R TABLE 36: REGULATORY OWN FUNDS REQUIREMENTS FOR MARKET RISK Regulatory capital requirements at December 31, 2014, were as follows: (in millions of euros) Type and nature of risk
Natixis’ operational risk framework is applied within all of its entities and includes the following elements: Framework governance
Governance of the framework is the responsibility of Natixis’ Operational Risk Committee. This Committee is charged with defi ning the operational risk policy, ensuring its application within Natixis’ entities, reviewing serious operational risks, analyzing potential risks for the Company and monitoring risk-reduction measures.
The department’s role is to maintain and actively improve the system that identifi es, measures, monitors and controls the level of operational risk within all of Natixis’ entities. Its main tasks are defi ning methodologies, monitoring and reporting on operational risks, collecting and reporting incidents and building a risk culture within the Company.
For the fi rst two business lines, a matrix organization structured by business line and location (French and international) allows the entire Company to be managed globally.
The capital requirements for operational risk are calculated using the standard method for all of Natixis’ operational divisions.
A n a ly se d e sc é n a ri o s
KRI: Key risk indicator RMS: Risk management system RSA: Risk self-assessment HR: Human Resources P&P: Policies and Procedures
In addition to risk mapping, the Operational Risk Department analyzes Key Risk Indicators (KRI) across the whole of the Natixis scope in order to dynamically detect any changes in the operational risk profi le. The indicators cover seven categories of loss-generating events, as defi ned by the banking regulations, and are divided into two categories: one category measuring magnitudes across all of Natixis’ business lines, and the other measuring magnitudes specifi c to the business lines analyzed. These risk indicators are submitted to the Operational Risk Committee for validation, and the breaching of their thresholds may result in an action plan introduced on the Committee’s initiative.
Note that most operational risk incidents occur frequently and have a low impact per incident. In 2014 they accounted for more than 99% of the total incident volume and less than 10% of the fi nancial impacts. They are not included in the analysis below. The change in losses is based on a comparison of the 2010-2014 and 2009-2013 periods. Comparing fi ve-year periods reduces the distortions introduced by the late detection of incidents.
Over fi ve rolling years, the number of incidents by Basel category remained stable during the 2010-2014 period compared to the 2009-2013 period, and the incidents fell primarily into the operational category.
Over the 2010-2014 period, losses mainly related to operationaltype incidents, whose relative weight fell compared to the 2009-2013 period, losing ground to Customers, products and commercial practices and Employment and safety practices incidents, which rose between the two periods.
V The main risks analyzed are: R internal or external fraud; R drop in the value of securities; R liability risk (civil operating and professional liability, as well as managers’ and executive corporate offi cers’ civil liability); R damage to operating assets (buildings and contents, IT hardware and data), as well as loss of banking business due to such damage.
All the insurance policies mentioned above are purchased with deductibles (accepted retention level) in accordance with Natixis’ retention capacity.
Natixis’ Asset and Liability Management (ALM) risks are managed and monitored under the authority of the Asset/Liability Management Committee (ALM Committee) chaired by the Chief Executive Offi cer, and comprised of the members of the Senior Management Committee (in charge of Finance and Risks, Wholesale Banking and market solutions), the Head of Risk, the Head of the Single Treasury and Central Bank Collateral Management Pool, the Head of Financial Management and BPCE’s Head of Asset/Liability Management. The Committee meets every two months and is mainly responsible for: V defining and monitoring Natixis’ ALM; V approving the major principles in terms of structural balance sheet risks (structure, delegation of authority, fund transfer pricing, etc.) in compliance with the standard ALM framework set up by BPCE; V validating ALM assumptions and conventions underlying calculations for metrics used to manage and monitor ALM risks; V validating limits related to liquidity, IRBB (1) and structural FX indicators; V validating the overall refinancing policy in conjunction with BPCE ALM; V monitoring the main balance sheet aggregates and their developments, as well as supervising structural balance sheet risks and compliance with limits.
Given the nature of its activities, Natixis has few structural interest rate exposures and the vast majority of its loans are based on fl oating rates; consequently, Natixis’ IRBB is predominantly a straight-line basis risk, concentrated at the short end of the yield curve and arising from delays in the re-setting of interbank rates.
The aim of Natixis’ policy for managing overall interest rate risk is not to hold long-term structural interest rate positions in its bank book. With a few exceptions, fi xed-rate fi nancial assets and liabilities are returned for BOR via rate swaps and are mainly held in the Treasury portfolios which are subject to ongoing monitoring of interest rate risk.
This risk is measured in terms of the sensitivity of portfolios’ economic value by bp on the yield curve and by currency. For the largest portfolios it is controlled through limits approved and monitored by the Risk Department. As regards Treasury, which centralizes most positions, this mechanism is rounded out with interest rate and spread stress tests which are also governed by limits.
Given its nature and low hysteresis, overall interest rate risk is a minor risk for Natixis and calls for no particular remarks; the Basel 2 normative shock (+200 bp instantaneous shift in the yield curves) would lead to an absolute value variation in the portfolio’s economic value of €134 million at December 31, 2014, approximately 36% of which stemming from basis exposures at the short end of the yield curve.
Given the presence of risk-weighted assets in foreign currencies (mostly USD), the aim of Natixis’ structural foreign exchange risk policy is to immunize the Core Tier 1 ratio from exchange rate fl uctuations. To this end, it establishes a foreign exchange exposures by purchasing the foreign currency against the euro when it funds strategic long-term net investments in foreign entities, while nonstrategic net investments in local currencies are refi nanced with loans. Furthermore, net investments in local currencies are never hedged, in line with the “net investment hedge” principle as defi ned by IAS 39.
3 RISKS AND CAPITAL ADEQUACYOverall interest rate, liquidity, structural foreign exchange risks 3.8.3.2 Monitoring system
In light of Groupe BPCE’s commitments has given the supervisory authorities to ensure and guarantee the liquidity of the bank as lender of last resort, Natixis remains under the supervisory authority of BPCE’s.
■ GROSS WEIGHT OF THE BANK’S ON-BALANCE SHEET REFINANCING SOURCES, BY MAJOR CATEGORY OF VEHICLE AND BY CUSTOMER SEGMENT AT END-2014
By currency, Natixis’ refi nancing structure is primarily concentrated in EUR, and the USD logically “follows” the bank’s asset structure, although the USD proportion has risen for the past two years due to the excess cash denominated in dollars and the diversifi cation policy currently under way. In terms of breakdown by counterparty, the biggest percentage consists of fi nancial customers in the broad sense of the term (including emerging central banks), with which the bank has developed a longstanding and stable relationship for many years and for which the average term of deposits continued to climb in 2014. The customer deposits collection strategy (mainly via the current account offering) launched two years ago has begun to pay off, although it is still an alternative source of funding. Finally, the weight of net resources provided by the Group was as always linked to the BPCE/Natixis Single Treasury and Central Bank Collateral Management Pool and the Group policy, making BPCE the sole public issuer in the long-term segment.
3 RISKS AND CAPITAL ADEQUACYOverall interest rate, liquidity, structural foreign exchange risks Under its annual medium-term refi nancing program, Natixis raised €10.7 billion in resources with a term of more than one year and an average lifespan of four years. 38% of this program was achieved via structured private placements, with the rest predominantly provided by BPCE, which is now the sole public issuer in the medium-term segment in accordance with Group policy.
This ratio is calculated on a parent company (non-consolidated) basis and according to regulations must be above 100%. Natixis’ ratio was 125% at December 31, 2014.
In December 2010, the Basel Committee introduced two new liquidity risk measures. In January 2013, amendments were added to this preliminary framework, leading to changes in certain calculation rules and in the implementation timetable. The new rules on prudential requirements applicable to credit institutions and investment fi rms (CRR/CRD IV), enacted through Regulation (EU) No. 575/2013 of the European Parliament and of the Council of June 26, 2013, which transposed the Basel 3 rules in the European Union, subsequently reshaped the metrics used in liquidity ratios.
Ultimately, in a recent and not yet fully stabilized regulatory environment, the European regulation mainly requires observing and reporting on the following two liquidity ratios: V the Liquidity Coverage Ratio (LCR): pursuant to CRR, the LCR’s entry into force is scheduled for October 1, 2015; on this date, the liquidity ratio of June 2010 will cease to apply to French credit institutions; the minimum requirement has been initially set at 60% and will rise in equal annual steps to reach 100% on January 1, 2018; V the Net Stable Funding Ratio (NSFR): the Basel 3 Committee wants to see this report and any amendments thereto become a minimum requirement by January 1, 2018.
The LCR, calculated on consolidated basis, is a short-term liquidity ratio whose aim is to ensure that, in stress scenarios, banks hold enough liquid assets to cover their net cash outfl ows for a 30-day period, while the NSFR is a long-term structural liquidity ratio developed to strengthen the resilience of the banking sector by requiring banks to maintain a stable funding profi le and by limiting the mismatching of assets and liabilities to less than one year.
In the last two years, Natixis has worked in advance of the implementation timetable to adapt the oversight of its refi nancing needs in order to meet the new requirements. As a result, the bank has: V adopted stricter liquidity gap limits, leading to an extension of its liabilities; V continued to diversify its sources of financing, in particular through a cash management offer aimed at corporate customers and at reducing its market footprint; V implemented a strategy to replace excess liquidity captured through the management of the LCR.
V other level 1 liquid assets comprised mostly of debt securities or guarantees by high-quality sovereign issuers and central banks; V level 2 liquid securities, mainly consisting of covered bonds, corporate debt securities and equities listed on the markets and meeting certain conditions.
Revaluation adjustments on portfolios hedged against interest rate risk - - - - - - - - - -
In the event the Bank’s external credit rating is downgraded, it may be required to provide additional collateral to investors under agreements that include rating triggers.
In particular, in calculating the liquidity coverage ratio (LCR) according to the Delegated Act of October 10, 2014, the amounts of these additional cash outfl ows and additional surety requirements are measured as the payment the bank would have to make within 30 calendar days of its credit rating being downgraded by up to three notches.
The purpose of this appendix is to show the portion of assets pledged as a guarantee or collateral, and the corresponding liabilities, in accordance with the requirements of the Ministerial Order of November 19, 2014.
Debt securities issued besides own secured bonds or own asset-backed securities 0 4,990
The Compliance Department is in charge of the development of best practices for developing and managing compliance risk in relation to banking and fi nancial regulations. It also oversees IT Systems Security and business continuity. Reporting to the Corporate Secretary, the Compliance Department functions independently of the operational departments. It acts in accordance with the rules set out by Groupe BPCE. Its scope of action encompasses all of the business lines and support functions of Natixis, the subsidiaries and branches in France and abroad.
The department carries out second-level controls to ensure that transactions comply with banking and fi nancing regulations. It ensures that anomalies detected by the relevant business lines are remedied.
Training and awareness-raising initiatives are regularly conducted to ensure that employees can demonstrate adequate levels of knowledge and vigilance.
Finally, it reports to the members of the Senior Management Committee and the Board of Directors (Audit Committee and Risk Committee) on the main risks detected and on the implementation and effectiveness of the means used to address these risks.
The prevention of confl icts of interest is ensured through: V employee compliance with professional obligations; V the set-up and monitoring of information barriers; V incorporation into the risk maps of situations posing a risk of conflict of interest; V the verification of compensation policies; V the maintenance of a conflict of interest catalog; and
Confl ict of interest is managed through: V compliance with the conflict of interest prevention framework; V cooperation among the business lines, Compliance and management in order to identify and manage conflicts of interest arising at various levels; V close monitoring by Compliance with the help of transactional conflict detection tools for personal transactions (GEODE) and sensitive transactions (ODEON); V a conflict of interest management commission tasked with mediating unresolved conflicts of interest if needed.
Natixis has put in place a permanent and complete information barrier separating its asset management business within Natixis Asset Management from its other activities.
The provisions concerning confl ict of interest and the circulation of information are enforced through formalized procedures, regular training and follow-up controls using a risk-based approach.
The procedure is optional. There is no penalty imposed on employees who do not use this procedure. Employees who do use the procedure are entitled to strict confi dentiality, and no penalties or unequal treatment may be imposed against them.
To prevent and manage the risk of confl ict of interest arising in the provision of products and services between Natixis and a customer or between different customers, Natixis has implemented a series of Compliance processes. These processes, which are based on a comprehensive view of Natixis’ activities (proposed mandate, transaction or commitment vis-à-vis the customer), allow Compliance to keep the surveillance and prohibition lists as well as the lists of insiders up to date. This helps to prevent, detect and manage any confl ict of interest that arises.
Natixis has established a system that ensures that: V customers receive transparent information on how their complaints are being handled; V complaints are handled effectively; V corrective action is enforced to remedy any problems identified.
In 2014, Natixis complied with FATCA regulations in all of the countries in which it operates and for all of the activities concerned. All entities have been registered with the IRS (Internal Revenue Service) in order to be included in the list of compliant institutions in July 2014.
Natixis is committed to protecting the personal data of customers and employees alike. As such: V processes involving the use of personal data are conducted pursuant to the French Data Protection Act and, in most cases, are declared to the Commission Nationale de l’Informatique et des Libertés (CNIL – French Data Protection Authority) in France or to the competent authorities internationally; V Natixis takes the necessary measures to guarantee the confidentiality of such data and to keep the persons whose data are being processed informed so that they can fully exercise their rights of access and rectification.
R oversight of training/communications and procedures dealing with “personal data” matters.
3 RISKS AND CAPITAL ADEQUACYCompliance and reputational risk, Legal risks Processes and procedures are implemented to prevent, manage and supervise: V conflicts of interest,
Regarding terrorist fi nancing, funds, fi nancial assets or economic resources identifi ed as likely to benefi t persons or entities linked to terrorist-related activities are automatically frozen. Natixis must meet two obligations: V continuously checking that customers do not appear on the official lists of persons or entities suspected of participating in terrorist financing; V promptly introducing permanent control procedures to detect and freeze funds belonging to persons or entities appearing on these lists.
Furthermore, Iran and the “P5+1” group” were unable to conclude a defi nitive agreement with respect to Iran’s nuclear program and decided, on November 24, 2014, to extend the ongoing negotiations by seven months. The provisions of the Geneva interim agreement on November 2013, which resulted in the partial lifting of international sanctions, remain in force.
The ITSS-BC Department coordinates its activities on the basis of the risks identifi ed. To this end, a method has been developed (1) to identify, in relation to operational risk, the risk situations of concern to the business lines and (2) to link these to the IT assets that may be vulnerable. This cross-checking is used to produce a map of the major ITSS-BC risks and to devise the major action plans needed to mitigate these risks. The IT Department handles the technical aspects of implementing solutions devised to respond to the needs expressed.
In 2007, the judge accepted all aspects of the Harris Associates L.P. motion and rejected the motion of the plaintiffs, who appealed the decision. In 2008, a panel of judges from the Court of Appeals for the Seventh Circuit upheld the ruling of the District Court in favor of Harris Associates L.P. The plaintiffs then (i) requested a rehearing of the appeal by the entire Court of Appeals, which rejected their request, after which they (ii) sought relief from the United States Supreme Court, requesting that the denial of their appeal be overturned. The Supreme Court decided to hear the case.
Irving H. Picard, the court-appointed trustee for Bernard L. Madoff Investment Securities LLC (BMIS) fi led a complaint with the United States Bankruptcy Court for the Southern District of New York against several banking institutions, including a $400 million complaint against Natixis. Natixis denies the allegations made and intends to take all steps to defend its position and protect its rights. The case is still in progress.
In April 2012, MMR Investment Ltd fi led a joint claim against Natixis and the fi nancial intermediary, claiming not to have received the bonds, despite having paid the subscription price to the fi nancial intermediary. The claim mainly concerns the reimbursement of the subscription price of the bonds and, and as an alternative, the annulment of the subscription in particular on the grounds of defect in consent.
On June 21, 2013, a complaint was fi led against Natixis as well as other defendants before the Commercial Court of Paris by Hermès seeking to cancel the equity swaps on Hermès shares. The parties withdrew in 2014 following the agreement reached between Hermès and LVMH.
In 2013, EDA Selcodis fi led a complaint against Compagnie Européenne de Garanties et Cautions for the sudden termination of commercial relations following the refusal by Compagnie Européenne de Garanties et Cautions to grant EDA Selcodis a guarantee. The amounts claimed by EDA Selcodis total €32 million. In November 2013, EDA Selcodis fi led a joint complaint against Natixis, BRED and CEGC for unlawful agreements for which EDA Selcodis is requesting that each entity pay a sum of €32 million.
In June 2014, the administrators of the MPS Foundation (Fondazione Monte dei Paschi di Siena), an Italian foundation, fi led a claim against 11 banks, including Natixis, which granted it fi nancing in 2011 at the request of its previous offi cers, on the grounds that the fi nancing thus granted was in violation of its bylaws, which state that the MPS Foundation cannot hold debt exceeding 20% of its total balance-sheet. The damages claimed from all of the banks by the MPS Foundation totals €285 million.
In the fi rst quarter of 2014, Natixis Assurances acquired (as indicated in chapter [4.1.2]) 60% of the capital of BPCE Assurances, which sells non-life and liability insurance (motor, comprehensive home insurance, legal protection), personal risk insurance (personal accident) and parabanking insurance. However, as Natixis Assurances predominantly sells savings products, the main risks resulting from insurance policies are of a fi nancial nature: Risk of no longer being able to meet the minimum contractual rate of return in the event of a decline in interest rates
To deal with this risk, ABP Vie (a subsidiary of Natixis Assurances) has only sold policies without a minimum guaranteed return in recent years: more than 90% of the policies have a zero minimum guaranteed return. The minimum guaranteed return averages 0.19%.
Natixis Assurances has identifi ed the policyholders with a high risk of redemption, the differential criteria being age, tax seniority and amount of capital. For these policyholders, Natixis Assurances has hedged the risk of interest rate increases and has limited the scope covered by such policies to approximately a quarter of its assets. Against this backdrop, it has hedged its portfolio with cap policies and has also subscribed to variable-rate bonds.
The liability adequacy test carried out in accordance with IFRS 4 showed that insurance liabilities measured under local standards, for the year ended December 31, 2014, were greater than the fair value of these liabilities, taking into account the redemption option incorporated in the policies.
Financial risk in the event of an increase in interest rates
The sensitivity of equity to variations in interest rates is mitigated by the classifi cation of approximately €3.4 billion, fair value, in interestbearing securities in the category of held-to-maturity securities.
According to the sensitivity analysis carried out at end-December 2014: V a 10% drop in the stock market would have a negative impact of €20 million on equity (after taking into account the variation attributable to policyholders and taxation), i.e. 1.4% of equity; V a 10% drop in the real estate market would have a negative impact of €6.6 million on equity (after taking into account the variation attributable to policyholders and taxation), i.e. 0.4% of equity.
3 RISKS AND CAPITAL ADEQUACYOther risks V Reserve risk: for each inventory, the technical and reinsurance department conducts an actuarial assessment of the reserves for claims to be paid (those already known and claims yet to be filed). The assessment is based on methods that are widely recognized by the profession and required by the regulator; V Catastrophe risk: catastrophe risk is the exposure to an event of significant magnitude generating a multitude of claims (storm, risk of civil liability, etc.). More often than not there is little possibility of pooling this risk on a national scale, or the risk is severe enough to threaten the company’s solvency. This risk is therefore reinsured either through the government in the event of a natural disaster or an attack, for example, or through private reinsurers, specifically in the event of a storm or a civil liability claim, or through reinsurance pools.
(1) The instantaneous loss ratio is a weekly indicator that reproduces the change in the loss ratio. It is monitored for each region and each country and is reported on weekly by Coface, particularly so that underwriters can monitor the change in their portfolio and detect any deterioration in order to introduce corrective actions as early as possible.
