Net Banking Income of core business 1,805 1,835 2,362 * over 6 months.
The bank holds leading positions in each of its core businesses.
Natexis Banques Populaires is the Banque Populaire Group's financing, investment banking and service bank and is also the Group's listed vehicle.
Income and contributed fully to the strong growth in the Group's bottom line.
Among our other achievements, we considerably enhanced our security processes and realized substantial productivity gains.
They also represent the payoff from our recent external growth operations, including
growth in Net Banking Income while at the same time boosting its stock of unrealized gains.
Management Services was the star performer in terms of business growth. Insurance revenues soared 50% while
F or Natexis Banques Populaires,2003 was a year of strong earnings growth, fueled by a sharp rise in Net Banking Income and tight control over general operating expenses.
This business line is central to our strategy and its solid performance last year is a source of considerable satisfaction.
Investment Banking staged a strong recovery, powered by a 60% increase in Capital
All in all, these results are very encouraging, especially given that they were achieved during a period of in-depth reorganization and repositioning of our Capital
Markets and Financial Services businesses, as well as of our headquarters functions and risk management structures.
We believe that we have considerable scope to further improve our performance in 2004 and to put our earnings on a more even keel.
Gross revenue per share, * Dividend recommended at the Annual Shareholders’ Meeting of May, 27, 2004.
P op ul ai re s sh ar e pe rf or m an ce
Market Euronext Paris Premier Marché, eligible for “SRD” deferred settlement service
Voting rights Shares registred in the name of the same holder for at least two years carry double voting rights. As of December 31, 2003, there were 81,794,906 voting rights.
This is sent out to all of the bank's identified shareholders, numbering around 200,000.A newsletter is also produced for the approximately 17,000 Banque Populaire Group employees who take part in the employee stock ownership plan launched in June 2001.
Individual shareholders in France can also obtain information throughout the year by dialing the
The Natexis Banques Populaires financial communications team manages all relations with analysts and investors, as well as with individual shareholders.The team places prime importance on regularly issuing high quality, accurate financial information.
Natexis Banques Populaires shareholder relations teams met private shareholders at the Actionaria fair held on at the Palais des Congrès conference center in Paris.
and the financial press at least 30 days prior to the Meeting date, or by calling the shareholder relations toll-free number (calls originating in France only) or visiting the bank's web site. Copies of the Notice of Meeting and the voting forms can be obtained from the bank or broker that manages their share account.
Holders of bearer shares must obtain from the bank or broker that manages their share account a certificate stating that a block has been placed on the shares up to the date of the Meeting (known as a certificat d'immobilisation).
Natexis Banques Populaires at least five days prior to the Meeting date, in order to allow time for an admittance card to be issued and sent to the shareholder.
The Notice of Meeting presents the agenda of the Meeting and the resolutions that will be put to the vote. It is sent directly to holders of registered shares who purchased their shares at least one month before the Meeting date.The file also includes a form to apply for an admittance card, for shareholders planning to attend the meeting in person, and a form of proxy and a postal voting form for shareholders who are unable to attend.
Shareholders will be required to present their admittance card at the door. If they do not receive this card in time, they can still take part in the vote by presenting an official identity document (together with the certificat d'immobilisation in the case of holders of bearer shares).
Non-voting Director Michel Goudard, Chief Operating Officer of Banque Fédérale des Banques Populaires
The Board has fifteen members (including one director representing employee-shareholders) and one non-voting director.
Group, the bank's majority shareholder. One fifth of the directors (three directors out of fifteen, not including the director representing employee-shareholders) are qualified as independent.
The three independent directors have no ties with any of the bank's direct or indirect shareholders, they are not members of the bank's management team and they have not sat on the Board for more than 12 years.They do not manage any companies that rely on the bank for a significant proportion of their total revenue.
■ One is the Chief Executive of a major French high-tech
Natexis Banques Populaires has been applying corporate governance recommendations for a number of years.
We consider that one of the keys to good corporate governance lies in organizing regular meetings of the Board of Directors and giving directors all the information needed to exercise their judgment. A variety of methods are used to ensure that
Board members are kept fully informed about the activities of the bank and its subsidiaries.
The list of directorships and executive positions held by the members of the Board in other companies is provided at the end of this section.
manufacturing group that is one of the world's leading aircraft engine manufacturers.
With their long-standing experience of the manufacturing and service sectors, these two directors provide valuable insight and a different point of view, complementing that of the bankers who represent the majority of Board members.
Banques Populaires and its subsidiaries and those of the other Banque Populaire
Each meeting lasted an average of more than three hours. Several days before each meeting, directors were given a file containing detailed information about each of the agenda items, representing in total several dozen pages
The bank's bylaws stipulate that each director must hold at least 100 Natexis
The "NRE" corporate governance act requires companies to formally decide whether to combine or separate the functions of Chairman and Chief Executive
It receives regular information about business performance, approves the financial statements of the bank and the Group, reviews the budget and various presentations concerning internal control and the determination of exposure limits.
During the year, the heads of the business lines take it in turn to make presentations to the Board covering the position and outlook of their business.
Presentations are also made to the Board about reorganizations, large-scale internal projects and other developments that materially affect operations.
Chief Executive Officer's discretionary authority in this area is particularly low.
There are three Committees of the Board: ■ The Financial Statements Review
Review Committee has four members, including one independent director: Richard Nalpas, René Clavaud,
External growth transactions planned by subsidiaries are also submitted to the Natexis
No formal assessment of the Board's performance has yet been performed.
attendance rate, to review the 2002 annual financial statements and the 2003 interim financial statements, prior to their presentation to the Board.The Auditors attended both meetings and provided all necessary explanations.The Committee focused, in particular, on the cost/income ratio and the impact of the
■ The Compensation Committee has four members, two of whom are independent directors: Jean de La Chauvinière,
It also makes recommendations concerning proposed stock option grants.The Committee met once in 2003, with 100% attendance.
The Committee met four times in 2003, with a 100% attendance rate.
During these meetings, the Committee reviewed the internal control report, the information systems convergence project, the results of Banque Fédérale des Banques Populaires'
Bleichroeder Inc. At each meeting, the Committee made the necessary inquiries of the management or the auditors of the business concerned.
Committees. Lastly, they describe the rules of conduct to be followed by each individual director.
In 2003, Philippe Dupont, the Chairman of the Board, received compensation of EUR359,557 in his capacity as Chairman and
Committee, the Board set at EUR362,000 the fixed compensation paid to François Ladam,
Chief Executive Officer, for 2003.The Board also decided to award a variable bonus of
It reiterates the provisions of the bylaws requiring each director to hold at least 100 Natexis Banques Populaires shares. It prohibits directors from trading in the bank's shares in the 30-day period preceding the announcement of the bank's quarterly, half-yearly or annual results, and from carrying out speculative or leveraged transactions in the shares.
The Charter describes the method used to determine the fees paid to each director.These include a small fixed fee (EUR1,525 since 2001) and a variable fee of EUR1,220 per meeting attended by the director during the year. In addition, members of the Committees of the Board are paid a fee of EUR915 per Committee meeting attended.
François Ladam also has the use of an apartment owned by the bank.
François Ladam did not receive any compensation in 2003 in respect of his functions at the level of Banque Fédérale des Banques Populaires, or in his capacity as director of certain subsidiaries of the bank.
The total fees paid to the fifteen directors and one non-voting director for 2003, determined as explained above, amounted to EUR182,390.
■ 42,000 options granted to the other members of the Executive Management
8 – Other executive positions and directorships held by the members of the Board of Directors and the Chief Executive Officer
The list of other executive positions and directorships held by the members of the Board of Directors and the Chief Executive Officer is provided on page 19.
The information is not sufficiently detailed to assess whether a director complies with the rules concerning multiple directorships, because it does not include details of any capital ties among the various companies concerned.
has an employment contract with the bank or any of its subsidiaries.
9 – Auditors The bank's financial statements are audited by three firms of independent accountants: ■ Deloitte Touche Tohmatsu, last re-appointed at the Annual
Shareholders' Meeting was held to approve the acquisition, in exchange for shares, of Banque Fédérale des Banques
Particular care was taken over preparing the proxy documents sent to shareholders in connection with the two meetings, so that individual shareholders were given detailed information, in a single document, about each of the transactions put to the vote.
Two Shareholders' Meetings were held in 2003: ■ The Annual Shareholders'
The Meeting also approved the acquisition, in exchange for shares, of Banque
in EUR thousands Deloitte-Touche Tohmatsu % RSM Salustro Reydel % Barbier Frinault et Autres %
Members of the Board of Directors (excluding the Chief Executive Officer, who is not a director) Name First elected/ Term expires Main position within Main position outside appointed (AGM called to the Company the Company approve the financial statements for the year indicated)
Philippe Dupont Board meeting of 2007 Chairman of the Board, Chairman and CEO November 25, 1997 Director Banque Fédérale des Banques Populaires
Banque Fédérale des Board meeting of 2007 Director Honorary Chairman Banques Populaires November 25, 1997 CASDEN Banque Populaire represented by Christian Hébrard
Jean-François Comas Shareholders' Meeting 2003 Director CEO of May 23, 2002 Banque Populaire Côte d'Azur
Daniel Duquesne Shareholders' Meeting 2003 Director CEO of May 23, 2002 Banque Populaire Loire et Lyonnais
Stève Gentili Shareholders' Meeting 2005 Director Chairman of May 23, 2002 BRED Banque Populaire
Jean de La Chauvinière Shareholders' Meeting 2007 Director of May 3, 1996
Richard Nalpas Shareholders' Meeting 2003 Director CEO of May 23, 2002 Banque Populaire Toulouse-Pyrénées
Robert Zolade Board meeting 2006 Director Chairman, H.B.M. of September 22, 1999 (Holding Bercy Management)
Michel Goudard Shareholders' Meeting 2004 Non-voting director Chief Operating Officer of May 23, 2002 Banque Fédérale des Banques Populaires
■ Jean-Paul Bechat Chairman and Chief Executive Officer: SNECMA Director: Alstom, Sogepa, Messier-Dowty International Ltd
■ Philippe Dupont Chairman and Chief Executive Officer: Banque Fédérale des Banques Populaires Chairman of the Board of Directors: Natexis Assurances
Director: Association Banque Populaire pour la Création d’Entreprise Chairman: Fédération Bancaire Française Banking Committee for the Alpes Maritimes region Technical advisor to: Chambre de Commerce et d’Industrie de Nice Côte d’Azur Member of the Supervisory Board: Cannes TV
■ Claude Cordel Chairman of the Board of Directors: Banque Populaire du Midi Chairman: Commission Financière Nationale de l’Unicem, cellule économique BTP du Languedoc Roussillon, SAS CPSL, SAS Holding Clobia Chairman of the Board of Directors: Natexis Factorem Director: Banque Fédérale des Banques Populaires, SAS Dupleix, SNC Hydromons
■ Stève Gentili Chairman of the Board of Directors: BRED Banque Populaire, BRED Gestion, Natexis Pramex International
Director: Banque Fédérale des Banques Populaires, Coface, Cofibred, LFI, BRED Cofilease, Bercy Gestion Finances + Vice-Chairman: Banque Internationale de Commerce (BIC BRED) Permanent representative of BRED Gestion on the Board of: Vialink
■ Alain Jacquier Chairman of the Board of Directors: Banque Populaire Bourgogne Franche-Comté, Banque Privée Saint Dominique, SFIH (Société Financière d’Investissements Hôteliers) Chairman and Chief Executive Officer: SA Central Hôtel, SIHT (Société d'Investissements Hôteliers et Touristiques) Managing partner of: 50 SNC subsidiaries of SFIH (Villages Hôtel) Director: Banque Fédérale des Banques Populaires, Natexis Intertitres Chairman: Comité Régional du Tourisme de Bourgogne Advisor to: Banque de France à Dijon Member of the Executive Board and Chairman of the Promotion and Development Commission: Union des Métiers de l'Industrie Hôtelière Member of the Board of Directors: Maison de la France
■ Robert Zolade Chairman: Servinvest 2 Chairman and director: Éliance, H.B.M. Director: Élior Nederland BV, Elior UK Ltd Director: Areas SA, Areas Ibericoamericana, Serunion, Avenance, Ristochef, I.D.I.A. Participations Member of the Supervisory Board: Pragma Capital Manager: Servinvest Co-Managing Partner: Bercy Participations Co-Legal representative of the Co-Managing Partner Bercy Participations: Société Élior Legal representative of the Co-Managing Partner H.B.M.: Société Élior Legal representative of H.B.M., Chairman of the Board of Directors: M.R.C.
Legal representative of the Managing Partner Éliance: Éliance Orly Ouest, Éliance Aéroport
■ Michel Goudard Chief Operating Officer: Banque Fédérale des Banques Populaires Chairman: SAS Guidéo Vice-Chairman of the Supervisory Board: SBE Director: Natexis Altaïr, Natexis Bleichroeder Inc. (New York),
Fees and other compensation paid to directors for 2003 (in euros)
In 2003, our headquarters teams completed certain major projects and launched new ones designed to leverage the fundamentals underpinning the bank's leading positions in the Financing, Investment Banking and Services markets. Operating in their own area or joining forces on cross-functional projects, the teams set about optimizing the bank's strategic management, bolstering the organization, upgrading management tools, enhancing risk management processes, fostering employee buy-in, strengthening international operations and unleashing synergies with the Banque Populaire Group and its partners.Together, these initiatives have represented the final building blocks in the drive to create a modern and efficient bank, completely focused on serving clients.
All of the projects pursued or launched in 2003 were designed to enable us to cope with challenging market conditions, fully meet client expectations and develop our Financing,
The Finance Department, the General Secretariat, the Information Systems teams and all of the business lines made rapid progress in implementing the Basel II and IFRS/IAS
and IFRS/IAS projects has been extended to include enhancements to our business monitoring and management systems.
The convergence of production systems is now 90%-complete and in 2003, the decision was made to take the initiative a step further by upgrading accounting, management reporting and risk tracking systems.The aim is to produce standard data for all activities to support a pro-active management approach, through increased cross-functional reporting and the use of
This strategic project is being led by a steering committee made up of information systems functional architects, and representatives of Risk
Fixed Income and Currency salesforce.The decision was also made to reorganize the trading business around four desks, to refocus equity derivatives activities on vanilla derivatives, to establish crossfunctional coordination of origination activities and to step up the level of computerization of middle and back office processing operations, in order to manage risks more closely and improve productivity.
Services teams behind a common strategy which re-affirms certain core principles, such as efficiency, risk discipline and giving priority to serving the Banque Populaire Group.
Group's real estate holdings was also high on the agenda in 2003, with the launch of construction work on a second building in
Upgraded systems A key objective of 2003 was to enhance the quality of
The new department has some 100 employees, half of whom work at Corporate level and half in the subsidiaries and branches.
It is responsible for ensuring that the controls performed by operations personnel and by the heads of the business lines are appropriate and are systematically implemented.
Management Department were extended during the year, to improve control over operational risks.The teams responsible for counterparty risks were strengthened and reorganized, with the formation of groups specialized by geographic area and by type of business.
In 2002, contingency plans were developed by the business lines and subsidiaries, addressing the risk
Oran and Setif – where we have had operations since 1999. Reaping the benefits of the improving
To achieve this goal, we will leverage our excellent reputation, our expertise in the guarantee business and our solid understanding of lending operations.
These plans were tested in 2003 to identify any changes required to keep pace with developments in the bank's activities.
On the technology front, we strengthened our information systems security by upgrading the system of clearances, updating the security charter, setting up a security call center and establishing a network of security officers.
Since 1977, when we opened our first and largest branch in
In addition to opening up cross-selling opportunities, the Group provides us with added security and the financial clout to support an ambitious growth strategy.
All of the major projects launched or continued in 2003, such as the Basel II and IFRS/IAS projects, were conducted in close cooperation with Banque Fédérale des Banques Populaires.
Populaires and the Banque Populaire regional banks in terms of product and service offerings and client-base diversification.
DZ Bank on November 21, 2003 has led to the formation of VR
offering a selection of the two groups' Luxembourg funds, to be marketed under the UniNatexis brand. Lastly, in private equity,
Natexis Private Equity International and DZ Equity Partner signed a memorandum of understanding in July 2003 concerning the joint financing of a German private equity fund, Buyout Finatem II, that will invest in small and mid-sized businesses.
Following our 2002 acquisition of the brokerage business of New York-based investment firm Arnhold & S. Bleichroeder
Group entities, in particular by providing assistance in rolling out the new CRM (customer relationship management) application,
Banque Populaire, the information systems platform used by two-thirds of the Banque Populaire regional banks) chose to transfer its hardware to Natexis Altaïr, thereby confirming the role of our facilities management and systems operations subsidiary as a technological lynchpin and cross-functional technical service provider.
In equity research and brokerage, following an agreement signed and the launch of a Global
Committed teams In 2003, we adopted an increasingly centralized and integrated approach to managing human resources, to tap the full potential offered by our 11,935 employees.
One illustration of this growing integration is our work on developing a skills database,
Natexis Management. One of the institute's roles is to contribute to the succession planning process, by helping to attract, integrate, develop and retain the best talents. It will also help us to build a genuine
Training was high on the agenda in 2003.With 264 new hires joining the bank during the year, we focused on organizing induction seminars and specific group training courses, as well as drawing up individual training programs, to facilitate the integration process.
At the same time, the performance review system was improved, to identify more easily employees'
hopes and expectations in terms of mobility and training, and provide personalized responses.
A project has been launched to make it easier for employees to move from one Group entity to another and we have also taken steps to pinpoint more effectively our bank's needs and the aspirations of our staff.These efforts have
Lastly, we stepped up our efforts to identify and nurture potential high flyers in our organization.
LISBON LJUBLJANA LONDON LUXEMBOURG MADRID MAINZ MILAN MONACO MOSCOW MUNICH NAPLES NUREMBERG OSLO PRAGUE RIGA ROME SAINT-PETERSBURG SAN SEBASTIAN SEVILLE SOFIA STOCKHOLM STUTTGART TALLINN VALENCIA WARSAW VIENNA VILNIUS WATFORD ZAGREB
BANGALORE BANGKOK BEIJING HANOI HO CHI MINH CITY HONG KONG JAKARTA KUALA LUMPUR LABUAN MELBOURNE MUMBAI NEW DELHI OSAKA SECUNDERABAD SEOUL SHANGHAI SINGAPORE SYDNEY TAIPEH TOKYO YANGON
99.7% Natexis Factorem Factoring 100% Natexis Lease Lease Financing 99.1% Natexis Pramex International Partnering corporate clients in international markets 92.5% Natexis Coficiné Finance company (audiovisual sector)
100% Natexis Algérie Banking in Algeria 100% Natexis Immo Développement Real estate development and refurbishment 100% Natexis Metals Ltd Commodities brokerage (London)
100% Natexis Luxembourg S.A. Banking in Luxembourg 100% Natexis Moscow Banking in Russia 100% Natexis Bleichroeder S.A. Investment company (Paris)
100% Natexis ABM Corp. Mortgage-backed securities managed in the United States 100% Natexis Arbitrage Equities and derivatives arbitrage 100% Natexis Private Equity Private Equity 100% Natexis Finance Mergers and acquisitions
2.4 million member-stakeholders 21 Banque Populaire regional banks CASDEN Banque Populaire,Crédit Coopératif
Si m pl ifi ed c or po ra te s tr uc tu re
International private banking 100% Banque Privée Saint Dominique Private banking in France 100% Natexis Interépargne Employee savings plans - Accounts keeping and marketing 99.6% Natexis Immo Placement Real estate fund management
Organized around three core businesses and six business lines, plus Coface, Natexis Banques Populaires serves a diversified clientele made up of large corporates, mid-sized companies, institutions and the Banque Populaire retail banking network.The three core businesses – Financing, Investment Banking and Services – each comprise two business lines.The business lines conduct their activities either directly or indirectly through dedicated subsidiaries.The Financing business comprises the Corporate & International Banking and Specialized Financing business lines; Investment Banking comprises the Capital Markets and Private Equity lines, and Services includes Banking, Financial & Technology Services and Asset Management & Insurance. These business lines are supported by four Corporate departments, Human Resources, Information Systems & Logistics, General Secretariat and Finance. The Internal Audit Department completes the structure.
P op ul ai re s bu si ne ss es
To promote a better understanding of our organization among clients, the markets and our employees, during 2003 we changed the name of most
Natexis Banques Populaires offers clients solutions covering their entire balance sheet, ranging from day-to-day banking transactions to more complex needs such as equity financing, structured finance, securities services and employee savings solutions.
Populaires companies now have Natexis in their name, followed by a term or business reflecting their specific area of expertise.
EUR32.3 billion worth of risk-weighted assets syndicated loan arranger mandates won in 2003
Efforts to reduce operating costs paid off in the shape of a further decline in the cost/income ratio to 41%, representing a 10-point improvement over the last three years.
Banking plays a central role in selling the various services offered by the bank.
Development initiatives in the area of secure electronic payments, led by the teams of cash management experts, have enabled the bank to meet the emerging needs of clients.
