Good day, welcome to the third quarter and first nine months results 2018 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jérôme Grivet, Deputy General Manager and Group CFO. Please go ahead, sir.
Good afternoon, everyone. It's my pleasure to start with this third quarter and first nine months results conference. I will try to go quite swiftly across the document in order to leave time to questions. Let me start with page five, on which you have the main figures in terms of results. What you can see on this page is that be it on the third quarter only or on the first nine months, be it on a stated basis or on an underlying basis, you can see that the net profit of Crédit Agricole S.A. is up.
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 third quarter or on the first half of the year, we had a quite significant positive one-offs, which are not repeated this year, namely, the capital gain on the sale of our stake in BSF in the third quarter, or the capital gain on the second quarter in connection with the sale of the stake in Eurazeo. On an underlying basis, net profit is up 17% as compared to Q3 2017. On the first nine 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 first nine months of the year is slightly above 13%, return on tangible equity.
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 basis points at 11.5%, and at group level, it comes in to 14.9%, which is again an increase of 10 basis points this quarter. On page six, 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&L by line of the P&L, or vertically, business line by business line. In terms of horizontal or across the board approach, I would say that we have a very positive job again this quarter, as was the case in the first half of the year.
The cost-income ratio at CASA level continues to significantly improve. The second point is that this improvement and the increase of the net profit is something that we see in all business divisions. Two or three additional points. I just want to recall that a few weeks ago, the long-term rating of Crédit Agricole Group was raised by Standard & Poor's to A +. We are now at A + or an equivalent grade with each of the three main rating agencies. Second point, as you may have seen, we went through the stress test exercise quite nicely, showing a 10.2% CET1 ratio at the end of the stress, and not reaching the MDA level at any of the three 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 that 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 third quarter 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 division, but for Asset Gathering, Retail Banking, and Large Customers, the net profit is up, and significantly up for Large Customers division. For the first nine months of the year, all the little bars are green, showing that the net profit of all business lines is up on the first nine months of the year.
As I explained, you can see it on page 10, this result is first 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 first nine months of the year on an underlying basis, and 6.4% on a stated basis. It's a very solid evolution of the top line. At the same time, the cost line is kept under strict control, with an increase in the region of 3.6% on an underlying basis and even 3.3% on a stated basis for the quarter, 4.9% on the first nine months of the year. In this context, obviously, the cost-income ratio is improving. The stated, the cost-income ratio for CASA comes in at 62.4% for the quarter.
It's down one percentage point, and on an underlying basis, it's even down 1.4 percentage points on the quarter at 51.6%. In addition to that, the cost of risk is still very low and actually continues to decrease on the perimeter of Crédit 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 2017, we had quite significant credit loss provision reversals. There is, I would say, a base effect. On the perimeter of Crédit Agricole S.A., we post a cost of risk which is a little bit below EUR 220 million this quarter. It's down 17% as compared to Q3 2017. What you can see is that on the rolling basis, on the four-quarter rolling basis, we are now at 26% for Crédit Agricole S.A., 18 basis points 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. In this context, what is interesting to note also is that the coverage ratio continues to improve as compared to the previous period, both at the level of the group and at the level of the S.A., the listed entity. This very good situation of the cost of 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 Crédit 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. A reminder that the target was initially 60 basis points, so we are now at 73 basis points on a rolling basis, which is close to the target.
For the financing activities of CA-CIB, 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. 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 can be seen as optimum in terms of cost of risk in this business, 110, 120 basis points running. On page 14, again, the idea that Crédit Agricole S.A. has 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, we have a very good breakdown, very balanced breakdown of results across the different business lines. Let me go now precisely to the different business lines themselves, starting with the asset gathering activities.
On page 15, maybe just two highlights. First, we continue to have positive inflows in the different businesses which are gathered into this business division. The second element is that the net income group share continues to be globally up 5.7% on nine months and 4.5% on the quarter. 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 16 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 inflows this quarter, but not at the expense of the unit linked business, because the unit linked inflows are still stable around a little bit above EUR 1 billion this quarter again.
At the same time, non-life activities continue to be very dynamic, and we are still gaining market share in P&C activities, in individual and group protection policies, and also in creditor insurance. In this context, the results are quite positively oriented with a net profit, which is up 7% on the quarter. It's apparently stable on the first nine months as compared to the first nine months of 2017. Actually, you may remember that in 2017, we booked a EUR 30 million profit with the sale of our reinsurance activity in Luxembourg, and excluding this sale in 2017, the net profit is up 3.5% nine months on nine 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 inflows are still positive this quarter again. Not only it's a positive quarter in terms of inflows, but the inflows continue to be of a 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 performance fees. The cost base continues to decrease, and all the cost synergies that were expected from the merger with Pioneer are not completely realized yet. It means that we still have room for further improvement. In this context, the net income group share is up 5% on the quarter without any scope effect, obviously, and 29.7% on the first nine months with a scope effect on the first six months of the year.
LCL is another business in which we had a very good quarter this year with, to put it in a nutshell, a credit demand which continues to be dynamic, both coming from corporate SMEs, self-employed professionals, and household. Credit outstandings, loans outstandings are up 6.5% as compared to end of September last year. We gained new customers again, around 10,000 new customers this quarter. 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 LCL continues to improve, be it in a payment card or the different insurance policy products. In this context, revenues are up 2.3%.
