Earnings Call: Q4 2013

Feb 20, 2014

Thank you. Good morning to all of you. I am delighted to be here in London to share the results for 2013 and for the fourth quarter. Before we go into the detail of the presentation, I wanted to tell you that we see that results, the counts are good, and they prove that our group is solid. What I wanted to tell you is that during the fourth quarter, and that goes also for the whole of last year, our results met our expectations and all our bases are solid. The Crédit Agricole group has a consolidated net income of EUR 5 billion, 136, and the RNPG is also EUR 2.505 for the year. These results will be able to mean that we can give a dividend of EUR 0.35 per share, a payout of 6%. As you know that the dividend will be paid either in cash or by share, the shareholder will be able to choose. The majority shareholder has already confirmed a choice, i.e., shares for the payments. There is something new in relation to this. The dividends will be +10% for those entitled shareholders. There are various important points for this year. I am going to give you three main messages in my introduction. I am going to talk about the speeches that meant we achieved those results. I believe that we succeeded in our refocusing effort. We have got a strong capital structure under Basel III, and we feel that the activity has been steady over the whole year, which is something remarkable if you think of the economic circumstances. So we are refocused. We are strong. We are looking toward the future. We are going to present on the 20th of March our midterm plan. The first item for 2013 is that we were successful in our refocusing. I am not going to go into all of the details. We have worked in depth. We worked as far as selling of holdings or branches or portfolios were concerned. I am going to stop for a moment on the more recent operations in January 2013. We have sold the last of our shares in Banco Espirito Santo, so we have completely gone from Banco Espirito Santo. As you know, we still have some convertible bonds, and we have got other projects. We are going to also divest Crédit Agricole Consumer Finance in Sweden and Denmark and in Bulgaria. There is something else that is important in terms of activity and our positioning. Here I am talking about the strength of our capital under Basel III. Can I remind you that our solvency ratio, as observed generally, is followed at group level? Our performance was good since we went beyond our targets. For Crédit Agricole SA, as you can see, the figure is 8.3. For the group, the figure is 11.2. Those are the results for last year. Can I also underline how successful our issues were? Here I am referring to Tier 2 and also, of course, additional Tier 1s. This is important, and we are most satisfied to see that our investments fully understood that they were right to have confidence in our strengths. There is another ratio, i.e., the leverage ratio. That too is analyzed, and there have been comments in the last weeks and the last few days. As we have said before, the regulatory requirement for 2018, i.e., 3%, has already been exceeded. Bernard Delpit, when he presents the results, is going to talk about liquidity ratio. Third element that I'd like to tell you about in this introduction is how good and how steady our activity was, and also how solid our results. In terms of retail banking, insurance, and savings. You can see that Crédit Agricole SA has had a slight increase in terms of NBI, 0.4%. You can see the charges have gone down by 3%, and the GOI has gone up by 9.4% in 2013 versus 2012. The cost of risk has gone down by 20%, which is mainly linked to restoring order in Agos Ducato. I'd like to mention a couple of points regarding Groupe Crédit Agricole, as you can see here at the bottom of the slide. The NBI of the group, which means the whole group, including all the Caisse Régionale, has gone up by 1.6% in 2013 versus 2012. The GOI has gone up by 7.6. The cost of risk gone down by 13.1, and the consolidated net income is EUR 5.136 billion. Just a few points on the activities, just to say that that also means business drive for the group. We've had a total inflow that has gone up by 4.5% from December to December, within a very weak economy. Outstanding credit has gone up by 0.4% year-on-year. The managed assets, so that's private banking as well, so this is EUR 47.7 billion increase. We can give you the details in a moment. Steady activity also means reducing costs. We've been working hard on this in order to meet our objectives. We've had a decrease of 3%, even 4%, from Q4 to Q4. This is a trend, as you can see. The operating ratio for Crédit Agricole SA has gone down by 2.5 points, and this is a consequence of our program, which we call MUST. As you know, it's about IT and purchases. We had planned to reach 600 million, and we are currently at 351 million savings in terms of charges. I