2010 extract from the management report · 2010, in favour of china (+10.2%), as well as india and...

2010Extract�from�thE�

managEmEnt�rEport

2010�management�report� 2

BOARD OF DIRECTORS’ REPORT 3

PARENT COMPANY FINANCIAL STATEMENTS 14

STATUTORY AUDITORS’ REPORT ON THE ANNUAL FINANCIAL STATEMENTS 17

STATUTORY AUDITORS’ REPORT ON THE PAYMENT OF A DIVIDEND IN SHARES 19

STATUTORY AUDITORS’ SPECIAL REPORT ON REGULATED AGREEMENTS 20

CONSOLIDATED FINANCIAL STATEMENTS UNDER IFRS 28

STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS 32

contEnts


1 - ECONOMIC CONDITIONS macroEconomic�Background

In addition to a return to positive global economic growth of +4.7% compared with -0.9% in 2009, two factors became clear in2010: a return to an exorbitant real level of debt in a number of countries and major differences in growth between developedcountries and what have so far been known as emerging markets. There was a clear shift in the global economic balance in2010, in favour of China (+10.2%), as well as India and Brazil (+7.7%), for example. Some of the world's developed marketsquite simply saw their recent "mono-growth" models called into question, such as Ireland, Spain and Iceland.

Developed countries' deficits have been severely aggravated in the wake of government bail-out plans and multiple measures tostimulate the economy around the world since 2008. However, these countries have avoided the worst and the recovery thatbegan in late 2009 continued, particularly at the start of the year before waning in the second half of the year, including in Asia.More or less everywhere, massive job losses have come to an end, although without really recreating jobs, in any case not enoughto ensure a lasting upturn. This sluggish job market and bleak housing market continued to weigh down consumer morale.

In spite of everything, while consumer spending improved slightly and inventories were built back up, business investment didnot see enough of an upturn. In Europe, Germany was the main driving force behind improvement (growth of +3.5%), and theonly country able to capture the momentum of global trade.

Europe - and above all the euro - was hit by growing fears relating to the public deficit in Ireland, Portugal and Spain. Ratingsagencies downgraded countries' credit ratings or put them on a watch list, exacerbating tensions on the financial markets. TheEuropean Union, the European Central Bank and the International Monetary Fund adopted a further bail-out plan in the middleof the year with the aim of reducing uncertainties and stabilising the markets.

The European Central Bank also maintained an accommodating monetary policy - keeping its key rate at 1% - while the UnitedStates launched itself even further into an aggressive strategy of quantitative easing. The absolute priority for now is putting theeconomy back on the right track.

This is the result of permanent tensions on the forex markets, with developed countries looking to become competitive again andemerging markets combating the revaluation of their national currencies. For example, the Bank of Japan intervened for the firsttime since 2003 to curb the rise in the yen against the dollar, while Brazil and Taiwan have taken measures to regulate exchangerates. The euro/dollar exchange rate oscillated between 1.22 at the peak of the crisis of confidence in the euro and 1.42 atthe peak of US quantitative easing measures.

The general economic situation was fully reflected by the equity markets in 2010. Europe and its financial markets suffered, witha major lull in May followed by an upturn at the end of the year (-3.3% for the CAC index, -5.8% for the DJ Stoxx 50), whileexcess liquidity resulted in growth of between +11% and +15% for the DJ and S&P 500 indices in the United States. There wasalso uncertainty about gold, with the safe haven reaching levels of $1,400 per ounce, an increase of +30% in one year.

intErEst�ratE�trEnds�

From a macroeconomic viewpoint, 2010 was definitively characterised by slight recovery in the majority of developed countries,primarily thanks to highly accommodating monetary policy by central banks and budget measures to support economic activityinitiated by the public authorities.

Board�of�dirEctors’

rEport�


Against this backdrop, the overall euro interest rate curve reached its lowest levels in Western Europe since the 1929 financialcrisis, before picking up again as of September 2010 as a result of a significant increase in medium and long-term interest rates,as shown in the following chart:

Euro interest rates since 2008

In the credit markets, having been affected by escalation in risk premiums on bank issuers following the collapse of LehmanBrothers in late 2008 and then on corporate bonds in 2009, investors were severely impacted in 2010 by the private debt crisisspreading to "peripheral" sovereign nations in the eurozone.

This situation resulted in major disparities between EMU Member States, to an extent not seen since the single currency wasintroduced.

Differences in 10-year government bond yields in Greece, Ireland, Portugal and Spain relative to French government bondsreached their highest level since the start of the financial crisis, as shown by the chart below:

Eurozone peripheral government bond yields and 10-year OAT rates

As a symbolic example of this trend, the particularly high public deficit in Greece revealed in late 2009 required the jointintervention of the European Union and the International Monetary Fund as of May 2010.

Source: Bloomberg

Source : Bloomberg

EONIA 3- month Euribor 2-yr swap 5-yr swap 10-yr swap xxx

France Portugal Spain Greece Ireland

Jan

08

Mar

08

May

08

Jul 0

8

Sept

08

Nov

08

Jan

09

Mar

09

May

09

Jul 0

9

Sept

09

Nov

09

Jan

10

Mar

10

May

10

Jul 1

0

Sept

10

Nov

10

Jan

11

Jan

08

Apr 0

8

Jul 0

8

Oct 0

8

Jan

09

Apr 0

9

Jul 0

9

Oct 0

9

Jan

10

Apr 1

0

Jul 1

0

Oct 1

0

Jan

11


While Greece was the first country to benefit from a bail-out plan, the crisis then spread to Ireland and many investors now believethat Portugal, or even Spain, is at risk of being the next country to ask for emergency financial aid.

Despite the implementation of a number of major support measures – such as the creation of a €750 million European FinancialStability Facility with the involvement of the International Monetary Fund, a European stabilisation mechanism involving privatecreditors, and a European Central Bank programme to buy sovereign notes – the lack of budgetary federalism within the EMUhas made it difficult for the European Commission, the Member States and the ECB to adopt a communal and unified approachto facing these challenges.

2 - 2010 HIGHLIGHTSgroupE�BpcE�highlights�

Simplification of the holding company structure of Groupe BPCE

As provided for on the formation of Groupe BPCE on 31 July 2009, the proposed merger of BP Participations and CE Participationsinto BPCE was approved on 3 June 2010 by BPCE’s Supervisory Board and the Boards of Directors of the holding companiesand went ahead on 5 August 2010 after the three companies’ general shareholders’ meetings.

Prior to the merger, the stakes held by CE Participations in Nexity (40.82%), GCE SEM (100%), GCE Habitat (100%) and Erixel(99.25%) were transferred to a dedicated holding company called CE Holding Promotion. This was followed by additional stages,including in particular the implementation of a mechanism to protect CE Participations’ proprietary activities.

Following these transactions, BPCE carried out a €1.8 billion capital increase in cash subscribed to equally by the BanquePopulaire banks and the Caisses d’Epargne.

Refocusing on core business lines and sale of non-core assets

Groupe BPCE has refocused on its core business lines by optimising the way in which they are organised:

• The Group has organised its international operations: in June, Financière Océor changed its name to BPCE Internationalet Outre-mer (BPCE IOM) and now comprises the majority of the Group’s assets in the French overseas departments andterritories, Europe and Africa (North and Sub-Saharan Africa);

• It has combined its leasing activities: via its subsidiary Natixis Lease, Natixis finalised the acquisition of a 99.91% stake inCicobail from Crédit Foncier de France, Banque Palatine and Eurosic on 31 December 2010;

• It has set up a “GIE” economic interest group to pool its procurement activities: GCE Achats became BPCE Achats in July2010 and has opened up its activities to the Banque Populaire banks and Natixis;

• It has reduced its risk profile by organising its major sales of Natixis’s workout portfolios.