R POLICIES SIGNED EXCLUDING TRANSACTIONS ON BEHALF OF THE STATE/ALL GUARANTEED PRODUCTS
Tranches – Total Buyer Outstandings Outstandings in millions of euros Number of limits Number of buyers Outstanding
Coface has implemented an investment policy that incorporates the management of fi nancial risk through the defi nition of its strategic allocation, regulations governing insurance companies and constraints related to the management of its liabilities. Management of fi nancial risks is thus based on a rigorous system of standards and controls which is regularly reviewed: V interest rate risk and credit risk: the majority of Coface’s allocations are in fixed-income products which guarantee it recurring and stable revenue. The overall maximum sensitivity (1) of the bond portfolio has been deliberately capped at 4 and stood at 3 at December 31, 2014. Coface is not exposed to Greek or Portuguese sovereign debt. Coface has limited exposure to Italian, Spanish and Irish sovereign debt as part of a defined-risk budget; V exchange rate risk: the majority of Coface’s investment instruments are denominated in euros. Subsidiaries and branches using other currencies must observe the same principles of congruence. In 2014, systematic foreign exchange hedges, through swaps or forward foreign exchange instruments, were arranged in the portfolio containing all of Coface’s European entities, to hedge bond investments denominated in USD, GBP and AUD; V equity risk: the exposure is capped at less than 10% of the portfolio and is concentrated in the euro zone, in connection with its core business. At December 31, 2014, listed equities represented 7.4% of the investment portfolio and underwent partial, discretionary hedging, through the acquisition of put options on indices, to mitigate any external shocks; V counterparty risk: the maximum exposure to any given counterparty is set at 5% of the assets under management, with exceptional exemptions for short-term exposures. More than 80% of the directly held bonds are Investment Grade and therefore have a median rating (2) of higher than BBB-; V liquidity risk: more than 59% of the bond portfolio was due to mature in less than 3 years at December 31, 2014. The vast majority of the portfolio is listed on OECD markets and carries a liquidity risk which is currently considered as weak.
(2) Second lowest rating in the event of three available ratings from the three international rating agencies; if one of the ratings is only provided for two of the agencies, the lower rating will be considered, if a rating is available from one agency alone, this rating will be considered.
In 2014, CEGC participated in an exercise organized by the ACPR in preparation for the entry into force of the Solvency 2 regulation. The aim of the exercise was to submit part of the new regulatory reports in XBRL format and to submit an ORSA report presenting the main results of CEGC’s internal risk assessment.
These regulated commitments or provisions amounted to nearly €1.2 billion at December 31, 2014 (up 11.0% compared to the end of 2013). This increase was in line with fi scal year 2013, driven mainly by mortgage guarantees for retail customers.
The increase in commitments in the real estate development segment is related to the provisions for high-severity claims at business line level. In a diffi cult environment, the real estate development activity saw a rise in losses in 2014. The loss ratio for the last fi ve years stayed below 35%, however, for an activity that represents only 2% of CEGC’s total business.
Each year, reinsurance hedging needs are defi ned based on changes in activity and in the risk observed in the portfolio.
Reinsurer default risk is governed by counterparty concentration and rating limits. CEGC’s reinsurance program is underwritten by 15 reinsurers with a minimum rating of A on the S&P scale.
3 RISKS AND CAPITAL ADEQUACYSensitive exposures in accordance with the recommendations of the Financial Stability Forum 3.11 Sensitive exposures in accordance with the recommendations of the Financial Stability Forum
Natixis was exposed to the following risks at December 31, 2014.
Net exposure at 12.31.2014 AAA AA A BBB BB B CCC C
Available-for-sale asset portfolio - - - - - - - - - - - -
3 RISKS AND CAPITAL ADEQUACYSensitive exposures in accordance with the recommendations of the Financial Stability Forum CMBS
At December 31, 2014, exposures to sovereign risk in countries receiving fi nancial aid were as follows: (in millions of euros)
In accordance with European regulation 809/2004 relating to information contained in prospectuses, the fi nancial statements for the year ended December 31, 2012, that were published in the 2012 registration document fi led with the AMF on March 19, 2013, are incorporated for reference into this registration document.
Since 2013, the earnings of the Natixis business lines have been presented in accordance with Basel 3 regulations.
Capital is allocated to Natixis business lines on the basis of 9% of their Basel 3 average risk-weighted assets.
Capital allocation specifi c to the insurance businesses is based on the Basel 3 accounting treatment for investments in insurance companies, as stated in the CRD4 and CRR (“Danish compromise”). From 2014, capital allocated to CEGC is adjusted to refl ect its exclusion from the “Danish compromise”. It is now based on the structure’s risk-weighted assets, with the assumption of its inclusion in the franchises.
Deeply subordinated notes are classifi ed as equity instruments, while interest expense on these instruments is not recognized in the income statement.
ROE and ROTE for Natixis and the business lines are calculated as follows: V the result used to determine Natixis’ ROE is net income (group share), from which DSN interest expense is deducted, net of tax effects as recognized in equity. The equity used is average annual shareholders’ equity (group share) under IFRS, after distribution of dividends, eliminating unrealized or deferred gains and losses recognized in equity and excluding DSNs; V as from December 31, 2013, the calculation of business line ROE is based on normative equity, plus goodwill and intangible fixed assets related to the business line. Pro forma calculations were performed on these 2013 data; V Natixis’ ROTE is determined using, as the denominator, the average book value after distribution of dividends, excluding average hybrid debt, average intangible fixed assets, and average goodwill, including goodwill recognized on companies accounted for by the equity method. The numerator comprises net income (group share) minus interest paid on DSNs net of tax.
It expanded its expertise in providing support to companies and client coverage, which saw it play a leading role in emblematic deals such as Arkema’s takeover of Bostik. It consolidated its expertise in the primary equities markets, ranked as the No. 2 bookrunner in terms of the number of deals conducted in France in 2014 (source: Bloomberg – underwriter ranking). It carried out large-scale, high value-added structured fi nancing transactions in the aviation, export, infrastructure, energy and commodities sectors, strategic and acquisition funding, and real estate fi nance. It was ranked No. 2 bookrunner in the French syndicated loan market in 2014 (source: Thomson Reuters); No. 9 MLA in project fi nance in the EMEA region; No. 10 MLA in the Americas and No. 11 global MLA in 2014 (source: Project Finance International); No. 2 bookrunner in LBO fi nancing in France and No. 11 in the EMEA region in 2014 (source: Thomson Reuters).
In the capital markets, Natixis adapted its strategy to better meet its customers’ needs, particularly in the cash equities and equity derivatives businesses, where it enjoyed considerable commercial success. It also maintained solid sales momentum in fi xed income deals, despite unsupportive yield conditions, and consolidated its franchise in these markets. Some of its top rankings included: No. 1 bookrunner on the French EUR primary bond market (source: Dealogic); No. 1 bookrunner on the EUR primary covered bond market in 2014 (source: Dealogic); No. 4 bookrunner on the EUR primary bond market for fi nancial institutions in 2014 (source: Dealogic – Covered Bonds, Senior Unsecured, Subordinated, Liability Management and ABS/MBS in euros).
Natixis developed its cross-expertise research to provide customers with cross-disciplinary expertise based on cross-analyses. It centered one of its biggest research teams in France on six areas of expertise: economic research, equities, credit, investment strategies, commodities, and fi xed income & forex.
Natixis also carried out structure-building projects to improve its sales development capacities and meet its customers’ needs. These projects included the roll-out of a single Customer Relationship Management (CRM) application and the creation of a department in charge of improving the customer referencing process.
Natixis further developed its international platforms in 2014. The Americas Platform continued its geographic expansion strategy by increasing its presence in Chile, Columbia, Peru, Mexico, Canada and the United States. It posted robust results in all business lines and broadened its range of products and services. In the Asia-Pacifi c region, Natixis enjoyed noteworthy commercial success, enhanced its distribution platform in Tokyo and set up a fi nancing team in Sydney specializing in project and infrastructure fi nance. Finally, the EMEA Platform’s business was highlighted by the substantial development of capital markets activities in London, the launch of the fi rst bond issues in Turkey and the roll-out of Islamic Finance in the Middle East.
Private Banking maintained solid sales momentum in 2014 in its individual, business owner and senior executive customer segments, with infl ows of almost €1.4 billion.
2014 saw the substantial development of sales cooperation with the Banque Populaire banks and Caisses d’Epargne, including the establishment of a nationwide commercial relations charter which started off with the signing of Banque Populaire Loire et Lyonnais.
With €5.79 billion in assets under management and 800 active IWMAs, Sélection 1818 launched a new website combining all its services in a single location in an effort to optimize its commercial relationship with its partners. In 2014 Sélection 1818 also took fi rst place in the 21st Supplier Awards (Palmarès des fournisseurs) organized by Gestion de Fortune magazine, ranking 3,200 independent wealth management advisers.
4 OVERVIEW OF THE FISCAL YEARManagement report at December 31, 2014 In personal insurance, 2014 saw the rapid development of the Assurément#2016 project, launched at the end of 2013 with the aim of rolling out a life insurance and personal protection insurance offering in the Caisse d’Epargne network starting in 2016. With a budget of more than €55 million and an average headcount of nearly 90 employees, this project has already shaped the product offering, the distribution architecture, the basic principles of the contractual conditions and guidelines for supporting the roll-out of the project in the Caisse d’Epargne network.
Finally, during the negotiations conducted by Groupe BPCE with CNP to established a renewed partnership as from January 1, 2016, the key conditions of an agreement were set forth in the second half of 2014, to be signed in the fi rst quarter of 2015: new life and personal protection insurance business in the Caisse d’Epargne network will be internalized via Natixis Assurances and the parties’ interests in the life insurance portfolio currently insured by CNP will be aligned via a cross-reinsurance mechanism, including in particular reinsurance with a quota-share of 10% by Natixis Assurances. In payment protection insurance, Natixis Assurances will become 34% co-insurer of all guarantees distributed by the BPCE networks, with CNP acting as lead insurer.
In preparing for Solvency 2 (“S2”), the business line continued its work on Pillar III and prospective risk assessment: with the integration of dedicated reporting tools and the adaptation of information systems and processes, the S2 prudential reports were prepared as at December 31, 2013 during the trial run conducted in September 2014.
This preparatory work carried out by the business line demonstrated the Bank’s satisfactory coverage of the capital adequacy margin under Solvency 2. However, in the interest of optimizing items eligible for the future capital adequacy margin, the business line’s holding company issued perpetual subordinated notes amounting to €251 million admitted for trading on the Euronext Paris regulated market.
In terms of activity, 2014 was a year of satisfactory sales momentum in all insurance segments, with a substantial rise in life insurance infl ows and personal protection insurance premiums (including payment protection insurance) and property and casualty insurance premiums.
In the Financial Investments division, the success of Coface’s partial IPO at the end of H1 2014 resulted in the placement of 92 million shares (58.7% of the company’s share capital). Natixis now holds 41.2% of the share capital and Coface is still fully consolidated in its accounts. Coface demonstrated robust risk management in 2014, showing a signifi cant improvement in its loss ratio by 3.4 points to 50.4%.
In the Corporate Center, Natixis sold its entire stake in Lazard on June 26, 2014.
The development of the divisions went hand-in-hand with strict financial management. RWA (including GAPC in 2013) were down 4% year-on-year to €115.1 billion at December 31, 2014. Wholesale Banking’s RWA dropped by 3% to €72.2 billion at December 31, 2014.
Excluding the impact of the revaluation of own senior debt, net revenues climbed 4% over the year to €7,713 million, refl ecting solid momentum in the core businesses (+4%).
Wholesale Banking’s net revenues picked up by 3.7%, restated for the main non-recurring items (2) despite limited capital and liquidity resources.
The fi nancing activities improved their net revenues (+6.2% for Commercial Banking and +5.4% for Structured Financing), driven by a robust level of business.
Net revenues recorded by Specialized Financial Services were up 1%, driven by Specialized Financing business with Group networks. Financial Services were resilient, with virtually stable net revenues despite the persistently unsupportive securities environment.
4 OVERVIEW OF THE FISCAL YEARManagement report at December 31, 2014 The Corporate Center’s net revenues recorded a capital gain of €99 million in Q2 2014 from the disposal of the stake in Lazard.
The Operational Effi ciency Program generated total savings of €343 million at end-2014 (of which €103 million in respect of fi scal year 2014).
Natixis’ headcount was down 1% year-on-year to 15,365 FTEs at end-2014, with the decreased headcounts in the Wholesale Banking and Financial Investment divisions more than offsetting the increase in the Investment Solutions division.
Recurring gross operating income (excluding GAPC) came out at €2,114 million in 2014, up 4% on 2013. Excluding the impact of the revaluation of own senior debt, gross operating income (excl. GAPC) was up 5%.
The cost/income ratio (excluding GAPC) improved by 0.2 point to 71.8%. Excluding the impact of the revaluation of own senior debt, it improved by 0.2 point year-on-year to 69.9%.
The provision for credit losses was €300 million in 2014 (excluding GAPC activities), representing a sharp decline of 22% compared to 2013, which refl ected a slight improvement in economic conditions and solid management of the quality of transactions introduced to the portfolio.
Change in the value of goodwill posted a loss of -€51 million in 2014 due to impairment losses on Corporate Data Solutions goodwill.
Pre-tax profit (excluding GAPC) came to €1,881 million in 2014 versus €1,663 million in 2013 (+13%), including an impact of -€208 million from the revaluation of own senior debt versus -€195 million in 2013. Excluding this impact, pre-tax profi t climbed 12% from 2013 to 2014.
The recurring tax expense (excluding GAPC) came to -€639 million in 2014. The effective tax rate was 33.8% at December 31, 2014.
After incorporating -€76 million in minority interests, recurring net income group share (excluding GAPC) amounted to €1,166 million.
In fi rst-half 2014, GAPC’s net loss was limited to -€28 million. The structure was closed at June 30, 2014.
The Tier 1 ratio rose by 1 point over the full year to 11.4% at December 31, 2014 versus 10.4% at December 31, 2013.
V Revenues from Global Energy & Commodities increased by 6%; V The contribution of Aircraft, Infrastructure & Export activities fell by 4%; V The Real Estate Financing business lines saw a 21% rise in net revenues, including a significant upturn in the European and US markets alike; V Acquisition & Strategic Finance net revenues climbed 7%.
Revenues from Fixed Income, Credit, Forex, Commodities and the Treasury platform fell 19.9% compared to 2013. Restated for non-recurring items included in the above-mentioned net revenues, they came out at €982 million in 2014 versus €1,005 million in 2013, representing a 2.3% decrease.
V Revenues from Fixed Income activities (yields, credit, forex) fell 5% due to the lower contribution from structured repos and income from emerging countries. Fixed Income and Forex activities expanded over the year.
V On the downside, Equity Linked Finance activities lost €81 million due to an adverse scope effect of €21 million and the lack of sizeable deals in 2014.
In 2014, Wholesale Banking’s expenses rose 3.2% to €1,712 million at constant exchange rates. Restated for non-recurring income of €15 million related to the overhaul of the pension plan in the United States recognized in 2013, payroll costs were up 0.9% for a 1.9% drop in the average headcount. IT costs fell by 2%. Other operating expenses climbed 3%.
The cost/income ratio was 61.6% in 2014, down 3.8 points on 2013. Restated for non-recurring items included in the above-mentioned net revenues, the C/I ratio was 59.0% in 2014 versus 59.3% in 2013 (+0.3 point).
4 OVERVIEW OF THE FISCAL YEARManagement report at December 31, 2014 4.1.4.2 Investment Solutions
The provision for credit losses recorded a sharp rise of €5.0 million, of which €3.3 million for Asset Management and €1.7 million for Private Banking.
At the end of December 2014, assets under management stood at €735.5 billion, up €63.4 billion (+9.4%) compared to December 31, 2013 at constant exchange rates, driven by a signifi cant market effect (+€33.3 billion) in Europe and the US and by net infl ows (€27.7 billion), at their highest level since 2006.
■ CHANGE IN ASSETS UNDER MANAGEMENT OVER THE YEAR (in billions of euros)
Net infl ows of €27.7 billion, i.e. €32.5 billion excluding money market products, underscored the business line’s momentum particularly in the United States. At end-2014, net infl ows attained their highest level since 2006: V the United States posted inflows of €29.9 billion, driven in large part by Loomis in bond products and Harris in equity vehicles;
V Europe recorded outflows of -€2.8 billion (-€9.8 billion in 2013), including -€5.5 billion in money market products. Excluding money market products, inflows amounted to €2.7 billion, including €1.2 billion for NAM, €1.9 billion for H2O, €0.8 billion for Mirova and €0.6 billion for Ossiam; V net inflows generated by Private Equity firms exceeded €600 million.
At €666.7 billion, average assets under management were up 11.1% in 2014 versus 2013 (at constant exchange rates).
Expenses climbed 14.1% on 2013 to €1,567.4 million (+13.9% at constant exchange rates), driven by business development in the United States and in distribution entities.
Given the lack of major fi nancial or weather-related events over the year, net revenues totaled €527.9 million, up 15.7% compared to 2013, resulting from: V the ongoing normalization of Life Insurance net revenues (+€10.3 million, +6.9%) amid historically low interest rates; V additional strong growth in net revenues (+€26.8 million, +22.1%) generated by personal protection insurance, and particularly payment protection insurance, driven by significant growth in premiums without a major deviation in claims; V robust growth in net revenues from Property and Casualty Insurance (+€33.9 million, +18.3%) through organic portfolio growth and well-managed recurring claims.
Assets under management gained 10% over the year to €24.7 billion thanks to robust infl ows and, to a lesser extent, a positive market effect of €859 million.
In 2014, Private Banking net revenues rose 3.2% (+€3.9 million) to €128.1 million compared to 2013, on the back of a 10% rise in fees on AuM and a dynamic trend in structured products. On the downside, incentive fees fell by €3.3 million on 2013, which boasted a very high comparison base.
Sureties and fi nancial guarantees earned revenues of €280 million in a persistently active loan guarantee market.
Specialized Financing revenues picked up 1%. Sureties and Financial Guarantees showed an 11% improvement in net revenues, with a drop in claims and an increase in fi nancial income. Consumer Finance outstandings climbed 9% and revenues 4%.
Coface’s IPO was a rousing success, demonstrating the confi dence investors have in a company now refocused on its historic business. Following the IPO, Natixis’ stake in Coface now stands at only 41.2% and remains fully consolidated in Natixis’ accounts.
Net revenues amounted to €687 million in 2014, down 2.7% on 2013 but up 4.5% at constant scope and exchange rates (withdrawal from institutional operations in Brazil and interest expense on hybrid debt).
Net revenues fell 17% on 2013 to €83 million, due in large part to the problems encountered by Kompass in balancing its operating income with a 23% decline in revenues. Restated for disposals and non-recurring items, total net revenues generated by the business were down 2%.
2014 net revenues were -€13 million versus -€19 million in 2013, due to a non-recurring impact of -€10.9 million linked to a haircut on seven funds, set to be sold in 2015.
RWA came down 25% year-on-year to €606 million at December 31, 2014.
4 OVERVIEW OF THE FISCAL YEARManagement report at December 31, 2014 4.1.4.5 Corporate Center
Net revenues generated by the Corporate Center came out at -€184 million in 2014 versus -€202 million in 2013.
The capital gain on the June 2014 disposal of the stake in Lazard contributed +€99 million.
Excluding this item and the impact of the revaluation of the issuer spread, net revenues would have been -€76 million in 2014 versus -€8 million in 2013. This fi gure notably includes transactions related to Natixis’ asset and liability management.
These factors forced both fi nancial and non-fi nancial clients to extend the duration of their investments.
Continuing on the trend that began in the fi rst half, the international business was strong, in particular with US investors, who are still interested in the main European issuers, which are offering better yields than their domestic counterparts.
In 2014 the ECB reviewed the balance sheets of the 130 biggest European banks, which it has directly supervised since November. The stress tests that were also carried out produced no unpleasant surprises. Bank credit spreads narrowed over the year.
In these market conditions, Natixis raised a total of €10.7 billion in funding on the markets under its medium- and long-term refi nancing program (versus €14.9 billion in 2013). As the only long-term issuer in the public issues segment, BPCE provided Natixis with fi nancing for a total euro-equivalent amount of €6.3 billion.
(in millions of euros or euro equivalents) EMTN BMTN USMTN Bond issues
With the exception of the items referred to in the above-mentioned note, there have been no material changes in the group’s fi nancial and commercial position since the end of the fi scal year for which the fi nancial statements have been audited.
Excluding the depreciation, amortization and write-down of fi xed assets, operating expenses decreased by €2 million. Taking into account the depreciation, amortization and write-down of fi xed assets, operating expenses decreased by €17 million.
The third resolution that will be put before the General Shareholders’ Meeting on May 19, 2015 proposes to: V allocate €65,265,847.15 to the legal reserve; V allocate a dividend of €1,059,612,591.14, broken down in a ordinary dividend of €623,301,524.20 and a special dividend of €436,311,066.94; V allocate the remaining distributable profits to retained earnings, i.e. €680,822,201.03.
Gain or loss on other assets 17 17 0 142 0 160 160
Change in value of goodwill (14) (14) 0 0 0 (14) (14)
5.1 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 194 5.2 STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS 321
5 FINANCIAL DATAConsolidated fi nancial statements and notes 5.1 Consolidated financial statements and notes
Accrual accounts and other liabilities 6.9 39,189 28,970 o/w institutional operations 4 5
The information taken at December 31, 2013 has not been restated for the effect of the fi rst application of IFRS 10 and 11, which was not material. The impacts of both standards are presented in Note 3.
