Coface has implemented an investment policy that incorporates the management of fi nancial risk through the defi nition of its strategic allocation, regulations governing insurance companies and constraints related to the management of its liabilities. Management of fi nancial risks is thus based on a rigorous system of standards and controls which is regularly reviewed: V interest rate risk and credit risk: the majority of Coface’s allocations are in fixed-income products which guarantee it recurring and stable revenue. The overall maximum sensitivity (1) of the bond portfolio has been deliberately capped at 4 and stood at 3.2 at December 31, 2015. Coface is not exposed to Greek or Portuguese sovereign debt. Coface has limited exposure to Italian, Spanish and Irish sovereign debt as part of a defined risk budget; V exchange rate risk: the majority of Coface’s investment instruments are denominated in euros. Subsidiaries and branches using other currencies must observe the same principles of congruence. In 2015 systematic foreign exchange hedges, through swaps or forward foreign exchange instruments, were arranged in the portfolio containing all of Coface’s European entities, to hedge bond investments denominated in USD, GBP and AUD; V equity risk: the exposure is capped at less than 10% of the portfolio and is concentrated in the euro zone, in connection with its core business. At December 31, 2015 listed equities represented 8.2% of the investment portfolio and underwent partial, discretionary hedging, through the acquisition of put options on indices, to mitigate any external shocks; V counterparty risk: the maximum exposure to any given counterparty is set at 5% of the assets under management, with exceptional exemptions for short-term exposures. More than 84% of the bonds are Investment Grade and therefore have a median rating (2) equal to at least BBB-; V liquidity risk: more than 54% of the bond portfolio was due to mature in less than three years at December 31, 2015. The vast majority of the portfolio is listed on OECD markets and carries a liquidity risk which is currently considered as weak.
As part of the new Solvency 2 supervisory regime, which came into effect on January 1, 2016, CEGC submitted an application to certify its internal assessment model for underwriting risks on mortgage guarantees for retail customers. In 2015 CEGC also participated in an exercise organized by the ACPR in preparation for the entry into force of the Solvency 2 regulation. The aim of the exercise was to submit part of the new regulatory reports on an annual and quarterly basis in XBRL format, to submit an ORSA report presenting the main results of CEGC’s internal risk assessment and to submit the narrative report.
CEGC holds an investment portfolio of about €1.47 billion on its balance sheet as at December 31, 2015. The portfolio is up 12.5% since the end of 2014. Market risk from the investment portfolio is limited by the Company’s investment choices. The Company’s risk limits are set out in the Asset Management agreement established with Natixis Asset Management. By collecting security insurance premiums at the time of commitment, CEGC does not require funding. Neither does CEGC carry transformation risk: the investment portfolio is entirely backed by equity and technical reserves.
Strategy risks are monitored by the Board of Directors, supported by the Strategic Committee, which approves the strategies guiding Natixis’ activities and reviews them at least once a year. The Board of Directors also approves strategic investment projects and any transactions, particularly including acquisitions and disposals, that are likely to signifi cantly affect Natixis’ results, the structure of its balance sheet or its risk profi le.
Natixis was exposed to the following risks at December 31, 2015.
Value adjustments increase by €3 million during 2015 (excluding the effect of the BPCE guarantee) to €106 million at December 31, 2015, versus €103 million at December 31, 2014.
Net exposure at 12.31.2015 AAA AA A BBB BB B CCC CC
At December 31, 2015 exposure to non-government risk, in particular Greece and countries facing uncertainties (political, currency, etc.), directly held by Natixis stood as follows: (in millions of euros)
December 31, 2015Bank Asset fi nancing and structured transactions (c) Corporate * Countries receiving fi nancial aid from the European Union.
(a) Gross exposure: gross carrying amount on the balance sheet at December 31, 2015.
The presentation of the divisions in 2015 is unchanged relative to December 31, 2014.
A new presentation of the business lines in Natixis’ Corporate & Investment Banking division was implemented following the creation of Strategic Equity Transaction (SET), a joint venture combining activities previously carried out by the fi nancing business lines or by the Equity business line. SET offers Natixis’ clients solutions for managing their equity positions. Revenues from this joint venture are, by convention, shared equally between Equity and Structured & Asset Finance business lines. Quarterly series have been recalculated as a result.
The earnings of the Natixis divisions have been presented in accordance with Basel 3 regulations.
Capital allocation specifi c to the Insurance businesses is based on the Basel 3 accounting treatment for investments in insurance companies, as stated in the CRD IV and CRR (“Danish compromise”). The capital allocated to CEGC takes into account its exclusion from the “Danish compromise”. It is based on a 250% risk weighting of the value of the structure’s securities, which is the prudential treatment under the threshold mechanism applied to the holding of capital instruments issued by fi nancial entities.
The conventions applied in determining the earnings generated by the various business lines are as follows: V the business lines record the return on regulatory capital allocated to them. By convention, the rate of return on normative capital remained at 3%; V the return on share capital of the entities comprising the divisions is eliminated; V the divisions are invoiced for an amount representing the bulk of Natixis’ overhead. The uninvoiced portion accounts for less than 3% of Natixis’ total expenses. The Single Resolution Fund contribution is covered by the Corporate Center and is not reallocated to the divisions.
Deeply Subordinated Notes (DSNs) are classifi ed as equity instruments, while interest expense on these instruments is not recognized in the income statement.
V Natixis’ ROTE is determined using, as the denominator, the average book value after distribution of dividends, excluding average hybrid debt, average intangible fixed assets, and average goodwill, including goodwill recognized on companies accounted for by the equity method. The numerator comprises net income (Group share) minus interest paid on DSNs net of tax.
The application from January 1, 2015 of the IFRIC 21 “Levies” interpretation covers the accounting for taxes other than income tax. It leads to relevant tax liabilities being recognized on the date of the obligating event, not necessarily progressively over a reporting period. This resulted in an increase in expenses for the fi rst quarter and an equivalent decline over the other three quarters. These taxes are re-invoiced to the business lines. The 2014 quarterly series have been restated to meet the same accounting standard, with an annual impact of -€3.5 million (2014 published data) due to the accounting recognition on January 1, 2014 of the corporate Social Security and Solidarity Contribution (C3S).
In summary, pro forma calculations were performed on 2014 data: V for all divisions to account for the impact of the change in the allocation of regulatory capital from 9% to 10%, and the change related to IFRIC 21; V for Corporate & Investment Banking, the new presentation of business lines following the creation of the SET joint venture.
Private Banking maintained a solid sales momentum in 2015 in its individual, business owner and senior executive customer segments, with infl ows of around €2 billion.
The quality of the relationship that the wealth management teams forged with coverage was confi rmed, making it possible for the bank to initiate business relationships with individuals in the companies overseen by these teams.
With €6 billion in assets under management at December 31, 2015 and 713 active IWMAs, Sélection 1818 won two major awards in 2015. The Banque Privée 1818 subsidiary dedicated to independent advisors was voted the No. 1 banking platform in France for the second year in a row by Gestion de Fortune magazine at its 22nd Supplier Awards (Palmarès des Fournisseurs). It was also recognized by Investissement Conseils magazine at the Pyramides de la Gestion de Patrimoine 2015 awards and received the Advisors Award in the banking platform category.
VEGA Investment Managers manages close to €6 billion in assets. This year the Revenu awards, held jointly with Morningstar, recognized two funds in the Top 10 best 1-, 3- and 5-year fund categories: Élite 1818 France Opportunité continued its ascent to take fi fth place in the best funds for French equities, and VEGA Europe Convictions went straight to sixth place in European equities. These outstanding performances bring recognition to VEGA Investment Managers’ active management based on meticulous and responsive stock selection.
4 OVERVIEW OF THE FISCAL YEARManagement report at December 31, 2015 As a result of BPCE’s stated strategic aim in Insurance, in the fi rst half of 2015 CNP and BPCE groups fi nalized the terms of the partnership agreement that will enter into force on January 1, 2016 for an initial term of seven years.
Accordingly, Natixis Assurances will become the exclusive insurer for retirement savings (life insurance and accumulation products) and personal protection insurance distributed by Caisses d’Epargne from January 2016. Similarly, in order to facilitate the run-off of existing assets at CNP, the parties’ interests were aligned via a cross-reinsurance mechanism, namely the approval by BPCE Vie, a wholly-owned subsidiary of Natixis Assurances, of quota-share reinsurance amounting to 10% of “Caisse d’Epargne” life insurance insured by CNP on December 31, 2015.
Furthermore, with regard to payment protection insurance, Natixis Assurances will co-insure 34% of all guarantees offered by collective contracts (“group contracts”) distributed by the BPCE networks (Banques Populaires, Caisses d’Epargne, Crédit Foncier), with CNP acting as lead insurer.
Finally, the parties agreed that Natixis Assurances would acquire 49% of equity in Écureuil Vie Développement, a common-law operational structure that will pool the resources and responsibilities for assisting sales of life insurance policies for retirement savings and personal protection insurance that are distributed by the Caisses d’Epargne network.
A new milestone was reached in December 2015 with the opening of the Centre d’Expertise et de Relation Client (CERC - Center for Expertise and Customer Relations) in Villeneuve d’Ascq. The center serves the Banque Populaire and Caisse d’Epargne networks. The Centre breaks free from existing models in the French insurance universe, offering pioneering and entirely digital working methods and management processes.
The personal insurance offering will be rolled out to CE branches in three stages: January 2016 for the two pilot Caisses d’Epargne (Loire Centre and Rhône Alpes), May 2016 for six Caisses d’Epargne and one Banque Populaire, and September 2016 for nine Caisses d’Epargne.
As a result of this expansion of activities to the Caisses d’Epargne network, the names of the companies were changed in June 2015 to refl ect their integration throughout the BPCE networks: ABP Vie, ABP Prévoyance and ABP Iard became BPCE Vie, BPCE Prévoyance and BPCE Iard.
On the capital markets, Natixis adapted its strategy to better meet the needs of its clients by merging the fi xed income activities under one management and structuring them into two business lines: Credit and Fixed Income & Forex. It also consolidated its franchise on the primary market for euro-denominated bonds across all categories of issuers, while furthering its development on the currency issues market. Some of its top rankings included: No. 4 bookrunner on the primary bond market for fi nancial institutions (Source: Dealogic) and No. 4 with agencies (Source: Dealogic, by number of transaction), No. 1 with public and private companies in France (Source: Dealogic). In the covered bonds segment, Natixis remands the leader on the euro market (No. 1 bookrunner on the EUR primary covered bond market in 2015 - Source: Dealogic).
The Specialized Financial Services division stepped up its relations with the BPCE networks by rolling out new products and services and new tools that adapt to changes in distribution and customer needs. They also maintained strict control of operating expenses and use of scarce resources while implementing a strategy based on operational effi ciency and innovation. Accordingly: V deployment of new products together with the roll-out of the “limit exceeded alert” revolving credit offering in the Caisse d’Epargne network and, in factoring, the Reverse Factoring product; V launch of the dynamic verification code, or motion code, card designed by Natixis with Payment Solutions. This innovative technology enhances the security of online transactions, and is a world first; V in response to the wave of digital disruption, the SGS business lines launched an innovation and digital transformation program to help transition their business into the digital world.
Equity (Average) 16,608 16,227 * Excluding GAPC for 2014 ** Core businesses and fi nancial investments.
4 OVERVIEW OF THE FISCAL YEARManagement report at December 31, 2015 Analysis of changes in the main items comprising the consolidated income statement
Net revenues earned by Investment Solutions climbed 25%, buoyed by solid momentum in asset management, especially in Europe, and by higher income in all segments of the Insurance business.
Corporate & Investment Banking’s net revenues picked up by 5% once restated for the main non-recurring items (3) despite controlled capital and liquidity resources.
Within the fi nancing business lines, SAF posted net revenues down 1% at constant exchange rates and excluding non-recurring transactions. New business (excluding SET) was up 19%, and, within the business line, AEI’s business levels picked up signifi cantly. Commercial banking revenues, however, fell 13% as a result of lower margins.
In capital market activities, up 9% excluding 2014 non-recurring items, revenues were most driven by the Equity Derivatives activities, which gained 44% on 2014 (excluding the SET joint venture) to become the main growth driver of the market business lines. Excluding non-recurring items, revenues from the Fixed Income, Credit, Forex, Commodities and Treasury activities gained 2% on 2014, with the Forex and Fixed Income activities being the strongest of the lot.
Net revenues recorded by Specialized Financial Services were up 3%, driven by Specialized Financing business with Group networks. Financial Services were resilient, with virtually stable net revenues despite a persistently unfavorable environment.
Furthermore, revenue synergies achieved with the BPCE networks represented €204 million in 2015, on target with the €400 million objective of the strategic plan.
As a reminder, the Corporate Center’s net revenues recorded a capital gain of €99 million in 2014 from the disposal of the stake in Lazard. In 2015 it totaled -€141 million (excluding the impact of the revaluation of own senior debt).
The Operational Effi ciency Program generated total savings of €398 million at end-2015 (of which €55 million in respect of fi scal year 2015).
The share in income from associates, for the most part consisting of contributions from Investment Solutions and Financial Investments, is up compared to 2014, totaling €46 million.
Gains or losses on other assets, which had a negative contribution of -€31 million in 2015, included an impairment loss of €29.6 million relating to the activities of CDS (Corporate Data Solutions).
Change in the value of goodwill is nil in 2015 vs. a loss of -€51 million in 2015 due to impairment losses on Corporate Data Solutions goodwill.
The recurring tax expense came to -€971 million in 2015. The effective tax rate was 40% at December 31, 2015.
After incorporating -€158 million in non-controlling interests, recurring net income (group share) amounted to €1,344 million versus €1,164 million in 2014 (excluding GAPC).
In the fi rst half of 2014, GAPC’s net loss was limited to -€28 million, leading to recurring net income (group share) of €1,136 million, including GAPC. The structure was closed at June 30, 2014.
Natixis’ CET1 ratio was at 11.2% at December 31, 2015 (versus 11.4% at December 31, 2014 and at 10.6% pro forma of DNCA’s acquisition).
Investment Solutions posted a 24.5% increase in revenues yearon -year to €3,514.9 million (up 12.9% at constant exchange rates) with a net scope effect of €108.7 million (of which €108.3 million related to DNCA).
Expenses rose 18.6% (up 7.7% at constant exchange rates) with the continued development of Asset Management, refl ected by the acquisition of asset management fi rm DNCA, and of the Insurance segment with the implementation of the Assurément#2016 project and the opening of the Center for Expertise and Customer Relations for the Caisses d’Epargne activities.
The provision for credit losses recorded a sharp rise of €3.6 million, of which €2.3 million for Private Banking and €1.3 million for Asset Management.
4 OVERVIEW OF THE FISCAL YEARManagement report at December 31, 2015 ■ CHANGE IN ASSETS UNDER MANAGEMENT
O in various other products. Inflows from the DNCA asset management firm, integrated in the middle of the year, totaled €2.8 billion; V the United States posted net inflows of €11.9 billion, driven in large part by Loomis in bond and equity products and, to a lesser extent, by Alpha Simplex and Vaughan; V net inflows generated by Private Equity firms came to nearly €500 million.
NGAM US Distribution posted very strong gross infl ows of $62.7 billion, with net infl ows reaching $1.7 billion.
At December 31, 2015, net revenues came to €2,754.7 million, up 28.9% from the same period in 2014 (up 13.4% at constant exchange rates). They were driven by fees on assets under management of asset management fi rms in the US and in Europe, and by performance fees for European asset management fi rms (namely H
O, NAM and DNCA). Excluding the scope effect, net revenues were up 9% year-on-year at constant exchange rates.
In terms of business levels, the sales momentum in all the Insurance segments was satisfactory in 2015.
With €4.23 billion in premiums, Life Insurance inflows fell 3% from 2014. The business line and distribution networks prioritized unit-linked policies, for which premiums were up 36% to €869 million, representing more than 20.5% of total gross infl ows. Conversely, infl ows invested in the “Euro” fund were down 10% to €3.36 billion, and decreased promotional efforts put into the “Euro” fund in an environment of historically low interest rates.
Given the lack of major fi nancial or weather-related events over the year, net revenues for Insurance businesses totaled €584.1 million, up 10.3% compared to 2014, resulting from: V strong net revenue growth in Life Insurance (€203 million, up 27%), supported by strong growth in assets (5%) linked to strong inflows on unit-linked policies (representing 20.5% of inflows, up 6 points on 2014). Likewise, the capital gains realized on the equity markets and investments made in private placements or the direct financing of the economy partially offset lower bond yields by 22 bp in an environment of historically low interest rates; V after an extremely positive 2014 fiscal year (up 22% vs. 2013), the 7% net revenue decrease (€138 million vs. €148 million) in the Personal Protection and Payment Protection insurance due to a slight increase of the loss ratio which; V significant net revenue growth in Property and Casualty Insurance (€243 million, up 11%) through organic portfolio growth and wellmanaged recurring claims.
Operating expenses were up 9.8% to €330.8 million. The Assurément#2016 project aimed at deploying the life and personal protection insurance products to the Caisse d’Epargne network from 2016, accounted for €11.3 million in 2015.
Assets under management gained 13.2% over the year to €28 billion, owing to robust infl ows and, to a lesser extent, a market effect.
Revenues from Structured Financing activities increased by 4.7% year-on-year at current exchange rates. As in the previous fi scal year, and measured without the activities of the Strategic Equity Transactions joint venture, business levels picked up signifi cantly (19%), while limiting the growth of outstandings (4%). Service fee income accounted for 37% of revenues.
V Revenues from Commodities activities picked up 27%, benefiting from the volatility on the commodity markets, including oil in particular.
V Advisory income increased by 34%. This result was driven chiefly by the integration of Natixis Partner, which made Natixis a leader on the the French M&A market by number of transactions.
Net revenues from the Strategic Equity Transactions joint venture, which are also shared between the Structured Finance and Equities activities, was down 15%.
4 OVERVIEW OF THE FISCAL YEARManagement report at December 31, 2015 In 2015, Corporate & Investment Banking’s expenses rose 8.5% to €1,861 million at current exchange rates. Excluding the impact of changes in payroll costs, 59% of this growth is attributable to the strong development of the international platforms, despite only making up approximately a third of the cost base.
Gross operating income, which stood at €1,194 million, increased by 10% at current exchange rates compared to 2014.
Based on average RWA calculated according to Basel 3 rules and intangible fi xed assets used, allocated capital was down by 3% compared to 2014.
At 9.2%, ROE gained 1.3 points compared to 2014. Excluding the above-mentioned non-recurring items recorded in 2014, it improved by 0.3 point.
Sureties and fi nancial guarantees generated turnover of €439 million, up 57%, in a very active loan guarantee market for retail customers and a context of low interest rates, favorable to loan renegotiations and redemptions.
With factoring revenues of €34.8 billion, up 9%, the Factoring business boasted market share of close to 14.0% at September 30, 2015.
Securities Services saw a 1% decline in the number of transactions in 2015. Assets under custody totaled €171 billion, down 4%. The business continued to expand its service offering to the networks.
Specialized Financing revenues picked up by almost 7%. Sureties and guarantees posted 20% growth in its net revenues, with a sharp increase in earned premiums mainly on the refi nancing of mortgage loans granted to retail customers. Consumer Finance outstandings climbed 11% and revenues 1%.
Specialized Financial Services recorded expenses of €848 million at end-2015, up 2% on 2014.
The provision for credit losses, down 23% to €58.5 million, is under control.
At 15.5%, ROE improved 1 point, refl ecting ongoing efforts to improve management of allocated capital, which remained stable over the year.
Net revenues reached €680 million in 2015, down 1.3% on 2014 and down 2.2% at constant scope and exchange rates (refl ecting the withdrawal from institutional operations in Brazil in 2014 and interest expense on hybrid debt).
After the sale of Kompass at the end of September 2015, CDS now only comprises the following entities: Ellisphère, Altus, Midt Factoring and Graydon.
Natixis Private Equity predominantly holds shares of funds and is currently comparable to a fund of funds. Relative to December 31, 2014, Natixis’ share of assets under management (or cash-atrisk ) fell 48% in 2015 to €101 million at December 31, 2015, while off-balance sheet commitments dropped 57% to €25 million.
Business remained strong despite new changes in local regulations. At constant exchange rates and on an annual average basis, shortterm outstandings rose 25%, medium- and long-term outstandings 46%, and leasing outstandings 29% compared to 2014. Off-balance sheet assets fell 14% due to regulations that limit documentary credit assets to 1x shareholders’ equity.
Net revenues generated by the Corporate Center came out at -€3 million in 2015 versus -€217 million in 2014.