As regards the sale of non-core assets, in October 2010, following the agreements announced on 5 July, Natixis carried out theeffective sale to a fund advised by AXA Private Equity of the majority of its proprietary private banking activities in France for atotal of €507 million.

In September, BPCE finalised the sale of Société Marseillaise de Crédit (SMC) to Crédit du Nord for €872 million. On a financiallevel, this sale resulted in the freeing up of Core Tier 1 capital of around €700 million.

Improvement in Groupe BPCE’s financial strength

During the second half of 2010, Groupe BPCE repaid a portion of the capital provided by the French government at the time ofthe creation of the new Group:

• 60% of preferred shares held by the government were bought back, representing €1.2 billion in early August and €0.6 billionfollowing the sale of SMC in September 2010;

• An additional €1.3 billion of deeply subordinated notes were redeemed, bringing the share of deeply subordinated notessubscribed by the government and redeemed to 75%.


BanquE�palatinE�highlights

Changes to the scope of activities

EUROSICAt the time of the payment of dividends relating to the 2010 financial year by Eurosic, Banque Palatine opted for the payment ofdividends in shares and thereby increased its percentage stake to 20.12% of share capital.

GERER S2EOn 20 July 2010, Banque Palatine sold all of its shares in GERER S2E, its employee savings subsidiary (generating a loss of €0.2million).

CICOBAILOn 31 December 2010, Banque Palatine sold all of its shares – representing 25.10% of share capital – in Cicobail. This resultedin a capital loss of €6.5 million. This capital loss includes an earn-out payment of €3.1 million determined according to the change in the company’s IFRS netcash position between 1 January and 31 December 2010. This amount will be definitive once Cicobail’s Board of Directors hasapproved the financial statements for the year.

In terms of the impact on earnings, this capital gain should be considered relative to the exceptional dividends paid by the subsidiaryof €24.6 million.

Greater integration into the Group

ELECTRONIC MONEYAs part of its integration into Groupe BPCE, Banque Palatine transferred management of its electronic money activities to NatixisLease. This activity was previously outsourced to CIC/CT6.

CASH MANAGEMENT Banque Palatine’s Banque de France account was integrated into the BPCE group of accounts via the extended second-tiervariant of the Virtual Account. BPCE has agreed with the supervisory authorities that it will gradually include the accounts of itsvarious subsidiaries in its group of accounts. BPCE’s Central Cash Management department has proposed that the scheme bepiloted by Banque Palatine. The solution selected makes it possible for the central body to view and use the liquidity of the entiregroup of accounts.

Initiatives to develop Banque Palatine’s reputation

HISTORIC NOVEL PRIZEIn April, Banque Palatine awarded the “Grand Prix Palatine” for the Historic Novel to Adrien Goetz for his novel “Le Coiffeur deChateaubriand” (Editions Grasset).

DIVERSITYBanque Palatine has decided to support Sciences-Po Paris via a partnership agreement for three academic years to help withthe recruitment and integration of young people from minority backgrounds. This initiative has been made formal primarily throughtutoring students and receiving interns.

BROADCAST MEDIA Banque Palatine has set up a Media division to address professionals’ new film and broadcast media needs. It now offers industryprofessionals a range of tailored services, business know-how and areas of expertise. Made up of renowned specialists who haveworked at well regarded institutions, the Media division aims to enhance Banque Palatine’s range of banking services in anindustry that has seen rapid growth over the last 15 years. Banque Palatine’s goal is to work in collaboration with all partiesinvolved in the sector, while also strengthening internal synergies within Groupe BPCE, a long-standing financial partner of filmand broadcast media.


ETIIn late 2010, Banque Palatine set up the “Observatoire de la Performance des PME-ETI” (SME and mid-size business performanceobservatory), a survey carried out by Opinion Way of 300 managers of businesses generating revenues of €15 million to €500million. One Thursday each month, Challenges magazine and television channel i>TELE report on the results of the survey, whichrepresents the voice of managers of mid-size businesses.

3 - 2010 BUSINESS REVIEWcommErcial�Banking�

Corporate clients

In 2010, despite continuing difficult economic conditions, Banque Palatine continued to expand its commercial banking activitiesin the corporate sector, achieving growth in its three main areas of business:

• Client recruitment improved on its 2009 performance in the core target market of companies with turnover of over €15 million.These companies alone accounted for 255 new relationships in 2010, an increase of more than 6% relative to the previous year.

• Against the backdrop of stabilisation in business levels for SMEs and contraction in investment, outstanding loans to companiesincreased by over 11% in 2010 to €4,132 million. Loan production was brisk in all types of loan (equipment, syndication,LBOs, short term etc.), confirming Banque Palatine’s desire to support companies during this period of economic crisis.

• Net new deposits from companies came to over €961 million in 2010, bringing total capital and financial resources to over€8,720 million, a year-on-year increase of 27%. The Banque Palatine network offers a comprehensive range of products viaits trading floor and its asset management subsidiary Palatine Asset Management.

Banque Palatine’s growth in the corporate market is based on an organisation structured around its national network, dedicatedclient teams, expert business lines and specialist services of Groupe BPCE.

• Through its national branch network, Banque Palatine has retained the core traditions of its history: a local, personalisedand bespoke relationship with clients. In 2010, there were 31 branches in six regions - West, South & Mediterranean, East,Western Paris, Central Paris and Eastern Paris – covering the corporate market.

• Since the acquisition of Crédit Foncier’s Regulated Real Estate Professions business in November 2008, Banque Palatine hasbecome French market leader in the Property Management market, with nearly 1,500 clients and market share of around 40%.

• The Real Estate professionals market, including in particular the investor market – long-standing clients of Banque Palatine– made a significant contribution to loan production in 2010.

• The dedicated major corporate team, based in the Matignon branch in Paris, allowed Banque Palatine to demonstrate itsexpertise in relation to this target market, by working closely with the expert business lines. This division was strengthenedin 2009 and 2010 by the transfer of major accounts from BPCE.

• 2010 also saw the creation of a Media division, with the aim of providing clients in this sector with the bank’s expert businesslines and knowledge. It participates in production credits, and also offers the bank’s full range of expertise to help customerswith the problems they face in terms of their portfolios, business capital, cash management and international activities.Banque Palatine is capitalising on its ability to make different sector operators cooperate by drawing on internal synergies atGroupe BPCE, the long-standing financial partner of cinema and broadcast media.

• The Corporate Finance business lines consolidated their position in Investment Banking in 2010, conducting 54 deals whichgenerated more than €8 million in commission. During 2010, la Banque Palatine demonstrated its strengths by structuring anew €12 million OBSAR bond issue for Groupe Prunay, thereby confirming its strong presence in this market. Banque Palatinealso arranged and underwrote the €43 million secondary LBO by Alpha Private Equity concerning Groupe Françoise Saget/Linvosges.


• International business saw robust growth in 2010, with record documentary loan production of over €630 million, a year-on-year increase of 25%. This performance was due in particular to the introduction of the Cap Export programme, designed tosupport exporting clients with a focus on countries in the Mediterranean Basin and Asia.

• Banque Palatine has also gradually strengthened its partnerships with Natixis’s specialised financing business lines such asNatixis Lease, Natixis Factor and Natixis Garantie.

Reflecting its commitment to companies and their directors, Banque Palatine created the Prix de l’Ambition in 2007 in order torecognise companies that achieve their ambitions in three major areas of the life of a business: growth, international expansionand sustainable development. The fourth awards ceremony in 2010 recognised some thirty or so companies through five regional prizes in Reims, Lyon, Marseille,Bordeaux and Paris and a national award made on 30 June at the Musée des Arts Premiers, Quai Branly.

Personal clients

In 2010, Banque Palatine continued to consolidate its presence among its core target client group of high net worth individuals,professionals and company directors. Recruitment of personal clients with assets of over €50 thousand was very brisk with 455accounts opened, an increase of 81% compared with 2009.

