2019 Universal registration document and annual financial report - BNP PARIBAS218
4 Consolidated finanCial statements for the year ended 31 deCemBer 2019
4
Notes to the financial statements
and bonds, its activity of private debt and real assets management and its multi-asset, quantitative and solutions division.
Insurance: BNP Paribas Cardif, a world leader in personal insurance, has designed, developed and marketed savings and protection products and services to protect individuals, their projects and their assets.
BNP Paribas Cardif also offer products in damage insurance, health insurance, budget insurance, revenue and means of payment insurance, unexpected event protection (unemployment, accident, death, theft or breakage) or the protection of private digital data to meet the evolution of customers needs.
In 2019, BNP Paribas Cardif sold part of its interest in the Indian life insurer SBI Life. After this partial sale, the Group retains a 5.2% stake.
BancWest: In the United States, the Retail Banking business is henceforth conducted through Bank of the West, which markets a very broad range of Retail Banking products and services to individuals, small businesses and corporate clients, through branches and offices in 24 States, mainly in western and mid-western America. It also has strong positions across the USA in several specialized lending activities, such as marine, recreational vehicles and agribusiness, and develops its commercial set up particularly in Corporate Banking, Wealth Management and Small and Medium Enterprise businesses.
Personal Finance: BNP Paribas Personal Finance is the Group s consumer credit specialist. Through its brands and partnerships such as Cetelem, Cofinoga, Findomestic, AlphaCredit, Opel Vauxhall or SevenDay Finans AB, Personal Finance provides a full range of consumer loans at point of sale (retail stores and car dealerships) or through its customer relation centres and websites and mobile applications. The business line, in some countries outside the Domestic Markets, is integrated into the BNP Paribas Group s Retail Banking.
Real Estate: BNP Paribas Real Estate serves the needs of its clients, whether institutional investors, corporates, public entities or individuals, at all stages of the life cycle of their property (from the conception of a construction project to its daily management).
Wealth Management: Wealth Management encompasses the Private Banking activities of BNP Paribas and serves a clientele of wealthy individuals, shareholder families and entrepreneurs seeking a one-stop shop for all their wealth management and financial needs.
In 2018, BNP Paribas Wealth Management purchased the Private Banking activities of ABN Amro in Luxembourg.
Corporate Banking: Corporate Banking combines financing solutions to corporates, all transaction banking products, corporate finance advisory services in mergers and acquisitions and primary equity activities.
Global Markets: Global Markets provides investment, hedging, financing and research services across asset classes, to corporate and institutional clients as well as private and Retail Banking networks. The sustainable, long-term business model of Global Markets connects clients to capital markets throughout EMEA (Europe, Middle East & Africa), Asia Pacific and the Americas, with innovative solutions and digital platforms. Global
Markets includes activities of Fixed Income, Currencies & Commodities and Equity & Prime Services.
Securities Services: BNP Paribas Securities Services is one of the major global players in Securities Services and provides integrated solutions for all actors involved in the investment cycle, sell side, buy side and issuers.
Goodwill impairment tests are based on three different methods: observation of transactions related to comparable businesses, share price data for listed companies with comparable businesses, and discounted future cash flows (DCF).
If one of the two comparables-based methods indicates the need for impairment, the DCF method is used to validate the results and determine the amount of impairment required.
The DCF method is based on a number of assumptions in terms of future revenues, expenses and cost of risk (cash flows) based on medium-term business plans over a period of five years. Cash flow projections beyond the 5-year forecast period are based on a growth rate to perpetuity and are normalised when the short-term environment does not reflect the normal conditions of the economic cycle.
The key parameters which are sensitive to the assumptions made are the cost of capital, the cost/income ratio, the cost of risk and the growth rate to perpetuity.
Cost of capital is determined on the basis of a risk-free rate, an observed market risk premium weighted by a risk factor based on comparables specific to each cash-generating units. The values of these parameters are obtained from external information sources.
Allocated capital is determined for each cash-generating units based on the Common Equity Tier One regulatory requirements for the legal entity to which the cash-generating units belongs, with a minimum of 7%.
The growth rate to perpetuity used is 2% for mature economies in Europe and 3% for BancWest more specific to California. For CGUs implemented in countries with high levels of inflation, a specific add-on is taken into account (calculated according to inflation rates disclosed by external sources).
The following table shows the sensitivity of cash generating unit valuations to changes in the value of parameters used in the DCF calculation: the cost of capital, the cost/income ratio in terminal value, the cost of risk in terminal value and the growth rate to perpetuity.
In 2019, the downward revision of the financial perspectives for the Personal Finance partnership specifically tested led to depreciate the total goodwill (318 million euros).
The economic environment evolution, particularly in interest rates in the United States, have led to partially depreciate BancWest s goodwill by 500 million euros.
