Financial Year 2004

Crédit du Nord Group 1 CRÉDIT DU NORD GROUP FINANCIAL YEAR 2004

Contents

REVIEW CONSOLIDATED FINANCIALS ADDITONAL

2004 STATEMENTS INFORMATION

2 C ORPORATE GOVERNANCEE 9 M ANAGEMENT REPORT 75 G ENERAL DESCRIPTION

OF CRÉDIT DU NORD 4 K EY FIGURES 37 R EPORT OF THE CHAIRMAN ON INTERNAL CONTROL 77 GENERAL DESCRIPTION 6 GROUP STRUCTURE OF THE SHAREHOLDER 48 S TATUTORY AUDITOR'S AND CAPITAL REPORT ON THE REPORT INFORMATION OF THE CHAIRMAN

79 G ROUP ACTIVITY C OMPARATIVE SCOPE 49 OF CONSOLIDATION 80 R ESPONSIBILITY FOR THE REGISTRED 51 SUMMARY BALANCE DOCUMENT AND AUDIT SHEETS AS AT DECEMBER 31

53 C OMPARATIVE INCOME STATEMENTS

54 C ONTRIBUTION TO NET INCOME BY BUSINESS LINE AND COMPANY

55 P RELIMINARY NOTES TO THE FINANCIAL

STATEMENTS

67 C OMPARATIVE BALANCE SHEETS AT DECEMBER 31

69 A CTIVITY OF CONSOLIDATED SUBSIDARIES AND

AFFILIATES

72 S TATUTORY AUDITOR'S REPORT

, REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2

Corporate governance as at 31 December 31, 2004

BOARD OF DIRECTORS Date appointed

Chairman

Alain PY 1 October 2002

Directors

Philippe CITERNE 28 April 1997 Christian DEWAVRIN 28 April 1997 Bruno FLICHY 28 April 1997 Jacques GUERBER 22 February 2000 Michel HERMAND 30 April 1998 Daniel JULIEN 15 May 2003 Axel MILLER 23 October 2003 Christian POIRIER 28 April 1997 Pierre RICHARD 22 february 2000 Hervé SAINT-SAUVEUR 14 May 2002 Patrick SUET 3 May 2001 Marie-Christine REMOND (Employee representative) 25 September 1997 Yvette BODEVIN (Employee representative) 23 November 2000 Patrick ROUSSEAU (Employee representative) 28 October 1999

The Board of Directors met three times during the course of 2004 in order to examine the budget, yearly and half-yearly accounts and discuss strategic decisions concerning commercial, organizational and investment policies.

The Compensation Committee, consisting of two Directors - Messrs Citerne and Suet, met once in the course of the year to submit a proposal to the Board of Directors concerning fixed and variable compensation, including benefits, for company directors.. 3 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

EXECUTIVE COMMITTEE

From left to right

Jean-Pierre Bon Deputy Chief Executive Offi cer – Finance Division Pierre Boncourt Head of Human Resources Francis Molino Head of Banking Operations Bernard Beaufi ls Chief Executive Offi cer Alain Py Chairman and Chief Executive Offi cer Clare Brennen Head of Communications (attends Executive Committee meetings) Patrick Renouvin Deputy Chief Executive Offi cer – Information Systems and Projects Division Marc Batave Deputy Chief Executive Offi cer – Group's Chief Client Offi cer REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 4

Key Figures

GROUP: CONSOLIDATED FIGURES

% Change (€ million) 2004 2003 2002 2004/2003 BALANCE SHEET Customer deposits 14,990.7 14,292.6 13,846.3 + 4.9 Customer loans 18,216.2 17,291.8 14,976.4 + 5.3 Shareholders’ equity 1,163.2 1,111.8 1,038.9 + 4.6 Doubtful loans (gross) 1,139.7 1,081.1 1,000.8 + 5.4 Provisions for doubtful loans 686.5 694.8 708.3 (1.2)

TOTAL 28,478.8 26,869.9 23,660.6 + 6.0

ASSETS UNDER MANAGEMENT 30,845.9 29,513.3 30,035.4 + 4.5

INCOME STATEMENT Net banking income (NBI) 1,308.8 1,234.4 1,162.9 + 6.0 Gross operating income (GOI) 432.2 376.7 320.4 + 14.7 Earnings before taxes 365.1 308.3 260.6 + 18.4 Net income 233.2 190.4 175.7 + 22.5 5 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

RATIOS as a % 2004 2003 2002 Cost of risk / Outstanding 0.38 0.43 0.46 Shareholders’ equity / Total assets 4.08 4.14 4.39

Solvency ratio(1) 9.15 8.78 9.35

Tier One capital / Total risk-weighted credit exposure(1) 6.68 6.61 6.74

RATINGS 2004 2003 2002 Standard and Poor’s ST A - 1 + A - 1 + A - 1 LT AA - AA - A + Fitch ST F1 F1 F1 LT A + A + AA - Intrinsic BC BC BC

CRÉDIT DU NORD SOCIAL (PARENT COMPANY) % Change (€ million) 2004 2003 2002 2004/2003 Net banking income (NBI) 911.1 851.4 824.7 +7.0 Gross operating income (GOI) 326.5 274.2 257.0 +19.1 Net income 198.9 157.3 173.1 +26.4

(1) These ratios are provided only as an indication by which to assess the profitability of the Crédit du Nord Group since the Crédit du Nord Group is not directly bound by regulatory solvency ratio requirements due to the nature of the Group’s ownership

REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 6

Group Structure

66.9%

99.8% 100% 96.8% 98.3% 63.2%

32.9% 64.0%

KOLB ÉTOILE 9.8% 8.3% INVESTISSEMENT GESTION 8.4% 100% 80.0%

SDB NORFINANCE NORBAIL BANQUE ANTARIUS GILBERT DUPONT GD ET ASSOCIÉS IMMOBILIER POUYANNE

100% 100% 100% 50% 35%

ORD N DEXIA SSURANCES S.P.T.F. NORIMMO STARLEASE A CLF BANQUE COURTAGE 99.8% 100% 99.8% 20% 100%

Shareholdings of less than 5% are not shown. Only those banks and companies with total assets in excess of € 100 million on net income in excess of € 1 million over the past three years are shown here. Other group companies are listed under “Scope of consolidation”, and financial data for these companies are shown in the preliminary notes to the financial statements under the heading ”Subsidaries and affiliates”. 7 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004 Consolidated fi nancial statements

9 MANAGEMENT REPORT 37 REPORT OF THE CHAIRMAN ON INTERNAL CONTROL 48 STATUTORY AUDITORS’ REPORT ON THE REPORT OF THE CHAIRMAN 49 COMPARATIVE SCOPE OF CONSOLIDATION 51 SUMMARY BALANCE SHEETS AS AT DECEMBER 31 53 COMPARATIVE INCOME STATEMENTS 54 CONTRIBUTION TO NET INCOME BY BUSINESS LINE AND COMPANY 55 PRELIMINARY NOTES TO THE FINANCIAL STATEMENTS 67 COMPARATIVE BALANCE SHEETS AT DECEMBER 31 69 ACTIVITY OF CONSOLIDATED SUBSIDARIES AND AFFILIATES 72 STATUTORY AUDITORS’ REPORT 9 CRÉDIT DU NORD GROUP FINANCIAL YEAR 2004

Management report Fiscal year 2004

Against a brighter economic backdrop … Crédit du Nord Group’s commercial that nonetheless continued to be plagued and fi nancial performance proved by uncertainty on many fronts … outstanding …

2004 was a year of record global expansion, thanks in particular Crédit du Nord Group followed up its excellent performance in 2003 to the buoyant economies of the United States and Asia. While the with a similar increase in earnings in 2004. NBI rose 6.0% (after 6.1% eurozone as a whole initially managed to capitalise fully on very strong in 2003), GOI was up 14.7% (17.6% in 2003) and consolidated net worldwide demand, its global competitiveness was subsequently income grew 22.5% to € 233.2 million (versus 8.4% in 2003). ROE dented by the plummeting dollar. Growth in the region is consequently came out at 20.6% for a Tier One ratio of 6.7%. fragile, with domestic demand remaining weak. The four major components of NBI enjoyed positive growth in 2004. France managed to buck the trend, with strong consumer spending Margins on deposits, which have suffered in the low-rate and capital expenditure resulting in GDP growth of 2.3% in 2004 environment of the past few years, benefited from a very strong - a significant increase on the 0.6% growth recorded in 2003 increase in volumes, which more than offset the further decline in despite exports markedly lagging imports. With domestic demand margin rates. Indeed, the highly prudent attitudes of consumers powering the French economy, it is little wonder that the second and businesses alike led to a rapid increase in short-term deposits half of the year proved less dynamic than the first, with stubborn throughout the year. unemployment and sluggish purchasing power growth eventually weighing on consumers’ willingness to spend. Lending remained strong in 2004, despite being down on 2003, which was an exceptional year for loan production. Consequently, These uncertainties over the eurozone recovery, exacerbated by margins on loans posted a further year-to-date increase, despite abrupt movements in oil prices, explain the European Central being down on the previous year as a result of poor demand for Bank’s decision to leave policy rates unchanged throughout the short-term business borrowing year, while the US Federal Reserve and Bank of England slowly tightened the monetary screws. While short-term interest rates The Group’s franchises on the corporate and, above all, remained low, there were bigger movements in long rates, with professional segments grew considerably for the second year an upward trend in the first half of the year giving way to very running, reflecting the close fit between the Group’s banking rapid easing in the second. The 10-year OAT, for example, went model – combining proximity and quality – and client expectations. from 4.39% in June 2004 to 3.64% in December. The decline The rising customer base was accompanied by an increase in the continued in early 2005 and long rates are now at their lowest number of products and services held per account and another in 50 years. healthy increase in banking fees.

2004 was also a year of consolidation for the stock markets, with the indices sticking close to 2003 levels throughout the year. While the CAC 40 rose 7.4% between December 2003 and December 2004, its average yearly trend is far more telling. In fact, the extremely low level of the CAC 40 in spring 2003 explains the 19.2% average increase in the index between 2003 and 2004. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 10

Financial fees were underpinned by solid production of both life At the same time, in-branch working methods were reviewed insurance and medium- and long-term mutual funds as well as in order to increase the commercial availability of advisors the previously mentioned rise in the stock markets. In fact, 2004 and improve resource allocation. This project is already well saw the significant expansion of our mutual fund range, aimed at underway, and the new set-up will be in place throughout the both individual customers - with the addition of two guaranteed Group in 2005. funds - and business and institutional customers with products 2004 also saw the transfer of our life insurance business to Aviva such as Étoile Moné Euribor and Étoile Sectorielle Europe. France, which took over the 50% stake in Antarius previously In order to address the growing concerns that its customers, held by Cardif (the remaining 50% is held by Crédit du Nord). like all French people, have regarding their pensions, Crédit du Close to 200 000 life insurance policies and 80 000 death and Nord Group has launched an exhaustive range of pension savings disability policies were transferred in October according to plan products including fixed-term life insurance policies (Antarius and with no subsequent slowdown in the rate of production of Horizon and Horizon Premium) and PERP individual retirement new business, which speaks volumes about the quality of service accounts (Antarius PERP, PERP Premium and Antarius Avenir provided by our new partner. PERP) for individual customers and its PEI and PERCO savings The switchover to IFRS accounting standards also entered the plans aimed at businesses and their employees. operational phase at the end of the year. The consolidated In a slightly more favourable market environment, brokerage firm financial statements for 2005 will be prepared according to the Gilbert Dupont was able to steer a number of Group clients through new format and compared in the annual accounts against 2004 successful market operations, including IT services company data, which will be recalculated according to the new standards Sword Group’s capital increase and the Euronext Second Marché (with the exception, as stipulated in IFRS 1, of IAS 32 and IAS 39 floatation of the Société Marseillaise du Tunnel Prado Carénage. governing financial instruments and IFRS 4 governing insurance The quality of its research department was also recognised by contracts, whose provisions are not applicable until financial year London-based research agency AQ Publications, which ranked 2005). Considerable headway was also made during the year in our analysts second for MIDCAC recommendations and third for the Group’s other major regulatory project, namely the switchover recommendations across the whole Paris market. to the new Basel II capital adequacy standards, meaning that the new capital adequacy ratio should be in place within the timeframe stipulated in the regulations. … enabling the Group to press ahead Bolstered by its performance, Crédit du Nord Group has decided to with a number of major technical and accelerate its organic development with an ambitious programme organisational projects of branch openings. Concrete progress has already been made towards achieving the target of 100 or so new points of sale A number of technical and organisational projects initiated in within three years, with the number of new branches rising from 2001 entered their operational phase in 2004. around 10 per year from 2001 to 2003 to 21 in 2004.

The new customer advisor workstations were successfully rolled The Group is targeting those areas where it believes its current out in spring meaning that branch officers now have access to commercial structures to be insufficient given the local economic modern, ergonomic tools, with a user-friendly design based on fabric and demographics, and is focusing on professional and real-life work situations. individual customers alike. 11 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Management report Fiscal year 2004

COMMERCIAL ACTIVITY

The present analysis of Crédit du Nord Group’s commercial activity A loyalty score has been made available to customer advisors in extends across the entire scope of the Group’s banks (all of which order to allow them to identify the risk of a faltering customer- were connected up to a common information system in November bank relationship at a very early stage and to take the necessary 2001), i.e. Crédit du Nord and its six subsidiary banks: Courtois, steps to ensure that the relationship is maintained. Rhône-Alpes, Tarneaud, Laydernier, Nuger et Kolb. Historical figures have been restated to reflect this consolidation scope. One sign of customer loyalty and confidence is the number of products and services held per account, which increased further Indicators shown relate to euro-denominated business. Figures in 2004 with 67.7% of customers subscribing to at least three for outstanding loans are given as annual averages, while growth products. Take-up of the Norplus service package, which is the in franchises is based upon end-of-year figures. core offering for individual customers, rose a further 4.6% to 557 000. This was accompanied by significant upgrading, with take-up of the top-end version of the package, which provides Further expansion of the client base customers with a VISA Premier card, rising 13.3%. across all segments and an increase One of the new products launched in 2004, the Sécurité Épargne in customer loyalty insurance policy, designed as an additional savings vehicle providing cover in the event of accidental death, provoked keen While the slowdown in mortgage lending resulted in fewer new interest, with 45,000 subscribers in its first year. customers in 2004, the individual customer base continued to Direct banking also reflects the increasingly close contact grow at a rate similar to that of the previous year. The surge in between our customers and their bank. Voice server Étoile Direct, branch openings is still too recent to have contributed significantly for example, received 3.6 million calls in 2004, i.e. 9.6% more to the increase in the customer base. than in the previous year, and the number of visits to the individual Alongside efforts to capture new customers, the Group also customers' website increased nearly 40% to over 8 million. focused on retaining existing ones. Building customer loyalty Individual customers % individuals with three or more products Customers (thousand) + 1.3% + 1.7% + 1.6% 67.1 67.7 1,251 65.8 64.7 1,231 1,210 1,194

2001 2002 2003 2004 2001 2002 2003 2004

The growth rates given in this document have been calculated on the basis of exact fi gures and not on the rounded-up fi gures used in the charts. This remark applies to all of the charts featured in this document. . REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 12

The financial information available on the website has been Business customers considerably enriched following a partnership agreement with Active companies (thousand) + 1.3% + 3.1% + 2.3% leading online broker Boursorama, which offers Crédit du Nord 26.5 Group customers a personalised website under the trademark Crédit du Nord by Boursorama. 25.9

Professional customers 25.2 Customers (thousand) 24.8 + 0.9% + 4.6% + 5.2%

129.7

123.2

117.8 116.8

2001 2002 2003 2004

Crédit du Nord Group also enjoyed further steady growth in the business customer segment, another market in which high-quality customer service is crucial. A competitive survey carried out by 2001 2002 2003 2004 CFI placed Crédit du Nord Group first out of eight major banks operating in the SME market on most of the issues cited in the survey including customer satisfaction, confidence and image. The professional market enjoyed particularly strong growth in 2004, with the number of professional customers increasing The simple interest rate and currency hedge products established by over 10% in the space of two years. The Group’s bespoke in 2004 and targeted at SME customers are a good illustration of commercial structures, with on-site dedicated customer advisors, Crédit du Nord’s close understanding of the corporate market. counter services in all branches and a tailored range of products Nearly one in two business customers now has an internet and services have contributed enormously to the Group’s success contract and the number of visits to the site’s business pages in this demanding customer segment. rose by 52% over the year to 1.5 million.

The very high number of products and services per account is The Group also notched up a number of successes on the again a sign of satisfaction. The number of customers subscribing institutional investor market, where its expertise in the to the Convention Alliance package climbed 26% in 2004, while management of flows won it a number of contract tenders by automated service contracts designed for retailers grew 8%. The major institutions such as the CPAM, Ursaaf and Carpa. number of visits to the professional website rose 51% on the previous year to 3.3 million.

13 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Management report Fiscal year 2004

Strong growth in savings deposits Customer deposits (€ million) + 2.2% + 2.1% + 5.8% For the first time since 2000, average yearly stock market 14.25 13.19 13.47 performance was up on the previous year in 2004. The increase 12.91 (12.0)% (22.5)% + 5.7% 1.83 in the value of the portion of off-balance sheet savings invested 1.73 2.23 in equities therefore contributed to the increase in the value of 2.54 customer savings. + 3.9% + 11.0% + 4.1%

5.24 5.45 With inflows also remaining very high, the overall increase in 4.72 4.54 total customer savings deposits (deposits and off-balance sheet + 7.0% + 4.2% + 7.2% savings) was a strong 7.0% in 2004 up from a mere 1.8% in 2003.

5.83 6.23 6.50 6.96 Current account deposits grew rapidly in both the individual and 2001 2002 2003 2004

the professional and business segments. Extreme consumer Current account deposits Savings account deposits Other deposits caution resulted in a historically high household savings rate and a wait-and-see attitude as to the use of savings, thereby boosting Life insurance production remained healthy and the strong current accounts. What is more, businesses and professionals performance of 2003 (up 44% on the previous year) was repeated were not, generally-speaking, hampered by cash flow pressures. in 2004. Savers, who showed a massive preference for euro- based vehicles at the beginning of the year, slowly switched to Regulated savings products also benefited from this pro-saving unit-linked policies. This shift is consistent with the long-term environment, offering returns that compared favourably to short- nature of life insurance investments, with equities offering the term market rates. The CODEVI account, for example, is currently highest returns over that sort of investment horizon. an excellent vehicle for short-term savings within the limits of its ceiling, which is why CODEVI outstandings rose 6.9% in 2004, Medium- and long-term mutual fund investment increased with growth accelerating throughout the year. significantly in 2004, another sign that the public’s perception of the stock market is gradually improving. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 14

Consumer lending still very strong Off-balance-sheet savings (€ million) (0.9)% + 1.7% + 7.7% The modest decline in mortgage production from the quite 22.79 exceptional levels reached in 2003 constitutes an excellent 21.16 21.01 20.82 performance given past figures.

(17.1)% (9.4)% + 7.3% 4.26 The real-estate market maintained its momentum, with another 3.97 year of buoyant demand and the sixth consecutive year of price 4.39 5.29 rises in both the Paris region (Ile-de-France) and provincial

+ 46.7% + 29.1% + 4.0% areas. Long-term interest rates remained very low, and even fell again at the end of the year, thereby underpinning affordability. 3.63 5.33 7.15 At the same time, the buy-to-let market continues to attract a 6.88 significant portion of investors who are still not convinced by the (1.0)% + 4.5% + 13.9% stock market upturn.

5.65 5.60 5.85 6.67

(14.5)% (19.0)% + 5.6%

6.44 5.50 4.46 4.71 Mortgage loan production 2001 2002 2003 2004 (€ million)

Custody Life-insurance ST mutual funds MLT mutual funds + 14.2% + 80.2% (19.4)% 2,401

High asset inflows and increased equity valuations boosted life 1,936 insurance and medium- and long-term mutual fund outstandings, with the latter rising after three years of sharp decline. 1,332 1,167 However, these valuation effects did not have such a positive impact on the custody business insofar as our customers tend to prefer to invest in the stock market through mutual funds rather than directly. The continued increase in the number of customers subscribing to equity savings plans (up 6.3% in 2004) was also 2001 2002 2003 2004 achieved thanks to our range of eligible funds. 15 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Management report Fiscal year 2004

Personal loan production Outstanding loans to individuals (€ million) (€ million) + 0.7% + 19.4% + 3.7% + 8.0% + 14.1% + 13.6% 643.0 666.9 8.55 0.32 534.8 538.5 7.53 6.60 0.32 6.11 1.38 0.31 0.30 + 4.0% + 6.2 % 1.31 + 5.6% 1.23 1.18

+ 9.2% + 16.8 % + 16.1% 2001 2002 2003 2004

4.63 5.05 5.90 6.85 2001 2002 2003 2004 Personal loan production reached a record high in another year Mortgage loans of upbeat consumer spending. Household goods expenditure, Consumer loans in particular, leapt 13.8% in volume alongside the continuing Overdrafts strength of the housing market, while auto spending rose 2.7%.

