Welcome to the Crédit Agricole first quarter 2018 results 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 to every one of you. Excuse us for this little delay in starting this conference. We have had a small technical problem that is now solved, I hope, and I hope that the line is clear for every one of you. Let me start with the slideshow swiftly, in order to leave time for your questions if you have some after the presentation. If we start with page six of the slideshow. Just as a reminder, Crédit Agricole S.A. posted this quarter a net profit of EUR 856 million, and Crédit Agricole Group posted a net profit of EUR 1,429,000,000. Just as a reminder, and I think it's an important information, the net tangible asset value per share at EUR 11.2 per share is stable versus the end of last year, despite the effect of IFRS 9.
Last point on this page, the CET1 ratio stands at 14.6% for the group and at 11.4% for Crédit Agricole S.A. On page seven, just a reminder of some events that have had an impact on our figures for the first quarter of this year. Obviously, you are fully aware that in the last 12 months we've been disposing of some non-core entities, namely Eurazeo and the deconsolidation of BSF. Of course, we have had also some significant acquisition transactions, Pioneer Investments through Amundi and three regional banks in Italy. Excuse me. We will go back on that later on.
In addition to that, you are fully aware that between the first quarter of 2017 and the first quarter of 2018, there has been a sharp decline in the euro-dollar parity. There has been, on the contrary, a sharp increase in the contribution that is asked from us to the Single Resolution Fund. Again, we will go back on these two elements later on through this presentation. The key messages I think are important regarding the results and the performance that we did this quarter. Excuse me. First is the fact that we have had a very good level of activity in all business lines.
The second key point is that we managed to keep our costs under control, despite obviously the sharp increase in the contribution to the Single Resolution Fund, and indeed with a decline of the level of costs at constant scope and ForEx rate by 0.7% on the perimeter of CASA. It's a good performance, which generated an underlying cost-income ratio, excluding our contribution to the Single Resolution Fund at 63.3%, which is a fairly good level, at least for a first quarter of the year, which is a quarter, as you know, impacted by IFRIC 21 regulations. The last point is that on the two acquisitions I was just mentioning, we are in a position to consider that the schedule of the cost synergies that we were targeting is going to be accelerated a little bit.
Amundi already said when it published its results that it was in a position to generate as much as 60% of the cost synergies of the Pioneer acquisition as early as 2018, not only 40% like was the initial schedule. As far as the three Italian banks are concerned, considering the fact that we are going to merge them into Cariparma in the middle of this year, we are in a position where the equilibrium, the break even on those four banks is going to be reached probably around the second quarter of this year. The contribution for the full year 2018 is going to be definitely positive.
The last point maybe I can mention is that the impact of the transition to IFRS 9 is exactly at the level that we had forecast, namely a 24 basis points in terms of CET1 ratio for Crédit Agricole S.A., 26 basis points for the group globally. On page nine, you have all the main activity indicators that you are used to. I'm not going to comment all those indicators, of course. Maybe just two indications. The first one is that in retail banking activities, especially in France, we are seeing the same movement that we had already mentioned last quarter, which is a slowdown in the home lending business and a pickup in the lending to businesses.
The second element is that obviously in the CIB space, especially in the credit market, we have seen a very pronounced wait-and-see attitude from our customers in terms of bond issuance, which is also triggering a weak demand for hedging activities. If I go now to page 11. Good news is that we have only very few specific items this quarter. I think there is only one which is worth mentioning. We have an additional bad will that we posted this quarter. It's an additional bad will on the acquisition of the three Italian banks, which translates into the acknowledgment of an intangible asset. So no impact on our solvency, but a EUR 66 million positive impact on the net profit of this quarter.
If we go now to page 12, there is maybe some explanations we need to remind you in terms of evolution of the net income group share. As I told you, we are posting this quarter a net income group share for Crédit Agricole S.A. of EUR 856 million, which is an increase of 1.2% as compared to the EUR 845 million posted last year on the first quarter. If we restate those two figures from the specific items, which were negative last year and which are positive this year, we have an underlying evolution between Q1 2017 and Q1 2018, which is declining by 12%, but actually at constant scope and at constant exchange rate, it's an increase of nearly 5%.
And if we also take out the impact of the sharp increase of the contribution to the Single Resolution Fund, it is actually an economical increase of nearly 9%, 8.7% of the underlying net income group share. And what you can see is that this increase of the net income group share is connected to what is now our perimeter of activity. Let me go now to page 13 and to the evolution of our revenues, the evolution of the top line. I would say that in gross terms, the top line is increasing by 4.4%. Actually, the underlying top line is growing by 2.5%, and on an underlying basis, excluding the scope and ForEx effect, it's almost a stable evolution, minus 0.7%.
What you can see actually is that all business lines are either stable or up, and the decrease in revenues is concentrated on the large customers division, which I will comment a little bit later on. On page 14, what you can see again is that we have had good cost control. I already said it, but there is a decline of 0.7% of the cost base in terms of underlying costs, excluding Single Resolution Fund contribution, and at constant scope and exchange rates. And actually, where there has been a slight increase in the cost base, it's in the two business divisions where we have made acquisitions, asset gathering and retail banking activities. And in both cases, actually, the increase in the overall cost base is below the simple integration of the cost basis of the entities that we acquired.
So it means that we have already started to generate cost synergies. And again, the cost-income ratio at 63.3%, excluding the contribution to the Single Resolution Fund, is at a good level, considering the fact that we are on the first quarter. In terms of the cost of risk, page 15, I think that there is nothing much to be said. The cost of risk is stable at a low level as compared to the fourth quarter of last year, and it's even decreasing as compared to the first quarter of last year, despite the first effect of IFRS 9, because as you know, we are now booking provisions not only for non-performing loans, doubtful loans, but also for the so-called bucket 1 and bucket 2 loans in all business lines.
On page 16, you have the breakdown of this evolution of the cost of risk by business line inside the perimeter of Crédit Agricole S.A. Nothing much to add on this page. Maybe just additional information, which is that despite this low level in terms of cost of risk, we have significantly increased the coverage ratio of our NPL portfolios. It's, of course, in connection with the transition to IFRS 9. If we now zoom on the different business lines, starting with the asset gathering business division. On page 17, what you can see is that there has been a good level of activity across the board with, but you know it already, a very significant level of net new inflows within Amundi, close to EUR 40 billion, but also a good momentum within the life insurance business, plus EUR 1.6 billion, and plus EUR 2 billion in the wealth management division.
All in all, we have a very significant improvement of the contribution of this business division to the net income group share of CASA at nearly EUR 450 million. It's up close to 12%. On page 18, with regards to the insurance activities, I think that what we can say is that we have had a very good level of activity across all segments within the insurance space, be it P&C activities, personal insurance, and also savings and retirement with a good quality of net new inflows. The level of profitability is up at a level, which was already quite high on the first quarter of 2017.
