Good afternoon, ladies and gentlemen, and welcome to the presentation of BNP Paribas Third Quarter 2021 Results. For your information, this conference call is being recorded. Supporting slides are available on BNP Paribas IR website, invest.bnpparibas.com. During today's presentation, you will be able to ask questions by pressing zero one on your telephone keypad. If you would like to ask a question, please make sure to be in a quiet area to maximize audio quality. I will now hand over to Mr. Lars Machenil, Group Chief Financial Officer. Sir, please go ahead.
Thank you. Good afternoon. Fine ladies, gentlemen, trust you are doing well, and hello from Paris, and welcome to BNP Paribas third quarter 2021 results presentation. In usual way, I'll take you through the first two chapters of the results presentation in a kind of synthetic way, and this before handing it over to you for Q&A. If you look at this third quarter, BNP Paribas demonstrated yet again the strength of its distinctive model. BNP Paribas performed well above 2019 levels, and business activity continued to evolve very positively. The group's performance in the first nine months of this year confirmed not only the rebound, which has now already occurred in the majority of the businesses, but also our potential for growth beyond a mere rebound to this level of 2019.
This evolution is structural on the back of the bank's distinctive, diversified, and integrated approach, and demonstrate that BNP Paribas is very well-positioned to capture an increasing part of the growth ahead. On the strength of this confirmed performance and growth as well as its solid balance sheet expressed via, pick two, but let's take the ratios ROTE at 10.4% and the CET1 ratio at 13.13%. If you look at those ratios, you can understand that BNP Paribas has enhanced its distribution policy for 2021 and announced this morning the launch of a share buyback program for EUR 900 million. Moving to the presentation now, let's go to slide three, and you see that BNP Paribas delivered a very solid performance in this third quarter 2021, with a sharp rise in net income and a positive jaws effect.
Looking at the financial summary line by line, you can see that revenues were up 4.7% year-on-year, with a similar evolution when compared to the third quarter 2019. Clearly, revenues benefited from the group's diversified business model with, on one hand, particularly good contributions from Domestic Markets and Wealth Management, and on the other hand, a high level of revenues at CIB, which experienced growth across all of the three business lines within CIB. These domains perform very well as they build on each other in a unique BNP Paribas way. For example, when we take domestic markets where wealth and domestic markets interact very strongly, and also if you look at CIB, where, for example, Global Banking and Global Markets interact very well in a kind of joint venture that is called capital markets. That's the revenues.
Costs accompany this evolution with 3.8% when compared to the third quarter in 2020, while they decreased by 0.1% when compared to 2019. Of course, the bank is supporting the growth of our businesses, which has been stronger than anticipated at the start of the year. In addition, as there is now a strong reduction in economic uncertainty and a better visibility on the growth potential in front of us, we're also investing to support future growth in a very disciplined and consistent manner. Furthermore, as you know, costs embedded this quarter some scope effects related to business development initiatives, I think in particular in equities with, on one hand, Exane, who's now fully consolidated, and Prime Brokerage, who is being transferred from Deutsche Bank.
In addition to our strict discipline, our improved efficiency continues to sustain structurally the containment of operating expenses. Thus the group operated with positive jaws close to one point in the third quarter, 4.7 points when looking at the third quarter of 2019 as the basis of comparison. If we further go down the P&L and we come to the cost of risk, it stood at a low level of thirty-two basis points over loans outstanding, and this with a moderate release of stage one and stage two provisions and a limited number of new defaults. Hence, a very steep increase in operating income, up 31% versus the third quarter and just shy of up 25% on 2019.
Finally, if we take it to the bottom line, net income came in at EUR 2.5 billion, sharply up from the third quarter last year and the year before last. Now this is at the P&L, and as I mentioned earlier, if we look at the balance sheet and its regulatory metrics, let's look at the CET1 ratio. It clocked in at 13% in the third quarter 2021. It would have stayed at 12.9% when taking into account the impact of the share buyback program announced today. If we now switch to slide four, which provides a summary of the evolution of several levers of the P&L, but this time on nine-month basis, and also comparing to 2019.
As you can see, the group delivered a strong performance on a quarterly basis as well as on nine months. You see that it outperformed 2019 results on all fronts with a 5.2% increase in revenues, an overwhelmingly positive jaws effect, an 18.7 increase in gross operating income, and a net income at EUR 7.2 billion in the first nine months. The group has clearly demonstrated the potential and preparedness to capture growth going forward. It has demonstrated that it's able to capture growth while keeping its costs under control, as evidenced by its positive jaws effects based on a comparison with the first nine months, 2020, and even more so, 2019.
With this, let's move to the update of the group's distribution policy. If I can ask you to swipe to slide five. First of all, it is important to note that the group has confirmed its strength, growth potential, and financial solidity. Again, if you look at the metrics, annualized ROTE at 10.4%, CET1 ratio at 13%, with no specific uncertainties in front of us. Given these ratios, given the absence of these uncertainties, the bank is more than ready to accompany growth, and this at an above average rate. As such, we step up our distribution policy in 2021, fronting the recurring increase to be announced with the 2025 plan on February eighth of next year. As a consequence, our distribution policy for 2021 has been enhanced.
In this respect, I trust you saw the announcement this morning with regard to the launch by the group of a share buyback program to the amount of EUR 900 million. This program has already been approved by the ECB and will be carried out between November 1, 2022 so next Monday, and February 8, 2022 at the latest. In addition, the group continues to set aside 50% of its 2021 net income with a view of paying it in cash as usual. As said, the new distribution policy for the years to come, it is 2022 to 2025, will be announced together with the 2021 full-year results in early February 2022. Actually, for those who wouldn't know, it's February 8, 2022.
With this, if we turn to slide seven, you can see that the total exceptional items of the third quarter entailed an overall moderately negative amount at the bottom line. This, with the capital gains arising from the sale of shares in Allfunds this quarter, more than offset by goodwill impairment and a very limited impact of restructuring and adaptation costs. Basically the bottom line results of EUR 2.5 billion is really stemming from the improvement and the evolution in operating results and is not driven by exceptional elements. With this, I can ask you to swipe to slide eight, and you can see the solid performance of the group in the third quarter.
As you can see from this slide, the financial performance has improved year on year on all fronts, from the revenue line all the way down to net income. In line with what we saw in the second quarter, this has also been the case when comparing to the third quarter 2019. Hence, this goes to confirm that the group has entered a new phase of growth that goes beyond the mere rebound to pre-crisis levels. Furthermore, to date, as we mentioned, the group has delivered an annualized return on tangible equity of 10.4%. If we now move to the elements of the P&L, let's start with the revenues on slide 9, that increased by 4.7% at group level.
If we look at the three domains, domestic markets first, they were up 6.3%, on the back of very good performances across retail networks, driven by our focus on the development of fee-generating business and a continued solid growth in specialized businesses. Again, this is quite distinct to BNP Paribas because we do have all of these services to offer on our client-centric model, and that is what delivers this solid revenue line. If we look at international financial services, they proved resilient at -1% on a like-for-like basis, with a strong increase on wealth and asset management more than offset by a lower contribution of insurance and a less favorable context of the international retail networks. The latter being compensated by the very strong focus on cost of risk.
