2012 Registration document and annual financial report - BNP Paribas

2012 REVIEW OF OPERATIONSProfit and loss account33.4 Profit and loss accountREVENUESIn millions of euros 2012 2011Change(2012/2011)Net interest income 21,745 23,981 -9%Net commission income 7,532 8,419 -11%Net gain on financial instruments at fair value through profit or loss 3,312 3,733 -11%Net gain on available-for-sale financial assets and other financial assets notmeasured at fair value 1,624 280 x 5.8Net income from other activities 4,859 5,971 -19%REVENUES 39,072 42,384 -8%3OVERVIEWThe 8% decline in the Group’s revenues in 2012 mainly reflects a 9% fallin net interest income and an 11% fall in net commission income, whichwas partially offset by an increase in net gains on available-for-salefinancial assets.NET INTEREST INCOMEThe “Net interest income” line item includes net interest income andinterest expenses related to customer items, interbank items, bondsissued by the Group, cash flow hedging instruments, interest rateportfolio hedging instruments, the trading book (fixed-income securities,repurchase agreements, loans and borrowings, and debt securities),available-for-sale financial assets, and held-to-maturity financial assets.More specifically, the “ Net interest income” line item includes:■ net interest income from loans and receivables, including the interest,transaction costs, fees, and commissions included in the initial value ofthe loan; these items are calculated using the effective interest methodand recognised in the profit and loss account over the life of the loan;■ net interest income from fixed-income securities held by the Groupwhich are classified as “ Financial assets at fair value through profitor loss” (for the contractual accrued interest) and “ Available-for-salefinancial assets” (for the interest calculated using the effective interestmethod;■ interest income from held-to-maturity assets, which are investmentswith fixed or determinable payments and fixed maturity that the Grouphas the intention and ability to hold until maturity; and■ net interest income from cash flow hedges, which are used inparticular to hedge interest rate risk on variable-rate assets andliabilities. Changes in the fair value of cash flow hedges are recordedin shareholders’ equity. The amounts recorded in shareholders’ equityover the life of the hedge are transferred to “ Net interest income” asand when the cash flows from the hedged item are recognised as profitor loss in the income statement.Interest income and expenses on hedging derivatives at value areincluded with the interest generated by the hedged item. Similarly,interest income and expenses arising from hedging derivatives used fortransactions designated as at fair or model value through profit or lossare allocated to the same line items as the interest income and expensesrelating to the underlying transactions.The main factors affecting the level of net interest income are the relativevolumes of interest-earning assets and interest-bearing liabilities and thespread between lending and funding rates. Net interest income is alsoaffected by the impact of hedging transactions, and, to a lesser extent,exchange rate fluctuations.Volumes of interest-earning assets and interest-bearing liabilities can beaffected by various factors, in addition to general economic conditionsand growth in the Group’s lending activities (either organically or throughacquisitions). One such factor is the Group’s business mix, such as therelative proportion of capital allocated to interest-generating as opposedto fee-generating businesses.The other principal factor affecting net interest income is the spreadbetween lending and funding rates, which itself is influenced by severalfactors. These include central bank funding rates (which affect boththe yield on interest-earning assets and the rates paid on sources offunding, although not always in a linear and simultaneous manner),the proportion of funding sources represented by non-interest bearingcustomer deposits, government decisions to raise or lower interestrates on regulated savings accounts, the competitive environment, therelative weight of the Group’s various interest-bearing products, whichhave different margins as a result of different competitive environments,and the Bank’s hedging strategy and accounting treatment of hedgingtransactions.2012 Registration document and annual financial report - BNP PARIBAS 93