In 2003, the bank further strengthened its position as arranger and underwriter of syndicated loans.The 82 mandates obtained in 2003 represented 74% more than in 2002.
Natexis Banques Populaires was also the world's ninth largest arranger of structured finance for international financial institutions (source: Dealogic). Thanks to their relations with a large number of banks, the teams in Paris,
of London, Société Tunisienne de Banque or Bancomext in significant transactions.
In 2003, the Commodity Financing business affirmed its position as arranger or co-arranger of structured financing deals, obtaining some thirty mandates during the year for soft commodities, metals and energy deals.The USD1,23 billion facility arranged for the Angolan oil company Sonangol, was the largest pre-financing operation ever carried out in the oil sector. Natexis Banques Populaires confirms its position as a leading player in Trade Finance, ranking among the world's top six arrangers of syndicated loans
In aircraft financing, the bank had the opportunity to demonstrate its financial engineering expertise by arranging export credit financing for eight Airbus on behalf of Qatar Airways.
The business line also expanded its international presence, arranging financing for Qantas, Iberia,Asa,
The business line continued its deployment in Algeria, opening two new branches in Setif and
Oran, in addition to its existing branch in Algiers. Natexis Banques
In April 2003, the Shanghai branch obtained a Renmibi (RMB) license enabling it to work in domestic currency and provide banking services to the local subsidiaries of French groups.
Lastly, the New York branch had a good year, helped by the US economic rebound.
Citibank and Bank of America, for a EUR700 million syndicated loan. The bank also acted as facility agent for the transaction, which represented a first for the world's fourth largest communications group. The aim was to set up a close-knit pool of banks to partner
Corporate capital spending, a critical indicator for the equipment and real estate leasing market, contracted by 2.2% in 2003, on the back of a 2.8%
The real estate lease financing market contracted sharply, after five years of double-digit growth.
EUR1.43 billion worth of new equipment and real estate lease financing, a decrease of 4.7%
These high business volumes were the pay-off from Natexis Lease's policy of geographic and industry diversification. In last year's difficult environment, the company reaped the benefits of its positioning in all customer segments, from
In lease financing for energy management and environmental projects (the so-called "Sofergie"
Crédit Maritime Mutuel, one of the newest members of the Banque
Populaire Group.The partnership is modeled on those in place for many years with the Banque
Automobile (LLD), the long-term leasing subsidiary, ended its first full year of operation with 893 vehicles on its books.To support sales of these complex products, comprehensive training was given to the Banque Populaire regional banks' sales forces.
The business is poised to take off in 2004, with the bolstering of Natexis LLD's teams which will allow the company to bid for a growing number of fleet contracts.
The gradual recovery in corporate capital spending expected in 2004, coupled with the additional business generated by the partnership with
Energeco Specialized in financing energy management and environmental projects, Energeco has participated actively in financing wind power projects.
For Natexis Factorem, 2003 was a year not only of organic growth but also external growth, in the shape of the merger with CrédiFrance Factor (CFF), the factoring subsidiary of
NATEXIS FACTOREM REVENUES ON A COMPARABLE STRUCTURE BASIS in EUR billions
The merged company has adopted a single-tier management structure and kept the name
In a factoring market only slightly up on 2002, Natexis Factorem boosted its market share to 13.2%
portfolio and the merger costs were offset by savings obtained through synergies and tight cost control. Determined action in these areas ensured that
Implementation of additional control procedures backed by a substantial training effort across all departments led to a sharp fall in provision expense to EUR3.7 million.
In France, enhancement of the product offer and the launch of a new credit insurance business in partnership with Coface will strengthen Natexis Factorem's position in the receivables management market.
In Germany, the operational launch of the joint venture with DZ Bank, in line with the Banque Populaire Group's development strategy, will strengthen the Group's position in the factoring market outside France.
In 2003, the Capital Markets business line set up a single sales force offering clients the full range of fixed income, credit and foreign exchange products. At the same time, Natexis Bleichroeder's Global Equities business started to reap the benefits of the synergies among the French, UK and US operations. Corporate control over the entire Capital Markets business has been bolstered by transferring internal control teams to the new Internal Control Department and market risk teams to the Risk Management Department, and by setting up a new Securities Law unit reporting to Legal and Tax Affairs. A new Development Department has also been set up, as part of the drive to ensure that business growth goes hand-in-hand with tight control over risks.
Singapore branches continued to grow their capital markets operations, primarily serving corporate clients and specializing mainly in foreign exchange products.
Natexis Banques Populaires has a strong presence in euro interest rate derivatives and has developed solid expertise in inflation-indexed products. In government securities, the bank is a Spécialiste en
Valeurs du Trésor (SVT) in France and a Creador in Spain, and is continuing to expand in Southern
On the primary market, the business line strengthened its position in the corporates, agency and finance company segment. Benchmark mandates were obtained from an increasingly wide range of issuers, including La Poste, Meliorbanca,
Natexis Banques Populaires was also selected by first-time issuers such as Caja Laboral,TF1,
de France and CADES, and also strengthened its position in private placement notes/EMTNs, especially for structured products.
The publication draws on the experience of dealers specialized in trading in inflation-indexed instruments.
European clients which analyzes the interaction of economic and stock market trends on the two sides of the Atlantic.
In line with this strategy, funds raised on the US market by the New York branch represent a growing proportion of the total.
At end-2003, the USCP program was increased from USD2 billion to USD5 billion, and the EMTN
The Equity Derivatives business focused on outsourcing certain exotic risks and prudently managing outstanding positions, while also boosting monitoring and control resources.The offer was refocused on vanilla equity derivatives and on products meeting the needs of the Banque
After a satisfactory year, they are starting to diversify their sources of revenue.
equity brokerage and the creation of a Global Equities business line, synergies are being unleashed between the French business
The Paris-based research teams now comply with US/UK standards, paving the way for the distribution of European equities in the United
Forecasts of French Companies two quarters in a row, the research team has built expertise in eight industries: life sciences, financial services, luxury goods, media, food and beverages, telecoms, energy and construction.
now carries out all equities lending-borrowing transactions on behalf of Natexis Banques
Populaires.This activity is growing in the United States, where it forms part of the Brokerage
Partnership with DZ Bank Natexis Bleichroeder and DZ Bank have signed an exclusive distribution agreement covering the distribution of
Natexis Bleichroeder-DZ Bank Research brand, as well as the distribution of
DZ Bank analysts take part in the drive to win new clients in the United States and the DZ Bank sales force in the
The Private Equity business, spearheaded by Natexis Private Equity, provides financing at each stage of a company's development, from seed capital to mezzanine finance, bringing it to the point where it is ready to launch an IPO. Natexis Private Equity acquires majority or minority interests, generally in unlisted companies, which it holds for an average of five years.The business is conducted by eleven subsidiaries organized around four business units: Expansion capital, Buy-Out/Buy-In Capital (LBOs),Venture Capital and International Private Equity.The business line also operates in the mergers and acquisitions market, through Natexis Finance and the M&A unit of Natexis Bleichroeder in New York.
The increased deal flow was mainly attributable to sustained investing activity by Natexis Industrie (LBO),
BREAKDOWN OF INVESTED CAPITAL in EUR millions at December 31, 2003
The first two FIP were launched in South West France (Aquitaine,
Sud-Est, are invested in SMEs which realize a significant proportion of their sales in these regions.
The line-up is scheduled to be completed in 2004, with the launch of six other FIP covering the other regions of France.
In line with its European growth strategy, Natexis Private Equity plans to bolster its position as a major provider of private equity capital to small and mid-sized
Thanks to the improved economic conditions, Natexis Private Equity expects capital inflows into these structures in 2004 to reach
Ventures, an Oslo-based venture capital fund manager, will finance the acquisition of SND Invest As, the
(PIPE) is a concept whereby private equity firms invest in quoted companies without any plans to take the company private.The market has grown in the recent period of low stock market prices. In 2003,
Access Commerce enabled the company to carry out further external growth operations.
M&A team was integrated into that of Natexis Finance, the bank's mergers and acquisitions advisory subsidiary.
specialists, spread between Paris and New York, placing the business on a truly international footing.
and cross-border transactions, carried out by major groups, mid-sized independent companies and investment funds.
Français du Pétrole (IFP). The fund invests in young companies at the vanguard of innovation in energy management and environmental protection, operating in the areas of new energy sources, pollution reduction, waste processing, recyclable materials, etc.
The reorganization successfully prepared the business line for anticipated developments and helped it withstand the macroeconomic difficulties experienced by the entire French banking industry, especially those activities requiring substantial investment in technology.
The Banking, Financial and Technology Services business line covers the entire spectrum of back office processing operations carried out by Natexis Banques Populaires and the Banque Populaire regional banks, related to payments and stock market transactions. For many years now, these services have also been offered to a broad array of clients, including network banks, specialist banks with or without a network and other financial institutions. Securities custody and processing services are provided by the Financial Services unit, while the Banking Services unit offers processing services for electronic banking and payment transactions. The business line also includes a Personal Banking Services unit, which is developing a multi-channel offer.
Services launched a series of client satisfaction surveys in order to better understand their clients' needs and expectations.
Group server platform. In addition, a project was initiated to develop a new data interchange platform.
The aim of the project is to prepare the integration of Natexis
Banques Populaires applications in the Banque Populaire Group information systems environment, i-BP (informatique-Banque Populaire).
The Mission Plus offer was enhanced with the addition of new Internetbased expense claim management functionalities and the success of the Visa Business range was confirmed, in the shape of a 66%
Financial Services The Financial Services unit was badly hit by the stock market crisis. In response to the severe impact of lower volumes and the withdrawal of a certain number of players, during 2003 the unit launched a major restructuring and redeployment program.
The program, dubbed Cap 2005, had several components: ■ Activities were refocused on the core financial services business and the unit pulled out of unprofitable businesses and businesses carrying risks that were considered as not being inherent in back office operations. In addition, redundant activities were transferred to more appropriate Natexis Banques
Populaires business lines, to fully leverage synergies and opportunities for productivity gains.
■ A major internal reorganization project was launched to improve efficiency through site specialization and organizational streamlining measures.
They will be pursued in the coming years, helping to firmly establish Financial Services as a key component of Natexis Banques
LineBourse's commitment to quality and to offering clients highly efficient online brokerage services is evidenced by the ISO 9001:2000 certification obtained in December 2003.
In Portugal, Slib now processes around 70% of clearing transactions on the Lisbon stock exchange.
The company also confirmed its strategy to develop a frontto -back offer by buying out the minority shareholders of its E-Market subsidiary.
Services project team continued to develop LineBanque, the multi-channel bank for personal banking clients.
LineBanque is now fully operational and its services will be offered to clients before the end of 2004.
Populaires' personal banking clients, will be the main user of this new product and has been reorganized to optimize its use.
Large corporates and institutions returned to the stock market while private investors (the general public and high net worth individuals)
continued to show a marked preference for guaranteed capital products and diversified investments.The movement picked up speed at the end of the year, following the modification and, in some cases, the withdrawal of certain bank-type savings products.
Asset Management and Insurance business line recorded 11% growth in total assets under management to EUR80.6 billion, on the back of a more than 4% increase in 2002.
Thanks to the constant drive to offer products closely tailored to market
Natexis Interépargne is France's leading administrator of employee savings plans. In 2003, the company managed 2.3 million employee savings plan accounts for a total of 19,839 companies, an increase of 12% over the previous year.
Natexis Asset Management consolidated its leadership in money market funds, with a 10% market share. In the Europerformance league tables, it was ranked fifth largest distributor of mutual funds in France, with net new money of EUR2.1 billion (source: Europerformance ranking at December 31, 2003 for distributed funds).
SCPI manager (source: Institut de l’Epargne Immobilière et Foncière), to expand its market share to 6.26%
innovation in the areas of insurance, investment funds, real estate management, employee savings plans and private banking.
Natexis Assurances, which operates in all segments of the insurance business, is pursuing a development policy in line with the Banque Populaire
Asset Square, marketed an innovative offering throughout 2003, comprising a comprehensive range of guaranteed direct and multimanager funds, BP
As of the end of December 2003,over 10,520 contracts had been signed.
Sales of the new ES-PL employee savings plan offer for members of the professions are also promising.
The Asset Management and Insurance business line has continued to launch projects with institutions outside France. Since 1997,
Banque Byblos and Natexis Assurances through a joint subsidiary – ADIR –
took shape with the launch of motor insurance, personal risk and pension products. ADIR had premium income of USD8.9 million in 2003.
In 2004, Natexis Asset Management will deepen its 10-year partnership with Union Investment (DZ Bank)
Services Authority in 2003 for the business-to-business distribution of multibrand funds in Europe.
Insurance business line will continue to focus on expanding its market share in France and abroad.
expertise will help to underpin the Banque Populaire Group's strategy to win new individual clients, with the launch of a new
(MAV) meets family protection needs, by offering coverage of up to
Unfavorable exchange rates had a negative impact of just under 1 point.The two businesses contributed to an equivalent extent to the increase, with the Insurance business reporting 13% growth and the Service business 6%.The high volume of sales offset the impact of depressed trading activity in the main European markets, including
2003 saw an improvement in claims expenses, corresponding to paid claims plus the change in reserves for outstanding reported and incurred but not reported claims.
It offers companies solutions to managing, protecting and financing their business transactions, by allowing them to outsource all or part of their receivables/payables management. Alongside its four core businesses – credit insurance, credit information, factoring and receivables management – Coface has developed three related businesses, guarantee insurance, receivables management training and, in France, the management of export credit insurance for very large scale contracts on behalf of the French State. Coface has operations in 57 countries and offers local services in 91 countries, through its partners in the international CreditAlliance network.
The loss ratio fell to an historic low of 52.2% (40.6% excluding the effect of adjustments to align reserving methods).
At the same time, the bottom-line contribution of underwriting income was partly offset by a
The company's brand equity is such that the name "Coface" is used as a verb in French. From this solid base, Coface has developed its business in two directions.
In parallel, over the last ten years or so, Coface has been extending its receivables management, protection and financing offering.
■ Domestic ■ Export ■ Excess of loss ■ Political and single risk 2 – Information ■ Marketing ■ Credit ■ @rating 3 – Factoring ■ Domestic ■ Export 4 – Receivables management ■ Receivables management ■ Debt recovery 5 – Guarantee insurance 6 – Public procedures management ■ Market survey cover ■ Medium and long-term export credit insurance ■ Exchange risk cover ■ Foreign investment cover 7 – Receivables management training
In October 2001, faced with the fourth cyclical credit crisis in forty years, Coface launched the New
In August 2002, Coface's acquisition by Natexis Banques Populaires paved the way for partnerships with the Banque Populaire regional banking network, based on a strong concept – devising and developing products for the Banque Populaire banks and other banks.
In the United States, Coface acquired a credit insurance portfolio and obtained a license to write insurance in the
US market, providing the platform needed to compete effectively in the world's largest credit management services market.
The factoring offer was successfully deployed in Germany, in partnership with Natexis
In France, steps have been taken to boost sales of combined insurance and service solutions by merging the two business's direct salesforces.This reorganization has been a big success, as evidenced by last year's growth in sales of all three product lines, credit insurance, credit information and receivables management. Partnerships with the
Assurcrédit. Lastly, Coface's role as manager of State guarantees for exporters was confirmed with the renewal of the agreement with the ministère des Finances for a further three-year period (2003-2006).
2004 will be devoted to pursuing the integration drive under the New Impulse program and leveraging the global economic recovery to build profitable sales.
Coface's businesses generally perform well in the aftermath of an economic crisis, because companies looking to increase their sales still remember the payment problems and credit risks that were a feature of the crisis years.
The figures for Coface presented in this section correspond to Coface's contribution to Natexis Banques Populaires' consolidated accounts.
Their respective conclusions will be compared, leading to the creation in 2004 of a community of employees united by common values. By putting these values into practice, day after day, managers will facilitate employee buy-in and their application to all internal or external actions by our bank.
This commitment is reflected in our business philosophy, our operating rules, our management methods, our human resources management, our high standards of integrity, our transparent internal and external communications, and the development of ethical products for our clients.
A Group ethic Sustainable development and socially responsible practices come naturally to Natexis Banques
To help ensure that the same practices are followed by all the business lines and subsidiaries, in 2003 we drafted and distributed a manual setting out the organization principles applicable throughout our bank, in the areas of risk management, security, ethics, control, information systems and communications. Updated annually, this set of rules serves as a reference for all of our employees, clarifying certain fundamental principles and contributing to more fluid operations.
The Human Resources Department established a work group to identify the values that most accurately reflect our bank's personality.
Our recruitment policy helped us to rebalance the age pyramid, while at the same time raising the overall level of qualifications. During 2003, 264 new hires were taken on by the parent company, raising to one-third the proportion of the company's employees who have joined the bank in the last five years (see table 1).
We also put the finishing touches to the system to promote and support internal mobility, as well as raising competence levels through a determined training policy focusing in particular on management skills, personal development and change management. In 2003, a total of 100,000 hours training were given, representing the equivalent of three days training on average per employee.
Internal Control Department to define control procedures covering compliance issues to be implemented on a regular basis.
In 2003, we further improved our anti-money laundering procedures.The team responsible for these procedures, which now reports directly to the
General Secretariat, was bolstered and its remit was extended to cover the broader issue of preventing financial crime.
The team also drew up a plan to ensure that all of our employees are given training to raise their awareness of these risks before the end of 2004.
In addition, computer applications were developed for Tracfin reporting and the management of international terrorist lists.
Natexis Banques Populaires has always maintained a solid commitment to promoting social development.We maintain a constructive dialogue with employee representatives, based on regular free and frank exchanges of views based on mutual consideration.
Since 2000, the consultation process has led to the signature of some fifty agreements on topics ranging from the alignment of employment terms and conditions following the merger
The above table shows employee numbers for the companies included in the Natexis Banques Populaires consolidated financial statements. Coface, Bleichroeder Inc. and CrédiFrance Factor are included as from 2002.
In 2003, the total number of employees increased by 103 persons.On a comparable structure basis, the number decreased slightly.The average number of employees, which also includes temporary staff and the employees of service companies, also remained more or less flat compared with 2002. Data taken from the 2003 corporate report to be published in the second quater of 2004.
Table 3 – Matching payments to the employee savings plan: Table 2 – Profit-sharing and incentive bonuses paid out since Natexis Banques Populaires was formed
Allocations to the statutory profit-sharing reserve take into account gross operating income, while total incentive bonuses are based solely on net income. Sixty percent of the amount to be distributed is allocated ratably based on each individual's salary and the other 40% is allocated by reference to the individual's period of presence within the company during the reference year.
Since 2002, external communications are organized around the publication of annual and interim reports and press releases, meetings with financial journalists and analysts, the Shareholder
In 2003, we continued to actively manage the environmental impact of our operations, through a broad array of programs including waste sorting, recycling of computer workstations (around 4,000 per year), programs to reduce paper consumption, and energy consumption monitoring.
objectives, in terms mainly of energy performance, climate control and sound insulation.
Natexis Asset Management and the implementation of the 35-hour week legislation to incentive bonus schemes, pensions and benefits.
In 2003, our employees received regular information through our internal newsletter, Trait d’union, our in-house magazine,
Durable Monétaire.The product is designed for all investor categories, including institutions and associations looking for sustainable development investments offering the steady performance of a money market investment.
Similarly, our assistance for the disabled is designed to help them enter professional life, while our action to protect marine and aquatic life will aim to ensure that endangered species survive to be appreciated by future generations.
In October 2003, the Foundation appointed the jury responsible for selecting projects to be funded.
Foundation carries the Group's colours and contributes to the sustainable development drive.Alongside Natexis Banques
Populaires, which established the original foundation some ten years ago, and Banque Fédérale des Banques Populaires, all of the Banque Populaire regional banks contribute funding and also propose projects.
For example, we support young musicians during the three critical years between the completion
In 2003, it will support 17 new young musicians, including pianists, string quartets, double base players, violinists, alto-violinists, saxophonists, guitarists and composers.
In September 2003, the Group signed a partnership agreement with Association Eric Tabarly, to help finance the maintenance and sailing of his famous boats.