Costs continue to be down 2.9%. The gross operating income is up 15%, and the 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 third quarter. We have now only one single entity. We have no longer the capacity of breaking down the figures between those coming from the, I would say, historical perimeter, and those coming from the three banks, both end of last year. I'm going to comment just the global figures. Loans outstanding are up quite significantly, + 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 staff reduction plan, which is now starting. The cost of risk is further declining, as I already said, - 12.4%. This is fueling a good behavior of the net income group share, which is up 19% on the quarter and close to 10% on the first nine months of the year. Now, Crédit Agricole 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 first nine months of this year, we've already managed to book a net profit of a little bit above EUR 420 million in nine months, which compares to the EUR 550 million or EUR 545 million for the full year 2017. The quality of the 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 to keep in mind that with almost no forex effect or currency effect, we have a sharp increase in the net profit, + 21% on the quarter and + 24% on the first nine months of the year.
The profit for the first nine months is now close to EUR 100 million. 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 leasing book which is also at 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%, the gross operating income is up 5%. We have had some volatility in the cost of risk, as I already mentioned. Actually, the net income group share of the division is almost flat for the quarter, and a little bit up for the first nine months of 2018. Large customers division, a good quarter overall with some discrepancies inside this 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%, positive growth again in this business division. In addition to that, the RWAs consumed or used by the CIB activities, which were quite significantly up in the second quarter, are now a little bit down. It shows, again, as I already said, is that we have the ability and the 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, + 25%, when at the same time, the capital market and investment banking revenues were down 16%, as a result of very good volumes in this division.
Very thin margins, actually, 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, custody, fund administration, and also the development of new businesses like the clearing of derivatives. All in all, a good level of profitability for this business division. Coming to the corporate center, net loss around EUR 200 million, 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 payments, which are accounted for in this business division or corporate center division, and some volatility in the level of revenues, but nothing worth to comment in depth. Coming now to the regional banks of Crédit Agricole.
It's always interesting to compare the performance of the regional banks of Crédit Agricole with the one of LCL, because this is giving a good idea of the evolution of the retail market in France. What is interesting to note is that we have more or less the same trends in terms of development of the business. Strong increase in the loan book, +6.5%. Strong dynamic in the capacity of attracting new customers and opening new bank accounts. 1.2 million new entry into relation on the last 12 months, and net 136 additional customers, 114,000 for the regional banks in nine months, and 22,000 for BforBank in the same nine-month period. What is interesting also is to note that this is progressively translating also for the regional banks into an increase in the top line, with revenues up 1% this quarter.
This is clearly a positive sign in terms of our capacity progressively to compensate 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 Crédit Agricole S.A. improved by a further 10 basis points this quarter. It's a result of a strong net profit I was just mentioning, minus the distribution. We retain 16 basis points of earnings. We use, I would say almost nothing, one basis point for the organic growth. This quarter, it was quite stable actually, the level of RWA. We consumed seven basis points of solvency due to the decrease in the level of the OCI reserves, which is again, perfectly in line with all the metrics that we have in mind about the evolution of the OCI reserves.
I remind you that we also booked this quarter the employee capital increase beginning of July, so it's another four basis points of solvency that we added up to our ratio this quarter. 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 and September was almost flat at EUR 307 billion.
At group level, again, an increase of 10 basis points of the CET1 ratio from 14.8% up to 14.9%, depending on in 26 basis points, OCI reserves -4 , organic growth, it is much sharper at group level. The RWA at group level increased by around EUR 5 billion, so the organic growth consumed 10 basis points of solvency. CET1 ratio 21.2%, nothing much to mention. The target of 22% is perfectly reachable by the end of next year. Funding, no specific issue.
We managed to book and to complete the funding program of Crédit Agricole S.A. by the end of September. We still have to continue for the rest of the group in the last quarter, things are perfectly on track, nothing much to mention. Liquidity, the reserves are still very high, EUR 260 billion of liquidity reserves, a surplus of stable funds, which continues to be steadily above EUR 100 billion, nothing much to mention. I am now finished with this presentation, I think it's better now to give you the floor in order to raise your questions. Thank you.
Thank you. Ladies and gentlemen, if you would like to ask a question at this time, please signal by pressing star one on your telephone keypad. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, please press star and then one to ask a question. We can now take our first question from Delphine 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 the trends in terms of margins, fee growth, and also a reminder of do you have any capital amounts that you've taken? My second question is on insurance. Performance has been restored this quarter. Just trying to understand what we should expect. Is this the new run rate, given that it's the best quarter so far for a long time? I'm just wondering if we can extrapolate this number given the items that you have mentioned on market share gains in non-life, and life seems to be still resilient. My last question is on capital.
When do you expect the 32 basis points regulatory impact by end of 2019? Should we see that mostly towards the end of 2019, or do we expect any sort of model adjustments in the coming quarters? 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, Delphine, I'm trying to be swift in my answers. First one on Italy and on revenues in Italy. We booked EUR 453 million 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 473 million. The third quarter is down EUR 20 million as compared to the average of the first two quarters of the year. I think this can be very easily explained by, first, the seasonality. The activity is always a little bit weaker in the third quarter due to the summer vacation. Second, precisely, the legal merger, because this was a period of time when the management, not only of the three banks, but also of Cariparma, was completely dedicated to the success of those legal mergers.
