Good afternoon, this is the conference operator. Welcome, and thank you for joining the Crédit Agricole Third Quarter 2022 Results Presentation. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions by pressing star and one on your telephone keypad. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Jérôme Grivet, the Deputy CEO in charge of steering division. Please go ahead, sir.
Good afternoon. It's a pleasure for me to be with you this afternoon to present our Q3 and first nine months of the year results. I will go directly with the main figures. I'll try to make the presentation as quickly as possible in order to leave your questions afterwards. Let me start on page four, where you can see CASA's main figures. Maybe just a few highlights on this page. On the quarter, revenues are up close to 1% up as compared to Q3 2021, which was already a record quarter in terms of revenue. Again, this is the highest level ever for a third quarter.
Second point on the quarter, you see the cost of risk increasing moderately as compared to a basis in 2021, which was very low. Third element on this page, the CET1 ratio at 11% is at the target. Last point, the return on tangible equity is at 12.5%, which is again above the target we had set for 2025. If I look now at the first three quarters of the year, the nine months, revenues are up more sharply on the first nine months, +5%, almost 5%. The cost income ratio on the first nine months at 58% is below our ceiling, below our commitment, and at a very comfortable level.
The bottom line, the net profit for the first nine months, underlying net profit, close to EUR 4 billion, EUR 3,937 million, excuse me, is flat, almost flat as compared to the first nine months of 2021, which was a record level. If I go now on page five, where we have the group's main figures, you'll find more or less the same trend, i.e., revenues for the quarter, which are more or less stable, but for the first nine months, the revenues are significantly up, +3%.
Cost of risk is more sharply up for the group globally, but you will see that at the level of the regional banks, we've been booking again this quarter a significant addition in terms of S1 and S2 provisions, so it doesn't translate any kind of increase in incurred risks. The net profit continues to be at a high level despite a small decrease as compared to 2021, both for the quarter and for the first nine months. Lastly, for the group, the solvency ratio at 17.2% is 8.3 percentage points above the stress level.
If I go now on page seven with the main messages we wanted to stress this quarter, I think that what is interesting to note is that we've continued, in the third quarter of this year, to have an adverse environment in terms of markets. Rates continued to increase significantly, and you will see that it's not necessarily only a good news. Equities market were significantly down in the third quarter, as was the case for the first two quarters, which has a significant impact on several of our activities. On the Forex market, the euro continued to decline quite significantly, especially compared to the dollar. Inflation kept being at a high level, and probably higher than what we initially expected.
Lastly, you know that this quarter, beginning of the third quarter, it was the end of the mechanism of bonus that applied to the TLTRO, which represented a significant add-on to our revenues up to the end of Q2 this year. Despite that, we've managed to keep a high level of revenues, as I said, and a high level of profitability alongside with the solvency that was maintained at the target for CASA, and of course, that was at a very high level for the group globally.
We've continued to roll out the different priorities of the medium-term plan with, amongst other elements, the signature of the deal between CACEIS and RBC, through which CACEIS is going to become the shareholder and the owner of the European activities of RBC, in the course of next year. Let me go now on page eight, where you have some elements regarding the activities, the underlying activities. I think that what we can see is that we've kept being very present vis-à-vis our customers in terms of lending. The loan production continued to increase both in retail banks, regional banks, plus LCL, and also in consumer and leasing activities. This of course was very positive in terms of activity for the group.
Again, this quarter it's close to 500,000 new customers we've managed to attract in our different networks, retail banking networks in Europe, France, Italy and Poland. All in all, since the beginning of this year, it's 1.5 million new customers that we've attracted in our networks. Of course, this is generating further increase in our revenues coming from additional activities like insurance, non-life insurance activities, where again, we've seen an increase of close to 7% of the premium income. On page nine, some additional elements regarding our revenues, our top line. As I said, over nine months the dynamic is absolutely excellent, plus close to 5% and even close to 3% at constant scope.
On the third quarter, of course, the market conditions I was mentioning earlier made it a little bit more difficult for several of our activities, among which, the asset management businesses and also in the specialized financial services division, where we have had a significant increase in our refinancing costs. Globally, thanks to the very good performances in the large customers division and also retail banking activities, we've managed to post for the businesses only, a top line improving by around 2% on the quarter. Again, this is illustrated on the right-hand side of this page. Again, this quarter, we've managed to post a higher level of revenues than in the same quarter of last year. It's been steadily the case quarter after quarter in the last five years.
On page ten, some elements regarding the costs. On nine months, the increase in the cost base is around 3.9% at constant scope, and it's below 3% overall, excluding the Forex effect. On the quarter only, the increase for the business lines is limited to 2.9% at constant scope. It's around EUR 90 million increase this quarter, out of which you have EUR 20 million regarding close to EUR 20 million in connection with the salary increase we have decided to grant in the middle of this year. I was already mentioning this point in the previous call. You have also EUR 30 million of Forex effect. If I go now to page eleven, the evolution of the gross operating income.
When we look only at the business lines, what you can see is that on the quarter, the gross operating income is very close to the one we had last year, minus 1%, and it's plus 2% on the first nine months of the year. In average, we post a gross operating income, which is very significantly above the one we had back in 2019, so pre-pandemic. Last point, the cost income ratio that we have continues to be steadily below our ceiling of 60%. Also interesting to note that it is constantly, in the last five years, five percentage points below the average of the biggest European banks.
It's the chart that you have on the right-hand side of this page. Going now to the cost of risk. What we can say this quarter is that we are back in terms of proven risk to the quarterly average of 2019. If we look back at the way we were qualifying the cost of risk in 2019, we found it at that time very moderate. Clearly we continue to have a cost of risk, which is very, very benign despite some increase if we compare the cost of risk with the same quarter last year, where it was abnormally, I would say, low.
In terms of ratio at CASA we have globally a cost of risk which is around 30 basis points regarding the outstandings be it on the basis of the last four quarters or on the basis of an annualization of the last quarter which is below the assumption of the medium term plan. When it comes to the group globally we are at 22-23 basis points including significant add-on again this quarter from the regional banks on the S1 and S2 provisions. It was already the case in Q2. It means that the regional banks continue to be very prudent in terms of preparing for the future and complementing once again their prudential provisions.
This is illustrated on the following page 13, where you can see that at group level, we have a global level of provisions, which is, more or less, which remains since three years in the same region, around EUR 20 billion. Interestingly, the proportion in this amount of EUR 20 billion of S1 and S2 provision has significantly increased. It now represents 42% of the total, and at CASA we have exactly the same trend. S1 and S2 provision represent, at CASA, 37% of the loan loss reserves that we have globally. In terms of coverage ratio, we continue to have very high coverage ratios, 73% at CASA and 87% at group globally.