5 FINANCIAL DATAConsolidated fi nancial statements and notes CONSOLIDATED INCOME STATEMENT
Net gains or losses on fi nancial instruments at fair value through profi t and loss 7.3 1,479 1,643
Net gains or losses on available-for-sale fi nancial assets 7.4 543 458
Net income/(loss) for the period 1,214 883 o/w: V Attributable to equity holders of the parent 1,138 884
Share in gains or losses of associates recorded directly in equity 13 830
Equity as of December 31, 2012 after appropriation of income - pro forma 4,938 5,307 0 1,262 (17) 9,068
Issuance and redemption of deeply subordinated notes and preference shares (273) 0
Equity as of December 31, 2013 before appropriation of income 4,960 4,374 0 989 (19) 6,877
(3) Of which -€675 million concerning the change in capital of the Local Savings Companies and the Sociétés de Caution Mutuelle. Under the proposed sale of the Cooperative Investment Certifi cates (CCIs) to the Caisses d’Epargne and Banque Populaire banks, the Local Savings Companies and Sociétés de Caution Mutuelle were deconsolidated on January 1, 2013.
The dilution - without loss of control - of 58.65% of Coface generated a capital loss of €135 million deducted from shareholders’ equity, group share and the recognition of non-controlling interests in the amount of €1,062 million.
+/- Net charge to other provisions (including insurance companies’ technical reserves) 2,191 2,365
= Total non-cash items included in pre-tax profi t and other adjustments 4,022 2,490
+/- Decrease/(increase) in non-fi nancial assets or liabilities (214) 3,252 - Income taxes paid (402) (632)
(1) Decrease/(increase) in fi nancial assets and investments in associates, including in particular: V fl ows related to assets held to maturity (+€374 million); V fl ows related to investments in consolidated affi liates (-€313 million) from the purchase of BPCE Assurances (-€288 million) and NexGen (-€15 million), the acquisition of additional shares of Dorval (-€4 million) and the exercise of a put on non-controlling interests (-€6 million); V fl ows related to non-consolidated affi liates (+€383 million) mainly from the disposal of the stake in Lazard for +€258 million.
NOTE 1 BASIS OF PRESENTATION 204 1.1 IFRS standards and IFRIC interpretations applied by the Group 204 1.2 Presentation of the consolidated fi nancial statements 205 1.3 Year-end 205 1.4 Notes to the consolidated fi nancial statements 205
NOTE 2 CONSOLIDATION METHODS AND PRINCIPLES 206 2.1 Consolidation scope 206 2.2 The notion of control and consolidation methods 206 2.3 Change in consolidation scope 207 2.4 Treatment of put options granted to minority shareholders 207 2.5 Business combinations and goodwill 207 2.6 Subsidiaries held for sale 210 2.7 Standardization of individual data and treatment of intra-group transactions 210 2.8 Consolidation of insurance companies 210 2.9 Institutional operations 211 2.10 Currency conversion of the statements of foreign subsidiaries and branches 211
NOTE 3 CONSOLIDATION SCOPE 212 3.1 Key events 212 3.2 Changes in consolidation scope since January 1, 2014 214 3.3 Interests in subsidiaries 214 3.4 Interests in partnerships and associates 216
NOTE 4 STRUCTURED ENTITIES 218 4.1 Scope of structured entities with which Natixis has dealings 218 4.2 Interests held in non-consolidated structured entities 220 4.3 Non-consolidated structured entities in which Natixis is involved only as a sponsor 221 4.4 Financial support to structured entities 221
NOTE 6 NOTES TO THE BALANCE SHEET 241 6.1 Financial assets and liabilities designated at fair value through profi t and loss 241 6.2 Hedging derivatives 244 6.3 Offsetting fi nancial assets and liabilities 245 6.4 Available-for-sale fi nancial assets 248 6.5 Loans and receivables 248 6.6 Held-to-maturity fi nancial assets 250 6.7 Other information relating to fi nancial assets 250 6.8 Deferred tax assets and liabilities 258 6.9 Accrual accounts, other assets and liabilities 259
NOTE 12 CAPITAL MANAGEMENT 300 12.1 Share capital 300 12.2 Capital Management 300 12.3 Equity instruments issued 300
NOTE 13 COMMITMENTS 301 13.1 Guarantee commitments 301 13.2 Financing commitments 301
NOTE 16 OPERATIONS BY COUNTRY 308 16.1 Entity operations by country at December 31, 2014 309 16.2 Net revenues, pre-tax profi t, taxes and headcount by country 314
The following standards, interpretations and amendments are applicable for the fi rst time from January 1, 2014: V the amendment to IAS 32 “Financial Instruments: Presentation– Offsetting Financial Assets and Financial Liabilities”. This amendment clarifies the disclosure conditions for offsetting financial instruments in the balance sheet. The application of this amendment led Natixis to amend the offsetting rules applicable to repurchase agreements handled through clearing houses. Under these new rules, Natixis would have offset €13.9 billion in place of an offset amount of €2.1 billion at December 31, 2013 according to the previous rules; V the new standards on consolidation, IFRS 10, “Consolidated Financial Statements,” IFRS 11, “Joint Arrangements,” and IFRS 12 “Disclosure of Interest in Other Entities,” published by the IASB on May 12, 2011 and adopted by the European Commission on December 11, 2012.
IFRS 11 replaces IAS 31, “Interests in Joint Ventures,” and SIC 13, “Jointly Controlled Entities– Non-Monetary Contributions by Venturers”. It bases the recording of partnerships on their substance, thereby making it necessary to analyze the rights and obligations of the joint agreement. The application of this standard did not have a material impact on Natixis’ consolidation scope. Only EIG, previously consolidated in accordance with the proportional consolidation method, has been consolidated according to the equity method since January 1, 2014.
IFRS 12 combines and enhances the information to be disclosed for subsidiaries, partnerships, affiliates and structured entities.
V the amendments to IFRS 10 “Consolidated Financial Statements”, IFRS 12 “Disclosure of Interests in Other Entities”, and IAS 27 “Separate Financial Statements” published by the IASB on October 31, 2012 and adopted by the European Commission on November 20, 2013. IFRS 10 was amended to define the business model of investment entities and calls for such entities to recognize their subsidiaries (barring exceptions) at fair value through profit and loss, rather than consolidating them. IFRS 12 was amended to introduce specific disclosure obligations in the Notes regarding investment entities and their subsidiaries. Finally, the amendment to IAS 27R removes the option of investment entities to measure investments in certain subsidiaries either at cost or at fair value in their separate financial statements. These amendments had no impact on Natixis’ financial statements at December 31, 2014.
The consolidated fi nancial statements are based on the individual fi nancial statements as at December 31, 2014, of the entities included in Natixis’ consolidation scope.
5 FINANCIAL DATAConsolidated fi nancial statements and notes NOTE 2 CONSOLIDATION METHODS AND PRINCIPLES
Natixis’ consolidated fi nancial statements include the fi nancial statements of Natixis and its main subsidiaries.
Materiality is determined based on specifi c thresholds for each of the Group’s business lines and on a qualitative assessment of the relevance of each entity’s contribution to the consolidated fi nancial statements of Natixis.
The consolidation scope includes all material entities over which Natixis exercises exclusive control, joint control or signifi cant infl uence. IFRS stipulate three types of control: exclusive control, joint control and signifi cant infl uence. Determining the type of control that exists is not limited to identifying the voting rights held, but also involves an analysis of the economic and legal relations existing between the various entities being analyzed.
The scope of Natixis’ consolidated entities is provided in Note 17 of the fi nancial statements.
IAS 27 defi nes control as the power to govern the operational and fi nancial policies of an entity to obtain benefi t from its activities. This defi nition applied to all entities, with the exception of special purpose entities, for which the SIC 12 interpretation established control indicators. Control is determined on the basis of voting rights under IAS 27, whereas SIC 12 attached high importance to the right to the majority of economic benefi ts and to the right to exposure to the majority of risks relating to the special purpose entity.
V Joint ventures are partnerships in which the parties exercising joint control over the company have rights to that company’s net assets. They are consolidated using the equity method. Consolidation by the equity method involves replacing the book value of the investments in the owner’s account by Natixis’ interest in the shareholders’ equity and income of the owned entity. Investments are recognized at this reassessed value on the asset side of the consolidated balance sheet in “Investments in associates”. The
The granting of put options to minority shareholders which do not transfer to Natixis the risks and benefi ts associated with the underlying shares prior to exercise, result in the recognition of a liability for the estimated present value of the option’s exercise price. The corresponding receivable is booked to equity, deducted in part from non-controlling interests in the amount of their carrying value, with the rest deducted from consolidated reserves (group share). Subsequent changes in the liability related to adjustments to the exercise price of the put option are recorded in consolidated reserves (group share).
The following accounting treatment is applied to business combinations giving rise to control: V IFRS 3 before revision if they are prior to January 1, 2010, except for those that occurred before January 1, 2004. On the initial application date of the IFRS, Natixis chose the option offered by IFRS 1 “First-Time Adoption” to not retroactively restate business combinations previous to January 1, 2004 pursuant to IFRS 3; V The revised IFRS 3 (IFRS 3R) if they occur after January 1, 2010. Indeed, IFRS 3R can be applied prospectively to business combinations where the acquisition date is the same or later than the adoption date of IFRS 3R.
5 FINANCIAL DATAConsolidated fi nancial statements and notes In accordance with IFRS 3 (pre-or post-revision), business combinations are recorded using the purchase method. Under the purchase method, the identifi able assets and liabilities of the acquired entity are measured at their fair value at the valuation date.
Principles adopted for measurement and recognition of transactions resulting in the creation of Natixis in 2006: The assets contributed by the CNCE to Natixis fall into two different categories: V shares in the Wholesale Banking and services subsidiaries; V a portion of the cooperative investment certificates (CCIs) conferring entitlement to the share capital of the Caisses d’Epargne.
Other goodwill: In 2014, goodwill decreased by €41.8 million, excluding translation gains of €164.6 million and write-down losses of €50.8 million.
Impairment tests: All items of goodwill are impaired, based on the value in use of the cash-generating units (CGUs) to which they have been allocated, except for the “Private Equity” CGU, which is evaluated using the restated net asset value, as all of the assets of the entities included in that CGU are recognized at fair value. The former Corporate Data Solution (CDS) CGU was also evaluated using a company-by-company approach in light of disposal plans concerning several entities of the CGU and limiting the synergies of the remaining group. For the Coface CGU, a listed entity since June 2014, value in use was supplemented by other approaches using market data (valuations by market multiples and brokers’ target prices).
The following assumptions have been used: V estimated future cash flows: forecast data drawn from mediumterm plans established in conjunction with the core business lines as part of Natixis’ strategic plan and resulting from the new business plan for Coface; V perpetual growth rate: 2.5%; V discount rate: use of a specific rate for each CGU: 9.9% for Investment Solutions (10% in 2013), 11.2% for Specialized Financial Services (unchanged from 2013), 11% for Coface (11.2% in 2013) and 11.1% for Wholesale Banking (11.2% in 2013). For the former CDS CGU, a company-by-company approach was taken in 2014 (12.3% in 2013).
Similarly, the sensitivity of future business-plan cash fl ows to variations in key assumptions does not signifi cantly affect the recoverable amount of CGUs, with the exception of the recoverable amount of the former CDS CGU: V for Investment Solutions, a 10% decline in the “equity” markets and one point decline in the EONIA and 10-year long-term interest rates would have a negative impact of -5% on the recoverable amount of the CGU and would not lead to any impairment being recorded; V for Specialized Financial Services, a one point drop in the threemonth EURIBOR applied to Factoring and recreating a “2008-2009” (drop in production and increased cost of risk) type crisis on Leasing would have a -8% negative impact on the recoverable amount of the CGS and would have no impact on terms of impairment; V for Coface, the primary sensitivity vector is the loss ratio. A level of 48% for this ratio (gross reinsurance), reflecting the deterioration of economic conditions, was applied to conduct the CGU’s impairment test at December 31, 2014. A one-point increase in this loss ratio would have no significant impact on the recoverable amount of the CGU. Only an increase of 13 points of the “loss ratio” would lead to impairment of the CGU being recorded; V for the former CDS CGU, the primary factor in sensitivity is the degree of the business plans’ achievement. A -5% variation in said plans would cause the CGU recoverable amount to fall by about €6 million and additional impairment to be found for an equivalent amount.
At December 31, 2013, Natixis maintained the full consolidation of the Natixis HO CHI MINH branch. It combined, in accordance with the provisions of IFRS 5 “Non-current assets held for sale and discontinued operations”, the assets and liabilities of these entities under two separate balance sheet line items: “Non-current assets held for sale” and “Liabilities associated with non-current assets held for sale”. At December 31, 2014, as the transfer had not yet occurred, the presentation of the entity under IFRS 5 was discontinued.
The impact on the balance sheet and income statement from internal transactions carried out between fully-consolidated entities is eliminated. The internal results of the entities consolidated using the equity method are eliminated to the extent of Natixis’ share of interest in the joint venture or associate.
The following rules are applied to consolidate the fi nancial statements of insurance subsidiaries: V income and expenses are classified by type in accordance with banking accounting principles and not as a function of expense; V balance sheet items are included under the corresponding line items of the financial statements presented in the banking format.
Technical reserves for insurance policies meet the commitments of insurance companies with regard to policyholders and contract benefi ciaries.
Deferred profi t-sharing assets and liabilities arise mainly on: V the revaluation of “available-for-sale financial assets” and “financial assets at fair value through profit and loss”; V the revaluation of real estate assets held to cover insurance policies; V the restatement in the consolidated financial statements of the capital reserve and the liquidity risk reserve.
Application of the shadow accounting mechanism resulted in the recognition of a deferred profi t-sharing liability on December 31, 2014 as on December 31, 2013.
In accordance with Article 41 of the Amended Finance Act for 1997 (No. 97-1239 of December 29, 2007), amended by Article 121 of the Amended Finance Act for 2008 (No. 2008-1443 of December 30, 2008) and the agreement signed with the French State on September 21, 2011, Natixis manages certain public procedures on behalf of the French State, mainly consisting of loans and gifts to foreign States conferred in the framework of Public Development Aid (“Emerging Country Reserve” loans and gifts to the “Fund for Private-Sector Aid and Studies”) and the stabilization of interest rates for export credit guaranteed by Coface. The related transactions, some of which may be guaranteed by the State, are recognized separately in the fi nancial statements. The State and other related creditors have a specifi c right over the assets and liabilities allocated to these institutional operations. The bank’s assets and liabilities relative to these operations are identifi ed on the balance sheet under each of the headings concerned with these operations.
Revenues derived from the management of public procedures represent the fees paid by the French State. The methods and principles of this compensation are set in a fi nancial agreement between the State and Coface. This agreement, signed on February 24, 2012, covers a four-year period (2012-2015) and replaces the previous fi nancial agreement signed in 2008.
€62.5 million was booked for 2014, versus €60 million in 2013.
Premiums paid by customers, claims covered and amounts recovered as a result of these guarantees are paid over to the State. Accordingly, they are not included in the Group’s consolidated fi nancial statements. Expenses relating to public procedures management are mainly incurred in delivering State guarantees, managing claims, and recovering debts covered by the guarantees.
5 FINANCIAL DATAConsolidated fi nancial statements and notes NOTE 3 CONSOLIDATION SCOPE
In the fi rst quarter of 2014, in line with Groupe BPCE’s strategy for developing its bancassurance model, Natixis – via Natixis Assurances – bought BPCE’s 60% stake in BPCE Assurances.
As BPCE Assurances is an entity controlled by Natixis and an entity controlled by BPCE, the transaction is deemed to have been carried out under joint control. Under this method, the acquired entity’s assets and liabilities were taken at their carrying value and the difference between the price paid and Natixis’ share in the carrying values of BPCE Assurances’ assets and liabilities was deducted from equity. The use of this method is equivalent to deducting goodwill from consolidated equity.
In light of Natixis Assurances’ ownership interest in BPCE Assurances (60%), Natixis exercises control over Natixis Assurances pursuant to IFRS 10 and has fully consolidated this entity.
At December 31, 2014 and after the capital increase reserved for employees and the implementation of a liquidity contract, Natixis held a 41.26% stake in Coface. In view of its percentage holding and its role in Coface’s governance as the leading shareholder, Natixis had control of and fully consolidated Coface in accordance with IFRS 10.
The application of IFRS 11 on January 1, 2014 led to the consolidation of the EDF Investment Group (EIG) entity using the equity method. Until then, the entity had been consolidated in accordance with the proportional consolidation method.
The following table summarizes the main impacts of the fi rst application of IFRS 10 and IFRS 11 on the fi nancial statements for fi scal year 2013.
(in millions of euros) 12.31.2013 reported IFRS 10 impacts IFRS 11 impacts 12.31. 2013 restated
Revaluation adjustments on portfolios hedged against interest rate risk 0 0 0 0
Revaluation adjustments on portfolios hedged against interest rate risk 163 0 0 163
Net depreciation, amortization and impairment of property, plant and equipment and intangible assets (250) 0 0 (250)
5 FINANCIAL DATAConsolidated fi nancial statements and notes 3.2 Changes in consolidation scope since
The main changes in scope since January 1, 2014 were as follows: 3.2.1 Wholesale Banking
V Consolidation of Contango Trading S.A. (commodities brokerage); V In accordance with IFRS 10 at January 1, 2014, consolidation of the Versailles and Bleachers securitization conduits; V Consolidation of Natixis Structured Issuance (issuing structure); V Consolidation of Trez Commercial Finance Limited Partnership (securitization of mortgage loans).
V Merger of ICMNA Australia Holding under Natixis Financial Products, with no impact on the consolidated financial statements.
V Under the “New Frontier” plan, Natixis Assurances bought out the 60% stake held by Groupe BPCE in BPCE Assurances and in its 50%-owned service subsidiary: BPCE Assurances Production Services (BPCE APS). Both entities were fully consolidated.
V Consolidation of the following companies: R NGAM Uruguay; R NAM US; R AEW value investors Asia II GP Limited; R Seeyond Multi Asset Allocation Fund; R NGAM Mexico.
V Newly consolidated entity following the acquisition of 100% of the following entities by NexGen in Canada: R NexGen Financial Corporation; R NexGen Financial Limited Partnership; R NexGen Limited; R NexGen Investment Corporation; R NexGen Ontario Inc.
Deconsolidated entities V Deconsolidation at January 1, 2014 of the following entities after they fell below the consolidation threshold: R Natixis Private Equity International Singapore; R Natixis venture selection; R NEM invest SAS.
* Comprehensive income includes net income/(loss) and gains and losses recorded directly in equity.
3.3.2 Impact of changes to percentage holdings in subsidiaries remaining controlled at December 31, 2014
The buying by Natixis of minority shareholders’ investments - - - -
The following table shows the impact of such loss of control on net income (excluding structured entities): (in millions of euros)
P&L Net gains or losses on other assets o/w gains or losses from the revaluation of the investment retained
5 FINANCIAL DATAConsolidated fi nancial statements and notes In 2013, following the changes made to the governance of BP Développement, Natixis lost control of the entity. Because this investment had been retained, its revaluation at fair value, on the date that control was lost, did not generate gains or losses to be recognized in income.
Natixis is subject to liquidity risk supervision, which requires it to establish a liquidity pool limiting the use of the assets constituting it (see section 3.8.4 “Liquidity Risk and Refi nancing Strategy “of Chapter [3] “Risk Management and Capital Adequacy” of the registration document).
Furthermore, some entities are subject to local regulations concerning liquidity and solvency.
Natixis Financement is a stakeholder in partnerships in the form of sociétés en participation (SEPs), with a lending institution (Banque Populaire bank or Caisse d’Epargne). The purpose of these SEPs is to ensure the origination, distribution, marketing, management and out-of-court collection of: V personal repayment loans granted by the Banque Populaire or Caisse d’Epargne network; V revolving credit products granted by Natixis Financement to the customers on the Banque Populaire or Caisse d’Epargne network.
Natixis does not have interests in joint ventures having a material impact on Natixis’ consolidated fi nancial statements.
* The percentage of ownership and voting rights at 31.12.2013 are 4.49% each.
Summarized fi nancial data pertaining to material associates and joint ventures under signifi cant infl uence are presented below.
See below the reconciliation table for fi nancial information with the book value under the equity method.
Value of the investment in the associate 532 3.4.3 Nature and scope of restrictions
3.4.4 Risks associated with interests in joint ventures and associates held by entities
Further to the application of the equity method, there is no unrecognized share of losses over the period in joint ventures or associates.
