Banque Palatine – INTERIM FINANCIAL REPORT – June 2015 · (-€0.1 million and -0.3%), reaching...

Banque Palatine – INTERIM FINANCIAL REPORT – June 2015

31 JULY 2015

INTERIM FINANCIAL REPORT June 2015

The condensed interim financial statements have been the subject of a limited review.


CONTENTS

Chapter 1 – Person responsible and their statement

Person taking responsibility for the Interim Financial Report

Statement from the person responsible for the Interim Financial Report

Chapter 2 – Interim Activity Report

Chapter 3 – Financial Statements

Condensed interim financial statements

Statutory Auditors' limited review report on the condensed interim financial

statements

Chapter 4 – Documents available to the public

Contacts


Chapter 1 – Person responsible and their statement

Person taking responsibility for the Interim Financial Report

Pierre-Yves Drean, Chief Executive Officer

Statement from the person responsible for the Interim Financial Report

I confirm that, to my knowledge, the condensed consolidated financial statements for this

period ended have been prepared in accordance with applicable accounting standards

and give a true and fair view of the assets, financial position and results of the company

and all entities included in the consolidated group, and that the interim activity report

attached hereto presents an accurate picture of the significant events which occurred

during the first six months of this financial year, their impact on the financial statements,

and a description of the main risks and uncertainties for the remaining six months of the

year.

Pierre-Yves Drean

Paris, 31 July 2015

Banque Palatine – Interim Financial Report – June 2015

CHAPTER 2 – INTERIM ACTIVITY REPORT – JUNE 2015

1 – Significant events of the first half-year and their impact on the interim

financial statements

IFRIC 21

Since 1 January 2015 (date of first-time adoption), Banque Palatine has applied IFRIC 21 "Levies", which has resulted in a change in accounting method with regard to:

� the social security and solidarity contribution (C3S or Organic) affecting the opening balance sheet at 1 January 2015 (by €0.45 million) and the income for 2015 (by €0.69 million);

� the accounting at 1 January 2015 of taxes previously spread over the year,

namely the systemic banking tax (TSB), the contribution to Autorité de Contrôle Prudentiel et de Résolution (ACPR) supervisory costs and property tax (effect of €1.4 million).

New contributions

Four new contributions have been introduced, representing a total amount of €3.8 million at 30 June 2015:

� the Single Resolution Fund (Regulation (EU) No. 806/2014 and Implementing Regulation (EU) No. 2015/81);

� the operating costs of the Single Resolution Council (Bank Recovery and

Resolution Directive No. 2014/59);

� European Central Bank supervisory fees;

� the local authorities' support fund.

2 – Post-balance sheet events

Between 30 June 2015 and 29 July 2015, the date on which the financial statements were approved by the Board of Directors, no event likely to have a material effect on the financial position or income of Banque Palatine occurred.

3 – Activity during first-half 2015

Economic climate Financial year 2015 began with an unexpected slowdown in American activity whilst growth in Britain was also disappointing. However, the euro zone maintained the same pace of growth as at the end of 2014 and even exceeded expectations in France, Spain and Italy. This growth was primarily due to the strong depreciation of the euro and the fall in the price of oil. In this generally positive context, the French economy was buoyant during the first quarter (+0.6%). This increase was driven by an upturn in manufacturing output (+1.3%) and higher household consumption (+0.8%).


The introduction of the ECB’s quantitative easing program accentuated the flattening of the long-term interest rate yield curve during the first quarter of 2015. This trend then reversed in the spring, following an improvement in the economic outlook for both Europe and the United States. The first half of the year ended with the resurgence of Greece's payment default risk. After much negotiation, a compromise was agreed at the beginning of July between Greece and its creditors, allowing Greece to remain in the euro zone, for the short term at least.

Commercial activity

Corporate Market

During the first half of 2015, in a context of increased competition, Banque Palatine continued to consolidate the development of its activity in the corporate market, across the three primary components of its business: � The acquisition of new corporate clients amounted to 215 accounts, including 107

new relationships in its core target market of companies with turnover of more than €15 million.

� Active support to stimulate the economy included new loans to businesses amounting to €783 million compared to €594 million for the same period in 2014. This sustained growth in lending has led to a significant increase in average corporate loans outstanding to €6,084 million at 30 June 2015, up 5.4% compared to the beginning of the year.

� Corporate savings and deposits now amount to average holdings of €12,440 million.

Private Customer Market

The private customer market continued to develop in line with the Bank's strategic plan and related objectives. Its teams are actively working on developing its company director customer base in synergy with the corporate market, wealth management customers and customer loyalty management: � At the end of June, new accounts for customers with assets in excess of €50,000

were up 32.9% (384 new accounts opened compared to 289 at the same time in 2014).

� With regard to financing since the beginning of the year, new home loans amounted to more than €116 million, however this was down on the level of €130 million at end-June 2014. The forecast suggests that this difference should be made up by strong growth during the second half of the year. Personal loans increased significantly to €21.3 million, against €13.1 million for the same period in 2014.


� Average security deposits (shares, bonds and UCITS) grew 7.3% compared to 31 December 2014 and life insurance was up 1.9%. Savings deposits increased 2.6% from 31 December 2014. Overall, the total average private customer market has grown by approximately 3% to €127.2 million since the beginning of the year (+1.7% since June 2014). In terms of assets, average outstandings fell by €29.5 million, or 2.0% (down 3.8% since June 2014).

Asset management – Palatine Asset Management

Palatine Asset Management outstandings amounted to €3,545 million at 30 June 2015, compared to €3,082 million at the beginning of the year. The company has undoubtedly benefited from equity market growth during this period and has not suffered despite excessively low short-term rates which, generally, have had an unfavourable impact on money market fund management fees. It should be noted in this respect that the active management approach used by the management company, strong equity market performance and good expense control have all contributed to an increase in half-year results. Net income soared to €6.1 million, €1 million higher than first-half 2014.

Activities and results of other subsidiaries and consolidated investments

At 30 June 2015, the fully consolidated insurance brokerage subsidiary Ariès Assurances recorded net income of €0.07 million compared to €0.1 million at 30 June 2014. This is due to the reduction in the size of company workforces, resulting in a lower total payroll, the basis on which the company's turnover is calculated. Conservateur Finance, a finance and corporate investment firm consolidated using the equity method, recorded a share of net income of €0.30 million at 30 June 2015, compared to €0.22 million at 30 June 2014, by virtue of the strong performance of UCI commission and good expense control.


4 – Analysis of interim financial statements

Consolidated financial results Net banking income for the first half of 2015 reached €164.2 million, an increase of €4.7 million or 2.9% compared to 30 June 2014. This increase reflects the positive movement of customer dealing room commissions and income, offsetting the decline experienced in interest income and other income. Interest income fell by 1.5% (-€1.7 million), reflecting both the reversal of first-half 2014 provisions for PEL regulated home savings plan contingencies (€1.9 million) and the impact of the Basel III LCR. Net commission rose 8.5% to €47.3 million (€43.6 million at 30 June 2014): the Bank (+€2.5 million) and Palatine Asset Management (+€1.2 million) both contributed to this positive change. Total operating expenses reached €100.1 million (+€10.7 million compared to 30 June 2014 published). In comparison with 30 June 2014 pro forma (adjusted for the impact of IFRIC 21), expenses rose by €8.3 million (+9.0%). This figure includes the €3.5 million contribution to the Single Resolution Fund. The remainder of the change is the result of an increase in the Bank's salary and employee benefit expenses. Gross operating income at 30 June 2015 thus amounted to €64.0 million, a decline of €6.0 million (-8.6%) compared to 30 June 2014 published. On a pro forma basis, gross operating income fell by €3.6 million (-5.3%) compared to first-half 2014. The cost of risk in the first half of 2015 amounted to -€22.9 million, down €3.4 million (-12.9%) on the same period in 2014. At 30 June 2015, the share in net income of associates stood at €0.30 million, generated entirely by Conservateur Finance, compared to €0.22 million in first-half 2014. Despite the impact of the €3.5 million contribution to the Single Resolution Fund, consolidated pre-tax net income was stable overall compared to first-half 2014 pro forma (-€0.1 million and -0.3%), reaching €41.4 million for first-half 2015. IFRS consolidated net income at 30 June 2015 amounted to €24.0 million, compared to €27.7 million as published in June 2014 and €26.4 million pro forma in June 2014. The Tier 1 capital and liquidity ratios remain satisfactory, at 8.1% and 189% respectively.

Consolidated balance sheet The consolidated balance sheet of the Bank at 30 June 2015 amounted to €16,003.9 million, an increase of €282.1 million compared to 31 December 2014. With regard to assets, the two most significant changes reflect the active management of the Bank's Basel III LCR: as a result, "Cash, central banks, post office banks" items increased by €1,360.5 million, while "Loans and advances due from credit institutions" fell by -€1,121.9 million. Loans and advances due from customers increased by €153.3 million. With regard to liabilities, the main differences reflect the change in structure of customer resources, with Debt securities (predominantly deposit certificates) falling by €1,474.1


million and Customer deposits (particularly overnight deposits) increasing by €1,492.4 million. Equity attributable to equity holders of the parent amounted to €804.1 million. 5 – Risk management

Rate and liquidity risks

Rate and liquidity risks are managed as part of the Bank's asset/liabilities management, which includes protecting the Bank's balance sheet and commercial margins whilst ensuring that results remain consistent through the monitoring and, where appropriate, hedging of these risks. This management is monitored quarterly by an asset and liabilities management committee, however liquidity is tracked daily and monthly by a variety of internal and regulatory indicators to which limits apply. These risks are measured:

� using a static approach until both on- and off-balance sheet transactions have been extinguished on the date of analysis;

� using a dynamic approach incorporating activity forecasts for the current year,

and the coming two years. Banque Palatine has introduced processes and indicators to ensure that it complies with French Law on the separation of banking activities.

