Groupe Crédit du Nord

Transcription

Annual Report
Contents
ACTIVITY
3
Key figures as at December 31, 2008.............................................................. 4
2008 highlights ................................................................................................. 6
Group structure .............................................................................................. 10
2
3
4
CONSOLIDATED FINANCIAL STATEMENTS
11
Management Report ...................................................................................... 12
Chairman’s Report on Internal Control .......................................................... 33
Report of the Statutory Auditors on the Chairman’s Report
on Internal Control ......................................................................................... 45
Consolidated balance sheet .......................................................................... 46
Consolidated income statement .................................................................... 48
Change in shareholders’ equity ..................................................................... 49
Statement of cash flows ................................................................................ 52
Notes to the consolidated financial statements ............................................ 53
Statutory Auditors’ Report on the Consolidated Financial Statements....... 130
INDIVIDUAL FINANCIAL STATEMENTS
132
2008 Management Report ........................................................................... 133
Five-year financial summary ........................................................................ 134
Individual balance sheet at December 31.................................................... 135
Income statement ........................................................................................ 137
Notes to the individual financial statements ................................................ 138
Information on the Corporate Officers ......................................................... 177
Statutory Auditors’ General Report on the Annual Financial Statements ... 188
Draft resolutionsGeneral Meeting of Shareholders of May 13, 2009 ..................191
ADDITIONAL INFORMATION
193
General description of Crédit du Nord ......................................................... 194
Group activity ............................................................................................... 197
Responsibility for the registered document and audit ................................. 198
Concordance table ....................................................................................... 199
Annual Report 2008 R Crédit du Nord Group
1
Corporate Governance
as December 31, 2008
Date of 1st appointment
Term of mandate
October 1, 2002
2012
Didier ALIX
July 25, 2007
2009
Séverin CABANNES
February 21, 2007
2012
Patrick DAHER
September 15, 2005
2009
Jean-Pierre DHERMANT *
November 16, 2006
2009
Bruno FLICHY
April 28, 1997
2011
Jacques GUERBER
February 22, 2000
2010
Hugo LASAT
February 21, 2007
2012
December 12, 2006
2009
Christian POIRIER
April 28, 1997
2011
Fabien FOUTRY *
December 10, 2008
2009 **
Patrick SUET
May 3, 2001
2011
Board of Directors
Chairman of the Board of Directors
Alain PY
Directors
Alex PEYTAVIN
*
* Employee representative.
** In replacement of Marie-Christine REMOND, who left office at end-December 2008.
The Board of Directors met four times during the course of 2008 in order to examine the budget, yearly and half-yearly accounts
and discuss strategic decisions concerning commercial, organisational and investment policies.
The Compensation Committee, consisting of two Directors – Didier ALIX and Patrick SUET, met twice in the course of the year
to submit a proposal to the Board of Directors concerning fixed and performance-based compensation, including benefits, for
corporate officers.
Executive Committee
Alain Py, Chairman and Chief Executive Officer,
Marc BATAVE, Executive Vice Chairman,
Alain CLOT, Executive Vice Chairman,
Jean-Pierre BON, Deputy Chief Executive Officer (Finance Division),
Pierre BONCOURT, Head of Human Resources,
Jean DUMONT, Head of the Central Risk Division,
Thierry LUCAS, Head of Information Systems, Projects and Banking Operations,
Gilles RENAUDIN, Head of Legal Affairs and Controls,
Jérôme FOURRÉ, Head of Communications (attends Executive Committee meetings)
2
1
Activity
Key figures
4
2008 highlights
6
Group structure
10
3
Activity
Key figures
Key figures as at December 31, 2008
Group: consolidated figures
Balance sheet
31/12/2008
IAS/IFRS
31/12/2007
IAS/IFRS
% change
2008/2007
IAS/IFRS
Customer deposits
19,496.9
18,268.3
+6.7
Customer loans
25,761.4
24,060.1
+7.1
1,912.8
1,890.2
+1.2
1,364.3
1,187.4
+14.9
(656.6)
(602.4)
+9.0
40,740.9
37,718.0
+8.0
23,470.9
27,234.3
-13.8
31/12/2008
IAS/IFRS
31/12/2007
IAS/IFRS
% change
2008/2007
IAS/IFRS
(in EUR millions)
Shareholders’ equity
(1)
Doubtful loans (gross)
Depreciation for individually impaired loans
TOTAL
(2)
ASSETS UNDER MANAGEMENT (3)
(1) Includes income in progress
(2) 2007 amount adjusted with respect to published financial statements.
(3) Excluding custody for third parties and restated for the UCITS included in life insurance products
Income
(in EUR millions)
Net banking income
4
1,543.9
1,597.5
-3.4
Gross operating income
512.4
585.6
-12.5
Earnings before taxes
382.5
515.2
-25.8
Consolidated net income
252.7
340.2
-25.7
Activity
Key figures
Ratios
31/12/2008
(As a %)
31/12/2007
31/12/2006
Cost of risk/outstanding loans
0.51
0.31
0.31
Shareholders’ equity (1)/Total assets
4.70
5.01
5.33
Solvency ratio (2)
8.37%
9.03%
10.15%
Tier One capital (3)/total risk-weighted credit exposure
7.01%
7.11%
7.14%
(1) 2007 amount adjusted with respect to published financial statements.
(2) These ratios are presented only as an indication with which to assess the profitability of Crédit du Nord Group since Crédit du Nord Group is not directly bound by regulatory
solvency ratio requirements due to the nature of the Group’s ownership.
(3) Tier One.
(2) and (3) include income in progress, net of forecasted dividend payout.
Ratings
Standard and Poor’s
Fitch
31/12/2008
31/12/2007
31/12/2006
ST
A-1+
A-1+
A-1+
LT
AA-
AA
AA
ST
F1
F1 +
F1 +
LT
A+
AA -
AA -
BC
BC
BC
Intrinsic
(*)
(*) The intrinsic rating is the rating attributed to Crédit du Nord Group by the ratings agency, i.e. without taking account of its consolidation within Societe Generale Group.
Contribution of Crédit du Nord (parent company)
(in EUR millions)
Net banking income
31/12/2008
IAS/IFRS
31/12/2007
IAS/IFRS
% change
2008/2007
IAS/IFRS
1,016.4
1,062.7
-4.4
354.2
410.8
-13.8
Net income
224.7
336.0
-33.1
5
Activity
2008 highlights
2008 highlights
Network structure
In 2008, the banks of Crédit du Nord Group expanded their network with the opening (or preparation for the opening) of new
branches.
Crédit du Nord
Banque Nuger
Étaples
Fontainebleau
Cassel
Châteauneuf sur Loire
Pithiviers
Montigny-le-Bretonneux
Paris Pyrénées
Colombes
Paris Malesherbes
Paris Rennes
Aurillac
Banque Courtois
Banque Tarneaud
Dax
La Teste de Buch
Montauban Cladel
Marsac sur l’Isle
Lorient
Brive Entreprise Corrèze
Vannes
Challans
Tours les Halles
Banque Kolb
Sens
Banque Laydernier
Saint-Jean-de-Maurienne
Banque Rhône-Alpes
Montélimar
Individual customers
6
January
September
Launch of Antarius Protection
Verified by Visa
Antarius Protection is a solution designed to protect the
future of the subscriber’s loved ones in the event of his or her
death or total and irreversible loss of independence due to
illness or accident. In the event of death, the beneficiary(ies)
receive(s) a lump sum, net of tax (including inheritance tax).
In the event of total and irreversible loss of independence, the
lump sum is paid to the subscriber.
The sharp rise in the volume of Internet banking transactions
led Visa to offer an authentication system to provide
cardholders with the assurance of secure online payments.
The principle is simple and affects all payment cardholders
(excluding American Express): cardholders are asked to
supply their date of birth when they use their card to make
a payment on a website displaying the “Verified by Visa”
secure payment guarantee.
Activity
2008 highlights
December
Launch of the Visa Infinite card
The Banks of Crédit du Nord Group broadened their range
of high-end cards by offering their individual customers the
new Visa Infinite Card.
The Visa Infinite Card gives cardholders a wide range of
benefits, including: tailored banking services, enhanced
insurance and assistance, and a personal assistant service
ready to answer a variety of requests
Launch of Coverage against “Everyday
Accidents” (Garantie des Accidents de la Vie)
Crédit du Nord Group added to its range of insurance
products by offering its individual customers Coverage
against “Everyday Accidents”.
Each year, over 8 million French fall victim to everyday
accidents (slips and falls on sidewalks, sports accident,
burns, cuts, etc.). Coverage against “Everyday Accidents”
pays benefits to cover the lasting consequences of such
accidents, which are generally not covered by social security
or supplemental health care policies.
Professionals and Associations
January
Launch of Fintrax
ADSL EPT
Fintrax is an electronic payment solution designed for
merchants which complements the conventional management
of transactions offered by the Banks of Crédit du Nord Group.
This solutions offers foreign cardholders (from outside the
euro zone) the option of paying for their purchase in their own
currency at the point of sale. Customers are debited directly
in their currency and the merchant is credited in euros.
The EPT (Electronic Payment Terminal) leasing range has
grown with the addition of a new ADSL terminal available
in both fixed and Bluetooth models. The terminal is
connected directly to the Internet Box of merchants which
are customers of Crédit du Nord Group and to their ADSL
network (regardless of their Internet operator). This offering
meets the requirements of merchants seeking to pay flat-rate
communication costs and save time thanks to greater fluidity
in payment collection.
Business and Institutional customer market
February
Launch of online “statements of LCR/BOR
payables”
This new function for the online management of LCR
(magnetically transferred bills of exchange) and BOR
(magnetically transferred promissory notes) payables has
been added to the “Overall Management” option, allowing
users to:
R consult statements of LCR/BOR payables,
R give instructions online concerning the LCRs/BORs which
are not subject to standing orders,
R issue rejection requests.
Customers taking advantage of this option may also:
R be notified by e-mail of any presentations for payment of a
new “statement of LCR/BOR payables” by choosing the
“no hard copy” option,
R consult archived statements of LCR/BOR payables.
7
Activity
2008 highlights
March
September
Launch of “Pack @rating”
VCOM offering expanded with “Supplier
notice by e-mail” service
Under a new partnership with Coface, the Banks of Crédit
du Nord Group are offering their Business customers the
Pack @rating, an online commercial information package
allowing subscribers to manage their portfolios of French and
foreign customers online.
A veritable customer management toolbox, the Pack @rating
offers unlimited access to four services:
R information: unlimited consultation of all information
available on the companies in the portfolio,
R monitoring: continuous alerts of any changes relating to
these companies,
R assessment: real-time analysis of the breakdown of the
portfolio’s risk exposure,
R collections: online filing of applications for collection
against the companies in the portfolio.
The VCOM offering now offers subscribers two options for
delivering supplier notices:
R by post,
R by e-mail (new) for faster response time.
This new service meets the requirements of companies
generating a large number of supplier payments in France,
by providing them with lighter and more secure administrative
processing.
Financial operations
Over the course of 2008, Crédit du Nord helped its customers prepare and carry out many types of financial transactions:
R IPOs;
R takeovers, public buyout offers, squeeze-out procedures;
R disposal/recovery of a business;
R LMBOs;
R debt relief and syndication;
R acquisitions;
R sales of small companies to larger companies operating in the same sector.
These transactions were completed by Crédit du Nord’s Finance Division, some of which in cooperation with Étoile ID,
Crédit du Nord Group’s venture capital company, and brokerage firm Gilbert Dupont.
8
Activity
2008 highlights
Awards and distinctions
February
May
Crédit du Nord Group honored at the 8th
Annual “Qualiweb/Stratégies” Awards
2008 Trophy for best SICAVs and funds
This award, handed out by the weekly Stratégies and Cocédal
Conseil on February 13, 2008, recognizes the best e-mail
replies (in terms of quality and timeliness) given by a panel
of 250 websites. Crédit du Nord Group won the Qualiweb/
Stratégies award for the Banking-Finance category and
ranked No. 5 in all categories combined.
March
Competition surveys
For the fourth year in a row, Crédit du Nord Group has
outperformed the top French banks (1) in terms of customer
satisfaction in the Individual and Professional Customer
markets and is No. 3 in the Business Customer market.
Furthermore, Crédit du Nord Group took the No. 1 spot in
the competition survey on International Trade (2) conducted
by CSA. The Group was also the leader in terms of overall
Business customer satisfaction, taking first place in several
criteria, including: proximity, responsiveness and efficiency
of operational services, assistance in the development
of international operations, ability to anticipate customer
requirements and propose solutions tailored to international
transactions, and quality execution of international
transactions.
Le Revenu magazine awarded Crédit du Nord Group the
2008 bronze trophy for its range of sector-oriented funds
over a three-year track record.
October
2008 “Palme d’Or” Award for Customer
Relations
Crédit du Nord Group Online Banking received the 2008
Palme d’Or Award for Customer Relations.
Each year the competition, whose tenth anniversary was
organized by the AFRC (French Association for Customer
Relations), recognizes the top French call centers. The
criteria are both quantitative and qualitative, and are based
on information collected from a panel of customers.
This award highlights the skill and professionalism of Crédit
du Nord Group’s call centre advisers and underscores the
Group’s determination to provide the same level of service to
its customers at its branches and by telephone.
(1) Competition surveys carried out by CSA: from March 25 to April 23, 2008, based on a sample of 4,642 Individual customers of the market’s top 11 banks; from
March 25 to April 30, 2008, based on a sample of 3,500 Professional customers of the market’s top 10 banks; from March 17 to April 8, 2008 based on a sample
of 2,700 Business customers of the market’s top 10 banks.
(2) Survey based on a sample of 816 companies active in international trade between February 18 and April 4, 2008.
9
Activity
Group structure
Group structure
The diagram below presents the links between the main Crédit du Nord Group entities.
Direct shareholdings are listed as well as the overall percentage of capital directly or indirectly held by the Group.
The consolidation scope is presented in its entirety in Note 2.
A presentation of the businesses of the main Group entities is provided in Note 43
CRÉDIT
DU NORD
78.44%
96.82%
99.87%
BANQUE
KOLB
100%
BANQUE
COURTOIS
98.34%
3.18%
100%
BANQUE
LAYDERNIER
99.99%
BANQUE
RHÔNE-ALPES
1.65%
21.43%
4%
9.81%
100%
1.20%
KOLB
INVESTISSEMENT
0.10%
63.19%
64.70%
BANQUE
NUGER
80%
BANQUE
TARNEAUD
1.51%
64.05%
99.99%
ÉTOILE
GESTION
0.50%
8.31%
3.60%
8.41%
0.01%
100%
100%
100%
50%
35%
SDB
GILBERT DUPONT
NORFINANCE GD
ET ASSOCIÉS
NORBAIL
IMMOBILIER
ANTARIUS
BANQUE
POUYANNE
99.80%
99.80%
100%
100%
NORD ASSURANCES
COURTAGE
ÉTOILE ID
100%
20%
100%
STAR LEASE
DEXIA
CLF BANQUE
NORIMMO
0.20%
0.20%
99.90%
100%
0.10%
S.F.A.G.
99.96%
100%
100%
100%
100%
SC FORT
DE NOYELLES
NORBAIL
SOFERGIE
CRÉDINORD
CIDIZE
PARTIRA
0.04%
10
2
Consolidated financial
statements
Management Report
12
Chairman’s Report on Internal Control
33
Report of the Statutory Auditors on the Chairman’s
Report on Internal Control
45
Consolidated balance sheet
46
Consolidated income statement
48
Change in shareholders’ equity
49
Statement of cash flows
52
Notes to the consolidated financial statements
53
Statutory Auditors’ Report on the Consolidated
Financial Statements
130
11
Management Report
Management Report
Fiscal year 2008
A crisis of exceptional magnitude strikes the
global economy
The financial crisis which began in the summer of 2007 in the
United States when the subprime mortgage bubble burst
evolved over 2008 into an economic crisis of exceptional
magnitude. No region was spared, as industrialized countries
entered into recession and emerging countries suffered a
sharp slowdown in growth.
Under the impact of asset write-downs and the drying-up
of liquidity, the banking and financial industry was the first to
fall victim to the crisis. The failure of leading banks in the US
and Europe brought the world financial system to the brink
of collapse, leading the central banks and the United States
to take extreme, globally coordinated measures (massive
cash injections, full or partial nationalizations, government
guarantees).
Against this backdrop of heightened risk aversion, soon
the economy as a whole was hit with a harsh slowdown in
international trade that put the breaks on growth in most
regions of the world. The deterioration of the economic
environment came with a decline in household consumption
and furnishings in the US, Europe and Asia, which particularly
hurt the automotive and property sectors. After years of
nearly 100% employment in most industrialized companies,
unemployment took off in the US and some European
countries as well.
Commodities and energy prices, which had peaked and
caused an inflationary spiral until mid-year, have since
plummeted under the weight of demand and production
declines. This easing of inflation paved the way for the main
banks to relax their monetary policies by making drastic cuts
to their policy rates with the aim of lowering interbank rates.
This aggressive monetary easing process went hand in hand
with the development of massive fiscal stimulus plans by
the governments in all developed countries in the Americas,
Europe and Asia alike.
France did not escape the far-reaching recession, seeing
many of its activity indicators drop precipitously towards the
12
end of the year and posting strong negative growth in the
fourth quarter. Industrial output and exports hit decades-long
record lows; and only household consumption, though slower,
appeared to hold up on the back of lower energy product
prices. Neither the government economic stimulus measures
announced at the end of the year, nor the ECB’s monetary
policy (expected to grow increasingly accommodating), are
likely to have their desired effect for several months.
This deep, hard-core recession dragged the stock markets
sharply downward and caused indexes the world over to
tumble. In France the CAC 40 closed at 3218 points on
December 31, 2008, i.e. down 43% on the start of the year.
Though penalized by the crisis, Crédit du
Nord Group posted solid results
Results at December 31, 2008 were drawn up under IFRS.
They are compared to 2007 figures, which were also drawn
up under IFRS.
Crédit du Nord Group’s 2008 consolidated results declined
against 2007: NBI shed 3.4%, GOI 12.5% and operating
income 25.7%. Consolidated net income fell by 25.7% to
EUR 252.7 million. ROE came out at 14.9% for a Tier One
ratio of 7.0%.
The Group’s results were particularly impacted by those
of its asset management company, Etoile Gestion. In line
with its policy of ensuring the liquidity of its funds without
disadvantaging the client, Etoile Gestion was led to sell off
assets held in its dynamic cash funds, while guaranteeing
equal consideration of all unitholders. Etoile Gestion generated
a loss of EUR 72.2 million on these disposals over 2008.
On the plus side, the Group had to record its financial liabilities
at fair value in 2008, in accordance with IFRS, resulting
in a positive contribution of EUR 28.4 million to NBI
at December 31.
Furthermore, as a member of the economic interest group,
“Carte Bleue”, Crédit du Nord benefited from the IPO of
Visa Corporation in the United States, in the form of shares
Management Report
and dividends with a positive impact of EUR 12 million on
income.
caused a mild slowdown in household consumption, leading
in turn to a drop in new personal loans.
Lastly, note that the 2007 financial statements included a
capital gain of EUR 36 million from the sale of Euronext/NYSE
shares.
Income from service fees once again recorded high growth of
9.2% in 2008, as a result of the ongoing dynamic expansion
of the customer base, the significant contributions of new
branches, and the improvements to the range of banking
and insurance products and services.
Adjusted for these non-recurring items and provisions
booked for future commitments relating to PEL and CEL
home savings products, Group NBI rose by 1.2% in 2008.
Such a low increase in NBI can be attributed to a significant
drop in income from financial fees owing to the worsening
of the financial environment, and the erosion in the margin
on deposits, due mainly to the fact that the rate of return on
regulated savings accounts was maintained at a high level.
Finally, it should be pointed out that, given the instruments
held, Crédit du Nord was only marginally impacted by the
collapse of Lehman Brothers (i.e. a loss of EUR 423,000).
Growth in the margin on deposits fell into slightly negative
territory in 2008 due to the decline in sight deposits by
business and individual customers alike. Their cash was
reinvested in particularly high-return savings products,
thanks in large part to the rise in the interest rate on special
savings schemes at end-2007, then successively in February
and August 2008.
With economic activity continuing on a positive trend over
the first part of the year, the investments and financing
requirements of business customers were buoyant. These
customers were able to take advantage of developments
in our medium- and long-term loans. At the same time, the
process of restoring margin levels, begun in 2007, carried
over into 2008, with the rise in the cost of access to cash
integrated into our pricing scales. Margins on loans rose as
business customers increasingly drew on short-term credit
lines and the base lending rate gradually increased.
Despite the slowdown in the property market, new housing
loans climbed by 22.8% in 2008 on the back of easing
long rates, compared to a significant rise in interest rates in
2007. At the same time, interest rate competition eased up
and, without changing its policy of a sufficient margin for its
new loans, the Group noted that it had the best-positioned
offering. Outstanding housing loans rose considerably, driven
by solid new loan issuing. Use of revolving credit also showed
satisfactory growth. On the downside, the economic crisis
In such a badly deteriorated economic environment, with
the stock markets in upheaval from the financial crisis, the
Group’s income from financial fees dropped by 29.6%, due
in large part to the results posted by its subsidiary, Etoile
Gestion.
The asset management company’s activity was strongly
impacted by the financial crisis, which sparked major net
fund outflows in the dynamic money market fund segment.
In the interest of preserving the liquidity of said funds, and
reducing the sensitivity of their assets under management
without penalizing the client, the Group implemented a plan
in 2008 to restructure their assets by selling them on the
market and having the funds transfer good-quality assets
affected by the liquidity crisis to the Group. The restructuring
plan resulted in loss of EUR 72.2 million for Etoile Gestion,
most of which was booked at the start of the year.
The measures implemented succeeded in ensuring the
funds’ liquidity and performance, as net fund outflows had
since slowed substantially despite the renewed deterioration
of the market towards the end of the year.
Adjusted for this effect, Etoile Gestion’s NBI was down
24.3%, owing to the impact that the troubles plaguing
the market and the decline in equity products had on its
management fees. The Group’s income from financial fees
came out at -9.5%.
Operating in a stock market severely pummeled by the crisis,
and in the absence of any major transactions on the primary
market, the NBI generated by brokerage firm Gilbert Dupont
(specializing in small and mid caps) slid by 18.9% in 2008,
excluding the capital gain on the sale of Euronext/NYSE
shares in 2007.
13
Management Report
The program targeting expansion by
opening new branches was a success
In autumn 2004, Crédit du Nord Group launched an
ambitious network expansion program, aimed at creating
more complete geographic coverage. 23 new branches were
opened in 2008, and a total of 140 new branches have been
opened throughout mainland France (and particularly in the
in Paris and greater Paris area) high-potential regions since
the program was launched four years ago. Note that Crédit
du Nord further expanded its network and customer base by
acquiring six branches, with their clientele, from Fortis France
on July 1, 2008.
The development of these new branches was perfectly
in line with expectations, with growth in NBI a little higher
than expected, thanks to a dynamic approach to gaining
new market share in the individual customers market and
a higher-than-expected share of professional customers in
the Bank’s customer base. Moreover, the branch openings
enabled a number of individual customers in large cities to
transfer their accounts to branches closer to their place of
residence, thereby facilitating their banking relations.
From an organizational standpoint, the Middle Office
streamlining project launched in 2006 is progressing
according to plan. This project, which will be completed in
early 2010, takes account of changes in customer behavior
with the development of telephone and internet banking.
New functionalities have been added to the workstation,
particularly in the area of loan management processes.
These new branches are now making significant contributions
to Crédit du Nord Group’s commercial and financial
performances, and their development represents a real
growth driver.
The renovation of flow management systems, aimed at
transforming the requirement to progress towards the Single
European Payment Area into an opportunity to consolidate
the treasury management strategy, and the multi-channel
technical platform project, aimed at modernizing the internet
banking offering through the use of new technologies and
investments carried out at the workstations, have entered
the development phase.
Crédit du Nord has continued to press
ahead with a number of major technical and
organizational projects
Lastly, Crédit du Nord launched a number of new projects
in 2008, including the project to overhaul management
procedures and applications designed to monitor and
prevent threshold crossings.
In 2008, Crédit du Nord pursued the implementation of the
technical and regulatory projects underway for four years
now, while also laying the groundwork for new renovation
projects.
The workstation in branches was expanded to include new
functionalities, products and services. This major Group
project will be completed in 2009, with all Front and Back
Office work scenarios integrated into the workstation.
14
The regulatory project concerning the transition to the new
Basel II prudential standards, which called for the renovation
of the information system and the overhauling of the risk
management and steering systems, has entered into the
operational phase. As a result, the valuation of risk-weighted
assets has been used to calculate capital requirements under
Basel II since early 2008. Crédit du Nord Group received
authorization from the banking authorities to use advanced
credit risk calculation methods on nearly all of its outstanding
loans beginning this year.
The methodical implementation of the information system’s
renovation will give Crédit du Nord a system meeting the top
market standards by 2009/2010.
Management Report
Commercial activity
The present analysis of Crédit du Nord Group’s commercial
activity extends across the entire scope of the Group’s banks,
i.e. Crédit du Nord and its six subsidiary banks: Courtois,
Rhône-Alpes, Tarneaud, Laydernier, Nuger and Kolb.
The expanding customer base drew on the Group’s efforts to
win new customers, particularly through recommendations,
prevention of departures and the very significant increase in
new branches.
Indicators shown relate to euro-denominated businesses,
which account for virtually all of the Group’s activities. Figures
for outstanding loans are given as growth in franchises based
upon end-of-year figures.
This strong growth once again saw a substantial effort to
sell new products to the Group’s customers. The number
of customers with six or more products remained at a high
level (44.5%).
Further development of the customer base
and continued efforts to improve customer
loyalty
With the environment in terms of housing loan promotion
remaining buoyant for Crédit du Nord, the expansion of the
individual customer base reached 2.6% year-on-year. At
December 31, 2008, the individual customer base came out
at 1.4 million, representing 110,000 customers over three
years.
New services launched in 2008 included the Antarius
Protection Famille life insurance policy, which guarantees the
payment of a lump sum to the subscriber’s family in the event
of his or her death. One year after its launch, this product has
garnered genuine interest from customers and has proven a
rousing success, with almost 14,000 policies already sold.
In addition, the Protection Juridique (legal protection) policy
was very well received after its launch in 2006, carrying on
the trend over the long term with over 26,600 policies sold
by end-2008 (up 24.1% on 2007).
Telephone and internet banking continued to enjoy highly
robust growth as well. There were over 23 million visits to the
Individual Customers website in 2008. The number of active
contracts has risen by 21.4% year-on-year.
INDIVIDUAL CUSTOMER BASE
Number of customers (in thousands)
CUSTOMER LOYALTY
+2.6%
+2.8%
+2.9%
Customers with 6 or more products (as a %)
1,282
1,318
1,356
1,391
45.9
45.7
45.8
44.5
2005
2006
2007
2008
2005
2006
2007
2008
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.
15
Management Report
The Group built up its professional customer base by
an additional 6.0% on 2007, bringing the total number of
customers to 170,000. This result testifies to the quality of
Crédit du Nord Group’s close-knit network, with dedicated
account managers to deal with both the private and
commercial aspects of banking relations, counter services in
all Group branches and a tailored offering. Like the individual
customer segment, the Group’s new branches also contributed
significantly to the growth of this customer base.
Speaking directly to the confidence of our customers, the
number of automated service contracts for retailers posted
stronger growth this year (+3.7%), while the number of
subscribers to the Convention Alliance package reached
9.5% on 2007 (with 1 out of every two customers subscribing).
What’s more, nearly half of this customer base maintains both
a commercial and private banking relationship with the Group,
which reflects the quality of its sales structure.
In terms of life insurance, the number of subscriptions to the
Etoile Sécurité policy, designed as an additional savings vehicle
providing coverage in the event of accidental death, climbed
by 9.7% on 2007; similarly, in the individual customers market,
the Protection Juridique policy expanded successfully, with
nearly 5,000 subscriptions sold by end-2008 (up 18.3% on
2007).
Visits to the Professional Customers website rose
substantially, with over 9 million visits recorded in 2008 (i.e.
+21.6% vs. 2007).
The business customer base grew by 4.2% year-on-year,
with a significant increase in penetration of the highestrevenue companies.
More than two out of three companies now hold an active
internet contract, i.e. +7 points against December 2007.
Year-on-year, the number of active contracts rose by 16.4%.
The number of visits to the Business Customers website also
grew very substantially, with over 3.4 million visits recorded
in 2008.
A competition survey (1) carried out in early 2008 by CSA
on a representative panel of customers across all main
markets once again placed Crédit du Nord Group first out
of the main French banks in the individual and professional
customer markets and among the top three French banks in
the business customer market on most of the issues cited:
overall customer satisfaction, image, confidence, advice.
The results of the survey reflected the excellent quality of
our customer relations, which are at the core of our growth
model.
The number of Plans d’Epargne Interentreprises (intercompany savings plans) created for small businesses, individual
entrepreneurs and independent professionals posted yet
another significant increase of 14.2% year-on-year.
PROFESSIONAL CUSTOMER BASE
BUSINESS CUSTOMER BASE
+6.0%
+7.1%
+6.5%
140.1
149.2
159.8
169.3
26.9
27.6
28.7
29.9
2005
2006
2007
2008
2005
2006
2007
2008
(1) Source: the CSA survey institute, from March 17, 2008 to April 30, 2008, competition survey (telephone survey)
16
+4.2%
+4.1%
+2.7%
Management Report
Savings deposits impacted by the crisis
After several straight years of robust net new inflows, savings
deposits diminished over 2008 under the impact of the severe
financial market crisis.
The market indexes had been on a sharp upward track for
several years. At December 31, 2007, the CAC 40 closed at
5,614 points. By December 31, 2008, however, the financial
crisis had taken a dramatic toll on the markets, causing the
CAC 40 to plummet 43% year-on-year to 3,218 points. In
the absence of a valuation effect and in light of the weak net
new inflows observed, financial savings deposits (on- and
off-balance sheet) fell by 4.9% on 2007.
Sight deposits rose again this year across all markets, i.e.
individual, professional and business customers. Even
so, with returns on short-term savings vehicles becoming
attractive, individual customers were led to transfer cash from
their sight accounts to their savings accounts: the 50-bp
hikes in the return on regulated savings products on February
1 and August 1, 2008 drove growth in balance sheet savings
indexed on these indexes.
ON-BALANCE SHEET SAVINGS DEPOSITS
(annual averages)
(in EUR billions)
15.52
16.75
+31.8%
-2.1%
5.72
7.49
+8.3%
2005
DAV
3.05
5.60
8.11
+33.1%
4.06
+16.1%
4.71
-1,8%
5.50
-1.0%
5.44
+6.5%
8.64
+3.1 %
8.91
2006
CERS*
19.06
+4.8%
+8.6%
+8.0%
2.31
18.19
2007
Benefiting from the rise in short rate over most of the year,
term deposit accounts saw their volumes jump by 53.6%
year-on-year. On the downside, the taxation of PEL home
savings plans aged 12 years or more (in force since January
1, 2006) again led this year to a net outflow in older home
savings plans. This capital was reinvested in off-balance
sheet vehicles or money market UCITS, and to a lesser extent
in life insurance products, or was redirected toward customer
sight and term deposit accounts.
Deposits by professional and business customers grew, but
at a slower pace this year, reflecting much tighter cash flow
positions.
The life insurance market underwent a major decline in 2008,
with net new inflows falling by 11% due to competition from
liquid savings products and aversion to the financial markets.
Even in such a difficult environment, however, Crédit du Nord
Group nevertheless fared relatively well, thanks in large part to
the success of the Invest offering launched at the start of the
year. Net new inflows on life insurance products contracted
by only 5.2%, on the heels of an excellent fiscal year 2007.
Life insurance outstandings grew by 0.9% in 2008. The
percentage of unit-linked policies dropped steeply compared
to euro-denominated policies, reflecting the withdrawal of
customers to lower-risk investment vehicles.
In the context of the financial market decline, assets under
management in medium- and long-term money UCITS
slid sharply (-31.6%). Production also slowed dramatically,
reflecting a wait-and-see attitude and risk aversion on the
part of customers, leading to a decline in market orders
processed. Net new inflows in medium- and long-term mutual
funds came out negative for the year under the influence of
a natural inclination towards redemptions.
2008
Other deposits
* CERS: Comptes d’Epargne à Régime Spécial – special regime savings
accounts (passbook accounts, sustainable development savings
accounts, etc.) or similar plans (e.g. home savings plans)
17
Management Report
OFF-BALANCE SHEET SAVINGS DEPOSITS
(annual averages)
7.89
The upturn in new housing loans, begun in autumn 2007,
continued throughout 2008 thanks to the improved positioning
of our pricing schedules as competition became more
reasonable on the whole. Despite the process of gradually
building up margins again and integrating the higher cost of
access to liquidity, total disbursements of housing loans came
out at almost EUR 3 billion, representing a rise of 22.8% on
2007. One of the more positive impacts of this performance
was the consequent acquisition of a significant number of
new customers, with research showing this new clientele to
be of high quality.
9.82
Although the French real estate market does appear to
have slowed over the year, demand nevertheless persisted,
as evidenced by the unprecedented level of new housing
loans.
(in EUR billions)
24.19
26.85
28.51
4.97
+4.1%
4.86
25.35
-11.1%
+6.2%
+11.0%
-31.6%
+2.3%
3.40
4.67
+10.0%
+5.6%
7.60
6.91
+17.2%
5.07
+10.1%
+9.4%
2005
Other custody
5.54
2006
Life insurance
-1.8%
+0.9%
9.73
8.84
7.54
8.03
+4.1%
5.77
-26.4%
2007
Short-term mutual funds
4.25
2008
Medium- to longterm mutual funds
Assets under management in money market UCITS for
individual and professional customers rose by 14.2% in 2008.
This type of fund became attractive again as short rates took
an upward track over the majority of the year.
Owing to the financial crisis, dynamic short-term UCITS for
business and institutional customers were subject to major
redemptions beginning in mid 2007. This net outflow in AuM
now appears to have ceased. Subscriptions by business and
institutional customers to money market products rose by
125% over other investment vehicles in 2008. On the whole,
counting the redemptions carried out at end-2007, assets
under management for business and institutional customers
in short-term UCITS slid by 7.6% year-on-year.
Direct ownership of securities dropped by 26.4% on 2007 in
terms of AuM, dragged down sharply by index declines and
market volatility.
18
Healthy growth in new loans to individual
customers
Against this backdrop, Crédit du Nord continued to implement
a cautious and selective risk policy, setting rules for the required
level of customer contributions and reasonable debt ratios,
and by offering only fixed- or adjustable-rate loans limited to
terms of under 25 years.
NEW HOUSING LOANS
(in EUR millions)
+22.8%
-5.8%
-13.1%
2,913
2,530
2,383
2,927
2005
2006
2007
2008
Management Report
Individual customer overdrafts contracted by 0.7% on
average in 2008, reflecting the wait-and-see attitude adopted
by consumers and confirmed by the robustness of shortterm savings deposits.
NEW PERSONAL LOANS
(in EUR millions)
-8.5%
+4.3%
+8.6%
However, the use of revolving credit lines remained on an
uptrend, with growth picking up to an average of 4.9% in
2008 (+5.8% at end-2008) on the back of the overhauled
commercial offering completed two years ago.
Strong growth in business lending (1)
despite the severity of the crisis
691
750
782
715
2005
2006
2007
2008
Government measures designed to stimulate purchasing
power by unblocking employee savings, implemented in
early 2008, failed to offset the deterioration of the economic
crisis. On the whole, there was a mild slowdown in household
consumption, leading to an 8.5% drop in new personal
loans.
LOANS TO INDIVIDUAL CUSTOMERS
(annual averages)
New capital expenditure loans grew by 15.5% in 2008
(+18.9% including special financing arrangements disbursed
in May 2008), in line with previous positive trends. Given the
twofold objective of restoring profitability and keeping risks
under control, this performance can be attributed to strong
development in our professional and business customer
base. It can also be linked to business investments over
the first part of the year, despite the uncertainties already
surrounding the development of the economy.
BUSINESS LOANS - CAPEX
(INCLUDING PBE) (2)
(in EUR millions)
+18.9%
+14.1%
+6.9%
(in EUR billions)
9.57
10.79
11.54
+8.5%
+7.0%
+12.7%
12.51
0.32
0.32
0.33
0.32
1.44
1.65
1.60
1.50
+4.5%
+6.0%
+3.6%
+14.7%
+7.4%
+9.6%
7.81
2005
Housing loans
8.96
2006
Consumer loans
9.62
10.54
2007
2008
1,478
1,579
1,802
2,143
2005
2006
2007
2008
(1) including loans to business, professional and institutional customers.
(2) including special financing arrangements
Overdrafts
19
Management Report
LEASING ACTIVITY
OUTSTANDING BUSINESS LOANS
(annual averages)
(in EUR millions)
(in EUR billions)
+22,2%
+12,7 %
+10,5 %
7.89
8.44
+4.6%
+6.2%
-13.1%
2006
2007
2008
New leasing activity picked up 22.2% in 2008, though
competition remained as intense as ever. This can be attributed
to a solid strategic determination to develop business loans
in this format, which is more secure for the Bank.
The gain in short-term business loans came out at +10.8%,
confirming the trends seen in 2006 and 2007, thanks in
large part to the expansion of the professional and business
customer base.
20
+4.6%
717
+10.0%
2005
1.60
1.84
1.82
587
1.79
1.67
+1.0%
521
+17.3%
1.53
1.44
1.37
9.90
+12.0%
+4.7%
+7.0%
471
8.84
+10.6%
4.70
5.17
2005
2006
Medium and long-term loans
+12.6 %
5.72
2007
Commercial & cash loans
6.44
2008
Overdrafts and others
Change in total outstanding business loans, excluding oneoff carry of CDN papers: +10.6% (+7.6% in outstanding
short-term loans).
Management Report
Financial developments
The figures presented below are taken from the Group’s fully
consolidated financial statements.
The scope of consolidation did not materially evolve during
the course of 2008.
In order to provide complementary information on specific
accounting items, reference will be made to managerial
accounting analyses applicable to different scopes of
consolidation as explained in the accompanying text.
(in EUR millions)
(including change in PEL/CEL provision)
These analyses concern first and foremost Retail Banking,
which accounts for over 90% of Group NBI, excluding the
exceptional loss of EUR 72.2 million on asset disposals.
The figures shown were prepared under IFRS, including IAS
32 and 39 and IFRS 4.
31/12/2008
31/12/2007
% change
2008/2007
Net interest and similar
829.9
807.2
+2.8
Net fee income
714.0
790.3
-9.7
1,543.9
1,597.5
-3.4
NBI
After the write-back of the provision for future commitments
on PEL products in 2007 (+EUR 1.7 million in 2008 vs.
+EUR 6.6 million in 2007), NBI decreased by 3.4%.
Against a very difficult financial context, NBI was particularly
hard hit by the results generated by the Group’s asset
management company, which had to sell off assets to ensure
the liquidity of certain funds. The capital loss on the disposal
of these assets totaled EUR 72.2 million.
NET BANKING INCOME
(at December 31)
Consolidated Group scope (in EUR millions)
+5.4%
+9.8%
- 3.4%
At the same time, the Group had to record its financial liabilities
at fair value under IFRS as from H1 2008, then to change the
projected impairment based on market conditions, bringing
a positive impact of EUR 28.4 million to the 2008 financial
statements under IFRS.
Finally, note that the Group recorded a substantial capital gain
of EUR 36.0 million on the sale of Euronext/NYSE shares in
2007, and gained EUR 12.0 in income in shares and dividends
from the IPO of Visa Incorporation in the United States.
Restated for these non-recurring items, and for the change
in the provision on future commitments relating to home
savings products, the Group’s NBI held up relatively well
given the environment, posting growth of 1.2%. This result
was particularly affected by the sharp downturn in income
from financial fees and the sluggish margin on deposits.
1,381.2
1,516.0
1,597.5
1,543.9
2005
2006
2007
2008
21
Management Report
An analysis of the full scope of consolidation of the Group’s
banks is useful in gaining a better understanding of NBI and
the underlying trends in its different components.
The commercial margins on deposits and loans picked
up by 1.0%, i.e. +EUR 7.2 million. This trend was driven
by the 4.3% rise in the margin on loans (i.e. +EUR 11.4
million), with the margin on deposits having fallen by 1.0%
(i.e. EUR 4.2 million).
The margin on loans benefited from positive developments in
outstanding loans, due partially to a slight dip in the lending
margin. However, this trend is expected to turn around
in early 2009 owing to the process of restoring margins
to support new loans over the entire fiscal year.
After getting off to a strong start in 2008, the margin on
deposits began to slow in April due to the successive
interest rate hikes on “Livret A” passbook savings accounts
(50-bp increase to 3.50% on February 1, then another
50-bp increase to 4.0% on August 1). The interest rate on
regular passbook savings accounts was raised from 2.75%
to 3.25% on April 1 and was maintained at 3.25% through
the end of the year.
Customers took advantage of these increased returns to
boost special-regime savings deposits by 6.0%. This rise was
offset, however, by ongoing net outflows from home saving
plans and accounts which began in late 2005 (-11.9%).
Lastly, the decline in the margin on deposits can be attributed
to the slowdown in growth of sight deposit volumes (+3.2%
vs. +6.5% in 2007) for business and individual customers.
On the whole, net interest and similar income climbed
by 2.8%. Restated for exceptional income (capital gain of
EUR 36.0 million on the sale of Euronext/NYSE shares and
EUR 12.0 million from Visa Incorporation’s IPO), the recording
of financial liabilities at fair value (i.e. EUR 28.4 million), and
the change in the assessment of the provision on future
commitments relating to PEL/CEL home savings products,
net interest and similar income grew at a steady 3.0%
in 2008.
22
NET FEE INCOME
(at December 31)
608.5
713.4
790.3
+32.8%
+10.2%
+5.4%
345.8
2005
Service fees
-29.6%
270.8
384.5
348.9
262.7
- 9.7%
+10.8%
+17.2%
714.0
+11.3%
+9.2 %
364.5
405.8
443.2
2006
2007
2008
Financial fees
Given the highly depressed financial and market environment,
consolidated net fee income fell 9.7%.
Excluding losses on the sale of Etoile Gestion assets, income
from fees still remained on a slight negative trend of -0.5%.
Income from financial fees diminished by 29.6%. Excluding
losses on the sale of Etoile Gestion assets, income from
financial fees declined by 10.8%. The financial crisis and the
steep loss on the CAC 40 penalized fees on market orders,
management fees on UCITS, and investment fees on UCITS
and life insurance products, as the wait-and-see attitude
adopted by customers led to a downturn in production.
Income from service fees rose by 9.2%, driven by the
expansion of the customer base and robust sales of products
tailored to meet our customers’ banking requirements.
Management Report
(in EUR millions)
Personnel expenses
Taxes
Other expenses
Depreciation and amortization
TOTAL OPERATING EXPENSES
General operating expenses rose just 1.9% to EUR 1,031.5
million.
Offset against the streamlining of the Middle Office structure
launched in 2006, the rise in the headcount required to open
23 new branches over the year resulted in a slight Group
headcount increase of 0.4%.
Personnel expenses thus rose by only 1.3%, also helped
by the positive effects of trends in company liabilities and
lower performance-based compensation paid out through
profit-sharing schemes.
Taxes fell by 21.2% thanks to the positive resolution in 2008
of old disputes with the tax authorities, coming as it did in the
wake of a heavy tax year in 2007 due mainly to an exceptional
tax expense.
31/12/2008
31/12/2007
% change
2008/2007
(617.5)
(609.6)
+1.3
(29.0)
(36.8)
-21.2
(310.4)
(296.5)
+4.7
(74.6)
(69.0)
+8.1
(1,031.5)
(1,011.9)
+1.9
Other expenses rose by 4.7%. The creation of new branches
boosted rent and rental charges on property by a solid +6.0%.
Sub-contracting expenses rose by 6.1% and IT expenses by
19.3%.
The 8.1% increase in depreciation and amortization was linked
to ongoing investment efforts in recent years, particularly the
implementation of various IT projects, in accordance with the
initial timetables.
The deployment of IT projects in the investment program
generated expenses in line with 2007: EUR 28.7 million in
2008 vs. EUR 27.3 million in 2007, with the corresponding
amortization expense rising from EUR 22.5 million in 2007 to
EUR 26.7 million in 2008.
31/12/2008
31/12/2007
% change
2008/2007
Pro rata staff count in activity – Group
7,725
7,697
+0.4
Average net staff count present – Group (1)
8,775
8,539
+2.8
(1) Including apprenticeship agreements.
23
Management Report
OPERATING EXPENSES
(at December 31)
GROSS OPERATING INCOME
(at December 31)
+1.9%
+3.7%
+5.4%
- 12.5%
+8.4%
+18.6%
925.7
975.9
1,011.9
1,031.5
455.5
540.1
585.6
512.4
2005
2006
2007
2008
2005
2006
2007
2008
The decline in NBI led to a 12.5% drop in GOI, which totaled
EUR 512.4 million.
Excluding exceptional items (loss of EUR 72.2 million on the
sale of Etoile Gestion’s assets, fair-value recording of financial
assets at EUR 28.4 million, impact of re-assessment of the
provision on future commitments relating to PEL/CEL home
savings products, and exceptional income (1) ), GOI was nearly
stable compared to 2007 (-0.1%).
(in EUR millions)
NBI
General operating expenses
GOI
31/12/2008
31/12/2007
% change
2008/2007
1,543.9
1,597.5
-3.4
(1,031.5)
(1,011.9)
+1.9
512.4
585.6
-12.5
(1) EUR 36.0 million on Euronext/NYSE in 2007 and EUR 12.0 million on Visa Incorporation in 2008
24
Management Report
The cost-to-income ratio came out at 66.8% (up 3.5 points
on 2007), due to the negative squeeze effect between NBI
and management fees.
Excluding exceptional items (mentioned above), operating
expenses/NBI increased to 65.5% vs. 65.1% in 2007.
COST-TO-INCOME RATIO
(at December 31)
Consolidated Group scope (as a %)
67,0
64,4
63,3
66,8
2005
2006
2007
2008
Cost of risk
Crédit du Nord Group’s consolidated cost of risk (1) totaled
EUR 132.0 million vs. EUR 73.5 million in 2007. Divided by
total lending, cost of risk came out at 0.51% (2), representing
a significant gain on fiscal year 2007.
(in EUR millions)
Cost of risk
Outstanding loans
Cost of risk/outstanding loans
Despite the better-equipped and ever-proactive management
of the Group’s risks, this negative development reflects the
impact of the very intense deterioration in the economy
in H2 on our customers.
31/12/2008
31/12/2007
31/12/2006
(132.0)
(73.5)
(67.6)
25,761.4
24,060.1
21,629.7
0.51%
0.31%
0.31%
(1) 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
the delay in recuperating cash flows on doubtful loans (principal and interest).
(2) 0.47%, excluding provisions on ROSKILDE BANK subordinated securities; Roskilde Bank was acquired during the redemption of certain Etoile Gestion
assets, for EUR 10.1 million.
25
Management Report
Crédit du Nord Group’s loan business predominantly targets
French customers, whose economic environment deteriorated
sharply in the second half. In France, 2008 was highlighted by
a major rise in the number of collective proceedings that were
both preventative (ad hoc mandates, conciliations, safeguard
procedures) and curative (restructuring and liquidation under
the supervision of the court) in nature. Against this very
different backdrop compared to previous fiscal years, the
ratio of doubtful and disputed loans (gross) to total loans
stood at 5.3%.
k For several half-years, doubtful loans have been subject
to detection and treatment procedures in line with
Basel II, causing an increase in doubtful loans due to
earlier reclassifications (thus often lower-risk and lessprovisioned).
k The relative decline in outstanding business loans, which
are traditionally less associated with guarantees (and
therefore more highly-provisioned), and, conversely, the
rise in the relative share of less-provisioned outstanding
professional loans (because associated with broader
guarantees).
The decrease in the provisioning ratio to 48.1% at end-2008
was not the result of a change in the Group’s provisioning
policy. Rather, there were two reasons for this change:
(in EUR millions)
31/12/2008
31/12/2007
31/12/2006
1,364.3
1,187.4
1,120.8
Doubtful and disputed loans (gross)
(656.6)
(602.4)
(603.9)
Gross doubtful and disputed loans/gross
outstanding loans
5.3%
4.9%
5.2%
Net doubtful and disputed loans/net
outstanding loans
2.7%
2.4%
2.3%
48.1%
50.7%
53.9%
31/12/2008
31/12/2007
% change
2008/2007
512.4
585.6
-12.5
(132.0)
(73.5)
+79.6
380.4
512.1
-25.7
2.1
1.8
16.7
Provisioning ratio for doubtful
and disputed loans (includes lease finance)
Operating income before corporation tax
(in EUR millions)
GOI
Cost of risk
OPERATING INCOME
Net income from companies accounted for by the
equity method
Gains or losses on fixed assets
OPERATING INCOME BEFORE CORPORATION TAX
26
-
1.3
-
382.5
515.2
-25.7
Management Report
After accounting for the cost of risk, Crédit du Nord Group’s
operating income reached EUR 380.4 million, down 25.7%
on 2007. Excluding the above-mentioned exceptional items,
the decline came out at -12.6%.
Operating income before the corporation tax amounted
to EUR 382.5 million, down 25.7% on 2007 (-12.7%
adjusted).
OPERATING INCOME
(at December 31)
RBE 455.5
540.1
585.6
+20.2%
+8.2%
-67.6
-25.7%
512.1
472.5
393.0
-62.5
+8.4%
512.4
380.4
+8.7%
-73.5
+79.6 %
-132.0
2005
Cost of risk
2006
2007
2008
Operating income
Net income
(in EUR millions)
OPERATING INCOME BEFORE THE CORPORATION TAX
Corporation tax
Minority interests
CONSOLIDATED NET INCOME AFTER TAXES
31/12/2008
31/12/2007
% change
2008/2007
382.5
515.2
-25.7
(123.3)
(165.8)
-25.6
6.5
(9.2)
-29.3
252.7
340.2
-25.7
Finally, consolidated net income after taxes came out at 252.7 million, a decrease of 25.7% compared to 2007.
27
Management Report
(in EUR millions)
Shareholders’ equity at year-end
(1)
of which Group share
Average shareholders’ equity (1)
BIS-weighted credit risk
(2)
Consolidated solvency ratio (2)
of which Tier One (2)
Movements which affected Group shareholders’ equity in
2008 included the incorporation of consolidated net income
after distribution of dividends into reserves.
Solvency ratios are presented for information purposes only,
as Crédit du Nord Group is not bound directly by regulatory
solvency ratio requirements due to its ownership structure.
The presentation of these ratios does, however, make it
possible to calculate the Group’s normative ROE on the
basis of a Tier One capital ratio equal to 6% of risk-weighted
assets.
31/12/2008
31/12/2007
31/12/2006
1,912.8
1,890.2
1,751.5
1,862.4
1,842.5
1,709.0
1,901.5
1,820.9
1,641.2
22,555.7
20,740.5
18,800.2
1,889.0
1,873.2
1,907.6
8.37%
9.03%
10.15%
7.01%
7.11%
7.14%
Consolidated profitability, calculated under Basel I, excluding
the above-mentioned exceptional items, was 19.5% in 2008,
vs. 24.2% in 2007 (excluding the capital gain on the sale of
Euronext/NYSE shares and the impact of the re-assessment
of the provision on future commitments relating to PEL/CEL
home savings products).
After-tax return on book equity came in at 14.9% (2) for a Tier
One ratio of 7.0% (2), compared with an ROE of 21.4% (2) and
a Tier One ratio of 7.1% (2) in 2007.
Restated for the above-mentioned exceptional items, return
on book equity stood at 16.2% (2) for a Tier One ratio of 7.2% (2),
versus 19.3% for a Tier One ratio of 6.9% in 2007.
Financial assets
Note that in 2007 the Group had to ensure the liquidity of
some of Etoile Gestion’s dynamic money market funds,
notably by redeeming certain assets, which generated a gain
of EUR 715 million in Group assets at December 31, 2007.
Note that there are no derivative credit products booked on
Crédit du Nord’s balance sheet.
In light of the asset write-downs carried out in 2008, Etoile
Gestion’s portfolio of securities stood at EUR 1,109.7 million
at December 31, 2008.
However, an OBSAAR reclassification (OBSAAR = bonds
with redeemable and/or acquisition warrants) of available-forsale securities as held-to-maturity securities was carried out.
The OBSAARs totaled EUR 56.9 million on the asset side of
the balance sheet at December 31, 2008.
(1) Includes income in progress.
(2) Includes income in progress, net of forecasted dividend payout.
28
Furthermore, Crédit du Nord did not make use of the option
of reclassifying securities under IFRS in 2008.
Management Report
Capital adequacy and solvency ratio
In accordance with the regulations of the French Banking
Commission, overall prudential capital requirements are
calculated at the consolidated level, by Société Générale,
which had exclusive control of Crédit du Nord at December
31, 2008. Consequently, only Société Générale has to
observe these requirements.
For information purposes only, Crédit du Nord Group had
sufficient prudential capital to cover 104.7% of its requirement
at end-2008 (vs. 112.9% at end-2007). This represents
specific requirements for credit risk, market risk and large
exposure.
At December 31 2008, Crédit du Nord Group’s total capital requirements broke down as follows:
(in EUR millions)
31/12/2008
For credit risks
1,797.1
For market risks
7.4
k interest rate risk
4.6
k foreign exchange risk
k settlement/counterparty risk
2.8
k ownership risk
-
For large exposure
-
Total capital requirements
1,804.5
Prudential capital
1,889.0
k Core Capital
1,580.9
k Supplementary Capital
Capital adequacy ratio
The increase in the Group’s capital requirement (EUR 1,804.5
million vs. EUR 1,659.2 million at end 2007) was derived
from credit risks (requirement of EUR 1,797.1 million vs. EUR
1,651.0 million at end 2007). Its other requirements were
significantly lower and any changes therein have little impact
on the total requirement.
308.1
104.7%
The Group’s capital adequacy ratio, i.e. the ratio of prudential
capital (EUR 1,889.0 million) to risk-weighted assets (EUR
22,555.7 million) stood at 8.4%, and its Tier One ratio at 7.0%
(compared with 9.0% and 7.1% respectively at end-2007).
29
Management Report
Outlook
Penalized by the crisis that has severely shaken the global
economy for several months, Crédit du Nord Group has
nevertheless succeeded in generating strong commercial
performances which testify to the resilience of its business
model, thanks in large part to the balanced distribution of its
portfolio of activities between the individual, professional and
business customer markets.
The Group’s 2008 results were impacted by those of its asset
management subsidiary, which was forced to sell off assets
to ensure the liquidity of certain funds. The net outflow trend
ceased a number of months ago, and no other disposals of
assets became necessary.
