HALF YEAR MANAGEMENT REPORT - SECOND UPDATE TO THE 2011 REGISTRATION DOCUMENT AND HALF YEAR FIN

1.1 Group presentation

BNP Paribas, Europe’s leading provider of banking and financial services, has four domestic retail banking markets in Europe, namely in Belgium, France, Italy and Luxembourg.

It is present in 79 countries and has almost 200,000 employees, including over 155,000 in Europe.

BNP Paribas holds key positions in its three activities:

Retail Banking, which includes the following:

• A set of Domestic Markets grouping together:

- French Retail Banking (FRB);

- BNL banca commerciale (BNL bc), Italian retail banking;

- Belgian Retail Banking (BRB);

- Other Domestic Markets activities including Luxembourg Retail Banking (LRB)

• An International Retail Banking entity grouping together:

- Europe-Mediterranean;

- BancWest;

• A Personal Finance entity;

Investment Solutions;

Corporate and Investment Banking (CIB).

BNP Paribas SA is the parent company of the BNP Paribas Group.

1.2 2012 first half results

GOOD RESULTS IN A CHALLENGING ENVIRONMENT N

I

NCOME

A

TTRIBUTABLE TO

E

QUITY

H

OLDERS

€4,715

(-0.6%

. 1H11) GROWTH OF DEPOSITS IN RETAIL BANKING

D

OMESTIC

M

ARKETS

’ D

EPOSITS

+3.2%

. 1H11 ADAPTING COSTS TO THE NEW ENVIRONMENT

O

PERATING

E

XPENSES

€13,184

(-1.1%

. 1H11) COST OF RISK AT A LOW LEVEL

C

OST OF

R

ISK

€1,798

(-20.8%*

. 1H11)

*+3.6% EXCLUDING THE COST OF RISK RELATED TO GREECE IN 1H11

ADAPTATION PLAN ALMOST ACHIEVED, WELL AHEAD OF SCHEDULE 90% OF THE TARGET ALREADY ATTAINED

(REMINDER OF THE TARGET:+100 BASIS POINTS OF COMMON EQUITY TIER 1 UNDER BASEL 3)

AMPLE LIQUIDITY

S

TABLE FUNDING SURPLUS

: €52

(

/

W USD

38 )

VERY STRONG SOLVENCY: TARGET OF 9% BASEL 3 (FULLY LOADED)

RATIO BY 31.12.2012 VIRTUALLY ACHIEVED

GOOD RESULTS IN A CHALLENGING ECONOMIC ENVIRONMENT

BNP Paribas reported good performances this semester despite a challenging environment marked by another slowdown of Europe’s economic activity and a new market crisis in the second quarter 2012.

The Group’s adaptation plan in response to new regulations is almost achieved and well ahead of schedule: 90% of the target to improve the common equity Tier 1 ratio by 100bp was already attained.

Thus, with a Basel 3 (fully loaded¹) ratio at 8.9%, the 9% target by 31 December 2012 is virtually achieved, 6 months ahead of schedule.

Revenues were 19,984 million euros, down 11.8% compared to the first half 2011. Revenues were flat in Retail Banking² (-0.1%), up in Investment Solutions (+1.1%) but down 16.7% in CIB given the challenging market environment in the second quarter 2012 and the reduction of outstandings in line with the adaptation plan.

Operating expenses, which totalled 13,184 million euros, were down 1.1% thanks to actions taken to adapt costs to the new environment. CIB’s operating expenses fell 7.0%, excluding adaptation costs.

Gross operating income thus declined 27.2%, to 6,800 million euros.

The Group’s cost of risk, at 1,798 million euros, or 52 basis points of outstanding customer loans, fell 20.8% compared to the first half 2011. Excluding the 534 million euro impact of the Greek assistance programme in the second quarter 2011, it was up 3.6%, remaining at a low level, which illustrates the quality of the portfolio and the good control of the Group’s risks.

Hence, operating income, which came to 5,002 million euros, edged down 29.2% compared to the first half 2011.

