BPCE - 2020 Universal Registration Document

FINANCIAL REPORT

IFRS CONSOLIDATED FINANCIAL STATEMENTS OF GROUPE BPCE AS AT DECEMBER 31, 2020

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 -10% 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 the recognition of impairment; for the Insurance CGU: • the main vector of sensitivity for life insurance is interest rates and the financial markets but various steps are being taken to reduce their impact (diversification of investments, reserves, hedging of equity positions, etc.). Accordingly, the impact on the income statement is limited and would not significantly affect 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. The New Dimension strategic plan, 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 the Payments CGU, 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 momentumin 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 lower volatility in earnings trends; 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 5.3% and would have no impact in terms of impairment; for the Regional Banks, the sensitivity of future cash flows, as • forecast in the business plan, to a 5%-point fall in recurrent net income combinedwith an increase in the target prudential ratio of 25 basis points would have a negative impact on the CGU’s value of 4.5% and would have no impact in terms of impairment.

Note 4

Notes to the income statement

Key points Net banking income (NBI) includes: interest income and expenses; • fees and commissions; • net gains or losses on financial instruments at fair value • through profit or loss;

net gains or losses on financial instruments at fair value • through other comprehensive income; net gains or losses resulting from the derecognition of • financial assets at amortized cost;

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net income from insurance businesses; • income and expenses from other activities. •

4.1

INTEREST AND SIMILAR INCOME AND EXPENSES

Accounting principles Interest income and expenses are recognized in the income statement for all financial instruments measured at amortized cost using the Effective Interest Method, which include interbank and customer items, the portfolio of securities at amortized cost, subordinateddebt and lease liabilities. This item also includes interest receivable on fixed income securities classified as financial assets at fair value through other comprehensiveincome and hedging derivatives, it being specified that accrued interest on cash flow hedging derivatives is taken to income in the same mannearnd period as the accrued interest on the hedged item. Interest income also consists of interest on non-SPPI debt instruments not held under a trading model as well as interest on the related economic hedges (classified by default as instruments at fair value through profit or loss). The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the net carrying amount of the financial asseot r financial liability. The effective interest rate calculation takes account of all transaction fees paid or received as well as premiums and discounts. Transaction fees paid or received that are an integral part of the effective interest rate of the contract, such as loan set-up fees and commissions paid to financial partners, are treated as additionailnterest. Over the 2020 fiscal year, negative interests are presented afsollows: when income from a financial asset is negative, it is deductedfrom interest income; • when income from a financial liability is negativei,t is deducted from interest income. • For the year 2019, negative interest was presented neot f positive interest on financialassets and liabilities, respectively.

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE