NATIXIS - 2018 Registration document and annual financial report

OVERVIEW OF THE FISCAL YEAR Management report at December 31, 2018

The business had zero net inflows for the year with diverging results: net inflows in Europe totaled €10.7 billion on the back of bond a products (H2O and DNCA), diversified products (H2O, Ostrum and Vega IM), equities (Seeyond and Ostrum) and real estate products (AEW Europe), partially offset by outflows in life insurance (Ostrum); in the US, net outflows of €10.1 billion were largely attributable a to Loomis debt and equity products and to diversified products (primarily Harris); there were limited net outflows of €641 million from private a equity companies, mainly from Euro Private Equity and Naxicap Partners. At €832.9 billion, average assets under management at December 31, 2018, were up (+3.9%) compared with 2017 (at constant EUR exchange rates). The rate of return on AuM was up 6.3% to 31.0 points compared with December 31, 2017 at constant exchange rates. At December 31, 2018, AuM can be broken down as predominantly bond products (29.8%), followed by equity products (23.2%) and life insurance (21.6%). At December 31, 2018, net revenues stood at €3,274.5 million, up 10% year-on-year (i.e. up 13% at constant exchange rates), driven by higher fees on AuM across the regions due to the increase in average AuM and in the commission rate over the period as well as the rise in incentive fees of European asset management companies. Expenses stood at €2,114.0 million, up 4% compared with December 31, 2017 (up 7% at constant exchange rates). This increase was mainly attributable to the variable compensation costs of asset management companies in the US and in Europe for the most part and, to a lesser extent, to fixed payroll costs linked to the increase in average headcount and pay raises. Excluding internal payroll costs, the increase in expenses was in

large part driven by operating costs (communication and advertising), consulting fees (implementation of strategic projects), and IT costs. B – Wealth management In 2018 the Wealth Management business recorded strong sales despite sensitive market conditions. Net inflows totaled €2.0 billion and was largely attributable to wealth management in France and abroad, and to the dynamism of the networks’ B2B private wealth management activities. Assets under management came to €26.1 billion, down 17% year-on-year due to a €5.7 billion scope effect resulting from the disposal of Sélection 1818. Restated for this effect, AuM increased 1% despite unfavorable market conditions in the second half of the year. At the same time, outstanding loans were up 14% to €2.0 billion. In 2018, the business line’s net revenues were up 2% to €144.1 million (+€2.6 million) compared with 2017. Restated for non-recurring items in 2017 linked to the adjustment of the Group's distribution system and the Sélection 1818 scope effect, the decrease would be 3%. This decline is mainly attributable to the absence of incentive fees, which were substantial in 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 AuM. Expenses stood at €150.3 million, representing growth of 5% compared with 2017. Restated for the scope effect and non-recurring items resulting from the disposal of Sélection 1818, the increase would be 4% mostly on account of fewer projects on hold over the period, higher fixed payroll costs (rise in average FTE), and consulting fees in connection with ongoing projects (digital, regulatory, business model review, etc.).

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Natixis Corporate & Investment Banking 4.2.2.2

2018

2017 pro forma Change 2018/2017

*

(in millions of euros) Net revenues Global Markets

3,237 1,331 1,158

3,581 1,921 1,317

(9.6)% (30.7)% (12.0)% (71.5)% (67.7)%

(8.0)% (29.7)% (10.8)% (71.0)% (67.7)%

Fixed Income

Equities

170

599

XVA desks

2

5

Financing

1,411

1,328

+6.2% +2.7%

+8.9% +3.9%

Investment Banking

372 123

362 (30)

Other items

Expenses

(2,193)

(2,194) 1,387 (115) 1,300 61.3% 6,810 13.5%

(0.1)% (24.7)% +52.0% (32.0)%

+1.0%

Gross operating income Provision for credit losses

1,045 (175)

(22.4)%

Pre-tax profit

884

Cost/income ratio

67.7% 6,466

Shareholders' equity (average)

ROE

9.9%

*

At constant exchange rates.

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Natixis Registration Document 2018