Excluding the impact of the revaluation of the issuer spread and the capital gains on the June 2014 sale of the stake in Lazard for €99 million, net revenues are estimated at -€141 million in 2015 versus -€109 million in 2014.
Corporate Center expenses consisted of expenses that were not re-invoiced to the Natixis business lines. Excluding the contribution to the Single Resolution Fund (€43 million), these expenses are expected to total €145 million in 2015, down 4% compared to 2014.
Short-term refi nancing 2015 saw a divergence of monetary policies on either side of the Atlantic.
In Europe, the European Central Bank (ECB) implemented its quantitative easing program with the launch of Eurozone sovereign bond purchases in March. Add to that the covered bond programs already in place and the monthly rate of bond purchases is over €60 billion. This far-reaching program has been extended to March 2017 and will help to combat the risk of defl ation caused by the fall in commodity and oil prices. In December, the European Central Bank also decided to cut the lower bound of its policy rate (from minus 0.20% to minus 0.30%) in the hope of stimulating infl ation expectations.
In order to reduce the impact of increasingly negative interest rates, Natixis’ clients have sought to extend the term of investments made with the bank. Although the aggregate outstanding amount of certifi cates of deposit issues has been held back by the fi nancial environment, Natixis’ program is gaining market share (from 9.4% to 10.8%).
In the United States, the situation is quite different. The Fed stopped expanding its balancing sheet and fi nally raised its key interest rate by 25 bp in December 2015. This fi rst tentative increase had been constantly deferred throughout the year owing to changes in economic activity in emerging countries. These uncertainties, along with regulatory changes on the money funds market, somewhat undermined the investment wishes of clients who favored shortinvestment horizons in 2015. The greater clarity provided by the Fed in December enabled some investors to reposition themselves by extending maturities.
In Europe, bank credit spreads were highly volatile throughout the year. First the Greek crisis, then the slowdown in emerging countries, which is behind the sharp decline in commodity prices, resulted in a widening of credit spreads on unsecured senior debt.
In the United States, growth was solid in 2015, with GDP of 2.4%. Encouraging employment fi gures, with year-long monthly job creation of over 200,000 and the unemployment rate down to 5% at the end of the year, led the Fed to raise the Fed funds rate by 25 bp in December. On the long end of the curve, the 10-year Treasury Note rose by 30 bp year-on-year to end at 2.27%.
Excluding the depreciation, amortization and write-down of fi xed assets, operating expenses increased by €111 million. Taking into account the depreciation, amortization and write-down of fi xed assets, operating expenses increased by €77 million.
Gains or losses on fi xed assets fell by -€81 million.
At December 31, 2015, the balance sheet totaled €394,698 million, down from €454,928 million at December 31, 2014.
The third resolution that will be put before the General Shareholders’ Meeting on May 24, 2016 proposes to: V allocate €56,711,275.72 to the legal reserve; V pay a total dividend of €1,094,844,717.75,
V allocate the remaining distributable profits to retained earnings, i.e. €663,705,354.84.
4 OVERVIEW OF THE FISCAL YEARInformation concerning Natixis S.A. Appendix to 4.1.3 – Consolidated Results
R 2 - MANAGEMENT RESULTS RECLASSIFIED AS CONSOLIDATED RESULTS IN 2014
Change in value of goodwill (0) (51) (51) 0 (51) (51)
Recurring net income (group share) 1,275 (111) 1,164 (28) 1,136 (2) 1,138
NET INCOME (GROUP SHARE) 1,136 1,136 (2) 1,138 * Of which adjustment on own senior debt (-€208 million, Corporate Center).
Financial assets designated at fair value through profi t and loss 6.1 191,639 254,560
Due to banks 6.13 113,743 134,988 o/w institutional operations 46 46 o/w institutional operations 818 799
Net gains or losses on fi nancial instruments at fair value through profi t and loss 7.3 1,985 1,479
Net income/(loss) for the period 1,502 1,214 o/w: V Groupe share 1,344 1,138
Net income/(loss) attributable to shareholders (see note 5.23) – group share – per share, calculated on the basis of the average number of shares over the period, excluding treasury shares and including shares that could be issued on the exercise of stock options and bonus shares 0.41 0.35
Share of gains and losses recognized directly in the equity of associates not recyclable to income
Share of gains and losses recognized directly in the equity of associates recyclable to income (2) 13
Gains and losses recognized directly in items of comprehensive income net of tax) 473 664
5 FINANCIAL DATAConsolidated fi nancial statements and notes STATEMENT OF CHANGES IN SHAREHOLDERS’EQUITY
Equity component of share-based payment plans 2 2013 dividend paid in 2014 (496)
Total activity related to relations with shareholders 26 14 8 (488)
Equity component of share-based payment plans 2 2014 dividend paid in 2015 (1,059)
Total activity related to relations with shareholders 19 26 (1) (1,057)
Issuance and redemption of deeply subordinated notes and preference shares 224
(c) At December 31, 2014, the acquisition under joint control of BPCE Assurance generated goodwill deducted from shareholders’equity, group share amounting to €137 million.
The dilution – without loss of control – of 58.65% of Coface generated a capital loss of €135 million deducted from shareholders’equity, group share and the recognition of non-controlling interests in the amount of €1.062 billion.
(d) The impacts of the change in method associated with the implementation of IFRIC 21 are presented in Note 15.4.
Changes in cash generated by operating activities consist of cash fl ows generated by Group activities, with the exception of those relating to held-to-maturity fi nancial assets and investment property.
+/- Net charge to other provisions (including insurance companies’ technical reserves) 2,875 2,191
+/- Decrease/(increase) in property, plant and equipment and intangible assets (283) (63)
+/- Other cash provided/(used) by fi nancing operations (c) 701 1,694
Cash fl ow of assets and liabilities held for sale 15 (4)
Impact of exchange rate changes on cash and cash equivalents 3,281 4,363
(a) Decrease/(increase) in fi nancial assets and investments in associates, including in particular: V fl ows related to assets held to maturity (+€548 million); V fl ows related to investments in consolidated affi liates (-€587 million) from the purchase of DNCA (-€547 million in cash fl ows and €8 million in cash acquired), Natixis Partners (-€12 million) and NGAM Australia (+€1 million). The balance comprised the disposal of Kompass International (-€24 million), Reich & Tang (-€10 million) and Cube IM (-€3 million); V fl ows related to non-consolidated affi liates (+€178 million), mainly from the disposal of the stake in Cube Infrastructure (+€85 million) and FIDEPP (+€24 million).
NOTE 1 BASIS OF PRESENTATION 216 1.1 IFRS standards and IFRIC interpretations applied by the Group 216 1.2 Presentation of the consolidated fi nancial statements 217 1.3 Year-end 217 1.4 Notes to the consolidated fi nancial statements 217
NOTE 2 CONSOLIDATION METHODS AND PRINCIPLES 218 2.1 Consolidation scope 218 2.2 The notion of control and consolidation methods 218 2.2.3 Signifi cant infl uence over associates 219 2.3 Change in consolidation scope 219 2.4 Treatment of put options granted to minority shareholders 219 2.5 Business combinations and goodwill 219 2.6 Subsidiaries held for sale 222 2.7 Standardization of individual data and treatment of intra-group transactions 222 2.8 Consolidation of insurance companies 222 2.9 Institutional operations 223 2.10 Currency conversion of the statements of foreign subsidiaries and branches 224
NOTE 4 STRUCTURED ENTITIES 229 4.1 Scope of structured entities with which Natixis has dealings 229 4.2 Interests held in non-consolidated structured entities 231 4.3 Non-consolidated structured entities in which Natixis is involved only as a sponsor 233 4.4 Financial support to structured entities 234
NOTE 6 NOTES TO THE BALANCE SHEET 254 6.1 Financial assets and liabilities designated at fair value through profi t and loss 254 6.2 Hedging derivatives 258 6.3 Offsetting fi nancial assets and liabilities 258 6.4 Available-for-sale fi nancial assets 260 6.5 Loans and receivables 261 6.6 Held-to-maturity fi nancial assets 264 6.7 Other information relating to fi nancial assets 264 6.8 Deferred tax assets and liabilities 272 6.9 Accrual accounts, other assets and liabilities 273 6.10 Property, plant and equipment, intangible assets, investment property 275
Consolidated fi nancial statements and notes 6.11 Assets obtained by taking possession of guarantees 276 6.13 Due to banks and customer deposits 277 6.14 Debt securities 278 6.15 Insurance companies’ technical reserves 278 6.16 Provisions and impairment 279 6.17 Subordinated debt 281 6.18 Fair value of fi nancial liabilities carried at fair value in the balance sheet 283 6.19 Fair value of fi nancial liabilities valued at amortized cost 287 6.20 Breakdown of fi nancial assets and liabilities by contractual maturity 287
NOTE 7 NOTES TO THE INCOME STATEMENT 290 7.1 Interest margin 290 7.2 Net fee and commission income 290 7.3 Gains and losses on fi nancial instruments at fair value through profi t and loss 291 7.4 Net gains or losses on available-for-sale fi nancial assets 291 7.5 Other income and expenses 292 7.6 Operating expenses 293 7.7 Provision for credit losses 293 7.8 Gain or loss on other assets 294 7.9 Reconciliation of the tax expense in the fi nancial statements and the theoretical tax expense 295
NOTE 10 RISK MANAGEMENT 301 10.1 Capital adequacy 301 10.2 Credit risk and counterparty risk 301 10.3 Market risk, overall interest rate risk, liquidity risk and structural foreign exchange risk 304
NOTE 12 CAPITAL MANAGEMENT 313 12.1 Share capital 313 12.2 Capital Management 314 12.3 Equity instruments issued 314
NOTE 15 OTHER INFORMATION 316 15.1 Finance and operating leases 316 15.2 Related parties 317 15.3 Insurance companies 318 15.4 Impacts of implementing IFRIC 21 321 15.5 Accounting change in the recognition of tax amortization of goodwill under deferred taxes 321 15.6 Fees paid to the Statutory Auditors 322
NOTE 16 OPERATIONS BY COUNTRY 323 16.1 Entity operations by country at December 31, 2015 324 16.2 Net revenues, pre-tax profi t, taxes and headcount by country 329
5 FINANCIAL DATAConsolidated fi nancial statements and notes NOTE 1 BASIS OF PRESENTATION
The fi nancial statements presented for comparative purposes were published by Natixis in the 2014 registration document fi led with the Autorité des Marchés Financiers (AMF – French Financial Markets Authority) on March 12, 2015.
In accordance with European regulation 809/2004 relating to information contained in prospectuses, the fi nancial statements for the year ended December 31, 2013, that were published in the 2013 registration document fi led with the AMF on March 14, 2014, are incorporated for reference into this registration document.
Natixis did not opt for early application of the standards adopted by the European Union at December 31, 2015 but which had not yet entered into force. This includes: V the amendment to IAS 19 “Employee Benefits” entitled “Defined Benefit Plans: Employee Contributions” adopted by the European Commission on December 17, 2014, with mandatory application from January 1, 2016 to Natixis’financial statements. This amendment applies to contributions by employees and third parties to defined benefit plans. The aim is to clarify and simplify accounting for contributions that are independent of employee seniority (e.g. employee contributions calculated as a fixed percentage of salary), which may be recognized as a reduction in the cost of services for the period during which the service is rendered instead of being allocated to the periods of service. This amendment had no impact on Natixis’financial statements; V the amendment entitled “Annual improvements to IFRS, 2010-2012 cycle”, adopted by the European Commission on December 17, 2014, with mandatory application from January 1, 2016 to Natixis’financial statements. This amendment stems from the annual improvement process aimed at simplifying and clarifying international accounting standards. The following standards have been amended: IFRS 2 “Share-based Payment”, IFRS 3 “Business Combinations”, IFRS 8 “Operating Segments”, IAS 16 “Property, Plant and Equipment”, IAS 38 “Intangible Assets”, and IAS 24 “Related Party Disclosures”. This amendment had no impact on Natixis’financial statements; V the amendment to IFRS 11 “Joint Arrangements” entitled “Accounting for Acquisitions of Interests in Joint Operations” adopted by the European Commission on November 24, 2015, with mandatory prospective application from January 1, 2016 to Natixis’financial statements. This amendment clarifies how to account for the acquisition of an interest in a joint operation that constitutes a business as defined under IFRS 3 “Business Combinations”. Accordingly, IFRS 3 guidelines should be applied in respect of the interest acquired; V the amendments to IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets” entitled “Clarification of Acceptable Methods of Depreciation and Amortisation”, adopted by the European Commission on December 2, 2015, with mandatory application from January 1, 2016 to Natixis’financial statements. This amendment stipulates that the use of revenue-based methods to calculate the depreciation or amortization of an asset is not appropriate and should not be used for property, plant and equipment. This amendment had no impact on Natixis’financial statements; V the amendment entitled “Annual improvements to IFRS, 2012-2014 cycle”, adopted by the European Commission on December 15, 2015, with mandatory application from January 1, 2016 to Natixis’financial statements. This amendment stems from the annual improvement process aimed at simplifying and clarifying international accounting standards. The following standards have been amended: IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”, IFRS 7 “Financial Instruments: Disclosures”, IAS 19 “Employee Benefits” and IAS 34 “Interim Financial Reporting”. This amendment had no impact on Natixis’financial statements; V the amendment to IAS 1 “Presentation of Financial Statements” entitled “Disclosure Initiative” adopted by the European Commission on December 18, 2015, with mandatory application from January 1, 2016 to Natixis’financial statements. This
Consolidated fi nancial statements and notes amendment aims to encourage companies to apply professional judgment in determining what information to disclose in their financial statements and to improve the effectiveness of disclosure. This amendment had no impact on Natixis’financial statements; V the amendment to IAS 27 “Separate Financial Statements” entitled “Equity Method in Separate Financial Statements” adopted by the European Commission on December 18, 2015, with mandatory application from January 1, 2016 to Natixis’financial statements. This amendment allows entities to use the equity method described in IAS 28 “Investments in Associates” to account for investments in subsidiaries, jointventures and associates in their separate financial statements. This amendment had no impact on Natixis’consolidated financial statements.
In July 2014, the IASB published the full and fi nal version of IFRS 9 “Financial Instruments”, which will mandatorily replace IAS 39 from January 1, 2018. The new standard introduces: V a new classification model for financial assets, based on the type of instrument (debt or equity instrument). For debt instruments, the standard revises the distinction between amortized cost and fair value, based on the business model within which the assets are held and their contractual cash flow characteristics. Only instruments with simple or standardized cash flow characteristics may be classified at amortized cost (if they are held under a “hold to collect” business model) or at fair value through other comprehensive income (if they are held under a “hold to collect and sell” business model); V for financial liabilities designated at fair value through profit and loss, the requirement to recognize changes in fair value attributable to internal credit risk in other comprehensive income (except where such recognition would create or enlarge an accounting mismatch in profit or loss); V a single impairment model that is forward-looking and based not on incurred credit losses but on expected credit losses calculated across all portfolios recognized at amortized cost or at fair value through other comprehensive income (recyclable). Under the new framework, it will no longer be necessary to identify an event of default to record an impairment. IFRS 9 generally requires one-year expected loss to be recorded upon initial recognition, and subsequently, if the counterparty risk has deteriorated significantly since initial recognition, expected losses at maturity should be recognized. Thirdly, if credit quality deteriorates to the point that recoverability is threatened, a provision must be set aside for expected loss at maturity, which is the same as the requirement under IAS 39 for individual impairment of loans in default (see Note 5.3); V a new hedge accounting model that is more in line with risk management activities.
IFRS 15 “Revenue from Contracts with Customers” will replace the current standards and intrepretations on revenue recognition. It will be applicable retrospectively as of January 1, 2018, subject to adoption by the European Union.
Under IFRS 15, the entity must recognize income arising from ordinary activities at an amount that refl ects the consideration that the entity expects to receive in exchange for the transfer of goods and services promised to customers.
In addition, in drawing up the consolidated fi nancial statements at December 31, 2015, Natixis also took the following into account: V with regard to the valuation of financial instruments, the recommendation published on October 15, 2008 by the AMF, the Conseil National de la Comptabilité (CNC - French National Accounting Board), the Commission Bancaire (French Banking Commission) and the Autorité de Contrôle des Assurances et des Mutuelles (ACAM - French insurance regulator), and the guide published by the IASB on October 31, 2008, entitled “Measuring and disclosing the fair value of financial instruments in markets that are no longer active.” These two texts underline the importance of using judgment to determine fair value in illiquid markets. As a result of this recommendation, as at December 31, 2015, Natixis does not systematically apply models using observable data, as with previous reporting periods, in view of the lack of market liquidity affecting some asset classes; V with regard to financial reporting on risk exposure, the recommendations applicable in France resulting from the Financial Stability Forum (FSF). Details of risk exposure, presented in the format recommended by the Commission Bancaire in its May 29, 2008 statement “Presentation note regarding the French application of the FSF’s recommendations for financial transparency”, have been incorporated into Section 3.11 of the Chapter on “Risk Management and Capital Adequacy” of the registration document.
The percentage of ownership and voting rights held is indicated for each entity within the consolidation scope. The percentage of ownership represents the equity share held by Natixis, directly and indirectly, in the entities within the consolidation scope. The percentage of ownership is used to determine Natixis’share in the net assets of the owned company.
The entities controlled by Natixis are consolidated using the full consolidation method, in accordance with IFRS 10. This standard defi nes a single audit model applicable to all entities, whether they are traditionally-governed entities or structured entities (see Note 4). The control of an entity will be analyzed using three cumulative criteria: V influence over relevant activities of the entity; V exposure or entitlement to variable returns by virtue of its relations with the entity; V the ability to exercise its power over the entity to influence the variable returns obtained.
When voting rights or similar rights are fundamental to an entity’s governance, control is generally understood to mean holding over 50 % of voting rights.
If, after reviewing these criteria, Natixis concludes that its decisionmaking rights over the management of the entity’s relevant activities enable it to infl uence the variable returns obtained, the entity in question will be subject to consolidation pursuant to IFRS 10.
The share of non-controlling interests in shareholders’equity and in income appear separately on the balance sheet, income statement and the statement of net income/(loss) and other comprehensive income.
V These investments are subject to an impairment test whenever there is objective evidence of impairment. If the recoverable value of the investment is lower than its book value, an impairment is recorded under “Share in income of associates” in the consolidated income statement.
When Natixis’share in the losses of a company consolidated using the equity method is equal to or higher than its interest in the company, Natixis ceases to take its share into account in future losses. In such cases, the investment is presented as zero. The associate’s additional losses are only provisioned when Natixis has a legal or implied obligation to hedge them or when it has made payments on behalf of the company.
V Joint operations are partnerships in which the parties exercising joint control of the arrangement have rights to the assets, and obligations for the liabilities, related to the arrangement. An investment in a joint operation is recorded by incorporating all of the interests held in the joint operation, i.e. its share in each of the assets, liabilities and other comprehensive income to which it is entitled. These interests are broken down by type across the various items on the consolidated balance sheet, consolidated income statement and statement of net income/(loss) and other comprehensive income.
In such cases, goodwill is determined only once based on the fair value of the assets acquired and liabilities assumed on the date that control over the entity is assumed.
The granting of put options to minority shareholders has no impact on Natixis’interest in the subsidiary in question unless the put option is associated with Natixis’holding a call option, and the call and put options give immediate entitlement to the economic benefi ts attached to the underlying shares.
The following accounting treatment is applied to business combinations giving rise to control: V IFRS 3 before revision if they are prior to January 1, 2010, except for those that occurred before January 1, 2004. On the initial application date of the IFRS, Natixis chose the option offered by
5 FINANCIAL DATAConsolidated fi nancial statements and notes IFRS 1 “First-Time Adoption” to not retroactively restate business combinations previous to January 1, 2004 pursuant to IFRS 3; V The revised IFRS 3 (IFRS 3R) if they occur after January 1, 2010. Indeed, IFRS 3R can be applied prospectively to business combinations where the acquisition date is the same or later than the adoption date of IFRS 3R.
A controlled entity’s negative goodwill is immediately recognized in income under “Change in value of goodwill”.
Barring clarifi cation of IFRS 3R on the accounting treatment of business combinations under joint control, Natixis applies a method based on historic carrying amount to such transactions. According to this method, the difference between the price paid and Natixis’share in the historic carrying amounts of the assets and liabilities of the acquired entity is recorded as a deduction from shareholders’equity. In effect, in using this method, any goodwill and valuation differences resulting from the application of the purchase method are deducted from shareholders’equity.
Principles adopted for measurement and recognition of transactions resulting in the creation of Natixis in 2006
Since then, goodwill related to IXIS CIB has been totally writtendown.
