Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Crédit Agricole fourth quarter and full year 2018 results conference call. At this time, participants are in a listen-only mode. There will be a presentation followed by a question- and- answer session, at which time, if you wish to ask a question, you will need to press star and one on your telephone and wait for your name to be announced. I must advise you, the conference is being recorded today, Thursday, the 14th of February, 2019. You will now be on music hold until the call begins.
Yes, I think we can start this meeting. Philippe Brassac speaking. Good afternoon, everyone, and thank you so much for being present for this meeting. With Jérôme, we are really very pleased to comment you our main results, our main figures for the fourth quarter and for the whole year 2018, and of course, we shall try to answer all your questions. Before giving the floor to Jérôme, I would like to state simply three key messages about these results. The first one is that, as you can see that despite uncertainties all around us, despite tough conditions, notably on market activities, our performance for Crédit Agricole S.A., for Crédit Agricole Group too, but today we shall speak about Crédit Agricole S.A. Our performance is high, is regular once again, and is once again balanced.
That means that notably for our profitability, the level of profitability is good for each of our divisions, each of our business line. I would like to highlight that this is probably mainly due to the relevance of our model. We like to repeat to you that the model, the historical model of Crédit Agricole, is a universal bank, because according to us, universal bank means the ability to create a global, a complete, and a sustainable lasting relationship with each of our customer. Just to explain that, within the group, there's no matter about cross-selling. There's only global approaches, and there's only global selling. It's very important point on which I wanted to highlight this ability of the model to deliver regular results. The second message is about what you can report about our fourth quarter.
During this fourth quarter, we proved our agility to adapt our basis of cost to an environment that was harder, notably for capital market activities, but that means for asset management activities, too, of course. As you could probably see that, we succeeded despite an environment that was not so good, to slightly increase the level of our revenue, and we succeeded to master cost. We succeeded to reduce cost. Within each of our divisions, notably if the rationale is excluding scope effects on the cost. The first point is about the regularity of our model. The second point is about the agility of our management of the situation. The third and last point is about our medium-term plan. As we committed that, we really manage within the group, the fact that we want to be prudent. We are really prudent in each of our activity.
We gave priority to organic growth. It's a choice. We kept this choice to give always priority to organic growth. Mainly, we committed to be very simple, customer-focused. I wanted to highlight that these are not very spectacular strategy, but it works. I would like to highlight that it works, and as you can see that we have commercial momentum that is as good as the level of our financial performance. What I mean is that we never have to forget that attractiveness, commercial attractiveness, is always the real key for development and profitability. In conclusion of this introduction, I would like to tell you that, of course, we are simply very happy, very happy having reached main targets of 2019 as soon as 2018.
Very naturally, we shall have the pleasure to present you a new plan for 2022, and we show that on the 6th of June. Of course, you are all invited to this event. I can't tell you anything about this Investor Day, simply that, of course, we shall try to go once again further, to go once again higher. I would like simply to tell you that I'm very optimistic for the future. Not because forecasts are simple about the future, but simply because our models, and our main strategy are relevant to face any kind of ground. Thanks to this strategy, thanks to this continuity, I'm sure that you will appreciate this Investor Day within which we shall be able to give you all our ambitions for 2022. Now we come back to our result, I give the floor immediately to Jérôme.
Thank you, Philippe, and good afternoon to every one of you. Let me start with the main messages that we can have in order to assess properly this year, 2018. I think for us, it's been a year of good customer acquisition and good customer-focused development. We managed to attract as much as 1.8 million new customers in our different retail networks in France and Italy, which is quite impressive, actually, at a time where everybody speaks about the attractiveness of Excuse me. I don't have any screen in front of me in order to check which is the slide which is presented. In a period of time where everybody's talking about digital banks and newcomers, we launched successfully many new offers in order to continue to satisfy our different customer bases. It's been also a year of integration after some quite significant acquisitions in 2017.
We achieved and completed the integration of Pioneer within Amundi, of the three regional banks that we bought in Italy, of the different operations that we purchased in private banking. It's been a year also where we put in place some new engines for our future growth in the conclusion of different partnerships, be it in the field of payment services, in the field of insurance with the acquisition of an additional 25% of our subsidiary in Portugal, in the partnership with Creval, and in the consumer credit business in Italy with the renewal and the extension of the partnership with Banco BPM and the launching of a new joint venture with Bankia in Spain. It's been a year also where we achieved most of the 2019 financial targets, as Philippe said, and it's been also a year where we strengthened further our robustness, our financial solidity.
Philippe said it. This quarter was quite challenging in the markets, leading to additional pressure on the revenues of some of our business lines, capital market activities or Amundi. All in all, we managed to navigate quite nicely, I would say, across this quarter with a net profit of EUR 1.1 billion underlying as well as stated. It is up 21.5% for the underlying basis as compared to Q4 2017. The cost control has been quite confirmed, I would say. We also managed to keep the solvency of Crédit Agricole S.A. at a high level, 11.5%, and the one of the group to increase it a little bit further at 15% CET1 ratio.
I will not describe, of course, these elements. This shows only the quite challenging environment through which we had to navigate in the fourth quarter. The main figures of the profitability are here, both for the group and for the S.A., for the quarter and for the full year, and the stated and the underlying figures. What you can see is that we are almost everywhere up, and sometimes quite significantly. For the listed entity, Crédit Agricole S.A., as stated, 21.5% increase for the underlying performance for the quarter, and +12.2% for the full year at EUR 4.4 billion of net profit. This is leading to a dividend per share that is going to be proposed by the board to the general meeting assembly in May of EUR 0.69 a share, which is up 9.5% as compared to the EUR 0.63 that we had last year.
The underlying return on tangible equity stands a little bit above 12.5%, which is obviously far above the target of at least 10% that we posted in our latest medium-term plan. This 12.7% return on tangible equity, as Philippe mentioned it, has been reached with a nice balance of performances in every business line. Actually, all the performances are, I would say, between 10%-25%, there is no area in which we have an issue to solve. All the businesses are performing. Of course, retail banking activities are a little bit, and have been in the last few years, a little bit more under pressure than other activities. Nevertheless, I think that considering their cost of equity, the performances are quite satisfying and are due to continue to improve going forward.
Talking about the medium-term plan, I think that it is fair to assess that the different objectives that we had set, be it financial objectives or non-financial objectives, are either reached or well on their way. It is the case for all the, I would say, the structure of the group, be it in terms of financial structure, or also be it in terms of strategic priorities and strategic focus. It is true also from a customer point of view, with a very good dynamic in terms of our capacity of attracting new customers in our different retail banks in France and Italy. It is also the case from an operational efficiency viewpoint. We had announced a few years ago the launching of several savings and efficiency plans, which are either completed or on their way with already a significant contribution to the global cost monitoring at group level.
Finally, revenue synergies are also now close to the 2019 target at EUR 8.7 billion, out of a target of EUR 8.8 billion. In terms of financials, we already said it. I'm not going to read all the figures of this slide. What you can see is that at the level of the listed entity, with a slight exception, which is the cost-income ratio, obviously this is vastly due to the rate environment that we had, which put some pressure on the revenues in the retail banking activities. For all the other objectives, we are already done with the 2019 targets. Actually, this is why we are now pleased to announce that we are going to present the new and next medium-term plan on June 6th in Montrouge. We are going to adapt to the Brexit possibility and to do it in France next time.
