Good afternoon. This is the conference operator. Welcome, and thank you for joining the Crédit Agricole fourth quarter and full year 2023 results conference call. 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. 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, Deputy Chief Executive Officer of Crédit Agricole S.A., in charge of Steering and Control. Please go ahead, sir.
Good afternoon. Thank you very much. Thanks for attending this conference. I want to start directly on the presentation on page 4, if you want. The first message I want to insist on is the fact that we are posting very good results for this year, 2023, and indeed, we are posting for Crédit Agricole S.A., a record level of net profit. This is leading us to propose to the general a ssembly meeting a dividend for 2023 at EUR 1.05 per share, which would be up 24% as compared to the 2022 dividend, excluding, of course, the part of this dividend that was linked to 2019.
The fourth quarter of the year was marked in the insurance activities by weather-related claims, but nevertheless, it was a good quarter, with revenues excluding insurance revenues, up more than 9%. Recurring cost base, which is completely under control with an increase of 3.7%, and a cost of risk, which continues to be in line with what we've posted in the previous quarters. Last point on this page, let me remind you that we've been organizing a dedicated workshop on climate strategy end of last year, and we continue to be dedicated to improve our policy regarding climate change and to deploy all the trajectories that we've published on different sectors.
If I go now to page 5, with the P&L of Crédit Agricole S.A. to start with, what you can see is that, for the full year, the net profit is at EUR 5.9 billion on an underlying basis. It's up 11% as compared to 2022, and for the full year, it is EUR 6.3 billion, up close to 20% as compared to the stated net profit for 2022. Revenues are up 9.5% for the full year. Cost base is increasing by 8.9%, so we have a positive surge for this full year, and thus we improve further the cost-income ratio globally.
If I go now to the following page with the figures for Crédit Agricole Group, again, what you can see is that for the full year, we have a net profit of EUR 8.3 billion on a stated basis, +3.3%, and EUR 7.6 billion minus 1.5% on an underlying basis. So again, a very high level of profit for the group globally. Let me now dig a little bit more into the rollout of our strategic plan at the level of CASA. On page 8, you have some reminders of the global strategies that we are following permanently.
Again, this is showing the efficiency of our model, which is combining client capture, plus improvement of equipment rates, plus permanent enlargement of the scope of products and services that we are proposing to our clients. On the right-hand side of the page, you see that we've been able to achieve different acquisitions and to conclude different partnerships in the last period of time, thus enhancing further the development of our business lines. This is leading on the right-hand bottom part of the page to a steady increase in our top line, which is up around one-third in the last six years, and again, close to 10% only on 2023.
On page nine, some additional details on regarding the net profit of Crédit Agricole S.A. on 2023. Maybe just two indications on this page. The first indication is that the record profit that we are posting with an improvement of EUR 1 billion of net profit on a stated basis, and EUR 600 million on a underlying basis, is spread across all business lines, asset gathering, large customers, specialized financial services, and retail banking activities. On the right-hand side of the page, some indication on the fact that this improvement of the net profit is mainly and almost exclusively driven by the improvement of the gross operating income. The other elements are either negligible or even negative as the increase in the level of taxes and the other elements.
On page ten, some elements regarding the profitability, which is and continues to be at a very high level. Again, 12.6% return on tangible equity at Crédit Agricole S.A. It's the third year in a row that we are above 12%, and if I assess the profitability of Crédit Agricole S.A., in average over the last seven years, we've been around 12% almost permanently. This is leading again to this dividend per share of EUR 1.05 per share, and you can see that it's a multiplication by 3 of the level of the dividend between 2024 and 2013 over the last nine years.
Page eleven, a reminder of the 2025 targets that we had set for the medium term plan, and you can assess that we are perfectly online with those targets, with a net income group share at EUR 5.9 billion on an underlying basis, so close to the level of EUR 6.6 billion that we are committed to reach by 2025. I just want to insist on the fact that this level of EUR 6 billion and above for 2025 is going alongside with a hypothesis of cost of risk of 40 basis points, which is a little bit higher than the one we had, indeed, this year. Return on tangible equity, 12.6%, which is reached in 2023, it's already above the target of 2025.
And cost income ratio, we target to be permanently below 58%. We are at 55.4%, so comfortably below this ceiling that we had set. CET1 stands end of 2023 at 11.8%, so clearly comfortably within the target of 11%. And last point, we're committed to distribute 50% in cash of our net profit. This is more than reached with the level of dividend of EUR 1.05 for this year, so no issue either on this point. We continue to progress alongside the strategic lines that we had set back in 2022, developing the new business lines we've announced last Crédit Agricole Transitions & Énergies and Crédit Agricole Santé & Territoires.
We continue to develop the activities and to progressively put in place the different businesses that are going to fuel those two new businesses. We continue also to progress in terms of customer satisfaction, in terms of digitization of our services and products, thus leading to a good level of customer capture with close to 600,000 new customers net captured since the beginning of the medium term plan. Last page on this elements regarding the medium term plan, we continue to develop our climate strategy. We've committed end of last year for a net zero trajectories for five additional sectors, so that we now cover 10 sectors.
The global strategy relies first and foremost on the accelerated development of the financing of low carbon and renewable energy sources, with some very ambitious figures that are on this page, amongst which are multiplication by 3 of the financing that are put in place by Crédit Agricole Transitions & Énergies, and an increase by 80% between 2020 and 2025 of the exposure of Crédit Agricole CIB on a low carbon energy financing. And at the same time, we accelerate our disengagement from fossil fuels with a sharp reduction that we forecast by 75% of the emissions that we financed for the oil and gas financing that we have in place by 2023. The previous target was only a reduction by 30%.
This is completely embedded in our offers, in our internal processes, among which the budget processing and in our reporting. Of course, we are induced to do so by the strengthening of the regulation regarding reporting and disclosure. Let me now dig a little bit more into the figures, starting on page 15, with some elements regarding the activity that we've had in 2023, and especially in the last quarter of 2023. Again, a very good level of customer capture. You see the figures here, close to 2 million new customers, and net, an increase of the customer base by close to 200,000 new customers. We continue to improve the equipment of those customers with our different products and services, especially P&C insurance policies.