Credit risks

Banque Palatine has no commitments in any country appearing on the list of at-risk countries as defined by BPCE, its parent company. In a difficult economic climate, the commercial bank's rate of doubtful loans for on-balance sheet and off-balance sheet commitments stood at 6.5%, compared to 6.3% in June 2014. We nevertheless have recorded a slight fall in the cost of risk which stood at €22.9 million at 30 June 2015, compared to €26.3 million at 30 June 2014.

6 – Outlook, main risks and uncertainties for the remaining six months of the

year Continuing on from first-half 2015, which notably saw the interest rate yield curve improve and the beginning of strong commercial momentum both in terms of lending and gaining new customer business, we can look to the second half of 2015 with confidence. Barring unforeseen events, current financial expectations are for 2015 net income to reach a similar level to that of 2014.

Banque Palatine S.A. 42, rue d’Anjou 75008 Paris, France

Statutory Auditors' report on the 2015 interim financial information

Period from 1 January to 30 June 2015

PricewaterhouseCoopers Audit 63, rue de Villiers

92208 Neuilly-sur-Seine Cedex

KPMG Audit FS I Tour EQHO

2, avenue Gambetta 92066 Paris La Défense Cedex

Banque Palatine S.A. 42, rue d’Anjou 75008 Paris

Statutory Auditors' report on the 2015 interim financial information

Period from 1 January to 30 June 2015

Dear Sirs,

Under the terms of the mission entrusted to us by your Annual General Meeting, and pursuant to Article L. 451-1-2 III of the French Monetary and Financial Code, we have carried out:

- a limited review of the condensed consolidated interim financial statements of Banque Palatine S.A. for the period 1 January to 30 June 2015, as attached to this report;

- checks on the information provided in the interim activity report.

Your Board of Directors is responsible for the preparation of these condensed consolidated interim financial statements. Our responsibility is to express an opinion on these financial statements, based on our limited review.

I. Opinion on the financial statements

We have carried out our limited review in accordance with the professional standards of practice applicable in France. A limited review essentially involves discussions with management members in charge of financial and accounting matters and applying analytical procedures. This work is less extensive than that required for an audit carried out in accordance with the professional standards of practice applicable in France. Consequently, the level of assurance obtained from a limited review that the financial statements, taken as a whole, are free from significant misstatements, is lower than that obtained following an audit.

Based on our limited review, we have not discovered any significant misstatements likely to have an effect on the compliance of the condensed consolidated interim financial statements with IAS 34 - Interim Financial Reporting – part of the IFRS as adopted in the European Union.

Banque Palatine S.A. Statutory Auditors' report on the 2015 interim financial information

Without prejudice to the opinion expressed above, we draw your attention to note 2.2 "Standards" which outlines the effects of the first-time adoption of IFRIC 21 "Levies".

II. Specific checks

We have also carried out specific checks on the information provided in the interim activity report accompanying the condensed consolidated interim financial statements on which we carried out our limited review.

We have no comments regarding the accuracy of this information, nor on the consistency of this information with the condensed consolidated interim financial statements.

Neuilly-sur-Seine and Paris La Défense, 31 July 2015

Statutory Auditors

PricewaterhouseCoopers Audit

Anik Chaumartin Lionel Lepetit Partner Partner

KPMG Audit FS I

Fabrice Odent Partner

30 JUNE 2015

IFRS CONSOLIDATED FINANCIAL

STATEMENTS OF THE PALATINE GROUP

AT 30 JUNE 2015

Palatine Group - IFRS consolidated financial statements at 30 June 2015 Page 2

I. CONSOLIDATED BALANCE SHEET

ASSETS

ASSETS

€ millions Notes 30/06/2015 31/12/2014

Banks and central banks

1,674.4 313.9

Financial assets at fair value through profit or loss account 3.1.1 92.3 67.7

Derivative hedging instruments 3.2 10.9 11.7

Financial assets available for sale 3.3 1,348.4 1,444.9

Loans to financial institutions 3.6.1 4,553.8 5,675.7

Loans to customers 3.6.2 7,902.2 7,748.9

Held-to-maturity investments 3.7 51.0 92.7

Deferred tax assets

15.9 17.5

Adjustment accounts and miscellaneous assets

304.4 298.8

Shares in associates 5.1 4.2 4.4

Investment property

0.4 0.4

Property, plant and equipment

19.8 20.5

Intangible assets

22.4 20.9

Goodwill 3.8 3.8 3.8

TOTAL ASSETS 16,003.9 15,721.8

LIABILITIES & EQUITY

LIABILITIES

€ millions Notes 30/06/2015 31/12/2014

Financial liabilities at fair value through profit or loss 3.1.2 85.5 61.9

Derivative hedging instruments 3.2 137.6 146.3

Debts to financial institutions 3.9.1 2,686.6 2,452.3

Customer deposits 3.9.2 9,634.3 8,141.9

Debt securities 3.10 2,428.9 3,903.0

Current tax liabilities

3.3 0.6

Deferred tax liabilities

1.7 1.9

Adjustment accounts and miscellaneous

129.9 107.1

Provisions 3.11 51.8 45.5

Subordinated debt 3.12 40.2 40.5

Shareholders’ equity 804.1 820.8

Equity attributable to equity holders of the parent 804.1 820.8

Share capital and share premium 595.5 595.5

Consolidated reserves 185.6 172.2

Gains and losses recognised directly in other items of comprehensive income -1.0 0.3

Income for the period 24.0 52.7

Non-controlling interests (minority interests) 0.0 0.0

TOTAL LIABILITIES AND EQUITY 16,003.9 15,721.8


II. CONSOLIDATED INCOME STATEMENT

€ millions Notes First-half 2015 First-half 2014

Interest and similar incomes 4.1 176.2 187.6

Interest and similar expenses 4.1 (66.6) (76.2)

Fee incomes 4.2 53.8 49.5

Fee expenses 4.2 (6.5) (5.9)

Gains or losses on financial assets at fair value through profit or loss 4.3 7.8 4.6

Gains or losses on financial assets available for sale 4.4 0.5 0.5

Incomes from other activities 4.5 1.0 0.7

Expenses on other activities 4.5 (2.0) (1.2)

Net banking income 164.2 159.5

Operating expenses 4.6 (94.9) (84.4)

Net depreciation and amortisation of tangible and intangible assets

(5.3) (5.1)

Gross operating income 64.0 70.0

Cost of risk 4.7 (22.9) (26.3)

Operating income 41.1 43.7

Share in net income of associates 5.2 0.3 0.2

Net income before tax 41.4 43.9

Income tax 4.8 (17.4) (16.2)

Net income 24.0 27.7

Non-controlling interests (minority interests)

0.0 0.0

Net income attributable to equity holders of the parent 24.0 27.7

III. COMPREHENSIVE INCOME

€ millions First-half 2015 First-half 2014

Net income 24.0 27.7

Remeasurement gains and losses on defined-benefit plans (1.5) 0.0

Tax impact of remeasurement gains and losses on defined-benefit plans 0.5 0.0

Items that cannot be reclassified in income (1.0) 0.0

Change in the value of available-for-sale financial assets (0.6) 0.8

Changes in the value of hedging derivatives 0.0 0.4

Income taxes 0.2 (0.4)

Items that can be reclassified in income (0.4) 0.8

GAINS AND LOSSES RECOGNISED DIRECTLY IN OTHER ITEMS OF COMPREHENSIVE INCOME (NET OF TAX) (1.4) 0.8

COMPREHENSIVE INCOME 22.6 28.5

Attributable to equity holders of the parent 22.6 28.5

Non-controlling interests (minority interests) 0.0 0.0


IV. STATEMENT OF CHANGES IN EQUITY

Statement of changes in equityPalatine Group

€ millions

Financial assets

available for sale

Derivative hedging

instruments

EQUITY AT 1 JANUARY 2014 538,8 56,7 159,6 80,0 (46,9) (0,1) 1,0 0,0 0,1 0,0 789,2 0,0 789,2

Dividends paid (19,4) -19,4 -19,4

Consideration for deeply subordinated notes (0,3) -0,3 -0,3

Gains and losses recognised directly in other items

of comprehensive income 0,6 0,3 0,9 0,9

Profit or loss 27,7 27,7 27,7

EQUITY AT 30 JUNE 2014 538,8 56,7 140,2 80,0 -47,2 -0,1 1,6 0,3 0,1 27,7 798,1 0,0 798,1

Consideration for deeply subordinated notes (0,2) (0,2) (0,2)


of comprehensive income 0,1 (0,7) (1,0) (1,6) (1,6)


Other changes 0,4 (0,9) (0,5) (0,5)

EQUITY AT 31 DECEMBER 2014 538,8 56,7 140,6 80,0 (48,3) (0,1) 1,7 (0,4) (0,9) 52,7 820,8 0,0 820,8

Appropriation of 2014 net income 53,5 (0,8) (52,7) 0,0 0,0

Effect of IFRIC 21 0,5 0,5 0,5

EQUITY AT 1 JANUARY 2015 538,8 56,7 194,1 80,0 (48,6) (0,1) 1,7 (0,4) (0,9) 0,0 821,3 0,0 821,3

Dividends paid (39,6) (39,6) (39,6)

Consideration for deeply subordinated notes (0,3) (0,3) (0,3)


of comprehensive income (0,4) (0,9) (1,3) (1,3)


EQUITY AT 30 JUNE 2015 538,8 56,7 154,5 80,0 (48,9) (0,1) 1,3 (0,4) (1,8) 24,0 804,1 0,0 804,1

Equity attributable to non-controlling

interests (minority interests)