If we go down a little bit more precisely on the performance of the full year and the performance of the quarter, what is important to note on this page is that actually, the 12.2% improvement that we had from an underlying profit point of view in the full year 2018 was reached with the contribution of all business lines, be it the asset gathering division, retail banking activities, specialized financial services, large customers, and also the corporate center, which continued to improve. In the fourth quarter, actually, with the exception of the asset gathering division, and namely with Amundi, to be frank, you know perfectly the figures of Amundi, which published its results yesterday. Again, all business lines continued to improve in the fourth quarter of this year.
Revenue-wise, the full year was quite dynamic, with top line growing by close to 5% on an underlying basis and close to 6% on a stated basis. Of course, the last quarter was a little bit more difficult for the reasons that you know within asset management and within CIB. Nevertheless, we continued to improve the retail banking division, SFS division, and also the corporate center. In terms of costs, what is important to note is that for the full year, the evolution was significantly below the evolution of the top line, at 3.8% as compared to close to 5% on an underlying basis, and 3.1% as compared to close to 6% on a stated basis. It's a very positive Jaws effect, which helped, of course, to continue to improve the cost-income ratio. As far as the last quarter of the year is concerned, stated costs are down 1.7%.
Underlying costs are up 4.8%, actually within this EUR 25 million increase in the cost base, EUR 15 million is simply the provisioning of the prime Macron that we are going to pay to some of our employees in March this year. It's actually a very stable cost basis, especially in the context of this quarter. In addition, as Philippe said it, if you try to carve out the scope effect from these figures, costs were down Q4- on- Q4. Cost of risk is also significantly down. Stable on the perimeter of the whole group, including the regional banks, actually down six basis points as compared to 2017 on the perimeter of Crédit Agricole S.A.
It's now a very low level of 23 basis points for the full year 2018, which is obviously the translation of an environment which has been quite benign from a risk viewpoint, but also the translation of our prudence policy. If we zoom on the cost of risk by business line, you'll see that within LCL, it's quite stable, actually. It's very steady and stable at a low level. In the retail banking activities in Italy, it continues to decline, and it's now at 67 basis points. It's getting close to the target that we had in mind of 60 basis points or being below 60 basis points. In the consumer credit businesses, I would say more or less stable around a low level.
I have said that in the previous quarters that actually with IFRS 9, we are going to have some volatility because we have to learn to live with IFRS 9 and the provisioning of bucket 1 and bucket 2 exposures. I will not be surprised by some volatility around these two levels in the coming quarters, but it's quite low from a historical viewpoint. Lastly, for the CIB financing activities, we are now for the third quarter in a row with a reversal actually of loan losses provisions. This is leading to a full year of reversal in average. Of course, this is not going to last forever, but this is the situation of 2018, clearly.
If I go now to the performance for each business line, starting with the asset gathering division, you perfectly know that 2018 was a quite bizarre year with a good commercial performance with significant inflows throughout the year, but a very negative market effect in the last quarter of the year. This is what you can see on this slide with actually assets under management globally up 3.5% for the first nine months of the year and only up 0.6% for the full year, with more than EUR 50 billion of negative market effect, market and Forex effect, in the fourth quarter, and especially in the last month of the fourth quarter, actually. In terms of profitability, of course, there has been a hit on the profitability of Amundi this quarter, as you know, but for the full year, the profitability of this business division continues to improve.
The insurance activities are going nicely, I would say, once again, with a level of turnover, which is hitting a new record at EUR 33.5 billion in total, adding up life and non-life premiums. The situation is actually quite positively oriented, both for protection, P&C, and life insurance activities. What you can see on the third quarter is that we continue to have a good dynamic of unit link products net inflows. In addition to that, we have seen a pickup in the inflows coming in EUR contracts. From a profitability viewpoint, actually, the net income is up both for the quarter and the full year. Actually, for the full year, if we restate 2017 from the capital gain that we made on the sale of a reinsurance activity in Luxembourg, the profit is up 3% 2018 on 2017.
It's clearly going alongside with the evolution of the business. Amundi, I think we can go quite swiftly considering all the details that were given by Yves and Nicolas yesterday. You see exactly what I was mentioning. Nice inflows in the first nine months and in the full year actually, because inflows were above EUR 40 billion for the full year. EUR 43 billion of negative market effect on the last quarter. In this context, the financial performance of the last quarter was negatively oriented, but with a good monitoring of the cost base, so the performance remains at a high level. Even in this difficult quarter, the cost-income ratio remains in the region of 55%, and for the full year, the profit is quite significantly at contribution of Amundi to the profitability of Crédit Agricole S.A. Retail banking activities in France, LCL. Activity is very good actually.
Loans outstandings continue to be up significantly. As in the previous quarters, these are more driven by corporate and SME loans than individual loans. Even though consumer credit and home loans are still positively oriented. Customer savings are also up, a little bit impacted for the off-balance sheet part by market effect, but still up. In terms of profitability, what we can see is that the revenues are flattish Q4-on-Q4, but this is due to a very specific point, which is the negative revaluation of some shares that are held by LCL, namely in two entities, Crédit Logement on the one hand, and Visa on the other hand. This is all in all generating around EUR 28 million of negative NBI. Besides this effect, the revenues at LCL would have been up for the quarter and up for the full year.
Actually, they are only flattish. As the cost base continued to decline quite significantly, 2.6% both for the full year and for the quarter. The cost of risk being also quite stable or volatile at a low level, I would say. We have a net income before tax, which is significantly up, and a profit, which is flattish for the full year and for the quarter. Due to the fact that we have had a normalization of the level of taxation, corporate tax for LCL. If I restate from the revenue effect in connection with this impairment on Crédit Logement and Visa, and with the normalized tax rates, we would have been significantly up in terms of profitability.
Italy, as we had forecast since now the beginning of last year, we are now in a situation where costs are trying to show the positive effect of the synergies that we are generating. Thus, we have an evolution of the revenues, which is now above the evolution of the cost base. Of course, these figures are quite significant because we have the scope effect. In 2017, we didn't have any contribution neither in the revenues nor in the cost stemming from the three banks. Now that we have them, what we see is that we start to generate more revenues than costs additions. This is generating a significant growth in the gross operating income.
Considering the further decrease in the cost of risk, we have a good evolution of the net income group share of the contribution of Cariparma to the profitability of Crédit Agricole S.A. This is leading us to the overall scope of activities of the group in Italy, where, as you know, we are developing all the scope of activities of the group, where we have launched or renewed some significant commercial agreements that are going to produce additional revenues as of this year, 2019. We generated EUR 573 million of net profit last year in Italy. It's up more than 5% as compared to last year, which was already up as compared to the previous year. Clearly, Italy is more and more a key area in terms of profitability for Crédit Agricole S.A.
Excluding Italy, retail banking activities abroad are individually small entities, but globally, they now represent close to EUR 150 million of net profit. It's up 50%, also EUR 50 million, I would say. It's benefiting notably from the fact that this year we haven't had any negative Forex effect, contrary to the previous year. All these activities continue to operate quite nicely. Specialized financial services. It's been a very good quarter, both for CACF and for CALF in terms of commercial activity. Actually it's been also a very good year globally, with outstandings quite significantly upGenerating a growth in the top line. The cost base continued to be under strict control. The cost of risk, as I already mentioned, is stable, yo-yoing a little bit around a low level.
In this context, we generated a significant improvement, further improvement of the net income group share, both from CACF and from CALF. In the large customer division, if we take a look only at the bottom line, we have had a very nice year and a very nice quarter indeed, with a high level of profitability, quite high level of return on normalized equity, especially if we consider that, as compared to last year, we no longer have any significant contribution coming from the BSF which was deconsolidated in the third quarter of 2017. Of course, if we go a little bit up in the P&L, what we would see is that revenues have been dented in the fourth quarter by market conditions. It's clearly focused on capital market activities.
It's clearly, as we already said in the past, it's strictly in connection with customer activity and commercial activity. We have had a quarter where customers were quite shy in term of developing their activities, in terms of requesting our services for the origination of bonds or other type of capital market activities. This has led to a lower level of activity, so a lower level of revenues. We haven't had any specific difficulty in connection with the volatility of market parameters. In this context, and thanks to a continuous control of the cost, thanks also, obviously, to the very low level of the cost of risk, we managed to compensate, I would say, for this weakness in the top line in capital market activities.
This led to this quite a high level of profitability and this quite attractive return on normalized equity for this division. If we go to the corporate center, it is of course a little bit volatile quarter- after- quarter, but we are, on a yearly basis, continuing to decrease the cost of the corporate center, and we are heading towards the target of minus EUR 700 million that we have in mind for 2019. We continue to struggle in order to reduce both the financial costs and the operating costs of the corporate center. Again, we are on track. Let me just spend a minute on the regional banks. Key, of course, within the group, both from a solvency viewpoint and also from a commercial viewpoint, and I should have started with the commercial viewpoint.
It is absolutely key for the group globally and for CASA's business lines that the regional banks continue to be attractive from a customer viewpoint, and it is clearly been the case last year. They continue to develop very actively their loan book, their customer savings collections, and the sale of additional services and products. This is a significant and very important contribution to the profitability of the group. As you know, the regional banks are monitoring their businesses more, looking at their results in French GAAP rather than IFRS. This is why we wanted to indicate the evolution of their P&L under French GAAP, and it was up close to 3% in 2018 as compared to 2017.
Translated into IFRS and transformed into their contribution to the profitability of the group, the situation is a little bit different because of all the intra-group elements that we have to take into account. Nevertheless, it has been a good year also for the regional banks as well as LCL globally. Let me go now to the solvency with, for Crédit Agricole S.A., a CET1 ratio which stands at 11.5% end of 2018. It is the same level as end of Q3. Actually, during this quarter, we have had quite heavy headwinds. It has been the case of the OCI reserve component of the solvency down 13 basis points. It is clearly due to the market conditions that we had, especially in December.
We also took a hit from a, I would say, regulatory viewpoint with a first layer of surcharge on the operational risk, which is only a step towards what we will have to stand when Basel IV is applicable in 2022. In this context, we managed to monitor quite strongly the organic growth of RWAs. This was completely absorbed, actually, by the results that we managed to keep and the evolution of the organic RWAs, leading to the stability of the CET1 ratio at CASA level. At group level, it has been an increase of 10 basis points of the solvency, 15%. We have more or less the same phenomenon than at the CASA level, with a strong level of retained earnings, but a negative impact both from the OCI reserves and from the regulatory headwinds.
A positive impact from the reasonable evolution of RWAs, all in all, this increase of 10 basis points of the CET1 ratio. In terms of TLAC, we are now at 21.4%, we are clearly close now to the 22% target that we had set for 2019 without any eligible senior preferred debt. In terms of MREL, we are at 12.4% in terms of TLOF, which is one of the different ways of assessing this ratio. Nothing much to say about it. Funding has not been an issue for the Group in 2018. The Group globally issued a little bit more than EUR 34 billion of debt, and CASA itself issued EUR 14 billion of debt. In both cases, we are a little bit ahead of the initial program that we had, which is a situation which we are used to, actually. In terms of liquidity, nothing much to say.
We are in a very positive and strong situation with very high reserves of liquidity, LCR ratio, which is far above any regulatory target, and a surplus of stable funds, which continues to be above EUR 100 billion. In conclusion, I will leave you the floor for your questions, I think that we have had healthy results, as Philippe said, healthy, robust, and balanced throughout the year, even though the year has been a little bit more bumpy than initially expected. I think that I can stop here and now go directly to your questions if you have any.
In terms of organization, we could start by local questions, if you want. Please.
Thank you. I have a question on the loan growth, in SMEs at LCL. It's been running quite strongly in the last few quarters. If I look back at 10 years ago, there had been, obviously, very strong growth going into the recession. Should we worry about when we go into late cycle to have an increase in provisioning? The second question relates to the corporate and investment banking. You're still containing the RWA growth in CIB, but there has been a small change, I think, in the methodology, there's a small optical increase. What's your thinking about how much growth you're happy to have there?
Within LCL, it's a strategic decision to increase the activity of LCL with corporate and SMEs. Because of the global strategy that we have for LCL, which is to be focused on cities, and which is to rely on, I would say, the DNA of LCL. Historically, LCL has always been a corporate and SME bank. What we see in the loans that we originate nowadays is that it's almost exclusively investment loans. We are not talking about treasury loans that can easily be transferred into bad loans. It's clearly investment loans that are designed to fund and to finance the investment needs of the customers. We are not worried by the strong development of this loan book, and we decided not to have any, I would say, loosening of the credit standard that we have on this category of customers.
In CACEIS, the idea is to continue to monitor the global RWAs within CACEIS at a level which has to be more or less stable. Of course, this is an area in which there can be some volatility because of Forex effects, because part of the loan book, significant part of the loan book, is not in euros. Because of methodology, because within CACEIS, you not only have credit RWAs, but also operational risks, RWAs, and market risks, RWAs. You may have different methodology evolutions. What happened in the fourth quarter of this year is what I said. We implemented a strengthening of the internal model that we have developed to assess the RWAs linked to operational risks. It's clear that if we did so, it was at the request of the ECB. That's absolutely clear. We decided to implement this modification swiftly.
First, because we had to do it, but also because it's only a step towards what we will have to support anyway with the full implementation of Basel IV, because you know that for Basel IV, for operational risks, no internal model would be allowed any longer, and we will have to go back to a standard formula. Anyway, we know that this is going to translate into an increase in the level of RWAs for operational risks. This is actually what happened in the fourth quarter, but I would say that organically, we continue to stick to the same principle, i.e., primary distribution of a significant part of all the loans that we originate and a rotation of the portfolio in order to be able to continue to be with our clients to finance them without having too strong a growth of the loan book.
Second question.
Jean-François Neuez from Goldman Sachs. I just wanted first to ask about the French retail, the French banking market in general. With Crédit Agricole Group now at around 15% tier 1 ratio, the other big mutual banks also have very high tier 1 ratios and no dividends to pay per se. The pricing remains extremely tight in France. As a market leader, I just wanted to understand what's your view on the interplay between the appetite to essentially deploy that capital and pricing for the French market, which has been problematic for, say, for example, Caisse Régionale are growing loan by seven but have flat or barely any growth in net interest income, according to the slides. Secondly, recently I attended a presentation by D-Rating, a fitting name for a rating agency about tech.
The point is that they showed that the Caisse Régionale have an extremely good ranking about their tech. The costs were up 2% this year. There was a big gap with LCL, which was trailing in their ranking. LCL has been really good on costs recently. I just wanted to understand whether there is any risk of a catch-up in cost going forward, and what was your take on their rating, if any. My second question was on CIB. You've shown a nice slide where you have all these nice returns in all of the businesses which you operate. The one business in the group, if you go down one level as opposed to the big aggregate, is the market business, where it's the second year where it's kind of a mid-single-digit return.
I just wanted to know whether other businesses were lurking at those risk-weighted assets and might want you to redistribute them somewhere else for more attractive returns prospect going forward.
Many questions, very interesting questions. I'll try to answer swiftly. First, on French retail globally. Our assessment, we already said it several quarters ago, but I think we are there, it's that we have reached the bottom and that going forward, we are going to see a stability and progressively some increase in the top line. Actually, what is happening now is that the volume effect, at least if the rate continues to be what we forecast. Of course, if there is a further deterioration, then it might be different. The volume effect plus the evolution of fees, which is positive, are now offsetting the further compression of the margin, which continue to happen, actually. We continue to have new loans that we book at a rate which is a little bit, but slightly only, below the average rate of the back book.
We used to have a difference between both, which was in excess of 100 basis points a few quarters ago. It's now probably around 30 to 40 basis points. It's much more tiny, and the gap is filling quite rapidly. We clearly are of the opinion that there is now a stabilization, actually, of the revenues globally in retail banking activities in France. When it comes to digital elements and things like that, you were mentioning the D-Rating rankings. I think that any bank can find at least one classification in which it would be in a good position, because you have as many classifications as you want in order to try to find one at least that will suit you.
What is for sure is that we have, and I don't remember which is the organization that publishes it, but we have an organization which is dedicated also to that kind of classification that published for two years in a row, a rating in which the app of LCL was the best app in the French market.
For the second year.
Second year in a row. I think the end game is, are you attractive from a customer viewpoint or not? And in 2018, the regional banks of Crédit Agricole attracted new customers, gross number, net number. LCL attracted new customers, gross number, net number. At the end of the day, I think that as long as we continue to have customers, as long as we continue to have and possibly to grow our market shares in the different products, the question of are we the best bank in this or that area is a relative question, I would say.
Yes, sure. This is a strategic question, too. We like to highlight the fact that it could be a mistake to rationalize retail banking as a standalone activity. For some competitors, this is the case, of course, if you are only that. In the story of Crédit Agricole Group, this is simply the roots of universal bank. That means that retail banking also fuels many other business lines of the whole group. You have to look at the global performance, both in terms of net income, of customer acquisition. What we can say is that even without this rationale, when you just look at the return on normalized equity, you can see that for LCL, the return on normalized equity is 11% with very low environment of interest rate. That's really not so bad.
This is possible if you are included, if you are linked in a global model of the relationship. That's exactly what I tried to explain at the very beginning of this meeting, that this is very important to see the global performance without the mistake to think that each entity is able to get this performance if it is standalone.
Actually, I was up to say exactly the same thing about capital market activities, because if you try to assess the profitability of a specific activity without putting this activity back in the scope of all what we propose to our customers, you'll miss something. As far as large corporates and financial institutions are concerned, the issue for us is to be able to have a scope of an offer of product which is wide enough in order to attract these customers and to generate enough profitability from a customer viewpoint, not necessarily from a product viewpoint. This is why we start by assessing the profitability of the large customers division, because this makes sense globally, and the profitability of the large customers division actually is indeed high, is indeed very positive, has improved quite significantly in the last three years.
The fact that in a specific year, and especially in a specific quarter, we have had some harder times on a specific set of activities, is not leading us to the conclusion that we have to get rid of these activities because they really fit in the business model that we want to deploy and in the product offer that we need to offer to our customers, actually. Capital market activities have had a poor level of revenues in the fourth quarter, that's for sure. We are going to continue to struggle in order, if possible, to adapt to cost base in order to be able to withhold that kind of environment, of course. This is absolutely not leading us to the idea that we must get rid of certain sub-activities of the capital market division. James.
Hi, Jon Peace from Credit Suisse. Two questions, please. Firstly, on the insurance business, very strong revenues this quarter. I think your policyholder participation reserves came down a little bit from Q3, and I just wondered to what extent that had contributed to the top line and how you saw those reserves developing going forward. My second question is on the capital and the sort of forward-looking bridge. To what extent do you see any other regulatory headwinds, and can you remind us of the OCI contribution which is left? As we look on also to 2022, any thoughts around Basel IV? What will be left of Basel IV by then? Thank you.
Thank you. Well, the insurance division has had a good quarter. This is one of the qualities of the insurance division. It's very stable, actually, even though we have difficult times on the market, which has been indeed the case. Of course, this translated into this OCI reserve reduction. By incident, I just give you the figures that you were requesting. We have, I think, around 30 basis points left of OCI reserves within our capital. These difficult market conditions translated into a decrease in the OCI reserves. It didn't translate to a deterioration of the profitability of the insurance activities. You were questioning the evolution of the profit-sharing rate with the policyholders. Actually, in the fourth quarter, as we do every year, we fine-tune
The breakdown within all the financial revenues of the life insurance activities between the policyholders and the shareholder. Within what is attributed to the policyholder, we make a second split, which is between what we are going to pay right away and what we are going to keep aside for the future. In the fourth quarter, I'm not going to be too precise, but what we did is that we reduced a little bit within what is allocated to the policyholders. We reduced a little bit what we put aside for the full year for the future, and we increased a little bit, slightly, what we had decided to pay for the year 2018 to the policyholders. This didn't lead to any modification of the first split between the shareholder and the policyholders.
In terms of capital, OCI reserves is no longer a significant component of our solvency. Maybe I just wanted to remind, I don't want to frighten you, but OCI reserves can be negative, too. It's not a matter of seeing the OCI reserves going down to zero. This is what is going to happen with a certain category of OCI reserve, which is the unrealized capital gain that we have on the fixed income book of the insurance activities, because this book is going to be carried up to its end. As far as the bond book of the bank is concerned, we can have positive or negative levels of OCI reserves. We can decide to crystallize either a positive or a negative situation. It's a matter of volatility within the solvency.
It's not just an element that you want to see declining down to zero, then it's over. It's just an element of volatility that we have to manage. More globally, do we see additional headwinds before Basel IV? Yes, some. It's going to start as soon as January 1st this year with the translation to IFRS 16, because you liked IFRS 9, you now have to like IFRS 16. IFRS 16, as you know, is this new standard in which you have to identify on the asset side of your balance sheet, the value of your rents, and on the liability side, the value of your commitments to pay the rent. It's increasing at the same size a little bit.
For the balance sheet of a bank, it's not massive, for CASA, it's going to lead to an increase of around EUR 2 billion of RWAs. It's not nothing. I made a funny exercise. Funny, it's not really the right word. In 2018, we had to absorb in the solvency of Crédit Agricole S.A., 42 basis points of different type of headwinds. 42 basis points. I'm not taking into account the evolution of the OCI reserves. I'm just talking about IFRS 9. The deduction of the commitments to pay to the Single Resolution Fund and the Deposit Guarantee Fund in France, plus the strengthening of the internal model on operational risk, plus TRIM, 3 basis points. All in all, 46 basis points for Crédit Agricole S.A. The same elements at the level of the group, 62 basis points of solvency.
It means that if you assess the evolution of the solvency of Crédit Agricole S.A., which in 2018 went down from 11.7% to 11.5%, it's after having absorbed 46 basis points from different categories of headwinds on which we have absolutely no influence. At the level of the group globally, where the CET1 ratio was up only 10 basis points between end of 2017 and end of 2019, it's after having absorbed these 62 basis points of different headwinds. It means that we have the capacity of absorbing quite significant headwinds. Of course, this is a little bit capping our capacity to continue to build up the level of capital. Going forward, what we have identified for 2019, it's IFRS 16. This is for sure, and it's not massive. Again, it's around EUR 2 billion for CASA and EUR 3 billion for the group globally.
Again, it's EUR 2 billion and EUR 3 billion of RWAs. We will still have probably some TRIM exercises that are going to continue, you see that the last one was only 3 basis points , it's not absolutely massive. Then there is Basel IV. For the time being, I'm not able to give you relevant figures on Basel IV because we still don't have any text coming from the European Commission. In these matters, the devil lies in details, and we haven't had the opportunity to see the details.
To the next question
Hello. Thank you for taking my question, Angeliki from Autonomous. One question on TRIM. If you could give us some detail on which part of the book exactly you booked those 3 basis points, and can you confirm the guidance that you had given last year around 30 basis points overall impact from TRIM? Secondly, on cost of risk, you had some reversals in the stage 1 and 2 brackets. Should we expect this to continue in 2019? What is the outlook overall for cost of risk this year? Thank you.
I don't have my crystal ball.
No. The TRIM impact that we had last year, the three basis points TRIM impact, came from LCL and from the fine-tuning of an internal model on, I think, corporate and SME lending at LCL. It's this one. What we said, the 30 basis points that you are mentioning, is what is left from the global 70 basis points evaluation that we had when we published the medium-term plan in 2016. I continue to think and to estimate that we have the capacity to absorb these additional 30 basis points up to the end of 2019, which was initially the capital planning that we published. I am absolutely not confirming that all the TRIM exercises are going to lead to a 30 basis points impact for this year, simply because we don't know when the reports are going to be published.
We don't know the magnitude of the request of the ECB, it was a pure evaluation. Up to now, we have been comfortably inside this evaluation, I don't have any clue leading to the idea that we should modify significantly that. Clearly what we are going to do is that we are going to update completely the capital planning when we publish the new medium-term plan. Cost of risk and bucket 1 and 2. I think that clearly, everybody knows that IFRS 9 is going to be pro-cyclical, IFRS 9 is leading to bucket 1 and bucket 2 provision reversal when the overall environment is positive. We are regularly, I would say, updating the global scenario that is leading to the global, I would say, evaluation of the bucket 1 and bucket 2 provision.
If at a certain point in time we have a darker view of the environment, this is going to lead to an impact on the bucket 1 and bucket 2 provisioning, that is for sure. For the time being, we haven't significantly modified our forecast in terms of the global macro environment. Yeah, for this question, please.
Yes, good afternoon. Kiri Vijayrajah from HSBC. Can I ask about Italy and the fact that it is in kind of technical recession? Does that have any kind of impact on your ability to, or desire to, put more capital to work in Italy, both organically and I guess more interestingly, through continuing with bolt-on acquisitions? The second question on the TLTRO, what is your kind of base case thinking there? Again, with regards to Italy, does it alter in any way your desire to grow the loan book there? Thank you.
Well, the situation in Italy is a little bit contrasted because it is clear that they have been, and they are, in a technical recession, as you mentioned. At the same time, what I noted is that, I think it was last week, the Italian government issued a 30-year bond. They wanted to raise EUR 8 billion, and I think the order book was EUR 42 billion, if I remember correctly. I think that around three-quarters of the order book was made of non-Italian investors. It clearly means that a lot of investors have positive view on the Italian situation. Nevertheless, as far as Italy is concerned, we see this country as a second domestic market. It is a very common expression, but for us it means really a domestic market where we are active since more than 30 years.
We are not going to modify our footprint in Italy because there is a positive or a negative news flows. We are here to stay. Of course, we manage our Italian operations in a prudent way, as we manage all our operations, actually. Of course, our teams in Italy monitor their activities, monitor their loan books cautiously, and especially cautiously when the environment is a little bit harder. Really, nothing that is going to lead us to decide to modify the capital allocated to this country and to these activities. You are talking about acquisitions or further growth. Organic growth, that is for sure.
We are here to grow, as in every country where we are active. When it comes to acquisition, we have been, in the past, quite cautious about acquisitions, and the three banks that we acquired in 2017, they were acquired in a very specific situation where their balance sheet was completely cleaned up, and where they had only a problem of operational efficiency. This is the type of operation that we had considered in the past, and we will not go beyond that type of potential target. For the time being, we are not looking at anything in Italy, and we are focused on the integration of the three banks that we acquired. TLTRO, it's true that it's coming to an end. It has to be repaid in between June 2020 and March 2021.
We are perfectly conscious of that, actually, we've been probably among the first to say that this was going to be an issue. As far as we are concerned, we monitor our TLTRO drawings in a very prudent matter. Actually, we have already started to early repay some of it in order not to have a too significant liquidity cliff in 2020 and 2021. We think that probably the ECB will have to replace it by some other type of facility, because it's going to be difficult for the ECB to accept to see a EUR 750 billion of funding provided to banks disappearing without anything else to replace it. We are ready to replace all the TLTRO funding that we have in our balance sheet by market funding.
One more question, then we shall take questions by phone, if you want.
Hi. Jacques-Henri from Kepler Cheuvreux. Just two questions. The first one, when I look at your quarterly net interest income at LCL, that's a positive question on LCL sort of forward. If I restate from the Crédit Logement write-off, it looks like the net interest income is EUR 460 million stable-ish over the last three quarters. Is it fair to assume that will be the same amount in 2019? Since the commissions are actually behaving quite nicely, could you have revenue growth at LCL in 2019? That's the first question. The second one is a question on the medium-term plan. Very simple question. What is going to be the first year of execution, 2019 or 2020? Thank you.
Well, I leave you with the precise calculation on the net interest margin on LCL. Clearly, we are working to increase the top line at LCL. That's for sure. We don't know exactly when it's going to be significant enough to open champagne bottles. Clearly, we are working to increase the top line and not only to decrease the cost line. That's for sure. For the medium-term plan, I think the question is not to know what will be the first year of the medium-term plan. What we are going to set is new targets for 2022.
Absolutely.
Can we take a question by phone? Is it possible?
