Policies and rules for determining compensation and benefi ts of all kinds paid to members of the corporate bodies 31
CHAIRMAN’S REPORT 413 Composition and conditions for the preparation and organization of the work of the Board 414
Draft resolutions for the Combined General Shareholders’ Meeting of May 27, 2010 436
This registration document was fi led with the French Financial Markets Authority on April 30, 2010, in accordance with Article 212-13 of the general regulations of the Financial Markets Authority. It may be used in connection with a fi nancial transaction only if accompanied by a transaction note approved by the Financial Markets Authority.
This registration document includes all elements of the annual fi nancial report mentioned in section I of Article L.451-1-2 of the French Monetary and Financial Code and Article 222-3 of the general regulations of the Financial Markets Authority. A cross-reference table showing documents referred to in Article 222-3 of the general regulations of the Financial Markets Authority and the corresponding sections of this registration document appear on page 497 .
Natixis’ links with BPCE and the fi nancial solidarity mechanism 4
Change in closing share price and number of shares traded 12
Natixis was formed in 2006 from the combination of Natexis Banques Populaires and various subsidiaries of the Caisse d’Epargne Group, notably Ixis Corporate & Investment Bank (Ixis CIB) and Ixis Asset Management (Ixis AM): a Natexis Banques Populaires itself was created from the combination in July 1999 of the operational activities of the Caisse Centrale des Banques Populaires, founded in 1921, with Natexis S.A., a holding company that was formed from Crédit National, founded in 1919 and which had gradually acquired a 100% stake in Banque Française du Commerce Extérieur, founded in 1946. As at December 31, 2000, Groupe Banque Populaire held 79.23% of Natexis Banques Populaires following an increase in its capital largely taken up by retail investors; a Ixis CIB and Ixis AM were originally part of CDC Ixis, itself part of the Caisse des Dépôts . The Ixis CIB and Ixis AM businesses were then combined with the Caisse Nationale des Caisses d’Epargne (CNCE) as part of the transformation of the Groupe Caisse d’Epargne into a major full-service banking group at the end of 2004.
After these contributions, CNCE and BFBP (directly and indirectly through SNC Champion) each had a 45.52% shareholding in the share capital of Natexis Banques Populaire, whose name was changed to Natixis.
In parallel to these contribution operations each Banque Populaire issued CCIs’ representing 20% of their capital in favor of Natexis Banques Populaires, which has since become Natixis.
a On February 26, 2009, the BFBP Board of Directors and the CNCE Supervisory Board approved the principles for the combination of their two central institutions and the creation of the number two French banking group.
a With the formation of Groupe BPCE, BPCE has taken the place of CNCE and BFBP, becoming the majority shareholder of Natixis.
a Natixis has been affiliated to BPCE since July 31, 2009 (not included) as a replacement of the dual affiliation of Natixis to CNCE and BFBP.
PRESENTATION OF NATIXIS 1 History a funds call); (iii) if BPCE’s regulatory capital and this mutual guarantee fund are insufficient, BPCE would call on (in equal shares) each of the two Banque Populaire and Caisse d’Epargne networks’ own guarantee funds and, finally (iv) if calls on BPCE’s regulatory capital and these three guarantee funds are insufficient, additional sums would be requested from all Banques Populaires and Caisses d’Epargne.
It should be pointed out that the guarantee fund referred to above consists of a Groupe BPCE internal guarantee mechanism activated at the initiative of the BPCE Executive Board and cannot be used by a third party, with the exception of the French banking regulator that may request that it be used if he deems it necessary.
In the 2009 second quarter Natixis carried out a detailed strategic review of its businesses. Following this review, from summer 2009, a medium-term plan, (out to 2012), called the “New Deal“ was launched. It is based around the three core businesses, adapted to the bank’s new risk profi le and is resolutely customer- focused: a the corporate and investment bank of Groupe BPCE ; a investment solutions , including asset management, a business with a global outlook, and integrating insurance and private banking; and a Specialized Financial Services, offering its expertise services to the BPCE networks.
As a result of management decisions taken throughout the year in 2009, Coface has succeeded in its recovery, with a claims rate signifi cantly improved to 63% in the 2009 fourth quarter.
On February 19, 2010 Natixis announced that it had entered into exclusive negotiations with AXA Private Equity with a view to the sale of its own account private equity activities in France.
FINALIZATION OF THE OBJECTIVES AND ROLL OUT OF THE NEW DEAL PLAN
The “synergies with the retail networks” initiative has confi rmed around 400 million euros in potential revenue synergies by 2013.
In order to strengthen Natixis’ management control and operational effi ciency, it is envisaged that support functions will be organized into integrated channels (Communication and sustainable development, Finance, Human Resources, Risks, Corporate Secretariat and IT and Shared Services ). Within this framework, an operational effi ciency plan was launched with an objective of reducing costs by around 200 million euros by 2013.
As of December 31, 2009, BPCE held 71.5% of the share capital of Natixis. The structure of Groupe BPCE as of December 31, 2009 was as follows: CURRENT GROUPE BPCE ORGANIZATION CHART
(4) BPCE SA holds one preference share in BP Participations and CE Participations.
Pre-tax income on ordinary activities attributable to the group (c) 916 886
Stock market capitalization (reference share price = 3.547 EUR) 10,315,164,397,071 EUR
In addition to the above, Natixis continued its program of meeting shareholders. 19 meetings were held during 2009.
a In 2009 activities offered relating to the Shareholders’ Club were enhanced. Training sessions organized in partnership with the École de la Bourse were presented in a number of cities in France (Nantes, Toulouse, Orléans, Rouen). At the same time a growing number of conferences were given by experts from Natixis, in particular in the area of macroeconomics, in Paris and the regions. Finally, these events are now complemented by shareholder meetings that enable Natixis teams to present the news, strategy and results of the business and to answer questions.
a On November 20-21, 2009, Natixis had a stand at the Actionaria trade show. As in 2008, Shareholders’ Club members were personally invited to this event by letter that included an invitation. At the stand they also enjoyed a specific welcome. Nearly 2,000 people visited the stand during these 2 days.
a During the General Shareholders’ Meeting on April 30, 2009 at Espace Grande Arche de La Défense, a dedicated stand was available to Shareholder Club members or shareholders wanting to join the Club. Nearly 650 shareholders attended this General Shareholders’ Meeting chaired by François Pérol, as Chairman of the Supervisory Board of Natixis.
This section is an extract from the Chairman of the Board’s report on the Board’s composition, the preparation and organization of its work and the internal control and risk management procedures implemented by Natixis (in application of Article
L.225-37 of the French Commercial Code). Please refer to Chapter 7 (Chairman’s report ) for the remainder of the report.
In accordance with Article 26 of Law 2008-649 of July 3, 2008, involving various provisions to adapt Company law to EU law, the Corporate Governance Code to which reference has voluntarily been made when preparing this report is the Corporate Governance Code for listed companies published in December 2008 by the French association of private sector companies Association Française des Entreprises Privées - AFEP and the French business confederation Mouvement des Entreprises de France - Medef (the “AFEP-Medef code”). The AFEP-Medef code is available for consultation at the Company’s head office and on the Natixis website.
Mr. François Pérol Date of birth: 11.06.1963 Natixis shares held: 1,000
Mr. Nicolas Duhamel Date of birth: 08.13.1953 Natixis shares held: 2,080,441,556
Member, Audit Committee First appointed: Board Meeting of 08.25.2009 Term expires: 2015 AGM (b)
Member of the BPCE Executive Board 50, avenue Pierre Mendès France 75201 Paris cedex 13
Mr. Vincent Bolloré * Date of birth: 04.01.1952 Natixis shares held: 1,000
Chief Executive Offi cer of Banque Populaire Rives de Paris, Member of the BPCE Supervisory Board
Director First appointed: AGM of 04.30.2009 Term expires: 2015 AGM (b)
Mr. Bernard Jeannin Date of birth: 04.19.1949 Natixis shares held: 2,399
(a) A brief curriculum vitae of each of Natixis corporate offi cers as well as a list of the offi ces held in 2009 and in previous years appears in Chapter 8 “Legal Information”.
Chief Executive Offi cer of Caisse d’Epargne Rhône-Alpes Member of the BPCE Executive Board 42 , boulevard Eugène Deruelle BP 3276 69404 Lyon cedex 0 3
Mr. Alain Lemaire Date of birth: 03.05.1950 Natixis shares held: 1,000
Director First appointed: Co-opted by the Board Meeting of 08.25.2009 Term expires: 2015 AGM (a)
Advisor to the BPCE Executive Chairman 50, avenue Pierre Mendès France 75201 Paris cedex 13
Mr. Bernard Oppetit * Date of birth: 08.05.1956 Natixis shares held: 1,000
Mr. Didier Patault Date of birth: 02.22.1961 Natixis shares held: 2,300
Chairman and Chief Executive Offi cer of EDF Chairman of the Board of Veolia Environnement 38, avenue Kléber 75016 Paris
Mr. Philippe Sueur Date of birth: 07.04.1946 Natixis shares held: 1,000
Director First appointed: AGM of 04.30.2009 Term expires: 2015 AGM (a)
(a) A list of the offi ces held by the Chief Executive Offi cer in 2009 and in previous years appears in the annex to Chapter 8 “Legal information”.
(1) This Committee is made up of business line, support function, Finance and Risk Department managers and the Corporate Secretary.
In the current environment, the change in the method of corporate governance was justifi ed by the desire to create a single custodian of Natixis’ best interests and value creation. This permits unity of action, an essential requirement in terms of control, reactivity and foresight in Company management.
Following the merger of BFBP and CNCE resulting in the creation of BPCE, Natixis has, since August 1, 2009, been 71.54% owned by BPCE.
As shown above, the Natixis Board of Directors, appointed for six years, had fi fteen members on April 1, 2010, broken down as follows: a two members from BPCE, i.e. François Pérol and BPCE; a four members from Banques Populaires, i.e. Messrs. de La Porte du Theil, Criton, Gentili and Jeannin; a four members from Caisses d’Epargne, i.e. Messrs. Lemaire, Klein, Patault and Sueur; a five independent members, i.e. Mrs. Debroux and Messrs. Bolloré, Naouri, Oppetit, and Proglio.
The Natixis Board of Directors, in its meeting of December 17, 2009, in view of the Compensation Committee report, examined each director’s position in terms of skills, qualities of judgment and freedom of thought and expression and, more generally speaking, in terms of the independence criteria recommended by the AFEP-Medef code and incorporated into the Board’s Internal Rules (see 2.1 B below). The report noted that the fi ve independent members fully satisfy independence criteria requirements. Banking relationships between Natixis and the groups chaired by each of the independent members are not of a nature as to affect the impartiality of their judgment.
Natixis directors’ term of offi ce is set at six years (and not four years as recommended by the AFEP-Medef code) in line with terms of offi ce within the group.
B – Role and powers of the Board of Directors 1. Legal and statutory requirements
The Board of Directors has decided to adopt a set of Internal Rules in addition to the legal and statutory requirements, specifying certain procedures for its operation and setting out the rights and duties of its members. These are sent to each member at the time of his or her appointment.
(1) From January 1, 2009 to April 30, 2009 the Supervisory Board was chaired by Bernard Comolet until the beginning of March 2009, and then by François Pérol.
With regard to the Board of Directors’ Internal Rules, in the version in force on December 17, 2009, particular attention should be drawn to those provisions dealing with: a the requirement for the Board of Directors’ prior authorization for a number of operations: j extension of Natixis activities into material lines of business not currently carried on by Natixis, j the appointment or removal of the CEO or, where applicable, one or more Deputy CEOs, j any acquisition or increase in shareholding, and any investments or di vestments (including the transfer of cooperative investment certifi cates issued by Caisses d’Epargne or Banques Populaires) or the formation of joint ventures by Natixis or any of its main subsidiaries, in an amount in excess of €150 million, j any asset transfers, mergers or demergers in which Natixis is involved; a the definition of the criteria used to qualify members as “independent”: An independent director is a person who has no relationship whatsoever with the Company, its management or the Group that may compromise his or her freedom of judgment or be of a nature as to create a situation of conflict of interest with management, the Company or the Group.
Directors representing significant shareholders, directly or indirectly, in the Company may be considered independent if these shareholders do not control the Company within the meaning of Article L.233-3 of the French Commercial Code. However, if a director represents a shareholder of the C ompany holding, directly or indirectly, more than 10% of the share capital or voting rights, the Board, on the basis of a report from the Compensation Committee, shall systematically review the member’s independence, taking into account the composition of the Company’s share capital and the existence of any potential conflicts of interest.
Designation as an independent member of the Board of Directors is discussed, on a case by case basis, by the Compensation Committee (the composition and role of which are described in greater detail below) which prepares a report on this subject for the Board; a the Ethics and Compliance Charter for members of the Board of Directors: T he Ethics and Compliance Charter for members of the Board of Directors, included in the Board of Director’s Internal Rules, defines a code of conduct which aims to encourage directors to act independently and responsibly.
C – Work of the Board of Directors (1) in 2009
In 2009, the Board held on a total of thirteen meetings (fi ve Supervisory Board Meetings and eight Board of Directors’ Meetings). Members’ attendance rate was 83.5% for the year as a whole (compared with 87% in 2008).
The Chief Executive Offi cer attended all meetings thereby enabling Board members to hear his point of view on important issues and to ask him any questions that they deemed to be relevant.
As and when required, the CFO or one or more business division executives were also invited to provide further information on subjects raised in meetings. Works council representatives attended various Board Meetings. The Board also met with members of the Executive Management Board during the course of its work.
In accordance with banking legislation, the Board was informed of reports on internal control requirements and on measuring and monitoring risks. It also conducted a review of internal control operations and results, in particular compliance control. The Board also approved the Chairman’s report on requirements for the preparation and organization of the Board’s work.
In particular, the Board, in accordance with the bylaws and the Internal Rules, had notably to give an opinion during 2009 on the restructuring operations between subsidiaries prior to their implementation, i.e. the projects listed below: a proposed sale of Natixis’ holding in Caceis to Crédit Agricole; a restructuring of Private Banking business by merging different entities; a proposed sale of Natixis Algérie to Banque Fédérale des Banques Populaires; a the complete transfer of Natixis Garanties’ assets and liabilities to Natixis; a dissolution of Natixis CIB Participations 1 and complete transfer of its assets and liabilities to its parent Company , Natixis; a acquisition of an additional interest in Natixis Global Asset Management; a sale of Natixis Pramex International to BPCE.
The Board of Directors also authorized the plan for BPCE to guarantee certain GAPC portfolios (for more detailed information on GAPC, please refer to Chapter 4 “GAPC”).
In accordance with current regulations, the Board authorized a number of agreements, such as re lated party agreements, prior to their signing (for more detailed information on regulated agreements please refer to the special report from the Statutory
At its meeting on June 25, 2009: a the contract of sale between Natixis and Banque Fédérale des Banques Populaires (BFBP) for Natixis Algérie.
At its meeting on August 25, 2009: a agreements relating to the purchase of securities and the issue and subscription for perpetual deeply subordinated notes between Natixis and BPCE; a agreements between Natixis, Natixis Transport Finance (NTF), the Société de Financement de l’Économie Française (SFEF) and BPCE.
At its meeting on November 12, 2009: a the agreement on the updating, within the context of post MIF regulation, of the agreement entered into by Natixis, BPCE and Crédit Foncier de France concerning the transfer and organization of regional public sector activities.
At its meeting on December 17, 2009: a framework credit and financial guarantee agreements between Natixis and Natixis Lease for the purpose of accessing funding received from SFEF, against collateral; a the contract of sale for Natixis Pramex International between Natixis and BPCE.
The questionnaire also included questions relating to Executive Management, in particular: a the involvement of executives in the Board’s work; a the quality of the work performed by executives; a the quality of the answers given to directors’ questions; a an overall impression of the quality of the information given to the Board.
This summary report showed that the Board was, overall, satisfi ed with its work. Points for improvement were, however, identifi ed with regard to each of the assessment’s objectives and, in particular: a with regard to how the Board operates, two points for change were identified i.e. expedite availability of files and involve directors more in compiling agendas; a with regard to the preparation of important questions: continuing the efforts already made in respect of the quality of the documentation and works of specialized Committees; a with regard to directors’ actual contribution to the Board’s work: strengthening the involvement of directors in the Board’s work by getting them to participate more and by giving them more decision-making responsibility.
For 2010, the Board has decided that the initiative to assess its work could be conducted with the help of an external consultant.
On April 1, 2010 the Audit Committee had seven members: Jean-Charles Naouri, Chairman (1), and Laurence Debroux, and Messrs. Criton, Duhamel, Klein, de La Porte du Theil and Lemaire.
Members of the Audit Committee have sound accounting and fi nancial know-how gained by virtue of professional experience.
Once the Board of Directors, together with a new Audit Committee, had been set up on April 30, 2009, the following changes were made to the composition of said Committee: a on December 17, 2009, following the resignation of JeanClaude Créquit, Jean Criton was appointed to the Audit Committee; a on December 17, 2009, Olivier Klein was appointed to the Audit Committee; a on April 1, 2010, following the resignation of Robert Zolade, Laurence Debroux was appointed to the Audit Committee.
The Company’s CEO provides the Audit Committee with any documents and information that may help it to perform its duties, as necessary. The following list is not exhaustive: a parent Company and consolidated financial, accounting, and regulatory documents prepared periodically by the Company; a summary reports by the Company’s Statutory Auditors; a any audit reports concerning the Company; a accounting policies and methods applied within the Company; a internal control policies and procedures; a projected Company and consolidated results to end of March, end of June, end of September and end of December; a consolidated budgets and financial statements of the main subsidiaries, as well as any related documents provided to the Supervisory Board or, if applicable, the Audit Committee of the principal subsidiaries.
Audit Committee Meeting minutes are prepared by the secretary of the Board of Directors. These minutes are distributed to members of the Audit Committee and the Board of Directors is made aware of the Audit Committee’s work so that it can be fully informed in its decision-making.
The Natixis Audit Committee met eight times in 2009. Its members’ attendance rate was over 78% for the year as a whole (vs. 94% in 2008).
On the subject of internal control and compliance, the Committee received a presentation of Banking Commission reports on risk monitoring and internal control. It also received a presentation on the assignments and organization of the Natixis compliance function, as well as the work program of the Natixis Inspection Department, with regular follow up bulletins.
In 2009, the Committee’s duties focused, in particular, on the following items: a setting up the BPCE guarantee covering certain GAPC assets (relating to GAPC, for further information, please refer to chapter 4“GAPC”); a given the current situation, liquidity-related issues as well as the position with regard to GAPC portfolio assets; a various Natixis proposals to sell holdings (on this occasion it received reports from independent experts); a the 2010 annual budget; and a systematic acknowledgement of correspondence from the Banking Commission and correspondence and information from the Autorité des Marchés Financiers, answers to said correspondence from Natixis.
At least half of the Natixis Compensation Committee are independent members.
The Committee is responsible for making proposals to the Board of Directors concerning: a the level and terms of compensation paid to the Chairman of the Board of Directors, the CEO and, where applicable, one or more Natixis Deputy CEOs (including fringe benefits, pension plans and health insurance, as well as the allocation of stock options or share purchases); a rules for allocating directors’ fees to the Board and the total amount submitted for approval by the Natixis General Shareholders’ Meeting; a the general policy for allocating stock options.
Since Q4/2009, the Compensation Committee has also been responsible for an annual review of compensation policy, in particular for market professionals and for checking, on the basis of an Executive Management report, that said policy complies with Chapter VI, Section VI of CRBF rule 97-02 and is in line with the provisions set out by the fi nancial stability council and the professional standards to which the Company adheres.
CORPORATE GOVERNANCE 2 Role and operating rules of the corporate bodies
To this end, the Committee may rely, where appropriate, on internal control services or outside experts.
Selection and appointment procedures a The Committee gives an opinion and, upon request from the Board, makes proposals and recommendations to the Board on the appointment of a CEO and, when appropriate, one or more Deputy CEOs.