Of course, this year, and also in the last quarter of the year, the production of new loans has slowed down as compared to what it was in 2022. This is of course linked to the increase in the level of rates. But nevertheless, loans outstandings continued to grow, and the rest of our activities had a very good momentum, both for the full year and especially for the last quarter. And I can give some example regarding the CIB activities, where we've posted a very high level of activity in the last quarter, very close to the one we had back in 2022, which was a record year.
In asset management, we have had strong inflows for the full year, and especially for the fourth quarter, bringing assets under management back over EUR 2,000 billion. The level of activity in the insurance business has been very good also for the full year with, for life insurance activities, a record level of unit-linked products inside the new inflows, and a very buoyant activity both in P&C and protection businesses with premium income sharply up. We also provide some data regarding Crédit Agricole Italia, where we have seen a sharp increase in the production of new loans. Let me now dig a little bit into the evolution of the revenues.
Starting with the full year, revenues are up 12% on a stated basis, and 9.5% on an underlying basis, which is a sharp increase. On the quarter, we have, of course, to spread the evolution of the revenues between the insurance activities and the other activities. When it comes to the other activities, revenues are up 9% on the quarter, and it's the case for the large customers division, for the specialized financial services division, and also for the retail banking activities. When it comes to asset-gathering activities, revenues at Amundi were at a good level, and the impact that we have had this quarter is concentrated on the insurance activities.
On the insurance activities, we have a significant decrease in the level of revenues compared to a fourth quarter of 2022, that we have restated under IFRS 17, and this decrease in the level of revenues is explained by three main elements. The first one, and the most important one, is the fact that we have had, in the fourth quarter of 2023, a very high level of claims regarding weather events that took place during this fourth quarter, as compared to a fourth quarter of 2022, which had a low level of claims regarding weather events.
You know that under IFRS 17, there is no longer the possibility of smoothing the impact of those weather events by using or building some specific provisions. So we've said it several times in the past, but this is an illustration of that, we have to take the one-off impact of those events. Nevertheless, all in all, for the full year, revenues in the insurance business division are at a very good level. The other two elements that explain this decrease in the level of revenues this quarter, coming from the insurance business, is first, the restatement of Q4 2022 under IFRS 17, which increased, I would say, the level of revenues as compared to what it was under IFRS 4, by around EUR 100 million.
The second element is the fact that we've taken some specific one-offs this quarter that represented also around EUR 100 million this quarter, which are not replicable. So all in all, in terms of revenues, a good level of activity and a sharp increase in the level of revenues for the full year, and a momentum that continues to go at the same pace in the fourth quarter. If I go now to page 17, regarding the evolution of the cost basis, again, some specific elements I want to comment on the fourth quarter.
On the fourth quarter, there is apparently a significant increase in the cost base by close to EUR 500 million on an underlying basis, excuse me, on a stated basis, and even at EUR 500 million euros on an underlying basis. But actually, this, the biggest part of this evolution is explained first by scope effect. We have now in our perimeter, CA Auto B ank, and we have also the European activities of RBC's, which were not in our perimeter back 1 year ago. This represents close to EUR 200 million euros of cost basis. We have also some non-recurring items, both base effects in 2022, close to EUR 100 million euros, and some specific one-offs in this quarter, last quarter of 2023, for again close to EUR 200 million euros.
So net-net, the underlying cost base, recurring cost base, is up this quarter only 3.7%. This is perfectly in line with the level of inflation that we are having now in France and Europe, which where our the biggest part of our cost base is taking place. And for the full year we have a level of cost base evolution, which is in the region of 8%, and again, we have a significant scope effect and some non-recurring items. And if I restate the evolution of the cost base for the full year from this scope effect and from these non-recurring items, the evolution is closer to 4%.
Nevertheless, even if I take the 8.1% or 8.9% evolution of the cost base, I compare it to the evolution of the top line, definitely we have a positive jaws e ffect. If I go now to page 18, regarding the gross operating income, what we can see is that on the fourth quarter, if I leave alone the asset gathering business division, because of the specific elements regarding the insurance activities, there is a further improvement of all business divisions in terms of gross operating income. And this is also very much the case for the full year, where all business divisions, including the asset gathering business division, are significantly improving their levels of gross operating income this quarter.
On the right-hand side of the page, we continue to have a decrease in the cost-income ratio at CASA, be it with or without the effect of the Single Resolution Fund, and we continue to be in the best part of the sample of European peers that we follow on this point of view. If I go now to page 19, starting with the cost of risk, what you can see is that in the fourth quarter of this year, we have a certain stability of the cost of risk, both vis-à-vis the fourth quarter of 2022, and also vis-à-vis the third quarter of 2023.
So, all in all, there is a very moderate evolution of the cost of risk for the full year, around 9% for Crédit Agricole S.A. and 6% for the group, despite the increase in loans outstanding. So no deterioration in the credit quality, neither for the full year nor for the fourth quarter. You can see that this is very much the case on most business divisions. On page 20, I want to stress the fact that on the financing activities of CACEIS, we continue to have a very, very low cost of risk. Actually, it's close to 0 this quarter, and it's very moderate for the full year.
At the level of the consumer finance entity, we have now a level of cost of risk which is more or less stabilized at a higher level than back in 2022, but no further deterioration, and a level that is, in absolute terms, far below the sharp levels that we could have had in the past.
At LCL, as well as the regional banks of Crédit Agricole, we have a cost of risk which is in the region of 18 basis points, and it's concentrated on certain segments of small businesses or self-employed professionals that are weakened, either by the increase in the cost of energy or by some specific difficulties in the real estate building business in France, due to the, amongst other elements, to the increase in interest rates. If I go to page 21, the same figures and the same trends, a high level of loan loss reserves, close to EUR 10 billion for Crédit Agricole S.A., and above EUR 20 billion for the group globally.
