Ladies and gentlemen, welcome to the Societe Generale Conference Call. I now hand over to Frederic Houdet, Chief Executive Officer. Sir, please go ahead.
Good morning to all of you. Thanks a lot for attending this call. As usual, with William, our CFO, I will make a brief presentation, and then we will enter into Q and A. So let's turn to Slide 4. I hope you have the documents with you.
Let me just highlight The few core items of this quarter, of course, which is the quarter of the lockdowns and so we see the impact of the COVID crisis. What I'd like to highlight is the improvement in all activities since mid May. You will see some chart, Which on a monthly basis reflects this improvement. Overall, we see a drop of revenues With a contrast situation, I don't enter into the detail. William will go through that.
A strong decrease of the cost of risk sorry, the cost, 9.6%. And we confirm that We are well on track to deliver our guidance for this year of €16,500,000,000
The cost of risk stands at 1 point
€279,000,000,000 clearly much higher than last year, which was a low level. I'm sure we will comment a lot and answer your questions. As you can see, more than half is related to Stage 1 and Stage 2, which means forward looking on one hand and also the impact of the Downgrading of internal ratings, we give a lot of information on that. I won't comment further. What is important, I think, That with more visibility for this year, at the end of July, we say that we should converge towards the low And of our revenue, 70 basis points to 100 basis points, knowing that the cost of risk was 81 basis points for the first There is some maybe noise that everybody could hear on mute.
That would be good To avoid this noise. Let me just highlight as part of our results, we have 2 exceptional one off For non cash items, William will comment it's around the goodwill and deferred tax asset related to the change of financial So trajectory of our capital market activities. Last point, core Tier 1 at 12 0.5%, same thing, we spent time on this. It's a very solid core Tier 1 ratio. All of the capital Total liquidity ratios are strong.
And same thing, we confirm that we will be at the high end of our range, 11.5 12%, knowing that we have had already told you that we plan to have all our regulatory impacts Tremend and invite this in the second half. We plan also for more capital on the operational risk And nevertheless, we'd be at the high end of our range. Page 5, just one word on the structured product As you know, we suffered further in April beginning of May of certain market Dislocations, but we've seen since mid May the progressive normalization. What we have done in the last 2 months is design a new range of products, The balance between the different products, which should on one hand reduce the risk if we were to face Similar situation like the one we experienced and reduced by half. Maintain in terms of So market share of our franchise probably have an impact on revenues given the nature of the product Between €200,000,000 250,000,000 that we will more than compensate with additional cost reduction initiatives by €450,000,000 Same thing.
I'm sure we will comment further on this. And Page 6, Before turning the floor to William, when I look at the bank and beyond the financial parameters, I think we first of all, we are there to accompany our clients. And it's very important because going forward, It's kind of capital on which we can build. It's very true with the French clients with the guaranteed loans. We I have allocated for €19,000,000,000 of these guaranteed loans.
We were there. It's true also for large corporate. When you look at So our market share, big tables, we maintain and sometimes gain market share. So I think it's positive for the future. For the retail clients, it's important we have signed a new partnership with Amundi, paving the way to an open architecture For our retail clients and providing the best of asset management products with a strong CSR component.
And 3rd, on the digital, further product progress, sorry. Boursorama actually Made money in the Q2 with less marketing cost, more revenues on the execution on the markets And gained 267,000 new clients in the first half. We made a nice acquisition of a neoband that is dedicated It's a entrepreneur in France called Shine, and we've developed nice things across the board. In ASG, which I want To be enshrined really in the strategy of all the business, we have a number one position in midyear In terms of renewable energy financing, number 1 in the world. We have further enhanced our policy To exit core financing, and we are developing our innovative offer.
We've put the ARD example. As well as beyond climate, I must say ensuring that our company further develop diversity and fight against Any kind of discrimination. And first, business efficiency, we'll come back to that. Of course, we know that we need to pursue the effort on the cost. I turn the message to William to give you more detail.
Hello. Good morning, everyone. So I suggest we go to Page 8 with a traditional overview on the group performance. To begin with, the net income For group net income adjusted for exceptional noncash items is positive this quarter at €70,000,000 7.0 With the published net income, including the 2 exceptional factors that Panaca Bank has done, is negative at minus EUR 1 €1,264,000,000 what are we talking about? As Frederic mentioned, we have some impairments of goodwill for 6.80 For million revolving around the entity that encompasses market activities and securities custody As well as an impairment of deferred tax assets for €650,000,000 I'd like to take the opportunity to mention that As you're aware, this is not unique to Societe Generale and this type of impairments, particularly this quarter.
But just to remind everyone that We have fairly low goodwill in percentage terms relative to our shareholder equity. That's about 7%. That Positions us at the bottom of comparables in terms of percentage. And same with DTAs, we have Approximately 9% would be slightly down given what I've just said. And that's pretty much at the low end of the comparables.
This is not a big issue for us. This is obviously a non cash item and this has absolutely no impact on capital, very marginal. Issue in terms of capital. So when you look now with a concrete view at Businesses, you have pretty much the same pattern, which we're going to comment more in detail upon. First of all, you have a performance in revenues that has been severely impacted on by the COVID crisis Until mid May in French Retail with a fairly strong recovery ever since.
At the same time, we increased Quite significantly, our provision for risk, essentially forward looking That's how French Retailer is concerned. And we have a very strong discipline on cost, minus 8.5%. So that's Translate into a book net income for French Retail at €60,000,000, six-0. You would say something very similar for International Retail Banking, Well, you have a decrease in revenues of about 9%, which is a combination of the confinements impact on production With the interest rate cuts in Czech Republic, Romania and Russia, we see a clear rebound in June And ever since mid May for those who have been confined before, where loan production is much higher than Q2 2019 monthly average, There again, increasing cost of risk, particularly pertaining to forward looking and strict cost discipline, minus 3%, 2.9% to be Precise. Net income positive at EUR 83,000,000.
Financial Services show resilience as usual. Insurance He's very resilient, minus 5%. Equipment Finance has even a gross operating income up In the quarter, AMD ex some provisions we've taken related to current sales results He's effectively quite resilient as well. Cost decreased 5%, 4.4%. Net income stands at €138,000,000 GBIS is on the loss, EUR67,000,000.
There we have reduced, obviously, the loss With the contrasted performance across businesses, very strong FICC, as you have seen with others, And we're a very good financing advisory as well as private banking. Obviously, equity is on the recovery mode. With the month of June, I'll come back to that, which is back to a normal month that you would see in equities. So GBRS Costs are also a silver lining here, minus 9.2%. On the Corporate Center, nothing much to mention Apart from the 2 exceptional, the rest is pretty much back to normal.
