2005 - Groupe Crédit du Nord

Transcription

2005 Financial Report
2005
A different perspective on banking
A different perspective on banking
Financial
report
2005
Contents
3
4
6
11
12
28
45
2005 REVIEW
KEY FIGURES
GROUP STRUCTURE
CONSOLIDATED FINANCIAL STATEMENTS
CHAIRMAN’S REPORT ON INTERNAL CONTROL
STATUTORY AUDITORS’ REPORT ON THE REPORT
SUMMARY BALANCE SHEETS
CONSOLIDATED INCOME STATEMENTS
CHANGE IN SHAREHOLDERS’ EQUITY
CASH FLOWS STATEMENT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXTRACT)
104
ADDITIONAL INFORMATION
GENERAL DESCRIPTION OF CRÉDIT DU NORD
SHAREHOLDER AND CAPITAL INFORMATION
GROUP ACTIVITY
RESPONSIBILITY FOR THE REGISTRATION
DOCUMENT AND AUDIT
MANAGEMENT REPORT
OF THE CHAIRMAN
42
44
45
48
49
107
108
110
112
114
STATUTORY AUDITORS’ REPORT
Corporate governance
AS AT DECEMBER 31, 2005
BOARD OF DIRECTORS
Date appointed
Year in which current
mandate will expire
October 1, 2002
2008
Philippe CITERNE
April 28, 1997
2009
Patrick DAHER
September 15, 2005
2009
Bruno FLICHY
April 28, 1997
2007
Jacques GUERBER
February 22, 2000
2010
Daniel JULIEN
May 15, 2003
2009
Axel MILLER
October 23, 2003
2006
Christian POIRIER
April 28, 1997
2007
Pierre RICHARD
February 22, 2000
2008
Hervé SAINT-SAUVEUR
May 14, 2002
2008
Patrick SUET
May 3, 2001
2007
Yvette BODEVIN (employee representative)
November 23, 2000
2006
Marie-Christine REMOND (employee representative)
September 25, 1997
2006
Patrick ROUSSEAU (employee representative)
October 28, 1999
2006
Chairman of the Board of Directors
Alain PY
Directors
The Board of Directors met three times during the course of 2005 in order to examine the budget, yearly and half-yearly accounts
and discuss strategic decisions concerning commercial, organizational and investment policies.
The Compensation Committee, consisting of two Directors – Philippe Citerne and Patrick Suet – met once in the course of the year to
submit a proposal to the Board of Directors concerning fixed and variable compensation, including benefits, for company directors.
EXECUTIVE COMMITTEE
Alain Py, Chairman and Chief Executive Officer
Bernard Beaufils, Chief Executive Officer
Marc Batave, Deputy Chief Executive Officer – Group’s Chief Client Officer
Jean-Pierre Bon, Deputy Chief Executive Officer – Finance Division
Pierre Boncourt, Head of Human Resources
Francis Molino, Head of Banking Operations
Patrick Renouvin, Deputy Chief Executive Officer – Information Systems and Projects Division and Banking Operations Division
Clare Brennen, Head of Communications (attends Executive Committee meetings)
2005 review
2005
Contents
4
6
FINANCIAL
REPORT
KEY FIGURES
GROUP STRUCTURE
Financial report 2005 Crédit du Nord Group •
3
Key figures
AS AT DECEMBER 31, 2005
GROUP: CONSOLIDATED DATA
2005
IAS/IFRS (1)
2004
IAS/IFRS (2)
2004
French
standards
% change
2005/2004
IAS/IFRS
Client deposits
16,277.7
14,990.7
14,990.7
+8.6
Client loans
20,132.9
18,216.2
18,216.2
+10.5
Shareholders’ equity
1,273.9
1,166.3
1,163.2
+9.2
Doubtful loans (gross)
1,055.6
1,139.7
1,139.7
–7.4
599.9
705.9
686.5
–15.0
TOTAL ASSETS
31,942.6
28,482.7
28,478.8
+12.1
ASSETS UNDER MANAGEMENT
32,067.6
30,845.9
30,845.9
+4.0
1,381.2
1,313.8
1,308.8
+5.1
Gross operating income
455.5
432.7
432.2
+5.3
Income before tax
395.4
365.3
365.1
+8.2
Net income
250.1
233.8
233.2
+7.0
(in millions of euros)
BALANCE SHEET
Provisions for doubtful loans
INCOME
Net banking income
(1) IAS/IFRS, including IAS 32 & 39 and IFRS 4.
(2) IAS/IFRS, excluding IAS 32 & 39 and IFRS 4.
4
• 2005 Review • Consolidated financial statements • Additionnal information
RATIOS
2005 (1)
2004(2)
2003(3)
Cost of risk/loan outstandings
0.31
0.38
0.43
Shareholders’ equity/total assets
3.99
4.08
4.14
Solvency ratio (4)
9.01
9.15
8.78
Tier One Capital (5)/Total risk-weighted credit exposure (4)
6.28
6.68
6.61
2005
2004
2003
ST
A–1+
A–1+
A–1+
LT
AA –
AA –
AA –
ST
F1
F1
F1
LT
A+
A+
A+
BC
BC
BC
(%)
CREDIT RATINGS
Standard and Poor’s
Fitch
Standalone
CONTRIBUTION OF CRÉDIT DU NORD (PARENT COMPANY)
2005
IAS/IFRS (1)
2005
French
standards
2004 (*)
French
standards
Net banking income
903.2
903.0
911.1
–0.9
304.6
304.4
326.5
–6.8
Net income
181.9
180.8
198.9
–9.1
(3) French accounting standards.
(4) These ratios are provided only as an indication by which to assess the
profitability of the Crédit du Nord Group since the Group is not directly bound
by regulatory solvency ratio requirements due to the nature of the Group’s
ownership.
(5) Tier One (excluding income currently being integrated).
% change
2005/2004
French
standards
(*) The scope of consolidation for income comparisons changed significantly
year to year as the Champagne-Ardenne sector was transferred to Banque
Kolb on January 1, 2005. However, the figures have not been adjusted as
this change has a relatively minimal impact.
5
Group structure
Crédit
du Nord
78.5%
99.9%
100%
96.8%
98.3%
63.2%
Banque
Kolb
Banque
Courtois
Banque
Laydernier
Banque
Rhône-Alpes
Banque
Nuger
21.4%
100%
64.0%
Kolb
Investissement
80%
9.8%
Étoile
Gestion
8.3%
Banque
Tarneaud
8.4%
100%
100%
100%
50%
35%
SDB Gilbert
Dupont
Norfinance
GD et Associés
Norbail
Immobilier
Antarius
Banque
Pouyanne
99.8%
100%
99.8%
20%
100%
Nord Assurances
Courtage
S.P.T.F.
Norimmo
Dexia
CLF Banque
Star Lease
Shareholdings of less than 5% are not shown.
Only those banks and companies with total assets in excess of 100 millions of euros on net income in excess of 1 million of eurosover the past three years are
shown here.
Other Group companies are listed under “Scope of consolidation”, and financial data for these companies are shown in the notes to the financial statements
under the heading “Activity of consolidated subsidiaries and affiliates”.
6
Consolidated
financial
statements
2005
Contents
8
28
41
FINANCIAL
REPORT
MANAGEMENT REPORT
CHAIRMAN’S REPORT ON INTERNAL CONTROL
STATUTORY AUDITORS’ REPORT ON THE REPORT
OF THE CHAIRMAN
42
44
45
48
49
SUMMARY BALANCE SHEETS
CONSOLIDATED INCOME STATEMENTS
CHANGE IN SHAREHOLDERS’ EQUITY
CASH FLOWS STATEMENT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXTRACT)
104
STATUTORY AUDITORS’ REPORT
ON THE CONSOLIDATED FINANCIAL STATEMENTS
7
Management report
FISCAL YEAR 2005
TENTATIVE IMPROVEMENTS
IN THE FRENCH ECONOMY
The global economy continued to expand at a strong pace in
For the European Central Bank uncertainties over improvements in eurozone growth are more than outweighed by the rise
of inflation caused by the surge in oil prices.
2005, confirming the record growth levels seen in 2004. The
As a result, it raised rates by 25bp on December 1 after almost
main risk factors identified at the beginning of the year linked to
30 months of status quo. The markets however do not seem to
international relations, exchange rates and raw material prices
be factoring in a rapid tightening of monetary conditions in the
did not materialise sufficiently to damage the buoyancy of world
eurozone – after falling sharply in the first half of 2005, long
economic growth. Even if oil prices escalated to a peak in
rates only bounced back slightly at the end of the year, with the
August-September of around $70 per barrel, the impact of the
10-year OAT closing at 3.38% at end-December 2005 versus
increase has to date only had a limited effect on global
3.64% one year earlier and 3.20% in June.
economies.
European stock markets remained extremely bullish over the
In 2005, eurozone countries profited to an even greater extent
year, buoyed by strong results from large French groups that
from strong business levels in the other main economic regions
were able to profit from global economic growth as a result of
of the world, due in part to the depreciation of the euro against
successful international expansion. The CAC 40 progressed by
the dollar over the year (from $1.36 per euro in December
23.4% to 4,715 points between end-2004 and end-2005,
2004 to 1.18 one year later). Nevertheless, the actual
which put it back at its mid-2001 levels.
economic climate varied widely from one country to another
and whereas Germany appears to be benefiting from renewed
price competitiveness, Italy seems unable to shake off its
ongoing economic inertia. However, given the weak levels of
consumer demand in both countries, there are some doubts as
CRÉDIT DU NORD GROUP CONFIRMED
ITS STRONG COMMERCIAL
AND FINANCIAL PERFORMANCES
to whether growth will continue to improve in 2006.
The results at December 31, 2005 were prepared under IFRSs,
France differed from its two large trading partners in that
consumer demand remained high and will have made a significant contribution to the +1.6% growth in GDP in 2005. Note
including IAS 32 & 39 and IFRS 4. Comparative figures for
2004 were also restated under IFRSs, but excluding IAS 32 & 39
and IFRS 4.
however that the positive consumer effect was largely due to a
fall in the household savings rate and there is no guarantee that
In 2005, Crédit du Nord Group reiterated the strong perfor-
this trend will continue. Given that the job recovery is still only
mances of 2003 and 2004, posting NBI growth in excess of 5%
modest and the slight dip in unemployment was mainly a result
for the third consecutive year. NBI in fact rose by 5.1%, GOI by
of subsidised jobs and new jobs in the not-for-profit sector.
5.3% and consolidated net income by 7.0% to a total of
250.1 millions of euros. ROE came out at 20.1% for a Tier One
ratio of 6.3%.
8
The new accounting standards require that the Group books a
Growth in banking fees remained strong, although slightly
provision for its commitments relating to home savings prod-
slower than the significant rates seen in recent years. The
ucts and that it reviews this provision at the end of each quarter
Group’s banks are making efforts to limit price increases, which
according to interest rate levels. Excluding the impact of this
means the rise in banking fees is primarily being fuelled by
revaluation, NBI would have risen by 5.6% over the year, which
satisfactory customer base growth and by increases in the
provides a better reflection of the dynamism of the Group’s
number of products and services per customer.
operating performance.
2005, for example, saw the launch of the American Express
Margins on deposits were boosted throughout the year by
Personal and American Express Gold cards, which are a useful
extremely strong rises in current account deposits, both for
complement to the range of bank cards offered by the Group’s
individual customers and for business customers, the majority
banks. Sales of American Express cards for the first year of
of whom seem to be enjoying healthy levels of cash. However,
distribution came to a total of 13,000.
growth in deposits was largely offset by low interest rates which
weighed on margin growth via a negative price effect.
After a rather lacklustre first half to the year, loan margins
The Group’s best results in 2005 were in financial savings, as
customers gradually abandoned the cautious approach of 2004
and took advantage of the stock market recovery by shifting
recovered and had visibly improved by the end of the year.
their investments to equity products. As a result, in life insur-
Albeit fragile, the improvement in economic activity is rekin-
ance, the share of inflows invested in unit-linked policies
dling demand for operating loans, which had tended to wane in
increased twofold on the previous year, while medium and long-
recent years. As a result, short-term loans to businesses and
term mutual funds once again attracted positive net inflows
professionals rose sharply at the end of the year.
after four consecutive years of net outflows. The number of
Mortgage lending at Crédit du Nord Group rose by 50% to a
total of around 3 billions of euros on the back of a buoyant
property market. In response to this sharp upturn in activity, the
stock market orders executed for our customers also jumped
sharply, reflecting renewed confidence in this type of investment.
Group defined strict standards for its lending business,
Against this more favourable backdrop, the brokerage firm
ensuring it has sufficient shareholders’ equity to finance each
Gilbert Dupont helped to guide Crédit du Nord Group’s
transaction and limiting loan maturities to 20 years. In order to
customers back into the markets. In particular, it managed the
adapt its offering to the demands of the market and to the
IPO for Meilleurtaux.com, the first company to be listed on
current interest rate environment, Crédit du Nord also launched
Alternext, an unregulated market reserved for small and mid
a new loan product, Libertimmo 4, which is initially reimbursed
caps. Gilbert Dupont was also one of the brokers awarded the
at a fixed-rate of interest, but then switches to a capped floating
madcap expertise label by Euronext, a new status designed to
rate for the remaining term.
increase access to small and medium-sized companies.
9
Management report
FISCAL YEAR 2005
SUCCESSFUL IMPLEMENTATION
OF THE GROUP’S ACCELERATED ORGANIC
GROWTH PROGRAMME
THE IMPLEMENTATION OF THE MAJOR
TECHNICAL AND ORGANISATIONAL PROJECTS
CONTINUED ACCORDING TO SCHEDULE
The ambitious branch of branch openings launched in the
Following the first delivery of new workstations for individual
autumn of 2004 and aimed at creating 100 new branches in
customer branch advisors in May 2004, the project was
three years got off to a strong start in its first year; a total of
extended to the business and professional customers. Further
33 branches were opened in 24 different départements,
deliveries have been scheduled for the coming year, to increase
reflecting the Group’s strategic decision to take advantage of
the range of functions available on the new workstations by
areas offering strong potential, while at the same time main-
gradually integrating all products and services.
taining a balanced presence in all regions.
The implementation of the new operating structure at the
Initial surveys of the new branches reveal a very satisfactory
branches was also completed on June 30, 2005. It is designed
start, in line with expectations. The rapid success of the new
to increase the amount of time advisors spend on sales by
branches is largely due to the large amount of professional
making the new workstations quicker and easier to use, opti-
clients in their customer base.
mising resource allocation and delegating certain administrative
In addition, we modified our set up in the east of France by
tasks to the branch support units.
transferring 11 Crédit du Nord branches in the Champagne-
The plan to transfer the custody of securities held by customers
Ardenne region to Banque Kolb. This operation, which follows
of Crédit du Nord Group banks to the Société Générale went
the transfer of the branches in Alsace and Moselle in 2002, is
ahead as planned, with a successful switchover on January 1,
a major step in our bid to make Banque Kolb a reference
2006.
among private banks in the east of France.
As far as regulatory projects were concerned, the transition to
Finally, to accompany this strong organic growth, the Group
International Financial Reporting Standards was completed at
launched a new advertising campaign in the autumn of 2005 to
the beginning of the year, and the Group’s full-year consoli-
promote a new corporate signature for its banks: “a different
dated financial statements for 2005 were prepared under the
perspective on banking”. Comprising television advertisements
new accounting framework and compared to restated figures
and a wave of billboard posters, the campaign draws attention
for 2004 prepared under IFRS (with the exception, as stipu-
to Crédit du Nord Group’s original banking model, which is
lated in IFRS 1, of IAS 32 and IAS 39 on financial instruments
based on a close, local relationship between the bank and its
and IFRS 4 on insurance contracts, which were only applicable
customers. In 2006, the initiative was singled out for the TOP
as of 2005).
COM bronze award by a panel of specialists.
The Group also made significant progress in 2005 in its preparations for the new Basel II capital adequacy framework,
notably in the adaptation of tools for storing management data
which will be used by the risk, commercial and financial functions, and in the modelling of parameters to calculate riskweighted assets. Regulatory capital will be calculated for the
first time under the new standard in 2006, with the system fully
operational in early 2007.
10
Commercial activity
According to Group estimates, new branches accounted for
The present analysis of Crédit du Nord Group’s commercial
activity extends across the entire scope of the Group’s banks
roughly 20% of the growth in the individual customer base in
2005.
(all of which were connected up to a common information
The proportion of customers with six or more products, which is
system in November 2001), i.e. Crédit du Nord and its six
an indicator of customer loyalty, continued to rise steadily,
subsidiary banks: Courtois, Rhône-Alpes, Tarneaud,
reaching 45.9%. This indicator has now replaced the previous
Laydernier, Nuger and Kolb.
benchmark customers with three products or more, which was
Indicators shown relate to euro-denominated business. Figures
for outstanding loans are given as annual averages, while
growth in franchises is based upon end-of-year figures.
approaching saturation at 68%. Take-up of the Norplus service
package, which is the core offering for individual customers,
rose a further 4.0% to 580,000, which is significantly faster
than customer base growth. This was accompanied by significant upgrading, with take-up of the top-end version of the
package, which provides customers with a Visa Premier card,
FURTHER EXPANSION OF THE CLIENT BASE
ACROSS ALL SEGMENTS AND AN INCREASE
IN CUSTOMER LOYALTY
rising 7.3%.
Our range of bank cards was expanded with the launch of the
American Express Personal and American Express Gold cards.
2005 was marked by an increase in the rate of growth of indi-
Over 13,000 of these cards have been sold since their launch
vidual customers to 2.5% year-on-year. This can in part be
in January 2005.
attributed to the roll-out of the new organisation at the
branches, which focuses staff attention on the development of
sales. It can also be put down to the addition of new branches
over the past years, including the most recent openings in 2005
which are starting to make a significant contribution to the
The use of direct banking channels also continued to expand
rapidly, with the number of connections to the individual
customer website increasing by a further 36.9% to over
11 millions.
growth in customer numbers.
INDIVIDUAL CUSTOMERS
BUILDING CUSTOMER LOYALTY
Number of individual customers (in thousands)
% individuals with six products or more
+1.6%
+1.7%
+2.5%
1,282
45.5
45.9
1,251
1,231
43.9
1,210
42.8
2002
2003
2004
2005
2002
2003
2004
2005
The growth rates given in this document have been calculated on the basis of exact figures and not on the rounded-up figures used in the charts.
This remark applies to all of the charts featured in this document.
11
Management report
FISCAL YEAR 2005
The professional market was again particularly buoyant with
Business customer numbers continued to rise in 2005
customer numbers increasing by 8.1% over the year. The
although at a more modest pace than in 2004. The slowdown
Group’s bespoke commercial structures, with on-site dedicated
can be partly attributed to the transfer of business customers to
customer advisors handling both the private and commercial
the professional customer segment which was found to be
aspects of the relationship, have contributed enormously to the
better suited to their needs.
Group’s success in this demanding customer segment. In addition, the Group constantly seeks to tailor its offer to the professional market and continues to provide over the counter
services in all of its branches, enabling it to better meet the
needs of its customers. As with the individual segment,
customer numbers have also been boosted by the recent
A “partnership” offer was set up at the end of the year in order
to take advantage of potential synergies between the business
and individual customer market. Aware of the challenge
companies face in securing the loyalty of promising young
recruits, the Group now offers its business customers attractive
banking conditions for this category of employer.
branch openings.
The very high number of products and services per account is
again a sign of satisfaction in the market. The number of
customers subscribing to the Convention Alliance package
Over one in two business customers now has an Internet
contract and the number of visits to the site’s business pages
rose by 32.4% over the year to almost two million.
climbed 19.3% in a year, while automated service contracts
Two new guaranteed funds, Étoile Duo garanti 2008 and Étoile
designed for retailers grew 6.2%.
Delta, were successfully launched for the institutional investor
The number of Plans d’Épargne Interentreprises (inter-company
market, attracting investments of 20 millions of euros and 25
savings plans) created for small businesses, entrepreneurs and
millions of euros respectively. The Group also structured six
professionals also rose sharply by 27.4% over the year.
Negotiable Medium Term Note issues which raised 84 millions
The Group also made improvements to its professional and
business customer websites in 2005, and now offers service
of euros over the year contributing to the bank’s medium and
long-term financing.
and online management of documentary credit. The number of
visits to the professional website rose significantly by 36.6% on
the previous year to 4.5 millions.
PROFESSIONAL CUSTOMERS
BUSINESS CUSTOMERS
Number of professional customers (in thousands)
Number of active companies (in thousands)
+5.2%
+4.6%
+2.3%
+3.1%
+8.1%
+1.5%
140.1
26.9
26.5
25.9
25.1
129.7
123.2
117.8
2002
12
2003
2004
2005
2002
2003
2004
2005
SAVINGS DEPOSITS CONTINUE TO RISE
Inflows of customer savings were very high over the year in all
The average annual balance of deposits in regulated savings
accounts also continued to rise, due to increased take-up of
these products by customers. However, growth in savings
markets.
account deposits (Codevi accounts, CEL home savings
The rise in the stock market indices (average growth of +16.2%
accounts, contracts, passbook savings accounts) was not as
for the CAC 40 between 2004 and 2005) also generated a posi-
dynamic at the end of the year. It will be interesting to see if the
tive price effect which combined with the increase in inflows to
announcement on February 1 of an increase in rates of interest
grow outstanding savings (deposits and off-balance sheet
has a positive effect on savings inflows. It is unlikely to affect
savings) by 5.8% over the year.
inflows into PEL home saving plans, which dropped off sharply
Current account deposits again grew rapidly in both the indi-
at the end of the year after it was announced that plans over
vidual and the professional and business segments. Although
12 years long would be taxed.
individual customers seem to be taking more interest in long-
Life insurance inflows rose sharply over the year (+20.5%) with
term savings vehicles, they are still choosing to keep comfort-
a much greater focus on unit-linked policies than in previous
able levels of liquid assets. These assets tend to remain in the
years. Unit-linked policies, including three guaranteed funds,
customer’s current account as the opportunity cost is low given
Antarius Garanti April 2013 and Antarius 4 Etoiles I & II,
the current level of interest rates. What is more, businesses and
accounted for 41% of the inflows for the year compared with
professionals were not, generally-speaking, hampered by cash
only 19% in 2004.
flow pressures.
This sign of renewed interest in equity investments is reflected
in the good figures for asset gathering for medium- and longterm mutual funds.
Gross investments by individuals and professionals in mediumand long-term mutual funds progressed by 40% over the year
and, more importantly, net levels returned to positive territory
after four years where redemptions substantially outweighed
subscriptions. The restructuring of the mutual fund offer at end
of 2004 made them more accessible for customers and also
improved returns, contributing to the rise in inflows.
CUSTOMER DEPOSITS
(in billions of euros)
+5.8%
+2.1%
+8.9%
15.52
14.25
13.47
13.19
2.23
4.72
6.23
–22,5%
1.73
+11.0%
5.24
+4.2%
6.50
2002
2003
+5.7%
1.83
+4.1%
5.45
+7.2%
6.96
2004
+26.3%
2.31
+4.8%
5.72
+7.5%
7.49
2005
■ Current account deposits ■ Savings account deposits
■ Other deposits
13
Management report
FISCAL YEAR 2005
RETURN TO STRONG GROWTH
IN INDIVIDUAL CUSTOMER LENDING
OFF-BALANCE SHEET SAVINGS
+1.1%
+7.7%
+4.0%
24.19
23.27
21.61
21.38
+7.3%
4.35
–9.4%
3.94
5.32
+29.1%
6.86
4.23
After stagnating in 2004, mortgage lending increased
spectacularly in 2005, surpassing the historically high level
+10.4%
4.67
recorded in 2003, mainly thanks to the Group’s very attractive
price positioning in a climate of falling interest rates.
+4.0%
7.14
–3.2%
6.91
The real-estate market maintained its momentum, with another
year of buoyant demand and the seventh consecutive year of
price rises in both the Paris region (Ile-de-France) and provin-
5.60
+4.5%
5.85
+13.9%
6.67
+13.2%
7.54
cial areas. This remarkable growth in the market led the Group
to adopt a cautious risk policy, setting strict rules for the
6.11
–19.0%
4.95
+5.6%
5.23
–3.2%
5.07
required policy level of customer down-payments and limiting
loan durations to 20 years. Moreover, price increases slowed
2002
2003
2004
2005
■ Custoday ■ Life insurance ■ ST mutual funds ■ LT mutual funds
towards the end of the year, helping to increase the purchasing
power of potential buyers.
The fall in average annual assets under management in shortterm mutual funds was due to substantial redemptions in 2004.
However, asset levels rose again from the beginning of the year,
outstripping the figures for 2004 as of August.
The decline in the direct custody of securities was linked to an
increased preference for mutual funds and life insurance policies as vehicles for financial savings. The continued increase in
the number of customers with equity savings plans (+4.5%
growth year-on-year in the number of plans and 20.3% growth
MORTGAGE LENDING
in outstanding balances) is also attributable to a rise in the
take-up of eligible mutual funds, again reflecting the preference
–19.4%
+80.2%
+50.5%
for managed equity accounts.
2,913
2,401
1,936
1,332
2002
14
2003
2004
2005
PERSONAL LOAN ISSUANCE
OUTSTANDING LOANS TO INDIVIDUALS
+3.7%
+19.4%
643.0
+14.1%
+3.5%
666.9
+12.0%
+13.6%
690.5
9.57
0.32
8.55
0.32
7.53
538.5
0.32
+5.6%
1.38
+16.1%
6.85
+4.4%
1.44
+13.9%
7.81
6.60
0.31
+6.2%
1.31
+16.8%
5.90
1.23
5.05
2002
2003
2004
2005
2002
2003
2004
2005
■ Mortgage lending ■ Consumer loans ■ Overdrafts
Personal loans increased further in 2005 as the positive trend
However, revolving credit fell very sharply (–6.6%) and indi-
in consumer spending continued, especially in the durable
vidual customer overdrafts only progressed slightly (+2.2%).
goods component which is often associated with funding
These elements seem to indicate that, on average, consumers
requirements. Auto spending progressed by 3.5%
while household goods expenditure was up by 10.0%.
eurohave
billion)
relatively
in(in
2005
comfortable cash levels. This was further
confirmed by the high level of consumer deposits as mentioned
earlier, along with the limited growth in the number of cases of
account mismanagement (+1.6% in the number of penalty
charges for Temporary Cash Facilities (Facilité Temporaire de
Trésorerie), i.e. less than the increase in the customer base).
Overall, outstanding loans to individuals grew sharply, driven
mainly by mortgage loans.
15
Management report
FISCAL YEAR 2005
EARLY SIGNS OF A RETURN TO GROWTH
IN BUSINESS LENDING
Capital expenditure lending rose again after a slump in 2004.
Business investment, although not very robust, was positive
again at the end of the year and the increase in the professional
short-term loan segment, customer receivables financing made
particularly good progress (average rise of +6.0% for the year)
after the Group repackaged its products, especially its Dailly
law financing products (discount financing and financing
secured by a guarantee).
and business customer base helped increase demand for this
type of financing.
This increase in demand was also fuelled by Crédit du Nord
Group’s strategic focus on the lease finance business, which
has been developing through its dedicated subsidiary, Star
NEW LEASE FINANCING
Lease, set up in 2001. Excellent growth in lease financing was
+10.2%
+11.6%
reported again in 2005.
+22.6%
471
Business loans outstandings progressed slowly in 2005 despite
the satisfactory results in the capex loan component (+4.6%).
Indeed, the annual balance of short-term loans declined. Note
384
349
312
however a reversal in this trend in the second half of the year,
with highly positive results at the end of the year for all business
loans, including short-term loans and capex lending. In the
2002
2003
2004
NEW CAPEX LOANS (including corporate bank loans) (1)
OUTSTANDING BUSINESS LOANS
+47.2%
–10.3%
+6.6%
+6.2%
+3.7%
1,550
6.96
1,391
+7.0%
1.51
+7.6%
1.80
+6.1%
4.12
+2.5%
7.89
7.70
7.43
1,478
2005
–10.6%
1.35
+1.6%
1.37
+3.2%
1.85
–2.0%
1.82
+9.2%
4.50
+4.6%
4.70
1.41
1.67
1,053
3.88
2002
2003
2004
2005
(1) Business lending by banks.
16
2002
2003
2004
2005
■ MLT loans ■ Receivables financing and ST loans
■ Overdrafts and others
Financial developments
Excluding the impact of the revaluation of a provision for future
The figures presented below are taken from the Group’s fully
commitments under home savings products, NBI would have
increased by 5.6%. This provision reflects the fair value of
consolidated financial statements.
certain commitments linked to products which give the
There was no significant change to the Group’s consolidation
customer arbitrage options both during the savings and loan
scope in 2005. In 2004, the Group integrated SNC Europe
phases.