On the deposits side, net new money in life insurance increased by 3% year-on-year to €174 million, confirming the role of lifeinsurance as the investment of choice for the French, which has now become fully relevant again against the backdrop of lowshort-term interest rates and uncertain equity markets. Total customer funds at 31 December 2010 stood at €4,092 million for individual clients, an increase of 3% compared with2009.

On the lending side, the commercial policy adopted consisted of remaining active in this highly competitive market in order tosupport personal clients in their projects. Against the backdrop of an upturn in property sales, home loan production came to€190 million compared with €120 million in 2009, a year-on-year increase of 60%.

Banque Palatine’s expansion in the personal client market is based on a structure built around the following main pillars:

• The 51 branches in our national network remain the main channel for building personalised relationships with our clients.The branch renovation programme launched in 2006, creating a new branch format, continued in 2010 with Marseille Pradoand Antibes.

• The telephone banking branch, Palatine Direct, represents a new distribution channel for Banque Palatine following theacquisition of this business from Crédit Foncier at the end of 2008. Banque Palatine’s offering in retail banking and assetmanagement was thus made available to 16,000 new clients.

• The Private Banking department provides value-added services in wealth management, legal and tax advice, investment advice,and a holistic approach to the private and professional wealth of business owners. Palatine Gestion Privée thus meets the needsof high net worth individuals, and particularly owners of businesses.

• The mutual fund offering of subsidiary Palatine Asset Management provides a full and diversified range covering all areas of thecapital markets: money-market, bond and equity mutual funds. The offering also includes funds specialising in particular areasof the equity markets, such as small and mid-cap stocks, particular geographical regions or socially responsible investment.

• Long-term savings products, providing tax diversification, have been offered to high net worth clients for several years. In 2010,this offering was centred around two main axes: a wealth tax holding company with our partner Truffle Capital, representinginflows of €5.3 million, and SOFICA UNI ETOILE 9, which with subscriptions of €6.3 million in 2010 was one of the keyplayers in the market.

• Banque Palatine also continued to market the range of tax-efficient real estate investment products from BPCE I Selection.


thE�Bank’s�financial�stratEgy

2010 was characterised by a relatively uncertain economic and financial climate, hesitating between recovery and crisis. Againstthis backdrop, Banque Palatine was able to reconcile strong growth in its commercial performance with a continuing high levelof caution in the management of its balance sheet and financial activities.

Bond holdings remained stable over the year at around €1,100m. This portfolio has a resolutely cautious investment philosophy,with the bank investing only in high quality bonds and following strict sector diversification rules. This strategy has enabled BanquePalatine to build up considerable reserves of securities that can be lodged with the European Central Bank, averaging at €650million in 2010, which is regarded as an additional safeguard and was not mobilised at any point during the year.

The bank continued with its strategy of raising resources from its clients. Its policy is to balance out client assets with client resources.Banque Palatine benefited from abundant liquidity, with an average liquidity coefficient of 126% in 2010.

At the same time, Banque Palatine continued in 2010 with its policy of reducing its exposure to interest rate risk in order toprotect itself against the effects of a rise in interest rates. This strategy resulted in fixed-rate hedging being taken out at an averagerate of 1.86% and an initial average term of around five years. The residual gap measuring the overall interest rate risk is nowvery small (less than €200 million). An increase in interest rates would therefore have a negligible effect on the bank’s financialstatements.

Lastly, despite an increase in outstanding loans, the bank maintained a cautious solvency ratio throughout the year (9.42% atthe end of 2009, 9.54% at end-June and 9.82% at the end of 2010).

palatinE�assEt�managEmEnt

Assets under management were in excess of €5.1 million at the end of 2010. This represents a year-on-year increase of 1%, despite low interest rates and tensions in European government bonds.

Equity mutual funds – a core asset class for the company – saw an overall increase of 13% in assets under management thanksto largely positive performances, generally well above those of the benchmark indices, as well as the recruitment of new institutionalclients.

Income after tax came to €8.4 million, 27% higher than the previous year and 21% above the forecast level.

othEr�suBsidiariEs:�BusinEss�rEviEw�and�rEsults��

In addition to Palatine Asset Management, the bank also has subsidiaries Ariès Assurances and Trust Mission.

Ariès Assurances specialises in group employee protection (personal risk insurance and healthcare costs), as well as creatingbespoke pension plans (articles 39 and 83), and the valuation and management of retirement lump-sum bonuses. Net incomefell by €0.05 million to €0.36 million in 2010.

Trust Mission allows for the secure processing of invoices and mail in the form of structured files (letters, contracts, transactionand collection notices etc.), as well as legal time-dating, electronic signature (guarantee of integrity), archiving and receivership(controlled by a court bailiff). Net income increased by €68 million but remained negative at -€1.11 million in 2010.

4 - RISK MANAGEMENTIn terms of risk management, 2010 was impacted by the economic crisis facing businesses. Cost of risk came to €58.2 million,including an exceptional loss of €16.93 million relating to Urbania. Non-performing loans accounted for 4.4% of commercialbanking balance sheet and off-balance sheet commitments. On the basis of the Magnitude IFRS database and adjusted for NorthParis Real Estate, the level of provisions for non-performing loans stood at 56%.

As in previous years, this cost of risk was highly concentrated, with 10 counterparties - including Urbania and some LBOs - representing 81%. Cost of risk in the real estate professionals sector was marginal at €700 thousand.


In this difficult climate, signs of economic recovery can already be seen, as demonstrated by the very significant reduction innew arbitration cases or ad hoc mandates since mid-2010.

Work carried out during the year concerned mainly the various projects relating to the bank’s integration into Groupe BPCE, including the consolidation of risk data in national databases and adapting to new assets and liabilities management and marketrisk standards. Within this framework, the new system of limits and delegations applicable to the bank will come into effect at thestart of 2011.

5 - EMPLOYEE AND ENVIRONMENTAL INFORMATIONA number of employee action initiatives were taken in 2010 in order to improve well-being at work, such as an agreement onoccupational stress signed during the year.

In terms of recruitment, Banque Palatine gives priority to applicants from the employment basins where our various sites arelocated, as is the case in particular for our head office in Val-de-Fontenay in the commune of Fontenay-sous-Bois.

In 2010, Banque Palatine dedicated around 6% of its wage bill to training its employees, exceeding the legal obligation of 1.6%.

Lastly, in preparation for future negotiations on professional equality, the bank signed – with the unanimous agreement of itstrade union organisations – an agreement on classifications aiming to define and rank the levels of classification for each job. An awareness day was also organised on the occasion of “Women’s Day” on the theme of “Women at Banque Palatine: more forwomen”.

A number of advances have been made in reducing carbon dioxide emissions over the last few years, in terms of recycling,saving paper and energy, or digitalising printed information. Efforts are continuing to limit the bank’s carbon footprint, such asthe use of videoconferencing and environmentally-friendly suppliers.

In terms of supporting civic society, the bank has decided to support Science Po Paris within the framework of its Priority EducationAgreements.

6 - FINANCIAL RESULTS FOR THE PAST FIVE YEARSThe table setting out results for the last five years is given in the appendix to this report.

7 - SUBSEQUENT EVENTS There have been no events arising since the closure of accounts likely to have an impact on accounts for 2010.

8 - POSITIONS HELD BY COMPANY OFFICERS A list of all positions and functions held in any company by each of the company officers over the year, and a table of compensationreceived, is given in the appendix to this report.

9 - INFORMATIONS ON PAYMENT TIMES Information on payment times is provided in the appendix to this report.

10 - EMPLOYEE SHARE OWNERSHIP AS AT 31 DECEMBER 2010 At 31 December 2010, no employee held shares in Banque Palatine.

