CM - RA 2005_GB

2005
ANNUAL REPORT
Sommaire
Crédit Mutuel
2
Contents
From the Chairman
4
Group profile
2005 figures
Board of directors of CNCM
7
Crédit Mutuel
THE mutual banking group
15
Consolidated results
and key figures in 2005
21
Retail banking close to home
27
Multi-channel banking
and technology
37
Network support services
41
Financial data
49
ANNUAL REPORT
2005
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Contents
From the Chairman
Crédit Mutuel was able to achieve excellent results
in what remained a highly competitive environment in 2005,
turning in the market's best performance for retail banking,
our core business, where we rank second in France.
Net income excluding minorities topped the €2 billion
mark for the first time at €2.4 billion, demonstrating
the effectiveness of a strategy focused on local presence
in bancassurance and state-of-the-art technology at the service
of our 14.2 million clients.
The dedicated efforts of our branch network combined
with a tight rein on overheads and the benefits of continuing
moves to pool resources and expertise brought a further
improvement in productivity, setting our operating ratio at 62.5%
--one of the best performances in our industry.
Crédit Mutuel
4
Contents
This in turn helped to further reinforce an already sound financial base.
Prudential own funds now amount to €22.6 billion including €19.6 billon in
tier-one capital, up 7.8% from the previous year, and our European solvency
ratio stands at 11.8%, a position reflected in our strong ratings.
The quality of Crédit Mutuel's client relationships has also won regular
recognition in France. In 2005, we took first place in the banking sector for the
third year running in Podium de la Relation Client rankings of client services
based on research by TNS Sofres, and Bearing Point. CIC, a subsidiary of
Banque Fédérative du Crédit Mutuel, was placed second.
Crédit Mutuel's identity is firmly anchored in mutualist values and a democratic
approach to corporate governance, with 6.7 million mutual members electing
24,000 volunteer managers to represent them. These members and clients
benefit from a decentralized decision-making structure that ensures a close
match with their varied needs.
In an increasingly open world, our group aims to provide clients with
the support they need wherever they are. We will thus be continuing our
development and we are ready to form new partnerships, in France or other
countries, to reinforce our position in bancassurance and expand the scope
of our activities along with our service and product offerings. In this, we will
draw strength from our longstanding regional and national presence,
our proven capacity for financial innovation and our leadership in technology.
ANNUAL REPORT
2005
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Contents
Group profile
ANNUAL REPORT
2005
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Contents
Group profile
France's second-largest retail bank, the Crédit Mutuel group is made up
of the Crédit Mutuel network and its subsidiaries, among them CIC.
In 2005, we attracted 300,000 new clients and now count a total of 14.2 million.
This includes 12.6 million individuals, who benefit from a full range
of financial expertise backed by dedication to the quality
of client relationships and service--our overriding priorities.
Our strategy is focused on local presence in retail banking, bancassurance
and technological excellence, and aims for profitable growth over the longer
term, building on sound financial bases recognized in independent ratings.
The success of our business development has also opened up new employment
opportunities, with our workforce 57,000.
Close to clients everywhere, we combine the strengths of Crédit Mutuel,
a cooperative, mutualist bank with an extensive regional and local presence,
with those of CIC, a commercial bank with some 40 offices outside France.
Crédit Mutuel Centre Est Europe took control of CIC through
Banque Fédérative du Crédit Mutuel in 1998.
Crédit Mutuel
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Crédit Mutuel regional federations
www.creditmutuel.com
Lille
Nord Europe
Normandie
Caen
Paris
Ile-de-France
Maine-Anjou,
Basse-Normandie
Brest
Bretagne
Strasbourg
Laval
Centre Est Europe
Anjou
Nantes
Orléans
Centre
Angers
La Rochesur-Yon
Océan
Loire-Atlantique
et
Centre-Ouest Clermont-
SavoieMont Blanc
Sud-Est
Ferrand
Annecy
Lyon
Sud-Ouest
Fort-deFrance
Dauphiné-Vivarais
Massif
Central
Bordeaux
Valence
Méditerranéen
Midi-Atlantique
Toulouse
Marseille
Antilles-Guyane
CIC regional banks
Holding
banking
Holdingcompany
et banqueand
de réseau
network
the Paris region
enserving
région parisienne
www.cic.fr
CIC
Banque
Scalbert Dupont
CIC Banque CIN
CIC
Banque BRO
CIC
Banque SNBV
CIC
Banque CIAL
CIC
Banque CIO
CIC
Lyonnaise de Banque
CIC
Société Bordelaise
ANNUAL REPORT
2005
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Contents
Together, the Crédit Mutuel and CIC groups count
some 5,000 outlets.
The structure of Crédit Mutuel begins with local
mutuals or caisses locales brought together
through 18 regional federations. These, in turn,
belong to the national confederation, the organization heading up the network.
CIC operates a branch network in the Paris area
and is the holding company for a group made up
of eight CIC regional banks organized into five
divisions and specialized subsidiaries in France
and other countries.
A leader in retail banking and bancassurance
making a significant contribution to the financing
of the French economy, the Crédit Mutuel group
offers a complete range of financial services for
individuals, professionals and businesses of all
sizes, placing special emphasis on local presence.
We account for 12.3% of bank deposits and
16.3% of loans distributed by banks in France.
In the bancassurance sector, we rank first for nonlife and fourth for life insurance. Our insurance
subsidiaries manage nearly 19 million savings,
home, automobile, healthcare, pension and personal coverage contracts for 9.5 million clients.
We are number two for home financing in France,
as well as the number-two retail banking network
for consumer credit.
In electronic banking, Crédit Mutuel is numbertwo in France overall, while our market share with
retailers is over 26%. Success has been confirmed
with our professional purchasing-procurement
card, which holds the top place in terms of business volumes and the number of suppliers to the
public sector.
The number-one bank for associations and number
two for farmers, Crédit Mutuel also counts one professional out of three among its clients, as well as
half of France's 100 largest companies. In addition
to the branch network, clients can access services
through a full range of innovative distribution channels. In 2005, the number of contracts booked
through remote banking rose 34% to over 200 million, with two-thirds of the total over the internet.
Crédit Mutuel
10
In this area, we broke new ground through a
tie-up with mobile telephony operator NRJ Mobile
at the end of 2005, expanding the scope of our
bancassurance and service offering and opening
new options for payments. Crédit Mutuel and CIC
together accounted for 70,000 of the 180,000
contracts signed in the months up to the end of
June 2006.
In all our businesses, the quality of client relationships is our top priority, as has regularly been
recognized by independent observers. Crédit
Mutuel and CIC were thus placed first and second
in France, and fourth and ninth in Europe, respectively, in the survey of client confidence in the
banking sector conducted by US consultancy
Forrester in May 2005. Also in 2005, Crédit
Mutuel took first place in the banking sector for
the third year running in Podium de la Relation
Client rankings of client services based on
research by TNS Sofres and Bearing Point. CIC
was placed second, as were the group's insurance
operations in their sector.
Turning to operational resources, optimization of
information systems has now been completed.
This centres on the European Information
Production platform, one of the most powerful in
Europe, which is shared by 13 Crédit Mutuel
regional federations and all CIC regional banks,
and on Groupement Informatique Crédit Mutuel,
serving five Crédit Mutuel federations.
Progress also continues on rationalizing the organization and the subsidiaries of both Crédit
Mutuel and CIC. Here benefits include economies
of scale and commercial synergies, as well as
pooling of specialized resources and know-how
to serve clients more effectively.
Productive and profitable, the group boasts robust
finances with both Crédit Mutuel and CIC awarded A+/A1 Standard & Poor's ratings with positive
outlooks. Banque Fédérative du Crédit Mutuel,
the holding company for the Crédit Mutuel Centre
Est Europe group and a direct shareholder of CIC
has ratings of Aa3 from Moody's and AA- from
Fitch, among the best for any bank in the euro
zone.
Contents
Crédit Mutuel group
2005 business profile
Net banking income: €9.6 billion
Net income attributable to the group: €2.4 billion
Shareholders’ funds: €20.5 billion
ROE: 13.7%
Tier-one ESR: 10.2%
Operating ratio: 62.5%
The no. 2 retail bank in France
5,020 points of sale
57,000 employees
14.2 million customers
16.3% market share for loans
12.3% market share for deposits
Savings accounts amounting to €402 billion
Loans amounting to €188 billion
No. 2 lender for housing
No. 2 banking network for consumer credit
No. 1 in French bancassurance for non-life insurance
No. 1 bank for non-profit associations
No. 2 bank for farmers and agriculture
No. 2 in electronic banking
No. 4 in French bancassurance for life insurance
No. 4 in bank factoring
Top quality service for all
Podium de la Relation Client, TNS Sofres rated
Crédit Mutuel the number one bank in France,
and ranked CIC number two
Forrester survey of European banks:
Crédit Mutuel: no. 1 in France and no. 4 in Europe
CIC: no. 2 in France and no. 9 in Europe
ANNUAL REPORT
2005
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Board of Directors of
the Crédit Mutuel National
Confederation
at June 30, 2006
Chairman
Etienne Pflimlin,
Chairman of the Centre Est Europe Federation
Deputy Chairman
Georges Coudray,
Chairman of the Bretagne Federation
Vice Chairmen
Amand Denieul,
Chairman of the Crédit Mutuel Agricole and Rural Federation
Bernard Morisseau,
Honorary Chairman of the Loire-Atlantique and Centre-Ouest Federation
Chief Financial Director
Philippe Vasseur,
Chairman of the Nord Europe Federation
Group Secretary
Pierre Filliger,
Chairman of the Crédit Mutuel Méditerranée Federation
Crédit Mutuel
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Other Supervisors
Pierre Arrivé
Chairman of the Océan Federation
Michel Bokarius
Michel Guibert
Chairman of the Anjou Federation
André Halipré
Vice Chairman of the Nord Europe Federation
Director of the Centre Est Europe Federation
Daniel Leroyer
Gérard Bontoux
Chairman of the Maine-Anjou,
Basse-Normandie Federation
Chairman of the Midi-Atlantique Federation
François Duret
Chairman of the Centre Federation
Alain Fradin
Deputy General Manager of the Caisse Fédérale
Centre Est Europe
Jacques Kergoat
General Manager of the Caisse Interfédérale
de Crédit Mutuel
André Meyer
Director of the Centre Est Europe Federation
Albert Peccoux
Chairman of the Savoie-Mont Blanc Federation
Jean Pierre Schneider
General Manager of the Maine-Anjou,
Basse-Normandie Federation
Paul Schwartz
Vice Chairman of the Centre-Est Federation
Alain Têtedoie
Other Directors
Vice Chairman of the Loire-Atlantique
and Centre-Ouest Federation
Philippe Andru
Eckart Thomä
Vice Chairman of the Bretagne Federation
Chairman of the Normandie Federation
Jean-Louis Boisson
Christian Touzalin
Vice Chairman of the Centre Est Europe Federation
Chairman of the Sud-Ouest Federation
Eric Charpentier
Michel Vieux
General Manager of the Nord Europe Federation
Jacques Chombart
Vice Chairman of the Crédit Mutuel Agricole and
Rural Federation
Chairman of the Dauphiné-Vivarais Federation
Pierre Wicker
General Manager of the Loire-Atlantique
and Centre-Ouest Federation
Gérard Cormorèche
Chairman of the Sud-Est Federation
Louis Crusol
Chairman of the Antilles-Guyane Federation
Bernard Daurensan
General Management
Michel Lucas, General Manager
General Manager of the Océan Federation
Jean-François Devaux
Chairman of the Massif Central Federation
Thierry Brichant, Deputy General Manager
Jean-Louis Girodot
State Representative
Chairman of the Ile-de-France Federation
Daniel Besson
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Crédit Mutuel
THE mutual
banking group
ANNUAL REPORT
2005
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Contents
THE mutual banking group
Crédit Mutuel, our group's central pillar, is a cooperative bank governed by legislation dated September
10, 1947. It belongs only to its members, who hold member shares (A shares). Members have only
one vote each at general meetings, where their powers include in particular the election of directors.
