Hello, and welcome to the Avolon 2021 Full -Year Results. Throughout the call, all participants will be in listen-only mode, and afterwards, there'll be a question and answer session. Today, I'm pleased to present Ross O'Connor, Head of Capital Markets. Please begin your meeting.
Thank you, operator. Good morning, and thank you all for joining us today to discuss Avolon's 2021 full year results. Today's call is being hosted by our CEO, Dómhnal Slattery, President and Chief Financial Officer, Andy Cronin, and Chief Commercial Officer, Paul Geaney. Our discussion on today's call may include forward-looking statements, and we refer you to the disclaimer on slide two of the presentation. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those estimated or anticipated. These statements reflect our opinions only as of today's date, and we undertake no obligation to revise or publicly update them in light of new information or future events. With that, I'll hand over to Dómhnal.
Yes. Thank you, Ross, and good morning, everybody, and thank you for joining our call today to discuss our fourth quarter and the full year results. I'm on page three. Unquestionably, 2021 was a challenging year for our industry. However, as we have discussed on previous calls and is evident in our quarter-on-quarter performance, we saw clear evidence of recovery in both our own business and amongst our airline customers as the year progressed. While it remains challenging for the short term, and no doubt recovery will be uneven across markets, we believe we've passed an inflection point, and we are in the rebuild phase of our industry and cycle. We enter 2022 with a strong business, significant liquidity, and a high degree of engagement with our customers on their multiple fleet development plans.
The restructuring of HNA is also proceeding to plan, and Andy will talk about that later. Consequently, many of the specific issues that have frankly impacted our performance in 2020 and in 2021 are now largely behind us. As pandemic restrictions have started to fall away, consumers are beginning to book and travel in scale. As that continues, we see really strong upside potential in this year. Looking at our 2021 performance in just a little bit more detail, we returned to profitability during the year with net income of $47 million. Our total revenue of $2.2 billion and operating cash flow of almost $900 million demonstrates the absolute resilience of the aircraft leasing model. Importantly, we increased our fleet by 4% last year.
This growth was achieved despite the challenging market and indeed aircraft production delays, and it demonstrates our global ability to be nimble and opportunistic and delivering this growth principally through sale and leasebacks. We ended the year with an exceptionally strong capital position of $6.3 billion of total available liquidity, and our sources to uses was 2.3 x, while our leverage continued to be one of the lowest in the sector at 2.4 x. We believe we are ideally positioned to take advantage of the opportunities we see in front of us and on the horizon. In terms of our capital structure, the rating agencies reaffirmed our investment grade ratings, and returned our outlook to stable as industry conditions showed steady improvement.
Our position as a strong credit enabled us to be active in the capital markets during the year, raising a total of $3.7 billion of new debt, including our lowest interest coupon to date. We also upsized and extended our unsecured revolving credit facility by $1.1 billion, indicative of the strong banking relationships that we have built and their confidence in our outlook for our business. The progressive recovery of the industry in 2021 and into this year is without doubt driven by vaccine rollouts. Over 10 billion vaccines have now been administered globally. In developed markets, vaccine adoption and booster take-up has been high. However, what is absolutely critical is that the adoption reaches a wider global population.
Over seven million people are now receiving their first vaccine each day, and this scale of rollout will allow immunity to penetrate deep into emerging and less developed economies. By halfway through this year, forecasts estimate that 75% of the world's population will have received a vaccine. The scale of the adoption of vaccines to date, the sustained pace of global rollout, and new antivirals continuing to come to the market, there is no doubt in our view that the worst of this pandemic is now firmly behind us. Globally, we are seeing international travel restrictions lift as governments adopt living with COVID strategies. Each day, we read of reduced restrictions, quarantines lifting, and new travel corridors opening.
Indeed, Andy and I will be at the Singapore Airshow next week, and we have seen the pent-up demand for travel that exists once markets reopen and passengers feel safe. Our airline customers are reporting increased confidence in their own outlook as the great return to office also heralds the return of the higher-yielding corporate traffic. Turning to slide four and the outlook for the year ahead. We have captured our overall thoughts in our recent outlook paper, which we published a few weeks back on our website. For those who haven't seen it, you can read it on avolon.aero, which is also available in the investor relations section of the site.
Four of our core expectations for the year are set out in the slide here and frankly underpin our confidence in the outlook and forecasts. GDP rebounded in 2021, and domestic travel surged as passengers took to the skies. As rising vaccination rates lead to diminishing restrictions, we are already seeing recovery in international traffic, and our expectation is that in 2022, international travel will mirror the recovery of domestic travel in the year just passed. The fundamentals are there. Household savings are at multi-decade highs. Economic growth is projected to follow a strong upward trajectory, and there is, frankly, a palpable desire for people to travel for business and for pleasure. On the supply side, we spoke recently about an emerging supply-demand imbalance for aircraft, reflecting, on one hand, accelerated retirements, reduced production, and traffic recovering faster than many had expected.
On the other hand, manufacturers struggling to reboot their supply chains after the slowdown of the past two years, while MROs, maintenance facilities, have limited capacity to reactivate stored aircraft, many of which require significant dollars invested to get them back into the skies. The net result is, we believe, a sustained level of demand for our used and order book aircraft, and this is feeding through to improved lease rates and firming values. Which leads me to another important point that is, we believe, topical for participants on today's call. We have, for some time, been talking about inflation and the impact it would have on our sector.
Well, it would appear that inflation is now here, and it is incumbent on us to remind investors that sustained, and what I would call controlled inflation, somewhere in the 2%-3% range, is positive for aircraft lessors as investors in real assets, and clearly is supportive of residual values, a dynamic we haven't seen for over a decade. In terms of the outlook for the sector, the leasing channel will disproportionately benefit from the recovery in air travel. No doubt, airline balance sheets are stressed. We saw an average 2-notch downgrade to airline credit ratings during the pandemic. In contrast, no investment grade rated lessor was downgraded, and we believe credit metrics are perhaps even stronger across the sector post-pandemic. We, Avolon, are actually in a stronger position today than even before, and we emerge from the pandemic, we believe, improved credit metrics.
Years of airline deleveraging is required, which will require an increased preference for airlines to lease rather than own aircraft. This, we believe, creates a major opportunity, and we will see the lessor share of the market continue to grow in 2022, rising to over 50% of the world's fleet. It's clear, not all lessors will benefit equally from this trend. Strategic scale, as I have said for many years, is absolutely critical. No doubt it has driven recent consolidation in our sector. Over the past decade, we have positioned Avolon to ensure that we benefit from the advantages of our strategic scale. We benefit from the deep relationships with both the engine and the airframe OEMs, our extensive and multi-decade relationships with our airlines, and our demonstrable and repeated access to the capital markets.
This is critical as we look to take advantage of the opportunities that the recovery is already presenting and will present in the future. Finally, sustainability is continuing to grow in importance, and we will be central on how aviation evolves in 2022. Last year, we saw a record number of airlines commit to a net zero 2050 target. Unquestionably, reducing emissions starts with operating the newest, most fuel-efficient technology aircraft available. Lessors have the largest new technology order books, and this will lead to increased demand for Avolon's fleet in the years to come. However, new technology aircraft is only part of the solution. We have today issued our inaugural sustainability report, which is on our website, which sets out our strong credentials and our ambitions, not just for Avolon, but for the whole sector.
It is our intention to be in the vanguard of change in aviation. If you could turn to slide five for a minute or two. We've consistently said that Avolon would be a sustainability leader and that we would be a pioneer in the decarbonization of our industry. Sustainability has been core to our strategy since we founded the company in 2010, and that approach is evident in our singular focus on investing in the most fuel-efficient aircraft from the very first day we launched this company. However, our commitment to sustainability is only one part of our culture of responsibility and awareness at the firm. In addition to recognizing that we must play a part in addressing the climate crisis, we have also worked hard to create a positive and inclusive workplace and to doing business responsibly with a strong risk management and governance framework.
The details of our progress, and more importantly, our future commitments, are included in our sustainability report. When you have a moment, we would encourage you to read that report. We have set out details of each of the pillars of ESG and are indeed proud of the progress we have made over the past 12 months. One highlight of our commitment to decarbonization last year was our order for 500 zero-emission operating eVTOL aircraft from Vertical Aerospace.
While the majority of our existing fleet, and indeed 100% of our order book, are new technology fuel-efficient aircraft, we are also investing in zero emissions aviation. Our ambition for this new form of transport is shared by many of our customers, and we have already placed the majority of our order book with airlines and are working with them on the introduction of the eVTOLs to serve their networks in the years and decades to come. Finally, before handing over to Paul to talk through our portfolio activity and indeed his perspective on the improving outlook for our customers, I would also like to update you on two recent changes to our board of directors. Kiyoshi Fushitani is retiring from ORIX after a long and indeed distinguished career. As part of his retirement, he will also step down from our board.
