CREDIT MUTUEL GROUP KNOWING AND SERVING OUR CUSTOMERS THE KEYS TO OUR COMMITMENT

Transcription

1 CREDIT MUTUEL GROUP KNOWING AND SERVING OUR CUSTOMERS THE KEYS TO OUR COMMITMENT ANNUAL REPORT 2011

2 ANNUAL REPORT 2011

3 CONTENTS Chairman's message 05 Board of Directors of Confédération Nationale du Crédit Mutuel (CNCM) 06 CREDIT MUTUEL, THE MUTUAL BANK: DOING IT DIFFERENTLY 10 The mutual bank, heart of the group 10 A decentralised structure 12 Operation through participation 14 A human resources policy geared towards training 16 An innovative corporate sponsorship approach 18 Banking for all members of society 22 CREDIT MUTUEL, GROUP PROFILE: CONTROLLED GROWTH 26 Business profile; 2011 key figures 28 Controlled growth 30 Highlights RESULTS: SOLIDITY AND PERFORMANCE 34 BANKINSURANCE: SERVICES AND SOLUTIONS 42 Bankinsurance, our core business 44 Retail banking, the group s main business 46 The preferred bank of private individuals 48 Number one bank for non-profit associations 56 Number two bank for the farming sector 58 Number three bank for SMEs 60 Leading the field in technology 62 Retail banking subsidiaries 66 Insurance 70 OTHER ACTIVITIES: EXPERTISE AND INNOVATION 76 Corporate and investment banking 78 Asset management and private banking 82 Technological services 86 FINANCIAL REPORT 90 CNCM Board of Directors' management report 94 Financial statements 115 Notes to the financial statements 122 Independent Auditor s report CREDIT MUTUEL GROUP Annual Report

4 CHAIRMAN'S MESSAGE Against an economic and financial backdrop dominated by uncertainty concerning the sovereign debt of the euro zone countries, Crédit Mutuel held a firm course, consolidated positions and affirmed its role as a regional bank serving its members and customers. At the end of 2011, net profit, group share, came to 2,113 million for a cost of risk down by 27% excluding non-recurring items, which included its contribution to the Greek debt restructuring. With a more than 1 billion increase in shareholders equity, group share, to 33.3 billion and a Core Tier 1 solvency ratio of 11.2% placing it among France s leading banks, the group bolstered its financial solidity, already acknowledged by the rating agencies through its investment grade issuer status. This financial strength goes hand in hand with its powerful sales capabilities based on the know-how and skills of its 78,000 employees and 24,000 directors working on behalf of its nearly 29 million members and customers. These feed a sustained level of business throughout the group, in both the networks and the specialised business lines. Once again, Crédit Mutuel demonstrated the strength of its mutual values and democratic model. By decentralising its organisation, facilitating tool sharing, supporting job creating companies and building relationships of confidence and closeness with its members and customers, Crédit Mutuel contributes fully to the financing of the real economy, particularly at regional level. In recognition of the relevance of its strategic decisions and the strength of its unique business model, Crédit Mutuel was designated French Bank of the Year by the economic and financial magazine The Banker and Best French Banking Group by the World Finance magazine; it also topped the survey carried out by the Le Revenu magazine at the end of 2011 in the overall customer satisfaction category under the customer-rated banks heading. Engaging constantly with every customer group, broadening the scope of its European operations and standing firmly by its values and convictions, Crédit Mutuel continues with complete confidence to consolidate its development and prepare for the future. Michel Lucas Chairman, Confédération Nationale du Crédit Mutuel 4 CREDIT MUTUEL GROUP Annual Report

5 BOARD OF DIRECTORS OF CONFÉDÉRATION NATIONALE DU CRÉDIT MUTUEL AT 31 MAI 2012 Chairman 1 Michel Lucas, Chairman of Crédit Mutuel Centre Est Europe Vice-Chairmen 2 Gérard Cormorèche, Chairman of Crédit Mutuel du Sud-Est 3 François Duret, Chairman of Crédit Mutuel Centre 4 Philippe Vasseur, Chairman of Crédit Mutuel Nord Europe Chief Financial Officer 5 Alain Têtedoie, Chairman of Crédit Mutuel Loire-Atlantique et du Centre-Ouest Group Secretary 6 Pierre Filliger, Chairman of Crédit Mutuel Méditerranéen Other members of the Bureau 7 Michel Bokarius, Director of Crédit Mutuel Centre Est Europe 8 Gérard Bontoux, Chairman of Crédit Mutuel Midi-Atlantique 9 Alain Delserieys, Chief Executive Officer of Crédit Mutuel Antilles-Guyane and Deputy Chief Executive Officer of Crédit Mutuel Centre Est Europe 10 Daniel Leroyer, Chairman of Crédit Mutuel Maine-Anjou, Basse-Normandie Other directors 11 Guy Allain, Director of Crédit Mutuel de Bretagne 12 Jean-Louis Bazille, Director of Crédit Mutuel Agricole et Rural 13 Jean-Louis Boisson, Vice-Chairman of Crédit Mutuel Centre Est Europe 14 Eric Charpentier, Chief Executive Officer of Crédit Mutuel Nord Europe 15 Jacques Chombart, Vice-Chairman of Crédit Mutuel Agricole et Rural 16 Louis Crusol, Chairman of Crédit Mutuel Antilles-Guyane 17 Roger Danguel, Director of Crédit Mutuel Centre Est Europe 18 Pascal Durand, Chief Executive Officer of Crédit Mutuel Maine-Anjou, Basse-Normandie 19 Jean-Louis Dussouchaud, Vice-Chairman of Crédit Mutuel Sud-Ouest 20 Jacques Enjalbert, Director of Crédit Mutuel de Bretagne 21 Bernard Flouriot, Chairman of Crédit Mutuel Anjou 22 Jean-Louis Girodot, Chairman of Crédit Mutuel Ile-de-France 23 André Halipré, Vice-Chairman of Crédit Mutuel Nord Europe 24 Guénhaël Le Huec, Director of Crédit Mutuel de Bretagne 25 Jean-Luc Le Pache, Director of Crédit Mutuel de Bretagne 26 Jean-Luc Menet, Chief Executive Officer of Crédit Mutuel Océan 27 Claude Osier, Vice-Chairman of Crédit Mutuel Massif Central 28 Albert Peccoux, Chairman of Crédit Mutuel Savoie-Mont Blanc 29 Jean-Noël Roul, Vice-Chairman of Crédit Mutuel Loire-Atlantique et du Centre-Ouest 30 Denis Schitz, Vice-Chairman of Crédit Mutuel Centre Est Europe 31 Eckart Thomä, Chairman of Crédit Mutuel Normandie 32 Michel Vieux, Chairman of Crédit Mutuel Dauphiné-Vivarais 33 Joseph Vrignon, Chairman of Crédit Mutuel Océan 34 Christine Zanetti, Chief Executive Officer of Crédit Mutuel Loire-Atlantique et du Centre-Ouest The following people also sit on the Board: Etienne Pflimlin, Honorary Chairman 35 Alain Fradin, Chief Executive Officer Daniel Baal, Deputy Chief Executive Officer Gilles Le Noc, Corporate Secretary 6 CREDIT MUTUEL GROUP Annual Report

6 THE MUTUAL BANK DOING IT DI FFERENTLY 8 THE MUTUAL BANK Annual Report

7 THE MUTUAL BANK, HEART OF THE GROUP THE CREDIT MUTUEL NETWORK 2,104 local mutual banks 3,137 branches 11.3 million customers, including 10.2 million private individuals 7.3 million members 24,000 elected directors 29,000 employees* *Regulatory headcount of Crédit Mutuel at 31 December 2011, including the regional federations, the federal and interfederal banks and the local mutuals. The Group's main entity, Crédit Mutuel, is a cooperative bank under the 10 September 1947 Act governing French cooperatives. It belongs exclusively to its members, who own its capital and determine its strategy within a framework of democratic methods. As a mutual bank, Crédit Mutuel places its members at the heart of all its decisions. Its growth is exclusively based on its founding values of solidarity, responsibility, equality, closeness and transparency. These values have the same strategic importance for the bank as service quality. They are the Crédit Mutuel hallmarks, and they testify to the relevance of its business model in modern France. At end-2011, Crédit Mutuel had 7.3 million members and 11.3 million customers in more than 2,100 local mutual banks run by 24,000 member-elected representatives. To serve its customers and society, Crédit Mutuel's strategy combines sustainable development and solidarity (1). Historically, the bank has played a key social role, notably through its action in support of society s most vulnerable members. Crédit Mutuel is a company based on people rather than capital. It is not listed on the stock exchange. Because it plays an important role in the social economy, its sustainable development strategy is not bound by an all-out quest for short-term profitability. CRÉDIT MUTUEL IS A COMPANY BASED ON PEOPLE RATHER THAN CAPITAL. IT IS INDEPENDENT AND CANNOT BE SOLD. Sound management, crucial to the company s durability, is not geared towards the enrichment of a group of shareholders: rather it serves to ensure growth and first-rate service quality in the most cost effective way. The shares held by members constitute the capital classed as Tier 1 regulatory capital. They can be redeemed only at their face value. As a financial cooperative, Crédit Mutuel is inalienable, meaning it can neither be sold nor taken over; it can be wound up only on the decision of its members. Its decentralised organisation encourages staff to become more involved at every level, be it local, regional or national, thus enhancing the group s responsiveness and service quality. It makes possible a short decision-making process, better risk diversification and a highly effective control system. Every year, 20,000 board of directors and/or supervisory board meetings and 2,000 general meetings take place in the 2,000- plus local mutual banks, of which more than a half are located in rural areas. These meetings aim to assemble 10% of members; they provide a basis for truly democratic corporate governance. The local mutual banks are organised into 18 regional federations, which in turn are part of the national confederation. Crédit Mutuel s three levels operate according to the principle of subsidiarity, the local mutual banks which are closest to members and customers carrying out all the key functions of bank branch offices, and the other two levels exercising only those functions for which the local entities are not equipped. The governing bodies are made up of representatives of the bank's members, from the level of local general meetings where they are elected on a one person, one vote basis right up to the Board of Directors at national level. With its solid local base, Crédit Mutuel cannot be moved offshore and stands as an independent entity that contributes to job creation and economic vitality in all the areas in which it operates. A BANK NOT LISTED ON THE STOCK EXCHANGE THAT S WHAT SETS US APART (1) Crédit Mutuel's Corporate Social Responsibility (CSR) report is available at 10 THE MUTUAL BANK Annual Report

8 A DECENTRALISED STRUCTURE 2,104 LOCAL MUTUAL BANKS The first level of organisation is made up of local mutual banks, or caisses locales, which have the legal status of cooperative companies with variable capital (sociétés coopératives à capital variable). These are credit institutions governed by French banking law, with the capital owned by their members, who are both shareholders and customers. Financially independent, the local mutual banks take deposits, distribute loans and provide a full range of banking services. Most decisions concerning customers are taken at this level. Each local mutual bank is governed by a board of directors and/or a supervisory board, made up of unpaid members elected at general meetings on a one person, one vote basis. In all, there are more than 2,100 local mutual banks, whose 24,000 directors represent 7.3 million members. 18 REGIONAL GROUPS At the next level up, there are 18 regional groups, each of which comprises a regional federation and a federal bank or caisse fédérale (or an interfederal bank or caisse interfédérale, as is the case for the Centre Est Europe, Ile-de- France, Sud-Est, Savoie-Mont Blanc and Midi-Atlantique federations; the Bretagne, Massif Central and Sud-Ouest federations; the Loire-Atlantique and Centre-Ouest, Normandie, Centre, Dauphiné-Vivarais and Méditerranéen federations (since 1 January 2011); and, since 1 January 2012, the Anjou federation). The local mutual banks and the federal bank, of which they are shareholders, each belong to a regional federation. The regional federation is responsible for strategy and supervision, and represents Crédit Mutuel in its region. The federal bank is responsible for functions such as cash management and providing technical and IT services. The regional federations and the federal bank are governed by boards elected by the local mutual banks. In addition to the 18 regional federations, there is a federation with nationwide scope specifically for the farming sector Crédit Mutuel Agricole et Rural (CMAR). THE NATIONAL CONFEDERATION AND THE CENTRAL FINANCING BANK These bodies make up the third and top level of organisation. The Conféderation Nationale or national confederation, which has the legal status of a non-profit organisation, is the central body governing the network in accordance with the provisions of the French monetary and financial code (Code monétaire et financier). The 19 Fédérations and the Caisse Centrale du Crédit Mutuel are affiliates of the Conféderation Nationale, which represents Crédit Mutuel vis-à-vis the authorities and is responsible for defending and promoting its interests. The Conféderation Nationale also oversees the proper operation of its member establishments, supervises the regional groups and ensures the overall cohesion of the network, as well as co-ordinating business development and providing shared services. A DIFFERENT APPROACH TO BANKING THAT S WHAT SETS US APART The Caisse Centrale, or central financing bank, manages treasury for the regional groups and organises the pooling of Crédit Mutuel's financial resources. Its capital is jointly owned by the Caisses Fédérales. The 18 regional federations of Crédit Mutuel Brest Lille NORD EUROPE NORMANDIE Caen Paris MAINE-ANJOU, ILE-DE-FRANCE BASSE-NORMANDIE ND BRETAGNE Laval al ANJOU Orléans Nantes CENTRE Angers Strasbourg CENTRE EST EUROPE The regional groups The federal banks, which are the financial life blood of the regions, have in recent years merged to form inter-regional federal banks. Grouping them in this way has the effect of streamlining resources and cutting costs via technical, IT and financial partnerships. Regional groups as at 1 January 2012 Nord Europe federal bank Brest BRETAGNE Nantes Caen MAINE-ANJOU, BASSE-NORMANDIE Laval ANJOU Angers NORMANDIE Orléans CENTRE Paris Lille NORD EUROPE ILE-DE-FRANCE CENTRE EST EUROPE Strasbourg La Rochesur-Yon LOIRE-ATLANTIQUE E ET OCÉAN CENTRE-OUEST T Clermont- Ferrand SUD-OUEST MASSIF Bordeaux CENTRAL SAVOIE- SUD-EST MONT BLANC Annecy Lyon DAUPHINÉ-VIVARAIS Valence e Main-Anjou / Basse-Normandie federal bank Arkéa interfederal bank (Inter-regional bank covering the Bretagne, Massif Central and Sud-Ouest regions) Océan federal bank OCÉAN Bordeaux La Rochesur-Yon LOIRE-ATLANTIQUE ET CENTRE-OUEST Clermont- Ferrand SUD-OUEST MASSIF CENTRAL SUD-EST Lyon Valence SAVOIE- MONT BLANC Annecy DAUPHINÉ-VIVARAIS Fort-de-- France ANTILLES-GUYANE MIDI-ATLANTIQUE Toulouseouse MÉDITERRANÉEN Marseille Antilles-Guyane federal bank Crédit Mutuel (CM11) federal bank (Inter-regional bank covering the Anjou, Centre, Centre Est Europe, Dauphiné-Vivarais, Ile-de-France, Loire-Atlantique Centre Ouest, Méditerranéen, Midi-Atlantique, Normandie, Savoie-Mont Blanc and Sud-Est regions) Fort-de- France ANTILLES-GUYANE MIDI-ATLANTIQUE Toulouse MÉDITERRANÉEN Marseille 12 THE MUTUAL BANK Annual Report

9 CRÉDIT MUTUEL S CUSTOMERS (millions) Customers Members % +1.3% ONE PERSON, ONE VOTE The Annual General Meetings that members and customers of the local mutual banks are invited to attend each year are the basis of Crédit Mutuel's democratic structure. General meetings provide members with a special opportunity to meet the bank s directors and employees and learn more about the business and express their own views. They also offer a forum for suggestions and discussion of ways to enhance services, reflecting the values that distinguish Crédit Mutuel from other banks. OPERATION THROUGH PARTICIPATION As a mutual bank, Crédit Mutuel receives capital contributions through subscriptions to member shares (1) that earn interest at a fixed rate set by the general meeting of member shareholders, who are associates and co-owners of their local mutual bank. Reserves serve to back the shared obligations of members and as security for deposits. They are also used to finance long-term development. At the end of 2011, Crédit Mutuel member shares represented a total of 8.8 billion, up 1.3% from the previous year, while 276 million (2) was paid to members in dividends, representing 28% of the net earnings of the core cooperative business carried out by the local mutual banks and federal banks. PARTICIPATION AND DEMOCRACY Participation and democracy are the cornerstones of Crédit Mutuel s operation as a mutual bank. The 7.3 million Crédit Mutuel members supervise the management of the local mutual banks and elect the directors at general meetings, ensuring genuinely democratic governance. The 24,000 elected voluntary directors present at all three levels of the organisation - local, regional and national - are responsible for Required items on the agenda include a report on the entity s management and activities and on its specific actions as a mutual bank, leading up to approval of the financial statements and the election of directors on the basis of one person, one vote. A second part of the meeting is devoted to the presentation and discussion of current themes and events. Some 500,000 members and customers attend the regional and local annual meetings held between February and May. the group s management and supervision. Attentive to the needs and aspirations of the members they represent, these directors are themselves committed, active members and participate in the administration of the local mutual banks alongside the employees. As members of the local communities, they also exemplify the values that Crédit Mutuel stands for, and help to ensure their implementation. More than 29,000 Crédit Mutuel staff members (average full time equivalent headcount) are responsible for implementing company strategy and operating the business under the supervision of the elected directors. BUSINESS OPERATION The decentralised structure with decisionmaking processes at regional and local level favours entrepreneurship, a sense of personal responsibility and team spirit. The ties between the local mutual banks and the regional federations and banks ensure the cohesion of the various entities as regional groups that operate as fully-fledged credit institutions within the framework of French banking regulations. (1) 'A' shares are those shares initially subscribed to by persons wishing to become members of a local mutual bank and to acquire the right to vote at general meetings on a one person, one vote basis. 'B' shares represent additional amounts paid in by members. They earn dividends but carry no voting rights. (2) Excluding 'A' shares AS AN ACTIVE MEMBER, I USE MY VOTE The regional groups cooperate freely to rationalise resources and costs through technical partnerships, notably in areas such as information technology and financing. Other avenues for cooperation are provided by the Caisses Interfédérales serving more than one regional bank and by joint subsidiaries in insurance, leasing, factoring, corporate banking, investment banking, asset management and private banking. Regional groups membership of the Confédération Nationale and the Caisse Centrale ensures cohesion and shared responsibility at national level. As the central body for the whole Crédit Mutuel group, the Confédération Nationale approves appointments to management positions and regional audit teams in the regional federations, and takes all necessary steps to ensure the group s proper operation, with responsibility for overall control and the coherence of business development. Jointly with Internal Control committees at regional federation level, the Confédération Nationale reviews audit reports and reports its findings to the boards concerned. The Confédération Nationale's Board of Directors comprises representatives of all the regional federations, elected by the general meeting of Confédération Nationale shareholders. This general meeting also elects the Chairman for five years. Mutual members are thus represented at all three levels of the organisation through the directors they elect. A BANK THAT BELONGS TO ITS MEMBERS AND CUSTOMERS THAT S WHAT SETS US APART 14 THE MUTUAL BANK Annual Report

10 The March 2011 agreement on professional training was amended to reflect the most recent legislative developments. The main change concerned vocational training contracts, the duration of which was extended to 24 months. At Crédit Mutuel, the extension will benefit not only the legally stipulated employee categories but also young graduates, over 50s and staff training for account manager positions. For training programmes covered by the extension to 24 months, the associated contract is signed exclusively on an open-ended basis. There was also a review of the agreed minimum pay standards for the sector in TRAINING, MOBILITY AND VOCATIONAL SKILLS DEVELOPMENT: THAT'S WHAT MAXIMISING HUMAN RESOURCES IS ABOUT A HUMAN RESOURCES POLICY GEARED TOWARDS TRAINING The rise in the number of Crédit Mutuel group employees (up by 2.9% to nearly 78,000, of which more than 67,000 in France) mainly reflects recent acquisitions. The average full time equivalent headcount for Crédit Mutuel alone exceeded 29,000 at 31 December 2011, while that of CIC stood at almost 20,700. Staff signed up for more than 1,400 professional training initiatives in 2011, including vocational contracts enabling over 400 young people at Bac to Bac +2 level to move rapidly to account manager posts for retail or professional customers, and just over 1,000 vocational programmes to help experienced staff train in new disciplines. Crédit Mutuel provides staff members with training opportunities throughout their careers, reflected by a training budget equivalent in 2011 to more than 5% of the payroll. Women represented 54% of the overall headcount at end-2011, and one-third of all executives are women, compared with less than a quarter in 2004 (all age groups included). The group s commitment to providing long-term employment is illustrated by the fact that 96% of its staff have permanent contracts. Crédit Mutuel sector joint negotiations led to the signing of a number of agreements in The Crédit Mutuel interfederal mobility agreement signed early in the year aims to facilitate interfederal mobility between the regional federations and other organisations covered by Crédit Mutuel s sector bargaining agreement. This agreement relates notably to job markets and the legal framework applicable to transfers between federations; under it, contracts are automatically transferred, probationary periods become discretionary and all length of service rights are maintained. The agreement is designed to meet the need to adapt jobs to reflect changes in business lines and employees aspirations. Internal mobility management is part of Crédit Mutuel's global jobs and training policy, which aims to preserve jobs while retaining and developing skills in-house. This global policy also seeks to prioritise, at the same level of qualification, job applications by candidates from within the bank s federations and other entities over external applications. In addition to the negotiation of sector agreements, the consultation meetings of France s joint national commission for jobs and professional training (Commission paritaire nationale de l emploi - CNPE) and of the Observatoire des Métiers, an employment and professional training research body, led to the publication of a sector employment data paper and the yearly professional training review. Meanwhile, in 2011 a CNPE-commissioned survey of the employment of seniors, conducted by the Observatoire des Métiers, revealed that, in contrast with the picture at national level, Crédit Mutuel has a high level of continuing employment of seniors including the over 55s. The bank has a low turnover rate, with seniors generally staying with the company until they reach retirement age. At the same time, their access to professional training provides a further illustration of Crédit Mutuel s policy of supporting jobs and promoting internal retraining. 16 THE MUTUAL BANK Annual Report

11 Reading Research and social assistance CICM Support for Haiti AN INNOVATIVE CORPORATE SPONSORSHIP APPROACH which was created in early 2009 and operates under the aegis of Fondation de France, houses Crédit Mutuel s various national corporate sponsorship initiatives: the promotion of reading and the French language in all its forms through the Reading programme; the creation and support of long-term mutual savings and credit networks to facilitate banking access for people in developing countries through Centre International du Crédit Mutuel (CICM); support for research into and action against economic and social exclusion through the Research and social assistance programme Since 2010, Fondation du Credit Mutuel has also supported the Together, let s rebuild Haiti programme. READING PROGRAMME The Reading programme has been working on the ground since 1992 to fight illiteracy and help everyone enjoy reading. Its work is based around three initiatives: Lire la ville (Reading the town), Prévenir l illettrisme (Fighting illiteracy) and La Voix Des Lettres (The power of literature). Lire la Ville gets thousands of school children above a certain year group involved in reading and writing projects linked to their immediate environment. They are tasked with recording their experiences, interviewing experts in the field, conducting surveys and then reporting on their findings in writing. Prévenir l illettrisme (Fighting illiteracy) provides the means for combating illiteracy-based exclusion. The foundation supports associations that work directly with families via existing structures such as childcare establishments, libraries, hospitals and prison workshops. They use techniques such as reading aloud to accustom children of nursery age and above to books and reading. The foundation brings together these associations in a national network called Quand les livres relient ( The binding power of books ). La Voix Des Lettres (The power of literature) the foundation supports national and regional festivals, literary awards, programmes to promote reading aloud and other innovative reading and literary awareness initiatives. In particular, it supports the flagship Incorruptibles awards, in which 200,000 pupils from nearly 3,000 schools across France read books selected according to their respective reading levels before voting for their favourite title. Since the earthquake that hit Haiti on 12 January 2010, Fondation du Crédit Mutuel has supported the Saint-Martin Avenir et développement solidarité Haïti association through its Together, let s rebuild Haiti programme. Thanks to mobilisation right across the Crédit Mutuel group and an appeal for donations from the bank s members and customers, the foundation was CICM Centre international du Credit Mutuel (CICM), which was created in 1979, continues its efforts to facilitate universal banking access. This non-profit association, to which the 18 Crédit Mutuel regional federations contribute, works to set up independent, sustainable cooperative networks in countries where individuals are excluded from existing banking services. Its initiatives are financed jointly by the Crédit Mutuel Fédérations and outside fund raisers. able to fund the French hospital reconstruction project in Port au Prince and to help this institution regain financial independence. Its financing of a new 154-unit residential district a few kilometres outside the capital is also ongoing. All of these projects are described in full, with regular updates, on Fondation du Crédit Mutuel s website at The site also features the Haiti appeal and a film about the group s Haitian reconstruction project. THE ESSENCE OF SOCIAL SOLIDARITY IS TO ACCEPT NO EXCLUSION VICTOR HUGO 18 THE MUTUAL BANK Annual Report

12 THE CICM IS ACTIVE IN SEVEN AFRICAN AND ASIAN COUNTRIES Central African Republic through Crédit Mutuel de Centrafrique, Cameroon through Mutuelles camerounaises d épargne et de crédit (MUCADEC), Republic of the Congo through Mutuelles congolaises d épargne et de crédit (MUCODEC), Niger through Crédit Mutuel du Niger (CMN), Burkina Faso through Crédit Mutuel du Burkina Faso (CMBF), a new project which aims to sign up 7,500 members over the next five years, The Philippines through the Mutual Saving and Credit Cooperative of Philippines (MSCCP), and Cambodia through Crédit Mutuel Kampuchea (CMK). The CICM helps to promote the mutual model while adopting a professional, sustainable approach. It is organised according to Crédit Mutuel's founding principles - members responsibility, unpaid directorship and clearly defined catchment areas for branches and offers modern management tools and training programmes designed to help the networks become independent. Expatriate staff apply their know-how to help train local bank staff. CICM s work thus covers many areas: extending banking services to communities to enable them to protect their assets, build up contingency savings and finance projects, helping to strengthen the local socio-economic fabric, disseminating the cooperative model and its democratic values, and promulgating a professional approach to savings and credit management. RESEARCH AND SOCIAL ASSISTANCE PROGRAMME Created in 2009, the Research and social assistance programme organises initiatives under four categories: Support for think tanks such as Confrontations Europe, Institut français des relations internationales (Ifri), Mouvement Européen-France and, since 2011, Fonda; Support for research through the Prix de la Recherche Coopérative (cooperative research award), Recma and assistance of various research teams working on topics in which Crédit Mutuel has specialist knowledge, such as mutualism, cooperation and corporate social responsibility; Support for social economy entities such as Conseil National des Cres, Coop FR and Centre des Jeunes Dirigeants de l Economie Sociale; Solidarity-promoting initiatives The foundation s renewed support of Passeport Avenir ( passport to the future ) and Entretiens de l excellence ( Excellence interviews ) through finance facilities and information workshops helps improve access to higher education for pupils from disadvantaged backgrounds. At the end of 2011, Fondation du Credit Mutuel sponsored the Reader s Digest-France Bleu solidarity awards, which saw around ten organisations rewarded for their daily work in the area of social initiatives. It was the third time it had sponsored this event. HELPING YOUNG TALENT WITH PASSEPORT AVENIR The Passeport Avenir initiative enables young people from disadvantaged backgrounds in sensitive urban areas to attend engineering or business schools (from preparatory year to final degree) by eliminating all financial discrimination. This association s work is supported by three government departments and 15 corporate partners*, including Crédit Mutuel, which has been involved in the project since 2007 through the provision of student loans requiring no parental guarantee and the joint running of educational workshops in the partner schools to give students advice on how to manage a budget and introduce them to financing solutions. The National Education Ministry, the Ministry for Higher Education and Research and the Secretary of State for Urban Policy are also partners. This public-private partnership has more than 100 member schools and is growing fast. By providing concrete help to youngsters wishing to access high-powered careers, it promotes Crédit Mutuel s aim to be the bank of choice for young talent in urban areas covered by government development programmes. (*) The National Education Ministry, the Ministry for Higher Education and Research and the Secretary of State for Urban Policy, Accenture, Alcatel-Lucent, Atos Origin, Capgemini, Devoteam, Ericsson, Gemalto, Hôtel F1, Nokia Siemens Network, Orange, Qualcomm, Sagemcom and SFR. 20 THE MUTUAL BANK Annual Report

13 BANKING FOR ALL MEMBERS OF SOCIETY The economic and financial crisis vindicated the group s choices, namely its commitment to strategic development and its decision to operate as a cooperative, mutual bank. Crédit Mutuel leads the way in promoting social cohesion, as can be seen in its responsible initiatives and solidarity-driven goals, implemented directly at ground level. Its initiatives cater for the needs of the most vulnerable members of society: it operates a low-income and business micro-credit activity, for example, both directly and in close cooperation with integration assistance and social aid networks. Crédit Mutuel underwrites 50% of the risk associated with loans granted under such schemes. It also offers a special assistance programme for members facing financial difficulties. Spanning past and present and embodying commitment for the future, the ethic of social responsibility is the cornerstone of the group s actions, the driving force behind a socially supportive, responsible bank. PERSONAL MICRO-CREDIT Crédit Mutuel assists the most vulnerable sections of the population by extending micro-credit within the framework of partnerships with non-profit organisations. These loans, for amounts ranging between 500 and 3,000, are granted to people who have little or no access to credit, and have no stable employment or are living on social welfare but are actively looking for work. The group has signed more than 200 regional agreements throughout France with social and insertion assistance organisations such as Secours Catholique, COORACE, UDAF and a number of other family support networks such as ADMR, Familles Rurales, Emmaüs and Restos du Cœur, together with local employment agencies, large numbers of community centres (CCAS) and local social integration organisations. The goal is to develop a joint approach to help people in financial difficulty implement a project that will enable them to find a job. By opening accounts for them and extending loans that are partly guaranteed by the Fonds de Cohésion Sociale (French social aid fund), Crédit Mutuel enables them to regain access to the banking system and become regular bank customers again. Under an agreement signed with Caisse des Dépôts et Consignations, Crédit Mutuel assumes 50% of the risk on these loans and the Fonds de Cohésion Sociale the other half. In 2011, Crédit Mutuel granted 9.1% of all micro-credits distributed in France, representing an 8% market share in monetary terms. PROFESSIONAL MICRO-CREDIT In 2011, the group financed almost 290 million in loans through three networks: Association pour le Droit à l Initiative Economique (ADIE), France Initiative and France Active. Crédit Mutuel continues to be a partner of ADIE, which saw an overall recovery in business in 2011, particularly towards the end of the year, with 10,322 business loans granted. Through seven regional federations and a CIC regional bank, the Crédit Mutuel group financed close on 11% of all 2011 lending by this organisation, representing a total of 4.1 million. For over 20 years, the group has been working with France Initiative, the leading network of associations set up to promote local economic development through help for business start-ups and buyouts. The group is actively involved with over 60% of its local initiative platforms (165 for Crédit Mutuel and 141 for CIC) and belongs to the "Entreprises" collegial body of partner companies that heads up the network. In 2011, Crédit Mutuel granted 2,932 loans ( 182 million) via this network, representing nearly 19% of its overall financing volume. France Initiative s business was down on the year - both with Crédit Mutuel and the banking sector as a whole because of the significant reduction in the national guarantee budget for the Nacre company creation and transfer scheme. Crédit Mutuel also works alongside the France Active network, which offers grants and loans to initiatives aimed at promoting economically driven social integration. It founded six of the organisation s 38 regional funds, sits on half of its financing committees, and in 2011 backed 22% of the guarantees extended, representing a commitment of 27.6 million. Loans to very small enterprises were up over the year but down for Nacre ventures. The implementation of new procedures has now made it easier to set up guarantees with France Active Garantie. The group s marked increase in micro-lending to businesses (7,100 more loans than last year) is attributable largely to credits granted to very small enterprises through France Active and to the recovery in ADIE's business. The Nacre scheme s impact on France Initiative s activity indirectly weighed on lending by the bank. MEMBERS IN FINANCIAL DIFFICULTY: SPECIFIC ASSISTANCE PROGRAMMES Crédit Mutuel s social assistance converts words into action. Through its regional federations, the group runs a number of initiatives, of which several are described below. They offer a reminder of the group s day-to-day commitment to its most vulnerable members. MICROCREDIT: A SIGN OF COMMITMENT, BECAUSE THERE'S NO SUCH THING AS A SMALL PROJECT WHEN IT COMES TO SOCIAL INVESTMENT 22 THE MUTUAL BANK Annual Report

14 A SOCIALLY SUPPORTIVE BANK Crédit Mutuel encourages and supports initiatives by its members and customers in favour of social cohesion, solidarity and the environment. It offers products with social and environmental added-value based on the new concept of solidarity-oriented savings solutions, loans for environmentally beneficial projects and socially responsible investment products distributed by CM-CIC Asset Management, Federal Finance (a Crédit Mutuel Arkéa company) and La Française AM (part of Crédit Mutuel Nord Europe). For more information see the annual report on corporate social responsibility (CSR) available at work-reintegration projects by helping them to obtain aid from the specialised associations and bodies with which CMS has partnership agreements. CMS works closely with the local mutual banks, which are responsible for identifying potential partner associations and, with help from CMS, handling relations with these partners. Repayments on loans granted, which amount to between 500 and 4,000 over 6 to 48 months, cannot exceed 100 per month. Since 1986, the Association de gestion du fond d entraide du Crédit Mutuel de Bretagne (CMB) has been providing aid to members faced with loan repayment difficulties resulting from unforeseen circumstances. The association covers up to 75% of remaining instalments for a period of up to 12 consecutive months, with a maximum of 16,000 available per borrower or household. Since 2010, the Ark'ensol association has coordinated Crédit Mutuel Arkéa s solidarityoriented initiatives, and it is now the one-stop entity for all the group s social undertakings. Ark ensol, which has an annual budget of 2 million, works at every level from local to international and has already helped create some 600 jobs. There are two specialised sub-associations working under the Ark'ensol banner: Ark ensol Créavenir and Ark ensol Entraide. The first, which is continuing in another form the work done by Créavenir, provides business start-up assistance, while the second - a continuation of the social aid fund - helps families in difficulty. Ark ensol also contributes to the fight against illiteracy and provides aid to emerging countries via Fondation du Crédit Mutuel. Operational since 2006 in Lille, Caisse Solidaire du Crédit Mutuel Nord Europe was created to enable people to re-enter the banking system after being excluded from it, and to provide basic financial services to people with little money or who are encountering temporary difficulties due to their professional situation or to health or other problems. It grants micro-loans of 500 to 2,000, repayable over 6 to 24 months at market rates, and can in some cases finance the purchase of subsidised housing. This entity works in partnership with a large number of aid organisations, some of which have a seat on its board of directors. At the end of 2007, Crédit Mutuel Maine- Anjou Basse-Normandie set up Crédit Mutuel Solidaire (CMS), which acts both as a social aid fund and a social micro-credit organisation. Its primary aim is to support members in difficulty who have personal In early 2008, the Nantes federation set up Créavenir Budget, a special initiative to help customers with payment difficulties. Aimed at local members only, this association is a vehicle for the group s individual solidarity micro-credit programme, and seeks to support those in financial difficulty by providing budget management advice and help with certain administrative procedures. In doing this, the group while not seeking to act as a substitute social security system shows its commitment to seeking solutions that require input from its directors and employees. Créavenir Budget relies on two voluntary directors for each area, with one employee per area acting in a consulting role. The economic and social action task force (Aide économique et sociale - AES) is responsible for coordinating the scheme. At the beginning of 2012, the group pooled its microcredit activities and that of AES within a single entity, Crédit Mutuel Solidaire. 24 THE MUTUAL BANK Annual Report

15 GROUP PROFILE 2011 CONTROLLED GROWTH 26 CREDIT MUTUEL GROUP Annual Report

16 GROUP PROFILE CREDIT MUTUEL BUSINESS PROFILE The Crédit Mutuel group, which is one of France's leading bankinsurers, comprises the Crédit Mutuel branch network and all the bank s subsidiaries. Backed by a staff more than 100,000 strong, comprising 78,000 employees and 24,000 directors, the group offers a comprehensive range of financial expertise to nearly 29 million customers, including more than 27 million retail customers. Its overriding priority, and the key to its development, is the quality of both its customer and member relationships and the services it provides. Its strategy is one of controlled growth based on local retail banking, bankinsurance and technological excellence. The group focuses on closeness to the customer, combining the strengths of Crédit Mutuel - a cooperative, mutual bank with extensive regional and local ties - with those of CIC, a commercial bank of which Crédit Mutuel Centre Est Europe took control in 1998 via Banque Federative du Crédit Mutuel. Combined with Targobank and Cofidis, Crédit Mutuel and CIC - the group s two leading brands - have a network of almost 6,000 points of sale. Crédit Mutuel is composed of local mutual banks organised into 18 regional federations, which in turn form the Conféderation Nationale du Crédit Mutuel, the central body that heads the network. CIC operates a branch network in the Paris region and is the holding company for a group of five regional divisions, along with subsidiaries specialised in all areas of finance and insurance. The group carries out nearly a fifth of all its business abroad. A RETAIL BANK WITH A LOCAL FOCUS Crédit Mutuel offers a comprehensive range of financial services to customers comprising private individuals, locally based professionals and companies of all sizes. It has a 14.8% share of the French deposit market and 17.1% of the bank-distributed loan market. It is France s number one non-life bankinsurer. Its insurance subsidiaries manage more than 30 million savings, auto, home, health, personal protection and retirement policies on behalf of almost 12 million policyholders. The group is a major player in the home loans market and France s number three for consumer credit. It is the country s biggest bank for non-profit associations, the second-largest for farmers and banker to one out of every three self-employed professionals. More than half of France s 100 largest companies bank with Crédit Mutuel. CREDIT MUTUEL GROUP 2011 KEY FIGURES Net banking income: 13.9 billion Net profit: 2,195 million Net profit, group share: 2,113 million Shareholders equity, group share: 33,292 million Core Tier 1 ratio: 11.2% 5,898 points of sale* 77,979 employees 28.8 million customers billion in customer deposits billion in loans outstanding A top grade issuer A+/A-1 Standard & Poor's with a stable outlook for Crédit Mutuel * of which 5,390 in France ** for CM10-CIC A+/F1+ Fitch with a stable outlook** A leading retail bankinsurance player in France 17.1% market share in bank loans 14.8% market share in deposits No. 1 bankinsurer in non-life insurance No. 1 bank for non-profit associations and works councils No. 2 bank in electronic banking No. 2 bank for the farming sector No. 2 bank for social and business micro-credits No. 3 bank for housing loans No. 3 bank for SMEs No. 3 for consumer credit Aa3/P-1 Moody's on review for downgrade** 28 CREDIT MUTUEL GROUP Annual Report

