Overall interest rate, liquidity, structural foreign exchange risks 4.3 Overall interest rate, liquidity, structural foreign exchange risks
It is not in Natixis’ interest to hold long-term structural interest rate positions in its banking portfolio. With a few exceptions, fi xed-rate fi nancial assets and liabilities are returned for BOR via rate swaps and are mainly held in the Treasury portfolios which are subject to ongoing monitoring of interest rate risk.
This risk is measured in terms of the sensitivity of portfolios’ economic value by basis point on the yield curve and by currency. For the largest portfolios it is controlled through limits approved and monitored by the Risk Department. As regards Treasury, in which most positions are concentrated, this mechanism is rounded out with interest rate and spread stress tests which are also governed by limits. VaR is measured on a daily basis, but is not subject to a limit.
RISK MANAGEMENT4 Overall interest rate, liquidity, structural foreign exchange risks This fi gure is down on the previous year (€60 million at December 31, 2012) due to a reduction in mismatched positions.
Liquidity risk is the risk that Natixis will be unable to honor its commitments to its creditors due to the mismatching of maturities between assets and liabilities. This risk could arise, for example, in the event of massive withdrawals of customer deposits, a crisis of confi dence, or an overall market liquidity crisis. As a Corporate and Investment Bank, this risk for Natixis results primarily from mismatched positions between transactions with contractual maturities, as Natixis has fewer stable and permanent customer resources than retail banks and partly funds its operations on the markets (see Chapter [5] “Financial data”, section [5.1.5] “Refinancing”).
Thus, the purpose of the overall liquidity risk management policy is to: V guarantee that Natixis complies with its financing commitments while ensuring that its refinancing needs and mismatches traded are in line with the Group’s short- and medium-term refinancing capacities; V optimize the cost of refinancing within the set risk constraints to help reach the profitability objectives; V respect the internal limits set in close cooperation with BPCE and adapted to the Group’s ability to provide for Natixis’ ultimate liquidity needs; V comply with national and international regulations; V contribute to the diversification of amounts raised by Groupe BPCE by geographic area, product and counterparty.
Liquidity risk is controlled, managed and monitored in the following manner: V management of each business line’s liquidity consumption: to manage the bank’s refinancing needs, liquidity budgets are allocated for each business line as part of the budgetary procedure and approved by the ALM Committee. Consumption is monitored weekly for Wholesale Banking business lines and monthly for other business lines; V supervision of short-term mismatching: this is measured on the basis of liquidity gaps. This indicator is produced daily for a 365-day horizon in intervals of one day, based on all the parent company’s transactions and is extended to the US subsidiaries. It is subject to four permanent limits approved by the ALM Committee and monitored daily, on overnight market exposure at opening, on the 60-day, 150-day and 330-day static liquidity gaps; V supervision of medium-term mismatching: this is measured on the basis of the liquidity gap and asset/liability hedging ratios. These ratios, calculated for all currencies combined and for the US dollar, include minimum hedging ratios approved by the ALM Committee and monitored monthly; V simulations of liquidity stress scenarios: the purpose of these scenarios is to measure the Group’s ability to continue to respect its commitments and operate in the event of a liquidity crisis. Natixis periodically simulates its contribution to the Group’s earnings based on different crisis scenarios (systemic, specific, combined etc.) and different levels of intensity (moderate, strong, extreme, etc.) over one-, two- and three-month periods for which assumptions are set by BPCE; V the refinancing structure: the refinancing structure is monitored to ensure that resources are well diversified, by type of counterparty, by market segment and by geographic area, in order to manage all consolidation risk; V the constitution of a liquidity pool: Natixis has a liquidity pool to secure intraday payments. It is composed of securities and Central Bank-eligible receivables and is based in Paris (Pool 3G) and New York (FRB’s Discount Windows). The amount held in the pool is fairly stable over time (some €4 billion in Pool 3G and $3 billion at the FRB).
Other fi nancial liabilities at fair value through profi t and loss 47 14 11 5 8 42 126
Structural foreign exchange risk is defi ned as the risk of transferable equity loss generated by an adverse fl uctuation in exchange rates against the Group currency used in the consolidated accounts due to mismatches between the currency of net investments refi nanced by purchases of currency and the currency of equity.
The Insurance Department, which reports to the Legal Department within the Corporate Secretariat, is tasked with analyzing insurable operational risks and taking out appropriate insurance coverage (direct insurance and/or transfer).
V The “Overall Banking”, “Company Civil Liability” (operational and professional) and “Management Civil Liability” insurance policies taken out by Natixis on behalf of the parent company and all its subsidiaries were renewed on January 1, 2013.
Insurance premiums for all these policies cost a total of €11.7 million for the 2013 fi scal year.
As a multinational banking group performing complex and large-scale cross-border transactions, Natixis is subject to tax legislation in a large number of countries throughout the world, and structures all of its operations in a way that optimizes the effective tax rates. Changes to tax legislation or its application by the competent authorities in these countries may have a signifi cant impact on Natixis’ results. Natixis implemented management processes 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 while optimizing their taxation. The structures of Natixis’ intragroup 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 advisers and, on an ad hoc basis as and when 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 adjustments.
Like many banking groups, Natixis and its consolidated subsidiaries are involved in litigation before the courts and can be investigated by regulatory authorities.
On November 3, 2008, the plaintiffs sought relief from the United States Supreme Court, requesting that the denial of their appeal be overturned.
The class actions in which Natixis Funding is cited as one of 13 providers and brokers of derivatives will go ahead, as the requests to dismiss the plaintiffs were rejected on March 25, 2010.
The individual municipalities’ cases against 40 defendants including Natixis Funding and Natixis will also go ahead, as the requests for dismissing the plaintiffs’ suits were rejected on April 26, 2010.
Irving H. Picard, the court-appointed trustee for Bernard L. Madoff Investment Securities LLC (BMIS) fi led a complaint with the United States Bankruptcy Court for the Southern District of New York against several banking institutions, including a $400 million complaint against Natixis. Natixis denies the allegations made and intends to take all steps to defend its position and protect its rights. The complaint is currently under examination by the Bankruptcy Court of the Southern District of New York.
Basing their argument on a report by the Autorité des Marchés Financiers, which had not been made public, the plaintiffs allege that Lagardère SCA failed to comply with market regulations when it issued bonds redeemable in EADS shares subscribed for by Natixis in April 2006.
The AMF conducted an audit of the marketing of Doubl’ô fund ranges from 2001 to 2002. In April 2011, Natixis asset management subsidiaries received a notifi cation of grievances from the AMF for failure to meet their professional obligations (inconsistency between the advertisement and the proposed investment).
The rapporteur designated by the AMF’s Enforcement Committee published his report in January 2012, recommending the exoneration of the parties on technical grounds (statute of limitations) and content grounds (consistency of sales documentation with the proposed investment, and compliance with applicable regulations in force at the time). On April 19, 2012, the Enforcement Committee rendered its verdict, ruling that the statute of limitations was reached in 2005.
As part of terminating a swap agreement entered into by Natixis FP in connection with a CDO transaction, the CDO’s trustee called on the New York magistrate judge to interpret the provisions of this swap agreement. On December 22, 2012, the magistrate
Legal risks judge ruled that Natixis is required to pay $10.5 million to terminate the swap. Natixis disputed this ruling and decided to appeal. A»transaction has been carried out regarding this case.
ICMOS France, a subsidiary of Natixis’ former alternative management division which has now been placed in liquidation, received a notifi cation of grievances from the AMF due to failings in its structure and internal procedures. It is claimed that this company implemented neither the structure nor human and material resources required by its activity and that it was not independent of Natixis. At the beginning of December 2013, it was fi ned €150,000 by the AMF.
There are no other governmental, legal or arbitrational procedures in progress that are likely to have a signifi cant impact on Natixis’ fi nancial statements.
Insurance risk is the risk to profi ts of any difference between expected and incurred claims. Depending on the insurance product in question, the risk varies according to macroeconomic changes, changes in customer behavior, changes in public healthcare policy, pandemics, accidents and natural disasters (such as earthquakes, industrial accidents or acts of terrorism or war). The credit insurance business is also subject to credit risk.
Natixis Assurances has identifi ed the policyholders with a high risk of redemption, the differential criteria being age, tax seniority and amount of capital. For these policyholders, Natixis Assurances has hedged the risk of interest rate increases and has limited the scope covered by such policies to approximately a quarter of its assets. Against this backdrop, it has hedged its portfolio with Cap policies and has also subscribed to variable-rate bonds.
Concerning securities in other categories, the sensitivity analysis carried out at end-December 2013 showed that a 1-point increase in bond yields would have a negative impact of €48 million on equity (taking into account the variation attributable to policyholders and taxation), i.e. 3.9% of equity.
The annual reinsurance plan seeks to diversify reinsurers and to deal only with parties having a high-quality rating. No reinsurance treaty is entered into or renewed with parties that are noninvestment grade (rating of BB+ to D-). In practice, the ratings of reinsurers with which Natixis Assurances does business range from AA to BBB+. The reinsurers that Natixis Assurances works with have a low issuer risk, and the risk of concentration in a given counterparty is limited since Natixis uses several reinsurers.
V Traditionally, Coface distinguishes between frequency risk and event risk: frequency risk represents the risk of a sudden and significant increase in delinquency from a multitude of debtors. This risk is measured for each region and country by monitoring the instantaneous loss ratio and the monthly indicator that breaks down the changes in domestic/export credit by DRA (Debtor Risk Assessment) and business sector, by acceptance rate on the DRA scale or by product line (deposit, single risks). Loss ratios for the different underwriting centers are also monitored at the consolidated Coface level. Missed payments are analyzed weekly by the Group Management Board and monthly by Coface’s Arbitration Committee; V event risk represents the risk of abnormally high losses recorded for the same debtor or group of debtors, or of an accumulation of losses for the same country.
Coface maintains a diversifi ed credit risk portfolio, in order to minimize the risk that a default by a debtor, a slowdown in a particular sector of activity or an adverse event in a given country might exert a disproportionate impact on its overall claims expense. Furthermore, the fact that the great majority of Coface’s risks are short-term (95% of total outstandings) allows it to reduce the risk covered for a debtor or a group of debtors relatively quickly and anticipate a decrease in their solvency.
Coface has implemented an investment policy that incorporates the management of fi nancial risk through the defi nition of its strategic allocation, regulations governing insurance companies and constraints related to the management of its liabilities. Management of fi nancial risks is thus based on a rigorous system of standards and controls which is regularly reviewed: V interest rate risk and credit risk: the majority of Coface’s allocations are in fixed-income products which guarantee it recurring and stable revenue. The bond portfolio’s overall sensitivity(1) was 2.1 at December 31, 2013. Coface is not exposed to Greek, Irish, Portuguese or Spanish sovereign debt. Coface has limited exposure to Italian sovereign debt as part of a defined-risk budget. It accounted for 3.9% of its global portfolio at December 31, 2013; V exchange rate risk: the majority of Coface’s investment instruments are denominated in euros. Subsidiaries and branches using other currencies must observe the same principles of congruence. At December 31, 2013, a foreign exchange hedge via swap in particular was carried out to hedge USD and GBP-denominated bond investments for a total amount of €143 million; V equity risk: exposure is limited to less than 10% of the portfolio and is concentrated in the euro zone, in connection with its core business. At December 31, 2013, listed equities represented 4% of the investment portfolio and were partially hedged via the acquisition of put options on indices; V counterparty risk: maximum exposure to any given counterparty is set at 5% of assets under management, with exceptional exemptions for short-term exposure. More than 62% of the bond portfolio carried a median rating (2) of above A-; (1) The sensitivity of a bond measures the bond’s loss in value in the event of an interest rate hike. For example, bonds with a sensitivity of 2.1 will see a 2.1% reduction in their market value if interest rates increase by 1%.
Underwriting risk is the main risk incurred by CEGC. The regulated commitments carried as liabilities amounted to €1.1 billion at December 31, 2013 (up 16% compared to fi scal year 2012). This increase was due to the outstanding performance of the guarantees for mortgage loans granted to retail customers. Low interest rates offered by the market led to a massive wave of borrowers refi nancing their outstanding loans.
For each of its activities, underwriting risk management is largely based on an analysis of the transactions under consideration (quality of counterparties, type and analysis of the project, funding or commitments and sureties collected) and on an individual and collective delegation system tailored to the specifi c risks of each market and the experience of the delegates. The delegation system covers specifi c market risks by level of risk, which refl ects the probability of occurrence of a claim, and by level of commitment, which refl ects the severity of the claim in the event of occurrence. The approval process governs CEGC’s delegation system through the establishment of absolute limits on risk exposure per business line (severity of the claim in the event of occurrence) and by counterparty rating or quality (probability of occurrence).
The system for managing these risks is based on 1) a fi nance management charter which details the limits, rules and alerts applicable to the entire portfolio and by asset class and 2) special Committees (ALM Committee and Finance Management Committee) that oversee compliance with these rules, implement the asset allocation policy and review the returns on the transactions carried out.
As a % of gross balance sheet value of the provision As a % of fair value
Each year, reinsurance hedging needs are defi ned based on changes in activity.
CEGC uses a default mapping tool and database tailored to its activities and developed on the basis of business line processes. This database is the standard framework used to catalog incidents and risk situations, and for monitoring corrective action plans based on the methods deployed by Natixis.
Sensitive exposures in accordance with the recommendations of the Financial Stability Forum 4.7 Sensitive exposures in accordance with the recommendations of the Financial Stability Forum
Subprime ABS CDOs represented gross exposure of €651 million as at December 31, 2013. €12 million in impairments were recognized (excluding the effect of the BPCE guarantee) in 2013, bringing total impairments to €560 million.
Value adjustments fell by €154 million during 2013 (excluding the effect of the BPCE guarantee) to €197 million at December 31, 2013, versus €351 million at December 31, 2012.
Exposure in the fi nancial statements at December 31, 2013 was as follows: (in millions of euros) US RMBS
Breakdowns by rating and type of underlying for US RMBS were as follows at December 31, 2013: Breakdown by rating % breakdown
Available-for-sale asset portfolio 6 - (6) 0 - - - - - - - -
% net exposure BPCE guarantee (including assets hold by SAHARA) 100%
Given the assumption of the P3CI repayment at January 1, 2012, all analytical restatements carried out in 2012 on the business line contributions to P3CI have been eliminated.
The management data presented in this registration document have been restated pro forma for fi scal year 2012.
As from 2013, the earnings of the Natixis business lines are presented in accordance with Basel 3 regulations. Basel 3 riskweighted assets are assessed by Natixis on the basis of the implementation documents published to date.
V The systemic risk levy and the contribution for ACPR (French Prudential Supervisory Authority) control fees, previously allocated to the Corporate Center, are now allocated to the different business lines.
The conventions applied in determining the earnings generated by the various business lines are as follows: V the business lines record the return on regulatory capital allocated to them; V the return on share capital of the entities comprising the divisions is eliminated based on a normative rate; V the carrying cost of goodwill is borne entirely by the Corporate Center; V the divisions are invoiced for an amount representing the bulk of Natixis’ overheads; the uninvoiced portion accounts for 3% of Natixis’ total expenses.
In 2013, Natixis’ operating environment was marked by a gradual increase in interest rates following announcements by developed country central banks, and an improvement in the indices of the world’s top fi nancial marketplaces. The big events on the economic front included the recovery in the United States and the beginning of the end of the recession in Europe.
In 2013, Natixis further expanded its “Originate-to-Distribute” (O2D) model with the establishment of a special structure in the Wholesale Banking division and the signing of two new major partnership agreements with institutional investors for the distribution of Structured Financing solutions. At the same time, Natixis successfully positioned itself as a major player contributing its expertise in M&A advisory, acquisition fi nancing and refi nancing on the high-yield markets in a number of emblematic deals.
In terms of research, Natixis was ranked No. 1 for covered bonds, Pfandbriefe, ABS, supranationals and agencies (source: Euromoney – Fixed Income Research Survey 2013). It was also recognized for its research in small and mid cap equities in France, taking the No. 4 spot in the Thomson Extel Survey 2013 ranking.
Natixis Global Asset Management (NGAM) continued to expand in 2013 and completed its distribution optimization project by creating a France BDU (business development unit) on its NGAM International Distribution platform and transferring NAM’s sales teams in charge of customers to this new structure. Upon completing this restructuring plan on October 1, 2013, NGAM International Distribution became the only distribution platform for clients shared by affi liates in France and abroad.
NGAM posted an exceptional year in terms of infl ows generated on its distribution platform, reaching record levels of assets under management.
Private Banking maintained its strong momentum in sales cooperation with the Group networks and further modernized its information system in France (roll-out of its new web tool scheduled for H2 2014 for IWMAs) and Luxembourg (launch of the OSIP project aimed at overhauling its back- and front-offi ce applications).
Insurance continued to develop its individual personal protection insurance and payment protection insurance offering.
Life Insurance enjoyed a more supportive economic environment and saw its level of activity return to normal. For its part, Natixis Assurance continued to adapt its range of multi-vehicle life insurance policies with the launch of the Horizeo policy. This new policy targeting the general public offers a wide range of investment monitoring options and prices on a sliding scale based on assets under management.
In the interest of building the markets back up, Natixis Assurances also increased the average annual revaluation rate for euro fundbacked AuM by 10 cents.
The Private Equity business line boasted a sharp rise in capital under management in 2013 on the back of various deals: V the acquisition in Q2 2013 of EURO Private Equity, a Swiss Asset Management and advisory firm specializing in European funds of funds; V the signing of a fund management mandate with Natixis Assurances (funds of funds); V fund raising for two venture capital funds: Quadrivium and Health for Life; V fund raising for three secondary funds in H2 (Cap Entrepreneur, Naxicap Secondary Opportunities II, Naxicap Secondary Opportunities III), managed by Naxicap; V the new closing of the Caspian II fund of funds (direct investment in the United States).
At €5,099 million, capital under management increased substantially compared to December 31, 2012 (+39%) despite persistently challenging fund-raising conditions (regulatory pressure and reduced tax benefi ts on certain types of products).
Specialized Financial Services stepped up its relations with the BPCE networks, in the Specialized Financing and Financial Services activities alike. It also continued its strict management of operating expenses and scarce resources.
In the Financial Investments business line, Coface fi nalized its efforts to refocus on credit insurance and factoring in Germany and Poland. Meanwhile Coface’s non-core businesses, now combined under the heading “Corporate Data Solutions” at Natixis, redefi ned their strategy for the business information and client management market. Finally, the Ho Chi Minh branch was incorporated in the business line as of January 1, 2013.
The development of the divisions went hand-in-hand with strict financial management: V liquidity requirements (excluding GAPC) were virtually stable at end-2013 compared to end-2012, in the wake of a €15 billion reduction in 2012; V RWA consumption (excluding GAPC), evaluated as per Basel 3 regulations, was down 2% to €116.4 billion at December 31, 2013 thanks to solid management of outstandings. Wholesale Banking’s RWA, calculated as per Basel 3 regulations, dropped by 1% to €74.5 billion at December 31, 2013.
Revenues from market activities were relatively stable compared to 2012, thanks in large part by the performance of the debt and treasury platform as well as equity derivatives fl ows.
Consolidated expenses (2), including GAPC, totaled €5,153 million, up 2.5% on 2012 at constant USD exchange rates.
At year-end, the headcount totaled 19,632 FTEs (excluding GAPC), down 3% year-on-year.
Recurring gross operating income (1) (2) (excluding GAPC) was €1,967 million for fi scal year 2013, up 19% versus 2012. Excluding the impact of the revaluation of own senior debt, gross operating income (excluding GAPC) rose by 8%.
The provision for credit losses came to €392 million in 2013 (excluding GAPC activities), refl ecting a moderate increase of 5% on 2012, in keeping with the Group’s provisioning policy in line with the economic environment.
The share in income from associates, for the most part consisting of contributions from Investment Solutions and Financial investments, climbed by 18% on 2012 to €21 million.
Pre-tax profit (1) (2) (excluding GAPC) came to €1,599 million in 2013 compared with €1,285 million in 2012 (i.e. +24%), including an impact of -€195 million from the revaluation of own senior debt, versus -€352 million in 2012. Excluding this impact, the increase in pre-tax profi t was +10% from 2012 to 2013.
The recurring tax expense (excluding GAPC) amounted to €592 million in 2013. The effective tax rate (1) (2) (excluding GAPC) stood at 37% at December 31, 2013, refl ecting the current rise in income tax rates in France.
Recurring net income group share including GAPC (1) (2) totaled €1,004 million 2013 versus €821 million in 2012.
The reclassifi cation of management results as accounting results included an impact of -€70 million linked to the pro forma result relative to the disposal of CCIs.
The Core Tier 1 ratio rose by 120 bp to 10.4% at December 31, 2013.
In 2013, average trading VaR was limited to €6.5 million compared to €7.3 million in 2012 (excluding GAPC). At year-end it amounted to €6.8 million, versus €5.1 million at end-2012.