MANAGEMENT REPORT Group structure 71 Overview of activities and results 71 Income statement review 72 Risk management 84 Financial structure and regulatory ratios 91 Corporate and environmental information 96 Recent developments and outlook for the future 98
REPORTS ON THE INTERNAL CONTROL PROCEDURES Chairman’s report on the terms and conditions governing the preparation and organization of the Board’s work and the internal control procedures initiated by the Company 203 Auditors’ report on the report prepared by the Chairman with respect to the internal control procedures 212
LEGAL INFORMATION General Meetings 214 Board of Directors’ report on the proposed resolutions 214 Resolutions presented to the General Meeting 215
ADDITIONAL INFORMATION General information concerning Natexis Banques Populaires 222 General information on the common stock 223 Share ownership and voting rights 227 Natexis Banques Populaires and the stock market 228 Dividends 230 Other information concerning Natexis Banques Populaires 230 Persons responsible for the reference document and the audit of the financial statements 232
an ag em en t r ep or t 1 – Group structure The principal changes in group structure in relation to fiscal year 2002 relate to the entry of new subsidiaries in the scope of consolidation: Crédifrance Factor, merged with Natexis Factorem;Natexis Bleichroeder Inc., acquired on December 6, 2002 and consolidated, solely, at the balance sheet level last year; various subsidiary investment capital companies of
2003 Management report 2 – Overview of activities and results in EUR millions 2003 2002 Change
Net Banking Income 2,454.7 2,082.8 + 18% General operating expenses, depreciation and amortization (1,738.4) (1,714.7) + 1%
Net reversal from Fund for General Banking Risks (FGBR) 0 20.9 nm
US dollar, with a parity of EUR0.79 to EUR0.95 at the end of 2002. This will undoubtedly continue to represent a significant element of uncertainty in 2004.
Considering this context, Natexis Banques Populaires had a very positive year, with solid performance growth for all the core businesses: ■ Net Banking Income (NBI) stood at EUR2,455 million, up 18% over last year and up 22% based on a constant dollar exchange rate; the core businesses reported Net Banking Income of EUR2,362 million, up 11% on last year; ■ the increase in operating expenses was limited to EUR1,738 million or 1.4%; ■ consequently, Gross operating income amounted to EUR716 million, a 95% increase compared to 2002; ■ Provisions for loan losses and country risks increased slightly (+ 8%) to EUR211 million, due to provisions raised for European Corporate banking activities.They represented 0.4% of the weighted outstandings of Natexis Banques Populaires;
Net Banking Income by core business Net Banking Income increased for all core businesses: NET BANKING INCOME BY CORE BUSINESS
Average outstandings increased 1% (6.6% excluding the US dollar exchange rate impact), to reach EUR63.7 billion.
year-on-year. It breaks down as follows: ■ EUR6.1 billion – Corporate financing,
Corporate and International Banking Cooke outstandings, contrary to average outstandings, fell 13% to EUR32.3 billion at the end of the period.This fall, which would have been 8%
Corporate and International Banking growth surged, with an 11% increase in NBI. Adjusted for the USD impact of EUR43 million, growth would have risen by 17%.This overall performance covers contrasting trends according to the activities: ■ Corporate activities (France, Europe and multinational) reported NBI growth of EUR364 million, which is stable, compared to 2002. The NBI generated by financing operations rose significantly (+ 4%), as a result of an increase in average margin rates and substantially higher commissions related to new transactions. Conversely, income from cash inflows and services declined by 8% due to a decrease in cash balances and interest-free deposits, in a context of low interest rates. ■ Structured finance activities, on the other hand, were up sharply in relation to 2002 (NBI of EUR229 million or + 36%). The main contributing business lines were LBO and acquisition financing (NBI of EUR87.3 million compared to EUR34.7 million in 2002), Natexis Banques Populaires is now number one in France for LBO debt financing in terms of the number of mandates and third in overall amount, all banks considered; syndications
■ In the lease financing sector, Natexis Lease is one of the top five players in the French market. In an unfavorable economic climate, new production totaled EUR1.43 billion in 2003, down 5% year-on-year. Of this amount, EUR921 million is attributable to equipment lease financing (down 2% on 2002), EUR462 million to real estate lease financing (down 13%) and EUR47 million to Sofergie financing.
The 6% growth in NBI for 2003 (EUR94 million) was primarily the net result of: – 5% growth in “current” NBI (EUR86.5 million), essentially in the real estate lease financing sector,
In this context, factoring activity NBI fell 4% in 2003 to EUR98 million: – Factoring commissions fell 2% to EUR60 million, despite steady factored revenues year-on-year. The French market has witnessed a gradual erosion in commission rates charged for a number of years now; – Financing commissions fell 6% to EUR44 million, due to a decrease in income from demand deposits.
Natexis Factorem will continue its development by expanding its product range towards credit insurance (Accrédia offering) and pursuing its commercial efforts with the Banques Populaires, Crédit Coopératif and Crédit Maritime networks, as well as with other prescribers. International development will be realized in Germany with the launch of the “VR Factorem” subsidiary in partnership with the DZ Bank group.
The Investment Banking business line, encompassing Capital Markets and Private Equity activities, was heavily hit by the weakness and volatility of the equity markets in 2002 and, more generally, the fall in company values. In a more favorable context, the 2003 performance was satisfactory, even though results were mixed for the business lines. NBI stood at EUR305 million, up 9% in relation to 2002, and accounted for 13% of total Natexis Banques Populaires core business NBI.
■ The brokerage and market origination activity of Natexis Banques Populaires is based on two pivotal entities, Natexis Bleichroeder S.A., which carries out business in the Eurozone, and Natexis Bleichroeder Inc., which covers North America and Asia, with the search for complementarity and synergies whenever possible. Natexis Bleichroeder S.A., with NBI of EUR31 million compared to EUR41 million at the end of 2002, felt the brunt of difficult market conditions, due to the average CAC 40 index dropping to 3,116 points at the end of December, down 17.9% year-on-year. This resulted in a 16.3% decline in average capital trade volumes over the same period. Conversely, Natexis Bleichroeder S.A. consolidated its position on the convertible bond primary market, obtaining mandates from Rallye,Affine and Oeneo. At the same time, the company reinforced its position as a major player in the French public offering market, with a market share of nearly 9% in terms of the number of transactions, compared to 8% the previous year.
The performances of Natexis Bleichroeder Inc. are also down (NBI of EUR47 million compared to EUR84 million one year earlier). Activity over the first half was violently disrupted by international events affecting the US market, but the success of primary market operations, due in particular to a reputation for shrewdness in the media sector, sparked an improvement for the second half results. Synergies, which are limited to commercial operations for the time being, should have a significant impact on revenues in the future.
■ Private Equity activities remained steady with new investments of EUR258 million, compared to EUR235 million in 2002. Divestments generated revenues of EUR229 million, compared to EUR223 million in 2002. Investments for the year rose by 10% in accordance with the mid-term plan objectives. There was greater uniformity in the breakdown by activity as opposed to last year, in which Growth and International were predominant. The dynamism of LBO investments in 2003 demonstrates the effectiveness of the growth strategy for the LBO/Mid-Caps market: Activity-growth EUR81 million (32%)
Capital under management increased 11% to EUR1.72 billion, including 55% held in third-party portfolios.They break down as follows: Activity-growth EUR639 million (37%)
– At EUR65 million, NBI for the own funds activity represents 79% of the total for the division. The increase recorded in 2003 (+ 66%) is primarily attributable to the reduction in risk charges (down by 56%), rather than net capital gains realized (31% lower than 2002 levels). Unrealized capital gains rose 37%, amounting to EUR203 million. The breakdown by activity demonstrates the growth of LBO and that of International activities particularly for Asia and Germany.
– NBI generated by asset management activities totaled EUR10.5 million. This is attributable to the commissions received for the management of 33 funds entrusted by third parties, bringing total assets under management to EUR952 million.
The targeted market is domestic and international mediumsized transactions conducted for major groups, independent companies or investment funds. In 2003, this business line was confronted with a lackluster market where the first signs of recovery were only felt late in the year. NBI was EUR6.4 million, compared to EUR7.8 million last year.
■ The Banking services segment reported NBI of EUR75 million, up 11% on 2002.The 33% growth in revenues from automated payment services more than offset the 3% fall in NBI generated by check processing and exchange system activities. Services to Banque Populaire regional banks declined overall by 3%, while NBI from activities with non Banque Populaire Group customers rose sharply to EUR24 million (+ 36%).
Activity indicators clearly reflect payment method trends in 2003, both with respect to the customer base and the organization of the financial market: the card pool increased 6%, the number of card transactions 7%, ITS transactions 8% (mainly due to the launch of check truncation), and the number of significant transactions 4%. Conversely, the number of checks processed fell 58% for national checks and 15% for international checks.
■ The Financial services segment is closely linked to the stock market.As such, the 16.3% decrease in average capital traded contributed to the lower NBI for 2003. The latter stood at EUR153 million, compared to EUR172 million at the end of 2002.
This downturn is partly attributable to Xeod Services’ order-flow activities, which reported a drop in NBI from EUR15 million to EUR8 million, due to a significant decline in the number of orders processed (38% decrease in on-line broker orders, which represent close to 44% of Xeod
NBI of financial production activities decreased to EUR119 million, compared to EUR129 million last year, despite the solid performance of custody (assets under custody up 13%), accounting services (net assets up 17%) and depository (outstandings up 10%) activities with, however, a decline in accounting services for mutual funds (5% decrease in mutual funds). Certain non-profitable activities were terminated in 2003 (maintenance of nonresident institutions, etc.).
The contribution of subsidiary activities also declined, with NBI of EUR25 million (down 10%). LineBourse, an online broker with over 31,000 open accounts, reported NBI of EUR4 million, compared to EUR3 million last year. However, Samic, the IT services company which specializes in software for private asset management banks, reported NBI of EUR6.7 million, a 21% fall on 2002.
Fund management NBI was up 15% on 2002 to stand at EUR83 million.
Accordingly, NBI for the Natexis Interépargne division stood at EUR72 million, up 24% over last year. Excluding the Natexis Intertitres group structure impact, the increase would have been reduced to 9%.
■ Insurance Natexis Assurances outstandings under management rose 9% (+ 7.9% in France, + 70% abroad), to reach EUR19.4 billion, due to net collections on individual life insurance policies (+ 6%) and substantial development of activity in the personal risk insurance sector (+ 21%). The resounding success of Multirisque des Accidents de la Vie (multi-risk accident life insurance) bears mentioning. The target of 30,000 new contracts was reached at the end of 2003. Launched on a gradual basis in September 2003 via the Banques Populaires network, this product was met favorably by customers who are increasingly conscious of the need for protection against potential accidents in daily life.
Natexis Assurances NBI totaled EUR152 million, compared to EUR129 million in 2002 (+ 17%). Of this income, 64% comprises remuneration on life-insurance assets under management, which increased 24% over the period.
■ Private asset management Assets under management increased by EUR120 million (EUR2.15 billion compared to EUR2.03 billion in 2002), due to a revaluation of the equity portfolios (+ 13%).
■ Estate planning While outstandings under management by Natexis Private Banking Luxembourg, which specializes in estate planning, increased significantly to EUR1.4 billion (up 19%), NBI growth was more restrained (up 8%) at EUR20.9 million, compared to EUR19.4 million at the end of 2002.
The solid performance for both Insurance and Services is particularly due to substantial activity growth in Germany (+ 13%).
■ Insurance Insurance revenues totaled EUR802 million (+ 13%), three quarters of which was generated in France, Germany and Italy (EUR258 million, EUR224 million and EUR102 million, respectively).
Losses for these activities stood at EUR313 million, compared to EUR496 million the previous year, a decrease of 37%.These solid results are due: – for EUR90 million, to the impact resulting from the harmonization of provision calculation methods for the losses of certain subsidiaries, particularly AK Coface in Germany; the purpose of this harmonization is to standardize, for all group entities, the ultimate loss valuation, which is to say the calculation of the final amount of losses to be settled after the extinction of risk and any recovery measures. After taking into account the equalization provision, the impact on results arising from the convergence of provisioning calculation methods is immaterial; – for EUR93 million, to the measures undertaken over the last 18 months (termination of contracts, more selective affiliations, quantified loss ratio objective, etc.).
Given these solid performances, the impact of the two technical amortization mechanisms represented by reinsurance and the equalization provision is highly significant for the year: respectively, - EUR122 million (compared to + EUR4 million in 2002) and - EUR48 million (+ EUR16 million the previous year), for a total of - EUR170 million.
■ Services Services activity showed a greater contrast, generating NBI of EUR270.4 million, compared to EUR251.3 million at the end of 2002.
■ Institutional activities, encompassing a range of activities performed on behalf of the French State under a mandate initially carried out by Crédit National and BFCE, generated NBI of EUR12 million, compared to EUR16.8 million last year.
■ Finally, other items (NBI of EUR30 million) include corporate treasury and banking income and expenses not attributable to specific activities. The contribution of this heading increased significantly in 2003, primarily due to capital gains and the reversal of provisions recorded against the own fund investment portfolio (positive NBI of EUR34 million compared to negative NBI of EUR60 million as of December 31, 2002).
There were an additional 103 Natexis Banques Populaires full-time equivalent (FTE) employees (fixed-term and permanent contracts), bringing the number to 11,935 as of December 31, 2003 (up 1%), compared to 11,832 employees the previous year. Excluding changes in group structure (198 FTE), there would have been 11,737 employees.
The virtual stability of operating expenses is part of the significant growth in NBI, which automatically triggered a noticeable improvement in the cost/income ratio, standing at 70.8%, for a gain of 11.5 points over the year. Excluding Coface, the cost/income ratio stood at 67.5%, compared to 79.6% the previous year.
The charge to Provisions for loan losses and country risks totaled EUR211 million, compared to EUR196 million in 2002 (+8%). It encompasses net charges of EUR148 million to provisions for specific credit risks and charges of EUR63 million to provisions for industry and country risks.
■ provisions for industry and country risks are recorded in respect of performing loans, in activity sectors or geographical areas requiring particular vigilance. Total provisions amounted to EUR392 million as of December 31, 2003.
■ furthermore, the FGBR was maintained at EUR242 million, its December 31, 2002 level. Added to provisions for industry and country risks, it represents a loan loss and country risk provision rate of 1.31% of Cooke outstandings.
Purely industry provisions represent 26% of total provisions, or EUR100 million. Net reversals to these provisions totaled EUR7 million in 2003, due to the decrease in outstandings. Other provisions for industry and country risks were subject to a EUR17 million reversal due to the USD foreign exchange impact.
The net charge for the period decreased from EUR221 million to EUR 148 million (down 33%).There was a sharp decrease in new non-performing loans. In 2003, specific credit risk was concentrated on 10 dossiers representing half of the net charge, i.e. EUR73 million. The 43 dossiers exceeding EUR1 million represented a EUR138 million charge to loan loss provisions out of a total of EUR148 million.
Divisional analysis of the net charge to provisions for specific credit risk: in EUR millions 2003 2002
Corp, as a result of last year's economic slump. In 2003, the portfolio’s value stabilized, and a EUR4 million reversal was recorded.
Xeod.This was fully provided for during the year and had no impact on 2003.
■ Central and Latin America (EUR18 million, 12% of the total), also down, due to the significant charges in 2002 for Argentina and Cuba (EUR35 million).
Corporate and International Banking activities: these encompass most of the specific credit risk, which declined significantly in 2003 (EUR117 million compared to EUR180 million). At the same time, a EUR90 million prudential provision was raised for the major European financial market dossiers.
A net reversal of EUR30 million was recorded for the country and industry risk provisions, due to the decrease in euro outstandings.
Capital Markets: other than the specific provisions already mentioned, a net reversal of EUR2 million was recorded for the country and industry risk provisions, due to the decrease in country and industry outstandings.
■ Net gains on disposals of fixed assets total EUR14 million, compared to EUR53 million as of December 31, 2002. They primarily comprise: – capital gains on disposals of investments in affiliates of EUR22 million,
– capital losses on debt securities held for investment of EUR7 million.
■ Income from companies accounted for by the equity method increased from EUR5 million to EUR10 million in 2003, primarily due to the increase of the BP general insurance (formerly Fructimaaf) contribution (up EUR3 million) and the profits of ADIR, the Lebanese company consolidated in 2003, amounting to EUR1 million.
■ The combination of these factors produced Income before exceptional items and tax of EUR528 million, compared to EUR230 million, a 130% increase.
■ Exceptional income totaled EUR13 million, compared to an exceptional expense of EUR16 million in 2002. In 2003, they included EUR30 million in VAT adjustment charges for fund management fees with respect to fiscal years 1999 to 2001, and EUR24 million in income from VAT and payroll tax cuts with respect to Treasury operations as part of consolidation agreements for the former BFCE. They also included a EUR30 million financial subsidy granted by Banque Fédérale des Banques Populaires to bolster the Tier One capital of its subsidiary as part of the action plan. Other exceptional expenses of EUR10 million correspond to the prior results of subsidiaries that entered the scope of consolidation in 2003.
Analysis of Income before exceptional items and tax by core business There was a significant turnaround in Income before exceptional items and tax by core business in 2003.
Total contribution to Income before exceptional items and tax 566 290 + 95%
Banking, Financial and Technology services which were lossmaking last year (- EUR25 million) recorded positive income before exceptional items and tax of EUR22 million in 2003. The noteworthy improvement in the performance of these activities is the result of a major reduction in operating expenses (down EUR28 million or 11%) related to the implementation of the CAP 2005 plan and the absence of major losses in 2003 - provisions for loan losses and country risks of EUR2.2 million compared to EUR27.5 million in 2002.
Asset Management and Insurance generated Income before exceptional items and tax of EUR128 million (compared to EUR85 million in 2002) in a slightly more favorable situation for the business lines. NBI increased by 15% and operating expenses by 6%.The latter include a group structure impact (Natexis Intertitres) for 4%.
There was substantial improvement in 2003, with Income before exceptional items and tax up 197% to EUR81 million. The performance stems from overall risk control in an environment that continued to impede the generation of revenues. The Coface objectives for 2003 were a return to positive underwriting income, improvement of the Services’ contribution, and an effective investment management to reduce market risk exposure.
General system and principles The risk control system of Natexis Banques Populaires was implemented in accordance with French Banking regulations and the corporate governance principles of the Banque Populaire Group of which it is a member.There are three control levels that are coordinated by Executive Management: internal checks, level two controls, and the level three control performed by Internal Audit. The main level two control units, which act independently of the operating divisions, are Risk Management, the Ethics Department, the Information System Security Department and the Internal Control division, created in October 2003 and attached to the General Secretariat. Chaired by Executive Management, the Control Function Coordinating Committee, created in 2003, coordinates the various players.
Risk Management sets the delegation rules for the operating divisions. Natexis Banques Populaires has retained a highly centralized delegation system. Accordingly, the Risk Management division issues an opinion on all Natexis Banques Populaires counterparty risks when new risks are accepted or existing facilities renewed. In 2003, the analysts examined nearly 10,000 files for Corporate and International Banking alone.
Implementation of the new prudential solvency ratio In order to ensure the uniformity of methods and tools within the Banque Populaire Group, the project to modify the solvency ratio (Basle II) is being coordinated by Banque Fédérale des Banques Populaires.The Group wishes to apply the internal rating method, and Natexis Banques Populaires is working in project mode to contribute to the preparation of new rating tools and meet the priorities and deadlines set by the Banque Populaire Group.
At Natexis Banques Populaires, this involves several subprojects (ratings, defaults, management of guarantees received, information systems, ratio calculation), with the active participation of Financial Management, Risk Management and the IT division. IT tools have been set up to improve the statistical monitoring of defaults and loss rates and enable back-testing of the rating models. The defaults and losses database was thus rolled out at the end of 2003.
■ Specialized Financing: EUR7 billion – Lease financing: EUR5 billion – Factoring: EUR2 billion
Since 2003, the rating system has undergone a major overhaul in conjunction with the work conducted within the Banque Populaire Group.There are now 16 rating scales for sound counterparties (1 being the highest rating). Because of the new rating grid and its 2003 implementation, comparisons with the 2002 results become a tricky matter. Nevertheless, risk quality has remained relatively stable with, moreover, an improvement in corporate risks with respect to external ratings.
For information purposes, the breakdown of commitments as of December 31, 2003 was as follows: Equivalent Investment Grade 77.5%
Breakdown of the charge to provisions for loan losses and country risks by geographical area as of December 31,2003 in EUR millions Specific credit risks Country risks Industry risks Total
Africa and the Middle East 113 616 730 56 67 5 129
The capital market risk control function operates at several levels: ■ level one control is performed by the Middle Offices of each entity. These are responsible for designing the capital market risk appraisal system and the capital market risk authorization and limits system, as well as for the daily monitoring of capital market risks and the control of market data.
■ level three control is performed by the Risk Management division, which is responsible, on behalf of the entire Natexis Banques Populaires group, for defining, in conjunction with the entities concerned, methods of quantifying capital market risks applicable to the group, ensuring the reliability of the models used, formulating crisis scenarii and assisting Executive Management with the allocation of capital market limits by entity.
The bank’s Board of Directors validates the overall risk limits for all entities.
In addition, the Internal Audit departments of Natexis Banques Populaires and Banque Fédérale des Banques Populaires intervene occasionally as part of specific audit assignments.
The main standard indicators used are: ■ sensitivity to a change in interest rates of +/- 1% (global indicator and indicators by maturity),
■ sensitivity to a change of +/- 1% in equity, foreign exchange and interest rate market implicit volatility (global indicators and indicators by maturity and strike price),
Banques Populaires group uses an historical VaR determined with the Riskmetrics Riskmanager tool. It seeks to quantify, based on prudent assumptions, the potential loss risk to which capital market activities are exposed.The measure is defined based on: ■ historical data covering one year; ■ a one-day potential loss horizon; ■ a confidence interval of 99%.
