SFIL Annual financial report 2018

1 I Management report 36 SFIL Annual Financial Report 2018 The year 2018 confirmed the effectiveness of the structure set up by the State in 2013 to finance the French local pub‑ lic sector through SFIL and its subsidiary CAFFIL together with La Banque Postale and Caisse des dépôts et consigna‑ tions. The SFIL/La Banque Postale partnership is recognized today as a leading player in local public sector financing in France. Accordingly, in 2019 SFIL will continue strengthen‑ ing this partnership and implementing the projects neces‑ sary for LBP to continue its business. In 2019, SFIL will continue to develop its export credit activ‑ ity in support of major French export contracts. In January, for example, it signed two agreements on which negotia‑ tions had begun in 2018. With regard to future projects, SFIL has been approached in connection with transactions corresponding to around 100 potential agreements for a total of EUR 25 billion. These projects are at different stages ranging from industrial ten‑ der to funding search. Meanwhile, following the publication of the decree estab‑ lishing the conditions for the guarantee of strategic pro‑ jects and the finance law aimed at enabling SFIL to take part in financing strategic projects (1) , as it does for export credits. The process of approving this activity by the Euro‑ pean Commission will be initiated at the beginning of 2019 for possible operational implementation at some time dur‑ ing the year. This new type of project will enable the SFIL Group to broaden its scope of activity by financing inter‑ national projects in which a French company operates not as an exporter but as a supplier, investor, operator, service provider or subcontractor. As regards issuance, SFIL plans to continue to develop its refinancing in the markets and in 2019 will seek to launch at least two issues in euros and US dollars in the primary public market. Meanwhile, as part of the strengthening of the SFIL Group’s social and environmental policy and in order to further diversify its sources of financing, CAFFIL has announced a “social covered bond” public issue project, which was implemented in February 2019. This proposed issue is the first step in the SFIL Group’s strategy of increas‑ (1) The enhanced guarantee is one of the elements necessary for SFIL to refinance export credits and strategic projects. ing its use of “social” and “green” bond issues. Lastly, it will launch a green issue in 2019, in partnership with La Banque Postale. Generally speaking, the SFIL Group expects to use market refinancing in 2019 at least as much as in 2018, while contin‑ uing to reduce its use of shareholder financing. In 2018, SFIL launched a project to build an internet plat‑ form for its borrowers, the main goal of which is to help local government entities and public healthcare facilities introduce paperless transactions. The first tests were con‑ ducted in October 2018 with a sample of borrowers, and actual implementation could take place at the end of 2019. Furthermore, the Group will continue its digital initiatives launched in 2018, including an automated borrower rela‑ tionship platform and the modernization of its employees’ working environment. From a macroeconomic viewpoint and as in 2018, two important background elements will be closely monitored in 2019: •  the degree of market volatility in a context influenced by the ECB’s expected exit from quantitative easing, Brexit- related measures and the geopolitical environment, •  changes in the regulatory environment, including as they relate specifically to public development banks, and regar‑ ding Caisse Française de Financement Local, the project to harmonize national covered bond regimes at European level. Lastly, implementation of the transfer to CDC of the control of SFIL, announced by the State and CDC on November 15, 2018, will continue in 2019 and is expected to be completed at the same time as the changes to the shareholder struc‑ ture of La Poste and CNP Assurances. This operation will contribute to the ongoing streamlining of the organization of public financial institutions in the service of France’s regions, by merging them into the CDC Group. SFIL’s shareholder base will remain – as today – fully public. Its shareholders will ensure that SFIL’s financial solidity is preserved and its economic base protected, and will con‑ tinue to provide it with the support it needs, in accordance with the applicable regulations. Outlook