Good day, and welcome to the Third Quarter and First 9 Months Results 2018 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jerome Riebe, JetBlue's General Manager and Group CFO. Please go ahead, sir.
Good afternoon, everyone. It's my pleasure to start with this Q3 and 1st 9 months Results Conference. And I will try to go quite swiftly across the documents, but it leaves time to Let me start with Page 5 on which you have the main figures in terms of results. What you can see on this page is that Be it on the Q3 only or on the 1st 9 months, be it on a status basis On an underlying basis, you can see that the net profit of Credit Agricole S. K.
Is up. And actually, I think it's more relevant to take a look at the underlying figures considering the fact that in 2017, be it on the Q3 or on the first half of the year, we had Quite significant positive one offs, which are not repeated this year, namely the capital gain on the sale of Our stake in BASF in the 3rd quarter or the capital gain on the 2nd quarter in connection with the sale of the stake in Eurasia. So on an underlying basis, net profit is up 17% as compared to Q3 'seventeen. And on the 1st 9 months of the year, net profit is up 9.5%, which is quite significant. In this environment, the return on tangible equity on an annualized basis For the 1st 9 months of the year, it's slightly above 14% in terms of tangible equity.
And last point, and we'll go back on this one too. We have a further increase of the CET1 ratio at CASA level by 10 bps at 11.5 percent. And at group level, it comes into 14.9%, which is again an increase of 10 bps this quarter. On Page 6, A few additional highlights and key messages on this quarter. I think what is interesting to note is that The good results I was just mentioning are good either you look at them, I would say, horizontally or vertically.
Horizontally meaning line of the P and L by line of the P and L or vertically business line by business line. In terms of Horizontal across the board approach, I would say that we have a very positive view again this quarter as was the case in the first half of the year and so the cost income ratio at data level continues to significantly improve. And the second point is that this improvement and the increase of the net profit is something that we see in all business divisions. 2 or 3 additional points. I just want to recall that A few weeks ago, the long term rating of Kabi Agricole Group was raised by Standard and Poor to A plus So we are now at A plus or an equivalent grade with each of the 3 main rating agencies.
7 points, as you may have seen, we went through the stress test exercise quite nicely, showing the 10.2% CET1 ratio at the end of the press and not reaching the MDA level of any of the 3 years of the test. Last point, we had a very good news a few days ago also, which was the definitive settlement of The OFAC litigation called the criminal charges or criminal prosecution against us, which was Deferred up to now is now definitely dropped. Let me go now directly to page 9, where you can see an illustration of what I was just mentioning a few minutes ago. On the Q3 only, what you can see is that all business lines posted A net profit which is increasing only stable net profit for the SFS Business Vision that for Asset Gathering, Retail Banking and Large Customers, the net profit is up and significantly up for Large Customers Division. And for the 1st 9 months of the year, all the little bars are green, showing that the net profit of all business lines is up on the 1st 9 months of the year.
And as I explained, you can see it on Page 10, this result is 1st, due to the fact that the top line is quite significantly up, 5.9% on an underlying basis for the quarter and even 5% on a stated basis and 6.6% for the 1st 9 months of the year on an underlying basis and 6.4% on a stated basis. So it's a very solid for evolution of the top line. At the same time, the top line is kept under quick control With an increase in the region of 3.6% on an underlying basis and then 3.3% on a for the quarter, 4.9 on the 1st 9 months of the year. And in this context, obviously, the costincome ratio is improving. The stated the costincome ratio for CASA comes in at 62.4% for the quarter.
It's down 1 percentage point. And on an underlying basis, it's even down 1.4 percentage points on the quarter at 61.6%. In addition to that, the cost of risk is still very low and actually continues to Please on the perimeter of Credit Agricole S. A. It's more or less stable on the perimeter of the group.
It's due to the fact that within the regional banks in Q3 'seventeen, we had quite significant credit plus provision reversals. So there is, I would say, a base effect. But on the perimeter of Pedial Recall SA, We post a cost loss release, which is a little bit below €220,000,000 this quarter. It's down 17% as compared to Q3 2017. And what you can see is that on a rolling basis, on the 4 quarter volume basis, we are now at 26% for Kallie Igl S.
A, 18 Gives for the group globally. It's more or less half of the assumption that we made when we published the medium term plan in 2016. And in this context, what is interesting to note also is that the coverage ratio It continues to improve as compared to the previous period, both at the level of the group and at the level of the SA, the listed entity. This very good situation of the first half risk is also spread across the board. What you can see is that within LCL, it's more or less stable at a very low level.
Within Credit Agricole Italia, it continues to decline quite significantly and it's now reaching levels which We consider more or less as, I would say, target levels. Remind you that the target was initially at 60 bps, so we are now at 73 bps on a rolling basis, which is close to the target. For the financing activities of CACIB, actually, we are in a reversal position. So now the cost of risk is Slightly negative, which is obviously not a sustainable situation, not a sustainable position. And within the consumer credit space, It's a little bit up this quarter, but it's clearly, I would say, some volatility close to What you can see can be seen as a result in terms of cost of sales in this business, 110, 120 bps running.
On Page 14, again, the idea that Should be I call it, they have a scope of businesses, which is very diversified and thus very resilient. What you can see is that both in terms of revenues and in terms of net income, So we have a very good breakdown, very balanced breakdown of results across Let me go now precisely to the different business lines themselves, starting with the asset gathering activities. On Page 15, maybe just two highlights. 1st, We continue to have positive inflows in the different businesses, which are gathered into this business division. And the second element is that the net income group share continues to be globally up 5.7 If I zoom a little bit In the different businesses within this business division, starting with the insurance business, what you can see on page 15 is that The activity is very dynamic.
Outstandings are up and inflows are Significantly up in savings and retirement activities. What is interesting is that the euro Fund is catching up a little bit with a significant positive inflow this quarter, but not at the extent Of the Unit Link business, because the Unit Link inflows Still stable or a little bit above €1,000,000,000 this quarter again. At the same time, non life activities Continue to be very dynamic, and we are still gaining market share in T and C activities in individual and group In this context, the results are quite positively oriented with net profit, which is It's up 7% on the quarter. It's apparently stable on the 1st 9 months as compared to the 1st 9 months of 2017. But Actually, you may remember that in 2017, we booked a €30,000,000 profit with the sale of our Reinsurance activity in Luxembourg and excluding this sale in 2017, the net profit is up 3.5% 9 months on 9 months.
Amundi, obviously, you know everything about Amundi, which published its results already 10 or 15 days ago. What I just want to mention is that the collect the inflows are still positive this quarter again. And not only It's a positive quarter in terms of inflows, but the inflows continue to be of good quality with a skew towards retail assets and towards long term assets. Revenues are more or less bottoming this quarter due to the fact that we have had almost no performances. The cost base continues to decrease and all the cost synergies That were expected from the merger with Pioneer are not completely realized yet.
