Good afternoon, ladies and gentlemen. Welcome to BNP Paribas' 3rd Quarter 2019 Results Presentation. In the usual way, I'll take you through the first two chapters of the results presentation, which I assume you have under your eyes and that's before handing it over to you for Q and A. But give me just 10 seconds as it is relatively warm in this room, I'm going to take off my blue tie, so I'm all ready to go. So as you can see in Slide 3, the key takeaways for this quarter are: 1st, Business activity progressed in all 3 operating divisions with outstanding loans up 5.5%.
In Europe, we saw this in particular in France. On the back of such business growth, group revenues were up 5.3% year on year. 2, the group delivered positive jaws and this in each operating division. This was achieved on the back of the continued implementation of the cost saving measures in line with the 2020 plan. 3rd, the group cost of risk remained low at 41 basis points over outstandings.
And 4th, Group net results cropped in at €1,900,000,000 down 8.8%, but up 3.4% when you exclude The exceptional items the group had recorded a year ago, which I remind you, we had EUR 286,000,000 capital gain on the sale of 30% of First Hawaiian Bank. And so lastly, the common equity ratio, which reached 12%, up 10 basis points on last quarter. And all this as a consequence of BNP Paribas being a diversified bank. Looking more broadly at the 1st 9 months of the year, the group generated €6,300,000,000 of net income, up 3.9% year on year with a positive jaws effect. If we now turn to Slide 5, you can see the exceptional items of the 3rd quarter, which had an impact of minus €178,000,000 net of tax, with the difference from last year that explained, as I mentioned, by the impact of the 30% sale in First Hawaiian Bank in the Q3 of 2018.
Exceptional Items included the 2020 planned transformation cost, restructuring cost of the acquisitions and additional adaptation measures as we announced this year in B and L and Asset Management, and this to address the evolution of the economic environment for these businesses. If you now swipe to Slide 6, you can see the positive jaws effect. Net income, Excluding exceptional items rose by 3.4 percent and as you can see the NIMO net results generated an annualized return on tangible equity of 10% 10.3%, which is equivalent to an annualized return on equity of 9%. Now moving to the revenues of the operating divisions on Slide 7. We see that they increased by 5.1%.
They were up in each operating division with domestic markets showing a 0.5% increase on the back of growth In the Specialized Businesses, largely offset by the effect of the low euro interest rates. They were up 5.1% at International Financial Services, our engine of growth and this on the back of good business development and a favorable foreign exchange effect this quarter. Thirdly, CIB delivered a strong revenue performance with a 12% increase on last year and a rise in revenues of all the businesses in CIB. And this attribute to us adapting the business and remaining present for our clients. If with this, you swipe to Slide 8, you will see that the cost in the operating divisions were up 2.9% and 1% on a like for like basis.
If we look in detail, we see that domestic markets had its cost up just 0.1% leading to positive jaws with a 0.9% cost reduction in the networks and the rise in the specialized businesses of domestic markets accompanying the growth of this activity. When we go to the second one, IFS cost evolution, up 4% and 0.4% on a comparable basis, reflected Cost containment and continued business growth, all accompanied by positive jaws effect. If we now turn to the third one, CIB, Costs increased by 4.8% on the back of the growth that we discussed before at CIB and benefited from the continued and accelerated implementation of cost savings, which led to very positive jaws effect. To sum up, You can see the impact of the cost saving measures generated by our transformation plan and a continuous focus on delivering positive Joel, if we look at those Joel's as well as the fact that I said earlier that our common equity Tier 1 stands at 12%, You clearly see that we deliver on what we set forth. Now if we stay on costs and if you advance to Slide 9, You have the detail of the implementation of our transformation plan.
In the Q3, we generated an additional 166,000,000 euros of recurring cost savings, taking the accumulated cost savings since the launch of the program to €1,700,000,000 As you know, The target next year is to generate a €3,300,000,000 recurring cost savings. Also, We booked transformation costs for €178,000,000 this quarter, taking the current spending in the 1st 9 months of this year to €568,000,000 in line with the target of €700,000,000 for the whole of 2019. Also, We confirm that there will be no transformation costs in 2020. So in a nutshell, the bank delivers on its 2020 plan with great success its digital transformation. Indeed, the focus on costs has stepped up in the beginning of the year led to an offsetting of the group's natural cost evolution stemming from supporting growth in natural lasers.
As such, our costs remained stable at plus 0.4% on a like for like basis, translating into a +2%, but mainly due to the strengthening of the dollar. So if with this, we turn to the cost of risk. Please flick through the 3 dedicated slides starting with Slide 10. As you can see, as I mentioned earlier, it clocked in at a low 41 basis points over outstanding. The increase versus previous quarter It's essentially due to significant provision write back in those previous quarters.
If we take the businesses 1 by 1 and we start with Corporate Banking. In Corporate Banking, cost of risk was low at 23 basis points. It was up on the Q3 of last year on the back of significant provision write backs In the Q3 of 2018 and one significant filed this quarter. These one offs write backs in CIB last year lead to a pickup in CIB's cost of risk when we express it in euros of €134,000,000 And this increase of €4,000,000 on the back of these write backs is actually the main part of the group effect, which stood at plus 161. So in synthesis, and I'll detail it in a second, but in this low rate environment, we do not see a deterioration of the quality of outstanding.
And so with this, if we move to domestic markets on Slide 11, cost of risk was low in French retail, very low in Belgian retail and confirmed its decrease at B and L in Italy. In the other retail businesses on Slide 12, Personal Finance So a low cost of risk over outstanding, up on the 2nd quarter, which had recorded significant nonrecurring provision write backs. Europe Med's cost of risk remained at a moderate level, while BancWest's cost of risk remained low. If we now swipe To Slide 13, to look at the financial structure. You can see that our common equity Tier 1 reached 12% at the end of September, up 10 basis points from the previous quarter and this due to the effect of, on one hand, the 3rd quarter results After, of course, as usual, taking into account 50% dividend payout and secondly, stable risk weighted assets at constant exchange rate, thanks to the more significant effect of securitization this quarter.