Obviously, I would say that the sales kept going, not at the same pace. Clearly, what we can say is that this quarter, 2018, was a weak quarter in terms of revenue, but a perfectly explainable weakness. 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 third quarter of 2017.
You may remember that during the conference call I held one year ago, I have had to answer to many questions about the level of revenues in the insurance business. I think the level of revenues that we have 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 owned by the insurance company, this may lead to a weaker recognition of financial margin. Preservation, obviously, of the level of profitability, the bottom line, but this may lead to a weaker level of top line. Clearly, the EUR 600 something million that we had this quarter is a much more normal level than the one we had one year ago.
On capital, you mentioned first the question of when are we supposed to have the impact of the remaining 32 basis points of regulatory headwinds. First point, 32 is the rest of the unused part of the 70 basis points we put 2 .5 years ago, it's not as precise as that. It may be 30 or 35 or whatever. It's not a commitment to use 32 and only 32 basis points 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 rough idea, but it's not a precision at one basis point.
This being said, I have no precise timetable in mind, it's possible that in the coming quarters, be it the last quarter of this year or the beginning of 2019, because we are presently discussing with the ECB on the outcome of certain TRIM reviews that they've undertaken with us. It's possible that once these discussions come to an end, we take into account the conclusion of the discussion. It's possible, fourth quarter 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. The OCI, we have at the end of June, in our CET1 ratio, we had all in all, around 40 to 45 basis points of OCI impact.
It means that after the third quarter, we are now a little bit below 40, probably around 35 or something like that.
At the end of September.
Excuse me, end of September. We have now, end of September, 43, if I'm not mistaken, basis points of OCI. You know that there is no precise date when all the OCIs are going to be completely unwound. You know that zero is not a level which is an absolute level that cannot be beaten, we can be above or below. This is just to give you an idea of the type of, I would say, impact of the OCI that we still have in our ratio.
Great. Thank you very much.
Okay.
Thank you. As a reminder, if you find that your question has been answered, you can remove yourself from the queue by pressing star two. We will now take our next question from Jon Peace of Credit Suisse.
Yes. Thank you. Could you talk about some of the trends in large corporates, please? Firstly, the year-on-year growth is similar to one of your peers, but it looks like from a market share point of view, you may have slipped a little bit. Do you feel that the run rate in fixed income was a little bit unusually low this quarter? 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 the two of them? Just another comment, please, on the cost of risk. I know write-backs are 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? Thank you.
Okay. On the CIB, in 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 position in tables can vary. Actually, what I am seeing in the last 12, 18 or 24 months is more an improvement of our respective positions than a deterioration. I think that in terms of market share, we manage more or less to keep our positions. In terms of revenues, you have to keep in mind two elements as far as the capital markets activities are concerned. The first one is that we have no, or almost no, revenues coming from trading. We are almost exclusively commercially oriented, so the trading revenues are very weak.
On a quarter where trading activities may generate significant profits, 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 parts of our capital market revenues are coming from commercial customer activity. The second key point is that we have almost no equities activities in the capital markets businesses. We are almost only concentrated and focused on fixed income currencies and rates, and we have almost no equities activity. What I can see when I try to read across the figures of my competitors is that in the FICC field, we see more or less the same kind of figures. For some competitors, they have a significant catch-up, which is coming from equities activities.
Of course, there is also a possible equilibrium line between capital market activity, especially when we are focused on FICC, and financing activities. What is true is that actually our customers often can choose their routes to finance their activity. They can take the route of loans, or they can take the route of securitization. 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. It is true that in this situation, the level of revenues can marginally switch from one division to the other, depending on the appetite of the customer. This being said, again, I am not seeing any market share reduction for CA-CIB globally towards its customers.
On the cost of risk, also?
Excuse me, cost of risk. I have forgotten this one. On the cost of risk, especially with CA-CIB, as you said, credit risk reversals are not a sustainable situation. 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 bill recovery. It is not a change in our appreciation of the level of risk. It is really the fact that we got the money back somehow. It means that those reversals are absolutely without any doubt. Going forward, I do not see any specific risk arising.
It does not mean that we will not have some specific files coming in the next quarters, but seen from now on, I do not see anything coming, and I do not see any reason why we should have, going forward, a significant increase in the cost of risk. The last point as far as the cost of risk is concerned, and this is a subject that is applicable not only to CA-CIB, but to all businesses. We are progressively learning to live with IFRS 9. You know that in IFRS 9, we have the specific provisions on the bucket 3, and we have also the collective provisions, or they are not collective because they are individual. They are based on models and on assumptions on bucket 1 and bucket 2.
We are learning to live with this new regulation. This may lead to some volatility because you know that we have to make some scenarios. We have then to apply those scenarios to our different portfolios in order to identify either the expected credit losses with one horizon in the bucket 1, or with a horizon to maturity for the bucket 2. 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 Gaulard from Kepler Cheuvreux. Please go ahead, your line is open.