On page 19, Amundi, of course, you have already noted when Amundi published its results 10 days ago that not only the net new inflows were very high, but also of good quality considering the breakdown of these new inflows between the different segments of customers and between the different asset classes. In addition to that, as I already said, the materialization of the cost synergies is going quite well. In this first quarter of 2018, Amundi managed to keep more or less stable its cost-income ratio, excluding contribution to the Single Resolution Fund, even though all the cost synergies are not materialized, of course, yet. The contribution to the net profit of Crédit Agricole S.A. is sharply increasing considering the integration of Pioneer. On page 20, retail banking activities in France, LCL.
From a commercial viewpoint, I think that all indicators are in the green, be it the evolution of loans outstanding of customer savings, but also the number of new customers. LCL opened close to 90,000 new bank accounts this quarter. The client equipment in different products and services is also improving this quarter, as was the case in the previous quarters. The net banking income is definitely impacted by the fact that we no longer have the early repayment and renegotiation fees that we had in the first quarter of 2017. We have also an impact of the increase of the Single Resolution Fund. Actually, the underlying level of revenues is now stable as compared to the first quarter of 2017, excluding these renegotiation and early repayment fees. It's even a little bit up as compared to the last quarter of last year.
In addition to that, the operating expenses are sharply down, -2.4%. We are in a position to fully confirm the guidance that we had given on the further evolution of the net banking income within LCL for the full year 2018. In Italy, retail banking activities on page 21. Like I said earlier, we now integrate the three banks that we purchased by the end of last year, which explains a significant part of the increase in customer savings and in loans outstanding. Not only, I would say that on the so-called historical perimeter of Cariparma, the activity was also quite dynamic. The net profit is a little bit down, but it's only due to the effect of the integration of the three banks.
All in all, they generate a negative contribution this quarter of around EUR 4 million, which, as I said, is going to slightly become positive, probably in the second quarter and to be positive for the full year 2018. Again, we see that the balance sheet quality has further improved this quarter with an impaired loan ratio at 11.5% now, and another improvement of the coverage ratio, which is now at 63%. The net income group share without the scope effect would have been up 7.5%. For the international retail banking activities excluding Italy, nothing much to say besides the fact that the net income group share is up close to 50% at EUR 30 million, and it's up in all geographies.
In specialized financial services on page 23, just one word on the leasing and factoring activities, which showed a very good commercial performance, plus a very sharp increase in their financial figures with a net profit, which is also up close to 50%. As far as the consumer credit business, CACF, is concerned, it's fair to say that we had had, in the first quarter of 2017, two significant positive one-offs, which are not repeated this quarter. Namely, it was the effect of the disposal of an important portfolio of non-performing loans, close to EUR 500 million of non-performing loans, which were sold at an overall profit of EUR 22 million net income group share. We also sold the Greek business in the first quarter of 2017, generating a net profit of EUR 15 million.
Excluding those two one-offs, actually, the net income group share of CACF is also up, slightly but up 1% this quarter as compared to the first quarter of 2017. In the large customers division, again, two different businesses and two different evolutions. As far as the asset servicing business is concerned, the net profit is up 12%. We benefit from a very good activity momentum, plus from the fact that we now own 100% of this business, so we no longer have any minority interest. In the CIB space, obviously this was probably the area where the environment was the most challenging on the first quarter of 2017.
If we go down by the different sub-business lines within the CIB space, I think that we can say that we had quite a good resistance in the fixed income capital market activity in a very, I would say, dull commercial environment. We managed to keep a decent level of activity, but the revenues were nevertheless down 20% at constant exchange rates. In the financing activities, actually the performance was quite satisfying considering the very scarce approach that we have in terms of risk-weighted assets. Indeed, the level of risk-weighted assets allocated to the CIB this quarter was significantly down. Considering the fact that, in addition to that, we managed to keep under tight control the cost base, and that the cost of risk was also significantly down this quarter as compared to the first quarter of 2017.
Despite this wait-and-see attitude of our customers on the capital market activities, we managed to keep the return on normalized equity of the CIB activities on a full-year basis, a little bit above 10%, which is quite decent for a first quarter. For the corporate center on page 25, I think that we are again on track to reach our target of around EUR 700 million of net cost in 2019. Nothing much to add despite this element. If I go now on page 27, on the Regional Banks, I think it's more or less the same situation than the one we have seen for LCL, with a very good commercial momentum.
Customer savings up close to 4%, loans outstanding up 6.1%, 270,000 new bank accounts opened in the first quarter of this year, out of which 30,000 in connection with the new offer EKO that was launched by the end of 2017. Revenues were obviously down for the same type of reasons as the one we had mentioned for LCL. This explains, obviously, a decline in the level of profitability. Nevertheless, commercially, it's working very well, and it's benefiting to all the business lines of Crédit Agricole S.A., starting, of course, with the insurance activities. If I go now to page 29 and 30 for the assessment of the solvency of the group, starting with Crédit Agricole S.A., the fully loaded CET1 ratio stands now at 11.4%.
It's down 30 basis points as compared to the end of last year, 30 basis points it's exactly the impact of the transition to IFRS 9, plus the deduction of the payment commitment to the resolution and deposit guarantee fund that the ECB imposed to all banks this year. A good level of CET1 ratio, which remains perfectly in line with our target of 11% in the medium to long term. This is notably due to the fact that we continue to manage the level of risk-weighted assets on a scarce manner with only a small increase as compared to the end of 2017, and a level which is more or less stable as compared to the end of March 2017. At group level, the solvency is, of course, much higher, 14.6% at the end of March.
It compares to 14.9% at the end of last year and to 14.5% at the end of March 2017. The evolution of this quarter is more than explained, I would say, by the regulatory impact, which represented a global impact of close to 40 basis points. It means that outside this impact, we would have been up 10 basis points. Again, this is due to a very cautious evolution of the level of risk-weighted assets. In addition to that, I want to mention a further improvement of the TLAC ratio, which is now at 21%, excluding eligible senior preferred debt. It's up 60 basis points as compared to the level we had reached at the end of last year.
This is partly due on page 31 to the fact that our long-term market funding program has well advanced on this quarter, and I would say on the first four months of 2018, because we have updated the figures at the end of April. On the perimeter of Crédit Agricole S.A., we have focused on senior non-preferred debt precisely in order to accelerate our evolution towards the target of 22% in terms of TLAC ratio, benefiting from very good market conditions and very cheap market conditions for this category of debt in the beginning of this year. In terms of liquidity and funding, nothing much to say. Again, the liquidity situation of the group is very sound, with liquidity reserves in the region of EUR 250 billion, an LCR ratio which is far above any requirements, and a surplus of stable funds which remains above EUR 100 billion.
