Ladies and gentlemen, welcome to the Société Générale conference call. Gentlemen, please go ahead.
Hello. Good morning to everyone. Thanks for participating to our call. I'm with our new CFO, Claire Dumas, and all our management team. As usual, we'll make a presentation. I know you have a very busy day with many presentations, but results will be really short, and then we'll go immediately to Q&A. Let me just say a few words looking at the presentation. Slide four. I will not go through all the details. You know, you might have seen the figures are obviously the best ever in Société Générale history. Strong revenue growth for all businesses in a favorable economic and financial environment. Very good discipline on the cost. That remains a key, of course, objective for us.
Very low cost of risk, including in the fourth quarter, even lower than for the first three quarters, 13 basis points for the full year, six just for the fourth quarter. We have a very strong, high-quality credit portfolio entering 2022. Let me just comment perhaps on the distribution. We are the 50% payout ratio, our earnings per share, it means EUR 2.75 per share. We've decided this year, I will comment again in future, we will come back to our previous breakdown and policy. We have decided to make an exception this year to have a cash dividend of EUR 1.65.
That means three times the dividend last year and a yield of 5%+. Effectively, a share buyback, which will be close to twice as the one last year or the equivalent of 1.1 EUR per share. We think it makes sense with a share price which is catching up, but nevertheless remains of course relatively low compared with the net asset tangible value. Next slide, just to say that when I look at 2021, beyond the financial results, of course, as you know, we've made very strong progress in some key strategic initiatives which will shape the group going forward, and it's very important. Of course, you have in mind the ALD LeasePlan. Boursorama, we will comment more in detail.
It has a very strong year. It is accelerating in terms of organic growth, and of course you have the recent announcement of ING. Across the board, we will pursue the development of our activities while also further improving step by step our efficiency. I will turn immediately to Claire in order to be, again, short. Claire?
Hello. As mentioned by Frédéric, Société Générale achieved this quarter another solid performance with strong earnings growth across businesses. Reported net income stands at EUR 1.8 billion at constant currency and FX rate, and the underlying net income at EUR 1.2 billion, translating into an underlying ROTE of 9.2%. As in Q3, the solid performance mainly results from strong growth in group pre-provision operating income, which is at 24% versus Q4, at EUR 1.9 billion, +16% versus 2019. Once again, we show high positive growth this quarter with revenues up 11.4% year-on-year. In the meantime, the underlying cost base moderately increases by 6.9%, +5.6% at constant currency and FX rate, mostly due to variable items linked to business performance.
All this translates into a decrease in underlying cost income ratio at 71% this quarter, confirming the downward trend observed since 2019. Let's move to Page 12. Costs. Underlying costs are up by a moderate 4.3% compared to last year. This increase is fully explained by higher variable compensation linked to performance and to an increase in the contribution to the SRF. Stripping out those items, the underlying cost base is down versus last year despite inflation. This is a concrete materialization of the continuous efforts on costs. We end this year with high positive growth, and an improved underlying cost income ratio at 67%, which is down 7.6 points compared to 2020 and 2019. Cost discipline will remain a key focus for the group.
Despite the inflationary context for 2022, we expect our underlying cost income ratio to remain moderate between 66%-68% excluding SRF, and we expect this ratio to improve going forward. Let's now, Slide 13, have a look at the cost of risk. It remains low across all businesses. It stands at low 6 basis points at group level in Q4, and 13 basis points for 2021. Our NPL ratio decreases to 2.9%, and our gross progress rate remains satisfactory. In line with the approach we adopted last year, we indicate at this stage that we anticipate the cost of risk to be below 30 basis points in 2022. The key factors behind this low cost of risk remain the same as in the previous quarter. Move to Slide 14.
First, we continue to see a very limited number of defaults leading to low Stage 3 provisions. This reflects the intrinsic quality of our loan portfolio. Second, we continue to take a prudent approach with very few write-backs. Our inventory of stage provisions remains broadly stable at EUR 3.4 billion. By way of comparison, it covers 2.3x the Stage 3 2019 provision. Let's turn to capital and liquidity, Slide 15. Our balance sheet structure remains very solid. The Core Tier 1 ratio increases to 13.7%, leading to a buffer to MDA over 470 basis points. In Q4, the group generates 18 basis points of organic capital pre dividend distribution provision, and 18 in 2021. On top of that, we account for the sale of Lyxor with a positive Core Tier 1 impact of 18 basis points.
Pro forma, the new SREP requirements applicable as of March 2022, this buffer stands at 450 basis points. Going forward, we intend to maintain a minimum buffer of 200-250 basis points above the MDA, including under Basel IV. Our strong capital ratio at 13.7% allows the group, first, to continue to finance the growth of its businesses. Second, to apply its distribution policy while absorbing the regulatory impact, such as Basel IV, but also IRB repair and the remaining TRIM impacts. For the last two items, we expect a total impact of around 40 basis points in 2022, with an important part in the first quarter. Other capital ratio are all comfortably above requirements, and liquidity profile is very solid. I will not comment Slide 16, and I propose you to move to Slide 18.
Let me turn to businesses with the main 2021 achievements. I will not comment in detail slide 18. You have very detailed information in the slide. Just keep in mind that concerning our networks, several key steps have been reached this year. Regarding Boursorama, Frédéric already mentioned the strong acceleration of the client acquisition growth. More specifically on the merger roadmap, I propose to turn to Slide 19. The different streams are progressing as planned. With the legal merger and the IT migration delivered in H1 2023, the group will have secured its ability to benefit from cost savings, materializing mainly for 2024 onwards. By 2024, the group will have to book the residual amount of the restructuring charges around between EUR 500 million and EUR 600 million, the bulk of which, about 2/3, should be recognized in 2022.
