NATIXIS - Universal registration document and financial report 2019

FINANCIAL DATA Statutory Auditors’ report on the consolidated financial statements

Impairment of customer loans and receivables (stages 1, 2 and 3) Risk identified and main judgments

Our audit approach Impairment of outstanding loans in stages 1 and 2 Our work mainly consisted in:

As part of its financing activities within the Corporate & Investment Banking division, Natixis is exposed to credit risk in respect of loans and receivables and financing commitments given to customers. In accordance with the “impairment” component of IFRS 9, Natixis recognizes impairment and provisions to cover expected credit losses on outstandings that reflect their classification in stage 1, 2 or 3. The stage that outstandings are assigned to depends on the increase in credit risk observed since their initial recognition. Impairment for expected credit losses on stage 1 or 2 outstandings is the discounted sum of the product of the exposure at default (EAD), probability of default (PD) and loss given default (LGD) inputs in each projection year, including forward-looking information. Outstanding loans bearing a known counterparty risk (stage 3) are subject to impairments determined essentially on an individual basis. These impairments are measured based on the recoverable value of the receivable, i.e. the present value of the estimated recoverable future cash flows after taking the impact of any collateral into account. We considered these impairments to be a key audit matter as it is an area where judgment plays a significant role in the preparation of the financial statements whether in terms of classifying outstanding loans in stage 1, 2 or 3, determining the inputs and procedures for impairment calculations in respect of outstandings in stages 1 and 2, and assessing the individual provisioning level of outstanding loans in stage 3. Net exposure in respect of customer loans and receivables totaled €71,089 million at December 31, 2019. Expected credit losses stood at €1,375 million at December 31, 2019. Please refer to Notes 6.1, 6.3, 6.21, 6.23, 7.8, 8.6.2, 8.16 and 11.2 to the consolidated financial statements for more details.

evaluating Natixis’ internal control system governing the V classification of outstandings in stages 1 or 2 according to the indicators used to define a significant increase in credit risk; evaluating the internal control system governing the validation V of internal models and the definition of the inputs used in the calculation of impairment; assessing the relevance of these inputs used in the calculation of V impairments as at December 31, 2019; performing counter calculations on a sample of contracts. V Impairment of outstanding loans in stage 3 We evaluated the design and tested the effectiveness of the key controls put in place by the Natixis Group in particular those related to: the identification of indicators of impairment (such as past-due V payments) and the counterparty rating process; the classification of exposures in stage 3; V the monitoring of guarantees, their analysis and their valuation; V the determination of individual impairment losses and the V associated governance and validation system. In addition, we carried out a credit review, based on a sample of files selected on the basis of materiality and risk criteria, in which we: took note of the latest available information on the situation V of counterparties whose risk has increased significantly; performed independent analyses of the assumptions used and the V estimates of provisions drawn up by management based on information provided by the institution and external data; verified that estimated impairment allowances were correctly V recognized. We also assessed the information presented in detail in the notes to the consolidated financial statements and required by IFRS 7 concerning the impairment of financial assets at December 31, 2019.

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019