First Quarter 2020 Results
Paris, May 6, 20201Q20 results
Positive earnings capacity1 despite an unprecedented market context
Reported net income at €(204)m in 1Q20 impacted by the Coface transaction announcement2 as well as IFRIC 21
Basel 3 fully-loaded CET1 ratio1 at 11.4%, +310bps above regulatory requirementsQuarter marked by mechanical market effects (linked to the COVID-19 context) thus mostly reversible:~€(290)m net revenue impact o/w ~€160m reversible (XvA, seed money in asset management)~(90)bps CET1 ratio impact o/w ~70bps reversible (OCI, PVA, Market and CVA RWA)A DIVERSIFIED ASSET-LIGHT MODEL DEDICATED TO CLIENTS’ NEEDSUNDERLYING NET REVENUES3 EXCLUDING CVA/DVA AT €1.9BN IN 1Q20 (-3% YOY)AWM: Resilient results, fee rate and flow dynamicsStrength of our active asset management model with underlying net revenues3 flat YoY in 1Q20 despite some mark-downs on the seed money portfolio. Revenue growth of +9% YoY excluding the seed money contribution i.e. +4pp above expense growthAverage fee rate slightly down to 29bps over the quarter due to a mix effect following the drop in equity marketsNet outflows on LT products limited to ~€(5)bn in North America and ~€(2)bn in Europe (excluding Life Insurance General Accounts)Outlook: Pursue the development of a truly global and diversified model, building up on key strategic initiatives (e.g. LBPAM) and already successful growth relays (e.g. WCM, Mirova and Thematics) while maintaining good cost management and flexibility in order to adapt to the environment. Good 2Q20 start so farCIB: Strong revenue diversification together with a tight control on expensesSupporting clients with more than €9bn financing granted since the beginning of the COVID-19 crisis as at 30/04/204Underlying net revenues3 impacted by the COVID-19 context in 1Q20, notably across market activities through elevated CVA/DVA effects and mark-downs (Equity dividends). Strong FICT performance with revenues up +46% YoY and from Investment banking/M&A, up +19%. Global finance activity impacted by lower syndication fees in MarchCosts under control, down -5% YoY at constant exchange rate in 1Q20Cost of risk increase in 1Q20 due to higher provisioning, notably across energy exposuresOutlook: Ongoing cost saving efforts to mitigate the combined effect of lower revenues and higher cost of risk. Under severe assumptions, notably including a -9% drop in the 2020 French GDP and a -4% cumulative drop over 2020-2021, cost of risk for the rest of the year could be along the lines of 1Q20 or moderately aboveInsurance: Particularly resilient model, driver of growth and profitabilityUnderlying net revenues3 up +5% YoY in 1Q20 with a limited impact of market volatilityUnderlying RoE3 at ~33% in 1Q20Outlook: Limited impacts from the current environment expected on the 2020 Gross operating incomePayments: Value creation accelerating through the beginning of 2020Underlying net revenues3 up +9% YoY in 1Q20 of which +13% in January/Febru aryUnderlying RoE3 at ~15% in 1Q20Outlook: 2020 net revenues are expected to continue to exhibit positive momentum vs. 2019SOLID BALANCE SHEET AND REINFORCED FINANCIAL STRENGTHBasel 3 FL CET1 ratio1 at 11.4% as at March 31, 2020, vs. 11.3% at 2019 year-end. Ratio +310bps above regulatory requirements which are now established at 8.29%, down -120bps vs. January 1st, 2020. Following this capital requirement reduction, mainly driven by the CRD V article 104 being brought forward, Natixis is now targeting a Basel 3 FL CET1 ratio1 of 10.2% for the 2020-2021 periodLiquidity: LCR ratio >100% as at March 31, 2020 through an efficient joint funding platform together with BPCE. Besides, >70% of assets on balance sheet have a duration < 1 year. This short-term balance sheet should potentially limit IFRS 9 provisioning based on lifetime expected lossPositive earnings capacity1 of +€60m in 1Q20 despite volatile items impacting the quarterFigures restated as communicated on April 20, 2020 following the announced disposal of a 29.5% stake in Coface. See page 15 for the reconciliation of the restated figures with the accounting view [1]See note on methodology 2 See page 5 3 Excluding exceptional items. Excluding exceptional items and excluding IFRIC 21 for the Cost income ratio, RoE and RoTE. See note on methodology 4 Management data
“Since the beginning of the COVID-19 crisis, our employees have been fully mobilized to support our clients and the real economy. They have been working very efficiently, and we have been able to function in a very satisfactory way, thanks to our early adoption of remote working practices. I pay tribute to the commitment and professionalism of our incredible teams, which has equally been noted by our clients.