The merger is expected to generate cost savings of more than EUR 350 million from 2024, and full benefit of it, EUR 450 million in 2025. Regarding business performance, Slide 20, I will not comment once again the slide in detail. Just keep in mind that loan production has proved very dynamic in Q4, with home loans production at 33%, corporate medium-term loans at 45%, and deposit collection, which remains strong. With regards to balance sheet savings, we continue to see solid growth in flows within life insurance and private banking. Regarding Boursorama, Slide 21, you have once again detailed information in the slide. Just keep in mind that Boursorama saw strong growth on the client base, reaching 3.3 million clients one year ahead of plan.
We now expect the client base to be above 4 million by the end of the year. In parallel, Boursorama continues to progress in monetization. Looking at the P&L, Slide 22, revenues including fintech are up 4.8% versus last year. Net interest margin is up 2.1%, benefiting from TLTRO and PGE, state guaranteed loans catch-up effect. Fees increased by 5.1%, costs are up 4% versus last year due to variable costs linked to the group's performance and also client acquisition initiatives. In this context, jaws are positive and ROAE, adjusted for fair value, is strong at 13.1% in 2021, and 14.4% excluding Boursorama. Let's turn to IBFS, Slide 23, where the year was also very dense.
Once again, I will not comment in detail on the slides all the achievements of the year. Just keep in mind that in our international banks, digitalization is accelerating, transformation is well on track to improve the cost-income ratio of our international subsidiaries. That means the insurance segment 2021 was a record year with high assets under management level in life insurance, as well as higher share of unit link, but Boursorama in France and at ALD posted a record financial performance in 2021 and is positioned to become a global leader in sustainable mobility with the proposed acquisition of LeasePlan. Regarding international retail banking, Slide 24. The commercial dynamics remain solid. Loan outstanding is up 6% versus Q4, and deposits are up +9% at constant perimeter and foreign exchange rate.
With a good commercial activity in Central and Eastern Europe and in Africa, the rebound started at the end of the quarter. The NIM is well-oriented in Europe at 9%. Let's turn to financial services, Slide 25. They put an excellent quarter. Please note that insurance revenues are up 8%. Life insurance reached a high level of outstanding at EUR 135 billion and with 37% share of unit link. In ALD, strong momentum continue this quarter. The funded fleet grew by 4% as of December last year, and ALD still benefit from a favorable remarketing environment with a used car sale results of more than EUR 1,400 per unit link.
In a summary for international retail and financial services on page Slide 26, revenues are up 9.9% at constant perimeter and foreign exchange rate, reflecting positive jaws. Gross operating income is up 18% and ROE is at 20.3% with a contribution to group net income of EUR 2.1 billion. Moving to GBIS, Slide 27. Once again, I will not comment in detail the slide. Just keep in mind that GBIS has delivered on the roadmap presented in May 2021. The reallocation of capital to financing and advisory paid off with a record year. The cost-income ratio improved by ten basis points versus 2019, and the repositioning and de-risking of structured products proved to be efficient, as illustrated by the strong performance. Coming to GBIS, Slide 28. Total revenues are up 9% versus Q4.
More especially, the performance of Global Markets was solid in Q4 with a 10% increase in revenues, thanks to dynamic client activity. Equity has continued to be strong, supported by a favorable market environment. At EUR 727 million, NBI increased by 23% versus normalized Q4. Fixed income activity remained resilient in a challenging market. Revenues were down 9%, but in line with peers. Overall, it was an excellent year for Global Markets, with revenues amounting to EUR 5 billion in 2021. Financing and advisory, Slide 29, registered this year its highest performance on record with an excellent performance across businesses. Annual revenues are up 15% versus last year. We have captured sustained growth opportunities in asset finance, natural resources, TMT, healthcare, ADP. We have also benefited from the good momentum in investment banking.
Performance was also excellent in Q4 with new historically high level of revenues. Momentum was strong across activities in financing, but also in investment banking, with a 48% increase in revenues versus Q4 and in transaction banking up 25% versus Q4. Last, revenues were up 6% versus Q4 in asset and wealth management. Commercial activity continued to be strong in private banking, and in 2021, net inflows steadily grew by EUR 8 billion, and assets under management were up 12%. To sum up, Slide 30. GBIS delivered an outstanding year, driven by on one hand, excellent business dynamics. Revenues are up 25%. On the other hand, it contained increasing costs by 4.7%, mostly due to variable costs and higher contribution to SRF.
Coupled with a low cost of risk, this translates into a strong ROE at 13.9% and even 16.11% excluding SRS, and a reported net income of EUR 2.1 billion. It is 2.2x higher than 2019. I will look very quickly on the corporate center, Slide 31. GIO stands at -EUR 550 million for 2021, and -EUR 294 million for Q4. I will let the floor to Frédéric for the conclusion.
Thank you very much, Claire. Briefly, if I go to Slide 33, it is just to reflect again the progress made in 2021 versus 2019. You can see on the figures how the performance of the bank has been again this year. Again on the distribution side, you can see our policy. If I turn to Page 34, let me really highlight that 2022 will be all focused on the execution, what we call the execution, the delivery of our roadmap in a crucial year because we are preparing for the merger of our two networks. In particular, on the IT side, it's going to be the critical year to be ready for the first half of next year.
Of course, with Boursorama, as we said, the capacity to bring this bank internally safe to maturity, both for organic growth and with ING is very important in terms of future contribution to our profit and growth, and of course, pursue the commercial activity. Regarding international banking and financial services, same thing. We have in mind to close the transaction with LeasePlan in the next 12 months. It's a very important element, of course, our business model going forward, but we do pursue the good development that we have seen. Global Banking & Investor Solutions is really about sustainable contribution to our profit and then pursue the efficiency plan.