Overall, outstanding loans to individuals once again recorded double-digit growth, led by the very high levels of mortgage loans production referred to above. Consumer loans as a whole grew significantly thanks to the personal lending component, although revolving credit fared less well with a 0.6% decline. As with overdrafts which were also down slightly, consumers tend to make less use of revolving credit in an economic environment in which they are unclear of the future and therefore tend to err on the side of caution. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 16

A signifi cant slowdown in business Trends were less positive, however, when it came to types of credit lending more directly associated with customers’ cash flow requirements, with overdraft outstandings suffering a serious decline ((10.9)%), and short-term lending at a standstill ((0.2)%). These trends In the same way as mortgage lending, capital expenditure obviously reflect our customers’ sound cash positions, as does (capex) lending to business suffered a modest slowdown in 2004 the solid increase in current account deposits. following an excellent year in 2003. Capex lending remains at a historically high level thanks to the rapid expansion of Crédit du Nord’s business customer base and to investment trends, which Outstanding business fi nancing picked up somewhat in 2004. (€ million) + 0.2% + 6.6% + 3.7% 7.43 7.70 6.95 6.96 Business loans - capex (1.0)% + 7.0% (10.8)% 1.35 (including PBE)(1) 1.51 1.43 1.41 (€ million) (3.3)% + 7.6% + 3.2% 1.85 1.80 (4.4)% + 47.2% (10.3)% 1.73 1.67 1,550 1,391 + 2.2% + 6.1% + 9.2%

1,101 1,053 3.80 3.88 4.12 4.50 2001 2002 2003 2004

MLT credit ST credit + notes Overdrafts + assimilated

2001 2002 2003 2004

Capex lending proved the most dynamic component of business lending in terms of outstandings in 2004. Short-term notes also posted a significant increase (7.5%) reflecting our emphasis on treasury management services and the development of receivable-backed finance.

(1) Reduced-rate loans. 17 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Management report Fiscal year 2004

FINANCIAL DEVELOPMENTS

The figures presented below are taken from the Group’s fully consolidated financial statements.

There was a significant change to the Group’s consolidation scope in 2004, namely the integration of SNC Europe Lafayette, a fully owned subsidiary of Banque Rhône-Alpes, which is now fully consolidated and whose only assets are real estate assets and a leasing contract.

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. These analyses concern first and foremost Retail Banking, which represents over 90% of Group activity. % Change (€ million) 2004 2003 (1) 2004/2003 Net interest and similar income 728.3 709.8 + 2.6 Net fee income 562.5 510.7 + 10.1 Gross margins on insurance business 18.0 13.9 + 29.5

NBI 1,308.8 1,234.4 + 6.0

(1) Proforma, in order to account for reclassifications between net fee income and margins on insurance business

Consolidated NBI for Crédit du Nord Group rose 6.0% year-on- Net banking income € year thanks to the continued solid performance of net interest Group consolidated data ( million) + 2.7% + 6.1% + 6.0% and similar income, which rose 2.6%, and net fee income, which grew 10.1%. Moreover, the stock markets had a positive impact 1,308.8 on financial fees and commissions in 2004.

Note that the excellent performance of insurance activities is 1,234.4 linked to the stock market rally and the strong sales performance of the network in 2003 and 2004, resulting in a 15.0% increase 1,162.9 in outstandings. 1,132.5 A management analysis relating to the Group’s full consolidation scope is useful in gaining a better understanding of NBI and the underlying trends in its various components.

2001 2002 2003 2004

At year-end 2004, the commercial margin on deposits and loans was up 3.6% on the previous year, i.e. + € 22.0 million (versus + 3.8%, or + € 22.4 million in 2003 compared with 2002).

A particularly important feature of 2004 was the 3.6% (€ 9.3 million) surge in loan margins relative to the same period one year earlier.

Continued low borrowing costs had a favourable impact on margins for overdrafts and short-term credit, which partly offset the drop in volumes. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 18

In addition, mortgage loan outstandings grew a healthy 16.1% Consolidated fee income rose 10.1% year-on-year following over the period, raising corresponding profits by 6.9% despite further growth in banking fees and a more favourable financial a 5bp reduction in the lending margin. Finally, loans for capital and stock market context. expenditure rose 9.6% in 2004 with a 13.0% increase in profit. Financial fees and commissions were also boosted by the improved Current account deposits also performed extremely well, rising stock market environment, with the CAC 40 gaining 19.2% during 7.3% to offset the 27bp reduction in the notional margin rate. the course of 2004. This partly explains the increase in mutual fund management fees (up 15.3%) and custody fees (up 10.5%). Regulated savings volumes continued their ascent (4.1%), driven by passbook savings (up 18.0%), CEL home savings accounts (up Life insurance fees and commissions benefited from a high level 6.8%), PEL home saving plans (up 6.3%) and Codevi accounts of net new money and a 14.8% increase in outstandings – also (up 6.9%). partly linked to the upturn in the CAC.

Total margins on deposits rose € 12.7 million or 3.5%. Banking fees continued to grow, climbing 6.2%(1) at end-December 2004, having risen 5.8% year-on-year in 2003.

The principal items that performed strongly in 2004 were: Net fee income (1) (Group consolidated data, € million) - overdraft fees, which grew 7.3% on the previous year due to the (0.4)% + 3.7% + 10.1% Facilité Temporaire de Trésorerie (FTT) credit facility agreements 562.5 and fully automated overdraft billing as of April 2003 510.7 - service package fees, which rose 10.7%, with a 9.0% increase 494.6 492.5 among individual customers and 15.8% growth among professionals; - 10.6% + 0.6% + 16.2% - transaction fees, which were up 12.4% for the year, a reflection of stronger day-to-day relations with our professional and 231.9 199.5 198.3 business customers. 221.8 - direct banking fees, which rose 21.2%; - foreign transaction fees, which were down 10.7%, reflecting for + 7.8% + 5.8% + 6.2% the second and, in principle, last year the impact of the drop in European transfer tariffs.

272.8 294.2 311.2 330.6 2001 2002 2003 2004

Banking fees Financial fees

(1) Restated for 2001, 2002 and 2003 to adjust for an account transfer between the two fee types. 19 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Management report Fiscal year 2004

Operating expenses % Change (€ million) 2004 2003 2004/2003 Personnel expenses 554.0 540.7 + 2.5 Taxes 23.9 23.9 + 0.0 Other expenses 244.8 244.4 + 0.2 Depreciation and amortisation 53.9 48.7 + 10.7

TOTAL OPERATING EXPENSES 876.6 857.7 + 2.2

Operating expenses rose moderately by 2.2% to € 876.6 million • The 2.5% increase in personnel expenses relative to 2003 is in 2004. essentially due to three factors: the increased profitability of the Group, which led to a 2.9% (€ 1.1 million) rise in provisions Note that over the course of 2004, Crédit du Nord spent associated with profit-sharing schemes; the moderate 0.6% € 25.8 million on IT projects versus € 19.8 million for fiscal year (€ 2.7 million) rise in the Group’s payroll following the 0.8% 2003. Depreciation began on the Chopin IT project involving the decrease in staff numbers and various changes in company replacement of workstations in the second quarter of 2004 in the liabilities and provisions for company debts. amount of € 600,000 per month.

% Change 2004 2003 2002 2004/2003 Pro rata staff count in activity - Group 7,518 7,576 7,733 - 0.8 Average staff count in activity - Group 7,756 7,904 8,007 - 1.9

• Other operating expenses rose 0.2%. In 2003, these included A Group-wide analysis shows that the main changes are as a write-back of € 2.5 million for tax provisions made by Étoile follows: Gestion. Excluding this item, other operating expenses fell 0.9% - rent and rental charges: down € 7.2 million or 19.2% year-on-year. year-on-year due to savings on rent following the repurchase of the Bank’s Paris buildings in late 2003; - sub-contracting expenses: up € 2.3 million or 6.4% on 2003. Most of this relates to feasibility studies for major IT and regulatory projects; - studies and intermediaries: up € 1.0 million or 17.0% from 2003. This increase is essentially due to feasibility studies for certain major projects. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 20

• Depreciation and amortization rose 10.7% in 2004 due to (a) Operating expenses the start of depreciation on the expenses linked to the overhaul (Group consolidated data € million) of our workstations referred to above and (b) the depreciation of + 3.2% + 1.8% + 2.2% 876.6 Paris headquarter buildings acquired in late 2003. 857.7 842.5 816.2 • Taxes were stable, with the abolition of the CIF (tax on financial institutions) offsetting the increase in France’s business tax (taxe professionnelle).

2001 2002 2003 2004

Gross operating income (GOI)

% Change (€ million) 2004 2003 2004/2003 NBI 1,308.8 1,234.4 + 6.0 Operating expenses 876.6 857.7 + 2.2

GOI 432.2 376.7 + 14.7

The combined effect of strong growth in NBI and successful cost Gross operating income control led to significant growth in GOI, which rose 14.7% in (Group consolidated data, € million) + 1.3% + 17.6% + 14.7% 2004, in a return to the strong growth trend seen for several 432.2 years before the financial market crisis of 2001-2002. 376.7

316.3 320.4

2001 2002 2003 2004 21 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Rapport de gestion Exercice 2004

At the same time, the cost-to-income ratio stood at 67.0%, down Cost-to-income ratio 2.5 points from the 2003 ratio of 69.5%. (Group consolidated data, as a %) 72.1 72.4 69.5 67.0

2001 2002 2003 2004

Cost of risk This decline must be considered in light of the strong increase Consolidated cost of risk(1) for Crédit du Nord Group stood at in lending, with the cost of risk divided by total lending falling to € 69.7 million in 2004, down 6.4% on 2003. 0.38% from 0.43% in 2003.

(€ million) 2004 2003 2002 2001 Cost of risk 69.7 74.5 68.9 61.6 Outstanding loans 18,216 17,292 14,977 14,009 Cost of risk/outstanding loans 0.38% 0.43% 0.46% 0.44%

(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. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 22

Despite an uncertain economic context, the quality of Crédit du Nord Group’s exposure was maintained. The ratio of doubtful and disputed loans was steady on the previous year at 6.0% of total loans at end-December 2004.

(€ million) 2004 2003 2002 Doubtful and disputed loans (gross) 1,139.7 1,081.1 1,000.8 Provisions for doubtful and disputed loans (686.5) (694.8) (708.3) Gross doubtful and disputed loans /gross outstanding loans 6.0% 6.0% 6.4% Net doubtful and disputed loans /net outstanding loans 2.5% 2.2% 2.0% Provisioning ratio for doubtful and disputed loans (incl. lease finance) 60.2% 64.3% 70.8%

The apparent decline in the ratio of provisions for doubtful and disputed loans between 2002 and 2003 is due to the fact that, until year-end 2002, the Crédit du Nord Group adhered to a more narrow defi nition of “doubtful”, according to which only provisioned loans were classifi ed as “doubtful”. Following the recommendations of the French Banking Commission, the Group decided on January 1, 2003, to proceed with the complete review of all impaired risks in order to reclassify all loans for which no provisions were deemed necessary but which meet the regulatory criteria of “doubtful”. This reclassifi cation resulted in an increase in doubtful loans without affecting provisions.

The further apparent decline in this same provisioning ratio between 2003 and 2004 is due to the implementation of stricter rules regarding the reclassification of loans as “doubtful”.

Operating income before corporation tax

% Change (€ million) 2004 2003 2004/2003 GOI 432.2 376.7 + 14.7

Cost of risk (69.7) (74.5) (6.4) OPERATING INCOME 362.5 302.2 + 20.0

Net income from equity investments 1.6 2.6 (38.5) Gains or losses on fixed assets 1.0 3.5 (71.4) OPERATING INCOME BEFORE CORPORATION TAX 365.1 308.3 + 18.4 23 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Management report Fiscal year 2004

Taking into account the cost of risk, the Crédit du Nord Group Operating income generated operating income of € 362.5 million in 2004, an (Group consolidated data, € million) increase of 20% on 2003 GOI : 316.3 320.4 376.7 432.2

Earnings before taxes were € 365.1 million, a year-on-year rise of 18.4%.

Gains or losses on fixed assets in 2004 did not include any - 1.3% + 20.2% + 20.0% major operations. In comparison, income from fixed assets in 2003 included capital gains of € 3.1 million on the sale of non-strategic investments. 362.5 254.7 251.5 302.2

- 61.6 - 68.9 - 74.5 - 69.7 2001 2002 2003 2004 Cost of risk Operating income

Net income % Change (€ million) 2004 2003 2004/2003 OPERATING INCOME BEFORE CORPORATION TAX 365.1 308.3 + 18.4

Exceptional items 4.1 0.0 NS Corporation tax (126.1) (108.5) + 16.2 Amortization of goodwill (4.1) (3.9) + 5.1 Minority interests (5.8) (5.5) + 5.5 CONSOLIDATED NET INCOME 233.2 190.4 + 22.5

Extraordinary income of € 4.1 million corresponds to negative Consolidated net income after taxes stood at € 233.2 million, a goodwill following the incorporation of SNC Europe Lafayette into 22.5% increase on end-2003. the Group. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 24

Shareholders’ equity

(€ million) 2004 2003 2002 Shareholders’ equity at year-end 1,163.2 1,111.8 1,038.9 of which Group share 1,133.4 1,084.0 1,012.3 Average shareholders’ equity 1,141.8 1,081.4 1,012.1 BIS risk-weighted equity 1,422.3 1,325.9 1,301.8 BIS-weighted credit risk 15,536.6 15,096.6 13,920.3 Consolidated solvency ratio 9.15% 8.78% 9.35% Of which Tier One 6.68% 6.61% 6.74%

Movements which affected Group shareholders’ equity in 2004 It should be noted that the solvency ratios are presented for included the incorporation of consolidated net income after the information purposes only, as the Crédit du Nord Group is not distribution of dividends into reserves and the negative expense bound directly by regulatory solvency ratio requirements due to to shareholders’ equity of € 29.8 million on January 1, 2004 its shareholder structure. linked to the change in accounting methods. These changes were The presentation of these ratios does, however, make it possible made in order to minimise differences in accounting treatment to calculate the Group’s normative ROE on the basis of a Tier between the rules applied by the Group in accordance with the One capital ratio equal to 6% of risk-weighted assets. As such, French accounting system and the format that will be used in consolidated profitability of the Crédit du Nord Group at year-end 2005 following the introduction of IFRS accounting standards. 2004 stood at 23.2% (22.8% excluding exceptional items), up In line with recommendation 2003-R01 of the French National from 20.0% one year earlier. Accounting Council (CNC), the switch will affect the treatment of some fees and commissions as well as the recognition and After-tax return on book equity came in at 20.6% (20.2% excluding provisioning of certain employee benefits which were not exceptional items) for a Tier One ratio of 6.7%, compared with a ROE accounted for in the 2003 financial statements. of 17.6% and a Tier One ratio of 6.6% at end-December 2003. 25 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Management report Fiscal year 2004

Outlook Subsidiaries and affi liates

The past two years have seen a return to dynamic form for the As a general rule, the key financial changes and trends commented Crédit du Nord Group after the negative effects of the bursting on above apply to all Group banking subsidiaries and affiliates at of the financial bubble at the beginning of the decade, effects a company level. that were particularly harmful for a network whose commercial Note that the company-level financial statements of Crédit du strategy is based partly on the sale of financial products. Nord and its subsidiaries and affiliates reflect the application of The Group’s original model based on local, high-quality services recommendation 2003-R01 of the French National Accounting continues to fi t perfectly with customer expectations today. The Council (CNC) and therefore that certain pension commitments projects involving the rolling out of the new workstations and the are recognised in the accounts (under extraordinary items). Also, redefi nition of branch tasks are geared towards increasing our the Group has chosen to change the accounting treatment of sales capacities and tailoring our commercial drive to the specifi c certain fees and commissions, recording advance income under banking needs of our customers as well as improving the skills and extraordinary items in the company-level financial statements. availability of our customer advisors. The new commercial structure of the branches should help further enhance Crédit du Nord Group’s Crédit du Nord original positioning. Crédit du Nord generated GOI of € 326.5 million at end- December 2004, an increase of 19.1% on the previous year. This Given the dearth of acquisition opportunities in today’s banking performance stemmed from a 7.0% increase in NBI, led by a sector in France, Crédit du Nord Group has decided to draw upon 5.6% rise in net interest and similar income and a 9.3% increase its excellent financial performance in pursuit of organic growth by in net fee income in conjunction with sound cost control, which stepping up the number of new branch openings. limited the rise in operating expenses to 1.3%. In fact, Crédit du Nord plans to open around one hundred new The cost of risk fell 6.1% to € 45.0 million in 2004. branches in the next three years and should see a return on its investment in fairly short order, since an initial focus on the Following the write-back of provisions totalling € 10.0 million, professional market will ensure that the new branches become the bulk of which relates to intra-group securities, earnings profitable very quickly. before taxes stood at € 291.4 million, a 34.1% increase on end- December 2003. In the shorter term, 2005 has got off to a good start on the commercial front, thanks to buoyant fi nancial markets and the branch-wide launch The € 30.4 million decrease in extraordinary items refl ects the impact of the American Express card, one of the key objectives of which is to of the change in accounting methods. As a result, net income in 2004 reinforce the quality image of Group banks. was € 198.9 million versus € 157.3 million in 2003.

The programme of new branch openings that began in 2004 will remain a focal point in 2005 and should produce concrete results in attracting new customers as of this year.

Given the ongoing nature of the underlying trends of the past two years, namely dynamic sales and sound cost control, NBI should continue to outpace costs by a substantial margin, resulting in another significant drop in our cost-to-income ratio in 2005. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 26

Banque Courtois Operating income came in at € 15.2 million, up from Stellar growth in GOI, up +14.2% to € 44.2 million in 2004, € 12.8 million at end-December 2003. for Banque Courtois was the result of the combined effects of After an exceptional loss of € 6.0 million due to the change in a strong 8.3% rise in NBI and of improved cost control which accounting methods, net income after taxes came in at € 5.8 contained the rise in operating expenses to 4.9% for the period. million compared with € 8.3 million at December 31, 2003. After the exceptional loss of € 4.8 million due to the change in Banque Nuger accounting methods, net income after taxes came in at € 22.7 million compared with € 22.2 million at December 31, 2003. The sharp 11.0% increase in net fee income triggered the 5.7% growth in NBI for Banque Nuger. Banque Rhône-Alpes Group At the same time, the entity’s operating expenses increased 6.2% Following a 6.4% rise in NBI and an increase of only 3.7% and its GOI 4.9%. in operating expenses, year-on-year growth in Banque Rhône- Alpes’ GOI stood at 11.0% at end-December 2004 (proforma Net financial income, for its part, came in at € 5.4 million in line consolidated data). with the figure booked in 2003.

The bank’s cost of risk increased 19.9% to € 10.1 million Banque Kolb following a number of SME claims and additional provisioning NBI for Banque Kolb increased 5.7% to € 29.7 million at to cover existing files and sector risk. Exceptional items also end-December 2004, while operating expenses for the entity € included 4.0 million in first consolidation differences for SNC increased 3.6%. Europe Lafayette. GOI increased 9.1% to € 11.9 million, while net financial income € Overall, net income rose 27.9% to stand at 23.8 million came in at € 7.0 million compared with € 5.0 million one year € compared with a figure of 18.6 million at year-end 2003 earlier. (proforma consolidated data). Étoile Gestion Tarneaud Group On the back of the strong improvement in stock market € Tarneaud Group generated GOI of 34.1 million in 2004, a year- performance seen over the year, asset management specialist on-year rise of 13.5%. Étoile Gestion recorded pre-tax earnings of € 26.3 million in € With the cost of risk rising € 1.1 million to stand at € 6.2 million 2004, up from 17.2 million at end-December 2003. as a result of the risks linked to several regional SMEs, operating Note that the figures for 2004 include the net recapture of a € € income came out at 27.9 million, up from 24.9 million one provision of € 2.0 million following the reversal, during 2003, year earlier. of € 2.6 million of the € 4.6 million provision booked in 2002 After an exceptional loss of € 1.0 million, and after income tax, following a fiscal audit. the entity’s net income totalled € 17.2 million in 2004 versus Gilbert Dupont € 17.0 million at end-December 2003. Given the improvement in market climate, particularly towards Banque Laydernier the end of 2003, operating income for Gilbert Dupont stood at € € NBI for Banque Nuger grew 4.5% year-on-year to € 47.5 million. 1.2 million in 2004 versus 0.7 million in 2003. Operating expenses increased 5.2%, whilst the bank’s GOI grew 3.3% to € 17.0 million at end-December 2004. 27 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Management report Information relative to market share

The Crédit du Nord Group does not have a uniform network of branches throughout France. As a result, while its share of the domestic market stands at between 1.4 and 1.8%, its market share is particularly strong in those areas in which it has been long established, notably north-western France, the Limousin region (Banque Tarneaud), the Auvergne region (Banque Nuger) and the Midi-Pyrénées region (Banque Courtois).

