NATIXIS_REGISTRATION_DOCUMENT_2017

RISKS AND CAPITAL ADEQUACY Capital management and capital adequacy

The following changes in Basel 3/CRR regulatory capital were recorded in 2017, after applying phase-in arrangements. Common Equity Tier 1 (CET1) capital totaled €12 billion at December 31, 2017, down €0.5 billion over the year. Shareholders' equity (Group share) remained stable for the year at €19.8 billion, as the incorporation of net income for the year in the amount of €1.67 billion and the issuance of new deeply subordinated instruments in the amount of €0.5 billion (net the value of exercised calls) were primarily offset by the negative impact of translation adjustments in the amount of -€0.67 billion, dividend payments for 2016 in the amount of -€1.1 billion and the impact of acquisitions (including puts on minority interests) in the amount of -€0.34 billion. CET1 capital included a provision for 2017 dividends payable in cash in the amount of €1.16 billion (i.e. €0.37 per share) and was impacted by goodwill on acquisitions (-€0.2 billion). Even though the phase-in period for deductions is coming to an end, the

substantial reduction of the tax base for deferred tax assets to be deducted (-€0.325 billion) more than offset this impact. Aside from the items above, Additional Tier 1 capital rose by €0.5 billion, primarily due to two issuances worth $500 million each for a total of €833 million and the exercise of a call option in October 2017 (€364 million of euros). The balance was primarily due to the change in the phase-in rate applied on items deducted from AT1 capital, as well as the items subject to these provisions. Tier 2 capital was down by -€0.3 billion for the year due to the impact of the prudential haircut on instruments eligible as Tier 2 capital, a reduction in excess provisions over expected losses and changes in the impact of phase-in arrangements over the period. At €110.7 billion, risk-weighted assets decreased €4.8 billion over the year.

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RISK-WEIGHTED ASSETS AT DECEMBER 31, 2017 R

Credit risk

CVA Market risk Operational risk

Total RWA

(in billions of euros)

BASEL 3 AT 12.31.2016 Changes in exchange rates Changes in business activity Improvement in risk parameters

86.9 (2.2)

3.8

11.1

13.7

115.5

(2.2)

4.5

(2.6)

1.1

2.9

(3.1) (0.4) (0.6)

(1.4)

(4.5) (0.4) (0.6)

Acquisitions and disposals of financial investments

Impact of guarantees

BASEL 3 AT 12.31.2017

85.0

1.2

9.7

14.8

110.7

The -€1.9 billion decrease in credit risk over the period was primarily due to the following factors: an increase in outstandings (+€4.5 billion), driven mainly by a a higher level of activity; the impact of the dollar’s depreciation (-€2.2 billion); a an improvement in risk inputs (improved ratings, shortening of a maturities), amounting to -€3.1 billion; a guarantee effect of -€0.6 billion. a a net impact of acquisitions and disposals of -€0.4 billion. a The -€2.6 billion decrease in counterparty risk can primarily be attributed to changes in volumes and the establishment of hedges.

Market risk fell -€1.4 billion due to changes in risk inputs and positions. Operational risk was up +€1.1 billion due to the replacement of the benchmark indicator for fiscal year 2017 with that of fiscal year 2014 (standard practice is to calculate operational risk using the average indicator for the previous three years).

CAPITAL PLANNING 3.4.5

Capital planning consists of determining Natixis’ target capital adequacy level, continually ensuring compliance with regulatory capital requirements in all compartments and capital adequacy in line with the risk appetite defined by the institution, and adapting capital allocation and measurement of business line profitability accordingly. As a result, under the New Frontier strategic plan, the target fully loaded CET1 ratio, without taking into account phase-in measures except for those concerning deferred tax assets, ranged from 9.5% to 10.5%, with the target fully loaded CET1 ratio for the end of the plan (i.e. December 31, 2017) set at 10.5%. With a fully loaded CET ratio without taking into account phase-in measures (before impact of IFRS 9), Natixis exceeded this target.

The new plan, entitled “New Dimension”, has set the target CET1 ratio after dividends at 11%. The capital planning system adapts all processes with the aim of ultimately meeting the requirements of the supervisory authorities, shareholders and investors: continuously maintaining the targets set in terms of capital a adequacy; developing an internal approach for measuring capital a requirements and overseeing Natixis’ resilience under stress scenarios (ICAAP);

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Natixis Registration Document 2017