Lafayette, a wholly-owned subsidiary of Banque Rhône-Alpes,
which is now fully consolidated and whose only assets are real
NBI in 2005 also integrated the cost of CDN’s repurchase of
“titres participatifs” issued in 1985 and 1990 (–3.2 millions of
estate assets and a lease finance contract.
euros), a capital gain from the sale of non-core stock (+3.0
In order to provide complementary information on specific
millions of euros) and two capital gains from the sale of stock as
accounting items, reference will be made to managerial
part of the Group’s capital development plan for (+7.2 millions
accounting analyses applicable to different scopes of consoli-
of euros).
dation as explained in the accompanying text. These analyses
concern first and foremost Retail Banking, which represents
A management analysis relating to the Group’s full consolidation scope is useful in gaining a better understanding of NBI
over 90% of Group activity.
and the underlying trends in its various components.
The figures for 2004 and 2005 were prepared under IFRS,
including IAS 32 & 39 and IFRS 4 for 2005, and excluding
IAS 32 & 39 and IFRS 4 for 2004. The figures for 2003,
included to provide a historical comparison, were prepared
2005 (1)
2004 (2)
% change
2005/2004
Net interest
and similar
772.7
751.3
+2.8
Net fee income
608.5
562.5
+8.2
1,313.8
+5.1
Group consolidated data (in millions of euros)
1,381.2
NBI
+6.0%
loans was up 3.1% on the previous year, i.e. +19.5 millions of
euros (versus +3.6%, or +22.0 millions of euros in 2004
compared with 2003).
under French accounting standards.
NET BANKING INCOME
At year-end 2005, the commercial margin on deposits and
NET BANKING INCOME
+5.1%
+6.0%
+5.1%
1,381.2
rose 5.1% year-onConsolidated NBI for Crédit du Nord Group
1,381.2
year thanks to the continued solid performance of net interest
1,313.8
1,308.8
and similar income,
which rose 2.8%, and net fee income,
1,308.8
1,313.8
2004 (3)
2004 (2)
which grew 8.2%.
1,234.4
2003 (3)
1,234.4
2004 (3)
2004 (2)
2005 (1)
2003 (3)
2005 (1)
17
Management report
FISCAL YEAR 2005
A particularly important feature of 2005 was the +2.9% (+7.8
Life insurance fees and commissions (management: +10.5%
millions of euros) surge in loan margins relative to the same
and investment: +18.9%) were buoyed by strong asset
period one year earlier.
gathering and a +13.2% increase in assets under manage-
In the first three quarters of the year, continued low interest
ment, also partly linked to the upturn in the CAC.
rates had a favourable impact on margins for overdrafts and
Service fees and commissions continued to grow, showing a
short-term credit, which offset the drop in volumes.
4.6% rise at end-December 2005 (after +6.2% in 2004
Moreover, the increase in mortgage loan outstandings
compared with 2003).
(+13.9%) helped boost the corresponding interest income
The principal items that performed strongly in 2004 were:
despite a slight erosion of the lending margin. Finally, loans for
• service package fees (+7.2%) with a 5.0% rise among indi-
capital expenditure rose 4.6% in 2004 with a 2.0% increase in
profit.
Current account deposits also continued to perform well, rising
+7.5% to offset the fall in interest rates.
vidual customers and 13.0% growth among professionals;
• transaction fees, which were up +7.7%, reflecting stronger
day-to-day relations with professional and business
customers;
• unauthorised overdraft fees, which rose +7.9%;
Regulated savings also progressed (+4.8%), driven by pass-
• electronic payment fees, which rose +5.0%;
book savings (+11.0%), CODEVI accounts (+7.5%), with
• conversely, foreign transaction fees fell 8.2% under the
contributions from CEL home savings accounts (+2.1%) and
continued impact of reductions in European tariffs as well as
PEL home savings plans (+3.6%).
the sharp rise in Internet transactions.
Total margins on deposits rose 11.8 millions of euros or 3.5%.
Consolidated fees income rose 8.2% year-on-year following
further growth in banking fees and a more favourable financial
and stock market context.
Financial fees and commissions were also boosted by the
improved stock market environment: the 16.2% average
NET FEES INCOME (4)
increase in the CAC 40 over the year helped increase mutual
+8.2%
+10.1%
fund management fees.
608.5
562.5
562.5
+16.2%
231.9
231.9
+6.2%
330.6
330.6
2004 (3)
2004 (2)
510.7
+13.3%
262.7
+4.6%
345.8
199.5
311.2
2003 (3)
2005 (1)
■ Service fees ■ Financial fees
(4) Restated for 2003 for an account transfer between the two types of fees.
18
OPERATING EXPENSES
■ Other operating expenses rose +7.5%. The main reasons for
this increase were the implementation of our sales development
2005 (1)
2004 (2)
% change
2005/2004
programme and the modernisation of our information system,
which is partially due to the application of new regulatory standards (Basel II and IAS).
Personnel expenses
Taxes
Other expenses
Amortisation
570.5
558.3
+2.2
• Subcontracting and studies: +17.1% or 7.0 millions of euros
34.4
23.9
+43.9
(2.8 millions of euros for systems analysis and 4.2 millions of
263.1
244.8
+7.5
57.7
54.1
+6.7
euros for project management);
• Sales development: +31.8% or 3.5 millions of euros
(2.8 millions of euros of which on the media campaign);
TOTAL OPERATING
EXPENSES
925.7
881.1
+5.1
• Rent and rental charges on property: +5.2% or 2.4 millions of
euros (0.9 millions of euros of which on branch opening).
Operating expenses reached 925.7 millions of euros, representing a 5.1% rise at end-December 2005.
■ Depreciation and amortization rose by 6.7% over the year
due to the start of depreciation on the expenses linked to the
Note that over the course of 2005, Crédit du Nord spent 23.8
millions of euros on IT projects versus 25.8 millions of euros for
overhaul of our workstations referred to above, which affected
all of 2005 and only part of 2004.
fiscal year 2004. Depreciation began in May 2004 on the
Chopin IT project involving the replacement of workstations in
the second quarter of 2004 in the amount of 600,000 euros per
month.
■ The 2.2% increase in personnel expenses relative to 2004 is
essentially due to three factors: the increased profitability of the
Group, which led to a 32.1% rise in provisions for profit-sharing
schemes (12.6 millions of euros, including 3.4 millions of euros
for a one-off payment linked to the Breton law); a moderate
OPERATING EXPENSES
+1.7% rise in the Group’s payroll (5.1 millions of euros) and
various changes
in employee commitments and provisions for
OPERATING
EXPENSES
+2.2%
+5.1%
Group
data (in millions of euros)
socialconsolidated
security debt.
+2.2%
925.7
+5.1%
2005
2004
2003
925.7
% change
2005/2004
876.6
857.7
881.1
876.6
Number of Group
857.7
employees Group
on a prorata basis
7,568
7,518
7,576
+0.7
Net average
present number
of employees
at the Group
7,791
7,759
7,904
+0.4
2003 (3)
2003
(3)
2004
(3)
881.1
2004
(2)
2005
(1)
2004 (3)
2004 (2)
2005 (1)
19
Management report
FISCAL YEAR 2005
■ Taxes rose by 43.9%. In 2004, Étoile Gestion (the Group’s
The combined effect of strong growth in NBI and a controlled
asset management arm) wrote back a 2.0 millions of euros
increase in operating expenses resulted in a 5.3% increase in
provision for an additional tax assessment. In 2005, the exemp-
GOI in 2005, continuing the trend in place since the second
tion of Sicav products from sales tax reduced the percentage of
half of 2003 after the end of the stock market downturn.
VAT the company can recover, leading to an additional tax
charge of 5.6 millions of euros. Adjusted for these items, taxes
rose by 10.6%, which is still high due to the reduction in the
Excluding the impact of the revaluation of the provision on
future commitments on PEL and CEL contracts, GOI would
have progressed by 6.6%.
amount of VAT Crédit du Nord parent company can claim back.
At the same time, the cost-to-income ratio came out at
67.0%(1), down 0.1 point from the end-2004 ratio(2) of 67.1%.
The temporary stabilisation of our cost-to-income ratio at
GROSS OPERATING INCOME
67.0% is due to expenditure on our major commercial development programme which, over the year, saw the number of
2005 (1)
2004 (2)
% change
2005/2004
1,381.2
1,313.8
+5.1
Operating expenses
925.7
881.1
+5.1
455.5
432.7
+5.3
NBI
branches in the network increase by close to 6%.
COST-TO-INCOME RATIO
Group consolidated data (%)
GROSS +14.7%
OPERATING INCOME
+5.3%
+14.7% 432.2
455.5
69.5
432.7 +5.3%
455.5
432.2
432.7
2004 (3)
2004 (2)
67.0
67.1
67.0
2004 (3)
2004 (2)
2005 (1)
376.7
376.7
2003 (3)
(3) French
accounting standards.
(3)
(3)
(2)
2003
2004
2004
2005 (1)
2005
(1)
20
2003 (3)
(1) Normes IAS/IFRS, including IAS 32 & 39 and IFRS 4.
(2) Normes IAS/IFRS, excluding IAS 32 & 39 and IFRS 4.
COST OF RISK
Against a relatively benign, and sadly not buoyant, global
Consolidated cost of risk* for Crédit du Nord Group stood at
economic backdrop, the Crédit du Nord Group was able to
maintain a good quality of risk thanks to sound financial
62.5 millions of euros, down 10.3% on end-2004.
management of its customers. The ratio of gross doubtful and
The cost of risk divided by total lending fell to 0.31% from
disputed loans to total outstanding loans improved from 6.0%
0.38% at end 2004, partially reflecting the Group’s decision to
at end-December 2004 to 5.1% at end-2005, mainly as
increase loans to individuals, which carry less risk than busi-
interest on disputed loans is not booked with outstanding
ness loans, as well as efficient risk management in the profes-
doubtful and disputed loans under IFRS (recognised and provi-
sional and business segment, which led to a particularly low
sioned under French standards). This accounting treatment led
provisioning charge in 2005.
to a slight deterioration in the overall provisions ratio, following
on from the decline in 2003 and 2004 caused by the imple-
(in millions of euros) 2005 (1)
2004 (2)
2004 (3)
2003 (3)
62.5
69.7
69.7
74.5
20,132.9
18,216.2
18,216.2
17,291.8
0.31%
0.38%
0.38%
0.43%
mentation of stricter rules on the declassification of doubtful
loans. Under identical accounting methods for interest on
Cost of risk
Loans outstanding
Cost of risk
on oustandings
disputed loans, the provisioning ratio would have been 57.2%
in 2004 and 56.8% in 2005.
2005 (1)
2004 (3)
2003 (3)
Doubtful and disputed
loans (gross amount)
1,055.6
1,139.7
1,081.1
Provisions for doubtful
and disputed loans
–599.9
–686.5
–694.8
Rate of gross oustandings
on doubtful and disputed
loans over total gross
outstandings
5.1%
6.0%
6.0%
Rate of net outstandings
on doubtful and disputed
loans over total
net outstandings
2.3%
2.5%
2.2%
Provisioning ratios
for doubtful and disputed
outstandings
(including leasing)
56.8%
60.2%
64.3%
The methods and organisation used in the approval of credit
and the management of credit risk are described in note 4 of
the notes to the financial statements.
* The cost of risk represents the net provisioning charge on banking activities
(allocations to provisions less write-backs), plus non-provisioned losses on
irrecoverable loans, less amounts recovered on amortised loans. Under IFRS,
the cost of risk now integrates the effect of discounting of provisions due to
(1) IAS/IFRS, IAS including 32 & 39 and IFRS 4.
the delay in recuperating cash flows on doubtful loans (principal and
(2) IAS/IFRS, IAS excluding 32 & 39 and IFRS 4.
interest).
21
Management report
FISCAL YEAR 2005
MARKET RISK
The chart below shows the evolution of the Group’s 99% Value
Crédit du Nord Group’s market activities are marginal and
relate exclusively to customer-driven transactions. The Group’s
market risk exposure is evaluated and monitored using the
at Risk over the course of 2005. The values given have the
following characteristics:
• variation in the portfolio over a holding period of X days;
• a confidence interval of 99%;
methods implemented by its majority shareholder.
• historical data considered for the last 260 business days.
The three indicators used to measure market risk assessment
are: the 99% Value at Risk (VaR) method, stress-test measurements and complementary limits. Details on all three can be
found in note 4 of the notes to the financial statements along
A confidence interval of 99% means that over a given period
there is a 99% probability that an eventual loss will not exceed
the defined value.
with information on how exposure limits are set and the organisation of the Group’s risk monitoring.
Value at Risk: breakdown by risk factor
1 DAY - 99% / FY 2005
10 DAYS - 99% / FY 2005
Foreign
exchange
Treasury
Jan. 3, 2005
–41
Minimum
–17
Maximum
(in thousands
(in thousands
Foreign
exchange
Trading
Overall
–165
0
–177
–130
–522
–560
–560
–44
0
–54
Minimum
–54
–139
–171
–171
–156
–590
0
–607
Maximum
–493
–1,866
–1,916
–1,920
Average
–62
–192
0
–202
Average
–195
–606
–637
–638
Dec. 31, 2005
–52
–82
0
–104
Dec. 31, 2005
–164
–259
–329
–329
of euros)
Limits
of euros)
Jan. 3, 2005
Treasury
Trading
Overall
–1,000
VALUE AT RISK (1 DAY - 99%)
VALUE AT RISK (10 DAYS - 99%)
(in thousands of euros)
(in thousands of euros)
– 800
– 2,500
– 700
– 2,000
– 600
– 500
– 1,500
– 400
– 1,000
– 300
– 200
– 500
– 100
0
01/03/05
22
03/03/05
05/03/05
07/03/05
09/03/05
11/03/05
01/03/06
0
01/03/05
03/03/05
05/03/05
07/03/05
09/03/05
11/03/05
01/03/06
OPERATING INCOME
BEFORE CORPORATION TAX
NET INCOME
2005 (1)
2004 (2)
% change
2005/2004
GOI
455.5
432.7
+5.3
Cost of risk
–62.5
–69.7
–10.3
Operating income
393.0
363.0
+8.3
2005 (1)
2004 (2)
% change
2005/2004
Income before
corporation tax
395.4
365.3
+8.2
Corporation tax
–138.5
–125.7
+10.2
–6.8
–5.8
+17.2
250.1
233.8
+7.0
Minority interests
Income under
the equity method
1.3
1.6
–18.8
CONSOLIDATED
NET INCOME
Gains or losses
on fixed assets
1.1
0.7
+57.1
395.4
365.3
+8.2
Consolidated net income after taxes stands at 250.1 millions of
INCOME BEFORE
CORPORATION TAX
euros, a 7.0% increase on end-2004.
Taking into account the cost of risk, Crédit du Nord Group
generates operating income of 393.0 millions of euros, in 2005,
an increase of 8.3% on 2004.
Earnings before taxes are 395.4 millions of euros, a year-onyear rise of 8.2%.
Gains or losses on fixed assets in 2005 includes a few property
disposals but no major transactions.
OPERATING INCOME
GOI
432.2
432.7
+20.0%
362.5
363.0
–6.4%
–69.7
–69.7
2004 (3)
2004 (2)
376.7
455.5
+8.3%
393.0
–10.3%
– 62.5
302.2
–74.5
2003 (3)
2005 (1)
■ Cost of risk ■ Operating income
23
Management report
FISCAL YEAR 2005
SHAREHOLDERS’ EQUITY
In 2005, shareholders’ equity was affected by the incorporation
into reserves of consolidated net income after the distribution of
2005 (1)
2004 (2)
2004 (3)
dividends and the 3.8 millions of euros positive impact of
IAS 32 & 39 and IFRS 4. On January 1, 2004 the impact of
IAS/IFRS on the 2004 opening balance sheet excluding IAS 32
at the end
of the period
& 39 and IFRS 4 was –29.4 millions of euros.
of which
Group share
1,273.9
1,166.3
1,163.2
1,242.2
1,136.5
1,133.4
1,229.1
1,143.6
1,141.8
It should be noted that the solvency ratios are presented for
Average
shareholders’ equity
information purposes only, as the Crédit du Nord Group is not
bound directly by regulatory solvency ratio requirements due to
its shareholder structure.
Risk-weighted credit
17,371.8
NA
15,536.6
The presentation of these ratios does, however, make it possible
1,564.5
NA
1,422.3
to calculate the Group’s normative ROE on the basis of a Tier
9.01%
NA
9.15%
6.28%
NA
6.68%
Capital (*)
Consolidated
solvency ratio
of which Tier One (*)
One capital ratio equal to 6% of risk-weighted assets. As such,
consolidated profitability stood at 23.3%(1), versus 23.3%(2) at
year-end 2004.
After-tax return on book equity came out at 20.1%(1) for a Tier
One ratio of 6.3%, compared with ROE of 20.6%(2) and a Tier
One ratio of 6.7% at end-December 2004.
(1) IAS/IFRS including IAS 32 & 39 and IFRS 4.
(2) IAS/IFRS excluding IAS 32 & 39 and IFRS 4.
(*) Excluding income currently being allocated.
24
OUTLOOK
As of early 2006, the range of provident products will be
extended with the launch of a legal protection policy for indi-
Over the last three years, results at Crédit du Nord Group have
vidual and professional customers, in partnership with an
validated its banking model as NBI has risen sharply in a less-
insurance specialist, La Paix, which is a subsidiary of Aviva
than-buoyant economic environment. In addition, revenue
group. Moreover, the offering of multi-management funds,
growth has been equally spread across the different NBI
which has been unrivalled in the French market since its
components and across the different segments of the Group’s
launch in 2000 will be completed with a new vehicle, Étoile
customer base.
Multi Gestion Croissance, focused on emerging markets.
The very high levels of customer satisfaction expressed in
From a financial perspective, the confirmation in early 2006 of
surveys suggest that commercial development in coming quar-
an upturn in demand for loans from businesses, and the strong
ters will continue to be based on solid fundamentals. The ambi-
performance of the financial markets, should help to keep NBI
tious branch opening programme, launched in Autumn 2004,
growth at healthy levels. Moreover, the consolidation of
is in its second year and the new points of sale are set to
economic growth in the eurozone should help to sustain this
become important growth drivers for the Group, which should
trend over the full year.
in turn help to restore the trend of improvements in the cost-toincome ratio.
BRANCH OPENING’S IN 2005
Lagny
Eaubonne
Montivillier
Issy-les-Moulineaux
Courbevoie
Laval
Bourges
Aytré
Le Puy-en-Velay
Salles
Tournefeuille
Anglet
Coudekerque
Wasquehal
Pont-à-Marcq
Thionville
Metz Cathédrale
Haguenau
Lingolsheim
Saint-Genis Poully
Albertville
Villeurbanne Grand
Sainte-Foy-les-Lyon
Caluire
Sassenage
Manosque
Carpentras
Cavaillon
Marseille St-Barnabé
Montpellier Faculté
Six-Fours
Nîmes Palais
25
Management report
FISCAL YEAR 2005
INFORMATION RELATIVE TO MARKET SHARE
The Crédit du Nord Group does not have a uniform network of branches throughout France. As a result, while its share of the
domestic market stands at between 1.4 and 1.8%, its market share is particularly strong in those areas in which it has been long
established, notably in its traditional regions in north-western France, the Limousin region (Banque Tarneaud), the Auvergne region
(Banque Nuger) and the Midi-Pyrénées region (Banque Courtois).
MARKET SHARE OF CUSTOMER LOANS
MARKET SHARE OF CUSTOMER DEPOSITS
FOR THE CRÉDIT DU NORD GROUP
FOR THE CRÉDIT DU NORD GROUP
AS AT 09/30/2005: 1.8%
AS AT 09/30/2005: 1.4%
7.2%
5.2%
4.0%
1.7%
0.7%
6.2%
1.1%
4.2%
2.4%
1.3%
1.2%
0.9%
0.4%
0.3%
0.4%
1.0%
0.3%
1.3%
1.0%
0.2%
1.2%
0.6%
2.8%
3.2%
2.0%
2.3%
1.5%
1.8%
1.2%
2.9%
1.4%
2.0%
0
0.1% to 1.5%
1.6% to 3%
> 3%
Source: Banque de France local deposit/loan statistics
26
0.1%
0.8%
5.6%
■
■
■
■
0.8%
1.8%
■
■
■
■
0
0.1% to 1.5%
1.6% to 3%
> 3%
Source: Banque de France local deposit/loan statistics
0.8%
1.5%
0.1%
27
Chairman’s report
ON INTERNAL CONTROL
Report of the Chairman
of the Board of Directors
on the preparation and
organisation of the Board’s
activities and on internal
control procedures in 2005
Directors are convened by letter at least two weeks before the
This report has been prepared in accordance with Article
• Chief Executive Officer;
L. 225-37 of the French Commercial Code, pursuant to the
• the members of the Executive Committee concerned by items
French Financial Security Act of August 1, 2003. It presents a
planned date of the Board meeting. Each letter includes:
• the agenda of the meeting;
• the draft minutes of the preceding Board meeting.
In addition to the Directors, the following also participate in
Board meetings:
on the agenda;
summary of the internal control procedures of the consolidated
• the Statutory Auditors;
Group. It does not purport to be a detailed description of the
• the Corporate Secretary in his capacity as Secretary of the
status of internal control across all Group businesses and
subsidiaries or a detailed description of the practical implementation of procedures.
Board;
• the Secretary of the Central Workers’ Committee (CCE).
The information pack sent to each Director includes:
• the various reports provided for by law (management report,
Chairman’s report on the Board’s activities and on internal
PREPARATION AND ORGANISATION
OF THE BOARD’S ACTIVITIES
The Board of Directors normally meets three times a year in
February, July and October.
The agenda of all Board meetings is set by the Chairman and
Chief Executive Officer during a preparatory meeting with the
Corporate Secretary and following consultation with the Chief
Executive Officer and the Executive Committee. During the
preparatory meeting, the following points are reviewed:
• mandatory items that must be examined by the Board by
virtue of law;
• non-mandatory items of particular interest, in order to report
to the Board on the proper functioning of the Company and
its strategic choices (sales, organisational and investment
strategies, etc.).
28
control, etc.);
• the draft resolutions for shareholders’ meetings;
• any studies pertaining to strategic decisions on which the
Directors may be called to deliberate.
For the Board meetings called to approve the annual financial
statements, the following information must also be sent:
• to each Director: a list of all other company directorships held
by the Director, it being the responsibility of each Director to
verify and amend the list as necessary;
• to the Chairman and Statutory Auditors, by virtue of current
regulations, a list of all significant agreements concluded
between Crédit du Nord and its senior managers and/or those
companies with which Crédit du Nord shares senior
managers or shareholders.
Board meetings last an average of two and a half hours.
Items for deliberation by the Board are presented by the
Chairman, the appropriate member of General Management or
the project manager in the event of a technical issue.
INTERNAL CONTROL PROCEDURES
This report discusses the internal control procedures that apply
to all entities within the Crédit du Nord Group. The various units
The issues are then discussed, after which the Board is asked
involved in internal control helped to prepare those parts of the
to vote where necessary.
report that relate specifically to their scope.
A draft of the minutes of the meeting is prepared by the
The activities of the Crédit du Nord Group are subject to a dual
Secretary of the Board, who submits the same to the Chairman
control framework, in that they must comply with both banking
and members of the Executive Committee present at the
regulations and the systems and procedures of its majority
meeting. The draft minutes are then submitted for the approval
shareholder (I).
of the Board at the start of the following meeting.
As a network bank with strong regional roots and a customerbase essentially comprised of individuals and SMEs, Crédit du
Limits to the powers of the Chief Executive Officer
The Chairman of the Board of Directors is also the Chief
Executive 0fficer.
The term of office and remuneration of the Chief Executive
Officer are determined by the Board of Directors.
Nord, like all banking institutions, is exposed to a certain
number of risks, notably credit risk (II).
However, due to its chosen business mix, the Crédit du Nord
Group has limited or no exposure to risks related to international, real estate and capital market (including derivatives)
activities.
The Chairman and Chief Executive Officer is vested with extensive powers to act under all circumstances on behalf of the
company, within the limits set out by the corporate bylaws and
excluding those powers expressly attributed by law to the
Shareholders’ Meetings and the Board of Directors.
Until end-2005, Crédit du Nord Group’s internal control system
was structured according to three interdependent levels (III).
This system was changed in early 2006 in order to meet the
new specifications of amended regulation 97-02 of the French
Banking and Financial Regulation Committee, which requires
A Chief Executive Officer, nominated by the Chairman and
that companies distinguish between the Periodical Controls and
Chief Executive Officer and appointed by the Board of
the Permanent Controls that make up their internal control
Directors, assists the Chairman and Chief Executive Officer in
system, and set up an adequate system to deal with compli-
his duties.
ance risk.
The scope and term of the powers conferred on the Chief
This report, written for the 2005 financial year, relates to the
Executive Officer, as well as the latter’s remuneration, are set by
system in place in 2005.
the Board of Directors in agreement with the Chairman and
Chief Executive Officer.
As regards accounting and financial management, a common
information system is shared by virtually all Group companies
The Chief Executive Officer has the same powers as the
and in particular the banking subsidiaries. This information
Chairman and Chief Executive Officer in respect of third parties.
system provides subsidiaries with access to all Crédit du Nord
rules and procedures and allows Crédit du Nord to centralise all
data required to monitor the results and activities of Group
companies in real-time, in accordance with the defined rules
and procedures (IV).
29
Chairman’s report
ON INTERNAL CONTROL
I. A dual control framework
The primary objectives of the majority shareholder’s internal
control system are to exercise satisfactory control over risk
BANKING REGULATIONS
■ In accordance with articles 42 et 43 of amended regulation
97-02 of the French Banking and Financial Regulation
exposure, to guarantee the accuracy of financial and management accounting data, and to ascertain the quality of information systems.
Committee, two reports are prepared and published annually:
Systematic controls are performed by the majority shareholder
• one report prepared by the Inspection Générale outlining the
as part of a programme of regular visits to Group entities aimed
conditions under which internal control is performed;
• one report prepared by the Central Risk Division on the measurement and monitoring of risk.
These reports are submitted to the Board, the Statutory
at ensuring that the defined standards are being met.
Because the majority shareholder is itself a banking institution,
permanent benchmarking between the two networks further
facilitates the analytical review of accounts and risks.
Auditors and the majority shareholder for consolidation before
being submitted to the General Secretariat of the French
II. Management of main banking risks
Banking Commission.
Accordingly, the French Banking Commission receives reports
from each subsidiary of Crédit du Nord, along with the consolidated report of Crédit du Nord Group and the consolidated
report of the Société Générale group.
■ The Controller of Investment Services sends the AMF
CREDIT RISK
The credit policy of the Crédit du Nord Group is based on a set
of rules and procedures concerning lending, delegation of
responsibilities, risk monitoring, classification of risk and identification of impaired risks.
(French Securities Regulator) a standard report each year on
compliance with investment service provider requirements.
This report, which follows a standard format, as well as a
This policy is defined by the Central Risk Division, which reports
directly to the Chairman and Chief Executive Officer.
special report on a subject set by the AMF, are reviewed and
The identification of counterparty risk impairment is the respon-
commented on by the Board.
sibility of all risk management personnel: sales units, risk
In 2005, the special report was on the observance of professional obligations regarding discretionary portfolio management.
management units, risk control units and the Inspection
Générale.
Risk management is organised on two levels:
PROCEDURES IMPLEMENTED BY THE MAJORITY
SHAREHOLDER
The Central Risk Division (DCR), which reports directly to the
Chairman of Crédit du Nord and reports functionally to the Risk
Part of the Société Générale group since 1997, Crédit du Nord
benefits from the control system put in place by its majority
shareholder, as described in the latter’s report on internal
control.
Division of the Société Générale group. This Division assists
with the definition of credit policies, oversees their implementation and participates in the credit approval process. Its responsibilities include risk control, risk classification, provisioning of
doubtful loans, recovery of doubtful and disputed loans, and
the itemisation of risks.
30
The Regional and Subsidiary Risk Departments, which report
INTEREST RATE, EXCHANGE RATE AND LIQUIDITY RISK
directly to the Regional Managers or Subsidiary Chairmen and
(EXCLUDING MARKET ACTIVITIES)
which report in functional terms to the Crédit du Nord Central
Risk Division. These departments are responsible for imple-
Asset and liability management (ALM)
menting the Group’s credit policies and managing risks at their
With regard to overall risk management, the Crédit du Nord
level. Their main areas of activity are:
Group distinguishes the management of structural balance
• credit approval;
sheet risks (Asset and Liability Management or ALM) from the
• monitoring and classification of risks;
management of risks related to trading activities.