Totalconsolidated

equityShare capital

Additional paid-in capital

Retained earnings

Translation differences

Change in fair value of financial instruments

Remeasurement gains and losses

on employee benefits

Share capital and premiums

Perpetual deeply subordinated

notesConsolidated

reserves

Gains and losses recognised directly as shareholder’s equity

Net income attributable

to equity holders of the parent

Equity attributable

to equity holders of the parent


V. CASH FLOW STATEMENT


Net income before tax 41.4 43.9 Net depreciation and amortisation of property, plant & equipment and intangible assets

5.2 5.1

Net provisions and charges for impairment 11.5 19.2

Share of income of affiliates 0.2 0.5

Net gains/losses on investment activities (1.1) (2.4)

Other movements 57.0 (91.2)

Total non-cash items included in net income before tax 72.9 (68.8) Net increase or decrease arising from transactions with credit institutions

782.6 786.4

Net increase or decrease arising from transactions with customers 1,328.5 118.5

Net increase or decrease arising from transactions affecting financial assets and liabilities

(1,389.9) 476.8

Net increase or decrease arising from transactions affecting non-financial assets and liabilities

(17.3) (61.4)

Tax paid (12.7) (13.2)

Net increase/(decrease) in assets and liabilities from operating activities 691.2 1,307.2

NET CASH FLOW FROM OPERATING ACTIVITIES (A) 805.5 1,282.3

Movements on financial assets and equity holdings 41.7 75.6

Movements from tangible and intangible assets (6.0) (4.2)

NET CASH FLOW FROM INVESTMENT ACTIVITIES (B) 35.6 71.4

Cash flow received from or paid to shareholders(1) (39.4) (19.2)

Cash flow from financing activities (0.3) (0.3)

NET CASH FLOW FROM FINANCING ACTIVITIES (C) (39.7) (19.5)

IMPACT OF CHANGES IN EXCHANGE RATES (D) 0.0 0.0

NET CHANGE IN CASH AND CASH EQUIVALENTS (A+B+C+D) 801.4 1,334.1

Banks and central banks 313.9 35.0

Cash and net balance of accounts with central banks (assets) 313.9 35.0

Net balance of demand transactions with credit institutions 394.6 (313.8)

Current accounts with overdrafts(2) 55.2 42.4

Demand accounts and loans 680.7 43.6

Demand deposits (341.3) (399.9)

Opening cash and cash equivalents 708.5 (278.8)

Banks and central banks 1,674.4 1,048.8

Cash and net balance of accounts with central banks (assets) 1,674.4 1,048.8

Net balance of demand transactions with credit institutions (164.6) 6.5

Current accounts with overdrafts(2) 58.6 59.8


Demand deposits (389.3) (149.1)

Cash flow at end of period 1,509.8 1,055.3

CHANGE IN NET CASH FLOW 801.4 1,334.1

(1) Cash flow received from or paid to shareholders corresponds to dividends paid. (2) Current accounts with overdrafts do not include Livret A and LDD savings accounts centralised with the

Caisse des Dépôts et Consignations.


VI. NOTES TO THE FINANCIAL STATEMENTS OF THE PALATINE GROUP

NOTE 1 – GENERAL BACKGROUND .................................................................................. 8

1.1 BPCE GROUP AND BANQUE PALATINE ...................................................................... 8 1.2 GUARANTEE MECHANISM ........................................................................................ 9 1.3 SIGNIFICANT EVENTS .......................................................................................... 10 1.4 POST-BALANCE SHEET EVENTS ............................................................................... 10

NOTE 2 – APPLICABLE ACCOUNTING STANDARDS AND COMPARABILITY ..................... 11

2.1 REGULATORY FRAMEWORK.................................................................................... 11 2.2 STANDARDS ...................................................................................................... 11 2.3 USE OF ESTIMATES ............................................................................................. 13 2.4 PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS AND REPORTING DATE ...... 15

NOTE 3 – NOTES TO THE BALANCE SHEET .................................................................... 16

3.1 FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS ................ 16 3.1.1 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS ...................................... 16 3.1.2 FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS ................................ 16 3.1.3 TRADING DERIVATIVES ........................................................................................ 16 3.2 HEDGING DERIVATIVES ....................................................................................... 17 3.3 AVAILABLE-FOR-SALE FINANCIAL ASSETS ................................................................ 17 3.4 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES ................................................... 17 3.4.1 FAIR VALUE HIERARCHY OF FINANCIAL ASSETS AND LIABILITIES ................................... 17 3.4.2 ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES CLASSIFIED IN LEVEL 3 OF THE

FAIR VALUE HIERARCHY ....................................................................................... 18 3.4.3 ANALYSIS OF TRANSFERS BETWEEN LEVELS IN THE FAIR VALUE HIERARCHY ..................... 18 3.4.4 SENSITIVITY OF FINANCIAL INSTRUMENTS CLASSIFIED IN LEVEL 3 OF THE FAIR VALUE

HIERARCHY TO CHANGES IN THE PRINCIPAL ASSUMPTIONS .......................................... 19 3.5 LOANS AND RECEIVABLES ..................................................................................... 19 3.5.1 LOANS AND ADVANCES DUE FROM CREDIT INSTITUTIONS ............ ERREUR ! SIGNET NON DEFINI. 3.5.2 LOANS AND ADVANCES DUE FROM CUSTOMERS .......................................................... 19 3.6 HELD-TO-MATURITY INVESTMENTS ......................................................................... 20 3.7 RECLASSIFICATIONS OF FINANCIAL ASSETS .............................................................. 20 3.8 GOODWILL ....................................................................................................... 21 3.9 AMOUNTS DUE TO CREDIT INSTITUTIONS AND TO CUSTOMERS ....................................... 21 3.9.1 AMOUNTS DUE TO CREDIT INSTITUTIONS ................................................................. 22 3.9.2 AMOUNTS DUE TO CUSTOMERS ............................................................................... 22 3.10 DEBT SECURITIES ............................................................................................... 22 3.11 PROVISIONS ..................................................................................................... 23 3.12 SUBORDINATED DEBT .......................................................................................... 23 3.13 ORDINARY SHARES AND EQUITY INSTRUMENTS ISSUED ............................................... 23 3.13.1 ORDINARY SHARES ............................................................................................. 23 3.13.2 PERPETUAL DEEPLY SUBORDINATED NOTES CLASSIFIED AS EQUITY ................................ 23


NOTE 4 – NOTES TO THE INCOME STATEMENT .............................................................. 24

4.1 INTEREST AND SIMILAR INCOME AND EXPENSE .......................................................... 24 4.2 FEE AND COMMISSION INCOME AND EXPENSE ............................................................ 24 4.3 NET GAINS OR LOSSES ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT

OR LOSS ........................................................................................................... 25 4.4 NET GAINS OR LOSSES ON AVAILABLE-FOR-SALE FINANCIAL ASSETS .............................. 25 4.5 INCOME AND EXPENSE FROM OTHER ACTIVITIES ........................................................ 26 4.6 OPERATING EXPENSES ......................................................................................... 26 4.7 CREDIT RISK ..................................................................................................... 26 4.7.1 COST OF RISK .................................................................................................... 27 4.7.2 IMPAIRMENTS AND PROVISIONS FOR CREDIT RISK ..................................................... 27 4.8 INCOME TAX ...................................................................................................... 27 4.8.1 ANALYSIS OF INCOME TAX .................................................................................... 27 4.8.2 RECONCILIATION BETWEEN THE TAX CHARGE IN THE FINANCIAL STATEMENTS AND THE

THEORETICAL TAX CHARGE .................................................................................... 27

NOTE 5 – JOINT ARRANGEMENTS AND ASSOCIATES .................................................... 28

5.1 INVESTMENTS IN ASSOCIATES ............................................................................... 28 5.2 SHARE IN NET INCOME OF ASSOCIATES .................................................................... 28

NOTE 6 – SEGMENT REPORTING ................................................................................... 29

NOTE 7 – COMMITMENTS .............................................................................................. 30

7.1 FINANCING COMMITMENTS ................................................................................... 30 7.2 GUARANTEE COMMITMENTS .................................................................................. 30

NOTE 8 – FINANCIAL ASSETS PLEDGED AS COLLATERAL .............................................. 31

NOTE 9 – OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES ................................. 32

9.1 FINANCIAL ASSETS ............................................................................................. 32 9.2 FINANCIAL LIABILITIES ....................................................................................... 33

NOTE 10 – SCOPE OF CONSOLIDATION ........................................................................ 33


NOTE 1 – General background

1.1 BPCE Group and Banque Palatine The BPCE Group comprises the Banque Populaire network, the Caisse d’Epargne network, the BPCE central body and its subsidiaries. Two banking networks – the Banque Populaire banks and the Caisses d’Epargne The BPCE Group is a cooperative group whose members own two retail banking networks: the 18 Banque Populaire banks and the 17 Caisses d'Epargne. Each of the two networks owns an equal share in BPCE, the Group’s central body. The Banque Populaire network consists of the Banque Populaire banks and the mutual guarantee companies granting them the exclusive benefit of their guarantees. The Caisse d’Epargne network consists of the Caisses d’Epargne and the local savings companies (LSCs). The Banque Populaire banks are wholly-owned by their cooperative members. The share capital of the Caisses d’Epargne is wholly-owned by the local savings companies. Local savings companies are cooperative entities with open-ended share capital owned by cooperative members. They are tasked with coordinating the cooperative membership, in line with the general objectives laid down for the individual Caisse d’Epargne with which they are affiliated, and they cannot perform banking transactions. BPCE BPCE, a central body as defined by French banking law and a credit institution licensed to operate as a bank, was created pursuant to law no. 2009-715 of 18 June 2009. BPCE was incorporated as a French société anonyme with a management board and a supervisory board. Its share capital is owned jointly and equally by the 18 Banque Populaire banks and the 17 Caisses d’Epargne. In its role, BPCE has to abide at all times by the cooperative principles of the Banque Populaire banks and the Caisses d’Epargne. Specifically, BPCE represents the interests of its various affiliates in dealings with the supervisory authorities, determines the range of products and services offered by them, takes steps to ensure depositor protection, approves appointments of senior executives and oversees the smooth operation of the Group’s institutions. As a holding company, BPCE acts the ultimate controlling party of the Group and holds the joint ventures between the two networks in retail banking, corporate banking and financial services, and their production units. It defines the Group’s corporate strategy and growth and expansion policies. BPCE’s main subsidiaries are organised around three major segments:

o Natixis, a 71.4%-owned listed organisation encompassing Wholesale Banking, Investment Solutions and Specialised Financial Services;

o Commercial Banking and Insurance (including Crédit Foncier, Banque Palatine and BPCE International et Outre-Mer);

o subsidiaries and equity interests.