11 - NON-DEDUCTIBLE HOSPITALITY EXPENSES In accordance with Article 223 quarter of the French Tax Code, we hereby note that the accounts for the year include €48,952 innon-deductible hospitality expenses.

The income tax charge due relating to these expenses is €16,854.


12 - PARENT COMPANY AND CONSOLIDATED BALANCE SHEETS parEnt�company�BalancE�shEEt�

Total parent company assets came to €10,786.6 million at 31 December 2010, an increase of +€190.9 million relating primarilyto growth in customer loans.

Government and similar securities came to €147.3 million, down -€71.9 million relative to 31 December 2009 due to the maturingof OAT bonds during the year.

Loans to lending establishments came to €2,921.7 million, down -€35.9 million.

Customer loans, which reflect overall commercial business levels, increased by +€356.5 million or +6.2% from €5,735.9 millionto €6,092.5 million, despite difficult economic conditions.

The bank continued with its financial policy of selling its mutual funds and shares in the Ivory Coast, bringing fixed-income assetsunder management to €8.0 million, a reduction of -€131.2 million.

The sale of the stake in Cicobail is the main reason for the change in shares in associated undertakings.

Intangible assets and property, plant and equipment came to €145.4 million, including the valuation of goodwill on the transferof major accounts in the industrial and commercial sectors from Caisses d’Epargne Participations.

On the liabilities side, debts to lending establishments came to €2,230.8 million, down -€1,119.9 million, mainly due to the repayment of term loans from Banque de France (-€277.4 million), the maturing of the home loan term account (-€200.0 million),the repayment of loans from BPCE (-€179.0 million) and the repayment of a term loan from Banque Intesa (-€173.4 million).

Customer funds came to €5,053.7 million, an increase of +€879.8 million relative to 31 December 2009, relating primarily tosight account deposits (+€396 million) and shares and securities sold under repurchase agreements (+€255.4 million).

Debt securities came to €2,435.6 million, up +€385.7 million, relating primarily to negotiable debt securities (+€393.2 million)and bonds (-€10.0 million).

Share capital remained stable at €538.8 million, with additional paid-in capital of €56.7 million.

consolidatEd�BalancE�shEEt�

As with the parent company balance sheet, total assets and liabilities on the consolidated balance sheet came to €10,752.4million at 31 December 2010, an increase of +€380.5 million relative to 2009.

On the assets side, this increase relates primarily to customer loans (+€406.2 million), reflecting a strong marketing performance.Loans to lending establishments also rose by +€153.5 million.

On the liabilities side, the increase relates primarily to customer deposits (+€881.3 million) and debt securities (+€384.7 million).Shareholders’ equity (Group share) was €725.3 million, benefiting from net income for the year.

13 - PARENT COMPANY AND CONSOLIDATED RESULTS parEnt�company�rEsults�

Parent company results for Banque Palatine in 2010 showed further significant improvement on 2009, with net income approximately+€33.7 million stronger at €53.0 million.

At €287.5 million, net banking income was +10.1% higher than in 2009.


General operating expenses plus depreciation, amortisation and provisions decreased by -0.2% to €171.0 million, reflectingcontrol of costs.

Gross operating income rose by around +€26.6 million to €116.5 million, as a result of the combined effect of strong growth innet banking income and stable general operating expenses.

The cost-income ratio was 59.5% compared with 65.6% in 2009.

Cost of risk increased by €30.4 million to -€58.2 million due to the weaker economic situation for SMEs and depreciation chargesrelating to Urbania.

Net gains on non-current assets came to around €2.9 million, relating primarily to the reversal of the provision for impairment ofthe bank’s stake in Eurosic.

ifrs�consolidatEd�financial�statEmEnts�

Consolidated net income under IFRS was €34.4 million, +€33.3 million higher than in 2009.

Net banking income came to €280.1 million, up 12.7%.

General operating expenses (comprising general expenses of €175.4 million and depreciation charges of €12.5 million, representinga total of €187.8 million) decreased by -1.1%.

Gross operating income was €92.3 million, up +57.3% relative to 2009.

Cost of risk deteriorated relative to 2009 to -€62.3 million compared with -€31.6 million, due to worsening cost of risk as measuredin the parent company accounts.

The share of income of affiliated undertakings was €21.2 million, +€39.8 million higher than in 2009, with a substantial positivecontribution from Eurosic (+€16.6 million).

Profits from other assets came to -€5.5 million.

Net income attributable to equity holders of the parent was €34.4 million in 2010 compared with €1.1 million in 2009.

14 - RESOLUTIONSIn view of net income of €53,001,763.33 and retained earnings of €9,160,973.29, distributable net income came to€62,162,736.62.

After an allocation to the statutory reserve of €2,650,088.17, we propose to the general shareholders’ meeting the payment of adividend of €34,213,970.18 or €1.27 per share for each of the 26,940,134 shares that make up the company’s share capital.

Retained earnings after such an allocation would be €25,298,678.27.

We propose that in accordance with Article 31 of the company’s by-laws, shareholders may opt for payment of the dividend inshares at a price of €24.2476 per share. This price corresponds to the net asset value of Banque Palatine after payment of the2010 dividend.

In accordance with Article 27 of law n° 65-566 of 12 July 1965, we note below the dividend payments made in previous years:


Year Number of shares Total dividend Dividend per share

2007 20 660 602 € 79 956 529,74 € 3,87 *

2008 26 618 599 € 7 453 207,72 € 0,28 *

2009 26 940 134 € 1 077 605,36 € 0,04 *

* not eligible for the 40% rebate

15 - OUTLOOKmacroEconomic�climatE:�wEak�and�limitEd�rEcovEry

Following a technical rebound, economic activity in developed countries could slow down in 2011 because of support factors reflatingthe economy coming to a natural end, whether concerning the automatic rebuilding of companies’ inventories or budgetary supportplans. However, this consolidation should ensure more solid and autonomous growth, likely to result in sluggish and risky recovery,but without a further slump or deflation. This would be restricted in the long term by a long process of debt reduction in both theprivate and public sector.

The current phase falls within what is usually a delicate period in the cycle, during which private demand needs to take over from publicdemand in order to result in a maintained process of growth. However, the responsiveness of public and monetary authorities, as wellas economic fundamentals, reduce the likelihood of sliding back into a recession, particularly as most of the corrections in businessand consumer spending have already been made. Similarly, the balancing out of public accounts - which is expected to have a negativeimpact on European GDP of around 1 point in 2011 (1.2 points for France) - is likely to be accompanied by the maintaining of accom-modating long-term monetary policy, which will probably only be tightened very gradually in the absence of inflationary tension.

France is expected to see GDP growth of around 1.6% in 2011, as in 2010. 3-month rates are expected to reach an annual averageof 1.2% in 2011. The 10-year OAT rate should be maintained at around 3.5%, or could even rise gradually towards 3.8% at the endof the year, more in keeping with the economic cycle.

groupE�BpcE�rEsolutEly�committEd�to�upholding�its�stratEgic�targEts�

Against this backdrop, Groupe BPCE is still focusing on achieving the targets set out in its Ensemble 2010 – 2013 strategic plan, inparticular:

• Improving its financial strength: the Group is maintaining its target of paying back all of the capital provided by the Frenchgovernment over the duration of the plan, thanks primarily to putting earnings aside as reserves;

• Continuing ambitious and innovative marketing initiatives by client-focused networks;• In relation to winning customers and providing long-term support for customers for the Banque Populaire banks; • In relation to the “client at the heart” concept for the Caisses d’Epargne;• Enhancing synergies between Natixis and bank networks.

BanquE�palatinE

2010 was the second year of Banque Palatine’s Strategic Plan, confirming the achievement of the first milestones in the bank’sstrategic plan.

