2018

Annual report 2018

CRÉDIT MUTUEL ALLIANCE FÉDÉRALE’S BANK FOR BUSINESSES AND REAL ESTATE PROFESSIONALS

CAISSE FEDERALE DE CREDIT MUTUEL

Banque Fédérative de Crédit Mutuel

BFCM

SUBSIDIARIES

• Financial sector• Technology• Real estate• Insurance• Consumer loans• Specialized businesses

RÉSEAUCaisses de Crédit Mutuel and Caisses régionales

3,9 %

93 %

5,1 %

96,1 %

FEDERATIONS

BFCM is the � nancial arm of Crédit Mutuel Alliance Fédérale. As the holding company of the group composed of the members of Caisse Fédérale de Crédit Mutuel, BFCM hold the group’s equity interests and coordinates the activities of the subsidiaries.

100 %

100 %

100 %

70,6 %

34 %

32,8 %

50 %

100 %

Germany

Spain

BECM is Crédit Mutuel Alliance Fédérale’s* bank for businesses and real estate professionals. Drawing on the � nancial strength of Crédit Mutuel Alliance Fédérale and, in particular BFCM, BECM is a reasonably sized, largely decentralized bank that maintains close ties with its customers and o� ers short decision times.

BECM’s strategy is based on values of proximity, responsiveness and expertise that make it the lead bank for corporate customers within Crédit Mutuel Alliance Fédérale.

These strengths enable it to develop lasting, personalized relationships with customers in France and abroad.pro�

l

* Crédit Mutuel Alliance Fédérale: consolidated scope of the following Crédit Mutuel mutual banks: Crédit Mutuel Centre Est Europe, Sud-Est, Île de France, Savoie-Mont Blanc, Midi-Atlantique, Loire-Atlantique et Centre-Ouest, Centre, Normandie, Dauphiné-Vivarais, Méditerranée and Anjou – Their joint federal mutual bank (Caisse Fédérale de Crédit Mutuel (CFCM)) the Banque Fédérative du Crédit Mutuel, and its main subsidiaries: ACM, BECM, BECM Monaco, IT and CIC. Targobank Germany, Targobank Spain, Co� dis, CIC Iberbanco

A Group with an international presenceWest Indies-French Guiana• Speci� c cooperation

Germany• BECM Frankfurt,• Dusseldorf, Stuttgart,

Hamburg and Munich• CM-CIC Leasing GmbH• Targobank• Targo Technology• Targo Factoring, Targo

Leasing

Belgium• CM-CIC Leasing Benelux• BT Belgium• Co� dis Belgium• Partners (Insurance)• North Europe Life Belgium

Canada• Desjardins Assurance• Monetico

Spain• GACM España (Amgen,

Agrupació, AMCI, Atlantis Vida)

• Targobank• Co� dis Spain• CM-CIC Bail Spain

TAIT España

Hungary• Co� dis Hungary

Italy• Co� dis Italy

Luxembourg• Banque de Luxembourg• BT Luxembourg• Nord Europe Life

Luxembourg (NELL) (Insurance)

• ICM Life (Insurance)

Morocco• BMCE (Banque Marocaine

du Commerce Extérieur)• Royale Marocaine

d'Assurance• EurAfric Information

Monaco• BECM Monaco

Poland• Co� dis Poland

Portugal• Co� dis Portugal• Margem

Czech Republic• Co� dis Czech Republic

United Kingdom• Banque Transatlantique

London Branch• CIC branch

Slovakia• Co� dis Slovakia

Switzerland• Banque CIC Suisse

Tunisia• Banque de Tunisie• ASTREE (Insurance)• Information International

Developments (IID)• Direct Phone Services

New York, Singapore and Hong Kong• CIC branches

ANTILLES

GUYANE

CANADANEW YORK

U.K.

UNITED KINGDOM

BELGIUM

LUX.

GERMANY

POLAND

SLOVAKIA

HUNGARY

CZECH REPUBLIC

SWITZERLAND

MOROCCO

ITALY

TUNISIA

SPAIN

PORTUGAL

SINGAPOURFrance

Management and supervisory bodiesat December 31, 2018

4

SUPERVISORY BOARD

Nicolas THÉRY, Chairman

Alain TETEDOIE, Vice-Chairman

Jean-Daniel AZAÏS

Gérard BONTOUX

Marie-Jean BOOG

Hervé BROCHARD

Hervé CHATANAY

Bernard DALBIEZ

Gérard DIACQUENOD

Mireille GAVILLON

Monique JOLY

Damien LIEVENS

Patrick MOREL

Simone MULLER

Philippe TUFFREAU

Michel VIEUX

HONORARY CHAIRMAN

Etienne PFLIMLIN

EXECUTIVE BOARD

René DANGEL, Chairman

Olivier CHAMBAUD

Bertrand de BUYER

Bruno LIGONNET

STATUTORY AUDITORS

ERNST & YOUNG et Autres

KPMG Audit

Cont

ents

5

1. Reports and resolutionsExecutive Board’s management report 8Statutory Auditors’ report on the �nancial statements 18Statutory auditors' report on related party agreements 21Proposed resolutions 23

2. Financial statementsBalance sheet 28Income statement 31

3. Financial resultsThe company's �nancial results 33

1

Reports and resolutions

EXECUTIVE BOARD MEMBERS From left to right: Bruno Ligonnet, Bertrand de Buyer, René Dangel and Olivier Chambaud.

Executive Board’s management report2018: SLOWER GROWTH AMID POLITICAL AND GEOPOLITICAL TENSIONS

The exceptional rebound in growth experienced in 2017, due in particular to global trade, decelerated throughout 2018. The implementation of customs barriers on exports a�ected all geo-graphical areas and, by creating a con�dence shock, also reduced the level of investment. Moreover, in Europe, the intensifica-tion of political uncertainties (Italy, Brexit), which have not been dissipated, has worsened visibility for economic agents, while the sharp rise in oil prices has weighed on consumption. The decoupling in growth in the various regions therefore widened between the United States, on the one hand, where growth continued to accelerate, and the rest of the world, on the other hand, where it slowed. Despite these concerns, the central banks of developed countries continued to manifest their con�dence by tightening their accommodating monetary policy (end of purchases of �nancial securities and/or increases in key interest rates).

A YEAR MARKED BY THE RESURGENCE OF POLITICAL AND GEOPOLITICAL RISKS

Since the spring of 2018, Donald Trump’s protectionist rhetoric has intensi�ed. After imposing sanctions on steel and aluminum that hit almost all its partners, the U.S. president concentrated on China: a �rst round of tari�s on $50 billion of Chinese goods imported into the United States (taxed at 25%) was followed by a second round of tari�s on $200 billion of imported goods (taxed at 10%). Each of these measures led to an equivalent response by

Beijing, raising fears of an unlimited escalation of protectionist reprisals between the two countries. At the end of 2018, a period of calm was negotiated between Donald Trump and Xi Jinping, with a 90-day truce starting on December 1 during which period both countries agreed not to raise tari�s with the stated aim of reaching a lasting trade agreement. Pressure also remains strong on Europe and Japan due to the threat of possible U.S. trade sanctions on the automotive sector.

Europe also faces tough political issues with both Italy and the United Kingdom. On Brexit, the political situation got bogged down at the end of the year. London and Brussels reached an agreement on the terms of the UK’s departure from the European Union, but Theresa May was unable to get it approved by the House of Commons. In Italy, it was not until mid-December that the Italian government returned to a more orthodox economic policy, in large part due to pressure from the �nancial markets. This lack of visibility contributed to weaker European growth by inhibiting investment decisions.

DECOUPLING OF GLOBAL GROWTH RATES

In the eurozone, the economic upturn in 2017 gradually faded due to a global environment that became increasingly unfavo-rable. The contribution of foreign trade decreased signi�cantly in 2018 after several exceptional quarters, due to the drop in foreign demand. In addition to this underlying trend, the slowdown in European growth intensi�ed in the second half due to the impact of temporary external factors (changes in automobile regula-tions, social unrest in France) and persistent political tensions between the European Union and the United Kingdom and Italy. Consumers were also hurt by the sharp rise in gasoline prices. Under these circumstances, the pace of job creation certainly slowed, but nevertheless remained su�ciently strong to increase wage pressures due to a dwindling of available labor.

Reports and resolutions1.

9

These reassuring factors for the in�ation outlook led to an adjust-ment in the signals from the European Central Bank (ECB): it gradually reduced its purchases of �nancial assets – which ceased entirely on January 1, 2019 – while expressing con�dence in the idea of an initial increase in key rates by the end of 2019.

