CORPORATE & INVESTMENT BANKING / INVESTMENT SOLUTIONS / SPECIALIZED FINANCIAL SERVICES
Information from Article L. 225-100-3 of the French Commercial Code 205
Statutory Auditors’ special report on related party agreements and commitments 406
ADDITIONAL INFORMATION 495 Statement by the Person responsible for the registration document 495
Finalization of the objectives and roll out of the New Deal plan 6
Natixis was formed by the realization of the following contribution operations: a CNCE contributing to Natexis Banque Populaire certain subsidiaries and shareholdings in corporate, investment and service banking businesses as well as a share of the cooperative investment certificates (CCI) issued since 2004 by each Caisse d’Epargne et de Prévoyance; and a SNC Champion’s contribution to Natexis Banques Populaires of a vehicle set up by the Banque Fédérale des Banques Populaires (BFBP) and the Banques Populaires with the balance of the CCIs’ of Caisses d’Epargne, not contributed by CNCE, previously acquired by SNC Champion from CNCE. In addition, CNCE and SNC Champion have contributed holdings in the share capital of the companies Ixis CIB and Ixis AM that they had previously acquired from SanPaolo IMI.
Between November 18, 2006 and December 5, 2006 CNCE and BFBP (through SNC Champion) offered some of their Natixis shares to the market. This operation took the form of a Retail Public Offering in France for retail investors and a Global Offering for institutional investors within and outside France. Once this operation was completed CNCE and BFBP each held 34.44% in Natixis.
Pursuant to Article L.511-31 of the French Monetary and Finance Code (Code monétaire et financier), BPCE should, as the central body , take any measures necessary with a view, notably, to guaranteeing the liquidity and solvency of Groupe BPCE. Natixis in its capacity as an institution affiliated to BPCE benefits from the Groupe BPCE financial solidarity mechanism. Thus, in the event of a default by Natixis (i) BPCE would firstly provide support using its own regulatory capital under its shareholder responsibility; (ii) if this was insufficient, BPCE would call upon the mutual guarantee fund created by the BPCE, the fund being initially funded for a total of 920 million euros in assets provided jointly by the two Banque Populaire and Caisse d’Epargne networks and which is set to grow through an annual contribution (subject to the amounts which would be used in the event of
Coface, as well as the private equity business, become fi nancial investments managed with the aim of value optimization.
The Corporate and Investment Bank continued its restructure by refocusing on customer transactions and businesses with high added value. Certain businesses, that no longer fi t in with the new strategy, notably due to insuffi cient competitive positions , have been progressively discontinued. Emphasis is placed on market and structured fi nance activities as well as the systematic quest for revenues originating from cross- selling, thanks to the implementation of a dedicated organization. P resence in Asia will be strengthened. A new business head joined Natixis on March 15, 2010.
The optimization of operations with the Groupe BPCE networks and investments in IT tools constitute the major development axes of the Specialized Financial Services business.
The cross selling initiative in the Corporate and Investment Bank, launched in the second half of 2009, has enabled over 200 million euros potential revenue synergies to be confi rmed by 2012. Client service teams have been formed, with the establishment of an account of profi tability per customer and adapted evaluation tools.
The three core businesses have a net banking income objective of 6.7 billion euros by 2012. Natixis objectives for its return on equity (ROE) (above 12%) and operating ratio (around 62%) are confi rmed.
On February 25, 2010, BPCE announced an objective to simplify its structure with the following target structure: TARGET GROUPE BPCE ORGANIZATION CHART (DRAFT)
PRESENTATION OF NATIXIS 1 2009 key fi gures 2009 key fi gures
(c) Excl. GAPC, net income of discontinued activities and restructuring costs, costs related to the creation of Natixis and extraordinary items.
Stock market indexes SBF 80, SBF 120, SBF 250, CAC Next 20 and Euronext 100
(b) Calculated on the number of shares at December 31 of the year concerned.
Jan. 09 Feb. 09 March 09 Apr. 09 May 09 June 09 July 09 Aug. 09 Sept. 09 Oct. 09 Nov. 09 Dec. 09 Jan. 10 Feb. 10 March 10 Apr. 10
During the 2009 fi nancial year, Natixis continued to provide a full range of information services to individual shareholders and the public in general, with three principal tools.
a a toll-free number (numéro vert) (0800 41 41 41) available Mondays to Fridays from 9 a.m. to 6 p.m. (except public holidays) to answer questions about Natixis; a a dedicated e-mail address (actionnaires@natixis.com), managed online by the Individual Shareholder Relations team, that enables those who so wish to ask questions to the c ompany; a A website: www.natixis.com: j that enables access at any time to information about the Company, j that in its “shareholders and investors” section displays Natixis press releases and fi nancial news, j that in its “shareholders corner” presents all editorial content and documents addressed to shareholders and, in particular, quarterly issues of the Lettre aux actionnaires (shareholders newsletter).
In addition there is: a a Natixis Shareholders’ Club, with almost 20,000 members, for shareholders who want to be more closely associated with news of the c ompany. Any shareholder holding at least one nominative share or 50 bearer shares may join the Club. Shareholders’ Club members have access to a dedicated website, whose access is by ID and password provided at the time of joining, in which all information relating to the
Club’s activities is brought together and where members may update their contact details; a a Natixis Shareholders’ Consultative Committee (CCAN ) that comprises twelve members and met twice in 2009.
POLICIES AND RULES FOR DETERMINING COMPENSATION AND BENEFITS OF ALL KINDS PAID TO MEMBERS OF THE CORPORATE BODIES 31
Introduction a This report was prepared in application of Article L.225-37 of the French Commercial Code.
The information it contains takes into consideration, in particular, annex I of European Regulation (EC) 809/2004 of April 29, 2004 as well as the 2009 French securities regulator Autorité des Marchés Financiers - AMF report on corporate governance and internal control published on December 8, 2009 and the Guide to preparing Reference documents, also published by the AMF on December 10, 2009.
a On April 30, 2009, Natixis changed its form of governance from a public limited Company société anonyme with a Supervisory and Executive Board to a société anonyme with a Board of Directors.
Chairman of the Board of Directors First appointed AGM of 04.30.2009 (Chairman of the Board: Board Meeting of 04.30.2009) Term expires: 2015 AGM (b)
Director Permanent representative of BPCE: First appointed: Co-opted by the Board Meeting of 08.25.2009 Term expires: 2015 AGM (b)
Chairman, Compensation Committee First appointed: Board Meeting of 04.30.2009 Term expires: 2015 AGM (b)
Mr. Jean Criton Date of birth: 06.02.1947 Natixis shares held: 2,699
Director First appointed: Co-opted by the Board Meeting of 11.12.2009 Term expires: 2015 AGM (b)
Member, Audit Committee First appointed: Board Meeting of 12.17.2009 Term expires: 2015 AGM (b)
Mrs. Laurence Debroux * Date of birth: 07.25.1969 Natixis shares held: (current)
Director First appointed: Co-opted by the Board Meeting of 04.01.2010 Term expires: 2015 AGM (b)
Chief Strategic offi cer of Sanofi -Aventis 174, avenue de France 75013 Paris
Mr. Stève Gentili Date of birth: 06.05.1949 Natixis shares held: 57,780
Chairman, BRED Banque Populaire 18, quai de la Rapée 75012 Paris
Member, Compensation Committee First appointed: Board Meeting of 04.30.2009 Term expires: 2015 AGM (b)
Chief Executive Offi cer of Banque Populaire Bourgogne Franche-Comté Member of the BPCE Supervisory Board 5 avenue de Bourgogne BP 63 21802 Quétigny cedex * Independe nt director.
Member, Audit Committee First appointed: Board Meeting of 12.17.2009 Term expires: 2015 AGM (a)
Member, Audit Committee First appointed: Board Meeting of 04.30.2009 Term expires: 2015 AGM (a)
Mr. Jean-Charles Naouri * Date of birth: 03.08.1949 Natixis shares held: 2,500
Chairman, Audit Committee First appointed: Board Meeting of 04.30.2009 Term expires: 2015 AGM (a)
Chairman and Chief Executive Offi cer of Euris 83, rue du FaubourgSaint -Honoré 75008 Paris
Director First appointed: Co-opted by the Board Meeting of 11.12.2009 Term expires: 2015 AGM (a)
Member, Compensation Committee First appointed: Board Meeting of 12.17.2009 Term expires: 2015 AGM (a)
Member, Compensation Committee First appointed: Board Meeting of 04.30.2009 Term expires: 2015 AGM (a)
Chairman, Executive Board, Caisse d’Epargne Bretagne – Pays de Loire Member of the BPCE Supervisory Board 8, r ue de Bréa BP 835 44000 Nantes
Mr. Henri Proglio * Date of birth: 06.29.1949 Natixis shares held: 1,000
Vice-Chairman of the Steering and Supervisory Board of Caisse d’Epargne Île-de-France 57, rue du Général-De-Gaulle 95880 Enghien-Les-Bains * Independe nt director.
Name and surname of the executive corporate offi cer Main role in the Company
J MEMBERS OF THE EXECUTIVE COMMITTEE (COMEX) AS AT APRIL 1, 2010
Mr. John Hailer Investment Solutions - Natixis Global Asset Management - US and Asia
Natixis corporate governance, in its current form, is based on corporate bylaws adopted by the Natixis combined Ordinary and Extraordinary Shareholders’ Meeting of April 30, 2009.
In 2009, Natixis changed the way in which it is overseen and managed by adopting, in place of Executive and Supervisory Boards (effective over the period from January 1, 2009 to April 30, 2009), the form of public limited Company ( société anonyme) with a Board of Directors (effective since the AGM of April 30, 2009) as described in Articles L.225-17 et seq. of the French Commercial Code.
In addition, the Natixis Board of Directors also decided, at its meeting on April 30, 2009, to separate the positions of Chairman of the Board and Chief Executive Offi cer. This decision can be explained by the Company’s wish to comply with corporate governance best practices and to guarantee, by virtue of transparency, a better balance of power between management and its control bodies.
Until the end of July 2009, Natixis was owned by two main shareholders: the Banque Fédérale des Banques Populaires and the Caisse Nationale des Caisses d’Epargne (each having a 35.62% interest in Natixis). A number of corporate governance rules relating to the composition and powers of Natixis corporate bodies were determined by a shareholders’ agreement between these main shareholders (1) which aimed, in particular, to guarantee their equal representation on the Board of Directors.
Laurence Debroux is Chief Strategic Offi cer of Sanofi -Aventis. Vincent Bolloré heads and controls the Bolloré Group, which occupies leading positions in several sectors of industry, services and media. Jean-Charles Naouri is Chairman of Euris, the holding Company to one of France’s largest retail groups. Henri Proglio is Chairman and CEO of EDF as well as Chairman of the Board of Véolia Environnement. M. Bernard Oppetit is Chairman of Centaurus Capital.
At least one third of the Natixis Board of Directors are independent members.
(1) Shareholders’ agreement of November 17, 2006 in its amended version as at April 30, 2009, the main terms and conditions of which have been published on the Autorité des Marchés Financiers website.
The Board of Directors has been chaired, since April 30, 2009, by François Pérol, Chairman of the BPCE Executive Board (1).
Changes made to the composition of the Board of Directors since April 30, 2009
The offi ces of fi rst and second Vice-Chairman, which were held by Messrs. Jean-Louis Tourret and Didier Patault respectively, in 2009, were abolished by decision of the Board of Directors on December 17, 2009.
Once the Board of Directors was set up on April 30, 2009, changes were made to its composition: a on May 19, 2009, Luigi Maranzana, a n Italian national and non-voting director , a senior executive of a large banking group, who had hitherto provided the Board with the insight of a European partner, resigned; a on August 25, 2009, further to the resignations of Banque Fédérale des Banques Populaires and Caisse Nationale des Caisses d’Epargne, BPCE and Alain Lemaire were coopted as Directors for the remainder of the terms of office of those handing in their resignation, i.e. until the Natixis General Shareholders’ Meeting held to approve the financial statements for 2014; a on November 12, 2009, further to the resignations of Messrs. Jean Clochet, Jean-Louis Tourret and Francis Henry, Messrs. Jean Criton and Bernard Oppetit were co-opted as Directors for the remainder of the terms of office of those handing in their resignation, i.e. until the Natixis General Shareholders’ Meeting called to approve the financial statements for 2014; a on December 16, 2009, Jean-Claude Créquit resigned from his position as Natixis Director; a on April 1, 2010, following the resignation of Robert Zolade, Laurence Debroux was co-opted as Director for the remainder of the term of office, i.e. until the Natixis General Shareholders’ Meeting called to approve the financial statements for 2014.
In accordance with Article 9 of Natixis bylaws , each director must own at least one thousand (1,000) Company shares during their term of offi ce.
When a director is appointed, their curriculum vitae with a career summary is sent to the other directors and to the shareholders.
In accordance with the law and the bylaws , the Board of Directors sets: a guidelines for the Company’s activities and oversees their implementation. Within the limits of the corporate purpose and the powers expressly granted by law or bylaws to General Shareholders’ Meetings, the Board concerns itself with any matter relating to good business practice and governs the business of the Company through its deliberations. The Board of Directors carries out the audits and controls it considers appropriate; a determines how executive management operates, given that it may only deliberate on the said operations if the agenda containing this item is sent out at least 15 days prior to the Board Meeting and if at least 2/3 of the directors are present or represented; a may appoint a Chief Executive Officer from among the directors or outside their ranks, whom it may dismiss at any time; a if proposed by the Chief Executive Officer, the Board of Directors may appoint one to five individuals, who shall assist the Chief Executive Officer and have the title of Deputy Chief Executive Officer; a convenes all General Shareholders’ Meetings, sets the agenda and executes decisions; a if so proposed by the Chairman, the Board may decide to set up its own Committees study at issues submitted to it for examination by the Board itself or its Chairman. The Board determines the composition and powers of these Committees, for which it is responsible.
In accordance with the law and the bylaws , the Chairman convenes and chairs the Board and organizes and manages its work. He chairs General Shareholders’ Meetings.
Therefore, an independent member of the Board of Directors may not: j be an employee or a corporate offi cer of the Company or the Group, an employee or a director of a shareholder controlling on its own, or in concert, the Company, in accordance with Article L.233-3 of the French Commercial Code, or a Company consolidated by it, and may not have served in such a capacity during the previous fi ve years; j be a corporate offi cer of a Company in which the Company, directly or indirectly, holds a directorship or in which an employee is designated as such or a corporate offi cer of the Company holds a directorship; j be a major customer, supplier, corporate or investment banker of the Company or the Group, or for which the Company accounts for a signifi cant portion of its business; j have a close family connection with an executive of the Company or its Group, have been an auditor of the Company or a Group Company in the previous fi ve years, have been an executive of the Company or one of the Group’s companies in the previous fi ve years, been a member of the Company’s Supervisory Board for more than 12 years, receive or have received additional material compensation from the Company or the Group other than directors’ fees.
T he Ethics and Compliance Charter states, in this regard, that: j each director must devote suffi cient time and attention to performing his or her duties and regularly attend meetings of the Board and Committee or Committees of which he or she is a member. Each director must ensure that he or she acts at all times in the best interests of Natixis and undertakes to defend and promote Natixis’ values, j the directors and Committee members, as well as anyone attending meetings of the Board and its Committees, have a general obligation of confi dentiality on matters discussed at such meetings, as well as on any information of a confi dential nature or information presented as such by its Chairman or the Chief Executive Offi cer, j each director must declare any trading in Company securities, in accordance with the provisions of Article L.621-18-2 of the French Monetary and Financial Code. Members must also inform the Company of the number of shares held as at 31 December each year and of any fi nancial transaction, to enable this information to be disclosed by the Company, j Natixis may also ask each director to provide any information in relation to the trading of listed companies’ securities, necessary for it to fulfi ll its reporting obligations to all authorities such as stock market authorities, both in France and abroad, j d irectors also refrain from carrying out any transactions involving Natixis securities in the 45 days prior to the publication of the Company’s quarterly, interim or full-year results or before a General Shareholders’ Meeting and ending two trading days after the date of the relevant event.
CORPORATE GOVERNANCE 2 Role and operating rules of the corporate bodies j d irectors must refrain from acting in a confl ict of interest with Natixis or the companies that it controls, e.g. when there is a proposed transaction in which a director or a nonvoting member is directly, or indirectly, involved; a evaluation of the Board of Directors: At least once a year, an agenda item will be devoted to evaluating the Board’s operation, with an account of this to be included in Natixis’ annual report (For 2009, see point D); a b oard operating procedures specified in the Internal Rules: In particular, the Internal Rules provide that, except for the adoption of decisions in relation to the preparation of Company and consolidated financial statements and the management report (Company and group), directors participating in a Board Meeting by videoconference or through the use of telecommunication facilities transmitting at least the member’s voice and whose technical characteristics allow for continuous and simultaneous streaming of the proceedings, shall be deemed present for the purposes of calculating the quorum and majority.
Minutes of Board Meetings are prepared and sent out to Company directors.
Throughout the year, the Board also received reports on the work of the Audit and Compensation Committees.
In terms of monitoring activities , the Board approved the Company and consolidated fi nancial statements and received and approved the Natixis strategic plan as well as budget projections for 2010. It was informed, on a regular basis, of correspondence from the Banking Commission (Commission Bancaire) and the AMF. It also prepared draft resolutions for submission to the General Shareholders’ Meeting. It received a regular update on the position with regard to GAPC assets.
In addition to business reports from Executive Management, giving an account of events between Board Meetings and business trends, the Board received a regular update on measures affecting the Company’s organization.
The Board focused, in particular, on the situation created by the international fi nancial crisis and questioned Company management on this matter on a regular basis and listened to the Audit Committee’s observations, in particular, on the impact of the crisis.
(1) From January 1, 2009 to April 30, 2009, Natixis was managed by a Supervisory and Executive Board, then from April 30, 2009, by a Board of Directors. The term “Board” is, therefore, used to refer both to the Supervisory Board and to the Board of Directors, depending on the period in question.
Auditors on said agreements in Chapter 6, “Financial Data”), namely: At its meeting on January 12, 2009: a the commutation agreement in respect of CIFG between Natixis, CIFG, Banque Fédérale des Banques Populaires (BFBP), Caisse Nationale des Caisses d’Epargne (CNCE) and the main CIFG counterparties.
At its meeting of February 25, 2009: a updating contractual documentation in relation to the €25 billion secured bond issue by Banque Fédérale des Banques Populaires (BFBP), in which Natixis was involved as arranger; At its meeting on May 13, 2009: a the shareholders’ loan agreement between Natixis, Banque Fédérale des Banques Populaires (BFBP) and Caisse Nationale des Caisses d’Epargne (CNCE) for €1.5 billion, half of which was provided by BFBP and the other half by CNCE.
At its meeting on July 10, 2009: a tripartite agreements between Natixis, the Société de Financement de l’Économie Française (SFEF) and, respectively, Banque Fédérale des Banques Populaires (BFBP) and Caisse Nationale des Caisses d’Epargne (CNCE).
At its meetings on August 25, 2009 and November 12, 2009: a the agreement between Natixis and BPCE relating to the Natixis protection mechanism and Agreements relating to the GAPC Guarantee between Natixis and BPCE.
In accordance with the Board of Directors’ Internal Rules and those of the AFEP-Medef code, the Board shall assess its work on a yearly basis.
At its meeting on December 17, 2009, the Board decided to use a questionnaire to carry out a self-assessment of its capacity, in 2009, to respond to the expectations of the shareholders appointing it to run the Company.
The assessment had three objectives: a to focus on how the Board operates; a to check that important questions are prepared and debated accordingly; and a to measure directors’ actual contribution to the work of the Board by virtue of their know-how and involvement in discussions.
A summary report of the answers given to the questionnaire was presented to the directors at the Board Meeting held on February 24, 2010.
CORPORATE GOVERNANCE 2 Role and operating rules of the corporate bodies 2 - Specialized Committees: set up by the Board of Directors
The Natixis Board of Directors has two specializ ed Committees: an Audit Committee and a Compensation Committee, each chaired by an independent director.