The Company’s CEO provides the Compensation Committee with any documents that may assist it in performing its duties and to ensure it is fully informed. At the request of the Board of Directors, the Compensation Committee may also appoint outside experts to carry out reviews or analysis of compensation paid to the corporate offi cers of comparable companies in the banking sector.
Minutes of each of the Compensation Committee’s meetings are prepared and sent to individual members. The Chairman of the Committee provides a report on the Committee’s work to the Board of Directors, thereby enabling the Board to be fully informed of its decisions. It is also specifi ed that when these reports are presented, the Board of Directors shall not decide upon compensation in the presence of corporate offi cers.
On April 30, 2009, the Board appointed Laurent Mignon as Chief Executive Offi cer as of May 14, 2009 for a six-year term ending on May 14, 2015. Jean-Marc Moriani acted as temporary CEO for the interim period (i.e. from April 30, 2009 to May 13, 2009 inclusive).
He also set up an Executive Management Board ( comité de direction générale - CDG) that he chairs, made up of business line, support function, Finance and Risk Department managers and the General Secretary.
As at December 31, 2009, the members were: Aline Bec (Information Systems and Shared Services) and Messrs. JeanMarc Moriani (CIB ), Luc Auberger (Finance and Risks), Jérôme Cazes (Coface), Jean Duhau de Berenx (Private Equity), Jean Yves Forel (Financial Services), André-Jean Olivier (General Secretariat ) and Pierre Servant (Investment Solutions).
The CDG is the ultimate decision-making body when it comes to all subjects relating to Natixis’ ordinary business.
In agreement with the CEO, the Board of Directors determines the scope and duration of the powers conferred on the Deputy CEOs. Deputy CEOs have the same powers as the CEO with regard to outside parties.
In 2009, and until the change to the way in which the Company is managed and administered on April 30, 2009, the Executive Board met, except in the case of particular exceptions , on a weekly basis. When justifi ed by the importance of decisions, Executive Board Meetings were called outside their usual schedule. This was, notably, the case for the convening and preparation of the Combined Ordinary and Extraordinary General Shareholders’ Meeting of April 30, 2009. The Executive Board, on the occasion of a specifi c meeting to which the Statutory Auditors were invited, adopted the 2008 fi nancial statements as well as the Company consolidated fi nancial statements. In total, the Executive Board met eighteen times between January 1 and April 30, 2009.
The Executive Board ensured implementation of the strategic guidelines and adaptation measures decided upon in 2008 and, in particular, plans to restructure CIB announced in December 2008, the creation of a team dedicated to segregating and managing, on a run-off basis, certain asset portfolios (GAPC), as well as the cost saving plan and the plan for adaptation to the competitive and economic context.
In accordance with legal requirements, the Executive Board prepared the Company’s fi nancial statements and called the General Shareholders’ Meeting after having established the agenda. The Executive Board ratifi ed the principles and strategies for Natixis’ fi nancial communications.
Once Natixis was converted into a public limited Company with a Board of Directors, an Executive Management Board was set up in early May 2009 to be the ultimate decision-making body for all Natixis’ ordinary business. It met on a weekly basis, except in the case of particular exceptions , apart from during part of the summer holidays. Twenty-six meetings were held in 2009, after April 30. They were chaired by the CEO once he took offi ce and, during the interim, by the temporary CEO.
The Executive Management Board was also involved in coordinating relations between Natixis and its majority shareholder BPCE, both during the period in which the latter was being formed and within the context of BPCE think tanks to defi ne strategic guidelines for Group development.
During its various meetings, the Executive Management Board reviewed the Company’s business development and trends in its results on a regular basis. It reviewed the half-yearly and quarterly fi nancial statements before they were presented to the Board of Directors. It was involved in defi ning the Company’s fi nancial communications.
Meetings are convened by the Board of Directors or, failing that, under the terms and conditions of Article 225-103 of the French Commercial Code. Notices of meeting are prepared in accordance with the conditions laid down by the regulations in force (Article 21 of the bylaws ).
Those shareholders that are able to justify their status with an accounting entry (pursuant to the seventh paragraph of Article L.228-1 of the French Commercial Code) in their name or in the name of the intermediary properly registered on their behalf, either in nominative shares accounts or in the bearer shares accounts held by their authorized intermediaries, no later than three working days before the date of the meeting, i.e. by midnight Paris local time (hereinafter referred to as D-3), may attend the meeting.
Shareholders may, under the terms and conditions fi xed by law and regulations, send their proxy and absentee ballots, either in paper format or, on decision of the Board of Directors published in the notices of meeting, through tele-transmission. The Board of Directors may also decide that shareholders may participate and vote at any General Shareholders’ Meeting by videoconference or tele-transmission under the terms and conditions fi xed under the regulations.
Any natural person or legal entity that owns, directly or indirectly, alone or jointly, a 1% share of the voting rights, or any multiple of this percentage, must notify the Company, by registered letter with acknowledgement of receipt, of the number of voting rights that they possess. This notifi cation must be made within fi fteen days of each acquisition or disposal of this fractional amount.
In the event of non-compliance with the notifi cation requirement provided for in the previous paragraph and upon request, recorded in the minutes of the meeting, from a shareholder representing at least 1% of the voting rights, the shares exceeding the fraction which should have been declared will lose their voting rights for a period of two years following the date of regularization of the notifi cation.
Policies and rules for determining compensation and benefi ts of all kinds paid to members of the corporate bodies
The chairmen of the Supervisory Board (until April 30, 2009) and then the Chairman of the Board of Directors (from April 30, 2009) have waived all fi xed and variable compensation for duties performed by them in 2009.
B – Compensation and benefi ts of all kinds for members of the Supervisory Board (until April 30, 2009) and the Board of Directors (from April 30, 2009)
From the second half of 2008, members of the Supervisory Board (until April 30, 2009) and then members of the Board of Directors (from April 30, 2009) decided, further to a proposal by the Compensation Committee, to waive all attendance fees for the whole of 2009.
Dominique Ferrero was not paid any variable compensation in relation to his duties as Chairman of the Executive Board over the period in question.
The fi xed compensation paid to Dominique Ferrero in relation to his duties as Natixis CEO was €103,562 gross for the period from January 1 to March 6, 2009.
B – Compensation paid to members of the Executive Board in the form of stock options
Executive corporate offi cers of Natixis – in the same manner as the list of permanent insiders for Natixis securities – have been individually notifi ed of the rules applicable to transactions on Natixis shares, and notably, the exercise of options and the sale of shares relating to subscription option plans or bonus shares.
The benefi ciaries of the stock options and bonus shares are bound by the following obligations: a sworn statement when exercising options or selling shares in which they declare that they are not contravening the legal provisions and regulations relating to insider dealings and share price manipulation; a prohibition on exercising options or selling shares arising from the exercise of options in the 45 days prior to the release of information on the quarterly, interim and annual results; a prohibition on selling shares granted freely in the 45 days prior to the release of information on the quarterly, interim and annual results, and 10 trading days after the release of information or publication of the aforesaid results.
For the period January 1, 2009 – April 30, 2009, Jean-Marc Moriani benefi ted from use of a Company car valued at €1,799 gross.
This group plan is closed to all new members from this date. The potential benefi ciaries of this plan will continue to be entitled to its benefi ts subject to ending their career within the Natixis Group and to completing a minimum seven-year period in their position. Benefi ts from this pension guarantee vest upon the member completing his career, which may occur at various ages from 55 years to 63 years, depending on the respective member’s age when he entered the plan.
In addition, members of the Supervisory Board do not benefi t from severance payments in relation to their functions with Natixis.
The fi xed compensation paid to Jean-Marc Moriani in relation to his employment contract with Natixis over this period was €10,484 gross.
The fi xed compensations paid to Laurent Mignon in relation to his duties as CEO of Natixis was €800,000 gross per annum, i.e. for the period from May 14, to December 31, 2009, €507,098 gross.
With regard to calculation of the variable compensation paid to the CEO for 2009, the Board of Directors, based on the opinion of the Compensation Committee, approved the proposal that, for 2009, variable compensation accounting for a maximum of 100% of his fi xed compensation should be paid to the CEO calculated, on a pro rata basis, for the period of time spent at the Company, i.e. from May 14, 2009.
The variable compensation to be paid to Laurent Mignon in 2010 for 2009 was calculated on the basis of quantitative and qualitative criteria defi ned by the Board of Directors in advance, as follows: a quantitative criteria relate to 40% of the basic variable compensation, to Underlying Net Income (group share) of ongoing Natixis bank activities (not GAPC) and to control of Natixis Group Basel II risks weighted assets.
a qualitative criteria concern the managerial performance assessed by the Board of Directors, in consideration of capacity for foresight, decision-making and organization, in particular, within the context of the MTP (Medium-Term Plan). These criteria are described in great detail and relate to over 60% of the basic variable compensation.
On February 24, 2010, the Board of Directors, on the advice of the Compensation Committee, decided to pay the CEO variable compensation of €500,000 gross, in consideration of the satisfaction of quantitative and qualitative criteria but: (i) to freeze 37% of this variable compensation and to make its payment conditional upon confirmation of Natixis’ recovery in Q1, 2010; (ii) to defer 63% of this variable compensation for three years, subject to performance requirements linked to Natixis’ results. This deferred portion of the variable compensation will be index-linked to Natixis shares.
For the period April 30, 2009 – May 13, 2009, Jean-Marc Moriani benefi ted from a Company car and a parking space valued at €188 gross.
With regard to calculation of severance payments for the duties of CEO, the Board of Directors, on the advice of the Compensation Committee, decided that no severance payments for duties as CEO would be paid during the fi rst year of offi ce and referred the task of reviewing this issue in relation to the AFEP-Medef code recommendations applicable, to a Compensation Committee Meeting to be held in the fi rst half of 2010.
Dominique Ferrero, CEO then Chairman of the Executive Board (term of offi ce ending on 04.30.2009) €193,716 €604,270
Value of options granted during the fi scal year (IFRS 2) 2009 2008
Jean-Marc Moriani, member of the Executive Board then CEO (term of offi ce at Natixis ending on 05.13.2009) n/a €0
Laurent Mignon, CEO (term of offi ce at Natixis commencing 05.14.2009) n/a n/a
Jean-Marc Moriani, member of the Executive Board then CEO (term of offi ce at Natixis ending on 05.13.2009) n/a n/a
Dominique Ferrero, CEO then Chairman of the Executive Board (term of offi ce ending on 04.30.2009) n/a n/a
J TABLE 2 Summary table of the compensation of each executive corporate officer
Jean-Marc Moriani, member of the Executive Board then CEO (term of offi ce ending on 05.13.2009)
(b) For the period from February 2008 to end of December 2008.
Dominique Ferrero, CEO then Chairman of the Executive Board (term of offi ce ending on 04.30.2009)
Fixed compensation in relation to employment contract €0 (a) €0 (a) €0 €0
Philippe Dupont, Chairman of the Natixis Executive Board (term of offi ce ending on 03.02.2009)
Extraordinary compensation €0 €0 a in relation to BFBP €2,837 €2,837 €11,484 €11,040 a in relation to BFBP subsidiaries €0 €0 €0 €0
Benefi ts in kind €8,323 €8,323 €45,237 €45,237 a in relation to Natixis €0 €0 €0 €0 a in relation to BFBP (car and accommodation) €8,323 €8,323 €45,237 €45,237
J TABLE 3 Table showing directors’ fees and other compensation received by non-executive corporate officers
In relation to Natixis subsidiaries 11,950 (d) 20,900 17,750 21,500 (b)
Jean CLOCHET (Term of offi ce at Natixis ending on 11.12.2009)
In relation to Natixis subsidiaries 16,500 (d) 12,900 12,900 9,600 (b)
In relation to BFBP, BPCE and its subsidiaries 9,861 (c) 26,909 18,623 12,436 (b)
Bernard COMOLET (Term of offi ce at Natixis ending on 03.05.2009)
Member of the Natixis Supervisory Board 0 0 10,000 14,000 (a)
In relation to CNCE, BPCE and its subsidiaries 14,750 (d) 123,383 19,900 66,000 (a)
Compensation in relation to his appointment as Chairman of the Natixis Supervisory Board 0 38,792 38,792 0
Member of the Natixis Audit Committee 0 0 10,000 11,000 (a)
In relation to CNCE, BPCE and its subsidiaries 0 0 10,500 10,500
In relation to BPCE and its subsidiaries 0 n/a n/a n/a
In relation to Natixis subsidiaries 12,700 (c) 12,700 9,700 7,000 (a)
In relation to BFBP, BPCE and its subsidiaries 18,258.54 (c) 21,494 16,475 13,301(b)
In relation to Natixis subsidiaries 9,900 (d) 6,750 6,750 10,800 (b)
In relation to BFBP, BPCE and its subsidiaries 5,654 (c) 27,260 23,550 18,062 (b)
Other compensation term of offi ce in relation to CNCE and BPCE subsidiaries 451,366.65 451,366.65 73,236.36 73,236.36
Extraordinary compensation in relation to CNCE and BPCE / 90,361.16 n/a n/a
Benefi ts in kind in relation to CNCE and BPCE 5,414.32 5,414.32 400 400
Bruno METTLING (Term of offi ce at Natixis ended on 03.05.2009)
Personal variable compensation in relation to BFBP 0 0 0 130,000 (b)
In relation to BFBP, CNCE, BPCE and its subsidiaries n/a n/a
Term of offi ce in relation to CNCE, BFBP and BPCE 457,594.10 457,594.10 n/a n/a
Extraordinary compensation in relation to CNCE then BPCE / 0 n/a n/a
Member of the Natixis Compensation Committee and then the Audit Committee 0 n/a n/a n/a
In relation to BFBP, BPCE and its subsidiaries 0 0 0 n/a
Jean-Louis TOURRET (Term of offi ce at Natixis ended on 11.12.2009)
Member of the Natixis Compensation Committee 0 0 4,000 10,000 (a)
Non-voting member of the Natixis Supervisory Board 0 0 6,000 12,000 (a)
J TABLE 6 Performance bonus shares granted to each executive corporate officer No performance bonus shares were granted in 2009 to executive corporate offi cers of the Natixis Group.
J TABLE 7 Performance bonus shares that became available-for-sale during the period for each executive corporate officer No performance bonus shares were granted.
J TABLE 8: GROUP (NATIXIS, BPCE, GROUPE CAISSE D’EPARGNE, GROUPE BANQUE POPULAIRE) Record of purchase or subscription options allocated
Information on purchase and subscription options 2003 plan 2004 plan 2005 plan 2007 plan 2008 plan
Date of the Executive Board’s decision 09.10.2003 11.17.2004 11.15.2005 01.29.2007 01.21.2008
Number of exercisable options as at 12.31.2009, including those exercisable by: 6,266,106 6,587,350 7,653,800 15,398,922 7,576,800 1) Natixis Supervisory Board members and/or directors in 2009: 187,880 192,500 235,620 623,700 0
Cumulative number of lapsed and cancelled subscription options 355,536 452,760 592,900 1,309,308 3,021,284
Options granted during the fi nanci al year by the issuer and any Company included in the scope for option grants for the period, to the top ten Natixis employees by number of options granted. 0 n/a n/a
Options held in the issuer and the companies previously referred to, exercised during the fi nanci al year, by the top ten Natixis employees by number of options exercised.
Laurent Mignon, CEO date term of offi ce commenced: May 14, 2009 date term of offi ce expires: May 14, 2015 X X X X
Potential confl icts of interest 1 - Competence and integrity of directors
In accordance with regulations, a list of the functions performed by the corporate offi cers of Natixis is shown in this document. The brief summary of their curriculum vitae shows that they all have recognized business expertise through their positions as executives of banks or large industrial companies or as former bank executives.
In accordance with EU regulations, there are no service agreements binding members of the Board of Directors or Executive Management to the Company that could confer benefi ts upon termination of such an agreement and that might by their nature compromise their independence or interfere with their decision-making.
Natixis and its subsidiaries do have business relationships with their main shareholder (and director) BPCE or some of its subsidiaries.
Banking relationships between Natixis and the groups chaired by the independent members of the Board are not of a nature as to affect the impartiality of their judgment.
3 ACTIVITIES3 CORPORATE AND INVESTMENT BANKING 50 Corporate and Institutional Relations 50 Debt and Financing 51 Capital markets 53 The Asian platform 55 The North American platform 56 Support functions 57
SPECIALIZED FINANCIAL SERVICES 64 Factoring 64 Sureties and guarantees 65 Leasing 66 Consumer Finance 66 Employee benefi ts planning 67 Payments 68 Securities Services 69
CCI 70 The Banque Populaire and Caisse d’Epargne networks 70 The Banques Populaires 70 The Caisses d’Epargne 73
The CIB division has three business lines: a Commercial Banking (Corporate and Institutional Relations), which provides the Coverage function for all Natixis’ business lines; a Structured Finance (Debt and Finance); and a Capital Markets.
In August 2009, a number of CIB assets housed within the GAPC benefi ted from a BPCE guarantee. At that time, the special-purpose GAPC structure was removed from the CIB’s scope of consolidation.
See chapter 4 for futher information on GAPC and BPCE’s guarantee.
The c orporate and Institutional Relations Department provides the c overage function for all clients worldwide, and directly manages three activities: plain vanilla fi nancing, domestic and international payments services, and merger and acquisition advice. It has business relationships with more than 2,000 companies in Europe, including virtually all of France’s 350 biggest groups. Its institutional clients mainly comprise 300 key accounts in Europe (half of which are in France) and 700 international banks.
The Coverage function coordinates, at the global level, relations with clients – issuers, borrowers and investors. It provides the link between the requirements of Natixis’ existing or prospective clients and the services offered by the Bank.
The straight financing business is the cornerstone of the relationship with corporate clients. It is managed by the Corporate and Institutional Relations Department, in close cooperation with the Bank’s business lines. Long-term relations are emphasized, as is the optimization of the Bank’s allocation of its regulatory capital. The business makes use of syndication with shareholder retail banking networks and other banks.
In 2009, in France, Natixis was involved in fi nancing a large number of French clients, including Banque PSA Finance, Holcim, EDF, Rexel, UNEDIC and CADES. Internationally, its clients included ENEL, SACYR, Heidelberg Cement, ACS, Farmafactoring and MAPFRE.
The Corporate and Institutional Relations Department also covers domestic and international payment services. In 2009, this business line continued to optimize its organization and obtained the renewal of its ISO 9001 certifi cation for product and service design, solution implementation and transaction processing.
Cross selling In 2009, the CIB launched its cross-selling program, one of three programs contained in Natixis’ New Deal plan.
The goal is to optimize the Coverage function, with a view to promoting crossed sales of products and services.
Starting in the second half of 2009, the department was restructured around fi ve global business lines.
Global Energy & Commodities (GEC) has active relations with all players along the energy and commodity value chains: producers, importers, traders and service providers. It has a matrix-type organization, linking global coverage of Natixis’ clients to the structuring of specifi c mining fi nancing deals in the fi elds of energy, metals , and soft commodities. In 2009, Natixis confi rmed its expertise in the implementation of borrowing-base lending (2), particularly in metals (Trafi gura, Duferco, Glencore, etc.), where it was voted Best Bank of the Year by Trade Finance Magazine, a specialized publication. It also won ten Deal of the Year awards from Thomson Reuters, Global Trade Review and Trade Finance Magazine, including Minera Esperanza (fi nancing a gold and copper mine in Chile), Tullow Oil (reserve-based lending (3) on oil assets) and ED&F Man (sugar trader).
a With global presence, project financing offers its clients a wide range of products and services: financial advisory services, arranging, subscribing and distributing senior and subordinated bank financing, managing and placing bond issues, and hedging against interest rate, currency and commodity price risk. The business is divided into four global skill centers by sector: infrastructure, energy and renewable energies, natural resources and telecommunications. In 2009, Natixis was ranked N°12 mandated arranger worldwide (source: Thomson Reuters) and N°7 in the United States, where it arranged and coordinated the financing of the Astoria Energy II project, cited as a Deal of the Year in the specialized press. In total, 23 of the deals arranged by the project financing team in 2009 went on to be cited by PFI, Project Finance Magazine and Global Trade Review.