In light of the sale of the Cooperative Investment Certifi cates during fi scal year 2013, the associated goodwill is no longer included in the consolidated balance sheet.
In 2015, goodwill increased by €598 million, excluding translation gains (€154 million), mainly due to the acquisition of DCNA.
The discount rates were determined by factoring in the following: V for the Investment Solutions, Specialized Financial Services and Corporate & Investment Banking CGUs, the risk-free interest rate of the Euro-Bund zone, averaged over a depth of 10 years, plus a risk premium calculated according to a sample of CGUrepresentative companies; V for the Coface CGU, the interest-rate references used were determined according to a similar method as applied to the other CGUs, using samples of equivalent companies for insurance and factoring activities; V for the former CDS CGU, the 10-year risk-free interest rates of the countries in which the various entities do business, plus a risk premium calculated according to a sample of companies that are representative of the sector and an additional risk premium to account for the relative size of the entities in comparison with sample references.
A 20 bp increase in discount rates (assumption based on the historical annual variability observed over the past four years) combined with a 50 bp reduction in perpetual growth rates would help to reduce the value in use of CGUs by: V - 6.7% for the Investment Solutions CGU; V - 4.2% for the Specialized Financial Services CGU; V - 3.4% for the Corporate & Investment Banking CGU; V - 2.6% for the Coface CGU; V - 6.6% for the former CDS CGU; and would not result in an impairment recorded for those CGUs, except for equity-accounted investments in the Graydon entity for which an additional €0.5 million impairment should then be recorded.
5 FINANCIAL DATAConsolidated fi nancial statements and notes V for Corporate & Investment Banking, sensitivity to the dollar or to the performance of the CAC would have a limited impact on net revenues and would not lead to any impairment being recorded; V for Coface, the primary sensitivity vector is the loss ratio. A level of 54.3% for this ratio (gross of reinsurance) was applied to conduct the CGU’s impairment test at December 31, 2015. A one-point increase in this loss ratio would have no significant impact on the recoverable amount of the CGU. Only an increase of 5 points of the loss ratio would lead to impairment of the CGU being recorded. Furthermore, a valuation at the lowest price in 2015 would lead to a limited impact on the weighted average valuation; V for the former CDS CGU (excluding the Graydon entity), the primary factor in sensitivity is the degree of the business plans’achievement. A - 5% variation in said plans would not lead to the recognition of any impairment.
Furthermore, on December 31, 2014, Natixis initiated discussions regarding the sale of its subsidiary Altus GTS Inc. At December 31, 2014, Natixis maintained the full consolidation of its subsidiary and combined, in accordance with the provisions of IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”, the assets and liabilities of that entity under two separate balance sheet line items: “Non-current assets held for sale” and “Liabilities associated with non-current assets held for sale”. As the sale of this entity was ongoing at December 31, 2015, Natixis continued to classify it in accordance with IFRS 5.
Finally, at December 31, 2015, Capital Growth Management, a subsidiary of the Investment Solutions division consolidated using the equity method, was also treated in accordance with IFRS 5, and recorded under “Non-current assets held for sale”. In accordance with IFRS 5, securities are measured at their net book value, without taking into account the share of income post classifi cation as “Non-current assets held for sale”.
Prior to consolidation, the individual fi nancial statements of companies included in the scope of consolidation are restated if necessary to bring them into line with Natixis’accounting policies described below.
The impact on the balance sheet and income statement from internal transactions carried out between fully-consolidated entities is eliminated. The internal results of the entities consolidated using the equity method are eliminated to the extent of Natixis’share of interest in the joint-venture or associate.
The following rules are applied to consolidate the fi nancial statements of insurance subsidiaries: V income and expenses are cl assified by type in accordance with banki ng accounting principles and not as a function of expense; V balance sheet items are included under the corresponding line items of the financial statements presented in the banking format.
Insurance offered primarily covers death, disability, work disability, dependency, damage to persons or property, health, legal protection and fi nancial loss. Related technical reserves are calculated using specialized tables (life, experience and Bureau Commun des Assurances Collectives/BCAC tables).
Technical reserves for non-life insurance policies include reserves for unearned premium income and for claims to be paid (not discounted).
In 2015, this activity resulted in a margin of €12.6 million versus €11.7 million for 2014.
The draft agreement signed by the French government, BPI Group and Coface on July 29, 2015 includes compensation of €89.7 million, broken down into a payment of €77.2 million and a transfer of liabilities with an estimated value at end-December 2015 of €12.5 million.
This compensation will allow Coface to absorb immediate depreciation charges (estimated at €16.3 million before tax) and will help to absorb the margin loss (€12.6 million) and the remaining fi xed costs (€20.3 million) borne by Coface (pre-tax amount at December 31, 2015).
NGAM held 70.7% of the share capital in DNCA Finance at December 31, 2015. Management remains a shareholder alongside NGAM and, from 2016, held exit options that would gradually increase its ownership interest up to 100% if exercised.
This transaction generated goodwill of €579.5 million, as determined using the partial goodwill method.
The changes in scope since January 1, 2015 were as follows: 3.2.1 Corporate and Investment Banking
V Sale of the Ho Chi Minh entity to BPCE International in late October 2015.
V Deconsolidation of SCI Valmy Coupole after its ownership interest threshold was crossed.
V Foncière Kupka, which carries an operating property, was included in the consolidation scope.
The main subsidiaries in which non-controlling interests are material at December 31, 2015 are Coface and BPCE Assurances.
5 FINANCIAL DATAConsolidated fi nancial statements and notes At December 31, 2015
During fi scal year 2015, Natixis did not make any signifi cant disposals in subsidiaries still under control . In 2014, Natixis carried out a partial disposal of its investment in Coface.
The buying by Natixis of minority shareholders’investments - - - -
Through these partnerships, the various associates contribute human and material resources and skills. The associates remain the owners of the property or rights available for use by the company (even in the event of the company’s liquidation). The company’s income is shared in accordance with allocation criteria set out in the by-laws. Decisions concerning the relevant activities of the SEPs are made unanimously. These partnerships are joint operations as defi ned in IFRS 11.
EDF Investment Group (EIG) * 532 21 1 * The percentage of ownership and voting rights at 12.31.2014 are 4.49% each.
Summarized fi nancial data pertaining to material associates and joint-ventures under signifi cant infl uence are presented below.
Gains or losses recorded directly in equity (12) 19 * The d ata for EIG established at December 31, 2014 and December 31, 2015 comply with IFRS as adopted by the European Union on that date and with the accounting principles and valuation methods applied to Natixis’consolidated fi nancial statements as presented in Note 5.
Value of the investment in the associate 538 532 3.4.3 Nature and scope of restrictions
The Group did not encounter signifi cant restrictions on interests held in associates and joint-ventures.
Further to the application of the equity method, there is no unrecognized share of losses over the period in joint-ventures or associates.
Interest in an entity is understood to mean a contractual or noncontractual relationship that exposes the entity to the risk of variable returns associated with the performance of another entity. Interests in other entities may be evidenced by, among others, the ownership of equity instruments or debt securities as well as by other links, such as fi nancing, cash loans, credit enhancement and the issuance of guarantees or structured derivatives.
R guarantees and plain vanilla fi nancing granted to family SCIs or certain holdings; V external structured entities for which Natixis acts simply as an investor. This mainly includes: R investments in external mutual funds not managed by Natixis, with the exception of those in which Natixis owns virtually all the shares,
In order to meet fi nancing requirements for movable assets (involving air, sea or land transportation), real estate, corporate acquisitions (LBO fi nancing) or commodities, Natixis may be required to create structured entities around a specifi c fi nancial transaction on behalf of a customer.
Auto-pilot mechanisms are generally in place for these structures. In the case of leasing contracts, the transaction must be structured such that its income always amounts to zero. As such, only default events would be capable of modifying the structured entity’s income, by leading to the disposal of the rights to the assets once the guarantees have been exercised. Natixis has the power to have the assets sold in the event of a default event, acting either alone or via the bank syndicate agent. This right equates to a protective right because Natixis would never benefi t from the income from the sale beyond the amount of the balance due under the loan agreement. As such, Natixis does not have power over such entities’relevant activities.
When auto-pilot mechanisms are not in place for these structures, it is generally the sponsor who oversees activities which are relevant and which generate returns. As previously, Natixis’rights as lender are protective rights limited to the amount of its receivable. As such, Natixis does not have power over such entities’relevant activities.
In addition, Natixis is rarely a shareholder in such entities and, when it is, it generally holds a non-controlling interest. The entities for which Natixis is the majority shareholder are limited in number and do not have a material impact on the consolidated fi nancial statements.
5 FINANCIAL DATAConsolidated fi nancial statements and notes 4.1.3 Asset management transactions
The compensation of NGAM and Banque Privée 1818 as managers is marginal compared to the returns generated for investors. Indeed, the management and incentive fees are obtained on the market and are consistent with the services rendered, since the asset management activity takes place on a competitive and international market.
In the absence of rights held by third parties (e.g. withdrawal or fund redemption/liquidation rights), the control of mutual funds managed by NGAM and Banque Privée 1818 is assessed according to the combined interests held by the entities and business lines within Natixis’consolidated scope: V as managers, NGAM and Banque Privée 1818 do not invest in the funds and generally own only several shares; V Natixis Assurances may take out interests in mutual funds managed by NGAM via its insurance subsidiaries. These interests are subscribed in the form of euro-denominated or unit-linked insurance policies: R Euro-denominated policies are policies under which the insured party receives a minimum guaranteed return plus the major share of the surpluses generated by the insurance company’s main fund. Any shortfall between the fund’s return and the minimum guaranteed return is borne by the insurer, which thus incurs the risks,
V if Natixis is not a manager but owns virtually all the shares.
Natixis guarantees the capital and/or performance of certain mutual funds. These packaged funds are passively-managed funds. Once the structuring is established initially, it is fi xed for the fund’s entire lifetime. Natixis has relatively limited exposure to negative variable returns thanks to the fund’s strict management by the NAM management company and a robust risk control system put in place upon structuring and monitored throughout the fund’s lifetime. These controls signifi cantly limit the risk of guarantee activation.
The analysis criteria for IFRS 10 consolidation applied to private equity funds are the same as those applied to real estate funds. A fund is subject to consolidation if Natixis acts as principal (e.g. Natixis is a manager and is non-revocable by a limited number of persons and holds material variable returns).
The purpose of such entities is to diversify and tranche the underlying credit risks, most often with a view to their acquisition by investors seeking a certain level of compensation based on the level of risk assumed.
A new structured entity, the securitization fund “PUMACC”, was consolidated for this purpose in 2015. This fund is intended to refi nance a portfolio of revolving credit receivables.
The Versailles conduit is consolidated, with Natixis holding power over activities relevant to the conduit enabling it to infl uence the amount of its returns, given its prominent role in the choosing and management of acquired receivables as well as the management of the issuance program.
The table below shows the (i) book value of interests held by Natixis in structured entities, broken down by major activities, as well as (ii) the maximum exposure to the risk of loss attributable to these interests.
5 FINANCIAL DATAConsolidated fi nancial statements and notes As well as the breakdown of Natixis’interests in these entities, the table below also provides information on the size of the entities. This information is reported on an aggregate basis, in which all entities that Natixis has an interest in, regardless of the level of the interest, are grouped together by business.
The size of structured entities equates: V for Securitization, to the total issues under balance sheet liabilities; V for Asset management, to the fund’s net assets; V for Structured financing, to the amount of remaining outstanding loans due to banks in the pool (drawn outstandings); V for other activities, to the total assets.
Financial instruments at fair value through profi t and loss 22 4,026 328 - 4,376
Financial liabilities at fair value through profi t and loss (derivatives) 36 446 369 22 874
Notional amount of sales of options and CDS 1,834 31 2,068 725 4,658
Notional amount of sales of options and CDS 1,621 - 1,679 65 3,365
Where Natixis’participation is simply as an advisor, arranger, custodian or placement agent, the structured entity is presumed not to be sponsored by Natixis.
Natixis plays the role of sponsor for: V mutual funds initiated by a Natixis management company and in which Natixis holds no stake nor any other interest. Reported income includes management and incentive fees received by Natixis, as well as profits and losses resulting from ongoing transactions with these funds; V a US activity consisting of originating and selling real estate loans to securitization vehicles, created by Natixis with third parties and in which Natixis holds no interest. Reported income includes structuring fees as well as capital gains and losses on the assignment of receivables.
Natixis did not grant any fi nancial support to consolidated or non-consolidated structured entities.
At initial recognition, fi nancial assets and liabilities are measured at fair value, corresponding to their acquisition price at that date. Their subsequent accounting treatment depends on their balance sheet classifi cation. In accordance with IAS 39, fi nancial assets are classifi ed in one of the four categories of fi nancial assets set out below: Financial assets at fair value through profit and loss
As stated in Note 2, Natixis has elected to use the option provided by IAS 28 and IAS 31, i.e. not to account for interests held by Private Equity subsidiaries using the equity method if they are designated as “Financial assets at fair value through profi t and loss”. In accordance with the fair value option amendment, private equity investments less than 20%-owned are also recognized as “Financial assets at fair value through profi t and loss”, since managing and measuring these investments at fair value is a wellestablished practice within private equity companies.
The instruments are reclassifi ed based on their fair value at the reclassifi cation date. The difference between this amount and the estimated cash fl ows the entity expects to recover at the reclassifi cation date is recognized as net revenues over the instrument’s expected maturity, based on the effective interest rate at that date. After reclassifi cation, the assets are measured at amortized cost using the effective interest rate method and will be tested for impairment at each reporting date. Any resulting impairment losses will be recognized in income under “Provision for credit losses”.
At December 31, 2015, Natixis no longer held any material assets reclassifi ed as “Loans and receivables”.
“Restructured” loans correspond to loans with modifi ed terms under which Natixis grants a concession to borrowers facing or likely to face fi nancial diffi culties. They are a combination of a concession granted by Natixis and fi nancial diffi culties experienced by the borrower.
Available-for-sale fi nancial assets include non-derivative fi nancial assets that are not classifi ed as loans and receivables, held-tomaturity investments or fi nancial assets at fair value through profi t and loss. Assets in this category include Natixis’investments in non-consolidated companies. Securities classifi ed in this category are initially recognized at their market value. At the reporting date, they are remeasured at their market value determined based on the market price for listed instruments.
R if this is not the case, the business plan must be revised in order to determine whether or not the securities should be impaired.
Consolidated fi nancial statements and notes between the transaction date and the settlement date when these transactions are recognized in “Liabilities” and “Loans and receivables” respectively. When repurchase and reverse repurchase transactions are recognized in “Assets and liabilities at fair value through profi t and loss”, the repurchase commitment is recognized as a forward interest rate derivative.
On its transition to IFRS, Natixis analyzed the substance of its lease contracts in accordance with the provisions of IAS 17, which are more specifi c than French GAAP. This led to certain “Finance leases” being reclassifi ed as “Operating leases”.
5.3 Credit risk on assets classified as loans and receivables a) Assets individually assessed for impairment
At each reporting date, Natixis reviews assets classifi ed as loans and receivables to determine whether there is any objective evidence of impairment arising from one or more events occurring after initial recognition and having an impact on estimated future cash fl ows. This generally concerns receivables for which an event of default has been identifi ed as defi ned in Article 178 of the EU regulation of 26 June 2013 on prudential requirements for credit institutions. Objective evidence of impairment, notwithstanding the existence of security, includes any payments that are past due by at least three months, or regardless of whether any payment has been missed, the observation of diffi culties experienced by the counterparty leading to the expectation that some or all of the amounts owed may not be recovered.
5 FINANCIAL DATAConsolidated fi nancial statements and notes When evidence of impairment exists, Natixis calculates the estimated recoverable amount discounted at the original effective interest rate, taking into account the impact of any available guarantees. Impairment is recognized as the difference between the net carrying amount of the loan and its estimated recoverable amount.
Where necessary, Natixis calls on the opinion of experts to adjust the results of this calculation to the Natixis group’s actual risks.
Derivatives may only be designated as hedges if they meet the criteria set out in IAS 39 at inception and throughout the term of the hedge. These criteria include formal documentation that the hedging relationship between the derivatives and the hedged items is both prospectively and retrospectively effective. Hedging relationships are presumed to be effective when, retrospectively,
Consolidated fi nancial statements and notes changes in the value of the hedging instrument offset changes in the value of the hedged item in a range of 80%- 125%.
Cash fl ow hedging is used to hedge future cash fl ows from an existing or highly probable future transaction.
Cash fl ow hedges are mainly used to hedge Natixis’overall interest rate risk.
Retrospective hedge effectiveness tests are used to verify whether or not the hedge was effective at different reporting dates. At each such date, changes in the fair value of hedging instruments (excluding accrued interest) are compared with changes in the fair value of the hypothetical derivative instruments hedged (synthetic instruments representative of hedged assets or liabilities and management intentions). To be effective, changes in the fair value of hedging instruments must offset changes in the fair value of hedged items in a range of 80%- 125%. Outside these limits, the hedge would no longer qualify.
If a hedging relationship is discontinued, for example when hedge effectiveness is outside the 80%- 125% range, the derivative must be reclassifi ed in fi nancial instruments at fair value through profi t and loss, while the cumulative amount relating to the effective portion of the hedge that has been carried directly in equity under “Unrealized or deferred gains or losses” is recycled to income when the hedged item itself affects income.
The method used to account for assets and liabilities relating to foreign currency transactions entered into by Natixis depends upon whether the asset or liability in question is classifi ed as a monetary or a non-monetary item.
The mid-market price is obtained based on: V if the instrument is quoted on an active market, fair value is its quoted price. A financial instrument is regarded as quoted on an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring transactions on an arm’s length basis on the main market or, failing that, the most advantageous market; V if the market for a financial instrument is not active, fair value is established using valuation techniques. The techniques used must maximize the use of relevant observable entry data and minimize the use of non-observable entry data. They may refer to observable data from recent transactions, the fair value of similar instruments, discounted cash flow analysis and option pricing models, proprietary models in the case of hybrid instruments or non-observable data when no pricing or market data are available.
Additional valuation adjustments incorporate factors related to valuation uncertainties, such as market, credit and liquidity risks in order to account, in particular, for the costs resulting from an exit transaction on the main market. Similarly, a Funding Value Adjustment (FVA) aiming to account for - through assumptions - costs associated with the funding cost of the future cash fl ows of uncollateralized derivatives or imperfectly collateralized derivatives is also taken into account.
This adjustment takes into account the imperfections of the valuation techniques used - in particular, the risk factors that are not considered, even when observable market inputs are available. This is the case where risks inherent to various instruments differ from those considered by the observable inputs used to value them.
This adjustment applies to valuations that do not account for the counterparty’s credit quality. It corresponds with the expected loss related to a counterparty’s default risk and aims to account for the fact that Natixis cannot recover all of the transactions’market value.
The method for determining the CVA is primarily based on the use of market inputs in connection with professional market practices for all counterparty segments included in this calculation. In the absence of liquid market inputs, the method made use of proxies by type of counterparty, rating and geographic area.
Fair values determined by reference to external quoted prices or market parameters are validated by an independent unit (the market data monitoring department). Second-level controls are carried out by the Risk Department.
The factors taken into account include the following: V the origin of the external source (stock market pages, content contribution services, etc.); V the consistency of the various sources; V the frequency at which the data are updated; V the representative nature of inputs based on recent market transactions.
It involves verifying that the model is consistent with and relevant to its intended function (price setting, valuation, coverage, measurement and control of risk) and the product to which it applies, based on: V the theoretical approach: the financial and mathematical foundations of the model; V the application of the model: the pricing models used to generate risk and earnings data; V the stability of the model under parametric stress; V an assessment of the stability and consistency of the numerical methods used; V the independent re-implementation of the model as part of algorithm validation; V the comparative analysis of the calibration of model parameters; V an assessment of the modeling risk, particularly the comparative analysis of the model with other valuation models, in order to ensure the adequacy of the model and the payoff; V the implementation of an adjustment in respect of modeling risk to account for potential deficiencies in the model or its calibration; V integration of the model in information systems.
The methods for determining fair value are monitored by a number of bodies including the Observability and Inputs Committee, the Valuation Committee, the Impairment Committee and the Model Validation Committee, which comprise representatives of the Risk Department, the Finance Department, and the Market Data and Valuations Monitoring Department.
5 FINANCIAL DATAConsolidated fi nancial statements and notes Fair value hierarchy
Some more hybrid and/or long-maturity fi nancial instruments are measured using a recognized model on the basis of market inputs derived from observable data such as yield curves, implied volatility layers of options, market consensus data or active over-the-counter markets.