A level of non-performing loans overall, low, 2.6% for Crédit Agricole S.A., 2.1% for the group, and a coverage ratio, which continues to be high, above 70% for Crédit Agricole S.A., and far above 80% for the group globally. This is illustrated on page 22, where you can see that both the group and Crédit Agricole S.A. are comparing very well vis-à-vis most of their European peers. And the diversification of the loan books that we have, both for the group and for Crédit Agricole S.A., explain very well the reasons why this level of cost of risk is low and this level of asset quality is very good. Let me go now to the solvency on page 23.
At CASA, the CET1 ratio is stable between end of Q3 and end of Q4, despite the top-up that we've decided to propose on the level of dividend, the normal level of dividend, applying strictly our 50% payout policy would have represented an impact of 16 bps, bps, on our CET1 ratio, and the top-up that we've decided to propose to the general assembly meeting represents an increase of 6 bps. So all in all, nevertheless, we retained around 10 bps of solvency this quarter, thanks to the high level of profits. The organic growth of our business line represents only 8 bps.
As the other elements are quite marginal, actually, this explains the stability of the CET1 ratio at CASA, far above this target that we have of 11%. At group level, we have more or less the same trends with a level of solvency, which continues to be at the forefront of all European G-SIBs, far above the second best capitalized G-SIB in Europe, and with an absolute level, which is stable over the quarter at 17.5%, a distance to SREP at 820 basis points.
Regarding liquidity, starting with the customer deposits, it increased close to 3% over the quarter at a very high level, above EUR 1,100 billion, and we continue to have a very good level of diversification of this customer deposit, ensuring the stability and the dynamics of our customer deposit basis. This is generating a liquidity indicators, which continue to be very well oriented, with liquidity reserves increasing further this quarter, close to EUR 450 billion, to LCR ratios above 140%, be it for Crédit Agricole S.A. and for the group, and be it end of the period or over the whole period.
Last point, we have, we still have EUR 27 billion of TLTRO to repay, but of course, we have far more than enough reserves to face these repayments, which are due this year, in March and June, mainly. I will stop now with this presentation. I simply summarize it, stating that we have had a very, very good year, a momentum and a dynamic that is still very active over the last quarter of the year, and thus, we confirm very comfortably our target for 2025, and as always, we'll try as much as we can to beat those targets. Thanks, and I'm ready now to take your questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on his 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 Giulia Aurora Miotto of Morgan Stanley. Please go ahead.
Yes, hello?
Yes. Hi, can you-
We don't hear you? Yeah, we are going to take the next question, and we, we'll go back to you just afterwards, 'cause we don't hear you.
I apologize. The next question is from Delphine Lee of JP Morgan. Please go ahead.
Good afternoon.
Hi, Delphine.
Thank you for taking my question. So, I've got two. My first one is on the cost income and cost in general. I mean, you're already at 55%, which is clearly well below your target, medium, long-term target of, you know, below 58%. So just wondering, is the intention in the next couple of years to continue to have just a positive jaws of 0.5 percentage point? Or, I mean, just kind of wondering how does that square with your targets in 2025. My second question is on capital and payout.
If you could just remind us of, you know, the moving parts on capital between the acquisitions and TRIM and, just so we set like what they have, and also, on payout, is 105 bps like the new floor? So do you intend to continue to be flexible about the payout ratio and potentially payout, you know, maybe closer to, I don't know, 55-60% going forward? Thank you.
Thank you, Delphine. When it comes to the cost-income ratio target, I think we are comfortable with this target of being below 58%, because we think that considering the business model that we have, considering the type of risks that we take, considering the size of the balance sheet that we mobilize, having a cost-income ratio of 58% is prudent enough, or below 58%, is prudent enough to enable us to cover any level of credit risk that can arise, and so this is a very high level of security for us.
We don't think that it's useful to improve permanently the cost-income ratio and to target permanently further improvements of the cost-income ratio, and we think that there is probably a better way to remunerate our shareholders and to boost our development, which is to use the capacity that we've had to generate cost cuttings and improvements in the cost-income ratio to continue to invest. So definitely there is no intention from our side to modify this level. We target, and we've committed to be below 58%. We are going to do whatever we can in order to remain below 58%. This is clearly a commitment, but we are also happy to invest in order to enhance our development capacities going forward.
So no modification of the cost-income ratio commitment. No, of course, no decision to increase the cost base without any purpose, and the capacity to invest whenever it's needed in order to enhance further the development. And it's going to be more or less the same story regarding the capital trajectory and the way we see the capital situation. Let me start with the first part of your question, regarding the moving pieces that are going to take place vis-a-vis the capital going forward. The elements that are known for the coming one or two years are prime.
We still have another EUR 4 billion of RWAs to take, and it's not sure if it's going to be in 2024 or 2025. We have the closing of the Degroof Petercam acquisition that is going to take place this summer. Again, the precise date is not set for the time being. We continue to collect the different authorization that we need to have before closing the deal, but it's going to be either end of Q2 or beginning of Q3. And we know that this operation is going to represent a hit between 25 and 30 bps of CET1 ratio at the level of CASA. We then have the last layer of the phasing out of IFRS 9. It's a tiny 5 bps this year and a tiny 5 bps next year.
And then we have Basel IV starting January 2025, and we continue to be of the opinion that, seeing from now, this is going to be neutral for CASA in terms of capital consumption, in terms of solvency. And again, when it comes to the phasing in of the output floor end of the period, so in 2030 and even 2032, this is going to bite, but bite only at the level of the group, not at the level of CASA. So definitely these moving pieces are tiny, are well identified, and are completely compatible with our level of capital that we have now. And then going forward, we stick.