In the United States, growth continued to accelerate throughout the year driven by the momentum in 2017, the impacts of the tax reform (voted in December 2017) felt by households and companies, and a massive increase in public spending. Although the trade war led by Donald Trump weighed on glo-bal activity, it did not have a strong impact on domestic growth, which bene�ted from increased consumption. As a result, the Fed continued to raise its key rates, taking advantage of the rise in in�ation. This drove the dollar, U.S. sovereign rates and equity markets higher. These broad-based upward trends came to a halt during the second half of the year due to fears about the consequences of protectionism, higher in�ation and the end of the growth cycle.

In emerging countries, capital outflows accelerated, jeopar-dizing financial balances – reflected, in particular, in a sharp depreciation of currencies – which forced central bankers to suddenly raise their key rates. Against this volatile backdrop, virtually all emerging economies slowed in the second half of 2018. In China, the cleanup of the �nancial system decided by the authorities in 2017 and the Sino-U.S. trade war contributed to the slowdown in activity. Given the magnitude of the drop in foreign demand, the Chinese government sought to revive domestic growth drivers through monetary easing, a tax reform for households and lower corporate levies, but the impact of these measures remains limited to date. In terms of commodities, in October 2018, the price of oil temporarily spiked to over $80 a barrel before prices resumed a downward trend trajectory following Donald Trump’s partial about-face on the issue of the oil embargo against Iran. This fall in prices in the last quarter was also fueled by concerns about the momentum of production growth and global overproduction.

IN FRANCE, THE EXECUTIVE AND GROWTH WERE CONFRONTED BY THE “YELLOW VESTS” SOCIAL MOVEMENT

In 2018, the French government endeavored to pursue reforms in an increasingly unfavorable economic environment. Compa-nies continued to invest, but households sharply reduced their consumer spending in the face of rising in�ation. At the end of the year, the “yellow vests” movement had a strong negative impact on the rebound in activity that had begun in the third quarter. The government’s announcements are expected to boost purchasing power in 2019 but could lead to a widening of the de�cit, as anticipated by the upward trend in French interest rates. Lastly, real estate prices rose sharply throughout 2018, continuing the trend observed in 2017. Despite a stabilization in the number of existing housing units, the rise in prices was widespread throughout the country, although the acceleration was particularly marked in Paris.

BANQUE EUROPÉENNE DU CRÉDIT MUTUEL

BECM is a reasonably sized bank that caters to businesses and real estate professionals. It conducts its business nationally and in Germany.It covers the following markets and areas of activity:

– small, medium and large companies, with appropriate targeting based on the regions to ensure that its services complement those of the Crédit Mutuel Alliance Fédérale federations;

– �nancing real estate development, developers, property sel-lers and real estate investors in France, primarily in the housing sector;

– real estate companies that manage commercial and business rental properties in France and Germany;

– payments processing for major players in the retail, transport and services sectors.

On December 31, 2018, the bank had a workforce of 399 persons, comprised of 211 women and 188 men. Eighteen percent of the workforce has been renewed over the last two years. BECM's ability to train its employees is illustrated by the fact that 40 employees have transferred to other Crédit Mutuel Alliance Fédérale entities over the past two years. The average age of employees is 44 years and 6 months.

The commercial network comprises 53 branches and BECM Monaco, a subsidiary in which BECM holds a 99.99% stake.

– By market, BECM has:36 branches in the corporate market in France and Germany; 15 branches in the real estate professionals market, including two new branches created in 2018: Méditerranée Marchands de biens and Annecy Immobilier;two specialized branches dedicated to niche markets in the retail sector.– By region, BECM’s network consists of:44 branches in France; 8 branches in Germany; 1 branch in the West Indies.

BECM o�ers its customers advanced technical expertise in invest-ment �nancing and services to support their strategy. Its customer relationship managers ensure that customers bene�t from all their expertise, as well as the skills of the teams at the various Crédit Mutuel Alliance Fédérale subsidiaries.

For large operators in the real estate market in France, as part of the Crédit Mutuel Alliance Fédérale organization, BECM focuses and synthesizes expertise upstream from the home financing activities carried out by the retail networks. It also contributes to the development of the Group’s real estate subsidiaries. In the real estate market, it partners with developers and real estate companies.

BECM also works with large German companies, particularly those with operations in France, and with the German subsidiaries of French groups. It contributes its knowledge of local German mar-kets and makes its know-how available to corporate customers. The teams based in Frankfurt, Düsseldorf, Stuttgart, Hamburg and Munich design personalized solutions tailored to the needs of

German customers. The business of �nancing major real estate investors was added in 2016 to support French real estate com-panies that invest in German real estate assets, as well as German real estate companies and investors.

BECM distributes the products and services of Crédit Mutuel Alliance Fédérale subsidiaries in all areas related to the corporate and real estate markets.

On December 31, 2018, BECM had total customers of 20,271, of whom 16,779 were businesses and professionals, 1,907 were individuals (primarily in the West Indies) and 1,585 fell into other categories (real estate investment companies, non-pro�t orga-nizations, etc.). Broken down geographically, 18,240 customers are based in France and 2,031 are based abroad.

SALES RESULTS AND OPERATIONAL EFFICIENCY

2018 was the last year of the 2013-2018 Medium-Term Plan. In terms of business activity, new business volumes and revenue increased in both the corporate market and the real estate market:

BUSINESS INDICATORS UNIT AS OF 12/31/2018

CHANGE / 12/31/2017

Corporate market

New MT/LT loans M€ 2,184 + 4.6%

New equipment leasing M€ 504 + 45.7%

New real estate leasing M€ 140 + 77.9%

Commission income on loans K€ 15,133 + 26.5%

Debits subject to transaction fees M€ 76,326 + 11.4%

Commission income on accounts K€ 16,968 + 12.3%

Real estate market

New loans and guarantees for developers M€ 2,686 + 1.1%

New investor loans in France M€ 328 + 12.9%

New loan agreements with real estate companies and investors in Germany

M€ 1,074 + 4.7%

Guarantee commissions GFA (�nancial completion bond)

K€ 22,479 + 0.6%

CORPORATE MARKET

All activities for which objectives were set are up sharply com-pared to 2017 and ahead of the targets set.

Customer acquisition increased with 737 new accounts opened during the year. The customer attrition rate is favorable and, therefore, the customer portfolio continues to grow with over 336 new net customers. Prospecting continues to be a priority for BECM’s sales teams, with a focus on smaller companies that complements the Crédit Mutuel regional banking network. In

the segment of the corporate market comprising companies with revenue of over €50 million, 61 net accounts were opened.

Debits subject to transaction fees increased sharply by 11.4% compared to 2017.

Growth in medium/long-term new loans continued: up 4.6% to €2.2 billion in new loans. This growth was driven by Germany, where new loans rose by 20.3% to €504 million.

In the context of the diversi�cation of its activities, the objective in terms of �nancing vehicle �eets was achieved, particularly in the Ile-de-France region.

In employee savings, the branches in the South and East were instrumental in exceeding the target set. The PACTE Act of 2019 and the quality of the Group’s products and services will enable it to increase market share.

In corporate insurance, creating a complete, structured and competitive range of insurance products for companies and professionals opens the door to a diversi�cation of activities into bank-insurance. The corporate market is one of the priority areas for the development of Assurances du Crédit Mutuel.

REAL ESTATE MARKET

Targets for new business of all types and in all segments were exceeded, reflecting an exceptionally strong year for new business.

The �nancing of real estate development operations in conjunc-tion with new listing contracts acquired by Crédit Mutuel Agence Immobilière, as well as a diversi�cation in the �nancing of pro-perty transactions, resulted in a sharp increase in new short-term loans of 12.5%.

In the professional real estate investment �eld, another focus of diversi�cation, new long-term loans also increased, by 12.9%.

Lastly, the combined strength of the activities of Foncière’s branches in France and Germany increased new business volumes, maintained the levels of outstanding loans despite signi�cant prepayments in France, and led to a signi�cant rise in arrangement fees in the second half of 2018.

OPERATIONAL EFFICIENCY

The main highlights of 2018 in France are described below.

The pooling of the Technical Sales, Commitments, Permanent Control and Compliance functions with those of the Crédit Mutuel Alliance Fédérale federations and CIC’s regional banks continued.