Market share of customer loans Market share of customer deposits for the Crédit du Nord Group as for the Crédit du Nord Group as at at 30.11.2004: 1.8% 30.11.2004: 1.4%

7.3% 6.2%

5.1 % 4.0% 4.0% 2.4% 1.9% 0.9% 1.1% 1.2% 1.0% 0.8% 1.3% 0.3% 1.1% 0.1%

0.6% 0.5% 1.0% 0.3% 0.3% 0.2% 0.6% 0.1%

1.2% 5.5% 0.7% 3.2% 2.3% 1.5% 2.8% 2.0%

1.8% 1.2% 2.9% 1.7% 1.4% 2.0% 0.8% 1.4%

0 0 0.1% at 1.5% 0.1% at 1.5% 1.6% at 3% 1.6% at 3% > 3% > 3%

Source: Banque de France local deposit/loan statistics REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 28

Management report Crédit du Nord Group's IAS/IFRS project

Pursuant to European regulation No. 1606/2002 of July 19, 2002, The preparation of these first IAS/IFRS financial statements will the consolidated financial statements to be published by Crédit mark the culmination of a process of adaptation that began in du Nord Group for financial year 2005 (ending December 31) late 2002 with the Group-level introduction of a project structure will be drawn up in accordance with the international accounting involving all affected departments and systems analysis and standards adopted in accordance with the process laid down in project management teams in order to ensure the successful Article 6 of the aforementioned regulation. These international switch to IAS/IFRS. Crédit du Nord has gradually set up around accounting standards comprise International Accounting 20 workgroups to analyse the main consequences of IAS/IFRS on Standards (IAS), International Financial Reporting Standards the Group’s accounting principles and information systems (IFRS) and related interpretations, except for certain provisions of This project has been carried out in tandem with the group wide IAS 39 relating to financial instruments. Basel II project in order to coordinate business practices and Crédit du Nord Group is fully subject to these standards by virtue make common use of new systems, especially in terms of the of its regular issuance of redeemable subordinated notes on the management of provisions and financial information. capital markets. This IAS project is also part of a project underway with Crédit du In application of IFRS 1 relating to the first-time adoption of Nord Group’s principal shareholder, Société Générale Group, and, international accounting standards, the first consolidated financial as a result, benefits from synergies relative to impact studies for statements for 2005 will present comparative data for fiscal year the new standards whilst ensuring the coherent application of 2004. These 2004 comparatives will have been prepared by IAS/IFRS between the two Groups. applying all the aforementioned standards with the exception, as In preparing for the transition to IAS/IFRS, Crédit du Nord Group laid down by IFRS 1, of standards IAS 32 and IAS 39 on financial has taken into account changes in the French accounting system instruments and IFRS 4 on insurance contracts, whose provisions and its convergence with the IAS/IFRS framework, the guiding will not be applied until financial year 2005. principle being, wherever possible, to standardise treatments In accordance with the recommendation of the AMF (French within the company and consolidated financial statements in Securities Regulator), the format and content of the 2004 order to offer greater transparency. comparatives will be prepared as indicated in the guide to The main impacts of the application of IAS/IFRS (excluding IAS implementing IFRS 1 namely: 32 and IAS 39) are presented below, bearing in mind that, in light - reconciliation between balance sheets at January 1, 2004 using of the convergence process described above, significant impacts current standards and IFRS standards; are outlined in the introduction to the accounting principles. - reconciliation between income statements for the period using

the current standards and IFRS standards; COMMISSIONS - reconciliation of balance sheets at December 31, 2004 using IAS 18 distinguishes three types of commissions: current standards and IFRS standards; - fees for one-off services, which are booked to income when the - reconciliation of shareholders’ equity between statements using service is provided; current standards and IFRS standards at the transition date - commissions earned as services are rendered, which are to (January 1, 2004); be accounted for according to the stage-of-completion method - reconciliation of shareholders’ equity between statements using over the life of the service; current standards and IFRS standards at the closing date of the - commissions that are part of the effective return of a financial financial year (December 31 2004) using the same format and instrument, which are accounted for as an adjustment to the the same level of information as that presented on the transition effective return of the financial instrument. date. 29 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Management report IAS/IFRS project

In order to harmonise the accounting treatments applied in the This method will also be applied in the company-level accounts of consolidated financial statements under French standards and IAS the Crédit du Nord Group as of January 1, 2005 in accordance with 18, Crédit du Nord Group decided that as of January 1, 2004: regulation no. 2002-10 of the CRC (French Accounting Standards - certain fees for continuous services that were previously booked Committee), relating to the amortisation and depreciation of at the time of receipt (essentially bank card and package fees) assets. will be accounted for according to the stage-of-completion method over the life of the service; EMPLOYEE BENEFITS - finders ’ fees will be carried at the effective interest rate of In accordance with French accounting standards, the Crédit du loans. Nord Group already books provisions covering a number of benefit obligations, including pension liabilities, long-service awards and These rules have also applied to company-level accounts since time-savings accounts. 1 January 2004. All other commissions booked by the Crédit du Nord Group already conform to IAS 18. In accordance with IAS 19, and as of January 1, 2004, the Crédit du Nord Group recognises: BUSINESS COMBINATIONS - certain pension benefits that were not accounted for on As allowed under IFRS 1 relating to the first-time adoption of December 31, 2003, notably life-insurance schemes and international reporting standards, the Group has elected not medical schemes, and which are now provisioned, to restate acquisitions occurring prior to January 1, 2004, the - certain share options that were not previously booked. opening date of the balance sheet. Identical treatments have been applied using the French accounting The Group also conforms to the provisions of IFRS 3, whereby framework, whether for company-level or consolidated accounts, goodwill is not amortised but is subject to tests for impairment. since January 1, 2004 in accordance with recommendation 2003-R 01 of the CNC (French National Accounting Council) These tests are carried out at least once a year in accordance governing the recognition and assessment of pension liabilities with the provisions of IAS 36. and similar benefits, with the exception of share options which

PROPERTY, PLANT AND EQUIPMENT are not covered by the recommendation. Under IAS 16, the significant components of an asset are to be accounted for separately when their useful lives differ significantly The IAS/IFRS standards to be applied in 2005 are in fact those from the asset as a whole. This component-based approach has that were applied in 2004 for the preparation of comparative data been applied since January 1, 2004 to all property, plant and as well as the provisions relating to financial instruments and equipment belonging to the Group, the weighting and useful transactions covered by IAS 32, IAS 39 and IFRS 4. lives of the components having been determined in conjunction with independent consultants and in accordance with the recommendations of the Fédération des Sociétés Immobilières et Foncières (Federation of Real-Estate Companies).

Property, like the Group’s other fixed assets, continues to be recorded at historic cost since the Group has chosen not to apply the voluntary exemption offered by IFRS 1 whereby a business may elect to use the fair value revaluation of an asset as its deemed cost. Impairment tests are now carried out periodically in accordance with the provisions of IAS 36. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 30

For 2004 comparative data, the Group recorded financial • Loans and receivables instruments according to French accounting principles, in Unless held for the purposes of trading, IAS 39 requires loans and accordance with CRC regulations 99-07 and 2000-04, which receivables to be initially recorded at fair value plus transaction are presented in the notes to the financial statements regarding costs. They are subsequently measured at amortised cost using accounting principles. the effective interest rate, which takes into consideration all contractual cash flows. These accounting principles differ in the following respects from IAS 32 and 39 on financial instruments and IFRS 4 on insurance • Derivatives and hedging contracts as adopted by the European Union: IAS 39 requires all derivatives to be recognised at fair value in the balance sheet, with differences in value to be recognised as an FINANCIAL INSTRUMENTS (IAS 32/IAS 39) adjustment to earnings. • Classification and valuation of securities portfolio Under IAS 39, hedging is subject to a special accounting treatment IAS 39 introduces a new classification system for securities held with very strict requirements in terms of the documentation on the in a portfolio: expected effectiveness of the hedge with respect to the hedged - financial assets at fair value through profit or loss. These are instrument and a posteriori verification. financial assets held for trading purposes, which are measured at fair value, with differences in value recorded in the income In the case of a fair-value hedge, hedging derivatives and hedged statement; items are measured at fair value for the hedged risk, with changes - held-to-maturity investments: non-derivative financial assets in value recorded in the income statement. with fixed and determinable payments and fixed maturity that In the case of a cash flow hedge, hedging derivatives are the Group has the intention and ability to hold to maturity. Held- measured at fair value and any changes in value are recorded in to-maturity assets cannot be hedged against interest rate risk, a specific item under shareholders’ equity, the treatment of the as they can under French standards. They are measured at hedged item remaining unchanged. However, any ineffective part amortised cost, taking into account premiums, discounts and of the hedge is recognised directly in the income statement. transaction costs; - available-for-sale assets: a residual category for all those European Regulation No. 2086/2004 has endorsed IAS 39 with financial assets that cannot be classified in the two previous the carve-out of some requirements in order to facilitate: categories. These assets are measured at fair value with - the use of fair value hedge accounting for macro-hedging changes recorded in equity and accrued or earned income is derivatives used in Asset & Liability Management in order to booked through profit and loss. Revaluation differences are hedge the Group’s fixed rate gaps from interest rate fluctuations only recognised in profit and loss in the event of disposal or (including customer sight deposits); permanent impairment; - the effectiveness test required by the standard. - financial assets chosen for the fair value option: these are The Crédit du Nord Group has decided to make use of these financial assets that the Group has elected to measure at fair provisions. value in compliance with the fair value option offered by IAS 39. Under the version of IAS 39 endorsed by the European Union, the use of the fair value option is restricted to financial assets. This limitation is scheduled to be reviewed under the amendment process for IAS 39 launched by the IASB, which will specify the conditions for the application of the fair value option for the valuation of financial assets and liabilities.

31 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Management report IAS/IFRS project

• Embedded derivatives • Commitments related to mortgage savings IAS 39 defines an embedded derivative as a component of a accounts (épargne-logement) hybrid instrument. Under IFRS, unlike French standards, where When the specific commitments linked to a given generation this hybrid instrument is not measured at fair value through the of mortgage savings accounts are expected to generate future income statement, the embedded derivative must be separated adverse effects for the Group, a provision is booked on the from its host contract if its economic characteristics and risks are liabilities side of the balance sheet. No provisions were previously not closely related to the economic characteristics and risks of recorded under French standards. the host contract and it meets the definition of a derivative.

• Fair value INSURANCE CONTRAT (IFRS 4) The fair value referred to in the previous paragraphs for the • Classification and valuation of contracts valuation of financial instruments will be the market value of the instrument when it is quoted on an active market. If there is no The provisions applicable to financial instruments described active market, the fair value is to be established using valuation above will henceforth be applied for the valuation of contracts that models incorporating observable market parameters. do not fall under the scope of IFRS 4. These savings contracts, including discretionary profit-sharing features, make up nearly • Allowances for credit risk the entire portfolio of the Group. IAS 39 does not alter either the measurement of risk or the • Technical reserves, deferred profit-sharing determination of the provisionable nature of receivables. The amount of provisions is determined on the basis of estimated Existing French regulations on the valuation of technical future cash flows discounted at the financial asset’s original reserves are maintained. Under IFRS 4, provisions for deferred effective interest rate. Allocations to and write-backs of provisions profit-sharing will be adjusted to reflect policyholders’ rights are recorded under cost of risk, while the progressive reversal of to unrealised gains recognised on the revaluation of financial the discount is deemed to be income from the impaired loans and assets at market value. They will also be adjusted according to is booked under net interest income. policyholders’ contribution to unrealised losses. The average rate of redistribution of financial income to customers will be taken Furthermore, when the evidence of impairment is collectively into account in the adjustment. assessed on a group of financial assets with similar credit risk characteristics, a provision may be recorded without the credit risk being individually attributed to one or several receivables. Part of the provisions for sector risks that are currently documented in the accounts under French standards will be reviewed in light of IAS/IFRS. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 32

Management report Internal control

The Crédit du Nord Group’s internal control system is structured The Inspector General produces an annual report on the conditions according to three interdependent levels: under which internal control is carried out in accordance with - line management control: each unit or department manager is regulation 97-02, as modified, of the French Banking and responsible for the ongoing supervision of transactions carried Financial Regulation Commission. Likewise, the Central Risk out under his responsibility. Operating branches and processing Division draws up an annual report on risk measurement and units must work to a predetermined plan (frequency/risks to monitoring in accordance with Article 43 of the said regulation. be checked) and must produce a formal statement of controls These reports confirm the constantly satisfactory quality of carried out. It should also be noted that specialist supervisory commercial risks and the high administrative and accounting staff assist branches with the day-to-day monitoring of their standards maintained by Group entities. accounts; - second-level controls carried out by dedicated members Internal control within Crédit du Nord Group is an integral part of of staff, who report at a hierarchical level to a regional, the internal control structures of its majority shareholder, Société subsidiary or functional division manager, and at a functional level Générale. to the Inspection Générale. The schedules for and details of their Accordingly, Société Générale’s audit teams carry out a number controls are decided in conjunction with the Inspection Générale of inspections within the Group. as far as the administrative aspects are concerned, and the Central Risk Division in terms of commitments; - the Inspection Générale, which oversees the controls, has full powers to intervene in any area of activity of Crédit du Nord and its subsidiaries. On average, it inspects each unit every four or five years. 33 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Management report Risk management

IMANAGEMENT OF INTEREST RATE, CURRENCY AND LIQUIDITY RISK (excluding market activities)

Crédit du Nord Group distinguishes between the management of MISMATCH RISK structural balance sheet risks, or Asset and Liability Management Outstanding home and capital investment loans continued to grow (ALM), and the management of risks related to trading activities. in 2004, with outstanding medium- and long-term lending rising more than 6% in 2004 (see Note 2 to the financial statements).

This growth in medium- and long-term lending came on the back Group risk management policy of the Group’s policy of targeting steady inflows of long-term assets from customers, notably through the issue of subordinated The ALM unit reports directly to the Finance Division of Crédit du redeemable bonds, which totalled € 50 million in 2004. Nord and is responsible for monitoring and analysing the Crédit The quality of Group assets, a high and stable rating (Standard & du Nord Group’s exposure to maturity mismatch and interest rate Poor’s: AA-) and low debt levels opened the doors to competitive and euro liquidity risks. financing from both major institutional lenders and the financial An ALM Committee, presided by the Chairman and Chief Executive markets. Officer and the Chief Executive Officer, meets on a monthly basis Accordingly, 2004 saw the second loan disbursement under to make all relevant decisions concerning the management of any the financing agreement signed with the Council of Europe interest rate and/or liquidity mismatch positions generated by the Development Bank (€ 25 million over 10 years from a total Group’s commercial activity. facility of € 50 million), as well as the implementation of a MTN LIQUIDITY RISK programme totalling € 150 million.

Crédit du Nord acts as the central refinancing unit of the Finally, Crédit du Nord enjoyed additional long-term fund totalling Group’s banks and financial subsidiaries. The ALM unit monitors € 150 million from its majority shareholder. outstanding loans and regulatory ratios by subsidiary, while short-term liquidity management is delegated to each subsidiary The regulatory capital ratio of Crédit du Nord - the Group’s central as part of its cash management activities and is subject to certain refinancing unit as determined on the basis of parent company limits (i.e. liquidity requirements). figures - stood at 61.5% at year-end 2004, above the regulatory limit of 60%, thus reflecting the entity’s successful management Although loan production continued to grow over the course of of mismatch risk. the year, Crédit du Nord was a net lender on the interbank market in 2004 owing to its policy of regular issuance of short- and A special quarterly report on maturity mismatch risk is submitted medium-term negotiable debt instruments, long-term structured to the majority shareholder. finance operations and strong fund inflows from customers.

Crédit du Nord has had to finance some of its subsidiaries while maintaining a high level of liquidity. In accordance with the regulations governing liquidity (CRB regulation 88-01, as amended), Crédit du Nord’s ratio averaged 121% over 2004, which is significantly higher than regulatory requirements. In fact, liquidity has never dropped below 100%. Accordingly, Crédit du Nord complied with regulatory liquidity requirements throughout 2004. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 34

INTEREST RATE RISK Throughout 2004, Crédit du Nord Group pursued its policy of All assets and liabilities of the Group’s banks, excluding those systematically hedging ALM risks, implementing a number of relating to trading activities, are subject to an identical set of complementary hedging transactions designed to further reduce rules governing interest rate risk management. the exposure of Group entities to fluctuations in interest rates and decrease sensitivity. Methods In particular, the ALM unit hedged short- and medium-term All on- and off-balance sheet transactions are match-funded mismatches with fi xed-rate borrowing transactions (fi xed payer according to their specific characteristics (maturity, interest rate, swaps) totalling almost € 2 billion. explicit or implicit options). A model developed by the ALM unit (“notional balance sheet” model) is used to monitor indicators Each Group entity is monitored individually and hedged on an of interest rate risk management, in particular a fixed-rate limit, ad-hoc basis. Hedges put on by the ALM unit thus cover all Crédit as well as the risks associated with options appearing on the du Nord Group entities. balance sheets of Group banks. TRADING Sight deposits and regulated savings products are subject to • Trading activities are closely linked to the management of specific modelling to lock in medium- and long-term yields. client-driven transactions initiated by operating units; the interest The rules for unwinding non-expired liabilities were only slightly rate and exchange rate risks generated by these transactions modified in 2004, and the conservative nature of the models used essentially comprise foreign currency positions (loans, borrowings was instrumental in maintaining the interest margins of Group and swaps). Transactions involving derivatives linked to client banks, despite the volatility of interest rate markets throughout transactions are systematically hedged by Crédit du Nord the year. shareholders Société Générale and Dexia since the bank does not hold any proprietary positions in these products. The residual interest rate risk was hedged using appropriate market instruments. Specific models are applied to risks on • Risk limits for trading activities, including stop-loss, sensitivity options linked to home savings plans and capped-rate loans, as limits, lending limits and counterparty limits, are defined by these products are hedged using an options portfolio. General Management and monitored by the Treasury and Foreign Exchange Department in accordance with the standards adopted Limit management and monitoring by the majority shareholder. The ALM Committee delegates responsibility for managing short- term interest rate risk to the Weekly Cash Flow Committee. This • The results of these activities are checked by the appropriate delegation is subject to limits on exposure to money-market audit teams (see “Market risks”). interest rate fluctuations and the net present value of the monthly CURRENCY RISK sensitivities of the maximum short-term rate (instruments with • The overall foreign exchange position is kept within conservative original maturities of under one year). These limits are verified at limits and remains small relative to the bank’s net shareholders’ the Weekly Cash Flow Committee meetings. equity. The overall interest rate risk of Crédit du Nord Group is subject to sensitivity limits. The measurement of overall interest rate risk exposure is based, among other things, on the recalculation of annual sensitivities to a uniform variation in the yield curve of plus or minus 1%. Compliance with these limits is verifi ed within the framework of regular reports to the majority shareholder. In 2004, the average net present value of the overall exposure of the balance sheet to a homothetic fl uctuation in the yield curve of plus or minus 1% was substantially below 5% of consolidated equity and down on the previous year’s sensitivities. 35 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Management report Risk management

MARKET RISKS

Strategies Capital market exposure limits are allocated as follows: - a proposal is made by the Treasury and Foreign Exchange All capital market activities carried out by the Crédit du Nord Department to the market risk monitoring unit of Société Group are client-driven. In terms of both products and regions, Générale’s Risk Division for their opinion. Once a final opinion the Crédit du Nord Group only conducts transactions on its own has been received from the Chief Executive Officer, the limits behalf in business segments where it has significant customer are compiled and integrated into the daily monitoring and interests. The primary purpose of its activities in this area is to reporting system. maintain a regular presence on the financial markets in order to Counterparty limits are allocated as follows: be able to offer its clients competitive price quotations. - where the counterparty is a bank, a file is opened for each As part of this fundamental strategy: counterparty, which provides details of requests for lines by - Cr édit du Nord does not hold any positions on derivatives product and duration based on a history of average borrowings markets and regularly matches customer orders through its and peak credit utilisation over the previous six months. This shareholders Société Générale and Dexia, thereby significantly file is forwarded to the appropriate teams at Société Générale reducing its exposure to market and counterparty risks; and once returned, the allocated limits are entered into the - trading on both the primary and secondary bond markets has information systems for daily monitoring and reporting; ceased due to insufficient commercial activity. The trading - where the counterparty is a customer, the regional Risk Divisions portfolio was gradually liquidated and no new positions have of Crédit du Nord or the Risk Divisions of Group subsidiaries been taken; provide the limits allocated by product, which are then fed into - with regard to other instruments, the trading limits imposed on the information systems for monitoring purposes; the cash position in terms of geographic regions, authorised - in the case of the Société de Bourse (stockbroker), the volumes and the duration of open positions are determined counterparty risk equates to settlement-delivery risk (the jointly with the bank’s majority shareholder and are kept low possibility that the principal or his custody agent will not pay relative to Crédit du Nord’s consolidated equity. the cash or deliver the securities). This type of risk is known as “replacement risk” because the initial risk, which is purely a counterparty risk (default by the principal) ultimately becomes a Risk exposure market risk. This risk is borne by the Société de Bourse, which is del credere until the transactions are recognised in the stock The Crédit du Nord is exposed to interest rate, exchange rate and exchange systems. The risk is then transferred to the Société counterparty risks (including issuer risks). A team of specialists de Bourse’s clearing house/account operator to which margin is responsible for monitoring market and counterparty risks. Risk calls are paid according to the positions and ratings of the exposure is calculated and compared with the limits on a daily counterparties. basis, and any overruns are reported to the management team of the Treasury and Foreign Exchange Department, which signs off on the report.