So the important message we wanted to pass One of the important message we wanted to pass is on the next page, Page 9. It's on the cost side. You have To start with where we were a few years ago, 2018, the cost base was €17,600,000,000 We started to decrease in absolute term that was paid in 2019, minus 1.1, And we committed to decrease it to 20.20 to 16.5 By the end of 2020, that's obviously a very strong commitment we made, But we are confident that we can achieve that. You see that in H1 2020, we were close to 6% down relative to H1 twenty nineteen, close to 10% down in Q2 relative The same period of last year, despite the fact that we incur, like others, the increase of regulatory costs, let me remind everyone that the Charge relating to the single reduction fund is up 25% This year over last year, for the Q2 2020, this is an additional €50,000,000 to the bill. We also have COVID related costs, operational costs.
For the 2nd quarter, it's EUR 53 1,000,000. So that gives you put in context the commitment and the achievements. And obviously, we continue, as Frederic said, to work on additional cost measures. We want to decrease the cost base beyond 2020 further down. Cost of risk, Page 10.
Much has been said already. We have A very strong increase in cost of risk. This has annualized numbers as far as the basis points are concerned. 81 basis point Cost of risk for the first half of twenty twenty relative to 25 for the whole year 2019. What is very important, and I'll come back to that on the next slide, is to have in mind that this is primarily revolving Around forward looking and ratings migration of 51% as a total.
On Stage 3, we have some files, no new files, just additional provisions of things we had. It is very important To look at the approach we take, we approach today we take an approach where we go beyond 2020, as our scenarios are concerned, we have probably slightly more conservative assumption than the average for 2021, 2022. And obviously, we smooth the impact over the period. And also, we probably have a weighting of the central scenarios that is lower than And some peers that translate into quite hefty additional provision for the forward looking Provisioning, which we think is a cautious approach given the uncertainties in the market. So in any way, if things go better, this is shareholders' money.
Let me point you to the NPL ratio, which is very stable And fairly low compared to peers on the European business at 3.2%. That's combined with a 54% Coverage rate is one of the highest that you would find in Europe. An important point is that we continue to Be very active in the management of the NPL in the midst of the crisis, being able to offload some of these NPLs in good conditions To 3rd parties. And also, let me take the opportunity to stress what we think is the quality of our assets. You'll find a lot of Disclosures in our appendices.
We have done some comparisons of parameters, for example, used for internal modeling and Continuing to corporate, for example, and find that if you should you look at probability of defaults for corporate, we probably ranked amongst The more cautious peers in Europe. So the next page then, I would not comment too much. You have the detail, give it for questions, That gives you a detail in terms of staging of our provisions. We know that this is something that you're particularly focused on. And as you can see, We have a strong increase in forward looking provisioning in Q2 based on the similar implementation of the IFRS nine scenarios Relative to Q1, I have to stress that this is what you should find with everyone, an increase In Q2 versus Q1, given the implementation of scenarios, there may be a few outliers, but that's a normal pattern 1 should find in Q2 2020.
Capital, that's another area where we I feel confident about we want to put the company in capital as far as the balance sheet is concerned with capital And the credibility on the very safe side. We've made the efforts, and I hope you will find it useful as far as capital is concerned, To differentiate what are the not only the organic impact, this This is a non organic impact, but this time around to differentiate what are the permanent impact relative to the transitory impact. We are in a period where there are many things happening that are new, such as the provision of state guaranteed loans and the Treatment made from one country to another. You have obviously some so called quick fix measures by the ECB. Some of them are permanent, some of them are temporary.
So we want to make sure that it is very clear what is temporary and will vanish before the end of the year versus What is permanent? And if you look at this, you will find that effectively our ratio is fairly stable, 12.6 percent Q1 2020, 12.6 percent pro form a, the announced transaction with SG Finance In Q2 2020, and should you adjust for the temporary effect, you'll find that actually the ratio is up, Which is a very important performance in the context, but obviously, we didn't have much creation of capital through on France given What I've described before, going ahead, as you know, we commit to be at the higher end of the range we had Stated earlier in the year, 12.5 to 12 sorry, 11.5 to 12. And quite confident on that one given that the main headwinds we may have in H2 pertain to regulatory. Most new sales is very consistent with what we had said. If you remember that we had said that TRIM would happen and effectively, the ECB has recently Said that it will happen.
All the ratios are very strong and your leverage ratio is up. Actually, it's 4.4 If you take into account the announced quick fix arrangements by the ECB, it's Cartoten Capital, TLAC well above requirements this time around. Balance sheet on the liquidity side is very strong. The LCR stands at 180% at the end of the quarter. The liquidity set buffer It's €227,000,000,000 This is €30,000,000,000 more than at the beginning at the end of last year.
I don't comment, but you know, Page 13, David, for questions. It's a more detailed page. And then maybe I'll go quicker On the results, per pillar to give the opportunity for questions. As Frederic said, what we would like to focus on It's a trend really of what we see and how it has developed through time. When you look at Frank's detail, I would focus on The upper end of the page, you see clearly, and we've just given here Some indicators, we have chosen others that we are back to normal in June 2020 for retail Activities or flow activities, we could have said the same for mortgage, for example, consumer lending as well.
You see That on the corporate side, mid side corporate, which is a key area of focus for our French retail banking networks, We are actually more than the average in terms of production of 2019 with the high portion Of state guaranteed loan, but also very dynamic increase in the medium term corporate loan outstanding. You see Plus 17%. So that area is an area where we've been very focused both on small corporate and A large corporate. I'll talk about that later because we think it's a core franchise for us. We are B2B house And we want to maintain and increase our market share.
You see that on the, for example, state preventive lowering, we have To maintain the market share, maybe a little above of what would be our natural market share. We continue to make progress on digital. You see, Bouyguesorama had a record quarter. It's profitable and profitable. When I say that, its published number is profitable.
Adjusted number for variable marketing cost is also very satisfactory. We had given you an indication in the deep dive a Few quarters ago, it was 14% for the quarter. The equivalent of the adjusted profitability is 25%. Brokerage accounts, obviously, brokerage worked very nicely this quarter. But you see in Private Banking, we have been able to increase net inflows, insurance, P and C penetration was up.
So in context where you have confinement, that means that we have been focused on the key clients. And the results which you find in the next page, you find what we had mentioned, pressure on revenues given the pattern on production, Strong effort on the cost, increase of forward looking provisioning and cost of risk. Maybe on the revenues, I'd like to point you to net interest margin. This is down 6% in Q2 relative to the same period of last year, actually Minus 2.4 percent in H1. In the context where you have a surge of deposits, Less volumes on the credit side.
I would say it's an okay performance certainly related to peers. Same with commission. You have to take the number excluding the adjustment on commission related taxes in Q2 2019, you'll find 7 point Percent down. Actually, the financial fees are increasing at +8 percent and the net income is Positive, also low positive at 60,000,000,60. So you'll find the same type of pattern for production On International Retail Banking, across areas, Europe, as you know, encompasses Czech Republic Romania and Consumer Lending we have in Western Europe primarily.
