Annual Report • 2002 The bank for a changing world In this year's Annual Report we have turned the lens on men and women who have moved to another region or country, and have had to come to grips with a new culture and work ethos. We have interviewed a cross-section of the BNP Paribas community – including an Italian in New York, a Russian in Athens, a Belgian in Tokyo, a Swedish woman in Paris and a woman from Alsace now based in Nice – to find out how they have adapted to their new environment, learned to accept and appreciate different mindsets and different ways of doing things. For the staff of BNP Paribas – formed out of a successful merger – this fusion of cultures is a source of personal and professional fulfilment. The photo shoots took place in January and February 2003 by four people from Rapho, one of the oldest press photography agencies in Paris, widely acclaimed for the diversity and reputation of its photographers. Jean-Marc Armani Jean-Erick Pasquier Bahrain Montreal Cairo New York Madrid Tokyo Gérard Uféras Gilles Leimdorfer London Athens Paris Moscow Metz Strasbourg Nice Cover photo : Gérard Uféras - Rapho Contents Key Figures 2 3 Chairman’s Statement 4 5 The Executive Committee 6 7 The Group’s Core Businesses 8 9 History of the Group 10 11 Corporate and Investment Banking 14 • Corporate & Financial Institutions 16 29 • Advisory and Capital Markets 18 • Specialised Financing 23 Retail Banking 30 BNP PARIBAS MONTREAL • French Retail Banking 32 59 • Retail Financial Services 42 • International Retail Banking 54 Private Banking, Asset Management, 60 Securities Services and Insurance 71 • Private Banking and Asset Management 62 • BNP Paribas Securities Services 66 • Insurance 69 Real Estate 70 BNP Paribas Capital 72 73 Sustainable Development 76 • BNP Paribas’ Sustainable Development Policy 126 - A structured approach to Sustainable Development 76 - Corporate Governance 78 Remunerations 91 - Group Ethics and Compliance 95 - Credit Policy 98 • BNP Paribas and its Stakeholders - Shareholder Information 102 - Human Resources Development 114 - Environment 119 - Client and Supplier Relations 121 - Patronage 124 Tennis: a commitment that has lasted 30 years 127 129 Financial and Legal Information 132 • Review of Operations 134 259 • Consolidated Financial Statements 160 • Parent Company Financial Statements 229 • General Information 246 • Resolutions presented at the Combined Annual and Extroardinary General Meeting of 14 May 2003 254 Glossary 257 262 ANNUAL REPORT BNP PARIBAS 2002 Fitch Standard Moody’s Key * Proformanetincomebeforerestructuringprovisions. & Ratings * Proformanetincomebeforerestructuringprovisions. Poor 1997 ’ 10.4 1997 909 s Return onequity (as of1March2003) 1998 11.8 1998* 1,114 (in millionsofeuros) Net income AA-Aa2 Stableoutlook Stableoutlook AA Stableoutlook 1999* 17.1 1999* 3,266 (in %) 2000 20.9 2000 4,124 2001 18.2 2001 4,018 2002 13.5 2002 3,295 2002 Figures EuropeWorld 66,200 65,000 (1 ) * 1999 pro forma net income before restructuring provisions divided 1999 proformanetincomebeforerestructuringprovisions * Number ofGroupEmployees by the number of shares outstanding at 31 December1999. by thenumberofsharesoutstandingat31 Adjusted for the 20 February 2002 two-for-one sharesplit. forthe20February2002 Adjusted (at 31 December, inbillionsofeuros) (at 31December, Earnings pershare 1997 10.4 Market capitalisation 1997 2.16 1998 15.3 1998 2.58 87,700 85,000 1999 41.2 (in euros) 2002 2001 1999* 2.79 2000 41.9 2000 4.70 2001 44.5 2001 4.64 2002 34.8 2002 3.78 (1) 3 Net banking income Gross operating income by core business by core business (in %) (in %) 13% 13% 57% 56% 30% 31% • Retail Banking • Retail Banking • Private Banking, Asset Management, • Private Banking, Asset Management, Insurance and Securities Services Insurance and Securities Services • Corporate and Investment Banking • Corporate and Investment Banking Results (in millions of euros) 2002 2001 Change 2002/2001 Net banking income 16,793 17,450 -3.8% Gross operating income 5,838 6,517 -10.4% Operating income 4,368 5,205 -16.1% Pre-tax income 4,813 6,232 -22.8% Net income 3,295 4,018 -18.0% Business (in millions of euros) 2002 2001 Total assets 710,319 825,296 Customer deposits 267,190 286,442 Customer loans (gross) 235,688 245,391 Shareholders’ equity (1) 26,445 24,610 International capital adequacy ratio 10.9% 10.6% o/w Tier One 8.1% 7.3% (1) Before income appropriation. Chairman’s Statement Conditions in the global banking and financial services’ market worsened significantly in 2002, especially during the second half. Although slower economic growth and the crisis in the financial markets inevitably had an effect on operating results, BNP Paribas turned in a very good performance. With net income of EUR 3.3 billion, BNP Paribas was the most profitable of the euro zone banks. Return on equity was correspondingly high, at 13.5%. We improved or maintained our competitive positions in most of our markets. We also stepped up our drive to contain costs, and strengthened our risk management procedures and disciplines. At the same time, our diversified portfolio