Back office duties have been adapted by streamlining admi-nistrative tasks in relation to the processing of �nancial �ows and increasing remote involvement in customer relationships through the use of technology.

In parallel with the measures taken to restructure CIC’s regional banking networks, the powers delegated to branch managers and customer relationship managers were increased in the cor-

Reports and resolutions10

porate and real estate markets. These measures have fostered greater decision-making responsibility closer to customers, grea-ter responsiveness and greater e�ciency in the credit application processing systems.

In Germany, the pooling of support functions with Targobank’s teams impacted the logistics and IT management domains, and a structural IT migration project is underway towards an upgraded information and management system that will create new deve-lopment possibilities.

The risk appetite framework has been supplemented and now comprises 18 indicators in six main risk areas: credit risk, solvency risk, return risk, liquidity risk, interest rate risk and operational risk. The management of these indicators is essential in order to control changes in risks, particularly credit risks, by reducing them and diversifying activities. The quarterly reporting on these indicators shows that BECM has a safety margin with regard to the alert thresholds set by the Supervisory Board.

In addition, the risk mapping was validated by the Supervisory Board on July 26, 2018. It provides a concise overview of BECM’s main risks, particularly in terms of credit and operational risks.

CUSTOMER BUSINESS AND FINANCIAL RESULTS

LOANS (average monthly balances)

Total managed on-balance sheet and off-balance sheet loan commitments reached €25.9 billion, an increase of €2.2 billion or 9.2%.

On-balance sheet loans grew by 7.3% to €15.0 billion.

An exceptionally high number of prepayments were made, pri-marily due to external growth transactions by several customers who re�nanced on the �nancial markets and the repayment of the �nancing of Group’s Press division. This item represented over €1.2 billion of the €14 billion in total loans at year-end 2017, i.e., approximately 8.8% of outstanding loans.

As a result, lending slowed in the first half of 2018; growth returned in the second half and the year ended with a higher increase than the market trend.

The corporate market grew by 7.6%, with loans totaling €9.8 billion, compared to a 9.9% increase in 2017. Investment loans rose by 13.8% to €7.3 billion, with a signi�cant 22.9% increase in Germany. Operating loans fell by €0.2 billion to €2.5 billion.

The real estate market is driven by loans to developers, which increased by 25.1% to €1.3 billion. Business with real estate com-panies and investors rose 2.5% to €3.8 billion.

External loans backed by �nancial assets and held by the Group’s business subsidiaries (equipment leasing, real estate leasing and factoring) rose by 18.4% to €1.7 billion.

Guarantees given, mainly in the real estate sector, grew by 14.0% to €2.8 billion.

Undrawn confirmed credit lines increased by 10.0% to €6.2 billion.

DEPOSITS (average monthly balances)

Deposits rose by 3.9% to €12.7 billion. Deposit intake was posi-tive, despite signi�cant volatility towards the end of the year. It was fueled by the German market, which generates 37% of the deposits.

The loan-to-deposit ratio was 118.2% compared to 114.4% at end-2017.

Savings balances fell by €105 million, or 5.6%, to €1.8 billion, due to low yields related to the short-term yield curve.

FINANCIAL RESULTS

BECM’s interest margin grew by 5.0% to €166.8 million.

Net income from transactions with customers was up €17.4 mil-lion to €189.5 million, driven by growth in loan volumes and the lower cost of deposits.

The rate of return on loans fell by 0.02 point to 1.41%. In France, due to the mix of real estate businesses and professionals, the rate of return on loans fell from 1.43% in 2017 to 1.39% in 2018.

In Germany, it rose from 1.35% in 2017 to 1.41% in 2018, driven by the sharp rise in loans to real estate companies.

The average cost of deposits fell by 0.07 point to 0.08%. In France, the average cost fell from 0.19% in 2017 to 0.10% in 2018. In Ger-many, it fell from 0.06% in 2017 to 0.04% in 2018.

The contribution of hedging transactions (fixed-rate lender/�oating-rate borrower swap indexed to the 3-month Euribor) continued to decline significantly by €8.7 million, from €24.6 million in 2017 to €15.9 million in 2018, due to the maturity of earlier contracts that were renewed at lower rates. However, this decline was less signi�cant than that in 2017 of €17.5 million.

Other net interest income was nearly stable at €64.7 million. It comprised primarily non-utilization or commitment fees of €25.2 million, up 0.7%, and bond and guarantee fees, in particular for property development, which totaled €27 million, up 2.3%.

Other net banking commission income fell by 2.8% to €62.3 million, although excluding fees on electronic payments, it rose sharply (+6.7%), in particular due to account fees (+12.2% to €18.7 million), service fees (+7.6% to €9.7 million) and �nancial fees (+17.7% to €4.8 million). Commission income on loans fell slightly by 3.0% to €21 million, despite a sharp upward trend in the second half of the year (€13 million) compared with the �rst half (€8 million).

Commission income on electronic payments fell to €6 million in 2018 due to further increases in charges billed by Visa and Mas-terCard in the global payments sector associated with Europe and non-Europe interchange rates. Action plans to recover cost increases in prices invoiced to customers are being implemented through a renegotiation of existing contracts.

11

Reports and resolutions12

Net banking income grew by 2.5% to €298.0 million.

General operating expenses rose by 3.8% to €95.0 million.

The cost/income ratio remained low at 31.9%, compared with 31.5% in 2017. This performance was achieved by developing the business and providing customers with products, and the-refore through value creation, rather than by reducing general operating expenses, which would limit the potential for growth.

Gross operating income rose by 1.9% to €203.0 million.

Net provision allocations/reversals for loan losses stood at €31.4 million, a decrease of €9.2 million. It represents 0.22% of the annual average of total loans and 15.5% of gross operating income.

Operating income rose by 8.2% to €171.6 million.

Therefore, after an income tax charge of €61.3 million, net income totaled €109.9 million, up 10.0%.

EQUITY

Since its creation, BECM has developed its business in markets that are structurally more exposed than retail banking markets. Moreover, the prudential supervision mechanism introduced by the European Central Bank (ECB) after the �nancial crisis tighte-ned regulatory constraints on banks.

BECM must comply with a capital adequacy ratio every year in line with the development of its weighted risks (on- and o�-ba-lance sheet credit risks and operational risks).

In April 2018, BECM released its annual ICAAP report to measure its capital adequacy in a number of adverse scenarios with high levels of intensity. In all cases, the tests con�rmed the soundness of its balance sheet and the quality of its risk policy.

As of December 31, 2018, BECM had a Common Equity Tier 1 (CET1) ratio of 11.13% and a leverage ratio of 5.81% (transitional period calculation).

CORPORATE MARKET: MAIN HIGHLIGHTS IN 2018

An initial action applying an approach focusing on needs in various �elds was carried out on the mobility of employees and managers, which involved the back o�ce, digital tools and new products.

In the context of a Group system, BECM has developed rela-tionships with the world of start-ups and innovative companies throughout its network (in Strasbourg, Lyon, Paris, Grenoble and Toulouse) with dual-function corporate customer rela-tionship managers combining a portfolio of “mature” com-panies and a portfolio of start-ups. A loan budget has been allocated to this start-up approach, which is based on a struc-tured offer in terms of needs, communication on the BECM online site, a market portal for internal community tools, a loan database, appropriate training, and a platform for exchanges and collaborative work.

The o�er of investment loans was adapted to take account of the �nancial context, particularly through the o�er of �oating-rate loans with a �xed-rate option. A range of loans called “Transition” has also been deployed with a focus on the digital transition, the energy transition and the Social and Environmental Responsibi-lity transition.

The diversi�cation of activities based on the services developed by the Group was extended to the mobile telephone sector and vehicle �eet �nancing. It has also been extended in the business insurance �eld.

The intensive customer relationship culture has been reinforced by improved coverage of core portfolios and the diversi�cation of activities.

A project to organize the small business market was launched to support the development of this market by the Crédit Mutuel Alliance Fédérale local branches. Over the next �ve years, BECM will train customer relationship managers in the retail network’s business market, with either a full-time or part-time presence in its branches. This project, known as the BECM Academy, will be implemented in 2019 and will also rely on an adapted training program that is being �nalized by CM-CIC Formation.

BECM is a founding partner and coordinator of the Club In with Banque Transatlantique, which focuses on innovation and inter-national markets.

This business club, which is also an additional mechanism for business development, provides a network effect to its cus-tomers, who present their activities and products to other business partners.

