DISPOSICIONS GENERALS Decrets de l'Alcaldia
Districte 1. Ciutat Vella
V2.1 – A year of sharp ups and downs
As in 2011, the question of sovereign debt led to alternating bouts of lost confidence and renewed risk appetite. At the beginning of the year, long-term refinancing operations (LTRO) carried out by the European Central Bank (ECB) in support of euro zone banks gave rise to the feeling that the problem had been resolved. However, doubts surrounding Spain and Italy’s public finances and the absence of any lasting solution for Greece led to increased strains on interest rates and gave rise to fears that the euro zone might collapse. The ECB was forced to intervene during the summer by adopting the role of lender of last resort. This decision, combined with the provision of substantial amounts of liquidity by the other major central banks, eventually allowed optimism to win through, thus giving the backseat to the tough austerity drive that has sharply reduced domestic demand, curbed international trade and increasingly sapped growth in the United States and emerging countries.
Europe: a roller coaster ride
The crisis passed through three distinct phases. In the first one, the refinancing operations undertaken by the ECB at the end of 2011 clearly relieved tensions: Spanish and Italian banks used the borrowed funds to buy up their countries’ sovereign debt on a massive scale. In the spring, however, the call for private sector creditors to take part in the haircut on Greek debt, together with governments’ failure to meet their deficit reduction objectives, led to investors drastically reducing their exposure to the euro. With capital taking flight and sovereign bond rates soaring, many feared the worst. Finally, the ECB’s announcement of the launch of “Outright Monetary Tran- sactions” (OMT) attenuated systemic risk without exposing political leaders to moral hazard. By making OMTs conditional on the prior existence of a partial assistance agreement with the European Stability Mechanism (ESM), which requires approval by the ESM’s board of governors, the ECB effectively avoided signing a blank check for countries in difficulty.
While this action may have saved the euro zone, it did not solve the question of how to reactivate GDP growth, nor was it intended to. The deleveraging phase that started two years ago will continue to weigh down on growth prospects for several more years. Following a 2012 marked by recession, 2013 is likely to see near-stagnation. Internal demand will remain heavily subdued, and sources of activity will have to be sought beyond the frontiers of Europe. For several quarters now, European economies have been kept afloat only by exports, and this will continue in 2013. This underlines the importance of bolstering gains in competitiveness in order to lock in improvements in the balance of trade. The continuing flatness of the economy has added fuel to the debate on whether austerity measures should be eased by deferring public deficit targets by one or two years, depending on the country, to take account of the short-term economic situation.
The outlook might brighten slightly if improvement is seen in the first quarter. Institutional developments were also far-reaching. The ESM is now fully operational and strengthened by the ECB’s commitment. Oversight mechanisms came into operation, with more exhaustive controls on imbalances and ever stricter recommendations from the EU authorities. Another particularly important logjam was cleared - that of the banking union, which will consolidate the European structure.
United States: ever tougher budget negotiations
The US started 2012 on an upbeat note, which gradually faded as a result of the worldwide slowdown caused by the difficulties in Europe and the impossibility of compromise between Republicans and Democrats on budget issues.
Since they share power in Congress, the two parties had agreed to defer all budget decisions to 2013 - this with an eye on the November 2012 elections, which they hoped would give them a mandate to negotiate. Since the electorate in effect opted to maintain the status quo, the fog has not cleared. An eleventh-hour partial agreement reached on January 1, 2013, while in fact dealing only with the revenue side of the equation, nonetheless avoided the “fiscal cliff” that would have plunged the US into recession. However, the compromise needed to agree on spending cuts by the end of February remained doggedly elusive. In this situation, economic agents preferred to adopt a cautious stance. Despite the uptick in the early part of the year, uncertainty returned in the second half, leading businesses to cut back on capital expenditure and hiring. The effect took longer to work through to households, whose spirits were lifted by the rebound in real estate, but consumption will likely continue to suffer for several more months.
While waiting for the politicians to finally set the pace and methods for reducing the gap in the budget, the Federal Reserve continued to make available all necessary resources to reduce its negative impact. It launched a new mortgage-backed securities purchasing program to support and extend the reactivation of the real estate sector, which is an important job creator. It further eased its monetary policy by replacing “Operation Twist” (exchanging short-term Treasury securities for longer-term ones), which expired in 2012, with net purchases for an additional $45 billion per month. This highly accommodative strategy will be maintained until the unemployment rate stabilizes below 6.5%, which will not be before 2014.
Emerging markets: growth is slowly being whittled away
Faced with slackening external demand, emerging countries were obliged to take additional measures to support economic activity. Virtually all their central banks (with the notable exception of Russia’s) eased their policies in order to favor capital expenditure and avoid excessive appreciation of their currencies. Governments also continued or accelerated their stimulus plans in order to boost domestic consumption and thus further reduce their dependence on external demand as the driver of economic growth.