We all wish Fushitani san the very best in his retirement, and I would like to personally thank him for his valuable guidance to me as CEO during his tenure as an Avolon director. I'm also pleased to advise that James Meyler, the CEO of ORIX Aviation Systems, who is the 30% shareholder in Avolon, will join our board as the ORIX-appointed director. James brings a great deal of aircraft leasing experience to the board, and we are very much looking forward to working with him. In addition, Yi Shen will step down from the Avolon board following his rotation as a Bohai director, and he is being replaced by Mr. Julian Wang. Yi Shen will continue as a MD of business development for us based in our Hong Kong office. As I said, we look forward to working with both James and Julian in the years ahead.
With that, I will hand the call over to Mr. Paul Geaney.
Thank you, Dómhnal. Turning to slide six. During the year, we grew our owned and managed fleet by 4% or almost $1 billion to 592 aircraft, adding 14 new customers, including names like Allegiant, Lufthansa, and Cathay Pacific. During the second half of the year alone, we deployed over $2 billion of capital, entering letters of intent for the sale and lease back of 45 aircraft.
Okay. Good afternoon again. At this stage, we still have a technical issue, so what we are going to do is to go through the presentation for you, the analyst, and then we will reorganize another conference call for the investors later. We can continue.
Lars, we'll now present to you the business evolution for last year, and then we turn back to the timeline in a few minutes.
Yes. Thank you. Thank you, Jean. Good afternoon, fine ladies and gentlemen. Hope you can hear me well. If I go back to 2021, and just we ended there, and then we'll go to 2025. If we start with the group's operating divisions, and let's start with domestic markets, the last time we can look at it, and we start at slide 17. You can see that business drive in domestic market has seen good momentum with loan growth of 4.2% due to a positive pickup in demand across all businesses.
At the same time, deposits increased by 8.6% across all networks due to customers' behavior still stemming from the health crisis. If we look at the levers, first of all, digital banking appetite remained very strong, with the number of connections to our mobile apps up 25% on last year, reflecting the success of domestic markets' digital offering associated with the high usage of customers. This momentum is further evidenced on one hand by the strong drive in new client acquisitions at Hello bank! across Europe, with the number of customers up 8.7% on last year. On the other hand, the sharp increase at Nickel, with now 2.4 million customers and expanding internationally. Both are strong engines of acquisition with a sound model of development that makes them unique on this front. Word of mouth advertising works.
If we look at financial savings, they continue to rise with off-balance sheet savings up 9.7% year-on-year on the back of strong asset intake and performance in mutual funds and the continued rise in life insurance outstandings. Furthermore, net asset inflows in private banking continued to grow solidly with EUR 7.7 billion in external assets for the most part. Here again, you can see our model at work supporting the shift into products in addressing the savings needs, hence triggering a further shift into fee business. Moreover, the division continued to put its new service model into action across its retail networks, including, for instance, the gradual rollout of service centers in France and Belgium, and the new partnership with bpost in Belgium.
When we look at the specialized businesses, Arval saw a continued expansion of its financed fleet and partnerships, as evidenced by the recently announced partnership with Jaguar Land Rover in nine European countries. While Consorsbank in Germany saw a further increase in assets under management as well as the number of clients. Having said that, how does all this translate into the P&L? Well, if we start at the top of the P&L with revenues, they clocked in at EUR 16.3 billion, up 5.3% on 2020, driven by the strong momentum in business activity, as just mentioned. The division saw a rebound in the networks, particularly in France, and a steep rise in fees across these networks. It also saw strong performance across specialized businesses, in particular at Arval.
When we look at the second line, operating costs, they were up 2%, reflecting the gains in efficiency across networks, where costs grew by a moderate 0.7%, as well as reflecting the ability to capture growth at marginal cost, as it is the case in the specialized businesses. Hence, given the very, very positive jaws effect at 3.1% in 2021 and the reduction in the cost of risk, pre-tax income increased to EUR 4.1 billion, up 26% on last year. To sum up, domestic markets saw a very good momentum across all its businesses with the benefit of its transformation and digitalization, leading to a strong rise in income in 2021 and opening further growth. That's the first.
If we now move to slide 22, where we have International Financial Services, and they also saw an overall positive momentum in business activity. First, Personal Finance saw its new loan production volumes bounce back 11.5% on last year, and the stock of loans outstanding exceeded the 2020 end-of-period level. It also saw a very positive momentum in the development of partnerships with the strengthening of the partnership with Stellantis and recently announced strategic partnership with Jaguar Land Rover in financing the mobility in Europe. In our international networks, new loan origination was strong and fees rose sharply. Focusing our attention to the U.S. West Coast, as you know, we announced the sale of Bank of the West to BMO on December 20th, with an expected closing by the end of this year.
If we now move to the asset gathering businesses, starting with wealth and asset management, the businesses saw a sharp rise in net asset inflow, as well as a positive performance effect on assets under management on the back of the success of their transformation, paving the way for further growth. It also saw the confirmation of the rebound in business activity at real estate services. Moreover, insurance also saw a steady business momentum in 2021, especially in savings as well as positive development in the partnership model. If we now also switch to the P&L, revenues were slightly down with a 1.2% decrease year on year at historical scope and exchange rate while they were up 1.7% on a like-for-like basis.
Asset gathering businesses at large saw revenues growth across wealth and asset management and insurance, while the overall context was somewhat less favorable for international networks and personal finance. On the other hand, if you look at costs, they rose moderately by 1.1% year-on-year at historical scope and exchange rates of 4.2% on a like-for-like basis. This due to the business development and targeted initiatives to prepare for further growth opportunities. If we take it to the pre-tax income row, the line, they rose sharply on the back of a steep decrease in cost of risk, up 35%. To conclude, IFS saw an overall positive momentum in business activity and a steep rise in income.
Let's now turn our attention to the third activity, corporate and institutional banking. CIB saw a further increase in business activity in 2021, confirming the consolidation of its position as the first Europe-based global tier one CIB, and consolidating its top three position in EMEA after the exceptional 2020 market circumstances where it demonstrated its clear ability to step up market shares. Volumes of capital raising transactions led for clients across equity, bond, and loan markets continued to rise compared to an already high 2020 base. These higher volumes were driven particularly by equity capital markets transactions, a very positive development given CIB's ambition in the equity space at large. If you now look at Forex credit and rates markets, the overall client's activity normalized after exceptional 2020 circumstances for our clients. In this context, business activity stood at a good level.
As mentioned before, and as a tribute to our diversified and comprehensive setup, equity and prime services saw strong client activity. Finally, security services, the third step in our CIB, saw an increase in volumes as well as higher levels of transactions in 2021, consolidating the effect of recent large mandates. CIB achieved two important strategic milestones in 2021, confirming the strengthening of its now comprehensive equity franchise. First, the full consolidation of BNP Paribas Exane, effectively July 1st, 2021, and in prime brokerage and electronic execution, the successful completion of the transfers of systems, teams, and clients by the end of 2021 as planned. If you now also look at the P&L, CIB's revenues were up 3.4% on 2020. A further increase compared to the already strong performance in that year, confirming the stepping stone approach year after year.
Indeed, looking at 2019 as the basis for comparison, the ramping up in revenues versus 2019 was just shy of +18%. This year, revenue growth was mainly driven by corporate banking at +7.6% and security services at +5.1%, while global markets revenues were flat compared to 2020. Again, in the comparison to 2019, sharply up with 22.4%. Illustrating the contribution, as I mentioned, of the diversified and comprehensive model, fully ready to capture growth in all environments. If we look at operating expenses, they were accompanying the growth in business activity, reflecting targeted projects, and sadly, also higher taxes to IFRIC 21.
Based on the strong performance and the steep decline in cost of risk in corporate banking, CIB's pre-tax income rose sharply to EUR 4.7 billion, up 37% versus 2020 and 47% on 2019. In a nutshell, CIB took advantage of its diversified business model, strengthened platforms and positions to deliver once more a steep rise in income in 2021 compared to both 2020 and 2019. With this, I hand it back to Jean-Laurent for the highlights of the group's new strategic plan.
Thank you, Lars.
Yes. I want to say, Jean-Laurent, investors are back with us. They can hear you.
Good. Welcome to the conference call. Sorry for this problem. But, well, this is the way it goes. Thank you, Lars. It's clear that the group's 2021 results encompass the key ingredients that will be the cornerstone of the successful execution of our new strategic plan, Growth, Technology and Sustainability 2025. The group is entering into its new strategic plan with a rolling start, to use an expression well-known in motorsports. Let us now move to slide 34, that introduces the group's distinctive business model. We have said this before, and we will continue to stress it, the group has built a model for all seasons. Because we are client-centric, we strive to anticipate relationships by leveraging flow business activities and the group's rigorous risk management culture.
Because we are integrated, meaning that we are in a position to provide a full suite of products and services to our leading franchises in Europe and our global connectivity, thus being strategically positioned to support our clients in their growth journey. Moreover, we're diversified, meaning a stronger stability of revenues and profitability in difficult environments, but also the ability to capture growth opportunities. Furthermore, we are at scale. Our execution platforms were made more powerful and scalable through digitalization and new technologies. Hence, the group is able to increase volumes and gain market shares at a marginal cost. All these put together define the group and its unique positioning and competitive edge. Switching now to slide 35. As you can see it, the group indeed benefits from leading platforms in quasi all of its businesses in Europe.
They are at the cornerstone of our ability to serve clients in a comprehensive and unique way in Europe and internationally, and hence to develop strong client franchises, in particular in the corporate, institutional, private banking, and affluent segments. Switching to slide 36. The group has positioned its set up for this new phase of growth around fully integrated pillars that focus on the needs of clients and partners. Corporate and Institutional Banking, CIB, Commercial, Personal Banking and Services, CPBS, which encompasses all the group's commercial and personal banking, as well as specialized businesses such as BNP Paribas Personal Finance or Arval. Investment and Protection Services, IPS, which brings together wealth and asset management businesses and insurance. As you can see, the new organization, while reinforcing cooperation and synergies, maintains the balance of the group's in terms of P&L.
Moving now to slide 37, showing that the group, despite multiple headwinds and the shock triggered by the public health crisis in 2020 and 2021, managed to meet and even exceed the main targets laid out in the previous strategic plan with a one-year shift. In particular, we achieve in 2021, a return on tangible equity at 10% with a CET1 of 12.9% when we add an objective at 10% with a CET1 at 12%. Looking ahead now, starting with the underlying economy scenario on slide 38. As you can see, we build the plan using prudent macroeconomic and interest rates assumptions with a gradual normalization of economic growth that remains under short-term pressures after the rebound in 2021, and an overall limited pickup in interest rates.
Pivoting now to the specifics of the strategic plan on slide 39, our ambitions can be summarized in three keywords. Growth, Technology, and Sustainability. The group will more than ever capitalize and develop the strengths of its leading platforms and client franchises with the full benefit of the integrated and transformed business model. We have developed strong assets in terms of technology and sustainable finance. We will now move to the next level. Moreover, you know the quality of our teams and their commitment. We will continue to accompany the development of that potential. This model has proven to be successful, and we will develop it further. As such, the group intends to foster organic growth, gain market share at marginal cost, create and develop new growth opportunities, and generate substantial economies of scale.
Based on the above, BNP Paribas affirms the importance of the three pillars underlying its value creation model. Revenue growth outpacing the evolution of costs, but also growth in revenues outstripping that in risk weights, and as such, a further stepping up in the return on tangible equity above its cost of capital in 2025. Moving now to slide 40, where you will see the group's financial KPIs. Over the period, revenue growth target stands at a compounded annual growth rate greater than 3.5%, with positive jaws each year and every year of the plan, and of more than 2- points on average. Again, each year and every year of the plan, starting of course, in 2022.
The group's target return on tangible equity in excess of 11% in 2025, with your CET1 ratio target at 12% in 2025, taking into account a fully loaded impact of the finalization of Basel III. As a matter of fact, we expect to reach a return on tangible equity at 11% as soon as in 2024. As indicated earlier, we will grow the risk weights at a slower pace than revenues, hence the target compounded annual growth rate of 3% under Basel III, fully loaded. Lastly, the plan distribution reflects a higher recurring total payout ratio, 60%, with a minimum 50% cash dividend. Let us now move to divisional strategic plans, starting with Commercial, Personal Banking and Services. To this end, I will hand over to Thierry Laborde. Over to you, Thierry.
Thank you, Jean-Laurent. Good afternoon, ladies and gentlemen. Let me walk you through the highlights of the CPBS strategic plan. The clear vision we at CPBS have of the bank and specialized businesses of tomorrow, both for customers and employees, allows us to control our future. In this vision, we are first and foremost, high-performing businesses with strong financial ambitions. Our objective is to become the trusted companion for and beyond banking for the best interest of the customer and society. Our vision relies on four axes. First, we will further improve the recommendation from our customers and employees with the strengthening of our client-centric organization, powered by agile ways of working and empowered teams. Second, we will simplify and enrich our offering beyond usual banking services with clear priorities. For instance, in transaction banking and innovative payments, where we are already performing very well.
In the transformation of deposits in financial savings, where our private banking and affluent franchise is a clear competitive advantage. In our sustainability offer, supporting our customers in their energy transition. In addition, we'll continue to enhance customer journeys on an extended perimeter, while leveraging even more our integrated model to increase cross-business and revenue synergies. Moreover, as a third one, we'll build a client relationship driven by a new balance between human and digital, notably with a continuously enhanced digital experience. This new client relationship will be managed with relationship managers as trusted companions, supported by enhanced expertise and digital tools, as well as omni-channel and personalized interactions powered by artificial intelligence and technology. We'll also adapt our commercial setup and service models to the client value.
Last but not least, we'll continue to build a resilient industrial operating model by simplifying and industrializing our end-to-end processes through digitalizations and new technologies, and leveraging the make by share approach. Let us move on to slide 42, where you can see that CPBS has a clear path for growth and showcases competitive advantages with a wide range of businesses and strong positions. As a matter of fact, two-thirds of our businesses are in a leading position in growing markets. We naturally strive to further strengthen these positions in Europe on corporate and private banking, but also to accelerate the profitable growth of our specialized businesses at marginal costs. For retail activities, we are embarking on a strategy repositioning through further segmentation and profit changes in the operating model.
With this in mind, we are targeting an average annual revenue growth of around 5%, a strong positive jaws effect of 3- points on average, as well as a growth in the divisional return on national equity by over 3.5- points between 2021 and 2025. Moving to IFS now with Renaud Dumora. Renaud, over to you.
Thank you, Thierry. Good afternoon, ladies and gentlemen. Let me remind you first that IPS was created mid last year with the aim to become a reference European player for sustainable savings, investments, and protection. The division is characterized by a very broad and strong offering in each of its businesses and a powerful distribution model. Building on the strong foundations laid by the previous strategic plan, our vision for 2025 is articulated along three angles. First, complement our already strong offering and distribution model. It will consist in widening a range of products and services, enriching our geographical presence, and further boosting our partnerships. Second, consolidate our leadership in sustainability to even better meet the massive client demand. This is a certain choice already made, notably by asset management over the past years with noticeable success.
Third, move to the next level of integration of tech and data analytics in our customer journeys and processes. Moving now to the strategy that will allow us to reach these goals on slide 44. The 2025 strategic plan relies on three strategic pillars I will develop. First, accelerating financial savings while leveraging further our holistic offering already in place with CPBS. We will work towards continuously upgrading our digital customer journeys. Second, capture growth in private assets, both in equity and debt. There is a solid and growing demand by our clients to complement their investments in this area, and we'll continue to build our value proposition. Third, strengthen our leadership in sustainability. We will rely on four key levers, and among which we strive to move to the next level on digitalization data and artificial intelligence.
To this end, we can rely on our deep pool of data scientists and analytics experts who will enable IPS to extract the full value of our data. Of course, we'll continue to unleash the potential of the group's unique integrated model. Looking now at financials targets under the strategic plan, they are reflective of the group's potential in front of us. Our target revenue CAGR of 4.5%, targeting a 1.5-point positive jaws effect on average, and a return on notional equity stepped up by 6.5 -points by 2025. To conclude, IPS will hence continue to be a key growth and profitability driver for the group. I would now like to hand over to Yann Gérardin for the highlights of the CIB strategic plan. Over to you, Yann.
Thank you, Renaud, and good morning, good afternoon, and good evening, ladies and gentlemen. Looking at CIB now on slide 45, our 2025 strategy is quite simple. We will continue and deepen our previous plan, which I'm sure you will agree with me has proven to be the right one over various economic cycles. We will add, of course, new transformational initiatives to always improve our level of relevance to our clients. Overall, we are heading towards the same strategic direction. Our first strategic lever, which is also our strongest differentiator versus competition, and often the most underestimated, is the power of our BNP Paribas integrated and diversified model. With this model comes a strong client franchise, more granular every year, especially in EMEA, and a leadership in technology and sustainable finance. CIB will continue to strongly leverage these assets.
Another key element of our strategy is our positioning as a bridge between corporates and institutional. This bridge is more critical than ever to enable our institutional clients to support the energy transition financing and the massive tech investment required by our corporate clients. We will also continue to be a natural consolidator as some competitors retrench or refocus. All in all, our 2025 strategy will refuel our ambition of being the first Europe-based CIB among global tier one. Many initiatives support this ambition and this strategy, and I will detail the most important ones in the next slide. First, looking now on slide 46, we rely on two transversal core assets that were already in our previous plan, ESG and tech. Starting by ESG. We were pioneers in ESG, and now we are a worldwide leader in sustainable finance.
We will keep stepping up our game to accompany our clients in their journey to sustainability. Secondly, we will continue to invest in our scalable tech platform in digital, data, AI, to continuously offer best-in-class client experience, but also to generate new efficiency gains and to be able to explore new ways of doing business with our clients. We will deepen the initiatives previously launched, first, as mentioned earlier, by pushing further the full potential of our integrated model, and two, by continuing to industrialize our operating model. This is absolutely key to continue controlling strictly our cost base, to finance our investments, and to ensure a sustainable growth.
Finally, we will accelerate on transforming initiatives like the equity house dimension of our project, which will enrich, and I'm not going to explain to you as an Equity Research Analyst, to enrich our strategic dialogue with our clients, creating a strong intimacy and CEO-level both with corporate and institutional, enabling us to offer investment opportunities which will benefit both our client franchise. We will foster also on our cross-regional business in Americas and in Asia Pacific. Thanks to these initiatives and many more, we target to deliver strong and sustainable profitability over the period with a 3% revenue CAGR, a positive year effect of around 2 -points, and ROTE increase of at least 3 -points. I would like now to hand over to Laurent for a presentation on technology and industrialization.
Thank you, Yann. Good afternoon, ladies and gentlemen. Let us look back for a minute at what has already been achieved during the former transformation plan on slide 47. We have put technology and industrialization as the cornerstones of our model to further improve operational efficiency and customer experience. As you can see, interactions with clients were heavily digitized. This has been in particular the case in the commercial and personal banking and specialized businesses, where the number of digital interactions and actions with and from customers have hugely increased, allowing at the same time more commercial efficiency, more operational efficiency, and a better service. It is also true in CIB. This multi-channel strategy continuously benefits from our cooperation with fintechs and is supported by the development of a full data and AI setup in order to get the best out of it.
We also progressively developed our model of smart sourcing at scale. The make-buy-share strategy has already delivered tangible results, for instance, with unified payment factories that will be further developed in the plan to come. These levers have proven to be effective. Indeed, recurring savings achieved over the duration of the plan exceeded the original target, and cost-income ratio was pushed down by 2.1 -points between 2017 and 2021, despite the increase of levies over the period. Technology and industrialization will continue to be critical pillars in the new strategic plan, as described on slide 48. We will improve the cost-income ratio in all businesses and get an average jaws effect of more than 2 -points. We have identified six main areas where we see opportunities to step up efficiencies.
To name a few, an increased use of artificial intelligence and strong development in the secure use of cloud technologies, the continuous use of smart sourcing solutions, the continued rollout of make-buy-share strategies, and the accelerated convergence of European technology platforms. These projects and changes will generate additional room of maneuver for business lines to self-fund their transformation and investments. I will now hand over to Laurence Pessez for the overview of the sustainable finance and ESG component of the strategic plan.
Thank you, Laurent. Good afternoon. Good morning to all of you. The BNP Paribas mission to contribute to responsible and sustainable economy is at the heart of the group's common purpose, and as such, is a major foundation to our new strategic plan. For the last 10 years, we've been at the vanguard of putting our mission into practice and have taken strong commitments for more sustainable economy. BNP Paribas has led the way in supporting our clients with sustainable finance, and we have undoubtedly become the reference bank for our clients in that field. The issue of managing an orderly and successful transition is governed at the very highest level. We are ready to go further and accelerate on the implementation of our commitments. To achieve this, we will focus our efforts on three main strategic initiatives.
First, we're moving to an industrial scale, the alignment of our portfolios with our commitment towards carbon neutrality. This means defining the trajectory reduction of CO2 emissions corresponding to the financing of the sectors with the highest levels of emissions, and defining for each sector targets and commercial strategies, taking into account each client's transition. In the first quarter, 2022, we will publish our first alignment report and announce additional commitments. In late 2022, we will publish our financed emissions, scope three emissions. Second, we will upscale the support of our clients in their transition towards a sustainable and low-carbon economy. To achieve this, we are mobilizing resources across all businesses. As you know, we've created a Low-Carbon Transition Group, a team of 250 professionals fully dedicated to support our clients in stepping up their transition.
Third, we will strengthen our steering tools, processes, and setups while strengthening governance under the direct supervision of the Group CEO. We will do it tangibly and in all our businesses with shared priorities, fully embedded in the strategies and objectives of each and every business line. Moving to slide 50 now, you can see that we've identified five priority areas aligned with the objectives of our clients as well as the Sustainable Development Goals of the United Nations. Climate action, biodiversity, circular economy, social inclusion, and sustainable savings. Meeting the challenges we share with our clients and the society is a truly collaborative exercise. As such, we've set ambitious targets. First, mobilize EUR 350 billion for loans and bond issues tied to environmental and social matters by 2025. Second, manage over EUR 300 billion in sustainable and responsible investments by 2025.
As you can see, the group is fully mobilized to accelerate on sustainable finance and ESG. This concludes my presentation today, and I will now hand back to Lars Machenil.
Thank you, Laurence. Finally, ladies and gentlemen, I'm back. I will just take a few minutes to synthesize what you've seen. If we swiftly start on slide 51, where we provide the details about the reporting that will be effective as of the first quarter 2020. Associated with the changes stemming from the new organization, we will provide hand-in-hand more granularity in the group's financial reporting with respect to certain businesses such as asset management at large, Arval and leasing solutions, new digital businesses, and Personal Finance. Moreover, you don't have to count on the word of mouth, as we posted this morning, restated financial information for 2019, 2020, 2021. Now, having said that, let's look at the financials now.
Let's move to slide 52, where you can find BNP Paribas' robust targets firing on all cylinders to stay in the analogy used before. You can see the balanced revenue growth as well as the material cost income and return on notional equity improvements. You can also see that the balanced in RWAs will be preserved between divisions and growing at a lower pace compared to revenues. As a consequence, the ROE will clock in at above 11% or at 11% as soon as 2024, and therefore, it will increase further to more than 11% in 2025. With this, let us turn our attention to slide 53. The group is very well-positioned to capture profitable growth. Indeed, with a current CET1 ratio at 12.9%, the group is ready to absorb the finalization of Basel to come.
This, combined with the profitable growth, ensures on one hand, full support of client demands, and on the other hand, stepping up the payout ratio to 60%. Talking about ratios, the next slide 54 lays out the various capital ratio targets foreseen in the light of the finalization of Basel III. With this, let's move to slide 55, where in a nutshell, all that has been discussed today boils down to, one, fostering organic growth in a disciplined manner. Two, gaining market share at marginal cost.
Three, create and develop new opportunities, and four, generate substantial economies of scale. As such, confirming the group's strong ambition with a target revenue CAGR of over 3.5%, a positive jaws effect on average of more than 2%, a cost of risk at around 40 basis points of loans outstanding, thus leading to a target net income CAGR of 7% over the duration of the plan. The profitable growth, combined with its stepped-up payout ratio to 60% are clear drivers for value creation by BNP Paribas. Moreover, you should be aware that these objectives continue to apply on a group parameter without Bank of the West. It speaks for itself that they will reflect a further increase in earnings per share occurring with the redeployment of the remaining capital released by the sale of Bank of the West.
Talking about Bank of the West, let's move to slide 56. As you know, the EPS dilution stemming from the sale will be offset by an extraordinary distribution in the form of share buybacks in the months following the closing. Looking beyond the closing, oriented towards the end of this year, the remaining capital released by the sale will be redeployed and gradually and in a disciplined manner. The redeployment will be done consistently with the group integrated and diversified business model and the many opportunities it provides. Hence, it should result in additional increase in EPS of more than 5% in 2025, and even more in the period thereafter. Charles.
Thank you, Lars. Moving now to slide 58, you can see that the group has confirmed its capacity to deliver profitable growth while maintaining a strong balance sheet. This was very well evidenced by solid 2021 net income of EUR 9.5 billion, up 34% on 2020. Its return on tangible equity at 10% and its CET1 equity ratio at 12.9%. The payout ratio for 2021 was increased to 60%, including 50% in cash, leading to a proposed dividend of EUR 3.67 per share. With our new plan, we will strengthen BNP Paribas' unique positioning by leveraging the strengths of the group's leading platforms and client franchises with three strategic priorities, Growth, Technology, and Sustainability. Finally, on slide 59, you will find again in brief the main objectives under the plan.
In particular, as I said, positive jaws in all divisions any year of the plan. As mentioned earlier, the group will also reach a return on tangible equity of 11% as soon as 2024, and as such, the return on tangible equity will be clearly above 11% in 2025. Moreover, the redeployment of the capital release following the sale of Bank of the West will not only increase the earnings per share by at least 5% in 2025 and more in the longer run, but it will also further increase the return on tangible equity above the target of the plan. Thank you very much for your attention. Again, apologies for the inconvenience at the beginning of the conference, and now we'll be pleased to take your questions.