Yes, very good effort, operator. Two questions, please. The first one, you have reported on a nine-month level a result of EUR 3.4 billion. If I do elementary math, I divide that by nine, multiply that by 12, I end up with EUR 4.5 billion, which tends to make us believe with only three months left in the year, that your EUR 4.2 billion net profit target for the whole plan of 2019 may well be beaten at this point in Q4 2018 and for the full year. I would like your comments on that. The second question, more generic, but the thing we've heard talking about the Crédit Agricole investment case with investors is the fact that it's in your insurance competitors are complaining about your favored capital treatment of the insurance business, which would enable you to make more profit, be more profitable and write obviously more business.
You have that story that resurfaces every three, four months about the Danish compromise being in jeopardy and all that. Can we have a bit of an update on that and maybe your reaction to what your, no doubt, jealous competitors are saying? Thank you.
Always easy question, Jacques-Henri. Thank you for that. The first one, I don't want to make any predictions, so I'm not giving you any guidance on what is going to be our profit for the fourth quarter of the year. I learned math when I was a boy, so I understand what you said. 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 only a single objective. We had a series of objectives, and we are dedicated not only to reach the global net profit objective, but all the other objectives. You cannot summarize, I would say, the Medium-Term Plan, only the EUR 4.2 billion of net profit. As far as the Danish compromise is concerned, again, I think I already had the opportunity to explain that.
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 pure insurer. It means that in exactly the same metrics, Crédit Agricole Assurances 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%. 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. Once it's recognized that our conglomerate ratio is also above the target, then it can be granted the Danish compromise.
It has nothing to do with the way the insurance division is operating, and to be even more precise, with the way the insurance operation is pricing its different policies.
Extremely clear. Thank you very much.
Nothing can be stretched on the field of competition from insurer to another one.
Okay, thank you.
Thank you.
Thank you. We can now take our next question from Azzurra Guelfi of Citi. Go ahead, your line is open.
Hi, good afternoon. Two question. One is on the margin in France. Can you give an outlook on how is the development of the lending margin in France in terms of competition and pricing ability? The other one is on the risky asset of the group. At group level, they were broadly flat. When I look at the various division, it seems that there has been some optimization in the retail business, given the strong lending growth that you are seeing there, and some decrease in the market risk-weighted assets. If you can give some color on that. Thank you.
Okay, Azzurra. 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 two figures. Either the difference between the average yield of the asset portfolio and the average cost of the liability portfolio. This continues to shrink a little bit. 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, the back book still has a yield, an interest rate, which is a little bit below, but still close to 2% when we write new business at a level which is at 1.5%. 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. In terms of net interest margin, we are under pressure, and we see that both at LCL and at réseaux. In terms of RWA calculation. In retail, 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, as you know, home loans have only a very low RWA density, actually. 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 it's probably been the case in the capital market activities this quarter, because you have mentioned that we reduced a little bit the RWAs in this business division. 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. We have also some other components of the RWA consumption of the global RWA consumption in capital market activities. It may be in connection with different credit risk in connection with capital market activities, it's really another explanation. The last one being possibly some adjustment on the calculation. Again, we try permanently to improve and sometimes to optimize our model.
Of course, this is under the scrutiny of the ECB, no doubt that any positive evolution of any model is checked many times before being implemented. This may be in connection with that. As far as the VaR is concerned, it went down from EUR 5.8 million in Q2 down to EUR 4.9 in Q3, this may trigger a significant RWA decrease.
Thank you.
Thank you. We can now take our next question from Maxime [audio distortion], Jefferies.
Hi, Michael [audio distortion] , Jefferies. A quick follow-up on the net interest margin at LCL, please. Can you give us a breakdown between the commercial margins and the trends on the replication of 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 going to gain more market share between the car insurance, home insurance, health insurance? Thank you, Jérôme.
Thank you. Let's start with the second question. In non-life insurance policies, we are gaining steadily market shares at about the same pace in home and car insurance. These are the main two products in which we are very active. We have a long history now, a good capacity of pricing rather efficiently the different policies. This is an area in which clearly we have the capacity to gain market shares and to continue to gain market shares. We have also, to be frank, an edge in terms of being able to propose the product 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 you have different layers of insurance. Let me start with the health insurance. You have the Sécurité Sociale, which is representing a compulsory 1st layer of protection for all customers. Now all employees have a 2nd layer of protection, which is provided by the employer. This is why four or five 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. Some customers may want to have a 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 or they have expensive hospital costs.
This is where we can propose an individual policy. It's, I would say, a more specific business in which actually we are developing at the same time an offer, a group offer in order to cover the 2nd layer of product and a specific individual policy either for employees looking for a 3rd layer or for self-employed person, who obviously don't have any employer to provide the 2nd layer. We are developing, but it's I would say less straightforward than for the car and home insurance. We have, of course, the creditor insurance, which is a business in which we have a significant market share. 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.
Actually, we managed to be able to continue to price quite aggressively those policies. Actually, we continue to grow a little bit the revenues coming from creditor insurance again this quarter as compared to third quarter 2017.
Okay. That's interesting.