Any overruns are reported to Crédit du Nord Group's majority shareholder on a daily basis, which computes the information and prepares a bi-monthly market risk statement that is submitted to the Chairman’s Office. In addition, weekly reviews of counterparty risk are sent to the Head of the Central Risk Division, while quarterly statements covering major regulatory risks are submitted to Société Générale for consolidation. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 36

A method for monitoring counterparty limits by client, based on Value at Risk the prudential framework defined by the AMF (French Securities Regulator) enables counterparty commitments to be checked a The Values at Risk (VaR) shown below have the following posteriori on a daily basis and flags any limit overruns. These characteristics: counterparty limits, which are established on the basis of activity - change in the portfolio over a holding period of X days; statistics or projections in the case of new customers, are first - a confidence interval of 99%; allocated by the Central Risk Division, directly by Société Générale - historical data considered for the last 260 business days. or by the “Banking and Overseas” Department. A confidence interval of 99% means that over a given period The method used to access capital market risk is as follows: there is a 99% probability that an eventual loss will not exceed - Cr édit du Nord has access to an application developed by the defined value. Société Générale known as TRAAB (gross annual actuarial rate of return) which incorporates the data from internal information systems required to calculate risk profiles on a daily basis. Value at Risk (1 day - 99%) (in € thousand) This information is also used by Société Générale for its own

consolidated risk monitoring. The model is based on a historical - 600



data series of daily movements in interest rate or exchange - 500

 rate instruments, which are applied to daily positions in order - 400

to measure risk with a 99% confidence interval. In addition,  - 300

the deployment of a single “front-to-back” system for managing

 - 200 

capital market transactions was completed in 2004, while risk

- 100 

 monitoring methods remained unchanged.

0



31/12/0331/03/04 30/06/04 30/09/04 31/12/04





Value at Risk (10 days - 99%)

 (in € thousand)

- 1 800

- 1 300

 - 1 050

- 800

- 550

- 300 

- 50 

31/12/0331/03/04 30/06/04 30/09/04 31/12/04



Value at Risk: breakdown by risk factor 





1 day - 99%/FY 2004 10 days - 99 %/FY 2004





(€ thousand) Average Minimum Maximum Average Minimum Maximum



Foreign exchange (33) (2) (208) (104) (6) (658)



Trading (173) (12) (506) (456) 0 (1,600)



Treasury (178) (14) (509) (560) (44) (1,610)

 Netting effect 190 - - 508 - -

TOTAL (194) - - (612) - -







 37 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Chairman’s report on internal control

REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS ON THE PREPARATION AND ORGANISATION OF THE BOARD’S ACTIVITIES AND ON INTERNAL CONTROL PROCEDURES IN 2004.

This report has been prepared in accordance with Article The information pack sent to each Director includes: L. 225-37 of the French Commercial Code, pursuant to the French - the various reports provided for by law (management report, Financial Security Act of August 1, 2003. It presents a summary of Chairman’s report on the Board’s activities and on internal the internal control procedures of the consolidated Group. It does control, etc.); not purport to be a detailed description of the status of internal - the draft resolutions for shareholders’ meetings; control across all Group businesses and subsidiaries or a detailed - any studies pertaining to strategic decisions on which the description of the practical implementation of procedures. Directors may be called to deliberate.

For the Board meetings called to approve the annual financial statements, the following information must also be sent: Preparation and organisation of the - to each Director: a list of all other company directorships held by Board’s activities the Director, it being the responsibility of each Director to verify and amend the list as necessary; - to the Chairman and Statutory Auditors, by virtue of current PREPARATION AND ORGANISATION OF THE regulations, a list of all significant agreements concluded BOARD'S ACTIVITIES between Crédit du Nord and its senior managers and/or those The Board of Directors normally meets three times a year in companies with which Crédit du Nord shares senior managers February, July and October. or shareholders. The agenda of all Board meetings is set by the Chairman and Board meetings last an average of two and a half hours. Chief Executive Officer during a preparatory meeting with the Corporate Secretary and following consultation with the Chief Items for deliberation by the Board are presented by the Chairman, Executive Officer and the Executive Committee. During the the appropriate member of General Management or the project preparatory meeting, the following points are reviewed: manager in the event of a technical issue. - mandatory items that must be examined by the Board by virtue The issues are then discussed, after which the Board is asked to of law; vote where necessary. - non-mandatory items of particular interest, in order to report to the Board on the proper functioning of the Company and its strategic A draft of the minutes of the meeting is prepared by the Secretary choices (sales, organisational and investment strategies, etc.). of the Board, who submits the same to the Chairman and members of the Executive Committee present at the meeting. The Directors are convened by letter at least two weeks before the draft minutes are then submitted for the approval of the Board at planned date of the Board meeting. Each letter includes: the start of the following meeting. - the agenda of the meeting, - the draft minutes of the preceding Board meeting.

In addition to the Directors, the following also participate in Board LIMITS TO THE POWERS OF THE meetings: CHIEF EXECUTIVE OFFICER - the members of the Executive Committee concerned by items The Chairman of the Board of Directors is also the Chief Executive on the agenda; Officer. - the Statutory Auditors; - the Corporate Secretary in his capacity as Secretary of the The term of office and remuneration of the Chief Executive Officer Board; are determined by the Board of Directors. - the Secretary of the Central Workers’ Committee (CCE) REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 38

The Chairman and Chief Executive Officer is vested with extensive As regards accounting and financial management, a common powers to act under all circumstances on behalf of the company, information system is shared by virtually all Group companies within the limits set out by the corporate by-laws and excluding and in particular the banking subsidiaries. This information those powers expressly attributed by law to the Shareholders’ system provides subsidiaries with access to all Crédit du Nord Meetings and the Board of Directors. rules and procedures and allows Crédit du Nord to centralise all data required to monitor the results and activities of Group A Deputy Chief Executive Officer, nominated by the Chairman and companies in real-time, in accordance with the defined rules and Chief Executive Officer and appointed by the Board of Directors, procedures. assists the Chairman and Chief Executive Officer in his duties.

The scope and term of the powers conferred on the Deputy Chief Executive Officer, as well as the latter’s remuneration, are set by A DUAL CONTROL FRAMEWORK the Board of Directors in agreement with the Chairman and Chief Banking regulations Executive Officer. • In accordance with Articles 42 and 43 of regulation 2001-01 The Chief Executive Officer has the same powers as the Chairman (exercice 97-02) of the French Banking and Finance Regulation and Chief Executive Officer in respect of third parties. Committee, two reports are prepared and published annually: - one report prepared by the Inspection Generale outlining the conditions under which internal control is performed; Internal control procedures - one report prepared by the Central Risk Division on the measurement and monitoring of risk.

This report discusses the internal control procedures that apply These reports are submitted to the Board, the Statutory Auditors to all entities within the Crédit du Nord Group, with the Chairman and the majority shareholder for consolidation before being of each Group subsidiary required to prepare his own report on submitted to the General Secretariat of the French Banking internal control. The various units involved in internal control Commission. helped to prepare those parts of the report that relate specifically Accordingly, the French Banking Commission receives reports to their scope. from each subsidiary of Crédit du Nord, along with the consolidated The activities of the Crédit du Nord Group are subject to a dual report of Crédit du Nord Group and the consolidated report of control framework, in that they must comply with both banking Société Générale Group. regulations and the systems and procedures of its majority • The Controller of Investment Services sends the AMF (French shareholder. Securities Regulator) a standard report each year on compliance As a network bank with strong regional roots and a customer- with investment service provider requirements. This report, which base essentially comprised of individuals and SMEs, Crédit du follows a standard format, as well as a special report on a subject Nord, like all banking institutions, is exposed to a certain number set by the AMF, are reviewed and commented on by the Board. of risks, notably credit risk. In 2004, the special report was on the control of the sale and However, due to its chosen business mix, the Crédit du Nord marketing of investment services and financial products. Group has limited or no exposure to risks related to international, real estate and capital market (including derivatives) activities.

The Crédit du Nord Group’s internal control system is structured according to three interdependent levels. 39 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Chairman’s report on internal control

Procedures implemented by the majority shareholder The Regional and Subsidiary Risk Departments, which report Part of the Société Générale Group since 1997, Crédit du Nord directly to the Regional Managers or Subsidiary Chairmen and benefits from the control system put in place by its majority which report in functional terms to the Crédit du Nord Central Risk shareholder, as described in the latter’s report on internal Division. These departments are responsible for implementing the control. Group’s credit policies and managing risks at their level. Their main areas of activity are: The primary objectives of the majority shareholder’s internal - credit approval, control system are to exercise satisfactory control over risk - monitoring and classification of risks, exposure, guarantee the accuracy of financial and management - recovery of doubtful and disputed loans. accounting data, and to ascertain the quality of information systems. Specialised committees and structures In order to monitor and manage risk, Crédit du Nord has set up Systematic controls are performed by the majority shareholder as specialised risk committees and structures at both a Group and a part of a programme of regular visits to Group entities aimed at regional/subsidiary level. These include: ensuring that the defined standards are being met. - a Risk Committee, chaired by the Chief Executive Officer or the Because the majority shareholder is itself a banking institution, Chairman and Chief Executive Officer, that meets once a month. permanent benchmarking between the two networks further A member of the Risk Division of the majority shareholder also facilitates the analytical review of accounts and risks. sits on this committee. - a Performing Loans Committee for each region and subsidiary that is chaired by the Chairman and Chief Executive Officer and/ or the Chief Executive Officer and in principle meets every six MANAGEMENT OF MAIN BANKING RISKS months. Credit risk - a review of impaired risks that is performed every six months by The credit policy of the Crédit du Nord Group is based on a the Control and Provisioning Committee of the DCR. set of rules and procedures concerning lending, delegation of These committees and structures regularly contribute to the responsibilities, risk monitoring, classification of risk and the definition of risk policy, the implementation of this policy, the identification of impaired risks. examination of significant risks, the monitoring of impaired risks, This policy is defined by the Central Risk Division, which reports provisioning for risks and overall risk analysis. directly to the Chairman and Chief Executive Officer. Crédit du Nord also prepares a quarterly report on major regulatory The identification of counterparty risk impairment is the risks for its majority shareholder which is then consolidated and responsibility of all risk management personnel: sales units, submitted to the French Banking Commission. risk management units, risk control units and the Inspection Générale. Interest rate, exchange rate and liquidity risk (excluding market activities) Risk management is organised on two levels: Asset and liability management (ALM) The Central Risk Division (DCR), which reports directly to the With regard to overall risk management, the Crédit du Nord Group Chairman of Crédit du Nord and reports functionally to the Risk distinguishes the management of structural balance sheet risks Division of Société Générale Group. This division assists with the (Asset and Liability Management or ALM) from the management definition of credit policies, oversees their implementation and of risks related to trading activities. participates in the credit approval process. Its responsibilities include, inter alia, risk control, risk classification, provisioning for The ALM unit reports directly to the Crédit du Nord Finance doubtful loans, recovery of doubtful and disputed loans, and the Division. itemisation of risks. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 40

It is responsible for monitoring and analysing the Crédit du Nord The hedging activities of the ALM unit cover all Crédit du Nord Group’s exposure to maturity mismatch, interest rate and euro Group entities. liquidity risks. Each Group entity is monitored individually and hedged on an ad All decisions concerning the management of any interest rate and/ hoc basis. or liquidity mismatch positions generated by the Group’s client- Note that the Group procured a new ALM tool, Almonde, in 2004. driven activities are made by the ALM Committee, which meets Almonde is used to produce the Weekly Cash Flow Committee’s on a monthly basis under the chairmanship of the Chairman and reports, the ALM Committee indicators and the quarterly Chief Executive Officer. A senior financial officer from the majority shareholders’ report. Derivative valuations and the hedge shareholder also sits on this committee. effectiveness tests required by the new international financial Liquidity risk reporting standards are also performed using this software. The monitoring of outstandings by subsidiary and regulatory The biggest improvements have come in the measurement of ratios is carried out by the ALM unit, while short-term liquidity asset-liability mismatch (restated as a monthly average) and management is delegated to each subsidiary as part of its cash the identification of mismatched transactions, which is now management activities and is subject to certain limits (i.e. liquidity exhaustive. requirements). Trading Mismatch risk Transactions involving derivatives linked to client transactions Changes in the structure of the balance sheet are carefully are, generally, hedged by Crédit du Nord shareholders Société monitored and managed by the ALM unit in order to determine Générale and Dexia, since Crédit du Nord holds only limited the refinancing requirements of the Group’s entities. proprietary positions in these products.

A quarterly report on maturity mismatch risk is submitted to the The limits assigned to these trading activities by General majority shareholder. Management are monitored by the Treasury and Foreign Exchange Department in accordance with the standards adopted by the Interest rate risk majority shareholder. All assets and liabilities of Group banks, excluding those related to trading activities, are subject to an identical set of rules governing The results of these activities are checked by the appropriate interest rate risk management. audit teams (see “Market risks” below).

The ALM Committee delegates the management of short-term Market risks linked to client-driven transactions interest rate risk to the Weekly Cash Flow Committee. This Crédit du Nord consistently matches customer orders through delegation is subject to limits on exposure to fluctuations in its shareholders Société Générale and Dexia, thus significantly money-market interest rates and the net current value of monthly reducing its exposure to market and counterparty risks. exposure to mismatches in short-term interest rates (instruments with original maturities of under one year). These limits are A specialised unit from the Treasury and Foreign Exchange verified at the Weekly Cash Flow Committee meetings. Department is responsible for monitoring market and counterparty risks. The overall interest rate risk of the Crédit du Nord Group is subject to sensitivity limits. The observance of these limits is verifi ed within the These risks are calculated on a daily basis and compared with framework of regular reports to the majority shareholder. the limits. Any breaches are reported to the specialist unit in the Treasury and Foreign Exchange Department, which must review Crédit du Nord Group operates a consistent hedging policy and certify all such reports against ALM risks and implements the hedges needed to reduce the exposure of Group entities to interest rate movements where necessary. 41 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Chairman’s report on internal control

A report on the control of limits is submitted to the majority A Continuity Plan, which is regularly tested, ensures that a Crisis shareholder on a fortnightly basis. The majority shareholder sends Unit composed of the main members of General Management can a monthly status report on market risk to the Chief Financial be assembled at any time within a dedicated Command Centre. Officer (CFO) and the Head of the Treasury and Foreign Exchange The strategic Head Office entities, i.e. those needed to ensure Department. The CFO also receives a weekly status report on the continuity of operations, prepared a Business Continuity Plan, results and limits and a monthly report on changes in limits from which was rolled out in 2004. This plan comes on top of the the Treasury and Foreign Exchange Department. The Chairman continuity procedures already in place throughout the network. and the Chief Executive Officer also receives a quarterly report on changes in limits. Finally, an Operational Risk Division was set up within the Central Risk Division in July 2004. Its teams were established In addition, a weekly review of any limit breaches is submitted to progressively during the second half of the year with the goal the Head of the Central Risk Division. that the Division would be operational in early 2005. This Division Operational risks will be responsible for managing and coordinating the Group’s operational risk. The business activities of the various Group entities are exposed to a whole series of risks – administrative, accounting, legal, IT, etc., which are covered by the term “Operational risks” within the framework of the reform of capital adequacy regulations (the ORGANISATION OF INTERNAL CONTROL MacDonough ratio). Internal control at Crédit du Nord Group is structured according to three independent levels: In accordance with the recommendations of the Basel Committee - line management control, of July 2002, also known as Basel II, and in consultation with - second-level control, the majority shareholder, operational risks have been newly - the Inspection Générale. classified. Moreover, all losses in excess of an amount fixed at € 10,000 for the Crédit du Nord Group have been subject to a The head of each entity or department is responsible for the systematic review. ongoing supervision of transactions carried out under his or her responsibility. Operating branches must adhere to a predetermined In general, all major projects launched by Crédit du Nord are plan (outlining the risks to be controlled and the frequency of said monitored by Steering Committees. The Chairman and Chief controls) and report on all controls performed. Specialised staff Executive Officer and the Deputy Chief Executive Officer sit on also assist branches in the day-to-day monitoring of accounts. the Steering Committees of all major projects. Second-level controls are performed by dedicated personnel, An Operational Risk Review Meeting, with the participation of who report hierarchically to the head of the respective region, the Inspection Générale, the Head of Information and Security subsidiary or functional department to which they are assigned Systems and, since July 2004, the Head of Operational Risk, but report functionally to the Inspection Générale. meets prior to delivery of each new IT application or new version of an existing application involving major modifications in order The schedules for and details of these controls are determined to ascertain risk in terms of availability, integrity, confidentiality, in conjunction with the Inspection Générale as regards testability and control (audit trail). administrative matters and with the Central Risk Division as regards commitments. In addition, an IT Security Committee, chaired by the Head of Information and Security Systems, meets twice a year. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 42

The Inspection Générale is responsible for supervising controls First- and second-level risk control of regions and and is mandated to intervene in any area of activity of the Crédit banking subsidiaries du Nord Group and its subsidiaries. It reports directly to the Chairman and Chief Executive Officer. First-level control at a regional and subsidiary level is carried out by the sales management and by the Risk Department of the These internal control procedures are an integral part of the region or subsidiary. internal control structures of the Group’s majority shareholder. Every year, the majority shareholder’s audit teams carry out In accordance with the Line Management Control Manual, the various assignments within Crédit du Nord Group. Branch or Business Centre Manager is responsible for overseeing compliance with delegated limits and the validity of loan decisions First- and second-level control systems taken by subordinate staff to whom the limits are assigned Regional and subsidiary first- and second-level (customer advisers, etc.), as well as for controlling any credit limit administrative and accounting control system overruns at the branch or business centre. These controls are performed monthly, are formalised and may not be delegated. The Line Management Control Manual defines day-to-day Group managers also intervene at this level: security requirements covering, inter alia, reception desks, the opening of mail and the filing of documents, as well as a limited • in their capacity as line managers, group managers receive the number of controls that require formalisation at a hierarchical following reports: level (recognition of securities in branches, certain sensitive - reports on the delegated credit approval limits of all branch procedures such as stock market orders, etc.). These controls managers within their group as well as all completed control may be delegated on the condition that each delegation of power forms; is subject to hierarchical control. - second-level on-site audit reports sent for information purposes. Each group manager is responsible for assisting branches in Second-level controls are performed by dedicated personnel who preparing and delivering a response to the aforementioned report directly to the Regional Manager or to the Chairmen of the reports and for supervising the implementation of the Auditor’s subsidiaries. These controls are performed using specific “control recommendations; forms” prepared with the Inspection Générale, and according to a defined plan which specifies the frequency of controls based on • in their capacity as decision-makers, group managers prepare the degree of risk that each procedure or operation represents. monthly decision reports which are addressed to: The second-level control unit had a permanent staff of 59 at - the Risk Controllers, where they make use of their personal end-December 2004. credit approval limits; - the regional or subsidiary Risk Managers within the reporting Whenever an on-site control of a procedure is performed, the framework of the Monthly Risk Committee, where they delegate control and the branch subject to this control are scored on their the decision-making process. degree of compliance with applicable rules using a dedicated software application. This allows the Inspection Générale to map Regional or subsidiary Risk Divisions are responsible for procedural compliance at both a local and national level and on supervising limit breaches and the proper classification of risks. a yearly basis. The Central Risk Division implemented the new rules applicable Following each of these assignments, the Inspection Générale to the entire Group concerning the management of overruns on evaluates the control structures for the regions in which the September 1, 2004, following the testing, by the regions and audited branches are based. subsidiaries, of several overrun monitoring systems during the first half of the year. 43 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Chairman’s report on internal control