Excluding non-recurring items, the Group in fact posted
a slight increase in NBI despite the significant decline in
income from financial fees, which were sharply impacted by
the financial crisis and the rise in interest rates on regulated
savings accounts that weighed on the margin on deposits.
2009 got off to a very sluggish start, with the prospect of a
deep recession in developed countries and a major slowdown
in growth in emerging countries. The fiscal stimulus packages
launched in the United States, Asia and Europe should only
gradually have their desired effect. In the very short term, the
world’s economies should continue to experience a great
deal of turbulence, with temporarily negative inflation, very
low interest rates and depressed equity markets. Economists
do not expect a recovery before late 2009 or early 2010.
In spite of this environment, Crédit du Nord Group is
determined to maintain its commercial development policy
across all markets, in line with its full service local banking
model. This momentum should help it through the crisis
and will continue to underpin the structural increase in its
results.
30
To this end, 23 branches were opened in 2008 in highpotential areas, in line with the Group’s selective policy for
expanding its geographic coverage.
Over the past four years, over 140 branches have been
created for individual and professional customers, thus
providing a real growth driver for Crédit du Nord Group. The
opening of another fifteen or so additional branches is already
planned for 2009. This type of momentum guarantees the
Group’s medium-term profitability.
In addition to expanding its network, Crédit du Nord will be
able to ensure the development of its NBI through the growth
in its savings deposits, with the launch of the Livret A passbook
savings account (the first few weeks of the product’s sales
have proven promising), and through life insurance products
(net new inflows should be less hurt by competition from
passbook accounts with interest rates being so low). From a
lending standpoint, growth in outstanding loans to individual,
professional and business customers should be driven by
robust new loan issuing in recent months. This growth is
not restricted by Crédit du Nord’s financing situation, which
remains balanced.
Furthermore, efforts to streamline processes will be stepped
up in order to further improve management of operating
expenses, which are expected to continue rising, but at a
slower pace due to the maturity of the amortization expense
on the IT projects and the slowdown in the branch opening
program.
Finally, risk management will continue to be stressed during
the economic recession, thus facilitating the deployment of a
wide range of risk management tools by the Group.
Management Report
Branches opened in 2008
Étaples
Cassel
Paris Pyrénées
Paris Rennes (2), Paris Malesherbes (2)
A
Colombes
Montigny-le-Bretonneux
Fontainebleau
B
Pithiviers (1)
2
C
D
Sens
Lorient
Chateauneuf-sur-Loire (1)
Vannes
Tours les Halles (2)
Challans
6
Marsac-sur-l'Isle
4
5
3
Brive
Saint-Jeande Maurienne
Montélimar
La Teste de Buch (1)
Dax
E
1
Aurillac
Montauban Cladel
Regions
(1) Formerly Fortis
(2) Formerly Boursorama
A
B
C
D
E
Les Provinces du Nord / Nord Métropole
Picardie
Normandie / Haute Bretagne
Île de France
Provence-Alpes-Côte d’Azur
Subsidiaries
1
2
3
4
5
6
Banque Courtois
Banque Kolb
Banque Laydernier
Banque Nuger
Banque Rhône-Alpes
Banque Tarneaud
31
Management Report
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 was situated between 1.5% and 1.6% at December 31, 2008, it occupies particularly stronger market shares
in those areas in which it has been long established, notably north-western France, the Limousin region (Banque Tarneaud), the
Auvergne region (Banque Nuger) and in the Midi-Pyrénées region (Banque Courtois).
Market share in loans (all customer segments combined)
of Crédit du Nord Group at December 31, 2008
Domestic market share: 1.6%
Market share in deposits (all customer
segments combined) of Crédit du Nord Group
at December 31, 2008
Domestic market share: 1.5%
6.5%
6.4%
6.1%
4.9%
4.8%
1.5%
1.4%
1.1%
0.9%
4.2%
2.4%
3.8%
3.7%
0.9%
1.1%
1.2%
1.1%
0.9%
0.3
%
0.7%
0.8%
0.9%
1.0%
0.4%
0.5%
0.3%
0.2%
0.2
%
0.3%
1.2%
3.5%
2.5%
2.4%
2.1%
1.8%
1.7%
1.3%
1.4%
1.6% to 3%
1.9%
1.8%
> 3%
Source: Local statistics on deposits/loans recorded by the Banque de France
32
2.2%
1.6%
1.2%
2.8%
2.9%
0.1% to 1.5%
0.1%
0.8%
4.9%
5.0%
0
0.6%
0.3%
2.0%
0
0.1% to 1.5%
1.0%
1.6% to 3%
1.5%
> 3%
REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS ON THE PREPARATION AND
ORGANISATION OF THE BOARD’S ACTIVITIES AND ON INTERNAL CONTROL PROCEDURES,
DRAWN UP FOR FISCAL YEAR 2008 IN ACCORDANCE WITH ARTICLE L.225-37 OF THE FRENCH
COMMERCIAL CODE.
PREPARATION AND ORGANISATION
OF THE BOARDIS ACTIVITIES
The Board of Directors typically 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
Executive Committee. During the preparatory meeting, the
following points are reviewed:
k items that must be examined by the Board pursuant to
the law;
k 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.).
Directors are convened no less than two weeks before
the planned date of the Board meeting. Their notification
includes:
k the agenda of the meeting;
k the draft minutes of the preceding Board meeting.
In addition to the Directors the following also participate in
Board meetings:
k the Executive Vice Chairmen and the Deputy Chief
Executive Officer;
k the other members of the Executive Committee concerned
by items on the agenda;
k the Statutory Auditors;
k the Corporate Secretary in his capacity as Secretary of
the Board;
k the Secretary of the Central Workers’ Council.
The information pack sent to each Director includes:
k the reports prescribed by law: Management Report,
Chairman’s Report on the Board’s activities and on internal
control procedures, etc.;
k draft resolutions for shareholders’ meetings;
k 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:
k 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;
k to the Chairman and Statutory Auditors, by virtue of current
regulations, a list of all significant agreements entered into
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 from two to three hours.
Items are presented by the Chairman, by a member of the
General Management, and in particular by the Deputy Chief
Executive Officer in his capacity as Chief Financial Officer,
or by the Project Manager where the item in question is of
a technical nature. A deliberation process ensues in which
views and opinions are expressed, at the close of which the
Board is asked to vote, where necessary.
A draft of the minutes of the meeting is prepared by the
Secretary of the Board, who submits the same to the
Chairman and members of the Executive Committee present
at the meeting. The draft minutes are then submitted for the
approval of the Board at the start of the following meeting.
The are no internal rules for the Board.
General Meetings of Shareholders are convened in
accordance with all currently applicable laws and regulations.
All shareholders receive a meeting notice.
33
Limits to the powers of the Chief Executive
Officer
The Chairman of the Board of Directors is also Chief Executive
Officer.
The term of office and remuneration of the Chief Executive
Officer are determined by the Board of Directors.
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.
Based on the proposal of the Chairman and Chief Executive
Officer, two Executive Vice Chairmen were appointed at the
last Board meeting of 2008, effective November 1, 2008.
The scope and term of the powers granted to the Executive
Vice Chairmen, as well as their remuneration, were set by
the Board of Directors on the proposal of the Chairman and
Chief Executive Officer.
Both Executive Vice Chairmen have the same powers as
the Chairman and Chief Executive Officer in respect of third
parties.
The company has a Special Compensation Committee
consisting of two Directors, which makes proposals to the
Board of Directors.
The compensation of the Chairman and Chief Executive
Officer and the Executive Vice Chairmen is established by the
Board of Directors. Said compensation is comprised of a fixed
component and a performance-based component linked to
the company’s results. Detailed information is provided in
the section entitled “Information on the Corporate Officers”
of the annual report.
INTERNAL CONTROL PROCEDURES
This report discusses the internal control procedures that
apply to all entities within Crédit du Nord Group. The various
units involved in internal control helped to prepare those parts
of the report that relate specifically to their scope.
The activities of Crédit du Nord Group are subject to a secure
control framework, in that they must comply with both
banking regulations and the systems and procedures of its
majority shareholder (I).
As a network bank with strong regional roots and a customerbase essentially comprised of individuals and SMEs, Crédit
du Nord and its subsidiaries, like all banking institutions, are
exposed to risks, the most significant of which is counterparty
risk (II).
34
However, due to its chosen business mix, Crédit du Nord
Group has limited exposure to risks related to international
and real estate activities.
Since January 2006, internal control at Crédit du Nord Group
has been based on a system that separates permanent and
periodic controls (III).
As regards accounting and financial management, a common
information system is shared by virtually all Group companies
and in particular the banking subsidiaries. This information
system provides subsidiaries with access to all Crédit du Nord
rules and procedures and facilitates their implementation,
while allowing Crédit du Nord to centralise all data required
to monitor the results and activities of Group companies in
real time (IV).
I. A SECURE FRAMEWORK
1- Filings with the regulatory authorities
In accordance with articles 42 and 43 of amended CRBF
(French Banking and Financial Regulation Committee)
Regulation No. 97-02, two reports are prepared and
published annually:
k one outlines the conditions under which internal control
is performed;
k the other pertains to the measurement and monitoring
of risk.
These reports are submitted to the Board, the Statutory
Auditors and the majority shareholder for consolidation
before being submitted to the General Secretariat of the
French 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 Société Générale Group.
Each year, the Group’s RSCIs (Heads of Investment Service
Compliance) submit a general report on compliance with
investment service provider requirements and a special
report addressing a specific topic to the AMF (French market
authority). These reports are also submitted to the decisionmaking body of each entity.
In 2008, the year in which the Markets in Financial Instruments
Directive (MiFID) was implemented, the general report focused
exclusively on compliance with new MiFID requirements,
and the special report covered the implementation of
professional obligations relating to the new Investment
Advisory department.
2- Control procedures of the majority shareholder
As part of Société Générale Group since 1997, Crédit du
Nord also benefits from the control system established by
its majority shareholder, as described in the latter’s report on
internal control.
The majority shareholder’s internal control system focuses
primarily on risk exposure, the accuracy of financial and
management accounting data, and the quality of information
systems.
Systematic controls are performed by the majority shareholder
as part of a programme of regular visits to Group entities aimed
at ensuring that the defined standards are being met.
As the majority shareholder is itself a banking establishment,
continuous comparisons between the two networks facilitates
the analytical review of accounts and risks.
II. MAIN BANKING RISKS
1- Counterparty risk
The credit policy of Crédit du Nord Group is based on a set
of rules and procedures concerning lending, delegation of
responsibilities, risk monitoring, rating and classification of
risk, and the identification of impaired risks.
This policy is defined by the Central Risk Division, which
reports directly to the Chairman and Chief Executive Officer.
The identification of counterparty risk impairment is the
responsibility of all personnel in charge of managing,
monitoring and controlling risks, i.e. the sales function, risk
management function, risk control department and periodic
control department.
Risk management is organised on two levels:
The Central Risk Division (DCR), which reports directly to the
Chairman and Chief Executive Officer of Crédit du Nord and
reports functionally to the Risk Division of Société Générale
Group. This division assists with the definition of credit
policies, oversees their implementation and participates in
the credit approval process.
The DCR is responsible for identifying and classifying risks,
and also participates in the risk control process, determining
the proper provisioning for doubtful loans and collections of
doubtful loans.
The Regional and Subsidiary Risk Departments,
which report directly to the Regional Managers or Subsidiary
Chairmen and which report in functional terms to Crédit
du Nord’s Central Risk Division, are responsible for
implementing the Group’s credit policies and managing risks
at their level. Their main areas of activity are:
k the credit approval process;
k monitoring and classification of risks;
k recovery of doubtful and disputed loans.
Specialised committees and systems
In order to monitor and manage risk, Crédit du Nord Group
has set up specialised risk committees and structures at both
a Group and a regional/subsidiary level.
k a Risk Committee, chaired by the Chairman and Chief
Executive Officer, that meets once a month. A member of
the Risk Division of the majority shareholder also sits on
this committee;
k a Regional Risk Strategy Committee that meets once a
year in each region and at each subsidiary. This committee
is chaired by the Chairman and Chief Executive Officer of
Crédit du Nord;
k a review of impaired risks is performed every six months by
the Control and Provisioning Division of the DCR.
On the Group’s main customer markets, the risk monitoring
and control procedures have been enhanced by risk modelling
systems developed while preparing to implement the new
capital adequacy ratio.
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
risks, provisioning for risks and overall risk analysis.
Crédit du Nord also prepares a quarterly report on major
regulatory risks for its majority shareholder, which is
then consolidated and submitted to the French Banking
Commission.
2 - Interest rate, exchange rate and liquidity risk
(excluding market activities)
With regard to global risk management, Crédit du Nord
Group distinguishes the management of structural balance
sheet risks (Asset and Liability Management or ALM) from the
management of risks related to trading activities.
2 - 1 Asset and liability management (ALM)
Reporting directly to the Finance Division of Crédit du Nord, the
ALM unit comes under the authority of the Head of the Financial
Management Division.
35
It is responsible for monitoring and analysing Crédit du Nord
Group’s exposure to maturity mismatch, interest rate and
liquidity risks.
All decisions concerning the management of any interest rate
and/or liquidity mismatch positions generated by the Group’s
client-driven activities are made by the ALM Committee,
which meets on a monthly basis under the chairmanship of
the Chairman and Chief Executive Officer. A member of the
Finance Division of the majority shareholder also sits on this
committee.
Liquidity risk
The ALM unit monitors the outstandings and regulatory ratios
of Crédit du Nord and its subsidiaries. Short-term liquidity
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).
Changes in the structure of the balance sheet are managed by
the ALM unit and monitored by the ALM Committee, which in
turn determines the refinancing requirements of the Group’s
entities. A quarterly report on liquidity risk is submitted to the
majority shareholder.
Interest rate risk
Note that the Group is equipped with the ALM application,
"Almonde". "Almonde" is used to produce the Weekly Cash
Flow Committee’s reports, the ALM Committee indicators and
the quarterly shareholders’ report. The hedge effectiveness
tests required by the new international financial reporting
standards (IFRS) are performed using market valuations
calculated by Evolan (software used by the Trading Room).
"Evolan" supplies a reliable restatement of positions, as
asset-liability mismatches are now exhaustive and calculated
as a monthly average.
2 - 2 Trading activity
Transactions involving derivatives linked to customer
transactions are, generally, hedged by Crédit du Nord
shareholders Société Générale and Dexia, since Crédit
du Nord holds only limited proprietary positions in these
products.
The control of limits assigned to these trading activities by
the General Management are monitored by the Treasury
and Foreign Exchange Department in accordance with the
standards adopted by the majority shareholder.
All assets and liabilities of Group banks, excluding those
related to trading activities, are subject to an identical set of
rules governing interest rate risk management.
The results of these activities are checked by the appropriate
audit teams (see «Market risks» below).
The ALM Committee delegates the management of shortterm interest rate risk to the Weekly Cash Flow Committee.
This risk is managed in large part by the following two
indicators:
3 - Market risks linked to client driven
transactions
k the daily short term interest rate, which is subject to
limits;
Crédit du Nord consistently matches customer orders, mainly
through its shareholders Société Générale and Dexia, thus
significantly reducing its exposure to market and counterparty
risks.
k exposure to short rates incurred by all balance sheet
transactions, which is also subject to a limit.
A specialised unit from the Treasury and Foreign Exchange
Department monitors market and counterparty risks.
The Weekly Cash Flow Committee makes sure these limits
are observed.
These risks are calculated on a daily basis and compared with
the limits. Any overruns are reported to the specialist unit in
the Treasury and Foreign Exchange Department.
The overall interest rate risk of Crédit du Nord Group is
subject to exposure limits in euros and local currencies. The
observance of these limits is verified within the framework of
reports to the majority shareholder.
Crédit du Nord Group operates a consistent hedging policy
against ALM risks and implements the appropriate hedges
to reduce the exposure of Group entities to interest rate
movements.
The hedging activities of the ALM unit cover all Crédit du
Nord Group entities.
36
Each Group entity is monitored individually and hedged on
an ad hoc basis.
A report on limit controls is submitted to the majority
shareholder once every two weeks. 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 also receives a quarterly report on changes in limits
from the Treasury and Foreign Exchange Department.
In addition, a weekly review of any limit overruns is submitted
to the Head of the Central Risk Division.
4 - 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 the capital
adequacy ratio.
In accordance with the recommendations of the Basel
Committee, and in consultation with the majority shareholder,
operational risks have been newly classified. Moreover, all
losses in excess of an amount set at EUR 10,000 for Crédit
du Nord Group are systematically reviewed.
Major projects are monitored by the Steering Committee. The
Chairman and Chief Executive Officer sits on the Committee
for the most significant projects.
The Operational Risk Division, set up in July 2004 within
the Central Risk Division, manages and coordinates all
Operational Risk and Business Continuity Plan systems
implemented within the Group.
The division uses a network of Operational Risk
Correspondents working in the different head office entities,
at the subsidiaries and throughout the operating network.
An Operational Risk Committee, comprising members
of the General Management, the Head of the Legal Affairs
and Controls Division (DAJDC), the Head of the Central Risk
Division, the Head of Information Systems, Projects and
Banking Operations, and the Head of Operational Risks,
meets three times a year.
This committee reviews operational losses and the mapping of
operational risks, and also assesses the progress of Business
Continuity Plans and the Crisis Management system.
Furthermore, the Head of Operational Risks is a member
of the Compliance Committee and the Internal Control
Coordination Committee (CCCI) of Credit du Nord.
An Operational Risk Review Meeting, with the participation
of the Head of Information System Security, the Head of
Operational Risks and the Heads of Internal Control, 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 addition, an IT Security Committee, chaired by the Head
of Information System Security, meets three times a year.
A Crisis Plan ensures that a Crisis Unit consisting of the main
members of the General Management can be assembled
at any time within a dedicated Command Centre. This unit
can, if necessary, request the presence of any executives,
managers and experts directly involved 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. This plan is in addition to the continuity procedures
already in place throughout the network.
5 - Non-compliance risk
In accordance with the rules applicable to credit institutions,
special procedures were developed to address noncompliance risk, defined by the consequences (penalties,
financial losses, damaged reputation) liable to result from
failure to comply with regulations governing banking and
financial activities.
At Crédit du Nord, the Corporate Secretary is Head of
Compliance; at its subsidiaries, the Head of the executive
body fulfils this role.
Crédit du Nord’s Head of Compliance reports to the
executive body where necessary, and provides a link with
the Compliance Committee of Société Générale Group, on
which he sits.
Crédit du Nord’s Compliance Committee has the following
duties:
k ensuring the effectiveness and consistency of the structure
and procedures relating to compliance;
k identifying new risks in this area;
k developing quantitative and qualitative indicators needed
to monitor anomalies;
k monitoring major anomalies and assessing the
effectiveness of corrective measures.
Crédit du Nord Group’s Management Committee, on which
the heads of the main subsidiaries sit, periodically reviews
progress on compliance issues.
Before being launched, each new product or significant
modification to an existing product is reviewed to make sure
the risks are properly identified and addressed. A written
opinion is then prepared by the Head of Compliance.
Management and the internal control teams are responsible
for controlling compliance.
The Heads of Compliance ensure that all employees
have access to the directives governing compliance with
regulations. They also see to it that the proper compliance
training initiatives are in place.
Internal guidelines stipulate the rules which apply to
outsourced banking and financial services.
37
III. ORGANISATION OF INTERNAL
CONTROL
Internal control of compliance, security and approval of
executed transactions, as well as observation of other due
diligence procedures linked to the monitoring of all types of
risks resulting from the transactions carried out by Crédit
du Nord Group, is based on a structure that distinguishes
between Permanent and Periodic controls.
In order to improve the consistency and effectiveness of
the control system, a Division of Legal Affairs and Controls
(DAJDC) was created in 2007. This division is headed by a
member of the Executive Committee.
It is responsible for Permanent Controls, Periodic Controls,
Compliance, Investment Service Compliance (RCSI), Ethics,
Anti-Money Laundering, Legal Affairs and Disputes.
An Internal Control Coordination Committee (CCCI) was
created in October 2008. It meets twice a year, under the
authority of the Chairman and Chief Executive Officer, and is
comprised of the members of the Executive Committee, the
Heads of Periodic Control, Permanent Control, Compliance,
Operational Risks, Information System Security, Ethics, RSCI
and Anti-Money Laundering.
1 - Permanent Control System
The head of each entity or department must carry out a
Level One permanent control of transactions carried out
under his responsibility. Operating branches must adhere
to a predetermined plan (detailing frequency and risks
to be controlled), formalise and report on certain controls
performed. Specialist supervisory staff also assist branches
in the day-to-day monitoring of accounts.
A Level Two permanent control is conducted by dedicated
personnel who report directly to the relevant Regional
Manager, Subsidiary Manager or Functional Division, and
report functionally to the Head of Permanent Control of Crédit
du Nord.
The scheduling and details of these controls are determined
by the Head of Permanent Control, in conjunction with the
Central Risk Division with respect to counterparty risk.
The Head of Permanent Control reports on his activities to
the General Management of Crédit du Nord.
38
1-1
Regional and subsidiary Level One and Two
permanent administrative and accounting
controls
The Line Management Control Manual defines day-to-day
security requirements covering, inter alia, reception desks,
the opening of mail and filing of documents, as well as a
limited number of controls that require formalisation at the
supervisory level (recognition of securities in branches,
sensitive procedures such as anti-money laundering, MiFID
compliance, etc.). These controls may be delegated on
the condition that each delegation of power is subject to
supervisory control.
Level Two controls are performed by dedicated personnel
who report directly to the Regional Manager or to the
Chairmen of the subsidiaries. These controls are performed
using specific «control forms» prepared with the Head of
Permanent Control, and according to a pre defined plan
which specifies the frequency of controls based on the
degree of risk that each procedure or transaction represents.
Level Two control teams consisted of 68 staff members at
end-December 2008.
Whenever an on-site control of a procedure is performed,
the procedure is rated for its degree of compliance with
applicable rules, using a software application. This allows the
Head of Permanent Control to map procedural compliance
at both a local and national level.
Following each of these assignments, the Periodic Control
department evaluates the control structures for the regions
in which the audited branches are based.
1- 2
Level One and Two permanent risk controls of
regions and banking subsidiaries
Level One permanent controls are carried out at the regional
and subsidiary level by the sales management and by the
Risk Department of the region or subsidiary in question.
In accordance with the Line Management Control Manual,
the Branch or Business Centre Manager is responsible for
overseeing compliance with delegated limits and the validity
of loan decisions taken by subordinate staff to whom the
limits are assigned (customer advisers, etc.), as well as for
controlling any credit limit overruns at the branch or business
centre. These controls are performed monthly, are formalised
and may not be delegated.
Group Managers also intervene:
k in their capacity as line managers, for which they receive
the following reports:
1-3
Central Risk Control, under the DCR’s Control
and Provisioning Division, performs
the following duties:
– reports on the delegated credit approval limits of all
branch managers within their group as well as all
completed control forms;
k ensuring that the regions and subsidiaries apply the risk
management system defined by the Central Risk Division,
as defined in the Credit Policy Manual;
– Level Two on-site audit reports sent for information
purposes. They are also responsible for assisting
branches in preparing a response to the abovementioned reports, and for supervising the
implementation of the Auditor’s recommendations.
k controlling compliance with applicable rating rules;
k in their capacity as decision-makers, group managers
prepare monthly decision reports which are addressed to:
– Risk Controllers, where they make use of their personal
credit approval limits;
–
the regional or subsidiary Risk Managers within the
reporting framework of the Monthly Risk Committee
meeting, where they delegate the decision-making
process.
Regional or subsidiary Risk Divisions are responsible for
supervising limit overruns and the proper classification
of risks. They primarily ensure the appropriateness of
counterparty classification. They may decide to classify loans
as “performing loans under watch” or to reclassify them as
“doubtful” in the event loans are renewed, loans requests are
made in the interim or overruns are identified.
Level Two controls are performed by regional or subsidiary
Risk Controllers, as well as Central Risk Control. The Level
Two control unit consisted of 28 staff members at endDecember 2008.
The role of regional or subsidiary Risk Controllers is to
continuously ensure that loans classified as «performing
loans» merit their classification. They examine and monitor
“performing loans under watch” and “doubtful loans” for the
purpose of reclassifying them if necessary. They oversee the
proper application of rules relating to ratings.
The majority of their work is carried out with the help of
computer applications and the monthly delegated limit reports.
These controls can be performed on site or remotely.
k continuously overseeing counterparty risks remotely via
the centralised monitoring of limit overruns and deferred
settlement market (SRD) margin calls;
k performing on-site audits;
k conducting a quarterly analysis of changes in impaired
risks, with particular attention given to risks linked to
“performing loans under watch» and «doubtful loans».
Annual on-site audits conducted by the Control and
Provisioning Division include:
k audits of all loans approved by Regional Managers,
Chairmen of subsidiaries and/or regional or subsidiary
Risk Managers. Of these loans, a sample of 20 to 40
(maximum), with an emphasis on business loans, is
taken and examined for the appropriateness of the credit
decisions, with an effort to avoid duplicating any controls
performed by the regions or subsidiaries;
k the entity’s risk monitoring system established by the Risk
Department;
k the audit of the appropriateness of risk classifications,
particularly in respect of loans classified as «performing
loans under watch» or «doubtful loans», and of their
management (Branch, Out-of-Court Collection, Special
Regional Affairs, Special Head Office Affairs).
Moreover, the analysis of changes in risks and, more
particularly, in impaired risks linked to “performing loans
under watch”, “doubtful loans”, “non-performing loans” and
“disputed loans” throughout Crédit du Nord Group is used to
compile a summary report by region, subsidiary and market.
Monitoring of these changes and in the associated level of
provisioning is performed by Central Risk Control, mainly
during the half-yearly reviews of impaired risks.
During the course of on-site controls, Risk Controllers use
sampling tests to verify:
k the quality of branch risks;
k the quality of risk management performed by operational
staff, with special attention given to monitoring procedures
and compliance with Level One control requirements.
39
1-4
Level One and Two controls of functional
divisions and specialised subsidiaries
Certain functional divisions, including Financial Affairs (DAF),
Finance, Banking Operations, Wealth and Asset Management
(DPGA, which mainly oversees discretionary private banking),
and Information Systems and Projects, have their own Level
Two Controllers who report directly to the Head of the Division
(exceptionally, the controllers of the Financial Affairs and
Wealth and Asset Management Divisions report directly to
Crédit du Nord’s RSCI), and report functionally to the Head
of Permanent Control.
The same is true for specialised subsidiaries Étoile Gestion
and Gilbert Dupont (Crédit du Nord’s brokerage firm), as
well as for the fixed income and foreign exchange activity
(Treasury and Foreign Exchange Division), which is part of
the Finance Division.
At end-December 2008, there were 16 such controllers.
Internal control at Norfinance Gilbert Dupont, which is
coordinated by the Financial Affairs Division, is carried out
by the Administrative Controller of the Nord Métropole region,
and by the Wealth and Asset Management Division for private
banking.
The size of the specialised subsidiary sometimes means
that its senior director carries out these controls (e.g. Norbail
Immobilier and Norbail Sofergie).
In other cases, internal control is outsourced. Starlease
subcontracts internal control to Franfinance, while the
internal control of Antarius is outsourced to Crédit du Nord’s
insurance partner, Aviva.
1-5
Permanent Control Committee
A Permanent Control Committee meets twice a year in the
presence of the Chairman and Chief Executive Officer. It
comprises the Heads of Permanent Control, the Central Risk
Division, Compliance, Periodic Control, the CFO, the Head
of Information Systems, Projects and Banking Operations
(DSIP) and the Head of DAJDC.
The Committee’s role is to ensure the consistency and
effectiveness of the Permanent Control system. It examines
the summary of the main observations presented by the
division heads involved in the Group’s Permanent Control
system; analyses and assesses any significant anomalies
identified by the various internal or external audit teams; and
is informed of the progress on the correction of anomalies
selected for this purpose.
40
2 - Periodic Control System
Crédit du Nord’s Periodic Control Department is responsible
for supervising controls and is mandated to intervene in any
area of activity of Crédit du Nord Group and its subsidiaries.
The Head of Periodic Control reports on his activities to the
Chairman and Chief Executive Officer.
These procedures are an integral part of the internal control
structure of the Group’s majority shareholder. The majority
shareholder’s audit teams regularly conduct periodic controls
of Crédit du Nord Group.
The number of staff members dedicated to periodic controls
was unchanged at end-December 2008 and mainly included
university graduates, supervised by senior inspectors with
experience in risk controls and administrative and accounting
countries, all of whom are supervised by a member of the
General Management. An audit leader specialising in IT
provides support where needed or conducts targeted
inspections of the central or decentralised IT systems of
some Head Office Divisions and of payment systems.
The various entities in the operating network are controlled
approximately once every four to five years, depending on the
priorities established by the General Management and any
audits performed by the majority shareholder.
These audits conform to written procedure and are based
upon a pre-selection of loans to be audited on-site. They are
broken down into three phases: pre-audit, on-site audit and
audit report.
The Periodic Control Department analyses the administrative
and accounting operations of the audited entities, as well as
their exposure to different types of risk (notably to counterparty
risk). These audits also cover Basel II regulations pertaining
to counterparty and operational risks.
It also assesses the quality of Level One and Two controls
and carries out audits of Head Office divisions or on specific
topics chosen by the General Management.
Audits of specialised entities often involve a preliminary
learning phase, which can lead the General Management to
make use of the specialised audits conducted by the majority
shareholder.
The reports prepared upon completion of the audits are
directly submitted to the Chairman and Chief Executive
Officer by the Head of Periodic Control.
Monitoring of the implementation of recommendations
appearing in the reports is carried out by the Head of
Permanent Control, under the authority of the Head of
Periodic Control, in accordance with procedures which were
enhanced in 2008.
The Head of Periodic Control reports on his activities to
the General Management of Crédit du Nord, mainly during
meetings of the Periodic Control Committee (two of which
were held in 2008), the annual Audit Committee meeting held
in the presence of the Head of Group Internal Audit of Société
Générale, and meetings of the Internal Control Coordination
Committee.
3 - Ethics and Investment Service Compliance
Also under the authority of DAJDC, this Division ensures that
the rules of professional conduct governing relations between
the Bank, its employees and its customers are well defined,
understood and observed.
Banking and financial compliance guidelines that all staff
must adhere to are outlined in a specific appendix to the
company bylaws, which are distributed to all staff. Added to
these principles are a number of specific measures relating to
certain activities (e.g. discretionary portfolio managers).
In addition to compliance with AMF regulations, and in
particular principles of organisation and rules of professional
conduct defined in Book III of the General Regulations of the
AMF, this Division is also in charge of anti-money laundering
and anti-terrorism financing procedures.
Anti-money laundering is essentially based on knowledge
of the Bank’s customers, vigilance in the processing of
transactions (blacklists of countries and individuals), specific
monitoring of certain payment instruments (cheques,
electronic payments) and the flagging of isolated transactions
or a series of transactions by a single customer.
Each of the Group’s legal entities nevertheless has a Tracfin
agent in charge of declarations of suspicious activity for his
entity, and a Head of Investment Service Compliance.
IV. PRODUCTION AND CONTROL OF
FINANCIAL AND MANAGEMENT
ACCOUNTING DATA
The Chief Financial Officer, who reports directly to the
Chairman and Chief Executive Officer and is a member of
the Executive Committee, is responsible for the production
and control of financial and management accounting data.
As such, he oversees the proper application of
applicable accounting rules and guidelines, and monitors
recommendations issued by the Statutory Auditors.
1 - Production of accounting data
1-1
Role of the Accounting and Summary
Information Department (DCIS)
This department, under the authority of the CFO, fulfils two
major roles
k accounting structure and procedures: a centralised
definition for the whole of Crédit du Nord Group of a set
of accounting rules conforming to current accounting
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.;
k production and analysis of accounting and financial
reports: preparation of the individual company and
consolidated financial statements for Crédit du Nord
Group, preparation of regulatory status reports for the
various supervisory authorities (Banque de France, French
Banking Commission, etc.).
1-2
Accounting information system
Crédit du Nord’s information system is a multi bank network:
all seven Group banks are managed on the same information
network.
As such, they share the same processing systems for banking
transactions and the same summary reporting systems,
which are used to prepare internal and regulatory statements
and reports.
This unified IT architecture shared by all Group banks is
instrumental in improving accounting consistency throughout
the Group. DCIS oversees the definition and validity of
accounting rules and procedures, from the point of input to
the preparation of the financial statements.
k the accounting treatment of Group-wide transactions
is based on automated procedures. Regardless of
whether the accounting frameworks are defined at the
accounting user level (over two-thirds of book entries) or
defined automatically by operating system software, all
accounting procedures have been defined, tested and
approved by DCIS. Manual entries, which are limited and
on the decline, are subject to restrictive authorisations and
numerous controls.
k 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.
41
1-3
Production of accounting data
Preparation of individual financial statements and
individual consolidation packages
The figures presented in regulatory reports and individual
consolidation packages are pre-estimated using parameters
managed centrally by DCIS.
Each “controlled” entity (using the same accounting
information system) then records all non-automated items
at the balance sheet date (representing a very low volume
of entries).
Finally, each entity controls, analyses and records, where
applicable, the adjustment accounting entries for all financial
reports.
Once approved, the entities transmit the regulatory reports
to the supervisory authorities and the individual financial
statements are published.
All “non-controlled” entities transmit consolidation packages
as produced by their internal accounting systems, in
accordance with the Group’s rules and procedures, in addition
to the regulatory reports transmitted to the supervisory
authorities.
The consistent application of accounting principles and
methods is ensured by periodically holding one-day meetings
organised by DCIS with the accounting managers of the
Group’s companies in order to present and comment on
current accounting issues as well as any account-closing
decisions made by the Group. This frequent contact
ensures that the key points of each account closing have
been integrated and interpreted by each company within the
Group.
Account consolidation process
This phase culminates with the production of the consolidated
financial statements, used for Group management, legal and
regulatory publications as well as shareholder reports.
During this phase, individual consolidation packages from
Group companies are controlled and approved, consolidation
entries are booked and intercompany eliminations are
recognised. The consolidated financial statements are then
analysed and approved before they are released 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.
2 - Internal accounting control
2-1
At the network branch level
Following the restructuring efforts decided in 2008 as part
of the “Middle Office” project, the day-to-day monitoring
of accounts is carried out by staff at the banking services
divisions for the branches and by staff at the business
assistance units for the business centres.
They use a day-to-day account monitoring application
developed and maintained by DCIS, which identifies
accounts requiring further examination (balance or directional
anomalies, failure to comply with regulatory thresholds,
manual entries).
The formalised and reported Level One control to ensure
that this monitoring is property performed is carried out by
the Line Manager of the staff in charge of monitoring the
accounts.
The Level Two control is conducted quarterly by the regional
and subsidiary Permanent Control departments.
2-2
At the Head Office division levelge
Each Head Office division is responsible for overseeing
accounting operations within its entity. The monitoring of
accounts is performed daily by division staff, who also use
the day-to-day account monitoring application. A Level
One supervisory control is performed (this control will be
formalised in 2009).
The Level Two control is performed annually by the
Permanent Control department of the Head Office divisions
with operational activities. This procedure will be extended
to all Head Office Divisions in 2009.
2-3
Control of preparation of individual 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:
The software used to generate the consolidated reports
includes configurable data consistency tests.
As long as the reporting company has not satisfied control
requirements, it may not transmit accounting information to
DCIS.
Once received, the consolidation packages sent by each
consolidated company are analysed, corrected as necessary,
42
and approved, notably with the help of tests for consistency
with preceding monthly reporting packages and budgets,
where available, and with unusual events for the month.
Entries specific to consolidation are then recorded. Lastly,
DCIS performs a variation analysis of consolidated statements,
focusing primarily on changes in equity levels.
Control of consolidation tools:
A Group chart of accounts specific to consolidation is
managed by DCIS and aids in breaking down information to
improve analysis.
Careful attention is paid to the configuration of the
Group consolidation system, and the various automated
consolidation processes are subject to validations and
controls.
Lastly, the automation of the monthly consolidated reporting
process in itself helps to control changes in data over time
and the understanding of any problems as they arise.
All of these controls help guarantee the quality of accounting
documents.
2-4
Organisation established to guarantee the
quality and reliability of the audit trail
The audit trail is present from the beginning to the end of
the information chain at Crédit du Nord Group. Given the
complexity of different banking systems and data production
circuits, this trail is comprised of various tools interconnected
by references which are representative of search keys.
It is defined by procedures established at each phase of the
data production circuit.
The audit trail is organised to be able to optimally respond
to different types of search queries. In fact, a different tool
is used depending on whether the user wishes to locate a
specific event or to recreate the production of a regulatory
filing comprised of a large number of accounting entries and
requiring the tracking of reference tables.
The tools used by Crédit du Nord Group include:
k a search application ranging from Event Reports (CREs)
to accounting entries with an audit trail at the accounting
user level,
k accounting database search engines (accounting flows
and balances),
Furthermore, the accounting documents used to monitor and
control accounting operations are archived for durations set
forth by legal and contractual texts.
2-5
Isolation and monitoring of assets held for third
parties
As an investment service provider with custody of customer
assets, Crédit du Nord is required to protect the rights of its
customers to the financial instruments belonging to them,
and to prevent their use for proprietary purposes, barring
customer approval.
Monitoring and management of assets held for third parties
over the long term are separate from proprietary activities and
are handled by separate departments and accounts.
IT authorisations for the applications used for both activities
are restricted and separate, thus facilitating their separate
management.
The Statutory Auditors are now required to issue an annual
report on the measures taken by the Group to ensure the
protection of customer assets.
3 - Preparation and control of financial and
management accounting data
3-1
Production of financial and management
accounting data
Crédit du Nord Group bases its financial management on
financial accounting data.
Analytical accounting data needed for the financial
management of Crédit du Nord Group are generated by
the accounting information system and operating systems,
which are able to break down data by item and by entity.
This information is stored in a unified management
database, which covers Crédit du Nord and its six banking
subsidiaries.
The Financial Management Division (DGF), placed under the
authority of the CFO, manages the integration of general
accounting data into the analytical accounting items on the
basis of the rules defined by the unit in charge of Group ALM
and the match-funding of assets and liabilities.The analytical
accounting system enables a switch from an interest paid/
received view to an analytical approach in terms of margins
on notional match-funding.
k search engines that work within report preparation
applications (regulatory reporting software, consolidation
software, etc.).
43
Information from the management database is accessible
from the branch level up to the Group level and is identical
from one level to the next. As a result, the data can be
used by all Crédit du Nord Group management control
teams, including subsidiaries, regional divisions, functional
departments and the Financial Management Division, which
use this information in particular to prepare the half-yearly
management report.
3-2
Verification of financial and management
information
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
gathered by the Group have been properly integrated into
the analytical framework. Variations in totals and material
movements are systematically analysed. Downstream of
the process, a monthly reconciliation is also performed
by comparing the financial accounting figures with the
management reporting figures.
Budgets are monitored, in the presence of the General
Management, three times a year: twice in the first half, during
the Regional Board Meetings of the Group’s regions and
subsidiaries, and once in the third quarter during the budget
meeting. These meetings, which are systematically attended
by the Deputy Chief Executive Officer or the Head of the
44
DGF, review the change in net banking income, operating
expenses, investments and the main risk indicators.
A Cost Monitoring Committee, which includes the
Chairman and Chief Executive Officer and the head-office
divisional managers, meets four times during the course of
the year. A DGF executive reviews the change in network
operating expenses.
An IT Project 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
Report of the Statutory Auditors on the Chairman’s Report on Internal Control
Report of the Statutory Auditors on the
FISCAL YEAR ENDED DECEMBER 31, 2008
This is a free translation into English of the statutory auditors’ report issued in French prepared in accordance with Article L.225235 of French company law on the report prepared by the Chairman of the Board of Directors on the internal control procedures
relating to the preparation and processing of accounting and financial information issued in French and is provided solely for the
convenience of English speaking users.
This report should be read in conjunction and construed in accordance with French law and the relevant professional standards
applicable in France.
Statutory Auditors’ report, prepared in accordance with Article L.225-235 of French company law (Code de Commerce)
on the report prepared by the Chairman of the Board of Directors of the company
To the Shareholders,
In our capacity as Statutory Auditors of Crédit du Nord and in accordance with Article L.225-235 of French company law (Code de
Commerce), we hereby report on the report prepared by the Chairman of your company in accordance with Article L.225-37 (limited
liability company with a Board of Directors) of French company law (Code de Commerce) for the year ended December 31, 2008.
It is the Chairman’s responsibility to prepare, and submit to the Board of Directors for approval, a report on the internal control and risk
management procedures implemented by the company and containing the other disclosures required by Article L.225-37 (limited liability
company with a Board of Directors) of French company law (Code de Commerce), particularly in terms of corporate governance.
It is our responsibility:
– to report to you on the information contained in the Chairman’s report in respect of the internal control procedures relating to
the preparation and processing of the accounting and financial information, and
– to attest that this report contains the other disclosures required by Article L.225-37 of French company law (Code de commerce),
it being specified that we are not responsible for verifying the fairness of these disclosures.
We conducted our work in accordance with professional standards applicable in France.
Information on the internal control procedures relating to the preparation and processing of accounting and financial
information
The professional standards require that we perform the necessary procedures to assess the fairness of the information provided in
the Chairman’s report in respect of the internal control procedures relating to the preparation and processing of the accounting and
financial information. These procedures consisted mainly in:
• obtaining an understanding of the internal control procedures relating to the preparation and processing of the accounting and
financial information on which the information presented in the Chairman’s report is based and the existing documentation;
• obtaining an understanding of the work involved in the preparation of this information and the existing documentation;
• determining if any significant weaknesses in the internal control procedures relating to the preparation and processing of the
accounting and financial information that we would have noted in the course of our engagement are properly disclosed in the
Chairman’s report.
On the basis of our work, we have nothing to report on the information in respect of the company’s internal control procedures
relating to the preparation and processing of accounting and financial information contained in the report prepared by the Chairman
of the Board in accordance with Article L.225-37 of French company law (Code de Commerce).
Neuilly-sur-Seine, March 11, 2009
The Statutory Auditors
French original signed by
DELOITTE & ASSOCIÉS
José-Luis Garcia
ERNST & YOUNG et Autres
Isabelle Santenac
45
ASSETS
Notes
31/12/2008
31/12/2007*
4
684.0
1,354.1
Financial assets measured at fair value through profit or loss
5
1,483.5
1,923.4
Hedging derivatives
6
213.3
96.2
(in EUR millions)
Cash, due from central banks
Available-for-sale financial assets
7
5,657.0
5,141.0
Due from banks
8
5,390.0
3,688.7
9
23,769.7
22,461.8
10
1,836.0
1,615.0
155.7
-16.7
Customer loans
Lease financing and similar agreements
Revaluation differences on portfolios hedged against interest rate risk
Held-to-maturity financial assetsv
11
59.4
3.9
Tax assets
12
313.4
329.3
Other assets
13
688.2
646.2
10.4
9.6
Investments in subsidiaries and affiliates accounted for by the equity
method
Tangible and intangible fixed assets
14
426.5
416.9
Goodwill
15
53.8
48.6
40,740.9
37,718.0
TOTAL
* Amounts adjusted with respect to published financial statements:
46
LIABILITIES
(in EUR millions)
Notes
Due to central banks
Financial liabilities at fair value through profit or loss
Hedging derivatives
5
31/12/2008
31/12/2007*
1.8
0.1
677.8
790.7
6
282.8
79.3
Due to banks
17
3,988.3
2,422.4
Customer deposits
18
19,478.4
18,280.8
Debt securities
19
8,893.0
8,683.9
18.5
-12.5
Tax liabilities
12
439.2
471.0
Other liabilities
13
972.6
1,058.3
Underwriting reserves of insurance companies
23
3,260.2
3,266.5
Provisions
16
145.0
143.1
Subordinated debt
22
670.5
644.2
38,828.1
35,827.8
Subscribed capital
740.3
740.3
Equity instruments and associated reserves
117.3
110.4
Retained earnings
759.8
608.8
Net income
252.7
340.2
1,870.1
1,799.7
Revaluation differences on portfolios hedged against interest rate risk
TOTAL DEBT
Sub-total
Unrealised or deferred gains or losses
Sub-total equity, Group share
Minority interests
TOTAL SHAREHOLDERS’ EQUITY
TOTAL
-7.7
42.8
1,862.4
1,842.5
50.4
47.7
1,912.8
1,890.2
40,740.9
37,718.0
* Amounts adjusted with respect to published financial statements:
47
(in EUR millions)
Notes
31/12/2007
% change
2008/2007
Interest and similar income
28
1,918.5
1,674.9
14.5
Interest and similar expenses
28
-1,132.1
-884.4
28.0
16.6
4.3
-
Commissions (income)
29
900.7
898.5
0.2
Commissions (expenses)
29
-186.7
-108.2
72.6
16.3
9.1
79.1
11.5
-32.7
135.2
Dividend income
Net gains or losses on financial transactions
o/w net gains/losses on financial instruments
at fair value through profit or loss
30
o/w net gains/losses on available-for-sale
financial assets
31
4.8
41.8
-88.5
Income from other activities
32
25.3
25.8
-1.9
Expenses from other activities
32
-14.7
-22.5
-34.7
Net banking income
27
1,543.9
1,597.5
-3.4
Personnel expenses
33
-617.5
-609.6
1.3
-29.0
-36.8
-21.2
Other expenses
34
-310.4
-296.5
4.7
Amortisation and depreciation and impairment of intangible
and tangible fixed assets
35
Taxes
Total operating expenses
Cost of risk
36
Operating income
Net income from companies accounted for
by the equity method
37
Net income/expenses from other assets
Impairment losses on goodwill
Earnings before tax
Income tax
38
Consolidated net income
Minority interests
CONSOLIDATED NET INCOME
Consolidated net earnings per share (in EUR)
Number of shares making up the company’s capital
48
31/12/2008
39
-74.6
-69.0
8.1
-1,031.5
-1,011.9
1.9
512.4
585.6
-12.5
-132.0
-73.5
79.6
380.4
512.1
-25.7
2.1
1.8
16.7
-
1.3
-
-
-
-
382.5,
515.2
-25.8
-123.3
-165.8
-25.6
259.2
349.4
-25.8
6.5
9.2
-29.3
252.7
340.2
-25.7
2.73
3.68
92,532,906
92,532,906
Retained
earnings
Capital and associated reserves
(in EUR millions)
SHAREHOLDERS’ EQUITY
AT DECEMBER 31, 2006
Common
stocks
Equity instr.
& associated
reserves
Elimination
of treasury
stock
740.3
96.2
-
Unrealised or differed
change in value
of financial instruments
Change in
fair value Change in Deferred
of avalaible fair value
tax on
Retained
for sale of hedging change in
earnings
assets derivatives fair value
787.8
87.6
-
-2.9
Shareholder’s
equity
Group
share
Shareholder’s
equity
Minority
interests
Total
consolidated
shareholder’s
equity
1,709.0
42.5
1,751.5
Increase in common stock
-
-
Elimination of treasury stock
-
-
Issuance of equity
instruments
-
-
Equity component of
share-based payment plans
11.0
11.0
2007 dividends paid
-175.8
-175.8
Impact of acquisitions
and disposals on minority
interests
Sub-total of changes
linked to relations with
shareholders
-
-
11.0
-
-175.8
Changes in value of financial
instruments having an
impact on shareholders’
equity
-
-
-
-43.7
instruments as a percentage
of income
Tax impact of change
in value of financial
equity or as a % of income
1.8
2007 net income
Sub-total
340.2
-
-
-
340.2
-43.7
-
1.8
Change in equity of
associates and joint
ventures accounted for by
the equity method
-164.8
3.2
-3.2
-179.8
-
-4.0
-168.8
-43.7
-43.7
-
-
1.8
1.8
340.2
9.2
349.4
298.3
9.2
307.5
,-,
Translation differences and
other changes
Sub-total
11.0
-4.0
-
,-,
-
-
3.2
-
-3.2
-
-
-
,-,
-
-
740.3
110.4
-
949.0
43.9
-
-1.1
1,842.5
47.7
1,890.2
49
Retained
earnings
Capital and associated reserves
(in EUR millions)
Common
stocks
Equity instr.
& associated
reserves
Elimination
of treasury
stock
740.3
110.4
-
Unrealised or differed
change in value
of financial instruments
Change in
fair value Change in Deferred
of avalaible fair value
tax on
Retained
for sale of hedging change in
earnings
assets derivatives fair value
949.0
43.9
-
-1.1
Shareholder’s
equity
Minority
interests
Total
consolidated
shareholder’s
equity
1,842.5
47.7
1,890.2
Increase in common stock
-
-
Elimination of treasury stock
-
-
Issuance of equity
instruments
-
-
Equity component of
share-based payment plans
7.4
7.4
2008 dividends paid
-189.7
-189.7
Impact of acquisitions
and disposals on minority
interests
Sub-total of changes
linked to relations with
shareholders
-
7.4
-
-189.7
-
-
-
-71.2
instruments as a percentage
of income
20.7
2008 net income
252.7
-
-
-
252.7
-71.2
-
20.7
Change in equity of
associates and joint
ventures accounted for by
the equity method
Translation differences and
other changes
Sub-total
-0.5
0.5
-193.7
-
-182.3
-4.0
-186.3
-71.2
0.2
-71.0
-
Tax impact of change
in value of financial
equity or as a % of income
Sub-total
7.4
-4.0
-
equity
50
Shareholder’s
equity
Group
share
-
20.7
20.7
252.7
6.5
259.2
202.2
6.7
208.9
-
-
-
-
-
-0.5
-
0.5
-
-
-
-
-
-
740.3
117.3
-
1,012.5
-27.3
-
19.6
1,862.4
50.4
1,912.8
Revaluation differences in the fair value of available-for-sale
assets came out at EUR -27.3 million at December 31, 2008,
which broke down as follows:
k unrealised capital losses on the insurance subsidiary
portfolio: EUR -62.5 million, offset by deferred profitsharing of EUR 60.4 million (see Note 23).
k unrealised capital gains: EUR 35.5 million;
In accordance with Group accounting principles, unrealised
capital losses were maintained in shareholders’ equity due to
the lack of any event indicative of probable credit risk relating
to issuers.
k unrealised capital losses: EUR -59.4 million;
k unrealised capital losses on OBSAARs (bonds with
redeemable and/or acquisition warrants) reclassified as
held-to-maturity securities: EUR -1.3 million;
Prudential capital
(in EUR millions)
SHAREHOLDERS’ EQUITY, GROUP SHARE
Dividends
Minority interests
Prudential deductions
(1)
TIER ONE PRUDENTIAL CAPITAL
Tier Two capital before deductions
Tier Two capital deductions
PRUDENTIAL CAPITAL
31/12/2008
31/12/2007
1,862.4
1,842.5
-129.5
-189.7
50.4
38.5
-202.4
(*)
-217.6 (*)
1,580.9
(*)
1,473.7 (*)
474.5
551.3
-166.4
-151.8
1,889.0 (*)
1,873.2 (*)
(1) Goodwill, intangible fixed assets and IFRS prudential filters.
(*) Figures modified following the correction filed with the AMF on May 25, 2009”
Information pertaining to Pillar 3 under Basel II regulations applicable to Crédit du Nord Group is available at www.groupe.credit-du-nord.com
51
Statement of cash flows
Statement of cash flows
(in EUR millions)
31/12/2008
31/12/2007
NET CASH INFLOW/OUTFLOW RELATED TO OPERATING ACTIVITIES
Net income (I)
259.2
349.4
Amortisation expense on tangible and intangible fixed assets
75.7
75.9
Net allocation to provisions (including underwriting reserves of insurance companies)
34.5
301.8
Net income/loss from companies accounted for by the equity method
-2.1
-1.8
Deferred taxes
99.2
43.4
Net income from the sale of long-term available-for-sale assets and consolidated subsidiaries
-0.1
-36.0
Change in deferred income
6.8
-25.3
Change in prepaid expenses
-18.9
15.2
Change in accrued income
-21.8
-62.2
8.0
107.2
Other changes (mainly adjustment in the value investments held to guarantee unit-linked policies
382.7
171.5
Non-monetary items included in net income and other adjustments (not including income on
financial instruments measured at fair value through profit or loss) (II)
564.0
589.7
Net income on financial instruments measured at fair value through profit or loss (III)
-11.5
32.7
Interbank transactions
-472.2
96.7
Transactions with customers
-245.3
71.3
Change in accrued expenses
Transactions related to other financial assets and liabilities
-433.1
63.0
Transactions related to other non-financial assets and liabilities
-157.8
-729.6
-1,308.4
-498.6
-496.7
473.2
Net increase/decrease in cash related to operating assets and liabilities (IV)
NET CASH INFLOW/OUTFLOW RELATED TO OPERATING ACTIVITIES (A)=(I)+(II)+(III)+(IV)
NET CASH INFLOW/OUTFLOW RELATED TO INVESTMENT ACTIVITIES
Cash flow/outflow related to acquisition and disposal of financial assets and long-term investments
-172.2
74.6
-77.2
-75.4
-249.4
-0.8
-193.7
-179.8
-2.0
-35.1
NET CASH INFLOW/OUTFLOW RELATED TO FINANCING ACTIVITIES (C)
-195.7
-214.9
NET INFLOW/OUTFLOW IN CASH AND CASH EQUIVALENTS (A) + (B) + (C)
-941.8
257.5
1,352.9
486.1
639.4
1,248.7
Net balance of cash accounts and accounts with central banks (excluding related receivables)
680.5
1,352.9
Net balance of accounts, demand deposits and loans with banks
370.0
639.4
NET INFLOW/OUTFLOW IN CASH AND CASH EQUIVALENTS
-941.8
257.5
NET CASH INFLOW/OUTFLOW RELATED TO INVESTMENT ACTIVITIES (B)
NET CASH INFLOW/OUTFLOW RELATED TO FINANCING ACTIVITIES
Cash flow from/to shareholders
Other net cash flows arising from financial activities
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the start of the year
Net balance of cash accounts and accounts with central banks (excluding related receivables)
Net balance of accounts, demand deposits and loans with banks
Cash and cash equivalents at the close of the year
52
Notes to the consolidated financial statements
Notes to the consolidated financial
statements
CONTENTS
Note 1
Principles and methods of
consolidation, accounting principles
54
Note 24
Breakdown of assets and liabilities by
term to maturity
109
Note 2
Consolidation scope
72
Note 25
Commitments
110
Note 3
Risk management
74
Note 26
Foreign exchange transactions
112
Note 4
85
Note 27
Net Banking Income
112
Note 5
Financial assets at fair value through
profit or loss
86
Note 28
113
Note 29
Commissions
114
Note 5 bis
Financial liabilities at fair value through
profit or loss
87
Note 30
115
Note 6
Hedging derivatives
88
Net income and expense from
financial instruments at fair value
through profit or loss
Note 7
Available-for-sale assets
89
Note 31
115
Note 8
Due from banks
90
Net gains or losses on available-for
sale financial assets
Note 9
Customer loans
91
Note 32
Income and expenses from other activities
116
Note 10
Lease financing and similar agreements
93
Note 33
Personnel expenses
116
Note 11
Held-to-maturity financial assets
94
Note 34
Others charges
120
Note 12
Tax assets and liabilities
95
Note 35
121
Note 13
Other assets and liabilities
95
Provisions, impairment and
depreciation of tangible and intangible
fixed assets
Note 14
Fixed assets
96
Note 36
Cost of risk
122
Note 15
Goodwill
98
Note 37
122
Note 16
Summary of depreciations
98
Income from companies accounted
for by the equity method
Note 17
Due to banks
99
Note 38
Income tax
123
Note 18
Customer deposits
100
Note 39
Minority interests
123
Note 19
Securitised debt repayables
100
Note 40
Statement of fair value
124
Note 20
PEL/CEL mortgage saving accounts
101
Note 41
Transactions with related parties
124
Note 21
Employee benefits
102
Note 42
Contribution to net income by
business line and company
126
Note 22
Subordinated debt
106
Note 43
Activities of subsidiaries and affiliates
127
Note 23
Insurance activities
107
53
Note 1
Principles and methods of consolidation, accounting principles
MAIN RULES FOR EVALUATING AND
PRESENTING THE CONSOLIDATED
FINANCIAL STATEMENTS
Pursuant to European Regulation No. 1606/2002 of July 19,
2002 concerning the application of International Accounting
Standards, the consolidated financial statements of Crédit
du Nord Group (“the Group”) for the year ended December
31, 2008, were prepared in accordance with the standards
adopted under the procedure specified in Article 6 of the
aforementioned regulation and applicable at that date.
