Annual Report 2008 Contents A European leader with global operations 02-03 Key figures 04-05 Chairman and Chief Executive Officer’s statement 06-09 Executive Committee 10-11 Memberships of the Board of directors 12-14 Remuneration 15 BNP Paribas and its shareholders 16-27 RETAIL BANKING 28-57 French Retail Banking 33-41 • Individual clients 34-36 • Entrepreneurs and freelance professionals 37-38 • Corporate and institutional clients 39-40 • FRB – After-sales organisation 41 BNL banca commerciale 42-47 BancWest 48-49 Emerging Markets 50-52 BNP Paribas Personal Finance 53-55 Equipment Solutions 56-57 CORPORATE & INVESTMENT BANKING 58-81 Financing expertise 63-69 Debt Capital Markets 70 Derivatives 71-77 Advisory franchise 78-81 ASSET MANAGEMENT & SERVICES 82-101 BNP Paribas Investment Partners 87-88 BNP Paribas Assurance 89-92 BNP Paribas Wealth Management 93-95 BNP Paribas Personal Investors 96-97 BNP Paribas Securities Services 98-99 BNP Paribas Real Estate 100-101 KLÉPIERRE & BNP PARIBAS PRINCIPAL INVESTMENTS 102-105 Innovation 106-111 BNP Paribas Group’s core values 112-113 Human resources development 114-133 Corporate social and environmental responsibility 134-149 • The Group’s approach 136-141 • A partner in society 142-149 Glossary 150-157 01 02 A European leader with global operations Over 170,000 employees in more than 80 countries Europe 132,000 employees including France 64,000 employees United States 15,000 employees Asia 9,500 employees Africa 8,900 employees Rest of world 6,800 employees 03 Results (in millions of euros) 31 December 2007 31 December 2008 Key Total Assets 1,694,454 2,075,551 Customer deposits 445,103 494,401 Customer loans (gross) 346,704 413,955 Shareholder’s equity 53,799 53,228 figures 10.0%* 11.1%** International capital adequacy ratio Tier one ratio 7.3%* 7.8%** (*) Bâle I. (**) Bâle II. Workforce (Full-time equivalent) 2007 2008 World 162,687 173,188 Europe (including overseas 126,000 132,759 department and territories) Long-term credit ratings Standard & Poor’s AA Negative outlook rating revised on 28 January 2009 Moody’s Aa1 Negative outlook outlook revised on 16 January 2009 Fitch AA Negative outlook outlook revised on 3 February 2009 Presentation of the Group BNP Paribas is a European leader in global banking and financial services and one of the six strongest banks in the world according to Standard & Poor’s. Present across Europe through all its business lines, the Group has two domestic retail banking markets in France (French Retail Banking) and Italy (BNL). It has one of the largest international networks with operations in more than 80 countries and over 170,000 employees, including over 130,000 in Europe. BNP Paribas has key positions in its three core businesses: Retail Banking Corporate &Investment Banking (CIB) Asset Management & Services (AMS) BNP04 Paribas Annual Report 2008 Revenues (in millions of euros) 27,943 31,037 27,376 18,823 21,854 2004* 2005** 2006** 2007** 2008** Gross operating income (in millions of euros) 12,273 10,878 7,231 8,485 8,976 2004* 2005** 2006** 2007** 2008** Net income Group share (in millions of euros) 7,308 7,822 5,852 4,668 3,021 2004* 2005** 2006** 2007** 2008** Earnings per share (in euros) (***) 8.49 6.96 8.03 5.51 3.07 2004* 2005** 2006** 2007** 2008** Return on Presentation of the Group equity (in %) (****) 21.2 16.8 20.2 19.6 6.6 2004* 2005** 2006** 2007** 2008** (*) Under French GAAP. (**) Under International Financial Reporting Standards (IFRS) as adopted by the European Union. Market (***) Adjusted for the impact of the 2006 rights issue on years 2003 capitalisation to 2005. (****) Return on equity is calculated by dividing net income Group (in billions of euros) 76.9 share (adjusted for interest on undated super-subordinated notes Source: Bloomberg 67.2 deemed equivalent to preferred shares issued by BNP Paribas SA 47.2 57.3 and treated as a dividend for accounting purposes) by average 27.6 equity attributable to equity holders at 1 January and 31 December of the period concerned (after distribution and excluding undated super-subordinated notes deemed equivalent to preferred shares 31/12/04 31/12/05 31/12/06 31/12/07 31/12/08 issued by BNP Paribas SA). 