Crédit Mutuel centres all business on the clients who are also its members. This is reflected in the
corporate values of responsibility, solidarity and commitment to the community that we consider
strategically important in the same way as the competitiveness of our services.
Demonstrating the continuing appeal of cooperatives, in 2005 Crédit Mutuel won more new members
than new clients, as was also the case in the two previous years. The number of clients rose by
132,000 to 10.5 million and that of members by 150,000 to 6.7 million.
Each year, there are 20,000 meetings of boards of directors and supervisory boards as well as
2,000 general meetings attended by nearly 10% of all members, ensuring a genuinely democratic
base for corporate governance.
Women are also well represented, accounting for 22% of the 24,000 elected directors, beating an
initial target of 20%. In some regional federations, this proportion rises to 36%.
The 1,920 local mutuals or caisses locales that are the basic building blocks of Crédit Mutuel are brought
together through 18 regional federations, which share responsibility within a national confederation.
These three levels of organization—local, regional and national—operate on a decentralized basis in
accordance with the principle of subsidiarity, which means that decisions are taken as close to the actual
area of implementation as possible. Local mutuals, which are closest to members and clients, are thus
responsible for the principal functions of bank branch offices, while regional federations and the national
confederation deal with those functions they are not equipped to handle on their own.
These structures favour a sense of direct responsibility at all levels, which in turn makes for greater
responsiveness and higher standards of client service.
This organization sets us apart from other banks and is in keeping with the principles of cooperative
economics, which also define our distinctive purpose.
The close relationships and streamlined decision-making processes that go with decentralization
also mean that risks tend to be more broadly spread and controls more effective.
Crédit Mutuel's prime purpose remains providing the best possible service to its members through
the pursuit of a strategy focused on lasting development, unconstrained by the demands
for near-term earnings that weigh on listed companies.
Crédit Mutuel network
1,920 local mutuals and 3,100 outlets
6.7 million members
10.5 million clients including
9.6 million individuals
24,000 directors
33,610 employees
Crédit Mutuel
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Decentralized organization
1,920 local mutuals
The first level of organization is made up of local
mutuals or caisses locales, which have the legal
status of sociétes coopératives à capital variable
(cooperative companies with variable capital).
Their capital is owned by members, who are at
once shareholders and clients. Fully autonomous,
these local mutuals collect savings, distribute
loans and provide a full range of other banking
services. Most decisions concerning clients are
taken at this level.
Each local mutual is governed by a board of
volunteer directors, in some cases backed by a
supervisory board, made up of members elected
at a general meeting at which all members have
one vote each.
All told, local mutuals have 24,000 directors
representing their 6.7 million members
18 regional groups
At the next level up, there are 18 regional groups,
each of which includes a Regional Federation
bringing together local mutuals and a Caisse
fédéral responsible for operational management.
Some regional federations share the same Caisse,
in which case it is referred to as a Caisse interfédérale. There are thus Caisses interfédérales
serving the Centre Est Europe, Ile de France, Sud
Est and Savoie-Mont Blanc federations, Bretagne,
Massif Central and Sud Ouest federations, and the
Crédit Mutuel Méditerranéen and DauphinéVivarais federations.
The local mutuals and the Caisses fédérales, of
which they are shareholders, are members of the
regional federations which manage a solidarity fund
between Caisses. Regional federations take responsibility for strategy and supervision, representing
Crédit Mutuel in their regions. The Caisses fédérales
take operational responsibility in areas of finance
such as treasury management, for the supervision of
services, and for information systems. The federations and the Caisses fédérales operate under the
authority of boards elected by local mutuals.
In addition to the 18 regional federations, there is
a federation with nationwide competence in the
farming and rural sector, Crédit Mutuel Agricole et
Rural or CMAR.
The national confederation
and the Caisse centrale
These bodies made up the third and highest level
of organization.
The national confederation is designated as the
central body governing the network under the
Banking Act of 1984. The 19 federations and the
Caisse centrale are affiliates of the confederation.
The confederation represents Crédit Mutuel in
relationships with public authorities and is
responsible for defending and promoting its interests. It is charged with overseeing the proper operation of member establishments and controls
regional groups, at the same time taking responsibility for the overall cohesion of the network,
coordinating business development and providing
related services.
The Caisse centrale is a financial institution heading up the organization. It manages treasury for
regional groups and organizes the pooling of
Crédit Mutuel's financial resources. Its capital is
jointly owned by the Caisses fédérales.
6.7 million members
10.5 million customers
3,100 outlets of which
1,920 local mutuals (Caisses locales)
18 regional groups
(Federations and Caisses fédérales)
+ CMAR for the
agricultural sector
National
Confederation
Caisse
Centrale
ANNUAL REPORT
2005
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Membership and governance
As a cooperative bank, Crédit Mutuel receives
capital contributions through subscriptions to
member shares, referred to as parts scoriae*,
earning interest at fixed rate set by the general
meeting of the members, who are associates and
co-owners of the local mutual.
Reserves are not distributable. Backing the shared
obligations of members and the security of
deposits, they are only drawn on to finance business development for the long-term.
At the end of 2005, Crédit Mutuel members'
shares represented a total of 6 billion, showing a
rise of 11.5% from the previous year, while payments to members rose 8% to €165 million, representing nearly a quarter of the net earnings of
core cooperative business through local mutuals
and regional federations.
Participation and democracy
Participation and democracy are the foundations
of Crédit Mutuel’s operation as a cooperative
organization. The 6.7 million Crédit Mutuel members control management of local mutuals and
elect directors at general meetings, ensuring a
genuinely democratic form of governance.
The 24,000 elected directors present at the three
levels of the organization--local, regional and
national--are responsible for the proper operation
and control of the group. Attentive to the needs
and aspirations of the members they represent,
these directors are themselves active members
and participate in the administration of the local
mutuals alongside employees. As members of
local communities, they also exemplify the values
Crédit Mutuel stands for and help to ensure their
realization.
The 33,610 Crédit Mutuel staff members, of whom
33% are executives or supervisors and 51%
women, take responsibility for the operation of
the business and the pursuit of strategic goals in
association with and under the supervision of
elected directors.
One person, one vote
The annual general meetings that bring together the members
and clients of local mutuals are the foundations of democracy
within the Crédit Mutuel organization. Meetings provide members with a special opportunity to learn more about the business
and express their own views to an attentive audience. Reflecting
cooperative values that set Crédit Mutuel apart, they also offer a
forum for suggestions and discussion of ways to enhance services.
Required items on the agenda include a report on the management and activities of the mutual within its cooperative
framework, leading up to a vote on financial statements and the
election of directors. Each member casts a single vote. A second
part of the meeting is devoted to the presentation and discussion
of current themes and events. All told, several hundred thousand
members participate in voting at regional and local meetings held
between February and May.
* These are of two kinds. A shares are those initially subscribed to become member of the local mutual and acquire a right to
vote at general meetings, where each member has only one vote. B shares represent additional amounts paid in, earning interest
but carrying no voting entitlement.
Crédit Mutuel
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Proactive employment policies
Business operation
At Crédit Mutuel, employment is a strategic
goal, rather than a lever for structural adjustments. To keep pace with our business growth
and anticipate future needs, we recruited over
13,000 people in the six years from 1999 to 2005,
adding a net total of 7,200 to the workforce.
In 2005, policies to preserve and expand
employment resulted in a 2.4% net rise in
employment with the creation of 785 jobs setting the average total for the year at 33,610.
Young graduates charged with client relationships in the branch network accounted for
80% of new recruits.
Crédit Mutuel offers staff members training
opportunities throughout their careers, as
reflected in a training budget equal to 6% of
payroll in 2005.
Under a collective labour agreement for the
Crédit Mutuel division initiated in 2004 and
confirmed with a decision for implementation
in May 2005, employees meeting requirements
for full entitlement to basic social security
pensions can be pensioned at the age of 60
instead of the usual 65. This offers favourable
conditions for employees as regards tax and
other aspects of retirement, while at the same
time increasing scope for recruitment and
training initiatives within the business.
Two additional collective agreements with
nationwide scope were finalized in May 2006,
one clarifying and structuring resources available to unions for the exercise of their duties
and the other implementing the inter-professional agreement on training pursuant to legislation dated May 4, 2004. The latter concerns in
particular individual training entitlements and
the organization of the Observatoire des
métiers, charged with monitoring employment trends. It also provides for the joint
staff/employer employment commission,
which is charged with anticipating the new
requirements associated with the changing
role of professions within the business.
Decision-making processes that are organized at
regional level rather than through a centralized
structure favour entrepreneurship, a sense of personal responsibility and team spirit.
Local mutuals’ ties to regional federations and
caisses fédérales underpin the cohesion of regional businesses, which operate as full-fledged credit
institutions within the framework of French banking regulations.
These regional groups cooperate with each other
on a voluntary basis to rationalize resources and
costs through technical partnerships in areas that
include in particular information systems and
finances. Other forms of cooperation are through
caisses interfédérales serving more than one
regional federation and joint subsidiaries in banking and insurance.
At the next level up, regional groups’ membership
in the national Confederation and the Caisse central ensures cohesion and shared responsibility at
national level. Heading up the Crédit Mutuel
group as a whole, the Confederation approves
appointments to management positions and
regional inspection teams, and in a general way
takes all necessary steps to ensure the proper
operation of the group, with responsibility for
overall control and the coherence of business
development.
Control commission at the levels of regional federations and the national confederation review
inspection reports and report findings to the
boards concerned. The members of the
Confederation’s Board of Directors include representatives of all regional federations. They are
elected at the General Meetings of the
Confederation.
The Meeting also elects the Chairman and Deputy
Chairman for terms of five years. Mutual members
are thus represented at all three levels of the
organization through the directors they elect.
Crédit Mutuel’s social responsibility report can
be accessed at www.creditmutuel.com
ANNUAL REPORT
2005
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Results and
key figures
for 2005
ANNUAL REPORT
2005
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Contents
2005 results
The Crédit Mutuel group has opted to present consolidated
financial statements in compliance with IFRS from 2006 on,
although it is under no legal obligation to do so.
In this context, consolidated financial information is presented
in a succinct form for 2005, which will be the base year
for IFRS comparisons, marking the first stage in the shift
to the new standards.
As a result, only the balance sheet and the statement
of income appear in this report.
Crédit Mutuel
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Contents
In 2005, the group benefited from growth in all
areas of business and consolidated net income
excluding minorities reached €2.4 billion, topping
the €2 billion mark for the first time.