As a reminder, certain securitizations were deferred in Europe from the first half of this year. And so we have a tad more in the Q3 of this year. When we look at the other metrics, the leverage ratio was Standing at 4.0 percent and the group's immediately available liquidity reserve totaled a massive, for the lack of a better word of €351,000,000,000 at the end of the Q3. The evolution of these ratios illustrate the very solid financial structure of the group. If we sum up the group overview on Slide 14, You can see that our net book value per share stood at €78 at the end of September.
Looking at the period starting from year end 2008, the compounded growth rate stands at 5.1% per annum. This slide basically highlights BNP Paribas' continued value creation through the cycle. I'll leave you to peruse the next two slides of this introductory part. Slide 15, our ambitious policy of engagement in society with very concrete examples such as our early commitment towards the principle of responsible banking in line with the United Nations Sustainable Development Goals, SDG. And Slide 16, summarizing the continuous reinforcement of the group's internal control and compliance system.
So with this, I kindly ask you to move on to the results by division. And so there are 3, let's start with the first, which is domestic markets and that is Slide 18 to 24. As you can see, in the Q3, domestic markets showed increased business activity with loan growth at 4.1% in the retail networks as in the specialized businesses with growth in particular in corporate loans. Besides, Private Banking saw net inflows at €1,600,000,000 in the 3rd quarter. Domestic Markets has continued To expand its footprint in digital banking services, as evidenced by the increase in mobile usages with over 78 1,000,000 connections to mobile apps this quarter alone, up 35% year on year.
Besides, Domestic Markets has simplified and digitalized its mortgage loan application process in Belgium, France and Italy. Now if we look in terms of P and L, revenues were up 0.5 percent at €3,900,000,000 on the back of increased business activity and a good drive in specialized businesses, offset by the impact of low interest rates on the retail networks. Operating costs were up just 0.1% year on year with a 0.9% decrease in the 3 networks. This generated a positive jaws effect, which has been achieved, thanks to the ongoing implementation of the digital Transformation as well as the new operating models illustrated, for example, by the adaptation of the 3 branch networks, which have already been reduced by 356 since the launch of the 2020 plan. Cost of risk at domestic markets remained low with a continued decrease at BNL and in total pretax income was up 2% at €975,000,000 So for domestic markets, that is a good evolution.
Looking now swiftly at each country and business, I'd like to highlight in particular. 1st, French Retail Banking continued to show good business drive with revenues a tad lower and positive jaws on the back of cost saving measures. 2nd, BNL continued to gain market shares in the corporate segment. Despite a slight decrease in overall loans, revenues were slightly on the rise, Thanks to higher fees and pretalk income was up 23.7 percent on the back of our continued decrease in cost of risk. Thirdly, Belgian Retail Banking, it shows sustained business activity, whereas revenues continue to be impacted by the low rate environment.
The business adapted its cost, which were down significantly, thanks to the effect of the transformation plan and resulted in positive jaws. 4th and final, the specialized businesses continue to deliver sustained business growth with postage jaws and a significant rise in income. So if we sum up, our 1st division, domestic markets delivered positive operating jaws and a rise in income in the context of low interest rate, a tribute to our diversified setup. If you now advance to the 2nd division, International Financial Services, Slides 25 to 32. You will see that this division confirmed good business growth in the Q3 with loans up 9.3%, 4.5% on a like for like basis and assets under management up 4.1% year on year in our savings businesses.
IFS businesses have continued to implement their digital transformation with, for example, the continued rollout of the e signature At Personal Finance, with over $1,300,000 contract signed electronically and $28,000,000 monthly statements made available electronically to customers. 2nd, the development of new self care features, which contributed to the development of mobile usages with over 70% Of Wealth Management customers being registered users of MyWealth, the new online private banking tool and 60 $2,000,000 self care transaction undertaken by customers at Personal Finance. If we now turn to the P and L, we see that revenues were up at 5.1%, clocking in at €4,200,000,000 with a positive foreign exchange effect and up 1.9% on a like for like basis. Given effective cost control, Operating jaws were positive, leading to a pretax income of €1,300,000,000 up 6.7% year on year and 5.7% on a comparable basis. Now like the other divisions, let me zoom quickly on the main components of IFS.
If we start with Personal Finance, Slide 27. It continued to show business growth with revenues up 4.1%, While costs evolved at a slightly lower pace, thus translating into positive jaws and a pretty tax Income of €424,000,000 up 2.4%. If we now switch to Euromand, Slide 28. Slides loan story were slightly down on a comparable basis with a decrease in Turkey due to selective positioning, but growth in Poland and Morocco. On a like for like basis, revenues were up 1.5%, while costs were quasi flat, thanks to cost savings, thus generating good positive jaws.
Cost of risk was lower year on year and pretax income was up 15.5% on a comparable basis and 26.3% at historical scope and exchange rate. Thanks to their appreciation of the Turkish lira. If we now turn to Banquest, Slide 29. On a like for like basis, it showed moderate loan growth compared to last year. Private banking assets under management continued to progress at $15,300,000,000 On a comparable basis, revenues were a tad lower due to the less favorable interest rate environment And costs were down 4.2% as BancWest is continuing to right size its headcount nearshore and mutualize support functions.
On the whole, Banquette delivered a largely positive jaws effect as well as a pretax income up 7.4% on a like for like basis or 10.5% at the historical scope and exchange rate and this, of course, given the dollar appreciation. Lastly, Slide 30, our savings business, which saw assets under management rise to slightly over €1,100,000,000,000 at the end of Number in particular due to a very positive performance effect as well as net inflows of €13,800,000,000 since the beginning of the year. There is 2 main parts in this. The first, Slide 31, Insurance business continued to show continued growth, especially in International Savings and Protection Insurance Business. Revenues rose by 2.7% with costs up 5.6% as a result of business development.
As you typically do in insurance, you have to look at the year to date and actually even the full year effect. And if you do, You'll see that after 9 months, there is a positive jaws effect in that activity and pretax income was slightly higher year on year. If we now end with Wealth and Asset Management, Slide 32, revenues were up 1.5%, driven in particular by Real Estate Services and Wealth Management. Costs decreased by 0.8%, thanks to the effect of cost saving measures, in particular in Asset Management. As already mentioned, This business line is implementing additional measures to streamline its products offering, regional organization as well as entities and this to result in additional cost reduction.
So overall, Wealth and Asset Management delivered positive jaws and pretax income up 18.3%. To wrap up, IFS showed continued business growth and rise in income in this Q3. With this, we reach the 3rd division, and so we switch to Slide 33 on Corporate and Institutional Banking. Indeed, CIB has stepped up the implementation of its transformation plan. It has achieved €62,000,000 of additional and recurring cost savings this quarter on the back of its continued industrialization.
Besides, it caps up its selective growth on targeted clients with, for example, the signing of the agreement with Deutsche Bank to provide service continuity to their prime brokerage and electronic execution. Also, CIB pursued the streamlining of its activities, which is illustrated by the recent signing of an agreement with All Funds, A leading Welltech platform in fund distribution services whereby CIB will contribute fund distribution businesses to Alfons in exchange for a 22.5 strategic stake. If we now look in particular in Q3 to CIB, how it further strengthened Its leading client position and gained market share as evidenced by its number one position for all bonds in Europe and syndicated loans in EMEA. This led CIB's revenues to clock in at €2,900,000,000 in the 3rd quarter, marking a 12% year on year increase, and this increase basically in all three of its sub businesses. Costs were up just 4.8% on the back of sustained business activity, leading to a 7.2 point positive jaws effect and benefited from the cost saving measures as well as from the implementation of end to end digitalization processes.
As a result, CIB generated €834,000,000 of pretax income, marking a 13.5% year on year increase. As I said, this positive evolution is witnessed in the 3 businesses of CIB. So if we take them one at a time and let's start on Slide 34 with Global Markets, which delivered again a sustained business and revenue growth with revenues up 14.7% and even up 17.2% when we exclude the effect of the creation of the Capital Markets platform. On that basis, FIC revenues were up 38.7 percent with a sharp rise in primary markets and credit and a rebound in ForEx and Emerging Markets, whereas equities revenues were down 15% with a lackluster market on flows partly offset by structured product and a slight increase in prime services. As I mentioned before, Global Markets has now signed agreement with Deutsche Bank to provide continuity of service to the fund manager clients of its Global Prime Finance and Electronic Equities.
If we now turn to the second part of CIB, which is Corporate Banking. Revenues increased by 11.7 percent and 8.7 percent excluding the effect of the creation of the Capital Markets platform. And this on the back of growth in the 3 regions and in particular, strong business development in Europe, the other one being the U. S. And Asia.
And it is driven by a ramping up of the new market platform with a significant number of transactions in the Q3. Finally, if we go to the 3rd part of CIB, Security Services, delivered business growth with revenues up 6.4% on back of increased volumes with assets under custody and other administration up 10% year on year. So this concludes the 3 divisions. And in a nutshell, a good performance for our CIB, which delivered revenue growth, positive jaws and a strong rise in income. So with this, ladies and gentlemen, this concludes my introductory remarks on the group's 3rd quarter results.
The main takeaways from today's presentation are: in Q3, we continue to successfully implement new digital customer experiences. The group enjoyed revenue growth and positive jaws in the 3 operating divisions. Besides, the group generated an annualized RoTE of 10.3%. And our CET1 ratio increased further to 2. I thank you so far for your kind attention and I hope you're pleased to take your questions.
We have a first question from John Pease from Credit Suisse. Sir, please go ahead.
Thank you. Good afternoon, Lars. So my two questions, please, would be number 1, could you just remind us what you think the potential revenue benefits might And the timing of the prime purchase from Deutsche Bank. And then the second question is on the outlook for French Retail Banking. Was it a little bit negative this quarter and one of your peers has guided negative growth for next year?
I mean, how do you
see the outlook Would you still expect to see positive revenues in 2020? Thank you.
Jean, thank you for your questions. If we take the first one, so as you know, we're very pleased to be able to onboard The prime brokerage activities, as you know, the deal still has to be closed, which will happen. And then we start a phase of transition. So it's a transition where that is gradual and that will be time. So let's be fair, I mean, it will take a year or a bit more before we have the full transfer.
And what we anticipate that once this is done, the full year effect, for example, on the top line would be around €400,000,000 Then if we go to your second question on the French retail. So what we see In this low interest rate environment, we see that there is growth in France, so we capture that growth. At the same time, as you know, we serve our clients with more than just lending products we provide and servicing products. And we saw this data if you look at it today after 9 months, You see that overall, the top line is flattish and that is the guidance for this year that we have given. For the moment, we are in the process of doing the budgeting to see what the latest updates and orientations of the ECB will be.
And so at this stage, we stick to our outlook and we will be able to give you an update once we
Thank you. We have another question from
Laurent Greer from UBS. Good afternoon, now a few questions from me.