And there you find revenues pretty much in line with French Retail Banking, minus 9, minus 10. But you see this pattern of strong improvement ever since May and particularly in June back to the production level 3 crisis. Still the loan and deposit outstanding increasing. Russia is fairly stable. You see that despite very strong strict confinement in the country, revenues are only down 3%.
And there again, you see this pattern of going back to normal in June. Strong surge in online sales. Russia was already Best in class, but close to 40% of the sales are done directly online. Aplita is a tale of different stories. The revenues look down 10%.
In fact, Sub Saharan Africa is up at close to 5%, It's 4.6%. There we have the impact of moratorium in Tunisia, which is very specific law where we have to Forgo the interest, it was €31,000,000 impact. So absent that impact, this is 2 0.7% decrease for the whole of Africa and Mediterranean Basin. So I would say it's fairly resilient. Financial Services And in France, I've already commented upon very resilient down of course, but very resilient Across the board, insurance, leasing as well as ALD.
ALD More affected by some depreciation pertaining to used cars sale For impairment of stocks, particularly in future margin, but that's, I would say sort of equivalent of what you would find in terms of forward looking cost of risk. So to me, that's a cautious approach to have. Nevertheless, as you can see, when you look at the total of the IBFS, you would find certainly a decrease In the net income, thanks to strong cost discipline, you will find that Overall, for H1, you have a net contribution for the group net income at EUR591,000,000 And a return on normative equity for the first half at 11.6% plus to 12%. Global Markets and Investor Services is an area where they are again have a concentrated performance, but the same message, FICC do improve over time. So you see FICC, as you have seen with other peers, this is a record quarter at EUR 700,000,000 Plus 38%.
Maybe what is a bit unique as far as we are concerned is the fact that and I remember that we had some debate at some point. We are a company that has largely restructured its fleet activities last year. And so there was a question as to whether We would damage the franchise or keep the franchise going on. And as you can see, the franchise is intact And he is performing well in the market. So FIT, again, has a record number.
Equities is improving. It's strong across the board in flow equities, very strong for listed products. Particularly, we are very happy with EMC integration, which delivers well. And you see the improving pattern month by month As far as structured equity is concerned, the month of June is back to a normal quarter. Financing and advisory, Asset and Wealth Management.
This is an area where you're in positive territories as far as revenues are concerned, Plus 2% for financing and advisory, plus 7% for private banking. Let me highlight that if you look Specifically, as structured finance, DCM, ECM, CIB and Finance, you would find the growth is close to 5%. So that's a very satisfactory performance given the fact that, as you know, we are, I think pretty cautious on the risk side and also we constrain our businesses in terms of scarce resources. And finally, so what I've already mentioned, given the performance on the equity side, Given the increase in cost of risk and despite the fact that we have a very strong discipline on cost, Minus 9% again this quarter for Global Banking and Investor Solutions. You are in a negative territory also At much lower level than the previous quarter.
Corporate Center, that would be my last word, not much comments. The Key issue elements are the 2 exceptional non cash items I commented already upon. The rest, I have to say, is very normal, Cost in check and nothing to mention particularly elsewhere. I hand over to Frederic for the conclusion.
Well, thank you very much, William. I will be very brief. We turned a first date to the first half, Of course, we've seen some impact of the crisis clearly, but at the same time, we keep a robust Balance sheet, we can build going forward. So for us, short term priorities to confirm the capacity to rebound in H2. So we've given some clear guidance with this higher visibility.
And of course, in the longer term, further built On client centricity, I think it's very clear that this industry will carry on changing. Clients' expectations are have changed in this crisis And we'll further change. So we have to further adapt our service offering. 2nd, CSR, as I said, which She's going to grow in importance, in particular in Europe, but I don't think that it will be just in Europe. And of course, Make further progress in efficiency and cost reduction with also technology helping in particular in that process.
So we are now ready to answer your question. Let me just remind you the nice rule, which is 2 questions per person. And the floor
is yours. The first question comes from Delphine from JPMorgan. Madam, please go ahead.
Yes. Good morning. Thanks for taking my questions. So my first question would be on capital. Just wanted to go back to your guidance of around just below or at 12% by year end.
Just wondering if you could give us more details around the headwinds that we're going to see in the second half because If I'm not wrong, you're already at 12.8% is your pro form a of The benefit from the state guaranteed loans, which are going to reverse in Q3. So if you could just maybe give us how much you Back from ratings migration, we have more than the 8 basis points we've seen and also the operational risk you mentioned and you haven't taken yet. My second question is on cost of risk. Your 70 basis points guidance, which I recall is around EUR 3 point €1,000,000,000 implies only a very small increase in Stage 3 provisions in the second half. So if you could just give us maybe a little bit of color around why that is?
And then also, do you That provision to remain elevated in 2021, any color on what we should expect for next year? Thanks a lot.
Yes. Hello, Darcin. I will leave the floor first to William on your question on capital and then to Johnny Le Bon on the cost of risk, the perspective of V3, the quality of the portfolio, etcetera. So first of all, William?
Thank you, Delphine, for your questions, and hello. So we feel very confident With the guidance, because effectively, we don't see many headwinds that are not known. First of all, the main headwinds you would see in H2, if we are correct, It is related to regulatory. And in the order of magnitude, we had already said, we had around 50 For TRIM, we had said 10,000,000,000 maybe a bit north of 10,000,000 for operational risk as new competition. And the rest is pretty
already
there in terms of organic Capital, yes, we may see some further ratings migration, but this is like the cost of risk, you have seen A lot happening in Q1 and Q2. So don't expect much to happen in the rest of the year. We won't see the normalization of market RWA before Maybe even 2021, maybe we are a bit cautious there, but that will happen. So that's essentially what is behind our guidance. We'd rather be cautious on any guidance we make, but effectively, we are very confident Yes, good morning.
Joni, what to expect in H2, please?
Yes. Good morning. So as we said, we are confident on our guidance, the low end of our guidance of 70 to 100 basis points, It would be rather EUR 3,700,000,000 given the increase of exposures For below end of the range. The reason why we are confident is that based on our scenario and all the parameters already Integrated in our IFRS nine provisions, we have Already taken a significant part in our Stage 1, Stage 2 provisions. As you saw for this quarter, it's more than 50% of total provisions, EUR 6 €54,000,000 of which €419,000,000 only for the forward looking.
So based on the accumulated amount Provisions for the first half, which is EUR 2,000,000,000 81 basis Based on our guidance, as you can see, we believe that this is a peak quarter, Again, based on our scenario, which is a combination of scenarios, Quite conservative, we believe, because the accumulated impact of these scenarios It's a quite sharp decrease of GDP with delayed impact, But Steve, I think we can't be passed in terms of bankruptcy. So in summary, we are quite Confident on our guidance given the conservative approach we took in building the Stage 1, stage 2, provisions.
And for 2021, we have a lower cost of risk next year. We've not changed our guidance, still higher than in mid cycle, fairly, but lower than 2020.
