Good day, and thank you for standing by, and welcome to the Credit Agricole Q2 Half Year Results 2021 Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jerome Gorey, CFO. Please go ahead, sir.
Good afternoon, everyone. Happy to share this hour and a half with you for the presentation of our Q2 and H1 results, which as you have seen are very good results. And I should say that these results are good. It's not a surprise because As Philippe Brassac explained it several times yesterday in front of the board, in the Context of this very specific crisis, where public authorities have put in place several measures in order to protect the economy, it's not a surprise that banks have good results. Nevertheless, I think that our results are specifically good with a net profit and you can see it on Page 4 for the group, which is not only up around 95% to 90% as compared to last year, but also significantly up as compared to 20 2019 for the same period both for the quarter and for the first half of the year.
It's the case for the stated figures. And as far as the underlying net income is concerned, the improvement is also very significant, plus 1 third on the quarter, that's close to 45% on the first half of the year, but also a significant improvement as compared to the underlying figures in 2019, plus 28% for the quarter and plus 21% for the half of the year. On the following page, you will see the figures for Credit Agricole SA. So for the quarter, close to €2,000,000,000 in terms of stated net income and close to €3,000,000,000 for the half of the year. And restated from some specific items that I will comment later on, we still have €1,600,000,000 of net profit for the quarter and €2,500,000,000 for the half year.
And it's up 45 around 45% in both cases as compared to last year and also up 25% to 30% as compared to 2019. This very good performance has been reached by a very, I would say, virtuous combination of a high Growth in terms of revenues, plus 12% for the quarter and plus 10% for half year, which is much steeper than the increase in the cost base, plus 8% 4%. So the gross operating income is sharply up around 20% and then the cost of risk is very significantly down minus 70 percent for the quarter and minus 60% for the first half of the year. The cost income ratio underlying cost income ratio for the quarter stands around 55%, which is a further and significant improvement as compared to Q2 last year. And the solvency is at a high level 12.6% for CASA end of June.
On the following page, you have the main messages We want to insist on in this quarter, but I think I can summarize that in saying that the economy is recovering very rapidly after the different phases of lockdowns that we have had. In this context, The level of activity that we have had in all business lines has been very booming, very buoyant and this is leading to this very sharp improvement in our profitability both through an increase in the top line and a significant decrease in the cost of risk line, thus preserving and improving and strengthening further the capital position of the group and of Credit Agricole If I go now to Page 8, you will see an illustration of what I was just saying regarding the economic situation in France, where you can see that seen to our own prism, which is the number of payments that we process, We have seen indeed in the different lockdown periods a significant decrease in the level of activity. But the two comments I can make is that every time after these lockdowns, we have seen a sharp rebound. And then a lockdown after lockdown, the decrease is smaller each time proving that the economy is progressively integrating and its behavior, the consequences of the different lockdowns.
So this is leading to the indicators that you have on the bottom part of the page, which illustrate the level of confidence of both the households and the business leaders as well as the PMI. On Page 9, some elements illustrating the fact that this very, I would say, fast rebound of the economy is translating into a very good level of activity for our different businesses. This is illustrated by the customer capture, which was significantly up in H1 'twenty one as compared to H1 'twenty 20. And indeed, we are now close to the number of new customers that we've had attracted back in 2019. It's also illustrated by the volume of new loans that we've put in place in Q2 2021, up 15% on Q2 2019.
And it's also the case for some additional product lines like the volume of new consumer loan that we put in place, up 62% in Q2 2021 as compared to Q2 2020. And in the insurance area, It's the example of the number of new policies that we've underwritten in P and C activities up also 62% close to 63% between Q2 2020 and Q2 2021. So this is leading to this very sharp increase in the top line and you can see on page 10 that this increase is not only the case as compared to Q2 2020, but also as compared to Q2 2019. And indeed, both for the quarter and for the semester, the increase is a double digit increase or close to a double digit increase even if we exclude the scope effect. And interestingly also, this increase is very well spread across all business lines with the exception of the large customers division, which you remember had a very, very buoyant quarter in Q2 2020 and is now at a more normalized, I would say, level of activity, but nevertheless, a good level of activity.
What I wanted to explain on the following page is that actually this good performance in terms of Revenue generation that we posted in Q2 and H1 2021, both compared to 2020 and to 2019 is actually part of a much wider achievement, which is the fact that in the last 5 years, quarter after quarter, both for Q1, for Q2, For Q3 and Q4, we will see later on this year, but both for Q1 and Q2, we've managed to improve the top line year after year after year. And this is the result of a very balanced a breakdown of our revenues at CASA level, 1st between fees, net interest margin, insurance revenues and other revenues. And also, it's This very good resilience is the consequence of a revenue generation, which is made by 3 quarters of revenues in connection with stocks of contracts and stocks of products that we have in our balance sheet. So only a quarter of the revenues are linked to transactions that we have regularly to rebuild year after year. So a very good resilience and a very good revenue generation capacity illustrated on this page 11.
When it comes to the evolution of the cost base, Indeed, when we first look at the evolution of the cost base between Q2 2020 and Q2 2021 at 8.3%, It may seem a little bit too dynamic even though it's still well below the evolution of the top line. But if we take into account 3 elements, which are the base effect, Q2 2020 was a very low base in terms of costs, considering the fact that Q2 2020 was earmarked by a lockdown, the most severe lockdown for the biggest part of it second element, the scope effect and third element, an effect linked to the increase this quarter of the provisions that we book for future are variable compensation. Actually, the evolution is very moderate. And actually, if we compare Q2 2021 to Q2 2019 excluding scope effect, So in 2 years' time, the increase in the cost base is only 3.6%, which is very moderate. And if you assess those figures for the full quarter, you will see evolution which are in the same region around 4% to 4 point 5% if you compare to 2020 or 2019.
So all in all, we continue to have a very strict monitoring of the cost base in this period of time. And this is illustrated indeed by the following page, which is page 13 where you see 2 interesting elements. The first one is the fact that in the last 5 years In Q2, we've managed to post a positive draw between the evolution of the top line and the evolution of the cost line. And indeed in 5 years' time, we've managed to generate a total of close to 10 percentage points of positive jaws effect. And this is leading to what you see on the right hand side of this page, which is a decrease by close to 5 percentage points in 5 years of the cost to income ratio of the Q2 since 2017.
And indeed if we had looked back a little bit earlier in time, the decrease would even have been sharper. Let's go now on page 14 to the topic of the asset quality. Well, nothing much to stay indeed because the asset quality remains very, very good across the board for Credit Agricole S. A. And for the group globally, You can see that the NPL ratios are stable as compared to March 2021.
And you may recall that in March 21, they were decreasing slightly as compared to end of last year. So indeed, we continue to have a very good and quality of our credit portfolio. Considering the provisioning that we did this quarter, this is indeed leading to a slight increase in the coverage ratios that we post. It's close to 75% at the level of Credit Agricole SA and close and even a little bit above 85% at the level of the group globally, considering the very high 102% within the regional banks. All in all, we have more than €10,000,000,000 of reserves in CASA's balance sheet and €20,000,000,000 altogether for the group, in which at CASA we have around 27% of this amount which is facing sound loans, so performing loans.
And at the level of the group globally, the proportion of provisions covering performing loans is even above 1 third. So a very prudent provisioning approach. Despite this prudent provisioning approach, what you will see on Page 15 is that the cost of risk this quarter declined significantly. At CASA, it's minus 72% Q2 on Q2 and minus 34% Q2 on Q1. And this decrease is explained both by a very sharp decrease in the evolution of S1 and S2 cost of risk, but no write backs on S1 and S2 provisioning, simply a slight increase and also a sharp decrease in the S3 provisioning because because of the evolution of the quality of the loan book, which again was very good.
