Good morning, everyone. Thank you so much for being there. Thank you so much for being connected, too. It is really a pleasure for me to welcome you there in Montrouge. Today, we present our new plan, a plan that is naturally built upon the success of the previous plan since we succeeded to reach, 1 year ahead of schedule, almost all of the targets we had set in 2016. As we do not see any glass ceiling over our heads, the 1st key message is obviously that we will amplify and that we will accelerate. We will amplify and accelerate on our current and successful momentum. For this new plan, let me immediately spoil the suspense with a few figures.
We shall target a higher net income, above EUR 5 billion for 2022, a return on tangible equity above 11%, 10% was our previous target, and the solvency maintained around 11% within a group ratio significantly above the 16% level. We add, and this is a very important point, that we secure these objectives by saying that we can reach them even under the assumption of a much higher cost of risk. That means a higher and a safer net income target. 4th point, the switch mechanism. Our commitment is to unwind half of the switch over the span of the plan, and we will start to switch off as early as 2020. 1 last point about the necessary control of our capital consumption. Thanks to our universal model, we really can manage an asset-agile policy where other players will have no choice but to adopt a Malthusian policy.
I shall come back on this point later. For the time being, let me invite you to rediscover Crédit Agricole Group, the 10th largest bank in the world. Let us look to this following video. If we choose to come back and to recall the group's performance, it is because this is naturally very important for the shareholders of Crédit Agricole S.A. Just a single example, it is the group's solvency that rating agencies look at, and in 2018, we were so pleased to return to the highest rating for a French bank, for S&P, as well as for Fitch and Moody's.
More concretely still, for our shareholders, it is because the group is very solid with a solvency ratio of more than 15% at the end of 2018, and because it bears at its level the G-SIB buffer that Crédit Agricole S.A. can limit its solvency target to 11%, an optimal level to be profitable. Now, let me take a brief look back on the previous plan. Geopolitical uncertainties, of course, constant new regulatory and prudential requirements, pressure also stemming from consumer protection regulators, interest rates extremely low. Our performance in this kind of environment has clearly demonstrated the relevance of our strategy. A strategy that can be summarized in a very pragmatic triadic, organic growth, internal revenue synergies, and consolidation driven by our specialized business lines.
Organic growth first, it allowed us to increase our customer base by more than 635,000 clients since end 2015 in France and in Italy. In France, we have by far the highest penetration rates in all segments from individual customers to corporates. Internal revenue synergies, they account now for a quarter of our revenues, they increased by close to EUR 1 billion over the previous plan. They are fueled by our strong universal customer-focused model that structurally links, connects our retail banks and our specialized business lines. It is also thanks to our synergies that we managed to improve CASA cost-income ratio by more than six points. Finally, our business lines have been very active in the ongoing European consolidation movement with major acquisitions like that of Pioneer by Amundi, which made us the first European asset manager, but also with the signing of long-term partnerships.
Banco BPM in Italy and Bankia in Spain for consumer financing, Credito Valtellinese for life insurance, or more recently, Santander for custodian activities. This very simple, very pragmatic strategy, organic growth, internal synergies, and consolidation through business lines, allowed us to reach, in 2018, one year ahead of time, almost all the targets we had set in 2016. A 11.5% solvency ratio, above our 11% target. Revenue growth over 4.3% per year versus a target of at least 2.5%. A return on tangible equity of 12.7%, where we had aimed to return above 10% at the end of the plan after the Eureka transaction that had normalized our solvency, but at the price of below 8% profitability. Finally, EUR 4.4 billion net income compared to a target of EUR 4.2 billion for 2019. Regarding the cost-income ratio, it dropped by more than six points over the period.
We have returned 50% of our results to shareholders in cash over the whole span of the MTP. Very concretely, EUR 5.5 billion over three years without any dilution. As I have already said, not only did this strategy perfectly work, but better still, we do not have any glass ceiling over our heads. We are at the end of a plan, we are not at the end of a cycle. We are not at the end of our momentum. Our growth potential in insurance remains high, in particular, outside of France. With the acquisition of three regional banks in Italy, we have built the foundations for more revenue synergies in this country, and these are just two of many examples.
Amplify and accelerate, this is really, and quite obviously, the key first message of the new plan. The second message is that radical changes can be observed in our environment. These changes are also strategic opportunities for a group like Crédit Agricole. Four main observations, all of them being threats for those who choose to disregard them, and at the same time, opportunities for those able to integrate them at the heart of their core strategies. My conviction is that Crédit Agricole Group is particularly well-armed, more than many others, to seize the opportunities they represent to differentiate compared to other competitors. The first observation is this one. When we moved after the 2008 and 2011 crisis to a period of uncertainties, we thought this could be a transitional period leading us towards a new stable state. It was wrong.
The world has simply become structurally less stable and structurally less predictable. The good news is that in this structurally less stable world, there is still room for ambitious strategy if, and only if, they are in continuation, if they build upon world-master know-hows, and if they are rooted in strong acquired positions, just like what we have done over the whole period of the previous plan. My conviction is that our cultural preference at Crédit Agricole, that is a kind of trademark for us, our preference for obstinacy rather than originality. This culture of obstinacy is, in fact, a strategic asset in this kind of environment. The second main observation is this unprecedented increase in regulatory burden. We have all become RWA hunters. Can this be a comparative advantage for Crédit Agricole?
I am convinced that the answer is yes, because as I said in my introduction, and contrary to specialized models organized in one silo that will suffer therefore from financing constraints, our universal banking model gives us the flexibility to dispose of the whole range of financing and refinancing methods, including the possibility to reasonably, within the group, refinance a share of the balance sheet of our banks by answering, for example, the investment needs of our life insurer and our asset manager, always looking for secure quality assets. My third observation is the deep transformation undergone by technologies and, in their wake, customers' expectations. They expect immediacy, they expect the simplicity of use, personalization, but they also expect the highest regard for the safety and confidentiality of their personal data.
Again, these high expectations are a competitive advantage for us since we do have this double culture about technology and customer relationships. You probably don't know in this room, or don't remember for certain of us, that Crédit Agricole regional banks were the first banks in Europe to use remote processing. Of course, it was a long time ago. It was at the very beginning of the '70s. Do you remember that Crédit Agricole has always massively invested in any new channel available for customer relations? At the end of the day, we always succeeded to confirm or to take the leadership. Yesterday or the day before yesterday in terms of ATMs, then for any kind of telephone platforms, more recently with internet banking, and today for digital solutions accessible from mobile devices.
20 years ago, we even launched a bank available on the television. Many of us don't remember that anymore. We were simply ahead of our times, and it did not meet the corresponding demand on our market. What I mean? What I mean is that our culture is strongly technology-friendly. I do tell you a thing as I think that only the illusion created by solely digitally-accessible banks introduced the false idea that so-called traditional banks had become obsolete, when in fact, our model and our know-how precisely consist in continuously building on the successive addition of every new channel technologically available. All this while consistently lowering our cost-income ratio, by the way. Digital is once again a strategic opportunity for us, really. Fourth and last observation, the appearance everywhere in Europe of social movements of new kind.
We are not solely facing traditional social demands, but we have entered into the deeper waters of societal contest. Everywhere in Europe, we can hear a growing defiance towards institutions and, on a larger scale, social and economic models themselves. Different movements, of course, but a common and fundamental need, looking for meaning. Now what is expected from private companies, I should say, what is required from private companies is that they have to fully and clearly align their core business with the creation of positive impacts for the society. Hiring and paying taxes locally are, of course, appreciated. Deploying a committed and ambitious social responsibility policy is a clear positive point, too. Far beyond that, companies' reputations will depend from now on their capacity to define their core business model on the basis of recognized usefulness.
These new expectations, these new requirements stemming from our society are once again an opportunity for us. To think otherwise would mean forgetting the magical potion, which transformed us from a smattering of small local and rural banks into one of the top banks in the world. That potion was made of two ingredients that, these days, sound so modern, usefulness and universality. Let me give you few examples of societal transformation Crédit Agricole has decided to accompany in a smart way. Giving access to financing solutions for outcast farmers more than one century ago. Bringing banking solutions to all households for the secluded and peripheral France of the 1960s. More recently, in the 1980s, facilitating home ownerships far before mortgage loans became the norm.
Today, democratizing a complete wealth overview for every individual customer, starting from the first euro onwards to help each customer navigate through an uncertain future. I know it may sound immodest, but simply we are sincere when we say that we are better equipped than most to face and adapt to new social requirements in terms of societal meaning, in terms of raison d'être, in terms of usefulness. This is why we decided that we would not only launch a new plan, but also reaffirm and re-express on a deeper level our raison d'être as well as our group project. Our raison d'être reasserts our willingness to be a real trusted partner for our customers. Our usefulness is quite concretely, much more concretely than you probably think, to advise them with transparency, with loyalty, and with pedagogy.
Our universality means, and we wish to spell it out in black and white, that we serve each and everyone from the lowest income households to the wealthiest, from local small businesses to large multinational companies. Our very simple, but absolutely not banal motto will be working every day in the interest of our customers and of society. This group project has been expressed in three pillars. The customer project itself, the human-centric project, which addresses the growing responsibilities we want to empower our teams with, and the societal project, which clearly states how we commit ourselves for the environment in the broadest meaning of the word. Three viewpoints for a single project, working every day in the interest of our customers and of society. Let us be clear, truly working in the interest of one's customer is a full strategic project.
It is a true defining choice. Choices are really to be made. Just a very concrete example. As we contemplate to do that using data and artificial intelligence to reduce the complexity and allow each customer to fully comprehend the variety of available choices, and then to give them back their capacity to exercise their free will when they decide on their own future. This is entirely different from the use of data and artificial intelligence to aim and shoot prospects with algorithm, simply assuming people on similarities observed in their past behaviors. Working in the interest of customers does not only mean complying with the regulation, it has really become a strategic investment. Our customer project obviously focuses on excellence in customer relations with 3 types of ambitions. First ambition, we want to become the favorite bank of individuals, of entrepreneurs, and of corporates. No more and no less.
The major announcement is that from now on, we will implement a group wide setup to the highest levels to manage this ambition for excellence. We want to become number 1 on the Net Promoter Score indicator, and I can tell you that this indicator is now included in the calculation of top executives' remuneration. We will implement a new organization to target and address pain points, customer champions, process managers. In brief, a complete setup. Second type of ambition, we want to be the best-in-class digital bank. Not only by offering digital products with a seamless user experience, it is no longer enough. We also want to streamline our pricing to make them clearer and more transparent. In addition, we are intensively working on our digital acquisitions via social networks and major e-commerce marketplaces.
Our target by the end of the plan is to enhance the rate of our customers using our digital apps by 20 points. This ambition goes with a strong ambition to be a leading player in the animation of innovative ecosystems. We plan on opening 17 new Village by CA in France and Italy, which will bring the total number to 46. Third type of ambition, offer a wide range of banking and extra-banking services. New offers and new service around cars, around health, around data management for our customer. We will create service platforms operated with our in-house solutions and non-banking partners. We will launch, for example, Je suis entrepreneur and Mon association this year. Mon premier emploi and Mon logement will start in 2020.
The point, probably the most important to highlight today, is that this ambitious customer project implies an ambitious human-centric project and absolutely not a defensive one. The issue of a modern banking distribution can't be reduced, of course, to a matter of reducing staff or closing branches. On the contrary, we need a very ambitious human-centric project to speed up the success of our digital strategy, this is, in fact, the way it works. Let me explain that. An increasingly digitalized society means an increasingly processed society with predefined and pre-coded rules and decisions, entirely blind to the specificity of each individual situation.
In a world where technology makes processes simpler but also makes decisions more and more standardized, offering customers a direct access to empowered human teams, able to show discernment and able to decide responsibly, is in fact a prerequisite for the successful digitalization of our customer practices. The true digital revolution is in reality the human revolution, with teams who, after decades of increasing automation, will have to express their strongest value added, an accessible, ultimate responsibility. Because for each of our customers, neither software nor robots will be responsible as a last resort. More concretely, you can see on this slide that we shall make many concrete decisions on this matter. At the end of the day, just an example, we want 80% of decisions taken locally within our retail banking networks.
We shall have really succeeded if at the end of this plan, Crédit Agricole really becomes the best company to work for in financial services in France and in the top five in Europe. To be frank, when I read that, I am wondering if we have been ambitious enough on this point. Perhaps we should have said top one in Europe and not simply top five. This will be probably for the next plan. Finally, last of our three pillars, our societal project. It includes actions in favor of inclusion and social impact, as well as commitments towards all major environmental causes. A matter that we shall name for simplicity, green finance.
As the largest cooperative bank in the world, I do recall this point, the largest cooperative bank in the world, we have always acted as part of our identity for a more inclusive development, a development that benefits to all. First, by systematically providing entry-level offers accessible for all customers. Following Eko, within regional banks, and LCL Essentiel for day-to-day banking, we will extend this kind of services to the rest of our offer range, including, of course, insurance products. We will also continue acting for the prevention and reduction of over-indebtedness. We will increase our support to the development of social impact businesses. Amundi will dedicate EUR 500 million to the financing of social and solidarity companies by 2021, and CACEIS, which is already a world leader in green bond arrangements, will strengthen its leadership on social bonds.
To sum up, Crédit Agricole will be more than ever faithful to its roots. Regarding green finance, this is exactly the kind of new great challenge for our societies for which Crédit Agricole can be once again decisive. As a matter of fact, we have already been pioneer on this matter, and we are already a world leader in this regard. That the key message of this plan is that green finance can no longer be considered as an adjacent activity. From now on, it is clearly a core business. We fully embrace the conviction of the climate emergency, and we will make green finance one of the key growth drivers of this new plan with different crucial decisions. First, we define a global climate strategy applicable in all group entities and in line with the Paris Agreement. Its implementation will be certified.
We commit to reinforce our contribution to the financing of energy transition by financing one in three renewable energy projects and doubling the size of our green loan portfolio by 2022. We promote two clean and responsible investment strategies. Amundi will apply its ESG policy to all its funds by 2021. Amundi will also double its assets invested in green portfolios for institutional clients and triple its asset for individual customers. Crédit Agricole Assurances will take into account ESG criteria for every new investment. Lastly, we have decided to take immediate new measures concerning the industry responsible for the largest share of greenhouse gas emissions and for coal, too, as it is written very precisely in the slide. Well, it is high time for me to leave the floor to another speaker to deepen several important points.
My takeaway message is this one. Thanks to our prudent and pragmatic strategy, we succeeded to reach the different targets we had set in 2016, and this as soon as 2018. No glass ceiling. Therefore, we accelerate and we amplify. How can we do that? Thanks to this ambitious group project. We want to be the favorite bank for each segment of customers. We want to be the best company to work for in financial services and a recognized leader of responsible financing. Nothing more, nothing less. I am aware that this kind of presentation can be trialed as non-spectacular, but this matter is the real life. This matter is the core basis on which you must be the best if you want to deserve sustainable and profitable development. On this point, I hope I convinced you this morning that we are more than ever very ambitious.
Thank you so much for listening to me. Now, I shall leave the floor to Xavier, who will present you with three priority action levers, growth on all our markets, revenue synergies all across the group, and technological transformation for greater efficiency. From now on, presentation will be in correct and fluent English. Thank you so much. Xavier, I give you the floor.
Thank you very much, Philippe. Even though I wonder whether I should thank you for your last remark, which is raising the bar. In any case, I will try to do my best. Good morning to all of you. In order to deliver the group project Philippe has just outlined, we will activate basically three levers. First, as Philippe said, we will grow our client base with the objective of being number one in customer conquest in all our markets. Second, we will continue to develop synergies up to EUR 10 billion at the end of the medium-term plan, in line with what we did during the previous medium-term plan. Third, we will invest massively, more than EUR 15 billion in technology in order to improve our efficiency and time to market. Let's briefly develop these three ideas. First, on growth.
I will try to give you some elements about the key segments of clientele in which we want to make progress. Individuals, small businesses, SMEs, large corporates, financial institutions. I will also try to make a brief focus on two transversal areas, payments and international strategy. As far as individuals are concerned, we start from a very good situation. We have a 35% penetration rate, and in 2018, we were number one in conquest in France. Our objective is very much to stay at this level of performance and to be, on the whole duration of the next plan, number one in conquest again. Which means having, at the end of this medium-term plan, 1 million additional customers in France and Italy. How to deliver that? Well, obviously, the mobilization of the retail networks will be key, but also the improvement of digital offers mentioned by Philippe.
Lastly, the fact that we will develop new ways to approach clients, like the platforms Philippe has mentioned, which have the characteristics of marrying financial services offers and non-financial services. We do not only want to conquer clients; we want to intensify the relationship we have with them. In this regard, we will pursue our efforts to equip our clients with housing loans. You know that's very important for the loyalty of the clients, at least in the French market. We have the objective for regional banks to reach 26% of penetration rate on this domain. Second, we will continue our well-known strategy of equipping our client with insurance products. I won't detail.
We have a lot of ambitions in all this area, and we will make a lot of progress, but I want to stress the fact that in particular for P&C, we forecast quite a significant increase our penetration rate by five points on LCL and regional banks network during the duration of the plan. Lastly, we have also an innovative approach on savings and wealth management. We call that Trajectoire Patrimoine. The idea is to have interviews of our clients, at least patrimonial clients, and to have a discussion with them to assess with them what is their wealth, what are their needs, what are their risk appetites. After that, to let them choose what are the products they want to select. That's very much in line with the customer project Philippe presented to you.
We think also that this method is key in order to push new offers, innovative offers. For example, we are convinced that through this mean, we will reach 500,000 real estate transaction by the end of this medium-term plan on an annual basis. These interviews, we forecast to have 5 million of them each year at the end of the medium-term plan. On small businesses now. On small businesses, well, the story is pretty the same. High penetration rate, number one in conquest in France in 2018, I would say that the recipe to gain more clients are in line with the one I've just described. Improved digital offer, shorter time response to the request of these clients, platforms notably for creation of firms. I would like here to insist on the fact that we will try also to strengthen our relationship with specific clientele.
Let's take, for example, farmers, which is, as you know, one of the historical strengths of Crédit Agricole Group. We think that customers which are important to us, close to our heart for a variety of reasons, and there is no reason to abandon them. Rather, we want to improve our situation vis-à-vis these categories of people. We will strengthen and develop a service platform, which is called Blank. We will support young farmers to set up their activities. We will create an energy transition fund, and so on and so forth. We have also high ambitions on independent professionals, and here we can count on LCL, which has, in particular, a very strong relationship with healthcare professional. Again, the objective will be during the next medium-term plan for all these categories to be number one in conquest. On SMEs and mid-caps.
Again, the story is that we start from a high point. 1 out of 3 of SMEs in France are client of regional banks. 1 out of 2 mid-caps are clients of LCL. Here, the key objective is rather principalization. What do we mean? We want to be the preferred banking partners to those SMEs and mid-caps. We want them to consider us as a strategic partner. We want, on this indicator, to have the fastest growth in France. How do we deliver that? Obviously, again, a variety of means, but I would like to insist on two dimension. The first one is that we will try to help those companies to internationalize their business. That's a key preoccupation for most of them, and we will provide new tools in terms of cash management and trade activities.
We have recently set up, for example, for SMEs through the regional banks network, a club which is called Trade Club in order to help their internationalization. Second, that's more innovative. We will try to develop comprehensive solution for all the social benefits companies can offer to their employees. Maybe I need to explain that because it could sound very French. Sorry for that. In the framework of the reform of Social Security, the government is pushing through regulatory measures, but also through tax relief, the companies to grant new benefits to their employees. We think it's a unique opportunity for us. A unique opportunity because we have a strong relationship with this network of companies, and also because we have Crédit Agricole Assurances and we have Amundi.
We are therefore able to offer comprehensive solution marrying savings schemes, health complementary insurance, retirement insurance, death and disability, and to be the partner of those companies for managing the social benefits of their employees. We think that it's a way to strengthen the relation with them. We are the only bank, I think, able to do that. By the same token, we will be the first bank by the end of 2020 to launch a PNC offer for SMEs and corporates. I would try to summarize this idea by saying that we have succeeded in bancassurance for individuals. We are now launching bancassurance for corporates and for SMEs. I am sure that again, we will succeed. On large corporate now. I have to say a word about CIB.
You know that we have here CIB, which is low risk, which is customer-oriented, which is adjoined thanks to its originate-to-distribute strategy. Basically, the message is that we want to prolong this trend. We won't change our strategy as far as CIB is concerned. Rather, we want to strengthen the relation CIB has with its client. Here again, two ideas very similar to the one I've just presented, developing the relationship on a day-to-day basis with large corporate, thanks to the development of new offers in cash management and trade finance. In cash management, as you see here, CIB, the ambition to multiply by 1.7x its revenue on this domain. Basically, the message here is we want to be the day-to-day partner of large corporate.