thought that was important to mention this, and to show that we are capable of meeting the expectations that we have. Just to conclude on this introduction, and before the presentation of our midterm plan, which will be done on 20th of March, where you can come, of course. The Crédit Agricole show that is forward-looking, is looking to the future with confidence. The risk profile has been reduced. It's very different from what it was before. We have refocused on our fundamentals, and our capital structure is very solid. We are ready to start a lasting development phase. I will now give the floor to Bernard. The key messages of Q4, and then we will have a review of the different business lines. In Q4, the group has a net profit of EUR 1.3 billion, and Crédit Agricole SA alone, a net profit of EUR 612 million with four highlights. First, business sales revenues are growing. Second, a reinforcement of our provisions. Third, a significant, if not very significant, deleveraging of the balance sheet. And fourth, a further improvement in our liquidity management. Just a few words about the P&L. You see here revenues up 22%, or 21.9%, Q4 over Q4. Of course, it takes into account very specific items such as a spread. You will see that behind that, the real underlying economics trend is an improvement of 3.2% of business mix revenues, and 0.4% year-to-date. Operating expenses down 4% in Q4, down 3% year-to-date. Gross operating income up 9.4% year-to-date. Cost of risk down 14% or 20% year-to-date. Equity affiliates, including the 25% of the regional banks and Banco Espirito Santo, EUR 206 million in Q4, EUR 1,074,000,000 year-to-date. Net income on other assets, mainly Eurazeo disposal for 5% of the capital and other real estate disposal of EUR 104 million in Q4. Tax is positive in Q4, and I will explain it later. Net income from discontinued activities, here are the disposal of Bulgaria and Nordic subsidiaries of Crédit Agricole Consumer Finance. So it is negative of EUR 132 million. So it brings net income to EUR 715 million, and the net income group share to EUR 612 million. As you have seen in the previous quarters, we have succeeded in offsetting one-offs, negative and positive, and again, the case in Q4. Among the negatives, the usual accounting stuff regarding spread, VaR, CVA, loan hedges, and so on. It is negative for EUR 146 million in Q4. As I said, the disposals of Bulgaria and consumer finance subsidiaries in Nordic entities is negative for EUR 138 million. Among the positives, the tax deduction of Emporiki for EUR 223 million, and the capital gains on Banque Haute and Eurazeo for EUR 104 million. To explain the Emporiki thing, it is different from the thing that you saw in last year results. Here we have just considered that the right issues of January, just three days before the closing of the operation, the securities from the right issues was both to be sold just three days after. So according to the accounting, and to the tax status of those short-term loss, it could be taken and deducted from the corporate tax. I must say that we have also claimed for last year tax status of the loss on the first capital increase in July. So it is different. Here it is technical, and we are very positive about the outcome of last year claim. In terms of revenues, on the left-hand side are the reported revenues of Q4 this year and last year. So you see an increase of more than 21%. You have to restate adjustments, so it brings the increase to 2% when you compare EUR 4,227,000,000 to EUR 4,147,000,000. And when you deduct corporate sales revenues, it brings the underlying trend for business lines to 3.2%, or up EUR 145 million, with a breakdown of our different business lines. For CIB, it is up 9%. For SFS, it is down 2% due to the disposal of portfolios of loans. For asset management and insurance, it is up 3.5%. For international retail banking, it is up 3%, and for LCL, it is up 2%. This 3.2% has to be compared with Q1, it was down 10%, Q2, it was up 1%, Q3, it was down 6%, so it is the best performance on all quarters in 2013. It gives the right idea that we have reached the end of the impact of deleveraging on our revenues. It paves the way for the medium-term plan, and a rebound in activities and in revenues. In terms of cost of risk, the yearly trend is clear. It is down for Crédit Agricole Group, including the regional banks, from 52 basis points to 48 basis points. For Crédit Agricole SA, from 75 basis points to 67 basis points. in Q4 alone, there was an increased cost of risk from 40 to 50 basis points for Groupe Crédit Agricole, and from 59 to 86 for Crédit Agricole SA. The NPL trend is very stable. Total NPL at the end of September was EUR 17,026,000,000. We have sold EUR 1.7 billion of non-performing loans in consumer finance. We have also the impact of IFRS 5 for Nordic countries for 124, so it should bring NPL to EUR 15,154,000,000. The reported figure