Great. Hello. It's a pleasure to welcome. Hi, Jérôme. Can you hear me?
Yes, we can hear you.
Perfect. It's our pleasure to welcome Jérôme Grivet, Chief Financial Officer of Crédit Agricole SA, who joined the bank in 1998, I believe. Jérôme spent time leading various finance and strategy functions at the group, most lately, as CEO of the insurance business. Good afternoon, Jérôme, and thank you for joining us in these slightly different circumstances to the last conference. Just before we get started, if I could just ask the audience to please remember to answer the six questions in our poll that they should see on the tab on their left, I believe. We can go through the answers together as a sort of fun exercise at the end. Similarly, you can use that tab to send through your own questions to us, and we can go through those later if we have time. Brilliant.
Okay.
Starting with the most topical subject, which is asset quality. Could you give us your updated thoughts on where we stand now that the reopening of the economy has progressed further? In particular, there are those of us who continue to be concerned that a kind of wave of defaults in both the corporate and retail segments as state support measures roll off. What do you think the risk is that actually impairments next year are not lower than 2020, as is the forecast by most banks? Maybe as a follow-up, how are loans under moratorium, under payment holidays behaving? Are you seeing normalization of payments occurring, as you'd forecast, or is it still a bit too early to tell?
Well, it's of course a very important and key question. Of course, we are still surrounded by many uncertainties. Just let me start by reminding everyone, the type of situation in which we are. It has been decided for perfectly understandable and relevant reasons to, I would say, shut down the economy for a while, and then to try to reopen it after the end of the lockdown period. What was absolutely key in order to preserve the capacity of all the economy to start again as soon as the lockdown was lifted, was to provide liquidity enough to all private sectors agents in order to, I would say, quote-unquote, survive the lockdown period and to be ready to reoperate, reconsume, reinvest, reproduce just after the end of the lockdown period.
What was key, to put it in a nutshell, was to make sure that all private agents access to the level of liquidity that they needed. In France, as in many other countries, and especially many other European countries, for businesses, this liquidity line took the form of state-guaranteed loans, state-guaranteed lines of credits granted by banks, but guaranteed by the state, guaranteed by the public authorities, guaranteed ultimately by the taxpayer. Just to put the figures on the table, in rough figures, rounded figures, when the state-guaranteed loan program was put in place, the state has put a headline figure for this program, which was EUR 300 billion. Actually, the credit demand in this program has now reached a little bit less than EUR 120 billion. This proves that the program was correctly dimensioned because it's far from being saturated by the demand.
It continues to run up to the end of this year, it means that we may see some additional demand coming in the coming months or weeks, especially in the case of businesses that didn't draw their full allocation at once. We may see some of those businesses going back to us, asking for another slice of state-guaranteed loan. Up to now, it's a little bit less than EUR 120 billion that were drawn at this facility, all in all, in the French economy. At the same time, what is the amount of losses that the businesses had to withstand because of the lockdown? Again, if I put some rough figures on the table, the French GDP is going to decline by around 10% this year.
It represents around 250 billion EUR of loss of wealth for the French economy this year as compared to last year. Out of this 250 billion EUR of loss of wealth for this full year, the public entities are going to cover at least 150 billion EUR. Both because the public revenues are going to decrease, the level of taxes is going to decrease, and so on and so forth, and also because the public spendings are going to increase quite significantly. Let's say EUR 150 billion taken by the public authorities, it leaves EUR 100 billion for the private agents. Out of which, the biggest part is certainly going to be taken by the businesses, be it the SMEs, self-employed professionals, or bigger corporates.
Only a very modest part is going to be withstand by the household and individuals because of the different unemployment indemnification schemes that were put in place in France. It means that probably the losses incurred by the businesses in France are going to be somewhere a little bit below EUR 100 billion when they were provided somewhere above EUR 100 billion of liquidity. It means that in terms of liquidity, they are completely covered by this program. The key question is now the capacity with their earnings progressively to repay those loans. Keep in mind that they will have one window to repay at once, one shot, beginning of next year. If they choose to amortize, they will have up to five years to amortize the repayment of these loans.
The French economy globally is going to be given up to five years in order to repay this state-guaranteed loan, state-guaranteed lines of credit. This is why we are quite, optimistic is not the real word, but we are quite convinced that this scheme is well-designed, and that the businesses are going to have time in order to repay their loans. Maybe one or two other elements to try to answer fully your question. Second element, as far as Crédit Agricole Group is concerned, we entered into this crisis with a very low level of NPLs and a very high level of coverage of those NPLs by provisions, by reserves.