Net income attributable to the group
(€ millions)
2,389
This strong showing made for the reinforcement of
own funds which reached a consolidated total of
€20.8 billion or €20.5 billion excluding minority
interests. In addition to earnings for the year, they
are principally made up of 6 billion in shares
subscribed to by mutual members and €11.5 billion in consolidated reserves.
Financial ratios are healthy, with return on equity at
13.7%, the solvency ratio calculated in accordance
with the standards defined by France’s Conseil
National de la Comptabilité at 11.8% including
10.2% for tier-one capital. These ratios more than
satisfy regulatory requirements and are reflected in
A+ ratings for group banks from Standard & Poor's.
Similarly, Banque Fédérative du Crédit Mutuel,
which is the holding company for the Centre Est
Europe group and a direct shareholder of CIC, has
ratings of Aa3 from Moody's and AA- from Fitch.
These good results are in particular attributable to
robust business growth, with deposits rising 18.7%
to €401.6 million, while loans and credit to clients
rose 14.2% to €188.2 million. Against this backdrop, net interest margin was up to €4.2 billion,
and fee and commission income to €2.3 billion.
Gains on financial assets designated at fair value
through profit and loss and on available-for-sale
financial assets totalled €2.3 billion, while net
income from other business, principally insurance,
came to €795 million.
1,494
1,304
2003(1)
2004(1)
2005(2)
Shareholders’ funds
(€ millions)
20,530
16,152
2003(1)
17,959
2004(1)
2005(2)
ROE
(%)
13.7
11.2
2003(1)
10.6
2004(1)
2005(2)
(1) Based on French GAP (CNC)
(2) Based on IFRS
ANNUAL REPORT
2005
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Contents
2005 results
These components together set net banking income
at €9.6 billion, with interest margin accounting for
44%, fees & commissions and gains on financial
assets for 24% each, and other business for 8%.
Net banking income
(€ millions)
9,633
8,789
8,754
2003(1)
2004(1)
Operating expenses amounted to 6 billion, of which
staff costs in an amount of €3.6 billion accounted for
60%, while other administrative expense in an
amount of €2 billion accounted for 33%, and depreciation and amortization in an amount of €0.4
billion for 7%.
The operating ratio came to a very healthy 62.5%,
rewarding efforts over a number of years to rationalize structures and optimize resources.
Operating profit before provisions reached €3.6
billion and with provision for bad and doubtful
loans limited to a very low €0.2 billion, operating
income was very close to pre-tax income at around
€3.4 billion.
2005(2)
Gross operating profit before provisions
(€ millions)
3,617
3,154
2,984
After income tax in an amount of €1 billion, net
income amounted to €2,417 million, of which
2,389 million after minority interests.
2004(1)
2005(2)
64.1
65.9
62.5
2003(1)
2004(1)
2005(2)
2003(1)
Operating ratio
(%)
(1) Based on French GAP (CNC)
(2) Based on IFRS
Crédit Mutuel
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Key figures for 2005
at December, 31
Customers
Outlets
Employees
2003
2004
2005
€ millions
CNC
€ millions
CNC
€ millions
IFRS
13.5 millions
4,960
56,360
13,9 millions
4,990
56,760
14.2 millions
5,020
57,000
307,616
338,205
401,613
134,723
122,710
50,183
150,933
12.3
15.6
144,394
137,787
56,024
164,777
12.4
15.4
148,990
189,948
62,676
188,172
12.3
16.3
355,005
16,342
16,152
11.5
9.6
387,886
18,208
17,959
12.4
10.5
436,390
20,776
20,530
11.8
10.2
BANKING OPERATIONS
Aggregate level of funds entrusted
of which
Customer-related items
Debt securities issued
Insurance-linked savings
Outstanding loans
Market share for deposits (%)
Market share for loans (%)
ASSETS AND SHAREHOLDERS’ FUNDS
Total assets
Shareholders’ funds (after appropriation of income)
of which attributable to group
Solvency Ratio (%)
Tier One Ratio (%)
INCOME
Net banking income
Operating expenses
Gross operating income
Risk-related costs
Net operating income
Pre-tax net recurring income
Corporate income tax
Net income
Net income attribuatable to group
Operating expense / Net income (%)
ROE (%) (2)
ROA (%) (3)
8,789
5,634
3,154
724
2,430
2,481(1)
847
1,324
1,304
8,754
5,770
2,984
405
2,580
2,627(1)
837
1,521
1,494
9,633
6,016
3,617
236
3,381
3,426
1,009
2,417
2,389
64.1
11.2
0.45
65.9
10.6
0.45
62.5
13.7
0.55
(1) Under French GAP (CNC) pretax earnings on ordinary business
(2) IFRS: net earnings/shareholders’ fund at 1 January; French GAP: net profit + allocation to FGBR / shareholders’ funds at 1 January
(3) IFRS: net income/total assets; French GAP: net profit + allocation to FGBR / total assets
ANNUAL REPORT
2005
25
Contents
Retail banking
close to home
ANNUAL REPORT
2005
27
Contents
Retail banking close to home
Retail banking, the core business of Crédit Mutuel, with its three components--banking proper, insurance
and technology services--demonstrated its vitality with continuing growth and productivity gains in 2005.
The performances of the branch network and the quality of offerings again won new clients and further
consolidated market positions during the year. The combined market share of Crédit Mutuel and CIC,
together accounting for 12.3% of deposit business in France, was up 0.9 of a point to 16.3%,
with 300,000 new clients raising the total to 14.2 million including 12.6 million individuals.
They are the first to benefit from what is France’s second largest retail banking network, with 5,020
outlets ensuring personal attention close to home, as well as from access to a full range of remote
banking services.This is provided by 57,000 employees, a figure that has risen by nearly 10,000
in the past six years.
Leveraging the complementary strengths of physical and virtual networks, the group continued
consolidation of its nationwide presence with 82 new outlets, making a total of 486 openings since 1999.
Crédit Mutuel and CIC accounted for a roughly equal number in the year, with the focus on medium-size
towns and large urban areas.
The group accounts for 23% of home loans in France, placing it second on the market, and plays
a central role in financing for subsidized housing and distribution of the interest-free home loan
recently introduced by the government.
Finally, it is the number-two branch network for consumer credit, where its share of the market exceeds 10%.
Clients (millions)
Market share in 2005
16.3%
13.5
13.9
14.2
12.0
12.3
12.6
2003
2004
2005
12.3%
of which
CM
7.7%
of which
CM
9.4%
Deposits
Loans
Of which individuals
Outlets
Employees
56,760
57,000
of which
CM
32,540
of which
CM
32,830
of which
CM
33,610
2003
2004
2005
56,360
Crédit Mutuel
28
4,960
4,990
5,020
of which
CM
3,120
of which
CM
3,100
of which
CM
3,100
2003
2004
2005
Contents
Savings--financial products
drive growth
Client deposits and other savings managed by the
Crédit Mutuel group rise 18.7% to €401.6 billion in
2005, a result largely attributable to a 30.3% surge in
financial products. This had already seen a 12.3% rise
in the previous year and thus reached €252.6 billion
to account for 63% of client savings with the bank.
Growth was particularly vigorous for banking products,
with assets under management showing an exceptional
37.9% rise to €190 billion. This reflected not only firm
trends on equity markets but also vigorous growth in
custody and fund management business through CIC.
Savings placed in insurance products were up a more
moderate 11.9% or €6.7 billion, with multi-investment
policies making a strong contribution to growth in life
insurance. The Crédit Mutuel group accounted for
8% of the new government-backed PERP retirement
packages taken out during the year.
Savings deposits, in contrast, suffered from low interest on regulated savings, with rates cut in August,
and the reallocation of available savings to finance
household spending. The rise in the outstanding total
was thus only 3.2% to €149 million, setting the
group’s market share in this area at 12.3%. The bulk
Breakdown of savings entrusted in 2005
€401.6 billion
of this rise concerned interest-free deposits, which
were up 10% to €44.1 billion as an additional €4
billion flowed into current accounts despite the fresh
decline in the household savings ratio to 15.3%.
These accounts represent 30% of total deposits, on a
par with savings book accounts .
Amounts on savings books, excluding home savings
accounts, rose 5.1% to €44.4 billion. This was
mainly attributable to rises of 3.4% or €553 million
to €17 billion for livret bleu blue passbooks and
9.9% or €1.3 billion to €14.8 billion for ordinary
savings book accounts.
Home savings accounts suffered from legal changes
at the end of 2005 making PEL government backed
accounts taxable after 10 years, and total deposits
under this heading showed a moderate 1.4% rise to
€31.1 billion.
Negotiated deposits were slightly higher showing a
3.3% rise to €27.8 billion, mainly as a result of a 7%
rise in term deposits to €18.8 billion.
Breakdown of customer deposits in 2005
€149 billion
11.4%
15.6%
19.8%
37.1%
47.3%
Deposits
Securities issued
Insurance-linked savings
18.4%
29.6%
20.8%
Blue passbook
Other savings books
Homebuyers savings accounts
Current accounts
Negociated deposits
ANNUAL REPORT
2005
29
Contents
Retail banking close to home
Credit--robust trends
Low interest rates and longer repayment periods
buoyed demand for credit from all sector of the economy, with property loans a special focus of attention.
New loans and credit to clients on Crédit Mutuel
books thus surged 25.5% to €59.2 billion, driven by
lending for property and business equipment, with
the outstanding total up a further 14.2% to €188.2
billion after a 9.2% rise in the previous year. This
exceeded overall market growth of 8.1% and Crédit
Mutuel’s share was thus up by 0.9 of a percentage
point to 16.3%.
Housing loans were up 20.3% to €98.3 billion or
over half of all outstanding loans. This reflected both
the efficiency of our branch network and the combination of low interest rates and persistently steep
price rises shaping market trends. We are France's
number-two lender in the sector, with loans distributed in 2005 showing a 28.2% rise from the previous year to reach €31.3 billion, accounting for 23%
of the market. We have also taken the lead for new
interest-free home loans, ranking second place by
number with 46,900 clients and third by volume
with nearly €705 million distributed.
New loan business in 2005
€59.2 billion
In consumer credit, we are the number-two retail
banking network with a market share of over 10%
and total loans and credit outstanding reaching
€13.5 billion in 2005, up 7.5% from the previous
year. New business backed by advertising campaigns
rose 6.9% to €7.8 billion.
We were also able to reinforce our place with business and professional clients, posting a 29.8% rise in
new business to €20.1 billion. Outstanding business
equipment loans, including lease financing, rose
6.2% to €38.5 billion and operating loans 22.3% to
€18.9 billion.
While volumes have increased, the quality of credit
remains high and gross doubtful loans represented a
steady 0.6% of the total. The risk ratio stood at 3.4%
in 2005 after 3.9% in 2004, and cover rose from
62% to 64%.
Structure of loans in 2005
€188.2 billion
1.1%
4.3%
31.3
4.7%
20.1
10.0%
20.5%
52.2%
7.8
7.2%
Housing Consumer Equipment
credit
Crédit Mutuel
30
Housing
Consumer credit
Equipment loans + leasing
Operating loans
Other loans
Debit account + card debits
Net doubtful loans
Contents
Services to match every need
Bancassurance for 12.6 million
people
Individual clients are at the heart of Crédit Mutuel’s
banking business, and in 2005 their numbers rose by
250,000, demonstrating the appeal of an offering that
matches the varied needs of people young and old,
families, and the financially vulnerable as well as the
wealthy.