Transversally, we will maintain a very strong discipline on cost, and of course, accelerate ESG and digital transformation. Just would like to say to, again, conclude technically, first, beginning of the year was good. We are providing you with some guidance, which I would say are prudent, taking into account a certain number of normalization of revenues. I have in mind capital markets, for example, more something like EUR 4.5 billion. That's a way for us to put pressure again on the cost in the budget construction. On the cost of risk, it's a little bit the same. As I said, I've never seen a situation as good as beginning of this year. As we did last year, we will refine the guidance, so step by step during the year.
We will also take the opportunity of this first quarter to put all the development in perspective, and give you the mid-term financial roadmap. We have announced in the last 18 months a series of initiatives. We have given you different figures, but I think it could be useful to put all that together, including the most recent announcement, and to explain what it can mean in terms of profitability for 2024, 2025. We will do that with the first quarter. That's it for the presentation, and now we are happy to take your questions. As you know, please let's stick to this good discipline, if possible, two questions per person. Floor is yours.
Thank you, ladies and gentlemen. If you wish to ask a question, you may press zero one on your telephone keypad. It's zero one on your telephone keypad. First question is from Madame Delphine Lee from JP Morgan. Madame?
Yes. Hi. Morning. Thanks for the presentation. I have two questions. My first one is on your new cost income target of 66%-68%. Just wanted to understand a little bit what that means for the absolute cost base. Is the intention to reduce the cost base without the restructuring costs? Or, I mean, just wanted to get a bit of direction about, you know, what you're assuming in this guidance. My second question is on capital. You're basically saying you're gonna be above 200-250 basis points over MDA even under Basel IV.
Given your starting point end of 2021, it does sound like your Basel IV guidance has changed, or just kind of wondering if you could just give us a bit of, you know, maybe an updated number for Basel IV and also the different moving parts, because you're also having 40 basis points regulatory impact for, I think, 2022. If you could just explain a bit, that new guidance as well. Thank you very much.
Yes. Hello, Delphine. I will turn the floor to Claire to answer your two questions.
I will start with the second one. Regarding Basel IV, our guidance hasn't changed. I guess at the last time, William had confirmed an impact around EUR 35 billion RWA, less than 115 basis points, for both Basel IV and FRTB. We confirm that. As I explained in the presentation, we confirm our steering buffer between 200-250 on capital. It's comfortable right now, but we confirm it, and we don't change our guidance on Basel IV. This is the answer for your second question. The first one, coming back to cost.
As I said, when it comes to 2022, we expect an underlying cost ratio between 66%-68%, excluding SRS. It's worth mentioning that this guidance is based on the run rate mid lifecycle of market revenues in an uncertain environment. It is, let's say, cautious or conservative. This guidance, we consider, illustrates our ability to contain rising costs in an inflationary environment. If you come back to 2021, we have been able to demonstrate that our cost base is decreasing, excluding variable costs linked to performance and of course, costs linked to SRS. To sum up the trend, we have a lot of initiatives in order to contain our cost base.
You have, for example, the Vision 2025, the merger between the French networks that should deliver EUR 350 million cost base below 2019 in 2024, and EUR 450 million below the 2019 cost base in 2025. We have also the initiatives in the investment banking regarding the refocus. We have a lot of initiatives in Central and Eastern Europe regarding digitalization that should lead also to improve our cost-to-income.
Thank you. Next question.
Next question is from Madame Giulia Aurora Miotto from Morgan Stanley. Madame, go ahead.
Yes. Hi, good morning. Can you hear me?
Yes, perfectly well.
Okay.
Hello, Giulia.
Perfect. Yes. Two questions from me as well. The first one is on ROTE, return on tangible. 2021, we can say, was an exceptional year. SocGen delivered the underlying, you know, 10.2%. How are you thinking about the through the cycle, you know, ROTE target, especially, for example, in 2022, as you have already mentioned some normalization expected in your guidance on the investment banking side? That's my first question. On ING. I understand that Boursorama will basically acquire around 1 million customers from ING. In terms of revenues, costs, what can we expect from those?
Because I think, you're not taking over the loan book, so yeah, how can we think about the impact on financials there? Thank you.
Giulia, I will leave the floor to Philippe for your second question. Can I say we will answer actually your questions more in detail in the first quarter. Really would like to just take the time the coming three months to fully digest precisely all our initiatives to provide you with the answer. May I say, yes, we factor the normalization of certain parameters in the PNL, I said, on certain revenue lines or on the customer risk, a progressive one. Of course, what we have in mind is that all our initiatives, I'm thinking about the merger of the French networks, the efficiency plans, of course, the benefit of acquisitions, which are relative, will help to precisely compensate for the normalization of these parameters.
I say to you, first quarter you will have, but clearly we have in mind to deliver an acceptable return on equity, on tangible equity to our shareholders. Of course, also on a 41, as we said, with this buffer of 200-250 basis points above NGA. Really, this is the plan. We'll be able to give you really more detail in the first quarter. Boursorama, same thing, will be also part of it. What can you say, Philippe?
Yes. Good morning. Yes, of course, we'll disclose more information later because, as you know, we are still you know, discussing with ING. What I could say is that it's not an acquisition per se. I mean, it's a referral agreement, which means that you know, the clients will have the possibility you know, to come to Boursorama. We are fully convinced that we have the best offer for them.
In terms of product, services, digital experience. What I can also share with you is that it will not be a transfer of 1 million clients. First, because some of these clients are already inactive, so the number will be smaller. After once the clients I mean will be transferred, of course, as we do for the existing clients, we will develop the relationship selling, you know, all of products and services because as you know, Boursorama has a full range of products and services. Of course, the priority for us will be to develop with all the relation with these clients who are clients with high potential and clients who are already familiar with a 100% digital experience.
