NATIXIS:2017 FIRST QUARTER RESULTS

Paris, May 9, 2017

1Q17 RESULTS

STRONG GROWTH IN REVENUES TO OVER €2.3bn (+14%)
and 40% ADVANCE IN REPORTED NET INCOME TO €280m

INVESTMENT SOLUTIONS: BRISK activitY IN INsurance AND REBOUND IN asset management inflow

• Insurance: Overall turnover of €3.3bn in 1Q17 (+84% vs. 1Q16 excluding reinsurance agreement with CNP), fueled notably by the rollout of life insurance products in the Caisses d'Epargne network
• Asset management: AuM up to €837bn at end-March 2017, with net inflow amounting to €5bn

CIB: STRONGER MOMENTUM IN GLOBAL MARKETS, INCREASED CONTRIBUTION FROM INTERNATIONAL PLATFORMS

• Global markets: Net revenues (excluding the CVA/DVA desk) up 38% vs. 1Q16, including increases of 36% for FICT and 42% for Equity, reflecting our market share gains
• Global finance & Investment banking: Net revenues up 11% vs. 1Q16
• International platform revenues up 32% yoy in 1Q17

SFS: Net revenues stable over one year to €344m

• Activity buoyed by Specialized financing (net revenues up 2% vs. 1Q16)

• Core-business net revenues up 14% yoy to €2.2bn, including a 26% increase for CIB
• Tight grip on expenses: up 6% yoy in 1Q17, excluding the estimated contribution to the SRF
• Marked reduction in the core-business provision for credit loss to 24bps in 1Q17 (vs. 45bps in 1Q16)
• Earnings capacity to €436m (+40% yoy). Reported net income (group share) to €280m, up 40% yoy despite a sharp increase in estimated contribution to the SRF
• Core-business ROE of 15.9% (+380bps vs. 1Q16)
• Natixis ROTE of 12.5% in 1Q17 (+340bps vs. 1Q16), at the top end of the New Frontier target range

• Basel III RWA down 1% for Natixis and 3% for CIB since end-2016
• CET1 ratio⁽²⁾ of 11.0% at end-March 2017 after factoring in a minimum pay-out ratio of 50% (vs. 10.8% at end-2016 pro forma)

(1) Excluding exceptional items and the IFRIC 21 impact for ROE, ROTE and earnings capacity calculations
(2) Based on CRR-CRD4 rules published on June 26, 2013, including the Danish compromise - no phase-in except for DTAs on loss carry-forwards. End-2016 ratio, pro forma of 20% additional phase-in of DTAs scheduled for January 1, 2017

The Board of Directors approved Natixis' accounts for first-quarter 2017 on May 9, 2017.

For Natixis, the main features of 1Q17 were⁽¹⁾:

• revenue growth of 14% yoy to €2.219bn for core businesses and 13% yoy to €2.358bn for Natixis.

The marked rebound in net revenues in the Investment Solutions (+8% relative to 1Q16) was fueled by Asset Management in Europe and solid growth momentum in Insurance.

The robust growth in net revenues from Corporate & Investment Banking (+26% relative to 1Q16) was mainly driven by fine performances by international platforms in Global markets.

Within Specialized Financial Services, Consumer Credit and Factoring both made further progress, underpinned by the Groupe BPCE networks.

• a marked improvement in the core-business provision for credit loss to €49m, down 42% relative to 1Q16,
• a 40% advance in reported net income (group share) to €280m,
• core-business ROE of 15.9%,  
• a CET1 ratio⁽²⁾ of 11.0% at end-March 2017,
• a leverage ratio of 4.2% at end-March 2017.

Laurent Mignon, Natixis Chief Executive Officer, said: "Natixis enjoyed a very good first quarter, fueled by strong momentum in our core businesses - particularly in Corporate & Investment Banking and Investment Solutions - tight control over expenses and lower provisions. Activity levels in Global markets were especially high and our Asset Management business also attracted renewed net inflow in the USA. The first quarter 2017 was perfectly consistent with the objectives of our New Frontier plan, namely improved profitability in core businesses, tight control of risk-weighted assets, a strong contribution from international platforms and sustained growth in Insurance".      

1. See note on methodology and excluding the IFRIC 21 impact for the ROE calculation
2. Based on CRR-CRD4 rules published on June 26, 2013, including the Danish compromise without phase-in except for DTAs on tax-loss carryforwards

1 - Natixis 1Q17 results

1.1          exceptional items

1. o/w €7m in Corporate Center

1.2          1Q17 results

1. See page 3

Unless stated otherwise, the commentary that follows refers to results excluding exceptional items (see detail p3).