With those needs in mind, our group has made the
combination of banking services and insurance
through the sale of non-life policies at its branches a
cornerstone of business since the 1970s and is now
the French leader in the sector. In a similar spirit,
Crédit Mutuel offers remote surveillance services for
residential security, taking a leading place with close
to 25% of the market and 100,000 subscribers.
In keeping with our commitment to close ties to all
our clients, we offer a full range of remote banking
options, harnessing state-of-the art technology to
back up the personalized service that is the hallmark
of our local networks.
In this area, as in our broader strategy for business
development, younger clients are a natural priority
and we have thus teamed up with mobile phone
operator NRJ to offer new options matching their
lifestyle as a basis for relationships over the longer
term. Key features of the NRJ mobile offering include
the freedom from subscription obligations, reloads
without time limit and a wide variety of services such
as credit downloads.
Since October 2005, we have also offered younger
clients financing for driving lessons and licence fees
with repayments of only €1 a day over a period that
varies with the amount of the loan. Crédit Mutuel
accounted for nearly 20% of all financing under this
government-backed programme up to the end of
2005.
Finally, we have developed a number of inter-generational products to help parents and grandparents put
money aside for children through accounts in their
own name or that of the beneficiaries.
ANNUAL REPORT
2005
31
Contents
Services to match every need
Turning to financially vulnerable clients, in particular
those without their own cheque books, Crédit Mutuel's
Facil'Accès package and CIC's Service Accueil provide
the solution, enabling these clients to make and
receive payments and withdraw cash 24 hours a day.
At the other end of the scale, our group provides
wealthier clients with a full range of targeted expertise
through the branch network and specialized
subsidiaries. In 2005, we set up a new private banking
under the name CIC Banque Privée, reflecting our
commitment to a broader presence in wealth management with customized services in asset optimization
and financial engineering.
At the end of 2005, our group had assets amounting to
nearly €70 billion under management including over
€40 million through CM-CIC Asset Management,
which ranks sixth in France for investment funds open
to the public according to Europerformance.
Close relationships to clients and geographical
proximity combined with responsive service and
advice when needed are what enable us to make the
difference. The quality of our client relationships, our
overriding priority, has won independent recognition
with a number-one place for France in Podium de la
Relation Client rankings based on research by TNS
Sofres and Bearing Point, as well as the number-four
place in European and the number-one place for
France in rankings by US consultancy Forrester
Research.
An ear for music
Crédit Mutuel has made musical expression a
prime focus for support for a number of years. In
2005, we were thus associated with the Victoires de
La Musique awards on TV channel France 2 and
radio station France Inter for the fifth year in a row,
and we are partners for the NRJ Music Awards on
TV channel TF1 and radio station NRJ, as well as for
the Top 50 on MCM, France's leading music channel via cable and satellite, and Taratata, a music
programme on channels France 3 and France 4. We also provide support for major musical events
around France, among them the Printemps de Bourges festival and the NRJ Music Tour.
This is in full keeping with values that stress attention to others and openness to difference and
talents of all kinds.
Crédit Mutuel
32
Contents
Micro-financing:
action in the field
At Crédit Mutuel, we aim for concrete economic responses to the challenges
of social marginalization, in line with cooperative values that associate solidarity
and economic progress. We have thus been among the first to turn our attention
to people denied access to traditional banking services and open new prospects
for social and professional integration.
Support for individuals in difficulty:
• Over 40,000 micro-loans in amounts of under
€1,000 are distributed directly by local mutual
in the group
• Crédit Mutuel has nationwide partnerships
with associations contributing to the social
integration of the underprivileged, among them
Secours Catholique, the Retravailler network,
COORACE and the Union Nationale des
Foyers de Jeunes Travailleurs. The goal is to take
a shared approach to support for people in difficulty, helping them with personal projects
that will enable them to find employment. The
associations recommend candidates to Crédit
Mutuel, which opens accounts for them and
provides loans partly guaranteed by the Fonds
de Cohésion Sociale, a government-backed
fund managed by Caisse de dépôts et consignation (CDC).
• We have also launched trial initiatives alongside Secours Catholique and others in regions
including Brittany, south-western France and
the Toulouse areas with the distribution of
loans in amounts of between €500 and
€2,000 to people with no cheque book and
little or no access to credit, who currently have
no steady employment or are dependent on
welfare but are in a position to make a success
of reintegration.
• Under an agreement signed in January 2006,
Crédit Mutuel has access to guarantees from
the Fonds de Cohésion Sociale managed by
CDC, which will initially allow financing for
1,000 to 1,600 micro-loans for total of €1.6
million to help people in difficulty. Initiatives
already taken by Crédit Mutuel du Sud Est in
the troubled neighbourhood of Les Minguettes
in Vénissieux, south of Lyon, illustrate the
practical benefits.
• Also in January 2006. Crédit Mutuel Nord Europe
set up a Caisse Solidaire in Lille specialized in
financing to help less favoured groups. A number
of associations are represented on its board.
Backing personal business starts:
Crédit Mutuel is a longstanding partner of associations dedicated to the support of individuals
starting up their own businesses, among them
ADIE, France Active and France Initiative Réseau.
• We have been associated with ADIE since
1994. We have 12 regional agreements with
the association and in 2005 provided 13% of
financing for its loans.
• Crédit Mutuel participates in the magnet
bodies of the France Active network and is a
founding member of seven of its regional
funds, financing 10% of its loans.
• Already a partner for many local development initiatives and a member of the France
Initiative Réseau for the Provence-Alpes-Côte
d'Azur region, in 2006 Crédit Mutuel took
this one step further, signing a nationwide
agreement with the organization.
ANNUAL REPORT
2005
33
Contents
Services to match every need
Banking for businesses of all sizes
Rural banking
Crédit Mutuel plays an active role alongside all those
contributing to regional economies, and we are the
banking partners of choice not only for local professionals and tradespeople but also for businesses of all
sizes, from the smallest to the largest. We draw on the
experience and expertise available through networks
and specialized subsidiaries to offer business and
professional clients solutions that exactly match their
needs in every area from daily banking to lease
financing, venture capital, factoring and employee
share-ownership programmes.
Half of France's 100 largest companies are among
our clients, while at the other end of the scale, we
serve 700,000 personal and other very small businesses, an area where we hold 15% of the market.
We are also an active provider of banking services for
business starts, backing new projects and taking third
place for the distribution of start-up loans, accounting
for 20% of the French total. In spring 2006, Crédit
Mutuel formed a new partnership with OSEO, the
government agency for the promotion of business
creation, with a view to facilitating financing for the
start-up and development of very small businesses
employing no more than ten people, as well as related successions and transfers.
Crédit Mutuel was again the number-two bank in
France for the farming sector in 2005, distributing
11.3% of all subsidized loans and counting 112,000
active clients. More than half of all our local mutuals
are based in rural areas and a team of dedicated
advisers as well as a specialized nationwide mutual,
Crédit Mutuel Agricole et Rural, help to ensure that
services are attuned to farmers' needs and keep pace
with their changing environment.
Our factoring subsidiary Facto-CIC is the fourth
largest business of its kind belonging to a French
bank. Accounting for 7.8% of the market, it has
nearly 2,300 active contracts and in 2005 posted the
strongest growth in the sector, with volumes up
10.4% to €6.9 billion.
Finally, in employee share ownership, Crédit Mutuel
consolidated its sixth place among French banks and
insurance companies with a 22% rise in holdings
under administration to €3.8 billion, representing
one million employee accounts for 23,400 client
businesses.
Crédit Mutuel
34
Our offering includes credit facilities, saving products and insurance policies designed especially for
the farming community. Exemplifying this approach,
our Actimat facility enables buyers of farm machinery to apply for credit or lease financing directly
through the dealer without having to call in at the
bank. Dealers have access to a specialized website
at www.actimat.net allowing them to carry out
financing simulations, enter applications and track
applications’ status online. Other online facilities on
offer from Crédit Mutuel include Préviris, allowing
secure access to trading on commodity derivatives
markets. Our offering has also been extended with a
new range of credit facilities under the name
Agridispo designed for farmers in need of quick
access to short-term financing.
In 2005, Crédit Mutuel's medium and long-term
lending to the farming sector totalled €935 million,
3.1% more than in the previous year, and outstanding loans across all maturities were up 4% to €3.5
billion.
Crédit Mutuel's share of subsidized loans distributed
to young farmers starting out was 13.3%.
Contents
The no. 1 bank for associations
Counting over 300,000 associations among its
clients, 35% of the national total, Crédit Mutuel is the
number-one bank in the sector, serving one out of
every two works councils as well as one out of three
associations. We are proud to be meeting the needs
of these organizations, which play a crucial role in
cementing social ties and developing new forms of
solidarity.
To this end, we have developed a specialized offering
to back up the close relationships we maintain with
associations and their federations at regional and
national levels, helping us to make us their natural
partner. Placing special emphasis on expert advice
and assistance in finance, administration, law and
taxation, we provide the products and services they
need to put treasury resources to work, finance their
investment, manage their accounts and cash flows to
deal with temporary shortfalls effectively and take out
appropriate insurance for people and property.
Personia--the new name in
household and personal services
Crédit Mutuel has
teamed up with
mutual
insurer
AG2R and ADMR, a
rural
association
network, to create
Personia, a nationwide offering of household and personal
services including home care for the aged
and disabled. Personia's operations are based
on the selection of local providers meeting
strict criteria to guarantee service quality, an
approach that also favours local employment.
Services are attractively priced, since payments are partly exempt from social security
charges and 50% deductible from taxable
income. Users' employers may also contribute through Chèques Emploi Services
Universel, a simplified system for payments
to service providers
Personia can be reached 24 hours a day,
7 days a week, by phone (0810 205 000) or at
www.personia.org.
ANNUAL REPORT
2005
35
Contents
Multi-channel banking
and technology
ANNUAL REPORT
2005
37
Contents
Multi-channel banking and technology
Local presence and
multi-channel access
In 2005, Crédit Mutuel further reinforced the nationwide presence of its branch network, France's second
largest with 5,020 outlets underpinning the close
client relationships that are at the heart of our business, while at the same time continuing extend our
reach with a full range of remote banking option. In
this, our goal is to offer clients a comprehensive
multi-channel banking service accessible at all times.
Client-initiated contacts with our remote-banking
facilities rose 34% to top the 200 million mark in
2005, of which 156 million or over three- quarters of
the total were via the internet*, with traffic up 50% on
a year.
Calls on our Audiotel voice messaging service and
our call centres were generally steady, showing a
moderate rise of 3% to a little over 37 million. These
services have now reached maturity and the focus is
thus now on enhancing service and commercial productivity.
Crédit Mutuel was the first bank in France to offer
shopkeepers secure internet payment services, which
are now also accessible via WAP and i-mode
connections and have been extended to cover
payments by instalments. In 2005, internet payments
totalled €676 million, showing a rise of 60% from
the previous year.
As in other areas of business, the quality of client
relationships is the overriding priority and this is
reflected in a steady flow of innovation enhancing
remote banking services with pioneering solutions
and regular expansion of functionalities.
Exemplifying this, our CyberMUT banking and information and Filbanque, CIC's online banking facility
are recognized benchmarks for internet security with
state-of-the-art identification technology. In 2006,
these will be extended with the launch of English,
German and Spanish versions.