The first one is, should
we expect more adaptation cost In the next quarter? And still on cost, I'm guessing, even you have we're getting closer to Could you confirm exactly what's your absolute cost target for 2020 before benefits of potential Additional adaptation costs. Thank you.
Lorraine, thank you for your questions. On the line, let's be fair, if you look at the overall So what exceptional kind of costs. So we of course, we have the transformation costs, which we are accompanying our 2020 plan with and basically, those costs will end this year, yes? So we will not have them next year. At the same time, We have had some adaptation costs in areas where we had to adapt ourselves given the economic situation.
So this is what we have in Asset Management and B and L. So We are continuously looking at the situation what we can adapt. So it cannot be excluded that there will be some of those Adaptation costs to come. But if you look at the size compared to that with what we have on the transformation costs, it's totally not comparable. And on top of that, These adaptation costs, they lead to savings and so they lead to savings of 1.5 times typically the investment and they come fast.
So it's a different nature than the transformation costs. It's really adaptation costs that we have. And when you look at your overall cost, what we do is, I said, we guide on what the reduction is of cost. For the rest, there is, of course, the traditional kind of wage risk which is there. And then there are the variable costs of the business that we are company.
So intrinsically, The cost savings that we have are definitely there to compensate the typical wage drift and evolutions. So, Lorraine, those will be my 2 answers.
Thank you.
Thank you. We have the next question from Jacques Henri Gaulard from Kepler Cheuvreux. Sir, please.
Yes, good morning, Lars afternoon, actually. Two questions from me. Honestly, you've delivered the results which are really good considering the really bad environment you have. Now on the back of what John was mentioning at the very beginning About the revenue and the impact of negative interest rates on domestic retail. The outlook you give on that It's really not exactly at French Retail level, but it's more really at the beginning of the press release, right, when you say that the new monetary policy measures occurred at the end of the So we produced their full effect only in 2020.
So the question is, you've given revised targets of plus 1.5% TCAM between 60% 20. Wouldn't it be wiser at this point to just give up on these revenue targets? That's the first question and irrespective of how good you can do, but the environment is what it is. And the second question, I was quite surprised to see on Page 31 of your press release how much the balance sheet has really increased significantly. And it seems to be linked to financial instruments at fair value and the repo line as sharp by like €200,000,000,000 I know that those are Just to fix photographs from one period to another, but it would be helpful to know where those increase were coming from.
Thank you, Lance.
Thank you for your questions. With respect to the targets, it is true that when we provided those targets, The overall market outlook of rates and the likes were a bit different. 1 assumed that there was Going to be a rate pickup somewhere at the beginning of 20s, which is maybe a bit different now. However, if you look at our results after 9 months, you look at it at the bank, you can clearly see, as I said, the credits are up by 5% and so is the top line, which is a bit of a tribute of being a diversified bank. Because yes, I know we have twice merits in our name, but French retail is 13 percent of our balance sheet, so we are the diversified bank, which in an environment of today basically plays out because some elements are impacted by low rates, but Others are impacted on the other side, on the positive side on it.
So for the moment, it is too early. We are looking at what The current elements of the ECB and the elements to come, what they are going to be, what it basically means on pricing, what it basically means on the economy. As of today, we are actually going through the budget process to see what it would mean, what we can adapt and how we can optimize. So it's a tad too early to make a statement on those targets. That's the first thing.
Secondly, when it comes to the balance sheet, Yes, the balance sheet has grown, but you've also seen that there is one business in particularly that has grown, right? So you've seen that CIB And as being there, a company declines and that basically led to also some growth in the balance sheet. But that's basically it. There's nothing more to say. So, Jacques Henriques, that will be my answers.
Thank you very much, Lars.
Thank you. We have a next question from Jean Pierre Lambert from Mr. Lambert, your microphone is open. You can ask your question.
Let's take the next one.
Okay. We have the next question from Stephen Stallman from Autonomous Research. Sir, please go ahead.
Yes. Good afternoon, Lars. I have two questions, please. The first one on M and A. Sanktam, earlier this year, I think it was you basically ruled out bolt on deals for the rest of the medium term plan.
But now it seems that Mbank in Poland is becoming available. Would you consider making an exception for looking at Mbank, please? And the second question regarding Belgium, where top line momentum continues to look quite weak. And I think from the data that you can that you provide, you can back out that the net interest margin in Belgium has contracted by about 20 basis points year on year, Which is worse, much worse than in France. And I know you say that it's coming from the impact of The low rate environment.
But could you maybe add a bit of color on what exactly is driving this, whether this is coming through more on the asset side or The liability side and whether you think this erosion will continue or whether it's now at a point where it will stabilize? Thank you.
Stefan, thank you for your questions. When it comes to the M and A, we indeed in bolt on acquisitions, so for example, the things like branch networks, yes? So we basically said that the growth, we are much more interested including the digital developments, which allows us to attract customers without needing to buy branches. And that is basically what you see, for example, The discussions we had with Deutsche Bank or the ones that we had with Orphan's are basically allowing us to strengthen our business position without buying branch networks. So that's basically where we stand.
When it comes to your question on Belgium on the top line, Let's not forget, I mean, if you look at the impact of the low interest rates, country to country, it can be quite different. For example, if you look at France and if you look in Belgium, they are a bit on the opposite sides of how the behavior happens. If you are in France, where the facility to buy back your loan is quite different, totally different actually. You can have a relatively rapid impact of what is happening on repricing. Whereas in Belgium, it basically takes more time.
And so that's basically the dynamic we see. We see France, which is now As we said earlier, and Belgium is still having the impact of those lower rates on its book. So Stephane, those will be my 2 answers. Okay. Thank you.
Thank you. We have a next question from Omar Fall from Barclays. Sir, please go ahead.