Thanks to the decline in operating expenses and the good control of its cost of risk, BNP Paribas posted, in a challenging environment, a net income of 1,848 million euros, down 13.2% compared to the second quarter 2011.

Given the 1,790 million euros of exceptional income booked after the Group’s sale of a 28.7% stake in Klépierre SA in the first half of this year, net income attributable to equity holders was 4,715 million euros, almost unchanged (-0.6%) compared to the same period a year earlier. Annualised return³ on equity for the first half of this year, excluding the exceptional income from the sale of Klépierre, was 9.0%. The net book value per share⁴ was €59.5, or a compounded annual growth rate of 6.8% since 31 December 2008.

* *

RETAIL BANKING

DOMESTIC MARKETS

Domestic Markets’ commercial business this semester was marked in particular by the continued growth trend of deposits in all the networks. At 270 billion euros in the first half of this year, Domestic Markets’

deposits posted 3.2% growth compared to the same period a year earlier. Despite a slowdown in demand, outstanding loans rose 2.3% compared to the first half 2011.

Revenues¹, which totalled 7,984 million euros in the first half of this year, were slightly up (+0.4%²) compared to the first half 2011 despite lower financial fees. Operating expenses¹ were down 0.9%² compared to the first half 2011, producing a positive jaws effect in each of the four domestic markets.

Given a moderate cost of risk, and after allocating one-third of Private Banking’s net income from Domestic Markets to the Investment Solutions division, pre-tax income³ came to 2,245 million euros, or +0.3% compared to the first half 2011. This good performance was achieved thanks to results maintained at a high level in each of the domestic markets.

French Retail Banking (FRB)

FRB continued to actively support its customers. Amidst a slowdown in the economy in the second quarter 2012, outstanding loans grew 4.1% compared to the first half 2011, driven in particular by the growth in small business and corporate loans. The special support to VSEs & SMEs continued with the opening of 10 new Small Business Centres in the first half 2012 and the launch of SME Innovation Hubs.

In addition, 5 billion euros in new loans were earmarked for small businesses and SMEs. Deposits grew 2.8% compared to the first half 2011, in particular thanks to strong growth of savings accounts (+9.2%).

Sales of protection insurance rose sharply in the first half of the year with 17.0% growth of the number of policies sold compared to the same period a year earlier.

Revenues⁴ totalled 3,583 million euros, down slightly by 0.3% compared to the first half 2011. The 2.7%

increase in net interest income, in line with the rise in volumes, was in fact more than offset by the 4.5%

decline in fees, in connection with falling financial markets.

The 1.2% drop in operating expenses⁴ compared to the first half 2011, thanks to the streamlining of operating efficiency, enabled FRB to improve by 0.6pt its cost/income ratio to 61.1% and to generate gross operating income⁴ of 1,395 million euros, up 1.3% compared to the same period a year earlier.

The cost of risk⁴, at 169 million euros, or 22 basis points of outstanding customer loans, remained at a moderate level.

BNL banca commerciale (BNL bc)

In a challenging economic environment, BNL bc’s commercial business saw a 2.2% growth in deposits compared to the first half 2011, driven by corporate clients and local governments. Outstanding loans edged down 0.9% due to lesser demand in line with the market. Business development agreements were entered into in the second quarter 2012 with several industrial, commercial and agricultural professional organisations.

Revenues¹, which amounted to 1,629 million euros, were up 2.1% compared to the first half 2011 driven by a rise in net interest income of 6.1%, in particular from small business and corporate loans, while fees declined 5.3% due to the contraction of new loans, and of financial fees as a result of falling markets.

Thanks to measures to streamline costs, operating expenses¹ were lower by 1.1% compared to the first half 2011, at 886 million euros, resulting in a positive jaws effect of 3.2pts improving cost/income ratio to 54.4%. Gross operating income¹ thus increased 6.3%, compared to the same period last year, to 743 million euros.

