NATIXIS_REGISTRATION_DOCUMENT_2017

4 OVERVIEW OF THE FISCAL YEAR Management report at December 31, 2017

Management report 4.1 at December 31, 2017

NOTE ON METHODOLOGY 4.1.1

The conventionsused to determine the earnings generated by the variousbusinessdivisions are as follows: the business divisions record the return on regulatory capital a allocated to them. By convention, the rate of return on regulatorycapital is 2%; the return on share capital of the entities that form the a divisionsis eliminated; the cost of Tier 2 subordinated debt is now charged to the a divisionsin proportionto their regulatorycapital; the divisions are invoiced for an amount representingthe bulk a of Natixis’ overhead. The uninvoicedportion accounts for less than 3%, excluding the Single Resolution Fund (SRF), of Natixis’ total overhead. The Single Resolution Fund contribution is covered by the Corporate Center and is not chargedback to the divisions. Deeply subordinated notes (DSNs) are classified as equity instruments; interest expense on those instruments is not recognizedin the incomestatement. 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 as the numerator: the business line’s pre-tax profit, as per j the aforementioned rules, to which a normative tax is applied.The normativetax rate is determinedfor each of the divisionswhile taking into account the tax liability conditions of Natixis’companiesin the jurisdictionswhere they operate. It is determinedonce a year and does not factor in potential changesto the effectivetax rate duringthe year; as the denominator: regulatory capital, calculated on the j basis of 10.5% of RWA assigned to the division, plus goodwilland intangibleassetsrelatedto the division. 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. gains and lossesrecognizedin equity; Businessline ROE is calculatedusing: a

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 includedfor referencein 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 Dimensionplan presentedin November 2017. Accordingly, the presentation of the divisions includes the followingdevelopments: InvestmentSolutionshas been split into two divisions: a Asset & WealthManagement; j Insurance; j withinCorporate& InvestmentBanking: a Global Financeand InvestmentBankingare now two distinct j businesslines, the creation of Global Securities & Financing (GSF), a joint j venture between FIC and Equity derivatives. The joint venturecomprisesSecuritiesFinancingGroup (SFG, formerly part of FIC) and Equity Finance (formerly part of Equity). GSF’s revenuesare dividedequallybetweenEquityand FIC. within Specialized Financial Services, the Payments business a has been extractedfrom PaymentServicesto form a separate, stand-alonebusinessline; Financial Investments has been eliminated and is henceforth a incorporatedin the CorporateCenter. In addition, to comply with the requirementsof the French law on the separation of banking activities, the Short-TermTreasury and Collateral Managementactivities, which used to be part of Global Markets, were transferredto the Finance Departmenton April 1, 2017. Nevertheless, to ensure comparability, in this management report CIB refers to CIB including Short-Term Treasuryand CollateralManagementactivities. In addition, the following changes to the standards used to assessthe performanceof the divisions have been factoredin: regulatorycapital allocatedto the businesslines was increased a from10%to 10.5%of Basel 3 averageRWA; rate of returnon capitalwas reducedfrom3% to 2%. a As a reminder, the earnings of the Natixis business lines have been presentedin accordancewith Basel 3regulations.Capital is specifically allocated to the Insurance business lines based on the Basel 3 accounting treatment for investments in insurance companies,as enacted into EU law by CRD IVand CRR (“Danish compromise”).The capital allocated to CEGC takes into account its exclusion from the “Danish compromise”. It is based on a 250%risk weightingof the value of the securitiesheld by CEGC, which is the prudential treatment under the threshold mechanismapplied to holdings of equity instruments issued by financialentities.

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Natixis Registration Document 2017