Thank you. Ladies and gentlemen, just to remind you, if you wish to ask a question on your telephone, please press star and one and wait for your name to be announced. That's star and one on the telephone if you wish to ask a question. Your first question comes from Bruce Hamilton of Morgan Stanley. Your line is open. Please go ahead.
Hi. Yes. Afternoon, guys, and thanks for taking my questions. Two, really. Firstly, just on Italy again. Actually, the top-line developments in Cariparma in Q4 look pretty encouraging. Was there any sort of one-off elements within there? As you cast out to 2019, do you expect you can actually see growth given the difficult backdrop, or would that be a bit too much of a challenge? Secondly, in terms of the provisioning outlook, I'm just interested in what sort of macro assumptions you've embedded in your current forecast, GDP and other, just to get a sense of how conservative you're being. Thanks.
Well, in Italy, it's clear that the dynamic of the top line in 2018 was significantly the result of the scope effect because the reference period in 2017 was without the three banks, and so the figures of 2018 were structurally above the figures of 2017. What we think, and actually it has started to work in the network of the three regional banks that we bought, what we think possible is to increase the sales on the customer base of those banks because we are offering a wider range of product than the one they were offering to their customers before the acquisition, because we have some expertise and skills in terms of commercial management that they didn't have in before. The idea is clearly to grow their top line on a quote, unquote, "standalone basis" as compared to what it was when we bought them.
At the same time, of course, we are targeting a decrease of their cost basis, which is going to accelerate the Jaws effect that we have started to see in Q4. Clearly, we are going to be more focused on the Jaws effect rather than seeing either an increase in the top line or a further decrease in the cost line. Clearly, what we target in Italy is to see an improvement of this Jaws effect that we started to have in the fourth quarter. In terms of economic forecast, what we have in mind is, I would say, more or less a plateau in 2019 as compared to 2018. In France, clearly, there has been a slowdown end of 2018. The latest forecast of the Banque de France is an acceleration in Q1 and Q2 2019.
Indeed, the different measures that have been taken by the government in December are going to boost the purchasing power of the consumers in France. In Germany, it's clear that the different confidence polls are heading a little bit down lately, but we continue to see a conjunctural element in this slowdown and the capacity of the German industry to accelerate again in the course of 2019. So no recession, I would say more or less a plateau in Europe.
Thank you.
May I add on Italy, this point, when you look at on the long term, you can see that there was no correlation between our net income results and the growth in Italy. We had recession in Italy several years ago. We had not negative results for Crédit Agricole. The explanation is very simple. Our setup started more than 30 years ago, especially north of Italy, and since this time, we just give the priority to organic growth and then to additional setup by gradually acquisition, very small acquisitions, never rupturing the model. Thanks to that, we succeeded to cross many situations, positive and negative situations. Simply when you look at the last three years, you can report that for the whole group, our net income group share for Crédit Agricole in Italy is above half a billion euro each year, and it is improving.
2018 was above 2017 was above 2016, and so on. Of course, forecast about growth is important, but in this kind of strategy, when you are not too big, when you are focused on north of Italy with a very special kind of organization, linking all the different business lines around our retail banking, that is Cariparma, Crédit Agricole in Italy, you can cross a situation with positive results and even reducing level of risk, though the environment is not as good as we could have shown. This is really an ongoing process. As we said two years ago, three years ago, four years ago, we repeat this year once again that this strategy will go on. We don't contemplate anything that could create a rupture in our organization. Simply, I'm as optimistic for next year than I was for last year. Next question.
A question in the room. We shall come back to phone later.
Yes. Thank you. Delphine from JPMorgan. Just three quick questions from my side. First of all, just to come back on French retail, just wanted to check that, in terms of the revenues, are you seeing any headwinds from the measures which have been announced by Macron at the end of the year? Does that kind of distorts a little bit your comment about revenue growth, well, stabilization of revenue growth, in 2019? The second question is on Corporate Center. It's just been a little bit volatile, I think, in 2018 in terms of the revenue line, which has been very good. The losses have declined quite a bit, but the cost line has increased. Obviously, you're close to your EUR 700 million, but just wanted to check there's nothing you want to highlight maybe on just the Corporate Center for this year.
The last question is on capital. Some of your peers have slightly kind of not increased their targets, but seem to be aiming for a little bit of a buffer above the 12%. Just wanted to think, from your side, given the breakage headwinds, which are still uncertain, would you consider revising a little bit your sort of 11% floor or if at this point there's no change. Thank you very much.
Thank you. Let's start with French retail. Obviously, the different decisions that were announced by banks in December are going to have a slight impact on the top line of French retail banks going forward in 2019. It's not going to be massive, to be frank. We're talking about two different things. The first one is that we agreed to freeze for 2019, I would say, the price grids of all the services that we sell to our customers. There's nothing more to say. It means that we are going to sell the products at the same prices as the one we had in 2018. Clearly, what we are targeting is not to generate revenues through a permanent increase in our pricing. We prefer to improve, I would say, the mix of the products that we sell.
There is an easy example to take, which is the improvement or the increase in the breakdown of the payment card that we sell. There is a permanent increase in the high-end category of the payment card that we sell. It means that without increasing the price of each card, if we sell more high-end cards than low-end cards.
We do.
We do, actually, we do. We did it within the Caisse Régionale, and we did it within LCL last year. We are going to increase our revenues globally, even though the tariffs, the prices are fixed. The second element is a ceiling that all banks agreed to put on the level of commissions that they can take for payment incidents on their fragile customers. The ceiling is set at EUR 25 a month. As Philippe says regularly, it's a very, I would say, reasonable decision that we took together. It wouldn't have been possible for a single bank to take that decision because obviously all the fragile customers will have concentrated on this bank. As long as all banks are taking the same commitments together, each bank is going more or less to keep its fragile customers, the one it had initially.
We are not going to generate additional revenues on these customers. Generally, when a customer is fragile, you may charge high fees, but it translates into high provisions, because generally, those fees are not paid. The impact may be material on the top line, but probably not on the bottom line. All in all, we were volunteer to take those measures because we thought it was a key element of the smoothing of the global situation, and we don't see it as a threat on our capacity to evolve positively next year. On the corporate center, there's one point which is explaining the situation you're describing, an increase higher than you expected on the revenue side, or an improvement on the revenue side and an increase on the cost base.
In the corporate center, we have several entities that are not profit centers, that are service centers dedicated to serve all the entities of the group. We have in the corporate center, both the operating costs of those entities and the revenues coming from the billing that we do to all the subsidiaries of the group or the Caisse Régionale. This is namely the case for IT services and for payment services. This may lead, and indeed clearly in 2018, we accelerated the investments, it led to an increase in the cost base of those entities. At the same time, we are billing all the users of those services, be it the Caisse Régionale and be it the subsidiaries of Crédit Agricole S.A.. This generates revenues for the corporate center. It's a technical effect.
It's not changing the bottom line, but it's leading to this effect that you are mentioning. On capital, excuse me, we have no intention to change our targets. The target is to remain above, but as close as possible to 11% at the level of Crédit Agricole S.A.. It's to continue to build up the capital at group level, because as you know, considering the distribution rate at group level, we are going to continue to build up the level of capital.
Next question.