Natixis' net revenues climbed 13% yoy to €2.358bn in 1Q17.

Core businesses lifted net revenues by 14% yoy to €2.219bn. This total was buoyed by a 26% advance in net revenues from Corporate & Investment Banking and a marked upturn in revenues (+8% yoy) from Investment Solutions. Specialized Financial Services resisted well overall and posted stable net revenues compared to 1Q16.
Net revenues from Financial Investments amounted to €153m and reflected declines of 16% from Coface and 30% from Corporate Data Solutions (the withdrawal strategy continues on the latter).
Operating expenses rose 9% yoy to €1.743bn in 1Q17, affected by an increase in the estimated contribution to the Single Resolution Fund (SRF) to €128m in 1Q17 from €79m in 1Q16. After restating for the impact of the SRF, expenses rose by only 6%.
The cost-income ratio excluding IFRIC 21 worked out to 67.9% in 1Q17, down 4.0pps yoy.

With revenues rising faster than expenses, gross operating income climbed 29% to €615m in 1Q17.

The provision for credit loss declined 20% yoy to €70m for Natixis in 1Q17 and 59% for CIB during the same period. 
In terms of basis points of the loan book, the core-business provision for credit loss worked out to 24bps in 1Q17, markedly lower than the 1Q16 level which was affected by provisioning efforts on the energy and commodities sectors.

The 18% decline in minority interests relative to 1Q16 was primarily due to Coface's lower contribution.

Restated net income (group share), excluding IFRIC 21 and exceptional items, amounted to €436m in 1Q17, up 40% yoy.
Including exceptional items (-€26m net of tax in 1Q17 vs. -€13m in 1Q16) and the IFRIC 21 impact (+€130m in 1Q17 vs. +€98m in 1Q16), net income (group share) worked out to €280m in 1Q17, a 40% improvement on a year earlier.

Excluding IFRIC 21, Natixis' ROTE equated to 12.5% and core-business ROE amounted to 15.9%, up 340bps and 380bps, respectively, relative to 1Q16.

2 - Financial structure

Natixis' Basel 3 CET1 ratio⁽¹⁾ worked out to 11.0% at March 31, 2017.

Based on a pro forma⁽²⁾ Basel 3 CET1 ratio of 10.8% at December 31, 2016, the respective impacts in the first quarter of 2017 were as follows:

• effect of allocating net income (group share) to retained earnings in 1Q17: +24bps,
• planned dividend for 1Q17: -12bps,
• RWA, FX and other effects: +4bps.

Basel 3 capital and risk-weighted assets⁽¹⁾ amounted to €12.6bn and €114.1bn, respectively, at March 31, 2017.

EQUITY CAPITAL - TIER ONE CAPITAL - BOOK VALUE PER SHARE

Equity capital (group share) totalled €20.5bn at March 31, 2017, of which €2.2bn was in the form of hybrid securities (DSNs) recognized in equity capital at fair value (excluding capital gain following reclassification of hybrids).

Core Tier 1 capital (Basel 3 - phased-in) stood at €12.4bn and Tier 1 capital (Basel 3 - phased-in) at €14.6bn.

Natixis' risk-weighted assets totalled €114.1bn at March 31, 2017 (Basel 3 - phased-in), breakdown as following:

• Credit risk: €79.0bn
• Counterparty risk: €7.3bn
• CVA risk: €3.7bn
• Market risk: €10.4bn
• Operational risk: €13.7bn

Under Basel 3 (phased-in), the CET1 ratio amounted to 10.9%, the Tier 1 ratio to 12.8% and the total solvency ratio to 15.1% at March 31, 2017.  

Book value per share, including planned dividend for 2016, was €5.46 at March 31, 2017 based on 3,135,684,763 shares excluding treasury stock (the total number of shares stands at 3,137,360,238). Tangible book value per share (after deducting goodwill and intangible fixed assets) was €4.29.

LEVERAGE RATIO⁽³⁾

The leverage ratio worked out to 4.2% at March 31, 2017.

OVERALL CAPITAL ADEQUACY RATIO
As at March 31, 2017, the financial conglomerate's capital excess was estimated at around €2.5bn.

1. Based on CRR-CRD4 rules as reported on June 26, 2013, including the Danish compromise - without phase-in except for DTAs on tax-loss carryforwards
2. After factoring in on 31/12/2016 the additional 20% phase-in of DTAs scheduled for January 1, 2017
3. See note on methodology
   
4. - results by Business line

Investment Solutions
Data excludes exceptional items⁽¹⁾

1.  See note on methodology and excluding IFRIC 21 impact on the calculation of the cost-income ratio and ROE
    

Net revenues from the Investment Solutions enjoyed a marked rebound in 1Q17. On a current  exchange-rate basis, they rose 8% yoy to reach €891m, fueled by increases of 7% in Asset Management and 12% in Insurance.