is EUR 15,201, so it is less than EUR 15 million in increase. NPL trend is clearly stabilizing for Crédit Agricole SA. In fourth quarter, we have increased our provision, so it explains why the cost of risk is up. The impaired loan coverage reaches 71.7% at the end of December. I remind you that we do not net impair loans with guarantee and safety and so on. It is different from what we can see among other banks. In our case, due to the disposal of NPL, the coverage ratio comparable with the end of September would be 73.7%. Due to the disposal first, and due to the increase of coverage in Italy, where the average is lower than for the group, it explains why the coverage ratio is down to 71.7% at the end of December. Here are the trends for the different business lines. For the regional banks, it is very low, 13 basis points at the end of Q4. For LCL, it is 36 up 9 basis points in Q4. For international retail banking, it is up due to the situation to employees that we will review later on. For consumer finance in gray, you see that the trend is still a negative trend, or improving trend for Agos Ducato with 115 basis points in Q4, down 6 basis points compared with Q3. It is up from 162 to 200 basis points for the rest of the consumer finance, where we have increased our coverage ratio. We have increased our coverage ratio because we pay a lot of attention to the definition of the EBA on the forbearance and restructured loans. We know that they are not accounting principles, neither prudential principles. They are quite brand new. We have reviewed all businesses to be sure that we have comfortable provisions, which is the case at the end of December. Another key message of our Q4 is the very significant decrease in the size of Crédit Agricole SA balance sheet. Here you can find two things. First, we took the advantage of IAS 32, which allows to net asset and liabilities for derivatives when you have the contractual framework to do so first, and when you have the intention to settle assets and liabilities at the same time through clearing house, which is the case. It allows us to reduce by EUR 225 billion the size of the balance sheet at the end of 2012. The stated reported balance sheet was EUR 1.842 billion at the end of December, and with the compensation, it is EUR 1.6 billion at the end of 2012, restated. On top of that, we have also reduced the total balance sheet thanks to mark-to-market of derivatives, treasury management optimization, disposals and decrease of inactivity, and the reduction in the repo business. It drove the total size of Crédit Agricole SA balance sheet to EUR 1,537 billion at the end of 2013. It represents a massive reduction in the size of balance sheet of EUR 305 billion. I am sure that you know that for the leverage ratio, according to CRD 4, we already net derivatives. It does not translate in a massive improvement of our leverage ratio, even if it has improved by 30 basis points in the last quarter. It just mean that when you look at the size of the balance sheet, IFRS doesn't give the right image of the risk you have exactly. Some fantasy in terms of studies, if I may say so, could be misleading if you only look at IFRS. I think it evidences what we have already said, that the size of Crédit Agricole SA balance sheet must be worked in depth to see the exact scale of our businesses. Talking about size, I think that the cash balance sheet gives a better image of the size of Crédit Agricole Group, Crédit Agricole businesses. The total assets and liabilities in terms of cash balance sheet reached a little bit more than EUR 1 trillion with a surplus of medium and long-term resources of stable assets of EUR 71 billion, up EUR 24 billion, 14 coming from a decrease in customer assets and 10 from an increase in customer-related sums. In terms of liquidity, our liquidity reserves now total EUR 239 billion, well above short-term market funds, 142, so 87 above, higher than the EUR 55 billion coming from assets eligible to central banks. Again, I mention here our additional Tier 1 issuance in January. Our medium and long-term program for 2014, EUR 10 billion, which is low. What we did last year, EUR 31 billion of senior debt issued in the market and in branches network by Crédit Agricole Group main insurers, including Crédit Agricole SA, for EUR 15.5 billion. A very good access to investors all over the year. Now let's have a look at different business lines. For French retail banking, a strong business momentum with customer assets up 3.4%, loans outstanding in positive territories, loan-to-deposit ratio 118, down six points versus end of 2012. Net income group share coming from French retail, EUR 337 million in Q4, up 1.4%. For the regional banks, a very good year, strong year, both in terms of activities and in terms of P&L. Revenues up 2% in Q4, expenses down 1.5%, cost of risk down 19%, cost-income ratio 55%, and a contribution to CASA