2018 Registration document and annual fi nancial report - BNP PARIBAS 115

32018 REVIEW OF OPERATIONS

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BNP Paribas consolidated results

The Group s operating income, at EUR 9,169 million (EUR 10,310 million in 2017), was thus down by 11.1%. It was down by 6.4% for the operating divisions (-5.5% at constant scope and exchange rates).

Non-operating items totalled EUR 1,039 million (EUR 1,000 million in 2017). They included the exceptional +EUR 101 million impact of the capital gain from the sale of a building and the +EUR 286 million capital gain from the sale of First Hawaiian Bank shares. Last year, they included a +EUR 326 million capital gain realised from the initial public offering of SBI Life as well as the full impairment of TEB s goodwill for -EUR 172 million.

Pre-tax income, which came to EUR 10,208 million (EUR 11,310 million in 2017), was thus down by 9.7%. It was down by 8.6% for the operating divisions (-5.3% at constant scope and exchange rates).

The average tax rate was 23.1%, benefi tting in particular from a decrease in the corporate tax rate in Belgium and in the United States and from the low tax rate on the long term capital gain from amongst others the sale of First Hawaiian Bank shares.

The Group s net income attributable to equity holders was EUR 7,526 million, down by 3.0% compared to 2017 but by only 1.4%, at EUR 8,036 million, excluding the effect of exceptional items(1).

Noteworthy that net income refl ected the spot impact, at the closing date, of the sharp fall in the markets on the revaluation of the residual stake in First Hawaiian Bank(2) and on some insurance portfolios (-EUR 220 million).

The return on equity was thus 8.2% (8.8% excluding exceptional items). The return on tangible equity came to 9.6% (10.2% excluding exceptional items). Earnings per share was 5.73.

As at 31 December 2018, the fully loaded Basel 3 common equity Tier 1 ratio(3) was 11.8% (stable compared to 31 December 2017 despite the -20 bp technical adjustment as at 1 January 2018 related to the full application of IFRS 9 and to an amended prudential treatment of irrevocable payment commitments). The fully loaded Basel 3 leverage ratio(4) came to 4.5% and the Liquidity Coverage Ratio to 132%. Lastly, the Group s immediately available liquidity reserve was EUR 308 billion, equivalent to over one year of room to manoeuvre in terms of wholesale funding.

The net book value per share reached EUR 74.7, equivalent to a compound annual growth rate of 5.0% since 31 December 2008, illustrating the continuous value creation throughout the cycle.

The Board of directors will propose to shareholders at the Shareholders Meeting to pay a 3.02 dividend per share (stable compared to 2017), payable in cash.

The Group is pursuing an ambitious policy of engagement in society with signifi cant initiatives to promote ethical responsibility, social and environmental innovation and a low carbon economy while strengthening its internal control and compliance system. The digital transformation programme is a success with the roll out of new customer experiences, the automation of processes and improved operating efficiency (EUR 1,150 million in savings since the launch of the programme in early 2017).

Capital allocation

Revenue from the capital allocated to each division is included in the division s profit and loss account. The capital allocated to each division corresponds to the amount required to comply with CRD IV regulation, also known as Basel 3, and is based on 11% of risk-weighted assets.

Risk-weighted assets are calculated as the sum of:

■ the risk-weighted assets for credit and counterparty risk, calculated using the standard approach or the Internal Ratings Based Approach (IRBA) depending on the particular entity or business activity;

■ the regulatory capital requirement for market risks, for adjustment of credit valuation and for operational risk, multiplied by 12.5.

Moreover, elements that are deducted from Tier 1 capital are allocated to each division.

Last, the capital allocated to the insurance business is based on the minimum solvency capital requirement as defined by Solvency II.

(1) Effect of exceptional items after tax: -EUR 510 million (-EUR 390 million in 2017).

(2) Value of the stake in First Hawaiian Bank now revalued at market value.

(3) Ratio taking into account all the CRD4 rules with no transitory provisions.

(4) Ratio taking into account all the CRD4 rules at 2019 with no transitory provisions, calculated according to the delegated act of the European Commission dated 10 October 2014.