Two thirds of the Natixis Audit Committee are not independent members, as recommended by the AFEP-Medef code. This composition is justifi ed by the need to represent the different components of its main shareholders (members from Caisse d’Epargne and Banques Populaires groups).
The Natixis Audit Committee has internal rules specifying its powers and its operating procedures that were approved, in their latest version, by the Board of Directors on December 17, 2009.
The Audit Committee has the following responsibilities: a it assists the Board of Directors in its role of preparing the financial statements and the Company’s management report. Within this context, it monitors the quality of the information issued to shareholders and, more generally, performs the duties set out by banking regulations (2) ; a it examines the Company and consolidated annual and interim financial statements as well as the Company’s budget projections and financial documents distributed when the financial statements are approved; a it monitors the independence of the Statutory Auditors, gives its opinion on their selection or renewal of their appointment and examines their schedule of works, the results of their audits and their recommendations as well as any actions taken on the basis of these recommendations; a it gives an opinion on the procedures implemented by the Company to ensure compliance with regulations, as well as the monitoring of the efficacy of internal control and risk management systems; to that end, it receives reports from the Risk Committees of the Company and its principal subsidiaries, as well as risk reporting, notably operational, market or counterparty risks, carried out under the supervision of the Company’s CEO; a it gives its opinion on the appointment or removal of the head of the Inspection Department; a it monitors the implementation of actions based on the conclusions of Inspection and Banking Commission assignments; for this purpose, it may receive reports from the Inspection and Banking Commission in relation to the Company and its subsidiaries; a it approves the Company’s annual internal audit program, including audits of subsidiaries, which should be presented to the Committee at least one week prior to approval; a it gives its opinion on the report presented to it on an annual basis regarding commercial relations between the Company or one or more of its subsidiaries, on the one hand, and all, or part, of the entities forming the Groupe BPCE , on the other hand.
(1) Before Natixis changed the way in which it is managed and administered, the Audit Committee was co-chaired by Messrs. Naouri and Lemaire.
(2) i.e.: CRBF rule 2001-01 of June 26, 2001, concerning internal control of credit institutions and investment fi rms, amending CRBF rule 97-02 of February 21, 1997, as amended by rule 2004-02 of January 15, 2004.
On the subject of the audit of fi nancial statements, the Audit Committee received presentations from the CFO and comments from the Statutory Auditors on the occasion of the approval of the quarterly, interim, and full-year fi nancial statements.
On April 1, 2010, the Compensation Committee had six members: Vincent Bolloré, Chairman and Messrs. Jeannin, Oppetit, Patault, Proglio and Sueur.
Once the Board of Directors, together with a new Compensation Committee, had been set up on April 30, 2009, the following changes were made to the composition of said Committee: a on December 17, 2009, following the resignation of Messrs. Henry and Tourret, the Board appointed Messrs. Oppetit and Sueur as members of the Compensation Committee.
The roles devolved to the Natixis Compensation Committee essentially relate to pay reviews and selection of corporate offi cers. The Compensation Committee’s powers and operating procedures are described in greater detail in a set of Internal Rules, the latest version of which was approved by the Board of Directors on December 17, 2009.
The Compensation Committee is responsible for making proposals to the Company’s Board of Directors on the following issues: Terms of compensation for corporate offi cers
The Compensation Committee met fi ve times in 2009 to give an opinion: a for the period from January 1, 2009 to April 30, 2009: j on the appointment of members of the Company’s Executive Board, j on compensation for the Chairman of the Supervisory Board, j on fees for Supervisory Board members at the start of 2009; a for the period from April 30, 2009 – December 31, 2009: j on compensation for the new Chairman of the Board of Directors for 2009 and 2010, j on the appointment of the CEO as well as calculation of his compensation for 2009 and 2010, j on the review of the planned update of the Compensation Committee’s Internal Rules, j on directors’ fees for the end of 2009 and for 2010, j on compensation for market professionals for 2009, j on the annual review of designation of directors as independent members, and j on the annual review of AFEP-Medef code recommendations.
Natixis Executive Management is directed by the CEO, in accordance with the April 30, 2009 decision of the Board of Directors to separate the offi ces of Chairman of the Board and Chief Executive Offi cer.
Lastly, an Executive Committee (Comex) brings together not only members of the CDG, but also some of the business line and support function managers essential to the Company’s operation. Its role mainly focuses on information and monitoring.
In accordance with Article 15 of the bylaws , the Chief Executive Offi cer is vested with the broadest powers to act on behalf of the Company under all circumstances. He or she exercises those powers within the limits of the corporate purpose and the powers expressly reserved to Shareholders’ Meetings and to the Board of Directors and to the provisions and restrictions contained in the Internal Rules. He or she represents the Company in its relations with outside parties.
C – Work of the Executive Board and the Executive Management Board in 2009
The Executive Chairman or, in his absence, the Chief Executive Offi cer chaired Executive Board Meetings. Executive Board members, without exception, attended all meetings. The Executive Board asked certain members of the Executive Committee to join in Executive Board discussions, when warranted by the nature of the topics raised.
The Executive Board was kept up to date with regard to the progress of the sale of the majority of Natixis’ holding in Caceis to the Crédit Agricole group and validated the way in which this transaction was processed.
Unless major confl icts of agenda prevented them from attending , members of the Executive Management Board attended all meetings. Representatives from business lines or different functions were invited to present projects or policies falling within their departmental remits to the Executive Management Board.
The Executive Management Board reviewed and validated, where necessary during specifi c working meetings, the Bank’s main aims: setting up the BPCE guarantee covering certain GAPC portfolios, defi ning the New Deal strategic plan, monitoring system changes linked, on the one hand, to strengthening the cross-selling policy and, on the other, to intensifying collaborations with Banques Populaires and Caisses d’Epargne networks and fi nally, plans to restructure the support functions. It also monitored operational design and implementation.
The Executive Management Board validated the main management decisions and, in particular, budget review and approval, the framing of mandatory annual negotiations and compensation review policy, the defi nition of general terms and procedures relating to variable compensation for market makers, appointment of senior executives and managers and plans for major investment.
The Executive Management Board monitored Natixis risk management and control measures.
Meetings take place either at the head offi ce or at another place specifi ed in the notice of meeting.
Meetings may be defi ned as ordinary, extraordinary or combined ordinary and extraordinary depending on the topics appearing in the agenda.
Its purpose may also include the appointment or renewal of directors and non-voting members as well as appointment or re-appointment of the Statutory Auditors and, if necessary, the ratifi cation of the co-opting of a member of the Board.
It is convened each time there are decisions concerning a change in the bylaws , notably in the event of a fi nancial transaction affecting the share capital.
It combines the two previous meetings (OGM and EGM) on the same date under the same notice of meeting.
Shareholders’ Meetings are made up of all the shareholders on whose shares all due amounts have been paid-up.
An authorized proxy (namely the shareholder’s spouse or another shareholder) may always represent a shareholder at Shareholders’ Meetings. This proxy may not represent another person.
For holders of nominative shares, such entry in the register by D-3 is suffi cient to enable them to attend the meeting.
With respect to holders of bearer shares, their authorized intermediaries are required to prove their clients’ status as a shareholder directly to the centralizing body of the meeting. They do so by producing a certifi cate that they attach to the voting form or admission card request in the name of the shareholder or the name of the registered intermediary acting on behalf of the shareholder. A certifi cate is also delivered to shareholders wishing to attend the meeting in person and who have not received an admission card by D-3.
According to the provisions of Article 23 of the bylaws , one or several shareholders, representing at least the portion of the share capital required, and acting under the conditions and within the timeframes fi xed by law, have the right to request, by registered letter with confi rmation of receipt, the inclusion of draft resolutions on the agenda of the meeting.
According to the provisions of Article 27 of the bylaws , each shareholder has the right to obtain, under the terms and conditions and at the times fi xed by law, communication of the documents necessary to enable the shareholder to give an informed opinion on the management and control of the Company. The nature of the documents and the terms and conditions for their dispatch or availability are determined by law and regulation.
According to the provisions of Article 25 of the bylaws , each member of the Shareholders’ Meeting is entitled to as many votes as he owns or represents in terms of shares.
According to the provisions of Article 5 of the bylaws , the Company may, under the conditions provided for by the laws and regulations in force, request from any authorized organization or intermediary, communication of all information relating to the holders of shares conferring immediately, or in the future, the right to vote at Shareholders’ Meetings, notably their identity, nationality, address, the number of shares that they own and the restrictions that may be placed on these shares.
AFEP-Medef code recommendations on the compensation of executive corporate offi cers of listed companies are taken into account in the bank’s corporate governance approach. As shown above, the AFEP-Medef code is the one that the Company refers to when preparing the report provided for by Article L.225-37 of the French Commercial Code.
1 - Compensation and benefi ts of all kinds for members of the Board
2 - Compensation and benefi ts of all kinds for members of the Executive Board (over the period January 1, 2009 - April 30, 2009)
The fi xed compensation paid to Philippe Dupont in relation to his duties as Chairman of the Natixis Executive Board for the period from January 1, to March 2, 2009 was €60,083 gross.
The fi xed compensation paid to Dominique Ferrero in relation to his duties as Chairman of the Natixis Executive Board for the period from March 6, to April 30, 2009 was €88,105 gross.
Dominique Ferrero was not paid any variable compensation in relation to his duties as CEO over the period in question.
Dominique Ferrero signed an employment contract with Natexis Banques Populaires (replaced by Natixis) on March 23, 2006. This employment contract was suspended for the duration of his term of offi ce with the Company (i.e. until April 30, 2009).
Between January 1, and April 30, 2009, compensation paid to Jean-Marc Moriani was as follows: a in relation to his employment contract with Natixis, a fixed salary of €100,000 gross; a in relation to his corporate duties, the fixed compensation paid to Jean-Marc Moriani over the period was €242,529 gross, including an adjustment of €175,862 gross paid in 2009 for 2008; a no variable compensation in relation to his corporate duties.
No stock options were allocated to members of the Executive Board in 2009.
Compliance rules applicable to the exercise of options and the sale of shares
No discount is applied to the exercise price of the options. No repurchase hedging operations of securities arising from the exercise of options are authorized for Executive Board members.
For the period January 1, 2009 – April 30, 2009, Dominique Ferrero benefi ted from use of a Company car and a parking space valued at €2,049 gross.
For the period January 1, 2009 – March 2, 2009, Philippe Dupont enjoyed benefi ts in kind (accommodation and Company car), paid for in full by the Banque Fédérale des Banques Populaires.
D – Executive c orporate offi cers’ group pension plan and severance payments
From November 17, 2006 to December 18, 2008, Natixis set up a group pension plan for Executive Board members through an insurance Company , similar to the plan for Banque Populaire bank CEOs.
This plan serves to provide a guaranteed pension income equivalent to a variable percentage, depending on the member’s entry date into the plan, up to a maximum of €370,000, and after deducting all Social Security, ARRCO, AGIRC and other pensions that the member of the Executive Board is entitled to.
The Compensation Committee and the Supervisory Board approved the closure of this plan on December 18, 2008.
For the period from November 17, 2006 to December 18, 2008, Dominique Ferrero and Jean-Marc Moriani became potential benefi ciaries of this plan.
In accordance with the law, we show that the information provided for in Article L.225-100-3 (relating to information likely to have an impact in the event of a public offer) of the French Commercial Code is published in this Natixis annual report.
CORPORATE GOVERNANCE 2 Policies and rules for determining compensation and benefi ts of all kinds paid to members of the corporate bodies 3 - Compensation and benefi ts of all kinds for the CEO (from April 30, 2009)
The fi xed compensation paid to Jean-Marc Moriani in relation to his duties as temporary Natixis CEO for the period from April 30, to May 13, 2009 was €20,000 gross.
Jean-Marc Moriani was not paid any variable compensation in relation to his duties as CEO over the period in question.
J TABLE 1 Summary of the compensation, stock options and shares granted to each executive director
Laurent Mignon, CEO (term of offi ce at Natixis commencing 05.14.2009) €1,010,119 n/a
Jean-Marc Moriani, member of the Executive Board then CEO (term of offi ce at Natixis ending on 05.13.2009) €199,138 €1,003,333
Philippe Dupont, Chairman of the Executive Board (term of offi ce ending on 03.02.2009) €103,037 €651,721 a in relation to his duties at Natixis €60,083 €350,000 a in relation to his duties at BFBP €42,955 €301,721
Dominique Ferrero, CEO then Chairman of the Executive Board (term of offi ce ending on 04.30.2009) n/a €0
Value of performance stocks granted during the fi scal year 2009 2008
Philippe Dupont, Chairman of the Executive Board (term of offi ce ending on 03.02.2009) n/a n/a a in relation to his duties at Natixis n/a n/a a in relation to his duties at BFBP n/a n/a
CORPORATE GOVERNANCE 2 Policies and rules for determining compensation and benefi ts of all kinds paid to members of the corporate bodies
In the tables below: a the expression “amounts due” corresponds to compensation and benefits granted to corporate officers within the context of their duties for the year, irrespective of the date of payment (for example variable compensation awarded for 2008 but paid in 2009 therefore appears both in the column “amounts due” for 2008, and the column “amounts paid” for 2009); a the expression “amounts paid” corresponds to compensation and benefits actually paid to corporate officers within the context of their duties for the year irrespective of the date of allocation.
Fixed compensation in relation to employment contract €110,484 (c ) €110,484 (c) €424,174 €424,174
Benefi ts in kind €1,987 €1,987 €404,160 €404,160 a benefi ts in France (car) €1,987 €1,987 €1,798 €1,798 a benefi ts in relation to secondment to the USA €0 €0 €402,361 (e) €402,361 (e)
(a) On February 24, 2010, the Board of Directors, further to the advice of the Compensation Committee, decided to pay the CEO variable compensation in consideration of the satisfaction of quantitative and qualitative criteria but to freeze 37% of this variable compensation and to make its payment conditional upon confi rmation of Natixis’ recovery in Q1, 2010. 63% of this variable compensation will be deferred for three years and will be subject to performance conditions linked to Natixis’ results. This deferred portion will be index-linked to Natixis shares.
(e) Benefi ts enjoyed by Jean-Marc Moriani in the US between February and August 2008: a accommodation: $210,000; a children’s school fees: $64,389; a voluntary contributions to French social security system: €50,504; a tax and social security contributions on benefi ts in kind: $243,107.
Benefi ts in kind (car, parking space) €2,049 €2,049 €4,270 €4,270
(a) Dominique Ferrero has agreed to continue to give the Company the exclusive benefi t of his skills and to remain as a salaried employee of Natixis, thereby receiving gross monthly compensation of €47,917.
Amounts due Amounts paid Amounts due Amounts paid a in relation to Natixis €60,083 €60,083 €350,000 €350,000 a in relation to BFBP €31,795 €31,795 €245,000 €245,000 a in relation to Natixis €0 €0 €0 €0 a in relation to BFBP €0 €0 €0 €110,000
Banque Fédérale des Banques Populaires (Term of offi ce at Natixis ended on 08.25.2009)
Caisse Nationale des Caisses d’Epargne (Term of offi ce at Natixis ending on 08.25.2009)
In relation to Natixis subsidiaries 5,500 (d) 10,500 10,500 11,550 (b)
Jean-Claude CRÉQUIT (Term of offi ce at Natixis ended on 12.16.2009)
Francis HENRY (Term of offi ce at Natixis ended on 11.12.2009)
In relation to CNCE and BPCE subsidiaries 78,766.67 (c) 67,600 4,500 4,500
In relation to BFBP, BPCE and its subsidiaries 20,664.67 (c) 27,576 18,253 12,852 (b)
In relation to CNCE and BPCE subsidiaries 80,921 97,088 22,700 22,058
Member of the Natixis Audit and Compensation Committees 0 0 10,000 10,000
Personal fi xed compensation in relation to BFBP 156,154 156,154 290,000 290,000
Benefi ts in kind in relation to BFBP 26,678 26,678 45,733 45,733
In relation to CNCE, BPCE and its subsidiaries 25,566.67 (c) 14,400
Benefi ts in kind in relation to CNCE then BPCE 4,290 4,290 n/a n/a
Philippe QUEUILLE (Term of offi ce at Natixis ended on 08.25.2009)
Member of the Natixis Audit Committee 0 0 10,000 13,000 (a)
Ulrich BRIXNER (Term of offi ce at Natixis ending on 02.25 .2009)
Luigi MARANZANA (Term of offi ce at Natixis ending on 05.19.2009)
(a) Including a portion due in relation to directors’ fees for 2007.
J TABLE 4 Subscription or purchase options granted during 2009 to each executive corporate officer by the issuer and by any Group Company
Philippe Dupont n/a n/a €0 0 n/a n/a a including in relation to Natixis n/a n/a €0 0 a including in relation to BFBP n/a n/a €0 0
J TABLE 5 Subscription or purchase options exercised during 2009 by each executive corporate officer
Name of executive corporate offi cer No. and date of plan Number of options exercised during the period Exercise price
Date of the General Shareholders’ Meeting 05.31.2001 05.27.2004 05.19.2005 11.17.2006 05.24.2007
Yvan de LA PORTE du THEIL 43,120 43,120 47,740 61,600 n/a (a)
(a) Taking into account individual waivers of subscription options granted in 2008.
Information on purchase and subscription options 2003 plan 2004 plan 2005 plan 2007 plan 2008 plan 2) Members of the Natixis Executive Board and the Natixis CEO in 2009: 184,800 192,500 215,600 693,000 0
Laurent Mignon n/a n/a n/a n/a n/a a in relation to his duties in the Natixis Group 92,400 100,100 107,800 292,600 0 a in relation to his duties in the Banque Populaire Group 92,400 92,400 107,800 107,800 n/a (a)
Exercising procedures when the plan includes several tranches n/a n/a n/a n/a n/a
Number of shares subscribed as at 12.31.2009 1,393,828 130,130 21,560 0 0
Cumulative number of outstanding subscription options at end of period 4,516,743 6,004,460 7,039,340 14,089,614 4,555,516
J TABLE 9 Options granted to, or exercised by, the top ten employee optionees at Natixis S.A. in 2009, are shown in the table below.
Payments or benefi ts due, or likely to be due, as a result of the termination or change of function
In accordance with the enforcement decree of the EU directive 2003/71 (Article 14.1, paragraph 2), none of the members of the Board of Directors or the Executive Management Board has been convicted of fraud in, at least, the previous fi ve years (minimum), has been subject to bankruptcy, liquidation or receivership during, at least, the previous fi ve years, has been convicted or punished by offi cial or regulatory bodies, has been disqualifi ed from acting as a member of administrative, management or supervisory bodies of an issuer or from involvement in the management or conduct of the business of an issuer during at least the previous fi ve years.
Members of the Natixis Board of Directors include BPCE, its main shareholder as well as salaried employees from the Groupe BPCE . What’s more, business relationships exist between Natixis and the shareholder and directors, BPCE. Natixis considers that this situation does not constitute a confl ict of interest.
INVESTMENT SOLUTIONS 58 Asset management 58 Insurance 62 Private Banking 63
SUPPORT FUNCTIONS 76 Human Resources 76 Information System and Shared Services 82
At December 31, 2009, Natixis’ Corporate and Investment Banking (CIB) division employed 4,565 people (1) in 27 countries. It operates mainly in the fi nancing and capital markets businesses. Natixis’ CIB recorded net banking income of €2.561 billion in 2009, or €3.243 billion excluding Credit Portfolio Management (CPM).
There are also two regional platforms (Asia and North America) and two support functions (Active Risk Management and Supervision on the one hand; Systems, Organization, Operations and Finance on the other hand).
Natixis CIB offers a diversifi ed range of fi nancing and capital markets products and services, using the full range of Natixis’ expertise: advisory services, origination, fi nancing, structuring and institutional placements. The offering is promoted by nearly 1,250 front-offi ce staff (corporate bankers, account managers, sales persons , etc.).