Regional and subsidiary Risk Departments are responsible for On-site audits of the Control and Provisioning Division are ensuring that appropriate risk classifications are applied. They performed annually and include: must permanently monitor the status of “performing loans under - the audit of all loan fi les that fall within the framework of loan watch” and, where necessary, reclassify them as “doubtful” in the decisions taken directly by Regional Managers, subsidiary chairmen event loans are renewed, loan requests are made in the interim and regional or subsidiary Risk Managers. From these fi les, a or breaches are identified. sample of between 20 and 30 fi les, with the emphasis on business loans, is taken and examined for the appropriateness of the credit Second-level control is performed by regional or subsidiary decisions. Care is taken to avoid redundancies with regional or Risk Controllers, as well as the Central Risk Control Division. subsidiary audits; The second-level control unit had a staff count of 26 at end- - the audit of each entity’s risk monitoring systems as December 2004. implemented by the Risk and Risk Control Divisions of the The role of the regional or subsidiary Risk Controller is to region or subsidiary; permanently monitor that loans classified as “performing loans” - the audit of the appropriateness of the risk classifi cation, particularly merit their classification. The Risk Controller is also responsible in respect of loans categorised as “under watch” or “doubtful” for reviewing and monitoring “performing loans under watch” and on the management (Branch, Out-of-Court Recovery, Special and “doubtful loans” for any necessary reclassification or Regional Affairs, Special Head Offi ce Affairs), monitoring and, where declassification. These tasks can be performed on site or necessary, provisioning of “doubtful loans”. remotely. Moreover, the analysis of risk trends and particularly the performance of impaired categories (i.e. all Crédit du Nord The majority of the Risk Controller’s work is carried out with the Group loans classed as “loans under watch”, “doubtful loans”, help of computer tools and the monthly delegated limit reports. “non-performing loans” or “disputed loans”) is used to compile a During the course of on-site visits, the Risk Controller uses summary by region, subsidiary and market. sampling tests to verify: First- and second-level controls within the - the quality of branch risks, functional divisions and specialised subsidiaries - the quality of operational risk management, with special attention given to monitoring systems and compliance with Certain functional divisions, including Financial Affairs, Finance, first-level control requirements. Banking Operations, Wealth and Asset Management (whose main Central Risk Control is the responsibility of the Control and task is to oversee discretionary private banking), and Information Provisioning Division of the DCR, which performs the following Systems and Projects, have their own second-level Controllers roles: who report directly to the Head of Division. - verification of due and proper implementation by the regions The same is true for the following specialised subsidiaries: Étoile and subsidiaries of the risk management system defined by the Gestion and Gilbert Dupont. Central Risk Division, i.e. the due and proper application of the Risk Policy Manual; At end-December 2004, there were 17 such Controllers working - ongoing remote supervision of risks based on the centralised within the Crédit du Nord Group, eight of whom were based in the monitoring of limit breaches and deferred settlement market Information Systems and Projects Division (including IT security (SRD) margin calls; staff). - on-site audits; Internal control at Norfinance Gilbert Dupont is co-ordinated by - quarterly analysis of changes in impaired risks, with particular the Financial Affairs Division controller and is carried out by the attention given to “performing loans under watch” and “doubtful Administrative Controller of the Nord Métropole region and by loans”. the Wealth and Asset Management Division. In 2004, customers from the Nord Métropole and Provinces du Nord regions that were previously assigned to Norfinance were reassigned to the Wealth Management centres of these regions. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 44

In some instances, the size of the specialised subsidiary means Compliance issues and anti-money laundering measures are the that its senior director carries out these controls, as is the case at responsibility of the Inspection Générale, which also participates Norbail Immobilier, Norbail Sofergie, SPTF and Norimmo. in the review of the operational risks linked to new IT projects or existing application upgrades, as well as the identification and In other cases, internal control is outsourced. Star Lease, for reporting of any losses linked to these risks. These reports are sent example, outsources its internal control to Franfinance, while the to the majority shareholder for processing and consolidation. internal control of Antarius was the responsibility of Cardif, our insurance partner in Antarius, until it was reassigned to Aviva on The compliance guidelines that all staff must adhere to, whether October 1, 2004. or not they are involved in “sensitive” activities, are outlined in a specific appendix to the company by-laws, which in turn are The Inspection Générale of Crédit du Nord distributed to all staff along with a Guide to Professional Conduct With a permanent staff of 35, the Inspection Générale has 23 prepared by the Corporate Communications Department. Added field inspectors, including 16 university graduates managed to these principles are a number of specific measures relating to by six senior inspectors with extensive experience in either certain tasks, such as those of discretionary portfolio managers Risk or Administrative and Accounting Control, all of whom are and corporate customer advisors supervised by a member of General Management. An audit officer Apart from the official KYC client knowledge rules imposed on the specialising in IT provides support where needed or conducts Operating Network, anti-money laundering is essentially based on targeted inspections of the central or decentralised IT systems of the vigilance requirements of regulators regarding the handling of some Head Office Divisions. certain transactions (black lists of countries and individuals) and The various entities in the operating network are controlled certain means of payments (regulations regarding cheques and approximately once every five years, depending on the priorities electronic payments) and the flagging of isolated transactions or a established by the General Management and any audits performed series of transactions by a single customer. by the majority shareholder. Reports prepared by the Inspection Générale upon completion These assignments conform to written procedure and are based of its assignments are systematically submitted to the Chairman upon a pre-selection of files to be audited on site. They generally and Chief Executive Officer and to the Chief Executive Officer. comprise three phases: pre-audit, on-site audit and audit The implementation of recommendations included in these reporting. reports is monitored by the Inspection Générale. The Inspection Générale analyses the administrative and The Inspection Générale also monitors the implementation of accounting operations of the audited entities as well as the risk recommendations issued by the French Banking Commission. exposure by category, especially counterparty, of each entity. In addition, it assesses the quality of the first- and second-level The Chairman and Chief Executive Officer meets with the Head of controls described above. the Inspection Générale on a monthly basis.

The audit and control of specialised entities often requires a great deal of ground work, which may prompt the General Management to draw upon the audits performed by the majority shareholder.

In addition to the co-ordination of second-level control assignments, the Inspection Générale also compiles and monitors all cases of fraud and/or embezzlement. To this end, it either performs its own audits or monitors the work of those controllers assigned to those “special affairs” that are likely to implicate a Group employee. Any ensuing sanctions are officially commented on by the Inspection Générale. 45 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Chairman’s report on internal control

PRODUCTION AND CONTROL OF FINANCIAL This unified IT architecture shared by all Group banks is AND MANAGEMENT ACCOUNTING DATA instrumental in improving accounting coherence and regularity, The Chief Financial Officer (CFO), who reports directly to the with the DCIS overseeing the definition and validity of accounting Chairman and Chief Executive Officer and is a member of the rules and procedures, as well as the flow of accounting information Executive Committee, is responsible for the production and from input to output: control of financial and management accounting data, as well as - the vast majority of accounting entries are processed for monitoring the implementation of recommendations made by automatically by the IT network. Regardless of whether the the Statutory Auditors. accounting frameworks are defined at user-level (over two- thirds of book entries) or defined automatically by the operating Production of accounting data system software, all accounting procedures have been defined and tested by the DCIS. Manual entries remain limited and are Role of the Accounting and Summary subject to restrictive authorisations and numerous controls; information department (DCIS) - accounting databases are interfaced to automatically input data This department, under the authority of the CFO, is structured into the consolidation packages and reports intended for the according to its two major roles: French Banking Commission and the Banque de France. - defining accounting organisation and procedures: a centralised The accounting information production process defi nition for the entire Crédit du Nord Group of a set of accounting rules conforming to current accounting and fi scal regulations, There are three successive phases in the production of the including the defi nition of accounting frameworks and procedures, consolidated accounts: the management of the internal charts of accounts and the defi nition of parameters by type of report, etc. Upstream data entry - preparing and analysing financial and accounting statements: For companies integrated into the Group’s accounting information preparation of individual company and consolidated accounts system (described above), data are processed by the operating for the Crédit du Nord Group, preparation of regulatory status systems and summary reporting systems, which results in the reports for the various regulators (Banque de France, French compilation of reliable accounting databases. Banking Commission, etc.), as well as the management of any All “non-integrated” entities transmit consolidation packages as accounting issues in the controls performed by the Statutory produced by their internal accounting systems, while respecting Auditors and other controlling bodies (tax authorities, French the Group’s rules and procedures. Banking Commission, Urssaf, etc.). Preparation of company financial statements In addition to these tasks, the DCIS oversaw the changeover Ahead of the closing of half-year accounts, one-day meetings to IAS/IFRS throughout 2004, ensuring the adoption of the are organised by the DCIS with the accounting managers of new standards by the various Group entities, the training of all the Group’s companies in order to explain and comment on operatives and compliance with the project timetable set by current accounting issues relating to the half-year, as well as General Management throughout the Group. any account-closing decisions made by the Group. This frequent Accounting information system contact ensures that the key points of each closing have been Crédit du Nord’s information system is a multi-bank network, i.e. integrated and interpreted correctly by each company within the all seven Group banks are managed on the same information Group. network. As such, they share the same processing systems for The final adjustment and manual journal entries are then banking transactions and the same summary reporting systems, recorded. However, the main mission of the DCIS during these which are used to prepare internal and regulatory statements and meetings is to control, analyse, correct as necessary and validate reports. the accounts before the company’s financial statements are transmitted to the regulatory authorities and published, and before the consolidation packages are forwarded to the Group’s Consolidation Department. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 46

Account consolidation process Control of data inputs This phase culminates in the production of consolidated financial • The software used to generate the consolidated reports includes statements, which can be used for Group management purposes, configurable data consistency tests. These tests are widely used, legal and regulatory publications as well as shareholder reports. with several hundred different controls being performed. As long as the reporting company has not satisfied control requirements, During this phase, individual consolidation packages from Group it may not transmit accounting information to the department in companies are controlled and validated, consolidation entries charge of consolidation. are booked and intercompany eliminations are recognised. The consolidated financial statements are then analysed and validated • Before submitting its consolidation package, every consolidated before being published internally and externally. The majority entity must ensure that the package data are consistent with of these operations are performed on a monthly basis, which the data intended for internal sales and financial management increases the reliability of the process. Group tax consolidation reporting purposes, as well as the reports intended for the and reporting are also carried out during this phase. regulatory authorities.

Internal accounting control • Consolidation packages sent by each consolidated company are analysed, validated and corrected as necessary, notably with Branch-level control the help of tests for consistency with preceding monthly reporting Responsibility for the monitoring of branch accounting (excluding packages and budgets, where available. Enterprise Business Centres) is assigned to the Heads of the Branch Support Units (UAA), who report to the Logistics Directors • Specific consolidation entries are also controlled. (DLO). • The reconciliation and elimination of intercompany transactions First-level control is the responsibility of the Head of the Branch can also help uncover anomalies in accounting entries. Support Unit. • Lastly, a variance analysis of consolidated statements is also Second-level control is the responsibility of Regional Audit and performed, notably focusing on changes in equity levels. Control Units. Control of consolidation tools The monitoring of Enterprise Business Centre accounts is the • A specific Group chart of accounts for consolidation is managed responsibility of the Managers of the Enterprise Sales Assistants by the department in charge of consolidation and aids in breaking (ACE). down information to improve analysis.

Controls during the preparation of company and • Careful attention is paid to the configuration of the Group consolidated financial statements consolidation system.

The process of consolidating accounting data and preparing • The various automated consolidation processes are subject to consolidated financial statements is subject to several types of regular validation and control. control. Lastly, the “industrialisation” of the monthly consolidated reporting process in itself helps to improve control of changes in data over time and the understanding of any problems as they arise. 47 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Chairman’s report on internal control

Preparation of financial and management Data control accounting data Financial and management accounting data is controlled during Production of financial and the monthly data entry process by checking that all balance management accounting data sheet, income statement and operating system data gathered Crédit du Nord Group bases its financial management upon by the Group have been properly integrated into the analytical financial accounting data. framework. Variations in totals and material movements are systematically analysed. Downstream of the process, a monthly Analytical accounting data needed for the financial management of reconciliation is also performed by comparing the financial Crédit du Nord Group are generated by the accounting information accounting figures with the management reporting figures. system and operating systems, which are able to break down data by item and by entity as required. This information is stored Budgets are monitored three times a year within the framework in a unified management database, which covers Crédit du Nord of the Regional Board Meetings of the Group’s regions and and its six banking subsidiaries. subsidiaries: twice in the first half of the fiscal year in the presence of the Chairman and Chief Executive Officer or Deputy The Financial Management Division (DGF), under the authority Chief Executive Officer, and once in the third quarter as part of the CFO, manages the allotment of general accounting data of the budget meeting attended by the Chairman and Chief to various accounting items on the basis of the rules defined by Executive Officer and Deputy Chief Executive Officer. During the the Group ALM unit regarding the match-funding of assets and course of these meetings, the evolution of net banking income, liabilities. The analytical accounting system enables a switch from operating expenses, investments and the main risk indicators are an interest paid/received view to an analytical approach in terms systematically reviewed. of margins on notional match-funding. A Cost Monitoring Committee, which includes the Chairman and Information from the management database is accessible from Chief Executive Officer, the Deputy Chief Executive Officer and the branch level up to the Group level and is identical from one all head-office divisional managers, meets four times during the level to the next. As a result, the data can be used by all Crédit du course of the year. A review of changes in operating expenses Nord Group management control teams, including subsidiaries, throughout the network is presented by a senior executive of the regional divisions, functional departments and the Financial Financial Management Division (DGF). Management Division, with the latter, in particular, using this information for the preparation of the half-yearly management An IT Projects Monitoring Committee meets quarterly with the report. Chairman and Chief Executive Officer in order to examine the progress of projects and their financial impact on budgets and medium-term planning.

REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 48

Report of the Statutory Auditors on the Chairman’s report on internal control

Statutory Auditors’ report, established in application of the We conducted our audit in accordance with French professional last paragraph of Article L. 225-235 of the French Commercial standards. These standards require that we perform the neces- Code, on the report of the Chairman of the Board of Crédit sary checks to verify the information provided in the Chairman’s du Nord describing the internal control procedures relative to report on internal control procedures relative to the elaboration the publication and processing of accounting and fi nancial and processing of accounting and financial information. Said information checks notably include: - examining the internal control objectives and organisation, as Fiscal year ended December 31, 2004 well as the internal control procedures relative to the publica- tion and processing of accounting and financial information, as In our capacity as Statutory Auditors of Crédit du Nord and in presented in the Chairman’s report; application of the last paragraph of Article L. 225-235 of the - examining the work supporting the duly presented information. French Commercial Code, we have audited the report prepared by the Chairman of Crédit du Nord, in compliance with the provisions On the basis of our examinations, we have no opinions to of Article L. 225-37 of the aforementioned Code, in respect of the express concerning the description of the company’s internal fiscal year ending December 31, 2004 control procedures relative to the publication and processing of accounting and financial information as contained in the report of It is the responsibility of the Chairman, in his report, to review the Chairman of the Board, established in application of the last and discuss the preparation and organisation of the Board of paragraph of Article L. 225-37 of the French Commercial Code. Directors’ activities and the internal control procedures which have been implemented throughout the company.

It is our responsibility to communicate our opinions concerning the information and declarations appearing in the Chairman’s report concerning the internal control procedures relative to the publication and processing of accounting and financial information.

Neuilly-sur-Seine, March 1, 2005

The Statutory Auditors

DELOITTE & ASSOCIÉS BARBIER FRINAULT & AUTRES ERNST & YOUNG

José-Luis Garcia Isabelle Santenac

49 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Comparative scope of consolidation

December 31, 2004 December 31, 2003 Consolidation Ownership Voting Consolidation Ownership Voting (as a %) method interest rights method interest rights

Crédit du Nord Full Consolidating company Full Consolidating company 28, place Rihour – 59800 Lille

Banque Rhône-Alpes Full 99.9905 99.9905 Full 99.9905 99.9905 20-22, boulevard Édouard-Rey 38000 Grenoble

Banque Tarneaud Full 79.9967 79.9967 Full 79.9018 79.9018 2-6, rue Turgot – 87000 Limoges

Banque Courtois Full 100.0000 100.0000 Full 100.0000 100.0000 33, rue de Rémusat – 31000 Toulouse

Banque Kolb Full 99.7972 99.7972 Full 99.7972 99.7972 1-3, place du Général-de-Gaulle 88500 Mirecourt

Banque Laydernier Full 99.9997 100.0000 Full 99.9997 100.0000 10, avenue du Rhône – 74000 Annecy

Banque Nuger Full 64.6977 64.6979 Full 64.6977 64.6979 7, place Michel-de-l’Hospital 63000 Clermont-Ferrand

Norbail Immobilier Full 100.0000 100.0000 Full 100.0000 100.0000 50, rue d’Anjou – 75008 Paris

Star Lease Full 100.0000 100.0000 Full 100.0000 100.0000 59, boulevard Haussmann – 75008 Paris

S.P.T.F. Full 100.0000 100.0000 Full 100.0000 100.0000 59, boulevard Haussmann – 75008 Paris

Norfi nance Gilbert Dupont Full 100.0000 100.0000 Full 100.0000 100.0000 et Associés 42, rue Royale – 59000 Lille

Société de Bourse Gilbert Dupont Full 100.0000 100.0000 Full 100.0000 100.0000 50, rue d’Anjou – 75008 Paris

Norimmo Full 100.0000 100.0000 Full 100.0000 100.0000 59, boulevard Haussmann – 75008 Paris

Turgot Gestion Full 79.9968 100.0000 Full 79.9018 100.0000 2-6, rue Turgot – 87000 Limoges

Fimmogest Full 100.0000 100.0000 Full 100.0000 100.0000 33, rue de Rémusat – 31000 Toulouse

Crédinord Cidize Full 100.0000 100.0000 Full 100.0000 100.0000 59, boulevard Haussmann – 75008 Paris

Étoile Gestion Full 96.9806 99.9000 Full 96.9726 99.9000 59, boulevard Haussmann – 75008 Paris REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 50

December 31, 2004 December 31, 2003 Consolidation Ownership Voting Consolidation Ownership Voting (as a %) method interest rights method interest rights

Anna Purna Full 100.0000 100.0000 Full 100.0000 100.0000 59, boulevard Haussmann – 75008 Paris

Nice Broc Full 100.0000 100.0000 Full 100.0000 100.0000 59, boulevard Haussmann – 75008 Paris

Nice Carros Full 100.0000 100.0000 Full 100.0000 100.0000 59, boulevard Haussmann – 75008 Paris

Kolb Investissement Full 100.0000 100.0000 Full 100.0000 100.0000 59, boulevard Haussmann – 75008 Paris

Couronna Not consolidated Full 99.9999 99.9999 33, rue de Rémusat – 31000 Toulouse

Nord Assurances Courtage Full 100.0000 100.0000 Full 100.0000 100.0000 28, place Rihour – 59800 Lille

Norbail Sofergie Full 100.0000 100.0000 Full 100.0000 100.0000 59, boulevard Haussmann – 75008 Paris

Sfag Full 100.0000 100,0000 Full 100.0000 100.0000 59, boulevard Haussmann – 75008 Paris

Partira Full 100.0000 100.0000 Full 100.0000 100.0000 59, boulevard Haussmann – 75008 Paris

Europe Lafayette Full 99.9906 100.0000 Not consolidated 20-22, bd Édouard-Rey – 38000 Grenoble

Banque Pouyanne Equity 35.0020 35.0020 Equity 35.0020 35.0020 12, place d’Armes – 64300 Orthez

Dexia-C.L.F. Banque Equity 20.0000 20.0000 Equity 20.0000 20.0000 Tour Cristal – 7 à 11, quai André-Citroën 75015 Paris

Antarius Proportionate 50.0000 50.0000 Proportionate 50.0000 50.0000 59, boulevard Haussmann – 75008 Paris

There were few changes to the scope of consolidation in 2004: the merger of Couronna with Banque Courtois had no impact on earnings or consolidated shareholders’ equity. In addition, Europe Lafayette was consolidated for the first time in 2004 and whilst the operation had no impact on Group shareholders’ equity, it nonetheless resulted in the booking of income as explained in the notes to the statements (see exceptional items).

Group companies are not considered significant for consolidation purposes where all three of the following criteria are met for two consecutive fiscal years: companies with total assets of under € 10 million, annual earnings of below € 1 million and no ownership interests in a consolidated company are not included within the scope of consolidation.