Excuse me, there is one last point, which is an element of actuality, because it's an operation that was announced only yesterday. There is this acquisition of Alpha Associates by Amundi that is going to be closed in the coming, I think, weeks. It's not a very complex operation, and this is going to represent six bps of capital consumption for us. So again, perfectly compatible with the level of capital that we have now.
So when it comes to the dividend policy, payout policy, we will continue to stick to the 50/50 policy, because we think that it's perfectly normal that we remunerate generously our shareholders, and we've proven in the past that we are very flexible to remunerate our shareholders. But we also want not to jeopardize our growth capacity, and we've proven also that we have the capacity to grow organically and inorganically in a profitable manner. So we continue to foresee a further development of our business lines, mostly organic development, but ready to seize the opportunities if we see some. So the 50% cash payout policy seems to us perfectly in line with this will of being able to continue to grow.
Great. Thank you very much.
Thank you. We go back to the previous question. I think we have now Morgan Stanley in line. Is that right?
Yes. The next question is from Giulia Aurora Miotto, from Morgan Stanley. Please go ahead.
Hello, Giulia.
Hi, Jérôme. Can you hear me now?
Yes, we can hear you.
Ah, great. Okay, perfect. Okay, so two questions from me. The first one, as you just pointed out in the previous answer, you're not gonna have any impact from Basel IV, basically, and 11%, I guess, remains your minimum. So with capital generation, that leaves you a bit of excess capital. Do you have any bolt-on, you know, opportunity in the horizon? And what are you looking for there? A continuation of what we have already seen or any change? And then, secondly-
... if I look at the revenue trajectory on the slide 6, no, 8, I think, of course, there has been some very solid growth. Looking forward, where do you see most growth coming from your divisions? And is there any part which instead is perhaps more challenged? Thanks.
Well, thank you for your two questions, Julia. In terms of bolt-on opportunities, we are not presently working on any specific opportunity, so there is no file on which we are actively working nowadays that would represent an opportunity in the very near future. But nevertheless, this is a permanent, I would say, a focus for us and for the different business lines. Of course, maintaining the strict discipline that we have had in the last two or three years in terms of acquisitions, you know, return on investment, return on normalized equity, capacity to integrate without any difficulty, and so on and so forth. So we are ready to take advantage of opportunities.
Nothing very concrete seen from now, but of course this is by definition what happens with opportunities. They arise at any moment. When it comes to the growth possibilities that we see, organic growth possibility mainly, well, it's limitless for us because again and the page page 8 perfectly illustrates this strategy.
By continuing to attract new customers, by improving the equipment of those customers with the, the scope of products and services that we are able to propose to them already now, and by trying to look at expansions, further expansion of this scope of products and services, we have a very solid growth engines, and so we continue to think that Crédit Agricole S.A. will be a growth story in the coming year.
Thank you.
Thank you.
The next question is from Jacques-Henri Gaulard, from Kepler Cheuvreux. Please go ahead.
Yes, good afternoon. I just had one question, sorry, which was about the one-off that you reported, the one-off items in insurance to start with, and also, generically throughout your cost base. One is the feeling that this was a choice rather than a necessity, probably to think, well, you know, the nine months were already fantastic. We already had a really, really good year, might as well, you know, not make the year that exceptional to leave us a little bit of leeway for 2024. Is this the right way to look at it? Thank you.
Well, Jacques-Henri, of course, we have to strictly apply all accounting rules, so there is not so much flexibility. But of course, when you end up in September with such a high result, there is always the capacity of optimizing a little bit the further evolution of the level of profit.
Thank you, Jérôme.
Thank you.
The next question is from Tarik El Mejjad, from Bank of America. Please go ahead.
Hello, Tarik.
Hi, good morning. Hello, Jérôme. I'm a bit surprised by your last answer, actually, I'm still thinking about it. Look, you want to surprise us every quarter, not to manage expectations, so... But anyway, now my question was on the really, like, strategically on your view of your profitability. I know saying above 12 means can be anything, right? You can be thinking on your budget, 13, 14, whatever. But for us, you know, we can't give you much more credit than that, than the 12. And as you pointed out, you've been delivering on average that same for the last 7 years, and above 12 for the last few quarters and years. I mean, you've been very active on both M&A, and I guess all very profitable and high margin business.
You're still, you know, still aiming for the same net profit group share of above EUR 6. So are you being really conservative, and you stick to your very, I mean, discipline on not moving targets within the plan? Or there are some elements that you thought could be better, and it didn't turn out that way, and then you have some positives from growth somewhere else, and you still think that's the right number? And maybe a question, I mean, you don't have to answer that, but I'll ask it. Do you think consensus is reflecting all the latest M&A, or bolt-on M&As you've done? Thank you.
Well, thank you, Tarik. Well, I think that actually what we should have done is to put on the same page the series of return and tangible equities that we've posted in the last seven years, so between 11% and 12%, and 13.1%, actually, because these are the different levels that we've reached, so on average, probably 12%. And on the same page, the evolution of our top line, because clearly, what we want to propose to our shareholders is not a return that would target to permanently improve, because at a certain point in time, trees do not reach the sky, and there are some levels of profitability that may be a little bit unsustainable or that could lead to too high risks. So our story, our value proposal, is a story of growth.
And so we are growing the top line, we are growing, of course, the equity basis, the tangible equity basis, and we are proposing a very steady level of return on this growing equity basis. And this is the value proposal that we are having. So some of our competitors are targeting to improve their level of return, and it's funny to look at the gray bars on the bar chart on page 10, where you can see that from 2020 to 2023, some competitors have managed to increase significantly their level of profitability, approaching now ours. But is this also going alongside with an increase of the basis on which this profitability is calculated? I don't know.
Our value proposal is clearly to continue to post as much as possible, very high level of profitability over time, and at the same time, to grow.
Thank you. I mean, the drawback of that is that, you know, a quarter like today, when you have a volatility of insurance, that's normal, and then a higher IFRS 17, which is not always very well understood. You get penalized and as part of your value proposition of tangible book, and so on. So, but I hear you, I hear you, and I respect that approach. Thank you.