The complex derivatives activities were wound down in 2009. All underlyings and positions were bundled together, along with certain assets, in a dedicated, special-purpose structure (GAPC). The CIB division’s headcount was reduced by 700 in 2009; its fi xed costs were cut by 11% over the year.
In August 2009, the foundations , the New Deal ( strategic plan), were laid. The plan focuses the future development of the CIB division on the deepening of client relationships and growth in the b ank’s strongest business lines. As part of the plan, systematic efforts will be made to promote cross selling (see boxed text). Capital allocation and risk taking are to be aligned with group strategy. Activities in which the b ank’s competitive positions are not suffi ciently strong will be phased out (closure of corporate fi nancing in Germany, refocus of the LBO fi nancing business on Europe and the shipping business on the energy sector), without losing sight of the need to ensure that the Bank’s business portfolio remains diversifi ed and well balanced.
Work assisting clients is done by: a dedicated investment bankers for major client relationships: large corporations, banks and insurance companies, government and public sector clients, investment funds; a 30 account managers spread across seven sector groups; a a network of 12 regional departments in France, including three in the Greater Paris area; a an international network covering Europe, Africa, the Middle East and South America, as well as two regional platforms: Asia, managed in Hong Kong, and North America, managed in New York; all this is done in close cooperation with Natixis’ specialized business line sales staff.
The cross-function Projects Department, focused on the development of new EBICS and Planet Link protocols (the latter being a joint service bureau shared by Natixis and BRED Banque Populaire for SWIFTNet clients), new applications and new products, was kept busy with the putting in place of the European payment-services directive and further work on Single Euro Payment Area (SEPA) Direct Debit (1). Natixis confi rmed its advisory role with its clients, particularly on topical questions such as the European payments system and change in banking communication. It also set up a department devoted to innovation in fl ow management.
Natixis Finance acts as a merger and acquisition advisor in the French market, mainly on midcap deals. Its clients include major French and international groups, small and mediumsized businesses, private equity funds and public entities. Natixis Finance has particular expertise in sectors such as food, business-to-business services, media, property, and public infrastructure and services.
In 2009, Natixis advised Mercialys (asset contribution of Casino) , FSI (investment in Daher), Malteurop (capital increase and debt restructuring), Casino (sale of property assets) and Vinci (acquisition of Captrade by Entrepose Contracting).
The Bank aims to generate more than €200 million in additional revenues by 2012 thanks to the systematization of cross-selling processes. The cross-selling program will be extended to business lines outside the CIB in 2010.
The Debt and Financing Department designs structured fi nancing and investment solutions for Natixis’ corporate and institutional clients. It employs more than 500 people in virtually all of the b ank’s offi ces around the world.
The aim of the new organization is to create unifi ed and substantially sized skill centers, divided into autonomous profi t centers, and to lay down a clear strategy for each of them in their respective markets.
(2) Borrowing-base lending: asset fi nancing where the borrower makes regular declarations of the value of the assets put up as collateral (generally on a weekly or a bi-monthly basis).
(3) Reserve-base lending: structured fi nancing secured by proven or probable reserves of oil or gas, generally used to fi nance production infrastructure.
This business line houses the b ank’s skills in fi nancing assets other than property, and in structured export fi nancing, when these activities concern the fi nancing of international assets.
a The maritime transport financing portfolio benefited from its broad geographical footprint, built on permanent offices in Hong Kong, Singapore, New York and Dubai. 2009 saw a strategic refocus on the energy sector. A respected player in the field, Natixis’ refinancing of LNG tankers for Kogas was cited by Global Trade Review as a Deal of the Year.
Of particular note was the arrangement of financing for the second generation of satellites deployed by Globalstar. A number of Asian projects, including An Hoa and EVN in Vietnam, were also finalized. Three deals won Global Trade Review and Trade Finance Magazine Deal of the Year awards, including the credit facility set up for Eskom, South Africa’s incumbent electricity generator and distributor.
In 2009, the business line continued to downsize its portfolio of commitments, while maintaining its presence alongside its clients, by restructuring existing loans and arranging new deals.
In Europe, Natixis arranged the first RMBS (residential mortgage-backed security) organized and placed publicly in continental Europe since mid-2007, on behalf of Delta Lloyd, a Dutch financial institution. It also set up several covered bond programs, a key source of access to liquidity for European banks. The business has refocused on arranging the financing of debt portfolios and distributing portfoliobacked securities on behalf of the Bank’s clients, particularly insurance companies.
Natixis’ capital markets businesses employ more than 1,400 people. Following a reorganization at end-2008, the b ank decided to focus chiefl y on fl ow products in the equity, interest rate, foreign exchange and commodity markets, and on client services via European, American and Asian sales platforms. Its offering is backed up by respected economic, credit and equity research often rewarded .
Natixis offers its clients investment and hedging products in the interest rate, credit, foreign exchange and commodity markets of OECD countries, and is also expanding its operations in the emerging markets.
Also noteworthy was the Bank’s presence among the 10 most active specialists in French government bonds (SVT), in ninth place (source Agence France Trésor).
The Foreign Exchange Department was cited in the 2009 Euromoney survey as the Most Improved Overall Market Share and by European CEO as the Best Foreign Exchange Broker in France.
Natixis’ teams now focus on short-term refi nancing (1 year and less) and structured products. They are based in Paris, Singapore and New York.
Natixis has a wealth of experience in the equity markets, in the fi elds of brokerage, derivatives, share issuance and Natixis Corporate Solutions, whose activities are described below. 2009 saw the closure of the complex derivatives activities and the start of work on the merging of the brokerage and equity derivatives businesses in the aim of building a unique multifl ow-product platform, as well as providing Natixis with a new source of growth in 2010.
Natixis’ takeover of Natixis Securities (which is responsible for equity brokerage in France) is to be presented at the approval of the General Shareholders’ Meeting to be held on May 27, 2010.
Natixis Securities has a multi-product distribution platform (cash equity, securities lending and borrowing, listed derivatives) for a large client base of 900 clients in Europe, the United Kingdom and the United States. Natixis Securities analysts cover the leading European companies, and once again received numerous awards in 2009 (see boxed text “Research: a strategic priority”, page 57).
Natixis Bleichrœ der Inc. (NBI) offers its American institutions and corporate clients a range of services including brokerage, order execution, prime brokerage, securities lending and borrowing, advisory services and access to the equity markets.
In the primary equity markets, Natixis confi rmed the frontranking status of its dual banner Natixis and Lazard-Natixis – the latter as part of its partnership with Lazard – in France, taking fourth place in terms of the number of deals in 2009 (source: Bloomberg). The team conducted 15 deals as lead manager and bookrunner.
In 2009, Natixis assisted its clients, including Faurecia, Club Méditerranée, NextradioTV, Cellectis, Nicox and Atari, in a large number of capital increases. The team also worked with blue chip companies including Danone, Pernod-Ricard, BNP Paribas and Société Générale. Natixis helped get Maurel & Prom, PSA, Air France-KLM, Altran, Neopost and Capgemini back into the convertible bond market. Lastly, Natixis took part in a growing number of international deals, particularly as part of numerous transactions carried out by fi nancial-sector issuers including Lloyds, Citi, ING and HSBC.
2009 saw a reduction in the number and size of deals in all geographic regions, particularly in Asia and the Middle East. The Corporate Solutions business as a whole remained profi table in 2009.
ACTIVITIES3 Corporate and Investment Banking in the region (ranked in the top 15 Mandated Lead Arrangers in Asia-Pacifi c and the N°3 non-regional bank; source: Project Finance International), with eight mandates won in 2009. A number of high-profi le deals were concluded in 2009, including the refi nancing of Senoko Power (Asia-Pacifi c Power Deal of the Year for PFI) and PNG LNG (Asia-Pacifi c Deal of the Year for PFI). In Structured Export Financing, the ongoing move up the value chain allowed Natixis to win seven mandates as arranger in 2009, for deals conducted on behalf of major clients, primarily in South Korea, Indonesia and Vietnam. In a fl at market for strategic and acquisition financing, teams based in Hong Kong and Sydney confi rmed their positioning as arranger, with a very selective approach to risk. They won two new mandates, one of which with Oriental Brewery in South Korea (Natixis’ fi rst global mandate with KKR), and several awards, including a citation for Best Leveraged Financing by Asia Money and Finance Asia. Lastly, the reinforcement of the regional syndication platform allowed Natixis to take sixth place as Mandated Lead Arranger of syndicated loans in Asia (excluding Japan) in 2009 in terms of the number of deals, and ninth place in terms of volumes (source: Loan Connector).
The strategic and acquisition financing team trimmed its portfolio by more than 10% over the year and is now focused on a core clientele of private equity funds. In 2009, the Debt Solutions business, which works closely with the fi nancing teams, took part in 19 deals, nearly quadrupling the number of deals compared with 2008. Lastly, the securitization teams continued to build up their advisory services activity, particularly in acquisitions and divestments, and continued to advise Lehman Estate on the sale of its property portfolio. They also co-arranged three securitizations of student loans, which benefi ted from private and federal guarantees. At the same time, the investor base contributing to the “Versailles conduit” increased by 70% to US$1.4 billion, thereby increasing the refi nancing capacity of both Natixis and its clients.
In the capital markets, Natixis worked on the construction of a more powerful and broader credit-market platform. Emphasis was placed on interest rate and debt activities. Primary bond market teams took part in eight euro-denominated deals as co-lead and joint bookrunner; in the corporate segment, their involvement, as co-lead manager, extended to approximately 30 dollar- and euro-denominated deals, three times the 2008 level . Emphasis was also placed on the reinforcement of commodity and foreign exchange activities, with the launch of an electronic trading platform for clients.
Artus. The team offers the Bank’s clients research on the economic climate, economic and fi nancial forecasts, analysis of interest rate, foreign exchange and commodity markets, and country assessments. A total of 40 critical countries in the world economy are covered, including the leading emerging markets. Crossing these sources provides a basis for allocation by geography and by asset class.
The credit strategy and analysis teams combine quantitative and fundamental approaches that result in in-depth and independent analyses of 90 private eurozone bond issuers. They also study trends and specifi c issues in the credit market. Their various publications allow clients to identify the best opportunities available on the market at any given time.
It also directs the Restructuring and Special Affairs Department, the Bank’s center of expertise on struggling companies .
Key players in the implementation of the New Deal plan, its teams serve all the Bank’s clients, in France and internationally, managing the processes designed to ensure the smooth execution of transactions initiated by the front offi ces in an effective and secure manner. They are also tasked with keeping up with change in the banking sector, by means of the constant fi ne-tuning of services, IT systems and management processes.
In 2009, the department undertook several projects in all the b ank’s business lines, in France and internationally. The Information Systems Department continued to reinforce frontto -back IT chains. It also pressed ahead with work aimed at pooling and streamlining IT tools, particularly in Asia and North America.
Building on the sound and reinforced foundations of its natural market, Investment Solutions plans to pursue its international expansion. More than 50% of the 3,700 people employed by Investment Solutions already work outside France, mainly with Natixis Global Asset Management: (i) approximal mately 1,600 people in 15 asset management companies in the United States, the world’s leading market for asset management, and (ii) a global distribution platform employing 500 people throughout the world, ranking tenth in the American mutualfund segment.
(1) Cerrulli Ranking (July 2009) based on assets under management at end-2008.
Natixis Global Asset Management is a global player in asset management, with strong positions in Europe (mainly France) and the United States. It is expanding in Asia-Pacifi c and the Middle East.
The asset management business is structured around the Natixis Global Asset Management holding company, which ensures the consistency of overall asset management operations and also has responsibility for developing Natixis Global Associates’ global distribution structure and overseeing the fi nancial and strategic management of roughly 20 specialized asset management companies in Europe, the United States and Asia. It employs a total of 2,800 people, more than 1,5 00 of whom in the United States.
The multi-boutique organizational model, which covers all asset classes and management styles, is designed to leverage the specifi c expertise of each asset management company to the full, while providing the advantages of a global distribution network. It is adapted to a highly varied range of clients: institutional and corporate clients, insurers, banks, and retail banking and private banking customers.
It responds to developments in the worldwide asset management market: consolidation of players, growth of the open-architecture model (strong in the United States and growing in Europe), the emergence of global distributors, increasing demand for integrated and customized high valueadded solutions (particularly for institutional clients, retail banking distributors and private banking customers).
On these foundations, Natixis Global Asset Management plans to renew its investment policy in order to ensure the development of its distribution platform and the constant reinforcement of its expertise in the United States and Europe. It will also examine external growth possibilities in various forms (acquisitions, defi ning partnerships, etc.).
A global distribution platform serving asset management companies: Natixis Global Associates
In the United States, Natixis Global Associates mainly targets distributors of personal banking savings products. Natixis Global Associates ranks tenth on this market (1).
Internationally, Natixis Global Associates sells management company products to institutional clients, via dedicated teams structured on a geographical basis.
Natixis Global Associates is a major driver behind the growth of Natixis Global Asset Management. This allows Natixis’ asset management companies to focus on their core business, namely the generation of performance, while reaping the benefi t of global marketing fi repower and shared support functions.
AEW Europe, one of Europe’s leading providers of real estate investment and asset management advisory services, is present in 11 European countries, with big offi ces in Paris and London, and manages €16.4 billion in real estate assets. It is owned in partnership with Caisse des Dépôts, which has a 40% interest.
As such, Natixis’ European management companies provide a full range of products and services covering all traditional asset classes: money market, interest rates, equities and real estate, as well as expertise in high value-added areas such as structured products, socially responsible investment and multimanagement.
At end-2009, Natixis Asset Management launched its Climate Change management expertise, an investment strategy that factors in climate change issues. Impact Funds Climate Change is a sub-fund of the Luxembourg SICAV Impact Funds aimed at investors who want to invest in companies whose activities contribute to limiting the impact of climate change or help adapt to change. A long-term investment, it targets all investors – institutional, corporate and retail. A dedicated Scientifi c Committee, comprising acknowledged experts, contributes its fi ndings to help management teams determine their strategy.
Trophy – best range of international equity funds; Bronze Trophy – best overall performance; Bronze
Trophy – best range of sector equity funds; j Les Actifs du Patrimoine: two “Actifs d’Or de la Distribution” for the “Natixis Actions US Value” fund, in the retail equity funds over more than 1 year category, and the “Natixis Souverains Euro 3-5 Ans” fund in the retail Fixed Income funds over more than 1 year category; j fi rst prize in the Victoires des Sicav – La Tribune/ Morningstar, for its broad range of Fixed Income funds over 5 years; j Lipper Fund Awards for its Fixed Income range
AEW Europe was awarded, for the third year in a row, a European Property Investment Award by an IPD
(Investment Property Databank). It also obtained the top ranking in the Novethic barometer on the communication of the energy effi ciency of buildings.
Assets under management for the 15 American and Asian subsidiaries stood at US$265 billion at end-2009, a substantial increase of 24% year-on-year. These companies demonstrated their capacity to adapt and recover in a very volatile market environment.
Recently acquired management companies such as Gateway Investment Advisers, specialized in hedged equity funds, and Alpha Simplex, specialized in quantitative and alternative management, launched several funds suited to the new market environment.
Natixis Global Associates also assists American asset management companies in developing sales of their products in Asia-Pacifi c, in Singapore, Japan and Australia. In 2009, it opened an offi ce in Taipei, with the aim of strengthening its presence in Asia.
Main US awards in 2009: Several managers working in the group’s affi liated asset management companies were cited by Morningstar: j David Herro, manager at Harris Associates, was named
US and Asian asset management companies at end-2009 j Loomis Sayles (€98.8 billion in assets under management): equities (growth, core, value) and bonds
small- and midcaps; core and high-yield international bonds; money market (1).
j Absolute Asia Management (€0.8 billion): Asian equities (excluding Japan); emerging Asian equities.
j Natixis Caspian Capital Management (51% owned, €0.2 billion): alternative and money market.
(1) The reorganization of Reich and Tang in 2009 led to the sale of Delafi eld AM and GIA, and the reorganization of the money market activity.
Fire, accidents and general risks insurance continued to grow: fourth-ranking bancassurer in France
Property and casualty insurance, still subject to a very competitive environment characterized by highly segmented offers and pricing pressure, recorded a 3% increase in premium income in 2009, outgrowing the broader market, where the increase averaged just 1% (source: FFSA). The number of contracts in the portfolio reached 795,000, denoting a signifi cant increase of 43,000 contracts over the period. In total, property and casualty insurance premium income was €201.6 million.
In an environment still characterized by a very high saving rate, all-time low short-term interest rates and a limited number of investment alternatives, prospects for infl ows remain favorable in life insurance, despite the uncertainties relating to the economic environment and the capital markets.
Provident and non-life insurance activities will be at the heart of the work done to foster the loyalty of Group BPCE customers and are set to enjoy robust growth.
Main awards won by Natixis Insurance in 2009 j individual life insurance: “Pyramide d’Argent”
Investissement Conseils editorial prize and “Oscar de l’Innovation” in the individual wealth management category for Scintilium; j collective life insurance: ”excellence” citation by
Dossiers de l’Épargne for Ressources Sélection Vie II and IFC Sélection Vie II; j provident insurance: ”excellence” citation by Dossiers de l’Épargne for Tisséa in 2009 and 2010; j non-life insurance: ”excellence” citation by Dossiers de l’Épargne for ASSUR-BP Habitat.
With expertise in wealth management and fi nancial solutions, Natixis’ Private Banking business offers its customers and partners a comprehensive range of products and services to structure and manage the assets of individual investors.
This business has all the necessary wealth management and fi nancial expertise to create high-value-added services.
It has in-depth knowledge of the legal and tax issues facing business owners and senior executives. It has also developed expertise in fi nancial engineering dedicated specifi cally to optimizing and fi nancing the private aspects of corporate fi nance transactions. Lastly, it offers services related to asset management, life insurance, collaterized loans and diversifi ed investments, all of which meet the specifi c requirements of private banking.
Banque Privée 1818 is one of the leading private banking fi rms in France. It has entirely restructured its business around three distribution channels: the branch networks of Groupe BPCE (Banque Populaire, Caisse d’Epargne, Banque Palatine, Société Marseillaise de Crédit, etc.), independent wealth management consultants and direct customers from Natixis in particular.
For direct clients, which mainly consist of large private investors and their families, Banque Privée 1818 offers a range of wealth management services founded on an entirely personalized approach. A focus is placed on the quality of the advice and follow-up provided by a private banker with the support of toplevel experts.
Since its creation in 1990, Natixis Private Banking International has been dedicated to managing the wealth of an internationally mobile clientele of private investors.
Its experience of international legal and tax issues enables it to provide assistance in complex operations involving both business and personal assets. To this end, it manages its customers’ assets and creates innovative and tailor-made solutions.
Natixis’ Specialized Financial Services division has two business lines – Specialized Financing and Financial Services – with similar industrial and distribution strategies.
They develop a large part of the services offered by retail banks to their customers and process all fi nancial and equity market fl ows.
With the exception of the securities business, which is operated by a Natixis department, the activities are organized in subsidiaries. They lie at the heart of the development of corporate banking.
Specialized Financing offers a range of services to retail, professional and corporate customers to optimize their cash management or to support an investment project. These include factoring, sureties and guarantees, lease fi nancing and consumer fi nance services.
Natixis has confi rmed more than €400 million of potential bottom-line synergies by 2013 from its “network synergies” plan, more than half of which are set to come from Specialized Financial Services.
Through its Natixis Factor subsidiary, Natixis creates and manages solutions for companies of all sizes to optimize and manage client receivables: factoring and fi nancing, credit insurance and receivables management.
In the context of a crisis that has strained relations between clients and suppliers, Natixis Factor displayed strong resilience, with stable factoring revenues of €17 billion in the full year and €2.8 billion of outstandings as at December 31, 2009. The third player in the French market with a market share of over 13%, it has continued to expand with the signing of almost 2,000 contracts with customers of the Groupe BPCE networks and Natixis and through partnerships with brokers.