Structured Financing revenues gained 4.1% year-on-year at constant exchange rates. Business was very strong, with more than €17.5 billion in new loans (€12.9 billion of which recorded on the balance sheet). Net margins on average outstandings were resilient. Service fee income accounted for 30% of revenues, up 5 points on 2012.
V The contribution of Aircraft, Infrastructure & Export activities fell by 4%.
V Net revenues from Acquisition Finance climbed by 8% on the back of emblematic international deals.
FINANCIAL DATA5 Management report at December 31, 2013 Revenues generated by the Fixed Income, Foreign Exchange, Credit, Commodities, Cash Management and Treasury businesses were virtually stable compared to 2012. This result included a non-recurring net positive impact of €38 million (CVA/ DVA and dual curve hedging) and a decrease of €85 million following the discontinuation of certain activities.
V Fixed Income revenues (Credit, Foreign Exchange and Commodities) dropped over the period despite resilient sales activity. This decrease was largely offset by the increase of revenues generated by Short-Term Treasury activities with intermediation volumes up significantly and refinancing costs on the decline.
Equities activities generated net revenues of €418 million, which was stable relative to 2012.
V Solutions activities, however, fell by €30 million due to market effects.
This alleviated the pressure gross operating income, which came out at €1,210 million, up €93 million year-on-year. The cost/income ratio was 57.8% in 2013, down 2.8 points on 2012.
Activities were developed under strict management of capital employed. As a result, at December 31, 2013, Basel 3 riskweighted assets (RWA) at period-end came to €74.5 billion versus €75.6 billion at end-2012.
(1) In 2013 and 2012: Euroweek, Covered Bonds Awards. In 2011: "Best Overall Bank" (Euroweek, Covered Bonds Awards).
(2) Dealogic at December 31, 2013: No. 1 bookrunner by number of issues, "All French Corporate Bonds in Euros".
(3) Dealogic at December 31, 2013: No. 1 bookrunner by number of issues, ""All French HY Corporate Bonds in Euros".
(4) IFR at December 31, 2013: “All Bonds in Euros” by number of issues.
Investment Solutions posted a 9.4% increase in revenues yearon -year to €2,258.7 million (+11.4% at constant exchange rates).
Gross operating income was up 11.2% (+13.3% at constant exchange rates) to €597.2 million.
In the United States: V In 2013, NGAM climbed to 8th place in US mutual fund inflows versus 17th place in 2012.
In Europe: V At the “Grands Prix de la Gestion d’Actifs” Asset Management awards handed out by Agefi, the Livret Bourse Investissements fund, managed by Natixis AM, took 3rd place in the “Equities France” category.
At the end of December 2013, assets under management stood at €629.2 billion, up €50.4 billion (+8.7%) compared to December 31, 2012, at constant exchange rates, driven by a signifi cant market effect (+€37.2 billion) in Europe and the US and by net infl ows (+€13.4 billion), at their highest level since 2007.
FINANCIAL DATA5 Management report at December 31, 2013 R CHANGE IN ASSETS UNDER MANAGEMENT OVER THE YEAR (IN BILLIONS OF EUROS)
At €599.4 billion, average assets under management were up 8.7% in 2013 versus 2012 (at constant exchange rates).
Expenses totaled €1,374.3 million, up 9.6% on 2012 (+12.1% at constant exchange rates). Excluding scope effects (particularly the acquisition of McDonnell at December 31, 2012 and transfer of Wholesale Banking activities in Q4 2012), expenses rose by 11% at constant exchange rates, buoyed by the development of affi liates in the United States and investments carried out by the distribution entities.
Provident Insurance and Payment Protection Insurance (PPI) continued to expand at a fast pace of 14.1% on the back of PPI’s rapid development (+20.0%): earned premiums came to €606 million in 2013 (two-thirds of which from payment protection guarantees). The increase in PPI earned premiums can be attributed to the limited seniority of the business (gradual distribution starting in 2007) and the 100% takeover of the guarantees distributed by the Banque Populaire network, previously co-insured (50/50).
Net revenues climbed by 39.5% on 2012 to €267.7 million, led by the rebound in Life Insurance net revenues (€150.3 million, i.e. +66.1%). With claims in line with the rates on guarantees, Provident Insurance and PPI delivered satisfactory profi tability: net revenues amounted to €130.1 million, up 12.4% versus 2012.
At end-December 2013, Private Banking recorded net inflows of €345 million. Net infl ows from the Networks and from direct clients helped offset net outfl ows on Sélection 1818’s IWMA platform and from institutional clients.
Assets under management totaled €22.4 billion, representing an increase of €1.6 billion over the year, boosted by a positive market effect of €1.3 billion.
Over the year, the business line’s net revenues picked up 13.2% (+€14.5 million versus 2012) to €124.2 million in 2013 on the back of a scope effect linked to the merger of 1818 Gestion with Natixis Multimanager at end-2012 (resulting in the creation of VEGA Investment Managers). Excluding this scope effect, net revenues were up 2.1% thanks to robust momentum in fees on AuM, while fees on transactions remained historically low.
Expenses stood at €121.8 million, representing a 9.5% increase in face value on 2012. This increase drops to 1.9% on a constant scope basis, marking a limited increase in light of the substantial resources devoted to modernizing the information systems.
Consumer Finance saw a sharp increase of 14% in personal loan commitments and growth of 5% in revolving credit commitments.
Through major sales efforts in Employee Savings Plans, Natixis won calls for tenders in the major corporate clients segment, taking assets under management up 13% to €21.8 billion compared to end-2012. Securities Services kept up the momentum of its development with an increase in its share of the Chèque de Table meal voucher market by 1.1 points to 14.5% in 2013.
Securities Services was impacted by weaker individual customer appetite for fi nancial investment products. The number of transactions fell by 11% in 2013, although there was an improvement for Euronext Paris in the fourth quarter. Assets under custody slid by 14% pro forma of the CCI disposal to €178 billion. The successful expansion of the range of services for the networks was promising.
Payments benefi ted from stronger Electronic Banking activity, with the number of transactions up 2%. The Transactions and Checks business was more contrasted: while check processing was down 3%, mass transactions was relatively stable.
Net revenues amounted to €1,271.6 million in 2013, up 7%. Growth was driven by Specialized Financing, which posted a 13% increase (6% at constant scope) in net revenues in 2013, while Financial Services revenues were relatively stable (excluding employee savings schemes, up 6%).
Specialized Financing businesses recorded strong growth in net revenues compared to 2012, driven by a particularly strong increase in Consumer Finance (+35%) related to changes in the BNP PF scope and solid sales momentum to the networks. Sureties and Financial Guarantees, up 6%, saw a drop in claims and an increase in fi nancial income.
Within Financial Services, the rise in employee savings schemes (+6%) offset the decline in net revenues from Securities Services (-8% related to the drop in transaction volumes), while revenues in Payments activities were stable (good momentum in Electronic Banking, up 6%).
Specialized Financial Services recorded total expenses of €833 million at end-2013, up 5% on 2012, with the impact on Consumer Finance of buying out minority shareholders being accountable for nearly two-thirds of this increase.
Overall, revenue slid only slightly by 1.6% at constant scope and exchange rates, rebounding by 4.3% in current terms in the fourth quarter, compared to Q4 2012.
Net revenues stood at €706 million in 2013, up 0.2% on 2012, thanks to management of underwriting profi tability. This included the capital gains generated from the centralized management of investments. Net revenues from Insurance picked up 1.4% in 2013 versus an 11% drop for Factoring net revenues in Germany and Poland over the same period, which nevertheless recorded a rise of 8% in Q4 2013 compared to Q4 2012.
2013 was marked by the disposal of Coface Services Belgium in Q1 (impact of -€2.5 million in net revenues and -€2.4 million in expenses in 2013 vs. 2012) and Ignios (formerly Coface Servicios Portugal) at the end of the fi scal year, with no impact on the fi nancial statements.
Natixis Private Equity predominantly holds units of funds and is currently comparable to a fund of funds. Natixis’ share of assets under management (or cash at risk) was €290 million at the end of December 2013, down 36.5% on the end of December 2012, while off-balance sheet commitments were down 51.7% to €90 million.
2013 net revenues were -€19 million versus +€8 million in 2012. This included an impact of -€6 million associated with the disposal of fund units. These disposals contributed to the sharp drop in RWA outstandings over the year (-39%).
RWA at period-end (Basel 3) after BPCE guarantee 3,746 10,339 (63.8)%
Risk-weighted assets (RWA) after the BPCE guarantee fell by 63.8% year-on-year. The majority of this reduction was attributable to disposal programs, commutations, restructuring and amortization of portfolios.
At December 31, 2013, RWA stood at €3.7 billion after the BPCE guarantee, which had an impact of €5.4 billion.
Admittedly, economic conditions varied between the United States and Europe. US growth took root, with a drop in unemployment, whereas European countries bore the brunt of a disparate economic situation. The US Fed and ECB’s mandates were separate and distinct, with a contrasting level of cash in circulation in each zone. The stepped-up repayment of the ECB’s LTROs led to greater volatility interest rates in the euro zone, particularly at the end of the year.
In order to optimize resources, Natixis continued its diversifi cation efforts and now has the liquidity position necessary to continue its fi nancing operations.
This measure, along with an improvement in the fi nancing conditions of sovereign peripheral country issuers, encouraged a cautious return to normal on the interbank market and better circulation of cash within the zone.
From May, long rates of US and core euro zone country bonds increased signifi cantly. In December, the improvement in economic activity and the job market in the United States during the year led the Fed to decrease asset purchases under the QE3 program from January 2014 by $10 billion (to $75 billion from $85 billion).
FINANCIAL DATA5 Management report at December 31, 2013 R NATIXIS’ MEDIUMAND LONG-TERM DEBT ISSUANCE PROGRAM OUTSTANDINGS
Refer to Note 15, “Post Closing Events”, in Chapter [5.2], Consolidated Financial Statements and Notes.
V a €33 million drop in net fee and commission income,
The provision for credit losses reached -€357 million for 2013, i.e. a €59 million increase over 2012.
Gains or losses on fi xed assets were positive at €1,391 million.
At December 31, 2013, the balance sheet totaled €398,821 million, down from €402,177 million at December 31, 2012.
V allocate the remaining distributable profits to retained earnings, i.e. €500,000,000.00.
In the management presentation, net income from the workout portfolio (GAPC), resulting from discontinued operations and net restructuring costs, was reported under the net income (group share). This made it easier to compare data from one fi scal year to the next. The following table sets out the reconciliation and consolidated net income.
management GAPC Pro forma impact of CCI disposal Restructuring 2013 published
R 2 - MANAGEMENT RESULTS RECLASSIFIED AS CONSOLIDATED RESULTS IN 2012
FINANCIAL DATA5 Consolidated fi nancial statements and notes 5.2 Consolidated financial statements and notes
Financial assets at fair value through profi t and loss 6.1 218,324 231,870
Loans and receivables due from banks 6.5 77,600 61,932 o/w institutional operations
Due to banks 6.13 127,657 127,754 o/w institutional operations 46 46 o/w institutional operations 771 745
Net gains or losses on available-for-sale fi nancial assets 7.4 458 362
Depreciation, amortization and impairment of property, plant and equipment and intangible assets (250) (235)
Consolidated net income/(loss) – group share – per share, calculated on the basis of the average number of shares over the period excluding treasury shares 5.24 0.27 0.27
NET INCOME/(LOSS) AND GAINS AND LOSSES RECORDED DIRECTLY IN EQUITY 1,926 1,399 o/w group share 1,927 1,353 o/w non-controlling interests share (1) 46 * The comparative 2012 fi nancial statements have been restated to refl ect the impact of the application of IAS 19 (revised). The effects of the change in accounting policy associated with the implementation of IAS 19 (revised) are described in Note 12.2.3.
FINANCIAL DATA5 Consolidated fi nancial statements and notes STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
Pro forma equity as of January 1, 2012 4,932 5,230 3,800 (14)
Equity as of December 31, 2012 after appropriation of income 4,938 5,259 1,262 (17)
Equity component of share-based payment plans 2012 dividend paid in 2013
Issuance and redemption of deeply subordinated notes and preference shares (273)
FINANCIAL DATA5 Consolidated fi nancial statements and notes NET CASH FLOW STATEMENT
+/- Net charge to depreciation and amortization of property, plant and equipment and intangible assets 313 306
= Total non-cash items included in pre-tax profi t and other adjustments 2,490 1,345
+/- Decrease/(increase) in non-fi nancial assets or liabilities 3,252 2,251 - Income taxes paid (632) (268)
+/- Other cash provided/(used) by fi nancing operations (3) (1,587) (5,003)
Impact of exchange rate changes on cash and cash equivalents (1,365) (149)
(1) Decrease/(increase) in fi nancial assets and investments in associates, including in particular: V fl ows related to assets held to maturity (+€612 million); V fl ows related to investments in consolidated affi liates (+€6.8 million); V fl ows related to CCIs (+€12,247 million including the sale of CCIs for €12,177 million, an increase in subscriptions to BP and CEP CCIs of -€57 million and dividends deposited totaling +€187 million).
FINANCIAL DATA5 Consolidated fi nancial statements and notes NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 SPECIAL PURPOSE ENTITIES 226 4.1 Consolidation of special purpose entities 226 4.2 Types of SPEs with which Natixis has dealings 227
Consolidated fi nancial statements and notes 6.13 Due to banks and customer deposits 276 6.14 Debt securities 277 6.15 Insurance companies’ technical reserves 277 6.16 Provisions and impairment 278 6.17 Subordinated debt 281 6.18 French State support 282 6.19 Fair value of fi nancial liabilities carried at fair value in the balance sheet 283 6.20 Fair value of fi nancial liabilities valued at amortized cost 287 6.21 Breakdown of fi nancial assets and liabilities by contractual maturity 288
NOTE 8 STATEMENT OF NET INCOME/(LOSS), GAINS AND LOSSES RECORDED DIRECTLY IN EQUITY 297 8.1 Change in gains and losses recorded directly in equity 297 8.2 Breakdown of tax on gains and losses recognized in equity 297
NOTE 10 SEGMENT REPORTING 301 10.1 Wholesale Banking 302 10.2 Specialized Financial Services 302 10.3 Investment Solutions 303 10.4 Private Equity (non-core activities) 303 10.6 Corporate Data Solutions 303 10.7 GAPC - Workout Portfolio Management 303 10.8 Corporate Center 304 10.9 Segment reporting 304 10.10 Other disclosures 307
NOTE 12 HEADCOUNT, PAYROLL COSTS, COMPENSATION AND EMPLOYEE BENEFITS 316 12.1 Number of employees 316 12.2 Compensation and employee benefi ts 316
NOTE 13 CAPITAL MANAGEMENT 325 13.1 Share capital 325 13.2 Capital Management 326 13.3 Equity instruments issued 326
NOTE 14 COMMITMENTS 327 14.1 Guarantee commitments 327 14.2 Financing commitments 327 14.3 Commitments on securitizations 328
NOTE 16 OTHER DISCLOSURES 329 16.1 Finance and operating leases 329 16.2 Related parties 330 16.3 Insurance companies 332 16.4 Statutory Auditors’ fees 335
The fi nancial statements presented for comparative purposes were published by Natixis in the 2012 registration document fi led with the Autorité des Marchés Financiers (AMF – French Financial Markets Authority) on March 19, 2013, restated to refl ect the impact of IAS 19 (revised) .
In accordance with European regulation 809/2004 relating to information contained in prospectuses, the fi nancial statements for the year ended December 31, 2011, that were published in the 2011 registration document fi led with the AMF on March 23, 2012, are incorporated for reference into this registration document.
The following standards, interpretations and amendments are applied for the fi rst time from January 1, 2013: V amendment to IAS 1, “Presentation of financial statements”. The aim of this amendment is to enhance the financial information provided on the “Statement of net income/(loss), gains and losses recorded directly in equity”. The presentation of gains and losses recorded directly in equity must distinguish items liable to be recycled to net income from items that will never be recycled to net income. This amendment has no effect on Natixis’ consolidated financial statements, but does result in the disclosure of additional information in the “Statement of net income/(loss), gains and losses recorded directly in equity”; V amendment to IAS 19, “Employee benefits”, retroactively applicable. This amendment makes changes to the recognition and presentation of pension obligations and similar items, particularly as regards actuarial differences, which are now fully and immediately booked to non-recyclable “Other comprehensive income” and past service cost, which are immediately booked to income. The impact of the first-time adoption of IAS 19 was the recognition in equity of -€202 million (before tax) at January 1, 2013; V amendment to IFRS 7 “Disclosures – Offsetting Financial Assets and Financial Liabilities”, retroactively applicable. This amendment requires the disclosure of new information on financial instruments offset on the balance sheet and those that are the subject of a legally enforceable master netting agreement or similar agreement. This amendment results in the disclosure of additional information in Note 6.3 at December 31, 2013; V IFRS 13 “Fair Value Measurement” applicable prospectively. This new standard creates a uniform IFRS financial information framework for determining fair value, and provides indications on how to evaluate the fair value of assets and liabilities, both financial and non-financial. It applies when another IFRS standard provides for or authorizes fair value measurement or the disclosure of fair value measurements (see Note 5.6). The impact at December 31, 2013 of the application of this new standard is disclosed in Note 7.3; V the amendment to IAS 12, “Deferred Taxes: Recovery of Underlying Assets” which aims to introduce a rebuttable presumption that the book value of an investment property will be recovered by its sale and the entity will be taxed at the rate applicable to the sale of the underlying asset. The application of this amendment did not have a significant impact on Natixis’ accounts at December 31, 2013; V amendments to IFRS 1, IAS 1, IAS 16, IAS 32, IAS 34 and IFRIC 2 under the “Annual Improvements - 2009-2011 cycle” published by the IASB on May 17, 2012 and adopted by the European Commission on March 27, 2013; The application of these amendments had no impact on Natixis’ accounts at December 31, 2013; V amendment to IFRS 1 “Government Loans” relating to the accounting treatment of certain government loans upon the first-time adoption of IFRS. This amendment deals with the accounting treatment of government loans obtained at belowmarket interest rates. It introduces an exemption to the rule of retroactive application of IFRS by allowing IFRS 9 – Financial Instruments and IAS 20 – Accounting for Government Grants and Disclosure of Government Assistance to be applied prospectively from the date of transition to IFRS. The application of this amendment had no impact on Natixis’ accounts at December 31, 2013.
The application of IFRS 12 will result in an enrichment of the information produced on Natixis’ interests in non-consolidated structured entities.
As a result of these new standards, the IASB has also published amended versions of IAS 27, “Separate Financial Statements,” and IAS 28, “Investments in Associates and Joint Ventures,” which were adopted by the European Commission on December 11, 2012 and are subject to mandatory application for the annual periods beginning on January 1, 2014: V the amendments to IFRS 10, IFRS 11 and IFRS 12 published by the IASB on June 28, 2012 and adopted by the European Commission on April 4, 2013 are subject to mandatory application from January 1, 2014. The amendment to IFRS 10 provides clarification on the transitional provisions and eases the requirements concerning comparative disclosures by limiting restatements to the prior period. Also, for disclosures for nonconsolidated structured entities, the amendments eliminate the requirement to present comparative information for periods prior to the one in which IFRS 12 is first applied; V the amendment to IAS 36 “Impairment of Assets”, published by the IASB on May 29, 2013 and adopted by the European Commission on December 19, 2013, is retroactively applicable to the fiscal periods beginning on January 1, 2014. The aim of this amendment is to clarify the fact that the scope of information to be provided on the recoverable value of depreciated assets is limited to the recoverable amount of depreciated assets where this amount is based on the fair value less selling costs. This amendment will have no impact on Natixis’ accounts, but will result in a financial disclosure where applicable in the notes at December 31, 2014; V the “Novation of derivatives and continuation of hedge accounting” amendment to IAS 39 “Financial Instruments: Recognition and Measurement”, published by the IASB on June 27, 2013 and adopted by the European Commission on December 19, 2013, is applicable to the fiscal periods beginning on January 1, 2014. This amendment continues hedge accounting in the event that a derivative designated as a hedging instrument is transferred by novation from a counterparty to a central counterparty due to legislative or regulatory provisions. This amendment will have no impact on Natixis’ accounts; V amendments to IFRS 10 “Consolidated Financial Statements”, IFRS 12 “Disclosure of Interests in Other Entities” and IAS 27R “Consolidated and Separate Financial Statements” published by the IASB on October 31, 2012 and adopted by the European Commission on November 20, 2013 are subject to application from January 1, 2014. IFRS 10 was modified to define the economic model of investment entities and requires that they measure their subsidiaries (barring exceptions) at fair value through profit and loss rather than consolidating them. IFRS 12 was amended to introduce specific disclosure obligations in the appendix regarding subsidiaries of investment entities. Finally, the amendment to IAS 27R removes the option of investment entities to measure investments in certain subsidiaries either at cost, or at fair value in their separate financial statements. These amendments will have no impact on Natixis’ accounts.