As such, the following companies which are more than 99%-owned by Crédit du Nord were not included within the scope of consolidation in 2004: Starhuit, Starquatorze, Starquinze, Starseize, Stardixsept, Stardixhuit, Stardixneuf, Starvingt, Nord Gérance, Immovalor Service and Crédinord Espana. None of these companies had total assets above € 70.000 in 2004. In addition, three other companies in which Crédit du Nord holds ownership interests were not consolidated, namely Banque Clément, which is 96.62%-owned and which is in liquidation; Cofipro, which is 33.21%-owned and which was wound up at the end of 2002 following the appointment of a liquidator and Scem Expansion which is 40%-owned. These three companies are not considered significant for consolidation purposes. 51 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Summary balance sheets at December 31

(€ million) ASSETS Notes 2004 2003 2002 Cash, due from central banks and postal accounts 2,001.9 1,989.9 1,488.0 Treasury notes and assimilated 4 644.1 629.2 948.0 Due from banks 1 3,555.5 3,429.2 3,257.2 Cash and interbank assets 6,201.5 6,048.3 5 693.2

Customer loans, leases and assimilated 2 / 3 18,216.2 17,291.8 14,976.4 Total customer loans 18,216.2 17,291.8 14,976.4

Bonds and other debt securities 4 681.8 569.2 562.9 Shares and other equity securities 4 164.3 164.3 41.6 Investments of insurance companies 8 1,872.4 1,547.7 1,259.1 Share of underwriters in reserves of insurance companies 8 189.7 130.6 95.6 Investments in non-consolidated affiliates and other long-term equity investments 5 66.9 62,9 56,6 Investments in subsidiaries and affi liates accounted for by the equity method 8.1 8.5 7.8 Fixed assets 6 335.2 307.1 231.9 Accruals and other accounts receivable 7 698.1 691.0 684.5 Goodwill 9 44.6 48.5 51.0 Total other assets 4,061.1 3,529.8 2,991.0

TOTAL 28,478.8 26,869.9 23,660.6 REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 52

(€ million) LIABILITIES AND SHAREHOLDERS’ EQUITY Notes 2004 2003 2002 Due to central banks and postal accounts 1,220.8 1,408.5 554.8 Due to banks 10 1,487.7 1,444.8 1,194.9 Cash and interbank liabilities 2,708.5 2,853.3 1,749.7

Customer deposits 11 14,990.7 14,292.6 13,846.3 Total customer deposits 14,990.7 14,292.6 13,846.3

Debt securities 12 5,720.8 5 250.1 3,731.9 Insurance company reserves 8 1,999.7 1 580.4 1,293.4 Accruals and other accounts receivable 7 1,008.3 1 006.2 1,240.5 Allowances for general risks and commitments 13 213.1 195.0 194.7 Subordinated debt 14 435.5 384.6 384.4 Shareholders’ equity 15 1,163.2 1,111.8 1,038.9 • of which Group share 1,133.4 1,084.0 1,012.3 Net income 15 239.0 195.9 180.8 • of which Group share 233.2 190.4 175.7 Total other liabilities 10,779.6 9,724.0 8,064.6

TOTAL 28,478.8 26,869.9 23,660.6

(as a %) BALANCE SHEET STRUCTURE Notes 2004 2003 2002 ASSETS Cash and interbank assets 21.8 22.5 24.1 Customer loans 64.0 64.4 63.3 Other assets 14.2 13.1 12.6

LIABILITIES AND SHAREHOLDERS’ EQUITY Cash and interbank liabilities 9.5 10.6 7.4 Customer deposits 52.6 53.2 58.5 Other liabilities 37.9 36.2 34.1 • of which shareholders’ equity (including net income) 4.9 4.9 5.2 53 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Consolidated income statement

% Change (€ million) Notes 2004 2003 2002 2004/2003 Net interest and similar 728.3 709.8 664.3 2.6 Net fee income (1) 562.5 510.7 492.5 10.1 Gross margin of insurance business (1) 18.0 13.9 6.1 29.5 Net banking income (NBI) 19 1,308.8 1,234.4 1,162.9 6.0 Personnel expenses 25 (554.0) (540.7) (525.9) 2.5 Taxes (23.9) (23.9) (31.0) 0.0 Other expenses 26 (244.8) (244.4) (241.6) 0.2 Depreciation and amortisation 27 (53.9) (48.7) (44.0) 10.7 Total operating expenses (876.6) (857.7) (842.5) 2.2 Gross operating income (GOI) 432.2 376.7 320.4 14.7 Cost of risk 28 (69.7) (74.5) (68.9) (6.4) Operating income 362.5 302.2 251.5 20.0 Net income from companies accounted for by the equity method 30 1.6 2.6 2.3 (38.5) Net income on long-term investments 31 1.0 3.5 6.8 (71.4) Earnings before taxes 365.1 308.3 260.6 18.4 Exceptional items 32 4.1 0.0 0.0 ns Income tax 33 (126.1) (108.5) (76.1) 16.2 Amortisation of goodwill 34 (4.1) (3.9) (3.7) 5.1 Minority interests 35 (5.8) (5.5) (5.1) 5.5 CONSOLIDATED NET INCOME 233.2 190.4 175.7 22.5

CONSOLIDATED NET EARNINGS PER SHARE (in euros) 2.52 2.06 1.90 22.5

(1) The figures for fiscal years 2002 and 2003 were restated proforma to factor in the new distinction between fee income and margins on insurance activities to better reflect the economic reality. Said restated amounts are outlined in notes 21 and 24. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 54

Contribution to net income by business line and company

Due to the restatements inherent to the consolidation process, the the elimination of intra-Group transactions (dividends, provisions contribution of Group companies to consolidated net income may on securities) and intra-Group asset disposals. The following differ significantly from those amounts booked in the financial table presents the net contribution (i.e. after restatement for statements of the companies in question. The nature of these consolidation purposes) by company, grouped by sector of activity, restatements is explained in the section entitled “Principles and to consolidated net income. Methods of Consolidation” below and they essentially include

(€ million) CONTRIBUTION TO CONSOLIDATED NET INCOME (GROUP SHARE) SUBSIDIARY COMPANIES 2004 2003 Crédit du Nord 117.0 95.5 Banque Rhône-Alpes (1) 22.4 17.1 Banque Tarneaud (1) 13.6 13.4 Banque Courtois (1) 24.6 21.6 Banque Laydernier 8.9 7.8 Banque Nuger 3.4 3.3 Banque Kolb 6.8 4.8 Norbail Immobilier 1.9 2.4 Société de Bourse Gilbert Dupont 0.7 2.9 Star Lease 3.8 1.3 Dexia-C.L.F. Banque 1.1 2.0 Other companies 6.1 1.8 Sub-total Banking 210.3 173.9

Étoile Gestion 16.9 11.5 Sub-total Asset management 16.9 11.5

Antarius 6.0 5.0 Sub-total Insurance 6.0 5.0

TOTAL ALL ACTIVITIES 233.2 190.4

(1) Consolidated financial statements.

(as a %) CONTRIBUTION BY BUSINESS LINE TO CONSOLIDATED NET INCOME Banking 90.2 91.3 Asset management 7.2 6.1 Insurance 2.6 2.6

Crédit du Nord Group’s banking business enjoyed renewed growth business lines together represented nearly 18% of consolidated in 2004. Indeed, most Group banks were able to increase their net income during the stock market euphoria of 2000, a level contribution to consolidated net income. That said, this business which fell to approximately 5% as stock markets bottomed out line is less sensitive to the markets than the Group’s asset in 2002. Accordingly, 2004 proved less excessive with their management and insurance activities, which both benefited from contribution amounting to just under 10% of consolidated a rebound therein after several difficult years. All told, these two income. 55 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Preliminary notes to the fi nancial statements Principles and methods of consolidation

Principles of consolidation FISCAL YEAR-END The consolidated financial statements were prepared on the The Crédit du Nord Group is a financial and banking group. Its basis of accounts closed on December 31 for all consolidated methods and scope of consolidation are thus determined in companies. accordance with regulation 99-07 of the French Accounting Regulation Committee (CRC). Methods of consolidation Group companies are not considered significant for consolidation purposes where all three of the following criteria are met for two consecutive fiscal years: companies with total assets of under RESTATEMENTS AND ELIMINATIONS € 10 million, annual earnings of below € 1 million and no Where applicable, the financial statements of consolidated ownership interests in a consolidated company. companies are restated according to Group accounting principles. Consolidated net assets and net income are presented after eliminations for intra-group transactions. FULL CONSOLIDATION DIVIDENDS Group companies which are exclusively owned and controlled by All dividends and interim dividends received from consolidated the Crédit du Nord Group are fully consolidated. Full consolidation companies by Crédit du Nord or any of its subsidiaries are involves recognising the full value of all subsidiary assets and eliminated from net income and booked under “consolidated liabilities, net of minority interests in both shareholders’ equity reserves”. and net income.

CONSOLIDATED RESERVES In compliance with regulation 99-07 of the Accounting Regulation PROPORTIONATE CONSOLIDATION Committee (CRC), this item includes consolidated reserves Group companies which are jointly owned and controlled are including revaluation reserves and adjustments for equity method consolidated by the proportionate method. This method consists consolidation. 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. PROVISIONS FOR SHARE DEPRECIATION Minority interests are not booked. Provisions for the financial depreciation of shares in Group companies are restated. As a result, said provisions and their re- versal have no impact on income. Where applicable, deferred taxes EQUITY METHOD are calculated on the basis of this restatement. The consolidation Companies in which the Group holds an ownership interest of difference is calculated in relation to the value of the shares 20-50% are consolidated using the equity method. Under the before depreciation. Provisions booked in the past which still equity method, the Group substitutes the value of the ownership apply at year-end are booked under consolidated reserves. 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”. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 56

PROVISIONS FOR DOUBTFUL LOANS LEASE FINANCING Provisions assimilated to provisions for doubtful loans, which are Lease financing transactions are carried out in the consolidated booked as liabilities due to their tax status or the currency in which accounts on the basis of their redemption value rather than their they were granted, are deducted from assets on the consolidated amortised book value. Deferred taxes are calculated on the basis balance sheet. In contrast, provisions for sovereign risks are fully of the full restatement. booked under liabilities. INSURANCE ACTIVITIES The accounting principles and valuation rules specific to insurance activities are applied in full to the Group’s consolidated GOODWILL accounts. The constituent account items of consolidated Upon the first consolidation of a company, an analysis is insurance companies are recorded under similar headings in performed to determine the difference between the original cost the consolidated financial statements, with the exception of “net of the shares and the proportional value of the company’s equity investments of insurance companies”, “underwriting reserves of that they represent. This difference is then booked to correct insurance companies”, the “share of underwriting companies in the value of the balance sheet items and commitments of the reserves” and the “gross margins of insurance activities”. These consolidated company, on the one hand, and booked to goodwill in items are detailed in a separate note. the consolidating company, on the other. Where the difference is positive, it is booked under consolidated balance sheet assets and generally amortised over a period of 5 years, with the exception Accounting principles of branch network banks for which the generally-accepted period is 20 years. If the difference is negative, it is booked as a liability. In the event that the difference is due to a projected downturn in All transactions are recorded in compliance with the accounting the future performance of the company in question, it is booked principles applicable to banking institutions. The consolidated to the income statement, either according to a pre-determined financial statements are accompanied by notes that complement schedule or at the actual time of recognition of the results and in and comment on the information appearing in the balance sheet the amount thereof. and income statement, in compliance with regulation 99-07 of the French Accounting Regulation Committee (CRC). Where the purchase of securities increases the Group’s ownership interest in an already consolidated company, the difference between the cost of acquisition of the securities and the proportion of the company’s equity that these securities represent is: FOREWORD - if positive, fully booked under goodwill, Change in method - if negative, after any necessary depreciation of assets of the The accounting methods applicable to Crédit du Nord Group were company in question, deducted from any positive goodwill revised in 2004 in two respects: generated during the initial consolidation. If a negative balance remains thereafter, it is booked as a non-equity liability, then • Crédit du Nord Group elected to modify, as of January 1, 2004, charged against income for a period reflecting the assumptions the accounting methods applied to certain fees (notably those made at the time of the latest acquisition. linked to bank cards). All income therein is henceforth booked on a straight-line basis over the duration of the service provided and no longer upon the payment of said fees. When applied for the first time, this modification resulted in the booking of a net amount of € 10.3 million in advances on fees deducted from equity. This change in method had no material impact on earnings over the period. 57 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Preliminary notes to the fi nancial statements Principles and methods of consolidation

• Moreover, the Group also elected to apply recommendation The fees incurred by capital increases are recorded in full on the 2003-R01 of the French National Accounting Council (CNC) income statement for the year in which they were sustained. On relative to the rules for booking and evaluating pension the other hand, redemption premiums on securities issued are commitments and other related benefits to all fiscal periods as amortised over the period of the transactions to which they relate. of January 1, 2004. Said recommendation stipulates that any The same treatment is applied to issuance fees in the event that changes subsequent to its initial application are to be processed they are deemed significant (in excess of € 150.000 or 0.5% of according to the provisions governing changes in accounting the issue value). Otherwise, they are charged in full to income for methods. Accordingly, Crédit du Nord Group therefore deducted the year during which they were incurred. € 19.5 million from its shareholders’ equity to reflect the impact net of deferred taxes of this change in method. This stems from Income from the securities portfolio the recognition of certain pension commitments and benefits. The Income from stocks, dividends and interim dividends is recognised impact of this new method is explained in the relevant notes. Note as received. Income from bonds is recorded to income on a that this change has had no material effect on earnings for the prorata basis. Interest accrued at the time of purchase is entered period. in a deferred income account.

As such, the application of the new method resulted in the Tax credits and dividend tax credits corresponding to income following changes: taxed according to the standard tax system are recorded at the same time as said income in the amount effectively applicable to Gross Fiscal Net sums value impact deducted from taxes payable shareholders' Income from the securities disposals (€ million) equity Capital gains and losses are calculated on the basis of the gross Fees (16.0) + 5.7 (10.3) value of securities sold, with any sales fees therein deducted from Employee benefits (30.2) + 10.7 (19.5) the proceeds of the disposal.

Total (29.8) Income from forex transactions Foreign exchange (forex) contracts are marked-to-market on their closing date (either on the basis of spot rates for spot transactions

BANKING INCOME AND EXPENSES or on the basis of the applicable forward rates for the remaining term to maturity of forward contracts). Interest and fee income Forward exchange transactions linked to spot transactions are Interest and similar fee income are recorded in the income valued at the spot rate. Discount and premiums (i.e. the difference statement on a prorata basis. Generally speaking, a provision is between the spot and forward rates of exchange at the time the made where they remained unpaid for over 90 days, or as soon transaction was completed) are recorded to income pro rata. as they are booked where they relate to “doubtful” or “difficult to recover” loans. Forex gains and losses resulting from the above valuations are recognised at the end of each period under income. Fees are booked according to their due date or collection date or payment date. Moreover, underwriting commissions on debt issues are recorded in the income statement as of the close of the issue. Bank card fees, however, are booked on a straight-line basis over the duration of the service provided. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 58

Income from financial instruments Concerned instruments include futures, MATIF contracts and • Interest rate swaps exchange-traded interest-rate and forex options. These concern all transactions relative to swaps, FRAs, caps, Margin calls paid or received on futures and MATIF contracts of a floors, collars and interest rate options. speculative nature, or on contracts that hedge positions that can These contracts are accounted for in accordance with CRB be marked-to-market, are recorded directly to income. regulation 90-15 as amended. Where these contracts hedge non market-priced items, margin From origination, these contracts are classified in four separate calls are recorded in suspense accounts and, once the contracts categories and recorded in distinct accounts. The risks and are settled, booked prorata over the remaining life of the covered income/expenses relative to each category are subject to specific transactions. monitoring: Premiums paid or received are entered in suspense accounts. a) Contracts whose purpose is to maintain open positions in order Premiums on unexpired and unexercised exchange-traded options to benefit from any eventual interest rate movements. All relative are re-valued on the closing date. Revaluations are treated in the income and expenses are booked on the income statement on same manner as margin calls. a prorata basis. Provisions are made for unrealised losses, as determined by book-to-market value comparisons. Unrealised Upon the expiry or exercise of the option, premiums are either gains are not recorded. recorded immediately to income (speculative options, hedge options on market-priced items), or booked prorata over the b) Contracts whose purpose is to hedge interest rate risk affecting residual life of the hedged transactions (hedge options on non one specific item or a homogeneous set of items (also called market-priced items). “microhedges”). All relative income and expenses are booked on the income statement on a prorata basis in the same manner as those relating to the hedged item. The same applies to unrealised TAXES gains and losses. All taxes, excluding income tax, whose assessment refers to c) Contracts whose purpose is to hedge and manage the global items for the fiscal year in question are recorded as expenses for interest rate risk of the institution (also called “macrohedges”). said year, whether or not the tax was effectively paid during the All relative income and expenses are booked on the income course of the fiscal year. statement on a prorata basis. Unrealised gains and losses, determined by a comparison between book value and market value, are not recognised. ASSETS, DEPRECIATION AND AMORTISATION d) Contracts whose purpose is to specifically manage a trading Fixed assets acquired prior to December 31, 1976 are recorded portfolio. All relative income and expenses are recorded to income in the balance sheet at their “useful value”, estimated according symmetrically with income and expenses relating to trades made to the rules of the “legal revaluation of 1976”, while fixed assets in the opposite direction. This symmetry is respected by valuing acquired after that date are booked at cost. the contracts at market value and by recording changes in value Tangible fixed assets are depreciated over their estimated useful from one closing date to the next. life, generally according to the straight-line method. • Other financial futures These instruments are accounted for according to CRB regulation 88-02 as amended. 59 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Preliminary notes to the fi nancial statements Principles and methods of consolidation

The depreciation periods generally applied by the Group are: 50 Long-term investment securities years for properties, 10 years for fixtures, fittings, equipment and Long-term investment securities include investments made by furniture, 5 years for equipment (office and safety equipment), the Group in order to foster the development of lasting business with the exception of computer hardware (depreciated over relations by creating a special link with the issuing company a period ranging from 3 to 10 years depending on the type of without, for as much, exercising any influence on its management equipment) and 4 years for transportation equipment. Accounting due to the small percentage of voting rights attached to said rules and procedures applied are in compliance with the provisions investments. of regulation 2003-07 published on December 12, 2003 by the French Accounting Regulation Committee (CRC). At year-end, the value of the securities is estimated on the basis of their useful value determined according to the same criteria Intangible assets represented by lease rights and purchase as those adopted at the time of their acquisition, such as the costs are amortised in full as of the year of acquisition. equity and profitability of the concerned companies. Unrealised Business software purchased from third parties is capitalised capital losses are provisioned, while potential capital gains are and depreciated using the straight-line method over a period of not recorded. 3-5 years. Software developed internally is either capitalised and depreciated in the same way as purchased business software Short-term investment securities where IT projects involving significant sums are deemed strategic Short-term investment securities include securities purchased for the Group, or expensed immediately. The accounting rules with the intention of holding them for a period of over six months, and procedures applied to software developed internally and with the exception of investment securities. capitalised comply with Note 31-1987 of the French Accounting Council (CNC). Capitalised production costs extend solely to costs Short-term investment securities are recorded at cost and net of relating to detailed design, programming, testing and test sets, as any expenses. Accrued interest at the time of purchase is recorded well as the publication of technical documentation. as applicable in the related accounts. The difference between the value on the date of acquisition and the redemption value of these securities is spread prorata over the period remaining to the date

SECURITIES AND PROVISIONS FOR SECURITIES of redemption.

Equity investments and subsidiaries At year-end, the value of the securities is estimated on the Equity investments and subsidiaries include the securities of basis of the most recent price in the case of listed securities, companies in which a significant fraction of capital (10-50% for or according to probable market value in the case of unlisted affiliates, over 50% for subsidiaries) is held over the long term. securities. Unrealised capital losses resulting from this valuation These investments are recorded at cost, and may eventually be are provisioned, while unrealised capital gains are not recorded. re-valued within the “revaluation of 1976” framework. Shares intended for portfolio activity At year-end, the value of the securities is estimated on the basis This category of securities covers investments made on a of their useful value determined according to the same criteria regular basis with the sole aim of realising a capital gain in the as those adopted at the time of their acquisition, such as the medium term and without making a long-term investment in the net asset value and profitability of the companies in question. development of the issuing company, or participating actively Unrealised capital losses are provisioned, while potential capital in its operational management. This category notably includes gains are not recorded. shares held in the context of venture capital activities. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 60

These securities are recorded at cost and net of any expenses. Borrowed securities are recorded to assets in the appropriate line At year-end, they are valued at their “useful value” which is item, while a debt of securities vis à-vis the lender is recorded to determined by taking into account the issuer’s general growth liabilities. At year-end, borrowed securities appearing in assets prospects and the projected holding period. The useful value of follow the accounting rules applicable to trading securities. quoted securities is determined by referring to the stock market Conversely, the debt recorded to liabilities is valued at market price over a sufficiently long period and by taking into account price. Revenues on loaned or borrowed securities are recorded the projected holding period. Unrealised capital losses resulting prorata to income. from this valuation are provisioned, while unrealised capital gains are not recorded. Securities with repurchase or resale options The amount of the repurchase agreement (the security sales Investment securities price) is recorded to assets (securities purchased) or to liabilities Investment securities include fixed-income securities purchased (securities sold). Revenues on repurchase agreements are with the intention of holding them until maturity and financed recorded prorata to income. by earmarked permanent resources. The difference between the Securities pledged, whether delivered or not, remain as originally value on the date of acquisition and the redemption value of these booked to assets and are valued according to the rules applicable securities is spread prorata over the period remaining to the date to the portfolio to which they belong. Revenues linked to these of redemption. securities are also recorded as if the securities were still in the At the close of the accounts, unrealised losses are determined portfolio. Securities purchased in this manner, for their part, are by a book-to-market value comparison but are not provisioned. not included in the bank’s securities portfolio. Unrealised gains are not recorded.

Trading securities LOANS AND PROVISIONS FOR DOUBTFUL LOANS Trading securities include all positions taken on liquid markets Loans to customers are recorded at face value on the balance with the intention of reselling the securities or of selling them to sheet. Regulation 2002-03 of the French Accounting Regulation customers in the short term, i.e. within a maximum period of six Committee (CRC) published on December 12, 2002 is applicable as months. At year-end, the securities are valued at the most recent of January 1, 2003. The new regulation outlines the classification market price. The net balance of differences resulting from price of doubtful loans on balance sheets and the treatment of off- changes is recorded to income. market restructured loans.