In parallel, BPCE is responsible for centralised management of surplus funds, for the execution of any financial transactions required to develop and fund the Group, and for choosing the most appropriate counterparty for these transactions in the broader interests of the Group as part of its general oversight of financial activities. BPCE also provides banking services to the other Group entities. Banque Palatine Banque Palatine is a société anonyme (French limited liability corporation) with a board of directors, wholly owned by the BPCE central body. Its head office is at 42 rue d’Anjou - 75008 Paris (France). Its main subsidiaries and affiliates are active in two segments:

o financial services and asset management; o insurance.

1.2 Guarantee mechanism In accordance with Article L. 512-107-6 of the French Monetary and Financial Code, the guarantee and solidarity mechanism aims to safeguard the liquidity and capital adequacy of the Group and BPCE's affiliates, and to organise financial support within the Banque Populaire and Caisse d’Epargne networks. BPCE is tasked with taking all the requisite measures to guarantee the capital adequacy of the Group and each of the networks. This includes implementing the appropriate internal financing mechanisms within the Group and establishing a mutual guarantee fund common to both networks, for which it determines the operating rules, the conditions for the provision of financial support to the existing funds of the two networks, as well as the contributions of affiliates to the fund’s initial capital endowment and its reconstitution. BPCE manages the Banque Populaire Network Fund and the Caisse d’Epargne Network Fund and sets up the Mutual Guarantee Fund. The Banque Populaire Network Fund was endowed with a €450.0 million deposit by the Banks that was recorded by BPCE as a 10-year term account renewable in perpetuity. The Caisse d’Épargne Network Fund consists of a €450.0 million deposit made by the Banks that was recorded by BPCE as a 10-year term account renewable in perpetuity. The Mutual Guarantee Fund was formed through deposits made by the Banque Populaire banks and the Caisses d’Epargne. These deposits were booked by BPCE in the form of 10-year term accounts renewable in perpetuity. The deposits by network amounted to €180.7 million at 30 June 2015, and the fund will be topped up each year by an amount equivalent to 5% of the contributions made by the Banque Populaire banks, the Caisses d’Epargne, and their subsidiaries to the Group’s consolidated income. The total amount of deposits made with BPCE in the Banque Populaire Network Fund, the Caisse d’Epargne Network Fund and the Mutual Guarantee Fund may be no lower than 0.15% and may not exceed 0.3% of the Group’s total risk-weighted assets. When deposits are recorded in the institutions’ individual accounts under the guarantee and solidarity system, an item of an equivalent amount is recorded under a dedicated capital heading. BPCE’s Management Board holds all the requisite powers to use the financial resources of the various contributors immediately and in the agreed order pursuant to prior authorisations given to BPCE by the contributors.


1.3 Significant events IFRIC 21 Since 1 January 2015 (date of first-time adoption), the Palatine Group has applied IFRIC 21 "Levies", which has resulted in a change in accounting method with regard to:

o the social security and solidarity contribution (C3S or Organic) affecting the opening balance sheet at 1 January 2015 (by €0.5 million) and the income for 2015 (by €0.7 million);

o the accounting at 1 January 2015 of taxes previously spread over the year, namely the systemic banking tax (TSB), the contribution to Autorité de Contrôle Prudentiel et de Résolution (ACPR) supervisory costs and property tax (effect of €1.4 million).

New contributions Four new contributions have been introduced, representing a total amount of €3.8 million at 30 June 2015:

o the Single Resolution Fund (SRF) (Regulation (EU) No. 806/2014 and Implementing Regulation (EU) No. 2015/81);

o the operating costs of the Single Resolution Council (SRC) (Bank Recovery Resolution Directive No. 2014/59);

o European Central Bank supervisory fees;

o the local authorities' support fund.

1.4 Post-balance sheet events Between 30 June 2015 and 29 July 2015, the date on which the financial statements were approved by the Board of Directors, no event likely to have a material effect on the consolidated financial position or consolidated income of the Palatine Group occurred.


Note 2 –Applicable accounting standards and comparability

2.1 Regulatory framework In accordance with EC Regulation No. 1606/2002 of 19 July 2002 on the application of international accounting standards, the Palatine Group prepared its consolidated financial statements for the financial year ended 31 December 2014 under International Financial Reporting Standards (IFRS) as adopted for use by the European Union and applicable at that date, thereby excluding certain provisions of IAS 39 relating to hedge accounting1. These condensed consolidated interim financial statements at 30 June 2015 have been prepared in accordance with IAS 34 "Interim Financial Reporting". As such, the accompanying notes relate to the most significant items of the period and must therefore be read in conjunction with the consolidated financial statements of the Group at 31 December 2014.

2.2 Standards The standards and interpretations used and outlined in the financial statements at 31 December 2014 were complemented by standards, amendments and interpretations, application of which is mandatory for reporting periods starting on or after 1 January 2015. Since 1 January 2015, the Palatine Group has applied IFRIC 21 "Levies". This interpretation of IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” outlines how to account for a debt related to public authority levies. The entity should recognise this debt only at the date on which the activity that triggers its payment, in accordance with legislation, takes place. The liability is recognised progressively over the same period if the obligating event occurs over a period of time. Finally, if the obligation to pay is triggered by reaching a minimum threshold, the liability is recognised only when that minimum threshold is reached. In the event that the obligation to pay the tax arises at 1 January, the latter must be registered as of that date. At the date of first-time adoption, i.e. 1 January 2015, the effects of IFRIC 21 are retrospectively recognised as follows:

o the change in method specifically related to the social security and solidarity contribution (C3S or Organic) affecting the opening balance sheet at 1 January 2014: cancellation of the provision recognised at 31 December 2013 by an offsetting entry under equity;

o the change in method specifically related to C3S affecting the income for 2014;

o the change in method specifically related to the accounting at 1 January 2014 of taxes previously spread over the year, namely the systemic banking tax (TSB), the contribution to ACPR supervisory costs and property tax.

This note recaps the effects of IFRIC 21 on the consolidated balance sheet at 31 December 2014 and on the consolidated income statement of first-half 2014.

1 These standards are available on the website of the European Commission at the following URL:

http://ec.europa.eu/internal_market/accounting/ias/index_en.htm


Assets

€ millions

31/12/2014 published

Impact at 01/01/2014

31/12/2014 adjusted

Cash, central banks 313.9

313.9

Financial assets at fair value through profit or loss account 67.7

67.7

Hedging derivatives 11.7

11.7

Available-for-sale financial assets 1,444.9

1,444.9

Loans and advances due from credit institutions 5,675.7

5,675.7

Loans to customers 7,748.9

7,748.9

Held-to-maturity investments 92.7

92.7

Deferred tax assets 17.5 -0.2 17.3

Adjustment accounts and miscellaneous assets 298.8

298.8

Investments in associates 4.4

4.4

Investment property 0.4

0.4

Property, plant and equipment 20.5

20.5

Intangible assets 20.9

20.9

Goodwill 3.8

3.8

TOTAL ASSETS 15,721.8 -0.2 15,721.6

Liabilities & equity

€ millions

31/12/2014 published

Impact at 01/01/2014

31/12/2014 adjusted

Financial liabilities at fair value through profit or loss 61.9

61.9

Derivative hedging instruments 146.3

146.3

Debts to financial institutions 2,452.3

2,452.3

Customer deposits 8,141.9

8,141.9

Debt securities 3,903.0

3,903.0

Current tax liabilities 0.6

0.6

Deferred tax liabilities 1.9

1.9

Adjustment accounts and miscellaneous 107.1 -0.7 106.4

Provisions 45.5

45.5

Subordinated debt 40.5

40.5

Shareholders’ equity 820.8 0.5 821.3

Equity attributable to equity holders of the parent 820.8 0.5 821.3

Share capital and share premium 595.5

595.5

Consolidated reserves 172.2 0.5 172.7

Gains and losses recognised directly in other items of comprehensive income 0.3 0.3

Income for the period 52.7 52.7

Non-controlling interests 0.0 0.0

TOTAL LIABILITIES AND EQUITY 15,721.8 -0.2 15,721.6


Income Statement

€ millions First-half 2014 Impact on

First-half 2014 First-half 2014

Adjusted

Net banking income 159.5 159.5

Operating expenses (84.4) (2.4) (86.8)

Net depreciation and amortisation of tangible and intangible assets (5.1) (5.1)

Gross operating income 70.0 (2.4) 67.6

Cost of risk (26.3)

(26.3)

Operating income 43.7 (2.4) 41.3

Share in net income of associates 0.2

0.2

Net income before tax 43.9 (2.4) 41.5

Income tax (16.2) 1.1 (15.1)

Net income 27.7 (1.3) 26.4

Non-controlling interests 0.0

0.0

Net income attributable to equity holders of the parent 27.7 (1.3) 26.4

The other standards, amendments and interpretations adopted by the European Union did not have a material impact on the financial statements of the Palatine Group.