FINANCIAL DATA5 Consolidated fi nancial statements and notes the guide published by the IASB on October 31, 2008, entitled “Measuring and disclosing the fair value of financial instruments in markets that are no longer active”. These two texts underline the importance of using judgment to determine fair value in illiquid markets. As a result of this recommendation, as at December 31, 2013, Natixis does not systematically apply models using observable data, as with previous reporting periods, in view of the lack of market liquidity affecting some asset classes; V with regard to financial reporting on risk exposure, the recommendations applicable in France resulting from the Financial Stability Forum (FSF). Details of risk exposure, presented in the format recommended by the Commission bancaire in its May 29, 2008, statement “Presentation note regarding the French application of the FSF’s recommendations for financial transparency”, have been incorporated in section 4.7 of the “Risk management” chapter of the registration document.
In accordance with IAS 27 (revised), potential voting rights resulting from a put option granted to non-controlling interests are not taken into account in calculating the percentage of ownership and voting rights held, since they are not currently exercisable by Natixis.
At December 31, 2012, ownership of the Banque Populaire and Caisse d’Epargne cooperative investment certifi cates (CCIs), representing 20% of the share capital of each entity, gives Natixis signifi cant infl uence over the Banque Populaire banks and Caisses d’Epargne. The fi nancial statements of these entities were therefore accounted for using the equity method in Natixis’ consolidated fi nancial statements.
Natixis’ signifi cant de jure infl uence over the Banque Populaire banks and Caisses d’Epargne derived from the following rights conferred on Natixis by certain corporate documents relating to BPCE and by the memorandum of understanding relating to the CCIs issued by the Banque Populaire banks and the Caisses d’Epargne.
When the Caisse d’Epargne and Banque Populaire bank accounts were brought into those of Natixis using the equity method, the securities of the central institution, entered in those accounts as “available-for-sale assets”, were measured at fair value, with the corresponding changes in fair value impacting Natixis’ recyclable reserves. The valuation method used depended on the net asset value method, which was based on a revaluation of the main subsidiaries, taking into account the prudential constraints applicable to the activities in question. In this regard, changes in value of the central institution’s securities attributable to Natixis were neutralized.
The balance sheets of foreign subsidiaries and branches whose functional currency is not the euro are translated into euros at the closing exchange rate, except for share capital, reserves and capital allocations, which are translated at the historic exchange rate. The income statements of foreign subsidiaries and branches whose functional currency is not the euro are translated at the average exchange rate for the year. Any resulting translation gains or losses arising on both balance sheet and income statement items are recognized in equity under “Translation adjustments” for the portion attributable to the Group and “Minority interests” for the portion attributable to third parties.
V Application of IFRS 3R to business combinations carried out after January 1, 2010: R for each business combination, Natixis chose to determine non-controlling interests: R either based on their share in the identifiable net assets of the acquired entity, measured at their fair value at the purchase date, and therefore without recognizing goodwill on the noncontrolling interests (partial goodwill method),
R or based on their fair value at the purchase date, resulting in the recognition of goodwill, both for the Group share and the non-controlling interests (full goodwill method); R Hence, goodwill is a residual item determined as the difference between (i) the sum of the purchase price, the fair value at the purchase date of the share of interest held in the acquired entity prior to the purchase date, and the amount of non-controlling interests (determined using the partial or full goodwill method) and (ii) the net amount of the assets and liabilities assumed, measured at their fair value at the purchase date.
Combinations between entities or operations under joint control are understood to be combinations in which several operations are combined and all interested parties (entities or operations) are ultimately controlled by the same party or parties for a relatively long period preceding the combination. Such combinations do not fall within the scope of IFRS 3R.
The assets contributed by the CNCE to Natixis fall into two different categories: V shares in the Wholesale Banking and services subsidiaries; V a portion of the cooperative investment certificates (CCIs) conferring entitlement to the share capital of the Caisses d’Epargne.
In accordance with IFRS 3, other transactions affecting the structure of the Group – contribution of the remaining Caisses d’Epargne CCIs, 1.23% of the share capital of IXIS CIB, and 4.63% of the share capital of IXIS AMG; subscription for the Banque Populaire CCIs, and acquisition of Novacrédit – have been accounted for by the purchase method for consolidation purposes.
The goodwill arising from business combinations amounted to €484 million, which breaks down as follows: €229 million on IAMG, €21 million on IXIS CIB and €8 million on Novacrédit, plus the goodwill recorded in “Investments in associates” relating to the Caisse d’Epargne CCIs (€190 million) and the Banque Populaire CCIs (€36 million).
These tests resulted in a writedown of: V €6 million for the CDS CGU goodwill. The net amount of goodwill after writedown is €96 million; V €8 million for goodwill arising on holdings in SCI Altair 1 and SCI Altair 2 (an impairment of 100% of goodwill), given the analyses carried out on data center assets at the Lognes location (drop recorded in occupancy rate among external customers). An additional provision of €3 million was recorded under impairment of property (i.e. data center). The recoverable value valuation for these two CGUs was carried out based on the DCF method, taking into account the last rent valuation by an external player.
A 20 bp increase in discount rates associated with a 50 bp reduction in perpetual growth rates would help to reduce the value in use of CGUs by: V -6.4% for the Investment Solutions CGU; V -4% for the Specialized Financial Services CGU; V -4.8% for the Coface CGU; V -4.9% for the CDS CGU; and would not result in fi nding a depreciation of those CGUs except for the CDS CGU for which an additional €7 million impairment should then be recorded.
Similarly, the sensitivity of future business-plan cash fl ows to variations in key assumptions does not signifi cantly affect the recoverable amount of CGUs, with the exception of the recoverable amount of the Coface “non-core” CGU: V for Investment Solutions, a 10% decline in the “equity” markets and one point decline in the EONIA would have a negative impact of -4% on the recoverable amount of the CGU and would not lead to any impairment being recorded; V for Specialized Financial Services, a one point drop in the three-month EURIBOR applied to Factoring and recreating a “2008-2009” (drop in production and increased cost of risk) type crisis on Leasing would have a -6% negative impact on the recoverable amount of the CGS and would have no impact on terms of impairment; V for Coface, the primary sensitivity vector is the loss ratio. A level of 52% for this ratio (gross reinsurance), reflecting the deterioration of economic conditions, was applied to conduct the test of the CGU’s depreciation at December 31, 2013. A one-point increase in this loss ratio would have no significant impact on the recoverable amount of the CGU. Only an increase of 9 points of the “loss ratio” would lead to impairment of the CGU being recorded; V for the CDS CGU, the primary factor in sensitivity is the degree of the business plans’ achievement. A -5% variation in said plans would cause the CGU recoverable amount to fall by about €8 million and an additional depreciation to be found for an equivalent amount.
On December 20, 2011, Natixis entered into an agreement to transfer its Natixis HO CHI MINH branch to BPCE. The transfer is currently on hold pending approval from the Vietnamese regulatory authorities.
At December 31, 2013, Natixis maintained the full consolidation of the Natixis HO CHI MINH branch. It combined, in accordance with the provisions of IFRS 5 “Non-current assets held for sale and discontinued operations”, the assets and liabilities of these entities under two separate balance sheet line items: “Non-current assets held for sale” and “Liabilities associated with non-current assets held for sale”.
At December 31, 2013, Hansberger, a subsidiary of the Investment Solutions division and fully consolidated, is also treated under IFRS 5 with the presentation of its assets and liabilities organized into the two balance sheet items. “Non-current assets held for sale” and “Non-current liabilities held for sale”.
FINANCIAL DATA5 Consolidated fi nancial statements and notes Technical reserves for life-insurance policies are primarily composed of mathematical reserves corresponding to the surrender value of the contract.
Insurance offered primarily covers death, disability, work disability, dependency and fi nancial loss. Related technical reserves (mathematical reserves and reserves for claims to be paid) are calculated using specialized tables (life, experience and BCAC tables).
Reserves for unearned premium income are prorated separately for each insurance policy. They correspond to the portion of premium income remaining between the fi scal year-end and the premium due date.
Pursuant to paragraph 30 of IFRS 4, insurance policies and investment contracts with discretionary participation (life insurance) are measured using shadow accounting, which consists in recognizing the portion of unrealized gains or losses potentially attributable to policyholders as a deferred profi t-sharing reserve. The deferred profi t-sharing reserve thus refl ects the potential entitlement of policyholders to unrealized gains for Financial investments or their portion of unrealized losses. Considering prospective pay-out ratios for the duration of the 2014-2017 Medium-Term Business Plan and in accordance with the payout ratio recorded for 2013, the deferred profi t-sharing rate adopted at December 31, 2013 is 94.8% compared to 100% at December 31, 2012. This change refl ects the improved fi nancial backdrop against which Natixis Assurances’ does business, as well as the normalization of margins established in accordance with the general conditions of insured contracts.
The change in the deferred profi t-sharing asset and liability is recognized: V in equity when it relates to changes in the value of “availablefor -sale assets”; V in income when it relates to changes in the value of assets “at fair value through profit and loss” or investment property held to cover insurance policies, as well as changes in provisions for prolonged declines in value in “available-for-sale assets”.
Application of the shadow accounting mechanism resulted in the recognition of a deferred profi t-sharing liability on December 31, 2013 as on December 31, 2012.
In the case of deferred profi t-sharing assets, a recoverability test is carried out. Deferred profi t-sharing may be recovered depending on the intention and ability of companies to steer future compensation of contracts according to resources.
Prospective analysis of the deferred profi t-sharing asset’s recoverability is therefore carried out to demonstrate the ability and intention of companies to meet liquidity requirements over the remaining recoverability period without selling investments in unrealized losses. This process corresponds to a forwardlooking view of future cash fl ows, built following regulatory and contractual conditions applied to contracts and with the help of economic scenarios based on historic probability.
On February 17, 2013, BPCE S.A. and Natixis announced that they had each submitted to their respective Supervisory Boards and Boards of Directors a proposal to signifi cantly simplify the structure of Groupe BPCE. The operation involved the repurchase by the Banque Populaire banks and Caisses d’Epargne of all of the cooperative investment certifi cates (CCIs) issued by them, which had previously been held entirely by Natixis. Following the cancellation of the CCIs repurchased by each of the Banque Populaire banks and Caisses d’Epargne, the capital of these institutions is held entirely by their cooperative shareholders.
The repurchase transaction, amounting to €12.1 billion, was completed on August 6, 2013 and the corresponding gain was recorded in Natixis’ consolidated fi nancial statements in the amount of €142 million. The buy-back was accompanied by the repayment of fi nancing and the associated mechanisms, including P3CI, which was set up in 2012, with no impact on Natixis’ income statement.
V Disposal of WTC Owner (Waikiki Trade Center); V Disposal of junior units of Nomura Resecuritization Trust 20121R (a securitization fund holding the US RMBS positions previously carried by Natixis Paris, Natixis London, Natixis Funding and Natixis Financial Products). The sale of these units has resulted in the deconsolidation of the Nomura Resecuritization Trust securitization fund and two intermediary legal entities Nordet LLC and Lombarde LLC; V Disposal of Natexis Commodity Markets Ltd and 720 Olive Street LLC; V Deconsolidation of Canvas at December 31, 2013, which fell below the consolidation threshold; V Liquidation of the following entities: R IXIS CMNA (Australia) (No. 2) SCA,
EIG carried out a capital increase of €1.5 billion on December 18, 2013 to which Natixis Belgique Investissements (NBI) did not subscribe. The Group’s stake in this proportionally consolidated subsidiary therefore decreased from 5.2% to 4.49% (-14%).
0 Asset Management Holding (Luxembourg) after the consolidation thresholds were exceeded; V Creation of AEW Partners VII, INC and Loomis Sayles Alpha, LLC (USA); V Incorporation of Aurora Horizon Funds.
V Deconsolidation of Natixis Private Equity Opportunities, which fell below the consolidation threshold; V Deconsolidation of BP Développement, Codeis and Naxicap Rendement 2018 following Natixis’ loss of exclusive control over BP Développement, mainly as a result of the amendment of BP Développement’s bylaws.
V Merger of ABP Vie and Vitalia Vie into Natixis Assurances Partenaires, now called ABP vie.
V Total transfer of GCE Bail to Natixis Lease on January 1, 2013.
V Total transfer of FNS 4 to NPEIS on January 1, 2013; V Total transfer of NPEIS to NPE on June 30, 2013.
The various legal entities specifi cally created to manage a transaction or group of similar transactions (special purpose entities – SPEs) and substantially controlled by Natixis, even where there is no equity relationship, are consolidated if they make a material contribution to the consolidated fi nancial statements. The main criteria for assessing the existence of such control as defi ned by SIC 12 are as follows: V Activity: the SPE’s activities are substantially conducted on behalf of Natixis which, directly or indirectly, has created the SPE to meet its specific business needs; V Decision-making powers: Natixis has decision-making and management powers enabling it to control or obtain control of the SPE or its assets, including certain decision-making powers arising after the formation of the SPE. Such decisionmaking powers may have been delegated by setting up an auto-pilot mechanism; V Benefits: the right to obtain a majority of the benefits of the SPE’s activities; the right to a majority of any economic benefits distributed in the form of future net cash flows, earnings, net assets or other economic benefits, or rights to the majority of residual interests; V Risks: Natixis substantially retains the majority of the residual risks or risks inherent in ownership of the SPE or its assets in order to obtain benefits from its activities.
An analysis of the characteristics of these entities and of their potential for consolidation is presented below by business and major categories of entities: 4.2.1 SPES INVOLVED IN ASSET MANAGEMENT BUSINESS LINES (MUTUAL FUNDS, CDOS, REAL ESTATE FUNDS)
The NGAM sub-group is involved in such funds as manager of the underlying portfolio for third-party investors. Its role is strictly defi ned by the portfolio management agreement, which never provides it with effective control of the structure. Neither NGAM nor any other Natixis entity holds a majority interest in these funds. Natixis thus does not retain a majority of the benefi ts or incur a majority of risks. Consequently, no such fund was consolidated as of December 31, 2013.
The management fees paid are not such as to allow it to benefi t from the bulk of the returns generated. If provision has been made for an incentive fee, it generally takes the form of a liquidation bonus, the major portion of which accrues to the unit holders. The “majority of risks” and “majority of benefi ts” criteria are assessed on the basis of the Group’s interest in such funds.
On this basis, only two real estate funds managed by the NGAM sub-group were consolidated as of December 31, 2013: V the EPI SLP fund; V the EPI SO SLP fund.
V As part of its private equity operations, Natixis makes equity investments in unlisted companies via venture capital vehicles (Fonds Communs de Placement à Risque – FCPRs – venture capital funds and SICARs – Sociétés d’Investissement à Capital Risque – venture capital companies) and limited partnerships. All SIC 12 criteria (“Activities”, “Decision-making powers”, “Majority of Benefits” and “Majority of Risks”) are assessed on the basis of the level of Natixis’ interest in each investment tranche, and on the basis of any guarantees provided to these entities; Based on these factors, three entities were consolidated as of December 31, 2013: R DAHLIA SICAR A; R NPE Caspian IA, LP; R NPE Caspian IB, LP.
Such entities do not meet any of the SIC 12 consolidation criteria because: V the SPEs activities are conducted first and foremost on behalf of the customer; V Natixis is rarely a shareholder in such entities and when it is, it generally holds a non-controlling interest. Auto-pilot mechanisms are generally in place and Natixis has not structured them for its benefit; V Natixis merely acts as a lender to such structures; most credit facilities are syndicated and the risks are equitably shared between the lenders in proportion to the amounts they have lent.
SPEs may be used to hold securities on behalf of a customer.
Since the repayment of Natexis Banque Populaire Preferred Capital 3 issues, Natixis has not consolidated this entity an no longer has any relationship with special purpose entities use to transform a debt type instrument (on the asset side of their balance sheet) into a more equity type instrument (on the liability side of their balance sheet).
V Natixis Immo Développement invests in real estate assets in partnership with other investors using two types of structures: R SEP-type structures. These entities are not consolidated inasmuch as each partner recognizes its share of the SEP’s assets, liabilities and results; R other structures under which a separate legal entity (SCI, SAS, SNC, etc.) acquires the assets. Natixis Immo Développement does not have any interest in structures that could have a material impact on Natixis’ consolidated fi nancial statements. Accordingly, no such entity was consolidated as of December 31, 2013.
V Natixis controls a certain number of SPEs designed to own or lease real estate assets intended to be re-let or otherwise made available to other Group subsidiaries or third parties. Such SPEs are consolidated once Natixis has a majority interest in these vehicles and where they are material to the consolidated financial statements. Three SPEs meet these criteria and were thus consolidated as of December 31, 2013: R Natixis Immo Exploitation; R SCI Altair 1; R SCI Altair 2.
V The Natixis Lease sub-group owns a certain number of SPEs which own real estate assets. Four of them are controlled by Natixis (>50% holding) and are significant in nature as of December 31, 2013. Therefore, they are included in the consolidation scope of Natixis on this date: R COASSUR; R SCI Valmy Coupole; R OPCI Natixis Lease Investissement; R SASU Immobilière Natixis Bail held by OPCI Natixis Lease Investissement.
V Natixis Garanties owns three SCIs that hold the business line’s operating property. All three were included in Natixis’ scope of consolidation as of December 31, 2013. They are: R SCI Champs-Élysées; R SCI La Boétie; R SCI SACCEF.
Natixis is mainly involved in structures employing securitization entities in its capacity as: V structurer of securitization transactions; V originator of securities or loans held as assets and pending securitization; V credit risk intermediary between the market and the securitization entity.
Given the segregation of risk and their aim of spreading credit risk for investors other than Natixis, securitization conduits do not generally require consolidation under IFRS: V the activities have been principally conducted on behalf of third party investors so as to provide them with access to diversified portfolios; V a third party entity manages the assets to the extent required. Natixis has no decision-making or management powers within such entities; V in comparison to third party investors, Natixis never derives the majority of the benefits; V Natixis only holds the most senior shares in these structures and is thus not exposed to the majority of risks.
These are non-derivative financial assets with fixed or determinable payments and fi xed maturities that Natixis has the clear intention and ability to hold through to maturity, other than those that are designated on initial recognition as at fair value through profi t and loss (fair value option) or available-forsale, and those that meet the defi nition of loans and receivables.
When loans are granted at below-market interest rates, a discount corresponding to the difference between the face value of the loan and the sum of future cash fl ows discounted at the market interest rate is deducted from the face value of the loan. The market rate of interest is the rate applied by the vast majority of fi nancial institutions at any given time for instruments and counterparties with similar characteristics.
The reserve to be recycled to the income statement in respect of instruments reclassifi ed from “available-for-sale fi nancial assets” to “loans and receivables” remains fi xed at its level as of the reclassifi cation date. The amounts in question are recycled to income using the effective interest rate method over the residual life of the assets, or immediately if the instrument has been impaired or sold since reclassifi cation.
At Natixis, loans that have been restructured due to the debtor’s fi nancial situation correspond to loans subject to restructuring incurred by the bank to prevent, or provide a solution to, the failure of a counterparty. The fact that the restructuring was “incurred by the bank” means that the bank would not have accepted new renegotiated loan terms in other circumstances.
For restructured loans either fully or partially converted into a substantially different asset (such as an equity instrument) or giving rise to a change of counterparty: V the new instruments are booked at fair value;
The fair value of listed non-consolidated investments corresponds to their last listed price prior to the reporting date. The fair value of unlisted non-consolidated investments is obtained using the P/E (price/earnings) ratio or DCF (discounted cash fl ow) valuation methods or share in (revalued on non-revalued) equity.
Determining whether there is objective evidence of impairment is based on a multi-criteria approach and independent expert opinions, particularly in the case of debt instruments. Evidence of impairment includes: V for debt instruments: default on interest or principal payments, existence of mediation, warning or legal reorganization procedures; counterparty bankruptcy and any other indicator pointing to a material decline in the counterparty’s financial position, such as losses on completion projected by discounted cash flow models; V for equity instruments (excluding investments in unlisted companies): indicators suggesting that the entity will not be able to recover all or part of its initial investment. Securities presenting an unrealized capital loss of over 30% on their face value, or presenting an unrealized capital loss for a period of more than six months, are systematically tested for impairment. The test involves a qualitative analysis considering a variety of factors such as share price performance over a given period or information relating to the issuer’s financial position. Where necessary, an impairment loss is recognized based on the market price at the reporting date. Irrespective of this analysis, an impairment loss is systematically recognized when securities present an unrealized capital loss of over 50% at the reporting date, or an unrealized capital loss on their face value for a period of more than 24 months; V for investments in unlisted, non-consolidated companies: unrealized capital losses of over 20% on their face value for a period of more than 18 months, or significant changes in the technological, market, economic or legal environment having an unfavorable impact on the issuer, suggesting that the amount invested in the equity instrument may not be recoverable.