The real estate business line is present in continental Europe and the United States. It covers institutional clients’ real estate financing needs in regard to all types of assets (offi ces, residential, hotels and leisure, commercial) as well as short- to medium-term equity transactions via a dedicated subsidiary, Natixis Immo Développement.
Despite the continued slowdown in the United States in the fi rst three quarters, the department maintained a presence in the US real estate fi nancing market, closing eight new deals, nearly 20% of which went to investors and syndicate members. It also fi nalized the restructuring of a third of its portfolio exposure, repaying more than 15% of outstanding loans.
Strategic and acquisition fi nancing a The creation of the new strategic and acquisition financing business line was aimed at combining the skills of financial engineering teams with those of teams specializing in leveraged financing and to shift the center of gravity in leveraged financing by focusing not just on private equity funds, but on the full spectrum of potential buyers. It is a global business line and focuses on financing the growth of major corporations and the b ank’s private equity partners. In 2009, Natixis arranged two extremely important deals: the LBO financing of the change of shareholdings in Gras Savoye and the acquisition of Oriental Brewery, South Korea’s second-largest brewery, by Kohlberg Kravis & Roberts (KKR). The latter deal won four Deal of the Year awards in the specialized press (Finance Asia, Asia Money, The Asset and IFR Asia).
a Syndicated loans structures and distributes syndicated loans for corporations and financial institutions, as well as Natixis’ own structured financing transactions. Its operations cover Europe, the Middle East, Africa, Asia and the United States, and extend into the secondary market. In 2009, amidst a decline in bank lending, Natixis was ranked N°14 in the Europe, Middle East and Africa (EMEA) region, with 62 deals arranged as bookrunner (up from N°45 in 2008; source: Bloomberg) and improved its ranking in France, moving up from fifth to fourth place. Natixis acted as mandated lead arranger and bookrunner in most of the high-profile deals of the year: Auchan, Enel’s jumbo credits, Enel Rete Gas (a Euromoney Deal of the Year), Schneider, Banque PSA and UGC.
a Debt engineering develops customized debt products and balance-sheet solutions for Natixis’ clients. In addition to this expertise, it structures and places deconsolidation transactions for non-liquid asset via CDSs (credit default swaps) and financial guarantees, as well as collateralized refinancing solutions for investors.
a Global Securitization structures, arranges and syndicates alternative and competitive financing solutions for Natixis’ clients – corporations or funds – in the United States and Europe. It has advisory expertise in securitization, particularly in the management and restructuring of asset portfolios. Natixis is also an interest rate and currency swap counterparty for securitization vehicles. Assets covered include commercial and bank debt, commercial real estate loans, CDOs (collateralized debt obligations) and insurance risks.
2009 marked a return to profi t in the capital markets business, chiefl y on the interest rate and credit side, which benefi ted from improved market conditions and robust sales.
More than 500 people are employed in the interest rate, foreign exchange, credit and commodity markets teams, based in Europe – Paris, London, Milan, Madrid and Frankfurt – as well as Singapore and New York, where they are active in both trading and sales.
In the primary bond market, 2009 saw the gradual reopening of a number of market segments, namely non-fi nancial issuance in Europe, where volumes climbed to an all-time high of nearly €300 billion. Benefi ting from its acknowledged expertise and origination teams operating across the world, Natixis acted as bookrunner on more than 140 bond issues in 2009. The Bank confi rmed its leading status, ranking among the 10 bestperforming banks in the euro-denominated fi xed bond market, in the number of deals (source: IFR), and confi rmed its leadership in covered bonds in euros, among public-sector and French corporate issuers. 2009 also saw major deals including the Rabobank private placement, worth €1.7 billion, cited by MTN-i (Deal of the Year). Natixis also ran primary market issues in the euro market for Suez Environnement (dual tranches), Unicredit (covered bond) and Havas, and acted as global coordinator for all issues by SFEF and UNEDIC . Natixis also undertook a bond issue with a 30-year maturity on behalf of the Kingdom of Spain, and managed a €3.2 billion issue by EDF, an iconic deal in 2009 in the French retail Market .
The Foreign Exchange Department offers 24/7 trading of all major currencies across its platforms in Singapore, Paris and New York. Amidst declining volumes in global forex markets, the department refocused its offering in 2009, putting the emphasis on fl ow and simple structured products, and reorganized its derivatives activity in response to market trends. The American business opened in May 2008 and focuses on hedge fund clients and family offi ces; it is enjoying robust growth. Lastly, investments on IT platforms sparked a big increase in the proportion of business volumes generated via this channel (virtually double the volumes generated across such platforms in 2009).
The Commodities Department has now been merged with the Foreign Exchange Department, with a view to developing synergies, particularly via the sales forces. In 2009, the Commodity Department strengthened its cooperation and cross selling with GEC’s fi nancing activities: it now operates in Houston, where it is assisting GEC in its expansion. The development of OTC derivatives in the energy market made a big contribution to the growth in revenues for that business (+30% compared with 2008).
In the emerging markets, Natixis offers a full range of interest rate, credit and foreign exchange products; its geographic positioning is aimed at supporting the expansion of the Bank’s other businesses, particularly in China, Russia and Vietnam. The emerging markets business continued to expand in 2009, both locally (in Moscow, Shanghai and Ho Chi Minh City) and in Paris and New York. Trading of external debt performed especially well, gaining traction from market opportunities and anomalies, mainly in Russia, Asia and Central Europe. The completion of two issues on behalf of the Republic of Lithuania between December 2008 and March 2009 have confi rmed the Bank’s know-how in structuring. The sale of interest rate and currency hedging instruments for Latin America from New York and for Central Europe from Paris is in the process of being organized.
As a consequence of the New Deal strategic plan, market sales teams were reorganized in 2009. They are now structured by client type for corporations and the shareholder networks, and by product for institutional investors. Business held up well in a challenging environment in 2009, thanks to the quality of relationships with the b ank’s key clients. Sales teams grew their business by 20% compared with 2008.
Natixis reorganized its medium- and long-term treasury in liaison with BPCE and extended the duration of its refi nancing, thereby strengthening its fi nancial structure.
Natixis offers its customers a wide range of equity derivative products based on a large variety of underlying assets and investment instruments. In 2009, efforts were made to reorganize the front offi ces of this business line, by optimizing its structuring, trading and sales capabilities. Steps were also taken to make processes more secure, with an eye to reducing operational risk and increasing the quality of service. The North American platform for passing orders and providing direct market access was rolled out across Europe and Asia. Lastly, the business line opened new execution capacity in Europe, Asia and the United States in order to broaden the range of underlyings available to its clients.
The Corporate Solutions teams offer clients customized solutions for managing and optimizing their balance sheets or transferring their risks when they restructure or make acquisitions. They also offer acknowledged execution capacity. With 130 people working in 12 countries, Corporate Solutions targets a wide international corporate client base in Europe, the Middle East, Asia (India, South-East Asia) and the Americas.
Other activities Natixis develops asset management activities on behalf of third parties that offer substantial synergies with the CIB, targeting French and international institutional investors. They include: j The management of infrastructure funds; j The management of environment and sustainable development funds (carbon fund, renewable energies fund); j The management of ”sale- and- lease- back” property funds; j The management of insurance risk transfer funds
(alternative risk transfer); and j A platform of managed funds and alternative management funds.
Natixis is present in 12 Asian countries, with nearly 380 staff, via a platform covering the fi nancing and capital markets businesses. Its goal is to assist the Bank’s large clients in Asia and build up specialized business expertise in this fast-growing region by establishing a portfolio of large regional accounts.
In 2009, the Coverage function was again enhanced to increase the Bank’s presence in areas that complement existing business specializations. Some 15 straight fi nancing mandates were signed in 2009, including Fraser & Neave and Suntec REIT in Singapore, Legend in China, Goodman in Hong Kong, KNOC, LG Telecom and SK Telecom in South Korea. The Bank also maintained a strong and selective presence among key institutional clients in the aim of forming new relationships with clients offering signifi cant scope for cross selling.
In commodity financing, Natixis maintained its position among the market leaders in straight trade deals. GEC also pursued its refocus on the leading producers and importers in each country, emphasizing structured transactions. Despite a much less buoyant environment, it won fi ve mandates as arranger in 2009, including BUMA and Pertamina in Indonesia and Olam in Singapore. In aerospace financing, Natixis maintained its front-ranking arranger status (N°1 Mandated Lead Arranger in Asia; source: Reuters), breaking into the South Korean market (Asiana-KEIC and Korean Air). Good contacts with Chinese banks (ICBC, CCB) allowed the b ank to get then involved in a number of European deals. In maritime transport financing, a strategic refocus on the fi nancing of energy assets and acknowledged expertise in Asian export fi nancing allowed the Bank to win two mandates relative to the refi nancing of seven LNG tankers for KOGAS (South Korea). In project financing, the business line reaffi rmed its status as arranger
In the capital markets, complex interest rate and equity derivatives activities, previously based in Tokyo and Hong Kong, were shut down. Interest rate, credit, foreign exchange and commodity activities have been redirected towards fl ow products targeting local clients with a view to generating cross selling with the fi nancing activities. In addition, a treasury business was launched during the year in Hong Kong.
Expansion in Asia is one of the bank’s strategic priorities for the coming years. There are plans to increase the number of Asian offi ces and to reinforce market activities in order to foster cross selling.
The North American platform serves institutional, corporate and local government clients via three entities, the New York offi ce and two subsidiaries, Natixis North America and Natixis Bleichroeder Inc., the second of which was integrated in 2009.
North American business returned to the black in 2009. It streamlined its internal organization and its real estate portfolio. It consolidated its governance, cut its headcount by more than 100 over the year and strengthened cost controls.
In the debt and fi nancing businesses, teams focused on the project financing and commodity financing lines, where Natixis has recognized local presence. Despite the fi nancial crisis, the project fi nancing team structured eight deals over the year in the natural gas, geothermal, solar and wind power sectors. Two deals, Astoria Energy II and GennConn Energy, won a total of four Deal of the Year awards. The commodity fi nancing team worked on six deals with new clients over the year, including one for Louisiana Sugar Refi ning, covering the construction of the biggest sugar refi nery in the United States. Real estate financing narrowed its focus, limiting its operations to its undisputed strengths, namely its capacity to have direct bilateral dealings with borrowers across the country, whatever the underlying. At the same time, it reined in its involvement in syndications and its presence in sectors that are no longer deemed strategic (loans for the construction of residential property, hotels and offi ces).
Businesses related to the equity markets – brokerage and derivatives – were brought closer in line with a similar move in the head offi ce in Paris. The team has now reorganized its research skills to focus on energy and healthcare, thanks to closer ties with European teams.
Natixis Securities covers more than 340 European stocks in 21 sectors. It was ranked second in 2009 in the
Quantitative research is geared towards adapting market offers, developing and maintaining valuation and riskmanagement models specifi cally suited to fi nancial products. It also contributes to defi ning investment strategies and market-trend indicators. The Natixis
Foundation for Quantitative Research funds fellowships for doctoral theses and university-based research projects on subjects that directly concern the challenges faced by fi nancial institutions and the lessons to be learnt from the fi nancial crisis.
The Active Risk Management and Supervision structure advises the CIB division on the strategic management of the business in coordination with the Risk Department. It is responsible for Credit Portfolio Management (CPM) which, in particular: a respects large exposure ratios by buying protection for the bank’s large counterparties; a pays up RWAs beneath the ROE threshold set by executive management; a actively manages concentration risk (single name, sectoral and geographic hedges); a implements the volatility reduction strategy for mark-tomarket valued instruments.
The Systems, Organization, Operations and Finance Department covers teams responsible for the proper execution, recording and fi nancial monitoring of the Bank’s businesses. It numbers around 1,600 staff.
Against a backdrop of staff cuts as part of the plan aimed at refocusing the Bank’s activities, 2009 saw further work to strengthen controls and boost operational effi ciency.
The capital markets back offi ce worked to reinforce the quality and security of its processes by implementing tools and applying processes that helped speed up processing and substantially reduce suspense items. Its reorganization, which began at year’s end, in conjunction with the creation of a unifi ed and independent middle offi ce, is part of the strategic plan, namely the development of fl ow products.
A Financing Support Department was set up in the second half of 2009; it has been set up as an integrated sector which brings together middle and back offi ce teams with a view to providing optimized monitoring and execution of the Bank’s fi nancing operations.
T he fi nancial monitoring and reporting teams of the CIB rolled out production tools under very tight deadlines, over a broad scope of activities. They worked to achieve a better geographical and business-line reporting segmentation and more in-depth monitoring of the Bank’s clients.
As part of its strategic review in the Summer of 2009, Natixis merged all of its savings-related activities into a single Investment Solutions division: at its core is expertise in asset management, where Group BPCE has global ambitions, and it was strengthened by the contribution of private banking and insurance businesses, where Natixis aims to accelerate its growth.
Investment Solutions has internationally acknowledged asset management expertise, as well as distribution structures adapted to the specifi cities and regulations of the various markets in which it operates. The new model is aimed at strengthening the positioning of the Banque Populaire and Caisse d’Epargne networks in the fi nancial savings segment in France and fi nding new growth potential internationally.
The creation of the Investment Solutions division will help the Bank better share its expertise in asset management, marketing and sales for Group BPCE distributors in France, namely Caisses d’Epargne and Banques Populaires, which boast more than €500 billion in savings. The Investment Solutions division launched three operational initiatives in late 2009: a in production, by streamlining offers in each client segment, thereby simplifying product line-ups and making the networks more reactive; a for the acquisition of external funds: the aggregate positions of the two networks and Natixis in private management make the group one of the leading buyers of external funds in France. The Investment Solutions division aims to develop centralized management and open architecture for the group as a whole (administration, due diligence and fund selection); a in the two networks’ marketing of their financial savings products: the Investment Solutions division aims to make marketing smoother and better structured by ensuring better upstream coordination on all supports and in all client segments, via product innovation (marketing), the management and training of sales forces and the development of defining cross-business projects.
The creation of the Investment Solutions business unit also aims to bolster Natixis’ growth in the independent wealth advisor segment in France.
Private banking also has a platform in Luxemb urg, where 100 people are working to build up the private banking business in Europe.
Located at the heart of the Investment Solutions business line, Natixis’ Asset Management business markets a wide range of investment solutions in the form of funds, dedicated products and mandates in all asset classes (money market, bonds, equities, real estate, alternative and diversifi ed).
Its business model is based on a global distribution platform serviced by multi-specialist asset management companies meeting the needs of a large international client base. Its diverse range of skills, its distribution capacity and the fl exibility of its business model have enabled Natixis Global Asset Management to keep ahead of its main competitors throughout the crisis, in terms of both asset infl ows and fi nancial performance. Natixis Global Asset Management ranks among the world’s 20 biggest asset managers (1).
In 2009, the global asset management market, which began contracting when the economic and fi nancial crisis hit in the summer of 2007, gradually recovered on the back of a rally by stock-market indices and the global economic recovery that began in the third quarter.
J ASSETS UNDER MANAGEMENT – 2009 ASSET MANAGEMENT (IN BILLIONS OF EUROS)
Natixis Global Asset Management’s growth strategy has been reaffi rmed under Natixis’ new strategic plan to transform a primarily Franco-American player into a global force. This implies regular extensions to the range of management expertise and the development of the distribution platform, particularly in emerging markets, such as Asia and the Middle East.
Natixis Global Associates performed strongly in 2009, ending the year with assets under management of US$120.1 billion, up from US$89.7 billion year-on-year.
The European asset management business had €320.5 billion in assets under management at end-2009, a 9% increase year-on-year.
European asset management companies at end-2009 j Natixis Asset Management (€301.5 billion in assets under management): money market, Fixed Income, equities and diversifi ed, alternative and structured management, and SRI funds; j Natixis Multi-manager (€2.6 billion): multi-manager, a range of absolute-performance funds; j AEW Europe and NAMI (€16.4 billion): management of real estate assets, real estate investment trusts and real estate mutual funds.
Natixis Asset Management is Natixis Global Asset Management’s European expert, with its subsidiaries Natixis Multi-manager, specialized in multi-management, and Natixis Épargne Financière, the distribution vehicle dedicated to the Caisse d’Epargne and Banque Populaire networks.
In 2009, Natixis Asset Management posted an impressive 11% increase in assets under management to €301.5 billion. This increase was attributable to a positive market effect and net asset infl ows totaling €4 billion on life insurance products with Group BPCE customers and Fixed Income products with external clients.
Natixis Asset Management achieved unifi ed management performances and pressed ahead with the streamlining and adaptation of its product expertise. New high value-added collective offers, suited to the post-crisis period, were launched in Fixed Income, equities (with the high-visibility launch of the Impact Climate Change fund) and diversifi ed management. The reinforcement of Natixis Asset Management’s sales outside France and the development of synergies with the Investment Solutions division are priorities for 2010.
Main awards in Europe Natixis Asset Management obtained numerous awards: j best asset management company in France and Europe by the Grands Prix Eurofonds/Fundclass – Le Monde; j four trophies in the Retail Banks category over 3 years by the magazine Le Revenu in 2009: Gold Trophy – best range of international Fixed Income funds; Silver
Assets under management increased by US$50.7 billion, thanks to net infl ows of US$5.3 billion, attributable mainly to Loomis Sayles, and a substantial market effect. Virtually all the group’s asset management companies logged an increase in assets under management.
All the group’s American management companies directly provide distribution services for institutional clients in the United States. In the retail banking segment, they enjoy the support of Natixis Global Associates, which distributes products, provides advisory and structuring capabilities, and also offers related services that can be tailored according to differences in markets and distribution channels. Natixis Global Associates supplies both volume retailers and private investment advisers.
Fuss and Kathleen Gaffney, managers at Loomis Sayles were fi nalists in the Fixed Income category.
Associates, were fi nalists in the US stock and international stock categories, respectively.
VNIM Small Cap Value fund in the Small Cap Core category over 3 years.
Total revenues for the insurance businesses totaled nearly €3.9 billion in 2009, an increase of 14.9% year-on-year.
Amidst all-time low short-term interest rates, the market enjoyed a signifi cant rebound in life-insurance infl ows across the Board, and particularly for bancassurers (+13.9%; source: G11 France), whose branch networks are the main force behind distribution in France. Natixis returned to levels previously seen in 2007 in life insurance, posting a 14.2% increase in revenues, representing €3, 575 million in infl ows. Accounting for 15.3% of the total, unit-linked contracts logged a satisfactory performance given the level of retail customers’ risk aversion. Net infl ows were multiplied by 2.5, taking funds under management above €33.4 billion at end-2009, an 8 % increase year-on-year.
The provident insurance business continued to grow steadily, beating the targets set for 2009, with premium income up 24.3% at €311 million. Natixis pressed ahead with the rollout of its borrowers’ insurance offer, which covers classic loans, as well as consumer loans and Natixis leasing products, distributed by the Banque Populaire and Caisse d’Epargne networks. Borrowers’ insurance now accounts for 47% of provident insurance premiums.
The creation of the Investment Solutions business unit will help strengthen cooperation and the presence of Natixis Insurance products in private banking, with a renovated offering suited to private banking distribution, particularly via Natixis Insurance Partenaires (formerly Foncier Assurance) and Natixis Life. In addition to the reinforcement of these links, the goal is to develop business relationships with major networks of independent wealth advisors.
At the same time, a new tool for the management of lifeinsurance contracts is to be rolled out in the Banque Populaire network, offering greater capacity for innovation and a response to client demand for increased quality of service, as well as more possibilities of adapting it to multi-channel distribution.
Natixis’ Private Banking business adopted a new organizational model in 2009 in order to improve support for its French and international clients. It is now organized around two entities working in close synergy: Banque Privée 1818 in France and Natixis Private Banking International.