of businesses proved its worth in these difficult times, by providing a wellspring of profits from the most buoyant businesses which largely offset the effect of lower profits from other activities, mainly as a result of the crisis in the financial markets. MICHEL PÉBEREAU – CEO All of our core businesses contributed to our robust earnings performance. Our three Retail Banking businesses – French Retail Banking, International Retail Banking and Retail Financial Services – achieved good results while at the same time laying the foundations for future growth. French Retail Banking stepped up a gear to offer clients the latest banking products and services, with the full-scale launch of its 5 multi-channel bank. International Retail Banking considerably extended its presence on the West Coast of the United States with the acquisition of United California Bank. Retail Financial Services continued to grow its business and establish new partnerships. Two strategic external growth operations were completed during the year – in the French consumer loans market with the acquisition of Facet and in the German on-line brokerage market with the formation of the Cortal Consors group. Corporate and Investment Banking turned in a resilient performance in a year of crisis BNP Paribas in the financial markets, while also successfully at a glance carrying through the rationalisation of client relationship management structures. Asset No. 1 bank in the euro zone in terms of profits Management and Services generated significant and market capitalisation profits despite being severely tested by the falling stock markets. Development programmes In a very difficult environment, for the various Asset Management and Services net banking income came to EUR 16.8 billion, businesses have been redrawn in response down by only 3.8% on 2001 to the changed market conditions. A healthy 13.5% return on equity and a competitive Since the beginning of 2003, economic conditions 65.2% cost/income ratio and the situation in the financial markets have remained difficult. The outlook is uncertain, Present in over 85 countries, especially now that war has been engaged in Iraq. with 87,700 employees, including 66,000 in Europe Against this unsettled backdrop, our Group is focusing on maintaining a steady course. We are giving priority to expanding the business base, actively seeking out opportunities to cut costs, tightly controlling risks and maintaining a strong balance sheet. Our teams are committed to offering clients an increasingly high quality service, seizing opportunities and successfully taking up the many challenges that are a feature of our changing world. d o e k l f g b i h p c q n a m j The Executive Committee 7 a Michel Pébereau j Vivien Lévy-Garboua Chairman of the Board of Directors Private Banking, Asset Management, and Chief Executive Officer Securities Services, Insurance and Real Estate b Baudouin Prot President, and Chief Operating Officer k Amaury-Daniel de Seze BNP Paribas Capital c Dominique Hoenn Chief Operating Officer l Michel François-Poncet, d Philippe Blavier Vice-Chairman of the BNP Paribas Corporate and Investment Banking Board of Directors, m Jacques de Larosière, e Philippe Bordenave Advisor to the Chairman, Finance and Control n Jean-Laurent Bonnafé, French Retail Banking, f Georges Chodron de Courcel o Michel Clair, Corporate and Investment Banking Group Real Estate Manager, p Pierre Mariani, g Jean Clamon International Retail Banking, Retail Financial Services are not members, but attend Executive Committee meetings h Hervé Gouëzel Group Information Systems q Laurent Tréca Group Development, i Bernard Lemée Executive Committee Spokesman Group Human Resources Executive Committee 2002 Corporate and Investment Banking Advisory and Capital Markets Corporate Finance In 2002, BNP Paribas ranked the 3rd largest player in Euronext (France, Belgium and the Netherlands) and 3rd in Germany for Corporate Finance offers advisory services for mergers share brokerage (sources : Euronext and Deutsche Börse). It was also & acquisitions and primary equity market transactions. ranked 1st on the Monep forward market (source : Euronext) and The M&A teams advise both buyers and targets and also offer 2nd in France for warrants trading volumes (source : Euronext). advice on other strategic financial issues, such as privatisations. Primary market services include flotations, equity issues, secondary issue placements, and convertible/exchangeable bond issues. Fixed Income Fixed Income’s formidable product expertise and distribution Corporate Finance has adopted a matrix organisation capabilities have positioned BNP Paribas in the top three designed to give clients access to the best combination of Fixed Income players in Europe (ranked 2nd in managing specialists in each product, industry and geographical area, euro-denominated bond sales in 2002, with 6.3% of the while optimising resource management. market, according to Bloomberg data), and have allowed it to build a strong client franchise in Asia, Japan Corporate Finance employs some 350 professionals located and the USA.