In conclusion, I would say that this quarter, despite challenging environment and despite some changes in the scope of the group between 2017 and 2018, proved to be a very satisfying quarter for the group and for Crédit Agricole S.A. As Philippe Brassac said when we presented the results to the press, we confirm that we are fully on track thanks to those results towards reaching all the targets that we had set for the medium-term plan for 2019. Thank you very much. Now I will hand the floor to you if you wish to ask questions.
Thank you, sir. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will now take our first question. Guillaume Tabourde from Exane. Please go ahead.
Yes, good afternoon. I have two questions. The first one relates to the RWA in the financing business. I appreciate they're well controlled year-on-year, but in the last six months, they've increased 10%, despite the fact that the FX should have actually reduced the growth rate. I was wondering whether you're taking a little bit of risk, or whether your growth is going to be obviously quite capital intensive. A similar question maybe for the growth at LCL in SME and professionals, you're growing at 8% or 9%. Admittedly, for now, the French economy is very sound, but that's usually a segment rather vulnerable when the cycle turns. I was wondering if you had some comments on that. The other question relates to the capital. Many questions, Guillaume.
The first one on the CIB, I don't have the precise figure you were mentioning as far as RWA and financing activities are concerned. I have always said that we can have a certain volatility, specifically if we're talking end-of-period RWAs, because in this CIB space, and especially in the financing activities, the strategy is to underwrite
Significant transaction, then to distribute those assets. As you know, we have regularly increased our primary distribution ratio in accordance with our global strategy. It can happen that on a specific end-of-quarter date, we have a peak in terms of RWA. What is important is the medium-to-long-term trend, and I can confirm you that we don't intend to grow and to start again, to grow the level of RWA that we keep on our balance sheet in this business. The idea is clearly to remain inside this distribute to originate strategy. At LCL, the situation is a little bit different.
Contrary to the CIB business where we want to manage this business on an asset-light basis, in the retail banking activities, we are in a business where we want to accompany the growth of the market, and we want to accompany our customers. It means that if the market for SME lending is growing, which is the case, and is growing on a sound manner, because as you know, we are not growing, I would say, treasury loans to our customers. What is growing is the investment loan segment. I think it's fully, I would say, coherent with our strategy to be part of this increase and to be able to accompany our customers when the market is here. It has been the case in home loans, and we tried not to lose any market shares in home loans when the business was booming.
It's slowing down a little bit. The business is now accelerating for SMEs and corporate in France, the intention is clearly to be part of it. In terms of evolution of the net asset value, what was your question exactly?
On page 17, the quarterly report, you mentioned [Foreign language]capital propre part du groupe of EUR 57,173, stable quarter-on-quarter.
I was wondering, despite the earnings, you should have had an increase, because that excludes the-
Yes. We have had-
I realize.
We have also provisioned, as you know, the future dividend and some of the elements of the earnings, like the. No, IFRS 9 didn't play anything.
No
Comparing January 1st with end of March. Part of the earnings of this quarter, like for example, the EUR 66 million of badwill, are not generating any increase in the shareholder equity, because there is, at the same time, an intangible asset, which is a book. I don't have all the figures in mind, but clearly, the evolution inside the quarter is perfectly, I would say, logical.
Okay. I'll check with Cyril. Thank you.
We will now take our next question from Jon Peace from Credit Suisse. Please go ahead.
Yes. Thank you. I wanted to ask about your net profit target of 2019 of EUR 4.2 billion, where, Jérôme, you said you were confident in hitting that next year. If I compare that with consensus, analysts have got numbers which are ahead of your plan in asset gathering and specialized financial services. It's more or less in line in the corporate center. It's a little bit below in CIB and even lower still in the retail businesses. If you're still confident in hitting the target, where do you think analysts are too conservative? Do you think the CIB business is going to accelerate and hit the plan? Are we too conservative around perhaps cost savings in the retail business going forward? Thank you.
No. I think these exercises are two different exercises. Analysts are forecasting. They are making assumptions. What we are committed to is to reach our target, which is a different exercise. I'm not pretending that if we are in a position to be above the target, we are going to limit ourselves just to the target. What we can say is that everything we are seeing in what happened in this quarter is consolidating our capacity to reaching our target in 2019. I'm not pretending that the analysts are either too aggressive or too conservative in different business lines.
If I were to look at Sorry.
Yeah, go ahead.
If I were to look at CIB, for example, obviously it came in a little bit light this quarter. You thinking that business will still accelerate going forward and is on track to meet the plan?
In the CIB activities, we have fixed income capital market activities, then we have financing activities. Leave alone the small part of what we call investment banking, in which we have advisory and a small corporate derivative business. If we leave alone this business, which is small. The financing activities are, and have been performing well this quarter. They are in line and evolving positively. As far as fixed income activities are concerned, I think we have to go a little bit more in detail. Actually, what happened this quarter is that the demand from customers to issue new bonds was weak. Typically, on the different bond markets, the volumes were down 15%-20%. In our case, the bond issuance is, I would say, triggering the rest of the business.
Typically what we do is that when we issue a bond for a customer, then we have the capacity to propose the hedging. We have the rate hedging, the FOREX hedging, and all the, I would say, the ancillary side business. Clearly, if the overall fixed income business was down, it was triggered by the weakness of the bond market. I leave alone the securitization business, which actually performed well this quarter inside those activities. It suffered from the FOREX, because a significant part of the securitization business is made in the U.S., and so translated into EUR, definitely we suffered from the evolution of the parity. Nevertheless, the volumes and the pricing were quite satisfying on this securitization business.
If we believe, which is my case, that the economic environment is and will remain more or less positive for the rest of the year, if we believe that the corporate customers have to issue bonds at a certain point in time, we can expect that the volumes we didn't do in the first quarter will happen somehow in the rest of the year. For the time being, I have absolutely no indication that this will be the case and when it will be the case. This year, the start of this year, makes me think a little bit of 2016, where the first quarter was weak, it improved in the second quarter, and surprisingly, we had a very, very strong third quarter. Again, I'm not forecasting that, but it starts a little bit like 2016 and absolutely not like 2017, which is more traditional.
Most of the issuers tried to take advantage of the first part of the year to issue their bonds on the market. In CIB, to summarize my answer, I consider that we have had a weak quarter, especially on the fixed income markets, for me, it's not a trend.
Great. Thank you.
Thank you.
We will now take our next question from Jean-Francois Nerette from Goldman Sachs. Please go ahead.
Hi. Good afternoon, Jean-Francois Nerette from Goldman Sachs. I just wanted to ask a first question on the CIB again. I just wanted to understand better the relationship essentially between cost and revenues and whether. Obviously, it's not your view, but let's assume that the revenue weakness would continue. Would we see a catch-up in the rate of decline on cost in the rest of the year? Meaning that the first quarter, you haven't really shown the flexibility that is possible to obtain, or is the cost base more fixed than sometimes it is in CIB businesses elsewhere? My second question is on capital management. I just wanted to know whether you could provide us an update on the moving part going forward, and where we are there, in particular on unrealized gain contribution to CET1.