• recovery of doubtful and disputed loans.
Specialised committees and structures
The ALM unit reports directly to the Crédit du Nord Finance
Division and, since January 1, 2006, has been under the
authority of the head of the Financial Management Division.
In order to monitor and manage risk, Crédit du Nord has set up
specialised risk committees and structures at both a Group and
It is responsible for monitoring and analysing the Crédit du
a regional/subsidiary level:
Nord Group’s exposure to maturity mismatch, interest rate and
• a Risk Committee, chaired by either the Chairman and Chief
euro liquidity risks.
Executive Officer or the Chief Executive Officer, that meets
All decisions concerning the management of any interest rate
once a month. A member of the Risk Division of the majority
and/ or liquidity mismatch positions generated by the Group’s
shareholder also sits on this Committee;
client-driven activities are made by the ALM Committee, which
• a Performing Loans Committee for each region and subsidiary,
meets on a monthly basis under the chairmanship of the
that is chaired by the Chairman and Chief Executive Officer
Chairman and Chief Executive Officer. A senior financial officer
and/or the Chief Executive Officer and in principle meets
from the majority shareholder also sits on this Committee.
every six months.
Liquidity risk
• a review of impaired risks that is performed every six months
by the Control and Provisioning Committee of the DCR.
The monitoring of outstandings by subsidiary and regulatory
ratios is carried out by the ALM unit. Short-term liquidity
These committees and structures regularly contribute to the
definition of risk policy, the implementation of this policy, the
examination of significant risks, the monitoring of impaired
management, on the other hand, is delegated to each
subsidiary as part of its cash management activities and is
subject to certain limits (i.e. liquidity requirements).
risks, provisioning for risks and overall risk analysis.
Crédit du Nord also prepares a quarterly report on major regu-
Mismatch risk
latory risks for its majority shareholder which is then consoli-
Changes in the structure of the balance sheet are carefully
dated and submitted to the French Banking Commission.
monitored and managed by the ALM unit in order to determine
the refinancing requirements of the Group’s entities.
A quarterly report on maturity mismatch risk is submitted to the
majority shareholder.
31
Chairman’s report
ON INTERNAL CONTROL
Interest rate risk
Trading
All assets and liabilities of Group banks, excluding those related
Transactions involving derivatives linked to client transactions
to trading activities, are subject to an identical set of rules
are, generally, hedged by Crédit du Nord shareholders (Société
governing interest rate risk management.
Générale and Dexia), since Crédit du Nord holds only limited
The ALM Committee delegates the management of short-term
proprietary positions in these products.
interest rate risk to the Weekly Cash Flow Committee. This dele-
The limits assigned to these trading activities by General
gation is subject to limits on exposure to fluctuations in money-
Management are monitored by the Treasury and Foreign
market interest rates and the net current value of monthly
Exchange Department in accordance with the standards
exposure to mismatches in short-term interest rates (instru-
adopted by the majority shareholder.
ments with original maturities of under one year). These limits
are verified at the Weekly Cash Flow Committee meetings.
The results of these activities are checked by the appropriate
audit teams (see “Market risks” below).
The overall interest rate risk of the Crédit du Nord Group is
subject to sensitivity limits. The observance of these limits is
MARKET RISKS LINKED TO CLIENT-DRIVEN
verified within the framework of regular reports to the majority
TRANSACTIONS
shareholder.
Crédit du Nord consistently matches customer orders through
Crédit du Nord Group operates a consistent hedging policy
its shareholders Société Générale and Dexia, thus significantly
against ALM risks and implements the hedges needed to
reducing its exposure to market and counterparty risks.
reduce the exposure of Group entities to interest rate movements where necessary.
The hedging activities of the ALM unit cover all Crédit du Nord
Group entities.
Each Group entity is monitored individually and hedged on an
ad hoc basis.
Note that the Group procured a new ALM tool, Almonde, in
2004. Almonde is used to produce the Weekly Cash Flow
Committee’s reports, the ALM Committee indicators and the
quarterly shareholders’ report. Hedge effectiveness tests
required by the new International Financial Reporting
Standards (IFRS) are also performed using this software.
Almonde supplies a reliable restatement of positions, as the
A specialised unit from the Treasury and Foreign Exchange
Department is responsible for monitoring market and counterparty risks.
These risks are calculated on a daily basis and compared with
the limits. Any breaches are reported to the specialist unit in
the Treasury and Foreign Exchange Department.
A report on the control of limits is submitted to the majority
shareholder on a fortnightly basis. The CFO also receives a
weekly status report on results and limits and a monthly report
on changes in limits from the Treasury and Foreign Exchange
Department. The Chairman and Chief Executive Officer and the
Chief Executive Officer also receive a quarterly report on
changes in limits.
asset-liability mismatches are now exhaustive and calculated as
a monthly average.
In addition, a weekly review of any limit breaches is submitted
to the Head of the Central Risk Division.
32
OPERATIONAL RISKS
The business activities of the various Group entities are
exposed to a whole series of risks - administrative, accounting,
legal, IT, etc., which are covered by the term “Operational
risks” within the framework of the reform of capital adequacy
regulations (the MacDonough ratio).
An operational risk review meeting, with the participation of the
Inspection Générale, the Head of Information and Security
Systems and, since July 2004, the Head of Operational Risk,
meets prior to delivery of each new IT application or new
version of an existing application involving major modifications
in order to ascertain risk in terms of availability, integrity, confidentiality, testability and control (audit trail).
In accordance with the recommendations of the Basel
Committee of July 2002, also known as Basel II, and in consultation with the majority shareholder, operational risks have been
In addition, an IT Security Committee, chaired by the Head of
Information and Security Systems, meets twice a year.
newly classified. Moreover, all losses in excess of an amount
A Crisis Plan ensures that a Crisis Unit composed of the main
fixed at 10,000 euros for the Crédit du Nord Group have been
members of General Management can be assembled at any
subject to a systematic review.
time within a dedicated Command Centre. This unit can, if
In general, all major projects launched by Crédit du Nord are
monitored by Steering Committees. The Chairman and Chief
Executive Officer and the Chief Executive Officer sit on the
Steering Committees of all major projects.
The Operational Risk Division, set up in July 2004 within the
Central Risk Division, is responsible for the management and
coordination of all Operational Risk and Business Continuity
Plan systems implemented within the Group.
The Division uses a network of Operational Risk
Correspondents appointed in the different head office entities,
at the subsidiaries and throughout the operating network.
An Operational Risk Committee, comprising members of
General Management, the Inspector General, the Head of the
Central Risk Division and the Head of Operational Risk, meets
every quarter. At its meetings, the Committee reviews operational losses and the mapping of operational risks and also
necessary, request the presence of any executives, managers
and experts directly implicated due to the nature and location
of the event.
The strategic Head Office entities, i.e. those needed to ensure
the continuity of operations, prepared a Business Continuity
Plan, which was rolled out in 2004. This plan comes on top of
the continuity procedures already in place throughout the
network.
III. Organisation of internal control
Internal control at Crédit du Nord Group is structured according
to three independent levels:
• line management control;
• second-level control;
• the Inspection Générale.
The head of each entity or department is responsible for the
assesses the progress of the Basel II operational Risk project
ongoing supervision of transactions carried out under his or her
and the Business Continuity Plans.
responsibility. Operating branches must adhere to a predetermined plan (outlining the risks to be controlled and the
frequency of said controls) and report on all controls
performed. Specialised staff also assist branches in the day-today monitoring of accounts.
33
Chairman’s report
ON INTERNAL CONTROL
Second-level controls are performed by dedicated personnel, who
Whenever an on-site control of a procedure is performed, the
report hierarchically to the head of the respective region,
control and the branch subject to this control are scored on
subsidiary or functional department to which they are assigned
their degree of compliance with applicable rules using a dedi-
but report functionally to the Inspection Générale.
cated software application. This allows the Inspection Générale
The schedules and details of these controls are determined in
conjunction with the Inspection Générale as regards adminis-
to map procedural compliance at both a local and national level
and on a yearly basis.
trative matters and with the Central Risk Division as regards
Following each of these assignments, the Inspection Générale
commitments.
evaluates the control structures for the regions in which the
The Inspection Générale is responsible for supervising controls
and is mandated to intervene in any area of activity of the Crédit
du Nord Group and its subsidiaries. It reports directly to the
audited branches are based.
First- and second-level risk control of regions
and banking subsidiaries
Chairman and Chief Executive Officer.
These internal control procedures are an integral part of the
internal control structures of the Group’s majority shareholder.
Every year, the majority shareholder’s audit teams carry out
various assignments within Crédit du Nord Group.
First-level control at a regional and subsidiary level is carried
out by the sales management and by the Risk Department of
the region or subsidiary.
In accordance with the Line Management Control Manual, the
Branch or Business Centre Manager is responsible for over-
FIRST- AND SECOND-LEVEL CONTROL SYSTEMS
seeing compliance with delegated limits and the validity of loan
decisions taken by subordinate staff to whom the limits are
Regional and subsidiary first- and second-level administrative
assigned (customer advisers, etc.), as well as for controlling any
and accounting control system
credit limit overruns at the branch or business centre. These
The Line Management Control Manual defines day-to-day
controls are performed monthly, are formalised and may not be
security requirements covering, inter alia, reception desks, the
delegated.
opening of mail and the filing of documents, as well as a limited
number of controls that require formalisation at a hierarchical
level (recognition of securities in branches, certain sensitive
procedures such as stock market orders, etc.). These controls
may be delegated on the condition that each delegation of
power is subject to hierarchical control.
■ In his capacity as line manager, group manager receive the
following reports:
• reports on the delegated credit approval limits of all branch
managers within his group as well as all completed control
forms;
Second-level controls are performed by dedicated personnel
• second-level on-site audit reports sent for information
who report directly to the Regional Manager or to the Chairmen
purposes. The group manager is responsible for assisting
of the subsidiaries. These controls are performed using specific
branches in preparing and delivering a response to the afore-
“control forms” prepared with the Inspection Générale, and
mentioned reports and for supervising the implementation of
according to a defined plan which specifies the frequency of
the Auditor’s recommendations.
controls based on the degree of risk that each procedure or
operation represents. The second-level control unit had a
permanent staff of 65 at end-December 2005.
34
Group Manager also intervene at this level:
■ In his capacity as decision-maker, Group Manager prepares
During the course of on-site visits, the Risk Controller uses
monthly decision reports which are addressed to:
sampling tests to verify:
• the Risk Controllers, where he makes use of his personal
• the quality of branch risks;
credit approval limits;
• the regional or subsidiary Risk Manager within the reporting
framework of the Monthly Risk Committee, where he delegates the decision-making process.
• the quality of operational risk management, with special
attention given to monitoring systems and compliance with
first-level control requirements.
Central Risk Control is the responsibility of the Control and
Regional or subsidiary Risk Divisions is responsible for super-
Provisioning Division of the DCR, which performs the following
vising limit breaches and the proper classification of risks.
roles:
In September 2004, the Central Risk Division implemented new
rules applicable to the entire Group concerning the management of limit breaches.
• verification of due and proper implementation by the regions
and subsidiaries of the risk management system defined by
the Central Risk Division, i.e. the due and proper application
of the Credit Policy Manual;
Regional and subsidiary Risk Department is responsible for
• ongoing remote supervision of counterparty risks based on
ensuring that appropriate risk classifications are applied. It
the centralised monitoring of limit breaches and deferred
must permanently monitor the status of “performing loans
settlement market (SRD) margin calls;
under watch” and, where necessary, reclassify them as
• on-site audits;
“doubtful” in the event loans are renewed, loan requests are
• quarterly analysis of changes in impaired risks, with particular
made in the interim or breaches are identified.
Second-level control is performed by regional or subsidiary Risk
attention given to “performing loans under watch” and
“doubtful loans”.
Controllers, as well as the Central Risk Control Division. The
On-site audits of the Control and Provisioning Division are
second-level control unit had a staff count of 29 at end-
performed annually and include:
December 2005.
• the audit of all loan files that fall within the framework of loan
The role of the regional or subsidiary Risk Controller is to perma-
nently monitor that loans classified as “performing loans” merit
their classification. The Risk Controller is also responsible for
reviewing and monitoring “performing loans under watch” and
“doubtful loans” for any necessary reclassification or declassification. These tasks can be performed on site or remotely.
The majority of the Risk Controller’s work is carried out with the
help of computer tools and the monthly delegated limit reports.
decisions taken directly by regional Managers, subsidiary
Chairmen and regional or subsidiary Risk Managers. From
these files, a sample of between 20 and 30 files, with the
emphasis on business loans, is taken and examined for the
appropriateness of the credit decisions. Care is taken to avoid
redundancies with regional or subsidiary audits;
• the audit of each entity’s risk monitoring systems as implemented by the Risk and Risk Control Divisions of the region or
subsidiary;
• the audit of the appropriateness of the risk classification,
particularly in respect of loans categorised as “under watch”
or “doubtful” and of the management (Branch, Out-of-CourtRecovery, Special Regional Affairs, Special Head Office
Affairs), monitoring and, where necessary, provisioning of
“doubtful loans”.
35
Chairman’s report
ON INTERNAL CONTROL
Moreover, the analysis of risk trends and particularly the
performance of impaired categories (i.e. all Crédit du Nord
Group loans classed as “loans under watch”, “doubtful loans”,
“non-performing loans” or “disputed loans”) is used to compile
a summary by region, subsidiary and market.
First- and second-level controls within the functional divisions
and specialised subsidiaries
THE INSPECTION GENERALE OF CRÉDIT DU NORD
At end-December, the Inspection Générale had a total of
37 staff. The department comprises 25 field inspectors,
including 15 university graduates managed by six senior
inspectors with extensive experience in either Risk or
Administrative and Accounting Control; all of whom are supervised by a member of General Management. An audit officer
specialising in IT provides support where needed or conducts
Certain functional divisions, including Financial Affairs,
Finance, Banking Operations, Wealth and Asset Management
targeted inspections of the central or decentralised IT systems
of some Head Office Divisions.
(whose main task is to oversee discretionary private banking),
and Information Systems and Projects, have their own secondlevel Controllers who report directly to the Head of Division.
The various entities in the operating network are controlled
approximately once every five years, depending on the priorities
established by the General Management and any audits
The same is true for the following specialised subsidiaries:
performed by the majority shareholder.
Étoile Gestion and brokerage firm Gilbert Dupont.
These assignments conform to written procedure and are
At end-December 2005, there were 17 such controllers.
based upon a pre-selection of files to be audited on site. They
Internal control at Norfinance Gilbert Dupont is co-ordinated by
generally comprise three phases: pre-audit, on-site audit and
the Financial Affairs Division Controller and is carried out by the
audit reporting.
Administrative Controller of the Nord Métropole region and by
the Wealth and Asset Management Division.
The Inspection Générale analyses the administrative and
accounting operations of the audited entities as well as their
In some instances, the size of the specialised subsidiary means
exposure to risk, notably to counterparty risk. In addition, it
that its senior director carries out these controls, as is the case
assesses the quality of the first- and second-level controls
at Norbail Immobilier, Norbail Sofergie, SPTF and Norimmo.
described above.
In other cases, internal control is outsourced. Star Lease, for
The audit and control of specialised entities often require a
example, outsources its internal control to Franfinance, while
great deal of ground work, which may prompt the General
the internal control of Antarius was the responsibility of Cardif,
Management to draw upon the audits performed by the
our insurance partner in Antarius, until it was reassigned to
majority shareholder.
Aviva on October 1, 2004.
In addition to the co-ordination of second-level control assignments, the Inspection Générale also compiles and monitors all
cases of fraud and/or embezzlement. To this end, it either
performs its own audits or monitors the work of those
controllers assigned to those “special affairs” that are likely to
implicate a Group employee. Any ensuing sanctions are officially commented on by the Inspection Générale.
36
Compliance issues and anti-money laundering measures are
the responsibility of the Inspection Générale, which also participates in the review of the operational risks linked to new IT projects or existing application upgrades, as well as the
identification and reporting of any losses linked to these risks.
IV. Production and control of financial
and management accounting data
The Chief Financial Officer (CFO), who reports directly to the
Chairman and Chief Executive Officer and is a member of the
Executive Committee, is responsible for the production and
These reports are sent to the majority shareholder for
control of financial and management accounting data, as well
processing and consolidation. The compliance guidelines that
as for monitoring the implementation of recommendations
all staff must adhere to, whether or not they are involved in
made by the Statutory Auditors.
“sensitive” activities, are outlined in a specific appendix to the
company bylaws, which in turn are distributed to all staff along
PRODUCTION OF ACCOUNTING DATA
with a Guide to Professional Conduct prepared by the
Corporate Communications Department. Added to these princi-
Role of the Accounting and Summary Information Department
ples are a number of specific measures relating to certain
(DCIS)
tasks, such as those of discretionary portfolio managers and
This Department, under the authority of the CFO, is structured
corporate customer advisors.
according to its two major roles:
Apart from the official KYC (Know-Your-Customer) rules
imposed on the Operating Network, anti-money laundering is
essentially based on the due diligence requirements of regulators regarding the handling of certain transactions (black lists of
countries and individuals) and certain means of payments
(regulations regarding cheques and electronic payments) and
the flagging of isolated transactions or a series of transactions
by a single customer.
• defining accounting organisation and procedures: a centralised
definition for the entire Crédit du Nord Group of a set of
accounting rules conforming to current accounting and fiscal
regulations, including the definition of accounting frameworks
and procedures, the management of the internal charts of
accounts and the definition of parameters by type of report,
etc.;
• preparing and analysing financial and accounting statements:
preparation of individual company and consolidated accounts
Reports prepared by the Inspection Générale upon completion
of its assignments are systematically submitted to the Chairman
and Chief Executive Officer and to the Chief Executive Officer.
The implementation of recommendations included in these
reports is monitored by the Inspection Générale.
The Inspection Générale also monitors the implementation of
for the Crédit du Nord Group, preparation of regulatory status
reports for the various regulators (Banque de France, French
Banking Commission, etc.), as well as the management of
any accounting issues in the controls performed by the
Statutory Auditors and other controlling bodies (tax authorities,
French Banking Commission, Urssaf, etc.).
recommendations issued by the French Banking Commission.
The Chairman and Chief Executive Officer meets with the Head
of the Inspection Générale on a monthly basis.
37
Chairman’s report
ON INTERNAL CONTROL
Accounting information system
Preparation of company financial statements
Crédit du Nord’s information system is a multi-bank network: all
Ahead of the closing of half-year accounts, one-day meetings
seven Group banks are managed on the same information
are organised by the DCIS with the Accounting Managers of the
network. As such, they share the same processing systems for
Group’s companies in order to explain and comment on current
banking transactions and the same summary reporting
accounting issues relating to the half-year, as well as any
systems, which are used to prepare internal and regulatory
account-closing decisions made by the Group. This frequent
statements and reports.
contact ensures that the key points of each closing have been
This unified IT architecture shared by all Group banks is instru-
integrated and interpreted correctly by each company within
mental in improving accounting coherence and regularity. The
the Group.
DCIS oversees the definition and validity of accounting rules
The final adjustment and manual journal entries are then
and procedures, as well as the flow of accounting information
recorded. However, the main mission of the DCIS during these
from input to output:
meetings is to control, analyse, correct as necessary and vali-
• the vast majority of accounting entries are processed auto-
date the accounts before the company’s financial statements
matically by the IT network. Regardless of whether the
are transmitted to the regulatory authorities and published, and
accounting frameworks are defined at user-level (over two-
before the consolidation packages are forwarded to the Group’s
thirds of book entries) or defined automatically by the
Consolidation Department.
operating system software, all accounting procedures have
Account consolidation process
been defined and tested by the DCIS. Manual entries remain
limited and are subject to restrictive authorisations and
numerous controls;
• accounting databases are interfaced to automatically input
data into the consolidation packages and reports intended for
the French Banking Commission and the Banque de France.
This phase culminates in the production of consolidated financial statements, which can be used for Group management
purposes, legal and regulatory publications as well as shareholder reports.
Unlike the company-level financial statements, which are
published under French standards, the consolidated financial
The accounting information production process
statements are published under IAS/IFRS. The existence of this
There are three successive phases in the production of the
dual framework requires that accounting differences are noted
consolidated accounts:
and stated for transactions for which convergence in not
Upstream data entry
For companies integrated into the Group’s accounting information system (described above), data are processed by the operating systems and summary reporting systems, which result in
the compilation of reliable accounting databases.
All “non-integrated” entities transmit consolidation packages as
produced by their internal accounting systems, while
respecting the Group’s rules and procedures.
permitted.
During this phase, individual consolidation packages from
Group companies are controlled and validated, consolidation
entries are booked and intercompany eliminations are recognised. The consolidated financial statements are then analysed
and validated before being published internally and externally.
The majority of these operations are performed on a monthly
basis, which increases the reliability of the process. Group tax
consolidation and reporting are also carried out during this
phase.
38
INTERNAL ACCOUNTING CONTROL
• before submitting its consolidation package, every consolidated entity must ensure that the package data are consistent
Branch-level control
with the data intended for internal sales and financial
Responsibility for the monitoring of branch accounting
management reporting purposes, as well as the reports
(excluding Enterprise Business Centres) is assigned to the
intended for the regulatory authorities;
Heads of the Branch Support Units (UAA), who report to the
Logistics Directors (DLO).
First-level control is the responsibility of the Head of the Branch
Support Unit.
Second-level control is the responsibility of Regional Audit and
Control Units.
The monitoring of Enterprise Business Centre accounts is the
responsibility of the Managers of the Enterprise Sales Assistants
(ACE).
• consolidation packages sent by each consolidated company
are analysed, validated and corrected as necessary, notably
with the help of tests for consistency with preceding monthly
reporting packages and budgets, where available;
• specific consolidation entries are also controlled;
• the reconciliation and elimination of intercompany transactions can also help detect anomalies in accounting entries;
• lastly, a variation analysis of consolidated statements is also
performed, notably focusing on changes in equity levels.
Control of consolidation tools:
• a specific Group chart of accounts for consolidation is
Controls during the preparation of company and consolidated
financial statements
The process of consolidating accounting data and preparing
consolidated financial statements is subject to several types of
control.
Control of data input:
managed by the department in charge of consolidation and
aids in breaking down information to improve analysis;
• careful attention is paid to the configuration of the Group
consolidation system;
• the various automated consolidation processes are subject to
regular validation and control.
• the software used to generate the consolidated reports
Lastly, the “industrialisation” of the monthly consolidated
includes configurable data consistency tests, which are
reporting process in itself helps to improve control of changes
performed up to several hundred times. As long as the
in data over time and the understanding of any problems as
reporting company has not satisfied control requirements, it
they arise.
may not transmit accounting information to the department in
charge of consolidation;
39
Chairman’s report
ON INTERNAL CONTROL
PREPARATION OF FINANCIAL AND MANAGEMENT
ACCOUNTING DATA
Production of financial and management accounting data
Data control
Financial and management accounting data is controlled
during the monthly data entry process by checking that all
balance sheet, income statement and operating system data
Crédit du Nord Group bases its financial management upon
financial accounting data.
gathered by the Group have been properly integrated into the
analytical framework. Variations in totals and material move-
Analytical accounting data needed for the financial manage-
ments are systematically analysed. Downstream of the process,
ment of Crédit du Nord Group are generated by the accounting
a monthly reconciliation is also performed by comparing the
information system and operating systems, which are able to
financial accounting figures with the management reporting
break down data by item and by entity as required. This infor-
figures.
mation is stored in a unified management database, which
Budgets are monitored three times a year within the framework
covers Crédit du Nord and its six banking subsidiaries.
of the regional board meetings of the Group’s regions and
The Financial Management Division (DGF), under the authority
subsidiaries: twice in the first half of the fiscal year in the pres-
of the CFO, manages the allotment of general accounting data
ence of the Chairman and Chief Executive Officer or Chief
to various accounting items on the basis of the rules defined by
Executive Officer, and once in the third quarter as part of the
the Group ALM unit regarding the match-funding of assets and
budget meeting attended by the Chairman and Chief Executive
liabilities. The analytical accounting system enables a switch
Officer and Chief Executive Officer. During the course of these
from an interest paid/received view to an analytical approach in
meetings, the evolution of net banking income, operating
terms of margins on notional match-funding.
expenses, investments and the main risk indicators are system-
Information from the management database is accessible from
atically reviewed.
the branch level up to the Group level and is identical from one
A Cost Monitoring Committee, which includes the Chairman and
level to the next. As a result, the data can be used by all Crédit
Chief Executive Officer, the Chief Executive Officer and all head-
du Nord Group management control teams, including
office divisional managers, meets four times during the course
subsidiaries, regional divisions, functional departments and the
of the year. A review of changes in operating expenses
Financial Management Division, with the latter, in particular,
throughout the network is presented by a senior executive of
using this information for the preparation of the half-yearly
the Financial Management Division (DGF).
management report.
An IT Projects Monitoring Committee meets quarterly with the
Chairman and Chief Executive Officer in order to examine the
progress of projects and their financial impact on budgets and
medium-term planning.
Chairman of the Board of Directors
Alain PY
40
Statutory Auditors’ report
ON THE REPORT OF THE CHAIRMAN
Statutory Auditors’ report, established in application
of Article L. 225-235 of the French Commercial
Code, on the report of the Chairman of the Board
of Crédit du Nord describing the internal control
procedures relative to the publication and processing
of accounting and financial information
We conducted our audit in accordance with French profes-
Fiscal year ended December 31, 2005
• examining the internal control objectives and organisation, as
sional standards. These standards require that we perform the
necessary checks to verify the information provided in the
Chairman’s report on internal control procedures relative to the
elaboration and processing of accounting and financial information. Said checks notably include:
well as the internal control procedures relative to the publicaIn our capacity as Statutory Auditors of Crédit du Nord and in
application of Article L. 225-235 of the French Commercial
tion and processing of accounting and financial information,
as presented in the Chairman’s report;
Code, we have audited the report prepared by the Chairman of
Crédit du Nord, in compliance with the provisions of Article
• examining the work supporting the duly presented information.
L. 225-37 of the aforementioned Code, in respect of the fiscal
On the basis of our examinations, we have no opinions to
year ended December 31, 2005.
express concerning the description of the company’s internal
It is the responsibility of the Chairman, in his report, to review
and discuss the preparation and organisation of the Board of
Directors’ activities and the internal control procedures which
control procedures relative to the publication and processing of
accounting and financial information as contained in the report
of the Chairman of the Board, established in application of the
last paragraph of Article L. 225-37 of the French Commercial
have been implemented throughout the company.
Code.
It is our responsibility to communicate our opinions concerning
the information and declarations appearing in the Chairman’s
report concerning the internal control procedures relative to
the publication and processing of accounting and financial
information.
Neuilly-sur-Seine, March 1, 2006.