Great. Thank you very much.
Next question?
The next question comes from Jacques Henri Gaulard from Kepler Cheuvreux. Sir, please go
ahead. Yes. Good morning, everyone. Sorry to dig on the capital guidance because I think it's quite important. Indeed.
12.75 percent roughly would be everything all inclusive. You mentioned 50 basis points because of TRIM, 10 bps for operational risk. You're still left with something that looks to be higher than 12%. So the question is, And since you just mentioned that you were not expecting any rating migration, does that mean you want to give yourself a leeway for, for example, the cost of realizing The cost savings of your next plan, and that leads me to my second question, which is how can I appreciate the time difference you mentioned Between the €200,000,000 €250,000,000 revenue loss on your structured product activity and the corresponding €450,000,000 I would say cost reduction program you have there? Thank you very much.
Jean Henri, hello. Again, I will leave the floor maybe to William and then to Ferran on your second part of the question. Please, William.
Hello, Jacorvie. Thanks for your question. Before I go to the guidance per se, Let me maybe clarify something that was obviously not clear enough on my side. I didn't say that would not I did not intend to say that there would not be impact of British migration going forward. Just saying that A large portion of what had to be done is already in the capital And maybe there will be some as time goes by.
But in other words, effectively, you're right, on the organic side, The mixture of production, ratings migration, gradual normalization on the market risk side And redemption of outstanding means that probably effectively, this is not a major impact that we expect Relative to the first half and effectively, we confirm the Regulatory impact that we said that it's a bit slightly higher on the operational Operational risk, sorry. So in the nutshell, that means that we want To make sure that we achieve that target and we don't want to give a target that would be too tight That's the way I would summarize the approach. Okay.
Serran? Yes. Good morning, Jacques Henriette. Thank you for your question. Regarding the revenue first, it's fair to say that we have already observed a reduction in term of revenue generation because we have to limit the production Just to adjust the risk profile of our current exposure.
So we said to say that the risk and the reduction of our risk profile with CapEx will have In fact, on the revenue earlier, in terms of cost, as we did last year, you saw that last year we announced the cost reduction plan and we delivered it Finally, completely now. So it is 18 months later on. So we will have this cost reduction more observed in 2022 and 2023. And you have also to have in mind that we are still some remediation costs, which will have protected the growth during this period of time. So The full year, it could be seen only in 2023.
But it's fair to have in mind that the cost of the risk profile and the risk appetite will have been decreased Also, which is explanation for next year, for example, and the revenue impact.
Okay. Very clear. Thank you.
Thank you. Next question?
The next question comes from John Pease from Credit Suisse. Sir, please go ahead.
Yes, good morning, everybody. So my first question is on capital. In the capital roll forward Slides you had in the Q1, you did illustrate the possibility of a catch up dividend. And I just wondered how you're thinking about that. Is it still a possibility?
Or Would you rather run with a higher capital level given the uncertain environment? And my second question relates to Slide 35, where you've given Your macro scenarios. And I just wondered how does that relate to the 70 to 100 basis points? Does your Base case form the 70 basis points and the weighted average is the midpoint of 70 to 100? Or how do we think about that?
Thank you.
Hello, John. I will leave Denis answer your second question. On the dividend, let me say, we took notice of the The case of the recommendation of the SSM, the Board did not make any decision on that Question, I think we will wait for year end. Who knows? Things might evolve.
And certainly, we The same policy, which is to provision for 50% of our underlying net profit. So of course, Not taking into account any exceptional like the one we booked this quarter or potential whatever additional Exceptional items. So let's wait, but there's no significance in the fact that we just confirmed There's no difference of message, if you wish, in the confirmation of our guidance. Jonny, could you answer perhaps the 2nd part of the question?
Yes. Our range is based on the scenarios based and Prolonged, but takes also into account the fact that for The first half, we have applied the multicenter scenario approach. And so in our disclosure, the probability weighted scenarios, Which in applying the methodology relies on the higher weighting of the Adverse scenarios than we usually do. It's almost inevitable compared to last year.
Thank you. Next question, please.
Thank you.
The next question comes from Tariq El Mejjad from Bank of America. Sir, please go ahead.
Hi, good morning everyone. Just a couple of questions please and one clarification. First, on the clarification, I mean the Q1, You said the strategic plan will be 2021 to 2025. And now you seem to suggest this only the plan will go to 2023. I'm just curious to know Why the timing difference and is there anything behind that?
And then on the cost of risk, in your scenario, do you factor in the potential Deterioration of your exposures, especially when the government guarantees scheme will start to unwind in the autumn And the reaction from some corporates not to keep some staff and so on. So just to know how you captured that in your Updated the guidance of lower end of the range. And then lastly on CIB. So just to know if there is any restructuring cost attached to the derisking You've just announced that Vienna disclosed later on. And in terms of timing, so the EUR 200,000,000 to EUR 250,000,000 revenues loss, Is that a loss that will come in 2022 or so?
Or it's just revenues that you owe the losses are not coming back Given what the level of revenues you are in equities.
Thank you.
Derek, hello. Good afternoon. On the clarification, let me be very, very clear. We will project the financial perspective of the group As usual, on the next 3 years and not go beyond 2023, at the same time, we might Give for certain businesses further strategic direction. Maybe we see it's premature.
I We will comment on that first half of next year. Some further perspective in terms of Long term transformation. So there's nothing changed. I mean, so really the full set of figures for the group We'll be like usual for 3 years. Perhaps on the question of the Provisioning and then again, Johnny, on the cost of risk.
Yes, if I may, yes, sorry. On the revenue, I have be clearer than I was probably, when we speak about EUR 200,000,000 EUR 250,000,000 in terms of impact on the revenue, it's clearly a stricter impact In a normalized environment in our global market activity. So you can take the figure we had before the shock The COVID and Solvitroche is taking less than 5% of the global market revenue we are speaking about. So in a structural environment, if I may, a normalized environment, it's fair to say that during the period of the transition period Before being at that target in terms of business and product mix, we will have lower production. Of course, Just not to reinforce the current product mix we don't want to have anymore.
So it's something you have to have in mind. In terms of cost, Your question is premature, Derek, sorry for that. So we will come back later on on this restructuring cost question. Jodi?
So hello. Indeed, We are taking into account the fact that when the moratorium will expire and Despite the rebound, we are going to have materialization of the default. And our scenario, Actually, the way it is taking into account in the forward looking and IFRS 9 Parameter. Actually, result in considering that all the government measures Delay the bankruptcies default versus fully eliminating them. So this is the reason why we have Such an important component this quarter of Stage 1 and Stage 2 and forward Looking because we consider that all these measures, government currency zone, no matter what, we will not eliminate Defaults, but delay them.
So indeed, our guidance takes into account materialization of the risks.
Thank you very much.
Thank you. Next question?