5 FINANCIAL DATAConsolidated fi nancial statements and notes NOTE 4 STRUCTURED ENTITIES
The structured entities with which Natixis has dealings can be categorized into four groups: entities created within the context of structured fi nancing, asset management funds, securitization vehicles and entities established for other types of transactions.
In accordance with IFRS 10, consolidation analyses for structured entities are performed taking into account all of the criteria referred to in paragraph 2.2.1.
Auto-pilot mechanisms are generally in place for these structures. In the case of leasing contracts, the transaction must be structured such that its income always amounts to zero. As such, only default events would be capable of modifying the structured entity’s income, by leading to the disposal of the rights to the assets once the guarantees have been exercised. Natixis has the power to have the assets sold in the event of a default event, acting either alone or via the bank syndicate agent. This right equates to a protective right because Natixis would never benefi t from the income from the sale beyond the amount of the balance due under the loan agreement. As such, Natixis does not have power over such entities’ relevant activities.
Securitization transactions are generally constituted in the form of structured entities used to segregate assets or derivatives representative of credit risks.
V Natixis controls a certain number of vehicles whose purpose is to manage operating property and non-operating property. The relevant activity is mainly the management of property as sources of returns for shareholders. Natixis generally has power over these activities. Such SPEs are consolidated once Natixis has a material interest and if they are material to the consolidated financial statements of Natixis.
V Natixis Coficiné has relationships with: R structured entities created by producers to host a fi lm production. Cofi ciné is involved only as a lender. It has no stake in the entity, which is wholly owned by the producer. Cofi ciné does not participate in managing the entity, as activity falls within the remit of the producer. Cofi ciné, and therefore Natixis, has no power over the relevant activities of these structured entities and has no control under IFRS 10; R Film Industry Financing companies (SOFICA). Natixis holds a nonmaterial stake in these SOFICAs and receives management fees at market rates consistent with the services rendered. Natixis does not hold any other interests in these structured entities. Therefore, they are not subject to consolidation under IFRS 10.
For Asset management entities, guarantees given correspond to capital and/or performance guarantees given to mutual funds (see Note 4.1.3).
4.3 Non-consolidated structured entities in which Natixis is involved only as a sponsor
With respect to information that must be disclosed under IFRS 12, Natixis sponsors a structured entity when the two following indicators are both met: Natixis is involved in the creation and structuring of the structured entity; and Natixis contributes to the entity’s success by transferring assets to it or by managing the structured entity’s relevant activities.
As stated in Note 2, Natixis has elected to use the option provided by IAS 28 and IAS 31, i.e., not to account for interests held by Private Equity subsidiaries using the equity method if they are designated as “Financial assets at fair value through profi t and loss”. In accordance with the fair value option amendment, Private Equity investments less than 20%-owned are also recognized as “Financial assets at fair value through profi t and loss”, since managing and measuring these investments at fair value is a well-established practice within Private Equity companies.
Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted on an active market, other than those designated as at fair value through profi t and loss or available-for-sale. This excludes assets for which the holder cannot recover the majority of the initial investment other than because of a credit deterioration, which should be classifi ed as available-forsale. The vast majority of loans granted by the Group are classifi ed in this category. Loans and receivables also include the fair value of the hedged component of assets classifi ed in this category (fair value hedges).
Financial diffi culties are determined by observing a number of criteria such as amounts past due for over 30 days or an at risk rating. The “restructuring” of a loan does not necessarily result in the counterparty being classifi ed in the Basel default category, as the fi nancial diffi culty is addressed before the counterparty is downgraded into the Basel default category.
For restructured loans either fully or partially converted into a substantially different asset (such as an equity instrument) or giving rise to a change of counterparty: V the new instruments are booked at fair value; V the difference between the book value of the derecognized loan (or portion of the loan) and the fair value of the assets received in exchange is entered as a loss under provision for credit losses; V any previous provision created on the loan is adjusted on the basis of the discounting of the new recoverable flows from the non-derecognized portion of the loan and is reversed in full if the loan is converted into new assets.
Available-for-sale fi nancial assets include non-derivative fi nancial assets that are not classifi ed as loans and receivables, held-tomaturity investments or fi nancial assets at fair value through profi t and loss. Assets in this category include Natixis’ investments in non-consolidated companies. Securities classifi ed in this category are initially recognized at their market value. At the reporting date, they are remeasured at their market value determined based on the market price for listed instruments.
The fair value of listed non-consolidated investments corresponds to their last listed price prior to the reporting date. The fair value of unlisted non-consolidated investments is obtained using the P/E (price/ earnings) ratio or DCF (discounted cash fl ow) valuation methods or share in (revalued on non-revalued) equity.
5 FINANCIAL DATAConsolidated fi nancial statements and notes V for investments in unlisted, non-consolidated companies: unrealized capital losses of over 20% on their face value for a period of more than 18 months, or significant changes in the technological, market, economic or legal environment having an unfavorable impact on the issuer, suggesting that the amount invested in the equity instrument may not be recoverable; V for shares in venture capital funds (FCPRs), net asset value alone is not enough to determine whether there is any evidence that the initial investment might not be recovered. This is because net asset value during the investment phase is reduced by start-up costs (structuring and brokerage fees, etc.). Accordingly, for investments of this type which are not quoted on an active market, the following impairment principles apply: R no impairment is recognized if, at the reporting date, the position and results of the fund are in line with the business plan,
IAS 17, which sets forth the accounting treatment of leases, gives fi ve examples of situations where substantially all of the risks and rewards incidental to ownership are transferred to the lessee: V the lease transfers ownership of the asset to the lessee by the end of the lease term; V the lessee has the option to purchase the asset at a price that is expected to be sufficiently below the fair value at the date the option becomes exercisable for it to be reasonably certain, at the inception of the lease, that the option will be exercised; V the lease term is for the major part of the economic life of the asset; V at the inception of the lease, the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset; V the leased assets are of such a specialized nature that only the lessee can use them without major modifications.
IAS 17 requires that non-guaranteed residual value be reviewed on a regular basis. If there has been a reduction in the estimated nonguaranteed residual value, the allocation of revenues over the lease term is revised (revised depreciation schedule) and any reduction in respect of amounts accrued is recognized immediately.
Finance lease contract revenues corresponding to interest are recognized in the income statement under “Interest and similar income”.
Provisions for fi nance leases are determined using the same method as that described for loans and receivables.
Where a group of fi nancial assets is found to be impaired, the impairment loss is calculated based on the expected losses arising on each exposure within the Group, in accordance with Basel provisions.
Specifi c case of embedded derivatives: An embedded derivative is a component of a host contract which causes some or all of the cash fl ows of that contract to change in response to changes in an underlying (interest rate, share price, exchange rate or other index).
Natixis uses plain vanilla interest rate swaps lending at fi xed rates to fi x future variable-rate borrowing costs.
The subsidiary Natixis Financial Products LLC documents overall hedging of its interest rate risk in accordance with fair value hedging rules. To account for these transactions, the subsidiary applies the carve-out provisions of IAS 39 as adopted by the European Union. The accounting treatment of derivative fi nancial instruments designated for accounting purposes as structural fair value hedges is similar to that applied to fair value hedging derivatives. Changes in the fair value of portfolios of hedged instruments are reported on a specifi c line of the balance sheet (“Revaluation adjustments on portfolios hedged against interest rate risk”), with a corresponding entry in income.
Prospective hedge effectiveness tests involve verifying that the fi nancial characteristics of the hedged item and the hedging instrument are virtually identical: value date, maturity date, notional amount, fi xed rate, and payment frequency.
Changes in the fair value of the derivatives are recognized as income for both the effective and ineffective portions.
Monetary assets and liabilities (mainly bonds and other fi xed-income securities) denominated in foreign currencies are translated into the functional currency at the spot rate prevailing at the reporting date. The resulting exchange gains and losses are recognized directly in income, or in equity for derivatives designated as cash fl ow hedges.
Non-monetary items denominated in foreign currencies and measured at fair value are translated at the prevailing exchange rate at the end of the reporting period. Gains or losses on a non-monetary item (e.g., equity instruments) denominated in foreign currency are recognized as income when the asset is classifi ed as “Financial assets at fair value through profi t and loss” and in equity when the asset is classifi ed as “available-for-sale fi nancial assets”, unless the fi nancial asset is designated as a hedged item in a fair value hedge, in which case foreign exchange gains and losses are recorded as income.
The main additional Funding Value Adjustment are as follows: V Bid/ask adjustment– Liquidity risk: This adjustment is the difference between the bid price and the ask price corresponding with the selling costs. It reflects the cost requested by a market player in respect of the risk of acquiring a position or of selling at a price proposed by another market player.
5 FINANCIAL DATAConsolidated fi nancial statements and notes V Adjustment for model uncertainty: This adjustment takes into account the imperfections of the valuation techniques used— in particular, the risk factors that are not considered, even when observable market inputs are available. This is the case where risks inherent to various instruments differ from those considered by the observable inputs used to value them.
V Adjustment for input uncertainty: Observing certain prices or inputs used in valuation techniques may be difficult or the price or input may be too regularly unavailable to determine the selling price. Under these circumstances, an adjustment may be necessary to reflect the probability that market participants might adopt different values for the same inputs when evaluating the financial instrument’s fair value.
V Value adjustment for counterparty risk (Credit Valuation Adjustment– CVA): This adjustment applies to valuations that do not account for the counterparty’s credit quality. It corresponds to the expected loss related to a counterparty’s default risk and aims to account for the fact that Natixis cannot recover all of the transactions’ market value.
On less liquid markets, other market information, primarily observable data, is used to validate the fair value of instruments.
Level 2 fair value comprises instruments other than those mentioned in Level 1 fair value and instruments measured using a valuation technique incorporating parameters that are either directly observable (prices) or indirectly observable (price derivatives) through to maturity. This mainly includes: Simple instruments: Most over-the-counter derivatives, swaps, forward rate agreements, caps, fl oors and plain vanilla options are traded in active markets, i.e. liquid markets in which trades occur regularly.
The products traded may be mono-underlying, multi-underlying or hybrid (e.g. fi xed income/equity) products.
The local volatility model treats volatility as a function of time and the price of the underlying. Its main property is that it considers the implied volatility of the option (derived from market data) relative to its exercise price.
The Hull & White models are simple pricing models for plain vanilla fi xed-income products and can be calibrated easily. Products valued using these models generally contain a Bermudan-type cancellation option (i.e. one that may be exercised at certain dates set at the beginning of the contract).
The main models used to value and manage currency products are local volatility and stochastic models, as well as the hybrid models combining an underlying currency model with two one-factor Hull & White models to understand fi xed-income factors.
Inputs relating to all such level 2 instruments were demonstrated to be observable and documented. From a methodology perspective, observability is based on four inseparable criteria: V inputs are derived from external sources (primarily a recognized contributor, for example); V they are updated periodically; V they are representative of recent transactions; V their characteristics are identical to the characteristics of the transaction. If necessary, a proxy may be used, provided that the relevance of such an arrangement is demonstrated and documented.
The fair value of instruments obtained using valuation models is adjusted to take account of liquidity risk (bid-ask), counterparty risk, internal credit risk (measurement of liability derivative positions), modeling risk and input risk.
Level 3 comprises instruments measured using unrecognized models and/or models based on non-observable market data, where they are liable to materially impact the valuation. This mainly includes: V unlisted shares whose fair value could not be determined using observable inputs; V private equity securities not listed on an active market, measured at fair value with models commonly used by market participants, in accordance with International Private Equity Valuation (IPEV) standards, but which are sensitive to market fluctuations and whose fair value determination necessarily involves a judgment call. In light of market practices, Natixis reviewed its position concerning the fair value level of securities held by the Private Equity business and reclassified them from Level 2 to Level 3 of the fair value hierarchy, with an impact of €1.1 billion on its balance sheet at December 31, 2013; V structured or representative of private investment portfolios, held by the insurance business line; V instruments with a deferred day-one margin; V shares of UCITS for which the fund has not published a recent NAV at the valuation date, or for which there is a lock-up period or any other constraint calling for a significant adjustment to available market prices (NAV, etc.) in respect of the low liquidity observed for such shares; V instruments carried at fair value on the balance sheet and for which data are no longer available due to a freeze in trading in the wake of the financial crisis, which were not reclassified within “Loans and receivables” pursuant to the amendment to IAS 39 and IFRS 7 published on October 13, 2008 (see below). When there is a significant drop in trading in a given market, a valuation model is used based on the only available relevant data.
As at December 31, 2014, instruments for which the recognition of day-one profi t/loss has been deferred included: V multi-underlying structured equity and index products; V synthetic financing; V options on funds (multi-asset and mutual funds); V structured interest rate products; V securitization swaps.
Securitization swaps Discounted cash fl ow expected based on the underlying portfolio’s early redemption assumption
Instruments affected by the financial crisis a) ABS CDOs with subprime exposure
The valuation model used to measure write-downs on CDS contracted with monoline insurers consists in applying a standard rate of recovery of 10% for unrealized capital losses on the underlying assets concerned (rate justifi ed by the low capitalization of monoline insurers given their risk exposures), except for a counterparty whose rate of recovery was deemed nil at December 31, 2014, and a probability of default calibrated to the credit risk associated with the credit enhancer.
5 FINANCIAL DATAConsolidated fi nancial statements and notes The current method for determining provisions for contracts with CDPCs (Credit Derivatives Product Companies) was refi ned by applying a transparency-based approach to the underlying assets, based on an estimate of exposure at the time of default, with the PD and LGD based on the tranche’s maturity. A stress factor of 1.2 was applied to the probabilities of default thus determined for the underlyings, based on a recovery rate of 27%. Counterparties are associated with a probability of default whenever the losses resulting from the calculation exceed the CDPC’s net available assets.
c) Other instruments not exposed to US housing risk measured by Natixis using a valuation model
The section below describes the underlying principles used to value assets resulting from securitization transactions for which no market prices could be identifi ed and which were therefore measured using valuation models: CLOs
If there is a quoted price that meets the criteria of IFRS 13, the quoted price is used.
On November 12, 2009, an arrangement was introduced by BPCE to protect assets of a portion of the former segregated GAPC hive-off portfolios with retroactive effect at July 1, 2009. With this guarantee mechanism, Natixis was able to free up a signifi cant portion of its equity allocated to segregated assets and to protect itself against the risk of loss from these portfolios subsequent to June 30, 2009. This protective arrangement is based on two mechanisms: V a sub-participation with the characteristics of a financial guarantee, covering 85% of the face value of assets recognized in “loans and receivables” and “available-for-sale financial assets”. Under this guarantee, Natixis is protected from the very first euro in default up to 85% of the default amount; V two Total Return Swaps (TRS), one in euros and one in US$, transferring to BPCE 85% of unrealized and realized gains and losses on the portfolio of instruments at fair value through profit and loss (cash and derivatives) since July 1, 2009. TRS are derivatives and are therefore carried at fair value on the balance sheet, with a matching entry to income. At the same time, Natixis purchases an option from BPCE which, if exercised, allows it to recover the net gains on this portfolio after a ten-year period in return for the payment of a premium estimated at €367 million. The premium is also recognized at fair value.
The amount of the premium paid in 2009 by Natixis in return for the fi nancial guarantee amounted to €1,183 million.
Since the unrealized capital losses or writedowns on the assets covered by the guarantee have already been recorded in income, the premium was not immediately taken to income or recognized on a straight-line basis.
V is a subsidiary acquired exclusively with a view to resale.
Assets and liabilities relating to discontinued operations are accounted for in the balance sheet in the same way as groups of assets held for sale. Gains or losses from these operations are presented on a separate line of the income statement and include the post-tax gain or loss resulting from operations discontinued before disposal and from the sale or valuation of assets or disposal groups held for sale at fair value less costs to sell.
Securities bought are not recognized but a receivable due from the assignee is recorded representing the funds lent. The amount disbursed in respect of the asset is recognized under “Securities acquired under repurchase agreements”.
Natixis booked a provision for restructuring in its fi nancial statements in respect of the workforce adaptation plan presented to employee representative bodies on December 2, 2013 and in respect of the winding up of GAPC for an amount of €60 million at December 31, 2014 versus €90.6 million at December 31, 2013.
5 FINANCIAL DATAConsolidated fi nancial statements and notes The plan includes the elimination of 659 positions without any forced departures, in two phases: V first phase: 528 positions involved and identified in detail. The characteristics of this first phase were presented to management and union bodies in 2013; V second phase: 131 positions involved and identified in detail. The characteristics of this second phase were presented to management and union bodies in 2014.
The plan relies on the conditions in the Employment agreement signed in 2013 by management and union bodies. It will involve early retirement, voluntary redundancy, requalifying training and transfers/promotions.
The amount of this provision is disclosed in Note 6.16.2 “Contingency reserves”, and in Note 7.6 “Operating expenses”.
The change over the fi scal year is presented in Note 6.17, “Changes in subordinated debt over the period”, and in Note 12, “Capital management”.
However, if an instrument is considered equity: V its compensation is treated as a dividend and therefore affects equity, as do the taxes related to this compensation; V if issued in foreign currencies, it is fixed at its historical value resulting from converting it to euros on the date it was initially classified under equity.
The units held by third party investors in dated funds, which are fully consolidated by Natixis, entitling the unit-holders to the repayment of a share of the fund’s net assets upon its liquidation, are classifi ed in liabilities on the consolidated balance sheet under “Accruals and other liabilities”. The share of third party investors in the fund’s profi ts is recorded under “Interest and similar expenses” on the consolidated income statement.
The receivables provided as security were maintained in Natixis’ consolidated balance sheet with their original classifi cation, since the criteria for derecognition defi ned by IAS 39 were not met. They were included in the “loans and receivables” line item of the table entitled “Financial assets provided as security against liabilities” presented in Note 6.7.3.
Natixis grants stock options to some of its employees. The options are exercisable over a period of three years after a lock-up period of four years. No performance conditions apply. In accordance with the provisions of IFRS 2, the options attributed after November 7, 2002 and not yet vested at the reporting date are measured at their fair value at the date they were granted to the employees. This fair value is determined using the Black & Scholes valuation method and recognized in payroll costs over the vesting period, with a corresponding entry in equity. The expense is revised at each reporting date and adjusted whenever subsequent information regarding the number of benefi ciaries alters the initial estimates of rights vested. The resulting adjustments affect the expense for the period and for subsequent periods.
In accordance with the principles set out in Directive 2013/36/EU, known as “CRD4”, and the Decree of November 3, 2014 and according to the criteria determined by the European Banking Authority (EBA) in its regulatory technical standard published on December 16, 2013 and approved by the European Commission in Commission Delegated Regulation (EU) No. 604/2014 of March 4, 2014, Natixis has set up a deferred variable compensation plan applicable to the so-called “regulated” categories of staff and to a certain number of employees not covered by the provisions of the Decree of November 3, 2014. Some plans are settled in Natixis shares, while others are settled in cash indexed to the Natixis share price.
Employee retention and performance plans settled in shares: Under IFRS 2 “Share-based payment”, employee bonus share awards give rise to an expense representing the fair value of the goods or services received at the grant date. This payroll expense is recognized against equity. The fair value of the services received is calculated by reference to the fair value of the shares at the grant date, less the present value of dividends forfeited by employees during the vesting period, taking into account the presence conditions.
The expense is recognized on a straight-line basis over the vesting period. The expense is adjusted over the vesting period to refl ect any losses of rights.
5 FINANCIAL DATAConsolidated fi nancial statements and notes Cash-settled employee retention and performance plans indexed to the value of the Natixis share: The accounting treatment applicable to cash-settled share-based payments is governed by IFRS 2 “Share-based payment”.
A contract obligating Natixis to buy its own shares creates a liability in the amount of the discounted acquisition price, regardless of how the derivative is classifi ed, with a corresponding entry in equity.
The tax expense for the year comprises: V tax payable by French companies at the rate of 38%, and by foreign companies and branches at the local rate. The French rate of 38% includes the additional contribution of 10.7% passed in December 2013 (French Finance Act for 2014) affecting the 2013 and 2014 fiscal years; V deferred taxes arising from temporary differences between the carrying amount of assets and liabilities and their tax basis, which are calculated using the balance sheet liability method.
The amended Finance Act of August 2012 introduced an additional contribution in the case of distribution of dividends in the form of cash fl ows. In accordance with IAS 12, the expense related to taxes on dividend payouts is recorded under the tax line for the period during which the payout decision was made. This amounted to €31.7 million for the 2013 fi scal year and €8.1 million for 2014.
Subsequently, fi nancial guarantees are stated at the higher of: V the amount initially recognized upon inception less, where appropriate, the amount of amortization recorded in line with the principles outlined in IAS 18 “Revenue”. This amortization represents the deferred recognition of the fees received over the period covered by the guarantee; V the value determined under IAS 37 “Provisions, contingent liabilities and contingent assets”, which is the amount that the entity would normally pay to settle the obligation or to transfer it to a third party.
