BPCE - 2018 Registration document

ACTIVITIES AND FINANCIAL INFORMATION 2018 Groupe BPCE financial data

a strong 2017, and to the drop in fees on structured products (inauspicious markets conditions), partially offset by healthy net interest income and, to a lesser extent, fees on assets under management. Expenses stood at € 150 million, up 5% compared with 2017. Restated for the scope effect and non-recurring items related to the

disposal of Sélection 1818, the increase would be 4%, mostly on account of the decline in projects recorded on the balance sheet over the period, higher fixed payroll costs (rise in average full-time equivalent), as well as consulting fees in connection with ongoing projects (digital, regulatory, business model review, etc.).

4.3.6

Corporate & Investment Banking (CIB)

Corporate & Investment Banking

Chg. 2018/2017

2018

2017

€m

%

in millions of euros

Net banking income Operating expenses

3,237 (2,193) 1,045 67.7%

3,581 (2,194) 1,387 61.3%

(344)

(9.6%) (0.1%)

2

4

Gross operating income

(342)

(24.7%) 6.5 pts 52.0% 10.9% (84.5%) (32.0%)

Cost/income ratio

-

Cost of risk

(175)

(115)

(60)

Share in income of equity-accounted associates

12

10 18

1

Gains or losses on other assets

3

(15)

Income before tax

884

1,300

(416)

In 2018, Corporate & Investment Banking’s net banking income totaled € 3,237 million, down 8.0% compared with 2017 at constant exchange rates. It included income of € 68 million from the settlement of the legal dispute with Société Wallone du Logement (SWL), reclassified as a non-recurring item in the third-quarter 2018 earnings release. Excluding this item, net banking income was down 10.0% compared with 2017 at constant exchange rates. And excluding the impact on equity derivatives in Asia, net banking income stood at € 3,435 million, down 2.5% compared with 2017 at constant exchange rates. Capital market revenues totaled € 1,331 million in 2018, down 29.7% compared with 2017 at constant exchange rates. Excluding the impact on equity derivatives in Asia, revenues were down 15.7% compared with 2017 at constant exchange rates. Revenues from Fixed Income, Forex, Credit, Commodities and Treasury activities stood at € 1,158 million in 2018, down 10.8% on 2017 at constant exchange rates. The following changes were observed in each segment: fixed Income and Forex revenues were down 14.1% to ● € 416 million, with Fixed Income falling 28.2% to € 265 million. This can be attributed to less dynamic sales, especially in the second half of the year on account of more challenging market conditions, while Forex was up 31.5% to € 151 million, thanks to sharp currency fluctuations in the second quarter, in particular as the Italian elections triggered an increase in flow volumes; credit revenues were down slightly (-1.1%) compared with 2017 to ● € 286 million. The decline in the management of positions was

partially offset by growth in securitization activities, which continued into 2018, up 2.5% on 2017 at constant exchange rates; revenues from the Repo business totaled € 422 million, down 11.5% ● compared with 2017 amid more competitive market conditions and consequently tighter margins. At € 170 million, Equity business fell 71.0% compared with 2017 at constant exchange rates. Excluding the impact on equity derivatives in Asia, revenues stood at € 437 million, down 26.1% compared with 2017 at constant exchange rates. The discontinuation of the Equity Brokerage business in the US and the UK at the end of 2017, then in France from July 1, 2018 following the transfer of the business to Oddo, pulled down the revenues of the Equity business line to a total amount of € 24 million compared with 2017. Excluding the impact on equity derivatives in Asia, the revenues of the Equity Derivatives business were down 24.1% to € 427 million. Sales bore the brunt of a more challenging market environment, especially at the end of the year. Revenues were also adversely affected by an increase in provisions for activities in Europe and in the US. Compared with a record 2017, Acquisition & Strategic Finance revenues were down 9.5% to € 151 million, with the Leverage Finance market starting to show signs of tension. Revenues from Syndication on the bond market fell 19.2% to € 84 million compared with 2017. The 12.1% increase in revenues generated on the primary bond market was more than offset by unsupportive conditions on the secondary market. This affected the management of sovereign debt positions amid uncertainty in the European environment surrounding the Italian elections.

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Registration document 2018