The Statutory Auditors
DELOITTE & ASSOCIES
BARBIER FRINAULT & AUTRES
ERNST & YOUNG
José-Luis Garcia
Isabelle Santenac
41
Summary balance sheets
ASSETS
ASSETS
12/31/2004
IFRS
(excluding
IAS 32 & 39)
01/01/2004
IFRS
(excluding
IAS 32 & 39)
Cash, due from central banks
2,001.9
1,989.9
Securities portfolio
3,362.6
2,910.4
3,555.5
Due from banks
3,555.5
3,429.2
18,806.9
16,993.6
Customer loans
17,040.2
16,267.8
10
1,326.0
1,158.8
1,176.0
1,024.0
6/6C
224.0
471.6
Deferred tax assets
11
345.3
175.7
Other assets
12
617.8
922.4
887.9
832.3
75.0
71.4
335.0
307.1
48.6
48.5
Notes
12/31/2005
IFRS
01/01/2005
IFRS
5
1,567.3
2,001.9
6/6A
2,959.7
2,188.2
7
295.5
334.4
6/6B
202.4
885.0
Due from banks
8
5,164.1
Customer loans
9
Financial assets at fair value
through profit or loss
Derivative financial instruments
Available-for-sale investments
Finance lease
and other receivables
Held-to-maturity investments
Investments in subsidiaries
and affiliates accounted
for by the equity method
8.1
Tangible and intangible fixed assets
13
376.5
355.1
Goodwill
14
48.6
48.6
31,942.6
29,098.9
TOTAL
42
8.5
Finance lease
and other receivables
Other assets
Goodwill
TOTAL
28,482.7
26,880.6
LIABILITIES
LIABILITIES
12/31/2004
IFRS
(excluding
IAS 32 & 39)
01/01/2004
IFRS
(excluding
IAS 32 & 39)
Due to central banks
1,220.8
1,408.5
Due to banks
1,487.7
1,444.8
14,990.7
14,292.6
5,720.8
5,250.1
Notes
12/31/2005
IFRS
01/01/2005
IFRS
17
757.7
1,220.8
Financial liabilities at fair
value through profit or loss
16
528.6
197.2
7
40.5
99.7
Due to banks
17
2,203.6
1,492.3
Customer deposits
18
16,277.7
15,166.3
Debt securities
19
5,467.5
5,494.1
Deferred tax liabilities
11
388.0
175.6
Other liabilities
12
1,477.5
1,132.8
Other liabilities
1,008.3
1,013.6
Underwriting reserves
of insurance companies
24
2,482.3
2,019.4
1,999.7
1,580.4
Provisions
21
225.7
215.5
Provisions
212.1
227.9
Subordinated debt
23
562.7
478.8
Subordinated debt
435.5
384.6
30,411.8
27,692.5
27,076.8
25,602.5
740.3
740.3
740.3
740.3
72.6
73.7
73.7
66.4
Consolidated reserves
388.4
288.6
322.5
247.9
Net income
250.1
233.8
Net income
233.8
190.4
1,451.4
1,336.4
Unrealised or deferred
capital gains and losses
40.9
34.6
Subtotal of consolidated
1,492.3
1,371.0
1,370.3
1,245.0
38.5
35.4
35.6
33.1
1,530.8
1,406.4
1,405.9
1,278.1
31,942.6
29,098.9
28,482.7
26,880.6
Total debt
Share capital
Equity instruments
and associated reserves
Subtotal
Minority interests
Total shareholders’ equity
TOTAL
Customer deposits
Debt securities
Total debt
Share capital
Equity instruments
Subtotal of consolidated
Minority interests
TOTAL
1.2
43
Consolidated income statement
12/31/2005
IFRS
Interest and similar income
29
1,284.5
1,361.2
–5.6
Interest and similar expenses
29
–526.2
–705.9
–25.5
2.9
2.6
11.5
Dividend income
12/31/2004
IFRS
(excluding
IAS 32 & 39)
Commissions (income)
30
695.4
597.9
16.3
Commissions (expenses)
30
–86.9
–35.4
145.5
60.7
89.7
–32.3
Net gains or losses on financial transactions
Of which net gains or losses on financial
instruments at fair value through profit or loss
31
47.2
–
Of which net gains or losses
on available-for-sale financial assets
32
13.5
–
Income from other activities
33
15.3
20.3
–24.6
Expenses on other activities
33
–64.5
–16.6
288.6
Net banking income
28
1,381.2
1,313.8
5.1
Personnel expenses
34
–570.5
–558.3
2.2
–34.4
–23.9
43.9
Taxes
Other expenses
35
–263.1
–244.8
7.5
Amortisation, depreciation and impairment
of tangible and intangible fixed assets
36
–57.7
–54.1
6.7
Total operating expenses
–925.7
–881.1
5.1
455.5
432.7
5.3
–62.5
–69.7
–10.3
393.0
363.0
8.3
1.3
1.6
–18.8
1.1
0.7
57.1
Cost of risk
37
Operating income
Net income from companies
accounted for by the equity method
38
Net income from other assets
Impairment of goodwill
–
395.4
365.3
8.2
Income tax
39
–138.5
–125.7
10.2
Minority interests
40
–6.8
–5.8
17.2
250.1
233.8
7.0
Consolidated net earnings per share (in euros)
2.70
2.53
Number of shares making up the share capital
92,532,906
92,532,906
Earnings before tax
CONSOLIDATED NET INCOME
44
%
change
2005/2004
Notes
Change in shareholders’ equity
Capital and associated reserves
Share
capital
Equity
instruments
and
associated
reserves
Consolidated
reserves
Treasury Consolidated
shares
reserves
at December 31, 2003
740.3
Incidence of transition
to IFRS
at January 1, 2004
(excluding IAS 32 & 39)
740.3
Unrealised or deferred capital
gains/losses (net of corporate tax)
Change in value of financial
instruments
Change
in fair
value
of available
for sale
assets
Change
in fair
value
of hedging
derivatives
Deferred
tax
change
in
fair
value
Shareholders’
equity,
Group
share
Minority
Total
interests consolidated
shareholders’
equity
534.1
1,274.4
33.3
1,307.7
66.4
–95.8
–29.4
–0.2
–29.6
66.4
438.3
1,245.0
33.1
1,278.1
2.5
2.5
–111.0
–111.0
–3.2
–114.2
–108.5
–3.2
–111.7
233.8
5.8
239.6
233.8
5.8
239.6
–0.1
–0.1
Increase in share capital
Elimination
of treasury shares
Equity component
of share-based
payment plans
Dividends paid in 2004
Changes linked
to relations with
shareholders
0.0
2004 net income
Subtotal
0.0
0.0
7.3
0.0
7.3
–108.5
0.0
0.0
0.0
226.5
0.0
226.5
0.0
0.0
0.0
2.5
Impact of acquisitions
and disposals
on minority interests
Translation differences
and other changes
at December 31, 2004
(excluding IAS 32 & 39)
740.3
73.7
0.0
Impact of transition
to IAS/IFRS
556.3
0.0
–33.9
36.6
522.4
36.6
0.0
0.0
1 370.3
35.6
1 405.9
–2.0
0.7
–0.2
0.5
–2.0
1,371.0
35.4
1,406.4
Appropriation of income
in 2004
at January 1, 2005
(including IAS 32 & 39)
740.3
73.7
0.0
0.0
45
Change in shareholders’ equity
Capital and associated reserves
Share
capital
Equity
instruments
and
associated
reserves
740.3
73.7
Consolidated
reserves
Treasury Consolidated
shares
reserves
at January 1, 2005
(including IAS 32 & 39)
0.0
522.4
Unrealised or deferred capital
gains/losses (net of corporate tax)
Change in value of financial
instruments
Change
in fair
value
of available
for sale
assets
Change
in fair
value
of hedging
derivatives
Deferred
tax
change
in
fair
value
Shareholders’
equity,
Group
share
Minority
Total
interests consolidated
shareholders’
equity
36.6
0.0
–2.0
1,371.0
35.4
1,406.4
–134.2
–3.2
–137.4
0.0
–134.2
–3.2
–137.4
–0.6
6.3
–0.5
5.8
250.1
6.8
256.9
256.4
6.3
262.7
Increase in share capital
Elimination
of treasury shares
Issuance of equity
instruments
Equity component
of share-based
payment plans
Dividends paid in 2005
Subtotal of changes
linked to relations
with shareholders
–134.2
0.0
0.0
0.0
–134.2
Change in value
of financial instruments
and fixed assets having
an impact on equity
0.0
0.0
6.9
Change in value
of financial instruments
and fixed assets
recognised in income
250.1
2005 net income
Subtotal
0.0
0.0
0.0
250.1
6.9
0.0
–0.6
Impact of acquisitions
and disposals on
minority interests
Translation differences
and other changes
SHAREHOLDERS’ EQUITY
AT DECEMBER 31, 2005
(INCLUDING IAS 32 & 39)
46
–1.1
740.3
72.6
0.2
0.0
638.5
–0.9
43.5
0.0
–2.6
1,492.3
–0.9
38.5
1,530.8
PRUDENTIAL CAPITAL
AND CAPITAL ADEQUACY RATIO
In accordance with the regulations of the French Banking
Note that the Group’s capital requirement has increased
Commission, overall prudential capital requirements are calcu-
sharply compared with the end of 2004, due mainly to credit
lated at consolidated level, by Société Générale, which had
risk (requirement of 1,373.6 millions of euros versus 1,227.8
exclusive control of Crédit du Nord on December 31, 2005.
millions of euros at the end of 2004). Its other requirements are
Consequently, only Société Générale has to respect these
significantly lower and any changes therein have little impact
requirements.
on the total requirement.
Crédit du Nord Group’s capital adequacy ratio was calculated
The Group’s capital adequacy ratio, i.e. the ratio of prudential
under IAS for the first time in 2005. As a result, the figures
capital (1,564.5 millions of euros) to risk-weighted assets
given for 2004 and 2003 have been calculated under French
(17,371.8 millions of euros), stood at 9% at end-2005, and its
accounting principles.
Tier One ratio at 6.3% (versus 9.2% and 6.7% respectively at
For information only, at end-2005, Crédit du Nord Group had
sufficient prudential capital to cover 112.6% of its requirement
(i.e. specific requirements for for credit risk, market risk and
the end of 2004). The fall in the ratio is mainly a result of the
increase in credit risk which was partly offset by a new issuance
of redeemable subordinated notes in 2005.
major risk), compared with 114.4% at end-2004 and 109.8%
at end-2003.
Crédit du Nord Group’s total capital requirements at December
31, 2005 broke down as follows:
For credit risk
For market risk
- of which interest rate risk
1,373.6
16.2
14.6
- of which exchange rate risk
0.0
- of which settlement/counterparty risk
1.6
- of which property risk
0.0
For major risks
0.0
Total requirements
1,389.8
Prudential capital
1,564.5
- of which basic core capital
1,091.4
- of which additional items
473.1
Coverage of total requirement
112.6%
47
Cash flow statement
12/31/2005
12/31/2004
IFRS (excluding
IAS 32 & 39)
256.9
239.6
37.3
334.3
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (I)
Amortisation expense on tangible and intangible fixed assets
Allocation to provisions (mainly underwriting reserves of insurance companies)
359.9
332.7
Net income (loss) from companies accounted for by the equity method
–1.3
–1.6
Deferred taxes
19.5
25.8
Net income from sale of available-for-sale assets,
LT equity investments and consolidated subsidiaries
–0.2
0.4
Change in deferred income
11.5
19.2
Change in prepaid expenses
–1.6
3.7
7.8
–15.8
Change in accrued expenses
–9.7
31.9
Other changes
41.8
181.1
465.0
911.7
Change in accrued income
Non-monetary items included net income and other adjustments,
excluding income on financial instruments at fair value through P&L (II)
Reclassification of net income on financial
instruments at fair value through P&L (III)
–47.2
–68.1
Interbank transactions
–424.4
–18.0
Customer transactions
–630.3
–160.6
10.8
–365.4
Transactions in other financial assets/liabilities
Transactions in other non-financial assets/liabilities
Net increase/decrease in operating assets/liabilities (IV)
NET CASH FROM OPERATING ACTIVITIES (A)=(I)+(II)+(III)+(IV)
634.9
–129.1
–409.0
–673.1
265.7
410.1
CASH FLOWS FROM INVESTMENT ACTIVITIES
Cash flow from acquisition and disposal of financial assets and LT investments
259.5
–5.5
–58.6
–71.2
NET CASH FROM INVESTING ACTIVITIES (B)
200.9
–76.7
–138.2
–114.3
CASH FLOWS FROM FINANCING ACTIVITIES
Cash flow from/to shareholders
88.9
49.6
NET CASH USED IN FINANCING ACTIVITIES (C)
–49.3
–64.7
INCREASE IN CASH AND CASH EQUIVALENTS (A)+(B)+(C)
417.3
268.7
Other cash flows from financing activities
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the financial year
1,322.7
1,000.3
Net balance of cash accounts and accounts with central banks
780.1
581.4
Net balance of current accounts, demand deposits and loans with credit establishments
542.6
418.9
Cash and cash equivalents at the end of the year
48
1,740.0
1,269.0
Net balance of cash accounts and accounts with central banks
808.3
781.1
Net balance of current accounts, demand deposits and loans with credit establishments
931.7
487.9
CHANGE IN CASH AND CASH EQUIVALENTS
417.3
268.7
Notes to the consolidated
financial statements (extract)
NOTE 1
● PRINCIPLES AND METHODS
OF CONSOLIDATION, ACCOUNTING PRINCIPLES
IFRS, with the exception of items falling under the scope of
IAS 32 and IAS 39 on financial instruments and IFRS 4 on insurance contracts, which were only applied as of January 1, 2005,
THE MAIN RULES FOR EVALUATING AND PRESENTING
THE CONSOLIDATED FINANCIAL STATEMENTS
as permitted under IFRS 1. In the case of these items, the
accounting principles state (a) the methods applied in 2004
under French accounting principles and (b) the methods
Pursuant to European Regulation 1606/2002 of July 19, 2002
applied in 2005 under full IFRS.
concerning the application of International Accounting
Standards, the consolidated financial statements of Crédit du
Nord Group (“the Group”) for the year ending December 31,
2005, were prepared in accordance with the standards
The effects of this change in accounting standards on Crédit du
Nord Group’s balance sheet, consolidated shareholders’ equity
and consolidated net income are presented in Note 2.
adopted under the procedure specified in Article 6 of the afore-
As the IFRSs do not specify a standard, compulsory presenta-
mentioned regulation and applicable at that date.
tion, the format of the summary financial statements has been
The Group is fully subject to these standards as it regularly
issues redeemable subordinated notes which are admitted to
trading on the primary market.
adapted to make it consistent with that proposed by French
National Accounting Standards Board (CNC) recommendation
n° 2004-R.03 dated October 27, 2004 on the summary financial statements of companies governed by the French
The IFRS framework includes IFRSs (International Financial
Consultative Committee on Financial Legislation and Regulation
Reporting Standards) 1 to 6 and IASs (International Accounting
(CCLRF) under international accounting standards.
Standards) 1 to 41, as well as the interpretations of these
standards adopted by the European Union at December 31, 2005.
The Group also made use of the provisions of IAS 39 as
adopted by the European Union relating to macro fair value
hedge accounting. The Group opted for the early application
of the amendment to IAS 39 on the fair value option, as of
January 1, 2005.
The consolidated financial statements also include an opening
balance sheet prepared in accordance with IFRS 1, “First-time
adoption of IFRS”.
Some of the figures booked in these consolidated financial
statements are based on estimates and assumptions made by
the Management. This applies in particular to the fair value of
financial instruments and the valuation of goodwill and the
calculation of the impairment of intangible assets, depreciation
for counterparty risk and provisions.
The most significant estimates are indicated in the notes to the
financial statements. Actual future results may differ from these
estimates.
The consolidated financial statements are presented in euros.
SEGMENT REPORTING (IAS 14)
Until December 31, 2004, the consolidated financial state-
Given that insurance, asset management and intermediation
ments of Crédit du Nord Group were prepared in accordance
activities are non-material in relation to banking activities,
with the French accounting principles, contained in Regulations
Credit du Nord Group only reports on one business segment.
99-07 and 2000-04 of the French Accounting Regulation
Similarly, as Crédit du Nord Group is a national banking group,
Committee, which differ in some respects from the IFRS frame-
it only reports on one geographical segment.
work adopted in the European Union. As a result, comparative
data for 2004 have been restated to bring them in line with
49
PRINCIPLES AND METHODS OF CONSOLIDATION
Companies that do not qualify as significant under the Group’s
accounting standards have been excluded from the consolida-
• or having the power to exercise a dominant influence over the
subsidiary through an agreement or provisions in the
company’s bylaws.
tion scope. In order to qualify as significant, Group companies
must meet the three following criteria for two consecutive fiscal
PROPORTIONATE CONSOLIDATION (IAS 31)
years:
Group companies which are jointly owned and controlled are
• total assets of under 10 millions of euros;
consolidated by the proportionate method. This method
• income of below 1 million of euros;
consists in recognising a proportion of the company’s assets
• no ownership of a stake in the capital of a consolidated
and liabilities equal to the percentage of Group ownership in
company.
The voting rights taken into consideration in order to determine
the company, rather than the value of the ownership interest in
the company. Minority interests are not booked.
the Group’s degree of control over an entity and the
IFRS defines joint control as the sharing of control over a
corresponding consolidation method include potential voting
subsidiary by a limited number of partners or shareholders,
rights where these can be freely exercised or converted at the
where the financial and operating policies of the said subsidiary
time the assessment is made. Potential voting rights are instru-
are determined by mutual agreement.
ments such as call options on ordinary shares outstanding in
the market or rights to convert bonds into new ordinary shares.
The following consolidation methods are used:
A contractual agreement must specify that the consent of all
partners or shareholders is required for exercising control over
the economic activity of the subsidiary and for all strategic
decisions.
FULL CONSOLIDATION (IAS 27)
Group companies which are exclusively controlled by Crédit du
Nord Group are fully consolidated. Full consolidation involves
Companies over which the Group exercises significant influ-
recognising the full value of the subsidiary’s assets and liabili-
ence are consolidated using the equity method. Significant
ties, and identifying separately any minority interests in both
influence is defined as the power to influence the policies of a
shareholders’ equity and net income.
subsidiary without exercising control over the said subsidiary.
IFRS defines exclusive control over a subsidiary as the power to
govern the financial and operating policies so as to obtain
benefits from its activities. Control results from:
• either owning, directly or indirectly, the majority of the voting
rights in the subsidiary, taking into account potential voting
rights;
• or having the power to appoint or remove the majority of
members of the administrative, management or supervisory
bodies of the subsidiary or to command the majority of the
voting rights at meetings of these bodies;
50
EQUITY METHOD (IAS 28)
This can result from representation on the management or
supervisory bodies, participation in the policy-making process,
the existence of significant intercompany transactions, interchange of managerial personnel or the provision of essential
technical information. The Group is presumed to exercise
significant influence if it holds, directly or indirectly, at least
20% of the voting rights, unless it can be clearly demonstrated
otherwise. Likewise, if the holding is less than 20%, the Group
will be presumed not to have significant influence unless such
influence can be clearly demonstrated.
Under the equity method, the value of the shares owned in the
company and booked in Crédit du Nord and its subsidiaries’
balance sheet is substituted by the equivalent share of the
company’s net income and shareholders’ equity. The net difference resulting from this substitution is recorded under
“Consolidated reserves”. The Group’s share in the company’s
income is recorded under “Income from companies accounted
for by the equity method”.
GOODWILL (IFRS 3)
Crédit du Nord Group uses the purchase method to account for
its business combinations. In order to determine goodwill,
IFRS 3 requires that all assets, liabilities, off-balance sheet
items and contingent liabilities of the acquired entities be
valued individually at fair value, regardless of their purpose.
The analyses and appraisals necessary for the initial valuation
of these items, and any corrections to the value based on new
information, must be carried out within 12 months of the date
SPECIFIC TREATMENT OF SPECIAL PURPOSE
of acquisition.
ENTITIES (SIC 12)
Upon the first consolidation of a company, an analysis is
The distinct legal structures, Special Purpose Entities or SPEs,
created specifically to manage a transaction or group of similar
transactions are consolidated if they are substantially controlled
by the Group, even in the absence of capital ties.
performed to determine the difference between the acquisition
cost of the shares and the assessed fair value of the proportion
of the net assets acquired. This difference is then booked to
correct the value of the balance sheet items and commitments
The following criteria are used to assess whether a special
of the consolidated company, on the one hand, and recorded
purpose entity is controlled by another entity:
as intangible assets, as defined by IAS 38. Any residual balance
• the SPE’s activities are being conducted on behalf of the
is recorded as goodwill. If the residual difference is positive, it is
Group so that the Group obtains benefits from the SPE’s
booked on the assets side of the consolidated balance sheet
operation;
under Goodwill. If the difference is negative, it is immediately
• the Group has the decision-making powers to obtain the
majority of the benefits of the SPE, whether or not this control
has been delegated through an “auto-pilot” mechanism;
• the Group has the ability to obtain the majority of the benefits
of the SPE;
• the Group retains the majority of the risks of the SPE.
recognised in profit or loss.
Goodwill is carried on the balance sheet at historical cost, and
is tested for impairment tests whenever there is any indication
that its value may have diminished, and at least once a year. At
the acquisition date, each item of goodwill is attributed to a
Cash Generating Unit (CGU) which is expected to derive bene-
In consolidating SPEs considered to be substantially controlled
fits from the acquisition. Any impairment of goodwill is calcu-
by the Group, those parts of entities not held by the Group are
lated based on the recoverable value of the relevant CGU.
recognised as debt in the balance sheet.
When the recoverable value of the CGU is less than its carrying
value, an irreversible impairment is recorded in the consoli-
RESTATEMENTS AND ELIMINATIONS
Where applicable, the financial statements of consolidated
companies are restated according to Group accounting princi-
dated income statement for the period under “Impairment of
goodwill”. At present, the Group has only defined one CGU: the
retail bank.
ples. Consolidated net assets and net income are presented
For the fiscal year ended December 31, 2005, no goodwill
after eliminations for intra-group transactions.
impairment was recognised.
FISCAL YEAR-END
The consolidated financial statements were prepared on the
basis of accounts closed on December 31, 2005 for all consolidated companies.
51
ACCOUNTING PRINCIPLES
Short-term investment securities are recorded at cost and net
of any expenses. Accrued interest at the time of purchase is
CLASSIFICATION AND VALUATION OF FINANCIAL ASSETS
recorded as related receivables. The difference between the
AND LIABILITIES
value on the date of acquisition and the redemption value of
these securities is spread prorata over the period remaining to
From January 1, 2004 to December 31, 2004
the date of redemption.
At year-end, the value of the securities is estimated on the basis
Loans and receivables
of the most recent price in the case of listed securities, or
Amounts due from banks and customers are recorded in
according to probable market value in the case of unlisted
the balance sheet at face value. Interest accrued on these
securities. Unrealised capital losses resulting from this valua-
receivables is recorded as related receivables through profit or
tion are provisioned, while unrealised capital gains are not
loss.
recorded.
Securities are classified according to their type (Treasury notes
and similar, bonds and other fixed-income securities, shares
and other equity securities) and according to the purpose for
which they were required (trading, short-term investment,
investment, equity investments and subsidiaries, other longterm investment securities, shares intended for portfolio
activity).
• Investment securities
Investment securities include fixed-income securities
purchased with the intention of holding them until maturity and
financed by earmarked permanent resources. The difference
between the value on the date of acquisition and the redemption value of these securities is spread prorata over the period
remaining to the date of redemption.
At the close of the accounts, unrealised losses are determined
by a book-to-market value comparison but are not provisioned.
• Trading securities
Trading securities include all positions taken on liquid markets
with the intention of reselling the securities or of selling them to
customers in the short term, i.e. within a maximum period of
six months. At year-end, the securities are valued at the most
recent market price. The net balance of differences resulting
from price changes is recorded to income.
Unrealised gains are not recorded.
• Equity investments and subsidiaries
Equity investments and subsidiaries include the securities of
companies in which a significant fraction of capital (10-50% for
affiliates, over 50% for subsidiaries) is held over the long term.
These investments are recorded at cost, and may eventually be
re-valued within the “revaluation of 1976” framework.
• Short-term investment securities
Short-term investment securities are those purchased with the
intention of holding them for a period of over six months, with
the exception of long-term investment securities.
of their useful value determined according to the same criteria
as those adopted at the time of their acquisition, such as the
net asset value and profitability of the companies in question.
Unrealised capital losses are provisioned, while potential capital
gains are not recorded.
52
• Long-term investment securities
• Income from the securities portfolio
Long-term investment securities are investments made by the
Income from stocks, dividends and interim dividends is recog-
Group in order to foster the development of lasting business
nised as received. Income from bonds is booked to income on
relations by creating a special link with the issuing company
a prorata basis. Interest accrued at the time of purchase is
without, for as much, exercising any influence on its manage-
entered in a deferred income account.
ment due to the small percentage of voting rights attached to
• Income from disposals of securities
said investments.
Capital gains and losses are calculated on the basis of the gross
of their useful value determined according to the same criteria
value of securities sold, with any sales fees therein deducted
from the proceeds of the disposal.
as those adopted at the time of their acquisition, such as the
equity and profitability of the concerned companies. Unrealised
capital losses are provisioned, while potential capital gains are
not recorded.
Financial liabilities valued at amortised cost
The treatment of financial liabilities carried in the balance sheet
at amortised cost is identical under French accounting stand-
• Shares intended for portfolio activity
ards and under IFRSs for fiscal years 2004 and 2005
This category of securities covers investments made on a
(cf. below).
regular basis with the sole aim of realising a capital gain in the
medium term and without making a long-term investment in
the development of the issuing company, or participating
actively in its operational management. This category notably
includes shares held in the context of venture capital activities.
As of January 1, 2005
When initially recognised, financial assets and liabilities are
measured at fair value including transaction costs (with the
exception of financial instruments recognised at fair value
These securities are recorded at cost and net of any expenses.
through profit or loss) and are classified under one of the
At year-end, they are valued at their value in use which is deter-
following financial categories.
mined by taking into account the issuer’s general growth
prospects and the projected holding period. The value in use of
listed securities is determined by referring to the stock market
price over a sufficiently long period and by taking into account
the projected holding period. Unrealised capital losses resulting
from this valuation are provisioned, while unrealised capital
In general, regardless of their category, sales and purchases of
securities are recognised in the balance sheet on the date of
settlement. Loans are initially recognised on the date of
disbursement.
Loans and receivables
gains are not recorded.
Loans to customers are recorded in the balance sheet under
• Securities with repurchase or resale options
“Customer loans”. They are initially recognised at fair value
Securities purchased under resale agreements are booked
plus transaction costs and thereafter valued at amortised cost
under assets at their sale price but are not included in the
at the close of each financial period using the effective interest
Bank’s securities portfolio. Revenues from resale agreements
rate method, which takes into consideration all contractual
are booked prorata to income.
cash flows. Any impairment loss may be recorded if appropriate
(cf. “Impairment of financial assets”).
53
This category also includes securities purchased under resale
value of the financial assets through profit or loss so that they
agreements. The securities received are booked at their sale
match fluctuations in the value of the insurance liabilities
price on the assets side of the balance sheet. Revenues from
associated with these unit-linked policies.
resale agreements are booked to income at amortised cost.
Financial assets and liabilities at fair value
Moreover, securities held in the context of the venture capital
activities, where the Group’s stake is between 20% and 50%,
have been designated to be carried at fair value, through profit
or loss, and therefore fall under the scope of IAS 39. They are
In the Group’s case, these are mostly financial assets held for
classified as securities valued using the fair value option.
trading purposes, which are all listed securities. They are
valued at fair value at the balance sheet date. Any changes in
fair value are recorded under Net gains/losses on financial
instruments at fair value through profit or loss.
Held-to-maturity financial investments
These are non-derivative fixed income assets with a fixed
maturity that the Group has the intention and ability to hold to
This category also includes non-derivative financial assets and
maturity. They are measured at amortised cost, taking into
liabilities which the Group has decided to carry at fair value in
account premiums, discounts and transaction costs and may
accordance with the application of the option available under
be provisioned for impairment.
IAS 39, specified in the amendment to IAS 39 published in
June 2005. The Group uses this option in two cases:
• to book certain compound instruments at fair value and
In the Group’s case, this category only includes government
funds or local authority funds, which have very limited exposure
to credit risk.
thereby avoid the need to separate out embedded derivatives
that would otherwise have to be booked separately. These
include unlisted securities containing embedded derivatives
(convertible bonds or bonds redeemable in shares) as well as
structured issues of negotiable medium-term notes;
• to eliminate or reduce discrepancies in the accounting treatment of certain financial assets and liabilities. The Group thus
recognises at fair value through profit or loss the financial
assets held to guarantee unit-linked policies of its life insurance subsidiaries to ensure their financial treatment matches
This is a default category that includes any assets that do not
fall into one of the previous categories. Available-for-sale financial assets are measured at fair value at the balance sheet date,
and any changes in value excluding accrued or earned interest
are recorded in shareholders’ equity under Unrealised gains or
losses.
Accrued or earned interest on fixed-income securities is
of the corresponding insurance liabilities. Under IFRS 4,
recorded in profit or loss under Interest and similar income –
insurance liabilities have to be recognised according to local
transactions in fixed-income financial instruments. Changes in
accounting principles. The revaluations of underwriting
fair value are only recognised in profit and loss, under Net gains
reserves on unit-linked policies, which are directly linked to
or losses on available-for-sale financial assets when the asset is
revaluations of the financial assets underlying their policies,
sold or permanently impaired.
are accordingly recognised in profit or loss. The fair value
option thus allows the Group to record changes in the fair
54
Available-for-sale financial assets
Income from equity securities classed as available-for-sale
securities is booked to profit or loss under Dividend income.
Financial liabilities valued at amortised cost
Group borrowings that are not classified as financial liabilities
measured at fair value through profit or loss are initially booked
at cost, corresponding to the fair value of the sums borrowed
undated subordinated notes are classified as subordinated
debt and not as shareholders’ equity given the implicit obligation to repay the debt.