The Natexis Banques Populaires capital market risk control system covers the capital markets activity of Natexis Banques Populaires and its subsidiaries. Furthering the work initiated as of 2002, significant work was carried out in 2003 in regard to two areas of improvement: ■ strengthening of the current system: Throughout the year, Natexis Banques Populaires has sought to implement new limits in order to fine-tune the current system.
■ the statistical calibration of risk measurement methods: This approach is part of the search for enhanced risk quantification using methods that are statistically calibrated. New measurement methodologies were thus introduced in 2003 for foreign exchange risk and issuer spread risk.
The maximum sensitivity to a change in the issuer spread for a secondary bond market trading portfolio is EUR8 million, with a one-day potential loss horizon and a confidence interval of 99%.
Volatility risk limits for interest rate, foreign exchange and equity optional transactions are: ■ EUR1.5 million, for a 1% change in interest rate volatility,
The ALM Committee, chaired by the Chief Executive Officer and comprising members from the Capital Markets, Financial
This limit also applies to a point-for-point deviation of the interest rate curve. Sub-limits for short-term and long-term treasury were set at EUR20 million and EUR30 million, respectively.
Global 100 of which short-term treasury 20 of which long-term treasury 30 2 – Liquidity risk
Minimum liquidity gap coverage levels are as follows: Ratio 3 – Foreign exchange risk
There are two elements to foreign exchange risk: ■ the foreign exchange operational risk generated by trading activity.The potential loss limit is EUR3 million.This risk is monitored by the Capital Markets Risk Management Committee and the ALM Committee; ■ foreign exchange structural risk.This risk is monitored by the ALM Committee.
Operating risk management was strengthened in 2003 with the creation of an Operating Risk Management Department within the Natexis Banques Populaires Risk Management division. This procedure follows the Basle Committee recommendations and is part of the new regulatory requirements concerning the treatment of operating risk in the solvency ratio, to be implemented in 2006.
The system, which was defined in 2003 and will be rolled out beginning in 2004, is based on an analysis of the main causes of problems as observed in the categories stipulated by the Basle Committees (procedures, systems, persons and external events) in order to prepare action plans to reduce future risks, and on an evaluation of financial and non-financial impacts to measure the consequences of operating incidents.
The capital needed to hedge operating risk was assessed according to the standard method.
Insurable risks The Risk Management division’s Insurance Department is responsible for the insurance plans of Natexis Banques Populaires and its subsidiaries: definition of insurable risks, search for coverage and market placement.
In a market that remains difficult, the cost of the 2003 Natexis Banques Populaires insurance plans again increased (overall budget of slightly over EUR4 million) with marginal restrictions on guarantees (limitations or exclusions).
The coverage levels of Natexis Banques Populaires remain appropriate to its risks.
■ Losses from banking or operating activities are subject to specific coverage that complements operating continuity plans set up at Natexis Banques Populaires and its subsidiaries. It covers the consequences of an accidental stoppage of operations (fire, etc.) until back-up mechanisms are implemented.The amounts guaranteed vary according to the importance of the operating sites (EUR75 million maximum).
■ The various civil liabilities are insured for differing amounts based on the type of risks (operating, vehicle, professional, company officers, specific business lines, etc.).
During 2003, no “significant claim” was filed with the insurers of Natexis Banques Populaires.
Legal risks Natexis Banques Populaires is currently involved in a limited number of civil liability suits. Following a review and based on its knowledge of the current proceedings and related facts, the bank considers that these issues are not likely to significantly impact either its results or financial structure.
The potential consequences have been reasonably provided for and are included in the financial statements for the period ended December 31, 2003.The same is true for tax issues.
Customer loans, including lease financing outstandings, total EUR32.5 billion, down 4% on last year due to the marked drop in the US dollar/euro exchange rate in 2003 and tight control over outstandings.
Reverse repurchase agreements, which primarily concern government securities, continue to increase at EUR35.1 billion following the development of this activity created in 2001. On the liabilities side these assets are financed by repurchase agreements.
Security transaction outstandings fell by 15% to stand at EUR16.3 billion.
On the asset side, insurance company investment portfolios, essentially life insurance, increased slightly to EUR20.9 billion. The same is true for Insurance company technical reserves on the liabilities side, representing commitments vis-à-vis insurees, standing at EUR20.6 billion.
Interbank liabilities, demand and time deposits and fixed and overnight borrowings with other credit institutions decreased sharply to EUR17.7 billion, while customer deposits and debt securities increased substantially to EUR40.6 billion, compared to EUR35.3 billion one year previously.
In 2003, the common stock was increased by 218,559 shares in connection with the contribution of Crédifrance Factor shares, the contribution of 336,647 Sopromec shares, and the 47,096 shares issued under existing employee savings mutual funds and on the exercise of share subscription options.
Overall, these operations increased the common stock to EUR768,722,224, comprised of 48,045,139 shares with a par value of EUR16 each as of December 31, 2003.
As of December 31, 2003, Natexis Banques Populaires consolidated regulatory capital for international solvency ratio purposes, extended to include capital market risks, amounted to EUR6.04 billion, compared to EUR5.82 billion as of December 31, 2002.
Tier Two and other capital remained stable following the issue of EUR400 million redeemable subordinated securities in 2003, serving to cover previous share issue redemptions, and the deduction of new shares representing the “first losses” of the Igloo II securitization.
Weighted assets, at EUR53.1 billion, declined sharply by EUR4.1 billion.The decrease is the result of the lower dollar and the measures undertaken in 2003 to free up regulatory capital for the Corporate and International Banking and Capital Markets portfolios. A new portfolio synthetic securitization transaction (i.e., without transfer of legal ownership of loans and without a change in the customer relationship), known as Igloo II, was carried out for EUR2 billion. It comprised medium and long-term bank loans to essentially European corporate and commercial customers. Regulated market risk, moreover, was held in check during the year.
Since 1996, French financial institutions have been required to measure and comply at all times with global regulatory capital levels covering both counterparty risks and capital market risks (interest rate, or foreign exchange, for example).
The liquidity ratio confirms that cash balances available within less than one month at least cover balances falling due within the same period. This ratio is equal to the relationship between assets and liabilities maturing within less than one month.
As of December 31, 2003, this ratio stands at 78% for
To meet the needs of increasingly diverse and numerous investors, the amount of the USCP issue program has been raised from USD2 billion to USD5 billion and that of the
Total issues during the year 133,724 6,146 4,576 2,066 905 2,632
(ii) Debt contracted outside of issue programs: The bonds issued in France (under the domestic format) contain a negative pledge clause similar to that of the EMTN program.
Information on the parent company Natexis Banques Populaires In 2003, NBI increased by 12%, to EUR132 million, despite a significant decrease of EUR75 million (- 31%) in income from variable income securities, representing, for the most part, holding activity revenue.
Control over operating expenses continued in 2003 (1% decrease in expenses).
Gross operating income, at EUR390 million, increased by 59% compared to 2002 (EUR246 million).The cost/income ratio stood at 66.9%. The charge to Provisions for loan losses (EUR231 million) increased substantially over 2002
Excluding this element, the net charge to provisions for specific credit risk is down 14% (EUR144 million, compared to EUR168 million), thus demonstrating the improvement in 2003 for all risk sectors, including the US.
Charges to Industry and country risk provisions have also risen substantially: net charge of EUR65 million in 2003, compared to a net reversal of EUR44 million in 2002.
Total assets as of December 31, 2003 stood at EUR98,414 million, compared to EUR99,723 million one year previously.
EUR9,571,170.75 to the legal reserve, giving distributable earnings of EUR181,852,244.26. The Annual General
Launched in September 2002, immediately after publication of the European regulation, the project is now in its implementation phase, following a pre-assessment phase and a detailed impact analysis phase.
In addition, to enhance its responsiveness to changes in the standards, Financial Management, the project manager, has opted to hire the services of a firm for the comprehension and interpretation of the standards.
In terms of the project’s organization and management, Natexis Banques Populaires has also called upon the expertise of a consulting firm.
The main sources of divergence identified to date between the current and IFRS frameworks, in terms of the Natexis Banques Populaires group structure, are the following: ■ customer loans: abandonment of face value recognition for recognition at amortized cost (actuarial spreading over the life of the loan of the costs and income directly related to the loan’s inception); ■ securities portfolio: breakdown of the securities portfolio according to the four IAS categories: “Financial asset at fair value through profit or loss,” “Loans and receivables,” “Available-for-sale financial assets,” and “Held-to-maturity investments;”
■ lease financing transactions (as lessor): conservation of a financial accounting presentation with, as is the case for customer loans, an actuarial spreading of the costs directly attributable to the contract’s inception; ■ futures and options transactions performed on Natexis Banques Populaires’ own account: these derivative instruments are recorded systematically on the balance sheet at their fair value in lieu of an off-balance sheet recognition at the notional amount. Micro-hedging instruments are valued at fair value in the amount of the micro-hedged component; ■ property and equipment: accounting by component approach. The depreciation schedule for each asset will be determined by taking into account the residual value, subject to periodic review; ■ intangible assets: development costs for software generated internally must be capitalized under IFRS; ■ goodwill: goodwill will be tested for impairment to determine whether or not to recognize a write-down in net income. It will no longer be systematically amortized according to a pre-determined schedule; ■ negative goodwill: at the time of the IFRS transition, goodwill will be reclassified in shareholders’ equity. Under IFRS, negative goodwill will be fully recognized in income at the time of the acquisition; ■ Fund for General Banking Risks (FGBR), as this type of provision is not admissible under IFRS, the Fund for General Banking Risks will be reclassified in shareholders’ equity;
■ scope of consolidation: consolidation of dedicated mutual funds held by the insurance subsidiaries (which previously was not mandatory); consolidation of majority interests held by the Natexis Banques Populaires group investment capital companies, if the IASB Board maintains its position despite the intense European lobbying on this issue.
Hirings In 2003, a total of 264 new employees joined the Company, breaking down into 185 permanent employees and 79 fixedterm employees.
Difficulties could be encountered for the recruitment of certain rare expert profiles.
Overtime hours There were a total of 13,817 overtime hours in 2003.
Information regarding employee reduction and job protection plans, rehiring and assistance measures Not applicable.
On an annual basis, the average weekly work time was 35 hours.
The collective weekly work time is 38 hours, with additional make-up days being granted to employees paid on an hourly basis.
Autonomous managers are paid on the basis of 208 days worked per full year of activity.
Employees working part-time, based on a 50, 60, 70, 80 or 90% schedule, constitute 9.3% of the total work force. In addition, 1.4% of the autonomous managers work according to a reduced schedule based on lump-sum timetables of 104,
Absenteeism accounted for a total 212,437 calendar days (reasons: paid holidays, family leave, maternity leave, postmaternity leave, sick leave, other leave).
Health and safety conditions A disaster recovery plan was set up in 2003 for each bank activity. It will be pursued in 2004 with an operational maintenance phase.
In concert with the CHSCT members, a single document covering occupational risk was prepared for all the operating buildings.
The document identifies the risks to which the Company could be exposed and the necessary prevention measures.
Importance of sub-contracting and manner in which the Company ensures that its subcontractors and subsidiaries comply with
Manner in which the Company takes into account the territorial impact of its activities in terms of employment and regional development Not applicable.
Relations with student placement associations and educational establishments Natexis Banques Populaires maintains and develops relations with certain establishments of higher education, chosen on the basis of the Company’s business lines. More than 350 trainees from various schools were welcomed to numerous areas of bank activity in 2003.
Drinking water (central operating buildings in the Paris region): – 2001: 49,036 m3
Use of raw materials White paper: consumption has dropped sharply in two years. The reduction is due to the optimization of photocopying and desktop publishing, and the dematerialization of numerous information media.
Auditory or olfactory annoyance Non-material data given the nature of the activity.
Measures undertaken to ensure the activity’s compliance with the legislative provisions Logistics management is responsible for normative monitoring. It ensures that the operating building
Training and information provided to employees No specific training given the nature of the activity.
Organization set up to handle pollution accidents outside the perimeter of Company establishments No specific organization given the nature of the activity.
Amount of compensation paid subsequent to court environmental rulings Not applicable.
Information on the objectives assigned to subsidiaries in foreign countries This information is unavailable.
During its meeting on March 3, 2004, the Natexis Banques Populaires Board of Directors decided to initiate a simplified takeover followed by a squeeze-out for the remaining shares of Coface. Natexis Banques Populaires already held 98.01% of the common stock and 98.6% of the voting rights.The bid will be subject to the approval of the Autorité des Marchés Financiers (AMF), the French Securities Regulator.
■ a division grouping Private Equity and Private Asset Management to be headed by Jean Duhau de Berenx, who is currently responsible for Private Equity.
Investments in affiliates and associated undertakings and other securities held for investment 7 1,585 1,686 489
Accrued income, prepaid expenses and other assets 10 9,790 11,458 10,133 of which institutional activities - - 1
Interbank and money market liabilities 11 36,100 46,184 35,624 of which institutional activities 515 1,453 1,279
Debt securities 13 27,819 23,621 23,411 of which institutional activities - - 305
Common stock 17 769 759 709 Additional paid-in capital 17 1,791 1,750 1,579
Financing commitments given in favor of: 21,892 21,386 19,774 of which institutional activities - - 13
Guarantees given on behalf of: 12,211 15,237 15,237 of which institutional activities 5 9 28
Commitments on securities 329 463 619 of which securities acquired with repurchase options - - -
Commitments on securities 596 436 282 of which securities sold with repurchase options - - -
Fi na nc ia l i nf or m at io n Co ns ol id at ed fi na nc ia l s ta te m en ts in EUR millions note 2003 2002 2001
Net gains on securities held for sale 26 126 4 293
Income from companies accounted for by the equity method 10 3 13
Diluted earnings per share 5.53 2.28 6.57 Consolidated net income per share, based on the number of shares outstanding at the year-end
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles and the accounting rules and methods laid down in French accounting regulations and, in particular, CRC Regulation No. 99-07 regarding consolidation rules and CRC Regulation No. 2000-04 regarding summarized consolidated documents.
1.1. – Scope of consolidation The Natexis Banques Populaires consolidated financial statements include the financial statements of Natexis Banques Populaires and its main subsidiaries.
Only those subsidiaries providing a material contribution are consolidated. The materiality of a subsidiary is not determined with respect to numerical thresholds but based on a qualitative appraisal of the relevance of its contribution to the group financial statements. As such, IT logistic subsidiaries are included in the scope of consolidation due to their material impact on the split of consolidated general expenses between payroll costs and other operating expenses.
Populaires Preferred Capital III, a Natexis Banques Populaires subsidiary set up to manage the issue of the fourth tranche of preferred shares; ■ entry into the scope of consolidation of E-market, a Slib subsidiary, which specializes in IT services; ■ entry into the scope of consolidation of Natexis Intertitres, a Natexis Interépargne subsidiary, which specializes in meal voucher management; ■ entry into the scope of consolidation of Sopromec Participations, an Natexis Private Equity investment capital subsidiary; ■ merger of the funds Natexis Actions Avenir and Natexis Actions Nouveau Marché into a new mutual fund, Natexis Actions Capital Structurant; ■ merger of Sud-Est Croissance and IDF Nord Croissance with +X Développement, the corporate name of which is now BP Développement; ■ acquisition of 95.5% of the shares of Banque du DômeCrédifrance Factor, which specializes in factoring transactions, and its merger with Natexis Factorem; ■ Coface: this company was accounted for by the equity method up to June 30, 2002; since July 1, 2002, the Coface sub-group has been fully consolidated following the public exchange offer in July 2002.
Special-purpose entities: special-purpose entities encompass three types of transactions: A – SECURITIZATION
Liquidity lines for commercial paper issued by Elixir Funding were opened, in addition to a letter of credit, in the following amounts: in EUR millions 2003
These cover the financing of real-estate assets (car parks, offices, corporate headquarters, etc.) on behalf of customers, using real estate investment companies as holders of finance leases set up by Natexis Banques Populaires finance lease subsidiaries or finance lease companies themselves. As for tax arrangements, Natexis Banques Populaires group acts as trustee at the request of its customers without exercising control as defined by the three criteria set forth in Section 10052 of CRC Regulation No. 99-07.
The financial statements are presented in EUR millions, with comparative figures covering three years.
Article 84 of the 2001 amended Finance Act (No. 20011276 of December 28,2001) extends until December 31,2005, the mandate entrusted to Natexis Banques Populaires and companies under its control to manage, on behalf of the State, certain fund-raising and other institutional activities relating to the public purse. Transactions performed pursuant to this mandate are recorded separately in the accounts and certain of them may be guaranteed by the State. These arrangements constitute Natexis Banques Populaires’s net assets that are allocated to institutional activities relating to the public purse, to which the State and other related creditors are specifically entitled.
1.5 – Goodwill When a company is consolidated for the first time, the difference between the acquisition cost of the investment and the total value of identified assets and liabilities as of the acquisition date is recorded as goodwill and amortized in an appropriate manner taking account of the objectives and characteristics of the acquisition. Goodwill and negative goodwill is amortized on a straightline basis over periods not exceeding ten years. Balances of less than EUR1 million are amortized over one year.
Goodwill is revalued periodically in order to revise, where necessary, the amortization schedule. Accordingly, exceptional amortization of EUR17.8 million was recorded in fiscal year 2003.
On the partial disposal of securities, the residual unamortized goodwill (or negative goodwill) is reversed pro rata to the securities sold.
Income statement items are translated at average annual rates of exchange (as published by the Banque de France) and the resulting differences (closing versus average rate) are taken directly to Translation reserves in shareholders’ equity.
1.7 – Lease financing Lease financing transactions entered into by Natexis Banques Populaires subsidiaries which specialize in this sector are recorded separately and valued in accordance with financial accounting policies. Deferred tax is calculated on the full amount of the financial reserve.
1.8 — Lease financing – lessee Natexis Banques Populaires elected from December 31, 2000 to account for financing transactions where it is the lessee using the preferred method. Operating assets
Fi na nc ia l i nf or m at io n Co ns ol id at ed fi na nc ia l s ta te m en ts purchased under lease finance contracts (lessee) are recorded in property and equipment in the consolidated balance sheet where material and depreciated over the expected useful life of assets of the same category.
1.9 – Adjustments and inter-company transactions Prior to consolidation, the statutory financial statements of companies included in the scope of consolidation are restated to bring them into line with the group accounting policies described below.
Inter-company balances and gains and losses arising on intercompany transactions are eliminated on consolidation.
1.10 – Other provisions of a reserve nature The special revaluation reserve and the provision for investments, which are purely tax-driven, are incorporated within consolidated reserves. Annual movements in these provisions are reversed in the income statement.
1.11 – Full consolidation of insurance companies Since the application as of January 1, 2001 of CRC Regulation No. 2000-05 on the consolidation of insurance companies, the following rules are applied for the consolidation of insurance subsidiary financial statements: ■ income and expenses are classified by nature in accordance with banking accounting policy and not by destination; ■ balance sheet and off-balance sheet items are presented using the same headings already existing under the banking format.
Life and personal risk insurance company capitalization reserves are adjusted against 2001 opening shareholders’ equity, net of an amount representing an adverse movement in the interest rate curve impacting reserve liability securities. This adjustment results in the recognition of deferred profit-sharing in the amount of the calculated risk.
Until December 31, 2000, the capitalization reserve and equalization provision were recorded in full within technical reserves.
1.12 – Notes to the financial statements Unless otherwise stated, the figures shown in the Notes are in EUR millions.
As of December 31, 2003, net loan outstandings underlying the options totaled EUR69 million (gross EUR146 million, provisions of EUR77 million), while the defeasance loan portfolio was sold in full on the secondary market.
Industry and country risk provisions cover certain Natexis Banques Populaires activity sectors presenting potential future but unknown risks.
2.3 – Securitization transactions Securitization transactions in progress transfer credit risk without disposing of the reference portfolios. Such transactions are credit-derivative based synthetic securitization transactions entered into with third-party banks jointly with special-purpose entities. The credit derivatives are equivalent in principle to credit insurance and provide protection against the signature risk (bankruptcy, restructuring of the terms and conditions of a reference asset and inability to pay) of debtors making up the portfolio. The special-purpose entities are not consolidated, as their financial statements merely reflect the protection provided to Natexis Banques Populaires and its hedging on the market, the residual risk being insured by the investors who finance the entities.
■ treasury shares: own shares are purchased for four purposes: the regularization of the stock market price by trading against market trends, as part of stock market interventions, to accompany external growth operations and for allotment to Group employees under share purchase option schemes or via corporate savings schemes. Accordingly, the number of treasury shares held as of December 31, 2003 totaled 1,423,843 with a total value of EUR126 million, recorded in Trading account securities.
The former BFCE assets are recorded in the group consolidated financial statements at their fair value attributed on the acquisition of BFCE by Crédit National.
■ Intangible assets mainly comprise Coface group network assets, valued based on 40% of net sales for insurance companies, and a multi-criteria valuation analysis (discounted net cash flows, PER multiple, net sales multiple) for service companies (information and loan management).