In business, maybe in addition to that, you may remember that beginning of 2018 or even end of 2017, we re-internalized fully the contract that was covered by CNP with Regional Banks since, I think, 15 years. This is also representing a booster for us in the development of our creditor insurance activity. Going back to LCL, your questions was about-
On the net interest margin, can we have a split between where the pressure is coming from? Is it coming from Professional, where clearly the competition seems to accelerate on mortgages, but on the other side, the speed of borrowing on Corporate should help you? 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 books of the retail bank. Clearly this is where the pressure is coming from. With two aspects. First, it is a fixed rate on a very long maturity. This is something that we are going to keep on our books for a long time. 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. We manage to keep more or less our margins. Consumer credit, which are booked in the books of LCL, is typically 2.5%, two to three years duration.
We see, of course, a strong competition coming not only from other banks, but also from consumer credit specialists. We managed to keep more or less our margin. For the SMEs and corporate loans, you know that it is mostly a variable rate lending policy, 90%. We managed to keep more or less 100 basis points of spread, even though the production is significantly up.
Okay.
Okay.
Thank you.
Thank you. We can now take our next question from Nick Davey of Redburn.
Good afternoon, everyone. A couple of questions, please. The first one, if we can go back to Italy, please, and thank you for your comments about the soft revenues in Q3. 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 nine-month operating trends, revenues up 12%, costs up 20%. Just trying to understand when you think you can get this business back to positive jaws, which we're seeing across other parts of the business. The second question, please, on LCL. 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? Maybe just as a follow-up question, sort of following up on Maxime's question on replicating portfolio. I was interested to hear you say that you thought your product margin was 2%. When I look at your net interest margins, just your NII divided by loans, it's about 1.5%. Could that maybe give us a clue about where you are on your replicating portfolio and your swap position overall, which is that you're paying away this product 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 would 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 EUR 293 million of costs for the first two quarters and EUR 293 million for the third quarter. We have already started the decline of the cost base. Clearly, we are targeting, of course, a positive jaw, and we are targeting to benefit from an optimization of the branches, réseaux of the three banks that we purchased, a reduction of the number of staff globally, and some reductions in the IT costs. Clearly, we expect somewhere in 2019 to go to a more normal situation where the jaw is positive between the evolution of the top line and the evolution of the cost line. Just keep in mind that we purchased banks that initially had a cost-income ratio, which was significantly above 100%.
Their portfolio of assets was clean, and this was a condition on which we were very strict, their operating parameters were very weak. This is precisely because we thought that we had the capacity to improve this operational parameter, that we were interested in this purchase. Of course, it takes a little time before we completely fine-tune the situation. 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 cost of risk, 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&L.
As far as LCL is concerned, first, it may be a little bit, I would say, hazardous or dangerous to say so, I expect indeed, and it's before all the internal budget procedures are completed, I expect LCL to propose to me an increase of the top line for 2019. We'll see exactly how far they can go, this is something which should be reachable. I had forgotten to answer to Michael's question about the hedge book. 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 costly. By definition, it's like an insurance premium. If you want to be protected, you have to pay something.
We are paying something in order to protect a little bit our revenues, we are now in a situation where this cost starts to decline a little bit, which is something globally the upper line.
Okay, thank you.
Thank you. We can now take our next question from Kiri Vijayarajah of HSBC.
Yes. Good afternoon, Jérôme. A couple questions on Italy. Firstly, on the Agos side, the rising cost of risk you show on slide 20. Based on your earlier comments, am I right to think that all of that increase you're showing for the course of this year, cost of risk in Agos, is all from IFRS 9? That actually, in terms of fresh problems emerging this year, is actually pretty limited. Then on the other bit of Italy, on the IRB Italy division, just trying to better understand the volume dynamics there, because I think your loans and your deposits both shrinking quarter-on-quarter on actually the preceding slide 19. Is that just a one-off blip as you integrate the acquisitions you did, or is there something else driving that, please? Thank you.
Okay. On Agos, 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 9 has started to become a key component of the way we are provisioning the credit books. This has increased a little bit, the volatility, which is in this business, which is, I would say, a statistical volatility rather than a volatility linked to individual specific files like it is in the CIB. What I can say in a nutshell on the cost of risk at Agos is that between 110 and 120 basis points, we are on a 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 combined ratio for the consumer credit business like we do in the P&C insurance business, which would be to add up the cost of risk and the operating cost and to compare it to the level of revenues. What we can see is that actually, we see CACF globally. I didn't do the math for only Agos, but what we can see is that bit on the quarter or bit on the first nine months of 2018, we are more or less stable as compared to the same periods of 2017. It means that globally, it's a business which you can accelerate a little bit the growth by modifying a little bit your pricing, and you have so a capacity of fine-tuning the business.
It's more important to look at the global equilibrium rather than only a single line of the P&L. Clearly at Agos, I think that in the region where we are now in terms of cost of risk, somewhere around 115, 120 basis points, it's a low normal level of cost of risk. We don't see any significant sign of deterioration. In addition to that, it's probably only a coincidence, but at 118 basis points at Agos, we are exactly at the average point 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 had this quarter a significant sale of NPL for a nominal amount of EUR 700 million. Clearly this explains the biggest part of the evolution between June and September.