If you had refined any Basel IV or EBA guideline estimates, as well as whether you could update us on the status of Switch within the context of your medium-term plan. Thank you very much.
Okay. On the CIB first. As you know, Jean-Francois, we are absolutely not in the same business model as some U.S. bulge bracket, very active in trading activities. The proportion of our costs, which are directly linked to the profitability or to the level of revenues, is much smaller than the one which is, I would say, more or less a fixed cost basis. When I say fixed, I'm not pretending that if we are seeing a decline in the medium-term trend of the revenues, we wouldn't be able to adapt the cost base. What you can see, for example, within LCL, is that we know how to adapt when we think it's necessary to restore the profitability.
In the CIB, in our model of CIB, we are not in a model where the revenues of a certain quarter is triggering directly a significant evolution of the cost base of the same quarter through the bonus provisions. Clearly, of course, we are aware of the necessity of maintaining a competitive cost-income ratio in this business. Actually, with a 59% cost-income ratio this quarter, excluding Single Resolution Fund, it's not so bad, actually. We are not going to be as flexible, again, as some big Wall Street firms. In capital management, you have raised several questions. Starting with Switch, it's a very easy one. Nothing new on the Switch front, I would say.
We are going to take our time, but we have the option within Switch to partially or totally unwind this mechanism if we think at a certain point in time that it's the best thing we can do with our capital. Nothing has changed. Basel IV, again, besides saying that what we saw in December last year seems digestible from our viewpoint, it's very difficult to be more precise before having in hand the directive proposals that are going to be issued by the commission, not before 2019. Don't expect from us any more precise guidance on Basel IV, until we see exactly how the commission wants to transpose this Basel agreement in the positive European legislation. Last point on the composition, the breakdown of our solvency as of today. I know that it's a subject that is always followed.
What I can tell you is that within the 11.4% of CET1 ratio of CASA, we have now what was called before the AFS component, which is now more an OCI component, which represents a little bit below 50 basis points.
Okay, on EBA guidelines?
On EBA guidelines about the NPL?
Yes, the one in November, December.
The one in November.
Yes.
I think many evolutions have taken place on this front, so we don't know exactly what is going to be the final output. What I can tell you is that, reading what I read about this subject, it's not going to be a big issue for us nevertheless.
Thank you very much.
Thank you.
We will now take our next question from Maxence Le Gouvello du Timat from Jefferies International. Please go ahead.
Good afternoon, Jérôme. I have a few questions for you. The first one is regarding the cost of risk in the other retail. There's a lot of cleaning
We hardly hear you, Maxence. I don't know what's going on.
Is it better?
Yeah, it's better.
Hello. Thank you.
Hello.
The first question is regarding the cost of risk in the other retail activities. You did the significant cleaning with the disposal of the EUR 500 million NPL ratio. Which kind of cost of risk guidance would we need to apply, going forward on that part of the business? The second element is regarding, is a follow-up on Guillaume's question. You were speaking at the time of the investor day about being more selective and reducing the RWAs. Where are you in the process? And can we estimate that today we reach the bottom and at the right level for you? The third question will be a comment regarding your Q4 comments, saying that you have postponed some deals from Q4 to Q1 to avoid the high tax rate. Where those deal have been allocated, and how do we need to interpret the underlying trends?
The last one is regarding the full, the +25 is quite significant, and it seems that the French bank are more impacted than other European banks. Do you have any idea why?
Again, important question. In terms of cost of risk, actually, it's very difficult to provide a guidance. What we can say is that in the different business lines, be it consumer credit, retail banking in Italy or in other geographies, retail banking in France, and financing activities of the CIB, we see absolutely no sign of deterioration. So it's difficult. It's been now eight or 10 quarters that we say that we have reached a very low level and that we see no sign of deterioration, but no reason why the decrease could continue. And again, it continues. But I think we have now to learn to live with IFRS 9, because IFRS 9 is probably going to trigger a certain volatility in the cost of risk.
What I can tell you is that, if we take, I would say, a quite objective indicator, which is the NPL ratio across the board within Crédit Agricole S.A., all business lines, it's rather declining actually, because it was at 3.6% by the end of March 2017. It's now at 3.4%. So clearly, I think it's the bottom line in order to assess the potential evolution in the cost of risk going forward. In terms of RWAs, I think we are now close to the target that we had set for the CIB. I assume you were raising your question about the CIB.
Yes.
I think we are now around the target that we had set for the CIB in the medium-term plan, which means that, again, there might be some volatility because this is always possible to see a deal taking place on March the 15th rather than on April the 15th. If you distribute it in one month's time, it means that it's going to weigh on your risk-weighted assets by the end of the first quarter, or not, depending on the precise date of the closing. I think we have no intention to reduce further massively the RWA allocated to the CIB, but we have either no intention to increase the RWAs just for the sake of trying to generate additional revenues. The business strategy is really to try to make the best use of a limited amount of RWA.
It's the case for capital market activities with a very low level of VaR and a very low level of capital consumed by those activities. It's also the case of financing activities where this distribute to originate strategy is still going on. You were also raising a question about LCL, and deals that were postponed. Actually, what we said in the end of last year was that we didn't try to generate the maximum possible profit in a context where the tax rate was high. I was not, if I remember correctly, precisely mentioning a specific deal that could be postponed from one quarter to another one. What we did was also to try to book some costs, rather in 2017 than in 2018, which was absolutely the case.
For example, you can see that the insurance business, the costs are down this quarter when they were up on the last quarter of 2017. The last point is regarding the contribution to the Single Resolution Fund. It's a very complex matter. For me, to be frank, it's something which I find a little bit weird. The bottom line is that the Single Resolution Board has set a target that has to be reached in 2023 in terms of a certain proportion of the 2023 deposit basis within European banks. It's, if I remember correctly, 1% of the deposit basis within the European banks. Between now and 2023, what they are doing once a year is to adjust the amount that they are asking the banks to pay in order to converge progressively towards this level.
The rate of 1% is fixed, but the basis for the calculation, which is the assumed level of customer deposits within the banks, is not fixed because it's reassessed regularly. What happened in the second part of April, so a little bit late this year, was that the chairwoman of the Single Resolution Board, during a conference, said that actually, she was seeing an increase in the customer deposit basis presently that probably could lead to an increase in their requirement. We have not received the bill yet. The bill typically is sent by the end of May. What we have been booking in the first quarter of this year was a provision, which we think is going to meet the bill that we are going to receive.
It's a quite weird exercise in which we receive the bill in May when the accounting regulation asks us to book the charge in the first quarter.