17 GROUP PROFILE 2011: CONTROLLED GROWTH CREDIT MUTUEL GROUP: INTERNATIONAL SITES AND PARTNERSHIPS (2011) Grande Bretagne CREDIT MUTUEL GROUP RETAIL BANK SERVING ALL CUSTOMER CATEGORIES AND CATCHMENTS Allemagne Belgique Rép. Tchèque Lux. A Slovaquie e du Nord iqu ér m Local mutual bancks Regional federations National bodies THE DRIVING FORCE behind the group s commitment and responsiveness THE ORGANISATIONAL FRAMEWORK of the business REPRESENTATION and promotion of interests France Hongrie Suisse Canada I ernationa nt THE HEART OF THE SYSTEM THE mutual bank Italie New York Local mutual banks, of which there are 2,104. Decisions at Crédit Mutuel are taken as close as possible to ground level. 18 regional federations, The final link in the chain, which coordinate business within their respective jurisdictions. 2 national bodies that represent and defend the group s interests. Asie Portugal Banking and finance subsidiaries Espagne Insurance subsidiaries Technology subsidiaries Real estate subsidiaries I A GROUP WITH A DIFFERENCE serving all its customers and supporting businesses and jobs. Maroc Tunisie Cofidis Participations Group LEADING THE WAY IN BANKING TECHNOLOGY Customers of the branch network benefit from a comprehensive multi-channel banking offer based on cutting edge technology. In 2011, its remote banking service clocked up nearly a billion contacts, half of them online. Crédit Mutuel s mobile telephony activity, marketed under the NRJ Mobile, Crédit Mutuel Mobile and CIC Mobile brands, provides a new channel for bankinsurance and services and constitutes a new approach to payment instruments that has attracted more than a million customers. The bank maintained its number two position in France in electronic payments, with a nearly 19.5% share of the overall market, and its number one position for transactions in France with affiliated retailers, with a 25% market share. Crédit Mutuel s complementary and competitive offer ensures it has coverage of all market segments, from the integrated distribution majors and franchise networks to independent retailers. A SOLID, INVESTMENT GRADE BANK In 2011, the group continued to boost its financial solidity, with a 1 billion increase in its group share of shareholders equity to 33.3 billion. At 11.2%, its Core Tier 1 solvency ratio puts it among France s leading banks. In a context of all-round ratings downgrades for banks, Crédit Mutuel remains an investment grade issuer, with an A+/A-1 rating and stable outlook from Standard & Poor s, an A+/F1+ rating and stable outlook for CM10-CIC from Fitch and an Aa3/P-1 rating on review for downgrade for CM10-CIC from Moody s CONTINUED EXPANSION The group developed existing operations abroad in 2011 and made further acquisitions. Its business grew: - in France s neighbouring countries, with the launch of Targobank Espagne and the takeover of Citibank Belgium (2012); - through the ramping up of market share 5,898 points of sale 78,000 employees 28.8 customers ona l nt BANQUE DE TUNISIE 30 CREDIT MUTUEL GROUP l * FRENCH BANK OF THE YEAR for the second year running (2010 and 2011) at its new subsidiaries, notably Targobank and Cofidis; - through the signing of a global cooperation agreement with Mouvement Desjardins, which resulted in an expansion of financial services between Canada and France. The group s business with major retailers grew. On the basis of its strong technological capabilities, CM10-CIC signed a partnership with Casino to develop the distribution of bank cards and consumer credit. This controlled development is taking place within a much broader avenue of growth for the group, and strengthening its position as a major bank both in France and elsewhere in Europe. Annual Report

18 GROUP PROFILE 2011 HIGHLIGHTS January CM10-CIC With effect from 1 January, more than half of the Crédit Mutuel federations became part of a single interfederal bank: CM5, in fact, became CM10-CIC as the Nantes, Caen, Orléans, Marseille and Valence groups joined Caisse Fédérale du Crédit Mutuel. Crédit Mutuel invests in Alsace via Alsace Croissance This 50 million regional investment fund has three partners: Crédit Mutuel-CIC, which has financed half of the venture via CM-CIC Capital Finance, the Fonds Stratégique d Investissement (FSI), with an 18 million investment through CDC Entreprises, and the Alsace regional authority for 7 million. July August Acquisition of 50% of Banque Casino in a bank cards and consumer credit deal Crédit Mutuel-CIC voted best French banking group by World Finance magazine Haiti: the Crédit Mutuel project gets under way with a first lot of 38 residential units due for delivery in June 2012 Crédit Mutuel Arkéa announces the creation of Arkéa Capital Partenaire, a private equity company set up to make equity investments in large companies. Training: inauguration of the Verrières le Buisson centre With 22 training rooms, 120 bedrooms with internet access, a 550-person dining room and a 300-seat lecture hall, the Gâtines centre situated on a six-hectare site in Verrières le Buisson held its first work sessions. February Creation of CM-CIC Capital Finance This new corporate finance entity is the result of a merger of three specialised subsidiaries: Banque de Vizille, based near Lyon, Nantes Institut de Participation de l Ouest (IPO) and CIC Finance. Together they make up France s second biggest bank-capital player in the private equity market. March Partnership between Desjardins and CM-CIC Securities This is a partnership signed by ESN North America, a CM-CIC Securities subsidiary, and Valeurs Mobilières Desjardins, for the distribution in Europe of research on companies listed on the Toronto stock exchange. April CM-CIC Services going strong Three years after its creation, this shared business centre serving the CIC regional banks and 12 Crédit Mutuel federations has more than 2,000 employees divided into five divisions. It enables services and costs to be harmonised by business line. May New identity campaign via television and radio slots and coverage online and in the regional daily press, intended to capitalise on the momentum generated in 2010 and underscore the distinguishing strengths of mutualist banking. CIC changes its governance structure from that of a French limited company with an executive board and a supervisory board to that of a standard French limited company. End of an episode for the livret bleu The case against the bank s receipt of state aid for the livret bleu savings product was closed. The European Commission ended its enquiry, which began at the end of 1997 but originated even earlier, when a complaint was filed complaint against Crédit Mutuel in June CM Anjou decides to join CM10, which will thus become CM11 as from 1 January Partnership comes into force between Allianz and ProCapital Banking Services, a Crédit Mutuel Arkéa subsidiary, to distribute banking services in France. Crédit Mutuel is an official partner of the 30th Fête de la Musique, marking three consecutive years of sponsorship of this event. September National advertising campaign on the main French television channels UFG-LFP becomes La Française AM (Asset Management) Two and a half years after the merger between Union Française de Gestion (UFG) and La Française des Placements, UFG-LFP, a subsidiary of Crédit Mutuel Nord Europe, changes its name in order to adopt a more recognisable and memorable brand that reflects the group s positioning and ambitions. October Crédit Mutuel and Mouvement Desjardins sign a global cooperation agreement in the context of their international development strategy, resulting in increased business in electronic banking and private banking. The agreement demonstrates the commitment of the two cooperative and mutual groups, which share the same values, to strengthening their business ties. By optimising investments it will allow them to enhance their respective service offers for the benefit of their members and customers. NRJ Mobile tops the one million customer mark, a commercial milestone that establishes mobile telephony as a fully fledged complementary business line for the bank. Cofidis expands in Hungary Crédit Mutuel s consumer credit subsidiary acquires HSBC s Hungarian consumer credit activity. November Crédit Mutuel-CIC and Banco Popular launch Targobank in Spain Targobank Spain has more than 200,000 retail and 18,000 business customers, 123 branches and 530 employees. With more than 2 billion of assets and over 276 million in shareholders capital, the bank has restated its intention to expand and be a part of moves to restructure the Spanish banking system. Cofidis launches Cofidis mobile in partnership with NRJ Mobile This is a strategic diversification involving offering a range of contract-only mobile deals to the 3.5 million Cofidis customers in France. December Crédit Mutuel named French Bank of the Year for the second year in succession by the Financial Times group economic and financial magazine, The Banker. 32 CREDIT MUTUEL GROUP Annual Report

19 2011 RESULTS SOLIDITY & PERFORMANCE 34 CREDIT MUTUEL GROUP Annual Report

20 2011 RESULTS THE GROUP CONSOLIDATES ITS POSITIONS SERVING NEARLY 29 MILLION CUSTOMERS 2011 was a year dominated by the euro zone sovereign debt crisis and by pressures on liquidity and the financial markets. In this environment of economic and financial uncertainty, Crédit Mutuel capitalised on its commercial development to strengthen its positions. Buoyed by its cooperative model, it stayed true to its mission of financing the economy and serving all its customers, whether private individuals or businesses. Crédit Mutuel posted a net profit, group share of 2,113 million (down 27.5% from 2010) on overall net profit of 2,195 million. This decrease takes into account the impairment of the Greek loan portfolio, which resulted in a one-off charge against profit of 359 million. Excluding exceptional items, the cost of risk fell by 27.1% to 1,168 million. The main data for 2011 reflect the solidity of Crédit Mutuel s business model and the active involvement of its 24,000 elected directors and 78,000 employees. They are also testament to the high quality service provided to its members and customers and the vitality of its networks in France and abroad. Crédit Mutuel was named French Bank of the Year for the second year in succession by the Financial Times group economic and financial magazine, The Banker, an international benchmark for current financial affairs. A SOLID, HIGHLY RATED BANK Crédit Mutuel uses all its profits to consolidate shareholders equity and pay dividends on its shares. Operating expenses remained under tight control, with virtually no change at constant scope (+0.3%). Financial solidity increased: the group share of shareholders equity was up by 1 billion at 33.3 billion while the Core Tier 1 capital ratio stood at 11.2%, putting Crédit Mutuel in the top tier of French banks. In a context of all-round ratings downgrades for European banks, Crédit Mutuel remains a highly rated issuer, with an A+/A-1 rating and stable outlook from Standard & Poor s, an A+/F1+ rating and stable outlook for CM10-CIC from Fitch and an Aa3/P-1 rating on review for downgrade for CM10-CIC from Moody s. STRONG PERFORMANCES IN A TURBULENT ENVIRONMENT Building on its deep roots in both mainland France and the overseas territories, Crédit Mutuel continues to promote its distinguishing strengths. Its main objective is to finance the economy and serve all its customers. In 2011, the bank saw a sustained level of business throughout the group, in both the networks and the specialised business lines. CUSTOMER FUNDS SUPPORTED BY SHARP RISE IN DEPOSITS In a year that saw savers spurn the financial markets, showing a marked preference for liquid savings products, new deposits excluding SFEF increased by 10% to billion. The surge was driven mainly by term accounts, which saw the biggest increase in deposits (up 25.3% to 58 billion), savings book accounts (up 15.9% to 53 billion), livret bleu and livret A regulated savings accounts (up 10.5% to 29.8 billion) and current account credit balances (up 5.5% to 70.6 billion). FINANCIAL STRUCTURE (In billions) 10.7% % 11.2% Shareholders equity of which, group share Core Tier 1 ratio +2.7% +3.1% 36 CREDIT MUTUEL GROUP Annual Report

21 2011 RESULTS RETAIL BANKING AND INSURANCE NET BANKI (In millions) RETAIL BANKING - 0.6% 11,738 11,662 10,559 INSURANCE 1,569 1, % 1,347 CORPORATE BANKING / INVESTMENT BANKING 1,761 1, % ASSET MANAGEMENT / PRIVATE BANKING OTHER TOTAL - 4.8% 15,354 14,080 14,624 INTRA-GROUP ELIMINATIONS CONSOLIDATED - 5.2% 13,57314,724 13, % % SUSTAINED LENDING ACTIVITY Lending grew by a healthy 4.7% to billion, underscoring the group s active support of the economy. Housing loan outstandings increased by 4.4% to billion. New housing loans remained at a good level, benefiting from a buoyant property market underpinned by attractive interest rates in the first half and the effect of the announcement of tax changes (Scellier law and the zero-rate loan scheme) in a positive environment for property, which, despite rising prices, remained popular as a safe haven asset. HIGH-PERFORMING SOLUTIONS, SOLID COMMITMENTS AND A RECOGNISED MODEL THAT S WHAT MAKES THE DIFFERENCE Consumer credit outstandings trended upwards by 1.9% to top 34 billion, fuelled by strong performances (up 4.1%) by Crédit Mutuel s specialised subsidiaries. Equipment loan outstandings continued to benefit from a healthy level of capital investment, climbing 11.5% (the strongest increase of all credit segments) to 59.5 billion, while lease outstandings saw a 5.9% increase to more than 10 billion. At 31 December 2011, the group had a 17.1% market share of the retail bank-distributed loans market (up 0.1%). INSURANCE, CREDIT MUTUEL S SECOND BIGGEST BUSINESS At 31 December 2011, the insurance subsidiaries were managing a total of 30.2 million policies (up 10%), of which 25.7 million in non-life and 4.5 million in life insurance, for nearly 12 million policyholders (up 4%). They generated total premium income of 12.1 billion, down 12.3%, reflecting the contrasting impact of a drop in premium income from life insurance and a significant rise in non-life income. Life insurance premium income fell 20.5% to 8.3 billion. Business was affected by falling stock markets and long-term interest rates, with customers opting for more liquid and in their opinion less risky savings products. However, this did not stop outstandings gaining 1.3% to almost 98 billion. Risk insurance continued to grow with a 13.7% increase in premium income to 3.8 billion, and the auto and home segments outperformed the market with respective rises of 6.9% and 8.2%. Personal insurance was up by more than 16%, driven largely by loan insurance boosted by the integration since 1 January 2011 of the Cofidis loan book. CONTINUED POOLING OF RESOURCES AND EXPANSION OF CUSTOMER BASE As a locally focused bank, Crédit Mutuel added branches to its regional network on the basis of demographic and geographic growth potential; it now has 5,898 points of sale, of which 5,390 in France and 508 abroad. INSURANCE, THE GROUP S SECOND LARGEST BUSINESS (In billions) NON-LIFE PREMIUM INCOME LIFE INSURANCE PREMIUM INCOME TOTAL TOTAL PREMIUM INCOME CREDIT MUTUEL GROUP Annual Report

22 2011 RESULTS As the network has expanded, there has been greater sharing of tools between the regional groups. On 1 January 2011, the Loire-Atlantique and Centre-Ouest, Normandie, Centre, Dauphiné- Vivarais and Méditerranéen federal banks joined the interfederal bank serving the Centre Est Europe, Ile-de-France, Sud-Est, Savoie-Mont Blanc and Midi-Atlantique federations, thereby raising the interfederal membership from five (CM5) to ten (CM10). The integration of Crédit Mutuel d'anjou took place on 1 January 2012 and work continues on the operational set-up of CM-CIC Services (CCS), the group s future logistics and production provider. These changes will help the banks benefit from the diversity of the group s businesses, making them more competitive and optimising their product and service quality on behalf of members and customers. The group s business grew: - in France s neighbouring countries, with the launch of Targobank Espagne; - through the ramping up of market share at its new subsidiaries, notably Targobank Germany and Cofidis; - through the development of B2B partnerships; - through the signing of a global cooperation agreement with Mouvement Desjardins, resulting in an expansion of financial services between Canada and France. The group s business with major retailers grew: thanks to its strong technological capabilities, CM10-CIC signed a partnership with Casino for the distribution of bank cards and consumer credit. CUTTING EDGE TECHNOLOGY FOR THE ELECTRONIC PAYMENTS MARKET The group asserted its position in new technologies in 2011, putting its expertise in this area at the core of its strategy. It offers its members the full range of remote banking channels through services with state of the art functionality. Crédit Mutuel continues to lead the way in technology, having been the first bank to offer retailers a secure online payment facility and the first French bank to test contactless mobile phone payments and contactless bank cards. The group s investment in mobile telephony through the NRJ Mobile, Crédit Mutuel Mobile and CIC Mobile brands is ongoing, helping lay down a new approach to bankinsurance and other banking services. The bank rolled out this new generation of payment instruments to more than a million customers in In 2012, the group will pass another milestone by setting up as a fully qualified mobile virtual network operator (MVNO) with integrated telecom operator architecture (excluding transmitters), with a view to increasing its independence and making it more competitive. This personalised service is also a feature of its range of home and business remote surveillance solutions. Group subsidiary EPS has a leading 30% share of this market in France, with some 237,000 subscribers. The group maintained its position as France s second biggest provider of electronic payment systems, where it has an almost 19.5% overall market share and 25% of the market with affiliated retailers. With some 9 million active bank cards on its books, the group is France s second largest player in the bank cards market and number one for public sector purchasing cards. Crédit Mutuel s complementary and competitive offer ensures it has coverage of all market segments, from the integrated distribution majors and franchise networks to independent retailers. With a dynamic commercial presence, providing ongoing support to all players in the economy and benefiting from strengthened fundamentals, Crédit Mutuel is expanding its market share, positioned as a major bank at both French and European level and serving nearly 29 million customers. COST OF RISK INCURRED RISKS (In millions) COST OF RISK -1,581-1, % 2011 COST OF RISK INCURRED RISKS EXCLUDING EXCEPTIONAL ITEMS -1, OPERATING EXPENSES (In millions) 8, ,018 4, OUTSTANDING LOANS (In billions) , ,090 5, , ,118 5, % -1, GENERAL PROVISIONS Personnel expense Other operating expens Depreciation and amortisation Home loans Equipment loans and leasing Consumer credit and revolving loans Current accounts and treasury facilities Other TOTAL -1, % -1, MARKET SHARE IN FRANCE (as a %) DEPOSITS (In billions) TOTAL EXCLUDING EXCEPTIONAL ITEMS -1, % -1, Loans Deposits Customer deposits Insurance-linked savings Securities 40 CREDIT MUTUEL GROUP Annual Report

23 BANKINSURANCE SERVICES & SOLUTIONS 42 CREDIT MUTUEL GROUP Annual Report

24 BANKINSURANCE KEY FIGURES FOR BANKINSURANCE 29 million customers of which 27 million retail customers 12 million policyholders and 30.2 million insurance contracts 5,898 points of sale Over 1 billion remote banking contacts BANKINSURANCE OUR CORE BUSINESS Bankinsurance comprises the group s retail banking and life and non-life insurance activities. The group assists its customers in all their projects, providing solutions in the areas of investment and borrowing, electronic payments and technology, insurance and savings, real estate, personal services and wealth management. One of France s biggest retail banks and its leading non-life bankinsurer, the Crédit Mutuel group has 27 million retail customers (22 million bank customers and 5 million consumer credit customers), including 12 million who subscribe to its life and non-life insurance products. It was to better address these customers needs that some 40 years ago Crédit Mutuel developed bankinsurance activities, i.e. the sale of insurance products through its bank branches, and it was this same responsiveness that led it to become the leader in remote home surveillance, with a 30% market share. As a local bank with nearly 6,000 branches and over 7,800 ATMs, the group has increased its geographic coverage with an appropriate balance between branch networks and remote banking technology. It thus offers a truly local banking service backed up by state-of-the-art, multi-channel technology: remote banking services alone have now recorded over a billion contacts, including more than 50% of them via the internet and a sharply increasing proportion via mobile applications. The group is a leader in breakthrough areas such as mobile telephony, which is a major strategic development priority within the context of Europe s emerging pay-by-mobile market. Good customer relationships are the key to successful development, and in 2011 Crédit Mutuel was once again rewarded for its quality and efficiency in this area. RECOGNITION FOR CREDIT MUTUEL IN 2011 French Bank of the Year At end-2011, the group was voted French Bank of the Year for the second year running by The Banker magazine, a standard-setting economic and financial international news publication belonging to the Financial Times group. The Banker highlighted three key points in its selection: the group s successful weathering of economic instability, its mutual values and business model and its dynamism, as illustrated by its recent strategic acquisitions and partnerships opening up new markets and strengthening its international business. This recognition is also testament to the 102,000 staff 24,000 elected directors and 78,000 employees - who work to serve the group's members and customers on a daily basis. Le Revenu survey: Crédit Mutuel number 1 for customer satisfaction Crédit Mutuel topped the rankings in the survey carried out in 2011 by the Le Revenu magazine in the overall customer satisfaction category under the customer-rated banks theme, while CIC came in third. This was an excellent accolade for the group, singled out from among 11 participating banks. (Le Revenu, October 2011) LIVRET A / LIVRET BLEU / LIVRET DD: CRÉDIT MUTUEL - A MAJOR FINANCER OF SMES Since early 2009, all banks have been able to offer the Livret A and the Livret Bleu regulated savings accounts. This, however, has not harmed the market share of Crédit Mutuel, a traditional provider of these products which in 2011 saw its number of active savers increase to more than 7 million, for total deposits up 10.5% to 29.8 billion. Crédit Mutuel continues to distribute this popular basic savings product offering availability and reliability, and shares the related costs between large and small savings accounts - yet another example of its commitment to solidarity. At a wider level, deposits in the Livret A and LDD (sustainable development) regulated savings accounts increased by 9.5% in 2011 to nearly 39 billion, representing a market share of 13.6% for the group. Crédit Mutuel comfortably complied with its regulatory obligations as regards the use of these decentralised funds, as its outstanding loans with SMEs were four times greater than the decentralised funds posted to the group s balance sheet (i.e. a 400% investment rate). 44 CREDIT MUTUEL GROUP Annual Report

25 BANKINSURANCE RETAIL BANKING, THE GROUP S MAIN BUSINESS Retail banking, the group's main business, encompasses the offers of Crédit Mutuel s 18 regional federations and CIC's five regional divisions. It also covers the specialised products and services marketed through the network, notably leasing, factoring, fund management and real estate. POINTS OF SALE 5,881 5,898 5, EMPLOYEES 72,465 75,805 77,979 Retail banking generated net banking income of 11,662 million in 2011 (nearly 80% of the group total) and 2,076 million of net profit, group share (98% of the group total). As the day-to-day banking partner of 27 million retail customers, Crédit Mutuel has a 14.8% share of the market for deposits and a 17.1% share of the bank loans market. The euro zone sovereign debt crisis and weak growth dominated the economic climate in 2011, as they had done in Market confidence diminished further against a backdrop of continuing uncertainty as to the future of Europe, which saw ratings downgrades for many banks and even some countries, including France. The economic slowdown in France impacted the job market in particular and led to an increase in the proportion of households that consider their financial situation to have deteriorated. particularly active in its lending to businesses notably via medium-term equipment loans designed to support growth. It also continued to develop new products and services designed to make life easier for the group s members and customers, such as in mobile telephony, where it pressed ahead with the roll-out of its offer within the context of Europe s emerging pay-by-mobile market. Crédit Mutuel continued to diversify its offer so as to meet all the needs from the simplest to the most sophisticated of its retail customers and, more generally, of its various customer segments, i.e. young people, who constitute one of its priority areas of development, but also non-profit associations, farmers, self-employed professionals and microbusinesses and SMEs. The group has made specialised online banking tools available to its customers, such as Monabanq and Fortuneo. well-off members of society. Against the backdrop of a slackening property market and ongoing price pressure, it continued to adopt a cautious approach and to focus on the funding of customers primary residences. Taking into account Targobank, Germany's leading consumer credit provider, and Cofidis, which has operations in around ten countries across Europe, the group is now France s third largest player in this sector. KEY FIGURES FOR RETAIL BANKING In millions Net banking income: 11,662 Gross operating profit: 4,244 Net profit, group share: 2,076 SAVINGS, LOANS, NSURANCE, MOBILE TELEPHONY: WELCOME TO A BANK WITH YOUR INTERESTS AT HEART In this persistently difficult, fragile economic environment, the group continued to provide solid support to all of its customers by relying on its core products and services: deposit facilities, regulated savings accounts and - the subject of a renewed sales drive since the reform introduced in March home savings schemes. For the more financially marginalised members of its customer base, Crédit Mutuel offers a full range of services for withdrawing cash and making payments in all circumstances. Since mid-2010, in line with industry commitments, these have included payment incident fee ceilings and real-time account balance alerts The group supported growing companies across the economic spectrum, posting an increase in outstanding loans, and was As a major housing loans player the group is a key player in the financing of programmes to facilitate home ownership among the less 46 CREDIT MUTUEL GROUP Annual Report

26 BANKINSURANCE THE PREFERRED BANK OF RIVATE INDIVIDUALS Crédit Mutuel endeavours to anticipate and respond to customers needs with an appropriate and particularly innovative offer of bankinsurance products and services. Sustainable development lies at the heart of Crédit Mutuel s activity; accordingly, it offers its retail customers a range of competitive solutions for environmentally oriented home purchases, refurbishment work and insurance. Similarly, Crédit Mutuel has gained a genuine lead concerning the quality and performance of new technological services provided to customers in the areas of remote banking, remote home surveillance, electronic payments and mobile telephony. THE BANK WITH A DIFFERENCE In a context of profound economic and social crisis in France and elsewhere in Europe, Crédit Mutuel continued to provide its members and customers with a service directly driven by their needs and expectations. Its 4.7% increase in outstanding loans is testament to its active support of the MEDIATION: MORE THAN 2,000 OPINIONS ISSUED IN 2011 Created by the Murcef Act, bank mediation has become an integral part of the customer relationship. It covers both retail deposit accounts and disputes linked to financial instruments, savings products, loans and investment services, insofar as these concern a contract s execution rather than its negotiation. Crédit Mutuel's ombudsman received 3,868 claims in 2011, a rise of 4.4% from Almost 60% of these fell within its ambit, and 76% received a response within a month. The ombudsman issued 2,273 opinions, 53% of which were partially or totally in the customer s favour. Although the ombudsman's opinion is not binding for the network, it has been followed in all cases by Crédit Mutuel s regional federations and CIC's regional banks. economy, benefiting both private individuals and businesses (SMEs in particular), while its focus on regular deposit taking which saw a 10% increase provides a secure refinancing base. The group faithfully pursued its strategy of controlled development in 2011, strengthening its positions by relying on its main pillars of proximity, openness and security. PROXIMITY: FRANCE'S OMNIPRESENT 24/7 BANK The group opened a number of new branches across the country, eschewing exclusion and income-based geographical segmentation in favour of the exploitation of demographic and growth potential. This brought its overall tally of points of sale to almost 6,000, including 5,390 in France; The group is represented in 80% of French towns with recognised sensitive urban areas, and seeks to be present in all areas where there is a lack of local banking services; Customers of the branch network benefit from a comprehensive multi-channel banking offer based on cutting edge technology. In 2011, its remote banking service clocked up almost a billion contacts, more than half of them online, while all local mutual banks and branches now provide an online service enabling customers to communicate directly with their advisor by . Crédit Mutuel is the first French bank to take this initiative; The development of mobile telephony, with a focus on high quality after-sales service, has generated a prominent new offer and a new approach to payment instruments; Funds lent by Crédit Mutuel to microbusinesses and independent SMEs rose by 4.3% in 2011, outstripping the national average of 3.3%. OPENNESS: TRANSPARENCY, THE BASIS FOR TRUST Always with its customers in mind, the group implemented its industry pricing commitments in terms of simplifying and improving information and assisting with mobility; the fact that the majority of loans saw no price change in June 2011 is concrete evidence of Crédit Mutuel's efforts to limit price inflation at a time of crisis when household budgets are under pressure; The bank believes that a transparent relationship is one which ensures trust, and that its customers should be able to choose between subscribing to and managing their accounts and overdrafts either based on personal preferences or using predefined packages; accordingly, it makes full details of its customer deals freely available on its website ( MY BANK IS COMPLETELY OPEN WITH ME, AND THAT CHANGES EVERYTHING 48 CREDIT MUTUEL GROUP Annual Report

27 BANKINSURANCE CRÉDIT MUTUEL ENSEIGNANT: A SPECIAL RELATIONSHIP Union Nationale du Crédit Mutuel Enseignant (UNCME) now has a membership of more than 40 mutual banks throughout France*. They offer a service combining clear terms and conditions, high quality products and mutualist values to civil servants employed by the departments of education, research, youth and sports and culture. Since 2008, they have been able to offer their shares to private sector teachers and support staff with government-issued contracts. The CME banks promote their core mutual values by providing specially adapted products including young colleague solutions, loans, savings accounts, banking services and insurance, which are widely appreciated among their members and customers. * REMOTE SURVEILLANCE: EPS NUMBER 1 IN FRANCE Crédit Mutuel s home and business remote surveillance solutions are a prime example of its commitment to providing top level service and innovative products that are tailored to customers needs. With a 30% market share and 237,000 subscribers, in 2011 group subsidiary EPS bolstered its number one position in this market in France. All retail customers can now receive a monthly statement of account fees, in addition to the annual fee statement. These statements enable all sight account holders, insofar as they wish to and in full transparency, to limit the account fees they pay. They also provide concrete evidence of the very reasonable account management fees Crédit Mutuel charges in relation to the wide range of service its provides (notable 24/7 account and transaction access). SECURITY: A SOLID BANK AND SIMPLE PRODUCTS WITH REGULAR RETURNS Crédit Mutuel allocates all annual profits not used to pay dividends on its members shares to consolidating its shareholders equity. Keeping these funds well provided ensures ongoing support from shareholders, the security of the bank s deposit-making customers and its financing of sustainable growth. In 2011, the group again boosted its financial solidity, with a 1 billion increase in the group share of shareholders equity to 33.3 billion. At 11.2%, its Core Tier 1 solvency ratio puts it uppermost among French banks and in the top tier of European banks. In a context of all-round ratings downgrades for banks, Crédit Mutuel remains a highly rated issuer. Crédit Mutuel endeavours to keep its product offer simple and clear: - in terms of savings, it pushes guaranteed rate products such as savings books and home savings accounts, while prioritising regular returns on its life insurance products; - when it comes to loans, customers are encouraged to take out fixed or capped rate mortgages, while consumer products all have a tightly controlled risk profile. THE BEST MOBILE TELEPHONY SERVICES Channel for bankinsurance and services and constitutes a new approach to payment instruments. In 2011, NRJ Mobile introduced a new deal, Tout illimité, incorporating unlimited calls, text messaging, , web browsing and, from as little as 1, bundled smartphones. This highly successful offer is just part of a range designed to meet the individual requirements of all members and customers, with free add-on services such as phone insurance, emergency assistance and links from the mobile to the CyberMUT/Filbanque online banking facilities for access to new value added services. In 2012, the group will pass another milestone by setting up as a fully qualified mobile virtual network operator (MVNO) with integrated telecom operator architecture (excluding transmitters), thereby increasing its independence and making it more competitive. THE BANK THAT PROVIDES SOLUTIONS FOR THE WHOLE FAMILY, EVEN WHEN IT COMES TO MOBILE PHONES 50 CREDIT MUTUEL GROUP Annual Report

28 BANKINSURANCE A KEY PLAYER IN HOUSING FINANCE In 2011, home loans benefited from a buoyant property market underpinned by still attractive interest rates (in the first half particularly) and the effect of the announcement of tax changes (Scellier law and the zero-rate loan scheme) in a positive environment for property which, despite rising prices, remained popular as a safe haven asset. The group granted home loans for some 30.8 billion during the year, a sustained high level of lending after the sharp rise of 2010 that brought its outstanding loans to billion. This 4.4% rise compares with the 7.6% increase seen in 2010, a bumper year for home loans. AN ACTIVE PARTNER IN SUBSIDISED HOUSING The group is one of the biggest banking partners for first-time buyers, with extensive experience in providing government subsidised loans via the new interest-free loan (Nptz) scheme, for which it is one of the leading distributors with a 15% market share. Meanwhile, it continues to provide PAS subsidised acquisition loans and PSLA subsidised rental-acquisition loans, and plays an increasing role in financing low cost rented accommodation by distributing PLS loans. CRÉDIT MUTUEL S 17.7% MARKET SHARE MAKES IT FRANCE S THIRD BIGGEST ISSUER OF HOME LOANS Crédit Mutuel has a longstanding relationship with the Action Logement organisations, operators of the former 1% logement subsidised housing scheme, which have traditionally been active in the rental sector for low income households. The group has begun to set up schemes for separating the purchase of land from that of the homes built on it. It is committed to working alongside the Action Logement groups to provide financing in conjunction with the local authorities contributions (aid in addition to higher limit interest-free loans, reduced VAT rate of 5.5% and carrying of the cost of land by the CIL cross-sector housing committees thanks to the Pass Foncier scheme). Since 2009, this activity has benefited from measures to stimulate new-builds, such as the raising of the interest-free loan ceiling to twice its former level until 30 June 2010 and the gradual roll-out of legal and tax arrangements for using the Pass Foncier for co-owned housing. The group is an active player in several regions, with a wide range of activities: it has capital stakes in around 40 subsidised housing bodies (entreprises sociales de l habitat - ESH). It also contributes its know-how in the sale of social housing (HLM) through subsidised homebuyer loans; it is a close partner of social housing cooperatives for construction programmes under subsidised homebuyer schemes, which it finances through interest-free loans or tenant home purchase schemes. Since the deregulation of PLS social housing rental loans in 2001, the creation of PSLA loans in 2004 and the excellent performance posted by Crédit Mutuel in the 2010 public tender, when it secured some 1.3 billion in regulated subsidised housing loans, (PLS and PSLA), the group has established itself as a recognised player in the social housing market. It has initiated relationships with a large number of property developers and subsidised rental specialists, such as OPH, ESH, Coop, HLM and SEM, for which it manages cash and employee retirement funds and finances real estate programmes. PARTNERING LOCAL AUTHORITIES Crédit Mutuel has been working actively alongside local authorities for more than 30 years. It provides them with not only financing expertise but also services designed to facilitate the management of individual towns and villages as well as district, departmental and regional councils. As a non-centralised banking organisation with strong involvement in local economic and social activities, it is the natural partner to the main civic decision makers, and a considerable number of elected representatives sit on the boards of its local mutuals. Dexia s collapse, the liquidity crisis and the new Basel 3 regulatory framework had a major impact on local authority funding in The Basel 3 framework is also particularly restrictive and cumbersome for banks, especially as regards granting long-term loans. To complicate matters further, local authorities are not able to manage their bank deposits themselves but must centralise all their funds with the French treasury office. Crédit Mutuel managed to overcome this difficult environment and these constraints to play a full role in financing local investment by responding positively to the public funding auction held at the end of 2011 and increasing its outstanding loans from 5.4 billion to 6.6 billion. Crédit Mutuel is also France s leading distributor of public sector purchasing cards, payment instruments specially adapted to public sector accounting requirements to facilitate the payment of local authorities' running expenses. Crédit Mutuel is a partner of Association des Petites Villes de France and Fédération des Entreprises Publiques Locales. A BANK THAT CAN MAKE DECISIONS RIGHT BY YOUR SIDE - THAT CHANGES EVERYTHING 52 CREDIT MUTUEL GROUP Annual Report

29 BANKINSURANCE A DEDICATED OFFER FOR YOUNG PEOPLE The Crédit Mutuel group has a dedicated offer for people under the age of 26, who represent a quarter of the Crédit Mutuel/CIC retail customer base. Teaching people how to use banking services, encouraging savings from an early age and assisting young account holders along the road to independence are the main facets of the bank s offer for a customer segment that is central to its development strategy. Pop Corn covers the period from birth to 11 years and features the livret bleu savings book account as well as insurance and savings products and assistance with starting and continuing to save; VIP caters for customers aged between 12 and 25, whatever stage of their schooling or career they are at (secondary school pupil, apprentice, student or graduate employee), in three major areas: day-to-day banking needs, notably through Eurocompte VIP, a service package helping young customers to manage their budget and including a range of cards to help them on the path to financial independence; accommodation, with Clic-Clac, a rent guarantee package comprising a loan to finance a guarantee deposit, a bank guarantee for the landlord and a home insurance policy. These products can be subscribed to separately if required; projects: computer loans, the 1 per day driving licence scheme, and flexible student loans, including, since the end of 2008, the Oséo government backed student loan, which enables the student to borrow up to 15,000 over a two- to ten-year period and comes with a government guarantee of 70% for the unpaid portion of capital. This loan is specifically tailored for young people without a parental guarantee. GIVING UNDER 26s THE MEANS TO CARRY OUT THEIR PROJECTS STILS CONFIDENCE FOR THE FUTURE CIC offers both Parcours J and the Starts Jeunes Actifs package for under 28s. To specifically cater for the needs of young people, most group entities now offer a prepaid bank card enabling 12 to 17 year olds to manage their pocket money securely and independently. It can be used for purchases in France or abroad, including online. The Crédit Mutuel-CIC group is responding to the growing number of international transactions and young people s increasing international mobility by gradually rolling out its banking and health insurance offers abroad. The group also offers intergenerational savings products (home savings accounts and life insurance schemes) that can be subscribed to by parents or grandparents to set aside money for their child or grandchild's future. Such solutions are becoming increasingly important in a global economic environment that is pushing back the age of financial independence for the under 30s. The group is particularly closely involved with young people who undertake responsible citizenship projects, through partnerships with non-profit associations such as the national network of junior associations, Les Trophées Jeunes Qui Osent and initiatives launched directly by the Crédit Mutuel federations, such as the Les jeunes qui s engagent programme, organised by the Centre Est Europe, Ile-de-France, Sud-Est, Savoie-Mont Blanc et Midi-Atlantique, Anjou, Loire-Atlantique et Centre-Ouest, Dauphiné-Vivarais, Méditerranéen, Centre and Normandie federations, Crédit Mutuel Maine-Anjou and Basse-Normandie s Challenge Jeunes Créavenir contest, Crédit Mutuel du Sud-Ouest s Coup de Pouce Initiative Locale programme and Ark ensol Créavenir, a Crédit Mutuel Arkéasponsored association formed to help young business entrepreneurs. THE BANK FOR EVERY KIND OF MUSIC Crédit Mutuel has been the bank for every kind of music for ten years now. It sponsors some of the leading music events and programmes on television and radio, such as the Victoires de la Musique, Taratata, N'oubliez pas les paroles and a number of Radio France music shows. On the ground, over the years it has established a presence at all of France s main festivals countrywide: le Printemps de Bourges, les Francofolies de la Rochelle, le Main Square Festival in Arras, Beauregard in Hérouville Saint-Clair, Musilac in Aix-les-Bains, la Fiesta des Suds in Marseille and, since 2012, les Vieilles Charrues in Carhaix and Les Déferlantes in Argelèssur-Mer. In a mark of recognition of its engagement in this area, since 2008 Crédit Mutuel has been the official partner of Fête de la Musique alongside the ministry of culture and communication. In response to the public s changing musical interests, Crédit Mutuel has also started to sponsor musicals, such as the highly successful Le Roi Soleil (2005), Cléopâtre (2008), Symphonic Mania s Mozart (2009), Il était une fois Joe Dassin and Gospel pour 100 voix (2010). In 2012, it is planning to add the musical comedy 1789, les amants de la Bastille to this list. In addition to this extensive event sponsorship programme, Crédit Mutuel supports associations and projects that promote popular access to music, such as Jeunesses Musicales de France, which organises 2,000 concerts every year for primary and secondary school children, and Confédération Musicale de France, which brings together more than 700,000 musicians in 6,000 music academies. Music is also a way for Crédit Mutuel to get involved in important causes. In January 2005, for example, it launched the ASIE campaign, involving the distribution of CDs in exchange for donations in order to collect funds for survivors of the tsunami. Crédit Mutuel also contributes to the fight against cancer by sponsoring the Tout le monde chante contre le cancer festival and Night for life (since 2006 and 2010 respectively). CIC also supports young performers, through its patronage, since 2003, of the Victoires de la Musique Classique classical music awards. This event, which enables talented young musicians to build a reputation, helps to promote classical music to an increasingly wide audience in Paris and throughout France. CIC has signed up for five years as official partner of the Festival de Pâques (Easter festival) in Aix-en-Provence, a new musical event of international dimensions. The first festival will take place from 26 March to 7 April 2013, in the year when Marseille and its environs will be designated European Capital of Culture. Born out of the city s dynamism Marseille is already well known for its lyrical arts festival - the collaboration of two talented personalities (Renaud Capuçon, a violonist, and Dominique Bluzet, director of the Grand Théâtre de Provence) and CIC s continual engagement in the region, the Festival de Pâques aims to reach beyond confirmed music lovers to as broad a public as possible. Pooling energies, developing the ability to listen and promoting individual talents and goals are just some of the values to be found in music and which justify the group's commitment to this form of expression. 54 CREDIT MUTUEL GROUP Annual Report

