Products: hybrid products are valued using: R market data; R the“payoff”, i.e. a calculation of positive or negative cash fl ows attached to the product at maturity; R a model of changes in the underlying asset.
The Tskew model is a valuation model for mono and multi-underlying options. Its principle is to calibrate the distribution of underlying asset or assets at maturity to standard option prices.
The main models used to value and manage fi xed-income products are Hull & White models (one-factor and two-factor models or onefactor Hull & White stochastic volatility model), the Hunt Kennedy model and the “smiled” BGM model.
5 FINANCIAL DATAConsolidated fi nancial statements and notes SBGM and Hunt Kennedy models are used to value fi xed-income products that are sensitive to volatility smiles (i.e. implied change in volatility relative to the exercise price) and to autocorrelation (or correlation between interest rates).
V Currency products: Currency products generally have specific characteristics which justify the choice of model.
In accordance with the decree of February 20, 2007, amended by the decree of November 23, 2011, relating to regulatory capital requirements applicable to credit institutions and investment fi rms, and in accordance with the European CRR Regulation of June 26, 2013 on requirements resulting from Basel 3, a description of crisis simulations and ex-post controls (validation of the accuracy and consistency of internal models and modeling procedures) is provided for each model used in section 3.6 of Chapter [3], “Risk Management and Capital Adequacy”.
Instrument class Main types of products comprising level 3 within the instrument class Valuation techniques used
Sticky CMS/Volatility Bond Valuation models for interest rate options Mean reversion parameters
The approach used is a hybrid model coupling the local volatility-type multiunderlying equity model with a onefactor Heath-Jarrow-Morton (HJM1F) interest rate model
Bi-Lognormal model to understand the time value of Spread Lock options, and replication for CMS and TEC Forwards
Spread Lock: -0.16% / -0.18% Volatility: 45% - 71% TEC/CMS correlation 70% - 90%
* As all transactions including this kind of data are back-to-back derivatives, this item, which justifi es the level-3 classifi cation, is fully hedged.
Transfers between fair value levels are reviewed and validated by ad hoc committees of representatives of various functions, particularly Finance, Risk and Business Lines. The Committee considers various indicators of market activity and liquidity as described in the General Principles.
In accordance with this procedure, CMBS and certain CLOs classifi ed in the fair value portfolio were marked-to-market in the fi rst half of 2014 (with no material impact on Natixis’ consolidated fi nancial statements due to the convergence of model and market prices) (see Note 6.7.7.2).
At December 31, 2014, unhedged net exposures were nil. As a reminder, at December 31, 2013, the following method was used: a valuation method based on a discounted cash fl ow approach using Intex modeling incorporating different assumptions based on the underlying asset classes.
The parameters were refi ned in 2014 (increasing convergence with market parameters) producing a -€29.8 million impact at December 31, 2014.
At December 31, 2014, Natixis no longer held any material positions reclassifi ed in accordance with this amendment (see note 6.7.2).
The majority of Natixis’ loans are variable-rate loans, and their fair value is determined on the basis of discounted future cash fl ows. The discount rate applied for a given loan is the rate at which Natixis would grant a loan with similar characteristics to a similar counterparty at the reporting date. As these are primarily variable-rate loans, the contractual rate is adjusted according to the trend in market lending rates and in counterparty risk.
5 FINANCIAL DATAConsolidated fi nancial statements and notes Purchased software is amortized on a straight-line basis over its estimated useful life, which in most cases is less than fi ve years. Internally generated software is amortized over its estimated useful life, which cannot exceed fi fteen years.
At December 29, 2014, Natixis entered into a sale agreement related to a share of its stake held in the Cube fund. The share of this stake initially classifi ed under “Available-for-sale fi nancial assets” was reclassifi ed under the line “Non-current assets held for sale”. At December 31, 2014, in accordance with IFRS 5, the reclassifi ed securities remain valued according to the provisions of IAS 39.
Continuing involvement is evidenced by the existence of contractual conditions such as: V an option or obligation to repurchase the assets transferred; V collection of financial compensation linked to the performance of the asset transferred.
R the location, function, and approximate number of employees who will be compensated upon termination of their services,
A description of the main risks and litigation to which Natixis is exposed is given in section 3.9 of Chapter [3], “Risk Management and Capital Adequacy”.
No provisions were recognized in respect of future operating losses or major repairs; nor were any contingent assets or liabilities recorded.
In accordance with the principles of recognition set out in IAS 19, Natixis has identifi ed the following types of post-employment benefi t: V defined contribution plans, under which an entity has no obligation to pay a specified benefit amount; V defined benefit plans, under which Natixis has a legal or constructive obligation to pay a specified benefit amount.
Other long-term benefi ts are valued using the same actuarial method as that applied to post-employment benefi ts under defi ned benefi t plans, except that liability revaluation items are recognized directly as an expense.
Deeply subordinated notes and preference shares are classifi ed in equity in light of the 2009 renegotiation of a clause making the payment of interest non-optional in the event of positive consolidated income and which has since become discretionary.
The share of third party investors in the net assets of dedicated mutual funds included in Natixis’ consolidation scope comprises a fi nancial liability recorded on the balance sheet under “Financial liabilities at fair value through profi t and loss”. The share of third party investors in the profi ts of the mutual funds is recorded in “Net gains or losses on fi nancial instruments at fair value through profi t and loss” in the consolidated income statement.
Through its principal shareholder BPCE, within the framework of the support plan to the fi nancial sector approved by the European Commission in 2008, Natixis indirectly received inter-bank mediumterm loans guaranteed by the transfer of full ownership of receivables meeting certain eligibility criteria. The transfer of ownership enabled the lenders to pledge the receivables with Société de Financement de l’Économie Française (SFEF) as security for any loans they received from SFEF. The corresponding loans granted to Natixis by BPCE, itself having been eligible for SFEF fi nancing, were shown in the consolidated balance sheet within “Deposits from fi nancial institutions”.
These loans, which amounted to €840 million at December 31, 2013, were fully repaid in 2014.
Features of the plan still in effect at December 31, 2014 are provided in Note 11.2.4.
The lock-up valuation method is based on the cost of a two-step strategy consisting of a fi ve-year forward sale of the locked-up shares and purchasing the same number of shares in cash, by fi nancing the purchase with a loan ultimately repayable at the end of the fi ve years with the income from the forward sale. The loan interest rate is that which would have been granted to a market player seeking a nonaffected cash loan repayable in fi ve years with an average risk profi le.
Under IFRS 2, the services acquired and the liability incurred are measured at fair value. Until the liability is settled, debt is remeasured at each reporting date and at the date of settlement, with any changes in fair value recognized in income for the period. The remeasurement of the liability at the reporting date takes into account any changes in the value of the underlying shares, as well as whether or not the presence conditions and performance criteria have been met.
The method of accounting for fees and commissions received depends on the end purpose of the services rendered and the method of accounting for the fi nancial instruments to which the service relates.
The fair value of hybrid market instruments not traded on an active market is calculated using valuation techniques. Valuations produced using valuation models are adjusted, depending on the instruments in question and the associated risks, to take account of the bid and ask price for the net position, modeling risks, assumptions regarding the funding cost of future cash fl ows, as well as counterparty and input risks. The fair values obtained from these methods may differ from the actual prices at which such transactions might be executed in the event of a sale on the market.
All goodwill is assigned to a CGU so that it may be tested for impairment. The tests conducted by Natixis consist in comparing the carrying amount of each CGU (including goodwill) with its recoverable amount. Where the recoverable amount equals the value in use, it is determined by discounting annual free cash fl ows to infi nity (see Note 2.5). Use of the discounted cash fl ow method involves: V estimating future cash flows. Natixis has based these estimates on forecasts included in its business units’ medium-term plans spanning five years; V projecting cash flows for the last year of the plan to infinity, at a rate reflecting the expected annual growth rate; V discounting cash flows at a specific rate for each CGU.
Natixis calls on independent actuaries to calculate its principal employee benefi ts. These commitments are determined using assumptions such as the salary growth rate, discount rates and rates of return on plan assets (see Note 11.2.3). These discount rates and rates of return are based on observed market rates at the reporting date, for example the yield curve on AA Corporate bonds for discount rates. When applied to long-term benefi t obligations, these rates introduce uncertainty into the valuations.
The participation rate used to calculate deferred profi t-sharing is determined based on pay-out ratios projected over the term of the medium-term plan and in line with the actual pay-out ratio for the previous fi scal year.
Provisions recognized in the consolidated balance sheet, other than those relating to fi nancial instruments, employee benefi ts and insurance policies, mainly concern provisions for litigation, fi nes and tax risks, as well as a provision for restructuring recorded at December 31, 2013 in respect of the workforce adaptation plan and the closing of the former GAPC hive-off.
Diluted earnings/(loss) per share corresponds to net earnings/(loss) for the period attributable to the group, divided by the weighted average number of shares, adjusted for the maximum impact resulting from the conversion of dilutive instruments into ordinary shares. Stock options issued are taken into account in calculating diluted earnings/ (loss) per share. The conversion of these instruments does not impact net income/(loss) used to calculate diluted earnings/(loss) per share.
Net earnings/(loss) attributable to the Group (in millions of €) 1,138 884
Net income/(loss) attributable to shareholders (in millions of €) (a) 1,085 835
Average number of shares used to calculate earnings/(loss) per share 3,107,314,636 3,087,418,898
Average number of ordinary shares issued and outstanding over the period 3,109,895,036 3,093,523,996
Average number of shares used to calculate diluted earnings/(loss) per share 3,109,929,784 3,096,362,860
(a) The difference between net earnings/(loss) attributable to the group and net income/(loss) attributable to shareholders corresponds to the interest generated on deeply subordinated notes and on preference shares, i.e. -€49 million at December 31, 2013 and -€53 million at December 31, 2014; (b) This number of shares refers to the shares granted under the deferred share-based bonus plans (2009, 2010, 2011, 2012 and 2013 plans). In 2013, based on the average share price, the 2008 stock option plan presented in Note 11.2.4 is not considered as potential dilutive shares. This is also the case for 2014.
6.1.1 Financial assets designated at fair value through profit and loss
Securities at fair value through profi t and loss 6.1.1.2 89,327 87,293
(b) The information presented takes into account the impact of offsetting carried out in accordance with IAS 32 (see Note 6.3).
Natixis does not purchase protection to hedge against credit risk associated with loans and receivables classifi ed as fair value instruments through profi t and loss.
6.1.1.2 Conditions for classifi cation of fi nancial assets designated at fair value through profi t and loss
Loans and receivables due from customers 5,212 74 1,113 4,024 3,791 103 499 3,190 6.1.2 Financial liabilities at fair value through profit and loss
At December 31, 2014, fi nancial liabilities at fair value through profi t and loss primarily comprised derivatives not used as hedging instruments.
Other payables 860 460 * The information presented takes into account the impact of offsetting carried out in accordance with IAS 32 (see Note 6.3).
The carrying amount of fi nancial liabilities designated at fair value through profi t and loss corresponds to their fair value shown on the balance sheet.
(a) The fair value, determined using the method described in Note 5.6, recorded in respect of internal credit risk on Natixis issues totaled -€89.2 million at the reporting date versus €125.7 million at December 31, 2013 (see Note 7.3). Besides changes in the outstanding amount, this difference refl ects changes in the Natixis spread since the close of the previous year’s accounts.
Liabilities measured at fair value through profi t and loss mainly comprise issues originated and structured on behalf of customers for which risks and hedging are collectively managed. These issues include signifi cant embedded derivatives for which changes in value are neutralized by those of the derivative instruments hedging them.
(a) Natixis has contracted Total Return Swaps (TRS) with BPCE. These instruments are used to hedge changes in the fair value recognized since July 1, 2009 on instruments previously linked to the former GAPC hive-off carried at fair value through profi t and loss at December 31, 2014 and are included on this line for an amount of €43.9 million in assets (versus €42 million at December 31, 2013) and €54 million in liabilities (versus €48 million at December 31, 2013).
(b) Natixis has contracted a call option with BPCE for the purpose of recovering, 10 years after its implementation, any net gains in fair value transferred to BPCE via TRS. The call option was recognized on this line in assets for €569.8 million versus €557.9 million at December 31, 2013.
Cash fl ow hedging is mainly used by Natixis and the leasing business as a structural hedge against interest rate risk.
The gross offset amounts refl ect derivatives and repurchase agreements with clearing houses for which the criteria set out in IAS 32 are met: V for derivatives, the information is presented in consideration of the effects of the currency offset between asset valuations and liability valuations of the derivatives handled through the “LCH Clearnet Ltd” clearing house via the “Swapclear” clearing system; V as regards repurchase agreements, the information presented includes repurchase agreements handled through clearing houses LCH Clearnet Ltd (Repoclear), LCH Clearnet S.A., Eurex AG and Fixed Income Clearing Corporation (FICC). Natixis records on its balance sheet the net value of repurchase and reverse repurchase agreements that: R are entered into with the same clearing house,
Guarantees received and given in the form of the securities shown in the “Financial instruments” column are recognized at fair value.
As stated in Note 1.1, Natixis amended the offsetting rules for repurchase agreements handled with clearing houses LCH Clearnet Ltd, LCH Clearnet SA, Fixed Income Clearing Corporation (FICC) and Eurex AG and no longer takes the ISIN code (value reference code) into account. This change, applied at December 31, 2013, would have led Natixis to offset €13.9 billion.
5 FINANCIAL DATAConsolidated fi nancial statements and notes 6.3.1 Financial assets
Gross amount of fi nancial assets recognized in the balance sheet*
Net amount of fi nancial assets recognized in the balance sheet
Loans and receivables due from banks 4,751 0 4,751 5,091 5,091
Financial liabilities at fair value through profi t and loss 128,850 48,228 80,622 126,815 30,031 96,784
Amounts not offset related to (a) Amounts not offset related to (a)
6.5 Loans and receivables 6.5.1 Loans and receivables due from banks
Consolidated fi nancial statements and notes 6.5.2 Customer loans and receivables
Customer lease fi nancing outstandings 6,344 4,088 10,432 6,650 3,972 10,622
5 FINANCIAL DATAConsolidated fi nancial statements and notes 6.5.2.4 Other customer loans and receivables
“Held-to-maturity fi nancial assets” are exclusively recognized by fully-consolidated insurance companies at December 31, 2014 and December 31, 2013.