Operating expenses progressed 6% yoy to €625m. The cost-income ratio, excluding IFRIC 21, declined 1.6pps to 68.6%.

Gross operating income advanced 14% yoy on a current exchange-rate basis and 11% on constant exchange rate in 1Q17.   

In 1Q16, the "Gain or loss on other assets" line included €20m of proceeds from the divestments of the Snyder and CGM entities, while in 1Q17 it incorporated €9m of proceeds from the divestment of the Caspian private equity funds.

ROE after tax and excluding IFRIC 21, amounted to 14.6% in 1Q17, up slightly compared to 1Q16, whereas the capital allocated to the Investment Solutions core business rose 7% between the two periods to support the development of Insurance businesses.   

The improvement in Asset Management revenues in 1Q17 was primarily driven by asset management firms in Europe (revenues rose 12% relative to 1Q16 to reach €183m). Asset management firms in the US recorded a 3% increase in their revenues during the same period to €391m.

Margins excluding performance fees worked out to 28bps in 1Q17 and were virtually unchanged on the full-year 2016 level.

First-quarter 2017 featured renewed net inflows of €6bn in the US, with Harris Associates and Loomis Sayles contributing €2.2bn and €3.6bn of this figure, respectively.
In Europe, net inflow excluding Natixis AM, amounted to €1.7bn, with a strong momentum on alternative strategies (H2O, DNCA and AEW-Ciloger).
All in all, net inflow totaled €5bn in 1Q17.

In addition to inflow, assets under management expanded to €837bn in 1Q17. AuM were impacted positively by a market effect (+€16bn) and negatively by a currency effect (-€5bn) and a change in the scope of consolidation (-€9bn). The latter effect stemmed from the disposal of IDFC AM, an India-based asset manager, without impact on the income statement.

In Insurance, overall turnover (excluding the reinsurance treaty with CNP), advanced to €3.3bn in 1Q17 from €1.8bn in 1Q16. This 84% advance was notably fueled by the rollout of life insurance products in the Caisses d'Epargne network since early 2016.
Overall turnover from life insurance climbed 113% yoy and net inflow more than tripled to €1.9bn in 1Q17 compared to a year earlier.
The proactive strategy of reorienting the offering towards unit-linked policies drove an 11pp-rise yoy in the proportion of net inflow derived from unit-linked policies to over 47%.
Assets under management expanded 12% over the year to reach €50bn at end-March 2017.
During 1Q17, turnover rose 7% yoy in the personal protection & borrower's insurance segment and by 9% in property & casualty insurance, thanks to brisk growth in all lines (car assurance, home insurance, etc.).

Corporate & Investment Banking
Data excludes exceptional items⁽¹⁾

1. See note on methodology and excluding IFRIC 21 impact on the calculation of the cost-income ratio and ROE

Net revenues from Corporate & Investment Banking expanded 26% yoy in 1Q17 (+20% excluding the CVA/DVA desk).
Within Global markets, business momentum accelerated in 1Q17, with net revenues excluding the CVA/DVA desk climbing 38% relative to 1Q16. 
The contribution to revenues from all international platforms rose from 55% in 1Q16 to 58% in 1Q17, reflecting significant growth in their revenues (+32% vs 1Q16).

Operating expenses increased 10% yoy in 1Q17, though with fixed costs rising by only 4%.

Compared to the year-earlier period, the cost-income ratio excluding IFRIC 21 improved by 7.1pps to 54.4%, while gross operating income jumped 56% to €421m in 1Q17.

        First-quarter 2017 featured a sharp reduction in provisions relative to 1Q16, the year-earlier period having witnessed sizeable provisioning efforts on the Oil and Gas sector. All in all, the provision for credit loss dropped 59% to €29m on a yoy basis.  
         
        As a result, pre-tax profit virtually doubled yoy to €394m in 1Q17.

ROE after tax and excluding IFRIC 21 exceeded 17%, a considerable 810bp-gain relative to 1Q16.

Within Global markets, FICT reported a 36% increase in net revenues excluding the CVA/DVA desk, with the momentum coming from Interest Rates & Forex (+56% vs. 1Q16) and the Securities Financing Group⁽¹⁾ (+73% vs. 1Q16).
Fixed Income activities posted 45% yoy growth in revenues at international platforms.

Net revenues from Equity Derivatives climbed 48% yoy in 1Q17, fueled by strong growth in Solutions and robust momentum from international platforms.