Non-operating property and equipment and intangible assets are depreciated over their estimated useful lives (30 to 40 years).
In accordance with the letter issued by the General Secretariat of the Banking Commission dated October 21, 1997, non-operating real estate assets, whether occupied or leased-out, have been provided on a case-bycase basis to cover all risks of unrealized capital loss.
Purchased software is amortized on a straight-line basis over one year.
2.8 – Perpetual and fixed-term subordinated notes The group has perpetual and fixed-term subordinated notes in circulation, the redemption of which, in the case of liquidation, ranks after the satisfaction of all other creditors.
2.9 – Participating securities Debt service costs in respect of participating securities are considered equivalent to an interest cost and expensed in the income statement on a time-apportioned basis.
2.10 – Interest, premiums, fees and commission Interest, together with premiums, fees and commission considered as equivalent to interest income are recorded in the income statement on a time-apportioned basis. Other commission is recognized on a receipts basis.
These transactions are performed for one of four purposes: – micro-hedging (transaction-specific), – macro-hedging (overall balance sheet management), – speculative position-taking, – specialized management of a trading portfolio. ■ Hedging transactions belonging to the first two categories are treated for income statement purposes as equivalent to lending/borrowing transactions and amounts received and paid are taken to income on a timeapportioned basis.
■ Open spot swap transactions are valued at closing rates at the period-end.
C – INTEREST RATE, CURRENCY AND STOCK OPTIONS AND FORWARD CONTRACTS
The nominal value of the underlying instrument covered by the option or forward contract is recorded off-balance sheet, with hedging and trading transactions separately identified.
Account is taken of all timing differences, irrespective of the recovery or due date.
In accordance with opinion No. 2000-C issued by the Urgent Issues Taskforce, retirement benefit commitments were provided in full, as per the preferred method identified in CRC Regulation No. 99-07, by deduction from fiscal year 2000 opening shareholders’ equity.
Following the harmonization of long-service medal schemes within the different Natexis Banques Populaires entities, an identical treatment was adopted for these commitments during fiscal year 2001.
The amount to be spread over future fiscal years amounts to EUR10.7 million.
2.17 – Changes in accounting method CRC Regulation No. 2000-06 regarding liabilities was applied for the first time on January 1, 2002. This regulation lays down the terms and conditions for recognition of provisions for contingencies and losses not directly relating to banking or associated activities and defines a liability as “an obligation of the company to a third party which is probable or certain to lead to an outflow of resources, without an expected consideration at least equivalent in amount from this third party.” Application of this new regulation did not impact the consolidated financial statements for the year ended December 31, 2002 or the amount of provisions for contingencies and losses recorded in the 2002 opening consolidated balance sheet.
Financiers (AMF), the French Securities Regulator, on the monitoring of intangible asset and goodwill value, Natexis
2 A – Comparative consolidated financial statements excluding the impact of full consolidation of Coface The financial statements were prepared with the full consolidation of Coface for both periods.
Interbank and money market assets 46,987 42,073 of which institutional activities 421 1,379
Deferred income, accrued charges and other liabilities 13,693 13,951 of which institutional activities 98 108
Financing commitments given in favor of: 21,892 21,386 financial institutions 2,317 3,614 customers 19,575 17,772 of which institutional activities - -
Comparative consolidated income statements with the full consolidation of Coface in EUR millions 2003 2002
Income from companies accounted for by the equity method 10 4
Non-performing loans 86 90 79 Accrued interest receivable 314 571 147 Provisions for loan losses (59) (62) (55)
securities held for sale (8) (9) (12) debt securities held for investment - - -
Assets temporarily not leased and non-performing loans 64 24 18 Accrued interest receivable 3 3 2 Provisions for asset impairment (12) (12) (8) Provisions for loan losses (15) (11) (9)
Fi na nc ia l i nf or m at io n Co ns ol id at ed fi na nc ia l s ta te m en ts 4.3 – Non-performing, irrecoverable loans and provisions for loan losses in EUR millions 2003 2002 2001
Non-performing customer loans 442 512 487 Gross non-performing loans 276 398 1,173 Provisions for non-performing loans (105) (138) (686) Gross irrecoverable loans 830 778 Provisions for irrecoverable loans (559) (525) -
Non-performing lease financing 137 104 60 Gross non-performing loans 77 47 236 Provisions for non-performing loans (40) (34) (176) Gross irrecoverable loans 234 233 Provisions for irrecoverable loans (134) (142) -
5 – Bonds, equities and other fixed and variable income securities in EUR millions 2003 2002 2001
Equities and other variable income securities 476 360 227 Bonds and other fixed income securities 3,196 2,649 2,741
(3) Of which: listed 3,362 5,451 7,231 transferred to/from securities held for sale - (18) (1,678) subordinated - - 5 issued by public institutions 55 742 776 doubtful securities 143 92 106 provisions (75) (50) (48) disposals before maturity (347) (1,104) (1,346)
Fi na nc ia l i nf or m at io n Co ns ol id at ed fi na nc ia l s ta te m en ts 5.1 – Non-performing securities, irrecoverable securities and impairment provisions in EUR millions 2003 2002 2001
Debt securities held for investments - net of provisions 63 43 59 Non-performing securities - gross 53 48 107 Provisions for non-performing securities (20) (32) (47)
Irrecoverable securities and provisions for impairment of irrecoverable securities were identified for the fiscal years ended December 31, 2003 and December 31, 2002 only.
6 – Insurance company transactions ASSETS – INSURANCE COMPANY INVESTMENT PORTFOLIOS AND OTHER ASSETS
■ non-life insurance 160 128 6 ■ representative of unit of account contracts 3,309 2,821 3,342
(1) The accounting treatment of these provisions is presented in Note 1.11.
Venture capital activities 28 27 31 BP Développement (formerly +X Développement) 28 12 13 IDF Nord Croissance - 6 7 Sofinnova - 2 3 Sud-est Croissance - 7 8 Other - - - of which Share in net income/(loss) - - 3
Real estate activities 0 0 0 of which Share in net income/(loss) - - -
Other activities 1 1 1 of which Share in net income/(loss) - - -
Subtotal 71 62 136 of which Share in net income/(loss) 9 3 13
(4) Including EUR1,250 million shareholder advance to Ecrinvest 4 as part of the temporary holding of Vivendi Universal Publishing securities in 2002 and EUR1,165 million in 2003
Operating intangible assets 560 32 (9) 7 (4) 586 Purchased goodwill 388 - (3) 1 - 386 Software 155 22 (6) 6 - 177 Other intangible assets 17 10 - - (4) 23
Non-operating property and equipment (5) (1) 1 0 0 (5) Non-operating land and buildings (5) (1) 1 - - (5) Other non-operating property and equipment - - - - - Charge to depreciation, amortization and provisions - - - - - -
Assets leased out under non-financial operating leases (105) (12) 7 - - (110)
Natexis Private Equity and subsidiaries 1 (4) - 18 21 17
New negative Amortization Removals Net Net Net in EUR millions goodwill reversals
For purposes of drawing up the financial statements for the year ended December 31, 2003, Natexis Banques Populaires valued its intangible assets and goodwill/negative goodwill recorded in its balance sheet.
The valuation covered material intangible assets and goodwill/negative goodwill exceeding EUR4 million and was based on the appraisal of an independent expert.
Valuation was based on the net present value of future cash flows. However, the market value was used when the goodwill/negative goodwill could be based on the market value of certain tangible assets such as real estate assets or the securities portfolio.
The net present value of future cash flows method is based on the business plans drawn up by the management of the main divisions and validated by Natexis Banques Populaires Executive Management.
The discount rate of the future cash flows was calculated for each subsidiary, based on the following: ■ the average OAT (French government bond) 10-year yield; ■ the risk premium in the subsidiary’s market; ■ a beta value based on a sample of comparable companies.
These procedures indicated the need to write down the goodwill of certain subsidiaries by EUR17.8 million, for which the return to profit is only expected in the mid-term.
The net present value of future cash flows method was applied to the Coface group under the same conditions as for the other subsidiaries.The result of this method confirms the valuation of the Coface group in the Natexis Banques Populaires books and does not question the valuation methods applied to network assets for the acquisition in July 2002, notably: 40% of average net sales over 3 years for the intangible assets of the insurance companies, and a multi-criteria valuation analysis for information and loan management companies.
Checks and notes presented for collection, settlement accounts in respect of security transactions 562 1,112 401
Accrued interest payable 65 89 19 13 – Debt securities in EUR millions 2003 2002 2001
(1) Convertible bonds In 1993, Natexis SA issued 1,781,000 bonds, for a total amount of FRF 1.3 billion, convertible into shares at a rate of 1 share for 1 bond and redeemable in full on January 1, 2001. As of December 31, 2001, all bonds had been redeemed.
(1) Including unearned income of EUR1,166 and 1,247 million, respectively, received in respect of the temporary holding of Vivendi Universal Publishing securities as of December 31, 2003 and December 31, 2002.
(1) Provisions for litigation cover the risk of the bank compensating damages to a third party. When a third party invokes the liability of the bank during legal proceedings, the bank’s legal department reviews the admissibility of the case by the courts and, where admissible, assesses potential damages. The provision is adjusted according to the progress of the legal proceedings (first instance, appeal, etc.).
(2) In 2001, in accordance with Opinion n° 2001-G issued by the French National Accounting Institute Urgent Issues Taskforce, policies covering employee-related liabilities taken out by group companies with group insurance companies are eliminated on consolidation in the amount of premiums paid and the value of these contracts transferred from Mathematical provisions to Provisions for contingencies and losses – employee-related liabilities in the consolidated balance sheet. A total of EUR15 million was transferred in this way.
Provision for specific credit risks 84 41 (1) (61) 9 72
Provision for off-balance sheet commitments 11 7 - (3) (3) 11
Provisions for forward financial instruments 19 17 (12) (15) - 9
(2) Perpetual subordinated debt: - of USD100 million at a post-swap rate of 12.7% and with an effective maturity date of February 25, 2004, treated as debt repayable as to capital in the accounts (see Note 2.8).
Equity and equivalents at 12/31/2001 after appropriation 709 1,579 1,269 3,557 263 3,820 566
Equity and equivalents at 12/31/2002 after appropriation 759 1,750 1,182 3,691 242 3,933 673
(5) Of which: Natexis Preferred Capital III 170 Sopromec 9 LineBourse 8 Other movements 4 Total 191
(6) Cancellation of treasury shares recorded under Long-term investments (4) (7) Minority interests in subsidiaries having issued preferred shares total EUR740 million
Futures 96,164 59,128 42,942 Interest rate caps, floors and options 46,691 42,942 40,268
Balance sheet outstandings related to derivatives Contingent instruments purchased 1,057 2,174 742 Contingent instruments sold 1,044 2,449 573
Fi na nc ia l i nf or m at io n Co ns ol id at ed fi na nc ia l s ta te m en ts 23 – Income from variable income securities in EUR millions 2003 2002 2001
Investments in affiliates 21 15 23 24 – Net fee and commission income in EUR millions 2003 2002 2001
Fee and commission income from: Fee and commission expenses on: Other financial services (155) (182) (180)
Net gains/(losses) on forward financial instruments (3) (88) 613 26 – Net gains on securities held for sale in EUR millions 2003 2002 2001
Real estate sales and rental income recorded by real estate subsidiaries 16 18 11
Credit management services (information and debt management) 85 41 29 – General operating expenses in EUR millions 2003 2002 2001
On contingencies and off-balance sheet commitments to provisions for contingencies (124) (130) (146) to provisions for signature commitments (5) (4) (5)
from provisions for contingencies 81 147 141 from provisions for signature commitments 4 5 8
Losses Investments in affiliates and other securities held for investment (9) (17) (20) Debt securities held for investment (16) (5) (15)
Total 13 (16) 3 (1) Of which mainly revised VAT assessment expense. (2) Of which an accrued subsidy from the parent company totaling EUR30 million and income from VAT and payroll tax abatement totaling
= Consolidated tax income 338 2 250 x Standard tax rate 33.33% 33.33% 33.33%
plus: Contributions and minimum annual tax charges (8) (3) (7) Income taxed at reduced rates (29) (16) (2) Losses of the period restricted in the interests of prudence (2) (13) (25) Impact of tax grouping 23 21 6 Impact of foreign subsidiary income taxed at different rates (2) (4) 1 Revised tax assessments (31) 6 (16)
(2) In 2001, losses restricted in the interest of prudence were included in “Other” as immaterial in amount.
Fi na nc ia l i nf or m at io n Co ns ol id at ed fi na nc ia l s ta te m en ts 34 – Income statement analysis by activity sector in EUR millions Financing Investment Banking Services Coface Other Total
Gross margin on insurance operations 694 718 395 385 204 186
Provisions for loan losses and country risks - - - - - -
Income from companies accounted for by the equity method 4 - - - - -
Net gains/(losses) on disposals of fixed assets - - 2 - - -
Income before exceptional items and tax 176 124 83 49 71 63
(1) In 2003, as in previous years, Directors’ fees paid to Board members included a fixed portion (EUR1,525 per year and per Director) and a variable portion (EUR1,220 per Board meeting and per Director). Members of the Financial Statements Review Committee, the Audit Committee and the Compensation Committee received in addition EUR915 per meeting and per Director. This compensation is paid in full at the end of the year.
(2) Total gross compensation paid to members of the Natexis Banques Populaires Executive Management Committee during their term of office during the period, including to the Chairman, the Chief Executive Officer and the Deputy Chief Operating Officer (see Note 35 A). Number of Executive Management Committee members: 9 in 2003; 11 in 2002; 12 in 2001.
Chief Executive Officer, former Deputy Chief Operating Officer (10/15/2001 to 12/31/2001) 509,286 331,273 80,912
Bonds and other fixed income securities 4,074 2,021 5,175 2,995 - 14,265
ADG COFACE ALLGEMEINE DEBITOREN GESELLSCHAFT Information and debt management services 75 74 75 74 (2) (2)
AK COFACE FINANZ GMBH (formerly ALLGEMEINE KREDIT FINANZ SERVICE AKFS) Factoring company 100 98 100 98 (2) (2)
ASSET BACKED MANAGEMENT CORPORATION Securitized security arbitrage 100 100 100 100 100 100
ASSURANCES BANQUE POPULAIRE PREVOYANCE (formerly Fructiprévoyance) Personal Risk Insurance 100 100 100 100 100 100
ASSURCREDIT* Credit insurance and services 40 39 - - - -
AUXILIAIRE ANTIN Real estate company 100 100 100 100 100 100
BANQUE PRIVEE ST DOMINIQUE Private asset management 100 100 100 100 100 100
BPSD GESTION Private asset management 100 100 100 100 100 100
CIMCO SYSTEMS LTD Information and debt management services 100 98 100 98 (2) (2)
COFACE CREDIT MANAGEMENT SERVICES Information and debt management services 100 98 100 98 - -
COFACE DEBT PURCHASE Information and debt management services 100 98 100 98 (2) (2)
COFACE HOLDING NORTH AMERICA Holding company 100 98 100 98 (2) (2)
COFACE INTERCREDIT CZECHIA Information and debt management services 97 71 97 71 (2) (2)
COFACE INTERCREDIT SLOVAKIA Information et gestion de créances 100 73 100 73 (2) (2)
COFACE SCRL Information and debt management services (21) (21) 100 98 (2) (2)
COFACE SERVICES NORTH AMERICA GROUP (formerly VERITAS SOUTH AMERICAN CORPORATION) Holding company 100 98 100 98 (2) (2)
COFACE SERVICIOS MEXICO SA DE CV (formerly Informes Veritas) Information and debt management services 100 98 100 98 (2) (2)
COFACERATING HOLDING Information and debt management services 100 98 100 98 (2) (2)
COFACERATING.DE Information and debt management services 100 98 100 98 (2) (2)
COFACERATING.US Information and debt management services (12) (12) 100 98 (2) (2)
COFINPAR Credit insurance and services 100 98 100 98 (2) (2)
CREDICO LTD (formerly Cimco Ltd) Information and debt management services 100 98 100 98 (2) (2)
ECRINVEST 6 (formerly IMMOBILIERE NATEXIS) Real estate investment 100 100 100 100 100 100
EDVAL C INVESTMENTS Ltd Country risk defeasance structure 100 100 100 100 - -
FONCIERE KUPKA Real estate investment 100 100 100 100 100 100
KOMPASS BILGI Marketing and other services 70 69 - - - -
KOMPASS CZECH REPUBLIC Marketing and other services 93 91 - - - -
KOMPASS POLAND Marketing and other services 100 98 - - - -
KOMPASS UNITED STATES Marketing and other services 100 98 - - - -
LBF LTD (formerly The Creditors Information Co Ltd) Information and debt management services 100 98 100 98 (2) (2)
NATEXIS ACTIONS CAPITAL STRUCTURANT Growth capital 74 72 - - - -
NATEXIS ALGERIE (formerly AL AMANA BANQUE) Bank 100 100 100 100 100 100
NATEXIS ALTAIR (formerly +X Altaïr) IT services 100 100 100 100 100 100
NATEXIS BAIL Real estate lease financing 100 100 100 100 100 100
NATEXIS BLEICHROEDER SA (formerly NATEXIS CAPITAL ) Investment company 100 100 100 100 100 100
NATEXIS BLEICHROEDER UK Investment company 100 100 - - - -
NATEXIS COFICINE (formerly Coficiné) Financial company (audio-visual) 93 93 93 93 93 93
NATEXIS IMMO EXPLOITATION (formerly INVEST SIGMA) Real estate company 100 100 100 100 100 100
NATEXIS INTERTITRES Service voucher management 100 100 - - - -
NATEXIS INVESTMENT ASIA International investment fund 100 100 - - - -
NATEXIS LEASE (formerly Bail Banque Populaire) Equipment lease financing 100 100 100 100 100 100
NATEXIS LIFE (formerly Fructilife) Life Insurance 100 96 100 96 100 96
NATEXIS METALS (formerly SOGEMIN) (16) Precious metal broker 100 100 80 80 80 80
NATEXIS PAIEMENTS (formerly BPL) Banking services 100 100 100 100 100 100
NATEXIS PRAMEX DEUTSCHLAND International commerce promotion and operations 100 99 100 99 100 99
NATEXIS PRAMEX France International commerce promotion and operations 100 99 - - - -
NATEXIS PRIVATE BANKING LUXEMBOURG SA (formerly BP LUXEMBOURG) International asset management 88 88 88 88 88 88
NBP PREFERRED CAPITAL I (formerly Natexis preferred shares)** Preferred share issues 100 100 100 100 100 100
NBP PREFERRED CAPITAL II** Preferred share issues 100 100 100 100 - -
NEM 2 Management company (private equity) 88 88 88 88 88 88
PROXIGMA (formerly SPATITRES) (19) IT services 100 100 100 100 100 100
REACOMEX Credit insurance and services (1) (1) 100 98 (2) (2)
S.A.S. MONTMARTRE 1 Recovery of mutual fund assets (1) (1) 100 100 100 100
S.C.I. VALMY COUPOLE Real estate company 100 100 100 100 100 100
SOCIETE IMMOBILIERE A.B.C. (10) Real estate company (10) (10) 100 100 100 100
SPEF DEVELOPPEMENT (8) Venture capital mutual investment fund manager 100 100 100 100 100 100
SPEF LBO (9) Venture capital mutual investment fund manager 100 100 100 100 - -
SPEF VENTURE (formerly SOPAGEST) Innovation mutual investment fund manager 100 100 100 100 100 100
UNISTRAT ASSURANCES Credit insurance and services 50 49 50 49 (2) (2)
VERITAS BUSINESS INFORMATION Information and debt management services (12) (12) 100 98 (2) (2)
VERITAS CARIBBEAN CORPORATION Information and debt management services (12) (12) 100 98 (2) (2)
VERITAS DE CENTRO AMERICA Information and debt management services 100 98 100 98 (2) (2)
VERITAS PUERTO RICO CORP. Information and debt management services 100 98 100 98 (2) (2)
CODINF SERVICES Information and debt management services 30 29 30 29 (2) (2)
(1) Company removed from the scope of consolidation. (2) Coface SA is accounted for by the equity method in December 2001 and for the first half of 2002. The Coface group is fully consolidated in the second half of 2002.
(11) Fructigestion was absorbed by Natexis Banques Populaires on November 25, 2002. (12) Merger with Coface Services North America on May 1, 2003.
(15) Dilution following exercise of redeemable bonds by Banques Populaires in 2003. (16) Buy-out of minority interests (20%) increasing the group’s interest to 100%. (17) Company sold outside the group on June 29, 2001.The 2001 consolidated income statement includes 50% of first-half income and expenses.
Auditors’ report on the consolidated financial statements For the year ended December 31, 2003
This is a free translation into English of the statutory auditors’ reports issued in the French language and is provided solely for the convenience of English speaking readers.The statutory auditors’ report includes for the information of the reader, as required under French law in any auditor’s report, whether qualified or not, explanatory paragraphs separate from and presented below the audit opinion discussing the auditors’ assessments of certain significant accounting and auditing matters.These assessments were considered for the purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account caption or on information taken outside of the consolidated financial statements. Such report, together with the statutory auditors report addressing financial reporting in the Chairman of the Board of Directors report on internal control, should be read in conjunction and construed in accordance with French law and French auditing professional standards.