The main models for determining the fair value of these instruments are described below by type of product: V Equity products: complex products are valued using: R market data,
The main models used to value and manage fi xed-income products are Hull & White models (one-factor and two-factor models or onefactor Hull & White stochastic volatility model), the Hunt Kennedy model and the BGM “smile ” model.
SBGM and Hunt Kennedy models are used to value fi xed-income products that are sensitive to volatility smiles (i.e. implied change in volatility relative to the exercise price) and to autocorrelation (or correlation between interest rates).
Inputs relating to all such Level 2 instruments were demonstrated to be observable and documented. From a methodology perspective, observability is based on four inseparable criteria: V inputs are derived from external sources (primarily a recognized contributor, for example); V they are updated periodically; V they are representative of recent transactions; V their characteristics are identical to the characteristics of the transaction. If necessary, a proxy may be used, provided that the relevance of such an arrangement is demonstrated and documented.
If the selected valuation model is not recognized by current market practices, or if one of the inputs signifi cantly affecting the instrument’s valuation is not observable, the trading profi t on the trade date cannot be recognized immediately in the income statement, but is taken to income on a straight-line basis over the life of the transaction or until the date the inputs become observable. Any losses incurred at the trade date are immediately recognized in income.
5 FINANCIAL DATAConsolidated fi nancial statements and notes For these instruments, the following table provides the main unobservable inputs as well as value ranges.
Instrument class Main types of products comprising Level 3 within the instrument class Valuation techniques used
Spread Lock: - 16bp / + 12bp Volatility: 50 bp / 70bp TEC/CMS correlation: 70% / 95%
Mono-underlying payoffs, with capital guarantee, indexed on an issuer cash/ CDS basis, including a call at par clause at Natixis’ discretion
Modeling which inputs the volatility of the cash-cds basis, rescaled for price volatility, and reinput to a Black model combined with a numeric method capable of incorporating early exercise.
Strip of long-term options, Strip of quanto options, Strip of digital options Options spread and digital options spread
Correlation between AUDJPY and USDJPY: 30% - 60% Long-Term Volatility: 10% - 17%
A review is undertaken for any instrument that ceases to meet these criteria or once again complies with the criteria. Transfers to and from Level 3 are subject to prior validation.
The valuation model used to measure write-downs on CDS contracted with monoline insurers changed on December 31, 2015, and is more in line, in terms of method, with the adjustment made for counterparty risk (Credit Valuation Adjustment – CVA). It also takes account of the expected depreciation of exposures and the counterparty spread implied from the market data. The impact of the change in accounting policy amounted to €4.3 million at December 31, 2015.
IFRS 13 requires disclosure in the notes to the fi nancial statements of the fair value, as well as the associated fair value hierarchy, of all fi nancial instruments carried at amortized cost, including loans. The valuation methods used to determine the fair value disclosed in the notes to the fi nancial statements are described below.
5 FINANCIAL DATAConsolidated fi nancial statements and notes 5.7 Guarantee mechanism for former
Expenses incurred during the development phase are capitalized if they meet the criteria for recognition as intangible assets set out in IAS 38: these include technical feasibility, the intention to complete the asset and use or sell it, the probability that the asset will generate future economic benefi ts, the availability of resources, and the ability to reliably measure the expenditure attributable to the asset’s development. Costs incurred during the research phase are not capitalized but are recognized in expenses.
Other items of property, plant and equipment are depreciated over their estimated useful lives, generally fi ve to ten years.
A sale is highly likely if: V a plan to sell the asset (or group of assets) involving active marketing is made by management; V a non-binding offer has been submitted by at least one potential buyer; V it is unlikely that significant changes will be made to the plan or that it will be withdrawn.
If the disposal has not taken place within twelve months of classifi cation in “Non-current assets held for sale”, the asset ceases to be classifi ed in this category, barring special circumstances independent of Natixis’control.
5 FINANCIAL DATAConsolidated fi nancial statements and notes On December 29, 2014, Natixis entered into a sale agreement related to a share of its stake held in the Cube fund. The share of this stake initially classifi ed under “Available-for-sale fi nancial assets” was reclassifi ed under “Non-current assets held for sale.” On December 31, 2014, in accordance with IFRS 5, the reclassifi ed securities were valued according to the provisions of IAS 39. As the sale was completed in 2015, the share of this stake was no longer recorded on Natixis’balance sheet at December 31, 2015.
Consolidated fi nancial statements and notes 5.14 Provisions and contingent liabilities
Provisions booked on the liabilities side of Natixis’fi nancial statements as at December 31, 2015, are discussed in Note 6.16.2 “Contingency reserves” and possible allocations are specifi ed in Note 7.5 “Other income and expenses”, Note 7.6 “Operating expenses” and Note 7.7 “Provision for credit losses”.
In accordance with IAS 19, employee benefi ts are classifi ed in one of four categories: V “short-term benefits”, including salaries, social security contributions, annual leave, employee profit-sharing, incentive plans, top-up contributions and bonuses payable for the period; V “severance payments”, comprising employee benefits granted in return for termination of a staff member’s employment before the normal retirement age, resulting from a decision by the entity, or a decision by the employee to accept a severance package in exchange for terminating their employment; V “post-employment benefits”, such as pensions, other supplementary retirement benefits applicable to the banking industry, end-of-career awards and other contractual benefits payable to retirees; V “other long-term employee benefits”, including long-service awards and deferred compensation payable in cash under Employee Retention and Performance Recognition Plans.
A provision is accrued for termination benefi ts when the employer is demonstrably committed to provide such benefi ts, or when the employer recognizes the costs of restructuring providing for the payment of such benefi ts.
5 FINANCIAL DATAConsolidated fi nancial statements and notes The annual payroll costs recognized in respect of defi ned-benefi t plans consist of: V the costs of services rendered, representing rights vested by beneficiaries over the period; V past service costs, arising from possible plan changes or curtailments as well as the effects of possible plan settlements; V the net interest cost reflecting the impact of unwinding the discount on the net obligation.
R if issued in foreign currencies, it is fi xed at its historical value resulting from converting it to euros on the date it was initially classifi ed under equity.
T he share of third party investors in the net assets of dedicated mutual funds included in Natixis’consolidation scope comprises a fi nancial liability recorded on the balance sheet under “Financial liabilities at fair value through profi t and loss”. The share of third party investors in the profi ts of the mutual funds is recorded in “Net gains or losses on fi nancial instruments at fair value through profi t and loss” in the consolidated income statement; T he units held by third party investors in dated funds, which are fully consolidated by Natixis, entitling the unit-holders to the repayment of a share of the fund’s net assets upon its liquidation, are classifi ed in liabilities on the consolidated balance sheet under “Accruals and other liabilities”. The share of third party investors in the fund’s profi ts is recorded under “Interest and similar expenses” on the consolidated income statement.
The lock-up valuation method is based on the cost of a two-step strategy consisting of a fi ve-year forward sale of the locked-up shares and purchasing the same number of shares in cash, by fi nancing the purchase with a loan ultimately repayable at the end of the fi ve years with the income from the forward sale. The loan interest rate is that which would have been granted to a market player seeking a non-affected cash loan repayable in fi ve years with an average risk profi le.
The main assumptions applied for valuing the advantages related to capital increases reserved for employees are provided in Note 11.2.4.
Deferred tax assets and liabilities are offset at the level of each tax entity. The tax entity may either be a single entity or, if applicable, a group of entities of which it is a part, that have elected for Group tax relief.
The value-added contribution, or “Cotisation sur la Valeur Ajoutée des Entreprises” (CVAE), is recorded in the accounts as “Operating expenses,” since Natixis considers that its calculation is not based on net income.
The amended Finance Act of August 2012 introduced an additional contribution in the case of distribution of dividends in the form of cash fl ows. In accordance with IAS 12, the expense related to taxes on dividend payouts is recorded under the tax line for the period during which the payout decision was made. This amounted to €8.1 million for the 2014 fi scal year and €31.0 million for 2015.
5 FINANCIAL DATAConsolidated fi nancial statements and notes In accordance with paragraph 43 of the amendment to IAS 39 and IFRS 4 (published by the IASB in August 2005 and adopted by the European Union), fi nancial guarantees given are carried at their fair value plus any transaction costs directly attributable to the issuance of the guarantees. For independent agreements entered into at market rates, fair value at the inception of the agreement is equal in theory to the amount of premium(s) received. All fi nancial guarantees issued within Natixis Group are entered into at market rates.
Subsequently, fi nancial guarantees are stated at the higher of: V the amount initially recognized upon inception less, where appropriate, the amount of amortization recorded in line with the principles outlined in IAS 18 “Revenue”. This amortization represents the deferred recognition of the fees received over the period covered by the guarantee; V the value determined under IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, which is the amount that the entity would normally pay to settle the obligation or to transfer it to a third party.
There are no IFRS standards prescribing the accounting treatment of fi nancial guarantees received. In the absence of specifi c guidance, the accounting treatment applied must be determined by analogy with the accounting treatment prescribed by other standards in similar situations. Accordingly, guarantees received meeting the defi nition of a fi nancial guarantee for an issuer are accounted for in accordance with: V IAS 39, for guarantees received in respect of financial instruments; V IAS 37, for guarantees received in respect of liabilities falling within the scope of IAS 37.
All fi nancing commitments granted by Natixis give rise to loans granted at market rates at the grant date. The drawn-down portion of these commitments is classifi ed in “Loans and receivables”. These fi nancing commitments are contingent liabilities and are recognized in accordance with IAS 37. On initial recognition, they are not entered in the balance sheet. A provision is recognized in liabilities if the cost of the commitment exceeds the associated revenues.
In preparing its fi nancial statements, Natixis is required to make certain estimates and assumptions based on available information that is likely to require expert judgment. These estimates and assumptions constitute sources of uncertainty which may affect the calculation of income and expenses in the income statement, the value of assets and liabilities in the balance sheet and/or certain disclosures in the notes to the fi nancial statements. The fi nancial crisis has led to greater use of accounting estimates. As a result, future results of certain operations may differ signifi cantly from the estimates used in the fi nancial statements at December 31, 2015.
At the reporting date, Natixis assesses whether or not there is any objective evidence of impairment for loans and receivables, either on an individual basis or collectively by risk category. To identify evidence of impairment, Natixis analyzes trends in a number of objective criteria, but also relies on the judgment of its own expert teams. Similarly, Natixis may use its expert judgment to establish the likely timing of recoveries (where the aim is to calculate the amount of individual impairment losses), or to adjust the amount of expected losses under the Basel framework, on which the amount of collective provision is based.
Consolidated fi nancial statements and notes of these methods requires certain choices and assumptions to be made in advance (in particular, projected expected future cash fl ows and discount rates).
All goodwill is assigned to a CGU so that it may be tested for impairment. The tests conducted by Natixis consist in comparing the carrying amount of each CGU (including goodwill) with its recoverable amount. Where the recoverable amount equals the value in use, it is determined by discounting annual free cash fl ows to infi nity (see Note 2.5). Use of the discounted cash fl ow method involves: V estimating future cash flows. Natixis has based these estimates on forecasts included in its business units’medium-term plans spanning five years; V projecting cash flows for the last year of the plan to perpetuity, at a rate reflecting the expected annual growth rate; V discounting cash flows at a specific rate for each CGU.
Insurance technical reserves are calculated using assumptions and estimates that may lead to adjustments in amounts reported over the subsequent period: V for personal protection insurance, claims reserves are calculated by modeling claims experience; V for life insurance, underwriting reserves are computed based on economic and financial assumptions, mortality and morbidity tables, and behavioral statistics, for example concerning surrenders; V for credit insurance, claims reserves include an estimate of claims reported but not settled at the reporting date. In addition to the amount of claims payable, a provision is set aside for unknown claims, calculated on a statistical basis in reference to the final amount of claims to be paid following settlement of risks and any debt recovery measures. Provisions for debt recovery procedures, representing estimates of expected recoveries, are calculated by applying a terminal recovery rate to all subscription periods not yet settled.
The participation rate used to calculate deferred profi t-sharing is determined based on payout ratios projected over the term of the medium-term plan and in line with the actual pay-out ratio for the previous fi scal year.
Average number of ordinary shares issued and outstanding over the period 3,123,389,399 3,109,895,036
Average number of treasury shares issued and outstanding over the period 1,477,399 2,580,400
(b) This number of shares refers to the shares granted under the deferred share-based bonus plans (2011 and 2012 plans).
At December 31, 2015, fi nancial assets at fair value primarily comprised securities and derivative instruments.
Derivative instruments not eligible for hedge accounting (b) 6.1.3 70,546 85,749
Securities at fair value through profi t and loss 6.1.1.2 64,460 89,327
Loans and receivables at fair value through profi t and loss 6.1.1.1 and 6.1.1.2 5,523 5,858
Consolidated fi nancial statements and notes 6.1.1.1 Loans and receivables designated at fair value through profi t and loss and credit risk
Exposure to credit risk represents a signifi cant share of the fair value of loans and receivables designated at fair value through profi t and loss shown on the balance sheet.
Natixis did not purchase protection to hedge against credit risk associated with loans and receivables classifi ed as fair value instruments through profi t and loss for the 2014 and 2015 fi scal years.
Financial assets measured at fair value through profi t and loss consist primarily of long-term structured repos indexed to a basket of equities whose risks are managed globally and dynamically, as well as fi nancial assets representative of unit-linked policies from insurance activities and, to a lesser extent, assets with embedded derivatives for which the principle of separation was not adopted.
Loans and receivables due from customers 4,424 141 530 3,753 5,212 74 1,113 4,024 6.1.2 Financial liabilities at fair value through profit and loss
At December 31, 2015, fi nancial liabilities at fair value through profi t and loss primarily comprised derivatives not used as hedging instruments.
Changes in the fair value of fi nancial liabilities, designated at fair value through profi t and loss, attributable to credit risk at December 31, 2015
(a) The fair value, determined using the method described in Note 5.6, recorded in respect of internal credit risk on Natixis issues totaled €49 million at the reporting date versus -€89.2 million at December 31, 2014 (see Note 7.3). Besides changes in the outstanding amount, this difference refl ects changes in the Natixis spread since the close of the previous year’s accounts.
Liabilities valued using the fair value through profi t and loss option consist mainly of long-term structured repos indexed to a basket of equities whose risks are managed globally and dynamically, as well as issues originated and structured for customers whose risks and hedges are managed collectively. These issues include signifi cant embedded derivatives for which changes in value are neutralized by those of the derivative instruments hedging them.
Derivatives may only be designated as hedges if they meet the criteria set out in IAS 39 at inception and throughout the term of the hedge. These criteria include formal documentation that the hedging relationship between the derivatives and the hedged items is both prospectively and retrospectively effective. Hedging relationships are presumed to be effective when, retrospectively, changes in the value of the hedging instrument offset changes in the value of the hedged item in a range of 80%- 125%.
Loans and receivables due from credit institutions 10,623 10,623 4,751 4,751
Other fi nancial instruments 2,708 1,492 1,215 * After taking into account collateral received in the form of securities.
Other fi nancial instruments 390 222 167 * After taking into account collateral received in the form of securities.
The table below shows available-for-sale fi nancial assets by type of instrument (loans outstanding, fi xed-income securities, variableincome securities). It discloses the gross value before impairment, the amount of impairment and the carrying amount net of impairment.
(b) In 2015, permanent impairment of variable-income securities stood at €44 million compared with €62 million in 2014. This expense involves insurance portfolios for €33 million (€24 million for 2014), the impact of which is neutralized at 90% and 92.7% respectively for 2015 and 2014 given the profi tsharing mechanism. The 2015 expense is divided between an additional impairment on previously-impaired securities for €29 million, including €17 million related to the insurance portfolios (€19 million in 2014, including €8 million on insurance portfolios), newly-impaired provisions on securities tied to the application of automatic criteria as defi ned in accounting principles and methods for €15 million related exclusively to insurance portfolios (€23 million in 2014 related mainly to non-insurance portfolios).
5 FINANCIAL DATAConsolidated fi nancial statements and notes 6.5.2 Customer loans and receivables
Consolidated fi nancial statements and notes 6.5.2.2 Performing loans to customers
Provisions for impairment of non6. 5.2.4 Other customer loans and receivables
5 FINANCIAL DATAConsolidated fi nancial statements and notes 6.6 Held-to-maturity financial assets
The fair value of held-to-maturity fi nancial assets is provided in Note 6.7.6.
“Held-to-maturity fi nancial assets” are exclusively recognized by fully-consolidated insurance companies at December 31, 2015 and December 31, 2014.
6.7 Other information relating to financial assets 6.7.1 Financial assets provided as security against liabilities
Financial assets at fair value through profi t or loss 17,860 17,913 37,460 34,405
Financial assets at fair value through profi t or loss 2,832 1,811
R SECURITIZATION FOR WHICH THE COUNTERPARTIES TO THE ASSOCIATED DEBTS HAVE RECOURSE ONLY TO THE TRANSFERRED ASSETS
Fair value of associated liabilities Net position 6.7.2.2 Fully derecognized transferred fi nancial assets for which continuing involvement is maintained
The fully derecognized transferred fi nancial assets for which Natixis maintains continuing involvement include transfers of assets to a deconsolidated securitization vehicle in which Natixis has an interest or an obligation, where these latter do not compromise the transfer of virtually all of the advantages and risks attached to the transferred assets.
At December 31, 2015, there is no material impact from continuing involvement in a securitization vehicle maintained by Natixis.
Past due assets are assets in arrears (i.e., missed principal or interest payments), but which have not yet been impaired.
The data reported in 2015 includes late payments identifi ed by the factoring entities amounting to €1.642 billion. These data refer to all outstandings rather than the unpaid amount alone.
The fair value of fi nancial assets carried at fair value in the balance sheet is broken down according to the hierarchy of inputs used to value the assets, as described in Note 5.6.
Other fi nancial assets held for trading 2,621 1,886 735 2,358 1,982 376
Other fi nancial assets at fair value through profi t and loss 56,781 55,775 1,006 82,837 81,237 1,600
Other available-for-sale securities 51,787 41,784 7,205 2,798 43,771 35,623 5,373 2,774
5 FINANCIAL DATAConsolidated fi nancial statements and notes 6.7.5.1 Financial assets at fair value measured using Level 3 of the fair value hierarchy
TOTAL FINANCIAL ASSETS RECORDED AT FAIR VALUE 10,950 268 (412) (41)
* The main impacts recognized in the income statement are mentioned in Note 7.3.
Other fi nancial assets held for trading Financial assets at fair value through profi t and loss 2,134 (330) 62 Fixed-income securities at fair value through profi t and loss 516 35 9 Variable-income securities at fair value through profi t and loss 1,121 (2) 2 Other fi nancial assets at fair value through profi t and loss 497 (363) 51 Hedging derivatives Available-for-sale fi nancial assets 1,163 (28) 31 87 Available-for-sale securities - Equity investments 1,098 7 29 83 Other available-for-sale securities 65 (27) 2 4 o/w fi xed-income securities 1 (27) 2 1 o/w variable-income securities 64 3
(a) Amount adjusted relative to the fi nancial statements at 31 December, 2013, mainly arising from the reclassifi cation of Private Equity securities from Level 2 to Level 3 of the fair value hierarchy for €1.121 billion (see Note 5.6).
(b) The main impacts recognized in the income statement are mentioned in Note 7.3.
5 FINANCIAL DATAConsolidated fi nancial statements and notes Sensitivity analysis of the fair value of fi nancial instruments measured according to Level 3 - Assets and Liabilities
i.e. a sensitivity impact representing a valuation increase of €52.4 million (reflecting an improvement in the above-mentioned inputs) or a valuation decrease of €51.9 million (reflecting a deterioration in said inputs) (2).
(1) i.e. the standard deviation of consensus prices used to measure the inputs.
6.7.5.2 Financial assets at fair value: transfer between fair value levels
Derivative instruments not eligible for hedge accounting (positive fair value) 663 39 o/w interest rate derivatives (a) 154 33 o/w currency derivatives 527 2 o/w credit derivatives o/w equity derivatives (b) (17) 4 o/w other
Other fi nancial assets at fair value through profi t and loss 20 22
(b) TRS and repos indexed to a basket of equities were transferred to Level 3 of the fair value hierarchy subsequent to a change in the valuation model based on proprietary data.
Securities at fair value through profi t and loss 1,232 553 66 o/w fi xed-income securities 1,230 553 1 o/w variable-income securities 2 65
Total deferred tax recognized 1,890 2,825 o/w: deferred tax assets 2,316 3,000 deferred tax liabilities (426) (176)
The change in deferred taxes on items whose variation is recorded directly in reserves is presented in Note 8.2 “Breakdown of tax on gains and losses recognized in other comprehensive income” At December 31, 2015, this amount was -€12 million compared to -€21 million at December 31, 2014. Other changes in deferred taxes for the period are booked to profi t or loss.
