BPCE - 2018 Registration document

4 ACTIVITIES AND FINANCIAL INFORMATION 2018 Groupe BPCE financial data

4.3.5

Asset & Wealth Management

Asset & Wealth Management

Chg. 2018/2017

2018

2017

€m

%

in millions of euros

Net banking income Operating expenses

3,419 (2,264) 1,154 66.2%

3,113 (2,178)

305 (87) 219

9.8% 4.0%

Gross operating income

936

23.4% -3.7 pts

Cost/income ratio

69.9%

-

Cost of risk

(1)

0 1

(2)

ns ns ns

Share in income of equity-accounted associates

3

2

Gains or losses on other assets

43

13

30

Income before tax

1,198

950

248

26.2%

net outflows of € 10.1 billion were recorded in the US, ● predominantly in Loomis bond and equity products and Harris diversified products. At € 832.9 billion, average assets under management at December 31, 2018 were up +3.9% compared to 2017 at constant exchange rates. The rate of return on assets under management was up 6.3% to 31.0 points compared with December 31, 2017 at constant exchange rates. At December 31, 2018, AuM can be broken down into predominantly bond products (29.8%), followed by equity products (23.2%) and life insurance (21.6%). At December 31, 2018, net banking income stood at € 3,274 million, up 10% year-on-year ( i.e. +13% at constant exchange rates), driven by higher fees on assets under management across the geographic areas, thanks to the increase in average assets under management and in the commission rate over the period and the sharp rise in incentive fees charged by European asset management companies. Expenses stood at € 2,114 million, up 4% compared with December 31, 2017 (+7% at constant exchange rates), mainly attributable to the variable payroll costs of asset management companies in the US and in Europe and, to a lesser extent, to fixed payroll costs stemming from the increase in average headcount and pay raises. Excluding internal payroll costs, the increase in expenses was in large part driven by operating costs (mainly communication and advertising costs), consulting fees (implementation of strategic projects) and IT costs. Wealth Management In 2018, the Wealth Management business line recorded strong sales despite sensitive market conditions. Net inflows totaled € 2.0 billion and were largely driven by wealth management in France and abroad, and to strong momentum in the B2B private banking business brought by the networks. Assets under management came to € 26.1 billion, down 17% year-on-year due to a € 5.7 billion scope effect from the disposal of Sélection 1818. Restated for this effect, assets under management improved 1% despite a negative market effect in the second half. Meanwhile, loan outstandings climbed 14% to € 2.0 billion. In 2018, the business line’s net banking income was up 2% year-on-year to € 144 million. Restated for 2017 non-recurring items linked to the adjustment of the Group’s distribution system and the Sélection 1818 scope effect, the decrease would be 3%. This decline is mainly attributable to the absence of incentive fees compared with

Asset & Wealth Management revenues were up 9.8% over the period to € 3,419 million (+12.6% at constant exchange rates). Expenses also rose, but to a lesser degree, by 4.0% (+6.6% at constant exchange rates). Gross operating income jumped 23.4% (+26.5% at constant exchange rates) to € 1,154 million. Asset Management Assets under management amounted to € 802.1 billion at end-December 2018, down 3% at current exchange rates (-6% at constant exchange rates) compared with December 31, 2017. This was due to a highly adverse market effect (- € 44.5 billion) and, to a lesser extent, a scope effect (1) of - € 4.8 billion, partially offset by a positive forex effect (+ € 20.4 billion).

YEAR-ON-YEAR CHANGE IN ASSETS UNDER MANAGEMENT ➡ (IN BILLIONS OF EUROS)

+20.4

+0.0

-4.8

-44.5

830.8

802.1

AuM at 12/31/2017

AuM at 12/31/2018

Market effect

Net inflows

Forex effect

Scope effect

The business had zero net inflows over the year, with diverging results: net inflows in Europe totaled € 10.7 billion on the back of bond ● products (H2O and DNCA), diversified products (H20, Ostrum and Vega IM), equity products (Seeyond and Ostrum) and real estate products (AEW Europe), partially offset by outflows from life insurance products (Ostrum);

2018 scope effects: acquisition of MV Credit (+€1.7 billion); disposal of Vega IM (-€6.5 billion) (1)

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Registration document 2018