2018 Registration document and annual fi nancial report - BNP PARIBAS126

3 2018 REVIEW OF OPERATIONS

3

Core business results

For the whole of 2018, CIB maintained its leading positions in Europe where it ranked joint number 3 and maintained its global market share after an increase in 2017. The operating division continued its good development on targeted clientele bases, onboarding over 300 new groups globally over the past two years.

CIB operated however in an unfavourable market environment and revenues, at EUR 10,829 million, were down by 7.5% compared to 2017 with contrasting evolutions between the businesses.

At EUR 4,727 million, Global Markets revenues were down by 15.4% compared to 2017 given the lacklustre context for FICC(1) in Europe and particularly challenging conditions for Equity and Prime Services at the end of the year. The VaR, which measures the level of market risks, was still at a low level (EUR 25 million) but rose slightly at the end of the year given increased volatility.

The revenues of FICC(1), at EUR 2,719 million, were down by 21.2% compared to last year. Client business in rates and credit was still weak in Europe due to monetary policy which resulted in low volatility and very low interest rates. The business also reported poor performance in forex, in particular in emerging markets. It did, however, deliver good performances on the primary market and on structured products. It confi rmed its strong positions on bond issues (ranked number 1 for all bond issues in euros and number 9 for all international bond issues) and made signifi cant progress on certain segments (ranked number 3 in the high-yield segment in Europe and number 3 for international green bond issues). The business continued its digital transformation with good development on multi dealer platforms where it ranked number 1 by volume for interest rate swaps in euros and number 5 for foreign exchange.

Revenues of Equity and Prime Services, at EUR 2,008 million, were down for their part by 6% with in particular the impact of extreme market movements at the end of the year on inventories valuation and a loss on index derivative hedging in the United States. The business, however, reported increased client business in equity derivatives and prime brokerage.

Securities Services revenues, at EUR 2,152 million, rose by 10.1% compared to 2017. Excluding the transfer this quarter of the correspondent banking business from Corporate Banking, they were up by 8.7% as a result of increased transactions as well as assets under custody and administration (+4.3% on average compared to 2017), benefi tting

additionally from the positive impact of the revaluation of an equity stake. The business continued its excellent drive with gains of signifi cant mandates (Carmignac, Intermediate Capital Group), the fi nalisation of the strategic partnership with Janus Henderson in the United States and the acquisition of the depositary bank business of Banco BPM(2). The business is implementing its digital transformation with already over 40 automated processes delivered and 30 in development. Its expertise was recognised with the Custodian of the Year Award at the 2018 CustodyRisk Global Awards.

Corporate Banking s revenues, at EUR 3,951 million, were down by 5.1% compared to 2017 but rose by 0.3% excluding capital gains realised in the second quarter 2017, the transfer of the correspondent banking business to Securities Services and the impact of the environmental responsibility policy(3). The business continued the development of the transaction businesses (cash management, trade fi nance) where it reinforced its number 1 position in Europe and reported good business development in Asia. It confi rmed its leading position on syndicated loans (ranked number 1 in the EMEA region(4)). Loans, at EUR 132 billion, were up by 1.0% compared to 2017 and deposits, at EUR 126 billion, were down by 3.5%. The business continued to implement its digital transformation, and Centric, its online platform for corporates, has already 10,000 clients as at 31 December 2018 (+1,500 compared to the end of 2017).

At EUR 8,163 million, CIB s operating expenses were down by 1.3% compared to 2017 thanks to cost saving measures (EUR 221 million in savings in 2018) with in particular the ramping up of shared platforms, the implementation of digitalised end-to-end processes of transactions and the automation of operations (over 180 processes in production).

The gross operating income of CIB was thus down by 22.3%, at EUR 2,666 million.

The cost of risk was still low, at EUR 43 million (EUR 81 million in 2017), as the provisions were partly offset by write-backs. It broke down between Global Markets (EUR 19 million compared to EUR 15 million in 2017), Corporate Banking (EUR 31 million compared to EUR 70 million in 2017) and Securities Services (net write-back of EUR 7 million compared to a net write-back of EUR 3 million in 2017).

CIB thus generated EUR 2,681 million in pre-tax income, down by 21.0% compared to 2017, as the impact of the unfavourable market context was attenuated by the decrease in costs and good control of risks.

(1) Fixed Income, Currencies and Commodities.

(2) Closing of the acquisition on 28 September 2018.

(3) Stopped fi nancing gas and oil from shale and tobacco companies.

(4) Europe, Middle East and Africa.