Also we will develop, also with this category of clients, the offers on savings and insurance for employees I've just presented. Another issue on which progresses will be possible and will be reached, is obviously in enhancing our relationship with financial institutions. We have obviously ambitions for Amundi services with the objective of reaching EUR 50 billion at the end of this medium-term plan. Above all, as you know, we have to set the foundation for a strong development of CACEIS in the years to come. CACEIS is about to buy KAS BANK in the Netherlands, and have struck a very decisive and strategic accord with Santander.
We are convinced that things, thanks to this agreement, but also thanks to the development through organic growth, CACEIS will be among the three biggest players in this domain in Europe at the end of the medium-term plan with three trillion assets under custody. I have outlined through this presentation the different segments. I think now it's time to go for a more horizontal approach, giving you some flavor about ambition concerning payments. On payments, we have here a conviction I want to share with you. We consider that even though this business is a difficult one, with a lot of competition, a lot of regulation, a lot of technological changes, it is key. We want to maintain it in-house. We are a strong leader on payments with a 27% of market share on individuals. Therefore, we can't abandon this segment of activities. Our strategy is therefore twofold.
First, for individual customers, we will continue to deliver the highest standards in products and innovation. We will launch the different X Pay, starting with Apple Pay at the end of this year. We will develop the biometric card, we will develop instant payment, and so on and so forth. The idea is that we have to, again, be the best also in this domain if we want to preserve our relationship with our customers. For merchant and corporate, we will offer them state-of-the-art payment services. In particular, for example, omni-channel offers, and thanks to the partnership we have with Wirecard, we will offer them a Pan-European solution. It is again key to gain market shares and to preserve our relationship with those merchants. All in all, in order to develop payments and to keep the pace in innovation, we will invest EUR 450 million in this area.
I have mentioned, talking about merchants, the need to accompany our customers when they want to go abroad, and that leads directly to another topic which is important, which is our international strategy. Here I can be quite brief because Philippe outlined the key elements of our position, but I want to restate very clearly that Europe is and will remain our priority. We have a strong universal bank in France and Italy. We are also developing our universal bank in Poland. On all the other countries of Europe, we will rely on the different business lines, obviously working together to develop their activity. We put a specific stress on Germany as we consider this country as very important and potentially promising for our businesses.
Apart from Europe, our efforts will concentrate on Asia, which is a region in which we have an historical presence, and in which some business lines of Crédit Agricole, notably CACEIS and Amundi, have a strong presence and are developing quite fast. We consider that we can, again, develop more in these countries, and we have there a recognized expertise, which will be very useful for these fast-growing countries with also a high level of savings. The point on which I want to insist right now, it's rather the way to develop. Here is the originality of the approach we are following. Obviously, priority to organic growth, but also to partnership. As mentioned by Philippe, and as you can see on this slide, I won't comment in detail. In the recent past, we have struck different partnerships which have been extremely successful.
We will continue exactly on the same path as we are convinced that it's the best way to minimizing risk, to be quite economical in terms of cost of capital, and to take advantage of the strengths of business. We are convinced that the good strategy is consolidation through business lines. In all these initiatives, I have outlined the strong relationship built between the retail banks and the different businesses. That leads to the second levels I will evoke briefly, which are our ambitions in terms of revenue synergy. I think you should look at this slide, which is illustrative of this strategy. Basically, it shows that in almost all the business lines, apart from asset management, the market share is lower than the one we have in France on retail.
That means by just conquering our home clients for insurance, for consumer credit, for leasing, et cetera, we can easily gain market share, we can easily gain revenue, and this conquest is not expensive, it's not risky. We want to develop that, and it is key for this current P&T, as it was for the previous one. You can see that we have high ambition to reach EUR 10 billion of synergies on revenue synergies, and that represent an increase of EUR 1.3 billion. A word before that. The way to deliver that is obviously to mobilize fully, insurance first. I won't describe in detail because I've evoked repeatedly the role of insurance, but it will be a key driver of the improvement of revenue synergies, but also Crédit Agricole Consumer Finance and leasing. Crédit Agricole Consumer Finance, maybe one fact.
We will have, in the next months, six new regional banks, well, six regional banks joining CSF, which have not yet joined, which means that by the same token, we will increase the synergies in this area. The same for leasing. We are developing Green Lease, which is leasing through the networks of the regional banks, and we are convinced it will increase the synergy. 80% of the synergies will come from SFS and from insurance. A good example of the synergies is obviously Italy. Recently, as you remember, we have bought Pioneer, therefore, we became number three in asset management in Italy. We have bought three small banks. We have also bought Banca Leonardo, which is now integrated into Indosuez, and we have launched plans to strengthen the relationship with all our business lines in Italy, in particular, the relationship between Cassa Italia and CA-GIP.
We are convinced that it will bear fruit. These are the EUR 1 billion synergy we forecast for Italy during the course of this medium-term plan. In order to be able to deliver those synergies, obviously, we need IT system which are fully interoperable, which are flexible, and that lead to the evolution of our IT system. We have to be able to make the IT system of the different business line dialogue in a seamless way. In order to do that, we will invest massively on technology. We will invest EUR 15 billion, out of which 40% are built, which represent an increase of more than 10% compared to the previous medium-term plan. That is quite impressive. It needs to be explained what are the objective of those investments.
First of all, we will try to move towards a data-centric architecture of our IT, because we think it's essential to develop API, the interfaces, as you know, that allows different apps to communicate quickly. It is very important in the prospect of digitization of our offers. It is important to increase efficiency to lower the cost of future development. We will go this route. The second element on which we will invest massively are our people. We will train 100% of the IT people to new technologies, and we will make sure to maintain a fair equilibrium between external and internal resources and to keep strategic IT skills in-house. As a result, we will hire more than 2,000 people during the course of this medium-term plan in order that we can rely on internal resources to manage and transform our IT system.
We will also invest in applied technology researches capacity, like cybersecurity or artificial intelligence. You see that these investments are quite heavy. Again, I repeat, more than EUR 15 billion, but they are also, to a certain extent, profitable. We consider that all in all, this IT investment will help us save EUR 300 million on the recurring base at the end of the MTP. To give a concrete example, for example, the creation of CA-GIP, which is our production house we have set at the beginning of this year, will allow us to reduce the cost by 2023, at around EUR 185 million. That's only one part of the different techniques we will apply in order to reduce cost. They are listed here. I won't enter into all the details.
You see that both automation, streamlining of the processes, simplification of our legal architecture, and also improvement in the payment system will be concerned, but more fundamentally, we'll put under stress the different business lines in order to be sure that they all converge towards this objective of reducing the cost-income ratio by two percentage points and to reach the level below 60%. That is very much at the heart of the financial ambition we have for this group, and which will now be presented by Jérôme. Thank you for your patience.
Good morning to every one of you. I, too, would like to start by thanking all of you to be here today, this morning. It's now my pleasure to continue the presentation and to address, I would say, more financial elements of this new Medium-Term Plan. I'll try to be concise so as to leave you enough time to ask your questions at the end of the presentation. Let me start now with a first view on what we forecast in terms of economic environment for the coming three years. As you can see, we forecast neither a recession or a shock, nor a strong improvement of the economic outlook in the coming years. We foresee an inflation that is going to remain subdued, and thus we foresee a monetary policy that will normalize only very slowly, only modestly, in the next three years.
In this context, we think the creditworthiness of our counterparts will remain good. Nevertheless, we have chosen to embed in our plan a very conservative, I would say, hypothesis in terms of cost of risk, as you can see on the right-hand side of the slide. Lastly, we, of course, tried to integrate in our plan all the regulatory and prudential evolutions that we know will happen in the coming years. Let me start now with, I would say, more financial elements, starting with the group level. At group level, I think that two key features of the group are very important, and we've been able to monitor those key features, in the last Medium-Term Plan. It's the solvency and the liquidity.
In terms of solvency, the group has one of the best capitalized position amongst SIFIs in Europe, as you can see, and even more important, it's the systemic bank which offer the highest distance between its capital situation and its Pillar 2 requirement. In terms of liquidity, we've been steadily building buffers and reserves, and we are able to provide a very strong capacity to reach and exceed all regulatory requirements. This strength have helped us, clearly, to obtain an improvement of our rating with all the three major rating agencies in the last few years. As you can see, we are A-plus or equivalent with all the three rating agencies, and this has a very positive outcome, which is a further reduction of our refinancing costs.
This is why we think it's absolutely key going forward to continue to reinforce those strength, especially given all the uncertainties of the environment Philippe mentioned earlier. This is why the first targets that we have set for our medium-term plans are group targets, and they are summarized on this page. We intend to increase further the solvency of the group with a CET1 ratio, which should exceed and then remain above 16%, despite any regulatory strengthening, with a MREL ratio, which is the European version of the TLAC that you know, which should go even further up, reaching a target between 24% and 25% by the end of the medium-term plan without taking into account any element of senior debt. Lastly, we want to keep the surplus of stable funds above EUR 100 billion. Let me go now to the figures regarding CASA.
Philippe already unveiled the net income target, EUR 5 billion by 2022, and I'll try to explain a little bit how we intend to reach this target. Let's start with the revenues. This revenue evolution, which is shown on this slide, is actually the result of all the actions and all the programs that have been developed by Xavier when he presented the first two levers we intend to use in the coming years. As you can see, we intend globally to target a revenue growth, which should be around 2.5% a year for the next three years. We think that in the environment I was describing, with nominal GDP growing around 3% a year, 1.5% of economic growth, 1.5% of inflation. We think that 2.5% of income growth or revenue growth is quite reasonable.
As you can see, this objective will be secured by all the revenue synergies we intend to continue to intensify going forward. Actually, 20%, at least, of this revenue growth is going to come from further revenue synergies internally. Of course, this revenue growth is also going to be underpinned by all the strong positions that have been built in all our business lines. It's going to be the case in asset gathering, of course, with Amundi and the insurance businesses. This is an area in which we are going to continue to target a very strong commercial momentum. We think that 2.5% revenue growth in average, despite the rate environment and the pressure it puts on margins, is feasible. In the retail banking activities and specialized financial services, we have integrated, in our hypothesis, the prospect of further pressure on margins.
We think we will be able to compensate and more than compensate with volume growth and fees and commissions increase. Lastly, in the large customers division, considering all the strengths of CACIB and all the project of additional partnership of CACEIS, we have set a target of 3% revenue growth. This is globally how we intend to reach this 2.5%+ target in terms of revenue growth. In this context, the breakdown of the revenues between the different business lines is not going to be strongly modified. Actually, it's going to remain quite balanced between the different business divisions. You can see that we foresee a reduction in our revenues, of the revenues coming from net interest, and a further increase of the proportion of our revenues coming from fees and commission.
Lastly, the geographical breakdown of the revenues is also going to evolve a little bit with a stronger part coming from Europe, Italy, and the rest of Europe. Let me go now to the cost base. I think the key point was already expressed by Xavier. We intend to continue to reduce a little bit, the cost-income ratio. We managed to reduce it by 6 percentage points in the last MTP. We intend to improve it by a further 2, a little bit more than 2 percentage points, in the coming 3 years. We have set, of course, specific cost-income ratio targets for each business line according to its capital consumption, its RWA consumption, and also its, I would say, average cost of risk across the cycle.
The idea clearly for each business line is to be able to reach this cost-income ratio, I would say, despite some possible volatility on the evolution of revenues. It means that depending on the evolution of the revenues, we will be able to deploy all the cost-cutting programs in order to reach business line by business line, these cost-income targets. On a global basis, the idea is that the cost base of CASA should raise by no more than 2 percentage points, 2% a year, less than 2% a year. Globally, as Xavier described it, we need to invest in several areas, IT, but not only IT. We need to reduce the cost-income ratio by a further 2 percentage points. This has driven the target in terms of cost-based evolution.
Considering the natural inflation that we are going to face on our HR costs, on all our running costs, I would say, considering also the evolution of the Single Resolution Fund contributions that we forecast increasing in the coming years, considering also the scope effects that we are going to encounter, and considering the investments that we deem necessary, this is implying a further and significant cost-cutting effort on our running costs. This is an additional EUR 600 million of cost cutting that we are going to pursue in the coming years, meaning that we are going to continue to deploy our different programs in terms of organization optimization, in terms of robotization deployment, in terms of purchasing programs improvement, and so on and so forth.
At the end of the medium-term plan, what you can see is that the IT proportion of our expenses is going to exceed a little bit 20% when it's below 20% as of now. Clearly, this illustrates also the strong improvement, the strong efforts that we intend to make in order to improve our IT system and to really deploy all the necessary programs to implement the action plans that were described by Xavier. Globally, this illustrates the way the net income will evolve at CASA level between 2018 and 2022. Starting point, EUR 4.4 billion in 2018. Final target, EUR 5 billion in 2022. 2.5% annual growth of the revenues. The efforts on the cost-income ratio with a cost base growing by less than 2% a year. Cost of risk, it's a key element of security, of solidity of our financial trajectory.
We make the assumption, it's not a forecast. It's not based on any elements that we foresee now, but we make the very conservative assumption that we should reach our net income target, even if the cost of risk was to increase from 23 basis points last year up to 40 basis points in 2022. It's an increase by more than 70%, if I put it in EUR, it's an increase of the cost of risk by more than EUR 700 million. After tax, it's a hit on the net income of around EUR 500 million. We have the equity accounted entities contribution.
Strong development, which is coming from the very good level of activity, both for Amundi's joint ventures and for CACF car financing partnerships. The tax burden is going to continue to increase, thanks actually to the improvement of the profit before tax, and despite the fact that we've taken into account the reduction in the French corporate tax rate going forward. Lastly, non-controlling interest deduction is also going to increase a little bit, due to the good development of all the activities in which we have minority partners. This is the very, I would say, virtuous way in which we intend to grow the net income of CASA from the present EUR 4.4 billion to more than EUR 5 billion next year. All the business lines are going to contribute. As you can see, the green areas are the improvements that we foresee for each business line.
The gray area is what is dented by the increase in the cost of risk that we foresee, or I should say, that we embedded in our hypothesis without foreseeing it. Again, this is going to keep a very balanced, diversified, and thus resilient business model for Crédit Agricole S.A. All in all, the shareholder, I would say, devices that we propose are summarized on this page. Return on tangible equity above 11%, Philippe mentioned it already. Dividends that we intend to pay on the period, EUR 8 billion, and tangible value per share at end 2022, which would be growing by 20% to reach EUR 14.5 per share. Let's go now to capital. Let's start with what Philippe already mentioned, switching off.
You all know that we have always considered the switch as a very good mechanism in order to provide temporarily, some solvency from the regional banks to Crédit Agricole S.A., but that we've always considered that progressively unwinding the switch mechanism could be a good way of improving the earnings per share at no cost for our shareholders. This is why we have taken the decision to unwind progressively, to start the unwinding of the switch mechanism, to start it as soon as 2020, and to do half of the way in the course of the present medium-term plan. Integrating this decision, this is the way our CET1 ratio is going to evolve between the 11.5% level that we have reached by the end of last year to the target that we are going to reiterate at 11%.
Let me start by just a few words on this target. This is a key feature of CASA as a listed vehicle to be able to operate at a solvency level of 11%, thanks to its inclusion in the more global and better capitalized group, Crédit Agricole. I've told you that for the group, the target of solvency is going to further increase at and above 16%. In this context, obviously, we can and we will continue to operate CASA with a target of 11%. Let's start at the 11.5% that we have reached at the end of last year. The results that we are going to make on the course of the Medium-Term Plan are going to represent 540 basis points of capital, out of which we are going to distribute 300 basis points. It's the 50% cash payout policy, plus the payment of the 81 coupons.
TRIM and other regulatory strengthening that we know for sure are going to happen, are going to cost 30 basis points. Of course, the partial dismantling of the switch mechanism is going to also dent our solvency by 60 basis points in the course of the Medium-Term Plan. This leaves us by the end of 2022 with 13% of solvency. A 200 basis points margin with the target of 11%. We estimate that the transition to Basel IV in 2022, if it indeed takes place that year, which is not sure as of now, would cost us 60 basis points of capital. This leaves us 140 basis points for the organic growth of RWA of our business line, and for any other volatility element that can be taken into account in our solvency trajectory.
It means that clearly, this trajectory is completely compatible with all the regulatory strengthening that we know for sure or that may happen, and with the continuation of our cash dividend policy. Let me end with this slide, which completely summarizes our commitments for this Medium-Term Plan. Net income above EUR 5 billion, earnings per share above EUR 1.6, and return on tangible equity above 11%, despite, again, the very prudent assumption that we make on cost of risk. Cost income ratio below 60%. This is going to contribute significantly to the improvement of the profitability. CET1 at 11%, no need to be above. Payout ratio continuing to be at 50%. Thank you very much, and I think that I will leave the floor now to Philippe to conclude the presentation.
Thank you so much, Jérôme, for this presentation. Before leaving you the floor, let me conclude by giving you a very important point about our rationale, about our strategic positioning. This is, according to us, very important. When you look at us, clearly, Crédit Agricole is already one of the largest bank in the world. That means absolutely no concern for us about critical size. Our model is the model of universal bank. That means that we already master all the different business lines, all the different knowhow we need for a sustainable and global relationship with each of our customer. Absolutely no concern about the range of our activities. Third point, as we are the biggest customer base in Europe, Crédit Agricole is already a natural consolidator through business lines. That means absolutely no concern.
We proved that about our ability to gather with us different kind of commercial partners. We are therefore in this particularly excellent position with no constraint to make any strategic move, and at the same time, powerful and solid enough to seize any kind of opportunity. I do think there are not so many competitors in this kind of strategic positioning. Well, we can now use as much time as you like for any question you may have. Just some rules. My proposal is that we shall take only one question at a time, but of course, you will be able to come back to microphone as often as you wish.
Probably, we could be helped by some members of the executive committees that who are very excited in this prospect for, I would like that this is an excellent team, and we are very proud to work together in Crédit Agricole. Now, the floor is yours. Chris.
Good morning, everyone. Three questions, please. No, just kidding. Just one question.
Can you start by the first one?
So-
Let's stick to this one
In your assumptions, you have 100 basis points of in interest rate increase in the course of the plan. My question would be, what is the risk to your targets if that doesn't appear? If it doesn't, what can you do to compensate for that lost revenue? What's the most important target here that you're committing to, the net profit, the revenue, or the cost? Thanks.
Jean.
It's obviously a very important question. First, I think that the real assumption in this medium-term plan is more the trend than the actual level of rates by the end of 2022. This is the key point, again, I repeat what I just said. We think that the normalization of the monetary policy is going to take time. It's going to be long. We haven't made very aggressive assumptions going this route. If the actual rate by the end of 2022 is not at the level we have forecast now, it's different, if we are talking about long-term rates and short-term rates. As far as long-term rates are concerned, I think that two businesses can be impacted.
The retail banking activities, of course, because, in the portfolio of home loans, it's important to know exactly when the rollover effect, I would say, would start to increase the yield on the portfolio. It's not the case as of now. We expect it to be the case somewhere in the medium-term plan. Obviously, if rates continue to decrease, it will not take place. Clearly, there is a slight risk in this area, but you may have seen that we have already taken into account the fact that net interest income is going to decrease in proportion of all our revenues, fees and commissions are going to increase. If it comes to short-term rates, the situation is a little bit different, because short-term rates are important also for retail banking activities, but for custody activities.
In those businesses, especially in the custody business, actually, we managed in the last three, four years to progressively pass to the customers the negative rates that we are standing. Of course, the assumption, if short-term rates start to increase, is that we are going to pass it also to the customers. The last point, which is, I think, important, is that we cannot have, at the same time, lower interest rates than the one we forecast and a higher cost of risk than the one we had today. It's one or the other. It means that if we make a little bit less revenues because of interest rates, it will more than probably be compensated by less cost of risk.
Which is what we have seen during the past medium-term plan, in which also we were not totally accurate on the level of interest rates, but we were quite generous about cost of risk, which realized to be far lower than the amount we expected. We can take another person, then we shall come back to you. I remember. Please.
It's Guillaume Tiberghien, Exane. The question relates to the RWA budget, because you have EUR 320 now. If I add Basel IV and TRIM, that's about EUR 350, and half of switch would be EUR 367, and your end of 2022 budget is EUR 360. That would imply negative organic growth. I don't see that on the slides.
You start with the figures at end Q1 this year. When we presented the results at end Q1 this year, I had the opportunity to explain why we had a peak in the level of RWA. I think that you should look at the evolution between end 2018 and end 2022. The figure at end 2018 was EUR 306 billion, if I remember correctly. We are targeting EUR 360 by the end of 2022. This is enough to cover all the elements that you've mentioned, switch and winding, TRIM, and Basel IV, plus organic evolution of the business lines, minus, of course, all the optimizations that we are permanently trying to generate everywhere. We are permanently. It's exactly the same, I would say discipline as for the costs.