P&L of EUR 230 million in Q4, and a record EUR 1,064 million year to date. For LCL, good business performance. Revenues are stable in Q4. The asset liability management of LCL is different from the Caisse Régionale. That's why trends are a bit different, but a solid business trend. Costs are under control. Cost of risk is down year to date 2.4% and up 11% in Q4 due to more provisions for the AQR exercise. A coverage ratio of 74.7% for 2.5% of impaired loans, which is low. In Italy, good business performance in terms of assets. Loans outstanding are down 0.9%, which is good in the Italian environment. An excess of deposits over loans of EUR 3.1 billion that we use now to fund our other Italian subsidiaries. A good trend in terms of revenues in Q4, up 2.3%, with margin up 10 basis points in Q4 over Q4 last year. Operating expenses are down 5.6%. Cost of risk is down compared with Q4, where we booked EUR 35 million for an inspection of the Bank of Italy last year. The impairment ratio stands at 10.4% with a coverage ratio of 45.7%, and we have a positive impact of the new rules for taxes in Italy of EUR 11 million. That drove the net income to EUR 20 million in Q4, EUR 104 million year to date, including the leasing and factoring businesses, Groupe Cariparma, which is EUR 13 million net profit in Q4 and EUR 150 million year-to-date. We have other businesses, international retail banking, excluding Italy, excluding Banco Espirito Santo, and the disposal of our Bulgarian subsidiary. All those business are in positive territories, EUR 43 million year-to-date for Polska, EUR 37 million for Ukraine, EUR 27 million for Egypt, EUR 19 million for Maroc. You see that all together, those businesses have a liquidity, an excess of liquidity, with roughly EUR 10 billion loans or EUR 12 billion customer assets. A strong part of our profit comes from savings management and insurance, with a very strong commercial trend in 2013, EUR 48 billion up in terms of assets under management coming from Amundi, from insurance, private banking stable and from CACEIS. With, of course, a positive market and currency impacts of roughly EUR 30 billion, but a positive net inflows of EUR 13 billion from businesses. With net income group share of EUR 1,679 billion year-to-date, excluding the increase in the corporate tax rate in France and the leverage of insurance. I remind you that at the beginning of the year, we have decided to reduce the equity of the insurance to increase internal Tier 2, so it does not impact the economic underlying trends in insurance, just in total, but it has an impact on the P&L of insurance. Excluding this specific feature and corporate tax rate increase in France, the contribution of those businesses are stable in 2013, and that's almost the same thing in Q4. I will go quick on Amundi to say that everything is positive. Inflows, revenues, net income, cost income ratio, that's very stronger for Amundi. For insurance, it's also a very good year with net inflows from life insurance, EUR 4.2 billion year-to-date and EUR 700 million in Q4. Strong year also for property and casualty. We run more than 9 million contracts in France. Revenues are up. Operating expenses are under control. Net income group share EUR 227 million, excluding the leverage of insurance and excluding the tax increase in France, that would be EUR 280 million, and that would be more than EUR 1 billion over the year. So very stable, resilient and good performance of the insurance business of Crédit Agricole. Regarding specialized financial services, you know it's a business that has been very actively managed in the last two years. We have continued to do so in Q4 with the disposal of our Nordic entities. The EUR 99 million negative includes EUR 186 million from a goodwill depreciation. This move has a positive impact on solvency, excluding goodwill, of course. We have also sold EUR 2.7 billion of loans, mainly in Agos Ducato, but also in the Netherlands. It explains why outstandings are down to EUR 70 billion at the end of the year. In terms of revenues, it's negative 0.4% year-to-date due to the disposal of portfolios. Excluding the disposal, it would be up 2.2%, and it reverses the trend in the last quarter. Consumer finance is now in positive territories. Operating expenses are under control. Cost of risk is down, thanks to a very good handling of the situation in Agos Ducato. Cost of risk in Q4 in Agos Ducato was EUR 187 million, is down, of course, compared with last year, but also down compared with Q3, where it was EUR 204 million. The trend is clearly down in Agos Ducato, as we have said since the beginning of the year. There was a positive impact of the Italian new tax rules on Agos Ducato, EUR 28 million, and the contribution of specialized financial services is EUR 53 million in Q4 and EUR 183 million year-to-date. In terms of CIB, revenues are up 9% in Q4, including a very strong