30 BANKINSURANCE CREDIT MUTUEL - PARTNER OF THE EUROPEAN YEAR OF VOLUNTEERING As the natural partner for volunteers with some 24,000 unpaid directors on its books, Crédit Mutuel has issued a new practical guide - L association et les bénévoles intended for the 16 million people in France involved in voluntary work, and has produced a downloadable tool kit to help them with the day-to-day running of non-profit organisations. The group has signed a threeyear partnership with France Bénévolat, a voluntary sector consultancy that frequently advises both public sector bodies and private associations. The partnership has a dual objective: to support the development and promotion of voluntary sector initiatives and help voluntary workers with their tasks, and to encourage the pooling of expertise and content via the associathèque.fr site. NUMBER ONE BANK FOR NON-PROFIT ASSOCIATIONS With a customer base comprising more than 420,000 associations, Crédit Mutuel is the active partner of one out of every three non-profit organisations and almost 60% of all works councils. It has a specifically tailored offer for this sector, which plays a key role in reinforcing social cohesion and creating new community ties. At end-2011, the group was managing more than 16 billion in non-profit association deposits, representing a 10.8% increase year-on-year, and 2.4 billion in outstanding loans (up 5.5%). A specifically targeted banking offering, assistance facilities for voluntary workers and close relationships with associations and their federations at national and regional level have helped to make Crédit Mutuel their partner of choice. At the beginning of 2012, Crédit Mutuel joined with the Legrand Fiduciaire accounting firm to launch a new survey, Baromètre CE Vision à 360, carried out by the CSA institute. All the results of this survey can be found on and in the Mag associathèque interactive section of the group s dedicated non-profit organisations website. The group is also co-funding the CNRS/Centre d Economie de la Sorbonne research lab s survey programme, a reference base that provides a detailed picture of the French not-for-profit sector. Two years on from its launch, associ@thèque is working ever more closely alongside the voluntary workers and directors and creators of associations for whom it was designed. New content was added to this website, which was opened to the public in connection with the European Year of Volunteering, including comprehensive new practical guides such as L association et les mineurs (Associations and the young) and L association et les bénévoles (Associations and volunteers). It also launched new services for associations, THE COMMITTED BANK Crédit Mutuel supports numerous networks under long-term agreements that cater for children, young people, the elderly, families, into work schemes, and social, cultural and sporting activities, including: Union nationale interfédérale des oeuvres et organismes privés sanitaires et sociaux (UNIOPSS), a national federation of private healthcare and social work organisations. As a member of its Club des partenaires (partners club), Crédit Mutuel provides financial support for a number of projects and participates actively in the federation s conventions and annual meetings; Union Nationale pour l Habitat des Jeunes (UNHAJ), a housing scheme formerly known as Foyers de jeunes travailleurs. The bank provides financial support and communication tools to drive publicity for the scheme s initiatives, notably for its development programme aimed at building 10,500 new housing units and renovating 3,500 existing ones; enabling them, for example, to publish articles on their own dedicated mini site. associ@thèque is active on social networks such as Facebook, Twitter and Viadeo, and offers an interactive online space called le Mag associathèque, where all users can respond to content and post contributions. In its second year of operation, the site recorded nearly 500,000 visits, almost double the amount from the previous year. www. associatheque.fr Fédération sportive et culturelle de France (FSCF). This sporting and cultural association is present in 74 departments throughout France and comprises more than 3,700 associations and sub-associations with 500,000 members, of which half are under 17, and 40,000 voluntary supervisors; Fédération nationale des jardins familiaux et collectifs (FNJFC), which focuses on nature conservation and the environment, sustainable development and enhancement of the living environment. Crédit Mutuel contributes to the development of this national association, which is becoming increasingly involved in developing public policies on land planning and health (dietary, physical and mental); Fédération française des BDE (FFBDE), a student union federation with a membership of over 2 million students and more than 1,000 student offices that run initiatives with assistance from Crédit Mutuel; Fédération des carnavals et festivités (FCF), a central body for events committees and popular culture organisations that coordinate festivals, shows and carnivals at local and regional level in both urban and rural areas; Réseau national des juniors associations (RNJA), which seeks to encourage under 18s to take on responsibilities by providing them with the resources and supervision that will enable them to carry out initiatives as independently as possible. The scheme is structured to enable them to set up an association with a dedicated bank account; Union générale sportive de l enseignement (UGSEL): in 2011, Crédit Mutuel helped to fund the association s centenary celebrations. UGSEL is a federation comprising more than 3,700 education-sector sports clubs, 134,000 teachers and more than 2 million pupils; Crédit Mutuel has been a partner to the Coorace and Familles Rurales associations for more than ten years, and in 2011 renewed its ties with these national federations for socially cohesive economic development. CREDIT MUTUEL STANDING ALONGSIDE YOUTH ASSOCIATIONS Crédit Mutuel provides active support to young initiative takers in the not-for-profit field. In 2011, the group renewed its national partnerships with the Familles Rurales (rural families) association and the Réseau National des Juniors Associations (RNJA) network. Under its partnership with Familles Rurales, it runs the Trophées jeunes qui osent competition to provide financial support for humanitarian, ecological, social and community projects handled by young people aged The Group has partnered RNJA since its creation in 1999, and continues to support this association which enables young people under 18 to organise initiatives and carry out projects within an association framework. As one of RNJA s leading banking partners, Crédit Mutuel Coorace s remit is to assist people who are temporarily out of work and contribute to developing employment at national level. It notably helps its 500 members to implement Cedre and Afnor Services quality certification procedures to heighten their professionalism and develop their ability to create jobs and produce high quality goods and services. Familles Rurales is France s biggest family support organisation. It comprises 3,000 associations that for the last 60 years have provided day to day assistance to some 180,000 families and at the same time contributed to the development of rural areas, particularly for the benefit of young people. Its 45,000 voluntary workers and 20,000 paid employees design, implement and run family-oriented services that focus on sharing in a sociable environment. also contributes to the financing of the many guides it publishes. Several other of the bank s partnerships also prioritise youth initiatives, particularly those with UNHAJ, UGSEL, FSCF and the BDE student offices. Through a partnership with France Bénévolat, in 2011 Crédit Mutuel launched a campaign for projects by associations in order to reward those that effectively involve young people in their organisation. The aim of the programme was also to collect, develop and disseminate best practices in the area of drawing young people into associations and encouraging their active involvement. 56 CREDIT MUTUEL GROUP Annual Report

31 BANKINSURANCE NUMBER TWO FOR THE FARMING SECTOR Crédit Mutuel ranks a firm second in the farming sector with 16% of subsidised loans to young farmers and 12% of the medium- and long-term loan market. The group has been a close partner of the farming community throughout France for more than 20 years, serving livestock farmers, crop producers and wine growers at all stages of a farm s life, from set-up to succession. Crédit Mutuel s loans, savings products and insurance solutions are all suited to the specific needs and constraints of agricultural production. Its financing solutions cover the entire range of farming projects. The Modul agri business loan with adjustable maturities enables borrowers to tailor repayments to their cash flow. Actimat is a farming equipment financing offer distributed directly through farm machinery dealers. Agridispo provides farmers with a range of short-term cash facilities to enable them to respond rapidly to urgent financing needs. New medium- and long-term loans granted in 2011 totalled 1.4 billion, while the overall farming loan book came to 5.8 billion. In terms of investment and cash management products, Crédit Mutuel s range enables customers to balance their requirements for asset availability, profitability and security. Plan Assurance Vie Agri, which enables holders to enjoy a regular additional income on reaching retirement age, is available for farmers and their spouses as well as paid helpers. Tonic Agri provides a way of building up a rainy day fund for the business and offers both readily accessible capital and, under certain conditions, access to the tax benefits implemented under the Dotation pour Aléas freak events provision fund legislation. Crédit Mutuel also offers solutions designed to allay production fluctuations caused by climatic and economic factors. The Assur Récolte harvest insurance products are available as part of the Tonic Agri rainy day savings package and offer protection against grain or grape harvest failure for the most common climate-related problems, while Préviris provides online access to grain and milk futures markets, allowing users to control price risk independently. With almost one-fifth of its local mutual banks located in towns or villages with fewer than 2,000 inhabitants, along with Fédération du Crédit Mutuel Agricole et Rural (FCMAR), a dedicated nationwide entity run by elected farmers, Crédit Mutuel is particularly attentive to developments in the agricultural sector, in touch with all types of farming and responsive to all the various associated needs. SPECIFIC PRODUCTS, SERVICES AND SOLUTIONS TO HELP FARMERS THAT'S THE DIFFERENCE 58 CREDIT MUTUEL GROUP Annual Report

32 BANKINSURANCE NUMBER THREE BANK FOR SMES Crédit Mutuel plays an active role alongside all those involved in the regional economy, whether independent professionals, microbusinesses or small and medium-sized enterprises. It ranked as the number three bank for the sector in 2011 with more than 80 billion in outstanding loans. Business financing activities are carried out by the network and specialised subsidiaries: Banque Européenne du Crédit Mutuel (BECM), a subsidiary of Crédit Mutuel Centre Est Europe; Arkéa Banque Entreprises et Institutionnels, a subsidiary of the Crédit Mutuel Arkéa group; and Banque Commerciale du Marché Nord Europe (BCMNE), holding company for the business banking division of Crédit Mutuel Nord Europe the majority shareholder of SA Crédit Professionnel, the central body for Crédit Professionnel Belge. PRESERVING COMPANIES ASSETS AND PROVIDING TAILORED SOLUTIONS THAT S HOW YOU SUPPORT THE ECONOMY AND PROTECT JOBS CIC has also put in place a system ensuring the local presence of account managers and rapid response times thanks to short decision-making circuits. The group is a major financer of independent professionals, artisans, small retailers and microbusinesses in the services and light manufacturing sectors, with nearly 650,000 customers and a 23% penetration rate. It is particularly strongly positioned among business start-ups, notably through the assistance provided to entrepreneurs and the distribution of business start-up loans (Prêts à la Création d Entreprise PCE), in which it holds third place with a market share of 20% in terms of the number of loans granted. The group s guarantee activity, comprising Oséo, Siagi and France Active Garantie, continued to grow. The group has active partnerships with France Initiative, France Active, BGE (the former Boutiques de Gestion network) and ADIE, France s main start-up support networks. It has worked for more than 20 years to help develop local economies with France Initiative, the largest association-run business creation and transfer aid network in France. The group is a member of the France Initiative "Banques et Etablissements financiers" central governing body and is actively involved with more than 60% of this network s local initiative platforms, with Crédit Mutuel covering 165 of them and CIC 141. In 2011, it distributed 2,932 loans totalling 182 million, accounting for more than 19% of total bank financing in this sector. The group also supports France Active, a network which aids and finances social inclusion through economic initiatives. As founder of six of the network s 38 local funds, Crédit Mutuel is present on half of the loan acceptance committees and accounted for 22% of the guarantees granted in Since January 2009, Crédit Mutuel has been a partner of Boutiques de Gestion, a non-profit association under the Law of 1901 and the leading independent network for business start-up aid, with 430 branches nationwide. Through this partnership it helps businesses from the ideas stage through to their third anniversary. BGE initiates and manages a variety of schemes (experimental business incubators, financial engineering for projects, enterprise zones and entrepreneur networks) to encourage job creation, initiative-taking, wealth creation and social cohesion. In 2011, work continued on initiatives taken in 2009 at regional level in Pays de la Loire, PACA (Provence-Alpes-Cote d Azur) and Burgundy to strengthen cooperation between the Crédit Mutuel federations and the Boutiques de Gestion. Crédit Mutuel continues to be a partner of Adie, which saw business overall recover in Through seven regional federations and a CIC regional bank, the Crédit Mutuel group financed 11% of all 2011 lending by this organisation, representing a total of more than 4 million. CRÉDIT MUTUEL PROFESSIONS DE SANTE (CMPS): SPECIALISED MUTUALS FOR THE HEALTHCARE SECTOR CMPS, which was created by medical professionals more than 30 years ago, is a network of branches dedicated exclusively to healthcare sector workers*. Representatives from all segments of the medical and paramedical sectors sit on the boards and supervisory bodies of these mutuals. The banks assist practitioners with their strategic and financial decisions, whether work related or private. In each case they offer personalised solutions, from WORKING ALONGSIDE SMES AND MICROBUSINESSES Despite the still sluggish economic climate, overall funds lent by Crédit Mutuel to microbusinesses and independent SMEs (including drawdowns and available but unused credit lines) rose by 4.3% in 2011, compared with a national average of 3.3%. Investment loan outstandings increased by 7.9% for businesses as a whole (i.e. including SMEs and large companies), while treasury loan outstandings grew by 2.1%. Crédit Mutuel continued to review files submitted by the credit ombudsman; there was a sharp drop in this business despite a slight pick-up in the number of claims submitted at the end of the year. The group had a successful mediation rate of 37%, compared with a national average of 62% (representing a further decrease in both cases). This low rate highlights the network s more in-depth approach to referrals and its excellent level of local knowledge: for a great number of companies, notably very small businesses, the mediator approved the Crédit Mutuel and CIC s decisions. bankinsurance, electronic payments and financing packages for individual projects to wealth management from a savings strategy perspective, retirement planning and tax planning. In addition to banking expertise, the CMPS have developed active partnerships with professional associations, unions, specialised management associations, professional guilds and regional and national institutional bodies. * 60 CREDIT MUTUEL GROUP Annual Report

33 BANKINSURANCE REMOTE BANKING (In millions of connections) INTERNET + 4.7% CUSTOMER RELATIONS CENTRES ATMs % MINITEL- AUDIOTEL MOBILE INTERNET (excluding SMS alerts) SMARTPHONE APPLICATIONS X 6 TOTAL REMOTE CONNECTIONS + 6.5% % LEADING THE FIELD IN TECHNOLOGY Using its technological skills to serve its customers is a central element of the group's development strategy. It regularly adds new, innovative services to its range, strengthening its expertise and leading role in this area. Close to its members and customers at all times, the group provides a comprehensive range of remote banking channels which, with over a billion uses in 2011 (of which half online), are clearly well suited to their needs. The highlight of 2011 was the spectacular jump in the use of smartphone applications. The group enhanced its smartphone offering launched in mid-2010 with the introduction of data charts, a stock market order placement facility and a secure messaging service. It also broadened compatibility to include Blackberry and Java telephones. The MailTiers application, which is integrated into the messaging system, links and secure message exchanges with customers into the bank s information system. Having automatically assigned nearly 15 million messages to customer accounts (up by 42%), this service continued to show its worth. The online appointment booking service launched in 2011 was an immediate success. With more than 500,000 customers now signed up, the bank s service providing free ten-year storage of statements in electronic rather than paper form - as PDF files consultable online - grew by 23%. More than 19 million documents were generated online in 2011, up 48% from the previous year. This growth is testament to the strong interest of members and customers in this service provided as part of the bank s sustainable development approach ELECTRONIC PAYMENTS: EXPERTISE AND LEADERSHIP The group s capabilities in electronic payments make it France's second largest player, with an almost 19.5% market share. It strengthened its leading position in affiliated retailer transactions in France, with a 25% market share representing 1.9 billion transactions worth a total of 84.5 billion. Crédit Mutuel s complementary and competitive offer ensures it has coverage of all market segments in this area, from the integrated distribution majors and franchise networks to independent retailers. With 9 million cards in issue, Crédit Mutuel ranks second in the bank cards market, and is the market leader for public sector purchasing cards % % A FULL RANGE OF REMOTE BANKING SERVICES The group aims to be within easy reach of its customers wherever they are, providing them with a full range of remote banking services in addition to its branch network. While internet banking still accounts for half of all contacts, its growth rate in 2011 diminished due to the spectacular jump in the use of smartphone applications, which represent a new form of contact between the bank and its customers. 62 CREDIT MUTUEL GROUP Annual Report

34 BANKINSURANCE EXTENSIVE ATM NETWORK IN FRANCE AND ABROAD The group s large number of ATMs (more than 10,500, including over 7,800 cashpoints) plays a large part in developing its remote services, representing more than a million transactions every day. Both in France and abroad, the ATM network gives customers access to a comprehensive range of domestic banking transactions including withdrawals, account selection and viewing, making transfers and deposits and ordering cheque books. The group s ATMs can also be used to top up an increasing number of facilities such as mobile phone accounts, prepaid cards and travel passes (Navigo, Badgéo, Técély, etc.). TECHNOLOGY DRIVING OFFERS AND SERVICES: THAT S WHAT MAKES THE GROUP STRONG ELECTRONIC PAYMENTS CASHPOINTS 7, % 7, PAYMENTS WITH AFFILIATED RETAILERS (in millions) + 4.0% 1, , BANK CARDS (in millions) % New for 2012 is the group s new ATM software, which is based on updated, simpler architecture with a state of the art man machine interface using web-style presentation and touch screen technology in tandem with standard side buttons. It is available in seven languages (four for back office and administrative applications). The group rolled out its first touch screen ATMs in France mid-year. DEVELOPMENT OF CONTACTLESS PAYMENT SOLUTIONS AND NEW SERVICES In 2011, Crédit Mutuel launched the following innovative new services for its range of payment cards: option for customers to receive locked cards directly at their home address; the card is then unlocked when the secret pin code is used for the first time; and commercial roll-out of contactless technology through partnerships in digital cities. In September 2011, Strasbourg became the first such location for extensive implementation of this service. MARKET SHARE - ELECTRONIC PAYMENTS pt 20.1% 19.6% 2011 MARKET SHARE - RETAILERS pt 25.8% 25.0% 2011 The following have been, or are due to be, launched in 2012: debit/credit cards, with the choice made at the point of sale; e-retrait, a service enabling customers who do not have their card on them to withdraw emergency cash from the group s Gab Euro Automatic Cash-affiliated branches; different themed card designs, at the customer s choice. In the electronic payments acquiring segment, the group s international growth continued notably with a first commercial success in Belgium, while the group significantly extended its acquiring offer for airline companies in the United States and Canada. Also in 2011, a new international project got under way for the acquisition of petrol payment transactions using a new protocol that is set to gain a rapid foothold in fuel retailing networks. This led to the launch of a pilot scheme at the beginning of also saw the group s first payment exchanges with Visa International, making it the first French banking group to offer direct access to Visa, having also been the first to do so for Mastercard. In terms of combating fraud, the group introduced new algorithms and calculation methods that allowed for a major step forward providing even greater transaction security for its customers. INTERBANK TRANSACTIONS: TARGETED OFFERS Business-to-bank transactions are currently seeing a major overhaul, with the replacement of X25 communications by online systems. The most popular choices for banks are the Electronic Banking Internet Communication Standard (EBICS) and SWIFTNet protocols. In response to this change, the group has introduced a range of targeted solutions perfectly tailored to the various needs of small, medium and large businesses. 64 CREDIT MUTUEL GROUP Annual Report

35 BANKINSURANCE RETAIL BANKING SUBSIDIARIES FACTORING FactoCIC, the group's factoring subsidiary, is the fifth largest bank factor in France. It has a market share of 8.34% in terms of volume of receivables purchased, 3,000 active contracts, turnover of more than 14.5 billion and total managed outstandings of 2.4 billion. It signed 683 new contracts, representing a potential turnover of nearly 3 billion, while net profit came to 9.8 million. FactoCIC and CM-CIC Laviolette Financement, the group s two flagship factoring companies, merged in early 2012 to form CM-CIC Factor. With an extensive customer base comprising 10,000 small business and corporate accounts and representing almost 15 billion of receivables purchased, this newly strengthened, all-round customer receivables expertise centre offers its products and services through all the Crédit Mutuel-CIC local mutual banks and branches. Its aim is to continue growing in Europe, notably in Germany and Spain, and to keep customer satisfaction at the heart of what it does, focusing on attentiveness, adaptability and quality. THE EXPERTISE OF A BANK THAT CATERS FOR ALL ITS CUSTOMERS THAT CHANGES EVERYTHING CONSUMER CREDIT The consumer credit offering marketed through the network is rounded out by those of specialised subsidiaries Targobank Germany, Cofidis, which has operations in eight European countries in addition to France, Financo, a Crédit Mutuel Arkéa subsidiary, and Sofemo, which is jointly owned by Crédit Mutuel Centre Est Europe and CIC. Outstanding loans increased by 1.9% to more than 34 billion thanks to impetus from the group s specialised subsidiaries, making Crédit Mutuel-CIC France s third largest consumer credit provider. REAL ESTATE The Crédit Mutuel group is active in all areas of the property market from sales, development and trading through to contract management, land development and real estate management. The main subsidiaries are CM-CIC Agence Immobilière (Crédit Mutuel Centre Est Europe), La Française AM (Crédit Mutuel Nord Europe) and Soderec. In 2011, the housing market benefited from buoyant activity underpinned by attractive interest rates and the effect of the announcement of tax changes (Scellier law and the zero-rate loan scheme) in a positive environment for property, which, despite rising prices, remained popular as a safe haven asset. Taken all together, in 2011 the subsidiaries made more than 7,300 real estate sales (up 28%), mainly in new property, for a total amount of 1.3 billion and corresponding to a 35% increase in turnover. CM-CIC Participations Immobilières, CM-CIC Aménagement Foncier, CM-CIC Agence Immobilière, CM-CIC Réalisations Immobilières and CM-CIC Immobilier (formerly Ataraxia) make up the CEE group s property division. CM-CIC Participations Immobilières SA supports property developers by helping finance non-trading real estate companies (société civile immobilière SCI) used for residential property development programmes throughout France. CM-CIC Aménagement Foncier SA: also known as CM-CIC Sarest, this company finds building land for property developers and individual customers. CM-CIC Agence Immobilière SAS: formerly known as Afedim, CM-CIC Agence Immobilière is a broker marketing new property developments within the framework of the Hoguet Act and on behalf of the Crédit Mutuel and CIC networks including the private banking division to investors and homebuyers. Its property marketing campaigns are pre-approved by a committee comprising representatives from the commitments, asset management and sales divisions. CM-CIC Réalisations Immobilières SAS: this company, which trades under the name CM-CIC Sofedim, undertakes a range of services for the CM-CIC group such as sales, renovation project ownership and various assistance assignments. 66 CREDIT MUTUEL GROUP Annual Report

36 BANKINSURANCE NEW CONTRACTING BUSINESS FOR SODEREC CM-CIC Immobilier, formerly known as Ataraxia, was the holding company controlling the specialised property entities of Credit Mutuel Loire-Atlantique et Centre Ouest. In connection with the partnership and convergence between the various Crédit Mutuel groups, this company became a wholly owned subsidiary of Banque Federative du Credit Mutuel (BFCM), and will gradually acquire control of all the specialised divisions, which are themselves set to merge. La Française Real Estate Manager (La Française Rem) carries on all the property investment activities of Groupe La Française AM (Groupe Crédit Mutuel Nord Europe). The French leader in unrated property investment funds (SCPI and OPCI) with an almost 25% market share in France (invested capital of 7 billion, managing more than 3 million square metres of property assets in over 1,200 buildings with 3,500 tenants), this investment and third-party management specialist is active across all types of property market: business, commercial, residential, senior citizens care homes and hotels, as well as in niche segments such as winemaking and farming. La Française Rem offers its retail customers a wide range of products corresponding to their various needs, including commercial real estate investment companies, tax-efficient real estate investment companies, real estate investment funds and unit-linked life insurance-eligible property investment vehicles. It also assists French and international institutional investors with their real estate projects, adapting its offering to their specific regulatory, tax, financial and organisational constraints. Having invested or committed 1.1 billion across all property market sectors in 2011, La Française Rem figures among the most active asset managers in the property markets. It posted a record 20% year-on-year increase in its property investment outstandings and passed another milestone in its development by topping the 7 billion mark in managed assets. It is continuing to grow in 2012 as it develops new real estate investment solutions and markets its OPCI and SCPI offer on the basis of profitability and secure investment. EQUIPMENT LEASING Between them, CM-CIC Bail (Crédit Mutuel Centre Est Europe), Bail Actéa (Crédit Mutuel Nord Europe) and Arkéa Crédit Bail manage 221,000 contracts representing a total of 6.3 billion of assets, up 5.4% from Aggregate production on the nearly 112,000 contracts rose almost 20% to 3.8 billion, Soderec, a nationwide Crédit Mutuel subsidiary, operates in the field of public works projects, where it acts as an agent or site manager on behalf of the State, local authorities or associations. It also undertakes private contracting work for these customers. Soderec s 2011 revenues came to 5 million. The company won several tenders for new projects in 2011, such as the construction of an AFORP training centre, a parent and child unit for the French Red Cross, the Languedoc-Roussillon regional headquarters of Centre national de la fonction publique territoriale, a public sector giving the company a 15.1% share of the overall market (up 1.1 point). PROPERTY LEASING As well as medium- and long-term loan financing, business customers are offered specialised property leasing products through CM-CIC Lease (a jointly owned subsidiary of Crédit Mutuel Centre Est Europe and CIC), Arkéa Crédit Bail (Crédit Mutuel Arkéa, formerly Bail Entreprises), Bail Immo Nord and Batiroc Normandie (Crédit Mutuel Nord Europe). The group s production grew by 1.6% to 780 million, i.e. 11.4% of the market (up 1 point from 2010), while managed outstandings increased 11.3% to 3.8 billion. training institute, a swimming pool at Saint-Genis-Pouilly, a nursery at Ostwald, a music workshop at Clermont-Ferrand and a senior citizens care home (EHPAD) at Epinal. It also completed a number of major projects during the year, including Chazelles-sur-Lyon s new sixth form college, a senior citizens care home at Quingey, the Bergopré park at Schirmeck, the new sterilisation unit at Pontairier hospital, a school canteen at Viroflay and a disabled adults care home at Wittenheim. 68 CREDIT MUTUEL GROUP Annual Report

37 BANKINSURANCE INSURANCE, THE GROUP S SECOND-LARGEST BUSINESS KEY FIGURES INSURANCE No. 1 in non-life bankinsurance 12 million policyholders 30.2 million policies Crédit Mutuel is France s leading non-life bankinsurer, and insurance is the group's second-largest business. In 2011, it generated net banking income of 1.3 billion, i.e. 9.2% of the total, and net profit, group share of 556 million (26.8% of the total). (In millions) Net banking income: 1,347 Net profit, group share: 556 Gross operating profit: 853 In 2011, the group's insurance subsidiaries managed some 30.2 million policies, of which 25.7 million were non-life policies and 4.5 million life policies, on behalf of nearly 12 million policyholders. They collected aggregate premiums of 12.1 billion, down 12.3% from This overall decrease was due to the 20.5% decline in life insurance premium income to 8.3 billion. Business was affected by falling stock markets and the prospect of disadvantageous tax changes, as customers opted for other types of savings products. Risk insurance continued to grow with a 13.7% increase in premium income to 3.8 billion, and the auto and home segments outperformed the market with respective rises of 6.9% and 8.2%. Personal insurance was up by more than 16%, driven largely by loan insurance boosted by the integration since 1 January 2011 of the loans marketed by Cofidis. The insurance activity is carried out through Groupe des Assurances du Crédit Mutuel (GACM), Suravenir, Suravenir Assurances and Assurances du Crédit Mutuel Nord (ACMN). THE GROUP BREAKS NEW GROUND INTERNATIONALLY International business was particularly upbeat in Following Crédit Mutuel s equity investment in Cofidis, which has operations in eight European countries, the ACM insurance entities assumed management of this consumer credit company s loan insurance claims. In Spain, RACC Seguros stepped up its business done via the Royal Automobile Club de Catalogne network, while the new Targobank network, which was born out of the agreement between Banco Popular and Crédit Mutuel in the last quarter of 2011, has already begun to sell ACM policies. The group has created management company Voy Mediacion and special ACM life and non-life insurance branches to ensure this venture s success. At the beginning of 2012, these units moved into the group s new building in Madrid. In Belgium, the Partners sales campaigns proved successful, contributing to the 16.8% overall growth in the company s portfolio. Lastly, ICM Life launched a loan insurance product for the customers of Banque de Luxembourg. Groupe des Assurances du Crédit Mutuel, the standard bearer of the bankinsurance concept invented by Crédit Mutuel in 1970, is nearly 53% owned by Banque Fédérative du Crédit Mutuel, 20.5% by CIC and 26.7% by the Crédit Mutuel federations. GACM s range of insurance products is marketed by 15 Crédit Mutuel federations and all of the CIC regional banks, which represent more than 5,000 sales outlets in total. In what was a particularly difficult year for the French market as a whole, GACM s consolidated premium income came to 8.2 billion in 2011, compared with 9.3 billion in Life insurance company premiums were limited to 4.9 billion (down 22.9%) following the sharp increase recorded in 2010; premium income outweighed payouts, however, and managed funds rose 2.2% to 62.7 billion. Personal insurance premiums rose 19.2%, bringing in 2.1 billion in premium income, while property premiums were up 6% for premium income of 1.2 billion. The overall portfolio of contracts for ACM across all sectors grew by 11.1% to 24.4 million, for 7.7 million policyholders. The contribution of the Cofidis loan accounts, comprising more than 1.6 million contracts, boosted new subscriptions in Consolidated net income rose 1.3% to 508 million, despite the financial provisions set aside during the year (per CRC French accounting regulator standards). This result also reflects an improvement in the loss ratio thanks to a lower rate of occurrence of serious natural disasters. The division also recorded capital gains on the sale of the Luxembourg subsidiary ICM Re and the sale of ACM s stake in Euro Protection Services to Euro Protection Surveillance. Commercially, the promotional resources deployed for auto and home insurance boosted network sales and led to significant portfolio growth. Technical support from the platforms rounded out the system put in place to offer tailored guarantees to each of the group s customers. Assurance Accidents de la Vie, a personal risk insurance policy, continued its successful trajectory, while dependency insurance also made further steady gains. 70 CREDIT MUTUEL GROUP Annual Report

38 BANKINSURANCE Following the implementation of loan insurance reform, the group broadened its range of guarantees in order to increase its competitiveness. Revenue from the range of health insurance products continued to grow steadily thanks to regular cover upgrades giving policy holders access to better healthcare and to the introduction of additional policies covering alternative therapies and hospitalisation expenses. The Crédit Mutuel group s exclusive Avance Santé card makes this offer even more competitive. Despite a swing away from life insurance in 2011 on the part of customers, this remains the best investment for savers. The ACM entities stepped up communication about life insurance products, notably with the banking networks, in order to remind people of their numerous benefits. The group delivered competitive rates of return on its products. LONG-TERM PERSONAL PROTECTION FOR EVERYBODY THAT S WHAT MAKES THE DIFFERENCE Most of the contracts in the ACM range have now been made available on the insurance sections of the networks' remote banking sites, thus perfectly complementing the service these banks provide. The ACM entities are set to step up their rate of development in Spain in 2012, notably through the Targobank network, which itself has plans to expand. Insurance will be the focus of sales campaigns, and new policies will be launched. All networks that market the insurance group s products will concentrate their efforts on selling insurance. In Ile de France, for example, Crédit Mutel and CIC have designated 2012 as the year of insurance. The group will introduce new information tools designed especially for policyholders, with a focus on improving prevention, and will continue to develop its internet applications in all entities. More generally, the ACM insurance companies set out in 2012 with the serenity of an organisation equipped with the necessary financial resources and reserves to face up to any new developments. In particular, the group has set in motion the major preparations needed for the application of CREDIT MUTUEL PENSION SAVINGS BOOK: AFFORDABLE LIFE INSURANCE FOR EVERYBODY, WITH GUARANTEED INFLATION BEATING RETURNS Ever since it was created, the Crédit Mutuel Livret Retraite, a retirement savings account based on a life insurance policy through which customers can invest amounts as little as 15 a month, has always offered savers regular returns above the rate of inflation. It symbolises the group s approach to distributing financial products, which is based on simplicity, reliability, affordability for the least well off and guaranteed positive real rates of return. INFLATION RATE COMPARED WITH LIVRET RETRAITE RATE OF RETURN 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 12.95% 9.46% % 3.20% % 3.22% % 1.78% % 0.54 % 1999 Livret Retraite rate of return Inflation (annual average including tobacco) 4.60% 2.11% % 1.49% % 2.10% 2011 CREDIT MUTUEL LIVRET RETRAITE: DELIVERING PERFORMANCE TO SAVERS Inflation 100 invested for 30 years with an average annual return of 2.57% Livret bleu 100 invested for 30 years with an average annual return of 3.73% Crédit Mutuel Livret Retraite 100 invested for 30 years with an average annual return of 6.55% Rainy day fund Long-term investment 72 CREDIT MUTUEL GROUP Annual Report

39 BANKINSURANCE the new Solvency 2 prudential rules as from 1 January 2013, including appointing staff and allocating specific tools. Suravenir, the life and personal insurance subsidiary of Crédit Mutuel Arkéa specialising in policy design, production and management, posted record net profit of 112 million (up 12% from 2010). Premium income, 22% of which came from outside the Crédit Mutuel Arkéa group, decreased by 12% to 2.3 billion due to savers holding back from making deposits in bank savings products. Net insurance income rose 18% to a record high of 241 million, while fees paid to the distributor networks grew 1% to 184 million. Against a highly unstable economic and financial backdrop, Suravenir posted 300 million in net new money, compared with 1 billion in 2010, while, despite the unfavourable market scenario, life insurance outstandings increased by 1% to 25 billion. Meanwhile, growth gathered pace in the personal insurance and loan insurance businesses. With a substantial portfolio of 1.4 million customers, this activity posted premium income of 225 million, representing a 6% increase year-on-year, on 35.5 billion of capital-at-risk. These results underline the appropriateness of Suravenir s multidistribution strategy and its prudent financial management, which is geared to achieving a secure, sustainable return for its policyholders. This prudent management enabled Suravenir to post a solvency ratio per standards applicable at end-2011 of 122% and to continue preparing for Solvency 2 at its own pace. Indeed, the latest simulations carried out based on the future standard revealed a significant strengthening of the insurer s regulatory solvency ratio. Suravenir s multidistribution strategy is built on four distribution channels: a banking network channel made up of Crédit Mutuel's shareholder federations Bretagne, Sud-Ouest and Massif Central, together with Banque Privée Européenne; a white label channel for distributing Suravenir products under other brand names (Fortuneo, Banque Accord, Fidelity, Linxea and Primonial); a channel dedicated to independent financial advisers; and a company retirement savings channel. The Crédit Mutuel federations and other partner networks together constitute a distribution network with a sales force of more than 10,000 customer advisers. Suravenir continues to focus its development on innovating on behalf of Crédit Mutuel and its other partners and seeking out new partnerships in strategic markets such as online businesses, independent financial advisors, credit brokers and company retirement savings schemes. Suravenir Assurances, a wholly owned subsidiary of Crédit Mutuel Arkéa, manages more than 1.7 million contracts covering a comprehensive range of non-life insurance products. It signed 237,000 new core contracts in The company supported environmentally responsible consumption, notably through its continued marketing of a limited mileage motor insurance deal. The beginning of 2011 saw the launch of a new healthcare package for Crédit Mutuel customers, an innovative product making it possible to build made-to-measure health cover based on the requirements and budget of individual customers. The company s broker networks, including wholesale broker Novélia and the local mutuals, contributed 40% of this activity s growth in core products premium income exceeded 266 million for net profit of 12.3 million. Crédit Mutuel Nord Europe manages more than two million life and non-life contracts through two subsidiaries: ACMN Vie and ACMN Iard. In 2011, in a difficult economic and financial environment that was relatively unfavourable for life insurance, ACMN Vie continued to record strong sales, with premium income coming in at 1.16 billion. Contracts distributed by Crédit Mutuel Nord Europe now account for more than 49% of new business. The company upgraded a number of its products over the course of the year, enhancing the ACMN Horizon Patrimoine range with new financial facilities and adding an investment management mandate option to NEA Patrimoine. It also set up a new partnership with Cholet-Dupont Partenaires, which yielded Afilium Pierre Vie, a multisupport product with a strong real estate focus. Meanwhile, its contracts earned widespread recognition from the financial press for comprehensiveness, innovation and consistent performance. Managed funds amounted to 10.1 billion, spread over more than 945,000 life insurance contracts. Personal insurance sales were extremely satisfactory, with the signing of more than 9,000 new health top-up contracts and more than 22,500 new family insurance contracts (Famili Securité and Assurance des Accidents de la Vie). In 2011, ACMN Iard posted its best results yet, with a 6.7% increase in premium income to million and a rise in net profit to 8.1 million, owing mainly to a lower than expected loss rate. 74 CREDIT MUTUEL GROUP Annual Report

40 OTHER ACTIVITIES: EXPERTISE & INNOVATION 76 CREDIT MUTUEL GROUP Annual Report

41 OTHER ACTIVITIES CORPORATE AND INVESTMENT BANKING Some activities of group-wide strategic importance, such as corporate and investment banking, asset management and private banking and technological services, are largely carried out through shared entities such as CM-CIC Asset Management, CM-CIC Epargne Salariale, CM-CIC Securities, CM-CIC Capital Finance and CM-CIC Marchés. Corporate banking covers all the banking and related services provided to companies with annual revenues of more than 50 million. Investment banking covers capital markets, merchant banking, venture capital, growth capital, broking and trading. In the specific context of 2011, the corporate and investment banking activities turned in contrasting performances: while corporate banking held up well, the capital markets and growth capital activities were affected by the market decline and the repercussions of the Greek crisis. Corporate banking, capital markets activities and investment banking are carried out by Banque Fédérative du Crédit Mutuel (BFCM), the holding company of Crédit Mutuel Centre Est Europe, and Crédit Mutuel Arkéa. There were a number of very distinct trends in 2011, including in particular a liquidity crunch resulting from the highly restrictive policy of the main interbank players and the withdrawal of access to US dollar funding. In this decidedly more difficult environment, particularly in the second half, the group maintained its strategy of supporting its major account customers. For the credit activity, the first half was marked essentially by refinancing transactions. The group benefited from companies and institutional investors strengthened cash positions, which led to a fresh round of increased investment. It kept payment instruments at the heart of its strategy, notably by extending the electronic payment capacities of large depositors, constantly improving service quality and assisting customers with regulatory and technical changes such as SEPA and the discontinuation of ETEBAC. Third-party and own account capital markets activities are carried out by CM-CIC Marchés, which has a shared trading room with BFCM and CIC and is the group s main operator in this field, and by Crédit Mutuel Arkéa. Debt market activity in 2011 can be divided into two separate phases: the first seven months of the year were very active in terms of issues and, more generally, medium- and long-term financing deals, which were funded largely thanks to life insurers keenness to make long-term investments; then, as from August, the market slumped sharply following Standard & Poor s decision to divest US debt of its triple A status and the resurgence of the euro zone sovereign debt crisis. Thanks to its low dependency on short-term US dollar funding, the group suffered little impact from the sharp reduction of this financing source after the summer. The year was marked by the group s continued efforts to limit its debt with the market and to maintain a good liquidity level, by continuing improvement of its lending/deposit ratio and a programme of regular bond issues targeting its customers. The participation of the main international institutional investors in the issues of BFCM and Crédit Mutuel-CIC Home Loan SFH the former CM-CIC Covered Bonds, which adopted Société de Financement de l Habitat (SFH) status in 2011 so as to be able to offer its investors this new standard in quality and liquidity confirmed their confidence in the Crédit Mutuel group. KEY FIGURES In millions Net banking income: 955 Gross operating profit: 652 Net profit, group share: CREDIT MUTUEL GROUP Annual Report