As far as the customer deposits are concerned, it happens that we found in the banks that we purchased some quite expensive deposits from Corporates. Of course, we wanted to reduce a little bit the cost of the funding, we reduced a little bit our wholesale pricing, accepting obviously to see some deposits going away. Nothing that would indicate a less dynamic commercial approach within our retail banking activities in Italy.
Great. Thank you very much.
Thank you. We can now take our next question from Guillaume Tiberghien of Exane.
Yes, good afternoon. I have two question. Number one is on cost of risk. You had a target in the Medium-Term Plan to have 50 basis points cost of risk, which are twice the current level. I heard the comments you made for the various division, but when do you think, or how do you think is a normalized level 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. The other question relates to, well, a follow-up on what Jacques-Henri asked earlier, which is that in the event where you reach, a year in advance your target, when do you think is reasonable to update us on your new strategic plan?
Guillaume, you are raising two 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 risk is something which is quite complicated because we have to assess what is the environment, how it has evolved and so on and so forth. 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 Medium-Term 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 important to give some additional and further visibility. We are going somehow to update and pronounce our objectives.
When we are going to do that, we are going to reassess what is a normal cost of risk.
You think this reassessment will be in H1 or in H2?
Don't know yet.
you
Thank you. We can now take our next question from Bruce Hamilton of Morgan Stanley.
Hi. Afternoon, Jérôme. Thank you. Just a quick follow-up on the insurance business, obviously good print in Q3. Just to check, 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. Then secondly, solvency, you said it's over 200%. Could you give us a precise number? 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. This is at the moment when we can have a better idea of the expectations, I would say, of the customers in terms of featuring rate. Every figure is only provisional between January the 1st and the end of the year. We didn't change significantly the level of the famous TTE provision in the course of the third quarter. 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 part of the excess of capital of any of our activities, not only the insurance business in the form of dividends, because we have an internal rule, which is normally that 95% of the profits of each business division is upstreamed to CASA. If the development, the organic growth of any of the subsidiaries requires some additional capital, either this dividend is paid partially or totally under the script form, or we make a specific capital increase. The rule is that obviously we don't want to leave unused capital at the level of the subsidiary.
This explained 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, we reduce the equity accounted value of the insurance business, and this is the time where the capital consumption of this business at CASA level reduces a little bit.
Thank you.
Okay.
Thank you. We can now take our next question from Matthew Clark of Mediobanca.
Okay. Two questions. Firstly, on Saudi Fransi dividend, could you just quantify the benefit that is the top line of the finance division? I am guessing it was a material driver of the strength we have seen in the second and third quarter, but if you could give us a number, that would be helpful. Also, could you update us on your current thinking of plans for that stake? Second question is just on the seasonality. In the fourth quarter of 2016 and 2017, there were lots of lumpy charges pushed through in the fourth quarter that depressed the headline profits. I am just wondering if you have any visibility on whether we should expect similar charges to come through this year, or whether we should expect a cleaner fourth quarter. Thanks.
Excuse me, Matthew, can you repeat your last question? Because I think I missed the first phrase, I do not really understand what you are talking about. The last question.
I am just wondering if there are going to be lots of impairments and restructuring charges in the fourth quarter that depress the net profit, as there have been in previous fourth quarter 2016 and fourth quarter 2017. So whether you have any visibility on lumpy items like that will depress the headline profits and therefore affect dividend at the end of the year.
Okay. Let's start with the BSF. In terms of dividend, just maybe to give you some figures. In 2017, for the first nine months of 2017, we had EUR 175 million of equity accounted contribution coming from BSF. 175. Which were for equity accounted. Since it's been deconsolidated in the beginning of Q4 2017, we had twice some dividends that we received from BSF, EUR 16 million in the second quarter of 2018, and EUR 39 million in the third quarter of 2018. It's not a significant amount. It's a much smaller amount, actually, than the former equity accounted contribution. First, because the stake has been divided by two, or a little bit more than two, and second, because actually, the dividend is supporting a certain amount of tax when the equity accounted contribution was only an equity accounted contribution.
Can I just check that EUR 39 million is a net of tax or a gross of tax?
It's a dividend that is inside the net banking income.
Net of tax. Okay.
Net banking income.
Then, again, you're talking about goodwill impairments, possible goodwill impairments, is that right?
Goodwill or any other impairments or restructuring charges or the like.
Well, restructuring charges, actually, what we book and what we actually restate is only now a small amount in connection with Italian integration of Pioneer -Amundi integration. The amounts are very tiny, and actually they are declining very rapidly. We don't expect, seen as of now, any other significant one-off in the fourth quarter.
Okay. All right. Thank you very much.
Thank you. We can now take our next question from Flora Benhakoun of Deutsche Bank.
Good afternoon.
Hello.
I have just two questions left, please. The first question is going back to capital. Just a general question regarding your order of preference for the usage of any potential excess capital that you would 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 repaying 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 and 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 assumed that this 50/50 breakdown of the attributable net profit was, on the medium term, a relevant breakdown 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 a regulatory headwind. We are not going to reassess this overall policy every other year or every other quarter. 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 our overall performance in terms of capital generation during the plan, and we will see exactly if we change or not our position.
