BPCE - 2020 Universal Registration Document

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RISK FACTORS & RISK MANAGEMENT

RISK FACTORS

For example, as of December 31,2020, in France, Groupe BPCE is the leading bank for SMEs (1) , and the second-largest bank for individuals and professionals (2) . It has a 26.1% market share in home loans (3) . In Retail Banking and Insurance, loan outstandings totaled €613 billion and deposits and savings (4) €816 billion (for more information on the contribution of each business line, and each network, see Chapter 1.5 “Groupe BPCE’s business lines” of the 2020 universal registration document). Moreover, a slowdown in the global economy or the economic environment of Groupe BPCE’s main markets is likely to increase competitive pressure, in particular through greater pricing pressure and a slowdown in business volume for Groupe BPCE and its competitors. New and more competitive rivals could also enter the market. Subject to separate or more flexible regulation, or to other requirements governing prudential ratios, these new market participants would be able to offer more competitive products and services. Advances in technology and the growth of e-commercehave made it possible for institutions other than custodians to offer products and services that were traditionally considered as banking products, and for financial institutions and other companies to provide electronic and internet-based financial solutions, including electronic securities trading. These new entrantsmay put downwardpressure on the price of Groupe BPCE’s products and services or affect Groupe BPCE’s market share. Advances in technology could lead to rapid and unexpected changes on Groupe BPCE’s markets of operation. Groupe BPCE’s competitive position, net earnings and profitability may be adversely affected should it prove unable to adequately adapt its activities or strategy in response to such changes. Groupe BPCE’s ability to attract and retain skilled employees is paramount to the success of its business and failing to do so may affect its performance. The employees of Groupe BPCE entities are the Group’s most valuable resource. Competition to attract qualified employees is fierce in many areas of the financial services sector. Groupe BPCE’s earnings and performancedepend on its ability to attract new employees and retain and motivate existing employees. Changes in the economic environment (in particular tax and other measures aimed at limiting the pay of banking sector employees) may compel Groupe BPCE to transfer its employees from one unit to another, or reduce the workforce in certain business lines, which may cause temporary disruptions due to the time required for employees to adapt to their new duties, and may limit Groupe BPCE’s ability to benefit from improvements in the economic environment. This may prevent Groupe BPCE from taking advantage of potential opportunities in terms of sales or efficiency, which could in turn affect its performance.

Groupe BPCE had a headcount of 100,344 employees on December 31, 2020. 11,605 permanent and fixed-term contract employees were hired in the year (for more information, please see Chapter 2.4.6 “Pay close attention to employees by developing their commitment”of the 2020 universal registration document). CREDIT AND COUNTERPARTY RISKS Groupe BPCE is exposed to credit and counterparty risks that could have a material adverse effect on the Group’s business, financial position and income. Groupe BPCE is significantly exposed to credit and counterparty risk through its financing or market activities. The Group could thus incur losses in the event of default by one or more counterparties, in particular if the Group encounters legal or other difficulties in exercising its collateral or if the value of the collateral does not allow it to fully cover the exposure in the event of a default. Despite the due diligence carried out by the Group, aimed at limiting the effects of having a concentrated credit portfolio, counterparty defaults may be amplified within a specific economic sector or world region by the effects of interdependencebetween these counterparties. Default by one or more major counterpartiescould thus have a material adverse effect on the Group’s cost of risk, income and financial position. For information, on December 31, 2020, Groupe BPCE’s gross exposure to credit risk amounted to €1,353 billion, with the following breakdown for the main types of counterparty: 38% for retail customers, 27% for corporates, 17% for central banks and other sovereign exposures, and 7% for the public sector and similar entities. Credit risk-weighted assets amounted to €376.5 billion (including counterparty risk). With regard to counterparty risks arising from capital market activities, gross exposure amounted to €62.2 billion as of December 31, 2020, mainly to financial institutions (49%). Risk-weighted counterparty risk amounted to €12.1 billion. The main economic sectors to which the Group is exposed in its Corporate portfolio are Real Estate (17% of gross exposures on December 31, 2020), Energy (10%), Finance/Insurance (9%), Real Estate Leasing (7%) and Distribution/Retail (7%). Groupe BPCE develops its activities mainly in France. The Group’s net exposure to France is €967 billion, representing 76% of its total net exposure. The remaining exposures focus mainly on European institutions for 11%, and Europe (excluding France) for 6%, with the United States accounting for 4% of total net exposures. For further information, please see Chapters 6.5 “Credit risks” and 6.6 “Counterparty risk” in the 2020 universal registration document.

(1) 53% (rank 1) total penetration rate (Kantar-TNS 2019 survey). (2) Retail market share: 22.2% in household savings and 26.1% in mortgage loans to households (Banque de France Q3-2020). Overall penetration rate of 29.6% (rank 2) among retail customers (SOFIA Kantar study, March 2020). For professionals: 39.9% (rank 2) penetration rate among professionals and individual entrepreneurs (Pépites CSA 2019-2020 survey). (3) Banque de France Q3-20 – Quarterly SURFI statements – Outstanding housing loans to households. (4) Balance sheet and financial savings.

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE

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