Thank you, sir. Ladies and gentlemen, if you wish to ask a question, please press zero one on your telephone keypad. Please lift your handset, ensure that the mute function on your telephone is switched off, and that you are in a quiet area to maximize audio quality. We will take questions as many as time permits. If you find that your question has been answered, you may remove yourself by pressing zero two. Again, if you wish to ask a question, it's zero one on your telephone keypad. We will take questions as many as time permits. First question is from Madame Flora Bocahut from Jefferies. Madame, please go ahead.
Yes, good afternoon. Thank you for taking my question. Thanks also for the presentation, and also the new disclosures. Look, the first question I wanted to ask you is focused a bit more on the next year, although you did provide us obviously here with the targets towards 25. The reason why I'm asking specifically for the next year is because when we look at Q4 results, it shows a slowdown in the revenue growth in some of the businesses. There's also a sharp deterioration in the jaws at group level suddenly this quarter. Now you've told us, you know, that you target revenue growth, positive jaws towards 2025. Can we also expect that you're gonna achieve revenue growth and positive jaws, including, you know, in 2022 and any year of the plan?
The second question is regarding the rate sensitivity, because as you mentioned in the slide pack, you've made conservative assumptions on the rate outlook. Can you maybe tell us how much of a boost that would be to your targets, if we were to see rate hikes at the ECB within the next 12-18 months? Thank you.
Thank you very much for your two questions. On the positive jaws, as I said, we're committed to deliver positive jaws in all divisions every year after year during the plan. It's not only a commitment for 2025 on a kind of marginal approach or average approach. It's every year, any division, year after year. The main difference comparing that plan to previous plan, and we have no adaptation costs. The first year, you will see an increase on the net result because there is nothing that at the very end pushes down the net results. All divisions are going to pay for their own investments, and nevertheless, they will deliver starting in 2022 as in 2021 positive jaws, those. This is very important.
Maybe it's not clear in our presentation, but again, positive jaws starting in 2022, moving on to 2023, 2024, 2025 in all three divisions. This is very important, and there is no adaptation costs outside of what we said that the so-called EUR 500 million at group level, which is really a minimum compared to what we did in the previous plans. Looking now at the sensitivity of the rate scenario, we know that we have taken, to some extent, kind of cautious scenarios as always. If we imagine that rates would move, let's say 50 bps above, ultimately in 2025, this could all in all represent kind of EUR 500 million net result globally at group level.
If you look globally at the picture in 2025, if you imagine that in 2024 we are already at 11% return on tangible equity, in 2025, we're clearly above 11%. If we're able to invest in a disciplined way the proceeds from Bank of the West, this will push further the return on tangible equity. If we get, because of the rate scenario, the equivalent of EUR 500 million, in that case, we would be close to 12% return on tangible equity. This is, let's say, a kind of more aggressive or more positive optimistic approach, but this is the way it goes. 11%, this is the target. We reach the target in 2024. In 2025 we're beyond.
If we can invest in a disciplined way, as it said, it's being said at the end of the presentation, we are further beyond 11 and closer to 12. If we're lucky to be in a better rate scenario, then we can reach 12%. This is the way you can look at the sensitivity of that plan.
Jean, do you want me just to add one color on Q4? Indeed, for what Jean has said is the aim is to have operating jaws positive every year. Just to give a little bit of color, what triggered your question is the cost evolution in the fourth quarter. As a quick reminder, the fourth quarter is every year atypical because it contains some elements of cost related to the full year, yeah. I think about kickbacks to distributors, it depends on how the year went. That's a bit that. Moreover, this year, there are several new businesses that we start. I think of what we have with Prime Brokerage or the Jaguar Land Rover deal, which basically come with some cost of the interfacing between us and them, and therefore have a little bit the delay in when the revenues come.
There is this kind of exaggeration that you see in Q4, but overall, as Jean said, we have a full focus on jaws, and we will keep them positive.
Thank you, Madame. Next question is from Mr. Jon Peace from Credit Suisse. Please go ahead.
Yeah, thank you. Good afternoon. My first question is, I just wanted to double-check my math, please. If I exclude the sale of Bankwest and exceptional items, are we starting from a clean net profit of EUR 8.3 billion? If we compound that at 7%, we should be looking at something north of EUR 11 billion by 2025, and then potentially more still, as you've discussed, if we get interest rate rises and reinvestment of the excess capital. The second question, please, is could you just remind us what your total Single Resolution Fund expense was for this year and the rough divisional split, so we can see where that comes out as we model it forward? Thank you.
Jon, I'll take your questions. If you look at your mathematics, if I can, in order to apply the 7%, intrinsically, it's rather simpe. What you have, the Bank of the West has a bit of growth, which is in line with what the group is. The 7% in that income, you can apply to the full parameter for the full period. As you know, yes, at some point in time, it will be out of it. The metric to use is the earnings per share, because the earnings per share, we will use part of the proceeds to basically get the earnings per share stable. That's basically what we have.
As Jean said, you can add, let's say a bit, a tad more north of 5% from the redeployment. When it comes to your question on the Single Resolution Fund, BNP Paribas contributes just shy of EUR 1.97 billion to be precise. That's basically what you do. If you look at the allocation, the way it is calculated, it goes a tad more into CIB and a tad less into domestic markets and IFS. That would be my answer, Jon.
Thank you, sir. Next question is from Mr. Pierre Chédeville from CIC. Please go ahead.
Yes, good morning. Two questions on business. First question regarding assets under management. We know there are two deep trends currently regarding development of real assets and passive asset management in this business. I wanted you to give us an update on where you are here and what is your strategy going forward, because you seems to lagging behind some of your main competitors on these two areas that are quite significant to develop this business. My second question is about Arval. How do you see the evolution of Arval revenues in a normalized used car prices environment? And also, what is your target in terms of electrification of your fleet? You have seen one of your major competitor being very aggressive regarding this electrification. Maybe last question for Lars. What is your view regarding the 40 basis point of cost of risk?
Does it include a significant amount of write-backs regarding S1 and S2 provisioning in 2020? If I remember, it's EUR 1.4 billion. Thank you very much.
We'll take your first question on the private assets. As I mentioned before, it's part of our initiative, also three main initiatives for the IPS pool to develop and to increase, to accelerate, or present in this kind of asset class. This is answering to a huge demand of our customers, meaning private individuals and institutions on both part on equity and on debt as well. What I can add is that we started with this kind of asset a long time ago because we use it in all the business lines within IPS.
First, Cardif has long been investing in this kind of asset for a very long time for its euro funds. Wealth Management is providing their customers with private assets for five years now. Asset Management has invested a lot in the private debt. I just mentioned the move we did last year with the acquisition of a Dutch mortgage provider in our Asset Management.
Maybe the question of Arval on your third, second question. The target on the electrified vehicles, it's 700,000 vehicles in 2025. It's roughly 35% of the fleet. The evolution of the fleet, you know, it's like the last two years. It was roughly between 6% and 7% per year, and we will be at the same pace for the next period. It was the ability for Arval to gain market shares because the evolution these last two years was better than the competition.
Jon, on your last question on the cost of risk. As you see the economic scenarios that we have used to underpin our plan, which are a tad conservative when it comes to rates. If you look at the generic economic cycle, it basically puts us a bit in the average of the cycle when it comes to cost of risk. The average of the cycle for BNP Paribas is a cost of risk when I express it in basis points. It's somewhere between 35 and 40. It used to be higher, but given the evolutions at BNL in personal finance, it's basically down. We put ourselves on the safe side towards that 40 basis points. Normally, in that scenario, we would not use those reserves. I don't have a crystal ball on it, but that's the assumptions we took.
Thank you, sir. Next question is from Mr. Stefan Stalmann from Autonomous Research. Please go ahead.
Yes, good afternoon. Thank you very much for the presentation. I would like to start by asking something about the business plan. I think if I start with your net profit in 2021 and I apply your growth targets, I can back solve that you're probably expecting to make about EUR 40 billion net profit in the next four years. You need about EUR 12 billion of that to fund your risk-weighted asset growth at 3% target rate. That's roughly 30% of what you expect to make. At the same time, you have a payout ratio target of about 60%. There seems to be about a 10% buffer.
I was wondering how you're thinking about that buffer, why you keep it, and if you don't need it, whether that signals that there's maybe additional room for opportunistic returns to shareholders. The second point, going back to rate sensitivity. Last year in your registration documents, it is disclosed that if all curves go up by 50 basis points, you make EUR 600 million additional NII in year three. Can you already hint whether this sensitivity will look very different from last year when you publish your updated document next? Thank you very much.
I'll take your first question, Stefan, on the 10% that you talk about. Listen, there are a couple of elements on the horizon that we basically need to cater for, and that is why we keep this kind of 10% buffer to be available. What do I think of? I think of, for example, when it comes to insurance, there is an introduction which will consume a couple of basis points. It is the same thing with the new regulation on the foreign of banking book. There is still a slew of things that is ahead of us, and so we basically take that to cover that. Stefan, can you rephrase your second question, please?