Hi. Matthew Clark, Mediobanca here. To come back to an earlier question on the insurance revenues and the policyholder reserves, I didn't quite understand the answer. If you had not made the adjustment to the policyholder reserves in the fourth quarter, would the insurance revenues have been lower as they're presented in the IFRS accounts? I just want to try and understand the interplay there between the reserving and the revenues as we see it. Second question is on the low tax rate in the fourth quarter. Did you generate any deferred tax assets there? I am just wondering whether this is purely catch up on a full year basis or whether there is anything else going on during the fourth quarter.
Finally, on the EUR 75 million litigation provision in the corporate center, which I think was for a specific case, could you comment on whether that's something where you have visibility on the ultimate cost, or is that a provision that could see further adjustment as whatever process evolves? Thank you.
Let me start with the last one. To be frank, up to now this year, we hadn't booked any general legal provision when, in 2017, we had booked a little bit more than EUR 100 million of unaffected general legal provisions. We decided that considering the good level of profitability that we generated in Q4, it would be quite sensible to complement our general provisions. There's nothing specific, there is not the possibility of saying that we would need to complement that further or not. It's, I would say, more a prudent approach of the different type of issues that we can have. On the corporate tax rate, it's true that we had a low corporate tax rate, apparent low corporate tax rate in Q4.
Clearly, I have always said that, it's maybe because I'm not a tax expert, but it's already hard to understand the level of taxation on a yearly basis. Clearly, on a quarterly basis, it's very difficult. Clearly, you're right, it's a catch-up at the end of the year of the full year rate, and probably we fine-tuned some assessments of the level of taxation that we did in the first three quarters of the year with this level in the fourth quarter. Insurance, it's a little bit tricky, actually, and I don't want to spend too much time on this issue. We have three level of decisions to make when it comes to the management of the financial revenues in life insurance activities. The basis is the level of financial revenues generated by the portfolio of assets.
This is decreasing slightly because obviously, considering the component of fixed income assets in this portfolio, it's slightly decreasing. Last year, actually, its yield was an average around 2.7%. The first decision we have to make is the split, what we call the setting of the financial margin. It's the decision of what proportion of the revenues we are going to attribute to the policyholders and what proportion of the revenues we are going to attribute to the policyholders in order to cover the costs and the cost of capital. I should have started by the very first decision, excuse me. The first decision is the level of revenues that you want to materialize because within your portfolio, you have unrealized capital gains, and you may decide to realize or not realize them. It's a permanent fine-tuning.
Of course, we have to take into consideration market considerations, market prospects, but we have also to try to manage the level of revenues that you book quarter- after- quarter. First decision, to find setting of the level of revenues that you are going to book through capital gains that you want to materialize or not. Second decision, the share between the shareholder and the policyholder. Third decision, within what is allocated to the policyholders, what is attributed immediately and what is kept for the future.
Thank you.
Thank you. We can come back to questions on phone, I think.
Thank you. Your next question comes from the line of Flora Benhakoun of Deutsche Bank. Your line is open. Please go ahead.
Yeah, thank you. Good afternoon. I have two questions as well, please. The first one is, I'd like to go back to the move you had on the operational risk RWA this quarter. The first thing I'd like to understand is whether you did that at the request of the regulator. The second thing is to what level of standard use in the calculation of the op risk RWA you had to go. The second question is regarding the FICC business. Obviously, the revenues have been down significantly this year. Clearly, part of this is cyclical, but part of this is structural. When we look at other banks, some of them are rethinking their FICC operations in order to improve the return on equity in their investment bank. Is it something that you're also considering? How would you see your position in the FICC business?
Thank you.
Thank you. Let me be very precise on the operational risks. It's clearly after a mission of the ECB that had challenged our internal model that we had to strengthen a little bit some parameters of the internal model that we use to assess the operational risk capital requirement. We strengthened a little bit the model. This has nothing to do with translating certain activities from internal model to standard formula, actually. We have certain part of the group in which we use the standard formula. Most of the group is under the internal model, an AMA model. We had to strengthen a little bit our model. This strengthening translated into an increase in the level of RWAs for CASA and for the group globally. Within CASA, it was massively allocated to the CIB.
Some other activities had also some slight increases in their capital requirement for operational risks, but the biggest chunk of it was allocated to the CIB. Coming to FICC, again, we are happy with the set of activities that we have in the capital market space. We don't have any, I would say, exotic trading, prop trading activities. We have only customer-oriented activities, which are consistent with our business model. We are active in securitization and bond origination, which is clearly in the continuation of the financing part of the CIB. We have rate hedging activities. We have Forex activities, which are also in the continuities of bond issuance or securitization. This is a set of activities that we are happy with.
Of course, we are going to continue to struggle in order to reduce the cost base of these activities or to improve the cost-income ratio and in order to be able to accommodate more easily some periods where revenues are harder to find. We are not going to reshape our capital markets or FICC activities, again, because we have the activities that we want to have.
I would like to highlight this point, especially as a chairman of Crédit Agricole CIB. I think it's important to explain that. When you look at the profitability of Crédit Agricole CIB, according to me, the profitability as a sense on the year level, it's very difficult to comment that for each quarter. When you look at that for Crédit Agricole CIB, our return on normalized equity for Crédit Agricole CIB is above 10% for several years, very regularly. As Jérôme explained, we have no reshaping to do about that. When within a quarter, market activities are not there, are low, revenues and net income are low. When they will be higher, our revenue and net income will be higher, simply. I think it could perhaps there are kind of confusion with some competitors or peers, were to face with losses on markets. This is not our case.
Simply when you have a very low profile of risk, of course, when activity is low, revenue are low, when activity is high, revenue are high. It's very important, not to re-explain, but to highlight this fact. The model of our CIB activities is really the good one for Crédit Agricole and for time being and for many years, at the end of the day, the return on normalized equity is above 10%. It's really a good performance. Really, it's really a good performance. I'm sure that after this current quarter, perhaps the question will be hugely different than the question about the fourth quarter of 2018. Thank you. Next question. Sorry.
Thank you. Your next question comes from the line of Pierre Chédeville of CIC Market Solutions. Your line is open. Please go ahead.
Yes, thank you. Good afternoon. A few questions from my side. First question is regarding your CIB business towards your customer. I wanted to know where you are regarding transaction banking activities, I mean, trade finance, cash management, because we can see that most of your peers in Europe are emphasizing on this area of the business, as it seems to be key now in the current environment to conquer new clients. In my view, you are not very vocal regarding this aspect of the customer banking in the CIBs. Could you tell us a word regarding your transaction banking franchise? My second question is regarding your activity towards SMEs and intermediary companies, because you have a strong market share here.
One of your peers, Société Générale to be precise, told us that it was contemplating the idea of securitize some loans from these types of customer in order to optimize its risk-weighted asset management. Is it something that you could also think about, or do you think that it's not a good idea? My last question would be about your global cost income ratio. As you said, you have reached all your targets except the target of the cost income ratio below 60%. Do you think that this is an achievable target in 2019, the last year of your medium-term plan. Thank you very much.
Thank you, Pierre. Starting with transaction banking activities, clearly we are acting, and we see also these businesses are key for our further development. We have been probably less vocal.
Should be more vocal.
We should be more vocal, but maybe we shouldn't stop acting at the same time.
Yes. Both are better.