To give figures for the group globally, we entered into this crisis, so beginning of this year, with a level of NPL, which was at 2.4%, and it was covered by loan loss provisions at the level of around 85%. It's a very low level of NPL and a very high level of coverage. I'm not pretending that the situation is not going to deteriorate somehow, and actually, indeed, it has started to deteriorate a little bit beginning of this year in H1. What I'm saying is that at the same time, we have a situation where the public tools that were put in place in order to cover the cost of the crisis and to handle this very specific type of crisis are well-designed. In addition to that, Crédit Agricole Group is entering this crisis with a very sound loan book.
In addition to that, the French government is now working on several additional programs in order to foster the pickup, and in order to make sure that after the first and mechanical rebound of the level of activity, we continue to have a steady pace of growth. Namely, the French government has presented a few days ago, a €100 billion recovery plan, and it's going to represent a very significant help to boost the GDP growth. In order to help the businesses to continue to weather the present circumstances, it is thinking about additional tools in order to help the businesses to improve their structure of balance sheet. Namely, we are discussing presently, we banks, with the French Ministry of Finance about a program of what we call prêt participatif, so participating loans.
Which is somehow, I would say, a mezzanine type of loans, which is a long-term lending to the SMEs with, again, a partial guarantee of the French state. All in all, and I could give many more additional information, but all in all, what we see is that we are in a situation where, of course, we know that certain businesses are going to be jeopardized by the crisis. Indeed, we have seen already certain defaults, but it was very much the case of businesses that were already fragile before the breakout of the crisis. All in all, we think that what has been put in place up to now in order to help our customers to weather the crisis was relevant. I don't know if you need some more information.
Again, as I said when I started to answer, of course, we are seeing still a lot of uncertainties, both on the field of the pandemic itself and on the field of the economy also.
No, that's very comprehensive. Maybe switching tack a bit to capital. You were obviously very detailed in giving guidance for uses of capital at your last investor day, but that was some time ago, particularly with regulatory headwinds such as Basel IV and the repayment of the switch, which is particular to you. A lot has happened since then, your CET1 ratio is 400 basis points above the regulatory minimum, which is a good buffer. There's plenty of uncertainty at the moment, of course, what would be very helpful would be getting your view on the priority of use of that excess over time, and dependent on the ECB, of course, between capital return and repayment of the switch and growth, of course.
Well, you know that because of the very specific structure of the group, we have two levels at which there is an assessment of our solvency, and we have different ways of monitoring these two levels of solvency. At group level, where we have already a solvency which is above 16%, I'm talking about CET1 ratio, so which is already above 16%, which was the target that we had initially set for the medium-term plan for 2022. We are perfectly comfortable with the idea of continuing to build up this level of capital. Indeed, at group level, we have only a very small proportion of our earnings that are paid outside under the form of a dividend or under the form of a remuneration for the mutual shares. Indeed, we are going to continue to build up this group solvency going forward.
At the level of CASA, the situation is different. CASA is part of the group. CASA benefits from the solvency of the group because of all the financial solidarity mechanisms that exist within the group. CASA is monitored and is going to be monitored going forward with a much lower level of capital. We have, for the time being, a target of 11% in terms of CET1. We think that this is one of the key features of the group to be able to offer our minority shareholders the capacity of accessing a listed vehicle, which is monitored at a lower level of capital, lower level of solvency, with benefiting from the solvency of the group, and with the capacity thus, first, to show a very good and very competitive level of profitability.
Keep in mind that, for example, last year, CASA generated a return on tangible equity, which was close to 12%, which is clearly one of the best performances in the space of European banks. The combination of a significantly high level of profitability on the one hand, and no need of fostering further the level of solvency on the other hand, is generating the capacity for CASA to remunerate its shareholders. This is leading to the question of the dividend. You know that in 2020, we had initially the intention of paying a EUR 0.70 a share dividend to our shareholders on the ground of the results that we've made last year in 2019, we are now faced with this dividend ban that has been put in place by the supervisor.
We deem that in our case, this dividend ban was not necessary considering the situation in which we are, because we have a level of solvency at 12%, including those 60 basis points cost of the dividends that we intended initially to pay. We had to reintegrate the 60 basis points of solvency in our solvency ratio. It means that even if we had paid our dividend, we would be at 11.4%, still very significantly above our target. We don't know exactly what's going to happen. We just say that we could have paid the dividend. In addition to that, I can add that even if we had paid the dividend at CASA, considering the retention at group level, the hit on the solvency of the group would have been far below 20 basis points. Almost nothing, considering the buffers that we have.
Nevertheless, we are under the supervision of the SSM and of the ECB, we are not going to do anything which is contradictory with what the ECB tells us. Nevertheless, we've continued to accrue a dividend on the basis of the 2020 results. We get prepared to pay our dividend in 2021 on the basis of 2020 results. If we enter into 2021 with an excess of capital, which is linked to the fact that we haven't paid our dividend in 2020, somehow, we will repay this excess of capital to our shareholders under a form which is not determined yet, we have many tools to do so.