Assets provided under operating leases are shown in the balance sheet under property, plant and equipment or intangible assets in the case of equipment leases, and investment property in the case of property leases. Lease income from operating leases is recognized in the income statement on a straight-line basis over the lease term, under “Income or expenses from other activities”.
FINANCIAL DATA5 Consolidated fi nancial statements and notes When evidence of impairment exists, Natixis calculates the estimated recoverable amount discounted at the original effective interest rate, taking into account the impact of any available guarantees. Impairment is recognized as the difference between the net carrying amount of the loan and its estimated recoverable amount.
For industry risk, the Sector Risk Department of the Risk division prepares a segment analysis included in a rating scale equivalent to the one used for rating major corporates. The rating procedure is based on the determination of an inherent score that is adjusted according to the position in the cycle, inherent fragility, whether or not there is an outside threat, and the positioning of the Natixis portfolio. Sectors whose rating is BB- or lower are automatically reviewed for their potential provisioning.
An embedded derivative is a component of a host contract which causes some or all of the cash fl ows of that contract to change in response to changes in an underlying (interest rate, share price, exchange rate or other index).
Cash fl ow hedges are mainly used to hedge Natixis’ overall interest rate risk.
If a hedging relationship is discontinued, for example when hedge effectiveness is outside the 80%-125% range, the derivative must be reclassifi ed in fi nancial instruments at fair value through profi t and loss, while the cumulative amount relating to the effective portion of the hedge that has been carried directly in equity under “Unrealized or deferred gains or losses” is recycled to income when the hedged item itself affects income.
FINANCIAL DATA5 Consolidated fi nancial statements and notes Outside these limits, the hedge no longer qualifi es for hedge accounting under IFRS.
Symmetrically, changes in the fair value of the hedged items are recognized as income.
Many internal contracts involving derivatives used in hedge accounting exist between Natixis and its subsidiaries. To ensure that the transactions meet the hedge accounting criteria for consolidation purposes, Natixis regularly verifi es that they have been correctly hedged on the market.
Credit derivatives used by Natixis are not considered as fi nancial guarantees but as derivatives falling within the scope of IAS 39. They are classifi ed as assets or liabilities at fair value through profi t and loss.
Consolidated fi nancial statements and notes regularly occurring transactions on an arm’s length basis on the main market or, failing that, the most advantageous market; V if the market for a financial instrument is not active, fair value is established using valuation techniques. The techniques used must maximize the use of relevant observable entry data and minimize the use of non-observable entry data. They may refer to observable data from recent transactions, the fair value of similar instruments, discounted cash flow analysis and option pricing models, proprietary models in the case of complex products or non-observable data when no pricing or market data are available.
Depending on the instruments in question and the associated risks, valuations thus determined incorporate additional valuation adjustments, including: V Bid/ask adjustment
This adjustment is the difference between the bid price and the ask price corresponding with the selling costs of another market player. It reflects the cost requested by a market player in respect of the risk of holding a position or of selling at a price proposed by another market player.
V Value adjustment for counterparty risk (Credit Valuation Adjustment – CVA)
The method for determining the CVA is based essentially on analyzing the appropriateness of using market inputs in connection with their availability and the practices of market professionals.
The DVA is symmetrical to the CVA and represents the expected loss, from the counterparty’s perspective, on liability valuations of derivative financial instruments and repurchase agreements designated at fair value. It reflects the impact of Natixis’ credit quality on the valuation of derivative financial instruments. The DVA is measured by observing Natixis’ credit market inputs.
FINANCIAL DATA5 Consolidated fi nancial statements and notes V an audit of the proposed implementation; V calibration of model parameters; V integration of the model in information systems.
For fi nancial reporting purposes, IFRS 13 requires fair value measurements applied to fi nancial and non-fi nancial instruments to be allocated to one of three fair value levels: a) Level 1: Fair value measurement using prices quoted on liquid markets
Certain more complex and/or long-maturity fi nancial instruments are measured using a recognized model on the basis of market inputs derived from observable data such as yield curves, implied volatility layers of options, market consensus data or active overthe -counter markets.
The main models for determining the fair value of these instruments are described below by type of product: V Equity products: complex products are valued using: R market data; R a “payoff”, i.e. a calculation of positive or negative cash fl ows attached to the product at maturity; R a model of changes in the underlying asset.
The Tskew model is a valuation model for mono and multiunderlying options. Its principle is to calibrate the distribution of underlying asset or assets at maturity to standard option prices.
V Fixed-income products: equity products generally have specific characteristics which justify the choice of model. The valuation of the payoff will take into account all underlying risk factors.
V Currency products: currency products generally have specific characteristics which justify the choice of model.
At December 31, 2013, instruments on which the recognition of day-one profi t/loss has been deferred included: V multi-underlying structured equity and index products; V synthetic financing; V options on funds (multi-asset and mutual funds); V structured interest rate products; V securitization swaps.
CDOs, Index tranche Technique for estimating defaults given the correlation effect and recovery modeling
The approach used is a hybrid model coupling the local volatility-type multiunderlying equity model with a one-factor Heath-Jarrow-Morton (HJM1F) interest rate model
Bonds backed by securitizations (CMBS), securitization assets (ABS CDOs, CREs CDOs), and loans (CLOs)
(b) The valuation models of instruments affected by the fi nancial crisis are described in Notes 5.6.c.a and 5.6.c.c.
Transfers between fair value levels are reviewed and validated by ad hoc Committees of representatives of various functions, particularly Finance, Risk and Business Lines. The Committee considers various indicators of market activity and liquidity as described in the General Principles.
A review is undertaken for any instrument that ceases to meet these criteria or once again complies with the criteria. Transfers to and from level 3 are subject to prior validation.
In the case of structures in which Natixis holds the underlying assets, each underlying tranche is valued transparently, using the corresponding mark-to-model or mark-to-market techniques, as in previous years.
The model used for European CMBS is based on projected future cash fl ows and defaults on underlying loans for each structure, which are determined based on the individual characteristics for each loan and a correlation assumption applied to loans in the same pool.
The fair value measurement of instruments reclassifi ed as “Loans and receivables” in accordance with the “Reclassifi cation of fi nancial assets” amendment to IAS 39 and IFRS 7 published on October 13, 2008, as referred to in the appendix (see Note 6.7.8), is based on the valuation principles described below: V the fair value measurement method for CMBS and CLOs is the same as that used for identical products classified as “Instruments at fair value through profit and loss” and “Available-for-sale assets”; V the fair value of US and European RMBS is measured using the market price used for identical products classified as “Instruments at fair value through profit and loss” and “Available-for-sale assets”.
The measurement of the fair value of Natixis’ borrowings and debt securities is based on the discounted cash fl ow method using inputs at the reporting date such as the underlying’s interest-rate curve and the spread applied to lending/borrowing between Natixis and Group entities.
On November 12, 2009, an arrangement was introduced by BPCE to protect assets of a portion of the GAPC portfolios with retroactive effect at July 1, 2009. With this guarantee mechanism, Natixis was able to free up a signifi cant portion of its equity allocated to ring-fenced assets and to protect itself against the risk of loss from these portfolios subsequent to June 30, 2009. This protective arrangement is based on two mechanisms: V a sub-participation with the characteristics of a financial guarantee, covering 85% of the face value of assets recognized in “loans and receivables” and “available-for-sale financial
Consolidated fi nancial statements and notes assets”. Under this guarantee, Natixis is protected from the very first euro in default up to 85% of the default amount; V two Total Return Swaps (TRS), one in euros and one in US$, transferring to BPCE 85% of unrealized and realized gains and losses on the portfolio of instruments at fair value through profit and loss (cash and derivatives) since July 1, 2009. TRS are derivatives and are therefore carried at fair value on the balance sheet, with a matching entry to income. At the same time, Natixis purchases an option from BPCE which, if exercised, allows it to recover the net gains on this portfolio after a tenyear period in return for the payment of a premium estimated at €367 million. The premium is also recognized at fair value.
FINANCIAL DATA5 Consolidated fi nancial statements and notes For buildings used in the business and investment property, the following components and depreciation periods have been identifi ed: Component Depreciation period
The expense incurred from the scrapping of a fi xed asset is booked to “Depreciation, amortization and impairment of property, plant and equipment and intangible assets” on the consolidated income statement.
The relevant assets are classifi ed in the “Non-current assets held for sale” line item, and cease to be amortized as soon as they are reclassifi ed. An impairment loss is recognized if their carrying amount is higher than their fair value less costs to sell. Associated liabilities are also identifi ed on a separate line of the balance sheet.
Securities lending/borrowing transactions do not involve the transfer of a fi nancial asset within the meaning of IFRS. Consequently, these transactions do not lead to the derecognition of the securities loaned. Securities loaned are not identifi ed in IFRS: they remain recorded in their original IFRS category and measured accordingly. Borrowed securities are not recognized by the borrower.
A provision for restructuring costs is recognized when the following standard criteria for recognizing provisions and the two following conditions are met: V there is a detailed formal plan for the restructuring on the closing date, identifying at least: R the operations or part of the operations concerned,
Independent of the employment adaptation plan, the winding up of GAPC on June 30, 2014 was announced as part of information provided on the strategic plan. Employees involved were notifi ed and their departure conditions were mentioned. A provision of €3.8 million was booked (included in the restructuring provision of €90.6 million).
Provisions booked on the liabilities side of Natixis’ fi nancial statements as at December 31, 2013, are discussed in Note 6.15.2 “Contingency reserves” and possible allocations are specifi ed in Note 7.6 “General operating expenses” and Note 7.7 “Provision for credit losses”.
Short-term employee benefi ts are recognized as an expense in the period in which the employee provides the service in exchange for said benefi ts.
Revaluation adjustments for actuarial debt related to changes in actuarial assumptions and experience adjustments (impact of differences between actuarial assumptions and actual experience) are booked under items not recycled to comprehensive income among “gains and losses recognized directly in equity”.
The annual payroll costs recognized in respect of defi ned benefi ts plans consist of: V the costs of services rendered, representing rights vested by beneficiaries over the period; V past service costs, arising from possible plan changes or curtailments as well as the effects of possible plan settlements; V the net interest cost reflecting the impact of unwinding the discount on the net obligation.
The details of these plans and their quantifi ed impacts over the period are provided in Note 12.2.2.
The value-added contribution, or “cotisation sur la valeur ajoutée des entreprises” (CVAE), is recorded in the accounts as “Operating expenses,” since Natixis considers that its calculation is not based on net income.
The French Finance Act for 2013 introduced an exceptional 7% tax on the capitalization reserve of insurance companies existing at January 1, 2010. This tax generated a tax expense of €8.2 million, recorded in the consolidated income statement at December 31, 2012.
Financial guarantee commitments not classifi ed as derivatives are contracts requiring the issuer to make specifi c payments to repay the business guaranteed for a loss that it has incurred owing to the failure of a debtor to make the contractual installments due.
Natixis guarantees the capital and/or returns on shares in certain mutual funds. These guarantees are executed solely in the event that the net asset value of each of the shares in the fund at maturity is lower than the guaranteed net asset value. Under IAS 39, these guarantees represent derivative instruments.
The participation rate adopted for calculating deferred profi tsharing is determined by observing past pay-out ratios, but also by taking into account assumptions on projected net future cash fl ows from fi nancial products and assumptions on expected returns on policies to be granted to policyholders. In highly fragile and competitive market conditions, the sources of concern weighing on these estimates are signifi cant.
In the event of a deferred profi t-sharing asset, a recoverability test is carried out to verify that liquidity requirements arising from an unfavorable economic environment do not force the sale of assets and generate unrealized losses. This recoverability test relies on projected future cash fl ows based on different economic assumptions about historical redemptions and infl ows.
Net earnings/(loss) attributable to the Group (in millions of euros) 884 913
Average number of treasury shares issued and outstanding over the period 6,105,098 5,891,124
Average number of shares used to calculate earnings/(loss) per share 3,096,362,860 3,093,182,851
6.1 Financial assets and liabilities designated at fair value through profit and loss
6.1.1 FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT AND LOSS
Derivative instruments not eligible for hedge accounting (b) 6.1.3 63,720 67,137
(b) The information is presented in consideration of offsetting effects, completed in accordance with IAS 32 (see Note 6.3).
FINANCIAL DATA5 Consolidated fi nancial statements and notes At December 31, 2013, Natixis did not purchase protection to hedge against credit risk associated with loans and receivables classifi ed as fair value instruments through profi t and loss.
Derivative instruments not eligible for hedge accounting (a) 6.1.3 63,337 66,458
(a) The information presented takes into account the impact of offsetting carried out in accordance with IAS 32 (see Note 6.3).
Changes in the fair value of fi nancial liabilities, designated at fair value through profi t and loss, attributable to credit risk at December 31, 2013
The use of the fair value option is considered to provide more pertinent information in two situations: V where there is an accounting mismatch between economically linked assets and liabilities. In particular, the fair value option is used when hedge accounting conditions are not met: in such cases, changes in the fair value of the hedged item automatically offset changes in the fair value of the hedging derivative; V where a portfolio of financial assets and liabilities is managed and recognized at fair value as part of a documented policy of asset and liability management.
(c) The notional amount of foreign exchange derivatives was restated in the amount of €658.949 billion in 2012 in order to include amounts related to foreign exchange forward contracts.
Fair value hedging is used to hedge changes in the fair value of fi xed-income securities on an individual basis, as well as comprehensive hedging of the interest-rate risk of Natixis Financial Products LLD according to the carve-out provisions of IAS 39.
Other fi nancial instruments * Including collateral received in the form of securities.
Other fi nancial instruments * Gross amount of fi nancial liabilities offset or covered by a master netting or similar arrangement.
The fair value of customer loans and receivables is provided in Note 6.7.8.
FINANCIAL DATA5 Consolidated fi nancial statements and notes 6.5.2.2 Customer fi nance leases
Provisions for impairment of non-performing outstandings (87) (142) (229) (80) (117) (197)
The fair value of held-to-maturity fi nancial assets is provided in Note 6.7.8.
6.7 Other information relating to financial assets 6.7.1 RECLASSIFICATION OF FINANCIAL ASSETS OVER THE PERIOD, PURSUANT TO THE AMENDMENT TO IAS 39 AND IFRS 7 PUBLISHED ON OCTOBER 13, 2008
At December 31, 2013, the carrying amount of assets reclassifi ed as “Loans and receivables” stood at €174 million compared to €1.576 billion at December 31, 2012. The fair value of these assets, for which the measurement approach is described in Note 5.6, is provided in Note 6.7.8, “Fair value of fi nancial assets measured at amortized cost”.
The table below shows, inter alia, the carrying amount of: V receivables for which ownership has been transferred to BPCE or SFEF as security in connection with the financing indirectly received from SFEF through BPCE; V financial instruments (securities and receivables) deposited with central banks and assignable as collateral to guarantee refinancing operations at any time.
The tables below show fi nancial asset transfers according to the amendment to IFRS 7, which distinguishes two categories of transferred assets: transferred fi nancial assets that are not, partially or wholly, derecognized, and transferred fi nancial assets that are fully derecognized, for which Natixis maintains continuing involvement.
A fi nancial asset is partially or wholly transferred if Natixis transfers the contractual rights to collect cash fl ow from the fi nancial asset or retains the contractual rights to collect cash fl ow from the fi nancial asset but assumes a contractual obligation to pay those cash fl ows to one or more benefi ciaries.
Financial assets at fair value through profi t and loss 21,750 20,893 23,271 23,262
Fair value of associated liabilities Net position 6.7.4.2 Fully derecognized transferred fi nancial assets for which continuing involvement is maintained
At December 31, 2013, continuing involvement in a securitization vehicle maintained by Natixis stands at: V zero shares held in a securitization vehicle compared to €86 million at December 31, 2012; V €108 million in liquidity lines granted that have been drawn down compared to €129 million at December 31, 2012. These transactions are recognized on the balance sheet under the heading “Customer Loans and Receivables”; V €34 million in liquidity lines granted that have not yet been drawn down compared to €65 million at December 31, 2012. These liquidity lines are recognized under the heading “Financing commitments”.
Continuing involvement subsequent to the deconsolidation of previously consolidated entities is as follows at December 31, 2013: V €345 million in held securities; V €8 million in other assets; V €59 million in loans.
Securities held for trading 60,903 53,568 6,406 928 o/w fi xed-income securities 36,026 30,356 4,742 928 o/w variable-income securities 24,877 23,212 1,665
Derivative instruments not eligible for hedge accounting (positive fair value) 63,720 2,180 59,498 2,042
Financial assets at fair value through profi t and loss 91,572 8,810 81,749 1,013
Securities at fair value through profi t and loss 12,060 8,810 2,734 516 o/w fi xed-income securities 3,482 2,103 863 516 o/w variable-income securities 8,578 6,708 1,870
Hedging derivatives (assets) 1,733 1,733 o/w interest rate derivatives 1,732 1,732 o/w currency derivatives 2 2
Other available-for-sale securities 39,309 31,660 7,585 65 o/w fi xed-income securities 34,217 27,264 6,953 1
Securities held for trading 61,708 49,381 8,408 3,919 o/w fi xed-income securities 45,922 37,029 4,974 3,919 o/w variable-income securities 15,786 12,352 3,434
Financial assets at fair value through profi t and loss 100,659 10,250 89,324 1,085
Hedging derivatives (assets) 2,722 2,722 o/w interest rate derivatives 2,722 2,722 o/w currency derivatives
Other available-for-sale securities 37,133 34,224 2,644 265 o/w fi xed-income securities 32,980 30,552 2,197 231
FINANCIAL DATA5 Consolidated fi nancial statements and notes 6.7.7.1 Financial assets at fair value measured using level 3 of the fair value hierarchy
Financial assets at fair value through profi t and loss - Trading 5,191 (166) (85)
Derivative instruments not eligible for hedge accounting (positive fair value) 1,271 (125) (37)
Financial assets at fair value through profi t and loss 1,085 (170) 1
Other fi nancial assets at fair value through profi t and loss 211 (4) (3)
TOTAL FINANCIAL ASSETS RECORDED AT FAIR VALUE 7,301 (320) (52) 55
Financial assets at fair value through profi t and loss 1,267 (84) 1
Securities at fair value through profi t and loss 967 (62)
Other fi nancial assets at fair value through profi t and loss 300 (21) 1
FINANCIAL DATA5 Consolidated fi nancial statements and notes Sensitivity analysis of the fair value of fi nancial instruments measured according to level 3 – Assets and Liabilities
Sensitivity of the fair value of fi nancial instruments measured using unobservable inputs was estimated at December 31, 2013. With the aid of probable assumptions, this sensitivity was used to estimate the impacts of market fl uctuations in unstable economic environments. This estimate was performed using: V a “standardized”(1) variation in unobservable inputs for interestrate and equity instruments. The resulting sensitivity was €1.2 million; V a flat variation of: R +/-10% in the estimated loss rates on underlying assets to model the valuation of ABS CDO tranches; or +/-1% for CLO underlyings,
R or +/-10% of the default probabilities of bank and insurance TruPS CDOs.
i.e. a sensitivity impact representing a valuation increase of €16 million (refl ecting an improvement in the above-mentioned inputs) or a valuation decrease of €23.5 million (refl ecting a deterioration in said inputs)(2).
To Level 2 Level 1 Level 3 (b) (c) Level 1 Level 2 (a)
Securities at fair value through profi t and loss o/w fi xed-income securities 693 175 7 o/w variable-income securities
Other available-for-sale securities o/w fi xed-income securities 2,368 77 25 o/w variable-income securities 76 11
(b) The spreadlocks were transferred to Level 3 of the fair value hierarchy in the amount of €20.8 million at December 31, 2013 subsequent to a change in the valuation model based on proprietary data.
Consolidated fi nancial statements and notes 6.7.8 FINANCIAL ASSETS VALUED AT AMORTIZED COST
Loans and receivables due from banks 77,600 77,785 73,090 4,695 o/w unlisted fi xed-income securities 1,312 1,197 1,197 o/w reverse repurchased securities 5,092 5,095 5,095
Customer loans and receivables 87,975 89,515 58,918 30,598 o/w unlisted fi xed-income securities 2,851 2,827 2,659 168 o/w fi nance leases 10,845 11,275 11,275
* The comparative 2012 fi nancial statements have been restated to refl ect the impact of adopting IAS 19 (revised).
The change in deferred taxes on items whose variation is recorded directly in reserves is presented in the Statement of Net Income/(Loss); gains and losses are recorded directly in equity. At December 31, 2013, this amount was -€98 million compared to -€61 million at December 31, 2012. Other changes in deferred taxes for the period are booked to profi t or loss.
FINANCIAL DATA5 Consolidated fi nancial statements and notes 6.9 Accrual accounts, other assets and liabilities
Accrued interest 36 26 * The comparative 2012 fi nancial statements have been restated to refl ect the impact of adopting IAS 19 (revised).