• Securities with repurchase or resale options
net of transaction costs. This debt is valued at amortised cost at
Securities sold under repurchase agreement, whether deliv-
the end of the financial period, using the effective interest
ered or not, remain as originally booked to assets and are
method.
valued according to the rules applicable to the portfolio to
Interest accrued on the debt is recorded under related
which they belong. Revenues linked to these securities are
payables through profit or loss.
also recorded as if the securities were still in the portfolio.
Debt on pledged securities is recorded as a liability at the sale
• Amounts due to banks, customer deposits
price of the securities.
Amounts due to banks and customer deposits are classified
according to their initial duration and type into: demand
IMPAIRMENT OF FINANCIAL ASSETS
(demand deposits, current accounts) and term borrowings in
the case of banks; special savings accounts and other
deposits for customers. Accrued interest on this debt is
recorded as related payables through profit or loss.
Regulation 2002-03 of the French Accounting Regulation
Committee (CRC), published on December 12, 2002 and appli-
• Debt securities
cable as of January 1, 2003, outlines the classification of
These liabilities are classified by type of security: medium-
doubtful loans on balance sheets and the treatment of off-
term notes, savings bonds, negotiable debt instruments,
market restructured loans.
bonds and other debt securities, with the exception of subordinated notes which are classified under subordinated debt.
Interest accrued is booked as related payables through profit
or loss. Bond issuance and redemption premiums are amortised using the actuarial method over the life of the related
borrowings. The resulting charge is recorded as interest
expenses in profit or loss.
• Subordinated debt
This item includes all dated or undated subordinated borrow-
If a loan is considered to bear a probable risk that all or part of
the sums owed by the counterparty under the initial terms and
conditions of the loan agreement will not be recovered, and
regardless of the existence of loan guarantees, the loan in question is classed as “doubtful” where one or more payments is
“90 days overdue” (six months for real estate and property
loans, nine months for municipal loans), where, any missed
payments notwithstanding, there is a proven risk of loss or
where a loan is disputed.
ings, which in the case of liquidation of the borrowing
Where a given borrower’s loan is classed as a “doubtful loan”,
company may only be redeemed after all other creditors have
any other loans and commitments of the same borrower are
been paid. Interest accrued and payable in respect of subor-
also automatically classed as doubtful, regardless of any
dinated debt, if any, is shown with the underlying liabilities as
guarantees.
related payables. Pending an interpretation by IFRIC,
55
Doubtful loans give rise to provisions for the portion of
The criteria for determining whether the credit risk on an indi-
outstanding loans that is not likely to be recovered, which are
vidual loan is identified are similar to those used under French
deducted directly from assets, without discounting to present
regulations to determine whether a loan is doubtful.
value. Interest on doubtful loans is also fully provisioned.
Doubtful loans can be reclassified as performing loans once
payments have resumed on a regular basis according to the
initial contractual schedule. Moreover, doubtful loans which
have been restructured may be reclassified as performing.
The amount of the impairment loss is equal to the difference
between the carrying value of the asset and the present value,
discounted at the original effective interest rate, of the total estimated recoverable sum, taking into account the value of any
guarantees. The impaired receivable subsequently generates
The net expense for banking risks for the year is recorded
interest income, calculated by applying the effective interest
under Cost of risk in the income statement. This net expense is
rate to the net carrying value of the receivable. Allocations to
constituted by allowances and non recoverable loans not
and write-backs of impairment losses are recorded under Cost
already covered by provisions, less write-backs and recoveries
of risk. The impaired receivables are remunerated for
on write-offs.
accounting purposes by the reversal over time of the
and similar income in profit or loss.
Financial assets carried at amortised cost
In a homogenous portfolio, as soon as a credit risk is incurred
discounting to present value, which is recorded under Interest
on a group of receivables, collective impairment loss is recogAt each balance-sheet date, the Group determines whether
there is objective evidence that any asset or group of individually assessed financial assets has been impaired as a result of
one or more events occurring since they were initially recognised (“a loss generating event”) that has (have) an impact on
the estimated future cash flows of the asset or group of financial assets which can be reliably estimated.
If there is no objective evidence of impairment for an individually assessed financial asset, the Group includes the financial
asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment.
nised without waiting for the risk to individually affect one or
more receivables. This impairment loss is directly deducted
from the value of the loans/receivables in the balance sheet.
The collective impairment losses cover, on the one hand, the
credit risk incurred on a portfolio of counterparties which are
sensitive or on the watch-list, and, on the other hand, the sector
or country risk exposure.
• Performing loans under watch (‘3S’)
Within the Performing loan risk category, the Group has
created a subcategory called Performing loans under watch,
to cover loans/receivables requiring closer surveillance. This
If a loan is considered to carry an identified credit risk which
category includes loans/receivables where certain evidence of
makes it probable that the Group will be unable to recover all or
deterioration has appeared since they were granted.
part of the amount owed by the counterparty under the initial
The Group conducts historical analyses to determine the rate
terms and conditions of the loan agreement, notwithstanding
of classification of these loans/receivables as doubtful and the
any loan guarantees, an impairment loss is booked for the loan
provisioning ratio, and updates these analyses on a regular
in question, and deducted directly from the value of the asset.
basis. It then applies these figures to homogenous groups of
receivables in order to determine the amount of impairment.
56
• Sector-based provisions
Impairment losses recognised through profit or loss on equity
The Group’s Central Risk Division regularly lists the business
instruments considered as available-for-sale are not reversed
sectors that it considers they represent a high probability of
until the financial instrument is sold. Once an equity instrument
default in the short-term due to recent events that may have
has been impaired, any further loss of value is booked as an
caused lasting damage to the sector. A rate of classification as
additional impairment loss. However, losses of value on debt
doubtful loans is then applied to the total outstandings in
instruments are reversed through profit or loss if the instru-
these sectors in order to determine the volume of doubtful
ments subsequently appreciate in value.
loans. Provisions are then booked for the overall amount of
these outstanding loans, using provisioning ratios which are
DERIVATIVES AND HEDGING
determined according to the historical average rates of
doubtful customers, adjusted to take into account an analysis
by an independent expert of the economic environment.
Interest rate swaps
Available-for-sale financial assets
When there is evidence of lasting impairment to an availablefor-sale financial asset, then an impairment loss is booked to
profit or loss. When a non-permanent unrealised capital loss
These concern all transactions relative to swaps, FRAs, caps,
floors, collars and interest rate options, accounted for under
modified regulation CRB 90-15.
has been directly booked to shareholders’ equity and subse-
From origination, these contracts are classified in four separate
quently objective evidence of lasting impairment emerges, the
categories and recorded in distinct accounts. The risks and
Group recognises the total accumulated unrealised loss previ-
income/expenses relative to each category are subject to
ously booked to shareholders’ equity in profit or loss:
specific monitoring:
• under Cost of risk for debt instruments (fixed-income securities);
• under Net gains or losses on available-for-sale financial assets
for equity instruments (equity securities).
a) Contracts whose purpose is to maintain open positions in
order to benefit from any eventual interest rate movements. All
relative income and expenses are booked to profit or loss on a
prorata basis. Unrealised losses, determined by a comparison
The sum of the cumulated loss is calculated as the difference
between book value and market value, are provisioned whereas
between the acquisition cost of the security (net of any repay-
underlying gains are not recognised.
ments of principal and amortisation) and its current fair value,
minus, if necessary, any loss of value on the security previously
booked through profit or loss.
b) Contracts whose purpose is to hedge interest rate risk
affecting one specific item or a homogeneous set of items (also
called “microhedges”). All relative income and expenses are
In the case of shareholder’s equity instruments, the notion of
booked on the income statement on a prorata basis in the same
lasting impairment is assessed mainly on the basis of whether
manner as those relating to the hedged item. The same applies
there is any significant and lasting loss of value on the instru-
to unrealised gains and losses.
ment.
57
c) Contracts whose purpose is to hedge and manage the global
interest rate risk of the institution (also called “macrohedges”).
All relative income and expenses are booked to profit or loss on
a prorata basis. Unrealised gains and losses, determined by a
comparison between book value and market value, are not
recognised.
d) Contracts whose purpose is to specifically manage a trading
portfolio. All relative income and expenses are recorded to
IAS 39 requires that all derivatives be recognised at fair value in
the balance sheet, and that variations in value be recognised in
the profit or loss for the period, with the exception of financial
derivatives, classified as cash flow hedges for accounting
purposes (see below). Derivative instruments are booked at
their trading date.
Derivative instruments are divided into two categories:
income symmetrically with income and expenses relating to
trades made in the opposite direction. This symmetry is
respected by valuing the contracts at market value and by
recording changes in value from one closing date to the next.
Other financial futures
Trading financial derivatives
Financial derivative instruments are considered to be trading
financial derivatives by default, unless they are designated as
hedging instruments for accounting purposes. They are booked
in the balance sheet under Financial assets or liabilities at fair
Futures and Matif contracts and exchange-traded interest-rate
and Forex options are accounted for amended CRB Regulation
88-02.
Margin calls paid or received on futures and Matif contracts of
a speculative nature, or on contracts that hedge positions that
can be marked-to-market, are recorded directly to income.
Where these contracts hedge non market-priced items, margin
value through profit or loss. Changes in fair value are booked in
the income statement under Net gains or losses on financial
instruments at fair value through profit or loss – Income from
financial derivatives.
Derivative instruments in the trading category include rate
swaps, caps, floors and collars, interest-rate options, futures
contracts, Matif contracts and Forex options.
calls are recorded in suspense accounts and, once the
contracts are settled, booked prorata over the remaining life of
Derivative hedging instruments
the covered transactions.
Under IFRS, hedge accounting is deemed to be an exceptional
Premiums paid or received are entered in suspense accounts.
Premiums on unexpired and unexercised exchange-traded
options are re-valued on the closing date.
treatment and is therefore subject to very strict requirements.
As a result, as soon as the hedging relationship is established,
Crédit du Nord Group produces documentation indicating: the
item hedged, the risk to be hedged, the type of financial
Upon the expiry or exercise of the option, premiums are either
recorded immediately to income (speculative options, hedge
derivative used and the evaluation method applied to measure
the effectiveness of the hedge.
options on market-priced items), or booked prorata over the
residual life of the hedged transactions (hedge options on non
market-priced items).
The hedging relationship must be highly effective, such that
variations in the value of the derivative hedging instrument
offset variations in the value of the hedged instrument, as to be
58
very efficient in order for the variations in value of the financial
• Macro fair value hedge
derivative hedging instrument offset the changes in value of the
In this type of hedge, financial instruments are used to hedge
item being hedged, both when the hedge is first set up and
the Group’s overall structural interest rate risk. Crédit du Nord
throughout its life.
Group has decided to use the carve-out version of IAS 39 as
Depending on the type of risk hedged, the Group defines the
adopted by the European Union, which facilitates:
derivative financial instrument as a fair value hedge, a macro
• the use of fair value hedge accounting for macro hedges used
fair value hedge or a cash flow hedge.
in asset & liability management including customer demand
deposits in the fixed rate positions being hedged;
• Fair value hedge
The main instruments used for fair value hedges are interest
rate swaps.
In a fair value hedge, the hedging derivative is measured at fair
value through profit or loss, as is the portion of the hedged item
that is exposed to the hedged risk: i.e. the gains or losses on
the hedged item attributable to the hedged risk adjust the
carrying amount of the hedged item and are recognised in
profit or loss under Net gains or losses on financial instruments
• the application of the effectiveness test required by the
standard.
The main instruments used for macro fair value hedges are rate
swaps and cap purchases.
Financial derivatives used for macro fair value hedges are
accounted for in a similar way to derivatives used in fair value
hedges. Changes in the fair value of the macro hedged portfolio
are booked in the balance sheet under Revaluation differences
on hedged items through profit or loss.
at fair value through profit or loss – Derivative financial instruments.
• Cash flow hedge
Accrued interest income or expenses on the hedging derivative
Crédit du Nord Group has no financial instruments in its
are booked to profit or loss under the same caption, at the
balance sheet classified as cash flow hedges or hedges of a net
same time as the interest income or expense related to the
investment.
hedged item.
The Group discontinues prospectively the hedge accounting if:
FOREIGN EXCHANGE TRANSACTIONS
• the effectiveness criteria for the hedging instrument are no
longer respected;
• the financial derivative is sold or terminated early;
Foreign exchange (Forex) contracts are marked-to-market on
• the hedged item is sold before maturity.
their closing date (either on the basis of spot rates for spot
As a result, with the exception of the last case, the balance
transactions or on the basis of the applicable forward rates for
sheet value of the hedged item is no longer adjusted to take into
the remaining term to maturity of forward contracts).
account variations in value, and cumulated gains or losses on
the previously hedged item are amortised over the remaining
life of the item.
Forward exchange transactions linked to spot transactions are
valued at the spot rate. Discount and premiums (i.e. the difference between the spot and forward rates of exchange at the
time the transaction was completed) are recorded to income
prorata.
Forex gains and losses resulting from the above valuations are
recognised at the end of each period under income.
59
COMMITMENTS UNDER HOME SAVINGS ACCOUNTS
At period-end, monetary assets and liabilities denominated in
Home savings accounts and plans are savings schemes for
foreign currencies are converted into euros (Crédit du Nord
individual customers, which combine an initial deposit phase in
Group’s functional currency) at the prevailing spot rate.
the form of an interest-earning savings account with a lending
Realised or unrealised foreign exchange losses or gains are
phase where the deposits are used to provide property loans.
These schemes generate two types of commitment for Crédit
Foreign exchange contracts are valued at the closing rate.
Forward contracts are valued using the forward exchange rate
for the remaining maturity, and variations in fair value are
du Nord Group:
• the obligation to remunerate the savings for an indeterminate
future period at in interest fixed at the inception of the home
savings agreement;
• the obligation to lend subsequently to the customer at an
interest rate also fixed at the inception of the savings agree-
PROVISIONS (IAS 37) – EXCLUDING PROVISIONS
ment.
FOR EMPLOYEE BENEFITS
For home savings accounts, the interest rate fixed at the incepProvisions, excluding those related to employee benefits, represent liabilities, the timing or amount of which cannot be
precisely determined. Provisions are booked where the Group
tion of the contract is revised every six months based on a
government-created indexation formula. The deposits collected
and loans granted are booked at amortised cost.
has a commitment to a third party which makes it probable or
certain that it will never incur an outflow of resources to this
Given that home savings products are specific to the French
third party without receiving at least an equivalent value in
market and are particularly complex, the accounting principles
exchange.
stated below are based on the IFRS framework but, to date,
have not been formally approved by the IFRIC or the IASB.
The estimated amount of the expected outflow is then
discounted to present value to determine the size of the provi-
Under the current regulation, the last phase is subject to the
sion, where this discounting has a significant impact.
previous existence of the savings phase and is therefore
Allocations to and write-backs of provisions are booked through
inseparable from it. Consequently, the valuations of both
profit or loss under the items corresponding to the future
elements are added together in order to assess the possible
expense, while the reversal over time of the discounting to
negative consequences for the Group. When commitments
present value is booked as net banking income.
arising from a given generation of home savings contracts
which is still outstanding at the balance sheet date (contracts
At Crédit du Nord Group, provisions are made up of provisions
for disputes and provisions for general risks.
valid for a given period and with identical conditions), will have
negative consequences for the Group, a provision is booked on
Contingent liabilities, where they exist, are not accounted for
the liabilities side of the balance sheet, with no netting between
but are disclosed in the notes to the financial statements.
the different generations of account.
For each generation concerned, provisions are calculated
taking into account (a) the average amount of outstanding
loans and the amount of loans expected to be issued in the
60
future on the basis of loan rights acquired on home savings
As soon as they are fit for use, fixed assets are depreciated over
accounts and plans still outstanding at the balance sheet date
their useful life. Any residual value of the asset is deducted
and (b) the statistically determined probable amount of
from its depreciable amount.
customer savings deposits for each future period minus the
minimum expected amount (comparable to certain term
deposits), where the customer deposits are determined on the
basis of outstanding deposits in the balance sheet at the closing
date and historical observations of effective customer behaviour.
Where one or several components of a fixed asset are used for
different purposes or to generate economic benefits over a
different time period from the asset considered as a whole,
these components are depreciated over their own useful life.
The Group has applied this approach to its operating purposes
A provision is booked if the discounted value of expected future
investment property, breaking down its assets into at least the
earnings for a given generation of home savings products is
following components, with their corresponding depreciation
negative. The provision is estimated on the basis of interest
periods:
rates available to individual customers for equivalent savings
and loan products, with similar estimated life and date of inception.
The parameters for estimating future commitments are based
on historic observation of market data over a long period and
Infrastructure
Major structures
50 years
Doors and windows, roofing
20 years
Frontages
30 years
statistics on the behaviour patterns of individual customers.
The values of the different parameters used constitute a best
Technical installations
estimate at the date of valuation by the Group of the future
Elevators
value of these elements for the periods concerned, in line with
Electrical installations
the Group’s interest rate risk management policy.
Electricity generators
The discount rates used are derived from the zero coupon
swaps versus. 3 months Euribor yield curve at the date of the
valuation, averaged out over 12 months.
Air conditioning, extractors
10 to 30 years
Heating
Security and surveillance installations
Plumbing
Fire safety equipment
TANGIBLE AND INTANGIBLE ASSETS (IAS 16, 36, 38, 40)
Operating and investment fixed assets are booked in the
balance sheet at cost. Borrowing expenses incurred to fund a
Fixtures and fittings
Finishings, surroundings
10 years
lengthy construction period for the fixed assets are included in
Depreciation periods for other categories of fixed assets depend
the acquisition cost, along with other directly attributable
on their useful life, usually estimated in the following ranges:
expenses. Investment subsidies received are deducted from
the cost of the relevant assets.
Safety and publicity equipment
5 years
Transport
4 years
Fixed assets purchased before December 31, 1976 are booked
Furniture
10 years
at their estimated value in use in accordance with the legal
IT and office equipment
3 to 5 years
revaluation rules published 1976.
Software, developed or acquired
3 to 5 years
61
Business software purchased from third parties is capitalised
Interest included in the lease payments is booked under
and depreciated using the straight-line method over a period of
income from other banking activities in the income statement
three-five years. Software developed internally is capitalised
such that the lease generates a constant periodic rate of return
and depreciated, in the same way as business software, if it
on the lessor’s net investment.
stems from an IT project involving significant amounts which
the Group expects will yield future benefits. Fixed costs correspond to the development phase and include the costs related
to the detailed design, programming, testing of the software,
and to the production of the technical documentation.
Fixed assets are tested for impairment tests whenever there is
an indication that their value may have diminished. Where a
loss is established, an impairment loss is booked to the income
statement, which may be reversed if there is a change in the
conditions that initially led to it being recognised. The impairment loss reduces the depreciable amount of the asset and
thus also affects its future depreciation schedule.
IAS 17 requires a regular review of unguaranteed residual
values used to calculate the gross investment of the lessor in
the finance lease contract. If there has been a reduction in the
estimated unguaranteed residual value used to calculate the
lessor’s gross investment in the finance lease, an expense is
recorded to adjust the financial income already recorded.
Fixed-assets arising from operating lease activities are
presented in the balance sheet under Tangible fixed assets and
are treated accordingly. In the case of buildings, they are
booked under Investment property. Income from lease
payments is recognised in the income statement on a straightline basis over the life of the lease under Other banking income.
The useful life and the residual value of fixed assets are
reviewed annually. If data need to be changed, the depreciation
FINANCING COMMITMENTS AND GUARANTEES
schedule is modified accordingly.
(GIVEN AND RECEIVED)
Guarantees given at the request of customers or banks are
LEASES (IAS 17)
commitment, provided they are not considered to be financial
• finance leases, which transfer substantially all the risks and
derivative instruments. For guarantees received, only those
rewards incidental to ownership to the lesses;
from lending institutions, states, government administrations
• operating leases, wich are leases other than finance leases.
and local authorities are recorded.
Finance lease receivables are recognised in the balance sheet
Financing commitments which are not considered as financial
under “Finance lease receivables” and represent the Group’s
derivative instruments are initially booked at their fair value.
net investment in the lease, calculated as the present value of
the minimum payments to be received from the lessee, plus
any unguaranteed residual value, discounted at the interest
rate implicit in the lease. If there is objective evidence of an
identified credit risk on the finance lease receivables, an
impairment loss is calculated using the same principles as
applied to the impairment of financial assets under IAS 39.
62
recorded as off-balance sheet items in the amount of the
There are two categories of lease transaction:
These guarantees and financing commitments are subsequently provisioned, if necessary, in accordance with
accounting principles relating to Provisions – excluding provisions for employee benefits.
INTEREST INCOME AND EXPENSES
Interest and similar fee income are recorded in the income
statement on a prorata basis. Generally speaking, a provision is
made where they remained unpaid for over 90 days, or as soon
as they are booked where they relate to “doubtful” or “difficult
to recover” loans.
COMMISSIONS (IAS 18)
Crédit du Nord Group books its commission revenues in the
income statement according to the nature of the transaction for
which they are charged.
Fees for one-off services are booked to income when the
service is provided.
Commissions for ongoing services are spread across the duration of the service.
Commissions that are part of the effective return of a financial
Interest income and expenses are booked to the income state-
instrument are accounted for as an adjustment to the effective
ment for all financial instruments valued at amortised cost
return of the financial instrument.
using the effective interest rate method.
The effective interest rate is taken to be the rate that discounts
EMPLOYEE BENEFITS (IAS 19)
the future cash inflows and outflows over the expected life of
In accordance with IAS 19 and IFRS 2, the Group recognises
the instrument to the book value of the financial asset or
four categories of benefit:
liability. To calculate the future cash flows, the Group takes into
account all the contractual provisions of the financial instrument without taking account of possible future loan losses. The
calculation includes commission paid or received between the
parties where these are assimilable to interest, transaction costs
Pension commitments and benefits
Commitments under statutory pension systems are covered by
the contributions paid to independent pension funds which
then manage all payments of retirement benefits.
and all types of premiums and discounts.
Under IAS 19, these are defined contribution plans, which limit
When a financial asset or a group of similar financial assets has
been impaired following an impairment of value, subsequent
interest income is booked through profit or loss using the same
interest rate that was used to discount the future cash flows
the company’s liability to the subscription paid into the plan,
and which do not commit the company to a specific level of
future benefit. Contributions paid are booked as an expense for
the year in question.
when measuring the loss of value.
On December 16, 2004, the IASB published an amendment to
Provisions that are booked as balance sheet liabilities, except
for those related to employee benefits, generate interest
expenses for accounting purposes. This expense is calculated
using the same interest rate as was used to discount to present
value the expected outflow of resources that gave rise to the
IAS 19 which was approved by the European Union in
November 2005. The revised standard includes a new option
allowing companies to recognise all actuarial gains and losses
on defined benefit plans in shareholders’ equity. At December
31, 2005 the Group did not use this option.
provision.
63
All commitments under defined benefit plans are valued using
Differences arising on each plan from changes in actuarial
an actuarial method.
assumptions and from differences between actuarial assump-
Defined benefit plans commit the Group, either formally or
constructively, to pay a certain amount or level of future benefits and the Group therefore bears the medium and long term
actuarial and financial risk.
tions and real performance are booked as actuarial gains and
losses. In the case of post-employment benefits, these actuarial
gains and losses are only partially recognised in profit or loss
when they exceed 10% of the present value of the defined
benefit obligation (“corridor” method). The fraction of the gains
Said plans cover several types of benefits, notably any residual
or losses recognised in this case is equal to the amount
complementary benefits afforded by specialist pension funds.
exceeding 10%, divided by the average remaining working life
Indeed, since January 1, 1994, pursuant to an agreement
of the plan beneficiaries. If a plan has plan assets, these are
signed by all French banks on September 13, 1993, the
valued at fair value at the balance sheet date and deducted
banking institutions of the Crédit du Nord Group are no longer
from the recognised defined benefit obligations.
affiliated with any specialist pension funds but are affiliated with
the national Arrco-Agirc funds. This agreement gave rise to
residual obligations with respect to current retirees and active
employees (for periods of employment within the Group prior to
December 31, 1993).
The annual charge booked under personnel expenses for
defined benefit plans includes:
• additional entitlements vested by each employee (current
service cost);
• the interest cost;
A provision is recorded on the liability side of the balance sheet
• the expected return on plan assets (gross yield);
under Provisions to cover all of the above retirement commit-
• the amortisation of actuarial gains and losses and past service
ments. In the case of Crédit du Nord, commitments are valued
by an independent actuary once a year, on the basis of data as
cost;
• the effect of settlement or curtailment of plans.
at August 31. In the case of banking subsidiaries, valuations
are performed once a year, generally in February, by the independent fund which manages these residual complementary
benefits, which makes it possible to determine commitments
for the following December 31. These commitments and the
Other long-term benefits
IAS 19 defines long-term benefits as benefits paid to employees
more than 12 months after the end of the period in which they
rendered the related service.
coverage thereof as well as the main underlying assumptions
therein are outlined in Note 22.
In various Group companies, staff may benefit from time
savings accounts as well as seniority bonuses. These obliga-
Employee benefits also include termination benefits, complementary retirement plans and post-employment medical care
and life insurance. These commitments and the coverage
thereof as well as the main underlying assumptions therein are
outlined in Note 22. Valuations are performed once a year by
an independent actuary, using the projected unit credit
method, on the basis of data as at August 31.
64
tions are valued using the same actuarial method described
above and are provisioned in full (including any actuarial gains
or losses). These obligations and related plan assets, as well as
the main underlying assumptions therein are outlined in Note 22.
Valuations are performed once a year by an independent
actuary, with the valuation on December 31 calculated on the
basis of data as at August 31.
Termination benefits
Termination benefits consist exclusively of those benefits
payable by Group companies between the effective day of
Pending a possible interpretation by IFRIC, this accounting
treatment complies with the provisions of the CNC statement on
company saving plans dated December 21, 2004.
departure of an employee and the date from which they are
Crédit du Nord Group has implemented stock option plans
covered by their respective pension schemes. Said pay is provi-
under which certain employees are given the option of
sioned in full as soon as an agreement is signed. At Crédit du
purchasing or subscribing to parent company shares.
Nord, these agreements are the “CATS” (early retirement for
certain employees) agreements whose beneficiaries are
common knowledge. These commitments are provisioned in
full according to an actuarial method.
Share-based payments
If the Group has adequate statistics on the behaviour of option
beneficiaries, Group stock option plans are valued by an independent actuary using a binomial model. If this data is not
available, the Black & Scholes model is used. The options are
valued on the date on which the employee is notified of the
award, without waiting for the conditions that trigger the award
As the Group is not listed, its employees are entitled to the
to be met.
equity instruments of the majority shareholder.
The cost of the plan, measured at the assignment date, is
Share-based payments include payments in equity instruments
and cash payments, whose amount depends on the performance of equity instruments.
Under the employee shareholder scheme, all the Group’s
booked under Personnel expenses on a straight-line basis over
the vesting period, which is the period between the assignment
date and the date at which the options can first be exercised
and recognised in shareholders’ equity.
current and former staff are entitled to participate in the parent
company’s capital increase reserved for employees.
During the period in which the employees subscribe to parent
company shares, Crédit du Nord Group books, on a straightline basis, a personnel expense equivalent to the difference
between the fair value of the shares acquired and the subscription price paid by the employee.
INCOME TAXES (IAS 12)
The income tax expense includes:
• current income tax for the fiscal year including dividend tax
credits and tax credits actually used for tax settlement
purposes. Said tax credits are booked under the same line
item as the income to which they relate;
• deferred tax.
The fair value of the acquired shares takes into account the
obligatory five-year holding period.
Current income tax
The overall discount therefore takes into account the total
In France, standard corporate income tax is 33.33%. However,
number of shares subscribed by employees, the difference
until December 31, 2005, long-term capital gains on equity
between the acquisition price fixed by the Board of Directors
investments were taxed at 15%. Moreover, French companies
and the share price on the day of the announcement of the
are subject to a tax surcharge introduced in 1995 equal to
subscription price, as well as the cost of the holding period as
1.5% of taxable income before deduction of tax credits in 2005,
defined by financial market parameters.
and reduced to zero in 2006. In addition, a new Social Security
65
contribution of 3.3% (after deduction from taxable income of
INSURANCE ACTIVITIES
0.763 million of euros) was introduced in 2000. Finally, as part
of the scheme for parent companies and subsidiaries, divi-
General framework
dends received from companies in which the Group’s interest is
Antarius, the Group’s only consolidated insurance company, is
at least equivalent to 5% are tax exempt.
a mixed insurance company (life and non-life) and is held
Tax credit arising in respect of revenues from receivables and
security portfolios, when they are effectively used for the settle-
jointly with Aviva.