If I may, really, I would like you to consider ING, if I may say, it should be a nice acceleration, but of an organic growth, which is accelerating itself. We were able to capture 100,000 new clients just in December last year. So it shows really Boursorama is, I think, a very successful model. At the end of the day, we are a year ahead of our plans, so it will be also reflected in the financial trajectory of Boursorama. Again, we will elaborate on that in the first quarter. Next question.
Next question is from Mr. Jacques-Henri Gaulard from Cheuvreux. Sir, go ahead.
Yes, good morning. One observation and two questions. The observation, congratulations for the return, for having done all these initiatives. When I think we were at EUR 11 back during the pandemic, we can actually look back. Congratulations on you guys. First question on the back of this observation is, you are well known as a management team to really get out of very, very difficult situation, and you've proven it. The counterpart of that is, you know, in development times, it's always a little bit more difficult, and you don't really fulfill your promises. What is different this time? That's the first question.
The second question is, on the Single Resolution Fund, your competitor from the other side of the Seine is probably going to pass a lot of the Single Resolution Fund down to the P&L to accelerate the cost income ratio decline. What is your thinking about what you will do about the SRF release, if any? Thank you.
Henri, first of all, thank you for your comments. If I may on your first question, first of all, maybe we are precisely changing the present guidelines, but beyond, I would say there's a very strong focus on execution. That's why, really, it's up to us now to demonstrate quarter after quarter. I think we did it in 2021. Not just on dealing with difficulties, yes, on the current state of the market, but what I would like to highlight, we have delivered also on the rest of the businesses, where there were no specific difficulty actually. I think here again, all the management team is focusing on this and, let's deliver quarter after quarter.
As I've said, we will give you a little bit of flavor on what we dictate. I agree, 2022 to a certain extent is as important as 2021 because it's around also getting ready on all our projects to enter 2023. I'm very confident with the current momentum, the positive energy across the board to deliver. Regarding your question on Single Resolution Fund, to be frank, it will be a pure benefit for the bank. If I may, first of all, this tax is really the result of a bad negotiation by the French government in 2014. It's a tax paid by the large French banks, largely to finance the hypothetical bankruptcy of small banks in Europe.
Let's face it, as we say, yes, there will be a further increase in the next two years, just because mechanically the way it's calculated penalizes, in practice, the French banks. This is true for all of us. At the end of the day, again, that's why we try to communicate, if you wish, to make it easier for you. Excluding the SRF, which again will increase in the next two years. After this, it will disappear, and it will be, of course, a structural benefit for the bank because it absorbs, if you wish, to a certain extent, the capital, in a way, capacity to invest.
The idea is we want to look at the cost income ratio excluding SRF, precisely to show you the progress that will be made from 2022 to 2024 to 2025. Next question.
Next question is from Madame Azzurra Guelfi from Citigroup. Please go ahead.
Hi, good morning. Two questions from me. One is on the CIB business. You've done several restructurings in the last few years, and finally, we are seeing a good outcome of all this restructuring, both on the revenue resilience, but also on the cost. Can you give us a little bit of color on if the market conditions that we have seen at the beginning of the year were to characterize the rest of the year, how this could impact the revenue environment? And how do you think the cost reduction that we're seeing in the fourth quarter is gonna be more structurally going through? The second question is on the rate sensitivity. Can you give us some indication of the group sensitivity? Thank you.
To rising rates.
Hello, Azzurra. I will turn the floor to Slawomir to answer your first question and Claire on your second one. I just would like to say, on this theme of inflation and interest rate, I think the jury is out still regarding how long inflation might last. Clearly, I think we will see pretty strong figures this year again, but the question is what kind of growth shall we have going forward? There are structural elements such as the demography, the aging population in Europe, etc., which in two or three years' time, if I may, at least with the excess of spending, etcetera, of saving, sorry, which can contribute to moderate the increase of inflation.
Let's see how it goes, but at least what is fair to say is probably we are now facing a better environment potentially going forward in the mid-term than the one we could have had in mind 12 months ago with this extraordinary situation of low and even negative interest rates. Again, Claire will answer your question. Now, Slawomir on CIB.
Good morning. Let me put it this way. We have grown the business 25% and grown the costs by 4.7%. Mostly because of variable costs linked to compensation and increased SRF. This is what we wanna do, because this shows you that our structural costs have declined on the back of all the efforts that we have already made, and the ones that we are currently making in, you know, relation to the roadmap that we laid out last May. We will keep on doing this, meaning reducing structural through-the-cycle costs while making sure that we can take full advantage of all the opportunities for growth that given market conditions offer us. This is the thing.
We will continue to decrease our structural cost base according to the plan that we laid out, making sure that our break-even point gets lower over time. Now in terms of the revenues, the way we see 2022 is a year of somewhat normalizing conditions in a you know post-pandemic world, which faces a number of tail risks and also you know more traditional macroeconomic risks, as you know. We expect overall the year to be normalizing in terms of revenues, especially on the Global Markets side, and we will therefore decrease you know the variable costs associated with the top line.
Now, it is a fairly cautious approach in terms of how we look at the year, and I would say that that we see some upside potential should the scenario materialize on the base case, which is inflation slowing down and no materialization of the tail risks that are out there in the market. If that's the scenario, we could see some upside because we see a lot of activity and markets which remain, let's say, acceptable.
Thank you. Claire?
Regarding interest rate sensitivity, we have a positive sensitivity, considering our business, our retail businesses. You've seen this year, for example, that, in Eastern Europe, we did-
Despite loans only being up 2%. If you could maybe clarify some of that. And then secondly, I recall the target was something like EUR 200 million of net profit from Boursorama in a couple of years once you cut, you know, some of the expenses, the cash backs and acquisition costs. Does that go up in line with the higher client base? Because I guess the idea was that Boursorama was unprofitable because of these high acquisition costs that presumably you need less of those given how far ahead you are on client acquisition. And then sorry, a tricky one. I see that Monsieur Krupa is on Bloomberg stating that bonuses in GBIS will rise massively, I believe, were his words. Could you give some color on that statement?