The table below shows the deferred day-one margin on instruments priced using valuation techniques drawing on non-observable inputs or market models not commonly used classifi ed as Level 3 in the fair value hierarchy: at the start of the period, at the end of the period, and changes during the period.
Deferred acquisition costs 242 215 6.9.3.2 Insurance accrual accounts – Liabilities
Gross value Impairment and amortization Net value Gross value Impairment and amortization Net value
(a) Insurance company investments. Changes in fair value give rise to the symmetrical recognition of a deferred profi t-sharing reserve equal to 94.8% of the related base amount on average at December 31, 2013 compared to 100% at December 31, 2012 (See Note 2.10).
The fair value of customer deposits is presented in Note 6.20.
Life insurance reserves refl ect the payments received, plus investment income paid out to policyholders and less exit benefi ts. These reserves are topped up by the management reserve, which is intended to cover future management costs on life insurance policies.
FINANCIAL DATA5 Consolidated fi nancial statements and notes 6.16 Provisions and impairment 6.16.1 SUMMARY OF PROVISIONS
Impairment losses taken on availablefor -sale fi nancial assets 1,221 86 (39) (314) (2) (14) 937
Provisions for impairment deducted from assets 5,498 835 (904) (986) (7) 13 4,448
FINANCIAL DATA5 Consolidated fi nancial statements and notes 6.16.2 CONTINGENCY RESERVES
(a) Of which €372 million in provisions at December 31, 2012 in respect of Madoff net outstandings.
(a) Subordinated debt issue agreements do not incorporate a clause providing for early redemption in the event that the covenants are not observed.
(in millions of euros) 12.31.2012 Issues (a) Redemptions (b) Translation adjustments Other (c) 12.31.2013
(b) Loan repayments and subordinated notes redemptions comprised: V in advance: buy-back in the amount of -€500 million, -€21.5 million and -€7.7 million in debt issued in July and April 2003, respectively, with an initial maturity of July 2018 and April 2013, and 10,000 participating securities issued in 1985; V at term: repayment of subordinated loans concerning the December 2002 issues subscribed by BPCE (€150 million) and the June 2003 issues for a total outstanding amount of €400 million.
Consolidated fi nancial statements and notes 6.19 Fair value of financial liabilities carried at fair value in the balance sheet
The table below presents the fair value of all fi nancial liabilities, whether or not they are recognized at fair value in the balance sheet.
Financial liabilities held for trading 105,698 42,742 61,678 1,278 113,872 47,195 65,891 786
Other fi nancial liabilities held for trading 1,067 1,067 1,165 6 1,159
Financial liabilities at fair value through profi t and loss 80,351 80,351 87,041 87,041
Derivative instruments not eligible for hedge accounting (negative fair value) 786 13 (100)
o/w interest rate derivatives 289 15 o/w currency derivatives o/w credit derivatives 9 13 o/w equity derivatives
FINANCIAL DATA5 Consolidated fi nancial statements and notes 6.21 Breakdown of financial assets and liabilities by contractual maturity
Derivative instruments not eligible for hedge accounting - - - - - 64 64
Loans and receivables due from banks 25 9 27 7 10 78
TotalLess than 1 month 1 to 3 months 3 months to 1 year 1 to 5 years Over 5 years Undated
FINANCIAL DATA5 Consolidated fi nancial statements and notes NOTE 7 NOTES TO THE INCOME STATEMENT
The method of accounting for fees and commissions received in respect of services or fi nancial instruments depends on the ultimate purpose of the services rendered and the method of accounting for the fi nancial instruments to which the service relates. Fees and commissions for one-off services, such as business provider commissions, are recognized in income as soon as the service is provided. Fees and commissions for ongoing services such as guarantee commissions or management fees are recognized over the service period.
Financing, guarantee, securities and derivative commitments (a) 208 (208) 1 185 (235) (50)
Hedging derivatives include changes in the fair value of derivatives classifi ed as fair value hedges, excluding interest, plus the symmetrical revaluation of the items hedged. They also include the “ineffective” portion of cash fl ow hedges.
Net gains/(losses) on other fi nancial assets and liabilities at fair value through profi t and loss (b) 693 455
At the same time, the reversal of the portfolio-based provision amounted to €19.3 million over the year, versus income of €99.3 million in 2012 (excluding the impact of the BPCE guarantee and exchange rate fl uctuations), bringing the cumulative balance to €34.7 million for an exposure of €41.3 million at December 31, 2013 versus €235.3 million at December 31, 2012.
V At December 31, 2013, the discount against fund units recognized in 2009 based on the selling prices observed on the secondary market totaled €19.6 million versus €29 million at December 31, 2012, i.e. a decrease of €9.4 million year on year.
(b) Net gains and losses include the valuation of the issuer spread on issues carried out by Natixis and designated at fair value through profi t and loss with a positive €197 million impact on income for the period versus a negative impact of €351 million last year.
Other related income and expenses 7.5.3 638 (364) 274 705 (436) 269
In 2012, insurance income includes changes recorded in income in respect of a -€2.2 billion drop in reinsurers’ share of technical reserves offset by the same amount in “Other insurance income and expenses.”
FINANCIAL DATA5 Consolidated fi nancial statements and notes 7.6 General operating expenses
Operating expenses mainly comprise payroll costs, including wages and salaries net of rebilled expenses, social security expenses and employee benefi ts such as pensions (defi ned benefi t plans), and expenses relating to share-based payment recognized in accordance with IFRS 2. The details on these expenses are provided in Note 12.
(a) Of which €5.3 million in respect of the Competitiveness and Employment Tax Credit (CICE) in 2013.
This line item mainly refl ects net risk recorded on lending transactions: net provisions for reversals of specifi c and collective provisions, loans and receivables written off during the period and recoveries on bad debts written off.
Summary fi nancial information for affi liates is provided in Note 16.2, “related parties.”
FINANCIAL DATA5 Consolidated fi nancial statements and notes 7.9 Gain or loss on other assets
= Consolidated net income/(loss) before tax, goodwill, amortization and share in income of associates 1,444 770
(c) o/w: -€118 million in write-downs on the past defi cit on the tax consolidated group in France (-€236 million in 2012).
(d) o/w: +€108 million related to the allocation of unrecognized past shortfalls (+€179 million in 2012).
Shares in unrealized or deferred gains/(losses) of associates, net of tax (a) 830 434 * The comparative 2012 fi nancial statements have been restated to refl ect the impact of adopting IAS 19 (revised). The effects of the change in accounting policy associated with the implementation of IAS 19 (revised) are described in Note 12.2.3.
(a) As the Banque Populaire and Caisse d’Epargne cooperative investment certifi cates were sold, no portion of net income or other components of comprehensive income was recorded for this item in the Natixis fi nancial statements of December 31, 2013. The overall change as a result of this amounted to €831 million for the period.
8.2 Breakdown of tax on gains and losses recognized in equity
Shares in unrealized or deferred gains/(losses) of associates 839 (9) 830 510 (76) 434
TOTAL CHANGES IN UNREALIZED OR DEFERRED GAINS OR LOSSES 1,141 (98) 1,043 502 (61) 441 * The comparative 2012 fi nancial statements have been restated to refl ect the impact of adopting IAS 19 (revised).
FINANCIAL DATA5 Consolidated fi nancial statements and notes NOTE 9 PRO FORMA STATEMENTS
R for 2013, the rate is based on the cash reinvestment terms prevailing at December 31, 2013, namely with one-third of the reinvestment carried out at a fi xed rate and two-thirds at a variable-rate pegged to the three-month Euribor, with a duration of 10.4 years. This rate comes to 2.8%, i.e. the equivalent average weighted rate over the average duration referred to above; V in 2012, taxation on the proceeds from the entire operation based on the effective tax rate for 2012 and the recognition on January 1, 2012 of deferred taxes in respect of the tax group’s tax loss carryforwards for a loss not yet recognized; V in 2013, the taxation of pro forma impacts is based on the effective tax rate at December 31, 2013.
In terms of these pro forma fi gures, like the impact of the sale (excluding earnouts), the CCI repurchase “proper” has a zero impact on Natixis’ results after taking into account the recycling of Natixis’ share in “Gains and losses recorded directly in equity” of the CCIs.
Net gains or losses on fi nancial instruments at fair value through profi t and loss 1,643 1,643
Net gains or losses on available-for-sale fi nancial assets 458 458
Net depreciation, amortization and impairment of property, plant and equipment and intangible assets (250) (250)
Net income/(loss) for the period 883 70 954 o/w Attributable to equity holders of the parent 884 70 955 o/w Attributable to non-controlling interests (1) (1)
Consolidated net income/(loss) attributable to shareholders (see Note 8.2.2) – group share – per share, calculated on the basis of the average number of shares over the period, excluding treasury shares 0.27 0.01 0.28
Consolidated net income/(loss) attributable to shareholders (see Note 8.2.2) – group share – per share, calculated on the basis of the average number of shares over the period, excluding treasury shares and including shares that could be issued on the exercise of stock options and bonus shares 0.27 0.01 0.28
The adjustments to the consolidated income statement at December 31, 2013 involve the restatement of the carrying costs of the CCIs, the cancellation of capital gains and related tax implications.
Net gains or losses on available-for-sale fi nancial assets 362 362
Net depreciation, amortization and impairment of property, plant and equipment and intangible assets (235) (235)
Net income/(loss) for the period 947 (81 ) 867 o/w Attributable to equity holders of the parent 901 (81 ) 821 o/w Attributable to non-controlling interests 45 45
Consolidated net income/(loss) attributable to shareholders (see Note 8.2.2) – group share – per share, calculated on the basis of the average number of shares over the period, excluding treasury shares 0.27 (0.03) 0.24
The share in the proceeds of the sale of the CCIs as at December 31, 2012 includes non-operating items.
Consolidated fi nancial statements and notes 9.2 Contribution by division to the pro forma consolidated income statement 12.31.2013 - PRO FORMA recognizing impact of CCI disposal
Other activities Total 12.31.2012 - PRO FORMA recognizing changes in consolidation scope in 2013 and impact of CCI disposal
This information is presented according to the new analytical structure of businesses adopted by Natixis at December 31, 2013.
The 2012 fi gures have not been restated to refl ect the impact of the implementation of IAS 19R.
In 2012, in light of regulatory constraints and a still-uncertain economic environment, Natixis pursued its transformation policy. In particular, in terms of Corporate and Investment Banking, its organization was adapted to place customer relations at the core of development and, as a result, the division was renamed Wholesale Banking.
The entity is organized around three core business lines: V Wholesale Banking, which advises businesses, institutional investors, insurance companies, banks and public sector entities and offers them a diversified line of financing solutions as well as access to the capital markets. Its mission is threefold: strengthen the bank’s customer orientation, be a meeting place between issuers and investors, deploy the “Originate to Distribute” model to optimize the rotation of the bank’s balance sheet via active management of the credit portfolio; V Investment Solutions, which includes Asset Management, life insurance, Private Banking and the Private Equity for third party clients business line that resulted from the spin-off of Natixis Private Equity in 2010; V Specialized Financial Services, which includes Factoring, Lease Financing, Consumer Credit, Guarantees, Film Industry Finance, Employee Benefits Planning, and Payment and Securities Services. These services are the key growth drivers for the retail banking business of Groupe BPCE.
R Global Transaction Banking is tasked with developing the available fl ow and Trade Finance,
R Portfolio Management is tasked with optimizing the fi nancing portfolio. This department is an essential part of the Originate to Distribute model,
R Steering of international platforms, in line with the bank’s overall objectives: North and South America, Asia-Pacifi c and EMEA (Europe (except France), Middle East and Africa).
This business line groups together a number of service businesses primarily serving the Caisse d’Epargne and Banque Populaire networks, as well as Natixis customers: V Factoring: provides companies with credit management solutions such as financing, insurance, and collection. Natixis Factor uses the Banque Populaire and Caisse d’Epargne networks, which account for a significant portion of its business; V Sureties & Financial Guarantees: this business line is operated by Compagnie Européenne de Garanties et Cautions (CEGC). It notably includes: guarantees for mortgage loans granted to retail and business customers by the Caisse d’Epargne, and more recently the Banque Populaire networks, along with legal guarantees and bail bonds; V Consumer Finance: this Natixis business line includes a broad range of activities throughout the value chain for revolving loans (marketing, origination, administrative management, outof -court collection) and administrative management services for personal loans. These activities are operated by Natixis Financement, which manages revolving loans granted by the Groupe BPCE networks, and manages personal loans granted by the Caisse d’Epargne and more recently by the Banque Populaire banks; V Leasing: this business line provides financing solutions for real estate and non-real estate that is managed under finance leases or other long-term leasing arrangements; V Employee Savings Schemes: this business line offers a comprehensive range of B2B employee benefits planning products based on employee savings (administration of employee accounts, fund administration and accounting) and special payment vouchers; V Securities Services: this business line offers back and middle office services for retail securities custody (account administration, back office outsourcing, office services, depositary control) for the BPCE networks and external clients; V Payments: this business line provides payments tools, infrastructure and services, including electronic banking, issuance and collection of high-volume electronic transfers and check processing;
Together, these specialized management companies enable the Group to provide a full range of expertise meeting demand from all customer segments. Coverage of the various customer segments is optimized by the organization of distribution around the NGAM Distribution platform and the business franchises developed over the long term by the Asset Management companies, mainly with various client groups. The management companies continue to handle distribution via the shareholder retail banking networks in France; V Insurance: Natixis Assurances is a holding company for various operating insurance subsidiaries. It offers a comprehensive range of individual and collective life insurance, personal protection insurance and property and casualty insurance solutions. These diversified, customized solutions are designed for retail and small business customers, farmers, companies and associations; V Private Banking: this business line encompasses wealth management activities in France and Luxembourg, financial planning solutions, and services for independent wealth management advisors (IWMAs). Banque Privée 1818, created from the merger between Banque Privée Saint Dominique (BPSD) and La Compagnie 1818, has taken its place as a major player on the French market. Its clientele derives mainly from Caisse d’Epargne and Banque Populaire banks, and to a lesser extent from Natixis. Private Banking offers advisory services, financial planning and expertise, and fund management solutions; V Private Equity for Third Party Clients: this business is centered around a Natixis department: Natixis Capital Investissement (NCI). The teams have extensive expertise in equity financing for generally unlisted, small and medium-sized enterprises in France and Europe via sponsored equity holdings. NCI covers the Private Equity segments for third party investors, such as Private Equity deals (top-line funding for mature companies), venture capital (new, innovative companies) and funds of funds.
This business covers proprietary Private Equity transactions, some sponsored funds, and our participation in certain sponsored funds not held by Natixis. After the October 2010 sale to AXA Private Equity of the majority of the proprietary operations in France, the international segment remains, and is divided into several small teams of investors. The teams have extensive expertise in equity fi nancing for generally unlisted, small and medium-sized enterprises outside France via equity holdings.
Its main activities are credit insurance, international factoring solutions, business information and ratings (credit and marketing), receivables management (from issuance through to collection), and management of public procedures on behalf of the French state. Most of Coface’s revenue is derived from its international operations.
Coface reorganized its business in 2011, refocusing on core business lines (credit insurance and factoring in Germany and Poland).
Coface’s non-core activities (service activities mainly) were grouped under Corporate Data Solutions at the beginning of 2013. The two main entities are Kompass and Coface Services.
The Corporate Center operates alongside the operating divisions. As such, it recognizes the central funding mechanisms and income from the Group’s asset and liability management. It also records income on the bank’s portfolio of equity investments not belonging to a division, and the revaluation of the Group’s own debt.
(a) Variation between December 31, 2013 and December 31, 2012 (pro forma fi gures).
(a) This information is presented according to the analytical structure of businesses adopted by Natixis at December 31, 2013.
(a) Segment disclosures have been restated to refl ect the impact of the application of IAS 19 (revised).
(b) Excluding restatement of items related to the sale of CCIs. Segment disclosures restated to refl ect the sale of CCIs are presented in Note 9.
Net income for the period (group share) 248 118 427 17 74 884
Assets at fair value through profi t and loss 201,786 11,322 3,014 2,072 130 218,324
Net income for the period (group share) 321 245 266 (1) 70 901
The liquidity ratio is established on an individual basis and designed to ensure that liquid assets with maturities of less than one month are equal to or exceed liabilities falling due within the same period. It is defi ned as the ratio between cash/ cash-equivalents and liabilities falling due in less than one month.
The information on risk management required under IFRS 7, with the exception of the disclosures given below, is presented in Pillar 3 in section 4.2 of Chapter 4, “Risk Management”.
Available-for-sale fi nancial assets (excluding variable-income securities) 34,252 52 (59) 34,245 33,016
Loans and receivables due from banks 77,511 275 (186)* 77,600 61,932
TOTAL EXPOSURE AND IMPACT OF GUARANTEES 248,025 6,191 (2,852) 251,364 2,105 39,711 244,809 5,836 (2,783) 247,862 1,690 39,179
Africa and the Middle East 325 2,156 2,481 127 31 158
Africa and the Middle East 352 1,413 1,765 142 34 176
At December 31, 2013: 78.8% of collective provisions on the Finance sector comprise provisions covering CDPCs (Credit Derivative Product Companies), compared with 90% at December 31, 2012.
Banking book Trading book Residual maturity o/w other loans and receivables (b)
o/w availablefor -sale assets o/w other fi nancial liabilities designated at fair value through profi t and loss (c) Direct net exposure (a)
Total exposure 1 year 2 years 3 years 5 years 10 years >10 years
FINANCIAL DATA5 Consolidated fi nancial statements and notes Furthermore, at December 31, 2013, Natixis was also exposed to sovereign risk linked to these same countries, in respect of its insurance activities, for the following amounts: (in millions of euros) Gross exposure at
At December 31, 2013, exposure to Greek non-sovereign risk held directly by Natixis was as follows: (in millions of euros) Gross exposure at December 31, 2013 Provisions (b)
Asset fi nancing and structured transactions (a) 282 (57) 224 347 (79) 269
Provisions on these outstandings are made in accordance with the principles in Note 5.3.
At December 31, 2013 as at December 31, 2012, Natixis no longer has any positions, except for warrants. The warrants were valued at December 31, 2013, based on market price, at €1.2 million.
On this basis, exposure to these countries shows no sign of entering a default situation as at December 31, 2013. So far, there have been no permanent write-downs of the debt instruments of these countries. There was also no change in their accounting category.
The fair value of these assets was recorded under level 1 in the special release on the fair value hierarchy (see Note 5.6), with the exception of Portuguese sovereign securities, whose fair value was recorded under level 2, as at December 31, 2012.
FINANCIAL DATA5 Consolidated fi nancial statements and notes 11.4.5 FAIR VALUE OF HELD-TO-MATURITY FINANCIAL ASSETS
Every year since 2010, a share-based payment plan has been granted to specifi c categories of personnel in accordance with regulations. The accounting treatment of these plans is described in Note 5.18.
Regarding the plan approved by the Board of Directors on February 19, 2014, as these allocations had not yet formally been carried out at the reporting date, these expenses have been estimated using best available estimates of inputs at the reporting date. These inputs relate to the share value and dividend assumptions.
Fair value of the indexed cash unit at the valuation date
The corresponding expense associated with the short-term plan, estimated based on the probability of the presence condition being met, is fully recognized in the 2013 fi nancial statements in the amount of €39 million.
Number of units acquired by benefi ciaries Free share price at grant date (in euros)
Consolidated fi nancial statements and notes 12.2.3 PENSIONS AND OTHER LONG-TERM EMPLOYEE BENEFITS
Post-employment defi ned-benefi t plans and other long-term employee benefi ts
85% of gross liabilities relating to these defi ned benefi t plans arise in France, with Natixis S.A. carrying 58% of these liabilities.
Liabilities in respect of these awarded benefi ts are hedged, in full or in part, by plan assets comprised mainly of outsourced insurance contracts managed by French insurers specializing in retirement. The insurers carry the longevity risk once the annuities are liquidated. Plan assets are invested in the insurers’ general funds, which, for the most part, generally consist of bonds. The insurers are subject to French prudential standards and regulations.
The insurers also manage the asset/liability strategy for the portion of the benefi t liabilities that they cover.
FINANCIAL DATA5 Consolidated fi nancial statements and notes a) Impact of the fi rst-time adoption of IAS19
This note summarizes the main impacts of the fi rst-time adoption of IAS 19 (revised) on equity at January 1, 2013 and on the 2012 comparative fi nancial statements.