The next question comes from Giulia Orroram from Morgan Stanley. Madam, please go ahead.
Yes. Hi. Thank you. Good morning. A couple of questions from my side as well.
So the first one is quite straightforward. On costs, I appreciate the clear commitment to €15,500,000,000 for 2020. Can we expect lower cost in absolute amount in absolute €1,000,000,000 Also for 2021 2022. So that's my first question. And then I wanted to ask you about NIM Margins.
So if I look actually across divisions, you had loan growth, but NIM was down Quite materially. And in particular, in for example, in Czech Republic or in ALD. So can you guide us through how you expect NIM to develop across the different products? Thank you.
Julia, I will let when we talk about him mainly Philippe Henrique to answer the French Retail And Philippe, I'm on ALD and the International Retail. On the cost, it's Pretty much hope to comment on 2021, 2022. What we said is that we have again this commitment To beyond 2020 improve the efficiency of the group. Some costs, some savings this year, As we've said, which are related to travel, etcetera, might go up next year or will go a little bit more in more No more functional, but some will be consolidated and much beyond we will turn down step by step all the costs Working structurally. And we again, well, Capital Markets is one example, but we will go beyond.
So It's a bit premature to give you any figure. It's part of the budget process that we have just started. Perhaps the name Philippe Henrique first on the French Retail.
Yes. Hello. Good morning. So I would say that the story, it's pretty much the same that What we said during the previous quarter, I mean, the big impact is still on the net interest margin For deposits, you have seen that during this quarter, we have been impacted by a strong increase In deposits, especially on-site deposits. And the percent of the increase, it's plus 19%.
And most of these amounts, it's replaced at a very short term in this very low rate So that's the main explanation of what happened on the net interest Margin, regarding net interest margin related to credit, I think it's well under control. Of Of course, the production has been reduced notably for individuals this quarter, but the new production is Still at a good margin. And so we don't expect any bad news on this
Philippe, I'm on ILD and International Retail, please. Yes. So On ID, what you need to understand is
that, let's say, revenues are driven mainly by the volumes we originate. The activity was pretty weak. And during this period of time, during COVID, what we did was to expand the contract, But also counting some rebates on the contract themselves. The service margins remain pretty resilient during this period of time. And then on used car sales results, We have to take into consideration, let's say, 2 effects.
First, we have reset, let's say, our value, let's The way we assess the residual values and the gap between the contractual residual values is an exercise we conduct On the let's say, let's say, on the quarterly basis. And then we have also taken into consideration that Due to the COVID and that market was virtually stopped, we have seen marginally the stock of vehicles Increasing and we took a specific provision on that. If I have to expand The landscape to International Retail Banking, let's say 2 things in a short,
because I don't want to
be too long. In Eastern Europe, namely Czech Republic, Romania and Russia, those two countries were impacted by decreasing interest rates. And I remind you that in Czech Republic between January June, interest rates were cut From EUR 2.25 to EUR 0.25, just an example. While the activity in Africa was It's very good. And it was mentioned by William, revenues increased by roughly 5% in this part of the world.
Thank you. Next question?
The next question comes from Jean Francois Neuez from Goldman Sachs. Sir, please go ahead.
Hi, good afternoon. I just wanted to ask firstly on the CIB. So I remember a slide last year in May And the deep dive where you showed that about half of your global markets business was flow business, which made less than 5% ROE. And then half the rest the other half of the business, which was financing and structured, which made 10 to 15. And the strategy at the time was to increase the capital allocation towards structured and deemphasize a bit of flow to the extent it wouldn't impact The leading franchises and protect their returns.
Now obviously, this looks to have changed. I just wanted To understand what's the new return you think you can achieve in Global Markets before you take into account The additional cost savings of €450,000,000 that are mentioned in the slides, because I assume that The cost savings in this envelope, if you want, are probably going to have to be allocated to different is across CIB beyond the structured credit sorry, the structured products. And if you could then elaborate as to where they fall, Which businesses you think can be impacted and what you can do differently in order also to preserve the revenues In the other areas where the cost savings will fall. And my second question was, I thought that the cost management, as per William's recent call, It was outstanding. And as with other banks also, we've seen strong cost decline this quarter.
I just wanted to understand What you think what you learned, what you can what you did better and how much of this you think you can take forward? So just trying to understand in staff Count or salary reduction or real estate and other expense reduction? Thank you.
Yes. Thank you, Jean Francois. First, that's Stephane.
Yes. Thank you, Jean Francois, for your question. The fact that last year, we had before this crisis of view that the full business, which is growing 45% today of our global market activity, We'll have clearly a longer review return in the past. The cost reduction plan we made and we will have still Increased, if I must say, in the long run, will lead to have higher than 5% revenue, return on equity on the long run-in this activity. It's fair to say that it could be difficult in my view as well to have above 10% in the proactivity for the long run.
So it's more it could be a bit below this Speak on the wrong one clearly. And to authorize, it's still valid. The question we have today is that in such market condition environment, And we have seen that in the last 2 years that the structured product of the Investment Solution activity has been really much, if I'm not saying, under pressure Due to market dislocation and market situation we have. So the way we are dealing with this question, as I said, Is to reduce the risk profile and to reduce the sensitivity of this exposure to such some market parameters. And so it will have A negative impact on the return structurally,
but we
are compensating that on the long run by the cost reduction, additional cost reduction I mentioned. On the financing activity, It has been, if I may say, during this period of time, the most positive activity we had above 15% also during this period of time. So having said that, Beyond the current crisis situation where we are, we will have the type of similar situation we had expected Last year when we presented to you, which probably due to the low revenue, also slightly pressure on the return, That which will be addressed in the long run.
And Jean Francois, on your second question, I think there are very different things. First, it's hard to say like probably most banks, as we've said, we've been able To save money on travel events, all external contractors, Discretionary expenses in a pretty unique way of functioning. So as we said, some of that will be consolidated by new way of working. I tend to think we would be able to say, for example, structurally on trips. And again, On the real estate, for example, you do not yet see the potential benefit of developing more structurally a different balance between Working on premises and from home, that's something we want to implement.
So there's certainly more on that front Step by step. But beyond, I think the improvement of efficiency will come regarding our group. First of all, On the end of the remediation, because we have and we've maintained that To avoid any delay in the remediation process, we've kept exactly the same effort regarding The remediation with the bulk of it, which should be completed end 2021. And of course, more structural changes, which can be related to automation, Digital Technology Offshoreing, etcetera, levers that we want to further develop. So It's a really mixed bag.
And I think, again, the priority on cost will remain very strong for us in the coming 2 to 3 years.
Maybe Frederic, one can add what specificity for your bank at least, which is Charge to CSRF, so that's nothing that we commit upon in our trajectory. But you should be aware that for us, this is approximately EUR 470,000,000 And for the market Which you referred to earlier in your question to second, this is €240,000,000 If you Straight part that EUR 240,000,000 you add back 2 percentage return to the activity. So into the 10% that Mr. Frank was diluting to that from 2024 onwards.