Hi, Lars. Just a couple of questions for me. So firstly, can you let us know the exact amount of securitization benefit through CET Q1, you have this quarter, I think you recall that in Q1, it was about $10,000,000,000 that had been of risk weighted assets that had been delayed worth of securitizations. Is that roughly in the right ballpark? Separately, is it a concern that Ex the SBI Life disposals, there's been no organic capital generation year to date.
And then lastly, sorry, I ask this every quarter and I'm hoping this time it's different given the importance of the topic right now, but it would be very helpful For our modeling, to know how much of the deposits of the group are reinvested at their effective duration, Either via replication portfolios or bonds and what the average duration is? Maybe even if you give us The figures for the domestic market retail units, that would be very helpful given that's what most people are talking about.
Thanks. Omar, thank you for your questions. So if we look at your first question on the common equity Tier 1. So as you know, we typically In the evolution, we generate profit. Half of that profit is basically going into the shareholders And the other part is basically strengthening the capital.
So that is as we have $6,300,000,000 of profits after 9 months, half of that is basically strengthening the capital. Now by doing this at the same time, of course, we grow our balance sheet. As you've seen again, we've grown it for 5% this quarter. Growing balance sheet also means growing RWAs. So what we aim to do is that we aim to compensate a part of that RWA growth through securitizations.
And we basically said that our overall objective is to have the equivalent of 5 basis points per quarter. So every quarter, we securitize to reduce the impact on the common equity for 5 basis points. What we said is at the beginning of the year, the first two quarters, There was a review by the supervisor to make sure that all the new concepts were applied with. And so there was in Europe a slowdown actually even in the Q1 a halt of the securitizations going on. So the 5 basis points that we said we would do every quarter, so like 4 times, well, we are now crystallizing a bit more of it In the Q3, so instead of doing the 5 basis points we typically do, we have them at 10 basis points.
That's it. So that's basically their behavior. So on the run rate, we stay on that 5 basis points, which allows us year after year to strengthen our common equity Tier 1. As you've seen, after 9 months, we started the year at 11.7% and after 9 months, we are at 12% common equity Tier 1. And so that basically I also answered your second question, right, when you say In their capital generation, bar SBI Life, as I said, we have a dividend policy of 50% of earnings.
We have this also policy of earnings going up, and so that basically means that we strengthened the capital that way. When it comes to Your question on models, allow me, as you know, we are very willing to share many things, but things which are a little bit in the domain, which are also The domains of interest for our competitors, I will refrain from answering that one. So Omar, that would be my answers.
Thanks a lot, Lars.
Thank you. We have a next question from Matthew Clark from Mediobanca. Sir, please go ahead.
Good afternoon. So a couple of questions from me. Firstly, on transformation costs, you said none in 2020. Should we expect none in 2021, too? Or will these be back again?
Just trying to work out if this kind of €3,000,000,000 of the last Plan is a once in a lifetime cost or if it's going to come back in a couple of years. Next question is on the CET1 ratio.
Looks like you
had a fairly large OCI benefit this quarter to IFRS shareholders' equity. Was there any benefit or impact On the CET1 or does that all get offset in the regulatory adjustments? And then a final question, just could you give any update on TRIM? Some of your Eurozone competitors have seen some drift upwards in their guidance for TRIM impact. Just wanted to check whether you're happy sticking with your 20 basis points TRIM impact and if you have any more visibility on timing there.
Thank you.
Matthew, thank you for your questions. And to I anticipate I am a happy camper, so that should be fine. And now if we look at it first on the transformation costs. So the transformation costs that we basically booked Centrally, we've done it and you're right, we've done it in this plan and we've done it in the previous plan. Why?
Because both plans Had a central theme, so the plan the previous plan had a central theme of simple and efficient. We really wanted to streamline that. The current plan has also a team which goes across the businesses of digitalization. So those were the 2 themes that basically made it for a central approach. At this stage, honestly, I don't see any of those central things on the horizon.
So that will basically be my answer on that. When it comes to the common equity Tier 1 and your question on OCI, It is true when we track the evolution of the common equity Tier 1, we bring it down to its really core elements. So that is we take The net income generated, we divided by 2 and that strengthens our capital. And then we look at the evolution of RWAs at constant exchange rate. And why is that?
Because the effect of exchange rate, you can see it in the OCI and that's basically what we mentioned. So if there is an exchange rate, you can see that in evolution of these OCI. And typically, as we are booking our activities where they are generating results, You basically see that, that impact on OCI is basically compensated by the similar impact on the RWAs. And so that is why we always mention, as I said, the impact of the RMPG, so of the net income and the impact of the RWAs excluding ForEx. And yes, and so there is basically no other effects because the interest rates do not have that kind of impact on the valuation.
So that would be that. And then on your third question of TRIM, listen, I don't have a crystal ball. Let's not forget, TRIM is not something which is universal, right? It's not like saying, hey, I have a new way of looking at liquidity You're looking at and that basically applies to all. TRIM is a review of the models and so it can have different impacts at different banks The phasing of the reviews are different or the status is different.
As we said, when we look really at the TRIM exercise For us at this stage, the impact is limited. But again, it's not done. And honestly, we've guided that there could be an impact of 20 basis Let's also not forget that 20 basis points that is not one shot, right? That's a thing that can stem from several kind of analysis and that can that will be Probably spread over time if it comes anyway, yes. So that's a bit the point.
So, Matthew, those would be my three answers. Very clear. Thank you.
Thank you. We have the next question from
Hi, good afternoon. Jean Francois Henriette from Goldman Sachs.