At the level of the group, you will find the same kind of evolutions, a decrease of 63% of the total cost of risk Q2 on Q2 and minus 17% Q2 on Q1 with more or less the same trends, a very sharp decrease in S3 3 provisioning because there is a fewer number of defaulting loans and an effort of S1 and S2 provisioning, which is maintained at a rather high level, especially within the regional banks of Credit Agricole and it is not linked to a change in or a significant change in the macroeconomic scenario, but much more to the continuous effort of Sectorial provisioning within the regional banks. Let's go now to Page 16, where you see the global evolution of the P and L of CASA. What you can see in a nutshell on this page is that both on the quarter and on the semester, The evolution is very positive. It's plus 45% around in terms of underlying as compared to Q2 2020 and H1 2020 and it is still plus 30% and plus 25% if you take the 2019 reference. What is interesting is to analyze the way this evolution is made.
And if we take the example of the quarter, you can see that the net profit is increasing by around €500,000,000 as compared to last year, there is an increase in the gross operating income of around €450,000,000 There is a decrease in the cost of risk of around €650,000,000 and then you have, of course, a very sharp increase in the level of taxes plus €400,000,000 and an increase in the other items amongst which you have the minority interest plus €200,000,000 negative impact. So this explains how this improvement of €500,000,000 has been obtained. But what is interesting really to keep in mind, it's a balanced combination of the improvement of the gross operating income and the decrease in the cost of risk. And lastly, on this page, You can see that this improvement is also very well balanced across the different business lines. On Page 17, again, a look back in the past, it's The appreciation of our return on tangible equity across the last four and a half years, So 18 quarters, we've managed to post a return on tangible equity across those 18 quarters, which was permanently at least 2.5 percentage points above the average of the 10 biggest European banks posting a return on tangible equity.
And again, this quarter and this semester at 13% 13.6%, the return on tangible equity that we published is very significantly above the average of this sample of European banks. Last point on this page, we will as we've said in February, we will Once the ECB's authorization will be granted to us, we will conduct the second share buyback operation that we had announced beginning of this year. The first one being well on its way, is completed at around 3 quarters for the time being. On page Following page, I don't have the number here. 2018, some highlights regarding our contribution to the transitions of the society, we have decided to join the net 0 Banking Alliance, the Net Zero Asset Managers Alliance and also we will join later on this year the Net Zero Insurance alliance in order to fully comply to our commitment to be best in class in terms of accompanying the transition of the economy globally.
But at the same time, we also want to deploy our effort in terms of social inclusivity and we will have dedicated initiatives regarding the integration of young people amongst the labor world in France going forward. And lastly on this page, we will continue to integrate as much as possible Climate changes opportunities in our business models in the different businesses of the group, retail banking, asset management, insurance, CIB and consumer finance. On Page 19, an illustration on which we regularly insist, but I think it's very important To again explain it, it's the growth engines that we have for the future. As you know, our model of universal banking is playing on 3 different growth engines. The first one is the scope of the services and businesses that we are able to develop, and we regularly extend the scope of our offers to our clients.
The second element is the equipment. Once we have a client and considering the scope of activities that we are able to propose to those clients, we try as much as possible to develop their equipment rates And the difference between the gray and the blue bar illustrates the improvements that we've managed to obtain in this regard in the last period of time. And then the 3rd axis is the improvement and the increase of the customer base itself by the acceleration of our customer capture, be it the customers that directly sit within CASA's balance sheet, I. E, within LCL or within Credit Agricole Italia or also, of course, within the regional banks of Credit Agricole. And you have here some indication regarding the improvement of the different equipment rates in 2021.
Let me go now on Page 21 precisely in order to give you some highlights regarding the different business lines of the group, different business divisions, starting with the Asset Gathering and Insurance Business division. On Page 2021 maybe just one key element, which is the further development of the assets under management within this business division, €2,300,000,000,000 of assets under management and indeed there's been an improvement both in Asset Management, Life Insurance and Wealth Management activities and the P and L of this business division continues to improve significantly as compared to last year. On Page 22, insurance activities, it's been a very good quarter in terms of Commercial activity for the Insurance Business division, both in savings and retirement, where we have net inflows of €1,600,000,000 And what is interesting is that unit linked product represent 40% of the growth inflows, around 100% of the net inflows Because what you can see is that actually we've been a slight negative flow net outflow for euro products and they now represent more than 25% of the outstandings, which is, as you know, a key targets that we have for this business division. In P and C, the premium income is up 10% Q2 and Q2, so it's a very sharp improvement.
Generally, we have between 7% 8% increase over time. So 10% shows a very, very sharp acceleration. And in Protection Businesses, Personal Insurance revenues are up even more sharply, plus 23%. It's mainly driven by the lending business both for home loan and for consumer credit loans. So in this context, the net income group share of the business division is up and reaches record level above €400,000,000 for the quarter €700,000,000 for the half year.
Including positive market effects, but also it's also the consequence of this very good level of commercial activity. On the following page, Page 23, Amundi. Amundi has already published its results. So you perfectly know all the figures, but was it I think that it can be summarized with a few ideas. The first one is that this quarter was earmarked by strong inflows in medium to long term assets.
There was some outflows in many market fronts, but in medium and long term assets, we have had significant inflows. The second highlight is that Armondi is reaching a new high in terms of assets under management close to €1.8 trillion, revenues are very sharply up and both management fees and performance fees are very significantly up and actually Amundi has reached a record in terms of performance fees this quarter. And the gross operating income is very significantly up despite the fact that The provisions for variable compensation were by definition up in this context. So Amundi is posting also a record level of underlying profit. If we go now to the large customers division, so CACIB plus CACIB, Globally, there has been a good level of activity, probably less buoyant than the one we have had in Q2 2020, but nevertheless a good level of activity and which was definitely above the Q2 that we've had in the past in 2017, in 2018 2019.
In terms of custody activities, revenues were slightly impacted by a very ample liquidity position, which is costly despite the fact that CACES is billing the biggest part of the cash it receives from its customers. There is nevertheless the remaining part that is supporting the negative interest rate conditions that we have now, but when it comes to the fee part of the revenues of CACCE, it is up significantly in line with the evolution of assets under custody and assets under administrations, which are up around 12% this quarter. Let me go now to CACIB on Page 25. It's a mixed Set of figures in terms of revenues as you know because again Q2 2020 was so high in terms of activity in the world of both syndicated loans and bond issuances that it was difficult to replicate the same performance. And actually, what I have seen is that most banks are in the same situation this quarter.
But nevertheless, globally, the activities of CACIB were good with good performances in structured finance, in trade finance, in transaction banking and also in investment banking activities and equities. In this context, the gross operating income is down, but considering the fact that the cost of risk was very benign this quarter and actually CACIB is even posting a write back on loan loss provisions by €40,000,000 The net income of CACIB is up 15%, above €450,000,000 for the quarter and above €700,000,000 for The half year. In the Specialized Financial Services division, both in Consumer Finance and also in Leasing and Factoring activities, the quarter was earmarked by a very high level of production of new contracts and new loans and new leasing put in place this quarter. So this is leading to an improvement and an increase in the outstandings, an increase also in the top line, a very good cost control and a decrease in the cost of risk. So all in all, again an improvement of the contribution of those activities to the net profit of Clariocol SA.
I'll finish with the retail banking activities, starting with LCL, where again, and I'm Sorry to repeat the same words permanently, but we've seen a very high level of activity with a good level of production of new loans leading to an increase in loans outstanding, a good level also of customer assets, A good level of customer acquisition with close to 90,000 new customers attracted in Q2 and an increase in the equipment rate of these customers with the different additional products that LCL is selling to them. LCL also launched its new project, LCL New Generation Network, which is going to leads to the regrouping of 250 branches in a network of 1600 branches in order to better meet the customer request in terms of advice and quality. In this context, the net the top line is up significantly 8%. The cost line is continues to be very well monitored, plus only 2.2%. So the gross operating income is up 21%, cost of risk declined significantly, minus 63%, and so the net income group share is up 78 Italy, in Italy, of course, there is the integration of Treval this quarter and I will come back on this issue later on.
But let's start with Credi Aricol Italia, the Original perimeter of Credit Agricole Italia, because it's a quarter on which on this perimeter the activity was very, very intense with a strong increase in the production of new loans, a very strong increase in the management of customer savings and a very good development of the level of revenues, which are up 12% if I exclude the Creval scope effect. And at the same time, expenses again excluding Creval are decreasing a little bit minus 1.5% and the cost of risk is down close to 60% on the permanent perimeter of Credit Agricole Italia. In addition to that, Creval is adding up some revenues, some costs and all in all, a net contribution of €7,000,000 for the last 2 months of the quarter because the acquisition of Treval was completed beginning of May. But the integration of Treval is not only leading to this contribution of EUR 7,000,000 of net profit for the quarter. It's also, of course, the integration of Treval's balance sheet in Credit Agricole Italia balance sheet with the first consolidation.
This is leading to an increase of are RWAs. I'll come back on this point later on, but it's an increase of €8,500,000,000 of additional RWAs and there's also the recognition of a net pad will, which is a provisory, but which represents for 100 percent of Credit Agricole Italia, EUR 3.7 €8,000,000 when translated to CASA considering the minority interest within at Credit Agricole Italia, this is €285,000,000 of net badwill. So the difference between the gross badwill and a first appreciation of the provisions that we will book in face of this amount of badwills. Let me note also that this bad will is not for the time being prudently recognized. It's going to be the case only end of this year when we will have the definitive PPA performed.
Let me take the opportunity of this page just to comment globally the group's presence and performance in Italy. We've managed proposed a net profit in Italy globally of €385,000,000 this semester and it's very well balanced between the 4 main business divisions of the group, 35% for the retail banking activities, but also 36% for the Specialty Financial Services Business division, 19% for the Asset Gathering Business division and 10% for the Large Customers division. So again, as we've already mentioned, a comprehensive set of activities generating a high level of profit annually. International Retail Banking activities excluding Italy, you know that we've had several difficult quarters after the start of the breakout of the pandemic because the Political answer in those countries was amongst other elements to decrease significantly the interest rates, which is putting a very high level of pressure on our top line and at the same time we had of course to book some additional Provisions. So the situation is now stabilizing and actually revenues this quarter are up close to 5% and cost of risk is declining significantly.
So this business division is getting back to a more normal level of profitability close to €40,000,000 this quarter and it's back to a more normal level of return around 15% of return on tangible equity, it's much more normal for this business division. Corporate Center, nothing much to say despite the fact that for the stable components of the Corporate Center, we continue to have this progressive improvement. We have some relatively volatile elements. One negative one, which is the fact that the net tax profit is reducing for technical reasons this quarter. And at the same time, the Private Equity business, which sits within this business division, is posting better revenues than in Q2 2020, so these elements are compensating each other.
Let me go now to the regional banks of Credit Agricole on Page 33. You will see more or less the same trends as the one we have noted regarding LCL with a very good level of activity, very good level also of customer capture with close to 650,000 new customers attracted in the first half of the year. Loans outstandings and customer assets are up quite significantly. Revenues are rebounding plus 4%. Costs are very significantly up.
You may notice that, but it's really in connection with the fact that last year, the regional banks posted a very sharp write back on the variable compensation reserve because of the dividend of CASA that was not paid in Q2 2020. And if you compare the cost base of the regional banks in Q2 2021 to the one they posted in Q2 2019, actually the evolution is very moderate around 1%. So the contribution of the regional banks to the net profit of the group, euros 740,000,000 is up 12% as compared to last year. Let me go now to the solvency on page 35. The CET1 ratio at CASA to start with 12.6%.
All in all, it's a decrease of 10 bps as compared to end of March. Actually, you can see on the right hand side that the total RWA increased by around €9,000,000,000 out of which €8,500,000,000 are explained by The consolidation of Creval. So it's really this one off effect and nothing more. And on the right hand side of the page, you can see that this explains also and more than explains actually the slight decrease of 10 bps of the CET1 ratio because The retained earnings represent around 20 bps of additional solvency, but This €8,500,000,000 of RWA consumed around 30 bps of solvency, so the difference is minus 10 bps on the ratio. The other ratios continue to be at very good levels.
And Of course, the 12.6% CET1 ratio at CASA is far above any requirement and far above the 11% target. We've already commented that. On the following page 36, the CET1 ratio of the group globally stands at 17.3%. It's stable as compared to end of March. It's 8 40 bps above SREP requirement.
And again, the evolution of the RWAs is almost completely explained by the integration of the €8,500,000,000 of RWAs coming from Queval. And again, this also explains the biggest part of the consumption of the retained earnings that we have this quarter at the level of the group. In terms of liquidity, nothing much to say. We continue to have very ample liquidity reserves above €460,000,000,000 Maybe just one point I can €1,000,000,000 Maybe just one point I can mention on this page, which is that our total outstanding TLTRO outstandings have increased a little bit by €10,000,000,000 this quarter. It's the result of first an additional drawing of €5,000,000,000 that we did on our own, I would say, plus also €5,000,000,000 that we found in the balance sheet of Treval.
Market funding program is well on its way. 70 2% of the program of Credit Agricolece has been completed as of now. And at group level, it's close to €18,000,000,000 that we have raised end of June since the beginning of the year. So it's really not an issue as usual. I think I can really stop here and try to answer now to your questions.
Thank And the first question comes from the line of Jack Henry Golar from Kepler Cheuvreux. Please ask your question. Your line is now open.
Yes. Good afternoon, Jerome. Two quick questions. The first one, when I look at your large corporate and investment banking, It really is really good when you compare to the objectives you had in 2019. If I annualize your cost base, which was supposed to be €2.8 there And your revenue objective, if you annualize them again, you're at 5.3%, you were at 5%.
So I was wondering to which extent even the Targets you have and then you have the level of provision, which is virtually 0, whereby you're not actually completely too conservative on your CIB forecast for 2022, which leads me to another question, which is I'm surprised you haven't actually confirmed the €5,000,000,000 Net income, so I was wondering what drove you to be cautious? And the second question is also linked to CIB, if we could have from the ground maybe a little bit of color about how the ESG transitioning is going on with your clients with the whole fit for 55, do you find them well organized? Do you find them a bit in a panic? Any color you can actually give would be helpful. Thank you very much.
Thank you, Jacanvi. Well, normally, we don't have to confirm quarter after quarter all our targets. I think it works the other way around. If I had some doubt or if I felt necessary to inform One of our targets, I definitely won the market from that. And so for the time being, as I regularly said it, we think that we are on track to reaching our different targets for 2022.
And So for the time being, we don't feel the necessity of updating these targets, but we will certainly have to do it at a certain point in time. Regarding specifically CACIB, it's more or less the same. It's true that we continue to have The proof that the model that we've put in place to on CACIB since now probably around 10 years is working. It's a model that has been challenged initially because it's not, as I would say, Market friendly as some models more invested Into equities, for example, but we deem that this model, which is really focusing at financing our customers with Market instruments and also balance sheet instruments is really coherent with the DNA of the group. It produces a very stable level of profitability across time, which is very important for us and it's generating a reasonable level of profitability, which is again coherent with our global model.
So of course, once we will review globally our targets, which may happen, I don't know exactly when, but somewhere before end 2022, obviously, considering the fact that the present targets are aiming at 2022. We will give some additional color on all the businesses, including the CIB. Regarding your questions on ESG and CIB clients, I think that Philippe Rasack stated in the press a few hours ago actually. We intend to have a dedicated event regarding our ESG commitments probably in the fall this year. So of course, this will be a good opportunity to give some color on the way our customers behave regarding ESG challenges.
But what I can tell you is that this ESG question and especially The climate change issue is taken more and more seriously by all our clients. And it's no longer a feature that you add up on top of a business model that is designed outside this preoccupation. It's now completely embedded by us in our business model, but also by our clients. And we have also now around 8,000 business clients that are having that has been granted a transition grade, a transition note by our internal tool. So it's really going to be a more and more important feature.