Insurance accrual accounts 6.9.3.2 8,528 7,981 * Including the outstanding non-amortized amount of the margin not recognized in income on the transaction date (“Day One Profi t”) of €82 million at December 31, 2015 versus €54 million at December 31, 2014 (see Note 6.9.2).
Security deposits received 16,810 19,097 6.9.2 Restatement of the deferred margin on financial instruments
Deferred acquisition costs 347 309 6.9.3.2 Insurance accrual accounts - Liabilities
Investment property * Insurance company investments. Changes in fair value give rise to the symmetrical recognition of a deferred profi t-sharing reserve equal to 90% of the related base amount on average at December 31, 2015 compared to 92.7% at December 31, 2014 (See Note 2.8).
Net value Fair value Net value Fair value 6.11 Assets obtained by taking possession of guarantees
In 2015, Natixis recognized no assets obtained by taking possession of guarantees. In 2014, €151 million in equity instruments had been recognized in this respect.
Natixis Intertitres 6 6 * including €579.5 million for the goodwill recorded from the acquisition of DNCA Finance during 2015 (see Note 3.1).
5 FINANCIAL DATAConsolidated fi nancial statements and notes 6.13.2 Customer deposits
Provisions for impairment deducted from assets 3,527 702 (310) (716) 68 63 3,334
Provisions for loans and receivables 2,392 547 (306) (369) 64 (8) 2,320
(b) Of which €60 million at December 31, 2014 in respect of the workforce adjustment plan discussed in Note 5.14.
Accrued interest 57 53 * Subordinated debt issue agreements do not incorporate a clause providing for early redemption in the event that the covenants are not observed.
The main features of undated subordinated securities are outlined in section 3.3 of Chapter III, “Risk Management and Capital Adequacy”.
(in millions of euros) 12.31.2014 Issues (a) Redemptions (b) Translation adjustments Changes in scope Other (c) 12.31.2015
(a) The following issues were carried out in 2014: V the March 2014 issue of +€375 million (for a nomimal amount of €380 million) in dated subordinated notes with a maturity of 10 years (March 2024 maturity) by Coface; V the June 2014 set-up of two subordinated loans, fully subscribed for by BPCE, for respective amounts of €900 million (June 2026 maturity) and €100 million (June 2024 maturity); V the Natixis Assurance public issue amounting to €251 million.
(b) Loan repayments and securities redemptions comprised: V the early redemption of a dated subordinated note with a nominal amount of $300 million, issued in December 2006 and having an initial maturity of January 2019; V the redemption of a dated subordinated note with a nominal value of €500 million and having an initial maturity of May 2019; V the maturing of a security issued by Versailles for $4.5 million; V the maturing of securities subscribed for by BPCE (-€41 million) and of securities issued by Natixis Financement (-€8 million), and the repayment by ABP Vie of a subordinated loan (€2 million).
(c) Changes in scope concerning the consolidation of BPCE Assurances and the Versailles conduit, with respective impacts of +€40.5 million and +$4.5 million.
Financial liabilities held for trading 94,153 23,213 69,380 1,560 123,686 38,541 82,891 2,254
Other fi nancial liabilities held for trading 765 765 936 936
Derivative instruments not eligible for hedge accounting (negative fair value) 2,244 430 (574)
Financial liabilities at fair value through profi t and loss 14 3 79
Other fi nancial liabilities at fair value through profi t and loss 14 79
Derivative instruments not eligible for hedge accounting (negative fair value) 1,649 558 112 o/w interest rate derivatives 1,035 397 70 o/w currency derivatives 51 (18)
Consolidated fi nancial statements and notes 6.19 Fair value of financial liabilities valued at amortized cost
Assets at fair value through profi t and loss - excluding trading derivatives 20 12 5 10 11 62 121
Loans and receivables due from credit institutions 31 14 15 3 8 0 71
Less than 1 month 1 to 3 months 3 months to 1 year 1 to 5 years years Undated Total
“Interest and similar income” and “Interest and similar expenses” comprise interest on fi xed-income securities recognized as available-for-sale fi nancial assets, and interest on loans and receivables to and from banks and customers.
Financing, guarantee, securities and derivative commitments* 244 (128) 116 202 (119) 83 * The premium, which amounted to €84.6 million at December 31, 2015, paid to BPCE in respect of the guarantee given against the former GAPC hive-off assets classifi ed as “Loans and receivables” and “Available-for-sale fi nancial assets” is recognized in expenses pro rata to the write-back of the provisions and the discounts recognized in respect of reclassifi cations during the period.
At December 31, 2015, the expense recognized in respect of the premium totaled -€10 million (-€27 million in 2014), of which -€1 million was recognized in net revenues under guarantee commissions (-€21 million in 2014) and -€9 million in provision for credit losses (-€6 million in 2014).
This item includes gains and losses on fi nancial assets and liabilities at fair value through profi t and loss, whether held for trading or designated at fair value through profi t and loss, including interest.
Net gains/(losses) on fi nancial assets and liabilities excluding hedging derivatives 1,969 1,463
(a) “Net gains/(losses) on fi nancial assets and liabilities held for trading” include: V Impairments taken against the fair value of CDS entered into with monoline insurers (see Note 5.6), which led to a decrease of €1.8 million in cumulative impairments in 2015, versus income of €102 million in 2014 (excluding the impact of exchange rate fl uctuations and the BPCE guarantee), bringing cumulative impairments to €106 million at December 31, 2015 versus €103 million at December 31, 2014; V A €6.7 million reversal at December 31, 2015 of the portfolio-based provision recorded on exposures in respect of CDPCs (Credit Derivatives Product Companies), bringing the cumulative balance to €4.4 million. At December 31, 2014, a €27.1 million reversal was carried out, bringing the cumulative balance to €11 million.
V At December 31, 2015, recognized internal credit risk adjustments to derivatives (debit valuation adjustments or DVAs) stood at -€4.9 million, versus €22.6 million at December 31, 2014. Furthermore, credit risk adjustments related to the valuation of counterparty risk (credit valuation adjustments or CVAs) on fi nancial assets amounted to -€1.6 million at December 31, 2015, versus -€85.6 million at December 31, 2014.
V The Funding Valuation Adjustment (FVA) used on uncollateralized derivatives or imperfectly collateralized derivatives is also recognized on this line in the amount of -€64.2 million at December 31, 2015 versus -€81.5 million at December 31, 2014.
Net charge to/reversal of insurance companies’technical reserves (1,830) (1,830) (2,212) (2,212)
Other related income and expenses 7.5.3 433 (399) 34 480 (346) 134 7.5.1 Finance leases
Other related income and expenses 236 (189) 47 239 (200) 38 7.5.2 Other insurance income and expenses
Consolidated fi nancial statements and notes 7.5.3 Other related income and expenses
* Of which -€80 million at December 31, 2015 versus +€12 million at December 31, 2014 resulting from the purchase and resale activity of commodity stocks on behalf of clients carried out by the entity Contango, which economically hedges its exposure to price changes using futures carried under “Gains or losses on fi nancial instruments at fair value through profi t and loss”.
(a) Of which €7.9 million in respect of the Competitiveness and Employment Tax Credit versus €6.6 million at December 31, 2014.
(d) Including a contribution of -€44 million to the Single Resolution Fund (SRF) at December 31, 2015; Including a tax of -€31 million on systemic banking risks (SBT) at December 31, 2015.
Net capital gains/(losses) on disposals (29) (1) (31) (13) 91 78
= Consolidated net income/(loss) before tax, goodwill, amortization and share in income of associates 2,427 1,849
+ Losses for the period not recognized for deferred tax purposes (19) (11)
(b) Of which -€51 million for the derecognition of the previous tax loss on the tax consolidation group in France (-€18 million at December 31, 2014).
(c) Of which -€31 million in dividend taxes (€8 million at December 31, 2014).
The main reasons for the upward adjustment are the questions raised by the tax authorities over the operations carried out with the Group’s Luxembourg subsidiary KFL.
For the 2010 and 2011 fi scal years, the upward adjustment totals €84.7 million, including €42.5 million in penalties.
NGAM P1 contested all of the increase in its response of September 2015.
Following this letter, NGAM P1 requested an appeal at a higher level in a letter dated 21 December, 2015.
5 FINANCIAL DATAConsolidated fi nancial statements and notes NOTE 8 STATEMENT OF NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME
8.1 Change in gains and losses recorded directly in other comprehensive income
8.2 Breakdown of tax on gains and losses recognized in other comprehensive income
Items recorded defi nitively in other items of comprehensive income 77 (28) 49 (104) 37 (67)
Shares in unrealized or deferred gains.(losses) of associates (4) 2 (2) 18 (5) 13
TOTAL CHANGES IN UNREALIZED OR DEFERRED GAINS OR LOSSES 483 (10) 473 691 (27) 664
In 2012, in light of regulatory constraints and the persistently uncertain economic environment, Natixis forged ahead with its transformation policy. In particular, in terms of Corporate and Investment Banking, its organization was adapted to place customer relations at the core of development and, as a result, the division was renamed Wholesale Banking and is now known as “Corporate & Investment Banking”).
Corporate & Investment Banking advises businesses, institutional investors, insurance companies, banks and public sector entities and offers them a diversifi ed line of customized fi nancing solutions as well as access to the capital markets.
This business line combines a number of service-oriented businesses primarily serving the Caisse d’Epargne and Banque Populaire networks, as well as Natixis customers: V Factoring: provides companies with credit management solutions such as financing, insurance, and collection. Natixis Factor uses the Banque Populaire and Caisse d’Epargne networks, which account for a significant portion of its business; V Sureties & Financial Guarantees: this business line is operated by Compagnie Européenne de Garanties et Cautions (CEGC). It notably includes: guarantees for mortgage loans granted to retail and business customers by the Caisse d’Epargne, and more recently the Banque Populaire networks, along with legal guarantees and bail bonds; V Consumer Finance: this Natixis business line includes a broad range of activities throughout the value chain for revolving loans (marketing, origination, administrative management, out-ofcourt collection, etc.) and administrative management services
5 FINANCIAL DATAConsolidated fi nancial statements and notes for personal loans. These activities are operated by Natixis Financement, which manages revolving loans granted by the Groupe BPCE networks, and manages personal loans granted by the Caisses d’Epargne and by the Banque Populaire banks; V Leasing: this business line provides financing solutions for real estate and non-real estate assets under finance leases or other long-term leasing arrangements; V Employee Savings Schemes: this business line offers a comprehensive range of B2B employee benefits planning products based on employee savings (administration of employee accounts, fund administration and accounting) and employment services vouchers; V Securities Services: this business line offers back and middle office services for retail securities custody (account administration, back office outsourcing, office services, depositary control) for the BPCE networks and external clients; V Payments: this business line provides payments tools, infrastructure and services, including electronic banking, issuance and collection of high-volume electronic transfers and check processing; V Film Industry Financing: this business line is operated via Coficiné, a subsidiary specializing in structured loans for film and audiovisual activities in France and Europe.
V Asset Management: Asset Management activities are grouped together within Natixis Global Asset Management. They cover all asset categories and are carried out mainly in the US and France. These activities are performed by autonomous entities (specialized asset management companies and specialized distribution units) coordinated by a holding company that ensures the organization’s consistency by overseeing its strategic direction. These companies are thus able to focus on their core business and on achieving robust performance, while retaining the option of developing their own institutional clientele and drawing on the business line’s other support functions, based on appropriate economic models. A number of them have forged a strong reputation, such as Loomis Sayles, Harris Associates, AEW, DNCA and Natixis Asset Management.
This business covers proprietary private equity transactions and Natixis’share of certain sponsored funds not held by Natixis. After the October 2010 sale to AXA Private Equity of the majority of the proprietary operations in France, the international segment (divided into several small teams of investors) has been gradually divested, with the most recent divestment carried out in the second quarter of 2015. The teams have extensive expertise in equity financing for generally unlisted, small and medium-sized enterprises outside France via equity holdings.
Natixis carried out an initial public offering on 58.65% of Coface’s share capital in June 2014.
The Corporate Center operates alongside the operating divisions. As such, it recognizes the central funding mechanisms and income from Natixis’asset and liability management. It also records income on the bank’s portfolio of equity investments not belonging to a division, and the revaluation of the Group’s own debt.
5 FINANCIAL DATAConsolidated fi nancial statements and notes 9.8.2 Balance sheet segment analysis
Financial liabilities at fair value through profi t and loss 157,101 1,159 0 7 0 723 158,990
Assets at fair value through profi t and loss 241,462 11,022 0 34 235 1,807 254,560
Loans and receivables due from banks 48,108 1,330 1,077 504 0 20,699 71,718
Assets at fair value through profi t and loss 233,035 14,488 3,536 3,221 280 254,560
The information on capital adequacy required under IAS 1 is presented in section 3.3 of Chapter III, “Risk Management and Capital Adequacy”.
The information on risk management required under IFRS 7, with the exception of the disclosures given below, is presented in section 3.4 of Chapter III, “Risk Management and Capital Adequacy.”
Available-for-sale fi nancial assets (excluding variable-income securities) 46,124 1 (47) 46,078 38,363
Loans and receivables due from banks 71,455 80 (73)* 71,462 71,718
Held-to-maturity fi nancial assets 2,301 0 (3) 2,298 2,763 * including collective provisions.
Loans and receivables due from banks 61,548 80 (73) 61,555 3 30 63,192 129 (117) 63,204 21 34
Africa and the Middle East 382 2,978 3,360 156 34 191
Individual risks Collective risks Total Risks Write-downs individual risks Write-downs collective risks Total Write-downs
5 FINANCIAL DATAConsolidated fi nancial statements and notes 10.2.4 Breakdown of collective provisions by business sector
At December 31, 2015: 30.9 % of collective provisions on the Finance sector comprised provisions covering CDPCs (Credit Derivative Product Companies), compared with 63.4% at December 31, 2014.
The sector reversal includes a €7.8 million reversal in respect of CDPCs.
March 2018 * The expected number of units at the vesting date is funded by equity swaps.
The corresponding expense associated with the short-term plan, estimated based on the probability of the presence condition being met, is fully recognized in the 2015 fi nancial statements in the amount of €31 million.
Fair value of the free share at the valuation date (in euros)
Deferred retention and performance bonuses paid in cash are awarded to some staff. These bonuses are subject to presence and performance criteria. In terms of accounting treatment, they are recorded under “Other long-term employee benefi ts”. The estimated expense is based on an actuarial estimate of the probability of these conditions being met. The expense is recognized over the vesting period. The amount recognized in respect of fi scal year 2015 was: Year of plan Expenses (in millions of euros) Grant date Acquisition dates
Pension plans for which employees can voluntarily opt are operated by certain Natixis entities and are also classifi ed as defi nedcontribution plans. These entities have a single contribution obligation (“PERCO” contribution).
Post-employment defi ned-benefi t plans include all postemployment benefi ts for which Natixis has committed to pay a specifi ed level of benefi ts.
For the other portion, Natixis has set up interest rate and liquidity hedges backed by long-term cash fl ows.
Fair value of plan assets (423) (7) 0 0 (430) (404) (5) 0 0 (409)
Fair value of separate assets* 0 (39) 0 0 (39) 0 (37) 0 0 (37)
Revaluation adjustments - fi nancial assumptions (60) (6) 0 0 (66) 79 23 0 0 101
Consolidated fi nancial statements and notes c) Changes in recognized amounts on the balance sheet (Change in hedging assets)
Fair value of assets at start of period 404 5 409 352 7 359 o/w amounts paid out in respect of plan liquidation (8) 0 (8) (7) 0 (7)
Fair value of assets at end of period 423 7 430 404 5 409
Fair value of assets at start of period 0 37 37 36 36 o/w amounts paid out in respect of plan liquidation 0 0 0 0 0
Changes recognized directly in non-recyclable equity 0 1 1 1 1
Revaluation adjustments - Return on assets 0 1 1 1 1
Fair value of assets at end of period 0 39 39 37 37
Revaluation adjustments over the period (67) (23) (90) 110 19 129
Revaluation adjustments over the period (21) 0 (21) 20 0 20 o/w effect of ceiling on plan assets (13) 0 (13) 0 0 0
Total revaluation adjustments at end of period 63 0 63 84 0 84 o/w effect of ceiling on assets (13) 0 (13) 0 0 0 f) Analysis of expenses for the period
Rate of increase in salaries 2.57% 2.41% 4.00% 2.06% 2.37% 4.00%
+ 1% change in rate of increase in healthcare costs 7.25% 7.13%
End-of-career awards 11.2.4 Other share-based plans a) Employee stock option plans under the Company employee savings plan
The capital increase in 2015 is linked to: V the allocation of bonus shares to some Natixis employees under the 2011 and 2012 Retention and Performance Plans, for which payment is share-based (see Note 5.17 and Note 11.2.2.); V the subscription to the share issue reserved for employees under the employee shareholding plan.
5 FINANCIAL DATAConsolidated fi nancial statements and notes 12.2 Capital Management
Natixis’main capital management objectives are to ensure that the Group meets the capital requirements imposed by its external environment and maintains an adequate rating to support its activity and maximize shareholder value.
Natixis adapts the management of its capital structure in line with changes in economic conditions and in the risk profi le of its operations. Its objectives, policies and procedures remained unchanged in 2015.
An issue dated 2004, with a fair value of €276 million, was repaid in the third quarter. A new issued subscribed for by BPCE was carried out on July 20, 2015 for €500 million.
The main features of undated deeply subordinated securities are outlined in section 3.3 of Chapter 3 , “Risk Management and Capital Adequacy”.
On November 12, 2009, BPCE provided Natixis with a guarantee covering 85% of the nominal value of the debt portfolio carried by the former GAPC hive-off and classifi ed in “Loans and receivables” and “Available-for-sale fi nancial assets” as at July 1, 2009. Under the guarantee, an indemnity is due in the event of any default (on principal, interest, fees, costs and any other amount due in accordance with the contractual documentation for the asset in question) relating to one of the assets in the guaranteed portfolio. Natixis is covered as from the fi rst euro in default and up to 85% of the default amount. This guarantee is shown on the line “Guarantee commitments received from banks” for 85% of the nominal amount of the assets guaranteed.
In addition to the commitments set out above, Coface’s contracts with clients in relation to its credit insurance activities represent a total credit risk exposure of €475.4 billion before the impact of reinsurance versus €508 billion at December 31, 2014 (see section 3.10 of Chapter III, “Risk Management and Capital Adequacy”).
In accordance with IAS 39 (paragraph 2), fi nancing commitments outside the scope of IAS 39 are recognized in accordance with IAS 37, “Provisions, contingent liabilities and contingent assets”.
Financing commitments received from banks 5,690 22,619 from customers 391 16,036
On February 10, 2016, Natixis announced that it had entered into an agreement to acquire a majority stake in the US advisory fi rm Peter J. Solomon Company (“PJSC”). Peter J. Solomon and its partners will continue to operate as an advisory fi rm and will retain a material position in the Company. Peter J. Solomon was established in 1989 to provide independent advice on mergers & acquisitions, capital structure and restructuring to public and private corporations. The Company comprises around 50 bankers and has advised on more than 500 transactions since its inception. The acquisition of PJSC will therefore contribute to the further development of Natixis’Americas platform.
Loans and receivables due from banks 50,770 502 78 52,414 715 70
Financial liabilities at fair value through profi t and loss 11,275 1,356 1,047 15,294 2,033 1,296
Net gains or losses on fi nancial instruments at fair value through profi t and loss (578) 81 258 (2,044) 396 1,634
Net gains or losses on available-for-sale fi nancial assets 12 0 14 31
In 2014: the members of the Audit and Risk Committee received a fi xed payment of €5,000 (€17,000 for its Chairman) and a variable portion of €1,000 per Board Meeting, per person (€2,000 for its Chairman); the members of the Appointments and Compensation Committee received a fi xed payment of €5,000 (€8,000 for its Chairman) and a variable portion of €1,000 per Board Meeting, per person (€2,000 for its Chairman) and the members of the Strategic Committee received a variable portion of €2,000 and the Chairman of the Strategic Committee received a fi xed portion of €8,000.
Compensation for corporate offi cers is granted as detailed in the standardized tables compliant with AMF recommendations in parts 2.4 of the registration document.