Banque Privée 1818 was created from the merger on July 1, 2009 of Banque Privée Saint-Dominique and La Compagnie 1818 – Banquiers Privés.
To develop its business with the Caisses d’Epargne and the Banques Populaires, Banque Privée 1818 has strengthened the team dedicated to supporting the networks: around 20 people, including private bankers and coordinators, are responsible today for assisting the private and corporate b anking divisions of the regional banks.
Banque Privée 1818 serves independent wealth advisors through its ”1818 Partenaires” subsidiary, previously known as the ”Centre Français du Patrimoine”. This is the secondlargest multi-product platform in France and had €1.5 billion of assets under management at the end of 2009. Its strategy focuses focusing on the 350 biggest agencies or associations in order to become their partner of choice. Its ambition is to gain market share rapidly in this sector by capitalizing on the breadth of its offering.
Its target market mainly consists of the international customers of the Groupe BPCE networks, especially those of Natixis, and third-party managers (i ndependent wealth manager who chooses depositaries and products for his/her customers).
Besides its presence in Luxemb urg, Natixis Private Banking International has an offi ce in London.
Financial Services groups together settlement and accountkeeping services in the fi eld of payments (transfers, direct debits, electronic payment transactions, etc.), stock-market transactions (retail custody and private banking), employee savings (profi t-sharing and incentive plans) and retirement schemes (individual and collective pension plans), special payment vouchers and collective provident insurance schemes.
Natixis Factor is investing in a new production tool to develop its existing services, to bring quickly to market products tailored even more specifi cally to the requirements of each business sector or customer segment and to enrich the exchange of information with clients. The gradual rollout of this tool in 2010 and a sharp improvement in the performance of the settlement chain will support the permanent search for productivity and growth in business revenues.
This unique tool in the factoring market already processes more than 1.7 million settlements annually, with a client satisfaction rate of over 90%.
J FACTORING REVENUES OVER THE PAST 5 YEARS (in millions of euros)
Natixis’ offerings are aimed at different markets: individuals (mortgage guarantees), professionals (business, equipment and site creations/transfers), social economy and social housing, industry, the environment and public-private partnerships.
The deterioration in the economic backdrop has weighed on overall activity, with varying situations in different markets, but Natixis remains the leading guarantee insurance company in France, with outstanding guarantees up 8% at €58 billion.
It also provides guarantees to more than 25,000 companies, covering their regulatory, tax or contractual requirements. The on-line tool www.cautionsenligne.com has continued to be rolled out in the Caisses d’Epargne and was launched in the Banques Populaires.
In 2010, Compagnie Européenne de Garanties et Cautions will seek to strengthen its presence in the Banques Populaires networks by supporting their marketing development.
All the Company’s services will also be mobilized for the introduction of the European reform of the insurance sector - or Solvency II - whose repercussions necessitate a new approach to the business.
Companies of all sizes and professionals (craftsmen, small retailers, self-employed professionals, farmers, etc.) can fi nd at Natixis, through its Natixis Lease division, a range of solutions for fi nancing equipment and installations, including equipment leasing, real estate leasing, basic leasing, long-term vehicle leasing, IT operational leasing and renewable energy fi nancing.
Internationally, Natixis Lease operates in Spain and Italy through local subsidiaries, as well as in Germany and Eastern Europe through its partnership with VR Leasing.
In an unfavorable environment that led to a sharp drop in Company investment and rising bankruptcies, Natixis Lease maintained its no. 2 position in France in real estate leasing, its no. 4 position in equipment leasing and its leadership in renewable energy fi nancing (wind and solar power). New production totaled €2.2 billion and average outstandings were up almost 6% to close to €8 billion.
In real estate leasing, production decreased by 24% to €545 million. In equipment leasing, Natixis’ production was down 23% at €1.3 billion, but it still managed to improve margins on new production.
In Sofergie fi nancial leasing, Natixis consolidated its leading position in renewable energy fi nancing and recorded new production of €166 million, up 8% from 2008.
The vehicle fl eet leasing business recorded an 11% increase in production in 2009.
Internationally, despite extreme market conditions, the Madrid group maintained stable activity, and production in Italy grew by 13% compared to 2008.
In 2010, Natixis plans to focus on developing IT operational leasing with large corporate clients, long-term vehicle leasing within the Banques Populaires, the business segment at the Caisses d’Epargne and the fi nancing of wind farms and solar power stations to consolidate its leadership in this fi eld.
Through its Natixis Financement division, Natixis develops revolving credit and personal loan management offerings.
In an unfavorable economic environment for consumer fi nance, Natixis Financement’s results attested to its strong sales momentum. This business consolidated its position as the no. 3 French player in this sector.
Outstandings totaled €8.6 billion, up 25% from a year earlier, with growth of 12% in revolving credit (to €1.3 billion) and 27% in personal loans (to €7.3 billion).
Natixis offers a full range of employee benefi ts planning services developed by its specialized subsidiaries, Natixis Interépargne and Natixis Intertitres. These include employee savings plans, retirement plans, shareholder plans, collective insurance and special payment vouchers.
Natixis is also committed to developing solidarity schemes and socially-responsible savings through Natixis Asset Management, which is no. 1 in socially-responsible employee savings plans accredited by the CIES (Comité Intersyndical de l’Épargne Salariale [Inter-Union Employee Savings Committee]) with a market share of 31.4%, and no. 1 in solidarity employee savings plans with a market share of 54.6% (source: Finansol 2009). Natixis is the fi rst employee savings manager to offer a socially-responsible capital-protected mutual fund. It has also produced the fi rst extra-fi nancial management report on socially-responsible savings plans.
New contracts signed with institutional and large corporate clients contributed to very signifi cant growth in the number of collective retirement plans (PERCO) under management.
The special payment vouchers business recorded an increase in total volumes issued of over 5%, exceeding the exchange value of €496 million as at December 31, 2009.
Its fi eld of operation includes Visa and Mastercard bank cards for retail, professional and corporate clients.
Retail services, offered in the retail banking networks, provide a multi-channel banking platform solution that allows a fi nancial institution to distribute banking products to individual customers via the Internet.
Natixis is the third-largest e-cash operator in France. It manages more than 6 million bank cards and processed almost 1.7 billion card transactions in 2009, up nearly 5%, on behalf of network banks, including the Banques Populaires.
Custody services range from the secure provision of offi ce service processing systems to wider services including all back-offi ce functions (order routing and execution, transaction accounting, client reporting, securities custody services, etc.).
Natixis continues to reorganize the Securities Services division with the aim of creating a unifi ed IT and back-offi ce platform by 2011. The convergence program for systems and activities is running on schedule, with priority given to monitoring client transactions, quality of service and the control of operational risks.
Natixis holds a 20% stake in each of the Banques Populaires and each of the Caisses d’Epargne through CCI “Certifi cats
One in two French people is a client of a Groupe BPCE bank. With 8,200 branches and 37 million customers, retail banking lies at the heart of the Group. It is supported by two networks present across France: that of the Banques Populaires (with CASDEN and Crédit Coopératif) and that of the Caisses d’Epargne. Other brands round out the offering: Crédit Foncier, Banque Palatine, Société Marseillaise de Crédit, Crédit Maritime and the banks of the Océor network.
To provide the full range of services, advice, fi nancing and investment solutions that their customers expect, the banking networks draw on the expertise and support of the Group’s specialist subsidiaries, especially Natixis. This approach respects the close relationship and decision-making capacity that clients appreciate and enables them to benefi t from benchmark solutions in insurance, real estate, asset management, means of payment, factoring, lease-fi nancing and many other services.
The Banques Populaires have continued to expand their retail, professional and corporate customer base. Outstanding loans are growing thanks to the revival of demand in the second half of 2009, and outstanding savings and on-demand deposits have also increased.
The Banque Populaire has once again been awarded the prize for the best customer service in 2010 in the banking category. This prize was awarded following a survey conducted between May and July 2009 by BVA and Viséo Conseil on the basis of criteria such as response time, the quality of the welcome and the personalization of contacts with “mystery customers”.
Demand for mortgages and consumer loans fell sharply in the fi rst half of the year, although the Banque Populaire network maintained a normal distribution policy.
Over the year, new mortgage production was down 25.3%, while personal loan production was fl at. Mortgage outstandings
grew by 3.9% and personal loan outstandings by 2.7% to reach €68.1 billion and €7.2 billion respectively at the end of 2009.
In personal loans, CASDEN Banque Populaire, the bank for employees of the French national teaching , research and culture systems, rounded out its offering for pensioners with the ”Départ à la retraite” personal loan, which is exempt from repayments for up to 12 months.
The Créodis revolving loan, launched in 2008, was taken out by 116,800 new clients in 2009 for an amount totaling €267 million.
Serving clients with between €150,000 and €1million in assets and high-net-worth individuals with more than €1 million, the private banking business addresses professional customers, self-employed professionals, managers of small and medium-sized companies and owners in partnership with Foncia. It employs 360 private banking advisors and around 40 asset engineers who can call upon the teams of Banque Privée 1818 – the wealth management bank of Groupe BPCE – when necessary.
The Banques Populaires have developed a comprehensive offering, which has recently been enriched in several areas: a advice on issues relating to the wealth tax; a tax exemption with Scellier REITs, an offering under the Girardin industrial and housing law and a full range of exemption solutions from the wealth tax combining a REIT and a wealth-tax holding company. A new tool also makes it possible to calculate the impact of the ceiling on tax loopholes introduced in 2009 and hence to optimize client investments; a financial savings with top-end structured products, particularly in life insurance. In addition, more occasional offerings have been offered with regard to market conditions; a advice on company transfers and, more generally, helping customers build, manage and transfer their assets.
Clients benefi t from a dedicated internet site (www.gestionprivee.banquepopulaire.fr), a monthly information letter and a specialist magazine, Synthèses.
From the creation to the sale of their businesses, the Banque Populaire network stands side-by-side with craftsmen and small retailers for whom it is the principal banker, as well as self-employed professionals, farmers and other professionals. As the banker of one in three craftsmen and one in four small retailers, Banque Populaire assists 360,000 craftsmen and small retailers, 66% of which also hold private accounts at the bank. The leading bank for franchisees and franchisors with a penetration rate of 25% and 57% respectively (source: CSA-FFF, December 2009) and the reference banker for selfemployed professionals with 100,000 clients, it also has more than 61,000 farmer clients.
In 2009, the Banques Populaires, together with Crédit Coopératif, opened €20.5 million of credit lines to Adie, the Association for the Right to Economic Initiative, which assists many reintegration projects. Since 2004, the volume of fi nancing granted exceeded €47 million, representing around 17,200 loans granted by Adie to project developers.
At the end of 2009, outstanding loans to professionals edged down by 3% to €23 billion.
Some 160 business centers and 1,000 dedicated associates are at the service of the 172,000 corporate clients of the Banques Populaires.
The Banque Populaire network continued its close partnership with Oséo for small and medium-sized companies in the fi elds of business creations, counter-guarantees and fi nancing.
Some 4.5 million clients also benefi t from the S’Miles multibrand loyalty program. This program helps to satisfy them and secure their loyalty, and more than 1 million gifts have already been handed out.
In 2009, the average outstanding amounts in retail demand deposits grew by 5%.
The new motor insurance offering, launched in May 2009, is a success. This competitively-priced offering comes in four different versions tailored to four client profi les, each offering customized guarantees: young people, women, families and pensioners. Thanks to this new offering, motor insurance sales increased by 20% compared with 2008.
Strong resilience of Livret A accounts and a solid performance by other savings products
The year was marked by the end of the distribution monopoly on Livret A accounts, but transfers were limited to around 1% of account holders. Infl ows into Livret A accounts suffered more from the cut to the regulated interest rate on these accounts, resulting in a shift towards other products.
Loans: recovery in the second half of the year in all segments
Caisse d’Epargne also markets the Ecureuil Crédit Développement Durable offering to fi nance home improvements and energy-saving measures.
In mortgages, after a diffi cult fi rst half of the year, the second half was very positive, with an acceleration in the pace of sales. This activity was principally aided by two phenomena: fi rst-time purchases thanks to the doubling of the zero-rate loan, and the Scellier law, which boosted rental investment.
Loan production amounted to €12.9 billion in 2009 compared with €13.8 billion in 2008. Mortgage outstandings totaled €72 billion at the end of 2009.
GCE Assurances, in partnership with Macif and MAIF, and Natixis Assurances, in partnership with MAAF in non-life insurance, are the group’s principal insurance vehicles.
GCE Assurances, whose products are distributed by the Caisses d’Epargne and Crédit Foncier, manages a portfolio of more than 2.1 million property and health insurance contracts.
with revenues of €202 million, up 3.3%. The comprehensive home insurance contract, Mr Privilège, offered to Foncia tenants, has enjoyed strong growth, as has the comprehensive insurance offering for craftsmen and small retailers.
In provident insurance for individuals and professional customers, premiums written by Natixis Assurances totaled €166 billion, up 11%. The three principal provident insurance products – Fructi-Famille death insurance, MAV comprehensive life protection and Autonomis dependency insurance – are growing strongly.
More generally, 2009 saw the launch of a new approach to handle in a differentiated manner the 886,000 customers of Caisse d’Epargne with a fi nancial base of over €75,000. They are followed in the branches, at the banking and wealth management levels, by client wealth managers trained to this effect. Customers with a fi nancial base of over €150,000 are followed by Caisse d’Epargne’s 500 private banking account executives, who cover the whole of France. They are also set to benefi t from the support of Banque Privée 1818, a partner of choice, and the natural private banking channels of the Caisses d’Epargne.
Almost one professional customer in ten, or more than 220,000 craftsmen, small retailers, self-employed professionals and small companies, are Caisse d’Epargne clients. Three quarters of them are also private customers of the bank.
Some 1,500 branch managers have been trained to serve them, and almost 1,100 specialist managers are dedicated to them.
Average daily outstanding demand deposits grew by 6.5% and payment contracts by 13%. Production of professional loans grew by 5% to €1.8 billion in a crisis environment. Production of private loans totaled €1.2 billion. Total infl ows, excluding Livret A accounts, remain positive . Surpluses amounted to €205 million in life insurance and subscriptions to member shares exceeded €100 million.
Interest paid on current accounts, service packages such as Franchise & Vous, the Visa Business card and innovative electronic payment solutions are driving the development of banking services.
Whether it concerns business creations or business transfers, equipment loans, fi nancial leasing or long-term rental, professional clients have a complete range of products for fi nancing their requirements in a simple and personalized way.
Caisse d’Epargne is the no. 3 distributor of loans for business creations, with an 11.7% market share (source: Oséo, September 2009).
Caisse d’Epargne contributes to the success of its regional corporate clients. Some 300 account executives are dedicated to 27,800 corporate clients. More than 3,600 companies became clients of Caisse d’Epargne in 2009.
In a diffi cult market context, the number of active customers grew by 11% in 1 year, outstanding loans increased by 16% and outstanding deposits rose by 4%, with funds under management exceeding €43.8 billion.
Whether it concerns fl ow and operating cycle management, employee benefi ts planning, investment fi nancing, business takeovers and disposals, or support for company managers, Caisse d’Epargne’s offering is competitive, comprehensive and tailored to customers’ requirements thanks to the support of the group’s specialist subsidiaries.
In each region, Caisse d’Epargne provides protected people, their families and their trustees with dedicated teams, an offering designed for them and an Internet-based management service, Webprotexion, which facilitates the task of professional or family legal representatives.
As a major player in the territorial public sector and the sanitary and healthy sector, in 2009 Caisse d’Epargne supported France’s economic stimulus plan, which is underpinned by local authorities. Loan production totaled €12.3 billion, with €5 billion of short-term loans and €7.9 billion of medium and long-term loans. Outstanding medium and long-term loans amounted to €42.7 billion at the end of 2009. Project fi nancing in publicprivate partnerships (PPP) totaled €641 million at the year-end. Debt management operations reached €2.6 billion this year, up sharply from 2008.
Caisse d’Epargne is the leading private bank in the social housing sector, which has historically been fi nanced by Livret A accounts. It operates and participates in the governance of more than 250 public and private social housing organizations.
In 2009, Caisse d’Epargne and Crédit Foncier obtained from the French government €2.2 billion of assisted rental loans and used the fi rst part of the EIB’s France Logement Social budget (€125 million).
The Caisses d’Epargne are key players in the fi nancing of real estate professionals (land developers, real estate developers and investors). They have strong regional positions and were able to adapt their business to the market crisis in 2009.
The close relationship between Caisse d’Epargne specialists and sector professionals was essential in supporting projects already underway and in fi nancing new real estate transactions. It allowed the Group’s teams to play to the full their role as economic players in a highly uncertain market.
The following paragraphs concern the Human Resources and IT and Shared Services functions.
In particular, t o improve the management and operational effi ciency of Natixis, support teams are being organized into integrated functions. This should generate a cost saving of around €70 million .
Department has developed and continued its actions with a constant eye on enhancing its performance and improving the quality and expertise of services rendered.
To anchor the “earnings culture” and to develop the practice of the annual interview, a campaign of interviews steered by the Human Resources Department has been rolled out across the Company. This campaign is founded on common principles, covers a period of 3 months and contains standardized, quantifi ed and qualitative objectives: a 3 quantitative objectives (objective related to the achievement of a result and inherent to the position in question); a 1-2 qualitative objectives (objective relating to the way in which the task was performed, and to behavior, functioning and skills).
A short objective (20 words maximum) must be written in the form of an action verb with a deadline and an indicator.
Efforts to mobilize managers have been taken: a organization of 8 conferences attended by almost 550 managers; a availability of e-learning modules and interview preparation and training sessions; a distribution of methodological guides on how to conduct interviews and set objectives.
Individual targets are set at all levels. They spell out the contribution of each individual to the implementation of the strategic orientations of the New Deal.
The training department has assisted employees with internal mobility, whether it involves professional retraining or a chosen transfer.
Natixis moved quickly to ensure the satisfaction of its employees by putting on-line in October 2009 a completely revised version of its training package adapted to the new challenges facing the fi rm. Since July 2009, the administrative part of its “training” department has been outsourced to an external service provider, allowing it to focus on its core activity: employee assistance and training.
The Employee Relations and Legal Affairs Department of HR informs those involved in Human Resources (its correspondents) in each entity about new legislation. The clear commitment to maintaining this network within Natixis resulted in the introduction of a strengthened legal watch, from the holding of presentations about Personnel Representative Bodies for the heads of Human Resources to the coordination of measures relating to the employment of senior staff within subsidiaries.
Employees can opt (in all or in part) for: a an immediate payment that is subject to income tax and social security contributions; a a payment into a current account that is blocked for 5 years but is tax exempt (excluding social security contributions). The payment into a current account will not give rise to a matching contribution; a payment into the Employee Savings Plan that is blocked for 5 years but is tax exempt (excluding social security contributions); a in this case, relative to Natixis S.A., the employee receives a matching contribution by the employer, as laid out in the Employee Savings Plan of February 15, 2008; or a a mix of the above three options is possible, but only in 5% multiples. For example: j For a profi t-sharing bonus of x euros: j 50% paid immediately; j 25% paid into a blocked account; j 25% paid into the Employee Savings Plan.
This measure applies to employees who have worked within the companies Natixis S.A., Natixis Asset Management Immobilier, Natixis Interépargne, Natixis Paiements, Natixis Intertitres, Natixis Investor Servicing, Natixis Transport Finance, Banque Privée Saint-Dominique*, Natixis Altaïr, Natixis Securities, Natixis Cofi ciné, Natixis Financement, Natixis Lease, Groupe Caisse d’Epargne Bail, Natixis Consumer Finance, Natixis Pramex International, La Compagnie 1818*, Centre Français du Patrimoine, Media Consulting Investissement and M+x.