With the pace of expansion currently in a stabilization phase, emerging economies partly dispelled the doubts surrounding their soli- dity. This was particularly so in the case of China, which is in full transition. The Chinese authorities managed to hold GDP growth above 7%, the threshold needed to ensure social stability. They have adopted a stimulus plan that is less far-reaching than that of 2008/09, but more finely targeted at achieving gradual deflation of the real estate bubble. Growth should resume its upward trend in 2013, having apparently bottomed out, which is also the case in Brazil.
Overall, progress in terms of European structure, together with expansionist monetary strategies, allowed global growth to consolidate at a moderate but acceptable level. Growth in 2013 is likely to be limited while new public spending practices are being implanted, but we shall probably see a clearer uptick in 2014.
V.2.2 – Key financial points relating to the consolidated financial statements
of Banque Fédérative du Crédit Mutuel
Pursuant to regulation (EC) 1606/2002 on the application of international accounting standards and regulation (EC) 1126/2008 on the adoption of said standards, the consolidated financial statements for the financial year have been drawn up in accordance with IFRS as adopted by the European Union at December 31, 2012. These standards include IAS 1 to 41, IFRS 1 to 8 and any SIC and IFRIC interpretations adopted at that date. Standards not adopted by the European Union have not been applied. The financial statements are presented in accordance with CNC recommendation 2009-R.04.
All IAS and IFRS were updated on November 3, 2008 by regulation 1126/2008, which replaced regulation 1725/2003. The entire framework of standards is available on the European Commission’s website at: http://ec.europa.eu/internal_market/accounting/ias/ index_en.htm
The information on risk management required by IFRS 7 is shown in a specific chapter of the management report.
IAS 19R on employee benefits published in the Official Journal of the European Union dated June 5, 2012, application of which is mandatory as from January 1, 2013, has been applied early as from January 1, 2012. The impact of this first-time application is explained in the notes to the consolidated financial statements.
Note: The table of new accounting standards applied as from January 1, 2012 is presented in Note 1.1 to the consolidated financial statements.
V.2.2.1 – Scope of consolidation
The general principles for the inclusion of an entity in the consolidation scope are defined in IAS 27, IAS 28 and IAS 31. The conso- lidation scope comprises entities under exclusive control, entities under joint control and entities over which the Group exercises signi- ficant influence.
Note: definitions of the various types of control and influence are presented in Note 1.2 to the consolidated financial statements. Shareholdings owned by private equity companies over which joint control or significant influence is exercised are excluded from the scope of consolidation and their value is accounted for under the fair value option.
V.2.2.2 – Changes in consolidation scope
Changes in the scope of consolidation as of December 31, 2012 were as follows:
Additions to the scope of consolidation
– Banking network and network subsidiaries: Banco Popular Español, BECM Monaco.
– Insurance companies: Agrupacio AMCI, AMSYR, AMDIF, Assistencia Advancada Barcelona, Agrupacio Bankpyme Pensiones, Agru- pacio Serveis Administratius, ACM RE.
– Other companies: Est Info TV, Lafayette CLO, GEIE Synergie.
Mergers / acquisitions
Euro Protection Services with Euro Protection Surveillance; Laviolette Financement with Factocic; Procourtage with Atlancourtage; Pasche International Holding with Pasche Finance; SEHPL with EBRA; RL Voyages with GRLC; Cime et Mag with Les Editions de l’Echiquier; Sofiliest et Publicité Moderne with l’Est Républicain; Alsatic with AMP; Europe Régie, AME, SCI Roseau and SCI Ecriture with SFEJIC.
Removals from the scope of consolidation
Cofidis Romania; Pasche Fund Management Ltd; Pasche SA Montevideo; Serficom Investment Consulting (Shanghai) Ltd; Serficom Maroc Sarl; A Télé.
V.2.3 – BFCM Group activity and results
V.2.3.1 – Analysis of the consolidated statement of financial position
The total IFRS consolidated statement of financial position of BFCM Group was e397.2 billion compared to e382.4 billion in 2011
(+ 3.9%).
Financial liabilities measured at fair value through profit or loss amounted to e31.0 billion in 2012, compared to e30.9 billion in 2011.
Those financial liabilities were mainly derivatives and other financial trading liabilities, as well as amounts due to credit institutions and measured at fair value through profit or loss.
The other liabilities due to credit institutions came to e34.5 billion compared to e49.1 billion in 2011 (- 29.8%).
Issues of securities other than those measured at fair value through profit or loss totaled e93.5 billion compared to e86.7 billion in
2011 (+ 7.9%). Interbank securities and negotiable debt securities accounted for the bulk of these, with an outstanding amount of e49.5
billion, followed by bond loans (e43.8 billion). The balance comprised short-term notes and various other securities.