The table below shows, inter alia, the carrying amount of: V the underlying assets of the covered bond issues; V financial instruments (securities and receivables) deposited with central banks and assignable as collateral to guarantee refinancing operations at any time.
They are kept on the asset side of the consolidated balance sheet because virtually all of the benefi ts and risks are maintained, since the securities must be returned to Natixis (unless Natixis defaults).
Net position 6.7.4.2 Fully derecognized transferred fi nancial assets for which continuing involvement is maintained
The fair value of fi nancial assets received as security that Natixis may sell or reuse as security was €226 billion at December 31, 2014, versus €102 billion at December 31, 2013.
Other fi nancial assets 6.7.7 Fair value of financial assets carried at fair value in the balance sheet
Other fi nancial assets held for trading 2,358 1,982 376 2,129 2,129
Securities at fair value through profi t and loss 12,348 7,440 2,622 2,286 12,060 8,810 1,613 1,637
Available-for-sale securities – Equity investments 1,025 2 67 955 1,341 237 7 1,098
Other fi nancial assets held for trading Financial assets at fair value through profi t and loss 2,134 (330) 62 Fixed-income securities at fair value through profi t and loss 516 35 9 Variable-income securities at fair value through profi t and loss 1,121 (2) 2 Other fi nancial assets at fair value through profi t and loss 497 (363) 51 Hedging derivatives Available-for-sale fi nancial assets 1,163 (28) 31 87 Available-for-sale securities – Equity investments 1,098 7 29 83 Other available-for-sale securities 65 (27) 2 4 o/w fi xed-income securities 1 (27) 2 1 o/w variable-income securities 64 3
TOTAL FINANCIAL ASSETS RECORDED AT FAIR VALUE 6,563 739 191 87 * Amount adjusted relative to the fi nancial statements at December 31, 2013, mainly arising from the reclassifi cation of Private Equity securities from Level 2 to Level 3 of the fair value hierarchy for €1.121 billion (see Note 5.6).
Financial assets at fair value through profi t and loss - Trading 5,191 (166) (85) Fixed-income securities held for trading 3,919 (43) (49) Derivative instruments not eligible for hedge accounting (positive fair value) 1,271 (125) (37)
o/w interest rate derivatives (20) 35 (12) o/w currency derivatives 9 o/w equity derivatives Other
TOTAL FINANCIAL ASSETS RECORDED AT FAIR VALUE 7,301 (320) (52) 55 * Amount adjusted relative to the fi nancial statements at December 31, 2013 (adjustments shown in the “Other reclassifi cations” column), mainly arising from the reclassifi cation of Private Equity securities from Level 2 to Level 3 of the fair value hierarchy for €1.121 billion (see Note 5.6).
Sensitivity of the fair value of fi nancial instruments measured using unobservable inputs was estimated at December 31, 2014. With the aid of probable assumptions, this sensitivity was used to estimate the impacts of market fl uctuations in uncertain economic environments. This estimate was performed using: V a “standardized (1)” variation in unobservable inputs related to assumptions of additional valuation adjustments for fixed income, currency and equity instruments. The resulting sensitivity was €8.7 million; V a flat variation of: R +/-1% in the recovery rate for unsecured debt on uncollateralized derivatives,
6.7.7.2 Financial assets at fair value: transfer between fair value levels
Securities at fair value through profi t and loss 1,232 553 (66)
Other available-for-sale securities 929 279 2,007 o/w fi xed-income securities 763 279 1,931 o/w variable-income securities 167 76
Derivative instruments not eligible for hedge accounting (positive fair value) 623 12 o/w interest rate derivatives 21 o/w currency derivatives o/w credit derivatives 12 o/w equity derivatives 602
Securities at fair value through profi t and loss 693 175 7 o/w fi xed-income securities 693 175 7 o/w variable-income securities
Other available-for-sale securities 2,444 77 11 25 o/w fi xed-income securities 2,368 77 25 o/w variable-income securities 76 11
(b) The spreadlocks were transferred to Level 3 of the fair value hierarchy subsequent to a change in the valuation model based on proprietary data.
Loans and receivables due from banks 71,718 72,620 0 66,969 5,651 o/w unlisted fi xed-income securities 1,232 1,232 1,232 o/w unlisted fi xed-income securities 4,571 4,672 117 4,555 * Including ordinary bank current accounts.
Loans and receivables due from banks 77,600 77,785 0 73,089 4,695 o/w unlisted fi xed-income securities 1,312 1,197 0 1,197 0 o/w unlisted fi xed-income securities 2,851 2,827 0 2,659 168
Insurance accrual accounts 6.9.3.2 7,981 7,511 * Including the outstanding non-amortized amount of the margin not recognized in income on the transaction date (“Day One Profi t”) of €54 million at December 31, 2014 versus €35 million at December 31, 2013 (see Note 6.9.2).
DEFERRED MARGIN AT THE END OF THE PERIOD 54 35 6.9.3 Insurance accrual accounts 6.9.3.1 Insurance accrual accounts – Assets
Investment property * Insurance company investments. Changes in fair value give rise to the symmetrical recognition of a deferred profi t-sharing reserve equal to 92.7% of the related base amount on average at December 31, 2014 compared to 94.8% at December 31, 2013 (See Note 2.8).
The fair value of investment property, for which the valuation techniques are described in Notes 5.6 and 5.8, is classifi ed in Level 3 of the fair value hierarchy of IFRS 13.
In 2014, Natixis recognized assets obtained by taking possession of guarantees.
Other technical reserves 1,775 1,342 * At December 31, 2014, net deferred profi t-sharing liabilities amount to €3.411 billion, compared with deferred profi t-sharing liabilities of €1.317 billion at December 31, 2013 (see Note 2.8).
Impairment losses taken on available-for-sale fi nancial assets 1,221 86 (39) (314) (2) (14) 937
(a) Of which €351 million in provisions at December 31, 2013 in respect of Madoff net outstandings.
(b) Of which €90.6 million in provisions at December 31, 2013 in respect of the workforce adjustment plan discussed in Note 5.14.
6.19 Fair value of financial liabilities carried at fair value in the balance sheet
Derivative instruments not eligible for hedge accounting (negative fair value) 84,123 1,522 80,357 2,244 63,337 2,127 59,561 1,649
Financial liabilities at fair value through profi t and loss 96,936 96,922 14 80,351 80,351
Other fi nancial liabilities at fair value through profi t and loss 83,300 83,286 14 68,987 68,987 o/w currency derivatives 3 3 * Amount adjusted relative to the fi nancial statements at December 31, 2013.
* Amount adjusted relative to the fi nancial statements at December 31, 2013 (adjustments shown in the “Other reclassifi cations” column).
5 FINANCIAL DATAConsolidated fi nancial statements and notes 6.19.2 Financial liabilities at fair value: transfer between fair value hierarchy levels
Transfers between fair value hierarchy levels occurring in 2013 and 2014 do not represent material amounts.
Consolidated fi nancial statements and notes 6.21 Breakdown of financial assets and liabilities by contractual maturity
5 FINANCIAL DATAConsolidated fi nancial statements and notes Assets (in Billions of euros)
Other fi nancial liabilities at fair value through profi t and loss 42 27 11 8 9 40 136
Fees and commissions that form an integral part of the effective yield on an instrument, such as fees on fi nancing commitments given or loan set-up fees, are recognized and amortized as an adjustment to the effective interest rate over the estimated term of the applicable loan. These fees and commissions are recognized as interest income rather than fee and commission income.
At December 31, 2014, the expense recognized in respect of the premium totaled -€27 million (-€135 million in 2013), of which -€21 million was recognized in net revenues under guarantee commissions (-€117 million in 2013) and -€6 million in provision for credit losses (-€19 million in 2013).
Net gains/(losses) on fi nancial assets and liabilities held for trading (a) 1,240 1,196 o/w derivatives not eligible for hedge accounting (60) (1,819)
Net gains/(losses) on other fi nancial assets and liabilities at fair value through profi t and loss (b) 73 693
(a) Net gains/(losses) on fi nancial assets and liabilities held for trading include: V The valuation of unhedged ABS CDOs with subprime exposure (see Note 5.6), resulting in the recognition of income of €10 million in 2014 (excluding the impact of the BPCE guarantee), versus income of €12 million at December 31, 2013. It should be noted that, in relation to the closing of the former GAPC hive-off, ABS CDOs with a subprime component were sold in H1 2014, without a material impact on the income statement (see section 3.11 of Chapter [3], “Risk Management and Capital Adequacy”).
V Impairments taken against the fair value of CDS entered into with monoline insurers (see Note 5.6), which led to a decrease of €102 million in cumulative impairments in 2014, versus income of €149 million in 2013 (excluding the impact of exchange rate fl uctuations and the BPCE guarantee), bringing cumulative impairments to €103 million at December 31, 2014 versus €197 million at December 31, 2013.
V A €27.1 million reversal at December 31, 2014 of the portfolio-based provision recorded on exposures in respect of CDPCs (Credit Derivatives Product Companies), bringing the cumulative balance to €11 million. At December 31, 2013, a €19.3 million reversal was carried out, bringing the cumulative balance to €34.7 million.
(b) Net gains and losses include the valuation of the issuer spread on issues carried out by Natixis and designated at fair value through profi t and loss with a negative €214.9 million impact on income for the period versus a negative impact of €197 million last year.
Net gains or losses on available-for-sale fi nancial assets principally comprise: V gains or losses on sales of available-for-sale financial assets and financial assets recognized at their amortized cost; V permanent losses in value and dividends payable on variable-income securities, charged to “Available-for-sale financial assets”.
Impairment of fi xed-income securities classifi ed as available-for-sale is charged to “Provision for credit losses”.
Net charge to/reversal of insurance companies’ technical reserves (2,212) (2,212) (1,519) (1,519)
Other insurance income and expenses 7.5.2 5,563 (3,240) 2,323 4,254 (3,120) 1,135
Pensions and other employee benefi ts 12.2.2 & 12.2.3 (210) (186)
(a) Of which €6.6 million in respect of the Competitiveness and Employment Tax Credit versus €5.3 million at December 31, 2013.
Total net reversals: 414 430 7.8 Gain or loss on other assets
Gains/losses on disposals for the period are mainly linked to the disposal of a property complex, the capital gain from which amounts to €92.2 million at December 31, 2014.
= Consolidated net income/(loss) before tax, goodwill, amortization and share in income of associates 1,849 1,444
= Consolidated taxable income/(loss) 1,638 1,361 x Theoretical tax rate 33.33% 33.33%
+ Losses for the period not recognized for deferred tax purposes (11) (28)
(b) o/w: an €8 million dividend tax recorded in 2014. Dividend tax paid in 2013 is shown under “Effect of the sale of CCIs” in the amount of €32 million.
(c) o/w: -€18 million in write-downs on the past defi cit on the tax consolidated group in France (-€118 million at December 31, 2013) and -€80 million in write-downs on the past defi cit recorded for the London branch (no impairment recorded in 2013).
(d) o/w: tax savings of €76 million resulting from the offset of previously unrecognized tax losses against 2014 profi ts (€108 million at December 31, 2013).
Other activity 12 8.2 Breakdown of tax on gains and losses recognized in equity
TOTAL CHANGES IN UNREALIZED OR DEFERRED GAINS OR LOSSES 691 (27) 664 1,141 (98) 1,043
In 2012, in light of regulatory constraints and the persistently uncertain economic environment, Natixis forged ahead with its transformation policy. In particular, in terms of Corporate and Investment Banking, its organization was adapted to place customer relations at the core of development and, as a result, the division was renamed Wholesale Banking.
The entity is organized around three core business lines: V Wholesale Banking, which advises businesses, institutional investors, insurance companies, banks and public sector entities and offers them a diversified line of financing solutions as well as access to the capital markets. Its duties are threefold: to strengthen the bank’s customer orientation, to serve as a meeting place between issuers and investors and to roll out the “Originate to Distribute” model to optimize the rotation of the bank’s balance sheet via active management of the credit portfolio; V Investment Solutions, which includes Asset Management, Insurance, Private Banking and the Private Equity for third party clients business line that resulted from the spin-off of Natixis Private Equity in 2010; V Specialized Financial Services, which includes Factoring, Lease Financing, Consumer Credit, Guarantees, Film Industry Finance, Employee Benefits Planning, and Payment and Securities Services. These services are the key growth drivers for the retail banking business of Groupe BPCE.
Non-strategic activities (primarily service activities) stemming from Coface have been grouped under Corporate Data Solutions and are now managed directly by Natixis’ Finance Department.
Based on this new organization, Management monitors divisional performance, draws up business plans and manages the business from an operational perspective. In accordance with IFRS 8 “Operating Segments”, this is the segmentation used by Natixis to defi ne its operating segments.
It is structured into two sub-divisions with complementary objectives: V Coverage and Advisory, whose missions are to develop customer relationships and contribute to strengthening synergies between Natixis’ business lines. It includes M&A Advisory Services, Primary Equity, Vanilla Finance and Coverage. Coverage, in partnership with all of Natixis’ business lines, designs innovative, tailored solutions designed to meet the specific requirements of each of its customers - from vanilla finance to the most sophisticated arrangements; V The Financing & Global Markets Department, which combines: R Global Markets, which includes the Equity, Credit Rate, Currency, Commodities and Global Structured Credit and Solutions business lines,
5 FINANCIAL DATAConsolidated fi nancial statements and notes V Leasing: this business line provides financing solutions for real estate and non-real estate assets under finance leases or other long-term leasing arrangements; V Employee Savings Schemes: this business line offers a comprehensive range of B2B employee benefits planning products based on employee savings (administration of employee accounts, fund administration and accounting) and employment services vouchers; V Securities Services: this business line offers back and middle office services for retail securities custody (account administration, back office outsourcing, office services, depositary control) for the BPCE networks and external clients; V Payments: this business line provides payments tools, infrastructure and services, including electronic banking, issuance and collection of high-volume electronic transfers and check processing; V Film Industry Financing: this business line is operated via Coficiné, a subsidiary specializing in structured loans for film and audiovisual activities in France and Europe.