An agreement to set up a Collective Retirement Plan (PERCO) for the Natixis Group was signed on June 30, 2009 by Management and the CFTC, SNB and UNSA unions. This agreement is applicable to Natixis S.A. and subsidiary companies in which it directly or indirectly holds majority stakes whose personnel and registered offi ces are domiciled in France. Its purpose is to create a Collective Retirement Plan to aid employees who so wish to build up a portfolio of securities with a view to their retirement and, in so doing, to benefi t from the social and tax advantages attached to this form of long-term collective savings. This PERCO rounds out the Employee Savings Plan, a fi ve-year savings scheme that allows employees to combine the advantages of these two savings formulas according to their plans and their investment horizon. For details on the Employee Savings Plans, please refer to the paragraph above.
The annual allocation of variable compensation for 2009 is closely interlinked with the ongoing recovery of the group, with a real commitment by Management to secure the loyalty of key employees and to maintain their motivation. Management has therefore wanted a compensation policy that is suffi ciently competitive to hold onto the best performers and selectively attract new employees.
This policy is now applied in accordance with the decree of November 3, 2009 (modifying regulation 97-02 of February 21, 1997 relating to the internal control of credit institutions and investment companies) and professional standards concerning the governance and variable compensation of fi nancial market professionals published on November 5, 2009.
In addition, the deferred component in shares or equivalent instruments will only be made if certain criteria are respected relating to presence and performance. These criteria are linked, depending on the employee, to either Natixis’ results or the results of the business line in question over an extended period of time.
The rollout of the individual coaching program to the Human Resources managers in January 2009 reaped dividends, since 25 “managers of managers” and senior executives from across the group received coaching. Regarding team coaching and teambuilding, the Management Development service assisted the Executive Committee (Comex) of Eurotitres, the Management Committee (Codir) of AEW Europe, senior executives at Banque Privée 1818 and several teams in the CIB division. This new activity is set to give rise in 2010 to the listing of several consultants and coaches specialized in this type of collective assistance.
Regarding the development of the business culture, the Management Development group successfully repeated the organization of the integration seminar called Objectif Découvertes. Professional radio announcers were hired for this seminar and participants were invited to experience the seminar in the form of a radio program, by adopting in turn the roles of listener, announcer or journalist. In 2009, this enabled
Lastly, the Management Development group took part in pedagogical engineering and organized training sessions and conferences to support the two fl agship Human Resources programs in 2009 (the launch of the assessment campaign and the prevention of psycho-social risks): a 8 conferences on the annual assessment and the setting of targets (550 managers mobilized in all business lines); a 6 training sessions on the regulation and notion of psychosocial risks for Human Resources directors, nurses, social workers and members of the commission from the Committee for Hygiene and Safety (CHSCT): “Stress, harassment and the prevention of psycho-social risks” (for more information on this commission, please refer chapter 5: Corporate Social Responsibility ).
At the introduction of the New Deal, which is designed to develop “new relations of confi dence”, the Human Resources Department, in consultation with Executive Management, consolidated the list of managers in the fi rst circle, i.e. managers who determine and participate in Natixis’ strategy. Condensed versions of the résumés of all these managers, containing details on their position, their education and their professional experience, can be found in a booklet entitled “the fi rst circle”.
Specifi c measures were taken with regard to senior executives: a In a context where companies are sensitive to the question of equality between men and women, and to extend the corporate actions taken by Groupe BPCE in this area, top management has set up a circle of female managers to exchange ideas and consult others about this subject. This circle is also tasked with issuing proposals to take specific measures on diversity within Natixis.
These are long-term measures and will accompany General Management’s different projects in 2010.
“The ambition of Groupe BPCE is to become, in 3 years, the benchmark employer in France, both for its employees and externally”.
Natixis’ Human Resources Department is integrated with the Human Resources function of Groupe BPCE and focuses its efforts on pursuing common objectives as a partner player with joint responsibility for the performance of this activity. To this end, it employs innovative policies and transmits and respects the values of Groupe BPCE, attesting to its commitment to strengthen the operational effi ciency of its Human Resources function.
The Human Resources Department is a key player in this process. It has clear targets and concentrates on developing career mobility, processes encouraging commercial cooperation and cross-functioning and strengthening business training plans.
To meet these challenges, its actions are focused on three areas: a setting up Human Resources functional areas; a sharing tools and practices; and a creating key indicators for use by Executive Management.
To support the investment solutions business , the Human Resources Department will commit itself to the success of Human Resources projects linked to the necessary reorganizations and restructurings and will encourage the development of internal mobility in key positions while developing and securing the loyalty of talented staff.
To assist the Specialized Financial Services business, it will work in synergy with the business lines and BPCE in the networks in question, will develop career mobility from and into Natixis and will support managers and the development of the business skills of employees.
The harmonization of employment statuses, the construction of an employment and expertise plan (GPEC) within the business linked with the rest of the bank and the continued rollout of Human Resources management tools adapted to changing skills will be the key concerns of Human Resources professionals.
On its own behalf, it will seek assistance from its “Corporate Secretary” Department created in 2009 to facilitate the collective functioning, operational effi ciency and security of the Human Resources function. By assisting those involved and introducing shared practices and tools (business scorecard, Human Resources newsletter, business continuity plan, etc.), it will ensure the harmonization of operating processes.
It will develop its administrative management and training service offerings on the basis of the restructuring efforts initiated in 2009.
j 118 international business interns acquired valuable and internationally-recognized experience from internships lasting 18-24 months. They were able to deepen their knowledge of the business lines: structured or corporate fi nance, commodity fi nancing, and capital markets, risks and compliance activities.
j 694 subsidized traineeship agreements were signed to allow trainees to work for 6-12 months within Natixis’
j In the summer of 2009, 367 support summer staff strengthened our teams during the summer holiday period.
Natixis S.A. has strengthened its partnerships with higher education institutions by participating in 18 school forums. The subsidiaries took part in this process and came to present their businesses on the Natixis S.A.
In September, we presented our capital markets activity to students taking the Applied Mathematics option that we sponsor. In December, we received 30 students taking this option and organized a visit to our trading fl oors, where they were able to talk to operational staff.
Natixis has established a circle of campus managers who regularly meet the heads of large banks to exchange best practices regarding students. In this framework, Natixis revised its traineeship compensation grid in July 2009 to bring it more into line with market realities.
The banking profession adopted on November 5, 2009 a new set of rules on the compensation of fi nancial market professionals. These rules cover: a governance linked to the compensation policy; and a variable compensation and the introduction of a malus system.
ACTIVITIES3 Support functions and investment companies. This decree modifi ed rule 97-02 dated February 21, 1997 relating to the internal control of credit institutions and investment companies, for which it clarifi ed certain provisions.
The Information Systems and Shared Services (ISSS) are in charge of Natixis’ IT, as well as purchasing, real estate and logistics.
Under the New Deal plan, the ISSS will actively contribute to Natixis’ operational effi ciency plan. The identifi ed areas of optimization include IT, real estate and purchasing.
Three major projects made their mark in 2009. First, the IT system in Natixis’ Asian offi ces was renovated, with the replacement of platforms to improve risk control and to contribute to the development of these businesses. Second, the risk architecture, monitored using “stress scenarios”, was revised by using calculation tools from front-offi ce systems. Third, work on capital markets tools to harness productivity gains was continued.
Through the Évasion project, the Savings division continued to overhaul the IT system of Natixis Assurances.
Asset management fi nalized the merger of its IT systems and deployed Straight Through Processing (STP) solutions for its different management lines.
Projects undertaken by the Risks Department concentrated on the optimization of equity capital calculations and the improvement of monitoring tools.
The work carried out by the Compliance Department resulted in the convergence of all tools used for monitoring non-compliance risks and the strengthening of the functionalities of tools used to detect confl icts of interest.
In 2007, Natixis began the construction of two datacenters in the Paris region: Véga and Sirius. This program, dubbed Antarès, will allow Natixis to support the growth of these datacenters by creating new hosting capacity and reducing the number of its IT sites from seven to two by eliminating external hosting sites. These datacenters, which will offer far superior electrical capacity to existing sites, will respond to technological changes in the market.
In 2009, the purchasing department strengthened its commitment to the business lines and continued to sign partnership agreements, including with Coface. Added to this, the organization of a process to purchase services directly through an e-procurement solution succeeded in covering 95% of needs. The various actions taken over the course of the year allowed the department to achieve a participation rate in purchasing of 55% versus 43% in 2008. This progress testifi ed to a more unifi ed functioning.
This standard applies to environmental aspects that a company has the means to infl uence. It commits the Company to a pollution reduction process and introduces requirements for communication, emergency prevention and the capacity to react to emergencies.
Receivables management provides them with a service for recovering monies due to them.
a Coface also manages public export guarantees conferred by the French government to Coface and Natixis: pre-financing insurance, bond insurance, credit insurance for exports financed over more than 2 years, exchange rate insurance, guarantees on foreign investments, etc.
Source 2008: Coface, drawn from ICISA (for credit insurance) and FCI (for factoring).
The year 2009 was marked above all by the fi fth global credit crisis since the Second World War. World economic growth fell from 4.2% in 2007 to 2.1% in 2008 and to -1.9% in 2009, representing an unprecedented “growth shock” of 6.1 points. Consolidated revenues at current scope of business were relatively resilient. After growing by 5.6% in 2008, they increased by 3.8% versus 2008.
The economic crisis went through three distinct phases: (i) during the fi rst three quarters of 2008, the limited impact of the fi nancial crisis on the real economy and the targeted measures Coface took on the affected countries from January 2008 substantially limited the repercussions on technical income (difference between premiums received from policyholders and compensation paid to them); (ii) during the second phase (after the bankruptcy of Lehman Brothers), in the last quarter of 2008 and the fi rst half of 2009, the sharp worsening of the crisis substantially weakened Coface’s technical balances (the balance of premiums received and compensation paid); and (iii) from the end of the fi rst half of 2009, the waning of the crisis and the effectiveness of Coface’s second plan (involving a rise in contributions and risk premiums) brought about a sharp rebound in its earnings.
The profi le of claims expense and hence that of profi ts followed these developments. The half year loss ratios (ratio of compensation paid and premiums received) were 55% and then 89% in 2008, and 116% in the fi rst half of 2009. The loss ratio recovered back to 93% in the third quarter of 2009 and to 63% in the fourth quarter.
After implementing an initial action plan as of the beginning of January 2008 to cope with the credit crisis, a tougher plan (“Act on Crisis Act II”) was implemented in 2009 to refl ect the worsening of the crisis after the bankruptcy of Lehman Brothers. This plan addressed both outstanding guarantees and insurance contracts.
a Coface Services contributed its retail receivables management business to a joint venture with sector leader Intrum Justitia (IJCOF), which will take control of this jointventure at a later date. Coface is exiting the retail sector, which has no synergies with its receivables management business.
a Coface continued the launch of its financial rating business, especially in France. Approval will be sought from European authorities once community procedure is operational, and it is hoped to be finalized in 2010.
Revenues in the factoring business line were up 2.2% at current scope and down 4.4% at constant scope and currency. As in credit insurance, this resulted from mixed developments: a the volume of factored receivables fell from €32.7 billion at the end of 2008 to €30.8 billion at the end of 2009, a drop of 5.6%, due to weaker activity with factoring clients despite new client gains;
ACTIVITIES3 Financial Stakes a outstanding receivables fell from €3.6 billion at the end of 2008 to €3.3 billion at the end of 2009, and risk-weighted assets decreased by €532 billion between the end of 2008 and the end of 2009, a decrease of around 12%; a revenues (net banking income) declined by just 4.4% at constant scope, reflecting an improvement in the business lines.
This change resulted from very different dynamics in each business line.
a company information suffered from the steep drop in marketing information, which particularly affected the Kompass business, and the discontinuation of the digitalization of the trade register, which led to a revenue loss of €2.5 million in the final quarter; a in contrast, receivables management showed very strong momentum thanks to the crisis; a management of public procedures suffered from a negative base effect of €3 million linked to a positive adjustment of this sum in 2008 with respect to financial year 2007.
a Natixis Private Equity groups together 20 teams in Europe (France, Spain, Italy, Poland, Sweden and the Netherlands) and in high-potential markets (Brazil, China, India, Singapore and the US) and has a portfolio of more than 600 investments.
Two Natixis Private Equity teams, Seventure (Venture) and Initiative & Finance (Transfer), received the Grands Prix awards from Private Equity Magazine.
a Creation of a new Sage Capital team (Development) in India.
Natixis announced its new strategic plan focused on three core business lines. This implies a strategic reorganization for Private Equity and its repositioning in third-party management. (See Chapter I: Strategy)
NOVEMBER 2009 a Natixis Private Equity and CDC Entreprises announced the launch of Kurma Biofund in partnership with the Pasteur and Curie institutes.
a Naxicap Partners (Development), a proprietary team sponsored by Natixis Private Equity, invested in the SolarQuest company, a creator of solar panel stations. This investment alongside SCR Provençale et Corse (a subsidiary of Banque Populaire Provençale et Corse) for a total of €1.2 million should enable SolarQuest to support its development and to finance solar electricity production stations.
Accounting and prudential consequences of the implementation of the Guarantee 96
a Decision on valuation (transfer to banking book ) of segregated assets.
GAPC’s fi nal scope thus includes the following proprietary investment operations: structured credit, mortgage portfolios of the ABM Corp. subsidiary based in New York, credit correlation portfolios, portfolios of complex interest rate and equity derivatives, as well as fund linked structured products . At December 31, 2009, these operations represented €27.5 billion of risk weighted assets , before the effect of the Guarantee.
On the credit assets, the change in the notional amount net of provisions in 2009 stemmed from: a asset disposals and amortization; a portfolio restructuring; a the sharp improvement in the fair value of hedging Credit Default Swaps (“CDS”) bought from Credit Derivative Product Companies (“CDPC”); a the positive impact of commutations with the monoline insurers; a the slight deterioration in the valuation of Residential Mortgage-Backed Securities (“RMBS”) and Commercial
Mortgage-Backed Securities (“CMBS”) booked in the loans & receivables portfolio and that of Collateralized Debt Obligations (“CDO”) with real estate underlyings .
In addition, in the case of non-credit assets, the change in 2009 in the Value at Risk (“VaR”) stemmed from: a the block disposal of the France long-term (LT) portfolio of equity derivatives and the ongoing disposal of the convertibles book; a the liquidation of fund linked structured products .
GAPC is a Natixis division, reporting to executive management, responsible for managing a certain number of accounting units within the Natixis balance sheet.
The unit established had 111 members at end 2009 built around expert teams dedicated to run-off assets. The organizational chart is as follows: O. Perquel
The credit asset portfolio was assessed line by line by external advisers at the end of the fi rst half of 2009, using the following methodology: a measurement of potential losses at completion (maturity) of underlying assets, regardless of any hedging on the basis of micro and macroeconomic assumptions comparable to those used by the US authorities as part of their stress testing of US banks; a measurement of the recovery rate of these losses at completion for assets insured by monoline insurers on the basis of a credit analysis specific to each monoline insurer; a analysis of the sensitivity of results on the basis of “high stress” assumptions and, as regards the monoline insurers, junior treatment of the CDS contracts compared to the financial guarantees.
Although correctly valued, the GAPC credit asset portfolio remains notably exposed to the volatility of these assets with a potential impact on the income statement and capital adequacy ratio of Natixis. In order to deal with this risk, which Groupe BPCE is better equipped to manage than Natixis alone, BPCE and Natixis agreed to put in place a mechanism to hedge Natixis against future losses and earnings volatility potentially stemming from the GAPC credit asset portfolio, represented by the Guarantee.
The scope of the G uarantee, in net value terms, amounted to €31.8 billion (excluding "CDPC") at December 31, 2009, €3.0 billion down on June 30, 2009 (see management report) as a result mainly of amortization and disposals.
The implementation of the G uarantee triggered two payments to BPCE: a the first for €1.183 billion in respect of the financial guarantee (including €1.035 billion for the assets recognized as loans and receivables (L&R) and €148 million for available-for-sale assets (AFS)) compared to €1,249 million in provisions; and a the second for €367 million in respect of the Option.
The implementation of the Guarantee did not have an initial impact on Natixis earnings. Subsequently, the consequences will be as follows: a changes in the value of the portfolio guaranteed, from June 30, 2009, by the TRS will be offset by the TRS up to 85%; a the Option will be measured at fair value through profit and loss primarily on the basis of the change in the value of the portfolio guaranteed by the two TRS; a the euro exchange value of the €1,183 million payment in consideration for the financial guarantee will be amortized almost symmetrically with the reversal of the provisions for writedown that were funded for this portfolio at June 30, 2009 and the amortization of reclassification discounts.
On the other hand, Natixis benefi ts from a substantial prudential impact, representing a reduction in its risk weighted assets and its regulatory deductions, resulting in an increase of 1.4% in its Core Tier 1 ratio at December 31, 2009.
The retention of existing governance structures and Committees as regards accounting, financial, risk, asset and liability management (ALM) and other issues: a arrangements regarding ad hoc reporting (regular reporting and reporting of warnings) and specific monitoring of risks of GAPC assets covered by the Guarantee between the BPCE and Natixis Risk Departments; a arrangements, which provide for procedures for getting the advice and assessment of the BPCE Risk Department on procedures implemented within Natixis regarding the GAPC assets, including in addition procedures to access information on the control of system reliability and model validation.
The CGAC is the new body responsible for providing direction and monitoring regarding all risks relating to the operations transferred to GAPC, both relating to counterparty and market risks. It replaces the CRPC.
This change was implemented to achieve two main goals: a provide BPCE’s representatives with increased and effective participation in this Committee’s decision making; and a provide BPCE, in connection with certain matters relating to the Guarantee or the guaranteed assets, with the right to suspend a decision pending review by a meeting of the CSG.
a Where decisions represent for BPCE a financial impact or specific risks as a result of the safeguard mechanism, BPCE’s representatives may request that the CSG look at the issue prior to the decision.
Financial guarantee a Guarantee covering 85% of the face value of the assets concerned; a Provision recognized on these assets at June 30, 2009 in Natixis’ financial statements (€1.249 million); a The counterparty (€1.183 million) is recognized over the life of the guarantee at the same frequency as reversals of provisions and discount amortization.
You asked Mediobanca France, Paris branch of Mediobanca – Banca di Credito Finanziario S.p.A. (“Mediobanca”) to draw up a certifi cate on the reasonable and balanced nature and hence fairness from a fi nancial perspective for Natixis (the “Company”) of the terms and conditions of the agreements constituting the safeguard mechanism for a credit portfolio comprising the GAPC (Gestion Active des Portefeuilles Cantonnés - Workout Portfolio Management) assets and the assets hedged by Credit Derivative Product Companies (“CDPC”), this overall mechanism being hereinafter referred to as the “Guarantee”.
The Company’s results and fi nancial position were heavily impacted over the past eighteen months by the fi nancial crisis, refl ected in particular by a substantial reduction in liquidity, a sharp market downturn and a signifi cant rise in the cost of risk, which became worse following the collapse of Lehman Brothers in September 2008. These very adverse conditions led the Company to, in December 2008, establish a segregated structure – GAPC – within Corporate and Investment Banking in order to run off the non-core activities and in particular the structured credit product and products involving complex interest rate and equity derivatives, fund-linked structured products and proprietary operations. Against this background, the Company was also recapitalized a number of times, in the form of a €3.7 billion capital increase in September 2008, a number of shareholder advances including one for €1.5 billion in the fi rst half of 2009 and the issue in December 2008 of €1.9 billion in perpetual deeply subordinated notes.
since January 1, 2007. With regard to their size and complexity, the GAPC credit portfolio assets represented a major risk to the Company’s future profi tability and soundness as a result of the volatility of their performance, limiting the implementation of the new strategic directions and representing a source of long-term concern for the Company’s various stakeholders (shareholders, clients, fi nancial analysts, etc.). Furthermore, the French Banking Commission (Commission Bancaire) had required the Company to comply with a minimum capital adequacy ratio (Tier 1) of 9% since the creation of Groupe BPCE , signifi cantly limiting the Company’s fl exibility as regards asset writedowns. In order to reduce the Company’s exposure to the risks posed by the GAPC assets and enable it to launch its 2012 strategic plan, management thus started a detailed review of its GAPC credit portfolio.