So it means that we still have room for further improvement. And in this context, the net income group share is up 5% on the quarter without any scope effect, obviously, at 29.7% on the 1st 9 months with a scope effect on the 1st 6 months of the year. NCL is another business in which we had a very good quarter this year with a 2 topic in a nutshell, credit demand, which continues to be dynamic, both coming from Corporate SMEs, Self Employed Professionals and Household. So Credit outstanding loans outstanding are up 6.5% as compared to September end of September last year. We gained New customers, again, around 10,000 new customers this quarter.
And these are real customers. We are not opening bank accounts just for the pleasure of opening bank accounts. These are real customers, which is fully illustrated by the fact that our equipment rate of the customer base of ICL continues to improve, be it in payment cards or the different insurance policy products. In this context, revenues are up 2.3%, costs continue to be down 2 9% for the gross operating income is up 15% and net income group share is up 14% on the quarter. Italy, retail banking activities in Italy, As you know, we managed to complete all the legal mergers in the course of this 3rd quarter, so we have now only one single entity.
We have no longer the capacity of Breaking down the figures between those coming from the historical perimeter and those coming from the 3 banks both at the end of last year. So I'm going to comment just the global figures. Loans outstanding are up quite significantly, plus 13.4%. And actually, we have Had especially a very good momentum in home loans with outstanding up 6% on the current scope as compared to market, which was increasing only by a little bit less than 3%. In this context, revenues are up close to 10%, costs are up 16.5%, but obviously, We are only starting to realize the cost synergies once the legal mergers are completed.
We are now able to work on the IT Migrations and on the SaaS reduction plan, which is now starting. And the cost of risk is further declining, as I already said, minus 12.4%. So this is fueling a good behavior of the net income group share, which is up 19% on the quarter and it rose to 10% in the 1st 9 months of the year. Now, credit technical in Italy, I think it's interesting to take a further look at what we now represent in Italy considering The completion of the different acquisitions that we've made in these countries in the last 15 or 18 months. I think it's important to note that in the 1st 9 months of the year of this year, we've already managed to Net profit of a little bit above €420,000,000 in 9 months, which compares to the €550,000,000 or €545,000,000 for the full year 2017.
And the quality of the credit portfolio that we have credit portfolios, I should say, that we have in Italy continues to improve quite sharply with a drop in the level of NPLs and a further increase in the coverage ratio. The rest of the international retail banking activities almost no, I would say, Significant elements to keep in mind just keep in mind that with almost no ForEx effect, With currency effect, we have a sharp increase in the net profit, plus 21% on the quarter and plus 24% on the 1st 9 months of the year. The profit of the 1st 9 months is now close to €100,000,000,000 Specialized Financial Services, again, a very good quarter in terms of activity with Gross managed loan book of CACF, which is up close to 7% with a leading book, which is also up 3.5% and with a very good level of activity in the factoring business. In this context, revenues are up 2.9% when the costs are only up 0.6%. So the Gross operating income is up 5%.
We have had some volatility in the cost of risk, as I already mentioned. And so actually, the net income group share of the division is almost flat for the quarter and will be up for the 1st 9 months of 2018. Large customer division, a good quarter overall with some discrepancies inside this to the business division. A good quarter overall because on an underlying basis. The net income group share is up 45%, The revenues are up 5.5% and the costs are up only 4.3%, so positive growth again in this with Net division.
In addition to that, the RWAs consumed or used by the CIB activities, which were quite significantly up in the Q2 are now a little bit down. So It shows again what I already said is that we have the ability and capacity to monitor precisely the level of RWA that we allocate to this business. In terms of revenues, there is a strong contrast between the financing activities of the CIB, which posted a very sharp Increase in the level of revenues was 25%, when at the same time, the Capital Markets and Investment Banking revenues were down as a result of very good volumes in this division, but very thin margins actually. And so we experienced this decrease in the level of revenues. In the Asset Servicing business, Again, a very good level of revenues, up 11% in connection with the development of the traditional businesses on the Investor Relations and also the development of new businesses like the clearing of derivatives.
So all in all, a good level of profitability for this business division. Coming to the corporate center, Net loss around €200,000,000, perfectly in line with actually the guidance for the full year and for next year. Some additional costs this quarter in connection with IT investments or investments in the area of Statements, which are accounted for in this business division or corporate center division and some volatility in the level of frozen news, but nothing worth to comment in-depth. Coming now to the regional banks of Credit Agricole. It's always interesting to compare the performance of the regional banks I recall with the one of FPL, because this is giving a good idea of the evolution of the retail market in France.
And what is interesting to note is that we have more or less the same trend in terms of development of the business, Strong increase in the loan book, on the last 12 months in net 136 additional customers, 114 1,000 for the regional banks in 9 months and 22,000 for Biforbach in the same 9 months period. And what is interesting also is to note that this is progressively translating also for the regional banks, due to an increase in the Top line with revenues up 1% this quarter. So this is clearly a positive sign in terms of And our capacity progressively through a constant rate the pressure on net interest margin, which continues by the development of volumes and by the development of commissions. Going now to the Solvency, I already mentioned that the common equity Tier 1 ratio of credit equity pay stay Net profit, I was just mentioning, minus the distribution. So we retain 16 bps of earnings.
Then we use, I would say, almost nothing, 1 bps for the organic growth. This quarter, it was quite and stable actually the level of RWAs, but we consume 7 bits of solvency due to the decrease in the level of the OCI reserves, which is again perfectly in line with all The metric that we have in mind about the evolution of the OCI results. I remind you that we also booked this quarter the employee capital increase beginning of July. So it's another 4 bps of solvency that we added up to our ratio this quarter. And so this is leading to the 11.5% CET1 ratio.
Again, I already mentioned it, but I want to give you the figure. The evolution of RWA between June September was almost flat at €307,000,000,000 At group level, Again, an increase of 10 bps at the CET1 ratio from 14.8% up to 14.9%, We paid earnings 26 bps, OCI reserves minus 4,000,000 and organic growth, it is much sharper at group level. The RWA is a group level increase by around €5,000,000,000 So the organic growth consumed 10 bps of solvency. And like we showed 21.2%, nothing much to mention, the target of 22% is perfectly, and I would say reachable by the end of next year. Funding no specific issues, We managed to book and to complete the funding program of clinical by the end of September.
We still have to continue for the rest of the group in the last quarter, but things are perfectly on track and nothing left to mention. Liquidity, the reserves are still very high, €250,000,000,000 of liquidity reserves and the surplus of stable funds, which continues to be steadily above €100,000,000, nothing much to mention. I am now finished with this presentation, and I think it's better now to give you the floor in order to raise your questions. Thank you.
Thank you.
We can now take our first question from Josephine Lee of JPMorgan.
Yes, good afternoon. Thank you for taking my questions. Just three quick ones, if I may. First of all, would you mind just giving a little bit of color on Italy in terms of top line performance, just to understand a little bit about the trends in terms of margins, Fee growth and also a reminder of do you have any cultural amount that you've taken? My second question is on insurance.
Performance has been reached out this quarter. Just trying to understand what we should expect. Is this new the new run rate, given that it's the best quarter so far for a long time? So I'm just wondering If we can extrapolate this number given the items that you have mentioned on market share gains in non And life seems to be still resilient. And my last question is on capital.
When do you expect the 30 Two basis points regulatory impacts by end of 2019. Should we see that mostly towards At the end of 2019? Or do we expect any sort of model adjustments in the coming quarters? And also if you could remind us in terms of assumptions on the OCI reserves, what rate assumptions you have Taken on the 50 basis points decrease that you had embedded in your business plan. Thank you very much.
Okay. Many questions, Delfin, so I'm trying to be swift in my answers. First one on Italy and on revenues in Italy. We booked €453,000,000 of revenues in Italy this quarter. In the first Half of the year, we booked in average I should say, in the first two quarters of the year, the average was EUR 4.73 million.
So the 3rd quarter is down EUR 20,000,000 as compared to the average of the 1st 2 quarters of the year. I think this can be very easily explained by first the seasonality. The It is always a little bit weaker in the Q3 due to the summer vacation. And second, precisely, The legal merger, because this was a period of time when the management, not only of the 3 banks, but also of Kariparma, It was completely dedicated to the success of those legal mergers. And so obviously, I would say that The sales kept going, but not at the same pace.
So clearly, what we can say is that This quarter 2018 was a weak quarter in terms of revenue, but perfectly explainable weakness. And so I expect clearly to see this number going up in the coming quarters, even though in Italy, as in France, We have a certain pressure on margin and we have also a certain pressure on the pricing of the different Fees and commissions that we take, it's always the case in the retail businesses in Europe. Insurance. Insurance, we have had this quarter, I would say, a more normal level of revenues than in the Q3 of for 2017. You may remember that during the conference call I held 1 year ago, I have had to answer many questions about the level of revenues in the Inference business.
So I think the level of revenues that we had this quarter is a much more normal level. Nevertheless, If going forward, we have some very significant and exceptional capital gains on the scale of certain assets This may lead to weaker recognition of financial margins, so Preservation, obviously, of the level of profitability, the bottom line, this may lead to a weaker level of Top line. But clearly, the €600,000,000 something that we had this quarter is at a much more normal level than the one we had 1 year ago. On capital, you mentioned first The question of when are we supposed to have the impact of the remaining 32 bps of regulatory headwinds. 1st point, 32 is the rest of the non used part of the 70 bps We put it 2.5 years ago, so it's not as precise as that.
It may be 30 or 35 or whatever. So it's not a commitment to use 32 and only 32 bps of solvency up to the end of 2019 for, I would say, regulatory headwinds. It was a rough idea. And for the time being, I see nothing That could modify this group ID, but it's not a precision at one basis point. This being said, I have no precise timetable in mind, but it's Possible that in the coming quarters, be it the last quarter of this year or the beginning of 2019, So we are presently discussing with the ECB on the outcome of certain TRIM reviews that they've Undertaking results, so it's possible that once the discussions come to an end, we take into account the conclusion of the discussion.
So It's possible Q4 of this year or beginning of next year, but again without any element That could lead to something different or significantly different from what you have in mind. Then the OCI, We have, at the end of June, in our CET1 ratio, we had, All in all, around 40 to 45 gigs of OCI impact. So it means that after The Q3, we are now a little bit below 40, probably around 35 or something like that. Excuse me, end of September. So we have now end of September 43, if I'm Not mistaken, bps of OCI.
So you know that there is no precise date when all the OCIs are going You know that 0 is not a level which is an absolute level that cannot We can be above our BO, but this is just to give you an idea of the type of, I would say, impact of UHCI that we still have in our ratio.
Great. Thank you very much.
Okay.
Thank We will now take our next question from Jon Pease from Credit Suisse.
Yes, thank you. Could you talk about some of the trends in the multi corporates, please? So firstly, the fixed income, I know the year on year growth similar to one of your peers, but it looks like from a market share point of view, you may have slipped a little bit. So Do you feel that the run rate in fixed income was a little bit unusually low this quarter? Then on the flip side, How should we think about the sustainability of financing?
Were you particularly pleased with what you were able to achieve? And is there any interplay between And then just another comment, please, on the cost of risk. I mean, I know right now, they're not sustainable forever, but You've had a little run now. Do you see any change in the outlook for asset quality in large corporate in Q?
Okay. On the CIB and the large corporate, I don't think we've lost significant market shares or I don't think we've lost market shares at all In the fixed income FICC businesses, from one quarter to another, your And the tables can vary. Actually, what I am seeing in the last 12, 18 or 24 months It is more an improvement of our respective positions than So I think that in terms of market share, we manage more or less to keep our position. In terms of revenues, you have to keep in mind 2 elements as far as the capital markets activities are concerned. The first one is that We have no or almost no revenues coming from savings.
We are almost exclusively commercially oriented, so the trading revenues are very weak. So On a quarter where trading activities may generate significant profit, we are not going to benefit from that. On a quarter where the trading activities are loss makers, we are not going to suffer from it. Clearly, By far, the biggest part of our capital market revenues are coming from commercial customer activity. The second key point is that we have almost no equities activity in the Capital Markets Business.
We are almost only concentrated and focused on fixed income currencies and rates, and we have almost no equities activity. And what I can see when I try to read across the figures of my competitors In the FICC field, we see more or less the same kind of figures. But For some competitors, we have a significant catch up, which is coming from equity activities. Then, of course, there is also a possible equilibrium time between capital market And what is true is that actually our customers Often can choose their routes to finance their activities. They can take the route of Loans or vacancy the route of loans for digitalization.
And we have the capacity to serve them in those different fields. Meaning that we are able to finance them through syndicated loans, through structured loans, but also through securitizations of bond issuance. And it's true that in this situation, the level of revenues can marginally switch from one in addition to the other one depending on the appetite of the customer. But this being said, again, I'm not seeing any market share reduction for CACIB globally towards its customers. Excuse me, cost of risk, I've forgotten this one.
On the cost of risk, Especially with CACIB, as you said, credit risk reversal are not a sustainable situation. But at the same time, all these reversals that we have booked this quarter are due to some specific files I know on which we have had, I would say, a field recovery. So it's not A change in our appreciation of the level of potential risk is really the fact that we got the money back somehow. So it means that those reversals are absolutely without any doubt. And going forward, I don't see any specific risk arising.