2.3 Use of estimates Preparation of the financial statements requires management to make estimates and assumptions in certain areas with regard to uncertain future events. These estimates are based on the judgment of the individuals preparing these financial statements and the information available at the reporting date. Actual future results may differ from these estimates. In the financial statements for the period ended 30 June 2015, the accounting estimates involving assumptions were mainly used for the following measurements:

o the fair value of financial instruments determined using valuation techniques (see note below – "Fair value measurement");

o the amount of impairment of financial assets, and more specifically prolonged impairment of available-for-sale financial assets and impairment losses applicable to loans and receivables assessed specifically or collectively;

o the provisions recorded under liabilities and, in particular, the provision for regulated home savings products;

o expense calculations associated with pensions and future employee benefits; o deferred income tax; o goodwill impairment tests.

Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Group measures the fair value of an asset or liability using assumptions that market participants would use to set the price of the asset or liability. These assumptions include, for derivatives, an assessment of counterparty risk (or CVA – Credit Valuation Adjustment) and of the risk of non-performance (DVA – Debit Valuation Adjustment).


The Group adjusted its valuation inputs for CVA and DVA during second-half 2014. These valuation adjustments are now measured using market inputs. In addition, derivatives that are traded with a counterparty belonging to the BPCE Group’s share support mechanism (see Note 1.2 – Solidarity mechanism) are not subject to the CVA or DVA valuation adjustments. Fair value upon initial recognition

For the majority of Group transactions, the price of trades (i.e. the value of the consideration paid or received) provides the best estimate of the fair value of the transaction at the initial recognition date. Fair value hierarchy

• Level 1 fair value and active market concept For financial instruments, prices quoted in an active market (“level 1 input”) represent the most reliable evidence of fair value. They should be used without adjustment to measure fair value. An active market is a market in which transactions for the asset or liability take place with sufficient frequency and volume.

• Level 2 fair value Where there is no quotation in an active market, fair value may be measured using appropriate methodology, in line with the generally accepted measurement methods in the financial markets, based on inputs directly or indirectly observable in the markets.

• Level 3 fair value Lastly, if there are not sufficient observable inputs available in the markets, fair value may be measured using a method based on internal models (“level 3 fair value”) using unobservable inputs. The model adopted must be calibrated by reconciling its results with recent transaction prices.

Over-the-counter instruments measured using infrequent models or using

unobservable inputs to a great extent (level 3)

When the measurements obtained are not supported by observable inputs or models recognised as market standards, the measurement obtained will be considered as unobservable. Instruments measured using specific models or using unobservable parameters include:

o unlisted equities, generally investments in unconsolidated investments; o certain mutual funds for which net asset value is an indicative value (in the

event of illiquidity, in the event of liquidation, etc.) and there are no prices to support this value;

o FCPRs (venture capital funds): net asset value is frequently indicative because exiting is often not possible;

o multi-underlying equity structured products, options on funds, hybrid interest-rate products, securitisation swaps, structured credit derivatives, option-based interest-rate products;

o structured loans for which certain measurement inputs are unobservable (credit spread, etc.);

o securitisation tranches for which no prices are quoted in an active market. These instruments are frequently measured based on contributors’ prices (structurers, for example).

Transfers between levels of the fair value hierarchy

Information about transfers between levels of the fair value hierarchy is provided in Note 3.4.3 – Analysis of transfers between levels of the fair value hierarchy. Special cases: fair value of financial instruments recognised at amortised cost


For financial instruments not measured at fair value on the balance sheet, fair value calculations are disclosed for information purposes and should be interpreted as estimates. In most cases, the values indicated are not likely to be realised and, generally speaking, are not actually realised. These fair values are thus only calculated for information purposes in the notes to the financial statements. They are not indicators used for the purpose of overseeing commercial banking activities, for which the management model is mainly based on collection of contractual cash flows. As a result, simplified assumptions have been used to measure the fair value of these instruments.

2.4 Presentation of the consolidated financial statements and reporting date

Consolidating entity Banque Palatine is the Palatine Group’s consolidating entity. The structure of the Group is as follows: Presentation of the interim consolidated financial statements As no specific format is required under IFRS, the presentation used by the Group for summarised statements follows Recommendation no. 2013-04 issued by the Autorité des Normes Comptables (ANC – French national accounting standards authority) on 7 November 2013. Date of the interim financial statements The consolidated financial statements are based on the financial statements at 30 June 2015. The Group’s consolidated financial statements for the period ended 30 June 2015 were approved by the Board of Directors on 29 July 2015.

BANQUE PALATINE

PALATINE ASSET MANAGEMENT

(PI and PC = 100%)

ARIES ASSURANCES

(PI and PC = 100%)

CONSERVATEUR FINANCE

(PI and PC = 20%)

Equity method

PI = Percentage interest

PC = Percentage control

Full consolidation


Note 3 – Notes to the balance sheet

3.1 Financial assets and liabilities at fair value through profit or loss Financial assets and liabilities at fair value through profit or loss are instruments held for trading, including derivatives, and certain assets and liabilities that the Group has designated to recognise at fair value, at their date of acquisition or issue, using the fair value option under IAS 39. 3.1.1 Financial assets at fair value through profit or loss Financial assets in the trading book mainly include derivatives used by the Group to manage its risk exposure.

€ millions

30/06/2015 31/12/2014

Trading Trading

Trading derivatives 92.3 67.7

TOTAL FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 92.3 67.7

3.1.2 Financial liabilities at fair value through profit or loss Financial liabilities in the trading book consist of derivatives.

€ millions 30/06/2015 31/12/2014

Trading derivatives 85.5 61.9

TOTAL FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS 85.5 61.9

3.1.3 Trading derivatives

€ millions

30/06/2015 31/12/2014

Notional Positive fair value

Negative fair value


Negative fair value

Interest rate instruments 3,778.6 40.0 34.1 3,613.6 42.1 36.8

Currency instruments 2,380.6 0.5 0.3 1,841.2 0.0 0.0

Futures and forwards 6,159.2 40.5 34.4 5,454.8 42.1 36.8


Currency instruments 2,208.9 47.6 47.6 1,681.0 24.6 24.6

Options 4,341.7 51.8 51.1 3,499.5 25.6 25.1

TOTAL TRADING DERIVATIVES 10,500.9 92.3 85.5 8,954.3 67.7 61.9


3.2 Derivative hedging instruments

€ millions

30/06/2015 31/12/2014


Negative fair value


Negative fair value


Futures and forwards 2,572.6 10.3 136.6 2,846.2 11.2 145.1

Fair value hedge 2,572.6 10.3 136.6 2,846.2 11.2 145.1

Interest rate instruments 182.5 0.6 1.0 536.8 0.5 1.2

Futures and forwards 182.5 0.6 1.0 536.8 0.5 1.2

Cash flow hedge 182.5 0.6 1.0 536.8 0.5 1.2

TOTAL HEDGING DERIVATIVES 2,755.1 10.9 137.6 3,383.0 11.7 146.3

3.3 Financial assets available for sale These are non-derivative financial assets that could not be classified in any of the other three categories (“Financial assets at fair value”, “Held-to-maturity investments” or “Loans and receivables”).

€ millions 30/06/2015 31/12/2014

Government and related securities 825.1 1,090.6

Bonds and other fixed-income securities 501.4 329.7

Impaired securities 0.0 0.2

Fixed-income securities 1,326.5 1,420.5

Equities and other variable-income securities 21.8 24.5

Loans to customers 0.1 0.1

Loans 0.1 0.1

TOTAL AVAILABLE-FOR-SALE FINANCIAL ASSETS, GROSS 1,348.4 1,445.1

Impairment of fixed-income securities and loans 0.0 (0.2)

TOTAL AVAILABLE-FOR-SALE FINANCIAL ASSETS, NET 1,348.4 1,444.9

Gains and losses recognised directly in equity on available-for-sale financial assets (before tax) 4.5 5.0

Impairment on available-for-sale financial assets is recognised whenever the Group considers that it may not recover its investment. For listed variable-income securities, a price decline in excess of 50% compared to the historical price or for more than a 36-month period represents evidence of impairment. At 30 June 2015, the gains and losses recognised directly in other items of comprehensive income derive in particular from treasury bills, bonds and other fixed-income securities.