Okay, very clear. Thank you very much.
The next question comes from Annke Reingen, RBC Capital Markets. Sir, please go ahead.
Yes, thank you very much. I actually had a follow-up question on the Slide 5 on the structured Product Review. Just to understand it correctly, so the revenue loss as well as the cost savings there compared To 2019 rather than what we've seen so far. And should this then mean the €450,000,000 cost savings if I compare to the €6,800,000,000 you talked about before for 2020, can we take off Can you hear me?
Yes. Sorry. So we had just a technical problem. I'm sorry, could you please repeat your question? We did not hear you.
Sorry about this.
Thank you.
No problem. Thank you very much for pointing it out. But my question is basically going to Slide 5. I just want to make sure I understand correctly the revenue loss and the cost reduction. So should I So tax 2019 and assume the revenues going off the 2019 number and the same with the cost of 2019 numbers.
Although, obviously, that would suggest the business was never profitable because obviously it was more I mean, the costs are higher than the revenues. And also the EUR 450,000,000, is that an additional step down On the €6,800,000,000 cost for GBIS you talked for 2020. And then lastly, just on the Capital, I understand it's early days on the dividend and you said it's a 50% payout ratio. But obviously, a capital ratio would suggest You could take more out than the 50% payout ratio would suggest. So would you consider going to an absolute level?
Or is it just really too premature to comment? Thank you very much.
Really, Anke, I will leave the floor to Severin on the dividends. It's really too early. Let's wait in year end what the SSM is saying, etcetera, and ourselves
who will
build Trajectory, so sorry about this, but I think we cannot comment more. Will yes, Stephane, sorry.
So if we take that back
to the Previous point I made already, thank you. In fact, I mentioned the fact that I consider a normalized environment, Saying that you have the market primaries which are more stable and you have normalized environment. We can consider that our global market revenue In the past, in the normalized environment, it was around €4,500,000,000 a year. So when I mentioned the €200,000,000 €250,000,000 it's hopefully speaking to Starting from this normalized environment first. And then when we had said that the EUR 450,000,000 Yes, if I may, in addition to what we've already done and what we've said last year clearly to be below It's for a very global stake in Columbia, yes, with a significant part with March.
So you have to take those view that would be On the cost base, it would be lower than what we said last year by a decent reduction of magnitude.
Thank you. Next question?
The next question comes from Stefan Michael Thalmann from Autonomous Research. Sir, please go ahead.
Good afternoon, gentlemen. Thanks for taking my questions. I have 2, please. The first one regarding your agreement with Amundi, which you have just extended. Could you maybe talk a little bit about First, what the direct financial impact could be.
I understand that the retrocession rates have Gone up somewhat. And the second point, maybe more broadly, you do have a bit more freedom under the new agreement in terms of Non exclusive distribution capabilities, what do you think you can do with these better degrees of freedom under this agreement? And the second question, a bit of an accounting question, I'm afraid. But looking at your level 3 assets, Your trading derivatives that are held under Level 3 have doubled year to date. And you also had very big moves in your P and L from Level 3 assets, a pretty big gain on Level 3 derivatives, but also The big loss on Level 3 structured notes.
So all of these amounts are quite big. And I was just wondering Whether you have taken any particular provisions in your P and L to account for the rising uncertainty on how to value these positions and whether these Valuation allowances are part of the problems that you have faced in equities in the first half. If If you could add a bit more color on that would be very helpful. Thank you.
Hello, Stephane. William will answer So your questions on the Amundi, I will leave the call immediately to Philippe Le Maric. I just would like to insist that I must say, my perspective is that going forward, the longer term Trend should be towards more open architecture for retail clients. And at least for us, It was a good opportunity on one hand to consolidate strong partnerships with a strong asset management Sure. But at the same time, broaden the range of products to be sold, Trying to really provide the best in our view and the most competitive Product offering, as I said, including with a strong ESG component.
So it is really the purpose of that agreement. Philippe, can you elaborate on the potential financial consequences?
I'm not going to elaborate on the financials of this new agreement. What I want to stress is that We do consider that the total cost of savings is really more strategic than ever. And that's really part of the strategy for the coming years with the individuals. So as you know,
we have invested quite
a lot. We have So what we are going to do is to enlarge these major products. We are going to Signed agreements with other partners. And overall, yes, we do think that all these actions
Thank you.
Hello. Listen, there are 2 components in your question. The one is pertaining to the balance sheet, and effectively, this is a balance sheet item. And the other one, maybe I misunderstood, but on the movement for the P and L, which I don't
fully
catch this with what we do. But anyway, I'll press it to
Could I just maybe clarify, if you like? Yes. It's from the same footnote on level 1 to 3 disclosures where you also have Basically a flow table that shows how much of the changes in down sheet values went through the P and L. And there was actually a €1,500,000,000 positive effect from Level 3 assets on trading derivatives in the first half, But there was also a €5,500,000,000 loss on Level 3 structured notes going through the P and L. Okay.
So fundamentally, yes, so that's the same statement. First of all, you're right to put out that There are some changes, particularly on the asset side of the balance sheet, leading to the 3. We've changed the methodology, and we think slightly more conservative In a sense that we are we no gate the observability of parameters, which is a key element Of Level 3 assets on the asset side. On the liability side, we're not that comparable, I have to Same with peers, and then everyone is maybe having different approach. But we are clearly more conservative, generally speaking, So that's a different.
I'd say the main thing that has changed for us is what is the assessment You can understand more input and what is the granularity that you have to take in the assessment of sustainability. The real, for me, P and L impact that we are talking about and then how much do we have to reserve By about €100,000,000 We have a very high amount of reserve. I mean, some people may say that We find this, to put ourselves in the best Lovely, Jeanine. I would say, you're perfectly right, it's part of the normal accounting for Trading assets and the ups and downs depending upon the valuation, and that's
Thank you. Next question.
The next question comes from Flora Brocaieux from Jefferies. Madam, please go ahead.
Yes, thank you. Good afternoon. I have just one question really on revenues because At the end, you guide us on the cost, you guide on the provision. So if we trust your guidance there, revenues are likely to be the main swing factor in terms of expectations. And obviously, if I think about revenues, Q2 was clearly a special quarter on that front with the effect of the lockdown.
So what I'd like to understand is how we should think about the outlook for revenues from here and especially in French retail and in African retail. So in French Retail, the question I wanted to ask is how much of a positive contribution could we see From Q3 onwards from the TLTRO3, if you disclose the take up maybe. And how quickly do you think we're going to see A rebound in the service fees, which you said in the slide deck decreased strongly in Q2. And in Africa, Regarding the comment you made, William, on the Tunisian moratoria, was this a one off? Or could that continue into Q3?
Thank you.
Laura, good afternoon.