The Group is fully subject to these standards as it regularly
issues redeemable subordinated notes which are admitted
to trading on the primary market.
The IFRS framework includes IFRS (International Financial
Reporting Standards) 1 to 8 and IAS (International Accounting
Standards) 1 to 41, as well as the interpretations of these
standards as adopted by the European Union at December
31, 2008.
The Group also made use of the provisions of IAS 39, as
adopted by the European Union, relating to macro fair value
hedge accounting (IAS 39: “carve out”).
IFRS and IFRIC interpretations applied
by the Group as from January 1, 2008
Amendments to IAS 39 and IFRS 7: reclassification
of financial assets
On October 15, 2008, the European Union adopted the
amendments to IAS 39, “Financial instruments: recognition
and measurement” and IFRS 7, “Financial instruments:
disclosures.”
k from the “financial assets at fair value through profit or
loss” category to other categories;
k from the “available-for-sale financial assets” category to
the “loans and receivables” category;
The amendment to IFRS 7 requires the presentation of
new disclosures relating to transfers addressed by these
changes.
Furthermore, on November 27, 2008, the IASB published a
second amendment relating to the reclassification of financial
assets, which had not been adopted by the European Union
as at December 31, 2008. This amendment set forth the
conditions for the possible retroactive application of the
above-mentioned reclassifications as at July 1, 2008.
The Group did not make use of the reclassification provided
by IAS 39 during fiscal year 2008.
Accounting standards and
interpretations that the Group will apply
in the future
Accounting standards, amendments and
interpretations adopted by the European Union
The IASB published standards and interpretations which had
not all been adopted by the European Union as at December
31, 2008. These standards and interpretations, listed below,
shall not be mandatory until January 1, 2009 or until they are
adopted by the European Union. Consequently, they were
not applied by the Group in 2008.
Date adopted
by European Union
Date of application:
fiscal year beginning
IFRS 8, “Operating segments”
November 21, 2007
January 1, 2009
IAS 1 (revised), “Presentation of financial statements”
December 17, 2008
January 1, 2009
Amendment to IAS 23, “Borrowing costs“
December 10, 2008
January 1, 2009
Amendment to IFRS 2, “Vesting conditions and cancellations“
December 16, 2008
January 1, 2009
IFRIC 13, “Customer loyalty programmes”
December 16, 2008
January 1, 2009
IFRIC 14, “The limit on a defined benefit asset, minimum funding
requirements and their interaction“
December 16, 2008
January 1, 2009
Standard or Interpretation
54
The amendment to IAS 39 offers the option, under certain
conditions, of reclassifying non-derivative financial assets:
IFRS 8, “Operating segments”
This standard modified segment reporting in terms of both
definitions and disclosures that must be presented in the
notes to the financial statements.
The application of this standard will have no impact on the
presentation of the notes to the financial statements. Given that
insurance, asset management and intermediation activities
are non-material in relation to banking activities, Credit du
Nord Group only reports on one operating segment.
IAS 1 revised, “Presentation of financial statements”
The only impact this revised standard will have is to change
the format of the Group’s financial statements.
Amendment to IAS 23, “Borrowing costs”
The purpose of this amendment was to eliminate the option
of recognising all borrowing costs as expenses and to require
entities to capitalise borrowing costs directly relating to the
acquisition, production or construction of eligible assets. It will
not, however, have any impact on the Group’s net income or
shareholders’ equity because the Group already applies the
optional accounting treatment that will be made mandatory
by the amendment.
Amendment to IFRS 2, “Vesting conditions and
cancellations”
This amendment clarified the definition of vesting conditions
as well as the accounting treatment of vesting conditions and
the cancellation of share-based payment plans. The future
application of this amendment should have no impact on the
Group’s net income or shareholders’ equity.
IFRIC 13, “Customer loyalty programmes”
IFRIC 13 offers a more detailed interpretation of the accounting
treatment of customer loyalty programmes. The Group is not
affected by this interpretation, which will therefore have no
impact on the Group’s net income or shareholders’ equity.
IFRIC 14, “The limit on a defined benefit asset,
minimum funding requirements and their interaction”
This interpretation clarifies how to determine the limit
placed on the amount of a surplus (linked to repayments
or reductions in future contributions) in a pension plan that
can be recognised as an asset, and how a minimum funding
requirement affects that asset. The future application of this
interpretation should have no impact on the Group’s net
income or shareholders’ equity.
Accounting standards and interpretations not yet adopted by the European Union at December 31, 2008
Standard or Interpretation
Improvements to IFRS
IFRIC 12, “Service concession arrangements”
Date published
by IASB
Date of application:
fiscal year beginning
May 22, 2008
January 1, 2009
November 30, 2006
January 1, 2008
IFRIC 15, “Agreements for the construction of real estate”
July 3, 2008
January 1, 2009
IFRIC 16, “Hedges of a net investment in a foreign operation”
July 3, 2008
October 1, 2008
November 27, 2008
July 1, 2009
IFRIC 17, “Distribution of non-cash assets to owners”
IFRS 3 (revised), “Business combinations” and IAS 27 (revised),
“Consolidated and separate financial statements“
January 10, 2008
July 1, 2009
Amendments to IAS 32 and IAS 1, “Financial instruments puttable at fair
value and obligations arising on liquidation”
February 14, 2008
January 1, 2009
Amendments to IFRS 1 and IAS 27, “Cost of investment in a subsidiary,
jointly controlled entity or associate“
May 22, 2008
January 1, 2009
Amendment to IAS 39, “Financial instruments: recognition and
measurement – eligible hedged items“
July 31, 2008
July 1, 2009
November 27, 2008
July 1, 2009
IFRS 1 (revised), “First-time adoption of international Financial reporting
standards”
55
Improvements to IFRS
As part of the annual procedure to improve International
Financial Reporting Standards, the IASB published 35 minor
amendments to 20 different standards. These amendments
were adopted by the European Union on January 23, 2009
and will become mandatory for fiscal years beginning on
January 1, 2009 (with the exception of the amendments to
IFRS 5, “Non-current assets held for sale and discontinued
operations”, for which the date of first application has been
moved forward to fiscal years beginning on July 1, 2009).
IFRIC 12, “Service concession arrangements”
treatment of service concession arrangements. As it does not
concern the Group’s activities, it will not have an impact on
net income or shareholders’ equity.
IFRIC 15, “Agreements for the construction of real
estate”
treatment of revenue from the sale of real estate, particularly
from the sale of residential buildings.
IFRIC 16, “Hedges of a net investment in a foreign
operation”
treatment of hedges of a net investment in a foreign operation.
The future application of this interpretation should have no
impact on the Group’s net income or shareholders’ equity.
IFRIC 17, “Distribution of non-cash assets to owners”
IFRIC 17 addresses the valuation and accounting treatment
of the distribution of non-cash assets to owners.
IFRS 3 revised, “Business combinations” and IAS
27 revised, “Consolidated and separate financial
statements”
The purpose of these standards is to amend the accounting
treatment of acquisitions and disposals of consolidated
subsidiaries.
Amendments to IAS 32 and IAS 1, “Financial
instruments puttable at fair value and obligations
arising on liquidation”
These amendments, adopted by the European Union on
January 22, 2009, clarify the accounting classification of
financial instruments puttable at the option of the holder or
in the event of the issuer’s liquidation.
56
Amendments to IFRS 1 and IAS 27, “Cost of
investment in a subsidiary, jointly controlled entity or
associate”
These amendments, adopted by the European Union on
January 23, 2009, apply only to entities presenting their
individual financial statements under IFRS for the first time.
Amendment to IAS 39, “Financial instruments:
recognition and measurement – eligible hedged
items“
This amendment clarifies the conditions for applying the
provisions of IAS 39, relating to hedged items, in two specific
cases: hedging of inflation risk and recognition of the time
value of options in a hedge.
IFRS 1 revised, “First-time adoption of international
financial reporting standards”
This revision of IFRS 1 deals exclusively with presentation
format, which was completely overhauled and simplified,
whereas the technical content remained unchanged.
Presentation of financial statements
In the absence of a model imposed by IFRS, the format used
for the financial reports complies with the format for financial
reports proposed by the Conseil National de la Comptabilité
(French accounting standards board) in Recommendation
No. 2004-R.03 of October 27, 2004
Use of estimates
In drawing up the consolidated financial statements, the
application of the accounting principles and methods
described below leads Management to develop assumptions
and make estimates which may have an impact on the amounts
booked to the income statement, on the valuation of balance
sheet assets and liabilities, and on the disclosures presented
in the notes to the consolidated financial statements.
In order to make these estimates and develop these
assumptions, Management uses data available at the date on
which the consolidated accounts were prepared and may be
called upon to use its own judgment. By nature, the evaluations
based on these estimates contain risks and uncertainties
regarding their materialisation in the future, particularly in light
of the financial crisis which developed in 2008. Consequently,
the final future results of the transactions in question may be
different from these estimates and therefore have a significant
impact on the financial statements.
The use of estimates primarily concerns the following
evaluations:
k the fair value on the balance sheet of financial instruments
not listed on an active market, recorded in «Financial assets
or liabilities at fair value through profit or loss», «Hedging
instruments» or «Available-for-sale financial assets» (see
Notes 5 to 7), and the fair value of unlisted instruments for
which this information must be presented in the notes to
the financial statements;
k the amount of depreciation of “Loans and receivables”,
“Available-for-sale financial assets”, “Held-to-maturity
financial assets”, lease financing and similar agreements,
tangible and intangible assets, and goodwill (see Note
16);
k provisions recorded on the liabilities side of the balance
sheet, including provisions for employee benefits and
underwriting reserves of insurance companies (see Notes
21 and 23);
k the initial value of goodwill recognised for business
combinations (see Note 15).
Segment reporting
Given that insurance, asset management and intermediation
activities are non-material in relation to banking activities,
Credit du Nord Group only reports on one business segment.
Similarly, as Crédit du Nord Group is a national banking group,
it only reports on one geographic segment.
The consolidated financial statements are presented in
euros.
The principal valuation and presentation rules applied during
the preparation of the consolidated financial statements are
indicated below. These accounting principles and methods
were applied consistently in 2007 and 2008, in accordance
with the principle of business continuity.
PRINCIPLES AND
CONSOLIDATION
METHODS
OF
Companies that do not qualify as significant under the
Group’s accounting standards have been excluded from the
consolidation scope. In order to qualify as not significant,
Group companies must meet all of the following three criteria
for two consecutive fiscal years:
k total assets of under EUR 10 million;
k net income of below EUR 1 million;
The voting rights taken into consideration in order to
determine the Group’s degree of control over an entity and
the corresponding consolidation method include potential
voting rights where these can be freely exercised or converted
at the time the assessment is made. Potential voting rights
are instruments such as call options on ordinary shares
outstanding in the market or rights to convert bonds into
new ordinary shares.
The following methods of consolidation are used:
Full consolidation (IAS 27)
Group companies which are exclusively owned and
controlled by Crédit du Nord Group are fully consolidated.
Full consolidation involves recognising the full value of all
subsidiary assets and liabilities, net of minority interests in
both shareholders’ equity and net income.
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:
k either owning, directly or indirectly, the majority of the
voting rights in the subsidiary, taking into account potential
voting rights;
k 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;
k or having the power to exercise a dominant influence over
the subsidiary through an agreement or provisions in the
company’s bylaws.
Proportionate consolidation (IAS 31)
Group companies which are jointly owned and controlled
by Crédit du Nord Group are consolidated proportionately.
This method consists in recognising a proportion of the
company’s assets and liabilities equal to the percentage of
Group ownership in the company, rather than the value of
the ownership interest in the company. Minority interests are
not booked.
IFRS defines joint control as the sharing of control over a
subsidiary by a limited number of partners or shareholders,
where the financial and operating policies of said subsidiary
are determined by mutual agreement.
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.
k no ownership of a stake in the capital of a consolidated
company.
57
Equity method (IAS 28)
Restatements and eliminations
Companies in which the Group holds a significant ownership
are consolidated using the equity method. Significant
influence is defined as the power to influence the policies of
a subsidiary without exercising control over said subsidiary.
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.
The financial statements of consolidated companies are
restated as necessary according to Group accounting
principles. Consolidated net assets and net income are
presented after eliminations for intra-group transactions.
Under the equity method, Crédit du Nord substitutes
the value of the ownership interest in the company with
a proportionate share of the company’s equity and net
income. 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».
Specific treatment of special purpose
entities (SIC 12)
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.
The following criteria are used on a non-cumulative basis
to assess whether a special purpose entity is controlled by
another entity:
k the SPE’s activities are being conducted on behalf of the
Group so that the Group obtains benefits from the SPE’s
operation;
k 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;
k the Group has the ability to obtain the majority of the
benefits of the SPE;
k the Group retains the majority of the risks of the SPE.
In consolidating SPEs considered to be substantially
controlled by the Group, those parts of entities not held by
the Group are recognised as debt in the balance sheet.
58
Business combinations and 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
of acquisition.
Upon the first consolidation of a company, an analysis is
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
of the consolidated company, on the one hand, and recorded
as intangible assets, as defined by IAS 38. Any residual balance
is recorded as goodwill. If the residual difference is positive, it is
booked on the assets side of the consolidated balance sheet
under “Goodwill”. If the difference is negative, it is immediately
recognised in profit or loss.
Goodwill is carried on the balance sheet at historical cost, and
is subject to 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
benefits from the acquisition. Any impairment of goodwill is
calculated based on the recoverable value of the relevant
CGU. When the recoverable value of the CGU is less than
its carrying value, an irreversible impairment is recorded
in the consolidated income statement for the period under
“Impairment of goodwill”. At present, the Group has only
defined one CGU: the retail bank.
For the fiscal year ended December 31, 2008, no goodwill
impairment was recognised.
Non-current assets held for sale and
discontinued operations
Derivative financial assets and liabilities at fair value through
profit or loss are booked at their trading date.
A fixed asset or group of assets and liabilities is deemed
to be «held for sale» if its carrying value will primarily be
recovered via a sale and not through its continuing use. For
this classification to apply, the asset must be immediately
available for sale and its sale must be highly probable. Assets
and liabilities falling under this category are reclassified as
“Non-current assets held for sale” and “Liabilities directly
associated with non-current assets classified as held for
sale”, with no netting.
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
through profit or loss) and are classified under one of the
following financial categories.
Any negative differences between the fair value less costs to
sell off non-current assets and groups of assets held for sale
and their net carrying value is recognised as an impairment
loss in profit or loss. Non-current assets held for sale are no
longer amortised as from their reclassification.
An operation is classified as discontinued at the date the
Group has actually disposed of the operation, or when the
operation meets the criteria to be classified as held for sale.
Discontinued operations are recognised as a single item in
the financial statements for the period, at their net income for
the period up to the date of sale, combined with any net gains
or losses on their disposal or on the fair value less costs to
sell of the assets and liabilities making up the discontinued
operations. Similarly, cash flows generated by discontinued
operations are booked as a separate item in the statement
of cash flows for the period
Fiscal year-end
The consolidated financial statements were prepared on
the basis of accounts closed on December 31, 2008 for all
consolidated companies.
ACCOUNTING PRINCIPLES
These accounting principles have been applied since January
1, 2005.
Classification and valuation of financial
assets and liabilities
In general, regardless of their category (held-to-maturity
securities, available-for-sale securities, securities at fair value
through profit or loss), sales and purchases of securities are
recognised on the balance sheet on the date of settlementdelivery. Loans are initially recognised on the date of
disbursement.
Loans and receivables
Loans and receivables include non-derivative fixed- or
determinable-income financial assets which are not listed on
an active market and which are not held for trading purposes
or held for sale from the time of their acquisition or issuance.
Loans and receivables are presented on the balance sheet
under “Due from banks” or “Customer loans”, depending on
the counterparty. They are valued after their initial recognition
at their amortised cost, based on the effective interest rate,
and may be subject to impairment if appropriate
Financial assets and liabilities at fair value through
profit or loss
This category covers financial assets and liabilities held for
trading purposes. They are measured at fair value at the
balance sheet date and recorded on the balance sheet
under “Financial assets and liabilities at fair value through
profit or loss”. Changes in fair value are booked on the income
statement for the period, under the heading “Net gains or
losses on financial instruments at fair value through profit
or loss.”
Added to financial assets and liabilities held for trading
purposes are non-derivative financial assets and liabilities
that the Group has designated at fair value through profit
or loss, in application of the option provided by IAS 39, as
defined in the amendment thereto in June 2005. The Group
uses this option in the following cases.
k to book certain compound instruments at fair value
and 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 and structured
borrowings;
k 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
59
treatment matches that of the corresponding insurance
liabilities. Under IFRS 4, insurance liabilities have to be
recognised according to local accounting principles.
k The revaluations of underwriting reserves on unit-linked
policies, which are directly linked to revaluations of the
financial assets underlying their policies, are accordingly
recognised in profit or loss. The fair value option thus
allows the Group to record changes in the fair value of
the financial assets through profit or loss so that they
match fluctuations in the value of the insurance liabilities
associated with these unit-linked policies.
k to measure the fair value of securities held for venture
capital activities, where the Group’s stake is between
20% and 50%, as the performance of these securities is
valued on the basis of fair value in accordance with a duly
documented risk management or investment strategy. The
business of capital venture companies involves investing
in financial assets in order to make a profit from their total
return in the form of dividends and changes in fair value.
Held-to-maturity investments
This category includes non-derivative fixed- or determinableincome assets with a fixed maturity, which are listed on
an active market and which the Group has the intention
and ability to hold to maturity. They are valued after their
acquisition at their amortised cost and may be subject to
impairment if appropriate. Amortised cost includes account
premiums, discounts and transaction costs. These financial
assets are recorded on the balance sheet under “Held-tomaturity financial assets”.
This category covers non-derivative financial assets held for
an indefinite period and which the Group may sell at any
time. By default, these are financial assets which are not
classified in one of the three categories above. Available-forsale 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
recorded in profit or loss under “Interest and similar income
– transactions in fixed-income financial instruments”.
Income from equity securities classified as available-forsale securities is booked to profit or loss under “Dividend
income”.
60
Changes in fair value are only recognised in profit and loss,
under « Net gains or losses on available-for-sale financial
assets” when the asset is sold or permanently impaired.
Write-downs affecting equity securities classified as availablefor-sale assets may not be reversed.
Reclassification of financial assets
After their initial recognition on the Group’s balance sheet,
financial assets may not be reclassified as “Financial assets
at fair value through profit or loss”.
A financial asset initially recorded on the balance sheet
under “Financial assets at fair value through profit or loss”
may be reclassified in different categories under the following
conditions:
k if a fixed- or determinable-income financial asset held
for trading purposes can no longer be traded on an
active market following its acquisition, and the Group
has the intention and the ability to hold the asset for the
foreseeable future or to maturity, then this financial asset
may be reclassified in «Loans and receivables», subject to
compliance with the applicable eligibility criteria;
k if rare circumstances lead to a change in holding strategy
for non-derivative financial assets or equity investments
initially held for trading purposes, these assets may be
reclassified either as “Available-for-sale financial assets”
or as “Held-to-maturity financial assets”, subject to
compliance with the applicable eligibility criteria.
Under no circumstances may derivative financial instruments
or financial assets using fair value option be reclassified in
a category other than «Financial assets and liabilities at fair
value through profit or loss».
Financial assets initially recorded as “Available-for-sale
financial assets” may be transferred to “Held-to-maturity
financial assets”, subject to compliance with the appropriate
eligibility criteria.
Furthermore, if a fixed- or determinable-income financial asset
initially recorded under “Available-for-sale financial assets” is
no longer available for sale following its acquisition, and the
Group has the intention and the ability to hold the asset for
the foreseeable future or to maturity, then this financial asset
may be reclassified in «Loans and receivables», subject to
compliance with the applicable eligibility criteria.
Reclassified financial assets are transferred to their new
category at their fair value at the date of reclassification after
which they are valued in accordance with the provisions
applicable to the new category.
The amortised cost of financial assets reclassified from
“Financial assets at fair value through profit or loss”
or “Available-for-sale financial assets” to “Loans and
receivables”, as well as the amortised cost of financial assets
reclassified from “Financial assets at fair value through profit
or loss” to “Available-for-sale financial asset”, are determined
on the basis of expected future cash flow estimates made
on the date of reclassification. The estimate of expected
future cash flows must be revised at each balance sheet
date; in the event of an increase in estimates of future inflows
following a rise in their recoverability, the effective interest rate
is adjusted on a forward-looking basis; however, if there is
an objective indication of impairment resulting from an event
which took place after the reclassification of the financial
assets in question, and this event has a negative impact
on initially expected future cash flows, a write-down on the
asset in question is booked to “Cost of risk” on the income
statement.
Financial liabilities measured at amortised cost
using the effective interest method
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 net of transaction costs. This debt is valued
at amortised cost at the end of the financial period, using the
effective interest method.
Amounts due to banks, Customer deposits
Amounts due to banks and customer deposits are classified
according to their initial duration and type into: demand
(demand deposits, current accounts) and term borrowings
in the case of banks; special savings accounts and other
deposits for customers. Accrued interest on these amounts
is recorded as related payables through profit or loss. This
debt includes pension transactions, in the form of securitised
debt payables, carried out with these economic operators.
Subordinated debt
This item includes all dated or undated subordinated
borrowings, which in the event of the liquidation of the
borrowing company may only be redeemed after all other
creditors have been paid. Interest accrued and payable
in respect of subordinated debt, if any, is shown with the
underlying abilities as related payables.
Derecognition of financial assets and
liabilities
The Group derecognises all or part of a financial asset (or
group of similar assets) when the contractual rights to the
cash flows on the asset expire or when the Group has
transferred the contractual rights to receive the cash flows
and substantially ail of the risks and rewards of ownership
of the asset.
Where the Group has transferred the cash flows of a financial
asset but has neither transferred nor retained substantially ail
the risks and rewards of its ownership and has not retained
control of the financial asset, the Group derecognises it and
recognises separately as asset or liability any rights and
obligations created or retained as a result of the asset’s
transfer. If the Group has retained control of the asset, it
continues to recognise it on the balance sheet to the extent
of its continuing involvement in that asset.
When a financial asset is derecognised in its entirety, a gain
or loss on disposal is recorded in the income statement for
the difference between the carrying value of the asset and
the payment received for it, adjusted where necessary for
any unrealised profit or loss previously recognised directly
in equity.
The Group only derecognises all or part of a financial liability
when it is extinguished, i.e. when the obligation specified in
the contract is discharged, cancelled or expires.
Impairment of financial assets
Securitised debt payables
Financial assets carried at amortised cost
These liabilities are classified by type of security: medium-term
notes, savings bonds, negotiable debt instruments, bonds
and other debt securities (with the exception of subordinated
notes, which are classified under subordinated debt).
The criteria for determining whether the credit risk on an
individual loan is identified are similar to those used under
French regulations to determine whether a loan is doubtful.
Interest accrued and payable in respect of these securities is
booked as related payables through profit or loss. Bond issue
and redemption premiums are amortised using the effective
interest rate method over the life of the bonds in question.
The resulting charge is recorded as interest expenses in profit
or loss.
At 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.
61
The Group first determines if there is objective evidence of
impairment in any individually significant financial assets,
and similarly, whether individually or collectively, for financial
assets which are not individually significant. Notwithstanding
the existence of a guarantee, the criteria used to determine
probable credit risk on individual outstanding loans include
the occurrence of one or more payments at least over 90
days due (six months for real estate and property loans and
nine months for municipal loans), or, even in the absence of
missed payments, the existence of probable credit risk or the
presence of procedures to contest the loan.
In the event there is no objective evidence of impairment for
a financial asset, whether considered individually significant
or not, the Group includes this financial asset in a group of
financial assets presenting similar credit risk and collectively
subjects them to an impairment test.
If a loan is considered to carry an identified credit risk which
makes it probable that the Group will be unable to recover
all or part of the amount owed by the counterparty under
the initial terms and conditions of the loan agreement,
notwithstanding any loan guarantees, an impairment loss is
booked for the loan in question, and deducted directly from
the value of the asset.
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 interest income, calculated by applying the
effective interest rate to the net carrying value of the
receivable. Impairment allowances and reversals, losses on
non-recoverable loans and amounts recovered on impaired
loans are booked under “Cost of risk”.
In a homogenous portfolio, as soon as a credit risk is incurred
on a group of receivables, collective impairment loss is
recognised 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, sector
risk exposure.
Performing loans under watch
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
62
category includes loans/receivables where certain evidence
of deterioration has appeared since they were granted.
The Group conducts historical analyses to determine the
rate of classification of these loans/receivables as doubtful
and the impairment ratio, and updates these analyses on a
regular basis. It then applies these figures to homogenous
groups of receivables in order to determine the amount of
impairment.
Impairment due to sector credit risk
The Group’s Central Risk Division regularly lists the business
sectors that it considers represent a high probability of
default in the short-term due to recent events that may have
caused lasting damage to the sector. A rate of classification
as doubtful loans is then applied to the total outstandings in
these sectors in order to determine the volume of doubtful
loans. Impairments are then booked for the overall amount of
these outstanding loans, using impairment ratios which are
determined according to the historical average impairment
rates of doubtful customers, adjusted to take into account
an analysis of each sector by an independent expert on the
basis of the economic environment.
Where there is evidence of lasting impairment to an availablefor-sale financial asset, an impairment loss is booked to profit
or loss. Where a non-permanent unrealised capital loss has
been directly booked to shareholders’ equity and subsequently
objective evidence of lasting impairment emerges, the Group
recognises the total accumulated unrealised loss previously
booked to shareholders’ equity in profit or loss:
k under “Cost of risk” for debt instruments (fixed-income
securities);
k under “Net gains or losses on available-for-sale financial
assets” for equity instruments (equity securities).
The sum of the cumulated loss is calculated as the difference
between the acquisition cost of the security (net of any
repayments 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.
In the case of shareholder’s equity instruments, the notion
of lasting impairment is assessed mainly on the basis of
whether there is any significant and lasting loss of value on
the instrument.
Impairment losses recognised through profit or loss on
equity instruments considered as available-for-sale are not
reversed until the financial instrument is sold. Once an equity
instrument has been impaired, any further loss of value is
booked as an additional impairment loss. However, losses of
value on debt instruments are reversed through profit or loss
if the instruments subsequently appreciate in value
Derivatives and hedging
IAS 39 requires that all derivatives be recognised at fair value in
the balance sheet, and that variations in value be recognised
in profit or loss for the period, with the exception of financial
derivatives classified as cash flow hedges for accounting
purposes. Derivatives are recorded on the balance sheet at
the trading date.
Derivative instruments are divided into two categories:
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 value through profit or loss». Changes in fair
value are booked on the income statement under the heading
“Net gains or losses on financial instruments at fair value
through profit or loss.”
Changes in fair value of derivative contracts entered into with
counterparties which end up defaulting are booked under
«Net gains or losses on financial instruments at fair value
through profit or loss» until the date the instruments are
cancelled and recognised on the balance sheet, for the fair
value at this same date of the receivable or debt vis-à-vis the
counterparties in question. Any subsequent impairments on
these receivables are recorded under “Cost of risk” on the
income statement.
Derivative instruments in the «Trading» category include rate
swaps, caps, floors and collars, interest-rate options, futures
contracts, Matif contracts and forex options.
Hedging derivatives
Under IFRS, hedge accounting is deemed to be an
exceptional treatment and is therefore subject to very strict
requirements.
As a result, as soon as the hedge is established, Crédit du
Nord Group produces documentation indicating: the item
hedged, the risk to be hedged, the type of financial derivative
used and the evaluation method applied to measure the
effectiveness of the hedge.
The hedge must be highly effective, such that variations in
the value of the derivative hedging instrument offset variations
in the value of the hedged instrument. This effectiveness is
measured when the hedge is first set up and throughout its
life.
Depending on the type of risk hedged, the Group defines
the derivative financial instrument as a fair value hedge, a
macro fair value hedge, a cash flow hedge or a net investment
hedge.
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 at fair value through profit or loss –
Derivative financial instruments».
For interest rate derivates, accrued interest income or
expenses on the hedging derivative are booked to profit or
loss under the same heading, at the same time as the interest
income or expense related to the hedged item.
The Group discontinues the hedge, on a forward-looking
basis, if:
k the effectiveness criteria for the hedging instrument are
no longer respected;
k the financial derivative is sold or terminated early;
k the hedged item is sold before maturity.
As a result, with the exception of the last case, the balance
sheet value of the hedged item is no longer adjusted to take
into account variations in value, and cumulated gains or
losses on the previously hedged item are amortised over the
remaining life of the item.
Macro hedging
In this type of hedge, interest rate derivatives are used to hedge
the Group’s overall structural interest rate risk. Crédit du Nord
Group has decided to use the carve-out version of IAS 39 as
adopted by the European Union, which facilitates:
k the use of fair value hedge accounting for macro-hedges
used in Asset & Liability Management including customer
63
demand deposits in the fixed rate positions being
hedged;
k the application of the effectiveness test required by IAS
39, adopted in the European Union.
The main instruments used for macro fair value hedges are
interest 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.
Cash flow hedge
Crédit du Nord Group has no financial instruments in
its balance sheet classified as cash flow hedges or net
investment hedges.
Embedded derivatives
An embedded derivative is a component of a hybrid
instrument. While hybrid instruments are not measured at
fair value through profit or loss, the Group does separate
embedded derivatives from their host instrument where, on
the initiation of the transaction, the economic characteristics
and risks associated with the embedded derivatives are not
closely linked to the characteristics and risks of the host
instrument and where they meet the definition of a derivative
financial instrument. Once separated, the derivative financial
instrument is booked at fair value on the balance sheet under
“Financial assets and liabilities at fair value through profit or
loss” under the terms described above.
At period-end, monetary assets and liabilities denominated
in foreign currencies are converted into euros (Crédit du
Nord Group’s operating currency) at the prevailing spot rate.
Realised or unrealised foreign exchange losses or gains are
recognised in profit or loss.
Foreign exchange contracts are valued at the spot rate on the
balance sheet date. Forward contracts are valued using the
forward exchange rate for the remaining maturity, and changes
in fair value are recorded on the income statement.
Provisions (IAS 37) – Excluding
provisions for employee benefits
Provisions, excluding those related to employee benefits
and credit risks, represent liabilities, the timing or amount
64
of which cannot be precisely determined. Provisions are
booked where the Group has a commitment to a third party
which makes it probable or certain that it will never incur an
outflow of resources to this third party without receiving at
least an equivalent value in exchange.
The estimated amount of the expected outflow is then
discounted to present value to determine the size of the
provision, where this discounting has a significant impact.
Allocations to and write-backs of provisions are booked
through profit or loss under the items corresponding to the
future expense.
At Crédit du Nord Group, provisions are made up of provisions
for disputes and provisions for general risks.
Contingent liabilities, where they exist, are not accounted for
but are disclosed in the notes to the financial statements.
Commitments under “contrats
d’épargne logement” (mortgage savings
agreements)
Comptes d’épargne-logement (CEL or mortgage savings
accounts) and plans d’épargne-logement (PEL or mortgage
savings plans) are savings schemes for individual customers
(in accordance with Law No. 65 554 of July 10, 1965), which
combine an initial deposit phase in the form of an interestearning savings account with a lending phase where the
deposits are used to provide property loans. The latter phase
is subject to the previous existence of the savings phase and
is therefore inseparable from it. The deposits collected and
loans granted are booked at amortised cost.
These schemes generate two types of commitments for the
Group: the obligation to lend subsequently to the customer
at an interest rate set upon the signing of the agreement,
and the obligation to pay interest on the customer’s savings
in the future at an interest rate set upon the signing of the
agreement, for an indefinite period.
Commitments with future adverse effects for the Group are
subject to provisions booked as balance-sheet liabilities,
any changes in which are recorded on the interest margin
line under “Net Banking Income”. These provisions relate
exclusively to commitments under mortgage savings
accounts and schemes existing at the date of the provision’s
calculation.
Provisions are calculated for each generation of home
savings schemes, on the one hand, with no netting between
the different generations of schemes, and for all home
savings accounts taken together, which constitutes a single
all-encompassing generation, on the other hand.
During the savings phase, provisions are calculated according
to the difference between average expected outstanding
savings and minimum expected outstanding savings, both
of which are determined statistically based on historical
observations of actual customer behaviour.
During the lending phase, provisions are calculated according
to loans already issued but not yet due at the balance sheet
date, as well as future loans considered as statistically
probable on the basis of customer savings deposits on the
balance sheet at the date of calculation and on historical
Infrastructures
Major structures
50 yrs
Doors and windows, roofing
20 yrs
Façades
30 yrs
Elevators
Electrical installations
Electricity generators
Technical
installation
Air conditioning, smoke
extractors
Heating
10-30 yrs
Security & surveillance
installations
Plumbing
Fire safety equipment
A provision is booked if the discounted value of expected
future earnings for a given generation of mortgage savings
products is negative. The provision is estimated on the
basis of interest rates available to individual customer for
equivalent savings and loan products, with similar estimated
life and date of inception.
Tangible and intangible assets (IAS 16,
36, 38, 40)
Operating and investment fixed assets are booked on the
balance sheet at cost. Borrowing expenses incurred to fund
a lengthy construction period for the fixed assets are included
in the acquisition cost, along with other directly attributable
expenses. Investment subsidies received are deducted from
the cost of the relevant assets.
Fixed assets purchased before December 31, 1976 are booked
at their estimated value in use in accordance with the legal
revaluation rules published 1976.
As soon as they are fit for use as decided by the Group,
fixed assets are depreciated over their useful life using the
straight-line method.
Any residual value of the asset is deducted from its
depreciable amount.
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
and investment properties, breaking down said assets into
at least the following components, with their corresponding
depreciation periods:
Fixtures & fittings
Finishing, surroundings
10 yrs
These depreciation periods are listed as an indication only
and may vary depending on the type fixed asset.
Depreciation periods for other categories of fixed assets
depend on their useful life, usually estimated in the following
ranges:
Safety and publicity equipment
5 yrs
Transport
4 yrs
Furniture
10 yrs
IT and office equipment
3-5 yrs
Software (acquired or developed)
3-5 yrs
Business software purchased from third parties is capitalised
and depreciated using the straight-line method over a period
of 3-5 years. Software developed internally is capitalised and
depreciated, in the same way as business software, if it stems
from an IT project involving significant amounts which the
Group expects to 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 subject to impairment tests whenever
there is an indication that their value may have diminished.
Evidence of a loss in value is assessed at every balance sheet
date. Impairment tests are carried out on assets grouped
by cash-generating unit. Where a loss is established, an
impairment loss is booked to the income statement, which
may be reversed if there is an improvement 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.
The useful life and the residual value of fixed assets are
reviewed annually. If this data needs to be changed, the
depreciation schedule is modified accordingly.
65
Leases (IAS 17)
There are two categories of lease transaction:
k finance leases, which transfer substantially all the risks and
rewards incidental to ownership to the lessees;
k operating leases, which are leases other than finance
leases.
Lease finance receivables are recognised in the balance sheet
under “Finance lease receivables” and represent the Group’s
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.
Interest included in the lease payments is booked under
income from other banking activities on the income
statement such that the lease generates a constant periodic
rate of return on the lessor’s net investment. In the event of
a decline in unguaranteed residual value, used in calculating
the lessor’s gross investment in the lease financing contract,
an expense is recorded to correct the amount of financial
income already booked.
Fixed-assets arising from operating lease activities are
presented in the balance sheet under “Investment fixed
assets” and are treated accordingly. In the case of buildings,
they are booked under “Real estate leasing”. Income from
lease payments is recognised in the income statement on
a straight-line basis over the life of the lease under “Other
banking income”.
Loan commitments
Financing commitments which are not considered as financial
derivative instruments are initially booked at their fair value.
Interest income and expenses
Interest income and expenses are booked to the income
statement for all financial instruments valued at amortised
cost using the effective interest rate method.
The effective interest rate is taken to be the rate that discounts
the future cash inflows and outflows over the expected life
of the instrument to the book value of the financial asset or
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 and all types of premiums and discounts.
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 when measuring the loss of value.
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 provision.
Commissions (IAS 18)
Crédit du Nord Group books its commission revenues on the
income statement according to the nature of the transaction
for which they are charged.
These financing commitments are subsequently provisioned,
if necessary, in accordance with accounting principles
relating to “Provisions – excluding provisions for employee
benefits”.
Fees for one-off services are booked to income when the
service is provided.
Financial commitments given
Commissions that are part of the effective return of a financial
instrument are accounted for as an adjustment to the effective
return of the financial instrument.
The Group initially recognises financial guarantees given as
financial instruments at their fair value, then subsequently
values them at the higher of the two amounts between the
amount of the obligation and the initially recorded amount,
minus the amortisation of the guarantee commission where
applicable. If there is objective evidence of impairment,
66
financial guarantees given are provisioned as balance sheet
liabilities.
Fees for ongoing services are spread across the duration of
the service.
Employee benefits (IAS 19)
In accordance with IAS 19 and IFRS 2, the Group recognises
four categories of benefit:
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.
Under IAS 19, these are defined contribution plans, which
limit 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.
All commitments under defined benefit plans are valued using
an actuarial method.
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.
Said plans cover several types of benefits, notably any
residual complementary benefits afforded by specialist
pension funds.
Since 1 January 1994, pursuant to an agreement signed by all
French banks on 13 September 1993, the banking institutions
of the Group, excluding Crédit du Nord, are no longer affiliated
with specialist pension funds and are henceforth affiliated
with the ARRCO-AGIRC funds of the general system. This
agreement gave rise to residual commitments to current
retirees and active employees (for periods of employment in
the Group prior to 31 December 1993).
For Crédit du Nord, following the Branche agreement of
February 25, 2005, which provided for the amendment of
the provisions relating to complementary benefits, and in
light of the negative balance of its pension fund, an internal
agreement was signed in 2006 setting forth the following
provisions:
k for beneficiaries of complementary benefits still employed
with Crédit du Nord, the value of the complementary
benefits was transferred to a supplementary savings plan
outsourced to an insurer;
Employee benefits also include termination benefits,
complementary retirement plans and post-employment
medical care. These commitments and the coverage thereof
as well as the main underlying assumptions therein are
outlined in Note 21. 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.
Pre-retirement benefits consist exclusively of those benefits
payable by Group companies between the effective day of
departure of an employee and the date from which they are
covered by their respective pension schemes. Said benefits
are provisioned in full as soon as an agreement is signed.
«Actuarial differences» reflect the difference between actuarial
assumptions and actual figures as well as the impact of any
change in actuarial assumptions. In the specific case of
pension benefits, these differences are only booked in part
on the income statement where they exceed 10% of the
maximum between the discounted value of the commitment
and the fair value of the plan assets (referred to as the «corridor»
method). The proportion of said booked differences is equal
to the surplus defined above divided by the average residual
working lives of the beneficiaries. If a plan has plan assets,
these are valued at fair value at the balance sheet date and
are subtracted from the recorded commitments.
The annual charge booked under personnel expenses for
defined benefit plans includes:
k additional entitlements vested by each employee (current
service cost);
k interest costs arising from the unwinding of the discounting
effect;
k the expected return on plan assets (gross yield);
k the amortisation of actuarial gains and losses and past
service cost;
k the effect of settlement or curtailment of plans.
Other long-term benefits
k retirees and beneficiaries of a survivor’s pension were
given a choice of opting for a single lump-sum payment
of their complementary 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.
Any residual complementary benefits are therefore linked to
retirees and beneficiaries of a survivor’s pension who did not
opt for a single lump-sum payment of their complementary
benefits, on the one hand, and to beneficiaries no longer
employed with Crédit du Nord, on the other hands.
In various Group companies, staff may benefit from time
savings accounts as well as seniority bonuses. These
obligations are valued using the same actuarial method
described above and are provisioned in full (including any
actuarial gains or losses). These plans do not have plan
67
assets. The different commitments and the assumptions
used are detailed in Note 21. Commitment valuations
are performed by an independent actuary once a year.
For commitments excluding time savings accounts, the
valuation made on December 31 was calculated on the basis
of data as at August 31. For commitments linked to time
savings accounts, the valuation made on December 31 was
calculated on the basis of data as at December 31.
the award, without waiting for the conditions that trigger the
award to be met.
Share-based payments
Income taxes (IAS 12)
As the Group does not issue listed shares, its employees
are entitled to the equity instruments of the majority
shareholder.
The income tax expense includes:
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
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 straight-line basis, a personnel expense equivalent to the
difference between the fair value of the shares acquired and
the subscription price paid by the employee.
The fair value of the acquired securities takes into account
the cost of the associated legal obligatory holding period,
estimated using interest rates available to beneficiaries to
estimate the free disposal ability.
The overall discount therefore takes into account the total
number of shares subscribed by employees, the difference
between the acquisition price fixed by the Board of Directors
and the share price on the day of the announcement of the
subscription price, as well as the cost of the holding period
as defined by financial market parameters.
This accounting treatment complies with the provisions of
the CNC statement dated December 21, 2004, relating to
company savings plans.
Société Générale Group’s stock option plans offer certain
employees of Crédit du Nord Group the option of purchasing
or subscribing to Société Générale shares. Under IFRS 2,
these stock option plans are treated as 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
68
The cost of the plan, measured at the assignment date,
is booked under “Personnel expenses” on a straight-line
basis over the vesting period, which is the period between
the award date and the date at which the options can first
be exercised and recognised in shareholders’ equity, in
accordance with IFRIC 11.
k 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;
k deferred taxes.
Current income tax
In France, standard income tax is 33.33%. Since January 1,
2007, long-term capital gains on equityinvestments have been
taxed at 15% for shares in companies whose main activity
is real estate and tax-exempt for other equity investments
(subject to a share for fees and expenses of 5% of net income
on capital gains during the fiscal year). Added to this is a
Social Security Contribution of 3.3% (after a deduction of
EUR 0.763 million) initiated in 2000. In addition, under the
regime of parent companies and subsidiaries, dividends
received from companies in which the equity investment is
at least 5% are tax-exempt (with the exception of a share for
fees and expenses equivalent to 5% of the dividends paid).
Tax credit arising in respect of revenues from receivables
and security portfolios, when they are effectively used for the
settlement of corporate tax due for the fiscal year, are booked
under the same line item as the revenues to which they relate.
The corresponding income tax expense is kept in the income
statement under “Income tax”.
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 based on a tax rate which has
been voted or 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 taxes” on the income statement or under
“Shareholders equity” in accordance with the principle of
symmetry.
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
12 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.
Insurance activity
General framework
Antarius, a mixed (life and non-life) insurance company, is
the Group’s only consolidated insurance company, which is
jointly held with Aviva.
Capitalisation reserve
The capitalisation reserve of insurance companies consists
of capital gains generated on the sale of obligations and
is designed to offset subsequent capital losses. The
capitalisation reserve is split between technical reserves and
shareholders’ equity 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
Financial assets and liabilities
The financial assets and liabilities of companies which are
part of the subsidiary Antarius are booked and valued using
methods described above for the valuation of financial
instruments.
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. Embedded
derivatives which are not valued with reserves are booked
separately.
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 potential 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.
Terms and conditions for establishing fair
value
Fair value is the amount for which an asset can be exchanged,
or a liability settled, between knowledgeable, willing parties in
an arm’s length transaction.
The fair value used to measure a financial instrument is, firstly,
the listed price where the financial instrument is listed on an
active market. In the absence of an actively traded market,
fair value is determined using valuation techniques.
A financial instrument is regarded as listed on an active
market if quoted prices are readily and regularly available from
an exchange, dealer, broker, pricing service or regulatory
agency, and those prices represent real and regularly
occurring transactions on an arm’s length basis.
A market is considered to be inactive on the basis of
indicators such as the significant decline in trading volumes
and the level of activity on the market, the significant disparity
between prices available over time and between the different
market operators mentioned above or the length of time that
has transpired since the most recent transactions took place
on the market on an arm’s length basis.
Where the financial instrument is traded on different markets
and the Group has immediate access to these markets, the
financial instrument’s fair value is represented by the most
beneficial market price. Where there is no listing for a given
financial instrument, but the components of the instrument
are listed, fair value is equal to the sum of the listed prices
of the various components of the financial instrument and
including the buy or sell price of the net position, given the
direction of the transaction.
Where the financial instrument’s market is not actively traded,
its fair value is determined using valuation techniques (internal
valuation models). Depending on the financial instrument,
these include the use of data derived from recent transactions,
fair values of substantially similar instruments, discounted
cash flow models, option valuation models and valuation
69
parameter models. These valuations are adjusted notably
to reflect (where applicable and depending on the financial
instruments in question and their associated risks) the buy
or sell price of the net position and model risks in the case of
complex products.
Securities containing embedded derivatives
Where observable market data are used as valuation
parameters, fair value is equal to market price, and the
difference between the transaction price and the value
derived from the internal valuation model, which represents
the sales margin, is immediately booked to the income
statement. However, where the valuation parameters are
not observable or the valuation models are not recognised
by the market, the financial instrument’s fair value at the time
of the transaction is deemed to be the transaction price
and the sales margin is generally recorded on the income
statement for the duration of the product’s life, except
where held to maturity or where sold prior to maturity for
certain products, given their complexity. For issued products
subject to significant redemptions on a secondary market
and products for which there are listings, the sales margin is
recorded on the income statement in accordance with the
method used to determine the price of the product. Where
a product’s valuation parameters become observable, the
part of the sales margin not yet booked is recorded on the
income statement.
At Crédit du Nord Group, fair value of the following assets is
assumed to be their carrying amount:
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
on the balance sheet at amortised cost, for which the fair
value is given in the notes to the financial statement purely
for information purposes.
Fair value of securities
Listed securities
The fair value of listed securities is determined on the basis
of their market price at the balance sheet date.
In the case of securities containing embedded derivatives,
the fair value is calculated for the combined instrument.
Fair value of loans
k short-term loans (with an initial maturity of one year or
less), insofar as their sensitivity to interest rate risk and
credit risk for the fiscal year is negligible;
k 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.
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 internal 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 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 contracts using internal valuation models:
k for property leases (Norbail Immobilier), all future
recoverable cash flows are discounted to present value
for the remaining term of the contract, at the market rate
increased by the initial margin on the contract.
k 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.
Unlisted securities
k the fair value of unlisted equity instruments as the
proportion of the restated net asset value that the
securities represent, when possible, as the last known
price paid for the securities in purchase, subscription or
sale transaction, taking into account certain potential
valuations of assets or liabilities.
k for debt instruments, fair value is determined by discounting
future cash flows to present value at market rates.
70
Fair value of financial guarantees given
Given the nature of the financial guarantees given by Société
Générale Group, fair value is taken to be the same as book
value.
Fair value of debt
In general, in the case of floating-rate debt, current account
deposits and debts with an initial maturity of one year or
less, fair value is assumed to correspond to their carrying
amount.
For fixed-rate borrowing with initial maturities of more than
one year, and in the absence of an actively traded market
for these debts, fair value is taken to be the present value of
future cash 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
rate is a market rate as it is identical for all establishments in
the sector and the carrying amount is therefore considered
to be representative of their fair value.
The fair value of PEL deposits is assumed to be their carrying
amount minus any provisions for PEL accounts
Fair value of debt securities
Negotiable medium-term notes, excluding structured issues,
are booked at amortised cost. The fair value of issued
negotiable medium-term notes is determined using internal
valuation models and by discounting future cash flows using
a zero coupon yield curve.
Structured issues of negotiable medium-term notes are
booked at fair value, which is determined either from prices
obtained from counterparties or from internal valuation
models that use observable market parameters.
The fair value of the Crédit du Nord Group’s certificates of
deposit is assumed to be their carrying amount, insofar as
all the certificates of deposit have maturities of less than one
year.
Fair value of financial derivatives
Interest rate derivatives (interest rate swaps and
options)
Crédit du Nord Group calculates the fair value of interest
rate derivatives using internal valuation models that take into
account market data. As a result, the fair value of swaps
is 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.
Forward contracts
These are derivative financial instruments carried at fair value
on the balance sheet, with changes in fair value recognised in
profit or loss. The fair value of a forward contract is determined
by the remaining forward term at the balance sheet date.
Fair value of fixed assets
The fair value of the Group’s investment property is determined
on the basis of an external assessment by an independent
property expert.
The most important properties are assessed annually and
other properties 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 internal
valuation models (capitalisation calculation).
Fair value of subordinated debt
Given that “titres participatifs” are quoted on an active market,
their fair value is determined on the basis of their quoted price
at the balance sheet date.
Redeemable subordinated notes are comparable to listed
bonds and their fair value is taken to be their quoted price on
Euronext at the balance sheet date.
71
Note 2
Consolidation scope
31/12/2008
Consolidation
method
72
Ownership
interest
31/12/2007
Ownership
voting rights
Consolidation
method
Consolidating company
full
Ownership
interest
Ownership
voting rights
Crédit du Nord
28, place Rihour - 59800 Lille
full
Banque Rhône-Alpes
20-22, boulevard Edouard Rey
38000 Grenoble
full
99.99
99.99
full
99.99
99.99
Banque Tarneaud
2-6, rue Turgot - 87000 Limoges
full
80.00
80.00
full
80.00
80.00
Banque Courtois
33, rue de Rémusat
31000 Toulouse
full
100.00
100.00
full
100.00
100.00
Banque Kolb
1-3, place du Général-de-Gaulle
88500 Mirecourt
full
99.87
99.87
full
99.87
99.87
Banque Laydernier
10, avenue du Rhône
74000 Annecy
full
100.00
100.00
full
100.00
100.00
Banque Nuger
7, place Michel-de-l’Hospital
63000 Clermont-Ferrand
full
64.70
64.70
full
64.70
64.70
Norbail Immobilier
50, rue d’Anjou - 75008 Paris
full
100.00
100.00
full
100.00
100.00
Star Lease
59, boulevard Haussmann - 75008 Paris
full
100.00
100.00
full
100.00
100.00
Étoile ID
full
100.00
100.00
full
100.00
100.00
Norfinance Gilbert Dupont
et Associés
42, rue Royale - 59000 Lille
full
100.00
100.00
full
100.00
100.00
Société de Bourse Gilbert Dupont
50, rue d’Anjou - 75008 Paris
full
100.00
100.00
full
100.00
100.00
Norimmo
full
100.00
100.00
full
100.00
100.00
Turgot Gestion
2-6, rue Turgot - 87000 Limoges
full
80.00
100.00
full
80.00
100.00
Crédinord Cidize
full
100.00
100.00
full
100.00
100.00
Étoile Gestion
full
97.03
99.99
full
96.98
99.90
Consolidating company
31/12/2008
31/12/2007
Consolidation
method
Ownership
interest
Ownership
voting rights
Consolidation
method
Ownership
interest
Ownership
voting rights
Anna Purna
full
100.00
100.00
full
100.00
100.00
Nice Broc
full
100.00
100.00
full
100.00
100.00
Nice Carros
full
100.00
100.00
full
100.00
100.00
Kolb Investissement
full
100.00
100.00
full
100.00
100.00
Nord Assurances Courtage
28, place Rihour - 59800 Lille
full
100.00
100.00
full
100.00
100.00
Norbail Sofergie
full
100.00
100.00
full
100.00
100.00
Sfag
full
100.00
100.00
full
100.00
100.00
Partira
full
100.00
100.00
full
100.00
100.00
SC Fort De Noyelles
full
100.00
100.00
full
100.00
100.00
Banque Pouyanne
12, place d’Armes - 64300 Orthez
equity
35.00
35.00
equity
35.00
35.00
Dexia-C.L.F. Banque
1 Passerelle des Reflets
Tour Dexia La Défense 2
92919 La Défense Cedex
equity
20.00
20.00
equity
20.00
20.00
proportionate
50.00
50.00
proportionate
50.00
50.00
Antarius (1)
(1) Including sub-consolidated insurance UCITS.
In 2008, Étoile Gestion carried out a capital increase, not
subscribed by Banque Pouyanne, which led to a change in
the Group’s shareholding.
In addition, the following companies, in which the Group
holds ownership interests ranging from 33.21% to 100%,
were not included in the consolidation scope: Starquatorze,
Starquinze, Starseize, Stardixsept, Stardixhuit, Starvingt,
Star vingt trois, Starvingt six, Starvingt sept, Starvingt huit,
Starvingt neuf, Startrente, Startrente quatre, Startrente cinq,
Startrente six, Startrente sept, Startrente huit, Startrente neuf,
Starquarante, Amerasia 3, Amerasia 4, Silk1, Snc Obbola,
Snc Wav II, Immovalor service, Cofipro, Scem Expansion, Snc
Hedin, Snc Legazpi, Snc Nordenskiold and Snc Verthema.
Lastly, Nord Gérance was absorbed by Transmission
Universelle de Patrimoine (TUP) by Crédit du Nord in 2008.