42 CM-CIC Capital Finance offers a comprehensive range of services including venture capital, growth capital, buyout capital, advisory and financial engineering. It makes equity investments ranging from 1 million to 100 million, enabling its customers to benefit from active support for their domestic and international growth projects. CM-CIC Capital Finance posted net income per IFRS of 58 million in 2011, a busy year for own-account management with 380 million invested in more than 170 transactions, made up for almost two-thirds of growth capital and with a significant amount allocated to additional investments to support existing portfolio lines, in larger unit amounts than the initial investments. The portfolio churn rate was also high, with sale proceeds of 319 million, including capital gains of 122 million (taking into account sale provision writebacks), which demonstrates the quality of the portfolio investment lines and the resilience of CM-CIC Capital Finance s business model. SERVICES FOR LISTED COMPANIES, MANAGEMENT COMPANIES AND INVESTORS Investment company CM-CIC Securities covers all the needs of corporate customers, asset management companies and institutional investors via three businesses. Its corporate business serves more than 150 different companies, offering a comprehensive range of services including financial transaction engineering, financial communication, investor relations, financial registrar services and a dedicated trading room for issuers providing a personalised, confidential approach. In its capacity as a clearer and custodian, as at end-2011 CM-CIC Securities provided services to 115 asset management companies and managed 27,000 individual customer accounts and 272 mutual funds, representing more than 9.4 billion in assets. A global broker, it is a member of the European Securities Network limited liability partnership, a multilocal partnership composed of financial intermediaries operating in ten European countries. CM-CIC Securities also has operations in London through its specialised execution branch and New York via its subsidiary ESN North America. This gives it trading access to equity markets in Europe and the United States, as well as to many emerging markets. As part of its ongoing approach for improving overall customer service, the division has adopted a new organisation comprising two cross-divisional entities: The Global Research department, which covers all macroeconomic and strategic research as well as specialised products and services, financial equity analysis, credit/fixed income analysis and CM-CIC Securities strategic developments; The Institutional Relations and Development department, which exists to identify, coordinate and promote innovative offers across all the CM-CIC Securities business lines. GROWTH CAPITAL The reorganisation of the Crédit Mutuel- CIC group s equity finance activities was completed in 2011 via a series of legal transactions. The new group, named CM-CIC Capital Finance and comprising the subsidiaries CM-CIC Investissement, CM-CIC Capital Innovation, CM-CIC Conseil, CM-CIC Capital Privé and CM-CIC LBO Partners, has its headquarters in Paris, employs nearly 110 people and is represented throughout France via five branches in Lyon, Nantes, Bordeaux, Lille and Strasbourg. CM-CIC Capital Finance constitutes a major national private equity and financial engineering advisory division, offering enhanced transparency and resources that are consonant with its ambitions. It has nearly 2.7 billion in managed capital and a portfolio of almost 650 companies, making it France s largest bank-capital based group in the French private equity market. As regards third-party management, CM-CIC Capital Privé completed a new financing round for a regional investment fund (FIP) and an innovation investment fund (FCPI), through which it raised 38 million and invested 48 million. It had managed assets at end-2011 of 398 million, taking into account a partial payback of 33 million to subscribers on the 2003, 2004 and 2005 funds. For its part, CM-CIC LBO Partners made two major investments for a total of 40 million and also sold an existing stake, confirming the extremely favourable performance of the CIC LBO Fund. The M&A advisory business saw an equally upbeat level of activity, with seven mandates completed over the year. Crédit Mutuel has a number of other dedicated structures: Federal Finance, Arkéa Capital Investissment, Océan Participations, CM-CIC Participations Immobilières, FCPR CM Arkéa and UFG Siparex. The market conditions weighed on the activity of these companies, leading to a 24% decline in investments to 84 million as at the end of 2011, when net portfolio investments came to more than 350 million, representing a year-on-year increase of 17.7%. 80 CREDIT MUTUEL GROUP Annual Report

43 OTHER ACTIVITIES TROPHIES AND PERFORMANCE AWARDS FOR THE GROUP IN 2011: CREDIT MUTUEL TOPS THE RANKINGS IN ALMOST EVERY CATEGORY KEY FIGURES In millions Net banking income: 619 Gross operating profit: 181 Net profit, group share: 124 ASSET MANAGEMENT AND PRIVATE BANKING ASSET MANAGEMENT Asset management covers fund management, employee savings plans and, for specific network customer groups, securities and custodian services. This activity is carried out through CM-CIC Asset Management, the fund management specialist that provides the Crédit Mutuel and CIC banking networks with a broad, innovative range of financial products, CM-CIC Gestion for discretionary and advisory management, and specialised subsidiaries Federal Finance, a Crédit Mutuel Arkéa subsidiary, and Crédit Mutuel Nord Europe subsidiary La Française AM, a multi-specialist asset manager serving institutional customers, intermediaries and private individuals. CM-CIC Epargne Salariale and Federal Finance Banque, subsidiaries specialised in employee savings schemes, offer a variety of products catering for corporate customers of all sizes, notably very small companies (i.e. with fewer than ten employees). At end-2011, assets under management were down slightly at billion, and comprised: 62.1 billion in mutual fund assets managed by the specialised subsidiaries, 41.5 billion under discretionary and advisory management for private customers ( 7.4 billion) and via delegation to the group s insurance subsidiaries ( 34.1 billion), and 5.9 billion in employee savings. Combined with the SCPI property investment business ( 7 billion overall for the group), assets under management came to billion. These asset management subsidiaries earn regular recognition for their consistent performances and first class contracts. PRIVATE BANKING The group s private banking activity involves providing, through its network and through specialised subsidiaries in France, Luxembourg and Switzerland, a comprehensive range of wealth management and advisory services for high net worth customers with financial assets in excess of 1 million. CIC Banque Private Banking is the umbrella organisation for Crédit Mutuel- CIC s global private banking activities, which are conducted mainly in Europe (Luxembourg, Switzerland and Belgium) and Asia (Singapore and Hong Kong). The group s French business is handled by the CIC Banque Privée business line, which provides high-end services to company managers, CIC Banque Transatlantique, which offers a range of customised solutions, including in private banking, principally to French citizens residing abroad, Dubly-Douilhet SA, Banque Privée Européenne (BPE), a Crédit Mutuel Arkéa subsidiary, and Nord Europe Private Bank SA, a Crédit Mutuel Nord Europe subsidiary. The group s asset management companies performed particularly well in The main awards included: TROPHÉES - LE REVENU (performances to 31 March 2011) Trophée d Or for the best range of three-year eurodenominated bond funds by retail banks (CM-CIC AM) Trophée d Or for the best range of three-year eurodenominated equity funds by retail banks (CM-CIC AM) Trophée d Argent for the best overall performance over three years of retail bank funds (CM-CIC AM) Trophée d Argent in the three-year international equity fund range category and in the three-year euro-denominated bond fund category (Federal Finance) Trophée de Bronze for Union Steep Curve for best ten-year euro-denominated bond fund (across all categories) (CM-CIC AM) CORBEILLES MIEUX VIVRE VOTRE ARGENT (performances to 30 June 2011) Corbeille long terme second place for the best performance over five years for CIC funds (retail banks - CM-CIC AM) Corbeille long terme Federal Finance Corbeille d Or third place for the best performance over one year for CIC funds (retail banks - CM-CIC AM) MORNINGSTAR FUND AWARDS (France one-year performances to 31 December 2011) Best group for broad ranging bond funds for the second year running (CM-CIC AM) Best fund in the diversified euro-denominated bond fund category for Union Obli (CM-CIC AM) 2011 NOVETHIC SRI LABEL for the following funds: CM-CIC Actions ISR CM-CIC Obli ISR CM-CIC Moné ISR LIPPER FUND AWARD Prize for the best ten-year fund for Schelcher Prince Convertibles and the best three-year fund for Schelcher Prince Convertibles Global Europe (Federal Finance) 82 CREDIT MUTUEL GROUP Annual Report

44 OTHER ACTIVITIES MORE THAN 35 BILLION IN ASSETS UNDER MANAGEMENT WITH LA FRANCAISE AM La Française AM (formerly UFG- LFP) is a multi-specialist asset manager that places its customers needs and satisfaction at the heart of its business. It had more than 35 billion in assets under management at end-2011, unchanged from 2010 despite the fall in the markets. Its diverse shareholder base comprises majority shareholder Crédit Mutuel Nord Europe, institutional investors and private shareholders from the group s management and staff. Using a long-term approach and combining its recognised expertise in managing both securities and real estate assets, La Française AM offers innovative investment solutions tailored to the requirements of its customers, who range from institutions and retail banking networks to brokers and individuals, both in France and abroad. Thanks to its partnership with Banque Sarasin, a pioneer in the field of sustainable development, La Française AM can really make its commitment count. It also supports various projects through corporate patronage and sponsorship initiatives, affirming its commitment to being a responsible player in a number of areas. La Française AM is now focused on continuing to grow and consolidating its new, unique brand, which has been created as a more effective vehicle for its positioning and ambitions. MORE THAN 200 BILLION IN SECURITIES UNDER CUSTODY CM-CIC Titres is CM-CIC s centre of expertise for account keeping and custody, fund centralisation and financial services for issuers. It provides these services to all Crédit Mutuel federal banks, CIC banks and group subsidiaries including CM-CIC AM, CM-CIC Gestion, CM-CIC Securities and the private banking arm - as well as the bank s major corporate and institutional customers and its ACM insurance division. Boreal, a BFCM subsidiary, provides the same range of services to non-group customers, including retail banks and private banks, investment companies and third-party management companies in France and abroad. Backed by the group s technological capabilities and prowess and its recognised business-line expertise, these products and services (trading website, real time services, and SMS alerts, etc.) have a strong customer focus and can be adjusted and tailored to suit individual needs. The main global financial market indicators followed a downward trend under the impact of the economic and financial crisis. This environment was further complicated by cash management problems stemming from low interest rates and capital adequacy ratio constraints. The upshot in terms of business was the shorting of stocks, B shares and money market funds in particular and a net outflow from markets across the board. Mutual fund and B share investment programmes were scaled back significantly, and customers reinvested their dividends much less. Against this backdrop, business volumes at CM-CIC Titres fell for stocks and mutual funds but held up well for Euronext and foreign equity index transactions. At end-2011, CM-CIC Titres had 217 billion of assets under custody, representing a 9.5% decline, while the number of securities accounts had fallen by 0.5% to 2,307,000 and the number of mutual funds under management had risen slightly to 1,065. The year s most notable performance was in stock market transactions on Euronext and foreign equity indexes, which were up 1.3% to 2,000,000 and 134,000 respectively. The division is focusing its efforts in 2012 on implementing its European platform, which is scheduled for completion in 2013 and will handle custody activities for the foreign subsidiaries, particularly Targobank Germany and Spain, and on commissioning its third production site, in Nantes, while work will continue on the projects to migrate group subsidiaries to its business line centre. ProCapital Securities Services, a subsidiary of Crédit Mutuel Arkéa with operations in France and Belgium, is a provider of securities services to financial institutions - portfolio management companies, private banks, retail banks, insurance companies and online brokers and banks that require flexible solutions ranging from accountkeeping and transaction execution services on behalf of customers to the development of transactional websites. ProCapital Securities Services provides its institutional customers with quality-assured service thanks to its integrated platform based on cutting edge technology. Crédit Mutuel Arkéa boosted its offering in 2011 with the creation of Arkéa Banking Services (formerly ProCapital Banking Services), a white label banking services subsidiary dedicated to customers in the asset management, insurance, payment services and retail sectors. 84 CREDIT MUTUEL GROUP Annual Report

45 OTHER ACTIVITIES TECHNOLOGICAL SERVICES A comprehensive range of technological services IT, payment instrument-related, telephony, remote surveillance and document dematerialisation are available to the Crédit Mutuel group and its customers. INFORMATION TECHNOLOGY This activity, focused on ongoing optimisation, is organised around two information system platforms provided by Euro-Information and Crédit Mutuel Arkéa. Euro-Information, the holding company for Crédit Mutuel Centre Est Europe-CIC's technology subsidiaries, provides financial and technical services that meet the IT needs of the group s various entities: Crédit Mutuel federations, CIC banks, insurance subsidiaries, business line centres and other subsidiaries. In this context, Euro-Information acts as a centralised procurement and financing platform and also manages relations with suppliers, the logistics of leasing and selling equipment and software, payment authorisations and remote deposits and banking channels. Euro-Information is supported by dedicated technical structures in charge of operating, developing and maintaining the group's IT resources and developing telephony and security-related activities, document dematerialisation and card and cheque processing and personalisation. Euro-Information Production serves as an information systems platform for 15 Crédit Mutuel federations and for all of the CIC banks. This information system is connected to stock market networks, electronic payment systems, and the Target2 settlement system, as well as data exchange systems such as STET (Système technique des échanges et des traitements) for SEPA and European Bank Area (EBA) transactions, and, of course, international systems. It is supported by four high-security, highperformance interconnected IT centres in Lille, Lyon, Paris and Strasbourg, a dedicated help centre, a broadband network and Euro-Information Développement, a company dedicated to the development and maintenance of the applications used by Crédit Mutuel Centre Est Europe-CIC and its partner federations and subsidiaries. Since June 2010, the Euro-Information teams have also been handling IT production and applications maintenance for Targobank. Euro-Information Services and Sicorfé Maintenance install and maintain the workstations, IT networks, electronic payment terminals, ATMs and telephony and video surveillance equipment. The Arkéa platform is shared by the three Crédit Mutuel Arkéa federations (Crédit Mutuel de Bretagne, Crédit Mutuel du Sud-Ouest and Crédit Mutuel du Massif Central). MOBILE TELEPHONY Crédit Mutuel s involvement in mobile telephony provides a new channel for bankinsurance and services and constitutes a new approach to payment instruments. NRJ Mobile is 95% owned by Euro-Information and 5% by NRJ Group. It uses the services of two network operators, Orange and SFR, with lines being opened depending on the offer subscribed to with the respective operator, thereby allowing our members and customers to benefit from the best terms available. NRJ Mobile markets its products mainly through: the Crédit Mutuel and CIC networks under the Crédit Mutuel Mobile, CIC Mobile and, targeting younger customers, NRJ Mobile brands; and various other channels, including via large retailers such as Carrefour and specialised networks such as Tel & Com and Internity as well as local outlets such as tobacconists and newsagents, through direct online sales on nrjmobile.fr and with web merchants such as Rueducommerce.com and Phoneandphone.com, and via the company s 1080 telesales platform. 86 CREDIT MUTUEL GROUP Annual Report

46 OTHER ACTIVITIES NRJ Mobile continued to grow in 2011, acquiring nearly 500,000 new customers on post-paid contracts (subscription or limited call time deals). This brought its number of active customer accounts at year-end to more than 1 million. NRJ Mobile marketed a large number of new offers in 2011 giving each CM-CIC member and customer the opportunity to subscribe to a deal and acquire a handset adapted to his or her needs. One of the landmark successes of the year was the Tout Illimité deal, which attracted more than 100,000 new customers. In a very unsettled telephony market, NRJ Mobile pursued its strategy of offering customers comprehensive deals featuring subsidised handsets and add-on services along with high quality customer service. Accordingly, all members and customers can obtain advice from their respective Crédit Mutuel local mutual banks or CIC branches on finding an offer that corresponds exactly to their needs, with free add-on services such as phone insurance, emergency assistance and links from the mobile to the CyberMUT/Filbanque online banking facilities for access to new value added services. NRJ Mobile is also continuing to expand in this area by setting up as a fully qualified mobile virtual network operator (MVNO) with integrated telecom operator architecture (excluding national transmitters), thereby maintaining its independence and making it more competitive. It has signed an initial contract with SFR and will market the related offers as from autumn In partnership with Crédit Mutuel and CIC, NRJ Mobile continues to play a major role in developing contactless payments and related services, and in 2011 participated actively in the launch of Cityzi in Strasbourg. PAYMENT SERVICES Payment-related services are managed mainly through the following specialised subsidiaries: Euro P3C, a dedicated entity that handles the personalisation of cheques, cards and other electronic components and which works for all Crédit Mutuel and CIC entities as well as for outside customers and partners. Its two production sites enable it to offer permanent back-up. Euro TVS (Traitement des Valeurs et Services) is number two in France in batch cheque processing. It provides processing services to Crédit Mutuel Centre Est Europe-CIC and partner federations, large retail groups, institutional customers and, more generally, any large document issuer wishing to dematerialise documentary and financial exchanges. Euro TVS is also participating in the group s project to offer invoice management services to customers. Thanks to its seven processing centres in Paris, Lyon, Nantes, Toulouse, Lille, Laval and Marseille, Euro TVS is able to provide a genuinely local service to its customers. Euro Télé Services (ETS) is a 24/7 incoming call centre, providing top-quality service to Centre Est Europe-CIC, partner federations and their respective customers (cardholders, merchants and NRJ mobile users). RESIDENTIAL REMOTE SURVEILLANCE, TELEMARKETING AND DOCUMENT MANAGEMENT Crédit Mutuel is the French leader in residential remote surveillance through Euro- Protection Surveillance (EPS), which provided services to more than 237,000 subscribers (up 16% from 2010) and had a 30% share of the market as at end With its Protection Vol solution, CM-CIC has made remote surveillance more affordable for its customers thanks to innovative and competitive offers combining equipment and services. EIDS (EIDS), a CM-CIC company, plans and executes telemarketing campaigns for Crédit Mutuel Centre Est Europe-CIC and partner federations. These campaigns use outgoing call centres with the aim of winning new customers and boosting the loyalty of existing ones. Euro GDS (Gestion de Documents et Services) is CM-CIC s dedicated production unit for indexed digital documents, which are fed into its central electronic document management system and those of the group s partners. The company has developed expertise in the batch production of electronic documents, and also offers paper document storage services. Euro GDS now handles most of CM-CIC's document storage. In 2011, Euro GDS dematerialised more than 18 million documents, a 26% increase from the previous year, representing 92.3 million pages, or 72.2 million scanned sheets of paper. Keynectis, the European leader in secure technologies and services, is a French software company specialised in identity and digital exchange security. It has more than 12 years experience of offering a comprehensive range of solutions for managing digital identities and securing documents and electronic transactions on behalf of governments, industrial companies, financial institutions and, ultimately, end users worldwide. Protecting more than 25 million digital identities and securing 200 million electronic transactions every month, Keynectis ranks among the top global providers of secure digital data exchange services. As an operator of electronic certification services, it also sets up secure areas and issues electronic certificates that comply with the most exacting reliability and security standards and make it possible, for example, to identify individuals, legal entities, web servers and software components. OTHER SERVICES Communication and media Crédit Mutuel Centre Est Europe owns 98.8% of the newspaper and commercial printer SFEJIC, the holding company for the Alsace group. Banque Fédérative du Crédit Mutuel (BFCM) holds 100% of the capital of Républicain Lorrain, which it bought in 2007, as well as directly and indirectly since 2011 almost 92% of Est Republicain. It also fully owns EBRA, which has controlling stakes in Le Bien Public, Le Journal de Saône-et-Loire, Le Progrès and Le Dauphine Libéré. 88 CREDIT MUTUEL GROUP Annual Report

47 FINANCIAL REPORT DISCIPLINE & P ERFORMANCE 90 CREDIT MUTUEL GROUP Annual Report

48 FINANCIAL REPORT CONTENTS MANAGEMENT REPORT OF THE BOARD OF DIRECTORS OF CONFEDERATION NATIONALE DU CREDIT MUTUEL 94 Economic and financial background 94 Activity and results 97 Analysis by sector of activity 99 Results by activity 100 Shareholders' equity and risk exposure 102 Recent trends and outlook 114 FINANCIAL STATEMENTS 115 Statement of financial position 115 Income statement 116 Statement of changes in shareholders' equity 118 Statement of cash flows 120 Notes to the financial statements 122 INDEPENDENT AUDITORS' REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS CREDIT MUTUEL GROUP Annual Report

49 FINANCIAL REPORT MANAGEMENT REPORT OF THE BOARD OF DIRECTORS OF CONFEDERATION NATIONALE DU CREDIT MUTUEL ON THE 2011 CONSOLIDATED FINANCIAL STATEMENTS ECONOMIC AND FINANCIAL BACKGROUND GROWTH REMAINED STRONG BUT PACE SLACKENED 2011 was marked by events with global repercussions, from the Arab Spring to the Japanese tsunami on 11 March, from the social and political unrest in China and Russia to the governance crisis in the euro zone. Globalisation has resulted in permanent instability. However, although the world economy did experience something of a deceleration as the months passed, growth remained strong. Global GDP growth averaged 3.6% in 2011 compared with 4.9% in 2010, which was more than the growth achieved over the long term (3.3% on average from 1973 to 2007). For the United States, 2011 was an opportunity to display some of its strengths, but lingering frailties were still very much in evidence also. The economy expanded by 1.7% in 2011 after growing by 3% in For Japan, 2011 was unlike anything seen before. The earthquake and tsunami on 11 March disrupted the Japanese economy during several months. The effects were also felt by Japan s trading partners because production processes are closely intertwined the world over was a watershed year for Europe. The sovereign debt crisis, as it spread gradually within the euro zone, revealed flaws in the recent construction of the European Union. While global trade exchanges were less dynamic, there was no repeat of the situation immediately after the collapse of Lehman Brothers, when exchanges ground to a halt. Emerging countries proved resilient to varying degrees. Emerging Asia was the most dynamic economy in the world, recording growth of 7.5%, fuelled notably by an ebullient Chinese economy, which grew by 9.2%. In Latin America, GDP grew by 4.4%, with signs of moderation. Because of its geographical location, Eastern Europe was the most exposed to the plight of the euro zone and its economy expanded by an estimated 3.7%. EURO ZONE - CONCERNS AND CRITICISM Throughout 2011, the sovereign debt crisis intensified, spreading from the peripheral countries to the core countries in the euro zone. In contrast to the American government which has been keen to bolster growth even if it meant prolonging certain imbalances, the priority for European authorities has been to restore equilibriums, notably at fiscal level, as a prelude to stimulating growth. As a result, the real economy was gradually caught up in the financial crisis. Although GDP grew by 1.5% in 2011, the signs are that the euro zone dipped back into recession at the end of The improvement on the employment front came to an abrupt halt during the second half of the year. The unemployment rate now stands at more than 10% in the euro zone, transforming what was cyclical unemployment into structural unemployment. Several European summits, each heralded as decisive, were held during the year, but without ever really appeasing the markets. Yet, there were real advances in short-term crisis management as well as in the implementation of fiscal consolidation strategies, designed to strengthen public finances in a lasting fashion. Elsewhere, Greece has no access to the markets. Italy came under the spotlight because of a lack of clarity in its political governance. Spain also had a difficult year. At the level of the euro zone, Germany acted as a safe haven throughout the crisis in 2011, but signs of a slowdown have multiplied in recent months even though it is estimated that GDP growth averaged 3% in COMPARED WITH EURO ZONE LEADERS, FRANCE FOUND ITSELF LAGGING BEHIND French growth, charting a very jagged profile, reached 1.7% in 2011, which was slightly more than the 1.5% achieved at the level of the euro zone. Economy activity was impeded by downward revisions to the expectations of both companies and households. In addition, France failed to check the rise in its employment rate, which deteriorated to 9.7% from 9.3% in Consumption, which grew by 0.3%, was not the engine of growth t has been in the past. Spending on productive investments (up 4.2%) together with changes in inventories accounted for three quarters of the growth recorded in Precautionary savings were maintained by households, which represented around 17% of gross disposable income, despite a small 1.3% increase in purchasing power. As a rule, French companies are struggling to establish positions at the top end of the range. In 2011, the trade deficit deepened to 70 billion from 51 billion in Against this backdrop, banks met demand for credits from companies and households. In order to press on with efforts to rein in public finances, new measures were announced in August, and again at the start of November, representing an amount equivalent to nearly 1% of GDP, with the focus on increasing tax receipts. These come on top of efforts to cut government spending. All in all, the structural deficit of public administrations was reduced by around 1.4 percentage point of GDP in CENTRAL BANKS HAVE BEEN VERY ACTIVE Soaring commodity prices lead to stronger inflation nearly everywhere in the world until the spring of 2011, after which tensions eased in the second half of the year. Also, central banks in emerging countries tightened monetary policies in the first half as they attempted to put a lid on inflation. In developed countries, central banks played a decisive role in addressing the slowdown in global growth and in tackling the lack liquidity experienced by banks in the second half. While the Federal Reserve opted to bolster the American economy, even resorting to non-standard measures, the European Central Bank (ECB) continued to focus on curbing inflation. It did not support the economy on the same scale as the Bank of England, Federal Reserve and Bank of Japan, all three pursuing near zero interest rate policies. In the first half of the year, the ECB even increased two times the refinancing rate, bringing it up to 1.5% in July, before cutting it back again to 1% and so reducing liquidity costs for banks. Because of the increasing wariness towards Member States and European banks, the ECB was obliged to take steps to attenuate the liquidity crunch threatening the Eurozone, by refinancing the banking system on a massive scale. FINANCIAL MARKETS LOST THEIR BEARINGS AT TIMES The European sovereign debt crisis caused investors to move into American and British government securities, whose yields declined to particularly low levels (less than 2% at the end of 2011) despite strained public finances. The substantial spreads between the yields of government bonds issued by the different Member States of the Economic and Monetary Union (EMU) hark back to the situation that existed before the creation of the single currency. Sovereign bonds have become risky investments and governments debts the butt of market speculation. 94 CREDIT MUTUEL GROUP Annual Report

50 FINANCIAL REPORT The proposal by European authorities to amend European Treaties and to bring forward to mid-2012 the implementation of the European Stability Mechanism (ESM) led to a steepening of many sovereign yield curves through the short end right at the end of As a result, the French 10-year rate rose to 3.15%, more than 130bp above its German counterpart at 1.83%. Spanish and Italian 10-year rates reached 5.12% and 6.9%, respectively. The risk premium on Spanish debt pulled back below 350 basis points, while in the case of the Italian debt this premium held at around 500 basis points. In peripheral countries, yields stabilised at high levels, notably in Greece where the 10-year rate camped above 33%. EURO PROVING RESILIENT TO THE SOVEREIGN DEBT CRISIS DESPITE THE NEGATIVE NEWS FLOW The economic environment should have heaped pressure on the euro. However, while the European single currency did soften towards the end of the year, the EUR/USD rate still reached 1.30 at 31 December 2011, which is more that its estimated purchasing power parity of between 1.15 and With the markets giving serious consideration to the possible exit of at least one country from the euro zone, the US dollar as well as the Swiss franc acted as safe haven currencies. The yen appreciated steadily throughout the year, prompting the Bank of Japan to intervene massively to preserve the competitiveness of Japanese products. The appreciation of emerging currencies was checked by interest rate hikes in these countries. The Chinese authorities did allow the yuan to appreciate gradually, but the Chinese currency remains weak, providing a formidable commercial advantage. INVESTORS MOVING OUT OF THE EURO ZONE Repeated disappointments and risk aversion unsettled investors. The global equity index declined by 7.9% in the year ended 31 December The European sovereign debt crisis and political unrest in the Middle East and emerging countries undermined the markets in the second half of While world equity markets naturally remain highly correlated, European equity markets were far more affected than their American counterparts. The EuroStoxx 50 slumped to a low at the end of 2011, down more than 14% in US dollar terms, whereas the Dow Jones put on 5.5%. Emerging markets posted disappointing performances, with a nearly uninterrupted downtrend from spring onwards. Besides specific factors at country level, prospects of an economic slowdown in developed countries were largely to blame for the poor performances of emerging markets in recent months. CREDIT AGENCIES WIELD CONSIDERABLE POWER With the decisions to downgrade the sovereign ratings of the United States and many euro zone countries, credit rating agencies grabbed the headlines as never before in 2011, but were equally the butt of much criticism. Repeated downgrades and market pressures prompted national governments and European authorities to implement austerity programmes in the second half of the year. The financial crisis has highlighted country differences, but some calm returned in Europe with the formation of new governments in Italy, Spain and Greece has been watershed year for Europe, particularly for the euro zone, prompting further integration two decades after Maastricht. ACTIVITY AND RESULTS The Crédit Mutuel group is not listed and is consequently under no obligation to present financial statements in accordance with International Financial Reporting Standards (IFRS). However, for the sake of greater transparency and to promote comparability with other leading financial institutions, the Board of Directors of Confédération Nationale du Crédit Mutuel, which is the group's central governing body within the meaning of Article L of the French Monetary and Financial Code, has opted to prepare consolidated financial statements in accordance with International Financial Reporting Standards as approved by the European Union. The Board of Directors approved the consolidated financial statements for the year ended 31 December 2011 when it met on 7 March 2012 and is presenting them, together with this report, to the General Meeting for its approval. The main changes in the consolidation scope arose from the first time consolidation of the Banque Casino (joint venture), Dernières Nouvelles d Alsace and Est Républicain and of Cholet Dupont and property management company LFP Nexity (notable influence). STEADY INCREASE IN LENDING, NOTABLY HOME LOANS, ACCOMPANIED BY AN INCREASE IN DEPOSITS IN AN UNFAVOURABLE INTEREST RATE ENVIRONMENT The interest margin decreased by 5.1% to 7,768 million in the year ended 31 December 2011, as charges increased more sharply than income. This marked a complete reversal of the trend observed in Interest income increased by 368 million to 22,139 million, while charges increased by 783 million to 14,371 million. There were increases in both deposits and loans. Customer loans and advances (1) increased to billion, up 4.7%: Home loans reached billion, up 4.4% year-on-year. Despite an 8.2% decline compared with 2010, loan production remained high at 30.8bn thanks to still attractive interest rate levels, to the announcements of fiscal reforms (Scellier Law, enhanced zero-interest loans) and to the upbeat conditions in the property markets (brick and mortar perceived as a safe haven). Consumer credits and revolving credits reached 34.1 billion, up 1.9%, bolstered by the good performances recorded by the pecialist subsidiaries of Crédit Mutuel. Loan production reached 13.6bn, up 3.5% year-on-year. At the level of the network, the loan book was relatively stable in the context of a sluggish French consumer credit market, adversely affected by the unsettled economic environment. Equipment loans to businesses and professionals were buoyed by investments in production; as a result, this loan book increased to 59.5 billion, up by 11.5%, like in More moderate growth was recorded by lease financing, up 5.9%, and short-term business credits, up 2.5% to 28.8 billion. Overall, equipment and short-term business credits increased by 13.2% to 26.4 billion. Crédit Mutuel Group has been a member of COSEF (Comité d Orientation et de Suivi de l Emploi du Fonds de Cohésion Sociale) ever since its creation, by virtue of which it distributes microcredits guaranteed by the Social Cohesion Fund. They include notably microcredit business loans and microcredit personal loans. At the level of the group, loan production in 2011 was as follows: Personal microcredits: 902 loans totalling 1.7 million; outstanding at 31 December 2011: 1,959 loans totalling 2.5 million; Business microcredits: Business microcredits complementary to NACRE business start-up loans: 1,925 loans totalling 73.9 million; and Other microcredit (France Initiative, Adie and France Active): 5,138 loans totalling million; In total: 7,063 loans amounting to million. In total, 7,965 loans totalling million were originated in 2011, which represents an increase of 36% despite the scaling back of the NACRE system for all participants in There was another increase in customer deposits (excluding SFEF), up 10% to 251,171 million. The main changes reflect depositor wariness towards the financial markets and the priority given to liquid savings products: Term accounts and deposits recorded the strongest increase, up 25.4% to 58,074 million; Passbook deposits also increased sharply: (1) Analysis of activity with customers includes management accounting data 96 CREDIT MUTUEL GROUP Annual Report

51 FINANCIAL REPORT Ordinary passbook deposits increased by 21.2% to 28,242 million. Mutual credit banks B passbook and savings banks A passbook deposits increased by 10.5%, up 2.8 billion to 29,815m, as the rate offered to savers was increased by 25 basis points in February and August Ordinary deposits increased by 5.6% to 69,804 million. The loan contracted with Société de Financement de l Economie Française (SFEF) amounting to 6,441 million, continued to decrease, down by 2.5 billion in SLIGHT DECLINE IN COMMISSIONS Net commission income decreased slightly, down 6.2% to 3,368 million, notably commissions linked to financial services and those linked to securities transactions. Other types of commissions were largely stable... PAVING THE WAY FOR A DECREASE IN NET BANKING INCOME, DOWN 5.2% TO 13,953 MILLION SIGNIFICANT DECREASE IN COST OF RISK FOR CUSTOMER ACTIVITIES The 5.1% increase in cost of risk was due to the Greek crisis ( 488 million out of a total of 1,663 million). Adjusted for this, cost of risk in fact declined 27% (to 1,175m). There were perceptible improvements for both incurrent and non-incurred risks. The proportion of impaired loans declined sharply to 4.0% of total loans, down from 4.2% at 31 December The overall coverage rate for these loans reached 65.7% compared with 64.6% at 31 December Without Targobank and Cofidis, the rate was 57.4% compared with 58.4% at 31 December AND TIGHTLY CONTROLLED GENERAL OPERATING EXPENSES. General operating expenses increased by 97 million to 9,047 million, this 1.1% increase being due mainly to a rise in staff costs linked to changes in the consolidation scope. Reasoning at constant consolidation scope, general operating expenses increased by only 0.3%. Crédit Mutuel group employed 78,000 people in 2011 when reasoning on a full-time equivalent basis, which represents an increase of 2.9% compared with This increase was due to changes in the consolidation scope. LIMITED THE DECLINE IN NET PROFIT ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT, WHICH DECREASED BY 27.5% TO 2,113 MILLION DESPITE THE WEAKER EARNINGS, THERE WAS ANOTHER INCREASE IN TOTAL SHAREHOLDERS EQUITY, UP 2.7% TO 34,305 MILLION Shareholders equity (excluding noncontrolling interests) increased by 3.1% to 33,292 million. This was due mainly to the: 110 million increase in capital to 9,128 million; transfer to reserves of much of the 2010 profit; profit generated in 2011; and 888 million increase in unrealised capital gains. It will be recalled that the impact on shareholders equity for prudential purposes differs because of the application of the filters imposed by the French Banking Commission and the differences in the consolidation methods applied to some entities, notably insurance undertakings. Standard & Poor s affirmed the A+/A-1 senior rating (Stable outlook) of Crédit Mutuel Group. Banque Fédérative du Crédit Mutuel (the holding company of the CM10- CIC group) is rated Aa3/P-1 (on review for possible downgrade) by Moody s and A+/F1+ (stable outlook) by Fitch. ANALYSIS BY SECTOR OF ACTIVITY The five operating segments for reporting purposes correspond to the organisation of Crédit Mutuel group. Retail Banking comprises the networks of Crédit Mutuel's regional federations and those of CIC's regional banks. This segment also includes some of the specialised activities whose products and services are marketed by the network such as finance leasing, factoring, real estate businesses (investment, facilities management, distribution and property development) and collective management of products distributed by the network. Insurance is considered as a separate segment given its importance in the group's activities. The group has historically been the leading bank in this activity, having started its bankinsurance activity in The activity covers both life and non-life insurance. Corporate and Investment Banking covers financing for large corporates and institutional customers, added-value financing activities, private equity, international activities and market activities, whether on its own behalf or on behalf of customers, including stock market intermediation. Asset management and private banking comprises the subsidiaries that are mainly engaged in private banking, both in France and abroad, together with the asset management and employee savings activities. Other activities cover all the activities that cannot be attributed to any of the above segments, together with subsidiaries involved purely in logistical support, whose expenses are generally re-billed to the other entities. They include intermediate holding companies, companies owning the property used in the group s operations and IT subsidiaries. 98 CREDIT MUTUEL GROUP Annual Report