Lastly, if we go to CIB, they saw higher revenues across all three of its businesses, resulting in a very good level of quarterly revenues, up 6.4% year-on-year against the level, which was already elevated a year ago, and sharply up 25% when compared to the third quarter of 2019.
If you can now swipe to slide 10, you can see that while supporting the business development in a disciplined manner, costs increased by 3.8% at group level, yet at a much slower pace than revenues, and with half of it stemming from business development, and particularly related to equities, as I mentioned before, having the cost of Exane and the prime brokerage being added. If we zoom in on the divisions, costs in Domestic Markets were up 2% year-on-year, mainly in connection with the growth in its specialized businesses, while costs remained well contained with a modest increase in its retail networks. Overall, Domestic Markets operated this quarter with very positive jaws. International Financial Services costs were up 3.5% year-on-year in connection with the growth in asset gathering businesses and targeted initiatives in other parts.
Finally, CIB operated with positive jaws with a cost evolution of 5.9% or 1.5% on a like-for-like basis in connection with the growth in activity and development initiatives that I mentioned before. If we now go to the third element in the P&L, that's the cost of risk. Slide 11 and beyond. You can see that the cost of risk stood at a low level of 32 basis points of loans outstanding, at a level some EUR 539 million lower than in the same quarter a year ago. This is mainly due to a limited number of new defaults and moderate releases of provisions of performing loans, stages 1 and 2, in particular taken in 2020.
Finally, at 37 basis points of loans outstanding year to date, the group's cost of risk comfortably stands below the 45-55 basis point range indicated earlier this year. If we now go to the financial structure, which is slide 14, which we modestly call solid, you can see that common equity tier one was up 10 basis points compared to the second quarter, clocking in at 13%. Actually, it is 20 basis points stemming from the third quarter results after taking into account a 50% payout ratio, partially offset by 10 basis points impact resulting from the rise in risk-weighted assets this quarter, and this rise is stemming from the growth that we accompany. All very logical.
The share buyback that we have launched, but of course, that we are launching Monday, so post end of September, will have a limited impact on the group's CET1 ratio. As a matter of fact, after taking into account the maximum amount of share buyback announced earlier today, the pro forma CET1 ratio end of September would stand at 12.9%. Our leverage ratio is still at 3.9%. Just to remind you, we have not opted for the temporary exclusion related to deposits with Eurosystem central banks authorized by the ECB decision of June 2021. Finally, the group's immediately available liquidity reserves totaled a whopping EUR 478 billion at the end of the third quarter. The evolution of these ratios goes to confirm the very solid financial structure of the group.
If we now turn to slide 15, you can see that the net book value per share stood at EUR 85.8. At EUR 76.8 when we look at the tangible book value per share, up 6.4% compared to a year ago. As you can see, since 2008, it has grown at a compounded annual growth rate, a CAGR of 7.1%, which goes to show our continued value creation through the cycle. I cannot repeat it enough. BNP Paribas, as you've seen once again, being very solid, providing a wide set of integrated services through good and bad times, is extremely well-positioned to continue this trend. If with this, we turn to our ambitious policy of commitment to a sustainable economy. I have a couple of slides starting on 17.
You are well aware of the group's long-lasting commitments toward the fight against global warming. As such, BNP Paribas was one of the first signatories of the Net-Zero Banking Alliance earlier this year and recently joined the Net-Zero Asset Owner Alliance. Not only the banks, but also the assets they own. Through these initiatives, the group is committed to aligning its financing and investment portfolios with the trajectory required for achieving carbon neutrality by 2050. You will find on this slide a summary of the very concrete targets that the group has set itself, in particular in the space of non-conventional oil and gas, thermal coal, and upstream oil and gas. You will also find the group's goals with respect to the financing of renewable energies and new technologies supporting the energy transition, as well as with respect to investing in alternative energies and energy efficiencies.
If we take the next one, slide 18, that describes the recently announced group's new initiative aimed at accompanying its clients in accelerating their transition towards a sustainable and low-carbon economy. The group has indeed decided to mobilize global resources by creating a dedicated, powerful, and agile organization within the bank to support its clients around the world. This new team that we named Low Carbon Transition Group will bring together over 250 professionals from advisory, capital markets, and industry backgrounds, and will engage in close and long-term dialogue with clients with a view to helping them accelerate their transition.
The group is particularly well equipped to undertake this new initiative in the light of its strong global ranking and market recognition as illustrated on this slide. If we now take the third slide in this series, slide 19, because when we talk about CSR or ESG, we also want to talk about, yes, the social impact. I will let you run through the list, but I would like to stress in particular that the group has financed microfinance institutions providing support to over 2 million beneficiaries, 81% of which were women. Also, it supported social enterprises to the tune of EUR 2.2 billion, out of which EUR 1.6 billion of loans and actively participates in the G7 working group on impact investing. With this, I would now kindly ask you to advance to the results by division. I'll synthesize rapidly all three.
Let's start with domestic markets, which you have on slide 21-25. As you can see, our domestic markets saw a continuing positive business drive this quarter, with a year-over-year evolution in loans of 3%, deposits of 6.4%, and even more markedly in all balance sheet savings at 14.4%. Besides, domestic markets saw an acceleration of digital users with over 151 million monthly connection to digital apps on average, up 27%. In the fast-growing space of payment services, it announced the acquisition of FLOA, a French leading player in split payment solutions, with a view of rolling out its solutions across Europe in the next few years. When we look at P&L, revenues were up 6.3% compared to the third quarter.
They were driven by a strong performance of its retail networks, which saw a hike of over 5% in revenues on the back of a continued sharp rise in fees. You know, we are particularly focused on providing services that lead to an increase in fees, in particular, financial fees, in all the networks, right? In France, in Belgium, in Italy. The strong performance of the specialized subsidiaries, especially Belgium and France, despite the ongoing impact of low interest rate environment. They were also driven by the sharp increase across the specialized businesses of domestic markets. I think of Arval, which is particularly up 17%, but also Nickel, which is, don't forget, profitable in France, and leasing solutions. If you look at costs, they were up 2%.
They are nearly stable in the networks, while the specialized businesses saw an increase of 7.7% in connection with their business growth. Listen, if Arval goes up because they have more cars that they provide to their customers, basically the cost related to that also go up. You know? That's my, the costs that go and accompany, the revenues. As already mentioned, domestic markets operated with very positive jaws, more than four points. As a result, gross operating income up 14.6%. Finally, cost of risk clocked in at a low level of 30 basis points of loans outstanding. Hence, pre-tax income came in at just shy of EUR 1.2 billion this quarter, marking a steep 27% rise.