V Asset Management: Asset Management activities are grouped together within Natixis Global Asset Management. They cover all asset categories and are carried out mainly in the US and France. These activities are performed by autonomous entities (specialized management companies and specialized distribution units) coordinated by a holding company that ensures the organization’s consistency by overseeing its strategic direction. These companies are thus able to focus on their core business and on achieving robust performance, while retaining the option of developing their own institutional clientele and drawing on the business line’s other support functions, based on appropriate economic models. A number of them have forged a strong reputation, such as Loomis Sayles, Harris Associates, AEW and Natixis Asset Management.
This business covers proprietary Private Equity transactions, some sponsored funds, and Natixis’ participation in certain sponsored funds not held by Natixis. After the October 2010 sale to AXA Private Equity of the majority of the proprietary operations in France, the international segment remains, and is divided into several small teams of investors. The teams have extensive expertise in equity fi nancing for generally unlisted, small and medium-sized enterprises outside France via equity holdings.
Coface’s non-core activities (service activities mainly) were grouped under Corporate Data Solutions at the beginning of 2013. The two main entities are Kompass and Ellisphere.
At the end of 2008, Natixis segregated its most illiquid and/or highrisk fi nancial markets exposures, in particular: convertible arbitrage, complex equity and interest rate derivatives, trading correlation derivatives, structured fund-based derivatives, proprietary credit activities and residential ABS.
The Corporate Center operates alongside the operating divisions. As such, it recognizes the central funding mechanisms and income from Natixis’ asset and liability management. It also records income on the bank’s portfolio of equity investments not belonging to a division, and the revaluation of the Group’s own debt.
In terms of costs, the Corporate Center recognizes the bank’s structural costs and certain restructuring costs not allocated to the businesses.
(b) Pro forma 2013 fi gures include the BPCE Assurances and BPCE APS contributions, as well as the transfer of SFS’ stake in Caceis to other activities.
5 FINANCIAL DATAConsolidated fi nancial statements and notes This information is determined based on the accounting principles applied in accordance with IFRS as adopted by the European Union at December 31, 2013.
Assets at fair value through profi t and loss 192,622 10,137 6 54 331 13,347 1,827 218,324
Financial assets at fair value through profi t and loss (excluding variable-income securities) 213,638 0 0 213,638 184,850
Held-to-maturity fi nancial assets 2,766 0 (3) 2,763 3,025 * including collective provisions
The reclassifi cation of consolidated accounting volumes as gross exposure and exposure at default with respect to prudential credit risk (presented in section 3.4 of Chapter [3], “Risk Management and Capital Adequacy”) involves the following key operations: V exclusion of equity-accounted insurance companies in the prudential scope; V exclusion of exposure classified in the trading scope; V inclusion of all netting agreements on market transactions; V restatement of factoring positions to take into account exposure to the risk of default and a position in risk dilution; V application of a credit-equivalent conversion factor on financing and guarantee commitments.
TOTAL EXPOSURE AND IMPACT OF GUARANTEES 236,798 5,303 (2,456) 239,645 1,850 43,893 248,025 6,191 (2,851) 251,364 2,105 39,711
Africa and the Middle East 304 2,770 3,074 126 30 156
At December 31, 2014: 63.4% of collective provisions on the Finance sector comprise provisions covering CDPCs (Credit Derivative Product Companies), compared with 78.8% at December 31, 2013.
The sector reversal includes a €27.4 million reversal in respect of CDPCs.
(in millions of euros) Provisions as at 12.31.2013 Additions (+) Reversals (-) Translation adjustments Provisions as at 12.31.2014
The sector reversal includes a €19.3 million reversal in respect of CDPCs.
10.3 Market risk, overall interest rate risk, liquidity risk and structural foreign exchange risk
Compensation and employee benefi ts include wages and salaries net of rebilled expenses paid within twelve months of the end of the reporting period in which the services were rendered, deferred cash-settled or equity-settled variable compensation, employee incentives and profi t-sharing for the period, the cost of pensions, other employee benefi t obligations such as long-service awards and benefi ts related to capital increases reserved for employees.
Regarding the plan approved by the Board of Directors on February 18, 2015, as these allocations had not yet formally been carried out at the reporting date, these expenses have been estimated using best available estimates of inputs at the reporting date. These inputs relate to the share value and dividend assumptions.
In 2014, Coface established compensation plans based on Coface shares. As the impact of these plans is not material for Natixis, the characteristics of these plans are not outlined in the paragraphs that follow.
October 2018 * The expected number of units at the vesting date is funded by equity swaps.
5 FINANCIAL DATAConsolidated fi nancial statements and notes Short-term cash-settled payment plans indexed to the Natixis share
The corresponding expense associated with the short-term plan, estimated based on the probability of the presence condition being met, is fully recognized in the 2014 fi nancial statements in the amount of €34 million.
Deferred retention and performance bonuses paid in cash are awarded to some staff. These bonuses are subject to presence and performance criteria. In terms of accounting treatment, they are recorded under “Other long-term employee benefi ts”. The estimated expense is based on an actuarial estimate of the probability of these conditions being met. The expense is recognized over the vesting period. The amount recognized in respect of fi scal year 2014 was: Year of plan Grant date Acquisition dates Expense for 2014
The main defi ned-contribution plans available to Natixis employees are operated in France. They include the mandatory pension scheme and the national schemes AGIRC and ARRCO.
Contributions paid under defi ned-contribution plans are expensed for the period in which the services were provided.
Post-employment defi ned-benefi t plans include all post-employment benefi ts for which Natixis has committed to pay a specifi ed level of benefi ts.
These notably include long-service awards and deferred compensation payable in cash twelve months or more after the end of the period.
a) Amounts recognized on the balance sheet at December 31, 2014
Net amount recognized in balance sheet 252 186 53 103 594 175 164 47 100 485 * Separate asset components are for the most part segregated in the balance sheets of Natixis insurance subsidiaries (ABP Life Insurance), hedging the benefi t liabilities of other entities within the Natixis group of consolidated companies which were transferred to hedge the post-employment benefi ts of a few categories of employees.
Actuarial liabilities at start of period 527 206 47 100 880 579 234 50 89 952 o/w amounts paid out in respect of plan liquidation (1) 0 0 0 (1) 0 0 0 0 0
Actuarial liabilities at end of period 656 228 53 103 1,040 527 206 47 100 880
Consolidated fi nancial statements and notes c) Changes in recognized amounts on the balance sheet (Change in hedging assets) R PLAN ASSETS
Revaluation adjustments - Return on assets 17 0 17 23 21 44
Revaluation adjustments over the period 110 19 129 (30) 2 (28)
Total revaluation adjustments at end of period 273 28 301 163 9 172
Total revaluation adjustments at start of period 64 0 64 41 (21) 20 o/w effect of ceiling on assets 0 0 0 0 0 0
Revaluation adjustments over the period 20 0 20 23 21 44 o/w effect of ceiling on plan assets 0 0 0 0 0 0
Total revaluation adjustments at end of period 84 0 84 64 0 64 o/w effect of ceiling on assets 0 0 0 0 0 0 f) Analysis of expenses for the period
Rate of increase in healthcare costs 4.30% 4.50% 5.00% 4.40% 4.50% 5.00%
For end-of-career awards and long-service awards, employee turnover is calculated by age bracket and grade based on a three-year average. A rate of 0% is used for employees aged 55 and over.
+1% change in rate of increase in healthcare costs 7.13% 26.29%
-1% change in rate of increase in healthcare costs (5.63%) (19.54%)
-1% change in rate of increase in salaries and income (incl. infl ation) (13.72%) (10.96%) (8.14%) (19.63%) (8.95%) (8.35%)
In accordance with IAS 19R, the impact is treated as a plan change. The measurement of gross liabilities as such is fully recognized under “Past service costs”, with an impact on consolidated net income of -€2.3 million at December 31, 2014, versus -€21.7 million at December 31, 2013.
The number of options awarded is consistent with the number of options awarded upon plan inception, without taking into account the readjustment linked to the special dividend distributed subsequent to the disposal of the CCIs.
5 FINANCIAL DATAConsolidated fi nancial statements and notes Expenses are not recognized in Natixis’ fi nancial statements as the bank’s fi nancial cost from the discount given upon subscription to employee stock options under the Company employee savings plan, measured taking into account the fi ve-year lock-up period applicable to the issued securities, is zero.
The capital increase in 2014 is linked to: V the allocation of bonus shares to some Natixis employees under the 2010, 2011 and 2012 conditional share allocation plans, for which payment is share-based (see Note 5.18 and Note 11.2.2.); V to the subscription to the share issue reserved for employees under the employee shareholding plan.
The main features of undated deeply subordinated securities are outlined in section 3.3 of Chapter [3], “Risk Management and Capital Adequacy”.
The amounts shown represent the nominal value of the commitment undertaken: (in millions of euros) 12.31.2014 12.31.2013
In addition to the commitments set out above, Coface’s contracts with clients in relation to its credit insurance activities represent a total credit risk exposure of €508 billion before the impact of reinsurance versus €453 billion at December 31, 2013 (see section 3.10 of Chapter [3], “Risk Management and Capital Adequacy”).
Other fi nancing commitments falling within the scope of IAS 37
V the amount of the obligation cannot be measured with sufficient reliability.
5 FINANCIAL DATAConsolidated fi nancial statements and notes (in millions of euros) 12.31.2014 12.31.2013
On February 19, 2015, Natixis announced that it had entered into exclusive discussions with Italian company Banca Leonardo regarding plans to acquire Leonardo & Co SAS (“Leonardo France”). The current management of Leonardo France would join Natixis if the acquisition of the company takes place. Leonardo France is a leading structure in mid-cap M&A and investment fund advisory in France. The company would become Natixis’ specialized entity in charge of M&A for investment funds and mid-cap customers.
Present value of minimum lease payments receivable 1,999 5,204 3,402 10,605 2,084 5,196 3,565 10,845
Minimum payments receivable under irrevocable leases 38 122 23 183 36 122 22 180
Finance leases Unsecured residual value accruing to lessor 599 14 613 602 14 616 15.1.2 Leases as lessee
(a) In 2013 and 2014, attendance fees paid to members of the Board of Directors included a fi xed portion (€8,000 in 2014 and €10,000 in 2013, per person) and a variable portion (€2,000 in 2014 and 2013 per Board Meeting, per person). The members of the Audit Committee and the Compensation Committee received a fi xed payment: €5,000 for the members of the Audit Committee (€17,000 in 2014 (€20,000 in 2013) for its Chairman), €3,000 for the members of the Compensation Committee (€8,000 (€10,000 in 2013) for its Chairman) and a variable portion of €1,000 per Board Meeting, per person). The members of the Strategic Committee received a variable portion of €2,000 and the Chairman of the Strategic Committee received a fi xed portion of €8,000 for 2014.
Natixis’ Chief Executive Offi cer enjoys the retirement benefi ts plan offered to upper management offi cers (“hors classifi cation”): V Social Security contributions in tranche A *; V Mandatory ARRCO contributions in tranche A (14.06%); V Additional ARRCO contributions in tranche B (5.63%); V AGIRC contributions in tranches B (20.43%) and C (20.43%).
At the end of this commitment, it is expected that the Chief Executive Offi cer will not receive severance payments if he leaves the Company at his initiative to perform new duties or changes his position within Groupe BPCE. Furthermore, in accordance with the provisions of the AFEP-Medef code of corporate governance, the right to compensation is subject to a certain number of criteria and performance conditions (unchanged since 2011).
This non-compete clause is limited to a period of six months and is associated with an indemnity equal to six months of fi xed compensation, as in force at the date on which the CEO leaves offi ce.
All of these obligations and agreements will once again be submitted to a vote by the shareholders at the General Shareholders’ Meeting of May 19, 2015, when Laurent Mignon will be reappointed as Chief Executive Offi cer as approved by the Board of Directors at its meeting of February 18, 2015.
* Tranche A corresponds to the fraction of annual compensation between €0 and €37,548.
Tranche B corresponds to the fraction of annual compensation between €37,548 and €150,192.
The following table shows a reconciliation between insurance companies’ fi nancial statements as presented and how they would translate into the banking format. It also shows the consolidated contribution by insurance companies in banking format.
As regards net revenues, in the interest of consistency, insurance income and expenses that are similar to banking income and expenses (principally interest and fees and commissions) are reclassifi ed under the corresponding line items in the banking format. Technical reserves and claims expenses are charged to net revenues rather than recognized as provisions for credit losses.
Balance sheet reclassifi cations are not material. Most of the balance sheet line items specifi c to insurance companies are shown under “insurance company investments” on the asset side and under “insurance companies’ technical reserves” on the liabilities side. Receivables and related payables, shown under accrued income, prepaid expenses and other assets or deferred income, accrued charges and other liabilities in the insurance format are reclassifi ed in the same lines as the principal in the banking format.
Income and expenses net of reinsurance transfers 117 117 117 117 Provision for credit losses (2) (2) (2)
Depreciation, amortization and impairment on property, plant and equipment and intangible assets (51) (39)
NET INCOME (GROUP SHARE) 354 327 15.4 Fees paid to the Statutory Auditors
The mandate of Mazars was renewed by the shareholders at the General Shareholders’ Meeting of May 2012, for a term of six years ending as of the General Shareholders’ Meeting called to approve the 2018 fi nancial statements. The mandate of Deloitte & Associés was renewed by the shareholders at the General Shareholders’ Meeting of May 2010, for a term of six years ending as of the General Shareholders’ Meeting called to approve the 2016 fi nancial statements. KPMG Audit was appointed in replacement of Salustro Reydel by the shareholders at the General Shareholders’ Meeting of May 2010, for a term of six years ending as of the General Shareholders’ Meeting called to approve the 2016 fi nancial statements.
Deloitte & Associés, KPMG Audit and Mazars are registered as Statutory Auditors with the “Compagnie Régionale des Commissaires aux Comptes of Versailles” and under the supervision of the “Haut Conseil du Commissariat aux Comptes”.
5 FINANCIAL DATAConsolidated fi nancial statements and notes The Statutory Auditors were paid the following amounts in return for their duties: (in thousands of euros)
Independent audit and examination of the separate and consolidated accounts 7,197 7,299 38% 65% 3,332 3,854 73% 90% 3,247 3,212 75% 86% 13,776 14,365 50% 75%
Other services included in “Other“ primarily involve support provided by Deloitte Conseil, particularly work related to subsidiary ABP Vie’s launch of the Natixis Assurances life and personal protection insurance product line on the Caisse d’Epargne network (after renegotiating agreements with CNP) starting on January 1, 2016 at a cost of €5,165,000.