Okay. We may have some adjustment in Q2 on that part?
I don't expect any adjustment, neither positive nor negative, because my teams try to make a quite, I would say, a thorough analysis of the basis of calculation. What I can say is that if you haven't seen some banks that published their results earlier, reassessing the level of their Single Resolution Fund contribution, it may be because they published their results before this statement made by Elke König.
Okay. Many thanks.
Thank you.
We will now take our next question from Delphine Lee from JPMorgan. Please go ahead.
Yes, good afternoon, Jérôme. Just a few questions on my side. First of all, just want to ask you on French retail. The net interest income has stabilized this quarter. I was just wondering if we should expect this kind of level as a run rate, or when could we expect a little bit of improvement given the very strong volumes? Secondly, if I can come back to CIB and just ask you maybe on a bit of color on April, if you have seen a little bit of a rebound on bond issuances in the environment for fixed income? Then just a very last one, technical one, but just on AT1 coupons. There's been a slight increase this quarter.
The amount can be a little bit volatile. Just wondering if there is anything to note or is that coupon or cost coming down in the next few quarters, or if there's any change to the full year, basically. Thank you.
Okay. LCL, the guidance that we gave by the end of last year, and that I confirm now, is that Q4 2017 is a good basis if you try to assess what is going to take place in 2018. It proves to be the case for the first quarter. It may vary from one quarter to another by a few million euros, but it's probably a good, I would say, guidance for the full year 2018. In CIB, it's a little bit early to try to assess things. What I can say is that March was really a difficult month and that April was probably a little bit better. I'm not pretending that we went from complete darkness to full light when we changed from March to April. Again, I was referring to 2016 earlier. In 2016, the recovery was quite slow, actually.
It wasn't all of a sudden that volumes increased and that the consumer appetite for new deals went back to its peaks. It's very difficult to give precise guidance. What I can tell you is that March was probably a very difficult month in the sequence of the last 6 months. The AT1 coupons, well, it's true that there has been a slight evolution from 125 to 131. I don't know exactly the explanation. It's probably in connection with the fact that almost all our AT1 are in U.S. dollars. It's a little bit counterintuitive because the U.S. dollar actually declined between at least Q1 2017 and Q1 2018. There is a decline in AT1 coupons, and there is a decline in the U.S. dollar. Probably there, the coherence is good.
Between Q4 2017 and Q1 2018, I don't have the precise answer, but it may simply depend on the date at which we pay the coupon. What I can tell you anyway, is that we haven't had any evolution in the outstandings of AT1.
Great. Thank you very much.
We will now take our next question, Flora Bocahut from UBS. Please go ahead.
Hi. Hello, good afternoon. Two questions for me. The first one on Cariparma. I was wondering whether with the acquisitions, you could maybe tell us a little bit more about your new cost-income ratio and cost of risk targets for 2019. The second question would be about the insurance. I thought the revenues were actually quite strong this quarter, and I know it's very difficult to understand how insurance accounting translates into banking accounting, but at the same time, I was just wondering whether you think the revenue this quarter is actually high for the next quarter. Thank you.
Well, on Cariparma, in terms of cost of risk, what we had said, I see no reason why I should change this, is that we think possible to reach a level of cost of risk in the region of 60 basis points. We are still above this level for the time being. We think that there is a further potential of decrease in the cost of risk, at least, I would say, for a run rate in terms of cost of risk. There is one caveat, which is, again, the way IFRS 9 is going to play and to introduce some volatility, but I think this is the type of figure that we have in mind.
In terms of cost-income ratio, what is important to keep in mind is that we started with the three banks that we integrated by the end of last year with a cost-income ratio, which was significantly above 100%. It's now already at 95% for this perimeter of these three new banks. Definitely what we target is to reach the average level of Cariparma, which is in the region on a run rate, I would say, which should be in the region of 55%-56%. I don't remember precisely the target that we had set in the medium-term plan, but I think it was in the region of 55%-56%. Again, we see no reason why we should change this target. In the insurance activities, I think again, it's very difficult to precisely explain all the details of the evolution of the top line.
What is interesting to notice is that we managed to keep more or less the top line stable as compared to last year, when last year we have had significant capital gains that were realized in the first quarter. We managed, I would say, globally to replace those capital gains on the portfolio of assets of the life insurance company by the recurring rhythm of financial revenues. There has been a small decline in the level of revenues generated by the P&C activity, because for some, I would say, weather-related events during the first quarter, we have had a slight deterioration of the combined ratio of the P&C insurance company, which translates into net banking income, quote-unquote.
I think, again, what is important for the insurance activities is to monitor the evolution of the net profit, which is going to remain somehow between the evolution of the outstandings of the life insurance activities and the evolution of the size of the portfolio in P&C and non-life activities.
Yeah, understood. Thank you.
Thank you.
We will now take our next question from Alexandre Coumel from Natixis. Please go ahead.
Yes. Hi, Jérôme. A few questions from my side as well. First question is on margins. Can you please just comment on the evolution of margins in the retail, both on home loan and SME? I don't know if you can provide figure on the level of new business compared to the back book. Second question is on the cost in the retail, specifically on LCL. I think that you're running ahead of your target in term of cost reduction. Should we expect this level to continue through 2019, or should we expect a kind of slowdown on the cost reduction? Last question is on Amundi. I think that the integration of Pioneer I mean, is going as planned. The group could be now open to new acquisition in my view.
I'm just wondering if you can update us on what is the holding you want to have in Amundi. Are you open to go below the 66%? What is the level on which you don't want to go down below? Thank you.
Okay. LCL, obviously what happened since one year is that the average yield of the back book continued to decline, at the same time, even if it was not enough, I would say by far, customer rates for new loans started to increase a little bit. This has significantly narrowed the gap between the back book and the front book, actually. It was in the region, I don't want to give too precise figures, but just to illustrate things, it was close to 100 basis points, and it has now more than halved, actually. Clearly, we are in a far better situation in terms of I would say rollover effect on the loan book of LCL, as is probably the case on all the markets.
Definitely, I think that we still have some room to see customer rates increasing because market rates, long-term market rates, have increased in the last 12 months by probably 80 basis points, I would say. At the same time, customer rates have increased only by 20 to 25 basis points. I think that, and it's, I would say, a competition issue on the market. The market remains very competitive, and banks have not fully integrated, and I would say even by far, this increase in market rates in their pricing for new loans. What I hope, I'm not saying that I'm forecasting that or precise date, but what I hope is to see a further increase in customer rates, which is going to help closing this gap between the front book and the back book.
For the time being, there is still a gap, which has, again, more than halved, but which is still a positive gap. In terms of costs at LCL, obviously, the idea was to be a little bit ahead of the curve in terms of cost-cutting within LCL when we saw that the top line was probably going to be a little bit behind of the curve. This is why the management of LCL decided to be quite aggressive in terms of cost-cutting. What I can give you as an indication, just to assess all the efforts that have been made in the last years within LCL, the total staff was around 20,000 people back four years ago, it's now 17,500 people. It's a very strong reduction in the number of staff.