Despite an almost 20% increase in potential revenues from new contracts and tight control of claims, confi rming the soundness of its growth strategy, earnings were hit by the negative impact of lower interest rates and the reduction in inter-company payment times (due to the new provisions introduced on August 4, 2008 by France’s Economic Modernization Act).
Natixis Factor’s growth outlook in 2010 is oriented towards the retail networks of groupe BPCE: an increase in market production, the availability of the business offering in the Caisses d’Epargne network, the rollout of factoring in French overseas territories and an expansion of market share in the large corporate segment.
Natixis still ranks second in the French market for guaranteeing mortgages to individuals, with more than 100,000 new mortgages guaranteed in 2009.
In real estate, Natixis is the second-largest provider of professional guarantees for realtors and real-estate administrators in France, with more than 4,000 guarantees supplied under the Hoguet law in 2009. After the partnership with Foncia in 2008, it confi rmed its position in this sector by forming a partnership with Gestrim Lamy in 2009.
Natixis continues to expand its business in social economy and social housing, with a 35% increase in the number of cases dealt with.
To accelerate the decision-making process with respect to clients, it has adopted a document dematerialization strategy – an original move in profession still attached to paper. This means that the documents required to apply for a mortgage guarantee for individual customers can be transmitted electronically to a client, a corporate client can obtain a guarantee for up to €80,000 of equipment within a few minutes and a market guarantee can be delivered within a few hours.
2010 is set to see the widespread adoption of electronic document transmission within Groupe BPCE for mortgage guarantees, as well as the rollout of dedicated sites for realtors and real estate administrators for requests for guarantees and for new developments under public-private partnerships.
Distributed through Banques Populaires and the Caisses d’Epargne (solely for equipment lease fi nancing), the offering developed by Natixis Lease also addresses Natixis’ large corporate clientele.
It provides a full range of expertise in the consumer fi nance value chain on behalf of banks in the Groupe BPCE network: marketing and design, network organization, credit scoring, management of applications, compliance, collection and litigation.
In 2009, Natixis Financement opened two new Customer Relations Centers in Guadeloupe and Reunion Island, adding to those in Nantes, Marseille and Reims, to meet the specifi c needs of the networks in French overseas territories.
New production increased by 8% in 2009 to €5.3 billion (€900m for revolving credit and €4.4 billion for personal loans).
J CHANGE IN CARRIED OR MANAGED LOAN OUTSTANDINGS (in billions of euros)
Natixis continues to expand this business and has consolidated its leading position in running employee savings accounts in France, with almost 3 million employees accounts under management, a market share of 25.5% (source: AFG on June 30, 2009) and more than 40,000 corporate clients.
Natixis Interépargne has also developed employee savings schemes for professional customers and small-and-mediumsized companies. Distributed by the Banques Populaires and Caisses d’Epargne networks, they represented almost 9,000 new contracts in 2009.
Besides streamlining its organizational structure – a key factor behind the effectiveness and competitiveness of its services – Natixis has widened its product range and adapted it to new market expectations brought about by recent regulatory changes allowing employees to access their savings. It offers companies a communication kit to provide their employees with all the information enabling them to make their choice. In parallel, it is developing new e-services to inform savers in real time of transactions made on their employee savings accounts.
As the only banking group authorized by public authorities to distribute all special payment vouchers, Natixis is stepping up the marketing development of the entire range. Its market share in restaurant vouchers is above 10%.
Titres Cadeaux, a joint-venture with La Banque Postale, recorded signifi cant annual growth, with almost 80 million ”Cadeau Chèque” vouchers issued in 2009 and a 30% increase in distributed vouchers.
In 2010, this business is set to maintain its presence within the Banque Populaire and Caisse d’Epargne networks to consolidate the acquisition of new contracts and to continue expanding their respective market shares in employee savings plans, pension schemes and special payment vouchers. It also aims to build on its presence with large and medium-sized companies by opening collective retirement plans.
J CHANGE IN THE FACIAL VALUE OF SPECIAL PAYMENT VOUCHERS ISSUED OVER 3 YEARS (in millions of euros)
Natixis, through its Natixis Paiements division designs, develops and manages all auxiliary processes and services necessary for the fi nancial conclusion of all types of domestic and international payments for the Banques Populaires and 80 institutions, including major banks.
Through an open information system, Natixis offers banking and fi nancial fi rms exchange and processing services for all payment transactions, in euros and foreign currencies (checks, block and unit transfers, direct debits, card-based transactions etc.), with all interbank exchange platforms.
In the area of payment systems, Natixis is developing a full range of services for the distribution networks, from product design to technical and marketing support.
Volumes in payments and exchange systems (with the exception of large-value transactions) have increased by 5%, while volumes of national and international checks have decreased. Natixis’ role includes acting as technical operator for the Banques Populaires network. It has handled 3.8 billion transactions on COmpensation REtail (CORE), the interbank exchange system for block transactions.
Natixis supports the development of professional and retail markets and prepares the systems necessary to launch new products (contactless payments, multi-visual cards, debit/credit cards, etc.). It has already launched the Prepaid Anywhere platform, which is dedicated to the production of pre-paid cards, and Systempay, a payment platform for e-commerce. It was also preparing to launch in the fi rst quarter of 2010, in partnership with Natixis Financement, a range of debit and credit cards for customers of the Groupe BPCE networks.
New applications for exchange systems and checks have been delivered and efforts to harmonize systems across Europe are underway.
Natixis’ EuroTitres Department provides security custody services for retail and private banking and has the leading open custody platform for these franchises in France. Its services are modular and tailored to the profi le of institutions that give it custody of their assets.
These services are provided to the Banques Populaires and Caisses d’Epargne networks and are also offered to a wide range of clients outside the Group, including network banks, specialized banks with or without networks, fi nancial institutions and private banking.
In 2009, activity was adversely impacted by the market environment, characterized by lower transaction volumes. Natixis recorded a slight reduction of 4% in the number of securities accounts managed to 3.4 million, and the number of transactions was down 11% at 14.5 million. Assets under custody rose by 3% to €311 billion.
In the context of anticipated consolidation among operators in this business, this integrated platform will allow Natixis to rank among the leading players in retail custody services in Europe.
Natixis’ Slib subsidiary produces software solutions for brokers, banks and global clearing members to manage market fl ows from trades on European markets (trading, post-trading and clearing, portfolio management and bookkeeping). BNP Paribas’ stake in Slib is set to provide new international growth opportunities. Today, around 60 institutions in seven countries use Slib solutions.
Coopératifs d’Investissement“ (“Cooperative Investment Certificates“) . As such, the retail banking business of the networks contributes to Natixis’ results.
The Banques Populaires have made successful efforts to broaden the range of services offered to active customers and to capture new customers. The number of clients has increased to almost 6.4 million: more than 3.3 million are active and more than 1.4 million individual customers have their principal account at Banque Populaire. Simplidom, the bank domiciliation transfer service launched in 2009, has contributed to this growth.
The number of customers under the age of 28 has increased by 1.2% and represents more than 22% of individual customers. The Banque Populaire network, which was the fi rst to sign in 2008 an agreement enabling it to sell the “Prêt étudiant garanti par l’État ” (student loan underwritten by the government), is today the leading distributor of this product, with almost 4,000 loans granted and total outstandings of €30 million.
The internet site www.banquedesetudiants.com, created in partnership with the LMDE (national student mutual group), has been overhauled. Banque Populaire offers solutions to LMDE members to fi nance their studies and to rent an apartment without a surety.
On-demand deposits held by private individuals have grown by 5.3%. The main event in 2009 was the end of the distribution monopoly on Livret A accounts: 815,000 Livret A accounts were opened in the Banque Populaire network for an amount totaling €2.8 billion at the end of December 2009.
With the lower interest rates served on liquid savings and the Livret A in the second half of the year, life insurance infl ows recovered to a level in line with that of bancassurers. Assets under management, up 10.5%, rose above €37.7 billion.
The Banque Populaire network also achieved a remarkable performance by selling €227 million of EDF bonds between June 17 and July 6, 2009.
In the mortgage segment, a new dedicated Internet site (www. immobilier.banquepopulaire.fr) offers advice to customers and allows them to simulate loans and repayment. The Crédidom brand now covers the range of mortgages.
The Banque Populaire respected its commitment to the environment by being the fi rst to offer the new Eco PTZ loan, which allows individual homeowners to fi nance energy-saving home improvements in their main residence. These 10-15 year zero-interest loans can go up to €30,000 without meanstested criteria. To support its launch, the Banques Populaires published a detailed educational document in partnership with retailer Point P and the Confederation of craftsmen and small construction fi rms (CAPEB). Some 7,500 Eco PTZ were distributed in 2009.
The number of bank cards is up 4% and the amount of card payments made by individuals has grown by 2.9%. A new three-step payment service for some types of spending is offered to debit card holders for a fee and can be cancelled free of charge. As at December 31, 2009, eight Banques Populaires offered this service and 15,000 customers had subscribed to it.
In 2009, fi nancing savings infl ows continued at a brisk pace, largely to the benefi t of Natixis Assurances life insurance contracts.
As a partner of the principal support networks and the leading distributor of loans for business creations, with a market share of 27.5% (source: Oséo, September 2009), the Banque Populaire network fi nances more than 70,000 projects each year and distributes micro-credits to businesses. With the Réseau Entreprendre network, it helps business founders and buyers take into account sustainable development issues in their projects.
The Banques Populaires have joined forces with the Confederation of Craftsmen and Small Construction Companies to support building craftsmen through the ECO Artisan® program, to meet everyday funding needs and to facilitate company transfers. Their advisers meet each year for the National Week of the Craft Industry and the National Week of business creations and takeovers.
As a partner of the Chambers of Commerce and Industry for the Challenge Commerce et Services, the Banques Populaires help to train the future economic advisers.
As the market leaders in franchise fi nance, they actively seek new partnerships with franchise networks. More than 100 of these networks have enabled their members to benefi t from rapid and exclusive relationships with Banque Populaire branches. In 2009, the Banques Populaires worked on projects with some 300 different brands through the national franchise structure.
They provide active support to young self-employed professionals from the moment they start their activity and have formed several partnerships with professional organizations to this end, including the Order of physical therapists in 2007 and the Order of nurses in 2009.
The Atout Libéral range is regularly enriched with offerings such as installation aid, fi nancing, service agreements and electronic payment systems packages.
The Banque Populaire network also rounds out its range of guarantees to micro-businesses by distributing the products of SACCEF, a Natixis subsidiary. These guarantees cover professional or mixed real estate fi nancing and some targeted client groups, such as self-employed professionals and farmers. Three new SACCEF Agri guarantees were launched in 2009.
With more than 50% of clients equipped with bank cards and almost 160,000 active contracts with retailers at the end of December 2009, the Banque Populaire network is one of the top providers of payment systems for professional customers. Its retailer clients can now accept cards issued by China Union Pay, a leading global card operator.
The Banques Populaires also continues to expand their presence among healthcare professionals with payment terminals that can read the Sesam-Vitale card and process bank-card payments.
In 2009, a new fi xed-priced offering for collecting fees by bank card proved highly successfully: the number of contract subscriptions grew by 71% year-on-year.
The Banques Populaires maintained their volume of employee savings production for micro-business with Fructi Duo, the fi rst product designed for them. The number of contracts grew by 6% to 42,500 for a total amount of almost €2 billion.
The Banques Populaires is the fi nancial partner of 38% of companies with more than 10 employees (source: TNS Sofres survey 2009), or 75,000 companies in total, consolidating their leadership in a segment growing at a net annual rate of close to 5%.
Outstanding business loans grew by 3% to €29.6 billion in 2009.
The no. 3 reference lender to companies generating sales of between €1.5 million and €15 million, the Banques Populaires are also highly active in receivables fi nancing with Natixis Energeco and cash management thanks to Natixis Global Asset Management’s range of products.
In 2009, the Banques Populaires launched a service in partnership with the Cegi subsidiary that enables customers to obtain a market guarantee on-line.
They are the exclusive distributor of the new Coface prospection insurance offering, which fully guarantees the fi nancing of prospection spending abroad if the annual budget does not exceed €100,000.
Also in the fi eld of international expansion, the operations of client companies wishing to invest in Morocco were greatly facilitated by the co-fi nancing and risk-sharing agreement signed at the end of 2008 with Banque Populaire du Maroc. This partnership may be duplicated in other Mediterranean and Asian countries.
The European Investment Bank granted Banque Populaire a €100 million credit line to fi nance small and medium-sized companies. This budget allows the group to offer investment loans at preferential interest rates to companies with less than 250 employees.
The Banques Populaires, including Crédit Coopératif, which is dedicated to companies in the social economy, are developing their positions with institutional clients and the territorial public sector.
Drawing on the expertise of the specialist subsidiaries of Groupe BPCE, they provide services catering to new needs in an evolving economic and regulatory environment, characterized by decentralization and the growing use of banking services in the territorial public sector and the accelerating pace of consolidation in the mutual sector.
Surplus infl ows from life insurance and collective savings plans rose by 140% to €4.2 billion. Ecureuil loans brought in €2.1 billion and infl ows of members’ shares in the Caisses d’Epargne totaled almost €3 billion, four times the amount in 2008. This refl ected the strong confi dence of Caisse d’Epargne customers in their bank.
Caisse d’Epargne also sold €450 million of EDF debt, representing 14% of the total bond issue.
Caisse d’Epargne has continued to strengthen its positions in consumer fi nance. In a declining market, commitments totaled €5.6 billion, up 2.5%.
Caisse d’Epargne signed an agreement with Oséo Garantie to market student loans underwritten by the government. This guarantee fund is designed to help students gain access to bank credit. This facility is in the process of being deployed in the Caisses d’Epargne.
A new offering called Prêt Pour Avancer for loans of up to €7,000 has been deployed to help young people start their active life, fi nd accommodation and become independent.
Caisse d’Epargne is one of the leading distributors of the eco ptz loans launched in 2009 to fi nance thermal renovation work in the home as part of the new French Grenelle environmental law.
Natixis Assurances also experienced strong activity in personal non-life insurance in the Banques Populaires and Foncia network,
Private banking employs 500 account executives who serve 144,000 active clients. It continued to grow in 2009 and made a strong contribution to fi nancial savings infl ows, with a net surplus of €2.3 billion in life insurance.
New products have rounded out the range with a focus on tax optimization, and a new section dedicated to private banking is operational on the Caisse d’Epargne Internet portal.
The new offerings launched in 2009 included a simplifi ed overdraft of up to €7,500 and Facturea, a simple and fl exible factoring package. Created in partnership with Natixis Factor, its pricing varies according to the volume of sales conferred.
The regional development bank (RDB) addresses all regional decision-makers: companies, developers, building fi rms and contractors, the public sector, and players in the social economy and social housing. The RDB draws on the range of expertise within Groupe BPCE to satisfy its clients’ needs. It benefi ts from the scale of the merged Caisses d’Epargne in its dealings with large regional customers.
The new physical format of the RDB’s business centers and its marketing logo “Regional deciders” encapsulate the ambition to make the RDB the growth driver of corporate banking.
This concept not only emphasizes the Group’s support for players active in the development of the regional economy but also consolidates the RDB’s marketing expertise in a single space to improve its collective effectiveness. In 2009, nine RDB business centers were converted according to the new concept.
In 2009, business activity was strong thanks to the development of banking services, with average outstanding demand deposits up 15% to €3.4 billion. Surplus infl ows totaled €818 million. Outstanding loans grew by €6 billion in the context of a weakening demand.
The Caisses d’Epargne raise local investment funds, innovation mutual funds and venture capital funds from their clients. These funds invest in seed, development or business transfer capital across France, thereby contributing to their development. They are managed locally by venture capital specialists.
Caisse d’Epargne has strengthened its positions among all players in the social economy. Loan production has been very strong, rising by 60% to over €1 billion, and fl ow management continues to grow: average daily outstanding demand deposits increased by 11% to €1.3 billion.
The growing sectoral expertise of account executives is refl ected in solutions tailored to different needs: corporate fi nance operations for mutual groups and subsidized fi nancing under the European Investment Bank (EIB) program France Santé Solidarité or backed by the resources of the Livret d’Épargne Populaire and the Livret Développement Durable.
One in three people with social protection is a client of Caisse d’Epargne, or around 284,000 people at the end of 2009, and their savings accounts are managed by a representative or a relative. Assets under management were up 6% to €5.7 billion at the end of 2009.
Caisse d’Epargne continued to actively distribute the EIB’s subsidized loans for the public hospital sector (€150 million) and high environmental quality buildings (€350 million).
Automated cash management, remote transmission, Internet service processing (canteens, school transport, etc.), payments for services with the Cesu (aid for the elderly, handicapped persons, etc.) and dedicated purchase vouchers are just some of the services the Caisses d’Epargne offer to support the territorial public sector on a daily basis.
The group offers a comprehensive range of regulated loans, including loans for the construction of social housing (PLS), loans for the fi rst-time rental of social housing (PSLA) and intermediate rental loans (PLI), as well as a wide range of long-term loans to ensure the fi nancial equilibrium of certain operations. New medium and long-term loans by the Caisse d’Epargne and Crédit Foncier reached almost €2 billion, raising outstanding loans to €9 billion at the end of 2009. Outstanding deposits amounted to €5.6 billion, including €3 billion in Livret A accounts.
They continued to support this sector, with production of loans for real estate clients totaling more than €1.8 billion and outstanding loans and fi nancial guarantees of €5.7 billion.
The support functions are as follows: Communication and sustainable development, Finance, Human Resources, Risks,
Over the entirety of support functions approximately €200 million in cost synergies are expected by 2013.
2010: a key year To respond to the new challenges presented by the group’s
The crisis demonstrated that the principles of fl exibility and adaptability to change are more necessary than ever for the group and its employees. Natixis continues to pursue its policy of sustainable employment by focusing on training and mobility. The objective is to improve employee professional mobility by providing them with greater visibility on vacant positions and more assistance and fl uid mobility channels.
This campaign creates a moment for everyone to talk to their manager while allowing management to assess the performance of employees, as well as to appreciate their skills and to discuss career development.
“Talentis”, the dedicated assessment application, has been rolled out over a wide scope including Natixis S.A., a signifi cant share of international entities (in Europe, Asia and the US) and a large number of entities in France. This application guarantees the traceability of discussions and facilitates the implementation of follow-up measures by Human Resources, such as transfer requests. It plays a major role in the harmonization of Natixis’ Human Resources practices and is due to be extended to other entities in 2010.
In parallel, it has been essential to integrate changes within Natixis to help improve the performance of Natixis employees. A focus has been placed more than ever on adapting the skills of employees to the evolving needs of the business lines and organizational structures. Working closely with the heads
The Human Resources Department has launched a diversity policy. The signing by the CEO in July 2009 of the “Corporate diversity charter” was a fi rst step. An action plan for the next 3 years is in preparation and aims to capitalize on the diversity of employee profi les, experience and skills. It is structured around three principles: keeping senior staff in employment, professional equality between men and women, and the integration of workers with distabilities (For more details, see Chapter 5 – Corporate Social Responsibility).
Natixis continued to pursue its contractual policy in 2009. Some 15 collective agreements were signed by Natixis S.A. concerning the harmonization of collective labor agreements (Gestitres, Ixis Cib, Altaïr and part of the employees of Natixis Financement) and the restructuring of the Personnel Representative Bodies (four collective agreements). At the level of Natixis S.A. and its subsidiaries, three collective agreements were signed regarding the implementation of common procedures (collective wage measures, profi t-sharing and collective retirement plans).
Assistance continued to be provided for reorganizations within the group in 2009, with 43 opinions received from the Central Employee-Representative Committee to help implement reorganizations (CIB, A ccounting, S ecurities Services, Human Resources , etc.), the “Employment Adaptation Plan” and certain disposals (Natixis Développement Maintenance Logiciel, Caceis, Natixis Algérie and Natixis Pramex International).
Elections of employee representatives were held using an electronic voting system for the fi rst time, and in accordance with the new terms of the law of August 20, 2009 relating to union representation.