The cost of risk¹ rose as a result of the challenging economic environment to 109 basis points of outstanding customer loans, or +55 million euros compared to the first half 2011. Given the 14.0%

increase of the cost of risk¹ compared to the same period a year earlier, pre-tax income, after allocating one-third of Italian Private Banking’s net income to the Investment Solutions division, came to 282 million euros, down 4.7% compared to the first half 2011, reflecting resilient performance despite the challenging economic environment.

Belgian Retail Banking

BRB continued to actively finance the Belgian economy. Loans grew by 4.4%² compared to the first half 2011 thanks to a good drive in loans to individual customers. Deposits rose by 2.6%² due, in particular, to growth in current and savings account. The commercial drive was also reflected in the development of new products with the launch of Easy Banking offer for the iPhone/iPad.

Revenues³, at 1,678 million euros, increased by 3.3%² due to a rise in net interest income driven by higher volumes and despite the contraction of financial fees from individual customers.

Thanks to the positive impact of measures to foster operating efficiency, operating expenses3 grew by only 0.2%2, at 1,206 million euros, helping to produce a positive 3.0pt jaws effect and to improve the cost/income ratio3 to 71.9%. Thus, gross operating income3 rose by 12.1%²compared to the first half 2011.

The cost of risk³, at 18 basis points of outstanding customer loans, increased by 4.0% compared to the first half 2011, but remained at a moderate level. The pre-tax income, after allocating one-third of Belgian

Luxembourg Retail Banking: outstanding loans grew 2.0% compared to the first half 2011, especially in the corporate customer segment. Growth of deposit was also strong (+6.8%), driven by current account deposits. The commercial offering was strengthened with the launch of the "1 billion for corporates in Luxembourg" campaign and the development of domestic Private Banking.

Personal Investors: assets under management were stable compared to 30 June 2011, net asset inflows being offset by a negative performance effect. Deposits saw significant growth over this same period (+14.1%). However, revenues were down due to a brokerage business which was affected by clients turning away from the financial markets.

Arval: the financed fleet grew 2.4%, compared to the first half 2011, to 687,500 vehicles. Arval’s revenues were impacted by the sale of the fuel card business in the UK in December 2011, but they were only slightly down, at constant scope and exchange rate, compared to the same period last year, in connection with decline in used vehicle prices.

Leasing Solutions: outstandings declined 10.0% compared to the first half 2011, in line with the adaptation plan. However, the impact on revenues was limited due to a selective policy in terms of the profitability of transactions.

In total, after allocating one-third of domestic Luxembourg Private Banking’s net income to the Investment Solutions division, these four business units contributed in aggregate 425 million euros to Domestic Markets’ pre-tax income, down 9.9%¹ compared to the first half 2011.

* *

Europe-Mediterranean

Europe-Mediterranean continued to enjoy a good sales and marketing drive. Deposits rose 13.9%¹ compared to the first half 2011 and were up in most countries, especially Turkey (+40.4%¹). Loans grew 6.6%¹ during this period, with in particular good performance in Turkey and continued decline in the Ukraine (-27.8%¹).

Revenues grew to 861 million euros, up 4.7%¹ due in particular to the strong growth in Turkey (+22.6%¹) and despite a decline of revenues in the Ukraine in line with outstandings. Excluding the Ukraine, revenue growth was 11.5%¹.

Operating expenses, at 651 million euros, moved up 4.2%¹ due in particular to the continued bolstering of the commercial organisation in the Mediterranean with the opening of 53 new branches in the past year, especially in Morocco. In Turkey, with a limited 2.5%¹ rise in operating expenses, TEB substantially improved its cost/income ratio, which fell to 70.0%.

At 135 million euros, the cost of risk was 112 basis points of outstanding customer loans and down 10.0% compared to the first half 2011. Europe-Mediterranean thus posted 108 million euros in pre-tax income, up sharply compared to the first half 2011 (+55.1%¹).

BancWest

BancWest enjoyed a good sales and marketing drive. Deposits grew 10.1%¹ compared to the first half 2011, driven in particular by strong growth in current and savings accounts. Loans rose by 2.6%¹ during the same period, benefiting from the continued good trend of corporate loans (+12.5%¹) and the effect of business investments in the SME segment. The good sales and marketing drive was also reflected in a sharp rise in Mobile Banking services.

