NATIXIS - 2018 Registration document and annual financial report

FINANCIAL DATA Consolidated financial statements and notes

The right of use will be amortized on a straight-line basis and the financial liability will be calculated on an actuarial basis over the duration of the lease contract. The interest expense relating to the financial liability and the amortization expense relating to the right of use will be recognized separately in income. In contrast, under the existing IAS 17, operating leases are not recorded in the balance sheet and only the related lease payments are recognized in the income statement. Natixis has chosen the modified retrospective method for the first-time application of this standard. This method will involve valuing lease liabilities based on residual payments by using the discount rates appropriate to the residual terms of the leases. The option of not recognizing contracts with a residual term of less than 12 months at January 1, 2019 in the balance sheet will be applied and initial direct costs will be excluded from the measurement of the right of use. Rights of use will be measured by referring to the lease liability amount determined on that date. Given Natixis’ activities, IFRS 16 will be applied, to a very large extent, to real estate assets leased for use as offices. Overall, Natixis estimates that rights of use and lease liabilities will amount to less than €1.4 billion on the first-time application date; IFRIC interpretation 23 “Uncertainty over Income Tax a Treatments” adopted by the European Commission on October 23, 2018 with mandatory application from January 1, 2019. This interpretation sets out the procedures for recognizing and measuring payable and deferred tax if there is uncertainty over the tax treatment applied. The method that provides the best projection of the tax uncertainty’s outcome should be used. Natixis has begun an analysis of its approach to identifying and documenting tax uncertainties and risks, but at this stage it is not expecting a significant valuation impact; IFRS 17 “Insurance Contracts” , published by the IASB on a May 18, 2017, will replace IFRS 4 “Insurance Contracts”. Initially applicable on January 1, 2021, with a comparison at January 1, 2020, this standard should only come into force from January 1, 2022. During its meeting on November 14, 2018, the IASB in fact decided to defer its application by a year, as clarifications still need to be given regarding key aspects of the standard. It was also decided to align the schedule for the temporary exemption from IFRS 9 for insurers so that it coincides with the application of IFRS 17 from January 1, 2022. IFRS 17 establishes the principles of recognition, measurement, presentation and disclosure for insurance contracts and investment contracts with discretionary participation. Liabilities under these contracts, which are currently valued at historical cost, will have to be recognized at present value under IFRS 17. As such, insurance contracts will be valued based on their future cash flows, including a risk margin in order to factor in the uncertainty relating to these cash flows. IFRS 17 also introduces the concept of the contractual service margin. This represents the insurer's unearned profit and will be released over time as services are rendered to the insured. The standard demands a more detailed level of granularity in calculations than previously as it require estimates by group of contracts.

These accounting changes could change the profile of insurance income (particularly for life insurance) and also introduce greater income volatility. Given the scale of the changes made, and despite the uncertainties still surrounding the standard, Natixis’ insurance entities have, or will soon have, completed the scoping phase aimed at defining their road maps and the cost of implementation. They have set up project structures that will allow them, within the various working groups, to understand the standard in all of its aspects, including modeling, the adaptation of systems and organizational structures, the production of financial statements and the transition strategy, financial communication and change management. In addition, when drawing up the consolidated financial statements at December 31, 2018, Natixis also took the following into account: for the valuation of financial instruments: the recommendation a published on October 15, 2008 by the AMF, the Conseil National de la Comptabilité (CNC—French National Accounting Board), the Commission Bancaire (French Banking Commission) and the Autorité de Contrôle des Assurances et des Mutuelles (ACAM—French insurance regulator), and the guide published by the IASB on October 31, 2008, entitled “Measuring and disclosing the fair value of financial instruments in markets that are no longer active”. These two texts underline the importance of using judgment to determine fair value in illiquid markets. Natixis no longer systematically uses models based on observable data as a result of this recommendation; for financial reporting on risk exposure: the recommendations a issued by the Financial Stability Forum (FSF), as adapted for France. This information, presented in the format recommended by the Commission Bancaire in its May 29, 2008 document “Presentation note regarding the French application of the FSF’s financial transparency recommendations”, has been included in Section 3.2.11 of the “Risk factors, risk management and the pillar III report” chapter of the registration document. Presentation of the consolidated 2.2 financial statements The consolidated financial statements have been prepared in accordance with the assessment and presentation principles set out in Notes 3 and 6 below. Year-end 2.3 The consolidated financial statements are based on the individual financial statements at December 31, 2018 of the entities included in Natixis’ consolidation scope. Notes to the consolidated financial 2.4 statements Unless otherwise indicated, the figures given in the notes are expressed in millions of euros.

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Natixis Registration Document 2018