Because, you know, as you stated earlier, if I look at markets, revenues were up, you know, almost 40% last year, but OpEx is barely higher on an adjusted basis. Just some color on that, please. Sorry for the amount of questions.
Yeah, no, Omar. Hello, good morning. I will leave Philippe and Sébastien answer your two questions. Slawomir is there, so what I can just say is the bonus has been provisioned, so it's in the cost line. I don't know if the net yield, but it compares with sales, but at least we reward the performance. Slawomir will comment also. Sébastien first, we don't give a guidance for 2022, but just to explain the dynamic of the revenues and the parameters.
Yes. Good morning, Omar. Maybe let me start by talking about Q4 net interest margin evolution. 'Cause I mean, as you said, on a year-on-year basis, it's + 6.7%, which is solid, obviously. The main drivers are first rebound in credit production, mainly as Claire just told in home loans and main long-term loans for corporate, excluding PGE.
A second factor is better credit margins, again, in investment loans for corporate and to a lesser extent in home loans. Third point, deposit margin, which is slightly down compared to Q4 2020, but with a slight decrease because we were quite successful in converting sight deposits into saving and investment product. The last factor is the TLTRO catch-up effect this quarter again, because group Credit, you know, which the target at the end of 2021, so there is benefit of the second bonification of TLTRO at Crédit du Nord level in Q4. That's for Q4. Regarding 2022, as Frédéric said, it's really too early to give you guidance at this stage.
Let me just say that commercial activities since first days of January is good. Obviously we will have to absorb in 2022 the increase of the increased interest rates of the Livret A, this savings French product. And also we would have a negative base effect mainly due to the TLTRO and PGE catch-up effect we got in Q3 and Q4 2021. Having said that, we will come back to you early May with the Q1 results and give you a more precise color of the guidance on the French retail revenues.
Thank you. Philippe on Boursorama.
Yes, again, we cannot disclose today too much detail, but yes, the more clients, the better profitability of Boursorama will be. Again, one of our priority is to make sure that we have a full range of product services in order to monetize the relationship with the clients. This means, for example, in 2021, you know, new savings products is a means to a huge effort regarding mortgages, and you can see in the numbers. It also means an effort to develop the non-banking product. You know, if you go to the Boursorama website, you have the corner, you know, and we are selling the products of 70 partners. Definitely, the number of clients will be a huge asset.
that you know ultimately the goal for Boursorama to have a strong client base and after we have already started you know to develop the capacity to sell products, services on the long-term basis with all these clients.
Thank you. Slawomir, your comments on Bloomberg.
Let me put it this way. First of all, I encourage you to read the entire article, which will give you the exact context that you are referring to. The context was you were massively down in the context of a performance which was what you know it was last year, and in the context of the competition on the market. My answer was, yes, we have an outstanding performance, and therefore we have a very significant, that we can debate whether massive or very significant is the most appropriate adjective here.
We have obviously rewarded the performance in a market which is competitive and in which we want to be competitive. Now more precisely, I told you earlier, without the SRF and without the variable compensation costs, our costs are down.
Thank you. Next question.
Next question from Madame Flora Bocahut from Jefferies. Madame, go ahead.
Thank you. Good morning. The first question I wanted to ask you is on financing and advisory revenues, which continue, you know, to show very good momentum. Based on the comments you make in the slide, this seems to be a bit across the board. Just wanted to ask you on the outlook there. You know, obviously we have a high base now after the strong performance the past two quarters, but do you think that you can grow the revenues further on that base and especially this year in 2022? And then I have just two very quick clarifications if I may. You just talked about the TLTRO bonus from Société Générale this quarter. Can you maybe quantify how much that contributed this quarter, please?
Just on Boursorama also, you know, you had presented us a plan in December 2020 where you were saying once you get to 4 million clients, you want to switch to a less aggressive customer acquisition phase, which I think you called the stabilization phase, and at which point we have this huge swing in the profitability of Boursorama. Is it still the plan? The 4 million number is the number at which you see the swing in profitability? Thank you.
Hello, Flora. Yes, I turn the floor to Slawomir, and then Sébastien and Philippe to answer briefly your two questions. Slawomir.
Good morning. Let me put it this way. Why do we have this kind of performance? Because we have a combination of factors. One, we are strong in these businesses with very high level of expertise from the sector and product and advisory perspective. You couple this with additional capital
You know, in line with what we said is last May, we are rebalancing the capital allocation towards this business, so there's more capital there. Three, you have a conducive market, and four, you have trends in these markets that are particularly well-matched with what we do and where we are active. You take these four features, and you have the kind of performance that we're showing. For the following years, we intend to keep our focus on this business. We intend to keep on supporting it, but it will obviously somewhat depend also on the market conditions. Our current view is that it will remain fairly conducive. Obviously, with the base effect, we don't necessarily expect 15% or 20% growth rates in 2022, but we expect to do well.
Sebastien?
Yes, Flora. I will not give a precise number on you. I mean, let me just say that this over bonification at group credit loss level is not big in amount, and it doesn't change the picture. I.e., even if we benefited in Q3 and in Q4 from this GLGO over bonification, the NIM increased even without your over bonification, and it's true also in Q4 compared to Q4 2020.
Philippe for Sana?
Yeah. I mean, the 4.5 million clients is not the end of the game. I mean, we do consider that, you know, it was necessary to reach this number, which is a kind of 4.5 million-5 million. It's a kind of, you know, critical size. Thereafter, as long as we, you know, can monitor the acquisition cost, we will continue, of course, to accept clients. You know, what is interesting in 2021 is that we have acquired a lot of clients, not because we have spent more money, but because we have improved the onboarding process. We have also improved our digital marketing tools.
