BPCE - 2019 Universal Registration Document

FINANCIAL REPORT

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

NET GAINS OR LOSSES ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS 4.3

Accounting principles This item includes gains and losses (including the related interest) on financial assets and liabilities classified as held for trading or designated at fair value through profit or loss. “Gains and losses on hedging transactions” include gains and losses arising from the revaluation of derivatives used as fair value hedges, as well as gains and losses from the revaluation of the hedged item in the same manner, the revaluation at fair value of the macro-hedged portfolio and the ineffective portion of cash flow hedges.

Fiscal year 2019 Fiscal year 2018

in millions of euros

Gains and losses on financial instruments mandatorily recognized at fair value through profit or loss (1) Gains and losses on financial instruments designated at fair value through profit or loss

5,701

300

(3,743)

1,377

(10)

20

Gains and losses on financial assets designated at fair value through profit or loss • Gains and losses on financial liabilities designated at fair value through profit or loss •

(3,733)

1,357 (149)

(297)

Gains and losses on hedging transactions (2) Ineffective portion of cash flow hedges (CFH) • Ineffective portion of fair value hedges (FVH) • Changes in fair value of fair value hedges

(2)

19

(295) (205)

(168)

(12)

Changes in fair value of hedged items

(90) 192

(158)

Gains and losses on foreign exchange transactions

184

TOTAL NET GAINS OR LOSSES ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

1,854

1,712

In 2019, “Gains and losses on financial instruments mandatorily recognized at fair value through profit or loss” included: (1) impairments taken against the fair value of CDS entered into with monoline insurers: an increase of €2 million was recorded in 2019 versus a decrease of €40 million in 2018, • taking cumulative impairment to €25 million at December 31, 2019 compared to €23 million at December 31, 2018; change in the fair value of derivatives, in the amount of -€132 million, arising from the difference in impairment for counterparty risk (Credit Valuation Adjustment – CVA), in • the amount of +€50 million due to the consideration of non-performance risk in the valuation of derivative financial liabilities (Debit Valuation Adjustment – DVA), and in the amount of +€137 million due to the inclusion of an adjustment for funding costs (Funding Valuation Adjustment – FVA); in 2019, market risks relating to certain transactions in the portfolio of derivatives in Asia were shifted to external counterparties. Simultaneously, reserves set aside on • December 31, 2018 in the amount of €173 million were reversed in their entirety in 2019. “Gains and losses on hedging transactions” consist mainly of gains and losses recorded in the event of over-hedging in interest rate macro-hedging transactions, i.e. -€237 million (2) in 2019 versus -€149 million in 2018 subsequent to the partial declassification of hedging relationships or due to the measured ineffectiveness. This over-hedging is caused mainly by the significant volume of loan renegotiations or prepayments observed in the current low interest rate environment.

5

DAY ONE PROFIT

Fiscal year 2019

Fiscal year 2018

in millions of euros

Day one profit at the start of the year Deferred profit on new transactions Profit recognized in income during the year

87

77

118 (84) 122

104 (94)

DAY ONE PROFIT AT YEAR-END

87

393

UNIVERSAL REGISTRATION DOCUMENT 2019 | GROUPE BPCE