performance of our financing activities, up 16.7%. Good performance too from capital market activities, up 5.3%, with a very low value at risk at the end of Q4 of EUR 8 million. Runoff activities have, I would say, marginal impact on revenues, EUR 12 million down, and I think that the end of those runoff activities for CACEIS. I would like to underline the trend in terms of NBI of the liquidity in the financing activities. The ratio was at 0.5 last year, it's now 0.65. It underlines the trend of improving the efficiency of the liquidity used by CIB, which is part of the new business model of mini CIB in Europe. CIB made huge efforts to put cost under control. It's down 6.7% for ongoing activities and 7.8% including discontinuing operations. The cost-income ratio of CIB has reached 57% end of the year, with a compensation ratio of 34% and staff on average down 12% in CIB. In terms of cost of risk, last year Q4 was very low, so it explains why the comparison is up, and we have taken the opportunity of Q4 to increase our add-on, on collective provisions as well. Just to mention that Banque Saudi Fransi in Q4 had a limited EUR 11 million contribution to CIB due to the requirement of the Saudi supervisor to increase provision in this country, but this bank is still very profitable of course. It's a EUR 151 million contribution of CIB in Q4, EUR 113 million for financing activities and EUR 38 million for market operations. Last but not least, corporate center. In Q4, revenues were negative for EUR 421 million, which is limited, with positive impact of the disposal of Bankinter. A positive impact of disposal on building properties in Paris, positive impact from the disposal of RIO shares. We also booked in the corporate center the positive impact on taxes of the employee thing that I explained earlier. At the end of Q4, net income of the corporate center, excluding spread, was a limited EUR 16 million negative, and it is EUR 1.2 billion negative over the year. A little bit below my initial guidance. Maybe I will not comment on solvency ratio since Jean Lambert did it at the beginning of his presentation, so it is now an old story in the Basel 2.5 with a 10% Tier 1 ratio at CASA level, up 60 basis points since the end of Q3, which is a very strong performance, too. Thank you. If you have any questions, don't hesitate. For this and so that people can hear online as well. Thank you. It is Bruce Hamilton from Morgan Stanley. Could I ask three questions, perhaps? Firstly, on the balance sheet improvement, very impressive reduction in balance sheet. I wonder what the further scope is to improve or optimize there through netting or trade compression. If you could give a sense there. Secondly, on trends in France, you obviously made some comments on a bit of NIM pressure on LCL given the reinvestment spreads and so forth. But it looks as though the regional banks have had a much better experience. Is that right? And how should we think about NIM and the broader sort of French dynamics looking into 2014? Then finally, on the cost of risk in the group center, the EUR 74 million. As I understand, that is driven by the sort of the AQR effect, but I am surprised you didn't try and allocate that across divisions. Which sort of areas are most of those provisions relating to in terms of geography or business type? Thank you. Thank you. In terms of results and the evolutions and the trends for 2014, indeed, we are working in France, in Italy in particular, where growth should be better next year, a bit better. We think about zero for France, zero plus, and 0.8 maybe next year. This is what we're working with. The retail banking activities should be stable for next year. Then for the other countries, here I'm talking about Italy and Portugal, the situation should get better because in Italy growth should also be better compared to 2013, which was difficult. Then the cost of risk should also become stable for Cariparma. A reduction with Agos because in 2012 and 2013, we've seen a regular decrease, and also there's been a difficult provision. We should be having an improvement in terms of this sector. Regarding savings, I think we should have an improvement with Amundi and life insurance. Then for BFI, we are improving things as well as specialized financial services. We've had an adaptation period, and now we should be finding our rhythm. That's for the trends. Then regarding France, you've mentioned we think that growth should keep going up 0.8% in France, and we are trying to push the French economy to try and get better improvement in the next few years. In terms of further balance sheet improvement, we are not looking for triple-digit improvement next year. I think it will be limited, but still improvement in the CIB. For France, as you said, there is a slight difference between LCL and the regional banks. It has nothing to do with the macro environment, but there are some slight