Capitalisation reserve
ment of corporate tax due for the fiscal year, are booked under
the same line item as the revenues to which they relate. The
The capitalisation reserve of insurance companies consists of
corresponding income tax expense is kept in the income state-
capital gains generated on the sale of bonds and is designed to
ment under “Income tax”.
offset subsequent capital losses. The capitalisation reserve is
split between technical reserves and shareholders’ equity
Deferred taxes
Deferred taxes are recognised whenever there is a difference
between the carrying amount of assets and liabilities in the
balance sheet and their respective tax base, which will have an
impact on future tax payments.
Deferred taxes are calculated tax rate which as been voted or
according to forecasts of future capital losses and therefore of
the use of reserves. As the recognition of part of the capitalisation reserve under shareholders’ equity generates a taxable
temporary difference, Credit du Nord Group records a deferred
tax liability in its consolidated financial statements.
From January 1, 2004, to December 31, 2004
almost voted and should be in effect at the time when the
temporary difference will reverse. If there is a change in the tax
rate, the corresponding effect is booked under Deferred tax in
the income statement.
The Group recognises deferred tax assets for deductible temporary differences, tax loss carry-forwards and deferred depreciation liable to be deducted from future taxable income.
These deferred taxes are calculated according to the liability
method by applying the expected effective tax rate (including
temporary increases) for the period in which the tax asset is to
be applied to income. The amount of deferred tax assets and
liabilities recognised in this manner is detailed in Note 11 to the
balance sheet. Since fiscal year 2000, Crédit du Nord has
opted to apply the Group’s tax regime to those of its subsidiaries
in which it holds a direct or indirect ownership interest of at
least 95%. The convention adopted is that of neutrality.
Deferred taxes are not discounted.
66
Investments by insurance companies
The investments of insurance companies include investments
held to guarantee unit-linked policies, euro-denominated policies and other insurance policies.
Investments held to guarantee unit-linked policies are marked
to market; the total value of these securities corresponds to the
total insurance liabilities.
Bonds and other debt securities are stated at cost, exclusive of
accrued interest and acquisition costs. If the redemption value
of the security differs from the purchase price, the difference
for each line of securities is amortised to income using an actuarial method over the term to maturity of these securities.
A provision for depreciation is booked if there is a risk that the
debtors will be unable to repay the principal or honour the
interest payments.
Share and other variable income securities are booked at cost.
year 2004. Embedded derivatives which are not valued with
A provision for impairment is booked in the event of a lasting
reserves are booked separately.
fall in the value of the securities as determined on the basis of
the estimated recoverable value.
Underwriting reserves of insurance companies
Under the “shadow accounting” principles defined in IFRS 4,
an allocation to a provision for deferred profit-sharing is booked
in respect of insurance contracts that provide for discretionary
profit-sharing. This provision is calculated to reflect the poten-
Underwriting reserves correspond to the commitments to insurance companies with respect to insured persons and the beneficiaries of policies.
Underwriting reserves for unit-linked policies are valued at the
balance sheet date on the basis of the market value of the
tial rights of policyholders to unrealised capital gains on financial instruments measured at fair value or their potential liability
for unrealised losses.
IFRS 4 also requires that a liability adequacy test be carried out
to assess whether underwriting reserves are sufficient.
assets underlying these policies.
Life insurance underwriting reserves mainly comprise mathematical reserves, which correspond to the difference between
the current value of commitments respectively made by the
TERMS AND CONDITIONS
FOR ESTABLISHING FAIR VALUE
insurer and insured persons, taking into account the probability
Fair value is one of the foundations of IFRS: it is defined under
of payment. Future management fees relative to policies not
IFRS as the amount for which an asset can be exchanged, or a
otherwise covered are subject to a provision. Non-life insurance
liability settled, between knowledgeable, willing parties in an
underwriting reserves comprise provisions for unearned
arm’s length transaction.
premiums (share of premium income relating to following fiscal
years) and for claims payable, including management fees.
The first choice basis for determining the fair value of a financial instrument is the quoted price in an active market. A finan-
The provision for claims payable represents the estimated value
cial instrument is regarded as quoted in an active market if
of disbursements in principal and expenses necessary for the
quoted prices are readily and regularly available from an
settlement of all unpaid claims.
exchange, dealer, broker, pricing service or regulatory agency,
and those prices represent real actual and regularly occurring
Financial assets and liabilities
transactions on an arm’s length basis.
As a result, fair value of instruments is mainly determined on
the basis of market value when the instrument is quoted on an
The financial assets and liabilities of companies which are part
of the subsidiary Antarius are booked and valued using methods
active market, adjusted if no price is available at the balance
sheet date.
described above for the valuation of financial instruments.
If the instrument is not traded in an active market, fair value is
Under IFRS 4 on insurance contracts, underwriting reserves for
life and non-life insurance contracts are still measured using
the methods defined under local regulations and used for fiscal
determined using valuation models that incorporate valuation
parameters based on market conditions at the balance sheet
date and assumptions such as the amount and schedule of estimated future cash flows, discount rates, volatility and credit risk.
67
The Group’s in-house valuation models are based on standard
techniques used by market participants to value financial
instruments, such as the discounting of future cash flows for
Securities containing embedded derivatives
In the case of securities containing embedded derivatives, the
fair value is calculated for the combined instrument.
swaps or the Black & Scholes model for options. In-house valuation models are mainly used to value financial derivatives
traded over-the-counter instruments or unlisted non-derivative
FAIR VALUE OF LOANS
financial instruments held for trading purposes or designated to
At Crédit du Nord Group, fair value of the following assets is
be carried at fair value through profit or loss under the fair value
assumed to be their carrying amount:
option.
• short-term loans (with an initial maturity of one year or less),
Given the type of financial instrument traded by Crédit du Nord
Group, the valuation parameters used are observable market
data and the difference between the transaction price and the
value determined by the in-house model is immediately booked
to the income statement.
insofar as their sensitivity to interest rate risk and credit risk
for the fiscal year is negligible;
• floating rate loans, due to the frequency of interest rate
adjustments (at least once a year for all products), except in
the case of a significant variation in the credit spread of a
borrower.
The methods described below are used by the Group to determine the fair value of financial instruments carried at fair value
through profit or loss and financial instruments carried in the
balance sheet at amortised cost, for which the fair value is
given in the notes to the financial statement purely for information purposes.
In the case of fixed-rate loans with an initial maturity of over one
year, and in the absence of an active market for bank loans,
Crédit du Nord Group decided to determine the fair value of
these assets by using in-house valuation models. The method
used consists in discounting to present value the future recoverable flows of principal and interest payments over the
remaining term to maturity at the interest rate on new lending
FAIR VALUE OF SECURITIES
Listed securities
The fair value of listed securities is determined on the basis of
their market price at the close of the financial statements.
in the month of calculation, for groups of similar loans with the
same maturity.
FAIR VALUE OF FINANCE LEASE CONTRACTS
Crédit du Nord Group determines the fair value of finance lease
Unlisted securities
contracts using in-house valuation models:
• The fair value of unlisted equity instruments is determined as
• for property leases (Norbail Immobilier), all future recoverable
the proportion of the restated net asset value that the securi-
cash flows are discounted to present value for the remaining
ties represent, or, when possible, as the last known price paid
term of the contract, at the market rate increased by the initial
for the securities in purchase, subscription or sale transac-
margin on the contract;
tion, taking into account certain potential valuations of assets
or liabilities.
• For debt instruments, fair value is determined by discounting
future cash flows to present value at market rates.
68
• for equipment leases (Star Lease), all remaining payments
(including their residual value) are discounted to present
value over the remaining term of the contract at the average
weighted interest rate on new lending in the previous month.
FAIR VALUE OF DEBT
FAIR VALUE OF SUBORDINATED DEBT
In general, in the case of floating-rate debt, current account
Given that “titres participatifs” are quoted on an active market,
deposits and debts with an initial maturity of one year or less,
their fair value is determined on the basis of their quoted price
fair value is assumed to correspond to their carrying amount.
at the balance sheet date.
For fixed-rate borrowing with initial maturities of more than one
Redeemable subordinated notes are comparable to listed
year, and in the absence of an actively traded market for these
bonds and their fair value is taken to be their quoted price on
debts, fair value is taken to be the present value of future cash
Euronext at the balance sheet date.
flows discounted at the market rate in effect at the balance
sheet date.
For deposits in regulated savings accounts excluding PEL
contracts, Crédit du Nord Group considers that the applicable
FAIR VALUE OF FINANCIAL DERIVATIVES
Interest rate derivatives (swaps and interest rate options)
rate is a market rate as it is identical for all establishments in
Crédit du Nord Group calculates the fair value of interest rate
the sector and the carrying amount is therefore considered to
derivatives using in-house valuation models that take into
be representative of their fair value.
account market data. As a result, the fair value of swaps is
The fair value of PEL deposits is assumed to be their carrying
amount minus any provisions for PEL accounts.
calculated by discounting future interest flows to present value.
The fair value of interest rate options is calculated on the basis
of valuations with measurements of future events, in accordance with the Black & Scholes method.
FAIR VALUE OF DEBT SECURITIES
Negotiable medium-term notes, excluding structured issues,
Forward contracts
are booked at amortised cost. The fair value of issued nego-
These are derivative financial instruments carried at fair value
tiable medium-term notes is determined using in-house valua-
in the balance sheet, with changes in fair value recognised in
tion models and by discounting future cash flows using a zero
profit or loss. The fair value of a forward contract is determined
coupon yield curve.
by the remaining forward rate at closing date.
Structured issues of negotiable medium-term notes are booked
at fair value, which is determined either from prices obtained
FAIR VALUE OF FIXED ASSETS
from counterparties or from in-house valuation models that use
The fair value of the Group’s investment property is determined
observable market parameters.
on the basis of an external assessment by an independent
The fair value of the Crédit du Nord Group’s certificates of
property expert.
deposit is assumed to be their carrying amount, insofar as all
The most important properties are assessed annually and the
the certificates of deposit have maturities of less than one year.
remaining every three to four years (unless a particular event
has a significant impact on the value of the asset). Between
each appraisal, fair value is estimated using in-house valuation
models (accrued value).
69
NOTE 2
● IMPACT OF THE FIRST TIME ADOPTION
OF IFRSs AS ADOPTED BY THE EUROPEAN UNION
1. Impact on Group shareholders’equity at January 1, 2004 and January 1, 2005
Total
shareholders’
equity
Of which
minority
interests
1,307.7
1,307.7
33.3
Impact of IFRS (excluding IAS 32 & 39) on reserves
–29.6
–29.6
–0.2
(a) Provision for employee benefits
–19.4
–19.4
(b) Fee recognition
–10.4
–10.4
1.2
1.2
–1.0
–1.0
1,278.1
1,278.1
33.1
–114.2
–114.2
–3.2
2.4
2.4
–0.1
239.6
239.6
5.8
1,405.9
1,405.9
35.6
–34.1
–34.1
–0.7
2.1
2.1
0.1
(f) Impairment of assets
–12.1
–12.1
–0.2
(g) Provisions for regulated savings products
–23.6
–23.6
–0.6
–0.6
–0.6
0.7
0.7
–0.6
–0.6
Capital, reserves,
net income
(including
minority interests)
Shareholders’ equity at 12/31/2003
under French standards
(c) Provisions
(d) Property, plant and equipment
Shareholders’ equity under IFRS
(excluding IAS 32 & 39) at 01/01/2004
Dividends in 2003
Others
2004 net income
Shareholders’ equity under IFRS
(excluding IAS 32 & 39) at 12/31/2004
Impact of IAS 32 & 39 on reserves
(e) Securities
(h) Forward exchange contracts
(i) Financial derivatives and hedged items
Others
Impact of IAS 32 & 39 on unrealised or deferred gains/losses
Shareholder’s equity under IFRS at 01/01/2005
1,371.8
OCI
–0.2
34.6
34.6
0.5
34.6
1,406.4
35.4
(a) In accordance with IAS 19, and as of January 1, 2004, Crédit du Nord Group expensed its post-employment benefits and other
long-term benefits, in particular healthcare and provident plans, and end-of-career payments.
(b) In accordance with IAS 18, Crédit du Nord has spread the recognition of certain service fees over an extended period (mainly
bank card fees).
(c) Adjustment of provisions to take account of the discounting to present value of payables, resulting in a fall in total provisions.
(d) The impact of the restatement of fixed assets is due to deferred tax liabilities related to the revaluation of property in 1976.
70
(e) Recognition under shareholders’ equity of the fair value revaluation of non-derivative financial instruments classified
as available-for-sale financial assets, in accordance with IAS 39.
(f) Adjustment of impairment to take account of the discounting to present value of estimated recoverable cash flows, with
a consequent increase in impairment losses.
(g) Provisioning of commitments related to PEL and CEL accounts as described in Note 1 of the principles and methods
of consolidation, accounting principles.
(h) In accordance with IAS 39, forward exchange contracts are considered to be derivatives and are therefore valued at fair value.
From now on, these transactions will no longer be valued according to the discount/premium method, but at market value.
(i) In accordance with IFRS 39, all derivative instruments are booked at fair value. The impact of these revaluations is booked
to income. The corresponding impact on shareholders’ equity at December 31, 2005 amounted to 0.7 million of euros.
2. Impact on net income at 12/31/2004.
12/31/2004
Of which minority
interests
Net income under French accounting standards
239.0
5.8
(a) Company savings plan and stock option plan
–2.5
(b) Amortisation of the Haussmann and Anjou buildings
–0.2
(b) Amortisation of revaluation reserves from 1976
–0.2
(c) Discounting of provisions for legal disputes
–0.6
(d) Goodwill
Net income under IFRS (excluding IAS 32 & 39) at 12/31/2004
4.1
239.6
5.8
(a) In accordance with IFRS 2, the Group booked additional charges for share-based payments: –0.5 million of euros to take into
account the discount awarded under the company savings plan, and –2 millions of euros for the amortisation of the stock-option
plan over the vesting period.
(b) The application of a by-component approach to the Group’s fixed assets and the cancellation of the write-back from the
reassessment reserves, booked following the sale of fixed assets under French accounting standards, led to a 0.4 million of euros
charge.
(c) Adjustment of provisions to take account of the discounting to fair value of payables, leading to a decrease in total provisions.
(d) In accordance with IFRS 3, goodwill is no longer amortised but is instead tested for impairment. As a result, the cancellation
of goodwill amortisation expenses under French accounting standards had a 4.1 millions of euros positive impact.
71
Transition from the balance sheet as at December 31, 2003 under French standards
to the opening balance sheet for 2004 under IFRS excluding IAS 32 & 39
ASSETS
12/31/2003
(French
standards)
Restatements
Reclassifications
01/01/2004
(excluding
IAS 32 & 39)
Cash, due from central banks and postal accounts
1,989.9
1,989.9
Securities portfolio (1)
2,910.4
2,910.4
Due from banks
3,429.2
3,429.2
Customer loans
16,267.8
16,267.8
1,024.0
1,024.0
Finance lease and other receivables
Other assets
(2)
Investments in subsidiaries and affiliates
Tangible and intangible fixed assets (3)
Goodwill
TOTAL
821.6
10.7
832.3
71.4
71.4
307.1
307.1
48.5
48.5
26,869.9
10.7
0.0
26,880.6
(1) This category includes: treasury notes and similar, bonds and other fixed income securities, shares and other equity securities as well as investments
of insurance companies.
(2) This category includes: the share of underwriters in reserves of insurance companies, other insurance assets and other assets.
(3) This category includes tangible and intangible fixed assets.
72
LIABILITIES
12/31/2003
(French
standards)
Restatements
Reclassifications
01/01/2004
(excluding
IAS 32 & 39)
Due to central banks and post office accounts
1,408.5
1,408.5
Due to banks
1,444.8
1,444.8
14,292.6
14,292.6
5,250.1
5,250.1
Customer deposits
Debt securities
Other liabilities
(4)
1,006.2
Provisions
195.0
Subordinated debt
384.6
Total debt
Share capital
Equity instruments and associated reserves
25,562.2
Net income
190.4
Net income attributable to minority interests
Minority interests
TOTAL
1,580.4
32.9
227.9
384.6
40.3
0.0
1,274.4
25,602.5
740.3
0.0
343.7
Consolidated reserves attributable to minority interests
1,013.6
740.3
Group shareholders’ equity
7.4
1,580.4
–29.4
66.4
66.4
–66.4
247.9
190.4
–29.4
0.0
27.8
1,245.0
27.8
5.5
–0.2
5.3
33.3
–0.2
0.0
33.1
1,307.7
–29.6
0.0
1,278.1
26,869.9
10.7
0.0
26,880.6
(4) This category includes other insurance liabilities.
NB: categories in italics are new categories under IFRS.
73
Restatement of the balance sheet as at December 31, 2003 under French accounting standards
for the 2004 opening balance sheet under IFRS, excluding IAS 32 & 39
ASSETS
Employee
benefits
Fee
recognition
Amort. of
revaluation
reserves from
1976
TOTAL
0.0
0.0
Due from banks
0.0
Customer loans
0.0
0.0
Other assets
10.7
10.7
0.0
0.0
Goodwill
0.0
TOTAL
74
Discounting
of provisions
for legal
disputes
10.7
0.0
0.0
0.0
10.7
LIABILITIES
Employee
benefits
Fee
recognition
Discounting
of provisions
for legal
disputes
Amort. of
revaluation
reserves from
1976
TOTAL
0.0
Due to banks
0.0
Customer deposits
0.0
Debt securities
0.0
Other liabilities
–4.7
10.4
0.7
1.0
Provisions
0.0
34.8
–1.9
32.9
Subordinated debt
Total debt
7.4
0.0
30.1
10.4
–1.2
1.0
40.3
Share capital
0.0
0.0
–19.4
–10.2
1.2
–1.0
Net income
0.0
–19.4
–10.2
1.2
–1.0
–0.2
TOTAL
–29.4
–0.2
Minority interests
–29.4
0.0
0.0
–0.2
0.0
0.0
–0.2
–19.4
–10.4
1.2
–1.0
–29.6
10.7
0.0
0.0
0.0
10.7
75
Transition from the balance sheet as at December 31, 2004 under French accountingstandards
to the balance sheet as at December 31, 2004 under IFRS, excluding IAS 32 & 39
ASSETS
12/31/2003
(French
standards)
Restatements
Reclassifications
01/01/2004
(excluding
IAS 32 & 39)
2,001.9
2,001.9
3,362.6
3,362.6
Due from banks
3,555.5
3,555.5
Customer loans
17,040.2
17,040.2
1,176.0
1,176.0
Other assets
(2)
Tangible and intangible fixed assets (3)
Goodwill
TOTAL
887.8
0.1
887.9
75.0
75.0
335.2
–0.2
335.0
44.6
4.0
48.6
28,478.8
3.9
0.0
28,482.7
(1) This category includes: treasury notes and similar, bonds and other fixed income securities, shares and other equity securities as well as investments
of insurance companies.
76
LIABILITIES
12/31/2004
(French
standards)
Restatements
Reclassifications
01/01/2004
(excluding
IAS 32 & 39)
1,220.8
1,220.8
Due to banks
1,487.7
1,487.7
14,990.7
14,990.7
5,720.8
5,720.8
Customer deposits
Debt securities
Tax liabilities
Other liabilities
1.2
(4)
1,008.3
1,008.3
1,999.7
1,999.7
Provisions
213.1
Subordinated debt
435.5
Total debt
Share capital
27,076.6
–1.0
0.2
3.1
Net income
233.2
0.6
1,366.6
3.7
Minority interests
TOTAL
27,076.8
740.3
393.1
0.0
740.3
212.1
435.5
1.2
73.7
73.7
–73.7
322.5
233.8
0.0
1,370.3
29.8
29.8
5.8
5.8
35.6
0.0
0.0
35.6
1,402.2
3.7
0.0
1,405.9
28,478.8
3.9
0.0
28,482.7
77
Restatement of the balance sheet as at December 31, 2004 under French accounting standards
to comply with IFRS, excluding IAS 32 and 39
ASSETS
Company
savings plan
and stock
options
Amort. of
Haussmann
and Anjou
buildings
Amort. of
revaluation
reserves
from 1976
Discounting
of provisions
for legal
disputes
Goodwill
and postal accounts
0.0
0.0
Due from banks
0.0
Customer loans
0.0
0.0
Other assets
0.1
0.1
& affiliates accounted
0.0
–0.2
–0.2
Goodwill
TOTAL
78
TOTAL
0.0
–0.2
0.1
0.0
4.0
4.0
4.0
3.9
LIABILITIES
Company
savings plan
and stock
options
Amort. of
Haussmann
and Anjou
buildings
Amort. of
revaluation
reserves
from 1976
Discounting
of provisions
for legal
disputes
Goodwill
TOTAL
and post office accounts
0.0
Due to banks
0.0
Customer deposits
0.0
Debt securities
0.0
Tax liabilities
0.8
0.4
1.2
Other liabilities
0.0
0.0
Provisions
–1.0
–1.0
Subordinated debt
Total debts
0.0
0.0
0.0
0.8
–0.6
0.0
0.2
Share capital
0.0
Equity instruments
0.0
Net income
2.5
–0.6
1.2
3.1
–2.5
–0.2
–0.1
–0.6
4.0
0.6
0.0
–0.2
–0.7
0.6
4.0
3.7
attributable to minority interests
0.0
Net income attributable
to minority interests
0.0
Minority interests
0.0
0.0
0.0
0.0
0.0
0.0
0.0
–0.2
–0.7
0.6
4.0
3.7
TOTAL
0.0
–0.2
0.1
0.0
4.0
3.9
79
Transition from the balance sheet as at December 31, 2004 under IFRS, excluding IAS 32 & 39
to the 2005 opening balance sheet under IFRS
ASSETS
12/31/2004
IFRS
(excl. IAS 32 & 39)
2,001.9
3,362.6
Restatements
Reclassifications
01/01/2005
IFRS
2,001.9
–3,362.6
0.0
Financial assets at fair value through profit or loss
0.0
232.7
1,955.5
2,188.2
Derivative financial
instruments
0.0
324.1
10.3
334.4
Available-for-sale
investments
0.0
–117.4
1,002.4
885.0
Due from banks
3,555.5
Customer loans
17,040.2
–17.9
–28.7
16,993.6
1,176.0
–2.4
–14.8
1,158.8
471.6
471.6
Financial lease and similar receivables
Deferred tax assets
Other assets (2)
and affiliates accounted for by the equity method
Tangible and intangible
fixed assets (3)
Goodwill
TOTAL
3,555.5
0.0
0.0
115.6
60.1
175.7
887.9
110.2
–75.7
922.4
75.0
–66.9
8.1
335.0
20.1
355.1
48.6
28,482.7
48.6
644.9
–28.7
29,098.9
(1) This category includes: treasury notes and similar, bonds and other fixed income securities, shares and other equity securities as well as investments of
insurance companies.