Pursuant to the article referred to above, the table below specifi cally provides information linked to net revenues, pre-tax profi t, income tax and headcount as at December 31, 2014.
Consolidated fi nancial statements and notes 16.1 Entity operations by country at December 31, 2014
WHOLESALE BANKING NATIXIS SA Credit institution FC 100 100 100 100 France
Natixis Structured Issuance (15) Issuing vehicle FC 100 100 0 0 Luxembourg
Bleachers fi nance (11) Securitization vehicle FC 100 0 0 0 United States
Secondary markets fi nance FC 100 100 100 100 United States
NEXGEN FINANCIAL HOLDINGS Ltd Holding company FC 100 100 100 100 Ireland
NATIXIS GLOBAL ASSET MANAGEMENT Holding company FC 100 100 100 100 France
ASAHI INVEST INVESTMENT ADVISORY CO, LTD Retail Equity (a) 49 49 49 49 Japan
HARRIS ALTERNATIVES HOLDING INC Holding company FC 100 100 100 100 United States
MC MANAGEMENT, LP Holding company FC 100 100 100 100 United States
Management of venture capital mutual funds FC 51 51 51 51 Luxembourg
NATIXIS GLOBAL ASSET MANAGEMENT HOLDINGS, LLC Holding company FC 100 100 100 100 United States
NATIXIS GLOBAL ASSOCIATES GERMANY Retail FC 100 100 100 100 Germany
NGAM UK Ltd * Retail FC 100 100 100 100 Luxembourg
NGAM Middle East Retail FC 100 100 100 100 United Arab
AEW Central Europe Romania Retail FC 100 100 100 100 Romania
AEW Central Europe Hungary Retail FC 100 100 100 100 Hungary
Mutual fund holding company FC 100 100 100 100 France 1818 IMMOBILIER Real estate operations FC 100 100 100 100 France
Investment product distribution to IWMAs FC 66 66 66 66 France
BPCE ASSURANCES (5) Insurance company FC 60 60 0 0 France
BRANCHES NATIXIS LIFE Life insurance FC 100 100 100 100 France
NATIXIS CONSUMER FINANCE Holding company FC 100 100 100 100 France
NATIXIS PAYMENT SOLUTIONS (Formerly NATIXIS PAIEMENTS) *** Banking services FC 100 100 100 100 France
OCEOR LEASE TAHITI ** Equipment leasing FC 100 100 100 100 Tahiti
COFACE DEUTSCHLAND VERTRIEB GMBH (24) Financial data 0 0 100 100 Germany
COFACE HOLDING AMERICA LATINA Financial data FC 41 41 100 100 Mexico
COFACE HOLDING ISRAEL Holding company FC 41 41 100 100 Israel
COFACE NORTH AMERICA HOLDING COMPANY Holding company FC 41 41 100 100 United States
COFACE POLAND CMS Financial data FC 31 31 100 75 Poland
COFACE RUS INSURANCE COMPANY Credit insurance FC 41 41 100 100 Russia
COFACE SEGURO DE CREDITO MEXICO Insurance FC 41 41 100 100 Mexico
COFACE SOUTH AFRICA Insurance FC 41 41 100 100 South Africa
COFACE SOUTH AFRICA SERVICES Insurance FC 41 41 100 100 South Africa
BRANCHES COFACE SVERIGE - SUCC (COFACE KREDIT) Insurance FC 41 41 100 100 SWEDEN
COFACE IRELAND - SUCC (COFACE SA) Insurance FC 41 41 100 100 Ireland
COFACE UK - SUCC (COFACE SA) Insurance FC 41 41 100 100 Luxembourg
COFACE BELGIUM - SUCC (COFACE SA) Insurance FC 41 41 100 100 Belgium
COFACE LUXEMBOURG (SUCC-Coface SA) Insurance FC 41 41 100 100 Luxembourg
COFACE SWITZERLAND - SUCC (COFACE SA) Insurance FC 41 41 100 100 Switzerland
COFACE ISRAEL (20) Credit insurance FC 41 41 0 0 Israel
COFACE NEDERLAND - SUCC (COFACE KREDIT) Insurance FC 41 41 100 100 Netherlands
COFACE CANADA - SUCC (COFACE SA) Insurance FC 41 41 100 100 Canada
COFACE POLAND - SUCC (COFACE AUSTRIA) Insurance FC 41 41 100 100 Poland
COFACE LATVIA INSURANCE -SUCC (COFACE AUSTRIA) Insurance FC 41 41 100 100 Latvia
COFACE JAPAN - SUCC (COFACE SA) Insurance FC 41 41 100 100 Japan
COFACE SINGAPORE - SUCC (COFACE SA) Insurance FC 41 41 100 100 Singapore
COFACE HONG KONG -SUCC (COFACE SA) Insurance FC 41 41 100 100 Hong Kong
NATIXIS VENTURE SELECTION (7) Investment fund 0 0 100 100 France
NEM INVEST SAS (7) Private Equity 0 0 100 100 France
KOMPASS Belgique Marketing and other services FC 100 100 100 100 Belgium
KOMPASS INTERNATIONAL NEUENSCHWANDER Holding company FC 100 100 100 100 France
Real estate investments FC 100 100 100 100 France * Change in registered company name in 2014.
(6) Newly consolidated entity in the fi rst quarter of 2014.
(10) Opening of a distribution offi ce in the fi rst quarter of 2014.
(15) Newly consolidated entity in the third quarter after thresholds were exceeded.
(16) Newly consolidated entity following the acquisition of additional shares in the third quarter.
(22) Deconsolidated entity after the entities were liquidated in the fourth quarter of 2014.
Statutory Auditors’ report on the consolidated fi nancial statements 5.2 Statutory Auditors’ report on the consolidated financial statements
Without calling into question the opinion expressed above, we would draw your attention to Notes 1.1, 3.1 and 4 of the appendix setting out the effects of the fi rst application of IFRS 10 “Consolidated fi nancial statements”, and IFRS 11 “Joint Arrangements” and IFRS 12 “Disclosure of interests in other entities”, as well as 1.1, 5.13 and 6.3 of the appendix setting out the consequences of IAS 32 amendment “Financial Instruments - Offsetting Financial Assets and Financial Liabilities”.
5 FINANCIAL DATAStatutory Auditors’ report on the consolidated fi nancial statements Liabilities relating to insurance policies
The Group records underwriting provisions in respect of risks relating to insurance policies (Notes 6.9.3, 6.15 and 7.5.2 to the consolidated fi nancial statements). We reviewed the methodology used to measure these insurance policies, as well as the main assumptions and parameters used.
The Group is updating its measurement of intangible assets and goodwill carried in its consolidated balance sheet (Notes 2.5, 5.8 and 6.12 to the consolidated fi nancial statements). We reviewed the methodology used to perform this work as well as the main assumptions and parameters.
The Group has recognized deferred tax assets in respect of tax loss carry-forwards (Notes 5.21 and 6.8 to the consolidated fi nancial statements). We examined the main estimates and assumptions on which the recognition of deferred tax assets was based.
The Group records provisions to cover the contingencies and litigation arising from its business activities (Notes 5.14, 6.16 and 7.7 to the consolidated fi nancial statements). We examined the methodology used to measure these provisions, as well as the main assumptions applied.
As required by law, we also specifi cally verifi ed the information presented in the Group’s Management Report, in accordance with the professional standards applicable in France.
See note no. Off-balance sheet items – Commitments received 2014 2013
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes (in millions of euros)
Revaluation adjustments 21 Regulated provisions and investment subsidies 11 13 22 Retained earnings 500
See note no. Off-balance sheet items – Commitments given 2014 2013
30 Net gains/(losses) on transactions on securities held for sale (49) 32
Write-down, amortization and impairment of property, plant and equipment and intangible assets (72) (87)
NET OPERATING INCOME 1,352 1,143 34 Net gains/(losses) on fi xed assets (202) 1,391
NOTE 24 STATEMENT OF ASSETS, LIABILITIES AND COMMITMENTS RELATED TO MANAGEMENT OF PUBLIC PROCEDURES 352
NOTE 30 GAINS/(LOSSES) ON SECURITIES HELD FOR SALE AND SIMILAR 355
NOTE 38 ASSETS, LIABILITIES AND FORWARD FINANCIAL INSTRUMENTS BY MATURITY 360
Natixis’ separate fi nancial statements have been prepared and are presented in accordance with the standards applicable to credit institutions laid out by the Comité de la réglementation comptable (CRC – French Accounting Regulation Committee) and the Comité de la réglementation bancaire et fi nancière (CRBF – French Banking and Financial Regulation Committee).
In particular, loans that include payments over three months overdue, more than six months overdue in the case of real estate loans or more than nine months overdue in the case of municipal loans, as well as loans to borrowers that are the subject of a legal dispute are classifi ed as non-performing loans.
Loans accelerated by the lender and loans classifi ed as non-performing for more than one year for which a write-off is planned are deemed to be irrecoverable.
Financial diffi culties are determined by observing a number of criteria such as amounts past due for over 30 days or an at risk rating. The restructuring of a loan does not necessarily result in the counterparty being classifi ed in the Basel default category, as the fi nancial diffi culty is addressed before the counterparty is downgraded into the Basel default category.
Impairment losses are calculated as the difference between the net carrying amount of the loan and the amounts thought to be recoverable, discounted at the original effective interest rate for fi xedrate loans or at the last effective interest rate determined according to the contractual terms for variable-rate loans.
In accordance with banking regulations: V accrued interest due on loans to borrowers subject to legal proceedings is deducted from the interest account in which it was initially recorded. If the interest is subsequently recovered, it is credited to this line upon collection; V interest on non-performing loans three or, where applicable, six or nine months overdue is also written down in full by deduction from the interest account in which it was initially recorded; V all other loans made to these customers are also automatically classified as non-performing, even when the risk appraisal does not require an impairment charge against the outstanding principal.
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes Write-downs for non-specific credit risk
Each group of assets is assessed for objective evidence of impairment based on observable data indicating a likely decrease in the estimated recoverable cash fl ows for that group of assets. A collective writedown in the balance sheet liabilities is taken against any group of assets showing objective evidence of impairment. Assets belonging to that group, which are subsequently specifi cally identifi ed as impaired (specifi c risk), are removed from the collective write-down calculation base.
In accordance with CRBF Regulation No. 90-01, as amended, on recognizing securities transactions, the following rules are applied regardless of the legal form of the security concerned (shares, bonds and notes, treasury bills, certifi cates of deposit, negotiable instruments, promissory notes, etc.). The buying and selling of securities are recorded in the balance sheet at the settlementdelivery date.
At each balance sheet date, they are measured at market value and the grand total of any valuation differences is recognized on the income statement under the heading, “Balance of transactions on securities held for trading”.
V 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 subsidiaries and affiliates. They are reported on the balance sheet at their purchase price, excluding acquisition costs. Any difference between the purchase price (excluding accrued interest) and the redemption price is recognized in income over the remaining life of the securities. They are valued at year end at the lower of their carrying amount and their market value. Unrealized losses give rise to the recognition of an impairment loss, whose calculation factors in gains from any hedging transactions conducted. Unrealized gains are not recognized.
V Investments in subsidiaries and affiliates: shares and other variable-income securities in related corporate entities over which Natixis exercises exclusive control, i.e. corporate entities likely to be fully consolidated in Natixis group. They are recognized at their acquisition date at the purchase price excluding acquisition costs. These securities are valued individually at the lower of their value in use at the reporting date and their acquisition cost. Unrealized losses are subject to a provision for impairment.
Income, value adjustments and proceeds on disposal of securities portfolios are recognized as follows: V income from variable-income securities is recognized as and when received or when the payment has been subject to a resolution at a Shareholders’ Meeting; V income from fixed-income securities is recognized based on the accrual method; V value adjustments and proceeds from the disposal of securities are recognized under different headings depending on which portfolio they belong to: R under “Net revenues” for securities held for trading and securities held for sale,
R for investments in associates, investments in subsidiaries and affiliates and other long-term securities.
In accordance with CRC Regulation No. 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 in question have ceased to be tradable on an active market since their acquisition.
This line item comprises debt attributable to securities held for sale issued by Natixis in France or in foreign countries, with the exception of subordinated instruments recognized as subordinated debt. This line item notably includes medium-term notes, interbank market instruments, negotiable debt securities and bonds and other fi xedincome securities.
This item covers perpetual and dated subordinated notes, for which the redemption in the event of liquidation ranks behind all other creditors. Accrued interest is credited to the corresponding receivables item on the income statement.
Outright foreign currency futures or transactions hedging other foreign currency futures are measured based on the forward foreign exchange rate remaining to run on the currency in question. Differences in interest rates or premiums and discounts associated with hedged foreign currency futures are recognized in stages as interest expense or income over the effective term of the transaction.
V “Post-employment benefits” such as pensions, other supplementary retirement benefits applicable to the banking industry, end-of-career awards and other contractual benefits payable to retirees. Natixis distinguishes between two types of post-employment benefits:
R defined-benefit plans under which Natixis has a legal or constructive obligation to pay a specifi ed benefi t amount are valued and funded.
On June 26, 2014, Natixis placed nearly 80 million Coface shares accounting for 51% of its share capital on the Paris Euronext regulated market at a price of €10.40 per share.
An over-allotment option was granted at the time on approximately 11.9 million shares, which were fully placed on the market at the same date. This option was fully exercised on July 2, 2014 by the banks in the placement syndicate, at the bid price, i.e. €10.40 per share. After the over-allotment option was fully exercised, Natixis held 41.35% of Coface SA’s share capital.