This provides further evidence, if need be, that the growth in domestic markets goes beyond the mere rebound to pre-crisis activity levels. To wrap up, domestic markets saw an increase level of activity this quarter, very positive jaws, and a steep rise in pre-tax income. If you now go to international financial services, the second of three, pages 26-32, and you see that the division saw an overall continued strong business drive, in particular with rising loan production and personal finance, as well as across its international retail networks with the easing of public health measures. In the asset gathering businesses, net asset inflows were well-oriented this quarter, and so were the assets under management, up close to 10% year-on-year. If we focus on the P&L, IFS revenues were down 1% year-on-year on a like-for-like basis.
On one hand, asset gathering businesses saw an overall growth in revenues. On the other hand, the contribution for insurance was driven lower by a decrease in financial results, while international retail networks and personal finance operated in a less favorable context. Let's not forget for those two, that context was more than compensated by the low cost of risk stemming from the efficient management of delinquencies. If you look at cost, up 3.5%, driven by the rebound in activity as well as targeted initiatives. Pre-tax income was up 12.6%, or 13.3% on a like-for-like basis, and this on the back of the sharp decrease in cost of risk that I alluded to. To wrap up, IFS saw a very impressive performance in wealth and asset management businesses and with other businesses not yet firing on all cylinders.
However, IFS saw an improved level of activity, especially with respect to new loan origination this quarter, so greasing the cylinders. Furthermore, it saw an improved net income level on the back of the drop in cost of risk. If you now take the third domain, Corporate and Institutional Banking, slides 33 to 36, which saw another strong quarter across all three of its businesses. Let's take them one at a time. If we start with the financing space, it saw a better level of activity across equity, bond, and syndicated loan businesses compared to a year ago. In particular, CIB's ECM franchise saw a 20% rise in volume this quarter, as well as market share gains. In terms of league table rankings by volume, CIB was the highest-ranked European bank in this space in the third quarter.
If we then go to the second department, Global Markets saw a strong activity in equity derivatives and prime services, while the environment was less supportive in Forex, credit, and in particular, rates. The business continued to roll out the strategic expansion of its platforms with the integration of Exane with effect from July of this year and the ongoing transfer of clients in prime brokerage in connection with the agreement with Deutsche Bank that is expected to be finalized by year-end. Let me add that we are particularly proud of the number one ranking of Exane BNP Paribas in developed Europe research, and this for the fifth year in a row. Lastly, if we turn to the third entity, Securities Services, which continue to see an increase in assets under custody and funds under administration and a good level of transactions.
Looking at the P&L, CIB's revenues were up 6.4% year-on-year and just shy of 25% when compared to 2019, and this on the back of strengthened platforms and very effective diversification and client centricity. They were driven by a strong 15% in corporate banking when compared to a year ago, and 23% compared to 2019. They were also driven by the very good overall performance of Global Markets that saw its third quarter revenues increased by 1.2% from an already high level a year ago, and 33% from the year before last. In a lackluster environment this quarter, particularly on rates, FICC revenues decreased by 28% when compared with the high base of the third quarter a year ago, while equity and prime services revenues rose very solidly by an overwhelming 79%.
Lastly, Securities Services achieved again a very good quarter with the rise in revenues of 5.8%. CIB costs were up 5.9% year-on-year or 1.5% on a like-for-like basis in connection with the positive momentum in business activity and investments for future growth. As such, CIB operated with positive jaws. With a further decrease in the cost of risk in the third quarter, CIB generated EUR 1.33 billion of pre-tax income, up 39% versus last year and almost 60% compared to 2019. To wrap up, a strong performance in revenues compared to 2020 and 2019 and a sharp rise in income for CIB this quarter.
This basically sums up the divisions, and if we switch to the slide at the end, slide 38, where you can see the confirmation of the group's growth potential with revenue and net income beyond the levels seen in 2019. Accordingly, the trends for 2021 are very well oriented with the confirmation of a strong revenue growth and a high level of revenues for 2021. The firm's objective to deliver positive jaws effect as our cost discipline and operating efficiency sustain our ability to support business growth and investments in a disciplined and targeted manner. The cost of risk at a low level below the 45-55 basis points range. If I can ask you to go to slide 39, that concludes our presentation today.
As key takeaway, I would like you to keep in mind the high level of results supported by the strength of the group's diversified and integrated model, quite a distinct model, with a third quarter net income at a high level of EUR 2.5 billion, up over 30%. The group's solid results beyond the level seen in 2019, so beyond that, and the enhancement of our distribution policy for 2021 with the launch of a share buyback program starting on Monday. We are pleased to confirm that we will all, as always, provide a high-level presentation of the group's strategic plan together with the annual results on February eighth, which will be followed by an investor day for which we have now set a date that is March fourteenth.
With this, fine ladies, gentlemen, I thank you for your kind attention, and I will be pleased to take your questions now if there are any.
Ladies and gentlemen, if you wish to ask a question, please press 01 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 in order received, and we will take as many as time permits. If you find that your question has been answered, please press zero two on your telephone keypad. Once again, it's zero one on your telephone keypad to ask a question. First question is from Madame Lorraine Quoirez from UBS. Madame, please go ahead.
Hello, Lars. Thank you for taking my question. Just a quick one from me. Obviously, you quote underlying group ROTE of 10.4%. But looking at market valuation, it seems to me that investors believe that the profitability in CIB may not be sustainable. I'd like to understand how you can change these market perceptions and if you have some arguments against this perception at present. Another one would be regarding your membership to the Net-Zero Banking Alliance. I'd like to understand how this will impact your lending practices in the coming years and whether you see competition stepping up in sustainable finance at present. Thank you.
Lorraine, thank you for your questions. If I start indeed, if you look at the numbers, if you look at the capitalization of 13% and the ROTE above 10%, there is the concern that you mentioned that some have about the sustainability of CIB. What for us, there is a reason we call CIB, we don't call it investment bank. What I mean, we call it corporate and institutional bank, so it's focused on serving corporate and institutional clients in the flow of business that they have. They have a recurring flow, it's not that there can be a specific demand one quarter or another. There is a recurring flow. Maybe in one quarter it can be more lending. Another quarter, it can be more equities.
Another quarter it can be that. That it depends. If you look on average over a given year, you see this recurring demand. Of that recurring demand, in particular to the flow business, we are organizing ourselves to ensure that we have the platforms and that we have all the services so that basically we can provide that service to our customers, and therefore we step up our market share. There is a recurring flow of all businesses. We are having all of those services available, and we are stepping up our market share into it. That, if you look at it, there are several ways you can see that. There is a chart that we have on page 33 where you basically see the yearly average CIB revenues. You clearly see that year after year, they are up.
Of course, there is some volatility within a quarter. If you look at the overall demand in a given year, and given the fact that we step up our market share, the yearly average goes up year after year, and that is what we've done now three years in a row, and that is something that we will continue to do. That is basically what we do. We capture into that, and that is why we are so pleased to be able to have now the equity products as part of one entity. We have been, or we are able, we have consolidated Exane, so it's part of that, and we are finalizing the onboarding of the prime brokerage. That basically makes also their one entire service offering. That's basically what we do.