Amounts recognized under IAS 19 at 12.31.2011 268 (33) (235) (235) Recognition of actuarial differences entirely in non-recyclable OCI 141 (141) (141)
Impact of the change in standard on income for H2 2012 (8) 8 8
Impact of fi rst-time adoption at 01.01.2013 172 30 (73) (115) (15) (129)
b) Amounts recognized on the balance sheet at December 31, 2013
Fair value of plan assets (352) (7) (359) (343) (9) (352)
Net amount recognized in balance sheet 175 164 47 100 485 236 195 50 89 569
Consolidated fi nancial statements and notes c) Changes in recognized amounts on the balance sheet (changes in actuarial liabilities)
Actuarial liabilities at end of period 527 206 47 100 880 579 234 50 89 952
V €18 million in booked service costs stemming from the termination of the New York benefit plan, converted to a defined contribution plan.
Fair value of plan assets at start of period 343 40 383 307 45 352
Changes recorded in income 1 15 3 18 o/w paid by benefi ciaries 1 1 8 8 o/w amounts paid out in respect of plan liquidation
Amounts recognized directly in non-recyclable equity 23 21 44 28 1 30
Revaluation adjustments over the period (30) 2 (28) 69 (1) 68
Revaluation adjustments over the period 23 21 44 28 1 29 o/w effect of ceiling on plan assets
Supplementary pension benefi ts and other End-of-career awards Long-service awards Other
The discount rate is determined based on the yields of AArated corporate bonds of the same duration. This benchmark is obtained from the Bloomberg “EUR Composite (AA) Zero Coupon Yield” yield curve.
+1% change in rate of increase in healthcare costs 26.29% 3.30%
-1% change in rate of increase in healthcare costs (19.54%) (2.45%)
+1% change in rate of increase in salaries and income (incl. infl ation) 25.87% 10.37% 9.46% 23% 13% 10%
The number of options outstanding as at December 31, 2013 was 4,846,798 versus 4,071,413 options outstanding as at December 31, 2012. The 775,385 increase in the number of options stems from a readjustment of the number of options subsequent to the distribution of the special dividend, corrected for options forfeited during the period.
No expense was recognized in income for the 2012 and 2013 fi scal years.
The capital increase in 2013 is linked to: V the allocation of bonus shares to some Natixis employees under the 2010 and 2011 conditional share allocation plans, for which payment is share-based (see Note 5.18 and Note 11.2.2); V to the subscription to the share issue reserved for employees under the employee shareholding plan.
FINANCIAL DATA5 Consolidated fi nancial statements and notes 13.2 Capital Management
Natixis adapts the management of its capital structure in line with changes in economic conditions and in the risk profi le of its operations. Its objectives, policies and procedures remained unchanged in 2013.
Under this contract, this service provider is mandated to intervene in Natixis’ treasury shares with a view of increasing transaction liquidity and the trading of Natixis shares so as to avoid price gaps unjustifi ed by market trends.
This authorization is based on the 8th resolution of the General Meeting of May 21, 2013. It authorizes Natixis to acquire, at a maximum price of €5 per share, a number of shares not exceeding 10% of the shares making up the capital of Natixis.
Pursuant to this contract, Natixis holds 4,935,416 shares representing €21 million as at December 31, 2013.
(a) The guarantees given by CEGC as part of its activity are now treated for accounting purposes as insurance contracts in accordance with IFRS 4, “Insurance Contracts”, and are recognized on the liabilities side of the balance sheet as stated in Note 2.10. The nominal value of these guarantees as at December 31, 2013, which stands at €92,314 million, is not included in the line item, “Other bonds and endorsements given”, in the table above. The amount reported under “Other bonds and endorsements given” was restated based on the guarantees given by CEGC as at December 31, 2012, amounting to €84,827 million.
In accordance with IAS 39 (paragraph 2), fi nancing commitments outside the scope of IAS 39 are recognized in accordance with IAS 37, “Provisions, Contingent Liabilities and Contingent Assets”.
Other fi nancing commitments falling within the scope of IAS 37.
Natixis sets up securitization transactions on behalf of its customers and investors using specifi c conduits. Natixis extends liquidity lines to two ABCP conduits (Versailles and Magenta). At December 31, 2013, these lines totaled €4.9 billion.
In accordance with the plan to develop the Groupe BPCE “bancassurance” model, Natixis plans to acquire BPCE SA’s stake in BPCE Assurances via Natixis Assurances between now and the end of the fi rst quarter of 2014. This transaction was approved by the Natixis Board of Directors and the BPCE Supervisory Board, both of which met on February 19, 2014.
A 60%-owned subsidiary of Groupe BPCE, BPCE Assurances, in partnership with MACIF and MAIF, is developing property and casualty insurance with customers of the Caisses d’Epargne as well as health insurance with the customers of the Caisses d’Epargne and the Banque Populaire banks. This acquisition will be carried out while maintaining the capital agreements and existing cooperation with MAIF and MACIF.
Present value of minimum lease payments receivable 2,084 5,196 3,565 10,845 2,111 5,301 3,682 11,094
Minimum payments receivable under irrevocable leases 36 122 22 180 50 163 51 264
FINANCIAL DATA5 Consolidated fi nancial statements and notes 16.2 Related parties
Loans and receivables due from banks 60,299 700 1,227 39,801 2,773 1,270
Financial liabilities at fair value through profi t and loss 8,188 1,451 2,951 5,816 1,188 4,418
Income and expenses from other activities 8 (1) (15) 15 (13) (37)
Tranche C corresponds to the fraction of annual compensation between €148,128 and €296,256.
FINANCIAL DATA5 Consolidated fi nancial statements and notes 16.3 Insurance companies 16.3.1 INSURANCE COMPANY RESULTS
The insurance industry companies within Natixis’ scope of consolidation are: Coface core (strategic activities) and its subsidiaries, Natixis Assurances and its subsidiaries (life insurance, personal protection insurance, property and casualty insurance) and CEGC (Compagnie Européenne de Garanties et de Cautions).
Capital gains and losses on disposal of investments (net of reversals, write-downs and amortization) 369 367 367 3 (1) 369
Income and expenses net of reinsurance transfers 79 79 79 79
Capital gains and losses on disposal of investments (net of reversals, write-downs and amortization) 174 163 163 12 174
Investment income (net of expenses) 1,844 1,855 (9) 1,846 (2) 1,844
Income and expenses net of reinsurance transfers 41 41 41 41
Other recurring operating income and expenses (279) (26) (253) (279) (279)
Net gains or losses on fi nancial instruments at fair value through profi t and loss 582 617
FINANCIAL DATA5 Consolidated fi nancial statements and notes The Statutory Auditors were paid the following amounts in return for their duties: (In thousands of euros)
%Amount % Amount % Amount % Amount % Amount % Amount % Amount % Amount %
Other services provided by the fi rms to fully consolidated subsidiaries
Other procedures and services directly related to the Statutory Auditors’ task, which mainly comprise procedures related to fi nancial transactions, auditing the entity’s compliance arrangement in respect of regulatory requirements, and auditing the quality of the internal audit operation.
In addition, the fees paid to PricewaterhouseCoopers, auditors for BPCE, stand at €3,157,000 for audit services and €2,592,000 for other services.
Pursuant to the article referred to above, the table below specifi cally provides information linked to net revenues and headcount as at December 31, 2013.
COFACE DO BRASIL SEGUROS DE CREDITO Credit insurance and related services
NATIXIS HO-CHI MINH Financial institution * Change in registered company name in 2013.
NORTH AMERICA INC)* Holding FC 100 100 100 100 United States
Other fi nancial company FC 100 100 100 100 United States
Real estate fi nance FC 100 100 100 100 United States
TRUST (1) Secondary markets fi nance FC 100 100 100 100 United States
MC MANAGEMENT, LP Holding FC 100 100 100 100 United States
INVESTMENT (1) Real estate funds FC 100 100 100 100 France
Fonds Colombes (16) Mutual funds FC 100 100 0 0 France
NEM INVEST SAS Private Equity FC 100 100 100 100 France
Receivables management and data FC 100 100 100 100 United States
LOIRE-CENTRE (2) Other fi nancial * Change in registered company name in 2013.
(28) Merger of ABP Vie and Vitalia Vie under Natixis Assurances Partenaires in Q4 2013.
We conducted our audit in accordance with professional standards applicable in France; those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated fi nancial statements are free of material misstatement. An audit involves performing procedures, using sampling techniques or other methods of selection to obtain audit evidence about the amounts and disclosures in the consolidated fi nancial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as the overall presentation of the fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
In our opinion, the consolidated fi nancial statements give a true and fair view of the assets and liabilities and of the fi nancial position of the Group as at December 31, 2013 and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.
In accordance with the requirements of article L. 823-9 of the French Commercial Code (“Code de commerce”), we bring to your attention to the following: Guarantee mechanism for GAPC assets
As described in Note 5.7 to the consolidated fi nancial statements, a guarantee mechanism with BPCE has been in place since July 1, 2009 covering certain assets ring-fenced in the Workout Portfolio Management structure (GAPC). We reviewed the monitoring of this mechanism and the corresponding accounting treatment.
The Group recognizes impairment losses and provisions to cover the credit and counterparty risks inherent to its activities (Notes 5.1, 5.2, 5.3, 6.5, 6.16.1 and 7.7 to the consolidated fi nancial statements). We reviewed the control procedures relating to credit and counterparty risk monitoring, the assessment of risks of non-recoverability, and the calculation of the corresponding individual and collective impairment and provisions.
The Group revises its measurement of intangible assets and goodwill carried in its consolidated balance sheet (Notes 2.5, 5.8 and 6.12 to the consolidated fi nancial statements). We reviewed the methodology used to perform this work as well as the main assumptions and parameters.
French original signed in Neuilly-sur-Seine and Paris-La-Défense on March 14, 2014, by
Commitments received from banks 2,494 4,268 24 o/w institutional operations: 37 Commitments on securities 6,411 5,036 37 Other commitments received 9,062 12,356
14 Due to central banks 14 Due to banks 173,236 157,853 24 o/w institutional operations: 3 18/19 Provisions for risks and other expenses 2,677 2,982
Balance of transactions on fi nancial instruments (1,084) 2,146 30 Net gains/(losses) on transactions on securities held for sale 32 (586)
Write-down, amortization and impairment of property, plant and equipment and intangible assets (87) (85)
NOTE 7 INVESTMENTS IN ASSOCIATES AND RELATED COMPANIES, EQUITY INTERESTS, OTHER LONG-TERM INVESTMENTS AND TREASURY SHARES 367
NOTE 24 STATEMENT OF ASSETS, LIABILITIES AND COMMITMENTS RELATED TO MANAGEMENT OF PUBLIC PROCEDURES 388
NOTE 30 GAINS/(LOSSES) ON SECURITIES HELD FOR SALE AND SIMILAR 391
NOTE 37 OFF-BALANCE SHEET ITEMS - FOREIGN CURRENCY COMMITMENTS AND TRANSACTIONS 396
The fi nancial statements for the fi scal year are presented in identical format to those for the previous fi scal year. Generally accepted accounting principles have been applied in compliance with the principle of prudence based on the following principles: V going concern; V consistency of accounting methods; V principle of periodicity.
Loans are carried on the balance sheet at their nominal value.
Non-performing loans are identifi ed and recognized in accordance with CRC Regulation 2002-03 as amended. This regulation and the notice issued by the CNC Urgent Issues Task Force on December 18, 2003 set out the regulations for classifying nonperforming loans and reclassifying them as irrecoverable loans.
FINANCIAL DATA5 Parent company fi nancial statements and notes WRITE-DOWNS FOR NON-SPECIFIC CREDIT RISK
In accordance with CRBF Regulation No. 90-01 on recognizing securities transactions, as amended, the following rules are applied regardless of the legal form of the security concerned (shares, bonds and notes, treasury bills, certifi cates of deposit, negotiable instruments, promissory notes, etc.). The buying and selling of securities are recorded in the balance sheet at the settlement-delivery date.
Instruments are assigned to one of the following categories based on type and the purpose for which they are held: securities held for trading, securities held for sale, securities held for investment, other long-term investments, investments in associates and investments in subsidiaries and affi liates.
V Securities held for investment: fixed-income dated securities acquired with the stated intention of holding them to maturity. They are reported on the balance sheet at their purchase price, excluding acquisition costs. Any difference between the purchase price and the redemption price is recorded in income over the remaining life of the securities.
V Investment securities: investments made on a regular basis with the sole aim of generating a capital gain in the medium-term, without any intention to invest sustainably in the issuing company or to actively participate in its operational management. This business is operated within a separate, specialized and structured department of Natixis.
V Investments in subsidiaries and affiliates: shares and other securities in related corporate entities over which Natixis exercises exclusive control, i.e. corporate entities likely to be fully consolidated in Natixis group. They are recognized at their acquisition date at the purchase price excluding acquisition costs. These securities are valued individually at the lower of their value in use at the reporting date and their acquisition cost. Unrealized losses are subject to a provision for impairment.
The DCF method for measuring future cash flows is based on the establishment of business plans prepared by the management of the subsidiaries in question and approved by Natixis senior management. The discount rate on future cash flows is the result of: R an average rate of return on an investment deemed to be risk-free,
R an average beta as refl ected in a sample of equivalent companies.
V Treasury shares: Natixis holds treasury shares to regulate the share price under a liquidity agreement. These shares are recognized as securities held for trading and follow the same rules as other securities in this category.
R as a provision for credit losses on fi xed-rate securities in the portfolio of securities held for sale or for investment when adjustments in value relate to counterparty risk exposure,
Internally generated software is carried on the asset side of the balance sheet at its direct development cost, including outsourcing expenses and personnel costs directly attributable to its production and preparation where they meet the criteria for capitalization.
In line with applicable accounting principles, a specifi c amortization schedule is defi ned for each signifi cant component of an item of property, plant and equipment which has a different useful life or is expected to consume future economic benefi ts differently from the item as a whole. For buildings comprising business and investment property, the following components and depreciation periods are applied: V land: non-depreciable; V non-destructible buildings (of historical importance): nondepreciable; V walls, roofs and waterproofing: 20-40 years; V foundations and framework: 30-60 years; V external rendering: 10-20 years; V equipment and installations: 10-20 years; V internal fixtures and fittings: 8-15 years.
In the fi rst half of 2012, Natixis implemented a transaction with BPCE called P3CI (a loan covering CCIs) to optimize the Core Tier 1 ratio via a guarantee mechanism based on the prudential value of the Cooperative Investment Certifi cates (CCIs) issued by the Banque Populaire banks and the Caisses d’Epargne.
The bonds’ redemption value at maturity provided a hedge against any fall in the prudential value of the CCIs (accounted for by the equity method) over the term of the transaction, i.e. 10 years.
These transactions are carried out for four purposes: V micro-hedging (hedging of specific transactions or positions); V macro-hedging (overall balance sheet management); V speculative position-taking; V specialized management of a trading portfolio.
For hedging transactions, income and expenses are recognized in income on a symmetrical basis with the income and expenses of the hedged items.
They fall into four categories: V “Short-term benefits” including salaries, social security contributions, annual leave, employee profit-sharing, incentive plans, top-up contributions and bonuses payable in the 12 months after they are attributed are expensed in the period in which the corresponding services were rendered.
R plus or minus any unrecognized actuarial gains or losses in accordance with the corridor principle arising from: • experience adjustments linked to demographic variables,
The annual payroll costs recognized in respect of defined benefits plans consist of: R rights vested by beneficiaries over the period,
R amortization of actuarial gains and losses and past service costs,
V “Other long-term benefits” including long-service awards and deferred compensation payable in cash under employee retention and performance recognition plans are valued using the same actuarial method as that applied to post-employment benefits under defined benefit plans, except that actuarial gains and losses are not subject to the corridor method and past service costs are recognized directly as an expense.
Plans settled in shares are recognized in accordance with CRC Rule No. 2008-15, which provides for the recognition of a liability where there is the likelihood or the certainty that the obligation to grant shares generates an outfl ow in settlement without an offsetting provision: V if the granting is made by means of the issue of new shares, and outflow in settlement is not deemed to be likely and, as a result, no expense is recognized; V if the granting is made by redemption of shares or the granting of existing shares, the possibility of an outflow in settlement is deemed likely and without an offsetting provision. A provision is then set aside taking account of the entry cost of the shares or the share price on the balance sheet date if the shares have not yet been purchased and the probable number of shares granted to employees. The expense is recognized in stages over the vesting period.
On November 12, 2009, an arrangement was introduced by BPCE to protect assets of a portion of the GAPC portfolios with retroactive effect at July 1, 2009. With this guarantee mechanism, Natixis was able to free up a signifi cant portion of its equity allocated to ring-fenced assets and to protect itself against the risk of loss from these portfolios subsequent to June 30, 2009. This protective arrangement is based on two mechanisms: V a sub-participation in terms of risk which acts as a financial guarantee on 85% of the nominal value of assets recognized as “securities held for investment”, “securities held for trading”, “securities held for sale” and ”receivables”. Under this guarantee, Natixis is protected from the very first euro in default up to 85% of the default amount; V two total return swaps (TRS), one in euros and another in dollars, which transfer to BPCE 85% of the profit or loss recognized as from July 1, 2009. The instruments hedged by these TRS are mostly represented by “securities held for trading” and to a lesser extent by “securities held for sale”. At the same time, Natixis has bought an option from BPCE which, if exercised, will allow it to recover in 10 years’ time any net positive performance by the portfolio in exchange for payment of a premium.
On February 17, 2013, BPCE S.A. and Natixis announced that they had each submitted to their respective supervisory boards and boards of directors a proposal to signifi cantly simply the structure of Groupe BPCE. The operation involves the repurchase by the Banque Populaire banks and Caisses d’Epargne of all of the Cooperative Investment Certifi cates (“CCIs”) issued by them, which were held entirely by Natixis. Following the cancellation of the CCIs repurchased by each of the Banque Populaire banks and Caisses d’Epargne, the capital of these institutions is held entirely by their cooperative shareholders.
The repurchase transaction, amounting to €12.1 billion, was completed on August 6, 2013 and the corresponding gain was recorded in Natixis’ parent company fi nancial statements in the amount of €1.4 billion. The buy-back was accompanied by the repayment of fi nancing and the associated mechanisms, including P3CI, which was set up in 2012.
The completion of this repurchase has resulted in a capital surplus, most of which was returned to shareholders in an exceptional distribution of around €2 billion in cash on August 19, 2013, as decided by the Extraordinary General Shareholders’ Meeting of July 31, 2013.
Current accounts overdrawn 2,932 2,953 o/w accrued interest 5 6 o/w non-performing 23 28 o/w write-downs of non-performing (14) (13)
Commercial loans 1,759 824 o/w accrued interest 34 15 o/w non-performing 21 13 o/w write-downs of non-performing (1)
Transfers of securities between categories: There were no transfers of securities between categories in 2012 or 2013.
FINANCIAL DATA5 Parent company fi nancial statements and notes % at 12.31.2013
NATIXIS ALGERIE 62, chemin Drareni Mohamed Hydra Algiers 10,000,002 DZD 4,583,883 DZD 100.00%
NATIXIS ASIA LIMITED Suite 1911-1922-19 F TWO 88 Queensway Pacifi c Place 632,395 HKD (62,802) HKD 100.00%
NATIXIS HCP 30 av. Pierre Mendès France 75013 Paris 20,037 EUR 452 EUR 100.00%
NATIXIS INTEREPARGNE 30 av. Pierre Mendès France 75013 Paris 8,891 EUR 18,578 EUR 100.00%
NATIXIS PAIEMENTS 30 av. Pierre Mendès France 75013 Paris 53,559 EUR 46,388 EUR 100.00%
NATIXIS CORPORATE SOLUTIONS 12 Lower Leeson Street Dublin 2 Dublin 99,997 EUR 1,319 EUR 100.00%
NATIXIS GLOBAL ASSET MANAGEMENT 30 av. Pierre Mendès France 75013 Paris 156,334 EUR 2,990,599 EUR 100.00%
NUSHI 399 Boylston St 13th Floor MA 02116 Boston USA 1,227,285 USD 3,274,524 USD 100.00%
(a) The net value of these lines is higher than their gross value due to a positive translation adjustment.
FINANCIAL DATA5 Parent company fi nancial statements and notes NOTE 14 INTERBANK AND SIMILAR TRANSACTIONS
Due to banks 173,236 157,853 o/w accrued interest 0 102 o/w other amounts due 0 0 o/w accrued interest 358 444
Other payables 76,548 85,307 o/w accrued interest 1 1 o/w other amounts due 40 2 o/w accrued interest 21 21 o/w security deposits 879 925
Interbank and money market instruments 32,492 31,394 o/w accrued interest 29 46 o/w accrued interest 134 625
Benefi ts paid over the period (4) (2) (2) (25) (33) (10) (1) (2) (20) (33)
Expected return on plan assets, gross (4) (1) (5) (5) (1) (6)
Recognized actuarial gains and losses over the period 4 (4) 1 1 2 (1) 1
Change in obligation taken to income 2 (7) (3) 6 (2) (8) 13 1 36 42
Other items (change in consolidation scope, etc.) (4) (4) 7 5 (4) 8
Actuarial gains and losses on benefi t obligations 12 (18) (3) (9) 24 (6) 8 26
The share capital is composed of 3,100,295,190 shares, each with a par value of €1.60. All shares confer the same rights on their holders, except for treasury shares, which have no voting rights.