Value of performance shares granted during the fi scal year 160,000 € 160,000 €
With regard to calculation of severance payments for the duties of Chief Executive Offi cer, the Board of Directors, on the advice of the Compensation Committee, authorized during the meeting of February 22, 2011, the commitment establishing the terms and conditions for compensation due or liable to be due to Laurent Mignon in the event he no longer performs the duties of Chief Executive Offi cer. This commitment was also approved by the Combined General Shareholders’Meeting of May 26, 2011 (see Resolution Six). In its session on February 19, 2014, Natixis’Board of Directors reviewed the commitment related to the severance payment to the Chief Executive Offi cer, in order to defi ne the Monthly Reference Compensation (1/12th the fi xed compensation paid for the last calendar year of activity and the average of variable compensation granted over the last three calendar years of activity) used to determine the payment amount. This agreement was subject to a shareholder vote and approved at the Ordinary General Shareholders’Meeting of May 20, 2014 (see Resolution Five). The Board of Directors meeting of February 18, 2015 authorized the renewal of the severance payment.
Members of the Board of Directors do not benefi t from severance payments in relation to their function with Natixis.
The insurance industry companies within Natixis’scope of consolidation are: Coface and its subsidiaries, Natixis Assurances and its subsidiaries (life insurance, personal protection insurance, property and casualty insurance) and CEGC (Compagnie Européenne de Garanties et de Cautions).
Balance sheet reclassifi cations are not material. Most of the balance sheet line items specifi c to insurance companies are shown under “insurance company investments” on the asset side and under “insurance companies’technical reserves” on the liabilities side. Receivables and related payables, shown under accrued income, prepaid expenses and other assets or deferred income, accrued charges and other liabilities in the insurance format are reclassifi ed in the same lines as the principal in the banking format.
* Tranche A corresponds to the fraction of annual compensation between €0 and €38,040.
Tranche C corresponds to the fraction of annual compensation between €152,160 and €304,320.
5 FINANCIAL DATAConsolidated fi nancial statements and notes R AT DECEMBER 31, 2014
Net gains or losses on fi nancial instruments at fair value through profi t and loss 302 406
Net gains or losses on available-for-sale fi nancial assets 518 369
NET INCOME (GROUP SHARE) 279 354 15.4 Impacts of implementing IFRIC 21
This note presents the main impacts of the fi rst application of IFRIC 21 on the fi nancial statements for fi scal year 2014.
15.5 Accounting change in the recognition of tax amortization of goodwill under deferred taxes
Note: in accordance with US tax laws, this goodwill is amortized for tax purposes over 15 years, generating a temporary difference between the carrying amount of goodwill (which cannot be amortized) and its tax base (amortized over time).
In 2005, when IFRS were implemented, it was determined that this difference could only be reversed in the event NGAM sold its shares in the US holding company or in the event of the partial disposal of shares in affi liates, in the form of an equity deal carried out from France, with the resulting capital gains generated and taxed in France.
5 FINANCIAL DATAConsolidated fi nancial statements and notes IFRIC’s July 2014 publication of additional information on “IAS 12 Income Taxes: recognition of deferred tax for a single asset in a corporate wrapper” in its Interpretations Committee Agenda Decisions provided a clarifi cation leading to the consideration that, starting with § 51 of IAS 12 which takes into account the method for recovering or settling assets (in our case, up to now, the disposal of shares from France), a deferred tax liability should be recorded both on the temporary difference relating to the asset (in this case goodwill) in the subsidiary, on an inside basis, and the temporary difference relating to the consolidated shares (outside basis), arising from the difference between the consolidated carrying amount under IFRS of the shares and their tax base (where the company does not control the reversal of this difference).
The application of this accounting change resulted in the recognition of a deferred tax liability at January 1, 2015 in the amount of €423.8 million with a corresponding reduction in shareholders’equity (-€383.0 million in consolidated reserves and -€40.8 million in foreign currency translation reserves) for deferred tax on an inside basis as explained above. A deferred tax liability expense was also recorded for the period (last year of amortization) for -€33 million. Natixis will continue not recognizing deferred tax liabilities on an outside basis insofar as it controls the reversal of the temporary difference.
The comparisons to December 31, 2015 and December 31, 2014 presented in all the notes to the updated 2015 registration document were not restated for this change due to their amount, considered not material by Natixis with respect to the impacted lines of the fi nancial statements.
It should be noted that the application of this change at January 1, 2014 would have had the following impacts: V a decrease of -€384.7 million in equity at January 1, 2014 (-€347.3 million in consolidated reserves and -€37.4 million in foreign currency translation reserves); V recognition of a change in translation adjustments of -€3.4 million in 2014, which thus amounted to €352 million versus the reported amount of €393 million; V recognition of an additional tax expense of -€35.7 million for fiscal year 2014, bringing net income, group share at December 31, 2014 to €1.102 billion versus a reported amount of €1.138 billion.
Earnings per share at December 31, 2014 would thus have been €0.34 versus a reported amount of €0.35.
Other procedures and services directly related to the Statutory Auditors’assignment 1,348 10% 5,000 27% (73)% 79 2% 1,032 23% (92)% 506 11% 445 10% 14% 1,933 9% 6,477 23% (70)%
Other work and services related directly to audit work, mainly includes work on fi nancial transactions, reviews of the entity’s compliance with regulatory provisions and reviews of internal control quality.
Other services included in “Other” primarily involve the review of the Solvability II internal model at CEGC at a cost of €574,000 billed by Mazars.
In addition, the fees paid to PricewaterhouseCoopers, auditors for BPCE, stand at €4,566,000 for audit services and €2,782,000 for other services.
The Deputy Auditors are: V Mireille Berthelot, from BEAS, avenue Charles de Gaulle (92200) Neuilly-sur-Seine for Deloitte; V Malcolm McLarty, 1 cours Valmy (92923) Paris La Défense Cedex for KPMG; V Franck Boyer, Immeuble Exaltis – 61, rue Henri-Régnault – 92075 La Défense Cedex for Mazars.
Article 7 of Law No. 2013-672 of the French Monetary and Financial Code of July 26, 2013, amending Article L. 511-45 requires credit institutions to publish information on their locations and activities in each country or territory.
Pursuant to the article referred to above, the table below specifi cally provides information linked to net revenues, pre-tax profi t, income tax and headcount as at December 31, 2015.
5 FINANCIAL DATAConsolidated fi nancial statements and notes Country of operation Activity
Consolidated fi nancial statements and notes 16.2 Net revenues, pre-tax profit, taxes and headcount by country
Mergers and acquisitions advisory services FC 92 92 0 0 France
REICH & TANG DISTRIBUTORS, INC. (14) Retail 0 0 100 100
AEW Central Europe Hungary (27) Retail 0 0 100 60 Hungary
AEW Central Europe Romania Retail FC 100 60 100 60 Romania
NGAM Sucursal en España Retail FC 100 100 100 100 Spain
BANQUE PRIVEE 1818 ** Credit institution FC 100 100 100 100 France
Investment product distribution to IWMAs FC 75 75 66 66 France
COFACE SOUTH AFRICA Insurance FC 41 41 41 41 South Africa
COFACE SOUTH AFRICA SERVICES Insurance FC 41 41 41 41 South Africa
FIMIPAR ** Buyback of receivables FC 41 41 41 41 France
LEID - BRANCH (COFACE AUSTRIA) Insurance FC 41 41 41 41 Lithuania
Real estate investments FC 100 100 100 100 France * Change in registered company name in 2015.
(4) Deconsolidation in the fi rst quarter of 2015 after thresholds were exceeded.
(5) Creation of the structured entity in the second quarter of 2015.
(7) Acquisition of the French activities of Leonardo & Co in the second quarter of 2015, now called Natixis Partners.
(10) Deconsolidation in the second quarter of 2015 after thresholds were exceeded.
(18) Sale in the fourth quarter of 2015 of 4% of shares held by Natixis S.A.
(20) Newly consolidated entities after thresholds were exceeded in the fourth quarter of 2015.
(21) Consolidation in the fourth quarter of 2015 following the repurchase by Natixis Assurances of 49% of the shares previously held by BPCE.
(23) Creation of the structured entity in the fourth quarter of 2015.
(28) Deconsolidation in the third quarter of 2015 after thresholds were exceeded.
5 FINANCIAL DATAStatutory Auditors’ report on the consolidated fi nancial statements 5.2 Statutory Auditors’ report on the consolidated financial statements
Without prejudice to the opinion expressed above, we draw your attention to Notes 1.1 and 15.4 in the appendix, which explain the impacts of the fi rst application of IFRIC 21 “Levies”, and to Note 15.5 that describes the accounting change concerning the recognition of goodwill tax amortization under deferred taxes.
As mentioned in Note 5.7 to the consolidated fi nancial statements, a guarantee mechanism with BPCE covering certain assets ringfenced in the Workout Portfolio Management structure (GAPC) has been in place since July 1, 2009. We have reviewed the procedures for monitoring this mechanism, and the treatment of this transaction in the Group’s fi nancial statements.
The Group uses internal models and methodologies to measure fi nancial instruments that are not traded on an active market, as well as to record certain impairment charges, as mentioned in Notes 5.6, 5.10, 6.6.5 and 6.18 to the consolidated fi nancial statements. We examined the control procedures relating to the validation of models and to the defi nition of the parameters used to assess the observability of these models.
The Group records underwriting provisions in respect of risks relating to insurance policies (Notes 2.8, 5.22, 6.15, 7.5 to the consolidated fi nancial statements). We reviewed the methodology used to measure these insurance policies, as well as the main assumptions and parameters used.
The Group has recognized deferred tax assets in respect of tax loss carry-forwards (Notes 5.20 and 6.8 to the consolidated fi nancial statements). We examined the main estimates and assumptions on which the recognition of deferred tax assets was based.
As required by law, we also specifi cally verifi ed the information presented in the Group’s Management report, in accordance with the professional standards applicable in France.
5 FINANCIAL DATAParent company fi nancial statements and notes 5.3 Parent company financial statements and notes
See note No. Off-balance sheet items – Commitments received 2015 2014
Commitments received from banks 5,201 2,973 35 Commitments on securities 7,919 6,053 35 Other commitments received 7,836 8,667
Funding/reversal of funding for general banking risks and regulated provisions 2 2
NOTE 6 INVESTMENT IN SUBSIDIARIES AND AFFILIATES, ASSOCIATES, OTHER LONG-TERM INVESTMENTS AND TREASURY SHARES 351
NOTE 35 OFF-BALANCE SHEET ITEMS – FOREIGN CURRENCY COMMITMENTS AND TRANSACTIONS 370
NOTE 36 FOREIGN EXCHANGE TRANSACTIONS, FOREIGN CURRENCY LENDING AND BORROWING 371
Fees earned on the granting or acquisition of loans, as well as marginal transaction costs, are recognized using the effective interest rate actuarial method over the effective life of the loan. Recognition is shown as net interest income in net revenues. Fees and transaction costs to be recognized are included in the relevant loan book.
The modifi ed terms of restructured loans must put the borrower in a more favorable situation (e.g. suspension of interest or principal payment, extension of term, etc.) and are confi rmed by the use of amendments that modify the terms of an existing contract or by the full or partial refi nancing of an existing loan.
V all other loans made to these customers are also automatically classified as non-performing, even when the risk appraisal does not require an impairment charge against the outstanding principal.
Impairment losses are calculated as the difference between the gross carrying amount of the receivable and the amounts thought to be recoverable (including fl ows from the realization of guarantees), discounted at the original effective interest rate for fi xed-rate receivables or at the last effective interest rate determined according to the contractual terms for variable-rate receivables.
Probable losses stemming from off-balance sheet commitments are recognized as provisions on the liability side of the balance sheet.
R Investments in subsidiaries and affiliates: shares and other variable-income securities in related corporate entities over which Natixis exercises exclusive control, i.e. corporate entities likely to be fully consolidated in the Natixis group.
The measurement approaches used to determine value in use are the following, as appropriate: R the net asset value method; R the peer comparison method; R the discounted future cash fl ows (DCF) method.
Reclassifi cations from the “held for trading” to the “held for sale” and “held for investment” categories and from “held for sale” to “held for investment” are permitted in exceptional market circumstances requiring a change in strategy or when the securities in question have ceased to be tradable on an active market since their acquisition.
As soon as they are in a condition to be used by Natixis in the manner in which they are intended, fi xed assets are depreciated or amortized over their estimated useful lives on a straight-line or declining balance basis when this better refl ects the economic amortization. The residual value of the asset is deducted from its depreciable or amortizable amount when it can be measured reliably.
Other items of property, plant and equipment are depreciated over their estimated useful lives, generally 5 to 10 years.
This line item notably includes medium-term notes, interbank market instruments, negotiable debt securities and bonds and other fi xed-income securities.
Accrued interest payable relating to these issues is disclosed separately as a related payable, with an offsetting entry in the income statement.
Issue or redemption premiums on bond issues are amortized over the life of the issues in question and the related expense is recognized under the heading “Interest and similar expenses” on the income statement.
The accounting principles applied depend on the instrument involved and the purpose of the transaction (hedging or for trading purposes).
Each instrument in the fi nal category is marked to market on an individual basis. Changes in value during the period are recognized immediately on the income statement. Valuations are adjusted for counterparty risk, the position funding cost and the discounted present value of future contractual management costs.
In accordance with recommendation No. 2013-02 of the Autorité des Normes Comptables (ANC – French accounting standards setter) on rules for measuring and recognizing retirement and similar commitments, dated November 7, 2013 (which allowed the partial adoption of revised IAS 19 as adopted by the European Union in June 2012), Natixis chose to maintain the corridor method approach in the parent company fi nancial statements.
Under this method, Natixis does not recognize the portion of net cumulative actuarial gains and losses that is lower than the greater of (i) 10% of the present value of the defi ned-benefi t obligation and (ii) 10% of the fair value of any plan assets at the end of the previous reporting period. The portion of actuarial gains and losses outside the 10% “corridor” is therefore recognized over the average remaining working lives of the employees participating in the relevant plan.
The amount recognized as a provision in the balance sheet represents the present value of the obligation under defi nedbenefi t plans: V minus any past service cost not yet recognized in income; V plus or minus any unrecognized actuarial gains or losses in accordance with the corridor principle arising from: R experience adjustments linked to demographic variables,
V “Other long-term benefits” including long-service awards and deferred compensation payable in cash under Employee Retention and Performance Recognition plans are valued using the same actuarial method as that applied to post-employment benefits under defined-benefit plans, except that actuarial gains and losses are not subject to the corridor method and past service costs are recognized directly as an expense.
A provision of €122,000 was recorded in the fi nancial statements at December 31, 2015 in respect of plans to be settled in shares (allocation of existing shares), against an expense of €14,000 in this respect in 2014.
Due to the 10.7% increase in the corporate income tax, the tax expense recognized in respect of fi scal year 2015 comprises taxes payable in France at the rate of 38%, and at the local corporate tax rate applicable to foreign branches.
The aim of this interpretation is to clarify the date used for the accounting recognition of levies in the fi nancial statements of the levied entity. For taxes calculated based on activity during the previous fi scal year, but which become chargeable during the following fi scal year, IFRIC 21 prohibits the recognition of an expense in advance during the fi scal year corresponding to the activity fl ow used as a base to calculate the tax. The main tax affected by this change in accounting period for recognition is the Social Security and Solidarity Contribution (C3S).
The application as of January 1, 2015 of this change is method, considering its non-material impact (€10.5 million), led to a cancellation of the 2014 accrued expense booked to income and the recognition of this expense at January 1, 2015.
As of December 31, 2015 the Ho Chi Minh City branch is therefore no longer included in Natixis’ fi nancial statements.
INTERBANK AND SIMILAR TRANSACTIONS 143,394 195,302 * o/w subordinated loans 91 47 o/w reverse repurchased securities 45,754 63,369 o/w accrued interest 129 175
Non-performing loans amounted to €3,198 million at December 31, 2015 versus €3,477 million at December 31, 2014 (of which €294 million at December 31, 2015 relating to irrecoverable loans versus €345 million at December 31, 2014).
Provisions for non-performing loans totaled -€1,154 million at December 31, 2015 versus -€1,214 million at December 31, 2014 (of which -€279 million at December 31, 2015 versus -€301 million at December 31, 2014 relating to provisions for irrecoverable loans).
5 FINANCIAL DATAParent company fi nancial statements and notes NOTE 5 BONDS, SHARES AND OTHER FIXED AND VARIABLE-INCOME SECURITIES
NOTE 6 INVESTMENT IN SUBSIDIARIES AND AFFILIATES, ASSOCIATES, OTHER LONG-TERM INVESTMENTS AND TREASURY SHARES
CACEIS 1/3 place Valhubert 75013 Paris NL 633,000 EUR 636,988 EUR 15.00%
Compagnie Européenne de Garanties & Cautions 16 RUE HOCHE - TOUR KUPKA B - TSA 39999 92919 LA DEFENCE CEDEX NL 160,996 EUR 175,814 EUR 100.00%
NATIXIS ASSURANCES 30 AV PIERRE MENDES FRANCE 75013 PARIS NL 135,077 EUR 943,525 EUR 100.00%
NATIXIS CONSUMER FINANCE 30 AV PIERRE MENDES FRANCE 75013 PARIS NL 35,340 EUR 319,942 EUR 100.00%
NATIXIS INNOV 47 QUAI D’AUSTERLITZ 75013 PARIS NL 150,060 EUR 23,042 EUR 100.00%
NATIXIS JAPAN SECURITIES CO., Ltd. 1-11-1, MARUNOUCHI, CHIYODA-KU TOKYO 100-6226 NL 13,900,000 JPY 2,375,812 JPY 100.00%
NATIXIS TRUST 51 AVENUE JOHN F. KENNEDY L-1855 Luxembourg NL 609,865 EUR 125,610 EUR 100.00%
NATIXIS Marco 47 QUAI D’AUSTERLITZ 75013 PARIS NL 1,000,170 EUR 6,715 EUR 100.00%
NATIXIS PAYMENT SOLUTIONS 30 AV PIERRE MENDES FRANCE 75013 PARIS NL 53,559 EUR 42,372 EUR 100.00%
NATIXIS PRIVATE EQUITY 5-7 RUE DE MONTTESSUY 75007 PARIS NL 585,633 EUR 213,752 EUR 100.00%
5 FINANCIAL DATAParent company fi nancial statements and notes NOTE 9 TREASURY SHARES – ASSETS
CUSTOMER TRANSACTIONS 88,043 80,156 * o/w repurchased securities 49,360 43,586 o/w accrued interest 38 23
Securities transactions 46,731 52,767 o/w trading securities, liabilities on borrowed securities 23,964 14,664 o/w trading securities, other liabilities on securities 22,755 38,097 o/w accrued interest 12 6
Investments in subsidiaries and affi liates (224) (83) 31 (5) (281)
Future salary increases are estimated by grade based on a constant population and a three-year average. At December 31, 2015, this average (including infl ation) was 2.75% versus 1.88% at December 31, 2014. The remaining average working lives of employees, for all benefi ts, is 15.8 years versus 15.9 years at December 31, 2014.
Benefi ts paid over the period (2) (3) (2) (28) (35) (3) (3) (2) (32) (40)
Benefi ts vested over the period 2 7 2 31 42 2 6 2 23 33
Payments to the fund during the period (2) (2) (12) (12)
Recognized actuarial gains and losses over the period 3 1 4 2 1 3
Change in obligation taken to income 2 12 1 5 20 (8) 10 2 (6) (2)
Natixis issued Perpetual deeply subordinated notes which offer unit-holders fi xed rate or variable rate income and which may be redeemed at the end of a set period and then at each coupon anniversary date. In the event of non-redemption at the end of this period, for some of these issues, a variable coupon indexed to the EURIBOR or LIBOR will be paid.
The capital increase in fi scal year 2014 corresponds to the allocation of 6,261,106 free shares to certain Natixis employees, within the scope of Retention and performance plans, and the subscription of 9,951,325 shares relating to the share issue reserved for employees under the employee shareholding plan.
NOTE 22 STATEMENT OF ASSETS, LIABILITIES AND COMMITMENTS RELATED TO MANAGEMENT OF PUBLIC PROCEDURES
(a) Of which pension costs for €75 million at December 31, 2015 versus €82 million at December 31, 2014.
(b) Of which a net provision reversal for the Workforce Adaptation Plan of €45 million at December 31, 2015 versus €28 million at December 31, 2014.
The tax consolidation agreement at Natixis group is based on the principle of neutrality, whereby each subsidiary determines its tax and contributes to the group tax as if it were not consolidated.
Interest and similar income and expenses 239 242 244 109 834 416 341 262 148 1,167
Net income from investment and trading portfolio transactions 892 235 (15) 1,112 872 (43) (1) 828
5 FINANCIAL DATAParent company fi nancial statements and notes Counterparty risk exposure
NOTE 35 OFF-BALANCE SHEET ITEMS – FOREIGN CURRENCY COMMITMENTS AND TRANSACTIONS
(in millions of euros) ≤3 months 3 months-1 year 1-5 years > 5 years Undated Total
Independent audit, certifi cation and examination of the separate and consolidated accounts 4.9 5.5
The line item “Other procedures and services directly related to the Statutory Auditors’ assignment” mainly comprises work on fi nancial transactions, opinions on the Group’s approach to implementing accounting standards and controls, reviews of the entity’s compliance with regulatory provisions and reviews of internal control quality.