73
Note 3
Risk management
This note describes the main risks incurred on the Group’s
banking activities, i.e.:
k It takes part in controlling and provisioning risks, and in the
recovery of non-disputed doubtful loans;
k credit risk: the risk of losses stemming from the inability of
a counterparty to meet its financial commitments;
k It identifies all Group risks;
k structural risk: the risk of loss or of residual depreciation
in balance sheet items arising from variations in interest
rates or exchange rates;
k liquidity risk: the risk that the Group may not be able to
meet its financial commitments when they mature;
k market risk: the risk of loss resulting from changes in
market rates and prices, in correlations between these
elements, and in their volatility.
CREDIT RISK
The provision of loans makes a significant contribution to
Crédit du Nord Group’s development and results. However,
it also exposes the Group to credit and counterparty risk,
i.e. to the risk of partial or complete default on the part of
the borrower.
For this reason, all lending activities are monitored and
controlled by a dedicated organisational structure, the risk
function, which is independent from the commercial divisions
and coordinated by the Central Risk Division (DCR), and are
subject to a body of rules and procedures governing the
granting of loans, delegation of responsibilities, monitoring
of risks, rating and classification of risks, identification of
deteriorations in credit risk and loan impairment.
Organisation
The Central Risk Division, which reports directly to
the Chairman of Crédit du Nord, contributes to the
development and profitability of the Group by ensuring that
the risk management framework in place is both sound and
effective.
To this end, it ensures that a consistent approach to risk
assessment and monitoring is applied at the Group level.
k It assists in the definition of the Group’s credit policies and
oversees its implementation;
k It defines or validates methods and procedures for
analysing, rating, approving and monitoring risk;
k It contributes to the assessment of credit risk during
the loan granting process by giving an opinion on the
transactions put forward by the commercial divisions;
74
k It monitors the consistency and adequacy of the risk
management information system.
The Central Risk Division reports on its activity and general
changes in the Group’s risk exposure to the General
Management at Monthly Risk Committee meetings. This
committee takes decisions on the main strategic issues: risktaking policies, measurement methods, analyses of portfolios
and of the cost of risk, detection of credit concentrations,
etc.
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.
Procedures and methods
Loan approval
The Group has a strict procedure for the provision of loans
to counterparties:
k a preliminary examination is conducted of all applications
for loans to ensure full information has been obtained
before any risk is incurred;
k aid in the decision-making process via the establishment
of counterparty and loan ratings;
k analysis and decision-making within the sales units and
risk units at the most relevant level in accordance with the
risk involved;
k decisions to grant loans must be formally set out in a dated
and signed written or electronic document that specifies
the limits of the commitment and the period of validity of
the approval. The notion of Group is integrated into risk
appreciation and an internal line manager is designated
for each Group identified, who has the final word on all
the Group’s entities;
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.
k loans are mainly provided for the financing of operations
and customers in mainland France. However, loans may
be provided to certain neighbouring or OECD member
countries, under specific conditions;
k division and distribution of risk;
k counter-guarantees must be sought from specialised
companies such as CREDIT LOGEMENT for residential
property loans and OSEO for loans to professionals and
businesses;
k wherever possible, loans provided to finance a business’s
operating cycle should be secured with customer
receivables;
k Investments in equipment and property by professional
and business customers should preferably be funded
through lease finance agreements;
k guarantees and collateral are systematically sought.
Measurements of internal ratings system risks
For several years, the Group has used internal quantitative
models for measuring credit risk as a tool in the loan approval
process. These models have gradually been extended to
include the main customer markets in which the Group
operates.
Risk management and control
All employees of commercial and risk functions are
responsible for risk management within the Group. It is
incumbent upon all employees to observe the limits and
terms of loan decisions, show vigilance and respond quickly
in detecting the deterioration of a counterparty’s financial
situation, and take the necessary measures to reduce the
risk incurred by the Bank. Loan decisions are addressed in
a monthly report.
The purpose of risk control is to continuously verify the
quality of counterparty risks to which Crédit du Nord Group
is exposed through its lending operations, and to make sure
that its commitments are classified in the appropriate risk
categories. This is an integral part of the processes defined
by the Group’s three-level control system (supervisory,
permanent and periodic controls).
The Central Risk Division and Periodic Control department
have developed risk analysis tools with a view to optimising
risk controls: these tools are updated on a regular basis,
notably to adjust to regulatory changes.
Beginning in 2005, these internal rating models (some of
which were based on Société Générale Group models) were
amended to take account of new regulatory requirements.
Management of non-disputed doubtful loans is usually
conferred to dedicated teams (out-of-court collection of
individual customer loans, special affairs, etc.). Where
doubtful loans become disputed, however, they are handed
over to teams specialising in collections of disputed loans.
There are three pillars to the Group’s internal rating system
for the business customer market:
Provisions for impairment
k internal rating models drawing on:
A counterparty is deemed to be in default where any of the
following takes place:
– the counterparty rating (debtor’s probability of default
at one year);
– the loan rating (loss in the event of default);
k a body of procedures which covers banking principles and
the rules for using the models (scope, frequency of rating
revision, approval procedure, etc.);
k the human judgment of those involved in the ratings
process who apply the models in compliance with the
relevant banking principles and whose expertise is
invaluable in drawing up the final ratings.
The Rating Systems Governance unit, created in 2007,
oversees the adequacy of ratings models and their rules of
use, and monitors compliance with rating procedures.
Across all of its operating markets, the Group has progressively
developed its credit risk management policy, with ratings now
forming an integral part of its day-to-day operations.
k a significant deterioration in the counterparty’s financial
situation creates a strong probability that it will not be able
to meet all of its commitments and thus represents a risk
of loss for the bank;
k one or more instalments have gone unpaid for at least 90
days and/or a collection procedure is instigated (180 days
for housing loans);
k a proceeding such as bankruptcy, compulsory liquidation
or legal protection is underway.
Once reclassified, doubtful loans are usually reviewed to
determine the possibilities of recovering the Bank’s funds.
This analysis takes into account the financial position of the
counterparty, its economic prospects and the guarantees
called up or which may be called up. The collection flows
thus determined are discounted to calculate the appropriate
level of provisioning.
75
The appropriateness of these provisions is reviewed quarterly,
under the supervision of the Central Risk Division.
Crédit du Nord also sets aside general portfolio based
provisions, which are reviewed quarterly, in order to factor in
any credit risks incurred on similar portfolio segments before
any impairments are recorded at an individual counterparty
level.
Credit risk exposure
The table below outlines the credit risk exposure of the Group’s
financial assets before any bilateral netting agreements
and collateral (notably any cash, financial or non-financial
assets received as collateral and any guarantees received
from legal entities).
2008 / 2007 change
31/12/2008
31/12/2007*
in value
in %
Assets at fair value through profit or loss (excluding floating-rate
securities)
262.8
259.4
3.4
1.3
Hedging derivatives
213.3
96.2
117.1
121.7
5,331.4
4,898.2
433.2
8.8
(in EUR millions)
(excluding floating-rate securities)
Due from banks
5,390.0
3,688.7
1,701.3
46.1
Customer loans
23,769.7
22,461.8
1,307.9
5.8
155.7
-16.7
172.4
-
1,836.0
1,615.0
221.0
13.7
59.4
3.9
55.5
-
Revaluation differences on portfolios hedged against interest rate
risk
Held-to-maturity financial assets
Exposure of balance sheet commitments, net of impairments
37,018.3
33,006.5
4,011.8
12.2
Financial commitments given
3,060.6
3,188.9
-128.3
-4.0
Financing guarantees given
7,698.7
4,906.1
2,792.6
56.9
-22.0
-16.6
-5.4
32.5
10,737.3
8,078.4
2,658.9
32.9
47,755.6
41,084.9
6,670.7
16.2
Provisions on guarantees and endorsements
Exposure of off-balance sheet commitments, net of impairment
TOTAL
* Amounts restated with respect to published financial statements
Additional analysis of the loan portfolio
(IFRS 7)
This analysis covers concentration risk as well as unpaid or
impaired loans.
Disclosures relating to risk concentration
Crédit du Nord Group’s core business is Retail Banking
in France, which naturally ensures diversification of
risks. Concentration risks are monitored with respect to
counterparties and economic sectors.
k counterparty concentration risk is reviewed during the loan
approval phase, during which the Group’s commitments
are systematically summarised: it is also subject to a special
half-yearly review (along with sector concentration risk).
At September 30, 2008, commitments linked to the top
76
10 counterparties accounted for 10.5% of outstandings
for Crédit du Nord Group’s business and professional
customers (excluding lease finance and disputed loans),
i.e. a slight decrease year-on-year. Of these counterparties,
the top three were major construction companies with
commitments primarily in the form of guarantees on very
diversified markets (with low historical risks).
k sector concentration risk is reviewed on a half-yearly basis
(at March 31 and September 30). At September 30, 2008,
a single sector accounted for over 10% of outstandings
for the Group’s business and professional customers:
construction, with a rather favourable positioning in
terms of the type of risk (see above). The No. 2 sector
was wholesale trade (9%), comprised of highly divided
outstandings. All other sectors accounted for less than 5%
of business and professional customer outstandings.
Breakdown in loan outstandings
Variation 2008 / 2007
Gross outstandings
(in EUR millions)
Performing and not unpaid or impaired
As a % of total gross outstandings
Unpaid but not impaired
Impaired
31/12/2008
31/12/2007
en valeur
en %
24,288.0
22,806.8
1,481.2
6.5
94.3%
94.8%
109.1
65.9
43.2
65.6
176.9
14.9
1,701.3
7.1
0.4%
0.3 %
1,364.3
1,187.4
5.3%
4.9%
TOTAL GROSS OUTSTANDINGS
25,761.4
24,060.1
After falling in 2007, the relative percentage of gross impaired outstandings rose slightly in 2008 due to the overall deterioration
in the economic environment. At December 31, 2008, they accounted for 5.3% of total outstandings, vs. 4.9% at end-2007 (but
5.2% at end-2006).
Unimpaired outstandings with past due amounts
Unimpaired outstandings with past due amounts increased by 65% in 2008, also due to the worsening economic environment.
The total amount nevertheless remained low (0.4% of outstanding loans).
(in EUR millions)
Business and institutional customer
loans
0-29 days
30-59 days
60-89 days
90-179 days
180 days1 yr
> 1 yr
TOTAL
6.5
1.4
1.9
-
-
-
9.8
Very small company & property
company loans
13.6
6.0
1.6
2.7
0.7
0.4
25.0
Mortgage lending
35.0
12.9
5.9
5.4
1.1
-
60.3
Other individual customer loans
TOTAL
7.3
3.4
1.3
0.5
1.4
0.1
14.0
62.4
23.7
10.7
8.6
3.2
0.5
109.1
The amounts presented in the table above refer to the total
amounts of loans (remaining principle, interest and unpaid
portions) with past due amounts. These loans primarily
concern payments less than 90 days overdue.
Impaired loans reclassified as performing loans
after renegotiation
When payments are more than 90 days overdue (180 days
for property loans), the loans are reclassified as “doubtful
loans”.
“Renegotiated” loans cover all customer groups. Renegotiated
loans are loans that have been restructured (in terms of
principal and/or interest rates and/or maturities) due to the
probability that the counterparty will be unable to meet its
commitments in the absence of such a restructuring.
A small number of customers may, on an exceptional basis,
be kept in the performing loans category where they agree
to rectify their payment status.
This does not include commercial renegotiations freely
entered into by the Bank in order to maintain the quality of its
relations with a customer.
In 2008, outstanding loans to property development
companies owned by individuals were listed under individual
loans under Basel II (they were previously classified as loans
to very small companies), which explains the very sharp
increase in outstanding loans to individuals.
These loans are identified from automated data retrieval
for small loans to individual customers, and from reporting
forms for other loans. They correspond to loans restructured
between October 1, 2007 and December 31, 2008, when
they were in default, and for which their post-restructuring
status qualified them for reclassification as performing
loans.
77
The amount of loans restructured since October 1, 2007 was
insignificant (EUR 2.6 million), as the majority of the loans
restructured over the period were still identified as being in
default at December 31, 2008.
loan basis. As a result, certain guarantees were not included,
such as guarantees on loans already benefiting from an
intrinsic guarantee (e.g. those linked to the mobilisation of
customer receivables).
Crédit du Nord Group’s banking practices call for most
customers whose loans have been renegotiated to be
maintained in the “impaired loans” category, as long as the
bank remains uncertain of their ability to meet their future
commitments (definition of default under Basel II).
k For individual customers (including property investment
companies owned by individuals): mortgages were
considered as fully guaranteed; for other medium-term
loans to property investment companies, guarantees
were noted at their recorded value in the database.
By default, other loans were considered as not covered
by guarantees.
Guarantees on impaired loans or loans with past
due amounts
k For other customers: short-term loans were considered
as not covered by guarantees, with the exception
of receivable-backed loans, which were considered as
fully guaranteed.
In 2006, Crédit du Nord developed an IT application for
managing guarantees received by the Bank.
An inventory of existing guarantees was carried out gradually
in 2006 and 2007. At end-2007, Crédit du Nord’s risk
management systems began using this new database,
with the exception of data relating to non-performing
(disputed) loans, in the process of being incorporated into
the database.
Mortgages were considered as fully guaranteed; for other
medium-term loans, guarantees were noted at their recorded
value in the database.
Some guarantees were not counted because their real value
in the event are called is difficult to estimate (particularly for
pledges of unlisted securities, personal sureties except for
those of major guarantors, etc.).
The following method was used to calculate the rate of loans
covered by guarantees: the amount of guarantees was
capped at the amount of the loan guaranteed, on a loan by
Guarantees on impaired outstandings at Dec. 31, 2008
(1)
Doubtful
Coverage rate
Non-performing
doubtful
Coverage rate
Business and institutional customer loans
133.1
41.1%
208.9
NC
Very small company & property company loans
206.7
56.1%
224.5
NC
Mortgage lending
138.7
100.0%
63.9
NC
(in EUR millions)
Other individual customer loans
TOTAL
107.4
7.9%
143.7
NC
585.9
54.2%
641.0
NC
(1) For technical reasons, impaired loans are reported excluding missed payments at this balance sheet date.
Guarantees on unimpaired outstandings with past due amounts at December 31, 2008
(in EUR millions)
Business and institutional customers
Due amounts on loans
Coverage rate
Other due amounts
Coverage rate
3.4
70.7%
6.4
NC
VSEs and Property investment companies
20.2
72.5%
4.8
NC
Housing loans to individual customers
60.3
100.0%
-
NC
Other loans to individual customers
TOTAL
12.6
23.7%
1.4
NC
96.5
83.3%
12.6
NC
For business customers, the Risk function validates procedures governing the periodic revaluation of guarantees, which is notably
performed during annual loan reviews and systematically when a loan is reclassified as doubtful.
78
STRUCTURAL INTEREST RATE AND
EXCHANGE RATE RISKS
With regard to the Group’s structural risk management, Crédit
du Nord Group distinguishes the management of structural
balance sheet risks (Asset and Liability Management or ALM)
from the management of risks related to trading activities.
k Structural interest rate and exchange rate risks are incurred
on client-driven and propriety activities (transactions
involving shareholders’ equity and investments
– Wherever possible, client-driven transactions are
hedged against interest rate and exchange rate risks,
either through micro-hedging (individual hedging
of each commercial transaction) or macro-hedging
techniques (hedging of portfolios of similar commercial
transactions within a treasury department).
– Interest rate risks on proprietary transactions must also
be hedged as far as possible. There is no exchange
rate risk on these transactions at Crédit du Nord.
The general principle is to reduce positions exposed to
interest rate and exchange rate risk as much as possible by
regularly implementing appropriate hedges.
Consequently, structural interest rate and exchange rate risks
are only borne on residual positions.
k Management of interest rate and exchange rate risks
associated with market activities is addressed in the section
entitled, “Market risks linked to trading activities”.
Organisation of the management of
structural interest rate and exchange
rate risks
The principles and standards for managing these risks are
defined by the majority shareholder. However, each entity is
primarily responsible for managing these risks.
Crédit du Nord Group therefore develops its own models,
measures its risks and sets up hedges on an ad hoc basis,
within the framework defined by these risk management
standards.
The majority shareholder’s assets and liability management
department carries out a Level Two control on the risk
management performed by the entities.
At Crédit du Nord, the ALM division, which reports directly
to the Finance Division and comes under the authority of the
Financial Management Division, is responsible for monitoring
and analysing global, interest rate, liquidity and maturity
transformation risk.
All decisions concerning the management of any interest rate
and/ or liquidity mismatch positions generated by the Group’s
client-driven activities are made by the ALM Committee,
which meets on a monthly basis under the chairmanship of
the Chairman and Chief Executive Officer. A member of the
Finance Division from the majority shareholder also sits on
this committee.
It should be noted that the ALM Committee delegates the
management of short-term interest rate risk to the Treasury
and Foreign Exchange Department. This department is
responsible for approving hedging transactions with an initial
maturity of less than one year, needed to limit short-term
interest rate exposure.
The Weekly Cash Flow Committee monitors this exposure by
examining the following indicators each week:
k the short-term fixed interest rate position. In absolute
value terms, this position must remain under EUR 1,500
million.
k exposure to short rates incurred by all transactions, which
is limited to EUR 3 million.
Structural interest rate risk
Structural interest rate risk arises from residual positions
(surplus or deficit) in fixed-rate positions with future maturities.
All assets and liabilities of Group banks, excluding those
related to trading activities, are subject to an identical set of
rules governing interest rate risk management.
The Group’s principal aim is to reduce each entity’s
exposure to interest rate risk as much as possible, once the
transformation policy has been defined.
Consequently, Crédit du Nord Group follows a policy of
systematically hedging structural interest rate risk and, where
applicable, implements the hedges needed to reduce the
exposure of Group entities to interest rate movements.
To this end, the overall interest rate risk of Crédit du Nord
Group is subject to sensitivity limits set by the Finance
Committee of the majority shareholder. Sensitivity is defined
as the variation in the net present value of future (maturities
of up to 20 years) residual fixed-rate positions (surplus or
deficits on assets and liabilities) for a 1% parallel shift in the
yield curve. The observance of these limits is verified within
the framework of regular reports to the majority shareholder.
Crédit du Nord Group’s overall limit is EUR 63.3 million
(representing around 5% of shareholders’ equity).
Over 2008, the overall sensitivity of Crédit du Nord Group’s
net present value (measured quarterly for the purpose
of Risk Phase reporting) reached EUR -15 million at
December 31, 2008, following a parallel shift in the yield
79
curve of +1%. It stood at a maximum of EUR -21 million,
below the limit of EUR 63.3 million. It remained well below
this limit in each quarter, for each period (short, medium and
long term).
Note that a sensitivity limit was set at EUR 1 million for Swiss
francs by the majority shareholder with the aim of issuing
property loans in Swiss francs to Swiss customers.
The sensitivity of the Group’s net present value in Swiss
francs came out at CHF -9,000 at December 31, 2008, i.e.
EUR -6,000 for a parallel shift of +1% of the yield curve. From
an overall standpoint or by period, sensitivity was below the
+/- EUR 1 million limit throughout 2008.
Measurement and monitoring of
structural interest rate risk
In order to quantify its exposure to structural interest rate
risks, the Group analyses all fixed-rate assets and liabilities
with future maturities to identify gaps. These positions come
from operations remunerated or charged at fixed rates and
from their maturities.
Assets and liabilities are generally analysed independently
without any a priori matching. Maturities on outstandings are
determined on the basis of the contractual terms governing
transactions (loans, etc.) or based on adopted conventions.
These conventions are the result of models of customer
behaviour patterns (special savings accounts, rates of early
repayments, etc.) as well as conventional assumptions
relating to certain aggregates (principally shareholders’ equity
and sight deposits).
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 stress tests
currently used correspond to an immediate parallel shift of
+1% and -1% in the yield curve.
The analysis of structural interest rate risks at Crédit du Nord
revealed that:
k all on- and off-balance sheet transactions are matchfunded, according to their specific characteristics
(maturity, interest rate, explicit or implicit options). A model
developed by the ALM unit («notional balance sheet»
model) is used to monitor indicators of interest rate risk
management, in particular a fixed-rate limit, as well as the
risks associated with options appearing on the balance
sheets of Group entities;
k options risk is also subject to regular monitoring and the
implementation of appropriate hedges (purchases of caps
or swaps);
80
k sight deposits and regulated savings products are subject
to specific modelling to lock in medium- and long-term
yields. The conservative nature of the models has enabled
the Group’s banks to maintain their interest margin.
Structural exchange rate risk
The overall foreign exchange position is kept within
conservative limits and remains small relative to the bank’s
net shareholders’ equity.
Hedging of interest rate and exchange
rate risks
In order to protect the bank’s balance sheet against certain
market risks, Crédit du Nord Group uses hedges designated
as fair value hedges for accounting purposes.
It also manages the exposure of its fixed-rate financial assets
and liabilities (mainly loans/borrowings, security issues and
fixed-rate securities) to risks of variations in long-term interest
rates, by setting up hedges recorded as fair value hedges for
accounting purposes, principally using interest rate swaps
and caps.
In order for these transactions to qualify as hedges, the Group
documents the hedging relationship in detail, from inception,
specifying the risk hedged, the risk management strategy
and the way in which the effectiveness of the hedge will be
documented.
The bank’s aim is to prevent an accounting reclassification of
portfolios of hedging derivatives in order to protect the bank
against an unfavourable variation in the fair value of an item
which, as long as the hedge is effective, has no impact on
profit or loss, but could affect it if the item were eliminated
from the balance sheet.
Tests are regularly carried out to prove the hedging relationship
and measure its effectiveness. These tests are both forwardlooking and retrospective.
The future effectiveness of the hedge is calculated using a
sensitivity analysis that integrates probable scenarios for
changes in market parameters.
Retrospective effectiveness is assessed by comparing the
variations in fair value of the hedging instrument with the
variations in fair value of the hedged item. The hedge is
deemed effective if variations in the fair value of the hedged
item are almost fully offset by the variations in fair value of the
hedging instrument, i.e. the ratio between the two variations
is in the 80% - 125% range (sliding quarter-on-quarter
changes).
Effectiveness is measured on a forward-looking basis each
quarter (expected effectiveness over future periods) as well
as retrospectively (actual effectiveness).
Measurement of the Group’s long-term financing requirements
is based on budget estimates and results of past transactions,
making it possible to plan appropriate financing solutions.
Crédit du Nord Group’s financing requirements result from:
LIQUIDITY RISK
Organisation of the management of
liquidity risk
The principles and standards for the management of liquidity
risk are defined by the majority shareholder. As Crédit du
Nord is nevertheless responsible for managing its liquidity
and complying with regulatory restrictions, it develops its
own models, measures its liquidity positions and finances
its activities or reinvests surplus cash in accordance with the
standards defined at the Group level.
Measurement and monitoring of liquidity
risk
Crédit du Nord acts as the central refinancing unit of the
Group’s banks and financial subsidiaries. The ALM unit
monitors outstanding loans and regulatory ratios. While shortterm liquidity management is delegated to each subsidiary
as part of its cash management activities and is subject to
certain limits.
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),
Crédit du Nord’s short-term ratio averaged 118% over 2008,
which is significantly higher than regulatory requirements.
Mismatch risk
Changes in the structure of the balance sheet are carefully
monitored and managed by the ALM unit in order to
determine and adjust the refinancing requirements of the
Group’s entities.
The elimination of the ratio of capital and long-term funds (by
the Order of June 28, 2007, repealing CRBF Regulation No.
86-17) removed the long-term funding requirement. Crédit du
Nord Group nonetheless decided to continue calculating this
indicator pending the upcoming deployment of an internal
liquidity management application.
k its commercial activities. The Group saw strong growth
in outstanding housing loans (+11.0%) and capital
expenditure loans (+13.2%) in 2008. Deposits experienced
less sustained growth, however (+2.4% for sight deposits
and -2.4% for special savings accounts);
k and the recovery of commercial paper formerly held by
funds managed by Étoile Gestion: the redemption of
about EUR 1.1 billion in securities over 2007 and 2008
put pressure on the Group’s financing requirements.
Despite the impacts of the financial crisis, Crédit du Nord
Group had no trouble securing its financing, mainly thanks to
its substantial, diversified deposits, which account for a large
portion of its short-, medium- and long-term resources. Shortterm deposits with contractual schedules (term accounts,
certificates of deposits and medium-term negotiable bonds
sold to customers) are also closely monitored on a monthly
basis as of 2008. This monitoring enabled the Group to
precisely follow developments in these outstandings over
the year.
To meet its short-term requirements, as part of its cash flow
management, the Group was led to issue a large number
of certificates of deposit (average annual outstandings of
more than EUR 5 billion) and to take advantage of the cash
injections carried out by the ECB (EUR 500 million borrowed
in October, EUR 600 million in November, EUR 950 million
in December).
As regards long-term refinancing transactions, Crédit du
Nord Group executed the following financing transactions
over 2008, for a total amount of EUR 836 million, of which
EUR 704 million disbursed prior to December 31, 2008:
k Crédit du Nord launched a EUR 514 million medium- and
long-term structured product programme;
k Crédit du Nord obtained EUR 120 million over three years
as part of the first issue of the SFEF (French Financing
Corporation);
k EUR 50 million in financing over 12 years was arranged
with the EIB;
81
k Crédit du Nord also obtained a 10-year, EUR 20 million
loan from Caisse de Refinancement de l’Habitat, designed
to finance the issuance of property loans.
In light of the liquidity crisis, Crédit du Nord Group has
undertaken to optimise the collateral at its disposal. The Group
holds significant collateral securing its borrowing capacity,
particularly with the Banque de France and the SFEF, totalling
some EUR 9 billion. In fact, this capacity exceeds the Group’s
current requirements. A project has been launched with the
aim of optimising the information system used to manage the
Group’s collateral allocation.
A quarterly report on mismatch risk is submitted to the
majority shareholder.
MARKET RISKS LINKED TO TRADING
ACTIVITIES
All capital market activities carried out by Crédit du Nord
Group are client-driven. In terms of both products and
regions, Crédit 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.
As part of this fundamental strategy
k Crédit du Nord holds only a few positions on derivatives
and regularly matches customer orders through its
shareholders Société Générale and Dexia, thereby
significantly reducing its exposure to market and
counterparty risks;
k with regard to other instruments, the trading limits imposed
on the cash position in terms of geographic regions,
authorised volumes and the duration of open positions
are determined jointly with the bank’s majority shareholder
and are kept low relative to Crédit du Nord’s equity.
Although the main responsibility for risk management falls
naturally to the front office managers, responsibility for
supervision lies with a special structure which is part of the
Treasury and Foreign Exchange Department. This structure
notably carries out the following functions:
k permanent monitoring of positions and results, in
collaboration with the front office;
82
k verification of the market parameters used to calculate
risks and results;
k daily calculation of market risk, using a formal and secure
procedure;
k daily limit monitoring for each activity.
Methods of measuring market risk
Market risk is assessed using three main indicators which are
used to define exposure limits:
k the 99% Value at Risk (VaR) method, in accordance with
the regulatory internal model, a composite indicator for
day-to-day monitoring of market risks incurred by the
bank, in particular covering most of the regulatory scope
of its trading activities;
k stress-test measurements, based on the decennial shocktype indicator, are established by Société Générale and
transmitted to Crédit du Nord so that it can incorporate
them into its limit monitoring methods;
k complementary limits (sensitivity, nominal, holding periods,
etc.) which ensure consistency between the total risk limits
and the operational limits used by the front office. These
limits also enable risks only partially detected by VaR or
stress-test measurements to be controlled (as is the case
for options).
Value at Risk (VaR) method
This method was introduced at the end of 1996 and is
constantly being improved with the addition of new risk
factors and the extension of the scope covered. The new risk
parameters and changes in the scope of the portfolios are
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.
The method used is the “historical simulation” method, which
is based on the following principles:
k the creation of a database containing historical information
on the main risk factors which are representative of the
Société Générale Group’s positions (interest rates, share
prices, exchange rates, commodity prices, volatility,
credit spreads, etc.). VaR is therefore calculated using a
database of several thousand risk factors;
k the definition of 250 scenarios, corresponding to one-day
variations in these market parameters over a sliding one
year period;
k the application of these 250 scenarios to the daily market
parameters;
k the revaluation of daily positions, on the basis of the
adjusted daily market conditions, and on the basis of
a revalaution taking 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.
Crédit du Nord has access to an application developed by
Société Générale known as TRAAB (gross annual actuarial
rate of return) used by the Treasury and Foreign Exchange
Department since June 30, 1998, which incorporates the data
(taken from the Treasury and Foreign Exchange Department’s
operating system) required to calculate risk profiles on a daily
basis. This information is also used by Société Générale for
its own consolidated risk monitoring. The model is based on
a historical data series of daily movements in interest rate
or exchange rate instruments, which are applied to daily
positions in order to measure risk with a 99% confidence
interval and sensitivity to 10 basis points.
The table below shows the evolution of the Group’s 99%
Value at Risk over the course of 2008. The values given have
the following characteristics:
k change in the portfolio over a holding period of 1 day;
k a confidence interval of 99%;
k historical data considered for the last 260 business
days.
Trading Value at Risk (VaR): breakdown by risk factor
1 day – 99% / FY 2008
(in EUR thousands)
02/01/2008
Foreign
exchange
Treasury
Currency
Securities and offbalance sheet
interest rate
Compensation
effect
Overall
-37
-76
-150
99
-164
(1)
-439
-139
Minimum
-406
-327
-203
Maximum
-37
-46
-84
NS (1)
-96
-108
-151
134
-221
-116
-95
-110
99
-222
Average
31/12/2008
LIMITS
-1,000
NS
-1,000
(1) Compensation is not significant, minimum/maximum potential losses do not occur on the same date.
A confidence interval of 99% means that over a one-day period, there is a 99% probability that an eventual loss will not exceed
the defined value.
Compensation is defined as the difference between the total VaR and the sum of the VaRs per risk factor. It reflects the extent of
elimination between the different type of risks (interest rate, equity, exchange rate, commodities).
83
Value at Risk (1 DAY - 99%)
(in EUR millions)
-500
-400
-300
-200
-100
0
02/01/2008
02/03/2008
02/05/2008
02/09/2008
02/11/2008
Limitations in the VaR calculation
Crédit du Nord controls the limitations of the VaR model by:
The VaR assessment is based on a conventional model and
assumptions: the main methodological limitations therein are
as follows:
k systematically assessing the relevance of the model by
back-testing to verify that the number of days for which
the negative result exceeds the VaR complies with the
99% confidence interval;
k the use of «1-day» shocks assumes that all positions can
be unwound or hedged within one day, which is not the
case for some products and in some crisis situations;
k the use of the 99% confidence interval does not take into
account any losses arising beyond this interval; the VaR
is therefore an indicator of losses under normal market
conditions and does not take into account exceptionally
large fluctuations;
k VaR is calculated using closing prices, so intra-day
fluctuations are not taken into account;
k there are a number of approximations in the VaR
calculation. For example, benchmark indices are used
instead of certain risk factors and, in the case of some
activities, not all of the relevant risk factors are taken into
account which can be due to difficulties in obtaining daily
data, and options held in the trading portfolio are not taken
into account.
84
02/07/2008
k supplementing the VaR system with stress test
measurements. Note that, in today’s environment of
dislocated markets, the historical 99% 1-day VaR is less
relevant than other risk indicators, such as stress tests.
Allocation of limits and organisation
of limit monitoring
Capital market exposure limits are allocated as follows: a
proposal is drawn up internally and presented to the Executive
Committee. If approved, it is transmitted to the Risk Division
of Société Générale (the market risk team) for their opinion.
The proposed limits are reviewed at least every two years,
and the last review was carried out in September 2007.
Once a final opinion has been received, the limits are sent
by Société Générale to the Chairman’s office and are then
compiled and integrated into the daily monitoring and
reporting system.
A monitoring report is submitted daily to Société Générale,
in which any overruns are reported.
Counterparty exposure limits are allocated as follows:
k in the case of banking counterparties, the Treasury and
Foreign Exchange Department opens a file for each
counterparty and records the details of requests for credit
lines by product and duration. The file is then submitted to
the relevant teams at Société Générale and to the Central
Risk Division for approval and validation. The allocated
limits are entered into the daily monitoring and reporting
systems;
k where the counterparty is a customer, the manager in
charge of the account asks for the limits from the Regional
and Subsidiary Risk Divisions. These limits allocated for
the products are then fed into the monitoring systems.
The Finance Division also receives a weekly status report on
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 Financial Officer also receive a quarterly report on
changes in limits.
Note 4
2008 / 2007 change
31/12/2008
31/12/2007
in value
in %
Cash
166.4
153.8
12.6
8.2
Due from central banks
515.9
1,199.1
-683.2
-57.0
1.7
1.2
0.5
41.7
TOTAL
684.0
1,354.1
-670.1
-49.5
Fair value
684.0
1,354.1
(in EUR millions)
Related receivables
85
Note 5
Financial assets at fair value through profit or loss
31/12/2008
(in EUR millions)
31/12/2007
Valuation
determined
using prices
published
on an active
market
Valuation
technique
based on
observable
market
data
Valuation
not based
on market
data
-
-
-
Valuation
determined
using prices
published
on an active
Total
market
Valuation
technique
based on
observable
market
data
Valuation
not based
on market
data
Total
-
-
-
ASSETS
TRADING PORTFOLIO
Treasury notes and similar securities
-
-
Bonds and other debt securities
53.1
-
-
53.1
61.4
-
-
61.4
Shares and other equity securities (1)
25.3
-
-
25.3
46.0
-
-
46.0
Other financial assets
SUB-TOTAL TRADING ASSETS
FINANCIAL ASSETS USING
FAIR VALUE OPTION THROUGH
PROFIT OR LOSS
-
-
-
-
-
-
-
-
78.4
-
-
78.4
107.4
-
-
107.4
-
-
-
-
1.0
-
-
1.0
4.3
205.4
-
209.7
5.6
191.4
-
197.0
Shares and other equity securities (1)
1.7
962.4
-
964.1
3.4
1,477.6
-
1,481.0
-
-
-
-
-
-
-
-
6.0
1,167.8
-
1,173.8
10.0
1,669.0
-
1,679.0
-
-
-
-
-
-
-
-
Interest rate instruments
-
73.1
-
73.1
-
56.5
-
56.5
Firm transactions
-
65.4
-
65.4
-
54.1
-
54.1
-
65.4
-
65.4
-
54.1
-
54.1
Other financial assets
SUB-TOTAL OF FINANCIAL ASSETS
USING FAIR VALUE OPTION
THROUGH PROFIT OR LOSS
SUB-TOTAL OF SEPARATE
ASSETS RELATING TO
EMPLOYEE BENEFITS
TRADING DERIVATIVES
Swaps
FRA
Options
-
-
-
-
-
-
-
7.7
-
7.7
-
2.4
-
2.4
Options on organised markets
-
-
-
-
-
-
-
-
OTC options
-
-
-
-
-
-
-
-
Caps, floors, collars
-
7.7
-
7.7
-
2.4
-
2.4
Foreign exchange instruments
-
158.2
-
158.2
-
80.5
-
80.5
Firm transactions
-
155.7
-
155.7
-
79.5
-
79.5
Options
-
2.5
-
2.5
-
1.0
-
1.0
Equity and index instruments
-
-
-
-
-
-
-
-
Other forward financial instruments
-
-
-
-
-
-
-
-
Instruments on organised markets
-
-
-
-
-
-
-
-
OTC instruments
SUB-TOTAL TRADING
DERIVATIVES
TOTAL ASSETS AT FAIR VALUE
THROUGH PROFIT OR LOSS (1)
-
-
-
-
-
-
-
-
-
231.3
-
231.3
-
137.0
-
137.0
84.4
1,399.1
-
1,483.5
117.4
1,806.0
-
1,923.4
(1) Including UCITS.
86
-
Note 5 bis
31/12/2008
(in EUR millions)
31/12/2007
Valuation
determined
using prices
published
on an active
market
Valuation
technique
based on
observable
market
data
Valuation
determined
using prices
published
on an active
Total
market
Valuation
technique
based on
observable
market
data
Valuation
not based
on market
data
Valuation
not based
on market
data
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2.8
-
-
-
2.8
1.0
-
-
1.0
-
-
-
-
-
-
-
2.8
-
-
2.8
1.0
-
-
1.0
-
68.3
-
68.3
-
32.4
-
32.4
LIABILITIES
TRADING PORTFOLIO
Securitised debt payables
Amounts payable on borrowed
securities
Bonds and other debt securities sold
short
Shares and other equity securities
sold short
Other financial liabilities
SUB-TOTAL TRADING
LIABILITIES
TRADING DERIVATIVES
Firm transactions
-
61.7
-
61.7
-
29.2
-
29.2
Swaps
-
61.7
-
61.7
-
29.2
-
29.2
FRAs
-
-
-
-
-
-
-
-
Options
-
6.6
-
6.6
-
3.2
-
3.2
-
-
-
-
-
-
-
-
Options on organised markets
OTC options
-
-
-
-
-
-
-
-
-
6.6
-
6.6
-
3.2
-
3.2
-
133.6
-
133.6
-
89.2
-
89.2
Firm transactions
-
131.0
-
131.0
-
88.1
-
88.1
Options
-
2.6
-
2.6
-
1.1
-
1.1
Equity and index instruments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
OTC instruments
-
-
-
-
-
-
-
-
SUB-TOTAL TRADING DERIVATIVES
SUB-TOTAL FINANCIAL LIABILITIES
USING FAIR VALUE OPTION
THROUGH PROFIT OR LOSS
TOTAL FINANCIAL LIABILITIES AT
FAIR VALUE THROUGH PROFIT OR
LOSS
-
201.9
-
201.9
-
121.6
-
121.6
-
473.1
-
473.1
-
668.1
-
668.1
2.8
675.0
-
677.8
1.0
789.7
-
790.7
31/12/2008
(in EUR millions)
TOTAL OF FINANCIAL LIABILITIES
MEASURED USING FAIR VALUE
OPTION THROUGH PROFIT OR
LOSS (1)
31/12/2007
Fair
value
Amount
repayable
at maturity
Difference between
fair value and amount
repayable at maturity
Fair
value
Amount
repayable
at maturity
Difference between
fair value and amount
repayable at maturity
473.1
557.3
-84.2
668.1
729.4
-61.3
(1) The variation in fair value attributable to the Group’s own credit risk stood at EUR -28.4 million at December 31, 2008.
87
Note 6
Hedging derivatives
31/12/2008
(in EUR millions)
Fair value hedge
(1)
31/12/2007
Assets
Liabilities
Assets
Liabilities
213.3
282.8
96.2
79.3
Firm transactions
Swaps
Options
Caps. floors. collars
Cash flow hedge
TOTAL
(1) Including Macro Fair Value Hedge derivatives.
88
204.6
282.8
89.0
79.3
204.6
282.8
89.0
79.3
8.7
-
7.2
-
8.7
-
7.2
-
-
-
-
-
213.3
282.8
96.2
79.3
Note 7
31/12/2008
(in EUR millions)
31/12/2007
Valuation
determined
using prices
published
on an
active market
Valuation
technique
based on
observable
market data
Total
Valuation
determined
using prices
published
on an
active market
Valuation
technique
based on
observable
market data
Valuation
not based on
market data
Valuation
not based on
market data
Total
500.5
-
-
500.5
712.0
-
-
712.0
CURRENT ASSETS
Treasury notes and similar
securities
o/w related receivables
-
-
-
4.7
-
-
-
12.4
o/w write-downs
-
-
-
-
-
-
-
-
Bonds and other debt
securities
1,079.6
3,751.3
-
4,830.9
820.4
3,349.3
16.5
4,186.2
-
-
-
54.2
-
-
-
18.9
o/w write-downs
-
-
-
-9.7
-
-
-
-
1.0
94.8
3.4
99.2
4.5
-
108.5
113.0
-
-
-
-
-
-
-
-
Shares and other equity
securities (1)
o/w impairments
SUB-TOTAL
Long-term investment
Securities
-
-
-
-4.6
-
-
-
-4.7
1,581.1
3,846.1
3.4
5,430.6
1,536.9
3,349.3
125.0
5,011.2
5.0
0.4
221.0
226.4
0.6
-
129.2
129.8
-
-
-
0.3
-
-
-
0.3
o/w impairments
-
-
-
-4.7
-
-
-
-5.3
5.0
0.4
221.0
226.4
0.6
-
129.2
129.8
1,586.1
3,846.5
224.4
5,657.0
1,537.5
3 349.3
254.2
5,141.0
-
-
-
-
-
-
-
-
SUB-TOTAL
TOTAL AVAILABLE-FORSALE FINANCIAL ASSETS
o/w loaned securities
(1) Including UCITS.
89
Movements in available-for-sale assets
2008
(in EUR millions)
2007
Balance at January 1
5,141.0
461.7
Acquisitions
1,392.4
3,486.2
Disposals/redemptions/mergers
-728.5
-281.4
Reclassification (outflows) of available-for-sale financial assets
-33.1 (2)
-
-
1,514.7
-111.5 (3)
-70.7
Other reclassifications
Gains and losses on changes in fair value
Change in write-downs on fixed-income securities
-9.7
-
0.8
-0.6
Change in related receivables
5.1
31.1
Foreign exchange differences
0.5
-
5,657.0
5,141.0
Change in impairment of equity instruments
BALANCE AT DECEMBER 31
(2) Given that certain available-for-sale assets (OBSAARs) were intended to be held to maturity, a reclassification at fair value was carried out between these two categories
at December 31, 2008, in the amount of EUR 33.1 million (see Note 11).
(3) The difference from the Change in value of financial instruments line under Shareholders’ equity, totalling EUR 41.2 million, came from the Insurance - Deferred profit sharing line.
Bear in mind that the sharp rise in available-for-sale financial
assets can be attributed to an increase of EUR 2.8 billion in
certificates of deposit and French medium-term negotiable
bonds at Crédit du Nord, in addition to the reclassification of
Antarius’ assets from the category of financial assets measured
at fair value through profit or loss for EUR 1.5 billion (value at
January 1, 2007).
Note 8
Due from banks
2008 / 2007 change
(in EUR millions)
Current accounts
Overnight deposits and loans and others
Loans secured by overnight notes
Related receivables
TOTAL DEMAND AND OVERNIGHTS
Term deposits and loans
Loans secured by notes and securities
Securities acquired under term repurchase agreements
31/12/2007
in value
in %
825.9
1,866.6
1,137.9
-312.0
-27.4
246.7
1,619.9
-
-
-
-
-
1.2
2.5
-1.3
-52.0
2,693.7
1,387.1
1,306.6
94.2
856.3
782.8
73.5
9.4
-
-
-
-
1,716.5
1,389.0
327.5
23.6
Subordinated loans and participating securities
89.1
89.6
-0.5
-0.6
Related receivables
34.9
40.2
-5.3
-13.2
2,696.8
2,301.6
395.2
17.2
5,390.5
3,688.7
1,701.8
46.1
-0.5
-
-0.5
-
5,390.0
3,688.7
1,701.3
46.1
5,389.9
3,688.4
TOTAL TERM
TOTAL GROSS
PROVISIONS FOR IMPAIRMENT
TOTAL NET
Fair value of amounts due from banks
Note that, at December 31 2008, EUR 2,017.3 million of the
total amount due from banks represented transactions with
Société Générale Group (EUR 449.4 million at December
31, 2007).
90
31/12/2008
Amounts due from banks outside France represented
23.0% of the total amount on the balance sheet. These
banks are mainly situated in the European Economic Area.
Other countries represented 3.8% of the balance-sheet
outstanding.
Note 9
Customer loans
2008 / 2007 change
(in EUR millions)
Trade notes
Related receivables
TOTAL TRADE NOTES
31/12/2008
31/12/2007
in value
in %
758.4
684.1
74.3
10.9
0.4
0.2
0.2
100.0
758.8
684.3
74.5
10.9
2,146.3
2,193.9
-47.6
-2.2
71.1
67.7
3.4
5.0
Other customer loans
Short-term loans
Export loans
Equipment loans
Housing loans
Other loans
Related receivables
TOTAL OTHER CUSTOMER LOANS
Overdrafts
Related receivables
TOTAL OVERDRAFTS
GROSS AMOUNT
4,907.2
4,334.0
573.2
13.2
11,137.1
10,034.5
1,102.6
11.0
2,985.8
2,609.1
376.7
14.4
71.5
66.2
5.3
8.0
21,319.0
19,305.4
2,013.6
10.4
2,054.8
2,000.3
54.5
2.7
38.0
37.9
0.1
0.3
2,092.8
2,038.2
54.6
2.7
24,170.6
22,027.9
2,142.7
9.7
DEPRECIATION
-676.3
-622.0
-54.3
8.7
-646.1
-593.0
-53.1
9.0
Depreciation for groups of homogeneous receivables
NET AMOUNT
Securities purchased under resale agreements (including related
receivables)
TOTAL AMOUNT OF CUSTOMER LOANS
Fair value of customer loans
-30.2
-29.0
-1.2
4.1
23,494.3
21,405.9
2,088.4
9.8
275.4
1,055.9
-780.5
-73.9
23,769.7
22,461.8
1,307.9
5.8
23,278.1
22,184.2
Outstanding loans granted by the Group increased in total by 5.8% vs. December 31, 2007, including an 11.0% increase in
housing loans and a 13.2% increase in equipment loans.
The provisioning rate for doubtful customer loans was 50.4% vs. 52.3% at December 31, 2007 (excluding depreciation for groups
of homogeneous receivables).
91
Breakdown of other outstanding performing customer loans
2008 / 2007 change
31/12/2008
31/12/2007
in value
in %
20 386,7
18 480,1
1 906,6
10,3
Business customers
8 979,7
8 081,1
898,6
11,1
10 504,3
9 532,2
972,1
10,2
-19,5
(in EUR millions)
Non-financial customers
Local authorities
Professional customers
Governments and central administrations
Others
Financial customers
TOTAL OTHER OUTSTANDING PERFORMING CUSTOMER LOANS
(1)
9,1
11,3
-2,2
775,4
742,2
33,2
4,5
0,7
1,0
-0,3
-30,0
117,5
112,3
5,2
4,6
1,8
-
1,8
-
20 388,5
18 480,1
1 908,4
10,3
(1) Excluding related receivables.
Other customer loans are mainly based in France (96.4% of total). The remaining amount is represented for the most part by
customers who are nationals of one of the member states of the European Economic Area or Monaco (1.9% of the remaining
amount).
Analysis of other outstanding performing customer loans
Business loans and other outstanding performing customer loans, including related receivables but excluding individual customers,
can be broken down as follows:
Food and agriculture 2.8%
Consumer goods 1.6%
Metals, minerals Ind. 2.3%
Others 1.2%
Finance and insurance
15.5%
Machinery and equipment
1.7%
Construction 3.3%
Public administrations 0.2%
Healthcare, social services
2.6%
Education, associations
1.0%
Transport and logistics
2.3%
Wholesale trade 7.8%
Multi-activity conglomerates
3.8%
Automobiles 0.7%
Media and telecoms
1.6%
Retail trade 6.7%
Hotels and catering
3.9%
Utilities
1.3%
Forestry, paper
0.8%
Business services
6.9%
Chemicals, rubber, plastic
0.9%
92
Retail estate
31.1%
Note 10
2008 / 2007 change
(in EUR millions)
Non-real estate lease financing agreements
Real estate lease financing agreements
Related receivables
SUB-TOTAL
Depreciation for lease finance assets
SUB-TOTAL
NET AMOUNT
Fair value of receivables on lease financing and similar assets
31/12/2008
31/12/2007
in value
in %
1,414.5
1,205.1
209.4
17.4
432.6
419.3
13.3
3.2
0.2
0.2
-
-
1,847.3
1,624.6
222.7
13.7
-10.5
-9.3
-1.2
12.9
-0.8
-0.3
-0.5
166.7
-11.3
-9.6
-1.7
17.7
1,836.0
1,615.0
221.0
13.7
1,822.3
1,588.5
Lease financing outstandings increased by 13.7% vs. December 31, 2007, thereby continuing the trend observed in recent fiscal
years. The increase was due to Star Lease, a Crédit du Nord Group leasing company. Its activity breaks down as follows: 57%
industrial equipment, 37% transport equipment, 5% IT equipment and 1% office equipment.
Breakdown of lease financing outstandings (excluding doubtful outstandings)
(in EUR millions)
Gross investments
Less than one year
1-5 years
More than five years
31/12/2008
31/12/2007
1,987.3
1,730.3
587.9
511.6
1,133.9
971.5
265.5
247.2
1,783.1
1,572.0
Less than one year
568.9
497.0
1-5 years
987.4
859.0
Present value of minimum payments receivable
More than five years
Unearned financial income
Non-guaranteed residual values receivable by the lessor
226.8
216.0
140.8
105.7
63.4
52.6
93
Note 11
2008 / 2007 change
(in EUR millions)
31/12/2008
31/12/2007
in value
in %
-
-
-
-
Listed
-
-
-
-
Unlisted
-
-
-
-
Related receivables
-
-
-
-
59.4
3.9
55.5
-
Listed
43.7
3.8
39.9
-
Unlisted
15.4
-
15.4
-
0.3
0.1
0.2
-
Related receivables
Provisions for impairment
TOTAL HELD-TO-MATURITY FINANCIAL ASSETS
Fair value of held-to-maturity financial assets
-
-
-
-
59.4
3.9
55.5
-
59.5
4.0
Changes in held-to-maturity financial assets
(in EUR millions)
2008
2007
Balance at January 1
Acquisitions
3,9
34,6
23,7 (1)
-
-1,5
-29,7
Redemptions (at maturity)
Changes in impairment
Reclassification (inflows) of held-to-maturity financial assets
-
-
33,1 (2)
-
0,2
-1,0
59,4
3,9
Others
BALANCE AT DECEMBER 31
(1) Exclusively OBSAARs.
(2) Given that certain available-for-sale assets (OBSAARs) were intended to be held to maturity, a reclassification at fair value was carried out between these two categories at
December 31, 2008, in the amount of EUR 33.1 million. The breakdown of this reclassification is presented in the table below:
(in EUR millions)
Original portfolio
Available-for-sale securities
Change in fair value:
Recorded under unrealised or deferred gains or losses
Final portfolio
Held-to-maturity securities
94
Book value at Dec. 31, 2007:
32.9
over 2008:
0.2
Book value at transfer date (Dec. 31, 2008):
33.1
Note 12
Tax assets and liabilities
2008 / 2007 change
31/12/2008
31/12/2007*
in value
in %
Current tax assets
187.0
236.8
-49.8
-21.0
Deferred tax assets
126.4
92.5
33.9
36.6
k on balance sheet items
125.6
92.0
33.6
36.5
(in EUR millions)
k on items credited or charged to shareholders’ equity
for unrealised gains or losses
0.8
0.5
0.3
60.0
313.4
329.3
-15.9
-4.8
Current tax liabilities
115.4
259.5
-144.1
-55.5
Deferred tax liabilities
323.8
211.5
112.3
53.1
k on balance sheet items
342.6
209.9
132.7
63.2
TOTAL TAX ASSETS
k on items credited or charged to shareholders’ equity
for unrealised gains or losses
TOTAL TAX LIABILITIES
-18.8
1.6
-20.4
-
439.2
471.0
-31.8
-6.8
Deferred taxes on shareholders’ equity pertain to unrealised gains or losses on available-for-sale securities and on deferred profit
sharing for the insurance business
Note 13
Other assets and liabilities
2008 / 2007 change
(in EUR millions)
31/12/2008
31/12/2007*
in value
in %
7.4
14.5
-7.1
-49.0
-
95.5
-95.5
-100.0
OTHER ASSETS
Securities transactions
Collective management of sustainable development passbooks
(e.g. Codevi)
Guarantee deposits paid
100.1
1.4
98.7
-
Accruals and other liabilities
271.7
274.5
-2.8
-1.0
Depreciation
-0.2
-1.9
1.7
-89.5
309.2
262.2
47.0
17.9
688.2
646.2
42.0
6.5
Accounts payable after cashing
246.8
280.8
-34.0
-12.1
134.7
62.3
72.4
116.2
Guarantee deposits received
10.7
11.3
-0.6
-5.3
Expenses payable on employee benefits
79.4
89.2
-9.8
-11.0
494.9
607.5
-112.6
-18.5
Other insurance assets
TOTAL OTHER ASSETS
OTHER LIABILITIES
Accruals and other liabilities
Other insurance liabilities
TOTAL OTHER LIABILITIES
6.1
7.2
-1.1
-15.3
972.6
1 058.3
-85.7
-8.1
* Amounts adjusted with respect to published financial statements.
95
Note 14
Fixed assets
Operating fixed assets
Gross value at
31/12/2008
Cumulated
amortisation
and depreciation
at 31/12/2008
Net
value at
31/12/2008
Net
value at
31/12/2007
Intangible assets
280.8
-156.3
124.5
115.0
Software created
176.9
-86.7
90.2
87.7
Software purchased
79.0
-69.5
9.5
10.3
Other intangible fixed assets
24.9
-0.1
24.8
17.0
Tangible fixed assets
728.7
-443.5
285.2
286.4
Land and buildings
172.2
-56.1
116.1
110.3
IT hardware
125.9
-103.1
22.8
24.9
Other tangible fixed assets
430.6
-284.3
146.3
151.2
1,009.5
-599.8
409.7
401.4
(in EUR millions)
TOTAL OPERATING FIXED ASSETS
Gross book value
Amount at
31/12/2007
Inflows
Outflows
Other
movements
Amount at
31/12/2008
153.7
29.2
-6.0
-
176.9
Software purchased
75.8
4.4
-1.6
0.4
79.0
17.0
8.5
-
-0.6
24.9
246.5
42.1
-7.6
-0.2
280.8
Land and buildings
160.5
8.0
-0.5
4.2
172.2
IT hardware
122.9
7.6
-5.4
0.8
125.9
419.1
26.5
-9.8
-5.2
430.6
702.5
42.1
-15.7
-0.2
728.7
Amount at
31/12/2007
Allocations
Write-backs
used
Other
movements
Amount at
31/12/2008
Software created
-66.0
-26.7
6.0
-
-86.7
Software purchased
-65.5
-5.5
1.5
-
-69.5
(in EUR millions)
Intangible fixed assets
Software created
TOTAL
TOTAL
Amortisation and depreciation
(in EUR millions)
TOTAL
-
-0.1
-
-
-0.1
-131.5
-32.3
7.5
-
-156.3
Land and buildings
-50.2
-4.0
0.5
-2.4
-56.1
IT hardware
-98.0
-10.3
5.2
-
-103.1
TOTAL
96
-267.9
-28.0
9.2
2.4
-284.3
-416.1
-42.3
14.9
-
-443.5
Investment fixed assets
(in EUR millions)
Gross value
at 31/12/2008
Cumulated
amortisation
and depreciation
at 31/12/2008
Net
value at
31/12/2008
Net
value at
31/12/2007
Non-operating property
20.1
-9.2
10.9
10.9
Operating lease activities
13.4
-7.5
5.9
4.6
Real estate leasing
13.4
-7.5
5.9
4.6
Equipment leasing
-
-
-
-
33.5
-16.7
16.8
15.5
TOTAL INVESTMENT FIXED ASSETS
Gross book value
Amount at
31/12/2007
Inflows
Outflows
Other
movements
25.8
0.4
-0.6
-5.5
20.1
13.4
-
-
-
13.4
(in EUR millions)
Amount at
31/12/2008
Real estate leasing
13.4
-
-
-
13.4
Equipment leasing
-
-
-
-
-
39.2
0.4
-0.6
-5.5
33.5
Amount at
31/12/2007
Allocations
Write-backs
used
Other
movements
Amount at
31/12/2008
-14.9
-0.8
0.8
5.7
-9.2
-8.8
-0.3
1.6
-
-7.5
-8.8
-0.3
1.6
-
-7.5
TOTAL
Amortisation and depreciation
(in EUR millions)
Real estate leasing
Equipment leasing
TOTAL
-
-
-
-
-
-23.7
-1.1
2.4
5.7
-16.7
97
Note 15
Goodwill
(in EUR millions)
Gross value at 31/12/2007
48.6
Acquisitions and other increases
5.2
Disposals and other decreases
-
GROSS VALUE AT 31/12/2008
53.8
Impairment of goodwill at 31/12/2007
-
Impairment losses
-
IMPAIRMENT OF GOODWILL AT 31/12/2008
-
Under IFRS, goodwill is no longer amortised. It is subject to an impairment test once a year.