Lastly, the bank activated a collaborative innovation laboratory (“Fab Lab”) in the corporate market to provide disruptive res-ponses to its activities when necessary. Employees take part in discussions to o�er new ideas and carry out new innovative projects.

THE REAL ESTATE PROFESSIONALS MARKET: MAIN HIGHLIGHTS IN 2018

For over 15 years, Crédit Mutuel Alliance Fédérale has entrusted responsibility for the business division that �nances real estate professionals to BECM.

As such, BECM manages Crédit Mutuel Alliance Fédérale’s rela-tions with national real estate developers and major multi-re-gional developers. Its customers also include leading property dealers, land developers and professional real estate investors in France. With branches located throughout the country, BECM �nances real estate development projects geared mainly towards housing, in cooperation with the group’s banking networks and real estate subsidiaries.

Within Crédit Mutuel Alliance Fédérale, BECM is also responsible for relations with listed real estate companies and major inves-tors that manage residential, commercial and business rental properties.

13

Thanks to its knowledge of the markets and operators, BECM plays a key role in the real estate value chain:

– helping Crédit Mutuel Agence Immobilière obtain real estate listing contracts;

– contributing to the development of EPS remote surveillance by bundling it into �nanced programs; and

– �nancing home loans through the group’s retail networks.

Lastly, in the area of real estate, BECM organizes and oversees, on behalf of the group, training, procedures and guidelines, a legal watch and the management and development of the “business” IT tools for which it is responsible.

It also acts as a liaison with the regulatory authorities for inqui-ries concerning the group's commitments vis-à-vis real estate professionals or in connection with the tasks of the European Central Bank (ECB).

Financing o�ered by BECM to operators is governed by strict prudential rules adapted to the particular characteristics of each deal. Its decentralized organization close to the markets in which it operates, its specialized teams, its dedicated analysis and management tool and the �nancing guidelines framework enable BECM to ensure tight risk management.

BECM has developed its profile in the real estate investment �nancing market conservatively, remaining very selective in its commercial proposals in view of the increase in asset values and heightened competition.

In 2018, a decision was made to create two new branches dedi-cated to real estate professionals:

– A branch in Aix-en-Provence, which will open in the second quarter of 2019 and will be aimed at prospective property dealers in the Provence-Alpes-Côte d'Azur region and profes-sional real estate customers of the Crédit Mutuel branches of the Crédit Mutuel Méditerranéen Federation.

It will strengthen the contribution to the marketing of existing properties in the network through Crédit Mutuel Agence Immo-bilière and the needs of being accommodated.

– A branch in Annecy, which opened on January 1, 2019, con�rms BECM’s positioning in a �eld covered by three Crédit Mutuel Alliance Fédérale federations: Savoie Mont Blanc, Dauphiné Vivarais and Sud-Est. It encourages the development of Cré-dit Mutuel Agence Immobilière's listing contracts, as well as property loans and services for their retail customers in these regions.

HUMAN RESOURCES

Since 2017, Crédit Mutuel Alliance Fédérale has adopted a com-mon status for the Group’s employees in France that supports the development of the company's culture, strengthens the social pact, protects all employees, helps employees work better together by providing the same employee bene�ts, and o�ers new opportunities for mobility and career development.

Reports and resolutions14

BECM’s compensation policy is based on the following principles:– no links between risk-taking and variable compensation;– individual raises based on performance, skills development and

scope of responsibility;– raises approved on a decentralized basis by branch and unit

managers;– raises based on loyalty, commitment, job competence in a team

setting and the ability to be involved in the development of activities that help BECM move forward.

As of December 31, 2018, the number of people employed under permanent and �xed-term contracts totaled 399 (391 permanent contracts, 4 �xed-term contracts and 4 on secondment).

Sta� movements during the year included 31 hires under perma-nent contracts, 40 departures of employees under permanent contracts (mainly transfers of sta� assigned to CCS and retire-ments) and 4 net departures of employees under fixed-term contracts.

SOCIAL AND ENVIRONMENTAL RESPONSIBILITY

Social and Environmental Responsibility (SER) is built on a set of economic, social, societal, environmental and governance commitments.

The SER policy is part of Crédit Mutuel Alliance Fédérale’s coope-rative and mutualist DNA and contributes to the group’s develop-ment and image through the search for increased e�ciency, pro-ductivity and safety. Its purpose is to achieve a balance between sustainable development, ethics and economic logic.

BECM is part of society, is committed to it and is considered a responsible player, mainly through four strategic priorities:– economic responsibility: �nancing the economy in our regions

and at the very local level;– social responsibility: developing a human resources policy that

promotes employment, training and professional employee development;

– environmental responsibility: adopting environmentally-frien-dly consumption habits;

– civic responsibility: promoting collective action, such as the support provided to research against melanoma, in partnership with the oncodermatology department at the Institut Gustave Roussy in Villejuif.

This means supporting the economy, supporting local territories and adopting a community-based and responsible approach. In particular, this involves implementing sector policies (mining sector, coal-fired power plants, civil nuclear energy, defense, purchasing, etc.) that contribute to the company’s image as an ethical entity.

As stated above, BECM participates in the deployment of the SER Transition loan, together with the Energy Transition loan and the Digital Transition loan.

This SER commitment is also re�ected in its respect for mutualist values such as solidarity, responsibility, autonomy and initiative, team spirit and compliance with the code of conduct and ethics.

COMPOSITION OF THE GOVERNING BODIES

The Shareholders’ Meeting of May 4, 2018 renewed the terms of o�ce as members of the Supervisory Board of Messrs. Gérard Bontoux, Hervé Brochard, Hervé Chatanay, Gérard Diacque-nod, Pierre Hussherr, Robert Laval, Daniel Schoepf and Philippe Tu�reau.

At the Supervisory Board’s meeting of May 4, 2018, Messrs. Olivier Chambaud, René Dangel, Bertrand de Buyer and Bruno Ligon-net were appointed members of the Executive Board and the appointment of Mr. René Dangel as Chairman of the Executive Board was renewed.

The provisional appointment of Mr. Bernard Dalbiez for the remainder of Ms. Danielle Joannes’ term of o�ce was approved by the Supervisory Board on July 26, 2018.

At the conclusion of the Supervisory Board meeting of December 6, 2018 the terms of o�ce of Messrs. Jean-Louis Boisson, Roger Danguel, Rémy Groz, Pierre Hussherr and Robert Laval expired because they had reached the age limit for serving on the board.

Mr. Daniel Schoepf also announced his resignation.

At the Supervisory Board meeting of December 6, 2018, the following provisional appointments were proposed:– Ms. Simone Muller for the remainder of Mr. Robert Danguel’s

term of o�ce;– Ms. Marie-Jean Boog for the remainder of Mr. Robert Laval’s

term of o�ce;– Ms. Mireille Gavillon for the remainder of Mr. Jean-Louis Bois-

son’s term of o�ce;– Ms. Monique Joly for the remainder of Mr. Pierre Hussherr’s

term of o�ce.Mr. Alain Tetedoie was appointed Vice-Chairman of the Supervi-sory Board to replace Mr. Jean-Louis Boisson.

In accordance with Article L.226-10-1 of the French Commercial Code, which refers to Article L.225-37-3 et seq. of the French Commercial Code, the list of o�ces held and functions exercised by each corporate o�cer during the past �scal year is included in this annual report.

EQUITY INTERESTS

As of December 31, 2018, shareholdings in subsidiaries and other equity interests stood at €13,279,466.62, of which €12,642,900 concerned the Monaco BECM subsidiary. For 2018, Banque Européenne du Crédit Mutuel Monaco posted net income of €890,266.50.

The SNC Foncière du Crédit Mutuel subsidiary acts as a property dealer in managing security related to cases in dispute or liti-gation. The company posted a pro�t of €11,689.90 for the year.

RECENT DEVELOPMENTS AND OUTLOOK

2019 is the start of a period that will be very important in the history of BECM and Crédit Mutuel Alliance Fédérale because it will be the �rst year of the �ve-year strategic plan, Ensemble#nou-veaumonde, which will be implemented between 2019 and 2023.

15

This strategic plan re� ects a desire for development and pro-found transformation in light of the acceleration of changes in the company, in customer behavior and in their expectations for a � uid and simpler relationship with their bank.

During the � rst half of 2019, BECM will carry out the following actions:

In terms of sales:– the adaptation of the sales policy to the new conditions de� ned

by the Group and dictated by the markets;– customer acquisition initiatives, including days dedicated to

prospecting in France and Germany;– equipment leasing actions (Flash lease) and pre-granted loans

to core portfolio customers;– inventorying core target customer projects and proposing a

debt restructuring o� er;– an initiative aimed at increasing customer loyalty through an

employee savings o� er in connection with the PACTE Act, meal vouchers and group health insurance.