Yes. Your sensitivity to rising interest rates. In your last registration document, you said it would be EUR 600 million additional NII in year three for a 50 basis point parallel shift upwards. I was wondering if that disclosure will look very different. Is your sensitivity still kind of the same as it was a year ago, or has it gone up or maybe down?
No, it is basically the sensitivity that we will publish in our reference document, which we will see in a couple of weeks, is basically unchanged. It's in that same neighborhood. You know, the situation of the bank hasn't really changed, so it's of the same orientation.
Thank you, sir. Next question is from Matthew Clark from Mediobanca. Sir, go ahead. Mr. Clark, your micro has been opened. The next question is from Madame Giulia Miotto from Morgan Stanley. Madame, go ahead.
Yes. Hi, good morning. Can you hear me?
Yes.
Yes.
Okay.
Yes, we can.
Perfect. Two questions from my side. The first one is on slide 56. You hint to the potential of deploying part of the excess capital that you will be left with from the Bank of the West sale and generating more than 5% of earnings with that. Can you give us a little bit more color? You know, is that towards fintech? Is that towards, I don't know, asset management, wealth management or more CIB type of deals? So that's essentially my first question. Secondly, I wanted to ask you on the various initiatives basically that I think you have underway. I'm thinking about Credit Suisse, the agreement on prime brokerage, then the new partnership with Jaguar, the agreement with Stellantis. Can you help us quantify the revenue impact that potentially we could see over 2022? Thank you.
For your first question around the reinvestment of the proceeds of the sale of Bank of the West, as we said, we're looking at investing in technology, new business models, bolt-on acquisition, accelerating organic growth in number of domains. As you can see, the group is well diversified. There's a lot of opportunities. You mentioned a couple of businesses we could consider. Looking at the past five, six, seven years, you can see the businesses in which we moved to achieve bolt-on acquisition, consumer lending, car fleet leasing, private banking, security services, equities platform, payments. This is the variety of domains we could consider, either for bolt-ons or for new technology or new business model.
Again, when you start a project, there's a kind of delay, not the day after you get the full return. Imagine we invest or we reinvest progressively the kind of 8% additional excess equity just after the disposal of Bank of the West and after having, I would say, bought back EUR 4 billion of shares. If you invest the day after, there is a certain delay. By 2025, you get only a portion of the potential of those new investments. With 5% is an indication, I mean, maybe we're a bit shy, maybe it's going to be above. Progressively, long -term, after four to five years, we'll get the 8% minimum, because in fact, there is also the possibility to have additional leverage.
Probably in the long term, these proceeds that today potentially represent 8% of the core equity return could translate in 10%, 12%, 13% additional earnings in the long run. This is the way we're considering the situation. This has to be progressive, disciplined, no hurry, and in any case, as it was mentioned, we have, even before, I would say, those proceeds, some room to maneuver, and some of you have made a computation around this potential 10%. Well, there's a certain room to maneuver, of course. Even before we have certain possibility to accelerate organic growth. The plan is already, I would say, ambitious with the 3.5% annual growth rate. This is the way we are looking at the situation.
Disciplined approach, variety of domains in which we are relevant, well-positioned to invest. No hurry. Progressively, we will see the effect in the group net result, earnings per share. 5% is, I would say, an illustration of the impact by the end of the plan. 8% is for sure in the more medium term. 10%, 12% could be potentially associated to those investments. Again, the group, in my opinion, is quite uniquely positioned in the banking universe because of the variety of those platforms, the variety of those leading position. For us, in the years to come, it will be a unique opportunity to grow one step further, looking at the global banking context in Europe. Moving that way, we will continue to some extent to consolidate, I would say, through a number of various businesses in the mid-long term. This is the plan. You have a second question?
Thank you. Yes, my second question was on the initiatives already announced, like Jaguar, like Stellantis, like Credit Suisse, potentially. So what sort of impact do you expect on the short term? So basically my second question is much more short term. The first one was strategic, and thank you for the color on that.
On Stellantis, maybe. On Stellantis, it's a very important deal for personal finance because it's the ability to focus on three strategic markets for PF, especially in Germany and in the U.K., for all the brands of the group. The objective is to increase volumes by EUR 6 billion of loans versus EUR 11 billion as of today. It's a very important deal for us. We will invest on one mutualized IT platform for all the brands of the Stellantis group. It's a game changer for PF, clearly on car finance.
Again, if I add a word on this, if you look at personal finance 10 years ago, I would say through the cycle, cost of risk was in the range of 200 basis points. Progressively, we went down to 150 basis points. With this kind of rebalancing towards more, I would say, financing of the auto universe, we could push down through the cycle the cost of risk to 120-125 basis points. That level would be best in class as a platform throughout Europe.
This is also part of that transformational move at Personal Finance that will also benefit from the buy now, pay later platforms we bought recently in France, and we will roll out through Europe like we are trying to roll out the Nickel we bought five years ago. Personal Finance is again, like Arval car fleet leasing, at the very core of the growth of the group.
If I had the JLR deal, the Jaguar Land Rover deal, it's EUR 4 billion of outstanding more in 2025. Six plus four, it's roughly EUR 10 billion of outstanding with very good risk because for JLR, for example, the cost of risk is very low because the clients are very good. It's two big partnerships, two very good news for PF, Arval, and also Cardif in the JLR deal because Cardif will contribute to the with this insurance offer.
On Credit Suisse, I guess you are referring to the prime brokerage agreement. Of course it comes with a prime brokerage deal that we did with DB. Let me tell you first, we are very satisfied with the agreement with DB because we have been able to transfer the clients, the technology and the key staff to BNP Paribas before the end of 2021 as scheduled, despite the COVID-19 period in between the announcement and the closure. We are very pleased with what we did, and the platform is now up and running.
The fact that we have been able to clinch this deal with Credit Suisse is a testament of the fact that we are comfortable with the quality of the platform today. This gives me more comfort to maintain last previous guidance of the revenue contribution and the cruising speed of EUR a few hundred million on a full-year basis.
Thank you. Madam, next question is for Mr. Omar Faruqui from Barclays. Sir, please go ahead.
Hi. Thank you for taking my questions. Firstly, just as a follow-up to a previous Giulia' s question. In the event that you don't see the opportunities that you've got on slide 56, I'm just wondering if you would leave the door open to returning some of the $7 billion capital left from Bank of the West to shareholders, I guess, you know, if the price of growth or bolt-ons becomes prohibitive or some of the projects you have in mind don't come through, if any given year you'd retain some flexibility to maybe top up that 60% payout. The second question is if you could give some color on the 8% revenue CAGR targeted for the specialized businesses.
You know, it doesn't seem like much normalization of trends that maybe aren't sustainable forever, like the used car result at Arval or the retail trading boom in Germany. It's obviously been a great business, and it's fantastic that there's better disclosure now. I'm just wondering, you know, how much is cyclical versus structural there? Thank you.
On your first question, you're asking your question in very cautious way. I mean, it's a very remote scenario, and most probably, looking again at the variety of the group in Europe, and I would say that the number of businesses in which we enjoy, I would say, key position with this. This is a remote scenario, but of course, we are not here to pile up equity. If at the end of the day, for unknown reasons, either because the increasing room to maneuver is already enough to provide the group with all the equity necessary to seize the opportunities, yes, of course, we will consider additional, I would say a return to investors. Could be a dividend, could be buybacks. I mean, this is obvious.
We have already, I would say, done the job in terms of additional equity linked to the finalization of Basel. There is no need for us to pile up again additional equity. I consider this scenario as remote. Nevertheless, if for again unknown reasons this would take place, then we would take action and I would say reconsider our position in terms of returning cash to shareholders. This is obvious. This is the normal discipline, I mean, no question. Looking at the specialized businesses, Thierry of course will answer the question. I mean, these are great businesses. We have developed global pan-European platforms. We can grow at a marginal cost.
If you look at the results of some recent tenders, it's very clear that we're not only very competitive but very relevant in terms of ability to provide the right services. This will give us additional, I would say, growth power for the years to come. Thierry will answer to you with additional details.
Yes. To give you some colors on Arval and Leasing Solutions, of course, these businesses are in a very good shape, very dynamic. The last year was very good, and the momentum for the beginning of this year for the plan, it's also very good. They are winning market shares. It's the case for Arval, it's the case for Leasing Solutions. With new partnership also with Arval, with Jaguar Land Rover, with Frey, with the big dealers in France and in some other countries, with a good partnership with some banks in Europe. In Central Europe, for example, we are dealing some very good partnerships. It's also the case for PF, of course, with this big move on the auto business.