I just wanted to ask with regards to the CIB, which has had strong performance in FICC, as has been noted, but also in the Corporate Banking part. And for the fixed income in particular, it was noted that this was of a low base Last year as one of the reasons behind the strength in particular versus competitors. But even if you took a 2 year stack, it's still a fair bit Of outperformance. And I just wanted to know whether you'd be able to elaborate a bit more as to what the drivers were maybe by business line or by regions a little more detail. And also on Corporate Banking, so the revenue growth has outperformed loan growth and in particular risk weighted asset growth.
I just wanted to understand as to why, if you want, the productivity of these risk weighted assets is increasing so much. And the second question I wanted to ask is, again, with regards to the transformation and restructuring costs, Not necessarily into next year, but simply speaking in the Q4 this year, is there any lump In a way that could come because your net income is likely to be above in particular due to the low Q4 last year that you might use as a budget if you want. Just a housekeeping question here. Thank you very much.
Housekeeping. Thank you, Jean Francois. If we look at CIB, First of all, let's not forget, if you look at CIB, Corporate Banking, to start with, we've been doing efforts to really stay Close to our customers to provide them with services. That's for example why we created the Capital Markets to be able to bring all kinds of solutions and services together. And what we've seen is indeed we've been able to step up growth in particular in EMEA.
And so that basically means you step up the growth and then the other services basically take a bit of time after the quarter to come in. And so that is why There is this evolution that you saw on the credit side and the RWA side, but that's basically a temporary one. When we go to CIB on FICC, yes, so basically the business is good. And when you say on a low base, while the low base was in particularly on ForEx and not necessarily on the other parts. And so what is it?
For me, what we see in Fig is a tribute to all the changes we've done. Let's be very fair. If you look at what we've done is that we've changed in the past, to be frank, The FICC kind of activities where I would call them averagely bespoke, yes. And so what has happened is that they now have become or very industrialized Or very bespoke. And so that means that you really have to change the setup, you have to digitalize and you have to be able to really deliver those bespoke products.
And that is the changes that we have been doing. That also meant that we have to do quite some changes. We have to digitalize. We have to bring down the cost. And that is what we have done.
So that basically means that when we have that interface, which is customer based, we are able to provide several services. And as I said, both in the standard digital kind of way and in the more sophisticated way. And so that is what we do, and this is While we indeed see the positive evolution in FICC, we see the positive evolution in Corporate Banking. And let's not forget, We also have that evolution in Security Services. So you have on the 3.
And if you look in particular, it's In the secondary, but also in the primary, if you look at in the rankings, we're number 1 in EMEA when it comes to bonds, so the fixed income. So from that point of view, it's a bit honestly a tribute to the changes we have been doing. And so it allowed us To step up our market share since the beginning of the year, so it's not only while we don't have the October or the September numbers, but look until the data that is available, you'll see clearly that we step up our market share. Then when it comes to your last question of the transformation cost. So yes, there is a remainder of transformation costs to come in the last quarter, but that is basically planned.
And then your question is on loan cost. It's a bit what I said earlier is that we are looking at continuously looking at how we have to adapt ourselves to be adapting to the interest rate environment to growth and so forth. And so if from time to time, this can lead to A kind of adaptation plans to be launched that might happen. But then again, the size of the adaptation Costs are not in compared to the transformation costs. And as I said earlier, we are the things that we do is we stick to The metrics that we set forth, as you saw, we said the operating jaws, we have quarters in a row operating jaws.
We set forward 12% common equity Tier 1, you'll see that we are there and we also have the growth of the bottom line and the likes to that we have in the wings And that is what we stick to. So Jean Francois, that will be my two answers. Thanks a lot.
Thank you. We have the next question from Jeff Davis from SocGen. Sir, please go ahead.
Yes. Hi. It's Jeff Dawes here from SocGen. A couple Questions from me. First of all, I just wanted to follow-up on the earlier question on balance sheet growth and hopefully get a bit more detail on that.
I mean, It's a very large jump up in the asset base, several 100 of 1,000,000,000 over the last 2 or 3 quarters. I just want to get a feeling for whether that's permanent, whether it's transitory, Sorry, whether any revenues attached to this and really map out why we've seen such a big inflation of the asset base. And the second question for me is on the French retail business. Domestic current accounts have increased quite substantially as well. Just want to get a feeling from you whether that's deliberate or whether it's just customer behavior coming through and What the kind of profitability impact of that is?
Are these is the increase in domestic current accounts good thing for the top line? Or is it a bad thing? Those are the two questions. Thank you.
Jeff, thank you for your questions. So when it comes to the balance sheet growth, as we basically said, The balance sheet grew on one hand because the credits grew. So that's one thing. But then the major step came from 2 other reasons. So first of all, there is, as I said, the dollar.
So there is the dollar appreciation which basically inflates your balance sheet. So that's also a point. And then the last part is also that I said the step up in CIB Global Markets Activity. And when your question is, are there any revenues attached to it? I invite you to look at the revenue evolution at CIB, and you'll see that there are indeed revenues attached to it.
So that's basically on that. When it comes to French Retail, yes, there is indeed a pickup in those current accounts. That is basically what it is. Current accounts our capital is basically 0 and that's it. But we serve the relationship with the retail customers.
So Jeff, those will be my 2 answers.
Great. Thank you. And perhaps just a quick follow-up on the French retail point. You noticed So a significant rise in revenues in nikal. I know that's captured elsewhere in the P and L and the divisionals.
But can you just give us an idea of the revenues there? How much is that significant rise in revenues? What's the base? Any kind of metrics around that?
And if you look at Niccolo, the overall evolution is part of the other domestic market. And as we said, we are stepping up materially the customer base. Again, as I said, this is an activity which is also looked in by other FinTechs and other banks. So it is Something at this stage, which we do not detail more, except that it is a double digit rise and it remains overall small. So that will be the color I can give you.
Okay. That's great. Thank you very much.