You know, as long as we are able to continue to monitor and to control the acquisition cost on one hand, and on the other hand, you know, to continue to develop our capacity, as I said before, to sell products and services, we will be happy to continue to improve our customer base. If you look, you know, I encourage you to look at some numbers. You know, there is a press release today of Boursorama, you know. You know, 750,000 clients six years ago, 1.7 million three years ago, 3.3 million today with 800 people.
You know, again, I mean, what is very important is also to continue to control the acquisition costs and simultaneously to develop revenues with these clients.
Thank you. Next question.
Next question is from Mr. Kiri Vijayarajah from HSBC. Please go ahead.
Yes, good morning, good afternoon, everyone. A couple of questions. Firstly, in terms of the approval process, with the ECB for the buyback, I was just wondering, you know, when you're in the middle of reasonably large acquisitions like LeasePlan, maybe ING France, not so large, is there an expectation from the ECB that you need to take a bit more of a cautious approach around sort of payouts and buybacks? When these deals are hopefully out the way at some stage, that there's going to be more aggressive when you next sit down with the ECB, perhaps. Just wondering how the ECB approaches these kind of payout discussions when, you know, a bank like Société Générale is very much in sort of acquisition growth mode.
Second question, just quickly on the corporate loan growth in French retail. I know you said the new production's pretty healthy, but when do you think we're likely to see more sustained growth in the actual stock of loans? I guess there's a lot of short-term stuff that's, you know, rolling off at the moment. Just the volume dynamics there, especially with regard to what you're seeing with the business loans in French retail. Thank you.
Hello, Kiri. Just, I will let Sébastien answer your second question. No, absolutely not. We have always been very clear, you as well, the SSM on our payout ratio policy to maintain it 50% for the next three years. We said that it was well suited for a bank with organic growth opportunities as well as, of course, acquisitions. We had in mind, as you know, of course, the ALD this time we presented to the SSM, we have an optimized structure, which means a 40 basis points impact is very manageable. The 50% is not a surprise, and the share buyback is within the 50%. It's not on top of that.
I see absolutely personally no difficulty with the SSM, but we have of course to go through the formal approval. We can't escape that. Now, Sébastien, on the outstandings.
Yes. For major networks, our outstanding are down quarter-over-quarter. I mean, year-on-year, Q4 2021 compared to Q4 2020.
Up versus 2019. You're right, Kiri , the evolution was penalized by the short-term activities still under pressure on consumer loans and short-term credit to corporate. I mean, in this environment of excess liquidity, having said that, credit production was very dynamic in Q4 for mid long-term credit to corporate and home loan. Keep in mind that, more broadly, we have a selective, or we keep a selective approach in terms of credit production in an environment which remains quite uncertain. In a context of low rates, we want to protect our margin. We are quite selective in order to get also the positive impact on our cost of risk.
At the end, it's the combination of all of this which explains our credit policy, which is again, quite selective in order to protect our margin and the cost of risk.
Thank you. Next question.
Next question is from Mr. Tarik El Mejjad from Bank of America Merrill Lynch. Please go ahead.
Hi, good morning. Allow me to come back, please, to the costs in CIB. I'm really struggling to get my head around this evolution of costs versus the revenues. You've been mentioning a few initiatives, and to be fair, I lost track a bit quarter- after- quarter on where you are at what level of achievement on that. Maybe to help us, can you give us a breakdown of your costs between fixed and variable, as some large CIB banks do? Because that will help us to really understand, yes, your variable is higher from a very, very low base, as you just said, but I'm interested to see what's the risk of acceleration costs from the variable because competition for talents is clearly there in Paris.
My second question is more general. Frédéric, you seem to be suggesting, I mean, you've done 10% ROTE in the bank this year. The plan could be around these levels. Yes, you have normalization of CIB revenues, higher cost of risk, inflation picking up, and also you don't have really normalization of your CET1 ratio because you're already kind of there on above 4% and after this plan. You have some offsets to that. But you'll be really firing on all cylinders with no room for issues in execution or unforeseen circumstances. Is that thinking correct? Or, just on that, for the CET1, as I said, you are 12% above 4%.
You won't have this element where you have some ammunition to do more M&A and grow faster organically if the growth is still there. Do you think you can have some extra cash at the plan to, when you present the plan, to be able to fund that growth? Thank you.
Tarik, I will let Slawomir answer as much as possible on your question on the variable cost. Briefly, can I just say, I see two different years. From now to 2024, if I may, with what we've announced, we have a lot already to do, and I think with a lot of benefit for our shareholders. Effectively, as I said, I can't give you two precise figures, but in practice, taking into account the normalization of certain parameters, to compensate by delivering on time all the different initiatives we have on our plate. As I said, end of 2022, our shareholders will have a pretty good clarity on most of these projects, actually. That's where we stand.
We have enough cash to finance the organic growth. As I said, I don't have in mind to make multiple acquisitions in the next three years to consume capital. Once we have absorbed the Basel IV, we have this structural good profitability. We are generating a lot of capital. As I said, we will have to decide how to use that payout increase acquisition. I mean, we are not looking at acquisition for the sake of doing acquisitions, to be frank. I must say, I think we have shown also the capacity to grow very well organically. ALD LeasePlan was, in my view, a unique transaction that we have been again working hard for many years.
I think it's really a good balance for the next three years. It's pretty clear. Our roadmap is pretty clear. It's not an issue. We are going to land, if I may say, and of course, deliver on this new business model, which I think will deliver a pretty good profitability at the end of the day. Of course, we need to deliver. As I said, the execution will be key. We are confident, and 2022 will be very important from that perspective. Slawomir.