Each of the sources of leverage has been fully deployed thanks to the commitment of all members of staff, in order to increasenet banking income while retaining tight control of the cost-income ratio.

On the back of these results, 2011 will be the year of quality for Banque Palatine, as well as consolidating past successes withthe goal of asserting its unique identity in the banking industry.


parEnt�company

financial�statEmEnts

1 - BALANCE SHEET AND OFF-BALANCE SHEET ITEMS


2 - INCOME STATEMENT


To the ShareholdersBanque Palatine S.A.42, rue d’Anjou75008 Paris

Ladies and Gentlemen,

In accordance with the assignment entrusted to us by the Annual General Meeting of Shareholders, we hereby present our reportfor the financial year to 31 December 2010, on:- our audit of the annual financial statements of Banque Palatine S.A., as appended to this report;- the justification of our opinions;- the specific checks and information determined by law.

The financial statements were prepared by the Board of Directors. It is our responsibility to express an opinion on these financialstatements based on our audit.

I - OPINION ON ANNUAL FINANCIAL STATEMENTSWe have conducted our audit in accordance with the applicable professional standards in France. These standards require that weperform such tests and procedures so as to obtain reasonable assurance that the financial statements are free from material mis-statement. An audit consists of checking, by sampling or any other selection method, the data justifying the values and informationprovided in annual financial statements. It also includes an assessment of the accounting policies used and the significant estimatesmade in preparing the financial statements, together with an evaluation of the overall adequacy of their presentation. We believethat the information we have gathered forms a sufficient and appropriate basis for our opinion.We certify that the financial statements for the year have been prepared in accordance with French accounting standards and thatthey give a true and fair view of the results for the year and the financial situation and assets of the company at the year end.Without altering the opinion expressed above, we would draw your attention to note 2.2 of the appendices, which details a changein accounting method of concerning CRC regulation n° 2009-03 relating to the recognition of commission income received by acredit institution and marginal transaction costs when granting or acquiring an overdraft facility.

II - JUSTIFICATION OF OUR OPINIONSIn accordance with the provisions of Article L. 823-9 of the French Commercial Code regarding the justification of our opinions, we bring the following items to your attention:

Changes in accounting method:

As part of our assessment of the accounting methods and principles adopted by your company, we have examined the appropriatenessof the aforementioned change in accounting method and its presentation.

Accounting estimates:

• As indicated in notes 2.3.2, 3.2, 3.10 and 5.9 of the appendices, your company books impairment reserves and provisions tocover the lending risk that is inherent in its business activities. As part of our assessment of the significant estimates used in preparing the financial statements, we have examined the controlprocedures put in place by the Board of Directors relative to the monitoring of lending risk, the assessment of risks of non-recoveryand the coverage of such risks by impairment, treated as assets where determined on an individual basis and as liabilities in thecase of provisions for unallocated lending risk.

statutory�auditors’�rEport�

on�thE�annual�financial�statEmEnts�

(yEar�to�31�dEcEmBEr�2010)

PRICEWATERHOUSECOOPERS AUDIT63, rue de Villiers92208 Neuilly-sur-Seine CedexFrance

KPMG AUDIT1, cours Valmy92923 Paris La Défense CedexFrance

• Your company books provisions against the risks relating to claims made against it as described in notes 2.3.8, 3.10.1 and3.10.2. As part of our assessment of the significant estimates used in preparing financial statements, we have examined the control pro-cedures put in place by the Board of Directors relative to the assessment of such risks and their coverage by specific provisions.

• Your company books provisions to cover against unfavourable consequences relating to commitments made on Pland’Epargne Logement and Compte Epargne Logement savings accounts, as described in notes 2.3.8 and 3.10.4 of theappendices. Our work consisted of assessing the data and the assumptions on which these estimates are based and of reviewing thecalculations made by the company.

• As described in notes 2.3.4 and 3.4 of the appendices, your company values equity holdings and other securities held forthe long term at the lower of their historic cost and their value in use.As part of our assessment of the estimates used in preparing financial statements, we have examined the items employedin calculating the value in use of the main lines of the portfolio.

• As part of the normal process of preparing accounts, your company has also made accounting estimates to determine theprovisions to be made for employee benefits (see notes 2.3.8, 3.10.1 and 3.10.3 of the appendices).We have reviewed the assumptions used and checked that these accounting estimates are based on documented methodsand are in accordance with the principles set out in the notes mentioned.

The assessments thus carried out form part of our overall assignment of auditing the annual financial statements as a whole andhave therefore contributed to the formation of the opinion expressed in the first section of this report.

III - SPECIFIC CHECKS AND INFORMATIONIn accordance with the professional standards applicable in France, we have also conducted the specific checks required bylaw.We have no comment to make on the accuracy and agreement with the annual financial statements of the information given inthe Board of Directors’ report and in the documents addressed to shareholders regarding the financial situation and annual fi-nancial statements.As regards the information provided in accordance with Article L. 225-102-1 of the French Commercial Code concerning com-pensation and benefits paid to corporate officers, as well as commitments made in their favour, we have verified their consistencywith the financial statements or with the information used to prepare the financial statements and, if applicable, with the infor-mation collected by the company from the companies controlling it or controlled by it. On the basis of this work, we confirm theaccuracy and sincerity of this information.

Neuilly-sur-Seine and Paris La Défense, France, 2 May 2011

The Auditors

PricewaterhouseCoopers Audit KPMG AuditDepartement of KPMG S.A.

Guy Flury Marie-Christine JolysPartner Partner

Philippe Saint-PierrePartner



statutory�auditors’�rEport�on

thE�paymEnt�of�a�dividEnd�in�sharEs��(ordinary�sharEholdErs’�mEEting�of�17�may�2011)



To the Shareholders, Banque Palatine S.A.Siège social : 42, rue d’Anjou - 75008 ParisCapital Social : €.538802680

Ladies and Gentlemen the Shareholders,

As statutory auditors of Banque Palatine S.A. and in accordance with Article L.232-19 of the French Commercial Code, we herebypresent our report on the proposed offer of payment to shareholders of a dividend in shares, which is submitted to the OrdinaryShareholders’ Meeting for approval.The price of the shares to be issued in the event of the payment of a dividend in shares has been determined by the Board ofDirectors. It is our duty, on the basis of the work we have conducted, to form an opinion on the application of rules governing thedetermination of the issue price.We have employed all due diligence we believed necessary in accordance with the professional standards of the Compagnie Nationaldes Commissaires aux Comptes regarding this review. This due diligence consists of ensuring that the issue price of the shares hasbeen determined in accordance with the rules set out in law.The factors used in the determination of the issue price are as follows:- shareholders' equity in Banque Palatine S.A. at 31 December 2010 less the proposed dividend payout from 2010 income;- divided by the number of Banque Palatine S.A. shares in issue at 31 December 2010. In view of these factors, the issue price of the shares, including issue premium, is €24.2476.We have no observations to make on the application of the applicable rules in the determination of the issue price of shares.






To the ShareholdersBanque Palatine S.A.42, rue d'Anjou75008 Paris


In our role as auditors of your company, we hereby present our report on regulated agreements.

It is not our responsibility to consider whether other agreements exist but to report to you, on the basis of the information providedto us, the characteristics and main details of those of which we have been made aware, without giving our opinion of their usefulnessor appropriateness. It is your responsibility, pursuant to Article R.225-58 of the French Commercial Code, to assess the advantageattached to these agreements when considering whether or not to approve them.

In addition, it is our responsibility, if applicable, to report to you on the information covered by Article R.225-88 of the French Com-mercial Code relating to the execution during the course of the past year of agreements already authorised by the general sharehol-ders' meeting.

We have employed all due diligence we believed necessary in accordance with the professional standards of the Compagnie Nationaldes Commissaires aux Comptes regarding this review. This diligence consists of checking the agreement of the information providedto us with the underlying documents on which it is based.