We permanently try to optimize the RWA calculation, this is going to continue to represent a significant part of our, I would say, RWA allocation capacity. It's at the same time the capacity of reducing the RWA density by some optimization. Last point, we are going to continue to stick to this originate to distribute model that we've developed in the last three, four years, five years. As far as CACIB is concerned, for example, five years ago, I think the primary distribution rates of all the assets that they generate was in the region of 25%. It's now above 40%.
You could get the phone. Sorry.
Sorry. Just to clarify. It means net growth plus optimization is only just EUR 10 billion?
Yes.
Okay. Thank you.
You can get the microphone on the left side, I think. No. Okay. You can. You can.
Yes. Hi, Tarik El Mejjad from Bank of America Merrill Lynch. I have one follow-up and one question. Is it allowed? Just, Jérôme, this was very helpful answer on the question on assumption on interest rates, especially on the short rate. I understand you've been conservative on the cost of risk. Maybe we can judge on that and just to know, and you can provide us sensitivity on rates, let's say 50 basis points, low rates, what would that mean in terms of your revenue growth? Some other banks gave that. It's very helpful. We can see how costs could offset that. My question is on the capital, and I didn't see the OCI bit into the capital planning. Is it within this other, the business development other?
The Basel IV 60 basis points, is that fully loaded with all the phasing of output floor, or is it only back in 2022, and then we have to add later on the rest?
No.
May we have the capital chart on the screen? Is it possible to come back on the capital chart?
Let's start with your last question because at the end of the day, you asked three.
It's possible.
The OCI reserves are in the volatility elements I was mentioning, so in the right-hand part of the chart. I remind you that by the end of 2018, the remaining OCI component of the capital was 40 basis points. It can stay above zero. It can be negative. When it's negative, it's a potential of pool to par, which is going to create additional solvency going forward. It's an element, and we are going to integrate that in the, I would say, day-to-day steering of the solvency as a volatility element, because it's really a volatility element. I've lost your previous question.
Basel IV.
Basel IV. Yes. Basel IV, of course, it's only Basel IV Season 1, which is the input floors and Basel IV Season 2, which is going to be the output floor, is a completely undetermined question and a very late question because this is going to take place only or to really bite if it takes place, only in 2026, 2027, which is the last phasing in date for this output floor. Clearly, we haven't taken that into account. Going back to the rates situation and the sensitivity analysis that you were asking for, it's very difficult actually, because it doesn't depend only on a point in time level of rates. It also depends on the evolution, on the trajectory of rates during the coming years. It's not a very easy question to answer.
What I can tell you is that, and I've always been clear on that, contrary to some of our competitors, we are not relying on increasing rates to improve-
Our revenues. We think that the sensitivity is, at the end of the day, smaller than what many competitors say.
Thank you.
Other question? As you want. Please.
Flora.
Good morning. Flora from Deutsche Bank. I'd like to ask you a question on the insurance. I think it's in the appendix, but you have a revenue growth target of 3% per year, which doesn't sound like it's very much considering what you have achieved in the past, everything you just said regarding the growth potential outside France, the synergies. Did you assume in there that you would further accrue the PPE provisioning?
We included in the insurance forecast, this interest rate situation we are just talking about. We integrated in the figures for the insurance business, the fact that the portfolio of assets of the life insurance companies, is going to yield less in the future on average than the yield we had in the last years. This is the main explanation, because otherwise, we continue to target a significant gain of market shares and of penetration rates for our different insurance activities on our customer base. Other question? Please.
Good morning. Pierre Chedeville. Just one question regarding the dividend. You mentioned the payout ratio of 50%. I would have liked to know if you are flexible on these figures, in case of relative stagnation of net income in the beginning of your plan, considering the situation in the rates but also in the global market. My question, to be clear, is that you mentioned the previous plan that your objective was to increase every year the dividend in absolute terms. If we have the hypothesis of a relative stagnant net income, are you open to the idea of slightly increase the payout ratio to 55%, 60%? Thank you.
I would like simply to answer your question for that. We proved in the past that we were flexible, since we are now launching a new medium-term plan, we have to give colors for the future. One of the main message of Crédit Agricole Group is the stability. The stability for you to say that we can be on a continuous trend in terms of growth, commercial point of view, and financial point of view. Each time something special happened within our P&L, we proved we were able, in fact, to be flexible on the real and concrete payout ratio. Probably my financial director could add something about that.
I think I was up to say exactly what Philippe just said.
Fine.
First, we've been flexible in the past. Second, it's a yearly decision that is taken by the board to propose to the general assembly meeting, the level of dividend. Of course, each time the board is making its decision, it's taking into account all the elements of context. No other answer possible. Please. There.
Hello.
Yeah, you can.
Hello. Matthew Clark, Mediobanca. The previous plan had a percentage point kind of buffer in the CET1 walk through for flexibility. This one doesn't. I guess tying into that, over the past plan, you've done a lot of bolt-on M&A deals and some quite large ones. Just putting those together, should we expect less acquisitions and bolt-on acquisitions, going forward in this plan than in the last one? Is this a decisive strategic shift? Related, why did you feel you didn't need that kind of flexibility buffer in this plan?
Would you answer the last.
One and a half questions.
I think that maybe the first thing is that you've seen that in the chart we have presented about the capital evolution. We remain quite, I would say, giving a broad range for growth in RWA, and obviously, there is here a capacity to have some flexibility. You shouldn't understand what we have said here and presented here as not incorporating a certain degree of flexibility in this regard. My second element is that, obviously, again, we will remain flexible either on acquisition and on selling activities, which are not core for us. It's obviously impossible at that point in time to make any assumption on both this movement. In any case, we consider that it's an element of, I would say, financial discipline not to build in, I would say, buffers which would be devoted to specific acquisition.
Finally, I would add that there was one buffer at the end of this medium-term plan, and we are partly using it, and it's not for external acquisition, it's for embossing the switch, which is, to a certain extent, investment on ourselves. I think that's the most secure way to invest. Microphone, please. Microphone.
Thank you. Just to check, by implication, that means the switch or the partial switch repayment takes priority over material M&A. Is that the right way to interpret this and the differences between-
No. I think we are committing to unwind half of the switch. We are saying no more than that. Obviously, as we commit, it supposes that if there are other movements, for example, of acquisition, they will have to be financed another way, and that's clearly a commitment we shall depart with. I don't know how to rephrase it in a more convincing way.
Let me insist on this point. As a matter of fact, I do repeat to you that we have quite a boring policy. I mean, organic growth first, internal synergies, and consolidation through business lines. We proved that each time an opportunity could be there, we were able to decide about these opportunities. It's not useful today to have a priority between the last part of switch and any kind of opportunity we can't know today. Once again, I think that it's hugely better for investors to know the normal trend and the normal business of banks and the ability to be able to look at opportunity if opportunities are there. We proved we are able to do that. Don't hesitate on the fact that we should be able to look at opportunity, either about half of switch, either or any kind of other opportunities.
We can speak about things that are not real today.
Thank you.
Thanks.
Jacques-Henri.
Jacques-Henri Gaulard, Deutsche Bank. Thank you, gentlemen.
Micro, please.
Yeah, it worked.
Follow up on-
Okay
my Mediobanca question, in a way. The bank, as it was during the beginning of the previous plan, doesn't look at all what it was now, okay. You get rid of 25% of the regional banks. You get Pioneer, you have the three Italian banks. In a way, it's almost not a comparable institution. Can we say at the start of this plan that at least the overall perimeter of the company is going to remain a steady state?
I do repeat, as I did that at the very beginning of 2016, it's very simple to answer the question, what will be Crédit Agricole in two or three years? Exactly the same, but safer and more profitable. Simply. Our model is stable, and it works. The universal model is something very special when you look at that. This model means that we have built a sustainable and long-term relationship with each of our customers, so we can't break that. That means that when you look at Crédit Agricole in two, three, or four years, probably, this is our willingness, it will be exactly the same in terms of perimeter, but we shall do so that it could be safer, it could be more profitable, and this is exactly what we launch today as a new plan. Is there a microphone in ends? You can.
Hello. Hi, it's Omar from Barclays.
Just looking at slide 57, you're showing that you're growing fastest-
May we have 57 chart?
57.
57.
Yes. Towards the end of the slide pack, you have, I think, you're adding EUR 300 million in revenues to fixed income. Why is it a good thing for shareholders for you to be growing in the most capital-consumptive part of the institution? Also, why is it credible, given what we're seeing in fixed income with electronification, the dominance of American banks, for you to be adding that much in revenues over the course of the plan? Thank you.
Maybe I'll start the answer, and then probably Jacques is going to be able to complement my answer. As far as capital allocation is concerned, I think we have always said that we want to master all the businesses in the field of financial services. We have designed, several years ago, actually, the type of CIB that we want. CIB is exactly the type of CIB that we want, and we have made the choice that in the different business lines in which we want to be in the CIB space, we need to have the critical size because if you don't have the critical size in those businesses, then it's better not to be there, because otherwise you take the bad risks, and you fight to try and cover your cost base at any cost of risk price.
We are in a situation where we have the critical size in all the businesses in which we are engaged in the CIB space, and all in all, the return on equity that we have in the CIB is above 10% and clearly above our cost of equity, considering, again, the type of CIB that we have. Maybe Jacques, on fixed income, if you have some additional elements to give.
Yeah.
I think that first-
Just, can you speak?
Yeah. Sorry. I think first that the figures compared to 2018 are a bit misleading, because 2018 was definitely a year of very low revenues in fixed income. In a way, the growth between 2018 and 2022 should be measured based on this very low base in 2018. Secondly, I think that the bigger you are in the market, the more you will stick to the overall performance of the market. In the case of fixed income at CACEIS, we're still a reasonable player, which means that if we're able to continue to develop our client base, because our fixed income is only following our clients and giving them the service they're expecting, we still have a growth which is probably bigger than the players who have a huge size in the market, which will more or less stick to the performance of the market.
Last but not least, as Jérôme was mentioning, the return on equity of this investment bank is a pretty solid one and definitely above the cost of capital.
Maybe I'll add something very important on the strategic level, because I hear very often this kind of question, for example, why don't you increase the part of asset management and increase the part of CIB activities since the level of profitability are so different? I have to explain that we are a global bank. We are not a holding conglomerate just optimizing different kind of business lines. For example, he didn't say that, but it's so important. CACEIS is very useful, too, to create links and business and co-business with many other entities of the group, regional banks, LCL, and many other activities. That means that you have to appreciate the global performance of Crédit Agricole S.A. as a share. I do tell you that the most important part of future performance is precisely there.