Legislative changes introduced by the law of December 3, 2008 (and its application decrees of March 30, 2009) regarding compensation for employment include a provision stating that profi t sharing can be paid directly to employee benefi ciaries or give rise to a matching contribution by the employer if it is invested in the Employee Savings Plan.
Natixis Interépargne is responsible for the administration of the PERCO and Natixis Asset Management for its fi nancial management. Both subsidiaries of Natixis S.A., these two companies are leaders on the employee savings market in France.
In accordance with these rules, the compensation policy stipulates that: a guaranteed variable compensations are prohibited, except in the context of hiring financial market professionals and excluding intra-group transfers (limited in this case to one year); a the deferred component must be staggered over at least 3 years following the award of the variable compensation, with installments paid prorata temporis, conditional on presence and performance; a deferred variable compensation must represent at least 50% of the variable compensation awarded to the professionals concerned; a for the highest variable compensation (above €500,000), the deferred portion is 70%; a variable compensation awarded in the form of shares or equivalent instruments must represent at least 50% of the variable compensation awarded to the professionals concerned.
To develop managers’ skills, 60 training sessions bringing together more than 400 managers were organized in 2009. These training sessions allowed about 100 employees recently appointed to managerial positions to learn the fundamentals of management. Sessions addressing the technique of the annual assessment interview were particularly successful. This was linked to efforts instigated by the CEO to motivate managers as part of the rollout of the objectives of the New Deal. The “Manage a team of managers” training program continued to attract participants to these customized sessions hosted by an external coach. The full training program was obviously integrated within the new training management process, alongside business training programs.
ACTIVITIES 3 Support functions 200 newly-hired employees to discover in an enjoyable manner the diversity of Natixis’ business lines and to broaden their understanding of the new strategy. These seminars were also an opportunity for top management to “take the pulse of newlyhired employees” and, for experienced managers, to discuss career management with these new employees.
a In partnership with Groupe BPCE, the “management of managers” entity has established a group of mentors consisting of all managerial staff. They help the Group’s young talents to draw up their career plans within the framework of the “Talents” course. Their task is to advise employees and to assist them in making contacts and seeing through their projects. This initiative helps involve senior management in supporting young talents become tomorrow’s leaders.
a As part of the program to assist employees displaying potential, and in partnership with each division of Natixis, the “management of managerial staff” entity has selected and assisted employees participating in training programs (in particular the Center for Management Improvement) who are expected to hold managerial or senior executive positions in the future.
a Lastly, to consolidate its ties with BPCE, the “management of managerial staff” entity helped to set up the Group’s Summer University and participates in the weekly meetings of the “management of managers” entity to promote the career development of senior executives between the Groupe B PCE’s different companies.
The setting-up of the new organizational structure of the Human Resources administration service took shape in 2009 with the publication of documented procedures and the introduction of homogeneous service contracts for all subsidiaries.
The guidelines and preliminary study for the creation of a common IT platform for the entire Human Resources community resulted in a call for tender at the end of the year. This tool, which is due to be operational in 2011, will make it possible to continue to harmonize practices and to simplify and increase information sharing between the different Human Resources players.
In 2010, Human Resources that meet the challenges facing the Group and its businesses
The objective of the New Deal is to create an integrated company with clearly defi ned roles and responsibilities based on a cross-company approach, the pooling of resources and close supervision.
This initiative is built around 3 transformation projects: “Network synergies”, “Cross-selling and Business Internationalization” and “the Organization of Support functions”.
HELPING THE THREE CORE BUSINESS LINES ADDRESS THE CHALLENGES THEY FACE
It will also assist with the implementation of new strategic projects in this business line and help develop a strong managerial culture.
The Human Resources Department will actively participate in the clarifi cation of the sharing of roles between support functions and the business lines and/or subsidiaries in all the functional areas. This assistance will result in the implementation of tools serving Human Resources policies (career and mobility management, training, diversity, etc.) through recruitment and the development of internal business skills.
The professionalization of its own business line will be a major challenge in 2010 to contribute to Natixis’ transformation projects, with the continuation of business training programs for Human Resources directors and, the implementation of common IT tools (in particular a shared information platform) .
The Human Resources Department will reinforce the coordination of its Labor Relations and Legal Affairs network by continuing regularly to communicate the “social watch” and by producing a disciplinary guide to harmonize practices within Natixis S.A. and a guide to standard contracts within Natixis.
Efforts to harmonize Human Resources policies will be continued in 2010 with the introduction of the employment and expertise plan (GPEC), the application of the “Mobility Charter” signed in 2009, the continuation of Male-Female and Senior staff equality programs and the strengthening of distability management.
The development of the autonomy of managers and employees will be strengthened with the introduction of new tools and the rollout or overhaul of existing tools (Talentis Assessment and Training and Human Resources Contacts) and the regular distribution of practical and information guides (manager guide and newsletter, induction guide for new hires ).
Lastly, the work undertaken by the Human Resources Department will assist managers with the rollout of the New Deal by developing interpersonal contacts between business lines to foster cross-selling. It will also provide its skills and tools to managers to help them develop their professionalism and the performance of their teams.
The Human Resources Department will strengthen its datamining possibilities in 2010 and develop the automated production of the Human Resources scorecard initiated in 2009.
The harmonization project with Management control will be continued with the creation of common organizational standards and the defi nition of a standard for product indicators.
Relations with schools and young employees 2009 in a few fi gures: j 1,102 students or young graduates took up traineeships, sandwich courses or international business internships
j 103 high-school or HNC students were received to discover Natixis.
A privileged partnership with the École Centrale Paris allowed us to meet future graduates on several occasions.
In 2008, Natixis contributed to the creation of a Masters degree in Investment and Market Banking at the university of Paris Dauphine. This new Masters degree is designed to respond to the demands of banking groups and to provide vocational training tailored to CIB: Natixis has received 5 students taking this degree since
September 2008 and offered 4 of them an international business internship at the end of 2009. In autumn 2009, 6 new graduates from the Investment and Market Banking program joined our teams.
Pointoise university was initiated in the spring to offer students taking a Masters degree in Penal and Financial
(MOM) at Lyons 2 university, Natixis participated in the selection of Masters students and met them in
Lastly, thanks to the apprenticeship tax, we have strengthened our ties with higher educational establishments, and we are members of the Corporate faculty of ESC Rouen, the Club Émeraude of the EDHEC
New practices relating to the variable compensation of Natixis’ fi nancial market professionals
These rules take into account the adoption by G20 member states at the Pittsburgh summit on September 24-25, 2009, of standards published by the Financial Stability Committee (FSC) on September 25, 2009.
In accordance with the decision taken by the Supervisory Board on February 24, 2010 based on the advice of the Compensation Committee and the controller of compensation, the following principles have been adopted: a the payment of a deferred component will be staggered over at least 3 years after the award of the variable compensation, with installments paid prorata temporis, conditional on employees respecting certain presence and performance conditions defined individually and collectively; a the proportion of deferred variable compensation will represent more than 50% of the total variable compensation of financial market operators. It is 72% for the highest variable compensations; a variable compensation awarded in the form of Natixis shares or share-based instruments will represent at least 50% of the variable compensation awarded to professionals to whom the aforementioned rules apply; a the deferred component will only be paid if employees respect certain presence and performance criteria defined individually and collectively. These will be linked, depending on the employee, to either the results of the bank or the results of the business line in question over an extended period; a the criteria adopted, in most cases, to measure performance will be gross operating profit (GOP) after bonuses and the cost of risk. This indicator will be measured, depending on the employee, at the level of the business line, and/or the platform, and/or the region; a if performance conditions are not met when the payment of the deferred component is calculated, this deferred component will not be paid and will be irrevocably lost (in application of the malus system).
The implementation of these principles refl ects Natixis’ commitment to respect these professional standards and the strengthening of governance involving the Compensation Committee, the Compliance Department and the Risks Department.
The Specialized Financial Services division continued its major efforts to overhaul and streamline IT systems: the Securities IT system convergence project for EuroTitres, the gradual production rollout of electronic payment systems developed by Partecis, the study on the renovation of the consumer fi nance platform of Natixis Financement by 2012 and the project by Natixis Paiements and CIB-CMO to create a new product that will be sold in France in 2010 – the SEPA direct debit scheme, which is due to replace standing orders.
Banque Privée 1818 chose to adopt a comprehensive solution (operations’ back-offi ce and IT tools) offered by EuroTitres, which will be brought into service in several steps over the course of 2010.
For the fi nancial department, the year 2009 was marked by the end of the overall plan for its accounting systems (SDSS), resulting in the integration in April of capital markets operations in Natixis’ unique accounting tool, Matisse. An invoice dematerialization project was also launched to optimize the receivables accounting process.
All the design studies for these datacenters, from calls-fortender to requests for authorization, were completed in 2008.
After a building phase carned out with a high quality environmental approach (HQE®) (1), Véga was delivered at the end of 2009. Sirius is due to be completed in mid-May 2010. The gradual transfer of IT equipment will not be completed until 2012.
In the context of the New Deal projects for support functions, Natixis will launch projects to bring about greater pooling of its IT production, as well as an optimized organization of its project management and contracting functions. These measures will signifi cantly improve the effi ciency of the IT systems serving the business lines and reduce operating costs through better architectural coherence and a pooling of technical resources.
More than 500 cases were handled, including the maintenance of all IBM servers and the three-year IBM ESSO contract for mainframe and distributed software. Calls-for-tender were launched for Natixis Assurance to contractualize a modelingsimulation platform and to design the internal model for the Solvency 2 project.
An HQE® approach, adopted since the launch of the Antarès program, aims to optimize energy management. A system that exports heat to adjacent buildings, including a nautical center, was developed. In addition as indicated hereinabove, the Véga and Sirius datacenters were designed to fi t in as well as possible with their environments (architecture and landscaping).
As test sites from an environmental perspective, these datacenters will serve as benchmarks for future installations. To this end, Natixis has made a commitment to the Building Scientifi c and Technical Center and the certifi cation organization Certivea to draw up a Datacenter HQE® reference document.
Natixis is one of the pioneers in the private sector in implementing the ISO 14001 standard.
In 2009, Natixis certifi ed the operation and maintenance of its buildings under this standard.
Natixis’ New Deal strategic plan, launched in summer 2009, identifi ed three integrated business lines – CIB, Savings and Specialized Financial Services – as core businesses. Natixis’ other divisions – Coface and Venture Capital – no longer have a suffi cient strategic fi t with Groupe BPCE overall and cannot be operationally integrated within Natixis. Accordingly, they have become fi nancial interests managed in a value optimization perspective.
Structural measures concerning these fi nancial interests have been taken rapidly.
In the fourth quarter of 2009, Coface staged a successful recovery, with a sharp improvement in its claims ratio to 63%.
In addition, Natixis announced on February 19, 2010 that it had entered exclusive negotiations with Axa Private Equity with a view to selling its proprietary venture capital operations in France.
Credit insurance protects companies against the risk of financial default by their customers.
Factoring enables companies to finance their accounts receivable by transferring them to a third party, the factor, who takes responsibility for collection.
Key events in 2009 1 - CRISIS MANAGEMENT PLACED A PRIORITY ON SUPPORTING CLIENTS
a Concerning outstanding guarantees, Coface took measures targeted at the most fragile debtors by continuing to support policyholders overall in a very difficult period: j the systematic rating of all risks, the strengthening of the quality and freshness of purchased or collected information and the reduction in non-investment grade assets made it possible to cut risk-weighted exposure by 35% in 2009 and by 30% compared with the end of 2007, j in contrast, total outstanding guarantees were stable between the end of 2007 and the end of 2009 at €370 billion; a concerning contracts, Coface reinforced declaration measures (notifications of arrears were brought forward), refused to underwrite contracts of more than one year and systematically put in place a new pricing structure for maturing policies to adjust their premiums to the new cost of risk, especially those in deficit. In addition, Coface focused its efforts on existing clients by limiting subscriptions to new contracts. This plan succeeded in bringing Coface back to technical equilibrium at the end of the year, with a healthier credit-insurance portfolio and a new pricing structure.
Through two successive capital increases, Natixis showed its support to Coface’s turnaround: a a first increase of €50 million was decided in June and completed in July 2009. It reflected Coface’s commitment with regard its partners (clients, brokers and reinsurers) to maintain throughout the crisis an excess solvency margin close to its level before the crisis, i.e. approximately €400 million; and a a second increase of €175 million (including the issuance premium) took place in March 2010. Combined with the first increase, it enabled the direct impact on Coface’s balance sheet of the 2009 pre-tax loss (-€223 million) to be offset. The pro forma excess solvency margin at the end of 2009 after this increase reached €575 million, i.e. 27% more than at December 31, 2007, while risk-weighted exposures were less than 30%.
The objective to integrate credit management services more closely led to several scope changes in 2009.
a Coface acquired in February 2009 Dutch company TKB, a credit management specialist, and initiated its integration within Coface Netherlands so as to strengthen Coface’s position in this market, with a market share in receivables management raised to 10%.
At €1,156 million, revenues in the insurance business line were down 0.9% at current scope (-0.2% at constant exchange rates). Quarterly revenue growth averaged 9%, with a fall of 7.1% in the fi nal quarter. This improvement in revenues resulted from three mixed developments: a the net margin in credit insurance underwritings was positive at an estimated 14%. It reflected resilient revenues despite measures to limit underwriting. Risk aversion led to increased demand for protection from companies; a price increase measures had an estimated average annual impact of 6% in 2009; and a the impact of the fall in premium volumes in credit insurance is estimated at -21%; in some industrial sectors, the decline exceeded 40%.
Services revenues were up 2.2%, boosted by the acquisition in February 2009 of TKB in the Netherlands (now a subsidiary of Coface Netherland Services), a credit management specialist (see above) with annual revenues of €8.9 million. On a like-forlike basis, revenues in this business line were down 1.2%.
For more than 20 years, Natixis Private Equity has stood out by its strong presence in the French venture capital market and its original business model dedicated to small and medium-sized companies (with €50 million and €500 million in value). It has €4.4 billion of assets under management (the total of the fair value of investments and stakes in funds).
Natixis Private Equity has a presence in all v enture capital business segments accross industrial sectors.
a The BazarChic group – the market leader in on-line sales of upscale items (luxury goods/designers/fashion) – raised more than €6.5 million from EPF Partners (Development), a third-party management team that Natixis Private Equity sponsors to the tune of 20%. The EPF III venture capital fund subscribed to a capital increase designed to reinforce the capital of BazarChic, which has also established ties with the NGR group (buying hub and its stores). Following this operation, founders Liberty Veryny and Nathalie Gillier maintained a majority interest. The Figaro group, which was already a shareholder in BazarChic, chose to support this operation by renewing existing agreements.
a Acquisition of Mundo Verde – retail sales of natural and wellbeing products – for €4.9 million by Axxon Group (Transfer), a proprietary team sponsored by Natixis Private Equity.
As part of the shift of Natixis Private Equity towards third-party management, Natixis’ Venture Capital division considered merging N.I. Partners and iXEN Partners to consolidate its presence in French midcaps. This new entity would consist of around 20 highly experienced professional investors. The strategy under consideration would involve minority and majority investments for a unit amount of between €10 million and €80 million in SMEs with revenues of €50-500 million. It would focus on injecting capital into growing companies and on complex capital changes and transfers alongside family shareholders or experienced management teams.
On February 19, 2010, Natixis announced that it was in exclusive negotiations with Axa Private Equity (press releases of February 19 and March 15) with a view to selling its proprietary venture capital businesses in France. An impairment charge of €35 million, which corresponds to the difference between the total IFRS value of the portfolio in question and the offer price, was recorded in the accounts of the fourth quarter of 2009.
In 2008, Natixis established a division, known as GAPC (Gestion Active des Portefeuilles Cantonnés - Workout Portfolio Management) in order to (i) isolate the assets that were most impacted by the crisis and those that are no longer felt to fi t the new strategic direction of Natixis and (ii) progressively offl oad these assets by means of active management that ensures the proper balance between speeding up the return of capital and the resale price of the assets. The assets held by GAPC, the organization of GAPC as well as the governance structure put in place are described below.
The process for determining the scope of the GAPC portfolio was as follows: December 2008 a Approval of the plan to refocus Corporate and Investment Banking (CIB): CIB’s operations were split into a segment known as “CIB continuing activities”, consisting of the operations to be pursued, and another containing the assets to be run off within GAPC. This separation was intended to ensure optimal proactive management of the assets segregated within GAPC, to protect the operations retained within “CIB continuing activities”, and to highlight the performance of the operations within “CIB continuing activities”.
January 2009 a Detailed selection of segregated assets within derivative portfolios.
Second half 2009 a Valuation of assets by external advisers using base case and stress case scenarios.
a Change in governance and GAPC spun out of CIB : GAPC henceforth reports to executive management .
a Approval and announcement in August 2009 of the principle of the guarantee provided by BPCE to Natixis (the “Guarantee”).
a Formal approval of the Guarantee by the corporate bodies of BPCE and of Natixis and the implementation of the Guarantee in November 2009 (retroactive effect to July 1, 2009).
The identifi cation of assets which were segregated was primarily done on the basis of three criteria: (i) assets or operations that did not or no longer offered synergies with the CIB continuing activities having regard to CIB’s new directions laid out in 2009; (ii) assets or operations offering poor returns on the capital or cash tied up; (iii) assets or operations with excessive risk profi les or offering insuffi cient liquidity.
Overall, GAPC’s 2009 Net Banking Income (“NBI”) amounted to - €1.8 billion after factoring in the Guarantee applicable in the second half.
This study concluded that the valuation in the Natixis fi nancial statements of these assets refl ected the losses at completion expected in the event of a stress scenario. Indeed, the external valuation carried out amounted to a total portfolio value of €36.6 billion. The assumptions made were downgraded with respect to certain digital assets at the request of Natixis management, trimming €2 billion off this value (€34.6 billion), ending up very close to the value at which these assets are carried in the Natixis accounts (€34.4 billion). (See Appendix 1 of this chapter).
The Guarantee covers the credit assets, except for complex credit derivative portfolios and RMBS portfolios insured by the US Agencies (FNMA known as Fannie Mae, FHLMC known as Freddie Mac) but including the hedging of risks on counterparties not providing collateral. The credit portfolio, which represented a notional amount of €40.7 billion when the Guarantee was established, stood at €37.4 billion at December 31, 2009 (see Appendix 1 of this chapter).
The general mechanism behind the Guarantee is based on the establishment: (i) of two Total Return Swap agreements (“TRS”), one in dollars and the other in euros covering 85% of the net value of the assets recognized in the trading portfolio and risks on counterparties not providing collateral. The purpose of these TRS is to transfer 85% of the gains or losses of the accounting units in which the assets are recognized at their fair value through profit or loss. On top of these two TRS, Natixis purchased an option from BPCE (the “Option”) allowing it, should it be exercised, to recover, in 10 years’ time, the capitalized net performance of the portfolios covered by the TRS and to terminate the TRS; (ii) a financial guarantee covering 85% of the nominal value of the assets recognized pursuant to IFRS as Loans and Receivables (“L&R”) and as available-for-sale assets (“AFS”), as determined on the date of the coming into force of the guarantee (namely June 30, 2009), less any amortization expensed prior to June 30, 2009. Pursuant to the terms of this financial guarantee, in the event of nonpayment confirmed on the scheduled contractual payment date of sums due in respect of any of the assets in the guaranteed portfolio, Natixis will be paid by BPCE from the first euro up to 85% of the amount due. The payment will be made in the currency in which the defaulting asset is denominated. The expiry date of the guarantee enjoyed by Natixis is that of the asset in the guaranteed portfolio with the longest maturity – currently April 28, 2099 – plus nine months (it being noted that this date may be brought forward to the date of termination of the guarantee in the event of a change in control at Natixis within the meaning of Art L.233-3 of the French Commercial Code). The expiry date of the financial guarantee is the date from which Natixis is no longer required to pay over to BPCE the sums recovered on assets in the guaranteed portfolio having defaulted. It post-dates the expiry date of the guarantee by 15 years.