Good afternoon. Let me walk you through my reasoning. We're not disclosing fixed and versus variable costs, but let me try and help you anyway. One, we have a massive increase in revenues, which is obviously linked year-on-year to the level, much lower level that we had, abnormal low level that we had last year. It's achieved through repositioning, restructuring, recovery, and a number of things we've done. I'm talking about the top line here. But it was not done with massive recruitments, for instance, right? We believe that with the other statement I made, which is without the SRF increase and without the increase in variable compensation, our costs are down.
We are moving forward on the -EUR 450 million of costs that we talked about last May. We're in the middle of that, and we are delivering more or less according to plan, and this creates room for maneuver to increase significantly the variable compensation. Again, without the SRF increase and without the variable compensation increase, our costs are down. In terms of how we are competitive versus the market, two thoughts on my end. One, we obviously, you know, understand that in this particular business, it is a critical concern to make sure that you can acquire and retain and develop talent. Obviously, we are doing something that I think is responsible there, being able to be competitive.
Now, the real measure here is at the end of the day, your compensation ratio. While I'm not gonna disclose it to you, think about it as in line with most of our peers that have similar business models, right? I have much lower footprint, to say the least, in terms of M&A in the U.S., on the domestic side. I don't need to compete with JP Morgan or Goldman Sachs in hiring in this particular segment of the market in the US. That's also something you need to take into account.
Lastly, longer-term view on this compensation topic on my end is that it's a cycle, and at some stage you will not be able to sustain this increase in costs in the context of a pool which I don't see rising at the rate at this stated rate of the rise in compensation costs. As you well know, in the last 10 years you had a very significant workforce adjustments that were, you know, implemented by the same people who are now driving the increase in compensation costs. You know, 25% cuts in the total workforce of a particular business line is not something uncommon.
Once these kind of things kick in, and they will, at some stage, the market will normalize on this front as all markets do in cycle dynamic.
Thank you. Next question.
Next question is from Mr. Stefan-Michael Stalmann from Autonomous Research. Please go ahead.
Yes, good morning. Thank you very much for taking my questions. I have just two small follow-ups on capital, please. The first one on the increase of your P2R requirement. Can you maybe add a little bit of color around what has driven that exactly, and whether you're doing something actively to actually reverse it and what that may be? The second point, your friendly competitors have guided to expect some small headwinds to the CET1 ratio from FX risk in the banking book and from IFRS 17. Are you expecting to see a little bit of regulatory creep there as well, please? Thank you.
Hello, Stefan . Claire will answer on IFRS 17 and also the increase. You have two elements in the increase of P2R. Claire?
Regarding P2R, we received the TRIM notification, and it led to a limited increase of the P2R from 1.75% to 2.12%. What you must keep in mind regarding this slight increase is two things. The first one, the TRIM decision was based on data that were dated 2020, which was of course the COVID year, which was before all our strategic moves. Since that period of time, the group has changed. First, of course, we have an increase in our revenues and in the trend. Second, you have all this workload that has been performed on the CIB business with the refocus of our activities, the reallocation of capital towards financing businesses.
We had also all the work that has been performed on the rest of the capital trajectory. Since that period of time, things have improved. Of course, we will have a discussion with ECB. The second thing you must keep in mind is that even after this slight increase in the P2R, we still have a very comfortable buffer above MDA because as we shared with you, this buffer is currently 470 basis points, and after the P2R, it still is 450 basis points, which is far above our steering buffer of 200-250.
This is for your question regarding P2R. You had another question.
S
orry.
Yes, regarding IFRS 17. We still are working on the impact of IFRS 17. It's too soon to comment, but the impact will be very limited and manageable. It's factored and completely in our capital trajectory and in the target we gave regarding the buffer over MVA. Maybe please keep in mind that we are not in the context of some banks that had to communicate on IFRS 17. The magnitude for SG is really far below, so it's completely manageable.
I must say, I don't know what our competitor was referring to in terms of impact of foreign exchange, because the capital one is to a certain extent aligned with our risk-weighted asset-
Yeah.
composition. So
Yes, we have an idea.
Yeah.
Yeah.
I don't know, maybe you need to check with them a little bit more. At least from our side-
Yeah.
We don't have that in mind.
Yeah.
No.
We hedged our forex risk on quarter one, so I will look more in detail, but I don't consider it could be an issue.
Next question.
Next question is from Mr. Pierre Chedeville from CIC Market Solutions. Sir, go ahead.
Yes, good morning. Not a lot of question left, but two questions that we could maybe discuss further in one quarter, but just to give an introduction. Regarding your merger, ALD LeasePlan, one of the key items regarding a growth driver is the electrification of your fleet with a very aggressive stance compared to some peers in the way you want to develop this electrification. My question was, aren't you worried regarding the fact that some [carmakers] say that it will be very difficult to provide all these electric cars in the coming years because of a shortage in supply chain? And I want...
I was wondering if it could hamper a little bit your targets in this merger, this shortage of electric cars in the coming years. Another question is regarding private bank, which is more or less the poor parent. I don't know if it exists in English. The poor parent of your financial communication. I wanted to know if now you consider that your restructuring is over, and particularly in your foreign setup. What was your net inflows in this business this year? What are your main ambitions regarding this division? Thank you.
Hello, Pierre. I will turn the floor to Dumas for your first question and Sébastien, for your second one. Dumas.
Yes, thank you Pierre for the question. The drivers of all this business are quite important and really reflect structural and long-term trends. Of course, electrification is an important one, you mentioned it, driven by indeed the need to reduce the CO2 emissions. We see all our clients accelerating. We were in Q4 at already 30% EV in total deliveries, which was our target for 2025. We are really ahead of plan. We are giving a guidance for this year, which will be that we'll be above 30%.