Yeah. Maybe I take the opportunity of your comment just to comment the level of profitability of the insurance business. On this quarter, despite this very high level of claims on weather events, we've posted a level of profit which is close to EUR 350 million on the insurance business division. For the full year, it's EUR 1.65 billion, and up 12.5% as compared to last year. So definitely we are very happy with the insurance that we have. Even though this quarter was a little bit more bumpy, it posted a very decent level of profitability, and in both cases, for the quarter and for the full year, it represents around 25% of the net profit of CASA.
Absolutely. Thank you, Jérôme.
The next question is from Chris Hallam of Goldman Sachs. Please go ahead.
Yeah, thanks for taking my questions. Two really quick ones, I think. Just on the cost of risk in consumer finance, EUR 170 million in the fourth quarter, I think you said on the call that that was a normal level, so I just wonder if that is the right level to run rate or to annualize for 2024? So just for clarification on what you said earlier. And then just secondly, maybe a broader question, just on the deal with Worldline, maybe could you just sort of remind us what the strategy is there, and what do you think you can do with a 7% stake in Worldline that you weren't able to do previously?
Two good questions, of course, Chris. The first question regarding the cost of risk at CACF. On average, the cost of risk on the book of loans that is consolidated within CACF, it's a cost of risk of around 120 bps, so it's more or less stabilized at this level. I think that the assumption that we had in the medium-term plan for this business in terms of cost of risk, I would say across the cycle or cost of risk that we deem compatible with the capacity of reaching EUR 6 billion of net profit, was rather 160 bps. So all in all, we are below this peak level of cost of risk.
Nevertheless, what is important from my point of view, because it's a business in which we have the capacity to fine-tune the credit granting criteria very rapidly in order to adjust the level of risk that we are taking, I think we are stabilized, and it's okay for us. Of course, we would like and we would hope at a certain point in time to see this decreasing, but nevertheless, 120 basis points is perfectly okay. Second point regarding Worldline, the strategy is very clear. The strategy is to conclude an industrial partnership with Worldline. We are working on it since now many, many months, and even more than that.
We've signed this agreement with them back last year, middle of last year, I think it was in July. We are still waiting for the approval from the European Commission to establish the joint venture. I have now the idea that this approval from the European Commission is going to be granted probably in March this year, so next month, which will enable us to create the joint venture formally. It's going to go live very rapidly, because, of course, we're preparing that since now many, many months. Then this joint venture is going to start already working in order to improve the scope of products and that the group is offering to their merchant clients.
This joint venture is going also to apply for a specific license in order to be able to propose directly payment services to customers, and it's going to develop its own business in partnership with the group and their clients. So this is the strategy, is to conclude and to develop an industrial joint venture and an industrial partnership with Worldline. When we saw what happened at Worldline last year, end of last year, with the sharp decrease in the share price and some other elements of the kind, we deemed it was relevant to show our confidence regarding Worldline and its capacities by taking this stake at a price that is, that we deemed reasonable. And this is, I would say, outside the scope of the industrial partnership that we've concluded.
So really, what is important for us, what is key, is the creation of this joint venture, the development of its business, and progressively, the development of our industrial and commercial partnership. The 7% is something different. It comes with it. It was not a necessity, it was more triggered by the circumstances, and it's not the basis of our strategy.
Okay, thanks very much.
Thank you.
The next question is from Geoff Dawes , from Société Générale. Please go ahead.
Hello?
Hi, everyone. Yeah, good afternoon. Geoff Dawes here from Soc Gen. A couple of questions, if I may.
Mm-hmm.
First of all, on Amundi, and obviously the Alpha acquisition yesterday, you've said in the past that you will try and limit integration efforts and acquisitions to one per operating division at any one time. Is Alpha big enough to kind of qualify as that? Is that your kind of operational bandwidth for bolt-on deals for asset management for the year? Or can you run things alongside that as well? So that's the first question. On the second question, French Retail, could you give us an idea, as you're restarting production a little bit in the mortgage book, what kind of margins, pricing, ROE, whatever you look at, new mortgages in France are actually generating?
Just to give us an idea on a standalone basis, before any cross-sell and everything else. So those are the questions. Thank you.
Thank you. Well, this acquisition that Amundi has signed and concluded, announced yesterday is very important for Amundi because it's bringing some significant complement to the real asset business of Amundi, but nevertheless, it's a tiny operation. So I think it does not really apply for or justify a very long acquisition ban, to take your expression-
Yeah
... because it, this one is, I think, quite easy to plug onto the rest of Amundi. It's not as complicated and as, I would say, large in terms of assets under management and in terms of teams to integrate than, for example, the Lyxor one, just one and a half year ago. So definitely-
Got it
... not the same category, for sure. And-
So it's open for deals, if needed.
And I think that Amundi is permanently making explaining their strategy regarding the possibility of making acquisition. When it comes to French Retail, what we're seeing for the time being, let's talk first with volumes, and then, let's talk about volumes, and then, let's assess a little bit pricing. When it comes to volumes, they were again a little subdued in the fourth quarter of last year, as was the case for most of the year. And even we've seen a decrease between the third and the fourth quarter in the production of new loans. But at the same time, we've seen a continuation of the increase in the level of rates, customer rates, that we've been able to justify with our customers.
So the loans that were produced in the course of the fourth quarter were, on average, 46 bps above the rates of the loans that were produced in the third quarter. But you know that banks, French banks, have been lagging behind the increase of the usury rate ceiling in the last one and a half year. So I think we've now reached a level where this ceiling is no longer that much biting. Nevertheless, the rates that we've signed and not put in place yet in the beginning of 2024 had a rate on average of 4.4%, which is, of course, very significantly above the back book.
Of course, this is positive for the future net interest income of LCL and, globally, for the market.
... Brilliant, that's really clear. Thank you.
Thank you.
The next question is from Sam Smith of Barclays. Please go ahead.