So it doesn't mean that we will not have Some specific files are coming in the next quarter, but since from now on, I don't see anything coming
And I don't
I don't any reason why we should have, going forward, a significant increase in the cost of risk. Then the last point as far as the cost of risk is concerned, and this is a subject that is Not only to Casting, but to all businesses. We are progressively learning to leave with IFRS 9. And you know that in IFRS 9, we have the specific provisions on the bucket 3, And we have also the collective provisions. They are not collective because they are individual, but they are based on models and on assumptions on budget 1 and budget 2.
So we are learning to live with with new regulation and this may lead to some volatility because we you know that we have to make scenarios and we have then to apply those scenarios to our different portfolios in order to identify Horizon 2 maturity for W2. So this may trigger some volatility going forward, but No deterioration that I can identify so far.
Great. Thank you.
Thank you. We can now take our next question from Jacques Henri Juliard from Kepler Cheuvreux.
Please go ahead. Your line.
It's very good effort, operator. Two questions, please. The first one, you have reported on a 9 month level a result of €3,400,000,000 Now if I do elementary math, I divide that by 9, multiply that by 12, I end up with €4,500,000,000 which tends to make us believe with only 3 months left in the year that your €4,200,000,000 net profit target for the whole plan of 'nineteen will May well be different this time in Q4 'eighteen and for
the full year, I would
like your comments on that. And the second question, More generic, but the thing we've heard talking about the Calyarico investment case with investors is the fact that it's in your insurance competitors are complaining about Your favorite capital treatment of the insurance business, which will enable you to make more profitable and write, obviously, more business.
And you have that sort
of like story that resurfaces every 3, 4 months about the Danish Can we have a bit of an update on that and maybe your reaction to what you're no doubt jealous competitors are saying? Thank you.
Always easy questions, Jacinto. Thank you for that. The first one, I don't want to make any prediction. So I'm not giving you any guidance on what is going to be our profit for the Q4 of the year. Then I learned math when I was a boy, so I understand what you we'll see at the end of the year where we stand.
Just let me remind you that our 2019 medium term plan didn't have a single objective. We had from a series of objectives and we are very interested not only to reach the global net profit objective, but all the other objectives. You cannot summarize, I would say, the medium term trends, only the €4,200,000,000 of net profit. As far as the Danish Compromise is concerned, again, I think I already had the Opportunity to explain that, but when you run the insurance business of the group, and I know quite well how it works. You are operating with exactly the same level of capital and the same profitability target than a few insurers.
It means that, with exactly the same method, Frederic Assurance is monitoring its solvency with a target which is, I think, between 160% and 200% of solvency. Actually, it's now even a little bit above 200%. And so it has exactly the same solvency requirement as a pure traditional insurer. The fact that once it's integrated within the financial conglomerate with all the requirements of being managed inside the conglomerate with the recognition of the ECB that we actually monitor the insurance activities in a conglomerate manner, I would say. And once it's recognized that our conglomerate ratio It's also above the target.
Then you can be granted the Danish conformal. It has nothing to do With the way the insurance division is operating and to be even more precise, with the way the insurance Nothing can be searched on the field of competition from an insurer to another one. Okay, thank you. Thank you.
Thank you. We can now take our next question from Azura Zulfi of Citi. Go ahead. Your line is open.
Hi, good afternoon. Two questions. One is on the margin in France. Can you give an outlook on how is the development of The lending margin in France and the true competition and the pricing ability. The other one is on
the risk asset of the group.
At group level, they were broadly flat. But when I look at various divisions, it seems that there has been some
Okay, Azuard. On Retail margin, unfortunately, the margin is not improving and it's even further deteriorating, meaning that The difference between I can illustrate that with 2 figures, either the difference between the average yield Of the asset portfolio and the average cost of the liability portfolio, this is this continues to shrink a little bit. And the second indicator, I would say, is the difference between the front book and the back book. The back book, I. E, and it's especially the case for home loans, but the back book It still has a yield interest rate, which is A little bit below, but still close to 2% when we write new business at a level which is up 1.5%.
So clearly, we still have a pressure on the net interest margin. Fortunately, we are now able to compensate with the development of the volumes on the one hand and the development of the commission fees on the other hand. But in terms of real net interest margin, we are under pressure, and we see that both at LCL and at the reserve index. In terms of RWA calculation, in retail, I think that Unless I'm missing something, I think that we didn't modify significantly the way we compute our RWAs. It simply is in connection with the fact that we had a strong development of home loans.
And as you know, home loans have only a very low RWA density actually. So this may explain the discrepancy that you are mentioning. More globally, it's true that everywhere we can, we try to optimize the way we calculate the RWAs. And Probably been the case in the Capital Market activity this quarter because you have mentioned that we reduced a little bit the arguably raised in this business division, so I don't have all the figures in mind. It may be linked to the fact that the VAR continued to decline, which is something that I have perfectly in mind, But we have also some other components of the RWA consumption of The global RWA consumption and capital market activities may be in connection with different Another explanation, the last one being possibly some adjustment on the calculation.
But Again, we try permanently to improve and sometimes to optimize our models. Of course, this is another scrutiny of the ECB. So No doubt that any positive evolution of any model is checked many, many times before being implemented, but this may be in connection with that. As far as the VAR is concerned, it went down from 5 €800,000 in Q2, down to €4,900,000 in Q3. So this may trigger a significant RWA decrease.
Thank you.
Thank you. We can We now take our next question from Maxime Livolot, Jefferies.
Hi, Maxime Livolot, Jefferies. A quick follow-up on net interest margin at NCL, please. Can you give us a breakdown between The commercial margins and the trends on the replication portfolios. Second question will be on the non life insurance. Can you give us a little bit more color where you are the more active and where you are able to gain more market share between the car insurance, home insurance, health insurance.
Thank you, Jerome.
Thank you. Let's start with the second question. So in non life insurance policies, We are gaining steady market share at about the same pace in holding car insurance. These are the main two products in which we are very active. We have a long, long History now, a good capacity of pricing rather efficiently the different policies.
So This is an area in which clearly we have the capacity to gain market share and to continue to gain market share. We have also, To be frank, an edge in terms of being able to focus the products at the right moment because thanks to our knowledge of the Banking life of our customers, we are able to identify the moment when we can propose either the home insurance or the car insurance. In Health and Protection Businesses, the situation is a little bit more complicated actually, because actually we are in a situation where the you have different layers of insurance. You have The and let me start with the health insurance. You have the security social, which is representing a compulsory provided by the employer.