Net value at 31/12/2007
48.6
NET VALUE AT 31/12/2008
53.8
Main sources of net goodwill at December 31, 2008
(in EUR millions)
Banque Courtois
10.2
Banque Laydernier
12.8
Banque Kolb
22.3
Banque Tarneaud
3.3
Fortis branches
5.2
NET VALUE AT 31/12/2008
53.8
In 2008, Crédit du Nord Group acquired six branches from Fortis Banque France (Crédit du Nord: four branches, Banque Kolb:
one branch, Banque Courtois: one branch). This led to the recognition of EUR 5.2 million in goodwill.
Note 16
Summary of depreciations
Depreciation and amortisation
(in EUR millions)
Notes
Write-backs Write-backs
Allocations
available
used
Others
Asset
depreciations
at 31/12/2008
Banks
8
-
0.5
-
-
-
0.5
Customer loans
9
593.0
268.2
-160.8
-54.3
-
646.1
Provisions for homogeneous receivables
9
29.0
1.9
-0.7
-
-
30.2
Lease financing and similar agreements (1)
10
9.6
9.2
-5.3
-1.2
-1.0
11.3
7
10.0
10.5
-1.6
-
-
18.9
Held-to-maturity assets
11
-
-
-
-
-
-
Fixed assets
14
11.2
0.1
-1.7
-0.4
-5.7
3.5
Others
13
1.9
0.1
-0.8
-
-1.0
0.2
654.7
290.5
-170.9
-55.9
-7.7
710.7
TOTAL
(1) O/w net provisions impacting counterparty risk: EUR 13.1 million.
98
Asset
depreciations
at 31/12/2007
Provisions
(in EUR millions)
Provisions at
Write-backs Write-backs
31/12/2007 Allocations
available
used
Discount
effect
Provisions at
Others 31/12/2008
Provisions for post-employment benefits
60.7
18.6
-0.4
-12.5
Provisions for long-term benefits
32.5
7.5
-6.1
-5.8
-
-
-
-
Provisions for other employee benefits
4.6
1.7
-1.4
-1.9
-
-
3.0
Provisions for property risks (2)
0.9
-
-
-0.5
-
-
0.4
-2.9
-1.1
0.7
1.0
12.7
Provisions for severance pay
Provisions for disputes (3)
-
-
66.4
-
-
28.1
-
-
-
13.8
1.2
Provisions for off-balance sheet commitments with
customers
16.6
12.4
-7.0
-
-
-
22.0
Other provisions (3) (4)
14.0
0.1
-1.7
-
-
-
12.4
143.1
41.5
-19.5
-21.8
0.7
1.0
145.0
TOTAL
(2) Provisions for property risks cover losses termination loss relative to investments in property programmes.
(3) O/w net write-backs impacting other risks: EUR 1.5 million.
(4) O/w provisions for home savings: EUR 10.9 million at December 31, 2008 vs. EUR 12.6 million at December 31, 2007, i.e. a net write-back of EUR 1.7 million over the year.
Note 17
Due to banks
2008 / 2007 change
31/12/2008
31/12/2007
in value
in %
Current accounts
248.2
312.8
-64.6
-20.7
Overnight deposits and borrowings
378.8
178.9
199.9
111.7
-
-
-
-
(in EUR millions)
Borrowings secured by overnight notes
Securities sold under repurchase agreements overnight
Related payables
TOTAL DEMAND DEPOSITS
Term deposits and borrowings
Borrowings secured by notes and securities
Securities sold under term repurchase agreements
Related payables
TOTAL TERM DEPOSITS
Revaluation of hedged items
TOTAL
Fair value of amounts due to banks
-
-
-
-
1.0
2.6
-1.6
-61.5
628.0
494.3
133.7
27.0
3,311.8
1,328.5
1,983.3
149.3
-
500.0
-500.0
-
-
108.5
-108.5
-
21.2
14.3
6.9
48.3
3,333.0
1,951.3
1,381.7
70.8
27.3
-23.2
50.5
-
3,988.3
2,422.4
1,565.9
64.6
3,988.3
2,422.4
Note that at December 31, 2008, EUR 1,015.9 million of the total due to banks represented transactions with Société Générale
Group.
99
Note 18
Customer deposits
2008 / 2007 change
31/12/2008
31/12/2007
in value
in %
4,086.3
3,672.2
414.1
11.3
Term regulated savings accounts
1,618.4
1,899.4
-281.0
-14.8
Demand and overnight accounts
10,139.9
9,905.7
234.2
2.4
(in EUR millions)
Demand regulated savings accounts
Companies and individual entrepreneurs
6,073.3
5,859.1
214.2
3.7
3,578.1
3,552.8
25.3
0.7
Financial customers
Others
Term accounts
6.0
2.1
3.9
185.7
482.5
491.7
-9.2
-1.9
1,666.0
1,691.1
-25.1
-1.5
829.0
871.7
-42.7
-4.9
808.1
795.3
12.8
1.6
Financial customers
0.9
0.8
0.1,
12.5,
28.0
23.3
4.7
20.2
150.0
200.0
-50.0
-25.0
261.0
111.5
149.5
134.1
1,428.4
701.6
726.8
103.6
127.7
98.7
29.0
29.4
Others
Related payables
Guarantee deposits
TOTAL
Fair value of customer deposits
0.7
0.6
0.1
16.7
19,478.4,
18,280.8
1,197.6
6.6
19,478.3
18,280.7
Note 19
2008 / 2007 change
(in EUR millions)
Savings certificates
Money market and negotiable debt securities
Bonds
Related payables
SUB-TOTAL
TOTAL
Fair value of debt securities
100
31/12/2008
31/12/2007
in value
in %
14.4
17.0
-2.6
-15.3
8,201.7
8,268.5
-66.8
-0.8
554.7
250.0
304.7
121.9
121.9
148.4
-26.5
-17.9
8,892.7
8,683.9
208.8
2.4
0.3
-
0.3
-
8,893.0,
8,683.9
209.1
2.4
8,904.9
8,676.0
Note 20
PEL/CEL mortgage saving accounts
A. Outstanding deposits in PEL/CEL accounts
2008 / 2007 change
31/12/2008
31/12/2007
Less than 4 years old
170.8
Between 4 and 10 years old
655.5
More than 10 years old
(in EUR millions)
in value
in %
236.0
-65.2
-27.6
823.2
-167.7
-20.4
587.4
613.1
-25.7
-4.2
1,413.7
1,672.3
-258.6
-15.5
298.9
299.3
-0.4
-0.1
1,712.6
1,971.6
-259.0
-13.1
PEL accounts
SUB-TOTAL
CEL accounts
TOTAL
B. Outstanding housing loans granted with respect to PEL/CEL accounts
2008 / 2007 change
31/12/2008
31/12/2007
in value
in %
18.8
19.5
-0.7
-3.6
28.2
25.9
2.3
8.9
9.4
4.3
5.1
118.6
56.4
49.7
6.7
13.5
(in EUR millions)
TOTAL
C. Provisions for commitments linked to PEL/CEL accounts (1)
2008 / 2007 change
(in EUR millions)
31/12/2008
31/12/2007
in value
in %
3.7
3.9
-0.2
-5.1
-
0.1
-0.1
-100.0
PEL accounts
SUB-TOTAL
-
2.1
-2.1
-100.0
3.7
6.1
-2.4
-39.3
CEL accounts
5.3
5.1
0.2
3.9
Drawn down loans
1.9
1.4
0.5
35.7
10.9
12.6
-1.7
-13.5
TOTAL
(1) These provisions are booked as Allowances for general risk and commitments
101
D. Methods used to establish the parameters for valuing provisions
The parameters used for estimating the future behaviour
of customers are derived from historical observations of
customer behaviour patterns over periods of between 10 and
15 years. The value of these parameters can be adjusted if
any changes are subsequently made to regulations that might
undermine the effectiveness of past data as an indicator of
future customer behaviour.
observable data and constitute a best estimate, at the date of
valuation, of the future value of these elements for the period
concerned, in line with the retail banking division’s policy of
interest rate risk management.
The discount rates used are derived from the zero coupon
swaps vs. Euribor yield curve at the date of valuation,
averaged over a 12-month period.
The values of the different market parameters used, notably
interest rates and margins, are calculated on the basis of
Note 21
Employee benefits
A. Post-employment defined contribution plans
Defined contribution plans limit the Group’s liability to the
contributions paid to the plan but do not commit the Group
to a specific level of future benefits.
The main defined contribution plans provided to employees
of the Group are located in France.
They include State pension plans and other national retirement
plans such as ARRCO and AGIRC, pension schemes for
102
which the only commitment is to pay annual contributions
(PERCO) and multi-employer plans.
Expenses relating to these plans totalled EUR 54.3 million
at December 31, 2008 vs. EUR 49.5 million at December
31, 2007.
B. Post-employment benefit plans (defined benefit plans) and other long-term benefits
B1. Reconciliation of assets and liabilities recorded in the balance sheet
31/12/2008
Post-employment
31/12/2007
Post-employment
Pension
schemes
Other
plans
Other
long-term
benefits
Total plan
benefits
Pension
schemes
Other
plans
Other
long-term
benefits
Total plan
benefits
Present value of defined benefit
obligations
116.2
-
-
116.2
112.5
-
-
112.5
Fair value of plan assets
-59.0
-
-
-59.0
-81.7
-
-
-81.7
ACTUARIAL DEFICIT (NET BALANCE) (A)
57.2
-
-
57.2
30.8
-
-
30.8
PRESENT VALUE OF UNFUNDED
OBLIGATIONS (B)
17.8
14.0
28.1
59.9
20.4
14.5
32.5
67.4
-
-
-
-
-
-
-
-
-1.1
-
-
-1.1
-1.2
-
-
-1.2
-23.6
2.1
-
-21.5
-4.8
1.0
-
-3.8
-
-
-
-
-
-
-
-
(in EUR millions)
BREAKDOWN OF THE DEFICIT
IN THE PLAN
OTHER ITEMS RECOGNISED
ON THE BALANCE SHEET (C)
Unrecognised items
Unrecognised past service cost
Unrecognised net actuarial gain/loss
Separate assets
Plan assets impacted by change
in asset ceiling
TOTAL UNRECOGNISED ITEMS (D)
DEFICIT IN THE PLAN (NET BALANCE)
A+B+C+D
-
-
-
-
-
-
-
-
-24.7
2.1
-
-22.6
-6.0
1.0
-
-5.0
50.3
16.1
28.1
94.5
45.2
15.5
32.5
93.2
Notes :
1. For defined-service pension schemes, in accordance with IAS 19, Crédit du Nord Group uses the projected credit units method to calculate
employee benefits, and amortises actuarial gains and losses which exceed 10% of the greater of the defined benefit obligations or funding
assets on the estimated average remaining working life of the employees participating in the plan (corridor method). The Group uses the
straight-line method over the residual working lives of employee beneficiaries to recognise past service cost resulting from an amendment of
the plan.
2. Pension plans include pension benefits as annuities and end of career payments. Pension benefit annuities are paid additionally to State
pension plans.
Other post employment benefit plans are insurance schemes covering accidental death at 3 institutions located in France.
Other long-term employee benefits include deferred bonuses, flexible working provisions (compte épargne temps) and long-service awards.
3. The present value of defined benefit obligations have been valued by independent qualified actuaries.
4. Information regarding plan assets:
k only end of career payments and additional complementary retirement plans are partially covered by assets managed by an external
company;
k the fair value of plan assets is comprised of 16.5% bonds, 59% equities, 21.5% money market funds and 3% property investments.
5. In general, the expected rates of return on scheme assets are based on a weighted average of expected returns on each category of assets
at fair value.
6. In France, the implementing decree of the law to modernise the labour market doubled the legal payments owed to employees in the event
of forced retirement by the employer. The impact of these payments, linked primarily to retirements prior to December 31, 2009, is booked to
Past Service Cost in the amount of EUR 11.0 million and gives rise to an update of 2008 expense items.
The Group considered the termination payment addressed in Article 11 of the ANI (national interprofessional agreement) of January 11, 2008
did not concern termination of the employment contract by employees taking their retirement.
7. Benefits payable under post-employment plans in 2009 are estimated at EUR 24.8 million.
103
The actual return on plan and separate assets was, in millions of euros
(as a % of the item measured)
31/12/2008
31/12/2007
-37.3
1.5
-
-
31/12/2008
31/12/2007
-22.0
1.2
-
-
Plan assets
Separate assets
(in EUR millions)
Plan assets
Separate assets
B2. Amounts recognised on the income statement
31/12/2008
Post-employment
31/12/2007
Post-employment
Pension
schemes
Other
plans
Other
long-term
benefits
Service cost
4.6
0.3
4.1
9.0
3.8
0.4
4.3
8.5
Interest cost
6.8
0.8
1.7
9.3
5.3
0.7
1.6
7.6
Expected return on assets
-5.1
-
-
-5.1
-5.0
-
-
-5.0
Amortisation of past service cost
11.2
-
-
11.2
0.1
-
-
0.1
(in EUR millions)
Total plan
benefits
Pension
schemes
Other
plans
Other
long-term
benefits
Total plan
benefits
Amortisation of actuarial gains/losses
-
-
-4.5
-4.5
-0.6
-
-1.7
-2.3
Settlement
-
-
-
-
-
-
-
-
17.5
1.1
1.3
19.9
3.6
1.1
4.2
8.9
TOTAL NET CHARGES RECOGNISED
ON THE INCOME STATEMENT
B3. Changes in net liabilities of post-employment plans booked to the balance sheet
B3a. Changes in the present value of defined benefit obligations
2008
(in EUR millions)
Value at January 1
Pension
schemes
Other
plans
Total
post-employ.
Pension
schemes
Other
plans
Total
post-employ.
133.0
14.5
147.5
122.3
15.1
137.4
Current service cost
4.6
0.3
4.9
3.8
0.4
4.2
Interest cost
6.8
0.8
7.6
5.3
0.7
6.0
-
-
-
-
-
-
-8.4
-1.1
-9.5
15.5
-1.2
14.3
-
-
-
-
-
-
Benefit payments
-13.0
-0.5
-13.5
-10.9
-0.5
-11.4
Past service cost
Employee contributions
Actuarial gains/loses
Foreign currency exchange adjustment
11.0
-
11.0
1.3
-
1.3
Acquisition of subsidiaries
-
-
-
-
-
-
Settlement
-
-
-
-4.3
-
-4.3
Transfers and others
-
-
-
-
-
-
134.0
14.0
148.0
133.0
14.5
147.5
VALUE AT DECEMBER 31
104
2007
B3b. Changes in fair value of plan assets and separate assets
2008
(in EUR millions)
2007
Pension
schemes
Other
plans
Total
post-employ.
Pension
schemes
Other
plans
Total
post-employ.
81.7
-
81.7
81.0
-
81.0
5.1
-
5.1
5.0
-
5.0
Value at January 1
Expected return on plan assets
Expected return on separate assets
-
-
-
-
-
-
-27.1
-
-27.1
-3.9
-
-3.9
Foreign currency exchange adjustment
-
-
-
-
-
-
-
-
-
-
-
-
Actuarial gains/losses
Employer contributions
Benefit payments
4.3
-
4.3
6.0
-
6.0
-5.0
-
-5.0
-6.4
-
-6.4
-
-
-
-
-
-
59.0
-
59.0
81.7
-
81.7
Acquisition of subsidiaries
B4. Main assumptions for post employment plans
2008
2007
Expected return on assets (separate and plan assets)
6,6 %
6,6 %
Future salary increase (including inflation)
3,5 %
2,0 % (1)
(1) 2007 figure is net of inflation.
The expected rate of return on assets (separate and plan
assets) has been 6.6% since 2005. The range in the expected
rate of return on assets is due to the composition of the
assets.
The discount rate used depends on the term of each plan
(5.58% for up to 3 years / 5.66% for up to 5 years / 6.20%
for up to 10 years / 6.42% for up to 15 years and 6.65% for
up to 20 years).
The average remaining lifetime is established individually by
benefit for each Group entity and is calculated taking into
account turnover assumptions.
Inflation depends on the term of each plan (1.90% for up to
3 years / 2.30% for up to 5 years / 2.40% for up to 10 years /
2.45% for up to 15 years and 2.50% for up to 20 years).
B5. Sensitivities analysis of post-employment defined benefit obligations compared to main assumption
ranges
2008
(as% of item measured)
Pension schemes
2 007
Others
Pension schemes
Others
Variation of +1% in discount rate
Impact on defined benefit obligations at December 31
-4.8%
-12.4%
-6.1%
-13.3%
Impact on total expenses
-8.4%
-20.7%
-6.7%
-20.8%
1.0%
-
1.0%
-
-9.6%
-
-19.2%
-
5.4%
16.1%
6.8%
17.3%
11.1%
29.3%
8.8%
29.4%
Variation of +1% in expected return on assets (plan
assets and separate assets)
Impact on plan assets at December 31
Variation of +1% of future salary increases net of
inflation
Impact on defined benefit obligations at December 31
105
B6. Experience adjustments on post-employment defined benefit obligations
31/12/2008
31/12/2007
134.0
133.0
59.0
81.7
Deficit / (surplus)
75.0
51.3
Experience adjustments on plan liabilities
-5.6
-6.1
-27.1
-3.9
(in EUR millions)
Defined benefit obligations
Experience adjustments on plan assets
Note 22
Subordinated debt
2008 / 2007 change
(in EUR millions)
Equity investments
Redeemable subordinated notes
Undated subordinated notes
Interest payable
TOTAL
31/12/2008
31/12/2007
in value
in %
-
-
-
-
638.3
638.4
-0.1
-
-
1.9
-1.9
-
10.2
10.2
-
-
22.0
-6.3
28.3
-
670.5
644.2
26.3
-
The fair value of subordinated debt was EUR 634.7 million at December 31, 2008 (EUR 638.2 million at December 31, 2007)
calculated entirely via reference to a price quoted on an active market.
The unamortised credit balance of the issuance premiums of these borrowings stands at EUR 0.1 million..
Schedule of redeemable subordinated notes issued by Crédit du Nord
Subordinated debt
106
2009
2010
2011
2012
2013
Others
Outstanding
at 31/12/2008
Outstanding
at 31/12/2007
45.7
151.6
160.0
-
-
281.0
638.3
638.4
Note 23
Insurance activities
2008 / 2007 change
(in EUR millions)
Underwriting reserves for unit-linked policies
Life insurance underwriting reserves
Non-life insurance underwriting reserves
TOTAL
Provisions for deferred profit sharing (1) (2)
Share of underwriters
Net underwriting reserves
31/12/2008
31/12/2007
in value
in %
876.1
1,267.7
-391.6
-30.9
2,382.5
1,997.4
385.1
19.3
1.6
1.4
0.2
14.3
3,260.2
3,266.5
-6.3
-0.2
60.1
19.0
41.1
-
221.1
203.9
17.2
8.4
2,979.0
3,043.6
-64.6
-2.1
(1) In accordance with the CNC Recommendation of December 19, 2008, a recoverability test was carried out on provisions for deferred profit sharing.
This test is based on a model used to forecast future cash flows, using an economic scenario deemed to be highly likely. Investment assets are modelled in accordance with
market data available at the inventory date, with a restatement for liquidity spreads on fixed income investments. Modelling of insurance liabilities include technical assumptions
(redemptions, mortality, etc.) consistent with a Market Consistent Embedded Value approach. The model also includes an estimate of inflows for the year to come.
Provisions for deferred profit sharing are considered to be fully recoverable where the forecasts resulting from the model indicate that future returns on assets will be sufficient to
allow the insurance company to:
- provide its beneficiaries over the long term with a profit sharing rate at least equal to the minimum contractually agreed upon rate;
- deduct from these returns the management fees stipulated in the terms of the policies.
As these two conditions were met at December 31, 2008, no provisions for deferred profit sharing were booked during the year.
(2) o/w a provision for deferred profit sharing for assets at fair value through shareholders’ equity of EUR 60.4 million at December 31, 2008 and EUR 19.2 million at December 31,
2007.
Statement of changes in underwriting reserves of insurance companies
(in EUR millions)
Reserves at 01/01/2008
Allocation to insurance reserves
Underwriting reserves
for unit-linked policies
Life insurance
underwriting reserves
Non-life insurance
underwriting reserves
1,267.7
1,997.4
1.4
-495.6
483.7
0.2
Revaluation of policies
0.2
-
-
Charges deducted from policies
9.9
-
-
93.9
-93.8
-
-
-
-
Profit sharing
-
-6.0
-
Others
-
1.2
-
876.1
2,382.5
1.6
Transfers and arbitrage
New customers
RESERVES AT DECEMBER 31, 2008
In accordance with IFRS and Group principles, the Liability Adequacy Test (LAT) was carried out at December 31, 2008.
This test is based on stochastic models, consistent with a Market Consistent Embedded Value approach.
107
Net investments by insurance companies
2008 / 2007 change
(in EUR millions)
31/12/2008
31/12/2007
in value
in %
-
1.0
-1.0
-100.0
206.2
191.7
14.5
7.6
964.1
1,481.0
-516.9
-34.9
279.3
299.9
-20.6
-6.9
1,763.3
1,417.6
345.7
24.4
30.8
32.5
-1.7
-5.2
-
-
-
-
Investment property
-
-
-
-
3,243.7
3,423.7
-180.0
-5.3
2008
2007
TOTAL
Technical income from insurance companies
2008 / 2007 change
(in EUR millions)
Earned premiums
in value
in %
523.0
531.8
-8.8
-1.7
Cost of benefits (including changes in reserves)
-190.7
-498.2
307.5
-61.7
Net income from investments
-286.6
8.0
-294.6
-
-25.5
-24.9
-0.6
2.4
20.2
16.7
3.5
21.0
-1.5
-1.4
-0.1
7.1
18.7
15.3
3.4
22.2
2008
2007
in value
in %
Acquisition fees
11.9
12.1
-0.2
-1.7
Management fees
30.7
29.1
1.6
5.5
0.1
-
0.1
-
-10.7
-10.5
-0.2
1.9
-9.4
-9.1
-0.3
3.3
-1.5
-1.4
-0.1
7.1
21.1
20.2
0.9
4.5
Other net technical income/expenses
CONTRIBUTION TO OPERATING INCOME BEFORE
ELIMINATION OF INTRA-GROUP OPERATIONS
Elimination of intra-group operations
CONTRIBUTION TO OPERATING INCOME AFTER
ELIMINATION OF INTRA-GROUP OPERATIONS
Net fee income (1)
2008 / 2007 change
(in EUR millions)
Fees received
Others
Fees paid
Acquisition fees
Management fees
Others
TOTAL FEES
(1) This table presents the contribution of fees before the elimination of intra-group operations.
108
Note 24
Breakdown of assets and liabilities by term to maturity
Maturities of financial assets and liabilities
At 31/12/2008
Less than
3 months (1)
3 months
to 1 year
1 to
5 years
More than
5 years
Undated
Total
684.0
-
-
-
-
684.0
Financial assets at fair value through
profit or loss
309.1
-
4.4
1,170.0
-
1,483.5
Hedging derivatives
213.3
-
-
-
-
213.3
984.5
1,275.7
206.1
3,091.8
98.9
5,657.0
Due from banks
3,677.2
1,369.8
262.7
80.3
-
5,390.0
Customer loans
4,431.7
2,403.2
8,237.9
8,696.9
-
23,769.7
148.5
364.1
1,058.0
265.4
-
1,836.0
Revaluation differences on portfolios
hedged against interest rate risk
155.7
-
-
-
-
155.7
0.2
2.3
56.9
-
-
59.4
1.8
-
-
-
-
1.8
Financial liabilities at fair value through
profit or loss
134.7
12.0
253.1
278.0
-
677.8
Hedging derivatives
282.8
-
-
-
-
282.8
(in EUR millions)
Assets
Liabilities
Due to central banks
Due to banks
2,292.2
647.8
857.0
191.3
-
3,988.3
Customer deposits
6,878.2
1,213.1
4,342.7
7,044.4
-
19,478.4
Debt securities
5,571.7
1,594.1
844.8
882.4
-
8,893.0
Revaluation differences on portfolios
hedged against interest rate risk
18.5
-
-
-
-
18.5
Subordinated debt
22.4
55.6
311.5
281.0
-
670.5
(1) By convention, derivatives are classified in the “Under 3 months” category.
109
Maturities of commitments on financial derivatives (2)
At 31/12/2008
(in EUR millions)
0 to 1 year
1 to 5 years
More than 5 years
Total
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
11,105.7
11,105.8
6,891.3
6,891.2
3,908.1
3,908.1
21,905.1
21,905.1
-
-
-
-
-
-
-
-
149.1
59.3
1,571.3
480.8
519.0
218.0
2,239.4
758.1
77.5
77.1
6.2
6.6
-
-
83.7
83.7
-
2.0
-
-
-
-
-
2.0
Firm transactions
Swaps
FRA
Options
Caps, Floors, Collars
Foreign exchange options
Other forward instruments
(2) These items are presented on the basis of the maturities of the financial instruments.
Note 25
Commitments
A. Financing commitments given and received
2008 / 2007 change
(in EUR millions)
31/12/2008
31/12/2007
in value
in %
103.4
162.8
-59.4
-36.5
2,957.2
3,026.1
-68.9
-2.3
256.9
134.2
122.7
91.4
3,536.8
3,597.7
-60.9
-1.7
Commitments given
Loan commitments
To banks
To customers
Guarantee commitments
On behalf of banks
On behalf of customers
On behalf of insurance activities
Others
272.2
387.9
-115.7
-29.8
3,632.8
786.3
2,846.5
-
-
-
-
-
6,831.8
5,770.7
1,061.1
18.4
237.4
239.6
-2.2
-0.9
84.8
88.7
-3.9
-4.4
Commitments received
Loan commitments
Guarantee commitments
From banks
From customers
Others
(1)
(1) o/w EUR 71.7 million in guarantee commitments received from public administrations and local authorities and EUR 13.1 million in pledged securities
At December 31, 2008, Société Générale Group’s financing and guarantee commitments totalled EUR 6.3 million vs. EUR 1.1
million at December 31, 2007.
The financing commitments and guarantees given to Société Générale Group amounted to EUR 210.2 million vs. EUR 5.8 million
at December 31, 2007.
110
B. Securities transactions and foreign exchange transactions
2008 / 2007 change
31/12/2008
31/12/2007
Securities to be received
54.3
12.1
42.2
-
Securities to deliver
78.2
92.0
-13.8
-15.0
Currency to be received
6,291.8
7,626.1
-1,334.3
-17.5
Currency to deliver
6,273.5
7,635.3
-1,361.8
-17.8
(in EUR millions)
in value
in %
At December 31, 2008, commitments of this nature with Société Générale Group stood at EUR 423.7 million (vs. EUR 545.9
million at December 31, 2007).
C. Financial derivatives
31/12/2008
(in EUR millions)
31/12/2007
Assets
Liabilities
Assets
Liabilities
8,687.4
8,687.4
4,420.1
4,420.1
-
-
-
-
-
-
38.0
717.4
758.1
522.5
581.6
83.7
83.7
73.1
73.1
TRADING FINANCIAL DERIVATIVES
Firm transactions
Swaps
FRAs
Options
OTC options
SUB-TOTAL TRADING FINANCIAL DERIVATIVES
-
2.0
-
8.3
9,488.5
9,531.2
5,015.7
5,121.1
13,217.7
13,217.7
11,240.5
11,240.5
1,522.0
-
1,249.0
-
FAIR VALUE HEDGE INSTRUMENTS (1)
Firm transactions
Swaps
Options
SUB-TOTAL HEDGING INSTRUMENTS
TOTAL
14,739.7
13,217.7
12,489.5
11,240.5
24,228.2
22,748.9
17,505.2
16,361.6
(1) Including macrohedging derivatives at fair value through profit or loss
At December 31, 2008, commitments of this nature with Société Générale Group stood at EUR 20,459.0 million (vs. EUR 11,905.8
million at December 31, 2007).
Note that, under the current regulations, transactions processed on behalf of and on the order of customers are classified in the
“Trading” category, even if any hedging of them is classified in “Fair value hedging through profit or loss”.
111
Note 26
CHF
GBP
USD
JPY
Other
currencies
5,427.1
65.1
166.3
251.2
37.0
127.3
6,074.0
25,543.3
103.6
16.5
90.1
3.9
4.0
25,761.4
Euro
(in EUR millions)
31/12/2008
Total
ASSETS
Short-term
Customer loans
Other assets
TOTAL
8,888.9
-
0.3
16.0
0.1
0.2
8,905.5
39,859.3
168.7
183.1
357.3
41.0
131.5
40,740.9
LIABILITIES
Short-term
3,243.1
69.2
141.0
485.8
42.5
8.5
3,990.1
19,096.7
17.7
52.0
317.0
3.1
10.4
19,496.9
8,885.1
-
-
7.9
-
-
8,893.0
Other liabilities
8,360.8,
-
0.4
-0.6
0.1
0.2
8,360.9
39,585.7
86.9
193.4
810.1
45.7
19.1
40,740.9
Customer deposits
TOTAL
FOREIGN EXCHANGE COMMITMENTS
Currencies bought, not yet received
2,331.3
292.6
244.9
2,484.7
52.5
885.8
6,291.8
Currencies sold, not yet delivered
2,586.5
379.6
233.8
2,028.5
47.2
997.9
6,273.5
Assets
39,859.3
168.7
183.1
357.3
41.0
131.5
40,740.9
Liabilities
39,585.7
86.9
193.4
810.1
45.7
19.1
40,740.9
-255.2
-87.0
11.1
456.2
5.3
-112.1
18.3
18.4
-5.2
0.8
3.4
0.6
0.3
18.3
NET POSITION
Net foreign exchange commitments
BALANCE
Currency positions are kept within very conservative limits, with respect of prudential capital, which stood at EUR 1,889.0 million.
As a result, the largest net position, in CHF, accounted for 0.28% of prudential capital.
Note that the euro represents a very significant share of the Group’s total transactions. The most significant foreign currency exposure
besides the euro, i.e. the dollar and the Swiss franc, accounted for 1.1% and 0.2% of total assets, respectively.
Note 27
Net Banking Income
2008 / 2007 change
Note
2008
2007
in value
in %
28
786.4
790.5
-4.1
-0.5
Fees and commissions
29
714.0
790.3
-76.3
-9.7
16.6
4.3
12.3
-
(in EUR millions)
Income from equity securities
112
Net gains/losses on financial instruments at fair value
through profit or loss
30
11.5
-32.7
44.2
-135.2
Net gains/losses on available-for-sale Financial assets
31
4.8
41.8
-37.0
-88.5
Income and expenses from other businesses
32
10.6
3.3
7.3
-
NET BANKING INCOME
1,543.9
1,597.5
-53.6
-3.4
% of commissions in NBI
46,2%
49,5%
Note 28
2008 / 2007 change
(in EUR millions)
2008
2007
in value
in %
Interest and similar income from
Transactions with banks
Transactions in financial instruments
Securities lending
Hedging derivatives
Finance leases
167.3
188.2
-20.9
-11.1
1,217.3
1,084.9
132.4
12.2
382.4
259.4
123.0
47.4
237.8
121.8
116.0
95.2
0.9
1.0
-0.1
-10.0
-
-
-
-
143.7
136.6
7.1
5.2
151.5
142.4
9.1
6.4
73.6
71.4
2.2
3.1
Non-real estate lease financing agreements
77.9
71.0
6.9
9.7
-
-
-
-
1,918.5
1,674.9
243.6
14.5
-147.0
-126.1
-20.9
16.6
-391.2
-319.9
-71.3
22.3
-537.1
-378.0
-159.1
42.1
-378.3
-246.9
-131.4
53.2
-30.8
-30.8
0.0
0.0
Other interest and similar income
SUB-TOTAL
Interest and similar expenses from
Subordinated and convertible debt
Securities borrowing
Hedging derivatives
Finance leases
Non-real estate financing agreements
Other interest and similar expenses
SUB-TOTAL
TOTAL INTEREST AND SIMILAR INCOME
-
-
-
-
-128.0
-100.3
-27.7
27.6
-56.1
-59.9
3.8
-6.3
-49.4
-47.9
-1.5
3.1
-6.7
-12.0
5.3
-44.2
-0.7
-0.5
-0.2
40.0
-1,132.1
-884.4
-247.7
28.0
786.4
790.5
-4.1
-0.5
2008
2007
in value
in %
2008 / 2007 change
(in EUR millions)
Net income/expenses from
Short-term loans
Export loans
20.3
62.1
-41.8
-67.3
826.1
765.0
61.1
8.0
156.9
143.3
13.6
9.5
4.1
4.4
-0.3
-6.8
Equipment loans
193.9
164.1
29.8
18.2
Housing loans
526.5
466.1
60.4
13.0
Other loans
-55.3
-12.9
-42.4
-
-154.7
-118.6
-36.1
30.4
95.4
82.5
12.9
15.7
-0.7
-0.5
-0.2
40.0
786.4
790.5
-4.1
-0.5
Finance leases
Others
TOTAL INTEREST AND SIMILAR INCOME
113
Note 29
Commissions
2008 / 2007 change
(in EUR millions)
2008
2007
in value
in %
Fee income
Foreign exchange transactions and financial derivatives
Loan and guarantee commitments
Services
Others
SUB-TOTAL
-
-
-
-
240.7
219.1
21.6
9.9
5.5
7.8
-2.3
-29.5
1.9
1.7
0.2
11.8
22.9
22.7
0.2
0.9
629.7
647.2
-17.5
-2.7
-
-
-
-
900.7
898.5
2.2
0.2
Fee expense
-0.7
-0.9
0.2
-22.2
-78.8 (1)
-6.2
-72.6
-
Foreign exchange transactions and financial derivatives
-0.1
-0.1
-
-
Loan and guarantee commitments
-0.5
-0.7
0.2
-28.6
Others
-106.6
-100.3
-6.3
6.3
SUB-TOTAL
-186.7
-108.2
-78.5
72.6
714.0
790.3
-76.3
-9.7
TOTAL NET FEES AND COMMISSIONS
This fee income and expenses includes:
k fee income, excluding EAT * linked to financial instruments not
measured at fair value through profit or loss
263.7
286.4
-22.7
-7.9
k fee income relating to trust or similar activities
200.8
228.4
-27.6
-12.1
-0.5
-0.7
0.2
-28.6
-18.4
-18.6
0.2
-1.1
k fee expenses, excluding EAT * linked to financial instruments not
measured at fair value through profit or loss
k fee expenses relating to trust or similar activities
*
Effective Interest Rate.
(1) o/w exceptional expenses of EUR -72.2 million linked to losses on disposals of assets from funds managed by Étoile Gestion.
114
Note 30
Net income and expense from financial instruments at fair value through profit
or loss
2008 / 2007 change
2008
2007
in value
in %
Net gain/loss on non-derivative financial assets held for trading
6.9
3.1
3.8
122.6
Net gain/loss on financial assets measured using fair value option
4.1
-16.0
20.1
125.6
Net gain/loss on non-derivative financial liabilities held for trading
(in EUR millions)
-
-
-
-
Net gain/loss on financial liabilities measured using fair value
option
29.8 (1)
9.8
20.0
-
Gain/loss on derivative financial instruments held for trading
-38.6
-44.1
5.5
-12.5
Net gain/loss on hedging instruments, Statement of fair value
-61.9
-74.2
12.3
-16.6
63.0
74.5
-11.5
-15.4
-
-
-
-
8.2
14.2
-6.0
-42.3
11.5
-32.7
44.2
135.2
Revaluation of hedged items attributable to hedged risks
Ineffective portion of cash flow hedge
Net gain/loss on foreign exchange transactions
TOTAL
(1) Including a gain of EUR 28.4 million from the effect of the Group’s credit spread on the revaluation of its financial liabilities.
Net income and expense from financial assets and liabilities at fair value through profit or loss is measured using valuation
techniques based on observable parameters.
Note 31
Net gains or losses on available-for sale financial assets
2008 / 2007 change
(in EUR millions)
2008
2007
in value
in %
Current activities
Gains on sale
2.6
2.4
0.2
8.3
Losses on sale
-0.7
-0.1
-0.6
-
-
-
-
-
-1.5
3.4
-4.9
-144.1
0.4
5.7
-5.3
-93.0
5.2
45.7 (1)
-40.5
-88.6
-
(2)
-
-
-1.0
0.2
-20.0
Impairment of equity instruments
Net capital gain on the sale of available-for-sale financial assets
(insurance activity)
SUB-TOTAL
Long-term equity investments
Gains on sale
Losses on sale
Impairment of equity instruments
SUB-TOTAL
TOTAL
-0.8
-8.6
4.4
36.1
-31.7
-87.8
4.8
41.8
-37.0
-88.5
(1) O/w capital gain of EUR 44.6 million on the sale of Euronext shares in 2007.
(2) O/w capital loss of EUR 8.6 million on the sale of NYSE Euronext shares in 2007.
115
Note 32
Income and expenses from other activities
2008 / 2007 change
(in EUR millions)
2008
2007
in value
in %
0.1
0.4
-0.3
-75.0
6.2
3.2
3.0
93.8
Income from other activities
Real estate development (1)
Real estate leasing
(2)
Equipment leasing
1.7
6.6
-4.9
-74.2
Other activities (3)
17.3
15.6
1.7
10.9
SUB-TOTAL
25.3
25.8
-0.5
-1.9
Real estate development (1)
-0.1
-0.2
0.1
-50.0
Real estate leasing
-1.6
-1.5
-0.1
6.7
Expenses from other activities
Equipment leasing
-0.2
-8.4
8.2
-97.6
Other activities
-12.8
-12.4
-0.4
3.2
SUB-TOTAL
-14.7
-22.5
7.8
-34.7
10.6
3.3
7.3
-
NET AMOUNT
(1) Income and expenses from property development are mainly generated by Norimmo Group (registered estate agents), whose activity is now marginal.
(2) O/w rent on investment property: EUR 2.7 million at December 31, 2008 and EUR 1.8 million at December 31, 2007.
(3) O/w net income on insurance business: EUR 8.2 million at December 31, 2008, which breaks down into income of EUR 979.7 million and expenses of EUR 971.5 million.
Note 33
Personnel expenses
A. Personnel expenses
2008 / 2007 change
2008
2007
in value
in %
-366.0
-355.3
-10.7
3.0
Social security charges and payroll taxes
-92.2
-103.2
11.0
-10.7
Retirement expenses
-71.7
-53.9
-17.8
33.0
Defined contribution plans
-54.3
-49.5
-4.8
9.7
Defined benefit plans
-17.4
-4.4
-13.0
-
Other social security charges and taxes
-50.3
-44.5
-5.8
13.0
Employee profit-sharing and incentives
-43.3
-57.2
13.9
-24.3
6.0
4.5
1.5
33.3
-617.5
-609.6
-7.9
1.3
(in EUR millions)
Employee compensation
Transfer of charges
TOTAL
Performance-based compensation paid in 2008 for 2007 came out at EUR 22.7 million.
116
B. Headcount
Variation 2008 / 2007
Registered workforce (1)
Average staff count in activity
(1)
Average staff count in activity compensated
by Crédit du Nord Group
Maternity leave, qualification/apprenticeship contracts
2008
2007
en valeur
en %
8,797
8,696
101
1.2
8,775
8,539
236
2.8
7,956
7,959
-3
-
819
580
239
41.2
(1) Excluding staff at Banque Pouyanne.
C. Share-based payment plans
Expenses recorded on the income statement
2008 / 2007 change
(in EUR millions)
2008
2007
in value
in %
Net expenses from stock option purchase plans
-4.2
-5.3
1.1
-20.8
Net expenses from stock option and free share allocation plans
-2.9
-4.6
1.7
-37.0
-7.1
-9.9
2.8
-28.3
TOTAL
The charge described above relates to equity-settled stock-option plans attributed after November 7, 2002 and to all cash-settled
plans.
Main characteristics of stock-option plans
Equity-settled stock option plans for Crédit du Nord Group employees for the year ended December 31, 2008 are briefly described
below.
117
Stock options
Issuer: Société Générale
Type of plan
Shareholders’ agreement
Board of Directors decision
Number of stock options granted
(1)
Term of validity of options
Settlement
Vesting period
2008
2007
2006
2005
2004
2003
Subscription
options
Purchase
options
Purchase
options
Purchase
options
Purchase
options
Purchase
options
30/05/2006
30/05/2006
29/04/2004
29/04/2004
23/04/2002
23/04/2002
21/03/2008
19/01/2007
18/01/2006
13/01/2005
14/01/2004
22/04/2003
61,038
44,968
78,295
306,199
316,075
230,729
7 years
7 years
7 years
7 years
7 years
7 years
SG shares
SG shares
SG shares
SG shares
SG shares
SG shares
21/03/2008 31/03/2011
19/01/2007 19/01/2010
18/01/2006 18/01/2009
13/01/2005 13/01/2008
14/01/2004 14/01/2007
22/04/2003 22/04/2006
No
No
No
No
yes
no, except
corporate
officers
Conditions linked to departure from
Group
Lost
Lost
Lost
Lost
Lost
Lost
Conditions linked to dismissal
Lost
Lost
Lost
Lost
Lost
Lost
Maintained
Maintained
Maintained
Maintained
Maintained
Maintained
Performance-based (2)
Conditions linked to retirement
In event of death
Maintained 6 m. Maintained 6 m. Maintained 6 m. Maintained 6 m. Maintained 6 m. Maintained 6 m.
Share price at grant date (in euros)
(average of 20 days prior to grant date)
Discount
67.08
121.93
98.12
68.61
64.03
47.57
0%
0%
0%
0%
0%
0%
67.08
121.93
98.12
68.61
64.03
47.57
Options exercised at December 31, 2008
-
-
-
-
19,414
110,919
Options forfeited at December 31, 2008
-
-
1,785
11,435
24,234
25,350
Exercise price (in euros)
Options outstanding at December 31,
2008
61,038
44,968
76,510
294,764
272,427
94,460
Number of shares reserved at December
31, 2008
-
(3)
(3)
(3)
272,427
94,460
Share price of shares reserved (in euros)
-
(3)
(3)
(3)
46,97
47,6
Total value of shares reserved
(in EUR millions)
-
(3)
(3)
(3)
12.8
4.5
First authorised date for selling the
shares
21/03/2012
19/01/2011
18/01/2010
13/01/2009
14/01/2008
22/04/2007
Delay for selling after vested period
1 year
1 year
1 year
1 year
1 year
1 year
24%
18%
16%
17%
21%
25%
Monte-Carlo
Monte-Carlo
Monte-Carlo
Monte-Carlo
Monte-Carlo
Monte-Carlo
Fair value (% of share price at grant date)
Valuation method used to determine fair
value
(1) In accordance with IAS 33, as a result of the detachment of Société Générale share preferential subscription rights, the historical share date has been adjusted by the coefficient
given by Euronext which reflects the part attributable to the share after detachment following the capital increase which took place in the fourth quarter of 2006 and the first quarter
of 2008.
(2) The performance-based conditions are described in the section pertaining to corporate governance in Société Générale Group’s registration document. At December 31, 2008, it
was determined that EPS performances on which 2008 stock option attributions were based would not be attained.
(3) 2005, 2006 and 2007 stock option plans have been hedged using call options
118
Free shares
Issuer: Société Générale
2008
2007
2006
Type of plan
Free shares
Free shares
Free shares
Shareholders’ agreement
30/05/2006
30/05/2006
09/05/2005
Board of Directors decision
21/03/2008
19/01/2007
18/01/2006
75,144
30,768
35,938
Number of free shares granted
Settlement
Vesting period
Performance-based
SG shares
SG shares
SG shares
21/03/2008 - 31/03/2010
19/01/2007 - 31/03/2009
18/01/2006 - 31/03/2008
21/03/2008 - 31/03/2011
19/01/2007 - 31/03/2010
18/01/2006 - 31/03/2009
yes
ROE conditions for
a list of beneficiaries
ROE conditions for
a list of beneficiaries
Lost
Lost
Lost
(1)
Conditions linked to departure from Group
Conditions linked to dismissal
Lost
Lost
Lost
maintained
maintained
maintained
Maintained 6 m.
Maintained 6 m.
Maintained 6 m.
61.33
123.00
93.66
Conditions linked to retirement
In event of death
Share price at grant date (in euros)
Shares delivered at December 31, 2008
-
-
15,906
786
1,992
2,524
Shares outstanding at December 31, 2008
74,358
28,776
17,508
Number of shares reserved at December 31, 2008
74,358
28,776
17,508
Share price of shares reserved (in euros)
106.44
94.30
83.58
Shares forfeited at December 31, 2008
Value of shares reserved (in EUR millions)
First authorised date for selling the shares
Delay for selling after vested period
7.9
2.7
1.5
31/03/2012
31/03/2011
31/03/2010
31/03/2013
31/03/2012
31/03/2011
2 years
2 years
2 years
87%
86%
86%
Fair value (% of share price at grant date)
- Vesting period 2 years
- Vesting period 3 years
Valuation method used to determine fair value
81%
81%
81%
Arbitrage
Arbitrage
Arbitrage
(1) The performance-based conditions are described in the section pertaining to corporate governance in Société Générale Group’s registration document. At December 31, 2008, it
was determined that EPS and ROE performances on which 2008 stock option attributions were based would not be attained.
Statistics concerning stock-option plans
Main figures concerning Crédit du Nord Group stock-option plans for the year ended December 31, 2008:
Weighted
average
Weighted
remaining
average
contractual
fair value
life at grant date
Weighted
average
share price
at exercise
date (euros)
Number of options
2008
Plan
2007
Plan
2006
Plan
2005
Plan
2004
Plan
2003
Plan
73 270 279 038 237 655
70 890
Options outstanding at January 1, 2008
-
-
-
-
42 064
Options granted in 2008
-
-
-
61 038
2 904
5 025
21 742
42 204
30 942
Options forfeited in 2008
-
-
-
-
-
1 785
6 016
4 374
3 281
Options exercised in 2008
-
-
74,11
-
-
-
-
3 058
4 091
Options expired in 2008
-
-
-
-
-
-
-
-
-
Outstanding options
34 months
14,86
-
61 038
44 968
76 510 294 764 272 427
94 460
Exercisable options
-
-
-
-
-
- 294 764 272 427
94 460
119
The main assumptions used to value Société Générale stock option plans are as follows:
2008
2007
2006
2005
2003-2004
4.2%
4.2%
3.3%
3.3%
3.8%
38.0%
21.0%
22.0%
21.0%
27.2%
Forfeited rights rate
0.0%
0.0%
0.0%
0.0%
0.0%
Expected dividend (yield)
5.0%
4.8%
4.2%
4.3%
4.3%
5 years
5 years
5 years
5 years
5 years
Risk-free interest rate
Implicit share volatility
(1)
Expected life (after grant date)
(1) The implicit volatility used is that of Société Générale 5-year share options traded OTC (TOTEM database), which was around 38% in 2008. This implicit volatility reflects the future
volatility.
Allocation of SG shares with a discount
As part of the Group employee shareholding policy, Société
Générale offered on March 21, 2008 to employees of the
Group the opportunity to subscribe to a reserved capital
increase at a share price of EUR 53.67, with a discount of
20% to the average share price of the Société Générale share
for the 20 prior to the offering date.
477,096 shares were attributed, representing an expense of
EUR 4.2 million euros for the Group after taking into account
the qualified five-year holding period. The valuation model
used, which complies with the recommendation of the
National Accounting Council on the accounting treatment of
company savings plans, compares the gain the employees
would have obtained if they had been able to sell the shares
immediately and the notional cost that the 5-year holding
period represents to the employees. This notional 5-year
holding period cost is valued as the net cost of the Société
Générale shares cash purchase financed by a non-affected
and non-revolving five-year credit facility and by a forward
sale of these same shares with a 5-year maturity. The main
market parameters used to value this notional 5-year holding
cost, determined at the attribution date, are:
k average price of the Société Générale share over the
subscription period: EUR 73.57;
k risk-free interest rate: 4.06%;
k interest rate of a non-affected 5-year credit facility applicable
to market players benefiting from non-transferable shares:
7.57%.
The notional 5-year holding period is valued at 15.2% of
Société Générale’s share price at the attribution date.
Note 34
Others charges
2008 / 2007 change
(in EUR millions)
Rent and rental charges
Lease finance charges
External services and other
2007
in value
in %
-37.2
-4.5
12.1
-0.4
-0.4
-
-
-259.0
-167.2
-91.8
54.9
Temporary employees and external contractors
-4.5
-86.2
81.7
-94.8
Telecoms expenditure
-9.4
-10.5
1.1
-10.5
-20.7
-18.9
-1.8
9.5
2.5
1.2
1.3
108.3
Transport and travel
Charges reinvoiced to third parties
Transfer of charges
TOTAL OTHER CHARGES
120
2008
-41.7
22.8
22.7
0.1
0.4
-310.4
-296.5
-13.9
4.7
Other operating charges increased by 4.7% in 2008
compared to December 31, 2007, which can be attributed
to the continued:
Note that, in according with the measures provided for in
accounting regulations, and in respect of these measures,
in 2008 Crédit du Nord capitalised EUR 22.8 million in
charges from the «External services and other» entry (vs.
EUR 22.7 million at end-2007). This sum corresponds to the
expenses generated by the production of different software
packages for the Group’s internal use. After capitalisation,
these software packages are amortised over 3 to 5 years as
of their installation.
k commercial development of Crédit du Nord Group (23
branches opened in 2008, six of which were acquired from
Fortis Banque France);
k modernisation of the information system.
In addition, the figures in the preceding table, line to line, are
gross, i.e. before any capitalisation; if and when charges are
capitalised, they also appear, deducted from total, in the last
line, «Transfer of charges».
In 2008, the Group’s global audit budget for the Statutory
Auditors and the members of their networks stood at, for fully
and proportionately consolidated companies, EUR 937,300
excluding tax (excluding expenses and outlay).
Furthermore, charges relating to the outsourcing of electronic
payment systems were reclassified in 2008; they now appear
under “External services and other” instead of “Temporary
employees and external contractors”. The 2008 income
impact of these charges was EUR 82.9 million (vs. EUR 81.6
million in 2007).
This sum is entered into the heading «External services and
other» and breaks down as follows:
DELOITTE
(in EUR thousands)
Statutory Auditors, certification, examination of individual
and consolidated accounts, for fully and proportionately
consolidated companies
Additional assignments
TOTAL
ERNST & YOUNG
AUTRES CABINETS
2008
2007
2008
2007
2008
2007
527.0
485.8
239.0
221.3
130.3
130.3
16.0
-
25.0
-
-
-
543.0
485.8
264.0
221.3
130.3
130.3
Note 35
Provisions, impairment and depreciation of tangible and intangible fixed assets
2008 / 2007 change
(in EUR millions)
2008
2007
in value
in %
-32.3
-28.0
-4.3
15.4
-42.3
-41.0
-1.3
3.2
-74.6
-69.0
-5.6
8.1
-42.6
-38.0
-4.6
12.1
DEPRECIATION AND AMORTISATION
o/w computer hardware and software
Note that the amortisation expense of IT hardware and
software represented EUR 42.6 million euros of the total EUR
74.6 million depreciation allowance (i.e. 57% of total), thus
clearly reflecting the Group’s focus on investment over recent
years in both IT equipment for the Group’s sales network and
specific central operating systems.
121
Note 36
Cost of risk
2008 / 2007 change
(in EUR millions)
Net allocation for impairment
Losses not covered by provisions
Amounts recovered on amortised receivables
COUNTERPARTY RISK
Net allowance for other provisions and liability items
Losses not covered by provisions
OTHER RISKS
TOTAL
2008
2007
in value
in %
-126.9
-75.0
-51.9
69.2
-13.8
-9.9
-3.9
39.4
8.1
9.3
-1.2
-12.9
-132.6
-75.6
-57.0
75.4
1.5
2.1
-0.6
-28.6
-0.9
-
-0.9
-
0.6
2.1
-1.5
-71.4
-132.0
-73.5
-58.5
79.6
Note 37
Income from companies accounted for by the equity method
2008 / 2007 change
(in EUR millions)
Financial
Non-financial
TOTAL
2008
2007
in value
in %
2.1
1.8
0.3
16.7
-
-
-
-
2.1
1.8
0.3
16.7
No non-financial companies are consolidated using the equity method. The income of EUR 2.1 million from financial companies
in 2008 is due to the Group’s proportionate share in Banque Pouyanne (EUR 1.0 million in 2008 vs. EUR 0.8 million in 2007) and
Dexia-CLF Banque (EUR 1.1 million in 2008 vs. EUR 1.1 million in 2007).
122
Note 38
Income tax
2008 / 2007 change
(in EUR millions)
2008
2007
in value
in %
Current taxes
-24.1
-122.4
98.3
-80.3
Deferred taxes
-99.2
-43.4
-55.8
128.6
-123.3
-165.8
42.5
-25.6
TOTAL
Reconciliation of the difference between the Group’s normative tax rate and its effective tax rate:
2008
2007
380.4
513.4
Normal tax rate applicable to French companies (including 3.3% contribution)
34.43 %
34.43 %
Permanent differences
-0.40 %
1.80 %
Differential on items taxed at reduced rate
-0.49 %
-3.40 %
Tax differential on profits taxed outside France
-0.41 %
-0.34 %
Gain due to tax consolidation
-0.88 %
-0.08 %
Adjustments and dividend tax credits
-0.02 %
0.01 %
-
-
(in EUR millions)
Income before tax and net income from companies accounted for by the equity
method
Change in tax rate
Other items
Group effective tax rate
In France, standard corporate income tax is 33.3%. Since
January 1, 2007, long-term capital gains on equity investments
have been tax-exempt, subject to taxation of a share for fees
and expenses of 1.66%. Added to this is a Social Security
and Solidarity Contribution of 3.3% (after a deduction of EUR
0.76 million) initiated in 2000. In addition, under the regime
of parent companies and subsidiaries, dividends received
0.18 %
-0.12 %
32.41 %
32.30 %
from companies in which the equity investment is at least 5%
are tax-exempt.