Securities held for investment 73 87 o/w accrued interest o/w non-performing
Advances to banks 138,801 143,853 o/w accrued interest o/w non-performing 1 1 o/w write-downs of non-performing (1) (1)
o/w accrued interest 175 193 o/w non-performing 125 214 o/w write-downs of non-performing (99) (109)
INTERBANK AND SIMILAR TRANSACTIONS 233,778 219,369 * o/w subordinated loans: non-performing 0 0 accrued interest 0 0 o/w reverse repurchased securities: 63,393 60,007 o/w accrued interest 24 25
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes NOTE 4
Commercial loans 725 1,759 o/w accrued interest 7 34 o/w non-performing 25 21 o/w write-downs of non-performing (1) (1)
Cash and consumer credit 22,527 20,080 o/w accrued interest 50 47
Other loans 18,551 19,394 o/w accrued interest 40 41 o/w non-performing 3,418 4,505 o/w write-downs of non-performing (1,202) (1,451)
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes NOTE 6 NON-PERFORMING AND IRRECOVERABLE LOANS AND IMPAIRMENT
NOTE 7 INVESTMENT IN SUBSIDIARIES AND AFFILIATES, ASSOCIATES, OTHER LONG-TERM INVESTMENTS AND TREASURY SHARES
D) Investments with a book value less than or equal to €150,000 756,755.69
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes NOTE 10 DISCLOSURES CONCERNING SUBSIDIARIES AND ASSOCIATES
COFACE SA 1, place Costes-et-Bellonte – CS20003 92276 Bois-Colombes 786,241 EUR 493,534 EUR 41.24%
NATIXIS Pfandbriefbank AG Im Trutz Frankfurt 55 D-60322 Frankfurt am Main 55,000 EUR 0 EUR 100.00%
NATIXIS TRUST 51 avenue John F. Kennedy L-1855 Luxembourg 609,805 EUR 119,004 EUR 100.00%
NEXGEN Financial Holding Ltd 12 Lower Leeson Street Dublin 2 Dublin 99,997 EUR 1,210 EUR 100.00%
NATIXIS FUNDING UK Cannon Bridge House – 25 Dowgate Hill London EC4R 2YA 225,514 USD 0 USD 100.00%
(2) For these lines, details of shareholder’s equity, revenues and income correspond to the most recent audited data (at 12.31.2013).
(in millions of euros) End 2013 Acquisitions Disposals Other End 2014
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes NOTE 15 CUSTOMER TRANSACTIONS
Other liabilities 80,061 76,548 o/w accrued interest 1 1 o/w other amounts due 10 40 o/w accrued interest 22 21 o/w security deposits 544 879
CUSTOMER TRANSACTIONS 80,156 76,732 * o/w repurchased securities: 32,312 24,380 o/w accrued interest 6 3
Interbank market instruments and negotiable debt securities 47,302 32,492 o/w accrued interest 35 29 o/w accrued interest 168 134
Certifi cates of deposit and savings bonds 0 0 o/w accrued interest 0 0
Off-balance sheet commitments Country risk Specifi c credit risk Provisions for litigation Sector risk
Benefi ts vested over the period 2 6 2 23 33 2 8 3 30 43
Recognized actuarial gains and losses over the period 2 1 3 4 (4) 1 1
Actuarial gains and losses on benefi t obligations 18 7 1 13 39 12 (18) (3) (9)
Unrecognized actuarial gains and losses 40 (1) 23 62 28 (9) 11 30
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes NOTE 20 SUBORDINATED DEBT
Revaluation reserve for depreciable fi xed assets Provisions for investment Accelerated depreciation
The share capital is composed of 3,116,507,621 shares, each with a par value of €1.60. All shares confer the same rights on their holders, except for treasury shares, which have no voting rights.
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes NOTE 23 TRANSACTIONS WITH SUBSIDIARIES AND AFFILIATES
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes NOTE 28 FEES AND COMMISSIONS
(a) Including, for 2014, the contribution on the dividend payout for -€8 million.
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes NOTE 36 OFF-BALANCE SHEET ITEMS – FORWARD FINANCIAL INSTRUMENTS
NOTE 37 OFF-BALANCE SHEET ITEMS – FOREIGN CURRENCY COMMITMENTS AND TRANSACTIONS
(in millions of euros) ≤1 month 1-3 months 3-6 months 6 months-1 year 1-5 years >5 years Undated Total
Shares and other variable-income securities 6,068 165 0 101 481 25,469 32,284
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes NOTE 39 STATUTORY AUDITORS’ FEES
Independent audit, certifi cation and examination of the separate and consolidated accounts 5.5 5.0
NOTE 40 ESTABLISHMENTS AND OPERATIONS IN NON-COOPERATIVES STATES OR TERRITORIES WITHIN THE MEANING OF ARTICLE 238-0A OF THE FRENCH GENERAL TAX
Article L.511-45 of the French Monetary and Financial Code and the Ministerial Order of October 6, 2009, require banks to disclose in a note to their fi nancial statements their establishments and operations in States and territories that do not have an administrative assistance agreement with France aimed at countering fraud and tax evasion, which provides access to banking information.
Monitoring of Natixis’ subsidiaries and branches in non-cooperative countries forms an integral part of Natixis’ risk monitoring process overseen by the Risk function. This process involves: V local Risk Officers/functions that have a functional link to the central Risk Control Department; V specific reporting procedures that respect local constraints but also comply with overall risk requirements.
As at December 31, 2014 Natixis hereby reports, in accordance with the above-mentioned Article, that no Natixis entity operates in a non-cooperative state or territory.
Income before tax, depreciation, amortization and provisions 644,584,484.60 (72,975,180.54) 861,041,488.98 2,259,385,434.57 738,855,652.86
Income after tax, depreciation, amortization and provisions 0.10 0.28 0.29 0.75 0.42
Social security and other employee benefi ts 322,453,719.64 334,569,060.30 364,133,590.12 365,395,752.03 389,150,406.91
The Company uses internal models and methodologies to measure fi nancial instruments that are not traded on an active market, as well as to record certain impairment charges (Notes 1.6, 18, 29, and 36 to the parent company fi nancial statements). We rewiewed the control procedures relating to the assessment of whether a given market was inactive, to the validation of models and to the defi nition of the parameters used.
The Company recognizes impairment charges and provisions in order to cover the credit and counterparty risks inherent to its activities (Notes 1.1, 3, 4, 6, 18, and 33 to the parent company fi nancial statements). We reviewed the control procedures relating to the monitoring of credit and counterparty risk, the assessment of nonrecoverability risks, and the calculation of the corresponding individual and collective impairment charges and provisions.
The Company recognizes provisions to cover employee benefi t obligations (Notes 1.8, 18 and 32 to the company fi nancial statements). We examined the methodology used to measure these benefi t obligations, as well as the main assumptions and parameters applied.
We have also performed the specifi c verifi cations required by French law, in accordance with professional standards applicable in France.
We have no matters to report as to the fair presentation and the consistency with the fi nancial statements of the information given in the Board of Directors’ Management Report, and in the documents addressed to shareholders with respect to the fi nancial position and the parent company fi nancial statements.
As regards the information provided in accordance with the requirements of Article L. 225-102-1 of the French Commercial Code relating to the compensation and benefi ts received by the corporate offi cers and any other commitments made in their favor, we have verifi ed the consistency of that information with the fi nancial statements or with the underlying information used to prepare these fi nancial statements and, where applicable, with the information obtained by the Company from companies controlling the Company or controlled by it. Based on this work, we certify the accuracy and fair presentation of this information.
French original signed in Neuilly-sur-Seine and Paris-La-Défense, on 12 March 2015, byThe Statutory Auditors
6.1 STRATEGIC OUTLINES AND ORGANIZATION OF THE SUSTAINABLE DEVELOPMENT POLICY 368 6.1.1 Sustainable development as a growth driver 368 6.1.2 Management of our direct environmental impacts 376 6.1.3 Responsible purchasing policy 377 6.1.4 Human Resources policy and diversity management 378 6.1.5 Community outreach 378 6.2 REPORTING FRAMEWORKS AND METHODOLOGY 381 6.3 LABOR INFORMATION 384 6.3.1 Change in headcount 384 6.3.3 Work management 385 6.3.4 Employee relations 386 6.3.5 Occupational health and safety 387 6.3.7 Diversity and equal opportunity 389 6.3.8 Promotion of and compliance with ILO fundamental conventions 391 6.4 ENVIRONMENTAL INFORMATION 392 6.4.1 Pollution and waste management 392 6.4.2 Sustainable resource use 392 6.4.3 Climate change 394 6.4.4 Protection of biodiversity 395 6.5 SOCIAL INFORMATION 396 6.5.1 Territorial, economic and social impacts 396 6.5.2 Relationships with stakeholders 396 6.5.3 Sub-contracting and suppliers 397 6.5.4 Fair practices 397 6.5.5 Other measures taken to safeguard human rights 397 6.6 SOCIAL AND ENVIRONMENTAL INFORMATION FOR INTERNATIONAL OPERATIONS 398 6.6.1 EMEA reporting scope 398 6.6.2 Americas reporting scope 400 6.6.3 Asia-Pacifi c reporting scope 402 6.7 REPORT OF ONE OF THE STATUTORY AUDITORS APPOINTED AS INDEPENDENT THIRD-PARTY BODIES ON THE CONSOLIDATED SOCIAL, ENVIRONMENTAL AND SOCIETAL INFORMATION PROVIDED IN THE MANAGEMENT REPORT 404 1. Certifi cate of inclusion of the CSR Information 404 2. Reasoned opinion on the fairness of the CSR Information 405
6 SOCIAL AND ENVIRONMENTAL PERFORMANCEStrategic outlines and organization of the sustainable development policy 6.1 Strategic outlines and organization of the sustainable development policy
Mindful of its social and environmental responsibility and with the backing of its employees, Natixis has embarked on a sustainable development policy structured around three themes: V incorporating social and environmental considerations in its business activities: the policy better identifies and manages the CSR (corporate social responsibility) risks of the projects Natixis finances and seizes opportunities for development in the green growth and responsible investment sectors; V minimizing its direct impact on the environment: it reduces Natixis’ resource consumption, waste production and carbon emissions and manages supplier relationships responsibly; V driving social progress through its Human Resources policy: it covers career management, hiring, training, compensation, labor relations and safety.
The Sustainable Development team works alongside some 20 correspondents from Natixis’ various businesses (Wholesale Banking, Investment Solutions and Insurance, Specialized Financial Services, Support Departments) and in collaboration with BPCE’s Sustainable Development division.
Rated by various extra-fi nancial rating agencies, Natixis recorded solid performances in social, environmental and governance areas, improving on the last rating established in 2013 and earning its way onto the major CSR indices (Euronext Vigeo – Eurozone, Stoxx Global ESG Leaders, etc.).
Development of renewable energies holds major potential for helping countries to reduce their greenhouse gas emissions and progress towards a safer, more centralized and more energy-effi cient source of power. Efforts being made to bring about the “Energy Transition” can be seen all around the world, especially in France where discussions are being held on the Energy Transition Act for Green Growth, and on the international stage, for example at the Lima Climate Change Conference organized by the UN in December 2014.
These commitments are refl ected in government support aimed at increasing worldwide installed capacity in renewable energies. According to the European Renewable Energy Observatory, the global installed capacity of wind power tripled from 121 GW to 319 GW in 2013. What’s more, the global installed capacity of solar energy increased eightfold from 15.8 GW to 136.7 GW in 2013. Renewable electricity is also becoming an economic reality in several countries throughout the world. As a result, some countries may in the short term be able to achieve grid parity with conventional GHG-generating energy sources such as coal and gas.
Natixis supports the development of renewable energies around the world through its local offi ces, which recorded very robust activity in 2014 across the entire range of renewable technologies (on- and offshore windfarms, solar PV and thermal energy, hydropower and biomass) and in a variety of geographic areas (Europe, US-Canada, South America, Asia, Africa/Middle East).
Natixis helped fi nance the Gemini project, a 600 MW wind farm located 85 km off the Dutch coast in the North Sea. This €2.8 billion deal is the largest offshore wind power fi nancing project ever undertaken and was named the 2014 “Power Deal of the Year” in Europe by PFI (Thomson Reuters).
All the plants have already been built and connected to the network, and will generate a total of 596 GWh of electricity per year, i.e. the equivalent of the annual energy demand of 187,000 Italian households.
V 16 solar PV projects with a capacity of 103.9 MW; V 10 wind power projects with a capacity of 135.5 MW; V one geothermal project with a capacity of 40.9 MW.
The “Sofergie” portfolio of project fi nance and leasing activities arranged by Natixis represented nearly 12 GW at end-2014, which can be broken down as follows: ■ GEOGRAPHIC BREAKDOWN OF THE RENEWABLE ENERGY PORTFOLIO AT 12.31.2014
In the asset management business, Natixis Asset Management created Mirova, which became a subsidiary dedicated to Responsible Investment on January 1, 2014. Its approach is to develop innovative fi nancial product offers that make ESG criteria the top priority in the generation of investment ideas.
For the third year in a row, Euromoney magazine recognized Natixis for the quality and relevance of its analyses. Its survey of some 1,900 portfolio managers and investors from around the world placed Natixis among the best European banks for its credit research in 2014. Wholesale Banking’s SRI analysis was ranked No. 2 by Extel/UKSIF SRI for SRI Corporate Access in 2014.
Since the end of 2013, Natixis Asset Management (Natixis AM) has taken another step forward in its responsible investment commitments. SRI has always been critical to Natixis AM’s business, as demonstrated by the development of its expertise in socially responsible and solidarity investment for going on 25 years now. Six years after signing the United Nations Principles for Responsible Investment (UN-PRI), Natixis Asset Management has reaffi rmed its commitment by structuring and implementing an ambitious SRI policy applied to all of its investment processes. Drawing on extensive discussions and analyses conducted over several years, this approach centers on four key commitments that encompass multiple initiatives.
V An incentivizing voting and shareholder engagement policy: voting rights in more than 1,100 companies, 16,000 resolutions analyzed worldwide (33% of which are contested) and 110 issuers contacted regarding environmental, social and governance initiatives in 2013.
In preparation for the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21), Mirova is strengthening its commitment to combating climate change through the various services it offers: measurement and monitoring of the carbon footprint generated by its equities strategies, investment in renewable energy infrastructure projects, and support for the development of green bonds.
For SRI Week, in the wake of the important statements issued by major institutional investors at the UN Climate Summit in New York and the PRI in Person Conference in Montreal, Mirova decided to sign the “Montreal Carbon Pledge” in October 2014. By doing so, Mirova has undertaken to measure and report on the carbon footprint of its equities portfolios by September 2015.