However, given the predominant impact of operational risk on the fair value of the guarantee, guarantees granted to mutual funds are treated as fi nancial guarantees.
The specifi c treatment applied to the guarantee granted to Natixis by BPCE regarding former GAPC hive-off assets is disclosed in Note 5.7.
In preparing its fi nancial statements, Natixis is required to make certain estimates and assumptions based on available information that is likely to require expert judgment. These estimates and assumptions constitute sources of uncertainty which may affect the calculation of income and expenses in the income statement, the value of assets and liabilities in the balance sheet and/or certain disclosures in the notes to the fi nancial statements. The fi nancial crisis has led to greater use of accounting estimates. As a result, future results of certain operations may differ signifi cantly from the estimates used in the fi nancial statements at December 31, 2014.
Unlisted equity instruments classifi ed as available-for-sale fi nancial assets primarily consist of investments in non-consolidated companies. The fair value of investments in unlisted non-consolidated companies is obtained principally by using valuation methods based on multiples or DCF (discounted cash fl ow). Use of these methods requires certain choices and assumptions to be made in advance (in particular, projected expected future cash fl ows and discount rates).
5 FINANCIAL DATAConsolidated fi nancial statements and notes Value of cash-generating units (CGUs)
The fair value of loans not quoted on an active market is determined using the discounted cash fl ow method. The discount rate is based on an assessment of the rates used by the institution during the period for groups of loans with similar risk characteristics. Loans have been classifi ed into groups with similar risk characteristics based on statistical research enabling factors having an impact on credit spreads to be identifi ed. Natixis also relies on expert judgment to refi ne this segmentation.
In the event of a deferred profi t-sharing asset, a recoverability test is carried out to verify that liquidity requirements arising from an unfavorable economic environment do not force the sale of assets and generate unrealized losses. This recoverability test relies on projected future cash fl ows based on different economic assumptions about historical redemptions and infl ows (see Note 2.8).
At December 31, 2014, fi nancial assets at fair value primarily comprised securities and derivative instruments.
Derivative instruments not eligible for hedge accounting (b) 6.1.3 85,749 63,720
Loans and receivables at fair value through profi t and loss 6.1.1.1 and 6.1.1.2 5,858 4,279
5 FINANCIAL DATAConsolidated fi nancial statements and notes 6.1.1.1 Loans and receivables designated at fair value through profi t and loss and credit risk
Exposure to credit risk represents a signifi cant share of the fair value of loans and receivables designated at fair value through profi t and loss shown on the balance sheet. Purchases of credit derivatives covering any exposure to credit risk on loans and receivables are shown at their fair value as recognized on the balance sheet.
Financial assets measured at fair value through profi t and loss consist primarily of fi nancial assets representative of unit-linked policies from insurance activities and, to a lesser extent, assets with embedded derivatives for which the principle of separation was not adopted.
6.1.2.1 Financial liabilities designated at fair value through profi t and loss and credit risk
Changes in the fair value of fi nancial liabilities, designated at fair value through profi t and loss, attributable to credit risk at December 31, 2014 Carrying amount
Fair value hedging is used to hedge changes in the fair value of fi xedincome securities on an individual basis, as well as comprehensive hedging of the interest-rate risk of Natixis Financial Products LLC according to the carve-out provisions of IAS 39.
Net investment in foreign currency hedges 6.3 Offsetting financial assets and liabilities
The table below presents the amounts offset on the Natixis balance sheet meeting the criteria set out in IAS 32 as detailed in Note 5.13 as well as the impacts linked to the existence of an enforceable right of set-off under a master netting arrangement or similar agreements that do not meet the criteria set out in IAS 32 dealing with offsetting.
The impacts linked to the existence of an enforceable right of set-off under master netting arrangements or similar agreements correspond to derivative amounts or outstanding repos covered by master arrangements under which the net settlement criterion or the simultaneous settlement of assets and liabilities cannot be demonstrated or for which the right to set-off cannot be exercised except in the event of the default, insolvency or bankruptcy of one or more counterparties. These amounts are not offset on the balance sheet.
Financial assets at fair value through profi t and loss 133,228 48,240 84,988 131,455 28,707 102,748
Other fi nancial instruments * Gross amount of fi nancial assets offset or covered by a master netting or similar arrangement.
Gross amount of fi nancial liabilities recognized in the balance sheet*
* Gross amount of fi nancial liabilities offset or covered by a master netting or similar arrangement.
Net amount of fi nancial liabilities recognized in the balance sheet
(b) In 2014, permanent impairment of variable-income securities stood at €62 million compared with €82 million in 2013. This expense involves insurance portfolios for €24 million (€60 million for 2013), the impact of which is neutralized at 92.7% and 94.8% respectively for 2014 and 2013 given the profi tsharing mechanism. The 2014 expense is divided between an additional impairment on previously-impaired securities for €19 million, including €8 million related to the insurance portfolios (€58 million in 2013, including €45 million on insurance portfolios), newly-impaired provisions on securities tied to the application of automatic criteria as defi ned in accounting principles and methods for €23 million mainly on non-insurance portfolios (€21 million in 2013, including €14 million related to insurance portfolios) and provisions on newly-impaired securities tied to the application of criteria for analysis for €20 million, including €16 million for insurance portfolios (€3 million in 2013, including €1 million on insurance portfolios).
The fair value of loans and receivables due from banks is provided in Note 6.7.8.
The following table lists the fi nancial assets (excluding assets held for trading) and fi nancing commitments subject to amendments to original contract terms or refi nancing constituting a concession granted due to the debtor’s fi nancial situation (see Note 5.1).
Off-balance sheet exposure 107 0 54 6.5.2.2 Performing loans to customers
6.7 Other information relating to financial assets 6.7.1 Reclassification of financial assets over the period, pursuant to the amendment to IAS 39 and IFRS 7 published on October 13, 2008
No fi nancial assets were reclassifi ed in 2014 by Natixis pursuant to the IASB’s “Reclassifi cation of fi nancial assets” amendment to IAS 39 and IFRS 7 published on October 13, 2008.
At December 31, 2014, the carrying amount of assets reclassifi ed as “Loans and receivables” is not material (less than €0.1 million) compared to €174 million at December 31, 2013.
Financial assets at fair value through profi t and loss 37,460 34,405 31,292 30,060
Loans and receivables at amortized cost 43 43 * Amount adjusted relative to the fi nancial statements at December 31, 2013.
Financial assets at fair value through profi t and loss 1,811 1,638
5 FINANCIAL DATAConsolidated fi nancial statements and notes R SECURITIZATION FOR WHICH THE COUNTERPARTIES TO THE ASSOCIATED DEBTS HAVE RECOURSE
At December 31, 2014, €322 million in bonds self-underwritten by Natixis and eliminated on consolidation are lent or sold under repurchase agreements.
At December 31, 2014, there is no material impact from continuing involvement in a securitization vehicle maintained by Natixis.
The fair value of the fi nancial assets received as security that were resold or reused as security was €148 billion at December 31, 2014.
Loans and receivables due from banks 41 2 0 1 44
Financial assets held for trading 159,375 64,679 91,382 3,315 126,752 55,748 67,738 3,266
Financial assets at fair value through profi t and loss 95,185 7,440 83,859 3,886 91,572 8,810 80,628 2,134
Other fi nancial assets at fair value through profi t and loss 82,837 81,237 1,600 79,512 79,015 497 o/w currency derivatives 2 2
Available-for-sale fi nancial assets 44,816 35,626 5,440 3,750 40,678 31,897 7,619 1,163
Other available-for-sale securities 43,771 35,623 5,373 2,774 39,309 31,660 7,585 65
Other available-for-sale fi nancial assets 20 20 28 28 * Amount adjusted relative to the fi nancial statements at December 31, 2013, mainly arising from the reclassifi cation of Private Equity securities from Level 2 to Level 3 of the fair value hierarchy for €1.121 billion (see Note 5.6).
Financial assets at fair value through profi t and loss - Trading 3,267 1,097 98 Fixed-income securities held for trading 928 18 81 Derivative instruments not eligible for hedge accounting (positive fair value) 2,338 1,079 17 o/w interest rate derivatives 772 480 73
Other fi nancial assets held for trading 0 Financial assets at fair value through profi t and loss 1,085 (170) 1 Fixed-income securities at fair value through profi t and loss 874 (166) 4 Variable-income securities at fair value through profi t and loss Other fi nancial assets at fair value through profi t and loss 211 (4) (3) Hedging derivatives Available-for-sale fi nancial assets 1,025 17 31 55 Available-for-sale securities – Equity investments 760 18 8 29 Other available-for-sale securities 265 (1) 23 26 o/w fi xed-income securities 231 23 18 o/w variable-income securities 34 (1) 8
5 FINANCIAL DATAConsolidated fi nancial statements and notes Sensitivity analysis of the fair value of fi nancial instruments measured according to level 3– Assets and Liabilities
R +/-50 basis points applied to the margin used for the discounted cash fl ow expected on TruPS CDOs; i.e. a sensitivity impact representing a valuation increase of €18.9 million (reflecting an improvement in the above-mentioned inputs) or a valuation decrease of €17.9 million (reflecting a deterioration in said inputs) (2).
To Level 2 Level 1 Level 3 Level 1 Level 2
Other fi nancial assets at fair value through profi t and loss
Securities held for trading 59 574 100 115 o/w fi xed-income securities 47 574 100 115 o/w variable-income securities 12
(a) In view of the improvement in the liquidity situation of US RMBS and European RMBS, these securities were valued on the basis of market prices at December 31, 2013, while they had been valued at December 31, 2012 according to a valuation model, with no signifi cant impact on the results of the period.
(c) A transaction undergoing restructuring was transferred to Level 3 of the fair value hierarchy.
(a) Amount adjusted relative to the fi nancial statements at December 31, 2013.
Total deferred tax recognized 2,825 2,993 o/w: -deferred tax assets 3,000 3,139 deferred tax liabilities (176) (146)
* Positive amounts represent sources of deferred tax giving rise to deferred tax assets, while negative amounts represent sources giving rise to deferred tax liabilities.
The change in deferred taxes on items whose variation is recorded directly in reserves is presented in the Statement of Net Income/ (Loss); gains and losses are recorded directly in equity. At December 31, 2014, this amount was -€21 million compared to -€98 million at December 31, 2013. Other changes in deferred taxes for the period are booked to profi t or loss.
(in millions of euros) 12.31.2014 12.31.2013 Legal carryforward period Max. recognition period
TOTAL SOURCES OF DEFERRED TAX, GROSS 2,254 2,415 6.9 Accrual accounts, other assets and liabilities
Security deposits received 19,097 8,779 6.9.2 Restatement of the deferred margin on financial instruments
5 FINANCIAL DATAConsolidated fi nancial statements and notes 6.13 Due to banks and customer deposits
Amounts due to banks and customer deposits are presented by type of deposit (demand or time deposits). They are measured in accordance with IAS 39 within other fi nancial liabilities using the amortized cost method.
In order to refl ect their obligations toward policyholders, insurance companies record under liabilities technical reserves determined on the basis of statistical calculations.
6.16 Provisions and impairment 6.16.1 Summary of provisions and impairment 01.01.2014 Increase
5 FINANCIAL DATAConsolidated fi nancial statements and notes Impact on the income statement (in millions of euros) Charges Reversals Net impact
Impairment and amortization of property, plant and equipment and intangible assets (2) 1 (1)
The amounts shown in the above tables include write-downs of assets held by the life insurance companies. They are shown without the impact of changes in insurance company technical reserves.
(a) Of which €415 million in provisions at December 31, 2014 in respect of Madoff net outstandings.
(b) Of which €60 million in provisions at December 31, 2014 in respect of the workforce adjustment plan discussed in Note 5.14.
Accrued interest 53 55 * Subordinated debt issue agreements do not incorporate a clause providing for early redemption in the event that the covenants are not observed.
The main features of undated subordinated securities are outlined in section 3.3 of Chapter [3], “Risk Management and Capital Adequacy”.
5 FINANCIAL DATAConsolidated fi nancial statements and notes Changes in subordinated debt over the period
(in millions of euros) 12.31.2013 Issues (a) Redemptions (b) Translation adjustments Changes in scope (c) Other (d) 12.31.2014
(a) The following issues were carried out in 2014: V The March 2014 issue of +€375 million (for a nomimal amount of €380 million) in dated subordinated notes with a maturity of 10 years (March 2024 maturity) by Coface; V The June 2014 set-up of two subordinated loans, fully subscribed for by BPCE, for respective amounts of €900 million (June 2026 maturity) and €100 million (June 2024 maturity); V The Natixis Assurance public issue amounting to €251 million.
(c) Changes in scope concerning the consolidation of BPCE Assurances and the Versailles conduit, with respective impacts of +€40.5 million and +$4.5 million; (d) Other changes mainly pertained to: V the revaluation of debts subject to hedging (+€15.3 million) and variations in intra-group securities held by Natixis Funding for the purposes of market making with respect to Natixis’ debt on the secondary market (+€53.3 million); V A €40.5 million reduction resulting from the assumption by Natixis Assurances of subordinated debt issued by BPCE.
(in millions of euros) 12.31.2012 Issues Redemptions Translation adjustments Other 12.31.2013
The fi nancing that Natixis indirectly received through its main shareholder BPCE under the fi nancial sector bail-out plan approved by the European Commission is described in Note 5.17.
Financial liabilities held for trading 123,686 38,541 82,891 2,254 105,698 42,742 61,307 1,649
Securities issued for trading purposes 38,628 37,019 1,598 10 41,294 40,615 679
Securities at fair value through profi t and loss 13,637 13,637 11,364 11,364
5 FINANCIAL DATAConsolidated fi nancial statements and notes 6.19.1 Financial liabilities at fair value measured using level 3 of the fair value hierarchy
Financial liabilities at fair value through profi t and loss - Trading 1,649 558 112
Financial liabilities at fair value through profi t and loss - Trading 786 13 (100)
Assets at fair value through profi t and loss - excluding trading derivatives 38 11 22 11 3 84 169
Loans and receivables due from banks 14 3 41 5 8 1 72
Less than 1 month 1 to 3 months 3 months to 1 year 1 to 5 years
5 FINANCIAL DATAConsolidated fi nancial statements and notes NOTE 7 NOTES TO THE INCOME STATEMENT
“Interest and similar income” and “Interest and similar expenses” comprise interest on fi xed-income securities recognized as availablefor -sale fi nancial assets, and interest on loans and receivables to and from banks and customers.
Interest accrued on impaired loans and receivables (including restructured items) 13 13 16 16 7.2 Net fee and commission income
The method for recognizing fees and commissions received in respect of services or fi nancial instruments depends on the ultimate purpose of the services rendered and the method for recognizing the fi nancial instruments to which the service relates. Fees and commissions for one-off services, such as business provider commissions, are recognized in income as soon as the service is provided. Fees and commissions for ongoing services such as guarantee commissions or management fees are recognized over the service period.
Financing, guarantee, securities and derivative commitments* 202 (119) 83 208 (208) 1 * The premium, which amounted to €85 million at December 31, 2014, paid to BPCE in respect of the guarantee given against the former GAPC hive-off assets classifi ed as “Loans and receivables” and “Available-for-sale fi nancial assets” is recognized in expenses pro rata to the write-back of the provisions and the discounts recognized in respect of reclassifi cations during the period.
It should be noted that impairments of credit derivatives entered into with CDPCs were fully reversed at December 31, 2013, without a material impact on income; V A €6.5 million reduction at December 31, 2014 of the discount against fund units recognized in 2009 based on the selling prices observed on the secondary market, bringing total provisions to €13.1 million at December 31, 2014 versus €19.6 million at December 31, 2013; V At December 31, 2014, recognized own credit risk adjustments to derivatives (debit valuation adjustments or DVAs) stand at €22.6 million, versus €81.2 million at December 31, 2013. Furthermore, credit risk adjustments related to the valuation of counterparty risk (credit valuation adjustments or CVAs) on fi nancial assets amount to -€85.6 million at December 31, 2014, versus -€10.8 million at December 31, 2013. These adjustments incorporate the net impact, in CVA and DVA terms, of refi nements to estimates carried out in 2014, particularly the extension of the use of market inputs (-€25.2 million) and the extension of the scope of calculation for adjustments (-€6.6 million).
The Funding Valuation Adjustment (FVA) used on uncollateralized derivatives or imperfectly collateralized derivatives is also recognized on this line in the amount of -€81.5 million at December 31, 2014.
This line item also includes market discounts on syndicated loans. In fact, loans outstanding with a theoretical syndication date expired as at December 31, 2014 were analyzed on a case-by-case basis in order to take into account any market discounts observed at the end of the reporting period.
In H1 2014, Natixis sold its entire stake in Lazard (5.4% in Lazard’s total share capital). As a result, a capital gain of €99.3 million was recorded in the 2014 income statement.
Other related income and expenses 7.5.3 480 (346) 134 638 (364) 274 7.5.1 Finance leases
Other related income and expenses 239 (200) 38 245 (189) 56 7.5.2 Other insurance income and expenses
Operating expenses mainly comprise payroll costs, including wages and salaries net of rebilled expenses, social security expenses and employee benefi ts such as pensions (defi ned benefi t plans), and expenses relating to share-based payment recognized in accordance with IFRS 2. The details on these expenses are provided in Note 11.
(b) Of which €30.6 million in a reversal of provisions, of which €10.6 million not used, in respect of the workforce adjustment plan versus an allocation of €90.6 million at December 31, 2013.
Provisions for impairments of fi nancial assets (628) 332 (78) 43 (331) (689) 365 (66) 31 (359)
Net capital gains/(losses) on disposals (13) 91 78 144 16 160
7.9 Reconciliation of the tax expense in the financial statements and the theoretical tax expense
+ Impairment of goodwill 51 14 - Share in income of associates (40) (21)
(a) The main permanent differences consist of capital gains taxed under the long-term scheme, tax-exempt earnings of foreign subsidiaries in Luxembourg, Belgium and the United States and the capital cost allowance for goodwill in the United States.
Shares in unrealized or deferred gains/(losses) of associates, net of tax 13 830
Revaluation of available-for-sale fi nancial assets 422 (66) 356 328 (1) 328
Shares in unrealized or deferred gains.(losses) of associates 18 (5) 13 839 (9) 830
This organization was confi rmed as part of Natixis’ 2014-2017 Strategic Plan, titled “New Frontier”.
R Oversight of international platforms, in line with the bank’s overall objectives: Americas, Asia-Pacifi c and EMEA (Europe (except France), Middle East and Africa).
This business line combines a number of service-oriented businesses primarily serving the Caisse d’Epargne and Banque Populaire networks, as well as Natixis customers: V Factoring: provides companies with credit management solutions such as financing, insurance, and collection. Natixis Factor uses the Banque Populaire and Caisse d’Epargne networks, which account for a significant portion of its business; V Sureties & Financial Guarantees: this business line is operated by Compagnie Européenne de Garanties et Cautions (CEGC). It notably includes: guarantees for mortgage loans granted to retail and business customers by the Caisse d’Epargne, and more recently the Banque Populaire networks, along with legal guarantees and bail bonds; V Consumer Finance: this Natixis business line includes a broad range of activities throughout the value chain for revolving loans (marketing, origination, administrative management, out-of-court collection, etc.) and administrative management services for personal loans. These activities are operated by Natixis Financement, which manages revolving loans granted by the Groupe BPCE networks, and manages personal loans granted by the Caisses d’Epargne and by the Banque Populaire banks;
Together, these specialized asset management companies enable the Group to provide a full range of expertise meeting demand from all customer segments. Coverage of the various customer segments is optimized by the organization of distribution around the NGAM Distribution platform and the business franchises developed over the long term by the Asset Management companies, mainly with various client groups. The management companies continue to handle distribution via the shareholder retail banking networks in France; V Insurance: Natixis Assurances is a holding company for various operating insurance subsidiaries. In March 2014, in accordance with the plan to develop the bancassurance model, Natixis Assurance acquired PPI and casualty insurance subsidiary BPCE Assurances. It offers a comprehensive range of individual and collective life insurance, personal protection insurance and property and casualty insurance solutions. These diversified, customized solutions are designed for retail and small business customers, farmers, companies and associations; V Private Banking: this business line encompasses wealth management activities in France and Luxembourg, financial planning solutions, and services for independent wealth management advisors (IWMAs). Banque Privée 1818, created from the merger between Banque Privée Saint Dominique (BPSD) and La Compagnie 1818, has taken its place as a major player on the French market. The bank mainly develops its customer base from the clientele of the Caisses d’Epargne and Banque Populaire banks, and to a lesser extent from that of Natixis. Private Banking offers advisory services, financial planning and expertise, and fund management solutions; V Private Equity for third party clients: At the start of 2014, NCI’s asset management companies were transferred to Natixis Global Asset Management and a sponsoring vehicle was set up to monitor Natixis’ commitments in the funds. The teams have extensive expertise in equity financing for generally unlisted, small and medium-sized enterprises in France and Europe via sponsored equity holdings. This business line covers the Private Equity segments for third party investors, such as Private Equity deals (top-line funding for mature companies), venture capital (new, innovative companies) and funds of funds.