This translates, and you have it on page 14, in a situation where both CASA and the group post among the best performances in terms of coverage ratio, in the space of European banks, which is illustrated on the left-hand side of the page. It comes from the fact, as illustrated on the right-hand side of the page, that we have a very diversified loan book, in addition to a very strict credit standard. Let me go now to the net profit on page 15.
As you have seen, we have a slight decrease Q3 on Q3, -10%, which is largely explained by the corporate center in which the deterioration of the level of profit comes significantly with some temporary and non-cash elements. We can go back on this point later on. On the first nine months, it's very stable, -0.6%, and it's 20%, 20.6% above the level we had back in 2019, so before the pandemic. In terms of profitability, page 16, you can see that the return on tangible equity, as I said, is at 12.5%. It's again 2.5 percentage points above the average of the biggest European banks.
Let me go now to the solvency, starting with CASA. This quarter, you can see on the waterfall on the left-hand side of the page that at CASA, the CET1 ratio decreased this quarter by around 30 basis points, which is more than explained by some market impact, both in terms of a further deterioration of the OCI reserves coming from the insurance business, plus also a significant market impact on the RWA of the capital market activities at CACIB. On the first nine months of the year, this is the right-hand side waterfall on this page.
The depletion is of around 90 bps, out of which the day-to-day business generated an improvement of the capital situation by 34 basis points, retained results 47 basis points, and the different elements coming from the day-to-day management of the group, it's a consumption of 13 basis points. The depletion is completely and more than completely explained by some market effect. The OCI reserves coming from the insurance activities represented, on the first nine months of the year, a global impact of 84 basis points, RWA and market effect on the capital consumption of CACIB's capital market activities, it's 24 basis points.
In addition to that, you remember that in the first quarter of the year, we booked a significant deterioration of our exposure on Russian counterparts. This translated into additional provision, S1 and S2 provision, plus also an increase in the RWA density of those exposures. What is interesting to note is that a significant part of these effects are going to revert in the future over time. It's especially the case of the OCI reserves of the insurance activities. If I summarize the situation, back end of 2021, we had a CET1 ratio of 11.9%, in which we had 30 basis points of unrealized capital gains that we are going to pull to zero over time.
We have now a CET1 ratio of 11%, which includes a negative component of 50 basis points coming from the OCI reserve. Again, this negative component is going to pull to par over time, when the bonds, the underlying bonds are going to mature progressively. This explains exactly how the situation evolved over the first three quarters of the year. Globally for the group, and you have it on page 18, on this quarter, we have more or less the same effect and the same impact as the one we've mentioned about CASA. The CET1 ratio of the group went down from 17.5% end of June to 17.2% end of September.
What you can see, and of course you are perfectly aware of that, is that at 17.2%, the group is one of the best capitalized G-SIBs in Europe. In terms of distance to SREP, with 830 basis points, it is the best capitalized G-SIB in Europe. In addition to that, CASA, which is not a G-SIB, continues to have a distance to SREP which is above 300 basis points, which compares very favorably to some of the G-SIBs of our sample. Last point on this section.
If we position the performances of CASA for the first nine months of 2022 on page 19, what you can see is that we are perfectly in line, both with the targets that we had set for 2022 in the previous medium-term plan, and also with the new targets that we have updated in June this year for 2025. It's the case, of course, for the return on equity, it's the case for the cost income ratio, it's the case for the CET1 ratio. In terms of profit, of course, we will see what the situation will be at the end of this year. Clearly we are not in a very uncomfortable situation from this point of view. Last point on this page.
The dividend that is accrued end of September represents EUR 0.58 a share. Let me go now to the different business lines rapidly, starting with the asset gathering division. Clearly on page 21, for the asset gathering business division, it was a difficult quarter in terms of a very negative market effect, plus also a slowing down of the inflows and even a negative flows at Amundi. Despite that, the business division continues to have a very good level of profitability with a net profit for the quarter, down only 3%, and for the nine months, down only 1.5%. For the insurance activities, specifically on page 22, the messages are very simple.
In terms of life insurance activities, exactly what we found globally for the business division, flows were more or less close to zero this quarter. Nevertheless in P&C activities and protection businesses, we continue to have premium income at around 7%. If you restate the gross figures from the fact that La Médicale de France has been sold beginning of the third quarter. This disposal of La Médicale de France generated a capital gain of EUR 100 million, which has been restated, so it's not in the P&L that is on this page.
Despite this restatement of the capital gain, the insurance business division posts an improvement of its profitability of around 4% this quarter and 5% for the first nine months. For Amundi, page 23, again, the market conditions were very negative with the decrease in equities market, an increase in the rates, and so a decrease in the value of the bonds and a decrease of the euro. The market globally was negative and the outflows were very significant, especially in Europe. In this context, Amundi's activity was quite resilient. Outflows were limited in terms of medium and long-term assets.
The decrease in revenues as compared to Q3 2021 translate into a slight increase as compared to the second quarter of 2022. Of course, the decrease between Q3 2021 and Q3 2022 is more than explained by the sharp decrease in performance fees. Going now to page 24 to the large customer division, starting with CACEIS. In the third quarter of this year, the activities were globally good with revenues up close to 5%. On the quarter, the engine that worked the best was clearly the financing part of CACEIS. It was more difficult in the capital market activities. The reason is, of course, very simple as always.
We are here to provide financing to our customers, either through our balance sheet or through capital market products. It happened that this quarter, DCM was a weak quarter globally in the market. Of course, as DCM is a very important driver for our capital market activities, this generated a slight decrease of the revenues of this subdivision this quarter. Globally, revenues were up at CACEIS. If I look back at the first nine months of the year, the increase is even sharper, +10%, and all sub compartments of the activities were significantly up. In terms of cost of risk, it's a significant increase as compared to last year, but last year was almost nil. You can note that this quarter, the level EUR 32 million is very low.
On the first nine months, take into account the fact that we've booked, in the first quarter, significant provisions regarding the Russian exposure. All in all, the profitability at CACIB is a little bit down, but nevertheless remains at a good level, above EUR 1 billion for the first nine months of the year. Large customers division, again, with the asset servicing activities, we wanted to highlight a little bit more, what is happening at CACEIS, because CACEIS is more and more becoming a very important component of the equilibrium of the group and the business model of the group. Two elements on this page.
The first one is that CACEIS has reached a few weeks or months ago an agreement in principle with RBC to buy its European activities in the field of investor services. This is really going to be a game changer for CACEIS, which will become the number one in Europe in terms of assets under administration. It would strengthen its position as number two in assets under custody. It's a very important operation, which is going to be very accretive with a return on investment that is going to be above 10%. This operation is to be completed and closed middle of next year, probably third quarter of next year.
In the present context, the assets at CACEIS were down this quarter because of course, market movements. Nevertheless, revenues were significantly up, and CACEIS starts to benefit from the cost-cutting plan that was put in place last year. All in all, this is generating a very sharp improvement of the profitability of CACEIS, plus 37% on the quarter and plus 23% on the first nine months. Specialized financial services on page 26. For the consumer credit business first, messages are very simple.
The production has been very dynamic this quarter, the biggest engine being the car financing businesses, both with the joint ventures that we have, and also with the car financing loans that we grant in the perimeter of Sofinco or directly at Agos. The margin continues to be a little bit under pressure, especially in France, because the refinancing cost rise more rapidly than our capacity to repass this increase to the customers, especially because of the mechanism of the usury rate, but it's going to be progressively accommodated over time. The costs are under control, so the cost income ratio is slightly down as compared both to Q3 2021 and Q2 2022.
The cost of risk is up, but up as compared to a quarter, a third quarter in 2021, which was very low, especially at Agos, where we had some reversal of provisions, for technical reason, back in 2021. On the leasing and factoring activities, also a very good quarter in terms of activity, a very good level of revenues and the cost of risk, which is down. All in all, the profitability at CAL&F is improving significantly. French retail and LCL commercial activity is very dynamic, and we have had a production of new loans, which was again this quarter, up, especially for the self-employed professional and business loan, and only very modestly down for home loans. I think it was -2% or -3% at LCL.
In an environment where globally the market was much more sharply down. Financial results are very solid. The top line is up 0.6%, despite the pressure on the net interest margin. You know that, in the middle of the summer, we have had a second increase in the cost of regulated savings accounts. We lost since the beginning of this quarter also the 50 basis points premium on the TLTRO drawing. Fees and commissions are very well oriented. Costs continue to be under control, +1% on the quarter, despite the increase in salaries I was mentioning for all our French staff. The cost of risk is up, but continues to be very low, actually, in absolute terms, in absolute numbers.
In Italy, the situation is a little bit different. The Italian market has been good for businesses and for consumer credit, but it has been much more muted for home loans. We find the same trends at Crédit Agricole Italia. Nevertheless, Crédit Agricole Italia is gaining market shares in home loans, and also Crédit Agricole Italia is progressively benefiting from the integration of Creval. All in all, revenues are slightly but positively up. Operating expenses are almost flat, 4.6%. The gross operating income is up 1.5%. The cost of risk is down and very low. The net profit of Crédit Agricole Italia is up 12% on the quarter and 33% on the first nine months.
For the rest of the international banking activities, international retail banking activities, very good momentum both in Poland and Egypt. In Poland, we have booked a provision regarding the moratorium that has been imposed by the Polish authorities. It's a EUR 20 million provision that has been booked at Crédit Agricole Bank Polska and restated, so it's not included in the P&L on this page, but it's an exceptional item. The cost of risk in those two countries continue to be very low. In Ukraine, again, as we did in the last two quarters, we've booked provisions that almost completely offset the gross operating income, which was quite nice this quarter in Ukraine, despite the context, EUR 35 million.
I remind you that we have a provision at CASA that is covering the full value of the equity invested in Ukraine. Corporate Center is down this quarter. It's down especially for revenue reasons, in particular with the elimination of intra-group securities issued by CASA, subscribed by Predica and/or Amundi. Also, as part of the TLTRO was booked at CASA, at the Corporate Center. Of course, the Corporate Center is losing the 50 basis points premium as everywhere else in the group. We have also probably a certain prudence in the assessment of the level of taxes that we are going to book end of the year at the Corporate Center. Here are the main points regarding CASA. On page 32, some highlights regarding the regional banks of Crédit Agricole.
You will find more or less the same trends as the ones we see at LCL, i.e., a very good level of loan production, both for business loans, consumer credit loans, and home loans. You can see that globally, the regional banks continue to attract new customers. It's again close to 300,000 new customers this quarter and 900,000 over the first nine months. This good level of attractivity is probably related also to the fact that we continue to be very present in terms of loans, in terms of lending. This is going to be beneficial more globally as time passes by.
The top line is down at the level of the regional banks in connection, not only with the fact that, as for LCL, there is a certain pressure on the net interest margin, but you also know that the regional banks have significant portfolios of assets. The fair value of those assets has been negative this quarter, considering the context. The cost of risk is significantly up, but really, you must assess the fact that amongst the EUR 273 million of cost of risk this quarter for the regional banks, you have EUR 160-something million of S1 and S2 provisions.
This is exactly the same for the first nine months. More than half of the level of cost of risk at the regional banks is made of credit provisions. If we go now to page 34, what you can see is that the liquidity situation of the group continues to be very comfortable. Maybe in addition to that, considering the new rules that apply to the TLTRO cost starting November 2023, we will certainly reduce the outstandings before year end, even though after November 2023, the TLTRO amount are going simply to represent a zero cost liquidity reserve for us. On page 35, just as a reminder, it's been the case steadily since the beginning of this year.
We are ahead of the curve in terms of deploying our market funding program. We have now raised EUR 14.5 billion of medium and long-term market funding at end September, and probably, I think it's EUR 1 billion more at end October. At group level globally, it's EUR 35 billion that we've raised since the beginning of this year. Here are the main figures and the main elements I wanted to stress in this presentation, and I think I will now let you have the floor for your questions.
Thank you. This is the conference operator. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Jacques-Henri Gaulard with Kepler Cheuvreux. Please go ahead.
Yes. Good afternoon, team. Just a question about the involvement of the regional banks in the capital of Casa. By involving them more closely, don't you run two risks, basically? The first one of materially reducing the liquidity of the shares, and at the same time, you're actually keeping the option of taking the company private at a potentially low price. 'Cause, you know, in any case, SAS Rue La Boétie would have no commitment to maintain any sort of price if that was the case. Then, wouldn't that make the long-term investment case of Casa a little bit pointless, basically? Thank you.
Well, Jacques-Henri , I think that, considering what we're talking about, I think your fears are, to a certain extent, overstated. Materially reducing the liquidity, we are talking about an operation that could represent up to EUR 1 billion, up to the middle of next year. It's not very significant considering the size of the liquidity, and the free float of CASA. And so I think that the fear of seeing a reduction in the level of liquidity is not very material. I just remind you that back in 2021, we ourselves developed two share buyback operations, representing all in all more than EUR 1 billion.
We know what it represents, EUR 1 billion for CASA, and it's not changing significantly the liquidity. The second point regarding the intentions that you, I would say, that you're referring to, of possibly taking the company private, I think the shareholder made it very clear that they don't want to exceed whatsoever the threshold of 65%, which is quite far away from any kind of a take private. Definitely, I think it's not the intention of the majority shareholder. This is not going to change anything in the governance. They will not have any additional governance rights or whatever.
It's really a technical, financial, and even if I may say so, opportunistic operation, considering the financial capacities of the regional banks and considering also the market condition.
Thank you. Very clear, Jérôme.
Thank you.
The next question is from Delphine Lee with JPMorgan. Please go ahead.
Good afternoon, Jérôme. Thank you for taking my questions. My first question is on net interest income. If you don't mind just sharing with us the benefits that you're going to lose or what you have booked maybe so far in the first half on TLTRO, just so we understand a little bit how much is going to fall away next year, both in French Retail and the corporate center. Related to that, do you think that French Retail NII can grow next year because of those headwinds and also because of the Livret A which is likely to go well above 2%? And then my second question is on capital.
You mentioned that the headwinds would reverse, and I understand what you mean by with the OCI and the pull to par effect. Could you maybe share a little bit of timing of that? Also on market, the other way, inflation, because of the volatility, can we see some of reversal of that in coming quarters or years? I mean, trying to understand a little bit, the speed at which, you know, capital could go back to the way it used to be. Thank you.
Okay. Regarding your first question on NII, benefits of the TLTRO, Livret A, and so on and so forth, let me start with a very important reminder. On the perimeter of CASA, we are talking about half of the NBI at LCL. Globally, we are talking about 10% of the global revenues of CASA. It's very important, but it's not the biggest part of the revenues that we book at CASA. Of course, it's much more important at group level because the regional banks, they all in all represent roughly five times or six times CASA, LCL, excuse me. Clearly, what is important is it's very important to understand what is going to happen regarding the NII, but it's going to impact much more the regional banks than CASA. Second point, TLTRO.
It's public that the group globally has drawn around EUR 160 billion at the TLTRO window. It's very difficult and I have always been very reluctant to give you exactly an amount of the benefit of the TLTRO, because the goal of the TLTRO was to improve the financing conditions in the European economy. Of course, a significant part of the benefits of this low-cost resource has been passed on to the customers in the pricing of the loans. Nevertheless, on the contrary, when we are going to lose this cheap resource because it's going to become a resource at the price of the deposit facility, then we know exactly what we are going to lose.
Because we are going to have to replace this resource either by another category of resource, market resource or simply by reducing by the same amount the deposits that we make at the ECB. We are going, of course, to progressively repay EUR 160 billion of TLTRO, and this is the basis on which we benefited up to the end of Q2 of the 50 basis points premium. Again, as a reminder, because I already explained it, the benefits and the amount was split more or less evenly between the regional banks on the one hand, and CASA and its different activities on the other hand.
Globally, if you assess 160 billion, 50 basis points on a yearly basis, this would represent around EUR 800 million, so EUR 400 million in 2022, and zero in 2023. That's very clear. In terms of Livret A and all the likes of Livret A, like the LDD and so on, at LCL, the global amount after the centralization at the Caisse des Dépôts et Consignations represents around EUR 10 billion at LCL. In 2021, the cost of this resource was 4.5%. In average in 2022, it was 1.5%, 1% in the first part of the year, 2% in the second part. It's a difference of EUR 100 million globally, concentrated on the second half of the year.
In 2023, our best guess is that on average, probably Livret A is going to cost us 3.5%, so it's an additional EUR 200 million of cost for LCL. Of course, this is going to have a negative pressure on the net interest income in the different retail banks in France globally, at LCL, with the amounts I was mentioning, at the regional banks and in all banks that have significant amount of Livret A and products of this kind. In terms of capital, the timing of the pull to par is difficult to assess because it's going to depend, of course, on market movements.
If we assume that rates are now stabilized, and rate is not the only question because of course, you have the equities market in a much smaller proportion, but they play a role. We have also the credit spread, because part of the bond book of Predica is not only made of sovereign bonds, but also of corporate bonds. The credit spread plays definitely an important role. We can assume that the duration of the bonds of Predica is rather long. It means that the effect is going to be spread over the coming several years, I would say. Probably five, six, seven years. It's not something we expect for tomorrow morning, clearly.
Up to now we had I would say an overhang on our solvency in connection with this unrealized capital gain component. We now have an engine that is going to fuel progressively our solvency, going forward. If I now take a look at the short term, what I can say is that at the end of September, I would say the risk-free rates are more or less at the same level, so no significant change. Corporate credit spread tightened quite significantly, actually, since end of September, probably around 20 basis points. Equities market improved by around 10 or 12% since end of September.
I'm not pretending this is going to be the situation end of December, but of course, we monitor this on almost a day-to-day basis, and what I can tell you is that it's been clearly rather improving over the first part of the quarter, when it's been deteriorating steadily over the course of the first three quarters.
On the market risk?
On market risk?
Mm-hmm.
On market risk, there are different components in the assessment and the calculation of the market risks. We have a VaR which is built on a historical methodology, so it means that progressively over time, we are going to see the market events that triggered this increase fading away, I would say. This is going to take time, probably one or two years, but it's going to progressively fade away, at least partially, over time.
Thank you very much.
Thank you.
The next question is from Tarik El Mejjad with BofA. Please go ahead.
Hi, good afternoon, Jérôme. Just a couple of questions, please. Still on the capital. I mean, I understand the reversal of this negative impact due to the volatility in the markets and the rates. But is that? I mean, it creates a lot of stress in the markets in terms of your capital adequacy and so on. Is it not now clear that given we had two rate cycles, that it's better that you increase your buffers as a target, it's more than 11%, so you just basically absorb this volatility and people are comfortable that you can stay above 11% at any time? I would like to hear you on that. Second question is on the costs in France and maybe in general.
If you can update us what's the latest negotiations you had for next year and the year after. I know in France, you've anticipated next year's cost, but you can maybe detail a bit where you see costs evolving and also maybe the windfall taxes in any jurisdictions where you operate. Thank you very much.
Why do you want us to be permanently and at any time above 11%? I always stated that 11% was a target, not a floor. I think that we've said when we presented the medium-term plan, that actually where we put the floor is buffer of 250 basis points above SREP. We are now at 310 basis points. Of course, we know that the SREP level, which includes the counter cyclical buffer, is going to modestly but really increase in the beginning of next year, I think in the second quarter, in April. But it's going to represent only a 20 basis points, I guess, of increase. We are at 310 basis points of buffer above SREP.
We have a floor at 250 basis points. We have more than 800 basis points of buffer at group level, so definitely there's absolutely no need of modifying our guidance, modifying our target, and we are perfectly happy with that. Regarding costs, the negotiation with the social partners are not completed yet. We are standing on our position, which is that with this general capital increase that we have granted middle of 2022, we have done a significant part of what we intended to do beginning of 2023. Now, I don't want, you know, to crystallize in advance the issue, the end point of these discussions.
Definitely, we stick to this idea that we've did in advance part of what we wanted to do beginning of 2023. It means that beginning of 2023, it's going to be only a part of what you could expect.
Can I follow up just on the capital? I mean, I completely understand your explanation. There are some elements that are out of your control, where rates go, where equity market goes, and that creates very high volatility in your capital. I'm not saying you're not sufficiently capitalized at around 11%, but it just creates these big swings that, for your equity story, can be a bit harmful. That's was my point.