05 Chairman and Chief Executive Officer’s statement Comfortable results despite BNP Paribas’ main strength lies in its the unprecedented crisis customer franchises, which were further 2008 was a year of unprecedented crisis strengthened in 2008 across most of for the entire financial services industry, its business activities. In 2009, more leading to the disappearance, takeover than ever before, we intend to leverage or nationalisation, either de jure or de this strength by remaining close to our facto, of many operators, including some customers and true to our credo of “real large banking and insurance groups in economy bank”. both the United States and Europe. It took massive government and central 2008 results bank intervention to avoid systemic failure 2008 revenues were driven by good following the collapse of Lehman Brothers performances from Retail Banking and in September. This caused a severe Asset Management and Services, which liquidity crunch and a stock market tumble produced a pre-tax return on allocated the like of which has not been seen since equity of 25% and 28% respectively. the nineteen thirties. Retail Banking continued to perform Along with the rest of the sector, well, supported by the growing appeal of BNP Paribas was badly affected by our brand. the crisis in the final quarter, due to the massive fall in the equity markets French Retail Banking reported strong and market dislocation. However, we growth in its customer franchise, attracting remained comfortably profitable over the more than 200,000 new retail customers year as a whole, reporting net earnings over the year, and a sharp improvement in of EUR 3 billion, putting us among the customer satisfaction. Continued revenue Top 10 banks in the world. During this year growth, coupled with strict cost and risk of crisis, we have therefore demonstrated discipline, resulted in a slight increase in the robustness of our diversified pre-tax income. Under the circumstances, customer-driven business model and this is an excellent performance. our healthy financial structure, which was During 2008, we also successfully further strengthened in early 2009 by our completed the integration of BNL. participation in the second tranche of the Synergies were revised up by 15% French government’s economic stimulus in early 2008 compared with the plan. initial plan and were fully achieved BNP06 Paribas Annual Report 2008 at 31 December 2008, thereby confirming the Bank’s integration capability. BNL continued to enjoy strong business momentum, attracting a net new 47,000 retail current accounts. It also met its target of delivering positive jaws of BNP Paribas 5 percentage points between revenue and cost growth, resulting in a sharp increase in pre-tax income. at a glance BancWest continued to perform well despite the deterioration in the economic EUR 3 BILLION environment, reporting pre-tax income of EUR 333 million. BancWest is one of the IN NET INCOME very few US retail banks to have made a comfortable profit in 2008. (GROUP SHARE) DEPSITE FINANCIAL CRISIS Emerging Markets reported 11.5% growth in pre-tax income despite the severe economic crisis that hit Ukraine. Business momentum remained strong, with Revenues EUR 27,376 million 250,000 new customers. In its first year as the specialist entity housing all the Group’s personal lending Gross operating income operations, Personal Finance posted good revenue growth but a sharp increase EUR 8,976 million in the cost of risk drove pre-tax income down to EUR 666 million compared with Net income group share EUR 808 million in 2007. Lastly, Equipment Solutions was affected by a sharp EUR 3,021 million deterioration in operating conditions, with falling used vehicle prices and an increase ROE after tax in the cost of leasing risk leading to a significant decline in pre-tax income. 6.6% Asset Management and Services (AMS) attracted net new inflows of EUR 11 billion Dividend in 2008, an altogether exceptional performance in current market conditions, largely EUR 1.00 due to the AMS teams’ dedication and the Group’s solid, professional reputation. BNP Paribas was one of the very few banks to achieve net asset inflows in 2008. STRENGTHENING Corporate and Investment Banking (CIB) experienced growing difficulties in its FINANCIAL STRUCTURE capital markets activities in 2008, which had a severe adverse impact on its results and Tier one ratio those of the Group. Although comfortably profitable in the first half, CIB fell just below 31/12/2008: 7.8% breakeven in the third quarter before suffering heavy losses in October and November. (31/12/2007: 7.3%) In line with our policy of transparency, we reported CIB’s results to the market at the end of November as soon as we had the details. 07 Chairman and Chief Executive Officer’s statement The October and November losses 2009 were due to the residual risks retained 2009 will be a year of continued strong by the bank when selling hedging uncertainty, with most observers instruments to its clients, mainly in the forecasting a world recession which equity markets. Under normal market will obviously affect the entire financial conditions, our own hedging strategies sector. would have strictly contained these risks As in 2008, we will continue to draw on but market dislocation during this period, our structural strengths to ride out the reflected in exceptionally high volatility crisis, namely our diversified business and an unprecedented correlated fall model with its strong weighting to retail in all asset classes, made them very banking, our robust financial structure difficult to manage.