And this is why 4, 5 years ago, we decided to launch group Health insurance policies in order to propose to our SMEs and corporate customers The capacity to fulfill their legal obligation to propose the 2nd layer of protection and then some customers may want to have 3rd layer of protection in order to be sure that there is no charge left to them even if they Go to see expensive doctors and they have expensive hospital costs. And so this is where we can propose an individual policy. So it's, I would say, a more specific business in which Actually, we are developing at the same time an offer group of in order to cover the 2nd layer of products and A specific individual policy, either for employees looking for a 3rd layer or for Self employed person, which who obviously don't have any employer to provide the 2nd layer. So we are developing, but it's, I would say, less straightforward than the car and home insurance. And then we have, of course, the creditor insurance, which is a business in which we have a significant market share.
And obviously, With the development of the new regulations, we considered in the beginning of the year that we could lose a little bit of ground, But actually, we managed to be able to continue to price quite aggressively those policies. And so actually, we continue to grow a little bit the revenues coming from clinical insurance again this quarter as compared to Q3 'seventeen. And in business, maybe in addition to that, You may remember that beginning of 'eighteen or even end of 'seventeen, we They internalized fully the contract that was covered by CMT with regional banks since I think 50 years. So this is also representing a booster for us in the development of our credit or reinsurance activities. Going back to LCL, your question What about
On the net interest margin, can we have a split between where the pressure is coming from? Is it coming from personnel, where clearly the competition seems to accelerate on mortgages? But on the other side, the speed of growing on corporates should help you? And also, can we have a little bit more feedback on where are you regarding the replication portfolio?
Yes. Well, clearly, the pressure continues to come from the home loans. They represent the biggest volume of loans that we have in the book of Retail Bank. And clearly, this is where the pressure is coming from. With 2 aspects, First, it's a fixed rate on a very long maturity.
So this is something that we are going to keep on our books for a long time. And the second element is that, as you know, on the French market, this is through a home loan that you may attract a new customer. As far as the other categories of loans are concerned, we are in a different environment. And so we managed to More or less, our margins, consumer credit, which are booked in the books of LCL It's typically a 2.5% 2 to 3 years duration, and we see, of course, strong competition coming not only from other banks, but also from consumer credit specialists, but we manage to see more or less our margin. And for the SMEs and corporate loans, you know that it's mostly variable rate
Thank you.
We can now take our next question from Nick Davy of Redburn.
Good afternoon, everyone. A couple of questions, please. The first one, if
we can come back
to HPT, and thank you for your comments about The soft revenues in Q3, but I suppose my question would then focus on the cost line, if you could just give us any more Detail on the scale and timing of any synergies you're aiming to get out. If I just step back and look at the 9 months operating trends, 12% cost of 20%. Just trying to understand when you think you can get this business back to positive jaws, which you're seeing across And the second question please on LTL. There's one simple part of the question, which is that You've seen 3.5% revenue growth in the quarter year on year, clean of renegotiation fees.
Can we dream of that
level of revenue growth next year? And then maybe just as a follow-up question, sort of following up on Maxence's question on the application portfolio. I was interested to hear you say that you thought your product margin was 2%. And when I look at your net interest margin, just your NII divided by loans,
it's about
1.5%. Would that maybe give us a clue about Where you are on your liquidating portfolio and your swap position overall, which is that you're paying away this spot spread, which seems quite a different outcome to your peers. I guess you won't comment on the last bit, but maybe if you have any other thoughts on that, Again, arithmetic, that will be helpful. Thank you.
Okay. On Italy, as far as the Costs are concerned. If I make the same kind of calculation, in average, we had €293,000,000 of costs for the 1st 2 quarters and €293,000,000 for the Q3. So we have already started the decline of the cost base. But clearly, we have we are targeting, of course, a positive show, and we are targeting to benefit from an optimization of the branches networks of the 3 banks that we purchased, a reduction of the number of staff globally and some reductions in the IT costs.
So clearly, we Correct, somewhere in 2019 to go through a more normal situation where the view is positive between The evolution of the top line and the evolution of the cost line. But just keep in mind that we purchased Initially had a cost income ratio, which was significantly above 100%. Their portfolio of assets is clean, and this was a condition on which they were very strict, but their operating parameters were very weak and this is precisely because we thought that we had the capacity to Improve this operational parameter that we were interested in this purchase. But of course, it takes a little time before we completely Fine tune the situation. So just give us a little time.
And what we expect is that in the meanwhile, If we can continue to benefit a little bit from the further reduction in the first half of this, we are going to, I would say, cover the period of time Before the moment, we are going to see a positive draw on the upper part of the P and L. As far as LCL is concerned, first, it may be a little bit, I would say, Lazardos are dangerous to say so, but I expect indeed, and it's before all the internal budget procedures I expect SBL to propose to me an increase of the top line for 2019. We see exactly how far they can go, but this is something which should be and I had forgotten to answer To Max's question about the hedge book, but indeed, we are now in a situation, and I'm not going to comment in-depth About that, we are now in a situation, obviously, where hedging the book is always healthy. By definition, it's like an insurance premium. If you want to be protected, you have to pay something.
So we are paying something in order to protect a little bit our revenues, but we are now in a situation where
Okay. Thank you.
Thank you. We can now take our next question from Kiri Vijayrajha of HSBC.
Yes. Good afternoon, Jerome. A couple of questions on Italy. So firstly, on the agos side and the rising cost of risk you show on Slide 20. So Based on your earlier comments, am I right to take it that all of that increase you're showing through the course of this year to risk in agos is all from IFRS 9?
And that actually in terms of fresh produce emerging this year is actually pretty limited. And then on the other piece of Italy on the IRB It's a little bit of a question. Just trying to understand the volume dynamics there because I think your loans and your deposits both shrinking quarter on quarter, actually the preceding Slide 19. So is that just a one off clip as you integrate the acquisitions you did? Or is there something else driving that, please?
Thank you.
Okay. I'm not pretending that all the volatility is in connection to IFRS 9. What I'm saying is that Starting in the beginning of 2017, IFRS nine has started to become a key component of the way we are provisioning the on credit books. So this has increased a little bit the volatility, which is in this business, which is, I would say, a strategic view of volatility rather than AEA as volatility leads to individual specific files It is in the CIB. What we can say in a nutshell on the cost of risk at Agros is that Between 110 bps and 120 bps, we are on the cost of risk, which may be seen as a normal cost of risk and a low normal cost of risk.
In addition to that, we could Try to elaborate a little bit around a kind of compound ratio for the consumer credit business like we do in the P and C in France Business, which would be to adopt the cost of risk and the operating cost and to compared to the level of revenues. And what we can see is that actually we see ACF globally. I didn't do the math for only Airbus. What we can see is that, beyond the quarter or beyond the 1st 9 months of 2018, We are more or less stable as compared to the same periods of 2017. So it means that probably it's a business Which you can accelerate a little bit the growth by modifying a little bit your pricing and you have so capacity of Fine tuning the business, and so it's more important to look at the global equilibrium rather than only at the single line of the P and L.