Yeah. Actually, we haven't had swings, because the swings go in both directions. It's been a one-way movement since the beginning of this year. We've been able to accommodate that. Of course, we all know that rates are not going to increase by around 100 basis points every quarter in the coming three, four, five quarters. It's not possible, it's not rational, and it's not in line with what we could expect from an economic viewpoint, because if we expect a slowdown of the economy, it's going to somehow slow down the increase in long-term rates. That's absolutely clear. What we are seeing since now six or seven weeks is precisely this, I would say, asymptote in the evolution of rates.
Thank you, Jérôme.
Thank you.
The next question is from Giulia Aurora Miotto with Morgan Stanley. Please go ahead.
Yeah. Hi, and good afternoon.
Hi.
Two questions from me as well. The first one, I just want to go back to the 2019 dividend, 20 basis points catch-up. I understand all your points that you just made on being well capitalized, well above SREP, but I was wondering if you keep seeing some OCI pressure, you know, wouldn't it be possible for you to reconsider that one? Or, you know, it is out of question, you will definitely pay that. That is my first question. Secondly, I was wondering on the investment banking performance, I think your FIC was quite a bit weaker than peers, and I was wondering if there were any marks or any specific, you know, negative impacts in the quarter that you would call out. Thank you.
Thank you, Giulia. No, on the EUR 0.20, I think it's again mentioned in our slide this time, and we reiterate that permanently. We have the intention to pay in 2023 this additional EUR 0.20 per share. That's absolutely clear. This is an intention because you perfectly know the difference between an intention and a commitment. As soon as I talk about commitment, precisely, I have to reserve the amount in my solvency ratio, and of course, I don't want to do that too early. I want to do it as close as possible to the moment I will be paying this amount. I will translate the intention into commitment exactly at the time when it's going to be necessary.
We clearly have this intention and this is a discussion that we will have with the board, when we will close 2022 accounts, so probably in February next year. In our investment banking performances and FIC precisely, it's very difficult to compare FIC to FIC, if I may say so, because the breakdown of activities that each bank is putting either in capital markets or in FIC or in corporate banking or in global banking or whatever, is very different. We haven't had any specific hit of any kind in our activities. The muted performance of our capital market activities this quarter, which is not the case for the first nine months, is absolutely explained by a customer behavior with a weakness on the DCM market, especially in Europe.
I think you can assess that it's perfectly a market trend and not only a trend at CACIB. Levels and volumes of activity of issuance of new coco bonds and especially corporate bonds this quarter were very weak. On the other hand, the credit demand that was addressed to us was quite significant. This explains the good performance of our financing activities. Really there was nothing specific and nothing worrying in our performance this quarter.
Thank you.
Thank you.
The next question is from Guillaume Tiberghien with BNP Paribas. Please go ahead.
Thank you. Good afternoon, Jérôme. On the capital front, please, so can you just remind us, in Q4 we will have +10 basis points for Crédit du Maroc, minus 15 or 16 for the dividend catch-up, minus 28 for IFRS 17. Can you confirm whether you've got any other moving parts? Beyond the capital build, obviously. The second question is on Stellantis partnership and relationship. My understanding was that towards year-end, or maybe I'm wrong on timing, but you would consolidate the loans. Can you just explain to us what would be the impact on revenues and maybe PBT, if any?
On capital impact, I think Stellantis, the idea was to not impact the capital, but is it an impact on RWA offsetting an impact on equity tier one, or is it really no impact at all on both sides of the ratio, please?
On capital in Q4, you got it right with Crédit du Maroc. You got it right with the EUR 0.20 catch-up. You are a little bit in advance for IFRS 17, because IFRS 17 is going to be Q1 2023, not Q4 2022. We haven't finalized completely the amount, but it's going to be much less than the 28 basis points you were mentioning. Regarding Stellantis, again, it's going to be beginning of 2023. I have in mind, but I have to check exactly mechanically how it's going to work, that it's going to be more or less neutral in terms of solvency.
Clearly, I have to call a friend to check if it's natively neutral, I would say, or if it's because we have effects both on the RWAs and on the capital. We'll check that and we'll go back to you very soon.
Thank you. That's Q1 ?
That's Q1.
Okay. Thank you.
At even H1. I'm not sure if it's going to be Q1 or Q2. H1.
Okay. Thank you. There will be an impact on P&L as well?
Yeah. After that, going forward, it's going to improve the P&L. That's clear.
Okay. Have you quantified that?
Not yet.
Okay. Thank you.
We have some ideas, but we haven't disclosed any kind of quantification.
Okay. Feel free to disclose if you want. Thank you.
The next question is from Stefan Stalmann with Autonomous Research. Please go ahead.
Good afternoon, Jérôme? Thank you for taking my question. I wanted to come back to the capital markets point, please, because you are flagging some value adjustment effects on revenue. You also have this market risk-weighted asset impact, and you also had quite a bit of growth in fair value assets through the P&L, almost 10% during the quarter. I think we have not seen this from any of your peers. I'm wondering if there's anything else that would explain these relatively unusual moves.
The second question goes to a point that comes out of the proposal of the EU Council on the implementation of Basel IV, where it seems they're proposing that the output floor would in effect apply at solo entities, but there could be a national discretion not to do it. Have you actually ever disclosed what difference it would make to CASA if the output floor were to be applied for you? Thank you.
Thank you. As far as the assets valued through P&L are concerned, I don't have anything significant or specific in mind, so I can see two points regarding that. Either it's a Forex effect, because obviously considering the fact that the euro dollar parity has changed quite dramatically this quarter, many elements in the balance sheet have moved significantly simply under this effect. The second possibility would be also the fact that we have some assets within the balance sheet of the insurance company that could be also valued through P&L. We have to check exactly.
There's nothing, I would say, noticeable or remarkable or no change in the scope of activities, that could be signaled by this evolution of the volumes of assets valued through P&L. Output floor, we have been, since the very beginning, convinced that the only relevant level to apply the output floor was the highest consolidated level. We have been steadily confirmed in this thinking by the French public authorities. What we see in the different documents published by the commission, by the parliament, and even by the council, you know that, within the council we have several countries that really want, because they are host countries, really want to have a direct grip on the solvency of banks' in their jurisdiction.
Even in the document of the council, there is this possibility of applying the output floor at the highest consolidated level, i.e., at group level for Crédit Agricole Group. We know that if this is the rule in principle, we are going to apply it. If this is an option, the French authorities are very clear, they are going to apply the option and allow us to apply the option. No doubt that it's going to apply only at group level. There's no need for us to disclose any impact if it were applied at CASA level.
Okay. Very clear. Thanks, Jérôme.
The next question is from Matthew Clark with Mediobanca. Please go ahead.