Securities lending and borrowing If a loan is considered to bear a probable risk that all or part Loaned securities are removed from the asset line item in which of the sums owed by the counterparty under the initial terms they appeared, and a receivable equal to the book value of the and conditions of the loan agreement will not be recovered, loaned securities is recorded. At year-end, the receivable is and regardless of the existence of loan guarantees, the loan in valued according to the rules applicable to the original portfolio question is classed as “doubtful” where one or more payments is from which the securities were loaned. “90 days overdue” (6 months forreal estate and property loans, 9 months for municipal loans), where, any missed payments notwithstanding, there is a proven risk of loss or where a loan is disputed, real estate and property loans, 9 months for municipal loans), where, any missed payments notwithstanding, there is a proven risk of loss or where a loan is disputed. 61 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Preliminary notes to the fi nancial statements Principles and methods of consolidation

Where a given borrower’s loan is classed as a “doubtful loan”, “Allowances for general risks and commitments” also include any other loans and commitments of the same borrower are also a provision for credit risks. This provision is not made on an automatically classed as doubtful, regardless of any guarantees. individual loan basis, but covers several classes of risk, including regional sector risk (global risk in sectors of the regional economy Doubtful loans give rise to provisions for the portion of impaired by specific unfavourable business conditions). Each year, outstanding loans that is not likely to be recovered, which are the Group’s Central Risk Division defines those sectors of activity deducted directly from assets. Interest on doubtful loans is also and type of debt that it considers represent a high probability of fully provisioned. Doubtful loans can be reclassified as normal default in the short term in view of the recent past. Provisions for loans once payments have resumed on a regular basis according the relevant loans outstanding are then booked according to the to the initial contractual schedule. Moreover, doubtful loans which rates defined by the Central Risk Division. have been restructured may be reclassified as normal. In the case of an off-market loan restructure, the difference between the new These various types of provisions are detailed in the notes. The loan conditions and the original loan conditions are booked under net expense for banking risks for the year is recorded to “cost “cost of risk” during the restructuring and then written back to of risk” in the income statement. This net expense is constituted “net banking income” over the remaining life of the loan. The by allowances and non recoverable loans not already covered by volume of off-market restructured loans during the course of provisions, less writebacks and recoveries on write-offs. 2004 and preceding years is insignificant. As such, it had no material impact on consolidated earnings in 2004. INCOME FROM REAL ESTATE AND PROPERTY Where the creditworthiness of a borrower is such that, after DEVELOPEMENT a reasonable period of classification under doubtful loans, The Group’s share in the profit and losses of real estate and the reclassification of a loan as normal is no longer plausible, property development companies is only recorded once the said loan is then classified as a “difficult to recover loan”. This Shareholders’ Meetings of the companies concerned have status is conferred at close-out or upon cancellation of the loan allocated their net income. However, any losses suffered by these agreement and, in any event, one year after classification under companies that have not been appropriated at year-end are doubtful loans, with the exception of those doubtful loans for subject to contingency provisions. 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 “difficult to recover loans”.

Cash advances and loans with maturities of over 12 months granted by the Group to countries generally classified as risky (sovereign risk) are subject to specific provisions. These provisions are booked as liabilities under “allowances for general risks and commitments”, as are provisions for guarantees and endorsements and contested customer loans. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 62

INCOME TAX Said plans cover several types of benefits, notably any residual The income tax expense includes: complementary benefits afforded by specialist pension - current income tax for the fiscal year including dividend tax funds. Indeed, since January 1, 1994, pursuant to an agreement credits and tax credits actually used for tax settlement purposes. signed by all French banks on September 13, 1993, the banking Said tax credits are booked under the same line item as the institutions of the Crédit du Nord Group are no longer affiliated income to which they relate; with any specialist pension funds but are affiliated with the - deferred income tax resulting notably from restatements for national ARRCO-AGIRC funds. This agreement gave rise to consolidation purposes. This tax is calculated according to the residual commitments with respect to current retirees and active liability method. employees (for periods of employment within the Group prior to December 31, 1993). Moreover, the Group recognises deferred tax assets due to timing differences and deferrable losses deemed likely to affect future In the case of Crédit du Nord, valuations are performed by an tax income. These deferred taxes are calculated according to independent actuary twice a year, with the valuation made on the liability method by applying the expected effective tax rate December 31 calculated on the basis of data as at August 31. (including temporary increases) for the period in which the tax In the case of banking subsidiaries, valuations are performed asset is to be applied to income. The amount of deferred tax assets once a year, generally in February, by the independent fund which and liabilities recognised in this manner is detailed in the notes manages these residual complementary benefits, which makes it to the balance sheet. Since fiscal year 2000, Crédit du Nord has possible to determine commitments for the following December opted to apply the Group’s tax regime to those of its subsidiaries 31. These commitments and the coverage thereof as well as the in which it holds a direct or indirect ownership interest of at least main underlying assumptions therein are outlined in the notes to 95%. The convention adopted is that of neutrality. the balance sheet. This category also includes severance pay, complementary EMPLOYEE BENEFITS retirement plans and medical and life insurance benefits. These Crédit du Nord Group has elected to apply recommendation 2003- commitments and the coverage thereof as well as the main R01 of the French National Accounting Council (CNC) relative to underlying assumptions therein are outlined in the notes below. the rules for booking and evaluating pension commitments and Commitment valuations are performed by an independent actuary other related benefits to all fiscal periods as of January 1, 2004. twice a year using the projected credit units method, with the Said recommendation defines three categories of benefits. valuation of December 31 calculated on the basis of data as at August 31. Pension commitments and benefits In accordance with Note 2004/A dated January 21, 2004 of the Commitments under statutory pension systems are covered by Emergency Committee of the French National Accounting Council the contributions paid to independent pension funds which then (CNC), the Group uses the straight-line method over the average manage all payments of retirement benefits. residual working lives of employee beneficiaries to account for All additional retirement plans with predefined benefits are the amendments linked to law 2003-775 of August 21, 2003 calculated according to an actuarial method. governing pension reforms. 63 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Preliminary notes to the fi nancial statements Principles and methods of consolidation

“Actuarial differences” reflect the difference between actuarial OFF-BALANCE SHEET ACCOUNTS hypothesis and actual figures as well as the impact of any Guarantees given by order of customer or lending institutions change in actuarial hypothesis. In the specific case of pension are recorded as off-balance sheet items in the amount of the benefits, these differences are only booked in part on the income commitments made. For guarantees received, only those from statement where they exceed 10% of the discounted value of the lending institutions, states, government administrations and local commitment (so-called “corridor” method). The proportion of said authorities are recorded. booked differences is equal to the surplus defined above divided by the average residual working lives of the beneficiaries. Where a scheme holds assets, said assets are valued at their market INSURANCE ACTIVITIES value upon closure of the accounts. General framework Other long-term benefits Antarius, a mixed (life and non-life) insurance company, is Crédit In various Group companies, personnel can also benefit from time du Nord Group’s only consolidated insurance company and is held savings accounts as well as from various seniority bonuses. These jointly with Aviva which acquired the stake in its capital previously benefits are calculated according to the same actuarial method held by Cardif SA in late 2004. Commercial activity is exercised described above and are provisioned in full as are any actuarial through the Crédit du Nord Group network of banks. Insurance differences. These commitments and the coverage thereof as well policies are generally co-insured by the partners (old or new as the main underlying assumptions therein are outlined in the depending on the policies), and this partnership is complemented notes to the accounts. Commitment valuations are performed by by reinsurance agreements in the form of acceptances and an independent actuary twice a year, with that of December 31 disposal/assignments between the two companies. calculated on the basis of data as at August 31. Reinsurance acceptances Severance pay Items received from ceding parties are recorded immediately. Severance pay consists exclusively of all benefits payable by the Where there is a known loss on reinsurance acceptances, a Group’s companies between the last working day of an employee provision for the amount of the loss is recorded. and the date as of which they are covered by their respective pension schemes. Said pay is provisioned in full as soon as an Reinsurance disposals agreement is signed. Within Crédit du Nord, these agreements are Items received from ceding companies are determined on the the “CATS” (early retirement for certain employees) agreements basis of the reinsurance agreement using the same accounting whose beneficiaries are common knowledge. These commitments and valuation rules as those applied to gross items. are provisioned for in full according to an actuarial method. Insurance company investments

Insurance company investments include investments made to guarantee unit-linked policies, as well as investments backing both the companies’ equity and euro-denominated policies. The latter include investments in affiliates. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 64

Investments representing the underwriting reserves backing unit- In compliance with the Note of January 2004 of the Emergency linked policies are valued at the market value of the underlying Committee of the French National Accounting Council (CNC) assets at year-end. relative to the accounting treatment of allowances in the individual and consolidated accounts of insurance companies, where the Investments and other fixed-income securities are recorded at net asset values of real-estate investments and variable-income cost, net of income accrued from the last coupon date to the date securities exceed total market values, an allowance (provisions of purchase. The difference, if any, between cost and redemption for early redemption risk) equal to the difference between the value is charged prorata to income on the basis of an actuarial two values is recorded. This allowance covers all unrealised calculation on the residual duration of securities. In the specific capital losses relative to the concerned assets. Allowances and case of inflation-indexed treasury bonds (OATi), the revaluation of writebacks of this nature are recorded to income for the fiscal initial capital due solely to inflation is recorded in full to income. year in question. Financial futures are booked using one of the following strategies: Insurance company reserves - with an investment or disinvestment strategy, cash flows rela- The reserves correspond to the commitments to the insured and tive to financial futures are kept on the balance sheet until the to policy beneficiaries. strategy is closed out at which time the purchase or sales price of the hedged asset is adjusted; The reserves of unit-linked policies are valued at year-end on the - with a capital gains or yield differential strategy, cash flows basis of the value of their underlying assets. and variations in market values of financial futures are booked Life insurance reserves consist principally of actuarial provisions to income over the lifetime of the strategy according to the corresponding to the difference between the current values effective rate of return of each transaction. of the commitments made respectively by the insurer and the Equities and other variable-income securities are recorded at insured, taking into account the probability of payment. Future cost or book value. However, if the market value of listed variable- management fees relative to policies not otherwise covered income securities falls more than 20% below their net book value are subject to a provision. In non-life insurance, provisions are (or 30% on markets deemed volatile) for a period exceeding 6 recorded for unearned premiums (fractions of premiums issued months and in a regular manner, the securities in question are corresponding to subsequent years) and for claims payable, reviewed in order to determine whether an allowance for durable including management fees. depreciation is necessary. Where such an allowance is deemed necessary, it is calculated on the basis of the recoverable value of The provision for claims payable represents the estimated value the securities concerned which in turn depends on the projected of disbursements in principal and expenses necessary for the holding period. The recoverable value is determined by a multi- settlement of all unpaid claims. criteria prospective approach on the basis of known and available elements such as present value of future cash flows, net asset value and commonly-used ratios to evaluate the projected return of each security. 65 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Preliminary notes to the fi nancial statements Principles and methods of consolidation

The capitalisation reserve, intended to offset the depreciation Gross margin of insurance activities of securities held by the insurance company and a reduction in The gross margin of insurance activities is constituted by actuarial the revenues they generate, is provisioned for disposals (sale or income and expenses (life and non-life), after reclassification by conversion) realised before the maturity of redeemable regulated class of actuarial income and expenses, and is notably calculated fixed-income securities. Allowances and writebacks recorded on the basis of: to the capitalisation reserve in the non-consolidated accounts - earned premiums or contributions; of the insurance company are eliminated from the consolidated - benefit expenses, including changes in provisions and profit- accounts when they do not represent a contractual commitment sharing, excluding management fees; to an insured party. - net income from investments; Provisions for undistributed profit carried on the balance sheet - eliminations for intra-group transactions as well as reinsurance represent the share of profits due to beneficiaries but not acceptance and assignment activities. distributed during the fiscal year in which they were generated. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 66

Preliminary notes to the fi nancial statements Principles and methods of consolidation

The consolidated financial statements of Crédit du Nord are • “cost of risk” corresponds exclusively to counterparty risk presented in accordance with regulation 2000-04 of the French relative to banking intermediation activities. Allowances and Accounting Regulation Committee (CRC). In this regard, the reversals for other risks are recorded to the same accounts as following points should be noted: the covered expenses;

• allowances for interest are deducted from interest in net • proceeds from the disposal of fixed assets used for ordinary banking income; Group activities, as well as income from the sale of and net allowances to holdings in subsidiaries and affiliates and other • income from securities booked under net banking income long-term securities, are recorded to “gains and losses on fixed includes all income from trading, investment and portfolio assets”. Proceeds from the disposal of investment securities are securities, i.e. income, proceeds from disposals and net also recorded to this account; allowances. Dividends on holdings in subsidiaries and affiliates, other long-term securities and interest on investment securities • extraordinary items are strictly defined by the following criteria, are also recorded to this account; which must all be met: - a significant amount (exceeding € 2 million); • personnel expenses include salaries, payroll taxes, incentives - an extraordinary nature (compared to ordinary operations); and employee profit-sharing, as well as all costs linked to - an exceptional occurrence (high probability of non-recurrence). employee benefit commitments. Allowances and reversals relative to these commitments are also recorded to this account

• all expenses incurred by temporary employees and personnel with an employment contract with a non-Group company are recorded to operating expenses under “Other expenses”; 67 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Consolidated balance sheets at December 31

(€ million) ASSETS Notes 2004 2003 2002 Cash, due from central banks and postal accounts 2,001.9 1,989.9 1,488.0 Treasury notes and assimilated 4 644.1 629.2 948.0 Due from banks 1 3,555.5 3,429.2 3,257.2 • Current accounts 1,108.6 1,146.2 1,532.2 • Term accounts 2,446.9 2,283.0 1,725.0 Customer deposits 2 17,040.2 16,267.8 14,173.3 • Commercial loans 903.7 888.7 810.6 • Other loans 14,596.8 13,712.3 11,733.1 • Overdrafts 1,539.7 1,666.8 1,629.6 Leases and assimilated 3 1,176.0 1,024.0 803 1 Bonds and other debt securities 4 681.8 569.2 562.9 Shares and other equity securities 4 164.3 164.3 41.6 Investments of insurance companies 8 1,872.4 1,547.7 1,259.1 Share of underwriters in reserves of insurance companies 8 189.7 130.6 95.6 Investments in non-consolidated affiliates and other long-term equity investments 5 66.9 62.9 56.6 Investments in subsidiaries and affiliates accounted for by the equity method 8.1 8.5 7.8 • Non financial 0.0 0.0 0.0 • Financial 8.1 8.5 7.8 Intangible fixed assets 6 78.6 62.4 46.4 Tangible fixed assets 6 256.6 244.7 185.5 Other assets 7 406.7 385.1 367.2 Other insurance assets 7 8.6 5.3 9.9 Accruals 7 282.8 300.6 307.4 Goodwill 9 44.6 48.5 51.0

TOTAL 28,478.8 26,869.9 23,660.6

OFF-BALANCE SHEET ITEMS 17 REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 68

(€ million) LIABILITIES AND SHAREHOLDERS’ EQUITY Notes 2004 2003 2002 Due to central banks and postal accounts 1,220.8 1,408.5 554.8 Due to banks 10 1,487.7 1,444.8 1,194.9 • Current accounts 315.2 417.0 510.0 • Term accounts 1,172.5 1,027.8 684.9 Customer deposits 11 14,990.7 14,292.6 13,846.3 • Special and regulated savings accounts 5,728.8 5,494.4 5,068.0 - Sight deposits 3,285.7 2,992.2 2,386.4 - Term accounts 2,443.1 2,502.2 2,681.6 • Other deposits 9,261.9 8,798.2 8,778.3 - Current accounts 7,895.7 7,400.8 7,207.2 - Term accounts 1,366.2 1,397.4 1,571.1 Debt securities 12 5,720.8 5,250.1 3,731.9 • Short term notes 31.5 40.5 59.0 • Money market and negotaible debt securities 5,689.3 5,209.6 3,648.9 • Bonds 0.0 0,0 24.0 Insurance company reserves 8 1,999.7 1,580.4 1,293.4 Other accounts payable 7 294.5 303.2 204.2 Other insurance liabilities 7 15.0 22.0 20.2 Accruals 7 698.8 681.0 1,016.1 Allowances for general risks and commitments 13 213.1 195.0 194.7 Subordinated debt 14 435.5 384.6 384.4 Subscribed capital 15 740.3 740.3 740.3 Consolidated reserves (including revaluation. conversion and consolidation adjustments 15 422.9 371.5 298.6 • Group share 393.1 343.7 272.0 • Minority interests 29.8 27.8 26.6 Net income 15 239.0 195.9 180.8 • Group share 233.2 190.4 175.7 • Minority interests 5.8 5.5 5.1

TOTAL 28,478.8 26,869.9 23,660.6

OFF-BALANCE SHEET ITEMS 17 69 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Activity of consolidated subsidiaries and affi liates

1 – Banks

(€ million) Company Date Total Customer Customer Net Remarks (% Owned) Assets Deposits Loans Income

BANQUE 31.12.04 1,883.4 1,073.7 1,468.2 18.0 Thanks to a combination of business RHÔNE-ALPES 31.12.03 1,783.8 1,005.3 1,420.4 18.0 growth and cost containment, Banque (100.0%) 31.12.02 1,587.1 943.0 1,223.6 16.7 Rhône-Alpes once again enjoyed an increase of 12.1% in its GOI. However, the increase in the entity’s cost of risk and, above all, an exceptional expense of € 3 million, prevented any improvement in the bank’s net income on 2003.

BANQUE 31.12.04 1,664.3 972.3 1,280.2 17.6 Although 2004 saw a drop in net TARNEAUD 31.12.03 1,603.4 924.0 1,186.8 21.8 income for Banque Tarneaud, this is (80.0%) 31.12.02 1,456.3 887.7 1,030.5 13.4 essentially due to the exceptional financial transaction booked in 2003. Compared with 2002, growth stood at over 30% thanks to the entity’s buoyant business activity and the sound management of overheads despite the increase in the bank’s risk expense in 2004.

BANQUE 31.12.04 2,000.4 1,292.7 1,597.6 22.7 Banque Courtois’s financial performance COURTOIS 31.12.03 1,816.6 1,211.8 1,436.5 22.2 in 2004 was marked by a strong increase (100.0%) 31.12.02 1,541.1 1,125.9 1,215.7 17.4 in GOI (+14.2%), on the back of an increase in NBI and stable operating expenses. Despite a limited cost of risk, an exceptional expense limited growth in the entity’s net income to 2.5%.

BANQUE 31.12.04 896.5 526.0 657.1 5.8 Despite a 4.5% increase in NBI and a LAYDERNIER 31.12.03 817.3 504.9 603.0 8.3 limited cost of risk, net income for Banque (100.0%) 31.12.02 670.8 457.2 525.6 6.2 Laydernier was strongly impacted by an exceptional loss of € 6 million largely due to the application, as of January 1, 2004, of CNC recommendation 2003-R01.

BANQUE 31.12.04 575.7 303.9 494.7 7.0 The 5.7% growth in NBI enjoyed by KOLB (*) 31.12.03 597.2 334.7 515.9 5.0 Banque Kolb in 2004 coupled with the (99.8%) 31.12.02 498.9 303.1 421.5 2.2 extensive drop in the entity’s risk expense resulted in a strong increase in the bank’s net income.

BANQUE 31.12.04 420.2 343.1 308.8 5.4 Over 2004, GOI for Banque Nuger NUGER (*) 31.12.03 383.6 317.9 288.9 5.3 increased 5% on 2003. Net income (64.7%) 31.12.02 379.0 296.7 258.6 4.9 remained stable.

BANQUE 31.12.04 158.2 139.5 116.9 1.6 Banque Pouyanne continued to enjoy POUYANNE 31.12.03 140.5 122.7 107.9 1.6 steady growth in its activities over 2004, (35.0%) 31.12.02 124.2 107.4 94.0 1.6 with net income proving stable year-on- year.

(*) To best reflect the economic reality, the accounting data of lease-financing companies was taken directly from the financial accounts. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 70

2 – Specialised banks and fi nancial institutions

(€ million) Company Date Total Customer Customer Net Remarks (% Owned) Assets Deposits Loans Income

SOCIÉTÉ 31.12.04 120.3 NS NS 1.2 Bolstered by the strong fi nancial DE BOURSE 31.12.03 127.6 NS NS 3.8 markets over 2004, Gilbert Dupont posted GILBERT DUPONT 31.12.02 39.8 NS NS 1.6 an increase of almost 12% in NBI on 2003 (100.0%) for a limited increase in overheads. Note that the entity’s net income in 2003 refl ected an exceptional € 3.1 million in gains on the disposal of fi xed assets. The income tax expense of this partnership is borne by its partners.