And so We'll have this press event somewhere in the fall regarding ESG issues and we'll be able at that time to give colors on many aspects of this issue in all our businesses.
Thanks a lot, Joel.
Thank you. And the next question comes from the line of Jean Noyes from Goldman Sachs. Please ask your question. Your line is now open.
Hi, Jerome. Good afternoon.
Hello.
I wanted to ask you first on the achievement so far in your business plan to follow-up on Jacques Henri's question. So you had a plan to be between 25% 30% of revenues in asset gathering, which is the most capital light of the businesses you have, I guess. Now it looks like it's going to be probably a bit over that. That will mechanically change your ROE in a sense and your capital generation higher In terms of the mix compared to risk weighted asset consumption. And I just wanted to understand whether you think you have More growth opportunity than you had at the time, in which case you'll be able to reemploy that or whether you're going to in a sense, Not to compress your ROE going forward, you're going to have to rethink the capital distribution slightly, leading me to my second sub question, which is, I have to say, I'm ashamed.
I had understood that the share buyback would have compensated the entire share issuance from the script. But now We're reading the past communication. I realize as is written today that it's also including the Switch 2. But in a sense, why not Expanding this and given all the capital you have to the entire scrip dilution if you want. And lastly, I just wanted to know because today you produced some good results in Italy with Treval integration and so on, whether you could give us a sense As to in 2022, what you think pre provision profit guidance could be for that business?
Many questions Jean Francois. I thought it was
a surprise.
No problem. No problem. I'll try to make it short in the answers. Regarding the first question, I. E, the breakdown of our activities between the different businesses.
We are not going to constrain The development of 1 business line before because it's simply because it's a little bit ahead of the curve in terms of development. And we are happy that the business in which we are probably ahead of the curve is a capital light business and we're happy with that and we are not going to try and force a rebalancing, which wouldn't make sense if it does not correspond to business opportunities, real business opportunities, I would say. So we have always given indicative breakdowns of our sources of revenues in the future, And we think that this indicative breakdown makes sense. But if the Asset Gathering Business division is ahead of the curve, No problem for us, of course. And again, I don't want you to take the opportunity only of The 2nd quarter results publication to reshuffle any kind of objectives will have At a certain point in time, a dedicated moment to give some longer term prospects for the whole business of the group.
It's the name of the game. We have for the time being targets for 2022. We are on track, which is a positive and we are and we will someday give again longer term prospects taking into account of course everything that has happened in the course of the present medium term plan. And what I can say is that what has happened indeed is satisfactory at least in our view point. It's the case in terms of business development.
It's also the case, It's also the case of course in terms of profitability, as I have explained, taking a certain long term horizon since beginning of 2017 in terms of profitability. Regarding the share buyback, I I don't know what you understood at the time where we announced the mechanism that we had put in place for the payment of the 2020 dividend. What is sure is that we are doing exactly what we had announced. And so we had announced that we wanted to eliminate first all the extra shares created on the basis of the take up of the minority shareholders. And this is what we are doing now.
And as I I think we have completed 77% of this program and it's going to be ended probably end of August, beginning Of September, I don't know exactly when depending on market conditions, but this will be done. And then we will add to that an extra share buyback operation that is going to take place in Q4 as soon as we have, of course, the authorization of the ECB. And this corresponds of course, when we presented this program back in February this year, we've made in our models some assumptions regarding the share price, which by definition are not exactly met. But nevertheless, Globally, the operation is exactly as we presented it. And this operation, the 2nd share buyback was aiming both at generating in combination with the switch dismantling as we've said and we are committed to fully dismantle the switch mechanism before end 2022 and will do it.
So In combination with the switch dismantling, this was aiming at improving enhancing the earnings per share At the end of the day, all things included, all operations included, and it's going to be the case at the end of the day once the second operation will be completed and with pro form a, I would say, the dismantling of the switch mechanism and it's pro form a because We cannot tell in advance when we will trigger the dismantling. This will enhance globally more or less the earnings per share by around 1%. And then the second goal of course was to rebuild the Tangible book value per share, which is also going to be the case by end 2021 as compared to end 2020. Why don't we conduct an additional or a wider larger share buyback? I have been asked about share buybacks since probably 5 years, and I have always been very about share buybacks for one simple reason, which is that the majority shareholder, the SIS Laboice is In my best understanding of its intentions, of course, I cannot talk on its account.
But It's my understanding that they do not participate in the share buyback. So if I repeat regularly share buybacks operation, there will be a permanent increase in the stake owned by the SIS Laboracy, which is not at the end of the day probably the best thing for the minority shareholders. So I will conduct this second share buyback operation before year end and then I will stick to my normal dividend policy, which is to pay a cash dividend. As I said also earlier, and I want to be precise on that, we consider that we haven't fully paid the 2019 dividend up to now. And we consider that End of 2021, end of 2022, when we will set The amount of the dividend that we intend to propose to the General Assembly Meeting to pay, We will round up the numbers in order to progressively repay this unpaid The 2019 dividend.
So this is the way I'm going to answer to your request of somehow boosting, I would say, the Dividend yield, if I understand you and your concern correctly. And so for the time being end of June, we've booked exactly The normal dividend policy for half of the attributable results, so it's already €0.39 a share that is booked, reserved in our books. And end of year, we will see exactly what we can do in order to probably round up the numbers in order to boost the dividend that is going to be paid in 2022. And if it's not enough to fully absorb this unpaid 2019 dividend, we will repeat the operation end of 2022. But It's not a commitment.
It's an intention. And you know that generally, of course, we stick to our commitment, but we try also to stick to our intentions.
Okay. And quickly on Treval?
And on Treval, excuse me, your question was regarding the NPLs, right?
No, no. I just wanted to think what you think is achievable run rate of pre provision profit in the quarters to come. To the base in which to go with?
Excuse me, excuse me. It's way too early to tell because actually We are the owners of Kleval since the beginning of May, but actually we are in the driver's seat since only mid June because you know that the General Assembly meeting that changed the management took place only on June 18. So we are now conducting different due diligence operations within Creval in order to fully assess the potential of this For the integration of Creval, we are going to give more color on that in September, October, November, I don't know exactly when, But I'm very confident that this is going to be a very accretive operation. I'm very confident that we've been conservative when booking this Provisory allocation of the purchase price end of June. And I'm very confident that this operation will prove to be a very positive operation for the group.
Okay. Thank you very much. Very clear on that.
Thank you. And the next question comes from the line of Azura Gulfi from Citi. Please ask your question. Your line is now open.
Hello, Adrienne.
Hi. Hello. Good afternoon. A couple of questions for me. One is on French retail, which has shown a very nice rebound, especially on the revenue.
When I look at the NII, what are the drivers that you expect for the 2nd part of the year? Could this be a level of sequential growth from now, thanks to the momentum in lending and maybe a little bit better margin. So if you can give us some color on that. The second one is looking at the slide where you showed the market share gain. So this has been increasing since the beginning of your plan.
What are the areas where you see more momentum for growth in the next couple of years? And what are the ones that contribute more to the profitability improvement? And if I may, a quick one on the provision. You have Stage 1 and Stage 2 provision. Some of it might be used if there is a deterioration of economic condition.
But if you will have still some left, which probably is the base case, what are the rule to release them? And what are your expectations for the release of this? Thank you.
Thank you, Arthur. French retail is a competitive market. It's is a difficult market. It's a competitive market. And as an example of that, you are aware that In Q2 this year, this is probably the lowest level that we've seen historically for the average price not only with us, But on the market for new home loans.
So clearly, it's a very competitive market. It's Absolutely key on this market to be able to have a very, very intense global relationship with your customers. So this is where actually we think that we have an edge as compared to some weaker or less complete, less comprehensive competitors. In terms of prospects, what is for sure is that For the NII, the NII is at the end of the day, it's the difference between the yield that you get on your loans, on your assets and the cost that you have to stand on your liabilities. So for the time being, we are seeing a further Pressure on the average yield of our assets because again, as I've mentioned, we've reached, I hope a bottom this quarter in terms of rates for new loans, but this continues to put a certain pressure on the yield of assets.
At the same time, we've benefited and we are still going to benefit in the coming quarters, hopefully, from some positive elements like the fact that we have a resource at a negative rate, which is the TLTRO. But This is not going to last forever. So it's very important to have good momentum in terms of volume development and volumes of good quality, of course, we don't want to relax our credit standards, of course. But it's very important to keep a good momentum in the development of the volumes. And also it's very important to be able to generate a growing amount of fees within your revenues.
And The NII was significantly up this quarter and it's definitely it's benefiting for the time being from this Very specific monetary conditions in connection with the ECB policy. But even more importantly, Fees are up more than 6% this quarter and this is also a very positive element because fees, of course, it can be a little bit more volatile, but It's here to stay also because if our customers are loyal to us and we do everything we can in order to keep them loyal, then Products and services are going to add up and the fee base is going to continue to grow. So it's very important for us to continue to develop this model, Which is leading to your second question regarding market shares, because what we are looking at in terms of development of products By definition, all the products that improve the loyalty of our customers and what we've noted is that P and C insurance policies improve the loyalty of retail banking customers. You know that I've been running the insurance business of the group for 5 years before joining this position. I've seen it from the side of the insurance companies.
It's absolutely true that the customer loyalty, Considering the way we do our business of P
and C
Insurance, every time we manage to sell an insurance policy P and C insurance policy to a retail customer, it improves his loyalty and even more every time When he has a claim on his P and C insurance policy, considering the fact that we managed the claim in a very specific manner, we improved further the customer loyalty. So it's very important for us to continue to develop P and C insurance policies, of course, life insurance because it's the continuation of the management of the assets of our customers, but P and C insurance is very important, Creditor insurance as well. And real estate is important not for all our customers, of course, by definition, because not all our customers can afford to invest part of their savings in real estate solutions. But every time we have a customer that wants to invest part of is savings in real estate solutions, we must be able to provide the answer. And so we are working on continuing to improve the capacity of selling real estate to our customers directly.
Then In terms of provisions and potential for releases, you know that, of course, Credit Agricole Group fully applies IFRS regulation, and we don't want to be outlier from this point. But at the same time, we have been in the past very reluctant in terms of provision write backs and this is this explains why at the end of the day we have a higher coverage ratio than most of our European peers. So my main preoccupation is not to wait for the moment when I will be able to release S1 and S2 provisions. I know that it's maybe not as aggressive as some of our competitors, but clearly, we feel comfortable with the idea of having ample provisions, even ample S1 and S2 provisions. And so we are not desperate and waiting to write back those provisions in order to boost our profit.
Okay.
Thank you.
Thank
you. Thank you. And the next question comes from the line of Giulia Miorto from Morgan Stanley. Please ask your question. Your line is now open.
Yes. Hi, good afternoon, Jerome. Thank you for taking my question. 2, please. The first one on Italy, And it's actually more strategic than the quarterly performance.
So Creval is now on track and you're looking at that new asset. But would you potentially be interested in acquiring further assets as it seems that there are other potential banks or parts of banks coming to the market? So that's my first question. And then the second question instead, looking at trends for loans and deposits in the quarter, so quarter on quarter. Deposits still keep growing more than loans in France, but also at the group level.
And do you have any evidence already from the July data that this trend is inverting? Or when do you expect to convert? And perhaps what opportunity do you see from potentially lower deposits for your asset gathering businesses? Thank you.
Thank you. Let's start with Italy. We are pragmatic and we are prudent. So pragmatically, we are focused on the integration of Creva. And this is going to take probably another 2 or 3 quarters because as I've said, we are conducting due diligence in order to fully assess everything within Creval.
Then we'll have of course to organize the legal merger of the 2 entities Creval and Creneries Telecom Italia. Then we'll have to industrially operate this merger. We'll have to migrate Creval's operation in our platforms and so on and so forth. So This is going to take time and I think that part of the successes that we've had in the past in this viewpoint are linked to the fact that when we conduct that kind of operation, we are very focused. And so I can tell you that Credit Agricole Italia's management is really focused on these operations, which are complex even though we are very confident, It needs to be really well prepared.
We are prudent at the same time, which means two things. We don't want to absorb Too many things at the same time. And also, of course, we continue to monitor the situation because, again, I'm looking back On what we are in Italy now, €385,000,000 of net profit in the first half of the year. We have many, many interest in Italy and we need to permanently assess the situation and be able to protect and defend our interest in all business lines and not only in retail banking. So we are monitoring the situation.
We Of course, we are aware of some movements that are taking place or may take place going forward. But for the time being, We are focused operationally on the integration of Treval. And maybe one last point on this question, There's no need for us to grow further inorganically in Retail Banking activities. We have a nice setup. It's efficient.
It's working well as the figures of Credit Agricole Italia this quarter illustrated, so there's no need for us to go further. Regarding deposits and loans. It's true that this quarter, I think that globally for the group, including the regional banks of Credit Agricole, Customer loans increased by around €28,000,000,000 all in all, and customer deposits at the same time increased by around €30,000,000,000 if I have the correct figures in mind. So It's true that the difference between loans and deposits Shrinked a little bit by €2,000,000,000 I think that this is going probably to reverse when our customers will have makeup their minds on what part of this excess of deposit they want to consume and what parts of these deposits they want to invest long term. So what we see now is that consumption accelerates.
So part of this extra deposit is really going to be consumed, but not in such a proportion for the time being as to completely, I would say, wipe out the extra savings of the pandemic. And so there's probably going to be part of it that is going to be long term invested and of course both Amundi and Credit Agricole Assurance are ready to make their propositions to their customers in order to be here and to attract these inflows. But for the time being consumers haven't made up their mind and when you see all the uncertainties regarding the future evolution of the pandemic, I cannot Thank you. Thank you.
Thank you. And the next question comes from the line of Omar Fall from Barclays. Please ask your question. Your line is now open.
Hi there. So two questions. Firstly, could you help us in modeling the insurance business, Please, since it's quite volatile. That $400,000,000 net number, Is that sustainable on which to base our forecast? Or do we have to make an adjustment for the financial margin?
So is that plus $187,000,000 positive market impact year on year that you quote Just a normalization from a depressed return a year ago and the current run rate is normal or is the current run or is the current quarter elevated? And then on the P and C side, I guess you've you will have had like an elevated combined ratio with some of these weather events. Could we have the €1,000,000 impact if you've got it and it's material? And then Secondly, just wondering on the comment you made on rounding up the dividends for future years to include The 2019 dividend, if I understood that correctly. So number 1, do you consider all of the canceled 2019 dividend as being available to be rounded up?
And secondly, why do you suggest that this will be done over time when you're in a position of significant Excess capital today, I mean, you could pay $2,000,000,000 today and you'd still be above 11%. And ECB doesn't seem to mind your peers Paying more than 100% of earnings, because I guess the previous question kind of asked A bit more elegantly, but there are fears that, well, maybe you're holding capital so that you can make a larger acquisition or larger transaction in Italy. Thanks. Okay. Trendatory?
Thanks.
Okay. Insurance modeling, It's going to be difficult to fully walk you through all the insurance modeling issues in a few minutes' time. So of course, we'll be ready to and probably we'll have at some point in time to reorganize the dedicated workshop on insurance activities because definitely it's a bit less familiar to bank analysts than traditional banking issues. No, This element that we quote as a positive market effect has not to be taken out of the normal run rate of the insurance revenues. It simply is an element that we point because this quarter, Contrary to what happened last year, we have had some positive market effects in two aspects.
The first one is the fact that there are some legal reserves that we have to book within our books if the value of certain assets decrease the market value of certain assets decrease below a certain point. So there is, for example, So it's a provision for the flow guarantee that we provide on life insurance policies. There is also the provision for depreciation duraamps. It's a provision regarding Long term depreciation of certain assets. So all these provisions have to be booked when some assets go below a certain value And they have to be covered fully by the insurance company.
So it's not shared with the policyholders. So we have had some Specific provisions of that kind 1 year ago and part of it is coming back in this second quarter. And then we have also some positive reevaluation of assets that are marked at market value under IFRS 9. So This €187,000,000 number that we've quoted is the addition of many events of this kind, some of them are being shared with policyholders, some of them being 100% for the insurer. What is for sure is that this quarter, considering the fact that partially because of this positive market effect, we have had a very or a more higher level of financial revenues.
We have been able to take only a proportion of the financial margin that we are allowed to take on This financial revenues and we have been able to book some additional provisions that are allocated to the policyholders, but that will not necessarily be paid by year end. So you know that this accounting between participations benefits, so the yearly profit sharing rate and Participacion Ozex Sedan PPE, which is reserved in our books but not necessarily paid immediately and kept for the future is definitely made only by the end of the year. So what we've done this quarter is that with provisionary again increased this PPE because we had a very high level of financial revenues, but it's not definitive before year end. So this is globally the mechanics that operate within the Life Insurance business. In the P and C Insurance business, it's True that this quarter we have had a significant amount of weather events that impacted a little bit The P and L.
But you know that there are 2 mechanics that really filter the impact of these weather events on the P and L of our insurance company. The first element is that part of it is reinsured outside the group. And so of course, part of these weather events was taken by the reinsurance companies. And then there is a risk sharing mechanism between the insurance company and the banks that sell the policies in order to align the interest in terms of underwriting the policies. And so part of the cost of these weather events is shared by the Regional Banks of Credit Agricole and by LCL through the level of fees that they get from Pacifica, which is the P&C Insurance Company.
So all in all, this quarter indeed the ratio of claim costs as compared to premium within Pacifica increased quite significantly compared to Q2 2020 from, let's say, around 62% to 72%, it's significant, but Q2 2020 was very low because of the lockdown. But in terms of combined ratio, which includes the commissions that Pacifica is paying to the distribution networks. Actually, it's been very stable around 97%. So actually, the profitability of Pacifica was more or less unchanged as compared to last year. So it's not a very significant impact that we've had this quarter, despite the fact that all these mechanisms reinsurance and sharing of the risk with the distribution banks has been operating.
So all in all, is this level of profitability run rate? I'm not pretending that every quarter we are going to post €400,000,000 of net profit for the insurance division, but It's not an abnormal level whatsoever.
Very clear. Got it.
Okay. And then coming to your question regarding the dividend. First, the unpaid 2019 dividend was €0.70 a share. What we've said when we presented the 2020 dividend scheme earlier this year was that this 2020 dividend scheme was covering around €0.30 of unpaid dividend coming from 2019, Because the normal dividend in 2020 would have been around €0.50 So it means that we deem we have another €0.40 per share to pay to the shareholders in the future. Then Why don't we pay one off this amount?
We don't like the idea of decreasing the level The dividend. So paying an extra dividend or paying a very high dividend on a single year is not an idea that we like. We really wants to be as stable as recurring as possible. What I can tell you nevertheless is that we do not intend to keep in the long run extra capital in order to have a reserve just in case we have a large M and A operation to finance. I have always said that it's better to be close to the target in terms of solvency and to ask the shareholders to provide the necessary funding of an M and A transaction because then it creates, I would say, a positive inducement to present a very convincing operation.
So it's far better Yes, and it's far more efficient.
Just as a follow-up, I take that on board, but do you see that there's maybe a clash Between that view because if you don't want to pay one off more sizable dividends, yet you're in a position of Significant excess capital, how do you then get down to a more normalized level Of CET1, if you're not banking on that additional capital for M and A?
Yes. Of course. But just keep in mind that up to a few days or weeks, the level of capital where we stand was a compulsory level considering all The restrictions put in place by the ECB. So the level of capital that we have now and it's going to be the case up to the end of Q3 this year is again a compulsory level of capital under which it was not possible to go Unless precisely we had concluded very large M and A transactions, It was the only way to spend capital accordingly to ECB's recommendation. So now we are we are going to be starting in October in a more normal situation.
Regarding our intentions For the Q4, we want to stick to what we had said beginning of this year. And so again, it's the idea of being very visible. And so we want to stick to what we had said for the rest of the year. And then end of this year, we will assess Exactly, this rounding up the numbers exercise I was mentioning.
Thank you, Jean. Thank
you. Thank you. And the next question comes from the line of Delphine Lee from JPMorgan. Please ask your question. Your line is now open.
Good afternoon, Jerome, and thank you for taking my questions. So I just want to quickly clarify on what you said on the for your 2019 dividend, the €0.40 remaining, you mentioned 2021 and 2022 to pay that, is the intention to pay the full €0.40 amount by the end of 2022, I. E, by the end of your business plan? Or do you intend to spread that out over a longer time period? So could we expect $0.20 per year?
Or is it going to take much longer? And I mean, also just sorry to come back on the Cheuvreux discussion, but I understand the regional banks don't want to be kind of increase their stake too much, and that's why you have a preference for dividends. But You've just issued quite a lot of shares because the script and that they have taken. So I don't understand why you wouldn't buy back part of I mean a lot more of those shares And you're only buying back the shares taken up by the minority shareholders. I mean, in proportion, that could be considered.
And I don't know, I mean, you've always run well above the 11% target. And I was just wondering if that's a real target or you actually aim to maintain some kind of buffer for prudence on top of that 11%. And just on capital, and that's my last one really, it's just regulatory impacts on TRIM. So you haven't taken much this quarter. Can you just confirm how much is left for the year please?
Thank you.
Okay. Many questions and finally all related to capital somehow. Our intention is not to spread this €0.40 repayment on the next 40 years to be a little bit caricature Delfin. So of course, we don't want to do it in too many years, but probably if the situation is convenient, we can do it in 2 years. So on the back of the 2021 dividend to be paid in 2022 and then on the back of the 2022 dividend to be paid in 2023.
Then regarding the share buyback, actually, we are up to finish to repurchase The shares issued with the take up of the minorities at the end of the present Share buyback operation. So it means that the 2nd share buyback operation is going to apply to part of the new shares created for the sake of the regional banks. So that's for sure. And so we are not preserving This number of share and so the €500,000,000 that we've announced is going to apply By definition, 2 shares somehow, I would say notionally, intellectually created for the stakes of the regional banks. What I was saying is that, In my understanding, but really I'm not the shareholder, I'm only The listed company in which the shareholder has a stake.
But in my understanding, the The regional banks don't intend to sell shares during this share buyback operation. And so it means that mechanically as they keep their shares, they are going to be diluted within the capital Kazan, I think that it's not in the best interest of minority shareholders to see the majority shareholder are seeing its stake mechanically growing and growing permanently. This is why we prefer to pay cash dividend to our shareholders. I can ensure that the 11% is the true target. And actually, if All these events regarding the dividend payment restrictions hadn't happened, We would be much lower than the level where we stand now.
That's for sure. And there is Management buffer above this 11% target. That's absolutely certain. But again, We are in an environment where we have restrictions on payments and we are also in an environment where there are still some Uncertainties in terms of regulation because we haven't talked about Basel IV yet. And I think it's not useful to talk too much about Basel IV because we are still awaiting for the draft proposal of directive from the commission, but We need to know exactly where it's going to land before being able to really project our capital trajectory in the long run.
And then TRIM, TRIM is part of these regulatory uncertainties. In my understanding, but it's varying regularly quarter on quarter. We still have, let's say, around €6,000,000,000 to €7,000,000,000 of RWAs to take In the coming six quarters, is it correct, Tracey? So let's say between €6,000,000,000 €7,000,000,000 in the coming 6 quarters. The calendar is not very precise because that it depends on interactions with the ECB on specific reports.
And of course, we try to discuss and then there is a whole phase of interactions. And so the calendar is not very precise, but this is more or less what is left in front of us. Okay?
Great. Thank you very much.
Thank you. And the next question comes from the line of Lorraine Couries from UBS. Please ask your question. Your line is now open. Hi, Jerome.
Thank you for taking my question. Just a quick one from me actually. It's regarding to the accounting of TLTRO. Can you remind me how is it accounted for in RCL and for how
long will have the impact of
that and how much, please? Thank you.
Yes. It's accounted for, I would say, over time, it's accrued actually. It means that every quarter, we book A liability within LCL, but also within CACF, within Credit Agricole Italia, within CASA and of Within the regional banks of Credit Agricole, which bears a negative interest rate of minus 1%. So this was the case up to end of June this year because we had certainties about the fact that the condition related to the extra premium was going to be met And actually it's been indeed met. So for this first period of premium, which is now over The accounting was really straightforward.
Then since July 1, we have started the second premium period, which is conditioned by another metric, another period of check of the evolution of the loans. And so we will see with the accountants how we do for this new period. But for the time being, what I can tell you is that the portfolio of loans, which is the condition for being granted the 2nd premium is up 3% or 4%. So we are again quite comfortable with the idea that we are going to be able to receive this second Premium for the 2nd year.
Right. And then in total it should be over 3 years, right?
No, no. The second period is also for 1 year. The first period was between June 2020 June 2021 And the 2nd period is between July 2021 June 2022.
Okay, perfect. Thank you.
Thank you.
Thank you. And the next question comes from the line of Tariq El Najjar from Bank of America. Please ask your question. Your line is now open.
Hi, Jerome. Just a couple of follow ups, please. First on the provisions. I mean, clearly, you seem cautious on releasing the provisions And favoring higher coverage ratio versus these releases. But isn't it automatic if you have to update your models?
And I guess you have to, if the environment is improving and that would lead to releases or is it your choice not to adjust the models and be voluntarily More cautious in your assumptions. And the question number 2, sorry to come back on capital because I mean correct me if I'm wrong, but I sense some Cautiousness versus your rhetoric in Q1. I mean Basel IV, yes, this is uncertain, but The Pillar 2 requirement relief that you promised to update us in full year would probably offset all Basel IV or most of it. And then you're left with a massive excess capital. So I mean, if your intention is to increase EUR few per year to keep the progressiveness of EPS, That would definitely take a long time if you don't use this excess capital to grow faster or non organically.
So I just want to know if the tone has changed the impression or you sense that you want to be More cautious and progressive.
I mean, I hear you about
the fact that we're now restricted to pay dividend and hence the accumulation of capital, but It's fair as well to have a catch up to basically as it was abnormal to ban you pay dividend. Is also maybe unusual for you to deviate from your strategy of progressiveness and running down the excess capital faster than what you had in mind pre COVID? Thank you.
Okay. Let me start with the second question actually. We didn't change tone as compared to the beginning of the year. What I'm just saying is that before accelerating the unwinding of this excess capital, I have first One tool, which is that and one usage, which is the dismantling the switch mechanism, it's a commitment, as I said. It's going to be important to enhance the earnings and the earnings per share, and it's to be done before year end 2022.
And this is going to consume 60, 65 bps of capital. So it's important, of course, to keep the necessary amount in order to do it exactly when we deem relevant to do so. 2nd element is that, of course, we have these uncertainties regarding Basel IV. I agree that Alongside with Basel IV, there is this capacity of covering PR2 requirement partially with AT1 and TR2 and we don't forget these components of the package, but of course it's better to know the full picture before drawing a trajectory of depletion of capital, if I may say so. But really don't misunderstanding and absolutely not changing tone as compared to the beginning of the year regarding this issue.
In terms of provision, of course, it's automatic, but It's automatic with many, many assessment that you can make. So first, the first assessment is the macroeconomic scenario that we use in order to calculate the expected credit losses, 1 year expected credit loss or maturity expected credit losses. So of course, we have to reassess permanently the macroeconomic scenario. For the time being, we are positive and of course, we have a positive scenario. But we don't want to be over positive even though there are some indications saying that most of the official public institutions that publish macroeconomic scenarios are more optimistic than what we are.
But nevertheless, we are not over optimistic in our own in house scenario that we use for the provisioning. And then second, you may Have in mind that S1 and S2 provisioning is made of 2 layers. The first layer is the central forward looking, which is based upon our global macroeconomic scenario. And then we have local forward looking layers that are added up to the normal provisioning, S1 and S2 provisioning, either in connection with certain specific sectors or with certain specific geographies. And in this front, we have certain capacity of being more prudent than only the central forward looking scenario.
Okay? Thank you.
Thank you. And the next question comes from the line of Stefan Stohlmann from Autonomous Research. Please ask your question. Your line is now open.
Hello, Stefan.
Yes. Good afternoon, Jerome. I wanted to ask you please on the stress test for Credit Agricole Group. I mean, the group drawdown was more than 6%, and I guess we can back solve roughly for something around 5.5% to 6 percent for CASA as well. And so with that kind of stress test drawdown, is 11% really realistic CET1 level to shoot for.
And in that context, do actually Pillar 2 gs considerations play any role at all at your level? Or is it only an issue for the group? And maybe related to this question, a very general question. It always strikes me as surprising that a group like Credit Agricole has such a severe stress test drawdown compared to many other banks. Is there anything that you would highlight that you think is responsible for that?
And are there maybe any issues maybe arising from the group structure that penalize you compared to other banks? Any color there would be very helpful. Thank you very much.
Good question, Stephane. Thank you very much. Well, first, it's true that we have a depletion which is huge and which is bigger than the one we had previously and bigger than the one of most of our peers. Nevertheless, considering the starting point of our Solvency at group level, it's not really an issue. And as you know, we end up this severe scenario stress testing with CET1 ratio which is close to 11%, which is the 2nd best in the European space of systemic banks, The best being exactly at 11%.
So it's not really differentiating. And so we can consider that amongst the space of European Systemic Banks, we end up with the best resilience to this very severe stress scenario. Then why does it happen that we are so severely hit? I think the main reason is the scenario itself. The scenario is hitting very hard on France, very hard on professionals, very hard on exactly all the businesses in which we are dominant in France.
So of course, the scenario is hitting hard on our group because it's hitting hard and in my opinion absurdly high Specifically on the businesses in which we are very, very present and which in which we don't intend to exit of course. These are our main Priorities and we are going to stick to these priorities. And of course, we think that the severe scenario of the EBA is not very Credible, especially this idea of saying that there is that all public support is lifted and not applicable doesn't work like that in the real life, so we don't buy that scenario. But nevertheless, we've applied it. A second point, there are some specific elements that hit us particularly, which are either methodological or which are linked to our good resilience to the scenario itself, I would say.
In this second category, It's the fact that at no point in time we cross the NDA threshold. So it means that during all the period, we continue to pay 81 coupons. So of course, compared to banks that stop to pay 81 coupons as soon as the 1st year of the scenario, it's an additional capital depletion. And for us, it's around 18 bps of depletion in the period. 2nd element and it's purely it's not in itself very interesting, but we have had in 2020, which is the reference of the stress testing, both for the starting point and for the run rate of activity.
You know that we have had some specific one offs like, for example, the fact that we've decided voluntarily to pay and to indemnify some of our customers that have an activity interruption insurance policy with us that was not supposed to be called for a pandemic, but we've decided to nevertheless indemnify our customers on this ground. And so to pay voluntarily a significant amount was around €300,000,000 for the group globally. And the ECB or the EBA said that we had to do as if we were to continue to repeat the same every year of the stress scenario. So it's an example, but this is also a cost of around 16 bps of CET1 depletion at the end of the day. So as this stress testing exercise is not a negotiation we have to apply at the end of the day to all their requests.