The item “Due to customers” on the liabilities side of the statement of financial position is made up of customer savings deposits, including accrued interest. These deposits increased by 10.3% to e134.9 billion in 2012 1, confirming the significant recovery of savings-
related inflows. The contribution of CIC entities alone represented 80% of this total, i.e. e107.9 billion, whereas Targobank Germany
contributed 7.8% (e10.6 billion), Cofidis Group e0.7 billion and Targobank Spain e0.8 billion.
Technical reserves of insurance companies, representing liabilities to policyholders, came to e62.1 billion (+ 11.1%), of which e55.0
billion comprised customer savings entrusted to the life insurance companies of Groupe Assurances du Crédit Mutuel (GACM). The non-controlling interests shown as liabilities (e3.3 billion at the end of 2012) mainly related to other Crédit Mutuel companies’
shareholdings in Groupe des Assurances du Crédit Mutuel (GACM, of which they own 28% of the capital), external shareholders within CIC (7% of capital) and the outside shareholders of the Cofidis Group (57% of the capital).
On the assets side, interbank investments increased by 7.0% between 2011 and 2012 to e70.7 billion.
Total loans and receivables due from customers rose from e165.4 billion to e165.8 billion (+0.3%) in 2012.
Nearly 80% of all loans are granted through CIC entities (132.9 billion). The loan portfolio of BECM represents 6% of total loans outstanding (e10.4 billion), followed by Targobank Germany (10.1 billion), Cofidis Group (7.7 billion), Targobank Spain (nearly 1 billion)
and Banque Casino (0.3 billion).
Financial instruments measured at fair value through profit or loss came to e43.1 billion compared to e36.9 billion in 2011.
Goodwill on the assets side (totaling e4.2 billion) resulted mainly from the acquisition of Targobank Germany securities in December
2008 (e2.8 billion), the acquisition of a e0.4 billion stake in the Cofidis Group at the beginning of March 2009, CIC securities (residual
goodwill of e506 million) and Targobank Spain securities for e183 million.
V.2.3.2 – Analysis of the consolidated income statement
Net banking income rose from e7.740 1 billion in 2011 to e8.159 billion at December 31, 2012.
General and administrative expenses totaled e5.1 billion compared to 4.9 billion. The changes in tax and social security regulations
(doubling of tax for systemic risks, increase in the “forfait social” corporate contribution) represented more than one-third of this increase. However, they remained under control, increasing by just 1.6% in 2012 excluding these external factors.
Net additions to/reversals of provisions for loan losses fell by e374 million to e962 million, 30 million of which was from the sale on
the markets of Greek sovereign securities in the first quarter of 2012. In 2011, the Group recorded an expense of e451 million on these
bonds. The net provisioning for known risks (excluding collective provisions) in relation to outstanding loans fell from 0.53% to 0.50% and the overall non-performing loans provisioning ratio was 67.71% at December 31, 2012.
The Group reported net income of e1.2 billion, compared to e1.086 billion in 2011.
The financial soundness of Banque Fédérative du Crédit Mutuel was confirmed by three rating agencies, which maintained its long- term rating at the same level throughout 2012.
V.2.3.3 – Breakdown by activity
BFCM Group’s business segments reflect its organizational structure, which is presented in detail in this document. The reader may also refer to Note 2 to the financial statements “Detailed analysis of the income statement by activity and by geographic area”, as well as Note 3 “Composition of the scope of consolidation”, which presents the selected groupings.
V.2.3.3.1 – Retail banking
Retail banking is the core business of BFCM Group. It comprises the Banque Européenne du Crédit Mutuel, the CIC network, CIC Iberbanco, the Targobank branches in Germany and Spain, the Cofidis Group, Banque Casino and all specialized activities for which the networks handle product marketing, such as equipment leasing and leasing with purchase option, real estate leasing, vendor credit, factoring, fund management and employee savings.
All these activities performed well in 2012. Deposit-taking, already strong in 2011, increased by 9.1%. Outstanding loans also increased, but at a slower pace (+ 1.6%).
In e millions 2012 2011 2011 revised 1 Change 2
Net banking income 5,854 6,214 6,214 - 6,3%
Operating expenses (3,748) (3,679) (3,642) + 2,2%
Operating income before provisions 2,106 2,535 2,573 - 18,3%
Income before tax 1,243 1,785 1,849 - 32,4%
Net income 787 1,192 1,243 - 36,4%
1. After taking into account IAS 19 revised standard and correction of the recognition of the investment in Banco Popular Español according to IAS 8. 2. Change on a comparable period and consolidation scope basis compared to 2011 revised.
Net banking income of retail banking was e5.854 billion compared to e6.214 billion in 2011. The main contributors were the CIC
(2.897 billion), Targobank Germany (e1.298 billion) and Cofidis Group (e1.067 billion) banking networks.