At the same time, I remind you that we had decided to merge 250 branches, which has been completed. For the time being, we are not going to launch additional cost-cut plans. We are going to continue to manage the cost base very carefully. We are going to continue to deploy all the plans that we had launched, especially in the back offices, in order to reduce their costs. I'm not guiding you to a 2.5% decline year-over-year on all coming quarters. At a certain point in time, we are going to be in a situation where it could make sense to accelerate some investments, be it IT investment or be it more, I would say, commercial investments, advertising and so on and so forth. Last point within Amundi.
Again, we have said that we intended to keep two-thirds of the capital of Amundi. We haven't changed our mind yet. To be frank, I don't know if you have asked the question to Yves Perrier, but at least from my viewpoint, I don't see any project coming from Amundi that could, I would say, raise the question.
Thank you very much.
Thank you.
We will now take our next question from Matthew Clark from Mediobanca. Please go ahead.
Good afternoon. Two questions. Firstly, coming back to the pull to par impact on CET1. How much of the 50 basis points contribution to the CET1 ratio that you said came from the OCI portfolio is related to the bond portfolio that you think could disappear by the end of the 2019 horizon for your plan? What's the specifically on the bond portfolio, the update compared to that original 70 basis points?
I don't have the precise breakdown, Clearly, I think it's not a massive mistake to assume that the far biggest part of it is due to the bond portfolio.
Okay. Do you still see that likely to unwind on a kind of now two-year horizon?
Probably not two years, because the duration of the bond portfolio is longer than that. I don't have the precise, I would say, spreading over time of this OCI reserve. It's probably going to take more time than two years, actually.
Okay. Second question was on the payment and account fees in LCL, where there's a very strong increase year-over-year. I think you'd mentioned in previous quarters that you are moving clients from different package programs around. I just wanted to see, is that now complete, or is there more benefit to come from shifting clients among different packages?
Well, I don't have a precise idea on the further evolution. What I can say is that, again, this quarter, what you can see within LCL is that the number of premium cards issued to customers has further increased by close to 5%, which means that we continue to try to convince the customers that they will find some, I would say, advantages in terms to purchase a premium card. Definitely, what is the responsibility of LCL is to provide the offer, and then it depends on the customer, which may choose either the low-cost offer or the premium offer, depending on their needs. What we try to do, of course, is to have as many customers attracted by the premium offer as possible, but definitely, the idea is even more important to keep the biggest possible number of customers.
I'm not able to say up to which level we can push this movement.
How much more profitable per customer are your premium package customers compared to your standard package customers?
Frankly, it's a question that is a little bit beyond my immediate knowledge. If you don't mind, I will ask the IR team to try to provide you with a more precise answer.
Perfect. Thanks very much.
Thank you.
We will now take our next question from Sharath Kumar from HSBC. Please go ahead.
Yes. Good afternoon, Jérôme. A couple of questions on Italy, if I may. Firstly, just curious, what are the levers that have allowed you to upgrade your profit contribution targets for those three Italian banks. Is it purely the work you've been doing on the cost side, or has there been some sort of positive surprises on the cost of risk or revenue lines as well? Then in terms of your enlarged Italian business and your volume growth ambitions there, you seem happy to grow faster than the market in mortgages. I'm just wondering at what point do you see maybe accelerating growth on the SME small business side? When can we see the pace picking up there as we've, I guess, we've already been seeing a similar trend in France?
Is it more a case that the risk reward in Italian SMEs are still kind of pretty unattractive for you guys at the moment? Thanks.
Well, I think as far as your last question is concerned, the answer was more or less inside the question, to be frank. Clearly, we are happy with the business of home loans, because it's a market that is developing in Italy and because there are, I would say, places to capture. We are happy also to develop the lending to corporate of a certain size. Actually clearly to SMEs, it's a business which is probably, if you're not cautious enough, is keen to generate a certain level of cost of risk when the economic environment is turning down. Obviously in our core regions where we know precisely the customers, where we know their business, where we know their capacity to export and to develop their activities, we are able, and indeed we do lend to SMEs.
This is, and this has not been set as a priority for Cariparma. Going back to your first question, which is how we can imagine to boost the profitability coming from the three regional banks we've acquired. Clearly, the idea was, if I put it in gross and simplified terms, we started with a cost-income ratio, which was probably in the region of 115, 120. The idea was simply to cut the cost base by 25%, at least as a starting point, simply by the merger of those banks within Cariparma, and the mergers are going to take place in June, July, and September, which means that in Q3 it's going to be completed.
In addition to that, we intend also to boost the top line simply by plugging all our product factories, life insurance, P&C insurance, consumer credit, asset management to the customer base of those three banks. This is in our assumption, this is going to boost the top line by probably 20%. If you increase the top line by 20% and you decrease the cost line by 25%, you are going to push down the cost-income ratio from 115, 120 to 70 around, which is probably not enough in the long run, but as a starting point, and this is on that calculation that our return on investment assumption has been made. It's by far enough to justify the level of return on investment that we had in mind.
Nothing coming from a decline in the cost of risk, simply because we start with banks with a completely clean level of balance sheet.
Great.
Great.
Thank you.
Thank you.
We will now take our next question from Pierre Chedeville from CIC. Please go ahead.
Good afternoon, Jérôme. Just a few last question. Following a discussion I had with Xavier Musca a few months ago, I understood that you were thinking about the evolution of the situation there from your point of view. That is to say, to stay or to leave. I wanted to know if the acquisition of Raiffeisen in Poland by BNP has made your reflection evolve regarding your positioning in Poland. That's my first question. My second question is regarding wealth management. I wanted to know where comes from the good evolution of the revenues. Do you have an improvement in the fees, in the mix? Where comes from the organic growth, from France or from foreign subsidiaries?
My last question is regarding the general situation in France regarding the growth of credit. Do you fear at a certain point that considering the fact that France is much more dynamic than other peers in Europe, from the credit growth point of view, that some authorities, the Minister of Finance, for instance, would be tempted to calm down this dynamic in France by increasing the core tier 1 requirements. Thank you very much.
Thank you. Your first question on Poland. First, you can see on page 22 that in Poland this quarter, the net income group share increased by 60% as compared to the first quarter of 2017. We said that we were not fully happy with our setup of activities. That's true. Nevertheless, we try to manage this setup of activities as efficiently as possible, and indeed, it's been positive this quarter. The second idea is that clearly, we think that we don't really have a fully critical size on an overall retail banking business model in Poland. We have different options. Nothing has been decided yet. We have the option of concentrating on certain business lines. We have the option of complementing the setup if we can. We have different options.