differences. For example, early repayments were different in the regional banks and LCL for home loans. It explains different trends in terms of revenues as well. Then for the cost of risk in the corporate center, it has to do with AQR, and we will use it to evidence that in some portfolios where we have not exactly tracked those provisions, it will improve the coverage ratio for forborne loans, not in France, in other geographies. Good morning. This is Jean-Francois Neuez from Goldman Sachs. I had a question. I noted that when you introduced the slide on corporate center, you said last but not least. I would agree with you, obviously, single biggest division. I just wondered, as you go into the medium-term thinking, whether you can explain to us if there is any significant way to optimize the cost which is in there due to group structure or anything else that could be done, because obviously, it is very difficult to understand how this is evolving. It is a very big swing for your results. The next question was also on France with the progressive implementation of the new employers tax and tax credits and so on that the French government is trying to introduce and potentially upside, given that you are the most French of the French banks, so to speak. I wanted to know whether that has any impact or any cost benefit going into 2014 and beyond. Thank you. Okay. On corporate center, as you said, we will take the opportunity of the medium-term plan to explain what is the corporate center and how much of that you should consider that could be put on the business lines, and what is definitely, and that the vast majority of our corporate center charge our negative revenues. It has improved versus my initial guidance. But next year, you have to take into account first a normalized tax rate, and then the switch, the second generation of switch, will also weigh on the corporate center. If you want to do the math for your next forecast, you have to take that into account. I do not expect a significant improvement in the corporate center in 2014. For the rest of the medium-term plan, please wait for next month for further explanations. For France, maybe just one word saying that for France Regional Banks and LCL, we already have tax credits from the government, CICE, EUR 90 million for the group, including, I think, EUR 27 million for CACEIS. So we have already in our results, the benefit from the initiatives taken from the French government to lower cost on staff. The French government does not know whether to maintain the CICE or to develop a reduction of fees for companies. Given the cost of labor for bank and Crédit Agricole, the second formula for us would be better for the banks because it would be more savings, but we are not yet sure whether we can get this change. If this happened, we would keep the same savings in terms of tax. I've got a few questions. It's Guillaume Duvernal, Exane. One is with regard to Cariparma, should we expect any more benefit from the change in the model? Secondly, are you planning to issue hybrid debt additional Tier 1 or Tier 2 beyond what you've done already, and how much would that cost in the corporate center? Thirdly, are we to expect a change in the divisional reporting around your investor day? Then finally, how much more leverage do you intend to do in the insurance business? Guillaume, I didn't really get the question on capital. Oh, yes. We don't expect any further improvement because we have not submitted anything on the corporate side, so no further improvement here. Hybrid debt, of course, we will contemplate regarding the situation in the market to issue more additional Tier 1s since the first one was a big success. Maybe something here I wanted to mention, and that could also answer to Jean-Francois's question. Our TSS costs are in the corporate center because we don't consider it today as capital, but as debt. It explains a lot of difference between Crédit Agricole corporate center and other banks' corporate center, where TSS is considered as capital instruments and where the cost is not taken into account in the corporate center. Okay? If we take costs as hybrid capital are now considered as capital, you won't see it in the corporate center. Right. In terms of divisional reporting change, I don't expect to change the reporting. In terms of leverage of insurance, we have no plan to increase the leverage of insurance anymore. Yes, hello, this is Florent Nitu from Citi. Two questions from me, please. First of all, if I refer to page 17 on CACF, clearly a sharp improvement in Agos, but a bit of a pickup in Q4 in non-Agos cost of risk, page 17. I was just wondering if that is a bit of the end-of-year cleanup that we would expect or some deterioration possibly of the book. My second question is on your NPL sales. Just wondering, what is the typical price that these transactions can come at, and if you would consider to enter