This decline was linked to the erosion in the intermediation margin resulting from high regulated savings rates and the increase in refinancing costs on the markets (gradual extension of loan terms).
General and administrative expenses rose from e3.642 billion in 2011 to e3.748 billion.
Net additions to/reversals of provisions for loan losses totaled e774 million compared to 781 million in 2011, which confirmed strong
risk management, particularly in the consumer credit activities at Cofidis and Targobank Germany. Net income was therefore e787 million compared to 1.243 billion.
V.2.3.3.2 – Insurance
BFCM Group expanded its insurance activities through the subsidiaries of the Groupe des Assurances du Crédit Mutuel (GACM) holding company, including in particular ACM Vie SA, Serenis Vie, ACM IARD, Serenis Assurances, Partners Assurances in Belgium and ICM Life in Luxembourg. The GACM companies do business in life and non-life insurance, insurance brokerage and reinsurance. The network handles product marketing.
In e millions 2012 2011 3 Change
Net banking income 1,318 875 + 50.5%
Operating expenses (335) (332) + 0.9%
Operating income before provisions 983 544 + 80.8%
Income before tax 942 587 + 60.4%
Net income 568 414 + 37.2%
3. Non-material impact of IAS 19 revised standard.
Consolidated insurance revenue increased by 0.9% to e7.9 billion compared to 2011: - 2.2% for life insurance, + 3.4% for personal
insurance, + 7.7% for automobile insurance and + 8.8% for home insurance.
Net premium income totaled e1.318 billion at December 31, 2012 compared to e875 million, after remittances to the retail networks
totaling e1.060 billion. Net income was e568 million, compared to e414 million in 2011, despite a higher tax burden.
V.2.3.3.3 – Corporate banking
Corporate banking includes the financing of large corporates and institutional clients, value-added financing (project and asset financing, export financing, etc.), international activities and foreign branches.
In terms of assets under management, and in a difficult economic environment marked by a slowdown in operations, credit declined by 15.8% to e13.1 billion while deposits increased significantly by 25.9% to e5.6 billion.
In e millions 2012 2011 3 Change
Net banking income 324 485 - 33.1%
Operating expenses (92) (83) + 11.0%
Operating income before provisions 232 401 - 42.3%
Income before tax 171 369 - 53.7%
Net income 131 240 - 45.6%
3. Non-material impact of IAS 19 revised standard.
Net banking income was e324 million (485 million in 2011) as a result of a reduction in margins following customer deposit-taking
efforts and better asset-liability duration matching. Additions to/reversals of provisions for loan losses increased from e28 million to e61 million. However, actual net provisioning for known risks (excluding collective provisions) remained stable at e49 million. Net income
therefore amounted to e131 million, compared to e240 million at the end of 2011.
V.2.3.3.4 – Capital markets
BFCM and CIC have consolidated their capital markets activities under one roof, “CM-CIC Marchés”. CM-CIC Marchés carries out the CM11-CIC refinancing and commercial and investment activities from offices in Paris and Strasbourg, as well as through branches in New York, London, Frankfurt and Singapore.
These transactions are recognized on two balance sheets: – that of BFCM for the refinancing business line,
– and that of CIC for the commercial and investment activities in fixed income products, equities and credit. The capital markets activities also include stock market intermediation, which is provided by CM-CIC Securities.
In e millions 2012 2011 1 Change
Net banking income 603 401 + 50.4%
Operating expenses (196) (173) + 13.4%
Operating income before provisions 407 228 + 78.5%
Income before tax 383 112 + 241.9%
Net income 230 61 + 277.0%
1. Non-material impact of IAS 19 revised standard.
At December 31, 2012, net banking income was more than e603 million (e401 million in 2011). General and administrative expenses
increased by more than e23 million (+ 13.4%), mainly as a result of changes in tax and social security regulations. Net additions to/
reversals of provisions for loan losses, which in 2011 included the cost of provisions for Greek debt, fell by e92 million to e24.5 million.
V.2.3.3.5 – Private banking
The private banking segment develops know-how in financial and wealth management, which is offered to the families of business owners and private investors.
The companies in this segment operate in France through CIC Banque Transatlantique and Dubly-Douilhet SA as well as abroad through the subsidiaries Banque de Luxembourg, Banque CIC Suisse, Banque Transatlantique Luxembourg, Banque Transatlantique Belgium, CIC – Banque Pasche and the CIC Singapore branch.
In e millions 2012 2011 1 Change
Net banking income 464 431 + 7.4%
Operating expenses (334) (317) + 5.6%
Operating income before provisions 129 115 + 12.4%
Income before tax 106 85 + 24.6%
Net income 79 68 + 16.9%
1. Non-material impact of IAS 19 revised standard.