2018 Registration document and annual fi nancial report - BNP PARIBAS136

3 2018 REVIEW OF OPERATIONS

3

Outlook

3.6 Outlook

A CONFIRMED 2020 AMBITION

The Group is actively implementing its 2017-2020 development plan in a contrasted environment (economic growth still favourable but which is expected to slow down, low interest rate environment in Europe which is expected to improve only gradually and uncertain evolution of foreign exchange parities).

Leveraging on its integrated and diversifi ed business model, the Group is successfully implementing its digital transformation and pursues differentiated business development strategies in Domestic Markets, International Financial Services (IFS) and CIB, all the while resolutely committing for a positive impact on society.

A TRAJECTORY IN LINE WITH THE PLAN FOR DOMESTIC MARKETS AND IFS BUT NEED TO ACCELERATE TRANSFORMATION AT CIB In line with its mid-term plan objectives, Domestic Markets confi rms its 2020 ambitions. In an interest rate environment that is expected to improve only gradually and with new expectations from customers influenced by digital uses, the operating division will continue to strengthen its sales and marketing drive while improving the customer experience and offering new services. It will intensify its cost reduction measures with an additional savings programme of EUR 150 million compared to the initial objective. It will continue adapting its branch network, creating omni-channel customer service centres and rolling out end-to-end digitalised processes. It will continue its rigorous risk management policy with in particular the continued improvement of the risk profi le of BNL bc for which it confi rms the cost of risk target of 50 basis points in 2020.

The operating division thus confi rms its 2020 trajectory with a revenue evolution slightly above initial expectations, an upcoming signifi cant improvement of the operating effi ciency generating a positive jaws effect (decrease in the cost income ratio in the networks and virtually stable in the specialised businesses) and a confi rmation of the plan s RONE(1) target.

Despite an unfavourable foreign exchange effect, IFS likewise presents a 2020 trajectory in line with the plan and confi rms its role as a growth engine for the Group. The operating division will thus continue its sustained growth, consolidating its leading positions in the businesses thanks to the quality of its product offering, pursuing its digital transformation, continuing the selective development of Retail Banking outside the Eurozone, strengthening cooperation with the Group and executing the integration of acquisitions made recently. It will intensify cost saving measures with a programme of an additional EUR 120 million in savings compared to the initial objective, continuing the industrialisation and

pooling of processes, the streamlining of certain product offerings and the implementation of digital initiatives.

IFS thus confi rms its 2020 trajectory with a revenue growth in line with the plan, thanks to a good business drive and acquisitions made, and a signifi cant improvement of the operating effi ciency (leading to a positive jaws effect as early as 2019) but less however than expected initially due mainly to the unfavourable foreign exchange effect. The RONE(1) will reach a level close to the target.

In the face of an unfavourable environment, CIB is intensifying its transformation. Despite the successes recorded both in terms of gains of new clients and cost savings (down for the third year in a row) and of containment of allocated capital (-6.3% since 2016), the operating division is confronted with a decrease of the global revenue pool in the CIB industry and a decrease in its profi tability with a 12.9% RONE(1) this year (-3.2 points compared to 2017).

CIB thus announces three-pronged structural actions to improve a profi tability that deviated from the 2020 trajectory:

(1) review of non-strategic, subscale or unprofi table business segments (e.g. stopped Opera Trading Capital s proprietary business and commodity derivatives in the United States); analysis of certain peripheral locations and rationalisation of the relationship with clients who are sub-profi table. The preliminary scope of potential exits could represent revenues in the range of 200 to EUR 300 million for a cost income ratio above 100% and EUR 5 billion in risk-weighted assets;

(2) intensification of the industrialisation to reduce costs with in particular the adaptation of the flow businesses to the fast electronisation of the fi nancial markets at Global Markets, the development of shared platforms at Corporate Banking, the industrialisation of the multi-local operations model at Securities Services and the streamlining and mutualising of IT and back offi ces. CIB thus increases its recurring savings programme by EUR 350 million to bring it to EUR 850 million(2) over 2019 and 2020;

(3) priority given to even more selective and profi table growth with in particular reinforced cooperation between the businesses (e.g. expansion of the joint Corporate Banking and Global Markets platform to develop the Originate & Distribute policy), the implementation of targeted measures at Global Markets to turn around the performances of the forex and the equity derivatives businesses, the continuation of development at Corporate Banking in targeted countries in Europe and the selective growth in America and Asia, and the integration of the acquisitions made at Securities Services.

(1) Pre-tax return on notional equity.

(2) Excluding savings related to businesses exits.