52 FINANCIAL REPORT RESULTS BY ACTIVITY The weight of the data by sector of activity is calculated before elimination of intra-group transactions. To permit prior-year comparisons, 2010 segment reporting has been restated when entities have changed segments. RETAIL BANKING CHANGE (IN M) /2010 Net banking income 11,662 11,738 (0.6 %) Gross operating profit 4,244 4,434 (4.3 %) Profit before tax 3,208 2, % Net profit, group share 2,076 1, % Net banking income contributed by Retail Banking declined by 76 million to 11,662 million. The acquisitions in 2011 and the full-year effect of the acquisitions completed in 2010 helped limit this decline due to the weaker financial margin. The main reason for the weaker margin was the increase in the cost of resources resulting from an increase in both intermediated deposits and interest rates. At the same time, revenue from customer loans and advances did not increase strongly enough to offset the higher costs. In effect, although there was an increase in the loan book thanks to INSURANCE a dynamic marketing activity, this volume effect was partly offset by lower loans margins, as was the case at other banking institutions. The customer base now stands at 28.8 million. Marketing activities at the level of the Crédit Mutuel and CIC networks enabled them to expand their customer base by 1.4% in General operating expenses increased by 114 million, due notably to higher staff costs as a result of changes in the consolidation scope between 2010 and Investments in the network continued, the number of branches increasing to 5,898, of which 5,390 in France and 508 abroad. The cost-to-income ratio reached 63.6% in 2011 compared with 62.2% in As a result, gross operating profit declined by 190 million. Cost of risk declined by almost 27% to 1,064 million, reflecting a decrease in incurred risk, as non-incurred risks inched higher. All in all, net attributable profit increased by 169 million to 2,076 million. Retail Banking contributed almost 80% of the group s net banking income (compared with 76.4% in 2010) and 98% of its net profit. CHANGE (IN M) /2010 Net banking income 1,347 1,569 (14.1 %) Gross operating profit 853 1,048 (18.6 %) Profit before tax 827 1,041 (20.6 %) Net profit, group share (35.3 %) CORPORATE AND INVESTMENT BANKING CHANGE (IN M) /2010 Net banking income 955 1,304 (26.8 %) Gross operating profit (34.5 %) Profit before tax (48.6 %) Net profit, group share (56.6 %) Net banking income contributed by Corporate and Investment Banking declined by almost 27% to 955 million, penalised by the market and capital development activities, due to lower portfolio valuations. General operating expenses ASSET MANAGEMENT AND PRIVATE BANKING Net banking income contributed jointly by Asset Management and by Private Banking was stable at 619 million but, separately, the results were very different. Asset Management recorded a 22 million decrease, one entity having discontented its activities, whereas the contribution by Private Banking increased. Not taking into declined by 1.9% to 303 million. Cost of risk increased sharply, up from 12 million to 147 million, mainly because of impairment losses recognised against sovereign debts amounting to 104 million. Net attributable profit decreased by 431 million to 330 million. account life insurance, off balance sheet savings managed by the group and in its billion. The performances of the financial markets in 2011 had a negative impact on the value of the assets under collective management and securities held in custody. General operating expenses decreased by 5%, with nearly all of this Corporate and Investment Banking accounted for a lower proportion of the group s net banking income (6.5% compared with 8.5% in 2010) and net profit. CHANGE (IN M) /2010 Net banking income % Gross operating profit % Profit before tax % Net profit, group share % OTHER ACTIVITIES decrease due to Asset Management. Cost of risk reached 43 million, reflecting impairment losses recognised against Greek securities. Gains on other assets increased by 27 million. After taking corporation tax into account, net attributable profit increased to 124 million, up from 108 million in CHANGE (IN M) /2010 In contrast to previous years, net banking income contributed by Insurance declined, down 14.1% to 1,347 million, reflecting a decrease in premium income and the adverse conditions in the financial markets. The decrease in premium income was due nearly exclusively to the Life Insurance business, reflecting conditions in the French market. On the other hand, the Non-Life Insurance business recorded an increase in premium income. The insurance subsidiaries currently manage 30.2 million policies, 10.1% more than the year before, for almost 12 million policyholders. General operating expenses declined by 5.2%, but staff costs were stable. Cost of risk reached 67 million, due entirely to the Greek crisis. Profit before tax declined overall by 214 million to 827 million. Despite this decrease, corporation tax increased because of the impact in 2010 of the measures contained in the Finance Act regarding the exit tax on capitalisation reserves. Net attributable profit declined by 303 million to 556 million. Net banking income n.m. Gross operating profit (1,024) (857) (19.5 %) Profit before tax (1,396) (993) (40.6 %) Net profit, group share (973) (719) (35.3 %) Net banking income contributed by Other activities amounted to 41 million, down 87 million from General operating expenses increased to 1,065 million, up 80 million, due notably to the consolidation of Est Républicain and Euro Protection Surveillance. Cost of risk increased to 342 million, up 104 million from the previous year, this increase being due to impairment losses recognised against Greek securities. The net attributable loss reached 973 million, up from 719 million in CREDIT MUTUEL GROUP Annual Report

53 FINANCIAL REPORT SHAREHOLDERS' EQUITY AND RISK EXPOSURE The data provided in the tables on the following pages are expressed in millions of euros. The figures correspond to audited figures unless indicated otherwise by an asterisk. SHAREHOLDERS EQUITY Under CRBF Regulation , the networks of banking institutions with a central body must comply with management ratios both on an individual basis (for each of the groups making up Crédit Mutuel) and on a consolidated basis at national level (market risk and credit risk, large risks, and equity holdings). The consolidating entity and the scope of prudential supervision of the Crédit Mutuel group are identical to those used for the group's consolidated financial statements. Only the consolidation method changes, notably as regards the insurance companies, which are consolidated for accounting purposes using the full consolidation method and consolidated using the equity method for prudential purposes. The solvency ratio defines the capital requirement needed to cover credit, market and operational risks. Total shareholders' equity corresponds to the sum of core shareholders' equity (Tier 1 including undated super-subordinated securities), additional shareholders' equity (including redeemable subordinated securities and undated subordinated securities) and regulatory deductions (some investments in non-consolidated or equity-accounted financial institutions and investments in insurance companies consolidated using the equity method). Shareholders' equity is restated to take into account the effect of prudential filters, whose purpose is to reduce the volatility of shareholders' equity induced by the international standards, notably by the introduction of fair value. The group also complies with the reporting requirements arising from the EU Directive applicable to financial conglomerates. This requires, among other things, additional monitoring of the coverage by consolidated shareholders' equity of the cumulative capital adequacy requirements of the banking activities and solvency margin of the insurance companies. The Crédit Mutuel group complies with all the applicable regulatory ratios. SOLVENCY RATIO* Tier 1 capital 27,680 26,875 Total prudential shareholders' equity 27,680 27,614 Weighted risk 210, ,353 Core Tier 1 ratio 11.2 % 11.2 % *Comparable basis regional group in the rules for approving loans and advances, for setting the main orientations of its lending activity (notably in terms of customer segmentation), and for setting and monitoring limits. Financing limits are set so that they are adapted to the risk management policy and to the financial fundamentals of the entity concerned and are consistent with the system in place at national level. National and regional procedures are based on an internal rating system, defined in compliance with Basel II requirements. This internal rating system is used by all group entities. It allows for the rating of all counterparts eligible for internal ratings-based approaches. The system is based on different statistical models for customer segments for retail exposures and on manual rating grids developed by experts for bank exposures, large corporate exposures and specialised market activities. All counterparts eligible for internal ratings-based approaches are positioned on a single rating scale reflecting the progressive nature of the risk. The systems for reclassifying and provisioning loans are integrated into the information systems and operate on a monthly basis, reclassifying performing loans as doubtful loans where applicable. The software also integrates the notion of contagion to a third party. Provisions are calculated according to the outstanding amount and the guarantees received, and adjusted by the risk managers depending on the CREDIT RISK EXPOSURE ON LOANS AND RECEIVABLES There was a 4.1% increase in the net exposure to credit risk. This reflects mainly an increase in net exposure to customers. estimated expected loss. At national level, data retrieval and steering applications have been enhanced. Mappings of credit risks are produced using these applications, which analyse commitments according to the main categories defined in the internal rating system. The mappings are completed by more detailed management reports, which are produced at national level and then analysed by regional entity, providing information on the quality of the group s commitments and compliance with national limits placed on credit risks. They are sent to the senior management of the regional groups (Chief Executive Officers, Risk Management Directors, Commitments Directors) and to the executive and deliberative bodies of Confédération Nationale du Crédit Mutuel. EXPOSITION Loans and receivables Credit institutions 45,986 46,097 Customers 347, ,191 Gross exposure 393, ,288 Provisions for impairment (9,314) (9,394) Credit institutions (310) (350) Customers (9,004) (9,044) Net exposure 384, ,894 RISK MANAGEMENT POLICY As the group's central governing body, the measurement and monitoring of consolidated risk exposures form part of Confédération Nationale du Crédit Mutuel's supervisory duties. At regional level, each Crédit Mutuel group is responsible for managing its own risk exposures. CREDIT RISK Crédit Mutuel s credit risk management policy seeks to achieve several objectives, namely to: measure capital requirements; help steer the group by managing commitments in compliance with limits set in terms of the amount and nature of these risks; reduce cost of risk over time; and respond efficiently to Basel II and internal control regulations and ensure that regulatory compliance investments generate a return. As part of the overall group risk policy adopted by the Confédération's Board of Directors, each regional group is responsible for defining a general policy for managing risks at its level. This policy is then applied by each CREDIT RISK EXPOSURE ON COMMITMENTS GIVEN EXPOSITION Financing commitments given Credit institutions 1,884 2,116 Customers 63,760 62,849 Guarantee commitments given Credit institutions 2,589 5,534 Customers 16,705 12,914 Provisions for risk on commitments given CREDIT MUTUEL GROUP Annual Report

54 FINANCIAL REPORT EXPOSURE TO CREDIT RISK ON DEBT SECURITIES EXPOSITION Debt securities (*) Government securities 19,000 18,100 Bonds 110, ,165 Derivatives 4,146 3,127 Repurchase agreements and securities lending 8,969 11,131 Gross exposure 142, ,523 Provisions for impairment (991) (166) Net exposure 141, ,357 (*) Excluding securities classified under loans and receivables Net credit risk exposure on debt securities decreased by 2.8%. RATING STRUCTURE OF INTERBANK OUTSTANDINGS AND GEOGRAPHIC BREAKDOWN OF INTERBANK LOANS RATING STRUCTURE OF INTERBANK OUTSTANDINGS as a % as a % AAA and AA+ 0.5 % 10.3 % AA and AA % 33.3 % A+ and A 53.3 % 42.5 % A- and BBB+ 5.4 % 4.4 % BBB and below 12.0 % 9.5 % The structure of the group s interbank exposures, based on the internal rating system, remained of good quality as at 31 December 2011, with 82.6% of these exposures rated between B+ and A+ (equivalent to external ratings of between A and AAA). The small changes observed in 2011 are linked to rating revisions for certain of the counterparties. GEOGRAPHIC BREAKDOWN OF INTERBANK LOANS as a % as a % France 40.6 % 38.9 % Rest of Europe 46.9 % 47.2 % Rest of world 12.6 % 13.9 % The geographical breakdown indicates that interbank exposure remains mainly to banks incorporated in France (40.6% at 31 December 2011, up 1.7 percentage points compared with the previous year) and in the rest of Europe (46.9%, broadly unchanged), while exposures to banks in the rest of the world declined (12.6%, down 1.3 percentage points). CUSTOMER CREDIT RISK BREAKDOWN OF LOANS AND ADVANCES BY CUSTOMER SEGMENT as a % en % A - Central governments and banks 14.1 % 12.6 % B - Credit institutions 9.3 % 10.9 % C - Corporates 19.6 % 18.7 % D - Retail 57.0 % 57.8 % Crédit Mutuel group is positioned mainly as a retail bank. Its exposure to retail customers was stable. GEOGRAPHIC BREAKDOWN OF CUSTOMER RISK as a % as a % France 86.1 % 84.5 % Germany 4.0 % 4.3 % Rest of Europe 6.2 % 6.8 % Rest of world 3.8 % 4.4 % CONCENTRATION OF GROSS CUSTOMER RISK Commitments exceeding 300 million Number Loans ( m) 14,416 13,492 Off balance sheet commitments ( m) 23,462 19,825 Securities ( m) 15,335 11,250 Commitments of between 200 million and 300 million Number Loans ( m) 2,796 2,060 Off balance sheet commitments ( m) 2,932 3,234 Securities ( m) 1,112 2,028 Taking all commitments into account (loans, off balance sheet and securities), the average unit amount of the 74 largest risks exceeding 300 million was 719 million (2010: 707 million) while the average unit amount of the 28 largest risks between 200 million and 300 million was 244 million (2010: 244 million). QUALITY OF RISK Loans and advances written down individually 13,711 14,000 Individual provisions (8,373) (8,503) General provisions (631) (541) Overall coverage ratio 65.7 % 64.6 % Coverage ratio (individual provisions only) 61.1 % 60.7 % Impaired loans declined to 4.0% of total loans (2010: 4.2%). 104 CREDIT MUTUEL GROUP Annual Report

55 FINANCIAL REPORT PAST DUES PAST DUES CARRYING AMOUNT OF IMPAIRED ASSETS (IN M) < 3 MONTHS > 3 MONTHS > 6 MONTHS 6 MONTHS 1 YEAR (1) + (2) GUARANTEES AND CREDIT ENHANCEMENTS RECEIVED IN RESPECT OF IMPAIRED ASSETS > 1 YEAR TOTAL TOTAL TOTAL Equity instruments 1,714 1,714 0 Debt instruments ,153 1,153 0 Central governments Credit institutions Financial institutions other than credit institutions Large corporates Retail customers Loans and advances 4, ,070 5,335 10,405 5,005 Central governments Credit institutions Financial institutions other than credit institutions Large corporates ,201 1, Retail customers 4, ,334 4,131 8,465 4,393 Other financial assets Total 4, ,074 8,202 13,276 5, PAST DUES CARRYING AMOUNT OF IMPAIRED ASSETS (IN M) < 3 MONTHS > 3 MONTHS > 6 MONTHS 6 MONTHS 1 YEAR (1) + (2) GUARANTEES AND CREDIT ENHANCEMENTS RECEIVED IN RESPECT OF IMPAIRED ASSETS > 1 YEAR TOTAL TOTAL TOTAL Equity instruments Debt instruments ,078 1,078 0 Central governments Credit institutions Financial institutions other than credit institutions Large corporates Retail customers Loans and advances 5, ,643 5,662 11,305 4,085 Central governments Credit institutions Financial institutions other than credit institutions Large corporates ,088 1, Retail customers 4, ,985 4,385 9,370 3,767 Other financial assets BREAKDOWN OF RISK BY ECONOMIC SECTOR as a % as a % Private individuals 47.1 % 47.1 % Public administrations 14.4 % 12.9 % Banks and financial institutions 7.3 % 9.1 % Industrial goods and services 2.1 % 2.1 % Holdings and conglomerates 2.4 % 2.4 % Sole traders 3.7 % 3.8 % Retail trade 3.5 % 3.5 % Food processing and beverages 1.4 % 1.4 % Agriculture 1.9 % 1.9 % Real estate 3.3 % 2.9 % Construction and building materials 2.4 % 2.5 % Other financial activities 2.1 % 2.2 % Industrial transport 1.3 % 1.2 % Travel and leisure 1.1 % 1.0 % Automobile industry 0.7 % 0.8 % Household products 0.6 % 0.6 % High technology 0.7 % 0.7 % Media 0.0 % 0.5 % Utilities 0.5 % 0.5 % Healthcare 0.5 % 0.5 % Telecommunications 0.0 % 0.5 % Crude oil, gas and commodities 1.2 % 1.2 % Associations 0.0 % 0.0 % Sundry 1.8 % 0.9 % Source: CM-CIC group Basel 2 calculator. As the segmentation was modified in 2011, 2010 comparatives were restated accordingly. Total 5, ,712 7,674 13,386 4,085 Scope: prudential scope Past due declined at all maturities, down 11.1% overall. They concern mainly retail customers. 106 CREDIT MUTUEL GROUP Annual Report

56 FINANCIAL REPORT EXPOSURES LINKED TO THE FINANCIAL CRISIS In response to the financial crisis, the Financial Stability Board (FSB) issued recommendations relating to SECURITISATION transparency, aimed at improving financial information in respect of certain risk exposures. The Crédit Mutuel group elected to apply these recommendations with a view to improving its financial Unless indicated otherwise, securities are not hedged by credit default swaps (CDS). communication. The information below is expressed in millions of euro. CARRYING VALUE CARRYING VALUE RMBS 4,186 5,827 CMBS CDO/CLO 1,710 2,013 Other ABS CLO hedged by CDS Other ABS hedged by CDS Liquidity lines TOTAL 8,421 10,589 EXPOSURES AT 31 DECEMBER 2011 CARRYING AMOUNT AT RMBS CMBS CLO OTHER ABS Trading 1, Available-for-sale (AFS) 1, Loans (held-to-maturity/loans and receivables) 1, , TOTAL 4, , France Spain United Kingdom Rest of Europe 1, United States 1, Rest of world EXPOSURES AT 31 DECEMBER 2010 CARRYING AMOUNT AT RMBS CMBS CLO OTHER ABS Trading 1, Available-for-sale (AFS) 2, Loans (held-to-maturity/loans and receivables) 1, , TOTAL 5, France Rest of Europe 3, United States 2, ,005 - Rest of world TOTAL 5, US Agencies 1, AAA 3, , AA Other 1, TOTAL 5, , EXPOSITIONS PAR ORIGINATION CARRYING AMOUNT AT RMBS CMBS CLO OTHER ABS and earlier 1, , , Since TOTAL 4, , TOTAL 4, , US Agencies AAA 1, AA A BBB BB B or less 1, Not rated TOTAL 4, , CREDIT MUTUEL GROUP Annual Report

57 FINANCIAL REPORT BASEL II SYSTEM CREDIT RISK To better take into account the quality of the borrower, a Framework for the Convergence of Capital Measurements and Capital Standards (Basel II), including notably the implementation of an internal system of ratings specific to each institution, has been instituted by the Basel Committee on Banking Supervision and by the European Commission. In France, these new prudential requirements were published on 20 February 2007 in the form of a decree issued pursuant to the recommendations of the Advisory Committee on Financial Legislation and Regulation (Comité Consultatif de la Législation et de la Réglementation Financières - CCLRF) dealing with capital requirements for credit institutions and investment companies. That decree describes the three pillars: the First Pillar introduces new minimum capital requirements, with the calculation of a capital ratio for credit, market and operational risks; the Second Pillar requires banks to perform their own assessment to determine whether they have adequate capital to support all the risks in their business and to perform stress tests to assess their capital requirements in the event of a deterioration in the economic environment; and the Third Pillar tightens up market discipline by requiring more extensive disclosure and transparency regarding the risk profile of banks governed by the new Framework. To this end, the Crédit Mutuel group will release a specific report in the first half of 2012 that will be available on its institutional website. Regarding the minimal capital requirements of Pillar I, the major changes compared with the Cooke ratio concern the treatment of credit risk, with a modification of the calculation of weighted risks related to unexpected losses (UL) included in the ratio s denominator and possible correction of the capital on the basis of the differential between expected losses (EL) and provisions included in the ratio s numerator. Banks must choose between three approaches of rising risk sensitivity subject to the authorisation and under the control of their national supervisory bodies: standardised approach, foundation internal ratings-based approach, and advanced internal ratings-based approach. Each banking institution is required to adopt the approach best suited to the stage of development of its activities and to its organisation. STANDARDISED APPROACH The so-called standardised approach is similar to the Basel I Framework insofar as it is based on the application of fixed risk weightings to the different categories of exposures as defined by the regulations. The main modifications result from the possibility to differentiate applicable risk weightings on the basis of credit assessments provided by reputed external institutions and from the broader range of sureties, guarantees and credit derivatives that may be taken into account by banks. With the agreement of France s Prudential Supervision Authority (Autorité de Contrôle Prudentiel - ACP), claims on sovereigns and on regional governments and local authorities will continue to be measured using the standardised method over the foreseeable future. INTERNAL RATINGS-BASED APPROACHES These approaches are more sophisticated. Credit risk is a function of the characteristics of each exposure (or pool of exposures) based on the four following parameters: probability of default (PD) by the debtor over a 1-year horizon, loss given default (LGD), credit conversion factors (CCF) for off balance sheet exposures, and the effective maturity (M. The use of internal ratings-based approaches is conditional upon complying with a series of quantitative and qualitative requirements aimed at guaranteeing the integrity and credibility of the processes as well as the estimation of parameters used for calculating the regulatory capital. There are two main approaches: Foundation internal ratings-based approach (F-IRB), under which banks provide their own empirical model to estimate the probability of default. Other risk components (LGD, CCF and M) are defined in the regulations. Confédération Nationale du Crédit Mutuel has been authorised by France s Prudential Supervision Authority to use its internal ratings models on exposures to credit institutions since 31 December Advanced internal ratings-based approach (A-IRB), under which banks provide their own internal estimates for the PD, CCF, LGD and M risk components. This approach requires historical records stretching back over a long enough period of time for statistical purposes. Confédération Nationale du Crédit Mutuel has been authorised by France s Prudential Supervision Authority to use its internal ratings models on exposures to retail customers since 30 June As a cooperative bank owned by its members, Crédit Mutuel group s purpose is not to redistribute any capital gain to its shareholders. By opting for an internal ratings-based approach for most of its exposures, the group has: - complied with requirements laid down in the regulations and by the France s Prudential Supervision Authority; - adopted a national framework that has helped standardise practices; - improved its customer risk segmentation, helping fine-tune its management and steering; and - brought up to standard its information systems and work methods at all levels of its organisation given the obligation to use ratings in its management. All in all, Crédit Mutuel has structured its management and credit risk management system by capitalising on the Basel II Framework, based upon: - a single counterparty rating system that is based very largely on statistical algorithms; - a harmonised definition of default that is consistent with the approach for accounting purposes; - the use of national parameters incorporating a margin of prudence; and - significant investments in its information systems. INTEREST RATE RISK Interest rate risk arises from the bank s commercial activities. It results from differences in interest rates and benchmark indices for customer loans and advances on the one hand and customer deposits on the other hand, based on a prospective analysis of expected changes in these components, taking into account embedded options (notably early repayments, extensions and drawdowns against confirmed credit lines). The regional groups are responsible for defining their interest rate risk management and hedging strategies. As required by the regulations (CRBF Regulation as amended and extended to central bodies), CNCM s Risk Management department is responsible for the consolidated and homogeneous measurement of this risk by co-ordinating methodologies and by regular measurement of overall risk at group level. The Crédit Mutuel group has established harmonised risk agreements and risk limits, which are set out in the "Group asset and liability management guidelines". Measurement and supervision of interest rate risk is carried out at regional level by the Crédit Mutuel regional groups and at national level by CNCM. At regional level Each of the Crédit Mutuel regional groups has an asset/liability management (ALM) unit dedicated to monitoring overall interest rate exposure. The Crédit Mutuel group entities all use a common base for measuring overall interest rate risk (application of common methodology for scheduling, scenarios and early repayment), which is measured excluding the trading book. The trading book is monitored at the level of the dealing room. Group entities have introduced systems of limits that are consistent with the national system. Management and hedging decisions are taken by the regional committees. Interest rate risk is analysed and hedged globally, if appropriate, by entering into so-called macro hedging transactions. These transactions are accounted for in accordance with IAS 39 as adopted by the European Union, i.e. in accordance with the carved out version. High-value or special-purpose customer transactions may be hedged specifically. may be hedged specifically. At national level Interest rate risk is measured by two indicators: - risk relating to future income, analysed in terms of the sensitivity of the margin over the short- to medium-term (1 to 5 years); and - risk relating to the instant value of the entity, measured as the sensitivity of net present value over a long-term horizon. At national level, the sensitivity limit for net banking income over one or two years includes new loan production based on a scenario of moderate changes in interest rates (+/- 1% for variable rates and +/- 0.5% for regulated interest rates). Sensitivity of net banking income to a differentiated rise in interest rates 2.00% 1.50% 1.00% 0.50% 0.00% 0.77% % Dynamic approach 0.87% 1.57% Year 1 Year 2 The sensitivity of the Crédit Mutuel group to a rise in interest rates is moderate. Other scenarios, including stress scenarios, are modelled under the supervision of CNCM. (1) Parameter used exclusively for exposures to central governments, institutions and corporates for which the advanced internal ratings-based approach is used. 110 CREDIT MUTUEL GROUP Annual Report

58 FINANCIAL REPORT LIQUIDITY RISK BREAKDOWN OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES The liquidity risk arises from a mismatching in the maturity of the applications of funds and the sources of funds. In its most extreme form, the risk is that an entity will encounter difficulty in meeting its obligations. The regional federations each have an ALM unit or committee tasked notably with ensuring there is sufficient liquidity to meet their commitments. They have concluded agreements with CCCM or BFCM to cover their refinancing needs. Liquidity risk is monitored by the regional groups using notably the following indicators: - the liquidity ratio as defined by regulations, which compares resources maturing in less than one month with applications maturing in less than one month. Some of the regional federations and Caisses Fédérales apply limits that are stricter than those required by the regulations; - a medium- to long-term liquidity ratio defined at national level, the general principle being to match all assets and all liabilities and to measure the coverage ratio of applications by resources of equivalent duration at different maturities. A system of limits has been put into place. - projected refinancing requirements over 5 years. Breakdown of maturities for liquidity risk at 31 December 2010 RESIDUAL CONTRACTUAL 1 MONTH > 1 MONTH > 3 MONTHS > 1 YEAR > 2 YEARS > 5 YEARS NO SET TOTAL MATURITIES (IN M) 3 MONTHS 1 YEAR 2 YEARS 5 YEARS MATURITY Assets Financial assets held for trading 1, ,202 3,197 4,512 4,992 1,177 18,891 Financial assets at fair value through profit and loss 3,939 3,121 1, , ,167 Financial assets available for sale ,360 4,658 11,679 9,332 4,824 34,170 Loans and advances (including leasing) 45,399 11,184 27,187 31,396 75, ,543 7, ,943 Financial assets held to maturity ,842 1, ,355 BREAKDOWN OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES Breakdown of maturities for liquidity risk at 31 December 2011 RESIDUAL CONTRACTUAL 1 MONTH > 1 MONTH > 3 MONTHS > 1 YEAR > 2 YEARS > 5 YEARS NO SET TOTAL MATURITIES (IN M) 3 MONTHS 1 YEAR 2 YEARS 5 YEARS MATURITY Assets Financial assets held for trading ,204 4,265 4,488 3, ,570 Financial assets at fair value through profit and loss 5,278 1,089 1, , ,979 Financial assets available for sale ,476 3,740 11,161 7,789 4,107 31,165 Loans and advances (including leasing) 44,735 12,013 29,571 31,722 77, ,716 7, ,476 Financial assets held to maturity 331 3,108 2, , ,990 Liabilities Central bank deposits Financial liabilities held for trading , ,607 1, ,992 Financial liabilities at fair value through profit and loss 9,962 6,295 6, ,512 Financial liabilities valued at amortised cost 201,184 38,404 43,402 27,582 66,075 42,231 5, ,707 Liabilities Central bank deposits Financial liabilities held for trading , ,926 2, ,527 Financial liabilities at fair value through profit and loss 9,953 8,035 7, ,249 Financial liabilities valued at amortised cost 198,988 47,061 45,004 27,764 43,235 36,656 4, ,020 Comments: This table was established using the FIN50 grid in application of CB instruction The entities included are those included within the prudential scope. Financial assets and financial liabilities correspond to amounts determined applying International Financial Reporting Standards. The scheduling rules are as follows: - Maturities are the contractual maturities for repayment of the principal. - Shares are recorded under No set maturity, as are undated loans and securities - Debts and related liabilities are broken down according to their actual maturity and, failing that, under less than 1 month. - Provisions are analysed in the same way as the assets concerned. - Non-performing loans are analysed according to their contractual date, if not yet past, and, failing that, under No set maturity, in the same way as receivables in litigation. - The market value of derivatives is recorded in the flow corresponding to the end date of the contract. - When it is not possible to establish a reliable repayment schedule, the carrying amount is recorded under No set maturity. 112 CREDIT MUTUEL GROUP Annual Report

59 FINANCIAL REPORT FOREIGN EXCHANGE RISK Each bank hedges the currency risk on customer transactions. This risk is not material at the Crédit Mutuel group level. MARKET RISK The main group entity engaged in market activities is CM10-CIC Group. It trades on its own account and on behalf of the other federations. Its activities include refinancing the local mutual banks' activities, securities management and commercial activities for corporate customers (foreign exchange transactions, interest-rate risk and foreign exchange hedging). The dealing room activities are the subject of regular reports covering risks as well as economic and accounting performances. The permitted activities and terms and conditions of capital markets activities are included in each regional group's internal regulations. At operational level, these are analysed by the various Committees involved and reported upon regularly to the Boards of Directors concerned. At national level, reports produced in respect of market activities are used to monitor the main risk indicators. OPERATIONAL RISK Since 1 January 2010, the Crédit Mutuel group is authorised to use its advanced measurement approach (AMA) for calculating regulatory capital requirements in respect of operational risk, save for the deduction of expected losses from capital requirements and the inclusion of the insurance activities, for all entities included in the consolidation scope other than the foreign subsidiaries, the Cofidis Group and Factocic. The system for measuring and controlling operational risk (progressively implemented since 2002) rests on foundations common to the entire Crédit Mutuel group and on common quantitative measurement methods. Risk mappings are performed for each business line, activity group and loss event type in close collaboration with the functional departments. These departments define a standardised framework for analysing losses and draw up expert-based modelling for comparison against scenario-based, probabilistic estimates. For its modelling, the group relies notably on a national database of internal loss events, in addition to which it has access to an external database on a subscription basis. It also relies on the scenarios developed during the mapping process and on the statistical studies drawn up in compliance with common procedures and regulatory requirements. Main objectives The operational risk management policy implemented by the group is designed to achieve the following: improve group management by controlling risks and related costs; at human level: protect people, foster individual responsibility, autonomy and controls, and capitalise on the skills within the group; at economic level: preserve margins by managing risks close to the ground in all activities; at regulatory level: meet effectively the requirements of Basel II and demands emanating from supervisory authorities. Structure and organisation The group has a clearly-identified function responsible specifically for the management of operational risk, which coordinates and consolidates the entire system and its implementation at the level of each entity. In this respect, it: defines and manages the reference databases as well as the risk measurement methods and models; organises the reporting of loss events and key risk indicators (KRI); draws up the mappings and designs the modelling; defines group methodologies; directs action plans for mitigating these risks; and manages financing plans. material size). At national level, their work is coordinated by national function under the responsibility of the risk management department of Confédération Nationale du Crédit Mutuel. Reporting and general supervision The reporting and oversight of operational risks are based on the following principles: - providing information at regular intervals to the board of directors covering capital requirements in respect of operational risk, and changes in potential risks and in incurred losses; - providing ad-hoc reports to national management teams setting out the risk profile analysed according to the risk structure defined by the group, capital requirements, losses and provisions in respect of loss events. RECENT TRENDS AND OUTLOOK The opening months of 2012 have been characterised by the continuing development of the group s commercial activities. In a difficult economic environment, the Crédit Mutuel and CIC networks recorded further strong increases in deposits, all the while managing tightly the growth in lending. In 2012, the group will press on with the development of its banking, insurance and services activities in its different markets, serving the needs of individuals, associations, professionals and corporates and participating in the financing of the local and national economy. To this end, it will draw on its network of local mutual banks and neighbourhood branches in France and on the continuing expansion of its activities in neighbouring countries. FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 STATEMENT OF FINANCIAL POSITION ASSETS (IFRS) (IN M) NOTES Cash in hand and balances with central banks 8,565 8,726 1a Financial assets at fair value through profit or loss 54,308 57,020 2a, 2c, 4, 9 Derivative hedging instruments 1, a, 4 Available for sale financial assets 97, ,213 5a, 5b, 9 Loans and advances to credit institutions 46,813 47,490 1a, 9 Loans and advances to customers 338, ,065 6a, 9 Re-measurement adjustment on portfolios hedged for interest rate risk 1, b Financial assets held to maturity 19,405 14,206 7, 9 Current tax assets 2,146 1,834 10a Deferred tax assets 1,962 1,620 10b Prepayments, accrued income and other assets 19,517 18,137 11a Non-current assets classified as held for sale 3 10 Deferred profit-sharing Investments in companies accounted for using the equity method 1,496 1, Investment property 1,441 1, Plant, property and equipment 3,566 3,592 14a Intangible assets 1,356 1,361 14b Goodwill 4,916 4, TOTAL ASSETS 605, ,309 LIABILITIES AND SHAREHOLDERS EQUITY (IFRS) (IN M) NOTES Central banks b Financial liabilities at fair value through profit or loss 31,497 34,939 2b, 2c, 4 Derivative hedging instruments 4,606 3,613 3a, 4 Amounts due to credit institutions 32,847 28,465 1b Amounts due to customers 257, ,402 6b Debt securities 119, , Re-measurement adjustment on portfolios hedged for interest rate risk (2,812) (1,916) 3b Current tax liabilities a Deferred tax liabilities b Accrued charges, deferred income and other liabilities 13,976 15,771 11b Liabilities directly associated with non-current assets classified as held for sale 0 0 Technical provisions for insurance contracts 102, , Provisions for risks and charges 2,126 1, Subordinated debt 7,362 8, Shareholders' equity 34,305 33,388 Shareholders' equity group share 33,292 32,289 Share capital and related reserves 9,156 9,046 20a Consolidated reserves 23,193 20,609 20a Unrealised or deferred gains or losses (1,170) (282) 20b Profit for the year 2,113 2,916 Non-controlling interests 1,013 1,099 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 605, , CREDIT MUTUEL GROUP Annual Report

60 FINANCIAL REPORT INCOME STATEMENT IFRS STATEMENT OF COMPREHENSIVE INCOME (IN M) NOTES Interest and similar income 22,139 21, Interest and similar expenses (14,371) (13,588) 22 Fees and commissions (income) 4,497 4, Fees and commissions (charges) (1,129) (1,093) 23 Net gains (losses) on financial instruments at fair value through profit or loss (178) Net gains (losses) on available for sale financial assets (31) Income from other activities 17,093 19, Expenses on other activities (14,067) (17,102) 26 Net banking income IFRS 13,953 14,724 General operating expenses (8,408) (8,292) 27a,27b Provisions, amortisation and depreciation for non-current assets (639) (658) 27c (IN M) NOTES Total consolidated profit 2,195 3,026 Translation differences 0 0 Re-measurement of available for sale financial assets (853) (254) Re-measurement of derivative hedging instruments (20) (46) Re-measurement of non-current assets (3) 1 Share of unrealised or deferred gains and losses on companies accounted for using the equity method (17) 4 Total gains and losses recognised directly in equity (893) (295) Profit and gains and losses recognised directly in equity 1,302 2,731 Of which Group share 1,225 2,631 Non-controlling interests Gross operating profit IFRS 4,906 5,774 Cost of risk (1,663) (1,583) 28 Operating profit IFRS 3,243 4,191 Share in net profit or loss of companies accounted for using the equity method Net gains (losses) on other assets Changes in goodwill (7) (45) 30 Profit on ordinary activities before tax IFRS 3,310 4,171 Corporation tax (1,115) (1,145) 31 Total consolidated profit 2,195 3,026 Minority interests Profit, group share 2,113 2, CREDIT MUTUEL GROUP Annual Report

61 FINANCIAL REPORT STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY SHARE CAPITAL AND RESERVES CONSOLIDATED UNREALISED OR DEFERRED GAINS/LOSSES (AFTER TAX) RESERVES (IN M) Share capital Other paid Elimination Translation Revaluation Changes in the value of Profit, Group Minority Total capital of treasury differences differences financial instruments group share of interests consolidated shares (excluding share shareholders shareholders' financial equity equity instruments) Changes in Changes in the fair the fair value of Shareholders equity at 1 January , , (76) 1,831 29,616 1,003 30,619 Capital increase 322 (11) Appropriation of profit for ,831 (1,831) - - Dividends paid in 2010 in respect of 2009 (294) (294) (9) (303) Sub-total of changes in capital linked to relations with shareholders 322 (11) - 1, (1,831) 17 (9) 8 Gains and losses recognised directly to equity 1 (251) (35) (285) (10) (295) Changes in the value of financial instruments and non-current assets recycled to profit or loss Profit for the year ,916 2, ,026 Sub-total (251) (35) 2,916 2, ,731 Impact of acquisitions and disposals on minority interests (22) (10) Changes in accounting methods Share of changes in the capital of companies accounted for using the equity method (35) (35) Changes in foreign exchange rates Other changes (13) (13) 14 1 Shareholders' equity at 31 December , ,609-3 (174) (111) 2,916 32,289 1,099 33,388 Shareholders' equity at 1 January , ,609-3 (174) (111) 2,916 32,289 1,099 33,388 Capital increase Appropriation of profit for ,916 (2,916) - - Dividends paid in 2011 in respect of 2010 (247) (247) (50) (297) Sub-total of changes in capital linked to relations with shareholders , (2,916) (137) (50) (187) Gains and losses recognised directly to equity (3) (1,066) (36) (1,105) (8) (1,113) Changes in the value of financial instruments and non-current assets recycled to profit or loss Profit for the year ,113 2, ,195 Sub-total (3) (856) (29) 2,113 1, ,302 Impact of acquisitions and disposals on minority interests (218) (218) (127) (345) Changes in accounting methods (3) (3) (0) (3) Share of changes in the capital of companies accounted for using the equity method Changes in foreign exchange rates (0) 17 Other changes Shareholders' equity at 31 December , , (1,030) (140) 2,113 33,292 1,013 34,305 value of AFS securities derivative hedging instruments 118 CREDIT MUTUEL GROUP Annual Report

62 FINANCIAL REPORT STATEMENT OF CASH FLOWS (IN M) Profit for the year 2,195 3,026 Corporation tax 1,115 1,145 Profit before tax 3,310 4,171 =+/- Net provision for depreciation of tangible and intangible non-current assets Impairment of goodwill and other non-current assets /- Net charges to provisions 896 3,421 +/- Share of results of companies accounted for using the equity method (1) (22) +/- Net loss/income from investment activities (134) (26) +/- (Income)/charges on financing activities +/- Other movements 1,784 (1,760) = Total of non-monetary items included in profit before tax and other adjustments 3,205 2,252 +/- Flows relating to transactions with credit institutions (a) 4,536 (9,872) +/- Flows relating to transactions with customers (b) 5, /- Flows relating to other transactions affecting financial assets or liabilities (c) (18,966) 3,838 +/- Flows relating to other transactions affecting non-financial assets or liabilities (2,778) Taxes paid (1,384) (1,227) = Net reduction/(increase) in assets and liabilities from operating activities (13,165) (6,172) TOTAL NET CASH FLOW GENERATED BY OPERATING ACTIVITIES (A) (6,650) 251 +/- Flows relating to financial assets and holdings (d) (4,686) (470) +/- Flows relating to investment property (e) (153) (142) +/- Flows relating to tangible and intangible non-current assets (f) (514) (566) TOTAL NET CASH FLOW RELATING TO INVESTMENT ACTIVITIES (B) (5,353) (1,178) +/- Cash flows from or to shareholders (g) (187) 22 +/- Other cash flows from financing activities (h) 11,027 1,924 TOTAL NET CASH FLOW RELATING TO FINANCING ACTIVITIES (C) 10,840 1,946 EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (D) Net increase/(reduction) in cash and cash equivalents (A + B+ C + D) (1,060) 1,146 Net cash flow from operating activities (A) (6,650) 251 Net cash flow relating to investment activities (B) (5,353) (1,178) Net cash flow relating to financing activities (C) 10,840 1,946 Effect of exchange rate changes on cash and cash equivalents (D) Cash and cash equivalents on opening 8,299 7,153 Cash and central banks (assets and liabilities) 8,680 9,409 Accounts (assets and liabilities) and lending/borrowing with credit institutions (381) (2,256) Cash and cash equivalents on closing 7,239 8,299 Cash and central banks (assets and liabilities) 8,280 8,680 Accounts (assets and liabilities) and lending/borrowing with credit institutions (1,041) (381) CHANGE IN NET CASH (1,060) 1,146 (IN M) (a) Flows relating to transactions with credit institutions break down as follows: +/- Inflows and outflows linked to loans and advances to credit institutions (other than items included in cash and cash equivalents), excluding accrued interest 741 1,136 +/- Inflows and outflows linked to amounts due to credit institutions, excluding accrued interest 3,795 (11,008) (b) Flows relating to transactions with customers break down as follows: +/- Inflows and outflows linked to loans and advances to customers, excluding accrued interest (14,479) (16,953) +/- Inflows and outflows linked to amounts due to customers, excluding accrued interest 19,906 17,545 (c) Flows relating to other transactions affecting financial assets or liabilities break down as follows: +/- Inflows and outflows linked to financial assets at fair value through profit and loss 1,333 10,539 +/- Inflows and outflows linked to financial liabilities at fair value through profit and loss (3,655) (13,172) - Outflows on acquisitions of fixed income available for sale securities (*) 4, Inflows on disposals of fixed income available for sale securities (*) +/- Inflows and outflows on derivative hedging instruments +/- Inflows and outflows on debt securities (20,834) 5,641 (d) Flows relating to financial assets and holdings break down as follows: - Outflows on acquisitions of subsidiaries, net of acquired cash + Inflows on disposals of subsidiaries, net of cash ceded - Outflows linked to purchase of securities of companies accounted for using the equity method (69) (72) + Inflows linked to sales of securities of companies accounted for using the equity method (9) + Inflows from dividends received - Outflows linked to purchases of held-to-maturity financial assets (5,499) (957) + Inflows linked to sales of held-to-maturity financial assets Outflows on acquisitions of variable income available for sale securities (218) (571) + Inflows on disposals of variable income available for sale securities /- Other flows linked to investment transactions + Inflows from interest received, excluding accrued interest not yet due (e) Flows relating to investment property break down as follows: - Outflows linked to acquisitions of investment property (182) (183) + Inflows linked to sales of investment property (f) Flows relating to non-current assets break down as follows: - Outflows linked to acquisition of non-current assets (764) (775) + Inflows linked to sales of non-current assets (g) Flows from or to shareholders break down as follows: + Inflows from issuance of shares and similar securities Inflows from sales of shares and similar securities - Outflows linked to dividends paid (297) (300) - Outflows linked to other remuneration paid (h) Other net cash flows from financing activities break down as follows: + Inflows linked to issuance of bonds and debt securities 18,390 9,249 - Outflows linked to repayment of bonds and debt securities (6,921) (8,239) + Inflows linked to issuance of subordinated debt 6 1,013 - Outflows linked to repayment of subordinated debt (448) (99) - Outflows linked to interest paid, excluding accrued interest not yet due (*) Including re-measurements linked to the purchase or sale of variable income financial assets available for sale. 120 CREDIT MUTUEL GROUP Annual Report