into these more transactions, given we're seeing a lot of appetite in the market? All right. In CACF, no trend of increasing cost of risk in CACF. I do not know if you can call it cleanup or AQR preparation or whatever you call it, but no increase in cost of risk outside Italy. We do not disclose prices, but just to give an idea, there is an impact of EUR 21 million of the disposal of those portfolios on Q4 in CACF. Negative 21 for a total EUR 2.7 billion disposal of loans in the consumer finance business. Hi there, Omar Fall from Jefferies. I just had two questions. Firstly, on the application of IAS 32, I know it is a bit boring, but could you just talk us through the mechanics behind the application of the standard? Is it a case of recognizing master netting agreements you already had in place? Also, what is the capacity to do more? From what I understand, you have just done it with Euroclear, maybe one clearinghouse. Yes. Is it possible to do more, and how much more? The second question is just on life insurance. You were up 10% this quarter. I know traditionally it is a quarter-by-quarter basis. It is difficult to gauge a trend given the accounting, but what are the prospects for that business into 2014, particularly given how low the is? Thank you. Yes, Tondo. Yes, it is boring. It is technical issues. It has not been done before. Why not ask? Maybe we did things step by step. in 2011, it was liquidity. In 2012, it was solvency. In 2013, it is leverage. It will be something else this year. It was not done before. Of course, we can take advantage in it from a contractual point of view, and because we use it as clean as a clearinghouse for those derivatives. I think that we have further improvement ahead, but don't expect, again, as I said, a new triple-digit decrease in our balance sheet. We have some further improvement to implement. In terms of life insurance- Here, networks are up again in relation to savings balance, because for a number of years, we wanted to improve the balance between debts and deposits. Today, having reached such a balance, we have got a rather more open vision of life insurance, given tax advantages. There will probably be a little more activity. Also our clients are very much inspired by the life insurance side. Yes. Good morning, everyone. It is Nick Davey from UBS. A couple of questions, please. The first one on the funding plan for 2014. You mentioned EUR 10 billion. I think you referenced as well that it was lower, significantly lower than what you have achieved this year. Could you please flesh it out a little bit more? For example, how much equivalent debt is maturing in the same time period, and whether you think the overall replacement of long-term funding in the next few years might become a P&L contributor. The second question, please, on risk-weighted assets in the CIB. If I remember well, you have a divisional target of around EUR 120 billion of risk-weighted assets in Basel III. Am I right in thinking there is about EUR 20 billion or so of risk-weighted asset reductions you are still targeting in that division? Could you give us any more flavor of the timeframe involved? Thank you. Nick, I am very sorry, but I will not give a lot of details about our funding plan, but we can discuss it later. EUR 10 billion is not much, but it is the market plan. We have also other ways of refunding, refinancing our activities through the network, for example. I was only referring to the medium and long-term on the market. For RWA and CIB, you get it right. We have an additional decrease to come in the medium-term plan. Something between 10 and 20 is our target. Thank you. Good morning. Hi, Geoff Dawes from SocGen here. Two quick questions from myself. The first is on the French retail bank. You gave the comment yesterday that you were somewhat surprised that the cost of risk in 2013 had not been a little higher, given the economic trends. Could you maybe just elaborate on that slightly and also think about whether 2014 we could see a bit of catch-up, and were there any particular parts of the book you are more concerned about? The second question is a quick one on the dividend. Obviously, your main shareholder is committed to scriping until you reach 9% Basel III core Tier 1. Would that be the point you would move to full cash, or is that not relevant to you? Thank you. On retail banking and surprise as to the cost of risk. Yes, indeed, we would have thought that there would have been progress in 2013. We realized that those who borrow and company bosses have managed all of their activities, and there would not be an increase in risk, whereas we were ready to work on risk provisions. If you remember, normally, if you know what the level for regional banks is, I understand normally you tend to be cautious in terms of provisioning. For 2014, we are not more worried. If the economy fares better, there should be less risk, but