Thank you. We have a next question from Philippa Venakun From Deutsche Bank. Madam, go ahead.
Yes, good afternoon. The first question is regarding the solvency To ratio in the insurance business, I was just wondering whether you could tell us ideally where you stand at the end of Q3, What has been a decline versus the beginning of this year? And if so, how you can potentially offset that? And the second question is regarding potentially charging negative deposit rates. Just wanted to have your view on this, what you are already doing, How much more you think you can do on that?
Thank you.
Flora, thank you very much for your So first of all, when it comes to the insurance activity, as you know, we are our solvency is well above 100%. And it's We publish it on a yearly basis because as I said earlier, the overall stance, if you look at an insurance also how to If you look at it from a bank perspective, what it means on top line, what it means on cost, it's a bit remains a bit peculiar. So we have to look at it on a yearly basis. And so we were well above 100%. So there is nothing else to mention on it.
Also, you know that we, the insurance at BNP Paribas, we are for a big part international, so not French. And on top of that, we are for a big part Non life and even if it is life, there is a lot of it which is driven by uses. So from that point of view, if you cannot consider that the risk with respect to that volatility will be very high. So that is why we are comfortable with that. And when it comes to negative rates, so on the negative rates, let's be very clear.
When it comes to the retail environment, We are sticking to 0. When it comes to the institutional, we charge. And when it comes to corporate, Basically, if it is related to investments, we consider it also a bit different. So that's basically our stance. So, Farah, that would be the 2 answers to your questions.
Thank you. We have a next question from Tarek El Mezade from Bank of America Merrill Lynch. Sir, please go
Hi, good afternoon, Lars. A couple of questions, please. First on capital. Would you review your priorities in terms of Capital build allocation, now that you reached 12%, there are discussions that Basel 4 might be delayed and even while you're down, maybe you can give your view on that. And you have clearly an ambition now to grow in CIB and to take market share.
So should we expect CET1 to remain at around 12%. Why do you be opportunistic about bolt on in CIB and growth? And second question is in CIB. Are we I mean, do you have these revenues losses from The deleveraging you announced in Q4 or is it something that you managed to offset somehow, so I shouldn't expect any loss in revenues from this deleveraging? And last question, CIB.
You mentioned €400,000,000 incremental revenues from the Deutsche Bank deal. But I heard somewhere that your ROE for the business will be above 20%. So how do you manage that? And what did Deutsche Bank missed in selling this business? Thank you.
Thank you for your questions. If we take the first one, so we are at 12%. 12%. And there are discussions about, well, they call it now finalizing Basel III, but when I was younger, it was basically called Basel IV. And so I want to stay in a sense where I'm relaxed and I don't have to think about it every day and we can continue to do the business.
So that's basically why until it gets clarified, we keep on accumulating capital. So that if there is this Final inflation as we anticipated for us at 10%, we will be at 12%. Now it can be that there is Because on one hand, there are some reflections of saying the RWA will be inflated, but at the same time, there is the European Commission that are saying there is Capital in the banking system, there doesn't have to be anymore. So how could those two things come together? And it's a bit the comparison with the thermometer.
If use a thermometer to measure the temperature of your body temperature, if you are a European one and you measure it and you look on the machine and it says 37. And so 37, you know that's healthy and that's okay. And then all of a sudden you change your thermometer by a U. S. One.
You put it under your arm, you look at it and you see 100. So you get very, very scared. But then you notice that your body temperature is basically unchanged and that the only thing is the scale that you have to change. So that is why overall, I mean, we keep on being ready for whatever might come. But what will be the form, once we know it, We might guide differently, but now we are on a conservative stance so that we can focus on delivering the business, growing the business, being with our customers.
When it comes to your question on CIB, the things that we have stopped and one of the things that you've seen is, it's like And Opera is not a singing kind of context, but it was the proprietary trading that we have stopped and there are some It is also in the U. S. That we have thought. But intrinsically, these were good businesses. They were businesses that maybe did not lead to Cross sell in other activities and so we said maybe there is a more logical kind of owner and that is why the impacts that you have seen both these are not the negative impact you might have expected.
And then when on your third question, when it comes to the prime brokerage activities, Yes, indeed, the return on equity that we anticipate from it is like around 20%. So what is the difference maybe from one to the other bank is one of the differences that we observe is that the cost of funding between banks being different. And so that's basically directed the three answers to your questions.
Lars, just follow-up on the revenues on Bjorn, I was mentioning Opera and other small division businesses you stopped. That was more likely, I think you guided by then the €200,000,000 or €300,000,000 revenues From a lower €5,000,000,000 exits in businesses. I was more referring to that part.
Yes. But as I said, for the moment, We gave a conservative outlook and for the moment we are relatively away from that impact. So we'll keep you updated if there would be one. Okay. Thank you.
Thank you. We have a next question from Kivip Tirajah From HSBC. Sir, please go ahead.
Yes. Good afternoon, Lars. Can I just come back To the rapid growth in the repo and the derivative balances on your balance sheet? And my question is more forward looking in that can you sustain that pace of growth? I'm looking at growth rates of over 20% year over year on the repo line and on the derivative line.
It's kind of important because as you alluded to, it's a big driver Of the FICC revenue market share that you've delivered. And secondly, just sticking with the CIB, on the prime brokerage transfer, I think you previously gave guidance that it was In capital consumption, 5 bps off your CET1 ratio and 10 bps off your leverage ratio. Is that guidance still valid now that you've started Integration process with Deutsche Bank. Thank you.
Kiri, thank you. First on the second one, yes, our guidance For the prime brokerage remains the same. But one thing, technically, we haven't started yet the transfer, right? I mean, it's typically going to be closed somewhere before the year end and that's the moment when it will start. But yes, we stay to that outlook.