63 FINANCIAL REPORT NOTES TO THE FINANCIAL STATEMENTS The Crédit Mutuel group is not listed and is consequently under no obligation to present financial statements in accordance with IFRS. However, for the sake of greater transparency and comparability with other leading financial institutions, the Board of Directors of Confédération Nationale du Crédit Mutuel, which is the group's central governing body within the meaning of Article L of the French Monetary and Financial Code, has decided to present consolidated financial statements according to IFRS. These financial statements are presented in accordance with CNC Recommendation 2009-R04 relating to summary financial statements. They comply with International Financial Reporting Standards as adopted by the European Union. Information regarding risk management and the financial crisis is presented in the group s management report. TABLE OF CONTENTS I ACCOUNTING POLICIES Note 1: Consolidation scope Determination of the consolidation scope Composition of the consolidation scope 124 Note 2: Consolidation methods and policies Consolidation methods Closing date Elimination of intra-group transactions Translation of accounts denominated in a foreign currency Goodwill 132 Note 3: Accounting policies and methods Loans and receivables Provisions for impairment of loans and receivables, loan commitments and guarantees Leases Securities Derivatives and hedge accounting Debt securities Subordinated debt Distinction between liabilities and shareholders equity Provisions Amounts due to customers and and credit institutions Cash and cash equivalents Employee benefits Insurance activities Non-current assets Fees and commissions Corporation tax Interest payable by the State on certain loans Financial guarantees and financing commitments Transactions denominated in foreign currencies Non-current assets classified as held for sale and discontinued operations Judgements and estimates used in preparation of the financial statements 144 Note 4: Segment reporting (IFRS 8) 144 Note 5: Related parties 145 Note 6: Standards and interpretations adopted by the European Union not yet applied due to their application date 145 Note 7: Events after the end of the reporting period II TABLES 1. Notes to the statement of financial position Notes to the income statement Notes to the statement of comprehensive income Segment reporting Other information ACCOUNTING POLICIES NOTE 1: CONSOLIDATION SCOPE 1.1 Determination of the consolidation scope Crédit Mutuel is a co-operative bank governed by the Law of 10 September It is owned solely by its members, who hold member shares ('A' shares). Members are each entitled to one vote at general meetings, where their powers include the election of directors. The three levels of organisation local, regional and national operate on a decentralised basis in accordance with the principle of subsidiarity. The local mutual banks, which are in closest contact with members and customers, carry out all the principal functions of bank branch offices, with the other two levels exercising only those functions the local entities are not in position to carry out alone. Under Article L of the French monetary and financial code, Confédération Nationale is the central body for the group. As such it is responsible for: - ensuring the liquidity and solvency of the Crédit Mutuel network, - representing Crédit Mutuel before the public authorities and defending and promoting its interests, - and, more generally, ensuring the overall cohesion of the network and overseeing its business development while at the same time exercising an administrative, technical and financial control over the regional groups and their subsidiaries. The method for consolidating a group with such a distinctive capital ownership structure is based on determining a consolidating entity that reflects the community of members linked by shared financial solidarity and governance. The analysis of the control exercised by the consolidating entity complies with IAS 27 (revised), thus enabling the group to present consolidated financial statements according to IFRS. Consolidating entity The consolidating entity for the Crédit Mutuel group is composed of all the local mutual banks, the Caisses Fédérales (general purpose, farming or rural), the Regional Federations, Caisse Centrale du Crédit Mutuel, Confédération Nationale du Crédit Mutuel, and Fédération du Crédit Mutuel Agricole et Rural. The capital of the consolidating entity is owned exclusively by all the members of the local mutual banks. Basis of consolidation The general principles for the inclusion of an entity within the consolidation scope are as defined in IAS 27 (revised), IAS 28 and IAS 31. All the entities included in the consolidation scopes of the regional groups are included in the national consolidation scope. Jointly-held companies, not consolidated at regional level, are excluded from the national consolidation scope if their total balance sheet or earnings have an impact of less than 1% on the consolidated equivalent. However, an entity that does not reach this threshold may be consolidated if its activity or development is considered a strategic investment. The consolidation scope comprises: - Entities controlled exclusively: exclusive control is presumed to exist when the group controls directly or indirectly a majority of the voting rights, or has the power to appoint the majority of the members of the administrative, management and supervisory bodies, or has the power to govern the financial and operating policies of an entity by virtue of regulations or a contract. The accounts of entities controlled exclusively are fully consolidated. - Entities controlled jointly: joint control arises when, in accordance with the terms of a contractual agreement, control of an economic activity is shared with one or more third parties regardless of the structure or form in which the activities are undertaken. Entities controlled jointly are consolidated using the proportional method. - Entities over which significant influence is exercised: these are entities over whose financial and operational policies the group exerts significant influence but does not have control. Entities over which significant influence is exercised are consolidated using the equity method. Special-purpose entities are consolidated when the conditions defined in SIC 12 are met, namely that the entity s activities are carried out exclusively on the group s behalf, the group has decision-making or management power to obtain the majority of the benefits deriving from the entity s ordinary activities and the capacity to profit from the entity s benefits, and retains the majority of the risks. Holdings belonging to private equity companies and over which joint control or significant influence is exercised are excluded from the consolidation scope and are recognised at fair value by option. 122 CREDIT MUTUEL GROUP Annual Report

64 FINANCIAL REPORT 1.2 Composition of the consolidation scope The following entities were included in the Crédit Mutuel group's consolidation scope at 31 December 2011: Consolidated entities are presented according to the sectors Comments used for preparing segment information under IFRS 8. Accordingly, for example, entities included under Method Method Retail Banking do not necessarily have the legal status of credit credit institutions Control Interest + Control Interest + A. Retail Banking CM10 (*) Actimo NC FC Deconsolidated Adepi FC FC Agence de l'hotel de ville NC FC Deconsolidated Agerim NC FC Deconsolidated AMOFI (formerly ERIF) NC FC Deconsolidated Amofi B NC FC Deconsolidated Ataraxia Distribution NC FC Deconsolidated Ataraxia Finance NC FC Deconsolidated Ataraxia Gestion NC FC Deconsolidated Ataraxia Production NC FC Deconsolidated Banca Popolare di Milano EM EM Banque Casino PM NC Acquired outside group Banque de Tunisie EM EM Banque du Crédit Mutuel Ile-de-France (BCMI) FC FC Banque de l'economie du Commerce et de la Monétique FC FC Banque de l'economie du Commerce et de la Monétique - Francfort FC FC Banque de l'economie du Commerce et de la Monétique - St Martin FC FC Banque Marocaine du Commerce Exterieur (BMCE) EM EM BEDE NC FC Deconsolidated C2C FC FC CIC Est FC FC CIC Banque Nord-Ouest (ex CIC Banque Scalbert Dupont - CIN) FC FC CIC Iberbanco FC FC CIC Ouest (formerly CIC Banque CIO - BRO) FC FC CIC Sud Ouest (formerly Société Bordelaise de CIC - SBCIC) FC FC CM-CIC Asset Management FC FC CM-CIC Bail FC FC CM-CIC Epargne salariale FC FC CM-CIC Gestion FC FC CM-CIC Home Loan SFH (formerly CM-CIC Covered Bonds) FC FC CM-CIC Laviolette Financement FC FC CM-CIC Lease FC FC CM-CIC Leasing Benelux FC FC CM-CIC Leasing GmbH FC FC Cofidis Argentina FC FC Cofidis Belgium FC FC Cofidis Spain FC FC Cofidis France FC FC Cofidis Hungary FC FC Cofidis Italy FC FC Cofidis Portugal FC FC Cofidis Czech Republic FC FC Cofidis Romania NC FC Wound up Cofidis Slovakia FC FC Creatis FC FC Ensemble Victor Hugo NC FC Deconsolidated Factocic FC FC FCT Cofititrisation FC FC Filaction NC FC Deconsolidated Gesteurop FC v61 FC Groupe Victor Hugo NC FC Deconsolidated Habitat Gestion NC FC Deconsolidated Method: FC = Full Consolidation, PM = Proportional Method, EM = Equity Method, NC = Not Consolidated, ALT =Asset, liability transfer (*) Presentation by majority-owned Crédit Mutuel group Consolidated entities are presented according to the sectors Comments used for preparing segment information under IFRS 8. Accordingly, for example, entities included under Method Method Retail Banking do not necessarily have the legal status of credit institutions Control Interest + Control Interest + IFT Immobilier NC FC Deconsolidated Immobilière des Marsauderies NC FC Deconsolidated Investlaco NC FC Deconsolidated Lacocim NC FC Deconsolidated Lyonnaise de Banque (LB) FC FC Monabanq FC FC Monabanq Belgique FC FC SA Ataraxia NC FC Deconsolidated Saint-Pierre SNC FC FC SCI Astrée NC FC Deconsolidated SCI Cafimmo Gap NC FC Deconsolidated SCI Cafimmo Marseille NC ,00 FC Deconsolidated SCI CMDV NC FC Deconsolidated SCI des Antons NC FC Deconsolidated SCI DVPT CMM NC FC Deconsolidated SCI Familia NC FC Deconsolidated SCI Fontainebleau NC FC Deconsolidated SCI Gambetta Immob NC FC Deconsolidated SCI Gueydan NC FC Deconsolidated SCI Jeanne d'arc NC FC Deconsolidated SCI les Trois Rues NC FC Deconsolidated SCI Maurice Faure NC FC Deconsolidated SCI Mende NC FC Deconsolidated SCI Nice Avenue NC FC Deconsolidated SCI Nice Joffre NC FC Deconsolidated SCI Nice République NC FC Deconsolidated SCI Palais de la Mer NC FC Deconsolidated SCI Provence Languedoc NC FC Deconsolidated SCI Puget NC FC Deconsolidated SCI SCMDV NC FC Deconsolidated SCI Sud-Est Gestion Immobilière NC FC Deconsolidated SCI Vercoulor NC FC Deconsolidated Selaco NC FC Deconsolidated SI du Vivier NC FC Deconsolidated Sofemo (Société Fédérative Européenne de Monétique et de Financement) FC FC Sofim FC FC Sud-Est Transactions Immobilières NC FC Deconsolidated Targo Finanzberatung GmbH FC FC Targobank AG & Co. KGaA FC FC Targobank Espagne (formerly Banco Popular Hipotecario) PM PM SCI La Tréflière FC FC CM Arkéa (*) Arkéa Banking Services (formerly Procapital Banking Services) FC FC Arkéa Banque Entreprises et Institutionnels (formely Banque Commerciale pour le Marché de l'entreprise -- BCME) FC FC Arkéa Crédit Bail (formerly Bail Entreprises) FC FC Arkéa SCD FC NC Created Banque Privée Européenne (BPE) FC FC Caisse de Bretagne de CMA FC FC Crédit foncier et communal d'alsace et de Lorraine Banque FC FC Crédit foncier et communal d'alsace et de Lorraine SCF FC FC CM Arkéa Home Loan SFH (formerly CM Arkea Covered Bonds) FC FC Crédit Mutuel Arkéa Public Sector SCF FC FC Fédéral Equipements FC FC Fédéral Service FC FC Financo FC FC Foncière Investissement FC FC Fortunéo FC FC GICM FC FC Leasecom FC FC Method: FC = Full Consolidation, PM = Proportional Method, EM = Equity Method, NC = Not Consolidated, ALT =Asset, liability transfer (*) Presentation by majority-owned Crédit Mutuel group 124 CREDIT MUTUEL GROUP Annual Report

65 FINANCIAL REPORT Consolidated entities are presented according to the sectors Comments used for preparing segment information under IFRS 8. Accordingly, for example, entities included under Method Method Retail Banking do not necessarily have the legal status of credit institutions Control Interest + Control Interest + Consolidated entities are presented according to the sectors Comments used for preparing segment information under IFRS 8. Accordingly, for example, entities included under Method Method Retail Banking do not necessarily have the legal status of credit institutions Control Interest + Control Interest + Leasecom Car FC FC Leasecom Financial Assets FC FC Leasecom Group FC FC Monext FC FC Monext Holding FC FC Procapital Securities Services (formerly Procapital) FC FC SCI Interfédérale IFC FC CMNE (*) Bail Actea FC FC Bail Immo Nord FC FC Banque Delubac NC EM Sold outside group Bâtiroc FC FC Bcmne FC FC BKCP Pool NC EM Wound up BKCP SCRL FC FC BKCP Securities FC FC CMNE Belgium FC FC CPSA FC FC FCP Nord Europe Gestion FC FC FCP Richebé NC FC Wound up FCP Richebé Gestion FC FC FCP Richebé Recovery FC FC GIE BCMNE Gestion FC FC GIE CMN Prestations FC FC Immobilière du CMN FC FC Mobilease FC FC SCI CMN FC FC SCI CMN FC FC SCI CMN FC FC SCI CMN FC FC SCI CMN location FC FC SCI CMN location FC FC SCI CMN Richebé Inkerman FC FC Services et Crédits aux Professions Independantes et PME FC FC Transactimmo FC FC CMO (*) SCI Merlet Immobilier FC FC Union Immobiliere Ocean SCI FC FC CMMABN (*) Acman FC FC CMA (*) GIE CMA FC FC GIEMAT FC FC SCI Plantagenets FC FC SNC Credit Mutuel Anjou Immobilier FC FC B. Corporate and Investment Banking CM10 (*) Banque Fédérative du Crédit Mutuel - Franckfurt FC FC CIC Investissement NC FC Absorbed by CMCIC Investissement CIC Vizille Participation NC FC Activity discontinued Cigogne Management FC FC CMCIC Capital Finance (formerly CIC Finance) FC FC CMCIC Capital Innovation (formely Vizille Capital Innovation) FC FC CMCIC Conseil (formerly Vizille Capital Finance) FC FC CMCIC Investissement (CIC Banque de Vizille) FC FC CM-CIC Securities FC FC CM-CIC Securities London Branch FC FC Diversified Debt Securities SICAV - SIF FC FC Divhold FC FC FCT CM-CIC Home loans FC FC Financière Voltaire NC FC ALT to CMCIC Capital Finance Institut de Participations de l'ouest (IPO) NC FC Absorbed by CMCIC Investissement IPO Ingénierie NC FC ALT to CMCIC Capital Finance Sudinnova FC FC CM Arkéa (*) Arkéa Capital Investissement (formerly Synergie Finance) FC FC Arkéa Capital Partenaire FC NC Created CEOI FC FC CMNE (*) Normandie Partenariat FC FC SDR de Normandie FC FC UFG SIPAREX FC FC CMO (*) Océan Participations FC FC CMMABN (*) Volney Développement FC FC C. Asset Management and Private Banking CM10 (*) Agefor SA Genève FC FC Alternative Gestion SA Genève EM EM Banque de Luxembourg FC FC Banque Pasche (Liechtenstein) AG FC FC Banque Pasche Monaco SAM FC FC Banque Transatlantique Belgium FC FC Banque Transatlantique Londres FC FC Banque Transatlantique Luxembourg (formerly Mutual Bank Luxembourg) FC FC Banque Transatlantique Singapore Private Ltd FC FC Calypso Management Company FC FC Banque Transatlantique FC FC CIC Private Banking - Banque Pasche FC FC CIC Suisse (formerly Banque CIAL Suisse) FC FC Dubly-Douilhet FC FC GPK Finance NC FC ALT to Transatlantique Gestion LRM Advisory SA FC FC Pasche Bank & Trust Ltd Nassau FC FC Pasche Finance SA Fribourg FC FC Pasche Fund Management Ltd FC FC Pasche International Holding Ltd FC FC Pasche SA Montevideo FC FC Serficom Brasil Gestao de Recursos Ltda FC FC Serficom Family Office Brasil Gestao de Recursos Ltda FC FC Serficom Family Office Inc FC FC Serficom Family Office SA FC FC Serficom Investment Consulting (Shanghaï) FC FC Serficom Maroc Sarl FC FC Transatlantique Gestion (formerly BLC Gestion) FC FC Method: FC = Full Consolidation, PM = Proportional Method, EM = Equity Method, NC = Not Consolidated, ALT =Asset, liability transfer (*) Presentation by majority-owned Crédit Mutuel group Method: FC = Full Consolidation, PM = Proportional Method, EM = Equity Method, NC = Not Consolidated, ALT =Asset, liability transfer (*) Presentation by majority-owned Crédit Mutuel group 126 CREDIT MUTUEL GROUP Annual Report

66 FINANCIAL REPORT Consolidated entities are presented according to the sectors Comments used for preparing segment information under IFRS 8. Accordingly, for example, entities included under Method Method Retail Banking do not necessarily have the legal status of credit institutions Control Interest + Control Interest + Consolidated entities are presented according to the sectors Comments used for preparing segment information under IFRS 8. Accordingly, for example, entities included under Method Method Retail Banking do not necessarily have the legal status of credit institutions Control Interest + Control Interest + Valeroso Management Ltd FC FC CM Arkéa (*) Arkéa Capital Gestion (ex Synergie Finance Gestion) FC FC Fédéral Finance Banque FC FC Fédéral Finance Gestion FC FC Schelcher Prince Gestion FC NC Acquired outside group CMNE (*) Cholet Dupont Partenaires PM NC Acquired outside group CM Habitat Gestion FC FC Convictions Asset Management EM NC Acquired outside group Franklin Gérance FC FC GIE La Française AM (formerly GIE UFG) FC FC Holding Cholet Dupont S.A EM NC Acquired outside group La Française AM (formerly UFG-LFP) FC FC La Française AM Finance Services (formerly UFG-LFP France) FC FC La Française AM Gestion Privée (fomerly La Française des Placements Gestion Privée) FC FC La Française AM International (formerly UFG-LFP International) FC FC La Française AM International Claims Collection (formerly UFG ICC) FC FC La Française AM Private Bank (formerly UFG-LFP Private Bank) FC FC La Française des Placements (formerly LFP - La Française des Placements) FC FC La Française Real Estate Managers (formerly UFG Rem) FC FC LFP-Sarasin AM FC FC Pythagore Investissement BP EM EM Société Holding Partenaires PM NC Acquired outside group UFG Courtage FC FC UFG Property Managers (formerly UFG Property Management) FC FC CMA (*) Multi Financière de l'anjou SA FC FC D. Multi-sectors CM10 (*) Banque Fédérative du Crédit Mutuel FC FC Crédit Industriel et Commercial (CIC) - IDF FC FC Crédit Industriel et Commercial (CIC) - London FC FC Crédit Industriel et Commercial (CIC) - New York FC FC Crédit Industriel et Commercial (CIC) - Singapore FC FC E. Insurance companies CM10 (*) ACM GIE FC FC ACM IARD FC FC ACM Services FC FC ACM Vie, Société d Assurance Mutuelle FC FC ACM Vie FC FC Astree EM EM Atlancourtage (formerly Atlancourtage Entreprise) FC FC Groupe des Assurances du Crédit Mutuel (GACM) FC FC ICM Life FC FC ICM Ré NC FC Sold outside group Immobilière ACM FC FC Massena Property FC FC Massimob FC FC MTRL FC FC Partners FC FC Procourtage FC FC RMA Watanya EM EM Royal Automobile Club de Catalogne EM EM SCI ADS FC FC Serenis Assurances FC FC Serenis Vie FC FC SNC Foncière Massena FC FC VOY MEDIACION FC NC Created CM Arkéa (*) Infolis FC FC Novelia FC FC Suravenir FC FC Suravenir Assurances FC FC CMNE (*) ACM Nord IARD FC FC ACMN Vie FC FC Alverzele NC FC Wound up Courtage CMN FC FC CP-BK reinsurance (lux) FC FC La Pérennité Entreprises FC FC Nord Europe Assurances FC FC Nord Europe Life Luxembourg FC FC Nord Europe Retraite FC FC Vie Services FC FC CMA (*) Atlancourtage Anjou FC FC F. Other CM10 (*) A. Télé FC NC Acquired outside group Actimut FC FC Affiches D'Alsace Lorraine FC NC Acquired outside group Agence Générale d'informations Régionales EM EM Alsace Média Participation FC NC Acquired outside group Alsacienne de Portage des DNA FC NC Acquired outside group Alsatic FC NC Acquired outside group Carmen Holding Investissement FC FC CIC Migrations FC FC CIC Participations FC FC Cicor FC FC Cicoval FC FC Cime & mag FC FC CM Akquisitions FC FC CMCIC Services FC FC CMCP (Crédit Mutuel Cartes de Paiement) FC FC Cofidis Participations FC FC Cofisun FC FC Documents AP FC FC Distripub FC FC EFSA FC FC Euro-Information Développement FC FC EIP (formerly GTOCM) FC FC EST Bourgogne Médias FC NC Acquired outside group Est Bourgogne Rhone Alpes FC FC Est imprimerie FC FC Euro-Information FC FC Method: FC = Full Consolidation, PM = Proportional Method, EM = Equity Method, NC = Not Consolidated, ALT =Asset, liability transfer (*) Presentation by majority-owned Crédit Mutuel group Method: FC = Full Consolidation, PM = Proportional Method, EM = Equity Method, NC = Not Consolidated, ALT =Asset, liability transfer (*) Presentation by majority-owned Crédit Mutuel group 128 CREDIT MUTUEL GROUP Annual Report

67 FINANCIAL REPORT Consolidated entities are presented according to the sectors Comments used for preparing segment information under IFRS 8. Accordingly, for example, entities included under Method Method Retail Banking do not necessarily have the legal status of credit institutions Control Interest + Control Interest + Consolidated entities are presented according to the sectors Comments used for preparing segment information under IFRS 8. Accordingly, for example, entities included under Method Method Retail Banking do not necessarily have the legal status of credit institutions Control Interest + Control Interest + Euro Protection Service FC FC Euro Protection Surveillance FC NC Consolidated for first time (already group entity) Europe Régie FC FC France Est FC NC Acquired outside group France Régie FC NC Acquired outside group Gestunion FC FC Gestunion FC FC Gestunion FC FC Groupe Progrès FC FC Groupe Républicain Lorrain (GRLC) FC FC Groupe Est Républicain FC NC Acquired outside group Groupe Républicain Lorrain Imprimeries (GRLI) FC FC Immocity FC FC Impex Finance FC FC Imprimerie michel FC FC Interprint FC FC Jean Bozzi Communication FC FC Journal de la Haute Marne EM NC Acquired outside group La Liberté de l'est FC NC Acquired outside group La liberte de l'est société d'édition EM EM L'alsace FC FC L'Alsace Magazines Editions - L'Ame FC FC L'Alsace Multimédia Internet - L'Ami NC FC Wound up La Tribune FC FC Le Bien Public ,00 NC FC Absorbed by Est Bourgogne Mèdias Le Dauphiné Libéré FC FC Le republicain Lorrain FC FC Les Dernières Nouvelles d'alsace FC NC Acquired outside group Les Dernières Nouvelles de Colmar FC NC Acquired outside group Les editions de l'échiquier FC FC Les journaux de Saone et Loire NC FC Absorbed by Est Bourgogne Mèdias Lumedia PM PM Marsovalor FC FC Mediaportage FC FC NRJ Mobile FC FC Pargestion FC FC Pargestion FC FC Placinvest FC FC Presse Diffusion FC FC Promopresse FC FC Publicité Moderne FC NC Acquired outside group Publiprint Dauphiné FC FC Publiprint province n FC FC Rhin presse NC FC Wound up Roto offset Imprimerie FC FC SA Agence Générale d'information EM NC Acquired outside group Société d'edition des hebdomadaires & périodiques locaux FC FC Sofiliest EM EM Républicain Lorrain Communication FC FC Républicain Lorrain - Tv news FC FC Républicain Lorrain voyages FC FC Société Civile de Gestion des Parts dans l'alsace - SCGPA FC FC SCI Alsace FC FC SCI Ecriture FC FC SCI Gutenberg FC FC SCI Le Progrès Confluence FC FC SCI Roseau d'or FC FC SDV Plurimédia EM NC Acquired outside group Société Française d'edition de Journaux et d'imprimés Commerciaux "l'alsace" (SFEJIC) IG IG Simply web NI IG ALT to Les Editions de l'echiquier Société Alsacienne de Presse et d'adiovisuelle IG NI Acquired outside group Société de Presse Investissement FC NC Acquired outside group Sofiholding FC FC Sofiholding FC FC Sofiholding FC FC Sofiliest FC NC Acquired outside group Sofinaction FC FC Société Édition Hebdomadaires du Louhannais & du Jura FC NC Acquired outside group Targo Akademie GmbH FC FC Targo Deutschland GmbH FC FC Targo Dienstleistungs GmbH FC FC Targo IT Consulting GmbH FC FC Targo IT Consulting Singapore FC FC Targo Management AG FC FC Targo Realty Services GmbH FC FC Top Est FC NC Acquired outside group Ufigestion FC FC Ugépar Service FC FC Valimar FC FC Valimar FC FC Ventadour investissement FC FC VTP FC FC VTP FC FC CM Arkéa (*) ACTA Voyages NC EM Sold outside group CMNE (*) Actéa Environnement FC FC BKCP it NC FC Wound upcmn Environnement (SNC) FC FC CMN Tel FC FC Financière Nord Europe FC FC Fininmad (formerly Fininmad SA) FC FC Immo W FC FC LFP Nexity services immobiliers EM NC Acquired outside group Nord Europe Participations et Investissements (NEPI) FC FC SA Sofimpar FC FC SCI Centre Gare FC FC Sicorfe Maintenance FC FC SNP Sicorfe NC FC Sold outside group Sofimmo FC FC CMO (*) Sodelem Services FC FC Method: FC = Full Consolidation, PM = Proportional Method, EM = Equity Method, NC = Not Consolidated, ALT =Asset, liability transfer (*) Presentation by majority-owned Crédit Mutuel group Method: FC = Full Consolidation, PM = Proportional Method, EM = Equity Method, NC = Not Consolidated, ALT =Asset, liability transfer 130 CREDIT MUTUEL GROUP Annual Report

68 FINANCIAL REPORT NOTE 2: CONSOLIDATION METHODS AND POLICIES 2.1 Consolidation methods The following consolidation methods have been used: Full consolidation This method consists of substituting the various assets and liabilities of the subsidiary concerned for the value of the securities held and of recognising the share of minority interests in shareholders equity and net profit. It is applied to all exclusively-controlled entities, including those with a different accounts structure, regardless of whether or not the activity concerned forms part of the consolidating entity s activities. Proportional consolidation This method consists of including in the accounts of the consolidating entity the proportion of the subsidiary s assets and liabilities represented by the interest held in the consolidated entity, as restated where required; minority interests are therefore not recognised. It is applied to all jointly-controlled entities, including those with a different accounts structure, regardless of whether or not the activity concerned forms part of the consolidating entity s activities. Equity method of consolidation The equity method of consolidation consists of substituting the group s share of the shareholders equity and net profit of the entity concerned for the value of the securities held. It is applied to all entities over which significant influence is exercised. Minority interests correspond to participating interests not resulting in control being exercised as defined by IAS 27 (revised) and include instruments constituting present ownership interests and conferring rights to a share of the net assets in the event of liquidation and other capital instruments issued by the subsidiary when held outside the group. 2.2 Closing date All the companies included in the group consolidation scope close their accounts on 31 December of each year. 2.3 Elimination of intra-group transactions Intra-group accounts and any effects resulting from intra-group transfers that would have a material impact on the consolidated financial statements are eliminated. Intra-group receivables, liabilities, reciprocal commitments, charges and income are eliminated for entities consolidated using the full or proportional methods. 2.4 Translation of accounts denominated in a foreign currency Concerning foreign entities whose accounts are denominated in a foreign currency, the balance sheet is translated using the official exchange rate on the closing date. The translation difference arising on the capital, reserves and retained earnings is recognised in shareholders equity, under Translation reserves. The income statement is translated using the average exchange rate for the year. The resulting translation differences are recognised directly in Translation reserves. Such differences are transferred to profit and loss in the event of the disposal or liquidation of all or part of the holding in the foreign entity. 2.5 Goodwill Valuation differences On the date that control of a new entity is acquired, the assets, liabilities and contingent operating liabilities are measured at their fair value. Valuation differences between the carrying amount and the fair value are recognised. Goodwill on acquisition In compliance with IFRS 3 (revised), on the date that control of a new entity is acquired, those identifiable assets, liabilities and contingent liabilities of the acquiree meeting criteria for recognitions under IFRS are measured at fair value on the date of acquisition, except for non-current assets classified as assets held for sale, which are recognised at fair value less costs to sell. IFRS 3 (revised) permits goodwill on acquisition to be recognised on a full basis or on a proportional basis, the choice being available for each business combination. In the first case, non-controlling interests are measured at fair value (so-called total goodwill method), while under the second they are measured at their proportionate interest in the value of the assets and liabilities of the acquiree (partial goodwill method). If goodwill is positive, it is recorded as an asset, and if it is negative, it is recognised immediately in profit or loss, under Changes in goodwill. If there is an increase (decrease) in the group s percentage holding in a controlled entity, the difference between the acquisition cost (sale price) of the securities and the share of consolidated shareholders equity represented by such securities date of acquisition (date of sale) is recognised in shareholders equity. The group regularly (at least once each year) tests goodwill for impairment. These tests are intended to ensure that such goodwill has not experienced any permanent impairment. If the recoverable value of the cash-generating unit (CGU) to which the goodwill is allocated is less than its carrying amount, the difference is recognised as an impairment. This impairment, recognised in profit and loss, is irreversible. In practice, the CGUs correspond to the various business lines as used by management to oversee the group s activity. NOTE 3 : ACCOUNTING POLICIES AND METHODS International Financial Reporting Standards (IFRS) offer a choice of accounting methods in certain areas. The main options adopted by the group concern: The mark to market valuation of certain liabilities issued by the enterprise that are not included in a trading portfolio. The eligibility for fair-value hedging relationships of macro-hedging transactions entered into in the context of the asset-liability management of fixed-rate positions (notably including customer demand deposits) authorised by EU Regulation 2086/2004 has been applied by the group. The group availed itself of the amendments to IAS 39 issued in October 2008 permitting the reclassification of some financial instruments from the fair-valuethrough-profit-or-loss category to loans and receivables or assets held to maturity. Note that reclassifications to available-for-sale assets are also permitted (see Note 3.4). 3.1 Loans and receivables Loans and receivables are fixed or determinable-income financial assets not listed on an active market, which are not intended for sale when acquired or granted. They include loans granted directly or the bank s share of syndicated loans, loans acquired and unlisted debt securities. When first recorded on the balance sheet, they are recognised at their fair value, which is generally the net amount disbursed. The rates applied are presumed to be market rates in that the rate scales are constantly adjusted as a function, in particular, of the rates applied by the large majority of competitor institutions. At subsequent period ends, they are measured at their amortised cost using the effective interest rate method (other than those recognised using the fair value by option method). All commissions received or paid relating directly to the setting in place of the loan and in the nature of interest are spread over the life of the loan in accordance with the effective interest rate method and are recorded in the income statement as an interest item. The fair value of loans and advances is disclosed in the notes to the financial statements on each closing date: it comprises the present value of projected future cash flows discounted using a zero-coupon interest rate curve, which includes the signature cost inherent to the debtor. 3.2 Provisions for impairment of loans and receivables, loan commitments and guarantees Individual provisions for impairment of loans and receivables Impairment is recognised once there is objective evidence of the existence of an event or events occurring subsequent to the granting of the loan or group of loans likely to generate a loss. An analysis is performed on a contract-by-contract basis at each period end. The amount of impairment is equal to the difference between the carrying amount and the present value of the projected future cash flows discounted at the original effective interest rate on the loan, taking into account any guarantees. For variable rate loans, the last known contractual rate is used. The existence of unpaid past due amounts for more than 3 months (or 6 months for mortgages and local governments, or for current accounts that have been non-compliant for more than 3 months) represents objective evidence of a loss event. Similarly, an objective indication of loss is identified when it is probable that the debtor will not be able to repay all the amounts due or when a default event has taken place or in the event of a court-ordered liquidation. Impairment losses and provisions are recognised as a component of cost of risk. When reversed, impairment losses and provisions are treated as a reduction in cost of risk with the exception of the portion relating to the impact of the passage of time associated with the discounting mechanism. The provision is deducted from loans and receivables when it related to impaired assets and is recognised as a liability under provisions for risks when it relates to loan commitments and guarantee obligations (see Note 3.9). Irrecoverable receivables are written off and the corresponding provisions are written back. General provisions for impairment of loans and receivables All loans to customers not written down for impairment on an individual basis are grouped together into homogenous pools of exposures. Exposures at risk are subject to an impairment provision based on the actual loss rate and the probability of default to maturity observed internally and externally applied to the loan outstandings. This provision is recognised as a deduction from the corresponding assets in the balance sheet and changes during the period are recognised in cost of risk in profit or loss. 132 CREDIT MUTUEL GROUP Annual Report

69 FINANCIAL REPORT 3.3 Leases A lease is an agreement under which the lessor grants to the lessee, for a predetermined period, the right to use an asset in exchange for a payment or series of payments. A finance lease is a lease under which virtually all of the risks and benefits inherent in the ownership of an asset are transferred to the lessee. Ownership of the asset may or may not eventually be transferred. An operating lease is any lease that is not a finance lease. Finance leases lessor In accordance with IAS 17, finance lease transactions with non-group companies are reported on the consolidated balance sheet at their financial accounting amount. Analysis of the economic substance of transactions results, in the accounts of the lessor, in: recognition of a financial receivable due from the customer, amortised by the lease payments received; breakdown of the lease payments between interest and the amortisation of the principal, known as financial amortisation; recognition of a net unrealised reserve, equal to the difference between: - the net financial outstanding: the amount due by the lessee, comprising the remaining capital due and accrued interest at the closing date; - the net carrying amount of the leased non-current assets; - the deferred tax provision. Finance leases lessee In accordance with IAS 17, the non-current assets concerned are recorded on the balance sheet as assets and the borrowing from credit institutions is recorded as a liability. Lease payments are broken down between interest expense and repayment of principal. 3.4 Securities Determination of fair value Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. On initial recognition of a financial instrument, fair value is generally the transaction price. When measured subsequently, fair value must be determined. The measurement method applied varies depending on whether the financial instrument is traded in a market considered as active or not. Financial instruments traded in an active market When financial instruments are traded in an active market, fair value is determined by reference to their quoted price as this is considered to represent the best estimate of fair value. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker or pricing service, and those prices represent actual and regularly occurring market transactions on an arm s length basis. Financial instruments not traded in an active market When the market is illiquid, market prices may be used as an element in determining fair value, but cannot be the overriding element. When there is no observable data or when adjustments to market prices require reliance to be placed on non-observable data, the entity may use internal assumptions regarding future cash flows and discount rates, integrating adjustments for market risks in the same way as the market would (i.e. credit risk and liquidity risk). Observable market data is used when this data reflects the reality of a transaction in an arm s length exchange motivated by normal business considerations and do not require material adjustments to the valuation obtained in this way. Otherwise, the group uses nonobservable data, applying a mark-tomodel approach. In all instances, the adjustments made by the group are reasonable and appropriate, with reliance placed on judgement. Fair value hierarchy A three-level hierarchy is used for fair value measurement: Level 1: quoted prices in active markets for identical assets or liabilities; Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). Given the diverse nature of the instruments valued as Level 3 and the reasons for their inclusion in this category, the calculation of fair value sensitivity to changes in the valuation parameters does not provide meaningful information. This category includes notably non consolidated participating interests held by venture capital entities or other entities. Classification of securities Securities may be classified in one of the following categories: financial assets at fair value through profit or loss; available-for-sale financial assets; held-to-maturity financial assets; or loans and receivables. Classification in one or other of these categories reflects the group s management intention and determines how a particular financial asset is recognised and measured in the financial statements. Financial assets and financial liabilities at fair value through profit or loss Classification criteria and transfer rules Securities are classified in this category when acquired for the purpose of selling them in the near term or because, upon initial recognition, they were designated as at fair value through profit or loss. a) Instruments held for trading Securities are classified as held for trading if they were acquired principally for the purpose of selling them in the near term or if they are part of a portfolio for which there is evidence of a recent actual pattern of short-term profit-taking. Market conditions may prompt the group to review the investment strategy and management intention for these securities. When it would be untimely to sell securities purchased initially for the purpose of selling them in the near term, these securities may be reclassified in accordance with the provisions of the amendments to IAS 39 issued in October Transfers to financial assets held for trading or financial assets held to maturity are permitted in limited circumstances. Transfers to loans and receivables are permitted when the group has the positive intention and ability to hold these securities over the foreseeable future or until their maturity, and when assets transferred meet criteria for recognition as loans and receivables, in particular the requirement that they not be quoted in an active market. These portfolio transfers are intended to better reflect the current management intention for these instruments and to reflect more fairly their impact on the group s results. b) Instruments designated at fair value through profit or loss Financial instruments may be designated as at fair value through profit or loss upon initial recognition. Once designated as such, financial instruments cannot be reclassified. This classification is permitted in the following circumstances: financial instruments containing one or several separable embedded derivatives; instruments for which the accounting treatment would be inconsistent with that applied to another related instrument, were the fair value option not applied; and instruments belonging to a pool of financial assets measured and accounted for at fair value. The group has used this option in particular for unit-linked insurance policies, for consistency with the treatment applied to liabilities, and for private equity securities and certain liabilities issued that contain embedded derivatives. Basis for the measurement and recognition of income and charges Securities classified as assets and liabilities at fair value through profit or loss are recognised on the balance sheet at fair value when they are first recorded and at all subsequent balance sheet dates until such time as they are disposed of. Changes in fair value and revenues received or accrued on fixed-income securities classified in this category are recorded in profit or loss under Net gains (losses) on financial instruments at fair value through profit or loss. Purchases and sales of securities measured at fair value through profit or loss are recognised on the settlement date. Changes in fair value between the transaction and settlement dates are recognised in profit or loss. If there is a transfer to one of the three other categories, the asset s fair value on the transfer date is treated subsequently as representing cost or amortised cost. No gain or loss recognised prior to transfer may be reversed. Financial assets and financial liabilities available for sale Classification criteria and transfer rules Available-for-sale financial assets comprise financial assets not classified as loans and receivables, as held-to-maturity financial assets, nor as at fair value through profit or loss. Fixed income securities may be reclassified as: held-to-maturity financial assets if there is a change in management intention, providing these assets meet the classification criteria for this category; loans and receivables if there is a change in management intention and a positive intention and ability to hold these securities over the foreseeable future or until their maturity, providing these assets meet the classification criteria for this category. 134 CREDIT MUTUEL GROUP Rapport annuel