The Guarantee covers portfolio assets held both by Natixis S.A. and by its subsidiaries and agreements between Natixis S.A. and its subsidiaries have been put in place with respect to this mechanism.
Over the fi rst six months in which the Guarantee mechanism applied (namely the second half of 2009), the impact on the Natixis fi nancial statements was -€19 million. Over this period, disposals represented a €82.3 million nominal amount for assets covered by the fi nancial guarantee, and a €1.08 billion nominal amount for assets under the TRS, with a net impact on results before the Guarantee of +€7.7 million.
The terms and conditions of the agreements constituting the Guarantee were deemed reasonable and balanced from a fi nancial perspective for Natixis by Mediobanca (see Appendix 2 of this chapter).
(in billions of euros) Assets covered by the fi nancial guarentee Assets under the TRS + option Total assets
The breakdown of the assets covered by the Guarantee is as follows:
The implementation of the Guarantee was accompanied by a change in governance at the end of summer 2009 resulting in: The establishment of a CSG (Comité de Suivi de la Garantie - Guarantee Monitoring Committee), responsible solely for the GAPC scope covered by the Guarantee: a the members of the CSG are the Executive Chairman of BPCE and the Chief Executive Officer of Natixis. Heads of finance, risk, legal affairs and strategy of BPCE and Natixis are systematically invited to the meetings; a the CSG meets every quarter and can also be convened at will when circumstances so require; a in order to be in a position to properly carry out its responsibilities, the CSG receives regular reports of necessary information and follow-up on issues dealt with by other Committees connected with the Guarantee or the guaranteed assets; a the CSG is the decision-making body for all issues relating to the Guarantee. It is notably responsible for monitoring the proper performance of the Guarantee and in this respect may intervene in any decision, or any plans, of the CGAC (Comité de Gestion des Actifs Cantonnés - Segregated Assets Management Committee), likely to have an impact on the Guarantee mechanism and/or the obligations of Natixis or of BPCE.
Transformation of the CRPC (Comité des Risques du Portefeuille Cantonné - Segregated Portfolio Risks Committee) into a CGAC (Comité de Gestion des Actifs Cantonnés - Segregated Assets Management Committee), responsible for the whole GAPC scope, with the involvement of BPCE with respect to the sub-scope covered by the Guarantee.
a Decisions are taken by the CGAC Chairman (namely the Chief Executive Officer of Natixis) following discussion.
a Natixis Risk Department, Natixis Finance Department and BPCE’s representatives are each completely free to add items felt relevant to the CGAC agenda.
(1) Excluding RMBS US Agencies portfolio (Net value at 06.30.2009: €3.6 billion)
The objective of the implementation of the guarantee remains unchanged a Reduce the volatility of Natixis’ earnings; a Improve Natixis’ solvency.
“The certifi cate of Mediobanca France (Paris branch of Mediobanca - Banca di Credito Finanziario S.p.A.), 43 rue de la Bienfaisance, F -75008 Paris, acting as independent expert, appears below in its comprehensive form, with the consent of Mediobanca, in order to provide better information and understanding of the Guarantee mechanism of GAPC.”
OVERVIEW OF THE COMPANY’S POSITION AND BACKGROUND TO THE IMPLEMENTATION OF THE GUARANTEE
The second part of the Guarantee covers, on one hand, the assets at fair value through profi t or loss up to 85% of their net value at June 30, 2009 (€23.5 billion) and, on the other hand, 85% of the risk on counterparties not providing collateral relating to the CDPC portfolio (for which €0.7 billion in provisions were recognized at June 30, 2009), and takes the form of two Total Return Swaps (“TRS”), one in euros and the other in dollars. The purpose of the TRS is to transfer 85% of the gains and losses recognized (unrealized and/or realized) on the portfolio of instruments at fair value through profi t or loss from July 1, 2009 (including in particular the principal, interest, premiums and commissions, fl ows from hedging instruments associated with the asset, and positive balance on termination), less a fi xed amount corresponding to the fi nancing cost of these assets for the Company. By means of a contractually agreed adjustment mechanism, any difference between the two branches of each of the TRS will be paid at year-end by one or other party to the TRS such that fi nancially, the positive net balance of the gains and losses on the portfolio net of the fi nancing cost is transferred to BPCE while the Company will be compensated by BPCE in the event of a negative net balance. The TRS agreed between BPCE and the Company are comprehensive agreements covering 85% of the gains and losses recognized since July 1, 2009 on some assets carried by Natixis S.A. or subsidiaries. Natixis S.A. will in parallel implement a mirror agreement with each of its subsidiaries covering the assets carried by the subsidiary. In addition to these two TRS, the Company purchased a call option from BPCE allowing it, should it be exercised, to recover, in 10 years’ time, the capitalized positive net performance of the portfolio (“cash settlement”) in consideration for the payment of a €367 million premium. In addition to the payment of this “cash settlement”, the exercise of the call option will trigger the application between BPCE and the Company of two TRS with reverse terms to the TRS initially agreed.
With a view to drawing up this certifi cate we reviewed the following items between October 7 and November 6, 2009: I. an overview of the GAPC asset portfolio covered by the Guarantee, the final version of which was sent to us by the Company on October 23, 2009; II. the working documents of the Company and of its financial adviser JPMorgan on the structure and financial terms of the Guarantee; III. the memorandum of understanding signed on August 25, 2009 by the Company and BPCE, as well as the draft term sheet and agreements formalizing the terms and conditions of the Guarantee; IV. the answers given to our questions by the Company’s Financial Management Department and Tax Department, in particular regarding the prudential, accounting and tax issues surrounding the transaction; V. the Company’s press releases and presentation to analysts dated August 26, 2009 detailing the terms of the Guarantee upon publication of its first-half 2009 results as well as the update to the registration document dated September 8, 2009; VI. the performance before and after the announcement of the implementation of the Guarantee of the stock price of ordinary shares and the Company’s refinancing terms as well as the research reports published on the Company;
Regarding the fi nancial terms of the Guarantee, we sought to compare them to market benchmarks. It became clear that given the size of the portfolio, there was likely no counterparty in the market to take BPCE’s place at June 30, 2009. By nevertheless assuming that there was such a counterparty, we sought to compare the cost of the guarantee instruments to a theoretical market cost. We found that the cost of the TRS combined with the call option, the combination of which is equivalent to a synthetic put option, was no higher than that of a put option having regard to the Black & Scholes formula used by BPCE and the Company to negotiate the cost of the call option. Moreover, we were informed that the TRS did not involve the Company paying a commercial spread and included no invoicing of the cost of capital tied up. Lastly, the counterparty paid in respect of the implementation of the guarantee on the L&R and AFS assets is below the level of provisions recognized at June 30, 2009, and the theoretical cost of the disposal or deconsolidation of these assets.
We fi nally verifi ed that the alternatives to implementing the Guarantee enabling the Company’s capital to be strengthened, whether by means of recourse to its key shareholder, the market or the State, did not provide the same benefi ts at a lower cost for the Company. In this respect, we notably reviewed the following options: capital increase, issue of preference shares to the State, hybrid issues or even the disposal of GAPC assets.
This certifi cate is based on the conditions prevailing on the date on which the Guarantee comes into force, notably the Company’s fi nancial position and the composition of the guaranteed portfolio (pro-forma of adjustments taking place after this date) at June 30, 2009, as well as economic and market conditions prior to the announcement of the Guarantee. It should be noted that any material change to the data and information provided to us or that we used and, more broadly, any subsequent development could affect this certifi cate without there being any obligation on us to update, revise or confi rm it.
This certifi cate is exclusively for the Board of Directors for the purposes of its own assessment of the Guarantee and may not be used or serve any other purpose nor confer any right on any third party.
This certifi cate may be published in the document provided to Company shareholders at the General Shareholders’ Meeting called to approve the 2009 fi nancial statements and which will be called upon to deliberate on the terms of the guarantee, in 2010. This certifi cate may not be otherwise used, taken into consideration, disclosed, intended for or communicated to, in whole or in part, by any means whatsoever, anybody and for any purpose whatsoever without the prior written agreement of Mediobanca.
NRE * APPENDICES – ENVIRONMENTAL INFORMATION 125 * NRE : French law on ”new economic regulations”.
Natixis’ commitment to sustainable development is applied to all its business lines. Working alongside national and international bodies actively pursuing sustainable development initiatives, Natixis is among the leading fi nanciers of renewable energy projects and managers of funds dedicated to countering global warming.
In the Asset Management fi eld, Natixis has more than 25 years experience and is one of France’s leading players in Socially
Lastly, Natixis develops partnerships with associations which enable it to reach out to civil society, and in 2009 it reiterated its 5-year commitment to the struggle against malaria with NGOs and research Institutes.
In France, Natixis is a member of the Observatory for Corporate Social Responsibility (Observatoire sur la responsabilité sociale des enterprises or ORSE) and of IMS-Entreprendre pour la Cité, a French association which helps companies meet their social responsibility commitments.
In 2009, Natixis Lease, the group’s leasing activity, participated in fi nancing 15 solar power plants, 9 wind farms and one municipal waste biogas installation via its subsidiary Energeco.
In its project financing activity, Natixis fi nanced eight renewable energy operations representing a total capacity of 1,620 megawatts: 5 wind farms, 2 solar power plants, as well as assets in mixed energy sectors such as geothermal power/ wind/solar.
Natixis Environnement & Infrastructures manages over €1 billion through six investment funds specializing in environmental engineering and sustainable infrastructures: the FIDEME and EuroFIDEME 2 funds, specialized in fi nancing renewable energies, the European Carbon Fund (ECF) and European Kyoto Fund (EKF), specialized in carbon fi nancing and the struggle against global warming, and the FIDEPPP and Cube infrastructures funds, specialized in Public-Private Partnerships (PPPs).
had fi nanced 23 projects in 7 Latin American countries of , North Africa and Asia, in particular in renewable energies, methane recovery and energy effi ciency.
These projects supported by ECF contribute to a total reduction of 65 million metric tons of CO
j One of the leaders of SRI management (open-end funds) in France and in Europe (France: Novethic’s half-yearly indicator dated November 2009; Europe: Base Feri).
In 2009, Natixis AM strengthened its SRI and solidarity offer with the creation of the solidarity fund Insertion Emplois Sérénité, the launch of the thematic fund Impact Funds Climate Change and the development of its solidarity management via the venture capital mutual fund (FCPR) Natixis Solidaire.
In 2009, Natixis Interépargne expanded its range of FCPE/ FCPR mutual funds labeled in the market for solidarity employee savings, with the launch of FCPE ES-PL Solidaire BP, FCPE Natixis ES Insertion Emplois Solidaire, Impact ISR Rendement Solidaire, Natixis Avenir Équilibre Solidaire and Natixis Élan Équilibre Solidaire.
Natixis Interépargne and Natixis AM are leaders on the French market for Solidarity Employee Savings with 46.8%
of market share (2009 Edition of Finansol’s baromètre professionnel des fi nances solidaires).
The indicators show a reduction in our consumption of energy, water and paper, (see NRE appendices in chapter 5).
Our waste sorting organization, set up in 2005, has now reached maturity, with tangible results at the different business lines: paper, batteries, cartridges, IT material, offi ce automation equipment and telephones. T hese materials are now processed in accordance with the regulations, recycled or re-used. (see NRE appendices in chapter 5)
emissions was initiated in 2006 in the framework of Natixis’ car policy; a carpooling program: This program enables Natixis employees working in the Paris region, by using geographical information which matches supply with demand, to share their vehicles, whether for commuting purposes or for travel between corporate premises.
During 2009, Natixis continued and strengthened the Company policy in terms of promotion of diversity. A s ignatory to the Diversity Charter, Natixis has confi rmed its commitment to a labor policy founded on integration via employment, respect of equal opportunities, prevention of discriminations, and the promotion of a diversity refl ecting the diversity of the Company.
A Diversity Manager position was created. This manager will be responsible for proposing and conducting a diversity policy and action plans throughout the
This policy will be rolled out by the Human Resources teams in the business lines and subsidiaries via the implementation of projects and the integration of diversity principles and objectives into the “Human Resources
The main areas of Natixis’ commitment focus on keeping employees aged 55 and over employed, with a target of pushing back the average retirement age by 3 months per year. The Human Resources managers have been instructed to conduct extensive interviews with older members of staff in order to establish a full summary of their experience, to identify their aspirations and career perspectives and to establish an appropriate action plan. Older members of staff will also be encouraged to participate in specifi c professional skills assessments conducted by external consultants. Lastly, our retirement preparation assistance plan will be strengthened and introduced at an earlier stage. This plan will be supported by a program designed to enhance employee and managerial awareness to the advantages of teams with members of staff of various ages.
S.A. and 51% of the “Integrated Natixis” scope (scope representing: France excl. Natixis Private Equity and
Coface ). 41% of the Company’s managers are women and the proportion of women in senior management is 35%.
Following the creation in July 2007 of an equal professional opportunities commission at Natixis S.A., negotiations were started with the social partners on gender equality with the objective of signing an agreement in 2010. In 2009 a special salary leveling mechanism was introduced and it will be strengthened in the fi rst semester of 2010 with a dedicated budget of over 400,000 euros.
The place of disabled employees within the Company was confi rmed as a specifi c corporate responsibility priority as of 2006 when “mission handicap” was fi rst launched. Based on a diagnosis conducted within Natixis S.A., it started by drawing the attention of HR Departments to the issue and by setting up a system of personalized assistance for each disabled employee in the adjustment of his/her working environment and in travelling to and from work. For persons with hearing diffi culties, sign language interpreters are brought in for all meetings where they may be needed.
(Établissement et service d’aide par le travail – helping through work service) and communication to suppliers on the subject of disabled employment.
In 2010 the focus will be on internal communication via training programs, special events and a special portal on the intranet to raise the awareness of our HR professionals but also of our managers and employees of Natixis’
Signatory to the Diversity Charter in 2009, Natixis has confi rmed its commitment to a labor policy based on integration via employment, respect of equal opportunities, prevention of discriminations, and the promotion of a diversity refl ecting that of the Company.
For several years now, Natixis has chosen to reach out to civil society by supporting projects outside its traditional fi elds of operations which express the Company’s solidarity with the least favored segments of the population and its willingness to contribute to the environmental protection.
Cameroon and 29,400 in Burkina Faso; and j more than 80% of the children and pregnant women are today sleeping under mosquito nets.
The indicators used hereafter are the indicators required under Articles L.225-102-1 and R.225-104 and R.225-105 of the French Commercial Code. Correspondence to indicators defi ned in the reference document “GRI 3 Global reporting initiative” (a set of international standards relating to good sustainable development practices) is indicated in brackets.
a At December 31, 2009, the total workforce under permanent and fixed-term employment contracts amounted to 22,325 contracts, of which, 19,439 FTEs.
J WORKFORCE BREAKDOWN – IN FRANCE (In number of contracts or in percentage)
J BREAKDOWN OF NATIXIS S.A. WORKFORCE (In number of contracts or in percentage)
The workforce of Natixis S.A. includes 85 civil servants on secondment from the French civil service .
New hires (permanent/fi xed-term) in 2009 represented 8% of the total workforce in France.
3. In 2009, Natixis conducted several staff transfers as part of merger operations (merger of Banque Privée Saint Dominique and Compagnie 1818 Banque Privée to form Banque Privée 1818) and restructuring initiatives (Asset Management).
After offsetting these transfer operations, there were 190 internal job transfers within Natixis in 2009.
a The implementation of the first plan started on September 22, 2008 and continued through to February 28, 2009. The employees of Natixis S.A. (CIB and the functional divisions: General Inspection, Compliance, Communication and Investor Relations, Finance, Risk, Corporate Secretariat and Human Resources, IT and Shared Services and support functions of the operational business lines) were offered voluntary departure either under the terms of an early retirement contract or in order to pursue a professional or personal project.
a A second plan was implemented between June 17 and September 15, 2009. The employees of the CIB - Natixis S.A. France and EuroTitres - Natixis S.A. France scope were also offered voluntary departure either under the terms of an early retirement contract or in order to pursue a professional or personal project.
J SEPTEMBER 2008 PLAN FOR ADAPTATION TO EMPLOYMENT AND TO THE COMPETITIVE AND ECONOMIC CONTEXT (PACEC)
The various business lines of Natixis in France are covered by more than ten collective labour agreements. Three-quarters of employees are covered by collective labour agreements applicable to the banking and insurance sectors.
To that end, in 2009, the CHSCT ordered two types of external assessments: a one concerned an appraisal of the impacts of Talentis, a tool used in the annual interviews of employees to fix objectives and assess professional progress; and a the other, still in progress, is designed to assess the impact of the PACEC on working conditions, workload and health risks for employees. The assessment of the September 2008 PACEC was followed by a second assessment relating to the June 2009 PACEC .
In addition, the commission set up at the end of 2008 − “Professional behavior, prevention of harassment and distress at work” (whose mission is to centralize information relating to situations classifi ed as distressful at work and to identify organizational and psycho-social risk factors) − began to play its role.
Apart from its mission described above, it also has the important mission of studying the situation of individuals who have decided to contact the commission because they consider themselves to be in situations of abnormal stress or harassment. In this framework, the commission handled two cases during 2009, for which solutions were found in both cases, and two other situations are currently being examined.
In the area of psycho-social risks, a two-day training course was offered in 2009 to the members of the commission (representatives of the staff, the medico-social services and the HR Department) and to all the HR managers. In accordance with government recommendations, Natixis is preparing to open negotiations aimed at concluding an agreement on the prevention of psycho-social risks and will, simultaneously, progressively expand the training program on this subject to Natixis senior management, then to the entire management structure, and then to all staff.
The “Moving into new Offi ces” commission of the CHSCT is also very solicited in the framework of the vast site redeployment which has been recently initiated. A general plan for the optimization of our offi ces has been defi ned resulting in the movement of more than 2,000 persons between December 2009 and April 2010. The commission examines each plan before the corresponding operation begins and it is empowered to make observations or request modifi cations in order to optimize employees’ transfer to their new offi ces.
Generally speaking, concerning employee health, the independent occupational Medicine Department regularly monitors employees in Paris and the Paris region. Employees requiring special medical supervision will continue to be monitored on an annual basis.
Lastly, as is the practice every year, a campaign of free infl uenza vaccination in the workplace took place in fall 2009.
The lower volume of hours dedicated to training in 2009, down sharply at Natixis S.A. (- 41%), refl ects the diffi cult situation linked to the PACEC in 2009. In this context, the primary focus has been the adaptation of employees’ skills to changes within the Company, hence the increase in the relative proportion of “language” and “IT” trainings during 2009 and the decrease in the proportion of “management and communication” trainings.
Indeed the prevalence of the three domains “languages”, “IT” and “professional training” has been observed within both the “Natixis S.A.” scope and the “France” scope.
a Percentage of women occupying managerial positions: Women in managerial positions (in %) 2009 2008 2007 a Evolution of the proportion of women promoted: In the “France” scope, as in the “Natixis S.A.” scope, the proportion of women promoted is higher than their proportions in the respective workforces.
CORPORATE SOCIAL RESPONSIBILITY5 NRE Appendices – Labor information a Individual pay increases granted to women: In the “France” scope, as in the “Natixis S.A.” scope, the proportion of women granted individual pay increases is higher than their proportion in the respective workforces.
Share of total training hours received by women 56.6 52.2 52.2
The age pyramid of the France workforce (permanent contracts only) is relatively balanced: 26.5% of employees are under 35. At the other end of the age pyramid, 1,530 employees were aged 55 and over at December 31, 2009, representing 11.4% of the workforce.
J AGE PYRAMID FOR NATIXIS FRANCE Permanent contract employees at 12.31.2009
(a) The total effort represents the number of disabled workers, sub-contracts signed, supplies, service provisions or disabled workers made available and disabled interns taken on.