That means the ability to exploit, to have a better level of performance on the global relationship, market by market, or customer by customer. This is very important, probably we can add, because this is very important, with a 10% level of return on normalized equity, we are proud of our CIB activities. Yes, we are really proud of that.
Maybe one last, I would say, technical answer to your question. We are targeting 3% revenue increase per year at the large customers division, including a positive scope effect coming from CACEIS, where we have these operations with Santander on the one hand and KAS BANK on the other hand, which are going to generate additional revenues, obviously.
Thank you. Other question? There. Sure. Please.
Thank you.
Mic? Okay.
Thank you. I just wanted to follow up on your comments about volume goals, fee goals. It suggests you're taking market share and increasing the customer penetration with your products. What is the key lever to increasing the penetration or market share? Is this general pie growth or is it market share growth as in your product is better, the digital investments are paying off. If you can maybe elaborate and especially for insurance and for cash management, it was mentioned.
I'm not sure I absolutely understood the question. I'm sorry. I can tell you something that is very important. The fact that we always have to gain market shares. This is the real and fine tradition of organic growth. I always repeated that organic growth was not the inability to do external growth, but the challenge to fight competitors. First, you have to prove you can fight competitors before looking at potential external growth. How can we gain market shares as a whole, as we gained them on our different markets for the last two or three years? I do tell you that, of course, you need innovations, you need good products. Let me tell you that this, as a rule, don't create a huge level of differentiation between competitors.
I do tell you that the real strength of a bank as we are, is the quality of the global relationship. I do tell you that something very important, and I have very often this kind of question, how do you do to have this high level of cross-selling? I don't know what mean cross-selling. I just understand what means global selling. It is not because we are organized in different entities, that our main driver to get clients, to get market share, is this global relationship. This is why you always find that for us, internal synergies, that is very special word, means developing the potential of this global relation with our customer. Each time we do that, we gain market share. We gained in terms of penetration on simply banks.
Regional banks, for example, last year gained more than one point, I mean 100 1% point in terms of market share in France. We gain about P&C insurance. What I said at the very beginning of my intervention about the fact that, well, pay attention, there's no glass ceiling above our head is absolutely right. That means when we give means, and mainly when we coordinate the different links between business lines and banks, really it works. I'm not sure I've understood the very beginning of your question, that was probably more precise.
I guess that the question I meant to ask is price one of the key drivers for you to gain market share?
I don't think so.
The price?
Are you offering the lowest of the low rates? Are you offering
Of course, price is very important, we have to explain that to neobank. To get a net income positive result, you want to sell prices. This is another question. Let me explain to you that when we decide to have a complete range of offers from the entry-level, Eko, EUR 2 a month, nothing more. A much more sophisticated offer with high-level cards. Today, the cards that are the most sold are the most sophisticated. The price, the most important, the highest. This means that something is very important. Either you choose to have a fight on this kind of price, at the end of the day, you are dead, or you organize a complete range of solutions from the entry guide to very sophisticated solutions, it works. For the time being, only eight or 10% of our customers open accounts on Eko.
90% of our new customers open something with a higher level of functionalities and a little more expensive. We think that, once again, it's not so easy to explain that, the real battle is about trust, confidence, relationship, with commitment you can take in terms of behavior towards your customers, it works for many, many years. According to me, it is not linked to the different kinds of channels you use for processing.
Maybe if I can complement. For example, on P&C, on insurance, the choice we have made is not to be low cost. We are in the middle of the range of all the prices, which are practiced by our competitors. If we are gaining market shares, it's for two reasons. First, the excellence of the service, and second, the relation of confidence we have with the client. Obviously, when the client is someone, which is not only the client of your P&C, but also the client of your whole bank, you know him and he knows you. The relationship is very much different. That's why, if you look at the recent past, during each year of the past Medium-Term Plan, we have gained market shares on our competitors in P&C insurance. That's why we are quite confident we will do the same.
Not by lowering the price, and that is an important message because it is very important for the profitability of the whole business, but rather by continuing to maintain the excellence of the service. Again, it is not a fight, as Philippe said, in which you try to lower our prices. Obviously, we have to do that for certain segments of clientele, because it is also part of our universality model. We are not convinced that the, I would say, the cost to the bottom will be the recipe for success.
Maybe just a last point, to try to complement the answer. This is precisely why we have set specific and targeted cost-income ratios by business line, because we know that there is competition in France on the different businesses in which we are engaged, and we need to be efficient enough to stand this competition. The idea is not to be a low pricing actor and to capture market shares by decreasing the price. We need to be able to stand the competition, and therefore, we need to have competitive cost-income ratios. This is exactly the approach that we have taken on the different businesses.
Thank you. We come back to you.
Nick Davey from Redburn. Can I ask a question about the timing of cost inflation in the period of the plan? You say less than 2% over the period, we have seen with a lot of other European banks a phase of higher cost growth at the beginning and efficiencies, hopefully, later in the plans. Should we expect that in the case of your plan? If we should, would you tolerate a year or two of negative jaws, or do you hope to deliver positive income and cost jaws through the period?
No, I think that, as Philippe said, this plan is in the continuity of the previous plan, meaning that in terms of cost base, we are going to benefit as soon as this year, next year, from the effects of the different efficiency programs that we've put in place in the last plan. This is exactly designed to finance the new investments that we want to make. Clearly, the idea is that the evolution of the cost base must remain quite regular. The potential negative jaws that we can have on a specific quarter can come not from an evolution of the cost base, but can come from a more volatile level of revenues. It can always happen.
Clearly, the idea is not to create a kind of hockey stick curve in which we have all the costs in the beginning, and hopefully, as you said, we expect some benefits at the end of the period. You, and then.
Aurelia Faure.
Yes.
It works.
Hello. Aurelia Faure from Santander. A question on the corporate center, which was a key topic in the last investor day. Could you give more details on what you are planning to achieve there? In particular, I've seen that the revenues are going to improve. How about costs? I know that your corporate structure, well, prevents some cost reductions, but could anything be done on the corporate center? Thank you.
Well, on the corporate center, you are right in saying that we target an improvement of the revenue line by around, if I remember correctly, around EUR 50 million. It is clearly the combination of a more important improvement of, I would say, the recurring revenue base of the corporate center, which is actually a revenue cost, which is the financial charges that we are facing in order to bear the cost of all the debts that are carried by Crédit Agricole S.A., especially the acquisition debts of the former acquisitions. This is going to continue to improve. In 2018, we have had, and we mentioned it when we talked about Q1 results, we have had some exceptional and positive element of revenues. Of course, with this basis of comparison, the revenue improvement is only EUR 50 million and not more than that because of this base effect.
The underlying performance is improving more than EUR 50 million. When it comes to the bottom line, it is maybe a little bit strange, but we are facing a headwind, which is the reduction in the corporate tax rate in France. The corporate center has a significant tax product, tax gain every year. This tax gain is reducing because of the forecast reduction in the corporate tax rate. This is why, all in all, there is not going to be an improvement, as we forecast it, as of now, of the corporate center. Of course, we will try and optimize as much as possible this, going forward. But the positive effect on the revenue line is going to be offset by the negative effect on the tax line.
As far as the cost base is concerned, of course, all the costs that we bear in the corporate center will benefit from all the cost-cutting programs that we deploy across the board. Please.
Clotilde L'Angevin from UBS. One question on the cost of risk at 40 basis points. You said it's an assumption rather than a forecast.
Is that here to actually guarantee the customer acquisition targets that you have? If you had to actually forecast it, what would it be?
I think that it would be differentiated by business line. First, it's very difficult to forecast the cost of risk in three years' time. Clearly, it's better to make an assumption and a prudent one than a real forecast, effective forecast. On a more shorter horizon, i.e. for this year and next year, what we have in mind is that in retail banking activities, we don't see any significant sign of deterioration. We even see a potential of further improvement in Italian retail banking activities in terms of cost of risk. In consumer finance businesses, we have a certain volatility around a low level, which we have reached, since now, probably one and a half year.
The area in which we may see a certain deterioration, which is only natural, is the CIB, simply for one simple reason, is that on the last four quarters, we have had a write-back of loan losses provisions. We cannot have permanently write-backs and reversals. We are going to go to a more normal level of cost of risk, which is not going to signal a deterioration in the creditworthiness of the counterparts, but simply back to a normal situation, with no more reversal.
Just look back, it's very important on our charts for the last 2 or 3 years. I remember that a very long time ago, I was a graduate in statistics, and if I had to do a prediction forecast for cost of risk, the normal forecast would be really lower because the trends are decreasing continuously on each of our business line, each of our territory. Simply, we say that we shall be able to reach EUR 5 billion, even if with this assumption, the cost of risk could be at 70% higher than today. Of course, we are not able to do this forecast, but we do tell you that the current trend is not this one, and within this assumption of a cost of risk really higher, we could reach EUR 5 billion of net income. That's simply the rationale we give you today.
If behind your question, the idea that the conquest will be at the cost of increased risk we would take in order to conquer new categories of clients, it's not the case. We are not planning to relax our rules and our requests.
Yeah.
Notably, for example, for consumer credit, we will stick to a very cautious and conservative approach. We are in a situation in which there are a lot of uncertainties on growth, uncertainties on rates, but these figures are not forecasting any relaxation in our standards.
Unfortunately, we are seasoned person. This is not the trademark of our development for many years. We don't do this kind of thing within Crédit Agricole. Thank you. Other question?
Sorry, on cost of risk, it's a shorter term question than the long-term plan. Just with regard to the Casino Rallye situation, question number 1 would be, if we had to have provisions on that file, would they be booked in LCL or CIB? Maybe, can you explain more in terms of risk management, when a file is problematic for years and you grant a credit line to a company, would you already take some provision when you grant that credit line? Thank you.
In my mind, as a rule, we never answer this kind of question. That means on a solo case. This is a question of perhaps rules, and we can speak about one case, whatever can be the case. I'm sorry, we don't give any figure, any explanation about that. Even if we had to say in which kind of balance sheet, of course, we perfectly know this topic. Well, because we are banker for many time of many corporates, and we do master this kind of situation. I can simply say that.
I can add something without violating the rule that Philippe just mentioned. IFRS 9 makes it compulsory for us to take provisions every time we grant a credit. It means that every time we grant a credit, we have to take into account, and you know the rules, bucket 1, bucket 2, bucket 3. We have to take into account a certain element in cost of risk.