The normal tax rate applicable to French companies to
determine their deferred tax is 34.43% and the reduced
rate is 1.72% depending on the nature of the transactions
in question.
Note 39
Minority interests
2008 / 2007 change
(in EUR millions)
SHARE OF MINORITY INTERESTS IN CONSOLIDATED NET INCOME
2008
2007
in value
in %
6.5
9.2
-2.7
-29.3
The share of minority interests in consolidated net income is mainly generated by Banque Tarneaud and Banque Nuger.
123
Note 40
Statement of fair value
Net book value
Fixed rate
At 31/12/2008
Floating
rate
Less than
1 year
Due from banks
4,809.6
359.4
221.0
5,390.0
5,389.9
Customer loans
8,245.4
249.9
15,274.4
23,769.7
23,278.1
195.4
7.5
1,633.1
1,836.0
1,822.3
-
0.3
59.1
59.4
59.5
(in EUR millions)
More than
1 year
Not broken
down
Total NBV
Fair value
Fair value of assets
Investments in subsidiaries and affiliates
accounted for by the equity method
10.4
10.4
10.4
Fixed assets (excluding intangible assets)
302.0
302.0
595.6
Fair value of liabilities
Due to banks
Customer deposits
Debt securities
Subordinated debt
1,655.5
2,147.2
185.6
3,988.3
3,988.3
12,225.5
5,734.8
1,518.1
19,478.4
19,478.3
5,856.8
2,487.6
548.6
8,893.0
8,904.9
95.7
9.3
565.5
670.5
634.7
For financial instruments which are recognised at fair value in the balance sheet, the figures given in the notes should not be taken
as an estimate of the amount that would be realised if all such financial instruments were to be settled immediately.
Note 41
Transactions with related parties
In accordance with the definitions provided under IAS 24, Crédit du Nord’s related parties include the following: members of the
Board of Directors, corporate officers (the Chairman and Chief Executive Officer and the two Deputy Chief Executive Officers) and
their respective spouses and any children residing in their family home, on the one hand, and affiliated companies, on the other.
1. Senior managers
This includes amounts effectively paid by Crédit du Nord Group to directors and corporate officers as remuneration (including
employer charges), and other benefits under IAS 24, paragraph 16, as indicated below:
1.1. Remuneration of the Group’s managers (1)
2008 / 2007 change
2008
2007
in value
in %
Short-term benefits
1,0
0,8
0,2
25,0
Post-employment benefits
0,3
0,2
0,1
50,0
-
-
-
-
(in EUR millions)
Long-term benefits
Termination benefits
Share-based payments
TOTAL
-
-
-
-
0,5
0,7
-0,2
-28,6
1,8
1,7
0,1
5,9
(1) There were three corporate officers at December 31, 2008 vs. just one at December 31, 2007. The remuneration indicated above concerning the Deputy Chief Executive Officers
refers only to the period elapsed since their appointment on November 1, 2008.
Information about company directors contains a detailed description of the remuneration and benefits of the Crédit du Nord’s
senior managers.
124
1.2. Related party transactions
The transactions with members of the Board of Directors, Chief Executive Officers and members of their families included in this
note comprise loans and guarantees outstanding at December 31, 2008 and securities transactions. These transactions are
insignificant.
2. Principal subsidiaries and affiliates
Crédit du Nord Group has reported the following companies as affiliated entities: on the one hand Antarius, consolidated using
the proportional method, and on the other hand Société Générale Group with which it carries out transactions.
2008 / 2007 change
(in EUR millions)
2008
2007
in value
in %
66.2
51.9
14.3
27.6
4,218.5
2,563.2
1,655.3
64.6
4,284.7
2,615.1
1,669.6
63.8
Outstanding assets with related parties
Other assets
TOTAL OUTSTANDING ASSETS
2008 / 2007 change
(in EUR millions)
2008
2007
in value
in %
25.8
9.1
16.7
183.5
Outstanding liabilities with related parties
Customer deposits
Other liabilities
TOTAL OUTSTANDING LIABILITIES
-
-
-
-
3,546.2
2,844.8
701.4
24.7
3,572.0
2,853.9
718.1
25.2
2008 / 2007 change
(in EUR millions)
2008
2007
in value
in %
13.2
51.7
-38.5
-74.5
NBI from related parties
Fees and commissions
Net income from financial transactions
Net income from other activities
NBI
-6.3
2.1
-8.4
-
-126.2
-157.4
31.2
-19.8
-
-
-
-
-119.3
-103.6
-15.7
15.2
2008 / 2007 change
(in EUR millions)
2008
2007
in value
in %
-
-
-
-
Commitments to related parties
Loan commitments given
Guarantee commitments given
Forward financial instrument commitments
210.2
5.8
204.4
-
20,459.0
11,905.8
8,553.2
71.8
125
Note 42
Contribution to net income by business line and company
Due to the restatements inherent in the consolidation process the contribution of Group companies to consolidated net income
may differ significantly from amounts appearing in individual financial statements. The following table presents the net contribution
(i.e. after restatement for consolidation purposes) by company, grouped by sector of activity, to consolidated net income.
Contribution to consolidated net income (Group share)
(in EUR millions)
2008
2007
Crédit du Nord
135.4
123.6
Banque Rhône-Alpes
28.5
30.6
Banque Tarneaud
18.5
21.3
Banque Courtois
33.2
36.7
Banque Laydernier
10.9
11.3
Banque Nuger
4.4
5.1
Banque Kolb
8.9
9.3
Norbail Immobilier
3.5
1.7
Gilbert Dupont (brokerage firm)
0.7
40.0
Star Lease
5.0
5.4
Dexia-C.L.F. Banque
1.1
1.0
Nord Assurances Courtage
1.1
4.9
Other companies
9.8
5.0
SUB-TOTAL BANKING
261.0
295.9
Étoile Gestion
-21.6
33.4
SUB-TOTAL ASSET MANAGEMENT
-21.6
33.4
13.3
10.9
Antarius (1)
SUB-TOTAL INSURANCE
TOTAL
13.3
10.9
252.7
340.2
(1) Including sub-consolidated insurance mutual funds.
Share of each activity in overall net income
Banking
Asset management
Insurance
126
2008
2007
103.3%
87.0%
-8.6%
9.8%
5.3%
3.2%
Note 43
Activities of subsidiaries and affiliates
The figures provided below are taken from the companies’ IFRS reporting packages, prior to consolidation restatements.
1. Banks
Name
(% stake)
(in EUR millions)
Date
Total Customer Customer
assets deposits
loans
Net
Income
Banque Rhône-Alpes
31/12/08
2,676.2
1,411.8
2,200.0
27.2
(99.99%)
31/12/07
2,570.4
1,370.0
2,015.6
30.9
Banque Tarneaud
31/12/08
2,396.1
1,195.6
1,933.8
21.4
(80.00%)
31/12/07
2,281.6
1,157.7
1,722.0
27.5
Banque Courtois
31/12/08
3,092.9
1,695.6
2,557.1
31.2
(100.00%)
31/12/07
2,779.5
1,629.9
2,286.9
37.4
Banque Laydernier
31/12/08
1,157.0
653.8
958.9
10.6
(100.00%)
31/12/07
1,129.8
628.0
857.8
11.7
Banque Kolb (1)
31/12/08
1,174.7
642.4
1,023.0
8.4
(99.87%)
31/12/07
1,184.2
639.9
951.8
9.8
Banque Nuger
31/12/08
574.6
433.2
422.5
6.2
(64.70%)
31/12/07
565.1
429.0
394.2
7.9
Banque Pouyanne
31/12/08
220.1
196.4
126.9
3.0
(35.00%)
31/12/07
205.3
183.3
118.9
2.1
Remarks
The interest margin on customers* continued to rise in
2008 (+8.5%), as did net fee income (+3.2%).
NBI, however, was negatively impacted by Étoile
Gestion’s income and thus fell by 3.0% overall.
Operating expenses were well-managed, while cost
of risk increased significantly.
In line with 2007, the interest margin on customers*
continued to rise in 2008 (+12.1%). NBI, however, was
negatively impacted by Étoile Gestion’s income and
thus fell by 6.4% overall. Operating expenses were
well-managed (+2.6%), while cost of risk (up 28.5%)
exacerbated the decline in net income.
The interest margin on customers* rose by 11.7%
and fee income by 5.3% on 2007. NBI, however,
was negatively impacted by Étoile Gestion’s income
and thus fell by 2.2% overall vs. 2007. Operating
expenses increased by 4.7% and cost of risk rose
by a substantial 50% Net income shed 16.6% overall
compared to 2007
The interest margin on customers* rose by 13.9%
in 2008 and net fee income by 7.1% vs. 2007. NBI,
however, was negatively impacted by Étoile Gestion’s
income and thus fell by 0.3% overall. Operating
expenses picked up slightly (+4.8%) while cost of risk
recorded a significant increase (+9.3%).
The interest margin on customers* and fee income
both rose in 2008 (+6.4% and +9.0%, respectively).
NBI, however, was negatively impacted by Étoile
Gestion’s income. Operating expenses were wellmanaged, but the rise in the cost of risk exacerbated
the decline in net income (-14.3%).
In 2008, Banque Nuger recorded a sharp decline of
21.5% in net income, which can be attributed mainly
to Étoile Gestion’s negative income, which had a
-6.3% impact on NBI, and to a 17.4% rise in the cost
of risk. The interest margin on customer* increased
by 4.2%, while fee income remained stable. Operating
expenses underwent a limited increased of 4.4%
42.9% increase in net income in 2008.
*
Interest margin on customers, excluding lease financing.
(1) As this company is a lease financing company, the income and outstandings presented here were taken from the financial accounts to best reflect the economic reality.
127
2. Specialised banks and financial institutions
Name
(% stake)
(in EUR millions)
Date
Total Customer Customer
assets deposits
loans
Net
Income
Gilbert Dupont
Brokerage firm
31/12/08
53.5
-
-
1.4
(100,00%)
31/12/07
104.7
-
-
39.9
Norbail Immobilier (1)
31/12/08
441.3
18.6
425.4
3.7
(100.00%)
31/12/07
439.9
19.4
411.1
2.0
Turgot Gestion (1)
31/12/08
1.5
-
-
0.1
(80.00%)
31/12/07
0.9
-
-
0.1
Norfinance
G. Dupont et Associés
31/12/08
17.6
5.5
-
1.6
(100.00%)
31/12/07
18.2
5.7
-
2.1
Dexia-C.L.F Banque
31/12/08
3,944.0
1,880.7
2,050.3
5.3
(20.00%)
31/12/07
2,854.3
1,277.6
1,368.8
5.2
Norbail Sofergie (1)
31/12/08
56.6
2.3
40.4
-1.4
(100.00%)
31/12/07
60.5
2.3
43.4
0.7
Star Lease
(100.00%)
(1)
31/12/08
1,518.7
1.5
1,361.6
5.0
31/12/07
1,254.9
3.4
1,148.6
5.4
Remarks
The sharp decline in net income generated by the
Gilbert Dupont brokerage firm can be attributed to
a net capital gain in 2007 from the sale of Euronext/
NYSE shares, in the amount of EUR 36.0 million, for
which there was no equivalent in 2008.
Norbail Immobilier is Crédit du Nord Group’s real
estate lease financing subsidiary. The gain in 2008
net income was primarily due to the reversal of
a depreciation allowance of EUR 1.6 million for a
building under lease. Income restated for this impact
was in line with 2007.
Banque Tarneaud’s leasing activity was redirected
from Turgot Gestion to Star Lease, Crédit du Nord
Group’s lease financing subsidiary. As in 2007, the
low income generated in 2008 was primarily due to
dividends on equity investments.
Norfinance is a wealth management company. Despite
an increase of EUR 0.3 million in capital gains on
securities in 2008, Norfinance’s NBI was hurt by a
drop in fees and commissions of 16.1%.
Net income generated by Dexia-C.L.F. Banque, a
joint subsidiary of Dexia and Crédit du Nord groups,
totalled EUR 5.3 million in 2008, i.e. stable compared
to 2007.
Norbail Sofergie continued to develop its wind energy
financing business in 2008. The loss of EUR 1.4 million
recorded in 2008 was mainly due to the valuation of
interest rate swaps.
Star Lease is Crédit du Nord’s non-real estate lease
financing subsidiary. Star Lease’s NBI rose by 17.5%
in 2008 vs. 2007. The apparent decrease in 2008
income can be attributed to the reversal of a provision
of EUR 1.2 million for tax adjustments in 2007, for
which there was no equivalent in 2008.
(1) As these are lease financing companies, the income and outstandings presented here were taken from the financial accounts to best reflect the economic reality
128
3. Other companies
Name
(in EUR millions)
Date
Total
assets
Net
Income
Étoile Gestion
31/12/08
95.8
-36.7
(97.03%)
31/12/07
76.7
52.2
Antarius
31/12/08
6 729.7
26.6
(50.00%)
31/12/07
6 836.1
21.9
Étoile ID
31/12/08
35.0
6.7
(100.00%)
31/12/07
27.4
1.5
Sfag
31/12/08
4.6
-
(100.00%)
31/12/07
0.2
0.1
Crédinord Cidize
31/12/08
83.0
0.9
(100.00%)
31/12/07
118.4
0.1
Norimmo
31/12/08
8.6
1.2
(100.00%)
31/12/07
8.5
1.0
Anna Purna
31/12/08
-
-
(100.00%)
31/12/07
-
-
Nice Broc
31/12/08
8.2
1.2
(100.00%)
31/12/07
7.9
0.9
Nice Carros
31/12/08
1.1
-0.1
(100.00%)
31/12/07
1.1
-0.1
Nord Assurances
Courtage
31/12/08
6.4
1.7
(100.00%)
31/12/07
9.3
7.4
Partira
31/12/08
1.7
-
(100.00%)
31/12/07
1.7
-
Kolb Investissement
31/12/08
9.8
1.6
(100.00%)
31/12/07
8.2
1.5
SC Fort de Noyelles
31/12/08
0.9
-
(100.00%)
31/12/07
0.9
-
(% stake)
Remarks
The Étoile Gestion brokerage firm manages UCITS for Crédit du Nord
Group. In 2007, Etoile Gestion posted solid results on the back of robust
financial markets in the first half and sustained activity in the second half.
In 2008, in order to preserve the liquidity of certain funds and protect the
interests of its shareholders, the entity was forced to sell off assets held
by dynamic money market funds which had become illiquid, at prices in
line with their valuation in the UCITS.
These disposals led to an expense of EUR 72.2 million for Étoile Gestion.
The deterioration of the financial markets also negatively impacted the level
of fee income invoiced. Management fees fell by 15.5% on 2007.
Antarius, which was created through a partnership with Aviva, is Crédit
Du Nord Group’s life insurance company. Despite the turbulance that
hit marchés the financial markets, premiums nevertheless remained
at a solid level (decline limited to EUR -17.1 million out of a total of
EUR 1,022.1 million, i.e. -1.6%). Net income amounted to EUR 26.6 million
(up 21.5%).
Crédit du Nord Group’s venture capital company, Etoile ID, derives the
majority of its income from capital gains on disposals and revenues on
securities. Its portfolio is exclusively comprised of unlisted companies.
2008 saw a large number of disposals which generated capital gains of
EUR 7.2 million (excluding reversals of provisions).
The company’s business remains very marginal.
This company, specialising in certain market activities, generated income
of EUR 0.9 million in 2008. Marketable securities account for the majority
of its assets.
Norimmo is a registered estate agent engaged in property development. Its
income rose in 2008 and was comprised in part by net income contributed
by its subsidiaries, Nice Broc and Nice Carros. The tax expense of this
partnership is borne by its partners.
These three companies are subsidiaries of Norimmo and specialise in
property transactions. Their 2008 income was stable on 2007: Nice Broc
posted profit of EUR 1.2 million, up 33.3% on 2007, while Nice Carros
posted a loss of EUR 0.1 million, identical to 2007
Retroceded commissions received by Nord Assurances Courtage and paid
to the banks of Crédit du Nord tripled from 2007 to 2008, which explains
the sharp decline in the company’s income over the period. Consequently,
this insurance brokerage firm generated earnings before taxse of EUR 1.7
million in 2008, down 77.0% on 2007. Note that the entity’s tax expense
is borne by its partners.
Partira manages a residual inventory of assets comprised of shares in
property investment companies
This company was acquired in 2001. It is a holding company which owns
21.4% of Banque Kolb. Income is almost exclusively derived from dividends
received from the latter.
This property development company was created in 2005 for a single
property construction and rental operation.
129
Statutory Auditors’ Report on the Consolidated Financial Statements
Statutory Auditor’s Report on the
consolidated financial statements
This is a free translation into English of the statutory auditors’
report on the consolidated financial statements issued in the
French language and is provided solely for the convenience
of English speaking users.
The statutory auditors’ report includes information specifically
required by French law in such reports, whether modified or
not. This information is presented below the opinion on the
consolidated financial statements and includes explanatory
paragraphs discussing the auditors’ assessments of
certain significant accounting and auditing matters. These
assessments were made for the purpose of issuing an audit
opinion on the consolidated financial statements taken as a
whole and not to provide separate assurance on individual
account captions or on information taken outside of the
consolidated financial statements.
This report should be read in conjunction with, and is
construed in accordance with, French law and professional
auditing standards applicable in France.
In compliance with the assignment entrusted to us by the
Shareholder’s Meeting, we hereby report to you on:
k the audit of the accompanying consolidated financial
statements of Crédit du Nord;
k the justification of our assessments;
k the specific verification required by law.
The consolidated financial statements have been approved
by the Board of Directors. Our role is to express an opinion
on these financial statements, based on our audit.
I. Opinion on the consolidated financial
statements
We conducted our audit in accordance with professional
standards applicable in France. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are
free of material misstatement. An audit includes examining,
130
using sample testing techniques or other selection methods,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made, as well as evaluating the overall financial
statement presentation. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a
basis for our opinion.
In our opinion, the consolidated financial statements give a
true and fair view of the assets and liabilities, of the financial
position of the Group and of the results of its operations for
the year then ended in accordance with the IFRSs as adopted
by the European Union.
II. Justification of our assessments
The accounting estimates used to prepare the consolidated
financial statements as at December 31, 2008 were calculated
in a highly volatile market environment. Accordingly, in
application of the provisions of Article L. 823-9 of the French
Commercial Code, we carried out our own assessments,
which are presented below.
Accounting estimates
k As indicated in Note 1 to the financial statements, your
Company makes provisions to cover the credit risks which
are inherent to its activities. Bearing in mind the specific
context of the crisis, 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.
k as indicated in Note 1 to the financial statements,
your company uses internal models to value financial
instruments which are not listed on active markets. As
such, we have reviewed the system for controlling the
models used and assessed the data and assumptions
used, as well as the integration of the risks and results
associated with these instruments.
Statutory Auditors’ Report on the Consolidated Financial Statements
k furthermore, against this backdrop, we have examined the
controls of accounting data on financial instruments which
can no longer be traded on active markets, or whose
valuation parameters are no longer observable, as well
as the methods used to value said instruments.
k as indicated in Note 3, your company carried out
estimated designed to take into account the impact of
the change in its credit risk on the valuation of certain
financial liabilities measured at fair value. We have verified
the appropriateness of the parameters used in these
estimates.
k in preparing its financial statements, your company
also makes significant accounting estimates, in
accordance with the methods described in Note 1 to the
financial statements, Statutory Auditors’ Report on the
Consolidated Financial Statements notably relating to
the fair value of financial instruments carried at amortised
cost, the valuation of goodwill, pension commitments
and other post-employment benefits. Bearing in mind
the specific context of the crisis, we have reviewed and
tested the procedures implemented by management,
the assumptions and parameters used, and ensured that
these accounting estimates are based on documented
methods in accordance with the principles described in
Note 1 to the financial statements.
These assessments were made as part of our audit
approach for the consolidated financial statements taken
as a whole and contributed to the expression of our
unqualified opinion in the first part of this report.
III. Specific verification
As required by law, we also verified the information presented
in the Group management report.
We have no matters to report regarding its fair presentation and
consistency with the consolidated financial statements.
José-Luis Garcia
Isabelle Santenac
131
3
Individual financial
statements
132
2008 Management Report
133
Five-year financial summary
134
Individual balance sheet at December 31
135
Income statement
137
Notes to the individual financial statements
138
Information on the Corporate Officers
177
Statutory Auditors’ General Report
on the Annual Financial Statements
188
Draft resolutions
General Meeting of Shareholders of May 13, 2009
191
As foreshadowed by the main economic indicators at the end
of 2007, the economic climate took a considerable turn for
the worse in 2008. All sectors were impacted, as the financial
crisis transitioned towards an economic crisis promising to
be particularly severe.
Although it maintained its commercial performances over the
year, Crédit du Nord was not spared from this very trying
environment. Gross operating income and net income for
fiscal year 2008 shed 34.8% and 50.0%, respectively, against
fiscal year 2007.
Fiscal year activity
On the balance sheet, outstanding customer loans picked up
by 3.4% over the year to reach EUR 14.9 billion. The Group
continued to develop its customer base in all three markets
(individual, professional and business customers). The
number of products per customer improved and outstanding
housing and equipment loans both increased significantly
(+12.0% and +12.8%, respectively).
Deposits by business and professional customers rose at a
slower pace due to the worsening economic environment. For
individual customers, the rise in returns on regulated savings
products boosted growth in savings deposits. Consequently,
customer savings deposits (excluding pension transactions)
rose by 1.9% to EUR 11.6 billion.
The financial market crisis also caused an across-the-board
decline in custody of securities managed by the Bank on
behalf of its customers: EUR 18.6 billion in 2008 vs. EUR 22.8
billion in 2007. The proportion of UCITS slid from 52.4% to
51.8% over the year.
As in Q4 2007, the financial crisis impacted the activities of
Étoile Gestion (Crédit du Nord’s brokerage subsidiary), which
continued to record net fund outflows in its dynamic money
market fund segment. In the interest of preserving the liquidity
of these funds, and reducing the sensitivity of their assets
under management without penalising the customer, a plan
was implemented to restructure their assets by selling them
on the market and having the funds transfer solid-quality
assets affected by the liquidity crisis to Crédit du Nord. This
restructuring programme led to an increase of EUR 1.12
billion in Crédit du Nord’s assets (of which EUR 404.9 million
in 2008) and an exceptional expense of EUR 51.2 million
2008 net income
At EUR 931.6 million, net banking income fell by 12.3% on
2007. Net interest and similar income (-23.1%) was affected
by the above-mentioned exceptional expense, by writedowns (EUR -58.8 million) recorded on short-term investment
securities purchased from Étoile Gestion, and by dividends
(+EUR 9.3 million) received from Visa Incorporation. Note
that in 2007, net banking income benefited from a net capital
gain on the sale of Euronext/NYSE shares amounting to
EUR 36 million. The collapse of the financial markets also
harshly penalised net fee income, which nevertheless
increased by 2.7% on the back of solid growth in income
from service fees.
Operating expenses totalled EUR 663.9 million. As in previous
years, operating expenses were kept under control with
respect to the previous fiscal year (+1.8%).
In light of all these factors, gross operating income came out
at EUR 267.7 million (-34.8%).
The accelerated rise in risks in the second half of 2008, linked
to the worsening of the economic environment, led to a
considerable increase in the cost of risk, which had remained
relatively low in recent years: EUR 85.6 million in 2008 versus
EUR 37.4 million in 2007 (+128.9%). Divided by the total
amount of outstanding loans, this level of provisioning stood
at 0.58% (0.51% excluding provisions on Roskilde Bank
securities, acquired in the redemption of certain Etoile Gestion
assets for EUR 10.1 million) versus 0.26% in 2007. Operating
income totalled EUR 182.1 million (-51.2%).
After corporate tax, net income for fiscal year 2008 came out
at EUR 168.2 million versus EUR 336.1 million in 2007.
Outlook
In spite of the negative economic climate, Crédit du Nord
succeeded in generating strong commercial performances,
thus confirming the value of its full-service local banking
model. The improvement in net banking income can be
133
Five-year financial summary
attributed to growth in savings deposits (launch of the Livret A
passbook savings account) and growth in outstanding loans
to individual, professional and business customers, which
should benefit from robust new loan activity in recent months.
This growth is not restricted by Crédit du Nord’s financing
situation, which remains balanced.
The various investments undertaken in recent years, both
in terms of branch openings as well as technical and
organisational projects, will be continued. This type of
momentum guarantees Crédit du Nord’s medium-term
profitability.
Five-year financial summary
2008
2007
2006
2005
2004
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
2,126,540
2,009,819
1,675,274
1,497,077
1,430,252
Net banking income (NBI)
931,564
1,062,358
973,749
903,044
911,113
Income before tax, depreciation, provisions
and profit-sharing
404,049
468,649
400,172
366,353
356,011
Income tax
-14,635
-30,672
-83,078
-72,242
-62,101
168,230
336,109
238,017
180,834
198,926
129,546
189,692
175,813
143,426
134,173
Earnings after tax and profit-sharing but before
depreciation and provisions (3)
4.05
4.48
3.17
2.88
2.95
Income after tax, depreciation, provisions
and profit-sharing (3)
1.82
3.63
2.57
1.95
2.15
1.40
2.05
1.90
1.55
1.45
5,965
5,918
5,850
5,856
5,913
262,405
257,216
246,059
236,419
236,802
114,583
111,933
117,396
117,163
118,251
CAPITAL AT YEAR-END
Common stock (in euros)
Shares outstanding
RESULTS OF OPERATIONS FOR THE YEAR
!in EUR thousands)
Revenue, without tax (1)
Income after tax, depreciation, provisions
and profit-sharing
Total dividends (2)
(2)
EARNINGS PER SHARE (in euros)
Dividend per share
(2)
EMPLOYEE DATA
Number of employees
Total payroll (in EUR thousands)
Total benefits (social security, social works, etc.)
(in EUR thousands)
(1) Defined as the sum of bank operating income and other income deducted for interest paid on swaps.
(2) For the financial year.
(3) Based on the number of shares issued at year-end.
134
Individual balance sheet
Individual balance sheet at December 31
ASSETS
(in EUR millions)
Notes
Cash, due from central banks and postal accounts
31/12/2008
31/12/2007
485.8
1,192.6
Treasury notes and assimilated
4
221.1
412.1
Due from banks
2
6,939.2
4,785.6
Current accounts
2,531.2
969.2
Term accounts
4,408.0
3,816.4
14,877.2
14,381.7
391.1
350.7
13,339.4
12,848.2
1,146.7
1,182.8
Transactions with customer
3
Commercial loans
Overdrafts
4
6,529.6
5,790.3
4
0.9
1.0
Equity investments and other long-term investment securities
5
96.0
71.8
Investments in subsidiaries and affiliates
5
725.2
618.2
6.7
7.5
Leases and rentals with option to purchase
Intangible assets
6
120.0
108.1
Tangible assets
6
194.8
197.1
Capital subscribed but unpaid
-
-
Treasury shares
-
-
Other assets
7
398.8
500.6
Accrued income
7
596.5
571.2
31,191.8
28,637.8
31/12/2008
31/12/2007
2,276.2
2,318.7
TOTAL
OFF-BALANCE SHEET ITEMS
(in EUR millions)
Notes
Loan commitments given
To banks
To customers
Guarantee commitments given
To banks
To customers
Securities commitments given
Securities acquired with option to repurchase or recover
Other commitments given
TOTAL COMMITMENTS GIVEN
17
127.6
157.3
2,148.6
2,161.4
3,696.1
3,581.8
346.0
225.6
3,350.1
3,356.2
51.0
44.2
-
-
51.0
44.2
6,023.3
5,944.7
135
Individual balance sheet
LIABILITIES
(in EUR millions)
Note
Due to central banks and postal accounts
Due to banks
9
Current accounts
Term accounts
10
Special and regulated savings accounts
31/12/2008
31/12/2007
1.8
0.1
4,532.6
3,073.1
910.5
833.3
3,622.1
2,239.8
13,450.2
12,406.0
3,756.6
3,673.7
Current accounts
2,697.8
2,431.1
Term accounts
1,058.8
1,242.6
9,693.6
8,732.3
7,076.3
6,745.8
2,617.3
1,986.5
9,629.2
9,611.0
Other debts
Current accounts
Term accounts
Debt securities
12
Short-term notes
Bonds
14.4
17.5
9,057.1
9,342.0
557.7
251.5
Other liabilities
13
395.7
345.9
Accrued expenses
13
858.4
860.4
Provisions
14
129.0
124.6
Subordinated debt
15
683.7
683.7
16
1,511.2
1,533.0
740.3
740.3
Subscribed capital
Additional paid-in capital
Reserves
Badwill
Regulated provisions
Retained earnings
Net income
TOTAL
10.4
10.4
591.2
444.5
-
-
0.9
0.9
0.2
0.8
168.2
336.1
31,191.8
28,637.8
31/12/2008
31/12/2007
-
-
OFF-BALANCE SHEET ITEMS
(in EUR millions)
Note
Loan commitments received
From banks
Guarantee commitments received
From banks
Securities commitments received
Securities sold with option to repurchase or recover
Other commitments received
TOTAL COMMITMENTS RECEIVED
136
17
-
-
4,671.5
3,950.9
4,671.5
3,950.9
50.6
9.3
-
-
50.6
9.3
4,722.1
3,960.2
Income statement
Income statement
(in EUR millions)
Notes
Interest and similar expenses
Net interest and similar income (expenses)
20
20
Fee income
Fee expenses
2008
2007
1,268.8
1,044.2
-860.8
-633.9
408.0
410.3
103.4
168.8
504.0
497.0
-48.7
-53.7
455.3
443.3
20
24.7
40.5
20
-58.5
-1.1
9.3
9.4
-10.6
-8.8
-1.3
0.6
Net fee income or (expenses)
21
Gains or losses on trading portfolio transactions
Gains or losses on investment portfolio and similar transactions
Other banking income
Other banking expenses
Net other banking income (expenses)
NET BANKING INCOME
19
931.6
1,062.4
Personnel expenses
23
-412.4
-407.2
Other operating expenses
24
-192.4
-189.9
Amortisation and depreciation expense
on tangible and intangible fixed assets
24
-59.1
-54.8
Operating expenses, depreciation and amortisation expense
22
-663.9
-651.9
267.7
410.5
-85.6
-37.4
182.1
373.1
0.7
5.9
GROSS OPERATING INCOME
Cost of risk
25
OPERATING INCOME
26
PRE-TAX PROFIT
182.8
379.0
Exceptional income
27
-
-12.2
Income tax
28
-14.6
-30.7
-
-
168.2
336.1
Net allocation to regulated provisions
NET INCOME
137
Notes to the individual financial statements
Notes to the individual financial statements
Note 1
Accounting principles and valuation method
Crédit du Nord’s individual financial statements were drawn
up in accordance with the provisions of CRB (Banking
Regulation Committee) Regulation No. 91-01 applicable to
credit institutions, and the generally accepted accounting
principles of the French banking profession. The presentation
of the financial statements complies with the provisions
of CRC (Accounting Regulation Committee) Regulation
No. 2000-03 relating to individual financial statements of
companies under the authority of the CRBF (French Banking
and Financial Regulation Committee), amended by CRC
Regulation No. 2005-04 of November 3, 2005.
Change in accounting methods relating to
fiscal year 2008
Crédit du Nord applied the following CRC regulations over
the course of fiscal year 2008:
k Regulation Nos. 2008-04 and 2008-02 of April 3, 2008
relating to the accounting treatment of trust activities and
their disclosures in the individual financial statements;
k Regulation No. 2008-07 of April 3, 2008 relating to the
accounting treatment of securities acquisition fees,
amending CRB Regulation No. 90-01 (amended) relating
to the accounting treatment of securities transactions.
This regulation now authorises the activation of securities
acquisition fees. Crédit du Nord has chosen not to change
its method of accounting for securities acquisition fees.
They continue to be booked as expenses (with the
exception of acquisition fees linked to equity investments
and subsidiaries, which are activated);
k Regulation No. 2008-17 of December 10, 2008 relating
to securities transfers outside the Trading Securities
and Investment Securities categories, amending CRB
Regulation No. 90 01 (amended) relating to the accounting
treatment of securities transactions. Crédit du Nord did
not reclassify any financial assets due to the regulation.
138
Due from banks and customers
Amounts due from banks and customers are recorded on the
balance sheet at face value. They are classified according to
their initial duration or type into: demand (current accounts
and overnight transactions) and term accounts in the case
of banks; customer receivables financing, current accounts
and other loans in the case of customers.
Amounts due from banks and customers include outstanding
loans and repurchase agreements for which the securities are
not delivered, entered into with these economic parties.
Accrued interest on these amounts is recorded as related
receivables through profit or loss.
Amounts due to banks, customer deposits
Amounts due to banks and customer deposits are classified
according to their initial duration and type into: demand
(demand deposits, current accounts) and term borrowings
in the case of banks; special savings accounts and other
deposits for customers. Amounts due to banks and customer
deposits include repurchase agreements for which the
securities are not delivered.
Accrued interest on these amounts is recorded as related
payables through profit or loss.
Debt securities
These liabilities are classified by type of security: medium-term
notes, savings bonds, negotiable debt instruments, bonds
and other debt securities (with the exception of subordinated
notes, which are classified under subordinated debt).
Interest accrued and payable in respect of these securities
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 through
profit or loss.
Subordinated debt
This item includes all dated or undated subordinated
borrowings, which in the event of the liquidation of the
borrowing company may only be redeemed after all other
creditors have been paid. Interest accrued and payable
in respect of subordinated debt, if any, is shown with the
underlying abilities as related payables.
Impairment of individual outstanding loans
due to probable credit risk
In accordance with CRC Regulation No. 2002-03, published
on December 12, 2002, 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 classified
as doubtful. In any event, outstanding loans are reclassified
as doubtful where one or more payments is “90 days
overdue” (six months for real estate and property loans, nine
months for municipal loans), or where, any missed payments
notwithstanding, there is a probable risk of loss or where a
loan is disputed.
Unauthorised overdrafts are classified as doubtful loans
after a period of no more than three uninterrupted months
during which the account limits are exceeded (limits of which
individual customers are notified; limits resulting from legal or
de facto agreements with other categories of customers).
Where a given borrower’s loan is classified as a «doubtful
loan», any other loans and commitments of the same borrower
are also automatically classed as doubtful, regardless of any
guarantees.
Doubtful loans and non-performing loans give rise to
impairment for the probable portion of doubtful and nonperforming loans that will not be recovered, recorded as an
asset write-down. The amount of the impairment loss for
doubtful and non-performing loans is equal to the difference
between the book value of the asset and the present value
discounted for estimated recoverable future cash flows,
taking into account the value of any guarantees, discounted
at the original effective interest rate of the loans. The
impaired receivable subsequently generates interest income,
calculated by applying the effective interest rate to the net
book value of the receivable. Impairment allowances and
reversals, losses on non-recoverable loans and amounts
recovered on impaired loans are booked under “Cost of
risk”.
Doubtful loans can be reclassified as performing loans once
there is no longer any probable credit risk and 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.
In the event the creditworthiness of the borrower is such that
after a reasonable period of classification in doubtful loans, a
reclassification to normal loan status is no longer plausible,
the loans is specifically classified as a non-performing loan.
This status is conferred at close-out or upon cancellation
of the loan agreement and, in any event, one year following
classification in doubtful loans, with the exception of doubtful
loans for which the contractual clauses are respected
and/or doubtful loans with valid enforceable guarantees.
Restructured loans for which the borrower has not respected
payment schedules are also classified as non-performing
loans.
This type of impairment is not made on an individual loan
basis and covers several classes of risk, including regional
sector risk (global risk in sectors of the regional economy
undermined by specific unfavourable business conditions).
Crédit du Nord’s Central Risk Division regularly lists the
business sectors that it considers to represent a high
probability of default in the short term due to recent events
that may have caused lasting damage to the sector. A rate
of classification as doubtful loans is then applied to the total
outstanding in these sectors in order to determine the volume
of doubtful loans. Impairments are then booked for the overall
amount of these outstanding loans, using impairment ratios
which are determined according to the historical average
rates of doubtful customers, adjusted to take into account
an analysis of each sector by an independent expert on the
basis of the economic environment.
Securities portfolio
Securities are classified according to their type (Treasury notes
and assimilated, 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 long-term investment securities, shares intended for
portfolio activity).
Sales and purchases of securities are recognised in the
balance sheet on the date of settlement-delivery.
139
In accordance with the provisions of amended CRB Regulation
No. 90-01 relating to the accounting treatment of securities
transactions, as amended by CRC Regulation No. 2008-17,
the rules for classifying and evaluating each portfolio category
are as follows:
Trading securities
Short-term investment securities can be transferred to the
“Investment Securities” category if:
k an exceptional market situation requires a change in
holding strategy;
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. At the close of the fiscal
year, the securities are measured at their market value. The
net balance of differences resulting from price changes is
recorded to income.
k or if the fixed-income securities can no longer be traded on
an active market following their acquisition, and if Crédit du
Nord intends and is able to hold them for the foreseeable
future or until their maturity.
Trading securities are recorded on the balance sheet at cost,
net of expenses.
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 on a pro
rata basis over the period remaining to the date of redemption.
This difference is spread using the actuarial method.
Trading securities no longer held with the intention for reselling
them in the short term, no longer held for market-making
purposes, or for which the specialised portfolio management
strategy for which they are held no longer offers a recent
profit-taking profile in the short term, can be transferred to the
“Short-term Investment Securities” or “Investment Securities”
category if:
k an exceptional market situation requires a change in
holding strategy;
k or if the fixed-income securities can no longer be traded on
an active market following their acquisition, and if Crédit du
Nord intends and is able to hold them for the foreseeable
future or until their maturity.
Transferred securities are recorded in their new category at
their market value on the date of transfer.
Short-term investment securities
This category includes securities which are not included with
trading securities, investment securities, equity investments
and subsidiaries, other long-term investment securities or
shares intended for portfolio activity.
Short-term investment securities are recorded at cost, net
of expenses. Accrued interest at the time of purchase is
recorded as related receivables. The difference between the
value on the date of acquisition and the redemption value of
these securities is spread on a pro rata basis over the period
remaining to the date of redemption. This difference is spread
using the actuarial method.
At year-end, the value of the securities is estimated on the
basis of the most recent price in the case of listed securities,
or according to probable market value in the case of unlisted
securities.
140
Unrealised capital losses resulting from this valuation are
amortised, while capital gains are not recorded.
Investment securities
At the close of the accounts, unrealised losses are determined
by a book-to-market value comparison but are not amortised.
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, including
expenses.
basis of their useful value, derived mainly using the net asset
value method. Unrealised capital losses are amortised, while
potential capital gains are not recorded.
Other long-term investment securities
Long-term investment securities include investments made
by Crédit du Nord in order to foster the development of lasting
business relations by creating a special link with the issuing
company without exercising any influence on its management
due to the small percentage of voting rights attached to said
investments.
basis of their useful value, derived mainly using the net asset
value method. Unrealised capital losses are amortised, while
potential capital gains are not recorded.
Shares intended for portfolio activity
Income from the securities portfolio
This category of securities covers investments made on a
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 for venture capital activities.
Income from stocks, dividends and interim dividends is
recognised as it is received. Income from bonds is booked
to income on a prorata basis. Interest accrued at the time of
purchase is entered in a deferred income account.
These securities are recorded at cost, net of any expenses.
At year-end, they are valued at their «useful value» which
is determined by taking into account the issuer’s general
growth prospects and the projected holding period. The
useful value 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 amortised,
while unrealised capital gains are not recorded.
Capital gains and losses are calculated on the basis of the
gross value of securities sold and selling costs are deducted
from the proceeds of the disposal.
Securities lending and borrowing
Loaned securities are removed from the asset line item in
which they appeared and a receivable equal to the book
value of the loaned securities is recorded. At year-end, this
receivable is valued according to the rules applicable to the
original portfolio from which the securities were loaned.
Borrowed securities are recorded to assets in the appropriate
line item, while a debt of securities vis-à-vis the lender is
recorded to liabilities. At year-end, borrowed securities
appearing in assets follow the accounting rules applicable to
trading securities. Conversely, the debt recorded to liabilities
is valued at market. Compensation generated by securities
lending or borrowing is recorded on a pro rata basis to
income.
Securities with repurchase or resale options
The amount of the repurchase agreement (the security
sales price) is recorded to assets (securities purchased)
or to liabilities (securities sold). Compensation relating to
repurchase agreements is recorded on a pro rata basis to
income.
Securities pledged remain as originally booked to assets and
are valued according to the rules applicable to the portfolio
to which they belong. Income relating to these securities is
also recorded as if the securities were still in the portfolio.
Symmetrically, securities purchased in this manner are not
included in the bank’s securities portfolio.
Income from securities disposals
Fixed assets purchased before December 31, 1976 are
recorded on the balance sheet at their “useful value”,
estimated according to the rules of the “legal revaluation of
1976”, while fixed assets acquired after that date are entered
at cost.
Borrowing expenses incurred to fund a lengthy construction
period for the fixed assets are included in the acquisition cost,
along with other directly attributable expenses. Investment
subsidies received are deducted from the cost of the relevant
assets.
Software developed internally is capitalised and depreciated,
in the same way as business software, if it stems from an IT
project involving significant amounts declared as strategic
by Crédit du Nord, which expects it to yield future benefits.
In accordance with Note No. 31 issued in 1987 by the
CNC (French National Accounting Council), fixed costs
correspond solely to the costs related to the detailed design,
programming, testing of the software, and to the production
of the technical documentation.
As soon as they are fit for use, fixed assets are depreciated
over their useful life using the straight-line method. Any
residual value of the asset is deducted from its depreciable
amount.
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.
Crédit du Nord has applied this approach to its operating
purposes investment property, breaking down its assets into
at least the following components, with their corresponding
depreciation periods:
141
Infrastructures
Major structures
50 yrs
Doors and windows, roofing
20 yrs
Façades
30 yrs
Elevators
of resources to this third party without receiving at least an
equivalent value in exchange. The estimated amount of the
expected outflow is then discounted to present value to
determine the size of the provision, where this discounting
has a significant impact.
Electrical installations
Commitments under home savings
accounts
Electricity generators
Technical
installations
Air conditioning, smoke
extraction
Heating
10
to
30 yrs
Security and surveillance
installations
Plumbing
Fire safety equipment
Fixtures & fittings
Finishings, surroundings
10 yrs
Depreciation periods for other categories of fixed assets
depend on their useful life, usually estimated in the following
ranges:
Safety and publicity equipment
5 yrs
Transport
4 yrs
Furniture
10 yrs
IT and office equipment
3 to 5 yrs
Software (developed or acquired)
3 to 5 yrs
These depreciation periods are listed as an indication only
and may vary depending on the specific characteristics of
the fixed assets in question.
Land, lease rights and business premises are not
depreciated.
Fixed assets are subject to impairment tests whenever there
is an indication that their value may have diminished. Where
an impairment loss is booked to the income statement, it can
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.
The useful life and the residual value of fixed assets are
reviewed annually. If data needs to be changed, the
depreciation schedule is modified accordingly.
Provisions
Provisions, excluding those related to employee benefits
and loans, represent liabilities, the timing or amount of which
cannot be precisely determined. Provisions are booked
where the Group has a commitment to a third party which
makes it probable or certain that it will never incur an outflow
142
Home savings accounts and plans are savings schemes for
individual customers, in accordance with Law No. 65-554 of
July 10, 1965, which combine an initial deposit phase in the
form of an interest-earning savings account with a lending
phase where the deposits are used to provide property loans.
By regulation, this latter phase is subject to the previous
existence of the savings phase and is therefore inseparable
from it. The deposits collected and loans granted are booked
at amortised cost.
These schemes generate two types of commitments for Crédit
du Nord: the obligation to lend subsequently to the customer
at an interest rate set upon the signing of the agreement,
and the obligation to pay interest on the customer’s savings
in the future at an interest rate set upon the signing of the
agreement, for an indefinite period.
Commitments with future adverse effects for Crédit du
Nord are subject to provisions booked as balance-sheet
liabilities, any changes in which are recorded on the interest
margin line under “Net Banking Income”. These provisions
relate exclusively to commitments under home savings
accounts and schemes existing at the date of the provision’s
calculation.
Provisions are calculated for each generation of home
savings schemes, on the one hand, with no netting between
the different generations of schemes, and for all home
savings accounts taken together, which constitutes a single
all-encompassing generation, on the other hand.
During the savings phase, provisions are calculated according
to the difference between average expected customer
savings deposits and minimum expected customer savings
deposits, both of which are determined statistically based on
historic observations of actual customer behaviour.
During the lending phase, provisions are calculated according
to loans already issued but not yet due at the balance sheet
date, as well as future loans considered as statistically
probable on the basis of customer savings deposits on
the balance sheet at the date of calculation and on historic
A provision is booked if the discounted value of expected
future earnings for a given generation of home savings
products is negative. These earnings are estimated on
the basis of interest rates available to individual customers
for equivalent savings and loan instruments, with similar
estimated life and date of inception.
Transactions in forward financial
instruments or options
Interest rate swaps
This category covers all transactions relative to swaps, FRAs,
caps, floors, collars and interest rate options, accounted for
under amended CRB Regulation No. 90 15.
From origination, these contracts are classified in four
separate categories and recorded in distinct accounts. The
risks and income/expenses relative to each category are
subject to specific monitoring:
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 the
income statement on a prorata basis. Unrealised losses,
determined by a book-to-market value comparison, are
provisioned. Unrealised gains are not recorded.
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 booked to the income statement on a
prorata basis in the same manner as those relating to the
hedged item. The same applies to unrealised gains and
losses.
c) Contracts whose purpose is to hedge and manage
the institution’s global interest rate risk (also called
“macrohedges”). All relative income and expenses are
booked to the income statement on a prorata basis.
Unrealised gains and losses, determined by a book-tomarket value comparison, are not recognised.
d) Contracts whose purpose is to specifically manage a
trading portfolio. All relative income and expenses are
recorded to 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.
Margin calls paid or received on futures and Matif contracts of
a speculative nature, or on contracts used to hedge markedto-market positions, are recorded directly to income.
In the event these contracts are used to hedge non markedto-market items, margin calls are recorded in suspense
accounts in order to be distributed, after contracts are
settled, on a pro rata basis over the remaining life of the
hedged transactions.
Premiums paid or received are entered in suspense
accounts.
Premiums on unexpired and unexercised exchange-traded
options are re-valued on the closing date. Revaluations are
treated in the same manner as margin calls.
At the time of expiration or exercise of the option, premiums
are either recorded immediately to income (speculative
options, hedge options on marked-to-market items), or
distributed on a pro rata basis over the residual life of the
hedged transactions (hedge options on non marked-tomarket items).
At period-end, monetary assets and liabilities denominated in
foreign currencies are converted into euros at the prevailing
spot rate. Realised or unrealised foreign exchange losses or
gains are recognised in profit or loss.
Foreign exchange contracts are valued at the spot rate
on the balance sheet date. Forward contracts are valued
using the forward exchange rate for the remaining maturity,
and variations in fair value are recorded on the income
statement.
Guarantees given and received
Guarantees given at the request of customers or banks
are recorded as off-balance sheet items in the amount of
the commitment. For guarantees received, only those from
lending institutions, States, government administrations and
local authorities are recorded.
Off-balance sheet guarantees and endorsements
correspond to irrevocable cash loan commitments and
guarantee commitments which did not give rise to any fund
movements.
Where necessary, these financing guarantees and
commitments are subject to provisions.
This category covers futures, Matif contracts, and exchangetraded interest-rate and forex options, which are booked in
accordance with amended CRB Regulation No. 88-02.
143
Employee benefits
Crédit du Nord has elected to apply CNC Recommendation
2003 R01, relative to the rules for booking and evaluating
pension commitments and other related benefits.
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.
All commitments under defined benefit plans are valued using
an actuarial method.
Said plans cover several types of benefits, notably any residual
complementary benefits afforded by specialist pension
funds. Following the Branche agreement of February 25,
2005, which provided for the amendment of the provisions
relating to complementary benefits, and in light of the negative
balance of its pension fund, Crédit du Nord signed an internal
agreement in 2006 setting forth the following provisions:
k for beneficiaries of complementary benefits still employed
with Crédit du Nord, the value of the complementary
benefits was transferred to a supplementary savings plan
outsourced to an insurer;
k retirees and beneficiaries of a survivor’s pension were
given a choice of opting for a single lump-sum payment
of their complementary benefits.
Any residual complementary benefits are therefore linked to
retirees and beneficiaries of a survivor’s pension who did not
opt for a single lump-sum payment of their complementary
benefits, on the one hand, and to beneficiaries no longer
employed with Crédit du Nord, on the other hands.
In the case of Crédit du Nord, valuations are performed by an
independent actuary twice a year, with the valuation made on
December 31 calculated on the basis of data as at August 31.
These commitments and the coverage thereof as well as the
main underlying assumptions therein are outlined in the notes
to the financial statements.
Employee benefits also include end-of-career 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 the notes to the financial statements.
Commitment valuations are performed by an independent
actuary using the projected credit units method, twice a year,
with the valuation of December 31 calculated on the basis of
data as at August 31.
In accordance with Note 2004/A dated January 21, 2004 of
the Emergency Committee of the CNC, the Group uses the
straight-line method over the average residual working lives
144
of employee beneficiaries to account for the amendments
linked to Law No. 2003-775 of August 21, 2003 governing
pension reforms.
«Actuarial differences» reflect the difference between
actuarial hypothesis and actual figures as well as the impact
of any change in actuarial hypothesis. In the specific case
of pension benefits, these differences are only booked in
part on the income statement where they exceed 10% of
the discounted value of the commitment (referred to as the
«corridor» method). The proportion of said booked differences
is equal to the surplus defined above divided by the average
residual working lives of the beneficiaries. If a plan has plan
assets, these are valued at fair value at the balance sheet
date.
Other long-term benefits
Crédit du Nord’s personnel can also benefit from time savings
accounts as well as from various seniority bonuses. These
benefits are calculated according to the same actuarial
method described above and are provisioned in full, as are any
actuarial differences. These commitments and the coverage
thereof as well as the main underlying assumptions therein are
outlined in the notes to the financial statements. Commitment
valuations are performed by an independent actuary once a
year. For commitments excluding time savings accounts, the
valuation made on December 31 was calculated on the basis
of data as at August 31. For commitments linked to time
savings accounts, the valuation made on December 31 was
calculated on the basis of data as at December 31
Interest and fee income
Interest and similar fee income are recorded on the income
statement on a prorata basis.
Fees are booked according to the type of services to which
they relate.
Fees for one-off services are booked to income when the service
is provided.
Fees for continuous services are booked over the life of the
service rendered.
Commissions that are part of the effective return of a financial
instrument are accounted for as an adjustment to the effective
return of the financial instrument.
Taxes
All taxes (excluding income tax) whose assessment refers to
items for the fiscal year in question are recorded as expenses
for said year, whether or not the tax was actually paid during
the course of the fiscal year.
Current income tax
Current income tax for the fiscal year includes 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.
In France, standard corporate income tax is 33.33%.
In addition, a social security contribution of 3.3% (after
deduction from taxable income of EUR 0.763 million), was
introduced in 2000. Since January 1, 2007, long-term capital
gains on equity investments have been taxed at 15%, while
capital gains on other equity investments are tax-exempt,
subject to a share for fees and expenses of 5% of net income
on capital gains during the fiscal year. In addition, under
the regime of parent companies and subsidiaries, dividends
received from companies in which the equity investment is
at least 5% are tax-exempt (with the exception of a share for
fees and expenses equivalent to 5% of the dividends paid).
Tax credit arising in respect of revenues from receivables
and security portfolios, when they are effectively used for the
settlement of corporate tax due for the fiscal year, are booked
under the same line item as the revenues to which they relate.
The corresponding income tax expense is kept in the income
statement under «Income Tax”.
Since January 1, 2006, the annual flat-rate corporate tax (IFA
or imposition forfaitaire annuelle) has been deducted from
taxable income and recorded under “Taxes” in accordance
with Note No. 2006-05 of the CNC.
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 based on a tax rate which has
been voted or 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 “Income Tax” on the income statement.
Crédit du Nord 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. 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.