To be frank, we think that globally, the 50/50 breakdown of the net attributable profit between the shareholders and the fueling of the development of the group is quite sensible, I would say. 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 state of the discussions between the Italian government and the European Commission. This subject is evolving on a daily or weekly basis. 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, ecosystem of SMEs and corporate and entrepreneurs. These people, they continue to invest, they continue to export, they continue to develop their activities.
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 increase of the Italian spread, financing conditions on the Italian market are going to tighten a little bit, probably. This is more, I would say, a macro financial issue than a real macroeconomic situation or evolution. Okay?
Yep. Thank you.
Yep.
Thank you. I can now take our next question from Anke Reingen of Royal Bank of Canada.
Yeah. Thank you very much. I just have two questions left. One is on the corporate center. I understand it's quite volatile, but I just wonder, I guess, do you reiterate your EUR 700 million net loss for 2019? In the meantime, are there any reasons why it should be running slightly higher, for example, investments or anything else? On the financing business, I guess the capital consumption or the increase in risk-weighted assets and the higher revenues are opportunistic. I was wondering, would you think Q3 is a level we should assume the division continues to consume in terms of capital or risk-weighted assets? Thank you.
For the corporate center, I think that there is some volatility because in the revenue line of the corporate center, we book not only the cost of the funding of the group, as I already explained many times, but also some potential revenues, be it some dividends, some results of a portfolio of private equity investments or elements like that. For example, the results of the real estate business of the group. We have some tiny pieces that may generate some volatility on the top line of the corporate center. In terms of costs, the biggest part of the cost of the corporate center 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.
We have also some additional entities that are accounted for within the corporate center in which we are investing. Namely, we have two entities created, payment services on the one hand, and another one which is called [Thinka], which is an IT entity in which we have approved some additional investments this quarter, which are generating an increase of exactly EUR 27 million of the cost line. It's exactly the evolution between the Q3 2017 and Q3 2018. It's just a coincidence again, but it's this amount. This is something which is, I would say, more structural, 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 use this cost. We are in the field of investment then.
You were talking about the RWA of the financing activities of the CIB. We have had a significant increase, which I qualified as a little bit, I would say, extraordinary. We took advantage in the second quarter of some good market conditions in order to book assets with a good yield in this financing business. We are now for the CIB at EUR 107 billion of RWAs. It's significantly actually below the level we had in the beginning of the Medium-Term Plan, because I think, if I remember correctly, we are close to EUR 120 billion. We don't intend to go back to this level, but we have a certain flexibility.
Again, if it's profitable, meaning that if it's yielding to a significant amount, if it's coherent with our overall strategy, and if it's also done in a way where either through primary distribution or through secondary sale, we have the capacity to continue in the long run to monitor the overall capital consumption of the division. Clearly, we are flexible, but we don't intend to go back to the level where we were a few years ago.
Thank you. We can now take our next question from Jean -François of Odoo.
Yes, good afternoon. Just two questions, one on LCL to start with. Once again, you've done quite well on the cost side. Just wondering whether it can go down further, what would be the leverage. In other words, what would be the run rate for the cost once you have done all the restructuring you are planning? On the insurance, to come back to the breakdown of the policyholder allocation. I'm not asking obviously what would be the policy, but how should we think about the way you compute that and the way you manage that? What are the key priorities? How do you decide, on which basis do you decide policyholder remuneration versus reserve building?
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 managed to generate and the level of profitability that is there for the shareholder. It is leading actually to the breakdown between what is kept by the company and the shareholder and what is allocated to the policyholder.
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. 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. It's an alchemy, I would say, in which you have some rule of thumbs and some also internal financial policies, and when the decision is made.
It's not very easy to predict, and it's a game in 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. You have also to be coherent among the different products that you have sold to your customers, because you don't have a single contract, you have maybe 10 or 20 or 50 different contracts sold to our customers, and we have to have a grid of remuneration which is coherent. We have also to preserve the coherence from one year to another one. 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 LCL, 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 reduction 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 LCL is the targeted cost-income ratio that we had in mind when we published the Medium-Term Plan. It was between 63.5% and 65%, with or without different investments. We targeted to have a Again, it was in the context where we expected the revenue growth to be a little bit more dynamic. We targeted initially a decline of the cost base of only 1.5% a year.
Actually, what you can see is that we've been between 2% and 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. 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. Of course, we do some IT investments, and we continue to be able to be, let's say, top of the class in terms of IT tools dedicated to our customers. We have also some potential additional investments that we could do if we see the top line dynamic enough. It's going to be in connection with the evolution of the top line.
We want to continue to look at this target in terms of cost-income ratio between below 65%.
Okay. Thank you very much.
Thank you. We can now take our next question from Stefan Stalmann of Autonomous Research.
Hi. Good afternoon, Jérôme. Two questions from myself, please. The first one on the stress test that we've just gone through. Crédit Agricole Group has seen about a 30% reduction of its CET1 ratio from the starting point to the trough. Could you maybe roughly indicate how that might have looked like at the CASA level? The second point, coming back to large corporates, to the markets activities, you mentioned in your report a margin squeeze. Could you maybe add a bit of color on which clients or products or geographies that related to? Thank you very much.