So clearly, at Agros, I think that in the region where we are now in terms of cost of risk, around 115, 120, it's a low normal level of cost of risk. And we don't see any significance of a sign of deterioration. In addition to that, it's Probably only a coincidence, but at 118 DISH at AgOS, We are exactly at the average type of risk for the whole of CACF this quarter. In terms of Balance sheet evolution at the Italian Retail Activities. As far as the loan book is concerned, We have this quarter a significant sale of NPL for a nominal amount of €700,000,000 So clearly, this explains The biggest part of the evolution between June September.
And as far as the customer deposits Confirmed. It happens that we found in the banks that we purchased some Expensive deposit from corporates and of course, we wanted to reduce a little bit The cost is trending and so we reduced a little bit our off road pricing, accepting obviously to see some deposits going away. So nothing that would indicate a less dynamic commercial approach within our retail banking activity in Chile.
Great. Thanks very much.
Thank you. We can now take our next question from Ghidholm Kiburgan of AXA.
Yes. Good afternoon. I have
two questions. Number 1 is on cost of risk. So you had a target in the medium term plan to have 50% cost of risk, which is about twice the current level. And I have the comments you made for the various divisions. But when do you think or how do you think
is a
normalized At what level is it going to be more normalized? Can you update us on what you think is a normalized level? Sorry, I was not very clear there. And then the other question relates to, well, a follow-up on what Jacquerie Ask Talia, which is that in the event where you reach a year in advance your targets, when do you think is reasonable to update us On your new strategic plan.
So I'm raising 2 questions, but you will get only one answer, Which is no, to be more serious, I think that reassessing what is the normal cost of this is something which Quite complicated because we have to assess what is the environment, how is that It has evolved and so on and so forth. And so I think that the idea is probably to reassess What would be a normal or average across the cycle cost of risk for the new or next million pound plan, which is going probably to take place somewhere in 2019. I don't know exactly when, but It's obvious that as we are reaching the end of the present medium term plan, it's going to be a response to to give some additional and further visibility. So we are going somehow to update and prolong Our objectives and when we are going to do that, we are going to reassess what is a normal cost of risk.
Whether you think this reassessment will be in H1 or in H2?
No, no, yes.
From Bruce Hamilton of Morgan Stanley.
Hi. Good afternoon, Gerard. Thank you. Just a quick follow-up on the insurance business. So obviously, good print in Q3.
Just to check the I know in Q2, part of The trend there was an addition to policyholder reserves. In Q3, I assume you haven't reversed any of that, so that's still something that could happen In Q4, just to check. And then secondly, Solvency, you said it's over 200%. Could you give us a precise number? And is there a point at which You feel pressure to upstream capital, I.
E, you'd want to move some of that excess capital up from insurance? Thank you.
Well, on insurance, it's true that we are fine tuning, I would say, the breakdown between What is given immediately to the policyholders and what is kept in our reserves only on Q4 because this is where we know exactly what are the Financial products for the full year and we see this at the moment when we can have a better idea of the expectations that you would tell the customers in terms of of the future. So every figure is only provisional between January 1st and the end of the year, but We didn't change significantly the level of the famous TTE provision in The Q3, I think it was more or less stable. No significant add up and no reversal, if I remember correctly. In terms of solvency, I don't have the precise figure in mind, but it's A little bit slightly above 200%, if I remember correctly. Of course, every year, we upstream after the excess of capital of Any of our activities, not only the insurance business in the form of dividend, because We have an internal rule, which is normally that 95% of the profits of each business division is upstream to CASA.
And if the development, the organic growth of any of the subsidiaries requires some additional capital, Then either this dividend is paid partially or EUR2 1,000,000,000 under the script form or we Make a specific capital increase, but the rule is that, obviously, we don't want to leave unused capital at the level of a subsidiary. This explains a little bit some evolutions of RWA across the year because As time passes by quarter after quarter, the equity accounted value of the insurance business increases by the Retained, even if it's only for a small amount of time, retained earnings Once a year, when the dividend is paid, then we reduce the equity accounted accounted value of the insurance business. And this is the time where the
Thank
you. Thank you.
Thank you. You can now take our next question from Matthew Clark of Mediobanca.
Two questions. So firstly, on the Saudi The dividend, could you just quantify the benefit of the top line of the financing division? I'm guessing it was A material driver of the strength we've seen in the 2nd Q3. If you could give us a number, that would be helpful. And also could you update us on your current thinking of Plans for that state?
And then second question is just on the seasonality. In the Q4 of In 2017, there were lots of lumpy charges pushed through in the Q4 that depressed the headline profits. I'm just wondering if you have any visibility on whether we should expect similar charges to come from this year or whether we should expect a cleaner 4th quarter? Thanks.
Can you repeat your last question, because I think I missed the first phrase and I don't really understand what you are talking about.
I'm just wondering if there are going to be lots of impairments and restructuring charges in the Q4 that depressed The profit has been in Q4 'sixteen and Q4 'seventeen. And so whether you have any visibility on lumpy items
Okay. Let's start with the BASF. In terms of dividend, just maybe to give you some figures. In 2017, We had €175,000,000 for the 1st 9 months of 2017, we had €175,000,000 of equity accounted contribution coming from BASF, 175, Since it's been deconsolidated in the beginning of Q4 'seventeen, We had twice some dividends that we received from BFF, EUR 16,000,000 in the Q2 of 2018 €39,000,000 in the Q3 of 2018. So it's not a significant amount.
It's a much smaller amount actually than the former equity accounted contribution. 1st, because the Stake has been divided by 2, a little bit more than 2. And second, because actually the dividend is Can I just check with
that €39,000,000 is a net of tax or a gross of tax?
It's a dividend that is The net banking income. Net of course, okay, but net banking income. You're talking about the goodwill impairment, possible goodwill impairment, is that right?
Goodwill or any other impairment So restructuring charges or the like?
Well, restructuring charges actually what we book and what we actually restate It is only now a small amount in connection with intelligent integration of Pioneer Amundi integration, but The amounts are very tiny and actually they are declining very rapidly and we don't expect seeing as of now any other significant run off in the
Thank you. We can now take our next question from Flora Benhakoun of Deutsche Bank.
Good afternoon. I have just two questions left, please. So the first question is going to capital. Just a general question regarding your order of preference for the usage of Any potential excess capital that you will have, what would you prefer whether it is paying more dividend as a payout, potentially doing some bolt on acquisitions. And if so, what kind of businesses, what kind of geographies Or even potentially partly repairing the Switch 2.
The second question is a general question regarding your exposure to Italy. Just to ask you regarding the client activity, how it's changed potentially over the past few weeks months, post the recent events. Thank you.
Thank you. I'm going to start with the first question. When we set this payout policy, Dividend policy, 50% cash payout. We assume that this fifty-fifty breakdown of the between the normal remuneration of the shareholders and what is usable either to fuel the organic growth or to finance some acquisitions or potentially to finance Regulatory headwind. So we are not going to reassess this overall policy every other year or every other quarter.