There are other trends which of course will favor the growth of this business. You mentioned our plan and proposed acquisition of LeasePlan. This we have already commented on it. It will give us the scale and the firepower which will allow us to really grasp all the opportunities of this mobility sector. It's a secular growth which is here to last. We said that after the integration, we expect to grow at 6% a year. Regarding the question on the shortage of supply, we don't see that. We really see on the contrary manufacturers accelerating the electrification of their fleet.
It is pushed also by the regulatory framework, and there are cities where you will not be allowed to drive ICE cars in a few years. We also benefit from very strong partnerships with the main manufacturers. We are by far the largest partner of Tesla, for instance. These partnerships allow us to be quite present in this market, which we believe will continue to grow.
Thank you. Sébastien, private banking.
Yes. No, Pierre, thanks for your question. Private banking is an important business. It's not left aside in our strategy. Thanks for the question. Let me just summarize 2021 by saying that net inflows
We were very significant in 2021, close to EUR 8 billion with half in France, which is very good. In terms of AUM, it's 130 billion. Again, +12% 2022 compared to 2020. NBI is up 12% 2022. With a strong positive geo effect, with OpEx +20%, then decreased cost/income between 2020 and 2021. Having said that, the strategy is the following. First, keep working on the costs, and especially in Europe, with this very important project to outsource, externalize to Azqore, a company owned by Crédit Agricole Indosuez and Capgemini, to outsource IT and operations. That's something very important.
The first migration will take place this year for Switzerland, then Luxembourg, Monaco, and our UK business. Second point, increase synergies between our different geographies and especially using Luxembourg and Switzerland to enrich the products and the offer we make to our clients. Third point in our strategy, make the synergies between French Retail and Private Banking on the French market something tangible and real. You know that we can do more with our affluent clients on the French market. We have very strong position on the private banking segment, but we could improve the [equitisation] on our affluent clients, retail clients, having between EUR 150,000 and EUR 500,000.
Here, that's the kind of area where we could benefit from more growth by leveraging our private banking G&A and offering.
Thank you. Next question.
Next question is from Mr. Guillaume Tiberghien from Exane. Please go ahead.
Good morning. Two clarifications, please. Do I understand that your resolution fund contribution will go up as much as 30%-40% this year? I don't really understand why there's such a massive jump. The second one, maybe I misheard earlier, but when you talked about Basel IV RWA inflation, did you confirm the previous EUR 39 billion or you fine-tuned to EUR 35 billion the RWA inflation? Thank you.
Hello, Guillaume. Yes, I think we can confirm both our estimate. Again, you have, it's an estimate, which takes into account different parameters, relative size and so on. Banks which are growing are by essence penalized. Also the mechanics for the French banks in particular, there's a specific catch-up situation, the calculation for all French banks, as far as we know, normally. Yes, we are unfortunately forecasting this kind of jump. I'm not sure to have understood your, the subtlety. We said EUR 35 billion, and I think it was in line with previous guidances for all the risk, operational, credit, and market risk in 2025. All in all, something similar as previous guidances. Next question.
Next question is from Matthew Clark from Mediobanca. Sir, you go ahead.
Good morning. Can I come back to a couple of cost targets you gave in your slides, this time last year and at the Retail Day? Back then you had a 2023 underlying cost to be below EUR 16.5 billion. Now I know there have been scope changes since then with Lyxor and with LeasePlan, and from what you've just said, there's also a change in the Single Resolution Fund contribution. If we adjust for those two items, would you still stick to that kind of 2023 underlying cost to be down versus 2020 on an underlying basis guidance that you gave a year ago?
With respect to the EUR 5 billion 2025 cost for the Société Générale and Crédit du Nord networks combined, do you stick to that target that was given at the time of plan announcement? Thanks.
Yes. Hello, Matthew. First, we confirm on the EUR 450 million target for the French retail. Exactly as you said, the 16.5%, which was given two years ago, is not any longer in any way relevant with all the changes which have happened, and including on the revenue basis. We will update again in first quarter where we want to land in terms of cost-income ratio. We've given, if you wish, a guidance for 2022. What I can say, the discipline on the cost remains. As we said, the previous plans, efficiency plans are confirmed, whether it's on GBIS or the French retail.
There's no change from that perspective, but obviously, with the changes in the business mix, et cetera, we will update you in due course, but, the figure is not any more relevant, obviously, an absolute figure like this. Next question.
Next question is from Madam Anke Reingen from RBC. Please go ahead.
Thank you very much for my question. I just wanted to ask about the 50% payout ratio and the mix. You reverted back to your previous mix commentary. I just wondered under what conditions would you change the mix, and is the absolute dividend you pay a consideration? Could we see a shift towards a higher weighting towards the cash dividend versus buyback? Just if you can talk a bit about more the parameters how we should think about you define the mix. Thank you very much.
Hello, Anke. Again, as I said, the idea is really to come back to at least 80% of the payout. We want to pay 50%. 80% of that at least should be the dividends, the cash dividends. Max 20%, so a fifth of the distribution, as share buybacks in 2022 onwards. We made an exception really this year because we considered that there was still a good opportunity between, you know, EUR 165, which gives a 5% yield, and again, the capacity to buy back shares cheap.
The whole purpose is to think, if I may, that with an additional year of 2022, there will be a further catch-up of the share price with more clarity on the big projects, a further delivery on the portfolio results. We thought it was from an opportunistic point of view, a good thing to accelerate the share buyback. It's not. It's there's not nothing more than that, but we will come back to the previous thinking in 2022 in our Q1. Next question.
We have no other questions, sir. Back to you for the conclusion.
No? Well, listen, thank you for attending. Again, I know you have a busy day, so thanks for your time, and see you soon, and hopefully keep safe. Thank you very much. Bye-bye.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.