NATIXIS - 2018 Registration document and annual financial report

FINANCIAL DATA Consolidated financial statements and notes

for credit insurance, claims reserves include an estimate of a claims reported but not settled at the reporting date. In addition to the amount of claims payable, a provision is set aside for unknown claims, calculated on a statistical basis in reference to the final amount of claims to be paid following settlement of risks and any debt recovery measures. Provisions for debt recovery procedures, representing estimates of expected recoveries, are calculated by applying a terminal recovery rate to all subscription periods not yet settled. Deferred profit-sharing The participation rate used to calculate deferred profit-sharing is determined based on payout ratios projected over the term of the medium-term plan and in line with the actual pay-out ratio for the previous fiscal year. In the event of a deferred profit-sharing asset, a recoverability test is carried out to verify that liquidity requirements arising from an unfavorable economic environment do not force the sale of assets and generate unrealized losses. This recoverability test relies on projected future cash flows based on various economic assumptions about historical redemptions and inflows (see Note 9.2.5) . Deferred taxes As a precaution, Natixis records a net deferred tax asset linked to its ability to generate taxable income over a given period (10 years maximum), while tax loss carry forwards are deductible with no time limitation in France and the UK or over very long periods (20 years in the US for deficits prior to January 1, 2018). To this end, Natixis prepares tax business plans based on the medium-term plans for the business lines. Adjustments for special tax schemes are also implemented. Other provisions Provisions recognized in the consolidated balance sheet, other than those relating to financial instruments, employee benefits and insurance policies, mainly concern provisions for litigation, restructuring, fines and penalties. A provision is raised when it is likely that an outflow of resources embodying economic benefits will be required to settle an obligation arising from a past event, and when the amount of the obligation can be reliably estimated. In order to calculate this amount, Management is required to assess the probability of the risk occurring. Future cash flows are discounted where the impact of discounting is material.

effective withdrawal. Complex negotiations are under way to redefine the new economic relations between the United Kingdom and the European Union. The political and economic consequences of Brexit are still uncertain, however, and the uncertainties are increasing as the exit date approaches and the possibility of a hard exit without a deal takes shape. Given this situation, Natixis has prepared for the various possible scenarios and is monitoring the progress of the negotiations and their potential consequences, to incorporate them, where necessary, in the assumptions and estimates made when preparing the consolidated financial statements. Uncertainties related to the application of certain provisions of the BMR European regulation (EU) 2016/1011 of June 8, 2016 on the indices used as benchmarks (“the Benchmarks regulation” or “BMR”) introduces a common framework aimed at guaranteeing the accuracy and integrity of the indices used as benchmarks for financial instruments and contracts, or to measure the performance of investment funds within the European Union. The purpose of the Benchmarks regulation is to regulate the provision of benchmarks, the provision of data underlying benchmarks, and the use of benchmarks, within the European Union. It provides for a transition period for administrators, who have until January 1, 2020 to be approved or registered. After this date, the use by entities supervised by the EU of benchmarks whose administrators are not approved or registered (or, if they are not located in the EU, are not subject to equivalent or otherwise recognized or approved regulations) will be prohibited. Under the BMR, the interest rate benchmarks EURIBOR, LIBOR and EONIA have been declared critical, although they may be phased out or their discontinuation may become likely in the future. Work in the euro zone to propose new indices is not yet complete. It is therefore difficult at this stage to accurately predict the conditions of a future substitution in existing financial instruments and contracts. Since the first half of 2018, Natixis has had a project structure tasked with anticipating the impact of the benchmarks’ discontinuation in the near future, from a legal, commercial, financial and accounting viewpoint. Regarding this last aspect, particularly close attention is being paid to the issues of fair value, the application of the SPPI criterion, hedging relationships and derecognition. Earnings/(loss) per share 6.24 Diluted earnings/(loss) per share corresponds to net earnings/(loss) for the period attributable to the Group, divided by the weighted average number of shares, adjusted for the maximum impact resulting from the conversion of dilutive instruments into ordinary shares. Stock options issued are taken into account in calculating diluted earnings/(loss) per share. The conversion of these instruments does not impact net income/(loss) used to calculate diluted earnings/(loss) per share.

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Other Uncertainties related to Brexit

On June 23, 2016, the UK decided to leave the European Union (Brexit) following a referendum. After the triggering of Article 50 of the treaty on European Union on March 29, 2017, the United Kingdom and the 27 other member countries of the European Union gave themselves two years to prepare for the country’s

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Natixis Registration Document 2018