In a persistently uncertain market environment, Natixis set up a guarantee mechanism in the third quarter of 2009 with BPCE. This mechanism is designed to offer protection against future losses and earnings volatility resulting from GAPC portfolios. This mechanism took effect on July 1, 2009.
Given the progress of the GAPC run-off program, Natixis closed this segregation vehicle at June 30, 2014. The residual positions were transferred to Wholesale Banking.
Other activities Total * Variation between December 31, 2014 and December 31, 2013 (pro forma fi gures).
(a) This information is presented according to the analytical structure of businesses adopted by Natixis at December 31, 2014.
Assets at fair value through profi t and loss 241,462 11,022 0 34 235 0 1,807 254,560
Available-for-sale fi nancial assets 1,448 38,237 1,531 2,355 2 0 1,244 44,816
Loans and receivables due from banks 48,108 1,330 1,077 504 0 0 20,699 71,718
Financial liabilities at fair value through profi t and loss 219,476 511 (0) 16 0 0 620 220,622
Loans and receivables due from banks 52,395 1,111 853 558 1 81 22,601 77,600
The information on risk management required under IFRS 7, with the exception of the disclosures given below, is presented in section 3.4 of Chapter [3], “Risk Management and Capital Adequacy”.
The following table sets out the exposure of all of Natixis’ fi nancial assets to credit risk. This exposure does not take into account guarantees, sureties, credit default swaps, collateral on OTC fi nancial instruments, the impact of netting agreements and other credit enhancements. It corresponds to the net value of the fi nancial assets on the balance sheet, after taking all impairments into account (individually or collectively assessed).
Loans and receivables due from banks 71,706 129 (117)* 71,718 77,600
The disclosures on the management of market risk, overall interest rate risk, liquidity risk and structural foreign exchange risk required under IFRS 7 are presented in sections 3.6 and 3.8 of Chapter [3], “Risk Management and Capital Adequacy”.
11.1 Number of employees * Full-time equivalent current employees of Natixis at the reporting date.
This item includes wages and salaries paid within twelve months of the end of the reporting period in which the related services were rendered, employee incentives and profi t-sharing, meeting the defi nition of short-term benefi ts under IAS 19R “Employee Benefi ts”. In accordance with this standard, short-term benefi ts are expensed in the period in which the employees render the services giving rise to such benefi ts.
Every year since 2010, Natixis has granted share-based payment plans to certain categories of staff. The accounting treatment of these plans is described in Note 5.18.
Valuation inputs used to calculate the expense of these plans: Share price 5.49 4.27
Under defi ned-contribution plans, Natixis pays fi xed contributions into a separate entity and has no obligation to pay further contributions.
Pension plans for which employees can voluntarily opt are operated by certain Natixis entities and are also classifi ed as defi ned-contribution plans. These entities have a single contribution obligation (“PERCO” contribution).
As of H2 2013, the defi ned benefi t plan in which some employees in New York were enrolled has been liquidated and replaced by a defi ned contribution plan.
Other long-term employee benefi ts comprise benefi ts other than post-employment and termination benefi ts not wholly due within twelve months of the end of the period in which employees have provided the related services.
The amount of the recognized provision on the liabilities side of the balance sheet corresponds to the value of the actuarial liabilities under the defi ned benefi t plans, less the market value of the assets to hedge these benefi t liabilities.
Fair value of plan assets (404) (5) 0 0 (409) (352) (7) 0 0 (359)
Changes recognized directly in non-recyclable equity 99 21 0 0 120 (30) 2 0 0 (27)
Revaluation adjustments - fi nancial assumptions 79 23 0 0 101 (22) (11) 0 0 (33)
Revaluation adjustments - past-experience effect 9 (0) 0 0 8 (7) 14 0 0 8
Fair value of assets at start of period 352 7 359 343 40 383 o/w amounts paid out in respect of plan liquidation (7) 0 (7) 0 0 0
Changes recognized directly in non-recyclable equity 17 0 17 23 21 44
Fair value of assets at end of period 404 5 409 352 43 395
Fair value of assets at start of period 36 36 changes recorded in income 1 1
Contributions received 0 0 o/w paid by employer 0 0 o/w paid by benefi ciaries 0 0
o/w amounts paid out in respect of plan liquidation 0 0
Structured debt instruments e) Post-retirement plan revaluation differences R REVALUATION COMPONENTS OF ACTUARIAL LIABILITIES
Total revaluation adjustments at start of period 163 9 172 193 7 200
Supplementary pension benefi ts and other End-of-career awards Long-service awards Other g) Main actuarial assumptions at December 31, 2014
The amount of the provision for post-employment defi ned-benefi t plans is calculated on an actuarial basis using a number of demographic and fi nancial assumptions.
Rate of increase in salaries 2.06% 2.37% 4.00% 2.76% 3.63% 4.00%
Rate of increase in salaries (incl. Infl ation) 2.57% 2.16% 2.18% 3.04% 3.19% 2.70% 2.73% 3.36%
Rate of increase in healthcare costs (incl. Infl ation) 4.42% 4.49%
+1% change in rate of increase in salaries and income (incl. infl ation) 17.34% 12.70% 9.52% 25.87% 10.37% 9.46%
The number of options outstanding was 4,760,945 at December 31, 2014 versus 4,846,798 at December 31, 2013. The 85,853 decrease in the number of options stems from options forfeited during the period.
b) Employee stock option plans under the Company employee savings plan
Natixis adapts the management of its capital structure in line with changes in economic conditions and in the risk profi le of its operations. Its objectives, policies and procedures remained unchanged in 2014.
Issues after June 30, 2009 were always classifi ed as equity given the discretionary nature of their interest.
Deeply subordinated notes, amounting to €989 million, were stable over the period.
This authorization is based on the 11th resolution of the General Shareholders’ Meeting of May 20, 2014. It authorizes Natixis to acquire, at a maximum price of €7 per share, a number of shares not exceeding 10% of the shares making up the capital of Natixis.
Pursuant to this contract, Natixis holds 2,154,653 shares representing €11.8 million as at December 31, 2014.
The following financing commitments fall within the scope of IAS 39: V commitments classified as financial liabilities at fair value through profit and loss. If an entity has a practice of reselling or securitizing loans immediately after they are issued, these loans are accounted for in accordance with IAS 39 as from the date the loan commitment is undertaken; V those which are settled net (i.e. sold); V commitments which result in a loan granted at below-market interest rates.
V a present obligation arising as a result of past events but not recognized because: V it is not likely that an outflow of economic benefits will be required to settle the obligation; or
On February 19, 2015, Natixis announced that it had entered into exclusive negotiations with TA Associates, Banca Leonardo and the managers of DNCA concerning the acquisition by Natixis Global Asset Management of their interests in DNCA. The planned acquisition concerns 71.2% of DNCA’s share capital. The management would remain a shareholder alongside NGAM and would benefi t from a gradual exit mechanism starting in 2016 to ensure the alignment of interests over the medium term and a gradual increase of ownership up to 100%.
The transaction is subject to regulatory authorization and the approval of the anti-trust authorities.
The main transactions between Natixis and related parties (BPCE and subsidiaries, Groupe Banque Populaire including Banque Populaire banks and their subsidiaries, Groupe Caisse d’Epargne including the Caisses d’Epargne and their subsidiaries and all affi liates consolidated by the equity method) are described below: (in millions of euros)
Assets at fair value through profi t and loss 16,911 4,477 8,607 8,803 3,614 14,243
Loans and receivables due from banks 52,414 715 70 60,299 700 1,227
Financial liabilities at fair value through profi t and loss 15,294 2,033 1,296 8,188 1,451 2,951
Net fee and commission income (12) (271) 4 (108) (225) 95
Value of performance shares granted during the fi scal year 160,000 € 350 €
With regard to calculation of severance payments for the duties of Chief Executive Offi cer, the Board of Directors, on the advice of the Compensation Committee, authorized during the meeting of February 22, 2011, the commitment establishing the terms and conditions for compensation due or liable to be due to Laurent Mignon in the event he no longer performs the duties of Chief Executive Offi cer. This commitment was also approved by the Combined General Shareholders’ Meeting of May 26, 2011 (see Resolution Six). In its session on February 19, 2014, Natixis’ Board of Directors reviewed the commitment related to the severance payment to the Chief Executive Offi cer, particularly to defi ne the Monthly Reference Compensation (1/12th the fi xed compensation paid for the last calendar year of activity and the average of variable compensation granted over the last three calendar years of activity) used to determine the payment amount. This amendment was also authorized by the Board of Directors and approved by the Ordinary General Shareholders’ Meeting of May 20, 2014 (see Resolution Five).
Furthermore, the Board of Directors meeting of February 19, 2014 authorized the potential implementation of a non-compete clause in the event the CEO leaves offi ce.
Consolidated fi nancial statements and notes 15.3 Insurance companies 15.3.1 Insurance company results
Capital gains and losses on disposal of investments (net of reversals, write-downs and amortization) 287 287 287 287
Other recurring operating income and expenses (252) (40) (208) (247) (3) (2) (252)
Other non recurring operating income and expenses (8) 3 (11) (8) (8)
5 FINANCIAL DATAConsolidated fi nancial statements and notes R AT DECEMBER 31, 2013
Investment income (net of expenses) 1,899 1,907 (9) 1,898 2 (1) 1,899
Other non recurring operating income and expenses 1 2 (1) 1 1
Net gains or losses on fi nancial instruments at fair value through profi t and loss 406 582
Net gains or losses on available-for-sale fi nancial assets 369 340
After-tax income from discontinued activities or activities currently being disposed of 0
V Deloitte & Associés – 185, avenue Charles-de-Gaulle – 92524 Neuilly-sur-Seine Cedex represented by signatory partners José-Luis Garcia and Jean-Marc Mickeler; V KPMG Audit, Département de KPMG SA – 1 cours Valmy – 92923 Paris La Défense Cedex, represented by signatory partner, Jean François Dandé; V Mazars – Immeuble Exaltis 61, rue Henri-Régnault – 92075 La Défense Cedex, represented by signatory partners Michel Barbet–Massin and Emmanuel Dooseman.
Other procedures and services directly related to the Statutory Auditors’ assignment 5,000 1,785 27% 16% 1,032 190 23% 4% 445 392 10% 11% 6,477 2,367 23% 12%
Legal, tax and employee related 1,005 879 65 158 198 107 1,267 1,143
Other work and services related directly to audit work, mainly work on fi nancial transactions, opinions on the Group’s approach to implementing accounting standards and controls, reviews of the entity’s compliance with regulatory provisions and reviews of internal control quality.
Major accounting expenses included the preparation for Natixis SA’s Asset Quality Review, conducted by Deloitte & Associés at a cost of €2,379,000, and fees related to the Coface IPO, which cost €1,526,000, divided equally between Deloitte & Associés and KPMG.
In addition, the fees paid to PricewaterhouseCoopers, auditors for BPCE, stand at €3,145,000 for audit services and €3,169,000 for other services.
The Deputy Auditors are: V BEAS, 7-9 Villa Houssay – 92200 Neuilly-sur-Seine, represented by partner, Mireille Berthelot; V Malcolm McLarty, 1 cours Valmy - 92923 Paris La Défense Cedex; V Franck Boyer, Immeuble Exaltis – 61, rue Henri-Régnault – 92075 La Défense cedex.
Profi t or loss before taxes, including operating taxes Income taxes Headcount (FTE)
NATIXIS MALTA INVESTMENTS LIMITED (22) Holding company 0 0 100 100 Malta
NATIXIS ALTERNATIVE ASSETS Holding company FC 100 100 100 100 Luxembourg
NATIXIS FUNDING UK LLP (1) (6) Issuing vehicle FC 100 100 0 0 Luxembourg
NATIXIS PFANDBRIEFBANK AG Credit institution FC 100 100 100 100 Germany
NATIXIS NORTH AMERICA LLC * Holding company FC 100 100 100 100 United States
Conduit Versailles (3) Securitization vehicle FC 100 0 0 0 United States
NATIXIS DERIVATIVES INC (12) Brokerage FC 0 0 100 100 United States
NATIXIS GLOBAL ASSOCIATES AUSTRALIA HOLDINGS, LLC Holding company FC 100 100 100 100 Australia
NGAM Distribution Corporation * Retail FC 100 100 100 100 United States
MC MANAGEMENT, INC. Holding company FC 100 100 100 100 United States
NATIXIS FORMATION EPARGNE FINANCIERE Holding company FC 100 100 100 100 France
NATIXIS GLOBAL ASSET MANAGEMENT PARTICIPATIONS 1 Holding company FC 100 100 100 100 France
NATIXIS GLOBAL ASSET MANAGEMENT PARTICIPATIONS 3 Holding company FC 100 100 100 100 France
BRANCHES NGAM Distribution, France branch Retail FC 100 100 100 100 France
NGAM SA Zweignierderlaasung Deutschland Retail FC 100 100 100 100 Germany
5 FINANCIAL DATAConsolidated fi nancial statements and notes Business lines Consolidated subsidiaries Activity
NGAM Sucursal en Espana Retail FC 100 100 100 100 Spain
OTHER ENTITIES NATIXIS US HOLDINGS Inc * Holding company FC 100 100 100 100 United States
NATIXIS PRIVATE EQUITY CASPIAN IA, LP (1) Private Equity FC 46 46 80 80 United States
NATIXIS PRIVATE EQUITY CASPIAN IB, LP (1) Private Equity FC 27 27 29 29 United States
COMPAGNIE 1818 GROUP BANQUE PRIVEE 1818 ** Credit institution FC 100 100 100 100 France
ASSURANCES BANQUE POPULAIRE VIE (formerly NATIXIS ASSURANCES PARTENAIRES) * Insurance FC 100 100 100 100 France
BPCE APS (5) Service provider FC 60 30 0 0 France
OPCI NATIXIS LEASE INVESTMENT (1) Real estate funds FC 100 100 100 100 France
OCEOR LEASE NOUMEA ** Equipment leasing FC 100 99 100 99 New Caledonia
OCEOR LEASE REUNION ** Equipment leasing FC 100 100 100 100 France
NATIXIS CAR LEASE Extended period vehicle rental FC 100 100 100 100 France
COFACE HOLDING SAS Holding company FC 41 41 100 100 France
COFACE SERVICES NORTH AMERICA GROUP Holding company FC 41 41 100 100 United States
COFACE UK HOLDING Holding company FC 41 41 100 100 Luxembourg
COFACE CENTRAL EUROPE HOLDING Holding company FC 31 31 75 75 Austria
COFACE PORTUGAL - SUCC (COFACE SA) Insurance FC 41 41 100 100 Portugal
COFACE DANMARKSUCC (COFACE KREDIT) Insurance FC 41 41 100 100 Denmark
COFACE ARGENTINA -SUCC (COFACE SA) Insurance FC 41 41 100 100 Argentina
COFACE CHILE -SUCC (COFACE SA) Insurance FC 41 41 100 100 Chile
LEID - SUCC (COFACE AUSTRIA) Insurance FC 41 41 100 100 Lithuania
COFACE ROMANIA INSURANCE -SUCC (COFACE AUSTRIA) Insurance FC 41 41 100 100 Romania
COFACE SLOVAKIA INSURANCE - SUCC (COFACE AUSTRIA) Insurance FC 41 41 100 100 Slovakia
COFACE ECUADOR (SUCC-COFACE SA) Insurance FC 41 41 100 100 Ecuador
COFACE AUSTRALIE (SUCC-COFACE SA) Insurance FC 41 41 100 100 Australia
Midt factoring A/S * Factoring FC 100 100 100 100 Denmark
** French subsidiaries whose individual prudential oversight is performed based on Group consolidated ratios in accordance with the provisions of Article 4.1 of CRC Rule 2000.03.
(2) Change in consolidation method following the entry into force of IFRS 11.
(4) Newly consolidated entity after thresholds were exceeded and for regulatory requirements.
(5) Newly consolidated entities following the purchase by Natixis Assurances of BPCE Assurances from BPCE in the fi rst quarter of 2014.
(7) Entities deconsolidated because they became non-material in the fi rst quarter of 2014.
(8) Entities sold by Natixis SA to NGAM in the fi rst quarter.
(18) Newly consolidated entity in the third quarter after thresholds were exceeded on a fund launched in the second quarter.
(21) Creation of a subsidiary in Canada covering real estate loans secured by mortgage.
In compliance with the assignment entrusted to us by your General Shareholders’ Meeting, we hereby report to you, for the year ended December 31, 2014, on: V the audit of the Natixis group’s consolidated financial statements, as appended to this report; V the justification of our assessments; V the specific verifications required by law.
We conducted our audit in accordance with the professional standards applicable in France; those standards require that we plan and perform the audit in order to obtain reasonable assurance on whether the consolidated fi nancial statements are free of material misstatements. An audit involves performing procedures, using sampling techniques or other methods of selection to obtain audit evidence about the amounts and disclosures in the consolidated fi nancial statements. An audit also involves assessing the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made, as well as the overall presentation of the fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
In our opinion, the consolidated fi nancial statements give a true and fair view of the Group’s assets and liabilities and fi nancial position at December 31, 2014, and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.
The Group uses internal models and methodologies to measure fi nancial instruments that are not traded on an active market, as well as to record certain impairment charges, as mentioned in Notes 5.6, 5.10, 6.6.7 and 6.19 to the consolidated fi nancial statements. We examined the control procedures relating to the validation of models and to the defi nition of the parameters used to assess the observability of these models.
The Group recognizes impairment charges and provisions to cover the credit and counterparty risks inherent to its activities (Notes 5.1, 5.2, 5.3, 6.5, 6.16.1 and 7.7 to the consolidated fi nancial statements). We reviewed the control procedures relating to the monitoring of credit and counterparty risk, the assessment of non-recoverability risks, and the calculation of the corresponding individual and collective impairment charges and provisions.
The Group recognizes impairment charges on available for-sale assets when there is objective evidence that such assets have suffered a decline in value (Notes 5.1, 6.4, 7.4 and 7.7 to the consolidated fi nancial statements). We reviewed the control procedures relating to the identifi cation of evidence of impairment and measurement of the largest impairment charges as well as the estimates made in recognizing impairment charges to cover the decline in value of these assets, where applicable.
These assessments were made as part of our audit of the fi nancial statements, taken as a whole, and therefore contributed to the opinion that we formed, which is expressed in the fi rst section of this report.
Parent company fi nancial statements and notes 5.3 Parent company financial statements and notes
3 Cash and balances with central banks 56,501 40,833 3 Government securities and equivalent 38,476 34,683 3 Advances to banks 138,801 143,853 24 o/w institutional operations 5 Bonds and other fi xed-income securities 15,926 17,220 5 Shares and other variable-income securities 32,283 26,211 7 Investments in associates and other long-term investments 466 355 7 Investments in subsidiaries and affi liates 13,530 14,375 4 Leasing 4 Operating leases 12 Property, plant and equipment 146 153
Commitments received from banks 2,973 2,494 24 o/w institutional operations: 37 Commitments on securities 6,053 6,411 37 Other commitments received 8,667 9,062
14 Due to central banks 14 Due to banks 197,845 173,236 18/19 Provisions for risks and other expenses 2,704 2,677
V Balance of transactions on securities held for trading 704 2,318
NOTE 5 BONDS, SHARES AND OTHER FIXED AND VARIABLE-INCOME SECURITIES 335
NOTE 7 INVESTMENT IN SUBSIDIARIES AND AFFILIATES, ASSOCIATES, OTHER LONGTERM INVESTMENTS AND TREASURY SHARES 336
NOTE 8 INVENTORY – INVESTMENT PORTFOLIO AT DECEMBER 31, 2014 337
NOTE 9 INFORMATION ON SHAREHOLDINGS EXCEEDING THE DISCLOSURE THRESHOLD FOLLOWING INVESTMENTS IN FRENCH COMPANIES DURING THE YEAR 339
NOTE 37 OFF-BALANCE SHEET ITEMS – FOREIGN CURRENCY COMMITMENTS AND TRANSACTIONS 359
NOTE 40 ESTABLISHMENTS AND OPERATIONS IN NON-COOPERATIVES STATES OR TERRITORIES WITHIN THE MEANING OF ARTICLE 238-0A OF THE FRENCH GENERAL TAX 362
Non-performing loans are identifi ed and recognized in accordance with CRC Regulation 2002-03 as amended. This regulation and the notice issued by the Urgent Issues Task Force of the Conseil National de la Comptabilité (CNC – French National Accounting Board), on December 18, 2003 set out the regulations for classifying non-performing loans and reclassifying them as irrecoverable loans.