Each year, Natixis S.A. allocates 1.3% of it total payroll costs to the funding of social and cultural activities. In addition to this allocation, it provides holiday vouchers to the entire staff (based on family income criteria and number of children) representing 0.6% of total payroll. The operating expenses for the c ompany , personnel and logistical enterprises are directly covered by Natixis S.A.
Besides these initiatives, in order to facilitate staff mobility between sites and the organization of meetings, our staff restaurants have been equipped with a centralized and standardized payment system. This applies to all the Company and inter-company restaurants in the Paris region (except, for the time being, the one at Arc de Seine). This enables Natixis employees to access the different restaurants and be billed a single price for the same service. Natixis S.A. subsidizes between 35% and 75% of the price of meals, according to employees’ remuneration.
As is customary every year, many employees took part in France’s annual Telethon fundraising campaign at the end of 2009.
The Company makes every effort to ascertain that the service-providers and suppliers it engages as sub-contractors or outsourcers abide by the legal requirements relating to personnel management.
In all our requests for proposals, the purchasing department includes clauses by which the supplier(s) undertake to respect human rights and equal opportunities.
METHODS USED BY INTERNATIONAL SUBSIDIARIES TO ASSESS THE IMPACT OF THEIR OPERATIONS ON REGIONAL DEVELOPMENT AND LOCAL POPULATIONS
The 2009 reporting scope includes Natixis and its subsidiaries in continental France (representing 435,000 m² of offi ce space and approximately 20,000 workstations).
Consumption (in m3 per m2 of usable offi ce space) 0,23 0,32 0,33
In 2009 Natixis consumed over 128,545 megawatt hours of energy (electricity, heating and air conditioning). This volume represented a 5.5% reduction versus 2008. The electricity consumption of the data center was 32,533 megawatt hours (vs. 31,000 in 2008). The consumption of gas and heating oil remain low.
For the time being, Natixis is not a direct consumer of renewable energy sources.
Natixis has refrained from installing any water loss airconditioning systems in order to avoid expelling polluted water: the glycolated water used in our systems is recovered from the heat exchangers when the periodical draining of the systems is performed by companies specialized in processing this product.
Since 2006, Natixis has taken a number of measures to optimize its waste management processes. Selective sorting of offi ce waste has been introduced with specifi c procedures for paper recycling, the collection and reprocessing of used batteries and printer cartridges, and the recovery of electrical and electronic equipment waste (DEEE) including used mobile telephones.
Selective bins for offi ce waste with recovery of paper for recycling Recovery of all out-of-date notes and documents for recycling. 1,084 t 1,603 t
Printer cartridges Recovery of used cartridges for recycling 9,055 cartridges 4,274 cartridges
Periodic controls of air and water quality are conducted. All the buildings to which the legislation concerning asbestos applies have a technical fi le on asbestos.
As a listed company, Natixis is regularly assessed by nonfi nancial rating agencies in the form of “self-assessment” ratings. These agencies appreciate, in particular, the Company’s environmental strategy.
Natixis complies with all legal and regulatory obligations with regard to the environment. To this end, Natixis employs qualifi ed facilities managers and civil engineers. These specialists, who are in close contact with the building’s users and are profi cient in the use of building technical equipment and installations, also monitor the evolution of regulatory standards. In addition, the technical installations and maintenance procedures are subject to regular inspections by certifi ed independent consultants.
In 2009, Natixis invested the following sums in environmental protection: a asbestos abatement: €5,000 (encapsulation); a processing of potentially polluting fluids: €18,000; a replacement of air conditioning equipment using CFC gas: €300,000.
MONETARY VALUE OF SIGNIFICANT FINES AND TOTAL NUMBER OF NON-MONETARY SANCTIONS FOR NON-COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS IN 2009 (EN 28)
Environmental aspects of construction work and property facilities management are supervised by a cross-functional unit reporting to the logistics department. This unit is responsible for monitoring the resources consumed at each site and for coordinating all actions undertaken by the operational services of the logistics department.
Since 2005, Natixis has engaged in training initiatives and awareness-raising campaigns to draw its employees’ attention to everyday practices that help minimize the Company’s impact on the environment (ADEME partnership, “Green practices” campaign). A dedicated website was established and is regularly updated.
Natixis’ business lines are also highly involved in fi nancing “green” growth, occupying a leader position in the fi nancing of renewable energies and the management of funds dedicated to reducing climate change (e.g. our Impact Climate Change fund managed by Natixis Asset Management and our European Carbon fund managed by Natixis Environnement et Infrastructure (see chapter 3)).
Any potentially polluting fl uid used in Natixis’ premises (glycolated water, hydrocarbons, etc.) is recovered and treated in line with current regulations.
INFORMATION FROM ARTICLE L. 225-100-3 OF THE FRENCH COMMERCIAL CODE 205
STATUTORY AUDITORS’ SPECIAL REPORT ON RELATED PARTY AGREEMENTS AND COMMITMENTS 406
Natixis’ sensitive exposures are detailed in section 5.10 of the management report, in accordance with the recommendations of the Financial Stability Forum.
Natixis’ businesses are very sensitive to changes in fi nancial markets and to economic conditions generally in France, in Europe and the rest of the world. During the 2008 fi nancial year and the fi rst half of 2009, Natixis’ results and fi nancial condition suffered signifi cantly as a result of the disruptions that affected all markets throughout the world.
The possible strengthening of regulations applicable to the fi nancial sector, dictated by the fi nancial crisis, could give rise to the introduction of new compliance restrictions
Governments (including countries where Natixis entities are established) have reacted to the fi nancial crisis by adopting a certain number of precautionary measures. Others are still under consideration. The analysis and interpretation of these measures, which arise from diverse and sometimes contradictory sources, may generate new pressures for Natixis in its efforts to comply with the new precautionary measures. The implementation of and compliance with these measures could cause an increase in Natixis’ costs and an increase in regulatory capital and liquidity requirements. The scale of these measures and their impact (in particular those that are still being examined) on the situation of fi nancial markets generally and Natixis in particular are diffi cult to determine at this point. In addition, a certain number of exceptional measures taken by governments (support measures), central banks (lowering of key interest rates) and regulators to remedy the fi nancial crisis, stabilize fi nancial markets and support fi nancial institutions have recently been, or soon could be, suspended or stopped, which in a context of a still weak recovery could have an adverse impact on the business conditions of fi nancial institutions. Furthermore, central banks could decide at any time, with or without prior consultation, to change their monetary policy (notably to increase their key interest rates) and adjust their policy as regards liquidity to take account of the relative stabilization of money and fi nancial markets, which could cause a potential sudden drying up of liquidity in these markets and more generally in the economy. In a context of a still weak recovery, such developments could have a negative impact on the environment in which fi nancial institutions operate and, as a result, have an adverse impact on Natixis’ fi nancial position and results.
As indicated above, since the creation of BPCE, Natixis’ medium-term refi nancing has been carried out through BPCE. The cost of this refi nancing is therefore dependent on the fi nancial structure and ratings of Groupe BPCE .
Natixis’ income depends partly on performances of the Banque Populaire and Caisse d’Epargne networks, both through services provided to their customers and through the share of the net income related to the 20% shareholding in the share capital of each Banque Populaire and each Caisse d’Epargne, in the form of cooperative investment certifi cates (“CCI s”) issued by each of these entities. For further information about the contractual relationships relating to these subjects, please refer to section 8 “Legal information – Signifi cant contracts”.
As indicated above, Natixis holds 20% of the share capital of Banques Populaires and Caisses d’Epargne, in the form of CCI s . These CCI s are non-voting securities, with different rights from those attached to cooperative shares issued by Banques Populaires and Caisses d’Epargne. Although Natixis is entitled to participate in meetings of the member-stakeholders (“sociétaires”) of Banques Populaires and Caisses d’Epargne, it is not entitled to vote at these meetings and has no control over decisions requiring approval by the shareholders of Banques Populaires and Caisses d’Epargne.
Natixis is obliged to maintain its holding in the capital of each of the Banques Populaires and Caisses d’Epargne at 20%
There are four main categories of risk (credit risk, market, liquidity and fi nance risk, operational risk and insurance risk) inherent to Natixis’ operations, which are summarized below and described more fully under the “Risk Management” section in the management report, reproduced in section 6 “Financial items” (the “Management report”) and in the Chairman’s report, reproduced in section 7 “Chairman’s report” (the “Chairman’s report”), (concerning, notably, the scale and the impact that these risks could have on the results and the assets of Natixis, as well as the organization and control of these risks).
The risk factors described in the following paragraphs (and above under the “Risks related to the fi nancial crisis” heading) detail or illustrate by specifi c examples these different types of risks, and also describe other risks to which Natixis is exposed.
CREDIT RISK (FOR FURTHER DETAILS REFER TO SECTION 5.3 OF THE MANAGEMENT REPORT AND SECTION B (SECTION 4.1) OF THE CHAIRMAN’S REPORT)
Credit risk is the risk of fi nancial loss on Natixis debts due to the inability of a debtor to honor its contractual obligations. The assessment of this probability of the inability to repay and the expected recovery in this event are essential elements in the measurement of the credit quality. The debtor may be a bank, an industrial or commercial company, a sovereign state and its various entities, an investment fund, or a natural person. Credit risk increases in periods of economic uncertainty such as that currently experienced in the market, insofar as these conditions may lead to a higher level of default.
Market risk (Please refer to section 5.4 of the Management report and section B (section 4.2) of the Chairman’s report for further details)
Overall interest-rate risk, liquidity and structural change risk (Please refer to section 5.5 of the Management report and section B (section 4.3) of the Chairman’s report for further details)
The risk of structural change is defi ned as the risk of loss of transferable equity caused by an adverse movement in exchange parities against the euro. Natixis’ risk of structural change for the most part concerns the structural positions in the US dollar due to the presence of foreign branches and subsidiaries funded in this currency in its consolidation scope.
Operational risks ( P lease refer to sections 5.6 and 5.8 of the Management report and B (section 4.4) of the Chairman’s report f or further details)
The procedures for monitoring and managing these risks are described in section 5.6 of the Management report.
Insurance risk (For further details, please refer to section 5.9 of the Management report)
Insurance risk is the risk to profi ts of any lag between expected and incurred claims. According to the insurance products concerned, the risk varies according to macroeconomic changes, changes in customer behavior, changes in public health policy, pandemics, accidents and natural catastrophes (such as earthquakes, industrial accidents or acts of terrorism or war). As mentioned previously, the credit insurance business is also subject to credit risk.
For Natixis Assurance, the risks supported fi nd their origin in the marketing in France and internationally of savings and provident insurance contracts. The principal risks are of a fi nancial nature, such as the risk of no longer being able to service a minimum contracted rate in the event of lower interest rates, risk of contract repurchases in the event of higher interest rates, credit risk, etc.
In August 2009, Natixis announced its intention to implement a new strategy aimed at simplifying and clarifying its governance, increasing synergies with retail networks, reinforcing the integration of teams and “customer focus”, and improving the method of operation of support functions. Even if Natixis considers that these new strategic directions provide it with several opportunities, Natixis will continue to face uncertainties given the current state of the global economy, and no guarantee may be given as to the realization of the objectives of this strategy.
If Natixis decided to dispose of certain operations, the sale price could turn out to be lower than expected and Natixis could have to continue to bear signifi cant risks stemming from these operations as a result of guarantees or indemnities of liabilities that it may have to grant to the buyers concerned.
Market fl uctuations and volatility may expose Natixis to the risk of losses in relation to its trading and investment operations
As part of its trading and investment operations, Natixis takes positions in the bond, currency, commodity and equity markets, as well as in unlisted securities, real estate and other asset classes. Market volatility and change could have an unfavorable impact on these positions. Such losses, if signifi cant, could adversely affect Natixis’ net income and fi nancial position.
Any interruption or failure of Natixis’ information systems, or those of third parties, may result in lost business and other losses
Like most of its competitors, Natixis relies heavily on its communication and information systems as its operations require it to process a large number of increasingly complex transactions. Any breakdown, interruption or failure of these systems could result in errors or interruptions to customer relationship management, general ledger, deposit, transaction and/or loan processing systems. If, for example, Natixis’ information systems failed, even for a short period of time, it would be unable to meet customers’ needs in a timely manner and could thus lose transaction opportunities. Likewise, a temporary breakdown of Natixis’ information systems, despite back-up systems and contingency plans, could result in considerable information retrieval and verifi cation costs, and even a decline in its proprietary business if, for instance, such a breakdown occurred during the implementation of hedging operations. The inability of Natixis’ systems to accommodate an increasing volume of transactions could also constrain its ability to develop its businesses.
Natixis also faces the risk of an operational failure or termination by one of its clearing agents, foreign exchange markets, clearing houses, custodians or other fi nancial intermediaries or external service providers that it uses to execute or facilitate its operations on securities. As its interconnectivity with its customers grows, Natixis may also be increasingly exposed to the risk of operational failure of its customers’ information systems. Natixis cannot provide assurances that such breakdowns or interruptions in its systems or in those of other parties will not occur or, if they do occur, that they will be adequately resolved.
The processes for the management of information systems security risks are described in greater detail in section B (paragraph 3.2.2) of the Chairman’s report.
Unforeseen events such as a severe natural disaster, a pandemic, terrorist attacks or any other states of emergency could lead to an abrupt interruption of Natixis’ operations and cause substantial losses insofar as they are not covered or are insuffi ciently covered by an insurance policy. These losses could relate to property, fi nancial assets, market positions and key employees. Such unforeseen events may, additionally, disrupt Natixis’ infrastructure, or that of third parties with which it conducts business, and could also lead to additional costs (such as relocation costs of employees affected) and increase Natixis’ costs (in particular insurance premiums). Subsequent to such events, Natixis may be unable to insure certain risks resulting in an increase in Natixis’ overall risk.
Natixis may be vulnerable to political, macroeconomic and fi nancial environments or specifi c circumstances in the countries where it does business
Natixis is subject to country risk, which is the risk that economic, fi nancial, political or social conditions in a foreign country will affect its fi nancial interests. Natixis does business throughout the world, including in developing regions of the world commonly known as emerging markets. In the past, many countries referred to as emerging markets have experienced severe economic and fi nancial disruptions, including devaluations of their currencies and capital and currency exchange controls, as well as low or negative economic growth. Natixis’ businesses and revenues derived from operations and trading outside the European Union and the United States, although limited, are subject to risk of loss from various unfavorable political, economic and legal developments, including currency fl uctuations, social instability, changes in governmental policies or policies of central banks, expropriation, nationalization, confi scation of assets and changes in legislation relating to local ownership.
Today the six principal countries (outside the European Union and the United States) in which Natixis would be exposed are: The United Arab Emirates, India, Russia, Brazil, Hong Kong and South Korea. Please refer to the Management R eport for further details.
Natixis is subject to signifi cant regulation in France and in several other countries around the world where it operates; regulatory actions and changes in these regulations could adversely affect Natixis’ business and results
Several supervisory and regulatory regimes apply to Natixis in each of the countries where it conducts its business . In addition to the damage to its reputation, non-compliance with these regulations could expose Natixis to signifi cant intervention by regulatory authorities and, to fi nes, public warnings by the authorities, suspensions of operations or, in extreme cases, withdrawal of Natixis’ operating authority. The fi nancial services industry has experienced increased scrutiny from several regulatory authorities in recent years, as well as an increase in the penalties and fi nes imposed by these regulatory authorities, a trend that may be accelerated in the current fi nancial context. Natixis’ operations and its income may be affected by various measures and actions taken by French regulatory authorities, by the European Union, by foreign governments or international organizations. Such constraints could limit Natixis’ ability to develop its businesses or to pursue certain operations. The nature and impact of these potential changes in regulatory policies and actions are unpredictable and Natixis has no way of controlling them.
Such changes could include, but are not limited to, the following: a the monetary, interest rate and other policies of central banks and regulatory authorities; a general changes in government or regulatory policy likely to significantly influence investor decisions, in particular in markets where Natixis operates; a general changes in regulatory requirements, notably prudential rules relating to the regulatory capital adequacy framework, such as the modifications being made to the regulations implementing the Basel II requirements; a changes in rules and procedures relating to internal controls; a changes in the competitive environment and prices; a changes in financial reporting rules; a expropriation, nationalization, price controls, exchange controls, confiscation of assets and changes in legislation relating to foreign property rights; and a any adverse change in the political, military or diplomatic environments creating social instability or an uncertain legal situation capable of affecting the demand for the products and services offered by Natixis.
As a multinational banking group involved in complex and large-scale cross-border transactions, Natixis is subject to tax legislation in a large number of countries throughout the world and Natixis structures its operations globally in order to optimize its effective tax rate. Changes to tax legislation or its application by the competent authorities in these countries may have a signifi cant impact on Natixis’ results. Natixis has introduced management processes whose objective is to create value from the synergies and business capabilities of its different entities. Natixis also endeavors to structure the fi nancial products sold to its customers by optimizing their tax position. The structures of Natixis’ intra-group transactions and fi nancial products sold by Natixis are based on Natixis’ own interpretations of applicable tax laws and regulations, generally on the basis of opinions received from independent tax counsel and, on an ad hoc basis, to the extent necessary, on rulings or specifi c interpretations from the tax authorities. There can be no assurance that the tax authorities will not seek to challenge such interpretations in the future, in which case Natixis could be subject to tax reassessments.
Despite the risk management policies, procedures and methods put in place, Natixis may be exposed to unidentifi ed or unanticipated risks, likely to give rise to signifi cant losses
Natixis’ risk management techniques and policies may not be effective in limiting its exposure to any type of market environments or all types of risk, including risks that Natixis has not been able to identify or anticipate. The risk management techniques and strategies used by Natixis may no longer enable an effective reduction of risk to be guaranteed under all market confi gurations. These techniques and strategies may not be effective against certain risks, particularly those that Natixis has not previously identifi ed or anticipated. Some of Natixis’ qualitative tools and metrics used to manage risk are based upon its use of observed historical market behavior. Natixis uses tools to analyze these observations, notably statistically, to quantify its risk exposure. The tools and metrics used may provide erroneous conclusions as to future risk exposures, notably because of factors that Natixis has not anticipated or correctly assessed in its statistical models, or because of unexpected and unprecedented market movements. This would limit
FINANCIAL DATA 6 Risk factors and the expected synergies may not be realized in whole or in part, or the transaction may even give rise to higher than forecast costs. Natixis may also encounter diffi culties in the integration of a new entity. The failure of an announced external growth operation or the failure to integrate the new entity or joint venture is likely to materially affect Natixis’ profi tability. This situation could also lead to the departure of key employees. Insofar as Natixis may feel compelled to offer its employees fi nancial incentives in order to retain them, this situation could also result in increased costs and an erosion of profi tability. In the case of joint ventures, Natixis is subject to additional risks and uncertainties in that it may be dependent on, and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under its control. In addition, confl icts or disagreements between Natixis and its joint venture partners may negatively impact the benefi ts intended to be achieved by the joint venture.
Intense competition, both in Natixis’ home market of France, its largest market, and internationally, could adversely affect Natixis’ net banking income and profi tability
The fi nancial soundness and behavior of other fi nancial institutions and market participants could have an adverse impact on Natixis
Natixis’ reputation is essential in attracting and retaining its customers. The use of inappropriate means to promote and market its products and services, inadequate management of potential confl icts of interest, legal and regulatory requirements, ethical issues, money laundering laws, information security policies and sales and trading practices may sully the reputation of Natixis. Its reputation could also be harmed by any inappropriate behavior of an employee, any fraud or misappropriation of funds committed by participants in the fi nancial sector to which Natixis is exposed, any decrease, restatement or correction of the fi nancial results, or any legal or regulatory action that has a potentially unfavorable outcome. Any damage caused to Natixis’ reputation could be accompanied by a loss of business likely to threaten its results and its fi nancial position.