We go for the flow, which is a recurring basis on a year. We step up our market share, and we have proven year after year that it is recurring and that we step up the revenues. That, Lorraine, would be the rationale why for us, CIB is not, we don't label it an investment bank. It's really corporate and institutional, and we have the recurring flow. Then on your other question of the Net-Zero Banking Alliance, it is what you see, and it will be even further strengthened in all the climate stress tests that are ongoing. There is, we at BNP Paribas, we really have embarked already since years the fact that one has to evolve.
Of course, you have to be sure that you yourself as a bank are carbon neutral, but you have to accompany the clients for this to happen. This is something that you really have to work at. That one of the reasons why we believe we can make also a difference is in that Low Carbon Transition Group that we just launched, where we basically take 250 dedicated people, so bankers who have that knowledge, but also specialists who are very well aware how and what options exist when it comes to transportation, when it comes to energy, when it comes to building and the like.
That's basically what we keep on providing and stepping up and guiding, and providing counseling and service, and therefore also that can then lead to project funds that comes with it that we do to make a difference. Yes, we started that early and we continue to be on the vanguard of things by setting objectives, but also making sure that we have an organization that is fully there, to provide additional services on this front to our clients. Lorraine, that would be my two answers.
Thank you, Madame. Next question is from Mr. Jean-François Neuez from Goldman Sachs. Sir, go ahead.
Hi, afternoon, Lars, and thanks for the presentation. I just would like to ask very quickly on. So you mentioned that the cost of risk is below your 45, sorry, yeah, 45-55 long-term range basis points, which is great. Then the question is, the reference to that range was based on your historical loan loss experience. Obviously the mix for over that time period has changed quite a lot in the domestic market. There are many, many more mortgages compared to corporate loans. In the corporate loans, there is a few more state-guaranteed ones, quite a bit, and obviously they can last up until a very long time.
In CIB, you've gone out of some of the maybe more high octane, so to speak, energy loans over time, et cetera, et cetera. I just wanted to understand how relevant you think that long-term rate still is or whether your mix has changed so that this range is probably now either too conservative or not. The second question I had was on the insurance run rate. You say this quarter it has benefited from less capital gains in the revenue side. The question is what's the right level as a base for that, for that business? Is it the base where you have a bit more capital gains because it's part of the business, or was the run rate of before maybe a bit too elevated?
Lastly, I just try to understand, could you please let us know what you think the contribution from the Deutsche Bank was also this quarter? 'Cause you give an example, I think I haven't been able to to back out the Deutsche Bank contribution. Just trying to understand your kind of organic growth in equities. Thank you.
Thank you, Jean-François. On the first question on cost of risk, you are right. You know, we are a bit of a bank that works on medium-term horizon. The horizon of the average cost of risk over the cycle, which we oriented in the previous plan by 45-55, was basically the horizon we had at the start of the plan. The plan indeed led to several businesses to be positioned a bit differently. The examples are indeed BNL, where we stepped out of some activities, or also Personal Finance, where we shifted much more into collateralized businesses. That's basically what we see. That implies that yes, the over the cycle, cost of risk will probably go down, yeah.
I invite you to come back on February eighth, where we will crystallize that. It is not unlikely that in the current evolutions that we've done in the plan, the average rate would rather be 40-45. Even beyond that, compared to that one, we are at a low level. I don't wanna jump ahead, but then that 40-45 is then what we have as a picture today, yeah. That could then still further evolve with whatever kind of evolutions that we would embark on. That's it. At 32, we are well below, let's say, the historical average. Even if you look at this kind of new average that we will clarify for the next plan, we are below that as well.
When we look at insurance, yes, I understand your question. Sometimes bancassurance is not always easy to read in the sense that if you look at the top line, the top line includes contribution of investment books, but also for example contains claims, yeah. It is as if the cost of risk of a bank would be deducted from the top line. That makes it a bit. Moreover, often our insurance is active through partners distributing in other channels, and that basically means that you see the contribution to that coming through the equity line, yeah. The line by line is a tad complicated. You have those evolutions within the quarter.
If you would look at the impact of the top line, if you take the run rate, you really have to look at it on a yearly basis, and that's about it. The run rate that you see on the investments is a tad low given the low interest rates and given the impact on the portfolios. On the other hand, if you look at the bottom line, you have some participations that sometimes you have impacts, you know, there can be floods, there can be whatever, not that impacts, but that is a rather one-off kind of element. Yes, that's a bit the thing.
I what else can I say than having you look at insurance on a run rate on a yearly basis rather than on a quarterly basis. Then on your question on the Prime Brokerage, yes, the Prime Brokerage, as you know, they have a wonderful system. We have to transfer that system in our environment, and we have to make sure that it is totally connected also with our system because that's what we wanna do, right? We wanna serve customers and also serve them on the other services. That means we have to integrate the Prime Brokerage service with our services, and then we have to migrate the customers to that and the other products. That is a bit what we are doing now.
This is ramping up, and we're doing this by the year-end. You can imagine that the more intricate, more interaction, different businesses impacting activities will be rather towards the end. The impact in the third quarter is rather marginal on CIB as it stands. It's rather in the tens of EUR millions. Jean-François, that would be my three answers.
Thank you, sir. Next question is from Madame Delphine Lee from JP Morgan. Madame, please go ahead.
Yes, good afternoon, Lars Machenil. So I'd like to ask my first question on the buyback amount of EUR 900 million. Would you mind just elaborating a little bit the rationale for that amount? I mean, do you see it more as a way to achieve something, you know, above or closer or above 60% payout if you include the 50% dividend? Just trying to get a feel of, you know, sort of how you came up with that number. Related to capital as well, the Basel IV
The text was finalized a couple of days ago. I was just wondering if you could provide any real updates on the impact and, you know, how you're thinking about what level of capital you wanna run at, that would be helpful. Just a numbers question, if I may. If you don't mind sharing with us just, you know, like the one-off, quantifying the one-off negatives that you had in revenues in Personal Finance and the one-off positives that you had in Belgium. Thank you very much.
Thank you, Delphine. Yeah, if we look at the EUR 900 million. The idea with the things that we undertake, we wanna have a continuation in things, yeah? We just don't wanna have a one-time activity that we then cannot continue. Our aim is when we step up return to shareholders that we can do it in a recurring way, yeah. Not one time and then not. It becomes a new basis. Initially, what we typically do is we do that in our plan. Every time we have a plan, we look at the environment, what capital can we free up, and therefore redistribute. We ended 2020 with a 50%, which by the way, we paid in September of this year.
Normally we would review that in the plan going forward. 2021 was a bit of a year in between. Remember at the beginning of the year, there was still a lot of uncertainty with the vaccination and the like, and so we said this is probably an interim year before we start in the new plan. Basically in the past we had in the previous plan a 50% payout ratio because we basically said, listen, of the 100% earnings, there is like 30% that we need to cover the growth. Yeah. The balance sheet grows, so we need to retain some capital. There is 50% that we pay out in dividend, and then there is 20% that we keep for uncertainty.