I - AGREEMENTS SUBJECT TO APPROVAL FROM THE GENERAL SHAREHOLDERS'MEETING

In accordance with Article L.225-88 of the French Commercial Code, we have been made aware of the following agreements whichreceived prior authorisation from your Supervisory Board.

I-1 - AGREEMENTS WITH BPCE S.A.Supervisory Board members concerned:- Olivier KLEIN: member of the Management Board of BPCE S.A. and member of the Supervisory Board of Banque Palatine S.A.;- Thierry CAHN: member of the Supervisory Board of BPCE S.A. and member of the Supervisory Board of Banque Palatine S.A.;- Pierre VALENTIN: member of the Supervisory Board of BPCE S.A. and Vice-Chairman of the Supervisory Board of BanquePalatine S.A.;

- Alain LEMAIRE: member of the Management Board of BPCE S.A. and Chairman of the Supervisory Board of Banque Palatine S.A.

• Tax consolidation agreement

Nature and purpose:

The aim of this agreement with BPCE S.A. is to determine the terms for the implementation and operation of tax consolidationbetween Banque Palatine S.A. and BPCE S.A. The agreement, signed on 17 November 2010, was authorised by the SupervisoryBoard on 19 February 2010.

statutory�auditors'�spEcial�rEport

on�rEgulatEd�agrEEmEnts(annual�gEnEral�mEEting�to�approvE�thE�financial�statEmEnts�

for�thE�yEar�to�31�dEcEmBEr�2010)




Details:

Under the agreement, corporation tax due by Banque Palatine S.A. has been paid by BPCE S.A. in the amount of €7,767 thousand.

• Invoicing agreement

Nature and purpose:

As of 1 July 2010, this agreement with BPCE S.A. replaces the previous invoicing agreement signed with CNCE S.A. on 11 December2007 (the central body of the former Caisse d'Epargne Group). The agreement was signed on 21 December 2010 and was authorisedby the Supervisory Board on 10 December 2010.

Its purpose is to determine the amount of compensation to be paid to BPCE S.A. for the duties exercised within the frameworkof the affiliation of Banque Palatine S.A.:- Guaranteeing the liquidity and solvency of Banque Palatine S.A.;- Exercising administrative, technical and financial control over its organisation and management;- Overseeing observance of legal and regulatory requirements, in particular CRBF regulation 97-02.

Details:

The compensation paid to BPCE S.A. in respect of these duties is a flat rate of €1,100 thousand a year, which is only payable in respect of the period from 1 July 2010 to 31 December 2010, as the previous invoicing agreement was still in effect from 1 January2010 to 30 June 2010 (see section II-a)-8 below). As of 2011, compensation will be indexed to the change in the regulatory capitalrequirement between 31 December of year n-2 and 31 December of year n-1, with a minimum level of €500 thousand a year.The financial impact for 2010 of this agreement and the invoicing agreement it cancels and replaces (see section II-a)-8 below) was an expense of €860 thousand.

I-2 - CREDIT AGREEMENT WITH GCE DOMAINES S.A.Supervisory Board members concerned:- Alain LEMAIRE: director of GCE Domaines S.A. and Chairman of the Supervisory Board of Banque Palatine S.A.;- Stéphane CAMINATI: Stéphane Caminati: director of GCE Domaines S.A. and member of the Supervisory Board of Banque

Palatine S.A.

Nature and purpose:

The purpose of this agreement with GCE Domaines S.A. is to determine the amount, term, repayment and terms of use of thecredit facility taken out by GCE Domaines S.A. from Banque Palatine S.A. to finance its general requirements.The agreement, signed on 28 September 2010, was authorised by the Supervisory Board on 30 June 2010.

Details

The characteristics of the credit facility are as follows:- Maximum amount of credit of €3 million;- Maturing 364 days after the agreement is signed;- May be renewed or extended no later than 60 days before maturity;- Used in the form of an overdraft.

The financial impact for 2010 was income of €9 thousand.

I-3 - AMENDMENT TO THE ADMINISTRATIVE SERVICES AGREEMENT WITH BANQUE FIDUCIAL S.A.Supervisory Board members concerned:- Thierry ZARAGOZA: Chairman of the Supervisory Board of Banque Fiducial S.A. and member of the Management Board ofBanque Palatine S.A.


Nature and purpose:

The purpose of this amendment is to specify the terms of Banque Palatine S.A. making a Head of Investment Services Controlavailable to Banque Fiducial S.A. pursuant to the administrative services agreement with Banque Fiducial S.A. of 11 July 2007. The Head of Compliance and Permanent Controls at Banque Palatine S.A. has therefore been designated Head of InvestmentServices Control at Banque Fiducial S.A. in order to allow it to comply with the professional obligations set out in Article L.621-15-II of the French Monetary and Financial Code.This amendment to the administrative services agreement of 11 July 2007 with Banque Fiducial S.A. signed on 13 December2010 was authorised by the Supervisory Board on 22 September 2010.

Details:

The financial impact for 2010 of the agreement and its amendment was income of €195 thousand.

I-4 - AMENDMENTS AND UPDATING OF AGREEMENTS WITH PALATINE ASSET MANAGEMENT S.A.Supervisory Board members concerned:- Daniel KARYOTIS: Chairman of the Supervisory Board of Palatine Asset Management S.A. and Chairman of the ManagementBoard of Banque Palatine S.A.

- Jean-Marc Ribes: member of the Supervisory Board of Palatine Asset Management S.A. and member of the ManagementBoard of Banque Palatine S.A.

- Thierry Zaragoza: member of the Supervisory Board of Palatine Asset Management S.A. and member of the ManagementBoard of Banque Palatine S.A.

- Laurent Roubin: member of the Supervisory Board of Palatine Asset Management S.A. and member of the Supervisory Boardof Banque Palatine S.A.

• Update of appendix 1 of the administrative services agreement

Nature and purpose:

The purpose of the update of appendix 1 of the administrative services agreement with Palatine Asset Management S.A. of 19September 2007 was to specify the list of:- Basic services charged at cost;- Optional services provided on request from Palatine Asset Management S.A. that are charged specifically.

This update of appendix 1 of the administrative services agreement of 19 September 2007, signed on 23 September 2010, wasauthorised by the Supervisory Board on 22 September 2010.

Details:

The financial impact for 2010 of the administrative services agreement of 19 September 2007 as amended on 23 September2010 was income of €885 thousand.

• Pricing amendment to the investment agreement

Nature and purpose:

The purpose of the amendment to the investment agreement of 13 September 2005 signed on 1 October 2010 is to amend thelist of mutual funds and compensation paid to Banque Palatine S.A.The amendment to the investment agreement of 13 September 2005 signed on 1 October 2010 was authorised by the SupervisoryBoard on 22 September 2010.

Details:

The financial impact for 2010 of the investment agreement of 13 September 2005 as modified by the amendment of 1 October2010 was income of €3,970 thousand.


I-5 - CICOBAIL S.A. SHARE TRANSFER AGREEMENT WITH NATIXIS LEASE S.A.Supervisory Board members concerned- Maurice BOURRIGAUD: director of Natixis Lease S.A. and member of the Supervisory Board of Banque Palatine S.A..

Nature and purpose:

The purpose of the agreement with Natixis Lease S.A. is to determine the terms for the transfer of Cicobail S.A. shares held byBanque Palatine S.A. to Natixis Lease S.A.The agreement, signed on 23 December 2010, was authorised by the Supervisory Board on 10 December 2010.

Details:

The terms of the share transfer are as follows:- Basic price per share of €45.43, representing a total of €45,680 thousand for all of the shares held by Banque Palatine S.A.;- Selling price increased or reduced on the basis of the positive or negative change in Cicobail S.A.'s IFRS net cash position(as determined by the Board of Directors of Cicobail S.A.) between 31 December 2009 and 31 December 2010, adjustedfor all cash payouts or reductions in share capital during 2010, amounting to €153,072 thousand.