When it comes to the report, let's be very fair. If you look at the Q3, And remember that I don't know exactly where you were in August and at the beginning of September, but there was Little demand, yes. And so what happened is that the last couple of weeks in September is where it picked up. And so this means that what you saw in the balance sheet at the end of September is a bit inflated because again, All the deals that were done, they were not unwound, they were not put into the market and so forth. So what you see as a volume is a little bit tainted by the fact that all those activities happened towards the end of September.
And as you can see for us, the one thing is, if you look at it, the one thing for us that is important is that the leverage ratio remains fine and that is what you Even with that pickup, it remains fine. So there is no concern about that. Okay. Thank you.
Thank you. We have a next question from Anke Reingen from Bank of Canada. Madam, please go ahead.
Yes. Thank you very much. I just wanted to come back to your earlier comment about you just going through the budget. And I just wanted to understand what this potentially could mean for your 2020 targets you put up at the beginning of the year. So are we thinking about Another review or is it a fine tuning or I'm just I mean, are we stepping away from the 10.5% RoTE target?
And then on the Investment Bank on Global Markets and Corporate Banking, clearly very strong revenues. And is there a risk That in Q4, there will be a cost true up because your revenues have been stronger than you expected. And I'm sorry, just lastly, because there seem to be maybe some Three questions. The increase in the liquidity buffer, quite surprising. Any reason?
Thank you.
Anke, can you repeat your second question, please?
Yes. On the Investment Bank, so is
there a
risk That we see an increase in the costs in Q4 because maybe your accrual in the quarter over year has been quite low and yet the full year Performance has been stronger on the revenue side, so you have to do some true up in Q4 costs.
Okay. Thank you. Let me say that one first. I mean, if you look at the evolution, if you look in Q3, you see in Q3, there is a pickup in the top line of CIB of Global Markets, which is also a pickup in cost. It is true that as the other elements are being worked on to reduce cost, You might have the impression if you look at it rapidly that indeed the costs do not evolve in line with the revenues.
And therefore, probably your question, Would there be an alignment? But as I said, this is from stemming from the fact that we are reducing the costs materially in all parts of CIB. So these evolutions are aligned. And so that's basically fine. When We look on your first question.
So what we do see is that the overall outlook of rates is a little bit different than what we anticipated before. But now we have to see and that is the budget exercise we're doing right now is what is then the longer term kind of rate is going to be, what is the adaptations that we are doing. For example, we announced some adaptations going on in several of our activities. What are the adaptations when it comes to the drive, the extra dive on the businesses that are positively impacted by the low interest rates environment? So that is where we are seeing what this total basically means.
So there are pluses and minuses, And we are doing that in the budget, and we will come back to you once we've done that finalized. When it comes to the liquidity buffer, as you know, one of as you see in our evolutions And if you look at the volume of pickup in deposits versus the loans, you see what the pickup on the liquidity buffer is, but there is nothing else to mention on that. So Anke, that will be my 3 answers.
Thank you very much.
Thank you. We have the next question from Jean Pierre Lambert from KBW. Sir, please proceed. Mr. Lambert, your microphone is open.
You can ask your question.
Jean Pierre, we cannot hear you.
Hello.
Jean Pierre?
Yes. Can you hear me?
I can hear you now. Okay. Sorry about that.
I had a problem with the battery. So the question I had earlier was on the Basel IV, 10% which was offset inflation. Can you give an indication of the allocation between output factors and input factors And whether this will represent a constraint for you in terms of acquisition policy for the moment you have And no bolt on acquisition policy. Is this Basel IV development a constraint for you in the future? And also related to that, are there the 10%, is it before mitigation or after mitigation?
Thank you.
Okay. Jean Pierre, with respect to the details on Basel IV, there are so many moving parts into it that it's a bit the generic impact that we have. The question is, Is it basically a constraint? And as I said earlier, it's not a constraint. So one of the things that we said is We're going to we are in a process where we strengthen our capital.
Look, we are at 12% and we are at 12% a year before we wanted to be there. And so that basically means that over time, we will accumulate further capital in such a way that at some point in time, Basel will become clear. And as I said, If it is what we might think it is in the current text, that will be an inflation of 10%, the capital will be there. If at the same time that Basel IV is accompanied by a reduction of the capital requirement, then we will see what we do with this capital. If in the end Basel IV is in a different form than what it is today, leading to a lower impact, it will be the same question and we will ask again and see how we can best use that capital at that point in time.
So that's where we stand. So it's still a tad too early to give more clarity, but the important We are positioned in such a way that it doesn't hamper the business. The business can basically grow And for the rest, we are ready to handle Basel when it comes. So that will be my answer, Jean Pierre.
Thank you very much. And on the Acquisition policy, the freeze on the bolt on, is that is there a firm end date to this like this end of this year?
Now as I said, on the bolt on and in general, I mean, buying branch networks and the likes is not what is in the wings. Yes, we want to continue to do the digitalization, sort of like that. And if from time to time, we can strengthen a bit the business, For example, in the deal that I mentioned with Deutsche Bank or in a deal with Orphan's, that is then what we will do. But again, as I said, Buying a branch network is not in the wings. Thank you very much.
Thank you.
Thank you. We haven't any more questions. Mr. Marshall, back to you for the conclusion.
Thank you so much. So thank you for staying with us. And as you've seen, the main takeaways for today's Presentation have been that in the Q3, we have continued to successfully implement the new digital customer experiences. We have witnessed volume growth, revenue growth, positive jaws and this in all three of the operating divisions. We have an RoTE at 10.3% our common equity Tier 1 ratio that further improved to 12%.
So with this, I thank you very much. Have a good day. Bye bye.