We have also some margin to improve with the price of all cars for Arval, because the momentum is so good for maybe one year, maybe a large part of this year. It's exceptional in the cycle. For 2022, it will be very good. We have also all the new digital businesses with Nickel, with the project to Europeanize Nickel with the opening in Portugal, in Belgium, and in Germany after Spain, this year and the year after this year. Also the project to develop very faster all the Floa platform in four or five countries in 2022 and 2023. With this, on this very dynamic market on buy now, pay later, with the strength of PF, of course, but also of the acquiring business and to develop this platform with big retailers, especially big e-retailers. I think the 8% CAGR of specialized businesses, it's very solid.
Thank you, sir. Next question is for Mr. Tarik El Mejjad from Bank of America. Sir, go ahead.
Hi, good afternoon, everyone, thank you for taking my questions. Two questions, please. First, on capital, just coming back on the capital return. Back to Stefan's question, so if you have 60% payouts and 30% to grow, I understand the remaining could be used for some tail end of regulations, but that's probably in year one, and then you'll start to again diverge from the 12.9% Basel III CET1. Clearly, if you want to stay around
12.9% CET1 or 12% Basel IV, would you consider at the end of each financial year reassess where you are and then return additional capital to stay at this level? Because I guess all the bolt-ons and acceleration of organic growth would come from the EUR 7 billion from Bank of the West. The second question is on the capital on the buyback. If you close the deal by the end of this year, you have EUR 4 billion buyback, and I think you can do EUR 600 million, EUR 700 million per month. That means that will be done in 2022 and 2023, plus the 10% payout from 2022 earnings. That would be quite a lot in year.
Do you feel you have the capacity to execute all this buyback. Secondly, on costs, could you please just clarify on the Single Resolution Fund contribution? You had EUR 970 million, I think, last year. EUR 200 million remaining, is that off the SRF or this is the DGS contribution or bank levies that remains? Could you just clarify that please? Thank you.
I'll start with the last question. Indeed, what we talk about is that this 970 is a Single Resolution Fund contribution. But there are several other kinds of costs, because if you take all the costs which fall under this, if in 2021 you get to close to EUR 1.5 billion. Normally what you have is once this Single Resolution Fund has been built up, that will basically fall to zero, and that is what we expect to happen in 2024. However, there are other local taxes in several countries that existed before the introduction and that have been suspended while there was the building up of the Single Resolution Fund. It's like rather local taxes for local resolution approaches. We anticipate that those will continue or will, let's say, come back.
The Single Resolution Fund contribution will drop to zero, but the EUR 200 million recurring cost that basically was being stopped while the Single Resolution Fund was built up, that one is expected to come back. That is why we say that the EUR 970 million would be EUR 200 million. Before handing it over to Renaud, just on the 10%, let's be fair. Listen, like, we're not in the business of stacking up capital, yeah? It's that 10%, so if we can redeploy it, we redeploy it, and otherwise it's back to that question if we cannot do anything with it, we're not in the business of stacking up capital.
On that buyback, just to position you as to the capacity to do so, if you take like the buyback corresponding to like 10% of earnings, that basically takes on average a month to execute. Doing the share buyback related to Bank of the West, that will probably three to four months. Overall it is not an impossible volume or an impossible amount. You'll let us handle, but it should be very handleable. Those will be my answers, Tarik El Mejjad.
Thank you, sir. Next question is for Mr. Jacques-Henri Gaulard from Kepler Cheuvreux. Sir, go ahead.
Yes, thank you. Good afternoon. Three questions. Considering the weight of the platforms, in particular in the engine that you were mentioning, is it fair to assume that you're going to continue to adjust your number of branches so that by 2025, you will still be reasonably down versus the already big effort you've done, over the length of the past plan? That is the first question. The second, for the EUR 7 billion reinvestment on Bank of the West, and it's great you're reinvesting capital, and not necessarily returning it, is it fair to assume a 10% return on investment, which is usually, you know, your return? And maybe historically, if we could have one example or a couple of example of where you stand with your past investments.
I'm thinking about Nickel in particular, if you're happy about how the investment has developed financially more than commercially. Lastly, on the presentation, you had a couple of non-recurring items, which are obviously quite big in Personal Finance and in Europe-Mediterranean, in revenues, and if we could identify how much those represent, that would be really super helpful. Thank you.
Maybe on the number of branches for the plan. It clearly depends on the situation of each market, you know, because in France, for example, it's a very interesting information. The demand of appointments with human people in branches in 2021 was increased by 5% compared to 2019. It's a very important trend, so we have to be careful on this evolution. In Belgium, our BNP Paribas Fortis is leading the market and all the big banks are in the same trend to reduce their number of branches. It will be different. To be clear, the rhythm will continue in Belgium. In France, we have to be cautious. We will adapt the number of branches, in fact, with the behaviors of the clients and, in Italy, it will be stable. What I can say about the branches.
Looking at the return of our, I would say, investment, 10%, yes, this is kind of average number for the group, but if you invest in a disciplined way in businesses in which you have already global platforms, you have a certain ability to scale up the investments also. You will, I would say, have a kind of marginal growth in terms of the cost base.
So ultimately the platform is at 10%+, and if you invest in a disciplined way because the cost base is being, I would say, increased at a marginal cost, this is as a way of having synergies. I mean, the marginal return on those investment is well above 10%. If you look at Compte Nickel, if you look at GE Capital Fleet Services, if you look at Opel, consumer lending platform, if you look at security services, if you look at the number of platforms we aggregated during the past seven, eight years, looking back at those investments were well above 10%. Well above 10%.
This is why ultimately, mid- to long-term, if you consider you have to invest 8%, ultimately you should get more than 8% effect on EPS. Ultimately, if you are disciplined, well-organized, and if you are coming across the right opportunities, I mean, the entry price is the key element of course. Again, it depends on your ability to seize opportunities, and this ability depends on the variety of businesses you are, I would say, entitled to invest in a professional way. There are many of those businesses at BNP Paribas.
On your third question on the effect in Europe-Mediterranean and Personal Finance, it's what you have sometimes if you take for example in Poland or in the south of Europe, you can have the overall banking system that has some counteracting on how products are positioned. For example, in Europe-Mediterranean, you had some investment products that were linked to the Swiss franc, and where the authorities basically decided how to unwind those kind of products. That's the kind of things you have, which is roughly we are provisioned a bit similar to the rest of the market, and this is basically what you see in Europe-Mediterranean, but it was already provisioned at the group. At the group it's basically not really an impact. Jacques-Henri Gaulard, that would be the color on that.
Thank you, sir. Next question is from Mr. Andrew Simpson from KBW. Sir, go ahead.
Thanks everyone, and thanks for taking my questions. First one on the leverage ratio, and then the second one on the sustainable finance goal, please. Firstly, on the leverage ratio, you've got a target on slide 54. The footnote says that you have a target to run an average of 4.1% through the plan. I just wanna check that is on the assumption of a future minimum of 4% as of next year, I think. And if so, then why only 10 basis points is the planned buffer? It just seems quite small to me, and it's obviously significantly smaller than the management buffer over the CET1 minimum you have. Then secondly, on the sustainable finance goal. Firstly, it's great to see that EUR 350 billion number.
I just wondered if you have got an idea of what mix between loans and bonds you think that might take? Assume that we're starting now that target at zero as of today, or at least at the start of the year. Or are you already gonna count the nearly EUR 200 billion that you'd achieved in the last plan, please? Thank you.
I'll maybe take the question on leverage. Yes. Well, anyway, the mentioning of the G-SIB is something which is under exploration, right? Because normally there is this law which basically said that the intra eurozone exposures should not count twice. Basel is reviewing that to update their definition into that, in which case that is not 4% but 3.7%. Nevertheless, having said that, if you look at the ratio, the leverage ratio is a bit of a quote-unquote "brutal" metric. It's basically looking at the balance sheet. As it is brutal, it is not really swinging up and down, yeah?
From that point of view, as it is a stable metric, as our capital is stable, moreover in the leverage ratio there is also the AT1, so it's not only capital that is included, AT1. In the frame of the plan, as we are stepping up our capital, we are also stepping up our AT1 issues. From that point of view, if you look at the volatility around it and the 4.2% objective works very well for us.
On sustainable finance, the split is the following. EUR 150 billion on a loan and EUR 200 billion on bonds without taking into account any inventory effect.
Thank you, sir. Next question is from Madame Delphine Lee from JPMorgan. Madame, go ahead.
Yes, good morning. Just have a few questions. First of all, if I can ask on your cost base, just want to understand a little bit the trajectory between now and 2025. You're committing to positive jaws every year, but is it a two percentage point every year, or is that two percentage point positive jaws really just for the end of the plan when you're gonna get the relief from the Single Resolution Fund contribution? Also related to cost, what is your, you know, inflation assumption during the plan and also investments? Just trying to understand a little bit the different moving parts and also just the timing of, you know, investments, and the cost trends, going into 2025.