So for the time being, we stick to this policy. When we will reach the end of the present medium term plan, we will fully reassess for overall performance in terms of capital generation during the plan, and we will see exactly if we Change or not our position. But to be frank, we think that globally, the fifty-fifty Breakdown of the net attributable profit between the shareholders and the feeling of the development of the group is Quite sensible, I would say. So don't expect too many changes rapidly. In terms of Italy, of course, the situation is moving.
I'm talking about the political situation and the strength of the discussions between the Italian government and European Commission. This subject is evolving on a daily or weekly basis. But As of now, this has not really triggered any significant changes in the behavior of our customers. As you know, our retail activities are located in the northern part of Italy, where you have the biggest, I would say, consistent with SMEs and Corporate and Entrepreneurs And these people, they continue to invest and continue to export. They continue to Develop their activities and so for the time being at least, we haven't seen any significant modification in the customer behavior.
What we have seen is that in connection with the incidence of the Italian spread, Financing conditions on the Italian market are going to tighten a little bit horribly. But this is more, I would say, A macro financial issue than a real macroeconomic situation, evolution.
Okay. Yes. Thank you.
Thank you. We can
now take our next question from Franca Ringen of Royal Bank of Canada.
Yes. Thank you very much. I just had two questions left. One is on the corporate center. I understand it's quite volatile, but I just wondered, I guess, do you reiterate your €700,000,000 net loss for 2019?
But in the meantime, are there any reasons why you should be running Slightly higher, for example, investments or anything else. And then on the financing business, I guess the profit and consumption or the increase in risk weighted assets and the higher revenues are opportunistic. But I was wondering, would you think that Q3 is a level we should assume the division continues to consume in terms of capital or risk of assets? Thank you.
For the corporate center, I think that there is some volatility because In the revenue line of the Corporate Center, we booked not only the cost of the funding of the group, As I already explained many times, but also some tons of revenues, be it some dividends And results of portfolio of private equity investments or elements like that, for example, the results of the Real Estate Business, as I hope. So we have some tiny pieces that may generate some volatility on the top line of the corporate center. In terms of cost, the biggest part of the cost of the corporate sector is linked to the holding entity. And this part of the cost is declining actually because we are working in order to reduce the cost as much as we can. But we have also some additional entities that accounted for within the corporate center in which we are investing.
And namely, we have 2 entities, Payment services on the one hand and another one which is called CIMTA, which is an IT entity in which we We have approved some additional investments this quarter, which are generating an increase of exactly €27,000,000 of the cross line. So it's exactly the evolution between the Q3 'seventeen and Q3 'eighteen. It's just This is something which is, I would say, Most sure, actually, with the idea, of course, that once the investments are up and running, especially the case for the IT tools, then the cost of operating those IT tools is Allocated to the different businesses that you discussed. We are in the field of investment. Then you were talking about the RWAs of the financing activities of the CIB.
We have had a significant increase, which I qualified as a little bit, I would say, We took advantage in the Q2 of some good market conditions in order to book Our asset with a good yield in this financing business. We are now for the CIB at 107 €1,000,000,000 of RWAs. It's significantly actually below the level we had in the beginning of the medium term term. Because I think If I remember correctly, we are close to €120,000,000 We don't intend to go back to this level, but we have a certain flexibility. Again, if it's profitable, meaning that it's yielding to a significant If it's coherent with our overall strategy and if it's and also done in a way where either through China redistribution of the 2nd article, We have the capacity to continue in the long run to monitor the overall capital consumption of the division.
So clearly, We are flexible, but we don't intend to go back to the level where we were a few years ago. Thank you.
Thank you. We can now take our next question from Jean Castoux of ODDO.
Yes, good afternoon. Just two questions. 1 on ECL To start with, once again, you have done a little bit well on the cost side. Just wondering where it goes whether it can goes down further And what would be the leverage? And in other words, what would be the run rate for the cost once you have done all the restructuring You are planning, first thing, on the insurance to come back to the breakdown of the policyholder allocation.
I'm not asking obviously what would be its policy, but how should we think about the way you compute that and the way you manage that? What are the
Okay. Let's start with the second question. It's a difficult one because at the end of the year, You have a decision to make, which is to decide precisely the level of remuneration that you are going to allocate to your customers. When you do that, you take into consideration, obviously, the financial parameters of the company, I. E, the level of financial revenues that you manage to generate and the level of profitability that is there for the shareholder.
This is leading
Actually, to
the breakdown between what is kept by the company and the shareholder and what is allocated to the policyholders. Then Among the amount which is allocated to the policyholders, you have a choice that you can make with certain regulatory constraints, but you have a choice, which is what you allocate directly, which is attributed immediately in terms of remuneration for the year And what is kept in the reserve. And this is when you have some, I would say, strategic decisions to take Assessing what the competition will do, what are the expectations of the customers, what is prudent to keep in reserves and so on and so forth. So it's an alchemy, I would say, in which you have no you have Some rule of thumb and some also internal financial policies and when The decision is made. So it's not very easy to predict and it's a game which you have to be as much as possible aware of what the competition is doing in order not to be completely outlier in terms of remuneration.
And you have also to be coherent among the different products that you have sold to your customers, because we don't have a single contract to have There will be 10 or 20 or 50 contracts, different contracts sold to our customers and we have to have A grid of remuneration, which is coherent, and then we have also to preserve the coherence from 1 year to another one. So it's a complex alchemy in which the decision is taken on the ground of many, many different aspects. In terms of the evolution of the cost base at LPL, I think that To be frank, we went a little bit further than what we initially expected when we presented the medium term plan. In terms of Cost deductions, when we saw that the top line was not going to be where we expected it to be. Because what we are looking at for SKL is the adjusted cost income ratio that we had in mind when we published the medium term plan.
It was between 63.5% 65% with or without different investment. And so we targeted to have a again, it was in the context where we We targeted initially a decline of the cost base of only 1.5% a year. And actually, what you can see is that we've been between 2% 3% since the beginning of the medium term plan. We know that we have Some potential investments going forward and we are ready to launch them as soon as we see the capacity of the top line to grow significantly back again. We have been, for example, scarce in terms of advertising expenses.
We have the capacity if we see that it's meaningful to launch additional advertising expenses. We have some, of course, reduced some IT investments and we continue to be able to be, let's say, a top of the class in terms of IT tools dedicated to our customers, but we have also some potential additional investments that we could do if we see the top line Dynamic enough. So it's going to be in connection with the evolution of the top line. And We want to continue to look at this target in terms of cost income ratio between below 65%.
Okay. Thank you very much.
We can now take our next question from Stefan Stalmann of Autonomous Research.