In terms of organization and operational e� ciency, the hook-up of the regional branches to the CCS flow platforms will be completed.

In the area of training, strategic actions are designed to:– promote the development of bank-insurance in the business

market, increase corporate market share and net banking income and gain new customers;

– adopt a customer-centered development strategy, in particular through a universe of needs approach (day-to-day manage-ment, development strategy, human resources, transmission, start-ups and innovative companies, real estate professionals);

– furnish branch managers and customer relationship managers with the tools to provide informed advice to customers by giving them the keys to understand national economic guide-lines and the current tax and legal situation;

– launch a new service activity: e-invoices;– combine innovation and pro� tability of payment processing

solutions; – support the increase in lending authority and convert regula-

tory requirements into opportunities to improve performance in prevention, risk management and pro� tability (risk culture and compliance).

The strategic actions are traditionally complemented by the various career pathways, including a new pathway dedicated to further skills development for real estate professionals, primarily regulatory e-learning modules, as well as a skills enhancement component through employee training modules. The emphasis is particularly placed on supporting back o� ces with the “BO Entreprises: actors in distance relationships” and “BO Entreprises: sales support” modules.

Lastly, e-learning training is provided in regulatory areas such as Tracfin, international financial sanctions, the General Data Protection Regulation, FATCA and QI.

In the real estate market, BECM will open a second branch in Paris in order to comply with one of the recommendations of the

European Central Bank in its report on Commercial Real Estate. It will join the team of the CIC Iberbanco real estate professionals branch in Paris and provide continuity for the business rela-tionship with the branch’s existing customers, who are mainly property dealers in Ile-de-France. This will also make it possible to exploit the � nancing potential of the Grand Paris project under improved conditions.

The priorities set for 2019 are consistent with the priorities of the BECM and Crédit Mutuel Alliance Fédérale 2019-2023 strategic plan. They take into account the changes that will be required, in conjunction with this plan, in the business market in terms of distribution channels (physical, direct, remote and expertise channels), the approach to the o� er in terms of needs, the digital transformation of the activity and sales promotion.

They are divided into � ve areas:

1. Acquiring new customers in three segments:

– small businesses, in support of the strategy at the level of the Crédit Mutuel local banks and the Crédit Mutuel Alliance Fédé-rale, as well as start-ups and innovative companies;

– SMEs with sales over €10 million;

– large and medium-sized European companies.

2. The development of loans from the budget for pre-approved loans, specialized � nancing and � nancing structures and real estate company � nancing in Germany.

3. Deposit in� ows, against a backdrop of possible rate hikes. The objective will be to stabilize the pool of overnight deposits accu-mulated during the market’s excess liquidity period and to adjust the o� ering of term accounts by moving � xed-rate products to � oating-rate products in a timely manner.

4. Support for growth in commission income, through � nancial � ows and account fees thanks to the quality of service and by promoting the new processing organization with the CCS Corpo-rate Flow platforms, as well as by continuing e� orts to distribute telephone, vehicle � eet and corporate insurance products.

5. The adaptation of distribution methods, through the “Cus-tomer Relationship Managers 2.0” pro� le, which make it possible to take the bank to the customer (digital tools) and have the customer come to the bank (videoconference).

nouveaumonde

Reports and resolutions16

FINANCIAL INFORMATION (by month-end balance)

MANAGEMENT OF FINANCIAL RISKS

The Crédit Mutuel Alliance Fédérale’s ALM technical committee manages the group's interest rate, foreign exchange and liqui-dity risks and, therefore, those of BECM. As part of overall asset and liability management, the duration and type of re�nancing is decided according to asset/liability management rules, par-ticularly in terms of transformation and interest rate risk and regulatory ratios. As cash centralizer, BFCM ensures that group entities have su�cient liquidity; accordingly, BECM does not bear any liquidity risk on its own account.

BALANCE SHEET

Total assets as of December 31, 2018 amounted to €19.3 billion, compared to €19.0 billion in 2017 (+1.6%).

LIABILITIES

Interbank transactions amounted to €5.0 billion and consisted almost exclusively of re�nancing activities with BFCM.

Customer deposits, down by 2.4% at €12.1 billion (including accrued interest), consisted mainly of term deposits (€5.3 billion), customers' current account credit balances (€5.3 billion) and savings accounts (€1.5 billion).

The fund for general banking risks (FGBR) totaled €200 million.

Total shareholders' equity and reserves (including FGBR and net income), was €1,483 million compared with €1,408 million in 2017, following the appropriation of 2017 retained earnings.

Subordinated debt totaled €281 million (excluding accrued inte-rest), including €50 million in the form of super-subordinated

securities subscribed by BFCM to help BECM bolster its long-term funding resources.

Articles L.441-6-1 and D.441-4 of the French Commercial Code provide for speci�c disclosures relating to the due date of trade payables.

ASSETS

Interbank transactions mostly re�ect cash surpluses placed with BFCM.

On the reporting date, loans to customers (including accrued interest) were up by 9.1% to €15.0 billion versus €13.8 billion in 2017.

Cash facilities (€1.5 billion), capital asset �nancing (€9.6 billion), loans to developers (€1.4 billion), other loans (€1.3 billion) and customers' current account overdrafts (€0.9 billion) accounted for most of the facilities granted.

Non-performing loans to customers (gross outstandings of €254 million) were 63% covered by provisions. BECM pursues a pru-dent loan reclassi�cation and provisioning policy.

INCOME STATEMENT

As of December 31, 2018, interest and similar income totaled €266.1 million, consisting mainly of interest received on loan transactions with customers (€219.2 million).

Interest and similar expenses (€31.3 million) consisted mainly of interest paid to BFCM in respect of re�nancing and interest paid on customers' term deposits.

Net banking income amounted to €298 million, compared with €290.7 million in 2017.

ARTICLE D. 441-4 I-1°: INVOICES RECEIVED BUT NOT SETTLED AS AT THE FISCAL YEAR CLOSING DATE AND WHICH WERE IN ARREARS BY:

ARTICLE D. 441-4 I-2°: INVOICES ISSUED BUT NOT SETTLED AS AT THE FISCAL YEAR CLOSING DATE AND WHICH WERE IN ARREARS BY:

0 DAYS (indicative)

1 TO 30 DAYS

31 TO 60 DAYS

61 TO 90 DAYS

91 DAYS OR

MORE

TOTAL (1 day or

more)

0 DAYS (indicative)

1 TO 30 DAYS

31 TO 60 DAYS

61 TO 90 DAYS

91 DAYS OR

MORE

TOTAL (1 day or

more)

(A) ARREARS TRANCHE

Number of invoices concerned 38

N/AWe consider that the scope of the information disclosed

concerning the payment periods referred to in Article D. 441-4 of the Commercial Code excludes bank and related transactions.

Total of the invoices concerned, inc. taxes 116,482 0.00 0.00 0.00 0.00 0.00

Percentage of total purchases for the �scal year, inc. taxes 1.10 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %

Percentage of revenue for the �scal year, inc. taxes

(B) INVOICES EXCLUDED FROM (A) CONCERNING PAYABLES AND RECEIVABLES IN LITIGATION OR NOT RECOGNIZED

Number of invoices excluded 0

N/ATotal amount of excluded invoices (specify whether tax inclusive or exclusive) 0

(C) REFERENCE PAYMENT PERIODS USED (CONTRACTUAL OR STATUTORY - ARTICLE L. 441-6 OR ARTICLE L. 443-1 OF THE COMMERCIAL CODE)Payment periods used for calculating arrears

Contractual periods: within 30 days of receipt of the invoice or supplier’s payment period if greater Contractual periods: due on receipt of the invoice

Pursuant to the provisions of Articles L. 441-6-1 and D. 441-4 of the French Commercial Code, we set out below the information concerning supplier and customer payment periods referred to in Article D. 441-4 of said Code for invoices received and issued but not settled as at the �scal year closing date and which were in arrears:

17

General operating expenses totaled €96.9 million, of which €2.1 million was incurred on behalf of other Crédit Mutuel Alliance Fédérale entities and subsequently recovered. Net operating expenses for BECM therefore totaled €94.8 million.

Net provision allocations/reversals for loan losses came to €31.4 million.