You know that besides all the tools that are accessible to all the banks, we have this very specific mechanism within the group, which is the switch, and we have the capacity to continue to dismantle the switch mechanism, which is, of course, consuming some solvency at our level, but which is improving our recurrent earnings capacity. Which is a way, actually, going forward, to increase our remuneration that we pay to our shareholders. These are the moving pieces. The last maybe element I could point is the fact that amongst the different measures taken by the ECB in order to ease a little bit the solvency constraints on European banks, there's one element that is here to stay, which is the implementation of Article 104a, which is in itself reducing our requirement by something like 50-60 bips.
All things being equal, in itself, this decision of the ECB has increased, without any necessity, has increased our buffer above the SREP by around 50-60 basis points. It's too early, because of the moving pieces to which we are faced, it's too early maybe to reset our targets and to redesign our capital trajectory. To summarize what I just said, we are very comfortably above any kind of requirement. We have continued in H1 this year to generate profits and to generate solvency. Our intention at the level of CASA is to continue to be investor and shareholder friendly, which means to remunerate properly our shareholder, the majority shareholder, but also the minority shareholders.
Great. Another topical area, as it often is in the sector every three or four years, is M&A.
The recent proposed transactions in Spain and in particular in Italy suggest we could finally see a broader wave of consolidation in the sector. Do you agree with this view, or do you think that these two geographies are specific and the focus is likely to remain on in-market transactions only?
You have high market shares in the country, in the product factories, as you like to call them, Pioneer, Agos, Leonardo, CA Vita, in insurance. Yet, you still have low market share comparatively on the retail side. I think 4%. Is it kind of inevitable that you would have to participate?
Well, let's start with the broad picture, and then we are going to zoom into Italy and our position in Italy. If I stick to the broad picture, what I would say is that I partially agree with what you just said. It's true that we are seeing some movements on the consolidation front in Europe, and namely, in Italy, we've seen transaction that has now been completed, which is the acquisition of UBI by Intesa. In Spain, we are seeing some rumors about a potential combination between Bankia and CaixaBank. Those two transactions involve quite, I would say, significant players on those two markets. It seems that actually, after several years during which everybody was talking about consolidation and nothing was taking place, we are now seeing some clues that there is a certain movement towards consolidation. We are seeing only domestic operations.
Those are not cross-border consolidation operations. In my opinion, this reinforce what we have always said, which is that a global cross-border consolidation operation would face very significant hurdles and very significant headwinds in Europe, namely regulatory headwinds, because actually there is not a single banking regulation and banking supervision area. If you have entities in several European and even Eurozone countries, it's not that easy to upstream or downstream liquidity or capital, despite the fact that we are supposedly in a single banking union. At the same time, you don't have a single banking market. In retail and commercial banking activities, we are facing a very fragmented market, actually. In the different European countries, you have different credit policies, different credit products, different savings products, different tax regimes for the savers, different legal regimes in case of insolvency, and so on and so forth.
It means that the capacity of generating cost synergies by merging two commercial and retail banks in two European and Eurozone countries is not here for the time being. It means that from our viewpoint, the two operations I just mentioned, the one that has taken place, and the one that is possibly going to take place, are the proof that domestic consolidation is clearly accelerating, especially in countries where domestic consolidation is needed. It's not a proof that we are heading towards a wave of Pan-European cross-border consolidation.
As far as our group is concerned, you know that it's been now several years that we insist on the fact that we think we have the capacity to participate in the consolidation within several business lines in which we have a very significant player, and in which we think the European market is more mature than for retail and commercial banking activities. It's the case in consumer credit, it's the case in car financing, it's of course, the case in asset management, and so on and so forth. We've been steadily developing the capacity of all these specialized business lines that exist within our group to distribute their products beyond our footprints in retail that we have in France, and to a certain extent, in Italy.
This is through this approach that we've entered into several significant partnerships in Spain, in Italy, or in other countries. I didn't mention custody activities, but it's also an area in proven that we have the capacity of closing significant transactions in order to reinforce our positioning and our profitability and our scope. Last point, in Italy, where we have a retail market operation, we've proven in the last two years that we have the capacity of reinforcing our franchise by integrating some smaller banks that fit within our model. This is so what we did beginning of 2018, and the integration actually was completed during 2018 and beginning of 2019 with the three regional banks that we've bought. We have the capacity to continue to do so if we find some targets that fit within our model.
We've proven also at the same time that even if we are still small in retail banking in this country, in Italy, we have had the capacity to find opportunities for our specialized business line to expand beyond, and sometimes far beyond our small retail network. So this is the case for the asset management activities where we distribute actually our products through UniCredit. This is the case also for