Just a general comment before leaving the floor To Philippe Henrique on certain passage guidance. Why don't we give any guidance on the revenue? There is more uncertainty. We have less control than on the cost, obviously. And even now, I would say on the contrary, given the development that we see, because if we were to go back to a lockdown In October, November, I don't think it's our central scenario.
Actually, the government cannot afford to go back to what we experienced in March April Maybe, but I think who knows. And so we did not want to give any guidance. As what we've said is the rebound that we saw from mid May or June, depending on the geographies, He is across the board. People, again, are able now to consume banking services more normally. But again, we remain a little bit prudent.
So we are confident to see an improvement, as you've mentioned, compared to Q2, clearly, but we did not need any guidance.
Yes. If I go item by item, yes, the first one is that we foresee Recovery and on services, what we have said is that, yes, April and the beginning of May We're at a very low level of activity, activity generated by the clients, less usage of credit Of credit cards, less transfer, less ForEx, less payment incidents. And the second point was, of course, the commercial activity It was very low, including less account of it. So what we have seen during the second part of the quarter is definitely a rebound, Especially in June. And we do consider that unless bad news from an health Some points.
This comment will continue. Regarding financial fees, actually, as we They were quite high during this quarter, and probably, they will come back to more Regarding the net interest margin on deposit, It will continue to drag on the net interest margin, but probably we More usage of the cash by the corporate. And so maybe we'll have some relief on this And finally, regarding the net interest margin for credit, Yes, we have a positive contribution of PG and E, including some effect from
Thank you. Thank you. Next question?
The next question comes from Guillaume Tiburghien from Exane. Sir, please go yes, sir, please go ahead.
Yes. Thank you for taking my question. I've got 2. The first one relates to the cost. So you've got EUR 16,500,000,000 commitment, but then you didn't seem very sure whether there will be or not a restructuring charge.
So should we Allow for a restructuring charge already this year or next year. And the second one is more about Your long term aspiration in the CIB division because with EUR 15,000,000,000 of capital allocated And maybe even more after Trim. If you wanted to make just 10% ROE, That would probably require, if I put a normalized cost of risk, about EUR 2,200,000,000 to EUR 2,500,000,000 Of pre provision profit. The last time I mean, you've been below EUR 2,000,000,000 since 2017. And actually, at the moment, you're below EUR 1,000,000,000 on the run rate.
And I do sympathize that equity derivative is not great, But fixed income is booming and Corporate Banking is actually very healthy. So actually, I don't find your revenue generation particularly Weak at the moment. So my question is, is it reasonable to aspire to 10% ROE? If So in what sort of time frame do you think? And if not, then should you just consider giving up on the whole business line?
Guillaume, hello. On the cost, the 15.5 do not include any provisioning. It's absolutely premature to comment on this.
And I will Yes. Yes. Yes. Yes. Yes.
Yes. All the initiatives. Absolutely. And beyond, that's another story.
And again, on the CIB. So, William? Severin, sorry.
Thank you, Guilher, for this prospective question. And It's not the time, if I may say, to present you the plan we will present you for the long period of time. But let me share with you some view we have already. Yes. The number 1, the €15,000,000,000 capital allocation to GBIS, it will be a question we present to you in our next strategic plan.
But the way to allocate, if we take this €15,000,000,000 as given today, there is clearly a trend where we are committed to It's to reduce the capital allocation to our global market activity and to increase the capital allocation to the business where we think there is a real profitable And today, I can mention 2 of those, which are very, very benefiting from the current situation, and we think it will continue for the next years. The first is what we call the Global Banking and Advisory side. And it's sad to say that during this quarter, we had to Put in place some treasury lines for all our large corporates, we were not really profitable activities, what we call commercial banking. But if you have a look on the Investment Bank activity during this quarter, we think that for a long period of time, there are opportunities in Europe For us and for all banks in Europe during that. So we can allocate more capital in Global Banking and Advisory With higher return than in average for Global GBIS.
And the second area where I think and we took market share over the last year and it's continuing to do that He's on our Global Intertransaction Banking, which is a low capital intensity business, and we have and we have demonstrated very recently that we have capacity to take market share. So all in all, I don't will tell you now I will not tell you now What will be the target in terms of return on the global banking? But I really feel that there is not fair, I'm really convinced that there is To deliver higher return on cost of equity in this activity. The franchise we have is a corporate franchise and a financial institution franchise. This business is serving a core franchise for Societe Generale, and it's also irrigating all the other business lines.
I can mention with Africa, for example, today we are making more than €100,000,000 in term of pure GLP activity with African Finance, And there is some opportunity there to continue to do. So for me, it will be at the heart of the business of Societe Generale for a long period of time.
And if I may, Guillaume, just don't forget between 2017 and now, the letter after the Single Resolution Fund, which is Going down to the net profit and probably we can check the global figures. It's probably around €300,000,000 net on the GBIS division. So this, of course, we can figure that at some point, it will go. We can hope. We can hope.
Yes, hopefully. Next question.
The next question comes from Tiri Vijayarajah from HSBC. Please go ahead.
Thank you. Yes, good afternoon, everyone. So firstly, just clarification. So William, did you say you've increased the stock of revenue reserves you've taken against Level 3 assets In the quarter. And if you could just quantify that, please.
And presumably, that's all in global markets rather than in the corporate center. And then Second question is on French Retail and this issue of deposits growing faster than loans and that's hurting your net interest margin. I just wondered, do you think that buildup of cash deposits on your balance sheet, is that continuing through into the second half, do you think? Or is it more just was a blip because of the crisis and so That sort of drag on net interest margin slowly unwinds as that sort of excess liquidity kind of drips To repeat off your balance sheet as we head into the end of the year. Thanks.
Thierry, William will answer the first On the first element, I think on the deposits, it's a bit difficult to predict. It was a pretty I mean, you have Outsourcing and Corporates. Corporates, they certainly wanted to secure liquidity. They might reimburse Some of the facilities in the field now when they started, feel more comfortable in the environment. And also, They should consume a little bit more.
Now it's also fair to say, when you look at France, people are a little bit worried about the future. And we tend to think that savings should remain relatively high, the saving rate. So hopefully, we will also advise to The product, but that's the point or so of this, again, focus perhaps Philippe, Emeric, just to come back.
No, just
I will be Frederic,
I think regarding corporate, yes, our assumption is that they reduce this cash as per
What I said is that, when we classify trading assets or banking assets, We would classify them in W3 or So what we think is we become more
Also,
the The reserving of future revenues or future margin generated through those assets, the so called day 1 This is the bad and chief executive.
Thank you. Next question?
The next question comes from Azuora Gelfi from Citi. Please go ahead.
Hi, good morning. Thank you for My question to one is on the business portfolio. You clearly made a huge effort last year reviewing your businesses. But post the crisis, do you think you can Expand on divest across and review other division, not just the CIB. And if you can give us some color if possible.