3.4 Fair value of financial assets and liabilities 3.4.1 Fair value hierarchy of financial assets and liabilities The following statement provides a breakdown of financial instruments by type of price and valuation model:


30/06/2015 31/12/2014

€ millions

Quoted on an active market

(Level 1)

Valuation techniques

using observable

inputs (Level 2)


using unobservable

inputs (Level 3)

Total

Quoted on an active market

(Level 1)


using observable

inputs (Level 2)


using unobservable

inputs (Level 3)

Total

FINANCIAL ASSETS

Derivatives 0.0 92.3 0.0 92.3 0.0 67.7 0.0 67.7

Interest-rate derivatives 0.0 44.2 0.0 44.2 0.0 43.0 0.0 43.0

Currency derivatives 0.0 48.1 0.0 48.1 0.0 24.7 0.0 24.7

Financial assets held for trading 0.0 92.3 0.0 92.3 0.0 67.7 0.0 67.7


Derivative hedging instruments 0.0 10.9 0.0 10.9 0.0 11.7 0.0 11.7 Investments in unconsolidated subsidiaries

0.0 0.0 4.5 4.5 0.0 0.0 3.5 3.5

Other securities 1,328.7 15.1 0.0 1,343.9 1,441.3 0.0 0.0 1,441.3

Fixed-income securities 1,326.5 0.0 0.0 1,326.5 1,420.3 0.0 0.0 1,420.3

Variable-income securities 2.2 15.1 0.0 17.4 21.0 0.0 0.0 21.0

Other financial assets 0.1 0.0 0.0 0.1 0.1 0.0 0.0 0.1

Financial assets available for sale

1,328.8 15.1 4.5

1,348.4

1,441.4 0.0 3.5

1,444.9

FINANCIAL LIABILITIES

Derivatives 85.5 0.0 0.0 85.5 0.0 61.9 0.0 61.9


Currency derivatives 47.9 0.0 0.0 47.9 0.0 24.6 0.0 24.6

Financial liabilities held for trading 85.5 0.0 0.0 85.5 0.0 61.9 0.0 61.9


Derivative hedging instruments 137.6 0.0 0.0 137.6 0.0 146.3 0.0 146.3 3.4.2 Analysis of financial assets and liabilities classified in level 3 of the fair

value hierarchy

€ millions

31/12/2014

Investment management events in the period

30/06/2015

Purchases/ Issues

Sales/ Repayments

FINANCIAL ASSETS

Investments in unconsolidated subsidiaries 3.5 1.1 (0.1) 4.5

Financial assets available for sale 3.5 1.1 (0.1) 4.5

At 30 June 2015, the financial instruments measured using a technique reflecting unobservable inputs were investments in unconsolidated subsidiaries. 3.4.3 Analysis of transfers between levels of the fair value hierarchy No transfers between levels of the fair value hierarchy occurred during first-half 2015.


3.4.4 Sensitivity of financial instruments classified in level 3 of the fair value

hierarchy to changes in the principal assumptions Other than investments in unconsolidated subsidiaries, the Palatine Group has no financial instruments classified in level 3 of the fair value hierarchy.

3.5 Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The vast majority of loans granted by the Group are classified in this category. 3.5.1 Loans and advances due from credit institutions

€ millions 30/06/2015 31/12/2014

Loans and advances due from credit institutions 4,553.8 5,675.7

TOTAL LOANS AND ADVANCES DUE FROM CREDIT INSTITUTIONS 4,553.8 5,675.7

Measurement at amortised cost (carrying amount) of loans and advances due from credit institutions amounted to €4,553.8 million at 30 June 2015 (€5,675.7 million at 31 December 2014). Breakdown of gross loans and advances due from credit institutions

€ millions 30/06/2015 31/12/2014

Current accounts with overdrafts 58.6 55.2

Accounts and loans 4,488.6 5,605.7

Securities classified as loans and advances 4.0 12.2

Subordinated and participating loans 2.5 2.5

Impaired loans and advances 0.1 0.1

TOTAL GROSS LOANS AND ADVANCES DUE FROM CREDIT INSTITUTIONS 4,553.8 5,675.7

Livret A and LDD savings accounts centralised with Caisse des Dépôts et Consignations and recorded under “Loans and advances” amounted to €250.3 million at 30 June 2015 (€248.0 million at 31 December 2014). 3.5.2 Loans and advances due from customers

€ millions 30/06/2015 31/12/2014

Loans and advances due from customers 8,174.5 8,009.5

Specific impairments (258.5) (245.8)

Collective impairments (13.8) (14.8)

TOTAL LOANS AND ADVANCES DUE FROM CUSTOMERS 7,902.2 7,748.9


Breakdown of gross loans and advances due from customers

€ millions 30/06/2015 31/12/2014

Current accounts with overdrafts 406.7 394.8

Trade receivables 180.4 199.9

Short-term loans 1,251.3 1,270.8

Equipment loans 1,701.0 1,652.2

Home loans 1,699.0 1,743.6

Export loans 96.9 87.7

Other loans 1,923.3 1,848.8

Subordinated loans 4.5 4.4

Other facilities granted to customers 6,856.4 6,807.4

Securities classified as loans and advances 337.6 272.7

Securities classified as doubtful loans and advances 4.0 4.0

Impaired loans and advances 569.8 530.6

TOTAL GROSS LOANS AND ADVANCES DUE FROM CUSTOMERS 8,174.5 8,009.5

Measurement at amortised cost (carrying amount) of loans and advances due from customers amounted to €7,902.2 million at 30 June 2015 (€7,748.9 million at 31 December 2014).

3.6 Held-to-maturity investments These are non-derivative financial assets with fixed or determinable payments that the Group has the intent and ability to hold to maturity.

€ millions 30/06/2015 31/12/2014

Government and related securities 10.0 51.0

Bonds and other fixed-income securities 41.0 41.7

TOTAL HELD-TO-MATURITY INVESTMENTS 51.0 92.7

Measurement at amortised cost (carrying amount) of held-to-maturity investments amounted to €51.0 million at 30 June 2015 (€92.7 million at 31 December 2014).

3.7 Reclassification of financial assets In application of the amendments to IAS 39 and IFRS 7 “Reclassification of financial assets”, the Group reclassified some of its financial assets during 2009. No reclassification was carried out between 2010 and 2014, nor during first-half 2015.


Portfolio of reclassified financial assets

€ millions

Carrying amount at the reclassification

date

Carrying amount at

31 December

2014

Carrying amount

at 30 June

2015

Change in 2015

Fair value at 31

December 2014

Fair value

at 30

June 2015

Change in 2015

Assets reclassified in 2009

Available-for-sale financial assets reclassified as loans and receivables 7.8 4.7 4.9 0.2 5.5 5.6 0.1

Total securities reclassified in 2009 7.8 4.7 4.9 0.2 5.5 5.6 0.1

Assets reclassified between 2010 and 2014

Total securities reclassified between 2010 and 2014 0.0 0.0 0.0 0.0 0.0 0.0 0.0

TOTAL FINANCIAL ASSETS RECLASSIFIED 7.8 4.7 4.9 0.2 5.5 5.6 0.1 Results related to reclassified financial assets and results that would have been recorded Gains and losses recognised directly in equity on transferred financial assets amounted to a net loss of €0.1 million at 30 June 2015. The income from first-half 2015 relating to reclassified financial assets was not material. The change in fair value that would have been recognised had the assets not been reclassified was not material.

3.8 Goodwill

€ millions 30/06/2015 31/12/2014

Net value at beginning of period 3.8 4.1

Impairment losses 0.0 (0.3)

Goodwill at end of period, net 3.8 3.8

€ millions

Carrying amount

30/06/2015 31/12/20

14

Ariès Assurances 3.8 3.8

TOTAL GOODWILL 3.8 3.8

3.9 Amounts due to credit institutions and to customers These liabilities, which are not classified as financial liabilities at fair value through profit or loss, are carried at amortised cost under “Amounts due to credit institutions” or “Amounts due to customers”.


3.9.1 Debts to financial institutions

€ millions 30/06/2015 31/12/2014

Demand accounts 410.8 354.0

Accrued interest 0.0 0.1

Amounts due to credit institutions - repayable on demand 410.8 354.1

Term deposits and loans 2,271.4 2,055.7

Repurchase agreements 0.0 37.6


Amounts due to credit institutions - repayable at agreed maturity dates 2,275.8 2,098.2

TOTAL AMOUNTS DUE TO CREDIT INSTITUTIONS 2,686.6 2,452.3

Measurement at amortised cost (carrying amount) of amounts due to credit institutions amounted to €2,686.6 million at 30 June 2015 (€2,452.3 million at 31 December 2014). 3.9.2 Customer deposits

€ millions 30/06/2015 31/12/2014

Current accounts in credit 7,424.7 5,786.8

Livret A savings accounts 165.2 162.7

Regulated home savings products 278.0 282.6

Other regulated savings accounts 543.4 544.8

Regulated savings accounts 993.6 990.1


Term accounts and loans 1,171.6 1,327.8


Other customer accounts 1,216.0 1,365.0

TOTAL AMOUNTS DUE TO CUSTOMERS 9,634.3 8,141.9 Measurement at amortised cost (carrying amount) of amounts due to customers amounted to €9,634.3 million at 30 June 2015 (€8,141.9 million at 31 December 2014).

3.10 Debt securities Debt securities are classified based on the nature of the underlying, except for subordinated notes presented under “Subordinated debt”.

€ millions 30/06/2015 31/12/2014

Interbank market instruments and negotiable debt securities 2,425.2 3,897.8


TOTAL DEBT SECURITIES 2,428.9 3,903.0

Measurement at amortised cost (carrying amount) of debt securities amounted to €2,428.9 million at 30 June 2015 (€3,903.0 million at 31 December 2014).


3.11 Provisions

€ millions 31/12/2014 Increase Reversal

Other movements 30/06/2015

Provisions for employee benefit obligations 16.7 0.3 (0.2) 5.8 22.6

Provisions for regulated home savings products 3.8 0.2 0.0 0.0 4.0

Provisions for off-balance sheet commitments 18.2 2.0 (2.0) 0.1 18.3

Provisions for litigation 3.2 0.6 (1.2) 0.0 2.6

Other 3.6 1.1 (0.4) 0.0 4.3

Other provisions 28.8 3.9 (3.6) 0.1 29.2

TOTAL PROVISIONS 45.5 4.2 (3.8) 5.9 51.8

3.12 Subordinated debt Subordinated debt is classified separately from issues of other debt and bonds because in the event of default, holders of subordinated debt rank after all senior and unsecured debt holders.

€ millions 30/06/2015 31/12/2014

Term subordinated debt 40.0 40.0


TOTAL SUBORDINATED DEBT 40.2 40.5

Measurement at amortised cost (carrying amount) of subordinated debt amounted to €40.2 million at 30 June 2015 (€40.5 million at 31 December 2014). Deeply subordinated notes qualifying as equity instruments are presented in Note 3.13.2 – “Perpetual deeply subordinated notes classified as equity”.