In 2014, Mirova launched EUROFIDEME 3, its third fund dedicated to renewable energy projects in Europe with nearly €140 million raised to date and a target of €200 million. This fund joined the existing range consisting of the Fideme (2002) and Eurofi deme 2 (2008) funds, both of which are fully invested.
EUROFIDEME 3’s purpose is to allow European institutions to invest in companies/projects in Europe’s renewable energy sector, predominantly in wind and solar PV power. The investment strategy aims to establish long-term partnerships with industrial groups to build and operate’ infrastructure projects.
Green bonds, also called social bonds, raise funds earmarked for environmental and/or social projects. They enjoyed huge success in 2013 and 2014, with new issues earning over €30 billion in 2014.
In response to solid demand, an increase in the size of each issue, and growing diversifi cation in the types of issuers involved, major institutional investors are now looking to invest in the segment while remaining in line with more rigorous governance for such issues.
Natixis has an extensive presence in this market, involving several of its businesses: Wholesale Banking’s origination teams have participated in four green bond issues in the public and private sectors: BEI, the Ile-de-France municipal government, GDF Suez and Abengoa.
Mirova has developed targeted expertise in green bonds, both in terms of management and extra-fi nancial research. The teams met with several issuers in 2014. Almost 20% of Mirova’s fi xed income strategies consisted of green bonds at end-2014.
Natixis’ cross-expertise (SRI and Credit) research has developed specifi c expertise in green bonds and, on December 1, published a study to help investors structure a methodological approach to the product. Next, a green bond seminar was held on December 2 (“Green Bonds: Growth Made to Last?”) that was attended by nearly 120 issuers and investors.
6 SOCIAL AND ENVIRONMENTAL PERFORMANCEStrategic outlines and organization of the sustainable development policy Mirova also created the specialized professional fund Natixis Solidaire, an innovative investment vehicle for solidarity-based management of employee savings plans with a total of more than €100 million in assets under management at December 31, 2014. The fund invests in a large number of solidarity-based companies, supports a multitude of projects in sectors such as housing, the environment, agriculture, the medical-social sector and international solidarity, while generating tangible social results. This Finansol-certifi ed fund also helps fi nance organizations such as AIDE, Habitat et Humanisme, NEF, SIFA and Terre de Liens.
Natixis remains a key player in the fast-growing SRI and solidarity investment market in France.
(1) Source: Finansol 2014 “Zoom sur la fi nance solidaire” survey, based on solidarity investment AuM at end-December 2013.
SRI and solidarity assets under management relative to Natixis Asset Management’s total AuM (as a %) (a) 4.08 3.07 3.14
(a) Source: Natixis Asset Management at December 31, 2013 in open-ended, dedicated and employee saving funds.
AEW Europe, a subsidiary of Natixis Global Asset Management, provides real estate investment advisory services and real estate asset management for third parties. New environmental criteria have been factored into the 2010-2015 sustainable development plan: V for the acquisition of new buildings, only properties that obtained environmental certification (HQE, BREEAM, LEED or BBC (3)) are accepted; V for the purchase of existing buildings, environmental performance assessments are systematically carried out and are included in the provisional spending budget for environmental improvements; V for the portfolio under management, actions plans have been implemented to improve environmental performance and comply with the Grenelle Environmental Law as it pertains to homeowners and renters.
Strategic outlines and organization of the sustainable development policy 2014 key event AEW Europe: recognized environmental policy
Natixis’ Private Equity business invests in unlisted SMEs. It comprises six asset management companies specializing in growth capital in France (Naxicap Partners and Alliance Entreprendre), in venture capital (Seventure Partners) and in funds of funds (Euro-PE for Europe, Caspian-PE for the United States and Eagle Asia Management for Asia).
For example, in 2014 asset management company Naxicap Partners conducted an ESG audit when building the portfolio for one of its funds. This audit, conducted by PricewaterhouseCoopers, measured the performances and risks incurred by companies in terms of HR management (diffi culty of work, professional risk, etc.), environmental impact (e.g. energy consumption of buildings, travel and commuting policy, etc.), responsible purchases, societal engagement (e.g. skills sponsorship, etc.) and compliance with laws stemming from Grenelle 2.
For more information on Natixis Compliance, see Chapter [2], “Corporate Governance”, section [2.5.3] and Chapter [3], “Risks and capital adequacy”, section [3.9.1].
In 2011, Natixis created an Environmental and Social Responsibility (ESR) team responsible for incorporating CSR considerations in the Wholesale Banking division’s fi nancing activities. The ESR team works in the Corporate Secretary’s offi ce and its job is to set up the organizational structure needed to apply and monitor the application of the Equator Principles.
Where it is deemed appropriate, the ESR team may notify and inform the Wholesale Banking division’s Senior Management of any E&S-related aspects of transactions through Business Committee Meetings (among other possibilities).
The ESR team is also called upon to oversee and manage the E&S risks and impacts of transactions located outside the scope of the Equator Principles.
The ESR team regularly provides training for the different employees involved in E&S management of transactions, particularly regarding transactions subject to the Equator Principles. The business lines, Risk Department, Compliance Department and various support departments in the Europe, Americas and Asia-Pacifi c regions have all received training.
The EP III amendment gave rise to a new version of the Equator Principles in June 2013, aimed at meeting the many expectations expressed in a study and opinion survey carried out in 2010/2011 (the Strategic Review).
emissions into account for projects emitting high levels of pollution, recognizing the principle of social and human rights due diligence, and adopting reporting principles to promote greater transparency.
For example, they must list transactions subject to an Equator Principles review that reached fi nancial close (3) during the reporting period, which for Natixis runs from January 1 to December 31, 2014.
(4) Note: the number of transactions reviewed in 2014 was signifi cantly higher than the number of transactions that reached fi nancial close in the same year. This was due to transactions that failed to reach fi nancial close and, for the rest, due to the time necessary to reach fi nancial close.
(ii) A review must be conducted by an independent consultant for most transactions. Nevertheless, transactions with minimal impacts are not systematically reviewed by an independent consultant.
This policy applies to the fi nancing of these companies, to proprietary investment and to third-party asset management by Natixis Asset Management, which has also launched a customer awareness program. This policy is applied during the decision-making process (e.g. Credit or Investment Committee) applicable to each activity concerned.
6 SOCIAL AND ENVIRONMENTAL PERFORMANCEStrategic outlines and organization of the sustainable development policy 6.1.2 MANAGEMENT OF OUR DIRECT
With more than 16,000 employees worldwide, Natixis, like any company, has an impact on the environment in terms of both resource consumption and the production of waste and carbon emissions. To reduce this impact, Natixis has adopted an environmental policy that rests on three pillars: managing buildings in an environmentally sustainable manner, combating global warming, and raising employee awareness.
The Real Estate and Logistics Department has introduced a total cost approach to its projects and investments that allows it to factor in the environmental impact of its activities. It is closely involved with the set-up and monitoring of environmental certifi cations, optimization of energy consumption, waste treatment and building accessibility.
The Real Estate and Logistics Department ensures optimum resource management by closely managing the various resources used: energy (electricity, heating and cooling utilities), water and paper. Each 14001-certifi ed building has a budget for its energy consumption, which is monitored on a monthly basis.
These measures, combined with initiatives to raise employee awareness of “green gestures” have in recent years led to a signifi cant reduction of energy consumption in Natixis buildings (see detailed indicators in section [6.4.2.3]).
In terms of building accessibility specifi cally, the Department aims to go beyond regulatory requirements to facilitate access to disabled persons to its buildings. Several accessibility projects have been carried out since 2012: V installation of “disability-friendly” meeting rooms accessible to persons with different disabilities (employees or visitors with reduced mobility or who are visually or hearing impaired); V accessibility and special equipment in training rooms; V signage and reserved spots in car parks; V «Just Bip» notification service (see inset below).
Strategic outlines and organization of the sustainable development policy 6.1.2.2 Combating climate change
2014 key event For the 10th year in a row, Natixis took part in Sustainable Development Week (April 1 to 7, 2014) by organizing various events, such as: Distribution of fruit: at Natixis Assurances, over 100 kg of fruit (organic and sustainable agriculture) were handed out to employees in Paris, Reims and Luxembourg during Sustainable Development Week. The fruit baskets were prepared by a company that employs disabled persons.
The main objective of the responsible purchasing policy is to promote more eco-friendly products and services that provide guarantees, and even added value, at the social and societal levels.
In 2014, as in previous years, the Purchasing Department carried out a sustainable development survey of 30 service providers (moving services, electronic banking, front desk and telephone reception, cleaning, IT hardware and services). None of the companies that responded were given an overall score that posed a high risk for Natixis.
6 SOCIAL AND ENVIRONMENTAL PERFORMANCEStrategic outlines and organization of the sustainable development policy 2014 key event In 2014, Natixis did a lot of work with disability-friendly companies, particularly for the following types of services: R management of WEEE (waste electrical and electronic equipment); R converting personnel fi les into electronic format; R administrative management of training programs; R production of entry badges; R mail shuttle; R sorting of ink cartridges.
Share of the amounts managed by the Purchasing Department that incorporate social and environmental criteria (as a %) 91 51 98
Number of suppliers surveyed in the sustainable development survey 30 30 30
Note: the projects taken into account do not include purchase orders.
The Human Resources Department plays a key role in achieving the Company’s strategy and furthering the development of its business lines. It has taken all necessary measures in this role under Natixis’ 2014-2017 strategic plan, focusing its efforts on mobility, commitment, community, customer-oriented actions and talent within the Company.
In 2014, the HR Department implemented a transformation plan aimed at refocusing the business line HR teams on developing and managing the potential of talented employees at all levels of the Group. Centers of expertise were set up in France, covering all fi elds of administrative management, internal transfers, recruitment, training and reporting. Coupled with the overhaul of the HR information system, the HR teams were able to place career management at the heart of their initiatives with the business lines and employees.
Finally, the HR Department continued its consultation work through the Financi’elles and Opinions surveys, the results of which were used to defi ne initiatives to build trust and engagement in 2015.
In the fi eld, Natixis has supported “Plan International”, an NGO, since 2005. Plan International is an association that implements prevention programs in Cameroon, Burkina Faso and Togo. In 2014, the bank
Since 2005, Natixis has also supported the research program of the Institut Pasteur, including studies on the resistance of parasites to antimalaria drugs. In 2014, the Natixis sponsorship program contributed to efforts to map out worldwide resistance to artemisinin anti-malarial drugs in affected regions. These data will provide the WHO (World Health Organization) and local health authorities with the information needed to alter treatment plans accordingly.
These major advances were achieved thanks to the use of insecticide-treated mosquito nets, the native population’s access to diagnostic tests, and artemisinin-based combination therapy (ACT). These efforts need to be continued so that malaria can be virtually wiped out by 2015, in line with the Millennium Development Goals.
On October 16, 2014, Natixis organized the “Fighting cancer with Gustave” event to raise employee awareness and get them involved in the fi ght against cancer. About 150 people participated in the proposed activities: R fi ve educational workshops (DNA extraction workshop, colonoscopy demonstration, quiz, bicycle workshop, Gustave “selfi e” workshop): Natixis contributed €1 for each person participating in these workshops; R projection of a short fi lm on breast cancer prevention entitled “La Lionne ou l’Autruche” (The lion or the ostrich) sponsored by Natixis and Institut Gustave Roussy, followed by a Q&A with the director; R projection of Institut Gustave Roussy videos; R one-on-one meetings with doctors.
In partnership with the Works Council and the Athletic Union, 493 employees and their families took part in the 2014 Odysséa race organized to raise money for the fi ght against breast cancer. Many employees also participated in the 28th annual Stock Market and Finance
Industry Telethon. In 2012, for the fi fth year running, Natixis also supported the “Course du cœur” race, organized by the association Trans-Forme to raise public awareness of organ donation.
In partnership with the Planète Urgence association, Natixis employees took short-term volunteer assignments to make their expertise available to social and/or environmental projects. Short-term volunteer assignments are centered on three objectives: building adult skills, providing social and educational support for young people, and protecting and enhancing biodiversity.
Since Natixis Asset Management has been a partner of “La Mie de Pain”, an association in the 13th arrondissement of Paris that has been working for more than 125 years to provide the disadvantaged with emergency housing and assistance with social and professional reintegration. The Company and its employees provide fi nancial aid to the association, organize collections, offering the benefi t of their skills by helping create the association’s website, and volunteering to distribute meals.
Natixis now has 48 active mentors regularly assisting one or more young people. 76 recent graduates participating in the program worked with a Natixis mentor in 2014, and more than half of the students looking for jobs in 2014 were hired during the year.
Natixis worldwide Natixis and all subsidiaries worldwide in which it holds at least a 50% stake 17,937 100%
Natixis France Natixis and all subsidiaries in France in which it holds at least a 50% stake 12,829 72%
Natixis and its subsidiaries in France excluding fi nancial interests , as indicated in the note below, “List of consolidated Natixis subsidiaries” 12,304 69%
Compared to 2013, the following changes took place in the 2014 reporting scope: V in France, Coface S.A. and Fimipar were removed from the consolidation scope because they are now below the 50% shareholding threshold and are no longer included in the Company’s CSR reporting framework; V conversely, BPCE Assurances and BPCE Assurances Production Services rejoined the consolidated Natixis scope in March 2014 and are included in the CSR reporting framework; V CSR indicators for the International scope were added for the first time in 2014.
6 SOCIAL AND ENVIRONMENTAL PERFORMANCELabor information 6.3 Labor information 6.3.1 CHANGE IN HEADCOUNT
These changes occurred in France and can be mainly attributed to voluntary departures under the Company’s workforce adaptation plan (PAE). Conversely, the Wholesale Banking division’s headcount increased; V Investment Solutions saw its headcount increase (+228 FTEs), mainly in international asset management activities; V the headcount at subsidiaries decreased over the year (-143 FTEs), mainly in France for Coface and Ellisphère.
Region 5: Africa, NME, Russia & Others (as a %) 5.0 5.1 5.1
Over eight months in 2014, the mobility and hiring team helped arrange 180 internal transfers.
Average gross annual compensation of staff under permanent employment contracts (excluding profi t sharing and employer contributions to the Company savings plan) (in thousands of euros) 78.5 77.1 74.0
Total employer contribution paid in respect of the Company savings plan and the collective pension plan (PERCO) (in millions of euros) 33.2 32.9 31.6 * Consolidated fi gures at February 5, 2015.
