NATIXIS -2020 Universal Registration Document

5 FINANCIAL DATA

Statutory Auditors’ report on the consolidated financial statements

Impairment of customer loans and receivables (stages 1, 2 and 3) Risk identified and main judgments

Our audit approach Our work was adapted to take account of changes in risk and the increaseddegree of uncertainty.We appreciatedthe relevance of the internal Natixis control system and in particular its adaptation to the crisis.

As part of its financing activities within the Corporate & Investment Banking division, Natixis is exposed to credit risk in respect of loans and receivables and financing commitments given to customers. The Covid-19 pandemic has led to a health and economic crisis that is affecting borrowers’ ability to repay their debts, with mixed situationsdependingon geographic regions and business sectors. In response to this crisis, each country deployed specific governmental measures (partial unemployment schemes, state-guaranteed loans, moratoriums, etc.). In accordance with the “impairment” component of IFRS 9, Natixis recognizes impairment and provisions to cover expected credit losses on outstandingsthat reflect their classificationin stage 1, 2 or 3. The stage that outstandings are assigned to depends on the increase in credit risk observed since their initial recognition. The deteriorationof the credit risk during fiscal year 2020 was assessed on the basis of the quantitative criteria and qualitative criteria as indicated in Notes 1.4.2 and 5.3 to the consolidated financial statements. Impairment for expected credit losses on stage 1 or 2 outstandings is the discounted sum of the product of the exposure at default (EAD), probability of default (PD) and loss given default (LGD) inputs in each projection year, including forward-looking information. In the context of a pandemicmarked by a high degree of uncertainty, Natixis made the following changes in 2020: an adjustment of the macroeconomic scenarios to take into V account the effects of the health crisis on the calculation of the IFRS 9 provisioning parameters; a methodological refinement relating to the inclusion of the V segment aspects in the assessment of credit risk. Outstanding loans bearing a known counterparty risk (stage 3) are subject to impairments determinedessentiallyon an individual basis. These impairmentsare measuredbased on the recoverablevalue of the receivable,i.e. the presentvalueof the estimatedrecoverablefuture cash flows after taking the impact of any collateral inatcocount. We considered these impairmentsto be a key audit matter as it is an area where judgment plays a significant role in the preparationof the financial statements, particularly in the context of a pandemic, whether in terms of classifying outstanding loans in stage 1, 2 or 3, determining the inputs and procedures for impairment calculations in respect of outstandings in stages 1 and 2, and assessing the individual provisioning level of outstanding loans in stage 3. Net exposures in respect of customer loans and receivables totaled €67,939 million at December 31, 2020. Provision for credit loss totaled €851 million at December 31, 2020. Please refer to Notes 1.4, 5.1, 5.3, 5.22, 6.8, 7.6.2 and 10.2 to the consolidated financial statements for more details.

Impairment of outstanding loans in stages 1 and 2 Our work mainly consisted in: assessing the Natixis control system covering: V

the classificationof outstandingsin stage 1 or 2 according to the V indicators used to define the significant deterioration in credit risk, validation of internal models; V assessing the appropriateness of the parameters used in the V calculation of impairmentsat December 31, 2020, in particular the methodological changes and adjustments of the macroeconomic scenarios aimed at taking into account the effects of the Covid-19 pandemic; performing counter calculations on a sample of contracts. V Impairment of outstanding loans in stage 3 We evaluated the design and tested the effectiveness of the key controls put in place by the Natixis Group in particular those related to: the identification of indicators of impairment (such as past-due V payments, restructuring, etc.) and the counterparty rating process; the classification of exposures in stage 3; V the monitoring of guarantees, their analysis and their valuation; V the determination of individual impairment losses and the V associated governance and validation system. In addition, we carried out a credit review over a sample of files selected based on materiality and risk criteria, particularly files exposed to the business sectors most affected by the health crisis. In this review we: took note of the latest available information on the situation of V counterparties whose risk has increased significantly; performed independent analyses of the assumptionsused and the V estimates of provisions drawn up by management based on information provided by the institution and external data; verified that estimated impairment allowances were correctly V recognized. As part of this work, we verified that the measures granted to customers in the context of the crisis (moratoriums, loans guaranteed by the State, etc.) had indeed been included in the risk assessment. We also verified the information detailed in the notes on the impairment of customer loans and receivables, including those relating to credit risk.

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2020