A N N U A L R E P O R T - C O M P A G N I E F I N A N C I È R E D E P A R I B A S TABLE OF CONTENTS Group organization (cover flap) P A R I B A S Profile 1 Interview with the chairmen 2 Consolidated financial highlights 6 Shareholder’s handbook 9 Supervisory Board 14 Executive Committee 17 INVESTMENT BANKING 18 Equity 20 Fixed Income 22 Corporate Banking 24 Advisory Services 26 Securities Services 28 Paribas Principal Investments (Paribas Affaires Industrielles) 30 ASSET MANAGEMENT 38 Institutional and Private Asset Management 40 Cardif 42 Cortal 43 RETAIL FINANCIAL SERVICES 44 UFB Locabail 46 Arval 46 Cetelem 47 Cofica 47 UCB 48 Banque Directe 48 OTHER ACTIVITIES 49 Rental property management 49 Real estate holdings 50 Equity holdings 51 Compagnie Financière de Paribas MANAGEMENT REPORT 53 5, rue d’Antin - 75078 Paris Cedex 02 - France CONSOLIDATED STATEMENTS 68 Tel.: 33 (0)1 42 98 12 34 - Telex: PARB 210041 Report of the Statutory Auditors 121 http://www.paribas.com General information 124 A N N U A L R E P O R T - C O M P A G N I E F I N A N C I È R E D E P A R I B A S TABLE OF CONTENTS Group organization (cover flap) P A R I B A S Profile 1 Interview with the chairmen 2 Consolidated financial highlights 6 Shareholder’s handbook 9 Supervisory Board 14 Executive Committee 17 INVESTMENT BANKING 18 Equity 20 Fixed Income 22 Corporate Banking 24 Advisory Services 26 Securities Services 28 Paribas Principal Investments (Paribas Affaires Industrielles) 30 ASSET MANAGEMENT 38 Institutional and Private Asset Management 40 Cardif 42 Cortal 43 RETAIL FINANCIAL SERVICES 44 UFB Locabail 46 Arval 46 Cetelem 47 Cofica 47 UCB 48 Banque Directe 48 OTHER ACTIVITIES 49 Rental property management 49 Real estate holdings 50 Equity holdings 51 Compagnie Financière de Paribas MANAGEMENT REPORT 53 5, rue d’Antin - 75078 Paris Cedex 02 - France CONSOLIDATED STATEMENTS 68 Tel.: 33 (0)1 42 98 12 34 - Telex: PARB 210041 Report of the Statutory Auditors 121 http://www.paribas.com General information 124 P A R I BAS RETAIL INVESTMENT FINANCIAL BANKING SERVICES ASSET MANAGEMENT P A R I BAS RETAIL INVESTMENT FINANCIAL BANKING SERVICES ASSET MANAGEMENT P r o f i l e Paribas, a specialized interna t i o n a l resulting from this merger will bank with a strong European base, be renamed “Paribas”. implements a strategy focusing on This series of transactions is aimed selective growth in expanding at creating value for Paribas share- markets, emphasizing technological holders by streamlining its fina n c i a l innovation, crea t i v i t y , worldwide st ru c t u r e and nurturing the growth of pr esence and distribution. pro fi table businesses in which the With shareholders’ equity of Bank already enjoys leading positions. FR F 53 billion (USD 8.9 billion) and Paribas is now organized arou n d a Cooke solvency ratio of 8.6%, th r ee core businesses: Paribas ranks among the world’s • Investment Banking, pr emier banking groups. Paribas including Equity; Fixed Income; intends to strengthen ret u r n on equity Corporate Banking; Advisory — currently at 13% — to 15% by the Se r vices; Securities Services year 2000. and Paribas Principal Investments In 1997, Paribas conducted a series (Paribas Affa i r es Industrielles); of transactions aimed at integrating • Asset Management, within a single organization all Grou p including the Institutional and businesses. Following successful Private Investment Management exchange offers for all Banque Paribas, activites of Banque Paribas, Cardi f Compagnie Bancaire and Cetelem and Corta l ; sh a r es held by outside investors, • Retail Financial Servi c e s , Compagnie Financière de Paribas will including UFB Locabail, Arva l , ask the Shareholder Meetings of the Cetelem, UCB and Banque Direc t e . various companies involved to approv e the merger of Banque Paribas, Paribas’ ambition is to be the Compagnie Financière de Paribas, Eu r opean ref e r ence and one of the Compagnie Bancaire, and Compagnie world leaders in each of its chosen de Navigation Mixte. The new entity bu s i n e s s e s . MI C H E L FR A N Ç O IS -PO N C E T AN D R É LE VY -LA N G Chairman of the Supervisory Board Chairman of the Board of Management I n t e r v i e