Good afternoon. Two more questions on capital, I'm afraid. Firstly, coming back to it was Guillaume's question on IFRS 17, and you kindly said the impact would be less than 28 basis points. Could you clarify whether you're talking about the gross impact of IFRS 17 being less than 28 basis points or whether that's including an expectation of further upstreaming of capital from Crédit Agricole Assurances? Second question, also on capital, on Basel IV, is that the size of your insurance operations in terms of risk-weighted assets, and I guess the book value or carrying value of your investment in them has shrunk quite a lot since you gave your negligible Basel IV impact guidance a couple of quarters ago.
Do you need to update that Basel IV guidance for the fact that you're not gonna have such a strong gross benefit from the Danish Compromise as maybe you might have thought a few quarters ago, given insurance has shrunk in regulatory balance sheet terms since then? If not, why not? Thank you.
IFRS 17, we are not thinking of either the gross amount or the net amount when we disclose a figure, because we haven't disclosed any figure. Clearly, when we will be more precise on that, and we will probably be able to do it when we publish Q4 accounts, we will give you the gross and the net figure. What I expect is that the net figure is going to be very, very tiny, if any, because we have again a certain flexibility and the idea is that we don't want to have any net impact coming from the transition to IFRS 17, as we've said since the beginning.
On Basel IV, I'm not sure I fully got your point because what I read is that the 370% is going to become 250% whatsoever, and there's nothing that seems to be changed from this viewpoint. Of course-
If, when
Yeah.
When you gave your original guidance, at that time, your insurance risk weighted assets were about EUR 50 billion or up in the EUR 40 billion.
Mm-hmm. Okay.
The impact of going 3.70%-2.50% would be greater in, you know
Mm.
euro billion terms than it would be now when your starting point is
Yeah. Okay.
EUR 8 billion.
Excuse me. Excuse me, I didn't get you right. No, when we say that excluding the output floor and after all the trim that we went through in the last two or three years, when we said that, beginning of 2025, the implementation of Basel IV is going to be net zero, I would say globally for CASA, it's taking into account, of course, the update of the carrying value of the infrastructure, which we applied at 250, and also the regular updates that we have to make on the other aspects of Basel IV. Net zero takes into account the fact that we have less RWAs within the insurance business division.
Okay. Thank you.
Thank you.
The next question is from Amit Goel with Barclays. Please go ahead.
Hi. Thank you for taking my questions. Just some follow ups, but do you mind just talking a little bit about some of the revenue trends for the main businesses going into 2023, in terms of some of the moving parts that we haven't already kind of covered? Secondly, just maybe honing in a little bit more on the insurance business. I'm just kind of curious on the, you know, on the kind of revenue growth and, you know, for example, on the unit linked sales, whether there's an impact there in terms of savings behavior, going forward. Thank you.
Well, thank you. You know that in the insurance activities, once translated into a banking accounting system, it's always very difficult to look at the level of revenues. We perfectly know that on a specific quarter we have, we can have a significant volatility regarding the revenues stemming from the insurance activities, while we continue to have a very steady, regular and positive evolution of the bottom line. Actually, where we guide the activities, the insurance activities, is more on the bottom line.
I think that a few quarters ago we've presented a historical series of data regarding the profitability of the insurance business, showing that more or less the bottom line is growing around 5% a year, which is rather aligned with non-life activities that grow at a higher pace around 7% a year, and life insurance activities that grow at a pace which is regarding the outstanding in the region of 2% or 2.5% or 3% a year. Maybe if rates stabilize at a higher level than before, the capitalization effect on life activities is going probably to improve a little bit the pace at which the outstanding are growing in the insurance activities.
This could possibly improve a little bit the evolution of the bottom- line. Keep in mind that what we had in the past in terms of bottom line for the insurance activities has been around 5% a year. What we foresee going forward is the continuation of this trend. Again, talking about IFRS 17, we are now quite confident that even if it may be a little bit more volatile because of the mechanism of the contractual service margin and so on and so forth, we are not going to change significantly the profile of the profitability of the insurance activities.
This is more the type of guidance that we have in mind rather than the guidance that would be focused on the top line.
Got it. Just in terms of any other kind of notable kind of changes we should think about for next year versus this year, in terms of top line? For the businesses.
Well, it could take a long while if we want to assess business by business, considering that each business has its own drivers. I would say that of course, at Amundi, you know, the main driver is the evolution of the valuation of the assets, because the main part of the revenues is made of management fees. And the good news is that management fees are holding well for the time being, and even more than well, because they've improved between 2021 and 2022. It's the performance fees that decline. We've talked a lot about the net interest income at the retail banking entities.
At CACIB, at the consumer credit business, when we use the balance sheet, it's more a spread business. Of course, we can have some temporary difficulties to pass to the customer the increase in refinancing costs. It's the case for the time being at Sofinco in France. Those businesses are spread business, and at the end of the day, when it stabilizes, it stabilizes at a spread that is covering all the costs, all the cost of risk and so on and so forth. We foresee that improving going forward. Of course, CACF is going to progressively benefit from the acceleration triggered by the inclusion of the leasing activities coming from the deal with Stellantis.
CACEIS is clearly going to be also a growth engine for the future. Already now with the benefits that CACEIS is drawing from the better remuneration of its cash activities, and also going forward with progressively once the acquisition is completed with the integration of RBC Europe.
All right. Thank you.
Thank you.
The next question is from Flora Bocahut with Jefferies. Please go ahead.
Yes, thank you, and good afternoon, Jérôme? The first question I wanted to ask you is going back to capital again, but this time more from a technical point of view. When I compare, you know, the 10.7% fully loaded to the 11% phased in, so there's a 30 basis points difference, which is more than peers and which seems to have actually been increasing year to date. The first question is just to try and understand, you know, what's the difference between the phased in and the fully loaded for CASA? And when this is going to converge at which speed, basically, given it's quite a notable difference, 30 basis points. The second question is regarding Russian risk.
You've had, you know, around EUR 200 million of decline in the exposure to Russia in the quarter. Can you just update us there? You know, is the exposure still performing? You're not seeing an increased risk from that exposure? Maybe can you remind us the provisions that you have set aside on that exposure, please?
The difference between the phased in and the fully loaded CET1 ratio is actually 25 basis points, not 30. It's the rounded numbers that we provide that make you think that it's 30 basis points. It's 25 basis points. It's going to be divided by two between now and end of 2023. It's going to be all things being equal, around 12 basis points end of 2023, and again divided by two in 2024, so probably a negligible 6 basis points end of 2024, and then it's going to disappear completely in 2025.
Just to be clear on this one, it converges towards the fully loaded, right?
Yes. All things being equal, again, it converges towards the fully loaded. Yes. It's a negative impact that we have to progressively absorb.
Okay.