Given the complexity of this portfolio and the lack of visibility regarding the economic environment when implementing the Guarantee, the Company’s management called on external advisers to reaffi rm the value of this portfolio in its fi nancial statements at June 30, 2009. It is in particular on the basis of this analysis that the Company, BPCE and their respective advisers negotiated the implementation of the Guarantee, announced by the Company when presenting its half-year results on August 26, 2009.
It should be noted that as at June 30, 2009 the guaranteed portfolio consisted of: i) virtually all of the GAPC credit portfolio (pro-forma of certain interim transactions concluded after this date), namely: loans and receivables and financial assets carried at amortized cost on the basis of the effective interest rate method (Loans & Receivables portfolio, L&R), with the exception of securitization components relating to the mortgage portfolios of the ABM Corp. subsidiary (“RMBS US Agencies”), namely a notional amount of €10.4 billion – plus €2.3 billion (notional amount) in available-for-sale financial assets (AFS) recognized at fair value – as well as €28.0 billion (notional amount) in cash and derivative assets from the trading portfolio recognized at their fair value, representing a total notional amount of €40.7 billion and a total net value of €34.8 billion; and ii) the risks on counterparties not providing collateral associated with the CDPC relating to the complex credit derivatives portfolio. The risks on counterparties represents a notional amount of €9.5 billion, with provisions of €0.7 billion .
In addition to the RMBS US agencies, the Guarantee excludes complex equity, interest rate and credit derivative product portfolios (the counterparty risk on the counterparties not providing collateral continuing to be covered by the Guarantee) and fund-linked structured products .
The fi rst part of the Guarantee covers the L&R and AFS assets (which, at June 30, 2009, had a notional value of €12.7 billion) up to 85% of this notional value, and took effect on July 1, 2009. The Guarantee will trigger the payment of any sum due and not paid (capital, interest, commission, expenses, incidentals, and/ or any other sum due pursuant to the contractual documentation relating to the asset) on any assets within the guaranteed portfolio. The Company will be paid by BPCE from the fi rst euro up to 85% of the amount of the default. The payment will be made in the currency in which the defaulting asset is denominated. In consideration for the implementation of the guarantee, the Company will pay an amount representing: (i) 85% of the difference between the amortized nominal value of the L&R assets and their amortized cost in the fi nancial statements at June 30, 2009, (ii) plus 85% of the amount of the provisions on the AFS assets at June 30, 2009, (iii) less 85% of 50% of the present value of the estimated potential gain on these portfolios, representing a total of €1.183 billion. This amount will be paid in a single installment at the start of the contract. The maturity of the guarantee is based on that of the asset in the guaranteed portfolio with the longest maturity. The guarantee agreement entered into by BPCE being a comprehensive agreement covering the assets carried both by Natixis S.A. and by its subsidiaries, Natixis will grant its subsidiaries a guarantee covering their own assets on the same terms.
We also had discussions with Company management as well as the department responsible for GAPC assets regarding the approach taken by the Company and its advisers with respect to the valuation of assets in the GAPC portfolio, the level of provisions as well as the stress case and high stress case scenarios drawn up in order to provide confi rmation for the Company and its management regarding the level of provisions and which served as a basis for setting the fi nancial terms of the Guarantee.
In the course of our assignment, we based our work solely on the documents and information listed above. We also based ourselves on the following items, which were confi rmed to us by the Company: I. the information provided to us by the Company (including public information) for the purposes of our assignment is accurate and true (it being noted that we did not check or have checked the accuracy or comprehensiveness of this information); II. the Company provided us with all the information necessary to carry out our assignment and that would be likely to influence our assessment of the planned transaction; III. the safeguard mechanism currently considered and presented to us is based on an analysis by the Company’s teams and those of its advisers. The valuation items used reflect the work carried out by a competent expert, in a position to make a judgment as to the risk assessment and value of the portfolios within the GAPC accounting structure. This expert was expressly retained for this purpose by the Company; IV. the scope of assets covered by the safeguard mechanisms was defined by the Company; this scope corresponds to the Company’s best assessment of the risk areas requiring a specific safeguard mechanism; V. there are, to the Company’s knowledge, no legal or contractual provisions that may prevail over the rights provided for in the planned safeguard mechanisms and capable of preventing their implementation or affecting their effectiveness; VI. the provisions for the assets affected by the transaction were determined on June 30, 2009 consistently with the accounting methods and prudential rules applied by the Natixis Group; they thus reflect the Company’s best estimate of the risks relating to these assets at that date; in particular, the Company feels that the level of provisions funded in respect of the so-called “digital ” assets is appropriate given their specific risk profile; VII. the Company’s financial statements as at June 30, 2009 were drawn up in accordance with generally accepted accounting principles and set out all the commitments of which management is aware. The level of provisions for the identified risks is, we feel, appropriate; VIII. the Company is not aware of any fact or circumstance that could render our work inaccurate or misleading; IX. there are no plans or lawsuits of which we are not aware that would be likely to materially impact the amount of provisions at June 30, 2009 in respect of the GAPC assets.
In accordance with the terms of our mandate, we did not carry out any assessment or estimation regarding the assets underlying the Guarantee nor of the level of the provisions, nor even checks regarding the assumptions, results and relative likelihood of the “stress case” and “high stress case” scenarios notably used as a basis for negotiating the terms of the Guarantee. We make no comment on the scope of the Guarantee nor on the level of exposure retained by the Company. Nor did we carry out an independent assessment of the legal, accounting, tax or regulatory aspects of the Guarantee and we thus assumed that the legal, accounting, tax and prudential consequences would be those described to us in the course of our discussions with the Company and its advisers. We also assumed that all the authorizations, and in particular regulatory and those relating to the Articles of Association, necessary for the implementation of the Guarantee would be obtained without any delay that would be negative for the Company or with respect to the expected benefi ts arising from the Guarantee.
The very specifi c nature of this transaction prevented us from carrying out a traditional assessment by means of a multicriteria analysis. Furthermore, given its particular characteristics (in terms of the size of the portfolio, the nature and quality of the underlying assets, the chosen tranching, or even the relations between the parties involved), it should be emphasized that no transactions are directly comparable to the Guarantee. In order to assess the fairness from a fi nancial perspective of the terms and conditions of the Guarantee, we thus carried out a range of analyses on i) the terms and fi nancial conditions of the Guarantee, ii) the benefi ts of this transaction for the Company, iii) the costs and benefi ts from guarantees provided in previous transactions in Europe and the US as part of a benchmarking analysis, iv) the costs and benefi ts of alternatives to the implementation of the Guarantee.
In order to be able to compare this Guarantee to other plans, it seemed to us to be appropriate to analyze not only the cost but also the benefi ts of the Guarantee to the Company. Taking this approach, we fi rst reviewed the Company’s stock market, fi nancial and prudential position prior to obtaining the Guarantee and subsequently reviewed the main effects of the implementation of the Guarantee on the capital adequacy ratios, earnings per share, the Company’s stock price as well as the price targets of research analysts. We thus noted that the Guarantee had enabled, on the basis of the fi nancial statements at June 30, 2009, to increase the Tier 1 ratio by 1.66% (proforma estimates prior to the repayment of the shareholder advance), thereby making it possible to free up capital to aid the development of the Company’s continuing activities as part of its strategic plan but also to repay the €1.5 billion shareholder advance granted to it by BPCE in the fi rst half of 2009 and thereby eliminate the cost associated with this advance. The implementation of the Guarantee also enabled the Company to recognize €831 million in tax loss carryforwards. We also noted, from the stock market performance, broker recommendations and target prices, the very positive view of the Guarantee by the market following the announcement of its implementation (the closing price on August 26, 2009 was 132% above the level at June 30, 2009). The market thus particularly valued the Guarantee, which made it possible to eliminate any additional future losses on the GAPC credit portfolio and enabled the Company to focus on its continuing operations in particular via the freeing up of capital previously allocated to this portfolio. We fi nally checked whether the conditions of the Guarantee enabled the Company to effectively retain management and capture the potential gain of the guaranteed portfolio in the event of the exercise of the call option. We nevertheless noted that, given the capitalization formula used in the TRS, the fl ows accruing to the Company upon exercise of the call in year 10 will in principle be lower than they would have been in the absence of the guarantee assuming that the fl ows from the GAPC assets had been reinvested in other Company operations as they fl owed in.
We reviewed French and international precedents as regards guarantees and assessed the costs (level of premium and fi rst loss excess not covered as a percentage of the assets or weighted risks, impact on earnings per share, etc.) and benefi ts (level of protection offered) offered by these transactions compared to the Guarantee implemented. We thus verifi ed that the cost of the Guarantee did not substantially differ from the conditions of guarantees provided under other French and foreign schemes, even if not directly comparable with this guarantee.
This certifi cate only relates to the reasonable and balanced nature and hence fairness from a fi nancial perspective of the terms of the safeguard mechanism for the GAPC assets. It does not constitute neither a recommendation to the Company’s shareholders or Board of Directors to approve or disapprove the Guarantee and the agreements implementing it, nor an opinion or indication on the Company’s stock or stock price nor its past, current or future performance.
We have acted solely for the Company’s Board of Directors with a view to providing it with this fi nancial certifi cate. The Company remunerates us for this work. It is added that there are no legal or equity links with the companies affected by the Guarantee likely to affect our independence, that we have moreover not assessed the Company over the past eighteen months, that we have not advised any of the companies affected by the Guarantee over the past eighteen months and that, fi nally, we have no fi nancial interest in the success of the transaction, nor any receivable or debt with regard to any of the companies affected by the Guarantee likely to affect our independence.
Aware of the impact of its own operations, Natixis implements a series of measures designed to reduce its direct impact on the environment: adoption of “green” practices in its everyday activities enabling it to reduce its consumption of resources, recycle its waste, and develop eco-friendly travel plans. Natixis also raises its suppliers’ awareness by advocating and communicating its responsible purchasing policy.
In the area of Human Resources, Natixis is thoroughly committed to a policy of diversity, whether in terms of male-female equality, employment of disabled persons or management of older members of staff.
Natixis, through its different business lines, is one of the leading investors in renewable energy and the struggle against global warming.
These projects are located in Western Europe (mainly in France, Italy and Spain) and in the United States. To date, Natixis has provided fi nancing for more than 63 projects with a combined installed capacity of 8,365 megawatts.
Natixis Private Equity is specialized in capital investments in SMEs that have strong growth potential and high quality management. NPE has already conducted a number of investments in the environment sector, in particular in companies specialized in solar panels, recycling and environmental consulting.
Natixis Asset Management is a pioneer in SRI and solidarity fi nancing, with an accumulated expertise in this fi eld of over 25 years. Its current product range covers all the main SRI asset classes and main approaches.
j No. 1 in solidarity fund management in France, with a 34% market share (2009 edition of the Baromètre des Finances Solidaires compiled by Finansol, La Croix and Ipsos).
Natixis Interépargne is the leader in SRI Employee Savings with a 31.4% market share (Activity Report published in December 2009 by the Comité Intersyndical de l’Épargne Salariale covering all the ranges of FCPE labeled mutual funds).
Natixis AM has launched a number of new SRI initiatives in particular via the organization of the Prix de l’Investisseur Responsible (Socially-responsible Investor Award) (created with Amadéis in partnership with Les Échos), its collaboration in the main initiatives and fi nancial working groups concerning SRI and its active participation in events and fi nancial market projects regarding responsible management.
Our Real Estate and Logistics Department applies a proactive policy of energy consumption reduction in our buildings . At the same time, our employees are made aware of the implementation of “green” practices that enable a reduction of their consumption of resources.
Natixis certifi ed ISO 9001 * and 14001 ** for the management of its property facilities: a decisive step towards a system of quality and environmental management These certifi cations reward the quality and environmental management systems implemented at all of our central corporate offi ce sites managed by our logistics department, They certify the management and technical maintenance of 16 buildings occupied by Natixis, representing more than 60% of the bank’s global offi ce presence.
In the framework of its “Antares” project, Natixis has launched an HQE® certifi cation initiative for its two future data centers in the Paris area (see the “IT and Shared Services” section in Chapter 3 “Activit ies”). The project is a pilot site favoring the integration of the specifi cities of a data center into the HQE® standards. Indeed, the originality of the project is that it integrates not only strictly technical criteria, but also an environmental dimension with, in particular, optimal management of energy consumption. In this way , there will be a heat export system to a nautical center at one of the two sites.
Since 2007, Natixis has launched a Company Travel Plan (plan de déplacement d’entreprise or PDE) , aimed at fi nding alternatives to the use of private vehicles for commuting and traveling between corporate offi ces: a use of public transport and “soft” modes of transport: For the last 5 years, Natixis has co-financed a public bus line to its sites at Charenton-le-Pont. Employees are encouraged to use public transport facilities close to Natixis’ sites, and bicycle parking facilities are progressively being installed at the bank’s main sites; a business journeys: Since 2008, Natixis has introduced a policy of using rail in preference to air as part of its comfort policy for travel within France as well as to Belgium, the Netherlands, Luxembourg and London. In addition, Natixis is promoting video-conferencing, which is increasingly being used; a environmental management of the vehicle fleet: the referencing of vehicles with low CO
Since 2005, the tendering process includes “product” criteria relating to sustainable development. Natixis has introduced social and environmental responsibility questionnaires for its suppliers and a Sustainable Development Charter for Suppliers has also been distributed. In 2009, Natixis renewed its list of products and solutions with the least impact on the environment to incorporate notably the following items: a paper from sustainably managed forests; a recyclable envelopes approved by French environmental standards (NF); a remanufactured consumables for printers and fax machines; and a office supplies referenced as “green products”.
According to the most recent Vigéo rating, Natixis is one of the leading fi nancial institutions in terms of Human Resources management. Howerer , diversity management is a specifi c corporate objective for Natixis and it receives special attention within the Company.
In 2009, the group created a Diversity Manager position and a diagnosis was conducted in collaboration with IMS-Entreprendre pour la cité. Three priority objectives were identifi ed: a gender equality; a maintained employment of older members of staff; and a assistance and training employees with disabilities .
The conclusions of the diagnosis conducted on the entirety of the diversity-related domains in 2009 in collaboration with IMS Entreprendre pour la cité, identifi ed four main challenges for the Diversity Policy: j develop a corporate responsibility policy, in accordance with the legal requirements relating to diversity; j build a Human Resources management policy aimed at capitalizing on a diversity of profi les, experiences and skills; j enhance Natixis’ reputation as an employer with employees, potential employees, the group and its environment; and j mitigate any possible risk of discrimination by an overhaul of the HR processes, by integrating diversity criteria and by specifi c training for managers.
Processes” . Three priority objectives were identifi ed: j maintained employment of older members of staff; j gender equality; j assistance and training for employees with disabilities.
With respect to the management of older members of staff, an analysis of the situation at Natixis was conducted in 2008 resulting in a series of recommendations that were delivered in 2009. An action plan for older members of staff was implemented in each structure for the years 2010 and 2011.
The proactive policy of professional equality concerns the entirety of Natixis’ Human Resources processes: recruitment, training, remuneration, career management, and professional and managerial development. A number of agreements have already been signed in certain subsidiaries including Coface and Natixis Factor.
In 2009, awareness-raising about disabled employees was addressed to a wider audience with the participation of employees from the operational divisions. Six sessions were organized in 2009, bringing the number of employees who have been able to participate up to 214 in 3 years. Six further sessions have already been planned for the fi rst semester of 2010 and this action will be continued in the second semester.
A report on the employment of disabled workers has also been conducted in three subsidiaries: Coface, Banque
Privée 1818 and Natixis Lease. This action will be extended to all the subsidiaries in the integrated scope during the fi rst semester 2010 in order to build a new action plan that will be coordinated between all the structures and to negotiate an agreement with the labor representatives for the next 3 years.
(Hanploi, AFIJ, AFIDEO, H andimanagement , IMS), as well as with our partner temporary employment agencies with a view to providing work placement and recruitment opportunities for disabled persons.
In the fi eld of external communications, Natixis has carried out development work on its website to ensure it is accessible to persons with impaired vision. In 2008, the Company’s website became the fi rst bank website in
Since 2005, the bank has been contributing to the fi ght against malaria by fi nancing prevention training programs and providing mosquito nets to the most vulnerable populations. In 2009 the projects started in 2005 with the Association “Plan France” were continued in Cameroon and in Burkina Faso.
Concrete results in the fi ght against malaria The programs implemented in the framework of “Plan
France” with the support of Natixis have already saved thousands of lives: j in the villages concerned, the populations have been made aware of the link between mosquitoes and malaria; j 12,200 mosquito nets have been distributed in
The data provided here refer: a for full-time equivalent (FTE) employees: to the “Natixis global” (France and International) scope, i.e. including all consolidated entities; a for staff under contract and the majority of the labor indicators: to the “France” scope (including Natixis S.A. and the other legal entities in France); a for the remuneration data: to the “France of Integrated Natixis” scope (covering the France “scope” except Coface, Private Equity and Pramex).
Workforce (in FTE) 2009 2008 * 2007 * Pro-forma fi gures including changes in the 2009 France scope and in particular the deconsolidation of CACEIS on June 30, 2009.
(1) The staff working outside France are accounted for under the operational divisions which amounts to only presenting the consolidated group (without any France/International distinction).
During 2009, 86 employees under fi xed-term contracts were given permanent contracts.
For the second year in a row, Natixis has sharply reduced its recruitment, the total number of hires in France amounting to 1,101 (down nearly 20% vs. 2008). Moreover, the proportion of fi xed-term contracts in these new hires has sharply increased: 42% vs. 25% in 2008.
In correlation to these trends, the proportion of total new managerial staff dropped to 49.2%. However, the proportion of managers hired under permanent contracts was 56% of total permanent contract recruitments.
Excluding internal job moves, a total of 1,549 employees left Natixis in 2009 (for all reasons and types of contracts) versus 1,585 in 2008.
The number of dismissals in France during 2009 was 112 (263 in 2008), of which 42 for Natixis S.A. These were mainly individual dismissals.
In addition, there were a number of redundancies in the framework of the staff reduction programs (see heading “Workforce reduction and employment preservation plans”).
In the diffi cult context of the last 2 years, Natixis has taken a number of measures designed to save as many jobs as possible. These measures are based on the following principles: priority is given to internal resources and to the adaptation of work organizations. They involve, in particular, reducing the number of new recruitments, anticipating and preparing internal career mobility, adapting workforces to activity levels by making the most of natural departures and the two job saving plans (PACEC ) both based on voluntary initiatives.
25 years and under years years years years years years 56 years and over
Some entities and sectors are subject to specifi c provisions, in particular with regard to working hours.
The absentee rate in the “France” scope was approximately 6.1% in 2009. Sick leave accounted for 2.5 points of the total absentee rate and maternity leave for 1.8 points. For Natixis S.A., the fi gures are 6.1%, 2.1% and 2.0% respectively.
In the France workforce: In number of employees 1,239 1,307 1,338
In 2009, the annual obligatory negotiations resulted in an agreement, the main measures of which were as follows: a adjustment to €19,500 of the minimum gross annual starting salary for full-time employees on fixed-term and permanent contracts, except for contracts related to the government’s employment policies; a increase of basic salaries according to the following scale: j 3% for salaries below or equal to a gross annual sum of €25,000, with a minimum increase of €650, j 2% for salaries of between €25,000 and €40,000, with a minimum increase of €600, j 1% for salaries of between €40,000 and €100,000 with a minimum increase of €500; a detailed analysis by managers (immediate superiors) and representatives of the corresponding HR Departments of the situations of employees whose salaries have not been raised for at least 3 years on June 1, 2009. The employees whose salaries it was decided to raise received a 2% increase in their basic salary with a minimum increase of €550 and a maximum of €2000; a in the event of reclassification to managerial status, the minimum increase of the gross annual salary is €1200.