We couldn't modify that, but we consider it's a little bit unrealistic again. So we have some bits and pieces of like this and we have also the fact that our business model is precisely in the heart of the severe scenario of DBA. But going back to your question, there's nothing regarding our structure, Our organization that is contrary to the methodology and that would really penalize us. Then how it's going to play on the P2G? We don't know exactly.
The ECB is to a certain extent a little bit of a black box regarding the connection between The results of the stress testing exercise and the SREP exercise, we'll know a bit more about it in the fall because we have this SREP exercise meeting that is organized, I don't remember exactly, but in September, October. So we'll see a little bit more how it works. And then regarding CASA, there's no CASA stress testing. Of course, CASA is integrated in the stress testing of the group, but we don't publish any CASA stress testing Specific results, and there's no request or requirement on CASA specifically regarding the stress testing.
Thank you. Thank you very
much for that, Jerome. Thank you. Thank you.
Hello, Kirill.
Hi, Jerome. Good afternoon. Just a couple of questions on Creval, if I may. So firstly, on the net bad wheel on Praful, correct me if I'm wrong, but you haven't included any kind of DTA benefits in there. So really what's your thinking there, roughly how much could the GPAs be worth eventually on some of those adjustments you're taking?
And then Related point, now you've got your hands on the Croval business, have those PPAs come in line with what you originally expected when you were trying to price up The original tender offer. So things like the extra provisioning needs on the loan book, etcetera, have they come in better Or worse than anticipated because I guess the macro has kind of yo yoed around a bit since the beginning of the whole process when you launched the tender offer for Clerval. Yes, just your view on how the PPAs have come in versus original expectations?
Thank you.
Thank you. You're right. We didn't book any VTA so far because in order to be allowed to book DTAs, we have to have a legally binding decision of merger in place. And the legally binding decision of merger is going to be taken 3rd General Assembly meetings both of Creval and of Credia Ecole Italia that are going to take place in Q4. So it's going to be only End of Q4 that we are going to be able to book the DTAs within Creval.
Of balance sheet DTAs amount to around €180,000,000 In terms of Findings regarding the Creval situation, well, it's too early to tell, but what I can tell you is that everything we see is confirming the very good potential of this acquisition in terms of complementing very, very nicely and very efficiently our set up in the northern part of Italy. So it really is a very, very attractive acquisition.
Great. Thank you.
Thank you. And the next question comes from the line of Matt Clark for Mediobanca. Please ask your question. Your line is now open.
Good morning. Can I just Can I come back to your comments earlier that the $400,000,000 net profit For the insurance business, it's kind of not an unusual or not an abnormal number? Would you also say the same would apply under IFRS 17? So can we still expect to see That level of profitability come through some quarters in the future. And anything else you can say to help us understand the impacts of IFRS 17 on the group, both from a capital and profitability perspective.
And actually, my other question has been covered. Thanks.
Well, thank you. It's a very good question. And definitely, IFRS 17 is going to be A headache both to apply and to explain and to live with in the future. That's for sure. We were not as you can imagine, we were not really candidates for IFRS 17.
But nevertheless, we are going to apply IFRS 17 when it's applicable, so starting in 2023, but with The dry run that we have to do in 2022, we will have a clearer view pretty soon now on the effect. You know that under IFRS 17, the total profit generated by insurance activities at the end the whole day is going to be the same. The issue is that It may be spread quite differently over time and that's the difficulty and we have still some arbitration to do with the first time implementation of IFRS 17 between What is going to bite on our solvency at the level of the group in order to protect as much as possible The profit generation capacity or on the contrary, what is going to preserve better our solvency at group level, but at the price of deteriorating a little bit the revenue trajectory and delaying a little bit The acknowledgment of revenues. So these are questions that we are working on presently quite hardly, and we are going to be able to give more clarity on that probably the end of this year. But as of now, I'm not really able to give you some precise color on that.
And what I told about the €400,000,000 is really under the present accounting standard.
Okay. Just to follow-up on that. I think in the current business plan To 2022. I mean, when you came up with that, it was It's still expected that IFRS 17 would have been imposed by 2022, but you chose to exclude that effect differently. I mean, does that mean that really when we think about the order of magnitude IFRS 17 could be the order of magnitude that would have threatened your group targets?
It was much more because in 2019, we had a much less Clearer view of all IFRS 17 impact and it was too difficult for us back in 2019 to really be able to give the, I would say, the sensitivity of the 2022 P and L target to the implementation of IFRS 17. So we preferred at that time to say that we were setting those targets under a constant accounting standard for the insurance activities. And at the end of the day, We were right because indeed IFRS 17 is not going to really be the standard before 2023.
Okay. Thank you.
Thank you. And we will now take our last question. And the question comes from the line of Pierre Chedeville from CIC. Please ask your question. Your line is now open.
Hello, Pierre. Hello, Jerome. Just a quick question. Regarding insurance, we've seen growth in penetration rate in your domestic markets and even if there are room to progress further notably at LCL and Italy. My question was regarding the development, the international development because I understand that You were keen to develop these insurance expertise elsewhere.
And I wanted to know where you are regarding this international development? And if you are also exposed to floods, Exceptional flutes in Germany, Belgium or Eastern Europe because I don't
Excuse me, exceptional flutes, what do you mean by that?
Lesimodation exceptional. Okay. Excuse me.
Sorry for that. The answer is no. The answer is no. No impact of the floods.
Okay. And Your question is regarding provision. So we have all understood that the level of provision is exceptionally low. And we have also understood that even if you are reluctant to make write backs, You will do so somehow in the future. My question was, in your opinion, when do you see The level of provision normal level of provision, we would say around 40 basis points coming in 2023, 2024?
How do you see that in your view? Thank you.
Okay. Thanks, Pierre. Well, in insurance activities, it's clear that we want will accelerate the international developments of our, I would say, our know how in terms of bank insurance capacities. And so we had in the past taken and we have in the recent past taken several initiatives. Actually, Creval is the result of one of those initiatives because initially we started with a life insurance distribution partnership with Creval.
And this was the starting point of our love story with Creval. We've also concluded a partnership in Spain with Abonca. And to be clear, I'm not pretending that The Treval scheme is going to be repeated in Spain. That's very clear. We have also a partnership with Novo Banco in Portugal.
We have also a global partnership, insurance partnership between CACI and CACF activities across Europe. So CACF is distributing Kassy, which is one of our insurance companies' Products across the whole Europe alongside with personal finance products, consumer credit loans or auto financing loans. And so we have a full range of initiatives in order to develop our insurance activities across Europe. But we definitely would like to accelerate on this front. And so we are working on several potential partnerships that could enhance the development of our activities.
So of course, we are going to work on several partnerships that are not going to generate anything. So it's something on which we are not going to communicate. And from time to time, we may have some we may conclude some additional partnerships in order to boost our capacity of distributing insurance policies. But we very much believe in the strength of this model. And so we think that we master this model of Bank Insurance Distribution and so we want to develop this model across Europe.
Regarding provisions, You rightly named quoted this figure of 40 bps because this was precisely Across the cycle figure that we had in mind when we published our medium term plan, 40 bps of cost of risk. And it happens that last year we were above and this year we are already significantly below for the time being. So when are we going to reach back This 40 bps amount, I don't know exactly. But on the single Quarter, Q2 quarter, we were at 24 bps on the perimeter of CASA. But if you take a rolling 4 quarter average, then you will end up with this 40 bps figure.
So this 40 bps figure across the cycle is not unrelevant, I would say. And I expect that we are going to vary around this figure And possibly we are going to be below this figure for the coming quarters and then at a certain point in time, but I don't know exactly when, We will be back at 4 EBIT.
Okay. Thank you very much.
Well, thanks. I understand this was the last question. So again, thank you for your time. Thank you for your attention and I wish you all a good holiday. Personally, this is what I'm going to do in the coming hours now and most of the team in the coming days.
So I'm glad that we are going to meet again in the fall after the vacation. Bye bye.
Thank you. This concludes today's conference call. Thank you for participating. You may now all disconnect.