Global Finance & Investment Banking net revenues advanced 11% in 1Q17 relative to 1Q16.
Global Finance origination revenues expanded 16% yoy, thanks to the Real Estate Finance and Global Energy & Commodities segments. During the same period, GEC Trade revenues climbed 25%.
In Investment Banking, the Acquisition & Strategic Finance segment delivered 62% growth in revenues, buoyed by attractive conditions in 1Q17.
The 9% decline in new production during 1Q17 was primarily due to a marked contraction in vanilla financings.

1. Merger of the Fixed Income and Treasury businesses' repo and collateral management activities
   

Specialized Financial Services
Data excludes exceptional items⁽¹⁾

1. See note on methodology and excluding IFRIC 21 impact on the calculation of the cost-income ratio and ROE

Net revenues from Specialized Financial Services were stable in 1Q17 relative to 1Q16. They included increases of 4% for Factoring, 5% for Leasing and 2% for Consumer Finance, which together drove a 2% rise for Specialized Financing as a whole.

Specialized Financing activities continued to enjoy healthy momentum. Personal loan issuance rose 25%, factored turnover with clients of the Groupe BPCE network expanded 10% and new equipment leasing production in France climbed 18%.

Specialized Financial Services recorded a 3% yoy increase in operating expenses, reflecting ongoing moves to integrate Groupe BPCE's payment structures into Natixis.

The provision for credit loss worked out to €21m. This figure reflected an adverse basis of comparison with 1Q16 in the Leasing segment and a temporary impact linked to the migration to a new recovery system in the Consumer Finance business (the situation should return to normal in 2Q17).

This deterioration in the provision for credit loss led to a 13% decline in pre-tax profit relative to 1Q16 and a decrease in ROE after tax, excluding IFRIC 21, to 14.3% (vs. 18.3% in 1Q16).

Financial Investments           

Net revenues from Financial Investments contracted 17% in 1Q17 compared to a year earlier. This contraction primarily reflected the ongoing withdrawal from Corporate Data Solutions entities.  

Turnover from Coface amounted to €345m on a constant perimeter and exchange-rate basis in 1Q17, down only 2% yoy. On a current basis, it totaled €348m vs. €365m in 1Q16, a reduction of 5% that notably reflects the downsizing of Coface's risk exposures on emerging markets and an adverse basis of comparison in North America (large contracts in 1Q16).
In line with the Fit-to-Win plan, Coface maintained a tight grip on expenses: excluding the public guarantee management business, the cost ratio improved 0.8pps yoy to 33.9% in 1Q17.
The loss picture is improving, with a loss ratio dropping to 58.2% in 1Q17 compared to 68.0% in 4Q16 and 72.4% in 3Q16. This significant decline lends weight to the 61% target for full-year 2017.
The combined ratio net of reinsurance worked out to 92% in 1Q17.

Appendices

Note on methodology:

The results at 31/03/2017 were examined by the board of directors at their meeting on 5/09/2017.
Figures at 31/03/2017 are presented in accordance with IAS/IFRS accounting standards and IFRS Interpretation Committee (IFRIC) rulings as adopted in the European Union and applicable at this date.

  
2016 figures are presented pro forma of new intra-pole organizations:

1. CIB: The 1H16 quarterly series have been restated for the change in CIB organization announced on March 15 2016. The new presentation of businesses within CIB mainly takes into account the creation of a new business line: Global Finance & Investment banking housing all financing businesses (structured & plain vanilla financing), as well as M&A, Equity Capital Markets, and Debt Capital Markets.
2. SFS: Within Financial services, transfer of the Intertitres activity from Employee savings scheme to the Payments business. Employee savings scheme becomes Employee savings plans. The 2016 series have been restated accordingly to this new organization.

Business line performances using Basel 3 standards:

• The performances of Natixis business lines are presented using Basel 3 standards. Basel 3 risk-weighted assets are based on CRR-CRD4 rules as published on June 26th, 2013 (including the Danish compromise treatment for qualified entities).
   
• Natixis' ROTE is calculated by taking as the numerator net income (group share) excluding DSN interest expenses on preferred shares after tax. Equity capital is average shareholders' equity group share as defined by IFRS, after payout of dividends, excluding average hybrid debt, average intangible assets and average goodwill.
   
• Natixis' ROE: results used for calculations are net income (group share), deducting DSN interest expenses on preferred shares after tax. Equity capital is average shareholders' equity group share as defined by IFRS, after payout of dividends, excluding average hybrid debt, and excluding unrealized or deferred gains and losses recognized in equity (OCI).
   