Hi.
Please.
Thomas Dewa from Goldman Sachs. Short question on Basel IV. I think in the past, when we are transitioning to Basel 2.5 and 3, you had given estimates of RWA inflation, which included some kind of mitigation. My question is, are the 60 basis points including any kind of mitigation, like higher syndication for product finance? Is it a gross estimate? Thank you.
It's a gross estimate. Of course, when a business line is facing a regulatory strengthening of that kind, it will definitely try to optimize somehow its overall RWA consumption. Clearly, the higher the impact of Basel IV, the more important the efforts of optimizing the organic consumption. Please. I'm sorry.
Another question, please. In terms of the 3% revenue growth in large customers, do you take into account already sort of impacts of Basel IV, especially on the large corporates? You assume there will be repricing, you assume it's still lobbying to get collateral on aircraft. What's your thinking there? Because that's tomorrow.
No. We haven't made any specific evaluation of what would be the impact of Basel IV in terms of repricing. It's still a long way from us. It's due in 2022. Actually, more and more, we think it can be delayed a little bit because, as you know, no directive proposal has been issued yet by the European Commission. For anybody who knows a little bit the lengths of the legislative process in Europe, it's difficult to envisage that this can be up and running end of 2021 in order to be applied beginning of 2022.
Thank you.
Please.
Are you willing to give the fully loaded impact, including the output floors of Basel IV? If you're not, is that because you're confident in the discussions around the application of the output floor between the consolidated level and the solo CASA level? Reports suggest that those discussions aren't exactly going the bank's way. I'd be curious on your thoughts on that.
First, I was just saying that Basel IV season one is already a long way from us, 2022 at best or at worst, I don't know what I should say, but at the soonest and more probably 2023. The output floor effect is even much later. It's very difficult to guess what would be our portfolio of assets in eight or 10 years. Of course, we are having regular discussions in order to try to orientate, I would say, the way that the regulation is going to be written like it should be
For the time being, we don't know exactly what would be the outcome. Clearly, it was part of the package initially, and we are going to do anything that is required in order to make sure that it remains in the package.
For Basel IV, Season 2, as Jérôme said, that I can say I am a little bit optimistic. I don't say absolutely optimistic. I can say a little bit optimistic because the point that would be the most hurt by a Season 2 is, for example, financing assets, our shipping, aircraft, highways, airports, and so on. That means this is no more a concern for banks. This is really a concern for economy, for policymakers. We have many discussions about that, and I know that there will be a very high pressure from the industry against the fact that Basel IV can't create a rupture in the ability of French and European banks to finance this kind of activity. Perhaps new speakers. Stefan.
Thank you very much. Stefan Stalmann from Autonomous. I would like to have one question, please. Actually, two parts of one question. Regarding your tax rate, your effective tax rate that you are using for the business plan, and also the effective minorities as a share of your profit after tax. If you could maybe either guide where you see these ratios or maybe guide whether they will be very different from where they were in 2018. That would be very helpful. Thank you.
I think the only two modifications that we have taken into account, because it is very difficult to predict going forward what would be the tax rate. We have taken into account two elements. The first one is the already-decided decrease in the level of the corporate tax rate in France, which is now still 33% and which is due to go down to 25% in 2022, if I remember correctly. This, we have been taking that into account. The second element we have been taking into account is the progressive evolution of the breakdown of our activities between the different geographies. No more than that.
Okay.
Yes, I would like to come back on the cash management and trade finance. That is a business that all banks like now. Could you give us a call regarding the revenues you are making in this area? Also, what is the breakdown of these revenues? Because one of your competitor recently announced EUR 2.5 billion in this global trade finance, I would say, activity. In details, we realize that most part of these revenues were actually booked in retail activities and not in the CIB activities, and particularly for ETIs, SMEs, et cetera. Also, do you have in mind any development in terms of tools? Because, here again, we can see that some of your competitors develop very developed front-to-end tools, like Centrix, Cortex, FX Markets, for instance, in order to capture this type of client and this type of business.
What are your projects there in order to develop and multiply by 1.7 your ambitions in this business? Thank you.
Jacques, can you take this question to do some comments? Cash management and trade.
Yeah. Definitely. Cash management, you cannot do cash management without good tools. Definitely, we have a plan to start developing or enhancing the systems that we currently have. The way we consider this business, which is a bit specific, is that we try to have teams that are joining forces between not only the front office, but the front office, the back office, and the IT, and risk and compliance. All those tools, you need to have them really fully integrating all the aspects of the business. That enables us to have a development which has started, which goes at a pretty nice pace, and which enables us, as you were mentioning, to have kind of an STP approach of those businesses.
With regards to the revenues, I'll come back to you on specifics here, as was mentioned, the overall figure is multiplied by 1.7, it's definitely revenues that are only within the CACEIS perimeters, nothing that is accounted for in the retail here.
Thanks.
Here. I come back to you.
Hello. Just a quick follow-up on Basel IV. Could you give the impact on Crédit Agricole Group? Ideally, fully loaded, but I can guess you're only one to give the transition. Thank you.
Actually, the impact on Crédit Agricole Group is a little bit smaller than on CACEIS itself. I don't have the precise figure in mind. I think we've put it somewhere in the pack. Well, I don't remember. It's in the credit update, actually. It's in our credit update document. We have the impact on the group globally, and I think it's around 30 basis points of ratio at group level, comparing to the 60 at CASA level.
Thank you.
Please.
Aurelia Faure from Santander. Just a quick follow-up on Basel IV. Could you give more details of what is included in the Pillar 1? For example, is the trading book review included in Pillar 2 or Pillar 1?
No. TRIM is a process that is presently going on. This is part of the 30 basis points of regulatory headwinds that we know for sure and that we've taken into account in the left-hand side of the chart presenting the capital trajectory. 30 basis points in which you have all our best guess, I would say.
Maybe we should project the chart.
The best guess, I would say, of all the TRIM effects are included in these 30 basis points. This is clearly going to take place in 2019 and 2020. The 60 basis points, what I'm calling season one, is all the decisions that are part of the Basel IV package that modify the rules in terms of input floors. All the rules that you have to take into account in order to design your models. What I'm calling season two is all what regards the output floor.
How about the trading book review?
Trading book review is before. Is it enough on this question? Is it okay? Next question.
Thank you. First, as a quick follow-up to what you just discussed, actually, when you say 30 basis points TRIM and other, what is other? The other question I wanted to ask is going back to the revenue growth targets that you were showing. If asset gathering is growing by around 2.5% and insurance is supposed to grow at 3%, I guess Amundi is supposed to grow at 2%. Could you explain why, only 2%? Because I suppose you've made here an assumption of market effect being neutral, net inflows, flat margin. Thank you.
Let's start with your first question. 30 basis points is TRIM and all the bits and pieces of regulatory headwinds that are already decided from a regulation viewpoint, and that we have to apply. TRIM has been decided. It's a process that is going on, and we have all the TRIM missions that are performed by the ECB staff. Every time a mission finishes, we have to take into account the outcome of the mission. Same thing for different internal model modifications that we have to take in place. Typically, it's the case for securitization. We know that we have to modify certain parameters of our models in the securitization business. This is going to bite in 2019 and 2020. This is the others, TRIM and others. Your second question, I'm not sure I fully got the math of your question. If you can just
Thank you. You know you have this slide where you show the revenue growth-
Yeah
by division, you have 2.5% for asset gathering.
Exactly.
Asset gathering is pretty much Amundi-
Insurance-
Insurance.
Amundi and private banking.
Exactly. Later in the appendix, we show for insurance 3% revenue growth. Given, it is roughly half-half insurance, Amundi, I guess we can assess it means Amundi is about 2% in the assumptions.
Yeah. It is clearly, I am talking under Yves Perrier's control, it is clearly the type of assumption that we made. Amundi is going, as I said, to have a very good commercial momentum. Positive net inflows, obviously. The pressure on margin is going to continue. We know that for sure, especially in the context of low interest rates that we know that we are having, I think the pressure on margin is going to continue. Other question? The top of the room.
Hi, it's Bruce Hamilton, Morgan Stanley. Could I just ask how you view the consolidation environments in the asset management space, and Amundi's role within that? When you think about your, I think what you said earlier in terms of prioritizing repayment of switch, it sounds like if Amundi found something, you'd be quite happy to keep your current stake and therefore raise capital to support that? Would you be happy to be diluted, and to what level, going forward?
Well, I explained you the global situation of Crédit Agricole Group and Crédit Agricole S.A. about this kind of issue. I explained you that. We are simply open to look at opportunities. In the special case of asset management, I'm just looking to Xavier, probably, he can explain you how we see this environment of potential consolidation, that is first a move of the past, not simply of the future. When you look at what really happened in the past, and we are very happy to have been successful in this consolidation on the last years. Probably Yves is ready to give some more colors about that. What could you say about, let's just have a very simple discussion about that.
About consolidation. My position is very simple. It has not changed. It's a question of opportunity, and the problem that there are more buyers than sellers, generally, and so far, there are not so many sellers. We have no objective of size. Very often, people are saying Amundi is a story of size. We have no strategy of size. We have a strategy of efficiency, organic growth, and size is a consequence. In the future, we have made the demonstration that we know how to integrate, to deliver synergy, to create value, then it will depend on the opportunities.
Maybe just as a reminder, in the latest Amundi acquisition, Crédit Agricole S.A. accepted a certain degree of dilution of its participation. The key for us is to remain-
In control
In control of Amundi, because asset management is a key and strategic business for us. We have this capacity, too.
We like Yves so much. We keep the control. Another question. Please.
Yeah, thank you. If you can please come back to the costs and revenue goals. If I don't think you can make the EUR 22 billion, because I think maybe I'm more conservative on the 3% revenue goal for large corporates, will you still be able to deliver the cost-income ratio? Will the cost be lower than the 13.5%?
Clearly, what I said is that we have set targets of cost-income ratio per business line, and then each business line has to develop its activities and develop its cost-cutting programs in order to meet the cost-income ratio that is targeted for this business line. Clearly, and this is actually the way we've been managing things in the last period of time. Revenues are never exactly where you forecast them, and so you have to adjust.
The 13.5 is an output, not an input.
I think.
The 13.5 will change depending on the revenues.
It can change.
Okay.