The second one is on Boursorama. You showed significant growth year on year there. Can you give us some Color on like where are you taking the clients? How active are these clients? Ideally, some indication on the profitability of clients comparing year on year.
And if without the record brokerage activities
that has been shown, would this still have a positive contribution to the group
So on the refocusing, I mean, we are done with the refocusing on retail financial services, and we have this It's also our Kandi equipment finance business. So we are done there fundamentally, but we We will effectively complete our refocusing program in the coming months as soon as things are normalizing. Philippe?
Yes. Thank you Yes. It's slightly down compared to the Q2 of 2019. This is quite
big growth. We have acquired
120 5 clients during the quarter. And overall, during the first semester, we are So, Finance, which is an increase of 24% compared to last year. And what is really interesting is to mention sales that At the same time, we have plus 30% plus first 2% regarding the deposits, Plus 23% regarding mortgages. Regarding the additional costs, it's actually down. And all the costs are still very well monitored.
In addition to that, that's true that We had a kind of boost on revenues due to stock market offers a time before compared to last year. And also to mention, just the thing is that we have opened a lot of accounts For the market orders, we know it's pan 6 compared to last year. So again, a kind of boost during this
Thank you. Next question.
The next question comes from Jean Sartou from ODDO BHF. Sir, please go ahead.
Good morning. Thank you for taking the question. Two questions, if I may. The first one is very basically regarding the TLTRO. What kind of impact should we expect In H2, is it significant?
Is it something which could support really the net interest income? 2nd Question regarding the goodwill impairment and the DTA thing you charged in Q2. Could you share with us the assumptions in terms of Future profitability you used as an input for those impairments? Yes. And Jean, the second part of the question is the easiest one.
You see that we not share our business plans because we don't have guidance beyond 20 20.
What we are talking here
is about business time. But methodologically, what we have to
And then
you also have to take into account some weighting On TLTRO, I'll start with the balance sheet again. We have so far grown for an amount for about €46,000,000,000 to €47,000,000,000 of TATEO, Some point you can think of taking a different period side. At least through June 2021, it's about Funds assets such as the state guarantee loans, which grew As a substitute, sometimes the projection we may have otherwise. And
The next question comes from Lorraine Quares from UBS. Madam, please go ahead. Yes. Hello. Good afternoon, and thank you for taking my question.
So just a quick follow-up. Do you exclude booking new Restructuring costs by year end, sorry, it's not entirely clear to me. And I was wondering whether you could give us the date when you intend to unveil your new strategic initiative for the next coming 3, 4 years.
Dorian, we plan to comment on the new plan in the first half of 2021, we are, again, as I said, working on this, but in terms of communication to the market. As I said, it's premature to comment on any restructuring cost. And I say, even if we were to do that, it It would not be included in the calculation of our dividend policy. We always calculate an underlying Net profit, it's again premature. So I can't say more than that on this topic.
Next question?
The next question comes from Omar Fall from Barclays. Sir, please go ahead.
Hi. Thank you for taking my questions. I'm very sorry to come back to Structured Products. I didn't hear Stephane's To answer to some of the questions, the line is a bit bad. So I just wanted to clarify the €450,000,000 of savings, it's not just the costs Associated to all the calls.
It's a broader target for more cost savings even from businesses Not directly affected by this derisking. So where are these costs going to come from in terms of their nature? Because you've already done So much on the expense base since CIB. I mean, you took out $500,000,000 as recently as the last year. So How can we be comfortable this doesn't have even more of an impact on revenues in other businesses beyond the €200,000,000 to €250,000,000 revenue As you've highlighted it.
And then is there an opportunity to sell some of the impacted portfolios to competitors to accelerate things? Some of your peers have done this in the past. And then if you could give us what the risk weighted assets associated with The perimeter being looked at, that would be helpful. And then the second question is just on loans under moratorium.
Could you just give us
a bit more detail on these programs? I know this kind of spread out a bit across the presentations, but How they're performing at the end of their grace period? And also whether you expect these balances to reduce Yes, meaningfully from here, that would be helpful. Thanks.
Omar, good afternoon. I will first leave the floor to Sylvain. Thank you, and thank you, Amar. Just taking the last point you made, we will consider any opportunity, any Feasibility to derisk the portfolio, we don't want to keep. So if there is possibility to sell, as you mentioned, yes, we will consider it.
The strikeout part of portfolio are not easy to serve, as you know, because there are not so many counterparts in a position to buy it. But if there were some interest, we will look at that. Regarding the risk weighted assets, there will be a slight positive impact on the risk weighted assets of this new Adjustment of our product portfolio. It's a bit in this business, there are a lot of nailing impact When you are starting one, but you are increasing another part. So you don't have to expect a significant impact on the risk weighted asset due to this product adjustment.
There will be Slide, a positive one, a minute, reduced one. And coming back to your question on cost. It's fair to say that we made a significant part Of our cost reduction last year. And we consider that we can go beyond without impacting the revenue Beyond the €250,000,000 we mentioned during this call and why. The first thing we did last year, as you know, in the mobile market activity was what I call the Agile at scale initiative, putting, for example, together our IT and operation by business lines.
Now we can consider that we have to go further, including the what we call the central function and the control function in this Front to
back view, which we have
not done yet. So there is some, if I may, additional capability in terms of efficiency. If we have the pure front to back view, Not from the front office until the accounting part, if I may say, we didn't completely address yet. 2nd point, Very important. The risk profile of this portfolio will be lower.
So we have also to adjust and the product mix will be lower. So we have also to take into account the fact that We could have some simplification in our process with lower risk profile of the business. 3rd, on IT. On IT, we are still very intent on IT. And in my view, as and we have already, we can go further In terms of IT cost efficiency.
And we will have clearly in that area some cloud initiative, which are Further than what we go today we have done today. We could also have further offering capability with what we have already done today. So all that mean, in my view, my comfort in terms of capability we have to go further in our consolidation without impacting beyond the €250,000,000 of
the revenue. Thank you. And on the moratorium, I must say, and I speak under the control of the 2Q live, I'm not sure actually that we have seen any And of the moratoriums that have just been put in place for over 6 months, I guess, for most of the countries. Briefly, Henrique and Philippe, I'm not.
Well, yes, very briefly. In France, there are 2 aspects. So it's a 6 month more volume. And as disclosed in the financial statement, It was not automatic at all. It was many specific decisions, client by client.
Thank you, Philippe. I'm just
yes, so on IDSS side, I would say that we have So very tightness landscape. So we have more time around 3 to 6 or 9 months. Just to give you an example, in Czech Republic, it's covering retail in semi corporate between 3 to 6 months in Romania, 9 months. There is only one situation in Tunisia where there's been, let's say, 4 business was granted an interest
Thank you. Next question?
We don't have any more questions.
Okay. Well, thank you very much for attending the call, And have a very nice afternoon. Thank you and a nice or good break.
Thank you very much. Bye bye.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.