The financial impact of the agreement to transfer Cicobail S.A. shares to Natixis Lease S.A. was a capital loss of €6,451 thousand,including an earn-out payment of €3,036 thousand.

II - AGREEMENTS ALREADY APPROVED BY THE GENERAL SHAREHOLDERS' MEETINGII-A - AGREEMENTS APPROVED IN PRIOR YEARS AND STILL IN EFFECT DURING THE YEARIn accordance with Article R. 225-57 of the French Commercial Code, we have been informed that the following agreements,already approved by the general shareholders' meetings for previous years, remained in effect in 2010.

II-A-1 - AGREEMENT WITH ARIÈS ASSURANCES S.A.S.

Nature and purpose:

On 12 December 2007, Banque Palatine S.A signed an administrative services agreement with Ariès Assurances S.A.S., aninsurance and reinsurance brokerage company and a wholly-owned subsidiary of Banque Palatine S.A. The agreement wasauthorised by the Supervisory Board on 11 December 2007. An amendment to the agreement signed on 21 May 2009 wasauthorised by the Supervisory Board on 20 May 2009. The services provided by Banque Palatine S.A. relate to the followingareas:

- Accounting management;- Employee management;- Legal and tax services; - Provision of office IT tools; - Periodical controls; - Provision of premises; - Insurance;- Specific services.

Details:

The financial impact of the agreement for 2010 was income of €52 thousand.


II-A-2 - AGREEMENT WITH BANQUE FIDUCIAL S.A.

Nature and purpose:

On 11 July 2007, Banque Palatine S.A. signed an administrative services agreement with Banque Fiducial S.A. The servicesprovided by Banque Palatine S.A. relate to legal management, human resources, internal control and periodical audit of theactivities and services of Banque Fiducial S.A.The amendment of 16 December 2009 specified the terms for the application of Banque Palatine S.A.'s permanent controlservices. As a majority shareholder and pursuant to the directives of BPCE S.A. (majority shareholder of Banque Palatine S.A.),Banque Palatine S.A. carries out additional controls and supervision of Banque Fiducial S.A. via its specialist control units: theRisk Management department, IT Security, Compliance and Accounting Revision.The agreement was amended on 13 December 2010 (see section I-3 above).

Details:

The financial impact for 2010 of the administrative services agreement as amended on 16 December 2009 and 13 December2010 is stated in section I-3 of this report.

II-A-3 - AGREEMENTS WITH PALATINE ASSET MANAGEMENT S.A.

• Administrative services agreement

Nature and purpose:

On 19 September 2007, Banque Palatine S.A. signed an administrative services agreement with Palatine Asset ManagementS.A. The agreement was approved by the Supervisory Board on 19 September 2007. The services provided relate to the followingareas:

- Legal and tax;- Accounting management;- Employee management;- Staff management;- Provision of IT equipment, office equipment and secure hosting resources ;- Compliance and permanent control;- Internal control;- Provision of premises.

The agreement was amended on 10 September 2008 in order to extend it to include the monitoring of the IT network and wasalso amended in 2010 (see section I-4 above).

Details:

The financial impact for 2010 of the agreement as amended in 2010 is stated in section I of this report.

• Investment agreement

Nature and purpose:

An investment agreement was signed between Banque Palatine S.A. and Palatine Asset Management S.A. on 13 September2005 and amended on 1 December 2008, 1 October 2009 and 1 October 2010 (see section I-4 above). This agreement defines:

- The nature and conditions of execution of the services provided by parties for the distribution of mutual funds and theterms of compensation paid to the distributed on the basis of average assets invested;

- The terms of the collaboration between Banque Palatine and Palatine Asset Management in countering money launderingand financing of terrorism;

Details:

The financial impact for 2010 of this agreement and its amendments is stated in section I-4 of this report.


• Custodian agreement

Nature and purpose:

The purpose of this agreement, signed on 12 may 2009, is to specify the obligations resulting from the custodian's legal andregulatory duties, as well as the rights and obligations of each of the parties on the basis of these duties being carried out,namely custody of fund assets, the holding of cash accounts opened in the custodian's books and checking the regularity ofthe asset management company's decisions.

Terms:


II-A-4 - AGREEMENT WITH SOCIÉTÉ FONCIÈRE D’INVESTISSEMENT S.A.S.

Nature and purpose:

This agreement concerns the granting of a subordinated loan with capital remaining due of €130 thousand as of 31 December2010. This loan is subject to interest and the average money market rate (T4M) plus 150 basis points. However, interest is onlypayable if Société Foncière d’Investissement S.A.'s annual earnings allow it to generate a profit and up to the amount of this profit.

Terms:


II-A-5 - AGREEMENTS WITH CRÉDIT FONCIER DE FRANCE S.A.

• Industrial partnership agreement

Nature and purpose:

Within the framework of the partial transfer of assets of Crédit Foncier de France S.A. to Banque Palatine S.A. of 10 June 2008,an industrial partnership agreement was authorised by the Supervisory Board on 1 July 2008 and signed on 4 July 2008. The aim of the agreement is to accompany the implementation of the transfer of banking services activities and define the termsof the cooperation between Crédit Foncier de France S.A. and Banque Palatine S.A. for the development of their future activitiesconcerning both transferred retail clients and business clients. The agreement came into effect on 22 November 2008 andends on 31 December 2012. It can then be renewed by two-year periods with the written agreement of each of the parties.

Terms:

The financial impact of the agreement for 2010 was income of €1,004 thousand.

• Refinancing agreement in favour of Crédit Foncier de France S.A.

Nature and purpose:

Within the framework of the partial transfer of assets of Crédit Foncier de France S.A. to Banque Palatine S.A. of 10 June 2008,the cash attached to the accounts of retail and business clients of Crédit Foncier de France S.A. was transferred to BanquePalatine S.A. In order to avoid a significant and immediate cash requirement at Crédit Foncier de France S.A., a refinancingagreement for 50% of the assets transferred was authorised by the Supervisory Board and signed on 2 December 2008.

Crédit Foncier de France S.A. repays the funds lent by Banque Palatine S.A. at Eonia + 30 bps capitalised.

Terms:

The financial impact of the agreement for 2010 was income of €6,356 thousand.


II-A-6 - AGREEMENT WITH TRUST MISSION S.A.

Nature and purpose:

On 10 december 2008, banque palatine s.a. signed an administrative services agreement with trust mission S.A. the servicesprovided by banque palatine s.a. are as follows:

- Preparation for and holding of Board meetings and ordinary and extraordinary general shareholders' meetings of TrustMission S.A., particularly with regard to matters to be included in the agendas for these meetings;

- Finalisation and communication of all documents made necessary by the holding of such meetings, including the TrustMission S.A. annual report;

- Carrying out regulatory formalities relating to the preparation for, holding of and follow-ups of such meetings.

These services are provided in terms of quality and quantity in accordance with the usual practices of banque palatine S.A.

Terms:


II-A-7 - AGREEMENT WITH GCE DOMAINES AND ITS SUBSIDIARIES

Nature and purpose:

The notional cash pooling agreement authorised by the supervisory board on 20 may 2009 and signed on 22 september 2009serves to merge the interest in the accounts of the companies concerned held with banque palatine s.a.The account of each of the companies involved is the subject of a quarterly statement. banque palatine s.a. merges the debitbalances and credit balances of the companies in order to produce a single overall balance. interest is then recalculated onthe basis of this single merged balance.

Terms:


II-A-9 - AGREEMENTS WITH BPCE S.A.