On Russia, I think that the bulk now of the exposures that we've kept are medium- to long-term exposures, so we don't expect a rapid further reduction or significant reduction going forward of these exposures. We've booked a provision, S1 and S2 provision of around 300 basis points, if I remember correctly, in the first quarter of this year. What we've said at that time is that we were done with, I would say, this political provision. Now we are back on the normal life of each of these exposures on an individual basis.
It may happen that on a specific quarter, one of these exposures has to be declassified from S1 to S2, or from S2 to S3. And of course, at that time, there is a modification in the level of provision. And as we never comment on individual exposures, we are not going to provide additional details on the evolution of the portfolio. It's now part of the, I would say, normal cost of risk if anything happens on this portfolio on a specific quarter. The initial provision, going back to your question, was to book. I don't remember the exact number. Was it EUR 300 million or EUR 400 million? I'll give you the figure right away.
There's been no change in Q2, Q3, basically.
Oh, no, no.
Okay. No, that's clear.
Okay.
Thank you.
Thank you.
The next question is from Pierre Chédeville with CIC. Please go ahead.
Yes, Pierre.
Mr. Chédeville, maybe your line is on mute.
Pierre, I take the advantage of Pierre being silenced to say that effectively the provision we booked in the first quarter was close to EUR 400 million, EUR 389 million to be precise. Pierre?
Mr. Chédeville, your line is open, maybe you muted yourself.
Pierre, we are going to take the next question, and we'll go back to you afterwards.
The next question is from Anke Reingen with Royal Bank of Canada. Please go ahead.
Yeah, thank you very much for taking my questions. The first is on cost control. Obviously, your cost income ratio is well within the target. But the jaws on negative year to date. Just wondering, going into 2023, should we expect, I mean, obviously markets play a key role given your business mix, but I was wondering, do you think you can keep your cost income ratio in line with your targets? Is it cost income ratio, or do you also yeah focus on the jaws? Then secondly, on your consumer finance book, I was just wondering if you can talk a bit about your asset quality going into a potential or in recession and cost of living crisis. What are you watching?
Are you a bit more restrictive in your lending? How concerned are you about what level of interest rates you think is a bit more alarming? Thank you very much.
Thank you. On the cost part, clearly the commitment that we have is to maintain the cost income ratio below 60%. The commitment is in terms of cost income ratio. The forecast that we've made in the medium term plan is that we could be, all things being equal, and of course it can vary on a yearly basis or on a quarterly basis, but all things being equal, we could target to further improve the cost income ratio by posting on average a positive jaws of 4.5% a year. It's an average over the duration of the medium term plan. It's not a commitment to sustain this positive jaws each quarter after the previous one.
We are presently, when it comes to 2023, in the budget process, and you can be confident that we are having and we are going to have very precise discussions with the head of every business in order to really assess their capacities to reach their individual cost income ratio targets in a context where there is going to be a certain volatility in their capacities of reaching their revenue targets. Of course, we must admit that there is some inflation. Actually inflation even in France, where it's lower than elsewhere, it's in the region of 6%, 6%-6.5%. In this context, managing the evolution of the cost base at around 3% is not bad.
We also want to preserve our capacity to respect our commitment regarding the cost income ratio. This is part of the present budget discussions we're having with the heads of the businesses. At CACF and the asset quality in the consumer business, it's clear that it's a business in which we are very reactive, and we have tools that provide us the capacity of, you know, adjusting through the pricing, adjusting the credit standards very rapidly if we see some deterioration that would be excessive of the cost of risk. We perfectly know that the cost of risk we had in this business last year was below the average, below the level we target across the cycle.
We have now a cost of risk which is around 130 basis points. Actually it's better than that if you reallocate all the components of the P&L of the car JVs, which are equity accounted. If you take into account the fact, if you really take into account their cost of risk and their asset, you would be closer to 100 basis points globally. It definitely is not an alarming level. We monitor very carefully the cost of risk in this business, and we will not hesitate to adjust the pricing and the credit standards if we think at a certain point in time that the situation is too hot and leading to a potential deterioration of the situation.
Okay, thank you.
Thank you. Pierre, maybe.
Yes. The next question is from Mr. Pierre Chédeville with CIC, please go ahead.
Hello, can you hear me now?
Yes, Pierre.
I'm sorry, I'm going to ask another question regarding OCI, which is a subject of the day, and IFRS 17. Because this week we had a presentation from AXA regarding IFRS 17 transition, and they clearly, like you did, explained that there will be no major impact regarding PNL. But they said something really interesting. They said that mechanically IFRS 17 tends to make OCI to zero, because if you replace mathematical reserve by best estimate, best estimate liability is evolving in the same way, more or less, of the asset side in IFRS 9, and then OCI is neutralized.
My question is, at the end of the day, if you implement IFRS 17, the day of your implementation, clearly you have an impact because your OCI is going to to be reduced by the increase of liabilities. But at the end of the day, you will not have any more volatility, as far as I understand, if you apply IFRS in the same way as it would be applied in a pure insurance company. Am I wrong or is there something I missed there?
No.
At the end of the day, it's a very good news for you, the implementation of IFRS 17 between. Because it will make disappear the volatility of OCI.
It's true that the volatility of OCI is going to be reduced. But it's a little bit more complex than that because there is some exception on IAS 39 or the implementation of IFRS 9 for the time being. It's not, I would say 100%, what you said, but globally it's true that we are going into a more stable environment with the implementation of IFRS 17, because what is going to be interesting is that you will have. I don't like IFRS 17, so it's a little bit perturbating for me to have to find the good aspects of this regulation.
Yes.
You will have an indication of, with the CSM, an indication of the amount of future profits that are here, available for the future. It's going also to be a reassuring element.
No, I'm okay about CSM, but for me, the most important fact, at least for AXA, but I can translate for another company, is that the volatility of OCI disappear more or less. My second question was about can you disclose the combined ratio? Lastly, you mentioned the impact, the negative impact of TLTRO. At the end of the day, you said that part of the TLTRO was used to grant loans to SMEs. The repricing of SMEs is much easier than the repricing for mortgages. At the end of the day, you mentioned a negative impact of EUR 400 million in 2023.
at the end of the day, part of this negative impact should be balanced by the quicker repricing on SMEs. Am I wrong here again?
Let me start with the combined ratio. It's deteriorated a little bit at Pacifica, the P&C activities. It's now at 98.7%. The year has been a little bit difficult from a risk point of view, especially with some climate events. Of course, all French population has heard about the different events that took place this year and especially this summer. Nevertheless, it continues to be significantly below 100%. Of course, in the context where we are, the pricing policy of 2023 is going to be, of course, a very important element. When it comes to TLTRO.
Well, when we've set the rate for a loan for any customer, be it an SME or be it a self-employed professional, or be it a household for home loan, it is set, and we are not going to modify or increase the rate because the cost of the resource has increased. Definitely, all things being equal, the increase in the cost of this resource that is represented by the TLTRO is going to impact us directly. Of course, going forward, and this is why, we think that we must look at this situation with a dynamic view. Going forward, there is a progressive repricing of the loans that we grant to our customers.