3.13 Ordinary shares and equity instruments issued 3.13.1 Ordinary shares

€ millions

30/06/2015 31/12/2014

Number Par value Share capital Number Par value

Share capital

Banque Palatine ordinary shares

Opening balance 26,940,134 20 538.8 26,940,134 20 538.8

Closing balance 26,940,134 20 538.8 26,940,134 20 538.8

3.13.2 Perpetual deeply subordinated notes classified as equity

Issue currency Issue date Interest rate

Amount Amount

€ millions 30/06/20

15 31/12/20

14

BPCE EUR 28/12/2004 3-month Euribor + 1.0% 15.0 15.0

BPCE EUR 20/12/2005 3-month Euribor + 0.92% 65.0 65.0 TOTAL PERPETUAL DEEPLY SUBORDINATED DEBT 80.0 80.0


Note 4 – Notes to the income statement

4.1 Interest and similar income and expense This line item comprises interest income and expense, calculated using the effective interest method, on financial assets and liabilities carried at amortised cost, which include interbank transactions and customer transactions, held-to-maturity investments, debt securities and subordinated debt. It also includes:

o interest calculated using the effective interest method on fixed-income securities classified as available-for-sale financial assets;

o interest on hedging derivatives, it being understood that interest accrued on hedging instruments is taken as income in the same manner and period as the interest accrued on the hedged item.

€ millions Income Expense Net Income Expense Net

Loans and advances due from/to customers

117.0 (22.0) 95.0 119.6 (26.6) 93.0

Transactions with customers (excl. regulated savings accounts)

117.2 (15.0) 102.2 117.7 (18.9) 98.8

Regulated term accounts and loans (0.2) (7.0) (7.2) 1.9 (7.7) (5.8)

Loans and advances due from/to credit institutions

29.7 (9.5) 20.2 34.3 (10.3) 24.0

Debt securities and subordinated debt (7.5) (7.5) (11.3) (11.3)

Derivative hedging instruments 6.4 (27.6) (21.2) 7.5 (28.0) (20.5)

Financial assets available for sale 19.8 19.8 21.6 21.6

Held-to-maturity investments 0.9 0.9 2.3 2.3

Impaired financial assets 2.4 2.4 2.3 2.3

TOTAL INTEREST INCOME AND EXPENSE 176.2 (66.6) 109.6 187.6 (76.2) 111.4

Interest income on loans and advances from credit institutions comprising €1.9 million (€2.1 million in first-half 2014) collected on the Livret A, LDD and LEP passbook savings accounts deposited centrally with Caisse des Dépôts et Consignations. Interest income or expenses on regulated savings accounts including €0.2 million in respect of a net charge to the provision for home savings (compared to a net reversal of €1.9 million in first-half 2014).

4.2 Fee and commission income and expense Fee and commission income and expense is recorded based on the type of service rendered and on the method of accounting for the financial instrument to which the service relates. This line includes mainly fees and commission receivable or payable on recurring services (payment processing, custody fees, etc.) and occasional services (fund transfers, payment penalties, etc.), commission receivable or payable on execution of significant transactions, and commission receivable or payable on trust assets managed on behalf of the Group’s customers.


However, fees and commission that form an integral part of the effective yield on a contract are recorded under “Net interest income”.



Cash and interbank transactions 0.0 0.0 0.0 0.0 (0.1) (0.1)

Loans to customers 16.9 0.0 16.9 14.8 0.0 14.8

Financial services 1.9 (3.7) (1.8) 2.3 (3.5) (1.2)

Sales of life insurance products 6.2 6.2 6.0 6.0

Payment services 5.5 (2.6) 2.9 5.3 (2.1) 3.2

Securities transactions 1.5 (0.1) 1.4 0.8 (0.1) 0.7

Fiduciary and trust activities 19.5 0.0 19.5 18.8 0.0 18.8

Foreign exchange and arbitrage transactions 0.1 0.0 0.1 0.1 0.0 0.1

Other fee and commission income 2.2 (0.1) 2.1 1.4 (0.1) 1.3

TOTAL FEES AND COMMISSION 53.8 (6.5) 47.3 49.5 (5.9) 43.6

4.3 Gains or losses on financial assets at fair value through profit or loss This item includes gains and losses, including the related interest, on financial assets and liabilities classified as held for trading or designated at fair value through profit or loss. “Gains and losses on hedging transactions” include gains and losses arising from the remeasurement of derivatives used as fair value hedges, as well as gains and losses from remeasurement of the hedged item in the same manner, remeasurement at fair value of the macro-hedged portfolio and the ineffective portion of cash flow hedges.

€ millions

First-half 2015

First-half 2014

Gains and losses on financial instruments held for trading 5.3 2.7

Gains and losses on hedging transactions 0.0 0.0

- Ineffective portion of fair value hedges 0.0 0.0

Change in fair value of hedging instrument 6.9 (76.5)

Change in fair value of hedged items attributable to hedged risks (6.9) 76.5

Gains and losses on foreign exchange transactions 2.5 1.9

TOTAL NET GAINS OR LOSSES ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS 7.8 4.6 "Gains and losses on financial instruments held for trading" include changes in value adjustments on the entire derivatives portfolio (both trading and hedging) in respect of CVA (Credit Valuation Adjustment) and DVA (Debit Valuation Adjustment).

4.4 Gains or losses on financial assets available for sale This item includes dividends from variable-income securities, gains and losses on the sale of available-for-sale financial assets and other financial assets not measured at fair value, as well as impairment losses recognised on variable-income securities owing to a prolonged decline in their value.


€ millions

First-half 2015

First-half 2014

Net gain/(loss) on disposal 0.5 0.5

TOTAL NET GAINS OR LOSSES ON AVAILABLE-FOR-SALE FINANCIAL ASSETS 0.5 0.5

4.5 Income and expense from other activities This item mainly comprises:

o income and expense on investment property (rental income and expense, gains and losses on disposals, depreciation and impairment);

o income and expense resulting from the Group’s insurance business (in particular premium income, benefits and claims paid, and changes in insurance companies’ technical provisions);

o income and expense on operating leases; o income and expense on real estate development activities (revenues,

purchases used).



Transfers of expenses and income 0.3 (0.5) (0.2) 0.3 (0.4) (0.1)

Other miscellaneous operating income and expense 0.7 (0.6) 0.1 0.3 (1.5) (1.2)

Additions to and reversals of provisions to other operating income and expense 0.0 (0.9) (0.9) 0.1 0.7 0.8

Other banking income and expense 1.0 (2.0) (1.0) 0.7 (1.2) (0.5)

TOTAL INCOME AND EXPENSE FROM OTHER ACTIVITIES 1.0 (2.0) (1.0) 0.7 (1.2) (0.5)

4.6 General operating costs Operating expenses include mainly payroll costs (wages and salaries net of rebilled amounts), social security charges, and employee benefit expenses such as pension costs. Operating expenses also include the full amount of administrative expenses and other external services costs.


Payroll costs (59.9) (56.3)

Taxes other than on income (9.5) (3.7)

External services (25.5) (24.4)

Other administrative expenses (35.0) (28.1)

TOTAL OPERATING EXPENSES (94.9) (84.4)

4.7 Credit risk This item records net impairment charges for credit risks, irrespective of whether the impairment is assessed specifically or collectively for a portfolio of homogeneous loans. Impairment losses are recognised for both loans and advances and fixed-income investment securities when there is an incurred counterparty risk. Losses arising from other types of instruments (derivatives or securities designated at fair value) recorded as


a result of default by credit institutions are also included in this line item. 4.7.1 Cost of risk Cost of risk for the period


Net impairment losses and provisions (23.5) (27.0)

Recoveries of bad debts written off 0.9 1.0

Unrecoverable loans and receivables not covered by impairment losses

(0.3) (0.3)

TOTAL COST OF RISK (22.9) (26.3)

Cost of risk by type of asset


Loans to customers (22.9) (24.7)

Off-balance sheet commitments 0.0 (1.6)

TOTAL COST OF RISK (22.9) (26.3)

4.7.2 Impairments and provisions for credit risk

€ millions 31/12/2014 Charges Reversals

Other changes 30/06/2015

Financial assets available for sale 0.2 0.0 (0.2) 0.0 0.0

Loans to customers 260.6 41.8 (30.5) 0.4 272.3

Other financial assets 0.8 0.0 0.0 0.0 0.8

Impairment losses recognised in assets 261.6 41.8 (30.7) 0.4 273.1

Provisions for off-balance sheet commitments 18.2 2.0 (2.0) 0.1 18.3 TOTAL IMPAIRMENT LOSSES AND PROVISIONS FOR CREDIT RISK 279.8 43.8 (32.7) 0.5 291.4

4.8 Income tax 4.8.1 Analysis of income tax


Current income tax (15.4) (15.4)

Deferred income tax (2.0) (0.8)

INCOME TAX (17.4) (16.2) 4.8.2 Reconciliation between the tax charge in the financial statements and the

theoretical tax charge



€ millions tax rate € millions tax rate

Net income attributable to equity holders of the parent 24.0 27.7

Share in net income of associates (0.3) (0.2)

Tax 17.4 16.3

INCOME BEFORE TAX AND CHANGES IN THE VALUE OF GOODWILL (A) 41.1 43.7

Standard income tax rate in France (B) 34.43%

34.43%

Theoretical income tax expense/(benefit) at the tax rate applicable in France (AxB)

(14.2) (15.1)

Impact of permanent differences (1.9) 4.62% 0.2 -0.46%

Reduced rate of tax and tax-exempt activities 0.0 0.00% (0.1) 0.23%

Temporary step-up in corporate tax (1.1) 2.68% (1.2) 2.75%

Tax on prior periods, tax credits and other taxes (0.3) 0.73% (0.2) 0.46%

Other items 0.1 -0.24% 0.1 -0.23%

Income tax expense/(benefit) recognised (17.4) (16.3)

EFFECTIVE TAX RATE (INCOME TAX EXPENSE DIVIDED BY TAXABLE INCOME) 42.34% 37.23%

Note 5 – Joint arrangements and associates 5.1 Shares in associates

€ millions 30/06/2015 31/12/2014

Conservateur Finance 4.2 4.4

Financial companies 4.2 4.4

TOTAL INVESTMENTS IN ASSOCIATES 4.2 4.4

5.2 Share in net income of associates


Conservateur Finance 0.3 0.2

Financial companies 0.3 0.2

TOTAL SHARE IN NET INCOME OF ASSOCIATES 0.3 0.2


Note 6 – Segment reporting

In line with the standards adopted by the BPCE Group, the Palatine Group presents information for the following three segments:

o retail banking; o asset management; o other activities.

