NATIXIS - 2018 Registration document and annual financial report

5 FINANCIAL DATA

Statutory Auditors’ report on the consolidated financial statements

Impact of the first-time application of IFRS 9 as of January 1, 2018

Risk identified and main judgments

Our audit approach

The application of IFRS 9 “Financial instruments” as of January 1, 2018 introduced significant changes in the rules for the classification and measurement as well as the impairment of financial assets, generating financial and operational impacts. Classification and measurement According to IFRS 9, the classification of a financial asset is based on the business model (collection, sale or mixed model) and the characteristics of contractual cash flows. Depending on the business model applied and the characteristics of its cash flows, as well as the type of model (debt or equity instruments), the financial asset is measured either at amortized cost or at fair value through other comprehensive income or profit or loss. In light of these criteria, financial instruments were analyzed as of January 1, 2018 in order to classify and measure them according to the procedures provided for by this new standard. Impairment for expected credit losses (stages 1 and 2) In addition to the impairment procedures for known credit risk (stage 3), the new impairment rules for expected losses require the recognition of estimated provisions as follows: Stage 1 incorporating a 12-month expected loss based on the a initial recognition of a financial asset; Stage 2 incorporating an expected loss at maturity, in the event a of a significant deterioration in the credit risk since the initial recognition. Estimating these expected credit losses requires a significant degree of judgment, in particular to define: Certain input for the calculation of expected credit losses, in a particular the Probability of Default and Loss Given Default. This input is established on the basis of models developed internally, taking into account specific sector characteristics; Credit risk deterioration criteria; a The procedures for taking account of macro-economic a projections both in the deterioration criteria and in the measurement of expected losses. We considered the impact of the first-time application of IFRS 9 as at January 1, 2018 to be a key audit matter due to the scope of this new standard, the complexity of its implementation and the significant role of judgment in the estimate of expected losses. The impact of the first-time application of IFRS 9 as at January 1, 2018 is presented in detail in Note 1 to the consolidated financial statements. The impact of the first-time application of IFRS 9 on opening equity totaled €132 million after the impact of deferred tax, including €125 million related to the implementation of the new impairment model (negative impacts). For more information, please see Notes 6.1 and 6.3 to the consolidated financial statements.

Classification and measurement Our main work on first-time application impacts consisted in: Reviewing the accounting principles defined by the Group and a evaluating their compliance with provisions set out in IFRS 9; Verifying the comprehensiveness of the analysis carried out by a Natixis to determine the classification of financial assets; Testing, based on a sample of contracts, the analyses carried a out by the Group of contractual cash flows and business models. Impairment for expected credit losses (stages 1 and 2) Our work mainly consisted, together with our credit risk experts, in: Reviewing methodologies used by Natixis to estimate expected credit losses (credit risk deterioration criteria, input for the calculation of expected credit losses and procedures for establishing macro-economic projections) and verifying that they have been established in compliance with the provisions set out in IFRS 9; Reviewing the work and conclusions of the Risk division relating to the internal validation of IFRS 9 impairment models; Performing counter calculations based on a sample of portfolios. Our information system and data analysis specialists have taken note of the IT system introduced by Natixis to collect, process and control IFRS 9-related data, as well as the general IT controls rolled out within IFRS 9 applications. Our work also consisted in verifying the information provided in the Notes to the consolidated financial statements relating to the first-time application of IFRS 9.

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Natixis Registration Document 2018