80
LIABILITIES
12/31/2004
IFRS
(excl. IAS 32 & 39)
Restatements
Reclassifications
1,220.8
01/01/2005
IFRS
1,220.8
Financial liabilities at fair value through profit or loss
0.0
–29.6
226.8
197.2
0.0
90.9
8.8
99.7
1,487.7
4.6
1,492.3
14,990.7
175.6
15,166.3
Due to banks
Customer deposits
Debt securities
5,720.8
Other liabilities
(4)
Provisions
Subordinated debt
Total debts
Share capital
–226.7
5,494.1
1.2
98.8
75.6
175.6
1,008.3
227.8
–103.3
1,132.8
19.7
2,019.4
–29.6
215.5
–28.7
27,692.5
1,999.7
212.1
33.0
435.5
43.3
27,076.8
644.4
478.8
740.3
740.3
73.7
73.7
322.5
Net income
233.8
233.8
1,370.3
1,336.4
Subtotal
Unrealised or deferred gains and losses
Subtotal Group shareholders’ equity
–33.9
0.0
34.6
1,370.3
0.7
29.8
–0.7
288.6
34.6
0.0
1,371.0
29.1
5.8
5.8
Unrealised or deferred capital gains and losses
0.0
0.5
35.6
–0.2
0.0
35.4
1,405.9
0.5
0.0
1,406.4
28,482.7
644.9
–28.7
29,098.9
Minority interests
TOTAL
0.5
81
Restatement of the balance sheet as at December 31, 2004 under IFRS, excluding IAS 32 & 39
for the 2005 opening balance sheet under IFRS
ASSETS
Securities
Impairment
of assets
Provisions
for
regulated
savings
Forward
exchange
contracts
Financial
derivatives
and
hedged
items
Miscellaneous
0.0
0.0
Financial assets at fair value
232.7
232.7
instruments
Available-for-sale
investments
324.1
324.1
–117.4
–117.4
Due from banks
0.0
Customer loans
–18.4
–3.2
3.7
Financial lease
and similar receivables
–17.9
–2.4
Deferred tax assets
–2.4
0.0
0.2
6.3
12.6
Other assets
0.3
95.9
0.3
115.6
195.2
–84.7
–0.3
110.2
0.0
Tangible and intangible
fixed assets
0.0
Goodwill
0.0
TOTAL
115.5
–12.1
82
TOTAL
9.4
195.5
339.0
–2.4
644.9
LIABILITIES
Securities
Impairment
of assets
Provisions
for
regulated
savings
Forward
exchange
contracts
Financial
derivatives
and
hedged
items
Miscellaneous
0.0
Financial liabilities at fair
value through profit or loss
instruments
Due to banks
Customer deposits
–29.6
–29.6
90.9
90.9
4.6
4.6
176.2
–0.6
Debt securities
Other liabilities
175.6
0.0
2.8
96.0
76.0
196.1
–43.1
98.8
–1.2
227.8
0.0
Provisions
33.0
33.0
Subordinated debt
Total debts
TOTAL
43.3
78.8
0.0
33.0
196.1
338.3
43.3
–1.8
644.4
Share capital
0.0
Equity instruments
0.0
1.5
–11.9
–23.0
–0.6
0.7
–0.6
Net income
Subtotal
–33.9
0.0
1.5
–11.9
–23.0
–0.6
0.7
–0.6
–33.9
34.6
Subtotal Group
36.1
–11.9
–23.0
0.6
–0.2
–0.6
36.7
–12.1
–23.6
–0.6
0.7
–0.6
0.5
115.5
–12.1
9.4
195.5
339.0
–2.4
644.9
Minority interests
TOTAL
34.6
–0.6
0.7
–0.6
0.7
–0.2
83
Restatement of the balance sheet as at December 31, 2004 under IFRS, excluding IAS 32 & 39
for the 2005 opening balance sheet under IFRS
ASSETS
Provisions
for sector
and
country
risks
Assets
not
leased
after
cancellation
Outstanding
finance
leases
Premiums
on derivative
financial
instruments
Held to
maturity
securities
Invest- Financial
ments assets and
and liabilities
similar measured
securities using the
fair value
option
DSS
securities
Payable
and
deferred
tax
assets
and
liabilities
Insurance/
Deferred
profit
sharing
Cash, due from
central banks
0.0
–471.6
–2,891.0
Financial assets
at fair value through
profit or loss
1,859.1
instruments
–3,362.6
96.4
1,955.5
10.3
10.3
Available-for-sale
investments
66.9
935.5
1,002.4
Due from banks
Customer loans
0.0
–28.7
96.4
Financial lease
and similar receivables
–96.4
–28.7
–14.8
–14.8
Held-to-maturity
investments
471.6
471.6
Deferred tax assets
Other assets
–5.3
–10.3
60.1
60.1
–60.1
–75.7
–66.9
Tangible
and intangible fixed assets
5.3
–66.9
20.1
14.8
Goodwill
TOTAL
0.0
–28.7
0.0
0.0
0.0
84
TOTAL
0.0
0.0
0.0
0.0
0.0
0.0
–28.7
LIABILITIES
Provisions
for sector
and
country
risks
Assets
not
leased
after
cancellation
Outstanding
finance
leases
Premiums
on derivative
financial
instruments
Held to
maturity
securities
Invest- Financial
ments assets and
and liabilities
similar measured
securities using the
fair value
option
DSS
securities
Payable
and
deferred
tax
assets
and
liabilities
Insurance/
Deferred
profit
sharing
0.0
Financial liabilities
at fair value through
profit or loss
226.8
instruments
226.8
8.8
8.8
Due to banks
0.0
Customer deposits
0.0
Debt securities
–226.7
–226.7
75.6
Other liabilities
–7.9
–0.1
–75.6
Provisions
75.6
–19.7
19.7
–28.7
–0.9
–103.3
19.7
–29.6
0.0
Subordinated debt
Total debt
TOTAL
–28.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
–28.7
Share capital
0.0
Equity instruments
0.0
0.0
Net income
0.0
Subtotal
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Subtotal Group
0.0
Minority interests
0.0
TOTAL
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
–28.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
–28.7
85
Transition from the income statement as at December 31, 2004 under French accounting standards
to the income statement as at December 31, 2004 under IFRS, excluding IAS 32 & 39
12/31/2004
French
standards
Restatements
Reclassifications
1,364.7
Interest and similar expense
–710.0
Dividends on equity income
2.6
2.6
597.9
597.9
Commissions (charges)
–35.4
–35.4
–0.9
–3.5
1,361.2
5.0
–705.9
69.0
20.7
89.7
Margin of insurance business
18.0
–18.0
0.0
10.9
9.4
20.3
Expenses from other activities
–8.9
–7.7
–16.6
Net banking income
1,308.8
–0.9
5.9
1,313.8
Personnel expenses
–554.0
–2.5
–1.8
–558.3
Taxes
Other expenses
Amortisation, depreciation
and impairment of tangible
–23.9
–23.9
–244.8
–244.8
–53.9
–0.2
–54.1
–876.6
–2.7
–1.8
–881.1
432.2
–3.6
4.1
432.7
Cost of risk
–69.7
Operating income
362.5
Earnings before tax
Exceptional items
Income tax
Minority interests
MINORITY INTERESTS
86
12/31/2004
IFRS
(Excl. IAS
32 and 39)
–69.7
–3.6
4.1
1.6
363.0
1.6
1.0
–0.3
0.7
–4.1
4.1
0.0
361.0
0.2
4.1
–126.1
4.1
365.3
–4.1
0.0
0.4
–125.7
–5.8
233.2
–5.8
0.6
0.0
233.8
Restatement of the income statement as at December 31, 2004 under French accounting standards
for the income statement as at December 31, 2004 under IFRS, excluding IAS 32 & 39
Company
saving plan and
stock options
Amort. of
Haussmann
and Anjou
buildings
Amort. of
revaluation
reserves from
1976
Discounting
of provisions
for legal
disputes
Goodwill
TOTAL
0.0
Interest and similar expense
–0.9
–0.9
0.0
0.0
0.0
Net gains or losses
on financial transactions
0.0
0.0
0.0
0.0
Net banking income
0.0
Personnel expenses
–2.5
0.0
0.0
–0.9
0.0
–0.9
–2.5
Taxes
0.0
Other expenses
0.0
Amortisation, depreciation
and impairment of tangible
–0.2
–0.2
–2.5
–0.2
0.0
0.0
0.0
–2.7
–2.5
–0.2
0.0
–0.9
0.0
–3.6
Cost of risk
Operating income
0.0
–2.5
–0.2
0.0
–0.9
0.0
0.0
–0.3
–0.3
Earnings before tax
–2.5
–0.2
–0.3
–0.9
4.1
4.1
4.1
0.2
0.0
Exceptional items
Income tax
0.1
0.3
0.4
0.0
Minority interests
GROUP NET INCOME
–3.6
–2.5
–0.2
–0.2
–0.6
4.1
0.6
87
Reclassifications of the income statement as at December 31, 2004 under French standards
for the income statement as at December 31, 2004 under IFRS, excluding IAS 32 & 39
Loans
to staff
Exceptional
income
Europe
Lafayette
1.8
Interest and similar expenses
Assets not
leased after
cancellation
Gross margin
of insurance
business
–5.3
–3.5
5.0
5.0
0.0
0.0
0.0
4.1
Net banking income
1.8
Personnel expenses
–1.8
4.1
20.7
20.7
–18.0
–18.0
5.3
9.4
–5.0
–2.7
–7.7
0.0
0.0
5.9
–1.8
Taxes
0.0
Other expenses
0.0
Amortisation, depreciation and impairment
of tangible and intangible fixed assets
0.0
–1.8
0.0
0.0
0.0
–1.8
0.0
4.1
0.0
0.0
4.1
Cost of risk
Operating income
0.0
0.0
4.1
0.0
0.0
4.1
0.0
0.0
0.0
Earnings before tax
0.0
4.1
0.0
0.0
4.1
–4.1
–4.1
Exceptional items
Income tax
0.0
Minority interests
0.0
GROUP NET INCOME
88
TOTAL
0.0
0.0
0.0
0.0
0.0
NOTE 3
● COMPARATIVE SCOPE OF CONSOLIDATION
Consolidation
method
December 31, 2005
Ownership
interest
Voting
rights
Consolidation
method
December 31, 2004
Ownership
interest
Voting
rights
Crédit du Nord
28, place Rihour – 59800 Lille
Full
Consolidating company
Full
Consolidating company
Banque Rhône-Alpes
20-22, bd Édouard-Rey
38000 Grenoble
Full
99.9905
99.9905
Full
99.9905
99.9905
Banque Tarneaud
2-6, rue Turgot – 87000 Limoges
Full
79.9967
79.9967
Full
79.9967
79.9967
Banque Courtois
33, rue de Rémusat
31000 Toulouse
Full
100.0000
100.0000
Full
100.0000
100.0000
Banque Kolb
1-3, place du Général-de-Gaulle
88500 Mirecourt
Full
99.8700
99.8700
Full
99.7972
99.7972
Banque Laydernier
10, av. – 74000 Annecy
Full
99.9997
100.0000
Full
99.9997
100.0000
Banque Nuger
7, place Michel-de-l’Hospital
63000 Clermont-Ferrand
Full
64.6977
64.6979
Full
64.6977
64.6979
Norbail Immobilier
50, rue d’Anjou – 75008 Paris
Full
100.0000
100.0000
Full
100.0000
100.0000
Star Lease
59, bd Haussmann – 75008 Paris
Full
100.0000
100.0000
Full
100.0000
100.0000
S.P.T.F.
Full
100.0000
100.0000
Full
100.0000
100.0000
Norfinance Gilbert Dupont et Associés
42, rue Royale – 59000 Lille
Full
100.0000
100.0000
Full
100.0000
100.0000
Société de Bourse Gilbert Dupont
50, rue d’Anjou – 75008 Paris
Full
100.0000
100.0000
Full
100.0000
100.0000
Norimmo
Full
100.0000
100.0000
Full
100.0000
100.0000
Turgot Gestion
2-6, rue Turgot – 87000 Limoges
Full
79.9968
100.0000
Full
79.9968
100.0000
Fimmogest
33, rue de Rémusat
31000 Toulouse
Full
100.0000
100.0000
Full
100.0000
100.0000
Crédinord Cidize
Full
100.0000
100.0000
Full
100.0000
100.0000
Étoile Gestion
Full
96.9806
99.9000
Full
96.9806
99.9000
89
Consolidation
method
December 31, 2005
Ownership
interest
Voting
rights
Consolidation
method
December 31, 2004
Ownership
interest
Voting
rights
Anna Purna
Full
100.0000
100.0000
Full
100.0000
100.0000
Nice Broc
Full
100.0000
100.0000
Full
100.0000
100.0000
Nice Carros
Full
100.0000
100.0000
Full
100.0000
100.0000
Kolb Investissement
Full
100.0000
100.0000
Full
100.0000
100.0000
Nord Assurances Courtage
28, place Rihour – 59800 Lille
Full
100.0000
100.0000
Full
100.0000
100.0000
Norbail Sofergie
Full
100.0000
100.0000
Full
100.0000
100.0000
SFAG
Full
100.0000
100.0000
Full
100.0000
100.0000
Partira
Full
100.0000
100.0000
Full
100.0000
100.0000
Europe Lafayette
20-22, bd Édouard-Rey
38000 Grenoble
Full
99.9906
100.0000
Full
99.9906
100.0000
SCI Fort de Noyelles
Full
99.9000
99.9000
Unconsolidated
Banque Pouyanne
12, place d’Armes – 64300 Orthez
Equity
35.0020
35.0020
Equity
35.0020
35.0020
Dexia-CLF Banque
Tour Cristal
7 à 11, quai André-Citröen
75015 Paris
Equity
20.0000
20.0000
Equity
20.0000
20.0000
Proportionate
50.0000
50.0000
Proportionate
50.0000
50.0000
Antarius (1)
(1) Including sub-consolidated insurance mutual funds.
There were few changes to the scope of consolidation in 2005: SCI Fort de Noyelles was consolidated for the first time in 2005; this
operation had no significant impact on either income or consolidated shareholders’ equity.
Group companies not considered significant for consolidation purposes (i.e. companies which have met all three of the following
criteria are met for two consecutive fiscal years: companies with total assets of under 10 millions of euros, annual earnings of below
1 million of euros and no ownership interests in a consolidated company) were not included in the consolidation scope, even
though Crédit du Nord holds over a 99% stake therein.
This includes, among others, the following companies: Starhuit, Starquatorze, Starquinze, Starseize, Stardixsept, Stardixhuit,
Stardixneuf, Starvingt, Nord Gérance and Immovalor Service. None of these companies had total assets above 700,000 euros
in 2005.
In addition, two other companies in which Crédit du Nord has ownership interests were not consolidated, namely Cofipro and
Banque Clément, in which Crédit du Nord holds a 33.2% and 96.6% stake, respectively. Cofipro was wound up at the end of 2002
following the appointment of a liquidator and Banque Clément is also in liquidation.
90
NOTE 4
● RISK MANAGEMENT
Organisation
This note describes the main risks incurred on the Group’s
The Central Risk Division, which reports directly to the
banking activities, i.e.:
Chairman of Crédit du Nord, contributes to the development
• credit risk: the risk of losses stemming from the inability of a
and profitability of the Group by ensuring that the risk manage-
counterparty to meet its financial commitments;
• structural risk: the risk of loss or of residual depreciation in
balance sheet items arising from variations in interest rates or
exchange rates;
• liquidity risk: the risk that the Group may not be able to meet
its financial commitments when they mature;
ment framework in place is both sound and effective. To this
end, the Central Risk Division:
• assists in the definition of the Group’s credit policies and
oversees its implementation;
• defines or validates methods and procedures for analysing,
approving and monitoring risk;
• market risk: the risk of loss resulting from changes in market
• contributes to the assessment of credit risk during the loan
rates and prices, in correlations between these elements, and
granting process by giving an opinion on the transactions put
in their volatility.
forward by the commercial divisions;
• is responsible for controlling and provisioning risks and for
CREDIT RISK
the recovery of doubtful and disputed loans;
• identifies all Group risks;
The provision of loans makes a significant contribution to Crédit
du Nord Group’s development and results. However, it also
• monitors the consistency and adequacy of the risk management information system.
exposes the Group to credit and counterparty risk, that is to the
risk of partial or complete default on the part of the borrower.
The Central Risk Division reports on its activity and general
changes in the Group’s risk exposure to the General
For this reason, all lending activities are monitored and
Management at the Monthly Risk Committee. This Committee
controlled by a dedicated organisational structure, the risk
takes decisions on the main strategic issues: risk-taking poli-
function, which is independent from the commercial divisions
cies, measurement methods, analyses of portfolios and of the
and coordinated by the Central Risk Division (DCR), and are
cost of risk, detection of credit concentrations, etc.
subject to a body of rules and procedures governing the
granting of loans, monitoring of risks, identification and classification of deteriorations in credit risk and loan impairment.
Each region of Crédit du Nord parent company and each Crédit
du Nord banking subsidiary has a Risk Division which reports
to the Regional Manager or Subsidiary Chairman and is responsible for implementing the Group’s credit policy and managing
risk exposure within their particular region or subsidiary. The
Risk Divisions report on a functional level to the Central Risk
Division.
91
Rules and procedures
Lending
Risk management
Risk monitoring is the responsibility of all members of the
commercial divisions and risk function. It involves respecting all
The Group has a strict procedure for the provision of loans
to counterparties:
• a preliminary examination is conducted of all applications for
loans to ensure full information has been obtained before any
the terms and limits of loans granted to counterparties, and
keeping a constant watch on these counterparties in order to
react quickly to any deterioration in their financial situation and
take adequate measures to reduce the Bank’s risk exposure.
risk is incurred;
• responsibility for analysis and approval of risks is delegated to
the most appropriate section of the commercial division and
risk function;
• decisions to grant loans must be formally set out in a dated
and signed document that specifies the limits of the commit-
Identification and classification of risks
The purpose of Risk Control is to permanently check the quality
of the counterparty risk incurred by Crédit du Nord Group in its
lending transactions and to classify them in the appropriate risk
category.
ment and the period of validity of the approval. All loan decisions are also compiled into a monthly report;
The management of doubtful loans is mostly handled by
• the notion of Group is integrated into risk appreciation and an
specialised teams (out-of-court recovery, special affairs, etc.).
internal lead manager is designated for each group identified,
Loans downgraded from doubtful to disputed are managed by
who has the final world on all the Group’s entities;
the legal recovery teams.
• a counterparty and loan rating system has been implemented
to facilitate decision-making for business loans.
The lending procedure also complies with a number of the core
principles of the Group’s credit policy which are designed to
limit counterparty risk:
• loans are mainly provided for the financing of operations and
Impairment
As soon as they are classified as doubtful, loans are analysed in
order to assess the probability of recovery, and to calculate the
amount of the impairment loss. These provisions are subject to
a quarterly review by the DCR to assess their relevance.
clients in mainland France. However, loans may be provided
Crédit du Nord Group also books collective impairment losses
to certain neighbouring or OECD member countries, under
for identified credit risks on homogenous groups of loans in its
specific conditions;
portfolio, without waiting for the impairment to individually
• division and distribution of risk;
affect identified counterparties. These impairment losses are
• counter-guarantees must be sought from specialised compa-
also reviewed quarterly.
nies such as CREDIT LOGEMENT for residential property
loans and OSEO BDPME - SOFARIS for loans to professionals
and businesses;
• wherever possible, loans provided to finance a business’s
operating cycle should be secured with customer receivables;
• investments in equipment and property by professional and
business customers should preferably be funded through
lease finance agreements;
• whenever possible, loans should be secured with guarantees
and collateral.
92
Exposure to credit risk
The chart below shows the exposure to credit risk of the
Group’s financial assets before the impact of unrecognised
offsetting agreements and collateral (in particular cash, financial and non-financial assets received as guarantees and
guarantees from legal entities).
December
2005
January
2005
in value
Change
% change
Assets at fair value through profit or loss
(excluding floating-rate securities)
1,681.1
1,483.4
197.7
13.3
Derivative financial hedging instruments
245.6
319.6
–74.0
–23.2
28.7
714.4
–685.7
–96.0
Due from banks
5,164.1
3,555.5
1,608.6
45.2
Customer loans
18,806.9
16,993.6
1,813.3
10.7
1,326.0
1 158.8
167.2
14.4
224.0
471.6
–247.6
–52.5
27,476.4
24,696.9
2,779.5
11.3
Financing commitments given
3,176.0
2,875.3
300.7
10.5
Financing guarantees given
3,647.2
3,101.3
545.9
–17.6
0.0
0.0
0.0
–
6,823.2
5,976.6
846.6
14.2
34,299.6
30,673.5
3,626.1
11.8
Available-for-sale investments
(excluding floating-rate securities)
Exposure of balance sheet commitments,
net of impairments
Provisions on guarantees and endorsements
Exposure of off-balance sheet commitments,
net of impairments
TOTAL
STRUCTURAL INTEREST RATE AND EXCHANGE
RATE RISKS
Structural interest rate and exchange rate risks are incurred on
Wherever possible, client-driven transactions are hedged
against interest rate and exchange rate risks, either by microhedging or macrohedging techniques.
client-driven and propriety activities (transactions involving
Interest rate risks on proprietary transactions must also be
shareholders’ equity and investments).
hedged as far as possible. There is no exchange rate risk on
The general principle is to concentrate interest rate and
these transactions at Crédit du Nord.
exchange rate risks in capital market activities, where they are
Consequently, structural interest rate and exchange rate risks
monitored and controlled using the methods described below,
are only borne on residual positions.
and to reduce structural interest rate and exchange rate risk as
much as possible.
93
Organisation of the management of structural interest
The Group’s principal aim is to reduce each entity’s exposure to
rate and exchange rate risks
interest rate risk as much as possible, once the transformation
The principles and standards for managing these risks are
policy has been defined.
defined at group level by the majority shareholder.
For this, any residual structural interest rate risk exposure must
Nevertheless, the entities themselves are responsible for
comply with sensitivity limits set by the Finance Committee of
managing these risks and consequently Crédit du Nord Group
the majority shareholder.
not only applies the defined standards but also develops
models, measures risks and implements hedges.
The majority shareholder’s assets and liability management
department then carries out a second-level control on the risk
management performed by the entities.
The measurement of overall interest rate risk exposure is
based, among other things, on the recalculation of annual
sensitivities to a parallel shift in the yield curve.
Crédit du Nord Group’s overall limit is 63 millions of euros
(representing around 5% of shareholders’ equity). Compliance
At Crédit du Nord, the ALM division, which reports directly to
with these limits is verified within the framework of regular
the Finance Division, is responsible for monitoring and
reports to the majority shareholder.
analysing global, interest rate, liquidity and maturity transformation risk.
In 2005, the average sensitivity of the balance sheet was very
low. The net present value of the overall exposure of the
An ALM Committee, presided by the Chairman and Chief
balance sheet to a parallel shift in the yield curve remained well
Executive Officer and the Chief Executive Officer, meets on a
below 5% of consolidated shareholders’ equity in all four quar-
monthly basis to make all relevant decisions concerning the
ters of 2005.
management of any interest rate and/or liquidity mismatch
positions generated by the Group’s commercial activity.
It should be noted that the ALM Committee delegates the
Measurement and monitoring
of structural interest rate risks
management of short-term interest rate risk to the Weekly Cash
In order to quantify its exposure to structural interest rate risks,
Flow Committee. This delegation is subject to limits on expo-
the Group analyses all fixed-rate assets and liabilities with
sure to fluctuations in money-market interest rates and the net
future maturities to identify gaps. These positions come from
current value of monthly exposure to mismatches in short-term
operations remunerated or charged at fixed rates and from their
interest rates (instruments with original maturities of under one
maturities.
year). These limits are verified at the Weekly Cash Flow
Committee meetings.
Assets and liabilities are generally analysed independently
without any a priori matching. Maturities on outstanding positions are determined on the basis of the contractual terms
Structural interest rate risk
Structural interest rate risk arises from residual positions
patterns (special savings accounts, early repayments, etc.) as
(surplus or deficit) in fixed-rate positions with future maturities.
well as conventional assumptions relating to certain aggregates
All assets and liabilities of Group banks, excluding those related
(principally shareholders’ equity and sight deposits).
to trading activities, are subject to an identical set of rules
governing interest rate risk management.
94
governing transactions, models of historical client behaviour
Once the Group has identified the gaps in its fixed rate positions (surplus or deficit), it calculates their sensitivity (as
defined above) to variations in interest rates. The current stress
test used corresponds to an immediate parallel shift of 1% in
Hedging of interest rate and exchange rate risks
In order to manage its exposure to certain market risks, Crédit
du Nord Group used hedges designated as fair value hedges
for accounting purposes.
the yield curve.
It also manages the exposure of its fixed-rate financial assets
The analysis of structural interest rate risks at Crédit du Nord
revealed that:
• all on- and off-balance sheet transactions are match-funded
according to their specific characteristics (maturity, interest
and liabilities (mainly loans/borrowings, security issues and
fixed-rate securities) to risks of variations in long-term interest
rates, by setting up hedges qualified as the fair value hedges for
accounting purposes, principally using interest rate swaps.
rate, explicit or implicit options). A model developed by the
ALM unit (“national balance sheet” model) is used to monitor
In order to qualify these transactions as hedges, the Group
indicators of interest rate risk management, in particular a
documents the hedging relationship in detail, from inception,
fixed-rate limit, as well as the risks associated with options
specifying the risk hedged, the risk management strategy and
appearing on the balance sheets of Group banks;
the way in which the effectiveness of the relationship will be
• sight deposits and regulated savings products are subject to
documented.
specific modelling to lock in medium- and long-term yields.
The aim of this hedging relationship is to cover the Bank
The conservative nature of the models has enabled the
against an unfavourable variation in the fair value of an item
Group’s banks to maintain their interest margin even when
which, in principle, has no impact on profit or loss, but could
market rates drop, as in 2005. In order to better take into
affect it if the item were eliminated from the balance sheet.
account interest rate risks linked to outstanding positions
directly indexed or correlated to Euribor, slight modifications
were made to the unwinding model at the end of the year;
• options exposure is analysed then neutralised using appro-
The future effectiveness of the hedge is calculated using a
sensitivity analysis that integrates probable scenarios for
changes in market parameters.
priate financial products. In particular, the Group monitored
Retrospective effectiveness is assessed by comparing the vari-
closely the sharp increase in its capped floating-rate loans.
ations in fair value of the hedging instrument with the variations
These were hedged throughout the fiscal year through the
in fair value of the hedged item. The hedge is deemed effective
purchase of caps.
if variations in the fair value of the hedged item are almost fully
offset by the variations in fair value of the hedging instrument,
Structural exchange rate risks
The overall foreign exchange position is kept within conservative limits and remains small relative to the bank’s net shareholders’ equity.
i.e. the ratio between the two variations is in the 80%-125%
range. Effectiveness is measured prospectively each quarter
(expected effectiveness over future periods) and retrospectively
(actual effectiveness). If the effectiveness falls outside the
aforementioned range, hedge accounting is discontinued.
95
Liquidity risk
Organisation of the management of liquidity risk
Maturity transformation
Crédit du Nord Group’s outstanding property and equipment
loans continued to grow at a steady rate in 2005, with
The principles and standards for the management of liquidity
outstanding medium- and long-term lending rising by 16.5%.
risk are defined by the majority shareholder. Crédit du Nord is
nonetheless responsible for managing its liquidity and
respecting regulatory constraints.
In order to continue increasing its medium and long term
lending and at the same time maintain the regulatory level of
capital and stable resources, Crédit du Nord Group carried out
It applies the standards defined at Group level, develops its own
models, measures its liquidity positions and finances it activities
a number of capital-raising transactions in 2005, to the amount
of 518 millions of euros.
or reinvests surplus cash via treasury departments.
It carried out two “Corporate” issues with maturities of 7 and
The entities submit reports on their liquidity risk to the Group
via a shared IT system.
Measurement and monitoring of liquidity risk
Monitoring liquidity involves analysing the Group’s funding
requirements based on budget forecasts in order to prepare
appropriate financing solutions.
10 years, in the amount of 250 millions of euros, and a 100
millions of euros private issue of redeemable subordinated
notes with a 10-year maturity.
Also in 2005, the Group drew its first loan under the financing
agreement signed with the European Investment Bank (50
millions of euros over 12 years out of a total facility of 100
millions of euros).
Crédit du Nord acts as the central refinancing unit of the
Group’s banks and financial subsidiaries. The ALM department
monitors outstanding loans and regulatory ratios by subsidiary,
while short-term liquidity management is delegated to each
loan from Caisse de Refinancement à l’Habitat over 10 years,
designed to finance the issuance of property loans.
subsidiary as part of its cash management activities and is
Finally, the trading department also launched a 18 millions of
subject to certain limits (i.e. liquidity requirements).
euros medium and long-term structured product programme.
Although loan issuance continued to increase over the course
The regulatory capital ratio of Crédit du Nord – the Group’s
of the year, Crédit du Nord was a lender on the interbank
central refinancing unit as determined on the basis of parent
market in 2005 owing to its policy of regular issuance of short-
company figures – stood at 60.5% on December 31, 2005,
and medium-term negotiable debt instruments, long-term
thus reflecting the entity’s successful management of its trans-
structured finance operations and growth in fund inflows from
formation policy.
customers.
Crédit du Nord has had to finance some of its subsidiaries while
maintaining a high level of liquidity. In accordance with the
regulations governing liquidity (CRB Regulation 88-01, as
amended), Crédit du Nord’s ratio averaged 113% over 2005,
which is significantly higher than regulatory requirements.
96
Crédit du Nord also obtained a 10-year 100 millions of euros
A special quarterly report on transformation risk is submitted
to the majority shareholder.
MARKET RISKS LINKED TO TRADING ACTIVITIES
Methods of measuring market risk
All capital market activities carried out by Crédit du Nord Group
Market risk is assessed using three main indicators which are
are client-driven. In terms of both products and regions, Crédit
used to define exposure limits:
du Nord Group only conducts transactions on its own behalf in
business segments where it has significant customer interests.
The primary purpose of its activities in this area is to maintain a
regular presence on the financial markets in order to be able to
offer its clients competitive price quotations.
• the 99% Value at Risk (VaR) method in accordance with the
regulatory internal model, a composite indicator for day-today monitoring of market risks incurred by the Bank, in
particular in its trading activities.
Crédit du Nord has access to an application developed by
As part of this fundamental strategy:
Société Générale known as TRAAB (gross annual actuarial
• Crédit du Nord only holds few positions on derivatives and
rate of return) which incorporates the data from internal infor-
regularly matches customer orders through its shareholders
mation systems at the Treasury and Foreign Exchange
Société Générale and Dexia, thereby significantly reducing its
Department, which has been using it since June 30, 1998,
exposure to market and counterparty risks;
required to calculate risk profiles on a daily basis. This infor-
• with regard to other instruments, the trading limits imposed
mation is also used by Société Générale for its own consoli-
on the cash position in terms of geographic regions, author-
dated risk monitoring. The model is based on a historical data
ised volumes and the duration of open positions are deter-
series of daily movements in interest rate or exchange rate
mined jointly with the bank’s majority shareholder and are
instruments, which are applied to daily positions in order to
kept low relative to Crédit du Nord’s equity.
measure risk with a 99% confidence interval and sensitivity to
Although the main responsibility for risk management falls
10 basis points.
naturally to the front office managers, responsibility for supervi-
The Value at Risk (VaR) method
sion lies with an independent structure which is part of the
This method was introduced at the end of 1996 and is
Treasury and Foreign Exchange Department. This structure
constantly being improved with the addition of new risk
notably carries out the following functions:
factors and the extension of the scope covered. The new risk
• permanent monitoring of positions and results, in collabora-
parameters and changes in the scope of the portfolios are
tion with the front office;
• verification of the market parameters used to calculate risks
and results;
• daily calculation of market risk, using a formal and secure
incorporated by Société Générale into the TRAAB application,
and Crédit du Nord then receives the new updated versions.
Société Générale then uses files sent back by Crédit du Nord
in TRAAB format to calculate the VaR.
procedure;
• daily limit monitoring for each activity.
97
The method used is the ‘historical simulation’ method, which is
based on the following principles:
- the creation of a database containing historical information on
Allocation of limits and organisation of limit monitoring
A daily report is sent to Société Générale on limits which have
been exceeded.
the main risk factors which are representative of the Société
Générale group’s positions (interest rates, share prices,
Capital market exposure limits are allocated as follows:
exchange rates, commodity prices, volatility, credit spreads,
a proposal is drawn up internally and presented to the
etc.). VaR is therefore calculated using a database of several
Executive Committee. If approved, it is transmitted to the Risk
thousand risk factors,
Control Division of Société Générale (the market risk monitoring
- the definition of 250 scenarios, corresponding to one-day vari-
team) for their opinion. The proposed limits are reviewed at
ations in these market parameters over a sliding one year
least every two years, and the last review was carried out in
period,
August 2005.
- the application of these 250 scenarios to the daily market
Once a final opinion has been received, the limits are sent by
parameters,
Société Générale to the Chairman’s office and are then
- the revaluation of daily positions, on the basis of the adjusted
compiled and integrated into the daily monitoring and reporting
daily market conditions, and on the basis of a revaluation taking
system.
into account the non-linearity of positions.
The 99% Value at Risk is the largest loss that would be incurred
after eliminating the top 1% of the most unfavourable occurrences: over one year, or 250 scenarios, it corresponds to the
average of the second and third largest losses observed;
Counterparty limits are allocated as follows:
• in the case of banking counterparties, the Treasury and
Foreign Exchange Department opens a file for each counterparty which records the details of requests for credit lines, by
product and duration. The file is then submitted to the
• stress-test measurements, based on the decennial shock-
relevant teams at Société Générale and to the Central Risk
type indicator, are established by Société Générale and trans-
Division for approval and validation. The allocated limits are
mitted to Crédit du Nord so that it can incorporate them into
entered into the daily monitoring and reporting systems;
its limit monitoring methods;
• where the counterparty is a customer, the manager in charge
• complementary limits (sensitivity, nominal, etc.) which
of the account asks for the limits from the Regional and
ensure coherency between the total risk limits and the opera-
Subsidiary Risk Divisions. These limits allocated for the prod-
tional limits used by the front office. These limits also enable
ucts are then fed into the monitoring systems.
risks only partially detected by VaR or stress-test measure-
The Finance Division also receives a weekly status report on
ments to be controlled.
results and limits from the Treasury and Foreign Exchange
Department, along with a monthly report indicating changes in
risk exposure and results. The Chairman and CEO and the
Chief Executive Officer also receive a quarterly report on
changes in risks.