Hi, me again. You've repeated a few times that you want to be a safer bank, more prudent, and with all these topics about anti-money laundering, you are a universal bank. You are almost everywhere. As an anecdote, I was in the West Coast last week, and I found a Crédit Agricole somewhere where you never think you'll find it, but anyway. One really question is how can you give us confidence that you are in control, at least you are doing as much as you can in terms of onboarding of new clients, KYC processes, and how would you rate your processes at the moment? Because we had experience with being disappointed with some other banks that we thought they were actually on top of things.
What I can tell you is that we are probably expressing the highest requirements on these kind of topics. You have to add the fact that we are one of the most important banks in the world. 50 million clients. That means that, of course, it may happen, something. When you look, for example, the last cases about some case in Europe, the problem was systemic problem in banks in northern Europe. Of course, you can have links with some clients with that. We always take decisions to be very safe about that. Simply, you have to mitigate the fact that on one hand, we are very hard in terms of constraints, and I can tell you that for commercial teams, it's more and more difficult to do all these kind of requirements.
At the same time, we can be sure not to be concerned by one or two cases, because once again, we are a systemic bank. I would like to add on this point that we can be sure, absolutely. When we took the decision to focus all the international wealth management only on territory that have decided to be compliant with the international standards in terms of exchange of information, this was not compulsory. We could have taken another decision. We took this decision to be more easier in terms of behavior on this kind of target. What I can tell you is that probably we are one of the banks the most invested, both in terms of behaviors and in terms of means about this topic.
Unfortunately, we are a so important bank, a so systematical bank, that from time to times we can have cases, and of course, it's a pity in terms of reputation, but we have to face and to cope with this kind of situation.
If you allow me to add something. We had a problem with the U.S. administration, as you know. We have gone through a remediation process, we took it extremely seriously, in particular, to lower the level of risk we are incurring. Well, for example, we have reduced the number of counterparts in terms of banking relationship. We have centralized, for example, screening and filtering. We have improved our instruments, and as a result of all of that, we have handed the deferred prosecution agreement at the time it was set initially. We took it very seriously. I personally, with my friends here, have a regular meeting at least once a month in order precisely to follow all the progress. We will not, despite the fact that we have gone out of the deferred prosecution agreement, lower the bar in terms of security and conformity. Compliance, sorry.
Other questions?
Yeah, sorry. This may be a slightly strange question, when you think of the use of capital at the Caisse, the Caisse Régionale, I know they have a specific business model, hurdle rates of returns, et cetera. I'm aware of all that. If we look at 2022 and beyond, the very long term, can they basically just keep building capital forever? Because in the bad old days, their use of capital was bailing out CASA, external growth, Eureka. What does the use of capital for them look in with CASA being a normal bank?
It's easier to answer the question, what is the usefulness than the use of this organization? I do remember you that this group has to be one of the safest in the world. We want to be above 16% in terms of Core CET1. That means 11 for us, 20, 21 or 22 for regional banks. The first point is that we want a group, one of the safest in the world. So the 16% is something very important, and we do use that as an advantage for shareholders of Crédit Agricole S.A., since we can maintain 11% target within the Crédit Agricole S.A. perimeter. This is the first point. You don't have many banking company that can present you this kind of organization, being safe and at a low and optimal level of solvency. This is the first point.
Second point is that, of course, regional banks are champions on many things, including the fact, the ability to create capital. Each time in our story, Crédit Agricole S.A., the group needed them, they were there, to invest or to defend the group. That means that we don't have to say too earlier what we could do with this global excess capital. I do tell to the shareholders of Crédit Agricole S.A., that there is a current advantage of this organization, thanks to the fact that we can simply stay at 11%. If you look at 11% for other shares, this is a problem. This is not for us. Each time in the long story of the group, you can see regional banks that are always there, for simply supporting the group in bad or good moments.
You have to add something else, that regional banks are not only major issue shareholders, they are the basis of our market share, notably in France. They are the basis of our reputation in France when we speak about Crédit Agricole, in fact, we speak about regional banks. They are absolutely integrated in our plan, even if it is not within our PNA, because all our targets in terms of development hugely depend on the fact that they are with us, to reach these targets. Something I have not probably enough highlighted in this meeting, is that we present you a plan for three or four years within Crédit Agricole S.A. perimeter, but this is the declination of a group project that we committed to develop altogether, regional banks on one hand, and Crédit Agricole S.A. on the other hand.
This is another story, a story that we shall explain June 18th, I think, together within the group. This is something very important for Crédit Agricole Group, because one of our conviction, one of my conviction is that to be safe, we absolutely have to avoid the fact that the group could be considered in two parts, regional banks on one hand, and Crédit Agricole S.A. on the other hand. If we did that, at this time, Crédit Agricole S.A. could become just a holding with different business lines. We are, in fact, a global bank on each of our territory, thanks to all of our banks and all our business lines. I succeeded not to answer your question about using the capital buffer, but I think my answer is not too bad.
It is the expectation that we will make a lot of losses.
No.
In order to be rescued by the regional banks.
It's a joke.
There's another point we can add, is that this excess of capital you were referring to, is also helping us to build a very cheap
MREL or TLAC ratio at group level. Because actually it's made-
Price of the issuance as well.
As Cassa is supporting the issuance of TLAC debt, this is also a benefit for Cassa.
Please.
Hi. Thomas again from Goldman Sachs. For international retail market, it seems that some of your global competitors are in a mood of divesting some of their subsidiaries locally, notably in Eastern Europe. Some local players are willing to scale up and invest in those markets. At the same time, some governments are increasing levies there. What's your thoughts about the local dynamics, and how could you react to them if they were to evolve dramatically? Thank you.
Well, it's a very broad question. I don't know how to answer to it. I would say that we have very simple rules in order to manage our international retail network. The first rule is obviously, and that's part of the global model we follow, utility for the whole group. Let's take, for example, you mentioned Eastern Europe. Let's take a country like Ukraine. Ukraine for us is quite interesting. Why? Because we have agribusiness companies, our clients, classic clients, they are very much interested to see us being present in this country and being able to manage business there. You know, that's the first rule. The second rule is obviously the fact that we want these subsidiaries to be extremely safe. After what has happened with Emporiki, we have strict rule. We want them to have a very strong liquidity.
We don't finance them from Paris. They raise themselves their liquidity. Second, we want them to have a return on equity which is decent. Indeed, I mentioned Ukraine, but it's not the only example. In fact, very often, and you can see on the last report we published, they have a return on equity which is far higher than the one we have on the global group. Provided that they follow these rules, we don't see any need to withdraw from this market. What I mentioned is obviously not concerning a country like Italy, which is not, I understand, encapsulated in your question.
Just to illustrate what Xavier just said, the return on equity that we target for these international retail banking activities outside Italy is above 18%, which is clearly relative globally for Crédit Agricole S.A.
Other questions? Please.
Can I ask a question about the pace of credit growth in France in general? On the one hand, if you look to the Banque de France, as they keep putting up the counter-cyclical buffer, their message is, it's time to try and slow things down. When I look to your bank, double-digit SME growth in Q1, when we look at mortgage rates now touching again new historic lows, when I look into the LCL presentation, which aggressive is perhaps a harsh word, but it's talking about conquests, market share gains. At what point is working every day in the interests of our customers and society in France about slowing down the pace of indebtedness rather than fueling it?
Just go, sir.
Well, that's a very broad question. First of all, we are not in charge of the management of the global economy. Thank God, maybe. In any case, when we are making assumption about growth, it is supposed to be, in some cases, getting market shares against some competitors, and we are determined to deliver that. I would say that more globally, I'm sorry if I shock some people in this room. We think that at least there are some inconsistency in the messages delivered by the authority. Because on one hand, we see the ECB talking about maybe lowering interest rates, prolonging and even renewing the TLTRO. On the other hand, the French Central Bank worried about the pace of credit growth. I doubt there is a lot of consistency.
To be more serious about the substance, what I see as far as France is concerned is a few things. First, well, quite a good dynamism. When you look at the last report about foreign investment in France, it goes quite well. There are a lot of dynamics which are extremely positive. Just look, for example, at what we call the Grand Paris. That's a huge subject, which attracts a lot of foreign capital, which triggers a lot of investment. Why shouldn't we participate to that? My second remark is basically that we think that the sentiment of the people about France is too gloomy. Again, that growth is there, and there is no reason that it won't be prolonged. Lastly, if we look at the risk, because as we said repeatedly, we are extremely conservative.
When we look at the risk we incur on both individuals, SMEs, midcaps, large corporates, we don't see too much tension. At least, the posture we adopt is to remain always quite conservative. Again, I repeat it, we don't see risk of significant deterioration of the credit risk. That's a good indicator, in our view, to the fact that, well, we are handling our credit policy in a reasonable way.
There, one of the last questions, perhaps. Yes.
Yes. A follow-up question regarding your international retail business. You mentioned Ukraine, you also mentioned in your presentation Poland. I remember that some months ago, you were questioning your presence in Poland, and particularly the fact that you are not very sure to remain in this country regarding tough regulation, market share, et cetera. Now it seems that you have made your mind on this subject and decided to remain there. What are your objectives? Because I guess that your ROE there is not 18%. What is your objective in term of market share? What do you want to do there? What are your financial targets? Thank you.
Well, I doubt that we have raised so much doubts about our presence in the country. Indeed, Poland has been in a more difficult situation, I would say this way, than other retail foreign banks we have abroad. For a variety of reasons, one of which being, as you mentioned it, the fact that regulation became tougher. What are our plan as far as the country is concerned and presence? First, we have a strong presence in retail, you have also to keep in mind that we have also a presence, which is extremely significant in leasing with EFL. We have also life insurance, non-life insurance. We have asset management. We are convinced that we can go developing all these businesses in synergies with the retail bank.
What we have decided to do is to put the focus again on one of the strengths of Crédit Agricole Bank Polska, which is consumer credit. It used to be initially a consumer credit subsidiary, which we transformed into a full-fledged retail bank. That was needed, but in the course of this move, maybe we have not yet sufficiently developed precisely consumer credit. We forgot about consumer credit. One of the plans we have is to relaunch very much the development of consumer credit and to gain market share. We will use, in particular, the knowhow of CACF, and our friend Philippe Beaumont is here, to strengthen this activity. Again, on top of that, we will use all the business lines in order to comfort the position of Crédit Agricole Bank Polska.
Lastly, what I want to say is that after a period in which, as you mentioned it, the ROE of Poland decreased, we are now in the opposite process. It increases again, it is reaching a level which seems to us quite satisfactory, and we are confident that we can improve it again.
Thank you. Last question before drink. If there is no other question. Let me simply thank you so much for being there. Thank you so much for your kind presence, let us have together a friendly drink if you want. Thank you so much.