Yes, hello.
Hi. Hi, thanks. Hi, Jérôme. Yes, two questions, please, both on LCL. So, firstly, specifically on the quarter, you've saw quite a bit of cost inflation, and I think in the slides you're flagging higher IT and staff costs. So just wondering to what extent we should view those as impacting each quarter from here, or some of the kind of higher staff costs Q4 specific? And then secondly, just a bit more strategic. So you announced at your CMD eighteen months ago that you would relaunch BforBank. We haven't heard much more on that since then. On customer numbers alone, it seems to be somewhat behind the curve, so just wondering if there's a reason that a digital bank brand seems to be of kind of lower importance to Casa than it does for peers. Thank you.
Thank you. Starting with the cost base at LCL, we've taken some one-offs at LCL, as well as in other business divisions. Let me name two for LCL. The first one is that we've had, in France, a decision from the Supreme Court, Cour de Cassation, regarding the way we must calculate some specific provisions, on paid leave. So all employers had to recalculate their paid leave provisions, and this triggered an increase, which was quite significant, actually for LCL, because LCL has a significant number of staff. And so I think for LCL, it was in the region of EUR 10 million of additional costs, which is a one-off, absolutely a one-off. It's not going to be repeated, quarter after quarter.
It is simply a readjustment of the level of the provision, and now, starting from now, the provision is going to be calculated according to new rules set by the Supreme Court, so nothing to expect in the future. The second element is regarding some IT costs. We've decided to write off some IT investments that we had in our balance sheet, that we are going to generate over time some amortization. For some reasons, either linked to their obsolescence or some other reasons, we've decided to write off those elements from our balance sheet, thus easing the efforts of amortizing over time.
And this is representing, I think, between EUR 10 million and EUR 20 million for this specific element. So all in all, at LCL, the non-recurring elements of increase in the cost basis represent EUR 32 million on the quarter alone. And going forward, we'll continue to monitor the cost base at LCL much closer to what you've seen in the last period of time, which is also the case globally for 2023 with an increase for the full year, which was limited to less than 3.5%. Then when it comes to BforBank, it's not moving the needles at the level of the figures for Crédit Agricole S.A. globally nowadays.
But, we've relaunched completely, BforBank, back in September, and so now we have a very, very steady level of customer capture, which is around 2,000 customers a week. And it's been regularly improving in the last four months, and so we are on track. The idea is not, you know, to pay a lot to attract customers that are going to leave us very rapidly, but to build really a customer base that is going to be loyal to BforBank in the long run, and that is going to appreciate the specific value of BforBank for their customers. So we are on track, and no worry regarding BforBank at this point in time.
Thank you.
Thank you.
The next question is from Stefan Stalmann, from Autonomous Research. Please go ahead.
Yes, Stefan.
Hi, Jérôme. Hope you're well. I wanted to ask two things, please. On slide 19, where you detail your cost of risk, there's about EUR 66 million, 66 million of other provisions. Could you maybe explain what they relate to? Some of them seem to be in Italy. And the second question, also a, let's say, risk question, regarding US commercial real estate, which is becoming a bit of a hot topic these days, with banks in the US and Japan and Europe being caught out, individual banks, very importantly. Do you see anything in your particular commercial real estate book, where, let's say, fault lines appear? Or are you totally comfortable with the way the portfolio looks like and how it's provisioned?
The 66 million euros of provision globally at CASA is spread between CIB on the one hand, and Crédit Agricole Italia on the other hand. It's made of different categories of provision for legal claims, for different elements. So not one specific issue, but bits and pieces of provisions regarding different topics which are not risk, credit risks-related, but nothing very specific and nothing that is going to be repeated over time. It's, I would say, even if it's not under IFRS 9, it's prudence rather than anything else.
When it comes to commercial real estate, if we were seeing signs of difficulties in our portfolio, we would certainly have taken some additional provisions, especially considering the level of cost of credit risk at CACEIS, which was almost nil on this quarter. But definitely what we see is that we have not identified any weakness in our portfolio, neither globally nor specifically in the U.S., where we have a rather small portfolio as compared to the size that we have globally. And so, no, definitely, of course, we are seeing what is taking place in the world, but no specific worry regarding our portfolio, and we provide on page 65 some additional information regarding our portfolio.
Great. Thank you, Jérôme.
The next question is from Guillaume Tiberghien, from BNP Paribas. Please go ahead.
Thank you. Good afternoon. I've got two questions and one clarification, please. The clarification, earlier you said that the new business rates in Q4 for LCL was 4.4. Did you say mortgages specifically or overall? And is it in January still 4.4? The two questions are, number one, on the cost. You seem to suggest the underlying cost rate, cost growth is about 3.7. Are there any elements in 2024 that get you to think that we can ease from that level of 3.7? And then the second question, small detail, but on the RWA slide, you highlight +EUR 2.9 billion on the corporate center due to some FX change impact.
So are we gonna get back those EUR 2.9 billion in Q1? Thank you.
Okay. Very precise questions, Guillaume, as usual. On the 4.4, if it's the level of the rate, the home loans that we've approved in January, and so those loans have not been put in place yet, and had not been put in place in the figures of the fourth quarter, by definition. They are going to be progressively put in place over the course of the first quarter of this year. This level was already around the same level back in October. So I think that what we can acknowledge is that we've reached some kind of a plateau when it comes to the pricing of new home loans in France, at least in our activities.
On the cost base, what do we see going forward in 2024? We are going to continue to have in the first quarter some scope effects, because in the first and second quarter, because the integration of Crédit Agricole Auto Bank was made only in the beginning of the second quarter of 2023. So the first quarter is going to have a scope effect. The integration of RBC's European activities took place only beginning of the third quarter. So again, in the second quarter, we will still have the scope effect regarding RBC. Then we will have, of course, the integration of the Degroof Petercam middle of the year, and we will have some integration costs both for RBC and for the Degroof Petercam.