The new version of CIC's site www.cic.fr in June
2006 illustrates the same dedication to excellence in
multi-channel banking, showcasing the brand and its
activities and hosting Filbanque online banking
services. This promises to be source of added
momentum, attracting new clients and boosting
business volumes
Our P@yweb Cards, a solution enabling clients to
make internet payments without entering their credit
card details, scored new success, continuing the
momentum developed since its general market
launch at the end of 2002, with the number of payments more than doubling to 47,000 in 2005 as a
whole. In 2006, further progress was made in this
area with the new 3 DeSecure standards for Visa and
UCAF standards for Mastercard, which guarantee
payment for vendors and at the same time enhance
security for buyers.
*www.creditmutuel.com and www.cic.fr are the portals that take internet visitors to sites
operated by the Crédit Mutuel and CIC groups and regional banks.
Crédit Mutuel
38
Contents
Taking the lead in electronic banking
Crédit Mutuel ranks second in France for electronic
banking with market share of 20.2% overall and
26.2% in the retailing sector. We are also number two
for the issue of interbank cards, counting 7.8 million
holders.
Over 206 million withdrawals from group ATMs
represented a total of €14.8 billion, while 1.3 billion
payments through 223,600 affiliated retailers came to
€54.5 billion.
Most of our 6,750 ATMs are multi-functional and all
apply new Eurocard MasterCard Visa standards for
improved security. We have our own hotlines
enabling clients to stop payments on lost or stolen
cards instantly, 24 hours a day, seven days a week.
In 2005, there was a continuing trend to increased
favour for card higher up the range, with Gold cards
making good progress, while our prestige Platinum
cards were made more broadly available. We also
brought out a new card under the name @cess
Mastercard with special service and security features
for internet and other remote banking.
Finally we now offer BusinessCard, a product
designed for the day-to-day outlays of professionals
and small businesses, also available in a prestige
BusinessCard Executive version.
Expertise in e-payment has won us an impressive
line-up of corporate clients including France
Télécom, retailer Auchan, the Paris urban transport
authority RATP, the Pinault-Printemps-Redoute
retail group and motorway operators using our
services to deal with card payments. Crédit Mutuel
is also present in a number of countries outside
France, not only in Europe but also in North and
South America. In Germany, our interest in Fiducia
Cash has involved our group in e-payment operations for German cooperative banks and the market
development of the GeldKarte electronic purse. We
are also active in e-payments in Spain, Switzerland,
Georgia, Russia, Iran and Cuba.
The Crédit Mutuel purchasing
card: no. 1 in the public sector
Launched in 2001, the Crédit Mutuel purchasing-procurement card helps public authorities
and other organizations optimize administration of spending. It was selected after competitive bidding by clients including the Ministry of
Finance, the Ministry of the Interior, Région
Poitou-Charentes, and the municipalities of
Toulouse in south-western France and Issy les
Moulineaux on the outskirts of Paris. New
clients in 2005 included the hospital of Le
Havre and the municipality of Colomiers
(Haute Garonne) in south-western France.
It has won our group the number-one place
in France for the business volumes and the
number of suppliers to the public sector
concerned.
ANNUAL REPORT
2005
39
Contents
Network support
services
ANNUAL REPORT
2005
41
Contents
Network support services
Crédit Mutuel branch networks draw on the expertise of specialized subsidiaries
to optimize service to all client groups.
Restructuring of support operations continued in 2005 with a view to reducing operating
expenses and ensuring the best possible service to our clients.
Activities with strategic group-wide importance such as insurance, property business,
trading room operation, management of information systems and asset management
are thus conducted through common entities that include GACM, CM-CIC Bail,
CM-CIC Leases, CM-CIC Titres, CM-CIC Securities, CM-CIC Soparim,
CM-CIC SCI Gestion and CM-CIC Asset Management.
■ INSURANCE
Insurance is a prime focus of strategy for Crédit
Mutuel as the French bancassurance group with the
number-one place in non-life and the fourth place in
life. Groupe des Assurances du Crédit Mutuel
(GACM) and Assurances du Crédit Mutuel Nord
(ACMN)) are active in both life and non-life insurance, while Suravenir specializes in life insurance
and Suravenir Assurance in non-life.
At the end of 2005, these subsidiaries managed a
total of 19 milllion policies including savings and
retirement products as well as automobile, household, health and personal cover. Of these, 11%
represented new clients.
Premiums for the year came to €11 billion, showing
a rise of 20.7%. Life insurance contributed €9.1 billion, an amount up 23.4% from the previous year,
with funds under management at €61.4 billion,
while the contribution from non-life rose 9.6% to
€1.9 billion with 15.1 million policies covering
9.5 million clients. The rise in premiums again outpaced overall market growth.
Consolidated net income of the group's insurance
companies rose 21.3% to €461.4 million.
Crédit Mutuel
42
Recognized quality
Assurances Crédit Mutuel's offering took
second place for the quality of client relationships in Podium de la Relation Client rankings based on research by Sofres TNS, and
recognition has come with other awards
including:
• Silver Laurels from Investir magazine for life
insurance on offer in the banking sector
in 2005
• Silver and bronze Trophies from Le Revenu
magazine for euro-denominated life insurance policies in 2006
• Silver Trophy from Le Revenu for multiinvestment policies covering 11 to 40 funds
in 2006.
Dossiers de l'Epargne, a review specializing in
savings products, has awarded its Label
d'Excellence for Assurances Crédit Mutuel
products including Plans Prévoyance, XL
Prévoyance, Securitys, Le Tout Santé and
Santé CIC.
Suravenir was awarded Investir magazine's
2005 Gold Laurels for multi-investment life
policies and for the third year in a row
Dossiers de l'Epargne awarded its Label
d'Excellence to Suravenir Assurances for policies in health, long-term care and general
personal cover.
Contents
■ ASSET MANAGEMENT
AND CUSTODY
The Crédit Mutuel group's asset management
division is made up of CM-CIC Asset Management, a
joint subsidiary of Crédit Mutuel and CIC networks,
Federal Finance, a subsidiary of Crédit Mutuel Arkéa
and UFG, a subsidiary of Crédit Mutuel Nord
Europe.
In 2005, CM-CIC Asset Management emerged as a
leader on the French market, taking sixth place in
Europerformance's rankings for investments funds
open to the public. In June 2006 Crédit Mutuel Nord
Europe merged its four asset management
subsidiaries UFG, Alteram, Mutifonds and Nord
Europe Private Equity to form the UFG group, which
offers a broad range of specialized expertise to serve
institutional investors and wealth management
specialists.
At the end of 2005, assets under management(1)
totalled nearly €70 billion, an amount including
over €45 billion through funds from CIC and Crédit
Mutuel networks, and €20 billion under management mandates. Of this total, €1 billion was for private clients and €19 billion for institutional
investors.
Crédit Mutuel also offers services for employee
share-ownership programmes of companies of all
sizes, including very small businesses with fewer
than ten employees. Specialized subsidiaries Crédit
Mutuel Participation, Federal Finance Banque and
CIC Epargne Salariale administer a total of €3.8
million in one million employee accounts for 23,400
client businesses.
New awards for management
performance
Crédit Mutuel group's range of investment
funds won broad recognition for performances over three years in 2005. In addition to
the Silver Trophy for the best overall results
awarded to CM-CIC Asset Management,
group funds took six other trophies for
performances in specific categories.
As in 2004, CM-CIC Asset Management funds
were awarded Investir magazine's Gold
Laurels for performances over five years,
while Federal Finance took the Golden
Laurels for its Federal Multi Or and Matières
Premières funds. Federal Finance also won Le
Revenu magazine's Bronze Trophy for the
performance of euro bond funds over three
years and Multifonds' CMNE Sélections fund
won first prize for five-year performances in
the euro money-market category in Le FigaroJournal des Finance rankings.
In employee share ownership, the Dossiers
de l'Epargne guide awarded Federal Finance
its Label d'Excellence Gold Medal for the second year in a row in 2005 and the 2006 guide
has awarded its Label d'Excellence to Crédit
Mutuel Participation.
Property fund business is through the UFG group's
SCPI--tax-transparent property investment companies--which together booked net subscriptions of
€336 million in 2005, setting market share at 27%
to make UGF number one in the sector.
Capitalization of assets under management rose
17.5% to €3.7 billion.
(1) Including OPCVM investment funds but not fonds maîtres,
delegated management and FCPEs (employee savings).
ANNUAL REPORT
2005
43
Contents
Network support services
■ CONSUMER CREDIT
■ PRIVATE BANKING
Crédit Mutuel is France's number-two banking
network for the distribution of consumer credit, with
specialized units rounding out offerings through
branches.
The Crédit Mutuel group offers an extensive range of
advisory and management services for wealthier
clients through its branch network and specialized
subsidiaries in France, Luxembourg and
Switzerland. The main entities are joint Crédit
Mutuel Centre Est Europe and CIC subsidiaries CIC
Banque Transatlantique, Banque de Luxembourg,
CIC Banque CIAL, Suisse and Banque Pasche;
Crédit Mutuel Arkéa subsidiaries Banque Privée
Européenne and Federal Finance; and Crédit Mutuel
Nord Europe subsidiary Nord Europe Private Bank
SA.
These include Financo, a subsidiary of Crédit Mutuel
Arkéa, the Sofemo group, which is a subsidiary of
Crédit Mutuel Centre Est Europe and CIC, and
Créfidis, which results from a partnership between
Crédit Mutuel Nord Europe and consumer credit
specialist Cofidis.
In 2005, these subsidiaries processed 650,000 applications and booked business worth a total of €991
million, showing an overall rise of 15% on a year.
Outstanding loans totalled €1,464 million, up 16%,
with vendor credit up 95%. The net result stood at
€5 million.
In June 2005, business in this area was brought
together under a common banner with the launch of
the CIC Banque Privée brand in cooperation with the
other private banking entities of Crédit Mutuel
Centre Est Europe and CIC. Present throughout
France, this is an offering centred on customized
wealth management solution for clients and
prospects with at least €1 million available for
investments. During the year, CIC reinforced its international presence with a new wealth management
unit in Belgium called Banque Transatlantique
Belgium.
Wealth management and private banking entities of
the Crédit Mutuel and CIC groups had client assets
under management or in custody totalling €66 billion at the end of 2005 (2), up 28% on a year.
(2) Excluding discretionary management
Crédit Mutuel
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Contents
■ CORPORATE FINANCING
AND FINANCIAL MARKETS
Corporate financing business is conducted through a
number of specialized entities. These include Crédit
Mutuel Centre Est Europe subsidiaries Banque
Fédérative du Crédit Mutuel (BFCM), and Banque de
l'Economie du Commerce, et la Monétique (BECM);
a joint subsidiary of Crédit Mutuel Arkéa and Crédit
Mutuel de Loire-Atlantique et du Centre-Ouest
called Compagnie financière du Crédit Mutuel, a
holding company for Groupe Crédit Mutuel Arkéa
and Banque Commerciale pour le Marché de
l’Entreprise (BCME); Banque Commerciale du
Marché Nord Europe (BCMNE), a holding company
of the corporate activities of Crédit Mutuel Nord
Europe (the majority shareholder of CSA Crédit
Professionnel, the central body for Crédit
Professionnel Belge); Caméfi Banque, a joint subsidiary of Crédit Mutuel Arkéa and Crédit Mutuel
Méditerraneéen; and, last but not least, the large
corporate accounts division of CIC.