Nothing has been decided, nevertheless, we are under no pressure as long as we are able to continue to improve the intrinsic profitability of the business that we already have there. In wealth management, we managed to increase the volume of assets under management. I'm talking about international wealth management. Clearly, it's mainly coming from the different acquisitions that we made, plus organic growth, obviously. Remember that last year we completed the acquisition of the activities of CIC in Asia. We integrated also some customer portfolios in Monaco coming from HSBC, and we are going to book, starting the second quarter this year, the activities of Banca Leonardo in Italy. It's another EUR four billion or EUR five billion of assets under management. It's generating an increase in our assets under management. It's generating an increase in the NBI.
We still have to complete a cost synergy program in order to improve the profitability of the business. As far as the credit demand in France is concerned, it is true that the credit demand is quite dynamic. It is also true and fair to say that it has been slowing down in home loans and increasing in SMEs and corporates, which means that it is not a dynamic which would be overwhelming all segments of customers. Of course, we heard that some authorities, as you said, were thinking about putting in place a so-called countercyclical buffer. It is a possibility. It works in a quite, I would say, digestible manner because between the moment it has been decided and the moment it starts to be implemented, there is a one-year transition period.
Nevertheless, even if in the coming months these authorities were to decide this countercyclical buffer, it would take another year before it starts to be implemented. In addition to that, considering the level of solvency that we have reached, especially at the level of the regional banks and at the level of Crédit Agricole Group, which are the perimeters which are the most concentrated on French banking activities, we are so far above any requirement that I doubt that such a countercyclical buffer would really, I would say, bite in terms of increasing the level of capital that we need to have to operate.
Which means that it would be useless.
It would be a message, a signal.
Okay.
It's used as a signal. I would say that even these discussions that we hear about in the press regularly are also a first step of signaling that the French economy is probably accelerating quite significantly in terms of credit. In addition to that, it's always difficult to look only at one side of the equation. It's true that the credit demand coming from corporates and SMEs has increased. It's also true to assess that the gross has increased and is accelerating. It's also fair to say that the treasury of those corporates and SMEs has also increased. One should look rather at the net level of indebtedness rather than at the growth level of indebtedness.
Okay. Thank you very much.
Thank you.
We will now take our next question from Stefan Stalmann of Autonomous Research . Please go ahead.
Good afternoon, Jérôme.
Good afternoon.
I was wondering if you could talk a little bit about your balance sheet under IFRS 9. You have seen some relatively big moves, in particular into positions that will now be fair valued through the P&L. I was wondering whether you think that could create more volatility of the P&L going forward. I was also wondering if maybe you have run a shadow account, where you could tell us how the P&L would have looked like if IFRS 9 had not happened, so if you had not had this increase in fair value assets. Related to this, I was wondering, you have this relatively large position now of debt securities in your balance sheet. How are they valued? Are they going through the P&L or through OCI? Thank you very much for any color on this, please.
Well, some tricky and technical questions. To be frank, I don't have all the answers. It's true that we've been declassifying several assets and quite big amounts of assets. It's been particularly the case in the insurance activities. I'm not really able to say what would have happened if we hadn't made those reclassification or if we still were under the regime of IAS 39. It's a little difficult for me to answer your questions. What I'm saying when I'm talking about the idea of having to learn how to live under IFRS 9 is more on the cost of risk side than purely on the volatility of asset valuation side, because clearly what is going to be important is how to be able to monitor the evolution of bucket 1 and bucket 2 provisions.
In terms of asset valuation, clearly, what we have been declassifying besides the insurance activity, I don't think was that massive. Difficult to answer precisely to your question, maybe we have to wait a few quarters before we see exactly the impact. Actually, I would even say, thinking a little bit further on your question, that at least talking about the portfolios of liquidity reserves that we keep at bank level, I think we have reduced the volatility of the P&L with the reclassification that we did, actually.
Right. Okay. Thank you very much for the color, Jérôme. Thank you.
Thank you.
We will now take our next question, Tarik El Mejjad from Bank of America. Please go ahead.
Hi. Good afternoon, Jérôme. I have two questions, please. First one on capital management. I noticed the last few months, you clearly communicate more on the fact that you would consider repaying the Switch 2, but very progressively. I heard what you said earlier in the call, but did you get any indication from the ACPR or the SSM that this is something you would address over time? Also because of your message in Q4, where you've missed a bit the consensus in terms of dividend per share, and justifying that by leaving some margin to actually be able to grow it later, which means very slow growth. Is that linked to your willingness to unwind the Switch 2 progressively? Still on capital management on Basel IV, post Q4, you told us that you're still looking if Basel IV will be implemented at group level or at CASA.
If it's group level, then it's not even a topic for you. Today, you are more suggesting that you need to see what's the impact. Even if it's 100 basis points, which I think it's a benign scenario, that's still for you, three, four years of capital generation. It's very important for us to understand basically how you'll be dealing with that and how that will impact your capital distribution. My second question is on CIB. You're saying that trading is not really your business much, and you are here more to serve your retail networks and corporate and stuff. Still, when you look at FICC, 10% of group revenues, maybe less if you remove some of the corporate-related deals.
My question here is, would you consider in the next plan, the 2020, 2024, whatever, to actually review that division and the size of it and basically its strategy? Because all the other divisions are actually working quite fine, and this is the one that's diluting your returns and consuming capital. These are my questions. Thank you.
Thank you, Tarik. Many questions in your question. First, on capital. Dividend. What I said when we presented the Q4 results and the level of dividend that we intended to pay was not exactly what you said. I was just saying that this level of EUR 0.63 of dividend per share was exactly the level corresponding to the commitment that we had, i.e., to pay 50% of our attributable results. Of course, what I hope is to see in the future the level of attributable results continue to grow, which is going to enable us to continue to grow the dividend. I was not exactly referring to the idea of putting some money aside in order to be able to increase regularly the dividend. In terms of Switch 2, we have no discussions with the ECB on this issue, simply because, again, it's fully in our hands.
We don't have any, I would say, authorizations to be granted. We just need to decide and then to trigger the either total or partial unwind of the Switch mechanism. In terms of Basel IV, again, I confirm what I said earlier in the previous call, which is that obviously if, and this is one of the key elements of the transposition, which is absolutely logical and should be the case without any discussion. If the transposition of the Basel IV agreement starts saying that the relevant level where the output floor should be applied is only at the highest level of consolidation of any group, then the biggest part of the impact is lifted from any of the components of the group. Moreover, this output floor applied at group level wouldn't change very much the capital situation of the group.