• ROE for business lines is calculated based on normative capital to which are added goodwill and intangible assets for the business line. Normative capital allocation to Natixis' business lines is carried out on the basis of 10% of their average Basel 3 risk-weighted assets. Business lines benefit from remuneration of normative capital allocated to them. By convention, the remuneration rate on normative capital is maintained at 3%.

Net book value: calculated by taking shareholders' equity group share, restated for hybrids and capital gains on reclassification of hybrids as equity instruments. Net tangible book value is adjusted for goodwill relating to equity affiliates, restated goodwill and intangible assets as follows:

Own senior debt fair-value adjustment: calculated using a discounted cash-flow model, contract by contract, including parameters such as swaps curve, and revaluation spread (based on the BPCE reoffer curve). Adoption of IFRS 9 standards, on November 22, 2016, authorizing the early application of provisions relating to own credit risk as of FY2016 closing. All impacts since the beginning of the financial year 2016 are recognized in equity, even those that had impacted the income statement in the interim financial statements for March, June and September 2016.

Leverage ratio: based on delegated act rules, without phase-in except for DTAs on tax-loss carryforwards and with the hypothesis of a roll-out for non-eligible subordinated notes under Basel 3 by eligible notes. Repo transactions with central counterparties are offset in accordance with IAS 32 rules without maturity or currency criteria. Leverage ratio disclosed including the effect of intragroup cancelation - pending ECB authorization.

Exceptional items: figures and comments on this press release are based on Natixis and its businesses' income statements excluding non- operating and/or exceptional items detailed page 3. Natixis and its businesses' income statements including these items are available in the appendix of this press release.

Restatement for IFRIC 21 impact: The cost/income ratio and the ROE excluding IFRIC 21 impact calculation takes into account by quarter one fourth of the annual duties and levies concerned by this new accounting rule.

Earnings capacity: net income (group share) restated for exceptional items and the IFRIC 21 impact.

Expenses: Sum of operating expenses and Depreciation, amortization and impairment on property, plant and equipment and intangible assets.

1Q17 results: from data excluding exceptional items to reported data

Natixis - Consolidated

Natixis - Breakdown by Business division in 1Q17

IFRIC 21 effects by business line

(1) -€14m in recurring expenses and -€14m in non-recurring expenses linked to the additional Corporate Social Solidarity Contribution resulting from agreement with CNP

Investment Solutions

1. Normative capital allocation methodology based on 10% of the average RWA-including goodwill and intangibles

Corporate & Investment Banking

1. Normative capital allocation methodology based on 10% of the average RWA-including goodwill and intangibles

Specialized Financial Services

1. Normative capital allocation methodology based on 10% of the average RWA-including goodwill and intangibles

Financial Investments

Corporate center

Regulatory capital in 1Q17 & financial structure Basel 3

1. Statutory balance sheet

Leverage ratio
According to the rules of the Delegated Act published by the European Commission on October 10, 2014 , including the effect of intragroup cancelation - pending  ECB authorization

(1) Without phase-in except for DTAs on tax loss carryforwards - supposing replacement of existing subordinated issuances when they become ineligible (2) Repos with clearing houses cleared according to IAS32 standard, without maturity or currency criteria

Normative capital allocation and RWA breakdown at end-March 2017 - under Basel 3

Net book value as of March 31, 2017 ⁽¹⁾

(1) Post distribution scheduled for 2016 (2) See note on methodology (3) Net tangible book value = Book value - goodwill - intangible assets (4) Calculated on the basis of 3,135,684,763 shares - end of period

Earnings per share (1Q17)  

(1)      See note on methodology

Balance sheet

Doubtful loans (inc. financial institutions)

Disclaimer

This media release may contain objectives and comments relating to the objectives and strategy of Natixis. Any such objectives inherently depend on assumptions, project considerations, objectives and expectations linked to future and uncertain events, transactions, products and services as well as suppositions regarding future performances and synergies.

No assurance can be given that such objectives will be realized. They are subject to inherent risks and uncertainties, and are based on assumptions relating to Natixis, its subsidiaries and associates, and the business development thereof; trends in the sector; future acquisitions and investments; macroeconomic conditions and conditions in Natixis' principal local markets; competition and regulation. Occurrence of such events is not certain, and outcomes may prove different from current expectations, significantly affecting expected results. Actual results may differ significantly from those implied by such objectives.

Information in this media release relating to parties other than Natixis or taken from external sources has not been subject to independent verification, and Natixis makes no warranty as to the accuracy, fairness, precision or completeness of the information or opinions herein. Neither Natixis nor its representatives shall be liable for any errors or omissions, or for any prejudice resulting from the use of this media release, its contents or any document or information referred to herein.

Included data in this press release have not been audited.

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