A prolonged fall in the markets may reduce the liquidity of assets and make it more diffi cult to sell them. Such a situation could give rise to signifi cant losses
In the presentation of management accounts, the following restatements have been made in order to provide a “proforma retail-securities” view of the Securities Services business line’s income: j the 2008 and 2009 results of the Eurotitres Department have been restated to take into account the contribution of the institutional custody business to Caceis in June 2008, and now include retail custody earnings only, j Caceis’ contribution to the Securities Services business line’s NBI is limited to the dividends corresponding to Natixis’ 15% interest in Caceis’ capital, j with the exception of the abovementioned dividends, the entirety of the 2008 and 2009 results of the institutional custody business have been placed in “income from discontinued operations.” This item also includes the result of the sale, j Corporate Center expenses allocated to Caceis were split between the other business lines as at June 30, 2009. To ensure comparability, restatements were made over both 2008 and 2009; a sector data for 2008 take into account organizational changes made in 2009; a income from discontinued operations and restructuring expenses and income, of non-recurrent nature, are identified hereinafter on separate lines, i.e. after determining the group share of recurrent net income, with a view to ensuring that the results of periods under consideration are comparable; a the earnings of GAPC (Workout Portfolio Management) in the first half of 2009 do not take into account the guarantee, but do include the valuation of the senior issuer spread. However, the GAPC’s earnings for the second half of 2009 take into account the guarantee but not the issuer spread, to facilitate the reading of individual business lines’ performances; a the other conventions applied to the earnings of entities comprising the various business lines are as follows: j the business line divisions benefi t from the income derived from the capital allocated to them; the cost of subordination (hybrids) is rebilled to the business lines in proportion to the weighted amounts used, j income on the corporate equity capital of the entities comprising the divisions is neutralized, j the cost of carrying goodwill is borne entirely by the Corporate Center, j the divisions are invoiced for an amount representing the major part of overheads, the portion not invoiced accounting for 3% of the group’s total charges; a capital necessary for the operations of Natixis’ business lines is allocated as follows: j Retail Banking: 75% of amounts deducted from Tier One capital in relation to the ownership of CCIs (cooperative certifi cates of investment), j Insurance (Investment Solutions division): 75% of the solvency margin requirement, j Credit Insurance (Coface): 100% of net earned premium income, j Services, Management of French government programs (Coface): 25% of annual expenses, j Other business lines: 6% of average Basel II risk-weighted assets and 75% of the amount deducted from Tier One capital in respect of shares in securitizations rated lower than BB-.
Business in the fi rst half of 2009 suffered the effects of an unprecedented economic crisis sparking heavy losses (the group share of net income was negative by €2,722.3 billion in the fi rst half) and prompting the group to take determined steps to restore a sound and stabilized fi nancial framework: a receipt in June 2009 of a €1.5 billion shareholder advance; a sale in the second quarter of 35% of Caceis to Crédit Agricole S.A. for €595 million;
FINANCIAL DATA6 Management Report a reinforcement of the financial structure of Natixis with the finalization, effective as of June 30, 2009, of the BPCE guarantee covering the GAPC loan portfolio: j fi nancial assets classifi ed as loans and receivables and available-for-sale assets are now covered by a fi nancial guarantee bearing on 85% of the face value of the relevant assets concerning the risk of non-reimbursement of principal or interest, j transactions recorded at fair value through profi t and loss are covered by TRSs (total-return swaps), with an option allowing Natixis to benefi t from 85% of possible subsequent increases in the assets’ value, j the overall impact of the BPCE guarantee mechanism in the second half of 2009 was -€19.4 million. As at end December 2009, the guarantee covered assets with a net value of €31.8 billion (excluding CDPC), €3.0 billion less than at June 30, 2009.
In addition, the New Deal 2010-2012 plan announced in the summer of 2009 confi rmed the group’s focus on three core business lines: a the CIB division is pressing ahead with a new strategy based on client-driven businesses and focusing its expansion on the capital markets and structured financing activities, two areas where Natixis’ expertise is recognized; a the Investment Solutions division, which brings together the Asset Management, Insurance and Private Banking business lines, is aimed at putting together a global approach to financial savings by pooling expertise and reinforcing synergies between its three business lines and the French networks. In this regard, Natixis acquired, on December 18, 2009, 11.34% minority interest in Natixis Global Asset Management previously owned by CNP for a total amount of €533 million. The division also recently embarked on the reorganization of the Private Banking business line within Banque Privée 1818; a the Specialized Financial Services division saw change in its scope with the creation of two major business lines: Specialized Financing, which includes factoring, sureties and financial guarantees, leasing and consumer finance, and Financial Services, which houses the employee-benefits planning, payments and securities services businesses. This division aims to optimize operations with Banque Populaire and Caisse d’Epargne and press ahead with investments on IT tools.
Activities that do not generate any synergies with the three core business lines have been housed in a new Financial Stakes division.
This division took defi ning steps in 2009 with respect to Coface operations, where a recovery was starting to take root by the end of 2009, and its fi nancial structure. Coface carried out a €175 million capital increase (including the issue premium) in the fi rst quarter of 2010, following an earlier capital increase of €50 million in July 2009.
Analysis of change in the main items on the consolidated income statement
This NBI takes into account a negative contribution of -€1,825.1 million from businesses in run-off management in 2009, compared with -€3,452.4 million in 2008. As a reminder, the GAPC division (Workout portfolio management ) bore most of the impact of the fi nancial crisis due to the nature of the activities it houses, namely complex equity and interest rate derivatives, which suffered from the steep increase in volatility and the increased cost of hedges, and because of value adjustments on structured credit portfolios.
It also includes Corporate Center NBI, which was a positive €173.7 million in 2009, after a negative €290.7 million in 2008.
2009 NBI was impacted by numerous non-recurrent items, including: a the capital gain on the public offer of BPCE securities in exchange for Natixis securities, which resulted in the recognition of a net gain of €460 million in the third quarter of 2009, after taking into account the impact of the unwinding of associated hedging positions;
FINANCIAL DATA6 Management Report a the reclassification of previously issued deeply subordinated securities and preferred shares as equity instruments in the fourth quarter of 2009, as opposed to debt previously, which led to the recognition of a gain of €398 million; a the result of the revaluation of Natixis’ own debt, with a negative impact of €295 million.
Fixed payroll charges fell by 2% due to the reduction in permanent and fi xed-term work contracts by 918 FTEs (-4.5%) over the year, with the headcount standing at 19,439 FTEs at end December 2009. Departures took place mainly in the CIB division (-713 FTEs) with the Job Adaptation Plan (PACEC).
Variable payroll charges, which include those relative to incentives, profi t sharing and severance payments, increased by €62 million, of which €37 million under the tax on the variable compensation of market operators and €12 million in additional severance payments.
Gross operating income was a negative €732.1 million in 2009, an improvement on the much worse outcome of -€1,890.8 million in 2008. Excluding GAPC, gross operating income was a positive €1,260.3 million in 2009.
Deferred tax assets were recognized for a total of €1,220.6 million over the year (see Note 7.10 financial statements).
In 2008, restructuring gains were derived chiefl y from the sale of Natixis’ institutional custody business to Caceis, 50% owned at that time by Natixis, which had a positive impact of €69.7 million after tax.
Divisional operating expenses were €1,607.3 million in 2009, compared with €1,656.5 million in 2008. This 3% saving resulted from the dual impact of a fall in overheads and a reduction in fi xed payroll charges, offsetting an increase in variable payroll charges attributable to the new regulatory tax on bonuses.
The CIB division’s loss before tax was €420.4 million, although this marked a considerable improvement compared with the loss at June 30, 2009, thanks to a profi t of €141.6 million in the second half of 2009 alone. Excluding CPM, income before tax was a positive €261.8 million in 2009.
* O/w CPM: -€682.2 million in 2009 and +€540.1 million in 2008.
End-of-period risk-weighted assets continued their decline, totaling €89.9 billion at end December 2009, compared with €100.3 billion a year earlier (-10%).
Plain vanilla fi nancing revenues increased by 27% year-on-year, driven by higher interest and fee income. 2009 was marked by numerous restructuring deals, allowing for net interest margins to be renegotiated with favorable terms and also generating the corresponding payment of fee and commission income. By contrast, fl ow businesses were down 49%, penalized by the remuneration of the fl oat and non-interest-bearing client balances, which suffered from the collapse in Eonia, which took a 300-basis-point dive over the year.
In an environment characterized by a high sector selectivness , underwriting was down by one-third, although net margins were up sharply.
a The NBI of the corporate business in France was 27% higher than at end 2008, thanks to a large increase in fees and commissions on loans (+55%) and a substantial increase in interest income (+22%).
Drawing rates on medium-and long-term facilities continued to decline, standing at 19% by year’s end in 2009, compared with 30% at the start of the year.
a Institutionals and Public Sector NBI advanced by 9% over the year, with the increase in the fourth quarter (+54%) far higher than advances made in the previous quarters.
The performance was contrasted in geographical terms. Thanks to acknowledged expertise in fund management and the multiplication of Lead Arranger and co-manager mandates, New York confirmed the soundness of its model, with dynamic management of counterparty credit risk quality.
Amidst a deliberate reduction in i nstitutional activity, underwriting logged the sharpest drop across the division, falling by 51% compared with 2008. Average loans held steady at the same level as in 2008.
a The flow activity contracted by 49% in 2009, with the fall in Eonia weighing on the remuneration of the float. This average annual interest rate fell from 3.98% in 2008 to 0.71% in 2009.
a The Merger and acquisition business fell year-on-year, on the back of a marked slowdown in the merger market, although business was much stronger in the fourth quarter than in the previous quarters. Operations were focused primarily on mandates in the real estate sector.
The 2009 NBI of the Debt and Finance business line was €999.0 million, in line with the level recorded in 2008. Debt and fi nance operations are very sensitive to change in the value of the US dollar, as dollar-denominated margins and fee and commission income account for nearly half of NBI. At a constant dollar, income would have been lower.
End-of-period risk-weighted assets totaled €35.2 billion in 2009, down 6% year-on-year.
a Over the year, global energy and commodities NBI was down 8%, due to a decline in service commissions (-11%) stemming from lower origination (-58%). The steep increase in the cost of liquidity over the year weighed on revenues.
a NBI for Aviation Finance increased by 18%, thanks in particular to the appreciation of the US currency.
a NBI in Shipping was up 14%, benefiting from renegotiated margins.
FINANCIAL DATA 6 Management Report a Project Financing NBI was up 13% in 2009, benefiting in particular from an improvement in interest income (+14%).
a Real Estate Financing NBI was down 16%, affected by slower business in the United States and a deliberate policy of keeping origination in commercial property low in Europe as well as the United States: j in Europe, full-year NBI increased by 12%, thanks to an increase in the net margin rate on average outstanding credits (1.15% in 2009, compared with 0.94% in 2008), although this was partially limited by a reduction in average balance sheet assets; j in the United States, NBI was down compared with 2008.
The Foreign Exchange business did well in the spot, forward and option markets in 2009, amidst a decline in trading volumes. Natixis was cited as the Best Foreign Exchange Bank in France (source: European CEO – Foreign Exchange Awards 2009) and the Most Improved Overall Market Share in foreign exchange transactions (source Euromoney 2009).
As in 2008, treasury management continued to benefi t from favorable market conditions in 2009, mainly in the fi rst half. NBI was high, slightly better than in 2008.
FINANCIAL DATA 6 Management Report a AEW Europe obtained the top ranking in the 2009 Novethic barometer for its communications; a the Absolute Asia AM Pacific Rim Equities Fund was singled out in the tenth annual Agefi “Asset Management Grands Prix,” winning second place in the Asia excluding Japan equities category.
Private Banking made a fresh start, symbolized by the appointment of a new manager. The restructuring of the business is ongoing. The merger of the French entities is being fi nalized and the streamlining of international operations is now getting underway.
The division’s NBI was €1,540 million in 2009, handicapped by the depressed state of the fi nancial markets.
a While the Asset Management business benefited from the market recovery in the second quarter, its revenues were nevertheless penalized strongly by the decline in average volumes (with the withdrawal of La Poste’s portfolios) and returns over the year.
a Private Banking NBI was also hurt by the slowdown in business and the market’s low levels, compounded by the impact of the restructuring of the international business undertaken in the final quarter.
Restructuring expenses totaled €16.3 million in Private Banking in France, of which €14.6 million in the fi nal quarter.
Gross operating income was down 21% year-on-year at €413.3 million, with the cost/income ratio up 4 points at 73%.
Assets under management in Europe increased by 9.1% to €320.5 billion at end December 2009. Volumes benefi ted from a marked improvement in market conditions starting in the second quarter.
a Net inflows were €7.5 billion in 2009, mainly directed towards insurance products and NAM’s money market and fixedincome funds.
a The market effect was a positive €19.2 billion and benefited all product categories with the exception of real estate.
Aggregate NBI in 2009 was down 7% compared with 2008 (-10% at constant exchange rates) at €1,261.7 million. Net management fees were hurt by the decline in average asset volumes and interest rates.
Total volumes continued to climb. They increased by €2.5 billion since January 1, 2009 to €33.4 billion. This refl ected net infl ows of €1.2 billion and a market effect of €1.3 billion. Volumes in euro funds increased by 7% year-on-year, while unit-linked volumes advanced by 12%.
a Volumes in unit-linked funds increased by 13% or €545 million over the year, outstripping the broader market, where unitlinked funds contracted by 11% (FFSA), by a wide margin.
The Provident Insurance business, which is less sensitive to the fi nancial environment, recorded a 24% increase in revenues over the year to €311 million, thanks to ongoing efforts to sell borrowers’ insurance products to the Banques Populaires and Caisses d’Epargne customers and individual provident insurance products to Banques Populaires customers.
Net inflows in Private Banking totaled €115 million at end December 2009.
Net yearly infl ows in France totaled €282 million, while in Luxembourg, the year closed on aggregate net outfl ows of €167 million. Growth nevertheless resumed in the fi nal quarter, with net infl ows of €2 million.
Net outflows in wealth management, which stood at €38 million at end June, stabilized in the second half and ended the year at €32 million.
Infl ows in wealth management in France totaled €135 million at end December. This accounted for nearly 48% of total net infl ows in 2009. But outfl ows in Luxembourg made it impossible to post an overall positive performance.
FINANCIAL DATA 6 Management Report 4.3 - Specialized Financial Services division
a Businesses that were hit hard by the economic environment in the first half of the year (factoring, sureties and financial guarantees and leasing) showed signs of a recovery in the latter part of the year: j origination in leasing grows as it has for two successive quarters, including a 20% quarter-on-quarter increase in the fi nal quarter; j Natixis Factor won additional market share (+0.5 points to 13.3%), with factored sales stable in a contracting French market (-3.6%); j the decline in sureties and fi nancial guarantees revenues was capped at 14% over the full year thanks to the strength of the Caisses d’Epargne network and the recovery in the residential real estate market in the second half.
All the division’s operations recorded positive income before tax totaling €181.8 million in 2009.
However, the fi nancial crisis and the depressed economic environment weighed on the division’s profi tability: a divisional NBI was down 10%, penalized by low interest rates, high claims (sureties and financial guarantees and leasing) and slower sales; a divisional expenses excluding restructuring were generally kept on a tight rein; the division’s restructuring charges are estimated at €34.4 million, of which 94% linked to the Securities Services Department’s SI convergence and operational trajectory projects; a the cost of risk, which came to nearly €46.7 million (up €18.7 million year-on-year), weighed heavily on the division’s earnings.
The SFS division’s NBI was €840.8 million at end December 2009, down 10% compared with end December 2008.
a The sureties and financial guarantees and leasing businesses were hit by higher claims. The leasing business partially made up for this factor thanks to an increase in average volumes.
a Securities services NBI was hit by a fall in its interest margin (low interest rates), the departure of the client LCL and the decline in the Caceis dividend.
a By contrast, consumer finance recorded an increase in its NBI, attributable mainly to growth in lending volumes driven by deeper penetration of the retail networks.
a Revenues for the payments and employee-benefits planning businesses were virtually stable.
a Payroll charges were €245.2 million, stable over the year (+1%), in line with the headcount.
a Other expenses totaled €366.9 million, a decline of 3% attributable mainly to a decrease in recurrent IT expenses in the securities services business.
Early in 2009, Coface launched its “Crisis, Act II” plan, which follows on from the “Act on the Crisis” plan, implemented in 2008. The following measures are aimed at drastically reducing exposure to risk: a cleaning up the policy portfolio; a terminating the policies generating the most losses; a toughening underwriting conditions for risks; a reducing the amount of payouts (increase in deductible portions), in line with a decrease in premiums.
Total yearly gross revenues were €1,534 million, virtually unchanged compared with 2008 (€1,536 million). Restated for change in the scope of consolidation and exchange rates, revenues edged down by 0.7%. Insurance accounted for threequarters of operations, factoring 7% and services 18%.
Coface’s NBI was €387.3 million in 2009, down 41% compared with 2008, due mainly to an increase in the claims ratio to 97.7%, compared with 72.6% in 2008, revenues having remained relatively stable.
Costs arising from c laims increased by 41% over the year, with the fi rst half accounting for 62% of the full-year total. The second half saw a clear improvement, the year ending with a claims ratio of 63%.
Playing the role of shock absorber within certain limits, the net impact of external reinsurance was a positive €36.6 million over the year, compared with just €9.7 million in 2008.
The headcount increased by 125 FTEs over the year (+2%) to a total of 5,190 FTEs.
The gross operating loss was €265.9 million, compared with income of €29.6 million in 2008.
The Coface loss before tax was €261.2 million in 2009, compared with income of €23.6 million in 2008.
In a particularly challenging environment, Private Equity recorded a steep decline over the full year, in both investments and divestments; together, the credit crunch and the fi nancial crisis reduced visibility from investors and pushed down valuations, limiting purchase and sale opportunities alike.
Assets under management totaled €4.4 billion, an increase of 9% or €0.3 billion over the year. At end 2009, proprietary investments accounted for 50% of the total, compared with 48% a year earlier.
Expenses were €60.7 million over the year, down €5.8 million (-9%) compared with 2008. The decline was attributable mainly to slower activity (investments) and the renegotiation of rents.
There were 142 FTEs at end 2009, a decline of three FTEs over the year.
The Corporate Center recorded the positive impact of the exchange of hybrid securities with BPCE (total impact: +€460 million), as well as capital gains on securities following the reclassifi cation of deeply subordinated notes as equity
(+€398 million). It also recorded the results of the revaluation of Natixis’ proprietary debt for a total of -€295 million.
In 2009, the networks’ contribution to the “share of income of associates” line was €403.9 million, down 10% year-on-year. This decline, less than the fall in the networks’ aggregate net income, was attenuated by revaluation adjustments, which were down 73% over the year.
The cooperative shareholder base increased, with 3.6 million cooperative shareholders at end December 2009.
Total c lient new money gathered by the Banques Populaires increased by 6.4%. Half of these additional infl ows went on balance sheet and half off balance sheet .
Restated for change in the scope of consolidation (HSBC banks), the increase in management expenses was limited to 1.7% in 2009, thanks to tight control over payroll and external services charges, demonstrating the Banques Populaires’ capacity to adapt their model to the economic environment.
The Caisses d’Epargne saw the arrival of new cooperative shareholders, bringing their total number to above 4 million.
Savings volumes increased by 1.6% despite the opening of the Livret A savings account to competition, which sparked a fall in total deposits. O n balance sheet c ustomer savings, which account for the largest portion of infl ows gathered, did well thanks to higher volumes in demand deposits and resurgent customer interest in home-savings products.
Loan volumes also increased across all markets (+7.3% over the year). This increase was driven by resilience in the retail and business markets, and a strong increase in commitments towards local authorities and in social housing. The Caisses d’Epargne network thereby complied fully with its commitment to the government to boost its contribution to fi nancing the economy.
The cost of risk was down a total of €55 million compared to 2008, refl ecting a substantial reduction in risk on the fi nancial portfolio and an increase in customer risk.
Before impairment charges on the group’s national investments, the Caisses d’Epargne’s earnings were up. After factoring in impairment charges, net income was €671 million (-27%).
Individual risk increased by 25% this year, with -€1,046 million in provisions for the CIB division and -€995 million for GAPC division, and accounted for 95% of net provisions for the year.