Revenues were down, however, 0.8%¹ compared to the first half 2011 as a result of the negative impact of regulatory changes on fees. Excluding this impact, revenues were up 1.1%¹.

Operating expenses grew by 3.1%¹ compared to the same period a year earlier due to the development of the Private Banking organisation as well as the expansion of the sales forces for corporate and small business customers.

The cost of risk, at 78 million euros, continued its downward trend to 39 basis points of outstanding customer loans, a 59 million euro drop compared to the first half 2011.

BancWest thus posted 438 million euros in pre-tax income, up 10.2%¹ compared to the first half 2011, thereby making a strong and growing contribution to the Group’s results.

Operating expenses edged up 2.5% compared to the same period a year earlier, to 1,234 million euros, due to adaptation costs (47 million euros). Excluding adaptation costs they declined 1.4%.

The cost of risk, at 701 million euros, or 155 basis points of outstanding consumer loans, continued to improve and was down 16.2% compared to the first half 2011.

Thus, Personal Finance’s pre-tax income came to 592 million euros, down 4.7% compared to the first half 2011. In a challenging environment, Personal Finance maintained its profit generation capacity.

* * INVESTMENT SOLUTIONS

Investment Solutions’ net asset inflows in the first half of the year was positive, totalling 8.5 billion euros¹, the positive inflows in the first quarter (+12.6 billion) having only been partly offset by the outflows observed in the second quarter (-4.1 billion). All the business units made a positive contribution, except Asset Management: Private Banking contributed +7.3 billion thanks to very solid asset inflows, especially in the second quarter, in domestic markets and in Asia; Insurance contributed +1.4 billion euros thanks to good asset inflows outside France, especially in Asia (Taiwan, South Korea, India); Personal Investors delivered +1.1 billion; Real Estate Services +0.6 billion; and Asset Management -1.9 billion euros with asset inflows into money market and bond funds more than offset by asset outflows in the other asset classes.

Net asset inflows in this first half of the year, combined with a favourable performance effect (good performance of the equity markets in the first quarter partly offset by the decline observed in the second quarter) and a positive foreign exchange effect drove assets under management² up 3.6%, compared to 31 December 2011, to 873 billion euros.

Investment Solutions’ revenues, which were 3,087 million euros, were up 1.1% compared to the first half 2011. Revenues from Wealth and Asset Management were down 6.7% due to the decline in outstandings in Asset Management. Insurance’s revenues moved up 11.2% (+6.2% excluding the effects of the consolidation of Cardif Vita in Italy) due to the growth of protection insurance and savings outside France. Securities Services’ revenues rose 5.7% compared to the first half 2011 thanks to good business growth in all countries, Securities Services’ assets under custody and assets under administration increasing by +4.7% and +9.4% respectively during this same period.

Investment Solutions’ operating expenses, at 2,111 million euros, were up 1.4% compared to the first half 2011 due to continued business development investments in Insurance and Securities Services, especially in Asia, partly offset by the effects of the implementation of the adaptation plan in Asset Management which saw its operating expenses decline 6.2%. The division’s gross operating income,

CORPORATE AND INVESTMENT BANKING (CIB)

CIB’s revenues, at 5,531 million euros, were down 16.7% compared to the first half 2011.

Revenues from Advisory and Capital Markets, at 3,456 million euros, fell by 16.6% compared to the same semester a year earlier. After a good first quarter 2012 at 2,249 million euros, close to the high level of the first quarter 2011, business in the second quarter 2012 was impacted by a general background of crisis in the capital markets and strong volatility. Revenues in the second quarter 2012, at 1,207 million euros were thus down 33.1% due to less demand from clients and cautious management of the businesses, with the average VaR maintained at a low level (46 million euros in the second quarter 2012). In this challenging environment, the business units maintained their market positions.