145
Note 2
Due from banks
2008/2007 change
(in EUR millions)
Related receivables
31/12/2008
31/12/2007
in value
in %
2,530.2
967.7
1,562.5
161.5
1.0
1.5
-0.5
-33.3
Total demand receivables
2,531.2
969.2
1,562.0
161.2
Term accounts
2,556.7
2,285.6
271.1
11.9
1,710.8
1,386.6
324.2
23.4
Subordinated loans
89.1
89.6
-0.5
-0.6
Related receivables
51.4
54.6
-3.2
-5.9
0.5
-
-
-
-0.5
-
-
-
-
-
-
-
Doubtful loans (impairment)
Non-performing loans (gross)
Non-performing loans (impairment)
Total term receivables
TOTAL
-
-
-
-
4,408.0
3,816.4
591.6
15.5
6,939.2
4,785.6
2,153.6
45.0
The schedule of term receivables due from banks (excluding related receivables) at December 31, 2008 was as follows:
Maturity
< 3 months
3 months to 1 yr
1 to 5 yrs
> 5 yrs
Total
Term accounts
453.4
611.5
1,166.9
324.9
2,556.7
611.1
1,099.7
-
-
1,710.8
-
12.3
74.4
2.4
89.1
1,064.5
1,723.5
1,241.3
327.3
4,356.6
Subordinated loans
TOTAL
Of the total amount due from banks, the following were intra-Group transactions:
2008/2007 change
(in EUR millions)
Transactions with Crédit du Nord Group
Transactions with Société Générale Group
TOTAL
146
31/12/2008
31/12/2007
in value
in %
2,059.9
1,688.8
371.1
22.0
1,804.6
263.4
1,541.2
-
3,864.5
1,952.2
1,912.3
98.0
Note 3
2008/2007 change
(in EUR millions)
Commercial loans
Related receivables
Total performing commercial loans
Short-term loans
31/12/2008
31/12/2007
in value
in %
380.8
339.2
41.6
12.3
0.2
0.1
0.1
100.0
381.0
339.3
41.7
12.3
1,381.9
1,440.7
-58.8
-4.1
Capital expenditure loans
3,022.8
2,680.6
342.2
12.8
Housing loans
7,078.5
6,322.3
756.2
12.0
Other loans
1,164.0
999.6
164.4
16.4
2.5
2.6
-0.1
-3.8
274.8
1,054.5
-779.7
-73.9
77.9
59.5
18.4
30.9
Non-attributed stock
Related receivables
Total - Other performing customer loans
Overdrafts
Related receivables
Total – Performing overdrafts
SUB-TOTAL PERFORMING LOANS
44.2
42.9
1.3
3.0
13,046.6
12,602.7
443.9
3.5
1,058.2
1,106.1
-47.9
-4.3
22.1
21.9
0.2
0.9
1,080.3
1,128.0
-47.7
-4.2
14,507.9
14,070.0
437.9
3.1
358.7
314.2
44.5
14.2
Doubtful loans (impairment)
-76.5
-73.4
-3.1
4.2
Non-performing loans (gross)
375.4
321.1
54.3
16.9
-288.3
-250.2
-38.1
15.2
369.3
311.7
57.6
18.5
14,877.2
14,381.7
495.5
3.4
49.7%
50.9%
- o/w non-performing loans:
76.8%
77.9%
- o/w other loans:
21.3%
23.4%
Non-performing loans (impairment)
SUB-TOTAL DOUBTFUL LOANS
TOTAL
Impairment rate for doubtful loans:
Term receivables due from customers (excluding related receivables and non-allocated stock) at December 31, 2008 can be
broken down as follows:
Maturity
< 3 months
3 months to 1 yr
1 to 5 yrs
> 5 yrs
Total
Commercial loans
377.0
3.8
-
-
380.8
943.9
1,360.4
4,828.5
5,514.4
12,647.2
TOTAL
0.1
0.4
2.0
-
2.5
274.8
-
-
-
274.8
1,595.8
1,364.6
4,830.5
5,514.4
13,305.3
147
Note 4
Securities portfolio
2008/2007 change
31/12/2008
(in EUR millions)
Trading securities
TOTAL
31/12/2007
in value
in %
40.2
43.0
-2.8
-6.5
6,654.3
6,160.4
493.9
8.0
57.1
-
-
-
6,751.6
6,203.4
548.2
8.8
BREAKDOWN BY PORTFOLIO
31/12/2008
31/12/2007
Listed
Unlisted
Total
Listed
Unlisted
Total
-
-
-
-
-
-
Bonds and other fixed-income securities
-
40.2
40.2
-
43.0
43.0
-
Trading securities
-
-
-
-
-
40.2
40.2
-
43.0
43.0
221.1
-
221.1
399.8
-
399.8
94.4
6,361.1
6,455.5
73.9
5,633.7
5,707.6
SUB-TOTAL (1)
0.1
4.9
5.0
0.1
5.0
5.1
Write-downs
-35.1
-37.5
-72.6
-1.6
-4.2
-5.8
SUB-TOTAL (2)
280.5
6,328.5
6,609.0
472.2
5,634.5
6,106.7
-
-
-
-
-
-
41.5
16.7
58.2
-
-
-
-
-
-
-
-
-
Write-downs
-0.1
-1.2
-1.3
-
-
-
SUB-TOTAL (3)
41.4
15.5
56.9
-
-
-
321.9
6,384.2
6,706.1
472.2
5,677.5
6,149.7
TOTAL (1)+(2)+(3)
Related receivables (4)
TOTAL (1)+(2)+(3)+(4)
45.5
53.7
6,751.6
6,203.4
o/w:
148
221.1
412.1
6,529.6
5,790.3
0.9
1.0
ADDITIONAL INFORMATION ON SECURITIES:
Short-term investment portfolio
31/12/2008
31/12/2007
4.1
3.2
Estimated value of short-term investment securities
Unrealised capital gains
• Unrealised capital gains on shares and other equity securities
2.4
2.9
• Unrealised capital gains on bonds and other fixed-income securities
1.7
0.3
Shares of UCITS held
Subordinated notes
-
-
88.4
43.6
4.5
1.9
Premiums and discounts relating to short-term investment securities
Investment portfolio
The investment portfolio is wholly comprised of OBSAARs (bonds with redeemable and/or acquisition warrants):
k three transactions for a total amount of EUR 33.1 million (excluding related receivables) were transferred on December 31, 2008 from the
short-term investment portfolio to the investment portfolio in accordance with the provisions of CRB Regulation No. 90-01;
k an additional transaction totalling EUR 23.8 million (excluding related receivables) was directly recorded in the investment portfolio.
The schedule (excluding related receivables) for fixed-income investment securities (treasury notes and bonds) is as follows:
Maturity
TOTAL
< 3 months
3 months to 1 yr
1 to 5 yrs
> 5 yrs
Total
-
221.1
-
-
221.1
2,959.0
1,305.1
315.5
1,875.9
6,455.5
2,959.0
1,526.2
315.5
1,875.9
6,676.6
Note 5
Equity investments and subsidiaries
2008/2007 change
(in EUR millions)
Equity investments and other long-term investment securities
Shares in affiliates
TOTAL
31/12/2008
31/12/2007
in value
in %
96.0
71.8
24.2
33.7
725.2
618.2
107.0
17.3
821.2
690.0
131.2
19.0
149
The equity investments and subsidiaries portfolio evolved as follows over fiscal year 2008
(in EUR millions)
Short-term
investment securities
Other long-term
Real estate
investment securities investment companies
Total
Gross book value
Amount at December 31, 2007
625.9
64.5
0.6
691.0
Investments
130.7
0.7
-
131.4
Disposals
Other changes
-
-
-0.3
-0.3
-0.4
0.2
-
-0.2
756.2
65.4
0.3
821.9
0.8
0.2
-
1.0
Write-downs
Allocations to provisions
Reversals
Other changes
Amount at 31 December 2008
NET VALUE AT DECEMBER 31, 2008
-
-
-
-
-0.1
-0.2
-
-0.3
-
-
-
-
0.7
-
-
0.7
755.5
65.4
0.3
821.2
The growth of the equity investments portfolio can be primarily attributed to the following capital increases:
k Étoile Gestion: EUR 22.4 million
k Verthema: EUR 23.2 million
k Legazpi: EUR 11.9 million
k Nordenskiöld: EUR 31.0 million
k Hedin: EUR 30.5 million
Note 6
Fixed assets
2008/2007 change
(in EUR millions)
31/12/2008
31/12/2007
in value
in %
87.1
82.9
4.2
5.1
105.5
112.0
-6.5
-5.8
90.2
87.7
2.5
2.9
Land and buildings
Developed intangible fixed assets
29.8
20.4
9.4
46.1
312.6
303.0
9.6
3.2
Land and buildings
0.8
0.9
-0.1
-11.1
1.4
1.3
0.1
7.7
Net value of operating fixed assets
Fixed assets (excluding operating fixed assets)
Net value of fixed assets (excluding operating fixed assets)
FIXED ASSETS
150
2.2
2.2
-
-
314.8
305.2
9.6
3.1
Tangible operating
fixed assets
Intangible
fixed assets
Land & Buildings
Others
Tangible
fixed assets (excl.
op. fixed assets) (1)
116.2
375.0
6.8
153.7
81.4
733.1
Inflows
5.9
20.8
0.2
29.2
14.0
70.1
Outflows
0.0
-8.6
-
-6.0
-0.8
-15.4
Other changes
0.9
-1.3
-
-
-
-0.4
123.0
385.9
7.0
176.9
94.6
787.4
33.3
263.0
4.6
66.0
61.0
427.9
2.4
25.4
0.2
26.7
4.6
59.3
-
-8.0
-
-6.0
-0.8
-14.8
(in EUR millions)
Developed
Acquired
TOTAL
Gross book value
Allocations during fiscal year 2008
(see Note 24)
Depreciation relating to asset disposals
Other changes
NET VALUE AT DECEMBER 31, 2008
0.2
-
-
-
-
0.2
35.9
280.4
4.8
86.7
64.8
472.6
87.1
105.5
2.2
90.2
29.8
314.8
(1) Allocations to depreciation of fixed assets (excluding operating fixed assets) are included in Net Banking Income.
IT investments totalled EUR 43.2 million in 2008, up 15.8% on
2007, and accounted for 61.6% of total investments in 2008.
On the whole, EUR 29.2 million in development expenses for
certain major IT software projects were capitalised in 2008,
vs. EUR 27.3 million in 2007, of which EUR 22.8 million from
“Other expenses” (see Note 24) and EUR 6.0 million from
“Personnel expenses” (see Note 23).
Note 7
Accruals and other accounts receivable
2008/2007 change
31/12/2008
31/12/2007
in value
in %
Other assets
398.8
500.6
-101.8
-20.3
Sundry debtors
351.9
421.8
-69.9
-16.6
-
65.0
-65.0
-100.0
31.1
6.4
24.7
-
(in EUR millions)
Collective management of sustainable development passbooks
Premiums on derivatives purchased
Others
Accruals and other accounts receivable
Securities received for deposit
Deferred taxes
Income to be received
15.8
7.4
8.4
113.5
596.5
571.2
25.3
4.4
8.1
21.0
-12.9
-61.4
54.6
42.1
12.5
29.7
415.9
419.1
-3.2
-0.8
Prepaid expenses
49.8
40.4
9.4
23.3
Others
68.1
48.6
19.5
40.1
995.3
1,071.8
-76.5
-7.1
TOTAL
151
Note 8
Depreciation and amortisation deducted from assets can be broken down as follows for fiscal year 2008:
2008/2007 change
31/12/2008
(in EUR millions)
Impairment of loans to banks
Impairment of customer loans
in %
0.5
-
0.5
100.0
323.6
41.2
12.7
72.6
5.8
66.8
-
1.3
-
1.3
100.0
0.7
1.0
-0.3
-30.0
(1)
Write-downs on equity investments and other long-term
Depreciation for sundry receivables
TOTAL
in value
364.8
Write-downs on short-term investment securities
Write-downs on investment securities
31/12/2007
-
0.8
-0.8
-100.0
439.9
331.2
108.7
32.8
Write-backs
and uses
Other
changes (1)
Stock
31/12/2008
(1) See Note 4.
Changes in depreciation and amortisation:
(in EUR millions)
Impairment of loans to banks
Impairment of customer loans
Write-downs on short-term investment securities
Write-downs on investment securities
Write-downs on equity investments and other long-term
Depreciation for sundry receivables
TOTAL
Stock
31/12/2007
Allocations to
provisions
-
0.5
-
-
0.5
323.6
156.9
-115.7
-
364.8
5.8
69.7
-1.6
-1.3
72.6
-
-
-
1.3
1.3
1.0
-
-0.3
-
0.7
0.8
-
-0.8
-
-
331.2
227.1
-118.4
-
439.9
Changes in depreciation and amortisation impacting Net Banking Income (Note 19):
Changes in depreciation and amortisation impacting “Cost of risk” (Note 25):
Changes in depreciation and amortisation impacting income from short-term
investment securities (Notes 5 and 26):
(1) See Note 4.
152
60.0
-1.6
167.1
-116.5
-
-0.3
Note 9
Due to banks
2008/2007 change
(in EUR millions)
Related payables
Total demand borrowings
Term accounts
Related payables
Total term borrowings
TOTAL
31/12/2008
31/12/2007
in value
in %
909.5
830.9
78.6
9.5
1.0
2.4
-1.4
-58.3
910.5
833.3
77.2
9.3
3,600.4
1,616.8
1,983.6
122.7
0.0
500.0
-500.0
-100.0
0.0
108.4
-108.4
-100.0
21.7
14.6
7.1
48.6
3,622.1
2,239.8
1,382.3
61.7
4,532.6
3,073.1
1,459.5
47.5
The schedule of term borrowings from banks (excluding related payables) can be broken down as follows at December 31,
2008:
Maturity
Term accounts
< 3 months
3 months to 1 yr
1 yr to 5 yrs
> 5 yrs
Total
1,618.4
650.7
1,115.4
215.9
3,600.4
1,618.4
650.7
1,115.4
215.9
3,600.4
31/12/2008
31/12/2007
in value
in %
Transactions with Crédit du Nord Group
543.8
705.2
-161.4
-22.9
Transactions with Société Générale Group
988.6
552.0
436.6
79.1
1,532.4
1,257.2
275.2
21.9
TOTAL
Of the total amount due to banks, the following were intra-Group transactions:
2008/2007 change
(in EUR millions)
TOTAL
153
Note 10
2008/2007 change
(in EUR millions)
31/12/2008
31/12/2007
in value
in %
Demand special savings accounts
2,628.6
2,378.5
250.1
10.5
Term special savings accounts
1,058.0
1,241.8
-183.8
-14.8
4,002.2
3,788.6
213.6
5.6
2,468.4
2,465.4
3.0
0.1
Financial customers
23.9
18.8
5.1
27.1
Others
318.4
357.9
-39.5
-11.0
Sub-total
6,812.9
6,630.7
182.2
2.7
Term accounts
489.7
549.3
-59.6
-10.9
516.1
508.0
8.1
1.6
Financial customers
0.9
0.8
0.1
12.5
Others
21.5
18.8
2.7
14.4
Sub-total
1,028.2
1,076.9
-48.7
-4.5
150.0
200.0
-50.0
-25.0
261.0
111.5
149.5
134.1
1,428.4
701.6
726.8
103.6
0.4
0.4
-
-
Guarantee deposits
Related payables
TOTAL
82.7
64.6
18.1
28.0
13,450.2
12,406.0
1,044.2
8.4
The schedule of term special savings accounts, term accounts and securities sold under term repurchase agreements can be
broken down as follows:
Maturity
< 3 months
3 months to 1 yr
1 yr to 5 yrs
> 5 yrs
Total
Term special savings accounts
964.4
28.8
64.4
0.4
1,058.0
Term accounts
841.6
165.7
20.9
-
1,028.2
150.0
-
-
-
150.0
1,428.4
-
-
-
1,428.4
3,384.4
194.5
85.3
0.4
3,664.6
TOTAL
Assets under custody for customers stood at EUR 18.6 billion in fiscal year 2008, of which UCITS accounted for 51.8%.
154
Note 11
Home savings accounts and plans
A. Outstanding deposits in PEL/CEL accounts
2008/2007 change
31/12/2008
31/12/2007
in value
in %
109.1
Four to 10 years old
417.7
150.3
-41.2
-27.4
538.5
-120.8
-22.4
395.6
408.9
-13.3
-3.3
SUB-TOTAL
922.4
1,097.7
-175.3
-16.0
CEL accounts
177.1
179.0
-1.9
-1.1
1,099.5
1,276.7
-177.2
-13.9
(in EUR millions)
PEL accounts
TOTAL
B. Outstanding housing loans granted with respect to PEL/CEL accounts
2008/2007 change
(in EUR millions)
31/12/2008
31/12/2007
in value
in %
-2.6
11.1
11.4
-0.3
4 to 10 years old
15.8
15.2
0.6
3.9
5.1
2.2
2.9
131.8
32.0
28.8
3.2
11.1
TOTAL
C. Provisions for commitments linked to PEL/CEL accounts (1)
2008/2007 change
(in EUR millions)
31/12/2008
31/12/2007
in value
in %
2.3
2.5
-0.2
-8.0
-
0.1
0.1
-100.0
PEL accounts
4 to 10 years old
-
1.2
-1.2
-100.0
SUB-TOTAL
2.3
3.8
-1.5
-39.5
CEL accounts
3.2
3.1
0.1
3.2
Drawn down loans
1.0
0.7
0.3
42.9
6.5
7.6
-1.1
-14.5
TOTAL
(1) These provisions are booked as Allowances for general risk and commitments (see Note 14).
D. Methods used to establish the parameters for valuing provisions
The parameters used for estimating the future behaviour
of customers are derived from historical observations of
customer behaviour patterns over periods of between 10 and
15 years. The value of these parameters can be adjusted if
any changes are subsequently made to regulations that might
undermine the effectiveness of past data as an indicator of
future customer behaviour.
observable data and constitute a best estimate, at the date of
valuation, of the future value of these elements for the period
concerned, in line with the retail banking division’s policy of
interest rate risk management.
The discount rates used are derived from the zero coupon
swaps vs. Euribor yield curve at the date of valuation,
averaged over a 12-month period.
The values of the different market parameters used, notably
interest rates and margins, are calculated on the basis of
155
Note 12
Debt securities
2008/2007 change
(in EUR millions)
31/12/2008
31/12/2007
in value
in %
12.1
14.8
-2.7
-18.2
8,933.7
9,187.5
-253.8
-2.8
Bonds
555.0
250.0
305.0
122.0
Related payables
128.4
158.7
-30.3
-19.1
9,629.2
9,611.0
18.2
0.2
TOTAL
The schedule for debt securities (excluding related payables) was as follows at December 31, 2008:
Maturity
Bonds
TOTAL
< 3 months
3 months to 1 yr
1 yr to 5 yrs
> 5 yrs
Total
7.6
1.0
3.5
-
12.1
5,527.4
1,366.9
714.9
1,324.5
8,933.7
50.0
200.0
305.0
-
555.0
5,585.0
1,567.9
1,023.4
1,324.5
9,500.8
Note 13
Accruals and other accounts payable
2008/2007 change
31/12/2008
31/12/2007
in value
in %
395.7
345.9
49.8
14.4
Sundry creditors
237.9
292.0
-54.1
-18.5
Payments remaining on non paid-up securities (1)
145.0
46.4
98.6
-
(in EUR millions)
Other accounts payable
Premiums on derivatives sold
12.6
5.1
7.5
147.1
0.2
2.4
-2.2
-91.7
Accruals
858.4
860.4
-2.0
-0.2
Unavailable accounts in collection accounts
252.3
279.7
-27.4
-9.8
Deferred taxes
168.5
99.7
68.8
69.0
Expenses payable
394.2
432.6
-38.4
-8.9
Others
Deferred income
Others
TOTAL
39.0
34.2
4.8
14.0
4.4
14.2
-9.8
-69.0
1 254.1
1 206.3
47.8
4.0
(1) Of which, at December 31, 2008: Antarius (EUR 45.0m) - Hedin (EUR 30.5m) - Verthema (EUR 23.2m) - Nordenskiöld (EUR 31.0m) - Legazpi (EUR 11.9m) – see Note 5.
156
Note 14
Provisions
The changes in provisions over fiscal year 2008 can be broken down as follows:
Stock at
31/12/2007
Allocations to
provisions
Reversals
and uses
Provisions for post-employment benefits
52.6
14.2
-10.6
-
56.2
Provisions for long-term benefits
20.5
4.3
-6.4
-
18.4
Provisions for other employee benefits
1.6
0.2
-0.4
-
1.4
Provisions for property risks
0.9
-
-0.5
-
0.4
Provisions for disputes with customers
9.7
0.3
-3.1
0.4
7.3
18.1
1.3
-
-
19.4
8.3
6.9
-3.3
-
11.9
(in EUR millions)
Provisions for off-balance sheet commitments
Other
Changes
Stock at
31/12/2008
Provisions for PEL/CEL commitments
7.6
-
-1.1
-
6.5
Other provisions
5.3
2.7
-0.5
-
7.5
124.6
29.9
-25.9
0.4
129.0
2.2
-1.6
18.8
-17.5
8.9
-6.8
TOTAL
Changes in provisions impacting “Net Banking Income” (Note 19):
Changes in provisions impacting “Operating expenses” (Note 23):
Changes in provisions impacting “Cost of risk” (Note 25):
Provisions for property risks cover termination loss relative to property programmes in which Crédit du Nord is invested.
Impairment due to sector credit risk, which is not made on an individual loan basis, covers several classes of unrealised risk,
including regional sector risk (global risk in sectors of the regional economy undermined by specific unfavourable business
conditions).
Note 15
Subordinated debt
2008/2007 change
(in EUR millions)
Subordinated notes and borrowings
Interest payable
TOTAL
31/12/2008
31/12/2007
in value
in %
673.2
673.2
-
-
10.5
10.5
-
-
683.7
683.7
-
-
No new redeemable subordinated notes were issued in 2008.
157
DETAILS OF REDEEMABLE SUBORDINATED NOTES ISSUED BY CREDIT DU NORD
Issuance in October 1997 of a total 300 million French francs
with the following characteristics:
Issuance in May 2000 of a total EUR 40 million
Size:
Size:
Principal:
Number of notes:
Issue price:
Maturity:
Coupon:
Redeemable at par on:
Principal:
Number of notes:
Issue price:
Maturity:
Coupon:
300 million French francs
(EUR 45.73 million)
5,000 FF (EUR 762.25)
60,000
101.353%
12 yrs
6% of principal
October 10, 2009
Issuance in June 1998 of a total 300 million French francs
Size:
Principal:
Number of notes:
Issue price:
Maturity:
Coupon:
(EUR 45.73 million)
5,000 FF (EUR 762.25)
60,000
100.87 %
12 yrs
5.40% of principal
June 5, 2010
Issuance in October 1998 of a total 300 million French francs
Size:
Principal:
Number of notes:
Issue price:
Maturity:
Coupon:
(EUR 45.73 million)
5,000 FF (EUR 762.25)
60,000
100.18% of principal
12 yrs
4.55% of principal
October 12, 2010
Issuance in June 1999 of a total EUR 40 million
Size:
Principal:
Number of notes:
Issue price:
Maturity:
Coupon:
EUR 40 million
EUR 1,000
40,000
100% of principal
12 yrs
4.75% of principal
June 30, 2011
Issuance in October 1999 of a total EUR 30 million
Size:
Principal:
Number of notes:
Issue price:
Maturity:
Coupon:
158
EUR 30 million
EUR 1,000
30,000
100% of principal
12 yrs
5.45% of principal
October 22, 2011
EUR 40 million
EUR 1,000
40,000
10 yrs
5.5% of principal
May 5, 2010
Issuance in November 2000 of a total EUR 20 million
Size:
Principal:
Number of notes:
Issue price:
Maturity:
Coupon:
EUR 20 million
EUR 1,000
20,000
10 yrs
5.75% of principal
November 3, 2010
Issuance in May 2001 of a total EUR 40 million
Size:
Principal:
Number of notes:
Issue price:
Maturity:
Coupon:
EUR 40 million
EUR 1,000
40,000
10 yrs
5.75% of principal
May 23, 2011
Issuance in November 2001 of a total EUR 50 million
Size:
Principal:
Number of notes:
Issue price:
Maturity
Coupon:
EUR 50 million
EUR 1,000
50,000
10 yrs
5.30% of principal
November 14, 2011
Issuance in June 2004 of a total EUR 50 million
Size:
Principal:
Number of notes:
Issue price:
Maturity:
Coupon:
EUR 50 million
EUR 300
166,667
99.87% of principal
12 yrs
4.70% of principal
June 14, 2016
Issuance in July 2005 of a total EUR 100 million with the following
characteristics:
Issuance in November 2006 of a total EUR 66 million with the
following characteristics:
Size:
Principal:
Number of notes:
Issue price:
Maturity:
Coupon:
Size:
Principal:
Number of notes:
Issue price:
Maturity:
Coupon:
EUR 100 million
EUR 10,000
10,000
100% of principal
10 years and 25 days
Principal x ((1 + CNO-TEC 10
- 0.48%)^1/4 - 1)
July 25, 2015
EUR 66 million
EUR 300
220,000
12 yrs
4.15% of principal
November 6, 2018w
Issuance in October 2006 of a total EUR 100 million with the
following characteristics:
Size:
Principal:
Number of notes:
Issue price:
Maturity:
Coupon:
EUR 100 million
EUR 10,000
10,000
100% of principal
10 yrs
4.38% of principal
October 18, 2016
For all redeemable subordinated notes, Crédit du Nord has placed a self-imposed ban on the early amortisation of subordinated
notes via redemption, but reserves the right to carry out early amortisation via stock market purchases and the public offer of
exchange or purchase of redeemable subordinated notes.
The unamortised credit balance of the issuance premiums of these borrowings stands at EUR 0.1 million.
Note 16
2008/2007 change
31/12/2008
31/12/2007
in value
in %
Common stock
740.3
740.3
-
-
Additional paid-in capital and reserves
601.6
454.9
146.7
32.2
10.4
10.4
-
-
(in EUR millions)
Additional paid-in capital
Legal reserve
Ordinary reserve
Regulated reserve
Retained earnings
Net income
Regulated provisions
TOTAL SHAREHOLDERS’ EQUITY
74.0
74.0
-
-
516.0
369.0
147.0
39.8
1.2
1.5
-0.3
-20.0
0.2
0.8
-0.6
-75.0
168.2
336.1
-167.9
-50.0
0.9
0.9
-
-
1,511.2
1,533.0
-21.8
-1.4
159
The change in shareholders’ equity can be broken down as follows:
(in EUR millions)
Shareholders’ equity at Dec. 31, 2007
Common
stock
Other shareholders’
equity
Total
740.3
792.7
1,533.0
-189.7
-189.7
168.2
168.2
3rd Resolution of the General Meeting of Shareholders
of May 22, 2008 (1)
Net income
Reversals of provisions and regulated reserves
in accordance with legal provisions in force
SHAREHOLDERS’ EQUITY AT DEC. 31, 2008
740.3
-0.3
-0.3
770.9
1,511.2
(1) Distribution of a dividend of EUR 189.7 million to shareholders.
Société Générale owned 80% of Crédit du Nord’s capital at
December 31, 2008. As a result, Crédit du Nord’s accounts
are fully consolidated in Société Générale’s consolidated
accounts.
Dexia owned 20% (10% of Dexia Crédit Local and 10%
of Dexia Banque Belgique) of Crédit du Nord’s capital at
December 31, 2008. As a result, Crédit du Nord’s accounts
are consolidated under the equity method in Dexia’s
consolidated accounts.
Proposed distribution of earnings
Net income for fiscal year 2008 amounted to
EUR 168,230,336.58.
Given that the legal reserve has been fully allocated, and
that net income plus retained earnings from fiscal year 2007
(i.e. EUR 188,103.66) resulted in total income available for
distribution of EUR 168,418,440.24, the following proposals
will be submitted to the General Meeting:
k distribution of a dividend of EUR 129,549,068.40 to
shareholders, i.e. a dividend per share of EUR 1.40;
k allocation of EUR 38,000,000.00 to the ordinary reserve;
k allocation of EUR 872,371.84 to retained earnings.
Note 17
Off-balance sheet commitments
A. Financing commitments given and received
2008/2007 change
(in EUR millions)
Financing commitments to banks
Financing commitments to customers
Guarantee commitments to banks
Guarantee commitments to customers
Financing commitments from banks
Guarantee commitments from banks
Guarantee commitments from customers
160
31/12/2008
31/12/2007
in value
in %
127.6
157.3
-29.7
-18.9
2,148.6
2,161.4
-12.8
-0.6
346.0
225.6
120.4
53.4
3,350.1
3,356.2
-6.1
-0.2
-
-
-
-
4,671.5
3,950.9
720.6
18.2
70.0
68.2
1.8
2.6
B. Securities transactions and foreign exchange transactions
2008/2007 change
31/12/2008
31/12/2007
in value
in %
Securities to be received
50.6
9.3
41.3
444.1
Securities to deliver
51.0
44.2
6.8
15.4
-
-
-
-
Currency to be received
5,694.3
7,162.1
-1,467.8
-20.5
Currency to deliver
5,671.1
7,170.6
-1,499.5
-20.9
Total
31/12/2008
Total
31/12/2007
(in EUR millions)
Securities acquired with option to repurchase or recover
Forward exchange transactions
C. Forward financial instruments
Trading
Speculative
Macro
hedging
Micro
hedging
D
A
C
B
-
-
-
-
-
-
Interest rate swaps
-
2,771.2
21,197.3
2,114.0
26,082.5
19,409.6
FRAs
-
-
-
-
-
-
Interest rate options
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
38.0
(in EUR millions)
Contract category under CRB
Regulation 90/15
Firm transactions
On organised markets
Futures
OTC
Options
OTC
-
-
-
167.4
167.4
146.2
Other options
-
-
-
-
-
-
Caps
-
1,265.5
2,509.3
-
3,774.8
2,749.6
Floors
-
208.8
-
-
208.8
243.4
-
4,245.5
23,706.6
2,281.4
30,233.5
22,586.8
TOTAL
At end-2008, of all off-balance sheet commitments,
commitments with the Group totalled EUR 27,148.8 million
(of which EUR 20,860.2 million with Société Générale Group
and EUR 6,288.6 million with Crédit du Nord Group). Note
that, under current regulations, transactions processed
on behalf of and on the order of customers are classified
in Category A (speculative), even if any hedging of them is
classified in Category C (macrohedging). Also note that Crédit
du Nord does not manage trading portfolios.
161
Finally, in accordance with CRC Regulation 2004-16, the fair value of financial derivatives is indicated in the table below:
Trading
Speculative
Macro
hedging
Micro
hedging
Total
31/12/2008
Total
31/12/2007
D
A
C
B
-
-
-
-
-
-
Interest rate swaps
-
-2.7
FRAs
-
-
-105.5
116.8
8.6
57.4
-
-
-
-
-
Forex options
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Forex options
-
-
-
-0.1
-0.1
-0.1
Other options
-
-
-
-
-
-
Caps
-
-2.7
3.2
-
0.5
2.4
Floors
-
3.6
-
-
3.6
0.4
TOTAL
-
-1.8
-102.3
116.7
12.6
60.1
(in EUR millions)
Contract category under CRB
Regulation 90/15
Firm transactions
Forward contracts
OTC
Options
OTC
Note 18
Post-employment defined contribution plans
A. Post-employment defined contribution plans
Defined contribution plans limit Crédit du Nord’s liability to the
contributions paid to the plan but do not commit the Group
to a specific level of future benefits.
The main defined contribution plans provided to Crédit du
Nord employees notably include State pension plans and
other national retirement plans such as ARRCO and AGIRC,
162
pension schemes for which the only commitment is to pay
annual contributions (PERCO) and multi-employer plans.
Expenses relating to these plans totalled EUR 35.4 million
at December 31, 2008 vs. EUR 35.0 million at December
31, 2007.
B. Post-employment benefit plans (defined benefit plans) and other long-term benefits
B1. Reconciliation of assets recorded on the balance sheet
31/12/2008
Post-employment
(in EUR millions)
Pension
schemes
Other
plans
31/12/2007
Other
long-term
benefits
Post-employment
Total
Pension
schemes
Other
plans
Other
long-term
benefits
Total
BREAKDOWN OF THE DEFICIT IN THE
PLAN
Present value of defined benefit obligations
89,4
-
-
89,4
86,3
-
-
86,3
-43,6
-
-
-43,6
-62,3
-
-
-62,3
ACTUARIAL DEFICIT (NET BALANCE) (A)
45,8
-
-
45,8
24,0
-
-
24,0
PRESENT VALUE OF UNFUNDED
OBLIGATIONS (B)
17,8
12,5
18,4
48,7
19,9
13,0
20,5
53,4
-
-
-
-
-
-
-
-
-1,2
-
-
-1,2
-1,3
-
-
-1,3
OTHER ITEMS RECOGNISED ON
THE BALANCE SHEET (C)
Unrecognised items
Unrecognised Past Service Cost
Unrecognised net actuarial
gain/loss
-20,6
1,9
-
-18,7
-4,0
1,0
-
-3,0
Separate assets
-
-
-
-
-
-
-
-
Plan assets impacted by change in
Asset Ceiling
-
-
-
-
-
-
-
-
TOTAL UNRECOGNISED
ITEMS (D)
SOLDE (A+B+C+D)
-21,8
1,9
-
-19,9
-5,3
1,0
-
-4,3
41,8
14,4
18,4
74,6
38,6
14,0
20,5
73,1
Notes :
1. For defined-service pension schemes, in accordance with IAS 19, Crédit du Nord uses the projected credit units method to calculate
employee benefits, and amortises actuarial gains and losses which exceed 10% of the greater of the defined benefit obligations or funding
assets on the estimated average remaining working life of the employees participating in the plan (corridor method). Crédit du Nord uses the
straight-line method over the residual working lives of employee beneficiaries to recognise past service cost resulting from an amendment of
the plan.
2. Pension plans include pension benefits as annuities and end-of-career payments. Pension benefit annuities are paid additionally to State
pension plans.
Other post-employment benefit plans are insurance schemes covering accidental death.
Other long-term employee benefits include deferred bonuses, flexible working provisions (compte épargne temps) and long-service awards.
3. The present value of defined benefit obligations have been valued by independent qualified actuaries.
4. Information regarding plan assets:
k only end-of-career payments and additional complementary retirement plans are partially covered by assets managed by an external
company.
k the fair value of plan assets is comprised of 16.5% bonds, 59% equities, 21.5% money market funds and 3% property investments.
5. In general, the expected rates of return on scheme assets are based on a weighted average of expected returns on each category of assets
at fair value.
6. In France, the implementing decree of the law to modernise the labour market doubled the legal payments owed to employees in the event
of forced retirement by the employer. The impact of these payments, linked primarily to retirements prior to December 31, 2009, is booked
to Past Service Cost in the amount of EUR 8.2 million and gives rise to an update of 2008 expense items. Crédit du Nord considered that
the termination payment addressed in Article 11 of the ANI (national interprofessional agreement) of January 11, 2008 did not concern
termination of the employment contract by employees taking their retirement.
7. Benefits payable under post-employment plans in 2009 are estimated at EUR 21.4 million.
163
The actual return on plan and separate assets was:
(as a % of the item measured)
Plan assets
31/12/2008
31/12/2007
-41.6
1.4
-
-
31/12/2008
31/12/2007
-18.2
0.9
-
-
Separate assets
(in EUR millions)
Plan assets
Separate assets
B2. Amounts recognised on the income statement
31/12/2008
Post-employment
(in EUR millions)
31/12/2007
Pension
schemes
Other
plans
Other
long-term
benefits
3.4
0.2
2.3
5.4
0.7
1.1
-3.9
-
-
Service cost
Interest cost
Expected return on assets
Amortisation of past service cost
Post-employment
Total
Pension
schemes
Other
plans
Other
long-term
benefits
Total
5.9
2.8
0.3
2.3
5.4
7.2
4.2
0.7
1.0
5.9
-3.9
-3.9
-
-
-3.9
8.3
-
-
8.3
0.1
-
-
0.1
Amortisation of gains/losses
-
-
-2.0
-2.0
-0.5
-
-0.1
-0.6
Settlement
-
-
-
-
-
-
-
-
13.2
0.9
1.4
15.5
2.7
1.0
3.2
6.9
TOTAL NET CHARGES
RECOGNISED ON THE INCOME
STATEMENT
B3. Changes in net liabilities of post-employment plans booked to the balance sheet
B3a. Changes in the present value of defined benefits obligations
2008
(in EUR millions)
Value at January 1
Other
plans
Tota postemployment
Pension
schemes
Other
plans
Tota postemployment
106.2
13.0
119.2
98.7
13.5
112.2
Current service cost
3.4
0.2
3.6
2.8
0.3
3.1
Interest cost
5.4
0.7
6.1
4.2
0.7
4.9
-
-
-
-
-
-
-5.5
-0.9
-6.4
12.7
-1.0
11.7
Benefit payments
-10.5
-0.5
-11.0
-9.3
-0.5
-9.8
Past service cost
8.2
-
8.2
1.4
-
1.4
-
-
-
-4.3
-
-4.3
Settlement
Transfers and others
164
2007
Pension
schemes
-
-
-
-
-
-
107.2
12.5
119.7
106.2
13.0
119.2
B3b. Changes in fair value of plan assets and separate assets
2008
(in EUR millions)
Value at January 1
Expected return on plan assets
Expected return on separate assets
Employer contributions
Benefit payments
2007
Pension
schemes
Other
plans
Tota postemployment
Pension
schemes
Other
plans
Tota postemployment
62,3
-
62,3
3,8
-
3,8
62,9
-
62,9
3,9
-
3,9
-
-
-
-
-
-
-22,0
-
-
-22,0
-3,0
-
-3,0
-
-
-
-
-
3,3
-
3,3
3,8
-
3,8
-3,8
-
-3,8
-5,3
-
-5,3
43,6
-
43,6
62,3
-
62,3
B4. Main assumptions for post-employment plans
2008
2007
Expected return on assets (separate and plan assets)
6.6%
6.6%
Future salary increase (including inflation)
3.5%
2.0% (1)
(1) 2007 figure presented net of inflation.
The expected rate of return on assets (separate and plan
assets) has been 6.6% since 2005. The range in the expected
rate of return on assets is due to the composition of the
assets.
The discount rate used depends on the term of each plan
(5.58% for up to 3 years / 5.66% for up to 5 years / 6.20%
for up to 10 years / 6.42% for up to 15 years and 6.65% for
up to 20 years).
The average remaining lifetime is established individually
by benefit and is calculated taking into account turnover
assumptions.
Inflation depends on the term of each plan (1.90% for up to
3 years / 2.30% for up to 5 years / 2.40% for up to 10 years /
2.45% for up to 15 years and 2.50% for up to 20 years).
B5. Sensitivities analysis of post-employment defined benefit obligations
compared to main assumption ranges
2008
2007
Pension schemes
Other plans
Pension schemes
Other plans
Impact on discounted value of defined benefit obligations
at December 31
-4.7%
-12.1%
-6.0%
-13.0%
-8.1%
-20.6%
-6.0%
-20.6%
1.0%
-
1.0%
-
-30.0%
-
-23.6%
-
5.0%
15.7%
6.4%
16.8%
10.8%
29.2%
7.7%
29.1%
(as % of item measured)
Variation of +1% in discount rate
Variation of +1% in expected return on assets
(plan assets and separate assets)
Impact on plan assets at December 31
Variation of +1% in future salary increases
(net of inflation)
Impact on discounted value of defined benefit
obligations at December 31
(1) Present value.
165
B6. Experience adjustments on post-employment defined benefit obligations
31/12/2008
31/12/2007
107.2
106.2
43.6
62.3
Deficit / (surplus)
63.6
43.9
(in EUR millions)
Defined benefit obligations
Experience adjustments on plan liabilities
Experience adjustments on plan assets
-4.1
-4.9
-22.0
-3.0
Note 19
Net banking income (NBI)
2008/2007 change
(in EUR millions)
2008
2007
in value
in %
408.0
410.3
-2.3
-0.6
Net fee income
455.3
443.3
12.0
2.7
103.4
168.8
-65.4
-38.7
24.7
40.5
-15.8
-39.0
-58.5
-1.1
-57.4
-
-1.3
0.6
-1.9
-
931.6
1,062.4
-130.8
-12.3
48.9%
41.7%
Gains or losses on trading portfolio transactions
Gains or losses on short-term investment portfolio transactions
Other banking income (expenses)
NET BANKING INCOME
Share of net fee income in Net Banking Income
Net Banking Income fell by 12.3% in 2008, due in large part to the decline in income from equity securities and write-downs on
the short-term investment portfolio (see Note 20).
166
Note 20
Interest and similar income, other income from securities
Net interest and similar income
The change in interest and similar income can be broken down as follows:
2008/2007 change
(in EUR millions)
2008
2007
in value
in %
223.4
231.3
-7.9
-3.4
174.2
165.1
9.1
5.5
49.2
66.2
-17.0
-25.7
751.6
666.1
85.5
12.8
20.5
20.3
0.2
1.0
Interest and similar income on
Transactions with banks (including central banks)
Commercial loans
Short-term loans
101.4
94.6
6.8
7.2
Capital expenditure loans
125.6
103.4
22.2
21.5
Home loans
329.3
292.3
37.0
12.7
Other loans
62.0
55.5
6.5
11.7
91.4
81.9
9.5
11.6
9.0
8.8
0.2
2.3
12.4
9.3
3.1
33.3
Overdrafts
SUB-TOTAL
293.8
146.8
147.0
100.1
1,268.8
1,044.2
224.6
21.5
-170.1
-154.6
-15.5
10.0
-158.7
-132.3
-26.4
20.0
-11.4
-22.3
10.9
-48.9
Interest and similar income on
Transactions with banks (including central banks)
-203.3
-173.8
-29.5
17.0
-106.7
-92.3
-14.4
15.6
Other amounts due to customers
-64.0
-56.1
-7.9
14.1
-32.0
-24.7
-7.3
29.6
-0.6
-0.7
0.1
-14.3
Special savings accounts (1)
Debt securities
SUB-TOTAL
-487.4
-305.5
-181.9
59.5
-860.8
-633.9
-226.9
35.8
53.3
76.7
-23.4
-30.5
548.3
492.3
56.0
11.4
Net income/expenses from
Debt securities
TOTAL NET INTEREST AND SIMILAR INCOME
293.8
146.8
147.0
100.1
-487.4
-305.5
-181.9
59.5
408.0
410.3
-2.3
-0.6
(1) Since January 1, 2007, Crédit du Nord has applied CNC Note No. 2006-02 of March 31, 2006, relating to the accounting treatment of home savings plans and schemes in banks
authorised to receive home savings deposits and to issue home savings loans.
167
2008/2007 change
(in EUR millions)
TOTAL INCOME FROM EQUITY SECURITIES
2008
2007
in value
in %
103.4
168.8
-65.4
-38.7
103.4
168.8
-65.4
-38.7
Income from equity securities is comprised mainly of EUR 9.3 million in dividends received from VISA Incorporation, EUR 83.4
million in dividends received from subsidiaries and EUR 7.1 million in positive earnings from partnerships in which Crédit du Nord
is a shareholder, vs. EUR 79.1 million in dividends received from subsidiaries and EUR 86.4 million in positive earnings from
partnerships in 2007.
Income from the trading portfolio:
2008/2007 change
(in EUR millions)
2008
2007
in value
in %
Income from fixediincome instruments
15.0
24.0
-9.0
-37.5
Income from foreign exchange instruments
6.0
14.4
-8.4
-58.3
Income from trading securities
3.7
2.1
1.6
76.2
24.7
40.5
-15.8
-39.0
GAINS OR LOSSES ON TRADING
PORTFOLIO TRANSACTIONS
Income from the short-term investment portfolio:
2008/2007 change
(in EUR millions)
Amortisation
Reversals
Income from disposals
GAINS OR LOSSES ON SHORT-TERM INVESTMENT
PORTFOLIO TRANSACTIONS
2008
2007
in value
in %
-60.0
-1.6
-58.4
-
1.6
0.5
1.1
-
-0.1
-
-
-
-58.5
-1.1
-57.4
-
Amortisation primarily concerns EUR 32.6 million for bonds and EUR 27.4 million for negotiable debt securities.
168
Note 21
Net fee income
Net fee income can be broken down by type, as follows:
2008/2007 change
(in EUR millions)
2008
2007
in value
in %
Fee income from
149.7
138.1
11.6
8.4
92.3
109.9
-17.6
-16.0
1.2
1.1
0.1
9.1
16.2
15.8
0.4
2.5
Services
244.6
232.1
12.5
5.4
SUB-TOTAL
504.0
497.0
7.0
1.4
-0.7
-0.9
0.2
-22.2
-
-0.1
-
-
-0.3
-0.2
-0.1
50.0
-47.7
-52.5
4.8
-9.1
Financing and guarantee commitments
Fee income from
Financing and guarantee commitments
Services
SUB-TOTAL
TOTAL NET FEE INCOME
-48.7
-53.7
5.0
-9.3
455.3
443.3
12.0
2.7
Note 22
Operating expenses
2008/2007 change
(in EUR millions)
Personnel expenses
Taxes
Other expenses
OPERATING EXPENSES
2008
2007
in value
in %
-412.4
-407.2
-5.2
1.3
-16.7
-22.8
6.1
-26.8
-175.7
-167.1
-8.6
5.1
-59.1
-54.8
-4.3
7.8
-663.9
-651.9
-12.0
1.8
169
Note 23
Personnel expenses
Personnel expenses, which came out at EUR 412.4 million for fiscal year 2008, can be broken down as follows:
2008/2007 change
(in EUR millions)
Employee compensation
2008
2007
in value
in %
-243.6
-238.8
-4.8
2.0
Social security charges and payroll taxes
-71.1
-70.0
-1.1
1.6
Retirement expenses
-48.4
-39.1
-9.3
23.8
Defined contribution schemes
-35.4
-35.0
-0.4
1.1
Defined benefit plans
-13.0
-4.1
-8.9
-
Other social security charges and taxes
-34.5
-31.9
-2.6
8.2
Employee profit-sharing and incentives
-20.8
-32.0
11.2
-35.0
-15.1
-16.9
1.8
-10.7
-
-6.8
-6.8
-100.0
6.0
4.6
1.4
30.4
-412.4
-407.2
-5.2
1.3
o/w incentives
o/w profit-sharing
Transfer of charges
TOTAL
«Employee compensation» includes salaries, changes in provisions in company liabilities excluding complementary benefits.
«Social security charges and payroll taxes» includes contributions to statutory benefit plans excluding pensions.
«Retirement expenses - defined contribution plans» includes contributions to statutory and retirement plans and complementary pension plans as well as benefits payable for retirement.
«Retirement expenses - defined benefit plans» includes changes in provisions for complementary retirement pension plans and insurance premiums and payments for retirement
benefits.
«Other social security charges and taxes» covers all other salary charges paid to specialised bodies.
“Employee profit-sharing and incentives (including top-ups)” includes sums paid for employee profit-sharing schemes, incentives and top-ups paid by the Group’s businesses on
payments by employees into the company savings plan.
“Transfer of charges” corresponds to personnel expenses capitalised for the development of business software.
2008/2007 change
2008
2007
in value
in %
Average staff count in activity
5,415
5,405
10
0.2
Staff count recorded at December 31
5,965
5,918
47
0.8
(in EUR millions)
Compensation of the administrative and decision-making bodies stood at EUR 1.9 million as at December 31, 2008.
170
Note 24
Other operating expenses, depreciation and amortisation
2008/2007 change
(in EUR millions)
Taxes
Other expenses
2008
2007
in value
in %
-16.7
-22.8
6.1
-26.8
-175.7
-167.1
-8.6
5.1
Rent and rental charges
-31.2
-29.5
-1.7
5.8
Sub-contracting expenses
-80.8
-77.3
-3.5
4.5
Postal and telecommunication expenses
-16.6
-17.4
0.8
-4.6
Transport and travel
-13.4
-12.2
-1.2
9.8
Sales development and marketing operations
-10.3
-11.2
0.9
-8.0
-46.2
-42.2
-4.0
9.5
22.8
22.7
0.1
0.4
-192.4
-189.9
-2.5
1.3
Transfer of charges
TOTAL
The figures in the table above, line to line, are gross, i.e. before
any capitalisation: if and when charges are capitalised, they
also appear, deducted from total, in the last line, “Transfer
of charges”.
Note that, in accordance with the measures provided for in
accounting regulations, and in respect of these measures, in
In 2008, the Group’s global audit expenses for the Statutory
Auditors amounted to EUR 384,400 excluding tax (excluding
expenses and outlay). This sum is entered into the heading
2008 Crédit du Nord capitalised EUR 22.8 million in charges
from the «Sub contracting expenses» entry (vs. EUR 22.7
million at end-2007). This sum corresponds to the expenses
generated by the production of different software packages
for internal use at Crédit du Nord. After capitalisation, these
software packages are amortised over 3 to 5 years as of
their installation.
“Other operating expenses”, which can be broken down as
follows:
Deloitte
(in EUR millions)
Statutory Auditors, certification,examination of individual
and consolidated accounts
Additional assignments
Ernst & Young
2008
2007
2008
2007
-177.0
-152.4
-177.0
-152.4
-5.0
-
-25.0
-
Amortissements
2008/2007 change
2008
2007
in value
in %
Amortisation expense on tangible fixed assets
-27,8
-27,5
-0,3
1,1
Depreciation expense on tangible fixed assets
-
-
-
-
(in EUR millions)
Amortisation expense on intangible fixed assets
TOTAL
-31,3
-27,3
-4,0
14,7
-59,1
-54,8
-4,3
7,8
171
Note 25
Cost of risk
2008/2007 change
(in EUR millions)
Impairment of doubtful loans (1)
TOTAL
(1) o/w disputes
2008
2007
in value
in %
-85.6
-37.4
-48.2
128.9
-85.6
-37.4
-48.2
128.9
1.1
-0.2
Note that «Cost of risk» corresponds exclusively to counterparty risk relative to banking intermediation activities. Allowances and
reversals for other risks are recorded to the same accounts as the covered expenses.
Cost of risk can be broken down as follows:
(in EUR millions)
Allowance for the fiscal year (see Notes 8 and 14)
2008
2007
-176.0
-133.7
Losses not covered by impairments
-7.7
-5.8
Losses covered by impairments
-30.7
-48.4
Reversals (including uses of impairments) (see Notes 8 and 14)
123.3
143.8
5.5
6.7
-85.6
-37.4
Amounts recovered on impaired loans
TOTAL
In the difficult environment of 2008, cost of risk shot up 128.9% on 2007. Divided by the total number of outstanding loans, the
level of provisioning stood at 0.58% (2) in 2008 versus 0.26% in 2007 and 2006. Also note that Crédit du Nord booked EUR 19.4
million in «Allowances for credit risks» (see Note 14).
(2) 0.51%, excluding provisions on ROSKILDE BANK subordinated securities; Roskilde Bank was acquired during the redemption of certain Etoile Gestion assets,
for EUR 10.1 million.
Note 26
2008/2007 change
(in EUR millions)
Net income from equity investments
Net income from investment securities
Net income from disposals of operating fixed assets
TOTAL
2008
2007
in value
in %
0.2
4.1
-3.9
-95.1
-
-
-
-
0.5
1.8
-1.3
-72.2
0.7
5.9
-5.2
-88.1
In 2007, the gain on fixed assets was generated mainly from the reversal of a provision of EUR 3.6 million for Norbail Sofergie
securities and from net capital gains on disposals of operating fixed assets totalling EUR 1.8 million.
172
Note 27
Exceptional items
2008/2007 change
(in EUR millions)
Impact of change in method
TOTAL
The exceptional items booked in 2007 corresponded to the
application, beginning on January 1, 2007, of CNC Note
No. 2006-02 of March 31, 2006, relating to the accounting
treatment of home savings plans and schemes in banks
authorised to receive home savings deposits and to issue
2008
2007
in value
in %
-
-12.2
12.2
-100.0
-
-12.2
12.2
-100.0
home savings loans. These commitments for Crédit du Nord
are subject to provisions (see Note 14), changes in which are
booked to “Net Banking Income”. The change in method was
recorded as an exceptional item at January 1, 2007 in the
amount of EUR 12.2 million
Note 28
Income tax
2008/2007 change
(in EUR millions)
Current income tax
Deferred tax
(1)
Gain due to tax consolidation
TOTAL
2008
2007
in value
in %
-16.4
-78.1
61.7
-79.0
-59.0
12.0
-71.0
-
60.8
35.4
25.4
71.8
-14.6
-30.7
16.1
-52.4
(1) In 2007, Crédit du Nord reversed a provision for deferred tax liabilities in the amount of EUR 44.2 million. This provision was designed to offset the tax savings linked to the tax
losses generated by its leasing subsidiary, Star Lease. In light of Star Lease’s continuous growth and the diminishing balance tax method, the deduction of these savings from the
subsidiary’s future taxable income appeared unlikely. Consequently, the Group decided to write back the 2007 provision in its entirety..
Since January 1, 2000, Crédit du Nord, as the head of the
Group, has established the overall net income relative to the
companies belonging to the tax consolidation scope (Art. 223
A to U of the French General Tax Code).
The tax savings in 2008 resulting from this tax consolidation
came out at EUR 60.8 million, which was booked to
income.
As a result, the corporate tax (an expense of EUR 14.6 million)
corresponds to:
The tax consolidation convention adopted is that of
neutrality. This means that, as regards corporate tax (as
well as the additional social security contributions and the
social contribution on profits), the tax is determined by the
subsidiaries as if there were no tax consolidation.
k current tax of EUR 16.4 million (representing income tax
payable for 2008);
Once calculated, after deduction of any dividend tax credits
and tax credits, these amounts are due to the parent
company.
k tax consolidation income of EUR 60.8 million (income).
k deferred tax on temporary differences totalling EUR 59.0
million (expenses);
173
Breakdown of the tax expense:
The tax expense can be broken down as follows in relation to pre-tax income:
Pre-tax income
182,8
Theoretical tax expense
-63,0
Normal tax rate, including temporary increases
34,43 %
Permanent differences and other items
-17,87 %
Tax differential on profits taxed outside France
-0,85 %
Differential on items taxed at a reduced rate
-0,05 %
Net gain of tax consolidation
0,35 %
Miscellaneous
-8,02 %
Apparent tax rate, including temporary increases
7,99 %
Real tax expense
-14,6
Note 29
Information concerning subsidiaries and equity investments
At December 31, 2008
(in EUR millions)
Capital
Reserves
and
retained
earnings
Share of
capital
Net asset
owned value of sha- Unpaid loans
(in %) res owned and advances
Guarantees
and endorse
given
Net
Banking
Income
2008
Net
Income
Dividends
received Obserin 2008 vations
A. Information concerning subsidiaries and equity investments owned by Crédit du Nord, whose net
asset value exceeds 1% of the bank’s capital.
Subsidiaries (at least 50% of capital owned)
174
Banque Courtois
33, rue Rémusat
31000 Toulouse
17,384
113,296
100.00
54,056
616
27,952 141,469
31,312
24,989
Banque Tarneaud
2-6, rue Turgot
87000 Limoges
26,529
122,121
80.00
74,881
973
69,430 104,571
21,916
9,285
Banque Rhône-Alpes
20-22, boulevard Édouard
Rey
38000 Grenoble
3,097 126,060
27,626
20,509
11,917
110,890
98.34
93,886
8,273
Norbail Immobilier
50, rue d’Anjou
75008 Paris
8,000
7,812
100.00
7,811
381,567
77,266
8,005
4,475
1,250
Société de Bourse Gilbert
Dupont
50, rue d’Anjou
75008 Paris
3,806
7,235
99.99
8,062
-
-
13,582
1,422
-
Banque Nuger
7, place Michel-del’Hospital
63000 Clermont-Ferrand
11,445
31,746
63.19
13,921
-
478
31,532
6,222
3,030
Banque Laydernier
10, avenue du Rhône
74000 Annecy
24,789
27,632
96.82
44,435
95,550
9,572
57,406
10,741
6,000
(1)
Capital
Reserves
and
retained
earnings
Étoile ID
59, boulevard Haussmann
75008 Paris
15,400
6,253
100.00
22,977
-
-
6,621
6,446
-
Banque Kolb
1-3, place du Général-deGaulle
88500 Mirecourt
14,099
44,618
78.44
46,606
5,374
9,599
58,459
9,770
5,638
Kolb Investissement
75008 Paris
77
8,075
100.00
38,964
-
-
1,722
1,640
-
Star Lease
75008 Paris
55,000
14,135
100.00
55,000
1,350,609
357,112
22,807
-40,769
-
Étoile Gestion
75008 Paris
40,965
4,903
64.05
26,204
35,136
-
-19,372
-36,799
-
Hedin
75008 Paris
32,147
-
94.99
30,540
-
-
-1,242
-7,374
-
Nordenskiöld
75008 Paris
32,656
-
94.99
31,023
-
-
-1,001
-7,135
-
Verthema
75008 Paris
24,451
-
94.99
23,229
-
-
-755
-5,379
-
Legazpi
17, cours Valmy
92800 Puteaux
23,888
-
50.00
11,944
-
-
-
-
-
106,400 154,809
79,961
2,275
(2)
(3) (4)
(in EUR millions)
Share of
capital
Net asset
Guarantees
and endorse
given
Net
Banking
Income
2008
Net
Income
Dividends
(1)
Equity investments (less than 50% of capital owned)
Crédit Logement
50, boulevard Sébastopol
75003 Paris
Sicovam Holding
18, rue La Fayette
75009 Paris
Antarius
75008 Paris
Croissance
Nord Pas-de-Calais
Euralliance - Porte A 2 avenue de Kaarst
59777 Euralille
1,253,975
53,787
3.00
38,852
86,665
10,265
620,073
6.10
14,889
-
-
13,516
12,888
784
284,060
1,593
49.99
142,407
-
-
54,568
26,608
11,451
50,165
545
12.50
7,883
-
-
10,447
1,677
-
(2) (4)
175
Capital
(in EUR millions)
Reserves
and
retained
earnings
Share of
capital
Net asset
Guarantees
and endorse
given
Net
Banking
Income
2008
Net
Income
Dividends
B. General information concerning other subsidiaries and equity investments
Subsidiaries not covered in Paragraph A
a) French subsidiaries
(combined)
-
-
-
11,243
44,538
36,830
-
-
-
b) Foreign subsidiaries
(combined)
-
-
-
-
-
-
-
-
-
Equity investments
(5)
not covered in Paragraph A
a) French equity investments
(combined, incl. property
dvlpt. companies)
-
-
-
19,386
-
-
-
-
1,458
b) Foreign equity investments
(combined)
-
-
-
3,510
-
-
-
-
9,305
(1) The company’s 2008 net income is partially included in Crédit du Nord’s net income.
