Groupe Renault - 2020 Universal Registration Document

56 GROUPE RENAULT I UNIVERSAL REGISTRATION DOCUMENT 2020 Find out more at group.renault.com 01 OVERVIEW OF RENAULT AND THE GROUP GROUPE RENAULT Solvency The total capital ratio (1) came to 19.83% at the end of December 2020 (of which Core Equity Tier One was 17.34%), against 17.73% at the end of December 2019 (of which Core Equity Tier One was 15.27%) (2) . The main impacts (3) stem from the generation of organic capital (4) , with the 2020 forecast dividend being limited to €69 million. This is in accordance with recommendations from the ECB on dividend payments. If these recommendations are not extended beyond September 30, 2021, and in the absence of an unanticipated unfavorable event, RCI plans to pay an additional dividend of around €930 million as soon as possible. This would impact the Core Equity Tier One ratio by -2.7%. Financial policy The COVID-19 pandemic profoundly affected economies and markets throughout 2020. Governments and central banks took quick action to avoid a major and lasting economic crisis. Initially confined to China and Asia, the coronavirus epidemic subsequently spread worldwide. Between March and April 2020, fears of a health crisis led many countries to impose strict lockdown measures, which had a major impact on economic activity and consumption. To prevent the health crisis from triggering a major economic crisis, the key central banks took far-reaching monetary policy initiatives. In the United States, the Federal Reserve reactivated an asset purchase program spanning government, municipal and corporate bonds, mortgage-backed securities and securitization instruments in a total amount of US$2,600 billion. It also cut the Fed Funds rate to 0-0.25%, bringing the reduction to 150 basis points since the beginning of March, and is guiding on near-zero interest rates until 2022 at least. In July, the Fed modified its long-term policy to achieve an average target interest rate of 2% and allow for flexibility in monetary policy with a view to achieving a return to full employment. The European Central Bank introduced a new emergency purchasing program in response to the pandemic. Initially intended to total €750 billion, the Pandemic Emergency Purchase Programme (PEPP) was later increased to €1,850 billion. The terms of the TLTRO III were also eased by lowering the interest rate and a downward recalibration of the growth targets that banks must meet in order to benefit from the subsidized rate. In July, the 27 European Union member states also reached an agreement on a €750 billion stimulus plan, split between €390 billion in grants and €360 billion in loans to fund post-pandemic recovery efforts. The Bank of England followed the lead of the Fed and the ECB, lowering its base rate in two steps from 0.75% to 0.10%, and strengthening its £200 billion non-bank investment grade government and corporate bond buyback program in March 2020. by the lifting of lockdown measures, market conditions gradually returned to normal before a temporary upturn in risk aversion sparked by the resurgence of the health crisis in late October. The election of a new Democratic President in the USA in early November and growing hopes for the development of an effective vaccine against COVID-19 allowed equity markets to rally significantly and risk premiums to tighten in the bond markets. The agreement reached on the terms of Brexit and the start of vaccination campaigns against COVID-19 also provided the markets with support in early 2021. Equity indices nevertheless fell sharply in February and March, and credit spreads widened significantly. During the second half, marked Down 36% at its intra-year low, the Eurostox 50 ended the year down 5%. At the same time, corporate bond credit spreads (IBOXX Corporate Overall index) experienced similar volatility, rising from 70bp in January to 200bp at the end of March, before ending the year at 74bp. Recourse to market financing was modest during the year, and the company was not particularly impacted by the increase in financing costs. The situation resulted from lower 2020 bond redemptions than in previous years (anticipation of the refinancing of TLTRO II launched in 2016), the slowdown in car sales and the resulting decline in new loan volume. A €750 million 7-year fixed-rate bond was issued in January. Retail customer deposits have increased by €2.8 billion since December 2019 and totaled €20.5 billion at December 31, 2020, representing 43% of net assets at the end of December. In the secured refinancing segment, private securitizations of car loans in the UK and leasing in Germany saw their revolving periods extended for another year. The French subsidiary also carried out its first securitization of automobile lease purchase option (LOA) receivables in France in the amount of €991.5 million, split between €950 million in senior securities (including €200 million in self-subscribed securities) and €41.5 million in subordinated securities. These resources, to which should be added, based on the European scope, €4.5 billion of undrawn committed credit lines, €4.5 billion of assets eligible as collateral in ECB monetary policy operations and €7.4 billion of high quality liquid assets (HQLA), enable RCI Banque to maintain the financing granted to its customers for more than 12 months without access to external sources of liquidity. At December 31, 2020, RCI Banque’s liquidity reserve (European scope) stood at €16.6 billion, an increase of €7.1 billion compared with the end of 2019. In a complex and volatile environment, the conservative financial policy implemented by the group for a number of years proved especially justified. This policy protects the commercial margin of each entity while securing the refinancing required for its business activities. It is defined and implemented at a consolidated level by RCI Banque and applies to all sales financing entities within the group. Ratio including interim profits net of forecast dividends, subject to the approval of the regulator in accordance with Article 26 (2) of (1) Regulation (EU) No. 575/2013. Impact of a €300 million residual 2019 dividend cancellation at end-December 2019 is +86bps on CET1. (2) TRIM related headwinds globally in line with expectations reported in February 2020 and compensated by activation of certain CRR options (3) (netting of deferred tax, Credit Conversion Factor). Net profit minus planned 2020 dividend distribution. (4)