NATIXIS - 2018 Registration document and annual financial report

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

In 2018 Corporate & Investment Banking’s net revenues totaled €3,237 million, down 8.0% compared with 2017 at constant exchange rates. This includes income of €68 million for the settlement of the legal dispute with Société Wallone du Logement, reclassified as a non-recurring item under Investor Relations for the third quarter of 2018. Excluding this item, net revenues were down 10.0% compared with 2017 at constant exchange rates. And excluding the impact of equity derivatives in Asia, net revenues stood at €3,435 million, down 2.5% compared with 2017 at constant exchange rates. Capital market revenues totaled €1,331 million in 2018, down 29.7% compared with 2017 at constant exchange rates. Excluding the impact of equity derivatives in Asia, revenues were down 15.7% compared with 2017 at constant exchange rates. Revenues from Fixed Income, Forex, Credit, Commodities and Treasury activities stood at €1,158 million in 2018, down 10.8% on 2017 at constant exchange rates. The following changes were observed in each segment: Fixed Income and Forex revenues were down 14.1%, with a Fixed Income falling 28.2%. This is explained by less robust sales, especially in the second half of the year due to more challenging market conditions. Meanwhile, Forex was up 31.5%, thanks to sharp currency fluctuations, especially starting in the second quarter as the Italian elections triggered an increase in flow volumes; Credit revenues dipped by 1.1% compared with 2017. The a decline in the management of positions was partially offset by the growth in securitization that continued into 2018, up 2.5% on 2017 at constant exchange rates; Revenues from repo activities , which were split evenly a between Fixed Income and Equity, fell 11.5% compared with 2017 on account of tighter margins caused by a more competitive market. Revenues from joint ventures (i.e. with income shared equally between Global Markets and Investment Banking to ensure team alignment) were mixed in 2018. Compared with a record 2017, Strategic & Acquisition Finance ’s revenues were down 9.5% as the leveraged finance market showed the first signs of stress. Revenues from syndication on the bond market fell 19.2% compared with 2017. The 12.1% increase in revenues generated on the primary bond market was more than offset by the unfavorable conditions on the secondary market. This affected the management of sovereign debt positions amid uncertainty in the European environment after the Italian elections. At €170 million, Equity fell 71.0% at constant exchange rates compared with 2017 at constant exchange rates. Excluding the impact of equity derivatives in Asia, net revenues stood at €437 million, down 26.1% from 2017 at constant exchange rates. The discontinuation of the Equity Brokerage business in the US and the UK at the end of 2017 and then in France from July 1, 2018, after the business was transferred to Oddo,

brought the Equity business line's revenues down to a total of €24 million compared with 2017. Excluding the impact of equity derivatives in Asia, the revenues of the Equity Derivatives business dropped 24.1% to €427 million. Sales bore the brunt of a more challenging market environment, especially at the end of the year. At €1,411 million, Financing revenues including TTS (Trade & Treasury Solutions, the new name for Global Transaction Banking) gained 8.9% compared with 2017 at constant exchange rates. Revenues from Real Assets rose 26.7% compared with 2017, driven by the performance of its strategic sectors: Real Estate Finance in the US, with a high volume of securitizations in the first half of the year, and Infrastructure, which was also very buoyant following a number of major deals. Commodities finance ( Energy & Natural Resources ) revenues pushed higher to 8.3% at constant exchange rates on a stronger average per-barrel oil price than last year, boosting the Trade Finance business. The revenues of the Distribution & Portfolio Management (DPM) financing portfolio contracted by 1.0% at constant exchange rates in a context of pressure on margins. Revenues from Investment Banking including M&A activities grew 3.9% at constant exchange rates compared with 2017 for cumulative revenues of €372 million. In 2018, Corporate & Investment Banking’s expenses (€2,193 million) were stable at current exchange rates, a small 1.0% increase from 2017 at constant exchange rates. Excluding Transformation & Business Efficiency costs classified as a non-recurring item under Investor Relations, i.e. €14 million in 2018 and €3 million in 2017, expenses totaled €2,178 million in 2018, down 0.6% at current exchange rates and up slightly by 0.5% at constant exchange rates. Gross operating income totaled €1,045 million, down 22.4% compared with 2017 at constant exchange rates. Excluding non-recurring items and the impact of equity derivatives in Asia, gross operating income totaled €1,256 million, down 7.1% at constant exchange rates. The cost/income ratio stood at 67.7% in 2018 (63.4% excluding non-recurring items and impact on auto-calls in Asia), slipping 6.4 points compared with 2017 (61.3%). At €175 million, provision for credit losses grew 52.0% compared with 2017, including €71 million for the Madoff fraud, reclassified as a non-recurring item under Investor Relations in the third quarter of 2018. Excluding this item, the provision for credit losses was €104 million in 2018, down 9.9% compared with 2017. ROE after tax totaled 9.9% in 2018, down 3.6 points compared with 2017 (13.5%). Excluding non-recurring items and the impact of equity derivatives in Asia, ROE after tax amounted to 13.1% in 2018, since CIB’s effective tax rate fell in 2018, reflecting the impact of the tax reform in the US and the company's control of its risk-weighted assets (RWA).

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Natixis Registration Document 2018