Equity and other long-term financing through
these subsidiaries totalled over €14 billion in 2005,
showing a rise of 2.3% from the previous year.
Trading, both on behalf of clients and in the name of
the group, is now mainly through two subsidiaries,
Compagnie Financière du Crédit Mutuel and, most
of all, CM-CIC Marchés, the new trading-room operator. This is a joint subsidiary of Crédit Mutuel Centre
Est Europe and CIC, with a common management
structure for teams from CIC and BFCM. The latter
now handles the bulk of group market operations.
■ LES MÉTIERS DE L’IMMOBILIER
Subsidiaries of the Crédit Mutuel group are active in
property sales, promotion, contracting, development
and management.
In 2005, property sales rose 19% to €640 million in
over 4,000 transactions. Avis Immobilier, a network
of franchised agencies headed by Crédit Mutuel's
property arm Ataraxia, posted sales of €1 billion.
In promotion, Ataraxia was involved in 54 new
projects, including 13 in housing for a total of
710 homes, while Crédit Mutuel Centre Est Europe
subsidiary Sofedim was involved in 12 projects
including four in housing for 107 homes.
Soderec, a Crédit Mutuel subsidiary providing
backup for public-sector contractors and organizing
major public works projects, took up some 30 new
projects under mandates from the government and
local authorities.
CM-CIC Soparim, specialized in equity investments
in SCI property companies, represented the group in
19 new transactions in 2005. Concerning some
1,150 homes, these represented business totalling
€213 million for the SCIs involved, with Soparim
contributing €4.3 million in equity.
In property development, Ataraxia and Sarest placed
nearly 900 lots in 2005, generating a gross margin of
€14 million. Finally Ataraxia, the only group entity
in property management, administer 4,000 management mandates and 780 facilities management
contracts.
Through BFCM, Crédit Mutuel is present in highvalue settlement systems including PNS, RTGS and
ABE as well as the RGV securities settlement system.
In 2005 it processed 11,300 client and own-account
transactions totalling €32 billion through these
platforms.
ANNUAL REPORT
2005
45
Contents
Network support services
■ EQUIPMENT LEASING
■ PROPERTY LEASING
Following two years of upheavals including migration
of information systems to allow unified processing(3)
and the merger of the group’s equipment leasing
entities(4), 2005 was a period of consolidation.
Corporate clients can call on specialized property
leasing services that effusively complement our
offering of long and medium-term financing.
CM-CIC Bail, a joint subsidiary of Crédit Mutuel Centre
Est Europe and CIC, Crédit Mutuel Nord Europe subsidiary Bail Actéa, and Sodelem, a subsidiary of several
Crédit Mutuel de l'Ouest groups, together manage
125,000 contracts representing an outstanding total of
€3.7 billion. New business in 2005 amounted to €2.2
billion for 52,300 contracts, representing 9.5% of the
French market.
CM-CIC Lease, a joint subsidiary of Crédit Mutuel
Centre Est Europe and CIC, counts among the top
five contenders in the sector. In 2005, the company
took over portfolios resulting from the mergers of
Lorbail, Solybail, Sofébail and CIAL Finance in the
second half of 2004 and now administers these on
its own platform. Migration to the Euro Information
Production system at the end of 2005 gives it the
capacity it needs as the focus of group property
leasing, and significantly eases day-to-day administration.
With the contributions of other entities including
Bait Entreprises, a subsidiary of Crédit Mutuel
Arkéa, Bail Immo Nord and Batiroc Normandie, a
subsidiary of Crédit Mutuel Nord Europe, new
property leasing contracts booked in 2005 reached
€429 million, representing 8.3% of the market,
and the outstanding total at the end of the year
amounted to €2.4 billion.
(3) CIO, SNVB and CIAL integrated into CM-CIC Bail since
1 January
(4) Merger of Bail Equipement and Fédébail.
Crédit Mutuel
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Contents
■ FACTORING
■ VENTURE CAPITAL
FactoCIC, the joint factoring subsidiary of Crédit
Mutuel, CIC and GE FactoFrance, posted the
market's highest growth with a 10.4% rise in revenues to €6.9 billion and market share measured by
receivables purchased reached 8%.
The number of clients rose 11% and FactoCIC now
serves more than one of ten businesses using factoring services. At the end of 2005, receivables outstanding showed a 14% rise on a year at €1.4 billion.
The 748 new contracts booked during the year
represented business totalling €1.8 billion.
The Crédit Mutuel group has three entities dedicated
to regional development in western France: Sobrepar
and Synergies Finance (Crédit Mutuel Arkéa group)
and CMO Participations (Crédit Mutuel Océan).
Despite pressure on margins, FactoCIC again reported healthy earnings, turning in one of the best
performances in the sector with net income up 3%
to €14.1 million. In addition to factoring, Crédit
Mutuel offers clients other solutions for receivables
through CM-CIC La Violette Financement, specialized in financing of receivables in accordance with
the provisions of the so-called loi Dailly. A new
corporate name and the company's place as the
focus of this area of business for the group as whole
contributed to a rise of 12% in business in 2005,
with revenues from the 208,000 invoices processed
topping the €1 billion mark.
The CIC Group is a leader for venture capital in
France with three regional structures offering nationwide coverage. These are:
• CIC Finance for Paris and the northeast
• CIC Banque de Vizille for the southeast
• Institut de Participations de l'Ouest (IPO) and
financial companies Ar Men and Financière
Voltaire, subsidiaries of CIC Banque CIO, for
western France.
Investments totalled a net €1.2 billion at the end of
2005, showing a rise of 20% from the previous year.
The years saw the launch of four new partnerships
with CIC Banque CIO, Crédit Mutuel Centre Est
Europe and Savoie Mont Blanc federations and
Banque Commercial du Marché Nord Europe
(BCMNE).
ANNUAL REPORT
2005
47
Contents
Financial data
ANNUAL REPORT
2005
49
Contents
Results and financial statements
NOTE
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 transparency and comparability with other leading
financial institutions, the Board of Directors of the National Confederation
of Crédit Mutuel, which is the group's central body as prescribed by
article L.511-31 of France's Monetary and Financial Code, decided
to present its first consolidated financial statements based on these
standards at December 31, 2006.
The consolidated accounts for 2005 thus represent the comparative
information required for the 2006 consolidation and as such have been
reviewed by the Statutory Auditors of the Crédit Mutuel group.
In this particular context, it was decided to present, in summary format,
financial statements for 2005 which represent the first step in the transition
to IFRS. Only the consolidated balance sheet and consolidated statement
of income for the Crédit Mutuel group appear in this report.
As no consolidated financial statements are published on the basis
of French CNC (Conseil National de la Comptabilité) standards, there
are no grounds for evaluating any transitional impact in applying IFRS.
The format of the statements presented here corresponds to
recommendation 2004-R03 of the Conseil National de la Comptabilité
relating to IFRS statements and these statements are not intended to
represent first-time financial statements as provided for by IFRS 1.
First-time IFRS financial statements will be established for the financial
year ending December 31, 2006 and published in 2007.
Crédit Mutuel
50
Contents
Scope
Consolidating entity
Paragraph 1001 of CRC (Conseil de la
Règlementation Comptable) Regulation 99-07 dated
November 24, 1999 concerning consolidation of
businesses subject to the supervision of the Comité
de la Règlementation Bancaire et Financière provides
that groups of credit institutions with a central body
within the meaning of article L.511-30 of the
Monetary and Financial Code may define one or several consolidating entities combining a number of
credit institutions directly or indirectly affiliated to the
central body, together with the central body itself if
appropriate. This principle has been retained for the
application of IFRS.
The consolidating entity for the Crédit Mutuel group
is made up of all local mutuals (Caisses locales),
Caisses Fédérales whether engaged in general business or specialized in rural banking, Regional
Federations, the Fédération de Crédit Mutuel Agricole
et Rural, the Caisse Centrale du Crédit Mutuel and the
Confédération Nationale du Crédit Mutuel.
The equity of the consolidating entity is thus owned
exclusively by the members of local mutuals (caisses
locales).
Consolidated entities
The general principles for the inclusion of a subsidiary are defined in IAS 27, IAS 28 and IAS 31.
The scope of consolidation encompasses:
• fully controlled companies for which the consolidating entity has the power to define financial and
operational policies, which are fully consolidated
• companies under the joint control of a limited
number of partners, which are consolidated on a
proportionate basis
• companies that are not controlled by the consolidating entity but over which it has significant influence, participating in the definition of financial and
operational policies, are accounted for by the equity method.
Special-purpose entities are consolidated where the
conditions defined in SIC 12 are met, i.e., the SPE
conducts its activities to meet the entity's specific
needs, or the entity has decision-making powers to
obtain the majority of the benefits of the SPE's activities, and/or the entity is exposed to the majority of the
SPE's business risks.
The scope of the national consolidation includes all
entities consolidated by the Crédit Mutuel Regional
Groups. Jointly controlled entities not consolidated at
regional level are excluded if balance sheet totals or
results (profit or loss) do not have an impact representing more than 1% of the corresponding consolidated aggregates. An entity not exceeding this threshold may nonetheless be included in the scope of the
consolidation if its areas of operation or its expected
future development are of strategic significance.
ANNUAL REPORT
2005
51
Contents
Results and financial statements
Options adopted by the
Crédit Mutuel group
IFRS provides for different options in some areas. The
principal options adopted by the group are outlined
below.
• The group has decided not to adopt the option of
taking the fair value to be the deemed cost of fixed
assets at the date of transition, which may apply
to any tangible fixed asset, any intangible asset
satisfying revaluation criteria, and any investment
property carried at cost.
• The group does not account for variations in the
actuarial value of commitments to employees
immediately in equity.
Crédit Mutuel
52
Group principles
Equity
In accordance with IFRIC 2, mutual members’ shares
are classified as equity if the entity has an unconditional right to refuse redemption or where the provisions of the law or the entity's governing charter prohibit or severely restrict redemption. In view of the
charters and the legal restrictions applying, the members’ shares issued by the entities of the Crédit Mutuel
group are accounted for as equity.
Financial assets and liabilities at fair value through
profit and loss
Financial instruments at fair value through profit and
loss include:
• The valuation at market price of debt securities
issued by the business and not held for trading: in
June 2005, the IASB published an amendment to
IAS 39 Financial Instruments: Recognition and
Measurement regarding conditions for the application of the fair value through profit and loss option
to financial assets and liabilities. This amendment
was adopted by the European Union on November
15 and the group has opted to apply it from January
1, 2005.
a) financial instruments held for trading, which are
mainly
• The group applies fair-value hedge accounting for a
portfolio hedge of interest-rate risk including the
hedging of core deposits, as allowed under the
European Commission's regulation 2086/2004.
b) financial instruments designated at fair value
through profit and loss pursuant to the option under
IAS 39 as amended in June 2005. The application of
fair value is intended to enhance the quality and
relevance of financial information, providing in
particular for:
• acquired for short-term resale or redemption;
• included in a portfolio of financial instruments
managed as a whole, with an updated operational
trading schedule for short-term realization of gains;
or
• derivatives not classified as hedging instruments.