NORBAIL 31.12.04 398.3 21.9 387.1 2.4 Activity for property leasing company Norbail IMMOBILIER (*) 31.12.03 379.3 19.1 372.7 3.2 proved relatively stable in 2004, recording (100.0%) 31.12.02 367.1 16.8 359.8 2.6 a 19% drop in net income compared with 2003.

TURGOT 31.12.04 6.7 NS NS 1.1 In recent years, the leasing activity of GESTION (*) 31.12.03 9.3 NS 4.5 2.0 Banque Tarneaud has been redirected (80.0%) 31.12.02 14.4 NS 11.2 1.5 from Turgot Gestion towards Star Lease, a Crédit du Nord Group leasing company. Accordingly, at December 31, 2004, Turgot Gestion had virtually no loans to speak of on its balance sheet.

NORFINANCE 31.12.04 11.9 3.1 NS 1.3 The strong improvement on the fi nancial G. DUPONT 31.12.03 10.6 2.8 NS (0.5) markets as well as the activity resulting ET ASSOCIÉS 31.12.02 12.2 3.9 NS 0.7 from KBC’s business assets prompted a (100.0%) strong increase in net income for Norfi nance compared with 2003 when the acquisition of KBC had weighed heavily on results.

DEXIA-C.L.F. 31.12.04 3 447.9 300.5 1 383.7 5.3 Net income for Dexia-C.L.F. Banque, a BANQUE 31.12.03 4 397.6 200.3 1 414.6 10.0 subsidiary held jointly by the Dexia and Crédit (20.0%) 31.12.02 4 344.2 198.8 1 558.4 8.7 du Nord groups came in at € 5.3 million; down 47% on 2003, but nevertheless in line with forecasts which accounted for the change in the entity’s activities.

NORBAIL 31.12.04 28.9 1,2 23.9 0.1 Activity for Norbail-Sofergie proved buoyant SOFERGIE (*) 31.12.03 9.7 NS 8.1 0.1 in 2004. Net income, however, remained (100.0%) 31.12.02 9.7 NS 8.6 0.1 stable on 2003 as most of the entity’s new business only bore fruit as of the second half of the year.

STAR LEASE (*) 31.12.04 763.3 1.5 710.5 3.0 Star Lease, a young company founded in (100.0%) 31.12.03 649.8 1.0 557.6 9.7 2001, had a satisfactory year in 2004, fol- 31.12.02 405.5 0.6 348.8 (8.5) lowing a strong increase in operating income due to the steady increase in loans. As such, net income improved dramatically on 2003 when, following its adjustment for exceptional items, it was only slightly positive.

(*) To best reflect the economic reality, the accounting data of lease-financing companies was taken directly from the financial accounts. 71 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

3 – Other companies

(€ million) Company Date Total Net Remarks (% Owned) Assets Income

ÉTOILE 31.12.04 41.9 26.3 2004 proved an excellent year for Crédit du Nord Group mutual fund GESTION 31.12.03 35.0 17.2 management company, Étoile Gestion, on the back of buoyant stock (97.0%) 31.12.02 33.6 15.4 markets after several difficult years. Net fees and commissions increased almost 30% on 2003 whilst overheads remained stable, resulting in growth of over 50% in the company’s net earnings before taxes. The tax expense of this partnership is borne by its partners.

ANTARIUS 31.12.04 4,177.7 10.6 Antarius, the Group’s insurance company, recorded a satisfactory (50.0%) 31.12.03 3,587.1 10.9 performance in 2004. Note that the company’s shareholder structure 31.12.02 2,806.2 1.3 changed over the year, with Aviva Group acquiring the stake previously held by Cardif. Net income proved stable on 2003 which had already benefi ted from the upturn on the fi nancial markets.

S.P.T.F. 31.12.04 24.2 2.9 Crédit du Nord’s venture capital company, S.P.T.F., derives the majority of (100.0%) 31.12.03 23.4 2.2 its income from capital gains on disposals and revenues on securities. In 31.12.02 21.6 0.5 2004, net income for S.P.T.F. increased 30.9%.

SFAG 31.12.04 0.0 0.0 This company’s activity is marginal and not really significant. It achieved its (100.0%) 31.12.03 0.0 0.0 breakeven point in 2004. 31.12.02 0.0 0.0

CRÉDINORD 31.12.04 2.0 0.0 This company, which specialises in certain market activities, did not CIDIZE 31.12.03 7.3 0.0 generate any income in 2004. Marketable securities account for the (100.0%) 31.12.02 21.5 0.0 majority of its assets.

NORIMMO 31.12.04 7.5 0.0 Norimmo, a registered estate agent, disposed of a major part of its (100.0%) 31.12.03 10.0 (1.6) property assets over the year. Net income proved stable, with the entity’s 31.12.02 11.3 (0.1) tax expense borne by its partners.

ANNA PURNA 31.12.04 0.0 0.0 (100.0%) 31.12.03 0.0 0.0 31.12.02 0.0 0.0 These three companies are subsidiaries of Norimmo specialising in real NICE BROC 31.12.04 7.5 0.5 estate and property transactions. Overall, operating income is at breakeven, (100.0%) 31.12.03 7.5 0.6 with Nice Broc posting a profit of € 0.5 million and Nice Carros posting a 31.12.02 7.2 0.4 loss of € 0.3 million.

NICE CARROS 31.12.04 1.6 (0.3) (100.0%) 31.12.03 3.8 (0.7) 31.12.02 5.0 (0.4)

FIMMOGEST 31.12.04 0.1 0.0 Fimmogest is a subsidiary of Banque Courtois whose activity is marginal (100.0%) 31.12.03 0.1 0.0 and whose net income remains close to breakeven. 31.12.02 0.1 0.0

NORD 31.12.04 3.3 3.3 Nord Assurances Courtage had a particularly good year in 2004. ASSURANCES 31.12.03 1.8 1.8 This insurance brokerage company generated earnings before taxes of COURTAGE 31.12.02 2.2 1.5 € 3.3 million. Its tax expense is borne by its partners (100.0%)

PARTIRA 31.12.04 1.5 0.1 Partira manages a residual stock of real estate assets, notably in the (100.0%) 31.12.03 1.5 0.0 Rhône-Alpes region. 31.12.02 1.4 0.1

KOLB 31.12.04 5.7 3.0 Income for this holding company, which owns 32.9% of Banque Kolb, is INVESTISSMENT 31.12.03 3.2 0.5 almost exclusively derived from dividends received from the latter. (100.0%) 31.12.02 4.2 1.4

SNC EUROPE 31.12.04 1.6 0.6 This subsidiary of Banque Rhône-Alpes was consolidated for the first time LAFAYETTE in 2004. Its assets essentially include real estate assets leased to Banque (100.0%) Rhône-Alpes. Its tax expense is borne by its partners. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 72

Statutory Auditors’ report on the consolidated fi nancial statements

Fiscal year ending December 31, 2004

In execution of the mission conferred to us by the Shareholders’ JUSTIFICATION OF OPINIONS AND EVALUATIONS Meeting, we hereby present our report relative to the fiscal year In application of the provisions of Article L 225-235 of the French ending December 31, 2004 on the yearly consolidated financial Commercial Code relative to the justification of our opinions and statements of Crédit du Nord such as they are presented herein. evaluations, we draw your attention to the following elements: - as specified in the statements, certain pension benefits awarded The consolidated financial statements were approved by the Board to staff were valued using an actuarial method and have been of Directors. It is our mission, based on our audit, to express an booked on the company’s balance sheet. We have reviewed the opinion on these financial statements. assumptions made by Management and verified the compliance OPINION ON THE YEARLY FINANCIAL STATEMENTS of this treatment with French National Accounting Council (CNC) We conducted our audit in accordance with French professional regulation 2003-R01, standards. These standards require that we plan and perform - as indicated in the section entitled “Accounting principles” of the the audit to obtain reasonable assurance about whether the present fi nancial statements, your company has provisioned for the annual consolidated financial statements are free from material credit risks inherent to its activities. We have reviewed the processes misstatement. An audit includes examining, on a test basis, implemented by Management to identify and evaluate these risks evidence supporting the amounts and disclosures in the annual and to determine the necessary level of provisions. accounts. An audit also includes assessing the accounting On the basis of these reviews, we conclude that these estimates principles used and significant estimates made by management, are of a reasonable nature. as well as evaluating the overall presentation of the annual financial statements. We believe that our audit provides a Said evaluations are an integral part of our audit of the parent reasonable basis for our opinion. company financial statements in their entirety and thus contributed to the formation of our opinion as expressed in the first part of In our opinion, the annual accounts present fairly, in all material this report. respects, the financial position of the entire Group as constituted by the consolidated companies as at December 31, 2004 and the SPECIFIC CONTROLS AND DISCLOSURES results of its operations for the year then ended, in accordance We have also carried out, in accordance with French professional with French accounting principles. standards, the specific procedures prescribed by French law.

Without expressing any reservations on the above opinion, we call We have nothing to report with respect to the fairness of the information your attention to the paragraph in the notes to the fi nancial statements contained in the Board of Director’s report and its consistency with which details changes in accounting methods resulting from: the annual accounts and other information presented to shareholders - the application of CNC regulation 2003-R01 governing the concerning the fi nancial position and annual accounts. accounting of employee benefits, In accordance with the law, we have verified that the management - the implementation, in compliance with IFRS standards, of a new report contains all relevant information regarding the company’s method of accounting certain service fees and commissions. shareholders.

Neuilly-sur-Seine, March 1, 2005

The Statutory Auditors

DELOITTE & ASSOCIÉS BARBIER FRINAULT & AUTRES ERNST & YOUNG

José-Luis Garcia Isabelle Santenac

73 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004 Additional information

75 GENERAL DESCRIPTION OF CREDIT DU NORD 77 SHAREHOLDER AND CAPITAL INFORMATION 79 GROUP ACTIVITY 80 RESPONSIBILITY FOR THE REGISTERED DOCUMENT AND AUDIT 75 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

General description of Crédit du Nord

Company name Corporate purpose (Article 3 of the bylaws) Crédit du Nord

The purpose of the company, under the conditions set forth by the laws and regulations applicable to credit institutions, is to perform, Head Offi ce with individuals or corporate entities, in France or abroad: - any and all banking transactions; 28, place Rihour - 59000 LILLE - any and all transactions related to banking transactions, including, in particular, all investment or related services as governed by Articles L. 321-1 and 321-2 of the French Monetary Legal form and Financial Code; - any and all acquisitions of ownership interests in other A limited liability company (Société Anonyme) registered in France companies. and governed by Articles L. 210-1 ff. of the French Commercial Code. The company has the status of a bank as governed by In accordance with the conditions set forth by the French Banking Articles L. 311-1 ff. of the French Monetary and Financial Code. 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. Duration Generally, the company may, on its own behalf, on behalf of third The date of expiration of the company is May 21, 2068, barring parties or jointly, engage in any and all financial, commercial, dissolution before this date or an extension thereof as provided industrial, agricultural or real estate transactions that are directly by law. or indirectly related to the abovementioned activities or likely to facilitate the execution thereof.

Registration number

SIREN 456 504 851 RCS Lille

APE activity code

651 C

Fiscal year

From January 1 to December 31 REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 76

Allocation and distribution of income Shareholders’ meetings (Article 22 of the bylaws) (Article 19 of the bylaws)

Net income for the year is determined in accordance with all The General Meeting, which meets on a regular basis, represents currently applicable laws and regulations. At least 5% of net all shareholders and exercises all powers devolved to it by law. income for the year, less any previous accumulated losses, must, It is convened to statute on those issues listed on the agenda by law, be set aside to form a legal reserve until this reserve in accordance with the currently applicable legal and regulatory reaches one-tenth of share capital. provisions. Net income available after said allocation to legal reserves, as The right to attend Shareholder Meetings is subject to registration, well as any earnings carried over, constitutes “income available in accordance with the relevant legal and regulatory provisions, for distribution” from which dividends may be paid out and/or of shares in the name of the shareholder at least five days before funds allocated to ordinary, extraordinary or special capital the date of the meeting. 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.

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. 77 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Shareholder and capital information

Share capital Profi t-sharing

Crédit du Nord’s share capital stands at € 740 263.248, divided A profit-sharing agreement was signed. On June, 1, 2004 which into 92 532.906 fully paid-up shares with a par value of € 8. applies to fiscal years 2004 through 2006.

All payments therein are calculated on the basis of 6% of gross operating income adjusted for certain parameters. 33% of Form of shares profit-sharing is paid out in equal amounts (capped at € 3 million), with the remainder paid in proportion to gross All shares must be registered. annual salaries excluding performance bonuses.

Total profit-sharing is capped at 8% of gross fiscal remuneration Disclosure requirements paid to all company employees in the year in question. Crédit du Nord makes an additional “employer’s contribution” No restrictions have been made to legal provisions concerning where employees pay any profit-sharing into the Company ownership thresholds. Savings Plan.

Share transfer approval

The General Meeting of April 28,1997 ruled that the assignment, sale or transfer of shares to a third party who is not a shareholder, for any reason whatsoever, except in the event of the transfer of an estate, liquidation, communal property between spouses or transfer to a spouse or next-of-kin, is subject to the company’s prior approval. REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 78

Changes in share capital

2004 2003 2002 2001 2000 Shares outstanding 92,532.906 92,532.906 92,532.906 92,532.906 92,561.406

Par Value per share (in euros) 8 8 8 8 8

Share capital (in euros) 740,263.248 740,263.248 740,263.248 740,263.248 740,491.248 Maximum No. of new shares* - - - - 4,500 Shares outstanding adjusted for potential dilution 92,532.906 92,532.906 92,532.906 92,565.906 92,565.906 Adjusted potential share capital (in euros) 740,263.248 740,263.248 740,263.248 740,263.248 740,527.248

* Through the conversion of bonds and/or the exercise of stock options

Ownership and voting rights as at December 31, 2004

Société Générale 80 % Dexia Crédit Local 10 % Dexia Banque Belgique 10 % General Management – Employees (via specialised fund managers) –

Double voting rights Dividend payments

None. - A dividend per share of € 1.03 was paid out in respect of FY 2000. - A dividend per share of € 1.00 was paid out in respect of Changes in ownership in the last three FY 2001. years - A dividend per share of € 1.12 was paid out in respect of FY 2002. - A dividend per share of € 1.20 was paid out in respect of • IN 2001 FY 2003 The Extraordinary Shareholders' Meeting of May 3, 2001, reduced - A dividend per share of € 1.45 will be paid out in respect of Crédit du Nord's share capital by canceling 28,500 shares with FY 2004. a par value of € 8.

Stock market information

Not applicable: Crédit du Nord shares are not listed on any markets. 79 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Group activity

Use of patents and licences A certain number of major risks are covered by policies taken out as part of Société Générale’s Global Insurance Policy, whilst Not applicable. others are covered by policies taken out by Crédit du Nord.

Risks covered by the Société Générale Global Insurance Policy Legal risks 1 – Theft/fraud Crédit du Nord is a credit institution approved in its capacity as a These risks are included in a “global banking” policy that insures bank. As such, it may engage in any and all banking transactions. the banking activities of Crédit du Nord and its subsidiaries. It is also authorized to provide any and all investment or related 2 – Professional liability services as governed by Articles L. 321-1 and L. 321-2 of the The consequences of any lawsuits are insured under the global French Monetary and Financial Code. s an investment service policy. The level of cover is the best available on the market. provider, Crédit du Nord is subject to the applicable regulatory framework, in particular prudential rules and the controls of the 3 – Operating losses French Banking Commission. All managers and employees are The consequences of an accidental interruption in activity are bound by professional secrecy, the breach of which is subject to insured under the global policy. This policy complements the penal law. Crédit du Nord is also an insurance broker. business continuity plans. 4 – Third-party liability insurance of Corporate Managers Litigation and extraordinary The purpose of this policy is to cover the company’s managers circumstances and directors in the event of claims filed against them and invoking their liability. To date there are no extraordinary circumstances and/or on-going litigation that may have, or may have had in the recent past, a Risks covered by Crédit du Nord policies significant effect on the business, income, financial position or 1 – Buildings and their contents assets and liabilities of Crédit du Nord or its subsidiaries. Buildings and their contents are insured by a multi-risk policy with a ceiling of € 76 500.000.

2 – IT risks Other special risks This insurance covers any loss or damages to equipment (hardware, supports) used to process information. To the best of Crédit du Nord’s knowledge, no such risks currently apply. 3 – Liability insurance linked to operations This insurance covers any pecuniary damages to third parties incurred by all persons or equipment deemed necessary for Insurance company’s operations.

General policy Other risks linked to activities Crédit du Nord’s insurance policy aims to obtain the best cover Within the framework of all Group contracts, Crédit du Nord offers with respect to the risks to which it is exposed. customers death and invalidity insurance on their loans (property, consumer loans, etc.). REVIEW 2004 CONSOLIDATED FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION 80

Responsibility for the registered document and audit

Person responsible for the registered document

Alain Py, Chairman of the Board of Directors and Chief Executive Officer

Certifi cation of the person responsible for the registered document

To the best of my knowledge, the information set out in the position, results and prospects. There are no omissions that could registered document (document de référence) is true and impair its meaning includes all the information needed by investors to form an opinion regarding Crédit du Nord’s assets and liabilities, business, financial

Chairman of the Board of Directors and Chief Executive Officer Alain Py

Statutory Auditors

Barbier Frinault & Autres Deloitte et Associés Ernst & Young

Represented by Isabelle Santenac Represented by José-Luis Garcia

Address: Address : 41, rue Ybry – 92200 Neuilly-sur-Seine 185, avenue Charles-de-Gaulle – 92200 Neuilly-sur-Seine

Date appointed: Date appointed : May 4, 2000 for a term of six fiscal years May 4, 2000 for a term of six fiscal years

Substitute auditor: Substitute auditor : Thierry Gorlin B.E.A.S 81 CRÉ DIT DU NORD GROUP FINANCIAL YEAR 2004

Report of the Statutory Auditors on the reference document

In our capacity as Statutory Auditors of Crédit du Nord and In accordance with French professional standards, we performed pursuant to Article 211-5-2 of the General Regulations of the our audit of the annual and consolidated financial statements French Securities Regulator (AMF), we have verified, in accordance for the years ended December 31, 2003 and December 31, with French professional standards, the information in respect of 2004 as approved by the Board of Directors according to French the financial position and the historical financial data included in accounting rules and principles, and certified said statements the present registered document (“document de reference”). without reservation.

The registered document was prepared under the responsibility For the year ending December 31, 2003, the remark made of the Chairman of the Board of Directors. It is our responsibility concerning the annual and consolidated financial statements to issue an opinion on the fairness of the information contained refers to the preliminary note to the financial statements which therein with respect to the financial position and financial details the change of accounting method resulting from the statements. application of CRC regulation 2002-03 relative to the accounting treatment of credit risk and CRC regulation 2002-10 relative to We conducted our review in accordance with French professional asset amortization and depreciation. standards. This review consisted in assessing the fairness of the information on the financial position and financial statements and For the year ending December 31, 2004, the remark made to verify their consistency with the audited financial statements. concerning the annual and consolidated financial statements We also reviewed the other financial information contained refers to the preliminary note to the financial statements which in the registered document in order to identify any significant details the change of accounting methods resulting, as of January inconsistency with information in respect of the financial position 1, 2004, from: and financial statements and to bring to your attention any obvious - the application of CNC regulation 2003-R01 governing the rules misstatements we noted based on our general understanding of for accounting employee benefits; the company gained through our audit. It should be noted that - the implementation of a new method for booking certain service the registered document does not contain any individual forecast fees and commissions in line with IFRS standards. data. On the basis of these examinations, we have nothing to report In accordance with French professional standards, we performed with respect to the fairness of the information on the financial our audit of the annual and consolidated financial statements for position and financial statements contained in this registration the year ended December 31, 2002 as approved by the Board of document. Directors in line with French accounting rules and principles and certified said statements without reservation.

Neuilly-sur-Seine, March 1, 2005

The Statutory Auditors

DELOITTE & ASSOCIÉS BARBIER FRINAULT & AUTRES ERNST & YOUNG

José-Luis Garcia Isabelle Santenac

The present reference document includes: - the report on the consolidated financial statements and the general report as at December 31, 2004 of the Statutory Auditors containing their justification of opinion drawn up in accordance with Article L. 225-235 of the French Commercial Code on pages 123 and 140; - the Statutory Auditors’ report, drawn up in application of the final paragraph of Article L. 225-235 of the French Commercial Code, on the report of the Chairman of the Board of Crédit du Nord describing the internal control procedures relative to the elaboration and processing of accounting and financial information on page 51.

Person responsible for the information contained in this report : Jean-Pierre Bon – Tel.: + 33 (0)1 40 22 23 91 – E-mail: [email protected] f. : 6361 - Avril 2005 en 456 504 851- Réf. : 6361 - Avril ienne • Illustration : Jean-Marie Cras ienne Terre de S de Conception et réalisation : Terre dit du Nord, SA au capital de EUR 740 263 248 - RCS Lille Sir Crédit du Nord,