The “Retail banking” segment encompasses all the activities of the Banque Palatine entity. “Asset management” encompasses all the activities of the “Palatine Asset Management” subsidiary. These two segments are complemented by the "Other activities" segment encompassing the insurance activities of the “Aries Assurances” subsidiary and the share in the income of associates (Conservateur Finance). The geographic analysis of segment results is based on the location where business activities are accounted for, with the Palatine Group’s net banking income deriving in full from France.

Retail banking Asset

management Other

activities Total Group

€ millions

First-half

2015

First-half

2014

First-half

2015

First-half

2014

First-half

2015

First-half

2014

First-half

2015

First-half

2014

Net banking income 150.7 147.2 13.3 12.0 0.2 0.3 164.2 159.5

Operating expenses (96.0) (85.1) (4.1) (4.3) (0.1) (0.1) (100.2) (89.5)

Gross operating income 54.7 62.1 9.2 7.7 0.1 0.2 64.0 70.0

Cost/income ratio 63.7% 57.8% 30.8% 35.8% 50.0% 33.3% 61.0% 56.1%

Cost of risk (22.9) (26.3)

(22.9) (26.3)

Share in net income of associates

0.3 0.2 0.3 0.2

Income before tax 31.8 35.8 9.2 7.7 0.4 0.4 41.4 43.9

Income tax expense (14.3) (13.5) (3.1) (2.6) 0.0 (0.1) (17.4) (16.2)

Non-controlling interests (minority interests)

0.0 0.0

NET INCOME ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 17.5 22.3 6.1 5.1 0.4 0.3 24.0 27.7

TOTAL ASSETS 15,984.4 14,912.1 16.2 15.2 3.3 3.4 16,003.9 14,930.7


Note 7 – Commitments

The amounts disclosed represent the nominal value of commitments given.

7.1 Financing commitments

€ millions 30/06/2015 31/12/2014

Financing commitments given to:

credit institutions 0.0 1,100.0

customers 1,650.9 1,470.4

- Confirmed credit lines 1,585.5 1,430.2

- Other commitments 65.4 40.2

TOTAL FINANCING COMMITMENTS GIVEN 1,650.9 2,570.4

Financing commitments received:

from credit institutions 573.4 613.2

from customers 50.0 0.0

TOTAL FINANCING COMMITMENTS RECEIVED 623.4 613.2

7.2 Guarantees issued

€ millions 30/06/2015 31/12/2014

Guarantee commitments given:

to credit institutions 63.5 85.6

to customers 1,021.8 1,025.4

other commitments given 573.4 613.2

TOTAL GUARANTEE COMMITMENTS GIVEN 1,658.7 1,724.2

Guarantee commitments received:

from credit institutions 347.3 386.5

from customers 612.3 621.5

other commitments received 4,060.0 4,034.6

TOTAL GUARANTEE COMMITMENTS RECEIVED 5,019.6 5,042.6


Note 8 – Financial assets pledged as collateral

Repos

Assets transferred or

pledged as collateral

30/06/2015 Repos

Assets transferred or

pledged as collateral

31/12/2014

€ millions

Carrying amount

Carrying amount

Carrying amount

Carrying amount

Carrying amount Carrying amount

FINANCIAL ASSETS PLEDGED AS COLLATERAL

Fixed-income securities 0.0 0.0 0.0 10.2 0.0 10.2

Financial assets available for sale 0.0 0.0 0.0 10.2 0.0 10.2

Loans to financial institutions 0.0 573.4 573.4 0.0 613.2 613.2

Securities classified as loans and advances due from credit institutions 0.0 0.0 0.0 28.1 0.0 28.1

Loans and receivables 0.0 573.4 573.4 28.1 613.2 641.3

TOTAL FINANCIAL ASSETS PLEDGED AS COLLATERAL 0.0 573.4 573.4 38.3 613.2 651.5

o/w financial assets transferred but not fully derecognised 0.0 573.4 573.4 38.3 613.2 651.5

ASSOCIATED LIABILITIES

Fixed-income securities 0.0 0.0 0.0 9.8 0.0 9.8

Financial assets available for sale 0.0 0.0 0.0 9.8 0.0 9.8

Securities classified as loans and advances due from credit institutions 0.0 0.0 0.0 27.8 0.0 27.8

Loans and receivables 0.0 0.0 0.0 27.8 0.0 27.8

TOTAL LIABILITIES ASSOCIATED WITH FINANCIAL ASSETS NOT FULLY DERECOGNISED 0.0 0.0 0.0 37.6 0.0 37.6

The "assigned" financial assets are receivables assigned as collateral (Articles L. 211-38 and L. 313-23 et seq. of the French Monetary and Financial Code) under guaranteed refinancing operations, with the central bank in particular. At 30 June 2014, receivables pledged as collateral under funding arrangements represented €573.4 million in receivables provided to the Banque de France under the TRICP system (€613.2 million at 31 December 2014).


Note 9 – Offsetting of financial assets and liabilities

Pursuant to the IAS 32 rules on offsetting, the Palatine Group does not offset financial assets and liabilities on the balance sheet. Financial assets and liabilities “under netting arrangements not offset on the balance sheet” comprise transactions under master netting or similar arrangements, which do not meet the restrictive offsetting criteria laid down in IAS 32. This applies to derivatives or outstanding repurchase agreements subject to framework partnership agreements for which the criteria for net settlement or the simultaneous settlement of assets and liabilities cannot be proven or for which offsetting is possible only in the event of the default, insolvency or failure of one of the contracting parties. For these instruments, the “Associated assets and financial instruments received as collateral” and “Associated liabilities and financial instruments pledged as collateral” include:

o for repurchase agreements: - loans or borrowings resulting from reverse repurchase agreements

with the same counterparty, and securities pledged or received as collateral (at the fair value of said securities);

- margin calls in the form of securities (at the fair value of said securities);

o for derivatives, the fair values of the reverse transactions with the same counterparty, as well as margin calls in the form of securities.

Margin calls received or paid in cash are shown in “Margin calls received (cash collateral)” and “Margin calls paid (cash collateral)”. Financial instruments under netting arrangements not offset on the balance sheet mainly consist of repo or over-the-counter derivative transactions.

9.1 Financial assets

30/06/2015 31/12/2014

€ millions

Net amount of financial assets

presented on the

balance sheet

Associated financial liabilities

and financial

instruments received as collateral

Net exposure

Net amount of financial assets

presented on the

balance sheet

Associated financial liabilities

and financial

instruments received as collateral

Net amount

Derivatives 39.3 38.3 1.0 27.2 24.7 2.5

TOTAL FINANCIAL ASSETS UNDER NETTING ARRANGEMENTS NOT OFFSET ON THE BALANCE SHEET 39.3 38.3 1.0 27.2 24.7 2.5


9.2 Financial liabilities 30/06/2015 31/12/2014

€ millions

Net amount

of financial liabilities presented

on the balance sheet

Associated financial

assets and financial

instruments pledged as collateral

Margin calls paid

(cash collateral)

Net exposure

Net amount

of financial liabilities presented

on the balance sheet

Associated financial

assets and financial

instruments pledged as collateral

Margin calls paid

(cash collateral)

Net exposure

Derivatives 205.7 38.3 127.1 40.3 204.1 24.7 132.2 47.3

Repurchase agreements 0.0 0.0 0.0 0.0 37.6 37.5 0.0 0.0

TOTAL FINANCIAL LIABILITIES UNDER NETTING ARRANGEMENTS NOT OFFSET ON THE BALANCE SHEET 205.7 38.3 127.1 40.3 241.6 62.2 132.2 47.3

Note 10 – Scope of consolidation

There has been no change in the scope of consolidation since 31 December 2014.

30/06/15

Country of

incorporation or domicile

Consolidation method

Changes in scope

compared with 31

December 2014

Percentage control

Percentage interest

BANQUE PALATINE France Full consolidation Consolidating entity

PALATINE ASSET MANAGEMENT France Full consolidation - 100.0% 100.0%

ARIES ASSURANCES France Full consolidation - 100.0% 100.0%

CONSERVATEUR FINANCE France Equity method - 20.0% 20.0%


CHAPTER 4 – DOCUMENT AVAILABLE TO THE PUBLIC

This document is also available on the following websites:

- Autorité des Marchés Financiers: www.amf-france.org

- Banque Palatine: www.palatine.fr (site in French), under “nous connaître - informations financiers - Chiffres clés/principaux indicateurs”

Copies of this document are also available free of charge from the Banque Palatine head office

at 42, rue d'Anjou - 75008 Paris, France.

Contacts

Thierry Zaragoza – Deputy Managing Director and Head of Finance & Banking Operations -

Tel.: +33 (0)1.55.27.95.50 [email protected]

Katia Gely – Communications Director - Tel.: +33 (0)1.55.27.95.15 [email protected]

- 08/2015

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