(2) Data in italics pertain to Dec. 31, 2007 (2008 data unavailable).
(3) Data in italics taken at July 31, 2008.
(4) For non-banking companies, revenue is indicated rather than Net Banking Income.
(5) Including equity investments of less than 10% recorded in equity investment accounts, in accordance with the provisions of the internal charts of accounts.
Note
Net income and Net Banking Income for 2008 are indicated for some companies, subject to the approval of the financial statements by the General Meeting of Shareholders
scheduled to meet in 2009.
MAIN CHANGES IN THE INVESTMENT PORTFOLIO IN 2008
None
In accordance with the provisions of Article L.233.6 of the
French Commercial Code, the table below summarises the
significant changes in Crédit du Nord’s investment portfolio
recorded in 2008 (note that legal thresholds exist at 5%, 10%,
20%, 33% and 50%).
Acquisition:
Downward threshold crossings:
Crédit du Nord carried out the following transactions on its
securities portfolio during fiscal year 2008:
Creation:
Visa Inc - Croissance Nord Pas-de-Calais - SNC Legazpi FCPR PME France investissement II - FCPI innovation
Technologie II
Participation in capital increases:
Caisse de refinancement de l’habitat - SNC Hedin - SNC
Verthema - SNC Nordenskiöld - Croissance Nord Pas-deCalais - SNC Legazpi - Étoile Gestion
% of capital
Seuil
Sociétés
5%
FCPR PME France
investissement II
31/12/2008
antérieur
6.01%
0.00%
10%
Croissance Nord Pas-de-Calais
12.50%
0.00%
50%
SNC Legazpi
50.00%
0.00%
Franchissement à la baisse :
Liquidation – complete disposal:
Nord gérance - Substant - HLM France habitation - HLM
3 vallées - Staronze - Golf de Reims - Septimanie export Mutua équipement - SMT Systèmes - HLM de la Somme
Reduction of equity investment:
Amérasia 3 - Amérasia 4 - FCPR PME France investissement
A - Valeur Pierre patrimoine
176
Thresh
hold
Company
% of capital
31/12/2008
antérieur
10%
Substant
0.00%
16.00%
50%
Nord gérance
0.00%
100.00%
Information on the Corporate Officers
Information on the Corporate Officers
MANDATES AND FUNCTIONS HELD
OVER THE PAST FIVE YEARS
Alain PY
Chairman and CEO, Crédit du Nord (*);
Chairman of the Board of Directors: Antarius (*);
Chief Executive Officer: Antarius (2003 to 09/2004);
Permanent Representative of Crédit du Nord
• on the Supervisory Board: Banque Rhône-Alpes
(09/2002 to 02/2007);
• on the Board of Directors: Banque Rhône-Alpes
(since 02/2007);
– Director: Banque Tarneaud (*), Banque Laydernier (since
02/2007), SGAM (*).
–
–
–
–
Alain CLOT
– Chairman and Chief Executive Officer: Coupole Investment
Management (2007 to 10/2008);
– Chairman of the Board of Directors: SGAM IBERIA
(06/2004 to 12/2008); SGAM - SUISSE (12/2007 to
10/2008);
– Chairman: SGAM (10/2005 to 09/2008); SGAM AI (02/2004
to 10/2008); SGAM Index (formerly PARGESFOND)
(05/2005 to 10/2008); VOURIC (05/2008 to 06/2008);
– Chief Executive Officer: SGAM (02/2004 to 09/2008);
– Executive Vice Chairman, Crédit du Nord (since
11/2008)
– Director: BAREP Asset Management SGAM (since
05/2004); SOGECAP DSFS (12/2004 to 12/2008); SGAM
JAPON (since 06/2004); SGAM GROUP LTD (since
03/2004); SBI FM SGAM (since 12/2004); SGAM Invest
Liquidités Euro (since 04/2002);
Marc BATAVE
– Executive Vice Chairman, Crédit du Nord (since
11/2008);
– Chairman of the Board of Directors: NORBAIL Immobilier
(03/ 2000 to 01/2007); STAR LEASE (09/2001 to
12/2006); Banque Courtois (since 05/2008);
– Chairman of the Supervisory Committee: Étoile Gestion
-SNC- (*); Norfinance Gilbert Dupont –SNC- (until 04/2004);
Banque KOLB (since 09/2005);
– Permanent Representative of Crédit du Nord: Banque
KOLB (05/2001 to 09/2005); Banque Pouyanne (02/2004
to 12/2006);
– Director: Antarius (*); Banque Tarneaud (*); Étoile ID
(formerly SPTF) (since 02/2004); STARLEASE (*); NORBAIL
Immobilier (since 05/2007);
– Member of the Supervisory Committee: Norfinance Gilbert
Dupont –SNC- (*);
(*)
Didier ALIX
– Chairman and Chief Executive Officer: Sogébail (*);
– Chairman of the Supervisory Board: Komercni Banka (*);
– Deputy Chief Executive Officer: Société Générale (since
09/2006);
– Director: Crédit du Nord (since 07/2007); Franfinance (*) ;
Yves Rocher (*); Sogessur (2003 to 11/2006); Fiditalia (2003
to 12/2006); Banque Roumaine de Développement(*);
National Société Générale Bank SAE (NSGB) (*); Société
Générale de Banques au Cameroun (*); Société Générale
de Banques au Sénégal(*); Société Générale au Liban (*);
MSR International Bank (2005 to 12/2006);
– - Director and Vice-Chairman: Société Générale de
Banques en Côte d’Ivoire (*);
– Member of the Supervisory Board: Société Générale
Marocaine de Banques (*); Groupama Banque (2003 to
10/2006);
– Permanent Representative of Salvépar on the Board of
Directors of Latécoère (2005 to 12/2006);
– Permanent Representative of Salvépar on the Board of
Directors of Latécoère (since 01/2007).
Mandates held for the past five years.
177
– Director: Crédit du Nord (since 02/2007); Fiditalia
(01/2007 to 04/2008); Genefimmo Cafi 1 (since 04/2007);
SG Global Solution RESG/ITS (since 2007); Rosbank
BHFM (since 05/2008);
– Member of the Supervisory Board: Komercni Banka (*);
Groupe Steria SCA (since 02/2007);
– Chairman of the Management Board: Dexia Crédit Local
(2003 to 01/2006);
– Chairman of the Board of Directors: IFAX (2003 to
11/2004);
– Member of the Supervisory Board: Financière Centuria
(2003 to 10/2007);
– Permanent Representative of Dexia Crédit Local: Dexia
Finance (2003 to 06/2006).
Patrick DAHER
Hugo LASAT
– Chairman of the Board of Directors: Compagnie DAHER
(since 2005);
– Chief Executive Officer: Compagnie DAHER (since
2005);
– Director and CEO: Sogemarco DAHER (since 2005);
– Director: Crédit du Nord (since 09/2005); DAHER
International Développement (since 2005); DAHER
Aérospace Ltd (2007); DAHER Inc. (2007); DAHER Sawley
Ltd (2005 to 2006); LISI (since 04/2008)
– Permanent Representative of DAHER MTS: Océanide
since 2005
– Permanent Representative of DAHER FLS: Transports
Angeleri (2005).
– Chairman of the Board of Directors: Dexia Asset
– Management SA (since 04/2003); Dexia Asset
Management Luxembourg (since 02/2007); Dexia
Banque Privée (since 03/2007);
– Director: Crédit du Nord (since 02/2007); Dexia Bank
Denmark (since 03/2005); Dexia Insurance (since
05/2007); Popular Banca Privada (since 03/2006);
Denizbank AS (since 01/2007);
– Member of the Management Committee: Dexia SA
(2007).
Séverin CABANNES
Bruno FLICHY
– Director: Crédit du Nord (*) ; Eiffage (*) ; Aviva Participations (*);
Dexia Banque Belgique (since 02/2004); Aviva France
(since (11/2008);
– Member of the Supervisory Board: Aviva France (2004
to 11/2008).
Jacques GUERBER
– Vice-Chairman of Management Committee: Dexia SA
(2006 to 11/2008);
– Vice-Chairman of the Board of Directors: Dexia Asset
Management France (2003 to 09/2004);
– Director: Dexia SA (05/2007 to 10/2008); Dexia Crédit
Local (since 2007); Dexia Banque Belgique SA (since
2006); Dexia Banque Internationale à Luxembourg (since
03/2007); Crédit du Nord (*); Financial Security Assurance
Ltd(*); Dexia Participation Luxembourg (since 06/2007);
Dexia Insurance (2003 to 02/2006);
– Member of the Management Committee: Dexia Banque
Internationale à Luxembourg (2006 to 02/2007); Dexia
Banque Belgique (2006 to 02/2007);
– Chairman of the Supervisory Board: Dexia Municipal
Agency (*);
(*)
178
Axel MILLER
– Chairman of the Management Committee: Dexia Banque
Belgique (2003 to 2005);
– Chairman of the Management Committee and Deputy
Director: Dexia (since 2006);
– Member of the Management Committee: Dexia Banque
Belgique (2006 to 02/2007); Dexia Banque Internationale
Luxembourg (2006 to 02/2007); Fonds de Protection des
Dépôts et des Instruments Financiers (2004 to 2005);
Dexia (2003 to 2005);
– Chairman of the Board of Directors: Dexia Financière
(2003 to 02/2004);
– Vice-Chairman of the Board of Directors: Financial Security
Assurance Ltd (since 05/2006); Dexia Insurance Belgium
(02/2003 to 02/2006); Crédit Agricole (until 08/2003);
DVV/LAP (02/2003 to 2005);
– Director: Dexia Banque Belgique (*); Dexia Crédit Local
(2007); Dexia Banque Internationale Luxembourg (since
03/2007); Crédit du Nord (10/2003 to 10/2008);
– «Commissaris» Director: LVI Holding (Carmeuse Group)
(since 2006);
– Member of the Executive Board: Dexia Crédit Local
(2006);
– Member of the Board of Directors: Dexia Nederland Holding
(04/2003 to 02/2004); Compagnie d’Investissement du
Larzac (2003 to 2005).
Christian POIRIER
Marie-Christine REMOND
– Chairman: SOGEFINANCEMENT SAS (until 05/2005);
– Director: Crédit du Nord (*); Fiditalia (*); Genefinance (*);
Sogébail (2003 to 03/2007); Deltacrédit (since 2006);
Fimat Banque (2007); Génébanque (since 05/2007);
Généval (since 06/2007); UIB (since 08/2007);
– Member of the Supervisory Board: Groupama Banque(*);
Komercni Banka (*);
– Permanent Representative of Société Générale: Crédit
Logement (2003 to 04/2007); ECS (*); SOGECAP (since
03/2007); OSEO SOFARIS (05/2005 to12/2006); SIAGI
(08/2006 to 12/2006);
– Employee representative: Crédit
12/2008).
Patrick SUET
– Chairman of the Board of Directors: Généras SA (since
2004);
– Member of the Supervisory Board: Lyxor Asset
Management (since 05/2005); Lyxor International Asset
Management (since 05/2005);
– Director: Crédit du Nord (*); Généras SA (*); Sogé
participations (04/2001 to 05/2008); Clickoptions (*); SGBT
Luxembourg (since 11/2006);
du
Nord
(until
Jean-Pierre DHERMANT
– Employee representative: Crédit du Nord (since
11/2006).
Fabien FOUTRY
– Employee representative: Crédit du Nord (since 12/2008
in replacement of Marie-Christine Remond).
Alex PEYTAVIN
– Employee representative: Crédit du Nord (since
12/2006).
To the best of Crédit du Nord’s knowledge, there are no conflicts of interest between Crédit du Nord and the members of the
Board of Directors, with respect to either their personal or professional interests.
(*)
179
SENIOR MANAGEMENT
REMUNERATION POLICY
The remuneration of the three senior management corporate
officers includes:
k fixed annual compensation;
k performance-based compensation in the form of a bonus,
paid at the end of each fiscal year following the closing
of accounts, which is determined as a percentage of the
fixed compensation.
This percentage was set at 60% for Alain PY by the Board of
Directors on July 26, 2006.
As regards Alain PY, payment of the percentage of fixed
compensation indicated above is subject to return on equity
reaching a pre-determined percentage, set at 20% for fiscal
year 2008 by the Board of Directors on July 26, 2006.
If for any given fiscal year, return on equity observed does not
match return on equity expected, the amount of performancebased compensation, expressed as a percentage of the
fixed compensation, is modified in proportion to the ratio
between return on equity observed divided by return on
equity expected.
As regards Messrs. BATAVE and CLOT, the Special
Compensation Committee which met on October 23, 2008
during the last Board of Directors’ meeting of the year,
proposed that the directors maintain their fixed compensation
and benefits (where applicable, e.g. company car, housing)
at the same level. It was also decided that no performancebased compensation would be paid as corporate officers of
Crédit du Nord for fiscal year 2008.
The amount of fixed compensation and the performancebased compensation system applicable as from January 1,
2009 were established by the Board of Directors in February
2009.
Post-mandate benefits
Alain PY benefits from the supplementary pension plan for
senior group managers of Société Générale, to which he is
entitled as an employee of Société Générale.
This plan guarantees that at the date on which their pension
benefits are settled by Social Security, beneficiaries will receive
a total amount equal to a percentage of compensation serving
as a base, determined according to the number of annuities
taken into account and capped at 70% of said compensation.
The base compensation is the fixed compensation plus
180
performance-based compensation (equal to 5% of fixed
compensation). The pension for which the Company is
responsible is equal to the difference between the overall
pension defined above and all pension funds and similar
benefits paid by Social Security and all other retirement plans
for the beneficiary’s salaried activity. 60% of said pension shall
be paid to any surviving spouse in the event of the death of
a beneficiary.
Alain CLOT benefits from the complimentary pension plan
for senior group managers, to which he is entitled as an
employee of Société Générale. This complementary regime
was set up in 1991. At the date of settlement of their Social
Security pension, it offers beneficiaries a total pension equal
to the product of the following two terms:
k the average, over the last ten years of the beneficiary’s
career, of the fraction of fixed compensation exceeding
«Tranche B” of the AGIRC, plus performance-based
compensation equal to 5% of fixed compensation;
k the rate equal to the number of annuities corresponding
to the beneficiary’s periods of employment with Société
Générale divided by 60.
AGIRC’s “Tranche C” pension, acquired by the beneficiary
for employment with Société Générale, is deducted from
this overall pension. The complementary allocation paid by
Société Générale is increased for beneficiaries having raised
at least three children and for those taking their retirement
after age 60. It cannot be less than one-third of the full-rate
value of service of AGIRC “Tranche B” points acquired by
the beneficiary since his or her entry in Société Générale’s
“Unclassified” category.
Benefits are subject to the employee’s presence in the
company at the time of the pension’s settlement.
Marc BATAVE holds an employment contract with Crédit du
Nord, the application of which was suspended during his
appointment and for the term of his corporate mandate.
This employment contract will become fully effective again in
the event of the termination of the corporate mandate, at the
date of said termination, for any reason whatsoever.
For the term of his corporate mandate, Marc BATAVE shall
maintain all of the benefits acquired prior thereto as an
employee of Crédit du Nord. He shall notably maintain the
benefit of the provisions of the supplementary pension plan
for senior group managers established by the Supervisory
Board of Crédit du Nord on September 5, 1996.
This plan guarantees that, at the date on which the pension
benefits are settled by Social Security, beneficiaries shall
receive an additional pension corresponding to the difference
between:
k an amount equal to 50% of the average, calculated
over the last five best years out of the last ten years of
employment, of the annual gross sums received for
employment with Crédit du Nord Group, although the
amount thus determined may not exceed 60% of the
annual contractual compensation for these same years;
k if less, the total of the pension plans (excluding increases
for large families) and other income acquired from Social
Security, of any other basic plans, of any other statutory
retirement plans by distribution or capitalisation, of any
compensation received for dismissible positions after
retirement, and of any compensation received from
positions held prior to employment with the Group.
It has been expressly agreed that during the term of the
mandate, fixed compensation (excluding the annual allocation
linked to the mandate addressed above) and performancebased compensation, paid during the term of the mandate,
shall be considered as salaried employment periods and
compensations for the determination of the amount of
guarantees provided for by this plan at the appropriate
time.
Messrs. PY, BATAVE and CLOT do not benefit from any
provisions providing for compensation in the event they are
led to step down from their corporate mandates.
ATTENDANCE FEES PAID TO
DIRECTORS
The amount of attendance fees was set at EUR 75,000 by
the General Meeting of Shareholders on May 4, 2000.
The rules for distributing attendance fees among directors,
drawn up by the Board of Directors on March 12, 1998, are
as follows:
k half of the attendance fees are distributed in equal parts
among the directors;
k the balance is divided up among directors in proportion to
the number of Board meetings attended by each director
during the fiscal year. The share belonging to absentees
is not redistributed among the other directors but is kept
by Crédit du Nord.
AFEP/MEDEF AND AMF
RECOMMENDATIONS
The Board of Directors of Crédit du Nord examined and
decided to apply the AFEP/MEDEF recommendations on
compensation of senior management corporate officers.
The standardised presentation of their compensation,
prepared in accordance with AFEP/MEDEF recommendations,
is presented below.
181
STANDARDISED TABLES IN COMPLIANCE WITH AFEP/MEDEF AND AMF RECOMMENDATIONS
Table 1
STATEMENT OF COMPENSATION, OPTIONS AND SHARES AWARDED
TO EACH SENIOR MANAGEMENT CORPORATE OFFICER
Fiscal year 2007
Fiscal year 2008
Remuneration due for the fiscal year (detailed in Table 2)
616,513
541,517
Valuation of options awarded during the fiscal year (detailed in Table 4)
433,547
357,746
Valuation of performance-based shares awarded during the fiscal year
(detailed in Table 6)
135,036
96,510
1,185,176
995,773
Alain PY, Chairman and Chief Executive Officer
TOTAL
Marc BATAVE, Executive Vice Chairman (*)
-
26,667
-
0
-
TOTAL
0
26,667
Alain CLOT, Executive Vice Chairman (*)
-
46,668
-
0
-
0
TOTAL
(*) The mandates of Messrs. BATAVE and CLOT as Executive Vice Chairmen began on November 1, 2008.
The compensation indicated concerns the period during which these mandates were held during fiscal year 2008.
182
46,668
Table 2
STATEMENT OF COMPENSATION PAID TO EACH SENIOR MANAGEMENT CORPORATE OFFICER (1)
Fiscal year 2007
Amount
paid
Amount due for the
fiscal year
Fiscal year 2008
Amount paid
Amount due
for the fiscal year
Alain PY, Chairman and Chief Executive Officer
- fixed compensation
360,000
360,000
360,000
360,000
- performance-based compensation (2)
221,661
251,748
251,748
176,184
0
0
0
0
- exceptional compensation
- attendance fees
- benefits in kind (3)
TOTAL
0
0
0
0
4,845
4,845
5,333
5,333
586,506
616,593
617,081
541,517
Marc BATAVE, Executive Vice Chairman (4)
26,667
26,667
0
0
0
0
- attendance fees
0
0
- benefits in kind
(3)
TOTAL
1,579
1,579
28,246
28,246
Alain CLOT, Executive Vice Chairman (4)
46,668
46,668
0
0
0
0
- attendance fees
0
0
- benefits in kind
(3)
TOTAL
1,000
1,000
47,668
47,668
(1) Compensation items are denominated in euros, on a gross pre-tax basis.
(2) The criteria based on which these items were calculated are detailed in the section pertaining to the compensation of corporate officers.
As regards Alain CLOT, Crédit du Nord does not pay any performance-based compensation.
(3) Messrs. PY and CLOT are provided with the use of a company car.
(4) For the period during which the Executive Vice Chairman mandate was exercised during the fiscal year
(5) This refers to the provision of a company car (EUR 1,050) and the payment of a housing allowance (EUR 529) calculated on a prorata basis for the period during which the
mandate was exercised.
183
Table 3
STATEMENT OF ATTENDANCE FEES
Members of the Board
Alain PY (1)
Marc BATAVE
Alain CLOT
Didier ALIX (1)
Attendance fees
paid in 2007
Attendance fees
paid in 2008
5,000
5,000
-
-
-
-
1,666
4,375
Séverin CABANNES (1)
3,332
5,000
Patrick DAHER
5,000
3,750
Jean-Pierre DHERMANT (2)
4,166
4,375
Bruno FLICHY
5,000
4,375
5,000
4,375
2,499
3,125
3,333
3,125
5,000
5,000
4,166
5,000
4,166
5,000
5,000
5,000
53,328
57,500
Jacques GUERBER
Hugo LASAT
(3)
(4)
Axel MILLER
Alex PEYTAVIN
(2)
Christian POIRIER (1)
Marie-Christine REMOND
(5)
Patrick SUET (1)
TOTAL
(1) Paid to Société Générale
(2) Paid to the CFDT Crédit du Nord union
(3) Paid to CLF Participations
(4) Paid to DEXIA SA
(5) Paid to the CGT Crédit du Nord union
Table 4
STOCK OPTIONS AWARDED DURING THE FISCAL YEAR TO EACH SENIOR MANAGEMENT
CORPORATE OFFICER BY THE ISSUER AND BY ANY COMPANY BELONGING TO THE GROUP
Name of senior
management
corporate officer
Date
Type of options
of plan (purchase or subscription)
Valuation of options
based on the method Number of options
used for the consolidated awarded during the
accounts (1)
fiscal year
Strike
price
Exercise
period
Alain PY
21/03/08
Subscription
16.57
10,796
€ 67.08
21/03/2011
to 20/03/2015
Alain PY (2)
21/03/08
Subscription
16.57
10,795
€ 67.08
21/03/2011
to 20/03/2015
(1) This value corresponds to the value of the options at the time they were awarded, in accordance with IFRS 2, after primarily taking into account a potential discount linked to
performance criteria and the probability of the individual’s continued presence in the company at the end of the acquisition period, but before the averaging effect under IFRS 2 of
the expense over the acquisition period.
(2) Options awarded based on performance.
184
Table 5
STOCK OPTIONS AWARDED DURING THE FISCAL YEAR
Name of senior management corporate officer
Alain PY
Date
of plan
Number of options exercised
during the fiscal year
-
No options exercised in 2008
TOTAL
Strike price
0
Table 6
PERFORMANCE-BASED SHARES AWARDED TO EACH CORPORATE OFFICER (1)
Actions de Performance attribuées
durant l’exercice à chaque mandataire
social par l’émetteur
Alain PY
TOTAL
Date
of plan (2)
Number of shares
awarded during
fiscal year 2008
Valuation of
shares (3)
Acquisition date
Date
of availability
Performance
based
21/03/2008
1,975
€ 51.38
21/03/2011
21/03/2012
Yes (4)
1,975
(1) Performance-based shares are free shares awarded to corporate officers, in accordance with Articles L.225-197-1 et seq. of the French Commercial Code, and which are subject to
additional requirements provided for by the AFEP/MEDEF recommendations of October 2008.
(2) Date of the Board of Directors meeting.
(3) Value of the shares at the time they were awarded, in accordance with IFRS 2, after primarily taking into account a potential discount linked to performance criteria and the
probability of the individual’s continued presence in the company at the end of the acquisition period, but before the averaging under IFRS 2 of the expense over the acquisition
period.
(4) The performance-based conditions were established by the parent company, Société Générale, and are detailed in the section entitled «Corporate Governance» in its registration
document.
Table 7
PERFORMANCE-BASED SHARES (*) PERMANENTLY AWARDED TO EACH SENIOR
MANAGEMENT CORPORATE OFFICER DURING THE FISCAL YEAR
Alain PY
Date of plan
Number of shares which became
available during the fiscal year
18/01/2006
4,140
TOTAL
(*) Performance-based shares are free shares awarded to corporate officers, in accordance with Articles L.225-197-1 et seq. Of the French Commercial Code, and which are subject
to additional requirements provided for by the AFEP/MEDEF recommendations of October 2008.
185
Table 8
HISTORY OF STOCK OPTIONS AWARDED
INFORMATION ON SUBSCRIPTIONS OR PURCHASES
The table covers only those plans in which corporate officers were awarded stock options.
Date of Board of Directors meeting
Total number of shares
or purchase
(1)
21/03/2008 19/01/2007 18/01/2006 13/01/2005 14/01/2004 22/04/2003 16/01/2002
available for subscription
2,208,920
1,345,286
1,650,054
4,397,150
4,071,706
4,028,710
3,614,262
21,591
17,177
24,317
37,716
36,077
32,282
23,200
o/w number of shares available for subscription or
purchase by the corporate officers
Corporate officer 1: Alain PY
Corporate officer 2: Marc BATAVE
(2)
Corporate officer 3: Alain CLOT (2)
Beginning of exercise period
21/03/2011 19/01/2010 18/01/2009 13/01/2008 14/01/2007 22/04/2006 16/01/2005
Expiry date
20/03/2015 18/01/2014 17/01/2013 12/01/2012 13/01/2011 22/04/2010 15/01/2009
Subscription or purchase price (3)
67.08
121.93
98.12
68.61
64.03
47.57
57.17
0
0
2,174
53,340
727,877
2,435,894
2,685,280
Terms of exercise (where the plan includes several
tranches)
Number of share subscriptions at Dec. 31, 2008
Total number of cancelled or expired stock options
Number of stock options remaining at period end
24,042
32,086
66,299
185,986
115,163
193 525
284,499
2,184,878
1,313,200
1,581,581
4,157,824
3,228,666
1,397,780
644,483
(1) Exercising an option gives the holder the right to one Société Générale share. This table reflects the adjustments made following capital increases.
(2) Appointed as a corporate officer on November 1, 2008.
(3) The subscription or purchase price is equal to the average of the 20 share prices preceding the Board of Directors meeting.
Table 9
STOCK OPTIONS AWARDED TO THE TOP TEN EMPLOYEES (NON CORPORATE OFFICERS)
OF CRÉDIT DU NORD GROUP AND OPTIONS EXERCISED BY THESE EMPLOYEES
186
Total number of options awarded/
share subscriptions or purchases
Average weighted price
Options awarded during the fiscal year, by the issuer, to the top ten employees
of Crédit du Nord Group (the number indicated is the highest number of options
awarded)
21,246
€ 67.08
Options held by the issuer, exercised during the fiscal year, by the top ten
employees of Crédit du Nord Group (the number indicated is the highest number
of options exercised)
19,385
€ 57.04
Table 10
SITUATION OF THE SENIOR MANAGEMENT CORPORATE OFFICERS
Dates of mandates
start
end
Employment contract
with Crédit du Nord (1)
yes
Compensation or benefits
due or liable to be due as
a result of the termination
Supplementary
of the mandate or a
change in position
pension plan (2)
no
yes
no
yes
no
Compensation
relative to a noncompetition clause
yes
no
Alain PY
Chairman and CEO
2002
X
X
X
X
Marc BATAVE
Executive Vice Chairman
2008
X (3)
X
X
X
Alain CLOT
Executive Vice Chairman
2008
X
X
X
X
(1) As regards the combination of a corporate mandate with an employment contract, the only positions addressed by the AFEP/MEDEF recommendations are Chairman of the Board
of Directors, the Chairman and Chief Executive Officer, and the Chief Executive Officer of companies with a Board of Directors.
(2) Detailed information on the supplementary pension plans is provided in the section entitled «Information on the corporate officer».
(3) Employment contract through to October 31, 2008, suspended since the start of the mandate
187
Statutory Auditors’ Report on the Annual Financial Statements
Statutory Auditors’ Report
on the Annual Financial Statements
This is a free translation into English of the statutory auditors’
report issued in the French language and is provided solely
for the convenience of English speaking readers. This
report includes information specifically required by French
law in all audit reports, whether qualified or not, and this
is presented below the opinion on the financial statements.
This information includes explanatory paragraphs discussing
the auditors’ assessments of certain significant accounting
matters. These assessments were made for the purpose of
issuing an opinion on the financial statements taken as a
whole and not to provide separate assurance on individual
account captions or on information taken outside of the
consolidated financial statements. The report also includes
information relating to the specific verification of information
in the Group management report.
This report, together with the statutory auditors’ report
addressing financial and accounting information in the
Chairman’s report on internal control, should be read in
conjunction with, and is construed in accordance with
French law and professional auditing standards applicable
in France.
Statutory Auditors’ Report On the Annual
Financial Statements
In compliance with the assignment entrusted to us by your
annual general meeting, we hereby report to you, for the year
ended December 31, 2008, on:
We conducted our audit in accordance with the professional
standards applicable in France; those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the annual financial statements are free of
material misstatement. An audit includes verifying, by audit
sampling and other selective testing procedures, evidence
supporting the amounts and disclosures in the annual
financial statements. An audit also includes assessing the
accounting principles used, the significant estimates made
by the management and the overall financial statements
presentation.
We believe that the evidence we have gathered in order to
form our opinion is adequate and relevant.
In our opinion, the annual financial statements present fairly,
in all material respects, the financial position of the company
at December 31, 2008 and the results of its operations for
the year then ended, in accordance with the accounting rules
and principles applicable in France.
Without qualifying our opinion, we draw your attention to
Note 1 to the financial statements that describes changes
in the accounting method arising from new regulations
issued by the Accounting Regulation Committee (Comité
de la Réglementation Comptable) which are applied starting
2008.
k the audit of the accompanying annual financial statements
of Crédit du Nord;
II. Justification of assessments
k the justification of our assessments;
Accounting estimates accompanying the preparation of the
financial statements for the year ended December 31, 2008
have been established in consideration of the high market
volatility. It is in this context and in accordance with article
L. 823-9 of the French commercial code (Code de commerce)
that we conducted our own assessments, which we bring to
your attention:
k the specific verifications and disclosures according to
the law.
These annual financial statements were approved by the
board of directors on February 20, 2009. Our role is to
express an opinion on these financial statements based on
our audit.
188
I. Opinion on the annual financial
statements
Statutory Auditors’ Report on the Annual Financial Statements
Accounting principles
As mentioned in Note 1 to the annual financial statements,
accounting methods have changed over the fiscal year
ended December 31, 2008 as a result of new regulations
issued by the Accounting Regulation Committee (Comité de
la Réglementation Comptable). As part of our assessment
of the general accounting policies applied by your company,
we have verified the correct application of these changes
in accounting method and the appropriateness of their
presentation, in particular for reclassification of financial
assets out of the trading and long-term investment securities
categories.
k Likewise, in this same context, we have reviewed the
control procedures relating to the identification of financial
instruments that can no longer be traded on an active
market or for which market parameters could no longer
be observed, and the methodology used for their valuation
as a consequence.
These assessments were performed as part of our audit
approach for the annual financial statements taken as a whole
and therefore contributed to the audit opinion expressed in
the first part of this report.
Accounting estimates
III. Specific procedures and disclosures
k For the purpose of preparing the financial statements,
your company records depreciations and provisions to
cover the credit risks inherent to its activities and performs
significant accounting estimates, as described in Note 1
to the financial statements, related in particular to the
valuation of the investments in subsidiaries and of its
securities portfolio, as well as the assessment of pension
plans and other postemployment benefits. Taking into
account the specific context of the current crisis, we
have reviewed and tested the processes implemented
by management and the underlying assumptions and
valuation parameters, and assessed whether these
accounting estimates are based on documented
procedures consistent with the accounting policies
disclosed in Note 1 to the annual financial statements.
We have also carried out the specific procedures prescribed
by French law.
k In the specific context of the current financial crisis,
as detailed in Note 1 to the financial statements, your
company uses internal models to measure financial
instruments that are not listed on active markets. Our
procedures consisted in reviewing the control procedures
for the models used, assessing the underlying data and
assumptions, and verifying that the risks and results
related to these instruments were taken into account.
We have nothing to report with respect to the fairness of the
information contained in the Board of Director’s report and its
consistency with the annual financial statements, and in the
documents addressed to the shareholders on the company’s
financial position and the annual financial statements.
In accordance with the law, we hereby draw to your attention
that, contrary to the provisions of Article L. 225-102-1 of the
French Commercial Code, your company did not mention
in the Management Report the information pertaining to the
compensation and benefits paid to corporate officers or the
commitments made in their favour upon the assumption,
termination or change of their function or thereafter.
Consequently, we cannot express an opinion on the fairness
of this information.
In accordance with the law, we have ensured that the various
information relating to equity investments and takeovers, as
well as the identity of the shareholders and holders of voting
rights, were presented to you in the Management Report.
José-Luis Garcia
Isabelle Santenac
189
Statutory Auditors’ Special Report on Regulated Agreements and commitments with third parties
Statutory Auditors’ Special Report on
Regulated Agreements and Commitments
with Third Parties
This is a free translation into English of a report issued in the
French language and is provided solely for the convenience
of English speaking readers. This report should be read
in conjunction with, and construed in accordance with,
French law and professional auditing standards applicable
in France.
Special Report of the Statutory Auditors
on Related Party Agreements and
Commitments
In our capacity as the Statutory Auditors of your company,
we hereby present our report on regulated agreements.
Our responsibility does not include identifying any
undisclosed agreements or commitments. We are required to
report to shareholders, based on the information provided,
on the main terms and conditions of the agreements and
commitments that have been disclosed to us, without
commenting on their relevance or substance. According to
the terms of Article R. 225-31 of the French Commercial
Code, it is your responsibility to assess the relevance of
entering into these agreements, with a view to approving or
rejecting them.
We hereby notify you that we were not advised of any new
agreements entered into during the fiscal year ended which
would be addressed by Article L.225-38 of the French
Commercial Code.
Furthermore, in application of the Decree of March 23, 1967,
we were notified that the following agreement, which was
approved during a previous fiscal year, was performed during
the fiscal year ended:
Agreement approved during a previous fiscal
year and which was performed during the fiscal
year ended
With Antarius:
Type and purpose of agreement: undated subordinated
notes issued by Antarius.
Conditions: The Board of Directors which met
December 8, 2000, terminated the guarantee given
Chauchat Expansion (a company absorbed by Crédit
Nord) covering undated subordinated notes issued
Antarius.
on
by
du
by
In exchange, Antarius increased the interest rate on the
undated subordinated notes by 0.30%.
This change in interest rate on the undated subordinated
notes issued by Antarius generated additional profit of
EUR 4,143 for Crédit du Nord during fiscal year 2008. These
undated subordinated notes were repaid on May 12, 2008.
We have performed the necessary checks, in accordance
with the professional standards of the Compagnie
Nationale des Commissaires aux Comptes (French Institute
of Statutory Auditors), relating to this assignment. These
checks consisted in ensuring that the information we were
given was consistent with the basic documents from which
it was taken.
190
José-Luis Garcia
Isabelle Santenac
Draft resolutions: general Meeting of Shareholders
Draft resolutions
General Meeting of Shareholders of May 13, 2009
First resolution
Approval of the consolidated financial
statements
The General Meeting of Shareholders, under the conditions
required by Ordinary General Meetings as to quorum and
majority, having been informed of the Statutory Auditors’
report on the consolidated financial statements, approves
the transactions cited therein, the balance sheet closed
December 31, 2008, and the income statement for fiscal
year 2008.
The General Meeting approves the net income after taxes
(Group share) of EUR 252,694,000.00.
k Allocation of EUR 38,000,000.00 to the ordinary reserve;
k Allocation of EUR 872,371.84 to retained earnings.
The ordinary reserve will thus be increased from EUR
516,000,000.00 to EUR 554,000,000.00.
The dividend distributed to individual shareholders is eligible
for the 40% deduction provided for by Article 158-3-2° of
the French General Tax Code, unless they opt for the flatrate withholding tax provided for by Article 117 quater of
the French General Tax Code. In accordance with the law,
shareholders are hereby reminded that the following dividends
were distributed over the past three years:
k fiscal year 2007: EUR 2.05 per share (1)
Second resolution
Approval of the individual financial statements
and release of the Directors from their duties
The General Meeting of Shareholders, under the conditions
required by Ordinary General Meetings as to quorum and
majority, having been informed of the Board of Directors’
report and the Statutory Auditors’ general report on the
individual financial statements, approves the transactions
cited therein, the balance sheet closed December 31,
2008, and the income statement for fiscal year 2008. The
General Meeting approves the net income after taxes of EUR
168,230,336.58.
(1) Dividend eligible for the 40% tax deduction in favour of individual
shareholders or for the flat-rate withholding tax.
(2) Dividend eligible for the 40% tax deduction in favour of individual
shareholders.
Fourth resolution
Agreements addressed by Articles L 225-38
et seq. of the French Commercial Code
Consequently, the General Meeting fully and without
reservation releases the Directors from their mandates for
said fiscal year.
The General Meeting, under the conditions required by
Ordinary General Meetings as to quorum and majority, has
been informed of the Statutory Auditors’ Special Report on
agreements addressed by Articles L 225-38 et seq. of the
French Commercial Code and approves this report.
Third resolution
Fifth resolution
Distribution of earnings
Renewal of a Director’s mandate
The General Meeting, under the conditions required by Ordinary
General Meetings as to quorum and majority, is distributing the net
income after taxes of EUR 168,230,336.58. Given that the legal
reserve has been fully allocated, and that net income plus retained
earnings from fiscal year 2007 (i.e. EUR 188,103.66) resulted in
total income available for distribution of EUR 168,418,440.24, the
General Meeting is allocating this sum as follows:
Ordinary General Meetings as to quorum and majority, hereby
re-elects Didier ALIX as a Director for a term of four years. His
mandate shall expire at the end of the General Meeting held
to approve the financial statements for the fiscal year ending
December 31, 2012.
k distribution of a dividend of EUR 129,549,068.40 to
shareholders, i.e. a dividend per share of EUR 1.40;
191
Draft resolutions: general Meeting of Shareholders
Sixth resolution
Renewal of a Director’s mandate
re-elects Patrick DAHER as a Director for a term of four years.
His mandate shall expire at the end of the General Meeting
held to approve the financial statements for the fiscal year
ending December 31, 2012.
Seventh resolution
Change in the representative of a Principal
Statutory Auditor
Ordinary General Meetings as to quorum and majority,
hereby notes the change of representative appointed
by DELOITTE & ASSOCIES, Principal Statutory Auditor. In
order to meet the obligations of Law 2003-76, José Luis
GARCIA, representing DELOITTE & ASSOCIES, is hereby
replaced by Jean-March MICKELER. His mandate shall
expire at the end of the General Meeting held to approve
the financial statements for the fiscal year ending December
31, 2011.
Appointment of a Director
appoints Stefaan DECRAENE as a Director for a term of four
years. His mandate shall expire at the end of the General
Meeting held to approve the financial statements for the fiscal
year ending December 31, 2012.
Eighth resolution
appoints Pierre MARIANI as a Director for a term of four years.
His mandate shall expire at the end of the General Meeting
held to approve the financial statements for the fiscal year
ending December 31, 2012.
Eleventh resolution
Change in the representative of a Principal
Statutory Auditor
Ordinary General Meetings as to quorum and majority,
hereby notes the change of representative appointed by
ERNST & YOUNG, Principal Statutory Auditor. In order to
meet the obligations of Law 2003-76, Isabelle SANTENAC,
representing ERNST & YOUNG, is hereby replaced by
Bernard HELLER. His mandate shall expire at the end of the
General Meeting held to approve the financial statements for
the fiscal year ending December 31, 2011.
Twelfth resolution
Powers
Ninth resolution
appoints Philippe RUCHETON as a Director for a term of four
years. His mandate shall expire at the end of the General
Meeting held to approve the financial statements for the fiscal
year ending December 31, 2012.
Tenth resolution
192
All powers are granted to bearers of a copy or extract of
the minutes of this General Meeting of Shareholders to carry
out all formalities and publications relating to the preceding
resolutions.
4
Additional
information
General description of Crédit du Nord
194
Group activity
197
Responsibility for the registered document
and audit
198
Concordance table
199
193
Company name
Crédit du Nord
Head Office
28, place Rihour - 59000 Lille, France
Legal form
A limited liability company (Société Anonyme) registered
in France and governed by Articles L. 210-1 et seq. of the
French Commercial Code.
The company has the status of a bank governed by Articles
L. 311-1 et seq. of the French Monetary and Financial Code.
Registration number
SIREN No. 456 504 851 RCS Lille
APE activity code
651 C
k any and all transactions related to banking transactions,
including, in particular, all investment or related services
as referred to in Articles L. 321-1 and 321-2 of the French
Monetary and Financial Code;
k 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
may also regularly engage in any and all transactions other
than those mentioned above, including in particular insurance
brokerage.
Generally, the company may, on its own behalf, on behalf
of third parties or jointly, engage in any and all financial,
commercial, industrial, agricultural or real estate transactions
that are directly or indirectly related to the above mentioned
activities or are likely to facilitate the execution thereof.
Share capital
The company’s share capital is set at EUR 740,263,248. It
is divided into 92,532,906 fully paid-up shares with a face
value of EUR 8.
The shares comprising the company’s capital are not subject
to any pledge agreements.
Creation and expiration date
Crédit du Nord was founded in 1848 under the company
name “Comptoir national d’escompte de l’arrondissement
de Lille».
It adopted the status of a public limited company (société
anonyme) in 1870 and took the name “Crédit du Nord” in
1871.
The date of expiration of the company is set at 21 May 2068,
barring dissolution before this date or an extension thereof
as provided by law.
Corporate purpose (article 3 of the bylaws)
The purpose of the company, under the conditions set forth
by the laws and regulations applicable to credit institutions,
is to perform with individuals or corporate entities, in France
or abroad:
k any and all banking transactions;
194
Form of shares
All shares must be registered.
Disclosure requirements
No restrictions have been made to legal provisions concerning
ownership thresholds.
Share transfer approval
The General Meeting of 28 April 1997 ruled that the
assignment, sale or transfer of shares to a third party which
does not have the right to be a shareholder for any reason
whatsoever, except in the event of estate transmission,
liquidation, community property between spouses or transfer
to a spouse or next-of-kin, is subject to the company’s
approval in order to become final.
Parent company documents
General Meeting
The documents relating to Crédit du Nord, including its
bylaws, financial statements, and the reports presented at
its General Meetings by the Board of Directors or Statutory
Auditors, can be consulted at 59, boulevard Haussmann,
75008 Paris, France
(Article 19 of the bylaws)
Fiscal year
From 1 January to 31 December.
Allocation and distribution of income
(Article 22 of the bylaws)
Net income for the year is determined in accordance with all
currently applicable laws and regulations. At least 5% of net
income for the year, less previous accumulated losses if any,
must, by law, be set aside to form a legal reserve until this
reserve reaches one-tenth of share capital.
Net income available after said allocation to legal reserves,
as 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.
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 received for the fiscal year.
The General Meeting, if it is regularly constituted, represents
all the shareholders and exercises the powers devolved to
it by law.
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 take part in the Meeting is subject to registration
of shares in the name of the shareholder at least five days
before the date of the meeting.
Profit-sharing
A profit-sharing agreement was signed on 7 June 2007 which
applies to fiscal years 2007 through 2009.
AII payments therein are calculated on the basis of 6% of
gross operating income adjusted for certain parameters.
35% of profit-sharing is paid out in equal amounts (capped
at EUR 4 million), with the remainder paid in proportion to
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.
Crédit du Nord makes an additional «employer’s contribution»
where employees pay any profit-sharing into the Company
Savings Plan or into the Company Pension Savings Plan
(PERCO), in accordance with pre-defined scales and limits.
Except in the case of a reduction in share capital, no distribution
to shareholders may take place where shareholders’ equity
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 not available for distribution.
195
Change in capital
Shares outstanding
Par value per share (in EUR)
Share capital (in EUR)
Maximum no. of new shares
(*)
Shares outstanding adjusted for potential dilution
Adjusted potential share capital (in EUR)
2008
2007
2006
2005
2004
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
(*) Created by convertible debt and/or the exercise of stock options.
Ownership and voting rights (as at 31 December 2008)
Société Générale
80%
Dexia Crédit Local
10%
Dexia Banque Belgique
10%
Members of the Management Bodies
-
Employees (via specialised fund managers)
-
Double voting rights
None.
Changes in ownership in the last three years
None.
Dividend payments
k A dividend per share of EUR 1.45 was paid out in respect of FY 2004.
k A dividend per share of EUR 1.40 will be paid out in respect of FY 2008.
Stock market information
Not applicable: Crédit du Nord shares are not listed on any markets.
196
Group activity
Group activity
Use of patents and licences
Not applicable.
Risks covered by the Société Générale
Global Insurance Policy
1. Theft/fraud
Legal risks
Crédit du Nord is a credit institution approved in its capacity
as a bank. As such, it may engage in any and all banking
transactions.
It is also authorized to provide any and all investment
or related services as referred to in 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 bound by professional secrecy,
the breach of which is subject to criminal penalties.
These risks are included in a «global banking» policy that
insures the banking activities of Crédit du Nord and its
subsidiaries.
2. Professional liability insurance
The consequences of any lawsuits are insured under the
global policy. The level of coverage is the best available on
the market.
3. Operating losses
The consequences of an accidental interruption in activity are
insured under the global policy. This policy complements the
business continuity plans.
Crédit du Nord is also an insurance broker.
Litigation and extraordinary
circumstances
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
To the best of Crédit du Nord’s knowledge, no such risk
currently applies
Insurance
General policy
Crédit du Nord’s insurance policy aims to obtain the best
coverage with respect to the risks to which it is exposed.
A certain number of major risks are covered by policies taken
out as part of Société Générale’s Global Insurance Policy,
while others are covered by policies taken out by Crédit du
Nord.
4. Third-party liability insurance of Corporate
Officers
The purpose of this policy is to cover the company’s managers
and directors in the event of claims filed against them and
invoking their liability.
Risks covered by Crédit du Nord policies
1. Buildings and their contents
Buildings and their contents are insured by a multi-risk policy
with a ceiling of EUR 76,500,000.
2. IT risks
This insurance covers any loss or damages to equipment
(hardware, media) used to process information.
3. Liability insurance linked to operations
This insurance covers any pecuniary damages to third parties
incurred by all persons or equipment deemed necessary for
the company’s operations.
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.).
197
Responsibility for the registered document and audit
Responsibility for the registered document
and audit
RESPONSIBILITY FOR THE
REGISTERED DOCUMENT
Alain PY, Chairman of the Board of Directors and Chief
Executive Officer
CERTIFICATION OF THE PERSON
RESPONSIBLE FOR THE REGISTERED
DOCUMENT
I hereby certify, having taken all reasonable measures to
this end, that to the best of my knowledge, the information
contained in this registered document is true and that there
are no omissions that could impair its meaning.
I received a letter of completion from the statutory auditors in
which they state that they verified the information in respect of
the financial position and accounts presented in the registered
document and that they read through the entire document.
The historic financial information presented in the registered
document was addressed in statutory auditors’ reports, which
appear on pages 130-131 and 188 190 of this document.
In addition, financial information for fiscal year 2007 was
incorporated for reference purposes from pages 149 and
208-209 of the 2007 registered document. The statutory
auditors’ reports referring to the 2008 annual company and
consolidated financial statements contain observations.
Chairman and Chief Executive Officer
Alain PY
I certify that to the best of my knowledge, the financial
statements were drawn up in accordance with applicable
accounting standards and present fairly, in all material
respects, the financial position and results of the parent
company and of the entire Group as constituted by the
consolidated companies, and that the Management Report
accurately reflects the development of business, results and
the financial situation of the parent company and of the entire
Group as constituted by the consolidated companies, as well
as a description of the main risks and uncertainties to which
they are exposed.
STATUTORY AUDITORS
ERNST & YOUNG ET AUTRES
Represented by Isabelle Santenac
Represented by José-Luis Garcia
Address:
41, rue d’Ibry – 92200 Neuilly-sur-Seine, France
Address:
185, avenue Charles de Gaulle – 92200 Neuilly-sur-Seine,
France
Date appointed:
May 18, 2006 for a term of six fiscal years
Substitute auditor:
PICARLE et Associés
198
Date appointed:
May 18, 2006 for a term of six fiscal years
Substitute auditor:
Société BEAS
Concordance table
Concordance table
In accordance with Article 28 of CE Regulation No. 809/2004 of April 29, 2004, the following information is included for reference
purposes in the registered document:
k individual and consolidated financial statements for the fiscal year ended December 31, 2007, the related Statutory Auditors’
reports and the Group Management Report appearing on pages 44-200, page 149, page 208 and pages 12-31 of the
registered document filed with the AMF on April 25, 2008 under No. D.08-0294;
k individual and consolidated financial statements for the fiscal year ended December 31, 2006, the related Statutory Auditors’
reports and the Group Management Report appearing on pages 44-167, pages 147-148, pages 174-175 and pages 12-31
of the registered document filed with the AMF on May 3, 2007 under No. D.07-0410.
The chapters of registered document Nos. D.08-0294 and D.07-0410 not listed above are either not applicable for investors or
are covered in another section of this registered document.
Page number of the
registered document
Chapters
1. Responsibility for the registered document
198
2. Statutory auditors
198
3. Select financial information
3.1.
Select historic financial information for the issuer, for each fiscal year
3.2.
Select financial information for interim periods
4-5
–
4. Risk factors
41, 74-85, 197
5. Information concerning the issuer
5.1.
History and development of the company
5.2.
Investments
194
6, 14, 31, 96-97
6. Overview of activities
6.1.
Core businesses
6.2.
Key markets
15-20
32, 91-92
6.3.
Exceptional events
6.4.
Degree of issuer dependence on patents, licences, industrial, commercial, and
financial contracts, and upon new manufacturing processes
–
6.5.
Basis of issuer statements concerning its competitive position
197
32
7. Organisation chart
7.1.
Overall description of the Group
7.2.
List of major subsidiaries
10
127-129, 174-176
8. Buildings, plant and equipment
8.1.
Major existing or planned tangible fixed assets
8.2.
Environmental issues with the potential to influence the use of tangible assets
96-97
–
199
Concordance table
Page number of the
registered document
Chapters
9. Overview of financial situation and results
9.1.
Financial situation
21-30
9.2.
Operating income
21-27
10. Cash flow and capital
10.1. Information on the issuer’s capital
10.2. Source and amount of the issuer’s cash flow
10.3. Information on the issuer’s borrowing conditions and financing structure
28-29, 49-51
52
90, 99-100, 106
10.4. Information concerning any restrictions on the use of capital having influenced or
capable of influencing the issuer’s transactions
–
10.5. Information concerning the expected sources of financing needed to honour the
commitments listed in chapters 5.2 and 8.1
–
11. Research and development, patents and licences
12. Information on trends
13. Profit forecasts or estimates
–
30
-
14. Administrative, Management and Supervisory bodies and General Management
14.1. Board of Directors and General Management
14.2. Conflicts of interest involving the administrative, management and supervisory
bodies, and General Management
2
177-179
15. Compensation and benefits
15.1. Amount of compensation paid and benefits in kind
15.2. Total amount provisioned or recorded by the issuer for the payment of pensions and
other benefits
180-187
124
16. Corporate Governance
16.1. Expiry of current mandates
16.2. Service agreements binding members of the administrative bodies
16.3. Information on the issuer’s Audit Committee and Compensation Committee
16.4. Declaration indicating whether or not the issuer complies
with corporate governance policy
2
–
2, 180-181
–
17. Employees
17.1. Number of employees
17.2. Ownership interests and stock options of Directors
17.3. Agreement allowing for employees to invest in the issuer’s capital
23, 117
182-186
196
18. Key shareholders
18.1. Shareholders owning more than 5% of the share capital or voting rights
196
18.2. Other voting rights
196
18.3. Ownership of the issuer
196
18.4. Agreement of which the issuer is aware, the implementation of which could lead
to a change in ownership at a future date
200
–
Concordance table
Page number of the
registered document
Chapters
19. Transactions with affiliâtes
124-125
20. Financial information concerning the issuer’s financial situation and results
20.1. Historic financial information
46-129, 134-176
20.2. Pro forma financial information
_
20.3. Financial statements
46-129, 134-176
20.4 Verification of annual historic financial information
130-131, 188-189
20.5. Date of latest financial information
46
20.6. Interim financial information
–
20.7. Dividend policy
196
20.8. Legal and arbitrage procedures
197
20.9. Significant change in the financial or commercial situation
30
21. Additional information
21.1. Share capital
194
21.2. Articles of incorporation and by laws
194-195
22. Major contracts
–
23. Information from third parties, expert certifications and interest declarations
–
24. Documents available to the public
25. Information on ownership interests
195
127-129, 174-176
201
This original document was filed with the AMF (French Securities Regulator) on April 28, 2009, in accordance with article
212-13 of the General Regulation of the AMF. As such, it may be used to support a financial transaction if accompanied
by a prospectus duly approved by the AMF.
This document contains corrections detailed in the amendment filed with the AMF at May 25, 2009
This registration document is available online at www.groupe-credit-du-nord.com
Responsible for the information : Jean-Pierre Bon – Tel : 33 (0)1 40 22 23 91 – E-mail : [email protected]
k
Crédit du Nord, a French corporation with a share capital of EUR 740.263.248 – RCS Lille Siren 456 504 851 – May 2009. Designed and created by: dollop

Groupe Crédit du Nord

Transcription

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