there again, we are cautious. That is our job. There should not be a slippage in terms of risks next year. As I speak to you today, I cannot see it coming. However, if there were an economic disaster, things might be different, but that is not anticipated. As to the cost of risk for CASA, you've got 1.5 million on consumption, and our risk is more limited in terms of activities, but we keep a close eye. It's in terms of dividend now. We've distributed EUR 0.35, and I would say that the majority shareholders agreed to go with us up to 9.5 in terms of ratio for Tier 1 for CASA. That is what we're doing. We did better than we had thought. We're probably going to get to this ratio very quickly, and we'll be more independent in terms of the way we operate. Thank you. Jean Lambert from KBW. First question was related to the potential restructuration of the link with the Caisse Régionale and the potential creation of intermediary holding between the Caisse Régionale and Crédit Agricole. I see there are some implications for minority shareholders, or what's the status of the project if it's going to be proposed at the AGM. The second question was related to the corporate center, the cost of risk increase. Is that related to restructured loans? You used to disclose those amounts. Have these amounts increased based on the definition of EBA, and in what proportion and which geographies? The third question was related to the potential phase-out of the Danish compromise. Have you heard any discussions on the subject? What would be the timeline? Are we speaking about five years or in excess of five years? Thank you. On the restructuration potential, we have no information other to say that when the time comes, we will talk about it. The next question, for which there's been a lot of discussion, I would say that we're talking about roughly one point of solvency ratio for Crédit Agricole. For Tier 2, we can continue to improve. I would say that in the coming years, that should not be a difficulty for the group. I don't think there's any particular danger in this respect. Now, cost of risk. And of increasing restructuration among our credits. It has nothing to do with an increased cost of risk. Good morning. Francesca Tondi, Morgan Stanley. I wanted to follow up on a couple of points, specifically looking at margin in the domestic business in LCL. Again, I think I understand a comment from the conference call yesterday that you are continuing to see a little bit of pressure coming from effectively your investment yield that is still in a down. Did I understand correctly, and can you talk about those dynamics in terms of margins a little bit more? The second point, on your point on increased provision given the EBA guideline on loans in forbearance. Your loans, however impaired, do not seem to have increased. Did you have to do any reclassification, or simply just an adjustment in provision for loans in forbearance that you had already? If that is the case, what guideline have you been given for the provisioning of forbearance loans? That will be interesting. Thank you. I will not give many details on that, because we are expecting this kind of discussion with the EBA and with l'Amour de France. So it's difficult for me to elaborate on that. Just to say that we have not seen, as I said, any trend of increase in restructuration of forbearance. It's just that we paid attention to the exact coverage ratio of forborne loans or restructured loans, giving the fact that every bank has to work on what is really forborne, making the difference between forbearance for commercial reasons or forbearance for risk reasons. So there is a lot of room for interpretation here, and that's what we have been working on. Thank you. On the margin trends that you have this year. Thank you. My first point on margin trends and the pressure coming from the reinvestment yield. We've got a level of clientele that's different. That has a bearing on how the client behaves, and there are evolutions. If rates change, we will follow that. We'll find the intermediation margin. We've slowed down looking for deposits. If there are a certain number of things that cost us less, we're going to try and get what we've already achieved. Because I think you probably know that the operating ratio is such that there's a challenge, perhaps, if you look at both networks. So it would be a good idea to motivate both. As to final arbitration, I think our provisioning level is coherent. It's strong. We find that prospects are better than they used to be in 2013. To see if there are any questions online. Operator, any questions online? To ask a question, please press star one on your telephone keypad. We currently have no telephone questions. Thank you very much. Then all we have to say is thank you very much for coming, and don't hesitate to contact us. Thank you very much. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.