In accordance with our appointment as auditors by your Annual General Meeting,we have audited the accompanying consolidated financial statements of Natexis Banques Populaires, for the year ended December 31, 2003.The consolidated financial statements have been approved by the Board of Directors.Our role is to express an opinion on these financial statements, based on our audit.
III. Specific procedures and disclosures We have also verified the financial information contained in the group management report.We have no comment to make as to the fair presentation of this information or its consistency with the consolidated financial statements.
In accordance with our appointment as auditors of your Company, we are required to report on related party transactions which have been brought to our attention.
The terms of our engagement do not require us to identify any other such agreements, if any, but to communicate to you, based on information provided to us, the principal terms and conditions of those agreements brought to our attention, without expressing an opinion on their usefulness and appropriateness. It is your responsibility, pursuant to Article 92 of the Decree of March 23, 1967, to assess the interest involved in respect of the conclusion of these agreements for the purpose of approving them.
Banque Fédérale des Banques Populaires granted the Company a financial subsidy in the amount of EUR30 million.
This transaction was authorized at the Board of Directors’ meeting of November 19, 2003.
Auditors’ report on related party transactions For the year ended December 31, 2003
Guarantees received from financial institutions 1,692 1,771 645 Guarantees received from customers 2,091 3,092 3,796 of which institutional activities 16 450 646 992
Cash, central banks and post office banks 7 1 3 143
Loans and advances from banks 7 35,930 45,640 32,379 of which institutional activities 16 515 1,453 1,279 of which institutional activities 16 1,137 106 36 of which institutional activities 16 - - 305
Comparative parent company income statements Year ended December 31, in EUR millions note 2003 2002 2001
Finance lease transactions (1) - Operating lease transactions (1) - Bonds and other fixed income securities (714) (857) (1,149) Other interest expenses (299) (420) (423)
Net gains/(losses) on trading account securities 21 35 (93) 142 Net gains/(losses) on trading account securities 43 (33) (388) Net foreign exchange gains/(losses) 3 38 6 Net gains/(losses) on financial instruments (11) (98) 524
Net gains/(losses) on securities held for sale 22 73 (21) 191
Net gains/(losses) on disposals of fixed assets 26 (18) 34 (46)
Net charge to/(release of) Fund for General Banking Risks 13 (1) 17 (3)
1.1 – Customer loans Loans are recorded in the balance sheet at face value. Undrawn amounts on loans already committed and agreed are included in off-balance sheet items under the heading Financing commitments.
Where there is a risk of partial or total non-recovery of loans or non-compliance with loan conditions or covenants, loan loss allowances or other provisions for risk are raised and the charge taken to the income statement within Provisions for loan losses and country risks. Provisions are valued quarterly on a case-by-case and country-by-country basis, taking into account an appraisal of risks and security available.As regards lease financing transactions, capital gains and losses on disposal and charges to and reversals of provisions (leased assets and assets temporarily not leased) are recorded in Net Banking Income.Termination compensation is recorded within Interest income.Only the capital portion of doubtful lease installments is provided within Provisions for loan losses and country risks.
In accordance with banking regulations: ■ unpaid accrued interest on loans to borrowers subject to bankruptcy proceedings is deducted from the interest account in which it was initially recorded. If this interest is subsequently recovered, it is credited to income through this same account on receipt; ■ doubtful loan interest, where customer repayments are overdue three, or, if the case arises, six or nine months, is also fully provided by deduction from the interest account in which it was initially recorded; ■ under the contamination principle, all loan outstandings of these customers are classified as non-performing, even if the risk appraisal does not call for provision of principal recovery risks; ■ this similarly applies to assets leased under lease financing arrangements, where a loan loss allowance is raised for the amount outstanding, as soon as a lease installment or ancillary costs are overdue more than three (equipment) or six (real estate) months.
In assets in the balance sheet, the net loan outstandings underlying the options are covered by zero-coupon securities held by these entities. Changes in net income of these entities are solely due to increases in the value of the zero-coupon securities until their redemption date and the end of the arrangement in 2014. Over this period, the increase in value of these securities exactly offsets the full provision of these loans underlying the options to ensure the complete neutrality of net income and the cash necessary to refinance these operations.
1.3 – Securitization transactions Securitization transactions in progress transfer credit risk without disposing of the reference portfolios. Such transactions are credit-derivative based synthetic securitization transactions entered into with third-party banks jointly with special-purpose entities. The credit derivatives are equivalent in principle to credit insurance and provide protection against the signature risk (bankruptcy, restructuring of the terms and conditions of a reference asset and inability to pay) of debtors making up the portfolio.
Conversely, unrealized exchange gains or losses arising upon translation of borrowings covered by an exchange rate guarantee from the French State or attributable to Institutional activities are carried forward under Accruals, Deferrals and Miscellaneous Assets & Liabilities.
1.5 – Securities portfolio 1.51 – SECURITIES TRANSACTIONS (TRADING ACCOUNT SECURITIES, SECURITIES HELD FOR SALE, DEBT SECURITIES HELD FOR INVESTMENT)
The following rules apply irrespective of the legal form of the security (equity, bonds and notes, treasury bills, certificates of deposit, negotiable instruments, money market securities, etc.) and depend solely on the purpose of the transaction: ■ trading account securities: these securities, which are acquired or sold with the original intention of reselling or repurchasing them after a short period, are traded on markets with guaranteed liquidity. Such securities are recorded at transaction value (including expenses and any accrued interest). At the balance sheet date, they are marked to market, and the aggregate net amount of differences arising is taken to the income statement. If these securities are held for more than six months, they are reclassified as securities held for sale at their estimated value on the date of reclassification; ■ securities held for sale: these securities are acquired with the intention of holding them for a period of more than six months, and are valued individually at the year-end at the lower of cost or estimated value. Unrealized losses are provided; unrealized gains are not recognized. Any premium or discount between the acquisition cost (excluding purchased interest) and redemption value is deferred and amortized to income over the remaining period to maturity; ■ debt securities held for investment: these are Fixed Income securities, acquired with the original intention of holding them as permanent investments and are either specifically funded or appropriately hedged with respect to interest rate risk. They are recorded at acquisition cost (excluding purchased interest), and any premium or discount between acquisition cost and redemption value is deferred and amortized to income over the remaining period to maturity; In accordance with French banking regulations, unrealized losses on such securities are not provided, except where there is an intention to dispose of the securities in the short term, in which case the provision covers market risks, and the charge is recorded in Net gains/(losses) on disposals of fixed assets, or there is a risk of counterparty failure, in which case the charge is recorded within Provisions for loan losses and country risks; ■ treasury shares: own shares are purchased for four purposes: the regularization of the stock market price by trading against market trends, as part of stock market interventions, to accompany external growth operations and for allotment to Group employees under share purchase option schemes or via corporate savings schemes.
1.6 – Income, adjustments in value and gains or losses on securities ■ Income from variable income securities is recorded on a receipts basis.
Computer hardware is depreciated on a declining balance basis over five years.
1.12 – Loan and capital issuance costs For all transactions performed post January 1, 1994, Natexis Banques Populaires has elected to spread loan issuance costs over the life of the related loan, as permitted by tax legislation (Law of August 8, 1994) and in line with changes in the nature of loan issuance costs, which essentially represent an additional financing cost.
The accounting treatment applied differs according to the instrument involved and the purpose of the contract entered into (hedging or trading).
■ Hedging transactions belonging to the first two categories are treated for income statement purposes as equivalent to lending/borrowing transactions and amounts received and paid are taken to income on a time-apportioned basis.
Where trading transactions are concerned, positions in a class of option or forward contract are marked to market. For instruments listed on an organized or equivalent market, movements in value are taken directly to the income statement. For instruments traded over the counter, any net position losses are taken to the income statement via a charge to a provision against financial instruments. Net unrealized gains are not recognized.
1.14 – Exceptional items Exceptional income and expense items are determined by reference to the materiality of their amount, the extent to which they fall outside the ordinary activities of the company and the low probability of recurrence of the events concerned.
These commitments were calculated taking account of: ■ vested benefit entitlement; ■ PV discounting rates of 4.75% to 5%; ■ life-expectancy table:TV 88/90; ■ most recent salaries, including employer social security contributions; ■ historical staff turnover rates.
In accordance with Opinion No. 2000-C issued by the Urgent Issues Taskforce of the French National Accounting Concil, retirement benefit commitments were provided in full, as per the preferred method identified in CRC Regulation No. 99-07, by deduction from fiscal year 2000 opening shareholders’ equity.
of which accrued interest receivable 315 579 149 of which non-performing loans 85 89 76 of which provisions for loan losses (59) (62) (52)
(*) Including subordinated debts: 119 17 18 accrued interest receivable 2 - 1
Including securities received under repurchase agreements: 28,719 23,332 2,524 of which accrued interest receivable 196 454 -
Current accounts in debit 4,235 3,505 3,961 of which accrued interest receivable 13 14 15 of which non-performing loans 124 89 59 of which provisions for loan losses (78) (40) (30)
of which accrued interest receivable - - 1 of which non-performing loans 16 14 13 of which provisions for loan losses (9) (10) (9)
of which accrued interest receivable 27 34 41 of which non-performing loans 817 953 999 of which provisions for loan losses (503) (561) (601)
Equities and other variable income securities 785 1,277 1,536 Trading account securities 506 765 1,025 Securities held for sale 279 508 511 Non-performing securities - 4 of which non-performing loans 5 44 37 of which provisions for loan losses (5) (40) (37)
Note 4 – Investments in affiliates and associated undertakings, other securities held for investment and treasury shares in EUR millions 2003 2002 2001
Current account advances 14 9 Currency translation adjustments 38 4 (1)
A) Banking and credit institutions NATEXIS LEASE (formerly Bail BP) 16,670,495 399,595,080.57 NATEXIS FACTOREM (formerly Factorem) 1,494,855 127,459,135.75 NATEXIS PRIVATE BANKING LUXEMBOURG S.A. (formerly BP du Luxembourg) 10,097 47,471,418.97 NATEXIS LUXEMBOURG S.A. (formerly Natexis Banques Populaires Luxembourg) 399,999 40,636,720.29 NATEXIS COFICINE (formerly Coficiné) 109,098 30,316,762.45 BANQUE PRIVEE SAINT DOMINIQUE 1,637,100 26,821,341.85 NATEXIS PAIEMENTS (formerly Banque pour les Paiements On Line) 2,399,988 21,886,766.70 NATEXIS ALGERIE (formerly Natexis Al Amana Banque) 1,360,056 10,932,911.14 SBFI - Sté de Bque Française et Internationale 53,556 6,103,425.26 CFDI - Caisse Française de Développement Industriel 29,994 4,572,555.82 SOFINGEST 170,128 3,880,947.56 INTERFINANCE NATEXIS NV 29,997 24,644.13
B) Financial institutions NATEXIS PRIVATE EQUITY 17,470,554 465,121,188.48 ARNHOLD & BLEICHROEDER Inc 100 224,630,601.53 NATEXIS AMBS Ordin. (New York) 281,150,000 222,606,000.00 NATEXIS ASSET MANAGEMENT (formerly BPAM) 1,802,751 157,877,881.78 SOCIETE FINANCIERE BFCE 6,052,993 92,950,992.79 NATEXIS INTEREPARGNE 555,653 81,837,556.38 NATEXIS BLEICHROEDER (formerly Natexis Capital) 671,169 75,419,129.54 SPAFICA 42,823 58,435,554.31 NATEXIS METALS Ltd 20,000,000 23,626,433.94 NATEXIS MOSCOW (formerly Zao Natexis Banques Populaires) 37,908 15,767,290.18 NATEXIS ASSET-BACKED MANAGEMENT CORPORATION 100 10,028,858.60 Natexis Banques Populaires Preferred Capital 3 (New York) 11,500,000 9,106,000.00 Natexis Banques Populaires Preferred Capital 2 (New York) 10,000,000 7,918,000.00 NATEXIS MERCOSUL FUND 45 7,556,581.52 INVESTIMA 6 690,922 6,562,719.00 NATEXIS INVESTMENT CORP 3,217 2,552,930.38 NATEXIS FINANCE 162,005 1,814,738.02 SOGAFI – Financial guarantee company 49,994 1,807,862.41 SPAFIC 2,494 651,221.92 IFCIC 37,708 574,854.75 LUGDUNUM GESTION 7,995 289,653.21 COMPAGNIE FINANCIERE EUROPEENNE ABS 7,647 116,577.76 CRENINVEST 1 4,994 76,133.04 NATEXIS US FINANCE CORPORATION (New York) 65,000 49,000.00 INVESTIMA 1 3,850 38,500.00 INVESTIMA 11 3,850 38,500.00 INVESTIMA 5 3,850 38,500.00 INVESTIMA 7 3,850 38,500.00 SAINT DOMINIQUE RADIO 3,850 38,500.00 CONTANGO TRADING SA (formerly Ecrinvest 2) 3,844 38,440.00 INVESTIMA 12 3,700 37,000.00
C) Other COFACE 12,790,197 641,219,903.49 NATEXIS ASSURANCES (formerly Assurances BP) 5,246,967 496,842,974.06 VAL "A" 1,640,000 276,872,875.00 NATEXIS IMMO EXPLOITATION (formerly Invest Sigma) 7,674,468 124,002,112.22 AUXILIAIRE ANTIN 8,338,449 118,893,164.53 NATEXIS ARBITRAGE 4,019,841 60,614,531.11 NATEXIS ALTAIR (formerly +X Altair) 6,274,985 14,445,332.68 LINEBOURSE 1,636,109 11,794,080.58 FINANCIERE CLADEL 607,891 10,099,256.51 NATEXIS IMMO DEVELOPPEMENT (formerly SOFEP) 92,674 6,775,627.22 SCI ALTAIR 1 120 6,276,887.28 SLIB 323,693 5,896,571.07 SCI HAUSSMANN 90 1,809 2,757,802.72 SAMIC "sté anonyme Monaco Internat Com" 756 2,040,718.40 NATEXIS IMMO PLACEMENT (formerly Fructiger) 89,612 1,241,182.69 CRISTAL NEGOCIATIONS 14,994 436,302.34 CO-ASSUR 2,494 282,570.47 SCI ANTIN HAUSSMANN 18 274,408.23 INVEST ALPHA 14,994 228,582.06 INVEST DELTA 14,994 228,582.06 BANCOSYS 9,996 152,439.00 TURBO SA 8,165 126,847.48 CLADEL MARITIME 4,590 69,974.09 VALMY LIBERTE CONSEIL 2,476 67,104.78 COMAVAM 399 59,850.00 NATEXIS FORMATION 3,494 55,904.00 NXBP 1 (formerly Natexis Gestion) 2,590 39,484.30 VAL "B" 2,494 38,416.68 CRENINVEST 7 2,494 38,020.78 SDGP 38 2,493 37,893.60 SDGP 41 2,493 37,893.60 SDGP 43 2,493 37,893.60 SDGP 45 2,493 37,893.60 SAS MONTMARTRE 1 2,500 34,166.83 INVEST GAMMA 2,494 32,807.63 INVEST OMEGA 2,494 25,744.43 SEMA ENGHIEN LES BAINS 1,500 22,867.35 GIE RESTAUPRISE 14,740 22,470.99
A) Banking and financial institutions I.K.B 2,200,000 29,430,369.72 BANCO FINANTIA 11,404,890 15,119,614.38 W.G.Z. BANK 290 650,545.87 B.P. DI NOVARA 14,400 231,696.78 PARNASSIENNE DE CREDIT 100 76,224.51 SEBADOUR 4,680 75,151.27 BANQUE GABONAISE DE DEVELOPPEMENT 16,200 67,077.57
B) Financial institutions SICOVAM HOLDING 3,694 30,417,099.22 OFIVM 679,999 11,333,327.33 MEDIAFINANCE 255,000 4,047,120.84 PROPARCO 267,300 4,017,739.19 SOFARIS 133,372 3,242,831.92 MAGHREB PRIVATE EQUITY FUND LTD 995 914,127.46 AFH -AFRICAN FINANCIAL HOLDING 6,186 742,958.95 VIETNAM INTERNATIONAL LEASING CIE 850,000 681,793.93 SOFIPROTEOL 17,501 243,163.03 UNIGRAINS 5,467 186,978.50 FIARO 29,166 97,508.98 PARIS TITRISATION 3,999 86,356.02 AL WASSIT - INTERMEDIATION ET CONSEIL FINANCIER 9,375 68,683.09 VAL "E" 2,494 38,020.80 NATEXIS BANQUES POPULAIRES IMAGES 5 15 15,000.00
EUROMEZZANINE 2 .SCA. 460,000 701,265.48 EUROPAY France 9,802 685,291.03 GIE FIRST SNOW 396,086,798 603,830.43 NATEXIS PRAMEX INTERNATIONAL 33,984 506,977.56 SOCIETE CONCESSIONNAIRE DU GRAND LOUVRE 16,009 457,361.32 SOFRANTEM 15,002 388,822.74 EUROPOLIS INVEST 32,399 383,721.29 GIE VULCAIN ENERGIE 24,446 372,676.87 LES JEUNES BOIS GIE 251,540 251,534.70 SRITHAI SUPERWARE (Singapore) 5,641,466 245,000.00 GIE STAR TROIS 149,902,077 228,524.24 LOXLEY PUBLIC Co Ltd (Singapore) 1,615,000 183,000.00 VEV 1,316,566 182,870.33 ECICs (Singapore) 250,000 140,000.00 ASSURANCES BANQUE POPULAIRE IARD (formerly Fructi-MAAF) 44 132,000.00 SEPIA 14,099 107,468.93 PARNASSE IMMO 300 78,128.30 E.A.D.S. France 7,365 75,561.89 I.D.P.C. 375 57,168.38 ECONOCOM GROUP 13,252 56,031.24 SOGEMAC habitat 3,580 47,213.07 UNICEREALES 2,750 41,923.48 NAM GERANCE (formerly BPAM GERANCE) 2,496 38,370.63 DEVELOPPEMENT DE L'HORLOGERIE (Sté) 2,400 36,587.76 ATIS-REAL (formerly Expertim) 11,946 36,423.12 SNPE 500 36,206.64 SWIFT 353 34,326.77 SOFIMAC 221 33,521.89 O.G.I.F. - Omnium de gestion Financière de l'Ile de France 77,350 31,556.95 MARCHES DE TITRES - France 305,555 28,947.30 SOMIVAL 1,750 26,678.58 EUROMEZZANINE.SCA 12,500 25,918.38 EUROPE OBLIGATIONS 1,872 23,572.76 SOFREAVIA 3,750 17,150.51 TRANSVALOR 1,069 16,754.15 CAISSE DE GARANTIE IMMOBILIERE " C.G.I.F.N.B." 2,000 15,244.90 CLEMET 1,000 15,244.90 SADEPAR 100 15,244.90
Note 4.2– Disclosure of significant shareholdings in French companies: The following information is provided pursuant to Article L247-1 of the French Commercial Code.