The agreement relating to union and collective bargaining rights within the consolidated Natixis France scope, signed in 2010 by Management and the majority of the representative union organizations, provided the consolidated Natixis France scope with union coordinators, who are Management’s preferred points of contact in the employee dialogue structure, and an integrated contractual bargaining body.
They make it possible to negotiate collective bargaining agreements on issues of common interest that are uniformly applicable to all employees in France, in line with Groupe BPCE’s labor relations policy.
The consolidated Natixis Committee, consisting of the elected representatives of the companies that make up Natixis, allows Management to inform the trade unions and employers’ organizations about the Company’s strategy and performance.
Natixis SA’s PAE rests on two pillars: R giving priority to internal transfers; R strictly voluntary external departures; Under the PAE, which is being rolled out in two phases including in 2015, Natixis entered into two agreements with the trade unions on internal transfers and voluntary departures. The trade unions follow up on the plan on a regular basis via a Monitoring Committee.
This framework now rests on: V a single consolidated Natixis employee savings plan; V a single supplementary pension plan (PERCO); V a Groupwide profit-sharing scheme; V uniform salary measures; V a Groupwide policy on the professional integration and retention of employees with disabilities; V a uniform benefit for children with disabilities; V trade union notification/consultation procedures; V internal transfer and career management opportunities; V actions to promote hiring young people while retaining older employees.
In addition to the global agreements, many agreements were entered into with each of Natixis’ French companies.
Natixis conducted its third annual Opinions survey in 2014. The results showed that 81% of employees surveyed are optimistic about the future (+13% on 2013) and 51% think that the Group’s strategy is headed in the right direction (+10 points on 2012). Customer focus is deeply ingrained (77% of participants believe that providing better service is a widely shared concern), but information on customer satisfaction is considered to be inadequate (48% say they are well informed). Working conditions are considered satisfactory, in terms of content (76%), atmosphere (74%), autonomy (72%) and the balance between home life/work life (69%), but progress still needs to be made on training and career development.
In the 2014 survey, the HR Department provided managers (in charge of at least a minimum number of employees, as defi ned by HR for each business line) with an application offering detailed results for their scope, which can be used to defi ne and monitor appropriate actions plans from 2015 onward, and encouraging them to share the results with their teams.
The agreement on the prevention of stress and psychosocial risks, in force since 2010, is based on: V the existence of a Committee for Hygiene, Safety and Working Conditions (CHSCT); V the continued use of the Stress Observatory questionnaire instigated in early 2009; V the provision of free psychological support by telephone; V a special training offer for managers.
In 2014, the “Professional Behavior, Prevention of Harassment and Distress at Work” Commission continued to fulfi ll its role in analyzing special situations.
6 SOCIAL AND ENVIRONMENTAL PERFORMANCELabor information of the PAE. However, Natixis continued to outperform the sample of companies used by Natixis’ service provider (Capital Santé).
The CHSCT’s “Workplace Adjustments” Commission was also consulted in 2014. This Committee examines site plans and may issue remarks or ask for adjustments to the plans, with the aim of improving employees’ physical working conditions.
Various initiatives were carried out in 2014 to raise employee awareness of health-related risks: R several cholesterol testing campaigns were run by the medical department; R in partnership with the Fondation Gustave Roussy, a conference was held on diagnosing colon cancer, and the risks and symptoms of the disease; R two conferences were held on various forms of addiction.
The Company’s training policy, in line with Natixis’ 2014-2017 strategic plan, is one of the key factors aimed at furthering the career development of employees as well as the development of Natixis’ core businesses.
Pursuant to the employment agreement of September 13, 2013, training activities in 2014-2017 are centered on four main objectives: V preparing and supporting transfers within the Company; V enhancing managerial skills and consolidating shared practices; V improving the professionalization of the teams; V supporting major business line projects and company procedures.
Training in regulations, which contributes to solid risk management and corporate compliance, was expanded (addition of a compliance module). To support Natixis’ internationalization under the New Frontier strategic plan, more English training options were added, including personalized programs and new modules (group-based, e-learning, combined, etc.).
Finally, more internal training programs in the form of campuses were developed in 2014 to promote the sharing of skills and expertise.
For several years, Natixis’ goal has been to guarantee gender equality thanks to its recruitment, training, compensation and career management policies. Natixis has continuously worked to: V reduce wage gaps; V include women in its high-potential leadership program; V mentor female employees.
Like the fi rst group to graduate from the Natixis Leadership program, the class of 2014 contained an equal number of men and women.
As part of the employment agreement signed in September 2013, set up a generation contract that provides for the introduction of new measures for older employees, which include hiring measures and volunteering with non-profi t organizations to begin the transition between active employment and retirement for employees.
They are followed within the framework of Natixis’ responsible purchasing policy: supplier contracts and the rules and principles established by the Purchasing Department (invitations to tenders, supplier sustainable development charter, contracts) contain clauses governing compliance with human rights by suppliers and their subcontractors.
The 2014 reporting scope consists of Natixis and its subsidiaries in mainland France and the French overseas departments, excluding data centers, covering 290,648 (1) m2 and 18,213 workstations.
Consumption in m3 per m2 of usable fl oor area 0.26 0.26 0.27
Measures have been taken to optimize water consumption, which has been falling for the past three years. These include continuous monitoring of the systems to detect any leaks, fi tting of pressure relief devices, installation of rain gauges to stop automatic sprinklers while it is raining and employee awareness efforts.
Everyday consumption by employees (reams of paper, letterhead paper) is steadily falling, primarily because the Company’s printing systems have been optimized by streamlining the printer pool and rolling out multi-function printers confi gured to print on both sides throughout the group.
In preparation for its 2014 General Shareholders’ Meeting, Natixis offered its shareholders the choice of receiving their notice of meeting by e-mail rather than by post.
Nearly 3,000 shareholders signed up to start receiving an “e-notice” of General Shareholders’ Meetings. By doing so, they made a solid gesture for the environment. And, in 2014, for each shareholder that signed up for the e-notice, 2 euros were contributed to malaria-fi ghting efforts, which Natixis has supported for the last 10 years.
Total energy consumption of buildings and data centers 60,623 82,679 88,836
Energy consumption per m² of usable offi ce space (in MWh) excluding centers 0.19 0.21 0.22
190 g in the previous policy; V reduction of the emissions ceiling for vehicles assigned to Category 1 sales representatives and managers: 135 g vs. 150 g;
V reduction of the emissions ceiling for fleet vehicles: 105 g vs. 110 g.
In 2014, Natixis also implemented a policy to gradually eliminate the use of diesel cars. The car policy no longer offers diesel cars to Natixis managers. This policy will be expanded in 2015 to include company cars used by sales staff in the Paris region.
Since 2011, the business travel policy has set rules ensuring the safety and comfort of employees during business trips, while contributing to the policy of optimizing the costs and managing the environmental impact of these trips. This policy applies in France to Natixis and its subsidiaries, excluding fi nancial investments (consolidated Natixis scope). The subsidiaries and branches abroad establish travel rules that are consistent with the worldwide travel policy.
This includes rules on travel that have an environmental impact: V when a destination can be reached by both rail and air, trains are now compulsory for a number of destinations in France and Europe (depending on journey time); V economy class is compulsory for domestic flights, flights between European countries and intercontinental flights of less than four hours; V the use of taxis and the reimbursement of per kilometer expenses are governed by rules on specific use (approval by manager, exceptional circumstances).Natixis also prefers that its employees use “green taxis” (hybrid vehicles) for travel; V when vehicles are used on a short-term rental basis, the category depends on the circumstances (number and type of people transported); V the use of alternatives to travel should be preferred (conference calls, videoconferences and web conferences). Use of these alternatives further increased at Natixis in 2014: 43,000 videoconferences were held (compared to 27,000 in 2013).
Natixis’ service operations are predominately located in urban environments and do not have a direct material impact on the natural environment. That said, prevention measures have been taken to avoid any accidental water or air pollution. These include regular maintenance of sensitive systems and reinforced leakproofi ng of installations containing potential pollutants.
In addition, as a bank that has signed the Equator Principles, Natixis pays particular attention to the protection of biodiversity in relation to fi nanced projects, in accordance with International Finance Corporation (IFC) standards.
6 SOCIAL AND ENVIRONMENTAL PERFORMANCESocial information 6.5 Social information 6.5.1 TERRITORIAL, ECONOMIC AND SOCIAL IMPACTS
V Supporting Chairs V Relations with Grandes Ecoles and universities V Campus Awards V Receiving interns, including co-op students
In accordance with its responsible purchasing policy (presented in paragraph 6.1.3), Natixis asks its suppliers to comply with current CSR standards and regulations and to encourage or require their subcontractors to comply with these commitments.
6 SOCIAL AND ENVIRONMENTAL PERFORMANCESocial and environmental information for international operations 6.6 Social and environmental information for international operations
In Moscow, Natixis aims to maintain gender balance in its hiring policy.
On healthcare issues, the bank participates in programs offered by the German Social Security systems that are intended to enhance the protection of employee health, particularly in areas such as back pain. To this end, the Bank organizes preventive health exams and, if necessary, provides specially adapted chairs and desks as well as medical follow-up.
In Moscow, Natixis’ new desks are highly compliant with regulatory obligations pertaining to disabled persons.
In Madrid, Natixis hired a disabled person in 2014 and regularly works with a company whose objective is to integrate disabled persons in the job market.
Data on energy consumption was collected for Natixis’ main operations in the EMEA region.
Natixis Dubai has decided to use more eco-friendly offi ce supplies (recycled paper and ink cartridges) and has also launched efforts to reduce its energy consumption (turning off air conditioning and computers at night).
There is a strict waste management policy in Frankfurt: all paper and boxes are recycled, then all other waste is processed. Natixis regularly participates in collection campaigns for cell phones, batteries and other electronic equipment organized by the owner of the building. Profi ts from these campaigns are used for environmental projects around the world.
In Madrid, Natixis pays a monthly commuting subsidy to its employees.
In London, Natixis participates in the “UK Cycle to Work scheme”, which encourages employees to purchase bikes for their daily commute.
EMEA employees are predominantly hired in the country of operation, which contributes to the development of local employment.
In Madrid, Natixis has entered into a partnership with the Caritas non-profi t organization to support the solidarity-based supermarket “Tres Olivos”, which helps approximately 100 disadvantaged families obtain staples such as food and hygiene products for 80% less than their market price. The supermarket is fi nanced by employees, whose contributions are topped up by Natixis. Caritas manages the supermarket, chooses the benefi ciary families and helps them reintegrate into society.
In London, Natixis encourages its employees’ solidarity-based initiatives and donates to three non-profi t organizations: Kids Company, War Child, and EveryChild.
2014 key event In September 2014, Natixis Wholesale Banking’s US Executive Committee received “Micro-Messaging” training to raise awareness of interpersonal interactions, led by a former diversity and integration manager with expertise in fi nancial institutions. The goal for 2015 is to offer this training program to all managers in an effort to develop a culture of open-mindedness, positive interactions and employee involvement with the aim of improving performance.
Data on water and paper consumption for Building 1251 and the Plaza V building: Water consumption (in m3) * 182.5 *
Waste reduction and sorting measures at the two main Natixis buildings in the US: V Reduction of paper consumption: photocopiers are configured to print on both sides.
Impact on society 1. Natixis’ impact in relation to jobs and regional development
6 SOCIAL AND ENVIRONMENTAL PERFORMANCESocial and environmental information for international operations 6.6.3 ASIA-PACIFIC REPORTING SCOPE
Scope: Australia, China, South Korea, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore, Taiwan, Thailand.
Natixis is working to promote diversity in a bid to develop business synergies through internal and external networks.
2014 key event Natixis Hong Kong has set aside a breastfeeding room in a private and comfortable setting. This initiative was carried out at the proposal of the WINN network in Hong Kong.
Natixis’ teams in Hong Kong work in the “ICC” building, which received several certifi cations for its environmental performances: V platinum-level BEAM certification, bronze-level LEED certification for interior design; V certification for protection of air quality: excellent
In Hong Kong, employees also have direct access to one of the principal train stations and to airport terminals.
Natixis also supports various sponsorship initiatives and solidarity races, such as: V the “Run for Hope” race in Singapore to support the National Cancer Research Center; V the “Inter Magic Square Mile” race in Hong Kong to support the Benji Center, which provides speech therapy to children of disadvantaged families; V support for the Greenpower association in Hong Kong, dedicated to environmental education and species preservation programs; V a partnership with the “French May” organization to promote French art and culture in Hong Kong.
6 SOCIAL AND ENVIRONMENTAL PERFORMANCEReport of one of the Statutory Auditors 6.7 Report of one of the Statutory Auditors appointed as independent third-party bodies on the consolidated social, environmental and societal information provided in the Management Report
The Board of Directors is responsible for drawing up a Management Report including the CSR Information provided for in Article R. 225105 -1 of the French Commercial Code, prepared in accordance with the procedures applied by the Company (hereinafter the “Standards”), a summary of which is provided in the Management Report; these Standards are available from the Company’s registered offi ce on request.
It is our responsibility, on the basis of our work: V to certify that the CSR Information required is included in the Management Report, or that any omission is explained pursuant to the third Sub-Paragraph of Article R. 225-105 of the French Commercial Code (Certificate of inclusion of the CSR Information); V to draw a conclusion expressing reasonable assurance on the fact that all the significant aspects of the CSR Information, taken as a whole, are presented in a fair manner, in accordance with the Standards (Reasoned opinion on the fairness of the CSR Information).
(1) The scope of which is available on the www.cofrac.fr website.
We held meetings with around ten individuals responsible for preparing the CSR Information at the departments in charge of gathering the information, and where applicable, with the individuals responsible for the internal control and risk management procedures, in order to: V assess the appropriate nature of the Standards in terms of their relevance, completeness, reliability, objectivity, and comprehensible nature, taking best practices in the sector into consideration, where applicable; V ascertain that an information-gathering, compilation, processing and control process had been implemented, with a view to the completeness and consistency of the Information, and familiarize ourselves with the internal control and risk management procedures relating to the preparation of the CSR Information.
In the case of the other consolidated CSR information, we assessed its consistency compared with our knowledge of the Company.