You see that we haven't talked about this precise point in the call, but since the beginning of this year, the pricing of home loans in France and at our different networks has increased quite significantly. What I have in mind, for example, is that at LCL, the pricing of the loan approvals that we've given in October was in the region of 2.2%-2.3%, which is not the case for the loans that are implemented presently, because there is always a time lag between the approval and the implementation, but it shows that there is a repricing of the loans. This repricing will have taken place even without this hit on the cost of the TLTRO. It
The other way around is to say that the cost of the TLTRO is a hit. The increase in the cost of the TLTRO is a hit in itself.
Yes, but mitigated by the repricing.
Yes, but even-
We should not put a minus of 500 and.
Yes, Pierre, even the repricing would have taken place even if the ECB hadn't changed the pricing of the TLTRO.
Okay.
That's the point.
Okay. Okay, thank you.
Mm-hmm.
The next question is from Akiri Vijayarajah with HSBC. Please go ahead.
Yes. Good afternoon, Jérôme. Thanks for taking my questions. I've got a couple just coming back on the share purchase thing with the regional bank. The press release, in the press release, they say their ownership won't go above 65%, but given they're at kind of, whatever, 56% at the moment, could we see kind of more purchases by the regional banks in the future? Because, you know, as you said, this, today's transaction is only 3% of the share count. At least factually, you know, if their self-imposed cap is 65%, could we see more transactions like today's announcement?
Then secondly, should we think about this transaction as really a potentially just a timing thing, that the regional banks are temporarily warehousing those shares for a time when it's better or more convenient for, say, Crédit Agricole, let's say, to actually do a proper buyback? You know, say for instance, when your CET1 ratio is back above 11%, and then you can buy those shares directly from the regional banks at a time that more suits you. Is this kind of a stepping stone towards a proper buyback, or am I kind of reading too much into the situation there? Thank you.
First point, I think that, of course, at the present market price of the share, EUR 1 billion doesn't lead the regional banks to 65. That's very clear. But I think that the idea for them was to say, we set a target or a ceiling which is here to stay, and we don't want to reassess potentially this level if there is another operation. Also 65 has a virtue of a round number because depending on the share price, EUR 1 billion above 57.1% could have led them to 60 point something. It was difficult for them to say, "We don't want to go above 60," because they could be a little bit stretched with this EUR 1 billion. I think 65 is a round number.
It's easy to articulate. It's a reassuring number because it's well below 2/3 of the capital. It has many virtues. It doesn't have any specific meaning or signification. It has simply the virtue of being simple, clear-cut, round and so on and so forth. I think you shouldn't read too much into this number. Are they warehousing stocks before CASA itself buys back the shares on the market? I think this is going very far in terms of subtlety. No.
If we were to undertake a buyback, which we are going to do, by the way, regularly because, as we've said, every time we are having a capital increase for the employees, we are going to buy back the shares on the market in order to eliminate these newly created shares. No, there's no link between any buyback that would be undertaken by Crédit Agricole S.A. and this will of the regional banks to make good use of some extra capital that they have.
Got it. That's very clear. Thank you.
The next question is from Benoît Valleaux with ODDO. Please go ahead.
Yes, good afternoon. A few questions on my side on insurance, maybe firstly on life insurance. Just want to understand how you booked your nine-month figures regarding investment margin on euro-denominated product. I mean, did you assume a stable investment margin compared to last year or not? Secondly, I mean, do you fear significant increase in lapse rate beginning of next year? And how do you protect yourself in terms of ALM policy? Secondly, in P&C, you mentioned 98.7% combined ratio, which was in fact stable in Q3 versus H1. And as you said, there have been a lot of net cat losses in Q3 in France. Can you quantify, I mean, the amount of net cat losses you booked?
Taking into account price increase and claims inflation, can you confirm that you plan to improve your combined ratio to 95%, maybe 96% in the course of next year? Thank you.
Thank you. The line was not so good, so I tried to guess complete your question. The first one is about investment margin. You mean the investments of the life insurance activities, is that right?
Yes, exactly. I mean, this is margin on euro product. I mean, did you assume stable investment margin compared to last year or no?
No, actually, we invest regularly, depending, of course, on the net inflows, plus also the redemption of present assets that we have in our books. We regularly invest and we invest at market prices. We try to be agile and to reduce a little bit our investments when we feel that yields are not as good as they could be and try to accelerate investments in better periods. There is no specific forecast regarding the yield of the investment that we intend to make in 2023.
What we can say is that, over 2022 already, we've progressively improved the reinvestment rate of our assets as compared to what was the case in 2021. Of course, we expect this to continue.
Oh, okay. Sorry. Maybe I was not totally, I mean, I'm just mentioning the gap between investment return and crediting rate paid to the policy holder.
In 2021, full- year 2021 the average yield of the investment of Predica was around 2.5% in 2021. What we paid to our policy holders was I think 1.6% or 1.3%, excuse me. We had a spread of more than 100 basis points between the yield of the assets and the profit sharing rate.
I don't know exactly what is going to be the yield of the assets for the full year 2022, but we expect this to be more or less at the same level as the one we had last year. The profit sharing rate, I don't know what it's going to be. We cannot rule out the possibility of increasing it, but you know that we have the PPE in which we can take what we need to complement, if needed, the yield of the assets. The PPE represents, I think, 7% of those 6.5% of outstanding.
It's really a very important reserve that we have and that will help us accommodate if needed any gap or any shrinking between the yield of the assets and the profit sharing rate. The second question was about ALM policy, but I'm not sure I fully got your question, excuse me.
No, do you feel, I mean, due to increase in interest rate, that there could be some lapse rate beginning of next year, I mean, some lapse ratio? Also on there, if you prefer, in that case, how do you protect this potential?
Also in the insurance activities?
Yes, in life insurance.
Yes, of course, we make regular stress testing, internal stress testing in order to assess our capacity to resist to some redemption, high redemptions. We have a liquidity ratio that we keep at a permanently at a very high level. We feel that we have the capacity to resist any kind of stress on redemption, if any. For the time being, we don't feel any kind of redemption movement.
Again, this PPE is here to show our policy holder that we are ready to complement, if needed, the yield of the assets, in order to precisely avoid any move of redemption.
Mm-hmm.
The solvency ratio continues to be very high. It was above 220% end of June. We haven't published the third quarter ratio. We publish it on the basis of only twice a year. It's very high and it's much higher than our risk appetite framework. The risk appetite framework that we have is much lower than that actually. We have the capacity to be flexible if needed. Okay?
Okay.
Thanks.
Yes.
Thank you. I think it was the last question. Thanks a lot, everyone. Have a good day and a good weekend for those that don't work on 11 November . Bye-bye.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.