For the whole of 2012, Operating income came in at EUR 1,116 million, up EUR 391 million compared to 2011, in spite of a credit spread net negative impact of EUR (172) million (nega-tive on own debt and posi(nega-tive on a loan portfolio held at fair value). Commercial revenues were resilient and the cost of risk declined steeply compared to 2011, which was impacted by the Greek debt restructuring. Operating income was positively influenced by EUR 194 million by acquiring control of leasing activities. Net profit attributable to shareholders came to EUR 307 million, impacted by an exceptional impairment of EUR (470) million on the asset management participation and a net loss of EUR (236) million on non-current assets, mainly due to disposal of foreign activities. The income tax expenses in both years were positively impacted by the recognition of deferred tax assets on tax losses carry forward gener-ated by the liquidation of former participations. The 2011 net result on discontinued operations of EUR (314) million was affected by the reorganisation of the BNP Paribas Group activities in Turkey.
The comparison between the 2012 and 2011 results is still largely impacted by the consequences of the various integra-tion initiatives between BNP Paribas Fortis and BNP Paribas.
BGL BNP Paribas, a 50% subsidiary of BNP Paribas Fortis, acquired an additional 16.67% of the shares of BNP Paribas Leasing Solutions (BPLS) on 30 March 2012, thereby obtaining control of BPLS (50% + one share in BPLS). This leads to the full consolidation of the leasing activities as from the second quarter of 2012 onwards, which were previously reported under one heading as ‘Share of earnings of associates’. In addition, the comparison between 2012 and 2011 results is affected by the reorganisation of the activities in Turkey in 2011, by the acquisition of Fortis Commercial Finance in Q4 2011, by the disposal of Fortis Bank Reinsurance in Q4 2011 and the deconsolidation or liquidation of some entities due to the running down of activities (FIF Dublin, Fortis Proprietary Investments, et al). These impacts are further detailed in the paragraphs below.
From a geographical point of view, based on the location of the BNP Paribas Fortis entities, 63% of the revenues were gener-ated in Belgium, 9% in Luxembourg and 28% in other countries in which BNP Paribas Fortis is active. The evolution in other countries was mainly impacted by the full consolidation of the leasing activities and the increased activity level in Turkey.
Net interest income reached EUR 4,457 million in 2012, up EUR 295 million or 7% compared to 2011. This includes scope changes related to the full consolidation of the leasing activities with a positive impact of EUR 460 million, a full year’s contribution from Fortis Commercial Finance (EUR 12 million) and a negative impact of EUR (22) million from the deconsolidation of entities and the disposal of FB Reinsurance.
Excluding scope changes, interest revenues were lower in most countries except in Turkey.
The 2012 interest margin in Belgium was in general negatively impacted by margins under pressure and lower income from the bond portfolio (due to re-investment at lower rates), partly neutralised by increased transformation margins benefiting from a high BOR/OIS spread in the first quarter. At Retail and Private Banking, pressure on margins, mainly of deposits, in the context of the low interest rate environment was partly counterbalanced by the impact of volume growth on loans and deposits. At Corporate and Public Banking, net interest income was supported by volume growth mainly in deposits, with underlying margins flat or slightly up on assets. The 2011 interest margin benefited from a revaluation of inflation-linked bonds in the amount of EUR 101 million.
The interest margin at BGL BNP Paribas was negatively impacted by a decline in the government bonds portfolio and the slowdown in the structured capital markets business, which more than offset the positive impact of deposit growth (mainly current accounts) at Retail Banking. The negative trend in interest margins in Poland was driven by a decline in margins, despite growth in deposits and loan volumes. Interest revenues at CIB Branches (mainly in Spain and the US) came under pressure due to the running down of portfolios.
Partly compensating for this, there was an increase in interest income in Turkey on the back of volume growth and a positive margin effect.
Net commission income amounted to EUR 1,317 million in 2012, up EUR 77 million or 6% compared to 2011. The increase in net commission income was supported by CIB Belgium (due to higher activity in structured finance and retrocession fees from BNP Paribas for capital markets activities) and by higher fee income in Turkey (i.e. on electronic payments).
Scope changes related to leasing entities, Fortis Commercial Finance and deconsolidated entities had a positive impact of EUR 21 million. Net commission income came under pres-sure at Belgian Retail Banking due to lower selling fees on off-balance sheet products and lower management fees. In addition, a termination fee of EUR 7 million was paid to the Belgian State, linked to the ending of the State guarantee on the Structured Credit Instruments portfolio. Net commission income also decreased at BGL BNP Paribas, mainly due to lower trailer and selling fees, alongside lower retrocession fees from BNP Paribas.