An amount of €32,949 corresponding to non-tax-deductible rental and depreciation of company cars was added back to taxable income.

After an income tax charge of €61.3 million, net income for the year came to €109.9 million compared to €99.8 million in 2017.

APPROPRIATION OF PRIOR YEAR EARNINGS AND NET INCOME PROPOSED TO THE SHAREHOLDERS' MEETING

The appropriation of net income and retained earnings sub-mitted to the Shareholders' Meeting is as follows (in euros):

ORIGIN OF INCOME TO BE APPROPRIATED:

2018 net income 109,853,434.04

Prior year retained earnings 524,847.14

TOTAL AVAILABLE FOR APPROPRIATION 110,378,281.18

The Executive Board proposes to allocate:

– an amount of €110,000,000 to the revenue reserve;– and carry the residual balance of €378,281.18 forward as

retained earnings.

In accordance with currently applicable legal provisions, the Exe-cutive Board reminds you that the following dividends per share were distributed in respect of the previous three �nancial years:

Year 2015 2016 2017

Amount in euros4.85 7.24(1) 5.29(1)

4.13(2) 3.09(2)

Dividend eligible for the tax allowance provided for in Article 158 of the French Tax Code

yes yes yes

(1) For shares entitled to the full year’s dividend.(2) For new shares entitled from June 6, 2016.

Strasbourg, April 4, 2019

The Executive Board

18

To the Annual General Meeting of Banque Européenne du Crédit Mutuel,

OPINION

In compliance with the engagement entrusted to us by your annual general meetings, we have audited the accompanying �nancial statements of Banque Européenne du Crédit Mutuel for the year ended December 31, 2018.

In our opinion, the financial statements give a true and fair view of the assets and liabilities and of the �nancial position of the Company as at December 31, 2018 and of the results of its operations for the year then ended in accordance with French accounting principles.

BASIS FOR OPINION

AUDIT FRAMEWORK

We conducted our audit in accordance with professional stan-dards applicable in France. We believe that the audit evidence we have obtained is su�cient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the Statutory Auditors’ Responsibilities for the Audit of the Finan-cial Statements section of our report.

INDEPENDENCE

We conducted our audit engagement in compliance with inde-pendence rules applicable to us, for the period from January 1, 2018 to the date of our report and speci�cally we did not provide any prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No 537/2014 or in the French Code of Ethics (Code de déontologie) for statutory auditors.

JUSTIFICATION OF ASSESSMENTS – KEY AUDIT MATTERS

In accordance with the requirements of Articles L.823-9 and R.823-7 of the French Commercial Code (Code de commerce) relating to the justi�cation of our assessments, we inform you of the key audit matters relating to risks of material misstatement that, in our professional judgment, were of most signi�cance in our audit of the �nancial statements of the current period, as well as how we addressed those risks.

These matters were addressed in the context of our audit of the �nancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on speci�c items of the �nancial statements.

ASSESSMENT OF IMPAIRMENT FOR CREDIT RISK ON CUSTOMER LOANS

RISK IDENTIFIED

Banque Européenne du Crédit Mutuel has written down pro-visions and depreciations to cover credit risk on its customer exposures.

Impairment of loans and receivables are recorded to cover these risks, on an individual basis. Provisions are established for �nan-cing and guarantee commitments. Impairment and provisions are recognized as soon as there is an objective indication of loss of value.

Impairment is the di�erence between the carrying amount of loans and the sum of discounted future cash �ows.

As at December 31, 2018, doubtful accounts receivable amount to € 254 million. Impairment losses and related provisions amount respectively to € 160 million and € 6 million,, as presented in Notes 2.4 and 2.17 to the �nancial statements.

The principles followed in the provisioning of credit risk are des-cribed in Note 1 "Accounting principles, valuation and presenta-tion methods" to the �nancial statements.

The valuation of impairments and provisions requires the exer-cise of judgment for the identi�cation of exposures presenting a risk of non-recovery, or for the determination of future recove-rable cash �ows and recovery periods.

We considered the valuation of impairments and provisions as a key audit matter due to:

the relative importance of outstanding loans in the balance sheet;

the complexity of the probabilities of default’s estimating, losses’ estimating in case of default or future recoverable �ows.

OUR RESPONSE

We examined the processes and controls relating to the allo-cation of internal rating on loans and receivables which has a proven risk of default, as well as the procedures for calculating the corresponding impairment.

We examined:

– with the help of our IT specialists, the mechanisms that ensure the quality of the data used by the rating and impairment models;

– on a sample of receivables, the classi�cation of loans between performing and non-performing loans.

Regarding credit risk for corporate clients:

– we acknowledged the minutes of governance decisions on impairment;

Reports and resolutions

Statutory Auditors' report on the annual �nancial statements (Year ended December 31, 2018)

19

– on a sampling basis, we examined impaired loan records to evaluate the documentation of the credit rating and the level of impairment applied;

– and, where applicable, we analyzed the appropriateness of manual adjustments to internal credit ratings.

SPECIFIC VERIFICATIONS

We have also performed, in accordance with professional stan-dards applicable in France, the speci�c veri�cations required by laws and regulations.

We have no matters to report as to the fair presentation and the consistency with the financial statements of the information given in the Executive Board’s management report and in the other documents with respect to the �nancial position and the �nancial statements except for the point below.

The sincerity and the consistency with the �nancial statements of the information relating to payment terms referred to in Article D. 441-4 of the French Commercial Code (Code de commerce) call on us the following observation: As indicated in the management report, this information does not include banking operations and related operations, your Company considering that they do not fall within the scope of the information to be produced.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

APPOINTMENT OF THE STATUTORY AUDITORS

We were appointed as statutory auditors of Banque Euro-péenne du Crédit Mutuel by the Annual General Meeting held on December 16, 2005 for KPMG S.A. and on May 15, 1992 for ERNST & YOUNG et Autres.

As at December 31, 2018 KPMG S.A. and ERNST & YOUNG et Autres were in the 16th year and 27th year of total uninterrup-ted engagement.

RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS

Management is responsible for the preparation and fair pre-sentation of the �nancial statements in accordance with French accounting principles and for such internal control as mana-gement determines is necessary to enable the preparation of �nancial statements that are free from material misstatement, whether due to fraud or error.

20 Reports and resolutions

In preparing the financial statements, management is res-ponsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is expected to liquidate the Company or to cease operations.

The �nancial statements were approved by the Executive Board.

STATUTORY AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our role is to issue a report on the financial statements. Our objective is to obtain reasonable assurance about whether the �nancial statements as a whole are free from material misstate-ment. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with pro-fessional standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to in�uence the economic deci-sions of users taken on the basis of these �nancial statements.

As speci�ed in Article L.823-10-1 of the French Commercial Code (Code de commerce), our statutory audit does not include assu-rance on the viability of the Company or the quality of manage-ment of the a�airs of the Company.

As part of an audit conducted in accordance with professional standards applicable in France, the statutory auditor exercises professional judgment throughout the audit and furthermore:

– Identi�es and assesses the risks of material misstatement of the �nancial statements, whether due to fraud or error, designs and performs audit procedures responsive to those risks, and obtains audit evidence considered to be su�cient and appro-

priate to provide a basis for his opinion. The risk of not detec-ting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the over-ride of internal control.

– Obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the e�ectiveness of the internal control.

– Evaluates the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management in the �nancial statements.

– Assesses the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evi-dence obtained, whether a material uncertainty exists related to events or conditions that may cast signi�cant doubt on the Company’s ability to continue as a going concern. This assess-ment is based on the audit evidence obtained up to the date of his audit report. However, future events or conditions may cause the Company to cease to continue as a going concern. If the statutory auditor concludes that a material uncertainty exists, there is a requirement to draw attention in the audit report to the related disclosures in the �nancial statements or, if such disclosures are not provided or inadequate, to modify the opinion expressed therein.

– Evaluates the overall presentation of the �nancial statements and assesses whether these statements represent the under-lying transactions and events in a manner that achieves fair presentation.

Paris-La Défense, April 24, 2019

The Statutory Auditors French original signed by

KPMG S.A.

Arnaud Bourdeille

ERNST & YOUNG et Autres

Hassan Baaj

21

Statutory auditors' report on related party agreements (Year ended December 31, 2018)

To the Annual General Meeting of Banque Européenne du Crédit Mutuel,

In our capacity as statutory auditors of your Company, we hereby present to you our report on related party agreements.