Okay. I'll 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. It means that we take the portfolios wherever the asset sits, and we apply the stress. This was clear since the beginning with the ECB. The perimeter that is stressed and tested is the group, and they are comfortable with that, and we are comfortable with it, too. From a methodological viewpoint, we apply the stress on different portfolios wherever the asset sits, which means that we have not the possibility to assess the impact of the stress on specific perimeters like the one of CASA.
In FICC activities, capital markets activities, it's very difficult to precisely tell where the pressure is put. What we can say is that volume indicators that we can have in mind, for example, for flow products, by opposition with structured products, is that we had an increase of 10%-15% this quarter as compared to the same quarter last year. At the same time, we have a reduction of 15% of the net banking income. It gives an idea of how important is the pressure on price and on margins.
Thank you very much, Jérôme.
Thank you. We can now take our next question from Thomas Roam 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 they were not willing to write loans because of the levels of margin that would imply and the profitability entailed with that. A digital bank yesterday let go of corporate deposits because those clients wanted to reprice them. Judging from the activity levels and the environment in Italy, where do you see the opportunity lying for CASA versus the plan, given your different funding structure? My second question is on Wirecard. Can 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 the partnership in terms of revenues? Thank you.
Thank you. In Italy, 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 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. I think that this is the main strategic driver that we have in Italy. As you know, we have all business lines, retail, and the footprint in retail has recently been increased. Insurance, life and non-life, consumer credit, car financing, CIB, leasing, factoring, et cetera. Amundi, of course.
What we try to do is to create value through the improvement of the capacity of those businesses to work together. This is the first key aspect that we want to promote in Italy. Second aspect, of course, is the fact that all these activities are branded or are at least attributable to Crédit Agricole Group, even if they are branded Agos, or FCA Bank, or Amundi. They are identified as belonging to the Crédit Agricole Group. Crédit Agricole has an image of strength, of robustness, again, reinforced recently with this upgrading from S&P, which is another asset. The idea of saying we are going to target the customers of certain banks in order to try to make what they can do, because we have some friendly specificities or whatever, is not exactly the way we conceive 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, to take advantage of the global strength and robustness and reputation of Crédit Agricole Group. Your second question, excuse me, was about-
Wirecard.
Wirecard, excuse me. Wirecard. The partnership with Wirecard is dedicated to the You know that in terms of payment services, you have two different targets, two different customer segments. Either you're working or 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. Then you work with the vendors. 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 big retailers, like [Carrefour] or Auchan or whatever. You have also the e-merchants. This is in this second area where we think we can improve our offer.
With Wirecard, we are going to try to improve the offer, the quality of the offer, the quality of the reporting services that we provide to our merchants with whom we work. In terms of development of this partnership and when we can expect some positive effect, I don't have precise elements in mind. It's obviously taking time because the idea is that once the partnership is launched, which is the case, it's signed and completed. Wirecard is working for us in order to help us to improve our offer. It's not going to produce a tangible effect very soon. It's clearly the idea of improving our offer towards merchants in order to develop our market shares with either big retailers or e-merchants.
Thank you.
Thank you. We can now take our next question from Pierre Chedeville 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 its partnership with Monte Paschi, had a very huge increase in sales in life products, + 30%. I was curious to know if you have seen the same trend for your part with Cariparma in terms of life products development. My second question is about the margin. We talked a lot about the margins at LCL. 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 CIB. What is the part between volumes and margins there? Thank you.
Okay. Thank you, Pierre. In terms of life insurance in Italy, I have in mind this figure for AXA, which is quite impressive indeed. I think that we are ahead of the curve as compared to them because they have this distribution partnership with Monte Paschi since a long time. It's not very natural for a traditional insurer to behave like a bank insurer. I think that actually, the idea that we can sell large amounts of, and large numbers of life insurance policies through a bank network is an idea that we are used to since many years. So actually, we probably haven't had an increase of 30% of our outstandings last year, and I think it was 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 a bank and a traditional insurer.
Regarding the global trend, I mean, in Italy.
The global trend in Italy was not 30%, clearly. The business was much weaker than that, even though our outstandings. We are going to find exactly the evolution of the outstandings in Italy. I don't have them in mind precisely, but we are going to give it to you in a minute. Clearly, I think that what happened with AXA and Monte Paschi is simply that they are now becoming more experienced 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 the margin that CA-CIB, I don't have in mind the level of margin that CA-CIB, but what we can tell you is that, and we stressed it in the second quarter, but it continued again this quarter, the revenues RWA ratio is up 18 basis points between the first nine months of 2017 and the first nine months of 2019.
Okay. Thank you very much.
Excuse me, I'm going back to your question about the evolution of life insurance. Within Crédit Agricole Assurances, which has life insurance activities, not only in Italy but also in Luxembourg, in Japan, and some other areas, the net premium income for the first nine months of 2018 was up 39% as compared to the first nine months of 2017. I'm talking about the premium income, not about the outstandings. I don't know about outstandings. 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. Mr. Grivet-
Okay
Would you like to have me call back for any additional or closing remarks?
No, I just wanted to thank all of you for your questions. Always very relevant, of course. It's my pleasure to see that before the end of the next quarter, I think we are going to have another event to meet with you in December. I'll see you soon. Bye-bye.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.