Fixed Income revenues, at 2,595 million euros, were down 6.3% compared to the first half 2011. After an increase in the first quarter 2012 of 6.6% compared to the first quarter 2011, Fixed Income’s revenues, at 838 million euros in the second quarter 2012, were down 25.3% compared to the second quarter 2011 as a result of the effect of the balance sheet deleveraging measures taken in connection with the adjustment to Basel 2.5 and Basel 3, and lower customer volumes, especially bond issues in Euros. In a challenging environment, the business unit confirmed again its leading positions in bond issues: number 1 position in all bonds in Euros. Separately, the business unit enjoyed good performance in the Rates and Forex businesses.

Revenues from Equities and Advisory, at 861 million euros, fell 37.4% compared to the first half 2011 due to the decline in flow business, especially in the second quarter 2012, in low volume markets and to limited demand from clients for structured products. In the primary equity market, volumes of new issues were also very limited in the second quarter 2012 because of the unfavourable market context.

Revenues from Corporate Banking totalled 1,895 million euros, down 16.8% compared to the first half 2011, in line with the adaptation plan to Basel 3 and the decrease in outstanding loans (-15.7%

compared to the 30 June 2011).

Drawing on its global reach with more than 60 entities in over 40 countries and with approximately 11,000 corporate and institutional clients, plus an additional 4,500 mid-cap clients from retail banking, Corporate Banking performed well in the context of the adaptation plan. With respect to financing, the adjustment of the model continued with a 9.2% net decrease in outstanding loans compared to the situation as at 31 December 2011 and the implementation of the Originate and Distribute model through a number of landmark transactions, Corporate Banking maintaining strong positions at origination.

Furthermore, the business unit benefited from the development of the global Cash Management offering, where BNP Paribas ranks number 5 worldwide, with a powerful domestic and European base and a strong presence in Asia. It gained several significant mandates in the second quarter of the year. Lastly, a Corporate Deposit line was created as part of the ambitious plan launched to grow the deposit base.

CIB’s operating expenses, which totalled 3,289 million euros, were down 4.3% compared to the first half

CORPORATE CENTRE

The Corporate Centre’s revenues totalled -678 million euros compared to 877 million euros in the first half 2011. This includes a -557 million euro own debt revaluation (compared to +14 million euros in the first half 2011), a +325 million euro amortisation of the fair value adjustment of Cardif Vita and of Fortis’

banking book (compared to +345 million euros in the first half 2011), -232 million euros in losses from the sale of sovereign bonds (negligible in the first half 2011), the -68 million euros impact of the exchange of Convertible & Subordinated Hybrid Equity-Linked Securities (“CASHES”), as well as +61 million euros in revenues from Klépierre (+155 million euros in the first half 2011). The Corporate Centre’s revenues in the first half 2011 also included +216 million euros in revenues from BNP Paribas Principal Investments (+31 million euros in the first half 2012).

The Corporate Centre’s operating expenses dropped to 415 million euros compared to 522 million euros in the first half 2011 due primarily to lower restructuring costs (169 million euros compared to 272 million euros).

The cost of risk totalled 27 million euros, compared to 457 million euros in the first half 2011, which included the 516 million euro impact of the Greek assistance programme.

Other non operating items amounted to 1,628 million euros (compared to 58 million euros in the first half 2011) due, primarily, to 1,790 million in capital gains from the sale of a 28.7% stake in Klépierre S.A.

Pre-tax income was 615 million euros compared to -34 million euros during the same period a year earlier.

* * LIQUIDITY AND FINANCING

The Group’s liquidity situation was extremely favourable.

The Group’s cash balance sheet, prepared based on the prudential banking scope and after netting amounts for derivatives, repos, securities lending/borrowing and payables/receivables, totalled 987 billion euros as at 30 June 2012. The total of equity, client deposits and medium/long-term funding came

In document SECOND UPDATE TO THE 2011 REGISTRATION DOCUMENT AND HALF YEAR FINANCIAL REPORT FILED WITH THE AMF ON AUGUST 3, 2012 (Page 3-67)