This is typically one of the key elements I was referring to with saying that I had to wait exactly to see the transposition proposals before being able to assess precisely the impact. I still continue to think that this is the right way to transpose this directive, and I have no indication as saying that the Commission have a different idea on this issue. On the CIB, I don't want to anticipate on the next, and possibly coming medium-term plan. Clearly, we have the CIB we wanted to have. We are happy with this level of CIB. We are happy with the medium-term profitability of the CIB, even though we are a little bit, I would say, unsatisfied with the level of revenues that we had on this quarter.
We fully understand the reasons are coming mainly, and I would say most exclusively from, A, the decline in customer demand, and B, the exchange parity between the euro and the dollar. We fully understand the situation. We are not going to modify our views, neither by unwinding further our CIB activities, neither by developing more aggressively some sources of revenues that we don't like trading revenues. We are happy with this CIB. We think that 10% of return on normalized equity on a poor quarter is quite decent. We target to be above this level in the medium to long term, and we have been indeed above this level last year. I think that without trying to anticipate on the next medium-term plan, I don't see no reason why we should drastically change our views on this business.
Okay. Thank you.
We will now take our next question from Bruce Hamilton from Morgan Stanley. Please go ahead.
Hi. Afternoon, Jérôme. Thanks for taking my questions. Firstly, just on the LCL revenues, you've been fairly clear about sort of 2018 outlook. I guess, just looking out beyond there, given the sort of shape of the rates curve, how should we think about where NII is going to sort of converge with volumes? I assume 2019 is going to be, if there's growth, it's going to be principally fee-driven. Perhaps in 2020, you get NII more reflecting the sort of volume growth in the business. Secondly, the EU have obviously put out a recent paper looking at sort of distribution costs for customers across Europe, highlighting entry and exit fees in different markets, which under MiFID II, clearly could come under some pressure.
Can you just remind us how you think about the risk to your business in terms of any fees, both in the French business and also in Italy, and whether that could drive any risks? Thirdly, and finally, on sort of risk management, are there any pockets of risk where you're being more selective in lending, either by sector or by geography? I think last quarter, you also mentioned the sort of leverage finance really being the only place that risk was perhaps running a bit higher. If you could just give us any update on those risks, that'd be great. Thank you.
Okay. In LCL and retail banking activities, I would love to be able to answer to your questions, definitely I don't know exactly what the rates are going to be in 2019. It's going to be important in order to assess what is going to be the breakdown between NII and fees. Clearly, what I expect and what I assume is that we are going to continue to have a good dynamic in terms of fees, simply because we have a growing customer base, and we have a growing equipment rate of our customers. This is going to generate fees going forward. That is going clearly to help the top line to grow. In terms of NII, there are two unknown pieces.
As I said, we still have a gap between the yield of the back book and the rate of the front book. It's been narrowing significantly in the coming quarters, but we expect, and probably we need to see customer rates grow a little bit in order to see a full, I would say, closing of this gap. Once the gap is closed, it's going to then have a boosted effect on the NII, obviously. The second element is obviously, regarding the evolution of rate. Is it going to change significantly the breakdown of the liability side of the balance sheet?
Obviously we have been benefiting in the last two, three, four years from a modification of the breakdown of the customer deposits on our balance sheet, with a growing amount of these customer deposits being another form of sight deposits, which is a zero-cost resource. Sight deposits represent now 42% of the customer deposits within LCL. A few years ago, it was closer to 30%. Obviously, if rates increase sharply, we may see at a certain point in time, a modification of the breakdown of customer resources. Many, many moving pieces, which makes it difficult to answer precisely to your question. Clearly, I think that if I make reasonable assumptions on these different moving pieces, I'm quite confident to forecast a stable level of revenues overall in 2018 as compared to the first quarter of 2017.
Possibly afterward, we are going to see some pickup. In distribution, I would say restrictions regarding MiFID II regulations and things like that, I don't see any impact neither in France nor in Italy for the time being. I think that considering the fact that we fully assume, I would say that, for example, Amundi is part of the group and we have a link between Amundi and the distribution network. We are able to continue to be exactly in the same production distribution model. Last point, in financing activities within CIB, we are cautious about LBOs, especially when we're talking about a high level of leverage, high prices, high valuations, and low governance. Of course, it's typically the case where we want to be cautious, and we have been cautious also in the last quarters on the shipping sector, too. Okay.
Thank you.
Bye. We have a last question, then
We will now take our next last question from Nick Delfas from Redburn. Please go ahead.
Yes, good afternoon, everyone. Two questions, please. The first one on back to French corporate debt. I know it was a proposal from December, but you've now got a bit more information about the Financial Stabilities Council limit on highly indebted corporate exposure as a percentage of your capital. Is there any disclosure you can give us on the scale of your exposure as it stands? The second one, I know you've given us a lot of detail about French retail margin, but just one more question there. I think six months ago, you said that until front book mortgage margins were about 100 basis points, it would be difficult for French retail revenues to grow. I think since then, they've actually fallen from about 70 basis points to 50 basis points.
I suppose I just come back to that quote of yours and ask you to comment any further. Have you given up on the aspiration of 100 basis points mortgage margin in France? What's taken its place in terms of your enthusiasm on French retail revenues being stable even without that help? Thanks.
Well, let me start with the first question because it's probably the easiest one. Clearly, there has been this decision made by the Haut Conseil de Stabilité Financière. I think it was finalized yesterday. It states that for highly indebted corporates, we have a limit on the lending we can grant to them in proportion of our own funds. This limit is, since for now, not biting actually as of today. I don't have the precise wording of the decision. I don't have the precise, I would say, analysis on the way it's going to play. I don't see this decision in itself to be biting. Again, I think it's part of a series of signals coming from the authorities in France saying that we have to be cautious in terms of credit. Again, I don't see this having a direct impact as of now.
For retail banking activities, I still consider, as I said earlier, that we need to have a certain gap between customer rates and market rates in order to be in a comfortable situation. Indeed, I concur with you to see that after some improvement in the first half or nine months of 2017, there has been a slowdown in this improvement, and I was referring to that a little bit earlier in the call. I still think that we need to see a further increase in customer rate in order to be fully comfortable. Nevertheless, again, I was mentioning different moving pieces, which are all playing a role in the building of the NII in retail banking activities in France.
One of these moving piece is that we managed to increase a little bit, and we intend to continue to increase, for example, consumer credit loans and corporate and SME lending in the balance sheet of LCL, which are providing a better margin. The other one is that the growth in fees is also helping, and the last one is that indeed, we managed to continue to monitor the cost of resources at a low level. Again, I was referring to the proportion of sight deposits within the customer deposit basis at 42%. It's also helping to preserve a little bit the net interest margin. Clearly, I still expect a further growth in customer rate. Thank you very much. I think that we are done with all the questions. Again, thank you for your patience.
It's been quite a long call, finally. I am glad to meet you again in three months' time for this call. Bye-bye. Good afternoon, everyone.
This concludes today's call. Thank you for your participation, ladies and gentlemen. You may now disconnect.