2012 Registration document and annual financial report - BNP Paribas

32012REVIEW OF OPERATIONSProfit and loss account3Net interest income fell by 9% year-on-year to EUR 21,745 millionin 2012. This decline mainly reflects a 41% reduction in income fromfixed-income securities measured at fair value through profit or lossto EUR 1,438 million in 2012 from EUR 2,435 million in 2011, and to adecrease in net income from customer items, to EUR 19,718 million in2012 from EUR 20,406 million in 2011.Net interest on debt securities issued by the Group fell 14%, fromEUR 4,025 million in 2011 to EUR 3,445 million in 2012.The decline in net interest income in 2012 was due to the general climateof low interest rates and decelerating business volumes, coupled withthe effects of adaptation plans instituted for certain businesses in 2011(mainly Corporate & Investment Banking, Leasing and Personal Finance).These factors contributed to a decrease in net interest income .NET COMMISSION INCOMENet commission income includes commissions on interbank and moneymarket transactions, customer transactions, securities transactions,foreign exchange and arbitrage transactions, securities commitments,forward financial instruments, and financial services. Net commissionincome fell to EUR 7,532 million in 2012 from EUR 8,419 million in 2011.This mainly reflects a fall in commission income from trusts and similaractivities, to EUR 2,298 million in 2012 from EUR 2,454 million in 2011,and a decline of EUR 330 million in commissions from financial assetsand liabilities not measured at fair or model value through profit or lossto EUR 2,657 million in 2012 from EUR 2,987 million in 2011.Commissions receded in 2012 owing to unfavourable financial marketconditions.NET GAIN ON FINANCIAL INSTRUMENTSAT FAIR OR MODEL VALUE THROUGHPROFIT OR LOSSThis line item includes all profit and loss items (other than interestincome and expenses, which are recognised under “Net interest income”as discussed above) relating to financial instruments managed in thetrading book and to financial instruments designated as fair or modelvalue through profit or loss by the Group under the fair value option ofIAS 39. This includes both capital gains and losses on the sale and themarking to fair or model value of these instruments, along with dividendsfrom variable-income securities.This line item also includes gains and losses due to the ineffectiveness offair value hedges, cash flow hedges, and net foreign currency investmenthedges.The net gain on financial instruments at fair or model value through profitor loss was EUR 3,312 million in 2012, down 11% from EUR 3,733 millionin 2011. The gains and losses resulting from cash flows and theremeasurement of financial instruments, either cash or derivatives, mustbe appreciated as a whole in order to give a fair representation of theprofit or loss resulting from trading activities.The decrease in this line item is primarily due to the change in the netgain on financial instruments at fair or model value through profit orloss under the IAS 39 option, essentially attributable to the BNP ParibasGroup’s issue risk (which fell from a gain of EUR 1,190 million in 2011 to aloss of EUR 1,617 million in 2012). The other components of income fromitems at fair value through profit or loss under the IAS 39 option are offsetby changes in the value of the equity instruments covering these assets.The residual change in net gains on portfolios of financial assetsand financial liabilities at fair value through profit or loss is due to aEUR 2,363 million increase in net gains on debt instruments combinedwith a EUR 499 million decrease in other derivatives.The remeasurement of currency positions increased by EUR 602 million.NET GAIN ON AVAILABLE-FOR-SALEFINANCIAL ASSETS AND OTHER FINANCIALASSETS NOT MEASURED AT FAIR OR MODELVALUEThis line item relates to assets classified as available-for-sale. Changes infair value (excluding interest due) of these assets are initially recognisedunder “Change in assets and liabilities recognised directly in shareholders’equity”. Upon the sale of such assets or the recognition of an impairmentloss, these unrealised gains or losses are recognised in the profit and lossaccount under “Net gain on available-for-sale financial assets and otherfinancial assets not measured at fair value”.This line item also includes gains and losses on the sale of other financialassets not measured at fair or model value.The net gain on available-for-sale financial assets and other financialassets not measured at fair or model value increased EUR 1,344 millionbetween 31 December 2011 and 31 December 2012. This increase canbe attributed to a EUR 1,247 million rise in the net gain on fixed-incomefinancial assets and a EUR 97 million increase in the net gain on variableincomefinancial assets.In 2012, this line item included significant exceptional items, such asa one-off amortisation of the fair value remeasurement of part of theBNP Paribas Fortis banking book due to prepayments (+ EUR 427 million).942012 Registration document and annual financial report - BNP PARIBAS