2018 Registration document and annual fi nancial report - BNP PARIBAS 137

32018 REVIEW OF OPERATIONS

3

Outlook

The operating division thus focuses on profitable growth to be the preferred European partner of its clients by continuing to strengthen its leading positions in Europe and selective development in the United States and Asia, and deepening the integrated model between the businesses and the regions ( One Bank ).

CIB is thereby adjusting its 2020 trajectory, with a downward revision of its revenue target (expected to be up however compared to a weak 2018 base), a signifi cant improvement of operating effi ciency enabling to generate a positive jaws effect thanks to additional cost saving efforts, stable risk-weighted assets in 2020 compared to 2016 (compared to a 2% increase per year(1) in the initial plan) and a rise in the RONE(2) to a level close to the initial objective.

SIGNIFICANT PROGRESS IN THE DIGITAL TRANSFORMATION The Group is successfully implementing in all the operating divisions its ambitious transformation programme designed to implement new customer experiences, accelerate digitalisation and improve operating effi ciency.

Digital is strongly growing in all the businesses. Domestic Markets already has over 8 million digital clients in Retail Banking (of which 3 million at Hello bank! and 1.1 million at Nickel) and accelerates mobile uses of individual customers thanks to expanded features available, ranking as fi rst bank in France in terms of mobile features according to D-rating(3). IFS has 0.9 million clients in its digital banks (Cepteteb in Turkey and BZG Optima in Poland) and makes electronic signature widely available (accounting already for 50% of contracts signed at Personal Finance). At CIB, the Centric digital platform is growing rapidly with close to 10,000 customers using it.

Robotics and artifi cial intelligence are developing rapidly with already over 500 robots operational (chatbots, automation of controls, reportings, data processing). Processes are industrialised and optimised everywhere and new end-to-end digitalised customer journeys implemented. Lastly, new digital products are being launched, such as LyfPay, a value-added mobile payment solution, with already 1.3 million downloadings.

The Group is thus successfully implementing its fi ve transformation levers (implement new customer journeys, make better use of data, upgrade the operational model, adapt and mutualise information systems and develop more digital work practices).

The costs associated with this transformation totalled EUR 2 billion since last year, in line with the plan. For 2019, the envelope of transformation costs is revised downward by EUR 300 million, to EUR 700 million versus EUR 1 billion initially planned (-10% compared to the EUR 3 billion envelope originally planned for the whole plan).

The recurring cost savings generated by the end of 2018 totalled EUR 1.15 billion, in line with the objective. Given the higher rise than expected of certain regulatory costs totalling EUR 200 million by 2020 and the needed intensifi cation of transformation at CIB, the Group updated its programme with an additional EUR 600 million in savings (55% at CIB, 25% at Domestic Markets, 20% at IFS). These additional savings will be

achieved in particular thanks to the streamlining of the IT organisation and the use of the cloud, the reinforcement of the industrialisation of the functions with increased use of artifi cial intelligence, the streamlining of structures through international mutualized competency centers and the optimisation of real estate costs (stepping-up of fl ex offi ces, etc.). The 2020 recurring cost savings target is thus raised from EUR 2.7 billion to EUR 3.3 billion.

COMMITMENT FOR A POSITIVE IMPACT ON SOCIETY The Group is pursuing out an ambitious corporate social and environmental responsibility (CSR) policy and is committed to making a positive impact on society with concrete impacts.

It thus stopped in 2018 fi nancing companies whose primary business is gas/oil from shale, oil from tar sands or gas / oil production in the Arctic as well as fi nancing tobacco companies. It ranks number 3 for green bonds and was involved in EUR 15.6 billion in fi nancing renewable energies and EUR 1.6 billion dedicated to social entrepreneurship.

The Group aims in particular to fi nance the economy in an ethical way, promote the development of its employees, support initiatives with a social impact and play a major role in the transition toward a low carbon economy. It thereby wants to be a major contributor to the UN Sustainable Development Goals and targets EUR 185 billion in 2020 in fi nancing to sectors that contribute to these goals (EUR 166 billion by the end of 2018).

This policy of engagement to make a positive impact on society is recognised through the bank s very good rankings in major specialised indices (World s Best Bank for sustainable fi nance at the Euromoney Awards for Excellence 2018).

The Group is also a very signifi cant tax payer with a total amount of taxes and levies of EUR 5.6 billion in 2018, of which EUR 2.5 billion in France.

2020 TARGETS UPDATED The Group is updating the plan s targets with revenue growth during the period 2016-2020 reviewed at 1.5% per year (2.5% per year in the initial plan) and a recurring cost savings target of EUR 3.3 billion (EUR 2.7 billion in the initial plan) from 2020. It expects about 2.5%(4) growth of risk- weighted assets per year by 2020 with active management of the balance sheet (sales of non-core equity stakes or assets). The Group thus expects an organic capital generation of at least 30 basis points per year after dividend distribution.

On these bases, the return on equity is expected at 9.5% in 2020 (or a return on tangible equity above 10.5%) with a CET1 ratio equal or above 12%.

The Group thus expects more than 20% growth in the earnings per share between 2016 and 2020 leading to, with a 50% pay-out ratio, an increase of the dividend of 35% during the same period.

(1) 2016-2020 compound annual growth rate.

(2) Pre-tax return on notional equity.

(3) Agency specialised in digital performance analysis.

(4) 2018-2020 Compound Annual Growth Rate.