Within the scope of the French companies covered by the obligatory annual negotiations (NAO) (corresponding to the French scope of integrated Natixis), the average gross annual remuneration for permanent employees on an FTE basis (fi xed and variable components, but excluding profi t-sharing, incentive plans and employer’s matching contributions to the employee savings plan) was €66,318.
* New scope of consolidation including all Caisse d’Epargne Group subsidiaries transferred to Natixis on November 17, 2006.
J EMPLOYER’S TOP-UP CONTRIBUTIONS TO THE EMPLOYEE SAVINGS PLAN NATIXIS S.A.
For further information on this subject, see the “Human Resources” Chapter.
In 2009, the CHSCT, whose mandate was renewed at the end of the year following the professional elections, 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 specifi c site (Charenton, Lumière, Austerlitz, Bourse). This organization enables the Committee for hygiene, safety and working conditions (CHSCT) to concentrate on more general issues related to the restructuring carried out at Natixis and its impact on working conditions.
Lastly, on this subject, Natixis has set up, via the occupational physicians, a “Stress Observatory” Since the start of 2009, each employee is invited to answer questions relating to stress at work in a detailed questionnaire during his/her annual medical examination with the occupational physician. The individual results of these questionnaires are presented to each employee and commented by the doctor, and, at the collective level, the information is fed into a statistical database that allows measurement of stress levels based on different criteria selections. At end 2009, the database was already substantial as it contained information from 3,700 questionnaires. The detailed results will soon be presented to the commission. Soon employees will begin to reply to the questionnaire for the second time which will allow comparisons to be made regarding the evolution of stress levels within the Company. The anonymity of the entire procedure and data collected is guaranteed by the occupational physician.
In 2009, the Sanitary Committee met on several occasions between spring and fall, i.e. during the period of observation and prevention of the development of the bird fl u H1N1. These meetings were naturally attended by the occupational physicians and focused on two key themes: the implementation of sanitary measures (posting of guidelines, management of the stock of masks with two test exercises for their distribution) and the implementation of business continuity measures should they be needed.
Gender equality a Recruitment: Women among new hires (in %) 2009 2008 2007 a Working hours: women represent 92.6% of the “France” workforce working part-time (93.3% in 2008).
* In 2009, the “France” scope is in fact the “Integrated Natixis” scope.
Women granted individual pay increases (in %) 2009 * 2008 2007 * In 2009, the “France” scope is in fact the “Integrated Natixis” scope.
a Training: In the “France” scope, as in the “Natixis S.A.” scope, the proportion of women amongst trainees and in the total volume of training hours awarded is higher than their proportion in the respective workforces.
Share of total training hours received by women 51.9 47.8 51.5
Average age in years 42.2 41.9 ns * Data not comparable in view of changes in the age brackets used.
Under 25 years 25-29 years 30-34 years 35-39 years 40-44 years 45-49 years 50-54 years 55 years and over
In addition, a mutual assistance scheme exists for employees suffering bereavement or encountering serious personal diffi culties. The voluntary annual contributions to this scheme paid by employees are supplemented by matching contributions paid by the Company.
The funds donated by employees on this occasion were matched by Natixis on a double-the-amount basis.
FRANCE: METHODS USED BY THE COMPANY TO ASSESS THE IMPACT OF ITS OPERATIONS ON EMPLOYMENT AND REGIONAL DEVELOPMENT IN FRANCE
Natixis supports regional development by providing fi nancing and building long-term relationships with clients (for further information, refer to c hapter 3 “Activities”).
SUB-CONTRACTING POLICY AND OBSERVANCE OF THE CORE CONVENTIONS OF THE INTERNATIONAL LABOR ORGANIZATION
Paper is the primary raw material consumed by Natixis and its consumption was down 14.3% in 2009 vs. 2008. Total paper consumption includes the consumption of white paper, colored paper, desktop publishing, envelopes, internal and external documents, etc.
Total energy consumption (electricity, heating and air-conditioning) (in MWh) 128,545 136,012 141,722
Energy consumption per m2 of usable offi ce space (in MWh) 0.29 0.31 0.32
The logistics department has facilities managers for each building who are permanently available to employees. They are notably responsible for optimizing energy consumption. To achieve this, they use powerful and centralized technical management tools allowing the qualitative confi guration of a building’s comfort and an optimization of the energies used. Technical installations are managed by automated systems which take account of external temperature and the thermal properties of buildings in addition to other factors.
The performance of these systems is monitored and improved via regular comparisons between actual consumption and the budgeted monthly energy requirements. These energy budgets are determined on the basis of annual targets and take account of the seasonal variations recorded for each building over several years.
This has enabled Natixis to apply for HQE (French High Environmental Quality) certifi cation, in the framework of its “Antares” project, for its new data centers in the Paris region. The fi rst center, “Véga”, was delivered at the end of 2009. The construction of the second site, “Sirius”, roughly 30 km from the fi rst, started at end 2008 and its delivery is expected in May 2010.
The “Antares” project is a pilot site that should allow the integration of the specifi cities of a data center into the HQE environmental standards. Indeed, the originality of the project is that it integrates not only strictly technical criteria, but also an environmental dimension with, in particular, optimal management of energy consumption. For example, there will be a heat export system to a nautical center at one of the two sites.
The Arc de Seine building in the 13th arrondissement of Paris, Natixis’ registered offi ce since 2007, has been certifi ed High Environmental Quality (HQE).
Regarding the risk of proliferation and dissemination into the atmosphere of l egionella bacteria, the program of replacement of our potentially sensitive technical facilities has been completed.
Emissions of gases that damage the ozone layer and of signifi cant atmospheric pollutants: NO
Used fl uids from combustion engines (electricity generators, vehicles, etc.) are also recovered and processed by specialized companies.
Recovered by the Ateliers du bocage, an association affi liated to the Emmaüs network, the handsets in working condition are sold through Emmaüs stores, and the defective handsets are transferred for disposal in accordance with the legislation. 893 handsets 511 handsets
Natixis’ service operations are predominately located in urban environments and do not have a direct material impact on the natural environment. Nevertheless, preventive measures are taken to avoid any accidental discharges into the atmosphere or sewage systems: regular maintenance of sensitive facilities and lining/tanking of premises containing potentially polluting substances or contaminants.
Natixis is a supporting partner to the Chair in New Energy Strategies at the École des Mines in Paris which conducts research into the carbon market and into biomass energy.
ARRANGEMENTS FOR DEALING WITH ACCIDENTAL POLLUTION WITH POTENTIAL REPERCUSSIONS EXTENDING BEYOND THE COMPANY’S OPERATIONS
INFORMATION ON TARGETS SET FOR INTERNATIONAL SUBSIDIARIES IN RELATION TO ITEMS 1 TO 6 OF ARTICLE R. 225-105 OF THE FRENCH COMMERCIAL CODE
The actions described above apply to Natixis and its subsidiaries in mainland France, representing a fl oor surface of 435,000 m² out of a global fl oor surface of approximately 500,000 m².
Natixis also conducts occasional initiatives regarding resource consumption, waste management or building according to HQE standards at some of its international operations.
Risks related to the macroeconomic environment and the fi nancial crisis 132
Net income/(loss) and gains and losses recorded directly in equity 209
Statement of changes in equity (From January 1, 2008 to December 31, 2009) 210
Natixis operates in an environment that presents inherent risks, some of which it cannot control. Certain risks to which Natixis is exposed are identifi ed below, it being emphasized that it is not an exhaustive list of all risks taken by Natixis in relation to its business or in consideration of its environment. The risks set out below, as well as other currently unidentifi ed risks or which are currently considered immaterial by Natixis, may have a material adverse impact on its operations, fi nancial position and/or results. The scale and impact that these risks could have on the results and assets of Natixis, as well as the organization and control of these risks are more fully described in section 5 of the management report “Risk management”.
Adverse market or economic conditions may cause a decrease in the net banking income, profi tability and fi nancial position of Natixis
In the future, signifi cant disruptions to the overall economic situation could have an adverse impact on Natixis’ results and fi nancial condition.
Conditions in the fi nancial markets, particularly the primary and secondary debt markets, may have a signifi cant negative effect upon Natixis
Since the formation of BPCE, the refi nancing of Natixis over the medium-long term is carried out at the Groupe BPCE level through BPCE S.A. Even if market conditions have largely stabilized in recent months, they could deteriorate in the future and BPCE, which fi nances itself, amongst others, on international debt markets, could encounter diffi culties in issuing these instruments under reasonable conditions.
Natixis has suffered signifi cant losses, and may continue to suffer losses, on its portfolio of assets affected by the fi nancial crisis (GAPC assets)
Natixis has recorded signifi cant losses on GAPC assets leading to a net loss attributable to the Group of €1.7 billion. The GAPC credit portfolio today benefi ts from its 85% cover of the Guarantee provided by BPCE and described in Chapter 4 of this registration document. This risk henceforth concerns a reduced volume of assets. For further information about GAPC and its assets, please refer to chapter 4 “GAPC”.
RISKS RELATED TO THE LINKS WITH BPCE AND THE BANQUES POPULAIRES AND CAISSES D’EPARGNE NETWORKS
BPCE, Natixis’ principal shareholder, held 71.54% of its capital (and 71.66% of its voting rights) at December 31, 2009. As a result BPCE is in a position to exercise a signifi cant infl uence on the appointment of Natixis’ directors and offi cers as well as any other corporate decision requiring shareholder approval. It is possible that the interests of BPCE in relation to these decisions could differ from those of other Natixis shareholders.
The risk management policies and procedures of Natixis are subject to the approval and control of BPCE
BPCE, as the central institution, is required to oversee compliance, by the entire Groupe BPCE to which Natixis belongs, with regulations applicable to the banking sector in force in France in areas such as regulatory capital adequacy and risk management requirements. As a result, BPCE has been given signifi cant rights of approval over important aspects of Natixis’ risk management policies. In particular, BPCE has the power to approve the appointment or removal of Natixis’ director of internal audit, as well as certain aspects of risk management such as the approval of credit limits and the classifi cation as doubtful loans of loans granted to customers common to Natixis and Groupe BPCE . For further information about the risk management policies and procedures at Natixis, please refer to section 7 “Chairman’s report”. BPCE’s interests (on behalf of Groupe BPCE ) concerning risk management may differ from those of Natixis.
Natixis depends upon the performances of the Banque Populaire and Caisse d’Epargne networks
Natixis has no voting rights with respect to the cooperative investment certifi cates representing 20% of the share capital of Banques Populaires and Caisses d’Epargne
However, Natixis has signifi cant infl uence over the Banques Populaires and the Caisses d’Epargne as a result of various rights granted to it in relation to agreements entered into at the time CCI s were acquired by Natixis.
Natixis cannot freely sell its 20% equity interests in Banques Populaires or Caisses d’Epargne, and in some circumstances could be required to resell them
Pursuant to agreements made when the CCI s were acquired, Natixis may only sell all or part of its 20% holding in Banques Populaires with the prior consent of the Board of Directors of the Banque Populaire concerned and all or part of its 20% holding in the Caisses d’Epargne with the prior agreement of the BPCE. In the event of refusal, the Banque Populaire will be required to repurchase the relevant equity interests from Natixis at a price that will be determined by taking account of the proportionate share of the net assets to which this holding gives a right and by respecting the valuation methods used to value this holding at the time of its acquisition by Natixis. This repurchase price could thus differ from the price that Natixis would have obtained from the proposed buyer. In addition, the mere existence of the approval right could make it diffi cult for Natixis to sell these holdings.
Pursuant to agreements entered at the time of the acquisition of CCI s , Natixis is obliged to maintain its holding in the capital of each of the Banques Populaires and Caisses d’Epargne at 20%. As a result, during any issue of new shares of a nature to dilute Natixis’ shareholding, Natixis must subscribe to additional CCI s so as to maintain its shareholding at 20%.
Credit risk affects lending operations as well as other operations exposing Natixis to the risk of counterparty default, notably its trading operations in fi nancial instruments on capital markets and its settlement operations. For instance, a default by a bank could directly and signifi cantly affect Natixis through its trading positions and relations with the said bank. Credit risk also exists in Natixis’ credit insurance and factoring businesses, even if the risk lies at the level of default of the customers of the debtor, rather than the debtor itself.
Market risk is the risk of loss in value caused by any adverse movements of market parameters. These parameters include, notably, bond prices, interest rates, securities and commodities prices, derivatives prices and prices of all other assets, notably real estate and foreign exchange rates.
Asset liquidity is also an important component of market risk. In the event of insuffi cient or non-existent liquidity (for example due to a reduction in the number of transactions or of a large imbalance in the supply and demand of certain assets), a fi nancial instrument or any other tradable asset may be unable to be traded at its estimated value. The lack of liquidity may refl ect reduced access to capital markets, unforeseen cash or capital requirements, or legal restrictions. Market risk affects Natixis’ trading and non-trading portfolios. In non-trading portfolios, market risk encompasses: a the overall interest-rate risk associated with asset and liability management, which is the risk to earnings arising from asset and liability mismatches in the banking book or in the insurance business; a the risk associated with investment operations, which depends directly on fluctuations in the value of invested assets in securities portfolios; and a the risk associated with other operations, notably real estate, which is indirectly affected by changes in the value of negotiable assets held in the normal course of business.
The Management report details: a the organization of the control of market risks (section 5.4.1). The control of market risks is essentially the responsibility of the Market Risk Department that defines risk measurement methodologies, advises limits and ensures the monitoring of all market risks within Natixis’ consolidation scope. The market risk control system is based on a delegated architecture, in which the Group Risk Committee is the General Committee and within which the Market Risk Committee plays an essential role; a the measurement of market risks (synthetic measures of Value at Risk, operational indicators used to manage activity on an overall basis and/or by homogenous activity, by focusing on more directly observable criteria, stress tests consisting of measuring potential losses suffered by portfolios in extreme market conditions) (section 5.4.2);
FINANCIAL DATA6 Risk factors a the quantitative data for measuring Natixis’ market risk (section 5.4.3); and a regulatory capital asset requirements (section 5.4.4).
The overall interest rate risk is defi ned as the risk of loss on the bank book caused by an adverse change in interest rates due to a mismatch between the nature of interest rates on assets and liabilities. At Natixis this risk is essentially linear and focused on the euro and the US dollar, resulting primarily from mismatched positions between contractual transactions. The most signifi cant positions concern exposures over the short end of yield curves and are, notably, linked to the lag between IBOR reset dates.
Liquidity risk is the risk that Natixis is unable to meet its commitments to its creditors due to a mismatch between the durations of assets and liabilities. This risk could arise, for example, in the event of massive withdrawals of customer deposits or a crisis of confi dence or an overall market liquidity crisis. As a corporate and investment bank, this risk for Natixis results primarily from mismatched positions between transactions with contractual maturities as Natixis does not have stable and permanent customer resources and partly funds itself on the markets. After a diffi cult fi rst quarter in 2009 still marked by the consequences of the collapse of Lehman Brothers in September 2008, Natixis recovered access to satisfactory liquidity during the second quarter as a result of a return of investor confi dence and a gradual return to normal of effi cient market operation.
The procedures for monitoring and managing these risks are described in section 5.5 of the Management report.
Operational risk is the risk of losses due to inadequate or failed internal processes, or due to external events, whether deliberate, accidental or natural occurrences. Internal procedures include, but are not limited to, Human Resources and information systems. External events include, amongst others, fl oods, fi res, earthquakes, fraud or even terrorist attacks.
The principal legal proceedings in hand in Natixis and its subsidiaries are described in section 5.8 of the Management report.
Today, as far as Natixis is aware, there are no government or legal proceedings, or arbitrages likely to have, or having recently had, signifi cant impacts on the fi nancial position or profi tability of Natixis S.A. and its subsidiaries.
The Insurance Department – reporting to the Legal Department in the Corporate Secretary’s offi ce – is tasked with analyzing insurable operational risks and taking out appropriate insurance cover against them (for further information, please refer to section 5.7 of the Management report). The purchase of insurance policies from leading insurers allows for the compensation of potentially signifi cant damages resulting from fraud, embezzlement and theft, operating losses or implicating Natixis’ civil liability and its subsidiaries or employees for which it is responsible.
For further details about corrective actions implemented with a view to the turnaround of Coface, please refer to section 4.4.1 of the Management report.
Any substantial increase in provisions or loss in excess of the previously recorded level of provisions could adversely affect Natixis’ operating income or fi nancial position
In its lending operations, Natixis periodically establishes provisions for loan losses, which are recorded in its income statement under the “cost of risk” heading. Natixis’ overall level of provisions is based upon its assessment of prior loss experience, the volume and type of loans granted, market practices, past due loans, economic conditions and other factors refl ecting the recovery rate of various loans. For further information on Natixis’ provisioning policy and its management of doubtful loans, please refer to section 5 “Risk management” of the Management report.
Independently of market changes, any under-performance of Natixis’ asset management business may result in a decline in assets managed (in particular, as a result of buybacks of mutual funds) fees, premiums and other management remuneration received by Natixis.
The amount of net interest income received by Natixis during any given period signifi cantly affects its net banking income and profi tability for that period. In addition, signifi cant changes in interest-rate spreads applicable to loans, such as the recent widening of these spreads, can have an infl uence on the net income of Natixis. Interest rates respond to many factors over which Natixis has no infl uence. Changes in market interest rates may affect interest rates charged on interest-earning assets differently than the interest rates paid on the contracted liability. Any adverse change in the yield curve could cause a decline in Natixis’ net interest income from lending operations. In addition, increases in the interest rates on Natixis’ shortterm funding and maturity mismatches are likely to affect its profi tability. High or rising interest rates and/or increasing credit spreads, especially if such changes occur rapidly, may create a less favorable environment for certain of Natixis’ businesses.
Natixis conducts a signifi cant portion of its business outside France, in particular in the United States, and its net banking income and results can be affected by exchange rate fl uctuations. Whilst Natixis incurs expenses in currencies other than the euro, these only partially offset the impact of changes in exchange rates to a fall in net banking income.
Natixis is particularly exposed to changes in the exchange rate between the United States dollar and the euro, as a signifi cant portion of its net banking income and operating income is realized in the United States. Natixis enters into transactions to hedge its exposure to exchange rate risks under its overall risk management policy. However, these transactions may not fully offset the impact of unfavorable foreign exchange rates on Natixis’ operating income and may even, under certain hypothetical situations, amplify them.
Tax law and its application in France and in the countries where Natixis operates are likely to have a signifi cant impact on Natixis’ results
Natixis’ ability to manage its risks. The losses borne by Natixis could prove to be signifi cantly greater than those forecast in the light of historical averages. In addition, Natixis’ quantitative models do not incorporate all risks. Certain of Natixis’ risks are subject to a more qualitative analysis that could prove insuffi cient and thus expose it to signifi cant and unanticipated losses. In addition, while no material issue has been identifi ed to date, the risk management systems are subject to the risk of operational failure, including fraud. (Please refer to section 5 “Risk management” of the Management report for a more detailed presentation of the policies, procedures and methods used by Natixis to identify, monitor and manage its risks.)
Natixis could suffer losses if one or other of the various instruments and hedging strategies that it uses to hedge the various types of risk to which it is exposed proved ineffective. Many of these strategies are based on observation of historical market behavior and historical correlation analysis. For example, if Natixis holds a long position in an asset, it could hedge the risk by taking a short position in another asset whose change in the past has allowed it to off-set the change in the long position. It could be the case that Natixis may only be partially hedged, or that these strategies do not fully hedge future risks or that they do not allow an effective reduction of risk or even cause a growth in risks. Any unexpected market development, such as the one currently experienced in international fi nancial markets since the second half of 2007, may also reduce the effectiveness of these hedging strategies. In addition, the manner in which gains and losses resulting from certain ineffective hedges are recorded may increase the volatility of Natixis’ reported earnings.