Hi, good afternoon, Jerome. Two questions from my side, please. The first one, the stress test that we've just gone through. Can you maybe roughly indicate how that might have looked like at the CASA level? And the second point coming back to large corporates to the market You mentioned in your report a margin squeeze.
Could you maybe add a bit of color on Which clients or products or geographies that's related to? Thank you very much.
Okay. Let's start with the first question. It's not possible. It's not that I don't want, but it's not possible to give you some indication about the impact of the stress test on CASA simply because The way the stress test is organized is that we apply the stress on different portfolios, not on different entities. So it means that we take the portfolios wherever the asset sits and we apply the stress.
So we and this was clear since the beginning with the ECB, the perimeter that is stressed and tested with the group and they are comfortable with that and we are comfortable with it too. And we from a methodological viewpoint, we apply the stress on different portfolios wherever the assets fit, which means that we have not the possibility to assess the impact of the spread on specific parameters like the one off Meta. In 5CC activities, capital market activities, It's very difficult to precisely tell where the pressure is put, but what we can say is that Volume indicators that we can have in mind, for example, for flow products, by a position with structured products is that we had an increase of 10% to 15% this quarter as compared to the same quarter last year. So at the same time, we have a reduction of 15% of the net banking income. So it gives an idea of how important is the pressure on price and on margins.
Thank you very much, Raimo.
Thank you. We can now take our next question from Thomas Guwam of Goldman Sachs.
Hi. On Italy, please. You mentioned that you expected pressure on funding costs. A competitor of yours, a small one, mentioned this morning that you are not willing to write loans because of the levels of margin that would imply and the profitability in terms of that. At the same time, the digital bank yesterday let go of credit deposits because those clients wanted to reprice them.
Judging from the activity levels and the environment in Italy, where do you see the opportunity Line for Casa versus the plan, given your different funding structure. My second question is on Wire Could you give us more details on what you expect from your partnership with them? How, where and when should we expect any material effect from from the partnership in terms of revenues. Thank you. Thank
you. As initially, I would say that we are not seeing the issue as you expressed it. We are not in a situation where we say, Do we have the capacity to take advantage of our situation in order to capture business from other banks? What we try to do in Italy is We improve as much as we can the capacity of the different business lines that are present in Italy to work together in order to develop cross selling and cross business. And I think that this is the main Strategic driver that we have in Italy.
As you know, we have all business segments, retail and footprint in retail has recently been In Greece, insurance, life and non life, consumer credit, car financing, CIG, leasing, factoring, that are EME, of course. And what we're trying to do is to create value through the improvement of 2nd aspect, of course, is the fact that all these activities are branded or are at least Attributable to Credit Agricole Group, even if they are branded Agos or FCA Tank or Amundi. They are identified as belonging to the Finn Technical Group. And Finn Technical has an edge of strength, of robustness, which we reinforced recently with this upgrading from FMP, which is another asset. So the idea of saying we are going to target The customers of certain banks in order to try to manage.
What they can do because we have some kind of specificity or whatever is not exactly the way we can see things. Clearly, the idea is to develop the same type of business model as in France, I. E, the complete Universal Bank. And of course, you take advantage of the global strength and robustness and differentiation of credit card Your second question, excuse me, was about Way of Card, excuse me, Way of Card. The partnership with Way of Card is dedicated to the you know that in terms of payment services, you have 2 Different targets, 2 different customer segments.
Either you're working You can do both, but you can work with the household in order to propose to them all the payment means that they need, Card, but also other payment services and then you work with the vendors. And then you have different categories of vendors. You have Small shops, which are the customers of the regional banks or LCL. You have the big retail networks like The retailers like Carrefour or Ocean or whatever, and also the e merchants. And this is in this second area where we think we can improve our offer.
And so with wire card, we are going to try to improve the offer, the quality of the offer, the quality of the reporting In terms of development of the partnership and when we can expect some positive effect, I don't have freeze side element in mind. It's obviously taking time because the idea is that once the partnership is launched, which is the case, it's time for people, Now, Vericar is working for us in order to help us to improve our offer. So it's not We're going to produce tangible effect very soon, but It's clearly the idea of improving our offer towards merchants in order to develop
Thank
you. Thank you. We can now take our next question from Pierre Chadeveau of CIC.
Yes, good afternoon. Two quick questions. First, a follow-up Regarding your business model in Italy, when you said that cross selling was core to your strategy, I was very surprised yesterday discovering that AXA in Italy in partnership with Monti Baski had a very huge increase in sales in Life Products, plus 30%. I was curious to know if you have seen the same trend for your part with Cariparma in terms of Life Project Development. My second question is about the margin.
We talked A lot about the margins at LTL.
I was curious also to have
a comment regarding margin In what is clearly one of your best engine this quarter, your commercial Bank in the CID, what is the path between volumes and margins there? Thank you.
Okay. Thank you, Thierry. In terms of life insurance in Italy, I think that I And have in mind this figure for AXA, which is quite impressive indeed. But I think that they we are ahead of the curve as compared to them because They have this distribution partnership with MultiPathKey since a long time, But it's not very natural for traditional insurers to behave like a bank insurer. And I think that actually The idea that we can sell a large amount And our numbers of life insurance policies through bank network is an idea that we are used to since many, many years.
So actually, we probably haven't had I mean, she's a 40% of our outstandings last year, and I think it's much lower, but the starting point is much higher. That means that we are clearly again ahead of the curve as compared to this type of partnership between the bank And the traditional insurer.
Regarding the global trend, I
mean, The global trend in Italy, it was not 30%, clearly. The business was much weaker than that. Even though outstanding, We are going to find exactly the evolution of the outstanding in Italy. I don't have any mind precisely, but we are going to give it to you in Clearly, I think that what happened with AXA and Motelaski is simply that they are now becoming more And more efficient in their capacity to sell their life insurance policies through bank network, which is something we do quite good, quite efficiently since now many years. In terms of margins at CACIB, I don't have in mind the level of margins at CACIB, but what we can tell you is that and we stressed it in the Q2, but it continues again this quarter.
The revenues RWA ratio is up 18 bps between the 1st 9 months of 2017 and the Excuse me, I'm going back to your question about the evolution of life insurance. Within Treviacoli Assurance, which has life insurance activities, not only in Italy, but also in The Luxembourg in Japan and some other areas, the net premium income for the 1st 9 months of 2018 was up 39% as compared to the 1st 9 months of 2017. So I'm talking about the premium income, not about the outstanding. I don't know about outstanding, So it's also significantly up, but it's not coming only from Italy.
Okay. Thank you very much.
This concludes today's question and answer session.
This is Greg Davis.
I'd like
to hand the call back
for any additional or closing remarks.
So I just wanted to thank all of you for your questions, always very relevant, of course. And it's my pleasure to see that before
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.