My second question is on just a quick follow-up on the sensitivity to rates that you mentioned earlier on the call. Is it possible to get, you know, the split between the sensitivity to short-term rates versus long-term rates, and the timing of that? My third question is on asset management. I think this is kind of one of the business where we are seeing really a step up in the growth rates that you're targeting for the next four years. I'm just wondering what has changed and in terms of strategy in that business, are you planning to make a bit more, you know, M&A and acquisitions than in the past?
I mean, it's clear that other businesses like Arval and Cetelem have done deals where asset management, just wondering, you know, how you're thinking about that business going forward versus the past. Yeah, so those would be my three questions. Thank you very much.
I'll start with the cost base. Indeed, we have that commitment and focus on the costs. We're not getting to that just taking into account the contribution to the Single Resolution Fund. We basically have those jaws every year. Now, let's be also fair, I mean, revenues will pick up, so costs will also grow with that. That is basically what you will see. We have that focus, and the jaws will be basically there every year. On your question of inflation, actually, if you look at the plan, looking at one element of the P&L on the cost, for example, and inflation doesn't really make sense, yeah?
We took a coherent set of what inflation would be and what the rates would be, therefore impacting the top line and the costs, and therefore the bottom line. Yes, indeed, if there is an evolution, there can be several scenarios where indeed the interest rates go up, and therefore also inflation goes up. But that basically means that intrinsically the profit before tax will even step up further. From that point of view, looking at that one, that doesn't really make sense. Now, on your third question, when it comes to the stress testing, indeed, if we do a.
What we have, what we typically use is a 50 basis points parallel shift that basically leads to the improvement of EUR 600 million and the ROT tilting towards the 12%. As I said, it's a parallel shift, yeah? If it would be a steepening, you can imagine that would be even a further cherry on the cake. There was a fourth question, but I'm not sure I grasped the fourth question. Was there a last question, Delphine?
She has disconnected.
First, just I want to remind that our all our plan, which is really ambitious for the asset management, is based on the organic growth. If you look at the growth of the net cash flow in 2021 of EUR 34.57 billion and the performance comparing financial performance of the different funds compared to peers, we are in a very good shape. As it has been said by Jean-Laurent, of course, during the call then, we envisaged it could be one of the client of this future operations.
Thank you. Next question is from Madam Anke Reingen from RBC. Madam, please go ahead.
Yeah, thank you very much for taking my question on this call. Just two more follow-up questions. Firstly is just on capital on the slide 53. I just want you to confirm the 12% that is pre on the Bank of the West. I just wonder, I mean, we have been piling up buffer over the years. Do you think by 2025, we're really in a position where you think you can run with the 12% and not having to build up buffer on buffer? Then coming back on the costs, if your interest rate assumption plays out, do you think in 2022 you will still be able to deliver a positive jaws, given pre-inflation count is coming in a bit faster than the NII benefit?
Just one simple question on the cost. It seems as if your cost management has sort of, like, changed from the previous strategic plans when you had, like, multi-year billion cost savings. I just wonder, is it now you're running, is your cost management more dynamic? What have you changed in order to make it a more, yeah, realistic plan? Thank you.
This is for on a couple of questions. I'll first take your jaws. As I said, in 2021, we will have jaws because you mentioned you hurt a bit my feelings. You basically say because the net interest income benefit might not be there. Just let me hammer this. We don't count on net interest income benefits to have operating jaws, yeah? We have operating jaws because we align the revenues and the costs that go with it because they are the variable costs that support that. That, that's basically, we will have positive jaws in 2022. On the capital, as you know, we basically, as a bank, we are a diversified bank.
If you look at whatever stress test you see, we basically withstand very well, and that is because we are so diversified, and we don't have one dominating activity which can tilt the bank. From that point of view, you clearly see that the 12% at which we operate is fine. That is what we have been operating at. We operate for the moment at 12.9%, which basically allows for implementing the inflation of RWAs according to Basel. Which would put us back at 12%, and we're very happy campers at that. I'm not sure I understood your third question.
Normally, I mean, looking back in your strategic plans, you always have like EUR 90 billion cost savings planned, and this is different this time. You talk about reported cost and not about adjusting for restructuring charges. Have you changed your cost management?
Yes. Basically, well, there's a couple of things. In the past, when we had, like, one main theme, which was digitalization, we wanted to be very fast. We up-fronted a lot of investments to be really on the vanguard of those changes. The savings came then basically in the third year. Whereas now we really changed the approach, where there are many new teams that we are pushing and that basically lead to a first investment that rapidly lead to savings. Those savings, a part of them, will then be used to do the next wave of investment. That's basically what we do. We phase the investment, and at the same time, Laurent David will basically monitor to ensure that all optimizations and cost reductions will be there. We'll talk more about that in March, on March fourteenth. Yes, they will be under control and phased differently.
Thank you.
Thank you, Madam. Next question is from Madam Azzurra Guelfi from Citi. Madam, please go ahead.
Hi, good afternoon. Thank you for the presentation. I have two questions. One is on the commercial and personal banking and service division. When I look at and I just heard your answer on the cost, I just wanted to know if you have any flexibility or you have some buffer of conservatism, whether there is a different development on the revenue side on your cost. Because that seems to be the division where you have the biggest potential reduction in cost income. The second one, I'm not sure if you can comment on this, but there has been news that the stock could be reclassified in a different index. I don't know if you can comment on that. Thank you.
Yes. About CPBS, you can see on page 52, the average jaws effect during the next plan. It will be roughly +3 -points. You can see that the decrease will be compared 2025 to 2021, a big decrease of the cost income ratio for this division from 62% to 58%. We will do a lot on operational efficiency, of course. We have also some fuel to develop the revenue. You're right. You will put a lot on the jaws effect, and we'll do a lot of efforts about operational efficiency. Yeah, on the FTSE. What you saw was a preliminary review that they published.
That basically is a way to allow banks to react and see if those reviews would be impacted by some misqualification of entities. What we saw is that this preliminary calculation had a misclassification of two of the businesses with a high contribution in revenues, and that was swiftly corrected by the FTSE Russell. That because that's the idea. They publish it to allow to see if there are reactions. We reacted, we identified those two things, and it was corrected a couple of days later. That's basically where we stand. It has nothing to do with the Bank of the West changes. It is just two of our basic activities, bank activities, that were misqualified. That's addressed, so it's not an issue.
Thank you, madam. Next question is from Mr. Kiri Vijayarajah from HSBC. Sir, please go ahead.
Yes. Good afternoon, everyone. Firstly, coming back to the rate sensitivity topic, and specifically on interest rate increases outside the Eurozone, you know, in places like Eastern Europe, where we've already actually had some pretty, you know, meaningful rate increases. My question is, are you seeing the NII benefit that you expected, or are you finding that some of the mechanical upside is getting competed away? The reason I ask is when I look at revenues in Europe-Mediterranean, you know, even when I exclude the exceptional item, it looks to be pretty flat at best. First question on NII dynamics in geographies where we've already had rate rises. Then secondly, on the EUR 4 billion buyback from the sale of Bank of the West, I just wondered what's to stop you starting that buyback before the sale closes?
You know, get the ball rolling early, because as you sort of alluded to, you've got, kind of plenty of capital buffers, in your projection. Just your thoughts on the timing of the buyback, 'cause, you know, it's probably gonna take you a few months, if not a few quarters, to get it done. You know, why not start it early? Thank you.
Yeah, I'll start with your question on rates. Let's be fair, we are not a good beacon when you look at those Eastern European activities, because if you look at us, what we have mainly is Poland. In Poland, well, the impact, as I mentioned on the top line, is rather to do with the exposures on Swiss francs and nothing particular on the interest rates. On the other countries, our activities are too slim to really say something on what it implies on the banking sector.
On the buyback?
Yeah, again, on the buybacks, listen, it, there's two things to that, right? On one hand, we wanna do the buybacks
In order to get the dilution, and so that basically is logical at the moment we get closure, we do this, and it's a bit the same thing in the redeployment. Therefore that is the pivotal point. As I mentioned earlier, if you look at the volumes, the peers that we have ahead of us, that works very fine.
Yes, sir. We have no other questions. Back to you for the conclusion.
Thank you very much for attending the conference. We are committed to deliver the plan as you can feel it. On the 14th of March, we'll have the investor day. It's going to be a digital session. Unfortunately, we cannot gather in Paris. We'd be happy to have you at home. We will give you more details. Don't hesitate to forward your questions to us. We will try to take care of those questions and give you the full detailed version of the strategic plan by mid-March. We believe this is a solid project. BNP Paribas is a growth engine because of the variety of businesses, key and nice positions throughout Europe. This is the goal.
Of course, at the very center of the plan, we have sustainability. This is also a dimension in which we enjoy a nice position, and we believe that this nice position will grow in even more, I would say, a competitive advantage looking ahead. Thank you very much again. Take care, stay safe, and see you soon in Paris digitally. Thank you.
Ladies and gentlemen, this concludes the call of BNP Paribas 2021 Full- Year Results. Thank you for your participation. You may now disconnect.