We are required to inform you, on the basis of the information provided to us, of the terms and conditions of those agreements indicated to us, or that we may have identified in the perfor-mance of our engagement. We are not required to give our opi-nion as to whether they are bene�cial or appropriate or to ascer-tain the existence of other agreements. It is your responsibility to assess the relevance of these agreements prior to their approval.

We performed those procedures which we deemed necessary in compliance with professional guidance issued by the French Institute of Statutory Auditors (Compagnie nationale des com-missaires aux comptes) relating to this type of engagement.

AGREEMENTS SUBMITTED FOR APPROVAL TO THE SHAREHOLDERS

We hereby inform you that we have not been notified of any agreements concluded during the year ended December 31, 2018 to be submitted to the shareholders for approval in accordance with Article L.227-10 of the French Commercial Code (Code de commerce).

Paris-La Défense, April 24, 2019

The Statutory Auditors French original signed by

KPMG S.A.

Arnaud Bourdeille

ERNST & YOUNG et Autres

Hassan Baaj

22 Reports and resolutions

23

Proposed resolutions for the Ordinary Shareholders’ MeetingFIRST RESOLUTION

The Shareholders’ Meeting, having heard the report of the Execu-tive Board, and the Statutory Auditors’ general report, approves the annual �nancial statements, i.e., the balance sheet, income statement and notes to the financial statements for the year ended December 31, 2018, as presented, as well as the transac-tions covered by these �nancial statements and summarized in these reports.

Consequently, it grants full discharge for the �nancial year ended December 31, 2018 to the members of the Executive Board and the Supervisory Board for their management.

SECOND RESOLUTION

After having noted that the financial statements for the year show net income of €109,853,434.04, as well as retained earnings of €524,847.14, i.e., a total of €110,378,281.18, the Shareholders’ Meeting approves the Executive Board's proposal.

Proposed appropriation (in euros):

1) to the revenue reserve 110,000,000.00

2. to retained earnings 378,281.18

TOTAL 110,378,281.18

In accordance with currently applicable legal provisions, the Exe-cutive Board reminds you that the following dividends per share were distributed in respect of the previous three �scal years:

YEAR 2015 2016 2017

Amount in euros4.85 7.24(1) 5.29(1)

4.13(2) 3.09(2)

Dividend eligible for the tax allowance provided for in Article 158 of the French Tax Code

yes yes yes

(1) For shares entitled to the full year’s dividend.(2) For new shares entitled from June 6, 2016.

THIRD RESOLUTION

The Shareholders' Meeting, having heard the Statutory Auditors’ special report on the agreements referred to in Article L.227-10 of the French Commercial Code, notes that no agreement of this kind was concluded during the year.

FOURTH RESOLUTION

The Shareholders’ Meeting approves the total amount of com-pensation paid to members of the Supervisory Board of Banque Européenne du Crédit Mutuel, as provided for in the charter on the resources for the performance of the duties of members of

the Board of Directors and Supervisory Board of Crédit Mutuel Alliance Fédérale, which for 2019 totals a maximum amount of €900,000. This amount is the total maximum amount for Caisse Fédérale de Crédit Mutuel, Banque Fédérative du Crédit Mutuel and Banque Européenne du Crédit Mutuel as a whole.

FIFTH RESOLUTION

The Shareholders’ Meeting rati�es the provisional appointment of Mr. Bernard Dalbiez as a member of the Supervisory Board for the portion of the term of o�ce of Ms. Danielle Joannes elapsed between his provisional appointment on July 26, 2018 and this date, and takes note of Mr. Dalbiez’s resignation from the Super-visory Board of BECM.

SIXTH RESOLUTION

The Shareholders’ Meeting rati�es the provisional appointment of Ms. Marie-Jean Boog as a member of the Supervisory Board for the remainder of the term of o�ce of Mr. Robert Laval, which will expire at the conclusion of the Shareholders’ Meeting convened to approve the �nancial statements for the year 2020.

SEVENTH RESOLUTION

The Shareholders’ Meeting rati�es the provisional appointment of Ms. Mireille Gavillon as a member of the Supervisory Board for the remainder of the term of o�ce of Mr. Jean-Louis Boisson, which will expire at the conclusion of the Shareholders’ Meeting convened to approve the �nancial statements for the year 2019.

EIGHTH RESOLUTION

The Shareholders’ Meeting rati�es the provisional appointment of Ms. Monique Joly as a member of the Supervisory Board for the remainder of the term of o�ce of Mr. Pierre Hussherr, which will expire at the conclusion of the Shareholders’ Meeting conve-ned to approve the �nancial statements for the year 2020.

NINTH RESOLUTION

The Shareholders’ Meeting rati�es the provisional appointment of Ms. Simone Muller as a member of the Supervisory Board for the remainder of the term of office of Mr. Roger Danguel, which will expire at the conclusion of the Shareholders’ Meeting convened to approve the �nancial statements for the year 2018.

TENTH RESOLUTION

The Shareholders’ Meeting renews the term of o�ce of Mr. Nico-las Thery as a member of the Supervisory Board for a period of three years, which will expire at the conclusion of the Sharehol-ders’ Meeting convened to approve the �nancial statements for the year 2021.

ELEVENTH RESOLUTION

The Shareholders’ Meeting renews the term of office of Mr. Patrick Morel as a member of the Supervisory Board for a period

24 Reports and resolutions

of three years, which will expire at the conclusion of the Sharehol-ders’ Meeting convened to approve the �nancial statements for the year 2021.

TWELFTH RESOLUTION

The Shareholders’ Meeting renews the term of office of Ms. Simone Muller as a member of the Supervisory Board for a period of three years, which will expire at the conclusion of the Sharehol-ders’ Meeting convened to approve the �nancial statements for the year 2021.

THIRTEENTH RESOLUTION

The Shareholders’ Meeting appoints Mr. Alain Pupel for a term of three years to replace Mr. Michel Vieux as a member of the Supervisory Board.

His term of o�ce will expire at the conclusion of the Sharehol-ders’ Meeting convened to approve the �nancial statements for the year 2021.

FOURTEENTH RESOLUTION

The Shareholders’ Meeting appoints Mr. Jean-François Parra for a term of three years to replace Mr. Bernard Dalbiez as a member of the Supervisory Board.

His term of o�ce will expire at the conclusion of the Sharehol-ders’ Meeting convened to approve the �nancial statements for the year 2021.

FIFTEENTH RESOLUTION

The Shareholders’ Meeting appoints Mr. Philippe Gallienne for a term of three years to replace Mr. Hervé Brochard as a member of the Supervisory Board.

His term of o�ce will expire at the conclusion of the Sharehol-ders’ Meeting convened to approve the �nancial statements for the year 2021.

SIXTEENTH RESOLUTION

The Shareholders’ Meeting appoints Mr. René Carel for a term of three years to replace Mr. Jean-Daniel Azaïs as a member of the Supervisory Board.

His term of o�ce will expire at the conclusion of the Sharehol-ders’ Meeting convened to approve the �nancial statements for the year 2021.

SEVENTEENTH RESOLUTION

The Shareholders’ Meeting appoints Ms. Monique Groc for a term of three years to replace Mr. Gérard Bontoux as a member of the Supervisory Board.

Her term of o�ce will expire at the conclusion of the Sharehol-ders’ Meeting convened to approve the �nancial statements for the year 2021.

Proposed resolutions for the Extraordinary Shareholders’ Meeting

FIRST RESOLUTION

The Shareholders’ Meeting, having heard the special report of the Executive Board, resolves to amend the company’s bylaws, after taking note of the change to the name of the street in which the registered o�ce is located.

Consequently, the Shareholders’ Meeting resolves to amend Article 4 of the company’s bylaws concerning the registered o�ce.

VERSION UNTIL MAY 18, 2018 NEW VERSION

The company’s registered o�ce is located at 34 rue du Wacken, Strasbourg (Bas-Rhin). […]

The company’s registered o�ce is located at 4 rue Frédéric-Guillaume Rai�eisen, Strasbourg (Bas-Rhin).[…]

SECOND RESOLUTION

The Shareholders’ Meeting resolves to amend Article 21 relating to the Executive Board.

CURRENT VERSION NEW VERSION

[…]Powers of the Executive BoardHowever, in its relationship with the Executive Board, and as internal measure that may not asserted against third parties, the Supervisory Board Conseil grants its prior approval fot the following transactions:– Acquisition, exchange or

sale of real property and real property rights

[…]Powers of the Executive BoardHowever, in its relationship with the Executive Board, and as internal measure that may not asserted against third parties, the Supervisory Board Conseil grants its prior approval for the following transactions:

– Acquisition, exchange or sale of real property assets and real property rights exceeding the threshold de�ned in the Internal Rules.