You know, there was this uncertainty. What is TRIM? Is it gonna be GRIM? What is the stress test gonna do? What is the finalization of Basel gonna do? What we have seen now is that in 2021, we are performing very well. We are building on all the strength of all the market share that we keep on grabbing on all the platforms. We have a very solid performance in this year, 2021. That we then see that is translated into return on tangible equity above 10, and a CET1 of 13%. That basically says that we are really ready, and a year that was a bit uncertain. Well, basically BNP Paribas does very well in this year.
That is why we thought like maybe we can step up as there is now less uncertainty. I come back to your other question on Basel IV. The TRIM is behind us, and for us, BNP Paribas was not GRIM. The same is true for the stress test. Within Basel, the inflation that we anticipate without acting on anything, so I'll come back to that, it basically is fine. We're in good shape, and therefore we thought like we can take a step up, and therefore we say we can roughly go to something like 60%, what have you not. We calibrated this at EUR 900 million to basically launch it now. That's a bit it. It's in the continuity of things.
We are in very good shape and well, as we are going to review it in the next plan, as this 2021 is a year in between, but as we are shooting for all stars, I thought we can already step it up. That's basically it. Yes, well, we can step it up. We will step it up. We have the approval, and it's basically gonna launch on Monday. On your question of the finalization of Basel, yes. It is now, if you look at the text, and yes, this text still has to be discussed trilaterally and all of these things.
As to the Basel, if you look at it for us, if we don't do anything, we just apply it would lead to an inflation of 8%. That's basically very fine for us to cater with. Again, as I said, we have to see what the final number is, and then we'll have to see if that would mean that there are still some products on which we have to take a different stance or what have you not, or that the market will take a different stance on. Intrinsically for us, listen, that's why in 2019, all those regulatory uncertainties, the TRIMs, the stress test, it's basically behind us. We're very well-positioned. We focus on the business. We have the platforms.
We're gonna grow, and basically, we should grow at a very solid way. On your question of the one-offs, yeah. What are those one-offs? We typically have every quarter some small one-offs left, right, and center, sometimes positive, sometimes negative. What are these things? Sometimes these are non-operational things. Yeah, these are, for example, if you take in credits, it can be a customer that went non-performing and in the restructuring, basically, we help the customer to restructure, and we take on an equity stake in the company that is in Chapter 11 and that is being restructured. That's what we have. From time to time, very often actually, these companies get back out of Chapter 11 in good shape, and then we basically sell those entities.
Those entities therefore crystallize again. These are the things. You understand that we're not saying it's company X, Y, Z. We don't do these kind of things. Of course, let's be fair, this is not a massive amount. If it would be a massive amount, we would list it explicitly in our exceptional elements. That's basically the answers, Delphine.
Thank you, Madam. Next question is from Mr. Stefan Stalmann from Autonomous Research. Sir, go ahead.
Yes. Good afternoon, Lars. Two questions from my side, starting with your evolution of credit risk-weighted assets per quarter. You had about EUR 8 billion more during the quarter, but you had only EUR 10 billion additional loans. It seems that maybe there was quite a bit of credit risk-weighted asset inflation outside of lending, possibly counterparty credit risk. I was wondering if maybe this reflects the initial transfers of Deutsche Bank prime positions, or are there any other drivers for credit risk-weighted asset inflation this quarter? The second question relates to TLTRO. I was wondering if you have actually started to book the bonus rate, the second bonus rate already in the third quarter, or whether that's only still to come. Thank you very much.
Stephan, thank you for your questions. On the risk-weighted assets, in our slides presentation on page 86, you have the evolution. If you look at what is driving the increase, the main one is the increase in credit risk. We've seen that our credits are going up, so the credit risk is going up. The other elements, just to put it in a number, we have more than 700 billion of Basel III risk-weighted assets. There is EUR 1 billion increase in operational risk, EUR 1 billion in market risk, and there is one billion in decrease stemming from, you know, we do this securitization of the banking book. The main driver of the pickup of the EUR 8 billion is the credit risk.
There is nothing particular on that. Yes, it is the growth of the balance sheet that we accompany. On the TLTRO, the TLTRO, for us, the impact is spread over time. That's basically. As you know, the impact for us and TLTRO as a general or the liquidity, for us, it is part of our overall liquidity, yeah? We attract liquidity by ourselves. We attract it from customers, but we also attract it in the market. Let's not forget that TLTRO is securitized lending that we do. If BNP Paribas, as you know as well, we have a good reputation in the market. If we go to the market, we basically do that at. If we do that in a securitized way, we also get very good pricing.
From that point of view, yes, we basically have it at all the other elements. It's spread in time, and it's part overall funding approach, funding cost. Stephan, that would be my answers.
Thank you, sir. Next question is from
If I may, I get reminded that on Delphine, I didn't answer her question on one-off on Personal Finance. The one-off on Personal Finance, without specifying everything else, but it's basically a one-off litigation effect that we have. On the one-off in Belgium, it's a sale of real estate related. That's basically it. Operator, back to you.
Thank you. Next question is from Mr. Omar Fall from Barclays. Please go ahead.
Hi there. Could you give some color on the strong Belgian top line, especially when it comes to fees? You know, one of your peers is raising their banking daily package fees. I just wondered if that's something you've done to explain the growth there, 'cause it's kind of +18%, which is more than the growth in savings and payments. Similarly, in personal finance, or conversely rather, the top-line performance was a bit weak. I know that there's this negative one-off that we don't know exactly how much that is, but even looking at loan growth, that fell sequentially on consolidated outstanding's, which seems a bit surprising at this stage. Are there issues around supply chain disruption and lower auto transactions impacting volumes or something along that?
Lastly, just on Bank of the West, sorry to take three questions. If you could again give a bit more color on the performance there, which does seem a bit weaker than expected. Thanks.
Omar, thank you for your questions. Well, if I take them one by one, if you look at Belgium in retail, it's attributable to a bit the generic thing, right? I mean, in an environment of rates in Europe, we focus on providing our customers with services which are then also fee-generating. So that can mean that we provide them on investment products with service. It also can mean that we have pricing in our packages that change to cater for that. So that is the kind of things that we continue to do. Fees are a main focus of what we do. We have the services and the products to basically do so, and that is what we continue to do. You see it in Belgium, you see it in France, and we will continue. On Personal Finance.
Yes, Personal Finance, actually, if you look at the business, that's fine. Personal Finance, it's a bit what I mentioned earlier also on insurance. It is a tad more difficult to read the P&L. Why? Because on one hand, you have the production, so the production is up, that's fine, but the P&L is impacted basically by the production that happened a couple of quarters before. The production in the quarters before, given there was the confinement, has been lower. That is why you see the production is basically back to a pre-pandemic rhythm. It will take a couple of quarters to basically replace the lower volumes that we had in the previous quarters. That's basically this. On the cars, listen, man, maybe there is some lower amount of new cars, but people need cars.
What people do is they basically take second-hand cars, and if it's a new car or a second-hand car, they need financing. Who provides financing? Oh, PF. That's basically the read on PF. Things are fine. There is just a backlog of the confinement of the last couple of quarters that's in there. And again, you focus on the top line and you see maybe something that triggers a concern, but you could also go down in the bottom line, and you could see something that triggers a good sign, which is that basically there is a tremendous focus on the delinquencies and on the recuperation, and you basically look at the bottom line. The bottom line is very fine, thank you. On BancWest, well, it's a bit the other way around, yeah. In BancWest, things are...