5 FINANCIAL DATAParent company fi nancial statements and notes NOTE 39
ESTABLISHMENTS AND OPERATIONS IN NON-COOPERATIVES STATES OR TERRITORIES WITHIN THE MEANING OF ARTICLE 238-0A OF THE FRENCH GENERAL TAX CODE
Income after tax, depreciation, amortization and provisions 873,436,574.80 907,172,429.97 2,323,073,936.17 1,305,316,943.00 1,134,225,514.40
Income after tax, but before depreciation, amortization and provisions 0.00 0.28 0.66 0.29 0.32
Income after tax, depreciation, amortization and provisions 0.28 0.29 0.75 0.42 0.36
In compliance with the assignment entrusted to us by your General Shareholders’ Meeting, we hereby report to you, for the year ended December 31, 2015, on: V the audit of the parent company financial statements of Natixis S.A., as appended to this report; V the justification of our assessments; V the specific verifications and information required by law.
As mentioned in Note 1.12 parent company fi nancial statements, a guarantee mechanism with BPCE covering certain assets ringfenced in the Workout Portfolio Management structure (GAPC) has been in place since July 1, 2009. We have reviewed the procedures for monitoring this mechanism, and the treatment of this transaction in the parent company fi nancial statements.
The Company recognizes impairment of assets and provisions in order to cover the credit and counterparty risks inherent to its activities (paragraph 1 of Note 1, and Notes 3, 4, 16, and 30 to the parent company fi nancial statements). We reviewed the control procedures relating to the monitoring of credit and counterparty risk, the assessment of non-recoverability risks, and the calculation of the corresponding individual and collective impairment charges and provisions.
5 FINANCIAL DATAStatutory Auditors’ report on the parent company fi nancial statements Investment securities, shares in affi liates and other long-term securities: Natixis is updating the valuation of investments in its associates, subsidiaries and affi liates, and other long-term securities (Notes 1.2, 6 and 31 to the parent company fi nancial statements). We reviewed the methodology used to perform this work as well as the main assumptions and parameters.
As regards the information provided in accordance with the requirements of Article L.225-102-1 of the French Commercial Code relating to the compensation and benefi ts received by the corporate offi cers and any other commitments made in their favor, we have verifi ed the consistency of that information with the fi nancial statements or with the underlying information used to prepare these fi nancial statements and, where applicable, with the information obtained by your Company from companies controlling your Company or controlled by it. Based on this work, we certify the accuracy and fair presentation of this information.
In accordance with French law, we have verifi ed that the various information items concerning the purchase of investments and controlling interests and the identity of the shareholders and holders of the voting rights has been properly disclosed in the management report.
French original signed in Neuilly-sur-Seine and Paris-La-Défense, on March 10, 2016,
6.1 STRATEGIC OUTLINES AND ORGANIZATION OF THE SUSTAINABLE DEVELOPMENT POLICY 376 6.1.1 Integration of CSR in our business lines 376 6.1.2 Management of our direct environmental impacts 384 6.1.3 Responsible purchasing policy 386 6.1.4 Human resources policy and diversity management 387 6.1.5 Community outreach 388 6.2 REPORTING FRAMEWORKS AND METHODOLOGY 390 6.3 LABOR INFORMATION 393 6.3.1 Change in headcount 393 6.3.3 Work management 395 6.3.4 Employee relations 396 6.3.5 Occupational health and safety 396 6.3.7 Diversity and equal opportunities 398 6.3.8 Promotion of and compliance with ILO fundamental conventions 400 6.4 ENVIRONMENTAL INFORMATION 401 6.4.1 Pollution and waste management 401 6.4.2 Sustainable resource use 401 6.4.3 Climate change 403 6.4.4 Protection of biodiversity 405 6.5 SOCIAL INFORMATION 406 6.5.1 Territorial, economic and social impacts 406 6.5.2 Relationships with stakeholders 406 6.5.3 Sub-contracting and suppliers 407 6.5.4 Fair practices 407 6.5.5 Other measures taken to safeguard human rights 407 6.6 SOCIAL AND ENVIRONMENTAL INFORMATION FOR INTERNATIONAL OPERATIONS 408 6.6.1 EMEA reporting scope 408 6.6.2 Americas reporting scope 410 6.6.3 Asia-Pacifi c reporting scope 412 6.7 REPORT OF ONE OF THE STATUTORY AUDITORS , APPOINTED AS INDEPENDENT THIRD-PARTY BODIES, ON THE CONSOLIDATED SOCIAL, ENVIRONMENTAL AND SOCIETAL INFORMATION PROVIDED IN THE MANAGEMENT REPORT 414
I - Certifi cate of inclusion of the CSR Information 414
II - Reasoned opinion on the fairness of the CSR Information 415
With the support of this network of correspondents, the CSR team ensures that CSR practices are integrated into Natixis’ businesses and operations. The team is responsible for communicating on the initiatives taken and raising employee awareness on the subject.
At COP 21, the 21st Conference of Parties that brought some 174 Heads of State to Paris, a climate deal was reached to keep global temperatures within two degrees in relation to pre-industrial levels.
The challenge for all lies in lowering the carbon in each country’s energy mix. Such a transformation must be undertaken not only by governments, but also by economic stakeholders and civil society. In this respect, Natixis’ decision to no longer fi nance coalfi red power plants worldwide, nor companies whose activities are weighted over 50% in such activities, is a new step in its commitment towards protecting the environment and developing renewable energies.
Natixis supports the development of renewable energies worldwide through its regional offi ces in Europe, the US, Canada and in South America. In 2015 it was very active in the promising and high-growth sector of offshore wind turbines. In the Corporate & Investment Banking division, the Global Infrastructure and Projects (GIP) team fi nanced 13 new deals in 2015 (versus nine in 2014), amounting to €5,234 billion (of which €616 million underwritten by Natixis) for a capacity of 1,415 MW: V three offshore wind power projects with a total capacity of 1,070 MW; V eight solar PV projects with a capacity of 216 MW; V two onshore wind power projects with a capacity of 129 MW.
At the end of 2015, renewable energies accounted for nearly 65% of fi nancing projects undertaken by the Natixis GIP team in the electrical power sector.
Construction of the offshore turbines should be completed between 2017 and 2018. Once built, they will supply up to 4,500 gigawatt-hours (GWh) of electricity per year, i.e. the equivalent of the annual energy demand of 1,400,000 households, and will reduce CO
Natixis acted as fi nancial adviser and arranger for the fi nancing of two windfarms in Peru, developed by the Cobra group, a subsidiary of the Spanish construction company ACS. Natixis played a major role in the innovative structuring of this fi nancing totaling $254 million and composed of a senior tranche arranged by Natixis, CAF, the credit export agency US Exim and development banks DEG, FMO and Proparco, as well as a fi xed income tranche arranged by Natixis and underwritten by an Asian international investor.
In 2015, Natixis Energéco fi nanced 25 new transactions for a total arranged amount of €323.6 million. These transactions are located on French territory and will add 248 MW to the following sectors: V Wind: 118.3 MW; V Solar: 102.8 MW; V Biomass: 24.8 W; V Hydraulic: 2 MW.
Akuo Energy, the leading producer of French renewable energy, and the European Investment Bank (EIB), announced in November 2015 their program to fi nance nine renewable energy power stations for an estimated amount of €329 million. The fi rst stage of the investment will be in fi ve projects in mainland France and overseas territories and will be rolled out via Natixis Energéco.
6 CORPORATE SOCIAL RESPONSIBILITYStrategic outlines and organization of the sustainable development policy The “Sofergie” portfolio of project fi nance and leasing activities arranged by Natixis represented over 13 GW at end-2015, which can be broken down as follows: ■ GEOGRAPHIC BREAKDOWN OF THE RENEWABLE ENERGY PORTFOLIO AT 12.31.2015
The second investment for €15 million will enable Natixis to support the Austrian developer RP Global for a second time by fi nancing the construction of 146.5 MW-capacity wind and hydro projects in Europe over the next two years.
In conjunction with Natixis’ equities and credit research, the SRI research team - consisting of four renowned SRI analysts - offers customers cross-disciplinary expertise on environmental, social and governance (ESG) issues focused on identifying risks (operational, regulatory, reputational, social, etc.) and market opportunities. This expertise is combined with the work of fi nancial analysts to form a comprehensive approach to each company’s fundamental and longterm performance.
Natixis’ SRI team provides tailored research (tracking 200 European companies and 350 international ones) and services to European investors in both the equities and credit (green bonds) segments: publications on specifi c sectors, investment themes, stock and bond-picking; daily analyses of ESG current events and controversies; thematic explanations of shareholder engagement strategies; assistance in structuring the investment process; facilitation of thematic and specialized events, etc.
Strategic outlines and organization of the sustainable development policy 2015 key event SRI research recognized
Research by Natixis was awarded by the 2015 European IRRI (Independent Research in Responsible Investment) survey conducted by Extel, WeConvene and SRI-Connect.
Committed to the issues of sustainable development and socially responsible investment (SRI) for close to 30 years (1), Natixis Asset Management has over the last few years decided to go one step further by developing an applied management approach to all of its investment processes.
The responsible asset management approach is based on four key commitments: V Analysis of ESG (environmental, social and governance) criteria throughout the investment process: Natixis Asset Management’s portfolio managers work with Mirova’s responsible investment research team (12 analysts) who perform ESG assessments on over 3,200 issuers. The ratings they give are integrated into the front-office tools and are available to the portfolio managers.
V Co-construction and promotion of RI/ESG standards with SRI professionals, active involvement in 11 market committees and first commitment report published in 2015.
(1) The fi rst socially-conscious fund of Natixis Asset Management Management, Natixis Impact Nord Sud Développement, was launched in 1985. A complete range of SRI and socially-conscious funds developed in the years that followed.
These tools measure the carbon footprint of Mirova’s listed equity investments with the goal of achieving a level that is compatible with the international community’s target to limit global warming to +2°C.
The methodological principles were published and shared with all the stakeholders interested in the initiative.
Fideme (2002) and Eurofideme 2 (2008) funds, both of which are fully invested; V The Mirova Global Energy Transition Equity fund is dedicated to financing the energy transition.
2015 key event Mirova and CNULCD join forces to create the LDN Fund (Land Degradation Neutrality)
The purpose of the LDN fund is to reward land management practices that avoid the degradation of productive lands. Accordingly, it favors the adoption of sustainable practices on land use and the rehabilitation of degraded land. The Fund is due for launch in December 2016.
Mirova is N°1 in solidarity investment in France (1) and in Europe (2). Mirova is also N°1 in France (3) in solidarity-based employee savings, with two signature funds: V FCP Insertion Emplois
Innovative investment support dedicated to solidarity-based management of employee savings. This fund was worth €127 million in AuM at December 31, 2015 and invests in a large number of socially-inclusive companies and achieves tangible results in social matters. This Finansol-certified fund (FPS) also helps finance organizations such as AIDE, Habitat et Humanisme, NEF, SIFA and Terre de Liens.
Natixis Interépargne holds the No. 6 spot in terms of solidarity investment infl ows in France, with market share of 22.8% (4).
SRI and solidarity investment infl ows recorded strong growth in 2015, both in absolute and relative value terms.
SRI and solidarity assets under management (in billions of euros) in Natixis AM open-ended, dedicated and employee savings funds (a) 16.4 12.8 9.0
SRI and solidarity assets under management relative to Natixis Asset Management’s total AuM (as a %) (a) 4.98 4.08 3.07
AEW Europe, a subsidiary of Natixis Global Asset Management, provides real estate investment advisory services and real estate asset management for third parties. New environmental criteria have been factored into the 2010-2015 sustainable development plan: V for the acquisition of new buildings, only properties that obtained environmental certification (HQE, BREEAM, LEED or BBC (5) are accepted; V for the purchase of existing buildings, environmental performance assessments are systematically carried out and are included in the provisional spending budget for environmental improvements; V for the portfolio under management, actions plans have been implemented to improve environmental performance and comply with the Grenelle Environmental Law as it pertains to homeowners and renters.
Following the certifi cation programs conducted in 2015, eight existing buildings were awarded HQE/BBC or HQE Exploitation certifi cation.
The Green Rating tool that AEW Europe helped to establish has been updated with six new indicators to assess real estate assets according to SRI criteria. Four pilot audits were carried out, and AEW Europe has conducted energy audit campaigns on building portfolios in order to prepare a plan for cutting energy consumption by 38% in accordance with the Grenelle Environmental law. This is the Greco (Grenelle Compliance) project which, since 2012, has already examined a portfolio of nearly 200 properties.
In the interest of furthering its initiatives for better managing energy usage, and in order to better monitor the performance of buildings in use, an energy and water consumption monitoring system has been up and running at 60 sites since 2012, representing average cost savings of 15% on the equipped buildings. Furthermore, development of a general information system for all assets in its portfolio began in 2013. With this system, the properties’ environmental performance can be centrally managed and monitored. The third module (HSE reporting) was developed in 2015 and has been tested on a portfolio of buildings. It should be rolled out to the portfolio of two major investors.
Purchases of certifi ed assets (as a % of new purchases) 18 50 50
Number and type of assessments on the portfolio of existing assets 20 Green Rating audits 70 energy audits 50 DPEs 10 Green Rating audits 100 energy audits 200 DPEs 10 Green Rating audits
Installation of fl uid meters that can be read remotely 10 40 20 2015 key event AEW Europe: recognized environmental policy
Green bonds raise funds earmarked for environmental and/or social projects. Since 2013 we have seen exponential growth in this market: at end-2015 total issues for the year were close to $60 billion, i.e. three times that of 2013.
Natixis is active member of Green Bond Principles and several business lines are participating in this impressive market growth: V Natixis was involved in several green bond issues in 2015, in both the private and public sector: Unibail, Paprec, Schneider Electric, the Ile-de-France region; V The SRI research teams of Natixis and Mirova have developed specific expertise in green bonds and have published several studies to help investors structure a methodological approach to the product;
On December 2, 2015, BPCE issued a €300 million green bond with a seven-year maturity. The issue was successfully executed with a €1.2 billion subscription by over 100 investors.
Environmental and social criteria in Corporate & Investment Banking’s fi nancing business lines are assessed by a dedicated team within the division’s Corporate Secretariat (“ESR”). The structure monitors the quality of the assessment, E&S risks in transactions, analyses reputational risk of involved parties, and implements CSR policies in sensitive sectors.
This methodology applied to investments fi nancing associated with new projects or with extensions of projects related mainly to, for Natixis, the infrastructure, energy (oil and gas), electricity and renewable energies, mining and metals sectors around the world.
An organizational structure based on the principle that both the business lines and the ESR team are involved in assessing and managing transactions has been set up. It is used to assess the quality of existing E&S documentation prepared by the client (or the client adviser if the documentation has not yet been drawn up), to measure and classify potential E&S impacts and risks by importance, and call upon the services of external consultancies if required. It also sets out to establish an action plan of mitigation and corrective measures of potential impacts. This action plan is provided in the fi nancial documentation and compliance with the action plan is monitored through the life time of the fi nancing.
A summary of the key elements for project assessment is included in Natixis’ loan approval process.
Mindful of the great diversity of its transactions and client fi nancing, Natixis ensures the same level of vigilance on the E&S underlying of certain types of transactions not within the scope of the Equator Principles.
All the above-mentioned fi nancing transactions, as well as any other transaction when deemed necessary, are checked to ascertain whether the borrowing company, its operator or main shareholder has a poor management history in the execution of its operations from an environmental, social, sanitary or security point of view.
This exclusion policy applies to the fi nancing of these companies, to proprietary investment and to third-party asset management by Natixis Asset Management, which has also launched a customer awareness program.
Since October 15, 2015, Natixis has committed itself to end its fi nancing of coal-fi red power plants and thermal coal mines worldwide, using current technologies. Natixis has also decided to no longer accept new advisory or arrangement mandates linked to fi nancings of this type.
Also, with regards to non-earmarked general purpose corporate fi nancing, Natixis will not fi nance companies whose business is over 50%-reliant on operating coal-fi red power plants or thermal coal mines.
This commitment completes Natixis’ commitment made in May 2015 to no longer coal mines that use to the Mountain Top Removal (MTR) technique. This policy applies to fi nancing transactions related to the operation of mining sites using the MTR technique. It also applies to any business fi nancing or non-earmarked general purpose fi nancing or investment (Natixis Asset Management) in companies whose activity is largely based on the operation of mining sites that use the MTR technique.
Natixis and its subsidiaries in France (with the exception of fi nancial investments and affi liates - see scopes Chap 6.2 ) make up 287,351 m2 in offi ce space and 18,226 workstations, as well as three data centers (two of which are operated for Groupe BPCE).
Since 2009, Natixis’ management of its buildings has been ISO 9001 (1) and 14001 (2) certifi ed (representing 217,739 m² or 76% of total surface area in France). In 2012, these certifi cations were renewed for three years and extended to the operating departments of Natixis’ data centers.
Natixis has optimized the energy consumption of its buildings for several years using various measures: V a re-lamping policy with the use of LED light bulbs; V installation of motion sensor lighting systems; V heating and cooling systems that give greater consideration to temperatures outside the building.
These measures, combined with initiatives to raise employee awareness of “green gestures” have in recent years led to a regular reduction of energy consumption in Natixis buildings (see detailed indicators in section 6.4.2.3).
The Real Estate and Logistics Department implements Natixis’ disability policy and carries out various projects aimed at promoting the employment of disabled persons by adapting working conditions to their needs.
In terms of building accessibility specifi cally, the Department aims to go beyond regulatory requirements to facilitate access to disabled persons to Natixis buildings.
The handi accueillant (“disability-friendly”) project is jointly run by the HR Mobility-Hiring and Mission Handicap teams. The aim is to give hearing-, sight- or motor-impaired staff easier access to the mobility zone where they can take part in themed workshops organized by Human Resources and consult documentation on career management.
The zone is equipped with contrasted signage, a video magnifi er, adjustable lighting, portable audio induction loops for staff with users with reduced hearing, a system for translating spoken exchanges into sign language or Veyboard.
As part of its longstanding commitment to reducing its direct impact on the environment, Natixis signed the Paris Action Climat partnership on October 12, 2015. It is a charter signed between several large corporations and the City of Paris stating their commitment to combating climate change. Natixis has set itself two targets for 2020: R to reduce the energy consumption of its buildings in Ile-de-France by 20% (compared to 2010)
R to reduce the greenhouse gas emissions of these buildings by 20%.
6 CORPORATE SOCIAL RESPONSIBILITYStrategic outlines and organization of the sustainable development policy 6.1.2.3 Employee training and awareness-raising
Regular communication raises employee awareness of sustainable development in order to reduce their impact on the environment. In 2015 a number of articles were published via internal communication media (intranet, magazine, etc.) and events were held for staff during Sustainable Development Week and the COP 21.
As part of the Sustainable Development Week from June 1-5, Natixis Assurances and AEW Europe, in partnership with the Relais association, organized a massive collection drive of clothing, towels and bedding, shoes and leather goods. A donation of €5 per kilo of collected items was made to the Secours Populaire charity store.
Natixis Asset Management organized a “Commitment” Challenge, attended by teams of 150 staff, which focused on sponsorship, gender diversity, the environment and team spirit. The most invested teams were recognized at an award ceremony organized within the company.
Within the EuroTitre department, staff were invited to participate in a quiz on the environment and share their ideas for every sustainable development initiative within the company.
In 2015, exercises were also conducted to train the maintenance teams in surveillance and alert procedures and in the upkeep of technical facilities where there is a risk of spreading legionella bacteria.
The socially responsible purchasing policy initiated in 2005 is a source of strategic and operational leverage for implementing Natixis’ CSR policy. The main objective of the policy is to promote eco-friendlier products and services that provide guarantees, and even added value, at the social and societal levels.
In practical terms, the Purchasing Department provides employees and suppliers with a number of tools: V a set of “responsible purchasing standards” that set out the regulatory or recommended social and environmental criteria for the most commonly purchased product categories; V a supplier relations charter incorporating its sustainable development values; V “sustainable development” clauses in invitations to tenders and contracts.
In 2015, and in keeping with previous years, the Purchasing Department conducted a sustainable development survey of 30 service providers (electronic banking, IT hardware and services, advisory services, printing, legal services, daycare, call center, catering, customized equipment manufacturing). None of the companies that responded were given an overall score that posed a high risk for Natixis.