Financing commitments given to: Guarantees provided on behalf of: Under Regulation No. 2010-04 on transactions between related parties, Natixis has no additional information to disclose, since these transactions are either excluded from the reporting scope (wholly-owned subsidiaries), or entered into under normal market conditions.
FINANCIAL DATA5 Parent company fi nancial statements and notes NOTE 24
Charge to provisions for risks and other expenses (b) (95) (42)
INTEREST RATE INSTRUMENTS 6,494,667 5,910,570 On organized markets 58 15 Swaps
FINANCIAL DATA5 Parent company fi nancial statements and notes Fair value of forward financial instruments (excluding international branches)
Bonds and other fi xed-income securities 2,897 3,041 1,309 595 4,766 4,612 17,220
Shares and other variable-income securities 4,890 67 8 133 271 20,842 26,211
Article L.511-45 of the French Monetary and Financial Code and the Ministerial order of October 6, 2009, require banks to disclose in a note to their fi nancial statements their establishments and operations in States and territories that do not have an administrative assistance agreement with France aimed at countering fraud and tax evasion, which provides access to banking information.
Income before tax, depreciation, amortization and provisions (1,664,174,176.79) 644,584,484.60 (72,975,180.54) 861,041,488.98 2,259,385,434.57
Income after tax, depreciation, amortization and provisions (2,046,308,381.66) 284,641,699.57 873,436,574.80 907,172,429.97 2,323,073,936.17
Income after tax, but before depreciation, amortization and provisions (0.52) 0.26 0.00 0.28 0.66
In compliance with the assignment entrusted to us by your General Meeting, we hereby report to you for the year ended December 31, 2013, on: V the audit of the accompanying financial statements of Natixis S.A.; V the justification of our assessments; V the specific verifications and information required by law.
The Company uses internal models and methodologies to measure fi nancial instruments that are not traded on an active market, as well as to book certain impairment losses (Notes 1.6, 18, 29, and 36 to the company fi nancial statements). We examined the control procedures relating to the assessment of whether a given market was inactive, to the validation of models and to the defi nition of the parameters used.
The Company recognizes impairment losses and provisions to cover the credit and counterparty risks inherent to its activities (Notes 1.1, 3, 4, 6, 18, and 33 to the company fi nancial statements). We reviewed the control procedures relating to credit and counterparty risk monitoring, the assessment of risks of non-recoverability, and the calculation of the corresponding individual and collective impairment and provisions.
The Company recognizes provisions to cover employee benefi t obligations (Notes 1.7, 18 and 32 to the company fi nancial statements). We examined the methodology used to measure these benefi t obligations, as well as the main assumptions and parameters applied.
Concerning the information given in accordance with the requirements of article L. 225-102-1 of the French Commercial Code (“Code de commerce”) relating to the remuneration and benefi ts received by the corporate offi cers and any other commitments made in their favor, we have verifi ed its consistency with the fi nancial statements or with the underlying information used to prepare these fi nancial statements and, where applicable, with the information obtained by the Company from companies controlling the Company or controlled by it. Based on this work, we attest the accuracy and fair presentation of this information.
French original signed in Neuilly-sur-Seine and Paris-La-Défense, on March 14, 2014, by
Statutory Auditors’ special report on related-party agreements and commitments 5.6 Statutory Auditors’ special report on related-party agreements and commitments
We are required to inform you, on the basis of the information provided to us, of the key features and terms and conditions of the contractual agreements and commitments indicated to us or that we may have identifi ed in the performance of our assignment. It is not our role to comment as to whether they are benefi cial, or to ascertain the existence of any other agreements and commitments. It is your responsibility, in accordance with Article R. 225-31 of the French Commercial Code, to assess the benefi ts resulting from these agreements and commitments prior to their approval.
Pursuant to Article L. 225-40 of the French Commercial Code, we have been informed of the following agreement, which was the subject of prior approval by your Administrative Director on March 21, 2013.
AUTHORIZATION OF THE SIGNING OF THE DRAFT MEMORANDUM OF UNDERSTANDING AIMED AT IMPLEMENTING OPERATION YANNE
O n May 21, 2013, the Board of Directors authorized the signing of the Memorandum of Understanding laying down all the terms and conditions of the plan in which Natixis, BPCE, the Caisses d’Epargne and the Banque Populaire banks wish to reach a fi nal agreement with a view to implementing Operation Yanne. This Memorandum specifi cally provided for the buyout of the CCIs, the payment of an exceptional dividend, and the conditions for investing the cash proceeds generated by the transaction.
The Board of Directors authorized the Chief Executive Offi cer to fi nalize and sign said Memorandum of Understanding, with the option to delegate this task to any person that he chooses to stand in for him.
FINANCIAL DATA5 Statutory Auditors’ special report on related-party agreements and commitments V interest income of €58,901,646.43 on the loan granted to BPCE
1.2 Agr eements and commitments authorized since the fi nancial year-end
We have been informed of the following agreements and commitments authorized since the fi nancial year-end, which were subject to the prior approval of your Board of Directors.
Corporate offi cers concerned: V Mr. Pérol, Chairman of the BPCE Executive Board, Chairman of the Natixis Board of Directors; V Mr. Patault, Member of the BPCE Supervisory Board, Natixis Director; V Mr. Sueur, Vice-Chairman of the Steering and Supervisory Committee of Caisse d’Epargne Ile-de-France, Natixis Director; V Mr. Cahn, Member of the BPCE Supervisory Board, Natixis Director; V Mr. Condaminas, Member of the BPCE Supervisory Board, Natixis Director; V Mrs. Halberstadt, Member of the BPCE Supervisory Board, Natixis Director; V Mr. Valentin, Member of the BPCE Supervisory Board, Natixis Director; V Mrs. Paix, Chairman of the Executive Board of Caisse d’Epargne Rhône Alpes, Natixis Director; V Mr. Grass, Chairman of the Board of Directors of Banque Populaire Bourgogne Franche Comté, Director of Natixis; V BPCE, represented by Mr. Karyotis, Chief Financial Officer and Member of the BPCE Executive Board, BPCE’s permanent representative on the Natixis Board of Directors.
1.2.2 AMENDMENT NO. 1 TO THE COMMITMENT ESTABLISHING THE TERMS AND CONDITIONS OF THE PAYMENT DUE OR LIKELY TO BE DUE TO LAURENT MIGNON IN THE EVENT THAT HE CEASES HIS DUTIES AS CHIEF EXECUTIVE OFFICER
This amendment, which was authorized by the Board of Directors’ meeting of February 19, 2014, alters the rules for calculating the severance payment, in order to make them compliant with the principles in effect for members of BPCE’s Executive Board.
This non-compete agreement, in the event that Mr. Mignon’s offi ce as Chief Executive Offi cer is terminated, was authorized by the Board of Directors’ meeting of February 19, 2014. It is limited to a period of six months, and includes a payment equal to six months’ fi xed compensation, as paid on the date when his corporate offi ce is terminated, on the understanding that the total amount of the severance payment and the non-compete payment may not exceed a cap set at 24 months’ monthly compensation, as defi ned in the commitment relating to his severance payment.
2.1 Agreements an d commitments approved in previous fi nancial years and continued during the past fi nancial year
In accordance with Article R. 225-30 of the French Commercial Code, we were informed that the execution of the following agreements and commitments, already approved by the General Shareholders’ Meeting in previous years, continued during the past fi nancial year.
FINANCIAL DATA5 Statutory Auditors’ special report on related-party agreements and commitments V amendments to the revised intra-group financial guarantee master agreements signed in 2008 with BFBP and CNCE, between (i) Natixis and CNCE, and between (ii) Natixis and BFBP.
On November 12, 2009, the Board of Directors approved a number of agreements regarding the guarantee covering certain GAPC assets, namely: V the Financial Guarantee agreement, under which BPCE agrees to grant Natixis a financial guarantee (term: the agreement will end on the final maturity date); V the ISDA Master Agreement and appendix, between BPCE and Natixis; V total return swap agreements between Natixis and BPCE, one of which relates to euro-denominated assets and the other to US dollar-denominated assets; V the Call Option granted by BPCE to Natixis; V the “miroir NLI” Reciprocal Financial Guarantee between Natixis and Natixis Luxembourg Investissements; V the “miroir NFP” Reciprocal Financial Guarantee between Natixis and Natixis Financial Products Inc.; V the “miroir NFUSA” Reciprocal Financial Guarantee between Natixis and Natixis Funding USA, LLC; V the “miroir Ixis CMNA Australia” Reciprocal Financial Guarantee between Natixis and Ixis CMNA Australia No. 2 SCA; V the “miroir NFP” Reciprocal total return swap agreement between Natixis and Natixis Financial Products Inc.; V the “miroir NREC” Reciprocal total return swap agreement between Natixis and Natixis Real Estate Capital Inc.; V governance arrangements set up in respect of the GAPC guarantee (specifically including draft operating charters for the Guarantee Supervision Committee and Workout Portfolio Management Committee).
The change in the fair value of the total return swaps gave rise to the recognition of income amounting to €14,144,302.94 for the fi nancial year ended December 31, 2013 in respect of Natixis’ activities, and to an expense of USD 26,797,861.06 in respect of the subsidiaries’ activities. This expense was neutralized in Natixis’ accounts by recognizing an offsetting expense against the subsidiaries.
As the premium was recognized immediately in the balance sheet, its revaluation led to the recording of income amounting to €8,801,437.36 for the 2013 fi nancial year.
The income recognized on the activation of guarantees amounted to €11,083,307.51 in the 2013 fi nancial year.
On December 17, 2009, the Board of Directors approved credit and fi nancial guarantee master agreements between Natixis and Natixis Lease designed to provide access to SFEF fi nancing against collateral.
To enable Natixis to act as the arranger for the €25 billion covered bond issue launched by BFBP, on November 23, 2007, the Supervisory Board approved: V credit and financial guarantee master agreements between BPCB, BFBP, Natixis, and initially, seven Banque Populaire banks; V a letter setting out hedging agreements between BPCB, BFBP and Natixis.
2.1.6 AGREEMENT ON A SEVERANCE PAYMENT IN THE EVENT OF THE EARLY TERMINATION OF THE CHIEF EXECUTIVE OFFICER
On February 22, 2011, the Board of Directors approved an agreement relating to a performance-based severance payment in the event of the termination of the Chief Executive Offi cer, for the benefi t of Mr. Laurent Mignon, capping it at one year’s maximum potential (fi xed and variable) compensation.
2.1.7 AUTHORIZATION OF A RELATED-PARTY AGREEMENT ON THE CHAPEL DEAL BETWEEN NATIXIS AND BPCE
On May 11, 2011, the Board of Directors approved an agreement on the Chapel deal between Natixis and BPCE. The Chapel Deal is part of GAPC (workout portfolio management), within a structured product called Sahara that more closely refl ects the rating of high-quality assets held by GAPC. These securities are covered by the “Neptune” Guarantee entered into with BPCE in 2009. To re-establish the equivalent of the Neptune Guarantee, from which Natixis benefi ted via Sahara, it was proposed that BPCE should guarantee the Chapel security via a total return swap (TRS).
The expenses recognized by Natixis in respect of this agreement amounted to €37,450,329.15 for the fi nancial year ended December 31, 2013.
Natixis of a P3CI with a nominal value of €6,930,000,000, or the early redemption by Natixis of six TSS lines owned by BPCE at their nominal value, i.e. USD 577,250,000 and €1,926,806,000 plus accrued interest at the date of said buyback or redemption.
On December 15, 2011, the Board of Directors approved the signing of a P3CI subscription agreement, which was to take effect no later than March 30, 2012.
The P3CI was to be issued for a term of 10 years except in the event of early redemption.
Term of the agreement: the agreement will enter into effect for the parties while Natixis is affi liated to BPCE, within the meaning of the provisions of Article L. 511-31 of the French Monetary and Financial Code.
The purpose of the credit master agreements is to defi ne the terms and conditions for intra-group loans. The purpose of the fi nancial guarantee master agreements is to organize Natixis’ collateral arrangements.
The expenses recognized by Natixis in respect of these agreements amounted to €27,703,974.30 for the fi nancial year ended December 31, 2013.
2.1.11 NATIXIS’ ROLE AS ARRANGER OF A €25 BILLION COVERED BOND ISSUE BY THE CAISSE D’EPARGNE GROUP
On December 18, 2008, the Supervisory Board: V adopted regulations for the closed collective pension scheme insofar as those regulations define the potential rights of Members of the Executive Board eligible to benefit from the scheme, provided that the Members were appointed to the Board between November 27, 2006 and December 15, 2008. It also closed the scheme to any new Members of the Executive Board (the regulations exclude any compensation resulting from the termination of professional relations with Members of the Executive Board); V where the collective provident insurance scheme is concerned: agreed to continue offering the collective provident insurance scheme available to the Chief Executive Officers of the Banque Populaire banks to Members of Natixis’ Executive Board in 2009, it being noted that the scheme adapts the guarantees applicable to all former Natixis Banque Populaire personnel to the specific situation of each Member; V where severance payments and retirement benefits are concerned: approved the decision not to apply the provisions regarding early termination or retirement compensation arrangements for the Chief Executive Officers of the Banque
2.1.13 AGREEMENT PROVIDING FOR THE DISTRIBUTION OF NATIXIS PRODUCTS AND SERVICES TO THE REGIONAL BANKS ACQUIRED BY THE BANQUE POPULAIRE GROUP FROM HSBC
On December 18, 2008, the Supervisory Board approved an agreement providing for the distribution of Natixis products and services to the regional banks acquired by the Banque Populaire Group from HSBC, pursuant to which Natixis was to be the exclusive supplier to these banks in the businesses concerned by the agreement as from 2009. The agreement also stipulated that the conditions established between Natixis and the Banque Populaire Group should apply to these banks.
The income recognized by Natixis in respect of this agreement amounted to €1,219,142.73 for the fi nancial year ended December 31, 2013.
2.1.15 LETTERS OF JOINT AND SEVERAL GUARANTEE AND COMMITMENT TERMINATED OR EXPIRED
Ixis CIB (formerly known as CDC Marchés and then as CDC Ixis Capital Markets) was required to enter into several letters of joint and several guarantee and commitment with its various successive shareholders between 1996 and 2004, including Caisse des Dépôts (CDC), CDC Finance-CDC Ixis (CNCE was the successor in title to this institution following the merger and acquisition that took place on December 31, 2004), and CNCE.
For joint and several guarantees entered into with CDC FinanceCDC Ixis, the Ixis CIB creditors for transactions secured under these guarantees that were entered into before the expiry of the respective guarantees may, in accordance with the letter from the Chief Executive Offi cer of CDC dated October 12, 2004, enforce their rights directly against CDC through to the maturity of the transactions guaranteed, as if this commitment had been taken out directly by CDC on behalf of the Ixis CIB creditors.
2.1.17 DE FACTO ASSOCIATION AGREEMENT BETWEEN CDC, CNCE (THE SUCCESSOR IN TITLE TO CDC IXIS), AND IXIS CIB (FORMERLY CDC IXIS CAPITAL MARKETS)
2.2 Agreements and commitments authorized during the past fi nancial year
The impact of this amendment on the 2013 fi nancial year was to reduce the expense recognized in relation to the agreement entered into by Natixis and BPCE as part of the Coccinelle Project (see Point 2.1.8 in this report).
A joint stock company (société anonyme) with a Board of Directors with share capital of €4,970,490,073.60.
The Company is a joint stock company (société anonyme) with a Board of Directors. It is governed by the regulations governing commercial companies, by the provisions of the French Monetary and Financial Code (Code monétaire et fi nancier) and by these bylaws.
The corporate purpose, in France and elsewhere comprises: V the conduct of all banking business and related businesses as per the banking law; V the provision of all investment services as defined in the French Monetary and Financial Code; V the performance of the specific assignments entrusted by the French State in the economic and financial area, in the framework of special agreements; V the performance of all brokerage business; V the acquisition of interests in companies, groups or associations with a direct or indirect connection with the activities referred to above; V as well as the completion of all private and commercial transactions.
The share capital has been set at €4,970,490,073.60, divided into 3,106,556,296 fully paid-up shares of €1.60 each.
They are registered in share accounts and are transferred under the terms provided for by law and regulations.
In the event of non-compliance with the notifi cation requirement provided for in the previous paragraph and upon request, recorded in the minutes of the meeting from a shareholder representing at least 1% of the voting rights, the shares exceeding the fraction which should have been declared will lose their voting rights for a period of 2 years following the notifi cation compliance date.
The director appointed in this capacity sits on the Board of Directors and is entitled to vote. He is subject to the same rights and obligations as the Company’s other directors.
By way of exception, the fi rst Board Meeting will be held immediately after the Combined General Shareholders’ Meeting of April 30, 2009, and the choice of the Executive Management procedure will be made with an ordinary quorum (at least onehalf of the directors present or represented).
When the Company’s Executive Management is handled by the Chairman of the Board of Directors, the following provisions concerning the Chief Executive Offi cer will apply to the Chairman of the Board of Directors who will assume the title of Chairman and Chief Executive Offi cer.
Shareholders may vote by post form or by proxy in accordance with the legal and regulatory provisions in force. In accordance with the decision of the Board of Directors, shareholders may participate in General Meetings by means of video-conferencing and may vote using all means of telecommunications and remote
LEGAL INFORMATION6 Natixis Bylaws transmission, including the Internet, in accordance with the applicable regulations at the time of their use. This decision is disclosed in the notice of meeting published in the BALO (Bulletin des Annonces Légales Obligatoires – Bulletin of Mandatory Legal Notices]). Those shareholders who use the electronic voting form offered on the website created by the meeting organizer, by the required deadline, are considered present or represented shareholders. The electronic form can be fi lled out and signed directly on that site by any process provided for by the Board of Directors that meets the conditions defi ned in the fi rst sentence of the second paragraph of Article 1316-4 of the French Civil Code [i.e. the use of a reliable identifi cation procedure guaranteeing that the signature is linked to the form], which may consist of a user name and password.
Natixis Bylaws however it cannot change the Company’s nationality or increase the shareholders’ commitments.
LEGAL INFORMATION6 General information on Natixis’ capital 6.2 General information on Natixis’ capital 6.2.1 FORM AND TRANSFER OF SHARES (CHAPTER II, ARTICLE 4 OF THE BYLAWS)
They are registered in share accounts and are transferred according to the terms provided for by law and regulations.
This same meeting resolved in particular that under certain circumstances, the Board of Directors may: V determine the issue price of the shares, within the limit of 10% of the share capital per year, as part of a capital increase with waiving of preferential subscription rights; V decide to increase capital with waiving of preferential subscription rights through an offer as set out in Article L.4112 (II) of the French Monetary and Financial Code (private placement); V decide to increase capital with waiving of preferential subscription rights with a view to remunerating contributions in kind granted to the Company, within the limit of 10% of the share capital at the time of the issue; V decide to increase capital via the incorporation of premiums, reserves, retained earnings or other items; V decide to increase the number of securities to be issued, within the legal limits, in the event of capital increases with or without preferential subscription rights; V decide to increase the share capital reserved for members of an employee savings plan, up to the par value limit of fortyeight (48) million euros.
Natixis allocated 1,724,325 shares that will automatically increase the capital by a maximum amount of €2,758,920 (number of shares multiplied by nominal value of shares) at the end of the vesting period for the issue of allocated shares.
Moreover, in its session on February 17, 2013, the Board of Directors also decided to use the authorization relating to the capital increase with waiving of preferential subscription rights reserved for members of employee savings plans granted by the Combined General Shareholders’ Meeting of May 26, 2011 (20th resolution), for the launch of the Mauve 2013 employee share ownership plan with an overall par value ceiling of €48,000,000, representing a maximum of 30,000,000 shares. In order to implement the Mauve 2013 offer, the Board of Directors invested the Chief Executive Offi cer with all the necessary powers in particular to set the Subscription Price and the subscription period for the shares to be issued.
During its session of August 6, 2013, the Board of Directors, on the opinion of the Appointments and Compensation Committee, decided as a result of the exceptional dividend payout approved by the Company’s General Shareholders’ Meeting on July 31, 2013, to adjust the number of free shares granted under all of the plans established in 2011, 2012, and 2013 with a vesting period in progress at the date of the exceptional dividend payout (transposing the provisions of Articles R.228-91 and R. 225-140 of the French Commercial Code applicable to securities granting rights to share capital).
Natixis allocated 90 free shares that will automatically increase the capital by a maximum amount of €144 (number of shares multiplied by nominal value of shares) at the end of the vesting period for the issue of allocated shares. This free share allocation was part of the payment of additional profi t-sharing for fi scal year 2012 paid in 2013, representing a gross amount of €350 per employee.