Acquisitions, subscriptions and asset transfers: Immobilière Privée France Pierre 3.34% 8,040 Natexis Asset Management 95.88% 1,802,751 Val E 99.79% 2,494
Note 4.3 – Information concerning subsidiaries and investments in affiliates Pursuant to Article L233 - 15 of the French Commercial Code
A - Investments with a carrying value in excess (‘000) (‘000) of 1% of the common stock of the reporting undertaking
Subsidiaries and investments in affiliates (holdings in excess of 10%) NATEXIS ALTAIR 4, rue Charles Gounod - 77185 LOGNES 10,040 EUR 6,858 EUR 99.99% NATEXIS ASSET BACKED MANAGEMENT CORPORATION 712 Fifth Avenue - NY 10019 - NEW YORK 10,000 USD 46,192 USD 100.00% NATEXIS ASSURANCES 27, boulevard Bourbon - 75004 PARIS 40,034 EUR 296,484 EUR 100.00% AUXILIAIRE ANTIN 18, rue de la Chaussée d'Antin - 75009 PARIS 127,578 EUR (8,686) EUR 100.00% NATEXIS LEASE 115, rue Montmartre - 75002 PARIS 266,728 EUR 134,640 EUR 99.99% NATEXIS ASSET MANAGEMENT 68-76, quai de la Rapée - 75012 PARIS 29,143 EUR 1,862 EUR 86.88% NATEXIS PRIVATE BANKING LUXEMBOURG S.A. 47, boulevard Royal - L 2449 LUXEMBOURG 28,750 EUR 891 EUR 87.80% NATEXIS PAIEMENTS 115, rue Montmartre - 75002 PARIS 22,800 EUR 57 EUR 100.00% BANQUE PRIVEE SAINT DOMINIQUE 12-14, rond point des Champs Elysées - 75008 PARIS 20,464 EUR 1,586 EUR 99.99% COFACE 12, cours Michelet - La Défense 10 - 92800 PUTEAUX 49,736 EUR 378,759 EUR 98.04% NATEXIS COFICINE 26, rue de Montévidéo - 75016 PARIS 5,897 EUR 4,203 EUR 92.50% CRISTAL NEGOCIATIONS 45, rue Saint-Dominique - 75007 PARIS 240 EUR 3,234 EUR 99.96% NATEXIS FACTOREM 4, place de la Coupole - 94600 CHARENTON LE PONT 12,000 EUR 124,544 EUR 99.99% FINANCIERE CLADEL 115, rue Montmartre - 75002 PARIS 9,727 EUR 895 EUR 100.00% NATEXIS IMMO EXPLOITATION 45, rue Saint-Dominique - 75007 PARIS 117,036 EUR 7,503 EUR 100.00% LINEBOURSE 45, rue Saint-Dominique - 75007 PARIS 32,335 EUR (15,077) EUR 100.00% NATEXIS AMBS 645 Fifth Avenue - NY 10022 - NEW YORK 556,150 USD 5,325 USD 100.00% NATEXIS ALGERIE 62 chemin Mohamed Drareni - Hydra - ALGER 1,000,000 DZD 91,766 DZD 87.18% NATEXIS ARBITRAGE 115, rue Montmartre - 75002 PARIS 60,298 EUR (19,398) EUR 100.00% NATEXIS LUXEMBOURG S.A. 28, avenue Marie-Thérèse - L2131 LUXEMBOURG 40,000 EUR 12,127 EUR 100.00% NATEXIS BLEICHROEDER INC. 1345 avenue of the Americas - NY 10105 - NEW YORK 151,503 USD (740) USD 100.00% NATEXIS BLEICHROEDER S.A. 100, rue Réaumur - 75002 PARIS 73,377 EUR (11,351) EUR 99.99% NATEXIS INTEREPARGNE 16-18, rue Jules César - 75012 PARIS 8,891 EUR 21,028 EUR 99.99% NATEXIS METALS 47-53, Cannon Street - LONDON EC4M 5SH 20,000 GBP (7,652) GBP 100.00% NATEXIS PRIVATE EQUITY 5-7, rue de Monttessuy - 75007 PARIS 438,456 EUR 141,481 EUR 91.35% NBP PREFERRED CAPITAL 2 1251, avenue of the Americas - NEW YORK 10020 160,000 USD (190) USD 100.00% NBP PREFERRED CAPITAL 3 1251, avenue of the Americas - NEW YORK 10020 211,500 USD - 100.00% OFIVM 1, rue Vernier - 75017 PARIS 20,000 EUR (720) EUR 34.00% SAMIC 24, avenue Fontvieille - 98000 MONACO 160 EUR 2,543 EUR 75.60% SBFI 45, rue Saint-Dominique - 75007 PARIS 8,623 EUR (2,293) EUR 94.69% SOCIETE FINANCIERE BFCE 5-7 rue de Monttessuy - 75007 PARIS 92,308 EUR 52,254 EUR 99.99% SPAFICA 115, rue Montmartre - 75002 PARIS 685 EUR 62,843 EUR 99.98% VAL A 115, rue Montmartre - 75002 PARIS 167,200 EUR 134,426 EUR 100.00% NATEXIS MOSCOW Business Center Parus, 1th Tverskaya - YANSKAYA STR.23/1 - 125047 MOSCOU - RUSSIA 379,080 RUR 61,278 RUR 100.00% B - Other interests
Book value of Oustanding loans Guarantees Total revenues Net income/(loss) Dividends Observ. securities held and advances at given by the in last of last reported received
Quantity Purchase Average Quantity Sales Average % of common Final purchased price price sold price price stock stock
Operating property and equipment and intangible assets 269 (145) 124 268 (136) 132 238 (118) 120
Intangible assets 79 (40) 39 74 (35) 39 68 (34) 34 Property and equipment 190 (105) 85 194 (101) 93 170 (84) 86
Operating property and equipment 194 15 (16) (3) 190 Operating land and buildings 53 - (1) - 52 Other operating property and equipment 141 15 (15) (3) 138
Non-operating property and equipment 14 0 (2) 0 12 Non-operating land and buildings 9 - (2) - 7 Other non-operating property and equipment 5 - - - 5 in EUR millions 2002 Charge/ Disposals Other 2003 (reversal)
Operating intangible assets 35 6 (1) (1) 39 Purchased goodwill - - - - - Software 26 4 (1) - 29 Other intangible assets 9 2 - (1) 10
Note 6 – Accrued income, prepaid expenses and other assets in EUR millions 2003 2002 2001
Note 7 – Interbank and money market liabilities in EUR millions 2003 2002 2001
Note 8 – Customer deposits in EUR millions 2003 2002 2001 of which accrued interest payable 2 3 3 of which other amounts due 25 100 208 of which accrued interest payable 64 86 16 of which guarantee deposits 129 81 -
(*) Including securities delivered under repurchase agreements: 11,172 7,978 6,608 of which accrued interest payable 49 67 1
Note 9 – Debt securities in EUR millions 2003 2002 2001
Security transactions 2,695 1,980 1,734 of which trading account securities - 48 44 of which trading account securities liabilities 2,694 1,933 1,690 of which accrued interest payable - - -
At January 1, 2002 17 333 36 17 152 188 56 3 836 Charges 3 13 77 - 30 46 63 3 259 Reversals (4) (47) (48) (3) (40) (21) (45) (3) (224) Currency translation adjustments - (23) - (1) (6) (2) - - (32) Other changes - - - - - - - - -
Note 12 – Long-term subordinated debt in EUR millions 2003 2002 2001
Fixed-term subordinated debt 2,343 1,957 1,471 Subordinated securities 1,691 1,249 928 Subordinated loans 652 708 543
Perpetual subordinated debt 382 397 527 Participating loans 107 107 107
Currency translation adjustments - (5) (5) (10) Other changes - - - 0
Note 14 – Common stock, additional paid-in capital, reserves and retained earnings in EUR millions Common Additional Legal General Long-term Other Retained Total stock paid-in reserve reserve capital gains reserves earnings capital tax-driven reserve
At January 1, 2002 709 1,579 40 180 140 11 0 2,659 Appropriation of 2001 income - - 3 - - - 71 74 Dividends paid in 2002 - - - (39) - - (71) (110) Arnhold & S. Bleichroeder acquisition 22 83 - - - - - 105 Conversion of perpetual subordinated securities convertible into shares 28 86 - - - - - 114 Other movements in equity - (2) - - - - 1 (1)
Note 19 – Income from variable income securities in EUR millions 2003 2002 2001
Fee and commission expenses on: Off-balance sheet items: Forward financial instruments (18) (19) (16)
Note 21 – Net gains/(losses) on trading account securities in EUR millions 2003 2002 2001
Note 22 – Net gains/(losses) on securities held for sale in EUR millions 2003 2002 2001
(1) Since 2002, ancillary income has been recorded under Commission income
Note 24 – General operating expenses in EUR millions 2003 2002 2001
Note 25 – Provisions for loan losses and country risks in EUR millions 2003 2002 2001
On non-performing loans: (145) (125) (140) Charges to provisions (149) (265) (308) Reversals from provisions 129 243 268 Losses covered (129) (102) (101) Losses not covered (8) (5) Recoveries on debts already provided 12 4 1
Charges to provisions (35) (18) (10) Reversals from provisions 2 7 -
Losses not covered - - Recoveries on debts already provided - - -
On contingencies & charges: (55) (16) (13) Charges to provisions (112) (110) (39) Reversals from provisions 57 94 26 Losses covered - - Losses not covered - - Recoveries on debts already provided - - -
Charges to provisions Investments in affiliates and other securities held for investment (33) (17) (43) Debt securities held for investment - - -
Revised VAT assessment (30) - Other exceptional income (2) 31 - 15 Recovery of VAT paid by BP regional banks 30 - -
Shoah Victim Foundation (2) NBP convergence costs (7) Euro conversion costs (6)
Fiscal year 2003 (in EUR millions): (2) Subsidy paid by BFBP 30
Financing commitments given in favor of 21,144 20,618 19,217 Financial institutions 2,330 3,619 3,507 Customers 18,814 16,999 15,710
Financing commitments received from 2,185 1,047 1,666 Financial institutions 1,643 897 1,601 Customers 542 150 65
Foreign currency-denominated loans / borrowings Currencies loaned and not delivered 40 93 124 Currencies borrowed and not delivered 124 936 667
Pursuant to Articles 133, 135 and 148 of the Commercial Companies Decree
Income after tax, depreciation, amortization and provisions 106,860,867.76 (230,860,374.57) 74,450,533.63 206,037,266.02 200,728,250.83
speaking readers.The statutory auditors’ report includes for the information of the reader, as required under French law in any auditor’s report, whether qualified or not, explanatory paragraphs separate from and presented below the audit opinion discussing the auditors’ assessments of certain significant accounting and auditing matters.These assessments were considered for the purpose of issuing an audit opinion on the financial statements taken as a whole and not to provide separate assurance on individual account caption or on information taken outside of the financial statements. Such report, together with the statutory auditors report addressing financial reporting in the chairman of the Board of Directors report on internal control, should be read in conjunction and construed in accordance with French law and French auditing professional standards.
I – Opinion on the financial statements We conducted our audit in accordance with professional standards applicable in France.Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements give a true and fair view of the financial position and the assets and liabilities of the Company as of December 31, 2003 and the results of its operations for the year then ended, in accordance with accounting principles generally accepted in France.
Without qualifying the opinion expressed above, we draw your attention to Note 17 (accounting policies) to the financial statements on changes in accounting method regarding the provisions recorded for non-performing loans and treatment of major repair programs.
These assessments were performed as part of our audit approach for the financial statements taken as a whole and contributed to the expression of the unqualified opinion in the first part of this report.
Pursuant to the law, we have verified that the Board of Director's Management Report contains the appropriate disclosures as to the acquisition of participating and controlling interests and the percentage interests and votes held by shareholders.
Chairman’s report on the terms and conditions governing the preparation and organization of the Board’s work and the internal control procedures initiated by the Company 203
The composition of the Board of Directors has not changed since the previous year.
In accordance with the bylaws, each director must hold at least 100 shares in the Company.
Finally, the terms of office of five directors, or one-third of the Board, will expire at the end of the Annual General Meeting held to adopt the 2003 financial statements 1.2 – Exercise of executive management duties Pursuant to the options offered by the New Economic Regulations Law of May 15, 2001, the Natexis Banques Populaires Board of Directors decided, on January 16, 2002, to separate the functions of Chairman and Chief Executive Officer, in accordance with the general logic underlying the organizational structure of the Group.
The Board of Directors meeting of the same day appointed Mr. Philippe Dupont as Chairman of the Board of Directors. He had previously been Chairman and Chief Executive Officer.
The meetings last on average three hours. A document, several tens of pages long, containing detailed information on all subjects to be covered during the meeting, is presented to directors several days prior to the meeting.
Detailed minutes are prepared after each meeting summarizing the presentations, activities of directors and the decisions made.
Chairman’s report on the terms and conditions governing the preparation and organization of the Board’s work and the internal control procedures initiated by the Company
The Board of Directors also deliberates, in advance, the main investment acquisitions proposed by Natexis Banques Populaires (required by the bylaws). Powers delegated to Executive Management in this respect are particularly limited.To ensure consistency within the entire Natexis Banques Populaires group, external growth transactions contemplated by the subsidiaries are submitted in advance to the Board of Directors of their parent company.
Finally, to further improve the conditions under which directors can forge an opinion on the operation of Natexis Banques Populaires and its subsidiaries, it was decided to appoint several Natexis Banques Populaires directors to the boards of the main subsidiaries in 2003.
■ The Financial Statements Review Committee has four members, including one independent director: Messrs. Nalpas, Clavaud, de La Chauvinière, and Thibaud. The committee’s purpose is detailed in the section describing the internal control procedures for accounting and financial information.
■ The Audit Committee has four members: Messrs. Duquesne, Comas, Cordel, and Tourret. The committee’s purpose is detailed in the section describing the internal control players.
■ There are two independent directors among the four members of the Compensation Committee: Messrs. de La Chauvinière, Bechat, Gentili, and Jacquier.
In accordance with its purpose, the Compensation Committee examines, before presenting them to the Board, all matters concerning the personal status of Company officers and, in particular, compensation (fixed and variable portions), pension terms and conditions and the allotment of share subscription and purchase options.
An operating charter has been drawn up for the Audit Committee and the Financial Statements Review Committee.
The Internal Regulations and Directors’ Charter are presented to each new Board member when they take up their duties.
The Regulations also set the method for calculating directors’ fees. Directors’ fees comprise a small annual fixed portion (EUR1,525 since 2001) and a variable portion strictly proportional to the number of meetings attended by each director, set at EUR1,220 per meeting as of the same date. The compensation payable to special committee members was set at EUR915 per meeting.
Audits can cover all categories of risk incurred by Natexis Banques Populaires with respect to the various business lines (counterparty and capital market risks, operating risks).
Internal Audit follows up these recommendations through monitoring activities conducted in the twelve to eighteen months following the initial investigation.
The audit procedures are part of the Natexis Banques Populaires group annual audit plan, prepared on a consolidated basis by Internal Audit and proposed to Executive Management, the Audit Committee and the Natexis Banques Populaires Board of Directors.
Its evolution takes into account the interventions of the Internal Audit division of Banque Fédérale des Banques Populaires, the two divisions avoiding the duplication of tasks.
Consequently, the audit plan’s preparation is based on a theoretical hierarchy of priorities, defined on the basis of a mapping of Natexis Banques Populaires activities, and on the state of risk within the group structure, as perceived by Internal Audit from the reporting supplied by the bank's subsidiaries.
Responsible for the definition and implementation of the internal control system, Natexis Banques Populaires Executive Management holds a monthly committee meeting for the coordination of control functions. Present at the meeting are the General Secretary, the Internal Control Director, the Risk Director, the Inspector General, the Financial Director, the Ethics Director, the Director responsible for financial crime prevention and the Director responsible for information system security.
The various control managers report on the results of their work, and the work of control authorities external to Natexis Banques Populaires (French Banking Commission, French Securities Regulator, statutory auditors and Banque Fédérale des Banques Populaires Internal Audit).
The Board’s composition, method of functioning, and the main issues it has covered during the year are presented in the first section of this report.
The committee also assesses internal control quality and, in particular, the consistency between risk measurement, monitoring and management systems. Additional measures are proposed when needed.
At each meeting, the Audit Committee was able to directly question the managers responsible for the activity sector concerned or the auditors.
Risk measurement and monitoring for Natexis Banques Populaires and its subsidiaries is the responsibility of the Natexis Banques Populaires Risk Management division, which reports to the General Secretariat and as such is independent of the operating subsidiaries.
The Risk Management division performs a credit risk analysis for a group of counterparties based on financial elements, external ratings and the internal rating system. It relies on the expertise of credit analysts, backed up by the knowledge of bank specialists.
Commitments are measured and monitored through an electronic summary that covers virtually all the Natexis Banques Populaires loans and most of the subsidiarys’ loans.
Qualitative monitoring is carried out via rating systems and specific tools.
■ Allocation of risks The allocation of risks is ensured by internal and external rules at the Banque Populaire Group. Natexis Banques Populaires considers the allocation of risks to be part of the fundamental risk management policy.
■ Monitoring of counterparty risk Commitments to capital market counterparties, usually banking institutions, are governed by limits.These limits are subject to the decisions of an ad hoc committee and are supervised using the bank’s monitoring tools. Any overruns are covered by monthly special committee meetings.
■ Natexis Banques Populaires policy Natexis Banques Populaires conducts transactions on the capital markets through its Capital Markets division or its subsidiaries.These transactions are carried out on behalf of the clientele of Natexis Banques Populaires (brokerage, management for third parties) or on its own account.
Fi na nc ia l i nf or m at io n Re po rt s on th e in te rn al c on tr ol p ro ce du re s
Capital markets risk is measured on a daily basis by the middle offices using front office systems or appropriate tools
In terms of liquidity risk, the Capital Markets division refinances the needs generated by the activities of Natexis
Operating risks are defined as the risks of loss due to the inadequacy or failure of processes, personnel, and systems or to external events.
Operating risk management was strengthened in 2003 with the creation of an Operating Risk Management department within the Natexis Banques Populaires Risk Management division, in accordance with the recommendations of the Basle committee. It relies on the internal control measures applied to all activities.
The Operating Risks committee, which seeks to appraise, on a transversal basis, all Natexis Banques Populaires operating risks, met five times in 2003. Its work focused on crisis management, business line disaster recovery plans and information system security.
Following the other control functions, the anti-money laundering cell, previously part of Internal Audit, was attached to the General Secretariat as of October 1, 2003. The entity, whose resources have been considerably strengthened, has become the Financial Crime Prevention department. In addition to money laundering, its role covers anti-terrorism efforts and the application of rules for the prevention of corruption.
The measures and resources of the Ethics function for Natexis Banques Populaires and its subsidiaries have been gradually reinforced throughout the year, particularly in regard to the situation of so-called “sensitive” persons.
scope of activity covers the management and administration of logical security. It also covers the operating risks to which the bank is exposed, regulatory supervision, the drafting of the Natexis Banques Populaires security charter, the disaster recovery plan, and back-up procedures.
The department also defines the bank's IT security architecture, detects and thwarts intrusion attempts and, more generally, proposes and initiates any measures necessary to safeguard and reinforce the security of Natexis Banques Populaires IT tools.
The Natexis Banques Populaires consolidated financial statements are prepared by the Financial Management of Natexis Banques Populaires, using the consolidation tool and framework developed by Banque Fédérale des Banques Populaires. As a listed company, Natexis Banques Populaires prepares separate consolidated financial statements, even though the sub-group which it heads is included in a larger consolidation package established by the Banque Populaire Group. Accordingly, the Natexis Banques Populaires consolidation process is independent but, nevertheless, fully interlinked with that of the parent.
As they are decentralized due to the existence of management and control functions within most of the subsidiaries, the internal control procedures are adapted to the organization of each consolidated company and systematically include a three-level accounting control process: ■ a basic level where the permanent controls of the operating divisions are integrated within the treatment process; ■ an intermediate level represented by the financial or accounting divisions where controls that are independent of the treatment processes are performed to ensure the reliability and completeness of the accounts; ■ finally, a top-level control involving Internal Audit in its compliance control role.
Banques Populaires Internal Audit, including the 2003 audit of Natexis Banques Populaires Financial Management, covering, in particular, the consolidation process; ■ the joint statutory audit work carried out consistently for the main Group entities and for which the conclusions are based, among other elements, on compliance with Group standards enacted by Banque Fédérale des Banques
Populaires, as well as the effectiveness of local internal control procedures.
Group’s two listed companies, Natexis Banques Populaires and Coface, are responsible for analyzing, without the presence of the Company Officers, the individual and consolidated financial statements of the entities concerned and ensuring the pertinence and permanence of the accounting methods and main accounts closure options.
It expresses an opinion on the choice of statutory auditors, their audit plan and the allocated budgets. It can also meet with other individuals who, in one form or another, participate in the preparation or audit of the financial statements, in particular with Financial Management and
2.4 – Conclusion In 2004, Natexis Banques Populaires will pursue its strategies aimed at optimizing its control mechanisms and will tailor them to the changes in its activities as well as in the regulatory environment (Basle Committee, IAS standards, banking regulations).
The efforts undertaken to rationalize the work methods and resources of the risk monitoring and management teams will be maintained.
With respect to its accounting and financial internal control systems, the Group has committed in the short and midterm to numerous projects whose development will continue. Specifically, these will cover the harmonization of accounting control procedures, integration of the Coface sub-group in the Group’s direct consolidation mechanism, finalization of the Natexis Banques Populaires’ accounting systems convergence to a single application, and reduction of the accounts closure time periods.
It is our responsibility to report to you our observations on the information and assertions set out in the Chairman’s report on the internal control procedures relating to the preparation and treatment of financial and accounting information.
We have performed our procedures in accordance with the professional guidelines applicable in France. These guidelines require that we perform procedures to assess the fairness of the information set forth in the Chairman’s report with respect to internal control procedures relating to the preparation and treatment of the financial and accounting information. These procedures mainly consisted of the following: ■ familiarizing ourselves with the internal control objectives and general organization as well as the internal control procedures relating to the preparation and treatment of financial and accounting information, as presented in the Chairman’s report; ■ familiarizing ourselves with the procedures underlying the information presented in the report.
Auditors’ report, prepared in accordance with the last paragraph of Article L225-235 of the French commercial code, on the report prepared by the Chairman of the Board of Directors, with respect to the internal control procedures for the preparation and treatment of financial and accounting information
Board of Directors’ report on the resolutions presented to the General Meeting of May 27, 2004 214
Resolutions presented to the General Meeting of May 27, 2004 215
Convening of general meetings General Meetings are convened by the Board of Directors in accordance with the law.The meetings are held at either the corporate headquarters or any other specified location.