70 FINANCIAL REPORT Basis for measurement and recognition of income and charges These assets are recognised on the balance sheet at fair market value when they are acquired and at subsequent balance sheet dates until such time as they are disposed of. Changes in fair value are recorded in shareholders equity under a specific heading entitled Unrealised or deferred gains or losses, excluding accrued income. Unrealised gains or losses recognised in shareholders equity are recognised in profit or loss only when the assets are disposed of or when evidence of permanent impairment is observed. On disposal, the unrealised gains or losses previously recognised in shareholders equity are transferred to profit or loss under Net gains (losses) on available-for-sale financial assets, together with the gain or loss on disposal. Purchases and sales of securities are recognised on the settlement date. If securities with a fixed maturity are transferred out to held-to-maturity financial assets or to loans and receivables, and in the absence of impairment losses, unrealised gains or losses previously recognised directly to equity are reversed over the residual life of the asset. If securities with no fixed maturity are transferred out to loans and receivables, unrealised gains or losses previously recognised directly to equity are maintained in equity until the sale of the securities. Income accrued or received on fixed-income securities is recognised in profit or loss using the effective interest method under Interest and similar income. Dividends received on variable-yield securities are recorded in profit or loss under Net gains (losses) on available-for-sale financial assets. Impairment and credit risk a) Lasting diminution in the value of shares and other equity instruments Impairment losses are recognised in respect of variable income financial assets classified as available for sale in the event of a prolonged and material decline in fair value relative to cost. In the case of variable income securities, Crédit Mutuel considers that a loss in the value of an instrument relative to its acquisition cost of 50% or a loss in value over a period of 36 consecutive months triggers the recognition of an impairment loss. Impairment testing is carried out on a line by line basis. Judgement is also exercised for securities not meeting the aforementioned criteria when management estimates that the recovery of the amount invested cannot be expected reasonably in the near future. The probable loss is recognised in profit and loss under "Net gains (losses) on available-for-sale financial assets". Any subsequent impairment is also recognised in profit and loss. Losses for permanent impairment of equities and other equity instruments recorded in profit and loss may not be reversed as long as the instrument is carried on the balance sheet. Any subsequent appreciation is recognised to equity under Unrealised or deferred gains and losses. b) Impairment losses in respect of credit risk Impairment losses relating to fixed-income securities available for sale (mainly bonds) are recognised under Cost of risk. The existence of a credit risk alone may justify recognising impairment losses against fixed income securities, whereas a decline in value due simply to an increase in interest rates does not. In the event an impairment loss is recognised, all accumulated unrealised losses taken to equity must be reversed to profit or loss. Impairment losses may be reversed. Any subsequent appreciation resulting from an event occurring since the recognition of the impairment is also recognised to profit or loss under Cost of risk when there has been an improvement in the borrower s credit situation. Held-to-maturity financial assets Classification criteria and transfer rules Held-to-maturity financial assets are securities with fixed or determinable payments and a fixed maturity, and which the group has the positive intention and ability to hold to maturity. Transactions to hedge the interest rate risk in respect of this category of securities are not eligible for hedge accounting under IAS 39. Possibilities for selling or transferring held-to-maturity securities are extremely restricted under IAS 39 which, depending on the circumstance, may require the entire portfolio to be reclassified at the level of the group and to prohibit the use of this category for two years. Basis for measurement and recognition of income and charges Held-to-maturity securities are recognised at fair value when acquired. Subsequently they are measured at amortised cost using the effective interest rate method, which factors in the amortisation of any premium, discount and acquisition costs if material. Purchases and sales of securities are recognised on the date of settlement. Income received from these securities is recorded under Interest and similar income in profit or loss. Credit risk An impairment loss is recognised when there is objective evidence that the asset is impaired as a result of one or more events having occurred after initial recognition of the asset and when this could generate a loss (proven credit risk). Impairment testing is carried out at each balance sheet date for each security in turn. The amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate, taking into account any guarantees. The impairment loss is recognised to profit or loss under Cost of risk. Any subsequent appreciation resulting from an event having occurred since the recognition of the impairment loss is also recognised to profit or loss under Cost of risk. Loans and receivables Classification criteria and transfer rules IAS 39 authorises certain securities to be classified as loans and receivables when they have fixed or determinable payments and they are not quoted in an active market. Classification as loans and receivables may take place upon initial recognition of the securities or upon their transfer from financial assets at fair value through profit or loss or from availablefor-sale securities pursuant to the amendments to IAS 39. Basis for measurement and recognition of income and charges Loans and receivables are recognised initially at fair value. Subsequently they are accounted for and measured in accordance with the rules applied to loans and receivables described in Note 3.1 dealing with loans and receivables. Credit risk An impairment loss is recognised when there is objective evidence that the asset is impaired as a result of one or more events having occurred after initial recognition of the asset and when this could generate a loss (proven credit risk). The amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated cash flows discounted at the asset's effective interest rate, taking into account any guarantees. The impairment loss is recognised to profit or loss under Cost of risk. Any subsequent appreciation resulting from an event having occurred since the recognition of the impairment loss is also recognised to profit or loss under Cost of risk. 3.5 Derivatives and hedge accounting Determination of fair value of derivatives The majority of over-the-counter derivatives, swaps, future rate agreements, caps, floors and simple options are valued using standard, generally accepted models (present value of future cash flows, Black and Scholes model, interpolation techniques), based on observable *market data such as yield curves. The valuations given by these models are adjusted to take into account the liquidity risk and the credit risk. Derivatives are recognised as financial assets when their market value is positive and as financial liabilities when their market value is negative. Classification of derivatives and hedge accounting Derivatives classified as financial assets or financial liabilities at fair value through profit or loss As a rule, all derivatives not designated as hedging instruments under International Financial Reporting Standards are classified as financial assets or financial liabilities at fair value through profit or loss, even when for financial purposes they were entered into to hedge one or more risks.. Embedded derivatives An embedded derivative is a component of a hybrid instrument that, when separated from its host contract, meets the definition criteria for a derivative. It has the effect, notably, of changing certain cash flows in a manner analogous to a separate derivative. The derivative is detached from the host contract and recognised separately as a derivative instrument at fair value through profit or loss only if all of the following three conditions are satisfied: the hybrid instrument hosting the embedded derivative is not measured at fair value through profit or loss; the economic characteristics of the derivative and the associated risks are not considered as being closely related to those of the host contract; and separate measurement of the embedded derivative is sufficiently reliable to provide relevant information. Accounting Realised and unrealised gains and losses are recognised to profit or loss under Gains and losses on financial instruments at fair value through profit or loss. 136 CREDIT MUTUEL GROUP Annual Report

71 FINANCIAL REPORT Hedge accounting IAS 39 provides for three types of hedging relationship. The choice of the hedging relationship is made according to the nature of the risk being hedged. A fair value hedge is a hedge of the exposure to changes in the fair value of financial assets or financial liabilities. A cash flow hedge is a hedge of the exposure to the variability in cash flows of financial assets or financial liabilities, firm commitments and forward transactions. Hedges of net investments in foreign operations, which are accounted for in the same way as cash flow hedges, are not used by the group. Hedging derivatives must meet the criteria required by IAS 39 to be designated as hedging instruments for accounting purposes. The hedging instrument and the hedged item must both qualify for hedge accounting. The relationship between the instrument covered and the hedging instrument is documented formally immediately upon inception of the hedging relationship. This documentation includes the management objectives of the hedging relationship, the nature of the risk hedged, the underlying strategy, the identification of the hedging instrument and of the item hedged, and the methods used to measure the effectiveness of the hedge. Hedge effectiveness is assessed immediately upon inception of the hedging relationship and subsequently throughout its life, at the very least at each balance sheet date. Changes in the fair value or cash flows of the hedging instrument must approximately offset changes in the fair value or cash flows of the hedged item. Actual results must be within a range of 80% to 125%. If this is not the case, hedge accounting is discontinued prospectively. Fair value hedge of identified assets and liabilities In the case of a fair value hedge, derivatives are measured at their fair value as an offset to profit or loss in Net gains (losses) on financial instruments at fair value through profit or loss symmetrically to the revaluation of the hedged items. This rule is also applied if the hedged item is recognised at its amortised cost or in the case of a financial asset classified as available for sale. Changes in the fair value of the hedging instrument and hedged risk component will offset partially or totally; only the ineffective portion of the hedge is recognised in profit or loss. The portion corresponding to the rediscounting of the derivative financial instrument is recognised in profit or loss under Interest income and charges symmetrically to the interest income or charges for the hedged item. If the hedging relationship is interrupted or the effectiveness criteria are not met, hedge accounting is discontinued on a prospective basis. Hedging derivatives are transferred to financial assets or financial liabilities at fair value through profit or loss and are accounted for in accordance with the principles applicable to this category. The carrying amount of the hedged item is subsequently no longer adjusted to reflect changes in fair value. In the case of identified interest rate instruments, valuation adjustments are amortised over their remaining life. If the hedged item has been derecognised, due notably to early repayments, the cumulative adjustments are recognised immediately in profit or loss. The group has availed itself of the possibilities offered by the European Commission as regards accounting for macro-hedging transactions. The European Union's so-called carve out amendment to IAS 39 enables customer demand deposits to be included in hedged fixed-rate liability portfolios with no effectiveness measurement if under hedged. The maturities of the deposits are established as a function of the runoff rules defined for asset-liability management purposes. For each portfolio of fixed rate assets or liabilities, the maturity schedule of the hedging derivatives is reconciled with that of the hedged items to ensure that there is no over-hedging. The accounting method for fair value macro-hedging derivatives is the same as for fair value hedges. Changes in the fair value of the hedged portfolios are recorded in a specific line of the balance sheet, Revaluation difference on portfolios hedged for interest rate risk, the other side of the entry being to profit or loss. Cash flow hedges In the case of cash flow hedging relationships, the derivatives are recognised in shareholders equity on the balance sheet at their fair value for the portion considered effective while the portion considered as ineffective is recorded in profit or loss under Net gains (losses) on financial instruments at fair value through profit or loss. Amounts recorded in shareholders equity are reversed through profit or loss under Interest income and charges symmetrically to the flows of the hedged item affecting profit or loss. The hedged items continue to be recognised in accordance with the rules specific to their accounting category. If the hedging relationship is interrupted or the effectiveness criteria are not met, hedge accounting ceases to be applied. The cumulative amounts recorded in shareholders equity for the remeasurement of the hedging derivative are maintained in shareholders equity until such time as the hedged transaction itself affects profit or loss or when it is determined that the transaction will not take place. These amounts are then transferred to profit or loss. If the hedged item has been derecognised, the cumulative amounts recorded in shareholders' equity are immediately transferred to profit or loss. 3.6 Debt securities Debt securities (interest-bearing notes, interbank market securities, bond loans etc.) that are not classified at fair value through profit or loss by option are recognised initially at their issue amount, when applicable net of transaction costs. These securities are subsequently measured at amortised cost using the effective interest rate method. 3.7 Subordinated debt Both dated and undated subordinated debt is separated from other debt securities as, in the event of the issuer s liquidation, it is repaid only after claims by other creditors have been extinguished. Subordinated debt is measured at amortised cost. 3.8 Distinction between liabilities and shareholders equity In accordance with IFRIC 2, the interests of members are classified as shareholders equity if the entity has the unconditional right to refuse to redeem such interests, or if there are legal or statutory provisions that prohibit or strictly limit such redemption. Under existing statutory and legal provisions, shares issued by the structures comprising the consolidating entity of the Crédit Mutuel group are recognised under shareholders equity. The other financial instruments issued by the group qualify for accounting purposes as debt instruments if the group has a contractual obligation to deliver cash to the holders of such instruments. This is the case, in particular, for all the subordinated securities issued by the group. 3.9 Provisions Provisions and reversals of provisions for risks are classified by type under the corresponding item of income or expenditure. A provision is set aside whenever it is probable that an outflow of resources representing economic benefits will be necessary to extinguish an obligation arising from a past event and when the amount of the obligation can be estimated accurately. Where applicable, the net present value of this obligation is calculated to determine the amount of the provision to be set aside. The provisions constituted by the group cover, in particular: operating risks; employee commitments (see Note 3.12); execution risks on signature commitments; legal disputes and liability guarantees; tax risks; and risks related to home savings (see Note 3.10) Amounts due to customers and credit institutions These are fixed- or determinable-rate financial liabilities. They are initially recognised at fair value and measured at subsequent balance sheet dates at amortised cost using the effective interest rate method, except in the case of those recognised at fair value by option. Regulated savings contracts Home savings accounts (comptes épargne logement - CEL) and home savings schemes (plans épargne logement - PEL) are French regulated products available to individual customers. These products provide retail investors with interest-bearing savings vehicles during a first phase, and grant them access to a mortgage during a second phase. They generate two kinds of commitments for the establishments that distribute them: a commitment to pay a fixed rate of interest in the future on the savings (solely for home savings schemes, as the interest rate on home savings accounts is comparable to a variable rate and is periodically revised in accordance with an indexation formula); a commitment to extend a loan based on predetermined conditions to customers who request one (both products). These commitments are estimated on the basis of customer behavioural statistics and market data. A provision is set aside on the liability side of the balance sheet to cover future charges related to the potentially disadvantageous conditions of these products in comparison with the interest rates offered to individual customers for products that are similar but whose remuneration is not regulated. 138 CREDIT MUTUEL GROUP Annual Report

72 FINANCIAL REPORT This approach is carried out by homogeneous generation in terms of the regulated conditions for both home savings accounts and home savings schemes. The impact on profit or loss is recorded as interest paid to customers Cash and cash equivalents Cash and cash equivalents comprise cash in hand, deposits and demand loans and borrowings with central banks and credit institutions. For cash flow statement purposes, UCITS are classified as an operating activity and are not therefore reclassified as cash Employee benefits Employee benefits are recognised in accordance with IAS 19. Where applicable, employee obligations are recognised under Provisions for risks and charges. Changes in such provisions are recognised in profit or loss under Staff costs. Post-employment defined benefit plans These comprise retirement, early retirement and supplementary retirement plans under which the group has a formal or implicit obligation to provide employees with pre-defined benefits. These obligations are calculated using the projected unit credit method, which involves allocating entitlement to benefits to periods of service by applying the contractual formula for calculating plan benefits. Such entitlements are then discounted using demographic and financial assumptions such as: a discount rate, determined by reference to the rate on long-term private-sector bonds as a function of the term of the commitments; the rate of salary increases, assessed as a function of age brackets, manager/non-manager classification and regional characteristics; inflation rates, estimated by comparing treasury bond rates and inflationlinked treasury bond rates at different maturities; staff turnover rates, determined by age bracket, using the three-year average for the ratio of resignations and dismissals relative to the year-end number of employees with permanent contracts; retirement ages: estimated on a case-by-case basis using the actual or estimated date of commencement of full-time employment and the assumptions set out in law reforming pensions, with a ceiling set at 67 years of age; and life expectancy rates set out in INSEE table TH/TF Differences arising from changes in these assumptions and from differences between previous assumptions and actual experience constitute actuarial differences. When the plan is funded by assets, these are measured at fair value and recognised in income statement for their expected yield. Differences between actual and expected yields also constitute actuarial differences. The group has opted to set aside provisions so as to recognise immediately to profit or loss any actuarial differences, rather than to spread it over the residual active life of employees. Any plan curtailments or terminations generate a change in the obligation, which is recognised immediately to profit or loss. Post-employment defined contribution plans Group entities contribute to various retirement plans managed by independent organisations, to which they have no formal or implicit obligation to make supplementary payments in the event, notably, that the fund s assets are insufficient to meet its commitments. As such plans do not represent a commitment for the group they are not subject to a provision. The charges are recognised in the period in which the contribution is due. Other long-term benefits These represent benefits other than post-employment benefits and end-ofservice indemnities payable more than 12 months after the end of the financial year in which staff rendered the corresponding service. They include, for example, long-service awards and time savings accounts. The group s commitment in respect of other long-term benefits is measured using the projected unit credit method. Actuarial differences are recognised immediately through profit or loss as the corridor method cannot be used. Certain commitments in respect of long-service awards are covered by insurance policies. Only the portion not covered is provisioned. End-of-contract indemnities These indemnities consist of benefits granted by the group when an employment contract is terminated before the usual retirement age or following the employee s decision to leave the group voluntarily in exchange for an indemnity. End-of-contract indemnity provisions are discounted if payment is expected to be made more than 12 months after the balance sheet date. Short-term benefits These are benefits, other than end-ofcontract indemnities, payable within the 12 months following the closing date and include salaries, social security contributions and certain bonuses. A charge is recognised in respect of short-term benefits in the period in which the services giving rise to the entitlement to the benefit are provided to the entity Insurance activities The accounting principles and measurement rules relating to assets and liabilities arising from the writing of insurance policies, including inwards and outwards reinsurance, and financial contracts that include a discretionary profit-sharing clause (which entitles subscribers to receive a share of the entity s financial results in addition to any guaranteed remuneration) are in accordance with IFRS 4. Other assets held and liabilities issued by fully-consolidated insurance companies are recognised in accordance with the rules common to all assets and liabilities of the group. Assets Except as indicated below, for financial assets, investment properties and non-current assets, the accounting methods applied are those described in these notes. By way of an exception to the above, financial assets representing technical provisions relating to contracts denominated in units of account are presented under Financial assets at fair value through profit or loss. Liabilities Insurance liabilities representing commitments towards policyholders or designated beneficiaries are presented under Technical provisions for insurance contracts. They continue to be valued, recognised and consolidated applying French accounting standards. Technical provisions for insurance contracts consist mainly of mathematical provisions. As a rule, these provisions correspond to the redemption value of the contracts. The main risks covered by these contracts are death, disability and industrial disablement (for loan insurance). Technical provisions for unit-linked contracts are measured, ay the balance sheet, by reference the realizable value of the contracts underlying assets. Technical provisions for non-life insurance contracts correspond to unearned premiums (i.e. premiums written relating to future accounting periods) and to claims payable. Mirror accounting is applied to insurance contracts providing for the discretionary sharing of profits with policyholders. The provision for deferred participation resulting from the application of this method represents the share of unrealised gains and losses accruing to the policyholders. Provisions for deferred participation are shown under assets or liabilities by each legal entity and are not netted off between entities in the consolidation scope. When on the asset side, they are reported under a separate heading. At the balance sheet date, a test is performed to determine if the liabilities recognised in connection with the contracts (net of other related assets and liabilities such as deferred acquisition costs and portfolio securities acquired) are adequate to cover estimated future cash flows at that date. Any shortfall in technical provisions is recognised in profit or loss for the period, and may subsequently be reversed if appropriate. Income statement Income and expenses arising from insurance contracts are reported under Income from other activities and Expenses on other activities. Income and expenses arising from proprietary activities carried on by insurance entities are reported under the headings corresponding to the nature of the transactions Non-current assets Non-current assets reported on the balance sheet include tangible and intangible assets used in operations as well as investment properties. Operating non-current assets are used for the production of services or for administrative purposes. Investment properties are property assets held to generate rental income and/or gains on the invested capital. The historical cost method is used to recognise both operating and investment properties. Non-current assets are initially recognised at acquisition cost plus any directly attributable costs required to bring them into working order with a view to their use. Finance charges incurred during the construction or transformation of property assets are not capitalised. Non-current assets are subsequently measured at amortised historical cost, i.e. their cost less accumulated depreciation and amortisation and any impairment. 140 CREDIT MUTUEL GROUP Annual Report

73 FINANCIAL REPORT When a non-current asset comprises several components likely to be replaced at regular intervals, with different uses or providing economic benefits over differing lengths of time, each component is recognised separately from the outset and is depreciated or amortised in accordance with its own depreciation schedule. The component approach is applied to both operating and investment properties. The depreciable or amortisable value of a non-current asset is determined after deducting its residual value net of disposal costs. As the useful life of non-current assets is generally equal to their expected economic life, residual values are not recognised. Non-current assets are depreciated or amortised over their estimated useful lives at rates reflecting the estimated consumption of the assets economic benefits by the entity owning the assets. Intangible assets with an indefinite useful life are not amortised. Depreciation and amortisation charges on operating non-current assets are recognised under Provisions, amortisation and depreciation for operating noncurrent assets in profit or loss. Depreciation charges on investment properties are recognised under Expenses on other activities in profit or loss. The following depreciation and amortisation periods are used: Property, plant and equipment: Land improvements: years Buildings shell: years (depending on the type of building) Buildings equipment: years Fixtures and fittings: 5-15 years Office furniture and equipment: 5-10 years Safety equipment: 3-10 years Vehicles and moveable equipment: 3-5 years IT hardware: 3-5 years Intangible assets: Software purchased or developed internally: 1-10 years Business goodwill acquired: 9-10 years (if customer contract portfolios acquired) Depreciable non-current assets are tested for impairment at each period end whenever there is evidence of loss of value. Non-depreciable non-current assets such as lease rights are tested for impairment once a year. If evidence of impairment is found, the asset s recoverable amount is compared with its net carrying amount. In the event of a loss of value, impairment is recognised in profit or loss, thus modifying the basis for future depreciation. Impairment losses are reversed if there is an improvement in the estimated recoverable value or there is no longer any evidence of impairment. The net carrying amount following the reversal of an impairment provision cannot exceed the net carrying amount that would have been calculated if the impairment had not been recognised. Impairment charges on operating non-current assets are recognised under Provisions, amortisation and depreciation for operating non-current assets in profit or loss. Impairment charges and reversals on investment properties are recognised in profit or loss under Charges on other activities and Income from other activities, respectively. Gains or losses on disposals of operating non-current assets are recorded in profit or loss on the line Net gains (losses) on other assets. Gains or losses on disposals of investment properties are recorded in profit or loss on the lines Income from other activities and Charges on other activities respectively. The fair value of investment property is disclosed in the notes to the financial statements at the end of each financial year. It is based on the market values determined by appraisals carried out by independent valuers Fees and commissions Fees and commissions in respect of services are recorded as income and charges according to the nature of the services involved. Fees and commissions linked directly to the grant of a loan are amortised (see Note 3.1). Fees and commissions remunerating a service provided on a continuous basis are recognised to profit or loss over the period during which the service was provided. Fees and commissions remunerating a significant service are recognised to profit or loss in full upon execution of the service Corporation tax The tax charge includes all tax, both current and deferred, chargeable in respect of the income for the period under review. Current taxes are determined in accordance with applicable tax regulations. The Territorial Economic Contribution (Contribution Economique Territoriale CET), which is composed of the Real Property Contribution (Cotisation Foncière des Entreprises - CFE) and Contribution on the Added Value (Cotisation sur la Valeur Ajoutée des Entreprises - CVAE), is treated as an operating charge and, accordingly, the group does not recognise any deferred taxes in the consolidated financial statements. Deferred tax As required by IAS 12, deferred taxes are calculated in respect of temporary differences between the value on the consolidated balance sheet of an asset or liability and its tax value, with the exception of goodwill. Deferred taxes are calculated using the liability method, applying the corporation tax rate known at the end of the period and applicable to subsequent years. Deferred tax assets net of deferred tax liabilities are recorded only when there is a high probability that they will be utilised. Current or deferred tax is recognised as income or a charge, except for that relating to unrealised or deferred gains or losses recognised in shareholders equity, for which the deferred tax is allocated directly to shareholders equity. Deferred tax assets and liabilities are netted if they arise in the same entity or in the same tax group subject to the same tax authority and if there is a legal right of set off. Deferred tax is not discounted Interest payable by the State on certain loans In the context of government measures to assist the agricultural and rural sector, and to assist with home purchases, certain group entities grant loans at reduced rates that are set by the State. Such entities therefore receive State subsidies equivalent to the differential between the interest rate granted to the customer and a pre-determined benchmark rate. Accordingly, no discount is applied to these subsidised loans. The terms and conditions of the compensation mechanism are periodically re-examined by the State. The State subsidies received are recognised under Interest and similar income and are spread over the term of the relevant loans, in accordance with IAS Financial guarantees and financing commitments A financial guarantee is similar to an insurance policy if it provides for a specific payment to be made to reimburse the holder of the guarantee for a loss incurred as the result of the failure of a specific debtor to make a payment on maturity of a debt instrument. In accordance with IFRS 4, such financial guarantees continue to be measured using French accounting standards, i.e. they are treated as off-balance sheet items until such time as the current standards are revised. Accordingly, they are subject to a provision for liabilities if an outflow of resources is probable. By contrast, financial guarantees requiring a payment to be made in the event of a change in a financial variable (price, rating, credit index, etc.) or a non-financial variable, provided that in such a case the variable is not specific to one of the parties to the contract, are covered by IAS 39 and are therefore treated as derivative instruments. Financing commitments that are not considered as derivatives within the meaning of IAS 39 are not shown on the balance sheet. However, they give rise to provisions in accordance with the provisions of IAS Transactions denominated in foreign currencies Financial assets and financial liabilities denominated in a currency other than the local currency are translated at the exchange rate ruling on the balance sheet date. Monetary financial assets and liabilities Foreign exchange gains and losses arising on the translation of such items are recognised in profit or loss under Net gains (losses) on portfolios at fair value through profit or loss. Non-monetary financial assets and liabilities Foreign exchange gains and losses arising on the translation of non-monetary assets and liabilities are recognised to profit or loss under Net gains (losses) on portfolios at fair value through profit or loss if the item is classified at fair value through profit or loss, or under Unrealised or deferred gains or losses if the item is classified under available-for-sale financial assets. When consolidated securities denominated in a foreign currency are funded by a borrowing in the same foreign currency, the future cash flows relating to the borrowing are hedged. 142 CREDIT MUTUEL GROUP Annual Report

74 FINANCIAL REPORT 3.20 Non-current assets classified as held for sale and discontinued operations Non-current assets, or groups of assets, are classified as held for sale if their carrying amount will be recovered through a sale and provided a sale is highly probable and likely to be completed within the next 12 months. The related assets and liabilities are presented on two distinct balance sheet lines under, respectively, Non-current assets classified as held for sale and Liabilities directly associated with assets classified as held for sale. They are recognised at the lower of their carrying amount and their fair value less the costs to sell, and are no longer depreciated or amortised. Any recognised impairment loss on such assets and liabilities is recognised to profit and loss. Discontinued operations are a component of an entity that either has been disposed of or is classified as held for sale, or they correspond to a subsidiary acquired exclusively with a view to resale. They are shown on a separate line of profit or loss under Gains and losses on discontinued operations, net of tax Judgements and estimates used in preparation of the financial statements The preparation of the group s financial statements necessitates the formulation of assumptions in order to effect the required measurements, which carry risks and uncertainties concerning their future outcome. The future outcome of such assumptions may be influenced by several factors, in particular: the activities of national and international markets; changes in interest rates and foreign exchange rates; economic and political conditions in certain business sectors or countries; and regulatory and legislative changes. Accounting estimates requiring the formulation of assumptions are used mainly for measurement of the following items: fair value of financial instruments not quoted on an active market. The distinction between an active and not active market, the definition of a forced transaction, and the definition of an observable parameter all require the exercise of judgement (see Note 3.4 Securities); retirement plans and other future employee benefits; permanent impairment losses; impairment of receivables; provisions; impairment of intangible assets and goodwill; and deferred tax assets. NOTE 4 : SEGMENT REPORTING (IFRS 8) In terms of segment reporting, the group has two levels of disclosure that are based on the group s own internal reporting system. Data by sector of activity is the primary level and data by geographic sector is the secondary level. Segment reporting by activity (primary level) Sector data for the Crédit Mutuel group is organised into five operating segments: Retail Banking; Corporate and Investment Banking; Insurance; Asset Management and Private Banking; and Other Activities. Retail Banking covers the network of Crédit Mutuel s local mutual banks, CIC's regional banks as well as all the specialised activities marketed through the network: all business banking (i.e. micro enterprises, small and medium-sized enterprises and industries but not large corporates), finance and property leasing, factoring, real estate, etc. Corporate and Investment Banking comprises the following activities: corporate banking, which covers banking and related services provided to large companies through a specific department or subsidiary; and investment banking, which covers market activities, merchant banking, venture capital, private equity, financial intermediation, mergers and acquisitions, etc. Insurance comprises the life and non-life insurance activities (life insurance, property and casualty insurance and insurance brokerage). Asset Management and Private Banking comprises two activities: asset management: fund management (UCITS, real estate funds), employees savings schemes, custody and depositary services for its own customer base, as opposed to that of the network; and private banking: wealth management and estate planning. Other Activities comprise technical support subsidiaries that cannot be included in the retail banking segment (technology, electronic payments, training, media and travel). Transactions between the different operating segments are carried out at market conditions. Segment reporting by geographic zone (secondary level) For the Crédit Mutuel group, three geographic zones have been defined for this secondary level of reporting: France ; rest of Europe; and rest of world. The geographic analysis of assets and earnings is based on the country in which the activities are recorded for accounting purposes. NOTE 5 : RELATED PARTIES Parties related to the Crédit Mutuel group are the consolidated companies, including companies accounted for using the equity method, and the third-level administrative entities (Caisse Centrale du Crédit Mutuel and Confédération Nationale du Crédit Mutuel). Transactions between the Crédit Mutuel group and related parties are carried out at the normal market conditions prevailing at the time of the transaction. The list of consolidated companies is provided in note 1.2. As transactions carried out and any outstandings at the end of the period between group companies consolidated using the full method are eliminated on consolidation, only transactions between companies over which the group exercises joint control (consolidated using the proportional method) are included in the tables in the notes for the portion not eliminated on consolidation, while transactions between companies over which the group exercises considerable influence, consolidated using the equity method, are included in the tables in the notes. NOTE 6 : STANDARDS AND INTERPRETATIONS ADOPTED BY THE EUROPEAN UNION NOT YET APPLIED DUE TO THEIR APPLICATION DATE IAS/IFRS TITLE APPLICATION IMPACT OF DATE APPLICATION IFRS Amendments to IFRS 7 Disclosures Transfers of financial assets NOTE 7 : EVENTS AFTER THE END OF THE REPORTING PERIOD None Effective for annual periods beginning on or after 1 January 2012 Limited 144 CREDIT MUTUEL GROUP Annual Report

75 FINANCIAL REPORT 2 - FINANCIAL DATA 1. Notes to the statement of financial position NOTE 1 : CASH IN HAND, BALANCES WITH CENTRAL BANKS AND LOANS AND ADVANCES TO CREDIT INSTITUTIONS 1A - LOANS AND ADVANCES TO CREDIT INSTITUTIONS (1) Relates mainly to outstandings with CDC (LEP, Codevi, Livret Bleu, Livret A) Cash in hand and balances with central banks Central banks 7,435 7,544 of which mandatory reserves 1, Cash in hand 1,130 1,182 Total 8,565 8,726 Loans and advances to credit institutions Crédit Mutuel network accounts (1) 29,174 28,173 Other ordinary accounts 2,033 4,925 Loans 8,627 5,267 Other receivables Securities not listed on an active market 3,728 4,834 Repurchase agreements 1,141 1,742 Loans having given rise to specific provisions 1,099 1,434 Accrued interest Provisions (310) (350) Total 46,813 47,490 NOTE 2 - FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS 2A - FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Trading Fair value Total Trading Fair value Total by option by option Securities 14,074 30,551 44,625 16,385 29,548 45,933 - Government securities 1, ,436 2, ,831 - Bonds and other fixed-income securities 11,929 7,598 19,527 12,169 8,209 20,378. Listed 11,929 7,483 19,412 12,169 8,076 20,245. Not listed Shares and other variable-yield securities ,929 23,662 1,436 21,288 22,724. Listed ,492 21,215 1,436 19,248 20,684. Not listed 10 2,437 2, ,040 2,040 Trading derivatives 2, ,548 2, ,555 Other financial assets 7,135 7,135 8,532 8,532 of which repurchase agreements 7,096 7,096 8,448 8,448 Total 16,622 37,686 54,308 18,940 38,080 57,020 The maximum exposure to credit risk on loans and receivables classified at fair value by option through profit and loss amounted to 36,918 million in B - FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS Financial liabilities held for trading purposes 7,007 7,532 Financial liabilities at fair value by option through profit or loss 24,490 27,407 Total 31,497 34,939 1B - AMOUNTS DUE TO CREDIT INSTITUTIONS Central banks Financial liabilities held for trading purposes Total Amounts due to credit institutions Other ordinary accounts 1,682 3,999 Loans 24,799 16,137 Others liabilities 2, Repurchase agreements 3,297 7,405 Accrued interest Total 32,847 28, Short sales of securities 1,088 1,864 - Government securities Bonds and other fixed-income securities 641 1,315 - Shares and other variable-yield securities Debt securities under repurchase agreements Trading derivatives 5,117 4,908 Other financial liabilities held for trading purposes Total 7,007 7, CREDIT MUTUEL GROUP Annual Report

76 FINANCIAL REPORT Financial liabilities at fair value by option through profit or loss Carrying Amount due Difference Carrying Amount due Difference amount at maturity amount at maturity Debt securities Subordinated debts Due to credit institutions 23,692 23, ,616 25,609 7 Due to customers ,210 1,209 1 Total 24,490 24, ,407 27, C - FAIR VALUE HIERARCHY Niveau 1 Niveau 2 Niveau 3 Total Financial assets Available for sale 93,419 2,381 1,974 97,774 - Government securities Available for sale 15, ,542 - Bonds and other fixed-income securities - Available for sale 69,712 2, ,303 - Shares and other variable-yield securities - Available for sale 7, ,352 - Participating interests and other long-term investments Available for sale 1, ,165 - Investments in related companies - Available for sale Trading and fair value option 35,053 16,407 2,848 54,308 - Government securities - Trading 1, ,412 - Government securities - Fair value option Bonds and other fixed-income securities - Trading 8,928 2, ,929 - Bonds and other fixed-income securities - Fair value option 3,472 4, ,598 - Shares and other variable-yield securities - Trading Shares and other variable-yield securities - Fair value option 20, ,756 22,929 - Loans and receivables from credit institutions - Fair value option - 2,793-2,793 - Loans and receivables from customers - Fair value option - 4,342-4,342 - Derivatives and other financial assets - Trading 56 2, ,548 Derivative instruments entered into for hedging purposes - 1, ,598 Total 128,472 20,374 4, ,680 Financial liabilities Trading and fair value option 1,929 29, ,497 - Due to credit institutions - Fair value option - 23,692-23,692 - Due to customers - Fair value option Debt securities - Fair value option Subordinated debt - Fair value option Derivatives and other financial liabilities - Trading 1,929 4, ,007 Derivative instruments entered into for hedging purposes - 3, ,606 Total 1,929 33,131 1,043 36, Level 1 Level 2 Level 3 Total Financial assets Available for sale 100,433 3,264 1, ,213 - Government securities Available for sale 14, ,087 - Bonds and other fixed-income securities - Available for sale 76,022 3, ,596 - Shares and other variable-yield securities - Available for sale 8, ,713 - Participating interests and other long-term investments Available for sale 1, ,373 - Investments in related companies - Available for sale Trading and fair value option 36,622 17,061 3,337 57,020 - Government securities - Trading 2, ,780 - Government securities - Fair value option Bonds and other fixed-income securities - Trading 9,127 1,463 1,579 12,169 - Bonds and other fixed-income securities - Fair value option 3,698 4,511-8,209 - Shares and other variable-yield securities - Trading 1, ,436 - Shares and other variable-yield securities - Fair value option 19,645-1,644 21,289 - Loans and receivables from credit institutions - Fair value option - 4,077-4,077 - Loans and receivables from customers - Fair value option - 4,454-4,454 - Derivatives and other financial assets - Trading 31 2, ,555 Derivative instruments entered into for hedging purposes Total 137,058 20,887 4, ,805 Financial liabilities Trading and fair value option 2,661 32, ,939 - Due to credit institutions - Fair value option 0 25, ,616 - Due to customers - Fair value option 0 1, ,210 - Debt securities - Fair value option Subordinated debt - Fair value option Derivatives and other financial liabilities - Trading 2,661 4, ,532 Derivative instruments entered into for hedging purposes 3 2, ,613 Total 2,664 35, ,552 In 2010, there was no material transfer (i.e. exceeding 10% total assets or total liabilities) between level 1 and level 2. Fair value hierarchy - Details of level Opening balance Purchases Issue Sales Redemptions Transfers Gains and losses to P&L Gains and losses to equity Shares and other variable-yield securities - Fair value option 1, (389) (12) , Opening balance Purchases Issue Sales Redemptions Transfers Gains and losses to P&L Gains and losses to equity Shares and other variable-yield securities - Fair value option 1, (373) (15) (10) 1,644 Other Other Closing balance Closing balance In 2011, there was no material transfer (i.e. exceeding 10% total assets or total liabilities) between level 1 and level CREDIT MUTUEL GROUP Annual Report