Well, no, I was going to say if you've been to the U.S., but not yet. You can, well, probably in a week or so. The activities have been solidly rebounding, and that is what we see. Again, there has been from time to time, you have a portfolio that you can crystallize, and that's what happened at Bank of the West a year ago. If you look through that, you see that the revenues are evolving positively. The same thing, if you go down to the lines, you can clearly see that the other elements, like the cost of risk, are showing that things are going very well. Omar, that would be my three answers.
Thank you, sir. Next question is from Madame Giulia Aurora Miotto from Morgan Stanley. Madame, go ahead.
Yes. Hi, and good afternoon, Lars. My first question, a bit technical on cost of risk and COVID overlays. How much do you have left? And given that, you know, the situation looks rosier, could we see them written back this year already, or is that 2022 business? Then secondly, a clarification on the payout distribution. For the investor day or, you know, full year results, you have already signaled that you intend to increase the overall payout, and I guess part of this will be in buybacks. Do I understand you correctly that you are, like the 50% in cash is probably here to stay, and then whatever comes on top is on buybacks.
Perhaps could you also consider a lower cash component given where the shares trade pretty discounted versus book value? Then a last technical one, IFRS 17, any comments there? Thank you.
Thank you, Julia, for your questions. If you look at the cost of risk, indeed, the COVID overlay, so to speak, let's quickly remind you. In the U.S. you have CECL, which is a different approach to what we have in Europe, which is IFRS 9. IFRS 9 basically asks you to look at a scenario which is a dire scenario and see what impact it means. In 2020, the dire scenario was a continuation of the pandemic and of COVID and the likes. That's basically what we saw. In that scenario at BNP Paribas, we took like roughly EUR 1.4 billion in provisioning on performing loans, yeah. That's basically that.
Now what you see is that took into account a scenario where one says, you know, in Q3, that was back in 2020, a scenario where you say in the third quarter of 2021, there will still be an impact of COVID, and in the fourth quarter and in the first quarter 2021, and so forth. As time comes by, when you arrive in the third quarter, you basically see, well, things are good. Yeah. Look at our results. Things are very good. That basically means that part, you write it back. You shouldn't anticipate that there is a full writeback of that amount, but that as time goes by and that time comes and demonstrates that everything is fine, you will have that writeback.
For us, out of the EUR 1.4 billion that we provisioned, it's only a small part that we've written back. Like it's a few hundred and that's basically it. That will continue over time. On your second question on the payout, yes, well, I'll come back to you on what the amount will be and what the cash part and share buyback will be. I'll come back to you on February eighth. It's a fair point. I hear you. If I talk to fixed income investors, if I talk to pure equity investors, they might have a different thing. We have both investors. I'll ask you to just bear with me and come back on February eighth, hopefully physically, to get some clarification on what it will be.
Of course, you see what we have done now, and so it gives you an orientation of what we want to do. If we talk about IFRS 17, all of those wonderful numbers. IFRS 17, if I was young, I would have supposed it replaces IFRS 16, right? No, it doesn't. It replaces IFRS 4. Yeah. These are and it's normal that the numbers are different because these are totally different animals describing how to handle insurance. IFRS 4 was more something which was introducing the local regulation because the insurers were operating before that on a local regulation, and it was kind of providing an umbrella for that local regulation. Those local regulations could be quite different. If you look at us, it's in French GAAP.
If you look at other parties, it's in local GAAPs, and that can be quite different. If you look at what we stand at, the IFRS 17 in the end would be relatively close to what we have in French GAAP. Over the horizon, let's say the plan, the contribution, be it 17 or be it four, will be very similar. That is why in order not to lead to confusion over new modeling, we will basically keep under IFRS 4 in our plan in February. Julia, if you come, you will see that we keep on having that outlook on IFRS 4 because that's in the continuation of what you have.
As I mentioned, if you look over the cycle, and the cycle is short for us, it's basically fine. Again, it's different. I don't know Julia, where you are physically based, but for example, in the U.K., the gaps used are quite different than the ones that we have in the French GAAP. That's a bit the situation. For us, over that horizon, not really different. We will give the plan under IFRS 4, and then later there will be the first time adoption that we will clarify. Julia, that would be my three answers.
Thank you, Madame. Next question is from Mr. Matthew Clark from Mediobanca. Please go ahead.
Good afternoon. Just a quick question on cost inflation. Some of your competitors have flagged increasing global wage and inflation as a pressure on the cost line, both at present and looking out. Have you got any comment on that? Are you seeing that as well? Or, you know, is the kind of flattish cost you guided for this year on a constant scope basis still your kind of expectation and can be sustainable going forward? Thanks.
Sure. Well, if you look at the overall cost, as the revenues are up, not through inflation because they are really up, some of them come with cost related to the cars that we provide or the cost of the people and so forth. That is linked to that. That is one thing. I think your inflation is rather on the aspects of saying, do we see the increase in rates therefore also leading to inflation in salaries and or the fact that there are difficulties to attract people?
Now, if you look at, particularly in Europe, where with all the planning that is being done by Europe and by the countries, which is phased over time, yeah, you have some countries, like if you look at the U.S., where at some point in time there will be massive checks going out in a very limited time. Whereas in Europe, it is phased much more over years, which basically means that people can redeploy from one activity to another. There should not be massive shortage of people.
When it comes to the shortage that you have in production leading to pricing, if you look at it, if you listen to what also the ECB said yesterday after having done the tour with the majority of European corporates, is that one believes that this is relatively limited in time. That's basically where we stand. For us, with the view we have along the lines that I just mentioned, that is not something that would be of a material impact on the profit going forward. Back to you, madam.
Thank you, sir. Next question is from Mr. Pierre Chédeville from CIC. Sir, go ahead.
Yes, thank you. Good afternoon, Lars. Thank you for taking my question. First question is regarding the discussion between ALD and LeasePlan. I was wondering if you could give us some update regarding your partnership with Element in Canada. How does it work? And do you think that it would be possible to reinforce this partnership, for instance, with a capitalistic agreement going forward? A follow-up question regarding insurance. You mentioned with Jean-François the volatility of your revenues in the insurance due to capital gains. But you also mentioned ongoing impact of claims. I wanted to know, what do you mean by that? And my last question is related to Allfunds.
Could you give us a clarification regarding your strategy with this participation, with this stake in this company? Because as far as I understand, what is the business model of Allfunds, I can see that there are some, I would say, industrial, synergies with your asset management, business or complementarities, call them, like you want. I don't understand why you are leaving this company, to be honest. Do you want to sell this stake and install partnership with it? How do you see your future with Allfunds? Thank you very much, Lars.