• Holding company to structure the creation and operation of a business base in the Trade business line

Nature and purpose:

This agreement was authorised by the Supervisory Board on 28 February 2007. It concerns the creation of a holding companyto be owned by Banque Palatine S.A. and BPCE S.A. (formerly Caisse d’Epargne Participations S.A.). The details of the creationand operation of a business base in the Trade business line are as follows:

- Contribution of €122 thousand by each of the partners;- Distribution of operating income according to a table determined in relation to a business plan that may be reviewed annuallyprior to 31 March based on results to 31 December.

The company is constituted with effect from the signature date of the agreement and will expire on 31 December 2016. It willthen be automatically renewed for a period of five years, unless either party notifies the other by recorded delivery at least oneyear before the date of expiry.

Terms:

The financial impact of the agreement for 2010 was an expense of €84 thousand.


• Invoicing agreement

Nature and purpose:

An invoicing agreement was signed on 11 December 2007 with CNCE S.A. (central body of the former Caisse d’EpargneGroup). This agreement remained in effect until 30 June 2010 and was replaced by the invoicing agreement of 21 December2010 with BPCE S.A., as described in section I of this report.The compensation paid to BPCE S.A. (formerly CNCE S.A.) in respect of the work performed by BPCE S.A. is at a flat rate of€500 thousand per year indexed to the consumption of regulatory capital between 31 December of year n-2 and 31 Decemberof year n-1, with a minimum level of €500 thousand per year. Since 2009, indexation has been equal to the change in consumption of regulatory capital as reported in the COREP summarydocument.

Terms:

The financial impact for 2010 of this agreement and the agreement with bpce s.a. of 21 december 2010 that replaces it(see section i-1 above) is stated in section i-1 of this report.

II-B - AGREEMENTS APPROVED IN PRIOR YEARS NOT IN EFFECT DURING THE YEARWe have also been informed of the continuation of the following agreements, already approved by the general shareholders' meetingsfor previous years, which did not remain in effect in 2010.

• Repurchase agreement with Palatine Asset Management S.A.

Nature and purpose:

The repurchase agreement between Banque Palatine S.A. and Sanpaolo Asset Management (now Palatine Asset ManagementS.A.) of 5 January 1998 was terminated on 8 April 2008. A new agreement was signed on 2 July 2008 which takes note of theabolition of powers given to Palatine Asset management S.A. by Banque Palatine S.A. to conclude repurchase transactions in itsname with external counterparties and compensation reviewed on the basis of current market conditions.

Terms:

No financial impact for 2010.


The Statutory Auditors

PricewaterhouseCoopers Audit KPMG AuditDépartement of KPMG S.A.




consolidatEd�financial

statEmEnts�undEr�ifrs�

I. CONSOLIDATED BALANCE SHEETASSETS

LIABILITIES AND EQUITY


II. CONSOLIDATED INCOME STATEMENT

III. NET INCOME AND GAINS AND LOSSES RECOGNISED DIRECTLY AS EQUITY


IV. STATEMENT OF CHANGES IN EQUITY


V. CASH FLOW STATEMENT


To the Shareholders Banque Palatine S.A.42, rue d’Anjou75008 Paris


In accordance with the assignment entrusted to us by the Annual General Meeting of Shareholders, we hereby present our reportfor the financial year to 31 December 2010, on:- our audit of the consolidated financial statements of Banque Palatine S.A., as appended to this report;- the justification of our opinions;- the specific checks determined by law.

The consolidated financial statements were prepared by the Board of Directors. It is our responsibility to express an opinion of thesefinancial statements based on our audit.

I. OPINION ON THE CONSOLIDATED FINANCIAL STATEMENTSWe have conducted our audit in accordance with the applicable professional standards in France. These standards require that weperform such tests and procedures so as to obtain reasonable assurance that the consolidated financial statements are free frommaterial mis-statement. An audit consists of checking, by sampling or any other selection method, the data justifying the values andinformation provided in consolidated financial statements. It also includes an assessment of the accounting policies used and thesignificant estimates made in preparing the financial statements, together with an evaluation of the overall adequacy of theirpresentation. We believe that the information we have gathered forms a sufficient and appropriate basis for our opinion.

We certify that the consolidated financial statements for the year have been prepared in accordance with International FinancialReporting Standards as adopted in the European Union and that they give a true and fair view of the financial situation and resultsof the entities included in the scope of consolidation.

II. JUSTIFICATION OF OUR OPINIONSIn accordance with the provisions of Article L. 823-9 of the French Commercial Code regarding the justification of our opinions,we bring the following items to your attention:

Accounting estimates

• As indicated in notes 4.16, 5.5.2, 5.16, 6.7, 7.2.2 and 7.2.3 of the appendices, your group books impairment reserves andprovisions to cover the lending risk that is inherent in its business activities. As part of our assessment of the significant estimates used in preparing financial statements, we have examined the controlprocedures put in place by the Board of Directors relative to the monitoring of lending risk, the assessment of risks of non-recovery and the coverage of such risks by impairment determined on an individual basis and for the portfolio.• Your group books provisions against the risks relating to claims made against it as described in notes 4.3 and 5.16. As part of our assessment of the significant estimates used in preparing financial statements, we have examined the control procedures put in place by the Board of Directors relative to the assessment of such risks and their coverage by specific provisions.

statutory�auditors’�rEport�on�thE

consolidatEd�financial�statEmEnts(yEar�to�31�dEcEmBEr�2010)




• Your group books provisions to cover against unfavourable consequences relating to commitments made on Plan d’EpargneLogement and Compte Epargne Logement savings accounts, as described in notes 4.3 and 5.16 of the appendices. Our work consisted of assessing the data and the assumptions on which these estimates are based and on reviewing thecalculations made by the group.• As indicated in notes 4.1, 6.1, 6.3 and 6.4, your group uses certain models and methods to determine the fair value of financialinstruments, estimate the impairment to be constituted and assess the relevance of the classification of hedging relationships. We have examined control structures for accounting classification, the checking of models and the parameters used to valuesuch positions.• As part of the normal process of preparing accounts, your group has also made accounting estimates to determine the provisions to be made for employee benefits (see notes 4.3, 4.7, 5.16 and 8.2 of the appendices). We have reviewed the assumptions used and checked that these accounting estimates are based on documented methodsand are in accordance with the principles set out in the notes mentioned.

The assessments thus carried out form part of our overall assignment of auditing consolidated accounts as a whole and havetherefore contributed to the formation of the opinion expressed in the first section of this report.

III. SPECIFIC VERIFICATIONIn accordance with the professional standards applicable in France we have also carried out the specific verification required bylaw of the information given in the Group's business report.We have no observations to make regarding its accuracy or its conformity with the consolidated financial statements.


The Auditors




SIÈGE SOCIAL : 42, rue d’Anjou - 75382 Paris Cedex 08 - Tél. : 01 55 27 94 94 - www.palatine.frSIÈGE ADMINISTRATIF : Le Péripole, 10, avenue Val de Fontenay - 94131 Fontenay-sous-bois Cedex - Tél. : 01 43 94 47 47SOCIÉTÉ ANONYME À DIRECTOIRE ET CONSEIL DE SURVEILLANCE AU CAPITAL DE 538.802.680 € - 542104245 R.C.S PARISC.C.P. Paris 2071 - TÉLEX 651 322 BSPPA - BIC BSPFFRPPXXX - Swift BSPF FR PP - Intermédiaire d’assurance immatriculé à l’Oriassous le numéro 07 025 988 - « Transactions sur immeubles et fonds de commerce sans perception de fonds, effets ou valeurs » n° T12620délivrée par la Préfecture de Police de Paris, garantie par la CEGI – 128 rue de la Boétie - 75378 Paris cedex 08 - Une Société du Groupe BPCE

2010 extract from the management report · 2010, in favour of china (+10.2%), as well as india and...

Documents