Loans for which there is an identifi ed credit risk that makes it probable that Natixis will be unable to recover all or part of the amount owed by the counterparty under the terms and conditions of the loan agreement, after taking into account any guarantees received, are considered to be non-performing.
Restructured loans correspond to loans with modifi ed terms under which Natixis grants a concession to borrowers facing or likely to face fi nancial diffi culties. They are a combination of a concession granted by Natixis and fi nancial diffi culties experienced by the borrower.
V Investments in associates: investments that give Natixis significant influence over the corporate bodies of the issuing companies and investments of strategic importance for the development of Natixis’ operations. They are recognized at their acquisition date at the purchase price excluding acquisition costs.
The DCF method for measuring future cash flows is based on the establishment of business plans prepared by the management of the subsidiaries in question and approved by Natixis’ senior management. The discount rate on future cash flows is the result of: R an average rate of return on an investment deemed to be risk-free; R an average credit spread on the market in which the subsidiary is listed; R an average beta as refl ected in a sample of equivalent companies.
Treasury shares: Natixis holds treasury shares to regulate its share price under a liquidity agreement. These shares are recognized as securities held for trading and follow the same rules as other securities in this category.
For non-hedging activities, positions in a class of option or forward contract are marked to market at the reporting dates. Changes in market value are recognized directly on the income statement. However, for instruments traded on over-the-counter markets, gains or losses are recognized on the income statement only upon settlement of these transactions, without effect on the potential setting aside of provisions for the net risk incurred over the life of the instrument.
In accordance with Article 41 of the Amended Finance Act for 1997 (No. 97-1239 of December 29, 2007), amended by Article 121 of the Amended Finance Act for 2008 (No. 2008-1443 of December 30, 2008) and the agreement signed with the French State on September 21, 2011, Natixis manages certain public procedures on behalf of the French State, mainly consisting of loans and gifts to foreign States conferred in the framework of Public Development Aid (“Emerging Country Reserve” loans and gifts to the “Fund for Private-Sector Aid and Studies”) and the stabilization of interest rates for export credit guaranteed by Coface.
R defined-contribution plans, which mainly consist of the social security basic pension scheme and the supplementary schemes Agirc and Arco, under which an entity has no obligation to pay a specifi ed benefi t amount. Contributions paid under defi ned contribution plans are expensed in the corresponding period,
Following the publication of recommendation No. 3013-02 of the Autorité des Normes Comptables (ANC – French accounting standards setter) on rules for measuring and recognizing retirement and similar commitments, dated November 7, 2013, which allowed the partial adoption of revised IAS 19 as adopted by the European Union in June 2012, Natixis chose to maintain its existing approach. The corridor method is therefore maintained in the parent company financial statements.
The amount recognized as a provision in the balance sheet represents the present value of the obligation under definedbenefit plans: R minus any past service cost not yet recognized in income; R plus or minus any unrecognized actuarial gains or losses in accordance with the corridor principle arising from: R experience adjustments linked to demographic variables,
The annual payroll costs recognized in respect of defined-benefit plans consist of: R rights vested by benefi ciaries over the period; R the interest cost refl ecting the impact of unwinding the discount on the obligation; R the expected return on plan assets; R amortization of actuarial gains and losses and past service costs; R the effects of plan curtailments and settlements.
Since 2010, Natixis has granted share-based payment plans to certain categories of staff. Some plans are settled in Natixis shares, while others are settled in cash indexed to the Natixis share price. Each plan is a three-year plan, with one-third of the plan settled each year, with the exception of “short-term” plans settled in cash indexed to the Natixis share price, which are settled in the year of granting.
A provision of €14,000 was recorded in the fi nancial statements at December 31, 2014 in respect of plans to be settled in shares (allocation of existing shares). No expense was recorded in this respect in 2013 as the share plans were to be settled in new shares.
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes 1.10 Provisions
The amount recognized as a provision should be the best estimate of the expenditure required to settle the present obligation at the reporting date. This amount is discounted when the effect of discounting is material. Provisions are reviewed at each reporting date and adjusted if necessary. Provisions recognized on the balance sheet, other than provisions to cover employee benefi ts, mainly concern provisions for restructuring, provisions for disputes, fi nes and penalties and provisions for other risks.
Due to the 10.7% increase in the corporate income tax, the tax expense recognized in respect of fi scal year 2013 comprises taxes payable in France at the rate of 38%, and at the local corporate tax rate applicable to foreign branches.
No change in accounting method had any impact on the fi nancial statements for the 2014 fi scal year.
At December 31, 2014 and after the capital increase reserved for employees, Natixis held a 41.24% stake in Coface. In view of its percentage holding and its role in Coface’s governance as the leading shareholder, Natixis continues to exercise exclusive control over Coface and records its residual holding under “investments in subsidiaries and affi liates” on the assets side of the parent company balance sheet. The placement generated a capital gain of €68 million, which was recorded under “Net gains/(losses) on fi xed assets” on the parent company income statement at December 31, 2014.
Securities held for sale 587 1,582 o/w accrued interest 4 14 o/w non-performing o/w write-downs
Current accounts overdrawn 3,112 2,932 o/w accrued interest 3 5 o/w non-performing 33 23 o/w write-downs of non-performing (11) (14)
Subordinated loans 550 555 o/w accrued interest 2 2 o/w non-performing o/w write-downs of non-performing
Restructured loans as defi ned in Note 1 amounted to €262 million in performing loans at December 31, 2014.
Transfers of securities between categories: There were no transfers of securities between categories in 2013 or 2014.
Breakdown of listed and unlisted securities: (in millions of euros) 2014 2013
Restructured loans as defi ned in Note 1 recorded as non-performing or irrecoverable loans amounted to €1,985 million before impairment and €1,402 million after impairment at December 31, 2014.
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes Amounts (in euros) Number of shares Book value
D) Investments with a book value less than or equal to €150,000 1,021,943.37
NOTE 9 INFORMATION ON SHAREHOLDINGS EXCEEDING THE DISCLOSURE THRESHOLD FOLLOWING INVESTMENTS IN FRENCH COMPANIES DURING THE YEAR
The table below was drawn up in accordance with the provisions of Article L.247-1 of the French Commercial Code
NATIXIS ALGERIE 62, Chemin Drareni Mohamed Hydra Algiers 10,000,002 DZD 4,594,646 DZD 100.00%
NATIXIS ASIA LIMITED Suite 1911-1922-19 F Two 88 Queensway Pacifi c Place – Hong Kong 632,395 HKD (99,669) HKD 100.00%
NUSHI 399 Boylston St 13th Floor MA 02116 Boston United States of America 1,227,285 USD 3,219,287 USD 15.00%
(1) The net value of these lines is higher than their gross value due to a positive translation adjustment.
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes NOTE 11 TREASURY SHARES – ASSETS
Due to banks 197,845 173,236 o/w accrued interest 0 0 o/w other amounts due 0 0 o/w accrued interest 223 358
Securities transactions 52,767 53,500 o/w trading securities, liabilities on borrowed securities 14,664 0 o/w trading securities, other liabilities on securities 38,097 53,492 o/w accrued interest 6 8
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes NOTE 19 HEADCOUNT AND EMPLOYEE BENEFITS
Future salary increases are estimated by grade based on a constant population and a three-year average. At December 31, 2014, this average (including infl ation) was 1.88%.
The remaining average working lives of employees, for all benefi ts, is 15.9 years.
Benefi ts paid over the period (3) (3) (2) (32) (40) (4) (2) (2) (25) (33)
Payments to the fund during the period (12) (12) (4) (4)
Change in obligation taken to income (8) 10 2 (6) (2) 2 (7) (3) 6 (2)
Total net obligation at December 31 74 93 29 103 299 71 78 26 97 272
NOTE 24 STATEMENT OF ASSETS, LIABILITIES AND COMMITMENTS RELATED TO MANAGEMENT OF PUBLIC PROCEDURES
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes NOTE 33 PROVISION FOR CREDIT LOSSES
In 2014, the impact of the tax consolidation notably includes the payment of €49.4 million to Coface in respect of past defi cits, following the exit of Coface from the tax consolidation scope in 2014.
EXCHANGE RATE INSTRUMENTS 604,470 444,404 On organized markets 88,736 113,822 Swaps
5 ÉLÉMENTS FINANCIERSParent company fi nancial statements and notes Currency trading
Bonds and other fi xed-income securities 5,049 1,168 383 760 5,002 3,564 15,926
Other procedures and services directly related to the Statutory Auditors’ assignment 4.3 1.7
Company fi nancial performance over the last fi ve years (Articles 133, 135 and 148 of the French Decree on Commercial Companies)
Income after tax, depreciation, amortization and provisions 284,641,699.57 873,436,574.80 907,172,429.97 2,323,073,936.17 1,305,316,943.00
Income after tax, but before depreciation, amortization and provisions 0.26 0.00 0.28 0.66 0.29
5 ÉLÉMENTS FINANCIERSStatutory Auditors’ report on the parent company fi nancial statements 5.4 Statutory Auditors’ report on the parent company financial statements
In compliance with the assignment entrusted to us by your General Meeting, we hereby report to you, for the year ended 31 December, 2014, on: V the audit of the parent company financial statements of Natixis S.A., as appended to this report; V the justification of our assessments; V the specific verifications and information required by law.
In our opinion, the parent company fi nancial statements give a true and fair view of the Company’s assets and liabilities and fi nancial position, and of the results of its operations for the year then ended in accordance with French accounting principles.
Pursuant to the provisions of Article L 823-9 of the French Commercial Code regarding the justifi cation of our assessments, we would draw the following items to your attention: Guarantee mechanism for the assets of the former GAPC hive-off vehicle
As mentioned in Note 1.12 to the parent company fi nancial statements, a guarantee mechanism with BPCE covering certain assets ring-fenced in the Workout Portfolio Management structure (GAPC) has been in place since July 1, 2009. We have reviewed the procedures for monitoring this mechanism, and the treatment of this transaction in the parent company fi nancial statements.
Natixis is updating the valuation of investments in its subsidiaries (Notes 1.2, 7 and 34 to the company fi nancial statements). We reviewed the methodology used to perform this work as well as the main assumptions and parameters.
The Company records provisions to cover the contingencies and litigation arising from its business activities (Notes 1.1, 1.2, 1.6, and 18 to the parent company fi nancial statements). We examined the methodology used to measure these provisions, as well as the main assumptions applied.
In accordance with French law, we have verifi ed that the various information items concerning the purchase of investments and controlling interests and the identity of the shareholders and holders of the voting rights has been properly disclosed in the Management Report.
Natixis’ corporate social responsibility (CSR) strategy and operational practices are guided by a set of international agreements and consultations within the banking industry: V commitment to the United Nations Global Compact since 2007; V adherence to the Principles for Responsible Investment (PRI) since 2008; V signature of the Equator Principles in 2010.
Natixis is also a member of the French Observatory for Corporate Social Responsibility (ORSE) and as such participates in the work of the ORSE Finance Club.
In the Wholesale Banking division, the Global Infrastructure and Projects (GIP) team fi nanced nine new deals in 2014 (versus fi ve in 2013), amounting to €3.668 billion and 1,319 MW (including €509 million arranged by Natixis): V one offshore wind farm with a capacity of 600 MW; V five solar PV projects with a capacity of 350 MW; V one onshore wind farm with a capacity of 152 MW; V one biomass project with a capacity of 37 MW; V one hydropower project with a capacity of 180 MW.
At the end of 2014, renewable energies accounted for nearly 50% of fi nancing projects undertaken by the GIP team in the electrical power sector.
Strategic outlines and organization of the sustainable development policy 2014 key events
Construction of the offshore turbines should be completed in 2017. Once built, they will supply up to 2,500 gigawatt-hours (GWh) of electricity per year, i.e. the equivalent of the annual energy demand of 785,000 Dutch households or 10% of the country’s population, and will reduce CO
In 2014, Natixis Energéco fi nanced 27 projects (the same number as in 2013) totaling €372 million (of which €204 million attributable to Natixis Energéco).
Energéco has fi nanced solar PV facilities with a capacity of over 42 MW, which is used to grow food crops. These installations meet the needs of Groupe BPCE customers by protecting their crops and making farmsteads more profi table.
Growth in the renewable energy sector is closely linked to technological innovation. In 2014, Natixis Energéco actively contributed to the development of the sector by providing three new fi nancing solutions including an energy storage system. As a result, additional capacity of 29 MW was fi nanced thanks to Energéco’s expertise. In the same vein, the fi rst deal involving concentrated PV (CPV) technology was signed.
Natixis’ Wholesale Banking and Investment Solutions divisions have developed dedicated expertise in this area for the benefi t of their clients.
Natixis’ Wholesale Banking division boasts one of the industry’s largest research teams, combining analysts, economists and strategies in the top international marketplaces.
The objective is to provide Natixis customers with cross-disciplinary expertise, based on joint analyses and targeted research, through the publication of studies and investment recommendations in equities, credit, fi xed income, forex and commodities.
In conjunction with Natixis’ equities and credit research, the SRI research team - consisting of four renowned SRI analysts - offers customers cross-disciplinary expertise centered on an analysis of environmental, social and governance (ESG) criteria focused on identifying risks (operational, regulatory, reputational, social, etc.) and market opportunities. This expertise is combined with the work of fi nancial analysts to form a comprehensive approach to each company’s fundamental and long-term performance.
Mirova has an 11-member SRI research team that offers investors longterm value-creating solutions, not only from a fi nancial standpoint but also from an environmental, economic or social perspective. It takes a global approach to responsible investment: equities, fi xed income, general and renewable energy infrastructures, impact investing (solidarity investments in projects or unlisted companies with a social and/or environmental impact), advice for institutional investors on how to exercise their voting rights, and dialogue with companies.
In 2014, Mirova outshone its peers in the survey published by Thomson Reuters and UKSIF (UK Sustainable Investment and Finance Association), which honors the top European players in Socially Responsible Investment (SRI) and sustainable fi nance. The 2014 survey involved 360 investment professionals in 27 countries. Mirova took 1st place in the “Leading Fund Management Firm Best at SRI/EST” category.
V A clear understanding of the stakes and challenges of sustainable development by the portfolio management teams thanks to Mirova’s extra-financial research: nine thematic studies examining these stakes and challenges, including one that addresses food safety, which was carried out in partnership with Cambridge University.
V Incorporation of ESG criteria in all investment processes: to this end, the Natixis Asset Management teams rely on the ESG analyses performed by Mirova’s research teams on an investment universe spanning over 3,000 companies.
2014 key event A third investment fund dedicated to renewable energy infrastructure projects
Natixis Asset Management is a key player in SRI and solidarity investment in France and Europe. Together with its subsidiary Mirova, it boasted almost €13 billion in assets under management at December 31, 2014, managing a dozen equity, fi xed income and diversifi ed strategies through some 30 different open-ended funds.
Created in partnership with investment fi rm France Active, the “Insertion Emplois” product range is made up of three funds with complementary risk/reward profi les. They had nearly €360 million in assets under management at the end of 2014. In addition to direct subscriptions, these mutual funds derive infl ows from life insurance products, institutional investors and employee savings plans.
Because all the solidarity Employee Share Ownership Plans offered in the employee savings vehicles distributed by Natixis Interépargne and the Groupe BPCE networks have the solidarity portion of their funds invested in Natixis Solidaire, they benefi t from this innovation.
With market share of close to 29.1% (1), Natixis Asset Management and its Mirova subsidiary continue to lead the French market in solidarity investment. In the fi nancial investment strategies segment (solidarity UCITS) of this market, this share increases to 39%.
Natixis Interépargne holds the No. 1 spot in terms of solidarity investment infl ows in France, with market share of 22.9% (versus 19.7% in 2012) (1). It is also the French market leader in solidaritybased employee savings with 37.3% market share (2).
SRI and solidarity investment infl ows recorded strong growth in 2014, both in absolute and relative value terms.
(2) Source: AFG (French Financial Management Association) at June 30, 2014.
SRI and solidarity assets under management (in billions of euros) in Natixis AM open-ended, dedicated and employee savings funds (a) 12.8 9.0 9.3
Following the certifi cation programs conducted in 2014, eight existing buildings were awarded HQE/BBC or HQE Exploitation certifi cation.
The Green Rating tool that AEW Europe helped to establish is in the process of being improved, with the addition of new indicators to assess real estate assets according to SRI criteria. AEW Europe has also conducted energy audit campaigns on building portfolios in order to prepare a plan for cutting energy consumption by 38% in accordance with the Grenelle Environmental law. This is the Greco (Grenelle Compliance) project which, since 2012, has already been completed for a portfolio of nearly 200 properties. Competing against 127 other projects, Greco won an innovation award in 2013 and was discussed in a 2014 publication (4).
In the interest of furthering its initiatives for better managing energy usage, and in order to better monitor the performance of buildings in use, an energy and water consumption monitoring system has been up and running at 60 sites since 2012. Furthermore, development of a general information system for all assets in its portfolio began in 2013. With this system, the properties’ environmental performance can be centrally managed and monitored. A second module (database) was developed in 2014 and the documents are currently being entered into the system.
Various solutions for reducing energy consumption have been implemented, including systems for remotely managing heating systems, low-energy lighting and building envelope upgrades.
(3) HQE: haute qualité environnementale (high environmental quality), a voluntary French standard; BREEAM: Building Research Establishment (BRE) Environmental Assessment Method, a voluntary UK standard; LEED: Leadership in Energy and Environmental Design, a voluntary US standard. BBC: Bâtiment basse consommation (low-energy building).
(4) Book title: “L’effi cacité énergétique du Bâtiment” by Ed Eyrolles (Guy Jover, Richard Franck, Frank Hovorka).
Purchases of certifi ed assets (as a % of new purchases) 50 50 10
Number and type of assessments on the portfolio of existing assets 70 energy audits 50 DPEs 10 Green Rating audits 100 energy audits 200 DPEs 10 Green Rating audits 75 DPE s 10 Green Rating audits
Installation of fl uid meters that can be read remotely 40 20 6
And, in the latest Global Real Estate Sustainability Benchmark (GRESB) survey, Logistis and AEW UK Core Fund, two funds managed by AEW Europe, were awarded the Green Star 2014 ranking for their environmental performances.
French private equity fi rms are members of the Association Française des Investisseurs pour la Croissance (AFIC - French Private Equity Association), which strengthened its commitment to extra-fi nancial criteria with the creation of an ESG commission in February 2013.
The limited partners (LPs) of these fi rms are increasingly calling for them to take ESG factors into account. This is why, at the end of 2013, the Naxicap Partners fund began thinking of ways to incorporate ESG criteria in its investments in order to provide a structured, professional response to the demands of certain clients.
The inclusion of ESG criteria provides additional information during due diligence procedures that can be used to assess risk-related costs as well as the investments needed to meet a given standard (an environmental standard, for example).
After spending one year setting up its organizational structure, developing internal and credit approval procedures, and launching a training program, in 2012 Natixis began applying the Equator Principles in its various businesses offering project fi nance services in any cases where the funds are predominantly allocated to an identifi ed project.
The Natixis business sectors subject to the Equator Principles are mainly infrastructures, energy (onshore and offshore oil and gas), electricity and renewable energy, and mining and metals all round the world.
This organizational structure is based on the principle that both the business lines and the ESR team are involved in assessing and managing transactions.
The business lines are directly in charge of analyzing and monitoring the E&S aspects of transactions, which are considered to be an integral part of the overall assessment of risk quality. Each transaction under review is categorized (A = signifi cant adverse E&S impact, B = limited adverse E&S impact, C = minimal or no adverse E&S impact) according to the International Finance Corporation (IFC) classifi cation. This rating affects the internal credit approval process (see below).
6 SOCIAL AND ENVIRONMENTAL PERFORMANCEStrategic outlines and organization of the sustainable development policy For category A and B transactions, the ESR team conducts its own review of the project’s E&S documentation and the independent consultant’s report, if such a report is required, while the business line is doing its analysis. For transactions arranged by Natixis, the ESR team also assists the business lines to prepare and monitor the independent consultant’s review and to carry out the various steps leading to the fi nancial close (1).
Special attention is focused on transactions hosted in non-designated countries (2) generating potentially high E&S risks.
