NATIXIS -2020 Universal Registration Document
5 FINANCIAL DATA
Consolidated financial statements and notes
Market data is now calculated on a historical depth of five years (vs. ten years previously) in order to take into account a period that is more representative of the current operating conditions of the various CGUs, in particular due to the constant decline in the number of CGUs interest rate since the eurozone crisis. This methodological adjustment mainly explains the decrease in discount rates between the two fiscal years. In addition, and in more detail, the discount rates were determined taking into account: for the Insuranceand PaymentsCGUs, the risk-free 10-year French V Treasury bond rate averaged over a period of 5 years; for the Asset & Wealth Management and Corporate & Investment V Banking CGUs, the average of the 10-year French Treasury bond and 10-year US Treasury, averaged over a period of five years. A risk premium calculated on the basis of a sample of companies representative of the CGU is then added to these rates, with an average over a depth of five years. For CIB, the fact that goodwill comes exclusively from the M&A activity on the one hand, and the work in progresswithin the division in view of the next strategic plan on the other hand led to the completionof the businessunit. Valuationexerciseon the sole scope of M&A while enriching the valuation methods used (multi-criteria approach including a DCF approach as well as methods of valuation by market multiples and comparable transactions) compared to the tests conducted previously. These tests did not result in the recognition of impairment losses at December 31, 2020. A 50 bp increase in discount rates (assumption based on the historical annual variability observed over one year using 2012-2020 historical data) combined with a 50 bp reduction in perpetual growth rates would reduce the value in use of CGUs by: -13% for the Asset & Wealth Management CGU; V -12% for the Wholesale Banking CGU (on M&A activity); V -14% for the Insurance CGU; V -17% for the Payment CGU, V and would not lead to the recognition of any impairment losses for these CGUs. The sensitivity to key assumptions does not significantly affect the recoverable amount of the CGUs: for Asset & Wealth Management, a 10% decline in the equity V markets (uniform decline across all years) would have a -10% negative impact on the CGU’s recoverable value and would not lead to the recognition of an impairment loss; for Corporate & Investment Banking, sensitivity to the dollar or to V higher liquidity costs would have a limited impact on net revenues and would not lead to any impairment being recorded; for Insurance: V the main vector of sensitivity for life insurance is interest and V market rates, but various steps are being taken to reduce their impact (diversification of investments, reserves, equity hedging, etc.). Accordingly, the impact on the income statement is limited and would not significantly affect the CGU’s value, for non-life insurance, the main vector of sensitivity is the loss V ratio, which is notably measured via the combined ratio. Natixis’ New Dimension strategic plan sets the combined ratio at below 94%. A one-point deterioration in this ratio each year would lead to a limited fall of 3% in the CGU’s value, with no impact on impairment;
Goodwill arising in connection with the above-mentioned business combination on December 31, 2006 was accounted for as follows: Goodwill on contributed entities As the contributions were recognized at their net carrying amount under IFRS, no valuation adjustments have been recorded for the various assets and liabilities contributed. The difference between the acquisition cost and the Group’s interest in the net assets of the contributed entities does not constitute goodwill within the meaning of IFRS 3, since the acquisitioncost takes into account the real value of the shares, while the contributions were recognized at their net carrying amount. Each of the differences observed was recognized in “Consolidated reserves”. An amount of €3,170 million was charged against the share premium in this respect at December 31, 2006. Goodwill on other transactions The goodwill arising from the transaction resulting in the creation of Natixis amounted to €484 million, which breaks down as follows: €229 million for the former IAMG, €21 million for the former IXISCIB and €8 million for the former Novacrédit, plus the goodwill recorded in “Investments in associates” relating to the Caisse d’Epargne CCIs (€190 million) and the Banque Populaire CCIs (€36 million). Since then, goodwill relating to the former IXIS CIB has been fully written-down. In light of the sale of the cooperative investment certificates during fiscal year 2013, the associated goodwill is no longer included in the consolidated balance sheet. Other goodwill During the fiscal year 2020, excluding translation differences (-€129 million), goodwill decreased by -€229 million (see Note 7.12) . Impairment tests All items of goodwill are impaired, based on the value in use of the cash-generating units (CGUs) to which they have been allocated. The determinationof values in use primarily relied on the updating of the estimate of future flows of CGUs (i.e. the DiscountedCash Flows (DCF) method) as determinedby the latest business divisions’ result forecasts reassessed in the context of the health crisis. At December 31, 2020, the following assumptions were used: estimated future cash flows: forecast data from the latest V multi-year profit trajectory forecasts for the business lines drawn up as part of the preparation of Natixis’ strategic plan; perpetual growth rate: the perpetual rate set at 2.5% for the V Insurance and Payments CGUs and for the M&A activity of CIB, due to the prospects for sustainedgrowth in their activity and their resilience. in the context of the crisis. The perpetuity rate is maintained at +2% for the AWM CGU in a context still marked by high volatility on stock market indices. As a reminder, the perpetual rate had been reduced to +2% for all CGUs for the test at June 30, 2020; discount rate: use of a specific rate for each CGU: 7.6% for Asset & V WealthManagement (9.1% as of December 31,2019), 9.5% for CIB (11.4% as of December 31, 2019), 7.6% for Insurance (10.6% as of December 31, 2019) and 6.7% for Payments (6.9% as of December 31, 2019).
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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2020
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