Contents
• fair value accounting for certain compound financial
instruments without any separate valuation of
embedded derivatives that would not be sufficiently
reliable
• significant reduction in accounting mismatches
that would otherwise arise from measuring assets
or liabilities or recognizing the gains and losses on
them on different bases
• management and monitoring on a fair-value basis
of a set of assets and/or liabilities intended for risk
management or an investment strategy.
Venture capital interests are recognized at fair value.
Instruments in this category are designated at fair
value through profit and loss on first recognition on
the balance sheet and remain so on successive
balance sheets until such time as they are sold.
Variations in fair value are booked to the income
statement under Net gains/losses on financial instruments at fair value through profit and loss. Purchases
and sales of financial instruments at fair value
through profit and loss are recognized at the settlement date. Variations in fair value between the
transaction date and the settlement date are recognized on the income statement. Counterparty risk
relating to these instruments is factored into 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, the fair value of a financial
instrument is normally the transaction price.
Where a financial instrument is traded on an active
market, fair value is equal to the quoted or market
price, as this is its most reliable measure.
Derivatives are revalued on the basis of observable
market data such as variations in the yield curve.
They are classified as financial assets when market
value is positive and as financial liabilities where it
is negative.
To qualify as hedging instruments, derivatives must
meet the requirements defined in IAS 39. Otherwise
they are classified as trading assets or liabilities even
if, from an economic point of view, they were
acquired for the purposes of covering one or more
risks. The nature of the hedge is defined by the nature
of the risk concerned:
• fair-value hedges provide cover for variations in the
fair value of financial assets and liabilities, in particular those relating to the impact of variations in
interest rates on assets and liabilities at fixed rates
• cash-flow hedges provide cover for the impact of
variations in cash flows relating to financial assets
and liabilities, firm commitments or future transactions, and in particular interest-rate risk relating to
assets and liabilities at variable rates.
RAPPORT ANNUEL
2005
53
Contents
Results and financial statements
Financial assets available for sale (AFS)
Financial assets available for sale include financial
assets that are neither classified as loans or receivables, nor as financial assets held to maturity, nor as
financial assets at fair value through profit and loss.
These assets are recognized on the balance sheet at
market value at the acquisition date and subsequently until the financial asset is derecognized. Variations
in fair value, excluding accrued income, are booked
to equity under latent gains/losses. On disposal, or on
recognition of an impairment loss, these unrealised
gains and losses are transferred from shareholders’
equity to the profit and loss account, where they are
shown on the line “Net gain/loss on available-for sale
financial assets”.
Income accrued or received on fixed income securities is recognized on the income statement under
“Interest and assimilated income”. Dividends
received on other securities are recognized on the
income statement under “Net gain/loss on availablefor-sale financial assets”.
An impairment charge is recognized when the fair
value of available-for-sale financial assets shows a
prolonged or significant decline from cost. Losses
recognized on the income statement in connection
with such prolonged or significant declines in the fair
value of “shares and other variable-income securities” classified as available-for-sale are irreversible as
long as the instruments remain on the balance sheet.
These losses are recognized under “Net gain/loss on
available-for-sale financial assets”.
Losses resulting from a lasting decline in the fair value
of “bonds and assimilated securities” classified under
available-for-sale assets may be reversed and are recognized under “cost of risk” where they relate to
credit risk.
Crédit Mutuel
54
Loans and receivables from clients
Loans and receivables are financial assets with fixed
or determinable payments that are not traded on an
active market. They include loans granted directly to
clients, interests in syndicated loans, purchased
loans, and unlisted debt securities.
They are recognized at market value, which is generally the net amount paid out at the date of initial
recognition on the balance sheet, and subsequently,
except for those designated at fair value through profit or loss using the fair value option available under
IAS 39, at amortized cost using the effective interest
rate method.
Fees and commissions received or paid in direct connection with the establishment of the loan and that
are in the nature of interest charges are spread over
the life of the loan in accordance with the effective
interest rate method and are recognized as interest
movements in the income statement.
Provision for impairment of loans and receivables,
financing commitments and guarantees
Provision for impairment of loans
Impairments are recognized where there is objective
evidence that events arising after the establishment of
the loan or group of loans are of a nature to cause a
loss. Loans are analysed contract by contract at the
close of each accounting period. The impairment
recognized is equal to the difference between the
book value of the loan and its corrected value based
on the present value of estimated future cash flows
calculated at the original interest rate. Where the
applicable rate is variable, the most recent contractual rate is used for this purpose.
Where due payments remain unpaid for three
months, or six months in the case of property loans
and nine months for loans to local authorities, this is
considered objective evidence of an event leading to
a loss. This is also the case where debtors appear
unlikely to be able to pay due amounts in full, or
when terms lapse or when the borrower is placed in
judicial administration.
Impairment is recognized in a provision for which
appropriations and recoveries are included in the
cost of risk. The provision is deducted from assets
where it concerns loans and shown as a liability for
risk contingencies when it concerns financing commitments and guarantees.
Contents
General provisions for loans
Individually unimpaired loans are subjected to collective risk analysis by homogeneous portfolio, either
on the basis of deterioration in internal or external ratings or of the probability of default at maturity, considering the likely proportion of losses and the
amounts outstanding.
Remeasurement adjustment on interest-rate risk
hedged portfolios
This hedging is intended to provide overall cover for
structural interest-rate risk. The European Union's
amendments to IAS 39 allow inclusion of core
deposits in fixed-interest liability portfolios. These
portfolios are included on the basis of the internal
assumptions made by Asset/Liability Management
function.
For each asset or liability portfolio, the maturities of
the hedging derivatives and the hedged items are
compared to check the adequacy of the hedging.
Fair value changes on interest-rate risk hedged portfolios are recognized on the balance sheet with an
offsetting entry on the income statement.
Financial instruments held to maturity
This category is made up of financial assets with fixed
or determinable payments and fixed or determinable
maturities that the Crédit Mutuel group intends to
hold, and is in a position to hold, to maturity.
They are initially recognized at fair value and subsequently at amortized costs calculated using the effective interest rate method. They are subject to impairment tests at each balance sheet date, and where
appropriate an impairment charge is recognized
under the cost of risk in on the income statement.
These instruments may not be hedged for interest-rate
risk. The rules for the sale of these assets defined
under IAS 39 are very strict. Income on these instruments is recognized under “Interest and assimilated
income” on the income statement.
Tangible and intangible fixed assets
Fixed assets on the balance sheet include tangible
and intangible operating assets and investment
property. Fixed operating assets are used in for the
production of services or for administrative purposes.
Investment properties are buildings held for the
purpose of receiving rent and increasing the value of
capital invested. They are valued on the same basis as
operating properties at historic costs.
After initial recognition, fixed assets are valued at
amortized costs, in other words at cost less accumulated amortization (depreciation) and impairment.
Operating and investment properties are valued by
components.
Amortizable fixed assets are subject to impairment
tests when, at the close of the accounting period, evidence of a decline in value is identified. Fixed assets
that are not amortizable are subject to annual impairment tests.
If there is an indication of impairment, the new recoverable amount of the asset is compared with the carrying amount. If the asset is found to be impaired, an
impairment loss is recognized in the income statement. This also modifies the future depreciable base.
The loss is reversed in the event of a change in the
estimated recoverable amount or if there is no longer
an indication of impairment. Impairment losses are
taken to the income statement in “Depreciation,
amortisation and impairment of property, plant and
equipment and intangible assets”.
Gains and losses on disposals on the sale of fixed
operating assets are recognized on the income statement under “Net gain/loss on other fixed assets”.
Capital gains/losses on the sale of investment properties are recognized on the income statement under
“Income from other business” or “Expense on other
business”.
ANNUAL REPORT
2005
55
Contents
Results and financial statements
Goodwill
As required under IFRS 3, the acquiree’s assets, liabilities and contingent liabilities are measured at fair value
at the date of acquisition. Goodwill represents the
difference between the cost of the combination and
the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the
acquiree at the acquisition date. Positive goodwill is
recognised in the acquirer’s balance sheet as an asset,
and negative goodwill is recognised immediately in
profit or loss, under “Change in value of goodwill” on
the acquisition date.
It may be recalculated if, within the 12 months following the acquisition, the valuation of the entity requires
correction to allow for variations attributable to causes
other than the acquisition. Any goodwill under 1 million is immediately written off. The group carries out
Goodwill impairment tests at least once a year.
Amounts due to clients and credit institutions
These debts are financial liabilities with fixed or determinable payments. They are initially recognized on the
balance sheet at market value and subsequently at
amortized cost calculated using the effective interest-rate
method unless they have been designated at fair value.
Regulated savings accounts
Home savings accounts (Comptes épargne logement
or Cel) and home savings plans (Plans épargne logement or Pel) are French regulatory savings products
and available only to individuals. They involve a first
phase of interest-earning savings entitling holders to
property loans in a subsequent phase. They entail two
commitments for the establishment that distributes
them:
• paying future interest at a fixed rate on Pel home
savings plans (whereas interest payable on Cel
home savings accounts is at a variable rate subject
to periodic revision on the basis of an indexation
formula);
• granting loans on request to holders of either
Pel plans or Cel accounts meeting pre-defined
conditions.
Crédit Mutuel
56
These commitments have been assessed on the basis
of statistical analysis of client behaviour and market
data. A provision is established as a liability on the
balance sheet to cover future costs relating to the
potentially unfavourable terms for these products
relative to the interest rates charged to individual
clients on similar products for which interest rates are
not subject to regulation. This accounting treatment
is applied to generations of Pel and Cel that are
homogeneous under the terms of the applicable
regulations. The impact of variations in the related
provisions is recognized in the income statement as
interest paid to clients.
Technical provisions for insurance contracts
The financial assets of the group's insurance companies are classified in accordance with the categories
defined in IAS 39 and treated in accordance with the
valuation rules and other accounting principles in
the standard. As provided under phase 1 of IFRS 4,
contracts entailing insurance risks continue to be
accounted for in accordance with French accounting
standards and rules relating to technical provisions
(mathematical reserves, provisions for claims, etc).
Capitalization reserves constituted cover declines in
the value of insurance companies' assets and their
revenues. Pursuant to CNC (Conseil National de la
Comptabilité) regulation 2000-05, variations in the
capitalization reserves are eliminated on consolidation. No additional adjustments are required for
transition to IFRS but pursuant to IAS 12 a deferred
tax liability has been recognized in connection with
the reclassification of capitalization reserve within
Equity.
Provisions for contingencies and other liabilities
Appropriations to provisions for contingencies and
other liabilities and recoveries of these provisions are
classified by nature under corresponding income and
expense items.
A provision is set aside when it appears likely that
resources providing economic benefits will have to
be ceded to extinguish an obligation arising from a
prior event and the amount of this obligation may be
reliably estimated. The amount of the obligation is
discounted to determine the amount of the provision.
Contents
Employee benefits as defined in IAS 19 fall into four
categories:
• short-term benefits including wages, social security
contributions and bonuses payable in less than 12
months from the accounting date;
• long-term benefits including long-service and other
bonuses and payments to be made 12 months or
more after the accounting date;
• termination benefits;
Deferred tax assets are recognized net of deferred tax
liabilities when there is a high probability that they will
be used. Current and deferred taxes are recognized as
income or expense except where they relate to latent
gains or losses, in which case the deferred tax is
booked directly to this item under equity.