Pierre, thank you for your questions. When it comes to the car leasing, as you know, we are very happy campers. We have a good platform. We are focused on Europe, and that's basically it. Yeah, when you mention Element, don't get me wrong, but a cross-Atlantic merger is not something that is of interest. For us, we're very happy. And if in some areas we can bolt on some stuff, that's fine, but there is nothing more to say. We're happy campers in the growth that we can have in the platforms that we have. That basically that. On insurance, yes, the claims that I mentioned is that from time to time in the non-life part, yeah, I'm not talking about the life part.
In the non-life part, you can have occasionally a major incident. I'm thinking about the water incidents, so the flooding that we had, if you think of Belgium, the Netherlands, Germany. If you have a non-life activity, you are exposed to these kind of things. That's what you can have. That's basically my reference to that. On Allfunds, yes, we're very happy. You know, we had an activity in a regional activity, and we saw that it was useful to basically combine that with others and make that the basis of a larger platform, and that's what Allfunds have become. With Allfunds, we're not alone. We're there with partners. We basically wanna stay at that same level with that partner.
If that partner basically floats a part of it, then we will do that same thing, and we stay a bit at the same level with that partnership. That's where we stand, Pierre.
Thank you, sir. Next question is from Madame Anke Reingen from RBC. Please go ahead.
Yeah, thank you very much for taking my question. I just have some follow-up questions, please. Firstly, on the Basel IV, the 8% in the RWA inflation, is that the 2025 impact, or is that the full impact over the whole implementation period? Secondly, on costs in Q3, there was a bit of a step up, and you mentioned investments, and obviously it's good business environment. I mean, looking into Q4, we have a bit more seasonality on the revenue side. Should we still think Q4 could be positive jaws or, I mean, should the focus really be on the full year trend? Cheeky third one, on the buyback, why did you think you need to announce this now?
I mean, obviously the positive news, but we usually expect this sort of like with full year results. I just wondered why now. Thank you very much.
Thank you, Anke. When it comes to the 8%, yeah, for the moment, we've calculated it on 2025, yeah. Thereafter, there is phasing of other stuff, so it's probably gonna be roughly the same. Technically, the number we've done is we've calculated it on 2025, but it shouldn't be that materially different. It might be a tad better over time, but that's basically it. I remind you, this is the 8% applying the numbers, right? That excludes any actions or optimizations, repricings that the sector or ourselves would do. When it comes to your cost evolution, yes, well, the thing is, it's a bit on the cost, it's a bit like on insurance, right? You have to look at it on the yearly basis.
You have some volatility coming in a given quarter. You should look at it over the full year and look at the evolutions that we have in a specific quarter. Don't get me wrong. If by accident, people of CIB are listening, I excuse myself, but basically, on CIB, the whole corporate and institutional environment takes two weeks of holidays. You know, I'm joking, but the volumes that one sees in December is like half of what you normally have, and then everybody's back in January, and that 50% comes back. That's the kind of thing that you which is a bit peculiarity of what you have in Q4. That's basically that. When you talk about the buyback.
The buyback, you basically want us to do it later. Is that what you say? No, it's just, it's in line with what you do, right? We see that the year is progressing very well, and then there will be, and it's to indicate that what will come will be also a recurring event, yeah. That is why we do it in 2021 over 2021. Then what we will announce will be going forward so that we will do it in 2022 for 2022, in 2023, 2024, 2025. We thought it was useful to ingrain that it is basically a recurring process that we do in the year. But again, Anke, if you tell me that I should stop the share buyback, tell me now.
I might still have an option to do so. Joking, right? Joking. Sorry for that. Operator, back to you.
Thank you. Next question is from Mr. Kiri Vijayarajah from HSBC. Sir, please go ahead.
Yes, good afternoon, Lars. Thanks for taking my questions. A couple of questions on CIB, if I may. Firstly, on the cost base in CIB, looking into 2022, I'm wondering what's the natural kind of mechanical cost inflation we should expect when things like, you know, travel budgets restart, hopefully, and normalize next year. You're gonna have the full year effect of Exane coming into the cost equation. Really some guidance on CIB costs would be helpful for next year. Or if not, then, you know, what kind of jaws would you be targeting in CIB? Then a similar question really on the RWAs and capital allocated to CIB.
You know, is the outlook there kind of steady state from here, or are you expecting the kind of strong demand to keep growing RWAs in CIB at the current pace? I'm thinking particularly on the financing side, when I look at the last few quarters. Some color on sort of costs and RWAs in CIB. Thank you.
Sure. Listen, if you look at that, CIB cost base 2022, now intrinsically, we always wanna operate with positive jaws, yeah. If you wanna see what other things that we will have, I would like to invite you on February eighth to have that. Intrinsically, that's basically what we wanna do. Now, there is indeed the Exane cost base. If you take that on a yearly basis, that would be like around EUR 200 million, yeah. That is just, it's not additional cost, yeah. It's the consolidation effort. That's basically how the base will change. For the rest, we continue to have the operating jaws as the element. That means that there can be some cost because the revenues come, right? That's the thing I just said. That's that.
That's therefore also the answer to the jaws. We keep focused on that. We are not gonna do ridiculous things, but there are some costs that will be accompanying that. That's the cost. That means you carry basically on the scarce resources, if I may. On the cost, as I said, we basically have shown we have them under control. We keep them under control, but of course, we accompany the growth in its form, but we keep them under control with positive jaws. On the other one, on the capital. Yes. On capital, well, you mentioned global banking. I would like to draw your attention.
I don't have the exact number, but if you go into the appendices where you have the global banking evolution, you will see that the revenues of global banking advanced to a higher speed than the capital requirements. Why is that? Because what global banking is doing is more than just shelling out loans, yeah. What they are doing is operating within capital markets, and they are working on generating fee business activities, yeah. That is what we will continue to do. What I mentioned earlier, that fee business is an important part when it comes to retail. Well, it's basically also an important part when it comes to CIB because of the interaction of what we do.
When Global Markets interacts with the needs of clients with Global Markets through what we then call capital markets, that is basically an activity where we leverage the relationship that the global banker has with the product and the knowledge of Global Markets, and that is basically generating fees. That's basically what you see. That is why the revenues at global banking or corporate banking, as we brand it, goes faster than the capital requirements. That's basically the answer, Kerry, on the scarce resources for CIB.
Thank you, sir. Next question is from Mr. Andrew Stimpson from KBW. Sir, please go ahead.
Afternoon, Lars. Thanks for taking my questions. two questions from me, one on ESG, please, and then the next one on leverage, please. On the first one on ESG, I think the commitments that you've been giving on funding for coal and oil and gas are all among the better ones in the sector, which is great, and it's clear that you're on top of this topic, which is all good. When I look at slide 17, I suppose I'm wondering why you're not being more ambitious on your financing volumes.
It shows at the bottom of that slide you're wanting to deliver EUR 2.2 billion extra lending to renewables over the next three years, which to my mind it just seems like a small number and small ambition for a bank of your size. Wondering why that is. Is there just no demand for bank loans on those assets at the minute, or is there, in fact, you know, quite a good amount of upside to you on this theme and on those volumes? Secondly, on leverage. Your CET1 ratio looks healthy enough and grew in the quarter, which is good, and the buybacks are very welcome. The leverage went down very slightly.