I think it's a key area. We are going to give some color on that during the Investor Day in June. It's certainly natural, everybody looks at the market the same way, and we are talking about the same market. Clearly, transaction banking services are key in order to improve the stickiness of the customers and the loyalty of the customers across different geographies. It's absolutely decisive. Securitization of SME lending. What is for sure is that going forward, we will have to accelerate further our capacity to distribute a growing part of the loans that we originate if we want to weather an environment where liquidity may be a little bit more scarce than what it has been under the quantitative easing regime. I'm not announcing anything precise on that, but it's key that we are going to work on this issue, too. Cost-income ratio.
Clearly, we are not at the 60% level we are targeting for 2019. We are not there yet. We continue to target this level as being a good level. I think the explanation is quite clear. We evolved in a less positive rate environment that dented significantly the revenues of several business lines in the last two to three years. Clearly the cost-income ratio, as its name indicates, it's the result of the income and the cost. We've managed quite, I think, strongly the costs. We lacked a little bit some revenues in some business lines in order to reach the initially targeted cost-income ratio. We continue to target it. When we see different competitors on the French market, I think that the 62% level that we reached is already quite significantly better than most of our competitors.
Thank you.
Thank you. Next question. No more question?
Yes, one question.
One in the room.
Yes, Laura.
Hi. Can you hear me? Good afternoon. Azzurra Guelfi, Citigroup. Two question on capital. One is on credit risk-weighted asset. If I look at the quarter, you had loan growth, but credit risk-weighted asset went down. Can you explain me why? The second one is, maybe I have to wait the 6th of June, but I'll ask it anyway. How do you think about Switch 2?
Well, for the second question, maybe you have to wait a little bit. To be frank, you have seen what we did from a capital viewpoint last year. We generated a significant level of profitability. We accommodated our organic growth. We financed some tiny acquisitions here and there, but we had also to face some significant regulatory headwinds, and of course, until we think the situation from a regulatory viewpoint is completely settled and stabilized, it's very difficult to make a decision on something which represents 120 basis points of capital. On the first part of your question, excuse me.
Risk-Weighted Asset.
Risk-Weighted Asset. Yes. Well, we continue to work hard in order to, I would say, optimize the Risk-Weighted Asset density of our loan book, and in the last quarter, especially, we managed to transfer to our internal model, the IRB model, I think a loan book in Italy, probably the loan book coming from the three regional banks, if I remember correctly. This explains why we could accommodate the increase in the loan book whilst maintaining flat the RWA credit risk. Is there a last question on phone?
Thank you. The last question comes from the line of Omar Fall of Barclays. Please go ahead. Your line is open.
Hi there. Just going back to capital. You've ended the year on 11.5%, 50 basis points higher than the medium-term target, yet because of these regulatory impacts you had, you decided to forego risk-weighted asset growth and, I guess, revenues, as to protect the CET1, instead of just letting it drift down towards the target. Is the target really a fairly meaningless number in terms of what you're actually managing the business to? And then the second question, a very boring one. Can you just update us on the amount of both synergies and integration costs for the acquired, the three Italian banks. If you have absolute numbers and the timing, that would be great. Thank you.
I will start with your second question. Probably you'll be a little bit disappointed, but actually these three banks no longer exist. They have been completely merged into Cariparma, we don't have the capacity to really track what their cost basis has become, and we didn't want, to be frank, to invest too much in audit trail to track those numbers. Clearly we are now sticking to a very simple metric, which is the relative growth of the top line and the cost line within Cariparma. We want to go back to where the cost-income ratio of Cariparma was before the acquisition. This is the metric that we are going to follow.
The first step made in Q4 this year was to be in the situation where we managed to have a positive gap between the growth of the top line and the growth of the bottom line. On capital, 11% is the real target. We have no, I would say, hidden management buffer, for example, 50 basis points above 11% in order to be fully comfortable. If at a certain point in time, because of either regulatory reasons or organic growth reason, or acquisition or whatever, we are at 11.0%, it's not going to be an issue for us. It's very clear.
It happens that for the time being, we have always stated that we didn't want to take, I would say, drastic decisions on the structure of the capital before we see the end of the medium-term plan and before we see the regulatory landscape stabilizing. This doesn't mean that we have an additional management buffer above the 11% target. This is the real target, we don't need to have anything else above that. Any more questions?
Thank you.
Perhaps to thank you, I would like to add nothing about the substance and the content of the next medium-term plan, but something to give you some color about the philosophy of the future medium-term plan. The question is, how can we amplify all the successes, the results we get through the current plan? How can we amplify without changing all the decisions or the policy we decided about prudence, about the group level, and so on? The idea is very simple, I shall end on this point. When you look at the current plan, what we succeeded to add is a higher level of consistency at the group level to create synergies. Synergies not only for cost, but for revenues, too.
One of the example is that at the very 1st day of January, we created a new company together, all the infrastructure of IT of Crédit Agricole. This is one of the decision of the current plan, to take the benefits of a higher level of consistencies at the group level in terms of synergy. I think that for the new medium-term plan, we can amplify this way, trying to reach a higher level of consistency, this time to get a higher level of attractiveness in terms of attractiveness for customer. To do that, we shall focus on three main topics. Of course, the customer project, but on the societal footprint, too, on the human project. Just a word on this point. On the customer project, it's obvious that for the last years, the main process was a kind of banalization. That means normalization of banks.
You never ask us what the main difference between you and competitors. I mean, excepting financial results. I think that as we lived for many years a kind of globalization of the world, now a kind of de-globalization, we shall live between banks after the normalization period, a kind of redifferentiation in terms of approaches, in terms of difference for attractiveness. We can create that, but of course, we can't do that if we don't do this mistake to consider that we are just a conglomerate adding different business line.
Together, we can create different approaches of customer compared to other competitors. The customer project will be probably a point on which we shall be able to create really difference, not simply in terms of communication and management, really, on the business itself. The societal footprint, you are all aware that now it is just not a question of communication, but.
New spring of profitable business will be in anything useful for the environment on a larger comprehension of this term. We shall focus all the efforts of our entities to create a new kind of business about that, and to create, once again, a kind of re-differentiation compared to other competitors. At least for the human project, the rationale is very simple. You can read that in the current plan. Of course, the society is more and more digitalized. That means that it is more and more processed. That process are the main driver of many things. In this environment, human resources won't be simply the small part, not still digitalized, but the part on which you can provide to your customer the good part of responsibility.
I mean that the more the society will be digitalized, the more the behavior of human resources in terms of ability to appreciate situation and to decide in situation will be something really creating differentiation. I can't tell you anything precise about these topics. I can't give you any figure, of course, for the next medium term plan.
I wanted simply to tell you that there is really room to amplify what we did on this current medium term plan, simply going further so that a higher level of consistency for the group level could create, for this time, a real re-differentiation, not only of Predica, not only of Pacifica, not of CACEIS, but of Crédit Agricole Group, both for the customer project, for the external footprint, and for the real culture of managing HR for differentiation towards customer in a world that will be more and more digitalized. I hope that with this very short comment, you will be happy to come to our Investor Day, and I hope to see you soon. Thank you so much.
Thank you. That does conclude our conference for today. Thank you all for participating. You may all disconnect.