So these elements are definitely going to play a role in the overall cost base in 2024, but we will, of course, provide all the details regarding those, those specific elements of cost. When it comes to the RWAs of the corporate center, I can tell you that a first operation that represents EUR 1.5 billion of RWAs has already taken place, so this part is already out. And the second part, I don't know exactly when it's going to come, but we'll check the element. But the 1.5 is already gone end of January.
It was a specific provision that we needed to take considering the RWA calculation rules because we bought the dollars to repay an AT1, and the repayment of the AT1 is indeed done. So now we have no longer the dollars in our books, and so we don't have the impact in terms of RWAs.
Thank you. My question on the cost, maybe was misunderstood. It was more to try and understand whether on the underlying basis, excluding the scope, you can get better than the 3.7 where we finished the year?
We'll see. We'll do as much as we can, of course, to monitor the cost base. We'll certainly have the full year effect of some salary increases that we had granted middle of last year. So, for the first part of the year, it's going to have an effect. But then otherwise, we have adopted our budget. We don't disclose the budget, but I can tell you that we have had some harsh discussions with the different business lines in order to curb as much as possible their asks regarding their capacity to spend.
Thank you.
Thank you.
The next question is from Anke Reingen, from RBC. Please go ahead.
Yeah, thank you very much for taking my question. I have two follow-up questions. Firstly, on the question from Justine earlier about the 105 being a floor, I think you responded with the 50% payout ratio, but I guess that wouldn't exclude you revisiting where you end up at year-end, and then potentially top up. And then secondly, on the cost of risk, there's around 40 basis points versus your current run rate. I guess that just assumes, like, some buffer for the financing area, or is there a structural shift that we should be expecting, that it goes to the 40 basis points? Thank you.
Well, we haven't said that 105 was a floor. It happens that for specific reasons, it's been the same level in the last 3 years, but actually the 105 of this year is not the same as the 105 we had in the last 2 years. So, I leave to every one of you the responsibility of assessing if there is a floor or not, but we do not commit to any kind of floor. The only commitment that we make in terms of dividend policy is the 50% payout policy in cash. When it comes to the cost of risk, the 40 basis points was an assumption, which is a blend actually between the different businesses, retail banking activities, corporate banking, consumer credit, so it's a blend.
It's a conservative assumption of what could be the cost of risk, I would say, across the cycle, and it's also an element of the commitment in terms of net profit, because what we're targeting is to be able to deliver a net profit above EUR 6 billion, even though we have a 40 bps cost of risk. So it's a calculation element, it's not a forecast, it's not a target of course, it's simply an element of explanation of how you should look at the over EUR 6 billion net profit target for 2025.
Okay, thank you very much. That was clear. Thank you.
Thank you.
The next question is from Pierre Chedeville, from CIC. Please go ahead.
Yes, good afternoon, Jérôme. One question regarding insurance. As we see that people focus on that. Do you think that you would need to change your underwriting policy or your reinsurance policy regarding P&C, considering the fact that now, unfortunately, we are probably living in a new world of Nat C at, more frequent, notably? And do you think there is something like that to do, or in order to stabilize your technical ratio?
I was also wondering if we have a decrease in the rate, notably in the second half of 2024, do you think that you will have a significant sensitivity regarding the discounting effect on your reserve that may probably disturb the understanding of your results in that part? And do you think that it would be useful to give any sensitivity of your technical ratio regarding evolution of rates in IFRS 17? My second question is about Italy. You mentioned that you have reached a ceiling on interest revenues, which is understandable regarding the high growth last year.
But in the meantime, some of your competitors, Italian competitors, said that they see a continuing growth next year, less than in 2024, 2023, but still a growth in their interest margin. How do you explain that? Thank you very much.
Well, let me start with your last question, because it's going to be quite swift, actually. I don't want to comment what some of our competitors said. What I'm seeing, and actually we are seeing it already in the course of the fourth quarter, is that there is some kind of stabilization at a high level of the net interest income at Crédit Agricole Italia. And probably we are not exactly the same as the other Italian banks, because we have probably granted more fixed rate loans in Italy than the average of the market, because we think that it's good for the consumers, and thus, at the end of the day, good for our cost of risk.
When it comes to P&C insurance activities and underwriting criteria or reinsurance policy, it's clear that every year when we prepare the next year, we have some elements on which we are going to play. We are, of course, integrating the cost of risk of year X into the pricing of the new policies for year X plus one, and definitely, after a year in which the cost of risk, cost of weather events has increased significantly, there is a translation into the pricing of the policies. So that is going to take place, of course.
Then the second element is that we are discussing with the different reinsurance companies in order to adjust the level of reinsurance that we take, and it's a permanent arbitration between the cost of this reinsurance and the level of protection that it's providing to us. In addition to that, you may have seen that last year, Pacifica, which is the P&C insurance company of the group, has issued a Cat Bond in order to complement its coverage of natural catastrophes impact going forward. So it's a permanent adjustment. We have to play on these different elements in order to adjust to what we can foresee in terms of intensity and cost of weather events.
But it's pretty sure that the cost of weather events is going to increase going forward, and that the only way to cover this increase in the cost is through the level of the premium that we have to apply, by definition. There is no possibility for us to take the charge at the place of our consumers. Then when it comes to the impact of rates on the discount combined ratio, I don't have in mind any sensitivity on this topic, so I'll check if we have some, and if we have some, I promise that we'll come back to you. But I don't have in mind any sensitivity analysis of this kind.
Okay, thank you very much.
I'll be seven to do so.
Okay. Thank you.
Sure. I think we still have 1 question to go, 2, 3? So please go ahead.
The next question is from Alberto Artoni, from Intesa Sanpaolo. Please go ahead.
Good afternoon. Thank you for taking my question.
Yeah, good afternoon.