98
NOTE 43
● CONTRIBUTION TO CONSOLIDATED NET INCOME
BY BUSINESS LINE AND COMPANY
Due to the restatements required for the consolidation process, the contribution of Group companies to consolidated net income
may differ significantly from their individual results. The table below indicates the actual contribution (after consolidation restatements) by companies to Group consolidated income. The companies are grouped by activity.
Contribution to Group consolidated net income
Crédit du Nord
Banque Rhône-Alpes
Banque Tarneaud
(1)
(1)
12/31/2005
(IFRS)
12/31/2004
(French standards)
112.8
117.0
23.9
22.4
15.6
13.6
(1)
31.1
24.6
Banque Laydernier
14.3
8.9
Banque Nuger
4.2
3.4
Banque Kolb
7.7
6.8
Norbail Immobilier
2.0
1.9
Société de Bourse Gilbert Dupont
1.6
0.7
Star Lease
4.1
3.8
Dexia-CLF Banque
1.0
1.1
10.6
6.1
228.9
210.3
Étoile Gestion
13.2
16.9
Subtotal of asset management activities
Banque Courtois
Other companies
Subtotal of banking activities
13.2
16.9
Antarius (2)
8.0
6.0
Subtotal of insurance activities
8.0
6.0
TOTAL FROM ALL ACTIVITIES
250.1
233.2
Percentage contribution of each activity to overall net income
Banking
91.5%
90.2%
Asset management
5.3%
7.2%
Insurance
3.2%
2.6%
(1) Consolidated financial statements.
(2) Including sub-consolidated insurance mutual funds.
99
NOTE 44
● ACTIVITY OF CONSOLIDATED SUBSIDIARIES AND AFFILIATES
2003 and 2004 data are under french standards.
2005 data is under IFRS.
1. Banks
Company name
(ownership interest)
Date
Total
assets
Customer
deposits
Customer
loans
Net
income
Remarks
12/31/05
12/31/04
12/31/03
2,293.2
1,883.4
1,783.8
1,164.5
1,073.7
1,005.3
1,716.8
1,468.2
1,420.4
23.9
18.0
18.0
Thanks to a combination of business
and cost containment, Banque RhôneAlpes once again reported an increase in
its GOI. Cost of risk fell considerably, with
the result that net income rose sharply on
2004 despite an exceptional charge of
1 million of euros, mainly due to the application of the CRC regulation 2002-03 on
the discounting of doubtful loans.
12/31/05
12/31/04
12/31/03
1,981.7
1,664.3
1,603.4
1,049.8
972.3
924.0
1,463.8
1,280.2
1,186.8
22.1
17.6
21.8
Banque Tarneaud posted excellent results
in 2005 despite a significant increase in
the cost of risk. This progress is linked to
good management of operating expenses.
NBI increased significantly due to sustained business activity.
Note that Banque Tarneaud booked an
exceptional financial transaction in 2003.
12/31/05
12/31/04
12/31/03
2,317.1
2,000.4
1,816.6
1,430.5
1,292.7
1,211.8
1,862.5
1,597.6
1,436.5
31.1
22.7
22.2
Banque Courtois’ financial performance
in 2005 was marked by a strong increase
in GOI, thanks to growth in NBI and a very
modest increase in operating expenses.
Risk provisioning remained moderate and,
despite an exceptional charge of 1 million
of euros linked to the discounting of
doubtful loans, net income rose sharply.
12/31/05
12/31/04
12/31/03
986.2
896.5
817.3
575.6
526.0
504.9
720.1
657.1
603.0
14.6
5.8
8.3
Banque Laydernier’s net income more
than doubled between 2004 and 2005.
This significant rise is due to continued
growth in NBI and a reduction in operating
expenses due to the liquidation of the
medical assistance scheme, which
resulted in a 5.2 millions of euros writeback of provisions over 2005.
BANQUE
RHÔNE-ALPES
(100.0%)
BANQUE
TARNEAUD
(80.0%)
BANQUE
COURTOIS
(100.0%)
BANQUE
LAYDERNIER
(100.0%)
100
Company name
Date
Total
assets
Customer
deposits
Customer
loans
Net
income
Remarks
12/31/05
12/31/04
12/31/03
1,053.1
575.7
597.2
577.3
303.9
334.7
853.7
494.7
515.9
8.0
7.0
5.0
Following the transfer of the ChampagneArdenne region to Banque Kolb on
January 1, 2005, activity increased
sharply. Gross operating income followed
this trend. However, increased cost of risk
limited the growth of net income.
12/31/05
12/31/04
12/31/03
458.8
420.2
383.6
359.6
343.1
317.9
349.6
308.8
288.9
6.7
5.4
5.3
The increase in mortgage lending and
financial fees and commissions as well as
good management of operating expenses
led to an increase in gross operating
income. Net income also grew strongly.
12/31/05
12/31/04
12/31/03
175.0
158.2
140.5
156.5
139.5
122.7
116.5
116.9
107.9
1.2
1.6
1.6
Banque Pouyannne’s net banking income
fell slightly. The stability of operating
expenses and the rise in the cost of risk led
to a fall in net income.
BANQUE KOLB (1)
(99.9%)
BANQUE NUGER (1)
(64.7%)
BANQUE
POUYANNE
(35.0%)
(1) To best reflect the economic reality, the accounting data of lease-financing companies was taken directly from the financial accounts.
2. Specialised banks and financial institutions
Company name
Date
Total
assets
Customer
deposits
Customer
loans
Net
income
Remarks
12/31/05
12/31/04
12/31/03
173.8
120.3
127.6
NC
NC
NC
NS
NS
NS
2.4
1.2
3.8
The buoyancy of the financial markets
in 2005 enabled Société de Bourse Gilbert
Dupont to post a sharp increase in activity
and double its net income on 2004. Note
that the entity’s net income in 2003 incorporated an exceptional 3.1 millions of
euros gain on the disposal of fixed assets.
The tax expense of this partnership is
borne by its partners.
12/31/05
12/31/04
12/31/03
405.3
398.3
379.3
20.6
21.9
19.1
389.0
387.1
372.7
2.4
2.4
3.2
Activity for property leasing company
Norbail Immobilier proved relatively stable
in 2005 and net income was in line with
2004.
12/31/05
12/31/04
12/31/03
1.7
6.7
9.3
NC
NC
NC
NS
NS
4.5
1.5
1.1
2.0
The leasing activity of Banque Tameaud
has been transferred from Turgot Gestion
to Star Lease, Crédit du Nord Group’s
leasing company. The net income posted
in 2005 essentially comes a capital gain
on the disposal of equity investments.
SOCIÉTÉ
DE BOURSE
GILBERT DUPONT
(100.0%)
NORBAIL
IMMOBILIER (1)
(100.0%)
TURGOT
GESTION (1)
(80.0%)
101
Company name
Date
Total
assets
Customer
deposits
Customer
loans
Net
income
Remarks
12/31/05
12/31/04
12/31/03
15.7
11.9
10.6
3.8
3.1
2.8
NC
NC
NC
0.7
1.3
–0.5
Norfinance is a wealth management
company. The decrease in its activity
compared to 2004 (32% drop in NBI)
is linked to the transfer of its customers to
Crédit du Nord.
12/31/05
12/31/04
12/31/03
3,333.6
3,447.9
4,397.6
852.3
300.5
200.3
1,108.9
1,383.7
1,414.6
4.8
5.3
10.0
Net income for Dexia-CLF Banque, a subsidiary held jointly by the Dexia and Crédit
du Nord Groups, carne in at 4.8 millions of
euros, which was down on 2004.
12/31/05
12/31/04
12/31/03
45.7
28.9
9.7
2.2
1.2
NC
36.3
23.9
8.1
–0.2
0.1
0.1
Activity for Norbail-Sofergie proved buoyant
in 2005. Net financial income before the
impact of IFRS (–0.3 million of euros)
remained stable on 2004 as most of the
entity’s new loans were only disbursed at
the very end of the year.
12/31/05
12/31/04
12/31/03
956.3
763.3
649.8
2.8
1.5
1.0
871.3
710.5
557.6
4.0
3.0
9.7
Star Lease, an equipment leasing company,
continued to increase its loan issuance in
2005. The company posted net income of
4 millions of euros, which was up on 2004.
NORFINANCE
G. DUPONT
ET ASSOCIÉS
(100.0%)
DEXIA-CLF
BANQUE
(20.0%)
NORBAIL
SOFERGIE (1)
(100.0%)
STAR LEASE (1)
(100.0%)
3. Other companies
Company name
(ownership interests)
Date
Total
assets
Net
income
Remarks
12/31/05
12/31/04
12/31/03
60.1
41.9
35.0
20.3
26.3
17.2
2005 proved an excellent year for Crédit du Nord Group mutual
fund management company, Étoile Gestion, driven notably by the
improvement in the stock markets (the CAC 40 was up by 16.2%
on average for the year). Management fees thus increased by
13.9% on 2004. After booking a provision of 13.9 millions of
euros, pending feedback from tax administrators on the interpretation of the new regulations relative to management fees paid to
third-party distributors, net income before tax was down 23%.
The tax expense of this partnership is borne by its partners.
12/31/05
12/31/04
12/31/03
5,163.1
4,177.7
3,587.1
16.1
10.6
10.9
Antarius is the Group’s insurance company. 2005 marked the
first complete year of the partnership between Crédit du Nord and
Aviva. Good operating relations between the two entities created
a favourable backdrop for the quality of customer service and
business development: posting a 26% rise on 2004, individual
savings hit a record high of 943.7 millions of euros and net
income before tax stood at 21.4 millions of euros in 2005, up by
52%.
ÉTOILE GESTION
(97.0%)
ANTARIUS
(50.0%)
102
Company name
(ownership interests)
Date
Total
assets
Net
income
Remarks
12/31/05
12/31/04
12/31/03
30.9
24.2
23.4
5.6
2.9
2.2
Crédit du Nord’s venture capital company, SPTF, derives
the majority of its income from capital gains on disposals and
revenues on securities. In 2005, SPTF almost doubled its net
income, mainly through securities disposals.
12/31/05
12/31/04
12/31/03
0.1
0.0
0.0
0.0
0.0
0.0
This company’s activity is marginal and not particularly significant. It broke even in 2005.
12/31/05
12/31/04
12/31/03
1.3
2.0
7.3
0.0
0.0
0.0
This company, which specialises in certain market activities, did
not generate any income in 2005. The majority of its assets
comprise short-term investment securities.
12/31/05
12/31/04
12/31/03
7.9
7.5
10.0
0.8
0.0
–1.6
Norimmo, a registered estate agent, is involved in property
development. As the net income of its subsidiaries is at breakeven
(0.3 million of euros), the company posted a profit of
0.8 million of euros. The tax expense of this partnership is borne
by its partners.
12/31/05
12/31/04
12/31/03
0.0
0.0
0.0
0.0
0.0
0.0
12/31/05
12/31/04
12/31/03
7.7
7.5
7.5
0.7
0.5
0.6
12/31/05
12/31/04
12/31/03
1.2
1.6
3.8
–0.4
–0.3
–0.7
(100.0%)
12/31/05
12/31/04
12/31/03
0.1
0.1
0.1
0.0
0.0
0.0
Fimmogest is a subsidiary of Banque Courtois. The company’s
activity is marginal and its results were close to breakeven.
NORD
ASSURANCES
COURTAGE
12/31/05
12/31/04
12/31/03
4.1
3.3
1.8
4.0
3.3
1.8
Nord Assurances Courtage had a particularly good year in 2005.
This insurance brokerage company generated pre-tax earnings of
4.0 millions of euros. The tax expense of this partnership is borne
by its partners.
12/31/05
12/31/04
12/31/03
1.7
1.5
1.5
0.1
0.1
0.0
Partira manages a residual stock of real estate assets, notably
in the Rhône-Alpes region.
KOLB
12/31/05
INVESTISSEMENTS 12/31/04
2.1
3.0
0.5
This company was acquired in 2001. It is a holding company
which owns 21.4% of Banque Kolb. Its net income is derived
almost exclusively from dividends received from the latter.
SPTF
(100.0%)
SFAG
(100.0%)
CRÉDINORD
CIDIZE
(100.0%)
NORIMMO
(100.0%)
ANNA PURNA
(100.0%)
NICE BROC
(100.0%)
NICE CARROS
(100.0%)
FIMMOGEST
(100.0%)
PARTIRA
(100.0%)
These three companies are subsidiaries of Norimmo specialising
in real estate and property transactions. Their combined net
income came out at breakeven for 2005. Whereas Nice Broc
generated a profit of 0.7 million of euros, Nice Carros posted a
loss of 0.4 million of euros.
(100.0%)
12/31/03
4.8
5.7
3.2
SNC EUROPE
LAFAYETTE
12/31/05
12/31/04
1.8
1.6
–0.4
0.6
This subsidiary of Banque Rhône-Alpes has only been consolidated since 2004. Its assets essentially include real estate assets
leased to Banque Rhône-Alpes. The tax expense of this partnership is borne by its partners.
12/31/05
0.1
0.0
This is a property development company created in 2005 which
has not yet begun any business.
(100.0%)
SCI FORT
DE NOYELLES
(100.0%)
103
Statutory Auditors’ report
ON THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal year ended December 31, 2005
II. Justification of our assessments
In execution of the mission conferred to us by the Shareholders’
In application of the provisions of Article L. 823-9 of the French
Meeting, we hereby present our report relative to the fiscal year
Commercial Code relative to the justification of our opinions
ended December 31, 2005 on the full-year consolidated finan-
and evaluations, we draw your attention to the following
cial statements of Crédit du Nord such as they are presented
elements:
herein.
The consolidated financial statements were approved by the
ACCOUNTING PRINCIPLES
Board of Directors. It is our role to express an opinion on these
• We have examined the accounting treatments applied by your
financial statements based on our audit. These financial state-
company in those areas which are not covered by specific
ments have been prepared for the first time in accordance with
provisions under the IFRS framework as adopted by the
the IFRSs. For comparative purposes, they also contain infor-
European Union (treatment of undated subordinated debt)
mation relative to fiscal year 2004 restated under the same
and we have ensured that the information provided in Note 1
standards, with the exception of IAS 32, IAS 39 and IFRS 4
of the notes to the financial statements is appropriate in this
which, in accordance with the option available under IFRS 1,
respect.
have only be applied by Crédit du Nord as of January 1, 2005.
ACCOUNTING ESTIMATES
I. Opinion on the consolidated financial statements
We conducted our audit in accordance with French professional standards. These standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the annual consolidated financial statements are free
from material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the annual accounts. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of
the annual financial statements. We believe that our audit
provides a reasonable basis for our opinion.
• As indicated in the section entitled “Accounting principles” of
the present financial statements, your company has provisioned for the credit risks inherent to its activities. As part of
our assessment of significant estimates retained for the
preparation of the accounts, we have reviewed and tested the
procedures implemented by management to identify and
evaluate non-recovery risks and determine the amount of
individual and collective provisions necessary.
• As indicated in the notes, your company records provisions to
cover potential negative global interest rate risks on the
épargne-logement contracts (mortgage savings accounts and
agreements). The method used for calculating these provisions was established pursuant to the information published
In our opinion, the consolidated financial statements give a true
the CNC release dated December 12, 2005.
and fair view of the assets and liabilities and of the financial
• As indicated in the notes, your company uses internal models
position of the Group as at December 31, 2005 and of the
to value structured negotiable medium term notes. As such,
results of its operations for the year then ended, in accordance
we have reviewed the system for controlling the models used
with IFRSs adopted by the European Union.
and assessed the data and assumptions used, as well as the
integration of the risks associated with these instruments.
104
• In preparing its financial statements, your company makes
Said evaluations are an integral part of our audit of the parent
significant accounting estimates, using the methods
company financial statements in their entirety and thus
described in the section entitled “Accounting Principles” in
contributed to the formation of our opinion as expressed in the
the notes to the financial statements. These estimates notably
first part of this report.
relate to the fair value of financial instruments carried at
amortised cost, the valuation of goodwill, pension commit-
III. Specific verification
ments and other post-employment benefits. We have
reviewed the underlying assumptions and valuation para-
In accordance with professional standards applicable in
meters and ensured that these accounting estimates are
France, we have also verified the information given in the
based on documented methods in accordance with the prin-
group’s management report. We have nothing to report with
ciples described in the notes to the financial statements.
respect to the fairness of the information contained in the
On the basis of these reviews, we conclude that these esti-
Board of Director’s report and its consistency with the annual
mates are of a reasonable nature.
accounts.
Neuilly-sur-Seine, March 1, 2006
The Statutory Auditors
DELOITTE & ASSOCIES
ERNST & YOUNG
José-Luis Garcia
Isabelle Santenac
105
106
Additional
information
2005
Contents
108
110
112
114
FINANCIAL
REPORT
GENERAL DESCRIPTION OF CRÉDIT DU NORD
SHAREHOLDER AND CAPITAL INFORMATION
GROUP ACTIVITY
RESPONSIBILITY FOR THE REGISTRATION
DOCUMENT AND AUDIT
107
General description
OF CRÉDIT DU NORD
COMPANY NAME
CORPORATE PURPOSE (article 3 of the bylaws)
Crédit du Nord
The purpose of the company, under the conditions set forth by
the laws and regulations applicable to credit institutions, is to
HEAD OFFICE
28, place Rihour – 59000 Lille - France
perform, with individuals or corporate entities, in France or
abroad:
• any and all banking transactions;
LEGAL FORM
• any and all transactions related to banking transactions,
including, in particular, all investment or related services as
A limited liability company (Société Anonyme) registered in
governed by Articles L. 321-1 and 321-2 of the French
France and governed by Articles L. 210-1 ff. of the French
Monetary and Financial Code;
Commercial Code.
The company has the status of a bank as governed by Articles
L. 311-1 ff. of the French Monetary and Financial Code.
• any and all acquisitions of ownership interests in other
companies.
In accordance with the conditions set forth by the French
Banking and Financial Regulation Committee, the company
DATE OF FORMATION AND DURATION
may also regularly engage in any and all transactions other than
Crédit du Nord was founded in 1848 under the name Comptoir
those mentioned above, including in particular insurance
national d’escompte de l’arrondissement de Lille. It became a
brokerage.
limited liability company (Société Anonyme) in 1870 and
Generally, the company may, on its own behalf, on behalf of
changed its name to Crédit du Nord in 1871.
third parties or jointly, engage in any and all financial, commer-
The date of expiration of the company is May 21, 2068, barring
cial, industrial, agricultural or real estate transactions that are
dissolution before this date or an extension thereof as provided
directly or indirectly related to the abovementioned activities or
by law.
likely to facilitate the execution thereof.
REGISTRATION NUMBER
SIREN 456 504 851 RCS Lille
APE ACTIVITY CODE
651 C
108
COMPANY DOCUMENTS
All documents relating to Crédit du Nord including, in particular, its bylaws, accounts and reports presented by the Board of
Directors and the Statutory Auditors at Shareholders’ Meetings,
can be consulted at 59, boulevard Haussmann, 75008 Paris,
France.
The General Meeting called to approve the financial statements
of the fiscal year may, in respect of all or part of final or interim
dividends proposed for distribution, offer each shareholder the
choice between payment of the final or interim dividends in
cash or in shares, under the conditions set forth by the
currently applicable legislation. Shareholders must exercise this
option for the entire amount of final or interim dividends to be
FISCAL YEAR
From January 1 to December 31.
received for the fiscal year.
Except in the case of a reduction in share capital, no distribution to shareholders may take place where shareholders’ equity
ALLOCATION AND DISTRIBUTION OF INCOME
(article 22 of the bylaws)
is or would as a result of said distribution be lower than the sum
of the company’s share capital plus any legal reserves which, in
accordance with the law or under the company’s bylaws, are
Net income for the year is determined in accordance with all
not available for distribution.
currently applicable laws and regulations. At least 5% of net
income for the year, less any previous accumulated losses,
SHAREHOLDERS’ MEETINGS (article 19 of the bylaws)
must, by law, be set aside to form a legal reserve until this
reserve reaches one-tenth of share capital.
The General Meeting, which meets on a regular basis, represents all shareholders and exercises all powers devolved to it
Net income available after said allocation to legal reserves, as
by law.
well as any earnings carried over, constitutes “income available
for distribution” from which dividends may be paid out and/or
funds allocated to ordinary, extraordinary or special capital
reserves as approved by the General Meeting on the basis of
the recommendations made by the Board of Directors.
It is convened to statute on those issues listed on the agenda in
accordance with the currently applicable legal and regulatory
provisions.
The right to attend Shareholder Meetings is subject to registration, in accordance with the relevant legal and regulatory provisions, of shares in the name of the shareholder at least five
days before the date of the meeting.
109
Shareholder and capital
information
SHARE CAPITAL
PROFIT-SHARING
Crédit du Nord’s share capital stands at 740,263.248 euros,
A profit-sharing agreement was signed on June 1, 2004 which
divided into 92,532,906 fully paid-up shares with a par value of
applies to fiscal years 2004 through 2006.
8 euros.
AII payments therein are calculated on the basis of 6% of gross
The shares making up the company’s share capital are not
operating income adjusted for certain parameters. 33% of
subject to any liens/pledges.
profit-sharing is paid out in equal amounts (capped at
3 millions of euros), with the remainder paid in proportion to
FORM OF SHARES
AII shares must be registered.
gross annual salaries excluding performance bonuses. Total
profit-sharing is capped at 8% of gross fiscal remuneration paid
to all company employees in the year in question.
DISCLOSURE REQUIREMENTS
No restrictions have been made to legal provisions concerning
ownership thresholds.
SHARE TRANSFER APPROVAL
The General Meeting of April 28, 1997 ruled that the assignment, sale or transfer of shares to a third party who is not a
shareholder, for any reason whatsoever, except in the event of
the transfer of an estate, liquidation, communal property
between spouses or transfer to a spouse or next-of-kin, is
subject to the company’s prior approval.
110
Crédit du Nord makes an additional “employer’s contribution”
where employees pay any profit-sharing into the Company
Savings Plan.
CHANGES IN SHARE CAPITAL
Number of shares
2005
2004
2003
2002
2001
92,532,906
92,532,906
92,532,906
92,532,906
92,532,906
8
8
8
8
8
740,263,248
740,263,248
740,263,248
740,263,248
740,263,248
–
–
–
–
–
92,532,906
92,532,906
92,532,906
92,532,906
92,532,906
740,263,248
740,263,248
740,263,248
740,263,248
740,263,248
Par value per share
(in euros)
Share capital (in euros)
Maximum number
of shares to be created (1)
Potential number
of shares
Potential share capital
(in euros)
(1) Through the conversion of bonds and/or the exercise of stock options.
OWNERSHIP AND VOTING RIGHTS AS AT DECEMBER 31, 2004
Société Générale
80%
Dexia Crédit Local
10%
Dexia Banque Belgique
10%
Members of management bodies
–
Employees (via specialised fund managers)
–
DOUBLE VOTING RIGHTS
DIVIDEND PAYMENTS
None.
• A dividend per share of 1.00 eurowas paid out in respect of
FY 2001.
CHANGES IN OWNERSHIP IN THE LAST THREE YEARS
None.
• A dividend per share of 1.12 euro was paid out in respect of
FY 2002.
FY 2003
FY 2004.
• A dividend per share of 1.55 eurowill be paid out in respect of
FY 2005.
STOCK MARKET INFORMATION
Not applicable: Crédit du Nord shares are not listed on any
markets.
111
Group activity
Use of patents and licences
vigorously oppose the claim since, after trying to support
Not applicable.
Moulinex on the grounds of a serious and credible recovery
plan, the banks were the first victims of the group’s collapse. All
Legal risks
reasonably anticipated expenses relative to the management of
these proceedings have been taken into account.
Crédit du Nord is a credit institution authorised to operate as
a bank. As such, it may carry out all banking transactions.
It is also authorized to provide any and all investment or related
services as governed by Articles L. 321-1 and L. 321-2 of the
French Monetary and Financial Code. As an investment service
provider, Crédit du Nord is subject to the applicable regulatory
framework, in particular prudential rules and the controls of the
French Banking Commission. All managers and employees are
To date there are no extraordinary circumstances and/or ongoing litigation that may have, or may have had in the recent
past, a significant effect on the business, income, financial
position or assets and liabilities of Crédit du Nord or its
subsidiaries.
Other special risks
bound by professional secrecy, the breach of which is subject
To the best of Crédit du Nord’s knowledge, no such risks
to penal law.
currently apply.
Crédit du Nord is also an insurance broker.
Insurance
Litigation and extraordinary circumstances
In October 2005, the official receivers in charge of the restructuring of Moulinex, which was put into bankruptcy in 2001,
General policy
Crédit du Nord’s insurance policy aims to obtain the best cover
with respect to the risks to which it is exposed.
initiated a lawsuit against banks which had participated in
syndicated loans granted to Moulinex in 1997. They are
seeking compensatory damages to indemnify the creditors for
the banks’ alleged improper financial support. Crédit du Nord,
which only held a share of the syndicated loans, intends to
112
A certain number of major risks are covered by policies taken
out as part of Société Générale’s Global Insurance Policy, whilst
others are covered by policies taken out by Crédit du Nord.
Risks covered by the Société Générale
Global Insurance Policy
Risks covered by Crédit du Nord policies
1 – Buildings and their contents
1 – Theft/fraud
Buildings and their contents are insured by a multi-risk policy
These risks are included in a “global banking” policy that
with a ceiling of 76,500,000 euros.
insures the banking activities of Crédit du Nord and its
subsidiaries.
2 – IT risks
This insurance covers any loss or damages to equipment (hard-
2 – Professional liability
The consequences of any lawsuits are insured under the global
policy. The level of cover is the best available on the market.
ware, supports) used to process information.
3 – Liability insurance linked to operations
This insurance covers any pecuniary damages to third parties
3 – Operating losses
incurred by all persons or equipment deemed necessary for
The consequences of an accidental interruption in activity are
company’s operations.
insured under the global policy. This policy complements the
business continuity plans.
4 – Third-party liability insurance of corporate managers
The purpose of this policy is to cover the company’s managers
Other risks linked to activities
Within the framework of all Group contracts, Crédit du Nord
offers customers death and invalidity insurance on their loans
(property, consumer loans, etc.).
and directors in the event of claims filed against them and
invoking their liability.
113
Responsibility for the registration
document and audit
PERSON RESPONSIBLE FOR THE REGISTRATION
DOCUMENT
Alain Py, Chairman and Chief Executive Officer
The company has obtained a comfort letter from its Statutory
Auditors, certifying that they have verified, in accordance with
French professional standards, the information contained in the
present updated registration document regarding the
company’s financial position and the company’s financial statements and moreover have read the entire document.
CERTIFICATION OF THE PERSON RESPONSIBLE
FOR THE REGISTRATION DOCUMENT
The comfort letter from the Statutory Auditors contains no
observations.
Having taken all reasonable care to ensure that such is the
Chairman and Chief Executive Officer
case, I hereby certify that the information set out in the present
Alain PY
updated registration document is, to the best of my knowledge,
true and includes all the information needed by investors to
form an opinion regarding Crédit du Nord’s assets and liabilities, business, financial position, results and prospects. There
are no omissions that could impair its meaning.
PERSONS RESPONSIBLE FOR THE AUDIT
OF THE FINANCIAL STATEMENTS
DELOITTE & ASSOCIÉS
ERNST & YOUNG
Represented by Isabelle Santenac
Represented by José-Luis Garcia
Adress:
Adress:
41, rue Ibry – 92200 Neuilly-sur-Seine – France
185, avenue Charles-de-Gaulle - 92200 Neuilly-sur-Seine –
France
114
Date appointed:
Date appointed:
May 4, 2000 for a term of six fiscal years
May 4, 2000 for a term of six fiscal years
Substitute auditor:
Substitute auditor:
Thierry Gorlin
BEAS
Person responsible for the information contained in this report: Jean-Pierre Bon
Tel.: +33 (0)1 40 22 23 91 - E-mail: [email protected]
Design and printing:

2005 - Groupe Crédit du Nord

Transcription

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