Balance sheet
• post-employment benefits, which may be either on
a defined benefits or on a defined contribution
basis.
The Crédit Mutuel group balance sheet at December
31, 2005 totals €436,390 million.
Commitments are covered by a provision and variations in this provision are recognized in the income
statement. Assumptions for the calculation of retirement and other post-employment commitments on a
defined benefits basis regard:
Main assets
• client loans and receivables account for 43% of
the total at €188,407 million, of which a little
more than a half is made up of home loans;
• the discount rate applied for calculating the present
value of commitments, which is determined by reference to long-term government bond yields as
measured by the 10-year constant maturity rate at
the close of the financial year;
• expected wage increases, assessed on the basis of
estimating long-term inflation and real wage
growth.
Provisions are also established for termination benefits, supplementary pensions, including those with
special status (regimes spéciaux), and long-service
bonuses.
Deferred taxes
Pursuant to IAS 12, deferred taxes are recognized for
temporary differences between the tax base and the
carrying amount of items on the consolidated balance
sheet except for goodwill and revaluction differences
on intangible assets that cannot be sold or transferred
separately from the entity acquired. Deferred taxes are
calculated by the liability method with reference to the
rate of corporate income tax known at the end of the
year and applicable to future years.
• client receivables, impaired on an individual basis
amount to €6,663 million and related provisions
to €4,464 million including a general provision of
€180.9 million at December 31, 2005;
• financial assets at fair value through profit and loss
amount to €81,170 million or 19% of the balance
sheet total. Of these, assets designated at fair value
amount to €36,439 million and derivatives classified as speculative for accounting purposes
amount to €5,765 million;
• available-for-sale financial assets make up the third
largest asset item at €74,915 million or 17% of the
balance sheet. Bonds and other fixed-income
securities at fair value amount to €65,656 million
and shares and other variable-income securities to
€6,072 million, while equity investments, other
investment securities and interests in affiliated
businesses amount to €1,510 million;
• loans and receivables due from credit institutions,
carried at amortized cost, amount to €55,015
million or 13% of the balance sheet. This is principally made up of €17,175 million in securities
under repurchase agreements, €21,163 million in
deposits with Caisse de dépôts et consignation in
connection with amounts outstanding on livret
bleu, compte d'épargne populaire and codevi
regulated savings accounts and €10,543 million
in loans and time deposits.
ANNUAL REPORT
2005
57
Contents
Results and financial statements
With respect to other assets:
• as a result of the classification’s constraints, held-tomaturity financial assets amount to only €4,322
million at December 31, 2005;
• main equity holdings accounted for by the equity
method are in Banque de Tunisie (€33.8 million),
Banque de Marché et d'Arbitrage (€12.4 million)
and the insurance company Astrée (€8.4 million).
Earnings of companies accounted for by the equity
method come to a total of €5.8 million in 2005;
• fixed assets, including both tangible and intangible
assets, total €2,988 million;
• positive goodwill amounts to €626 million, of
which €527 million for the CIC group. Negative
goodwill recognized in the income statement
amounted to €12.8 million for the year.
Liabilities and shareholders' equity
Main items are:
• amounts due to clients, carried at amortized cost,
total €148,230 million or 34% of the balance
sheet. This includes €84,552 million for regulated
savings accounts, €43,173 million for ordinary
accounts and €18,608 million for time deposits
and loans;
• debt securities issued amount to €75,530 million
or 17% of the balance sheet total. This amount is
principally made up of interbank securities and
negotiable debt securities (€54,118 million) and
bonds (€17,673 million);
• technical provisions for insurance contracts
amount to €72,482 million or 17% of the balance
sheet total;
• amounts due to credit institutions, carried at amortized cost, amount to €59,305 million or 14% of
the balance sheet. These are principally debt
securities placed under repurchase agreements
(€37,448 million) and loans and time deposits
(€18,522 million);
Crédit Mutuel
58
• financial liabilities at fair value through profit and
loss amount to €33,763 million or 8% of the balance sheet total. This is principally made up of
debts represented by securities placed under repurchase agreements (€7,392 million), derivatives recognized as speculative for accounting purposes
(€5,746 million) and debts to credit institutions
designated at fair value through profit and loss
relating to short securities sales (€15,720 million);
• shareholders' equity amounts to €20,530 million.
Deferred tax liabilities deducted from equity
amount to a net €112 million.
With respect to other liabilities:
• remeasurement adjustments relating to portfolios
hedged for interest rate exposure represent a net liability of €169 million;
• provisions for contingencies and other liabilities
amount to €1,277 million. This includes €325.4
million in provision for home savings following
recoveries in an amount of €103 million during the
year, €322 million in provisions for retirement
commitments and €102 million in provisions for
guarantee commitments.
The European Commission's decision of January 15,
2002 calling for repayment of state aid purportedly
granted to Crédit Mutuel in connection with the
administration of livret bleu accounts was overturned
by the Court of First Instance of the European
Communities on January 18, 2005. The European
Commission did not appeal the decision of the Court
of First Instance and Crédit Mutuel thus reduced provisions by an amount of €164 million. In March
2005, the European Commission decided to open a
new inquiry and in June 2006 announced resumption
of the procedure. The potential risk is not measurable.
Contents
Income statement
Net banking income for the year came to €9,633
million, an amount made up of €4,249 million in
interest margin, €2,336 million in fees and commissions, €2,252 million in gains on financial assets at
faire value through profit and loss and available-forsale financial assets, and €795 in income from other
business.
• Client business and income from available-for-sale
financial assets made positive contributions to
interest margins in respective amounts of €5,362
million and €1,550 million, while the negative
impact of refinancing expense was €2,549 million
and that of subordinated debt €113 million.
• Fee and commission income was essentially from
business with clients (€890 million) and from securities business (€709 million).
• Net gains/losses on financial assets and liabilities at
fair value through profit and loss concern both
those held for trading and those designated at fair
value, with positive contributions, including interest generated by these instruments, amounting to
€2,175 million and €1,063 million, respectively.
This item also includes variations in the fair value of
derivatives, interest included, for transactions in forward financial instruments (-1,353 million),
whether classified as speculative for accounting
purposes or as hedges, and the net result of foreign
exchange transactions (€65 million).
Net gains/losses on available-for-sale financial assets
mainly comprise income from shares and other variable-income securities (€68 million), net gains on
equity investments, interests in unconsolidated affiliated companies and other long-term securities investments (€119 million) and net gains on other securities (€115 million). Shares and other variable income
securities classified under available-for-sale financial
assets are written down when carrying value exceeds
realizable value.
• Income and expense relating to other business principally concerns insurance, with respective
amounts of €13,635 million and €13,196 million.
Earned life-insurance premiums amounted to
9,096 million and non-life premiums to €1,796
million. Claims paid amounted to €5,187 million
and variation in technical reserves to €4,901 million.
Payroll expense amounted to €3,622 million, representing 60% of operating expense totalling €6,016
million. The operating ratio was 62.5% and operating
income before provisions came to €3,617 million.
Cost of risk totalled €236 million. Negligible for
credit institutions, it came to €260 million for client
business, including €8 million for leasing receivables. Excluding the last item, irrecoverable accounts
totalled €391 million, while related provisions
amounted to €348 million, reversals of provisions to
€105 million, and recovery of amortized accounts
receivable to €33 million.
Declines in the value of fixed income securities were
recognized in an amount of €1.5 million and the cost
of other risk came to €23 million.
Operating income after provision came to €3,381
million. After inclusion of €6 million for equity in the
earnings of companies accounted for by the equity
method, of €27 million on other assets and a €13
million variation in goodwill, pre-tax income stood at
€3,426 million.
Income tax amounted to €1,009 million, representing 29.5% of pre-tax income.
Net income amounted to €2,417 million or €2,389
million excluding minority interests.
ANNUAL REPORT
2005
59
Contents
IFRS balance sheet
at December 31, 2005
Crédit Mutuel group
€millions
ASSETS
Cash and amounts due from central banks and post office banks
Financial assets at fair value through profit and loss
Derivatives used for hedging purposes
81,170
934
74,915
Loans and receivables due from credit institutions
55,015
Remeasurement adjustment on portfolios hedged for interest rate risk
Held-to-maturity financial assets
188,407
-10
4,322
Current tax assets
615
Deferred tax assets
559
Accruals and other assets
19,187
Investments of insurance companies
0
Other insurance assets
0
Non-current assets intended for sale
0
Interests in companies accounted for by the equity method
Investment property
Property and equipment and finance leases (lessee accounting)
60
980
2,722
Intangible assets
266
Goodwill
626
TOTAL ASSETS
60
6,621
Available-for-sale financial assets
Loans and receivables due from clients
Crédit Mutuel
December 31, 2005
436,390
Contents
LIABILITIES AND SHAREHOLDERS’ EQUITY
Due to central banks and post office banks
Financial liabilities at fair value through profit and loss
Derivatives used for hedging purposes
Due to credit institutions
December 31, 2005
1
33,763
1,304
59,305
Due to clients
148,230
Debt securities
73,530
Remeasurement adjustment on portfolios hedged for interest-rate risk
179
Current tax liabilities
719
Deferred tax liabilities
612
Accruals and other liabilities
18,559
Other insurance liabilities
0
Debt relating to assets intended for sale
0
Technical provisions for insurance contracts
72,482
Provisions for contingencies and other liabilities
1,277
Subordinated debt
5,653
Shareholders’ equity - minority interests
- Consolidated reserves - minority interests
- Net income - minority interests
- Latent gains/losses - minority interests
Attributable to shareholders
- Capital stock
- Additional paid-in capital
- Group: Consolidated reserves excluding minority interests
- Group: Net income excluding minority interests
- Group: Latent gains/losses
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
245
209
28
8
20,530
6,001
32
11,488
2,389
621
436,390
ANNUAL REPORT
2005
61
Contents
IFRS consolidated statement of income
at December 31, 2005
Crédit Mutuel group
€millions
December 31, 2005
Interest and assimilated income
17,797
Interest and assimilated expense
- 13,548
Fees and commissions received
3,296
Fees and commissions paid
- 960
Net gain/(loss) on financial instruments at fair value through profit and loss
1,950
Net gain/(loss) on available-for-sale financial assets
Income from other business
Expense on other business
Net banking income under IFRS
Operating expense under IFRS
- 13,418
9,633
- 6,016
- 3,622
- Other general operating expense
- 1,982
- 412
Operating income before provisions under IFRS
3,617
Cost of risk
- 236
Operating income after provisions under IFRS
3,381
Share in earnings/(losses) of companies accounted for by the equity method
6
Net gain/(loss) on other assets
27
Variations in the value of goodwill
13
Income before tax under IFRS
Income tax expense
Net post-tax gain/loss on discontinued operations
Total net income under IFRS
Minority interests
Net income excluding minority interests
62
14,214
- Payroll expense
- Net change in provisions, amortization and depreciation - operating properties
Crédit Mutuel
302
3,426
- 1,009
2,417
28
2,389
Confédération nationale du Crédit Mutuel
88-90, rue Cardinet - 75847 Paris Cedex 17
Tel.: 01 44 01 10 10 - Fax: 01 44 01 12 30
www.creditmutuel.com
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Conception / Réalisation : BDC
Photos : Crédit Mutuel - Graphic Obsession