We believe that the sampling methods and the size of the samples that we selected by exercising our professional judgment enable us to draw a conclusion expressing moderate assurance; a higher level of assurance would have required more extensive audit work. Given the use of sampling techniques, and the other limits inherent to the operation of any information and internal control system, the risk of a material misstatement not being identifi ed in the CSR Information cannot be completely eliminated.
Qualitative social indicators: Human Resources and Diversity Management policies, Diversity and equality of opportunity, Compensation.
Qualitative societal indicators: Prevention of fraud and bribery, Fairness of the Practices, Responsible investment solutions, and Inclusion of social and environmental criteria in the fi nancing.
7.1 NATIXIS BYLAWS 408 7.2 GENERAL INFORMATION ON NATIXIS’ CAPITAL 413 7.2.1 Form and transfer of shares (Chapter II, Article 4 of the bylaws) 413 7.2.2 Share capital 413 7.2.3 Authorized but unissued capital – capital increase authorizations 413 7.2.4 Securities not conferring rights over the share capital 414 7.2.5 Other securities giving access to capital 414 7.2.6 Changes in the capital over the last fi ve fi scal years 416 7.2.7 Other information on the capital 416 7.3 DISTRIBUTION OF SHARE CAPITAL AND VOTING RIGHTS 417 7.3.1 Distribution of share capital at December 31, 2014 417 7.3.2 Ownership of shares by members of management and supervisory bodies 417 7.3.3 Treasury shares 417 7.3.4 Employee shareholders 417 7.3.5 Changes in the shareholder base over the past three years 418 7.3.6 Natural or legal persons exercising or potentially exercising control over Natixis 418 7.4 INFORMATION FROM ARTICLE L. 225-100-3 OF THE FRENCH COMMERCIAL CODE 419 7.5 DRAFT RESOLUTIONS OF THE COMBINED GENERAL SHAREHOLDERS’ MEETING OF MAY 19, 2015 420 7.5.1 Report of the Board Of Directors on the resolutions submitted to the Shareholders’ Meeting 420 7.5.2 Agenda and draft resolutions of the Combined General Shareholders’ Meeting of May 19, 2015 431 7.6 STATUTORY AUDITORS’ SPECIAL REPORT ON RELATED-PARTY AGREEMENTS AND COMMITMENTS 447
II - Agreements and commitments already approved by the General Shareholders’ Meeting 449
Chapter I: Form of the Company – Name – Registered Offi ce – Duration – Corporate Purpose
The share capital has been set at €4,991,395,425.60, divided into 3,119,622,141 fully paid-up shares of €1.60 each.
The Company’s Senior Management is the responsibility of either the Chairman of the Board of Directors, or that of another individual appointed by the Board of Directors bearing the title of Chief Executive Offi cer.
The choice between these two Senior Management procedures is made by the Board of Directors which may take valid decisions only if: V the agenda containing this item has been sent out at least 15 days in advance of the Board Meeting; V at least two-thirds of the directors are present or represented at the meeting.
The non-voting members receive the same information as the directors, and are convened to all meetings of the Board of Directors. They sit on the Board of Directors in an advisory capacity.
In accordance with Article R.225-85 of the French Commercial Code, the right to take part in the General Shareholders’ Meeting is subject to the registration of the shares in the accounts in the name of the shareholder or broker registered on his behalf on the third business day preceding the General Shareholders’ Meeting at twelve midnight, Paris time, or in the accounts of registered shares kept by the Company, or in the accounts of bearer shares kept by the authorized brokers.
With respect to holders of bearer shares, it is their authorized intermediaries which hold accounts of bearer shares which prove their clients’ status as a shareholder directly to the centralizing body of the meeting. They do so by producing a certifi cate that they attach to the voting form or admission card request in the name of the shareholder or the name of the registered intermediary acting on behalf of the shareholder. A certifi cate is also delivered to shareholders who wish to attend the meeting in person and who have not received an admission card by the third business day preceding the General Shareholders’ Meeting at twelve midnight Paris time.
A register of attendance is kept in accordance with the regulations in force. General Shareholders’ Meetings vote on the quorum and majority conditions stipulated by law.
7 LEGAL INFORMATIONNatixis bylaws Following the Company’s dissolution and during its liquidation, these copies or extracts are certifi ed by one or more of the liquidators.
It appoints the directors, the non-voting members and the Statutory Auditors.
The balance of the earnings constitutes, along with any retained earnings, the distributable profi t of which the Ordinary General Shareholders’ Meeting disposes freely in the framework of the laws in force, and which it can carry forward, or place on reserve, or distribute partially or entirely, on the proposal of the Board of Directors.
At the Company’s expiry, or in the event of early dissolution, the General Shareholders’ Meeting determines the liquidation method, on the proposal of the Board of Directors and subject to the legal requirements in force, and appoints one or more liquidators whose powers it determines.
General information on Natixis’ capital 7.2 General information on Natixis’ capital 7.2.1 FORM AND TRANSFER OF SHARES (CHAPTER II, ARTICLE 4 OF THE BYLAWS)
The share capital has been set at €4,991,395,425.60 at March 2, 2015, divided into 3,119,622,141 fully paid-up shares of €1.60 each.
At its meeting on July 31, 2014, the Board of Directors used the authorization that was granted to it by the Combined General Shareholders’ Meeting of May 21, 2013 on the allocation of free shares (17th resolution) to the Corporate Offi cers. Natixis allocated 31,955 performance shares to Laurent Mignon. These are existing shares previously purchased by Natixis under its share buyback program.
In order to carry out a capital increase, through the issue – with preferential subscription rights maintained – of shares and/or securities providing access to the capital of the Company and/or the issue of securities entitling holders to the allotment of debt securities €1.5 bn 26 months None None
In order to determine the issue price of new shares in the event of a capital increase without preferential subscription rights maintained of the share capital (a) 26 months None None
In order to increase the share capital via the incorporation of premiums, reserves, retained earnings or other items €1.5 bn (a) 26 months None None
(a) Amount deducted from the ceiling decided in resolution No. 9 of the General Shareholders’ Meeting of May 21, 2013 (€1.5 bn).
On May 24, 2007, the Combined General Shareholders’ Meeting once again authorized the Natixis Management Board to grant stock options to some, or all, employees or corporate offi cers of the Company or of related companies, within the 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).
Certain exemptions allow options to be exercised early (third-party fi nancial transactions impacting Natixis’ capital, and the death or negotiated retirement of the benefi ciary).
Number of shares at the end of the fi scal year
Shares issued in respect of the capital increase reserved for employees 9,951,325 15,922,120 24,291,184.33 7.2.7 OTHER INFORMATION ON THE CAPITAL
Board members, including natural and legal persons, owned 71.47% of Natixis’ capital at December 31, 2014 (almost all of this being owned by BPCE).
Under the share buyback program authorized by the General Shareholders’ Meeting of May 20, 2014, Natixis owned 2,489,588 treasury shares at December 31, 2014.
7 LEGAL INFORMATIONDistribution of share capital and voting rights By the resolution of November 12, 2007 and on the basis of the authorization of the Combined General Shareholders’ Meeting of May 24, 2007, the Management Board had granted a maximum of 6,600,000 bonus shares, split equally between employees of Natixis and of companies that are directly or indirectly related to it as per Article L.225-197-1 et seq. of the French Commercial Code.
These bonus shares were vested to beneficiaries on November 12, 2009, subject to satisfaction of certain conditions, notably presence conditions.
Furthermore, in accordance with the provisions of Articles L.225-197-1 et seq. of the French Commercial Code: V the Natixis Board of Directors, at its meeting on August 5, 2010 (by virtue of the authorization granted by the General Shareholders’ Meeting of May 27, 2010, 18th resolution), decided to grant 6,595,308 free shares to certain employees of Natixis and its subsidiaries by virtue of their employment contracts; V the Natixis Board of Directors, at its meeting on February 22, 2011 (by virtue of the authorization granted by the General Shareholders’ Meeting of May 27, 2010, 18th resolution), decided to grant 6,893,424 free shares to certain employees of Natixis and its subsidiaries by virtue of their employment contracts; V the Natixis Board of Directors, at its meeting on February 22, 2012 (by virtue of the authorization granted by the General Shareholders’ Meeting of May 27, 2010, 18th resolution), decided to grant 6,119,373 free shares to certain employees of Natixis and its subsidiaries by virtue of their employment contracts; V the Natixis Board of Directors, at its meeting on February 17, 2013 (by virtue of the authorization granted by the General Shareholders’ Meeting of May 27, 2010, 18th resolution), decided to grant 1,724,325 free shares to certain employees of Natixis and its subsidiaries by virtue of their employment contracts; V the Natixis Board of Directors, at its meeting on November 6, 2013 (by virtue of the authorization granted by the General Shareholders’ Meeting of May 21, 2013, 17th resolution), decided to grant 90 free shares to the Chief Executive Officer of Natixis; V the Natixis Board of Directors, at its meeting on July 31, 2014 (by virtue of the authorization granted by the General Shareholders’ Meeting of May 21, 2013, 17th resolution), decided to grant 31,955 performance shares to the Chief Executive Officer of Natixis.
Finally, as indicated in paragraph 7.2.3 herein, during its session on February 19, 2014, the Board of Directors decided to use the authorization relating to the capital increase with waiving of preferential subscription rights reserved for members of employee savings plans granted by the Combined General Shareholders’ Meeting of May 21, 2013 (16th resolution), for the launch of the Mauve 2014 employee share ownership plan with an overall par value ceiling of €48,000,000, representing a maximum of 30,000,000 shares.
As a result, in a decision taken on July 24, 2014, the Chief Executive Offi cer of Natixis recognized Natixis’ capital increase for a total of €40,213,304.33 through the issuance of 9,951,325 new shares with a par value of €1.60, which breaks down into a nominal amount of €15,922,120 and an issue premium of €24,291,184.33, and the bylaws were accordingly amended.
7.3.5 CHANGES IN THE SHAREHOLDER BASE OVER THE PAST THREE YEARS
The application of corporate governance rules and the rules set out for members of the Board of Directors prevent the risk of abusive exercise of control.
Article L. 225-100-3 of the French Commercial Code requires companies whose securities are admitted for trading on a regulated market to make available and explain certain information, where said information may have an impact in the event of a public offer.
7 LEGAL INFORMATIONDraft resolutions of the Combined General Shareholders’ Meeting of May 19, 2015 7.5 Draft resolutions of the Combined General
Thirty-seven resolutions will be submitted to the shareholders at the Combined General Shareholders’ Meeting to be held at 3 p.m. on May 19, 2015 at CNIT Paris La Défense, 2 place de la Défense – 92053 Paris.
These resolutions can be categorized into three groups: V the first 11 resolutions (resolution one to resolution eleven) require the approval of the Ordinary General Shareholders’ Meeting and concern fiscal year 2014: approval of the financial statements, appropriation of earnings and payment of a special dividend, approval of related party agreements, advisory opinion on the components of compensation due or granted in respect of fiscal year 2014 to each executive corporate officer, overall budget for compensation paid in fiscal year 2014 to the employees referred to in Article L.511-71 of the French Monetary and Financial Code, variable compensation ceiling for these same employees, ratification of the decision to co-opt a new director and the Company’s transactions in its own shares on the market; V the following 13 resolutions (resolution twelve to resolution twentyfour ) require the approval of the Extraordinary General Shareholders’ Meeting and concern the renewal of all of the financial delegations and authorizations that provide your Company with the financial means to develop and implement its strategy as well as the reverse split of the Company’s stock and changes to the Company’s bylaws (term of office of directors, powers of the Board of Directors, shareholders’ voting rights and compliance with legal and regulatory provisions); V the final 13 resolutions (resolution twenty-five to resolution thirty-seven) once again require the approval of the Ordinary General Shareholders’ Meeting and concern the reappointment of 10 directors, the appointment of one new director and the establishment of a total yearly budget for directors’ fees.
Resolutions requiring the approval of the Ordinary General Shareholders’ Meeting (resolutions one to eleven)
In resolutions one and two, the General Shareholders’ Meeting is asked to approve the Natixis 2014 parent company and consolidated fi nancial statements, respectively.
Resolution three proposes to: V allocate €65,265,847.15 to the legal reserve; V pay a dividend of €1,059,612,591.14, broken down as follows: R an ordinary dividend totaling €623,301,524.20,
R a special dividend of €436,311,066.94; V allocate the remaining distributable profits to retained earnings, i.e. €680,822,201.03 (1).
At December 31, 2014, Natixis’ ratio far exceeded this target range. This was due to: V its earnings, which led to an increase to the ratio at every quarterly interval; V the IPO of 59% of Coface in late June 2014, which resulted in a 39 basis point increase in the Common Equity Tier 1 ratio in the second quarter of 2014.
(1) This amount is estimated based on the amount of share capital at December 31, 2014. It will be adjusted depending on the number of shares entitled to dividends.
In accordance with legal provisions, we remind you that for the three fi scal years prior to fi scal year 2014, the following dividends were distributed: Fiscal year
V approval by the Board of Directors on February 18, 2015 of the terms and conditions for a Renewed Partnership with CNP Assurances and the authorization given to the Chief Executive Officer, with the right to sub-delegate said powers, in the name and on behalf of Natixis, to finalize, complete, sign, initial and return the New
Partnership Agreements to which Natixis is a party, namely the general framework agreement, the quota share reinsurance treaty, the tranche 1 and tranche 2 reinsurance treaties, the EuroCroissance matching agreement and the tranche 2 matching agreement.
R the average variable compensation granted (paid immediately or deferred in any form) in respect of the past three calendar years in office.
* The terms followed by an asterisk are defi ned in the index below.
7 LEGAL INFORMATIONDraft resolutions of the Combined General Shareholders’ Meeting of May 19, 2015 The amount of the indemnity (hereinafter referred to as the “Severance payment”) is equal to: Monthly reference pay x (12 months + 1 month per year of seniority).
The amount of this severance payment, together with the noncompete allowance, if applicable, received by the Chief Executive Offi cer is capped at twenty-four (24) months of the Monthly Reference Pay.
No severance payment is made if the CEO leaves offi ce: R due to serious negligence or misconduct, or
The severance payment will only be made if the Board of Directors observes, when implementing the Commitment related to the severance payment, that the performance conditions have been met.