Even though external growth does not constitute a signifi cant part of its current strategy, in the future, Natixis may consider external growth or partnership opportunities from time to time. Even though Natixis plans to perform in-depth reviews of companies that it will acquire or joint ventures into which it will enter, it is generally not feasible for these reviews to be comprehensive in all respects. As a result, Natixis may have to assume liabilities unforeseen initially. Similarly, the results of the acquired company or joint venture may prove disappointing
Natixis’ capacity to carry out its operations could be affected by the fi nancial soundness of other fi nancial institutions and market participants. Financial institutions are closely interconnected as a result, notably, of their trading, clearing, counterparty and fi nancing operations. The default of a sector participant, or even simple rumors or questions concerning one or more fi nancial institutions or the fi nance industry more generally, have lead to a widespread contraction in liquidity in the market and in the future could lead to additional losses or defaults. Natixis is exposed to several fi nancial counterparties such as investment service providers, commercial or investment banks, mutual funds and hedge funds, as well as other institutional clients, with which it concludes transactions in the usual manner, thus exposing Natixis to a risk of insolvency if a group of Natixis’ counterparties or customers should fail to meet their commitments. This risk would be aggravated if the assets held as collateral by Natixis were unable to be sold or if their price was unable to cover all of Natixis’ exposure relating to loans or derivatives in default.
Inadequate management of these issues could also give rise to additional legal risk for Natixis and cause an increase in the number of legal proceedings and the amount of damages claimed against Natixis, or expose Natixis to sanctions from the regulatory authorities (please refer to section 5.8 “Legal risks” of the Management report, and in particular, the paragraph on “Legal and arbitration procedures” for further details).
In certain of Natixis’ businesses, a prolonged fall in asset prices could threaten the level of activity or reduce liquidity in the market concerned. This situation would expose Natixis to signifi cant losses if it was unable to rapidly close out its potentially loss-making positions. This is particularly true in relation to assets that are intrinsically illiquid. Certain assets that are not traded on a stock exchange or on a regulated market, such as derivatives traded between banks, are generally valued with the assistance of models rather than on the basis of market prices. Given the diffi culty in monitoring changes in prices of these assets, Natixis could suffer unforeseen losses.
The data included in the Management Report have been restated to take into account the following: a in Natixis’ financial statements, Caceis has been deconsolidated as of March 31, 2009, the remaining shares held by Natixis have been reclassified as available-for-sale assets and 50% of the first-quarter accounting income has been included in consolidated earnings.
In the division’s Private Equity business line, Natixis opened exclusive talks with AXA Private Equity with a view to selling its proprietary Private Equity operations in France.
The rollout of the new strategic plan also led to the launch in the second half of 2009 of three key projects aimed at: a intensifying business relations between Natixis and Banque Populaire and Caisse d’Epargne; a increasing cross selling by setting up a commercial mechanism focused on client relationships and structured marketing processes; a optimizing the support functions, where the group hopes to achieve substantial efficiency gains.
Lastly, Natixis sought to strengthen its fi nancial structure in the fourth quarter by reorganizing its long-term treasury in conjunction with BPCE and pushing back its refi nancing maturities. Over 2009 as a whole, Natixis cut its risk-weighted assets by 20%, its total assets by 19% and its refi nancing requirements by 11%.
Natixis’ Net banking income (NBI), restated in accordance with the indications given in the previous chapter, was €3,678.5 million at December 31, 2009, up sharply compared with December 31, 2008 (+46%) thanks to a strong recovery in the second half of the year. The economic environment held up equity markets, where volatility was limited. Credit indices (such as Itraxx) held fi rm, while the spread on the Natixis CDS slightly widened. Lead interest rates still benefi t from liquidity fl ows, and have remained at all-time lows (0.35% for Eonia, 3.5% for 10-year French government bonds).
The NBI of the business lines, corresponding to the NBI of the Natixis company adjusted for the two previous scopes (GAPC and Corporate Center), was €5,330.0 million in 2009, down 15% year-on-year due to the signifi cantly negative contribution over the year of the Credit Portfolio Management (CPM) business of the Corporate and Investment Banking (CIB) division, contrasting with 2008, when substantial revenues were recorded in this business. Excluding CPM, the NBI of the business lines cleared the six-billion-euro mark in 2009, at €6,012.2 million, an increase of nearly 5% on a like-for-like basis compared with 2008. This positive change was attributable to: a a 13% increase of the NBI of the core business lines excluding CPM to reach €5,623.8 million; a the halving of the full-year NBI of the Financial Stakes division to €388.4 million.
The cost of risk was -€2,401.2 million in 2009 (see the analysis in Section 4.8 of the Management Report), including -€913.5 million attributable to GAPC.
The share of income from associates, mainly comprising the consolidation of 20% of the aggregate results of the Groupe BPCE regional banks, via the CCIs, fell by 12% to €425.3 million at December 31, 2009, due to the recognition of impairments on investments for a total of €77 million.
Gains or losses on other assets reversed a loss of €9.0 million in 2008, posting an underlying gain of €3.8 million in 2009.
Changes in value of goodwill declined in 2009 to a charge of only €9.2 million, compared with a charge of €72.5 million in 2008, due to the impairment, for a total of -€69 million, of the full amount of goodwill relative to the CIB businesses.
The underlying net loss before tax was €2,713.4 million in 2009, €589.6 million less than the loss recorded in 2008. Excluding the GAPC division, the underlying net profi t before tax was €192.6 million.
After taking into account minority interests for a total of €54.6 million, the underlying net income (group share) was -€1,547.4 million. Excluding GAPC, underlying net income (group share) was €916.0 million in 2009, up 3% compared with 2008.
Restructuring expenses after tax fell by 37% in 2009 to €152.9 million. This was attributable mainly to the reduction to just €47 million in the expense recognized with respect to the Job Adaptation Plan (PACEC) over the year, representing roughly one-third of the corresponding expense in 2008. Restructuring expenses also included other charges such as severance payments outside the Job Adaptation Plan and spending relating to the implementation of various reorganization projects such as the merging of the French Private Banking entities and the ramp-up of the retail securities services platform.
The net loss (group share) was €1,706.6 million in 2009, compared with a loss of €2,799.2 million in 2008. The second half of 2009 resulted in a net profi t (group share) of €1,015.6 million, clearing the one-billion-euro mark, after a loss of €2,722.3 recognized at end June 2009.
The Corporate and Investment Banking division’s NBI was €2,560.8 million in 2009, down 10% in current data compared with 2008 due to the strongly negative contribution of the Credit Portfolio Management (CPM) in 2009, unlike 2008, when signifi cant revenues were recorded. Excluding CPM, the CIB division business lines’ NBI was €3,243 million in 2009, up nearly 40% compared with 2008.
The Capital Markets recorded a 70% increase in NBI in 2009 on the back of robust trading revenues of Fixed Income in the fi rst half.
Origination nevertheless picked up slightly in the Debt and Finance businesses in the fourth quarter, after three lackluster quarters.
The division’s headcount stood at 4,566 FTEs at end December 2009, down 14% year-on-year. All businesses, from the front offi ces through to support functions, helped achieve this outcome.
The division’s gross operating income was down 21% yearon -year at €953.6 million. Adjusted for the CPM impact, it was €1,635.8 million.
The CIB division’s cost of risk increased signifi cantly to €1,385.5 million, compared with €652.8 million one year earlier. An additional provision of €748 million aimed at reinforcing overall risk coverage was recognized in the second quarter of 2009.
The NBI of the Corporate and Institutional Relations business line was up 12% in 2009 to €554.9 million.
The Corporate and Institutional Relations operations saw improvements in both interest margins and fees income, offsetting the ongoing decline in new facilities .
Over the year, net margins on average loans (drawn facilities) increased: they gained 18 basis points in 2009 for short-term facilities and 14 basis points for medium- and long-term facilities.
New facilities have been deliberately kept low at €4.7 billion, 24% less than in December 2008, although there was a considerable increase (+92 bp) in gross margins, which are more robust on lines of credit (+124 bp) than on loans (+44 bp).
In 2009, the group continued to resize its international presence, with the run-off management of the London and German portfolios, and the refocus of business at the New York office.
At a current dollar, NBI for the fi nancing business refl ected a 13% increase in net margins, partially attenuated by an 8% drop in average volumes. Origination was down 61%. Service commissions were down, but the business recorded substantial fee and commission income on restructuring deals.
Aviation financing was held up in 2009 by increased net margins compounded by higher volumes and more generous fee and commission income on individual deals.
a The NBI of the Structured Export Finance business accounted for 34% of the additional full-year growth at December 2009, thanks to higher margins (+34%), allied with a surge in service commissions to €10 million in 2009 and the strength of the Bank’s business in Asia.
a The NBI of the Financial Engineering business was up 3%. The low origination over the period resulted from a deliberate policy of prioritizing the restructuring of existing lines.
The Hong Kong branch made its fi rst contribution to the business’ result.
Aggregate NBI for the Capital Markets business was €1,749 million at end December 2009, reversing severe losses in equity, interest rates and credit derivatives in 2008.
Fixed Income, Credit, Foreign Exchange and Commodities 2009 was a record year thanks to the exceptionally high margins recorded in the fi rst half.
Revenues in interest rate derivatives advanced strongly. High margins and substantial trading revenues were recorded in the fi rst half. Revenues slowed for this business in the second part of the year.
The Credit business posted excellent results thanks to the performances on the primary and secondary markets.
In 2009, revenues derived from Equity Derivatives and Arbitrage increased signifi cantly, mainly thanks to the end of trading losses following the reinforcement in hedging transactions in late 2008, and strong performances in Equity Finance.
2009 Corporate Solutions revenues were down due to the small number of new deals in equity derivatives. Most of the business line’s NBI comes from running margins on existing deals or from deal restructurings.
The Cash Equity business posted a 17% decline over the year, despite a marked recovery in the fi nal quarter. There was abundant primary market activity owing to exceptional capital increases in the banking sector, for which Natixis acted as lead or co-lead manager. However, brokers Natixis Securities and Bleichroder Inc. posted year-on-year declines in their earnings.
The Third-Party Asset management business within the Capital Markets business line enjoyed growth in 2009.
The Credit Portfolio Management and Other business line posted negative NBI of a substantial €754 million in 2009, compared with a positive €331 million in 2008. The fair value valuation of hedges suffered due to the narrowing of investment grade counterparty spreads. This trend lasted throughout 2009, after the widening of the spreads which generated a very positive contribution, in 2008. CPM hedges were nevertheless restructured in November.
At €505.2 billion at end December 2009, assets under management were up 14% at constant exchange rates, held up by a substantial market effect (+€52.5 billion) and a high level of net infl ows (+€11.4 billion).
Global rankings published recently confi rm Natixis’ strong position in the Asset Management sector: a NGAM ranked eighth in the Institutional Investors ranking of the top 100 European asset management companies; a David Herro of Harris Associates was named “International Stock Fund Manager of the Decade” by Morningstar. The
Oakmark Fund topped the rankings in the blue chip category for its performance over one year; a the Loomis Sayles Multisector Bonds Fund team was named “Fixed Income Fund Manager of the Year”; a Dan Fuss of Loomis Sayles was a finalist for Morningstar’s “Manager of the Decade” prize in the Fixed Income category;
The Insurance business took advantage of the year-end rally in the fi nancial markets to reconstitute its available reserves. Life insurance volumes advanced to €33 billion, benefi ting from robust infl ows and a positive market effect. Sales remained strong in the other businesses.
a Insurance NBI was down 13%, hit by the volatility of the financial markets, although it rebounded in the final quarter.
The division’s charges were down 4%, making for an aggregate negative impact of €41.7 million over the year, with particular efforts made in asset management (-7.5% in constant euros).
The product mix at end December confi rmed the dominance of fi xed-income and money market products (40% of assets under management, compared with 39% in 2008). Insurance accounted for 28.4% of assets under management at end December. The proportion of assets invested in equity products and mutual funds (OPCVM) nevertheless increased by 1.6 points year-on-year, balancing a 1.4-point reduction in money market volumes.
Alternative and structured 24% (+2.4pt) Bonds 21% (+1.6pt) Equities and diversified mutual funds (OPCVM)
a The breakdown of assets under management in Europe in 2009 reveals a higher proportion of insurance products (+1.3 points). The proportion of equity products also increased by 1.3 points over the year and represented 8.3% of assets under management at year’s end. By contrast, the weight of money-market products fell by 0.8 points over the year.
Assets under management in North America increased by 23.7% or US$51 billion to US$264.9 billion at end December 2009, with regard to end December 2008, thanks in large part to a signifi cant market effect (+US$47.6 billion).
a Net inflows were US$5.3 billion, driven mainly by Loomis (+US$10.1 billion).
FINANCIAL DATA6 Management Report a The market effect was a positive US$47.6 billion in 2009, chiefly benefiting Loomis (US$26.2 billion) and Harris Associates (US$13.1 billion).
Life insurance revenues increased by 14% over the year, thanks in large part to the strength of Natixis Life and ABP Vie, compared to a growth of 12% in the broader market.
Funds under management in Private Banking ended the year at €14.6 billion, and were virtually unchanged (-€36 million) in the fourth quarter.
Robust sales for the SFS division a Sales of consumer finance, employee-benefits planning, securities services and payments products remained strong over the year: j consumer finance enjoyed very robust sales, amidst an unprecedented decline in the market, thanks to ongoing work to promote the offering in network banks; j employee-benefits planning gained traction from social CESU service vouchers (three million vouchers issued), while maintaining its determined sales efforts (new contracts, development of PERCO collective retirement plans and other special products); j the securities services business won two calls for tender, demonstrating the competitiveness of its offer; j lastly, electronic payment systems, within the payments business, maintained its pace of growth.
The SFS division’s expenses were €612.1 million, down 1% compared with December 2008, the decline in securities services expenses being neutralized by an increase in expenses in the consumer fi nance business.
Recruitments in consumer finance offset the efforts made in the securities services business. The overall headcount was virtually unchanged at 3,130 FTEs.
The SFS division’s gross operating income was €228.7 million, down 28% year-on-year.
Income before tax was €181.8 million in 2009, down 40% yearon -year.
The plan also includes changes to the pricing scale, which will allow a better balance to be achieved in insurance policies over a two-year period.
Europe continued to dominate (83% of full-year revenues, of which 31% for France), although the stability of the business at constant scope was ensured by countries outside Europe, whose share of revenues increased by 2 points.
The combined ratio in Credit Insurance, which includes operating expenses and external acquisition costs as well as claims, followed the same path: it increased to 130% in 2009, compared with 104.3% in 2008.
The 2009 International factoring NBI fell by 1.9% year-on-year, hit by the slowdown in client operations.
The NBI of the Services business lines increased by 1%. Restated for change in the scope of consolidation and exchange rates, it was down 2%.
Total expenses reached €653.1 million, an increase of 4.8% year-on-year. Restated for change in the scope of consolidation and exchange rates, expenses increased by 3.2%, despite a much larger increase in claims management costs (+18.6%) attributable to the severity of the downturn.
Over the full year, Private Equity NBI was a negative €42.5 million, compared with a positive €80.3 million at end 2008: a net capital gains on divestments made over the year were down sharply at €96.3 million, compared with €268.7 million in 2008 (-64%); a the stock of unrealized capital gains contracted by €28.1 million, compared with a contraction of €69.7 million in 2008 (-60%); a net provisions were €121.7 million, €20.3 million less than in 2008 (-14%); a portfolio income and other commissions were €41 million, close to the level of €44.6 million recorded in 2008.
The loss before tax was €102.6 million, compared with income of €13.1 million in 2008.
Value adjustments and changes in the scope of consolidation reduced the contribution by €11.7 million in 2009 (-€43.4 million in 2008). At the time of the initial consolidation of the CCIs by Natixis, unrealized capital gains made by the two networks on part of their investment portfolios were treated as capital, limiting recognition of goodwill. The effective realization of these capital gains by the two networks in 2009 generated revenues recognized under net banking income that Natixis cannot recognize twice. These revenues have therefore been deducted (after tax) from the share of net income of associates line.
Despite the economic environment depressed by the economic and fi nancial crisis, the Banques Populaires enjoyed dynamic business, especially in the second half, leading to improvements on most intermediate aggregates.
The Banques Populaires strengthened their positions with active customers, and the number of business customers increased by 7% in 2009.
Customer deposits increased across all markets. For retail customers, most of this growth went into demand deposits and Livret A savings accounts, largely offsetting the decline in volumes in term deposits. By contrast, for businesses, the growth stemmed from higher volumes in deposits (+28%).
Loan volumes also increased across all markets (+2.5% over the year). Despite a challenging environment in the fi rst half, the Banques Populaires managed to make up for lost ground in loan origination, particularly in the fi nal quarter.
NBI increased by 7% under the combined impact of improved refi nancing conditions and the increase in customer volumes.
Customer fee and commission income was stable. Financial commissions were down 1.4%, due in large part to falls in commissions on securities. Service fees and commissions, accounting for 74% of total customer fee and commission income increased by 0.4%.
The cost of risk was up 39% or €208 million, due mainly to an increase in corporate defaults. It should be noted that doubtful loans as a percentage of total loans fell by 0.6 points to 4.9%.
In a challenging environment, the Caisses d’Epargne managed to improve their financial ratios and commercial positions.
NBI was up 10% in 2009 to €6,324 million. The increase gathered pace in the second half. The change was attributable mainly to stronger loan business than in 2008, as well as increased intermediation margins. Loan-related revenues offset a reduction in intra-group dividends received over the year.
Fee and commission income was stable at €2,907 million (-0.1%), despite the fall in commissions on Livret A savings accounts. Fee and commission NBI was held up by the favorable impact of increased banking penetration and an increase in other service commissions (Credit Insurance commissions).
Commissions on fi nancial savings products were penalized by muted business in mutual funds (OPCVM) and lower margins on life insurance.
The increase in management expenses was limited to 1.4% in 2009 thanks largely to a reduction in expenses relating to external services. This control was made possible by a strong reduction in IT and community charges.
The current cost of risk was -€2,401 million at December 31, 2009, of which -€2,139 million in individual risk and -€262 million in collective provisions. This compares with -€1,815 million in 2008, of which -€1,707 million in individual risk and -€108 million in collective provisions.
Natixis’ general risk management system is managed in accordance with banking regulations and governance guidelines laid down by the Groupe BPCE . The system is the responsibility of Natixis’ Chief Executive Offi cer and is built around three tiers of coordinated risk management: a internal controls are carried out by operational or functional departments or under the supervision of their management: the business lines are responsible for the risks they incur in their operations, until their extinction. Depending on the precise situation and operations, first-tier controls are conducted either by personnel themselves or by an ad hoc body, such as a middle office or an accounting control department, or, where appropriate, by both acting together; a second-tier controls (within the meaning of Article 6-a of CRBF regulation 97-02) are carried out by dedicated bodies acting independently from operational departments; a third-tier controls, also known as periodic controls, are carried out by the Internal Audit Department.
The Chief Executive Offi cer chairs a Committee that coordinates controls and includes all people involved in permanent controls, the head of IT Systems Security, the Chief Financial and Risk Offi cer and the General Secretary.
In keeping with commitments made to the Credit Institutions and Investment Firms Commission (CECEI), Natixis also has an additional control system based on: a the separation of risk and control functions within Natixis, including: j distinction between front and back offi ce functions, j the existence of fi rst-tier controls at an operational level, j a distinction between periodic and permanent controls; a the organization of the Company’s control functions to fit in with the group organization laid down by BPCE, the central institution shareholder.
The Risk Control Department recommends a risk policy to the executive management, consistent and in compliance with that of the Groupe BPCE .
Similarly, it makes proposals to the executive body concerning principles and rules in the following areas: a risk acceptance procedures;
It plays a key role within a system of Committees, including: a a global R isk Committee; a the Credit Committee; a the Market Risk Committee; a the Operational Risk Committee; a the New Products and New Business Committees; a the Breach Committees; a the Counterparty Watch List Committee.
Natixis has received permission from the French Banking Commission to use the internal rating based foundation approach (IRBF) to calculate its regulatory capital requirements for credit risk.