The Purchasing Department also continued to contribute to the Natixis action plan for disabled persons by increasing its use of disability-friendly companies (STPA). In 2015, Natixis did a lot of work with and reinforced its collaboration with disability-friendly companies, particularly for the following types of services: V converting Natixis Financement’s incoming mail into electronic format; V production of entry badges; V telephone survey on banking mobility; V supply and document workflow management; V production of video presentations; V various events: round table discussions on the IT intellectually services that can be provided by disability-friendly suppliers, repeat of staff bicycle repair and maintenance days, etc.
A budget of €2.3 million has been assigned to disability-friendly suppliers in 2015, recording a signifi cant increase compared to 2014 (€1.5 million).
Share of purchases managed by the Purchasing Department that incorporate social and environmental criteria (as a %) 96 91 79
Number of suppliers surveyed in the sustainable development survey 30 30 30 6.1.4 HUMAN RESOURCES POLICY AND DIVERSITY MANAGEMENT
The Human Resources Department plays a key role in achieving the Company’s strategy and furthering the development of its business lines. It has based its actions on Natixis’ New Frontier strategic plan, focusing its initiatives on mobility, commitment, community, customer-oriented actions and developing the potential of our employees.
Accordingly, in keeping with previous years (which saw over 850 internal transfers in France and internationally), mobility was strongly supported in 2015 to help the business lines continue to grow with new talents, and to help staff develop their skills by pursuing diverse career paths. After the creation of the mobility and hiring team in 2014, a massive campaign to promote mobility («Get into the move») was run in 2015.
Training initiatives also proved invaluable over the year: 87% of employees received training in 2015, whether to enhance their professional or language skills, to develop their managerial skills, or to learn a new skill in a new profession. Attention was also given to leadership development with the creation of the Purple Academy internal university.
Malaria is a parasitic disease that affects more than 100 countries, mainly in tropical climates. It claims more than 600,000 victims each year, mainly pregnant women and young children, who could be saved through simple prevention and treatment measures. For the 11th year running, Natixis has actively supported prevention programs in endemic regions and research into the disease.
Natixis’ employees also devote their time to Institut Gustave Roussy by taking part in the Odysséa breast cancer run in Paris every year.
The Victoires des leaders du Capital Humain held by the Leaders League group, editor of Les Décideurs magazine, gave Natixis a special mention for the quality of its HR policy in the banking, fi nance and insurance sector. This distinction salutes the human resources actions and initiatives that Natixis has undertaken for several years.
Through the digitization of its processes, the staff of all entities within the French scope (some 30 entities under six different collective bargaining agreements) can carry out most of their administrative tasks online.
In partnership with the Works Council and the Athletic Union, 271 employees and their families took part in the 2015 Odysséa race organized to raise money for the fi ght against breast cancer. Many employees also participated in the 29th annual Telethon of the Financial Community. The amounts paid to the two associations were matched in full by the company. In 2012, for the fi fth year running, Natixis also supported the “Course du Cœur” race, organized by the association Trans-Forme to raise public awareness of organ donation.
Since 2011 Natixis managers have been involved in the “Nos Quartiers ont des Talents” program aimed at helping young people from priority neighborhoods or disadvantaged backgrounds to fi nd their fi rst job. In 2015 Natixis mentored an additional 33 young people.
“Fighting cancer with Gustave”, for Pink October. On the program: fun workshops (general knowledge quiz on cancer, the laboratory, etc.), a “neo-magician”, talks on conventional and alternative treatments, videos.
6 CORPORATE SOCIAL RESPONSIBILITYReporting frameworks and methodology 6.2 Reporting frameworks and methodology
The CSR report for 2015 is based on the following standards: V the social and environmental information set out in Article 225 of the Grenelle 2 law, which governs reporting structure; V the GRI 4 framework (1).
Information on social and environmental performance covers the scope of Natixis France, with the exception of Worldwide and FTS staff including in the accounting consolidation scope.
In terms of the CSR reporting framework, the Natixis France scope is understood as the Natixis scope and all its subsidiaries in France monitored by the company: shared agreements and policies, and pooling of support function resources. Excluded from this scope are fi nancial investments and affi liates. (see list of included entities hereafter).
Outside France, the inclusion of entities depends on the relevance of indicators with respect to social and environmental regulations and their ability to integrate monitoring tools or deliver information. The applicable scope for HR indicators is Natixis International, excluding fi nancial investments and affi liates (see list of included entities in appendix). Indicators are broken down by geographic area.
Within the reporting framework, the presentation of the scope for each indicator is as follows: Name of scope Description
Compared to 2014, the following changes took place in the 2015 reporting scope: In France, Coface S.A. and Fimipar remain excluded from the consolidation scope because they are below the 50% shareholding threshold and are no longer included in the scope subject to CSR monitoring by the company; In 2015 in France the fi nancial investment in Kompass was sold and two entities were consolidated into the Natixis scope: DNCA Finance and Natixis Partners (formerly Léonardo France).
The only remaining fi nancial investments are now Ellisphère and Natixis Private Equity (subsidiary in the process of closing). There are two outcomes of these developments in France: V The definition of the “Natixis France” and “Natixis International” scopes were reviewed to align it with the “monitored” scope, which excludes both affiliates and financial investments; V Excluding the changes in the workforce (FTE) in the consolidated worldwide scope, in 2015 all the social and environmental indicators were applied to the “monitored” scope with, when required, a pro forma recalculation for previous years.
Specific methodological information on audited data: V the headcount includes all employees who have an active employment contract with one of Natixis’ legal entities. Interns, apprentices and beneficiaries of a VIE (International Volunteer Program) assignment are not considered. Expatriates and seconded employees are accounted for in their entity of origin; V hires include external recruitment on permanent employment contracts or fixed-term employment contracts, transfers from Groupe BPCE and the conversion of all other types of contract (work-study placements, internships, VIE, etc.) into permanent employment contracts or fixed-term employment contracts; V departures include external departures of employees on permanent employment contract or fixed-term employment contracts and transfers to Groupe BPCE; V SRI and solidarity assets under management include open-ended, dedicated (to Natixis’ clients) and employee savings funds that take into account environmental, social and governance criteria and are managed by Natixis Asset Management; V purchasing that includes sustainable development criteria takes into account contracts within which a sustainable development clause has been signed by the vendor; V the absentee rate is the total number of days absent (due to illness, accidents in the workplace or in transit, maternity or parental leaves, etc.) multiplied by 100 and divided by the total number of employee workdays theoretically available;
Year-on-year, and after pro forma adjustments in December 2014, the headcount increased by 330 FTEs overall: V Corporate & Investment Banking +148 FTEs, mostly internationally; V Specialized Financial Services: +79 FTEs in the Sureties & Financial Guarantees, Lease Financing and Employee Benefits Planning business lines; V Investment Solutions: +206 FTEs, of which +96 FTEs in the Asset Management and Private Banking business line, particularly after the acquisition of DNCA Finance (89 FTEs) and +110 FTEs for the Insurance business line; V Support departments and others: +58 FTEs, primarily in the Finance, Risk and Internal Audit departments; V Financial Investments: -160 FTEs, following the disposal of Kompass and the transfer of Natixis’ activities in Vietnam to BPCE.
Region 2: Europe excl. France (as a %) 13.4 13.2 15.1
Region 5: Africa, NME, Russia & Others (as a %) 5.3 5.0 5.1
Total new hires 1,263 904 650 * Figures restated (pro forma 2015) in accordance with the new defi nition of the scope.
Natixis is eager to offer its employees an attractive career path and, in June 2015, ran an awareness campaign on internal transfers called “Get into the move - mobility for my career and for the company”.
The campaign focused on the winning trio of mobility: employee, manager and HR manager.
The compensation policy is a key tool for the implementation of Natixis’ strategy. Its aim is to keep compensation levels competitive relative to the bank’s reference markets. It is structured in a way that encourages employee commitment to the Company over the long term and enhances the Company’s appeal while complying with regulations in force. It refl ects the bank’s individual and collective performance.
The governance set up by Natixis in these areas provides for a complete review of its compensation policies and adherence to guidelines when implementing these policies. A detailed description is given in Chapter 2, section 2.4.
Average gross annual compensation of staff under permanent employment contracts (excluding profi t sharing and employer contributions to the Company savings plan) (in thousands of euros) 80.3 78.5 77.1
Mandatory employee profi t-sharing (in millions of euros)* 32.4 34.2 25.7
Total employer contribution paid in respect of the Company savings plan and the collective pension plan (PERCO) (in millions of euros) 35.6 33.2 32.9 * Consolidated fi gures at 02.04.2016.
85% of employees in the scope of Natixis France, working at 32 different companies, are covered by the collective bargaining agreements of the banking and insurance industries. There are, however, seven separate agreements across the whole scope, containing specifi c details depending on the sector.
Within Natixis S.A., the collective workweek is 38 hours and employees also enjoy compensatory time off in lieu of overtime. The current set of agreements on the management of working hours includes several types of contracts (part-time, short-time, special working conditions for employees with disabilities, etc.) and provides for the associated terms and conditions of compensation and social security contributions.
The Natixis Works Council, consisting of the elected representatives of the companies that make up Natixis, allows Senior Management to inform the trade unions and employers’ organizations about the Company’s strategy and performance.
In view of the transformation of our economic models, and in keeping with the strategic priorities of Groupe BPCE, in January 2015 a BPCE agreement setting out the fundamentals of a dynamic business line and skills management policy was signed.
The collective bargaining negotiations carried out within the Natixis France scope in 2015 confi rm the steps taken to adopt uniform measures that gradually create a group-wide employment framework.
This framework now rests on: V a single consolidated Natixis employee savings plan; V a single supplementary pension plan (PERCO); V a group-wide profit-sharing scheme; V a group-wide policy on the professional integration and retention of employees with disabilities; V a uniform benefit for children with disabilities; V trade union notification/consultation procedures; V internal transfer and career management opportunities; V actions to promote hiring young people while retaining older employees.
In addition to overall agreements, over 60 agreements were signed by Natixis’ French entities in 2015.
In 2015, Natixis S.A.’s Committee for Hygiene, Safety and Working Conditions (CHSCT) for the Paris location, continued to work closely with each of its sub-Committees responsible for ensuring the application of rules on health & safety and working conditions at each of their respective sites. This delegation allowed the Committee’s plenary sessions to focus on matters of general interest.
In 2015 the “Professional Behavior, Prevention of Harassment and Distress at Work” Commission, which meets every quarter, continued to fulfi ll its role in analyzing specifi c situations.
The CHSCT’s “Workplace Adjustments” Commission was also consulted in 2015. This Committee examines site plans and may issue remarks or ask for adjustments to the plans, with the aim of improving employees’ physical working conditions. On the medical front, Natixis S.A. has a full-service medical department (three company physicians, four clinics, six nurses) and three company social workers.
Severity rate of workplace accidents (b) (by number of days of incapacity per thousand hours worked) 0.14 0.14 0.15
Various initiatives were carried out in 2015 to raise employee awareness of health-related risks: R several cholesterol testing and fl u vaccination drives were organized by the medical department; R in partnership with the Fondation Gustave Roussy, a conference was held on diagnosing colon cancer, and the risks and symptoms of the disease; R a campaign on addition prevention was initiated with a specialized consultancy, CHSCT.
The Company’s training policy is one of the key factors aimed at furthering the career development of employees as well as the development of Natixis’ core businesses.
V preparing and supporting transfers within the Company; V enhancing managerial skills and consolidating shared practices; V improving the professionalization of the teams; The teams in charge of training develop comprehensive as well as tailored solutions, offered through one-off initiatives or longer-term programs targeting the development of individual and collective skills. These multi-modal solutions help continuously improve employee skills. In 2015 Natixis’ employees in France received more than 215,000 hours of training.
Natixis created its own internal university for managers. Its purpose is to strengthen leadership and managerial practices in the interest of supporting the cultural transformations needed to successfully fulfi ll Natixis’ strategic plan. The Purple Academy offers bespoke development programs for different target populations (senior executives, potential managers and Natixis Senior Managers) in order to align strategy with implementation.
At the initiative of BPCE, the fi rst massive open online course (MOOC), entitled Digit’All, was offered to all Natixis employees. It covered the impacts of the digital transformation of the economy - on the banking and fi nance sector in particular - as well as on the Groupe BPCE strategy.
V Offi cial qualifi cation courses (as a %) 7.6 6.9 4.9 * Provisional consolidated fi gures at 01.31.2016 representing at least 90% of hours of training received during the year.
For several years, Natixis’ goal has been to guarantee gender equality as regards to recruitment, training, compensation and career. In 2015 Natixis has continuously worked to: V eliminate wage gaps; V include women in training programs for “high-potential” employees.
2015 saw the launch of the “Progresser au féminin” program for women with the potential to reach technician level or who are on executive level 1. There were 19 participants in 2015, and the program will be rolled out to all the Natixis entities in 2016.
As with the fi rst two groups to graduate from the Natixis Leadership program, the class of 2015 contained an equal number of men and women.
WINN promotes gender diversity within Natixis’ management and runs a women’s network that focus on matters pertaining to professional and personal development (learning about the business lines, international operations, digital transformation, innovation, etc.). Members can participate in a number of activities: mentoring, interaction with other networks, feedback, getting to meet infl uential women and members of Senior Management, conferences, taking part in sporting events, etc. The representatives of WINN regularly meet with Natixis’ senior managers to advance the issue of gender diversity within the company.
In 2015, WINN had over 600 members with a stronger international base on the back of the launch of WINN London in November after that of WINN APAC.
Laurent Mignon, Chief Executive Offi cer, and Laurence Debroux, independent director of Natixis and CFO of Heineken, have been the network’s sponsors since its formation.
Percentage of women in the workforce (as a %) (a) 51.6 51.5 49.5
Percentage of women on the Executive Committee (as a %) (c) 12.1 13.3 11.8
Percentage of women promoted (as a %) (c) 60.3 57.6 59.3
Percentage of women granted individual pay increases (as a %) (c) 54.6 53.1 54.4
Percentage of women who received training (as a %) (b) 51.1 50.6 50.7
Three conferences on retirement were also held this year for more than 200 employees. In addition, interested employees were able to take part in individual retirement interviews and in “Preparing for retirement” training initiatives.
Natixis continued to develop a policy to promote the professional integration and retention of employees with disabilities and carried out numerous initiatives under the framework agreement.
In 2015 Natixis hired 40 employees with disabilities in France (17 of which on permanent employment contracts), taking the number of disabled staff to 331 . The direct employment rate increased to 2.93% (versus 2.81% at end-2014).
In accordance with the commitments made when signing the Global Compact, Natixis complies with all of the ILO’s rules, particularly freedom of association and the right to collective bargaining, the prevention of discrimination, the elimination of forced labor and the abolition of child labor.
These rules are also applied to the projects fi nanced by Natixis: the bank focuses on the impact of projects on the local populace, in accordance with International Finance Corporation (IFC) standards.
Ordinary industrial waste - not sorted (in metric tons) 116 413 841
The large increase in the number of batteries sorted between 2012 and 2013 is due to inverter batteries being collected in addition to the small batteries collected from employees.
Within the ISO 14001-certifi ed operating scope managed by the Real Estate and Logistics Department (76% of offi ce space in France), all waste is sorted: ordinary industrial waste (paper, cardboard, glass, metal, etc.) and hazardous industrial waste (WEEE, solvents, paint, varnish, infectious waste, etc.). Waste is recycled or subject to a special treatment process.
Consumption in m3 per m2 of usable fl oor area 0.23 0.26 0.26
6 CORPORATE SOCIAL RESPONSIBILITYEnvironmental information Measures have been taken to optimize water consumption, the absolute value of which has been falling for the past three years. These include continuous monitoring of the systems to detect any leaks, fi tting of pressure relief devices, installation of rain gauges to stop automatic sprinklers while it is raining and employee awareness efforts.
Percentage of recycled and/or eco-certifi ed paper (as a %) 99 98.04 96.21
In desktop publishing, paper consumption is relatively stable (172 metric tons in 2015 versus 167 metric tons in 2014). Several of Natixis’ business lines have taken steps to optimize or reduce paper consumption on behalf of customers: Natixis Intertitres is the fi rst player on the payment voucher market to use 100% recycled paper to print its Chèque de Table® restaurant vouchers and accompanying documents. Natixis Intertitres has also undertaken to print fewer personalized restaurant vouchers by encouraging clients to use standard paper Chèque de Table®
By doing so, the shareholders and clients made a gesture for the environment: for every subscription to receive an electronic document, a donation was made to the fi ght against malaria, which Natixis has supported for the last 11 years.
Total energy consumption of buildings and data centers 58,352 60,623 82,679
Energy consumption per m2 of usable offi ce space (in MWh) excluding data centers 0.19 0.19 0.21
For the third year running, Natixis recorded a drop in the energy consumption of its offi ce buildings, which, since 2014, is attributable in large part to the removal of Coface from the consolidation scope, but also to energy consumption reduction and optimization measures (see section 6.1.2.1). The data centers also reduced their energy consumption.
A company-wide travel plan has been in place since 2008, with a series of measures promoting the use of public and low-impact transportation, or carpooling: V employees are encouraged to use the public transport near sites, with a public transport pass reimbursement rate of 60%; V the bank jointly funds a public bus route that connects Paris to Charenton-le-Pont that serves five of its sites. When the Nouveau Bercy site was opened, the bus service’s frequency was increased with backing from the STIF and the Mairie de Charenton-le-Pont. A private shuttle also connects five sites in this town to public transport; V bike stands have been installed (258 bike stands at 13 sites at the end of 2015) and employees regularly use the Vélib’ bikes provided by the Mairie de Paris; V parking spaces with recharging sockets for electric vehicles have been gradually introduced (at the end of 2015, there were 42 spaces at 14 Natixis sites).
The environmental impact of the company fl eet can be signifi cant. In 2015 alone over 13 million kilometers were covered. Natixis is therefore selecting eco-friendlier vehicles - in terms of both CO
Since 2014 Natixis also committed to a policy to gradually eliminate the use of diesel cars.
The car policy no longer offers diesel cars to Natixis managers. This policy was expanded in 2015 to include company cars used by sales staff.
150g in the previous policy; V reduction of the emissions ceiling for vehicles assigned to Category 1 sales representatives and managers: 140g vs. 135g; V reduction of the emissions ceiling for fleet vehicles: 115g vs. 105g.
Lastly, the number of hybrid electric vehicles again increase in 2015 from six to 14 (three of which are electric vehicles, used by Senior Management Committee and Executive Committee staff). It should be noted that three orders for electric cars were made in 2015 for the company fl eet.
Number of company and fl eet vehicles managed 576 581 536
Since 2011, the business travel policy has set rules ensuring the safety and comfort of employees during business trips, while contributing to the policy of optimizing the costs and managing the environmental impact of these trips. This policy applies to Natixis and its subsidiaries, excluding fi nancial investments in France. The subsidiaries and branches abroad establish travel rules that are consistent with the “worldwide travel” policy.
Regarding urgent courier services in the Paris region, the Real Estate and Logistics Department has suggested using cycle couriers for distances under 3km (19% of the courier needs). This mode of delivery represented over 4,000km in 2015.
Natixis has also adapted to climate change through its Business Continuity Plan, which addresses the management of extreme weather-related events and their consequences on its buildings and data centers.
Natixis is the corporate, investment, insurance and fi nancial services arm of Groupe BPCE. Its activities are entirely dedicated to providing fi nancial advice and support to its business customers and contributing to the social and economic advancement of the countries where it operates.
It helps develop local employment through its international operations: more than 5,000 Natixis employees work in its offi ces, branches and subsidiaries abroad. Virtually all of these employees are recruited locally.
Measures taken to safeguard against all forms of corruption are described in section 6.1.1.3 “CSR risk management”.
In terms of consumer protection, Natixis’ employees are obliged to go about their business in an honest and fair way. When a fi nancial product or service is sold, they are subject to a number of rules in the interests of, and to protect, their customers: V customer categorization imposed by the regulations, including professional customers, eligible counterparties and nonprofessional customers; V an assessment of the suitability and appropriateness of the products and services to be supplied: employees are obliged to check that the customer has the level of competency required to understand and deal with the risks inherent in the product or service offered and that the product meets their investment objectives.
The information in this chapter covers the Natixis international scope, excluding NGAM (see section 6.2).
The large majority of the 877 Natixis employees in the EMEA region work in Europe.
In Moscow and Dubai, Natixis aims to maintain gender balance in its hiring policy.
In Madrid, its objective is to increase the number of women in the upper echelons of the company. Since 2015, two women have been appointed to the Management Committee.