[…]Supervision of the Executive Board’s management The Executive Board shall perform its duties under the supervision of the Supervisory Board. At least once a quarter, the Executive Board shall submit a report to the Supervisory Board on the state of the company’s business. […]

[…]Supervision of the Executive Board’s management The Executive Board shall perform its duties under the supervision of the Supervisory Board. At least three times a year, the Executive Board shall submit a report to the Supervisory Board on the state of the company’s business. […]

THIRD RESOLUTION

The Shareholders’ Meeting resolves to delete the term “tele-gram” from the company’s bylaws due to the fact that the service has been permanently halted e�ective April 30, 2018.

Accordingly, the Shareholders’ Meeting resolves to update Article 15 as follows:

CURRENT VERSION NEW VERSION

[…] Any member of the Supervisory Board who is unable to attend a meeting may be represented by any of his/her colleagues, who may only hold one proxy. Such proxy, which is valid for a single meeting, may be granted by letter or telegram. […]

[…]Any member of the Supervisory Board who is unable to attend a meeting may be represented by any of his/her colleagues, who may only hold one proxy. Such proxy, which is valid for a single meeting, may be granted by letter or e-mail. […]

FOURTH RESOLUTION

The Shareholders’ Meeting resolves to delete the term “tele-gram” from the company’s bylaws due to the fact that the service has been permanently halted e�ective April 30, 2018.

Accordingly, the Shareholders’ Meeting resolves to update Article 21 as follows:

CURRENT VERSION NEW VERSION

[…] Any member of the Executive Board may, by letter or telegram, grant a proxy to another member to represent him/her at an Executive Board meeting. […]

[…]Any member of the Executive Board may, by letter or e-mail, grant a proxy to another member to represent him/her at an Executive Board meeting. […]

FIFTH RESOLUTION

The Shareholders’ Meeting resolves to amend Article 17 of the bylaws concerning the powers of the Supervisory Board.

CURRENT VERSION NEW VERSION

[…] At least once a quarter, the Executive Board shall submit a report to it on the state of the company’s business. After the end of each �scal year, the Executive Board shall submit the company �nancial statements for the past �scal year to the Supervisory Board for purposes of veri�cation and control. […]

[…]At least three times a year, the Executive Board shall submit a report to it on the state of the company’s business. After the end of each �scal year, the Executive Board shall submit the company �nancial statements for the past �scal year to the Supervisory Board for purposes of veri�cation and control. […]

2

Financial statements

ASSETS (IN € THOUSANDS) 12/31/2018 12/31/2017

Cash and amounts due from central banks 59,303 58,730

Receivables due from credit institutions 3,567,186 4,868,143

Receivables due from customers 15,040,324 13,780,136

Bonds and other �xed-income securities 0 0

Shares and other variable-income securities 21 21

Shares in subsidiaries and other long-term investments 637 499

Investments in a�liates 12,643 11,023

Intangible assets 1,094 1,067

Property, plant and equipment 1,176 872

Other assets 37,048 33,735

Prepayments and accrued income 536,921 214,129

TOTAL ASSETS 19,256,353 18,968,355

OFF–BALANCE SHEET ITEMS (COMMITMENTS GIVEN) 12/31/2018 12/31/2017

Financing commitments 6,285,839 5,673,942

Guarantees 4,140,618 3,664,543

Balance sheet

Financial statements3.

LIABILITIES (IN € THOUSANDS) 12/31/2018 12/31/2017

Due to credit institutions 5,072,634 4,674,226

Receivables due to customers 12,062,342 12,360,542

Debt securities 11,399 11,099

Other liabilitie 61,847 96,696

Deferred income and accrued expenses 273,822 107,143

Provisions 10,308 9,535

Subordinated debt 281,081 301,083

Fund for general banking risks (FGBR) 200,000 200,000

Equity capital excluding FGBR 1,282,920 1,208,031

Subscribed capital 134,049 134 049

Additional paid-in capital 368,011 368,011

Reserves 670,482 606,035

Retained earnings (+/-) 525 101

Net income for the year (+/-) 109,853 99,835

TOTAL LIABILITIES AND EQUITY 19,256,353 18,968,355

OFF–BALANCE SHEET ITEMS (COMMITMENTS AND GUARANTEES RECEIVED) 12/31/2018 12/31/2017

Financing commitments 0 0

Guarantees 3,691,751 2,906,083

29

Financial statements30

(IN € THOUSANDS) 12/31/2018 12/31/2017

Interest and similar income 266,143 266,290

- Interest and similar expense -31,283 -39,474

+ Income from variable-income securities 0 1

+ Commission income 419,620 382,584

- Commission expense -357,336 -318,534

+/- Gains or losses on trading account transactions 1,500 927

+/- Gains or losses on investment portfolio and similar transactions

1 1

+ Other banking income 1,235 4,450

- Other banking expense -1,835 -5,572

NET BANKING INCOME 298,045 290,673

- General operating expenses -94,784 -91,260

- Depreciation, amortization and impairment -227 -192

OPERATING INCOME BEFORE PROVISIONS 203,034 199,221

+/- Net provision allocations/reversals for loan losses -31,437 -40,570

OPERATING INCOME AFTER PROVISIONS 171,597 158,651

+/- Gains or losses on non-current assets -11 -4

INCOME FROM ORDINARY OPERATIONS BEFORE TAX 171,586 158,647

+/- Non-recurring items -416 -421

- Corporate income tax -61,317 -58,391

+/- Net allocation to the fund for general banking risks and to regulated provisions

0 0

NET INCOME 109,853 99,835

Income statement

31

Financial results3

33

The company's �nancial results

Financial results

in euros 2014 2015 2016 2017 2018

1. CAPITAL AT YEAR END

A Share capital 108,801,720.00 108,801,720.00 129,573,460.00 134,048,920.00 134,048,920.00

B Number of ordinary shares issued 5,440,086 5,440,086 6,478,673 6,702,446 6 ,702,446

C Number of preferred dividend shares (non-voting) issued

D Maximum number of shares to be created

– By conversion of bonds

– By exercise of subscription rights

2. OPERATIONS AND RESULTS FOR THE YEAR

A Net banking income, income from the securities portfolio and other 226,103,526.94 235,473,913.27 331,967,901.86 290,673,902.06 298,044,817.35

B Income before tax, employee pro�t-sharing, depreciation, amortization and provisions 124,764,411.49 135,978,993.52 230,920,567.90 181,092,717.23 199,481,534.87

C Corporate income tax 47,283,170.27 53,583,329.06 77,279,599.13 58,391,301.06 61,316,597.71

D Employee pro�t-sharing for the year 442,195.61 375,341.60 530,871.49 525,555.93 528,872.71

E Income after tax, employee pro�t-sharing,depreciation, amortization and provisions 82,747,612.68 88,065,182.42 105,579,537.51 99,835,011.94 109,853,434.02

F Dividend distributed 24,643,589.58 26,384,417.10 43,675,586.95 34,963,638.74 0.00

3. EARNINGS PER SHARE

A Income after tax and employee pro�t-sharing but before depreciation, amortization and provisions

14.16 15.08 25.38 18.23 20.54

B Income after tax, employee pro�t-sharing, depreciation, amortization and provisions 15.21 16.19 17.50 14.90 16.39

C Dividend per share 4.53 4.85 7.24 5.29 0.00

4. PERSONNEL

A Average number of employees during the year 393 386 408 408 399

B Total payroll costs 22,492,550.47 23,275,409.57 24,634,260.24 25,004,776.10 25,338,628.28

C Employee bene�ts (social security, bene�t schemes, etc.) 10,052,980.33 10,479,308.72 10,674,550.53 10,358,193.91 11,026,623.37

BECM – Simpli�ed corporation (société par actions simpli�ée) with capital of €134,048,920Registered with the Strasbourg Trade and Companies Registry under number B 379 522 600

APE code 6419Z – VAT no: FR 48 379 522 600 Registered o�ce: 4 rue Frédéric-Guillaume Rai�eisen – 67913 Strasbourg Cedex 9 – France

Tel. +33 (0)3 88 14 74 74 – Fax: +33 (0)3 88 14 75 10E-mail: becm@becm.fr – Website: www.becm.fr – ORIAS No. 07 025 384 – SWIFT Code: CMCI FR 2A Ed

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