w with the chair m e n ahead of our own timetable: net ret u r n on equity was 13% last year, as compared to an interim target of 10% in 1998. Our ambition is to In 1997, Paribas achieved build on this prog r ess to reach a record profits of 15% ret u r n by the year 2000. FRF 6.6 billion — is this A long-standing strategic objective Fi n a l l y , Compagnie Bancaire uptrend sustainable? — and an area of significa n t is reaping the benefits of several pro g r ess in all our businesses last “W e are ahead of years of effo r t, ret u r ning 1997 was a milestone year for ye a r— is to increase the rec u rr i n g to net profi tability and exceeding our own timetable. Paribas, both structurally and in po r tion of our results. In its targets for 1997. Net return on equity te r ms of results. Our goal is Corporate Banking, stren g t h e n e d Ob v i o u s l y , there is still work to was 13% last year. th r eefold: marketing capabilities have en- be done in all areas. Our grow t h Our ambition • for our clients, to rank among abled us to considerably expand plans are ambitious, in line the world’s best banks in our our volume of client-rel a t e d is to reach 15% with the potential of the markets chosen areas of specialization; revenues, reducing profi t in which we operate. We are by the year 2000.“ • for our shareholders, to rel i a b l y dependence on trading for our continuing to invest, parti c u l a r l y generate net ret u r n on equity own account. Asset Management in our international development. of 15%; for third parties also had an And our results are providing us • and for our associates, to excellent year, both in terms of the financial res o u r ces we need pr ovide exciting, high-quality pe rf o r mance and growth of assets to do this. in t e r national career opportu n i t i e s . under management. Paribas We are well on the way toward Principal Investments (Pa r i b a s meeting all these objectives. Aff a i r es Industrielles) confirmed its How will the integration Our 1997 results are good: net capacity to generate steady of Compagnie Bancaire income, at FRF 6. 6 billion, was pro fi ts, thanks to the caref u l and Paribas create value? up 51%, and excluding the di v e r s i fi cation of its portf o l i o , activities disposed of in 1997 — and turned in an outstanding This merger is a fundamental i.e., with our struc t u r e going pe rf o r mance, with ret u r n on step in constructing the Paribas fo rw a r d — net income would capital invested of 30%. of tomorrow , and is value- have been up 68%. In terms of cr eating both from a business pro fit a b i l i t y , we are on track and and from a financial standpoint. 2 “With the three-way merger of Compagnie What will the new Paribas Financière de Paribas, On the business side, with look like? the support of Paribas’ network Compagnie Bancaire and Banque Paribas, of logistical capabilities and solid The struc t u r e is considerably working relationships, the si m p l i fi ed. With the three - w a y So we can say that Paribas is a the holding company companies of the Compagnie me r ger of Compagnie Financière bank active in fast-growing busi- structure will disappear. Ba n c a i r e group will be able to de Paribas, Compagnie Bancaire nesses, with 20,000 em p l o y e e s , Virtually all the activities accelerate growth of their including 8,000 outside of and Banque Paribas, the holding now integrated into activities outside of France, company struc t u r e will disappear. Fr a n c e . Paribas enjoy double-digit which already rep r esent 25% In its place will be a single bank, of the total. Conversely, Paribas Paribas, encompassing a number growth rates. will gain direct access to several Is the strategy modified by of operating units specialized We are emphasizing million Compagnie Bancaire the merger? by line of business or operating Paribas’ appeal customers in France and as wholly owned subsidiaries, as a growth stock.” el s e w h e r e, a client base which in three core businesses: Our strategy remains based on should over time benefit our our perception that the world- asset management and brok e r a g e • Investment Banking, encom- wide financial environment is activities.