77 FINANCIAL REPORT NOTE 3 - HEDGING 3A - DERIVATIVE HEDGING INSTRUMENTS Assets Liabilities Assets Liabilities Cash flow hedges Fair value hedges (change through profit or loss) 1,561 4, ,483 Total 1,598 4, ,613 - Hedge ineffectiveness recognised to profit or loss amounted to 52 million. - Changes in cash flow recycled to profit or loss amounted to 7 million. 3B - REVALUATION DIFFERENCE ON PORTFOLIOS HEDGED AGAINST INTEREST RATE RISK NOTE 4 - BREAKDOWN OF DERIVATIVES FAIR VALUE CHANGE IN FAIR VALUE Fair value of interest rate risk by portfolio - Financial assets 1, Financial liabilities (2,812) (1,916) (896) NOTE 5 - FINANCIAL ASSETS AVAILABLE FOR SALE 5A - FINANCIAL ASSETS AVAILABLE FOR SALE Government securities 15,342 13,902 Bonds and other fixed-income securities 71,605 78,947 - Listed 70,736 77,943 - Not listed 869 1,004 Shares and other variable-yield securities 7,388 8,750 - Listed 6,697 8,066 - Not listed Long-term investments 2,537 2,772 - Investments in associates 1,593 1,729 - Other long-term investments Investments in related undertakings Securities lent Non-performing current account advances 0 0 Accrued interest TOTAL 97, o/w unrealised gains or losses recognised in shareholders' equity (1,030) (174) o/w impaired bonds 1, o/w provisions for impairment (3,153) (1,944) o/w listed investments 1,060 1, Notional Assets Liabilities Notional Assets Liabilities Trading derivatives Interest rate instruments Swaps 375,778 1,526 4, ,018 1,655 3,830 Other firm contracts 17, , Options and conditional instruments 39, , Foreign exchange instruments Swaps (*) 84, , Other firm contracts 21, , Options and conditional instruments 17, , Other instruments Swaps 16, , Other firm contracts 3, , Options and conditional instruments , Sub-total 576,464 2,548 5, ,412 2,555 4,908 Hedging derivatives Fair Value Hedges Swaps 93,209 1,561 4,451 75, ,483 Other firm contracts Options and conditional instruments 4, Cash Flow Hedges Swaps 2, , Other firm contracts Options and conditional instruments Sub-total 99,655 1,598 4,606 76, ,613 5B - LIST OF MAIN UNCONSOLIDATED INVESTMENTS % held Shareholders' Total Net banking Net profit equity Assets income or revenue loss Crédit Logement Not listed < 10 % 1,452 9, Caisse de Refinancement de l'habitat (CRH) Not listed < 36 % , Tickehau Capital Partners Not listed 10 % Banco Popular (Spain) Listed < 5 % 8, ,140 3, Foncière des Régions Listed < 5 % 6,028 14, Veolia Environnement Listed < 5 % 10,895 51,511 34, The above information, except for percentages held, relates to Total 676,119 4,146 9, ,949 3,127 8,521 (*) Information provided in respect of just one leg to be consistent with Corep and Finrep. 150 CREDIT MUTUEL GROUP Annual Report

78 FINANCIAL REPORT NOTE 6 - CUSTOMERS 6A - CUSTOMER LOANS AND RECEIVABLES Performing receivables 323, ,262 Receivable-related claims 5,318 4,539 Other customer loans and advances 316, ,482 - Home loans 178, ,483 - Other loans and receivables including repurchase agreements 137, ,999 Accrued interest Securities not quoted on an active market Insurance and reinsurance receivables Loans having given rise to specific provisions 13,480 13,765 Gross loans and advances 336, ,294 Specific provisions (8,207) (8,343) General provisions (631) (541) Sub-total I 328, ,410 Finance leases (net investment) 10,380 9,815 Equipment 6,322 6,117 Property 3,827 3,463 Receivables having given rise to specific provisions Provisions for impairment (166) (160) Sub-total II 10,214 9,655 Total 338, ,065 o/w participating loans o/w subordinated loans B - AMOUNTS DUE TO CUSTOMERS Regulated savings deposits 119, ,569 - On demand 84,935 73,856 - Term 34,724 34,713 Liabilities associated with savings deposits Sub-total 119, ,663 Demand accounts 71,703 70,647 Term accounts and borrowings 65,084 56,213 Repurchase agreements Related liabilities 783 1,078 Insurance and reinsurance liabilities Sub-total 137, ,739 Total 257, ,402 NOTE 7 - FINANCIAL ASSETS HELD TO MATURITY Securities 19,447 14,177 - Government securities 1,395 1,159 - Bonds and other fixed-income securities 18,052 13,018. Listed 12,417 12,287. Not listed 5, Accrued interest Total gross 19,519 14,240 Of which written down for impairment Provisions for impairment (114) (34) Total net 19,405 14,206 Finance leases with customers Increase Decrease Other Gross carrying amount 9,815 2,178 (1,665) 52 10,380 Impairment of uncollectable lease payments (160) (57) 49 2 (166) Net carrying amount 9,655 2,121 (1,616) 54 10,214 NOTE 8 - CHANGE IN IMPAIRMENT PROVISIONS Charges Write-backs Other Loans and receivables due from credit institutions (350) (3) 51 (8) (310) Customer loans and receivables (9,044) (2,196) 2, (9,004) Securities available for sale - Fixed income (132) (674) 19 (16) (803) Securities available for sale -Variable income (1,812) (535) 25 (28) (2,350) Securities held to maturity (34) (83) 3 0 (114) Total (11,372) (3,491) 2, (12,581) 152 CREDIT MUTUEL GROUP Annual Report

79 FINANCIAL REPORT NOTE 9 - RECLASSIFICATIONS OF FINANCIAL INSTRUMENTS There was no reclassification in The information below concerns reclassifications made in Assets reclassified Carrying Fair Carrying Carrying value value value value Portfolio of loans and receivables 4,584 4,280 5,733 5,445 Portfolio of financial assets available for sale 7,413 7,414 9,285 9,285 Total 11,998 11,694 15,017 14, Gains (losses) that would have been recognised to profit or loss in application of fair value rule had the assets not been reclassified (185) 140 Gains (losses) that would have been recognised to equity had the assets not been reclassified 48 (137) Gains (losses) recognised to profit or loss in respect of reclassified assets (7) 20 NOTE 10 - TAXES 10A - CURRENT TAXES Current tax assets (to profit or loss) 2,146 1,834 Current tax liabilities (to profit or loss) Breakdown of deferred tax by main category NOTE 11 - ACCRUAL ACCOUNTS AND OTHER ASSETS AND LIABILITIES 11A - PREPAYMENTS, ACCRUED INCOME AND OTHER ASSETS Assets Liabilities Assets Liabilities Tax losses carried forward Temporary differences 3,107 2,050 2,194 1,754 - Deferred gains or losses on available-for-sale securities Other unrealised or deferred gains or losses Provisions Unrealised finance leasing reserve Results of transparent companies Other temporary differences 1,512 1, ,377 Offsetting (1,444) (1,444) (1,002) (1,002) Total deferred tax assets and liabilities 1, , Deferred tax is calculated using the liability method. For French companies, the deferred tax rate is 34.43%, rising to 36.10% to include an exceptional additional contribution when net banking income or revenue exceeds 250 million Prepayments and accrued income Securities collection accounts 1, Currency adjustment accounts Accrued income Sundry accruals 2,404 2,934 Sub-total 4,446 4,339 10B - DEFERRED TAXES Deferred tax assets (to profit or loss) 1,157 1,231 Deferred tax assets (to equity) Deferred tax liabilities (to profit or loss) Deferred tax liabilities (to equity) Other assets Settlement accounts on securities transactions Guarantee deposits paid 8,057 6,440 Other debtors 6,366 6,642 Inventories and similar Sundry Sub-total 14,640 13,369 Other assets of insurance companies Technical provision - reinsurers share Other Sub-total Total 19,517 18, CREDIT MUTUEL GROUP Annual Report

80 FINANCIAL REPORT 11B - ACCRUED CHARGES, DEFERRED INCOME AND OTHER LIABILITIES Accrued charges and deferred income Blocked accounts on collection transactions Currency adjustment accounts Accrued charges 1,193 1,271 Deferred income 2,365 2,222 Sundry adjustment accounts 3,182 6,435 Sub-total 7,897 10,895 Other liabilities Settlement accounts on securities transactions 907 1,025 Payments to be made on securities Other creditors 4,829 3,471 Sub-total 5,915 4,702 Other liabilities of insurance companies Security deposits and guarantees received Other 0 0 Sub-total Total 13,976 15,771 NOTE 13 - INVESTMENT PROPERTY NOTE 14 - NON-CURRENT ASSETS 14 A - PROPERTY, PLANT AND EQUIPMENT Increase Decrease Other Historical cost 1, (30) (13) 1,788 Depreciation and impairment (306) (48) 5 2 (347) Net carrying amount 1, (25) (11) 1,441 The fair value of property recognised at cost came to 2,019 million at 31 December 2011 ( 1,839 million at 31 December 2010) Increase Decrease Other changes Cost Land used in operations (3) Buildings used in operations 4, (70) 12 5,116 Other property, plant and equipment 2, (258) 27 2,741 Total 8, (331) 42 8,356 NOTE 12 - INVESTMENTS IN COMPANIES ACCOUNTED FOR USING THE EQUITY METHOD Share in net profit or loss of companies accounted for using the equity method Share of net Share of net Investment profit or loss Investment profit or loss Banque Marocaine du Commerce Extérieur (*) RMA Watanya (*) BPM (*) 196 (31) Other 171 (5) 158 (2) Total 1, , (*) In accordance with IAS 28, goodwill recognised in respect of entities over which significant influence is exercised is included in the value of the investments accounted for using the equity method. Financial information published by the main companies accounted for using the equity method Depreciation and impairment Land used in operations (1) 0 0 (2) -3) ldings used in operations (2,572) (246) 56 4 (2,758) Other property, plant and equipment (1,922) (209) 172 (70) (2,029) Total (4,495) (455) 228 (68) (4,790) Net carrying amount 3, (103) (26) 3,566 Of which buildings rented under finance leases Increase Decrease Other Gross carrying amount Depreciation and impairment (9) (5) 0 (23) (37) Total 76 (5) TOTAL ASSETS NET BANKING INCOME NET PROFIT Banque Marocaine du Commerce Extérieur** 187,187 7,552 1,426 RMA Watanya (**) 222,247 4,448 2,240 Banca Popolare di Milano 54, For the year ended (**) In million of Moroccan dirham 156 CREDIT MUTUEL GROUP Annual Report

81 FINANCIAL REPORT 14 B - INTANGIBLE ASSETS Increase Decrease Other changes Historical cost Non-current assets produced internally (1) Non-current assets acquired 2, (84) 69 2,312 - Software (11) Other 1, (73) 64 1,484 NOTE 16 - DEBT SECURITIES Certificates of deposit 1,061 1,105 Interbank certificates and negotiable debt securities 64,992 84,203 Bonds 51,985 39,398 Accrued interest 1,529 1,027 Total 119, ,733 Total 2, (85) 70 2,456 Amortisation and impairment Non-current assets produced internally (43) (28) 0 0 (71) on-current assets acquired (861) (180) 17 (5) (1,029) - Software (477) (85) 9 1 (552) - Other (384) (95) 8 6 (477) Total (904) (208) 17 (5) (1,100) Net carrying amount 1,361 (2) (68) 65 1,356 NOTE 17 - INSURANCE TECHNICAL RESERVES Life 87,696 86,322 Non-life 2,543 2,487 Unit-linked 11,754 13,055 Other Total 102, ,164 NOTE 15 - GOODWILL Increase Decrease Other changes Goodwill - gross amount 4, (20) 7 5,100 Impairment (170) (9) 1 (6) (184) Carrying amount 4, ,916 Subsidiaries Carrying amount Increase Decrease Impairment Other Carrying amount of goodwill changes of goodwill at at Targobank 2, ,763 Groupe CIC Cofidis/Monabanq Banco Popular Hipotecario UFG - La française des placements Procapital Fortunéo Monext Banque Casino NRJ Mobile Other (*) (20) (14) Total 4, (20) (14) 7 4,916 (*) Including the first-time consolidation of Est Républicain Group. Of which: Deferred participation - liability 2,251 4,032 Deferred participation - asset Reinsurers share of technical provisions Net technical reserves 101, ,782 Details regarding the results of the insurance activity are provided in Note 26. NOTE 18 - PROVISIONS AND CONTINGENT LIABILITIES 18 A - PROVISIONS Increases Reversals Reversals Other for the for the changes period period (used) (not used) Provisions for risks (100) (126) Guarantee obligations (14) (54) (10) 164 Loan and guarantee commitments 3 0 (1) (2) 1 1 Country risks 20 0 (2) Tax (57) (2) (3) 69 Disputes (16) (22) Sundry receivables (10) (46) 0 59 Other provisions 1, (143) (158) (28) 862 Home savings accounts and schemes (9) (42) Sundry contingencies (121) (87) Other (13) (29) (29) 286 Provisions for retirement commitments (22) (18) Total 1, (265) (302) 362 2, CREDIT MUTUEL GROUP Annual Report

82 FINANCIAL REPORT Commitments for retirement and similar benefits Increases Reversals Reversals Other for the for the changes period period (used) (not used) Provisions for risks (62) (110) Guarantee obligations (17) (69) Loan and guarantee commitments (2) 4 3 Country risks Tax (26) (11) Disputes (9) (11) Sundry receivables (10) (17) (19) 87 Other provisions (67) (93) 9 1,027 Home savings accounts and schemes (5) (46) Sundry contingencies (35) (31) (3) 534 Other (27) (16) Provisions for retirement commitments (19) (18) (6) 359 Total 1, (148) (221) 30 1, Increase Decrease Other changes (*) Obligations relating to defined benefit retirement plans and similar, excluding pension funds Retirement indemnities (16) Top-up retirement benefits (10) Premiums linked to long-service awards (other long-term benefits) 71 4 (12) Total recognised (38) Top-up defined benefit plans covered by the group's retirement funds Commitments to employees and retired employees 13 2 (2) 0 13 Fair value of assets Total recognised 13 2 (2) 0 13 Total (40) (*) This column concerns mainly the restatement of benefits covered by internal contracts (reclassification of technical reserves as retirement commitments). Discount rates Provisions for home savings accounts and schemes years 4-10 years +10 years Total Discount rates based on maturity of commitments at level of regional groups 3,1 % à 4,8 % 3,1 % à 5,4 % Deposits in respect of home savings schemes during the savings phase 3,239 16,103 6,215 25,557 Provisions in respect of home savings schemes Deposits taken on home savings accounts during the savings phase 4,573 Provisions in respect of home savings accounts 69 Provisions set aside in respect of home savings products (1) Reversal of provisions set aside in respect of home savings products 51 Outstanding loans granted in respect of home savings products 1,457 Provisions in respect of these loans CREDIT MUTUEL GROUP Annual Report

83 FINANCIAL REPORT Retirement indemnities Main subordinated debt issues Discounting effect Financial income Cost of services rendered Change in actuarial differences Payments to beneficiaries Insurance premiums Other (IN M) Type Date Amount Amount Maturity of issue issued outstanding date year-end Commitments (33) Deferred recognition (64) (53) Insurance contract (3) 3 (269) (*) 12 Provision (*) This concerns mainly the restatement of benefits covered by internal contracts (reclassification of technical reserves as retirement commitments) Discounting effect Financial income Cost of services rendered Change in actuarial differences Payments to beneficiaries Insurance premiums Other Commitments (31) Deferred recognition (*) (64) (64) Insurance contract (18) 65 (1) 280 Provision Banque Fédérative du Crédit Mutuel SR July 01/December July 13 Banque Fédérative du Crédit Mutuel SR September 03/February September 15 Banque Fédérative du Crédit Mutuel SR December December 15 Banque Fédérative du Crédit Mutuel SR June June 16 Banque Fédérative du Crédit Mutuel SR December December 16 Banque Fédérative du Crédit Mutuel SR December 11 1,000 1,000 December 18 Banque Fédérative du Crédit Mutuel SR October 10 1,000 1,000 October 20 Banque Fédérative du Crédit Mutuel SSP December Undated Banque Fédérative du Crédit Mutuel SSP February Undated Banque Fédérative du Crédit Mutuel SSP April Undated Crédit Mutuel Arkéa SR May May 17 Crédit Mutuel Arkéa SR September September 18 Crédit Mutuel Arkéa SSP July Undated NOTE 20 - SHAREHOLDERS' EQUITY AND RESERVES (*) In 2010, an agreement on the unique status of CIC Group came into force, which resulted in modifications to the method of calculation of retirement indemnities. As this concerns the cost of past services, the overall impact of this agreement is to increase commitments by 78 million spread over the estimated remaining period of employment of the employees. 18 B - CONTINGENT LIABILITIES None NOTE 19 - SUBORDINATED DEBT Subordinated debt 5,352 5,773 Participating loans Perpetual subordinated debt 1,834 2,061 Other debt Accrued interest Total 7,362 8, A - SHAREHOLDERS' EQUITY - GROUP SHARE (EXCLUDING UNREALISED GAINS OR LOSSES) Capital and capital reserves 9,156 9,046 - Share capital 9,128 9,018 - Share premium and other similar amounts Consolidated reserves 23,193 20,609 - Regulated reserves Translation reserves Other reserves (including impact of first-time adoption) 22,995 20,544 - Retained earnings Total 32,349 29, B - UNREALISED OR DEFERRED GAINS AND LOSSES Unrealised or deferred gains or losses (*) on: - Available-for-sale assets (1,030) (174) - Cash flow hedges (140) (111) - Other 0 3 Total (1,170) (282) (*) Net of tax and after adjustment for mirror accounting 162 CREDIT MUTUEL GROUP Annual Report

84 FINANCIAL REPORT NOTE 21 - COMMITMENTS GIVEN AND RECEIVED COMMITMENTS GIVEN Financing commitments Commitments given to credit institutions 1,884 2,116 Commitments given to customers 63,760 62,849 Guarantee commitments Commitments given to credit institutions 2,589 5,534 Commitments given to customers 16,705 12,914 Commitments on securities Other commitments given 688 1, Notes to the income statement NOTE 22 - INTEREST AND SIMILAR INCOME AND CHARGES Income Charges Income Charges Credit institutions and central banks 1,572 (1,360) 1,497 (1,297) Customers 17,169 (7,321) 16,522 (6,325) - o/w Finance leases 3,187 (2,781) 3,052 (2,668) Hedging derivative instruments 2,205 (2,634) 2,709 (3,532) Financial assets available for sale Financial assets held to maturity Debt securities (2,975) (2,356) Subordinated debt (81) (78) Total 22,139 (14,371) 21,771 (13,588) COMMITMENTS RECEIVED Financing commitments Commitments received from credit institutions 24,379 27,223 Guarantee commitments Commitments received from credit institutions 36,137 34,900 Commitments received from customers 13,748 13,017 Commitments on securities Other commitments received 369 1,281 Assets given as guarantees for liabilities Securities loaned 5 0 Guarantee deposits for market transactions 8,057 6,440 Securities given under repurchase agreements 27,483 33,914 o/w interest income and charges calculated at the effective interest rate 19,934 (11,737) 19,062 (10,056) o/w interest on liabilities at amortised cost (11,737) (10,056) NOTE 23 - FEES AND COMMISSIONS Income Charges Income Charges Credit institutions 25 (6) 28 (8) Customers 1,390 (22) 1,338 (15) Securities 907 (65) 952 (59) o/w activities managed on behalf of third parties Derivative instruments 18 (18) 12 (23) Foreign exchange 22 (3) 26 (5) Loan commitments and guarantee obligations 47 (6) 51 (9) Services rendered 2,088 (1,009) 2,276 (974) Total 4,497 (1,129) 4,683 (1,093) Total 35,545 40, CREDIT MUTUEL GROUP Annual Report

85 FINANCIAL REPORT NOTE 24 - NET GAINS (LOSSES) ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS Trading instruments (40) (179) Instruments at fair value by option (149) 144 Ineffective portion of hedges (52) 56 - On cash flow hedges On fair value hedges (52) 54. Change in fair value of hedged items Change in fair value of hedging items (127) 22 Foreign exchange gain (loss) Total changes in fair value (178) 86 Of which trading derivatives (797) (244) Including 29 million estimated based on a valuation model comprising non-observable market data NOTE 26 - INCOME AND CHARGES FROM OTHER ACTIVITIES Income from other activities. Insurance contracts 14,942 18,056. Investment property: Provision and impairment losses reversed Gains on disposal Charges rebilled Other income 2,057 1,739 Sub-total 17,093 19,813 Charges on other activities. Insurance contracts (12,802) (15,901). Investment property: (57) (41) - Provisions and impairment losses recognised (44) (40) - Losses on disposals (13) (1). Other charges (1,208) (1,160) Sub-total (14,067) (17,102) NOTE 25 - NET GAINS (LOSSES) ON FINANCIAL ASSETS AVAILABLE FOR SALE Total other net income (charges) 3,026 2, Dividends Gains/losses realised Impairment Total Government securities, bonds and other fixed-income securities Shares and other variable-yield securities (36) 10 Long-term investments (104) 31 Other 0 (84) 0 (84) Total (140) (31) Net income from insurance activities Premiums earned 11,770 13,573 Cost of benefits (7,332) (6,224) Changes in provisions (2,177) (5,981) Other technical and non-technical charges (2,721) (2,864) Net investment income 2,600 3,651 Total 2,140 2, Dividends Gains/losses realised Impairment Total Government securities, bonds and other fixed-income securities Shares and other variable-yield securities (18) 27 Long-term investments (31) 42 Other Total (49) 154 NOTE 27 - GENERAL OPERATING EXPENSES Staff costs (5,290) (5,202) Other charges (3,757) (3,748) Total (9,047) (8,950) 166 CREDIT MUTUEL GROUP Annual Report

86 FINANCIAL REPORT 27 A - STAFF COSTS Wages and salaries (3,318) (3,178) Social security costs (1,365) (1,344) Short-term benefits (7) -8) Employee profit-sharing and incentives (246) (343) Payroll and other similar taxes (353) (326) Other (1) (3) Total (5,290) (5,202) AVERAGE STAFF NUMBERS Operational staff 49,050 47,826 Executives 28,929 27,979 NOTE 28 - COST OF RISK Increases Recoveries Uncollectable Uncollectable Collections of TOTAL receivables receivables receivables covered not covered previously written off Credit institutions (3) 51 0 (41) 0 7 Customers (2,050) 2,028 (874) (385) 120 (1,161). Finance leases (16) 17 (9) (6) 0 (14). Other (2,034) 2,011 (865) (379) 120 (1,147) Sub total (2,053) 2,079 (874) (426) 120 (1,154) Held-to-maturity assets (9) ) Available-for-sale assets (492) 19 (55) (55) 44 (539) Other (94) 134 (4) Total (2,648) 2,235 (933) (481) 164 (1,663) Total 77,979 75,805 o/w France 67,150 65,408 o/w Rest of world 10,829 10, B - OTHER OPERATING CHARGES Taxes other than corporation tax (374) (323) External services (2,638) (2,668) Sundry expenses (transport, travel, etc.) (106) (99) Total (3,118) (3,090) Increases Recoveries Uncollectable Uncollectable Collections of TOTAL receivables receivables receivables covered not covered previously written off Credit institutions (131) 348 (131) (1) 0 85 Customers (2,256) 1,853 (661) (553) 82 (1,535). Finance leases (11) 8 (4) (6) 1 (12). Other (2,245) 1,845 (657) (547) 81 (1,523) Sub-total (2,387) 2,201 (792) (554) 82 (1,450) Held-to-maturity assets (28) 11 (1) 0 0 (18) Available-for-sale assets (25) 22 (84) (38) 0 (125) Other (109) 179 (61) Total (2,549) 2,413 (938) (592) 83 (1,583) NOTE 29 - GAINS OR LOSSES ON OTHER ASSETS 27 C - DEPRECIATION, AMORTISATION AND IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS RECOGNISED AND REVERSED Depreciation and amortisation: (638) (657) - Property, plant and equipment (465) (476) - Intangible assets (173) (181) Impairment: (1) (1) - Property, plant and equipment 0 (1) - Intangible assets (1) Property, plant and equipment and intangible assets Losses on disposals (17) (37). Gains on disposals Gains (losses) on disposals of consolidated securities (3) (4) Total 73 3 Gains on disposals in 2011 arose notably from the sale of ICM Reinsurance. Total (639) (658) 168 CREDIT MUTUEL GROUP Annual Report

87 FINANCIAL REPORT NOTE 30 - CHANGES IN GOODWILL Impairment (9) (45) Negative goodwill charged to profit and loss 2 0 Total (7) (45) NOTE 31 - TAX CHARGE FOR THE PERIOD Breakdown of tax charge for the period Current taxes (1,053) (1,349) Deferred taxes (74) 182 Adjustments for prior years Total (1,115) (1,145) 3. Notes to the statement of comprehensive income NOTE 32 - RECLASSIFICATION OF GAINS AND LOSSES RECOGNISED DIRECTLY TO EQUITY Re-measurement of available for sale financial assets Reclassified to profit and loss Other (1,066) (294) Sub-total (853) (254) Re-measurement of derivative hedging instruments Reclassified to profit and loss 7 (21) Other (27) (25) Sub-total (20) (46) Re-measurement of non-current assets (3) 1 Actuarial differences on defined benefit plans NA NA Share of unrealised or deferred gains and losses on companies accounted for using the equity method (17) 4 Total (893) (295) Reconciliation of actual tax charge and theoretical tax charge Theoretical tax rate 36.10% 34.43% Impact of special tax regime for venture capital companies and real property leasing companies (0.57%) (0.67%) Impact of reduced tax rate on long-term capital gains (2.81%) (1.63%) Impact of specific tax rates at foreign entities (0.21%) (0.17%) Impact of carry back 0.00% 0,22% Permanent timing differences 4.29% 1.58% Other (3.21%) (6.30%) Effective tax rate 33.60% 27.46% Taxable income 3,310 4,171 Tax charge (1,115) (1,145) The impact of the change in the deferred tax rate amounted to 23 million at the level of the group. NOTE 33 - TAX IN RESPECT OF EACH CATEGORY OF GAINS AND LOSSES RECOGNISED DIRECTLY TO EQUITY Gross amount Tax Net amount Gross amount Tax Net amount Re-measurement of available for sale financial assets (1,300) 447 (853) (348) 94 (254) Re-measurement of derivative hedging instruments (27) 7 (20) (70) 24 (46) Re-measurement of non-current assets (3) 0 (3) Actuarial differences on defined benefit plans NA NA NA NA NA NA Share of unrealised or deferred gains and losses on companies accounted for using the equity method (17) 0 (17) Total (1,347) 454 (893) (414) 119 (295) 170 CREDIT MUTUEL GROUP Annual Report

88 FINANCIAL REPORT 4. Segment Reporting Breakdown of total assets by business line Retail Insurance Corporate Asset Other Total Elimination Consolidat banking and investment management of intra-group ed total banking and private transactions banking , , ,041 34,157 27,114 1,133,167 (528,071) 605,096 Total assets 71.9 % 10.3 % 12.4 % 3.0 % 2.4 % 100 % , , ,806 31,704 22,783 1,026,223 (434,914) 591,309 Total assets 68.7 % 11.4 % 14.5 % 3.1 % 2.2 % 100 % Breakdown of results by activity Retail Insurance Corporate and Asset Other Elimination Total banking investment management of intra-group banking and private transactions banking Net banking income 11,662 1, (671) 13,953 General expenses (7,418) (494) (303) (438) (1,065) 671 (9,047) Gross operating profit 4, (1,024) 0 4,906 Cost of risk (1,064) (67) (147) (43) (342) (1,663) Income (loss) on other assets (*) (30) 67 Profit before tax 3, (1,396) 3,310 Corporation tax (1,044) (269) (168) (40) 406 (1,115) Consolidated net profit 2, (990) 2,195 Minority interests (17) 82 Net profit, group share 2, (973) 2,113 Breakdown of results by activity Retail Insurance Corporate and Asset Other Elimination Total banking investment management of intra-group banking and private transactions banking Net banking income 11,738 1,569 1, (630) 14,724 General expenses (7,304) (521) (309) (461) (985) 630 (8,950) Gross operating profit 4,434 1, (857) 0 5,774 Cost of risk (1,453) 0 (12) (14) (104) (1,583) Income (loss) on other assets (*) 18 (7) 0 1 (32) (20) Profit before tax 2,999 1, (993) 4,171 Corporation tax (986) (179) (207) (32) 259 (1,145) Consolidated net profit 2, (734) 3,026 Minority interests (15) 110 Net profit, group share 1, (719) 2,916 (*) Including share in net profit or loss of companies accounted for using the equity method and impairment losses on goodwill. Analysis of balance sheet by geographic zone ASSETS France Rest of Rest of Total France Rest of Rest of Total Europe world (*) Europe world (*) Cash in hand and balances with central banks 4,967 2,105 1,493 8,565 3,527 1,221 3,978 8,726 Financial assets at fair value through profit or loss 51,958 1, ,308 54, ,586 57,020 Derivative hedging instruments 1, , Available for sale financial assets 91,438 5, ,774 97,711 6,261 1, ,213 Loans and advances to credit institutions 41,215 3,463 2,135 46,813 39,490 5,058 2,942 47,490 Loans and advances to customers 311,632 23,394 3, , ,194 22,787 3, ,065 Financial assets held to maturity 19, ,405 14, ,206 Investments in companies accounted for using the equity method , ,373 (*) United States, Singapore, Morocco and Tunisia LIABILITIES France Rest of Rest of Total France Rest of Rest of Total Europe world (*) Europe world (*) Central banks Financial liabilities at fair value through profit or loss 30, ,497 33,236 1, ,939 Derivative hedging instruments 4, ,606 3, ,613 Amounts due to credit institutions 17,887 7,845 7,115 32,847 25,668 (980) 3,777 28,465 Amounts due to customers 231,165 25, , ,378 25, ,402 Debt securities 118, , ,826 10,102 7, ,733 (*) United States, Singapore, Morocco and Tunisia Analysis of profit and loss by geographic zone France Rest of Rest of Total France Rest of Rest of Total Europe world (*) Europe world (*) Net banking income 11,769 1, ,953 12,330 2, ,724 General expenses (7,636) (1,343) (68) (9,047) (7,488) (1,388) (74) (8,950) Gross operating profit 4, ,906 4, ,774 Cost of risk (1,236) (425) (2) (1,663) (792) (611) (180) (1,583) Gains on other assets (**) ) 4 34 (20) Profit before tax 2, ,310 3, ,171 Consolidated net profit 1, ,195 2, ,026 Profit attributable to equity holders 1, ,113 2, ,916 (*) United States, Singapore, Morocco and Tunisia (**) including net profit or loss of companies accounted for using the equity method and goodwill impairment 172 CREDIT MUTUEL GROUP Annual Report

89 FINANCIAL REPORT 5 - Other information NOTE I1 - FAIR VALUE NOTE I2 - DIVIDENDS The consolidating entity intends to pay 276 million in dividends outside the CM-CIC group. Fair value of financial instruments recognised at amortised cost The fair values given here are estimates based on observable parameters as at 31 December They are based on discounted future cash flows estimated based on a yield curve that takes into account the debtor's inherent signature risk. The financial instruments referred to in this note are loans and borrowings. They do not include non-monetary instruments (equities), trade payables, other assets, other liabilities or accrual accounts. Non-financial instruments are not covered by this note. The fair value of on-demand financial instruments and customers' regulated savings contracts is the amount that can be demanded by the customer, i.e. the carrying amount. Some group entities also apply assumptions, which is that the market value is the carrying amount for contracts based on variable rates and for contracts with a residual maturity of one year or less. Note that, except for financial assets held to maturity, financial instruments recorded at amortised cost cannot be sold or, in practice, disposed of before maturity. Accordingly, capital gains or losses are not recognised. However, if a financial instrument recognised at amortised cost were to be sold, the disposal proceeds could be significantly different to the fair value calculated as at 31 December. (IN M) Market Carrying Unrealised Market Carrying Unrealised value amount gain value amount gain or loss or loss Assets Loans and receivables due from credit institutions 44,727 46,813 (2,086) 44,435 47,490 (3,055) Loans and receivables due from customers 341, ,354 3, , ,065 4,509 Held-to-maturity financial assets 19,542 19, ,584 14, Liabilities Due to credit institutions 32,641 32, ,369 28, Due to customers 253, ,612 3, , ,402 6,901 Debt securities 120, ,567 (1,114) 125, , Subordinated debt 7,893 7,362 (531) 9,125 8,133 (992) NOTE I3 - RELATED PARTIES Companies Companies Companies Companies consolidated using consolidated using consolidated using consolidated using the proportional the equity the proportional the equity method method method method Assets Loans and advances to credit institutions Of which ordinary accounts Loans and advances to customers Assets at fair value through profit and loss Assets available for sale Assets held to maturity Derivative hedging instruments Other assets Liabilities Due to credit institutions Of which ordinary accounts Derivative hedging instruments Liabilities at fair value through profit and loss Due to customers Debt securities Subordinated debt Interest and similar income Interest and similar expense Fees and commissions (income) Fees and commissions (charges) Net gains (losses) on financial assets available for sale or at fair value through profit or loss Other income (charges) Net banking income General operating expenses (1) Financing commitments given Guarantee commitments given Financing commitments received Guarantee commitments received CREDIT MUTUEL GROUP Annual Report

90 FINANCIAL REPORT NOTE I4 - REMUNERATION OF CORPORATE OFFICERS These amounts relate to overall remuneration paid to the main corporate officers of CNCM in respect of their functions in the various group entities. In addition, members of senior management benefit from group retirement and supplementary pension schemes. On the other hand, the group s senior executives receive no other specific benefits. Note that senior executives do not receive board attendance fees in respect of their functions at group companies or at other companies, only in respect of their functions in the group. Senior executives may hold assets in the group or receive loans from the group on the same conditions as applicable to all the staff. Pursuant to the above, the total remuneration (including all benefits of any type) paid to the group s senior management amounted to 1,719 thousand in NOTE I5 - SOVEREIGN EXPOSURES Going back on the agreement reached on 21 July, the European authorities defined a new bailout plan for Greece on 27 October 2011, with negotiations between the different parties lasting until 21 February This new plan provides notably for the voluntary exchange of Greek government bonds held by private creditors. As at 31 December 2011, the approach used for estimating the value of these securities took into account the deterioration in the Greek economy and the poor liquidity of these securities. Accordingly, these securities were classified as Level 2 and impairment losses recognised representing 72.3% of their nominal value. Amounts reported in respect of Greek sovereign debt include amounts arising from the insurance activities, after deducting, when applicable, amounts accruing to policyholders pursuant to the participation features of the insurance contracts. The situations, however, of Greece and the other European countries including these in receipt of aid from the European Union and International Monetary Fund are not comparable. This is highlighted by the different positions reached by the International Monetary Fund and credit rating agencies, for which reason these other countries did not give rise to the recognition of impairment losses. EXPOSURE TO GREEK SOVEREIGN RISK NET EXPOSURE (IN M) BANKING INSURANCE TOTAL Assets at fair value through profit and loss Assets available for sale Assets held to maturity Total The impact amounts to 359 million after tax, of which 488 million concerns cost of risk. OTHER COUNTRIES IN RECEIPT OF AID NET EXPOSURE (IN M) - BANKING AND INSURANCE PORTUGAL IRELAND Assets at fair value through profit and loss 50 - Assets available for sale Assets held to maturity - - Total SPAIN AND ITALY NET EXPOSURE (IN M) - BANKING ONLY SPAIN ITALY Assets at fair value through profit and loss Assets available for sale 135 4,405 Assets held to maturity - - Total 266 4, CREDIT MUTUEL GROUP Annual Report

91 FINANCIAL REPORT INDEPENDENT AUDITORS' REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS MAZARS To the Shareholders, In fulfilment of the assignment entrusted to us by your General Meeting of Shareholders, we present to you our report for the year ended 31 December 2011 on: - the audit of the consolidated financial statements of Crédit Mutuel, as attached to this report; - the basis of our opinion; and - the specific verifications required by law. The consolidated financial statements have been prepared under the responsibility of the Board of Directors. It is our responsibility, based on our audit, to express an opinion on these financial statements. I - Opinion on the consolidated financial statements Year ended 31 December 2011 ERNST & YOUNG ET AUTRES We conducted our audit in accordance with auditing standards applied in France. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement. An audit includes examining, on a sample basis or via other means of selection, the evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the information we have obtained provides an adequate and reasonable basis for our opinion. In our opinion, having regard to International Financial Reporting Standards (IFRS) as adopted by the European Union, the consolidated financial statements give a true and fair view of the group s financial position and its assets and liabilities at 31 December 2011, and of the results of the operations of the companies and entities included in the consolidation scope for the year then ended. In the note providing other information, the group has provided details regarding its sovereign risk exposures, notably its exposure to Greek sovereign risk, as well as applicable valuation and accounting methods. We examined the system of controls for valuing and estimating the credit risk, the accounting treatment applied, as well as the appropriateness of the disclosures in this note. As explained in Note I-3 to the consolidated financial statements describing the accounting policies and methods and in Note II-5a, impairment losses in respect of available-for-sale assets are recognised when there is objective evidence of a prolonged or significant diminution in an asset s value. We examined the system of controls used to identify evidence of impairment and to value the most material holdings and the estimates relied upon to recognise provisions in respect of these impairment losses. As explained in Note I-3 to the consolidated financial statements describing the accounting policies and methods and in Notes II5a, II-6, II-7, II-8, II-18 and II-28, impairment losses and provisions are recognised to cover credit risks inherent to the group s activities. We examined the system of controls used to monitor credit and counterparty risks, to assess impairment losses, and to cover these losses by recognising specific or general provisions. As explained in Note I-3 to the consolidated financial statements describing the accounting policies and methods and in Notes II-15 and II-30, impairment tests were performed in respect of goodwill and investments and, when applicable, impairment losses were recognised in the year ended. We examined the conditions under which these tests were performed, the main assumptions and parameters used, and resulting estimates that, when applicable, led to adjustment in asset values through the recognition of impairment losses. As explained in Note I-3 to the consolidated financial statements describing the accounting policies and methods and in Note II-10b, deferred tax assets and liabilities have been recognised. We examined the key estimates and assumptions used to recognise these deferred tax items. As explained in Note I-3 to the consolidated financial statements describing the accounting policies and methods and in Note II-18, provisions are recognised in respect of employee benefits. We examined the assumptions used to determine these obligations, as well as the main hypotheses and calculation methods. These assessments were made as part of our audit of the consolidated financial statements taken as a whole, and therefore contributed to determining the unqualified opinion expressed in the first part of this report. III Specific verifications We have also verified the information on the group contained in the Management Report. This work was performed in accordance with French auditing standards. We have no comment to make as to its fair presentation and its consistency with the consolidated financial statements. II - Basis of our opinion The accounting estimates relied upon for the preparation of the financial statements for the year ended 31 December 2011 were drawn up in an uncertain environment, marked by a public finance crisis in several euro zone countries, Greece in particular, accompanied by an economic crisis and liquidity crisis, which makes it difficult to assess the economic outlook. In is in this context that, pursuant to the provisions of article L823.9 of the French Commercial Code requiring that we indicate the basis for our opinion, we draw your attention to the following elements: The group uses internal models and methods for valuing certain financial instruments that are not quoted on an active market and for determining certain provisions, as described in Note I-3 to the consolidated financial statements describing the accounting policies and methods. We examined the system of controls for these models and methods, the parameters used and the identification of the relevant financial instruments. MAZARS Pierre Masieri Neuilly-sur-Seine and Courbevoie, 30 April 2012 The Independent Auditors ERNST & YOUNG ET AUTRES Olivier Durand 178 CREDIT MUTUEL GROUP Annual Report

92 Confédération Nationale du Crédit Mutuel 88-90, rue Cardinet Paris Cedex 17 Tel: 33 (0) Fax: 33 (0) Institutional Communication Design / Realisation: BDC / Bela Vista Photos: Crédit Mutuel Thinkstock Caroline Doutre (Chairman P.4)