Yeah, just a quick follow-up on the cost. I just wanted to understand, is it fair to say that for you, beating your target of 12% return in tangible equity would be more important than beating your target of the cost income below 58%? And then that would be explained by the type of bolt-on acquisition that you've made, where perhaps you might have higher cost income, but in very interesting return on tangible equity. And the-
I-
Sorry, we just-
No, go ahead. Go ahead. Go ahead.
Sorry, my second question, very quickly, I understood that you expected some recovery on LCL in the second half of 2024. Is this still the case? Is there, has something changed and from that point of view? Thank you.
Okay. So let me start with your first question, which is a difficult one, and hopefully we have not been faced up to now with this arbitration to do between cost-income ratio and return on tangible equity. Because all the bolt-on acquisitions that we've made, in average, had a cost-income ratio after synergies that was at or below 58%. So nothing dilutive regarding our cost-income ratio in terms of commitment. So no, I would say jeopardization of our commitment of keeping our cost-income ratio between, below 58%. And at the same time, all these operations were generating a return on tangible equity, a marginal return on tangible equity, normalized equity above 12%. So all these operations were meeting, at the same time, those two criteria.
I don't have in mind any operation that could pose the question of making an arbitration between those two elements, and it would be, of course, a puzzling situation. But for the time being, I don't have in mind any operation that would pose such a question. When it comes to 2024 and the forecast at LCL, of course, when we say that we expect a pickup in the NII at LCL somewhere in 2024. This is under a certain number of assumptions regarding the evolution of rates, namely the fact that the rates would not start to decrease too rapidly and would not decrease too abruptly.
Because of course, if rates go back down very, very rapidly, and I don't expect that to take place, it would change a little bit the situation. But under the assumptions that we've made, and this assumption is namely the fact that the rates are not going to decrease probably September. This is what we expect.
Thank you very much.
Thank you.
The next question is from Benoit Valleaux, from ODDO BHF. Please go ahead.
Yes, good afternoon, Jérôme.
Hello?
Hello, do you hear me?
Yes, yes.
Yeah. Okay, sorry. Two questions on insurance, one in P&C, one in Life. Maybe in P&C, just kind of follow-up question regarding profitability outlook. You mentioned price increase plus net cat losses, so how do you see the level of profitability? So is this year, I mean, is it fair to assume, for example, that your combined ratio could return to more 2022 level, at, I don't know, 95% or below that under IFRS 17? And the second question in Life, we've seen a decrease in outflows on traditional life insurance product in Q4 versus Q3. Despite this, you have reduced your level of PPE reserves, meaning that you've tried to boost your level of crediting rate paid to policyholders.
I just wonder if it's a kind of defensive move in order to preserve your book of business, or do you see this business as being profitable, and therefore you would like to push sales on this product going forward? Thank you.
Well, two good questions, and difficult to answer very simply. Of course, we've seen an increase in the Combined Ratio in 2023 as compared to 2022, and I think that all the elements I was mentioning earlier, underwriting and pricing policy, reinsurance policy, Cat Bond insurance, all these elements are here in order to improve further, going forward, the Combined Ratio. We cannot commit to go back in 2024 to the level of 2022, but certainly we want to reduce this Combined Ratio going forward.
When it comes to life insurance activities, we've been using the PPE exactly for the purpose for which it was made. Actually, the PPE is here to accompany the increase in rates in order to preserve the portfolio, to develop the business, to remunerate the client, the policyholders. And so we've used a small part of the PPE that we had. We still have 4.5% or 5% of the euro-denominated products outstandings in PPE for the future. But clearly, the idea of the PPE was to be used, and legally we must use it in the eight years after the building up of the PPE.
So it's here to be used, and we've used it for all the purposes you mentioned, to preserve the book, to remunerate the customers, and to improve their loyalty, to increase their loyalty, and also to apply our client policy, which is a policy that needs to be client-friendly, and so we did. It was reasonable to do so.
Okay, thank you.
Thank you.
The last question is from Flora Benhakoun of Société Générale. Please go ahead.
Hello, this is [inaudible] from Société Générale. Can you hear me?
Yes, absolutely.
Hello, thank you very much. Thank you for taking my questions. I have two actually, please, on your Italian retail business. So apologies in advance if I'm missing anything here, but you're describing a quite strong performance in the business this quarter. But on a quarter-on-quarter basis, it actually looks like your revenues are down quite significantly in the division. So can you give us some explanations around that, and whether you expect NII growth to decelerate quite quickly in the coming quarters, even in the context of you know, gradual potential rate cuts as you described it earlier? And then secondly, still on Italy, but more generally, you're giving us a number of customers acquisition in the business this quarter.
Can you remind us your retail market share in the country, and whether you've been happy with the way it has evolved over the recent past? So those are my two questions. Thank you very much.
Thank you. On your last question, which country are you talking about? In Italy again?
Still Italy. Yeah, indeed.
Okay, so in Italy, what we've seen in the last quarter was that, of course the revenues were up globally for Crédit Agricole Italia. If you can just show the page. Revenues were up 4.4%, and the net interest margin was a little bit down between Q3 and Q4. So exactly what we've been saying already, between Q2 and Q3, i.e., we have more or less reached some kind of a plateau in terms of NII in Italy, because rates have stabilized and even started to decrease a little bit, if we talk about long-term rates.
So this is perfectly in line with what we had in mind, and I think there's nothing more to say on that. Of course, the same assumptions for the future evolution of rates applies as for LCL. In terms of the development in the country, the last significant operation that we made was the acquisition of Creval, inorganic growth operation. But now we are working on the organic development of Crédit Agricole Italia, and in terms of number of new customers that we've managed to capture, in Italia, we've managed to attract 175,000 new customers in Crédit Agricole Italia, which was an acceleration as compared to 2022.
So we combine inorganic growth when available, and organic growth every time it's feasible. And just to mention that our market share in Italy in retail banking in Italy is now at 5%, which is the highest level we've reached ever.
Thank you.
Thanks very much. I think it was the last question. So again, thanks for attending this call, and looking forward to seeing you in the coming weeks or months. Bye-bye.