BPCE - 2019 Universal Registration Document

FINANCIAL REPORT

IFRS CONSOLIDATED FINANCIAL STATEMENTS OF BPCE SA GROUP AS AT DECEMBER 31, 2019

IMPAIRMENT TESTS 3.4.2 All items of goodwill are impaired, based on an assessment of the value in use of the cash-generating units (CGUs) to which they have been allocated.

Key assumptions used to determine recoverable value Value in use was primarily determined based on the estimated present value of the CGU’s future cash flows under medium-term plans drawn up for the purposes of the Group’s budget process.

The following assumptions were used:

Discount rate Long-term growth rate

Retail Banking and Insurance Insurance

10.6%

2.5% 2.5% 2.0% 2.5% 2.5% 2.5%

Payments

6.9% 9.5% 9.2% 9.1%

Financial Solutions & Expertise Equity interests (Coface) Asset & Wealth Management Corporate & Investment Banking

11.4%

The discount rates were determined by factoring in the following: for the Insurance and Payments CGUs, the 10-year OAT • risk-free rate averaged over a depth of 10 years and, for the Asset & Wealth Management and Corporate & Investment Banking CGUs, the 10-year OAT and US 10-year averaged over a depth of 10 years. A risk premium calculated from a sample of companies representative of the CGU is then added to these rates; for the Coface CGU, the benchmark interest rates used were • determined according to a similar method as applied to the other CGUs, using samples of equivalent companies for the insurance, services and factoring activities; for the SEF CGU, based on a weekly average of the 10-year • OAT rate of return over a depth of 10 years, plus a national equity risk premium based on the projected rate of return on the French market and the French risk-free rate. The impairment tests conducted at the limits of each CGU did not result in the recognition of impairment at December 31, 2019. Sensitivity of recoverable values A 30 bp increase in discount rates (assumption based on the historical annual variability observed over one year using 2012-2019 historical data) combined with a 50 bp reduction in perpetual growth rates would reduce the value in use of CGUs by: -9.7% for the Asset & Wealth Management CGU; • -3.9% for the Corporate & Investment Banking CGU; • -7.8% for the Insurance CGU; • -12.9% for the Payments CGU; • -4.3% for the Coface CGU; • -5.4% for the Financial Solutions & Expertise CGU. • These variations would not lead to the recognition of any impairment losses for these CGUs. Similarly, the sensitivity of these CGUs’ future cash flows, as forecast in the business plan, to changes in the main assumptions would not significantly affect their recoverable value: for Asset & Wealth Management, a 10% decline in the equity • markets (a uniform decline across all years) would have a -6% negative impact on the CGU’s recoverable value and would not lead to the recognition of impairment;

for Corporate & Investment Banking, sensitivity to the dollar or • to higher liquidity costs would have a limited impact on net banking income and would not result in recognition of impairment; for Insurance, the main vector of sensitivity for life insurance • is interest rates but various steps are being taken to reduce their impact (diversification of investments, reserves, etc.). Accordingly, the impact on the income statement is limited and would not significantly impact the CGU’s value. For non-life insurance, the main vector of sensitivity is the loss ratio, which is notably measured via the combined ratio. Natixis’ strategic plan, New Dimension, sets this ratio at below 94%. A one-point deterioration in this ratio over all years would lead to a limited decline of 3% in the value of the CGU, with no impact on impairment; for Payments, in terms of business activity, the division’s • business model is diversified, with i) a historic payments business line for the Groupe BPCE networks, posting a highly recurring business volume over the years (and strong momentum in electronic payments) and ii) a portfolio of fintechs offering multiple products to Group and external customers (book entry securities, merchant solutions, e-commerce, solutions for Works Councils, etc.). This business model generates low volatility in earnings trends; for Coface, the primary sensitivity vector is “the loss ratio”. • The projected level of this ratio is around 45.6% (net of reinsurance) for 2019. A one-point increase in the loss ratio relative to the assumptions used for the DCF calculation over all years from 2020, would impact the average multi-criteria value by around 3% and would not lead to the recognition of impairment on the CGU. Furthermore, a valuation at the lowest price in 2019 would lead to a very limited impact on the weighted average valuation for the various methods (around -1%); for Financial Solutions & Expertise, the sensitivity of future • cash flows, as forecast in the business plan, to a 5%-point fall in recurring net income combined with an increase in the target prudential ratio of 25 basis points would have a negative impact on the CGU’s value of -5.8% and would have no impact in terms of impairment.

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UNIVERSAL REGISTRATION DOCUMENT 2019 | GROUPE BPCE