Net results on financial instruments at fair value through profit or loss came in at EUR 89 million in 2012, a decrease of EUR (220) million on 2011. This was mainly driven by the credit spread net negative impact of EUR (172) million (negative on own debt (EUR (411) million) and positive on a loan portfolio held at fair value (EUR 239 million)) and the indemnity paid for the unwinding of part of the subordinated debt CASHES (EUR (69) million). The running down of portfo-lios previously located in Fortis Proprietary Investments (EUR (52) million) also influenced this evolution, partly offset by positive trading results.
Net results on available-for-sale financial assets amounted to EUR (45) million in 2012 compared to EUR (36) million in 2011.
Scope changes related to leasing entities, Fortis Commercial Finance and the running down of portfolios previously located in Fortis Proprietary Investments had a limited (EUR (5.5) million) impact. Further reduction in exposure to sovereign risk led to losses of EUR (134) million on the sale of Portuguese government bonds, partly counterbalanced by gains on the sale of Greek exchanged bonds and other European (i.e.
German and Belgian) government bonds.
Net income from other activities reached EUR 63 million in 2012, EUR 5 million higher compared to 2011. Scope changes related to leasing entities and disposal of FB Reinsurance had a positive impact of EUR 48 million, partly counterbalanced by higher legal and operational risk provisions.
operating expenses amounted to EUR (4,155) million in 2012, EUR (526) million or 14% higher than 2011. Operating expenses benefited in 2011 from an exceptional release of tax-related provisions worth EUR 256 million. The 2012 evolution was impacted by scope changes related to leasing entities (EUR (235) million) and Fortis Commercial Finance (EUR (10) million). In addition, operating expenses increased in Turkey while other entities kept their expenses fairly flat, in which was the case for Belgium if we exclude the exceptional release of tax related provision in 2011. In Belgium, the impact of the wage drift was offset by a new compensation model, while the contribution to the deposit guarantee scheme, taxes on deposits and the financial stabil-ity contribution increased by 23% to EUR (173) million.
depreciation charges came to EUR (236) million in 2012, EUR (9) million higher than the previous year. Depreciation charges in 2012 included scope changes related to leasing entities (EUR (8) million) and Fortis Commercial Finance (EUR (6) million) and a write-off on intangibles for the London and Lisbon branches (EUR (10) million, relating to an forthcom-ing transfer to BNP Paribas. Depreciation charges in 2011 included accelerated depreciation charges of commercial branches as part of the reshaping process for the retail distribution network in Belgium (EUR (12) million).
Cost of risk amounted to EUR (374) million in 2012, EUR 778 million lower than in 2011 which included a EUR (866) million provision for Greek sovereign debt restructuring.
Excluding the provision for Greek debt and the scope changes due to leasing (EUR (61) million), the cost of risk was at a comparable level over the two years.
share of earnings of associates totalled EUR (294) million in 2012, reflecting a strong decrease of EUR (183) million on 2011. This evolution is mainly due to the EUR (470) million impairment on the investment in asset management associ-ates in 2012. The change from the equity method to full consolidation of the leasing entities in Q2 2012 had a nega-tive impact of EUR (56) million. These neganega-tive results were
partly counterbalanced by a higher positive contribution from AG Insurance (EUR 195 million), 2011 having been negatively impacted by the Greek debt restructuring. The 2011 result was also impacted by the EUR (167) million impairment on the investment in AG Insurance.
Net results on non-current assets came in at EUR (236) million in 2012 compared to EUR 51 million in 2011. The negative result in 2012 was mainly due to the antici-pated losses on the disposal of the London and Lisbon branches (EUR (105) million), the recycling through P&L of currency conversion reserves linked to the liquidation of Fortis Proprietary Investments and FB Energy Trading (EUR (94) million) and a loss on the disposal of hardware (EUR (15) million). The 2011 positive result was gener-ated by the sale of Textainer Marine Containers LTD and Fortis Bank Réinsurance.
income tax expenses amounted to EUR (41) million in 2012 including the recognition of deferred tax assets on tax losses carry-forward generated by the liquidation of participations (EUR 291 million). Excluding this DTA recognition and the share in the result of associates reported net of income taxes, the effective tax rate was 38%. Income taxes in 2011 amounted to EUR (80) million, also including the recognition of additional deferred tax assets worth EUR 197 million on Fortis Proprietary Investment (Ireland). Excluding this DTA and the share in the result of associates, the effective tax rate works out at 36%.
Net result on discontinued operations of EUR (314) million in 2011 comprised the negative accounting result related to a currency conversion loss of EUR (233) million following the loss of control over Fortis Bank Turkey, the negative fair value (EUR (75) million) of a put option granted to the partner in the TEB Holding joint venture (as part of the reorganisation of of BNP Paribas’ Turkish entities) in addition to the net operating results of the disposed subsidiaries and branches (EUR (5) million).
Net income attributable to minority interests amounted to EUR 238 million in 2012, EUR 71 million higher than in 2011, mainly driven by the scope change in the Leasing entities (with an increase in minority interests from 50% to 75%) and the higher result in Turkey, partly offset by the lower contribution from BGL BNP Paribas.