2020 Universal registration document and annual financial report - BNP PARIBAS 143

32020 review of oPerations

3

Profit and loss account

and the Bank s hedging strategy and accounting treatment of hedging transactions.

Net Interest income increased by 0.9% to EUR 21,312 million for the year ended 31 December 2020. This variation is mainly attributable to the increase in net income from debt securities at amortised cost and at fair value through equity (EUR 2,563 million in 2020, compared with EUR 2,417 million in 2019) and the decrease in net expense on debt issued by the Group (EUR 2,357 million for the year ended 31 December 2020, compared with EUR 3,021 million for the year ended 31 December 2019), partially offset by the decrease of income from loans, deposits and borrowings (EUR 18,333 million for the year ended 31 December 2020, compared with EUR 18,707 million for the year ended 31 December 2019).

Besides, expense on financial instruments designated as at fair value through profit or loss decreased from EUR 347 million in 2019 to EUR 302 million in 2020, net revenues of cash flow hedge instruments decreased by EUR 541 million compared with the year ended 31 December 2019.

NET COMMISSION INCOME Net commission income includes commissions on customer transactions, securities and derivatives transactions, financing and guarantee commitments, and asset management and other services. Net commission income increased by 5.3%, from EUR 9,365 million in 2019 to EUR 9,862 million in 2020.

Insurance activity fees are included in Net income from insurance activities .

NET GAIN ON FINANCIAL INSTRUMENTS AT FAIR OR MODEL VALUE THROUGH PROFIT OR LOSS This line item includes all profit and loss items relating to financial instruments managed in the trading book, to financial instruments designated as at fair value through profit or loss by the Group under the fair value option and to non-trading debt securities that do not meet the criteria required to be recognised at amortised cost or at fair value through equity (other than interest income and expense on the last two categories, which are recognised under Net interest income as presented above). It also includes gains and losses on non-trading equity instruments that the Group did not choose to measure at fair value through equity. This includes both capital gains and losses on the sale and the marking to fair value of these instruments, along with dividends from equity securities.

This line item also includes gains and losses due to the ineffectiveness of fair value hedges, cash flow hedges, and net foreign investment hedges.

The gains and losses resulting from cash flows and the remeasurement of financial instruments, either cash or derivatives, must be appreciated as a whole in order to give a fair representation of the profit or loss resulting from trading activities.

Net gains on financial instruments as at fair value through profit or loss decreased by 3.5% from EUR 7,111 million for the year ended 31 December 2019 to EUR 6,861 million for the year ended 31 December 2020.

The income from items designated as at fair value through profit or loss are partly offset by changes in value of the derivative instruments hedging these assets.

NET GAIN ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH EQUITY Net gains on financial instruments at fair value through equity correspond to gains and losses realised on debt securities recognised at fair value through equity and to dividends from equity securities that the Group chose to recognise at fair value through equity.

Changes in fair value of these assets are initially recognised under Changes in assets and liabilities recognised directly in equity . Upon sale of these assets, realised gains or losses are recognised in the profit or loss account under Net gains on financial instruments at fair value through equity for debt securities, or transferred to retained earnings for equity securities.

Net gains on financial instruments at fair value through equity amounted to EUR 249 million in 2020 and EUR 350 million in 2019.

NET INCOME FROM INSURANCE ACTIVITIES Net income from insurance activities decreased by 7.3% compared to 2019, amounting to EUR 4,114 million. Its main components are: gross written premiums, net income from financial investments, technical charges related to contracts, policy benefit expenses and net charges from ceded reinsurance.

The change in net income from insurance activities is due to a decrease of net gains from financial investments which correspond to a net gain of EUR 4,610 million in 2020 and to a net gain of EUR 14,858 million in 2019, offset by a decrease of in technical charges which amount to -EUR 19,664 million for the year ended 31 December 2020, compared to -EUR 32,423 million for the year ended 31 December 2019.

NET INCOME FROM OTHER ACTIVITIES This item includes, among other things, net income from investment property, assets held under operating lease and property development activities. Net income from other activities decreased by 16.5%, from EUR 2,204 million in 2019 to EUR 1,841 million in 2020. This change is mainly due to a EUR 239 million decrease in Other net income.