LEGAL INFORMATION6 General information on Natixis’ capital SUMMARY TABLE OF AUTHORIZATIONS GRANTED TO THE BOARD OF DIRECTORS BY THE GENERAL SHAREHOLDERS’ MEETING
In order to carry out a capital increase through the issue – without preferential subscription rights maintained – of shares and.or securities giving access to the capital of the Company and/or the issue of securities entitling holders to the allotment of debt securities €1.5 bn (c) 26 months None None
In order to increase the share capital by issuing shares or securities giving access to capital in the Company as remuneration for contributions in kind involving securities of unlisted companies 10% of the share capital (c) 26 months None None
In order to increase the share capital via the incorporation of premiums, reserves, retained earnings or other items €1.5 bn (c) 26 months None None
05.21.2013 17 In order to grant shares €246 m (c) 38 months 11.06.2013 €144 (d)
(b) Amount deducted from the ceiling decided in resolution No. 13 of the General Shareholders’ Meeting of May 26, 2011 (€3 bn).
On November 25, 1985, Banque Française du Commerce Extérieur issued 140,000 non-voting shares with a par value of FRF 5,000 (€762.25). The coupon is payable annually on November 25. Redemptions are at the initiative of the borrower. At December 31, 2013, 47,000 non-voting shares were outstanding.
On November 17, 2006, the Combined General Shareholders’ Meeting authorized the Natixis Management Board to grant, on one or more occasions, stock options to some, or all, employees or corporate offi cers of the Company or of related companies, within the meaning of Article L.225-180 of the
French Commercial Code. This authorization involved a maximum of 10,000,000 shares (i.e. 15,400,000 shares following the adjustment resulting from the September 2008 capital increase).
SUMMARY OF STOCK OPTION PLANS GRANTED TO NATIXIS CORPORATE OFFICERS AT DECEMBER 31, 2013
In 2007, the corporate offi cers were the members of the Natixis Management Board.
LEGAL INFORMATION6 General information on Natixis’ capital Natixis scope of consolidation
The ownership of shares by corporate offi cers who are individuals is not material. Please see the preceding pages for details of stock options granted by the Company to certain employees and corporate offi cers.
They are locked-up until November 14, 2011 and became freely transferable at that date.
Natixis’ main shareholder, BPCE held 71.84% of the share capital and 71.96% of the voting rights at December 31, 2013. Given its capital structure, Natixis believes that a hostile takeover bid would have very little chance of succeeding.
General Shareholders’ Meeting of May 20, 2014 6.5.1 REPORT OF THE BOARD OF DIRECTORS ON THE RESOLUTIONS SUBMITTED TO THE SHAREHOLDERS’ MEETING
You may refer to this 2013 registration document for the statement on the fi nancial condition, activity and results of the Company and its group during the past fi scal year and the various disclosures required by the legal and regulatory provisions in effect (also available on the Natixis website: www.natixis.com).
Twelve resolutions will be submitted to the shareholders at the Ordinary General Shareholders’ Meeting to be held at 3 p.m. on May 20, 2014 at CNIT’s Centre des Congrès et des Expositions at Paris La Défense, 2 place de la Défense – 92053 Paris La Défense Cedex.
APPROVAL OF THE FINANCIAL STATEMENTS FOR FISCAL YEAR 2013 (RESOLUTIONS ONE AND TWO)
Resolution Three proposes to: V allocate €116,153,696.81 to the legal reserve; V allocate a dividend of €496,047,230.40; V carry a free reserve of €1,210,873,008.96; V allocate the remaining distributable profits to retained earnings, i.e. €500,000,000.00.
The dividend will be detached from the share on May 23, 2014 and paid starting on May 28, 2014.
For Natixis, this includes the following related party agreements: V the authorization given by the Board of Directors on May 21, 2013 related to signing the Memorandum of Understanding laying down all the terms and conditions of the plan in which Natixis, BPCE, the Caisses d’Epargne and the Banque Populaire banks aimed at establishing a final agreement on the implementation of Operation Yanne for the buyback and cancellation of the Cooperative Investment Certificates held by Natixis; V the authorization given by the Board of Directors on February 19, 2014 related to signing the amendment to the agreement entered into on April 9, 2013 between BPCE and Natixis, on the guarantee set up for BPCE’s bond issuance program in the United States. The aim of this amendment is to raise the sub-ceilings provided for in Article 4 of the agreement.
This Commitment related to the severance payment was authorized by the Natixis Board of Directors at its meeting of February 22, 2011 and approved by the Combined General Shareholders’ Meeting of May 26, 2011.
Following the appointment of Laurent Mignon to the BPCE Management Board in August 2013, a proposal was made to change the ruled used to calculate the amount of the severance payment for the Natixis CEO in order to bring them into compliance with the principles in force for the members of the BPCE Management Board.
Under the terms of Amendment No. 1, authorized by the Board of Directors on February 19, 2014, the amount of the severance payment for the CEO is calculated as follows: R Amount of indemnity
The monthly reference compensation (hereinafter referred to as the «Monthly reference compensation») included in the calculation is equal to 1/12th of the sum of: R the fixed compensation paid in respect of the last calendar year in office and,
Seniority is broken down into years and fractions of years during which the Natixis CEO’s offi ce is held.
In accordance with the recommendations made by the AFEP-Medef Corporate Governance Code, the amount of this Severance payment, which is combined where applicable with any non-compete indemnity paid to the Chief Executive Offi cer, may not exceed a ceiling of twenty-four (24) months of the Monthly reference compensation.
No severance payment is made if the CEO leaves offi ce: due to serious negligence or misconduct, or at his/her own initiative in order to hold new offi ces, or following a change in offi ce within Groupe BPCE.
The other provisions of the Commitment related to the severance payment remain unchanged. As such, entitlement to the indemnity remains subject to performance criteria and conditions.
LEGAL INFORMATION6 Draft resolutions of the Ordinary General Shareholders’ Meeting of May 20, 2014 V Implementation of a non-compete clause authorized by the
OPINION ON THE COMPONENTS OF COMPENSATION DUE OR GRANTED IN RESPECT OF THE FISCAL YEAR ENDED DECEMBER 31, 2013 TO EACH EXECUTIVE CORPORATE OFFICER (RESOLUTIONS SIX AND SEVEN)
Components of compensation due or granted in respect of the fi scal year ended December 31, 2013 to François Pérol, Chairman of the Board of Directors of Natixis: Components of compensation Amounts Comments
It should also be noted that François Pérol does not receive any compensation - and particularly any variable compensation, multi-annual variable compensation, extraordinary compensation, stock options, performance shares, indemnities for taking or leaving offi ce, supplementary pension scheme or any other type of benefi ts - in respect of his offi ce as Chairman of the Board of Directors.
Annual variable compensation can represent a maximum of 156% of annual fi xed compensation. Based on the criteria set by the Board of Directors and the achievements observed by the Board of Directors on February 19, 2014, the amount of variable compensation was calculated as follows: V 86.75% of fi xed compensation for quantitative criteria, V 33% of fi xed compensation for qualitative criteria.
Allocation of stock options/performance share and any other long-term compensation 90 shares valued at €350
The Board of Directors used the authorization granted to it by the Combined General Shareholders’ Meeting of May 21, 2013 related to the granting of shares (17th resolution) to grant 90 shares to Laurent Mignon on November 6, 2013 (i.e. 0.005% of the total number of shares granted by the Board of Directors during the fi scal year). These shares will be fully vested on March 1, 2016 provided that the presence condition is met. 100% of the shares granted must be held until the expiry of the CEO’s term of offi ce. No stock options were granted to Laurent Mignon during fi scal year 2013.
N/A No severance payment is due in respect of fi scal year 2013. In accordance with the Board of Directors’ decision of February 22, 2011, approved by the Combined General Shareholders’ Meeting of May 26, 2011, Laurent Mignon is entitled to an indemnity in the event he leaves his offi ce as CEO. The amount of the severance payment is capped at one year of maximum potential compensation (fi xed and variable). The severance payment is only made if the quantitative targets are reached, such as Natixis’ net income Group share, ROE and cost/income ratio for the two years preceding the departure. Depending on the level of targets achieved, payment can range from 0% to 100% of the maximum severance payment. No severance payment is given to the Natixis Chief Executive Offi cer if he leaves on his own initiative or if he changes positions within Groupe BPCE.
N/A Laurent Mignon does not benefi t from a supplementary pension plan.
LEGAL INFORMATION6 Draft resolutions of the Ordinary General Shareholders’ Meeting of May 20, 2014 OVERALL BUDGET FOR COMPENSATION PAID TO THE EMPLOYEES REFERRED TO IN ARTICLE L.511-71 OF THE FRENCH MONETARY AND FINANCIAL CODE DURING THE FISCAL YEAR ENDED DECEMBER 31, 2013 (RESOLUTION EIGHT)
In accordance with the provisions of Article L.511-78 of the French Monetary and Financial Code, resolution nine asks the shareholders to cap the variable compensation paid to Natixis employees referred to in Article L.511-71 of the same Code at double the amount of their fi xed compensation in respect of fi scal years beginning on or after January 1, 2014.
According Article L.511-78 Paragraph 2 of the French Monetary and Financial Code, the variable compensation of MRTs is capped at 200% of fi xed compensation if approved by the General Shareholders’ Meeting under the following conditions: V a quorum of 50%, with a two-thirds majority of votes in favor, or failing that; V no quorum, with 75% of votes in favor approving the increase.
Michel Grass, 57, has been Chairman of the Board of Directors of Banque Populaire Bourgogne Franche Comté since 2010 (see Michel Grass’ CV in Chapter 3 “Corporate governance” – paragraph 3.2.4. herein).
The Board of Directors would thus be authorized to set up a treasury share buyback program up to a limit of no more than 10% of the total number of shares comprising the Company’s share capital, or 5% of the total number of shares comprising the Company’s share capital acquired with a view to being held and subsequently tendered in connection with a merger, spin-off or asset transfer. The Company cannot under any circumstance own at any given time more than 10% of the ordinary shares comprising its share capital. The objectives of these share purchases would be: V to implement a liquidity contract; V to award or transfer shares to the employees in respect of their share of the Company profits, employee savings plans or share buyback programs and to award free shares or any other form of share allocation to members of the staff; V payment or exchange in connection with merger and acquisition transactions.
These shares may be bought, sold or transferred at any time (except in the event of a public offer of the Company’s shares) by any means (including block trades or the use of derivatives) in accordance with the regulations in effect (see below the summary table on this financial resolutions submitted to the shareholders).
V Promoting the share in the secondary market or the liquidity of the Company’s share through an investment services provider in connection with a liquidity contract that meets the terms of the compliance charter recognized by the Autorité des Marchés Financiers (AMF - French Financial Markets Authority)
The shareholders hereby resolve to appropriate the distributable earnings as follows: To the legal reserve (5% of the earnings for the fi scal year) €116,153,696.81
Resolution four (Approval of the agreements and commitments covered by Articles L.225-38 et seq. of the French Commercial Code)
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, having reviewed the special report of the Statutory Auditors on the agreements and commitments subject to the provisions of Articles L.225-38 and L.225-40 to L.225-42 of the French Commercial Code, hereby approves all provisions of this report and the new agreements mentioned therein, previously authorized by the Board of Directors during the fi scal year ended December 31, 2013 and after this date up until this Shareholders’ Meeting.
Resolution six (Opinion on the components of compensation due or granted in respect of the fiscal year ended December 31, 2013 to François Pérol, Chairman of the Board of Directors)
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, consulted in accordance with the recommendation in paragraph 24.3 of the June 2013 AFEP-Medef Corporate Governance Code for listed companies, hereby approves the components of compensation due or granted in respect of the fi scal year ended December 31, 2013 to François Pérol, Chairman of the Board of Directors, as presented in Natixis’ 2013 annual report/ registration document in Chapter 6, Paragraph 6.5.1.
Resolution seven (Opinion on components of compensation due or granted in respect of the fiscal year ended December 31, 2013 to Laurent Mignon, Chief Executive Officer)
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, consulted in accordance with Article L.511-73 of the French Monetary and Financial Code, hereby approves the overall budget for compensation of any kind in the amount of €113.1 million, paid during the fi scal year ended December 31, 2013, to employees referred to in Article L.511-71 of the same Code.
Resolution nine (Ceiling on variable compensation of employees referred to in Article L.511-71 of the French Monetary and Financial Code in respect of fiscal years beginning on or after January 1, 2014)
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements provided for in Paragraph 3 of Article L.511-78 of the French Monetary and Financial Code, hereby resolves that the variable compensation paid to employees referred to in Article L.511-71 may not exceed a limit of 200% of their fi xed compensation.
Resolution ten (Approval of the co-opting of Michel Grass as Director)
R award or transfer shares to employees in connection with their share of Company profi ts or implement any Company or group employee savings plan (or similar plan) under the conditions provided for by law, in particular Articles L.3332-1 et seq. of the French Labor Code; or
R allocate free shares in accordance with the provisions of Articles L.225-197-1 et seq. of the French Commercial Code; or
R in general, honor obligations related to stock option programs or other share allocations to employees or corporate offi cers of the issuer or a related company based on the provisions of Articles L.225-180 and L.225-197-2 of the French Commercial Code; or remit shares in connection with the exercise of rights attached to securities convertible into the Company’s shares, by way of redemption, ordinary conversion, exchange, presentation of a warrant or any other manner; or
This program is also intended to enable the Company to implement any market practices that might be permitted by the AMF and, more generally, to conduct any other transaction that complies with the regulations in effect. In such a scenario, the Company will notify its shareholders by means of a press release; 2) resolves that Company share purchases may relate to a number of shares such that: R the number of shares that the Company buys during the buyback program may not, at any time, exceed 10% of the shares comprising the Company’s share capital, this percentage being applied to a capital amount adjusted in accordance with transactions impacting it subsequent to this General Shareholders’ Meeting. It is specifi ed that (i) the number of shares acquired with a view to being held and subsequently tendered in connection with a merger, spin-off or asset transfer may not exceed 5% of its share capital; and (ii) when the shares are bought back to promote liquidity under the conditions set out by the General Regulations of the AMF, the number of shares taken into account to calculate the 10% limit provided for by the fi rst paragraph corresponds to the number of shares purchased, net of the number of shares resold during the authorization period; R the number of shares that the Company holds at any time whatsoever does not exceed 10% of the shares comprising the Company’s share capital on the date in question, pursuant to Article L.225-210 of the French Commercial Code; 3) resolves that the acquisition, sale or transfer of the shares may take place at any time, except in public offer periods, within the limits authorized by current legal and regulatory provisions, by any means, on regulated markets, multilateral trading platforms, with systematic internalizers or over the counter, including by means of the acquisition or sale of blocks of shares (without limiting the portion of the buyback program that may be realized by this means), by a tender or exchange offer, by using options or other forward financial instruments traded on regulated markets, multilateral trading platforms, with systematic internalizers or over the counter, or by the tendering of shares subsequent to the issue of securities giving access to the Company’s capital by means of conversion, exchange or redemption, by exercising a warrant or by any other means, either directly or indirectly via an investment services provider.
The Board of Directors will ensure that these buybacks are executed in accordance with prudential requirements, such as those established by regulation and by the Autorité de Contrôle Prudentiel et de Résolution (ACPR – French Prudential Supervisory Authority).
This authorization is granted for a period of eighteen (18) months from this meeting. It voids, from this day, as applicable, any unused part of any prior delegated power given to the Board of Directors for the purpose of trading in the Company’s shares, particularly that given by the shareholders in the Combined General Shareholders’ Meeting of May 21, 2013 in resolution seven.
In order to make this document easier to read, the following cross-reference table outlines the main headings required by Annex 1 of EC Regulation No. 809/2004 of April 29, 2004, implementing the so-called “Prospectus” Directive.
14. Administrative, management, and supervisory bodies and Executive Management 14.1. Administrative bodies 68 to 98 14.2.
Administrative, management, and supervisory bodies and Executive Management confl icts of interest 113 15. Compensation and benefi ts 15.1. Amount of compensation and benefi ts in kind 105 to 109 15.2. Total amounts paid accrued by the issuer to provide pension, retirement or similar benefi ts 331
Heading Registration document page number 16. Administrative and management bodies practices 16.1. Date of expiration of current terms of offi ce 69 to 91 16.2. Service contracts with members of the administrative bodies 113 16.3. Information about the issuer’s Audit Committee and Compensation Committee 98 to 101 16.4. Statement as whether or not the issuer complies with the corporate governance regime 68 17. Employees 17.1. Number of employees 50-51 17.2. Directors’ shareholdings and stock options 111 ; 421-422 17.3. Arrangements for involving employees in the issuer’s capital 248 18. Major shareholders 18.1. Shareholders owning more than 5% of the share capital or voting rights 423 18.2. Different voting rights of the aforementioned shareholders 423 18.3. Control of the issuer 424 18.4.
Arrangements, known to the issuer, the operation of which may at a subsequent date result in a change in its control 425 19. Related-party transactions N/A
20. Financial information concerning the issuer’s assets and liabilities, fi nancial position and profi ts and losses 20.1. Historical fi nancial information 206 to 350 ; 353 to 400 20.2. Pro forma fi nancial information 10-11 ; 301 ; 304 to 307 20.4. Auditing of historical annual fi nancial information 351-352 ; 401-402 20.5. Age of latest fi nancial information 351-352 ; 401-402 20.6. Interim fi nancial and other information N/A
24. Documents available to the public 439 25. Information on holdings 218 to 224
V Summary table of powers currently delegated by the Annual General Shareholders’ Meeting to the Board of Directors with respect to capital increases 432
V Factors likely to be material in the event of a public tender offer 425
V Buyback by the Company of its own shares 422 4. Declaration by the person responsible for the registration document 438 5. Statutory Auditors’ report on the fi nancial statements 401-402 6. Statutory Auditors’ report on the consolidated fi nancial statements 351-352 7. Statutory Auditors’ special report on related-party agreements and commitments 403 to 409 8. Fees paid to the Statutory Auditors 335-336 9.
Report by the Chairman of the Board on corporate governance, internal controls and risk management (Article L.225-37 of the French Commercial Code) 114 to 128 10. Statutory Auditors’ report on the Chairman’s report 129
Pursuant to Article 28 of Commission Regulation No. (EC) 809/2004 of April 29, 2004, the following information is incorporated by reference in this registration document: V the consolidated financial statements for the year ended December 31, 2011, presented on pages 202 to 333, the Statutory Auditors’ report thereon, pages 334 to 335, and the Group management report, on pages 184 to 201 of the registration document filed with the AMF on March 23, 2012 under number D.12-0211; V the consolidated financial statements for the year ended December 31, 2010, presented on pages 186 to 327, the Statutory Auditors’ report thereon, pages 328 to 329, and the Group management report, on pages 168 to 185 of the registration document filed with the AMF on April 5, 2011 under number D.11-0236; All other Chapters of reference documents fi led under numbers D.12-0211 and D.11-0236 that are not mentioned above are either of no material interest to investors or covered elsewhere in this registration document.
Cross-reference table for the management report 7.5 Cross-reference table for the management report
1.3. Natixis parent company 353 to 400 2. Progress made and diffi culties encountered en 2012 190 to 193 3. Research and development 179 4. Signifi cant events after the reporting period 328 5. Trends and outlook 12 to 26 6. Risk factors 7. Corporate offi cers and senior managers 7.1. Corporate offi cers and other positions held by members of the Board of Directors 69 to 91 7.2. Transactions in Natixis securities by corporate offi cers and senior managers 110 to 112 7.3. Members of the Board of Directors compensation 108 to 109 7.4. Compensation and benefi ts payable to the CEO 107 7.5. Stock options and performance shares 110 8. Information concerning the Company and its capital 386 ; 418 to 422 9. Social and Environmental information 35 to 66
V Summary of authorizations to increase the Company’s share capital and their use during fi scal 2013 432
The report of the Board of Directors or the Executive Board presents, (…), the way in which the Company takes into account the social and environmental consequences of its activity, as well as its social commitments in terms of sustainable development
f) Diversity and equal opportunity Policy implemented and measures taken to promote it
Promotion and respect of the International Labour Organisation’s fundamental conventions: V on protecting freedom of association and the right to collective bargaining V on eliminating discrimination in employment and occupation V on eliminating forced or compulsory labour V on abolishing child labour 57
V Resources allocated to the prevention of environmental risks and pollution G4-45, G4-47 43-45
d) Contribution to adapting to and fi ghting climate change V Greenhouse gas emissions
b) Relationships with stakeholders V Conditions of dialogue with interested parties V Acts of support, partnership or sponsorship 63
c) Subcontractors and suppliers V Purchasing policies that take into account social and environmental issues 64
V The importance of sub-contracting and the social and environmental responsibilities in relation to service providers and sub-contractors 64
d) Fair practices V Measures taken to avoid corruption V Measures taken to safeguard the health and safety of consumers 64
AFEP/Medef Association française des entreprises privées – Mouvement des entreprises de France/French business association