NATIXIS_REGISTRATION_DOCUMENT_2017

5 FINANCIAL DATA

Consolidated financial statements and notes

vehicle with retroactive effect at July 1, 2009. With this guaranteemechanism,Natixis was able to free up a significant portionof its equity allocatedto segregatedassets and to protect itself against the risk of loss from these portfoliossubsequentto June 30, 2009. This protective arrangement is based on two mechanisms: a sub-participation with the characteristics of a financial a guarantee, covering 85% of the face value of assets recognized in “loans and receivables” and “available-for-sale financial assets”. Under this guarantee, Natixis is protected from the very first euro in default up to 85% of the default amount; two Total Return Swaps (TRS), one in euros and one in US$, a transferringto BPCE 85% of unrealizedand realized gains and losses on the portfolio of instruments at fair value through profit or loss (cash and derivatives)since July 1, 2009.TRS are derivatives and are therefore carried at fair value on the balance sheet, with a matching entry to income. At the same time, Natixis purchases an option from BPCE which, if exercised, allows it to recover the net gains on this portfolio after a ten-year period in return for the payment of a premium estimated at €367 million.The premium is also recognized at fair value. The amount of the premiumpaid in 2009 by Natixis in return for the financialguaranteeamountedto €1,183 million. Since the unrealizedcapital losses or write-downson the assets coveredby the guaranteehave already been recordedin income, the premiumwas not immediatelytaken to incomeor recognized on a straight-linebasis. Instead, the premium is initially recognized on the accruals line and taken to income over the same period, in the same amount and on the same line as: reversals of provisions for impairment (in Provision for credit a losses); the deferred recognition of the discount (under net revenues) a arisingon October 1, 2008on assetsreclassifiedwithin“Loans and receivables” at that date pursuant to the amendment to IAS 39and IFRS 7publishedon October 13, 2008. At December 31,2017 (as was the case at December 31,2016), the financial guaranteenow has almost no impact in accounting and prudential terms, as the positions which it backed have almostall been sold or closed. The same is true of the guaranteecomprisingTRS and an option, with the option in the money.

Private Finance Initiative CDS (PFI CDS) The valuation model used, for Private Finance Initiative (PFI) CDS, is based on an approach calibratedto the market prices of underlyingPFI bonds and the use of a uniformcollectionrate.

Instruments not carried at fair value on the balance sheet

IFRS 13 requires disclosure in the notes to the financial statementsof the fair value, as well as the associatedfair value hierarchy, of all financial instruments carried at amortized cost, including loans. The valuation methods used to determine the fair value disclosed in the notes to the financial statements are describedbelow. Loans classified as “Loans and receivables” and amounts payable under finance leases The majorityof Natixis’ loans are variable-rateloans, and their fair value is determinedon the basis of discountedfuture cash flows. The discount rate applied for a given loan is the rate at which Natixiswould grant a loan with similar characteristicsto a similar counterparty at the reporting date. As these are primarily variable-rate loans, the contractual rate is adjusted according to the trend in marketlendingrates and in counterpartyrisk. The fair value of repurchase agreements is calculated by discounting expected cash flows at the market rate on the closingdate and addinga liquidityspread. If there is a quoted price that meets the criteria of IFRS 13, the quotedprice is used. The fair value of loans with an initial termof less than one year is consideredto be their book value. This is also generallythe case for financial assets with a term of one year or less and current accounts.The correspondingreceivablesare classifiedin Level 2 of the fair value hierarchy. Loans and receivables granted to affiliatesare also classifiedin Level 2 of the fair value hierarchy. Borrowings and savings The measurement of the fair value of Natixis’ borrowings and debt securities is based on the discounted cash flow method using inputs at the reporting date such as the underlying’s interest-rate curve and the spread applied to lending/borrowing between Natixis and Group entities. The fair value of debts maturing in less than one year is considered to be the book value; these debts are classified in Level 2 of the fair value The fair value of investment property (excluding investment property held by insurance companies) is determined by referenceto the capitalizationof rents, a methodwidely used by real estate professionals. The capitalization rate applied to the property depends on a number of factors such as location, the quality and type of building, use, type of ownership, quality of lessee and characteristics of the lease, the interest rate and competitionin the real estatemarket. hierarchy,as are debts payableto affiliates. Investment property recognized at cost: Guarantee mechanism for former 5.7 GAPC assets On November 12,2009, an arrangementwas made by BPCE to protect a portion of the portfolios of the former GAPC hive-off

Property, plant and equipment, 5.8

intangible assets (excluding goodwill) and investment property

Measurement on initial recognition Investment property, shown separately from other property, plant and equipment on the balance sheet, consists of property held with the aim of generatingleasing revenues rather than for operatingpurposes.

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Natixis Registration Document 2017