I'm just wondering how much the leverage ratio is factoring into your mind when you're considering what the real constraints are for you when you're managing the business. I suspect part of the reason the leverage is more of a constraint is because of the excess liquidity position, which is also welcome. You've got an LCR of 136%. Wondering, you know, two parts to that one, I suppose. How are you thinking about the leverage ratio? Is that really the true constraint on your business now? Then secondly, to what degree could you improve that by reducing the LCR? What level would you feel comfortable at? Thank you.
Andrew Stimpson, thank you for your questions. Yes. On ESG, you know, we're always, on one hand, ambitious, but also very prudent, yeah. Probably we can do more. The main thing is that we don't necessarily go for the easy wins, yeah. If you remember, if you wanna accompany ESG with our clients, there's basically three buckets. Yes, of course, there are easy things. Stop using plastic and what have you not, and that's something you can do and you can fund. Then you have the midterm kind of things. These are things that are not carbon neutral at all today, but where there are routes ahead which are clear but take time. It's for example, with cars. Cars that they should go into other things. They should go into hydrogen, or they should go into batteries and the likes.
If that is what you want to accomplish, there's a lot of project finance going on, yeah, and that is longer term. You need your manufacturers to adapt, then you need the outlets to get for hydrogen or electricity, what have you. These are all the kind of things that you have to do. You have the longer term ones where there are things like in construction. I don't know if you are in a concrete building, but imagine you are. Concrete is really generating a lot of emissions. It is absolutely not carbon neutral, yeah. Because already, one, because of the products, and then secondly, because of the heat that you need in order to make it.
That basically means there are a lot of levers to work on. Yes, you can go for the easy ones, but you have to make sure that you can accompany the other ones. Yes, we are very ambitious on this, and we can probably step it up, but we want to have the accompanying of all the sectors, and that's why we have introduced this new task force of zero carbon bankers. That's indeed very ambitious, and we will keep on being ambitious. On the leverage, if I may, the thing is there are so many regulatory requirements that, you know, honestly, it becomes so complex that I cannot give one to our banker because it wouldn't make sense, yeah?
We basically take one, the one that basically if we comply with it, with some structural elements, is basically fine. For us by saying, "Listen, we have a 12% common equity tier one. We have one-third domestic markets, one-third IFS, one-third CIB," basically makes us coherent in all the other elements. It makes us coherent in the TLAC, makes us coherent in the leverage. These metrics are also rather stable, yeah. The balance sheet that is being used in the leverage is not fluctuating that rapidly. From our point of view, that's how we work. We basically say, if we look at the metric of the common equity tier one with the distribution that we have, that is it. Then from time to time, you have to look at changes in business, yeah.
If you onboard the prime brokerage, prime brokerage consumes a bit more of leverage, and that is where we have to look at how can that be contained and reduced. It is one element. Intrinsically, we pilot the business through the common equity tier one and the other ratios that we have. By that, basically that means that the other metrics, like TLAC and the likes, are manageable given the issuance that we have. I give the example, right? On leverage, it is the tier one capital, yeah. That means that next to the balance sheet, you also have the tier one. You have many other levers to basically contain it. That's what we do. I'm not saying we are not looking into it. They are there, but they are not the primary one on which we pilot the business.
Andrew, that would be my two answers.
Thank you, sir. Next question is from Mr. Jacques-Henri Gaulard from Kepler Cheuvreux. Sir, please.
Yes. Good afternoon. Two questions. First, I think there is EUR 149 million of goodwill impairment in the result this quarter. Any topic in particular, area in particular where you impaired the goodwill, in terms of breakdown, would be great. I guess I'm sorry I have to ask you, because believe me, I'm as tired of it as you are, but I have to ask you about BancWest, whether it is core, non-core, or none of the above. Thank you.
All right. Thank you. I like your options, so I should get a buzzer, you know, that I can push the option. No, at first, on the goodwill. Listen, this is just these are things that have been acquired a long time ago, so you know when you have goodwill, it basically means you shelled out money for an intangible. From time to time, you review and you see that given some uncertainty in some areas with COVID and what have you, that we say, "Well, listen, it's now a decade ago," and with this uncertainty around us in that area, we basically say, "Listen, we impair that goodwill," yeah. That doesn't mean anything. It just means that probably 10 years ago, some cash has been paid for that. That's that.
Listen, I will leave it to that as core. There is not really a concern. It is something that has been bought well before the new banking environment where the yields, given the regulatory changes and so forth, the yields are not the same as the yield that we paid at that time. That's basically the impairment. On BancWest, as you know, the U.S. economy, and particularly California, is doing well. We have a good positioning. We have a lady who's in charge who's hitting all cylinders. From that point of view, we're happy campers. As you know, there are things happening. Yeah, we keep our eyes open. I mean, there's nothing new I can say.
Those will be my two answers.
Thank you, sir. We have one last question from Mr. Tarik El Mejjad from Bank of America. Please go ahead.
Hi. Good afternoon. Just a quick question on cost, please. If we assume the cost inflation we have now is stays longer than we think now, I mean, next plan, which we understand will be mostly focusing on growth and contrary to previous plans, less so on identifying cost savings and so on. One, are you surprised by this inflation? Now I'm thinking on the next plan, are you incorporating elements of cost savings to preserve the jewels that you were willing to present to us to justify double-digit ROE? Thank you.
Tarik, thank you for your question. Listen, at this stage, we don't see that cost inflation to last, yeah. We see that there is a temporary pickup due to all the reasons that I mentioned before. At this stage, our central scenario remains that it will be under control, and therefore, we stay focused on capturing the growth. I mean, we are really kicking on all cylinders. We have the platforms. Clients come to us. We take market share. We're gonna remain focused on that, yeah. If at some point in time I will be mistaken, and there will be inflation, and I don't know what, then basically we will adapt. Tarik, you've been following us for a while, yeah? You know that we are very agile in adapting what it is.
The thing that is ahead of us now is we are very well positioned to capture and accompany that growth. That is what we will do. If there will be another phase kicking in or whatever, we'll adapt at that time, yeah. I'm not gonna break things and not capture the things that are really tangibly ahead of us because of some things that could happen. If these things will happen, we'll adapt as we have always done. You know, we are an agile bank. We are very responsive. Look at us. Where were you? I know where you were a year ago in 2020. There was the COVID hitting. Everybody got scared. Many banks retracted. We didn't. Look at us, what happened, because basically we stayed to our clients. We stayed to serve them. We stayed to strengthen our platforms.
That's what we'll do, and that's what we will continue to do. Operator, back to you.
Thank you, sir. We have no other questions. Back to you for the conclusion.
Last of all, thank you all for having spent the time with us. You have seen that we had a very solid result, that as a bank, we are very well positioned to capture the growth that is ahead of us. We are firing on basically all cylinders. I look forward to see you again in early February to give you an update going forward. Thank you very much. Have a very good weekend. Bye-bye.
Ladies and gentlemen, this concludes the call of BNP Paribas' third quarter 2021 results. Thank you for your participation. You may now disconnect.