2018 Registration document and annual fi nancial report - BNP PARIBAS 249

4CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018

4

Notes to the fi nancial statements

The US regulatory and law enforcement authorities are currently investigating or requesting information in relation to certain activities as reported in the international fi nancial press in relation to the US treasuries market and US Agency bonds. The Bank, which has received some requests for information, is cooperating with investigations and is responding to requests for information. The outcome and potential impact of these investigations or requests for information is diffi cult to

predict before their close and the subsequent discussions with the US authorities. It should be noted that it has been reported that a number of fi nancial institutions are involved in these investigations or requests for information and that it is sometimes the case that reviews carried out in connection therewith may lead to settlements including in particular the payment of fi nes or signifi cant penalties depending on the circumstances specifi c to each situation.

8.c BUSINESS COMBINATIONS AND LOSS OF CONTROL

Transactions completed in 2018

First Hawaiian Inc. On 4 August 2016, BNP Paribas Group launched an initial public offering on its First Hawaiian Inc (FHI) subsidiary on the US market.

Subsequently, four partial sales were made.

Date Transaction Interest

sold Residual interest held Control/Signifi cant infl uence

4 August 2016 Initial offering 17.4% 82.6% Control

6 February 2017 1st secondary offering 20.6% 62.0% Control

8 May 2018 2nd secondary offering 13.2% 48.8% Control

31 July 2018 3rd secondary offering 15.5% 33.3% Signifi cant infl uence

5 September 2018 4th secondary offering 14.9% 18.4% Signifi cant infl uence

31 DECEMBER 2018 81.6% 18.4% SIGNIFICANT INFLUENCE

The fi rst three operations resulted in an increase in the Group s retained earnings of EUR 422 million and in minority interests of EUR 1, 363 million.

As at 30 June 2018, the Group considered the loss of control within one year to be highly probable and applied the provisions of IFRS 5 on groups of assets and liabilities held for sale.

The application of IFRS 5 had the effect of splitting the BancWest homogeneous group of businesses and, as a result, the related goodwill (i.e. EUR 4.3 billion) between Bank of the West (BoW) and FHI. This split was determined based on the recoverable amounts of the First Hawaiian Bank and BoW activities, and led to the allocation of a EUR 1.3 billion goodwill to FHI.

In addition, assets and liabilities have been reclassifi ed respectively as non-current assets held for sale and liabilities related to non-current assets held for sale.

Following the sale realised on 31 July 2018, the Group ceased to exercise exclusive control over FHI but retained a signifi cant infl uence. This loss of control resulted in a decrease of EUR 17.4 billion in the Group s balance sheet and a decrease in retained earnings attributable to minority shareholders of EUR 1, 473 million.

This operation and the last partial sale generated an overall gain of EUR 286 million before tax, recognised in the profi t and loss acount.

As at 31 December 2018, the Group continues to apply the provisions of IFRS 5.

The effect of IFRS 5 is to assess the equity-method value at the balance sheet date at the lowest value between the book value and the market value. At 31 December 2018, this method resulted in the recognition of a EUR -125 million impairment.

On 29 January 2019, the Group announced the launch of a new secondary offering for 24.9 million ordinary shares of First Hawaiian Inc (FHI). As a result of this transaction, the BNP Paribas Group will have sold its entire 18.4% stake in FHI, which has no effect on the accounts as at 31 December 2018.

ABN Amro Bank Luxembourg On 3 September 2018, BGL BNP Paribas acquired 100% of ABN Amro Bank Luxembourg (Private Banking activity) and its subsidiary ABN Amro Life SA (insurance activity). As a result of this transaction, the BNP Paribas Group fully consolidates these activities.

The result of this acquisition is to increase the Group s balance sheet at acquisition date by EUR 5.1 billion, including loans and advances to customers for EUR 1.6 billion and fi nancial investments of insurance activities for EUR 2.7 billion.

The goodwill linked to this operation amounts to EUR 39 million.

As at 31 December 2018, ABN Amro Bank Luxembourg merged into BGL BNP Paribas.

Raiffeisen Bank Polska On 31 October 2018, Bank BGZ BNP Paribas bought the Core banking activities of Raiffeisen Bank Polska from Raiffeisen Bank International.

This acquisition resulted in an increase in the Group s balance sheet at acquisition date of EUR 9.5 billion, including loans and advances to customers for EUR 4.3 billion and amortised-cost debt securities for EUR 3.9 billion.

The negative goodwill associated with this operation amounts to EUR 68 million.