2020 Universal registration document and annual financial report - BNP PARIBAS192

4 Consolidated finanCial statements for the year ended 31 deCemBer 2020

4

Notes to the financial statements

2.b COMMISSION INCOME AND EXPENSE

In millions of euros

Year to 31 Dec. 2020 Year to 31 Dec. 2019

Income Expense Net Income Expense Net

Customer transactions 4,314 (848) 3,466 4,535 (1,246) 3,289

Securities and derivatives transactions 2,252 (1,423) 829 1,751 (1,283) 468

Financing and guarantee commitments 1,141 (48) 1,093 1,276 (59) 1,217

Asset management and other services 4,904 (344) 4,560 4,769 (288) 4,481

Others 988 (1,074) (86) 934 (1,024) (90)

COMMISSION INCOME/EXPENSE 13,599 (3,737) 9,862 13,265 (3,900) 9,365

of which net commission income related to trust and similar activities through which the Group holds or invests assets on behalf of clients, trusts, pension and personal risk funds or other institutions 2,729 (245) 2,484 2,753 (210) 2,543

of which commission income and expense on financial instruments not measured at fair value through profit or loss 3,092 (285) 2,807 3,105 (490) 2,615

2.c NET GAIN ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Net gain on financial instruments measured at fair value through profit or loss includes all profit and loss items relating to financial instruments held for trading, financial instruments that the Group has designated as at fair value through profit or loss, non-trading equity instruments that the Group did not choose to measure at fair value through equity, as well as debt instruments whose cash flows are not solely repayments

of principal and interest on the principal or whose business model is not to collect cash flows nor to collect cash flows and sell the assets.

These income items include dividends on these instruments and exclude interest income and expense from financial instruments designated as at fair value through profit or loss and instruments whose cash flows are not only repayments of principal and interest on the principal or whose business model is not to collect cash flows nor to collect cash flows and sell the assets, which are presented in Net interest income (note 2.a).

In millions of euros Year to

31 Dec. 2020 Year to

31 Dec. 2019

Financial instruments held for trading 4,116 11,768

Interest rate and credit instruments 4,566 7,489

Equity financial instruments (1,582) 3,562

Foreign exchange financial instruments 608 2,203

Loans and repurchase agreements (82) (1,573)

Other financial instruments 606 87

Financial instruments designated as at fair value through profit or loss 2,852 (5,217)

Other financial instruments at fair value through profit or loss (103) 585

Impact of hedge accounting (4) (25)

Fair value hedging derivatives 456 1,014

Hedged items in fair value hedge (460) (1,039)

NET GAIN ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS 6,861 7,111

Gains and losses on financial instruments designated as at fair value through profit or loss are mainly related to instruments which changes in value may be compensated by changes in the value of economic hedging derivative financial instruments held for trading.

Net gain on financial instruments held for trading in 2020 and 2019 include a non-material amount related to the ineffective portion of cash flow hedges.

Potential sources of ineffectiveness can be the differences between hedging instruments and hedged items, notably generated by mismatches in the terms of hedged and hedging instruments, such as

the frequency and timing of interest rates resetting, the frequency of payments and the discounting factors, or when hedging derivatives have a non-zero fair value at inception date of the hedging relationship. Credit valuation adjustments applied to hedging derivatives are also sources of ineffectiveness.

Cumulated changes in fair value related to discontinued cash flow hedge relationships, previously recognised in equity and included in 2020 in profit and loss accounts are not material, whether the hedged item ceased to exist or not.