Conditions for exercising voting rights Pursuant to Article 26 of the bylaws, each shareholder is entitled to as many votes as the number of shares he or she owns or represents subject to the following provisions.
Double voting rights shall be granted, based on the number of shares held in the Company and pursuant to applicable laws and regulations, to all registered shares fully paid-in. Evidence of share ownership under the same name for a period of at least two years shall be requested. Double voting rights shall also be granted, in the event of a common stock issue via capitalization of available reserves, additional paid-in capital or profits, to registered shares issued free of charge to a shareholder based on existing shares entitled to this right.
Shares converted into bearer shares or sold shall cease to be entitled to double voting rights. Nonetheless, the two-year period referred to in the previous paragraph shall not be interrupted by transfers between registered holders as a result of in testate succession or inheritance by will, the split of assets between spouses, or gifts during a lifetime to a spouse or a close relative.
Shareholder identification Under Article 5 of the bylaws, the Company may, under the conditions laid down by applicable law regulations, request any relevant body or authorized intermediary to provide all information concerning holders of securities that confer immediate or future rights to vote at General Meetings, and notably their identity, nationality, address, the number of shares held by them and the restrictions binding such shares.
Any individual or legal entity holding, directly or indirectly, on their own or in concert with another such individual or legal entity, a fraction of 1% of the voting rights, or any other multiple thereof, must notify the Company, by registered letter with acknowledgement of receipt, of the number of voting rights it holds. Such notice must be made within 15 days of each acquisition or disposal of this percentage or multiple thereof.
In the event that the above-mentioned reporting requirement is not complied with, and at the request, recorded in the minutes of the General Meeting, of a shareholder representing at least 1% of the voting rights, those shares held in excess of the percentage limits that should have been reported shall be stripped of all voting rights for a period of two years following the date notice is given.
Shareholders, having approved in the second resolution agreements involving members of the Board of Directors detailed in the Auditors’ Special Report, are asked to approve, in the third resolution, the appropriation of earnings and the distribution of dividends.
Fi na nc ia l i nf or m at io n Le ga l i nf or m at io n
Company to trade in its own shares, in accordance with defined limits and conditions, where permitted by law.
The mandates of the three statutory auditors and three alternate auditors are due to expire at the end of the Annual
The thirteenth to sixteenth resolutions ask shareholders to renew the terms of office of the four directors, which are due to expire as from the end of this meeting.
Mr. Jean-Paul Béchat presented his resignation to the Board in February 2004 after accepting new responsibilities, which are incompatible with his role as independent director. As such, shareholders are asked to appoint Mr.Vincent Bolloré,
Chairman of Banque Populaire d’Alsace to the Board in replacement of Mr.Alain Jacquier, who is stepping down from his Banque Populaire Group functions in 2004.
Resolutions presented to the extraordinary general meeting Resolution twenty asks shareholders to renew for one year and within the limit of 500,000 options, the authorization granted to the Extraordinary General Meeting of May 31,2001, in view of the allotment of share subscription or purchase options to employees of Natexis Banques Populaires and its subsidiaries, Banque Fédérale des Banques Populaires, as well as Banque Populaire regional banks and some of their subsidiaries.
The twentieth and twenty-first resolutions ask shareholders to grant the Board authorization to reduce the Company’s common stock, where deemed necessary, by cancellation of a portion of the treasury shares.
First resolution: Approval of the financial statements Overview: This resolution asks shareholders to approve the financial statements for fiscal year 2003.
Shareholders, having reviewed: ■ the management report on the business activities of
December 31, 2003; ■ the parent company financial statements; ■ and having heard the Auditors’ reports; approve the 2003 financial statements as presented to them.
Second resolution:Auditors’ report Overview: This resolution asks shareholders to approve any agreements involving members of the
on agreements involving members of the Board of Directors covered by Article L225-38 of the French Commercial Code.
Directors, approve this proposal and: ■ decide to: – appropriate net income for the year of EUR200,728,250.83
– to the legal reserve in the amount of EUR9,571,170.75 leaving distributable earnings of EUR181,852,244.26
– appropriate the residual balance to retained earnings EUR39,362.12 giving total distributable earnings appropriated of EUR181,852,244.26
Fourth resolution:Approval of the consolidated financial statements Overview: This resolution asks shareholders to approve the consolidated financial statements for fiscal year 2003, pursuant to the law of May 15, 2001.
Fifth resolution:Allocation of dividends payable on treasury shares held by the Company
Shareholders hereby resolve to allocate to retained earnings the 2003 dividends payable on the Natexis Banques
Populaires shares held by the Company as of the payment date. In 2002, such dividends represented an aggregate amount of EUR1,897,311.
Overview: This resolution asks shareholders to authorize the Company to buy, subject to a 5% limit, its own shares on the stock market.
Pursuant to Articles L225-209 to L225-212 of the French Commercial Code, and after having duly noted the Board of Directors’ report and the prospectus approved by the Autorité des Marchés Financiers (AMF), the French Securities Regulator, shareholders hereby authorize the Board of Directors and Executive Management to buy shares representing a maximum of 5% of the common stock, or currently 2,402,257 shares.
Shareholders set the maximum purchase price per share at EUR125 and the minimum selling price per share at EUR50.
Shareholders hereby renew the mandate of RSM Salustro Reydel as Statutory Auditor for a period of six years, expiring at the end of the Annual General Meeting held to adopt the 2009 financial statements.
Shareholders hereby appoint BEAS as Alternate Auditor, in replacement of Mr. Bernard Boiton, for a period of six years, expiring at the end of the Annual General Meeting held to adopt the 2009 financial statements.
Twelfth resolution: Renewal of the mandate of an Alternate Auditor Overview: This resolution asks shareholders to renew the mandate of Mr. François Chevreux, whose current mandate expires this year, as Alternate Auditor for a period of six years.
Overview: This resolution asks shareholders to renew the term of office as Director of Mr. JeanFrançois Comas, which expires this year, for the period provided in the bylaws.
Fourteenth resolution: Renewal of a Director’s term of office Overview: This resolution asks shareholders to renew the term of office as Director of Mr. Daniel Duquesne, which expires this year, for the period provided in the bylaws.
Overview: This resolution asks shareholders to appoint Mr. Vincent Bolloré as Director in replacement of Mr. Jean-Paul Bechat, who has resigned from his functions, and whose term of office was due to expire this year.
Eighteenth resolution: Appointment of a Director Overview: This resolution asks shareholders to appoint Mr. Christian Brevard as Director in replacement of Mr. Alain Jacquier, who has resigned from his functions.
Shareholders hereby appoint Mr.Yvan de La Porte du Theil as Director in replacement of Mr. René Clavaud, who has resigned from his functions, for the remaining term of office of his predecessor, notably the end of the Annual General Meeting held to adopt the 2005 financial statements.
Consequently, shareholders hereby confer on the Board full powers to perform share issues, on one or more occasions, within the limit of 500,000 options.
In accordance with the law, this authorization includes the express waiver by shareholders of their preferential subscription rights to all other shares that shall be issued following the exercise of their options, in favor of option beneficiaries.
Furthermore, for the allocation of purchase options, the purchase price may not be less than 95% of the average purchase price of the shares held by the Company in respect of Articles L225-208 and L225-209 of the French Commercial Code.
Options not exercised within seven years shall be deemed null and void.
This authorization is valid for a period of fourteen months as from the date of this meeting.
A maximum of 500,000 shares comprising Company common stock can be canceled by the Company in application of this authorization during a continuous period of 18 months.
The difference between the purchase price of the shares and their nominal value shall be deducted from all reserve or additional paid-in capital headings.
Shareholders confer full powers on the Board of Directors, including that of delegation, to perform the common stock cancellation(s) or reduction(s) that may arise from application of this authorization, make the necessary amendments to the bylaws and perform all formalities.
Persons responsible for the reference document and the audit of the financial statements 232
Corporate purpose Pursuant to Article 2 of the bylaws, the corporate purpose in France and abroad is as follows: ■ the performance of all types of banking transactions and related operations under banking law; ■ the supply of all type of investment services as defined by the Monetary and Financial Code; ■ the performance of specific assignments on behalf of the French State in economic and financial areas, in connection with specific agreements; ■ the performance of all brokerage operations; ■ the acquisition of interests in companies, groups or associations with a direct or indirect involvement in the above-mentioned activities; ■ and the performance of all manner of private and commercial transactions.
Incorporation particulars Paris Trade and Companies Register RCS Number: Company legal documents All books and records relating to the Company and, in particular, its bylaws, financial statements and reports presented to Shareholders’ Meetings by the Board of Directors or the Auditors, may be consulted at the corporate headquarters.
Appropriation of earnings (Title V, Article 34 of the Company’s bylaws) 5% of annual profits, less any prior year losses, is taken to the legal reserve. This transfer of profits is no longer required once this reserve exceeds an amount equal to one-tenth of the common stock and becomes mandatory once again when the reserve falls below one-tenth of the common stock.
Annual dividends shall be paid on the date set by the Board of Directors, within nine months of the year-end.
Form and method for recording shares (Title II, Article 4 of the Company’s bylaws) Company shares take the form of registered shares or identifiable bearer shares, at the option of the holder.
They are registered in an account and transacted according to the terms and conditions defined in the applicable laws and regulations.
Common stock EUR768,722,224 as of December 31, 2003, made up of 48,045,139 fully paid-up ordinary shares of EUR16 par value each.
This authorization covers share issues performed with and without retention of shareholder preferred subscription rights.
Populaires, the Banque Populaire regional banks, and entities in which Banque Fédérale des Banques Populaires or associated undertakings hold, directly or indirectly, individually or jointly, over 50% of common stock.
Board meeting which determined the conditions of the annual stock option plan, after deducting the 5% discount provided by applicable law.
Finally, a decision was taken to allot 406,890 share subscription options as follows: ■ 185,900 to employees and executives of Natexis Banques
Populaires or associated undertakings hold, directly or indirectly, individually or jointly, over 50% of common stock.
(*) Certain exceptions enable options to be exercised in advance. ** The amounts shown in this table are included in the preceding table.
Changes in common stock over the past five fiscal years Opening number Number of shares created Closing number Common stock of shares during the year of shares (in EUR)
Shares issued in consideration for the merger-absorption of Banques Populaires Ingénierie S.A. by NBP 459,555 7,352,880 28,052,982.82
Shares issued in consideration for the transfer of Assurances Banque Populaire and Factorem and the transfer-merger of SAS Fructivie and Factorem 3,386,962 54,191,392 144,992,018.29
Shares conversion of Perpetual subordinated securities convertible into shares 83,310 1,332,960 4,191,769.44
Shares issued following the merger with the real estate company ABC 217 3,472 3 943,16
Closing number of shares 47,442,837 759,085,392 2003 Opening number of shares 47,442,837 759,085,392
Shares issued in contribution for Banque du Dôme-Crédifrance Factor securities 218,559 3,496,944 14,643,375.64
Executive officer shareholdings are not material. Please refer to page 223 for details of stock options allotted to certain employees and executive officers.
Quantity purchased Purchase price Average price Quantity sold % common stock in EUR in EUR
In June 2001, a first Group share ownership plan was implemented, resulting in the issue of 1,273,854 new shares reserved for Banque Populaire Group employees.Within the
Company mutual investment funds, the share of common stock held by Banque Populaire Group employees now totals 4.12%.
Markets on which Natexis Banques Populaires securities are listed Natexis Banques Populaires shares are listed on the Paris Euronext Premier Marché and qualify for deferred settlement (ISIN Code: FR0000120685). Natexis Banques Populaires securities are included in the SBF 120 and SBF 250 indexes.
As of January 1, 2003, there were no outstanding subordinated securities convertible into shares.
5 – Dividends Dividends not claimed within a period of five years following the date of payment are barred by statute and paid to the French State in accordance with the law.
Dividends distributed during the past five years: 12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003
Background Natexis Banques Populaires was created by the transfer of Caisse Centrale des Banques Populaires’ (CCBP) operating activities to Natexis S.A. and was approved by the Extraordinary General Meetings of the two entities on July
Natexis S.A. common stock.This interest was increased to 74.36% at the end of 1998.
Following the law of May 15, 2001, BFBP replaced CCBP as the central body of the Banque Populaire Group.
The transfer in July 1999 of CCBP operating activities to Natexis S.A. produced a new entity, Natexis Banques Populaires.
On June 28, 2000, Natexis Banques Populaires shareholders in Extraordinary General Meeting approved the mergerabsorption of Natexis Banque by Natexis Banques Populaires, with effect from June 30, 2000.As the operation involved the absorption of a wholly-owned subsidiary, it was performed under the simplified merger regime and did not result in the issue of new shares.
The decision by Natexis Banques Populaires to control the entire common stock of its subsidiaries within its own structure, resulted in a number of transactions during 2000 which led to it holding the entire common stock of
In May 2002, the German bank DZ Bank AG acquired Natexis Banques Populaires shares as part of its partnership with the Banque Populaire Group, giving it a 1.89% interest as of December 31, 2003.
During the year, two transactions had a slight impact on the breakdown of Natexis Banques Populaires share ownership: ■ transfer of the Banque du Dôme-Crédifrance Factor shares to Natexis Banques Populaires by Banque Fédérale des Banques Populaires.
■ transfer of the Sopromec Participations shares to Natexis Banques Populaires by Banque Fédérale des Banques Populaires.
Pursuant to the terms of the agreement entered into between the Banque Populaire and the Crédit Coopératif Groups on November 18, 2002, Crédit Coopératif transferred 958,124 shares of Sopromec Participations, a Caisse Centrale de Crédit Coopératif subsidiary specialized in small and medium-sized enterprise financing using all or a portion of own funds. An agreement for the transfer of Sopromec Participations shares to Natexis Banques Populaires by Banque Fédérale des Banques Populaires was then signed.
The Natexis Banques Populaires Extraordinary General Meeting held on November 19, 2003 approved all provisions of the aforementioned transfer. The transfer was based on the recognized value at the time of the transaction in December 2002, i.e. EUR30,634,915.45. The Sopromec Participations share transfer was financed by a Natexis Banques Populaires common stock increase for a par value amount of EUR5,386,352, together with additional paid-in capital of EUR25,248,525 and a balancing payment of EUR38.45. This common stock increase was calculated based on a per share issue price of EUR91.
7 – Persons responsible for the reference document and the audit of the financial statements
Person responsible for the reference document M. François Ladam Chief Executive Officer
– Deloitte Touche Tohmatsu, 185, avenue Charles de Gaulle - 92200 Neuilly-sur-Seine
– RSM Salustro Reydel, 8, avenue Delcassé - 75378 Paris Cedex 08
– Barbier Frinault et Autres, 41, rue Ybry - 92576 Neuilly sur Seine
– Bernard Boiton, residing 16, Parc de Béarn – 92210 Saint-Cloud
The Statutory Auditors and Alternate Auditors were appointed by the Extraordinary General Meeting of June 16, 1998, for a period of six years expiring at the end of the Annual General Meeting held to approve the 2003 financial statements.
We have audited in accordance with professional standards applicable in France the Company financial statements for the year ended December 31, 2001 and the Company and consolidated financial statements for the year ended December 31, 2002, approved by the Board of Directors.We expressed an unqualified opinion on such financial statements.
We have audited in accordance with professional standards applicable in France the consolidated financial statements for the year ended December 31, 2001, approved by the Board of Directors.We expressed an unqualified opinion, including an observation drawing attention to Notes 1.8, 1.11 and 2.16 to the consolidated financial statements which detail the accounting changes resulting, respectively, from the adoption of the preferred accounting method for lease finance transactions where the Group is the lessee, the application of the new consolidation rules applicable to insurance companies and the harmonization of long-service medal schemes.
Pursuant to Article L225-235 of the French Commercial Code governing the justification of our assessments, as
introduced by the French Financial Security Act of August 1, 2003, which applies for the first time this year, we referred to the justification of the following assessments in our report on the financial statements: ■ your Company records provisions to cover the credit risks arising from the performance of its activities. As part of our assessment of the significant estimates made by management, we reviewed the control mechanism for monitoring credit risk, the assessment of risks of nonrecovery and their coverage by both individual, as well as industry and country risk provisions; ■ in addition, Note 17 to the financial statements describes a change in accounting method for non-performing loans pursuant to CRC Regulation No. 2002-03.As this concerns loans restructured in previous fiscal years at non-market conditions, the discount set forth in this regulation was deducted from shareholders’ equity in the amount of EUR11 million. This change in method is justified by the application of the new regulation and the compliance of the accounting translation with current policies; ■ as indicated in Note 5.2 to the financial statements, Natexis Banques Populaires valued its investments in affiliates based on an independent expert appraisal for the most material investments. As part of our assessment of the significant estimates made by management, we familiarized ourselves with the conclusions of the independent expert and verified their inclusion in the balance sheet as of
Cr os s Re fe re nc e ta bl e
Attestations of persons responsible for the reference document and the audit of the financial statements
Attestation of the persons responsible for the reference document p. 232 Attestation of the statutory auditors of the financial statements p. 233 Corporate communications p. 234
Natexis Banques Populaires activities Organization p. 30, 230 Key figures Inside cover page Quantified industry information p. 71 à 84, 145 Markets and competitive position p. 33 to 61 Investment policy p. 80, 171 Performance indicators None
Capital market risks p. 88 Specific risks relating to activities p. 84 to 91 Legal risks p. 91, 232 Industrial and environmental risks None
Corporate governance Composition and activities of the Board of Directors p. 10, 11 Composition and activities of the committees p. 12 Executive officers p. 14 Top ten non-executive officers p. 224 Related party transactions p. 157
Recent changes and outlook for the future Recent changes p. 98 Outlook for the future p. 98
Photo credits Digitalvision, Fabrice Vallon, Getty Images, Image Bank, Images Dynamo,
This reference document was filed with the Autorité des Marchés Financiers (the French Securities and Exchange Commission)
on 27/4/2004, in accordance with regulation n°98-01 (AMF filing n° D.04-0590). The document may be used to support a financial operation if it is complemented with an operation note stamped by the Autorité des Marchés Financiers.
The Group delivers an expansive product offering to clients on global markets from its Paris headquarters, as well as from branches in Frankfurt, London and Tokyo, and the New York-based operation, CDC IXIS Capital
Management report 26 Business lines in 2003 34 Financial structure and regulatory ratios 36 Risk control 43 Internal control and compliance 45 Resources 47 Outlook for 2004 48 Legal elements (extracts)
95 Table of results for the past 5 years 96 Additional information 100 AMF regulations table
Caisse des dépôts et consignations will consolidate its role as an investor with a 35% stake in the new bank.
This operation represents a genuine opportunity for CDC IXIS Capital Markets to develop and expand within a group that commands an excellent rating.
CDC IXIS Capital Markets once again proved its ability to adapt to the prevailing economic and financial environment.
With consolidated net profit of €112 million and an ROE of 16%, the Group not only beat its targets, but also confirmed that growth was being achieved virtuously, while posting its best results to date.
As in 2002, our profits in 2003 were driven by solid resistance in equity businesses and an excellent showing in fixed-income markets. They were also fuelled by the expansion of our international operations, via our three branches in Frankfurt, London and Tokyo, and were achieved while maintaining an extremely stringent risk selection policy.
Caisse d’Epargne Group, one of our major challenges in 2004 will be to ensure the successful integration of our activities with those of Caisse Nationale des Caisses d’Epargne et de Prévoyance (CNCEP). This operation represents an important stage in the development of our business.
It will enable CDC IXIS Capital Markets to house its business lines within one of France’s largest banking groups, while continuing to pursue its growth model as a multi-specialist in a selection of high value-added businesses.
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Supervisory Board Supervisory Financial and Internal Remuneration and specialised committees Board Control Committee Committee
BCEEL Member - Chairman Date first appointed: 3 November 1998 Permanent representative (since 3 November 1998): Raymond Kirsch, Chairman of BCEEL BCEEL has been represented by Jean-Claude FINCK since 16 February 2004
Jean-Pierre Menanteau, Director of Economics Member Member and Finance of SNCF group Date first appointed: 17 October 2003
Nicolas Merindol, Member of Executive Board of CNCEP Member Member Member Date first appointed: 20 March 2002
The mandates of the members of the Supervisory Board will be subject to renewal at the Annual General Meeting of Shareholders convened to approve the accounts for the financial year ended 31 December 2003.
Alain Prévot, General Secretary Chief Executive Date first appointed: 3 November 1998 Officer
Since January 2004 Michel Berthezène Member Date first appointed: 14 January 2004
Preparation and organisation of tasks undertaken by the Supervisory Board and specialised committees (1)
CDC IXIS Capital Markets’ definition of an independent Board member is that set out in the Bouton Report of 23 September 2002, i.e. any person whose judgement remains free of influence from any relations that he or she may maintain either with the Company, the Group to which it belongs or its management.
The Supervisory Board ensures the Company and the entities attached to it are functioning correctly. In this capacity, it exercises control over the management of the Executive Board and on the accounts drawn up by the Board.