NATIXIS - 2018 Registration document and annual financial report

4 OVERVIEW OF THE FISCAL YEAR

Definitions and alternative performance indicators

Definitions and alternative 4.7 performance indicators

In accordance with European regulation 809/2004 relating to information contained in prospectuses, the financial statements for the year ended December 31, 2015, that were published in the 2016 registration document filed with the AMF on March 21, 2017, are included for reference in this document.

Starting from the publication of annual earnings for 2017, the presentation of the divisions as well as the standards used to assess their performance are those included in the New Dimension plan presented in November 2017.

the return on share capital of the entities comprising the a divisions is eliminated; the cost of Tier Two subordinated debt is now charged to the a divisions in proportion to their regulatory capital; the divisions are invoiced for an amount representing the bulk a of Natixis’ expenses. The uninvoiced portion accounts for less than 3% (excluding the Single Resolution Fund) of Natixis' total expenses. The Single Resolution Fund (SRF) contribution is covered by the Corporate Center and is not charged back to the divisions. Deeply subordinated notes (DSNs) are classified as equity instruments; interest expense on those instruments is not recognized in the income statement. ROE and ROTE for Natixis and the business lines are calculated as follows: the profit measure used to determine Natixis’ ROE is net a income (Group share) minus the post-tax interest expense on DSNs. The equity used is average shareholders' equity (Group share) under IFRS, after distribution of dividends, excluding average hybrid debt, and eliminating unrealized or deferred gains and losses recognized in equity; Business line ROE is calculated based on: a as the numerator, the business line’s pre-tax profit, as per j the aforementioned rules, to which a normative tax is applied. The normative tax rate is determined for each of the divisions while taking into account the tax liability conditions of Natixis’ companies in the jurisdictions where they operate. It is determined once a year and does not factor in potential changes over the year linked to deferred taxes; as the denominator, regulatory capital, calculated on the j basis of 10.5% of RWA assigned to the division, plus goodwill and intangible assets related to the business line. Natixis’ ROTE is determined using, as the numerator, net a income (Group share) minus the post-tax interest expense on DSNs. The equity used is average shareholders’ equity (Group share) under IFRS, after distribution of dividends, excluding average hybrid debt, average intangible assets and average goodwill.

Asset & Wealth Management; a Corporate & Investment Banking; a Insurance; a SFS. a

The plan to sell Natixis’ retail activities to BPCE has no impact on this registration document’s presentation of the divisions’ 2018 performance. In addition, to comply with the requirements of the French law on the separation of banking activities, the Short-Term Treasury and Collateral Management activities, which used to be part of Global Markets, were transferred to the Finance Department on April 1, 2017. Nevertheless, to ensure comparability, in this management report CIB refers to CIB including Short-Term Treasury and Collateral Management activities. In addition, the standards used to assess the performance of the divisions are those defined for the New Dimension plan: regulatory capital allocated to the business lines on the basis of a 10.5% of Basel 3 average RWA; 2% rate of return on capital; a As a reminder, the earnings of the Natixis business lines have been presented in accordance with Basel 3 regulations. Capital allocation specific to the insurance businesses is based on the Basel 3 accounting treatment for investments in insurance companies, as enacted in the CRD4 and CRR (“Danish compromise”). The capital allocated to CEGC takes into account its exclusion from the “Danish compromise”. It is based on a 250% risk weighting of the value of the securities held by CEGC, which is the prudential treatment under the threshold mechanism applied to holdings of equity instruments issued by financial entities. The conventions applied to determine the earnings generated by the various business lines are as follows: the business divisions record the return on regulatory capital a allocated to them. By convention, the rate of return on regulatory capital is 2%;

238

Natixis Registration Document 2018