An E&S Appendix, summarizing the key components in the project’s evaluation, must be presented for any new transaction pending credit approval. This appendix is prepared by the business line and, for category A and B projects, expanded on by the ESR team, which validates or amends the project category and outlines its position and recommendations on the project.
The E&S Appendix is an integral part of the credit application. Accordingly, the various members of the credit approval body study this document before making any decisions. Category A projects follow a special procedure in which the fi nal decision is made by a higher-ranking credit approval body.
The changes ushered in by the EP III amendment were presented to the teams during a training program that will be continued in 2015.
In addition, a number of changes were made that involved taking CO
The current report includes new data that Equator Principles Financial Institutions (EPFIs) are required to provide as of January 1, 2014, in accordance with the June 2013 version of the Equator Principles.
(i) The list of designated countries is available on the website of the Equator Principles Association. Non-designated countries are countries not appearing on this list.
Name of project fi nance transactions that reached fi nancial close in 2014
Natixis implements credit policies designed to supervise the social and environmental risks associated with its fi nancing projects in a number of sensitive sectors such as coal, oil and gas, nuclear power, etc.
In 2014 its environmental impact management scope covered Natixis and most of its French subsidiaries (excluding BPCE Assurances and GEGC). This represents 272,000 m2 of offi ce space and 17,000 workstations, as well as three data centers (two of which are operated for BPCE), covering 94% of Natixis’ scope in France.
Based on calculated carbon emissions (see section [6.4.3.1]), a carbon action plan is applied in accordance with Natixis’ operational effi ciency program. It covers three main areas: V buildings: optimized occupation of work space and reduction of energy consumption; V business travel: rules for travel by rail or air defined in the travel policy; restricted use of taxis and development of videoconferencing; V IT: energy saving systems for computers, stricter rules for providing mobile equipment to employees (cell phones, laptops, etc.), streamlining of the printer pool with the general roll-out of multifunction printers.
Regular communication raises employee awareness of sustainable development in order to reduce their impact on the environment. In 2014, a number of articles were published via internal communication media (intranet, newsletter, magazine, etc.) and events were organized for Sustainable Development Week and European Waste Reduction Week.
Provision of a concierge service: also during Sustainable Development Week, Natixis Asset Management launched a company concierge service for its employees, offering a variety of services (dry-cleaning, shoe repair, purchases, hairdressing, etc.) to improve the quality of their working conditions and help balance out their home and work life.
6.1.2.4 Resources allocated to the prevention of environmental risks and pollution
In 2014, exercises were also conducted to train the maintenance teams in surveillance and alert procedures and in the upkeep of technical facilities where there is a risk of spreading legionella bacteria.
Since 2013, the main technical managers within the Real Estate and Logistics Department have also received training in Groupe BPCE’s regulatory and environmental charter, which specifi es the regulatory and environmental obligations to be observed for each type of outfi tting and improvement operation. This charter also contains standards relating to environmental certifi cations 6.1.3 RESPONSIBLE PURCHASING POLICY
The socially responsible purchasing policy initiated in 2005 is a source of strategic and operational leverage for implementing Natixis’ sustainable development policy.
In 2014, the Purchasing Department also continued to contribute to the Natixis action plan for disabled persons by increasing its use of disability-friendly companies (see below).
The budget allocated to disability-friendly suppliers in 2014 amounted to more than €1.5 million, or the equivalent of 83.44 disabled employees.
Share of purchases managed by the Purchasing Department that incorporate social and environmental criteria (as a %) 91 79 78
Natixis fi rmly believes that career management and the working environment are the key ingredients in building commitment as well as individual and collective effi ciency. It is this belief that drives it to be a responsible employer that is committed to supporting all its employees from the moment they are hired and over the course of their personal and professional development.
Drawing on the strong momentum initiated in 2013, a lot of progress was made in mobility (with close to 1,000 internal transfers, both in France and abroad), infusing the business lines with new talent to continue developing their strategies and giving employees the opportunity to offer their skills to other departments. The new mobility and hiring team, created mid-2014 specifi cally to increase internal transfers, was a key player alongside the HR managers and teams, combining internal consultants’ knowledge of the business lines with hiring expertise. Training initiatives also proved invaluable over the year: 63% of employees received training in 2014, whether to enhance their professional, linguistic or behavioral skills, to consolidate their managerial skills, or to learn a new skill in a new profession.
In addition to increased mobility and career management, the supply of new tools and services also helped Natixis employees to become proactive in developing their career path.
Strategic outlines and organization of the sustainable development policy continued to support a mother and child healthcare program, including a major anti-malaria drive, led by Plan International targeting 18,000 children and 4,000 pregnant women in 52 villages in Togo.
The activities supported by the bank in 2014 are aimed at educating families and improving the availability and quality of healthcare services for children under fi ve and pregnant women. The communities covered by the program, with a population of more than 91,000 people, also benefi t indirectly from the program.
According to the most recent WHO World Malaria Report (1), the number of malaria cases has continued to decline dramatically. Malaria mortality rates dropped by 47% from 2000 to 2013 around the world, and by 54% in Africa.
According to WHO estimates, cancer is a leading cause of death in the world, responsible for 8.2 million deaths in 2012 alone. The number of cancer cases is expected to rise from 14 million in 2012 to 22 million over the course of the next two decades (GLOBOCAN 2012, IARC).
In this way; Natixis’ partnership with the Fondation Gustave Roussy will step up cancer research and probably save several years spent defi ning new treatments.
In 2014, Natixis was a partner in the “Roulons pour le côlon” rollerblading event organized by the Institut Gustave Roussy in March. This event was designed to raise public awareness of colon cancer.
Natixis also conducts several awareness-raising initiatives for its employees, including conferences and videoconferencing events with Institut Gustave Roussy representatives, cancer knowledge quizzes, a cancer intranet site, an internal mobilization event in October 2014 (see inset below), etc.
6 SOCIAL AND ENVIRONMENTAL PERFORMANCEStrategic outlines and organization of the sustainable development policy 6.1.5.2 Employee participation in solidarity-based initiatives
Natixis organized the third annual “The Boost” event, a call for projects to support individual or collective initiatives led by employees in the humanitarian, cultural, scientifi c and sporting fi elds. Project selection, which is subject to a vote by all employees through the Internet, is objective and fair. Four projects received fi nancial support from Natixis in 2014: “Association Rissoise Protection des Animaux”, “Club Perspectives +”, “Association Théodora” and “A chacun ses vacances.”
Since 2011, Natixis managers have been involved in the “Nos Quartiers ont des Talents” program aimed at helping young people from priority neighborhoods or disadvantaged backgrounds to fi nd their fi rst job.
The social and environmental information for 2014 is based on the following standards: V the social and environmental information set out in Article 225 of the Grenelle 2 law, which governs reporting structure; V the GRI 4 framework (1).
The information in this document covers the 2014 fi scal year. The reporting period considered is one full calendar year, running from January 1 to December 31.
In France, barring exceptions, information on social and environmental performance covers the scope of Natixis France, including Natixis S.A. and all its subsidiaries in France, as well as fi nancial interests of more than 50% (Ellisphère, Kompass, Natixis Private Equity).
The Natixis’ consolidated scope is defi ned in Natixis’ strategic plan as the scope of Natixis and its subsidiaries (excluding fi nancial interests).
Natixis and its subsidiaries worldwide excluding fi nancial interests, as indicated in the note below, “List of consolidated Natixis subsidiaries” 16,340 91%
Natixis and its international subsidiaries excluding fi nancial interests , as indicated in the note below, “List of consolidated Natixis subsidiaries” 4,036 23%
Natixis and its international subsidiaries excluding fi nancial interests and excluding NGAM, as indicated in the note below, “List of consolidated Natixis subsidiaries” 1,858 10%
Specifi c methodological information on audited data: V the headcount includes all employees who have an active employment contract with one of Natixis’ legal entities. Interns, apprentices and beneficiaries of a VIE (International Volunteer Program) assignment are not considered. Expatriates and seconded employees are accounted for in their entity of origin; V hires include external recruitment and transfers from Groupe BPCE; V departures include resignations, terminations, retirements, dismissals, contract terminations due to death or incapacity and transfers to BPCE; V SRI and solidarity assets under management include open-ended, dedicated (to Natixis’ clients) and employee savings funds that take into account environmental, social and governance criteria and are managed by Natixis Asset Management; V purchasing that includes sustainable development criteria takes into account contracts within which a sustainable development clause has been signed by the vendor; V the absentee rate is the total number of days absent (due to illness, accidents in the workplace or in transit, maternity or parental leaves, etc.) divided by the total number of employee workdays theoretically available;
Some pollution indicators have not been included as they are considered to be irrelevant given the nature of Natixis’ operations, which do not generate any serious or specifi c pollution: V measures for the prevention, reduction or remediation of discharges into the air, water or ground that are seriously damaging to the environment; V the consideration of noise pollution and all types of pollution specific to a particular activity.
Considering its business sector, occupational illnesses are not signifi cant and do not require a specifi c follow-up.
Media Consulting & Investment France * Companies falling within NGAM’s international scope can include several legal entities.
Year-on-year, and after pro forma adjustments in December 2013, the headcount decreased by 233 FTEs overall in 2014, with contrasting patterns in France and abroad: V an additional decline in headcount due to the restructuring of activities in Wholesale Banking and GAPC (-155 FTEs), Specialized Financial Services (-68 FTEs) and Support Departments (-95 FTEs).
Region 2: Europe excl. France (as a %) 13.2 13.3 15.1
Created in May 2014 as part of the Human Resources Department, the purpose of this team - consisting of internal consultants each specializing in a different business line and a unit focused exclusively on youth employment - is to give new momentum to internal mobility and to balance supply and demand for skills within the group. The team assists the business lines when they are hiring by fi nding the right profi les for open positions, with an emphasis on hiring from within the group. It also helps applicants fi nd the right position for their unique set of skills and aspirations.
Positions fi lled through internal transfers (as a %) 72 6.3.2 COMPENSATION
Natixis’ compensation policy strictly complies with the regulatory framework specifi c to its sectors of economic activity. It also incorporates the fundamental objectives of equality in the workplace and non-discrimination pursued by Natixis.
The governance set up by Natixis in these areas provides for a complete review of its compensation policies and adherence to guidelines when implementing these policies. A detailed description is given in Chapter [2], section [2.4].
Voluntary employee profi t-sharing (in millions of euros) * 112.2 99.7 97.8
85% of Natixis employees in France, working at 36 different companies, are covered by the collective bargaining agreements of the banking and insurance industries. There are, however, eight separate agreements across the whole scope, containing specifi c details depending on the sector.
Natixis launched several initiatives in 2014 to improve working conditions and the balance between private and professional life, including: V telecommuting: this project was launched at various “pilot” subsidiaries and business lines; V concierge services: these are now available at Natixis Asset Management and Natixis Assurances; V parenting: in 2014, Natixis started a program to help its employees find a childcare solution. Natixis entered into a partnership with Babilou, resulting in the allocation of 50 nursery reservations according to predominantly socio-economic criteria. This initiative rounds out the growing number of parenting options in place at the different entities (for example partial coverage of childcare costs was offered to 1,700 NSA employees in 2014).
After applying and receiving approval from the company, the participants in the program can work from home using one of two options: a) either on a regular basis, at a rate of one day per week to work from home or b) on a fl exible schedule, at a rate of four days per month scheduled based on need and with their manager’s approval.
The participants were provided with technology giving them access to their usual applications, data and telephone equipment.
Employee representative bodies, created for the consolidated Natixis France scope, provide a forum for social dialogue and guarantee that all staff are represented.
Amendment to the agreement on the Natixis employee savings plan allowing a capital increase for employees 2.18.2014 2014 profi t-sharing agreement 6.26.2014
In 2014, Natixis initiated a workforce adaptation plan within the scope of Natixis SA in France, with the goal of preserving the Company’s competitiveness and refocusing certain business lines on more buoyant markets.
The collective bargaining negotiations carried out within the consolidated Natixis France scope in 2014 resulted in the adoption of uniform measures that gradually create a Groupwide employment framework.
The Stress Observatory allows every employee to answer a questionnaire when they go for their regular medical checkup and then discuss the results with the Company physician. From a company-wide standpoint, the observatory is used to maintain a statistical database that makes it possible to measure the global stress level within the Company and how it changes over time, based on organizational and geographic criteria. The results are presented each year to the CHSCT.
After three consecutive years of improved “high stress” rates, this indicator rose for the fi rst time since the Observatory was created, from 8.50% to 9.20% in 2014, due in large part to the implementation
On the medical front, Natixis S.A. has a full-service medical department (three company physicians, four clinics, seven nurses) and three company social workers.
Natixis S.A.’s Caen and Reims locations, and all eligible subsidiaries (that have reached the 50-employee threshold), have a CHSCT consisting of employee representatives who, in cooperation with Management and occupational healthcare services, play an active role in all areas that involve health, security and working conditions.
Severity rate of workplace accidents (b) (by number of days of incapacity per thousand hours worked) 0.14 0.15 0.10
Absentee rate for sick leave (including for occupational illness) (c) (as a %) 2.9 2.8 2.6
To help managers gain a better understanding of their activity and key role in the Company, Natixis expanded the range of managerial training courses it offers and innovated with the “M is for Manager” e-learning module.
Campus 4 You is an internal training program offered by approximately 50 Wholesale Banking specialists. Launched in 2011 for the Wholesale Banking teams, it is now open to all Natixis employees.
Its objective is to promote the sharing of knowledge, contribute to skills development and capitalize on the division’s internal expertise in fi nancing, capital markets solutions, current market events, regulations, the customer-based approach, etc.
V Offi cial qualifi cation courses (as a %) 6.9 4.9 9.6 * Provisional consolidated fi gures at February 5, 2015 representing at least 90% of hours worked during the year.
In 2014, Natixis continued to move ahead with its initiatives to promote diversity, based on three priority areas: V gender equality in the workplace; V retention of older employees; V the professional integration and retention of employees with disabilities.
In terms of training, some 50 female employees completed the “Réussir sa carrière au féminin” training module in 2014.
Percentage of women granted individual pay increases (a) (as a %) 53.1 54.4 55.1
The 2012-2014 action plan promotes the retention of employees over 55. It calls for dedicated training and career management programs and access to subsidized part-time work for staff over 58 so as to cater for the aspirations of older members of staff as they reach the end of their careers.
The nine partner associations selected to participate support a variety of causes: disability, environment, children’s services and professional integration. The projects themselves were also varied and complementary in 2015, as they were directly associated with the association’s activity or helped support its operation.
Three conferences on retirement were also held this year and were attended by more than 200 employees. In addition, interested employees were able to take part in individual retirement interviews and in «Preparing for retirement» training initiatives.
The percentage of employees over the age of 55 was 13.7% at end2014 (versus 15.5% at end-2013), including long-service departures, retirements and end-of-career measures under the PAE.
In 2014, Natixis continued to develop a policy to promote the professional integration and retention of employees with disabilities and carried out numerous initiatives under the framework agreement (see inset below). At the end of 2014, the direct employment rate was approximately 2.81%, compared to 2.26% in 2013.
Natixis has undertaken to hire at least 45 employees with disabilities over the three years of the agreement. This commitment also pertains to the recruitment of 30 student interns and at least 50 co-op students.
In 2014, Natixis stepped up its measures to promote subcontracting to disability-friendly companies. It substantially increased the number of invitations to tenders in this sector, primarily by renewing co-contracting, on-site service and supply contracts (see section 6.1.3).
More than 1,100 employees took part in the activities proposed at the “Handi Tour 2014” event. At nearly 15 sites both in the Paris region and throughout the rest of France, several events were organized during Disabled Persons Employment Week (sensory workshops, quizzes, conferences, a play, awareness-raising).
Over the course of 2014, 130 employees received training in the professional integration of disabled persons.
This chapter presents the results of the programs and measures described in section [6.1.2] “Managing our direct impact on the environment”.
Waste-sorting is managed by the Real Estate and Logistics Department and has now been extended to all of Natixis’ buildings. It consists of the following: V sorting and recycling of paper in offices; V collection and special disposal of used ink cartridges and batteries; V recovery of WEEE (Waste Electrical and Electronic Equipment) by recycling companies; V sorting and recycling of plastic pens.
Ordinary industrial waste - not sorted (in metric tons) 413 841 653
Within the ISO 14001-certifi ed operating scope managed by the Real Estate and Logistics Department (77% of offi ce space in France), all waste is sorted: ordinary industrial waste (paper, cardboard, glass, metal, etc.) and hazardous industrial waste (WEEE, solvents, paint, varnish, infectious waste, etc.). Within this scope, 72% is recycled or subject to a special treatment process.
In 2014, water consumption declined in absolute value and was stable in relative value.
In desktop publishing, paper consumption was down slightly to 167 metric tons of printouts in 2014 (excluding Natixis Interépargne). Several of Natixis’ business lines have taken steps to optimize or reduce paper consumption on behalf of customers: V Natixis Intertitres is the first player on the payment voucher market to use 100% recycled paper to print its Chèque de Table® restaurant vouchers. Accompanying documents are also printed on both sides of 100% recycled paper, cutting the quantity of paper used by the production centers in half. Natixis Intertitres launched the Apetiz meal voucher card in 2014. Apetiz is a more eco-friendly and sustainable prepaid payment solution with a three-year validity period, which will help reduce the quantity of packaging and number of deliveries; V several years ago, the Wholesale Banking division’s Global Transaction Banking business line voluntarily switched to electronic client orders and related reporting; V in the Employee Savings Plan business line, Natixis Interépargne encourages account-holders to opt for electronic statements.
Total fuel consumption of buildings and data centers (in m3) 16 20 60
The 2014 carbon footprint assessment showed another 6.4% decline in emissions for Natixis, thanks in large part to reduced energy consumption (power, heating and cooling) and the lower impact of inputs (purchases and services). Emissions per person were stable at 7 metric tons of CO
■ RESULTS OF THE 2014 NATIXIS (FRANCE) GREENHOUSE GAS EMISSIONS ASSESSMENT (IN TCO
A carbon action plan was developed in 2011 and aligned with Natixis’ operational effi ciency program (see section [6.1.2.2]).
In June and October 2014, the ”Mission Handicap” association organized temporary bicycle diagnostics workshops in partnership with Maurice Pilod, an ESAT (vocational rehabilitation center). Under the name ”Petits vélos de Maurice”, these workshops have employed disabled persons since 2004. Natixis employees were able to get free diagnostics of their bicycles (a complete check-up, tire pressure, chain lubrication, nuts and bolts, adjustments of brakes and gears, etc.).
The environmental impact of the company fl eet can be signifi cant. In 2014, for example, over 14 million km were traveled, which is why Natixis is selecting more eco-friendly vehicles under its car policy.
The Real Estate and Logistics department’s car fl eet team increased the number of vehicles it manages to 581 at end-2014.
The car policy in place since 2012 sets forth rules that include limits on CO
Lowering thresholds reduces the environmental impact of the fl eet, particularly with regard to the selection of vehicles offered in the catalogue: V the average for the vehicles in the two top categories is 117 g; V six hybrid vehicles and one electric fleet car are listed.
Number of company and fl eet vehicles managed 581 536 509
Since 2012, these rules have been reconfi rmed and specifi cally sent to the heads of entities and made available to all on the intranet. A travel agency listed since 2012 to cover the worldwide scope has been tasked with applying these rules to travel booked by employees.
Business travel increased signifi cantly in 2014, mainly in terms of long-haul fl ights.
Adapting to climate change is a challenge that is incorporated in Natixis’ activities (indirect impact) and in its operations (direct impact).
It helps develop local employment through its international operations: in the consolidated Natixis scope, more than 4,000 employees work in its offi ces, branches and subsidiaries abroad. Virtually all of these employees are recruited locally.
Finally, Natixis sets up numerous partnerships with local non-profi t organizations, described in section [6.1.5].
In the course of its business, Natixis has dealings with various stakeholders, including but not limited to: Stakeholders Who? Relationship
V Businesses V Institutions V Retail customers V Banque Populaire and Caisse d’Epargne networks
V Groupe BPCE V Active and inactive employees V Individual shareholders
Universities and schools V Business and fi nance universities and schools
Measures taken to safeguard against all forms of corruption are described in section [6.1.1.3] “CSR risk management”.
In terms of consumer protection, Natixis’ employees are obliged to go about their business in an honest and fair way. When a fi nancial product or service is sold, they are subject to a number of rules in the interests of, and to protect, their customers: V customer categorization imposed by the regulations, including professional customers, eligible counterparties and non-professional customers; V an assessment of the suitability and appropriateness of the products and services to be supplied: employees are obliged to check that the customer has the level of competency required to understand and deal with the risks inherent in the product or service offered and that the product meets their investment objectives.